Caro Capital, LLC v. Koch

Background

Robert Koch and Bedford Investment Partners, LLC brought counterclaims against Caro Capital, LLC, Caro Partners, LLC, Jupiter Wellness, Inc., Brian John, and Richard Miller. The counterclaims alleged that Koch and Bedford entered into oral consulting agreements with John, Caro Capital, and Caro Partners. Under those alleged agreements, Koch was to help clients obtain financing by making introductions to investors, brokers, funding sources, and others in the financial community. The alleged compensation was a percentage of the money, stock, or warrants received by Caro Capital or Caro Partners from their clients.

The counterclaims also alleged that Koch helped create and develop Jupiter, including by registering domain names, developing logos, preparing business materials, contacting potential investors, recruiting a possible board member, and helping arrange financing. Koch alleged that John promised him an ownership interest in Jupiter, later described as 1.2 million shares or a 40-percent interest, but did not transfer the promised interest or otherwise compensate him.

The court had previously dismissed earlier counterclaims but allowed amendment of the contract and unjust-enrichment claims. Koch and Bedford filed a second amended counterclaim. The plaintiffs then moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a pleading does not state a legally sufficient claim.

Consulting Agreements

The court held that the alleged oral consulting agreements fell within New York’s Statute of Frauds. That law requires a written agreement for compensation for services involved in negotiating a loan or a business opportunity, including finding potential investors, making introductions, and assisting with financing. The court concluded that the alleged services—using Koch’s contacts, seeking potential funding sources, arranging introductions, and helping present opportunities to investors—fit within that rule.

The court rejected the argument that the services were broader than financing-related negotiation. It found that the counterclaims described Koch and Bedford as independent consultants retained for the limited purpose of helping clients obtain financing through Koch’s financial contacts. The court also rejected reliance on an exception for arrangements resembling joint ventures because the counterclaims did not allege pooled interests, shared losses, joint control, or an agreement to share a finder’s fee.

Because the alleged consulting agreements were oral and therefore unenforceable under the Statute of Frauds, the court dismissed both the breach-of-contract claims and the unjust-enrichment claim based on those agreements. The court granted the motion with prejudice as to those claims.

Jupiter-Related Claims

The court separately considered the claims concerning Koch’s alleged ownership interest in Jupiter. It dismissed the breach-of-contract claim because the counterclaim still did not identify definite contractual duties that Koch was required to perform in exchange for the ownership interest. The added allegations described activities Koch performed, but did not establish what the alleged agreement required him to do. The court also found that the February 2019 email exchange did not clearly establish agreement on the ownership split or other material terms.

The court reached a different conclusion about unjust enrichment. Because the alleged Jupiter agreement was unenforceable, it did not prevent an unjust-enrichment claim. The court also found that some alleged work—such as developing logos, preparing business materials, registering and transferring a domain name, recruiting a board member, and hiring marketers—went beyond merely negotiating or completing a business opportunity. Accepting the allegations as true, the court found that John and Jupiter allegedly benefited from that work, which Koch performed with an expectation of compensation.

The court therefore denied the motion to dismiss the unjust-enrichment claim insofar as it sought compensation from John and Jupiter for work on Jupiter that went beyond negotiating or completing a business opportunity. The opinion noted that the claim survived only against John and Jupiter because the allegations supported a benefit to those two plaintiffs.

Disposition

The motion to dismiss was granted in part and denied in part. It was granted with prejudice as to the breach-of-contract claims and the unjust-enrichment claim concerning the consulting contracts. It was denied as to the unjust-enrichment claim against John and Jupiter for qualifying work performed on Jupiter. The court directed the Clerk of Court to close the motion.