Highmore Financing Co. I, LLC v. The Greig Companies, Inc.

Background

Highmore Financing Co. I, LLC alleged that it financed five transactions for The Greig Companies, Inc. (TGC) to purchase computer equipment from Storbyte Inc. Highmore alleged that Jason Allen Greig and Jeffrey Sparrow provided inaccurate or falsified financial information, and that invoices attributed to Storbyte listed inflated prices or equipment that Storbyte did not sell. Highmore alleged that funds were distributed through escrow arrangements in ways that violated the financing and escrow agreements. TGC repaid the first three transactions but defaulted on the January 2020 transactions. Highmore alleged that TGC owed $19,954,515.07, plus interest and late fees.

Highmore’s amended complaint asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), including claims under 18 U.S.C. §§ 1962(c) and 1962(d), along with state-law claims. The opinion addressed motions to dismiss filed by Diamond Lauffin; Jeffrey Sparrow; Joseph Drissel, Steven Groenke, and Storbyte Inc.; Shawn Harju and Equinox Business Law Group PLLC; and PayRange Inc. The court noted that The Greig Companies, Jason Allen Greig, and Datassure Corp. had defaulted, but said Highmore’s request concerning a possible default judgment would be addressed separately.

RICO claims

The court granted the motions to dismiss the RICO claims for failure to state a claim. For a substantive RICO claim, Highmore had to plead a pattern of related racketeering acts showing either extended past criminal activity or a threat that the activity would continue.

The court found that the alleged related acts lasted at most seven months, from July 2019 through January 2020, which was insufficient under the applicable Second Circuit precedent. The court rejected Highmore’s attempt to extend the period back to a 2015 filing with the Securities and Exchange Commission because the alleged filing was not sufficiently related to the later conduct and was not alleged to have been used to defraud Highmore. The court also found that Highmore had not adequately alleged that fraud was the defendants’ regular way of doing business or that the alleged scheme posed a future threat of repetition. Because Highmore did not adequately plead the underlying RICO violation under Section 1962(c), the court also granted the motions to dismiss the RICO conspiracy claim under Section 1962(d). The court did not reach the defendants’ remaining arguments concerning the RICO claims.

Personal jurisdiction

The court granted the motions by Lauffin, the Storbyte Defendants, the Equinox Defendants, and PayRange to dismiss for lack of personal jurisdiction. The court found that none of those defendants was domiciled or legally “at home” in New York. It also found that Highmore’s allegations did not show that those defendants had sufficient New York contacts for specific jurisdiction under New York’s long-arm statute.

Among other things, the court rejected Highmore’s reliance on the fact that it was located in New York or that the funds came from a New York-based business. The court said Highmore could not establish jurisdiction over each defendant through group allegations or through the actions of the Greig Defendants. The court also found that Highmore was not a party to the escrow agreements and had not adequately alleged that it was an intended third-party beneficiary. The court did not reach the Storbyte Defendants’ separate argument concerning subject-matter jurisdiction because it dismissed the claims against them for lack of personal jurisdiction.

State-law claims against Sparrow

The court granted Sparrow’s motion to dismiss the remaining state-law claims against him for failure to state a claim. It found that Highmore had not adequately alleged that Sparrow substantially assisted a breach of fiduciary duty. It also found that neither Highmore nor Sparrow was a party to the escrow agreements and that Highmore had not adequately alleged that it was an intended third-party beneficiary, defeating the breach-of-contract and negligence theories based on those agreements. Finally, Highmore did not allege that Sparrow personally received an unjust enrichment; its group allegations that defendants were enriched were insufficient.

Disposition

The court granted the defendants’ motions to dismiss for lack of personal jurisdiction and failure to state a claim. The court dismissed Highmore’s claims against the defendants without prejudice and directed the Clerk of Court to terminate the five motions. The opinion did not decide Highmore’s separate request for a possible default judgment against The Greig Companies, Jason Allen Greig, and Datassure Corp.