Anglin Automotive LLC v. EBF Holdings, LLC

Background

Anglin Automotive LLC and its owner, Thomas Anglin, sued EBF Holdings, LLC (identified in the opinion as Everest), Novus Capital Funding II LLC, MCA Receivables, LLC, doing business as Ally Funding Group, Five G Funding LLC, and unidentified individuals. The plaintiffs alleged that the defendants marketed transactions as merchant cash advances but structured them as loans with fixed payments, short repayment periods, and high annualized interest rates. The complaint asserted a substantive civil claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), a civil RICO conspiracy claim, and a breach-of-contract claim.

The opinion focused on agreements with Everest, Novus, and MCA Receivables. The agreements described purchases of future receipts and included reconciliation provisions, but the plaintiffs alleged that the arrangements required fixed daily payments and operated as loans. Five G Funding had not appeared, and the plaintiffs separately sought default judgment against it.

Rulings on the RICO Claims

The court granted the motions to dismiss filed by Everest, Novus, and MCA Receivables. It held that the plaintiffs did not adequately plead a distinct RICO enterprise. The complaint described each alleged enterprise as the corresponding funding company together with its owners, officers, employees, and investors. The court concluded that these allegations described the companies acting through their ordinary business operations rather than separate enterprises legally distinct from the companies themselves.

Because the lack of a distinct enterprise defeated the substantive RICO claim, the court did not decide the moving defendants’ other arguments about unlawful debt, wire fraud, a pattern of racketeering activity, or injury to business or property.

The court also dismissed the civil RICO conspiracy claim for two independent reasons. First, the conspiracy claim depended on the alleged substantive RICO violation, which was inadequately pleaded. Second, the complaint offered only general statements that the defendants had agreed to violate RICO and did not provide specific facts showing an agreement among them.

The court dismissed the RICO claims against Five G Funding even though that company had not appeared. It found that the same enterprise allegations applied to Five G Funding and that the plaintiffs had an opportunity to address the relevant issues in responding to the other defendants’ motions. The court denied the plaintiffs’ motion for default judgment against Five G Funding on those claims.

Breach-of-Contract Claim

After dismissing the federal RICO claims, the court declined to exercise supplemental jurisdiction, meaning its authority to hear a related state-law claim, over the breach-of-contract claim. The case was still at an early stage, discovery had not begun, and the court concluded that the state-law claim was better suited for state court. It therefore dismissed Count Three without prejudice to the plaintiffs’ refiling it in state court.

Leave to Amend and Final Disposition

Although the plaintiffs had not requested permission to amend, the court granted them leave to file an amended complaint if they could plead facts that adequately stated a claim. The plaintiffs were given thirty days to amend or obtain an extension. The court stated that if they did not do so, it would dismiss Counts One and Two with prejudice and dismiss Count Three without prejudice so that the state-law claim could be refiled in state court.

The final order granted the motions to dismiss, denied the motion for default judgment against Five G Funding LLC, and dismissed the claims against Five G Funding LLC without prejudice. The classification is procedural because the order’s operative dismissals were made under the failure-to-state-a-claim framework, even though the court addressed the merits of the RICO pleading arguments.