Newman Capital LLC v. Private Capital Group, Inc.

Background

Newman Capital LLC alleged that it provided financial advisory and investment-banking services to Private Capital Group, Inc. and related entities. According to the amended complaint, the parties entered into agreements between 2013 and 2018 under which Newman Capital, or WaveCrest Securities LLC before certain assignments, introduced potential investors and was entitled to fees if those introductions led to investments. Newman Capital alleged that Crestline ultimately invested $100 million and that the defendants failed to pay the required fees while transferring assets and investment opportunities among affiliated entities.

The amended complaint asserted claims for breach of contract, intentional interference with contractual relations, unjust enrichment, and fraudulent conveyance. Private Capital and the other defendants moved to dismiss under several Federal Rules of Civil Procedure and, alternatively, sought summary judgment.

Summary Judgment

The court declined to consider the summary-judgment motions because discovery had not yet provided the parties with a fully adequate opportunity to develop the relevant facts. The court therefore treated the requests for summary judgment as premature.

Personal Jurisdiction

The court denied the New Defendants’ motion to dismiss for lack of personal jurisdiction as to Jared Lucero and Michael Burke because Newman Capital plausibly alleged that they conducted business in Manhattan related to the contracts at issue. The court also found personal jurisdiction over Select Fund Management LLC based on the 2018 Advisory Fee Agreement’s forum-selection clause, which selected state or federal courts in Manhattan and consented to personal jurisdiction there.

The court further found that Newman Capital sufficiently alleged that most of the Known Affiliates and Select Fund Management LLC were alter egos of Private Capital and the Individual Defendants. An alter ego is an entity alleged to be so controlled and operated as one with another entity that the law may treat the entities as connected for jurisdictional purposes. The allegations included common ownership or management, transfers of assets without consideration, commingling of funds, inadequate observance of corporate formalities, and shared property or addresses.

The court granted the personal-jurisdiction motion as to PCG Select Series II LLC and PCG Select Series Secured LLC because the amended complaint lacked sufficient jurisdictional allegations concerning them. It also granted the motion as to the Nominal Defendants because Newman Capital did not adequately explain how those entities were alter egos of the other defendants. The Nominal Defendants were identified as PCG Credit Partners LLC, PCG Holdings LLC, 160 W Canyon Crest Road LLC, 1705 Viewpoint LLC, Outlaw Country Holding LLC, Iron Fox Ballard LLC, and Brookside Prairie View LLC.

Permission to Add Defendants

The New Defendants argued that Newman Capital had not obtained permission to add fourteen defendants to the amended complaint. The court denied that request to dismiss the claims against those defendants, finding that the record did not definitively establish what the state court had intended and that, in the federal case, leave to amend should generally be given when justice requires it. The court found no undue delay, bad faith, repeated failure to fix deficiencies, undue prejudice, or futility at that stage.

Settlement Agreement

Private Capital argued that a 2018 settlement agreement released Newman Capital’s claims. The court considered the agreement because the amended complaint incorporated it by reference and relied on it. The court rejected the release argument, finding that the agreement resolved only the dispute over the “WaveCrest Fee” and expressly excluded claims arising from the “Newman Fee.” The court concluded that the claims in the amended complaint concerned the Newman Fee.

Breach of Contract

The court denied Private Capital’s motion to dismiss the breach-of-contract claim. Although later agreements contained standard merger clauses stating that they superseded prior agreements, the court found that those clauses did not clearly release obligations already incurred under earlier agreements. The amended complaint plausibly alleged that Private Capital and related entities repeatedly breached the agreements by failing to pay advisory fees.

The court also denied the New Defendants’ motion to dismiss the contract claim. Newman Capital plausibly alleged the existence of contracts, its own performance, failure to pay fees connected to Crestline investments, and resulting damages. The court concluded that the agreements’ references to affiliates, subsidiaries, and assigns, together with the allegations that certain entities were alter egos of Private Capital, were sufficient at the pleading stage.

Intentional Interference with Contractual Relations

The court granted the motion to dismiss this claim. It found that Newman Capital had not alleged a duty independent of the contractual duties when seeking to impose tort liability on parties connected to the contracts. The court also found that the alleged breach was Private Capital’s failure to pay Newman Capital, not a breach by a third party that the Individual Defendants or other entities had procured. As to the remaining Known Affiliates, the court found that allegations of knowledge and intent were conclusory and insufficient.

Unjust Enrichment

The court granted the motion to dismiss the unjust-enrichment claim. Newman Capital did not dispute that a valid, enforceable contract governed the parties’ conduct. Because the claim’s subject matter was governed by that contract, the court held that Newman Capital could not plead unjust enrichment as an alternative to its contract claim under the facts alleged.

Fraudulent Conveyance

The court dismissed the fraudulent-conveyance claim without prejudice, with leave to file a second amended complaint. Applying the Utah Uniform Fraudulent Transfer Act, the court held that the claim was untimely because Newman Capital filed it more than six years after the alleged transfers, beyond the applicable four-year period and, for intentional transfers, the alternative one-year discovery period.

The court rejected Newman Capital’s argument that the discovery rule or relation-back doctrine avoided the time bar. The amended complaint did not sufficiently allege how the defendants concealed the transfers, when Newman Capital learned of them, or how it learned of them.

Final Disposition

The court stated that the defendants’ motions to dismiss were GRANTED in part and DENIED in part. The breach-of-contract claim survived. The claims for unjust enrichment, intentional interference with contractual relations, and fraudulent conveyance were dismissed without prejudice, with leave to file a second amended complaint. The court also dismissed PCG Select Series II LLC, PCG Select Series Secured LLC, and the Nominal Defendants for lack of personal jurisdiction, and dismissed Reef Investment Management, Canyon Accounting, PCG Series I, PCG Offshore, SFM Offshore, SFM II, and RIM Secured III because the remaining breach-of-contract claim did not plausibly allege claims against them. The defendants were ordered to answer the amended complaint by April 11, 2024.