Newman Capital LLC v. Private Capital Group, Inc.

Background

Newman Capital alleged that it provided financial advisory and investment-banking services and introduced Private Capital Group and related entities to potential investors. The parties entered into several agreements between 2013 and 2018. Newman Capital alleged that its introductions led to investments by Crestline totaling $100 million, but that the defendants failed to pay the agreed fees and transferred 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. The defendants moved to dismiss or, alternatively, for summary judgment. The court treated the factual allegations as true for purposes of the dismissal motions, without making findings about whether those allegations were true.

Summary-judgment request

The court found that the requests for summary judgment were premature because the parties had not yet had a fully adequate opportunity for discovery. The opinion therefore did not decide the case under the summary-judgment standard.

Personal jurisdiction

The court held that New York had personal jurisdiction over Jared Lucero and Michael Burke because Newman Capital plausibly alleged that they traveled to New York more than 15 times to meet with Newman Capital and potential investors in connection with the contracts at issue. The court also found jurisdiction over Select Fund Management LLC because the 2018 agreement contained an exclusive New York forum-selection clause and because Newman Capital adequately alleged that it was an alter ego of Private Capital.

The court concluded that Newman Capital sufficiently alleged that the Known Affiliates, other than PCG Select Series II LLC and PCG Select Series Secured LLC, were alter egos of Private Capital and the Individual Defendants. An alter-ego theory treats entities as sufficiently connected that one may be subject to jurisdiction based on the other’s contacts. The court found that the allegations about common ownership or management, transfers of assets without consideration, shared addresses, lack of corporate formalities, and intermingled funds were sufficient at the pleading stage.

The court held that Newman Capital did not sufficiently establish personal jurisdiction over PCG Select Series II LLC, PCG Select Series Secured LLC, or the Nominal Defendants. It therefore granted the jurisdiction-based dismissal as to those entities. The court’s conclusion specifically dismissed PCG Select Series II LLC, PCG Select Series Secured LLC, 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 as defendants.

Permission to join defendants

The defendants argued that Newman Capital had added certain defendants without the required permission. The court denied that request to dismiss the claims against those defendants, finding that the record did not definitively show whether the state court intended to permit the additions and that federal procedural rules generally allow amendments to add parties when justice requires.

Settlement agreement

Private Capital argued that a 2018 settlement agreement released Newman Capital’s claims. The court rejected that argument. It determined that the agreement resolved only the portion of the unpaid commission allocated to WaveCrest and expressly excluded claims involving the Newman Fee. The court concluded that the settlement agreement did not release the claims asserted in this action.

Breach of contract

The court denied both motions to dismiss the breach-of-contract claim. Newman Capital plausibly alleged the existence of contracts, its own performance, the defendants’ failure to pay fees connected to Crestline investments, and resulting damages.

The court rejected the argument that later agreements’ standard merger clauses eliminated obligations arising from earlier agreements. It found that the clauses did not specifically refer to the earlier agreements or clearly release liabilities for earlier breaches. The court also held that Newman Capital plausibly alleged that SFM and the PCG Assignees were bound by the agreements because some agreements covered affiliates, subsidiaries, and assigns, and because Newman Capital adequately alleged that the PCG Assignees were alter egos of Private Capital.

Intentional interference with contractual relations

The court granted dismissal of this claim. It found that Newman Capital did not allege that the Individual Defendants or PCG Assignees violated a duty independent of their contractual duties. It also found that the alleged breach was Private Capital’s failure to pay Newman Capital, rather than a third party’s breach that the defendants 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 dismissal of the unjust-enrichment claim. Newman Capital did not dispute that valid, enforceable contracts governed the parties’ conduct. Under the court’s analysis, unjust enrichment could not be pleaded as an alternative claim alongside a breach-of-contract claim when the validity of the governing contracts was not challenged.

Fraudulent conveyance

The court dismissed the fraudulent-conveyance claim without prejudice and granted leave to file a second amended complaint. Applying the Utah Uniform Fraudulent Transfer Act, the court found that the claim was filed more than four years after the alleged transfers. The court rejected Newman Capital’s request to use a discovery rule because the amended complaint did not adequately explain how the defendants concealed the transfers, when Newman Capital learned of them, or how it learned of them. The court made no finding about whether the deficiencies could be cured.

Final disposition

The court stated that the defendants’ motions to dismiss were granted in part and denied in part. The breach-of-contract claim remained. The unjust-enrichment, intentional-interference, and fraudulent-conveyance claims were dismissed without prejudice, with leave to file a second amended complaint. The court also dismissed the defendants identified in its jurisdiction ruling and separately dismissed Lucero, Burke, and several non-PCG Assignees because the remaining breach-of-contract claim was not alleged against them.

The opinion is an amended version of an earlier opinion and order. It clarified which defendants had been dismissed and stated that it otherwise did not modify the earlier conclusion.