100 Mount Holly Bypass v. Axos Bank
| Decision Date | 27 July 2021 |
| Docket Number | Case No. 2:20-CV-856-TS-CMR |
| Parties | 100 MOUNT HOLLY BYPASS, MILES TECHNOLOGIES, and CHRISTOPHER MILES, Plaintiffs, v. AXOS BANK, GREGORY GARRABRANTS, BARRY GORDON JR., KRISTIN PHILLIPS, JEFF PISTORIUS, TECHNICAL EQUIPMENT FINANCE, LEIGH EVERETT DORAND, NEW JERSEY CLEAN ENERGY SOLUTIONS d/b/a SOLAR EXPERTS, DAVID J. WIDI SR., and DAVID WIDI JR., Defendants. |
| Court | U.S. District Court — District of Utah |
Plaintiffs sue Defendants under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq. and for numerous state common-law causes of action for Defendants' alleged roles in a complex equipment leasing scheme.1 Defendants have filed various motions to dismiss.2 For the reasons below, the Axos Defendants' motion to dismiss will be granted as to the breach of contract claim but otherwise denied. All the other motions to dismiss will be denied.
100 Mount Holly Bypass, LLC ("Mount Holly") is a New Jersey LLC that owns a large commercial building in Lumberton, New Jersey. Miles Technologies, Inc. ("Miles Tech") is a New Jersey corporation that occupies part of the building. Christopher Miles is the sole member of Mount Holly, the president of Miles Tech, and a New Jersey resident.
New Jersey Clean Energy Solutions, LLC d/b/a Solar Experts ("Solar Experts") is a New Jersey LLC that sells and installs solar energy systems in New Jersey. David J. Widi, Sr. ("Widi Sr.") is a New Jersey resident and the president and CEO of Solar Experts. David Widi, Jr. ("Widi Jr.") is a New Jersey resident and Solar Experts' Director of Marketing and Sales.
Axos Bank ("Axos") is a federally chartered Federal Savings Association with an office in Cottonwood Heights, Utah. It is a wholly owned subsidiary of Axos Financial, Inc. ("Axos Financial"), a Delaware corporation with corporate headquarters in Nevada. Gregory Garrabrants, a citizen of California, is the president and CEO of both Axos and Axos Financial. Jeff Pistorius is a Utah citizen and Senior Relationship Manager for Axos. Barry Gordon is a Utah citizen, Vice President of Equipment Leasing for Axos, and Pistorius's immediate supervisor. Plaintiffs allegeKristin Phillips is a Utah citizen,4 but Phillips avers she now resides in California and works out of Axos's San Diego office. Phillips is Axos's Vice President for Documentation.
Tech Equipment Finance, LLC ("TechEFI") is an Arizona LLC with a business address in Nevada.5 TechEFI is in the business of equipment leasing and finance and allegedly acted as an agent of Axos.6 Everett Dorand is the managing member of TechEFI who allegedly conducted business from Nevada and was an agent of Axos.7
Plaintiffs allege that Defendants participated in a scheme to defraud, extort, and steal by selling and financing rooftop solar energy systems. Plaintiffs allege that Gordon, supported by Garrabrants, concocted a scheme whereby Solar Defendants would market systems that purchasers could finance with what the purchasers believed to be low- or no-interest loans from Axos, brokered by TechEFI Defendants for a fee.8 Defendants would then, through a series of misrepresentations, steer the customers into signing leases (not loans) that stripped customers of their contractual rights against Solar Experts and locked customers into paying exorbitant and perpetual "service charges" to Axos that constituted de facto interest at a ruinous rate.9
Plaintiffs allege that they fell victim to the scheme when, in July 2019, Miles Tech contacted Solar Experts about purchasing a solar energy system (the "system") for the roof of their building.10 Plaintiffs allege that Widi Jr. and others misrepresented relevant facts during those initial discussions, including that the building could support 4,000 panels and that roof penetrations would not be necessary.11 Solar Defendants and TechEFI sent Plaintiffs a proposal for purchase and installation of a SunPower solar energy system for a total purchase price of $3,819,700, payable over seven years with a 2% interest rate.12 Axos, acting through Gordon and Pistorius, allegedly approved the proposal.13 On July 12, 2019, Dorand and Widi Jr. contacted Miles stating that he must immediately pay TechEFI $25,000 to "lock in" the 2% interest rate.14 Widi Jr. drove to Miles' home to pick up a personal check for $25,000.15 TechEFI Defendants then asked Plaintiffs to provide extensive financial information to obtain approval for a loan.16
On July 24, 2019—after Plaintiffs paid the $25,000 to TechEFI but before any financing agreement was in place—Plaintiffs and Solar Experts entered into the "Purchase Agreement," which contained, inter alia, the following terms:
On October 10, 2019, Dorand and Solar Experts provided Plaintiffs with two financing options, allegedly provided by Axos: the prior offer of a seven-year 2% option and a new five-year 0% option.18 The documents they provided stated that the new five-year 0% option required "no capital investment" and the total cost would be $3,819,700 ("includes interest") with monthly payments of $63,662.19 Miles selected the five-year 0% option that day.20 Defendants allegedly did not tell Miles that the financing would be a lease, not a loan, and that it would require Plaintiffs to pay interest on the price of the system in the form of "service charges" before the term of that lease would begin.21 Defendants also did not tell Plaintiffs that Solar Experts directed SunPower (the equipment supplier) to invoice Axos for the cost of the equipment that same day, despite the lack of any agreement yet between Plaintiffs and Axos that would have authorized this.22
On October 15, 2019, TechEFI Defendants sent a term sheet (the "Conditional Lease Proposal") signed by Pistorius requiring Plaintiffs to pay Axos a $63,662 deposit, which includeda $2,000 charge for the credit approval process.23 The document also referred to a "Lease Rate Factor," which apparently confused Miles, who asked for clarification.24 Dorand stated in response that it was 25 Defendants allegedly did not explain that the Lease Rate Factor would be used to calculate a daily pro rata service charge before the lease (not loan, as Dorand stated) would begin, pursuant to a "Progress Funding Facility" that was referenced in the documents but not provided to Plaintiffs at that time.26
Over the next month, TechEFI Defendants continued to request and receive financial information from Plaintiffs purportedly to obtain approval of the "loan" by Axos.27 On November 12, 2019, Plaintiffs asked Dorand about the status of the "loan" documents and were told they were "in the works."28 Plaintiffs also asked how the disbursement of funds would work, and Dorand responded that funds would be paid to the installer only when Miles provided "a specific verbal ok, directly to the bank."29 Dorand allegedly failed to tell Plaintiffs that this would be a lease, not a loan, and that funds would be released not on Miles' verbal assent but on Miles signing certificates containing certain representations, examples of which were not provided to Miles at that time.
Also on November 12, 2019, Phillips told Plaintiffs she had received an invoice from Solar Experts for a $2,200,705 deposit on the system.30 However, the invoice she referenced was dated November 18, 2019—six days later. Furthermore, Plaintiffs had not yet signed any agreement with Axos, yet Solar Experts had sent the invoice to Axos instead of Plaintiffs.31
On Friday, November 15, 2019, Axos provided the final lease documentation to Solar Experts.32 Widi Jr. encouraged Miles to sign and return the documents by the end of that day, telling Miles that if he did not do so he would lose his delivery date with SunPower, further delaying the project.33 However, Axos did not send Plaintiffs the lease documents that day, so Miles did not sign until the following week.34
On November 18, 2019, Plaintiffs finally received the following documents (together, the "lease documents"):
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