Focus 15, LLC v. Nico Corp.

• Decision Date: 28 January 2022
• Docket Number: 21-cv-01493-EMC
• Parties: FOCUS 15, LLC, Plaintiff, v. NICO CORPORATION, et al., Defendants.
• Court: U.S. District Court — Northern District of California

FOCUS 15, LLC, Plaintiff,
v.
NICO CORPORATION, et al., Defendants.

No. 21-cv-01493-EMC

United States District Court, N.D. California

January 28, 2022

ORDER GRANTING IN PART AND DENYING IN PART THIRD-PARTY DEFENDANTS' MOTIONS TO DISMISS DEFENDANTS' SECOND AMENDED THIRD-PARTY COMPLAINT; AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS

DOCKET NOS. 42, 44, 47

EDWARD M. CHEN, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Focus 15, LLC and Defendant NICO Corp. entered into four promissory notes between 2016 and 2017 for $225, 000 in total. Ian Hannula, Joseph Haller, and Maurizio Donadi each had ownership of NICO Corp. under a partnership agreement. When NICO Corp. failed to repay its loans, Focus 15 sued NICO Corp., Hannula, and Haller (collectively “Defendants”), asserting Civil RICO, breach of contract, money had and received, unjust enrichment, and unfair competition claims. Defendants subsequently filed a Third-Party Complaint against Donadi and NICO Corp.'s bookkeeper and accountant, Denise Cassano and Advanced Accounting Solutions, Inc. (“AAS”). Defendants seek indemnity, contribution, and declaratory relief against the third-party defendants.

Pending before the Court is Donadi, Cassano, and AAS's motions to dismiss Defendants' Second Amended Third-Party Complaint (“SATPC”), as well as Defendants' motion for judgment on the pleadings.

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II. FACTUAL & PROCEDURAL BACKGROUND

A. Focus 15's Complaint

Focus 15 alleges in the Complaint that NICO Corp. entered into four promissory notes in which Focus 15 loaned NICO Corp. a total of $225, 000 as follows:

1. On February 23, 2016, NICO Corp. entered into a written promissory note with Focus 15 in which Focus 15 agreed to loan NICO Corp. hundred thousand dollars ($100, 000.00) Docket No. 1 (“Complaint”) at 3. NICO Corp agreed to make payments on the note each month beginning on April 1, 2016, through the maturity date on March 1, 2020 Id.

2. On June 1, 2016, NICO Corp. entered into a second written promissory note in which Focus 15 agreed to loan NICO Corp. fifty thousand dollars ($50, 000.00). Id. NICO Corp. agreed to make payments each month beginning on July 1, 2016, through the maturity date on June 1, 2020. Id.

3. On July 31, 2016, NICO Corp. entered into a written promissory note with Golden Focus, LLC for fifty thousand dollars ($50, 000.00). Id. NICO Corp. agreed to make payments each month beginning on August 15, 2016, through the maturity date on August 15, 2020. Id. On or around July 17, 2017, Golden Focus assigned the note to Focus 15. Id.

4. On February 15, 2017, NICO Corp. entered into a written promissory note with Focus 15, in which Focus 15 agreed to loan NICO Corp. twenty-five thousand dollars ($25, 000.00). NICO Corp. agreed to make payments each month beginning on December 1, 2016. Id. at 3-4. NICO Corp. also agreed to pay fifty percent (50%) of the loan by March 15, 2017, and the entire outstanding balance of the loan by April 15, 2017. Id. at 4.

Hannula and Haller signed a guaranty for each of the promissory notes. Id. at 3-4. According to Focus 15, Defendants failed to make payments on any of the notes and never intended to pay these loans back. Id. at 4. Focus 15 alleges that Defendants' acts of entering into these promissory notes and accepting the loan proceeds with no intention of paying them back

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constitute a fraudulent scheme. Id.

B. Defendants' Third-Party Complaint

On September 27, 2021, Defendants filed the SATPC against Cassano, AAS, and Donadi as follows:

In 2016, Hannula, Haller, and Donadi entered into an agreement in which Donadi would invest $100, 000.00 into NICO Corp. in exchange for a 30% partnership share (“Nico Partnership Agreement”). Docket No. 41 (“SATPC”) at 13-14. The Nico Partnership Agreement stated that each partner's ownership share would be Hannula (35%), Haller (35%), and Donadi (30%). Id. Donadi then recommended that Cassano, his financial advisor and the Chief Executive Officer, President, Treasurer, Secretary, and Director of AAS, take over the finances of NICO Corp. in the position of Chief Financial Officer. Id. at 13-14. Cassano thereafter convinced Hannula, Haller, and Donadi to take out a series of loans from Focus 15 between 2016 and 2017. Id. Hannula, Haller, and Donadi all signed personal guarantees of said loans with respect to the 2016 loans, and Hannula and Haller signed a personal guarantee with regards to the 2017 loan. Id.

III. LEGAL STANDARD

A. Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). See Fed. R. Civ. P. 12(b)(6). To overcome a Fed.R.Civ.P. 12(b)(6) motion to dismiss after the Supreme Court's decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007), a plaintiff's “factual allegations [in the complaint] ‘must . . . suggest that the claim has at least a plausible chance of success.'” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014). The court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself

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effectively.” Levitt, 765 F.3d at 1135 (quoting Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014)). “A claim has facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the Defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).

B. Motion for Judgment on the Pleadings

Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” “[T]he same standard of review applicable to a Rule 12(b) motion applies to its Rules 12(c) analog” because the motions are “functionally identical.” Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). Thus, when considering a Rule 12(c) motion, a district court “must accept the facts as pled by the nonmovant.” Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1053 (9th Cir. 2011). The district court then must apply the Iqbal standard to determine “whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief.” Id. at 1054 & n.4 (citing Iqbal, 556 U.S. at 662).

IV. DISCUSSION

A. AAS & Cassano's Motion to Dismiss Defendants' SATPC

AAS and Cassano dispute Focus 15's representation that NICO Corp. made no payments. See Docket No. 42. Defendants have since conferred with Focus 15's counsel, who clarified that payments were made prior to April 2017, as represented by AAS and Cassano. Docket No. 48 at 2. As such, Defendants do not object to the dismissal of the claims against Cassano and AAS. Id.

Accordingly, the Court GRANTS AAS and Cassano's motion to dismiss without prejudice.

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B. Donadi's Motion to Dismiss Defendants' SATPC

1. Indemnity and Contribution

a. Lack of Money Judgment

Donadi argues that because a money judgment has not yet been rendered in this action, Defendants cannot assert a right of contribution and indemnification against him. Docket No. 44 (“MTD”) at 8. Donadi cites Sullins, in which the court specifically required a judgment or a settlement prior to a claim of equitable indemnity or contribution. Id. (citing Sullins v. Exxon/Mobil Corp., 729 F.Supp.2d 1129, 1139 (N.D. Cal. 2010)).

However, courts have distinguished Sullins when Federal Rule of Civil Procedure 14(a) applies. For example, in Mehta v. Medovich, the defendant filed a cross-complaint for equitable indemnification and contribution under Rule 14. No. 18-CV-04373-RS, 2019 WL 7841861, at *1 (N.D. Cal. Apr. 29, 2019). The cross-defendants moved to dismiss the case and argued that the defendant's claim for contribution was premature because no judgment had yet been entered against him. Id. at *2. The Mehta court disagreed and concluded:

Under the doctrine of equitable contribution, a tortfeasor may seek to distribute the damages for which he or she is liable equally among all tortfeasors. A defendant may seek contribution from a third-party even though the defendant's claim is purely inchoate-i.e., has not yet accrued under the governing substantive law. Indeed, Rule 14(a) expressly allows a defendant to file a third-party complaint against a non-party “who is or may be liable to it for all or part of the claim against it.”

Id. at *3 (internal quotation marks and citations omitted); Hecht v. Summerlin Life & Health Ins. Co., 536 F.Supp.2d 1236, 1241-42 (D. Nev. 2008) (“Rule 14(a) is, in effect, a recognition that where procedurally it is possible to bring all related liability and indemnity or contribution claims in a single action, the interests involved are sufficiently concrete to permit accelerated adjudication of the inchoate claims.”); see also Tan v. Quick Box, LLC, No. 3:20-CV-01082-H-DEB, 2021 WL 2473948, at *5 (S.D. Cal. June 16, 2021) (“The . . . Defendants argue that California courts have held that a claim for contribution may not be asserted absent the existence of a joint...