Iota Phi Lambda Sorority, Inc. v. Contenta Glob. Capital Grp., LLC

• Decision Date: 26 September 2019
• Docket Number: Case No. 19-CV-532 (SRN/DTS)
• Parties: Iota Phi Lambda Sorority, Inc., Plaintiff, v. Contenta Global Capital Group, LLC, Cheryl Broussard, individually and as an officer or owner of Cheryl Broussard d/b/a Contenta Global Capital Group, LLC, Defendants.
• Court: U.S. District Court — District of Minnesota

Iota Phi Lambda Sorority, Inc., Plaintiff, v. Contenta Global Capital Group, LLC, Cheryl Broussard,individually and as an officer or owner of Cheryl Broussardd/b/a Contenta Global Capital Group, LLC, Defendants.

Case No. 19-CV-532 (SRN/DTS)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

September 26, 2019

ORDER

Damon L. Ward, Ward Law Group, 6200 Excelsior Boulevard, Suite 101, Saint Louis Park, Minnesota, 55416, and Albert T. Goins, Sr., Goings Law Offices, Ltd., 301 Fourth Avenue South, # 378N, Minneapolis, Minnesota, 55415, for Plaintiff.

No appearance by DefendantsContenta Global Capital Group, LLC and Cheryl Broussard.

SUSAN RICHARD NELSON, United States District Judge

The above entitled matter came before the Court on PlaintiffIota Phi Lambda Sorority, Inc.'s ("IPL") corrected Motion for Default Judgment[Doc. No. 21] against DefendantsContenta Global Capital Group, LLC("Contenta") and Cheryl Broussard.IPL seeks a default judgment, damages, attorneys' fees, prejudgment interest, postjudgment interest, and costs.Neither Contenta or Broussard have appeared at any point in this litigation, and do not contest the motion.The Court, having carefully reviewed IPL's motion and all of the files, pleadings, and proceedings herein, makes the following findings of fact, conclusions of law, and order for judgment.

FINDINGS OF FACT

I.BACKGROUND

A.The Lawsuit and Parties

1.Plaintiff IPL is an Illinois corporation having its principal place of business in the District of Columbia.(Compl. [Doc. No. 1]at 1.)IPL is a sorority with national membership.(Id. at 2.)

2.Defendant Contenta is a sole proprietorship owned and operated by Broussard.(SeePlea Agreement, United States v. Broussard, No. 3:19-CR-29(TAV/DCP)[Doc. No. 25]at 2(E.D. Tenn.July 16, 2019).)

3.Defendant Broussard is a natural person residing in Florida.(Compl. [Doc. No. 1]at 2.)

4.The Court has subject matter jurisdiction over this matter under 28 U.S.C. §§ 1331(federal question jurisdiction), 1332(a)(1)(diversity jurisdiction), and 1367(a)(supplemental jurisdiction)(2012).

5.The Court has personal jurisdiction over Contenta and Broussard.SeeIns. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704(1982)(noting that "under Rule 12(h) Federal Rules of Civil Procedure, '[a] defense of lack of jurisdiction over the person . . . is waived' if not timely raised in the answer or a responsive pleading.").Here, neither Contenta nor Broussard have appeared, answered, or filed any responsivepleading contesting personal jurisdiction.Consequently, any defense on such a ground is waived.

6.Venue is proper in this Court under 28 U.S.C. § 1391(b).Neither Contenta nor Broussard have appeared, answered, or filed any responsive pleading contesting venue, and therefore any defense on such a ground is waived.SeeFed. R. Civ. P. 12(h)(1).

7.This is an action for violations of the securities laws of the United States, including violations of the Securities Exchange Act of 1934, see15 U.S.C. §§ 78j,77t (2012)and17 C.F.R. § 240.10b-5(2019), the Securities Act of 1933, see15 U.S.C. §§ 77l,77o (2012), and the Investment Advisors Act of 1940, see15 U.S.C. § 80b-1 et. seq.(2012).IPL also asserts a host of state-law claims, including negligence, intentional fraud, unjust enrichment, breach of fiduciary duty, aiding and abetting, breach of contract, account stated, equitable accounting, constructive trust, and conversion.(See generallyCompl.[Doc. No. 1].)

B.Facts Underlying The Lawsuit

8.As an initial matter, the Court notes that when a defendant is in default, the district court accepts as true all of the factual allegations in the complaint except those relating to the amount of damages.SeeMurray v. Lene, 595 F.3d 868, 871(8th Cir.2010).Additionally, Broussard has pleaded guilty to one count of wire fraud, based on the same facts below, before the United States District Court for the Eastern District of Tennessee.(SeePlea Agreement, United States v. Broussard, No. 3:19-CR-29(TAV/DCP)[Doc. No. 25](E.D. Tenn.July 16, 2019).)Consequently, the following findings of fact are considered true by the Court.

9.Around 2013, IPL's investment and finance committee began looking for ways to invest some of the organization's funds.(Compl. [Doc. No. 1]at 2.)During its search, IPL became aware of Broussard; in 2014, Broussard presented a webinar presentation to certain IPL members seeking to induce IPL to invest funds with Contenta, purportedly under the management of Broussard.(Id.)

10.During this process, Contenta and Broussard represented themselves to IPL as being in the business of providing investment advice and management.(Id. at 5.)Specifically, Broussard (and, via Broussard, Contenta) represented to IPL that Broussard and Contenta created "customized portfolios for the world's most sophisticated investors, pension funds, foundations and endowments using the public and private markets," and had an "experienced research team" with "extensive industry experience in portfolio management."(Id.)Defendants further asserted that if IPL invested, Defendants would invest in high quality stocks to double IPL's investment.(Id. at 6.)None of these representations were true.(Id. at 24.)

11.To persuade IPL of Contenta's pedigree, Defendants represented that Contenta was a stock market specialist, that both Broussard and Contenta monitored and analyzed "several hundreds of stocks daily for their clients," and that if IPL invested, its portfolio would be "diversified and provide a conservative higher return to build up Plaintiff's accounts during any economic period."(Id. at 6.)Moreover, Defendants assured IPL that its money would be liquid and available from its investment account within two to three business days.(Id. at 6-7.)Overall, Defendants represented themselves as a "safe, profitable investment and management firm where . . . investors'funds would be held by an independent third party, closely regulated by U.S. financial authorities, and, in fact, guaranteed under U.S. law."(Id. at 7.)None of this was true.(Id. at 24.)

12.As a result of Defendants' assertions, IPL executed an Investment Advisory Agreement ("Agreement") with Defendants on February 11, 2015.(Id. at 7.)The Agreement states that Contenta, with Broussard as IPL's adviser, would provide "investment management and account administration services" for IPL so that it could achieve "certain long-term investment goals."(Agreement [Doc. No. 1-1]at 4.)It provided that Contenta will "purchase and sell securities for [IPL's] Account without first consulting with, or obtaining, specific authorization from" the organization.(Id.)Through the Agreement, Defendants became IPL's fiduciaries, and were given authority to take custody of IPL's funds in order to invest them.(Id. at 5.)Either IPL or Defendants could terminate the Agreement at any time "for any reason . . . upon receipt of written notice of termination . . . ."(Id. at 7.)The Agreement did not provide a guarantee of investment success, (seeid. at 9), but did provide an expected range of annual returns as anywhere from -8% to 20%, (id. at 10.)

13.After entering into the Agreement, IPL was instructed to wire $100,000 to a bank account held in Contenta's name pursuant to instructions from Broussard, who signed the instruction letter above the title "Registered Investment Advisor."(Compl. [Doc. No. 1]at 7;Agreement [Doc. No. 1-1]at 19-20.)IPL sent $100,000 to the bank account specified by Broussard.(Compl. [Doc. No. 1]at 8.)Contenta also charged IPL an annual$3,000 investment management fee, which IPL paid, totaling $6,000 from 2015 to 2017.(Broussard Indictment [Doc. No. 1-2]at 2-3.)

14.Instead of investing the funds, Broussard and Contenta used the $100,000 entirely for their own personal benefit; no funds were ever invested.(Compl. [Doc. No. 1]at 7.)To hide this fact, Broussard and Contenta prepared and sent fraudulent financial statements to IPL on a monthly basis, assuring IPL that its investment was profitable.(Id. at 8;seePlea Agreement, United States v. Broussard, No. 3:19-CR-29(TAV/DCP)[Doc. No. 25]at 3(E.D. Tenn.July 16, 2019).)

15.In or about July 2016, IPL decided to terminate its relationship and Agreement with Defendants.(Id.)On July 26, 2016, IPL sent Defendants a termination letter pursuant to the terms of the Agreement.(Id.)Defendants responded by informing IPL that terminating the agreement "early" would result in a 35% penalty against IPL.(Id.)IPL requested an explanation as to the basis for asserting the early-termination penalty, as the Agreement contained no such penalty; no explanation was provided, but IPL permitted the funds to remain with Defendants for an additional six months as a result of Defendants' representation about an early-termination penalty.(Id. at 8-9.)

16.On January 12, 2017, IPL again decided to terminate its relationship and Agreement with Defendants, effective February 11, 2017.(Id. at 9.)It sent another termination memorandum requesting that Defendants wire IPL's funds back to IPL's bank account.(Id.)

17.From January 12, 2017 through April of 2017, IPL repeatedly contacted Defendants and requested information as to the status and whereabouts of its funds, inaddition to requesting updates as to when the funds would be returned to IPL.(Id.)During that time, Defendants repeatedly provided false assurances, misrepresentations, and excuses for why the funds had not been returned.(Id. at 9-10.)

18.On April 26, 2017, Defendants, through Broussard, wrote to IPL and falsely represented that the funds had been wired back to IPL; however, no funds were transferred to any account held by or affiliated with IPL.(Id. at 10.)On May 10, 2017, Defendants, through Broussard, stated in writing to IPL that for security reasons, it was having trouble "straightening [IPL's] account out."(Id.)

19.From April...