MBI Servs. v. Apex Distribution LLC

• Decision Date: 17 January 2023
• Docket Number: 21-cv- 20975-BLOOM/Otazo-Reyes
• Parties: MBI SERVICES, LLC, Plaintiff, v. APEX DISTRIBUTION LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

MBI SERVICES, LLC, Plaintiff, v. APEX DISTRIBUTION LLC, et al., Defendants.

No. 21-cv- 20975-BLOOM/Otazo-Reyes

United States District Court, S.D. Florida

January 17, 2023

FINDINGS OF FACT AND CONCLUSIONS OF LAW

BETH BLOOM UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court following a non-jury trial held on December 12, 2022. ECF No. [242]. Plaintiff MBI Services, LLC (“MBI”) subsequently filed Proposed Findings of Fact and Conclusions of Law, ECF No. [246] (“MBI's Proposed Findings”). The Court has carefully considered the evidence presented at trial MBI's Proposed Findings, the record as a whole, and the applicable law. Set forth below are the Court's relevant findings of fact and conclusions of law.

I. INTRODUCTION

This case stems from a failed business venture between Plaintiff MBI Services, LLC (“MBI”), and Defendant Apex Distribution LLC (“Apex”). See generally ECF No. [5] (“Amended Complaint”). According to the Amended Complaint, Defendant Apex, Defendant Hector Alvarez (“Alvarez”), Defendant Terry Barnes (“Barnes”), and Defendant Gregory Jones (“Jones”) fraudulently induced MBI into wiring $2,000,000.00 to Apex for the purchase of disposable gloves. Id. ¶¶ 1, 16. Apex, Alvarez, Barnes, and Jones then allegedly converted that $2,000,000.00 for their benefit and the benefit of Defendant Imitari Corporation (“Imitari”). Id. ¶¶ 169, 170. In addition to seeking recovery from the aforementioned Defendants, MBI also sought to recover from Apex's lawyer, Defendant David Tillman (“Tillman”) and Tillman & Tillman PLLC (collectively, “the Tillman Defendants”), and another lawyer who worked on behalf of Apex, Jan Laurence Sadick (“Sadick”) and J.L. Sadick P.C. (collectively, “the Sadick Defendants”) for their roles in the alleged scheme. See generally id.

On October 12, 2021, the Court dismissed the Tillman Defendants in accordance with a settlement agreement they reached with MBI. ECF No. [85]. The Sadick Defendants also settled and were dismissed on November 21, 2022. ECF No. [221]. On December 9, 2022, the Court entered a Consent Judgment pursuant to a settlement agreement between MBI, Apex, and Alvarez, in which Apex and Alvarez agreed to pay MBI $2,100,000.00. See ECF No. [241].

The remaining Defendants in this case are Barnes, Jones, and Imitari. Although those three Defendants were initially represented by counsel and filed a timely Answer to MBI's Amended Complaint, ECF No. [17], their counsel subsequently withdrew from this case. See ECF No. [168]. The Court ordered the Defendants to retain counsel by July 8, 2022, ECF No. [169], and subsequently extended that deadline to July 25, 2022. See ECF No. [176]. The Defendants failed to retain counsel by that deadline, and it appeared that Barnes and Jones had decided to proceed pro se. ECF No. [182]. Imitari, on the other hand, is a corporation and therefore ineligible to proceed on a pro se basis, and the Court ordered that Imitari's Answer to the Amended Complaint be stricken. Id. at 2. The Clerk thereafter entered default against Imitari. ECF No. [183].

Trial against Barnes and Jones was scheduled to begin on December 12, 2022. See ECF No. [230]. After being duly noticed, Barnes and Jones failed to appear. ECF No. [242]. At the scheduled trial, MBI waived its right to a jury trial and moved for entry of a default against Barnes and Jones. Id. The Court granted that motion. See Gulf Coast Fans, Inc. v. Midwest Electronics Importers, Inc., 740 F.2d 1499, 1512 (11th Cir. 1984) (“The failure to appear at a duly scheduled trial after months of preparation by the parties and by the trial court is a serious offense for which the entry of a default is appropriate.”). MBI dismissed its claims against Imitari. The Court then held a bench trial to determine the amount of damages MBI should recover against Jones and Barnes.

The Amended Complaint alleges the following Counts against Jones and Barnes: Count V (Fraudulent Inducement/Misrepresentation), Count XI (Conversion), Count XIII (Unjust Enrichment), Count XIV (Civil Conspiracy to Commit Fraud), Count XV (Fraud), Count XIX (Florida Deceptive and Unfair Trade Practices Act), and Count XX (RICO).

II. FINDINGS OF FACT

MBI is engaged in the business of procuring personal protective equipment, including gloves, for resale in the U.S. market. In December 2020, a managing member of MBI, Jorge Garcia-Menocal, was introduced to Alvarez and Apex.

Alvarez and Jones entered into a Joint Venture Agreement (“JVA”), under which MBI would provide $2,000,000.00 in financing to Apex, Apex would import 5 million boxes of gloves per week, and MBI would receive 5 cents per box. The JVA provided that MBI's funds could be used exclusively for costs directly related to the importation of gloves.

On January 20, 2021, MBI wired $2,000,000.00 to Tillman. Shortly thereafter, it became apparent to MBI that Apex was not performing in accordance with the JVA. Among other issues, Apex continuously changed the date of shipment arrivals, and failed to provide documents regarding its activity. MBI informed Alvarez that it was going to declare a default under the JVA. Alvarez assured MBI that all was in order and offered to arrange a phone call with his partners, Barnes and Jones. Over the course of several weeks, Barnes and Jones assured MBI that Apex's non-performance was due to banking issues that were being rectified. Those assurances were lies; the Defendants had no intention of performing in accordance with the JVA. MBI declared default under the JVA on February 10, 2021. Apex was required to return the $2,000,000.00 to MBI by February 25, 2021, but failed to do so.

MBI subsequently discovered that its $2,000,000.00 had been misappropriated by Barnes and Jones. Pursuant to Alvarez's instructions, Tillman took $20,000.00 out of the funds as his attorney's fee and wired the rest of the money to Sadick. Following Barnes's instructions, Sadick paid himself $130,000.00 from the remaining $1,980,000.00, and then distributed the remaining money to a variety of destinations, including companies owned by Barnes, and to properties in Michigan that Barnes was purchasing.

III. CONCLUSIONS OF LAW

All well-pleaded allegations of fact are deemed admitted upon entry of default. Nishimatsu Const. Co. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).^[1] “The corollary of this rule, however, is that a defendant's default does not in itself warrant the court in entering a default judgment. There must be a sufficient basis in the pleadings for the judgment entered.” Id. Moreover, “[a] court has an obligation to assure that there is a legitimate basis for any damage award it enters[.]” Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2003).

A. Liability

MBI asserts seven bases for liability against Jones and Barnes: Count V (Fraudulent Inducement/Misrepresentation), Count XI (Conversion), Count XIII (Unjust Enrichment), Count XIV (Civil Conspiracy to Commit Fraud), Count XV (Fraud), Count XIX (Florida Deceptive and Unfair Trade Practices Act), and Count XX (RICO). For the reasons that follow, the Court finds that Barnes and Jones are liable under Counts V (Fraudulent Inducement/Misrepresentation), XI (Conversion), XIII (Unjust Enrichment), XIV (Civil Conspiracy to Commit Fraud), and XIX (Florida Deceptive and Unfair Trade Practices Act).

i. Count V (Fraudulent Misrepresentation)

A claim for fraudulent misrepresentation under Florida law has four elements: “(1) a false statement concerning a material fact; (2) the representor's knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation.” In re Harris, 3 F.4th 1339, 1349 (11th Cir. 2021) (quotation marks omitted).

According to the Amended Complaint and the uncontroverted evidence and testimony presented at trial, Jones and Barnes made the following false statements concerning material facts: (i) that non-performance was attributable to banking issues; (ii) that the banking issues had been rectified; (iii) that there were issues obtaining inspection reports, but the inspection had been conducted; and (iv) that the gloves were ready for delivery and being loaded onto planes as they spoke. Jones and Barnes knew those statements were false but made them with the intent that MBI would rely on them and would delay seeking the return of the Funds. MBI relied on Jones' and Barnes' false statements and delayed declaring a default under the JVA, which caused it damages by being deprived of the Funds. Based on these uncontested allegations, MBI has shown that Jones and Barns are liable for fraudulent misrepresentation.

ii. Conversion (Count XI)

The elements of conversion of money are: “(1) specific and identifiable money; (2) possession or an immediate right to possess that money; (3) an unauthorized act which deprives plaintiff of that money; and (4) a demand for return of the money and a refusal to do so.” Longo v. Campus Advantage, Inc., 588 F.Supp.3d 1286, 1298 (M.D. Fla. 2022) (quotation marks omitted). “Conversion may be properly charged where, for example, the money was set aside in a trust or escrow account.” Combe v. Flocar Inv. Grp. Corp., 977 F.Supp.2d 1301, 1308 (S.D. Fla. 2013).

In this action, $2,000,000.00 in funds were deposited in the Tillman Defendants' trust account and were to be used only for certain expenses outlined in the JVA. MBI had an absolute right to immediate possession of the funds ten business days after declaring a default under the JVA, on February 25 2021. Rather than returning the funds to MBI, Jones and Barnes distributed the money between themselves and third parties with business links to them. Under...