Viridis Corp. v. TCA Global Credit Master Fund, LP

• Decision Date: 17 December 2015
• Docket Number: Case No. 1:15–cv–61706–UU
• Citation: 155 F.Supp.3d 1344
• Parties: Viridis Corporation, et al., Plaintiffs, v. TCA Global Credit Master Fund, LP, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

155 F.Supp.3d 1344

Viridis Corporation, et al., Plaintiffs,

v.TCA Global Credit Master Fund, LP, et al., Defendants.

Case No. 1:15–cv–61706–UU

United States District Court, S.D. Florida.

Signed December 17, 2015

Christina Guzman, Richard Wayne Epstein, Greenspoon Marder Law, Fort Lauderdale, FL, Jordan Kam, Richard A. Roth, The Roth Law Firm, PLLC, New York, NY, for Plaintiffs.

Carl Francis Schoeppl, Jr., Schoeppl & Burke, P.A., Boca Raton, FL, Jacqueline Marie Arango, Sandra Jessica Millor, Lawrence Dean Silverman, Akerman, Senterfitt, Miami, FL, for Defendants.

ORDER

Ursula Ungaro

, United States District Judge

THIS CAUSE comes before the Court upon Defendants' Motion to Dismiss the First Amended Complaint. D.E. 33.

THE COURT has considered the Motion, the pertinent portions of the record and is otherwise fully advised in the premises.

BACKGROUND

The following facts are taken from Plaintiffs' First Amended Complaint. D.E. 24. On September 23, 2015, Plaintiffs, Viridis Corporation (“Viridis”), Beck–Ford Construction, LLC (“Beckford”), LCTI Low Carbon Technologies International, Inc. (“LCTI”), Ideal National Mechanical Corporation (“Ideal”), Commercial & Institutional Mechanical, Ltd. (“C & I”), Sustainable Energy Properties, Inc. (“SEP”), WK Management Services, Inc. (“WKMS”), and Bryan Scott Jarnagin (“Jarnagin”) (collectively “Plaintiffs”), filed their First Amended Complaint against Defendants, TCA Global Credit Master Fund, LP (“TCA”), Robert Press (“Press”), and Donna Silverman (“Silverman”) (collectively “Defendants”), and asserted the following claims: (1) Violation of the Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c)

; (2) Violation of RICO, 18 U.S.C. § 1962(d) ; (3) Violation of Florida's Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.211 (2015) ; (4) Declaratory Judgment under Florida law; (5) Declaratory Judgment—Fee Note Constitutes Usurious Interest under Florida law; (6) Tortious Interference with Business Relationships under Florida law; (7) Civil Conspiracy under Florida law; (8) Concert of Action under Florida law; (9) Breach of Implied Covenant of Good Faith and Fair Dealing under Florida law; (10) Unjust Enrichment under Florida law; and (11) Accounting.¹

Plaintiff Jarnagin is an entrepreneur and developer in the areas of commercial construction, technology, real estate, and energy efficiency industries. D.E. 24 ¶ 19. Plaintiff Viridis creates companies in the clean-tech, energy efficiency, environmental conservation, and green building sectors. Id. ¶ 20. Viridis's subsidiary, Plaintiff Beckford, is a commercial general contracting company that specializes in the design and construction of facilities. Id. ¶ 21. Plaintiff LCTI is a technology company that focuses on securing, licensing, and deploying green technologies. Id. ¶ 22. LCTI's subsidiaries, Ideal and C & I, provide mechanical contracting services. Id. ¶ 23–24. Another LCTI subsidiary, SEP, is involved with promoting innovative clean solutions for applications within the infrastructure and energy sectors. Id. ¶ 25. Plaintiff WKMS is an indirect subsidiary of SEP and LCTI. Id. ¶ 26. Defendant TCA was created to support the trading and investing activities of two feeder funds: (i) TCA Global Credit Fund, Ltd. and (ii) TCA Global Credit Fund. Id. ¶ 27. These feeder funds invest all of their assets in TCA. Id. ¶ 27. Defendant Press is the Chief Executive Officer and Founding Partner of TCA. Id. ¶ 17. Defendant Silverman is the Managing Director of TCA. Id. ¶ 18.

In 2013, Jarnagin was searching for financing for three potential acquisitions, which he estimated would require approximately $10 million in funding. Id. ¶ 36. Two financing headhunters connected Jarnagin with Press and Silverman, both of TCA, who proposed providing Jarnagin with a $20 million revolving credit line. Id. ¶ 39. During a conversation between Jarnagin and Press and Silverman on October 19, 2013, which occurred via telephone and e-mail, Press and Silverman did not inform Jarnagin that TCA could not fund a $20 million credit line because TCA's corporate charter prohibited TCA from making a single loan greater than 2% of TCA's total Net Asset Value. Id. ¶ 40. In addition to the $20 million credit line, TCA's proposal also included fees, costs, and assessments. Id. ¶ 41. Jarnagin declined the proposal amount because it exceeded his needs for future acquisitions. Id. ¶ 42. Press and Silverman then proposed a $10 million line of credit, which Jarnagin accepted. Id. ¶ 43. LCTI, C & I, SEP, and WKMS (“Plaintiff borrowers”) executed a Credit Agreement evidencing the $10 million line of credit on November 19, 2013. Id. ¶ 44; D.E. 24–1.

On November 19, 2015, the Plaintiff borrowers also executed a Revolving Note in the amount of $2,250,000.00 to fund the acquisition of Ideal for approximately $1.5 million. Id. ¶ 45; D.E. 24–2. In connection with this closing, Plaintiffs paid approximately $187,350.00 to TCA in closing costs. Id. ¶ 46. LCTI, C & I, SEP, and WKMS also executed security agreements, placing a first priority security interest on personal property. Id. ¶ 49. WKMS provided a Deed of Trust that mortgaged real property in Texas. Id. Jarnagin delivered a personal guaranty to TCA in the form of a Validity Certification, where he personally guaranteed payment of the full amount of the original loan. Id. ; D.E. 24–3. Under the terms of the Agreement, the Plaintiff borrowers were required to send payments and receipts to a TCA-controlled post office box and to deposit the payments and receipts into a TCA-controlled bank account, called a Lock Box Account. Id. ¶ 51. LCTI, C & I, SEP, and WKMS executed a Lock Box Deposit Requirement Confirmation, which required all receipts, monies, checks, notes, drafts, or other payments to be deposited into a designated account, or mailed to a post office box in Atlanta, Georgia. Id. ¶ 52. The Lock Box Account was subject to automatic withdrawals by TCA of the principal and interest due under the terms of the original loan. Id. ¶ 53. The loan required that the borrowers maintain at least 20 percent of the revolving loan commitment in the Lock Box Account, and if the amount of $450,000.00 was not maintained in the account, TCA was entitled to withhold and apply an equal amount to establish the minimum. Id. Under the terms of the agreement, the borrowers were also required to pay an “advisory fee” to TCA in the amount of $250,000.00, and LCTI issued 2,500,000 restricted shares of its common stock to TCA pursuant to the agreement. Id. ¶ 57, 59.

Following the closing of this loan, Press and Silverman promised Jarnagin that funding for the next two acquisitions would follow 30 to 45 days after the Ideal acquisition. Id. ¶ 60. Jarnagin submitted a request to fund the second acquisition for $3.2 million, but TCA refused to fund it and the second acquisition failed. Id. ¶ 61. Jarnagin submitted a request to TCA to fund a third acquisition and purchase Beckford for $3.8 million, but TCA refused to do so. Id. ¶ 62. In a telephone conversation, Silverman informed Jarnagin that despite TCA's commitment to a loan of $10 million, it could not do so because it would push TCA over its lending limit of 2 percent of its corporate charter. Id. ¶ 63. Jarnagin asked Silverman why TCA offered a loan for $10 million if a $3.8 million transaction would exceed TCA's lending limits and violate its corporate charter, but Silverman did not have an answer for Jarnagin. Id. ¶ 64–65.

Beginning in March 2014, TCA refused to allow Jarnagin to make withdrawals from the Lock Box Account and held sums of Plaintiffs' money in excess of the amounts that were due to TCA under the repayment terms of the loan. Id. ¶ 67. Because TCA constricted Plaintiffs' cash through the Lock Box Account, Ideal and C & I were unable to meet payroll, to pay payroll taxes, and to pay their subcontractors and vendors. Id. ¶ 68. Because of this, Plaintiffs' bonding company pulled bonding lines, the vendors cut off all lines of credit, and their customers stopped issuing new contracts. Id. ¶ 68. Ideal lost more than $25 million in contracts as a result of TCA's tactics. Id. Press and Silverman refused to make additional funds available on the existing credit line, but proposed a new transaction. Id. ¶ 69. Jarnagin agreed. Id. ¶ 70.

In May 2014, the Plaintiff borrowers executed a First Amendment to Credit Agreement and First Replacement Revolving Note in the amount of $3,135,439.58. D.E. 24–5; D.E. 24–6. The borrowers paid $471,500.00 in closing costs. Id. ¶ 74. In August 2014, Jarnagin informed TCA that he intended to pay off the outstanding balance by refinancing with another lender. Id. ¶ 80. Silverman avoided telephone calls from the other lender, but she eventually agreed to participate in a telephone call on September 2, 2015. Id. ¶ 82. Thereafter, Silverman issued a default letter and informed the other lender, via telephone and e-mail, that Plaintiffs were in default for their failure to deposit money in the Lock Box Account and for their failure to adhere to the Credit Agreement's reporting requirements. Id. ¶ 83; D.E. 24–8.

In October 2014, the Plaintiff borrowers executed a Second Amendment to Credit Agreement and a Second Replacement Revolving Note in the amount of $3,768,563.04 with TCA. Id. ¶ 89; D.E. 24–9, 24–10. In connection with this document, Plaintiffs paid $33,250.00 in closing costs to TCA. After the Second Amendment closed, Press and Silverman agreed to fund the Beckford acquisition, and offered the Plaintiff borrowers a second $10 million revolving loan of credit. Id. ¶ 93–94.

On October 31, 2015, Viridis and TCA entered into a Senior Secured Revolving Credit Facility Agreement, which became effective on December 31, 2014, where TCA agreed to extend a $10 million revolving line of credit to allow Viridis to acquire Beckford. Id. ¶ 95. Pursuant to this Agreement, Beckford would become a guarantor of the Viridis/Beckford Agreement. Id. TCA...