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Tripoint Global Equities, L.L.C. v. Fasolino

United States District Court, Second Circuit

October 18, 2013

TRIPOINT GLOBAL EQUITIES, L.L.C., a Maryland limited liability company, in its capacity as collateral agent for CIP, L.L.C., a Kansas limited liability company and CARL W. GROVER, Plaintiff,
v.
ANTONIO R. FASOLINO, FASOLINO FOODS USA, INC., FASOLINO FOODS CO., INC., FASOLINO ENTERPRISES, INC., and FASOLINO WINE & SPIRITS, INC., Defendants. ANTONIO R. FASOLINO, FASOLINO FOODS USA, INC., FASOLINO FOODS CO., INC., FASOLINO ENTERPRISES, INC., and FASOLINO WINE & SPIRITS, INC., Third Party Plaintiffs,
v.
CARL W. GROVER, WILLIAM MOORE, CIP, L.L.C., HUNTER, TAUBMAN & WEISS, LLP, STEPHEN WEISS, ESQ. and SUNFLOWER CAPITAL, L.L.C., Third Party Defendants.

Gary Lee Mason, Klafter & Mason, L.L.C. Manalapan, NJ, For the Plaintiff, Tripoint Global Equities, L.L.C., and Third Party Defendant, Carl W. Grover.

Vincent Savino Verdiramo, Verdiramo & Verdiramo, P.A. Jersey City, N.J. for the Defendants and Third Party Plaintiffs.

Marshall Clinton Turner, Mark T. Benedict, Husch Blackwell Sanders, L.L.P., St. Louis, MO, For the Third Party Defendants, CIP, L.L.C., William Moore, Sunflower Capital, L.L.C.

Barry Jacobs, Abrams, Gorelick, Friedman & Jacobson, L.L.P. New York, NY, For the Third Party Defendants, Stephen A. Weiss and Hunter, Taubman and Weiss, L.L.P.:

OPINION AND ORDER

DENISE COTE, District Judge.

On May 27, 2013, Antonio R. Fasolino, Fasolino Foods USA, Inc., Fasolino Foods Co., Inc., Fasolino Enterprises, Inc. and Fasolino Wine & Spirits Inc. (collectively, "Fasolino"), filed a third party amended complaint ("Fasolino Complaint") against CIP, L.L.C. ("CIP"), William Moore ("Moore"), Sunflower Capital, L.L.C. ("Sunflower Capital") (collectively, CIP, Moore, and Sunflower Capital as "Kansas Defendants"), Carl W. Grover ("Grover"), Stephen Weiss, Esq. ("Weiss"), and Hunter, Taubman, and Weiss, L.L.P. ("HTW") (collectively, Weiss and HTW as "Lawyer Defendants"). On June 3, Kansas Defendants and Grover moved to dismiss the Fasolino Complaint; on July 12, the Lawyer Defendants did the same. For the reasons explained in this Opinion, these motions are granted, and the Fasolino Complaint is dismissed in its entirety.

BACKGROUND

Although this Opinion relates only to the third party claims raised in the Fasolino Complaint, the underlying case is central to understanding these claims. In fact, two of the third party defendants - CIP and Grover - are the lenders for whom Tripoint Global Equities, L.L.C. ("Tripoint") is bringing the underlying suit. It is therefore appropriate to begin with the allegations made in the underlying case, before discussing Fasolino's allegations.

According to the allegations in Tripoint's complaint, on November 14, 2012, Fasolino acquired a $5, 000, 000 loan from CIP (a Kansas corporation) and Carl Grover, through fraudulent representations regarding his intended use of the funds and regarding the assets he had available to be used as collateral in the event of default. While Fasolino claimed that he would be using the loaned funds to operate his olive oil business, he secreted the funds into private offshore accounts with no intent to repay the loan. Moreover, because Fasolino misrepresented his assets, CIP and Grover cannot be made whole by seizing Fasolino's promised collateral. Accordingly, Tripoint - as collateral agent on behalf of CIP and Grover - seeks compensatory, consequential, punitive, treble, and statutory damages under various legal theories, including civil RICO, fraud, breach of contract, conversion, and unjust enrichment.

Fasolino's story differs significantly from that of Tripoint's. According to Fasolino, he is a wholesale manufacturer and distributer of Italian olive oil who, due to repair work on his factories in Italy, was in need of bridge financing to maintain his contractual obligations with his largest clients, Costco and Target. Fasolino retained the services of Tripoint to find him suitable lenders, and Tripoint arranged for CIP and Grover to lend Fasolino the necessary funds.

Fasolino was already acquainted with CIP. On August 6, 2012 (i.e., approximately two months prior to the $5, 000, 000 loan that is the subject of Tripoint's suit), Fasolino had executed a separate loan with CIP for $150, 000, with a total balance due of $250, 000 on October 5, 2012 ("CIP Loan 1"). A few weeks later, on August 31, the total balance due on the CIP Loan 1 was subsumed into a new loan from CIP to Fasolino for $1, 375, 500, with a total balance due of $2, 250, 000 on November 6 ("CIP Loan 2"). As will be relevant below, the promissory notes for CIP Loan 1 and CIP Loan 2 included a Kansas choice-of-law provision.

On November 14, as part of the transaction that Tripoint facilitated, Fasolino executed a loan agreement with CIP and Grover ("Loan Agreement"). In the Loan Agreement, CIP and Grover agreed to loan Fasolino up to $7, 750, 000, and to provide $5, 000, 000 of that upon the execution date of the loan. $2, 250, 000 of the $5, 000, 000 was actually an extension of the total balance due on CIP Loan 2, and the remaining $2, 750, 000 was provided by Grover. The total amount due in the Loan Agreement was 115% of the principal (which could range from $5, 000, 000 to $7, 750, 000, depending on whether Fasolino asked for additional funds), on March 15, 2013. The Loan Agreement included a New York choice-of-law provision.

Fasolino's legal counsel for the Loan Agreement transaction was Weiss, who is a partner at HTW. Fasolino alleges that Tripoint directed him to use the legal services of Weiss in order for the transaction to proceed "smoothly." Fasolino alleges that, consistent with Tripoint's directive, he relied on Weiss fully to structure the transaction.

At some point after November 14, 2012, CIP and Grover determined that Fasolino was not complying with the terms of the Loan Agreement. Accordingly, on February 14, 2013, Tripoint - acting as collateral agent on behalf of CIP and Grover - filed the underlying suit against Fasolino. On March 20, 2013, Fasolino filed an answer, counter-claim, and third party complaint. On May 5 and May 10, the Kansas Defendants and Grover moved to dismiss the third party action against them. The motion was mooted, however, when Fasolino chose to amend his answer, counter-claim, and third party complaint. On May 27, Fasolino filed his amended pleading, referred to in this Opinion as "Fasolino Complaint."

The gravamen of the Fasolino Complaint is that all of the loans (the CIP Loans and the Loan Agreement) were or are usurious. He specifically notes the following. The effective annual interest rate on CIP Loan 1 was 500%. The effective annual interest rate on CIP Loan 2 was 254%. The effective annual interest rate on the Loan Agreement was 45%. Fasolino contends that these rates are usurious, that the loans are thereby rendered unenforceable, and that he is entitled to damages from the third party defendants as a result. The Fasolino Complaint has nine specified counts.

In Count One, Fasolino alleges that Weiss operated under an undisclosed conflict of interest whereby he actually served Weiss's counter-party, Tripoint, and inter alia acted to structure the transaction to avoid the protection of New York's usury laws. Count Two is directed against HTW on a respondeat superior theory for Weiss's allegedly tortious conduct. In Counts Three, Four, Five, and Seven, Fasolino sues CIP, Moore (the alleged principal shareholder of CIP), and Grover for making these usurious loans. Fasolino seeks to have CIP Loan 1, CIP Loan 2, and the Loan Agreement deemed void, to recoup any payments he made, and to recover damages and other ancillary relief.

In Count Six, Fasolino sues Moore and Sunflower Capital (a corporation alleged to be wholly owned by Moore) for allegedly extorting Fasolino into agreeing to pay an additional $350, 000 to have the CIP Loan 2 subsumed into the Loan Agreement. In Counts Eight and Nine, Fasolino essentially repeats his request for the relief sought in the prior counts.

On June 3, the Kansas Defendants moved to dismiss the Fasolino Complaint. On the same day, Grover moved for the same, incorporating all the arguments made by the Kansas Defendants. On July 12, Weiss and HTW moved to dismiss ...


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