United States District Court, D. Minnesota
L. Ward, and Albert T. Goins, Sr., for Plaintiff.
appearance by Defendants Contenta Global Capital Group, LLC
and Cheryl Broussard.
RICHARD NELSON, United States District Judge
above entitled matter came before the Court on Plaintiff Iota
Phi Lambda Sorority, Inc.’s (“IPL”)
corrected Motion for Default Judgment [Doc. No. 21] against
Defendants Contenta 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.
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.)
Defendant Contenta is a sole proprietorship owned and
operated by Broussard. (See Plea Agreement,
United States v. Broussard, No. 3:19-CR-29 (TAV/DCP)
[Doc. No. 25] at 2 (E.D. Tenn. July 16, 2019).)
Defendant Broussard is a natural person residing in Florida.
(Compl. [Doc. No. 1] at 2.)
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).
Court has personal jurisdiction over Contenta and Broussard.
See Ins. 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 responsive
pleading contesting personal jurisdiction. Consequently, any
defense on such a ground is waived.
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. See Fed. R.
Civ. P. 12(h)(1).
is an action for violations of the securities laws of the
United States, including violations of the Securities
Exchange Act of 1934, see 15 U.S.C. §§
78j, 77t (2012) and 17 C.F.R. § 240.10b-5 (2019), the
Securities Act of 1933, see 15 U.S.C. §§
77l, 77o (2012), and the Investment Advisors Act of 1940,
see 15 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 generally Compl. [Doc. No. 1].)
Facts Underlying The Lawsuit
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. See Murray 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. (See Plea 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.
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.)
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
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.)
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, (see Id .
at 9), but did provide an expected range of annual returns as
anywhere from -8% to 20%, (id. at 10.)
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
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; see Plea Agreement, United
States v. Broussard, No. 3:19-CR-29 (TAV/DCP) [Doc. No.
25] at 3 (E.D. Tenn. July 16, 2019).)
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.)
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.
From January 12, 2017 through April of 2017, IPL repeatedly
contacted Defendants and requested information as to the
status and whereabouts of its funds, in addition 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
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.”
From April through August of 2017, IPL sent numerous
communications and requests to Defendants requesting
information as to the status and location of its investment
funds. (Id. at 10–13.) Defendants’
responses to these communications consisted of lies and
excuses regarding delays, passing the blame to third parties,
or false assertions that the transfer had already occurred.
(Id.) Eventually, Defendants stopped responding to
IPL’s inquiries. (Id. at 13.) To date,
Defendants have not returned any funds to IPL. (Id.
its own, IPL investigated Defendants and learned no
investment account was ever opened for IPL, and that
Broussard was in her fifth bankruptcy. (Id. at
February 20, 2019, a grand jury in the United States District
Court for the Eastern District of Tennessee indicted
Broussard on five counts of wire fraud based on the above
conduct. (Id. at 14; see Broussard
Indictment [Doc. No. 1-2].) On July 16, 2019, Broussard
admitted to a general version of the above facts and pleaded
guilty to one count of wire fraud. (See Plea
Agreement, United States v. Broussard, No.
3:19-CR-29 (TAV/DCP) [Doc. No. 25] (E.D. Tenn. July 16,
Service on Defaulting Defendants
served its Complaint on Defendants on March 11, 2019.
(See Broussard Executed Summons [Doc. No. 8];
Contenta Executed Summons [Doc. No. 9].) Accordingly,
Defendants’ deadline to respond to the Complaint was
April 1, 2019. To date, Defendants have not answered or
otherwise responded to the Complaint.
When Defendants failed to answer, IPL filed an application
for entry of default. (See Doc. No. 11.) On April
15, 2019, the Clerk of Court entered default against
Defendants. (See Entry of Default [Doc. No. 13].) On
June 9, 2019, IPL filed the current corrected Motion for
Default Judgment [Doc. No. 21].
THE DEFENDANTS ARE IN DEFAULT
Pursuant to Federal Rule of Civil Procedure 55, the Court may
enter a default judgment against a defendant against whom a
default has been entered for failing to plead or otherwise
defend. As noted above, when a defendant is in default, the
Court accepts as true all of the factual allegations in the
complaint except those relating to damages. See
Murray, 595 F.3d at 871.
Pursuant to Federal Rule of Civil Procedure 55, there is a
two-step process for the entry of a default judgment. See
Johnson v. Dayton Elec. Mfg. Co., 140 F.2d 781, 783 (8th
Cir. 1988). First, the moving party must seek a default from
the Clerk of Court, and the Clerk must enter default based on
proof that the opposing party has failed to plead or defend
against the action. Fed.R.Civ.P. 55(a). Second, the moving
party must seek entry of default judgment from the Court
based on either Rule 55(b)(1) (where damages are sum certain)
or Rule 55(b)(2) (in all other cases). See Fed. R.
Civ. P. 55(b)(1)–(2). Entry of default by the Clerk of
Court must precede entry of default judgment.
Johnson, 140 F.2d at 783.
Having been served with the summons and complaint in this
action and having failed to answer or otherwise respond to
the Complaint, the Defendants are in default. The Clerk of
Court has entered a default against Defendants, and IPL has
moved for a default judgment. Accordingly, the Court will
enter default judgment against the Defendants as provided
noted above, the factual allegations in the Complaint-other
than those relating to the amount of damages-are accepted as
determining Defendants’ liability, the Court must
“ensure that ‘the unchallenged facts constitute a
legitimate cause of action’ prior to entering final
judgment.” Marshall v. Baggett, 616 F.3d 849,
852–53 (8th Cir. 2010) (citation omitted). While a
default judgment is appropriate where an adversary does not
respond to legal proceedings, “the fact that the
litigant[s] sued did not respond does not vitiate the
[C]ourt’s responsibility to do justice[.]”
Am. Cyanamid Co. v. Page, 66 F.R.D. 143, 145 (D.S.C.
1975). To that end, the Court independently reviews the
causes of action in IPL’s complaint to ensure that the
facts and law applicable to the suit entitle IPL to judgment
Court applies federal law to IPL’s federal claims
(counts 1 through 5). IPL’s state-law claims-over which
the Court possesses both diversity and supplemental
jurisdiction-require additional analysis. “Federal
courts hearing state law claims under diversity or
supplemental jurisdiction apply the forum state’s
choice of law rules to select the applicable state
substantive law.” McCoy v. Iberdrola Renewables,
Inc., 760 F.3d 674, 684 (7th Cir. 2014) (citing
Felder v. Casey, 487 U.S. 131, 151 (1988)).
Therefore, the Court will first address IPL’s state law
claims, and determine which state’s law applies. It
will then address IPL’s federal claims.
State-Law Claims (Counts 6 through 16)
Where the Court’s jurisdiction over a claim is based on
diversity or supplemental jurisdiction, the Court
“appl[ies] the [forum’s] choice-of-law rules in
determining which state law governs the issue[s]”
before it. Ferrell v. West Bend Mut. Ins. Co., 393
F.3d 786, 796 (8th Cir. 2005) (citation omitted). As such,
the Court applies Minnesota choice-of-law rules to determine
which state’s law applies to the diversity- and
supplemental-jurisdiction-based claims in this case.
Guardian Fiberglass, Inc. v. Whit Davis Lumber Co.,
509 F.3d 512, 515 (8th Cir. 2007). While IPL has not
explicitly asserted that California law applies to the
state-law claims in its Complaint, its briefing relies on
California law. Consequently, the Court applies Minnesota
choice-of-law rules to determine whether California or
Minnesota law applies.
Minnesota Supreme Court has generally adopted the
“significant contacts” test for choice-of-law
analyses. See Nodak Mut. Ins. Co. v. Am. Family Mut. Ins.
Co., 604 N.W.2d 91, 93–94 (Minn. 2000). The first
step-technically a precursor step to a “significant
contacts” analysis-is to determine whether a conflict
exists between the laws of the forum (here, Minnesota) and
the laws of California. Id. (citation omitted). A
conflict exists only where “the choice of one
forum’s law over the other will determine the outcome
of the case.” Id. at 94 (citation omitted). If
conflicts exist, the Court must determine whether each
state’s contacts with the case are constitutionally
sufficient such that the state’s law could be
applied. Id. at 94 n.2 (citation omitted).
There are no apparent conflicts between California law and
Minnesota law with respect to the state law claims asserted
by IPL. With respect to count 6, both Minnesota and
California law utilize standard negligence elements.
Compare Bjerke v. Johnson, 742 N.W.2d 660, 664
(Minn.Ct.App. 2007) (setting forth elements of negligence
claim), with Peredia v. HR Mobile Servs., Inc., 236
Cal.Rptr.3d 157, 162 (Cal.Ct.App. 2018) (setting forth
elements of negligence claim). To the extent IPL’s
complaint can be construed as asserting a cause of action for
“professional” negligence, each state is still in
accord. Compare Valley Paving, Inc. v. Stanley
Consultants, Inc., No. A15-1321, 2016 WL 2615956, at *5
(Minn.Ct.App. May 9, 2016) (setting forth the elements of
professional negligence), with Hasso v. Hapke, 173
Cal.Rptr.3d 356, 394 (Cal.Ct.App. 2014) (setting forth
elements of professional negligence), rev. denied
(Cal. Oct. 22, 2014). Both states also share the same
elements for intentional fraud claims (count 7). Compare
U.S. Bank N.A. v. Cold Spring Granite Co., 802 N.W.2d
363, 373 (Minn. 2011) (setting forth elements of intentional
fraud claim), with Tenet Healthsystem Desert, Inc. v.
Blue Cross of California, 199 Cal.Rptr.3d 901,
914–15 (Cal.Ct.App. 2016) (setting forth largely
identical elements of intentional fraud claim, also termed an
action for “deceit”).
California courts are split over whether unjust enrichment
(count 8) exists as a standalone cause of action, while
Minnesota recognizes unjust enrichment as a claim.
Compare Dahl v. R.J. Reynolds Tobacco Co., 742
N.W.2d 186, 195 (Minn.Ct.App. 2007) (setting forth elements
of unjust enrichment claim), with Lyles v.
Sangadeo-Patel, 171 Cal.Rptr.3d 34, 40 (Cal.Ct.App.
2014) (setting forth substantially similar elements of unjust
enrichment claim), and O & M LLC v. Wells Fargo Bank,
N.A., No. G052840, 2017 WL 1534666, at *6 (Cal.Ct.App.
Apr. 28, 2017) (noting that “California courts are
split on whether a separate cause of action for unjust
enrichment exists”). In any case, however, this split
in authority is irrelevant because California has explicitly
held that “[a]n unjust enrichment theory is
inapplicable” where the plaintiff alleges that the
parties entered into an express contract. Durell v. Sharp
Healthcare, 108 Cal.Rptr.3d 682, 699 (Cal.Ct.App. 2010).
Because IPL asserts Defendants breached an express contract
between the parties, and because (for the reasons discussed
below) the Court finds IPL has proven that claim, IPL is
barred from asserting an unjust enrichment claim. Therefore,
any apparent conflict between Minnesota and California over
whether unjust enrichment is a valid independent cause of
action is irrelevant.
Both California and Minnesota also use the same general
breach of fiduciary duty elements (count 9). Compare TCI
Bus. Capital, Inc. v. Five Star Am. Die Casting, LLC,
890 N.W.2d 423, 434 (Minn.Ct.App. 2017) (setting forth
elements of breach of fiduciary duty claim), with IIG
Wireless, Inc. v. Yi, 231 Cal.Rptr.3d 771, 787
(Cal.Ct.App. 2018) (setting forth elements of breach of
fiduciary duty claim). Similarly, both states utilize the
same elements on aiding and abetting claims (counts 10 and
11), as well as breach of contract claims (count 12).
Compare Witzman v. Lehrman, Lehrman & Flom, 601
N.W.2d 179, 187 (Minn. 1999) (setting forth elements of an
aiding and abetting tortious conduct claim), and Lyon
Fin. Servs., Inc. v. Illinois Paper & Copier Co.,
848 N.W.2d 539, 543 (Minn. 2014) (setting forth elements of
breach of contract claim), with Casey v. U.S. Bank Nat.
Ass’n, 26 Cal.Rptr.3d 401, 405 (Cal.Ct.App. 2005)
(setting forth elements of an aiding and abetting tortious
conduct claim), and Coles v. Glaser, 205 Cal.Rptr.3d
922, 927 (Cal.Ct.App. 2016) (setting forth elements of a
breach of contract claim).
same goes for IPL’s account stated claim (count 13),
compare Mountain Peaks Fin. Servs., Inc. v.
Roth-Steffen, 778 N.W.2d 380, 387 (Minn.Ct.App. 2010)
(setting forth elements of an account stated claim), with
Leighton v. Forster, 213 Cal.Rptr.3d 899, 918
(Cal.Ct.App. 2017) (setting forth elements of an account
stated claim), equitable accounting claim (count 14),
compare United Prairie Bank-Mountain Lake v. Haugen
Nutrition & Equipment, LLC, 813 N.W.2d 49, 57 n.3
(Minn. 2012) (discussing the remedy of equitable accounting),
with Prakashpalan v. Engstrom, Lipscomb & Lack,
167 Cal.Rptr.3d 832, 859 (Cal.Ct.App. 2014) (discussing
equitable accounting claims), constructive trust claim (count
15), compare Peterson v. Holiday Recreational Indus.,
Inc., 726 N.W.2d 499, 507 (Minn.Ct.App. 2007)) (setting
forth constructive trust claim requirements), with
Optional Capital, Inc. v. DAS Corp., 166 Cal.Rptr.3d
705, 715 (Cal.Ct.App. 2014), and conversion claim (count 16),
compare Staffing Specifix, Inc. v. TempWorks Mgmt.
Servs., Inc., 896 N.W.2d 115, 125 (Minn.Ct.App.
2017) (setting forth elements of common law conversion
claim), with Prakashpalan, 167 Cal.Rptr.3d at 857
(setting forth elements of common law conversion claim).
Because Minnesota and California law are, where relevant,
essentially the same, the Court could apply either
state’s substantive law. Because IPL asserts California
law applies, and because there are no objections, the Court
will apply California law to IPL’s state-law claims.
Count 6 – Negligence
count 6 of its complaint, IPL asserts a common-law negligence
claim against Defendants. (See Compl. [Doc. No. 1]
at 23.) Specifically, IPL contends that during the term of
its Agreement with Defendants, both Contenta and Broussard
owed an independent duty to IPL to use such “skill,
prudence, and diligence as other members of their profession
commonly possess and exercise” and that they breached
that duty by mispresenting their pedigree and stealing
IPL’s funds. (Id. at 7–8, 23.)
Under California law, “any negligence cause of
action” requires the plaintiff to show “duty,
breach of duty, proximate cause, and damages.”
Peredia, 236 Cal.Rptr.3d at 162 (citation omitted).
To the extent IPL’s claim is one for professional
negligence, it must show: “ ‘(1) the existence of
the duty of the professional to use such skill, prudence, and
diligence as other members of the professional commonly
possess and exercise; (2) breach of that duty; (3) a causal
connection between the negligent conduct and the resulting
injury; and (4) actual loss or damage resulting from the
professional negligence.’ ” Hasso, 173
Cal.Rptr.3d at 394 (citation omitted). Under California law,
an “investment adviser/client relationship . . .
giv[es] rise to a fiduciary duty as a matter of law.”
Id. at 384 (citing S.E.C. v. Capital Gains
Bureau, 375 U.S. 180, 191, 194 (1963)). A fiduciary duty
requires the fiduciary to “ ‘act with the utmost
good faith for the benefit of the other party’ ”
and must not take any “ ‘advantage from his acts
relating to the interest of the other party with the
latter’s knowledge or consent.’ ” In re
Marriage of Duffy, 11 Cal.Rptr.2d 160, 168 (Cal.Ct.App.
2001) (citations omitted).
Based on the findings of fact above, and the allegations in
IPL’s complaint, the Court finds that Defendants owed a
fiduciary duty to IPL as both a matter of law, see
Hasso, 173 Cal.Rptr.3d at 394 (citation omitted), and
under the terms of the party’s Investment Advisory
Agreement, (see, e.g., Agreement [Doc. No. 1-1] at
4.) As a fiduciary, Defendants owed an even higher standard
of care to IPL than under negligence principles. Defendants
breached that duty by putting themselves and their interests
before IPL and absconding with its investment funds, directly
causing financial harm to IPL. Accordingly, the Court holds
that IPL has proven that Defendants were negligent-indeed,
they were more than negligent-and will grant IPL default
judgment on count 6.
Count 7 – Intentional Fraud
count 7 of its complaint, IPL asserts that Defendants
intentionally defrauded IPL by making numerous
misrepresentations about Defendants’ qualities as
investment advisers and Defendants’ intent for
IPL’s investment funds, with the goal of inducing IPL
to invest through Defendants. (Compl. [Doc. No. 1] at
23–24.) IPL claims that all of Defendants’
representations were false, that Defendants knew they were
false at the time they were made, and that Defendants
intended to provide “no consideration or value to
[IPL]” and instead intended to “deceive and
defraud [IPL]” after inducing it to invest.
(Id. at 24–25.)
Under California law, an action for intentional fraud (also
termed a “tort action for deceit”) requires a
plaintiff to prove “ ‘(a) misrepresentation
(false representation, concealment, or nondisclosure); (b)
knowledge of falsity (or ‘scienter’); (c) intent
to defraud, i.e., to induce reliance; (d) justifiable
reliance; and (3) resulting damage.’ ” Tenet
Healthsystem Desert, Inc., 199 Cal.Rptr.3d at
914–15 (citation omitted). Fraud must be “pled
specifically . . . [and] necessitates pleading facts
which ‘show how, when, where, to whom, and by what
means the representations were tendered.’ ”
Id. at 915 (citation omitted).
Court finds that Defendants intentionally defrauded IPL. IPL
has proven that Defendants falsely represented to IPL that
they were experienced investment advisers, stock market
specialists, and they would and could manage IPL’s
investments for the organization. (Compl. [Doc. No. 1] at
5–6.) Defendants also falsely represented to IPL that
if IPL invested under their guidance, IPL’s portfolio
would be diversified, provide a higher conservative return,
and would remain liquid and accessible. (Id. at
6–7.) Further, Defendants misrepresented that any funds
IPL provided for investment purposes would be held by a
third-party custodian, and that Defendants would carefully
manage IPL’s investment under fiduciary standards.
(Id. at 7.) IPL contends-and again, this Court takes
as true-that Defendants knew each and every representation
was false and intended to defraud IPL by inducing it to
invest through Defendants so that Defendants could steal
IPL’s funds for their own benefit. (Id. at
7–8, 24–25.) IPL did in fact rely on
Defendants’ misrepresentations, placed its investment
funds in their hands, and lost its entire investment when
Defendants stole their funds for their own benefit.
(Id. at 7–8.)
Finally, IPL’s reliance on Defendants’
misrepresentations was reasonable and justified. Under
California law, reasonable reliance exists if the person who
claims reliance was “justified in believing the [false]
representation in the light of his own knowledge and
experience.” Gray v. Don Miller & Assocs.,
Inc., 674 P.2d 253, 254 (Cal. 1984). Here, the facts
indicate that Defendants made multiple representations of
investment expertise, presented IPL with a formal investment
advisory contract, and engaged in widespread, consistent
misrepresentation as to Defendants’ financial savvy and
experience both before and after IPL decided to hire
Defendants. There are no facts indicating IPL had experience
with investing. And while the Court considers
Defendants’ representation to IPL that it would
“double” IPL’s funds to be a red flag that
a reasonable person may have investigated, California law
specifically holds that “[n]egligence on the part
of the plaintiff in failing to discover the falsity of a
statement is no defense when the misrepresentation
was intentional”-like the case here-“rather than
negligent.” Alliance Mortg. Co. v. Rothwell,
900 P.2d 601, 609 (Cal. 1995) (emphasis added). Consequently,
the intentional nature of Defendants’ fraud renders
irrelevant any negligence by IPL in relying on Defendants.
Accordingly, the Court holds that IPL has proven that
Defendants engaged in intentional fraud against IPL and will
grant default judgment on count 7.
Count 8 – Unjust Enrichment
count 8 of its complaint, IPL asserts an unjust enrichment
claim against Defendants. (Compl. [Doc. No. 1] at 25.) As
noted above, however, California courts are split over
whether unjust enrichment exists as a standalone cause of
action. See, e.g., Lyles, 171 Cal.Rptr.3d
at 40; O & M LLC, 2017 WL 1534666, at *6. In any
case, however, this split in authority is irrelevant because
California has explicitly held that “[a]n unjust
enrichment theory is inapplicable” where the plaintiff
alleges that the parties entered into an express contract.
Durell, 108 Cal.Rptr.3d at 699. Because IPL has also
brought a breach of contract claim, and because the Court
(for the reasons discussed below) finds IPL has proven that
claim, IPL is barred from recovering under an unjust
enrichment theory even if California would permit it as an
independent claim. Accordingly, the Court will not grant IPL
default judgment on count 8.
Count 9 – ...