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Iota Phi Lambda Sorority, Inc. v. Contenta Global Capital Group, LLC

United States District Court, D. Minnesota

September 26, 2019

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.

          Damon L. Ward, and Albert T. Goins, Sr., for Plaintiff.

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

          ORDER

          SUSAN RICHARD NELSON, United States District Judge

         The 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.

         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. (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).)

         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. 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.

         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. See Fed. 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, 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].)

         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. 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.

         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, (see Id . 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; 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).)

         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, 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 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 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. at 14.)

         20. On 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 13–14.)

         21. On 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, 2019).)

         C. Service on Defaulting Defendants

         22. IPL 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.

         23. 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].

         CONCLUSIONS OF LAW

         I. THE DEFENDANTS ARE IN DEFAULT

         1. 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.

         2. 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.

         3. 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 below.

         II. LIABILITY

         4. As noted above, the factual allegations in the Complaint-other than those relating to the amount of damages-are accepted as true.

         5. In 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 and relief.

         6. The 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.

         A. State-Law Claims (Counts 6 through 16)

         7. 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.[1]

         8. The 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.[2] Id. at 94 n.2 (citation omitted).

         9. 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”).

         10. 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.

         11. 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).

         12. The 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).

         13. 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.

         1. Count 6 – Negligence

         14. In 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.)

         15. 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).

         16. 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.

         2. Count 7 – Intentional Fraud

         17. In 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.)

         18. 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).

         19. The 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.)

         20. 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.

         21. Accordingly, the Court holds that IPL has proven that Defendants engaged in intentional fraud against IPL and will grant default judgment on count 7.

         3. Count 8 – Unjust Enrichment

         22. In 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.

         4. Count 9 – ...


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