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NDGS, LLC v. Radium2 Capital, Inc.

United States District Court, D. Minnesota

October 9, 2019

NDGS, LLC Plaintiff,
Radium2 Capital, Inc., Defendant.

          James W. Moen and Joseph A. Wentzell, Wentzell Law Office, PLLC, 2812 Anthony Lane South, Suite 200, Saint Anthony, MN 55418, for Plaintiff.

          Bethany J. Rubis, Ask LLP, 2600 Eagan Woods Drive, Eagan, MN 55121; and Shanna M. Kaminski, Varnum LLP, 160 W. Fort Street, Suite 5th Floor, Detroit, MI 48226, for Defendant.



         Before the Court is Defendant Radium 2 Capital, Inc.'s (“Radium2”) Motion to Dismiss, or in the alternative, Transfer Venue or Stay Case [Doc. No. 10] seeking either dismissal, transfer, or a stay based on, among other theories, the first-filed rule. For the reasons set forth below, the Court grants Radium2's Motion and orders that the case be stayed pending resolution of the parallel New York proceedings.

         I. BACKGROUND

         At the motion-to-dismiss stage, the Court construes the facts in favor of, and in the light most favorable to, the nonmoving party (here NDGS, LLC, or “NDGS”). See Awnings v. Fullerton, 912 F.3d 1089, 1101 (8th Cir. 2019) (presuming the truth of the nonmoving party's factual allegations in a motion to dismiss).

         A. The Parties and Related Entities

          Plaintiff NDGS is a limited liability company organized under the laws of North Dakota. (See Am. Compl. [Doc. No. 9] at 1.) NDGS operates a small chain of grocery stores known as “Jack & Jill” in North Dakota. (Id. at 2.) NDGS is owned by Duane Johnson (“Johnson”), who owns and operates numerous small businesses in Minnesota and North Dakota. (Id.)

         Defendant Radium2 is a New York corporation with its principal place of business in New York. (Radium2 Mem. in Supp. of Mot. (“Radium2 Mem.”) [Doc. No. 12] at 1.) It provides working capital to businesses and bills itself as a “merchant cash advance company.” (Id. at 1-2; Radium2 Ex. 6 - New York Supreme Court Notice of Petition (Index No. 801410/2019) (henceforth “NY Special Proceeding Petition”) [Doc. No. 13-5] at 10.)

         B. Factual Background

         Beginning in 2018, Dan and Jenna Ross expressed interest in purchasing NDGS and its assets (namely, the Jack & Jill grocery stores). (Am. Compl. [Doc. No. 9] at 2.) Accordingly, Johnson and the Rosses entered into negotiations, during which the Rosses were provided with access to NDGS's financial and business records in order to conduct due diligence about a possible sale. (Id.) Following negotiations, however, the Rosses decided not to purchase NDGS or its assets. (Id.)

         NDGS contends that after negotiations concluded, the Rosses used the NDGS business and financial documents obtained during negotiations to secure a $250, 000 payment from Radium2 in exchange for Radium2's right to $355, 000 of NDGS's future receivables. (Id. at 3.) NDGS asserts that Jenna Ross masqueraded as the owner and manager of NDGS, and altered and falsified NDGS documents in order to strengthen her misrepresentations and obtain this purchase money. (Id.) Radium2 generally agrees that the Rosses appeared to have misrepresented their authority or position with NDGS, but takes the position that Johnson was working in tandem with the Rosses to perpetrate fraud on Radium2. (See Radium2 Mem. [Doc. No. 12] at 1-2, 5; Radium2 Ex. 1 [Doc. No. 13] (purportedly false articles of organization).) Jenna Ross also executed an Affidavit of Confession of Judgment in favor of Radium2 in which she confessed judgment, individually and personally as well as jointly and severally, against herself and NDGS in the event of a default under the agreement between Ross, NDGS, and Radium2. (See Radium2 Ex. 3 [Doc. No. 13-2].) After purportedly engaging in due diligence, Radium2 approved Ross's application for payment. (Radium2 Mem. [Doc. No. 12] at 2.)

         On or about September 10, 2018, Radium2 entered into an “Agreement for the Purchase and Sale of Future Receipts” (henceforth, the “Future Receipts Agreement”) with Ross and, allegedly, NDGS. (See Am. Compl. [Doc. No. 9] at 3 (noting the agreement's existence but asserting NDGS is not bound by it); Radium2 Mem. [Doc. No. 12] at 2-3, 5 (contending the agreement binds NDGS).) Per that agreement, on September 12, 2018, Radium2 wired $242, 475 to a bank account in NDGS's name. (See Radium2. Ex. 4 [Doc. No. 13-3]; see also NDGS Mem. in Opp'n to Mot. (“NDGS Mem.”) [Doc. No. 17] at 4-5 (noting the funds were wired to an NDGS bank account).) NDGS contends that the Rosses convinced Johnson that the reason the Rosses were using NDGS's bank account was to permit them to repay money that the Rosses owed to Johnson stemming from a prior loan between a different Johnson-owned company and a Ross-owned company. (NDGS Mem. [Doc. No. 17] at 4-5.) Per the Future Receipts Agreement, Radium2 was being repaid through daily withdrawals from the NDGS bank account in the amount of $2, 113.10. (Radium2 Ex. 2 [Doc. No. 13-1] at 2.) On about October 25, 2018, however, Dan Ross purportedly terminated the payments to Radium2.[1] (NDGS Mem. [Doc. No. 17] at 5.)

         C. Procedural Posture

         After Radium2 stopped receiving repayments, it filed the Confession of Judgment executed by Jenna Ross in New York state court. (Id. at 6.) On November 9, 2018, based on the confession and other evidence, Radium2 obtained a judgment in its favor against NDGS and Jenna Ross in the amount of $363, 868.99 (See Radium2 Ex. 5 - New York Supreme Court Judgment (Index No. 18-817680) (henceforth “NY Judgment”) [Doc. No. 13-4] at 2.) On January 29, 2019, Radium2 commenced a special proceeding against NDGS, Jenna Ross, several other NDGS-named entities, Johnson, and Daniel Wessman in New York state court in order to execute and recover under its November 2018 judgment. (See Radium2 Ex. 6 NY Special Proceeding Petition [Doc. No. 13-5].) On March 5, 2019, NDGS removed the special proceeding to the United States District Court for the Western District of New York. (See Radium2 Ex. 8 ...

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