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Schwartzman v. Rogue International Talent Group, Inc.

United States District Court, Third Circuit

November 7, 2013

KAMIAN SCHWARTZMAN, in his capacity as Receiver, Plaintiff,
v.
ROGUE INTERNATIONAL TALENT GROUP, INC., et al., Defendants.

MEMORANDUM

Berle M. Schiller, J.

Kamian Schwartzman, acting as Receiver for the receivership estate established by the Court in SEC v. Stinson, brings claims for fraudulent transfer, unjust enrichment, and equitable accounting against Rogue International Talent Group, Inc. (“Rogue”). The Receiver also seeks to pierce the corporate veil of Roger Paul, Inc. (“RPI”) to hold RPI liable for any judgment against Rogue. Before the Court is the Receiver’s Motion for Default Judgment against Rogue and RPI in the amount of $81, 861.89. For the following reasons, the Court grants the motion.

I. BACKGROUND

By Order dated September 13, 2010, this Court established a receivership estate to recover funds stolen in a Ponzi scheme perpetrated by Robert Stinson. (Order Establishing Receivership Estate, SEC v. Stinson, Civ. A. No. 10-3130, Document No. 29.) On September 12, 2012, the Receiver sued to recover funds allegedly transferred from Stinson entities involved in the Ponzi scheme (“Stinson entities”) to Roger Paul (“Paul”) and entities that he allegedly controlled, Rogue and RPI. (Compl. ¶¶ 12, 46.) Rogue operates as a talent and entertainment agency primarily representing actors and comedians. (Id. ¶ 15.) RPI is a “successor entity to Rogue, ” and it “serves the same business purpose as Rogue and maintains the same clientele.” (Id. ¶ 16.) The Receiver alleges that Stinson entities transferred $143, 273.44 to or for the benefit of Paul, Rogue, and RPI between November 2009 and July 2010.[1] (Pl.’s Mot. for Summ. J. 1; Pl.’s Statement of Undisputed Material Facts in Supp. of Mot. for Summ. J. ¶ 14.)

According to the docket, RPI was properly served on September 24, 2012, and Rogue was properly served on October 11, 2012. Neither RPI nor Rogue has answered. On October 8, 2013, the Clerk of Court entered a default against RPI and Rogue. On October 18, 2013, the Receiver moved for default judgment against Rogue and RPI in the amount of $81, 861.89. To date, Rogue and RPI have not responded.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 55(b)(2) provides that a district court may enter default judgment against a party when default has been entered by the Clerk of Court. Before entering default judgment, the court must determine that the unchallenged facts set forth in the complaint establish a legitimate cause of action, since a party in default does not admit mere conclusions of law. Carroll v. Stettler, Civ. A. No. 10-2262, 2012 WL 3279213, at *2 (E.D. Pa. Aug. 10, 2012); Bricklayers & Allied Craftworkers Local 1 v. WaterControl Servs., Inc., Civ. A. No. 09-3935, 2012 WL 3104437, at *3 (E.D. Pa. July 30, 2012). In addition, the court must consider three factors when deciding whether to grant default judgment: (1) prejudice to the plaintiff if default judgment is denied; (2) whether the defendant appears to have a litigable defense; and (3) whether the defendant’s delay is due to culpable conduct. Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000).

III. DISCUSSION

A. The Complaint Establishes Legitimate Causes of Action

The Receiver brings claims against Rogue for fraudulent transfer pursuant to the Pennsylvania Uniform Fraudulent Transfer Act (“PUFTA”), for unjust enrichment, and for an equitable accounting. (Compl. ¶¶ 32-44, 64-69) The Receiver also seeks to pierce RPI’s corporate veil to hold it liable for Rogue’s debts. (Compl. ¶¶ 45-52.) For the following reasons, the Court finds that the unchallenged factual allegations of the Complaint establish legitimate causes of action against Rogue and RPI.

i. Rogue

The facts in the Complaint, accepted as true, entitle the Receiver to recover under PUFTA the money that Stinson entities paid for the benefit of Rogue. PUFTA allows a creditor such as the Receiver to obtain avoidance of a “transfer” made to another party with “actual intent to . . . defraud.” 12 Pa. Cons. Stat. §§ 5104(a), 5107(a). A transfer is “[e]very mode . . . of disposing of or parting with an asset or an interest in an asset, ” including the payment of money. Id. § 5101(b). Actual fraudulent intent is established through the mere existence of a Ponzi scheme. Hecht v. Malvern Preparatory Sch., 716 F.Supp.2d 395, 400 (E.D. Pa. 2010); see also SEC v. Forte, Civ. A. Nos. 09-63, 09-64, 2010 WL 939042, at *5 (E.D. Pa. Mar. 17, 2010). Judgment may be entered against “the first transferee of the asset or the person for whose benefit the transfer was made, ” among other parties. 12 Pa. Cons. Stat. § 5108(b).

The Complaint adequately pleads the elements of a PUFTA claim. Because this Court has already determined that Stinson entities operated a Ponzi scheme, transfers by Stinson entities are presumptively fraudulent. See Hecht, 716 F.Supp.2d at 400-01. In November 2009, Paul and Stinson entered into a written agreement providing that Stinson entities would fund Paul’s and Rogue’s operations. (Compl. ¶ 25 & Ex. C [Stinson Letter to Paul].) Between November 2009 and July 2010, Stinson entities paid for office space, salaries, and other goods and services for Paul and Rogue, without receiving anything of value from Paul or Rogue. (Compl. ¶¶ 6-12, 26.) Although the initial transferees included Rogue employees and commercial entities such as Staples and Walmart (Pl.’s Mot. for Summ. J. Exs. G, I), the Complaint asserts that these transfers were made for the benefit of Rogue. (See Compl. ¶ 26.); see also 12 Pa. Cons. Stat. § 5108(b) (“[J]udgment may be entered against . . . the person for whose benefit the transfer was made . . . .”). Therefore, the factual allegations in the ...


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