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Fleetwood Services LLC v. Complete Business Solutions Group Inc.

United States District Court, E.D. Pennsylvania

October 23, 2019

FLEETWOOD SERVICES, LLC, et al.
v.
COMPLETE BUSINESS SOLUTIONS GROUP, INC. doing business as PAR FUNDING

          MEMORANDUM

          JUAN R. SÁNCHEZ JUAN R. SÁNCHEZ, C. JUDGE

         Plaintiffs Fleetwood Services LLC, Robert Fleetwood, and Pamela Fleetwood filed a Complaint alleging they were the victims of a financial fraud perpetrated by Defendants Complete Business Solutions Group, Inc. and John and Jane Doe investors. Plaintiffs have moved to amend their Complaint. Among other changes, they would like to add class claims, request injunctive and declaratory relief, and include allegations related to a Bloomberg article. While the Court will grant leave to amend the Complaint, it will not allow the request for injunctive and declaratory relief. The Court finds amending the Complaint to seek injunctive and declaratory relief would be futile.

         BACKGROUND

         Fleetwood Services is a golf course construction company owned by Robert and Pamela Fleetwood. Complete Business is a company that buys future receivables from small businesses.[1]In January 2017, Complete Business allegedly approached Fleetwood Services with a plan to consolidate Fleetwood Services' debt. Fleetwood Services agreed to this consolidation plan. To implement the plan, the two companies signed an agreement in which Complete Business paid $370, 000.00 for $547, 600.00 of future receivables.

         According to Fleetwood Services, this agreement was not a purchase of future receivables. Instead, Fleetwood Services alleges, the agreement was actually a loan designed to keep Fleetwood Services in never-ending debt. Plaintiffs allege Complete Business demanded daily payments unrelated to any future receivables. They also allege Complete Business charged usurious interest rates and unauthorized fees. When Fleetwood Services got behind on its payments, Complete Business allegedly called Mr. and Mrs. Fleetwood and threatened to take away their business and their personal assets if they did not pay. In July 2017, Fleetwood paid back the money it owed to Complete Business with a loan from another company.

         On January 22, 2018, Fleetwood Services and Mr. and Mrs. Fleetwood filed a Complaint in this case. Complete Business moved to dismiss. Plaintiffs responded to the motion to dismiss by filing their First Amended Complaint. The First Amended Complaint included claims for violations of Texas usury laws, fraud, negligent misrepresentation, damages pursuant to a term in the contract, and violations of the Racketeer Influence and Corrupt Organizations Act (RICO). Complete Business then moved to dismiss the First Amended Complaint. On March 29, 2019, the Court dismissed the contract claim in the First Amended Complaint, but allowed the rest of the Complaint to go forward.

         On July 19, 2019, Plaintiffs sought leave to file a Second Amended Complaint. The Second Amended Complaint included many of the same claims as the First Amended Complaint: violations of Texas usury law, fraud, and RICO. It also removed some of the claims in the First Amended Complaint; it removed the negligent misrepresentation claim and a claim relying on an inapplicable Texas law. The Second Amended Complaint added a new claim for attorneys' fees and a new request for injunctive and declaratory relief. Finally, the Second Amended Complaint included additional allegations such as: facts tending to show the agreement the parties signed was unconscionable; facts tending to show the agreement the parties signed was a loan rather than a purchase agreement for future receivables; and class action allegations.[2] To demonstrate that Complete Business treated its agreements with businesses like loans instead of purchases of future receivables, Plaintiffs included allegations related to a Bloomberg article. This article focused on Complete Business's “mob-like intimidation tactics” when a business cannot pay. Pl.'s Mot. for Leave to File Second Am. Compl. (Pl.'s Mot.), Ex. A at ¶ 93. According to Plaintiffs, if the agreements were actually for future receivables as they purported to be, Complete Business would have contacted the business's customers rather than the business itself.

         As explained in detail below, Complete Business opposes three of the changes in the Second Amended Complaint. It urges the Court to deny Plaintiffs leave to make those three changes. The Court will allow Plaintiffs to make two of these three changes, but the Court finds that the remaining change-the new request for injunctive and declaratory relief-is futile.

         DISCUSSION

         A court may grant leave to amend a pleading under Federal Rule of Civil Procedure 15(a)(2). This rule instructs a court to “freely give leave [to amend] when justice so requires.” Fed.R.Civ.P. 15(a)(2). A court can deny leave to amend, however, when the amendment would be futile. City of Cambridge Ret. Sys. v. Altisource Asset Mgmt. Corp, 908 F.3d 872, 878 (3d Cir. 2018). An amendment is futile when it “could not withstand a renewed motion to dismiss.” Id. (internal quotations omitted). A court may also strike allegations in a complaint when they are “redundant, immaterial, impertinent, or scandalous.” Fed.R.Civ.P. 12(f).

         Complete Business argues two changes in the proposed Second Amended Complaint are futile: the new class action allegations and the new request for declaratory and injunctive relief. Complete Business also argues the allegations relying on the Bloomberg article (in paragraph 91-97 of the Second Amended Complaint) should be stricken under Rule 12(f) as “immaterial, impertinent, or scandalous.” The Court will address each of these proposed changes in turn.

         Plaintiffs' amendment adding class allegations is not futile. Complete Business makes two arguments to the contrary, but neither is persuasive. First, Complete Business argues Plaintiffs cannot represent the class because their claims are barred by Texas's voluntary payment rule.[3]Second, Complete Business argues the class allegations are futile because of the class action waiver in the parties' contract.

         Complete Business's voluntary payment argument fails because the voluntary payment rule does not apply to the claims in this case. The voluntary payment rule is a defense to equitable claims for unjust enrichment. BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763, 768 (Tex. 2005). A defendant can assert this defense when the plaintiff voluntarily pays money “on a claim of right, with full knowledge of all the facts, in the absence of fraud, deception, duress, or compulsion.” Id. Because the voluntary payment rule is an equitable defense, it does not apply to claims based on a statutory scheme. Id. at 776 n. 9. (“[T]he voluntary-payment rule would not apply to situations in which the Legislature or commonlaw has provided a right of recovery even though payment is voluntary.”). In particular, this defense is not available when a plaintiff brings a claim under Texas's usury laws. Id. at 770 (explaining that, since 1890, Texas courts have held the “usury statute prevented [the] voluntary-payment defense”). Because the claims in this case are under Texas's usury laws, the voluntary payment defense does not apply here.

         Complete Business's argument that the class action waiver makes the class claims futile is unpersuasive because Plaintiffs plausibly allege the contract was unconscionable. Complete Business correctly points out Plaintiffs waived their right to bring a class action in the parties' contract. The contract says “the parties hereto waive any right to assert any claims against [an]other party as a representative or member in any class or representative action, except where such waiver is prohibited by law against public policy.” Def.'s Resp. in Opp'n to Pl.'s Mot. for Leave to File Second Am. Compl. (Def's Resp.), ...


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