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Freestream Aircraft USA Ltd. v. Chowdry

United States District Court, S.D. Florida

April 30, 2018



          WILLIAM MATTHEWMAN United States Magistrate Judge

         THIS CAUSE is before the Court upon Plaintiff, Freestream Aircraft USA Ltd.'s ("Plaintiff) Motion to Strike Defendants' First Amended Affirmative Defense ("Motion") [DE 178]. Defendants, Ronni Chowdry, Atlas Aviation LLC ("Atlas Aviation"), Atlas Aviation Sales & Leasing LLC ("Atlas Sales"), and Atlas Luxury Jets LLC ("Atlas Luxury") (collectively, "Defendants"), filed a response [DE 206], and Plaintiff filed a reply [DE 209]. The matter is now ripe for review. The Court has carefully considered the filings and attachments thereto, as well as the entire docket in this case. No. hearing is necessary.

         I. BACKGROUND

         Plaintiff filed its original complaint in this case on July 11, 2016. See DE 1. Plaintiff filed an Amended Complaint [DE 109] on December 27, 2017, with leave of Court. The Amended Complaint alleges piercing the corporate veil against Defendants Ronni Chowdry, Atlas Aviation, Atlas Sales, and Atlas Luxury (Count 1); conversion against Defendants Atlas Aviation, Atlas Sales, and Chowdry (Count 2); unjust enrichment against Defendants Atlas Aviation, Atlas Sales, Chowdry, and Atlas Luxury Jets (Count 3); civil theft in violation of section 772.11, Florida Statutes, against Defendant Chowdry (Count 4); and civil theft in violation of section 812.014, Florida Statutes, against Defendant Chowdry (Count 5). [Amended Compl., DE 17].

         On January 5, 2018, Defendant Ronni Chowdry[1] filed his Answer and Affirmative Defenses to Amended Complaint [DE 121]. He asserted the following affirmative defenses: unclean hands, lack of standing, failure to state a cause of action, lack of jurisdiction, and improper party. Id. On January 19, 2018, Plaintiff filed a Motion to Strike Defendant Ronni Chowdry's Affirmative Defenses [DE 136]. The Court entered an Order Granting in Part and Denying in Part Plaintiffs motion. [DE 160]. In the Order, the Court struck Defendant's affirmative defenses that alleged failure to state a cause of action and improper party. Id. The Court denied Plaintiffs motion as to Defendant's lack of standing and lack of jurisdiction affirmative defenses and allowed those affirmative defenses to stand. Id. Finally, the Court struck Defendant's unclean hands affirmative defense without prejudice to Defendant amending the affirmative defense. Id.

         On March 15, 2018, all of the current Defendants filed an Amended First Affirmative Defense [DE 166].[2] The amended first affirmative defense states as follows:

UNCLEAN HANDS-Plaintiffs equitable claims are barred by the doctrine of unclean hands. Plaintiff and/or Tyrus utilized the operating account of ATLAS AVIATION, to perpetrate a fraud on the IRS to avoid paying taxes. The wire copy showing the transfer of the funds in question is attached as EXHIBIT A.
The email chain between ATLAS AVIATION and Tyrus, including the W9 that was requested by Tyrus, and issued to ATLAS AVIATION is attached as EXHIBIT B. Thereafter, in connection with filing its 2013 tax return, Tyrus submitted the information gathered from the W9 that it issued to ATLAS AVIATION, to the IRS, representing to the Federal Government, that it paid ATLAS AVIATION, a consulting fee in the amount of $2, 580, 950.00. See EXHIBIT C. Thus, Tyrus requested the W9 from ATLAS AVIATION, not from the Plaintiff, and submitted that information to the IRS, representing that the money was due and payable to ATLAS AVIATION, not to the Plaintiff. The plan to use ATLAS AVIATION'S bank account in this way was directed by the Plaintiffs principal, Rebecca Posili-Cilli. See EXHIBIT D. By using ATLAS AVIATION'S bank account in this way and by representing to the IRS that the money was earned by ATLAS AVIATION, as a consulting fee, the tax liability on the entire sum of $2, 580, 950.00 belongs to ATLAS AVIATION. Plaintiffs intention is to seek a judgment against ATLAS AVIATION, and the other Defendants, in this action, recover the principal sum of $1, 130, 475.00 from the Defendants, but to leave ATLAS AVIATION, with the tax liability. ATLAS AVIATION and the other Defendants have been injured by Plaintiffs tax evasion scheme because as far as the IRS is currently aware, as a result of the W9 submitted by Tyrus, at the direction of the Plaintiff, ATLAS AVIATION earned $2, 580, 950.00 as a consulting fee, and has to pay taxes on it. To seek recovery from the Defendants of the monies that the Plaintiff sought to hide from the IRS, while leaving the Defendants with the tax liability, constitutes injury to the Defendants, and unclean hands.

         This amended affirmative defense filed on behalf of all Defendants only relates to Count 3 of the Amended Complaint-unjust enrichment-and not to any other counts.


         A. Motion

         In the Motion, Plaintiff argues that Defendants' unclean hands affirmative defense should be stricken because there is "simply no direct relationship between the claim and the alleged wrongdoing." [DE 178 at p. 3]. Plaintiff further contends that Defendants' "attempt to conflate their admitted misappropriation of Freestream's money with their theory of tax fraud or tax evasion is unavailing; neither tax fraud nor tax evasion are the reason for the unjust enrichment claim to the lawsuit." Id. Plaintiff next asserts that Defendants have failed to properly allege any personal injury resulting from Plaintiffs conduct. Id. at p. 4. Plaintiff maintains that Defendants have not alleged that they have paid any taxes on the $2, 580, 950.00 or that they will be likely to pay any such taxes. Id. Plaintiff argues that "if Defendants have any potential tax liability on the $1, 130, 475.00 [the amount Plaintiff asserts Defendants owe it], the liability is self-inflicted." Id. at p. 5.

         B. Response

         In response, Defendants argue that they have properly asserted an unclean hands defense as they have sufficiently pled that Plaintiffs wrongdoing is directly related to the claim against which it is asserted and Defendants have sufficiently pled that they were personally injured by Plaintiffs conduct. [DE 206 at pp. 4-5]. Defendants argue that the fact that they have not yet paid taxes on the money at issue is irrelevant. Id. at p. 6. Defendants maintain that "at this stage, the Court should only be examining what is pled and the Defendants have properly pled that they have been personally injured." Id. Finally, Defendants assert that Plaintiffs argument that the unclean hands affirmative defense fails because Defendants' ...

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