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Damian v. Yellow Brick Capital Advisers (UK) Ltd

United States District Court, S.D. Florida

November 12, 2019




         THIS CAUSE came before the Court on Defendants, Yellow Brick Capital Advisers (UK) Limited (“Yellow Brick UK”) and Yellow Brick Innovations (US) LLC's[1] (“Yellow Brick US['s]”) Motion to Dismiss First Amended Complaint [ECF No. 35] for failure to state a claim for relief under Federal Rule of Civil Procedure 12(b)(6) as to Yellow Brick US, and for lack of personal jurisdiction over Yellow Brick UK under Rule 12(b)(2). Plaintiff, Melanie Damian, filed a Response [ECF No. 37]; to which Defendants filed a Reply [ECF No. 38]. The Court has carefully considered the First Amended Complaint (“Am. Compl.”) [ECF No. 25], the parties' written submissions, and applicable law. For the following reasons, the Motion is denied.

         I. BACKGROUND

         This is an action to recover allegedly fraudulent transfers from Onix Capital LLC, an insolvent company, to Defendant Yellow Brick UK. (See Am. Compl. 1-2). Plaintiff is the Receiver for Onix Capital.[2] (See id. ¶ 11). Defendant Yellow Brick UK is a United Kingdom private limited company advertising itself as an investment and financial advisory firm. (See Id. ¶¶ 12, 21). Defendant Yellow Brick U.S. is a Delaware limited liability company with its principal place of business in Florida. (See Id. ¶ 13).

         Plaintiff alleges Yellow Brick U.S. was incorporated by and is financially, logistically, and pragmatically controlled by Yellow Brick UK. (See Id. ¶¶ 13, 28). On July 25, 2019, Plaintiff filed the Amended Complaint, bringing three separate claims of fraudulent transfer and one claim of unjust enrichment against Yellow Brick UK and Yellow Brick US, as Yellow Brick UK's alter ego. (See generally id.).

         A. The Receivership

         In November 2016, the Securities and Exchange Commission (“SEC”) commenced an action against Onix Capital and the Relief Defendants as entities run for the purpose of furthering a securities fraud scheme perpetrated by Alberto Chang-Rajii (“Chang”). (See Id. ¶ 1). The case - SEC v. Onix Capital LLC, No. 16-CV-24678 (S.D. Fla. filed Nov. 8. 2016) (the “Receivership Proceeding”) - is pending. (See id.). On April 4, 2017, the court in the Receivership Proceeding entered an order (the “Receivership Order”)[3] appointing Plaintiff as Receiver. (See Id. ¶ 2). Under the Receivership Order, Plaintiff has the duty to investigate the assets belonging to Onix Capital and the Relief Defendants and prosecute causes of action to recover assets, including bringing fraudulent transfer actions. (See Id. ¶¶ 2-4 (citing Receivership Order)).

         Plaintiff determined Onix Capital paid Defendant Yellow Brick UK an amount in excess of $164, 833.00 while Onix Capital was insolvent, in furtherance of Onix Capital's fraudulent scheme. (See Id. ¶ 5). Plaintiff filed this action to recover the fraudulent transfers. (See Id. ¶ 7).

         B. The Yellow Brick Group

         Yellow Brick UK and Yellow Brick U.S. comprise the Yellow Brick Group.[4] (See Id. 1). Plaintiff alleges Andres Hammer is the CEO of the Yellow Brick Group and Jonathan Kol-Bar is Yellow Brick Group's Group Executive Chairman.[5] (See Id. ¶¶ 12-13). According to Plaintiff, since opening its office in the United States, “Yellow Brick U.S. has agreed to act on Yellow Brick UK's behalf, and has been financially, logistically and pragmatically controlled by Yellow Brick UK and the Yellow Brick Group.” (Id. ¶ 13). Plaintiffs allegations regarding Yellow Brick UK, the formation of Yellow Brick US, and the relationship between the two entities are as follows:

         Yellow Brick UK.

         Since 2010, Yellow Brick UK, a United Kingdom private liability company, has been controlled by Joko Holdings LLC, a Florida-based company registered in New York with a principal office at 20890 North East 32nd Avenue, Aventura, Florida 33180.[6] (See id. ¶¶ 20-21 (citing PSC Form 2)). Joko Holdings owns seventy-five percent or more of Yellow Brick UK's voting shares. (See Id. ¶ 12). Joko Holdings is the required signatory for Yellow Brick UK's corporate governance resolutions. (See Id. ¶ 22). Kol-Bar is the authorized signatory of Joko Holdings. (See Id. ¶ 12).

         With the Amended Complaint, Plaintiff shows Yellow Brick UK engaged in business in the United States at least twice prior to the creation of Yellow Brick US. (See Id. ¶ 27). In 2015, Yellow Brick UK announced a merger with a Lancaster, Pennsylvania company, Aspire Ventures; and the same year, Yellow Brick UK advertised business dealings in San Francisco with a company called Smart Sparrow. (See Id. (incorporating screen shots from Yellow Brick Capital Facebook page)).

         Yellow Brick US.

         In 2016, Yellow Brick UK hired Hammer as CEO of the Yellow Brick Group. (See Id. ¶ 28).[7] Yellow Brick UK, “through Mr. Kol-Bar and Mr. Hammer” incorporated Yellow Brick US. (Id. ¶ 28). Kol-Bar is a director and shareholder of Yellow Brick US. (See Id. ¶ 29). Hammer is a director and shareholder of Yellow Brick US. (See Id. ¶ 32).

         In 2016, Hammer opened an office in Aventura, Florida in Yellow Brick US's name; however, Yellow Brick UK advertised the office as its own on its website (See Id. ¶ 28 (citing Ex. E, Website [ECF No. 25-5] (listing the address for Yellow Brick UK's “USA Office” as 20807 Biscayne Boulevard, Suite 100, Aventura, FL 33180))). Yellow Brick UK pays the salaries and expenses of Yellow Brick US. (See Id. ¶ 30). Yellow Brick UK is Hammer's sole “client” in the United States. (Id. ¶ 31). Hammer testified Yellow Brick U.S. has other clients, but these are managed by Kol-Bar and Hammer is unsure what income, if any, Yellow Brick U.S. receives from those clients. (See Id. ¶ 30 (citing Ex. F, July 1, 2019 Andres Hammer Deposition (“Hammer Dep.”) [ECF No. 25-6] 61:14-62:12)). Yellow Brick U.S. is “directly funded” by Yellow Brick UK via invoices Hammer submits to Yellow Brick UK after Hammer completes Yellow Brick U.S. assignments for Yellow Brick UK. (Id.).

         The corporate formalities between the two entities are otherwise unclear or nonexistent. (See Id. ¶ 31). The two share the same officers and directors. (See Id. ¶ 32). There is no written partnership agreement between the two. (See Id. ¶ 31 (citing Hammer Dep. 88:5-6)).[8] There is no written agreement formalizing a client relationship - only a “verbal consulting agreement.” (Id. (quoting Hammer Dep. 81:6-7)). Yellow Brick U.S. does not have its own website, and it is only referred to on Yellow Brick UK's website. (See Id. ¶ 33). Yellow Brick US's information technology infrastructure is controlled by Yellow Brick UK, and Hammer's work email address shares the same URL as the emails for Yellow Brick UK. (See Id. (citing Hammer Dep. 132:22-133:7)).

         Hammer's Work on Behalf of Yellow Brick UK.

         Hammer is listed on Yellow Brick UK's website and Facebook page as Yellow Brick UK's CEO. (See Am. Compl. ¶ 32). Hammer's LinkedIn page lists him as an employee of Yellow Brick UK.[9] (See id.). Hammer testified when Yellow Brick U.S. needs to discuss something with Yellow Brick UK, the conversation is between him and Kol-Bar, similar to regular conversations the two have as partners of Yellow Brick U.S. and as partners of Yellow Brick UK. (See Id. ¶ 34).

         From his base in Florida, Hammer participates in major business decisions regarding Yellow Brick UK, decisions that do not pertain to Yellow Brick US. (See Id. ¶ 35). Plaintiff alleges Hammer's activities “reflect[] Yellow Brick UK uses Yellow Brick US's office space as its own and the daily operations of Yellow Brick UK and Yellow Brick U.S. are not kept separate.” (Id. ¶ 35 (alteration added)). For example, Mr. Hammer worked from his home base in Florida “as Andres Hammer, Partner” of Yellow Brick UK to decide whether Yellow Brick UK should adjust its licensing status with the United Kingdom's Financial Conduct Authority (“FCA”). (Id. ¶ 35 (citing Hammer Dep. 85:3-17; 108:20-109:10)).

         Hammer is based in Miami, and Kol-Bar is based in London. (See Id. ¶ 36). Hammer and Kol-Bar “work fluidly” between the offices under the name “The Yellow Brick Group.” (Id.). For instance, Kol-Bar and Hammer travelled to Israel together on behalf of the Yellow Brick Group. (See Id. ¶ 37). The pair also travelled to London together to inaugurate the ground floor of Yellow Brick UK's London hotel. (See id.).

         Yellow Brick UK's Relationship with Onix Capital and the Alleged Fraudulent Transfers.

         In 2013, Yellow Brick UK transferred $5, 000 to Highlander Real Estate Ventures, an entity owned by Chang. (See Id. ¶ 23 (citing Ex. C, Highlander Bank Records [ECF No. 25-3])). Chang published marketing materials in connection with Highlander, stating Kol-Bar was a member of Onix Capital's “advisory board.” (Id. ¶ 24 (internal quotation marks removed)). Around the time of the Highlander transaction, “Mr. Kol-Bar, Yellow Brick UK and Chang developed a close relationship.” (Id. ¶ 25). Kol-Bar introduced Chang to people Chang would later hire as employees in London. (See id.). Yellow Brick UK permitted Chang to work from its London office and have packages delivered there. (See id.). Chang also invited Kol-Bar to serve on the board of directors of Chang's UK company, Onix Capital Limited. (See Id. ¶ 26).

         On June 4, 2015, prior to the creation of Yellow Brick US, Onix Capital wired Yellow Brick UK $57, 518.00 for “Consulting Fees.” (Id. ¶ 38 (citing Ex. I, Bank Records [ECF No. 25-9]). On October 8, 2015, Onix Capital wired Yellow Brick UK $107, 315.83 for “Advisory Services.” (Id.). These transfers occurred at times when Onix Capital was insolvent. (See Id. ¶ 44). At the time of the transfers, Yellow Brick UK had been owned and controlled by Florida-based Joko Holdings LLC for at least five years. (See Id. ¶ 38). Yellow Brick UK had also been actively engaged in business with one of Chang's Miami-based companies for at least two years.[10](See id.).

         Plaintiff's Attempt to Recover the Alleged Fraudulent Transfers.

         On January 8, 2019, Plaintiff subpoenaed the Yellow Brick Group at its Aventura office for documents relating to the wire transfers and the consulting services provided to Onix Capital. (See Id. ¶ 39 (citing Ex. J, Subpoena [ECF No. 25-10])). Yellow Brick Group responded to the subpoena via a letter dated January 9, 2019, stating the only documents in its possession relating to Chang concerned Chang's rental of office space belonging to Yellow Brick UK in London. (See Id. (citing Ex. K, Response to Subpoena [ECF No. 25-11] 4-5)).[11] The letter states “[Yellow Brick UK] did not have any other business or other activity with Alberto Chang and/or any of his companies, investments or anything related to them.” (Id. ¶ 42 (quoting Response to Subpoena 5 (alteration added; internal quotation marks omitted))). Hammer testified he participated in drafting the letter. (See Id. ¶ 40).

         The January 9, 2019 letter's statements are inconsistent with the memo notes on the alleged fraudulent wire transfers indicating payments were made to Yellow Brick UK for “Consulting Fees” and “Advisory Services.” (Id. ¶ 41 (internal quotation marks omitted)). The letter's statement Yellow Brick UK “did not have any other business or activity with Alberto Chang” is also inconsistent with the fact Yellow Brick previously transferred $5, 000 to Chang's Highlander entity. (Id. ¶ 42 (quoting Response to Subpoena 5 (alteration added; internal quotation marks omitted))). Yellow Brick Group did not produce a lease agreement between any Yellow Brick entity and Onix Capital to substantiate the claim the wire transfers constituted lease payments. (See Id. ¶ 43). Neither did Yellow Brick Group produce documents showing the wire transfers were for consulting or advisory services. (See id.).[12]

         Yellow Brick Group did not return the funds. (See Id. Am. Compl. ¶ 45). Instead, Yellow Brick UK asserts it has an agreement with Chang under which Chang still owes Yellow Brick UK $700, 000.00. (See Id. ¶ 59).

         Defendants' Efforts to Distinguish Yellow Brick UK from Yellow Brick US.

         Plaintiff alleges “the Yellow Brick Group has taken several proactive and improper steps to try and to distance itself from the Receiver's and this Court's jurisdiction.” (Id. ¶ 45).

         In correspondence with Plaintiff's counsel, Hammer “has repeatedly modified his email signature to cover up the Yellow Brick Group and [Yellow Brick UK]'s contact with and business dealings in Florida.” (Id. ¶ 47 (alteration added)). On January 31, 2019, Hammer emailed Plaintiff's counsel attaching the January 9, 2019 letter. (See Id. (citing Response to Subpoena 2)). The email signature block identifies Hammer as “Group CEO” of “Yellow Brick Group” and lists an Aventura, Florida address. (Id. (internal quotation marks omitted)). The email contains subscript stating, “[Yellow Brick UK] is authorized and registered by the Financial Conduct Authority (FCA).” (Id.; Response to Subpoena 2 (alteration added)).

         Plaintiff asked Hammer to accept service of the subpoena directed to him in his capacity as Group CEO of the Yellow Brick Group. (See Id. ¶ 49). On March 4, 2019, Hammer replied via email stating he would accept service, but modified his email signature to state “CEO” of “Yellow Brick US” and not “Group CEO” of “Yellow Brick Group.” (Id. (citing Ex. M, March 4, 2019 Email [ECF No. 25-13] 1])). The March 4, 2019 email contains the same subscript as the January 31, 2019 email concerning Yellow Brick UK. (See id.).

         Plaintiff asked the Yellow Brick Group to enter into a tolling agreement when it appeared Hammer's deposition would be delayed. (See Id. ¶ 50). Hammer replied to Plaintiff via email requesting the tolling agreement be addressed to Yellow Brick U.S. only. Hammer further stated he has “no authority to sign on behalf of any entity besides [Yellow Brick US].” (Id. (quoting Ex. N, March 6, 2019 Email [ECF No. 25-14] 1] (alteration added))). Hammer again altered the signature block of the March 6, 2019 email. The March 6, 2019 email's signature block identifies Hammer as CEO of Yellow Brick U.S. and removes the subscript pertaining to Yellow Brick UK present in his earlier emails. (See id.). Hammer's LinkedIn page, however, identifies him as an employee of Yellow Brick Capital, based in the Miami/Ft. Lauderdale area.[13]

         On May 8, 2019, Plaintiff served Andres Hammer “as CEO for [Yellow Brick UK]” at 20201 East Country Club Dr., Miami FL 33180. (See Return of Service [ECF No. 6] (alteration added)).

         Defendants now move to dismiss on two grounds: (1) Plaintiff fails to state a claim against Yellow Brick U.S. under Rule 12(b)(6); and (2) Yellow Brick UK must be dismissed for lack of personal jurisdiction under Rule 12(b)(2). (See generally Mot.).


         A. Dismissal for Failure to State a Claim

         Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss a claim against it by asserting the complaint fails state a claim for relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (alteration added; quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The pleading standard “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (quoting Twombly, 550 U.S. at 555). Pleadings must contain more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). Therefore a plaintiff must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (alteration added; citing Twombly, 550 U.S. at 556). When reviewing a motion to dismiss, the Court must construe the complaint in the light most favorable to the plaintiff and take the factual allegations therein as true. See Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997) (citation omitted).

         B. Dismissal for Lack of Personal Jurisdiction

         Under Federal Rule of Civil Procedure 12(b)(2), a defendant may move to dismiss a claim against it by asserting the defense of lack of personal jurisdiction. Because “[f]ederal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons, ” Daimler AG v. Bauman, 571 U.S. 117, 125 (2014) (citing Fed.R.Civ.P. 4(k)(1)(A)), a federal court sitting in Florida may properly exercise personal jurisdiction only if the requirements of (1) Florida's long-arm statute; and (2) the Due Process Clause of the Fourteenth Amendment to the United States Constitution are both satisfied. See Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209, 1214 (11th Cir. 1999) (citing Sculptchair, Inc. v. Century Arts Ltd., 94 F.3d 623, 626 (11th Cir. 1996)).

         “A plaintiff seeking to obtain jurisdiction over a non-resident defendant initially need only allege sufficient facts to make out a prima face case of jurisdiction.” Id. (citing Electro Eng'g Prods. Co. v. Lewis, 352 So.2d 862, 864 (Fla. 1977)). “The district court must accept the facts alleged in the complaint as true, to the extent they are uncontroverted by the defendant's affidavits.” Peruyero v. Airbus S.A.S., 83 F.Supp.3d 1283, 1286 (S.D. Fla. 2014) (citing Consol. Dev. Corp. v. Sherritt, Inc., 216 F.3d 1286, 1291 (11th Cir. 2000)). If a plaintiff pleads sufficient facts to support the exercise of personal jurisdiction, the burden shifts to the defendant to make a prima facie showing of the inapplicability of the state's long-arm statute. See Future Tech. Today, Inc. v. OSF Healthcare Sys., 218 F.3d 1247, 1249 (11th Cir. 2000) (per curiam) (quoting Prentice v. Prentice Colour, Inc., 779 F.Supp. 578, 583 (M.D. Fla. 1991)).

         If the defendant satisfies its burden, the burden then shifts to the plaintiff to “substantiate the jurisdictional allegations in the complaint by affidavits or other competent proof, and not merely reiterate the factual allegations in the complaint.” Id. “The district court must construe all reasonable inferences in the light most favorable to the plaintiff when dealing with conflicting evidence.” Peruyero, 83 F.Supp.3d at 1287 (citing PVC Windoors, Inc. v. Babbitbay Beach Const., N.V., 598 F.3d 802, 810 (11th Cir. 2010)) (other citation omitted).

         III. ...

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