Oregon JV LLC v. Advance Investment Corp

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

OREGON JV LLC, a New York limited No. 3:22-cv-00337-HZ

liability company,

OPINION & ORDER

Plaintiff,

v.

ADVANCED INVESTMENT CORP d/b/a

AIC, an Oregon limited liability company;

AUSTIN L. WALKER, an individual;

JOSEPH RUSSI, an individual; ANTHONY

J. FAVREAU and CYNTHIA L.

FAVREAU, Trustees of the Favreau Family

Trust; JOHN P. RUDE and CHRISTINE

ANN SULLIVAN, individuals; DW&S,

LLC, an Oregon limited liability company;

CLS INVESTMENTS, LLC, an Oregon

limited liability company; JOANNA

NASSET and STEVEN NASSET, Trustees

of the J&S Enterprises; CHARLES D.

EVERARD, ADA M. EVERARD, DONNA

J. SWANSON, and DIANE M. DUYCK,

individuals; ROBBIN DENISE FREEDMAN,

Trustee of the Robbin Denise Freedman

Revocable Living Trust; SCHULTZ REAL

ESTATE INVESTMENTS, LLC, an Oregon

limited liability company, ROBERT EDISON

SILVIS and MICHAEL J. SILVIS, Trustees

for the Silvis Family Revocable Trust,

ROBERT BAYMAN and DELORES

BAYMAN, individuals; EUGENE W.

GRAMZOW, Trustee for the Eugene W.

Gramzow Revocable Trust; JOHN V.K.

FEARING and SUSAN L. BAKER,

Co-Trustees of the Baker Fearing Trust;

EMILY R. COLLINS, NEIL L. WARNE,

CHRISTY WARNE, MARK ALLEN

DITGEN, LINDA CAROL DITGEN,

STEPHEN F. DUFFY, AMY S. LA

GRANDER, MARGIE NEMCIK-CRUZ,

JONNY B. WATSON, REX B.

BALLENGER, BONNIE L. BALLENGER,

MICHAEL A. WELT, ROBERT A. ZOLLER,

DIANA GREENE, individuals; RH

VENTURES, LLC, an Oregon limited liability

company; ERVIN WOOD, an individual; J&D

OR PROPERTIES, LLC, an Oregon limited

liability company; MATTHEW DAVID

FREEDMAN, Trustee of the Matthew

David Freedman Revocable Trust; CARL M.

DUTLI, Trustee of the CMD Retirement

Trust; MARGARET J. BROWN OLSON,

Trustee of the Margaret J. Brown Trust;

JOHN M. COMPTON, BETTY COMPTON,

KURT D. CONNELL, ERIN RONNIE

CONNELL, individuals; CRAIG ALACANO,

CYNTHIA L. ALACANO, Co-Trustees of

the Craig and Cynthia Alacano Joint Trust;

VIC MITCHELL, ANDREW STRICKLAND,

JOSEPH RUSSI, individuals.

Defendants,

v.

MENACHEM SILBER,

Third-Party Defendant.

Joseph M. Mabe

Keith A. Pitt

Slinde Nelson

425 NW 10th Ave, Suite 200

Portland, OR 97209

Daniel H. Roseman

Hinman Howard & Kattell, LLP

707 Westchester Ave, Suite 407

White Plains, NY 10604

Paul T. Sheppard

Hinman Howard & Kattell, LLP

80 Exchange Street, P.O. Box 5250

Binghamton, NY 13902

Attorneys for Plaintiff and

Third-Party Defendant

Keith D. Ropp

Christopher W. Peterman

P.O. Box 1146

Roseburg, OR 97471

Attorneys for Defendant Russi

HERNÁNDEZ, District Judge:

Plaintiff Oregon JV LLC brings this action against Defendants Advanced Investment

Corp (d/b/a “AIC”), Austin Walker—an AIC employee, Joseph Russi, and fifty-one individual

“Defendant Lenders.”1 AIC managed a pool of construction loans to Defendant Russi, each of

which was funded by a distinct Defendant Lender. Plaintiff’s assumption of those loans form the

basis of its claims. Plaintiff brings claims for fraud, unjust enrichment, negligent

misrepresentation, and rescission of contract. Defendant Russi filed an Amended Answer to

Plaintiff’s Second Amended Complaint, in which he asserts counterclaims as well as third-party

1 On September 16, 2022, Plaintiff dismissed Defendants Anthony J. Favreau and Cynthia L.

Favreau from this action.

claims against Third-Party Defendant Menachem Silber.2 Defendant Russi also asserts a third-

party claim against Toprock Funding, LLC, who is currently not a party to this case.3 Plaintiff

and Third-Party Defendant Silber move to dismiss all claims brought by Defendant Russi under

Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). For the reasons explained below, the

Court grants in part and denies in part Plaintiff and Third-Party Defendant’s motion.

BACKGROUND

Defendant AIC, a construction lender, originated and managed dozens of construction

loans to Defendant Russi for the purpose of constructing homes on various real estate parcels in

Oregon. Second Am. Compl. (“SAC”) ¶¶ 44, 46. Russi held title to the various properties. SAC

¶ 46. Each loan at issue in this case was funded by a distinct individual Defendant Lender. SAC

¶ 49. In late 2019, construction work slowed because of the large number of projects and a poor

labor market. Russi First Am. Ans. (“FAA”) ¶ 144. Construction was further hampered in 2020

due to the COVID-19 pandemic. FAA ¶ 145. Around March 2020, Russi began to borrow money

from Toprock Funding, LLC (“Toprock”), a company co-owned by Third-Party Defendant

Menachem Silber. FAA ¶ 146; SAC ¶ 64. The loans from Toprock carried high interest rates up

to 72% and encumbered Russi’s entire portfolio. FAA ¶ 146. Russi filed for Chapter 7

bankruptcy in the summer of 2020. FAA ¶ 147. Russi alleges that in the fall of 2020, Silber

promised to help him get out of bankruptcy by taking over the loans from Defendant Lenders and

buying Russi’s properties through Toprock. FAA ¶ 148. In December 2020, Russi executed a

2 Defendants AIC, Walker, and Defendant Lenders filed a joint Amended Answer separate from

that filed by Defendant Russi. On June 7, 2023, the Court entered an Opinion and Order denying

Plaintiff and Third-Party Defendant’s Motion to Dismiss counterclaims and third-party claims

brought by these Defendants AIC, Walker, and Defendant Lenders. ECF 95. Defendant Russi

asserts counterclaims and third-party claims separately.

3 No waiver of service and no affidavit of service has been filed indicating that Toprock Funding

LLC has been served.

“Sale Agreement” with Toprock. FAA, Ex. 1. The Sale Agreement provided that in

consideration for the transfer of Russi’s properties, Toprock would pay Russi $250,000 up-front,

followed by a gradual payment of $350,000 as the properties sold. FAA ¶¶ 149, 152. Under the

Sale Agreement, Toprock would also pay Russi 5% of profits it made on the sale of all homes

built by Toprock on a particular 38-acre parcel and pay Russi’s mother $35,000. FAA ¶ 152.

Toprock failed to make these payments. FAA ¶ 153.

In March 2020, Third-Party Defendant Silber formed Plaintiff Oregon JV LLC as an

Oregon limited liability company. Defs. AIC, Walker, and Defendant Lenders’ First Am. Ans.

(“AIC FAA”) ¶ 167. Oregon JV LLC then obtained title to Russi’s properties and assumed all of

Defendant Lenders’ loans on the properties. AIC FAA ¶¶ 168, 169; SAC ¶¶ 63, 64. Silber

executed the assumption agreements on behalf of Plaintiff Oregon JV LLC. AIC FAA ¶ 169.

Defendant Lenders, AIC, and Walker bring counterclaims and third-party claims against Plaintiff

Oregon JV LLC and Third-Party Defendant Silber based on breach of the assumption

agreements. AIC FAA ¶¶ 180-241. Defendant Russi’s counterclaims and third-party claims

relate to the Sale Agreement with Toprock but not the assumption agreements. FAA ¶¶ 160-182.

Plaintiff and Third-Party Defendant Silber move to dismiss all of Defendant Russi’s claims.

STANDARDS

I. Rule 12(b)(6) – Failure to State a Claim

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). When evaluating the

sufficiency of a complaint’s factual allegations, the court must accept all material facts alleged in

the complaint as true and construe them in the light most favorable to the non-moving party.

Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). A motion to dismiss under

Rule 12(b)(6) will be granted if a plaintiff alleges the “grounds” of his “entitlement to relief”

with nothing “more than labels and conclusions, and a formulaic recitation of the elements of a

cause of action[.]” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Factual allegations

must be enough to raise a right to relief above the speculative level on the assumption that all the

allegations in the complaint are true (even if doubtful in fact)[.]” Id. (citations and footnote

omitted).

To survive a motion to dismiss, a complaint “must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.

662, 678 (2009) (internal quotation marks omitted). A plaintiff must “plead[] factual content that

allows the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Id. In other words, a complaint must state a plausible claim for relief and contain “well-

pleaded facts” that “permit the court to infer more than the mere possibility of misconduct[.]” Id.

at 679.

II. Rule 12(b)(2) – Personal Jurisdiction

Under Federal Rule of Civil Procedure 12(b)(2), a defendant may move for dismissal on

the grounds that the court lacks personal jurisdiction. The plaintiff has the burden of showing

personal jurisdiction. Will Co. v. Lee, 47 F.4th 917, 921 (9th Cir. 2022) (citing Schwarzenegger

v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)).

When the Defendant's motion is based on written materials rather than an

evidentiary hearing . . . we only inquire into whether [the plaintiff's]

pleadings and affidavits make a prima facie showing of personal

jurisdiction. Uncontroverted allegations in the complaint must be taken as

true, and conflicts between parties over statements contained in affidavits

must be resolved in the plaintiff's favor.

Will, 47 F.4th at 921 (internal quotation marks and citation omitted).

In a diversity case, the federal court looks to the law of the state in which it sits to

determine whether it has personal jurisdiction over a non-resident defendant. W. Helicopters, Inc.

v. Rogerson Aircraft Corp., 715 F. Supp. 1486, 1489 (D. Or. 1989); see also Boschetto v.

Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008) (“When no federal statute governs personal

jurisdiction, the district court applies the law of the forum state.”).

Oregon Rule of Civil Procedure 4 governs personal jurisdiction in Oregon courts.

Oregon's long-arm statute confers jurisdiction to the extent permitted by due process under the

United States Constitution. Gray & Co. v. Firstenberg Mach. Co., Inc., 913 F.2d 758, 760 (9th

Cir. 1990) (citing Or. R. Civ. P. 4(L)); Oregon ex rel. Hydraulic Servocontrols Corp. v. Dale,

294 Or. 381, 657 P.2d 211 (1982)). Thus, the court may proceed directly to the federal due

process analysis. See Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122,

1129 (9th Cir. 2003) (when state long-arm statute reaches as far as the Due Process Clause, the

court need only analyze whether the exercise of jurisdiction complies with due process); see also

Millennium Enters., Inc. v. Millennium Music, LP, 33 F. Supp. 2d 907, 909 (D. Or. 1999) (noting

that because “Oregon’s catch-all jurisdictional rule confers personal jurisdiction coextensive with

due process . . . the analysis collapses into a single framework and the court proceeds under

federal due process standards”).

To comport with due process, “the nonresident generally must have ‘certain minimum

contacts [with the forum state] such that the maintenance of the suit does not offend traditional

notions of fair play and substantial justice.’” Walden v. Fiore, 571 U.S. 277, 283 (2014) (quoting

Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). The forum state may exercise either

general or specific jurisdiction over a non-resident defendant. Boschetto, 539 F.3d at 1016.

DISCUSSION

Defendant Russi brings three counterclaims against Plaintiff and Third-Party Defendant

Silber: (1) Breach of Contract; (2) Fraud; and (3) Unjust Enrichment.4 Defendant’s claims all

relate to the Sale Agreement between him and non-party Toprock. Third-Party Defendant argues

that all claims against him should be dismissed because Defendant fails to adequately plead

individual liability and the Court lacks personal jurisdiction over him. Plaintiff and Third-Party

Defendant also argue that Defendant fails to meet the heightened pleading standard for fraud

claims under Federal Rule of Civil Procedure 9(b) and that his fraud and unjust enrichment

claims are duplicative of his breach of contract claim.

I. Claims Against Third-Party Defendant

Defendant asserts all claims jointly against Plaintiff Oregon JV LLC and Third-Party

Defendant Silber. Defendant alleges that Third-Party Defendant Silber “signed all relevant

documents on behalf of Plaintiff and Toprock, and was in charge of gathering all relevant

information and conducting due diligence before doing so.” FAA ¶ 141. Defendant also states:

At all times material, Silber held himself out as the principal member of Plaintiff

and Toprock, and all actions taken by Plaintiff and Toprock in this matter were at

his individual direction and control. At all times material hereto, Silber was the

alter-ego of Plaintiff and Toprock, and both the written and verbal communications

and transactions of Plaintiff and Toprock with Defendant Russi were undertaken at

Silber’s express direction and control. Upon information and belief, Silber operated

and exercised control over Plaintiff and Toprock for his own personal benefit and

to the detriment and harm of Defendant Russi. As a result of the conduct alleged

herein, Silber is personally liable for the debts, liabilities, and obligations of

Plaintiff and Toprock.

FAA ¶ 142. Third-Party Defendant argues that all claims against him should be dismissed

because (1) Defendant does not plead facts sufficient to show that he is personally liable for the

4 Defendant also asserts these claims against Toprock Funding, LLC. But, as noted in Footnote 3,

Toprock has not been served or waived service and is not a party to this action.

claims alleged against Plaintiff or for any wrongdoing by non-party Toprock and (2) Defendant

does not state a basis for the Court to have personal jurisdiction over him.

A. Individual Liability

Under Oregon law, “the debts, obligations and liabilities of a limited liability company,

whether arising in contract, tort or otherwise” belong solely to the LLC. Or. Rev. Stat. §

(“O.R.S.”) 63.165(1). Thus, “[a] member or manager is not personally liable for a debt,

obligation or liability of the [LLC] solely by reason of being or acting as a member or manager.”

Id. In other words, for Defendant to state a claim against Third-Party Defendant, he must allege

individual wrongful conduct by Third-Party Defendant apart from simply being a member or

manager of Plaintiff or Toprock. See Kinzua Res., LLC v. Or. Dep’t of Env’t Quality, 366 Or.

674, 687, 468 P.3d 410, 417 (2020) (internal quotation marks and citation omitted) (“[M]embers

and managers of an LLC are not vicariously liable for the LLC’s debts, obligations, or

liabilities.”).

But members and managers of LLCs may be held liable for their own acts or omissions

“to the extent that those acts or omissions would be actionable against the member or manager if

that person were acting in an individual capacity.” Cortez v. Nacco Material Handling Grp., 356

Or. 254, 268-69, 337 P.3d 111, 119 (2014) (en banc). Claims against individuals acting on behalf

of an LLC need not be distinguished from claims against the LLC itself. A member or manager

is responsible “even if the allegedly tortious actions were taken in the individual’s capacity as

member of the LLC in furtherance of the LLC’s business.” Nebulae Inc. v. Taylor, No. 3:20-cv-

946-JR, 2020 WL 8474587, at *3 (D. Or. Oct. 19, 2020); see Cortez, 356 Or. at 269 (noting that

O.R.S. 63.165(1) does not shield the owner/member of an LLC “from responsibility for its own

negligent acts in managing [the LLC]”). Thus, “members and managers remain personally liable

for the actions that they take on behalf of an LLC to the same extent that they would be liable if

they were acting in an individual capacity.” Cortez, 356 at 268 (internal quotation marks and

brackets omitted).

The Court previously denied Third-Party Defendant’s motion to dismiss third-party

claims brought by Defendants AIC, Walker, and Defendant Lenders. Oregon JV LLC v.

Advanced Inv. Corp., No. 3:22-cv-00337-HZ, 2023 WL 3886111 (D. Or. June 7, 2023). Third-

Party Defendant had argued that he could not be held individually liable for the actions of

Plaintiff. Id. at *3. In denying his motion to dismiss, the Court found that the defendants had

adequately alleged individual conduct by Third-Party Defendant that justify a claim for

individual liability. Id. at *5.

Similarly, with his third-party claims, Defendant Russi alleges individual conduct by

Third-Party Defendant on behalf of Toprock that caused him harm. According to Defendant,

Third-Party Defendant issued predatory loans on behalf of Toprock, promised to help him get

out of bankruptcy, pressured him to sign the Sale Agreement, and made false representations to

him that Toprock would perform its duties under the Sale Agreement. Defendant alleges direct

tortious conduct by Third-Party Defendant that justifies a claim for individual liability. Third-

Party Defendant is responsible for his own actions. Thus, the allegations in Defendant Russi’s

First Amended Answer and Third-Party Complaint adequately state a basis for holding Third-

Party Defendant individually liable on his tort claims, even if the alleged tortious acts were done

on behalf of Toprock.5

5 Defendant Russi’s assertion of an alter-ego theory fails because he does not allege actions by

Third-Party Defendant that prevent him from bringing claims against and collecting from

Toprock. See Amfac Foods, Inc. v. Int’l Sys. & Controls Corp., 294 Or. 94, 108, 654 P.2d 1092,

1101 (1982) (an alter-ego theory of liability requires a showing that “the plaintiff’s inability to

B. Personal Jurisdiction

Third-Party Defendant asserts that because he is a citizen of New York and because he

was not an individual party to the transactions in this case, there are no grounds for the Court to

have personal jurisdiction over him. Courts may exercise personal jurisdiction over a party in

two ways: “general (sometimes called all-purpose) jurisdiction and specific (sometimes called

case-linked) jurisdiction.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024

(2021). Under general jurisdiction, a court may exercise jurisdiction over “any and all claims”

brought against a party who is “essentially at home” in the forum state. Id. (quoting Goodyear

Dunlap Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). Because Third-Party

Defendant is not a citizen of Oregon and is not alleged to have “continuous and systematic

general business contacts” with the state, the Court has no basis to exert general jurisdiction over

him. See Schwarzenegger, 374 F.3d at 801.

A court has specific personal jurisdiction where “the defendant has purposefully directed

his activities at residents of the forum, and the litigation results from alleged injuries that arise

out of or relate to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)

(internal quotation marks and citations omitted). For specific jurisdiction, the defendant must

have purposely availed itself to the forum state, and “[t]he plaintiff’s claims . . . ‘must arise out

of or relate to the defendant’s contacts with the forum.” Ford Motor Co., 141 S. Ct. at 1025

(quoting Bristol-Meyers Squibb Co. v. Superior Ct. of Cal., 582 U.S. 255, 262 (2017)).

Defendant alleges enough facts to show that his claims arise out of Third-Party

Defendant’s contact with Oregon. Third-Party purposely directed his activities at Defendant

collect from the corporation resulted from some form of improper conduct on the part of the

shareholder”).

Russi, a citizen of Oregon, and Russi’s properties in Oregon. The Sale Agreement executed by

Third-Party Defendant gave Toprock ownership of properties in Oregon. In addition, the Court’s

exercise of specific jurisdiction is not unreasonable or unjust. Accordingly, the Court has

personal jurisdiction over Third-Party Defendant as to the Defendant Russi’s claims against him.

II. Breach of Contract

Defendant Russi brings a claim for breach of contract against Plaintiff and Third-Party

Defendant. Defendant alleges that under the Sale Agreement, Toprock was obligated to pay him

$250,000 up-front, $350,000 over time as properties sold, and 5% net profits on sales of

particular homes. He claims that Toprock failed to perform those duties.

But Toprock is a not a party to this action. And Plaintiff and Third-Party Defendant are

not parties to Sale Agreement. Plaintiff did not yet exist at the time the Sale Agreement was

executed in December 2020. Defendant does not allege that Plaintiff had any obligations under

the contract. As for Third-Party Defendant, he may be individually liable for any tort he

committed on behalf of Toprock. But to the extent that Defendant alleges that Third-Party

Defendant should be liable for Toprock’s breach of contract simply because he controlled the

company, his claim fails.

To succeed on an alter-ego or piercing-the-corporate-veil theory for his breach of contract

claim, Defendant must allege that Third-Party Defendant engaged in some form of improper

conduct, such as inadequate capitalization, to hinder Defendant’s ability to collect from Toprock.

Great Am. Ins. Co. v. Linderman, 116 F. Supp. 3d 1183, 1196 (D. Or. 2015) (citing Amfac

Foods, Inc. v. Int’l Sys. & Controls Corp., 294 Or. 94, 108, 654 P.2d 1092, 1101 (1982)).

Defendant does not claim that Toprock is insolvent or otherwise unable to satisfy any debts it

owes or any judgment obtained against it. Thus, Defendant does not allege facts to support

Third-Party Defendant’s liability for Toprock’s failure to perform under the contract.

Because the Sale Agreement was between Defendant and Toprock only, Defendant fails

to state a breach of contract claim against Plaintiff or Third-Party Defendant. Their motion to

dismiss this claim is granted.

III. Fraud

Defendant brings a fraud claim against Plaintiff and Third-Party Defendant. Defendant

alleges that Third-Party Defendant falsely represented that he and Toprock would perform

contractual duties under the Sale Agreement. To state a claim for fraud under Oregon law, a

plaintiff must allege particular facts showing: “[1] the defendant made a material

misrepresentation that was false; [2] the defendant did so knowing that the representation [w]as

false; [3] the defendant intended the plaintiff to rely on the misrepresentation; [4] the plaintiff

justifiably relied on the misrepresentation; and [5] the plaintiff was damaged as a result of that

reliance.” Great Am. Ins. Co., 116 F. Supp. 3d at 1192 (quoting Strawn v. Farmers Ins. Co., 350

Or. 366, 352, 258 P.3d 1199, 1209 (2011)). The federal rules require that a party “state with

particularity the circumstances constituting fraud[.]” Fed. R. Civ. P. 9(b). A plaintiff must allege

facts that “give defendants notice of the particular misconduct,” including “the who, what, when,

where, and how” of the alleged misrepresentations. Kearns v. Ford Motor Co., 567 F.3d 1120,

1124 (9th Cir. 2009). “[A] fraud claim based on a promise not performed may be actionable if

the party never intended to perform the contract or acted with reckless disregard regarding its

ability to perform.” Metropolis Holdings, LLC v. SP Plus Corp., No. 3:20-cv-00612-SB, 2020

WL 4506778, at *4 (D. Or. Aug. 5, 2020). But to maintain a fraud claim based on breach of a

contract, a plaintiff must plead with specificity facts that show the defendant fraudulently

intended not to perform. Hill Meat Co. v. Sioux-Preme Packing Co., No. 08-1062-SU, 2009 WL

1346606, at *6 (D. Or. May 13, 2009).

First, Defendant does not plead any facts to support a fraud claim against Plaintiff.

Defendant does not allege that Plaintiff had a duty to perform under the Sale Agreement. Nor

does Defendant claim that Plaintiff made any representations to him about making the required

payments under the contract. Again, Plaintiff did not exist as an entity at the time the Sale

Agreement was executed.

Second, Defendant alleges no facts to support his contention that Third-Party Defendant

made false representations and never intended to have Toprock perform under the contract.

Defendant simply states in a conclusory manner that Third-Party Defendant’s representations

that Toprock would pay him under the contract “were false, and [Third-Party Defendant] knew

they were false.” A fraud claim premised on an intent to not perform on a contract must allege

“fraudulent intent . . . with the specificity required by Rule 9(b).” Id. Defendant’s conclusory

allegation fails to meet this standard. Even if Third-Party Defendant caused Toprock to breach

the Sale Agreement, that failure to perform on the contract by itself “does not create an inference

that [Third-Party Defendant] never intended to perform.” Metropolis Holdings, 2020 WL

4506778, at *3; see Sizer v. New England Life Ins. Co., 871 F. Supp. 2d 1071, 1079 (D. Or.

2012) (“To establish a defendant's fraudulent intent regarding a promise to act in the future, a

plaintiff must do more than show the eventual breach of that promise.”). To state a claim for

fraud, Defendant must allege some action by Third-Party Defendant from which the court can

infer that Third-Party Defendant never intended to have Toprock perform on the contract or

acted with reckless disregard as to Toprock’s ability to perform.

Defendant’s conclusory allegation without supporting alleged facts does not satisfy the

pleading standard for a fraud claim under Rule 9(b). Accordingly, the Court grants Plaintiff and

Third-Party Defendant’s motion to dismiss Defendant’s counterclaim and third-party claim for

fraud.

IV. Unjust Enrichment

Plaintiff and Third-Party Defendant move to dismiss Defendant’s unjust enrichment

claim as duplicative of his breach of contract claim. Under Oregon law, a party asserting a claim

for unjust enrichment must allege: “(1) [the] party has conferred a benefit on another, (2) the

recipient is aware that a benefit has been received, and (3) ‘under the circumstances, it would be

unjust to allow retention of the benefit without requiring the recipient to pay for it.’”

Confederated Tribes of Warm Springs Rsrv. v. Ambac Assur. Corp., Civ. No. 10-130-KI, 2010

WL 4875657, at *6 (D. Or. Nov. 17, 2010) (quoting Summer Oaks Ltd. P’ship v. McGinley, 183

Or. App. 645, 654, 55 P.3d 1100, 1104 (2002). Unjust enrichment is a “quasi-contract” claim,

which “presupposes that no enforceable contract exists.” Id. (quoting Kashmir v. Patterson, 43

Or. App. 45, 48, 602 P.2d 294, 296 (1979). Thus, a claim for unjust enrichment fails “when it is

undisputed that a valid contract exists.” Harney v. Associated Materials, LLC, No. 3:16-cv-1587-

SI, 2018 WL 468303, at *4 (D. Or. Jan. 18, 2018) (citation and ellipses omitted).

But under Oregon law, a party may bring an unjust enrichment claim in the alternative to

a breach of express contract claim when it “is unsure whether it can actually prove the existence

of the contract at trial.” Confederated Tribes, 2010 WL 4875657, at *7. In other words, “Oregon

law allows pleading unjust enrichment in the alternative, at least until there is a dispositive

determination” that an express contract exists. Martell v. Gen. Motors LLC, 492 F. Supp. 3d

1131, 1147 (D. Or. 2020).

In denying Plaintiff and Third-Party Defendant’s motion to dismiss an unjust enrichment

claim brought by AIC, Walker, and Defendant Lenders, the Court found that “whether an

express contract existed is a matter yet to be determined.” Oregon JV LLC, 2023 WL 3886111,

at *8. On that motion, the issue was whether the assumption agreements were valid, enforceable

contracts. Similarly, in its Second Amended Complaint, Plaintiff brings a rescission claim

against Defendant that challenges the validity of the Sale Agreement. See SAC ¶ 122 (emphasis

added) (“Plaintiff’s purchase agreement with Russi and Assumption Agreements with Defendant

Lenders are not valid and enforceable contracts because of mutual mistake.”). Plaintiff may

eventually succeed on its rescission claim against Defendant by showing that the Sale Agreement

is not valid or enforceable. Thus, Defendant’s unjust enrichment claim is not duplicative and

may be pleaded in the alternative to the breach of contract claim.

According to the pleadings, three months after the Sale Agreement was executed, Third-

Party Defendant transferred ownership of the properties purchased under the agreement from

Toprock to Plaintiff. AIC FAA ¶¶ 161, 168. Thus, Plaintiff and Third-Party Defendant received a

benefit from Defendant—ownership of his properties. But no party alleges that the obligation to

perform on the Sale Agreement transferred as well. For Plaintiff and Third-Party Defendant to

retain a benefit without an obligation to compensate Defendant for that benefit would be unjust.

Thus, Defendant has pleaded sufficient facts from which the Court can infer that Plaintiff and

Third-Party Defendant were unjustly enriched by Toprock’s alleged failure to pay Defendant

under the Sale Agreement. Accordingly, Plaintiff and Third-Party Defendant’s motion to dismiss

Defendant’s unjust enrichment claim is denied.

CONCLUSION

The Court GRANTS in part and DENIES in part Plaintiff and Third-Party Defendant’s

Motion to Dismiss [92]. Plaintiff and Third-Party Defendant’s motion to dismiss Defendant

Russi’s unjust enrichment claim is denied. Defendant Russi’s counterclaims and third-party

claims for fraud and breach of contract are dismissed without prejudice and with leave to amend.

IT IS SO ORDERED.

DATED:____A_u_g_u_s_t_ 2__2_, _2_0_2_3______.

______________________________

MARCO A. HERNÁNDEZ

United States District Judge