Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States Small Business Administration v. Donald

United States District Court, N.D. California

February 9, 2015

UNITED STATES SMALL BUSINESS ADMINISTRATION, Plaintiff,
v.
ALISTAIR ANDERSON DONALD, et al., Defendants.

REPORT AND RECOMMENDATION RE MOTIONS FOR DEFAULT JUDGMENT Re: Docket Nos. 187-189, 191-197

JOSEPH C. SPERO, Magistrate Judge.

I. INTRODUCTION

In this breach of contract action, the Court previously denied without prejudice the applications of Plaintiff United States Small Business Administration ("SBA" or "Plaintiff"), in its capacity as Receiver for Rocket Ventures II SBIC, L.P. ("Rocket Ventures"), for default judgment against Defendants Alistair Anderson Donald ("Donald"), Luca Casiraghi ("Casiraghi"), Fred Cucchi ("Cucchi"), Tyna Development c/o Fiderservice SA ("Tyna"), Alberto Gandini ("Gandini"), David Mather ("Mather"), Rijete PTY, Ltd. c/o Brian Wilson ("Rijete"), ValorLife, Hahei, Ltd. c/o Allan Cockell ("Hahei"), and Christopher Stainton ("Stainton") (collectively, "Defaulting Defendants"). Plaintiff now brings renewed applications for default judgment against the same defendants ("the Motions"), which were referred to the undersigned for a Report and Recommendation. A hearing on the Motions was held on Friday, December 5, 2014 at 9:30 am. Plaintiff filed additional materials in support of the Motion on December 16, 2014 and on January 16, 2015. For the reasons stated below, it is recommended that the Court GRANT all of the Motions.

II. BACKGROUND

A. The Amended Complaint[1]

Plaintiff filed its initial Complaint in this action alleging breach of contract claims against Rocket Ventures II, L.P. ("RVII"), Rocket Ventures II CEO Fund, L.P. ("CEO Fund"), and Rocket Ventures SBIC Partners, LLC ("SBIC Partners") on September 30, 2010. Complaint, ¶¶ 30-47. On January 18, 2012, Plaintiff filed its Amended Complaint ("FAC"). Docket No. 29. In the FAC, Plaintiffs allege that RVII and CEO Fund are comprised of "Class B Limited Partners." FAC, ¶ 7. According to Plaintiff, the Defaulting Defendants are Class B Limited Partners of RVII, CEO Fund, or both. Id. at ¶¶ 15, 24-29, 32, 42-43, 47.

Plaintiff alleges that it is authorized by statute to license Small Business Investment Companies ("SBICs") to provide capital to qualified small business concerns. Id. at ¶ 50. Plaintiff states that the statute authorizes it to prescribe regulations governing operations of the SBICs, which it has exercised by promulgating the regulations reported in Part 107 of Title 13 of the Code of Federal Regulations. Id. (citing 15 U.S.C. § 687(c)). Plaintiff alleges that it is pursuing and preserving all of Rocket Ventures' claims pursuant to a Consent Order of Receivership in the "Receivership Action"[2] and consistent with the governing statutes and regulations. Id. at ¶ 51, Ex. A.

Plaintiff alleges the factual background as follows. Rocket Ventures was formed for the purpose of operating as a venture capital fund licensed as a SBIC. Id. at ¶ 52. Rocket Ventures held U.S. Small Business Administration Small Business Investment Company License No. 0979-0435 at all relevant times. Id. SBIC Partners was Rocket Ventures' managing general partner. Id. at ¶ 53. SBIC Partners had exclusive control of Rocket Ventures' management and operations, within the limitations of the governing statutes and regulations. Id. RVII and CEO Fund were Rocket Ventures' private limited partners. Id. at ¶ 54.

SBIC Partners, RVII, and CEO Fund each entered into the Rocket Ventures Limited Partnership Agreement ("Partnership Agreement") in late 2000. Id. at ¶ 55, Ex. B. Under the terms of the Partnership Agreement: (1) SBIC Partners agreed to be general partner of Rocket Ventures, acknowledged and agreed to be bound by the terms of the agreement, and agreed to a capital commitment of $100, 000; (2) RVII agreed to be a limited partner of Rocket Ventures, acknowledged and agreed to be bound by the terms of the agreement, and agreed to a capital commitment of $25, 730, 900; and (3) CEO Fund agreed to be a limited partner of Rocket Ventures, acknowledged and agreed to be bound by the terms of the agreement, and agreed to a capital commitment of $443, 500. Id. at ¶¶ 56-58. RVII and CEO Fund are "Class A Limited Partners." Id. at ¶ 64 n.2.

Rocket Ventures was structured as a "drop down" SBIC fund. Id. at ¶ 59. This means that Rocket Ventures' limited partners, RVII and CEO Fund, were to raise capital from their investors (limited partners), and in turn drop down some or all of the capital raised into the SBIC Fund. Id. A Capital Certificate submitted to the SBA and certified by Rocket Ventures' then-management identified the individuals and entities that invested in Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 60. These individuals and entities are known as "Class B Limited Partners." Id.

Article 5 of the Partnership Agreement governs "Partners' Capital Contributions." Id. at ¶ 61, Ex. B. Pursuant to the agreement, "[a]ll capital contributions to the Partnership by [the General Partner and Private Limited Partners] must be in cash, except as provided in this agreement and approved by the SBA." Id. at ¶¶ 62, 63 (quoting Partnership Agreement §§ 5.02(a), 5.04). The Partnership Agreement further provides that "[i]f at any time the Class A Limited Partner fails to make a Capital Contribution as required by this Agreement, then the Class B Limited Partners shall contribute to the capital of the Partnership in cash in an amount equal to the Class A Limited Partner's Capital Contribution then in default, with each such Class B Limited Partner being required to contribute its Proportionate Share of the Capital Contribution then in default, provided, however, that the obligation of each Class B Limited Partner to contribute to the capital of the Partnership shall be several, and not joint, and in no event shall any Class B Limited Partner be required to contribute to the Partnership in an amount greater than the then unpaid amount that such Class B Limited Partner has agreed to contribute to the capital of the Class A Limited Partner." Id. at ¶ 64 (quoting Partnership Agreement § 5.02(c)). Pursuant to the Capital Certificate, former management was aware that all Class B Limited Partners were required to execute the Partnership Agreement. Id. at ¶ 65.

Rocket Ventures' books and records reflect that RVII failed to make its required capital commitment. Id. at ¶¶ 66, 79. As a result, RVII owes a balance of $9, 690, 144, plus recoverable interest, the amount of its unfunded capital commitment. Id. at ¶¶ 66, 80. Rocket Ventures' books and records reflect that CEO Fund failed to make its required capital commitment. Id. at ¶¶ 67, 85. As a result, [CEO Fund] owes a balance of $167, 640, plus recoverable interest, the amount of its unfunded capital commitment. Id. at ¶¶ 67, 86. The Partnership Agreement provides that, where the partnership is liquidated, the general and limited partners must make any unfunded capital commitments if the assets of the partnership are insufficient to repay the partnership obligations owed to the SBA. Id. at ¶ 69 (citing Partnership Agreement § 5.06). "The Partnership is entitled to enforce the obligations of each Partner to make contributions to capital specified in [the Partnership Agreement]. The Partnership has all rights and remedies available at law or equity if any such contribution is not so made." Id. at ¶ 70 (quoting Partnership Agreement § 5.07(a)). The Partnership Agreement also provides that the general partner may commence legal proceedings against any defaulting partner to collect due and unpaid capital commitments, including interest and attorneys' fees. Id. at ¶ 71 (citing Partnership Agreement § 5.07(a)(ii)(D)).

Plaintiff demanded payment of the unfunded capital commitment from the Class A Limited Partners, and, not receiving payment, issued default notices. Id. at ¶¶ 72-73, Ex. C. Only RVII made any payment in response to the default notice, and even after payment the shortfall listed above remained. Id. at ¶ 66, 72. On September 2, 2010, the court in the receivership action entered an order authorizing Plaintiff to commence this action. Id. at ¶ 75, Ex. D.

Plaintiff alleges twelve breach of contract causes of action that are relevant to the present Motions, as follows:

(1) Breach of Contract Against Donald, Count 1: Rocket Ventures' books and records reflect that Donald executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 193. The books and records also reflect that, around that time, Donald executed the Limited Partnership Agreement of RVII. Id. at ¶ 194. Further, the books and records reflect that Donald executed a Consent of Limited Partners of Rocket Ventures II, L.P. ("Consent") on or around April 30, 2001. Id. at ¶ 195. In the Consent, Donald consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Donald and referenced in the Consent. Id. at ¶ 196.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Donald's conduct. Id. at ¶ 197. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 198. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Donald, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 15, 199.

On October 21, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Donald pay the full amount of his remaining unfunded capital commitment, then $62, 500, by November 30, 2011. Id. at ¶ 200. Donald did not do so. Id. On December 5, 2011, Plaintiff notified Donald that he was in default and gave him three business days from the date of that notice to make payment in full. Id. at ¶ 201. He did not do so. Id. As a result, Donald breached the Partnership Agreement and is liable for his remaining share of the unfunded capital commitment, $62, 500, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 202-205.

(2) Breach of Contract Against Donald, Count 2: The allegations against Donald in the second count for breach of contract are similar to those in the first count. The allegations only differ in that they are predicated on Donald's Class B Limited Partnership in CEO Fund, as opposed to RVII. Id. at ¶¶ 42, 543-545. In this count, Plaintiff seeks to recover Donald's unfunded capital commitment to CEO Fund, $3, 840, plus interest, attorneys' fees, and costs. Id. at ¶¶ 553-555.

(3) Breach of Contract Against Cucchi: Rocket Ventures' books and records reflect that Cucchi executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 319. The books and records also reflect that, around that time, Cucchi executed the Limited Partnership Agreement of RVII. Id. at ¶ 320. Further, the books and records reflect that Cucchi executed the Consent on or around April 30, 2001. Id. at ¶ 321. In the Consent, Cucchi consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Cucchi and referenced in the Consent. Id. at ¶ 322.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Cucchi's conduct. Id. at ¶ 323. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 324. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Cucchi, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 24, 325.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Cucchi pay the full amount of his remaining unfunded capital commitment, then $98, 360, by August 31, 2011. Id. at ¶ 326. Cucchi did not do so. Id. On November 10, 2011, Plaintiff notified Cucchi that he was in default and gave him three business days from the date of that notice to make payment in full. Id. at ¶ 327. He did not do so. Id. As a result, Cucchi breached the Partnership Agreement and is liable for his remaining share of the unfunded capital commitment, now $75, 000, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 328-331.

(4) Breach of Contract Against ValorLife: Rocket Ventures' books and records reflect that ValorLife executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 333. The books and records also reflect that, around that time, ValorLife executed the Limited Partnership Agreement of RVII. Id. at ¶ 334. Further, the books and records reflect that ValorLife executed the Consent on or around April 30, 2001. Id. at ¶ 335. In the Consent, ValorLife consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to ValorLife and referenced in the Consent. Id. at ¶ 336.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by ValorLife's conduct. Id. at ¶ 337. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 338. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including ValorLife, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 25, 339.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded ValorLife pay the full amount of his remaining unfunded capital commitment, then $445, 519.50, by August 31, 2011. Id. at ¶ 340. ValorLife did not do so. Id. On November 10, 2011, Plaintiff notified ValorLife that it was in default and gave it three business days from the date of that notice to make payment in full. Id. at ¶ 341. ValorLife did not do so. Id. As a result, ValorLife breached the Partnership Agreement and is liable for its remaining share of the unfunded capital commitment, now $339, 800, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 342-346.

(5) Breach of Contract Against Gandini: Rocket Ventures' books and records reflect that Gandini executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 347. The books and records also reflect that, around that time, Gandini executed the Limited Partnership Agreement of RVII. Id. at ¶ 348. Further, the books and records reflect that Gandini executed the Consent on or around April 30, 2001. Id. at ¶ 349. In the Consent, Gandini consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Gandini and referenced in the Consent. Id. at ¶ 350. Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Gandini's conduct. Id. at ¶ 351. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 352. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Gandini, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 26, 353.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Gandini pay the full amount of his remaining unfunded capital commitment, then $148, 511.50, by August 31, 2011. Id. at ¶ 354. Gandini did not do so. Id. On November 10, 2011, Plaintiff notified Gandini that he was in default and gave him three business days from the date of that notice to make payment in full. Id. at ¶ 355. He did not do so. Id. As a result, Gandini breached the Partnership Agreement and is liable for his remaining share of the unfunded capital commitment, $148, 511, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 356-359.

(6) Breach of Contract Against Rijete, Count 1: Rocket Ventures' books and records reflect that Rijete executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 361. The books and records also reflect that, around that time, Rijete executed the Limited Partnership Agreement of RVII. Id. at ¶ 362. Further, the books and records reflect that Rijete executed the Consent on or around April 30, 2001. Id. at ¶ 363. In the Consent, Rijete consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Rijete and referenced in the Consent. Id. at ¶ 364.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Rijete's conduct. Id. at ¶ 365. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 366. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Rijete, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 27, 367.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Rijete pay the full amount of its remaining unfunded capital commitment, then $60, 137, by August 31, 2011. Id. at ¶ 368. Rijete did not do so. Id. On November 10, 2011, Plaintiff notified Rijete that it was in default and gave it three business days from the date of that notice to make payment in full. Id. at ¶ 369. It did not do so. Id. As a result, Rijete breached the Partnership Agreement and is liable for its remaining share of the unfunded capital commitment, now $38, 000, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 370-373.

(7) Breach of Contract Against Rijete, Count 2: The allegations against Rijete in the second count for breach of contract are similar to those in the first count. The allegations only differ (1) in that they are predicated on Rijete's Class B Limited Partnership in CEO Fund, as opposed to RVII; and (2) in that the time Rijete was given to respond to the initial demand for payment ran from August 26, 2011 to August 30, 2011. Id. at ¶¶ 47, 627-629. In this count, Plaintiff seeks to recover Rijete's unfunded capital commitment to CEO Fund, $7, 515, plus interest, attorneys' fees, and costs. Id. at ¶¶ 637-639.

(8) Breach of Contract Against Stainton: Rocket Ventures' books and records reflect that Stainton executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 375. The books and records also reflect that, around that time, Stainton executed the Limited Partnership Agreement of RVII. Id. at ¶ 376. Further, the books and records reflect that Stainton executed the Consent on or around April 30, 2001. Id. at ¶ 377. In the Consent, Stainton consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Stainton and referenced in the Consent. Id. at ¶ 378.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Stainton's conduct. Id. at ¶ 379. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 380. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Stainton, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 28, 381.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Stainton pay the full amount of his remaining unfunded capital commitment, then $30, 000, by August 31, 2011. Id. at ¶ 382. Stainton did not do so. Id. On December 5, 2011, Plaintiff notified Stainton that he was in default and gave him three business days from the date of that notice to make payment in full. Id. at ¶ 383. He did not do so. Id. As a result, Stainton breached the Partnership Agreement and is liable for his remaining share of the unfunded capital commitment, now $25, 000, plus interest and attorneys' fees and costs recoverable pursuant to the Partnership Agreement. Id. at ¶¶ 384-387.

(9) Breach of Contract Against Tyna: Rocket Ventures' books and records reflect that Tyna executed a Subscription Agreement and became a limited partner in RVII in or around May 2000. Id. at ¶ 389. The books and records also reflect that, around that time, Tyna executed the Limited Partnership Agreement of RVII. Id. at ¶ 390. Further, the books and records reflect that Tyna executed the Consent on or around April 30, 2001. Id. at ¶ 391. In the Consent, Tyna consented to becoming a Conditional Class B Private Limited Partner of Rocket Ventures. Id. The Partnership Agreement, in a form substantially similar or identical to its present form, was submitted to Tyna and referenced in the Consent. Id. at ¶ 392.

Plaintiff and Rocket Ventures performed as required under the Partnership Agreement, except where prevented or excused by Tyna's conduct. Id. at ¶ 393. Pursuant to the Partnership Agreement, Plaintiff demanded payment of the unfunded capital commitment from Rocket Ventures' limited partners, RVII and CEO Fund. Id. at ¶ 394. Even so, RVII and CEO Fund failed to make payment in full. Id. As a result of this failure, the individual Class B Limited Partners, including Tyna, are each liable for their proportionate share of the unfunded capital commitment in accordance with section 5.02(c) of the Partnership Agreement. Id. at ¶¶ 29, 395.

On June 26, 2011, in accordance with the Partnership Agreement, Plaintiff demanded Tyna pay the full amount of his remaining unfunded capital commitment, then $150, 085, by August 31, 2011. Id. at ¶ 396. Tyna did not do so. Id. On November 10, 2011, Plaintiff notified Tyna that it was in default and gave it three business days from the date of that notice to make payment in full. Id. at ¶ 397. It did not do so. Id. As a result, Tyna breached the Partnership Agreement and is liable for its remaining share of the unfunded capital ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.