Becker v. Noe

JOHN BECKER, et al. Plaintiffs, v. PAUL HOWE NOE, II, et al. Defendants.

Civil Action No. ELH-18-00931

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

March 27, 2019

MEMORANDUM OPINION

In this fraud and breach of contract case, lodged under federal and Maryland law, plaintiffs John Becker; Joan Becker; Stanley J. Sersen; Environmental Design & Resource Center, LLC ("EDRC"); and Architectural Support Group, Inc. ("ASG") filed suit against multiple defendants. They are Eco-Gen Energy, Inc. ("Eco-Gen") and four of its officers and/or advisors: Paul Howe Noe, II, "aka Paul B. Delanoe, aka Paul Boaventura-Delanoe"; Licia B. Noe, "aka Licia Boaventura-Delanoe," in her personal capacity and as trustee of the Bellagio Trust; Julia Otey; and Raoul Hamilton (collectively, the "Eco-Gen Defendants"). Id. ¶¶ 6-10. Plaintiffs also sued defendants Operating Expense Consulting, LLC ("OPEX") and Ralph Warren, the managing member of OPEX (collectively, the "OPEX defendants"). Id. ¶¶ 11-12.

The Amended Complaint (ECF 35), supported by exhibits, alleges, inter alia, that defendants engaged in a fraudulent scheme to induce plaintiffs to purchase a hybrid wind and solar powered electricity generator, called "JouleBox," as well as stock in Eco-Gen.¹ According to the Amended Complaint, defendants marketed JouleBox as a product that "can generate moreelectrical output than is required to power it," without using any external power source. Id. ¶ 1. However, plaintiffs maintain that the generator does not work as described. Id.

The Amended Complaint contains five claims. Count I asserts a claim of violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), under 18 U.S.C. § 1962(c). ECF 35, ¶¶ 49-58. Count II alleges conspiracy to violate RICO, based on 18 U.S.C. § 1962(d). ECF 35, ¶¶ 59-65. In Count III, plaintiffs allege fraud. ECF 35, ¶¶ 66-70. Count IV alleges civil conspiracy. ECF 35, ¶¶ 71-74. And, Count V asserts breach of contract. ECF 35, ¶¶ 76-87. Plaintiffs seek monetary relief, including treble and punitive damages, as well as attorneys' fees and costs. See ECF 35.

Jurisdiction is based on 28 U.S.C. § 1331, "because this action arises under the laws of the United States, namely [the RICO statute,] 18 U.S.C. §§ 1961, et seq.," as well as 18 U.S.C. § 1341 (mail fraud), § 1343 (fraud by wire, radio, or television), and § 2314 (transportation of stolen goals, securities, or moneys). ECF 35, ¶ 14. In addition, plaintiffs assert jurisdiction based on diversity of citizenship, pursuant to 28 U.S.C. § 1332, as well as supplemental jurisdiction under 28 U.S.C. § 1967. ECF 35, ¶ 14.

OPEX is the sole defendant to have answered the suit. ECF 28. Warren has moved to dismiss the Amended Complaint, pursuant to Fed. R. Civ. P. 12(b)(2), for lack of personal jurisdiction (ECF 38), supported by a memorandum. ECF 38-1 (collectively, the "Warren Motion"). Plaintiffs oppose the Warren Motion (ECF 41), and submitted two exhibits. ECF 41-1; ECF 41-2. Warren has not replied, and the time to do so has expired. See Local Rule 105.6. The Eco-Gen Defendants also moved to the dismiss, pursuant to Fed. R. Civ. P. 12(b)(2), claiming lack of personal jurisdiction, and under Fed. R. Civ. P. 12(b)(6), for failure to state a claim. ECF 40. The motion is supported by a memorandum of law. ECF 40-1 (collectively, the "Eco-Gen Motion"). Plaintiffs oppose the Eco-Gen Motion (ECF 42), and defendants have replied. ECF 43.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall deny the Warren Motion (ECF 38). And, I shall grant the Eco-Gen Motion (ECF 40) in part and deny it in part.

I. Factual Background²

John Becker and Joan Becker (the "Beckers") are husband and wife. ECF 35, ¶ 2. They are Maryland residents. Id. Sersen, a Maryland resident,³ is a member of EDRC and a shareholder and officer of ASG. Id. ¶ 3. EDRC, a Maryland limited liability company, filed articles of cancellation in 2017. Id. ¶ 4. However, pursuant to Md. Code (2014 Repl. Vol., 2018 Supp.), § 4A-908 of the Corporations and Associations Article ("C.A."), EDRC "continues to exist for the purpose of pursuing its claims against Defendants." Id. ASG, a Maryland corporation, "was voluntarily dissolved in 2017." Id. ¶ 5. Thereafter, pursuant to C.A. § 3-410, "Sersen became a trustee of the assets of ASG, including ASG's claims against Defendants." Id.

OPEX "is a limited liability company organized under South Dakota law, with its principal office in South Dakota." ECF 35, ¶ 11. OPEX has two members: Warren and Mike Beaulieu. ECF 29 (Local Rule 103.3 Disclosure Statement) at 1. Warren "is a South Dakota resident, the managing member of OPEX, and a certified public accountant licensed in the State of SouthDakota." ECF 35, ¶ 12. As the "owner" of OPEX, Warren "identifies OPEX as the U.S. Distributor for the JouleBox and the U.S. marketing company for Eco-Gen." Id. ¶ 35.

Eco-Gen "is a Nevada corporation with its principal office in California." Id. ¶ 8. Hamilton "is a California resident and an officer of Eco-Gen." Id. ¶ 9. Otey is also "a California resident and an officer of Eco-Gen." Id. ¶ 10.

Paul Howe Noe, II, also known as Paul B. Delanoe and Paul Boaventura Delanoe, is a California resident and an officer, owner, and board member of Eco-Gen. Id. ¶ 6. According to the Amended Complaint, "Mr. Noe legally changed his surname to Boaventura-Delanoe in 2013, but his name at birth was Paul Howe Noe, II, and he has continued to use that name even after he legally changed it." Id. However, Noe asserts that his name is Paul B. Delanoe, and that he was "incorrectly sued herein as Paul Howe Noe, II." ECF 15.

Mr. Noe is married to Licia Boaventura Noe, a California resident. ECF 35, ¶ 7. In 2013, she "changed her name from Licia Boaventura Noe to Licia Boaventura-Delanoe." Id. Ms. Noe is a member of Eco Gen's "'board of technology advisors'" and a trustee of the Bellagio Trust, "which owns and licenses to Eco-Gen Energy, Inc. the purported intellectual property for the JouleBox." Id.

According to plaintiffs, "Mr. Noe changed his name to conceal" his "long history of criminal fraud convictions and questionable financial practices." Id. ¶ 24 (citing ECF 35-6, Exhibit E; ECF 35-7, Exhibit F). Specifically, in 1989 Mr. Noe "was convicted of wire fraud by the U.S. District Court for the Eastern District of Pennsylvania." ECF 35, ¶ 24 (citing ECF 35-7). See United States v. Clifford D. Noe and Paul H. Noe, II, 1989 WL 5567, Crim. Nos. 87-00303-01, 87-00303-02, 1989 WL 5577 (E.D. Pa. Jan 19. 1989); United States v. Clifford D. Noe and Paul H. Noe, II, Crim. Nos. 87-00303-01, 87-00303-02, 1989 WL 5577 (E.D. Pa. Jan. 19 1989); UnitedStates v. Clifford D. Noe, Crim. No. 87-00303-01, 1990 WL 67117, at *2 (E.D. Pa. May 16, 1990)). Also, plaintiffs allege that "[o]n August 1, 2003, the California Department of Insurance issued a Cease and Desist Order against Paul Noe for engaging in the unlicensed sale of insurance products" by "induc[ing] elderly clients to purchase living trusts." ECF 35, ¶ 24 (citing ECF 35-8, Exhibit G). And, they claim that in 2010, Mr. Noe was "ordered by the California Real Estate Commissioner to cease and desist from offering loan modification services and foreclosure rescue services in violation of California law." ECF 35, ¶ 24 (citing ECF 35-9, Exhibit H).

In addition, plaintiffs maintain that Mr. Noe continued to use the name "Paul H. Noe, II" to thwart mortgage foreclosure proceedings on his home. ECF 35, ¶ 24 (citing Paul H. Noe, II v. Morg. Elec. Registration Sys., Inc., et al, Case No. 16-cv-06316 (C.D. Cal. Aug. 23, 2016)). And, in 2016, he "filed multiple petitions for bankruptcy" under the name of Paul H. Noe, II. ECF 35, ¶ 24 (citing Paul H. Noe, II, No. 16-bk-23853 (Bankr. C.D. Cal. Oct. 20, 2016) (dismissed on November 23, 2016, for failure to file schedules); Paul H. Noe, II, No. 16-bk-25416 (Bankr. C.D. Cal. Nov. 22, 2016) (dismissed on December 12, 2016, for failure to file schedules)).

Plaintiffs contend that beginning in 2009 and "continuing to the present day" defendants "have constituted an associated-in-fact enterprise" (the "Enterprise") under 18 U.S.C. § 1961(4). ECF 35, ¶ 13. According to plaintiffs, defendants "conspired to perpetrate . . . a scheme to defraud Plaintiffs through a litany of illegal acts, including mail fraud, wire fraud, interstate transportation of fraudulently acquired money and securities, and inducement of interstate travel in furtherance of a scheme to defraud." Id.

Plaintiffs characterize the Enterprise as "a classic Ponzi scheme." Id. ¶ 20. Specifically, it "used a two-fold strategy comprised of collecting cash deposits on contracts to sell non-existent JouleBoxes, and selling stock in Eco-Gen to unsuspecting investors." Id. The Enterprise offered"special terms" to prospective purchasers as "'early adopters,' which would enable them to earn commissions on later sales." Id. Further, the Enterprise "cloak[ed] their scheme with indicia of legitimacy," by forming and registering Eco-Gen and OPEX with the Secretaries of State in Nevada, California, and South Dakota, securing trademark registration for the name JouleBox, filing a patent application for the hybrid electric generator, drafting and issuing a private placement memorandum to secure investments in Eco-Gen, and establishing websites for both companies." Id. ¶ 21.

On or about March 23, 2009, Hamilton and Otey, "on behalf of the Enterprise, filed articles of incorporation for Eco-Gen with the Nevada Secretary of State." Id. ¶ 22. Every year thereafter, "the Enterprise filed with the Nevada Secretary of State an annual list naming Mr. Hamilton and Ms. Otey as Eco-Gen's officers and directors." Id. (citing ECF 35-3, Exhibit B). Similarly, in November 2012, Otey, "on behalf of the Enterprise," registered Eco-Gen "to do business in California." Id. ¶ 23 (citing ECF 35-4, Exhibit C).

In June 2013, Eco-Gen applied for "a...