Chaleplis v. Karloutsos

579 F.Supp.3d 685

Gabriel CHALEPLIS, et al., Plaintiffs,

v.Michael KARLOUTSOS, et al., Defendants.

CIVIL ACTION NO. 21-1492

United States District Court, E.D. Pennsylvania.

Filed January 10, 2022

Haralamapo Bobby Kasolas, Thomas Kamvosoulis, Brach Eichler LLC, Roseland, NJ, for Plaintiffs.

Amy Y. Chen, Randall L. Rasey, Barton LLP, New York, NY, Carol S. Harding, Douglas F. Johnson, Earp Cohn PC, Philadelphia, PA, for Defendants Michael Karloutsos, Mak Consulting LLC.

James M. Rodgers, Philadelphia, PA, for Defendants James M. Rodgers, Esq., Rodgers Investments LLC, James M. Rodgers, P.C.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge

Table of Contents

I. INTRODUCTION...694

II. BACKGROUND...694

A. Formation of One World, LLC...695

B. Chaleplis Invests in the Greek Medicinal Cannabis Market...696

C. Rodgers and Karloutsos Misappropriate Funds Invested by Chaleplis...697

D. Karloutsos and Rodgers’ Use of Converted Funds...697

E. Related Proceedings in Other Courts...698

III. LEGAL STANDARD...699

IV. DISCUSSION...699

A. Karloutsos’ 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction...699

B. The Karloutsos Defendants’ 12(b)(6) Motion to Dismiss...702

1. Choice of Law...702

2. Counts I, II, and III: Conversion...703

3. Counts V-VII: Breach of Fiduciary Duties...704

4. Count VIII: Unjust Enrichment...705

5. Count IX: Accounting...705

6. Count X: Constructive Trust...705

7. Count XI: Declaratory Judgment...706

8. Count XII: Alter Ego...707

9. Count XIII: Fraud...707

C. Rodgers Defendants’ Motion to Dismiss under R. 12(b)(6)...708

D. Karloutsos Defendants’ Motion under Fed. R. Civ. P. 12(b)(7), 12(f), 19, and 28 U.S.C. § 1404...709

1. Necessary and Indispensable Party...709

2. Motion to Transfer Venue...710

E. Rodgers’ Motion for Sanctions...711

V. CONCLUSION...712

I. INTRODUCTION

One World, LLC and Gabriel Chaleplis, its sole member (hereinafter referred to as "Plaintiffs"), bring this action against defendants James M. Rodgers, Esq., Rodgers Investments, and James M. Rodgers, P.C. (collectively the "Rodgers Defendants"), and Michael Karloutsos and his company, MAK Consulting, LLC (collectively the "Karloutsos Defendants").

Plaintiffs allege that Defendants induced Chaleplis to invest €10,750,000 (approximately $12,000,000) of One World, LLC funds in Greek companies controlled by Defendants’ associates, who then rerouted the funds back to Defendants in the United States where they were misappropriated for personal purposes.

The following six motions are pending before the Court:

1) A motion to dismiss for lack of jurisdiction under Fed. R. Civ. P. 12(b)(2) filed by Karloutsos (ECF No. 15);

2) A motion to dismiss under Fed. R. Civ. P. 12(b)(6) filed by the Rodgers Defendants (ECF No. 19);

3) A motion to dismiss under Fed. R. Civ. P. 12(b)(6) filed by the Karloutsos Defendants (ECF No. 20);

4) A motion for sanctions filed by the Rodgers Defendants (ECF No. 23);

5) A motion to dismiss or transfer venue filed by the Karloutsos Defendants (ECF No. 40); and

6) A motion to dismiss pursuant to Fed. R. Civ. P. 19 and Fed. R. Civ. P. 12(b)(7) filed by the Rodgers Defendants (ECF No. 42).

For the reasons that follow, the Karloutsos Defendants’ motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) will be granted in part and denied in part. Pursuant to that motion, Count XI (declaratory judgment) will be dismissed with prejudice, and Counts XII (alter ego) and XIII (fraud) will be dismissed without prejudice and with leave to amend. Defendants’ remaining motions are denied.

Count X of the Complaint asserts an independent claim for constructive trust, which is not recognized as an independent claim under Pennsylvania law. Pursuant to Fed. R. Civ. P. 12(f)(1), Count X (constructive trust) will be stricken as a standalone claim.

II. BACKGROUND¹

Plaintiff Gabriel Chaleplis is a citizen of the United Kingdom. Chaleplis is the sole member of One World, LLC ("One World"), which is a Delaware LLC.

Michael Karloutsos is a citizen of Virginia or Florida and a resident of Virginia.² Before moving to Virginia, Karloutsos owned and operated a restaurant in Philadelphia called Water Works. On July 23, 2017, he took a position as Deputy Chief of Protocol with the U.S. State Department, where he served until December 17, 2017. Karloutsos is also the sole member and manager of MAK Consulting, LLC ("MAK"), which is a Pennsylvania LLC also named as a defendant in this case.

Defendant James Rodgers, Esq., is a citizen and resident of Pennsylvania. He is a member of the Pennsylvania Bar. Rodgers is the sole member of Rodgers Investments and sole shareholder of James M. Rodgers, P.C., which are named as defendants in this action.

A. Formation of One World, LLC

Before May 2017, Chaleplis decided to form a company to serve as a vehicle through which he could invest in American businesses. To that end, Chaleplis consulted with a friend in Greece who referred him to Nikolaos Onoufriadis, a businessman who is not a party to this action.

Onoufriadis represented to Chaleplis that he was experienced in international business development and global government relations, and that he was familiar with various American industries in which Chaleplis was interested in investing. Onoufriadis further recommended that Chaleplis hire Karloutsos, Onoufriadis’ "very good friend and best man," for his "presence in the United States," purported experience in American and Greek politics, government relations, and lobbying, and because of his father's position within the Greek Orthodox Church. Compl. ¶¶ 14-15, ECF No. 1. Onoufriadis, Karloutsos, and Chaleplis later met in Greece to discuss their respective roles in the proposed company. Id. Karloutsos recommended that Chaleplis also hire Rodgers to handle the company's legal work. The proposed company ultimately became One World, LLC (hereinafter "One World").

In the communications leading up to the formation of One World, Karloutsos advised Chaleplis that he would be taking a position with the U.S. State Department, and thus could not formally or publicly participate in the membership or management of One World. Karloutsos recommended that Chaleplis use Onoufriadis and Rodgers as formal officers of One World. However, while Karloutsos could not formally participate in the operation of One World, the Complaint alleges that he "silently" worked with Onoufriadis and Rodgers on Plaintiffs’ behalf to research and pursue opportunities for One World. Id. at ¶ 29.

On May 24, 2017, Chaleplis officially formed One World as a Delaware LLC. On June 15, 2017, Rodgers allegedly formed Rodgers Investments as a Wyoming LLC to serve as the conduit company and bank account designed for Rodgers and his businesses, and for Karloutsos and his company, MAK, to misappropriate and convert Plaintiffs’ funds for their own benefit.

The parties met in New York City on September 28, 2017. Onoufriadis, Karloutsos, and Rodgers assured Chaleplis they had the necessary experience to successfully identify and pursue investments on behalf of Chaleplis and One World. Based on these assurances, Chaleplis hired Onoufriadis as Manager and Rodgers as Secretary and Chief Legal Officer of One World. The appointments were memorialized in One World's operating agreement, which the parties executed two days later.

Pursuant to the Operating Agreement, Chaleplis held an 80% membership interest in One World while Onoufriadis held a 20% membership interest. Chaleplis was the 100% "profit member," however, as he contributed all of One World's capital.

Because of Karloutsos’ official position in the State Department, he was not identified in the agreement. But the Complaint alleges that Karloutsos "utilized his good friends Onoufriadis and Rodgers as ‘front men’ for Karloutsos to participate in the management, operations, and profitability of One World" and entered into an oral "side agreement" with Rodgers, pursuant to which Rodgers and Karloutsos would split Rodgers’ three percent interest in One World 50-50. Id. at ¶¶ 58-59. Karloutsos allegedly continued co-managing One World pursuant to this "side agreement" after leaving the State Department on December 17, 2017. Id. at ¶¶ 61, 62.

Chaleplis began making capital contributions to One World in August 2017. Following the execution of the Operating Agreement, Onoufriadis, Karloutsos, and Rodgers caused One World to open (i) three separate Citizens Bank accounts, (ii) an Alex Brown/Raymond James investment account, and (iii) a Hancock Whitney account. Virtually all of Chaleplis’ capital contributions were deposited into Rodger's Citizen Bank IOLTA attorney trust account for intended transfer to One World's bank accounts. The Complaint alleges that Onoufriadis opened three separate accounts with Citizens Bank for the sole reason of allowing Rodgers, Karloutsos, and himself to misappropriate Chaleplis’ capital contributions.

B. Chaleplis Invests in the Greek Medicinal Cannabis Market

Karloutsos, Rodgers, and Onoufriadis met again with Chaleplis in New York City on March 17, 2018. In this meeting, they proposed to Chaleplis that One World invest in the Greek medicinal cannabis market.

At the March 17, 2018 meeting, Karloutsos, Rodgers, and Onoufriadis presented Chaleplis with a budget that they claimed itemized the estimated cost to capitalize and launch the business. In exchange for providing funding, One World was supposed to receive an equity interest in the new Greek companies and in Conmave, a Greek single-member company that was supposed to hold One World's proceeds in escrow temporarily until bank accounts could be opened for the new cannabis companies.

Following the meeting, and in order to invest in the cannabis market, they recommended that One World invest in new Greek companies, which would then use the funds to apply for licensing, pay governmental and lobbying expenses, purchase land and equipment, and all other necessary services to establish and operate the medicinal cannabis business. Because the Greek cannabis market was "publicly perceived with...