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Mukthineni v. Paladugu

United States District Court, D. Massachusetts

June 8, 2017

RAVI MUKTHINENI, Plaintiff,
v.
MURAHARI RAO PALADUGU, NAVEENA LAKSHMI PALADUGU, and AKSHITA PROPERTIES, LLC, Defendants.

          ORDER ADOPTING REPORT AND RECOMMENDATION

          George A. O'Toole, Jr. United States District Judge.

         The magistrate judge to whom this matter was referred has filed a report and recommendation (dkt. no. 27) (“R&R”) with respect to the defendants' motion to dismiss Count II (as to defendants Naveena Lakshmi Paladugu and Akshita Properties, LLC), III, IV, V (as to defendants Naveena Lakshmi Paladugu and Akshita Properties, LLC), IX, and X of the plaintiff's Complaint. No objections to the R&R have been filed.

         After carefully reviewing the pleadings, the parties' motion papers, and the R&R, I ADOPT the recommendation of the magistrate judge. The defendants' Partial Motion to Dismiss (dkt. no. 22) is GRANTED to the extent that Count III is dismissed as to Naveena Lakshmi Paladugu, Count IV is dismissed in its entirety, and Count V is dismissed as to Naveena Lakshmi Paladugu and Akshita Properties, LLC. The motion is otherwise DENIED.

         It is SO ORDERED.

         REPORT AND RECOMMENDATION ON DEFENDANTS' MOTION TO DISMISS (#22).

          KELLEY, U.S.M.J.

         I. Introduction.

         On May 31, 2016, plaintiff Ravi Mukthineni filed an eleven count complaint (#1) against defendants Murahari Rao Paladugu, Naveena Lakshmi Paladugu, [1] and Akshita Properties, LLC[2](Akshita). This action, which consists of claims for breach of contract (Counts I and VII), breach of implied contract (Counts II and VIII), unjust enrichment (Counts III and IX), conversion (Counts IV and X), equitable estoppel (Counts V and XI), and breach of fiduciary duty (Count VI), stems from a business venture and loan agreement gone awry. Defendants moved to dismiss Counts II (as to Ms. Paladugu and Akshita), III (in its entirety), IV (in its entirety), V (as to Ms. Paladugu and Akshita), IX (in its entirety), and X (in its entirety);[3] and plaintiff responded in opposition (#16).

         II. The Facts.

         A. The Partnership.

         The facts as set forth in the complaint are as follows. Around May 3, 2013, plaintiff and Mr. Paladugu entered into a partnership agreement (the Agreement) (#1-3 at 2-4) with the intention to open a cigar lounge and café called “The Royale, ” to be located at 297 Georgesville Road in Columbus, Ohio. (#1 ¶¶ 8, 9; #1-3 at 2-4.) The record owner of 297 Georgesville Road is Akshita. Id. ¶ 10.

         Around May 9, 2013, plaintiff transferred via bank wire $150, 000.00 to Akshita in connection with the business venture. Id. ¶ 13. Pursuant to the Agreement, plaintiff and Mr. Paladugu were each to have a 50% ownership interest in The Royale, and the business was to be managed by Mr. Paladugu. Id. ¶¶ 12, 14; (#1-3 at 2-3.) On June 24, 2013 and again on August 16, 2013, plaintiff received from Mr. Paladugu emails regarding interior and exterior renovation and design of The Royale.[4] (#1 ¶¶ 15, 16.)

         Over the next twelve months, plaintiff repeatedly called and sent messages to Mr. Paladugu inquiring as to the status of the business venture. Id. ¶ 17. Mr. Paladugu orally promised to repay, with 18% interest, all funds tendered by plaintiff in connection with the Agreement. Id. ¶ 18. Around January 2014, defendants made a payment of $4, 500.00 in an effort to reimburse plaintiff for his contribution to the business venture under the Agreement. Id. ¶ 19. Around February 2014, defendants made an additional payment of $4, 500.00 for the same purpose.[5] Id. ¶ 20.

         At the time this suit was filed, plaintiff had not been paid the $150, 000.00 debt owed by Mr. Paladugu as a result of the Agreement, and plaintiff was unaware of the status of The Royale's existence. Id. ¶¶ 21, 22.

         B. The Loan.

         Around June 29, 2013, plaintiff and Mr. Paladugu entered into a loan agreement (the Loan) (#1-3 at 10-11), separate from the above-described partnership agreement. Id. ¶ 24; (#1-3 at 10-11.) Pursuant to the Loan, plaintiff agreed to lend Mr. Paladugu $150, 000.00 at an interest rate of 18% per year that was to be repaid in full, via monthly installments, by July 2014. (#1 ¶¶ 25, 28; #1-3 at 10-11.)

         Around July 2013, Mr. Paladugu paid $2, 250.00 toward the interest on the Loan. (#1 ¶ 29.) Around January 2014 and again around February 2014, defendants made two payments of $4, 500.00 towards the balance of the Loan.[6] Id. ¶¶ 30, 31. “Thereafter, a check for the sum of $4, 500.00 was returned for insufficient funds.”[7] Id. ¶ 32.

         At the time this action was initiated, plaintiff had not been repaid the debt owed under the Loan or his investment made pursuant to the Agreement. Id. ¶ 33. Plaintiff has demanded repayment of all funds. Id. ¶ 36. Specifically, around May 20, 2015, plaintiff sent an email to Mr. and Ms. Paladugu (#1-3 at 17-18), in which he itemized the amounts owed and sought to recoup his money. Id. ¶¶ 36-39.

         III. Standard of Review.

         A Rule 12(b)(6) motion to dismiss challenges a party's complaint for failing to state a claim. In deciding such a motion, a court must “‘accept as true all well-pleaded facts set forth in the complaint and draw all reasonable inferences therefrom in the pleader's favor.'” Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (quoting Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 5 (1st Cir. 2011)). When considering a motion to dismiss, a court “may augment these facts and inferences with data points gleaned from documents incorporated by reference into the complaint, matters of public record, and facts susceptible to judicial notice.” Haley, 657 F.3d at 46 (citing In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003)).

         In order to survive a motion to dismiss under Rule 12(b)(6), the plaintiff must provide “enough facts to state a claim to relief that is plausible on its face.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The “obligation to provide the grounds of [the plaintiff's] entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (internal quotation marks and alteration omitted). The “[f]actual allegations must be enough to raise a right to relief above the speculative level, ” and to cross the “line from conceivable to plausible.” Id. at 555, 570.

         “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). However, the court is “‘not bound to accept as true a legal conclusion couched as a factual allegation.'” Id. at 678 (quoting Twombly, 550 U.S. at 555). Simply put, the court should assume that well-pleaded facts are genuine and then determine whether such facts state a plausible claim for relief. Id. at 679.

         IV. Discussion.

         A. Partnership Agreement.

         With respect to the claims brought in connection with the Agreement, defendants move to dismiss Count II, breach of implied contract, as to Ms. Paladugu and Akshita; Count III, unjust enrichment, as to all defendants; Count IV, conversion, as to all defendants; and Count V, equitable estoppel, as to Ms. Paladugu and Akshita.

         The Agreement contains a choice of law provision that mandates application of Ohio law, (see #1-3 at 3 ¶ 14), and the parties do not contest that Ohio law applies to claims pertaining to the Agreement. (See ##7, 16 (applying Ohio law).)

         1. Breach of Implied Contract - Count II.

         Plaintiff alleges that Ms. Paladugu and Akshita are bound by an implied contract to repay the funds he tendered under the Agreement. Under Ohio law, mutual assent in the context of an implied-in-fact contract is shown not by an express offer and acceptance, “but by ‘the surrounding circumstances, including the conduct and declarations of the parties.' Those circumstances must ‘make it inferable that the contract exists as a matter of tacit understanding.'” GEM Indus., Inc. v. Sun Trust Bank, 700 F.Supp.2d 915, 922 (N.D. Ohio 2010) (quoting Stepp v. Freeman, 119 Ohio App.3d 68, 74, 694 N.E.2d 510 (1997)); see also Legros v. Tarr, 44 Ohio St.3d 1, 6-7 (1989).

         This matter is an extremely close call and turns on the allegation that “the defendants” made certain payments to plaintiff in an effort to repay him. (See #1 ¶¶ 19, 20.) Taking the facts alleged in a light most favorable to Mr. Mukthineni, which must be done at this stage, if Ms. Paladugu and Akshita made these payments with the intention of repaying the debt owed, then plaintiff's breach of implied contract claim has merit. That said, an email attached to the complaint, (#1-3 at 17-18), in which plaintiff itemizes the debts he is allegedly owed, cuts against the inference that there was a meeting of the minds between Mr. Mukthineni and the moving defendants. Specifically, the email, entitled “Spreadsheet with the details of money owed by Murali[8] to me, ” seems to show that plaintiff was under the impression, as of May 20, 2015, that Mr. Paladugu would remunerate the funds owed. (See #1-3 at 17 (“I loaned my daughter's college savings . . . with the expectation that Murali will be paying back the amount”); 18 (labeling the debt owed as “Total Money Owed to me by Murali”).) In Gem Indus., Inc., the court found such conduct - demanding payment from other individuals - to be of substantial import in deciding whether the relevant circumstances illustrated the existence of an implied contract. See Gem Indus., Inc., 700 F.Supp.2d at 922-923. While the Gem Indus., Inc. court was confronted with this question at the summary judgment stage and found a complete absence of evidence to support an implied-in-fact contract, the May 20, 2015 email is enough to give the court pause.[9] However, the court will not speculate as to the potential existence of evidence in support of or against this claim and leaves it to the parties to ferret out these issues through the discovery process.

         In sum, plaintiff has, by the thinnest of margins, pled adequately his claim for breach of implied contract such that Count II should survive the motion to dismiss. For these reasons, defendants' motion should be denied as to Count II.

         2. Unjust ...


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