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Mirlisena v. Babu

United States District Court, S.D. Ohio, Western Division

December 15, 2017

John R. Mirlisena, et al., Plaintiffs
Nirav Babu, et al., Defendants.


          Susan J. Dlott Judge

         This matter is before the Court on Defendant Pendum LLC's Motion for Summary Judgment (Doc. 146) and Crossclaim Defendant Nirav Babu's Motion for Summary Judgment as to Remaining Crossclaims (Doc. 147). For the reasons that follow, Pendum LLC's Motion will be DENIED, and Babu's Motion will be GRANTED.

         I. Background

         This case involves the unusual circumstance of a business receiving and retaining more than one million dollars from an entity with which it had no prior business dealings and suing the individual who transferred the funds to it. Plaintiffs, whose bank account was used to wire the funds, assert the receipt and retention of its money constitutes unjust enrichment-a claim that after review of the record evidence, the Court finds must proceed to trial. The business that received the money, Pendum LLC, asserts claims for tortious interference with contract and tortious interference with a business relationship under Ohio law against the individual who wired the funds, Crossclaim Defendant Babu. Those claims cannot withstand summary judgment. The reasoning for the Court's conclusions is set forth below.

         A. Facts[1]

         1. $1.1 Million Dollar Transfer

         On February 10, 2014, Defendant and Crossclaim Plaintiff Pendum LLC, [2] a limited liability corporation in the business of selling, maintaining, and servicing ATMs, received a payment of $1, 145, 630.50[3] from Great Tax, LLP's bank account at TAB Bank.[4] (Mirlisena Dec., Doc. 156-2 at PageID 3712.) Pendum had no business relationship with the entity from which the funds were received. (Hauck Dep., Doc. 108 at PageID 1007-08.[5])

         2. Relevant Parties

         The $1.1 million was wired to Pendum from Great Tax, LLC's bank account by Crossclaim Defendant Nirav Babu. (Mirlisena Dec., Doc. 156-2 at PageID 3712.) Although currently not working, Babu is an attorney who previously was involved in the tax refund business and had an interest in a software company called Refunds Plus, LLC. (Babu Dep., Doc. 143 at PageID 2053.)

         In late 2013 and early 2014, Babu entered into a business agreement with Plaintiffs John Mirlisena, Jr. and two tax service businesses Mirlisena owns, GTP Financial, LLC (“GTP”), and Great Tax, LLC (“GT”). (Mirlisena Dec., Doc. 156-2 at PageID 3710.) GTP provides tax refund anticipation loans (called “RALs” in the industry). GT provides tax preparer services, and GTP is the company through which GT's funds were used to conduct GT's business, such as paying GT's vendors and refund loans to qualified taxpayers. (Id. at PageID 3710-11.) Babu agreed to provide GT and GTP with operating capital and funds for working capital to issue tax rebates and to give RALs to taxpayers. (Id. at PageID 3710.)

         Babu, Plaintiffs, and Pendum had ties to an individual in the tax rebate industry named Fesum Ogbazion, a former defendant to this action who is permanently enjoined from operating businesses related to the preparation of tax returns.[6] Babu previously served as in-house counsel and a franchisee of one of Ogbazion's companies, ITS. (Babu Dep., Doc. 143 at PageID 2053.)

         2. Plaintiffs' Business Relationship with Babu

         Babu lent approximately $5 million dollars to GTP and GT as “co-borrowers.” (Mirlisena Dep., Doc. 135 at PageID 1311-12.) Babu supplied funds to GTP and GT by depositing them into accounts at TAB Bank. (Id. at PageID 1318.) On January 2, 2014, Babu entered into Deposit Account Control Agreements with TAB Bank and each GTP and GT. (Id. at PageID 1319-21; Doc. 135-1 at PageID 1488; Doc. 135-2 at PageID 1499.) Pursuant to the Deposit Account Control Agreements:

         The Company[7] authorizes and directs the Bank to comply, and the Bank agrees to comply, with instructions given by the Lender[8] in accordance with this Agreement

directing the disposition of funds from time to time in any Account or as to any other matters relating to any Account or any of the other Account Collateral without further consent by the Company. The Bank shall be entitled to rely and act upon any instructions received by the Bank from the Lender, even if such instructions shall be contrary to any instructions received by the Bank from the Company.

(Doc. 135-1 at PageID 1489; 135-2 at PageID 1500.)

         3. Pendum's Contract for ATM Sale with EZ Tax/Ogbazion

         On August 30, 2013, Pendum entered into an Equipment Sale Agreement for 300 ATMs for a sale price of $2, 699, 700[9] with “ez Tax Cash, ”[10] with Ogbazion as the signatory. (Hauck Dep., Doc. 161-2 at PageID 3812.) EZ Tax did not pay Pendum the $2.7 million; rather, payments came in from various sources. (Boyd Dep., Doc. 154 at PageID 3299.) A fifty percent down payment for the ATMs was made by an individual named Charles Verghese[11] with his personal credit card. (Id. at PageID 3240-41.) However, the balance was not paid near the end of 2013, and it became designated as a delinquent account. Pendum had released half of the ATMs but held back the remainder until payment was received. (Hauck Dep., Doc. 108 at PageID 1000-01.) Pendum agreed that Babu and Verghese could make payments from their credit cards towards the balance, although it did not know who these individuals were. (Id. at PageID 1004-05.) The remainder of the balance, $1.1 million dollars, was due on February 7, 2014. (Id. at PageID 1007.) On February 10, 2014, the exact dollar amount Pendum was expecting was received from GTS, although no one at Pendum was aware of what GTS was. (Id. at PageID 1007-09.) That payment came from Babu.

         B. Procedural History

         This action originated in the Ohio Court of Common Pleas for Hamilton County on May 30, 2014 and was removed to federal court on January 28, 2015. In the Corrected Fourth Amended Complaint, Plaintiffs John R. Mirlisena, Jr, Great Tax LLC, and GTP Financial LLC brought claims against Charles Verghese, Refunds Plus, LLC c/o Nirav Babu, Pendum, LLC, Fesum Ogbazion, EZ Tax Cash, LLC c/o Fesum Ogbazion, and Nirav Babu. (Doc. 90.) Babu brought a third-party claim against Falcon Tax Products LLC. (Id.)

         On June 14, 2016, Plaintiffs dismissed with prejudice all claims brought in this action against Verghese, Refunds Plus, LLC, and Babu, and Babu dismissed his counterclaims against Falcon Tax Products, LLC. (Doc. 102.) On June 30, 2016, Plaintiffs dismissed without prejudice their claims against Defendants ...

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