United States District Court, D. Colorado
RAYMOND P. MOORE, UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff's motion for
default judgment (ECF No. 215), Defendants BA Brokerage, LLC
(“BA”) and Appelhans' motion for partial
judgment on the pleadings (ECF No. 223), Defendant
Reich's motion for partial judgment on the pleadings and
for summary judgment as to all claims against him (ECF No.
224), and Plaintiff's motion to strike (ECF No. 256). For
the reasons given below, these motions are denied.
is a Delaware limited liability company with its principal
place of business in Broomfield, Colorado. (ECF No. 102 at
¶ 1.) Plaintiff processes and settles transactions on
behalf of merchants who accept credit and debit cards for
payment of goods and services by receiving card transactions
initiated by a merchant, routing them to the appropriate
bank, settling the transactions, collecting the resulting
credits, and forwarding the credits to the merchant's
account. (Id. at ¶ 13.) Cardholders may charge
back a transaction under certain circumstances, such as when
goods are not delivered, services are not as represented, or
a charge is not authorized. (Id. at ¶ 14.) When
chargebacks occur, Plaintiff must re-credit the issuing bank
and look to the merchant to recover. (Id.)
Chargeback rights may be exercised up to 180 days after the
date of the card transaction. (Id.)
Veteran Toner Services, LLC (“VTS”) was in the
business of selling toner cartridges and related products.
(Id. at 16.) VTS had branches in three
states-Illinois, New York, and California. Plaintiff alleges
that VTS was dominated and controlled by the individual
Defendants. (ECF No. 102 at ¶ 9.) BA was owned and
operated by Defendant Appelhans.
November 2013, VTS filed an application with Plaintiff for
merchant card processing. (Id. at ¶ 22.)
Plaintiff's Colorado address was on the application,
making it clear that Plaintiff operated in Colorado.
Plaintiff alleges the application VTS submitted was
misleading in several respects. (Id. at ¶ 23.)
Nonetheless, after multiple meetings and communications
between Plaintiff and VTS, Plaintiff accepted and approved
the application, and the parties entered into a merchant
agreement. (Id.) In December 2013, Plaintiff began
processing card transactions for VTS. (Id. at
¶¶ 27, 28.) Over the course the parties'
two-and-a-half-year business relationship, Plaintiff
processed roughly 1500 card transactions for VTS, totaling
more than $15 million. (Id. at ¶ 30.)
merchant agreement, personal charges were not permitted.
According to the complaint, however, Defendants circumvented
this rule and generated cash deposits into the VTS account by
presenting personal card transactions accompanied by phony
invoice numbers to make the transactions look like product
sales. (Id. at ¶¶ 32-34.)
August 2016, VTS announced it had ceased operations, and
Plaintiff began receiving chargebacks on some VTS
transactions, totaling more than $1.8 million. (Id.
at ¶ 40.) The VTS account had insufficient funds to
cover the chargebacks, and Plaintiff's attempts to
recover from VTS were unsuccessful. (Id. at ¶
47.) Plaintiff alleges that the individual Defendants
transferred the money from the VTS account to themselves and
persons associated with them. (Id. at ¶¶
filed this suit in state court, and the case was removed to
this Court. In its second amended complaint, Plaintiff
asserts eight claims for relief, seeking to hold Defendants
jointly and severally liable for (1) breach of contract; (2)
restitution; (3) fraud/deceit; (4) aiding and abetting
fraud/deceit; (5) civil theft; (6) aiding and abetting civil
theft; (7) violations of the Colorado Organized Crime Control
Act (“COCCA”); and (8) civil conspiracy.
Motion for Default Judgment
successfully moved for entry of default against VTS after it
failed to respond to Plaintiff's complaint. (ECF No. 99.)
Plaintiff has now moved for entry of judgment of default
against VTS, seeking a judgment of over $6 million. (ECF No.
decision to enter default judgment is discretionary for this
Court. Dennis Garberg & Assocs., Inc. v. Pack-Tech
Int'l Corp., 115 F.3d 767, 771 (10th Cir. 1997).
“Once default is entered, it remains for the court to
consider whether the unchallenged facts constitute a
legitimate cause of action, since a party in default does not
admit mere conclusions of law.” Bixler v.
Foster, 596 F.3d 751, 762 (10th Cir. 2010) (quotation
omitted). But “when one of several defendants who is
alleged to be jointly liable defaults, judgment should not be
entered against him until the matter has been adjudicated
with regard to all defendants, or all defendants have
defaulted.” Hunt v. Inter-Globe Energy, Inc.,
770 F.2d 145, 147 (10th Cir. 1985) (quotation omitted). Thus,
the Hunt court concluded that in the interest of
avoiding inconsistent liability determinations among joint
tortfeasors, the district court should not have entered
default judgment against one defendant where multiple
defendants were alleged to be jointly and severally liable.
Id. at 148 (“[J]ust as consistent verdict
determinations are essential among joint tortfeasors,
consistent damage awards on the same claim are essential
among joint and several tortfeasors.”).
Court finds that the rationale in Hunt applies here
and that entry of default judgment against VTS would be
inappropriate before liability of the other Defendants is
determined. Accordingly, Plaintiff's motion is denied.
Motion for Partial Judgment on the Pleadings
Defendants Appelhans and BA have moved for partial judgment
on the pleadings on ...