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Harley-Davidson Credit Corp. v. JHD Holdings, Inc.

United States District Court, W.D. Wisconsin

July 19, 2019

HARLEY-DAVIDSON CREDIT CORP., Plaintiff,
v.
JHD HOLDINGS INC., H2D MOTORCYCLE VENTURES LLC, and SARA J. POMEROY, Defendants.

          OPINION AND ORDER

          JAMES D. PETERSON, DISTRICT JUDGE

         Plaintiff Harley-Davidson Credit Corp. sued defendants JHD Holdings Inc., H2D Motorcycle Ventures LLC, and Sara J. Pomeroy for breach of contract, multiple types of fraud, and conversion. The court may exercise jurisdiction under 28 U.S.C. § 1332 because Harley-Davidson has alleged that there is complete diversity of citizenship and the amount in controversy is greater than $75, 000.

         Defendants now move to dismiss Harley-Davidson's claims for fraud, check fraud, inventory financing fraud, and conversion under Federal Rule of Civil Procedure 12(b)(6). For the reasons explained below, the court will grant the motion in part and deny it in part.

         ALLEGATIONS OF FACT

         Harley-Davidson Credit Corp. is a floorplan lender. It is incorporated and has its principal place of business in Nevada. Defendants JHD and H2D are dealers of Harley-Davidson motorcycles. JHD is incorporated and has its principal place of business in Wisconsin. Sarah J. Pomeroy is the sole the sole member of H2D. She is domiciled in Florida, but the H2D dealership is located in Wisconsin.

         As a floor plan lender, Harley-Davidson extends credit to dealers for the purchase of goods, such as new and used motorcycles, for sale at Harley-Davidson dealerships. Harley-Davidson has a financing agreement with both JHD and H2D. Defendant Pomeroy signed a continuing guaranty in connection with both financing agreements.

         In the fall of 2018, defendants began selling their merchandise and retaining the proceeds rather than using those proceeds to repay their loans to Harley-Davidson, as required by the agreement. Defendants also lied to Harley-Davidson in several ways to induce Harley-Davidson to continue advancing credit to defendants. These actions included falsely promising and scheduling payments, prescheduling payments that were canceled or pushed back, issuing fraudulent checks, and sending a falsified screenshot of a wire-transfer.

         The court will discuss additional allegations as they become relevant to the analysis.

         ANALYSIS

         A. Motion to dismiss standard

         Defendants have moved to dismiss Harley-Davidson's claims under Rule 12(b)(6). Generally, all that is required by federal pleading rules is “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The question is “simply whether the complaint includes factual allegations that state a plausible claim for relief.” BBL, Inc. v. City of Angola, 809 F.3d 317, 325 (7th Cir. 2015). To satisfy the plausibility requirement the complaint must have “enough details about the subject-matter of the case to present a story that holds together.” Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 526 (7th Cir. 2015) (citation and quotations omitted).

         Under Rule 9(b), a party alleging fraud must state with particularity the circumstances constituting fraud. This means that the plaintiff must allege the “‘who, what, when, where, and how' of the fraud.” AnchorBank, FSB v. Hofer, 649 F.3d 610, 615 (7th Cir. 2011) (citations omitted). Requiring this level of particularity “force[s] the plaintiff to do more than the usual investigation before filing [a] complaint.” Camasta v. Jos. A. Bank. Clothiers, Inc., 761 F.3d 732, 737 (7th Cir. 2014) (citations and internal quotations omitted).

         The parties do not dispute that Rule 8 applies to Harley-Davidson's conversion claim and Rule 9 applies to the fraud claims. In reviewing both types of claims, the court construes the complaint in the light most favorable to Harley-Davidson, accepting the well-pleaded facts as true and drawing all reasonable inferences in Harley-Davidson's favor. Burke v. 401 N. Wabash Venture, LLC, 714 F.3d 501, 504 (7th Cir. 2013).

         B. ...


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