AwalNet Technology Co. v. EB Wireless, Inc. et al

Filing 66

ORDER Denying Motion for Rule 11 Sanctions 43 . Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
AWALNET TECHNOLOGY,
Plaintiff,
Case No. 17-13411
v.
HON. DENISE PAGE HOOD
EB WIRELESS, INC., et al.,
Defendants.
______________________________/
ORDER DENYING MOTION FOR RULE 11 SANCTIONS [#43]
I.

INTRODUCTION
On October 19, 2017, Plaintiff filed a five-count complaint against Defendants

EB Wireless, Inc. (“EB Wireless”), Edward A. Bajoka (“Bajoka”), and Rodney Moret
(“Moret”) alleging: (a) breach of contract (Count I); (b) unjust enrichment (Count II);
(c) piercing the corporate veil as to EB Wireless (Count III); (d) statutory conversion
(Count IV); and (e) common-law conversion (Count V). Bajoka filed a Motion to
Dismiss Plaintiff’s conversion claims (Counts IV and V) against him pursuant to Rule
12(b)(6), which was granted.
On March 26, 2018, Plaintiff filed a Motion to File First Amended Complaint
[Dkt. No. 19] to: (1) add EB Cellular Wholesale, LLC (“EB Cellular”) as a
party-Defendant; (2) add a count of unjust enrichment as to EB Cellular; (3) clarify

the conversion counts as to Bajoka, as he now claims he is not a shareholder in EB
Wireless, but the funds were placed in an account of another company he is a member,
and he withdrew funds from that account; (4) clarify the conversions counts as to
Moret, as the funds were not placed in an EB Wireless account, but in another account
of a company he is a member, and he withdrew funds from that account; and (5) add
a count of piercing the corporate veil as to EB Cellular. The Court granted in part and
denied in part the Motion to File First Amended Complaint. The Court allowed
Plaintiff to: (a) add EB Cellular as a party; (b) assert claims against EB Cellular; and
(c) clarify the conversion claims against Moret. The Court prohibited Plaintiff from
filing any conversion claims against Bajoka or adding any other allegations against
Bajoka that did not appear in the original Complaint.
Defendant Bajoka filed a Motion for Rule 11 Sanctions [Dkt. No. 43] as a result
of the Motion to File First Amended Complaint. Bajoka argued that Plaintiff filed its
Motion to File First Amended Complaint: (a) without conducting reasonable inquiry
into its allegations; and (b) for the improper purpose of harassing Defendant Bajoka
and tarnishing his professional reputation as an attorney. The Motion for Rule 11
Sanctions was fully briefed, and a hearing was held on August 15, 2018. For the
reasons that follow, the Court denies Bajoka’s Motion for Sanctions.

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II.

BACKGROUND
This case stems from an agreement between Plaintiff and EB Wireless. At

some point prior to December 2016, EB Wireless was owned by Moret and Bajoka.
Bajoka was the incorporator for EB Wireless, as well as the President, but he
“disassociated with EB Wireless” in December 2016, at which time Moret became the
sole owner and officer of EB Wireless. On March 11, 2017, Plaintiff and EB Wireless
entered into an agreement, pursuant to which Plaintiff would pay $110,550.00 to EB
Wireless, and EB Wireless would ship to Plaintiff’s place of business 8,844 used LG
L22C TracPhone A/B stock, with no cracked lenses and including the battery and
back door (“Products”). Plaintiff paid a total of $110,550.00 to EB Wireless in two
payments ($49,500.00 on March 16, 2017 and $61,050.00 on March 20, 2017), but
EB Wireless did not provide the Products to Plaintiff.
The $110,550.00 paid by Plaintiff to EB Wireless was deposited into a
Comerica Bank account, Number xxx3324, which was held by EB Cellular, not EB
Wireless (the “EB Cellular Account”). Bajoka was the organizer and resident agent
for EB Cellular, a company with the same address as EB Wireless. Plaintiff alleges
that Bajoka and Moret withdrew funds from the EB Cellular Account, as follows: (1)
Bajoka withdrew $15,000.00 on April 19, 2017; and (2) Moret withdrew $13,000.00
on April 3, 2017, $5,000.00 on April 5, 2017, $12,500.00 on April 11, 2017,
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$10,400.00 on April 12, 2017, and $35,000.00 on July 6, 2017.
Bajoka represented Moret’s father, also named Rodney Moret (hereinafter
“Moret’s Father”), in a criminal matter. In its Motion to File First Amended
Complaint, Plaintiff detailed Moret’s Father’s convictions pursuant to guilty pleas for
criminal sexual conduct, health care fraud and distributing controlled substances,
including being ordered to pay $2,581,128.53 in restitution to the Medicare Trust
fund. Plaintiff alleged that Moret’s Father transferred $282,000 from a bank in the
Dominican Republic – Banco Popular Dominicano Account Number xxx2434
(“Account No. 2434”) – to the EB Cellular Account in the course of five transactions
between November 15, 2016 and February 17, 2017, a period of time when Moret and
Bajoka allegedly were withdrawing funds from the EB Cellular Account for their own
purposes.
III.

APPLICABLE LAW & ANALYSIS
Bajoka asserts that Plaintiff’s amendments related to the statutory and common

law conversion claims against Bajoka in the proposed First Amended Complaint
include many allegations that are irrelevant, scandalous, harassing, and serve no
purpose other than to tarnish Bajoka’s reputation as an attorney (specifically, those
allegations related to Moret’s Father). Defendants argue that Plaintiff’s “reckless
allegations . . . improperly insinuate that . . . Bajoka either wrongfully transferred
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money to the EB Cellular Account paid to . . . Bajoka by [Moret’s Father] for legal
services on behalf of [Moret’s Father]; or even worse, . . . that . . . Bajoka aided
[Father] Moret in hiding money from the U.S. Government that should have been paid
as restitution for [Moret’s Father’s] criminal convictions.” Defendants contend that
Plaintiff failed to establish a causal link between Bajoka’s representations of Moret’s
Father, the order to pay restitution, and deposits from Moret’s account to the EB
Cellular Account.
Defendants assert that the allegations that Moret’s Father deposited funds in the
EB Cellular account are misplaced because Plaintiff failed to conduct a proper inquiry
that would have revealed that “Sr. Rodney Moret” does not refer to Moret’s Father.
According to Defendants, “Sr. Rodney Moret” is Spanish (the primary language
spoken in the Dominican Republic) and means “Senor Rodney Moret” and refers to
Moret, not Moret’s Father. In support of their argument that Plaintiff was making bad
faith allegations, Defendants cite numerous statements by Plaintiff’s owner
(collectively, “Plaintiff’s statements regarding reputation”), including the following:
A.

“Today i sent to you my guy to your office in Michigan,” “And he will
comes next Monday to your office to meet you,” (message accompanied
by a photograph of Mr. Bajoka’s business card).

B.

“You don’t care about your Reputation? It’s Your Most Valuable Asset.”

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C.

I swear to god [. . .] We are going to posting about Edward bajoka and
Bajoka Law Group [. . .] And your reputation I will spoil it in
everywhere [. . .] I Will send to All email addresses And I will posting
and share in.
-Facebook pages
-Linkendin groups
-Linkedin Friends and more 1191 followers
-Twitter pages @bajokalaw @eddiebajoka -Bajokalaw.Blogspot.com
[. . .]
To : Chief Justice [. . .]
And i will not stop and i will showing to all the people in USA [. . .]
And If we don’t receive response during one week, that’s mean you
don’t care about your reputation I swear I will spoil it in everywhere [.
. .] I am telling you solve it amicably. We don’t spoil your reputation and
your business.

[Dkt. No. 21, Ex. 2 (WhatsApp Correspondence), Ex. 3 (WhatsApp Correspondence),
and Ex. 4 (Text Messages)] Defendants believe the Plaintiff’s statements regarding
reputation constituted threats to Bajoka’s safety and professional reputation if
Defendants did not resolve this matter to Plaintiff’s satisfaction.
Plaintiff argues that EB Cellular was used as a sham for Bajoka and Moret,
particularly as Defendants have not explained why Moret’s Father (Plaintiff asserts
that “Sr. Rodney Moret” is Moret’s Father) deposited funds in the EB Cellular
Account. Plaintiff contends that Defendants’ statements that Moret deposited funds
into the EB Cellular Account are misleading. Plaintiff acknowledges that Moret may
have deposited some funds from a Banco Popular Domincano account into the EB
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Cellular Account, but Plaintiff contends such funds were not from Account No. xxx
2434, the origin of the $282,000.00 in deposits about which Plaintiff bases his
allegations in the proposed First Amended Complaint.
Plaintiff further argues that Bajoka (or any Defendant) could have provided
documentation regarding Banco Popular Dominicano accounts held by Moret, as
Plaintiff requested. Plaintiff asserts that Moret has refused to produce his bank
records from Banco Popular Dominicano and instead prepared an affidavit dated June
2, 2018. [Dkt. No. 21, Ex. 6] Plaintiff notes that Moret’s June 2, 2018 affidavit: (a)
does not include a representation that the $282,000.00 in funds was from Moret
(rather than from Moret’s Father); and (b) none of the Defendants makes such a
representation in any brief filed with respect to the Motion to File First Amended
Complaint or the Motion for Rule 11 Sanctions.
For the reasons set forth above, (1) Bajoka argues that he is entitled to Rule 11
sanctions against Plaintiff for filing the Motion to File First Amended Complaint; and
(2) Plaintiff asserts that Bajoka is not entitled to Rule 11 sanctions. For the reasons
that follow, the Motion for Rule 11 Sanctions is denied.
The Sixth Circuit has stated, “Rule 11 imposes on attorneys a duty to
reasonably investigate factual allegations and legal contentions before presenting them
to the court.” Penn, LLC v. Prosper Bus. Dev. Corp., 773 F.3d 764, 766 (6th Cir.
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2014). Under Rule 11:
By presenting to the court a … motion, or any other paper—whether by
signing, filing, submitting, or later advocating it—an attorney … certifies
that to the best of the person’s knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances:
1. it is not being presented for any improper purpose, such as to
harass . . .
*****
3. the factual contentions have evidentiary support or, if
specifically so identified, will likely have evidentiary support after
a reasonable opportunity for further investigation or discovery . .
..
Fed.R.Civ.P. 11(b) (emphasis added); see also Vickery v. Caruso, No. 07-13419, 2008
WL 4058662, at *2 (E.D. Mich. Aug. 28, 2008). Rule 11 prevents wasteful, false
filings by “requir[ing] litigants to ‘stop-and-think’ before initially making legal or
factual contentions.” See Fed. R. Civ. P. 11, Advisory Committee Notes (1993
Revision). Rule 11 “emphasizes the duty of candor by subjecting litigants to potential
sanctions for insisting upon a position after it is no longer tenable and by generally
providing protection against sanctions if they withdraw or correct contentions after a
possible violation is called to their attention.” Id. (emphasis added); see also Rentz v.
Dynasty Apparel Indus., Inc., 556 F.3d 389, 395 (6th Cir. 2009) (“The amended rule
imposes on litigants a continuing duty of candor, and a litigant may be sanctioned for
continuing to insist upon a position that is no longer tenable.”) (quotation and citations
omitted). “[T]he central purpose of Rule 11 is to deter baseless filings in district
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court.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990).
In his Motion for Rule 11 Sanctions, Bajoka argues that Plaintiff’s “reckless
allegations . . . improperly insinuate that . . . Bajoka either wrongfully transferred
money to the EB Cellular Account paid to . . . Bajoka by [Moret’s Father] for legal
services on behalf of [Moret’s Father]; or even worse, . . . that . . . Bajoka aided
[Father] Moret in hiding money from the U.S. Government that should have been paid
as restitution for [Moret’s Father’s] criminal convictions.”
The Court rejects Defendant’s contentions that Plaintiff filed a motion to amend
its complaint for an improper purpose or without conducting reasonable inquiry into
its allegations regarding conversion or Bajoka’s role regarding funds transferred to the
EB Cellular Account. First, it is an undisputed fact that Bajoka represented Moret’s
Father and that Moret’s Father paid Bajoka for legal services provided to Moret’s
Father. Second, even if Plaintiff is erroneous in its belief that “Sr. Rodney Moret”
meant Moret’s Father (as opposed to Defendants’ claim that it was Spanish for “Senor
Rodney Moret”), it is clear that Plaintiff had a basis for its argument. Third, Plaintiff
requested bank account information from Moret regarding the Dominican Republic
account from which the funds deposited into the EB Cellular Account originated.
That information was not provided. If that information had been provided, it likely
would have clarified this issue for Plaintiff. The only factor weighing in favor of
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finding an improper purpose or an intent to harass or tarnish the reputation of Bajoka
are Plaintiff’s statements regarding reputation, but these statements do not establish
that the allegations are inaccurate.
The Court: (a) concludes that Plaintiff conducted a reasonable inquiry into the
truth of its factual allegations; (b) finds that there is no evidence that Plaintiff insisted
upon a position after it was determined to be no longer tenable; and (c) finds that it is
not evident that there was an improper purpose or intent to harass or tarnish the
reputation of Bajoka when filing the Motion to File First Amended Complaint. The
Court denies Bajoka’s Motion for Rule 11 Sanctions.
IV.

CONCLUSION
Accordingly, for the reasons stated above, the Court DENIES Bajoka’s Motion

for Rule 11 Sanctions.
IT IS ORDERED.
s/Denise Page Hood
DENISE PAGE HOOD
UNITED STATES DISTRICT JUDGE

Dated: October 31, 2018

I hereby certify that a copy of the foregoing document was served upon counsel of
record on November 1, 2018, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
Case Manager
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