MEMORANDUM OPINION AND ORDER
JOSEPH H. McKINLEY, Jr., Chief District Judge.
This matter is before the Court on motions by Crossclaim Defendants Brian Sly; Anthony Huff; Sheri Huff; Michele Brown; Anthony Russo; Huff Grandchildren's Trust; River Falls Investments LLC; Oxygen Unlimited, LLC; River Falls Holdings, LLC and Huff Farms (Horsebranch) LLC's (collectively "Crossclaim Defendants") to dismiss the cross claim for failure to state a claim [DN 140; DN 144]. Also before the Court is Crossclaim Plaintiff Danny Pixler's motion to dismiss various claims against Crossclaim Defendants [DN 151] and motion for entry of default against Jordan Wagenseller [DN 153]. Fully briefed, these matters are ripe for decision.
This case centers around the creation and operation of Midwest Merger Management, LLC ("MMM"). In 2001, Plaintiff Roxann Pixler's (R. Pixler) husband, Danny Pixler ("D. Pixler"), and Anthony Huff ("A. Huff") formed MMM. Danny and Anthony placed their shares in the company in their respective wives' names, making R. Pixler and Sheri Huff ("S. Huffi") the only members of the LLC, with each holding a 50% interest. On July 20, 2001, MMM filed its Articles of Organization, which listed two members, R. Pixler and S. Huff. In its 2002 annual report filed with the Kentucky Secretary of State, MMM listed an additional member and/or manager, Michele Brown. In 2006, Anthony Russo became a manager of MMM, and at some point, Brian Sly also served as either a manager and/or employee of MMM.
MMM was established as a "risk manager." In this line of work, MMM would collect premiums and fees from clients and would in turn pay premiums to insurance carriers that provided workers' compensation insurance coverage. In 2001, MMM acquired Certified Services, Inc., ("Certified") which itself acquired several subsidiaries. A. Huff and D. Huff ran all of these companies, along with several other Kentucky LLCs, using the same working capital and regularly commingling funds. These entities were used to funnel money from MMM for the personal benefit of A. Huff, S. Huff, D. Pixler, Brown, Russo, Sly and others.
On May 12, 2005, the scheme began to unravel as Certified filed for Chapter 11 bankruptcy. In 2006, D. Pixler and A. Huff told R. Pixler that MMM had no value, but that A. Huff would still buy-out R. Pixler's share in the company. R. Pixler then accepted $170, 000 from A. Huff for her interest in MMM. At this point, and potentially even earlier, MMM, Certified, A. Huff, and many of the other individual Defendants were engulfed in litigation. See, e.g., S.E.C. v. Huff , 758 F.Supp.2d 1288 (S.D. Fl. 2010). In 2007, after she had sold her interest, R. Pixler requested a copy of MMM's financial records from Brown, but was told that they were currently unavailable because they were being audited. In 2008, R. Pixler obtained a copy of MMM's financials and discovered a litany of accounting discrepancies demonstrating how the Defendants had used MMM to misappropriate its assets for their own personal gain.
R. Pixler filed suit against Defendants in April of 2011claiming that Defendants defrauded her out of her contractual right to share in the profits and financial gain of MMM. In August of 2012, Defendant D. Pixler first made an appearance in the litigation by answering Plaintiff's Second Amended Complaint and filing his cross complaint pro se [DN 87]. Crossclaim Plaintiff filed an Amended Cross Complaint on September 11, 2012, and, after the Court granted his motion to amend his Complaint on February 1, 2013, he filed his Second Amended Cross Complaint [DN 133].
A. Motion To Dismiss Second Amended Cross Complaint
The Second Amended Cross Complaint alleges ten claims against the various Crossclaim Defendants: breach of agreement (Count I); breach of fiduciary duty (Count II); breach of agreement (Count III); breach of contract (Count IV); conspiracy (Count V); fraud (Count VI); accounting fraud (Count VII); conversion (Count VIII); RICO (Count IX); negligence (Count X); and punitive damages (Count XI). [DN 133]. The Court grants Crossclaim Plaintiff's, D. Pixler, motion to dismiss Count III, Count VII, Count VIII, and Count X [DN 151], and thus the Court will only address the remaining crossclaim counts.
Crossclaim Defendants have filed motions to dismiss the Second Amended Complaint arguing the cross complaint alleges fraud but fails to satisfy the requirements of Fed.R.Civ.P. 9(b); the cross complaint fails to state a claim under Fed.R.Civ.P. 12(b)(6); and improper cross claim practice under Fed.R.Civ.P. 13(g). Crossclaim Defendants state that "Plaintiff Roxann Pixler's remaining claims relate to (i) breach and/or fraud relating to the operating agreement(s) of Midwest only received one $60, 000 distribution from MMM and she "paid the money she received from Midwest to the federal government in taxes without enjoying a corresponding income or other benefit from Midwest, the Court concludes that disgorgement is not appropriate." Huff , 758 F.Supp.2d at 1362. To the extent Plaintiff now claims that she was entitled to additional distributions, the Court is unsure that she would be entitled to keep any award representing lost profits or distributions from MMM. However, as this is only a motion to dismiss, the Court reserves this issue for another day. Merger Management, LLC, (ii) a failure to disclose alleged improper transfers of assets out of MMM, and (iii) the partial buyout of Ms. Pixler's MMM membership interest (the Surviving Claims')." (Cross-Claim Defs.' Motion to Dismiss, 3 [DN 140].)
Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court "must construe the complaint in the light most favorable to plaintiff, " League of United Latin Am. Citizens v. Bredesen , 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), "accept all well-pled factual allegations as true[, ]" id., and determine whether the "complaint states a plausible claim for relief[, ]" Ashcroft v. Iqbal , 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for its entitlement to relief, which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678. A complaint falls short if it pleads facts "merely consistent with a defendant's liability" or if the alleged facts do not "permit the court to infer more than the mere possibility of misconduct." Id. at 678, 679. Instead, the allegations must "show[ ] that the pleader is entitled to relief.'" Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).
i. Breach of Agreement (Count I)
In the Second Amended Complaint, D. Pixler asserts that he advanced $429, 650.20 to Anthony Huff and Michele Brown as an investment with Oxygen Unlimited II, LLC. Allegedly, the investment was to have monthly or annual principal payments until it was paid back in full with 10% interest. D. Pixler was never paid.
Crossclaim Defendants first state that this claim does not relate to any Surviving Claims and must be dismissed. Second, they argue that the agreement D. Pixler alleges was to continue for more than one year and KRS 371.010(7) "provides that one may not enforce an agreement not to be performed in on year unless in writing and signed by the party charged with non-performance." (Crossclaim Defs.' Mot. to Dismiss, 4 [DN 140].) Third, Crossclaim Defendants argue that the statute of limitations for enforcement of an oral promise is five years under KRS 413.120(1) and D. Pixler filed the Cross Complaint in August of 2012, after the limitations has run. Lastly, Crossclaim Defendants contend that D. Pixler failed to assert that he had a contract with the Crossclaim Defendants with respect to the investment which they actually breached. Crossclaim Defendant Sly reiterates these arguments in his motion.
In response, D. Pixler states it is an oral agreement, and up until October of 2009 he was still in contact with the Crossclaim Defendants regarding the agreement. He asserts they continued to make timely payments through March of 2010. D. Pixler ...