throbber
Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 1 of 61
`
`IN THE UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF ARKANSAS
`CENTRAL DMSION
`
`FILED
`EAsr~·RN°drl-mfcl"rCOURT
`ARKANSAS
`M
`
`f TAM
`By: ----r-:-~~~-2.
`
`CNH INDUSTRIAL CAPITAL
`AMERICALLC
`
`v.
`
`VENTURE EQUIPMENT, LLC; and
`STEVE MERRITT
`
`Case No. ¥-~e24v..:l?~-~
`•
`This case assigned to D~~ d
`
`and to Magistrate Judge~-'-,.1""4',...,__.&...... ___ _
`D ENDANTS
`
`VERIFIED COMPLAINT
`
`Plaintiff CNH Industrial Capital America LLC, for its verified complaint
`
`against Venture Equipment, LLC, and Steve Merritt for breach of contract, fraud,
`
`and other relief ("Complaint"), states as follows:
`
`Parties, Jurisdiction, & Venue
`
`1.
`
`CNH Industrial Capital America LLC ("CNH'') is a limited liability
`
`company formed under the laws of the State of Delaware with its principal place of
`
`business located in Racine, Wisconsin. CNH changed its name from CNH Capital
`
`America LLC to CNH Industrial Capital America LLC effective February 28, 2014.
`
`CNH's sole member, CNH Industrial Capital LLC, is a Delaware limited liability
`
`company with its principal place of business located in Racine, Wisconsin. The sole
`
`member of CNH Industrial Capital LLC is CNH Industrial America LLC, a Delaware
`
`limited liability company with its principal place of business located in Racine,
`
`Wisconsin. The sole member of CNH Industrial America LLC is Case New Holland
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 2 of 61
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`Industrial, Inc., a Delaware corporation with its principal place of business in Racine,
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`Wisconsin.
`
`2.
`
`Defendant Venture Equipment, LLC (''Venture Equipment") is an
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`Arkansas limited liability company with its principal place of business in Searcy,
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`Arkansas. Member-manager Steve Merritt ("Merritt") is a citizen of White County,
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`Arkansas.
`
`3.
`
`Defendant Merritt is a citizen of White County, Arkansas, with his
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`permanent residence located in Beebe, Arkansas.
`
`4.
`
`This Court has jurisdiction over these proceedings pursuant to the
`
`provisions of 28 USC § 1332(a)(l) because there is complete diversity of citizenship
`
`between the parties to this action and the amount in controversy exceeds the sum of
`
`$75,000.00 exclusive of interest and costs.
`
`5.
`
`Venue is proper in this district pursuant to 28 USC§ 1391 because
`
`all of the defendants reside in this district.
`
`FACTS
`
`Wholesale Financing and Security Agreement
`
`6.
`
`Venture Equipment is an agricultural equipment dealership located
`
`in Searcy, Arkansas.
`
`7.
`
`CNH is the captive finance company for CNH Industrial America
`
`LLC ("New Holland") and finances the acquisition of agricultural and
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`construction equipment fleets for sale or rental by New Holland dealerships
`
`throughout North America.
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 3 of 61
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`8.
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`On or about February 10, 2011, Venture Equipment entered into a
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`Wholesale Financing and Security Agreement ("WFSA") with CNH. A true and
`
`correct copy of the WFSA is attached hereto and incorporated herein as
`
`Exhibit 1. Merritt executed the WFSA on behalf of Venture Equipment as the
`
`"Manager Member."
`
`9.
`
`Under the WFSA, in exchange for the extension of substantial sums
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`of credit and other advances provided by CNH, Venture Equipment granted to
`
`CNH a security interest in, inter alia, all of its inventory, equipment, and other
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`movable property obtained from or financed by CNH or its affiliates and
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`subsidiaries, including all proceeds of such inventory and other moveable
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`property (each, a "Secured Asset," and collectively, the "Secured Assets"). See
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`Exhibit 1, ,r 3.
`
`10.
`
`From 2011 and continuing through 2022, CNH provided and
`
`financed inventory and equipment for Venture Equipment pursuant to the
`
`WFSA.
`
`11. Under the terms of the WFSA, Venture Equipment agreed that upon
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`sale of any of the Secured Assets by Venture Equipment, Venture Equipment
`
`would immediately remit the proceeds to CNH to satisfy the outstanding balance of
`
`the Secured Asset. See Exhibit 1, ,r 6.
`
`12.
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`Furthermore, under paragraph 6 of the WFSA, Venture Equipment
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`agreed to hold all proceeds of Secured Assets in which CNH holds a first priority
`
`security interest "in express trust" for CNH. See Exhibit 1, ,r 6.
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 4 of 61
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`13. Based on the terms of the WFSA, Venture Equipment agreed to 1epay
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`all loans, credit and advances made to or on behalf of Venture Equipment by CNH.
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`14. CNH performed all of its obligations under the WFSA.
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`Retail Financing Agreement
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`15. Also on or about February 10, 2011, Venture Equipment entered into a
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`Retail Financing Agreement ("RFA'') with CNH, whereby CNH agreed to provide
`
`customers of Venture Equipment the ability to obtain financing for the purchase or
`
`lease of equipment. A true and correct copy of the RFA is attached hereto and
`
`incorporated herein as Exhibit 2. Merritt executed the RFA on behalf of Venture
`
`Equipment as the "Manager Member."
`
`16. Under this program, Venture Equipment would enter into a contract
`
`with a customer and would then sell and assign all of its right, title and interest in
`
`and to the contract to CNH as well as all of the proceeds from the contract.
`
`17.
`
`To this end, Venture Equipment granted to CNH a first priority
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`security interest in the contracts with Venture Equipment customers, the goods, all
`
`supporting obligations and other rights and property related thereto, and all
`
`proceeds thereof, to secure all of Venture Equipment's present and future
`
`obligations arising under the RFA or otherwise. See Exhibit 2, ,r 5(d).
`
`18.
`
`In the RFA, Venture Equipment and Merritt made presentment
`
`representations, warranties, and covenants relating to each Retail Contract and
`
`Transaction including without limitation that "All signatures on the Documentation
`
`are genuine, and any Person signing the Documentation has full legal Capacity to
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 5 of 61
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`execute the Documentation in the capacity indicated. Dealer and its
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`Representatives have no actual knowledge of any fraud with respect to the
`
`Application, Contract or Retail Transaction." See Exhibit 2, ,r 9(a).
`
`19. Venture Equipment and Merritt further represented that a "Retail
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`Transaction involves the bona fide sale or lease of Goods or services by Dealer in the
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`ordinary course of its business, in an arms-length transaction, and does not involve
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`any cash advance to the Obligor or the purchase of any goods or services that cannot
`
`be purchased on credit under Applicable Law." See Exhibit 2, ,r 9(b).
`
`20. Venture Equipment and Merritt also warranted that "There [was] no
`
`fact, nor any claim or defense available to the Obligor, that would in any respect
`
`impair the validity, enforceability, collectability, value, or marketability of the
`
`Contract, including, without limitation, any discount, allowance, setoff,
`
`counterclaim, bankruptcy, right of rescission, fraud, forgery, or lack of
`
`consideration" and that "There have been no false, misleading, or deceptive acts or
`
`practices by Dealer in connection with any Retail Transaction." See Exhibit 2,
`
`,r 9(e).
`
`21. Venture Equipment further agreed under the RFA that if any payment
`
`was made to the dealer by a customer related to a customer financing agreement,
`
`Venture Equipment would retain the payment in trust for CNH and would
`
`promptly remit the payment to CNH within five (5) business days. See Exhibit 2,
`
`,r 3(f).
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 6 of 61
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`22. Under the RFA, Venture Equipment is in default if, among other
`
`things, there is a material breach of any obligation or representation under the RF A
`
`or if it fails to pay or perform any of its obligations under any agreement with CNH
`
`or it fails to make any payment under any agreement with CNH. See Exhibit 2, -,r
`
`13(b).
`
`23. By virtue of this cross default provision, if Venture Equipment
`
`defaulted under any agreement with CNH, then Venture Equipment would be in
`
`default of all of its agreements with CNH.
`
`24.
`
`CNH performed all of its obligations under the RFA, including, but not
`
`limited to, extending financing to Venture Equipment's customers pursuant to the
`
`RFA.
`
`Financing Statements Perfecting Security Interest
`
`25.
`
`CNH filed a UCC financing statement with the Arkansas Secretary of
`
`State perfecting its security interest in all of the Secured Assets obtained from or
`
`financed by CNH (or any affiliate of CNH), including Venture Equipment's
`
`inventory, equipment, software, and other goods to secure its obligations to CNH.
`
`True and correct copies of the UCC-1 financing statement, continuation statement,
`
`and amendment are attached hereto and incorporated herein as Exhibit 3.
`
`Personal Guaranty of Merritt
`
`26. On February 10, 2011, defendant Merritt executed a personal guaranty
`
`agreement ("Guaranty"), pursuant to which Merritt agreed to "absolutely and
`
`unconditionally" guaranty the "payment and performance when due ... of all present
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 7 of 61
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`and future obligations and indebtedness" of Venture Equipment to CNH arising
`
`under the WFSA and RFA. A true and correct copy of the Guaranty is attached
`
`hereto and incorporated herein as Exhibit 4.
`
`27.
`
`CNH entered into the WFSA and RFA in reliance upon the guaranty of
`
`payment and performance by Merritt.
`
`Breach of the Financing Agreements
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`28. Venture Equipment incurred debts and obligations to CNH pursuant
`
`to the WFSA and RFA. The WFSA and RFA are collectively hereafter referred to as
`
`the "Financing Agreements."
`
`29. Venture Equipment has failed to pay its debts and obligations owed to
`
`CNH under the Financing Agreements.
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`WFSA Violations
`
`30. On March 7, 2022, after conducting an on-site inventory audit of its
`
`collateral, CNH discovered that 204 units of Secured Assets in which CNH held a
`
`properly perfected first-priority security interest, were unaccounted. Upon further
`
`investigation, CNH discovered that an additional 21 items of Secured Assets were
`
`also unaccounted. Today, 225 Secured Assets remain unaccounted. A true and
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`correct copy of the list of the missing Secured Asset units is attached hereto and
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`incorporated herein as Exhibit 5 (each unaccounted unit, a "Missing Secured Unit,"
`
`and collectively, the "Missing Secured Units").
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`31. Of these 225 Missing Secured Assets, (a) the majority were sold out of
`
`trust by Venture Equipment and the sale proceeds converted, while (b) others were
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 8 of 61
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`purely fictitious trade-ins that Venture Equipment floor-planned with CNH causing
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`CNH to advance funds the proceeds of which also were converted.
`
`32. By Merritt's admission, Venture Equipment and Merritt actively
`
`concealed the sale of the Secured Assets by misrepresenting the financial condition
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`of Venture Equipment through the electronic submission of false financial
`
`documents that were provided monthly to CNH in accordance with the financial
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`reporting required under the WFSA. Venture Equipment deliberately and
`
`intentionally misrepresented its assets and liabilities to avoid triggering detection
`
`and to appear as if it was fulfilling its obligations under the WFSA.
`
`33. Venture Equipment by virtue of sales out of trust and fictitious floor(cid:173)
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`planned trade-ins resulted in $5,109,514.24 of proceeds that should have been paid
`
`to CNH under the WFSA.
`
`34. Venture Equipment defaulted under the terms ofWFSA by, among
`
`other things, failing and refusing to remit and converting the proceeds from the sale
`
`of the Secured Assets to CNH as required, floor-planning fictitious equipment and
`
`converting the loan proceeds, and submitting false financial statements.
`
`35. Demand was made on Venture Equipment, on or about
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`March 14, 2022, (the "Notice of Default") to pay the amounts due and owing under
`
`the WFSA. A true and correct copy of the Notice of Default is attached hereto and
`
`incorporated herein as Exhibit 6. The Notice of Default also notified Venture
`
`Equipment that it was in breach of the RFA by virtue of the cross-default provision.
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 9 of 61
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`36. Merritt, as guarantor, was included in the Notice of Default and was
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`made aware of his obligations under the Guaranty.
`
`37. Despite demand, Venture Equipment and Merritt failed to pay the
`
`amounts owed under the WFSA.
`
`38. As a result, in accordance with the terms ofWFSA and the Notice of
`
`Default, the financing of the Secured Assets was terminated effective
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`March 17, 2022. A true and correct copy of the Termination Notice is attached
`
`hereto and incorporated herein as Exhibit 7.
`
`39. At the time CNH discovered the Missing Secured Units, CNH also
`
`discovered that Venture Equipment breached the RFA by orchestrating a separate,
`
`fraudulent financing scheme to defraud CNH and obtain payment on account of
`
`fraudulent retail contracts sold and assigned to CNH.
`
`40.
`
`The fraudulent scheme employed by Venture Equipment to defraud
`
`CNH varied depending on the type of financing provided by CNH.
`
`41.
`
`In the first instance, Venture Equipment and Merritt defrauded CNH
`
`with respect to the floor plan financing of the Secured Assets by concealing the sale
`
`of a Secured Asset to a customer who paid in cash directly to Venture Equipment or
`
`financing fictitious trade-ins. Merritt also deliberately failed to register the
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`warranty for these Missing Secured Units, among others, to ensure the floor plan
`
`fraud would be difficult to detect. The floor plan fraud committed by Venture
`
`Equipment and Merritt was complimented by concomitant retail fraud.
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`Retail Financing Violations
`
`42. On numerous occasions, upon completion of a cash sale and receipt of
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`the lump sum payment from the customer, Venture Equipment, and specifically
`
`Merritt, prepared false retail financing documents including, but not limited to,
`
`forged promissory notes and security agreements for the same Secured Asset, which
`
`were then assigned to CNH for value. Many of these fraudulent contracts included
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`non-existent equipment. In this occurrence, the make and model of the Secured
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`Asset listed in the security agreement might match Venture Equipment and
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`Merritt's inventory and the Secured Asset listing, or the VIN number might be
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`completely fabricated so as to avoid detection.
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`43.
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`The fraudulent retail promissory notes and security agreements were
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`all prepared by or under the direction and control of Merritt.
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`44.
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`Venture Equipment, at the direction and control of Merritt, would
`
`then assign the fraudulent retail financing documents, including the promissory
`
`notes and security agreements, to CNH under the RF A and receive payment from
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`CNH for those financing agreements.
`
`45.
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`The retail fraud was further concealed over the course of this scheme
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`as a result of payments Merritt would make to CNH pursuant to the forged
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`promissory notes in order to keep the fraudulent accounts current. On information
`
`and belief, Merritt and Venture Equipment made some of the payments on the
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`fraudulent contracts by selling Secured Assets out of trust under the WFSA. As the
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`fraudulent scheme grew, however, Merritt was unable to make every ensuing
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 11 of 61
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`payment owed to CNH and eventually many of the fraudulent accounts went into
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`default.
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`46.
`
`CNH also became aware, when trying to locate Secured Assets, that
`
`not only did the customers not authorize the execution of the promissory note and
`
`security agreement bearing their name as the borrower, most of the Secured Assets
`
`that were the subject of the contract did not exist.
`
`4 7. Venture Equipment and Merritt also regularly accepted cash
`
`payments from customers on valid retail financing contracts, but failed to remit the
`
`payments to CNH as required by the RFA. Instead, Merritt would keep and convert
`
`the proceeds personally and never report the payment to CNH.
`
`48. Merritt has admitted to many of the details of this scheme which has
`
`allowed CNH to determine what it believes to be the full scope of the fraud, but
`
`CNH's investigation into the fraudulent acts of Venture Equipment and Merritt is
`
`continuing, and CNH reserves the right to file an amended complaint to assert
`
`additional allegations of fraud.
`
`49. Venture Equipment, by Merritt's own admission, assigned 151 retail
`
`contracts to CNH with a value of $9,241,724.29, that were forgeries, fraudulent
`
`and/or violated the RFA. Presently, $5,895,268.08 remains outstanding on the
`
`fraudulent contracts. A true and correct summary of the fraudulent retail contracts
`
`that Venture Equipment and/or Merritt fraudulently assigned to CNH and
`
`represented to be valid is attached hereto and incorporated herein as Exhibit 8.
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`50. As of the date of this Complaint based on the facts known to CNH,
`
`there are substantial debts and obligations owed to CNH by Venture Equipment
`
`and Merritt pursuant to the WFSA and RFA and CNH has sustained substantial
`
`damages as a result of the intentional, malicious and fraudulent acts of Venture
`
`Equipment and Merritt.
`
`Count I: Breach of Contract
`
`51.
`
`CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`52.
`
`The Financing Agreements are binding and enforceable contracts
`
`between Venture Equipment and CNH.
`
`53. As of March 31, 2022, Venture Equipment was indebted to CNH for
`
`unpaid amounts advanced by CNH for the benefit of Venture Equipment under the
`
`terms of the WFSA for Venture Equipment's purchase of Secured Assets in the
`
`amount of $8,439,903.62. On or after March 7, 2022, Venture Equipment
`
`acknowledged its default under the terms of the WFSA and voluntarily surrendered
`
`to CNH the remaining Secured Assets in the possession of Venture Equipment.
`
`CNH provided notice of disposition pursuant to Ark. Code Ann. §4-9-611 and on or
`
`about April 1, 2022 sold the surrendered Secured Assets at a private sale in
`
`accordance with the WFSA and the Arkansas Uniform Commercial Code. As of
`
`April 22, 2022, after application of the sale proceeds from the private sale and the
`
`application of various credits, Venture Equipment remains obligated and indebted
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`to CNH under the terms of the WFSA in the amount of $4,614,656.05 for amounts
`
`actually advanced by CNH to Venture Equipment under the WFSA.
`
`54.
`
`The sale of the Secured Asset units out of trust without remitting the
`
`Secured Asset proceeds to CNH in addition to the floor-planning of fictitious trade(cid:173)
`
`ins is a breach of the terms of the WFSA by Venture Equipment. As of April 22,
`
`2022, the total indebtedness owed by Venture Equipment to CNH, under the terms
`
`of the WFSA, including the dollar amount of Missing Secured Units known to CNH
`
`as of the date of the Complaint, in violation of the WFSA is in the amount of
`
`$4,614,656.05.
`
`55.
`
`The actions by Merritt and Venture Equipment in forging retail
`
`promissory notes and security agreements and then assigning the forged
`
`instruments to CNH in consideration for receiving additional funds from CNH
`
`constitutes a breach of the representations and warranties contained in the RF A
`
`related to the retail contracts. CNH has been damaged by Venture Equipment's
`
`breach of the representations and warranties related to the retail contracts in an
`
`amount equal to not less than $5,895,268.08.
`
`56. As a result of Venture Equipment's breach of the Financing
`
`Agreements based on the facts known to CNH as of the date of the Complaint, CNH
`
`has been damaged in a total amount equal to not less than $10,509,924.13.
`
`57.
`
`CNH is also entitled to recover all of its costs and attorneys' fees in the
`
`enforcement ofWFSA and RFA. CNH has incurred costs and attorneys' fees to date,
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 14 of 61
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`and will continue to incur attorneys' fees and costs until the amounts due and owing
`
`under WFSA and RFA have been fully satisfied.
`
`Count II: Breach of Personal Guaranty
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`58.
`
`CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`59. Merritt executed a continuing personal guaranty, under the terms of
`
`which he unconditionally promised and guaranteed payment and performance of
`
`any present or future obligations or debt owed by Venture Equipment to CNH.
`
`60. Venture Equipment has incurred debt owed to CNH in an amount not
`
`less than $10,509,924.13.
`
`61. Merritt has failed to pay the amounts due and owing to CNH under
`
`the Guaranty despite demand.
`
`62.
`
`As a result of the default of Merritt under the Guaranty, CNH has
`
`been damaged in an amount not less than $10,509,924.13, plus pre- and post(cid:173)
`
`judgment interest, late fees, attorneys' fees, and costs.
`
`Count III: Fraud
`
`63.
`
`CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`64. Venture Equipment and CNH have had a long-standing business
`
`relationship.
`
`65. CNH has provided wholesale financing and retail financing to Venture
`
`Equipment since at least 2008.
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 15 of 61
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`66.
`
`Pursuant to the terms of the WFSA, and as a condition of additional
`
`advances under the WFSA, Venture Equipment regularly provided financial and
`
`inventory information to CNH. The financial and inventory information provided by
`
`Merritt and Venture Equipment to CNH was false at the time it was provided.
`
`67. Venture Equipment, in addition to financing fictitious trade-ins with
`
`CNH, sold Secured Assets subject to CNH's secured lien but failed to remit the sale
`
`proceeds to CNH.
`
`68. Venture Equipment and Merritt deliberately submitted falsified
`
`inventory reports to CNH that grossly misrepresented the status of Secured Assets
`
`on site at Venture Equipment for the purpose of inducing CNH to continue to
`
`finance additional inventory under the WFSA, which reports CNH relied on when it
`
`made additional advances on behalf of Venture Equipment.
`
`69.
`
`CNH relied on Venture Equipment's falsified inventory reports and
`
`continued to advance additional financing for the purchase of Venture Equipment's
`
`Secured Assets until March 2022.
`
`70. Merritt is an experienced dealer and has operated Venture Equipment
`
`for many years. Merritt knew that financing fictitious equipment and failing to
`
`remit the sale proceeds from the Secured Assets to CNH would put both the Secured
`
`Assets and the proceeds beyond the reach of CNH. Merritt further knew that
`
`submitting false inventory records would induce CNH to advance additional funds
`
`toward the purchase of more inventory for Venture Equipment.
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 16 of 61
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`71. Venture Equipment and Merritt knew at all times that CNH expected
`
`to receive all proceeds from the sale of the Secured Assets and, based on the
`
`representations by Venture Equipment and Merritt, CNH believed that it was
`
`receiving the proceeds of the Secured Assets.
`
`72.
`
`Equally important, Venture Equipment and Merritt sold and assigned
`
`to CNH fraudulent retail promissory notes and security agreements which Venture
`
`Equipment and Merritt knew were fraudulent and knew that the buyers identified
`
`on the fraudulent contracts did not consent to the execution of the documents, and
`
`knew that in many instances the purported Secured Assets did not exist.
`
`73. Venture Equipment and Merritt represented and warranted the
`
`legitimacy of the retail contracts to CNH, despite knowing that they were in fact
`
`were fraudulent.
`
`7 4.
`
`Venture Equipment and Merritt intended to induce CNH to advance
`
`large sums of money to Venture Equipment (and Merritt as the sole member) based
`
`on the presentation of fraudulent retail finance contracts, which CNH did.
`
`75. CNH reasonably and justifiably relied on Venture Equipment's and
`
`Merritt's representations and warranties, based on the long-standing relationship
`
`and based on the documents provided to it by Venture Equipment and Merritt, and
`
`CNH had no way to discover the falsity at the time the representations were made.
`
`76. As a direct and proximate result of its reasonable reliance on these
`
`false representations, CNH has been damaged by Venture Equipment and Merritt
`
`in an amount not less than $10,509,924.13.
`
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`16
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 17 of 61
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`Count IV: Conversion
`
`77.
`
`CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`78. Under the terms of the WFSA, CNH was entitled to receive proceeds
`
`from the sale of the Secured Assets, and CNH was the rightful owner of the Secured
`
`Asset proceeds.
`
`79. However, Venture Equipment and Merritt, as the sole member of
`
`Venture Equipment, wrongfully took possession of the proceeds from the sale of the
`
`Secured Assets with the intent to exercise control over the proceeds thereby denying
`
`CNH's right to receive payment of the Secured Assets proceeds and financed
`
`fictitious trade-ins with the intent to exercise control over the loan proceeds
`
`thereby denying CNH both its security interest as well any hope for payment.
`
`80.
`
`Furthermore, based on the false representations by Venture
`
`Equipment and/or Merritt, CNH believed it was receiving the proceeds from the
`
`sale of the Secured Assets, and CNH extended additional credit and made
`
`additional loans to Venture Equipment.
`
`81.
`
`Likewise, CNH was entitled to receive the payments made by retail
`
`customers to Venture Equipment and/or Merritt for application to the customer's
`
`retail financing contracts. Venture Equipment and Merritt wrongfully took
`
`possession of the proceeds from these customer payments with the intent to exercise
`
`control over the proceeds and denied CNH's right to receive payment of the
`
`customer payments resulting in damages to CNH.
`
`2554646-vl
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`17
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 18 of 61
`
`82. As a result, CNH is entitled to a judgment against Venture Equipment
`
`and/or Merritt, jointly and severally, in an amount to be proven at trial.
`
`Count V: Unjust Enrichment
`
`83. CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`84. Venture Equipment and Merritt wrongfully retained proceeds from the
`
`sale of Secured Assets that should have been paid to CNH.
`
`85.
`
`Further, CNH disbursed monies and advanced credit to Venture
`
`Equipment based on the false representations of Venture Equipment and Merritt.
`
`86. CNH had the reasonable expectation that: (i) Venture Equipment was
`
`submitting monthly financials that did not misrepresent or conceal the fraud
`
`Venture Equipment was continually committing; (ii)Venture Equipment was not
`
`financing fictitious trade-ins; (iii) Venture Equipment was remitting all the
`
`proceeds from all the Secured Assets sold by Venture Equipment, in which CNH
`
`held a perfected first-priority lien; (iv) that CNH was receiving all payments made
`
`by retail customers to Venture Equipment and Merritt on any retail financing
`
`agreement; and (v) that the retail promissory notes and security agreements
`
`assigned to CNH by Venture Equipment and Merritt were legitimate.
`
`87. Venture Equipment and Merritt were aware that CNH was disbursing
`
`funds and advancing credit to Venture Equipment in reliance on their false
`
`representations.
`
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`18
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 19 of 61
`
`88. Venture Equipment and/or Merritt were not entitled to receive the
`
`funds or credit advanced by CNH, and were not entitled to retain the funds paid by
`
`retail customers to purchase inventory or related to customers' retail financing
`
`contracts with CNH.
`
`89. As a result of the wrongful taking of these funds by Venture
`
`Equipment and/or Merritt, Venture Equipment and/or Merritt have been unjustly
`
`enriched at the expense of CNH.
`
`90.
`
`CNH is entitled to a judgment against the Venture Equipment and
`
`Merritt, jointly and severally, in an amount an amount to be proven at trial.
`
`Count VI: Punitive Damages
`
`91.
`
`CNH repeats and realleges all paragraphs of this Complaint as though
`
`set forth fully herein.
`
`92. Venture Equipment and Merritt's actions were willful, wanton,
`
`reckless and malicious.
`
`93. Venture Equipment and Merritt committed acts intentionally designed
`
`to cause injury to CNH.
`
`94. Venture Equipment and Merritt had a long-standing relationship with
`
`CNH. Merritt served as the President of New Holland's Dealer Advisory Board, an
`
`esteemed position among New Holland dealers in North America for those dealers
`
`who embodied the principles of the New Holland organization. Merritt could not
`
`have performed the acts alleged in this complaint without full knowledge of and
`
`understanding the enormous injury he would cause to CNH.
`
`2554646-vl
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`19
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 20 of 61
`
`95.
`
`In light of Venture Equipment's and Merritt's long history with CNH
`
`and as an agricultural dealer, Venture Equipment and Merritt knew that the
`
`actions stated above would naturally result in injury given the enormity of the
`
`fraud, but continued their conduct in reckless and malicious disregard for the
`
`circumstances.
`
`96. Moreover, Venture Equipment and Merritt repeatedly and over the
`
`course of several years prepared and submitted false financial documentation, some
`
`even in the name of other individuals, fully aware that CNH would rely on those
`
`representations. The defendants intentionally pursued this course of conduct for
`
`the purpose of financial gain, causing injury to CNH.
`
`97.
`
`The actions of Venture Equipment and Merritt as alleged in this
`
`complaint were done knowingly, willfully and maliciously. At all relevant times,
`
`because of Merritt and Venture Equipment's long history with and extensive
`
`knowledge of CNH, Venture Equipment and Merritt knew that their intentional
`
`actions would cause significant damages to CNH. Merritt and Venture Equipment
`
`knew at all relevant times that, in light of the financial condition of Venture
`
`Equipment, and other circumstances that their intentional and fraudulent conduct
`
`in selling the Secured Assets out of trust and obtaining advances from CNH based
`
`on fraudulent retail contracts would certainly result in damages to CNH that they
`
`would not have the ability to pay. Notwithstanding Merritt and Venture
`
`Equipment's knowledge, they continued their fraudulent conduct maliciously and in
`
`reckless disregard for the damages that would certainly be caused to CNH. Merritt
`
`2554646-vl
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`20
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`

`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 21 of 61
`
`and Venture Equipment intentionally pursued their fraudulent course of conduct
`
`for the purpose of and with the intent to cause damage to CNH.
`
`98. As a result, in addition to the compensatory damages for the actual
`
`loss sustained by CNH, plaintiff is entitled to an award of punitive damages.
`
`99. CNH reserves the right to file substituted and amended pleadings in
`
`this action pending discovery and the completion of its investigation.
`
`WHEREFORE, CNH Industrial Capital America, LLC, prays that the Court
`
`award it a money judgment against Venture Equipment, LLC and Steve Merritt,
`
`jointly and severally, for pre- and post- judgment interest, for its attorneys' fees and
`
`costs, and for all other relief to which it is entitled.
`
`WRIGHT, LINDSEY & JENNINGS LLP
`200 West Capitol Avenue, Suite 2300
`Little Rock, AR 72201-3699
`(501) 371-0808
`FAX: (501) 376-9442
`E-MAIL: ccoleman@wlj.com
`
`w l j om~
`
`By:
`
`~ - u ~#4
`
`Charles T. Coleman (80030)
`Jaimie G. Moss (2012228)
`
`Attorneys for CNH Industrial
`Capital America, LLC
`
`2554646-vl
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`21
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`Case 4:22-cv-00399-BSM Document 1 Filed 05/03/22 Page 22 of 61
`
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