Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_18-cv-00075/USCOURTS-ared-4_18-cv-00075-3/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 28:1441 Petition for Removal- Racketeering (RICO) Act

---

IN THE UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF ARKANSAS 

CENTRAL DIVISION 

CHAOTIC LABZ, INC. PLAINTIFF 

v. No. 4:18-cv-75-DPM 

SDC NUTRITION, INC. DEFENDANT 

ORDER 

Chaotic sells dietary products to consumers and wholesalers. The 

products come in capsules and powder, marketed with names such as 

Warlord, PreAbolic, and NurtrAsylum MS1. SDC manufactures such 

products. So did a company named Reaction, with whom SDC merged. 

Chaotic had problems with some Reaction products, problems for 

which it has sued SDC, standing in for Reaction post-merger. Chaotic 

also paid a deposit for, but didn't get, some protein products from SDC. 

Chaotic alleges violations of various UCC warranties, conversion of the 

deposit, violations of the Arkansas Deceptive Trade Practices Act, and 

a civil RICO claim. Three motions pend: SDC seeks summary 

judgment with many and various arguments; in a sequel to a discovery 

dispute, it requests sanctions; and it makes an unopposed request to 

continue the trial date. 

There's a threshold issue: who is the right plaintiff? SDC points 

out on several claims that Chaotic's owner, Cordy Hooten, or another 

related entity, is the one supposedly out of pocket. The record 

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 1 of 7
demonstrates that Hooten is at the center of all this. NQ 34 at 18, 24-25. 

Chaotic Labz, Inc., Bloodline Holdings, LLC, and many d/b / a names 

are all his creatures. He wrote checks from whichever bank account 

happened to have money, including his own. Hooten' s main contact at 

Reaction, and later at SDC, was Frank Bedoloto. According to Bedoloto, 

Hooten/Chaotic was the client. NQ 31-2 at 2. The various disputed 

transactions have been fully ventilated in discovery. Though the 

deadline for amending pleadings has passed, the interests of justice 

favor allowing Chaotic to amend its complaint, adding Hooten and 

any related affected entities as plaintiffs. FED. R. Crv. P. 15(a)(2); 

Thomas v. United Steelworkers Local 1938, 743 F.3d 1134, 1140 

(8th Cir. 2014). In the circumstances, there's no prejudice to SDC in this 

clean up. 

The warranty claims are for the jury. Chaotic says the seals were 

bad, and the "best by" date was faulty, on the PreAbolic product. The 

powder clumped and spoiled. SDC counters that Chaotic accepted it, 

knowing of the seal defect. Chaotic replies that SDC (speaking through 

Bedoloto) said the powder was fine for sale and would last. It didn't. 

All this back-and-forth creates genuinely disputed material facts about 

acceptance, assurances, and cover. 

Chaotic' s conversion claim also goes forward. Chaotic has now 

made clear that it does not want its $18,375 deposit back; it wants net 

lost profits from these undelivered products. NQ 39 at 29. The law 

-2-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 2 of 7
allows this. Shepherd v. Looper, 293 Ark. 29, 30, 732 S.W.2d 150, 151 

(1987). There will be no double recovery. 

Chaotic' s ADPT A claim goes forward, too. SDC is mistaken in 

arguing that the Act does not protect Chaotic in business deals like 

these. It does. Electrocraft Arkansas, Inc. v. Super Electric Motors, Ltd., 

NQ 4:09-cv-318-SWW, No. 23, 2009 WL 5181854 at *7 (E.D. Ark. 

23 December 2009). Here again, whether SDC actually deceived 

Chaotic is genuinely disputed. 

Chaotic' s civil RICO claim fails on this record as a matter of law. 

SDC argues that the record shows no intent to defraud; Chaotic 

responds that intent can be inferred. But this record doesn't support 

that inference. Intent to defraud can often be inferred from the scheme 

itself. United States v. Ervasti, 201 F.3d 1029, 1037 (8th Cir. 2000). Lying 

to clients about how their money will be invested and then diverting 

the funds to one's own use; or skimming from clients' segregated tax 

funds - these types of schemes, perpetrated repeatedly over time, 

amount to strong circumstantial evidence of intent to defraud. 

United States v. Brown, 627 F.3d 1068, 1072 (8th Cir. 2010); 

Ervasti, 201 F.3d at 1033. 

Here, though, the scheme alleged is a series of differing business 

dust-ups - faulty seals, incorrect best-by dates, tainted products, 

licensing problems. They show a pattern of loose business and broken 

pronuses. And the Court of Appeals has repeatedly turned aside 

-3-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 3 of 7
efforts to deploy civil RICO's big gun-treble damages-in disputes 

about broken pronuses and ordinary commercial fraud. 

E.g., Stonebridge Collection, Inc. v. Carmichael, 791 F.3d 811, 822 

(8th Cir. 2015); see also Perlman v. Zell, 185 F.3d 850, 853 (7th Cir. 1999) 

(Easterbrook, J.). These broken promises, in and of themselves, don't 

amount to the kind of scheme that would support an inference of intent 

to defraud. 

The rest of the record doesn't fill the gap, either. Bedoloto 

testified, for example, that he had approval from the prior patent holder 

to use DHEA ingredients in Chaotic's products; things fell apart when 

the patent was sold. NQ 31-2 at 3-7. And the buyer confirmed that the 

seller hadn't been aggressive enforcing the patent. NQ 31-4 at 6. That is 

loose business, not fraud. It was a similar situation with the Yohimbetainted product: as Hooten said in his initial inquiry to Bedoloto, 

"[ d]irty blender, I would assume." NQ 34 at 12-13. On the seals, the 

proof is strong on an SDC mistake plus a broken promise. Bedoloto 

assured Hooten the product would stay fresh notwithstanding seal 

problems. NQ 39 at 12-13; NQ 31-2 at 20-23. It did not, says Hooten. 

NQ 39 at 13. But there is no evidence that Bedoloto knew the product 

would go bad, but assured Hooten the opposite. In sum, Chaotic has 

solid claims for the jury arising from this soured business relationship. 

Taken in the light most favorable to Chaotic, however, there isn't 

enough evidence to support a reasonable inference of intent to defraud 

-4-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 4 of 7
without resorting to speculation. SDC 1s entitled to judgment on 

Chaotic' s civil RICO claim. 

SDC is correct on many damages issues. First, the record presents 

no direct evidence of malice in the legal sense, or of willful and 

wanton disregard, such that malice may be inferred. Therefore, 

punitive damages are out. McClellan v. Brown, 276 Ark. 28, 30, 

632 S.W.2d 406, 407 (1982); compare Dees v. Allied Fidelity Insurance Co. 

of Indiana, 655 F. Supp. 10, 13-14 (E.D. Ark. 1985). Second, Chaotic's 

proof on the lawyer bills related to the FDA's investigation of the 

Yohimbe-tainted product is insufficiently certain. A few phone calls do 

not cost approximately $10,000; and Hooten was clear that these 

lawyers were doing other work for him, too. Third, the approximately 

$10,000 eventually paid to the new patent holder for DHEA is not 

recoverable. The evidence here leads to only one reasonable 

conclusion. Chaotic was going to pay for using this ingredient one way 

or the other: by paying an increased amount to a manufacturer such as 

SDC, who would handle payments to the patent owner; or by paying 

the owner directly. Chaotic has not shown that it ended up paying 

more than it otherwise would have if SDC had handled things with the 

new patent owner. Fourth, no mental anguish damages. They can be 

recovered in an egregious case of conversion. E.g., Dees, 655 F. Supp. at 

13-14; HOWARD BRILL & CHRISTIAN BRILL, Law of Damages§ 33:7 at 773 

(6th ed. 2014). In light of all the discussions about accepting 

-5-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 5 of 7
replacement products or a credit, SDC' s retention of Chaotic' s 

approximately $18,000 deposit after the parties' relationship 

completely broke down is just one more example of that failed 

relationship. Most importantly, Hooten's stress was the sum of the 

whole, especially the $70,000-plus in spoiled PreAbolic. The danger is 

that the jury would award mental anguish damages based on the whole 

failed relationship, which the law does not allow, rather than just for 

any conversion. 

The Court declines to award discovery sanctions. Chaotic' s 

belated production on damages mooted that issue. The Court takes 

Chaotic' s lawyer at his word: all non-privileged and non-public 

information possessed by Chaotic and its lawyers has been produced. 

The Court's prior Order did not carve out publicly available 

information, such as the FDA notices, but SDC has them, so there's no 

prejudice in not producing them. Some Chaotic records were lost in a 

hard drive crash. This was a random event. Given the parties' 

developing dispute, Hooten probably should have preserved the 

computer to see if anything could be recovered. He testified that he 

didn't because of all the sensitive personal information about 

customers. Even if his judgment here was mistaken, SDC hasn't shown 

that Hooten or Chaotic intended to destroy the electronic information 

to hide facts about this dispute. Stevenson v. Union Pacific Railroad 

Company, 354 F.3d 739, 747-48 (8th Cir. 2004). 

-6-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 6 of 7
* * * 

Motion for sanctions, NQ 28, denied. Motion for leave, NQ 51, 

denied as moot. Motion for summary judgment, NQ 29, partly granted 

and partly denied as specified. Amended complaint, which only 

corrects the plaintiff, due by 27 March 2020. The civil RICO claim, and 

various noted damage claims, drop out. Unopposed motion for 

continuance, NQ 55, granted for good cause. The Scheduling Order, 

NQ 23, is suspended; an Amended Order will issue. Trial is re-set for 

5 October 2020, first out. The Court regrets the delay, but this is the best 

the Court can do on a crowded docket. I 

So Ordered. 

D.P. Marshall jr. 

United States District Judge 

-7-

Case 4:18-cv-00075-DPM Document 56 Filed 02/26/20 Page 7 of 7