UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

FORT WORTH DIVISION 

ERIC GREATHOUSE, ET AL.,

Plaintiffs, 

v. No. 4:22-CV-0686-P

CAPITAL PLUS FINANCIAL LLC, ET AL.,

Defendants.

OPINION & ORDER 

Before the Court are Defendants’ Motions to Dismiss (ECF Nos. 31, 

34, 36). For the reasons stated below, the motions are GRANTED IN 

PART and DENIED IN PART. Plaintiffs’ unjust enrichment claims 

against all Defendants are DISMISSED. To the extent Defendants seek 

to dismiss Plaintiffs’ other claims, the motions are DENIED. 

INTRODUCTION 

In 2020, Congress put their trust—to the tune of $800 billion—into 

private lenders to help alleviate the effects of the burdensome federal, 

state, and local regulations that crippled businesses and the livelihoods 

of millions of families across the country. As with any $800 billion 

government program, the trust placed in the actors carrying it out was 

often undeserved. Like magic, bad actors arrive wherever hundredbillion-dollar government programs occur.

In this case, Plaintiffs allege that Defendants were bad actors who 

capitalized on the exorbitant government fees given for approving PPP

loans while never disbursing the funds to countless businesses in need. 

And because of the striking allegations in their complaint, this Court 

must allow many of Plaintiffs’ claims to proceed. When such an

egregious abuse of public trust is apparent, the Court cannot dismiss

this case on the pleadings alone. 

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FACTUAL & PROCEDURAL BACKGROUND

In 2020, Congress passed the CARES Act, which provided for the 

Payroll Protection Program (“PPP”)—a loan assistance program for 

businesses financially burdened by restrictions imposed on the country 

by local, state, and federal officials. This extraordinary act required a

comprehensive plan to disburse billions of dollars to countless 

businesses in a very short window of time. Because of the logistical 

challenges that approving loans for millions of American businesses

presented, the government worked with private lenders to streamline

the approval process. 

The approval and loan disbursal process promulgated by the SBAs 

rulemaking followed a 7-step process:

1. The business sent in the required information on an application 

to show eligibility for the PPP program.

2. The lender approved the application and sent notice to the SBA.

3. The SBA issues an “SBA number” to the loan, signifying its 

approval.

4. The lender makes a one-time, full disbursement of the PPP funds 

within 10 days of loan approval. 

5. After disbursing the funds, the lender received the fees they are 

statutorily entitled to. 

6. The lender monitors the loan and reviews the businesses’ use of 

the funds to establish whether loan forgiveness applies. 

7. The loan is either forgiven, forgiven in part, or paid back in whole

by the business. 

To assist lenders with the approval process, the Federal Reserve 

Bank of the United States also instituted the Paycheck Protection 

Program Liquidity Facility (“PPPFL”), which advanced funds through 

non-recourse loans to lenders who could provide proof of approvals and 

disbursements of PPP loans as collateral. 

Defendant Capital Plus Financial LLC (“Capital Plus”)—a wholly 

owned subsidiary of Defendant Crossroads Inc.—stepped up to the plate 

and began approving loans through the process authorized by the 

CARES Act and subsequent rulemaking procedures. And they did so at 

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an astonishing pace. In less than five months, Capital Plus approved an 

astonishing 472,036 PPP loans. The volume of loans approved was so 

numerous that they were the second largest lender of PPP loans in 2021 

by volume—assigning more loans than the combined efforts of many 

major financial behemoths. Indeed, Capital Plus enlisted help from

outside providers to process loans due to capacity constraints. To make 

monetary matters even more astonishing, Capital Plus—due to their 

massive quantity of “approved” loans—drew down nearly $7.5 billion in 

funding from the PPPFL program. 

The plan instituted by Capital Plus and its parent company,

Crossroads, paid off as they amassed an astonishing $970.5 million in 

revenue—a 2,446% increase from the year before. In many shareholder 

letters and releases, Crossroads—through their directors including 

Defendants Alpert and Donnelly—talked about the success of the PPP 

lending craze and the income it was generating for the parent company. 

In some SEC filings directors touted the $930 million “windfall” from 

PPP lending. And they also often discussed strategies and other 

directives that Crossroads aimed toward regarding the lending

program—often referring to Capital Plus and Crossroads as a single 

entity. One of the immediate strategies implemented with the new 

windfall of cash was a $238.9 million dividend that was quickly paid out 

after the PPP window closed. Most of the money went to insiders in the 

company like Defendants Alpert and Donnelly who together owned 

62.8% of outstanding shares. This resulted in a $149,918,480 payday 

between the two individuals.

But while income soared for Capital Plus and Crossroads, complaints 

from individuals approved for loans did as well. Plaintiffs allege that—

although they received SBA numbers—funds were never disbursed to 

them and others. In effect, Capital Plus and Crossroads collected the 

fees associated with approval and interest on the $7.5 billion in PPPFL 

funds but never completed their obligation to countless individuals who 

were in dire straits financially. Even worse, Plaintiffs could not go to 

another lender as they were restricted from processing any other 

applications once a valid SBA number was assigned to them. And 

further, Plaintiffs allege that because the SBA number was assigned to 

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them, they are still under legal obligations to pay back money that they 

never received. 

Because of the alleged faults of Crossroads, Capital Plus, and its 

directors, a group of Plaintiffs bring this suit under the Class Action 

Fairness Act seeking redress of their injuries under four theories: (1) 

Breach of Contract; (2) Unjust Enrichment; (3) California’s Unfair 

Competition Law (“UCL); and (4) North Carolina Unfair and Deceptive 

Trade Practices Act (“NCUDTPA”). 

B. The Parties 

1. Plaintiffs 

Plaintiff Eric Greathouse is a citizen of Arkansas who owns an 

insurance inspection business. Plaintiff Tiffany Sumrall is a citizen of 

Texas who owns a landscaping business. Plaintiff Cori Pericho is a 

citizen of Hawaii who owns a messenger and delivery service. Plaintiff 

John Pinkney is a citizen of Texas who owns a cable communications 

business. Plaintiff Alicia Mena is a citizen of Arizona who owns a 

housecleaning business. These Plaintiffs collectively seek to represent a 

nationwide class and bring two claims for breach-of-contract and unjust 

enrichment. 

Plaintiff Barbara Myles is a citizen of North Carolina who owns a 

business that assists independent artists. Myles seeks to represent a 

North Carolina subclass and brings a claim under the NCUDTPA in 

addition to claims for breach-of-contract and unjust enrichment. 

Lastly, Plaintiff Ernesto Covarrubias is a citizen of California who 

owns an auto repair business. Plaintiff Joshua Smith is also a citizen of 

California who is an operates a delivery and human resource and 

consulting business. Covarrubias and Smith seek to represent a 

California subclass and bring a claim under the UCL in addition to 

claims for breach-of-contract and unjust enrichment. 

All Plaintiffs were assigned an SBA number by Capital Plus, but 

never received PPP funds. 

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2. Corporate Defendants 

Defendant Crossroads is a publicly traded Delaware corporation with 

its principal place of business in Dallas, Texas. 

Defendant Capital Plus is a Texas limited liability company with its 

principal place of business in Bedford, Texas. Capital Plus is a wholly 

owned subsidiary of Crossroads. 

3. Individual Defendants 

Defendant Donnelly has continually served as a Director and CEO of 

Defendant Crossroads since December 2017. Donnelly also 

simultaneously served as CEO of Defendant Capital Plus from 2014 

until August 30, 2021. 

Defendant Alpert is the Chairman of the Board of Directors of 

Defendant Crossroads. Alpert has served in this role since 2017. Alpert

also holds leadership positions with other Texas-based companies that 

engage in business with the Corporate Defendants through investment 

advisory services.

LEGAL STANDARD

A. Rule 12(b)(1) 

Article III of the Constitution limits federal-court jurisdiction to 

“cases” or “controversies.” U.S. CONST. art. III, § 2. To satisfy this 

requirement, a plaintiff must establish that he has a “personal stake” in 

the lawsuit. See Davis v. Fed. Election Comm’n, 554 U.S. 724, 732–33 

(2008). Because standing is a central concern of subjectmatter jurisdiction, it is properly addressed under Rule 12(b)(1). Lee v. 

Verizon Commc’ns, Inc., 837 F.3d 523, 533 (5th Cir. 2016). The party 

seeking federal jurisdiction has the burden of establishing 

standing. Lujan v. Def. of Wildlife, 504 U.S. 555, 561 (1992).

B. Rule 12(b)(2) 

After personal jurisdiction has been raised in a 12(b)(2) motion, “the 

party seeking jurisdiction bears the burden of proof but must only 

present a prima facie case.” Luv N’ care, Ltd. v. Insta–Mix, Inc., 438 F.3d 

465, 469 (5th Cir. 2006). In determining whether a plaintiff meets its 

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burden, a district court must “accept the plaintiff’s uncontroverted 

allegations as true and resolve all conflicts of jurisdictional facts 

contained in the parties’ affidavits and other documentation in the 

plaintiff’s favor.” Jones v. Artists Rts. Enf’t Corp., 789 F. App’x 423, 425 

(5th Cir. 2019).

C. Rule 12(b)(6)

To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must 

plead “enough facts to state a claim to relief that is plausible on its face.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court, in turn, 

must accept all well-pleaded facts in the complaint as true and view 

them in the light most favorable to the plaintiff. Sonnier v. State Farm 

Mut. Auto. Ins., 509 F.3d 673, 675 (5th Cir. 2007). If there are well-plead 

factual allegations, the Court assumes their veracity and then 

determines whether they plausibly give rise to an entitlement to relief. 

Id.

ANALYSIS

Due to the many arguments contained in Defendants’ three motions, 

the Court proceeds to address them in the following order: (1) Article III 

standing; (2) arguments particular to the Individual Defendants; (3) 

arguments particular to the Corporate Defendants; and (4) arguments 

applicable to claims brought against all Defendants. The Court 

addresses each issue in turn. 

A. Article III Standing 

Article III’s case-or-controversy requirement demands that a 

plaintiff show he has standing to sue. This prevents courts from “being 

used to usurp the powers of the [other] political branches.” Clapper v. 

Amnesty Int’l USA, 568 U.S. 398, 408 (2013). This doctrine thus

preserves the “proper—and properly limited—role of the courts in a 

democratic society.” Warth v. Seldin, 422 U.S. 490, 498 (1975). 

Historically, this concept meant that a plaintiff only needed a “legally 

cognizable cause of action.” Sierra v. City of Hallandale Beach, Fla., 996 

F.3d 1110, 1115 (11th Cir. 2021) (Newsom, J., concurring). But over

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many decades, the Supreme Court jumbled together an opaque standing 

doctrine that came to its full fruition in 1992. Like most cobbled together 

doctrines not found in the text of the Constitution, this standard has 

provided no modicum of predictability or clarity to the lower courts other 

than the ability to shrink the size of their dockets.1 

Regardless of the nature of this doctrine, “it is now all but gospel”2

that a plaintiff must show “(1) an injury in fact, (2) that is fairly 

traceable to the challenged conduct of the defendant, and (3) that is 

likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. 

Robins, 578 U.S. 330, 341 (2016). Failure to establish these elements 

“deprives the federal courts of jurisdiction to hear the suit.” Rivera v. 

Wyeth–Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002). But courts must 

“assume, for purposes of the standing analysis, that [Plaintiffs are] 

correct on the merits of [their] claim.” Texas v. Equal Emp. Opportunity 

Comm’n, 933 F.3d 433, 447 (5th Cir. 2019).

Defendants argue that Plaintiffs lack Article III standing to pursue 

their claims. Their specific arguments are addressed below under each 

corresponding element. 

1. Injury in Fact 

Defendants assert that Plaintiffs suffered no injury. “Injury in fact” 

requires that a plaintiff allege an invasion of a legally protected interest. 

See Lujan, 504 U.S. at 560. This inquiry further divides into several 

nebulous subtests—an injury in fact must be (1) concrete, not abstract, 

(2) particularized, not generalized, and (3) actual or imminent, not 

conjectural or hypothetical. Id. at 1548; see also Clapper v. Amnesty Int’l 

USA, 568 U.S. 398, 408–09 (2013); Schlesinger v. Reservists Comm. to 

Stop the War, 418 U.S. 208 (1974). Though neatly organized, these 

1 See Cass R. Sunstein, Standing and the Privatization of Public Law, 88 COLUM.

L. REV. 1432, 1436-38 (1988); see also Robert J. Pushaw Jr., Bridging the Enforcement 

Gap in Constitutional Law: A Critique of the Supreme Court’s Theory That SelfRestraint Promotes Federalism, 46 Wm. & Mary L. Rev. 1289, 1327 (2005) (“[T]he 

Court’s refusal to admit explicitly that it was acting on policy rather than 

constitutional grounds resulted in further analytical confusion.”).

2 See Sierra, 996 F.3d at 1115 (Newsom, J., concurring). 

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categories are often better suited to acquit Clodius rather than forming 

a solid basis for dismissal.3 

Plaintiffs allege that their concrete injuries are (1) the deprivation of 

the use of their PPP loan funds, (2) the inability to seek alternative 

funding for their PPP loan after Defendants failed to fund the loans, (3) 

the lost opportunities incident upon Capital Plus’s failure to fund 

Plaintiffs’ loans during the pandemic, and (4) the continuing obligation 

to repay loan funds that they never received.4 

These injuries are concrete because they already happened when 

payments were not remitted; particularized because they deal with each 

Plaintiffs’ individual loan; actual because the payment has not occurred; 

or—in the case of the obligation to repay with interest—imminent as the

loan repayments continue to loom over Plaintiffs. And though 

Defendants may have qualms about why the payments were not 

remitted, the Court must assume that Plaintiffs are correct on the 

merits at this stage. 

Injury in fact is present. 

2. Causation 

A plaintiff has standing if he can demonstrate a “personal injury 

fairly traceable to the defendant’s allegedly unlawful conduct.” 

California v. Texas, 141 S. Ct. 2104, 2113 (2021). Causation does not 

“require a showing of proximate cause or that ‘the defendant’s actions 

are the very last step in the chain of causation.’” Inclusive Communities 

Project, Inc. v. Dep’t of Treasury, 946 F.3d 649, 655 (5th Cir. 2019) (citing 

Bennett v. Spear, 520 U.S. 154, 169 (1997)). But a plaintiff’s injuries 

3 “Clodius, at any rate, escaped; most of the judges giving their opinions so written 

as to be illegible that they might not be in danger from the people by condemning him, 

nor in disgrace with the nobility by acquitting him.” Plutarch, John Langhorne & 

William Langhorne, PLUTARCH’S LIVES 272 (1804). 

4 Plaintiffs also potentially lost the opportunity to apply for loan forgiveness. 

Borrowers can apply for loan forgiveness any time up to the maturity date of the loan. 

It is unclear whether the maturity date of the loan was set when SBA approved 

Plaintiffs’ PPP loan request and released the funds to Capital Plus for disbursal to 

Plaintiffs or whether the maturity date is not finalized until Plaintiffs receive the loan 

funds. Still, Plaintiffs injuries are enough to stand on their own. 

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can’t be “the result of the independent action of some third party not 

before the court.” Bennett, 520 U.S. at 167. 

Plaintiffs argue that Capital Plus’s actions caused their injuries

because they received the PPP loan funding from the government but 

failed to release it to Plaintiffs even though the SBA had approved their 

PPP loan applications. Defendants counter that they tried to release the 

funds to Plaintiffs’ accounts but could not do so because of account blocks 

or faulty paperwork submitted by Plaintiffs. And while Defendants’ 

arguments may have merit, the Court must accept the merits of 

Plaintiffs’ arguments as true. At bottom, Plaintiffs plausibly claim that 

Defendants’ refusal or failure to remit the loan payments they were 

entitled to caused their injuries.

Causation is met. 

3. Redressability 

Redressability “limits the relief that a plaintiff may seek to that 

which is likely to remedy the plaintiff’s alleged injuries.” Stringer v. 

Whitley, 942 F.3d 715, 720 (5th Cir. 2019). And this requires a plaintiff

to show that a favorable decision will likely redress the injury. Inclusive 

Communities Project, Inc. v. Dep’t. of Treasury, 946 F.3d 649, 655 (5th 

Cir. 2019). A plaintiff need only allege the recovery to which they are 

entitled and “[w]hether recovery for such a claim is permitted under 

governing law is a separate question.” Cole v. Gen. Motors Corp., 484 

F.3d 717, 723 (5th Cir. 2007). It is thus “sufficient for standing purposes 

that the plaintiffs seek recovery for an economic harm that they allege 

they have suffered.” Id. 

Defendants assert that redressability is not met for two reasons. 

First, the relief requested in the complaint exceeds Plaintiffs’ alleged 

injuries. And second, Plaintiffs have not shown or alleged that their PPP 

loans would be forgiven—making any payment insignificant. The Court

disagrees. 

As to the first assertion, the Court finds that the requested relief does 

not exceed Plaintiffs’ alleged injuries. Plaintiffs plead multiple causes of 

action in the alternative—which they could do at this stage. 

Defendants—as a result—seek to improperly dive into the merits of 

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Plaintiffs’ claims at a time when they only need to allege redressability 

in line with the claims they assert. Cole, 484 F.3d at 723.

As to the second assertion, it does not matter whether the loans are 

forgivable or not. In Sprint Communications, Justice Breyer—writing 

for the majority—held that an assignee had standing to sue even when 

the assignee was contractually obligated to remit the litigation proceeds

to an assignor. Sprint Communs. Co., L.P. v. APCC Servs., 554 U.S. 269, 

286-87, 128 S. Ct. 2531, 2542 (2008). The majority opinion reasoned that 

redressability focuses on “whether the injury that a plaintiff alleges is 

likely to be redressed through the ligation—not on what the plaintiff 

ultimately intends to do with the money he recovers.” Id. Redressability 

was met even though the plaintiff would be required to hot-potato the 

money away to a non-party immediately. Id. 

Here, a legal victory would redress the injuries for which the 

Plaintiffs bring suit. Plaintiffs’ injuries relate to the failure to receive 

the PPP loans they were entitled to after they received an SBA loan 

number. Indeed, one of the injuries alleged includes the debt now owed 

to the SBA by Plaintiffs. And if the Plaintiffs prevail, the fact that they 

might hot-potato any recovery to the SBA is irrelevant under current 

precedent. 

Redressability is met. And having met all the elements of Article III 

standing, the Court next turns to Defendants’ objections. 

B. Individual Defendants: Donnelly & Alpert 

Donnelly and Alpert (“Individual Defendants”) assert arguments and 

defenses related to their positions within the corporate framework of 

Crossroads and Capital Plus. The Court addresses each argument in 

turn. 

Donnelly first asserts that this Court does not have personal 

jurisdiction over him. But before analyzing personal jurisdiction, the 

Court must address whether the fiduciary-shield doctrine applies to 

Donnelly. 

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1. Fiduciary-Shield Doctrine 

The fiduciary-shield doctrine prohibits a court from exercising 

personal jurisdiction over an individual whose only actions in the forum 

state were taken in the individual’s capacity as a corporate 

representative—even if the court has personal jurisdiction over the 

corporation itself. See Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 

1985). But the fiduciary-shield doctrine is “removed if the individual’s 

personal interests motivate his actions.” Lewis v. Fresne, 252 F.3d 352, 

359 n.6 (5th Cir. 2001). To prove this, a plaintiff must allege “individual 

participation in the unlawful conduct challenged in the Complaint.” Fed. 

Trade Comm’n v. Educare Ctr. Servs., Inc., 414 F. Supp. 3d 960, 980 

(W.D. Tex. 2019). As a result, Plaintiffs must plead Donnelly’s (1) 

individual participation in the unlawful conduct and (2) personal 

interest in the unlawful conduct.

The operative facts of the complaint allege Donnelly’s individual 

participation: 

• “[Donnelly] controlled and directed Crossroads’s and CPF’s PPP 

lending activities and directly participated in CPF’s and Crossroads’s 

violations and failure to fund the SBA-approved PPP loans at issue 

and personally profited therefore.”5 

• “Donnelly and Alpert controlled both Crossroads and CPF. 

Defendants Donnelly and Alpert also controlled and directed 

Crossroads’s and CPF’s PPP lending activities.”6

• “As a direct and proximate result of defendants Donnelly’s and 

Alpert’s conduct, Plaintiffs and the Class have suffered and continue 

to suffer injury.”7

The complaint also paints a picture rife with personal interest. 

Donnelly owned 37.8% of outstanding shares of a company where a 

$238.9 million dividend was up streamed from Capital Plus after profits 

went from $26 million to $997 million in one year. Donnelly personally 

earned $90,227,080 in dividends as a result. This qualifies as a personal 

5 ECF No. 1 at 62, 65

6 ECF No. 1 at 58. 7 ECF No. 1 at 59. 

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benefit. And combined with the context that Crossroads, through a small 

regional Community Development Financial Institution, processed 

more PPP loans than Bank of America, PNC Bank, TD Bank and Wells 

Fargo combined—despite similar financial incentives—also suggests 

that this was something beyond “business as usual.” 

The fiduciary-shield doctrine does not apply to Donnelly. So the 

Court turns to personal jurisdiction. 

1. Personal Jurisdiction – Donnelly 

Donnelly argues that this Court does not have personal jurisdiction 

over him because he is a nonresident of Texas and his only contacts with 

the state come in his official capacity with Capital Plus and Crossroads. 

The Court disagrees.

Federal courts sitting in diversity may exercise personal jurisdiction

if: “(1) the long-arm statute of the forum state creates personal 

jurisdiction over the defendant; and (2) the exercise of personal 

jurisdiction is consistent with the due process guarantees of the United 

States Constitution.” Clemens v. McNamee, 615 F.3d 374, 378 (5th Cir. 

2010). And because Texas’s long-arm statute “extends as far as 

constitutional due process allows,” courts only need to consider the due 

process inquiry. McFadin v. Gerber, 587 F.3d 753, 759 (5th Cir. 2009). 

This requires a plaintiff to show: (1) minimum contacts between the 

defendant and the forum state and; (2) that the assertion of jurisdiction 

is fair and reasonable. Int’l Shoe Co. v. Washington, 326 U.S. 310, 316, 

(1945); Sangha v. Navig8 ShipManagement Private Ltd., 882 F.3d 96, 

102 (5th Cir. 2018). The Court thus addresses both elements. 

a. Minimum Contacts 

While physical presence or residency are not required for personal 

jurisdiction, a defendant must have “certain minimum contacts . . . such 

that the maintenance of the suit does not offend traditional notions of 

fair play and substantial justice.” Int’l Shoe, 326 U.S. at 316. 

A court may assert specific jurisdiction over a nonresident defendant 

“whose contacts with the forum state are singular or sporadic only if the 

cause of action asserted arises out of or is related to those contacts.” Int’l 

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Energy Ventures Mgmt. v. United Energy Grp., Ltd., 818 F.3d 193, 212

(5th Cir. 2016) (citing Daimler AG v. Bauman, 571 U.S. 117, 126 (2014)). 

The Court considers three prongs in making this determination: 

(1) whether the defendant has minimum contacts with the 

forum state, i.e., whether it purposely directed its activities 

toward the forum state or purposefully availed itself of the 

privileges of conducting activities there; (2) whether the 

plaintiff’s cause of action arises out of or results from the 

defendant’s forum-related contacts; and (3) whether the 

exercise of personal jurisdiction is fair and reasonable.

Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 271 (5th Cir. 2006). 

The first prong requires that the contacts asserted are not “random, 

fortuitous, or attenuated.” Moncrief Oil, Int’l. Inc. v. OAO Gazprom, 481 

F.3d 309, 312 (5th Cir. 2007). But a single act by the defendant directed 

at the forum state can be enough to confer personal jurisdiction if that 

act gives rise to the claim being asserted. Ruston Gas Turbines, Inc. v. 

Donaldson Co., 9 F.3d 415, 418 (5th Cir. 1993). This analysis must “look 

to the defendant’s contacts with the forum State itself, not the 

defendant’s contacts with persons who reside there.” Walden v. Fiore, 

571 U.S. 277, 285 (2014). Put simply, “the plaintiff cannot be the only 

link between the defendant and the forum. Rather, it is a defendant’s 

conduct that must form the necessary connection with the forum State 

that is the basis for its jurisdiction over him.” Id.

Donnelly argues that his contacts with Texas are limited and 

sporadic. The Court disagrees. 

Donnelly’s conduct surrounding this suit directs and avails itself of

the privileges of conducting business in Texas. Donnelly attended 

meetings in Texas, directed communications into Texas, and performed 

work for Texas entities8 that served many citizens of Texas. Indeed, his 

8 Donnelly continues to serve as a manager and director of Capital Plus. See Texas 

Comptroller of Public Accounts, Capital Plus Financial, LLC Report, 

https://mycpa.cpa.state.tx.us/coa/coaSearchBtn. 

Donnelly also serves as CEO, director, and board member of Crossroads which is 

headquartered in Dallas, Texas (¶ 26), and has served as CEO and director since 

December 2017. See see also Texas Comptroller of Public Accounts, Crossroads 

Systems, Inc. Report, https://mycpa.cpa.state.tx.us/coa/coaSearchBtn.

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status as a “registered” agent for Capital Plus requires that he must

“continuously maintain” a presence in the state and “maintain a 

business office at the same address as the entity’s registered office.” TEX.

BUS. ORGS. CODE ANN. § 5.201. Notwithstanding his choice to live in a 

different state, these contacts are systematically intertwined with and 

avail himself to Texas. The first element is met. 

The second prong requires “a connection between the forum and the 

specific claims at issue.” Bristol-Myers Squibb Co. v. Sup. Ct. of Cal., 137 

S. Ct. 1773, 1781 (2017). At bottom, “there must be . . . [a related] activity 

or an occurrence that takes place in the forum State and is therefore 

subject to the State’s regulation.” Ford Motor Co., 141 S. Ct. at 1025. 

According to Plaintiffs’ complaint, Donnelly—as the dual CEO of 

Crossroads and Capital Plus—orchestrated a plan to fund over 472,000 

PPP loans. As a result, Donnelly’s companies received over $930 million 

in loan processing fees. The complaint further alleges that Donnelly 

exercised significant control over Capital Plus and Crossroads and 

directed decisions on PPP lending. This included establishing corporate 

policies and supervising Capital Plus’s PPP lending activities. Under 

Donnelly’s direction, Capital Plus ratcheted up its participation in PPP 

lending to exploit higher lender fees and to use unfunded and other PPP 

loans as collateral to secure billions of dollars in PPPLF loan advances. 

Donnelly’s contacts that avail him of Texas’s privileges are intertwined 

with the facts that give rise to this suit. His position in a Texas company 

and direction and control over it are both the basis for his availment and 

central to the facts alleged in Plaintiffs’ complaint. 

Plaintiff thus meets its burden of satisfying the first two elements. 

Because of this, the burden now shifts to Donnelly to prove that it would 

be unfair to exercise personal jurisdiction over him. To meet this burden, 

the defendant must make a “compelling case” that exercising 

jurisdiction would be unfair. See Wien Air Alaska, Inc. v. Brandt, 195 

F.3d 208, 215 (5th Cir. 1999) (“[O]nce minimum contacts are 

established, the interests of the forum and the plaintiff justify even large 

burdens on the defendant.”). Courts make the fairness determination by 

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assessing five factors: (1) the burden on the defendant having to litigate 

in the forum; (2) the forum state’s interests in the lawsuit; (3) the 

plaintiff’s interests in convenient and effective relief; (4) the judicial 

system’s interest in efficient resolution of controversies; and (5) the 

state’s shared interest in furthering fundamental social policies. See 

Ruston Gas Turbines, Inc. v. Donaldson Co., 9 F.3d 415, 421 (5th Cir. 

1993).

First, Donnelly notes that he travels to Texas for business and other 

matters. Additional trips for the occasional hearing or trial are not 

unduly burdensome. Indeed, Donnelly is litigating in this district 

already—in a case in which he did not challenge personal jurisdiction. 

See Oto Analytics Inc. v. Capital Plus Fin. LLC, Case No. 3:21-cv-2636 

(N.D. Tex.) (Boyle, J.). And even if it were “inconvenient” for Donnelly 

to make the occasional trip to Fort Worth, “once minimum contacts are 

established, the interests of the forum and the plaintiff justify even large 

burdens on the defendant.” Wien Air Alaska, Inc., 195 F.3d at 215. 

Second, Texas is interested in protecting its consumers and ensuring 

that companies within its borders comply with its law. And this case 

involves allegations of harm done to Texas citizens by Texas companies. 

Third, Plaintiffs are interested in relief from harm allegedly done to 

them, and this forum is appropriate for redressing the harm. Fourth, the 

judicial system’s interest is met as this Court affords a proper forum for 

this suit where alleged harms can be remedied. Fifth, the states share

an interest in the efficient resolution of cases, especially ones that 

allegedly caused harm on a national scale. 

All fairness factors thus favor personal jurisdiction. And the Court 

thus has personal jurisdiction over Donnelly. 

2. Liability Shield – Alpert and Donnelly 

The Individual Defendants next contend they should be dismissed 

from the case as their companies’ liability shields cover them. The Court 

disagrees. 

Under Texas law, the shareholder or affiliate of a corporation: 

may not be held liable to the corporation or its obligees with 

respect to . . . any contractual obligation of the corporation 

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or any matter relating to or arising from the obligation on 

the basis that the holder, beneficial owner, subscriber, or 

affiliate is or was the alter ego of the corporation or on the 

basis of actual or constructive fraud, a sham to perpetrate 

a fraud, or other similar theory.

TEX. BUS. ORGS. CODE § 21.223(a)(2) (emphasis added).9 An exception 

exists if the defendant “caused the corporation to be used for the purpose 

of perpetrating and did perpetrate an actual fraud on the obligee 

primarily for the direct personal benefit of the holder, beneficial owner, 

subscriber, or affiliate.” Id. § 21.223(b).

Here, Donnelly and Alpert both fall into affiliate shareholder status. 

And because they fall into the text of the statute, the Court must address 

two things: (1) whether the claims against them “arise out of” or “relate 

to” a contractual obligation of the corporation; and (2) whether the 

complaint sufficiently alleges that the Individual Defendants 

perpetrated an actual fraud. 

i. “Relating to” or “arising out of”

The first issue is whether the claims against Donnelly and Alpert 

“arise out of” or “relate to” a contractual obligation. The terms “relating 

to” and “arising out of” are broad and flexible and should be construed 

as such. 

Plaintiffs assert that because they do not make any contractual 

claims against the Individual Defendants, the liability shield afforded 

by § 21.223(a)(2) does not apply. The Court disagrees. 

Plaintiff’s claims are noncontractual in nature and relate to three 

causes of action: unjust enrichment, the UCL, and the NCUDTPA. 

Plaintiffs allege that the Individual Defendants led, directed, and 

controlled their companies to engage in business practices leading to 

their unjust enrichment at the expense of the SBA and the loss of 

Plaintiffs. And while Plaintiffs attempt to creatively plead around the 

liability shield by claiming that they are only concerned with the 

dividend and SBA fees, it does not change the proximity of the 

9 Although § 21.223 refers only to corporations, TEX. BUS. ORGS. CODE ANN. § 

101.002(a) extends its reach to limited liability companies as well. 

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Individual Defendants’ actions to the contractual issue. Plaintiffs’ only 

tie to the SBA fees at issue is their contractual relationship with Capital 

Plus. At bottom, the gravamen of Plaintiffs’ claims arise from the 

unfulfilled loans, which they assert is a breach of contract in the same

complaint. Without this contractual relationship, Plaintiffs have no 

ground to stand on as to why the Individual Defendants were unjustly 

enriched or engaged in unfair business practices related to them. Thus, 

all of Plaintiffs’ noncontractual claims relate to or arise from the conduct 

surrounding the unfulfilled loan agreements—which are contractual in 

nature. 

Plaintiffs’ claims fall under § 21.223(a)(2). And thus, for their claims

against the Individual Defendants to survive, they must show that 

actual fraud is present. 

ii. Actual Fraud & Direct Personal Benefit 

Evading limited liability requires a plaintiff to show that: “(1) the 

affiliate caused the corporation to be used to perpetrate and did 

perpetrate an actual fraud on the obligee; and (2) the fraud was 

primarily for the direct personal benefit of the holder, beneficial owner, 

subscriber, or affiliate.” Thomas v. Hughes, 27 F.4th 995, 1016 (5th Cir. 

2022) (citing TEX. BUS. ORGS. CODE § 21.223(a)(2)). 

“Actual fraud”—as required by § 21.223(a)(2)—is distinct from the 

tort of fraud and only requires a plaintiff to show “dishonesty of purpose 

or intent to deceive.” Archer v. Griffith, 390 S.W.2d 735, 740 (Tex. 1964); 

Latham v. Burgher, 320 S.W.3d 602, 607 (Tex. App.—Dallas 2010, no 

pet.). Because Rule 9(b) states that “conditions of a person’s mind may 

be alleged generally,” actual fraud is evaluated under Rule 12(b)(6) and 

not the more restrictive Rule 9 standard. Weston Grp., Inc. v. Sw. Home 

Health Care, LP, No. 3:12-CV-1964-G, 2014 WL 940329, at *2 (N.D. Tex. 

Mar. 11, 2014) (Fitzwater, J.). As a result, courts “may deduce 

fraudulent intent from all of the facts and circumstances.” Spring St. 

Partners, 730 F.3d 427, 443 (5th Cir. 2013) (emphasis in original). And 

“courts generally look at the totality of a shareholder’s actions to 

determine whether he committed actual fraud.” Weston Grp., 2014 WL 

940329, at *2. Thus, “all that is required at the pleading stage is a 

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general allegation of [a defendant’s] dishonest purpose or deceitful 

intent with respect to [the company] and its transactions.” AHBP LLC 

v. Lynd Co., No. SA-22-CV-00096-XR, 2023 WL 139149, at *7 (W.D. Tex. 

Jan. 9, 2023) (citing Archer, 390 S.W.2d at 740 (Tex. 1964)). 

Defendants assert that Plaintiff does not plead actual fraud with 

enough specificity and only relies on a conclusory statement that Alpert 

and Donnelly “directed” and “controlled” the companies. The Court 

disagrees. 

Considering the full context of the complaint and all allegations in it, 

actual fraud is met. Plaintiffs allege that Alpert and Donnelly 

“controlled and directed Crossroads’s and CPF’s PPP lending activities,”

including a lending scheme where the company acted “acted 

intentionally, knowingly, and maliciously” to maximize SBA fees and 

disregard loan obligations to Plaintiffs. ECF No. 65 at ¶¶ 303, 306.

Indeed, despite having fewer resources than more prominent financial 

institutions, a modest regional LLC under Donnelly and Alpert’s control

managed to process a larger volume of PPP loans than Bank of America, 

PNC Bank, TD Bank, and Wells Fargo combined. This resulted in the 

approval of “472,036 PPP loans totaling over $7.5 billion in funds” in a 

very short time window. ¶¶ 9, 75, 79, 87, 90. And while Plaintiffs do not 

allege fraud in the complaint, the “overarching theme of the [Plaintiffs’] 

complaint, regardless of the accompanying legal labels,” is that Alpert 

and Donnelly led and directed CFP and Crossroads to maximize fees in 

order to enrich themselves and other insiders in the company. Gold 

Coast Commodities, Inc. v. Crum, 68 F.4th 963, 969 (5th Cir. 2023). But 

doing so was at the detriment of those who applied for loans. Indeed, the 

only people enriched by the alleged scheme were insiders after issuing 

the dividend. And while Plaintiffs use no magic words in their 

complaint, “all the facts and circumstances” surrounding the conduct 

alleged support a finding of actual fraud.10 Latham, 320 S.W.3d at 607 

10 See also Spring St. Partners, 730 F.3d at 445 (finding actual fraud where the 

context of the complaint showed that defendant created an LLC to shift assets and 

allowed the company’s charter to lapse after litigation began); In re Arnette, 454 B.R. 

663, 694–95 (Bankr. N.D. Tex. 2011) (holding that a party committed actual fraud by 

making material misrepresentations, failing to disclose important information, and 

never intending to comply with the terms of the parties’ agreement); Latham, 320 

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(“[A]ctual fraud means conduct involving either dishonesty of purpose 

or intent to deceive.” (emphasis added)). 

Personal benefit requires a plaintiff to plead that “funds derived from 

the corporations’ allegedly fraudulent conduct were pocketed by or 

diverted to the individual defendant.” Bates Energy Oil & Gas v. 

Complete Oilfield Svcs., 361 F. Supp. 3d 633, 665 (W.D. Tex. 2019). If

funds are only used for a corporation’s benefit or are diverted to other 

ventures, a plaintiff’s claim fails. Id. 

Here, personal benefit is met for a hundred-million reasons. The 

Individual Defendants both received paydays in a quickly announced

dividend—equal to nearly 80% of the outstanding share price at the 

time. Alpert (25%) and Donnelly (37.8%) together owned 62.8% of a 

company’s outstanding shares where the $238.9 million dividend was 

quickly upstreamed and paid out to shareholders after the PPP window 

closed. In the end, Alpert and Donnelly collectively pocketed 

$149,918,480 in cash from the special dividend. This easily meets the 

standard of a personal benefit. 

* * * 

Because actual fraud is present in the context of Plaintiffs’ complaint

and the Individual Defendants personally benefited from their alleged 

conduct, the liability shield does not apply to the Individual Defendants, 

and they must face the claims brought against them. 

The Court now addresses the jurisdictional and preliminary issues 

brought by the Corporate Defendants’ motions. 

C. Capital Plus Financial & Crossroads 

1. Alter Ego - Crossroads 

Crossroads asserts that it must be dismissed from the case because 

they are a member of Capital Plus and shielded under limited liability. 

S.W.3d at 610 (“A rational juror could also have decided Latham’s contextual conduct 

represented dishonesty of purpose or an intent to deceive, i.e., actual fraud.”).

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Federal district courts sitting in diversity must “apply the conflict of 

laws rule of the state in which it sits to determine which state’s 

substantive law should be applied.” Because the forum state is Texas, 

the Court applies Texas’ conflict of laws to its alter ego analysis. Texas 

law dictates that the state of incorporation controls. See TEX. BUS. ORG.

CODE ANN. § 1.104; Alberto v. Diversified Grp. Inc., 55 F.3d 201, 203 (5th

Cir. 1995). Where the claim seeks to hold a parent company liable for 

the obligations of a subsidiary, the subsidiary’s state of incorporation 

provides the applicable law. See ASARCO LLC v. Americas Min. Corp., 

382 B.R. 49, 64–65 (S.D. Tex. 2007). And as Capital Plus—the subsidiary 

in this situation—is organized under the laws of Texas, the Court looks 

to Texas law. 

As stated before, Texas law dictates that the shareholder or affiliate

of a corporation “may not be held liable to the corporation or its obligees 

with respect to . . . any contractual obligation of the corporation or any 

matter relating to or arising from the obligation on the basis that the 

holder, beneficial owner, subscriber, or affiliate is or was the alter ego of 

the corporation.” TEX. BUS. ORGS. CODE § 21.223(a)(2) (emphasis 

added).11 To defeat this, Plaintiffs must show that a defendant “caused 

the corporation to be used for the purpose of perpetrating and did 

perpetrate an actual fraud on the obligee primarily for the direct 

personal benefit of the holder, beneficial owner, subscriber, or 

affiliate.” Id. § 21.223(b).

Here, Crossroads is a shareholder/member, so the statute applies.

So—once again—the Court must address two things: (1) whether the 

claims against them “arise out of” or “relate to” a contractual obligation 

of the corporation; and (2) whether the complaint sufficiently alleges 

that the Individual Defendants perpetrated an actual fraud. 

i. “Relating to” or “arising out of” 

The first issue is whether the claims against Crossroads “arise out 

of” or “relate to” a contractual obligation. As established in the section 

11 Although § 21.223 refers only to corporations, TEX. BUS. ORGS. CODE

§101.002(a) extends its reach to limited liability companies as well. 

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dealing with the Individual Defendants, the claims asserted by 

Plaintiffs are contractual in nature. 

As stated in depth before, the breach-of-contract claim is clearly 

contractual, and the other claims arise out of and relate to the alleged 

contractual relationship with Capital Plus.12 At issue is the conduct 

surrounding the unfulfilled loan agreements—which are contractual in 

nature. 

Plaintiffs’ claims thus fall under § 21.223(a)(2). And for their claims

against Crossroads to survive, they must show that actual fraud is 

present. 

ii. Actual Fraud & Direct Personal Benefit

Once again, to evade limited liability a plaintiff to show that “(1) the 

affiliate caused the corporation to be used to perpetrate and did 

perpetrate an actual fraud on the obligee; and (2) the fraud was 

primarily for the direct personal benefit of the holder, beneficial owner, 

subscriber, or affiliate.” Thomas, 27 F.4th at 1016 (citing TEX. BUS.

ORGS. CODE § 21.223(a)(2)). 

Crossroads asserts that Plaintiffs do not plead actual fraud with 

enough specificity and that they only rely on conclusory statements of 

regular business activity—insufficient to pierce the corporate veil of 

Capital Plus. The Court disagrees. 

As stated before “actual fraud” requires a plaintiff to show 

“dishonesty of purpose or intent to deceive.” Archer, 390 S.W.2d at 740; 

Latham, 320 S.W.3d at 607 (Tex. App.—Dallas 2010, no pet.). Courts 

“may deduce fraudulent intent from all of the facts and circumstances.”

Spring St. Partners, 730 F.3d at 443 (emphasis in original). And “all that 

is required at the pleading stage is a general allegation of [a defendant’s]

dishonest purpose or deceitful intent with respect to [the company] and 

its transactions.” AHBP LLC, 2023 WL 139149, at *7 (citing Archer, 390 

S.W.2d at 740). In a business-transaction context that might be routine

in a vacuum, actual fraud can be inferred from the proximity or volume 

of transactions in context with other circumstances. See Spring St. 

12 See supra at p. 16. 

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Partners, 730 F.3d at 445 (finding actual fraud where the context of the 

complaint showed that defendant created an LLC to shift assets and 

allowed the company’s charter to lapse after litigation began); In re 

Arnette, 454 B.R. at 694–95 (holding that a party committed actual fraud 

by making material misrepresentations, failing to disclose important 

information, and never intending to comply with the terms of the 

parties’ agreement). 

In Weston Group, the court found that a plaintiff’s allegations were 

sufficient to plead actual fraud. Weston Grp, 2014 WL 940329, at *5. 

There the plaintiffs alleged that (1) a business promised to pay but never 

followed through, (2) an LLC was used to funnel money between 

different companies, and (3) the corporate defendant received 

government benefits that were supposed to go to plaintiffs but were 

funneled upstream to insiders instead. Id. The court reasoned that even 

though the regular movement of money between companies is not 

enough to plead actual fraud, the movements of money alongside the 

other allegations and circumstances “[rose] above the level of a 

conclusory description.” Id. (citing Shandong Yinguang Chem. Indus. 

Joint Stock Company, Ltd. v. Potter, 607 F.3d 1029, 1032–33 (5th Cir.

2010)).

Like the pleadings in Weston Group, which alleged (1) unfulfilled 

payments, (2) upstreamed money, and (3) improperly used government 

benefits, here, Plaintiffs allege the same but on a grander scale. 

Plaintiffs allege that Crossroads exercised its control over Capital Plus

and its PPP lending scheme. The primary purpose of the alleged plan 

was to maximize SBA fees to the detriment of loan obligations it owed 

to Plaintiffs. ECF No. 65 at ¶¶ 303, 306. Captial Plus approved “472,036 

PPP loans totaling over $7.5 billion in funds” in a short time window. ¶¶ 

9, 75, 79, 87, 90. Again, the “overarching theme of the [Plaintiffs’] 

complaint, regardless of the accompanying legal labels,” is that 

Crossroads saw a window to maximize fees earned at the detriment of 

those who applied for loans to enrich itself and other insiders in the 

company. Gold Coast Commodities, 68 F.4th at 969. An awareness of the 

nearly half-a-million loan agreements was often noted in Crossroads 

financial statements and shareholder letters. And Crossroads also often 

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noted strategies and timelines on the company’s policy toward these 

loans. So this was anything but a regular business transaction or 

transfer between parent and subsidiary—it was a transformational plan 

executed with the full knowledge and control of Crossroads.

Indeed, Crossroads’s involvement in the PPP became the main event 

as it reported that “the Company’ received $970.5 million in total 

revenue of which $930 million was PPP loan fees in 2021 compared to 

just $27.5 million in total revenue the prior year.” ECF No. 1 at 4. The 

subsidiary LLCs’ profits on the back of the PPP program dwarfed those 

of the parent corporation. It was a modern-day gold rush as 

Crossroads—knowing that many of Plaintiffs’ loans remained 

unfunded—upstreamed hundreds of millions of dollars in PPP-related 

loan processing fees and PPPLF loan advances. And once the PPP 

window closed, Crossroads paid out a $238.9 million dividend to its 

insiders and kept the rest of the profit for the corporation’s benefit.

Lastly, the funds at issue were not corporate funds owned by 

Crossroads. These funds were earned because of Capital Plus and 

Crossroads engaging in an emergency government benefit program. 

Plaintiffs allege that Crossroads kept fees for processing the loans and

sat on PPPFL advances from the federal reserve and milked interest on 

the nearly $7.5 billion in cash it gained from that was intended to cover 

loan disbursements that Plaintiffs were entitled to. Plaintiffs even 

allege that the PPPFL funds were obtained by lying about loans that 

were never completed. Considering the full context of the complaint that 

alleges (1) unfulfilled payments, (2) upstreamed money, (3) a wild 

lending spree that overhauled the nature of Crossroads’s business 

model, and (4) improperly used government programming funds, actual 

fraud is met.

Again, Personal benefit requires a plaintiff to plead that “funds 

derived from the corporations’ allegedly fraudulent conduct were 

pocketed by or diverted to the individual defendant.” Bates Energy Oil 

& Gas v. Complete Oilfield Svcs., 361 F. Supp. 3d 633, 665 (W.D. Tex. 

2019). If funds are only used for a corporation’s benefit or are diverted 

to other ventures, a plaintiff’s claim fails. Id. 

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As discussed above, personal benefit is met for a hundred-million 

reasons present in Crossroads’ income statements and its insiders’ bank 

accounts. 

* * * 

Because actual fraud is present in the context of Plaintiffs’ complaint 

and Crossroads personally benefited from its alleged conduct, the 

liability shield does not apply, and it must face the claims brought by 

Plaintiffs. 

2. Statutory Standing - Negotiable Instruments & Breach of 

Contract 

Defendants next argue that Plaintiffs lack statutory standing to sue 

for breach of contract because the contract is a negotiable instrument

held by Defendants. 

A negotiable instrument is created where there is 

“an unconditional promise or order to pay a fixed amount of money, with 

or without interest or other charges described in the promise or 

order.” TEX. BUS. & COM. CODE § 3.104(a). Only holders of negotiable 

instruments may enforce their terms. Id. § 3.301; see also Maldonado 

v. CitiMortgage, Inc., 676 F. App’x 282, 284 (5th Cir. 2017). Because 

Capital Plus is the holder of the agreement, if it is negotiable, Plaintiffs 

will be unable to enforce it. 

Plaintiffs assert that the note is not a negotiable instrument because 

it is forgivable, thus calling the fixed nature of the note into question. 

They are correct. 

Notes are not negotiable where there is uncertainty as to the amount 

or where they incorporate methods that establish the value of the note

and its forgivability from outside the agreement. See Cobb Bank & Tr. 

Co. v. Am. Mfrs. Mut. Ins., 624 F.2d 722, 725 (5th Cir. 1980) (holding 

that the instrument was not negotiable where the amount to be paid was 

uncertain); Fed. Deposit Ins. Corp. v. Eagle Props., Ltd., 664 F. Supp. 

1027, 1035 (W.D. Tex. 1985) (note is not negotiable if a “provision leaves 

a possibility of reduction in the amount collectible on the note”); FFP 

Mktg. Co. v. Long Lane Master Tr. IV, 169 S.W.3d 402, 408 (Tex. App. 

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2005—Fort Worth 2005, no pet.) (note is not negotiable where “one 

cannot determine from the face of [the] note the extent of the maker’s 

liability”); Hinckley v. Eggers, 587 S.W.2d 448, 451 (Tex. Civ. App. 

1979—Dallas 1979, no writ) (note is not for a fixed amount where the 

amount to be paid could only “be determined only from sources outside 

the instrument”). 

The centrality of forgiveness to the nature of the PPP loan process 

meets this uncertainty. And while Defendants assert that all notes are 

forgivable at the holder’s discretion, they again fail to distinguish the 

unique posture of PPP loans. As other courts have noted, “forgiveness is 

the essential characteristic of the debtor’s obligation under the PPP 

Note and the PPP requirements. But for forgiveness, there is no PPP.” 

In re Parking Mgmt., 620 B.R. 544, 558 (Bankr. D. Md. 2020). Indeed, 

“[t]he debtor’s liability to repay the PPP relies on some future extrinsic 

event which may never occur.” Id. (cleaned up). And the agreement is 

“subject to a triggering event or occurrence reasonably contemplated by 

the debtor and creditor at the time the debtor applied for and obtained 

the PPP funds.” Id. 

On top of the amount being uncertain, the note is not unconditional. 

A promise is not unconditional if a promissory note incorporates other 

provisions. See Resol. Tr. Corp. v. 1601 Partners, Ltd., 796 F. Supp. 238, 

239-40 (N.D. Tex. 1992) (Sanders, J.) (“[W]hen an instrument 

incorporates by reference the terms of another document the ... promise 

contained within the instrument, therefore, is rendered conditional.”).

Here, the entire forgiveness or partial forgiveness mechanism 

associated with the PPP loans came from agency rulemaking that fell 

outside the promissory note and had the potential to change any minute 

the SBA issued a new guidance. So the terms that make the note 

uncertain as to the amount also make the note conditional. 

Defendants’ objections on statutory standing are meritless. 

3. Breach of Contract 

Crossroads and CFP assert that the documents signed by Plaintiffs 

do not give rise to a contractual obligation because they were unilateral 

and binding only on Plaintiffs. The Court disagrees. 

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Documents “executed at the same time, with the same purpose, and 

in the course of the same transaction, [are] construe[d] . . . together.” NC 

Lear Servs., Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 216 (5th Cir. 

2009). And “[i]t is well settled that courts must enforce the unambiguous 

language in a contract as written, and the applicable standard is the 

objective intent evidenced by the language used, rather than by the 

subjective intent of the parties.” Dresser-Rand Co. v. Virtual 

Automation, Inc., 361 F.3d 831, 845 (5th Cir. 2004) (citations omitted). 

Capital Plus executed a “Notice – No Oral Agreements” clause, which 

refers to the notes as a “Loan Agreement.” It then defines “Loan 

Agreement” as “one or more promises, promissory notes, agreements . . 

. pursuant to which a financial institution loans . . . or agrees to loan

money.” ECF No. 4 at 10. Further, the SBA PPP lending rule was 

incorporated into the documents governing the contract. The lending 

rule states: “[t]he lender must make a one-time, full disbursement of the 

PPP loan within 10 calendar days of loan approval; for the purposes of 

this rule, a loan is considered approved when the loan is assigned a loan 

number by SBA.” 86 FED. REG. 3692, 3710. Taken together, the 

documents contain unambiguous language that provides CFP a duty to 

disburse funding upon issuing an SBA number—regardless of CFPs 

subjective intent surrounding the agreement. 

Plaintiffs have a proper breach-of-contract claim. 

4. Release 

Defendants next contend that Plaintiffs’ contractual claims are 

barred by a validly signed release covering all claims brought under the

“loan agreement.” The parties collectively whiffed on briefing this issue. 

Plaintiffs claim that the release didn’t include future acts, and 

Defendants claim that the release was a complete forfeiture of all claims 

stemming from the agreement. And yet, neither party recognizes the 

unique relationship embedded in this specific contract. 

Texas law holds that “parties have the right to contract as they see 

fit as long as their agreement does not violate the law or public 

policy.” In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex. 2004). 

And “it is by now axiomatic that legislative enactments generally 

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establish public policy.” Royston, Rayzor, Vickery, & Williams, LLP v. 

Lopez, 467 S.W.3d 494, 504 (Tex. 2015). So when lawmakers impose a

statutory restriction, “the issue for the courts is whether the contract 

violates the statute, not whether it violates public policy.” Marsh USA 

Inc. v. Cook, 354 S.W.3d 764, 771 (Tex. 2011) (discussing whether the 

contract meets statutory “requirement for enforceability under the 

Act”); see also Woolsey v. Panhandle Ref. Co., 131 Tex. 449, 116 S.W.2d 

675, 678 (Tex. 1938) (“[A]n agreement which violates a valid statute is 

illegal and void.”).

The Court thus identifies the issue here as “whether public policy 

embedded in [the PPP program and SBA Lending Rules] precludes 

enforcement of [the exculpatory clause].” Phila. Indem. Ins. Co. v. White, 

490 S.W.3d 468, 471 (Tex. 2016). 

While private parties can contract around many laws, Texas looks to 

their relationship to determine whether the provisions violate public 

policy. Crowell v. Hous. Auth. of Dall., 495 S.W.2d 887, 889 (Tex. 1973). 

Courts regularly enforce exculpatory agreements between private 

persons of equal bargaining strength. Id. But when one party has 

substantially less bargaining power in the relationship, the exculpatory 

agreement will be declared void. Id. 

In Crowell, the Texas Supreme Court held that an exculpatory clause 

exempting the Dallas Housing Authority (“DHA”) from premises 

liability was against public policy. Crowell, 495 S.W.2d at 889. The court 

reasoned that because the DHA’s legislative purpose rested on providing 

safe dwelling accommodations to low-income families, the provision 

directly violated the nature of the statutory relationship between the 

contracting parties. Id.; see also Lone Star Gas Co. v. Veal, 378 S.W.2d

89, 93 (Tex. Civ. App.—Eastland 1964, writ ref’d n.r.e.) (holding that

exculpatory clause invalid where a public utility contracted out of

liability for negligence in the performance of public service). 

Like the DHA—a creature of specific legislative enactment—Capital 

Plus was a component of a government assistance program and not a 

freewheeling lender. For PPP loan agreements, there is no 

customization or negotiation of the core terms of the agreement because

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it is prescribed by statute. Plaintiffs could not take to the marketplace 

to hunt down a better rate or deal. Indeed, Capital Plus’s only job was 

mechanical—to approve or deny the loan and then release the funds. 

And while the exculpatory clause may cover conduct outside the

regulation, its primary function reserves the right to directly violate 

statutorily enacted public policy—the only basis for the relationship 

between Capital Plus and Plaintiffs. 

Thus, the exculpatory clause is void. 

5. Damages 

Defendants next argue that Plaintiffs’ claims should be dismissed 

because they inconsistently or improperly pleaded the damages they are 

allegedly entitled to. The Court disagrees.

A 12(b)(6) motion concerns causes of action, not remedies. So 

“[w]hether a claim for relief should be dismissed under Rule 12(b)(6) 

turns not on whether all of the relief asked for can be granted, but 

whether the plaintiff is entitled to any relief.” Mott’s, LLP v. 

Comercializadora Eloro, S.A., 507 F. Supp. 3d 780, 791 (W.D. Tex. 2020). 

And courts “have consistently interpreted [Rule 8] to allow a plaintiff 

any relief that the pleaded claim supports; requesting an improper 

remedy is not fatal.” Laird v. Integrated Res., Inc., 897 F.2d 826, 841 

(5th Cir. 1990). Indeed, “[I]t need not appear that the plaintiff can obtain 

the particular relief prayed for in the complaint, as long as the district 

judge can ascertain from what has been alleged that some relief may be 

granted by the court.” Mott’s, 507 F. Supp. 3d at 791 (citing 5B Charles 

A. Wright & Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 

1357 (3d ed. 2004)). 

At this stage, Plaintiffs can plead alternative causes of action with 

different damage theories. And while some are debatably wrong, (1) this 

is not the time to address them, and (2) they are not fatal to Plaintiffs 

claims. 

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D. All Defendants 

1. Unjust Enrichment 

Plaintiffs state a claim for unjust enrichment against all Defendants 

due to the millions of SBA fees the Corporate Defendants received and 

the dividend payments the Individual Defendants received. They argue 

that because Defendants received the fees associated with processing 

their loans from the SBA and never disbursed the money, this entitles 

them to restitution. This argument misses the whole point of unjust 

enrichment. 

Unjust enrichment requires a party to make restitution to another if 

they have been enriched at the other party’s expense. See Penick v. 

Penick, 783 S.W.2d 194, 197 (Tex. 1988) (“one receiving benefits which 

are unjust for him to retain ought to make restitution or pay the value 

of the benefit to the party contributing the benefit.”) This means that 

the benefit received by a defendant must come directly from a plaintiff. 

Id. Unjust enrichment does not operate on a but-for-causation benefit 

scheme, the benefit must be directly conferred. Id. 

Here, Defendants were enriched from the fees they obtained from 

processing loan applications. These fees came directly from the 

government, not from Plaintiffs. And this rule is the same in every state 

from which Plaintiffs bring a claim.13 Therefore, Plaintiffs conferred no 

benefit or enrichment. Therefore, Plaintiffs’ unjust enrichment claims 

fail. 

Plaintiffs’ unjust enrichment claims are thus DISMISSED. 

13 See First Union Nat. Bank, 168 S.W.3d 917, 931 (Tex. App.––Dallas 2005, no 

pet.); Hartness v. Nuckles, 2015 Ark. 444, 475 (2015); D.W.H Painting Co., Inc. v. D.W.

Ward Constr. Co., Inc., 174 N.C.App. 327, 334 (2005); State v. Ariz. Pension Planning, 

154 Ariz. 56, 58 (1987) (en banc); Small v. Badenhop, 67 Haw. 626, 636 (1985). 

In addition to other states not recognizing claims where a benefit is not conferred 

by the plaintiff, California does not recognize unjust enrichment claims at all. 

Therefore, the California subclass claim fails under this theory were California law to 

apply. See Hooked Media Grp., Inc. v. Apple, Inc., 55 Cal.App.5th 323, 336 (2020)

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2. North Carolina Unfair and Deceptive Trade Practices Act 

Defendants next argue that Plaintiff failed to bring a proper claim 

under the NCUDTPA. The Court disagrees. 

The NCUDTPA states that “[u]nfair methods of competition in or 

affecting commerce, and unfair or deceptive acts or practices in or 

affecting commerce, are declared unlawful.” N.C. GEN. STAT. ANN. § 75–

1.1(a). In applying North Carolina law, federal district courts in the 

Fifth Circuit are bound by the North Carolina Supreme Court’s 

decisions. Camacho v. Ford Motor Co., 993 F.3d 308, 311 (5th Cir. 2021). 

And when interpreting a North Carolina statute, we use the same 

methods of statutory interpretation used by the North Carolina 

Supreme Court. Id. 

To establish a claim for unfair trade practices under the NCUDTPA, 

a plaintiff must meet three elements: (1) that the defendant 

committed an unfair or deceptive act or practice; (2) that the action was 

in or affecting commerce; and (3) that the act proximately caused injury 

to the plaintiff. Dalton v. Camp, 353 N.C. 647, 656–57 (2001) (citation 

omitted). 

As to the first element, “[a] practice is unfair if it is unethical or 

unscrupulous, and it is deceptive if it has a tendency to deceive.” Id. 

(citing Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 148 (4th Cir. 

1987)). Determining whether an act is unfair or deceptive is a question 

of law for the court. Gray v. N.C. Ins. Underwriting Ass’n, 352 N.C. 61, 

68 (2000). 

Whether the Court uses the words unfair, deceptive, unethical, or 

unscrupulous, the facts before it meet this standard. Plaintiffs allege 

that in a national crisis—where Congress entrusted private actors with 

approving PPP loans—Alpert and Donnelly controlled and directed 

Capital Plus and Crossroads to process an unattainable number of 

applications designed to skim fees off the top. They allegedly did this 

while owning a majority of the company’s outstanding shares. And the 

second the PPP window closed, Alpert and Donnelly paid themselves 

millions in dividends while thousands of loans remained unprocessed—

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leaving businesses hung out to dry in their time of need. These facts on 

the face of the complaint mean that the first element is met. 

As to the second element, “in or affecting commerce,” the statute 

defines “commerce” inclusively as “business activity, however 

denominated.” § 75-1.1(b). But from this expansive definition, the North 

Carolina Supreme Court has somehow gathered that “[the Act] is not 

intended to apply to all wrongs in a business setting.” Dalton, 

353 N.C. at 658. Business activities that fall beyond the statute’s scope

include professional services, most employer-employee disputes, and 

securities transactions. Id. This is because the Act concerns only two 

types of business transactions: “(1) interactions between businesses, and 

(2) interactions between businesses and consumers.” Nobel v. Foxmoor 

Grp., 380 N.C. 116, 121 (2022). 

This case fits neatly into the second category as it involves an 

interaction between a private company and a large class of individual 

consumers. And because the conduct here falls within the statute’s 

scope, the second element is met. 

Turning to the third element, the Act requires more than just proving 

simple causation. It also requires that “some type 

of egregious or aggravating circumstances must be alleged” for the Act’s 

provisions to take effect. Dalton, 353 N.C. 647, 656–57 (2001). 

Plaintiffs properly allege that the act was partly caused by Alpert 

and Donnelly because they controlled and directed the Crossroads and 

Capital Plus. And the facts and allegations contained in the complaint 

are egregious and aggravating. At risk of sounding repetitive, hundreds 

of thousands of loans remained unprocessed while the Corporate 

Defendants and insiders were enriched by a large dividend earned by 

approving an absurd amount of loans. Holding the facts alleged by 

Plaintiffs as true, this was an egregious abuse of private and public 

trust. 

Plaintiffs have a valid NCUDTPA claim. 

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3. California Unfair Competition Law 

Defendants next argue that Plaintiffs failed to bring a proper claim 

under California’s Unfair Competition Law (“UCL”). The Court 

disagrees.

Once again, in diversity cases, courts must apply state substantive 

law and federal procedural rules. Camacho, 993 F.3d at 311. State 

statutes promulgated by the California legislature—like the UCL—are 

substantive. Id. In applying California law, federal district courts in the 

Fifth Circuit are bound by the Supreme Court of California’s decisions. 

Id. And when interpreting a California statute, we use the same 

methods of statutory interpretation used by the Supreme Court of 

California. Id. 

The UCL prohibits “unlawful, unfair or fraudulent” business 

practices. CAL. BUS. & PROF. CODE § 17200. Each of these three 

categories come with their own requirements. Here, Plaintiffs only 

allege (1) “unlawful” and (2) “unfair” conduct. The Court thus addresses 

both. 

i. “Unlawful” Business Practices 

Defendants argue that Plaintiff fails to state a claim for unlawful 

business practices under the UCL. The Court disagrees. 

To be “unlawful,” the UCL requires a plaintiff to allege a business 

practice that resulted in the independent violation of “any law.” See 

Hamilton v. Bank of Blue Valley, 746 F. Supp. 2d 1160, 1180 (E.D. Cal. 

2010) (“The UCL ‘borrows’ violations of other laws and treats them as 

unlawful practices independently actionable.”). Under this broadly 

drawn statute, “[a] business act or practice is unlawful under the [UCL] 

if it violates a rule contained in some other state or federal statute.” 

Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664, 1673 (2017) (citing Rose v.

Bank of Am., N. A., 57 Cal. 4th 390, 396 (2013)). And the predicate laws 

in question can be “civil, criminal, federal, state, or municipal, statutory, 

regulatory, or court-made.” See Sybersound Recs., Inc. v. UAV Corp., 517 

F.3d 1137, 1151 (9th Cir. 2008) (cleaned up). In short, an alleged 

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violation of almost any law—save the law of the jungle—is enough to 

state a claim. 

Defendants assert that Plaintiffs failed to allege a predicate violation 

of another law because a breach-of-contract claim does not provide an 

independent violation of a law unless there is an independent basis to 

make the breach unlawful. See Sybersound Recs., 517 F.3d at 1152. But 

Plaintiffs correctly argue that they properly pleaded a regulatory 

violation—existing independent of their contractual relationship. 

Plaintiffs’ complaint points to a violation of the SBA “lending rule.”

The rule states: “[t]he lender must make a one-time, full disbursement 

of the PPP loan within 10 calendar days of loan approval; for the 

purposes of this rule, a loan is considered approved when the loan is 

assigned a loan number by SBA.” 86 FED. REG. 3692, 3710 (emphasis 

added). 

Because a predicate law can be regulatory14 in nature, Plaintiffs 

maintain a valid UCL claim for unlawful business practices.15 See 

Sybersound Recs., 517 F.3d at 1151. 

 ii. “Unfair” Business Practices

Defendants next argue that Plaintiffs fail to state a claim for an 

unfair business practice under the UCL. They are wrong. 

There is a current three-way split in California appellate courts as to 

what constitutes an “unfair” business practice in the consumer context. 

See Nationwide Biweekly Admin., Inc. v. Superior Court, 9 Cal. 5th 279, 

284 (2020) (acknowledging the split among the appellate courts but 

declining to resolve it). So this Court must make an Erie guess as to 

which test the Supreme Court of California would adopt. 

14 Defendants’ contention that this interim final rule issued by the SBA does not 

qualify as a law under the UCL is incorrect. Administrative rule making is a valid 

predicate law under the UCL. See Sybersound Recs., 517 F.3d at 1151. 

15 The Complaint also alleges a violation of the NCUDTPA—which is a state 

enacted law. See Sandoz Inc., 137 S. Ct. 1664, 1673 (2017). Though not raised by either 

party, this is arguably enough to state a valid and independently actionable UCL 

claim. So, in a strange way, one poorly drawn statute—plagued with vagueness—could 

give rise to another. 

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Erie guesses “treat state intermediate courts’ decisions as the 

strongest indicator of what a state supreme court would do, absent a 

compelling reason to believe that the state supreme court would reject 

the lower courts’ reasoning.” Kelly v. Nichamoff, 868 F.3d 371, 375 (5th 

Cir. 2017). But an Erie guess may also consider the following factors:

(1) decisions of the state supreme court in analogous cases, 

(2) the rationales and analyses underlying state supreme 

court decisions on related issues, (3) dicta by the state 

supreme court, (4) lower state court decisions, (5) the 

general rule on the question, (6) the rulings of courts of 

other states to which state courts look when formulating 

substantive law[,] and (7) other available sources, such as 

treatises and legal commentaries.

Weatherly v. Pershing, L.L.C., 945 F.3d 915, 920 (5th Cir. 2019), cert. 

denied, 141 S. Ct. 236 (2020). 

Many of these factors offer little help—California appellate and 

lower courts are split more than three ways on the issue, the Supreme 

Court of California has so far ducked resolving the issue, and treatises 

acknowledge the split with no resolution. But the “rationales and 

analyses underlying state supreme court decisions on related issues”

highlight how broadly the California Supreme Court is willing to 

interpret this statute. As a result, this Court will turn to the statute’s 

text and utilize “the same methods of statutory interpretation used by 

the California Supreme Court” to interpret the text of the UCL. Id. After 

this, the Court will determine which test has the most fidelity to the text 

of the UCL. 

It does not appear that the Supreme Court of California has any 

consistent principles of statutory interpretation beyond pondering the 

orb of legislative history. See Almond All. of Cal. v. Fish & Game Com., 

No. S275412, 2022 Cal. LEXIS 5573, at *2 (Sep. 21, 2022) (denying 

review of appellate court opinion finding that bumble bees were fish); 

Ferra v. Loews Hollywood Hotel, LLC, 11 Cal. 5th 858, 879 (2021)

(“[C]anons of construction . . . will not be applied so as to defeat the 

underlying legislative intent otherwise determined.”). Indeed, the court 

has embraced the chaotic results of “divining” legislative intent from 

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whatever sources are available—even where it leads to an absurd result 

contrary to the text: 

Careful analysis of a statute to divine legislative intent can 

sometimes yield results that might seem surprising at first 

blush. Courts engaged in this task have interpreted “less”

as “more” and “unlawful” as “lawful” Long ago, the United 

States Supreme Court concluded that the “seas” referenced 

in one statute required no water at all; quite recently, it 

determined that a fish is not a “‘tangible object.’”

These kinds of seemingly illogical outcomes can in fact best 

capture the enacting Legislature’s intent in a variety of 

circumstances. A statute may be construed in a manner 

that goes beyond the literal meaning of its text to avoid an 

absurd result the Legislature could not possibly have 

contemplated.

Almond All. of Cal., 2022 Cal. LEXIS 5573, at *2 (cleaned up). And while 

this Court strongly disagrees with this judicial philosophy, it will do its 

best to implement and impersonate it here.16

The UCL is all about equity. In the Supreme Court of California’s 

decisions applying the UCL, it consistently emphasizes that “the section 

was intentionally framed in its broad, sweeping language, precisely to 

enable judicial tribunals to deal with the innumerable . . . new schemes 

which the fertility of man’s invention would contrive.” Barquis v. 

Merchants Collection Ass’n, 7 Cal. 3d 94, 112 (1972) (cleaned up). This 

means that “[w]hen a scheme is evolved which on its face violates the 

16 Rather than looking to the one thing that the legislature adopted—the text—

Courts who adopt this philosophy find themselves reviewing everything besides that 

which was agreed and voted on. While this method requires judges to pretend that the 

legislature contains some Borg-like consciousness, it usually results in picking and 

choosing whatever fits a judge’s sensibilities. Justice Scalia noted that: 

[L]egislative history has facilitated rather than deterred decisions that 

are based upon the courts’ policy preferences, rather than neutral 

principles of law . . . . In any major piece of legislation, the legislative 

history is extensive, and there is something for everybody. As 

Judge Harold Leventhal used to say, the trick is to look over the heads 

of the crowd and pick out your friends. The variety and specificity of 

result that legislative history can achieve is unparalleled.

Antonin Scalia, A MATTER OF INTERPRETATION 21 (1997). 

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fundamental rules of honesty and fair dealing, a court of equity is not 

impotent to frustrate its consummation because the scheme is an 

original one.” Id. at 112. And “there is a maxim as old as law that there 

can be no right without a remedy, and in searching for a precise 

precedent, an equity court must not lose sight, not only of its power, but 

of its duty to arrive at a just solution of the problem.” Id. The California 

Supreme Court states a court’s role in equity as follows:

[Equity is] much more elastic and capable of expansion and 

extension to new cases than the common law. Its very 

central principles, its foundation upon the eternal verities 

of right and justice, its resting upon the truths of morality 

rather than upon arbitrary customs and rigid dogmas, 

necessarily gave it this character of flexibility, and 

permitted its doctrines to be enlarged so as to embrace new 

cases as they constantly arose. It has, therefore, as an 

essential part of its nature, a capacity of orderly and 

regular growth—a growth not arbitrary, according to the 

will of individual judges—but in the direction of its already 

settled principles. It is ever reaching out and expanding 

its doctrines so as to cover new facts and relations, but still 

without any break or change in the principles or doctrines 

themselves.17

Nationwide Biweekly, 9 Cal. 5th at 300. Indeed, “the flexible equitable 

powers of the modern trial judge derive from the role of the trained and 

experienced chancellor and depend upon skills and wisdom acquired 

through years of study, training and experience which are not 

susceptible of adequate transmission through instructions to a lay jury.”

Id. 

17 “Men should use common words to say uncommon things, but they do the 

reverse. We find them trying to envelop trivial ideas in grand words and to dress their 

very ordinary thoughts in the most extraordinary expressions and the most outlandish, 

artificial, and rarest phrases. Their sentences perpetually stalk about on stilts. [They] 

delight in bombast, and to their writing generally in a grand, puffed-up, unreal, 

hyperbolical, and acrobatic style.” Arthur Schopenhauer, Essays of Schopenhauer –

“On Authorship and Style” 150 (1890). 

To put this passage on equity commonly, judges can do whatever they want when 

sitting in equity so long as the subjective taste of the judges who review their work 

agree with them as well. 

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After engaging with this flexible understanding of the law, the Court 

now turns to the three tests before it—analyzing which one best fits this 

judicial philosophy. 

The first test—adopted by the Supreme Court of California in cases 

between direct competitors—boxes the definition of “unfair” into a small 

corner. This is because it requires the business conduct to violate

antitrust or “the spirit” of antitrust law. See Scripps Clinic v. Superior 

Court, 108 Cal. App. 4th 917, 939 (2003). But the UCL was 

“intentionally framed in its broad, sweeping language, precisely to 

enable judicial tribunals to deal with the innumerable new schemes 

which the fertility of man’s invention would contrive.” Barquis, 7 Cal.

3d at 112. Applying this narrow definition in all consumer cases would 

extinguish numerous actions based on unfair business practices. This 

would allow companies to fly above the great penumbras of the UCL—

enacted to give little clarity and to allow judges maximum leeway to 

channel the spirit of the great muses of justice outside of “arbitrary 

customs and rigid dogmas.” Nationwide Biweekly, 9 Cal. 5th at 300. The 

first test does not apply as it intrudes on the divinely appointed territory 

of the “great chancellor” to determine right and wrong.18 Id. 

Under the second test, courts apply the definition of “unfair” from 

Section 5 of the Federal Trade Commission Act (“FTCA”). See Camacho 

v. Auto. Club of S. Cal., 142 Cal. App. 4th 1394, 1403 (2006). This 

requires the plaintiff to prove three elements: (1) that the consumer 

injury is substantial; (2) that the injury is not outweighed by any 

countervailing benefits or consumers or competition; and (3) that it must 

be an injury that consumers themselves could not reasonably have 

avoided. Id. Such a constricting definition would chain down the “eternal 

verities of right and justice” and allow the “fertility of man’s invention” 

to scheme of ways to escape the divine fate of justice. Barquis, 7 Cal.3d 

at 112. Thus, a rigid application of elements made with mere words 

18 The Court notes that some circuits that apply this test also allow a violation of 

statutory or administrative laws. However, the Court still finds this standard too 

restrictive given the California Supreme Court’s comments on the purpose and 

meaning of the statute. 

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would despoil the lofty cause of the legislature—bringing it earthbound. 

The second test does not apply.19 

Under the third test, an act or practice is “unfair” when it “offends 

an established public policy or when the practice is immoral, unethical, 

oppressive, unscrupulous, or substantially injurious to consumers.”

Smith v. State Farm Mutual Auto. Ins. Co., 93 Cal. App. 4th 700, 719

(2001); see also Ticconi v. Blue Shield of California Life & Health Ins. 

Co., 160 Cal. App. 4th 528, 539 (2008); Candelore v. Tinder, Inc., 19 Cal.

App. 5th 1138, 1156 (2018). This test simply restates the words of the 

UCL. And it remains flexible enough for judges to continue “reaching 

out and expanding its doctrines so as to cover new facts and relations.”

Nationwide Biweekly, 9 Cal. 5th at 300. After all, what is unfair? What 

is injurious? What is unethical? What is public policy? These decisions

are not for ordinary men to make. Nay, they are for “the trained and 

experienced chancellor . . . [with] skills and wisdom acquired through 

years of study, training and experience which are not susceptible of 

adequate transmission through instructions to a lay jury.” Id. And this 

test keeps skyward the ethereal wings of the legislature’s intent, laying 

waste to any “arbitrary customs and rigid dogmas” such as elements, 

factors, or a predictable application of the law over time. Id. 

Having adopted the third test in line with the Supreme Court of 

California’s reasoning, the Court now analyzes Defendants’ alleged 

conduct to see if it was substantially injurious, unethical, or against 

public policy. 

Defendants alleged conduct was against public policy as it violates 

the federally enacted PPP program’s intended benefit. Defendants’

alleged conduct was also injurious. By ignoring loan obligations and 

refusing to disburse the funds the individuals were entitled to, Plaintiffs 

19 The Court further notes that even if the California Supreme Court adopted the 

FTCA test, its elements are still met. Plaintiffs’ injuries are substantial because they 

are deprived of funds they are entitled to and must pay them back. There are no 

countervailing benefits to consumers or competition as this was a government program 

and other lenders were not able to process loans as a result of Capital Plus’s aggressive 

lending practices. And lastly, consumers could not have reasonably avoided the 

mistake as Capital Plus was a credible lender under the PPP program. 

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businesses were harmed, and they remain on the hook for the needed 

payments they never received. See Gibson v. World Sav. & Loan Assn., 

103 Cal. App. 4th 1291, 1306–1307 (2002) (holding that a lender’s failure 

to comply with trust-deed provisions was an unfair business practice). 

Lastly, Defendants’ alleged conduct was also unethical. Scheming to 

keep government fees and shirking statutorily enacted responsibilities

to disburse loans to individuals is unethical and violative of the public 

and private trust even under a narrow textualist reading of the UCL.

Plaintiffs thus state a valid UCL claim for unfair business practices 

against all Defendants. 

CONCLUSION 

Defendants make many arguments in their defense that may be true 

but cannot be considered at this stage in the case. These issues are

appropriately resolved at the summary judgment stage. 

Bound by precedent, Defendants’ Motions to Dismiss (ECF Nos. 31, 

34, 36) are GRANTED IN PART and DENIED IN PART. Plaintiffs’ 

unjust enrichment claims against all Defendants are DISMISSED. And 

to the extent Defendants seek to dismiss any other claims, their motions 

are DENIED. 

SO ORDERED on this 6th day of September 2023.

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