Opinion
Index No. 655047/2020 Motion Seq. No. 001 003
07-27-2023
ALPHA OMEGA ALLIANCE, LLC, Plaintiff, v. IRA LANDSMAN, ANDREW DENISON, MARC EISENMANN, ROY PRINCIPE, TRIAD HEALTH, LLC, d/b/a MEDIIRARx, ECO PHARMACY, LLC, ECOPHARM, LLC, d/b/a ECO PHARM, LLC, Defendants.
Unpublished Opinion
PRESENT: HON. VERNA L. SAUNDERS, JSC Justice
DECISION + ORDER ON MOTION
HON. VERNA L. SAUNDERS, JSC JUSTICE
The following e-filed documents, listed by NYSCEF document number (Motion 001) 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 33, 34 were read on this motion to/for DISMISS .
The following e-filed documents, listed by NYSCEF document number (Motion 003) 29, 30, 31, 32, 35 were read on this motion to/for LEAVE TO FILE .
Plaintiff initiated this case claiming fraudulent inducement and conspiracy to commit fraudulent inducement for which plaintiff seeks damages; a declaratory judgment that the subject contracts are null and void; and injunctive relief prohibiting interference in its business operations. I
Under Mot. Seq. 001, defendants Ira Landsman ("Landsman"), Andrew Denison ("Denison"), Marc Eisenmann ("Eisenmann"), Roy Principe ("Principe"), Triad Health d/b/a MediraRx ("MediraRx"), Eco Pharmacy, LLC ("Eco Pharmacy"), and Ecopharm, LLC ("Eco Pharm"), (collectively, "defendants" or "movants") move for an order dismissing plaintiff's first amended complaint in its entirety.
Under Mot. Seq. 003, plaintiff Alpha Omega Alliance, LLC ("Alpha Omega") "cross-\moves" for leave to file a second amended complaint and within, oppose defendants' motion to dismiss. Defendants oppose plaintiffs cross-motion to which plaintiff files a reply.
Under Mot. Seq. 002, plaintiff sought and was granted an extension of time to oppose Mot Seq. 001. Plaintiff thereafter "cross-moved" for relief seeking leave to file a second amended complaint (Mot. Seq. 003) and opposed defendants' motion to dismiss (Mot. Seq. 001). (See NYSCEF Doc. No. 28, Decision and Order, J. Saunders.)
Defendants assert the following facts in support of their motion. In 2019, plaintiff and defendants MediraRx and Eco Pharmacy were in a contractual relationship whereby defendants were to provide certain services in connection with plaintiffs participation in a federal discount drug pricing program known as the "340B" program. According to movants, plaintiff unilaterally terminated the contracts between it and defendants MediraRx and Eco Pharmacy without complying with the contract's notice and cure provisions, though plaintiff maintains that the contracts were terminated for cause. Movant argues that the fraudulent inducement claims herein are attempts by plaintiff to "immunize" its improper termination of the contracts.
Essentially, plaintiffs position is that defendant Ira Landsman, purportedly speaking as a representative of MediraRx, made various representations about the 340B program and various services provided by MediraRx and Eco Pharmacy. Reliance on these representations allegedly convinced plaintiff to enter into the agreements at issue here.
Defendants move for dismissal on three grounds: 1) that the court lacks personal jurisdiction over defendants Eisenmann, Principe, Eco Pharmacy, and Eco Pharm as these । defendants are located in and reside in Florida and have no connections to New York; 2) that | plaintiff has failed to plead justifiable reliance; and 3) as to defendants Principe and Eco Pharm, that no specific factual allegations are pleaded as against them.
Plaintiff opposes the motion arguing that the court has jurisdiction over Eisenmann, Principe, Eco Pharmacy, and Eco Pharm under both the conspiracy theory of personal jurisdiction and, as against the individually-named defendants, under the alter ego theory of personal jurisdiction. Plaintiff further argues that as to the heightened standard of due diligence of fraudulent misrepresentations, same only applies to sophisticated parties, which plaintiffs [ former CEO was not; and finally, that the conspiracy claim is valid as the underlying fraudulent inducement claim is valid. Plaintiff also seeks leave to file a second amended complaint.
In determining a motion to dismiss pursuant to CPLR 3211, "the pleading is to be afforded a liberal construction. [The court must] accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." (Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994] [internal citations omitted].)
Leave to amend a pleading pursuant to CPLR § 3025 "shall be freely given," in the absence of prejudice or surprise (see e.g, Thompson v Cooper, 24 A.D.3d 203, 205 [1st Dept 2005]; Zaid Theatre Corp, v Sona Realty Co., 18 A.D.3d 352, 354 [1st Dept 2005]). CPLR 3025 requires "[a]ny motion to amend or supplement pleadings [to] be accompanied by the proposed amended or supplemental pleading clearly showing the changes or additions to be made to the pleading." In order to conserve judicial resources, examination of the underlying merits of the proposed amendment is mandated (Thompson, 24 A.D.3d at 205; Zaid, 18 A.D.3d at 355). Leave will be denied where the proposed pleading fails to state a cause of action or is palpably insufficient as a matter of law (see Aerolineas Galapagos, S.A. v Sundowner Alexandria, 74 A.D.3d 652 [1st Dept 2010]; Thompson, 24 A.D.3d at 205).
Here, plaintiff avers that jurisdiction may be had over the moving defendants on two specific grounds: the conspiracy theory and the alter ego theory. Plaintiff asserts that defendants engaged in a conspiracy to commit the tortious act of fraud to induce it to enter into the subject contracts.
Plaintiff must present sufficient facts to demonstrate jurisdiction.
To assert a basis for jurisdiction under the alter ego theory, "generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiffs injury." (Sutton 58 Assocs. LLC v Pilevsky, 189 A.D.3d 726, 729 [1st Dept 2020], quoting Cortlandt St. Recovery Corp, v Bonderman, 31 N.Y.3d 30, 47 [2018]). Plaintiff must allege sufficient facts to "satisfy the 'heavy burden' necessary to pierce the corporate veil or to establish an alter ego relationship." (Etex Apparel, Inc. v Tractor Inti. Corp., 83 A.D.3d 587, 587 [1st Dept 2011]).
In the proposed second amended complaint, plaintiff alleges that the individual defendants, to wit: Eisenmann and Principe, are the alter egos of MediraRx. This assertion is not supported by specific facts but rather allegations made upon information and belief that Eisenmann and Principe use MediraRx as a shell company in that they failed to implement formalities of the corporate existence, removed funds for personal use, used common office space, telephone, etc., and engaged in transactions which were not at arm's length, among other allegations. These allegations however do little more than regurgitate the rule set out in Wm. Passalacqua Bldrs., Inc. v Resnick Devs. S. Inc., 933 F.2d 131, 139 (2d Circ 1991) and lack supporting facts. In fact, there is no factual support in the record as developed by these motions for any of the conclusory statements made herein. This, without more, is insufficient to grant an exercise of personal jurisdiction on the basis of alter ego.
Alternatively, plaintiff seeks to establish jurisdiction over Eisenmann, Principe, Eco Pharmacy, and Eco Pharm pursuant to CPLR 302(a)(2). Plaintiff therefore must demonstrate that the above defendants were involved in a conspiracy in the commission of tortious acts within New York State. While the relationship between the parties must be evaluated to ascertain awareness and/or direction and control of the alleged in-state versus out-of-state coconspirators, (see Lawati v Montague Morgan Slade Ltd., 102 A.D.3d 427, 428 [1st Dept 2013]), an analysis of the alleged tortious act here must first be conducted.
"The elements of a claim for fraudulent inducement are 'a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury'" (United States Life Ins. Co. in NY v Horowitz, 192 A.D.3d 613, 613 [1st Dept 2021], quoting Lama Holding Co. v Smith Barney, 88 N.Y.2d413,421 [1996].)
Here, the tortious act alleged is fraud in the contract inducement and plaintiff claims that the movants engaged in a conspiracy in the commission of this act. Specifically, plaintiff claims that defendant Landsman, a purported 340B third-party administrator, offered to assist plaintiffs former CEO, Monique D. Brown Wellons ("Wellons"), in complying with the 340B federal program requirements such that Wellons contracted on behalf of plaintiff to execute a third-party administrator contract with MediraRx and a contract with Eco Pharmacy. Wellons purportedly relied upon Landsman's statements that Landsman was experienced in administering and managing the various procedural and bureaucratic policies and regulations associated with the 340B program and these representations persuaded her to enter into the subject contracts. Plaintiff contends that Wellons was not sophisticated and thus, relied on Landsman's statements to her detriment. However, these facts are insufficient to sustain a fraud in the inducement claim insofar as the bald allegation that plaintiffs former CEO Wellons lacked knowledge of complex federal regulations such that she was unsophisticated in her business dealings with defendants is belied by her undisputed fifteen-year tenure as an executive of the company. Wellons claimed dependence on information she elected not to vet, and without seeking the aid of in-house or retained legal or financial advisors cannot be said to be defendants' fault. An assessment of fact versus opinion, puffery, or other marketing techniques is indeed one of the functions of an executive who reasonably and routinely avails itself of experts in order to obtain reliable information to protect its organization in fulfillment of its fiduciary functions. When that does not occur, the burden of liability, if any, cannot be said to fall upon other parties. While plaintiff asserts that there was a scheme afoot to defraud plaintiff and other similar non-profit organizations, this bald assertion, without more, is insufficient to demonstrate an inability to act with ordinary care to consult knowledgeable disinterested persons and act with due diligence. Thus, plaintiffs allegations here that Wellons relied on the statements of Landsman as she was not a sophisticated party fails to show that such reliance was justified given the above and thus, fails to support the conspiracy claim which jurisdiction would then be based upon (see United Natural Foods, Inc. v Goldman Sachs Group, 190 A.D.3d 578, 579 [1st Dept 2021]; UST Private Equity Investors Fund, Inc. v Salomon Smith Barney, 288 A.D.2d 87, 88 [1st Dept 2001]). Furthermore, an examination of the allegations in the second amended complaint indicate that the plaintiff has failed to cure the deficiencies outlined above (see State of N.Y.ex rel. Willcox v Credit Suisse Sec. (USA) LLC, 210 A.D.3d 609, 610 [1st Dept 2022], citing Kliebert v McKoan, 228 A.D.2d 232, 233 [1st Dept 1996]). Thus, leave to amend the complaint is denied.
All other arguments have been considered and are either without merit or need not be addressed given the foregoing. Accordingly, it is hereby
ORDERED defendants' motion to dismiss the complaint is hereby granted; and it is further ORDERED plaintiffs cross-motion to amend the complaint is denied; and it is further
ORDERED that, within twenty (20) days after this decision and order is uploaded to NYSCEF, counsel for defendants shall serve a copy of this decision and order, with notice of entry, upon plaintiff.
This constitutes the decision and order of this court.