Opinion
2:21-CV-00925-CCW-CRE
07-13-2023
JAMES R. BERKLEY, 3540 WASHINGTON, LLC, Plaintiffs, v. MATINA REALTY, LLC, FOUNTAIN LIFE MANAGEMENT, LLC, FOUNTAIN LIFE HOLDINGS, LLC, Defendants,
REPORT AND RECOMMENDATION
CYNTHIA REED EDDY, UNITED STATES MAGISTRATE JUDGE.
I. RECOMMENDATION
This civil action is brought by Plaintiffs, James R. Berkley and 3540 Washington, LLC (collectively “Plaintiffs”), against Defendants, Matina Realty, LLC (“Matina”), Fountain Life Management, LLC, and Fountain Life Holdings, LLC (collectively “Fountain Life”) for, inter alia, violations of Pennsylvania Uniform Voidable Transactions Act, 12 Pa. C.S.A. §§5104(a)(1), 5104(a)(2), 5105(a). The Court has subject matter jurisdiction over this matter under 28 U.S.C. § 1332(a), as complete diversity exists between the parties and the amount in controversy exceeds $75,000.
Presently before the Court is Fountain Life Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint (“SAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (ECF No. 80). The motion is fully briefed and ripe for consideration. (ECF Nos. 81, 84, 85, 89).
For the reasons that follow, it is respectfully recommended that Fountain Life Defendants' Motion (ECF No. 80) be denied.
II. REPORT
All facts are taken from the SAC (ECF No. 79) unless otherwise noted.
Defendant Matina is the owner of certain commercial realty located at 3540 Washington Road, Canonsburg, PA 15317 and 9000 Perry Highway, Pittsburgh, Pennsylvania 15237 (collectively the “Property”). (ECF No. 79, at ¶12). Prior to the events giving rise to this lawsuit, Matina, as a landlord, leased several portions of the Property to Legacy Medical Centers, LLC (“Legacy”), as tenant under several commercial lease agreements between Matina and Legacy. Id. at ¶13. Plaintiffs allege that both Matina and Legacy are owned by Dr. Matthew Burnett, a chiropractor practicing in the greater Pittsburgh area and provided chiropractic and physical medicine services at the leased premises. Id. at ¶¶15-16. In 2020, Legacy entered into a business relationship with Fountain Life Defendants transferring ownership from Legacy to Fountain Life Defendants and a merger of Legacy into Fountain Life. Id. at ¶¶20-21. Dr. Burnett joined Fountain Life as its Chief Operating Officer. Id. at ¶¶22, 31.
In late 2020, Legacy no longer occupied the leased premises and stopped paying rent under the Leases while Fountain Life began occupying the leased premises and paying rent under the Leases. Id. at ¶¶25-30. Plaintiffs contend “Fountain Life is the alter ego of and/or successor company to Legacy.” Id. at ¶37. To that end, Plaintiffs maintain that “Fountain life assumed the assets and liabilities of Legacy, changed all of the signage on the buildings to indicate that it was not occupying the leased premises at the Property, paid the monthly rent under the Leases in a timely manner, continued with the same ownership, management, personnel, physical locations, assets, and general business operation, and issued a written notice via its website, social media accounts and elsewhere that it had assumed the business and operations of Legacy at the same location.” Id. at ¶40.
In early 2021, Plaintiffs and Matina discussed and negotiated a framework agreement for the purchase and sale of the Property through oral and written communications and drafted a term sheet. Id. at ¶49. Plaintiffs maintain that Fountain Life's tenancy at the Property was a “basic element of the transaction” because it was the key tenant at the Property and Fountain Life's financial information “would be critical for [Plaintiffs'] due diligence analysis and financing.” Id. at ¶52. On March 25, 2021, Plaintiffs and Matina reached an agreement and executed a letter of intent (“LOI”). Id. at ¶¶54, 55, 68. The LOI identifies the Buyer as “James Berkley or Nominee” and sets the purchase price at $6,275,000.00. Id. at ¶56. The LOI recognizes Fountain Life as a tenant at the Property under the Leases. Id. at ¶57. The LOI does not refer to Legacy as a tenant. Id. The LOI provides that Matina would be responsible for paying all transfer taxes and closing costs. Id. at ¶58. It further specifies certain due diligence information that Matina agreed to provide to Plaintiffs, including “all information in [Matina's] possession or control regarding the Property, including but not limited to . . . financial statements from the new tenant, and the guarantors and other financial information regarding the building.” Id. at ¶¶59-60. The LOI provides Plaintiffs with forty-five days after receiving the information from Matina to conduct and complete all due diligence. Id. at ¶61. Additionally, the LOI indicates that Plaintiffs' purchase of the Property was contingent upon Plaintiffs' receipt of financing. Id. at ¶62. The LOI provides that if Fountain Life extended its lease, the lease term would be for no shorter than a five-year period at a fair market rental price. Id. at ¶63.
According to Plaintiffs, the parties acknowledged that the LOI addresses certain terms of the transaction but not all essential terms and that the parties agreed to negotiate the remaining essential terms. Id. at ¶64. Additionally, Plaintiffs assert that because Plaintiffs would incur substantial expense in connection with completing the transaction, and in consideration, Matina agreed to withdraw the Property from the market and negotiate the purchase and sale to completion until either mutual revocation from the LOI or written disapproval of the sale by Plaintiffs during the inspection period. Id. at ¶65. Specifically, the LOI provided:
THIS LETTER IS INTENDED ONLY TO EXPRESS THE INTEREST OF THE PARTIES TO PURCHASE AND SELL THE PROPERTY. EXCEPT AS HEREINAFTER SET FORTH, NEITHER BUYER NOR SELLER SHALL BE LEGALLY OBLIGATED TO PURCHASE OR SELL THE PROPERTY UNLESS AND UNTIL THE CONTRACT IS EXECUTED BY THE PARTIES. THE PARTIES ACKNOWLEDGE THAT THIS NON-BINDING LETTER OF INTEREST DOES NOT ADDRESS ALL ESSENTIAL TERMS OF THE CONTRACT AND THAT SUCH ESSENTIAL TERMS WILL BE THE SUBJECT OF THE FURTHER NEGOTIATION. NOTWITHSTANDING THE FOREGOING, THE FOLLOWING PROVISIONS ARE INTENDED BY THE PARTIES TO BE A LEGALLY BINDING AGREEMENT AND ARE MADE IN CONSIDERATION OF ONE ANOTHER: SELLER ACKNOWLEDGES THAT BUYER HAS INCURRED AND WILL INCUR SUBSTANTIAL EXPENSE IN PERFORMING ITS PRELIMINARY UNDERWRITING AND INVESTIGATIONS CONCERNING THE PROPERTY. IN CONSIDERATION OF THIS ACKNOWLEDGMENT, SELLER HEREBY AGREES NOT TO SOLICIT, ENTERTAIN OR ACCEPT ANY FORMAL OR INFORMAL OFFERS TO PURCHASE THE PROPERTY, OR ANY PART THEREOF, UNTIL THE FIRST TO OCCUR OF (A) MUTUAL WRITTEN REVOCATION OF THIS LETTER BY BOTH BUYER AND SELLER; OR (B) WRITTEN DISAPPROVAL OF THE PURCHASE OF THE PROPERTY BY PURCHASER DURING THE INSPECTIONS PERIOD.Id. at ¶66.
Following the execution of the LOI, the parties began drafting and exchanging various versions of a purchase and sale agreement consistent with the LOI. Id. at ¶71. During April 2021, the parties negotiated and agreed on the terms of a definitive Purchase and Sale Agreement (“P&S Agreement”) and identifies the purchaser as “3540 Washington, LLC or its permitted assigns.” Id. at ¶¶72-73. On April 21, 2021, after exchanging various draft purchase and sale agreements, Plaintiffs claim that the parties agreed on all relevant terms and that Matina's agent indicated that the P&S Agreement “looked good” with the exception of one term related to the Fountain Life lease and that when Plaintiffs made those changes, Matina's agent would “get [it] signed ASAP.” Id. at ¶¶74-82. The next day, on April 22, 2021, Plaintiffs' attorney emailed Matina's agent a copy of what they claim is the final, definitive agreed-upon version of the P&S Agreement (version 5) accepting Matina's requested changes. Id. at ¶¶83-85. On April 23, 2021, however, Matina's agent called Plaintiffs' agent to inform them that Matina was no longer willing to sell the Property to Plaintiffs, was no longer willing to sign the P&S Agreement, and was unilaterally terminating and abandoning the deal. Id. at ¶98. According to Plaintiffs, Dr. Burnett was at a conference in Florida and had spoken with a broker who convinced Dr. Burnett that the agreed-upon sales price was too low and believed he should sell the Property for more money. Id. at ¶99. Matina did not execute the P&S agreement and ceased all communications with Plaintiffs. Id. at ¶¶113-114.
Thereafter, on May 11, 2021, Matina emailed Plaintiffs indicating that it would continue with negotiations for the proposed sale and proposed negotiation topics with Plaintiffs, and in an effort to resolve the sale issues and avoid litigation, Plaintiffs agreed to enter into compromise negotiations with Matina. Id. at ¶¶115-119. On May 17, 2021, Matina's counsel sent a revised version of the P&S Agreement (version 6) and on May 20, 2021, Plaintiffs' counsel sent a revised version 6. Id. at ¶¶121-122. On May 28, 3021, Matina's counsel sent Plaintiffs a new revised version of the P&S Agreement which Plaintiffs' counsel rejected. Id. at ¶¶123-124. According to Plaintiffs, “Matina now claimed that it would not provide certified profit and loss statements or financial information from Fountain Life,” and indicated there “were no formal written assignments of the Leases from Legacy to Matina.” Id. at ¶127. On June 11, 2021, Plaintiffs' counsel emailed a different revised version of the P& S Agreement. Id. at ¶¶129-130.
During this time, Matina's counsel inquired from Cindy Griffith, Fountain Life's Controller, about obtaining financial information for Fountain Life. Id. at ¶132. On June 2, 2021, Ms. Griffith provided a profit and loss state for Fountain Life Management, LLC and provided a profit and loss statement for Fountain Life Holdings, LLC on June 14, 2021. Id. at ¶133. Thereafter, counsel, along with Mr. Burnett, engaged in discussions about financial information from Fountain Life. Id. at ¶¶ 134-136.
On June 17, 2021, Matina's counsel emailed Ms. Griffith inquiring about the tax and financial information from Legacy. Id. at ¶137.
Plaintiffs claim “Fountain Life acted as the agent and alter ego [f]or Legacy and undeniably occupied the leased premises at the Property since in or around late 2020. Moreover, Legacy and Fountain Life undeniably entered into a change of control transaction/transfer and thus an assignment and Transfer under the Lease.” Id. at ¶144. Thus, Plaintiffs allege that Fountain Life “is the true tenant under the Leases, not Legacy, and Fountian (sic) Life assumed and is bound by all the terms of this (sic) Leases, including, but not limited to, payment of rent throughout the terms of the Leases.” Id. at ¶145.
On June 22, 2021, the parties and counsel had a conference call to try to work things out. Id. at ¶¶149-150. Negotiations failed. Id. at ¶¶151-153. Ultimately, litigation ensued on July 16, 2021. (ECF No. 1). Plaintiffs assert “[u]pon information and belief, at some point following commencement of this litigation, and with full knowledge of Plaintiffs' claims by Fountain Life, Matina agreed to Fountain Life's voluntary termination of Fountain Life's obligations under the assigned Leases, including, but not limited to, payment of rent by Fountain Life to Matina throughout the terms of the Leases.” Id. at ¶162. Upon further information and belief, Plaintiffs maintain that “the assigned Leases were terminated by party agreement,” that “Matina did not receive [a] reasonably equivalent value in exchange for the termination of Fountain Life's obligations under the assigned Leases,” and that “Legacy has not performed its obligations under the terms of the Leases - including, but not limited to, payment of Minimum Rent - and Matina has not sought to enforce the terms of the Leases against Legacy. Additionally, upon information and belief, Legacy is unable to perform its obligations under the terms of the Leases, including payment of Minimum Rent. Suffice is to say, Legacy is a far less creditworthy tenant than Fountain Life.” Id. at ¶¶165-167.
Plaintiffs filed its SAC on December 28, 2022. (ECF No. 79). Counts I-IX are asserted against Defendant Matina. Id. Count X assert a cause of action against all Defendants for violation of Pennsylvania's Uniform Voidable Transactions Act, 12 Pa. C.S.A. §§5104(a)(1), 5104(a)(2), and 5105(a). Id. at ¶¶211-229. Based on the same, Plaintiffs seek a judgment avoiding and preserving the transfers of the assigned Leases, directing that the transfers of the assigned Leases be set aside, recovering the transfers or the value thereof from Defendants, attorney's fees and costs, and punitive damages with respect to the transfer of the assigned Leases. Id. at ¶229 and Requested Relief at pp. 47-48. Fountain Life Defendants filed a Motion to Dismiss Count X. (ECF No. 80).
Counts I-IX of the SAC allege the following causes of action: Count I-Specific Performance; Count II -Declaratory Relief; Count III-Breach of Contract; Count IV-Breach of Duty to Negotiate in Good Faith; Count V-Misrepresentation; Count VI-Fraudulent Concealment; Count VII-Fraudulent Non-disclosure; Count VIII-Promissory Estoppel; and Count IX-Unjust Enrichment. (ECF No. 79).
B. Standard of Review
1. Federal Rule of Civil Procedure 12(b)(6)
The applicable inquiry under Federal Rule of Civil Procedure 12(b)(6) is well settled. Under Federal Rule of Civil Procedure 8, a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 12(b)(6) provides that a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). This “‘does not impose a probability requirement at the pleading stage,' but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary elements.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Bell Atlantic Corp., 550 U.S. at 556). All inferences are to be construed in the light most favorable to the non-moving party but the court need not accept as true “unsupported conclusions and unwarranted inferences,” Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000), or the plaintiffs “bald assertions” or “legal conclusions.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).
Although a complaint does not need detailed factual allegations to survive a Fed.R.Civ.P. 12(b)(6) motion, a complaint must provide more than labels and conclusions. Bell Atlantic Corp., 550 U.S. at 555. A “formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). “Factual allegations must be enough to raise a right to relief above the speculative level” and “sufficient to state a claim for relief that is plausible on its face.” Bell Atlantic Corp., 550 U.S. at 555. Facial plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678 (citing Bell Atlantic Corp., 550 U.S. at 556).
The plausibility standard is not akin to a “probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.... Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.'” Id. (quoting Bell Atlantic Corp., 550 U.S. at 556) (internal citations omitted). This plausibility standard, however, “does not impose a heightened pleading requirement.” Id. In other words, “courts cannot inject evidentiary issues into the plausibility determination.” Id. The Third Circuit has also made it clear that “at least for purposes of pleading sufficiency, a complaint need not establish a prima facie case in order to survive a motion to dismiss” because a “prima facie case is an evidentiary standard, not a pleading requirement and hence is not proper measure of whether a complaint fails to state a claim.” Connelly v. Lane Const. Corp., 809 F.3d 780, 789 (3d Cir. 2016) (internal quotations and citations omitted). Instead, a plaintiff should plead “enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary elements.” Id. (quoting Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008)).
When considering a Rule 12(b)(6) motion, the court's role is limited to determining whether a plaintiff is entitled to offer evidence in support of his claims. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The court does not consider whether a plaintiff will ultimately prevail. Id. A defendant bears the burden of establishing that a plaintiff's complaint fails to state a claim. Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).
As a general rule, if a court “consider[s] matters extraneous to the pleadings” on a motion for judgment on the pleadings, the motion must be converted into one for summary judgment. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997). However, a court may consider (1) exhibits attached to the complaint, (2) matters of public record, and (3) all documents integral to or explicitly relied on in the complaint, even if they are not attached thereto, without converting the motion into one for summary judgment. Mele v. Fed. Rsrv. Bank of New York, 359 F.3d 251, 256 (3d Cir. 2004) n. 5 (3d Cir. 2004); Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
C. Discussion
1. Pennsylvania Uniform Voidable Transactions Act, 12 Pa. C.S.A. §5101, et seq.
The only count of the SAC against Fountain Life is Count X. (ECF No. 79, pp. 43-46). Count X alleges a violation of Pennsylvania Uniform Voidable Transactions Act (“PUVTA”), 12 Pa. C.S.A. §§5104(a)(1), 5104(a)(2), and 5405(a). Id. at ¶¶211-229. Fountain Life Defendants assert that Plaintiffs' SAC fails to state a claim against them under the PUVTA. (ECF Nos. 80, 81).
Count X is also filed against Matina. (ECF No. 79, p. 43). Matina has filed an Answer to the SAC. (ECF No. 82).
Section 5104(a) of the PUVTA provides:
A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business or a transaction
for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.12 Pa. C.S.A. §5104(a)(1) and (a)(2). In determining actual intent under subsection (a)(1), a court may consider, inter alia, “(1) the transfer or obligation was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer or obligation was disclosed or concealed; (4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) the transfer was of substantially all the debtor's assets; (6) the debtor absconded; (7) the debtor removed or concealed assets; (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.” 12 Pa. C.S.A. §5104(b).
Additionally, §5105(a) provides:
A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.12 Pa. C.S.A. §5105(a). A creditor seeking relief under any of the subsections above has the burden of proof by a preponderance of the evidence. 12 Pa. C.S.A. §§5104(c), 5105(b).
Fountain Life Defendants assert that Count X, brought pursuant to the PUVTA, should be dismissed because: 1) Plaintiffs cannot establish the existence of a “transfer” within the meaning of the PUVTA; and 2) Plaintiffs have failed to establish that Matina is a “debtor” within the meaning of the PUTVA. (ECF No. 80, ¶¶5-11). The undersigned will address each of these arguments.
a. Transfer
Fountain Life Defendants argue Plaintiffs have failed to allege facts constituting a “transfer.” (ECF No. 81, pp. 4-9). The PUVTA defines “transfer” as “[e]very mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset. The term includes payment of money, release, lease, license and creation of a lien or other encumbrance.” 12 Pa. C.S.A. §5101(b). The term “asset” is defined as “property of a debtor” and the term “property” is defined as “anything that may be the subject of ownership.” Id.
Specifically, Fountain Life Defendants allege that Plaintiffs cannot show a transfer under the PUVTA occurred because the actual lessee under the Leases, Legacy, was and remains the actual tenant and there is no allegation that any lease payment has been unpaid; and, therefore, Matina has not received a reasonably equivalent value in exchange for the transfer. (ECF No. 80, at ¶8). To that end, Fountain Life Defendants maintain that any allegations in the SAC (ECF No. 79, ¶167) to the contrary are based on “information and belief” without any factual basis to support the same. (ECF No. 81, p. 5). “In short, [Fountain Life submits] Plaintiffs cannot show that a ‘transfer' was fraudulent or voidable simply through the exchange of one paying tenant for another.” Id.
In opposition, Plaintiffs assert the SAC facts showing a plausible basis to a transfer occurred within the meaning of the PUVTA referring specifically to the SAC allegations that are based on information and belief. (ECF No. 84, pp. 2-3, 9). To that end, Plaintiffs maintain that they are entitled to plead allegations based on information and belief “because the facts concerning rent payments and creditworthiness are [particularly] within Matina's possession.” (ECF No. 84, p. 9). The undersigned agrees that Plaintiffs may plead based on information and belief.. Under Third Circuit pleading standards, “pleading upon information and belief is permissible ‘[w]here it can be shown that the requisite factual information is peculiarly within the defendant's knowledge or control'-so long as there are no ‘boilerplate and conclusory allegations' and ‘[p]laintiffs ... accompany their legal theory with factual allegations that make their theoretically viable claim plausible.' ” McDermott v. Clondalkin Grp., Inc., 649 Fed.Appx. 263, 267-68 (3d Cir. 2016) (quoting In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002)) (alterations and ellipsis in the original).
In this case, there is no dispute that Plaintiffs do not have access the Fountain Life Defendants' financial information. Furthermore, as set forth above, the SAC provides: “[u]pon information and belief, at some point following commencement of this litigation, and with full knowledge of Plaintiffs' claims by Fountain Life, Matina agreed to Fountain Life's voluntary termination of Fountain Life's obligations under the assigned Leases, including, but not limited to, payment of rent by Fountain Life to Matina throughout the terms of the Leases.” Id. at ¶162. Upon further information and belief, the SAC alleges that “the assigned Leases were terminated by party agreement,” that “Matina did not receive [a] reasonably equivalent value in exchange for the termination of Fountain Life's obligations under the assigned Leases,” and that “Legacy has not performed its obligations under the terms of the Leases - including, but not limited to, payment of Minimum Rent - and Matina has not sought to enforce the terms of the Leases against Legacy. Additionally, upon information and belief, Legacy is unable to perform its obligations under the terms of the Leases, including payment of Minimum Rent. Suffice is to say, Legacy is a far less creditworthy tenant than Fountain Life.” Id. at ¶¶165-167.
Plaintiffs rely on these allegation to assert their legal theory that the Fountain Life Defendants violated the PUVTA. See, id., at ¶¶ 211-229. For example, Plaintiffs assert in the SAC, inter alia, that the “assigned Leases constitute interest in assets and their voluntary termination constitutes transfers by Matina within the meaning of the PUVTA.. ..[because] Matina transferred its interests in the assigned Leases to Fountain Life by virtue of the voluntary termination and release of Fountain Life's obligations under the assigned Leases.” (ECF No. 79, ¶¶217-218).
After careful review of the same, the undersigned finds Plaintiffs properly set forth pleadings “based on information and belief” and that these allegations are sufficient at this stage to plead facts showing a plausible basis for a “transfer” within the meaning of the PUVTA.Giving Plaintiffs the benefit of all reasonable inferences, the allegations of the SAC go beyond mere legal conclusions regurgitating the PUVTA and explain how the alleged “transfer” occurred and how the PUVTA was violated. Fountain Life Defendants' arguments regarding the legal relationship between Fountain Life and Legacy set forth in their Brief in Support and their Reply Brief are more properly considered at the summary judgment stage rather than the motion to dismiss stage, where the court must consider all well-pleaded allegations as true in making its determination. See, Ashcroft, 556 U.S. at 678 (quoting Bell Atlantic Corp., 550 U.S. at 570). At this juncture, it is proper to allow for a fully developed record. Therefore, it is respectfully recommended that Fountain Life Defendants' Motion to Dismiss based on the failure to assert a “transfer” within the meaning of the PUVTA be denied.
Moreover, undersigned notes that Plaintiffs have requested the financial information to support the same from Matina, however, to date Matina has failed to produce said financial information. (ECF No. 84, p. 9 n. 2).
b. Debtor
Plaintiffs allege that Matina is a debtor within the meaning of the PUVTA. (ECF No. 79, ¶217). Fountain Life Defendants argue that Plaintiffs have failed to state a claim that Matina is a “debtor” because Plaintiffs seek specific performance of real property. (ECF No. 81, pp. 9-10). Specifically, Fountain Life Defendants submit that the equitable relief sought in Count I (specific performance) and Count II (declaratory relief) do not meet the definition of a “claim” because “if Plaintiffs obtain specific performance, they get to buy the real property from Matina. They do not get to separately collect against that real property via a money judgment.” (ECF No. 81, p. 9-10). After review, the Court disagrees with the Fountain Life Defendants.
The PUVTA defines “debtor” as “[a] person that is liable on a claim.” 12 Pa. C.S.A. §5101(b). A “claim” is defined as “a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.” Id. Thus, a “claim” can be for, inter alia, “unliquidated,” “contingent,” or “equitable” Id. Given the plain definition of a claim, the undersigned is not persuaded by Fountain Life Defendants' argument in this regard.
Fountain Life Defendants further assert that to the extent the Matina is a debtor, such assertions are premature and unripe since it is “unknown whether Plaintiffs will have a claim for specific performance, damages, or neither.” (ECF No. 81, p. 10; ECF No. 85, pp. 1-5). In response, Plaintiffs argue that “Fountain Life ignores the fact that Plaintiffs seek the recovery of money damages additionally or in the alternative to specific performance.” (ECF No. 84, p. 17; ECF No. 89, pp. 1-3). Pleading in the alternative is permitted and does not require dismissal at this early juncture of the proceeding. See, F.R.C.P. 8(a)(3) (allowing for pleading in the alternative); F.R.C.P. 8(d)(2)-(3)(permitting alternative statements of a claim, regardless of consistency); and F.R.C.P. 57 (which provides that “[t]he existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate.”). Accordingly, dismissal is not warranted on this basis at this stage and the case should proceed to the discovery phase.
Consequently, it is respectfully recommended that Fountain Life Defendants' Motion to Dismiss be denied in this respect as well.
D. Conclusion
Therefore, pursuant to 28 U.S.C. § 636(b)(1)(B) and (C), Federal Rule of Civil Procedure 72, and the Local Rules for Magistrates, the parties have until July 27, 2023 to file objections to this report and recommendation. Unless otherwise ordered by the District Judge, responses to objections are due fourteen days after the service of the objections. Failure to file timely objections will constitute a waiver of any appellate rights. Brightwell v. Lehman, 637 F.3d 187, 193 n.7 (3d Cir. 2011).