Barr v. MFI Management, Inc.
| Decision Date | 25 March 2019 |
| Docket Number | X08CV175017309 |
| Court | Connecticut Superior Court |
| Parties | Dean Barr v. MFI Management, Inc. et al. |
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Lee, Charles T., J.
This action arises out of a prior business relationship between the plaintiff Dean Barr and the defendants, which are various business entities and affiliated individuals who had formerly invested in a Connecticut-based private equity fund Foundation Capital Partners, LLC (Foundation), managed in part by the plaintiff. The defendants have presently moved to dismiss several, but not all, counts of the plaintiff’s complaint as well as all of the plaintiff’s claims against two of the defendants, Messrs. Dyra and Lazer Milstein. In the alternative, the defendants move to stay the present matter pending resolution of a current appeal before the United States Court of Appeals for the Second Circuit of the district court’s decision in a related federal matter FIH, LLC v. Foundation Capital Partners, LLC, District Court, Docket No. 3:15-cv-785 (JBA) (D.Conn. January 31, 2018) (the federal action).
For the reasons discussed below, the defendants’ motion to stay is denied. The defendants’ motion to dismiss is granted with respect to paragraph 83(2) of count one of the plaintiff’s complaint, alleging defamation; paragraph 83(2) as incorporated in count two of the complaint, alleging defamation per se; and the entirety of count four of the complaint, alleging negligent infliction of emotional distress. The defendants’ motion to dismiss is further granted with respect to counts fifteen and sixteen of the complaint, alleging vexatious litigation and abuse of process, as well as counts seventeen, eighteen, and nineteen alleging violations of the Connecticut Uniform Securities Act, General Statutes § § 36b-3 et seq., pursuant to the plaintiff’s concessions at short calendar. Finally, the defendants’ motion to dismiss all claims against the individual defendant Greg Dyra is granted for lack of personal jurisdiction. In all other respects, the defendants’ motion to dismiss is denied.
The following facts are relevant to the defendants’ motion to dismiss. The defendants Lazer Milstein (Lazer) and his son Nesanel Milstein (Nesanel) (collectively, the Milsteins) are involved in the operation of interconnected business entities purportedly used as wealth management vehicles for the Milsteins and other family members. Lazer, who resides in Florida, is reputed to have minimal day-to-day involvement with the entities relevant to the plaintiff’s claims[1] but sole managerial authority over them.
The pertinent facts relating to the Milsteins’ business entities are as follows: As alleged in the plaintiff’s complaint and further set forth by Nesanel in deposition testimony submitted with the plaintiff’s memorandum in opposition to the present motion, Lazer owns all managing shares of LAZN 510, LLC (LAZN 510), a business entity in which Nesanel and two other family members hold shares belonging to a separate share class with no management authority. LAZN 510, in turn, owns the defendant LAZ May 10, LLC (LAZ May 10), which in turn owns the defendant Foundation Investment Holdings, LLC (FIH). Lazer has exclusive management authority over FIH as well, while Nesanel advises Lazer on FIH’s investment decisions. Nesanel further serves as president of the defendant MFI Management, Inc. (MFI), an entity whose purpose is described as "look[ing] at investments that [Lazer] might be interested in" as well as providing Lazer with tax planning advice. Pl. Mem. D.N. 132, Exh. A.
The plaintiff alleges that the Milsteins decided in late 2013 to make an investment in Foundation and that the Milsteins, through MFI, created FIH to act as a vehicle for their investment. As set forth in Nesanel’s deposition, MFI utilized the services of the defendant Greg Dyra, a consultant whom MFI had previously retained to conduct research into potential investments, to further evaluate MFI’s possible investment in Foundation. Between September 2013, and February 2014, the plaintiff alleges that Nesanel and Dyra conducted due diligence of Foundation on FIH’s behalf. Lazer, in an affidavit submitted with the defendants’ motion to dismiss, stated that he "did not actively participate in the due diligence" and that his involvement prior to authorizing the investment was limited to "discussing the transaction with [his] son, Nesanel Milstein." D.N. 177, Exh. 10. Ultimately, the plaintiff alleges, FIH agreed in February 2014, to invest approximately $8.85 million into Foundation, [2] with funds for the investment being wired into Connecticut from bank accounts controlled by LAZ May 10 shortly thereafter. In his affidavit, Lazer stated that he authorized this investment.
The plaintiff alleges that the relationship between himself and the defendants ultimately became hostile. Specifically, the plaintiff alleges that, shortly after FIH’s investment into Foundation, the Milsteins asked Dyra to undermine the plaintiff’s position at Foundation and ultimately force the plaintiff out of his role there. The plaintiff claims that Dyra carried out two courses of action in furtherance of this request. The first, known as "Project Soothsayer," allegedly involved compelling the plaintiff’s former brother-in-law, Joseph Meehan, [3] to put together a set of incriminating facts about the plaintiff, many of which the plaintiff claims were untrue or embellished. The purported end result of Project Soothsayer was a memorandum (the Soothsayer memo) outlining various alleged concerns about the plaintiff’s personal and professional competencies. The plaintiff alleges that Dyra then transmitted the Soothsayer memo to FIH and the Milstein family, as well as to at least one other investor in Foundation, [4] in April 2014. Second, the plaintiff alleges that Dyra recruited Meehan to attempt to turn the plaintiff’s partners at Foundation against the plaintiff, again in an effort to undermine the plaintiff’s position at the fund. Finally, beyond Meehan’s purported involvement in Project Soothsayer, the plaintiff also alleges that Meehan "delivered to the Milsteins and Dyra 183 pages of Barr’s personal and professional emails" as well as "thousands of documents from Barr’s personal and work email." Am. Compl., ¶¶48-49. The plaintiff goes on to claim that "[t]he Milsteins continue at present to use those communications ... to harm [the plaintiff] and for other purposes." Id., ¶50.
Ultimately, on August 14, 2014, FIH withdrew its investment in Foundation. On May 22, 2015, FIH initiated the federal action, alleging that the present plaintiff as well as affiliated individuals and business entities had made various misrepresentations during the course of FIH’s now-abandoned investment in Foundation. Specifically, FIH brought the following claims: (1) violation of § 10(b) of the Securities Exchange Act of 1934, (2) violation of the Connecticut Securities Act, (3) intentional misrepresentation, (4) fraudulent inducement, (5) negligent misrepresentation, and (6) unjust enrichment. Several of the allegations in the federal action concerned the plaintiff’s business capabilities and acumen, as well as questions about his spending habits and overall fitness to manage an investment fund. Further, FIH’s initial complaint referred numerous times to the Soothsayer memo, citing it as proof that the present plaintiff’s business partners lacked confidence in his abilities despite outward representations to the contrary. Later, in a second amended complaint filed on May 10, 2016, FIH made several direct references to the Soothsayer memo and its contents, and attached a copy of the memo to the complaint as further support for FIH’s allegations. The plaintiff alleges that the Milsteins and associated business entities then proceeded to forward the second amended complaint and the attached Soothsayer memo "to reporters and various websites." Am. Compl., count one ¶83(2).
The plaintiff initiated the current lawsuit against all now appearing defendants on September 21, 2017, claiming various harms arising out of the defendants’ prior business relationship with the plaintiff. Specifically, in his pro se complaint, the plaintiff brought three claims against all defendants: (1) defamation per se, (2) defamation, and (3) interference with prospective advantage.
In his summons, dated September 21, 2017, the plaintiff listed a return date of November 14, 2017. Relevant to the present motion, the plaintiff attempted to serve Dyra, pursuant to the procedures codified at General Statutes § 52-59b(c) for service of process on a nonresident individual. According to the marshal’s return of service, the marshal sent certified mail containing the appropriate documentation required by § 52-59b(c) to Dyra at 201 Bellegrove Court, Franklin, TN 37096. Nevertheless, as set forth in Dyra’s affidavit and further supported by Dyra’s deposition testimony and curriculum vitae from the federal action, all of which the defendants have submitted in support of their present motion, Dyra in actuality resided at 107 Lucas Lane, Brentwood, TN 37027 at the time of service. Dyra further stated in his affidavit that he had not lived at the Bellegrove Court address for over eleven years.
Counsel for the defendants MFI, FIH, the Milsteins, and Dyra filed initial appearances on November 16, 2017. On December 27, 2017, the plaintiff, acknowledging that he had served Dyra at the incorrect address, sought leave to amend his...
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