Blink v. Johnson
| Decision Date | 21 August 2015 |
| Docket Number | Index 51201/2014 |
| Citation | 2015 NY Slip Op 32975 (U) |
| Parties | ROBERT BLINK and JASON GOLDKLANG, Plaintiffs, v. RICHARD JOHNSON, M.D., HUDSON COMMUNICATIONS, LLC, 5 MEDICAL MARKETING LLC, HUDSON GLOBAL GROUP, LLC, INFINITY GLOBAL EVENTS, LLC, and HEALTHONE GROUP, LLC, Defendants. Motion Seq. # 2 |
| Court | New York Supreme Court |
Unpublished Opinion
Motion Date: May 8, 2015.
LAW OFFICE OF MICHELE L. ROSS, LLC, Attorneys for Plaintiffs By Michele L. Ross, Esq.
SHECHTMAN HALPERIN & SAVAGE LLP, Attorneys for Defendants By: Antonette Ruocco, Esq., Lynn Judell, Esq.
Present: HON. ALAN D. SCHEINKMAN, Justice.
DECISION & ORDER
Defendants, Richard Johnson, M.D. ("Johnson"), Hudson Communications, LLC ("Hudson Communications"), 5 Medical Marketing LLC ("5 Medical"), Hudson Global Group, LLC ("Hudson Global"), Infinity Global Events, LLC ("Infinity") and Healthone Group, LLC ("Healthone") (collectively "Hudson Group" or "Defendants") move, pursuant to CPLR 3212, for summary judgment dismissing the Amended Complaint of Plaintiffs Robert Blink ("Blink") and Jason Goldklang ("Goldklang") ("Plaintiffs"). Plaintiffs oppose Defendants' motion.
This action was initiated by Plaintiffs' filing of a Verified Complaint on January 27, 2014. The Court was asked to intervene in connection with Defendants' motion to dismiss.
On April 24, 2014, the Court held a conference to determine whether discovery should proceed pending the motion to dismiss and decided that discovery should proceed since the Court perceived that it was unlikely that the motion would dispose entirely of the case. The Court asked Plaintiffs if they wanted to amend the Complaint and was advised that Plaintiffs wished to avail themselves of that opportunity.
On May 5, 2014, Plaintiffs filed their Amended Verified Complaint.
The Court held a Preliminary Conference on May 8, 2014 and issued a Preliminary Conference Order which required that all discovery be completed by November 13, 2014 and that a Trial Readiness Conference would be held on November 14, 2014.
On June 13, 2014, Defendants filed their Verified Answer and Counterclaims denying the material allegations of the Amended Complaint, asserting various affirmative defenses and interposing counterclaims on behalf of Johnson and HMC America, LLC. On July 3, 2014, Plaintiffs filed their Answer to Defendants' Counterclaims in which they denied the material allegations and asserted various affirmative defenses.
Due to various discovery disputes, the discovery cut-off date and the Trial Readiness Conference date were adjourned to January 16, 2015. On January 16, 2015 the Court issued the Trial Readiness Order and directed that Plaintiffs file their Note of Issue. The Note of Issue was filed and this motion ensued.
Based on the allegations of the Amended Verified Complaint, Blink held a 45.75% interest in Hudson Group as a Common Member. Goldklang was also a Common Member of Hudson Group holding a 6.5% interest and Johnson and an entity in which he held a controlling interest (MidAtlantic Partners II, LP) were Preferred Members in Hudson Group, each holding a 24% interest (Amended Complaint at ¶¶ 1-3). Hudson Group provided strategic marketing, scientific communications, interactive educational services, and post-marketing research for the pharmaceutical and healthcare industries (id. at ¶ 11).
Plaintiffs allege that on August 30, 2012, Hudson Group, Blink, Johnson MidAtlantic and Goldklang entered into an Asset Purchase Agreement with HG Group, LLC ("HG Group"), a subsidiary of Interpublic Group ("IPG") for the sale of a majority of Hudson Group's assets for a purchase price of $35, 795, 037.00. Plaintiffs describe the allocation of the purchase price among the various Sellers (Blink [$9, 664, 031], Goldklang [$1, 371, 669], MidAtlantic [$11, 618, 198] and Johnson [$10, 114, 667]) and the remaining balance ($3, 026, 472) was paid to Hudson Global (id. at ¶ 15). Plaintiffs claim that Sellers were also entitled to an Earnout from HG Group based on HG Group's profitability, which was based on the 2012 balance sheet of Hudson Group, as well as Plaintiffs' future employment efforts at HG Group (Id. at ¶ 16).
Plaintiffs allege that throughout their association with Hudson Group they had no access to Hudson Group's financial information and data, which was exclusively controlled by Johnson (id. at ¶ 17). They further claim that Johnson did not provide them with access to data regarding Hudson Group's distributions, capital accounts, company expenses or working capital despite repeated requests to review this information (id. at ¶ 17). According to Plaintiffs, on the eve of the closing, Johnson required (based on a threat that he would walk away from the transaction) that Plaintiffs execute the Members Agreement and Release Agreement, which are attached to the Complaint as Exhibits A and B (id. at ¶ 18). It is alleged that Johnson required that they do so because he knew that there would be financial liabilities to HG Group to which Plaintiffs and not Johnson would be responsible (id. at ¶ 19).
Based on the terms of the Members Agreement, Blink and Goldklang were required to repay certain loans reflected on the books that Plaintiffs contend were placed there by Johnson shortly before the transfer. These loan repayments totaled $2, 449, 173 (hereinafter the "Loan Repayments") (id at ¶¶ 21-22). Blink was also required to pay Johnson $103, 777, which reflected amounts due pursuant to a Promissory Note dated March 9, 1999 (the "Promissory Note Payment") (id at ¶ 21). Blink contends that shortly after he made the Promissory Note Payment, he determined that he had already paid that amount and despite Blink's having provided Johnson with proof of the prior payment, Johnson refused to refund Blink the amount of this overpayment (id at ¶ 23).
Plaintiffs contend that "[d]espite Defendants having received and benefitted from the collective payment from Plaintiffs in the sum of $2, 449, 173.00, Defendants have failed to re-distribute to Plaintiffs their pro-rata share of such distributions in violation of Articles 7 and 15 of the Hudson Group Operating Agreement" (id at ¶ 24). In a similar vein, Plaintiffs contend that sometime after the Asset Sale, $50, 000 in bonus monies were returned to Hudson Group by former employees Patricia Buckley and Mary McNamee (hereinafter the "Bonus Refund") and Defendants have failed to re-distribute those monies to Plaintiffs pro rata in violation of Articles 7 and 15 of the Operating Agreement (id at ¶ 25).
With regard to Plaintiffs' further liabilities following the Asset Sale, Plaintiffs explain that under the Members Agreement and Release, they were the ones who remained liable for the increase in working capital to HG Group as defined in the APA for a period of 180 days following the closing (id at ¶ 26). Plaintiffs contend that it was Johnson who determined the working capital figure and that it was Johnson who required that they be liable for it (id at ¶ 26). Plaintiffs assert that to satisfy any shortfall in working capital for which they would be liable, they had to escrow 5% of the proceeds they received for a period of 180 days (Id.).[1] Within 180 days of the closing, HG Group sent notice of a shortfall in working capital and that a payment was required to satisfy the deficiency for which Plaintiffs were responsible pursuant to Section 6(d) of the Members Agreement (id at ¶ 27). It is Plaintiffs' contention that Johnson was aware that the working capital figure projected to HG Group was inaccurate and that there would be a future deficiency. The inaccuracy resulted from Johnson having taken out large quantities of cash from the business immediately prior to the closing and his "misrepresenting the accounts receivable data to project that cash had instead remained with the company" which "altered the actual financial forecast of the Hudson Group and what it would take to maintain all of the liabilities going forward" (id at ¶ 28). Plaintiffs contend that Johnson waited until the eve of closing to fraudulently induce Plaintiffs into executing the Release knowing that he would continue to operate Hudson Group with Plaintiffs' funds in violation of the APA. Plaintiffs assert that they detrimentally relied on Johnson in executing the Release (id. at ¶ 29).
With regard to Plaintiffs' claims for breach of the Operating Agreement, Plaintiffs allege that Johnson has failed to wind down Hudson Group and has failed to relinquish final distribution payments owed to Plaintiff pursuant to Articles 7 and 15. According to Plaintiffs, Hudson Group received more than $2, 500, 000 and Defendants have unlawfully retained the entire amount of these funds (id. at ¶ 32). Plaintiffs contend that Johnson wrote a check for the sum of $132, 314 to HG Group in violation of the APA and the check is attached as Exhibit C (id at ¶ 27). According to Plaintiffs, Johnson, as Managing Member of Hudson Group, delayed and then manipulated the K-1's prepared post-closing causing Plaintiffs' capital accounts to increase despite the fact that they did not receive any additional distributions from Hudson Group pursuant to Article 15 of the Operating Agreement. By contrast, Plaintiffs assert that Johnson manipulated Hudson Group's books by taking repayments of loans in the form of distributions, purchasing gifts and making unlawful corporate expenditures to reduce his capital account (id. at ¶ 35). Plaintiffs also allege that Johnson wrongfully put the employees of his private dental practice on Hudson Group's payroll and had Hudson Group provide them with medical benefits and...
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