Freedom Medical Inc. v. Gillespie
| Decision Date | 29 August 2007 |
| Docket Number | Civil Action No. 06-3195. |
| Citation | 634 F.Supp.2d 490 |
| Parties | FREEDOM MEDICAL INC. v. Thomas R. GILLESPIE, III, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Edward T. Kang, Oliver D. Griffin, Melissa A. Lebon, Weir & Partners LLP, Philadelphia, PA, Gregory H. Mathews, Law Offices of Gregory Mathews, West Chester, PA, for Plaintiff.
Maryteresa Soltis, Robert V. Dell'Osa, Cozen O'Connor, H. David Seidman, Walter M. Phillips, Jr., Lori E. Halber, Obermayer Rebmann Maxwell & Hippel LLP, Frank H. Griffin, III, Jeffrey D. Hofferman, Gollatz, Griffin & Ewing, P.C., Thomas P. Hanna, Kelley Jasons McGowan & Spinelli LLP, James P. Golden, Shelley R. Goldner, Hamburg and Golden, P.C., Philadelphia PA, James J. Riley, Riley & Fanelli, P.C., Pottsville, PA, Ronald David Ashby, Ronald David Ashby & Associates, P.C., Media, PA, Steven T. Fulk, Fulk & Associates, Indianapolis, IN, Joseph P. Green, Jr., Duffy Green & Redmond, West Chester, PA, for Defendants.
Jasper Smith, Wilmington, DE, pro se.
Rick Burgess, Indianapolis, IN, pro se.
Plaintiff Freedom Medical, Inc. ("Freedom Medical") is in the business of purchasing and refurbishing medical equipment and then reselling, renting, and servicing it. In this suit, Freedom Medical alleges that a number of former employees, along with several corporations controlled by them and several associated individuals, entered into a conspiracy to steal Freedom Medical's inventory and business opportunities. The complaint names seventeen individual defendants and six corporate defendants and brings claims for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., as well as state law claims of misappropriation of trade secrets, fraud, breach of fiduciary duty, conspiracy, conversion, and breach of contract.
Four groups of defendants, encompassing eight individuals and two corporations, have moved to dismiss the claims against them.1 All of the defendants moving to dismiss challenge the sufficiency of Freedom Medical's pleading concerning its RICO claims and all but one challenge the sufficiency of its state law fraud claims. In the alternative, several defendants seek a more definite statement. Several of the moving defendants also challenge the sufficiency of the allegations concerning the other state law claims. In addition, defendant Gurmit Bhatia challenges this Court's personal jurisdiction over him and defendant Sandra "Dawn" Hall challenges whether the complaint, as a whole, adequately alleges that she participated in the alleged fraud and conspiracy.
This Court will grant the defendants' motions to dismiss in part. The Court will dismiss the RICO claim alleged in Count I of the complaint as to all defendants named therein for failure to adequately allege a nexus between the validly pled enterprises in that count and a "pattern of racketeering activity." The Court will also dismiss the fraud claim alleged in Count IV with respect to all defendants moving to dismiss it, on the ground that it is not pled with sufficient particularity. The Court will deny the defendants' motions to dismiss as to the other claims of the complaint and will deny as moot defendant Dawn Hall's motion to strike.
The plaintiff's complaint alleges the following facts relevant to the defendants' motions to dismiss, all of which the Court will assume are true for purposes of evaluating the motions.
Plaintiff Freedom Medical is a Pennsylvania medical equipment company founded in 1997. It is in the business of buying, refurbishing, renting, and selling biomedical equipment. By October 2002, Freedom Medical operated 15 branch offices throughout the United States with over 100 employees. By 2003, it had revenues of approximately $21.5 million.
Moving defendant Thomas Gillespie was hired as Freedom Medical's first employee in March 1997. At the time of his hire, he was 24 years old and had no experience in the health care sector. He rose rapidly in the company, and four years later, in 2001, he held the position of Vice President of Marketing and Sales. In that position, among other responsibilities, he managed all equipment sales and purchases, the transportation of equipment to and from customers, and the repair and maintenance of equipment. Gillespie was employed by Freedom Medical from 1997 until May 2006.
Moving defendant Lori Gillespie is Thomas Gillespie's wife and a former employee of Freedom Medical. Moving defendants Phillip Frayne and Patrick Frayne are Lori Gillespie's brothers and Thomas Gillespie's brothers-in-law. They are also both former employees of Freedom Medical. Phillip Frayne was employed from January 2000 to March 2005 as an inventory prep technician and in warehouse operations. Patrick Frayne was employed in unspecified positions from 1999 through June 2006.
Moving defendant Greg Salario was hired by Freedom Medical in August 1999 as Marketing Manager for the Houston branch. By 2002, he had been promoted to overseeing all Freedom Medical branch operations except those in Florida and California. In this position, he worked closely with Thomas Gillespie, who supervised equipment purchasing, sales, and repair. Salario also supervised other branch managers, including moving defendant George Rivera, and non-moving defendants Joseph Janssens and Rick Burgess.
Greg Salario reported to Freedom Medical's president, Frank Gwynn. In 2002, shortly after Salario was given supervising responsibility over all branches outside Florida and California, Gwynn requested that Salario provide him with monthly written reports on branch operations. Salario resisted providing these reports. In August 15, 2003, Gwynn gave him an ultimatum demanding these reports. The next day Salario abruptly resigned.
Salario established moving defendant U.S. Med-Equip, Inc. ("US Med-Equip") in Texas in 2003, while he was still employed by Freedom Medical. US Med-Equip, like Freedom Medical, was in the business of buying, refurbishing, renting, and selling biomedical equipment.
Moving defendant Gurmit Bhatia is one of U.S. Med-Equip's owners, directors, and officers. He is alleged to have actively participated in the management of U.S. Med-Equip.
Moving defendant George Rivera was employed by Freedom Medical as Manager of its New York Metro branch beginning in August 1999. He was terminated in December 2003 for non-performance, after revenue in the geographic area for which he was responsible began declining.
Rivera established moving defendant American Medical Logistics, LLC ("American Medical") in February 2004. Both Rivera and Thomas Gillespie are alleged to have ownership interests in American Medical.
Non-moving defendant Cliff Hall was hired by Freedom Medical in October 2000 as a salesman. His responsibilities included the purchase, sale, and rental of medical equipment. He left Freedom Medical in June 2001. After leaving Freedom Medical, Cliff Hall formed two companies, non-moving defendants Signature Medical Ltd., LLC ("Signature Medical") and Signature Emergency Products, LLC ("Signature Emergency"), both of which are companies in the business of buying, selling, renting, and servicing medical equipment. Thomas Gillespie is alleged to have an ownership interest in Signature Medical and Signature Emergency.
Moving defendant Sandra "Dawn" Hall is Cliff Hall's wife. She is alleged to be actively involved in the operations and management of both Signature Medical and Signature Emergency.
The basic allegation of Freedom Medical's complaint is that the individual defendants, led by Thomas Gillespie, Greg Salario, and George Rivera, conspired to steal equipment and business opportunities from Freedom Medical and to falsely sell to Freedom Medical equipment that they did not own. Freedom Medical alleges Gillespie, Salario, and Rivera, were later joined in this conspiracy by the other defendants. The plaintiff alleges several types of wrongful behavior, including the theft of equipment from Freedom Medical and its suppliers, the diversion of business opportunities belonging to Freedom Medical to the defendants and their affiliates, and the fraudulent sale of equipment to Freedom Medical. The plaintiff specifically alleges that the defendants stole the assets and business of Freedom Medical's emergency medical services division and its New York home infusion business.2
Freedom Medical alleges that, as of 2001, Thomas Gillespie was responsible for its equipment inventory and controlled Freedom Medical's purchases and sales of biomedical equipment. Using this position, Freedom Medical alleges that Gillespie personally stole Freedom Medical's equipment and coordinated and facilitated the theft of equipment by other defendants. The initial thefts of equipment were allegedly done by Thomas Gillespie, Greg Salario, Cliff Hall, and George Rivera, who then later recruited other lower-level employees to participate, including defendants Patrick and Phillip Frayne, Jason Ragazzo, Jasper Smith, Omar Hunt, and Martin Crouch.
In its complaint, Freedom Medical alleges that it has obtained documentation showing that moving defendants American Medical, Signature Medical, and U.S. Med-Equip are all in possession of numerous pieces of equipment stolen from Freedom Medical. Freedom Medical alleges that American Medical has 24 items of its equipment, Signature Medical has 148 items, and U.S. Med-Equip has...
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