Giuliano v. Barch
| Decision Date | 31 March 2017 |
| Docket Number | No. 16 CV 0859 (NSR),16 CV 0859 (NSR) |
| Parties | ROBERT GIULIANO a/k/a ROBERT P. GIULIANO, Plaintiff, v. MACKIE BARCH, RICHARD A. WOLPOW, DANNY M. BARNES, STEPHEN M. PERRY, DAVID S. ROWLEY, BOYD R. RELAC, RUSSELL SKIBSTED, JUSTIN BARCH, and ERIC CLARKE, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Robert Giuliano ("Giuliano" or "Plaintiff") is suing several corporate directors and officers of Pharmagen, Inc.1 ("Pharmagen"), in their individual capacity. Giuliano founded and solely owned Bryce Rx Laboratories ("Bryce Labs") until he sold it to Pharmagen in 2012 for $1,875 million. (Am. Compl. ¶ 1, ECF No. 29.) The sale was memorialized by a Stock Purchase Agreement, an Employment Agreement, and a Restrictive Covenant. (see generally Am. Compl., Exs. A-C, respectively.) Giuliano alleges, among other things, that defendants knew Pharmagen never intended to fulfill its obligations under the Agreements and engaged in fraud and misconduct to lure Giuliano into selling Bryce Labs. (Am. Compl. ¶¶ 60, 66-67, 79, 81.) The instant case involves the following defendants: Richard A. Wolpow ("Wolpow"), David S. Rowley ("Rowley"), Boyd R. Relac ("Relac"), Russell Skibsted ("Skibsted"), Mackie Barch ("M. Barch"), Justin Barch ("J. Barch"), and Eric Clarke ("Clarke") (together, the "Defendants").
Giuliano pleads causes of action that sound in contract (breach and anticipatory breach of contract), tort (tortious interferences, conversion), equity (pierce the corporate veil, unjust enrichment, promissory estoppel), and state employment law (non-payment of wages). All the defendants, except for Clarke, move to dismiss the Amended Complaint (the "Complaint") in its entirety pursuant to Rules 12(b)(2) and 12(b)(6) for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. (see Defs.' Wolpow, Rowley, Relac, and Skibsted's Mem. Law Supp. Mot. to Dismiss Am. Compl. ( ) 17-19, ECF No. 47); (Def. M. Barch's Mem. Law. Supp. Mot. to Dismiss. Am. Compl. ("Def. M. Barch's Mem."), ECF No. 59); (Def. J. Barch's Mem. Law. Supp. Mot. to Dismiss. Am. Compl. ("Def. J. Barch's Mem."), ECF No. 63.) Defendant Clarke moves to dismiss pursuant to Rule 8, Rule 9(b), and Rule 12(b)(6) of the Federal Rules of Civil Procedures. For the reasons explained below, the collective motion by Defendants Wolpow, Rowley, Relac, and Skibsted is GRANTED, Defendant M. Barch's motion is GRANTED, Defendant J. Barch's motion is GRANTED, and Defendant Eric Clarke's motion is GRANTED.
The following facts - taken from the Amended Complaint, exhibits attached thereto, statements or documents incorporated by reference, and documents that Plaintiff either possesses or knew about, and relied upon, in bringing suit - are assumed to be true for purposes of this motion. See, e.g., Kleinman v. Elan Corp., 706 F.3d 145, 152 (2d Cir. 2013); LaFaro v. N.Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009); Kerman v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999).
Giuliano founded and individually operated Bryce Labs until December 13, 2012, when he sold it to Pharmagen for a "total purchase price" of $1,875,000. (Am. Compl. ¶¶ 1, 40.) On March 4, 2013, approximately three months after acquiring Bryce Labs, Pharmagen registered a name change from Bryce Labs to "Pharmagen Laboratories, Inc." ("Bryce Labs").2 (Am. Compl. ¶ 31.) Bryce Labs was incorporated in New York and has its principal place of business in Connecticut. The purchase was memorialized in three separate documents: the Stock Purchase Agreement, the Employment Agreement, and Restrictive Covenant Agreement. (Am. Compl. ¶ 42, collectively referred to as "the Agreements.") Executed as separate documents, the Employment and Restrictive Covenant Agreements "were ancillary to, and a part of, the SPA in order to subsidize the monies to be paid to [Plaintiff] under the terms of the SPA." (Am. Compl. ¶ 42.) The Agreements were all signed on the same day, December 13, 2012, by Pharmagen (formerly known as Sunpeaks Ventures),3 Bryce Labs, and Giuliano. (Am. Compl. ¶¶ 40-41; Ex. A, Securities Purchase Agreement ("SPA"), at 1.)
Pharmagen agreed to pay a total purchase price of $1,875,000, plus benefits. (Am. Compl. ¶ 77.) The parties apportioned the total purchase price for Bryce Labs between the Agreements. First, Pharmagen agreed to pay Giuliano a "sale price" of $1.1 million to acquire all of Bryce's outstanding securities. (SPA § 1.2.1.) Pursuant to the SPA, the "sale price" would be paid in four installments, with $100,000 due at closing, and the remaining $1 million in payments of $250,000. Under this scheme, Pharmagen would pay Giuliano a yearly sum of $250,000 over four years, starting on December 31, 2013 and continuing through December 31, 2016. (Am. Compl. ¶ 44;SPA §§1.2.1.1, 1.2.1.2.) The parties further agreed that the SPA "shall be governed by and construed in accordance with, the laws of the State of Maryland." (Am. Compl. ¶ 54; SPA § 7.11.)
Second, Pharmagen agreed to employ Giuliano for a period of four years, with the option to extend Giuliano's term for one additional year.4 The Employment Agreement, incorporated by reference in the SPA, explains that "the Board of Directors ... consider[ed] it to be in the best interests of [Pharmagen] that Giuliano remain ... and continue to devote his attention," to Bryce Labs given his "great deal of knowledge about [its] business affairs." (Am. Compl., Ex. B ("Emp't Agreement"), at 1.) Most relevant here, the Employment Agreement provided that Pharmagen would pay Giuliano a total of $775,000 in wages as part of the deal's "subsidized price." (Am. Compl. ¶ 45; Emp't Agreement §§ 1, 3.) Giuliano alleges that while the Employment Agreement was separately executed, it was "ancillary to, and a part of the, [SPA] in order to subsidize the monies to be paid to Giuliano under the terms of the [SPA]." (Am. Compl. ¶ 42.) The Employment Agreement also provided that if Pharmagen terminated Giuliano "without cause" "[Pharmagen] [was required to] continue pay[ing] [Guliano] his compensation" through "December 31, 2017." (Emp't Agreement § 6(c).) Like the SPA, the parties designated Maryland as the law governing the "validity, interpretation, construction, and performance" of the Employment Agreement. (Am. Compl. ¶ 55; Emp't Agreement § 10.) Finally, pursuant to the Restrictive Covenant Agreement Giuliano agreed to "... the covenants and promises made ... [here as] a material inducement to the Company to continue" employing Giuliano and providing him with "other benefits and consideration." (Id. § 15.)
Plaintiff's factual allegations as to the individual defendants relate exclusively to their roles as directors or officers of Pharmagen, Inc. The majority of the Complaint asserts that Defendants committed fraud when they lured" Plaintiff into selling his company "knowing full well they had neither the means nor the intention of fulfilling their obligations under the terms of the Agreements." (¶¶ 79, 83, 100.) Additionally, Defendants allegedly undercapitalized Pharmagen, ignored corporate formalities, and dominated its affairs. Lastly, on April 22, 2013, Defendants fired Giuliano from Bryce Labs. (Am. Compl. ¶ 52.) Giuliano asserts that he "was wrongfully terminated, without cause," (id.) after "Defendant Officers blamed [Plaintiff] for errors made by another employee (pharmacist) when the other employee sent the wrong medications to a client." (Id. ¶ 92.) According to Plaintiff, this was a pretext to avoid paying him the monies due for acquiring Bryce Labs. (Id. ¶¶ 84, 96.)
On December 11, 2015, Giuliano commenced this action in the Supreme Court of the State of New York, specifically Westchester County, but former defendants5 removed the case here by invoking the federal courts' diversity jurisdiction established by 28 U.S.C. § 1332. After a pre-motion conference on March 16, 2016, the Court granted Giuliano leave to file an amended complaint to address issues raised by Defendants, and granted Defendants leave to file separate motions to dismiss.6 Giuliano timely amended the initial complaint (ECF No. 29),7 after which Defendants Relac, Rowley, Wolpow, and Skibsted separately filed a motion to dismiss pursuantto Fed. R. Civ. P. 12(b)(2) and 12(b)(6). (See ECF Nos. 43, 46, 47.) Defendants M. Barch and J. Barch, each proceeding pro se, filed separate 12(b)(2) and (b)(6) motions to dismiss. (ECF Nos. 59, 63.) Defendant Clarke filed a motion dismiss pursuant to Rules 8, 9(b), and 12(b)(6). Fed. R. Civ. P. (ECF No. 51.)
Plaintiff's Amended Complaint, filed on April 9, 2016, alleges that up to, during, and after this sale, the named defendants perpetrated various frauds on Plaintiff. (see generally Am. Compl. ¶¶ 56-77.) Notably, neither Pharmagen nor Bryce Labs (a wholly owned subsidiary of Pharmagen) is a named party in the instant action. In filing suit against individual corporate defendants rather than Pharmagen itself, Giuliano is essentially asking the Court to pierce the corporate veil on an alter ego theory so that he may assert claims against (and potentially recover from) the individual directors and officers for (1) piercing the corporate veil due to fraud, (2) breach of contract, (3) tortious interference, (4) indemnification, (5) declaratory judgment and specific performance, (6) unjust enrichment, (7) promissory estoppel, (8) conversion, (9) attorneys' fees, (10) non-payment of wages, and (11) twice the amount of unpaid wages and attorneys' fees under Connecticut state law.
"The lawful exercise of personal jurisdiction by a federal court requires satisfaction of three primary requirements." Jonas v. Estate of Leven, 116 F. Supp. 3d 314, 323-24 (S.D.N.Y. 2015) (citing Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59 (2d Cir. 2012)). First, "the plaintiffs...
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