Goldberg v. Dufour

• Decision Date: 23 January 2020
• Docket Number: Case No. 2:17-cv-00061
• Court: U.S. District Court — District of Vermont
• Parties: MICHAEL I. GOLDBERG, as Court-Appointed Receiver in Securities and Exchange Commission v. Ariel Quiros et al., U.S. District Court of South Florida, Case No. 16-cv-21301-Gayles, Plaintiff, v. LOUIS DUFOUR, LOUIS P. HEBERT, and SAINT-SAUVEUR VALLEY RESORTS, INC., Defendants.

MICHAEL I. GOLDBERG,as Court-Appointed Receiver in Securitiesand Exchange Commission v. Ariel Quiros et al., U.S. District Court ofSouth Florida, Case No. 16-cv-21301-Gayles, Plaintiff, v. LOUIS DUFOUR, LOUIS P. HEBERT,and SAINT-SAUVEUR VALLEY RESORTS, INC., Defendants.

Case No. 2:17-cv-00061

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VERMONT

January 23, 2020

OPINION AND ORDER DENYING DEFENDANT SAINT-SAUVEUR VALLEY RESORTS, INC.'S MOTION TO STRIKE AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS THE THIRD AMENDED COMPLAINT

(Docs. 105, 106, 120)

Plaintiff Michael I. Goldberg, Esq. brings this action as a court-appointed receiver on behalf of Jay Peak Hotel Suites LP ("Phase I") and Jay Peak Hotel Suites Phase II LP ("Phase II"), which were formed pursuant to the federal EB-5 Immigrant Investor Program (the "EB-5 Program") in order to facilitate investment in Jay Peak, Inc., a Vermont corporation which was the owner of a ski resort in Jay, Vermont (the "Resort"). In June 2008, Saint-Sauveur Valley Resorts, Inc., currently known as Valley Summits, Inc. ("SSVR"), sold Jay Peak to Ariel Quiros and his corporation, Q Resorts, Inc. ("Q Resorts").

In his Third Amended Complaint ("TAC"), Plaintiff asserts the following claims against SSVR as well as proposed Defendants Louis Dufour and Louis Hebert: Count One: breach of fiduciary duty and Count Two: violations of the Vermont Fraudulent Transfer Act ("VFTA"), 9 V.S.A. §§ 2288 and 2289. Although framed as separate counts as opposed to remedies, in Count Three Plaintiff seeks exemplary damages and in Count Four he seeks a constructive trust.

Pending before the court is SSVR's motion to strike unauthorized new parties and claims from the TAC (Doc. 105) and its motion to dismiss the same (Doc. 106), as well as Defendants Dufour's and Hebert's separate motion to dismiss the TAC. (Doc. 120.) Plaintiff is represented by Joshua L. Simonds, Esq., and Keith L. Miller, Esq. Defendants are represented by David M. Pocius, Esq., and Laurence May, Esq.

I. Whether Plaintiff May Amend His Complaint to Add Defendants Dufour and Hebert and Assert New Claims.

SSVR requests the court to strike from the TAC the addition of Defendants Dufour and Hebert as well as Plaintiff's claims for punitive damages and a constructive trust, arguing that the court authorized only a limited amendment to Plaintiff's Second Amended Complaint ("SAC") "to cure pleading deficiencies raised by [SSVR's] Motion for More Definite Statement[.]" (Doc. 105 at 1.) Citing the hearing transcript for the court's authorization, Plaintiff points to the representations he made regarding the expansion of his claims and the court's agreement that additional claims and parties were permissible.

Fed. R. Civ. P. 15(a) allows parties to amend their pleadings once as a matter of course within twenty-one days of service or, if the pleading requires a response, within twenty-one days after service of a responsive pleading or applicable motion. "In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Rule 15 expressly instructs courts to "freely give leave when justice so requires." Id.

In granting SSVR's motion for a more definite statement, the court acknowledged that Plaintiff might add new parties and claims and granted SSVR additional time to file a motion to dismiss on that basis. See Doc. 98 at 26:7-12 (clarifying at the March 8, 2019 hearing that the new Complaint "needs to include the more definite statement, and I'm hearing from plaintiff it's going to include a lot of other stuff, and then you have askedfor and been granted 28 days thereafter to file a motion to dismiss, to file an answer, to file third party claims, and we'll go from there"). Plaintiff's addition of new claims and Louis Dufour and Louis Hebert as proposed defendants thus falls within the scope of the court's ruling. SSVR's motion to strike Plaintiff's new parties and request for additional remedies is therefore DENIED.

Having denied SSVR's motion to strike, the court must still analyze whether Plaintiff's specific revisions are permissible. "Leave to amend may properly be denied if the amendment would be futile, as when the proposed new pleading fails to state a claim on which relief can be granted[.]" Anderson News, LLC v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir. 2012) (citations omitted). "The adequacy of the proposed amended complaint[] . . . is to be judged by the same standards as those governing the adequacy of a filed pleading." Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991).

A court faced with an amended complaint and a motion to dismiss at the same time may determine whether dismissal is appropriate in the context of the amended complaint. See A.M. by & through Messineo v. French, 2019 WL 7038208, at *2 (D. Vt. Dec. 20, 2019) ("In order to further the 'just, speedy, and inexpensive determination' of this action, Fed. R. Civ. P. 1, the court considers Defendant's arguments for dismissal in light of the [first amended complaint]."). In this case, the court applies Defendants' arguments in support of dismissal to the TAC.

II. The TAC's Allegations.

The TAC contains a lengthy introduction which is not set forth in numbered allegations and to which Defendants have no obligation to respond. See Fed. R. Civ. P. 10(b) ("A party must state its claims or defenses in numbered paragraphs, each limited as far as practicable to a single set of circumstances."); see also Three Rivers Hydroponics, LLC v. Florists' Mut. Ins. Co., 2018 WL 791405, at *7 (W.D. Pa. Feb. 8, 2018) (granting motion to strike "the 'introduction' section of Plaintiff's Amended Complaint, a four-page prosaic narrative that [defendant] argues is patently redundant of later paragraphs and violates [Fed. R. Civ. P.] 10(b), which requires claims to be set forth in numbered paragraphs limited to a single set of circumstances" and finding defendant "need onlyrespond to the numbered paragraphs."); Katz v. Am. Exp. Co., 2014 WL 6470595, at *6 (D. Haw. Nov. 18, 2014) (criticizing amended complaint's "long narrative" introduction and observing that "superfluous allegations only make[] discerning the true basis of Plaintiffs' claims that much more difficult"). Because Plaintiff has been granted several opportunities to amend his Complaint, is represented by counsel, and is himself an attorney, the court disregards the TAC's "Introduction" on the grounds that Plaintiff's factual allegations do not incorporate it by reference.

With regard to Plaintiff's factual allegations set forth in a section titled "THE ACTS GIVING RISE TO THE CLAIM" (Doc. 96, at 8), the court agrees with SSVR that the TAC addresses "Defendants" collectively even though this designation is, at times, inaccurate. In the Second Circuit, grouping defendants is permissible where the defendants are "plural author[s]" or act in concert. See Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 173 (2d Cir. 2015) (holding that "identification of the group suffices to meet the particularity of attribution required by Rule 9(b)" where "[t]he entities named in the complaint and treated collectively were . . . 'insiders or affiliates'") (quoting Ouaknine v. MacFarlane, 897 F.2d 75, 80 (2d Cir. 1990)). The court thus addresses Plaintiff's "group pleading" only to the extent that it creates confusion or is contradicted by the exhibits attached to the TAC. See L-7 Designs, Inc. v. Old Navy LLC, 647 F.3d 419, 422 (2d Cir. 2011) (ruling that for purposes of a motion to dismiss, the court accepts the complaint's factual allegations as true "unless contradicted by . . . documentary evidence . . . from the exhibits attached" to the complaint).

Plaintiff alleges that he is a court-appointed receiver for, among others, six Vermont limited partnerships (Phase I-VI) in a Securities and Exchange Commission ("SEC") civil enforcement proceeding with regard to the sale of the Resort in an action styled Securities and Exchange Commission v. Ariel Quiros et al., Case No. 16-21301-Gayles (the "SEC Action"). He attaches to the TAC the Order granting the SEC's motion for appointment of a receiver which authorizes Plaintiff to:

. . . institute such actions and legal proceedings, for the benefit and on behalf of the Corporate Defendants [which include Jay Peak Hotel Suites,LP (Phase I) and Jay Peak Hotel Suites Phase II, LP (Phase II), Jay Peak Management, Inc. ("JPM")] and their investors . . . as the Receiver deems necessary against those individuals, corporations, partnerships, associations and/or unincorporated organizations, which the Receiver may claim have wrongfully, illegally or otherwise improperly misappropriated or transferred monies or other proceeds directly or indirectly traceable from investors in the Corporate Defendants and Relief Defendants, including the Corporate Defendants, the other Defendants, and the Relief Defendants, their officers, directors, employees, affiliates, subsidiaries, or any persons acting in concert or participation with them, or against any transfers of money or other proceeds directly or indirectly traceable from investors in the Corporate Defendants and Relief Defendants; provided such actions may include, but not be limited to, seeking imposition of constructive trusts, disgorgement of profits, recovery and/or avoidance of fraudulent transfers under Florida Statute § 726.101, et. seq. or otherwise, rescission and restitution, [and] the collection of debts[.]

(Doc. 96-1 at 4-5.)

SSVR is a Canadian corporation registered to do business as a foreign corporation in Vermont. At all relevant times, William Stenger was a Vice-President of SSVR, Defendant Dufour was SSVR's Chairman and Chief Executive Officer ("CEO"), and Defendant Hebert was its President.

The TAC alleges that Phase I and Phase II were created by "Defendants" to raise capital to develop the Resort. At...