Pharmerica Chicago Inc. v. Meisels

• Decision Date: 16 February 2011
• Docket Number: No. 10 C 2741.,10 C 2741.
• Parties: PHARMERICA CHICAGO, INC., Plaintiff,v.David MEISELS, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

772 F.Supp.2d 938

PHARMERICA CHICAGO, INC., Plaintiff,

v.David MEISELS, et al., Defendants.

No. 10 C 2741.

United States District Court, N.D. Illinois, Eastern Division.

Feb. 16, 2011.

Benjamin C. Fultz, Chacey R. Ford, Jennifer Metzger Stinnett, Fultz, Maddox, Hovious & Dickens PLC, Louisville, KY, Katherine L. Hartley, Mark Gerard Sheridan, Bates & Carey, LLP, Chicago, IL, for Plaintiff.Kenneth Jay Ashman, Neal Dewitt Kitterlin, Ashman Law Office LLC, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

NAN R. NOLAN, United States Magistrate Judge.

Plaintiff PharMerica Chicago, Inc., f/k/a KPS Chicago, Inc. (“PharMerica”) filed a Complaint against Defendants David Meisels (“Meisels”), Continental Care Center, Inc. (“Continental”), Ambassador Nursing and Rehabilitation Center, Inc., f/k/a Ambassador Nursing Center (“Ambassador”), Bloomingdale Pavilion, LLC (“Bloomingdale Pavilion”), BCDM, LLC (“BCDM”), Bloomingdale Terrace Realty, LLC (“Bloomingdale Terrace”), Meisels Family Limited Partnership (“Meisels Family LP”),¹ and Michael Filippo (“Filippo”), alleging a variety of state law claims arising from Plaintiff's inability to collect on a judgment obtained by PharMerica against West Suburban Care Center, LLC (“West Suburban”).² In its Complaint, Plaintiff alleges fraud, breach of fiduciary duty, conspiracy to breach fiduciary duty, inducement of a breach of fiduciary duty, fraudulent transfer, unjust enrichment, and tortious interference with contract. Defendants now move to dismiss all of Plaintiff's claims for failure to meet the pleading standards under Federal Rules of Civil Procedure 8(a) and 9(b), and for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Defendants also move to strike certain portions of Plaintiff's response in opposition to the motion to dismiss.³ The parties have consented to the limited jurisdiction of the United States Magistrate Judge, pursuant to 28 U.S.C. § 636(c), to conduct certain specific proceedings related to the motion to dismiss and the motion to strike. For the reasons stated below, the motion to dismiss is granted in part and denied in part.

I. BACKGROUND ⁴

Plaintiff PharMerica provides pharmaceuticals and pharmaceutical management and consulting services to its customers. (Compl. ¶ 1.) One of its customers was a nursing facility located at 311 Edgewater Drive, Bloomingdale, Illinois (the “Facility”). ( Id. ¶ 18.) Defendant BCDM was at one time the licensed operator of the Facility. ( Id. ¶ 33.) On May 4, 2006, BCDM transferred operations of the Facility to West Suburban (“2006 Facility Transfer”), which was owned and operated by Defendant Filippo. ( Id. ¶ 34, Ex. 3.) On the same day, Defendant Bloomingdale Terrace, which owned the real property at 311 Edgewater Drive, entered into a lease with West Suburban. ( Id. ¶ 36, Ex. 6.)

In May 2007, PharMerica sued BCDM, Bloomingdale Pavilion, Bloomingdale Terrace, and Meisels for outstanding amounts owed for unpaid goods and services provided to the Facility from June 1, 2004, to May 4, 2006 (“2007 Lawsuit”). (Compl. ¶¶ 41–42, Exs. 8–9); see KPS Chicago, Inc. v. Continental Care Center, Inc., et al., No. 07 C 2591 (N.D. Ill. filed May 8, 2007). PharMerica also sued two other Meisels-owned facilities, Continental and Ambassador (collectively and together with Bloomingdale Pavilion, Bloomingdale Terrace and Meisels, the “2007 Lawsuit Defendants”),⁵ for outstanding amounts they owed. (Compl. ¶ 43.)

West Suburban was originally named as a defendant in the 2007 Lawsuit. (Compl. ¶ 47, Ex. 8.) However, soon after PharMerica filed the 2007 Lawsuit, West Suburban's counsel, Abraham Stern, contacted PharMerica and stated that West Suburban was improperly named in the lawsuit. ( Id. ¶ 48.) Because PharMerica's claims were for goods and services provided to the Facility, before West Suburban purchased the Facility's operations, Stern stated that West Suburban was not liable for any of the amounts owed. ( Id. ¶¶ 49–50.) Stern also represented that West Suburban and its owner Filippo were “completely unrelated” and “not affiliated in any way with” Meisels or the other 2007 Lawsuit Defendants. ( Id. ¶ 51.) BCDM, Bloomingdale Terrace, Meisels, Ambassador and Continental also represented in writing that they were unrelated to West Suburban. ( Id. ¶ 52.) Based on the operations transfer date and documentation provided by Stern, along with representations made by Stern, PharMerica dismissed West Suburban from the 2007 Lawsuit without prejudice and continued to provide pharmacy goods and services to West Suburban. ( Id. ¶¶ 58–59, Ex. 13.) On May 12, 2008, the parties reached a settlement in the 2007 Lawsuit. ( Id. ¶ 62.) In the settlement, Meisels, through his counsel, made repeated representations that he was “unrelated” and “unaffiliated” with West Suburban. ( Id. ¶¶ 16, 57, 63.)

In November 2007, West Suburban transferred operations of the Facility to the current operator, West Suburban Nursing and Rehabilitation Center, LLC, which is owned by Moishe Gubin (“2007 Facility Transfer”). (Compl. ¶ 67.) At the same time, Bloomingdale Terrace transferred the Facility's real estate to West Suburban Nursing Realty, LLC, which is also owned by Gubin. ( Id. ¶ 68, Ex. 14.)

On July 2, 2008, PharMerica sued West Suburban for amounts due and owing for goods and services provided after May 2006 (“2008 Lawsuit”). (Compl. ¶¶ 71–73); see PharMerica Chicago, Inc. v. West Suburban Care Center, LLC, No. 08 C 3775, 2008 WL 4264956 (N.D. Ill. filed July 2, 2008). West Suburban failed to answer the complaint and PharMerica obtained a $249,373.16 default judgment on September 9, 2008 (“Default Judgment”). (Compl. ¶¶ 13, 74, Ex. 1.) Because of West Suburban's insolvency, PharMerica has been unable to satisfy the Default Judgment. ( Id. ¶¶ 101–02.)

West Suburban became insolvent as early as May 2007 when it was unable to pay its debts as they became due, including the debt owed to PharMerica. (Compl. ¶ ¶ 101–02, 104–05, 132–34). During the time that West Suburban was insolvent, it transferred assets to Meisels via excessive lease payments to Bloomingdale Terrace. ( Id. ¶¶ 124, 133.) Filippo—named owner and manager of West Suburban—and Meisels—West Suburban's de facto owner and manager—used West Suburban's assets to pay Meisels and his related entities before paying creditors like PharMerica. ( Id. ¶¶ 135–36, 138–40.) Further, Meisels and Filippo unlawfully transferred West Suburban's assets by loading the consideration for the 2007 Facility Transfer into the sale proceeds for the real estate, thus avoiding West Suburban's liability to its creditors, such as PharMerica. ( Id. ¶¶ 67–70, 98–99.) It was not until PharMerica conducted post-Default Judgment discovery after the 2008 Lawsuit that it learned that the lease payments made by West Suburban were not only a way for Meisels to hide the operations transfer proceeds, but also a way for Meisels to continue to pull out the proceeds from the Facility until he could sell both the Facility and the real property to Gubin. ( Id. ¶¶ 67–70, 88–90.)

On May 3, 2010, Plaintiff filed the instant lawsuit. The Complaint alleges that Defendants and their agents made numerous misrepresentations to PharMerica and participated in fraudulent transfers, which resulted in West Suburban being unable to pay for goods and services provided by PharMerica or pay the Default Judgment. (Compl. ¶¶ 2–8, 13, 18–24, 41, 47–70, 85–97.) Plaintiff contends that the 2006 Facility Transfer was a sham transaction and a fraudulent transfer designed to thwart creditors of the Facility and siphon off money in excessive rent payments. ( Id. ¶ 88.) Despite representations to the contrary by Defendants and their agents, Plaintiff asserts that Meisels was the real party in interest of West Suburban during the period giving rise to the Default Judgment. ( Id. ¶ 89.) Plaintiff's Complaint alleges fraud against all Defendants except Meisels Family LP (Count I); breach of fiduciary duty against Meisels and Filippo (Count II); conspiracy to breach fiduciary duty against all Defendants (Count III); inducement of a breach of fiduciary duty against Meisels, Filippo, Continental and Bloomingdale Terrace (Count IV); fraudulent transfer against Meisels, Filippo and Bloomingdale Terrace (Count V); unjust enrichment against all Defendants (Count VI); and tortious interference with contract against Meisels, Filippo and Bloomingdale Terrace (Count VII). ( Id. ¶¶ 116–80.)

II. STANDARD OF REVIEW

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the sufficiency of the complaint, not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990). A Rule 12(b)(6) motion to dismiss must be considered in light of the liberal pleading standard of Rule 8(a)(2), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” “Specific facts are not necessary; the statement need only give the defendant fair notice of what the claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (internal citations and alterations omitted). Determination of the sufficiency of a claim must be made “on the assumption that all allegations in the complaint are true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (emphasis omitted).

Nevertheless, a motion to dismiss should be granted if the plaintiff fails to make allegations that are “enough to raise a right to relief above the speculative level” and are sufficient to show “a plausible entitlement” to recovery under a viable legal theory. Twombly, 550 U.S. at 555, 559, 127 S.Ct. 1955 (While the court must accept factual allegations as true, it need not credit mere labels, conclusions or “formulaic recitation of the elements of a cause of action.”); EEOC v. Concentra...