St. Francis Holdings, LLC v. MMP Capital, Inc., 20-CV-4636 (MKB)

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Writing for the CourtMARGO K. BRODIE, UNITED STATES DISTRICT JUDGE.
PartiesST. FRANCIS HOLDINGS, LLC and FRANCIS J. AVERILL, M.D., Plaintiffs, v. MMP CAPITAL, INC., Defendant.
Decision Date31 March 2022
Docket Number20-CV-4636 (MKB)

ST. FRANCIS HOLDINGS, LLC and FRANCIS J. AVERILL, M.D., Plaintiffs,
v.

MMP CAPITAL, INC., Defendant.

No. 20-CV-4636 (MKB)

United States District Court, E.D. New York

March 31, 2022


MEMORANDUM & ORDER

MARGO K. BRODIE, UNITED STATES DISTRICT JUDGE.

Plaintiffs St. Francis Holdings, LLC and Francis J. Averill, M.D. filed the above-captioned action on June 12, 2020, against Defendant MMP Capital, Inc. (“MMP”), alleging that (1) a sales agent acting on behalf of Defendant fraudulently induced Plaintiffs to enter into a finance agreement, (2) Defendant violated the Florida Deceptive and Unfair Trade Practices Act (the “FDUTPA”), (3) Plaintiffs canceled and/or rescinded the finance agreement, and (4) Defendant committed civil conspiracy.[1] (Am. Compl. ¶¶ 94-105, 116-52, Docket Entry No. 21.) Plaintiffs allege that they executed a finance agreement with Defendant following a

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“cold call[ ]” from a sales agent attempting to sell them on the idea of purchasing equipment to start a new aesthetics practice and a June 26, 2019 sales meeting, (id. at ¶¶ 35-36, 48), and further allege that the agent made a number of “inflated claims and material misrepresentations and omissions” concerning the efficacy and operation of the equipment, (id. at ¶¶ 37-44, 66, 75- 79). Plaintiffs seek rescission of the agreement and disgorgement of amounts paid to purchase the equipment. (Id. at ¶¶ 105, 130-39.)

Defendant moves to dismiss the Amended Complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and Plaintiffs oppose the motion.[2]Plaintiffs also seek leave to further amend the Complaint.[3] For the reasons explained below, the Court grants Defendant's motion to dismiss in part and denies it in part. The Court grants Plaintiffs leave to file a second amended complaint.

I. Background

The Court assumes the truth of the factual allegations in the Amended Complaint for the purpose of deciding Defendant's motion.

a. Factual background

i. June 2019 “cold call” and agreements

In or around June of 2019, Kristopher Huston, the Director of Sales Growth of Cynosure, LLC, (“Cynosure”), a manufacturer of aesthetic medical devices, “cold called” Plaintiffs' office

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seeking to sell Plaintiffs on the idea of establishing a new aesthetics practice.[4] (Am. Compl. ¶¶ 4-6, 35.) Huston recommended that Plaintiffs purchase Cynosure's (1) SculpSure Contouring Platform (“SculpSure System”) - a non-invasive body-contouring device that eliminates unwanted fat cells without surgery - and (2) TempSure Envi System (“TempSure System”) - a device that purportedly reduces the appearance of wrinkles - for the new aesthetic practice. (Id. at ¶¶ 4, 33-35.) On June 26, 2019, Huston visited Plaintiffs' office and conducted a presentation on the SculpSure and TempSure Systems. (Id. at ¶ 36.) Dr. Averill, a board-certified physician and managing member of St. Francis Holdings, LLC, attended the presentation. (Id. at ¶¶ 2, 36.)

During the presentation, Huston described the SculpSure System as “virtually painless” for patients and claimed that the device could be used “hands free” or without a trained staff member present during most of the treatment. (Id. at ¶¶ 40-41, 95.) In addition to stating that the SculpSure and TempSure Systems were well-suited for a new aesthetics practice and likely to be highly profitable, (id. at ¶¶ 38-42), Huston also represented that Cynosure would provide financing for the equipment, including a six-month payment deferral after signing, and a $26, 750.00 “marketing rebate check” within six to eight weeks after purchase, (id. at ¶¶ 43-45).

Based on Huston's representations, Plaintiffs entered into four agreements to procure both systems. (Id. at ¶¶ 48-49.) First, they executed two purchase agreements with Cynosure- a purchase order for the SculpSure System and a purchase order for the TempSure System (the “Purchase Agreements”). (Id.; Purchase Agreements at 2-3, annexed to Am. Compl. as Ex. 4, Docket Entry No. 21.) Second, Plaintiffs signed a finance agreement contract with Defendant,

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an equipment finance company, for the financing to procure the TempSure System (the “Finance Agreement”). (Am. Compl. ¶¶ 21, 48; Def.'s Mem. at 10.) Lastly, Plaintiffs signed an equipment leasing agreement with Pawnee Leasing Corp., (“Pawnee”), an equipment financing company, allowing St. Francis to lease the SculpSure System from Pawnee (the “Leasing Agreement”). (Id. at ¶¶ 13, 16, 48; Def.'s Mem. at 1 n.1.) Huston presented the agreements to Plaintiffs predated and preprinted with Dr. Averill's personal identifying information. (Id. at ¶ 48.)

ii. The Purchase Agreements with Cynosure

The Purchase Agreements list the SculpSure and TempSure Systems for $205, 750 and $140, 750, respectively. (Product Descriptions, Purchase Agreements at 2-3.) They also provide a $26, 750 marketing rebate as a part of the purchase. (Id; Am. Compl. ¶ 44; Cynosure Letter dated Aug. 30, 2019 at 1, annexed to Am. Compl. as Ex. 12, Docket Entry No. 21.) However, in a letter Cynosure sent to Plaintiffs after Plaintiffs attempted to return the equipment, Cynosure stated that it was unable to amend the terms of the Leasing Agreement or the Finance Agreement - or otherwise release Plaintiffs from their obligations thereunder - because it “is not a party to the [agreements].” (Cynosure Letter dated Aug. 30, 2019 at 1.) The Purchase Agreements promise “on-site installation” and “clinical in-service” to train Plaintiffs on how to utilize the SculpSure and TempSure Systems. (Product Descriptions, Purchase Agreements at 2-3; Am. Compl. ¶¶ 63-64.) They also limit cancellation of purchase, stating that “[a]ll [s]ales are final [and] Cynosure [g]rants no right of return.” (Purchase Agreements at 1; Cynosure Letter dated Aug. 30, 2019 at 1.)

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iii. The Finance Agreement with Defendant for TempSure System

The Finance Agreement states that “[Defendant] agrees to lend to [Plaintiffs] and [Plaintiffs] agree to borrow[] from [Defendant] an amount for the financing of the [TempSure System]” and that Plaintiffs “authorize [Defendant] to pay [Cynosure] for the [TempSure System].” (Agreement, Finance Agreement at 2, annexed to Am. Compl. as Ex. 10, Docket Entry No. 21.) It requires Plaintiffs to make monthly installment payments of $99 for the first six months, followed by sixty monthly payments of $3, 349.29. (Monthly Installment Payment, Finance Agreement at 2; Am. Compl. at ¶¶ 55-56.) It also requires Plaintiffs to make an advanced payment of $99 and a documentation fee of $350. (Advanced Payment (if any) and Documentation Fee (if any), Finance Agreement at 2.) The Finance Agreement does not specify the principal amount to be financed. (Am. Compl. ¶ 57.)

The Finance Agreement includes, among others, (1) a choice-of-law provision, (2) a warranty disclaimer provision, and (3) an agency disclaimer provision. The choice of law provision states:

This [Finance Agreement] shall be governed and construed under the laws of the State of New York (NY), without reference to its principle of conflicts of laws and is deemed to have been performed in Nassau County, NY. [Plaintiffs] submit to the jurisdiction of NY and agree that the state and federal courts sitting in Nassau County, New York, shall have the exclusive jurisdiction over any action or proceeding to enforce this [Finance Agreement] or any action or proceeding arising under this [Finance Agreement].

(General, Finance Agreement at 2.) With respect to the warranty disclaimer, the Finance Agreement states:

Disclaimer of Warranties and Claims. We make no representation or warranty to any matter whatsoever including the merchantability or fitness for particular purpose the [TempSure System]. This [Finance Agreement] is irrevocable. Your obligation to pay all amounts hereunder is non-cancellable, absolute, and unconditional and will not be subject to any reduction, setoff,
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defense, counterclaim, deferment or recoupment for any reason, even if the [TempSure System] is damaged, destroyed or defective.

(Disclaimer of Warranties and Claims, Finance Agreement at 2 (emphasis in original).) The Finance Agreement also includes two agency disclaimer provisions. One is included on the face of the Finance Agreement in the warranty disclaimer provision and states:

You acknowledge you selected the [TempSure System] and the supplier and your supplier is not our agent, nor are we their agent. You acknowledge that no one, including the supplier, has been authorized to waiver or change any term or condition of this [Finance Agreement]. No representation by the supplier as to any matter shall bind us or affect your duty to pay all amounts and perform all obligations hereunder. You will use the [TempSure System] for commercial purposes only, in compliance with the law and not for any personal, family or household use.

(Id.) The second disclaimer provision is included in an Equipment Acceptance Certificate[5] (the “Acceptance Certificate”), incorporated into the Finance Agreement, which states:

Neither the Vendor nor any of its salespersons or other agents are agents of ours or are authorized to waive or modify any term or condition of this Acceptance Agreement, the Agreement and/or related documents. Any representation as to the Equipment or any other matter made by the Vendor shall not in any way affect your duty to make payments to us and perform all your other obligations as set forth in the Agreement or the other documents related thereto.

(Acceptance Certificate ¶ 3, Finance Agreement at 1.) The Acceptance Certificate also provides that Plaintiffs “irrevocably accept[ed]” the TempSure System “AS IS” and Defendant made “NO EXPRESS OR IMPLIED WARRANTIES AS TO ITS MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE.” (Acceptance Certificate ¶ 1, Finance Agreement at 1-2 (emphasis...

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