The opinion of the court was delivered by: (judge Caputo)
Defendants USA Sports, LLC ("USA Sports"), Joseph Mies ("Mies"), and Robert O'Leary ("O'Leary") move to dismiss Plaintiff Vital Pharmaceuticals' ("VPX") First Amended Complaint. Because VPX sufficiently states claims for successor liability against USA Sports and for breach of fiduciary duty against Mies, Defendants' motion to dismiss Counts I-IV and Count VII will be denied. However, because VPX seeks relief against a non-party to this action in its claim to set aside a fraudulent transfer pursuant to the Pennsylvania Uniform Fraudulent Transfer Act, and because VPX fails to adequately allege a claim for breach of the Uniform Commercial Code, Defendants' motion to dismiss Counts V-VI will be granted.
The facts as alleged in VPX's First Amended Complaint are as follows:
VPX is a leading provider of dietary supplements and beverages. From late December 2007 through February 2008, VPX delivered $579,274.65 in products to Bob O'Leary Health Food Distributor Co., Inc. d/b/a Boss Nutrition ("BOSS"), a wholesale distributor of nutritional and health products.*fn1 O'Leary was the sole owner of BOSS until approximately October 1, 2004. At that time, O'Leary sold his entire interest in BOSS to Dynamic Health Products, Inc. ("DHP"), but O'Leary remained as landlord for BOSS/DHP. Articles of Merger confirming the BOSS/DHP merger, however, were not filed with the State of Florida until late March 2008.*fn2
The DHP/BOSS merger occurred subject to a merger agreement executed by Mandeep K. Taneja. After the merger, Mandeep K. Taneja became the CEO and Director for BOSS, while also remaining as the CEO, President, Director and principal shareholder of DHP. Similarly, BOSS' Chief Operating Officer, Mies, became an employee of DHP.
In early April 2008, VPX filed a lawsuit against BOSS in the 17th Judicial Circuit in and for Broward County, Florida (the "Florida action"), docketed as case number 08-14868. VPX obtained summary judgment in the Florida action and final judgment was ultimately entered in favor of VPX and against BOSS in the amount of $566,717.73 plus interest.
VPX, though, has been unable to collect on the final judgment in the Florida action because DHP/BOSS sold the assets of BOSS to USA SPORTS, LLC ("USA Sports"), a wholesale distributor of nutritional and health products, on June 30, 2009 for $2,223,351.03.*fn3 The purchase was financed in part by a personal loan from O'Leary to USA Sports in exchange for a ten percent (10%) equity ownership interest in USA Sports and a position of "industry advisor" for USA Sports. Prior to the sale, DHP/BOSS had assets valued at $3,306,409.73. The sale of assets included inventory, accounts receivable, and other intangible assets. As a result of the sale, DHP/BOSS was left with virtually no assets.
USA Sports retained multiple BOSS employees in identical capacities after the purchase. These employees included: (1) BOSS controller Mike Kilzi; (2) BOSS regional manager Ken Collins; (3) BOSS marketing manager Jim Rainey; (4) BOSS sales representative Michelle Kalinoski; (5) BOSS employee Angela Balsta; and (6) BOSS Chief Operating Officer Joseph Mies. Moreover, USA Sports operates out of the same facilities and location of DHP/BOSS and engages in a business virtually identical to DHP/BOSS.
VPX, despite being engaged in litigation with BOSS in Florida, never received notice of the proposed sale of DHP/BOSS to USA Sports. VPX twice deposed Mies in the Florida action and Mies failed to notify VPX of the pending sale of DHP/BOSS to USA Sports. Mies also prepared sworn answers to Interrogatories in the Florida action in which he identified himself as Chief Operating Officer of BOSS, without revealing the contemplated sale of DHP/BOSS to USA Sports.
VPX instituted this action against USA Sports, Mies, and O'Leary on May 20, 2011. VPX subsequently filed its First Amended Complaint on July 22, 2011. The First Amended Complaint contains seven counts: (1) successor liability against USA Sports based on a "mere continuation" theory; (2) successor liability against USA Sports based on a "de facto merger" theory; (3) successor liability against USA Sports based on a fraudulent transaction to escape liability theory; (4) successor liability against USA Sports based on a transfer without fair and/or adequate consideration theory; (5) breach of Uniform Commercial Code Section 9-504 against USA Sports, Mies, and O'Leary; (6) action to set aside fraudulent transfer under Pennsylvania Uniform Fraudulent Transfer Act against USA Sports; and (7) breach of fiduciary duty against Mies. VPX's First Amended Complaint also seeks injunctive relief against DHP, a non-party to this action, and to have the transfer between DHP/BOSS and USA Sports set aside.
USA Sports, Mies, and O'Leary moved to dismiss the First Amended Complaint on September 9, 2011. Defendants argue that VPX's claims are defective and fail to state a claim for which relief can be granted. Alternatively, Defendants seek dismissal of VPX's claims for failure to join an indispensable party as VPX seeks equitable relief against a non-party to this action. Defendants' motion to dismiss has been fully briefed and argued, and is now ripe for disposition.
1. Motion to Dismiss Under 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6) motion, the Court's role is limited to determining if a plaintiff is entitled to offer evidence in support of their claims. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The Court does not consider whether a plaintiff will ultimately prevail. See id. A defendant bears the burden of establishing that a plaintiff's complaint fails to state a claim. See Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir.2000).
"A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). The statement required by Rule 8(a)(2) must 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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Detailed factual allegations are not required. Twombly, 550 U.S. at 555. However, mere conclusory statements will not do; "a complaint must do more than allege the plaintiff's entitlement to relief." Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). Instead, a complaint must "show" this entitlement by alleging sufficient facts. Id. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009).
As such, the inquiry at the motion to dismiss stage is "normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir.2011).
Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, a plaintiff has not pleaded "enough facts to state a claim to relief that is plausible on its face," Twombly, 550 U.S. at 570, meaning enough factual allegations "'to raise a reasonable expectation that discovery will reveal evidence of'" each necessary element. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.2008) (quoting Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S.Ct. at 1949. "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S.Ct. at 1949.
In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint, and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993). The Court may also consider "undisputedly authentic" documents when the plaintiff's claims are based on the documents and the defendant has attached copies of the documents to the motion to dismiss. Id. The Court need not assume the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 263 & n. 13 (3d Cir.1998), or credit a complaint's "'bald assertions'" or "'legal conclusions.'" Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429--30 (3d Cir.1997)).
2. Motion to Dismiss Under 12(b)(7)
Federal Rule of Civil Procedure 12(b)(7) provides for dismissal of a complaint for "failure to join a party under Rule 19." Fed. R. Civ. P. 12(b)(7). Thus, Rule 19 specifies the circumstances "in which the joinder of a particular party is compulsory." Cummings v. Allstate Ins. Co., no. 11-02691, 2011 WL 6779321, at *3 (E.D. Pa. Dec. 27, 2011) (citing Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 312 (3d Cir. 2007)). Rule 19 states:
A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:
(A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a ...