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Greenfish Ii, L.P., By and Through Its General Partner v. International Portfolio

July 23, 2012


The opinion of the court was delivered by: Goldberg, J.

Memorandum Opinion

This case involves Plaintiffs' claim that Defendants engaged in a "widespread, premeditated pattern of deception and fraud" involving the solicitation of investment money for the purchase of medical debt from hospitals.*fn1 (Comp., ¶ 1.) Presently at issue is which of Plaintiffs' claims, if any, enjoy proper venue in the Eastern District of Pennsylvania, and which should be either dismissed or transferred pursuant to 42 Pa.C.S. § 5103 to the Court of Common Pleas of Montgomery County. These questions arise from a motion to dismiss based upon improper venue.

I. Factual and Procedural History

Because multiple Plaintiffs and Defendants are involved in this case, and the claims entail several complicated business transactions, we first provide a factual background of the allegations and business relationships between the parties.

Plaintiffs, who are investors in discounted portfolios of medical receivables, have sued the following Defendants: International Portfolio, Inc. ("IPI"), its principals Richard Shusterman and Robert Feldman ("IPI Principals"), IPI's attorneys William Weiner, Peter Tucci and Gary Perkiss, as well as the law firms of Fox Rothschild LLC and Duane Morris LLC ("Attorney Defendants"), DSP Holdings, Inc. ("DSP"), and its principal Michael Zoldan. Plaintiffs allege that IPI, through its principals and attorneys, fraudulently induced them into purchasing portfolios of medical debt by intentionally misrepresenting the existence of a secondary market for resale of that debt. Plaintiffs further assert that DSP and Zoldan assisted the scheme by creating fraudulent valuations of the debt portfolios at the direction of IPI. Plaintiffs claim that these fraudulent misrepresentations were part of a scheme by Shusterman, Feldman, Zoldan and DSP to use IPI to sell the same debt to multiple investors, such as Plaintiffs, and thereafter use the money solicited from new investors to repurchase accounts from previous investors, thereby creating the illusion of a secondary market. (Comp., ¶¶ 1-7, 98, 126.)

According to Plaintiffs, Defendants represented that IPI would purchase debt from certain hospitals, bundle it into "portfolios" and sell it directly to Plaintiffs.*fn2 (Id., ¶¶ 34-35.) IPI and DSP would then supplement information regarding the outstanding debts, begin collection efforts, and monitor and remit to Plaintiffs any payments made toward the debts. (Id., ¶¶ 38-41.) Plaintiffs claim that Defendants fraudulently represented that a strong secondary market of buyers for the portfolios existed, and that IPI would assist Plaintiffs to resell the portfolios. (Id.)

Plaintiffs allege that they relied upon these representations in purchasing several portfolios from IPI. Specifically, Plaintiff Roundstone purchased ten portfolios between September 2008 and June 2010, and Plaintiff Greenfish purchased five portfolios throughout 2009. (Comp., Exs. D, L; ¶¶ 56-57.) As contemplated from the outset, Greenfish and IPI subsequently entered into "Repurchase Agreements" whereby IPI agreed to repurchase, purportedly in order to resell to third-party buyers, the first four of the portfolios previously sold to Greenfish ("Portfolios 1-4"). (Comp., ¶ 80; Ex. Q.)Each of the Greenfish Repurchase Agreements contained the following forum selection clause:

The parties agree that any legal actions between Buyer and Seller regarding the purchase of the Accounts hereunder shall be originated in a court of competent jurisdiction in the Commonwealth of Pennsylvania with venue in Montgomery County, Pennsylvania, and each party hereby consents to the jurisdiction of such court in connection with any action or proceeding initiated concerning this Agreement. (Comp., Ex. Q, § 10.8)

Those agreements also contained the following integration clause:

This Agreement, the Confidentiality Agreement, and the instruments to be delivered by the parties pursuant to the provisions hereof constitute the entire agreement between the parties and supersedes all prior agreements between the parties with respect to the subject matter hereof and thereof. To the extent there exists any inconsistency between the provisions of this Agreement and any other agreement entered into between the parties, the provisions of this Agreement shall govern. (Id., § 10.6.)

IPI entered into similar Repurchase Agreements with Roundstone in February 2010. (Comp. Ex. S.) However, the Roundstone Repurchase Agreements do not contain a forum selection clause. (Id.) Aside from a small portion of two of the Greenfish portfolios, IPI has not repurchased any of the portfolios subject to the Greenfish or Roundstone Repurchase Agreements. (Comp., ¶¶ 88, 96.)

In the Summer of 2010, Roundstone became concerned with DSP's collection efforts, and met with Zoldan to discuss those concerns. (Id., ¶ 97.) Roundstone alleges that at this meeting Zoldan told them that he had fraudulently created portfolio valuations at the direction of IPI. (Id., ¶ 98.) Roundstone then hired Shafritz and Brate, P.A. ("S&B") to audit and assume management of the portfolios. (Id., ¶ 100.) The S&B audit allegedly uncovered numerous problems with the portfolios, including the sale of debt previously owned by other investors (i.e., not "zero agency"), the sale of debt to multiple investors simultaneously, and the failure to remit payment to Plaintiffs for debt that had been paid or settled. (Id., ¶¶ 101-109.)

Plaintiffs instituted this action on December 13, 2011, asserting claims for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 ("RICO"), breach of contract, fraud in the inducement, aiding and abetting fraud, negligent and innocent misrepresentation, conversion/misappropriation, intentional interference with contractual relations, and unjust enrichment. On January 3, 2012, IPI moved, pursuant to Rules of Civil Procedure 12(b)(3) and 12(b)(6), to dismiss Plaintiffs' entire complaint based upon the forum selection clause contained in the Greenfish Repurchase Agreements. (Doc. No. 18.) DSP, Zoldan and the Attorney Defendants also filed motions to dismiss, arguing that Plaintiffs' complaint failed to adequately state a claim against them. Plaintiffs opposed Defendants' motions, and oral argument was held on May 29, 2012. (Doc. No. 76.)

Following oral argument, and in light of the forum selection clause in the Greenfish Repurchase Agreements, Plaintiffs withdrew their opposition to IPI's motion, but only as it related to Greenfish's breach of contract claims. (Doc. No. 82.) Plaintiffs then moved, with agreement from IPI, to transfer all remaining claims to the Court of Common Pleas of Montgomery County pursuant to 42 Pa.C.S. § 5103, asserting that § 5103 authorizes the transfer of the entire matter to an appropriate state court upon dismissal of any claim for improper venue. Both ...

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