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Hadeed v. Advanced Vascular Resources of Johnstown, LLC

United States District Court, W.D. Pennsylvania

October 30, 2017

SAMIR HADEED, MD, and JOHNSTOWN HEART AND VASCULAR CENTER, INC., Plaintiffs,
v.
ADVANCED VASCULAR RESOURCES OF JOHNSTOWN, LLC; AVR MANAGEMENT, LLC; WASHINGTON VASCULAR INSTITUTE, LLC; and MUBASHAR CHOUDRY, MD, Defendants.

          MEMORANDUM OPINION

          KIM R. GIBSON, UNITED STATES DISTRICT JUDGE

         I. Introduction

         Pending before the Court is Plaintiff Samir Hadeed, MD (“Hadeed”) and Plaintiff Johnstown Heart and Vascular Center, Inc.'s (“JHVC”) Motion for Summary Judgment (ECF No. 40) and Defendant Advanced Vascular Resources of Johnstown, LLC (“AVR-Johnstown”), Defendant AVR Management, LLC (“AVR-Management”), Defendant Washington Vascular Institute, LLC (“WVI”), and Defendant Mubashar Choudry, MD's (“Choudry”) Motion for Judgment on the Pleadings and Motion for Summary Judgment on Plaintiffs' Complaint (ECF No. 44). These motions have been fully briefed. (See ECF Nos. 42, 43, 45, 46, 59, 60, 61, 62, 63, 64, 67.)

         This case arises from disputes over the operation of a vascular services center located in Johnstown, Pennsylvania. In short, Plaintiffs, who already operated a heart and vascular center in Johnstown, entered into a series of contracts with Defendants (or, at least, some of the Defendants) by which Plaintiffs would operate the “medical side” of the vascular services center and Defendants would manage the “business side” of the center. The present case ensued because Plaintiffs and Defendants argue that the other side of the dispute failed to comply with the duties imposed by these contracts.

         For the reasons that follow, Plaintiffs' Motion for Summary Judgment (ECF No. 40) is GRANTED IN PART and DENIED IN PART, and Defendants' Motion for Judgment on the Pleadings and Motion for Summary Judgment on Plaintiffs' Complaint (ECF No. 44) is GRANTED IN PART and DENIED IN PART.

         II. Jurisdiction and Venue

         The Court has diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(1) because Plaintiffs are citizens of different states than Defendants and the amount in controversy exceeds $75, 000. (See ECF Nos. 1 ¶¶ 1-7, 55-56; 10 ¶¶ 1-6.) Because a substantial part of the events underlying this case-namely, the alleged mismanagement of AVR-Johnstown-occurred in the Western District of Pennsylvania, venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(2).

         III. Procedural History

         Plaintiffs initiated this lawsuit by filing their Complaint on January 23, 2015. (ECF No. 1.) In essence, the Complaint alleged severe mismanagement of AVR-Johnstown by Defendants. (See Id. at ¶¶ 44-64.) The Complaint is divided into five counts: (1) breach of contract based on Defendants' mismanagement of AVR-Johnstown; (2) an accounting; (3) partition/dissolution of AVR-Johnstown; (4) breach of contract based on Defendants' failure to pay Plaintiffs' wages; and (5) fraudulent misrepresentation. (ECF No. 1 ¶¶ 44-64.) Plaintiffs seek damages for lost profits and revenues, diminution in ownership value, and attorneys' fees and costs. (Id. at 8-13.) Plaintiffs also seek a full and accurate accounting and the dissolution and distribution of the assets of AVR-Johnstown. (Id. at 9-10.)

         In response, Defendants filed their Answer on March 16, 2015, denying all liability and bringing five counterclaims against Plaintiffs, namely (1) breach of contract based on the Sublease and JHVC's Group Physician Agreement with WVI; (2) tortious interference with contractual relations; (3) conversion; (4) unjust enrichment; and (5) breach of fiduciary duty. (ECF No. 10 ¶¶ 114-36.)

         The Court denied Defendants' Motion for Leave to Amend Defendants' Answer, Affirmative Defenses and Counter-Claims to Plaintiff's Complaint (ECF No. 47) by Memorandum Opinion and Order of September 26, 2017. (ECF No. 77.)

         Most pertinent here, on October 17, 2016, Plaintiffs filed their Motion for Summary Judgment (ECF No. 40) and Defendants filed their Motion for Judgment on the Pleadings and Motion for Summary Judgment on Plaintiff's Complaint (ECF No. 44). The extensive briefing and responses on these motions concluded on November 17, 2016. (See ECF Nos. 42, 43, 45, 46, 59, 60, 61, 62, 63, 64, 67.)

         IV. Factual History

         The following facts are undisputed unless otherwise noted.[1]

         The present case arises from various disputes relating to the operation of AVR-Johnstown-a limited liability company created under Delaware law to operate and manage a vascular center within Hadeed's already existing solo cardiovascular practice in Johnstown, Pennsylvania. (ECF No. 46 ¶ 1; ECF No. 61 ¶ 1.) Hadeed's cardiovascular practice is conducted through JHVC. (ECF No. 46 ¶ 2; ECF No. 61 ¶ 2.)

         Choudry formed Advanced Vascular Resources, LLC (“AVR”)[2] to develop vascular facilities on a national level. (ECF No. 46 ¶ 5; ECF No. 61 ¶ 5.) AVR-Johnstown is one such facility. (ECF No. 46 ¶ 5; ECF No. 61 ¶ 5.) To foster the development and operation of vascular facilities across the country, Choudry also formed AVR-Management to oversee the management of AVR's vascular labs and formed WVI to oversee compensation, namely the compensation for JHVC. (ECF No. 42 ¶¶ 25-26; ECF No. 63 ¶¶ 25-26.)

         Sometime in 2013, Donald Greer (“Greer”), the Chief Operating Officer of AVR, flew to Johnstown, Pennsylvania to meet with Hadeed to discuss opening an outpatient vascular center in the Johnstown area. (ECF No. 42 ¶ 11; ECF No. 63 ¶ 11.) After numerous discussions and negotiations, Hadeed and JHVC reached an agreement with AVR to open a vascular lab in Johnstown, which would become AVR-Johnstown. (ECF No. 42 ¶ 13; ECF No. 63 ¶ 13.) Numerous contracts were executed to govern the relationships between the various parties, including (1) a Sublease between JHVC and AVR-Johnstown governed by Pennsylvania law, (2) a Group Physician Agreement (“GPA”) between JHVC and WVI governed by Maryland law, (3) an Operating Agreement between AVR, AVR-Management, and JHVC governed by Delaware law, (4) a Management Agreement between AVR-Johnstown and AVR-Management governed by Delaware law, and (5) a Subscription Agreement between AVR-Johnstown and JHVC governed by Delaware law. (ECF No. 42 ¶¶ 15, 46; ECF No. 46 ¶ 12; ECF No. 61 ¶ 12; ECF No. 63 ¶¶ 15, 46.) Under the Operating Agreement, JHVC owns a 55% majority ownership interest in AVR-Johnstown and AVR holds a 45% ownership interest. (ECF No. 46 ¶ 17; ECF No. 61 ¶ 17.)

         After opening in April 2014, AVR-Johnstown was an immediate success. (ECF No. 46 ¶ 6; ECF No. 61 ¶ 5.) Both parties directly attribute this success to Hadeed and recognize him as “one of the best” physicians. (ECF No. 42 ¶ 70; ECF No. 63 ¶ 70.) However, complications soon arose.

         While it is undisputed that AVR-Johnstown soon experienced cash flow problems, the parties disagree as to whether these problems were naturally caused by the great success of AVR-Johnstown or by Defendants' failure to properly fund AVR-Johnstown as required by contract. (ECF No. 46 ¶ 7; ECF No. 61 ¶ 7.) Despite having the contractual duty and authority to manage the business affairs of AVR-Johnstown-including staffing, accounting, management of employees, credentialing, billing, coding, compliance, and marketing of AVR-Johnstown (ECF No. 46 ¶¶ 20-21; ECF No. 61 ¶¶ 20-21), Defendants failed to timely pay at least some bills and invoices, including bills relating to contractors retained to build-out the vascular lab, vendors and/or suppliers of medical supplies and equipment, rent payments, and compensation to JHVC for physician services. (ECF No. 42 ¶¶ 73-94; ECF No. 63 ¶¶ 73-94.).

         As a consequence, various third parties dealing with AVR-Johnstown placed credit holds on AVR-Johnstown, preventing AVR-Johnstown from receiving medical supplies and equipment for at least some period of time and inducing threats of mechanic's liens against the vascular lab. (ECF No. 42 ¶¶ 73-94; ECF No. 63 ¶¶ 73-94.) However, the parties dispute the duration of this non-payment, i.e., whether and, if so, when nonpayment issues were resolved, the cause of the non-payment/untimely payment, and whether the lack of supplies and equipment resulted in patients being turned away or other detriment to the business. (See ECF No. 42. ¶¶ 91-85; ECF No. 63 ¶¶ 91-95.)

         Despite having a contractual responsibility for insurance credentialing and informing AVR-Johnstown that it was approved for UPMC insurance, AVR-Management failed to secure credentialing and approval for UPMC insurance, resulting in AVR-Johnstown not being reimbursed for procedures performed on patients insured by UPMC. (ECF No. 42 ¶¶ 100-105; ECF No. 63 ¶¶ 100-105.) Additionally, WVI stopped remitting any salary payment for Hadeed after the end of November 2014. (ECF No. 42. ¶ 106; ECF No. 63 ¶ 106.) Although the parties dispute the extent of the issue, there were at least some issues with the payment of AVR-Johnstown's employees' health care coverage (ECF No. 42 ¶ 108; ECF No. 63 ¶ 108.)

         After encountering these problems, [3] on or around November 3, 2014, JHVC gave 90 days' notice to WVI that JHVC was exercising its option to terminate the GPA. (ECF No. 42 ¶¶ 117-118; ECF No. 61 ¶¶ 117-118.) JHVC also terminated the Sublease, [4] effective December 1, 2014, but did not do so with 120 days' notice. (ECF No. 42 ¶ 119; ECF No. 63 ¶ 119.) Shortly thereafter, in December 2014, regardless of the state of the parties' legal relationship, the parties' actual business relationship ended as a practical matter. Plaintiffs changed the locks on the vascular center premises (ECF No. 42 ¶ 120; ECF No. 63 ¶ 120) and ran a profitable business at the same physical location without Defendants' meaningful involvement (ECF No. 46 ¶¶ 8-11; ECF No. 61 ¶¶ 8-11.) Plaintiffs are also currently creating a vascular center in Richland Township, seven miles from the prior place of business. (ECF No. 46 ¶ 11; ECF No. 61 ¶¶ 8-11.)

         V. Legal Standard

         A. Judgment on the Pleadings

         Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Under Rule 12(c), judgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law. Minnesota Lawyers Mut. Ins. Co. v. Ahrens, 432 F. App'x 143, 147 (3d Cir. 2011) (quoting Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)). Courts must view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. Id. (quoting Rosenau, 539 F.3d at 221).

         B. Summary Judgment

         “Summary judgment is appropriate only where . . . there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law.” Melrose, Inc. v. Pittsburgh, 613 F.3d 380, 387 (3d Cir. 2010) (quoting Ruehl v. Viacom, Inc., 500 F.3d 375, 380 n.6 (3d Cir. 2007)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56(a). Issues of fact are genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). Material facts are those that will affect the outcome of the trial under governing law. Anderson, 477 U.S. at 248. The Court's role is “not to weigh the evidence or to determine the truth of the matter, but only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the nonmoving party.” Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009). “In making this determination, ‘a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor.'” Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000) (quoting Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994)).

         The moving party bears the initial responsibility of stating the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the moving party meets this burden, the party opposing summary judgment “may not rest upon the mere allegations or denials” of the pleading, but “must set forth specific facts showing that there is a genuine issue for trial.” Saldana v. Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 n.11 (1986)). “For an issue to be genuine, the nonmovant needs to supply more than a scintilla of evidence in support of its position-there must be sufficient evidence (not mere allegations) for a reasonable jury to find for the nonmovant.” Coolspring Stone Supply v. Am. States Life Ins. Co., 10 F.3d 144, 148 (3d Cir. 1993); see also Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (noting that a party opposing summary judgment “must present more than just bare assertions, conclusory allegations or suspicions to show the existence of a genuine issue”) (internal quotation marks omitted).

         VI. Discussion

         The Court will first quickly dispose of the claims and counterclaims that the parties have agreed to withdraw. Then, the Court will analyze the parties' arguments in favor of and in opposition to summary judgment and judgment on the pleadings on the remaining claims and counterclaims of the Complaint and Answer.

         A. Withdrawals of Claims and Counterclaims by the Parties 1. Withdrawal of Count 5 of the Complaint

         In their Response to Defendants' Motion for Judgment on the Pleadings and Motion for Summary Judgment, Plaintiffs expressly “consent to the dismissal of Count 5 of the Complaint- Fraudulent Misrepresentation.” (ECF No. 59 ¶ 2.)

         Therefore, the Court grants summary judgment in favor of Defendants as to Count 5 of the Complaint and dismisses Plaintiffs' fraudulent misrepresentation claim with prejudice.

         2. Withdrawal of Count II and Count III of the Answer

         In their Memorandum of Law in Opposition to Plaintiffs' Motion for Summary Judgment, Defendants expressly withdraw their counterclaims for tortious interference with contractual relations and conversion. (ECF No. 64 at 14.)

         Therefore, the Court grants summary judgment in favor of Plaintiffs as to Count II and Count III of the Answer and dismisses Defendants' tortious interference and conversion counterclaims with prejudice.

         3. Dismissal of Claims and Counterclaims to the Extent They Are Asserted by or Against Hadeed and Choudry

         In Defendants' Brief in Support of Defendants' Motion for Judgment on the Pleadings and Motion for Summary Judgment on Plaintiffs' Complaint, Defendants argue that all claims in the Complaint brought against Choudry must be dismissed because Choudry is not a party to any of the agreements in this case and, thus, cannot be liable for breaching the agreements. (ECF No. 45 at 6-7.) Similarly, Defendants argue that all claims brought by Hadeed must be dismissed because he was also not a party to any of these agreements and, thus, has no right to enforce the agreements. (Id. at 6.)

         Plaintiffs largely agree, with the caveat that the “non-privity” status of Hadeed and Choudry must limit both Plaintiffs' claims and Defendants' counterclaims.[5] (See ECF No. 59 ¶ 2.) In their Brief in Opposition to Defendants' Motion for Judgment on the Pleadings and Motion for Summary Judgment, Plaintiffs explain that they “do not object to the dismissal of all claims brought by Dr. Hadeed against Defendants.” (ECF No. 60 at 7.) Likewise, Plaintiffs “do not object to summary judgment being granted in favor of Dr. Choudry on all counts.” (Id.) However, as to both Hadeed and Choudry, Plaintiffs suggest that, for the same reason articulated by Defendants, i.e., not being a parties to the contracts, all counterclaims brought by Choudry against Plaintiffs and by Defendants against Hadeed should be dismissed as well. (Id.) In essence, Plaintiffs consent to the removal of both Choudry and Hadeed as parties to this case.

         The Court, with one exception, agrees that the dismissal of all claims brought by and against Hadeed and Choudry is appropriate based on lack of privity.

         “It is fundamental contract law that one cannot be liable for a breach of contract unless one is a party to that contract.” Norfolk S. Ry. Co. v. Pittsburgh & W. Virginia R.R., 153 F.Supp.3d 778, 806 (W.D. Pa. 2015), aff'd, 870 F.3d 244 (3d Cir. 2017) (quoting Electron Energy Corp. v. Short, 597 A.2d 175, 177 (Pa. Super. Ct. 1991)). The Court finds, and both parties agree, that neither Hadeed nor Choudry was a party to any of the agreements relevant to this case. (See ECF No. 46 ¶¶ 13, 16; ECF No. 61 ¶¶ 13, 16.) Thus, Hadeed and Choudry cannot be personally liable for breaches of the agreements in this case. Furthermore, no facts presented to the Court or arguments of the parties suggest that the non-parties Hadeed and Choudry have any other right to enforce any of the provisions of the agreements in their individual capacities.

         Consequently, because all of the remaining claims of the Complaint are based on the agreements, [6] the Court grants summary judgment in favor of Choudry as to all claims in the Complaint and dismisses all claims brought against Choudry in the Complaint with prejudice. Additionally, because all of the remaining counterclaims of the Answer are contingent upon the agreements except for the unjust enrichment claim in Count IV, [7] the Court grants summary judgment in favor of Hadeed as to all counterclaims in the Answer except for Count IV and dismisses all counterclaims brought against Hadeed except for Count IV of the Answer with prejudice.

         4. The Remaining Claims and Counterclaims for Consideration

         To summarize the status of this case after these preliminary dismissals, JHVC is now the only remaining Plaintiff. Hadeed remains in the case only as a Counter-Defendant in regard to the unjust enrichment claim in Count IV of the Answer. The only remaining Defendants are AVR-Johnstown, AVR-Management, and WVI. Choudry is no longer a party to this case.

         After these preliminary dismissals, the remaining claims in the Complaint are: (1) Count 1 for breach of contract based on mismanagement, (2) Count 2 for an accounting, (3) Count 3 for dissolution/partition, and (4) Count 4 for unpaid wages. The remaining counterclaims in the Answer are: (1) Count I for breach of contract, (2) Count IV for unjust enrichment, and (3) Count V for breach of fiduciary duty.[8] All remaining claims in the Complaint were brought against all of the remaining Defendants, i.e., AVR-Johnstown, AVR-Management, and WVI. (See ECF No. 1.) All remaining counterclaims in the Answer were brought against all Plaintiffs, but, with the exception of Count IV of the Answer, only JHVC is potentially subject to these remaining counterclaims. (See ECF No. 7.)

         B. Remaining Claims of the Complaint[9]

         1. Count 1: Breach of Contract-Mismanagement

         i. Overview of Count 1

         Under Count 1 of the Complaint, JHVC asserts a breach of contract claim against AVR-Johnstown, AVR-Management, and WVI.[10] (ECF No. 1 ¶¶ 44-47.) Plaintiffs allege that nonspecific Defendants violated contractual duties owed to non-specific Plaintiffs from non-specific “Agreements referenced herein” through assorted instances of mismanagement. (Id. ¶¶ 45-46.) The alleged mismanagement is detailed with some specificity. However, Plaintiffs have not clearly identified which agreement(s) were allegedly breached or which Defendant(s) were in breach. Plaintiffs' Brief in Support of Plaintiffs' Motion for Summary Judgment argues only that the Managing Agreement between AVR-Johnstown and AVR-Management was violated due to mismanagement.[11] (See ECF No. 43 at 6-17.) However, Plaintiffs' Brief in Opposition to Defendants' Motion for Judgment on the Pleadings and Motion for Summary Judgment appears to argue that the Operating Agreement was breached due to mismanagement. (See ECF No. 60 at 8-9.) Again, the Complaint itself ambiguously refers to “the Agreements.” (ECF No. 1 ¶¶ 45-46.)

         Despite these ambiguities, based on the Complaint and the briefs, the Court concludes that Count 1's claim of mismanagement alleges breaches of the Managing Agreement and the Operating Agreement.

         ii. The Management Agreement

         The Management Agreement obligates AVR-Management to perform certain administrative duties relating to the business and management of AVR-Johnstown, including most issues regarding the employment of support personnel, administering the compensation of physicians, acquiring and disposing of office and medical supplies and equipment, leasing and maintaining the premises, and billing and collecting payment from patients. (ECF No. 62-9.) In exchange for the provision of these services, AVR-Management was to receive a fee equal to between two and three percent of AVR-Johnstown's gross revenue. (Id.)

         Overall, Plaintiffs assert that AVR-Management breached the Management Agreement by failing to satisfy almost all of its contractual obligations to AVR-Johnstown. Some of Plaintiffs' evidence is contested. However, Plaintiffs have provided undisputed evidence that Defendants failed to timely pay at least some bills and invoices, including bills for contractors retained to “build-out” the vascular lab, vendors and/or suppliers of medical supplies and equipment, and rent payments. (ECF No. 42 ¶¶ 73-94; ECF No. 63 ¶¶ 73-94.). As a result, at least some third parties dealing with AVR-Johnstown placed credit holds on AVR-Johnstown, which prevented AVR-Johnstown from receiving medical supplies and equipment for at least some period of time and inducing threats of mechanic's liens against the vascular lab. (ECF No. 42 ¶¶ 73-94; ECF No. 63 ¶¶ 73-94.) However, the parties dispute the duration of this non-payment, i.e., whether and when nonpayment issues were resolved, and whether the lack of supplies and equipment resulted in patients being turned away. (See ECF No. 42. ¶¶ 91-85; ECF No. 63 ¶¶ 91-95.)

         Additionally, AVR-Management-in direct contradiction to information it expressly conveyed to AVR-Johnstown-failed to secure credentialing and approval for UPMC insurance, resulting in AVR-Johnstown not being reimbursed for procedures performed on patients insured by UPMC. (ECF No. 42 ¶¶ 100-105; ECF No. 63 ¶¶ 100-105.)

         Yet, regardless of these allegations and the facts presented to support them, Defendant argues that Plaintiffs lack standing to enforce the Management Agreement. (ECF No. 64 at 3-4.) Defendants argue that, under Delaware law, [12] non-parties to a contract normally have no rights under the contract. Metcap Securities LLC v. Pearl Senior Care, Inc., No. Civ. A. 2129-VCN, 2007 WL 1498989, at *7 (Del. Ch. May 16, 2007). “[O]nly parties to a contract and intended third-party beneficiaries may enforce an agreement's provisions.” Amirsaleh v. Board of Trade of City of New York, Inc., Civil Action No. 2822-CC, 2008 WL 4182998, at *4 (Del. Ch. Sept. 11, 2008) (citing NAMA Holdings, LLC v. Related World Market Center, LLC, 922 A.2d 417, 434 (Del. Ch. 2007)).

         Applying these principles to the Management Agreement, Defendants observe that Plaintiffs admit they are not a party to the Management Agreement, which was executed between Defendant AVR-Management and Defendant AVR-Johnstown. (See ECF No. 43 at 7.) Moreover, Plaintiffs have not made any showing that they are an intended third-party beneficiary of the Management Agreement and, in fact, Plaintiffs concede that the Management Agreement provides that AVR-Management is to provide management services “on behalf of and for the benefit of AVR-Johnstown. (Id.)

         The Court agrees with Defendants' interpretation of Delaware law, agrees that Plaintiffs are not parties to the Management Agreement, and agrees that Plaintiffs have not established that they are third-party beneficiaries to the Management Agreement. Thus, to the extent that Count 1 asserts a cause of action under the Management Agreement, the Court grants summary judgment in favor Defendants and dismisses the claim with prejudice.

         iii. The Operating Agreement

         a. Defendants' Arguments for Dismissal

         Defendants do not contest whether Plaintiffs, namely the remaining Plaintiff JHVC, have a right to seek enforcement of the terms of the Operating Agreement.[13] Instead, Defendants make two primary arguments.

         First, Defendants argue that a claim for mismanagement under the Operating Agreement cannot be sustained against any Defendants except for AVR-Management because “only AVR-Management was contractually obligated to manage AVR-Johnstown pursuant to the Operating Agreement that was signed by JHVC.” (ECF No. 45 at 8.) The Court agrees, and Plaintiffs have not offered any counterargument. (See ECF No. 60.) Therefore, Plaintiffs' claim for mismanagement in Count 1 is dismissed to the extent it is brought against any Defendant other than AVR-Management.

         Second, Defendants argue that the Operating Agreement relieves AVR-Management from liability “except to the extent the Person's actions constitute willful misconduct or recklessness.” (ECF No. 45 at 9) (quoting ECF No. 1, Ex. E, Art. 4.5.) Defendants then suggest that the Complaint must be dismissed because it fails to allege that AVR-Management engaged in willful misconduct or reckless conduct with respect to its duties under the Operating Agreement. (Id.)

         The Court agrees with Defendants that the Operating Agreement requires willful or reckless conduct to incur liability. (See id.) However, the Court finds that the Complaint's allegations are, nevertheless, sufficient under federal pleading standards. See supra Part V.B.

         The Complaint alleges that Defendants failed to pay various creditors, failed to provide medical supplies and equipment which were necessary to treat patients, failed to pay General Electric Healthcare for the vital piece of equipment known as a “C-Arm, ” failed to pay rent and utilities, failed to keep accurate financial records, used investment and revenues for other businesses, and failed to timely pay health insurance premiums for employees. (ECF No. 1 at ¶¶ 28-42.)

         The totality of these and other allegations of the Complaint and the reasonable inferences therefrom sufficiently state that AVR-Management's willful or reckless conduct violated the Operating Agreement. See Minnesota Lawyers, 432 F. App'x at 147 (quoting Rosenau, 539 F.3d at 221) (providing the standard for deciding a motion for judgment on the pleadings). Thus, the Court denies Defendants' motion for judgment on the pleadings as to the mismanagement count under the Operating Agreement.

         Moreover, while Defendants appear to seek dismissal of Count 1 under the Operating Agreement based only on their motion for judgment on the pleadings (see ECF No. 45 at 8-9), if Defendants also intended to challenge Count 1 under the Operating Agreement with both aspects of their joint motion, the Court would likewise deny Defendants' motion for summary judgment on this same matter. As Plaintiffs detail in their opposing brief, the record is likewise sufficient to demonstrate a triable issue of fact regarding the willfulness and/or recklessness of AVR-Management in regard to management. (See ECF No. 60 at 8-9.)

         b. Plaintiffs' Arguments for Summary Judgment

         Plaintiffs also moved for summary judgment as to Count 1. (See ECF No. 40 ¶ 2; ECF No. 43 at 6-17.) Given the Court's conclusions supra Part VI.B.1.iii.a, to succeed on this motion for summary judgment as to Count 1, Plaintiffs would need to offer undisputed facts to establish that AVR-Management breached the Operating Agreement through willful or reckless mismanagement. Plaintiffs have offered various depositions and other facts to support their argument. Yet, the undisputed material facts offered to the Court have not established that Plaintiffs are entitled to judgment as a matter of law. SeeMelrose, 613 F.3d at 387.

         As summarized supra Part IV and supra Part VI.B.1.ii, the record provided to the Court for the purposes of deciding Plaintiffs' Motion for Summary Judgment clearly establishes that AVR-Management failed to perfectly perform its contractual duties under the Operating Agreement. However, the undisputed facts demonstrate only that AVR-Management failed in its duties-not that it did so willfully or recklessly. The undisputed facts likely establish AVR-Management's negligent breach of its duties under the contract, but the Operating Agreement expressly limits liability to actions or inactions that “constitute willful misconduct or recklessness.” (ECF No. 1-6, Art. 4.5.) The record demonstrates AVR-Management's failure to make payments, certify insurance, and to timely perform other duties, see supra Part IV and supra Part VI.B.1.ii, but AVR-Management's state of mind (through its agents), degree of fault, and intent is not beyond dispute and these factual determinations are material to whether AVR-Management acted or failed to act willfully or recklessly.[14]

         A jury could certainly come to the conclusion that AVR-Management's actions and/or inactions were willful or reckless, but the Court cannot come to that determination as a matter of law. Therefore, Plaintiffs' Motion for Summary Judgment (ECF No. 40) as to Count 1 for mismanagement under the Operating Agreement is denied.

         iv. Plaintiffs' Request for Attorneys' Fees

         Lastly, Count 1's claim of damages includes “attorneys' fees and costs.” (ECF No. 1 ¶ 47.) As Defendants correctly point out, under Delaware law, attorneys' fees will not be awarded “unless clearly provided for by statute or contract.” Pedrick v. Roten, 70 F.Supp.3d 638, 653-54 (D. Del. 2014) (quoting Honaker v. Farmers Mut. Ins. Co., 313 A.2d 900, 904 (Del. Super. Ct. 1973)).[15]Plaintiffs have not identified any statute or contractual provision that provides for attorneys' fees and, therefore, summary judgment is granted in favor of Defendants' in regard to Count 1's request for attorneys' fees. This request is dismissed with prejudice.

         v. Summary of the Court's Holding on Count 1

         Count 1 remains only as brought by JHVC against AVR-Management and only as to breaches of the Operating Agreement regarding mismanagement. In addition, Plaintiffs' request for attorneys' fees is dismissed with prejudice.

         2. Count 2: Accounting i. Parties' Arguments

         In Count 2, the Complaint alleges that “Defendants have failed to keep accurate and adequate records as to the financial performance of the Broad Street facility, ” which has “resulted in the capital shares/interests and revenues of the parties being incomplete and/or inaccurate.” (ECF No. 1 ¶¶49-50.) The Complaint requests “a full and accurate accounting relative to the financial affairs of the Broad Street facility.” (Id. at 9.)

         Defendants ask that Count 2 be either dismissed via judgment on the pleadings or via summary judgment. (ECF No. 45 at 9.) Defendants' first argue that Delaware law should apply to Count 2 and, under Delaware law, an accounting “reflects a request for a particular type of remedy, rather than an equitable claim in and of itself.” Stevanov v. O'Connor, Civ. No. 3820-VCP, 2009 WL 1059640, at *15 (Del. Ch. Apr. 21, 2009). Thus, Plaintiffs cannot bring this separate cause of action for an accounting. (ECF No. 45 at 10.)

         In the alternative, Defendants argue that, even if the cause of action is considered under Pennsylvania law, summary judgment should be granted because an accounting is an equitable claim for which Plaintiffs have an adequate remedy at law in the breach of contract action in Count 1 and the discovery already taken with respect to that claim. (Id.) (citing Buczek v. First Nat'l Bank of Mifflintown, 531 A.2d 1122, 1124 (Pa. Super. Ct. 1987). In essence, Defendants suggest that Plaintiffs have already received the relief requested in the accounting claim through discovery. (Id.)

         Plaintiffs do not deny that an accounting is an equitable remedy under Delaware law. (ECF No. 60 at 11) (citing Albert v. Alex Brown Mgmt. Servs., Inc., No. Civ. A. 762-N and 763-N, 2005 WL 2130607, at *11 (Del. Ch. Aug. 26, 2005)). Instead, Plaintiffs assert that the remedy of an accounting must be allowed to remain in the pleadings if Plaintiffs have pleaded cognizable underlying claims. (Id.) Plaintiffs then conclude that, because the Complaint properly stated the underlying claims, their request for an accounting is proper. (Id.) In response to Defendants' alternative argument regarding Pennsylvania law, Plaintiffs contend that there is a dispute of material fact as to whether they have an adequate remedy at law because they have received insufficient information as to the financial condition of AVR-Johnstown, as evidenced by their expert's opinion that Plaintiffs lack the supporting documentation necessary to verify the validity of the financial records accessed during discovery. (Id. at 12.)

         ii. Choice of Law

         As a threshold inquiry, the Court must determine the applicable law. It is well established that a “federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state.” Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir. 1994) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497 (1941)). In Pennsylvania, courts will “generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them.” Id. More specifically, Pennsylvania has adopted Section 187 of the Restatement (Second) of Conflict of Laws, which provides that the law of the chosen state will be applied:

unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue . . . .

Id. (citing Schifano v. Schifano, 471 A.2d 839, 843 n.5 (Pa. Super. Ct. 1984)); Restatement (Second) of Conflict of Laws § 187 (Am. Law. Inst. 1971)).

         As discussed above, the operative document that provides the remaining Plaintiff, JHVC, a cause of action against Defendants for breaches of contract (other than in regard to compensation[16]) is the Operating Agreement. The Operating Agreement clearly and expressly provides that it is governed by Delaware law.[17] (ECF No. 1-6, art. 10.6.) While neither party offered a choice of law argument-instead opting to argue in the alternative under both Delaware law and Pennsylvania law, the Court holds that this contractual choice of law provision in the Operating Agreement is enforceable to the extent it provides for the application of Delaware law to Count 2 because AVR-Johnstown is an LLC created under the laws of ...


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