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Razzano v. Vmi Nutrition, Inc.

United States District Court, W.D. Pennsylvania

May 9, 2018

ANTHONY J. RAZZANO, Plaintiff,
v.
VMI NUTRITION, INC., D/B/A GENYSIS BRAND SOLUTIONS, INC., AND JEFFERY REYNOLDS, INDIVIDUALLY AND AS A REGISTERED AGENT OF VMI NUTRITION, INC., D/B/A GENYSIS BRAND SOLUTIONS, INC. AND FEEL FIT ENTERPRISES LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          CYNTHIA REED EDDY UNITED STATES MAGISTRATE JUDGE.

         I. INTRODUCTION

         Presently before the court is a Motion to Dismiss (ECF No. 15) filed on behalf of Defendants VMI Nutrition, Inc. d/b/a Genysis Brand Solutions, Inc. (“VMI”), Jeffery Reynolds, and Feel Fit Enterprises LLC. For the reasons stated herein, the motion will be granted and the plaintiff will be granted leave to amend.

         II. STATEMENT OF FACTS

         Plaintiff Anthony J. Razzano's Amended Complaint (“Complaint”) (ECF No. 14) alleges as follows. Exclusive Supplement, Inc., a sports supplement company, issued one hundred shares of capital stock during its inception, which were owned by Mark Mangieri. Amended Complaint at ¶¶ 9, 10, 11. Plaintiff purchased stock and entered into a Shareholder Buy/Sell Agreement with Mangieri in June 2014, the combined effect of which was that Plaintiff' acquired 35 shares of stock in Exclusive, which stock had a minimum value of $390, 000.00. Id. at ¶¶ 12, 14. Subsequently, Plaintiff left his job as an accountant to become Exclusive's Chief Financial Officer. Id. at ¶15. In August 2014, the Food and Drug Administration (“FDA”) reinvestigated Exclusive's prior non-compliance and issued 14 citations for manufacturing and labeling noncompliance. Id. at ¶ 16-17. As a result, Mangieri resigned as Chief Executive Officer; Plaintiff replaced him in that office. Id. at ¶18. Thereafter, Exclusive and the FDA met in Philadelphia and Plaintiff agreed to conduct an investigation and provide a corrective action plan. Id. at ¶¶ 19-20. Pursuant to that internal investigation, Plaintiff found Mangieri did not know the components of Exclusive products' flavoring system and committed multiple FDA manufacturing guideline violations. Id. at ¶ 22. Plaintiff obtained formulas for Exclusive's products and presented them to Defendant VMI in Salt Lake City, Utah to see if the latter could match the products' flavoring system and cure the compliance issues. Id. at ¶¶ 23-24. In December 2014, Plaintiff terminated its prior manufacturer, Vitaquest, for cause. Id. at ¶ 25. Thereafter, Exclusive and VMI entered into a supply agreement. Id. at ¶ 26 & Ex. A. Reynolds signed the Agreement as Chief Executive Officer of VMI, and Razzano, as Chief Executive Officer of Exclusive. (ECF No. 14-1 at 14).

         On March 7, 2015, Mangieri resigned as President of Exclusive and Plaintiff was appointed President by unanimous consent of the Board of Directors of Exclusive. Id. at ¶ 28. Exclusive terminated Mangieri for cause and repurchased Mangieri's 65 shares of Exclusive stock, thus leaving Plaintiff as the sole individual shareholder of the issued Exclusive stock. Id. at ¶¶ 29-30. Mangieri sued Plaintiff, Exclusive, and others in the Court of Common Pleas of Allegheny County. Id. at ¶ 31. After cross motions for summary judgment were denied, Razzano attempted to sell his 35 individual shares of stock. Id. at ¶ 32.

         Due to the mismanagement during Mangieri's tenure at Exclusive, Exclusive failed to pay numerous trade vendors, including VMI. Id. at ¶ 33. Further, Exclusive failed to service a loan with First National Bank, secured with its intellectual property. Id. at ¶ 34.

         In late July 2015, Plaintiff, Steven Andersen (“Andersen”), Reynolds and Exclusive drafted a letter of intent for Andersen and Reynolds (referred to throughout Plaintiff's Complaint, as “Reynolds Group”) to purchase Exclusive's outstanding debts and assets. Id. at ¶ 35 & Ex. B. Plaintiff rejected the proposed letter of intent by the Reynolds group in favor of a different offer made by Afterglow Holding Company Limited (“Afterglow”) to purchase Plaintiff's stock for $500, 000 Id. at ¶¶ 36, 37 & Ex. C. Michael J. Tarutis signed the letter of intent on behalf of Afterglow. The letter of intent included a period of due diligence prior to the purchase of sale and final approval of a definitive agreement. Id.

         Plaintiff alleges Tarutis on behalf of Afterglow and Reynolds “had multiple conversations concerning the transaction with Plaintiff and how it could be of benefit to each party.” Id. at ¶ 38. On August 24, 2015 Shane Howell, Executive Vice President of VMI, sent an email to Tarutis stating among other things, "[l]ooking forward to working with you on this." Id. at ¶ 39. Mr. Howell also included information on VMI's credit default insurance. Id. at ¶ 41. Plaintiff alleges “[u]pon information and belief this communication of credit default insurance dissuaded Tarutis and Afterglow Holdings Limited from going through with the stock purchase agreement and thus not showing up for the rescheduled August 31, 2015 closing.” Id. at ¶ 41.

         Plaintiff further alleges “Defendants (Genysis/Reynolds) communicated the existence of Genysis's credit default insurance to dissuade Tarutis and Afterglow Holdings Limited from closing on the Stock Purchase Agreement, thereby guaranteeing the default of Exclusive, in an effort to wrongfully receive compensation from a credit default insurance carrier. Defendant Reynolds, individually and as part of Defendant Genysis, planned to use the increased liquidity from the insurance carrier to capitalize (in part) Defendant Feel Fit and carry out the plan of acquiring the intellectual property they sought in the July 31, 2015 letter of intent proposed by the Reynolds Group.” Id. at ¶ 42. Subsequently, Reynolds for his own personal gain and on behalf of the newly capitalized Defendant Feel Fit bought the Exclusive note from First National Bank that was secured by all of Exclusive's assets including Exclusive's intellectual property. Id. at ¶ 43. Feel Fit foreclosed on that loan and now owns the collateral, i.e., Exclusive's intellectual property. Id. at ¶ 44. The Amended Complaint continues: Upon information and belief, at all times during the planning and execution of the above described interference, Defendant Reynolds, acting in his own personal capacity and in a corporate capacity for both Defendant Genysis and Defendant Feel Fit, was physically present in Western Pennsylvania, specifically the greater Pittsburgh area.” Id. at ¶ 45.

         The Amended Complaint alleges a single count of intentional interference with prospective business relations against all defendants, under Pennsylvania law. As a result of this interference Plaintiff seeks damages for the value of the prospective stock purchase agreement, $500, 000, as well as for the harm to his professional reputation and legal fees incurred in the drafting of the letters of intent, which would have been paid by the buyer Afterglow Holdings Limited. Id. at ¶ 51-53.

         We have diversity jurisdiction. 28 U.S.C. § 1332.

         III. DISCUSSION

         A. Motion to ...


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