Juliano v Paragon, Inc NY Slip Op 51291(U) Supreme Court, Monroe County. Rosenbaum, J.

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1 [*1] Juliano v Paragon, Inc NY Slip Op 51291(U) Decided on August 27, 2015 Supreme Court, Monroe County Rosenbaum, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law 431. This opinion is uncorrected and will not be published in the printed Official Reports. Decided on August 27, 2015 Supreme Court, Monroe County Christopher Juliano, D.M.D., Plaintiff, against Paragon, Inc. and Jonathan S. Carey, D.M.D., Defendants /12

2 Glenn E. Pezzulo, Esq. Culley, Marks, Tanenbaum & Pezzulo, LLP Counsel for Plaintiff 36 West Main Street, Suite 500 Rochester, NY Paul F. Keneally, Esq. Underberg & Kessler, LLP Counsel for Defendants 2/12

3 300 Bausch & Lomb Pl. Rochester, NY Matthew A. Rosenbaum, J. Defendants Paragon and Jonathan S. Carey D.M.D. by notice of motion seek an order dismissing the action pursuant to CPLR 3211(a)(1) and (a)(7) based on a defense founded upon documentary evidence and failure to state a cause of action. Plaintiff opposes Defendants' motion. Discussion: Plaintiff, a dentist, alleges that in August 2013 he learned, from a mutual acquaintance, that Dr. Denny Chen and Dr. David Fantuzzo were interested in selling their shared space dental [*2]practice. (Verified complaint dated October 20, 2014). The acquaintance set up a meeting between Plaintiff and Drs. Chen and Fantuzzo which was held on September 11, 2013 at the Chen/Fantuzzo office. The individuals met again on December 11, Plaintiff further alleges that on January 17, 2014 he was contacted by Defendant Dr. Carey, a practicing dentist in Newark, NY, and consultant for Paragon to set up a meeting. Defendant Carey had been retained by the selling dentists Drs. Fantuzzo and Chen on December 31, 2013 and January 9, 2014 to perform an appraisal of the individual dental practices. Thereafter, Plaintiff and Defendant Carey met on January 19, 2014 at which time 3/12

4 Defendant Carey presented Plaintiff with two Fair Market Value and Financial Analysis Reports (Reports). Plaintiff alleges that Defendant Carey as the disclosed agent of Paragon prepared the Reports for him under their own advertised "dual representation." Plaintiff contends that despite the contract language, Defendant Carey, without full disclosure, purchased the dental practices for his own business enterprise. Plaintiff alleges that the Reports constituted contracts between him and Defendants Plaintiff further submits that those contracts were breached by Defendants. (Def Ex A complaint First Cause of Action). Plaintiff's second cause of action alleges breach of fiduciary duty based upon Defendant Carey's purchase of the two practices, failing to disclose his intent which deprived Plaintiff the opportunity to fairly compete, and failure to disclose all material facts while representing both parties. Plaintiff further claims unjust enrichment. Plaintiff bases his claim on the Report language in the introduction which states: Paragon Dental Practice Transitions ("PARAGON") is a consulting firm specializing in evaluating and selling healthcare practices with the vast majority of our focus on dental practices. Since 1988, PARAGON consultants have analyzed the needs of dentists and have provided in depth consulting services for purchasing, selling, merging and consolidating dental practices. ************* We have no past, present or intended ownership or financial interest in this professional practice, and the fee for this determination of fair market value is not contingent upon the conclusions supported herein. However, PARAGON may or may not be engaged by the current owner to provide its consulting and/or brokerage services for the sale of this practice. We have no reason to believe that any of the representations made to us by the current owner are not true and accurate. 4/12

5 Defendant has submitted two signed Practice Sales Agreements between Paragon and Drs. Chen and Fantuzzo as sellers. Defendant does not deny that he purchased the practices, but submits that Plaintiff has not submitted proof of a signed contract as buyer, nor has he even alleged that he signed a contract with Defendants. Rather, Defendants assert that Plaintiff [*3]improperly claims that the reports created contracts between them. Defendants further contend that Plaintiff never provided a purchase proposal or offer nor any other writing of intent to purchase the sellers' practices. Defendant Carey submits that normally at the meeting, Plaintiff would not have known the identity of the sellers without signing a "Client Agreement," but since Plaintiff had already been introduced by a common acquaintance, confidentiality was not necessary. (Aff'd dated 3/4/15). Defendant further submits due to the non party sellers' interests with the future of the business, they did not feel Plaintiff was a good fit, and prompted Defendant to purchase the practices. Defendant has submitted the affidavits of both selling dentists who aver that they did not engage Paragon jointly with Plaintiff. They chose not to sell to Plaintiff, due to their personal needs including building ownership and future part time practice and their personal belief that it would not be a "good fit." (Fantuzzo affi'd dated August 19, 2015; Chen affi'd dated August 17, 2015). They both aver that they never agreed to sell to Plaintiff nor sign any agreement to sell to Plaintiff. (id.). Plaintiff never made a purchase offer, but if he had, they would not have sold to him. (id.). Defendant Carey further submits that Plaintiff has not alleged he entered into a contract with Defendants, made an offer to purchase the practice, or that sellers offered to sell to him. Plaintiff has submitted no evidence to the contrary or proof that he had an interest in the practice and/or incurred any expenses or damages in reliance thereof, except getting excited and starting the financing process. Motion to Dismiss: 5/12

6 Documentary Evidence: Dismissal is warranted under paragraph 1 of subdivision (a) of CPLR 3211 "only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." (Id. at 88. See also, Goshen v. Mut. Life Ins. Co., 98 NY2d 314,326 (2002)("motion may be appropriately granted only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law"); 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144,152 (2002). "In order to prevail on a motion to dismiss based on documentary evidence pursuant to CPLR 3211(a)(1), the documents relied upon must definitively dispose of plaintiff's claim." (Bronxville Knolls, Inc. v. Webster Town Center Partnership, 221 AD2d 248 (1st Dept. 1995)(citations omitted). See also, Zuckerwise v. Sorceron, Inc., 289 AD2d 114 (1st Dept. 2001). Defendants submit that the complaint should be dismissed since the documentary evidence establishes the Plaintiff never entered into a Paragon Dental Practice Transitions Client Agreement which would have permitted Defendants to locate a practice for Plaintiff to purchase nor did Plaintiff sign a purchase agreement or otherwise contract with Defendants. Plaintiff in opposition thereto, submits that the two Fair Market Value and Financial Analysis Report Summary(ies) (FMV Summaries), dated January 19, 2014, valuing each practice, were prepared solely for him by Paragon as evidenced in the documents, "Prepared for: Dr. Christopher Juliano." (Def. Ex AA). Plaintiff submits that the documents provide that Paragon maintains "a professional client/consultant relationship" with both the buyer and the seller as "Dual Representation." The Dual Representation Policy provides: PARAGON's approach to each practice valuation actually involves looking at the practice opportunity from the 6/12

7 buyer's bottom line first and then flowing back up to the practice production and collection and then to the practice fair market value. This is probably quite reverse of the way you may be thinking. However, using this approach, PARAGON arrives at a fair price supported by statistical data to show a buyer how that price was determined! We then dual represent to make sure the fair outcome is realized. Dual Representation has made it possible for PARAGON to close virtually all practices we list with absolutely no need for negotiation. (Complaint Ex C). There is no signed agreement between Plaintiff and Defendants. The FMV Summaries containing the dual representation clause, although addressed to Plaintiff were compiled, paid for and provided at the direction of Drs. Chen and Fantuzzo, the non party sellers. (See Carey Ex A). Although Plaintiff alleges that he agreed to pay a finder's fee, there was no signed agreement or other writing evidencing that alleged agreement. The documentary evidence establishes that Drs. Chen and Fantuzzo were the only contracting parties. Defendant had a signed practice sales agreement with Drs. Chen and Fantuzzo, and there was no similar agreement with or remuneration from Plaintiff. Absent an agreement to the contrary with Plaintiff, Defendants owed Plaintiff no duty. (See Elliman LLC v. Tretter, 84 AD3d 446, (1st Dept., 2011) aff'd 20 NY3d 875, citing to Sonnenschein v. Elliman Gibbons, 96 NY2d 369, (2001). CPLR 3211(a)(7): On a motion to dismiss pursuant to CPLR 3211(a)(7) the complaint must be given every favorable inference and the allegations in the complaint are deemed to be true. (See Dannasch v. Bifulco, 184 AD2d 415, 417 (1st Dep't 1992). When considering such a motion, it is the task of the court to determine whether, " accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated.'" (Campaign for Fiscal Equity, Inc. v. State of New York, 86 NY2d 307, 318 (1995)(citations omitted). If the court determines 7/12

8 "that plaintiffs are entitled to relief on any reasonable view of the facts stated," the court's inquiry is complete, and the complaint is deemed legally sufficient. (See id.) The elements of a cause of action for breach of contract are: (1) formation of a contract [*4]between plaintiff and defendant, (2) performance by plaintiff, (3) defendant's failure to perform, and (4) resulting damage. (See Furia v. Furia, 116 AD2d 694 (2d Dept. 1986). Here, it is undisputed that there is no written contract or client agreement between Plaintiff and Defendants. Rather, Plaintiff submits that the liability flows from an implied contract whereby Paragon offered to act as the broker or intermediary and locate a dental practice for Plaintiff, Plaintiff agreed to retain Paragon and pay Paragon a commission. Plaintiff has cited several cases, however those cases are not analogous to the situation presented here. GOL Section 5 701(10) provides that "a contract to pay compensation for services rendered in negotiating...the purchase...of a business opportunity..." "is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith." It is undisputed that there is no written agreement or memorandum thereof. The signed agreement was between Defendants and the sellers, Drs. Chen and Fantuzzo. Defendants submit that this transaction is similar to the situation of a realtor/broker representing the seller in a real estate transaction, where no liability would arise to the broker for providing a sales packet to a potential buyer. No exclusivity agreement or any written agreement, for that matter, has been submitted by Plaintiff. Defendants had a contract with the sellers and was representing their interests. Although the FMV Summaries stated that they were prepared for Plaintiff, they were prepared at the request of the sellers. Defendants could have provided the information to any potential purchaser. The Court agrees that the situation is analogous to the real estate broker's duties and obligations to its principal. Although a broker may owe duties to both a buyer and seller, absent a written dual representation agreement or sufficient writing thereof, the Courts have held that the broker has a duty to the party which contracted with the broker. (Elliman, supra; Sonnenschein, supra; see also Rivkin v. Century 21, /12

9 NY3d 344, (2008). Here, there are no allegations that Defendants were prohibited from providing the FMV analysis of the business to other potential purchasers nor is there an allegation that oral promises were memorialized in a writing. Any such allegation would be contrary to the detailed affidavits of both Drs. Chen and Fantuzzo. These cases do not support a determination that once contact between a broker and buyer is made and purchase discussions held, an "unwritten" binding contract would preclude the broker from selling the business to another prospective buyer, or in this case purchasing the entity. Even accepting as true the Complaint's allegation and providing every favorable inference, the claims are insufficient to withstand scrutiny under CPLR 3211(a)(7). Plaintiff has made no showing that there was in fact an agreement between him and Defendants. (Brois v. DeLuca, 154 AD2d 417, (2nd Dept., 1989). Drs. Chen and Fantuzzo, non parties, were the ones who retained Defendant, and also the individuals who declined to sell to Plaintiff. (Letter dated June 9, 2014, Juliano aff'd Ex A; See also non party sellers Fantuzzo affi'd dated August 18, 2015 and Chen affi'd dated August 17, 2015). Although Plaintiff's counsel in his sur reply argues that the Reports created a contract, he has failed to submit any writing thereof, or case law which supports his theory. Those arguments [*5]are contrary to the cases cited above where the broker has a duty to the party which contracted with him/her or a written agreement supporting Plaintiff's claim of dual representation. Accordingly, Plaintiff's breach of contract cause of action is dismissed pursuant to CPLR 3211(a)(7). Breach of Fiduciary Duty: "A conventional business relationship, without more, does not become a fiduciary relationship by mere allegation." (Oursler v. Women's Interart Ctr., 170 AD2d 407, 408 ( 1991). See also, Friedman v. Anderson, /12

10 AD3d 163, 166 (1st Dept. 2005). "Rather a plaintiff must make a showing of special circumstances that could have transformed the parties' business relationship to a fiduciary one, such as control by one party of the other for the good of the other." (DiTolla v. Doral Dental IPA of New York, LLC, 100 AD3d 586, 587 (2d Dept. 2012). "A fiduciary relationship exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation.'" (EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11, 19 (2005), quoting Restatement [Second] of Torts 874, Comment a. See also, Roni LLC v. Arfa, 18 NY2d 846 (2011) ("Put differently, a[] fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other.'") (citation omitted). "Such a relationship, necessarily fact specific, is grounded in a higher level of trust than normally present in the marketplace between those involved in arm's length business transactions." (EBC I, Inc., 5 NY3d at 19.) Moreover: "If the parties... do not create their own relationship of higher trust, courts should not ordinarily transport them to the higher realm of relationship and fashion the stricter duty for them." However, it is fundamental that fiduciary "liability is not dependant solely upon an agreement or contractual relation between the fiduciary and the beneficiary but results from the relation." (Id., quoting Restatement [Second] of Torts 874, Comment b.) "[A] cause of action for breach of fiduciary duty may survive, for pleading purposes, where the complaining party sets forth allegations that, apart from the terms of the contract" the parties created "a relationship of higher trust." Id. "[T]he actual relationship between the parties determined the existence of a fiduciary duty." (Carbon Capital Management, LLC v. Amer. Exp. Co., 88 AD3d 933, 938 (2d Dept. 2011). "Ascertaining the existence of a fiduciary relationship inevitably requires a fact specific inquiry.'" (Roni, LLC, 18 NY3d at 848, quoting Eurycleai Partners, LP v. Seward & Kissel, LLP, 12 NY3d 553, 561 (2009). Defendants contend that the relationship between the parties at bar does not give rise to a fiduciary duty, since 10/12

11 there is no written agreement, Plaintiff has not sufficiently alleged facts which would support Plaintiff's fiduciary duty claim, nor has Plaintiff alleged proximate cause or actual damages flowing therefrom. The Court agrees and finds that the Complaint lacks sufficient allegations to withstand the motion to dismiss on this cause of action. The FMV report which Plaintiff claims created a contract, despite the lack of a signed written agreement, [*6]provides, Prospective purchasers of this practice opportunity must not construe th[e] contents of this report, or any prior or subsequent communication from the valuator or any of Paragon's representatives as legal and/or tax advice. Each prospective purchaser should consult with his or her personal attorney, accountant or other advisors as to the legal, tax or economic effect of related matters concerning this practice. (Ex A complaint). Defendants had a duty of loyalty to its principals, Drs. Chen and Fantuzzo, the only individuals who contracted with Defendants. (Sonnenschein, supra). Plaintiff has failed to submit sufficient proof to a establish a fiduciary relationship. Plaintiff's remaining claim for unjust enrichment must also fail for the same reasons set forth above. Although privity is not required and quasi contract sufficient to establish a cause of action, if the connection between the parties is attenuated liability will not exist. (Madarin Trading v. Wildenstein, 16 NY3d 173, (2011). "Mere enrichment is not enough...to warrant liability in quasi contract." (E. Williamson v. Town of Parish, 139 AD2d 97, (4th Dept., 1988). Accordingly, Defendants' motion to dismiss is granted. This constitutes the opinion and decision of the Court pursuant to CPLR Defendants shall submit the order on notice. 11/12

12 Dated this 27th day of August, 2015 at Rochester, New York. HON. MATTHEW A. ROSENBAUM SUPREME COURT JUSTICE Return to Decision List 12/12

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