Neurology and Pain Management Associates P.C. v. Bunin et al

Filing 141

OPINION AND ORDER: As outlined in order, the Court DISMISSES BCS claim for fraudulent inducement in Count VI of its Amended Complaint 85 . Signed by Chief Judge Jon E DeGuilio on 04/12/2023. (sej)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
NEUROLOGY AND PAIN
MANAGEMENT ASSOCIATES, P.C.,
Plaintiff,
v.

Case No. 3:17-CV-35 JD

ANTHONY BUNIN, et al.,
Defendants.
OPINION AND ORDER
In this Court’s prior order, it invited Defendant and Counter-Plaintiff Bio-Behavioral
Care Solutions LLC (“BCS”) to provide supplemental briefing on “whether there can be a viable
claim for fraudulent inducement to enter into an unenforceable contract under Indiana law.” (DE
136 at 14.) Because BCS failed to adequately address that issue, and because other states have
held that such a claim is not viable, the Court now dismisses the counterclaim for fraudulent
inducement (Count VI of the Amended Complaint).
Prior to addressing the dismissal of Count VI, the Court briefly reviews the relevant
factual background and procedural history. Both BCS and Neurology and Pain Management
Associates, d/b/a Vanguard Eldercare (“Vanguard”) manage and provide general services to
various mental health and senior living facilities. In January 2013, BCS entered into a Marketing
Agreement with Doctors Behavioral Hospital (“Doctors Hospital”) in which BCS agreed to
provide marketing and consulting services to Doctors Hospital. Section 8.2 of the Marketing
Agreement provided a restrictive covenant where BCS agreed not to compete with Doctors
Hospital in Indiana, and, in turn, Doctors Hospital, including any of its affiliates, agreed not to

compete with BCS in Michigan. According to BCS, Vanguard was an affiliate of Doctors
Hospital and thus barred from competing with BCS in Michigan.
The issue before the Court has to do with the counterclaims BCS filed against Vanguard
and its CEO Dr. Steven Posar. (DE 85.) These counterclaims stemmed from Vanguard allegedly
making false representations leading BCS to enter into the Marketing Agreement and then
violating the Marketing Agreement by approaching nursing homes and extended care facilities in
the Michigan Service Area. BCS filed an Amended Complaint bringing claims for breach of
contract (Count I), unjust enrichment (Count II), three counts of tortious interference with a
contractual or business relationship (Counts III, IV, and V), fraud in the inducement (Count VI),
and promissory estoppel (Count VII). (DE 85.)
At summary judgment, the Court dismissed the claim for unjust enrichment because there
was no evidence showing that BCS expected payment from Vanguard, which is a required
element in such a claim. See Reed v. Reid, 980 N.E.2d 277, 296 (Ind. 2012) (“To recover under
an unjust enrichment claim, a plaintiff must generally show that he rendered a benefit to the
defendant at the defendant’s express or implied request, that the plaintiff expected payment from
the defendant, and that allowing the defendant to retain the benefit without restitution would be
unjust.”). The Court also dismissed each of the three claims for tortious interference because they
were barred by the applicable statute of limitations. (DE 112 at 31–34.) Therefore, BCS’ only
remaining claims against Vanguard and Posar were for breach of contract, fraud in the
inducement, and promissory estoppel.
Vanguard then asked the Court to reconsider its summary judgment order. (DE 131.)
Vanguard argued that the order did not address the enforceability of Section 8.2 of the Marketing
Agreement and that “the lack of any time restraint in Section 8.2 of the Marketing Agreement . . .

2

renders Section 8.2 void and unenforceable as a matter of law.” (DE 132 at 2.) If Section 8.2
were unenforceable, then Count I of BCS’ Amended Complaint for breach of contract should
have been dismissed. Vanguard therefore asked that the Court reconsider its prior opinion and
dismiss Count I of BCS’ Amended Complaint. Vanguard also asked the Court to reconsider its
denial of summary judgment as to BCS’ promissory estoppel claim. (Id.) According to
Vanguard, the Court failed to address whether the statute of frauds prevented BCS from pursuing
a claim of promissory estoppel.
The Court issued an order partially granting Vanguard’s motion. (DE 136.) The Court
first found that the Marketing Agreement was unenforceable and void because the “lack of a
time limitation [made] it an unreasonable restraint of trade under Indiana law[.]” (Id. at 12.)
Accordingly, the Court dismissed BCS’ contract claim. The Court then found that Vanguard was
not entitled to summary judgment on the claim of promissory estoppel because it waived that
issue at summary judgment by waiting until its reply brief to raise it. (Id. at 13.) Therefore, BCS’
only remaining claims against Vanguard were for fraudulent inducement and promissory
estoppel. However, the Court asked BCS to provide briefing on an unaddressed issue:
The Court is uncertain whether, in light of granting Summary Judgment on Count
I of BCS’ counterclaim, Count VI of BCS’ counterclaim for fraudulent inducement
can also survive. “Fraudulent inducement occurs when a party is induced through
fraudulent misrepresentation to enter into a contract.” Tru-Cal Inc. v. Conrad
Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 45 n.6 (Ind. Ct. App. 2009). The
contract underlying BCS’ claims is the Marketing Agreement, which the Court has
just found to be legally void as unenforceable. Whether an unenforceable contract
can be the basis for a fraudulent inducement claim seems to be an issue of first
impression in Indiana. From the Court’s research, the two other state courts to reach
the issue have held it cannot. Clifford R. Gray, Inc. v. LeChase Const. Servs., LLC,
31 A.D.3d 983, 986 (N.Y. App. Div. 2006) (“there can be no viable claim for
fraudulent inducement to enter an unenforceable contract”); Haase v. Glazner, 62
S.W.3d 795, 797–98 (Tex. 2001).
(DE 136 at 14.)

3

BCS then filed a brief addressing several topics, none of which concern whether an
unenforceable contract can be the basis for a fraudulent inducement claim. (DE 137.) The only
argument BCS raises that relates to its fraudulent inducement claim is its assertion that it has a
“viable claim for fraud in the inducement separate and apart from the Marketing Agreement and
its Section 8.2.” (Id. at 2.) In support of this assertion, BCS indicates that Vanguard and its CEO
made verbal assurances and promises that they would not interfere with existing contracts and
business relationships. But promises and assurances alone do not make a contract. Perrill v.
Perrill, 126 N.E.3d 834, 840 (Ind. Ct. App. 2019) (“The basic requirements for a contract are
offer, acceptance, consideration, and a meeting of the minds between the contracting parties on
all essential elements or terms of the transaction.”). Not once does BCS indicate what other
contract, outside the Marketing Agreement, it was fraudulently induced into entering. Given that
fraudulent inducement only “occurs when a party is induced through fraudulent
misrepresentations to enter into a contract,” Am.’s Directories Inc., Inc. v. Stellhorn One Hour
Photo, Inc., 833 N.E.2d 1059, 1068 (Ind. Ct. App. 2005) (emphasis added), the failure to identify
any other contract it was fraudulently induced to enter defeats BCS’ argument that it has a claim
for fraudulent inducement separate from the Marketing Agreement.
The Court understands why BCS had trouble identifying another contract outside the
Marketing Agreement. After all, BCS has repeatedly identified the Marketing Agreement as the
contract it was fraudulently induced into entering. For example, in Count VI of its Amended
Complaint, BCS alleged that “without [the assurances provided by Posar on behalf of Vanguard]
BCS would not have entered into the Marketing Agreement,” that “the Conduct of Defendant
Posar and Counter-Defendant Vanguard constitutes fraud in the inducement of the Marketing
Agreement” and that they knew their conduct “breached the promises and assurances made to

4

Robert Clemente and BCS as described above and confirmed in the Marketing Agreement.” (DE
85 ¶¶ 101, 109–10 (emphasis added).) Later, BCS argued at summary judgment that dismissal of
its fraudulent inducement claim was not warranted because BCS “signed the Marketing
Agreement” based on representations that neither Dr. Bunin nor “Vanguard would pursue
contracts with health care facilities in the Michigan Service Area that were under contract with
BCS.” (DE 104 at 29.) BCS’ recital of the various promises made by Vanguard and Posar simply
distracts from the fundamental issue: BCS has never alleged there was another contract it was
fraudulently induced into entering outside the Marketing Agreement and is unable to point to any
facts supporting that there was another contract.
BCS’ failure to identify any other contract brings the Court back to its initial request for
further briefing on whether, given the Marketing Agreement’s lack of enforceability, Indiana law
allowed for the fraudulent inducement claim to survive. (DE 136 at 14.) In its response,
Vanguard argues that an unenforceable contract cannot be the basis of a fraudulent inducement
claim, relying on the two state court cases this Court previously identified: Clifford R. Gray, Inc.
v. LeChase Const. Servs., LLC, 31 A.D.3d 983, 986 (N.Y. App. Div. 2006) (“There can be no
viable claim for fraudulent inducement to enter an unenforceable contract.”); and Haase v.
Glazner, 62 S.W.3d 795, 797–98 (Tex. 2001) (same).
First, the Court finds that BCS has waived any argument that a fraudulent inducement
claim may be based on an unenforceable contract. In its briefing, BCS does not address, in any
manner, the question raised by this Court, the arguments raised by Vanguard, or the holdings of
Haase and Clifford R. Gray, Inc. Therefore, any argument that a fraudulent inducement claim
can be based on an unenforceable contract is waived. United States v. Berkowitz, 927 F.2d 1376,

5

1384 (7th Cir. 1991) (“[P]erfunctory and undeveloped arguments, and arguments that are
unsupported by pertinent authority, are waived . . . .”).
Even if the Court reached this argument’s merits, the reasoning in Haase is equally
applicable in Indiana. In Haase, the Supreme Court of Texas held that a fraudulent inducement
claim is not viable in the absence of an enforceable contract because, without an enforceable
contract having been entered, a party cannot be said to have “relied to its detriment on an alleged
misrepresentation,” which is an “essential element of a fraud claim” in Texas. Haase, 62 S.W.3d
at 798. As in Texas, an essential element of fraudulent inducement claim in Indiana is that the
complaining party rightfully rely on a false material representation. Wind Wire, LLC v. Finney,
977 N.E.2d 401, 404 (Ind. Ct. App. 2012). Accordingly, without showing that the party was
induced into entering an enforceable contract, it would not have suffered the detrimental reliance
required to bring a fraudulent inducement claim. Therefore, on the merits, the Court finds that
Count VI must be dismissed, given that the Marketing Agreement is unenforceable.
Rather than address the issue this Court identified, BCS spends most of its briefing
rehashing its previously dismissed claims for tortious interference and constructive fraud. (DE
137; DE 139.) BCS also argues that it has a valid claim for Promissory Estoppel, which is odd
considering this is precisely what the Court held in its prior order addressing Vanguard’s motion
for reconsideration. (DE 136 (reiterating “summary judgment [on the promissory estoppel claim]
would be inappropriate due to a genuine dispute of material fact over whether Vanguard induced
reasonable reliance on the part of BCS due to its promises to be bound by the terms of the
Agreement.”). These claims have each been addressed previously and the Court did not invite
BCS to relitigate them. Accordingly, the Court does not consider these arguments.

6

For the above reasons, the Court DISMISSES BCS’ claim for fraudulent inducement in
Count VI of its Amended Complaint. (DE 85.)
SO ORDERED.
ENTERED: April 12, 2023
/s/ JON E. DEGUILIO
Chief Judge
United States District Court

7