AngioDynamics, Inc. v. Biolitec AG et al

Filing 53

Judge Michael A. Ponsor: MEMORANDUM AND ORDER entered. As follows: Defendants 13 Motion to Dismiss Plaintiffs Complaint Pursuant to Rules 12(b)(2) and 12(b)(6) is hereby DENIED. The clerk will refer the matter to Magistrate Judge Neiman for a Rule 16 status conference. It is So Ordered. See the attached memo and order for complete details. (Lindsay, Maurice)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

ANGIODYNAMICS, INC.,
Plaintiff

)
)
)
)
)
)
)

v.
BIOLITEC, INC., ET AL.,
Defendants

C.A. No. 09-cv-30181-MAP

MEMORANDUM AND ORDER REGARDING
DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT
PURSUANT TO RULES 12(b)(2) AND 12(b)(6)
(Dkt. No. 13)
July 25, 2011
PONSOR, D.J.
I.

INTRODUCTION

This case arises out of a Supply and Distribution
Agreement in which Defendant Biolitec, Inc. (“BI”), a
subsidiary of Defendant Biolitec AG (“BAG”), agreed to
defend and indemnify Plaintiff AngioDynamics, Inc. against
all third-party patent infringement claims arising out of
the marketing and distribution of Defendants’ products.
Plaintiff alleges that, when Defendants learned of the steep
cost of defending Plaintiff against such claims, Defendant
BAG looted Defendant BI, draining more than $18 million out
of the company and undermining its ability to defend

Plaintiff.

Plaintiff brings claims for, inter alia,

tortious interference with contract, and fraudulent transfer
in violation of Mass. Gen. Laws ch. 109A.
Defendants now move to dismiss Plaintiff’s claims under
Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction
and Fed. R. Civ. P. 12(b)(6) for failure to state a claim.
(Dkt. No. 13.)

For the reasons stated below, Defendants’

motion will be denied.
II.
A.

FACTUAL BACKGROUND

The Parties.
Plaintiff AngioDynamics, Inc. is a Delaware corporation

with a principal place of business in New York.

Plaintiff

specializes in the manufacture and sale of medical devices.
Defendant BI is a New Jersey corporation with a
principal place of business in East Longmeadow,
Massachusetts.

Defendant BI is closely held corporation;

ninety percent of its stock is owned by Defendant BAG, a
German corporation headquartered in Germany.

The remaining

ten percent is owned by Kelly Moran and Carol Morello, who
were officers of BI from 1989 through 2009.

Moran served as

Vice President and COO from 1995 through 2008, and Morello
2

served as Secretary and Treasurer from 1989 through 2009.
Additionally, they both served as directors of the company,
along with Defendant Wolfgang Neuberger.1
Defendant Neuberger is a citizen of Austria and resides
in various locations around the globe.

He is President,

CEO, and Chairman of the Board of both Defendant BI and
Defendant BAG.

Through his holding company, Defendant

Biomed Technology Holdings Ltd. (of which he is sole owner),
Defendant Neuberger owns just under seventy-five percent of
stock in Defendant BAG.

He also owns one hundred percent of

the stock of the following entities, which were the alleged
recipients of the looted funds at issue here: Biolitec
Pharma Marketing, Ltd.; CeramOptec GmbH; Biolitec Pharma,
Ltd.; and Biolitec SIA.
B.

The Formation and Alleged Breach of the SDA.

1

Moran and Morello have filed three separate
complaints of their own against Defendants in a New Jersey
state court and in two Massachusetts state courts. (See Dkt
No. 20, Exs. A, B, & C.) In reciting the facts of this
case, Plaintiff relies on allegations contained in those
three verified complaints filed by Moran and Morello and has
attached them to the First Amended Complaint in this case,
contending that the state-court complaints are “in effect
sworn affidavits.” (Dkt. No. 20, Pl.’s Mem. in Opp’n at 2
n.2.)
3

In April 2002, Defendant BI entered into a Supply and
Distribution Agreement (“the Agreement”) with Plaintiff.
Under the Agreement, Plaintiff was given exclusive
distribution rights within Canada and the United States to
certain Biolitec products, including lasers and optical
fibers used for the treatment of varicose veins.
The Agreement required Defendant BI to defend and
indemnify Plaintiff against third-party patent infringement
claims arising from “the manufacture, marketing, sale,
distribution, and use” of the above-mentioned products.
(Dkt. No. 7, Am. Compl. ¶ 41.)

Plaintiff alleges that,

before entering into the Agreement, Defendants BI,
Neuberger, and BAG had been aware that two competitors -Diomed, Inc. and VNUS Medical Technologies, Inc. -- owned
similar patents and that litigation would likely ensue.
On January 6, 2004, Diomed filed suit against Plaintiff
alleging patent infringement.

Plaintiff notified Defendant

BI, which assumed defense of the action.
On October 12, 2005, VNUS also sued Plaintiff, on the
same grounds.

Plaintiff again notified Defendant BI, but

this time, Plaintiff alleges, Defendant BI refused to take
4

on the defense.
Defendant BI paid for the defense of the Diomed case
until the jury returned an unfavorable verdict on March 28,
2007, at which time Defendant BI renounced its obligation to
pay for further defense and refused to indemnify Plaintiff.
Plaintiff appealed the Diomed verdict and eventually settled
with Diomed, at its own expense, for $7 million.

Plaintiff

later litigated the VNUS action, also at its own expense,
and settled with VNUS in 2008 for $6.8 million, plus ongoing
royalty payments.
C.

The Alleged Looting of Defendant BI.
Plaintiff alleges that Defendant BAG “looted,” i.e.,

fraudulently removed assets from, Defendant BI in an amount
exceeding $18 million between 2002 and 2009.

Plaintiff

asserts that over $15 million in transfers were made after
Diomed sued Plaintiff in 2004 and over $12 million in
transfers were made after VNUS sued Plaintiff in 2005.
Specifically, Plaintiff sets forth the following list of
allegations:
•

Defendant BAG issued more than $3.6 million in
false and fraudulent invoices to Defendant BI,
approximately $3.4 million of which was
5

invoiced after Diomed sued Plaintiff in 2004.
•

Defendant BAG issued between $5 million and $7
million in improperly and fraudulently
overbilled laser invoices to Defendant BI -all dated from August 2006 forward, after the
commencement of both infringement actions.

•

Defendant BAG fraudulently charged Defendant
BI approximately $5 million in “fees,” of
which $4 million date from March 2004 forward
-- after the Diomed lawsuit.

•

Defendant BAG imposed more than $400,000 in
fraudulent interest charges on Defendant BI
(almost all directly paid to Defendant BAG).
The first of these charges was dated January
6, 2004 -- the exact date that Diomed filed
its complaint against Plaintiff.

•

Biolitec Pharma Marketing Ltd., an entity
wholly owned by Defendant BAG, issued a
$62,500 fraudulent invoice to Defendant BI on
February 15, 2008.

•

In March 2009, Defendant BAG transferred
patents worth more than $1 million from
Defendant BI to Biolitec Pharma Marketing Ltd.
without any compensation in return and for no
legitimate business purpose.

•

In June 2009, Defendant BAG transferred the
headquarters and factory of Defendant BI
(worth over $1 million) to CeramOptec
Industries, Inc., which is ninety-percent
owned by Defendant BAG, for no consideration
and no legitimate business purpose.

(Dkt. No. 20, Pl.’s Opp’n at 6-7; Dkt. No. 7, Amended Compl.
¶¶ 91-138.)
6

D.

The Alleged Tortious Interference by Defendants BAG and
Neuberger.
In the years after the signing of the Agreement, the

relationship between Plaintiff and Defendants BAG and
Neuberger (its CEO) became increasingly strained, according
to Plaintiff.2

Plaintiff alleges that Defendant BAG was

fully aware of the Agreement between Plaintiff and Defendant
BI, and Defendant BAG knowingly interfered with that
contract by systematically depriving Defendant BI of
resources needed to fulfill its obligations under the
Agreement.

Plaintiff alleges that it is now facing “the

great likelihood that BI will be unable to satisfy any
judgment [obtained against it].”

(Dkt. No. 20, Pl.’s Opp’n

at 14.)
III. PROCEDURAL BACKGROUND
On January 2, 2008, Plaintiff commenced an action for
breach of contract in the United States District Court for

2

Disputes arose regarding Plaintiff’s exclusive rights
to distribute Defendants’ products, and, in 2004, when
Plaintiff was on the eve of printing a preliminary
prospectus for its IPO, Defendants Neuberger and BAG
allegedly attempted to revoke Plaintiff’s exclusivity rights
under the Agreement, knowing that it would negatively affect
the IPO.
7

the Northern District of New York, alleging that Defendant
BI had breached the Agreement by failing to fully defend and
indemnify Plaintiff against patent infringement claims.

On

October 26, 2009, Plaintiff filed suit in this court against
Defendants BI, BAG, Biomed, and Neuberger.
The First Amended Complaint contains five counts: (1)
tortious interference with contract; (2) piercing the
corporate veil; (3) declaratory judgment; (4) fraudulent
transfer in violation of Mass. Gen. Laws ch. 109A; and (5)
violation of Mass. Gen. Laws ch. 93A.

Defendants now move

to dismiss the entire complaint as to Defendant BAG for lack
of personal jurisdiction and Counts 1, 2, and 5 for failure
to state a claim upon which relief may be granted.

(Dkt.

No. 13.)
IV. DISCUSSION
A.

Personal Jurisdiction (Fed. R. Civ. P. 12(b)(2)).
To establish personal jurisdiction over a defendant,

the plaintiff bears the burden of showing by a preponderance
of the evidence that jurisdiction exists.

See Lechoslaw v.

Bank of Am., N.A., 618 F.3d 49, 54 (1st Cir. 2010).

On a

motion to dismiss, courts must assess whether the plaintiff
8

has made a prima facie showing of personal jurisdiction.
Id. (noting that this inquiry asks “whether the plaintiff
has proffered evidence which, if credited, is sufficient to
support findings of all facts essential to personal
jurisdiction”) (citation omitted).

In assessing the

sufficiency of this showing, the court must accept the
plaintiff’s proffers of evidence as true where supported by
specific facts as set forth in the record.

See United

Elec., Radio & Mach. Workers v. 163 Pleasant St. Corp., 960
F.2d 1080, 1091 (1st Cir. 1992).

Personal jurisdiction is

established by demonstrating that: (1) the state’s long-arm
statute authorizes jurisdiction; and (2) general due process
requirements are met.

Id.

In Massachusetts, the long-arm

statute is coextensive with the constitutional limits of the
Due Process Clause and, thus, it is appropriate to “sidestep
the statutory inquiry and proceed directly to the
constitutional analysis.”

Daynard v. Ness, 290 F.3d 42, 52

(1st Cir. 2002) (citing Automatic Sprinkler Corp. of Am. v.
Seneca Foods Corp., 280 N.E.2d 423, 424 (Mass. 1972)).
The constitutional analysis considers, first, whether
Defendant has “sufficient minimum contacts with the state,
9

such that maintenance of the suit does not offend
traditional notions of fair play and substantial justice.”
Adelson v. Hananel, 510 F.3d 43, 49 (1st Cir. 2007)
(citation omitted).

These contacts with the state must be

either related to Plaintiff’s claim, thus creating specific
jurisdiction, or they must be “continuous and systematic,”
thus creating general jurisdiction.

Lechoslaw, 618 F.3d at

54 (citing Harlow v. Children’s Hosp., 432 F.3d 50, 57 (1st
Cir. 2005)).

Second, in either instance, the defendant’s

contacts with the state must be purposeful.

Id.

Third, and

finally, the exercise of jurisdiction must be “reasonable
under the circumstances.”

Id. (citation omitted).

Here, Plaintiff proceeds under theories of both general
jurisdiction and specific jurisdiction.

As to the former,

Plaintiff asserts that the court’s undisputed authority to
exercise general jurisdiction over Defendant BI -- a New
Jersey corporation with a principal place of business in
Massachusetts -- should be imputed to Defendant BAG on a
piercing-the-corporate-veil theory.3
3

For the reasons stated

At the outset, it is worth noting that this court
addressed a similar issue in American Medical Sys., Inc. v.
Biolitec, Inc., 604 F. Supp. 2d 325 (D. Mass. 2009) (“AMS”),
10

below, this court agrees.
A subsidiary’s contacts with the forum state may be
attributed to the parent corporation under a veil-piercing
theory.

Negron-Torres v. Verizon Comm’s, Inc., 478 F.3d 19,

26 (1st Cir. 2007).

More commonly, plaintiffs use this

theory to impute liability to parent entities for actions
taken by a subsidiary.

When invoked in the jurisdictional

context, the inquiry remains the same.

Id. (“[W]hile it is

generally true that questions of liability and jurisdiction

in which a different plaintiff sought to impute the court’s
authority over Defendant BI to Defendant BAG on a veilpiercing theory. The court’s decision in AMS is not
controlling here for two reasons. First, AMS involved the
application of federal law because it was a federal question
case. See id. (applying the standard set forth in United
Elec., Radio & Mach. Workers v. 163 Pleasant St. Corp., 960
F.2d 1080, 1091 (1st Cir. 1992), which requires a showing of
“lack of corporate independence, fraudulent intent, and
manifest injustice”). Here, where subject matter
jurisdiction is premised on diversity of citizenship, the
court must apply a materially different state law standard,
which, as discussed in the text, does not require a showing
of fraudulent intent, among other things. Moreover, in AMS,
the plaintiffs apparently did not make any of the
allegations that Plaintiff makes here in support of its
veil-piercing theory. See id. (“At best Plaintiffs allege
that Biolitec AG oversees and controls its subsidiaries and
works with them to market products. None of this evidence
indicates that Biolitec AG and Biolitec, Inc. enjoyed
anything other than the traditional parent-subsidiary
relationship . . . .”).
11

are independent, the factors that we must consider for
purposes of piercing the veil separating two corporations in
the liability context also inform the jurisdictional
inquiry.”) (citation and quotation marks omitted).
In Massachusetts, there is a “presumption of corporate
separateness,” which may be overcome only in rare
situations.

Platten v. HG Bermuda Exempted Ltd., 437 F.3d

118, 129 (1st Cir. 2006).

“The mere fact that a subsidiary

company does business within a state does not confer
jurisdiction over its nonresident parent . . . .”
(citation omitted).

Id.

In the seminal case of My Bread Baking

Co. v. Cumberland Farms, Inc., 233 N.E.2d 748, 752 (Mass.
1968), the Massachusetts Supreme Judicial Court (“SJC”) set
forth a two-pronged test for determining when a plaintiff
may pierce the corporate veil:
(a) when there is active and direct participation
by the representatives of one corporation,
apparently exercising some form of pervasive
control, in the activities of another and there is
some fraudulent or injurious consequence of the
intercorporate relationship, or (b) when there is a
confused intermingling of activity of two or more
corporations engaged in a common enterprise with
substantial disregard of the separate nature of the
corporate entities, or serious ambiguity about the
manner and capacity in which the various
12

corporations and their respective representatives
are acting.
Id. (emphasis added).

More recently, the SJC refined this

test by establishing twelve factors4 for courts to consider:
(1) common ownership; (2) pervasive control; (3)
confused intermingling of business assets; (4) thin
capitalization; (5) nonobservance of corporate
formalities; (6) absence of corporate records; (7)
no payment of dividends; (8) insolvency at the time
of the litigated transaction; (9) siphoning away of
corporation’s funds by dominant shareholder; (10)
nonfunctioning of officers and directors; (11) use
of the corporation for transactions of the dominant
shareholders; and (12) use of the corporation in
promoting fraud.
Attorney Gen. v. M.C.K., Inc., 736 N.E.2d 373, 380 n.19
(Mass. 2000).

The analysis of these factors does not

involve merely counting those favoring veil-piercing and
those against it; a court must “examine[ ] the twelve
factors to form an opinion whether the over-all structure
and operation misleads.”

Evans v. Multicon Const. Corp.,

574 N.E.2d 395, 400 (Mass. App. Ct. 1991) (piercing
corporate veil when four factors favored veil-piercing and
4

The parties cite nine factors originally set forth by
the First Circuit in Pepsi-Cola Met. Bottling Co. v.
Checkers, Inc., 754 F.2d 10 (1st Cir. 1985), which was later
expanded in Attorney Gen. v. M.C.K., Inc., 736 N.E.2d 373,
380 n.19 (Mass. 2000). The nine Pepsi factors are identical
to factors four through twelve in text.
13

eight opposed it).
Here, Plaintiff asserts that Defendant BAG, at the
behest of its controlling shareholder, Defendant Neuberger,
fraudulently siphoned more than $18 million out of its
subsidiary, most of which was transferred after Diomed and
VNUS instituted their infringement actions.

As set forth in

the above statement of facts, these transfers were allegedly
made under the guise of “fees” and “invoices.”

Plaintiff

asserts that the transfers had no legitimate business
purpose and that Defendant BI received nothing in return.
Rather, Plaintiff submits, their sole purpose was to deprive
Defendant BI of the resources necessary to fulfill its
contractual obligations under the defense and indemnity
provisions of the Supply and Distribution Agreement.
Defendants challenge the veracity of these allegations,
labeling them “deficient,” “simply unsupportable,” and
“riddled with factual errors.”
at 14-15.)

(Dkt. No. 23, Defs.’ Reply

Defendants maintain that these transfers are

individually explainable and cumulatively do not amount to
the nefarious course of conduct alleged in the complaint.
However, at this stage in the litigation, the court must
14

accept Plaintiff’s allegations as true.

See Adelson v.

Hananel, 510 F.3d 43, 50 (1st Cir. 2007) (“[U]nder the prima
facie standard, [the plaintiff’s] evidence is accepted as
true and all inferences are drawn in favor of his
jurisdictional claim.”).

Viewed in this light, the

complaint contains powerful, highly detailed allegations of
corporate misconduct, including fraud.

These allegations,

if true, describe a shocking pattern of corporate looting
sufficient to satisfy several of the factors set forth by
the SJC.

Undoubtedly, Plaintiff’s claims involve the

confused intermingling of business assets (fraudulent
invoices for fictional goods and services),5 thin
capitalization (Defendant BI is allegedly unable to fulfill
its defense and indemnity obligations), siphoning the

5

Defendants correctly point out that Plaintiff has not
presented any allegation that it was actually confused about
the defendant entities, which unquestionably reduces the
force of this factor. See Platten v. HG Bermuda Exempted
Ltd., 437 F.3d 118, 129 (1st Cir. 2006) (“Despite their
allegations of intermingling, plaintiffs have never alleged
that they were confused about the identity of the legal
entity with which they were contracting.”)(emphasis in
original). Yet, while it scores a point for Defendants,
this argument does not affect the outcome of the analysis,
as it represents only a minor element in Plaintiff’s many
veil-piercing allegations.
15

subsidiary’s funds, using the subsidiary for transactions of
the parent, and using the subsidiary to promote fraud.
These allegations alone would likely justify piercing
Defendant BAG’s corporate veil.

See Rivera v. Club Caravan,

Inc., 928 N.E.2d 348, 354 (Mass. App. Ct. 2010) (noting that
the allegation that a parent entity was “siphoning off
significant corporate resources” by itself would have
created a basis for veil-piercing if not for the plaintiff’s
failure “to develop the point adequately to send the issue
to the jury”); Birbara v. Locke, 99 F.3d 1233, 1241 (1st
Cir. 1996) (vacating jury verdict in which jury held parent
liable for actions of subsidiary and highlighting
plaintiff’s failure to present evidence of “financial
misconduct of the subsidiary involving such manipulation as
asset-stripping or asset-siphoning, which depleted the
resources of the subsidiary”) (citation omitted).6
6

But

Defendants rely on Platten v. HG Bermuda Exempted
Ltd., 437 F.3d 118 (1st Cir. 2006) for the contrary
proposition, but this reliance is misplaced. Although
Defendants suggest that Platten establishes a bright-line
rule that siphoning corporate assets is not sufficient to
pierce the corporate veil, Platten contains no such
language, and the above-cited case law makes clear that this
is a fact-specific inquiry. Moreover, the plaintiff in
Platten merely alleged that “surplus profits earned by [the
16

Plaintiff’s allegations do not end here.
Plaintiff notes that Defendant BAG owns ninety percent
of Defendant BI, and Defendant Wolfgang Neuberger is
President, CEO, and Chairman of the Board of both Defendant
BI and Defendant BAG.

In addition, through his holding

company, Biomed Technology Holdings Ltd. (of which he is
sole owner), Defendant Neuberger is the majority shareholder
of Defendant BAG.

The alleged systematic looting of

Defendant BI by its parent corporation, as allegedly
overseen and directed by Defendant Neuberger, demonstrates
Defendant Neuberger’s ability and willingness to manipulate
the operations of the subsidiary.

Moreover, when Defendant

Neuberger learned of the litigation instituted in 2009 by
COO Moran and Secretary/Treasurer Morello -- the only other
officers and directors of Defendant BI -- he immediately
eliminated them from Defendant BI’s management team.

Thus,

common ownership and pervasive control are readily apparent
in this case.
Plaintiff further asserts that Defendant BI held no

subsidiary] ‘are siphoned upward to the Partnership for
distribution to the partners as bonuses,’” making it plainly
inapposite. Id. at 128 (emphasis added).
17

board meetings from its 1989 inception until July 2009, when
Moran and Morello were removed from the board.

The failure

to hold board meetings clearly constitutes the nonobservance
of corporate formalities, leads to an absence of corporate
records, and prevents directors from adequately fulfilling
their designated roles.
In short, the complaint sets forth a textbook example
of the “rare situation[ ]” in which disregard of the
corporate form is warranted.

Platten, 437 F.3d at 127.

Although this analysis does not require merely tallying up
the factors for and against piercing the corporate veil, it
is particularly noteworthy that Plaintiff’s allegations here
satisfy almost every factor presented by the SJC, with the
possible exceptions of non-payment of dividends and
insolvency.

Of course, the analysis of jurisdiction is not

intended to suggest that success on the merits is
inevitable.

As noted, Defendants vigorously attack

Plaintiff’s allegations, and Plaintiff carries the burden of
proving them.

At this stage, however, Plaintiffs have more

than satisfied their burden of making a prima facie showing
that the exercise of jurisdiction is warranted on a veil18

piercing theory.
The jurisdictional inquiry contains one additional
element.

The exercise of jurisdiction must be “reasonable

under the circumstances,” or, in other words, comport with
“traditional notions of fair play and substantial justice.”
Lechoslaw v. Bank of Am., N.A., 618 F.3d 49, 54 (1st Cir.
2010).7

To evaluate reasonableness, courts must apply the

following so-called “Gestalt” factors:
(1) the defendant's burden of appearing, (2) the
forum state’s interest in adjudicating the dispute,
(3) the plaintiff’s interest in obtaining
convenient and effective relief, (4) the judicial
system's interest in obtaining the most effective
resolution of the controversy, and (5) the common
interests of all sovereigns in promoting
substantive social policies.
Cossaboon v. Maine Med. Ctr., 600 F.3d 25, 33 n.3 (1st Cir.
2010).

Applying these factors, Defendants argue: (1)

Defendant BAG, as a German corporation, is burdened by
appearing in Massachusetts; (2) Massachusetts does not have

7

The court notes that the due process analysis also
requires a showing that the defendant’s contacts with the
forum state were “purposeful.” Here, however, the
“purposeful” element is no longer in play because Defendant
BI’s contacts with Massachusetts are indisputably
“purposeful” (operating out of the Commonwealth), and those
contacts will be imputed to Defendant BAG.
19

a strong interest in litigating a dispute between a New York
and a German corporation; (3) obtaining a judgment in
Massachusetts against a German corporation is not the most
effective way to resolve the controversy; and (4) both
Massachusetts and Germany have an interest in avoiding this
kind of international dispute.
Plaintiff responds that (1) Defendant BAG is already
litigating a case in Massachusetts state court, thus
minimizing the burden of appearing here; (2) Massachusetts
has a strong interest in the case because violations of
state law are at issue; (3) the disposition of
Massachusetts’ real estate (Defendant BI’s headquarters and
facilities) is at issue; and (4) Plaintiff would be unable
to obtain “convenient and effective relief” if it was forced
to litigate the case in Germany.
Both parties’ arguments have some force.

Certainly,

requiring a foreign defendant to appear in a United States
court creates a burden for that individual or entity.
Nonetheless, in this case such considerations are not
sufficient to overcome Plaintiff’s strong prima facie
showing of general jurisdiction on a veil-piercing theory.
20

As Plaintiff observes, “BAG purposefully availed itself of
the privilege of conducting activities in Massachusetts when
it fraudulently removed $16.5 million in Massachusetts-held
assets that its Massachusetts-based subsidiary had
accumulated while doing business in Massachusetts.”8
No. 25, Pl.’s Sur-Reply at 13.)

(Dkt.

As such, the exercise of

jurisdiction over Defendant BAG does not offend “traditional
notions of fair play and substantial justice.”

Lechoslaw,

618 F.3d at 54.
In conclusion, jurisdiction exists, and this court will
exercise it.
B.

Failure to State a Claim (Fed. R. Civ. P. 12(b)(6)).
1.

Count 1: Tortious Interference with Contract.

Under Massachusetts law, a claim for contractual
interference has four necessary elements: “(i) the existence
of a business relationship, (ii) of which the defendant is
aware and (iii) with which the defendant intentionally and
8

Such allegations may also satisfy the requirements of
specific jurisdiction, which involves a “material
connection” between the plaintiff’s claims and the
defendant’s contacts with the forum state. Platten, 437
F.3d at 138. However, the court need not decide this issue
given that general jurisdiction has been so clearly
established.
21

improperly interferes, (iv) causing impairment of the
relationship to the plaintiff’s detriment.”

Kouvchinov v.

Parametric Tech. Corp., 537 F.3d 62, 70 (1st Cir. 2008).
The third element requires the plaintiff to establish
improper conduct, “which may include ulterior motive (e.g.,
wishing to do injury) or wrongful means (e.g., deceit or
economic coercion).”

Luciano v. Coca-Cola Enters., Inc.,

307 F. Supp. 2d 308, 323 (D. Mass. 2004) (citation omitted).
Here, it is undisputed that Plaintiff and Defendant BI
had a business relationship, that the other parties were
aware of that relationship, and that Plaintiff suffered
detriment, which, it alleges, was directly attributable to
Defendants’ actions.

In support of their motion to dismiss,

Defendants rely primarily on the argument that Plaintiff has
failed to show improper motive.

Defendants correctly

observe that, in the context of a parent allegedly
interfering with the contract of a subsidiary, Plaintiff
must demonstrate that the parent acted with “actual malice,”
meaning “malevolence, spite or ill will.”

See Charles River

Data Sys., Inc. v. Oracle Complex Sys. Corp., 788 F. Supp.
54, 59 (D. Mass. 1991) (“[A] parent corporation is
22

privileged to ‘interfere’ with the contractual business of
its subsidiary . . . provided the privileged defendants act
with the purpose of protecting their legitimate economic
interests, and without actual malice directed toward the
plaintiff.”).
Plaintiff responds by pointing to the breakdown of
relations between Defendant Neuberger and Plaintiff and
highlighting its core allegation that Defendants siphoned
millions of dollars out of Defendant BI, knowing full well
that Plaintiff would be relying on Defendant BI’s financial
backing throughout the impending lawsuits.

At this stage in

the litigation, these allegations are sufficient to overcome
Defendants’ Rule 12(b)(6) motion.

See Powderly v. MetraByte

Corp., 866 F. Supp. 39, 43-44 (D. Mass. 1994) (denying
motion to dismiss tortious interference claim where
plaintiff alleged that the parent corporation “mismanaged
[its subsidiary’s] business, mischarged expenses and
diverted revenues, with the deliberate purpose of depriving
him of his bonus”).
2.

Count 2: Piercing the Corporate Veil.

Under Count 2, Plaintiff seeks to hold Defendants
23

liable for any judgment obtained by Plaintiff in the New
York action against Defendant BI by piercing the corporate
veil.

On this count, Defendants simply incorporate by

reference their earlier objections to Plaintiff’s veilpiercing allegations, as the standard remains the same in
this context.

See Negron-Torres v. Verizon Comm’s, Inc.,

478 F.3d 19, 26 (1st Cir. 2007).

Accordingly, the court

will deny Defendants’ motion on this count for the reasons
stated above.9
3.

Count 5: Chapter 93A.

Chapter 93A provides a cause of action to “a person who
is engaged in business and who suffers a loss as a result of
an unfair or deceptive act or practice by another person

9

Defendants note in passing that it is not clear
whether Massachusetts imposes a heightened burden on
plaintiffs seeking to pierce the corporate veil in a breachof-contract action as opposed to a tort action, and they
argue that this court should resolve the issue in their
favor. See Birbara, 99 F.3d at 1238 (stating that “several
courts and commentators have suggested that it should be
more difficult to pierce the veil in a contract case than in
a tort case,” highlighting the absence of relevant authority
in Massachusetts, and ultimately declining to resolve the
issue); Platten, 437 F.3d at 129 n.7 (same). Given that
this is a motion to dismiss and the fact that the parties
have not briefed the issue, it is unnecessary and
inappropriate to render a decision at this time.
24

also engaged in business.”

Manning v. Zuckerman, 444 N.E.2d

1262, 1264 (Mass. 1983) (citing Mass. Gen. Laws ch. 93A, §
11).

Chapter 93A requires that the unfair or deceptive

trade practice must have occurred “primarily or
substantially” in Massachusetts.

Mass. Gen. Laws ch. 93A, §

11.
Defendants argue, first, that as a “simple breach of
contract,” this case does not fall under the purview of
Chapter 93A.

See Incase Inc. v. Timex Corp., 488 F.3d 46,

56 (1st Cir. 2007) (“Simple breach of contract is not
sufficiently unfair or deceptive to be alone a violation of
Chapter 93A.”).

Under Count 4, however, Plaintiff alleges

the fraudulent transfer of assets in violation of Mass. Gen.
Laws ch. 109A, and Chapter 93A certainly encompasses fraud.
See Slaney v. Westwood Auto, Inc., 322 N.E.2d 768, 779
(Mass. 1975) (“[T]he definition of an actionable ‘unfair or
deceptive act or practice’ goes far beyond the scope of the
common law action for fraud and deceit.”).
Next, Defendants argue that the conduct at issue here
did not occur primarily or substantially in Massachusetts.
This inquiry “looks to whether the center of gravity of the
25

circumstances that give rise to the claim is primarily and
substantially within the Commonwealth.”

Uncle Henry’s, Inc.

v. Plaut Consulting Co., 399 F.3d 33, 44 (1st Cir. 2005).
The burden is on Defendants to prove that such actions did
not occur in-state.

See Mass. Gen. Laws ch. 93A, § 11.

As discussed extensively above, this case centers on
the allegation that Defendants fraudulently transferred
funds out of a Massachusetts-based entity and into a number
of foreign corporations.

This allegation is sufficient to

overcome the motion to dismiss.

Although further factual

development may reveal that much of the alleged misconduct
in fact occurred outside the Commonwealth, dismissal at this
stage is plainly improper.
V.

CONCLUSION

For the foregoing reasons, Defendants’ Motion to
Dismiss Plaintiff’s Complaint Pursuant to Rules 12(b)(2) and
12(b)(6) is hereby DENIED.

The clerk will refer the matter

to Magistrate Judge Neiman for a Rule 16 status conference.
It is So Ordered.
/s/ Michael A. Ponsor
MICHAEL A. PONSOR
U. S. District Judge
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