GENERAL ELECTRIC CAPITAL CORPORATION v. ONCOLOGY ASSOCIATES OF OCEAN COUNTY LLC et al
Filing
105
OPINION filed. Signed by Judge Anne E. Thompson on 9/24/2014. (kas, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
GENERAL ELECTRIC CAPITAL
CORPORATION,
Civ. No. 10-1972
Plaintiff,
OPINION
v.
ONCOLOGY ASSOCIATES OF OCEAN
COUNTY, LLC, Michael MARCHESE,
Barbara SCHNEIDER, Parvez DARA, and
Steward BERKOWITZ,
Defendants.
THOMPSON, U.S.D.J.
The present matter comes before the Court upon the Motion of Defendant Michael J.
Marchese (hereinafter, “Marchese”) for Summary Judgment against Defendant Barbara
Schneider (hereinafter, “Schneider”) and Defendant Parvez Dara (hereinafter, “Dara”). (Doc.
No. 91). Schneider opposes the motion. (Doc. No. 95). Dara has not opposed the motion. For
the reasons stated herein, Marchese’s motion will be granted.
BACKGROUND
The issues currently before the Court involve an indemnity provision contained in a
written Buyout Agreement signed by Defendants Marchese, Schneider, and Dara. 1
In 2004, Defendant Oncology Associates of Ocean County (hereinafter, “OAOC”) and
OAOC’s principals entered into a Master Lease Agreement and Security Agreement (hereinafter,
1
This Opinion focuses only on the dispute between Defendant Marchese and Defendants
Schneider and Dara; it does not address the merits of the underlying dispute between Plaintiff
and Defendants.
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“the Agreements”) for the lease of medical equipment from Plaintiff General Electric Capital
Corporation (hereinafter, “GECC”). (Doc. No. 91 at 4). Marchese was a principal of OAOC and
a guarantor of OAOC’s obligations under the Agreements. (Id.).
In March of 2007, Marchese withdrew his membership interest from OAOC. Marchese
effectuated this withdrawal from OAOC through a “Buyout Agreement” in which Schneider and
Dara acquired Marchese’s interest in OAOC. (Id.). The Buyout Agreement also contained an
indemnity provision, which states in relevant part:
OAOC, Dara and Schneider each hereby covenant and agree to defend,
indemnify and hold Dr. Michael Marchese harmless from and against any
and all loss, liability, damage, or expense arising out of, or resulting from,
any and all Debts, liabilities or obligations of OAOC, or Dr. Michael
Marchese’s exposure to [the] same including, but not limited to, any and all
Debts and liabilities of OAOC to any individuals or entities and all
guaranties executed by Dr. Marchese relating thereto.
This indemnification includes, but is not limited to, the obligation to defend
Dr. Michael Marchese against any claims which may be brought against
him (including the payment of reasonable attorney fees, expenses, and all
other costs of defense), as well as the cost of paying any settlement or
judgment on account of such claims.
(Doc. No. 91, Ex. 4, Gadhok Certification at 8).
In January 2010, the loan obligation to GECC went into default. On April 16, 2010,
GECC filed the present action seeking to enforce the terms of those agreements against the
guarantors – OAOC, Dara, Schneider, Marchese, and Berkowitz. (Doc. No. 1).
Marchese filed a Crossclaim for indemnification against Schneider and Dara, claiming
that the terms of the Buyout Agreement require Schneider and Dara to pay for any damages
Marchese suffered as a result of his role as guarantor. Marchese then engaged in negotiations
with GECC and eventually entered into a settlement agreement with GECC in the amount of
$190,000. Relying on the terms of the Buyout Agreement, Marchese moves for indemnification
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with respect to the settlement amount of $190,000 and “reimbursement of all attorneys’ fees,
expenses and costs incurred by him in this action.” (Doc. No. 91 at 6).
DISCUSSION
I. Legal Standard for Summary Judgment
Summary judgment shall be granted if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A fact is “material” if it will “affect the outcome of the suit under the governing law [. .
.].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is “genuine” if it
could lead a “reasonable jury [to] return a verdict for the nonmoving party.” Id. When deciding
the existence of a genuine dispute of material fact, a court’s role is not to weigh the evidence; all
reasonable “inferences, doubts, and issues of credibility should be resolved against the moving
party.” Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983). The movant
“always bears the initial responsibility of informing the district court of the basis for its motion,
and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,’ which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(quoting Fed. R. Civ. P. 56(c)). Then, “when a properly supported motion for summary
judgment [has been] made, the adverse party ‘must set forth specific facts showing that there is a
genuine issue for trial.’” Anderson, 477 U.S. at 250 (quoting Fed. R. Civ. P. 56(e)). The nonmovant’s burden is rigorous: it “must point to concrete evidence in the record;” mere allegations,
conclusions, conjecture, and speculation will not defeat summary judgment. Orsatte v. N.J. State
Police, 71 F.3d 480, 484 (3d Cir. 1995); Jackson v. Danberg, 594 F.3d 210, 227 (3d Cir. 2010)
(citations omitted) (“[S]peculation and conjecture may not defeat summary judgment.”).
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II. Analysis
a. Indemnification
Marchese claims that the terms of the Buyout Agreement require that Schneider and Dara
indemnify him for the settlement with GECC. Schneider raises three arguments against
indemnification: (1) the terms of the Buyout Agreement do not make Schneider liable to
Marchese; (2) the Buyout Agreement should be voided due to fraud; and (3) Marchese failed to
properly mitigate his damages.
1. Terms of the Buyout Agreement
The Buyout Agreement expressly states that it is governed by New Jersey law and no
party disputes the applicability of New Jersey law to the terms of the Buyout Agreement. (See
Doc. No. 91, Ex. 4, Gadhok Certification at 8). Under New Jersey law, “where the terms of a
contract are clear and unambiguous, there is no room for interpretation or construction and the
court must enforce those terms as written.” Sons of Thunder, Inc. v. Dorden, Inc., 285 N.J.
Super. 27, 48 (App. Div. 1995). Indemnification provisions are interpreted in accordance with
the same general rules governing the construction of contracts. See Kieffer v. Best Buy, 205 N.J.
213, 223 (2011) (“[i]f an indemnity provision is unambiguous, then the words presumably will
reflect the parties’ expectations”).
Here, Marchese was named in the present action because he was a guarantor in the
Master Lease Agreement and Security Agreement, which involved the lease of medical
equipment to OAOC. Marchese eventually settled with GECC in the amount of $190,000. The
Buyout Agreement expressly stated that “OAOC, Dara and Schneider each” agree to indemnify
Marchese “against any and all . . . expense arising out of, or resulting from any and all Debts,
liabilities or obligations of OAOC, or Dr. Michael Marchese’s exposure to [the] same including,
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but not limited to . . . all guaranties executed by Dr. Marchese relating thereto.” (Doc. No. 91,
Ex. 4, Gadhok Certification at 8). Accordingly, the terms of the Buyout Agreement require that
OAOC, Dara, and Schneider each indemnify Marchese for the settlement amount of $190,000.
2. Fraud
Schneider also claims that the Buyout Agreement should be voided because Schneider
was fraudulently induced to sign the Buyout Agreement. Fraudulent inducement is a valid
ground for recession of a contract. Ramapo Bank v. Bechtel, 224 N.J. Super. 191, 197 (App.
Div. 1988). To prevail on a claim of fraudulent inducement, a party must show that the opposing
party “knowingly omitted material facts in the execution of the [relevant contract].” The Mall at
IV Grp. Props., LLC v. Roberts, 2005 WL 3338369, at *1 (D.N.J. Dec. 8, 2005); EUSA-Allied
Acquisition Corp. v. Teamsters Pension Trust Fund of Phila. & Vicinity, 2011 WL 3651315
(D.N.J. Aug. 18, 2011).
Schneider alleges that she never would have signed the Buyout Agreement had she
known that Marchese had deceived her in a separate deal. Specifically, Schneider claims that
Marchese and Berkowitz fraudulently induced Schneider to “execute the Buyout Agreement by
intentionally misleading Dr. Schneider regarding the refinancing of a loan to Dover Real Estate
Holdings, LLC.” (Doc. No. 95 at 18). Schneider does not show how Marchese’s alleged fraud
in a different matter constitutes a knowing omission of a material fact with respect to the Buyout
Agreement, which concerned Marchese’s interests in OAOC. Therefore, Schneider has not
provided sufficient proof or allegations to show fraudulent inducement.
3. Breach of Good Faith
Schneider argues that, even if Marchese would have been entitled to indemnification
under the Buyout Agreement, his failure to include Schneider in the negotiation settlements with
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GECC is a breach of the covenant of good faith and fair dealing. “The covenant of good faith
and fair dealing calls for parties to a contract to refrain from doing ‘anything which will have the
effect of destroying or injuring the right of the other party to receive the benefits of the contract.”
Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224–25
(2005).
Here, Schneider does not show that Marchese acted in breach of the covenant of good
faith and fair dealing. First, there is no evidence that Schneider was actively excluded from the
negotiations. Schneider was copied in a letter which stated that GECC and Marchese were
making “significant progress towards a negotiated settlement.” (Doc. No. 100 at 12). Despite
receiving this notice, there is no evidence or allegation that Schneider attempted to intervene in
the negotiations at this point. There is also no evidence that Schneider objected to the idea of
settlement or that she inquired into the amount of settlement.
Second, Schneider also fails to show that Marchese acted in bad faith. A party injured by
a breach of contract is obligated to mitigate damages. See Ingraham v. Trowbridge Builders, 297
N.J. Super. 72, 82 (App. Div. 1997). Marchese states, and Schneider does not dispute, that
Marchese faced a maximum individual liability of $475,000 to GECC for his role as a guarantor.
Marchese engaged in lengthy negotiations with GECC and was able to reach a settlement in the
amount of $190,000. For the reasons set forth above, Schneider provides insufficient proof and
allegations to support a finding that Marchese breached the covenant of good faith and fair
dealing.
4. Mitigation
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Schneider claims that “Marchese failed to include []Schneider in settlement discussions
and thus failed to take a reasonable step necessary to mitigate []Schneider’s potential damages to
[]Marchese pursuant to the Buyout Agreement.” (Doc. No. 95 at 29).
“It is well settled that injured parties have a duty to take reasonable steps to mitigate
damages.” Ingraham, 297 N.J. Super. at 82–83 (citations omitted). “Damages will not be
recovered to the extent that the injured party could have avoided his losses through reasonable
efforts ‘without undue risk, burden or humiliation.’” Id. at 83 (citations omitted). “[T]he burden
of proving facts in mitigation of damages rest[s] upon the party breaching the contract.” Id. at
83.
Here, Schneider claims that Marchese failed to mitigate Schneider’s potential damages
“pursuant to the Buyout Agreement” by failing to include Schneider in the settlement discussions
with GECC. Schneider claims that, had she been included in the discussions, she could have
lowered the settlement amount by pointing out various examples of misconduct engaged in by
GECC and by pointing out her own inability to pay any large settlement. Nothing in the record
suggests that Schneider offered to assist Marchese in the settlement negotiations or that she
informed Marchese after the suit was filed that she intended to indemnify him for this settlement.
Thus, Schneider’s argument is that Marchese acted unreasonably by failing to include her in
settlement negotiations, even though she refused to indemnify Marchese and had no contractual
authority to accept or reject the settlement. Moreover, Schneider provides no proof that her
participation in the settlement discussions would have lowered the settlement amount. For
instance, Schneider did not allege or show that Marchese did not point out Schneider’s financial
situation and the examples of misconduct, nor did she show that these examples of misconduct
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would have had any effect on the final settlement amount. Therefore, Schneider does not
provide facts upon which a reasonable jury could rely in finding a failure to mitigate.
b. Attorney Fees
Marchese also moves for summary judgment with respect to attorneys’ fees.
“In general, New Jersey disfavors the shifting of attorneys’ fees.” Litton Indus., Inc. v. IMO
Indus., Inc., 200 N.J. 372, 385 (2009) (citations omitted). However, “a prevailing party can
recover those fees if they are expressly provided for by statute, court rule, or contract.”
Packard–Bamberger & Co., Inc. v. Collier, 167 N.J. 427, 440 (2001). “When the fee-shifting is
controlled by a contractual provision, the provision should be strictly construed in light of our
general policy disfavoring the award of attorneys’ fees.” Litton Indus., Inc., 200 N.J. at 385.
Here, the Buyout Agreement states that Schneider and Dara had an “obligation to defend
Dr. Michael Marchese against any claims which may be brought against him (including the
payment of reasonable attorney fees, expenses, and all other costs of defense), as well as the cost
of paying any settlement or judgment on account of such claims.” (Doc. No. 91, Ex. 4, Gadhok
Certification at 8). The attorneys’ fees and other costs incurred in the litigation against GECC
and the litigation against Schneider and Dara stem from Marchese’s role as a guarantor and
Schneider’s and Dara’s breached obligation to indemnify Marchese. Therefore, Marchese is
entitled to reasonable “attorney fees, expenses, and all other costs of defense” arising out of his
litigation and settlement with GECC and his Crossclaim against Schneider and Dara.
CONCLUSION
For the reasons set forth above, Marchese’s Motion for Summary Judgment will be
granted.
/s/ Anne E. Thompson
ANNE E. THOMPSON, U.S.D.J.
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