GREENBERGER et al v. VARUS VENTURES, LLC et al
Filing
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OPINION. Signed by Judge Joel A. Pisano on 12/10/2014. (jjc)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MARC GREENBERGER and NANCY
GREENBERGER,
Plaintiffs,
v.
VARUS VENTURES LLC, TRADITION
SOURCING, LLC, NICHOLAS P. SANDOR,
and DAVID GULLIAN,
Defendants.
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Civil Action No. 13-7920
OPINION
PISANO, District Judge
Plaintiffs, Marc and Nancy Greenberger (“Plaintiffs” or the “Greenbergers”), brought this
suit, seeking damages for allegedly being induced into investing retirement funds into a sham
financial vehicle. This matter comes before the Court on a motion to dismiss, or, alternatively,
for a more definite statement pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(e) by
Defendant David Gulian (“Defendant” or “Gulian”). Plaintiffs oppose the motion. The Court
decides these matters without oral argument pursuant to Federal Rule of Civil Procedure 78. For
the reasons set forth below, the Court grants in part and denies in part Defendant’s motion.
I.
Background
Starting in 2010, Nicholas Sandor (“Sandor”) began soliciting Marc Greenberger to
invest personal funds with a wealth advisory group in which Sandor was involved. Plaintiffs
allege that, as a result of Sandor’s solicitations, Mr. Greenberger invested certain personal funds
with Sandor’s group.
Subsequently, Sandor introduced Mr. Greenberger to Gulian. Sandor and Gulian
represented to Mr. Greenberger that they were creating an investment fund to be known as
“Varus Ventures.” They each advised Mr. Greenberger that they would be the leaders of Varus,
and that they would use Varus as a vehicle through which they would make targeted investments
in companies that they, and in particular Gulian, would identify. Plaintiffs allege that Gulian
represented himself as the creator of Varus and a leader of the fund. Sandor echoed this
sentiment, telling Mr. Greenberger that Gulian was the “money guy,” the “fund manager,” and
the “brains behind the operation” of Varus. Sandor, on the other hand, was responsible for sales.
Plaintiffs allege that Sandor and Gulian contacted Mr. Greenberger, either together or
separately, no less than fifty separate occasions from late 2010 and into 2011 about investing in
Varus. Often, Sandor and Gulian would bring up investing in Varus during personal visits; for
example, when Sandor and Gulian visited the Greenbergers’ home, they would speak in detail to
Mr. Greenberger about investing in Varus. Gulian identified numerous companies for the
Greenbergers to invest in, and provided Mr. Greenberger with documents and other details about
these companies. Gulian also put Mr. Greenberger in touch with several of the companies that
Sandor and Gulian were identifying as investments for Varus, and encouraged Mr. Greenberger
to invest in them through Varus. Plaintiffs allege that Sandor and Gulian each solicited and
made representations concerning the value and potential reward of the investments in order to
convince the Greenbergers to invest money in Varus. Sandor and Gulian each represented that
they were experienced investors and had expertise in the investment business, particularly in
investment-type vehicles such as Varus. They explicitly advised Mr. Greenberger that the
Greenbergers’ investments with them would be made through their venture, Varus, which they
purported to own and control.
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On or about February 9, 2011, the Greenbergers purchased $36,000 worth of ownership
interests in Tradition, a company that purportedly manufactures golf accessorizes, allegedly as a
result of the numerous representations of Gulian and Sandor. They understood and believed that
this purchase was made through Varus. Subsequently, on or about August 26, 2011, the
Greenbergers purchased $68,000 worth of ownership interest in Varus. They made this purchase
based upon the representations and solicitations of Gulian and Sandor, particularly their
representations that they owned and controlled Varus, that they would manage Varus’s
investments and opportunities, and that they would provide the Greenbergers with proper
documentation and reporting concerning their investments.
The Greenbergers made their respective investments through two Individuals Retirement
Accounts (“IRA”), one in each of their respective names. These IRAs were administered by
Entrust CAMA Self-Directed IRA, LLC PA (“CAMA”). To maintain the IRA accounts, regular
administrative and custodial payments were required to be made to CAMA. Plaintiffs allege that
Sandor and Gulian repeatedly assured the Greenbergers that they would cause Varus to make the
necessary payments to CAMA as they became due. Plaintiffs allege that it was a condition of
their investments in and through Varus that Varus would cover CAMA’s administrative expenses
to maintain these accounts. These administrative and custodial fees for the Greenbergers’
respective IRAs were paid for approximately two years, although Sandor allegedly needed
constant reminding and missed or delayed certain payments.
In the weeks and months subsequent to making these initials investments, Mr.
Greenberger had difficulty contacting either Gulian or Sandor. Both ceased contacting Mr.
Greenberger after the Greenbergers invested funds in Varus, and failed to return his phone calls.
Despite Mr. Greenberger’s numerous requests, Plaintiffs never received any unit or ownership
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certificates reflecting their investments in Varus. Ultimately, Plaintiffs invested a total of
$213,000 in or through Varus, allegedly in response to the solicitations of Sandor and Gulian and
the representations each of them made concerning their investments.
In April 2012, Mr. Greenberger requested that Sandor and Gulian divest and return to
them their respective investments. Because he received no response, he repeated this request
several times over the next year. In or about the last quarter of 2012, the administrative
payments to CAMA ceased, without any notice to the Greenbergers and allegedly without any
justification. Thereafter, by letters dated June 3, 2013, CAMA terminated each of the accounts
of the Greenbergers, based upon the failure to pay the requisite administrative fees. CAMA
advised the Greenbergers that their IRA accounts were empty, with no funds left to divest or
return. The Greenbergers have sustained substantial tax consequences and penalties, as a result
of alleged malfeasance of Sandor and Gulian, and CAMA’s premature termination of these
accounts.
Over the past several months, Sandor and Gulian have failed to communicate with Mr.
Greenberger, have ignored his written and oral communications for information concerning
Plaintiffs’ investments in and through Varus, and have failed and refused to confirm that Varus
even continues to hold their respective investments. Varus has abandoned its former mailing
address, and has shut down its website, and is no longer functioning as a going forward entity.
Plaintiffs question whether Varus ever existed as an entity, because they never received any
proof that Sandor and Gulian actually created Varus or that Varus formally existed.
Subsequent to the filing of this action, Mr. Greenberger has received text messages from
Sandor, apologizing to Mr. Greenberger and claiming to have experienced some personal
problems. Sandor provided no information regarding the $213,000 that the Greenbergers had
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invested in and through what they believed to be Varus, based upon the representations of
Sandor and Gulian. Sandor also provided an affidavit to counsel for the Greenbergers, dated
February 11, 2014 (the “Sandor Affidavit”), in which Sandor claims that Gulian “formally
acknowledged that the cessation of his affiliation with Varus” on January 24, 2012. See Am.
Compl. ¶ 38. This circumstance, if true, was never conveyed to Mr. Greenberger. The Sandor
Affidavit also contained the allegedly false assertion that “Gulian did not induce or solicit the
Greenbergers to invest with Varus.” Id. at ¶ 39. The Sandor Affidavit also states that Gulian
never executed any “formation agreements or other documentation” concerning Varus, although
he was purportedly “informally affiliated with Varus.” Id. at ¶ 40. If true, these circumstances
were contrary to the representations that Gulian and Sandor made to Mr. Greenberger concerning
Gulian’s affiliation with Varus. The Sandor Affidavit states that Gulian became affiliated with
Varus “on the assumption that Varus was actually properly established on a formal basis,” and
that neither he nor Varus executed formation agreements or other documentation. See
Certification of James H. Steigerwald (“Steigerwald Cert.”) Ex. A at ¶ 2. The Sandor Affidavit
never states that Varus was properly established. See Am. Compl. at ¶ 41.
Based on the Sandor Affidavit, Plaintiffs allege that “Varus doesn’t exist, may never have
existed, and Gulian’s role in Varus was falsely represented to the Greenbergers in order to induce
them into investing monies that have disappeared into the hands of Sandor and/or Gulian.” Id. at
¶ 44. To date, Plaintiffs allege they still do not know the location of the $213,000 they invested
with Sandor and Gulian, nor have Sandor or Gulian ever provided any information to the
Greenbergers concerning their investment.
On January 31, 2013, Plaintiffs filed the current action, bringing seven causes of action
against Defendants: breach of contract, breach of the covenant of good faith and fair dealing,
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negligence, breach of fiduciary duty, fraud, tortious interference with prospective economic gain,
and unjust enrichment. On April 14, 2014, Plaintiffs filed an Amended Complaint, in which they
bring the same seven causes of action. Defendant Gulian has moved to dismiss the Complaint,
or, in the alternative, seeks a more definitive statement.
II.
Standard of Review
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint
“for failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
reviewing a motion to dismiss, courts must first separate the factual and legal elements of the
claims, and accept all of the well-pleaded facts as true. See Fowler v. UPMC Shadyside, 578
F.3d 203, 210–11 (3d Cir. 2009). All reasonable inferences must be made in the Plaintiff's favor.
See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010). In order to survive a
motion to dismiss, the plaintiff must provide “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This standard
requires the plaintiff to show “more than a sheer possibility that a defendant has acted
unlawfully,” but does not create as high of a standard as to be a “probability requirement.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The Third Circuit has required a three-step analysis to meet the plausibility standard
mandated by Twombly and Iqbal. First, the court should “outline the elements a plaintiff must
plead to a state a claim for relief.” Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012). Next, the
court should “peel away” legal conclusions that are not entitled to the assumption of truth. Id.;
see also Iqbal, 556 U.S. 678–79 (“While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.”). It is well-established that a proper
complaint “requires more than labels and conclusions, and a formulaic recitation of the elements
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of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal quotations and citations
omitted). Finally, the court should assume the veracity of all well-pled factual allegations, and
then “determine whether they plausibly give rise to an entitlement to relief.” Bistrian, 696 F.3d
at 365 (quoting Iqbal, 556 U.S. at 679). A claim is facially plausible when there is sufficient
factual content to draw a “reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678. The third step of the analysis is “a context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.
In addition, Rule 9(b) requires that “in all averments or fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent,
knowledge, and other condition of mind of a person may be averred generally.” Fed. R. Civ. P.
9(b). Rule 9(b)’s heightened pleading standard for fraud claims is meant “to place the
defendants on notice of the precise misconduct with which they are charged, and to safeguard
defendants against spurious charges of immoral and fraudulent behavior.” Seville Indus. Mach.
Corp. v. Southmost Mach., 742 F.2d 786, 791 (3d Cir. 1984). In general, the complaint must
describe the “who, what, when, where and how of the events at issue.” In re Rockefeller Ctr.
Props. Secs. Litig., 311 F.3d 198, 217 (3d Cir. 2002) (citations and quotations omitted).
Generally, a district court may not consider matters extraneous to the complaint when
determining a Rule 12(b)(6) motion to dismiss. See In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1426 (3d Cir. 1997). This means that the district court relies on “the complaint,
attached exhibits, and matters of public record.” Sands v. McCormick, 502 F.3d 263, 268 (3d
Cir. 2007). A district court may, however, appropriately consider “a document integral to or
explicitly relied upon in the complaint may be considered without converting the motion to
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dismiss into one for summary judgment.” Angstadt v. Midd–West Sch. Dist., 377 F.3d 338, 342
(3d Cir. 2004).
III.
Discussion
As discussed, Plaintiffs’ Complaint asserts seven causes of action against Defendants:
breach of contract, breach of the covenant of good faith and fair dealing, negligence, breach of
fiduciary duty, fraud, tortious interference with prospective economic gain, and unjust
enrichment. Defendant Gulian moves to dismiss the Amended Complaint on two major grounds:
first, that Plaintiffs’ contract and quasi-contract claims fail as a matter of law because Gulian was
not personally a party to the contract at issue; second, that Plaintiffs’ tort claims are precluded by
the New Jersey economic loss rule. Defendant Gulian also argues that Plaintiffs have failed to
allege a claim for fraud with the required specificity under Rule 9(b). The Court addresses these
arguments below.
A.
Breach of Contract Claim
First, Defendant Gulian argues that Plaintiffs’ breach of contract claim must be dismissed
because Plaintiffs have failed to allege the existence of a contract between Plaintiffs and Gulian
personally. Generally, a limited liability company, like Varus, is an entity separate and distinct
from its employees and officers; accordingly, contractual agreements with such companies do
not impute liability onto its officers. See, e.g., Gardner v. The Calvert, 253 F.2d 395, 398 (3d
Cir. 1958). An officer, however, may be found individually liable if there is evidence that an
officer “intended to be bound personally, or that he acted beyond the scope of his authority . . . .”
Id. Here, Gulian asserts that the Amended Complaint only alleges the existence of a contractual
relationship between himself and Plaintiffs based upon his position as an “officer[], director[],
member[], and founding owner[] of Varus.” Def.’s Br. at 8 (quoting Am. Compl. ¶¶ 46, 59–60,
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68–69). Gulian argues that these assertions show that Plaintiffs entered an agreement with Varus
only, and not with Gulian personally; consequently, he argues that Plaintiffs’ contract claim
against him individually must be dismissed.
While legally sound, Defendant Gulian’s argument misses the mark based on the facts as
alleged in the Amended Complaint. Plaintiffs assert that they entered into a separate contract
with Gulian “by which he obligated himself, personally, to undertake certain tasks on behalf of
the Plaintiffs.” Pl.’s Opp. Br. at 4. The Court agrees. Plaintiffs have pled sufficient factual
allegations that, if true, would state a plausible basis for a breach of contract claim. For example,
Plaintiffs have alleged that Sandor and Gulian represented to Plaintiffs that they were creating an
investment fund to be known as Varus, that they would make the necessary payments to CAMA
as they came due, and that they would make the necessary custodial fees that were necessary to
maintain the Greenbergers’ IRA accounts with and through CAMA. See, e.g., Compl. ¶¶ 9, 21,
47–49. Plaintiffs have alleged that Defendants thereafter failed to invest their funds as promised,
failed to properly form Varus, and also failed to pay the requisite administrative and custodial
fees. Plaintiffs argue that Gulian and Sandor also represented Varus itself as an investment, and
that Plaintiffs “entered into an agreement with Sandor and Gulian in which Sandor and Gulian
agreed to sell investment funds in Varus . . . .” Id. at ¶ 46.
As Plaintiffs argue, these allegations establish the existence of agreements with Gulian
and Sandor as individuals, not as officers. This point is furthered by Plaintiffs’ contentions that
Varus was never formed, or that, if it was formed, it was never operational and Plaintiffs’
retirements funds were never in fact invested in Varus. At this stage of the proceedings, to find
that Plantiffs’ breach of contract claim is insufficient as a matter of law because they had an
agreement with Varus, a company that they allege never existed, is inappropriate. Quite simply,
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Gulian’s arguments are better suited after a period of discovery, at the summary judgment stage.
Otherwise, when reviewing the Amended Complaint in a light most favorable to Plaintiffs, the
Court must find that Plaintiffs have sufficiently alleged a breach of contract claim, and deny
Gulian’s motion to dismiss Plaintiffs’ contract claim.
B.
Breach of the Covenant of Good Faith and Fair Dealing
Plaintiffs have next brought a claim for the breach of the implied covenant of good faith
and fair dealing. In New Jersey, parties to a contract have a duty of good faith and fair dealing
imposed on them. See Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs.,
182 N.J. 210, 224 (2005). “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.” Id. at 224–25 (quoting Palisades
Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965)); see also Sons of Thunder, Inc. v. Borden, 148
N.J. 396, 423 (1997). There are a “myriad forms conduct that may constitute a violation of good
faith and fair dealing,” making it a fact-sensitive determination regarding whether the covenant
has been violated. Brunswick Hills Racquet Club, 182 N.J. at 225. Generally, however, if a
plaintiff’s “reasonable expectations are destroyed when a defendant acts with ill motives and
without any legitimate purpose” or if he detrimentally relies “on a defendant’s intentional
misleading assertions,” he is entitled to relief. Id. at 226 (citing Wilson v. Amerada Hess Corp.,
168 N.J. 236, 251 (2001); Bak-a-Lum Corp. v. Alcoa Bldg. Prods., Inc., 69 N.J. 123, 129–30
(1976)).
Because the Court finds that Plaintiffs have sufficiently alleged the existence of a
contractual relationship, the only issue is if Plaintiffs have sufficiently alleged that Gulian
breached an implied covenant. Defendant Gulian asserts that any breach alleged by Plaintiffs is
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expressly alleged to be part of the parties’ agreement. While the Court agrees that the Amended
Complaint is not entirely clear about the terms of the agreement between Plaintiffs and Gulian,
when reviewing the pleadings in the light most favorable to Plaintiffs, Plaintiffs’ allegations are
sufficient to allow the case to proceed to discovery on the breach of the implied covenant of
good faith and fair dealing claim. A review of Plaintiffs’ Complaint does sufficiently establish
the existence of a contractual relationship between the parties, and does allege facts insinuating
that Gulian acted in a way that had “the effect of destroying or injuring the right of the other
party to receive the benefits of the contract.” Brunswick Hills Racquet Club, 182 N.J. at 224–25.
Whether this claim will withstand summary judgment, at which point the terms of the contractual
relationship should be sketched out with greater specificity, is a different matter. At this stage of
the proceedings, Gulian’s motion to dismiss Plaintiffs’ claim for a breach of the implied
covenant of good faith and fair dealing must be denied.
C.
Negligence Claim
In their negligence claim, Plaintiffs allege that Defendant Gulian was negligent in failing
to properly manage their investments. See Am. Compl. ¶¶ 57–63. Under New Jersey law, a
negligence claim requires proof that (1) the plaintiff was owed a duty of care by the defendant,
(2) the defendant breached that duty, and (3) that this breach was the proximate cause of
damages suffered by the plaintiff. See Worrell v. Elliot & Frantz, 799 F. Supp. 2d 343, 353
(D.N.J. 2011). A review of the Amended Complaint shows that Plaintiffs have properly alleged
each of the elements of a negligence claim.
Defendant Gulian argues, and Plaintiffs do not dispute, that Plaintiffs’ negligence claim is
barred by New Jersey’s economic loss rule. Under New Jersey law, “the economic loss doctrine
prohibits plaintiffs from recovering in tort economic losses to which they are entitled only by
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contract.” Arcand v. Brother Int’l Corp., 673 F. Supp. 2d 282, 308 (D.N.J. 2009) (citing Saltiel
v. GSI Consultants, Inc., 170 N.J. 297, 310 (2002)). The relevant inquiry for whether a tort
claim can coexist with a breach of contract claim focuses on whether the alleged tortious conduct
is extrinsic to the contract between the parties. See id. A review of Count Three of Plaintiffs’
Amended Complaint reveals that Plaintiffs are seeking damages based upon Defendant Gulian’s
alleged mismanagement of their investment, but this claim arises out of Defendant Gulian’s
failure to perform in accordance with the parties’ contract. In other words, Plaintiffs have
alleged that Defendant Gulian negligently performed his contractual task. Plaintiffs have neither
alleged nor argued any obligations that are not encompassed by the parties’ contract in regards to
their negligence claim—indeed, Plaintiffs have not responded to the motion to dismiss their
negligence claim at all. Accordingly, the Court must dismiss Plaintiffs’ negligence claim, as it is
barred by the economic loss doctrine.
D.
Breach of Fiduciary Duty Claim
Defendant Gulian next argues that Plaintiffs’ claim for breach of fiduciary duty must be
dismissed. Gulian asserts that Plaintiffs’ breach of fiduciary duty claim is based solely on the
parties’ contractual relationship, and is thereby precluded by the economic loss doctrine. See
Def.’s Br. at 14. Alternatively, Gulian argues that he did not owe Plaintiffs a duty of care as an
officer of Varus. See Def.’s Reply Br. at 3.
As discussed, “a party cannot maintain a negligence action, in addition to a contract
action, unless the plaintiff can establish an independent duty of care.” Saltiel v. GSI Consultants,
Inc., 170 N.J. 297, 314 (2002). The existence of a fiduciary duty is a fact-specific analysis, and
is not necessarily governed by a contract. See Shan Indus., LLC v. Tyco Int'l (US), Inc., Civ. No.
04-1018 (HAA), 2005 U.S. Dist. LEXIS 37983, at *58–59 (D.N.J. Sept. 9, 2005) (citing Berman
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v. Gurwicz, 189 N.J. Super. 89, 93–94 (App. Div. 1981)). As indicated by the cases cited by
Defendant, courts have analyzed factors such as the parties’ expectations regarding individual
liability under a contract or the expected scope of contractual obligations when determining
whether a breach of fiduciary duty claim sounded more in tort or contract. See, e.g., Saltiel, 170
N.J. at 315–17. Because of the factual nature of these findings, the objection to this claim is
premature and better suited for the summary judgment stage. This is particularly essential here,
where determinations regarding if Varus was ever formally created could potentially impact the
existence of a fiduciary duty. 1
Further, a review of Plaintiffs’ Amended Complaint reveals sufficient factual allegations
to support their argument that Gulian owed an independent duty to them external to the contract
to establish a plausible claim for breach of fiduciary duty. It is well-established that a defendant
can voluntarily assume a duty in addition to those obligations created by a contractual
agreement. See, e.g., Saltiel, 170 N.J. at 315 (citing Scribner v. O’Brien, Inc., 363 A.2d 160, 168
(Conn. 1975) (describing that corporate officer defendant who had held himself out to be a
skilled builder had a duty of care consistent with that representation imposed upon him); Stewart
Title Guar. Co. v. Greenlands Realty L.L.C., 58 F. Supp. 2d 370, 386–87 (D.N.J. 1999) (citing
Walker Rogge, Inc. v. Chelsea Title & Guaranty Co., 116 N.J. 517 (1989)). As Plaintiffs argue,
they have alleged facts establishing Gulian assumed duties extraneous to those contained within
an agreement, and that he “made numerous representations apart from the contract regarding his
role in Varus, his ability to manage Varus and the Plaintiffs’ investments, and his expertise in
this enterprise . . . .” Pls.’ Opp. Br. at 12 (citing Am. Compl. ¶¶ 9, 10, 14, 15, 19, 23, 25, 28, 29,
1
Significantly, part of Plaintiffs’ claim currently relies on certain fiduciary duties they alleged they were owed by
Gulian, in his capacity as an owner and officer at Varus, after they purchased certain ownership shares in Varus.
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35, 36, 42, 44). These allegations, including certain representations made by Gulian, create a
plausible claim for breach of fiduciary duty at this stage of the proceedings.
Finally, Plaintiffs have argued that part of their claim relies upon the existence of a
fiduciary duty owed to them by Gulian due to his status as an officer and owner of Varus, if
Varus existed. Defendant Gulian has argued that such a duty cannot exist as a matter of law,
because Gulian only owed a duty of care to Varus and its members. See Def.’s Reply Br. at 3.
Plaintiffs, however, have alleged that they had purchased ownership interests in Varus.
Assumedly, therefore, the existence of a fiduciary duty to Plaintiffs would exist. Accordingly,
Defendant Gulian’s motion to dismiss must be denied at this stage of the proceedings.
E.
Claim for Tortious Interference
In order to succeed with a claim for tortious interference with prospective economic gain
under New Jersey law, a plaintiff must allege: (1) a reasonable expectation of economic
advantage or existing contractual relation; (2) interference with that right, or a contract,
intentionally and with malice; (3) that causes a loss of that prospective gain as a result of that
interference; and (4) damages. See Macdougall v. Weichert, 144 N.J. 380, 403–04 (1996). Here,
Defendant Gulian does not argue that Plaintiffs have failed to state a claim generally for tortious
interference; rather, he asserts that Plaintiffs’ claim fails as a matter of law because he, as an
alleged officer of Varus, cannot be found to have interfered with Plaintiffs’ contract with Varus.
Under New Jersey law, a defendant cannot commit tortious interference with a contract
or economic relationship to which it is a party; indeed, “it is ‘fundamental’ to a cause of action
for tortious interference . . . that the claim be directed against defendants who are not parties to
the relationship.” Printing Mart–Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 752 (1989).
Because a corporation can only act through its officers and agents, the rule established in
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Printing Mart extends to corporate agents. See F.D.I.C. v. Bathgate, 27 F.3d 850, 875 (3d Cir.
1994). “Since Printing Mart, a clear-cut consensus has emerged that if an employee or agent is
acting on behalf of his or her employer or principal, then no action for tortious interference will
lie. If, on the other hand, the employee or agent is acting outside the scope of his or her
employment or agency, then an action for tortious interference will lie.” DiMaria Const., Inc. v.
Interarch, 351 N.J. Super. 558, 568 (App. Div. 2001) aff'd, 172 N.J. 182 (2002) (internal
citations omitted). As the Third Circuit has concluded, “an employee who acts for personal
motives, out of malice, beyond his authority, or otherwise not ‘in good faith in the corporate
interest’ fall beyond the scope of the privilege.” Varrallo v. Hammond Inc., 94 F.3d 842, 849
n.11 (3d Cir. 1996) (citing cases); see also Silvestre v. Bell Atl. Corp., 973 F. Supp. 475, 486
(D.N.J. 1997) aff'd, 156 F.3d 1225 (3d Cir. 1998) (“An employee working for the corporation
with which the plaintiff allegedly had a contract cannot serve as the third-party necessary for the
tripartite relationship, unless the employee acted outside the scope of his employment.”);
Obendorfer v. Gitano Group, Inc., 838 F. Supp. 950, 956 (D.N.J.1993).
Here, Plaintiffs have alleged that Defendant Gulian acted ultra vires, and therefore is
liable for interfering with any contract Varus had with Plaintiffs. 2 In support of this claim,
Plaintiffs have alleged certain facts that are sufficient to allow for an inference that Gulian was
acting outside the scope of his relationship with Varus. Specifically, Plaintiffs have alleged facts
indicating that, after Plaintiffs’ investment with Varus and Tradition, Gulian and Sandor ceased
any major communications with Plaintiffs, including a response to divest and return their
investments to Plaintiffs. Plaintiffs allege that Gulian and Sandor have refused to confirm that
2
The Court notes that Plaintiffs have also alleged that Gulian may not have been officially affiliated with Varus, a
point that would appear to alleviate Defendant’s issues with the tortious interference claim. More significantly,
these issues of whether Varus was ever officially formed or whether Gulian was an officer or agent of Varus
emphasizes the need for discovery in this case before dismissing any claims.
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Varus held or continues to hold their investment. Overall, Plaintiffs have alleged facts sufficient
to infer that Gulian either failed to make Plaintiffs’ investment with Varus or failed to administer
the Plaintiffs’ accounts properly, leading to a complete loss of their investment. These
allegations sufficiently allow for an inference that, assuming Varus was created, Gulian acted for
personal motive, beyond his authority, or otherwise did not act in good faith in the corporate
interest. Thus, the Amended Complaint adequately alleges that Gulian acted outside the scope of
his employment and therefore sufficiently states a plausible interference claim.
F.
Claim for Unjust Enrichment
Under New Jersey law, there are three elements a plaintiff must allege to properly state a
claim for unjust enrichment: “(1) the defendant received a benefit, (2) at the plaintiff's expense,
(3) under circumstances that would make it unjust for the defendant to retain the benefit without
paying for it.” Jurista v. Amerinox Processing, Inc., 492 B.R. 707, 754 (D.N.J. 2013). The
doctrine is based on “the equitable principle that a person shall not be allowed to enrich himself
unjustly at the expense of another.” Associates Commercial Corp. v. Wallia, 211 N.J. Super.
231, 243 (App. Div. 1986) (citing Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105,
108 (App. Div. 1966)).
Defendant Gulian argues that Plaintiffs’ claim for unjust enrichment fails because
Plaintiffs failed to prove that Gulian was unjustly enriched by Plaintiffs’ investment with Varus.
In other words, Gulian asserts that Plaintiffs’ allegations show that “the only party that was
arguably enriched by Plaintiffs’ investment was Varus.” See Def.’s Br. at 17. Plaintiffs
disagree, emphasizing that they have alleged that Gulian and Sandor never formed and/or
operated Varus; consequently, they argue, “the entity purportedly known as Varus could not
have been enriched, and Gulian necessary was enriched.” See Pls.’ Opp. Br. at 16. At this stage
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of the proceedings, the Court must agree. Plaintiffs have alleged that they entrusted $213,000 to
Gulian and Sandor, and that this investment is still missing and unaccounted for nearly three
years later. See Am. Compl. ¶¶ 23, 26, 27, 30, 34, 43, 95, 96. These allegations, combined with
the mystery surrounding the formation of Varus, are sufficient to allow Plaintiffs’ claim for
unjust enrichment to proceed to discovery. Once again, whether or not this claim will survive
summary judgment is another matter. At this stage of the proceedings, however, Gulian’s
motion to dismiss the unjust enrichment claim must be denied.
G.
Claim for Fraud
Finally, the Court turns to Plaintiffs’ claim for fraud. A common law claim for fraud
requires proof of five elements: “(1) a material misrepresentation of a presently existing or past
fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person
rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages.” Banco
Popular N. Am. v. Gandi, 184 N.J. 161, 172–73 (2005) (quoting Gennari v. Weichert Co.
Realtors, 148 N.J. 582, 610 (1997)). Allegations of fraud in federal court are subject to the
requirements of Rule 9(b), under which a plaintiff must plead the circumstances of the alleged
fraud with sufficient particularity to place the defendants on notice of the “precise misconduct
with which they are charged.” Lum v. Bank of America, 361 F.3d 217, 223-24 (3d Cir. 2004). In
order to satisfy this standard, a plaintiff “must plead or allege the date, time, and place of the
alleged fraud or otherwise inject precision or some measure of substantiation into a fraud
allegation.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (internal citations
omitted); see also In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999) (explaining
that Rule 9(b) “requires plaintiffs to plead the ‘who, what, when, where, and how: the first
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paragraph of any newspaper story’”) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th
Cir. 1990)).
Here, Defendant Gulian argues that Plaintiffs have not pled their fraud allegations with
sufficient particularity. Gulian argues that Plaintiffs have failed to sufficiently plead the
misrepresentations that he allegedly made, asserting that “Plaintiffs have not sufficiently pled the
who, what, when, where and how of the misrepresentations allegedly made by Mr. Gulian.”
Def.’s Br. at 19. These specifications, however, of date, time, or place are sufficient, but not
necessary, to satisfy Rule 9(b). See Seville Indust. Mach., 742 F.2d at 791. Rather, as explained
by the Third Circuit, “[p]laintiffs are free to use alternative means of injecting precision and
some measure of substantiation into their allegations of fraud.” Id. Here, Plaintiffs have made
the following allegations regarding misrepresentations:
Throughout late 2010 and into 2011, Sandor and Gulian contacted Marc, together
or separately, on no less than fifty separate occasions, often in personal visits,
about investing in Varus. They visited [the Greenberger’s] home on numerous
occasions, Marc visited Gulian at Gulian’s home on numerous occasions and
Marc and Gulian visited Sandor at his home on numerous occasions. During each
of these visits, Gulian and/or Sandor spoke in detail to Mark about Varus.
Am. Compl. ¶ 11. Plaintiffs also alleged how “[i]n these meetings, and in telephone calls,
Gulian identified numerous companies for Marc and Nancy to invest in . . . .” Id. at ¶ 12.
Plaintiffs also alleged that Gulian and Sandor had numerous conversations with Mr. Greenberger
“concerning the value and potential reward of these investments, in order to induce them to
invest money into Varus.” Id. at ¶ 14. In sum, Plaintiffs have alleged that Gulian, throughout
late 2010 and into 2011, had numerous in-person conversations at Gulian’s home, Plaintiffs’
home, or Sandor’s home, as well as calling the Greenbergers—particularly Mr. Greenberger—on
the phone about investing in and through Varus. During these conversations, Gulian identified
numerous companies for the Greenbergers to invest in, and referenced the value and potential
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reward of these investments. Defendants Gulian and Sandor also promised to the Greenbergers
that they and Varus “had the ability, experience and expertise to handle the Greenbergers’
investments and to properly manage Varus in accordance with the law.” Id. at ¶ 72. Gulian and
Sandor also represented that they or Varus would make the proper custodial payments associated
with the Greenbergers’ CAMA account. Part of these alleged misrepresentations include the
formation and legitimacy of Varus as an investment vehicle generally, as well as Gulian’s plan
and ability to invest on behalf of the Greenbergers. See id. at ¶¶ 72–74.
The Court finds that the Amended Complaint surely places Gulian on notice of the
misconduct alleged by him, including the nature of the misrepresentations. 3 See Seville Indust.
Mach., 742 F.2d at 791 (explaining that one purpose of Rule 9(b) is “to place the defendants on
notice of the precise misconduct with which they are charged”). Rule 9(b) is concerned with
safeguarding “defendants against spurious charges of immoral and fraudulent behavior.” Id.
There is no need for such a concern here, where Plaintiffs have done far more than allege “fraud”
against Gulian; rather, Plaintiffs have sufficiently “inject[ed] precision and some measure of
substantiation into their allegations of fraud.” Id. Plaintiffs’ reliance—their investment of
$213,000 investment with Defendants—follows from these alleged misrepresentations.
Defendant Gulian’s final argument is that Plaintiffs failed to sufficiently plead that he
intended to induce Plaintiffs to rely on the misrepresentations he allegedly made to Plaintiffs.
Under Rule 9(b), while circumstances constituting fraud must be pled with particularity, a
3
The Court disagrees with Gulian’s contention that each of the 50 separate conversations have to be assigned to
each speaker individually or to be set with a specific location and date at this stage of the proceedings. Under Rule
9(b), pleadings that contain “collectivized allegations against ‘defendants’ do not suffice.” Naporano Iron & Metal
Co. v. American Crane Corp., 79 F. Supp. 2d 494, 511 (D.N.J. 1999). Rather, Rule 9(b) requires fraud to be plead
with particularity to each defendant, “thereby informing each defendants of the nature of its alleged participation in
the fraud.” Id. While the Court finds that the Amended Complaint, in general, does sufficiently inform Gulian of
the nature of his purported participation in the fraudulent activity, any argument to the contrary nevertheless would
be misplaced because Plaintiffs allege that Gulian and Sandor acted jointly to perpetrate the alleged fraud. See
Watts v. Jackson Hewitt Tax Serv., 579 F. Supp. 2d 334, 352 (E.D.N.Y. 2008); see, e.g., Am. Compl. ¶¶ 9–10.
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plaintiff may aver “generally” conditions of a person’s mind, such as intent. See Fed. R. Civ. P.
9(b). Therefore, when pleading intent, “the complaint must contain more than a ‘conclusory
allegation,’ and the pleading must meet the ‘less rigid—though still operative—strictures of Rule
8.” Gotthelf v. Toyota Motor Sales, U.S.A., In., 525 F. App’x 94, 103 n.15 (3d Cir. 2013)
(quoting Iqbal, 556 U.S. at 686–87). Defendant Gulian has asserted that Plaintiffs must plead
facts sufficient to allow for a “strong inference of fraudulent intent,” which can be established by
“(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud,
or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior
or recklessness.” Def.’s Br. at 22 (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290–91 (2d
Cir. 2006)). Both Defendant Gulian and Plaintiffs have mistakenly indicated that Lerner was a
Third Circuit case; it is, however, a Second Circuit case. While the Third Circuit has adopted
this standard for establishing fraudulent intent in the securities fraud realm, see In re Burlington
Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir.1997), the Court has found no case law
indicating that a plaintiff must allege such specific facts when alleging common law fraud in this
Circuit.
Therefore, the Court finds that Plaintiffs’ Amended Complaint clearly meets the standard
under Rule 9(b). Contrary to Gulian’s assertions, Plaintiffs have provided sufficient facts to
allow for an inference that Gulian intended for Plaintiffs to rely on his alleged
misrepresentations. Plaintiffs have alleged that Gulian and Sandor emphasized their experience
as investors and their expertise in the investment business, and regularly communicated with
Plaintiffs and solicited their investments over some period of time during personal visits. After
finally choosing to invest with Defendants, Plaintiffs have alleged that Defendants essentially
ceased all communications with Plaintiffs and failed to respond to Mr. Greenberger’s efforts to
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reach them. See Am. Compl. ¶¶ 23, 25. Plaintiffs have alleged that they requested unit or
ownership certificates reflecting their investments through Varus in Tradition or their
investments in Varus, and never received any response. In 2012, Mr. Greenberger made his first
request that Gulian and Sandor divest and return to Plaintiffs their respective investments; Mr.
Greenberger repeated this request several times throughout the next year and received no
response at any time. Plaintiffs allege that Gulian and Sandor failed and refused to communicate
with them, ignored Plaintiffs’ oral and written requests for information concerning their
investments, and have failed and refused to confirm that Varus still holds their investments. Am.
Compl. ¶ 34. Plaintiffs further allege that “Varus has abandoned its former mailing address, has
shut down its website and is no longer functioning as a going forward entity-if it ever was.” Id.
at ¶ 35. Plaintiffs have alleged that they have never received proof that Varus was ever created
or that it ever formally existed. They point to the Sandor Affidavit, which fails to state that
Varus was formed or incorporated. Plaintiffs also have raised issues regarding Gulian’s role in
Varus and how it was represented to them. These allegations easily allow for an inference that
Gulian intended Plaintiffs to rely on the alleged misrepresentations, particularly when
considering the abrupt change in Gulian’s behavior and attitude towards the Plaintiffs after
Plaintiffs had entrusted their investment with him and Sandor. Further, even if Plaintiffs were
under an obligation to allege facts giving rise to a “strong inference of fraudulent intent” to
survive Rule 9(b)’s requirements, they have done so. Overall, the Amended Complaint satisfied
the notice concerns behind Rule 9(b)’s heightened pleading requirement, and the Court finds
Gulian’s arguments without merit. Accordingly, the motion to dismiss the common law fraud
claim is denied.
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H.
Request under Rule 12(e)
Finally, Gulian has also requested, in the alternative, for a more definite statement under
Rule 12(e). Gulian argues that Plaintiffs’ fraud claim “is so vague and ambiguous that Mr.
Gulian cannot reasonably be required to frame a responsive pleading at this time.” Def.’s Br. at
25. Federal Rule of Civil Procedure 12(e) authorizes a motion for a more definite statement if
the complaint is “so vague or ambiguous that a party cannot reasonably be required to frame a
responsive pleading.” Fed. R. Civ. P. 12(e). Rule 12(e) is meant for “the rare case where
because of the vagueness or ambiguity of the pleading the answering party will not be able to
frame a responsive pleading.” Schaedler v. Reading Eagle Publications, Inc., 370 F.2d 795, 798
(3d Cir. 1967). In other words, a request under Rule 12(e) should be granted where “the
opposing party cannot respond, even with a simple denial, in good faith, without prejudice to
itself.” MK Strategies, LLC v. Ann Taylor Stores Corp., 567 F. Supp. 2d 729, 736–37 (D.N.J.
2008) (quotation omitted). Courts should not grant such motions simply for lack of detail in a
complaint because “[i]t is not the function of 12(e) to provide greater particularization of
information alleged in the complaint or which presents a proper subject for discovery.” Id.
(quoting Lincoln Labs., Inc. v. Savage Labs., Inc., 26 F.R.D. 141, 142–43 (D. Del. 1960)).
The Court has found that Plaintiffs have sufficiently pled their fraud claim. They have
set forth sufficient facts identifying both the specifics of the alleged misrepresentations made by
Gulian and as well as Gulian’s fraudulent intent. The Amended Complaint is simply not so
vague, ambiguous, or intelligible that Gulian cannot respond in good faith. The details sought by
Gulian will most likely be disclosed in discovery. Like Defendant’s other arguments, if the facts
revealed in discovery do not support Plaintiffs’ claims, then Defendant Gulian is free to file a
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motion for summary judgment on that basis. Gulian’s motion for a more definite statement
under Rule 12(e), however, must be denied.
IV.
Conclusion
Overall, the majority of Defendant’s arguments are simply premature. As the Court has
indicated numerous times throughout this Opinion, there are simply too many questions
surrounding Gulian’s affiliation with Varus, and—more importantly—whether Varus was ever
officially formed. Whether or not all of Plaintiffs’ remaining claims will survive the summary
judgment stage after a period of discovery is another matter. At this stage of the proceedings,
however, Plaintiffs’ Amended Complaint establishes a plausible factual basis for each claim.
The one exception is Plaintiffs’ negligence claim, which must be dismissed because it is barred
by the economic loss doctrine. For these reasons, the Court denies in part and grants in part
Defendant Gulian’s motion to dismiss, and denies Defendant Gulian’s motion for a more definite
statement [ECF No. 14]. An appropriate Order accompanies this Opinion.
/s/ Joel A. Pisano
JOEL A. PISANO, U.S.D.J.
Dated: December 10, 2014
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