Trodale Holdings LLC et al v. Bristol Healthcare Investors, L.P. et al

Filing 79

OPINION AND ORDER: re: 73 MOTION to Dismiss Second Amended Complaint. filed by Franklin Healthcare of Peabody LLC, H/P Carrington Inc., Lynchburg Healthcare Investors, L.P., Bristol Healthcare Investors, L.P., Douglas K. Mittlei der, Legacy Healthcare Corporation, Salem Nursing & Rehabilitation Center of Reform, Inc., H/P Cambridge House, Inc., Demquarter Healthcare Investors, L.P. For the foregoing reasons, the motion of H/P Carrington Inc., H/P Cambridge House, Inc ., Legacy Healthcare Corporation, and Franklin Healthcare of Peabody, LLC to dismiss the SAC in its entirety under Rule 12(b)(2) is GRANTED without prejudice, and the Clerk of Court is directed to terminate these parties from the case.The motion of t he Sellers and Mittleider under Rule 12(b)(6) to dismiss the Fourth, Sixth, Seventh, and Ninth Causes of Action is GRANTED. The motion of the Sellers and Mittleider to dismiss the First, Third, and Eighth Causes of Action under Rule 12(b)(6) is DENIE D. The motion of the Sellers and Mittleider under Rule 12(b)(6) to dismiss the Tenth Cause of Action is GRANTED as to the Sellers and DENIED as to Mittleider. The motion of Mittleider under Rule 12(b)(6) to dismiss the Second Cause of Action is GRANT ED. The motion of the Sellers and Mittleider under Rule 12(f) to strike certain portions of the SAC is DENIED.The Clerk of Court is directed to terminate the motions at docket entry73.The following claims remain active in this case:(i) First Cau se of Action for Specific Performance against the Sellers and Mittleider;(ii) Second Cause of Action for Breach of Contract against the Sellers;(iii) Third Cause of Action for Breach of Express Warranty against the Sellers and Mittleider;(iv) Fifth Cause of Action for Fraudulent Concealment against the Sellers and Mittleider;(v) Eighth Cause of Action for a Vendees Lien against the Sellers and Mittleider;(vi) Tenth Cause of Action for Promissory Estoppel against Mittleider.The C ourt has limited this Opinion and Order to the motions made by the various Defendants, and any claim that was not the subject of a motion to dismiss survives. The Courts Opinion should not be construed as expressing a position on the viability of an y claims raised by Plaintiff that Defendants did not move to dismiss. The parties are hereby ORDERED to submit a proposed Case Management Plan by December 15, 2017. The parties should contemplate that the Court will not agree to extensions of discovery deadlines, once imposed, and should plan accordingly. (Signed by Judge Katherine Polk Failla on 11/29/2017) (js)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------- X
:
TRODALE HOLDINGS LLC,
:
:
Plaintiff,
:
:
v.
:
:
BRISTOL HEALTHCARE INVESTORS, L.P.; :
LYNCHBURG HEALTHCARE INVESTORS,
:
L.P.; DEMQUARTER HEALTHCARE
:
INVESTORS, L.P.; SALEM NURSING &
:
REHABILITATION CENTER OF REFORM,
:
INC.; DOUGLAS K. MITTLEIDER; H/P
:
CARRINGTON, INC.; LEGACY HEALTHCARE :
CORPORATION, H/P CAMBRIDGE HOUSE, :
INC.; FRANKLIN HEALTHCARE OF
:
PEABODY LLC d/b/a PEABODY
:
ASSOCIATES,
:
:
Defendants.
:
------------------------------------------------------- X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: November 29, 2017
______________

16 Civ. 4254 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
On February 6, 2014, Plaintiff Trodale Holdings LLC entered into an
Asset Purchase Agreement (the “APA”) with Defendants Bristol Healthcare
Investors, L.P.; Lynchburg Healthcare Investors, L.P.; DemQuarter Healthcare
Investors, L.P.; and Salem Nursing & Rehabilitation Center of Reform, Inc.
(together, the “Sellers”), to purchase four nursing homes. After signing the
APA, Plaintiff discovered an undisclosed “materially adverse change” to one of
the nursing homes, as well as facts suggesting that the Sellers did not in fact
have the authority to enter into the APA. Rather than walk away from the
transaction, Plaintiff tendered a Notice of Default under the APA on April 21,

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------- X
:
TRODALE HOLDINGS LLC,
:
:
:
Plaintiff,
:
v.
:
:
BRISTOL HEALTHCARE INVESTORS, L.P.; :
LYNCHBURG HEALTHCARE INVESTORS,
:
L.P.; DEMQUARTER HEALTHCARE
:
INVESTORS, L.P.; SALEM NURSING &
:
REHABILITATION CENTER OF REFORM,
:
INC.; DOUGLAS K. MITTLEIDER; H/P
:
CARRINGTON, INC.; LEGACY HEALTHCARE :
CORPORATION, H/P CAMBRIDGE HOUSE, :
INC.; FRANKLIN HEALTHCARE OF
:
PEABODY LLC d/b/a PEABODY
:
ASSOCIATES,
:
:
Defendants.
:
------------------------------------------------------- X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: November 29, 2017
______________

16 Civ. 4254 (KPF)
OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:
On February 6, 2014, Plaintiff Trodale Holdings LLC entered into an
Asset Purchase Agreement (the “APA”) with Defendants Bristol Healthcare
Investors, L.P.; Lynchburg Healthcare Investors, L.P.; DemQuarter Healthcare
Investors, L.P.; and Salem Nursing & Rehabilitation Center of Reform, Inc.
(together, the “Sellers”), to purchase four nursing homes. After signing the
APA, Plaintiff discovered an undisclosed “materially adverse change” to one of
the nursing homes, as well as facts suggesting that the Sellers did not in fact
have the authority to enter into the APA. Rather than walk away from the
transaction, Plaintiff tendered a Notice of Default under the APA on April 21,

2016, and filed this action against the Sellers and Yuba Aviv, LLC. 1 Plaintiff
filed its First Amended Complaint on July 18, 2016, adding Douglas K.
Mittleider as a Defendant. (Dkt. #17). After abortive settlement efforts, Plaintiff
filed its Second Amended Complaint (or “SAC”) on January 27, 2017, adding
H/P Carrington, Inc.; Legacy Healthcare Corporation; H/P Cambridge House,
Inc.; and Franklin Healthcare of Peabody LLC d/b/a Peabody Associates as
Defendants (together, the “New Defendants”). (Dkt. #58). 2
The various defendants in this case have brought a series of motions
under Federal Rule of Civil Procedure 12. The New Defendants move under
Rule 12(b)(2) to dismiss all claims against them for lack of personal
jurisdiction. The Sellers, the New Defendants, and Mittleider (together,
“Defendants”) move under Rule 12(b)(6) to dismiss certain of Plaintiff’s claims
for failure to state a claim upon which relief can be granted. Finally,
Defendants move under Rule 12(f) to strike certain allegations from the

1

Yuba Aviv, LLC (“Yuba Aviv”) was named as a defendant in the Complaint and First
Amended Complaint. (Dkt. #1, 17). On July 22, 2016, Plaintiff filed a notice of
voluntary dismissal without prejudice under Federal Rule of Civil Procedure
41(a)(1)(A)(i) of its claim against Yuba Aviv. (Dkt. #21). When Plaintiff filed the SAC
(Dkt. #58), Plaintiff included Yuba Aviv in the case caption. Plaintiff does not make any
mention of Yuba Aviv in the SAC beyond the case caption, and, beyond a passing
reference in Defendants’ reply, the parties’ briefing does not mention Yuba Aviv. It does
not appear from any submission in connection with this motion that the parties believe
Plaintiff to have an extant claim against Yuba Aviv. And even if Plaintiff did intend to
raise a claim, the SAC would not meet Rule 8’s pleading requirements of providing fair
notice to Yuba Aviv. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 561 (2007).
Accordingly, the Court does not construe the SAC to plead any claim against Yuba Aviv
and does not consider Yuba Aviv in the resolution of the instant motion.

2

The SAC also named as a defendant Lafayette Lifeplans of Hiawatha, Inc. Plaintiff
voluntarily dismissed its claims against this entity under Federal Rule of Civil
Procedure 41(a)(1)(A)(ii) on February 17, 2017. (Dkt. #71).

2

pleadings. For the reasons stated below, the motion under Rule 12(b)(2) is
granted, the motion under Rule 12(b)(6) is granted in part and denied in part,
and the motion under Rule 12(f) is denied.
BACKGROUND 3
A.

Factual Background
The SAC offers a veritable smorgasbord of salacious facts concerning

Mittleider and the various healthcare and nursing home entities he controls.
(See generally SAC ¶¶ 48-101). Many of these allegations, however enticing,
are not germane to the resolution of the limited jurisdictional and pleading
questions at issue in the instant motions. Accordingly, the Court will not
engage in a full recitation of the facts alleged in the SAC and will recount below
only what is relevant to the questions before it.
On February 6, 2014, Plaintiff and the Sellers entered into the APA and
agreed that Plaintiff would purchase the following four nursing homes,

3

This Opinion draws principally on facts from the SAC (Dkt. #58). The APA forms the
basis of Plaintiff’s claims and is appended to the SAC as an exhibit, and therefore the
Court can consider the APA in resolving Defendants’ motion. Int’l Audiotext Network,
Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (“The complaint is deemed to
include any written instrument attached to it as an exhibit or any statements or
documents incorporated in it by reference.” (internal quotation marks and alteration
omitted)); Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a
pleading is a part of the pleading for all purposes.”). For ease of reference, the Court
refers to the Memorandum of Law in Support of Defendants’ Omnibus Federal Rule of
Civil Procedure 12 Motion (Dkt. #74), as “Def. Br.,” to Plaintiff’s Memorandum of Law in
Opposition of Defendants’ Motion to Dismiss (Dkt. #76), as “Pl. Opp.,” and to the Reply
Memorandum of Law in Further Support of Defendants’ Omnibus Federal Rule of Civil
Procedure 12 Motion (Dkt. #78), as “Def. Reply.”
In deciding Defendants’ motion under Federal Rule of Civil Procedure 12(b)(2), the Court
considers, as it is permitted to do, the Declaration of Douglas K. Mittleider in Support of
Defendants’ Rule 12 Motion (“Mittleider Decl.” (Dkt. #75)) and the Declaration of Jeffrey
Fleischman (“Fleischman Decl.” (Dkt. #77)). See Chloe v. Queen Bee of Beverly Hills,
LLC, 616 F.3d 158, 163 (2d Cir. 2010).

3

including the underlying real estate and assets: (i) The Cambridge House in
Bristol, Tennessee; (ii) The Carrington in Lynchburg, Virginia; (iii) The Stratford
House in Chattanooga, Tennessee; and (iv) Reform Nursing and Rehab in
Reform, Alabama. (SAC ¶¶ 29-30). The Sellers also agreed to give Plaintiff the
option of purchasing seven additional nursing homes: (i) Westview Manor of
Peabody (“Westview”) in Peabody, Kansas; (ii) College Hills Nursing and
Rehabilitation in Wichita, Kansas; (iii) Maple Heights Nursing and
Rehabilitation Center in Hiawatha, Kansas; (iv) Riverwood Healthcare and
Rehab (“Riverwood”) in Madisonville, Texas; (v) Timberlake Health and
Rehabilitation Center in Jasper, Texas; (vi) Amara Health Care and Rehab in
Augusta, Georgia; and (vii) Salem Nursing and Rehab Center of Tuskegee in
Tuskegee, Alabama. (Id. at ¶ 31).
The various corporate defendants named in this action are alleged to be
entities that own or operate certain of the nursing home facilities named in the
APA as of the time the APA was executed: Defendant Bristol Healthcare
Investors, L.P. (“Bristol”) owns The Cambridge House; Defendant Lynchburg
Healthcare Investors, L.P. (“Lynchburg”) owns The Carrington; Defendant
DemQuarter Healthcare Investors, L.P. (“DemQuarter”) owns The Stratford
House; and Defendant Salem Nursing & Rehabilitation Center of Reform, Inc.
(“Salem-Reform”) is affiliated with Reform Nursing and Rehab. (SAC ¶¶ 9-12).
These four entities are each organized under the laws of the state of Georgia.
(Id.). Plaintiff alleges further that Defendant H/P Carrington Inc. (“H/P
4

Carrington”) is a Georgia corporation that operates The Carrington House and
holds an option to purchase the property on which the facility is located. (Id. at
¶¶ 16-17). Defendant H/P Cambridge House Inc. (“H/P Cambridge House”) is
a Georgia corporation that allegedly operates The Cambridge House. (Id. at
¶¶ 17-18). Defendant Legacy Healthcare Corporation (“Legacy”) was a
Tennessee corporation with its principal place of business in Georgia, and was
administratively dissolved in 2010. (Id. at ¶¶ 19-20). Plaintiff alleges that
Legacy owns the Riverwood facility, as well as the underlying property, and,
further, that Mittleider is Legacy’s president and is “directly liable for its
actions” following its dissolution. (Id. at ¶¶ 20-21). Defendant Franklin
Healthcare of Peabody, LLC (“Franklin”), a Georgia limited liability company, is
alleged to own the Westview facility and the underlying property. (Id. at ¶¶ 2223). More broadly, Plaintiff alleges that Mittleider owns and controls all of the
nursing home entities named in the SAC. (Id. at ¶ 28).
On February 6, 2014, the same day it entered into the APA with the
Sellers, Plaintiff tendered an initial deposit of $100,000; it subsequently
tendered an additional deposit of $1,000,000. (SAC ¶¶ 35-36). Plaintiff
received a reimbursement of $800,000, but subsequently made another deposit
of $100,000, such that there remains $400,000 of deposits held in escrow. (Id.
at ¶¶ 37-38). At some point following the execution of the APA, Defendants are
alleged to have “breached the APA by failing to disclose numerous, material

5

lawsuits and actions which directly affect the assets that are the subject of the
APA.” (Id. at ¶ 102). Specifically, Plaintiff alleges the following breaches:
First, after entering into the APA, Plaintiff discovered
that Defendants had sold College Hills Nursing and
Rehabilitation, including its real estate and assets, to a
third party without informing Plaintiff. (SAC ¶ 103). 4
Second, after signing the APA and after this lawsuit was
filed, Mittleider caused Legacy to file a lawsuit in Texas
“claiming that he had entered into a contract to sell the
Riverwood facility … in violation of the APA.” (SAC
¶ 104). Plaintiff was never informed of this fact;
Mittleider
had
represented
to
Plaintiff
that
“[D]efendants would perform their obligations under the
APA” and, in point of fact, Mittleider had had his
counsel extend the APA’s due diligence period “over 100
times, under this false pretense.” (Id. at ¶ 105).
Third, Plaintiff discovered that Amara Health Care and
Rehab, Reform Nursing and Rehab, and Salem Nursing
and Rehab Center of Tuskegee had each been “taken
over by Court[-o]rdered receivers or health care
ombudsman as the result of [D]efendants’ gross
mismanagement and improper litigation tactics.” (SAC
¶ 106).
Fourth, Plaintiff discovered that occupancy at The
Cambridge House had dropped from 115 out of 130
beds to 80 out of 130 beds. (SAC ¶ 107).

4

Throughout the SAC, Plaintiff refers to actions committed by “defendants” without
defining that term. Presumably, Plaintiff intends this shorthand to refer to all of the
Defendants named in this case. However, the SAC raises facts about three distinct
groups of Defendants — the Sellers (which were parties to the APA), Mittleider (who
signed the APA in a representative capacity on behalf of the Sellers), and the New
Defendants (which were not parties to the APA). In recounting Plaintiff’s allegations in
this Opinion, the Court uses the term “Defendants” where Plaintiff has done so simply
because it is not clear from the pleading which of these three groups is implicated in
certain of the allegations, and the Court will not so speculate. That said, the Court’s
recounting of the facts — while necessarily taking all well-pleaded allegations as true —
is not meant to ascribe responsibility for a particular action to a particular Defendant or
group of Defendants.

6

Fifth, Plaintiff conducted a lien search and discovered
“millions [of dollars] in judgments docketed against”
certain nursing home facilities referenced in the APA
and/or their operating entities. (SAC ¶ 108).
Sixth, Plaintiff alleges that Defendants defaulted on
their obligation under § 4 of the APA to provide
information such as “CPA audited financial statements”
for 2010-13 to enable Plaintiff to conduct adequate due
diligence. (SAC ¶ 109).
Seventh, Defendants did not disclose the existence of a
qui tam action filed in the United States District Court
for the Southern District of Mississippi against
Mittleider and several entities he controls. (SAC ¶ 111).
Eighth and finally, Plaintiff was informed that The
Carrington House would be sold to a third party, even
though it was sold to Plaintiff in the APA. (SAC ¶ 112).
Plaintiff viewed these alleged breaches as “Material Adverse Changes,”
and, on April 21, 2016, tendered a Notice of Default. (SAC ¶¶ 110, 116). The
APA provides that, in the event the Sellers default on the APA’s terms, Plaintiff
could elect to terminate the APA or specifically enforce it. (APA ¶ 12(a)).
Plaintiff now seeks to do the latter.
B.

Procedural Background
Plaintiff initiated this action against the Sellers in New York State

Supreme Court, Kings County, on May 2, 2016. (Dkt. #1). The Sellers
removed this case to the Southern District of New York on June 8, 2016. (Id.).
Following a settlement conference before Magistrate Judge Andrew J. Peck on
September 9, 2016, this case was conditionally dismissed on September 30,
2016. (Dkt. #30). Thereafter, on October 2, 2016, Plaintiff moved to re-open
the case (Dkt. #31), and Defendant filed a motion to enforce the settlement
7

(Dkt. #33). On December 22, 2016, the Court denied Defendants’ motion to
enforce. (Dkt. #45).
Plaintiff filed the SAC on January 27, 2017. (Dkt. #58). The parties
appeared for a pre-motion conference with the Court on February 2, 2017, and
Defendants filed the instant motion to dismiss on March 10, 2017. (Dkt. #73).
On April 7, 2017, Plaintiff filed its memorandum of law in opposition to
Defendants’ motion (Dkt. #74), and this motion became fully briefed on
April 21, 2017, when Defendants filed their reply in support of their motion to
dismiss (Dkt. #78).
DISCUSSION
Defendants’ motion proceeds in three parts, relying on different
subsections of Rule 12: First, the New Defendants move under Rule 12(b)(2) to
dismiss Plaintiff’s claims against them for a lack of personal jurisdiction.
Second, Defendants move under Rule 12(b)(6): (i) to dismiss the First, Fourth,
Sixth, Eighth, and Ninth Causes of Action in the SAC in their entirety as
remedies that are improperly pled as causes of action; (ii) to dismiss the
Second Cause of Action against Mittleider and the New Defendants; (iii) to
dismiss the Third, Seventh, and Tenth Causes of Action in their entirety as
duplicative of the breach-of-contract claim; and (iv) to dismiss the Fifth Cause
of Action against the New Defendants. Third, Defendants move under Rule

8

12(f) to strike certain allegations from the SAC. The Court addresses each of
Defendants’ motions in turn below. 5
A.

The Court Grants the New Defendants’ Motion to Dismiss for Lack of
Personal Jurisdiction
1.

Motions to Dismiss Under Rule 12(b)(2)

The plaintiff bears the burden under Rule 12(b)(2) of establishing that
jurisdiction is proper. Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez,
171 F.3d 779, 784 (2d Cir. 1999). In the absence of a “full-blown evidentiary
hearing on the motion,” a plaintiff can make a prima facie showing in support
of jurisdiction “through its own affidavits and supporting materials,” id., which
a court construes “in the light most favorable to [the] plaintiffs, resolving all
doubts in their favor,” Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158,
163 (2d Cir. 2010) (internal quotation marks omitted).
Defendants argue, without citing any authority, that “[f]or purposes of a
Rule 12(b)(2) motion, the Court is not obliged to deem [Plaintiff’s] allegations to
be true.” (Def. Br. 8). This proposition is not entirely correct: While a court
need not accept as true legal conclusions couched as factual allegations and
ought not draw argumentative inferences in a plaintiff’s favor, it must evaluate
whether the jurisdictional allegations in Plaintiff’s pleading and supporting
affidavit could establish personal jurisdiction “if credited by the ultimate trier of

5

The Court analyzes the APA under New York law. Neither side has addressed the
choice-of-law issue but the Court observes that the APA contains an unambiguous
choice-of-law provision that states that “[t]his agreement … shall be governed and
controlled by the internal laws of the state of New York as to interpretation,
enforcement, validity, construction, effect, and in all other respects.” (APA ¶ 19).

9

fact.” Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 69 (2d
Cir. 2012) (internal quotation marks and citation omitted).
As noted, this motion is brought only by the New Defendants. To
determine whether the exercise of personal jurisdiction over them is proper, the
Court looks first to whether the New Defendants are bound by the forumselection clause in the APA. If so, the jurisdictional analysis ends there.
Export-Import Bank of U.S. v. Hi-Films S.A. de C.V., No. 09 Civ. 3573 (PGG),
2010 WL 3743826, at *4 (S.D.N.Y. Sept. 24, 2010) (“Where an agreement
contains a valid and enforceable forum selection clause, however, it is not
necessary to analyze jurisdiction under New York’s long-arm statute or federal
constitutional requirements of due process.”). If, however, the forum-selection
clause cannot be applied to the New Defendants, the Court looks next to
whether jurisdiction can be obtained through operation of New York’s long-arm
statute and, finally, whether the exercise of jurisdiction would comport with
constitutional principles of due process. Grand River Enters. Six Nations, Ltd.
v. Pryor, 425 F.3d 158, 165 (2d Cir. 2005).
2.

Analysis

None of the New Defendants is a New York corporation. H/P Carrington
is alleged in the SAC to be a Georgia corporation with its principal place of
business in Georgia that operates The Carrington, a nursing home located in
Virginia. (SAC ¶¶ 10, 15-16). H/P Cambridge House is alleged to be a Georgia
corporation with its principal place of business in Georgia that operates The
Cambridge House, a nursing home located in Tennessee. (Id. at ¶¶ 9, 17-18).
10

Plaintiff alleges that Legacy was administratively dissolved in 2010 but that,
prior to its dissolution, Legacy was a Tennessee corporation with its principal
place of business in Georgia that owns Riverwood, a nursing home located in
Texas. (Id. at ¶¶ 19-21). Finally, Franklin is alleged to be a Georgia limited
liability company with its principal place of business in Georgia that owns
Westview, a nursing home located in Kansas. (Id. at ¶¶ 22-23, 31). Moreover,
as the parties agree, none of the New Defendants is a signatory to the APA.
(APA, Ex. K; see also Pl. Opp. 9, Def Br. 11). The Carrington and The
Cambridge House were two of the nursing homes to be sold under the APA
(APA, Ex. A-1); Riverwood and Westview were two of the facilities for which
Plaintiff received an option under the APA (id. at ¶ 16, see also id. at Ex. J).
Plaintiff argues that the exercise of personal jurisdiction over the New
Defendants is nonetheless proper because each is subject to the forumselection clause in the APA. (Pl. Opp. 7-15). In particular, Plaintiff argues
that: (i) the forum-selection clause is “mandatory,” such that all claims and
parties under the APA are subject to jurisdiction in New York; (ii) the
relationship between the New Defendants and the Sellers is sufficiently close
that the non-signatory New Defendants can be bound to the forum-selection
clause; (iii) the New Defendants are estopped from contesting the application of
the forum-selection clause because they stand to benefit from the APA; and
(iv) the New Defendants are bound under a veil-piercing or alter-ego theory.
(Id.). The New Defendants vigorously contest the application of the forum11

selection clause because they are not signatories to the APA. 6 (Def. Br. 10-14).
They further argue that (i) they are not assignees of any signatories; (ii) they are
not third-party beneficiaries of the APA; (iii) they are not alter egos of Mittleider
(who, himself, is not a signatory to the APA); and, (iv) finally, they are not so
“closely related” to the signatories as to warrant application of the forumselection clause to them. (Id. at 11-14).
a.

Personal Jurisdiction Does Not Extend to the New
Defendants by Operation of the Forum-Selection Clause

The Court views the parties’ arguments within the framework of the
Second Circuit’s four-part test for enforcement of a forum-selection clause.
Under Phillips v. Audio Active Ltd., a court first considers whether the clause
(i) was “reasonably communicated to the party resisting enforcement;” (ii) is
mandatory rather than permissive; (iii) and encompasses “the claims and
parties involved in the suit[.]” 494 F.3d 378, 383 (2d Cir. 2007). If all three
prongs of this inquiry are met, the clause is presumptively enforceable. Id.
Fourth, and finally, a court considers “whether the resisting party has rebutted
the presumption of enforceability by making a sufficiently strong showing that
enforcement would be unreasonable or unjust, or that the clause was invalid
for such reasons as fraud or overreaching.” Id. at 384-85 (internal quotation
marks omitted).

6

Defendants Bristol, Lynchburg, DemQuarter, and Salem-Reform (the Sellers) do not
contest the application of the forum-selection clause. (Def. Br. 11). Defendant
Mittleider also does not contest the exercise of personal jurisdiction over him. (Id. at
13).

12

“[T]he fact [that] a party is a non-signatory to an agreement is
insufficient, standing alone, to preclude enforcement of a forum selection
clause.” Aguas Lenders Recovery Grp. LLC v. Suez, S.A., 585 F.3d 696, 701 (2d
Cir. 2009). Even so, upon consideration of the Phillips factors, the Court
cannot find that the SAC and Plaintiff’s supporting declaration plead sufficient
facts that, if credited by the ultimate trier of fact, would support a finding of
personal jurisdiction over the New Defendants.
i.

The Forum Selection Clause Was Not Reasonably
Communicated to the New Defendants

“In general, awareness by a nonsignatory of a forum selection clause or
of the contract in which such a clause is contained is enough to satisfy the first
[Phillips] condition.” Overseas Ventures, LLC v. ROW Mgmt., Ltd., Inc., No. 12
Civ. 1033 (PAE), 2012 WL 5363782, at *4 (S.D.N.Y. Oct. 26, 2012). Even in the
absence of actual awareness, a non-signatory can be bound if it is “closely
related” to the signatory to the contract containing the clause. Id. Plaintiff
argues that there is “no dispute” that the clause was adequately communicated
because “Mr. Mittleider, the owner of all [Defendants], signed the APA which
contained the venue clause, and admits in his affidavit to owning or controlling
all of the defendants in one capacity or another.” (Pl. Opp. 8). The analysis
here is not as straightforward as Plaintiff suggests.
Plaintiff alleges, in effect, that the New Defendants were aware of the
forum-selection clause because Mittleider signed the APA in a representative
capacity on behalf of all Sellers, and, because he also controls the New
13

Defendants, knowledge can be imputed to those entities. (Pl. Opp. 13-14). The
New Defendants object to Plaintiff’s attempt to paint all of the corporate entities
in this case as Mittleider’s alter egos. (Def. Br. 13).
Courts have found that a forum-selection clause is reasonably
communicated to a non-signatory corporate representative who negotiates or
signs an agreement on behalf of a corporate entity. E.g., RedHawk Holdings
Corp. v. Craig Invs., LLC, No. 15 Civ. 9127 (CM), 2016 WL 6143355, at *5
(S.D.N.Y. Oct. 19, 2016) (enforcing a forum selection clause against corporate
agent who negotiated agreement); Kahala Corp. v. Holtzman, No. 10 Civ. 4259
(DLC), 2010 WL 4942221, at *3 (S.D.N.Y. Dec. 3, 2010) (same against
individual who personally guaranteed certain provisions of the agreement);
Firefly Equities LLC v. Ultimate Combustion Co., Inc., 736 F. Supp. 2d 797, 800
(S.D.N.Y. 2010) (same against corporate president who signed agreement).
More to the present point, at least two courts in this District have found that a
forum-selection clause is reasonably communicated to a non-signatory
corporate entity where an individual who controls that entity signed the
agreement on behalf of a signatory corporate entity. KTV Media Int’l, Inc. v.
Galaxy Grp., LA LLC, 812 F. Supp. 2d 377, 384 (S.D.N.Y. 2011) (enforcing
forum selection clause against non-signatory corporation where agreement was
signed by individual who was the registered agent for both the non-signatory
and signatory corporations); Philippe N.Y.C. I LLC v. Philippe West Coast, LLC,
14 Civ. 9858 (NRB), 2016 WL 1183669, at *7 (S.D.N.Y. Mar. 24, 2016)
14

(enforcing forum-selection clause where the agreement “was reasonably
communicated to [non-signatory], and, therefore, the business entities he
controls”).
Both of those cases, however, are readily distinguishable from this one.
In KTV Media, the non-signatory plaintiff’s claims were derivative of and
directly related to the conduct of a signatory entity, and the plaintiff had
effectively conceded in its pleadings that it was part of the same corporate
family as the signatory. On those facts, the court found the non-signatory was
“closely-related” to the signatory and enforced the forum-selection clause
against the plaintiff. KTV Media Int’l, Inc., 812 F. Supp. 2d at 386-87. In
Philippe N.Y.C., the non-signatories were successors-in-interest to a signatory
or were so intertwined with the business relationship at issue that the court
found the parties to be “closely related” and, accordingly, enforced the clause
against non-signatories. Philippe N.Y.C., 2016 WL 1183669, at *8-9.
For reasons addressed in greater detail in the Court’s discussion of the
third Phillips prong, the New Defendants are not so “closely related” to the
Sellers to warrant a finding that the forum-selection clause was reasonably
communicated to them. While the SAC certainly supports a finding that the
clause was reasonably communicated to Mittleider, it is a step too far for the
Court to find that the SAC adequately pleads that the clause was reasonably
communicated to the New Defendants. Even if the Court were to take that

15

step, this prong would militate only mildly in favor of enforcement of the forumselection clause.
ii.

The Forum-Selection Clause Is Mandatory

A court looks to the plain text of the clause to determine whether it is
permissive or mandatory. Overseas Ventures, 2012 WL 5363782, at *4. In
general, a permissive forum-selection clause is one that “designates a forum in
advance, but does not preclude a different choice,” while a mandatory forumselection clause is one in which the parties “agree in advance on a forum that
is exclusive of all others[.]” Aguas Lenders, 585 F.3d at 700. Only the latter is
afforded a “presumption of enforceability.” Id.
The APA provides in relevant part:
Any dispute may be brought before any court having
situs in New York County, New York. Each of the
parties hereto hereby consents and submits to the
jurisdiction of any local, state or federal courts located
within said county and state. … The parties hereto
hereby waive any right they may have to transfer to
change the venue of any litigation brought against such
party in accordance with this section.
(APA ¶ 20(g)). The New Defendants unsurprisingly latch on to the “may be
brought” language and argue that the clause is permissive. (Def. Reply 4). On
its plain text, the forum-selection clause in the APA does appear to be
permissive — it selects a forum in advance, but does not require that all suits
be brought in New York. Plaintiff responds that this language, coupled with
the parties’ waiver of the right to change venue, renders the clause mandatory.
(Pl. Opp. 8-9). The case law bears out Plaintiff’s view on this score: The
16

Second Circuit has found that a facially permissive forum-selection clause
“may nonetheless be mandatory where it combines permissive forum selection
language with an express waiver of venue objections.” Akers Biosciences, Inc.
v. Martin, No. 14 Civ. 8241 (AJN), 2015 WL 1054971, at * 4 (S.D.N.Y. Mar. 10,
2015) (internal quotation marks omitted); Aguas Lenders, 585 F.3d at 700.
The forum-selection clause in the APA is thus mandatory, and this factor
weighs in favor of enforcement.
iii.

The New Defendants Are Not Subject to the ForumSelection Clause

The third Phillips factor asks whether the claims and parties at issue are
subject to the forum-selection clause. Neither side argues that any of Plaintiff’s
claims is not subject to the clause — indeed, all of Plaintiff’s claims are related
to the APA or the transaction surrounding it and, accordingly, appear to fall
squarely within its ambit. The same cannot be said for all of the parties. It is
well-settled that the fact that a party is a non-signatory to the agreement is
not, alone, enough to resist enforcement of a forum-selection clause, Aguas
Lenders, 585 F.3d at 701, and that “a range of transaction participants, parties
and non-parties, should benefit from and be subject to forum[-]selection
clauses,” RedHawk Holdings, 2016 WL 6143355, at *4 (internal quotation
marks and citation omitted). The question before the Court is whether the New
Defendants are so “closely related” to the signatories to the APA that they may
be found to be subject to the operation of its forum-selection clause.

17

Courts have found non-signatories to be “closely related” to a signatory
where they are corporate officers of a signatory entity, see Firefly Equities, 736
F. Supp. 2d at 800; where they are corporate parents with a controlling interest
in a signatory, see Metro-Goldwyn-Mayer Studios Inc. v. Canal & Distribution
S.A.S., No. 07 Civ. 2918 (DAB), 2010 WL 537583, at *5 (S.D.N.Y. Feb. 9, 2010);
and where the non-signatory was alleged to have acted in concert with the
signatory, see Weingrad v. Telepathy, Inc., No. 05 Civ. 2024 (MBM), 2005 WL
2990645, at *5-6 (S.D.N.Y. Nov. 7, 2005). Courts have also found that a thirdparty beneficiary to a contract is necessarily “closely related” to the signatories.
Overseas Ventures, 2012 WL 5363782, at *5. Finally, courts have found that a
non-signatory is “‘closely related’ to a dispute if its interests are ‘completely
derivative’ of and ‘directly related to, if not predicated upon’ the signatory
party’s interests or conduct.” Id. (quoting Weingrad, 2005 WL 2990645, at *4).
Proceeding somewhat out of order, the Court concludes that the New
Defendants are not third-party beneficiaries to the APA and cannot be bound to
the forum-selection clause on that basis. For a party to be a third-party
beneficiary to a contract under New York law, the parties must have intended
to confer a benefit on the third party. Bayerische Landesbank, N.Y. Branch v.
Aladdin Capital Mgmt. LLC, 692 F.3d 42, 52 (2d Cir. 2012). There are no facts
alleged in the SAC indicating that the parties to the APA intended to confer any
benefit on the New Defendants. And, as the New Defendants correctly point
out (see Def. Br. 12), a third-party beneficiary theory of contract enforcement
18

grants a third party a right to enforce the contract; it does not grant a cause of
action against the third party. See Premium Mortg. Corp. v. Equifax, Inc., 583
F.3d 103, 108 (2d Cir. 2009) (citing Fourth Ocean Putnam Corp. v. Interstate
Wrecking Co., 66 N.Y.2d 38, 45 (1985)). There is similarly no allegation that
any of the New Defendants is a successor in interest or assignee of any of the
Sellers sufficient to support a finding that the parties are “closely related.” Cf.
Philippe N.Y.C., 2016 WL 1183669, at *8.
Nor can the Court find a close relationship under a veil-piercing or alterego theory, as Plaintiff asks this Court to do. (Pl. Br. 13-14). To pierce the
corporate veil, a court must find that “[i] the owner has exercised such control
that the corporation has become a mere instrumentality of the owner, which is
the real actor; [ii] such control has been used to commit a fraud or other
wrong; and [iii] the fraud or wrong results in an unjust loss or injury to
plaintiff.” Atateks Foreign Trade, Ltd. v. Private Label Sourcing, LLC, 402 F.
App’x 623, 625 (2d Cir. 2010) (summary order) (quoting Freeman v. Complex
Computing Co., 119 F.3d 1044, 1052 (2d Cir. 1997)). Plaintiff alleges, and
Mittleider himself confirms, that he is the president of or otherwise affiliated
with all of the corporate Defendants, both signatory and non-signatory entities.
(SAC ¶ 28; Mittleider Decl. ¶ 2(a)-(h)). From here, however, Plaintiff’s
allegations devolve into the conclusory. Plaintiff asserts that “Mittleider
essentially used each of the [nursing homes] as a personal piggy bank and
transferred funds from one entity to another for his own personal benefit” (SAC
19

¶ 152), but there are no allegations of that activity as to any of the corporate
Defendants in this case. Plaintiffs further allege that Mittleider owns all of the
nursing homes at issue in the APA “and there is substantial overlap between
its directors, officers, and [personnel]”; that all of the nursing homes “share an
address, office space, telephone numbers, and Mittleider uses the same email
address to conduct business for each facility”; and that “there is such unity of
interest and ownership that the separate personalities of the [nursing homes]
and Mittleider no longer exist.” (Id. at ¶¶ 184-87). But the actual factual
assertions mined from that claim, involving common corporate officers and
office space, are but two of many factors considered to find the degree of
control over a corporate entity needed to pierce the corporate veil. Wm.
Passalacqua Builders, Inc. v. Resnick Dev. South, Inc., 933 F.2d 131, 139 (2d
Cir. 1991) (setting out ten factors to consider when assessing domination over
a corporate entity).
Plaintiff spills considerable ink discussing Mittleider’s “pattern of abusing
the corporate form,” and limning findings made by other courts piercing the
corporate veil of certain Mittleider-controlled entities not at issue in this case.
(SAC ¶¶ 1, 48-58). But the factual allegations and evidence that caused those
courts to arrive at those conclusions find no analogues in this case. Indeed,
the relevant allegations of facts (as distinguished from legal conclusions) are
few. The SAC is devoid of any facts that funds were freely transferred between
the New Defendants and Mittleider or the Sellers, or that these entities did not
20

deal at arm’s length or were not treated as independent profit centers. See
Wm. Passalacqua Builders, Inc., 933 F.3d at 139. While the facts alleged in the
SAC give the Court pause, they do not provide a basis, even when construed in
Plaintiff’s favor, to find that the New Defendants — H/P Carrington, H/P
Cambridge House, Legacy, and Franklin — were so completely dominated by
Mittleider as to be his alter egos. Plaintiff’s argument would effectively bind
any entity associated with Mittleider to the APA’s forum-selection clause, and
this result cannot stand.
Having found that Plaintiff’s claims fail the first prong of the veil-piercing
test, the Court will not move to the remaining two prongs. And having found
that the balance of the first three Phillips factors does not make the APA’s
forum-selection clause presumptively enforceable, the Court will not engage the
fourth Phillips factor. Instead, the Court will review whether personal
jurisdiction is proper under New York’s long-arm statute and principles of
constitutional due process.
b.

The Court Lacks General Jurisdiction Under New York
Law as to the New Defendants

General jurisdiction under the New York Civil Practice Law and Rules
§ 301 is proper when “a company has engaged in such a continuous and
systematic course of ‘doing business’ in New York that a finding of its
‘presence’ in New York is warranted.” Sonera Holding B.V. v. Cukurova Holding
A.S., 750 F.3d 221, 224 (2d Cir. 2014) (alterations omitted) (quoting Landoil
Res. Corp. v. Alexander & Alexander Servs., 77 N.Y.2d 28, 33 (1990)); cf. id. at
21

225 n.2 (“[W]e note some tension between Daimler’s ‘at home’ requirement and
New York’s ‘doing business’ test.”); see generally Daimler AG v. Bauman, 134 S.
Ct. 746, 751 (2014) (concluding that court may only exercise general
jurisdiction over non-domiciliary corporation where “the corporation’s
affiliations with the State in which suit is brought are so constant and
pervasive ‘as to render [it] essentially at home in the forum State’” (quoting
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011))).
The New Defendants correctly argue that “[Plaintiff] does not allege that
any of the New Defendant[s] [] has done any business in New York, let alone
any business on a continuous, permanent, and substantial basis.” (Def.
Br. 15). Plaintiff’s brief does not address the question of personal jurisdiction
under New York law despite Plaintiff’s burden to make a prima facie showing
that jurisdiction is proper. Even construing the facts in the SAC in a light most
favorable to the Plaintiff, the Court cannot find any basis for the exercise of
general jurisdiction over any of the New Defendants.
c.

The Court Lacks Jurisdiction Over the New Defendants
Under New York’s Long-Arm Statute

New York’s long-arm statute permits the exercise of personal jurisdiction
over any non-domiciliary who “transacts any business within the state or
contracts anywhere to supply goods or services in the state.” N.Y. C.P.L.R.
§ 302(a)(1); see also Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450
F.3d 100, 103 (2d Cir. 2006) (“To establish personal jurisdiction under section
302(a)(1) … [i] The defendant must have transacted business within the state;
22

and [ii] the claim asserted must arise from that business activity.”). 7 The New
Defendants argue that the SAC simply does not plead any facts that support a
finding that any of them conducted business within the state of New York or
contracted to provide goods or services in the state. (Def. Br. 16). The Court
agrees. Plaintiff’s pleading and supporting declaration do not contain any facts
to establish a prima facie showing that the New Defendants have availed
themselves of the New York forum.
Because there is no statutory basis for personal jurisdiction over the New
Defendants, the Court need not reach the question of whether the exercise of
jurisdiction comports with due process. The record before the Court strongly
suggests, however, that it would not. Due process requires that the party over
which jurisdiction is asserted have sufficient “minimum contacts with the
forum state such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice.” Licci, 732 F.3d at 169 (citation
and alterations omitted). Where a court finds that a party has minimum
contacts with the forum state, the court looks next to “[i] the burden that the
exercise of jurisdiction will impose on the defendant; [ii] the interests of the
forum state in adjudicating the case; and [iii] the plaintiff’s interest in obtaining
convenient and effective relief.” Id. at 170 (citation and alteration omitted).

7

The long-arm statute also provides for personal jurisdiction over alleged tortfeasors in
certain circumstances, but there is no allegation in the SAC that the New Defendants
committed any tort in or affecting the state of New York.

23

Here, the SAC does not contain any facts showing that the New
Defendants have any contacts with the state of New York. The New Defendants
are organized under the laws of Georgia (H/P Carrington, H/P Cambridge
House, and Franklin) and Tennessee (Legacy); they own or operate nursing
homes in Virginia (H/P Carrington), Tennessee (H/P Cambridge House), Texas
(Legacy), and Kansas (Franklin). (SAC ¶¶ 15-23, 30-31). At most, the SAC
alleges that the New Defendants are associated, through their operation of
nursing homes, with entities that signed a contract under New York law to sell
nursing homes to a New York-based entity. This cannot suffice under a due
process analysis. Accordingly, the New Defendants’ motion to dismiss the SAC
under Rule 12(b)(2) for a lack of personal jurisdiction is granted.
B.

The Court Grants in Part and Denies in Part Defendants’ Motion to
Dismiss for Failure to State a Claim
1.

Motions to Dismiss Under Rule 12(b)(6)

Defendants as a group have moved to dismiss certain claims in the SAC.
To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must show that
its pleadings “contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim
has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. In weighing whether a plaintiff has met this burden,
a court must “draw all reasonable inferences in [the plaintiff’s] favor [and]
24

assume all well-pleaded factual allegations to be true[.]” Faber v. Met. Life Ins.
Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted). The
Court need not, however, accept as true conclusory allegations or legal
conclusions phrased as factual allegations. Id.
To decide Defendants’ motion under Rule 12(b)(6), the Court may
consider the facts alleged in the SAC, any documents attached to it, and any
documents incorporated by reference. DiFolco v. MSNBC Cable LLC, 622 F.3d
104, 111 (2d Cir. 2010); see generally Goel v. Bunge, Ltd., 820 F.3d 554, 559
(2d Cir. 2016) (discussing documents that may be considered in resolving a
motion pursuant to Fed. R. Civ. P. 12(b)(6)). In particular, the Court may
consider the APA, as it forms the basis of Plaintiff’s breach-of-contract claim.
Nirvana Int’l, Inc. v. ADT Sec. Servs., Inc., 525 F. App’x 12, 13 (2d Cir. 2013)
(summary order) (citing Interpharm, Inc. v. Wells Fargo Bank, N.A., 655 F.3d
136, 141 (2d Cir. 2011)).
2.

Analysis

Because the Court granted the New Defendants’ motion to dismiss under
Rule 12(b)(2), it will not consider their portion of the motion under Rule 12(b)(6)
to dismiss Plaintiff’s claims for breach of contract and fraudulent concealment.
The remaining Defendants in this action are the Sellers (Bristol, Lynchburg,
DemQuarter, and Salem-Reform) and Mittleider. The Court will only consider
the Rule 12(b)(6) motion as to these Defendants and will, for ease of reference,
refer to them below as the “Remaining Defendants.”
25

a.

Remedies vs. Causes of Action

The Remaining Defendants move to dismiss several of Plaintiff’s causes
of action on the basis that they are not claims but remedies. (Def. Br. 17-19).
The Court addresses the relevant causes of action in turn.
i.

First Cause of Action: Specific Performance

The Remaining Defendants argue that specific performance is a remedy
for a breach-of-contract claim and, thus, cannot lie as an independent cause of
action. (Def. Br. 17). To be sure, specific performance can be a remedy on a
breach-of-contract claim. See RESTATEMENT (SECOND) OF CONTRACTS § 357
(“[S]pecific performance of a contract duty will be granted in the discretion of
the court against a party who has committed or is threatening to commit a
breach of the duty.”). And at least one court in this District has held that
specific performance cannot stand as its own cause of action separate from an
underlying action for breach of contract. See Tierney v. Omnicom Grp. Inc., No.
06 Civ. 14302 (LTS), 2007 WL 2012412, at *10 (S.D.N.Y. July 11, 2007)
(“Specific performance is a remedy, and a remedy itself cannot be a cause of
action.”).
The fact remains that New York courts routinely recognize actions for
specific performance, particularly in disputes over real property. See, e.g.,
Terex Corp. v. Bucyrus Int’l, Inc., 943 N.Y.S.2d 18, 21 (1st Dep’t 2012)
(reversing grant of summary judgment on claim for specific performance); City
Ownership v. Giambrone, 772 N.Y.S.2d 870, 870-71 (2d Dep’t 2004) (affirming
26

denial of summary judgment on cause of action for specific performance). And
the New York Court of Appeals has recognized that “[t]here is no inconsistency
between an action for specific performance and an action for breach of
contract, both being affirmance of the contract.” Judnick Realty Corp. v. 32
West 32nd Street Corp., 61 N.Y.2d 819, 823 (1984). Accordingly, the Court
makes no finding as to whether Plaintiff can prevail on this claim, but will
permit it to proceed. The Remaining Defendants’ motion under Rule 12(b)(6) to
dismiss the First Cause of Action is denied.
ii.

Fourth and Ninth Causes of Action: Declaratory
Judgment

Plaintiff cannot sustain an independent cause of action for a declaratory
judgment. A declaratory judgment is a remedy, not a cause of action. In re
Joint Eastern & Southern Dist. Asbestos Litig., 14 F.3d 726, 731 (2d Cir. 1993)
(“A request for relief in the form of a declaratory judgment does not by itself
establish a case or controversy involving an adjudication of rights.”). Plaintiff’s
opposition simply argues that Plaintiff is entitled to pursue a declaratory
judgment where it has other viable claims. (Pl. Opp. 19). The Remaining
Defendants contend a declaratory judgment is not an independent cause of
action, and they are correct. Their motion to dismiss the Fourth and Ninth
Causes of Action is granted, but this ruling should not be construed as a
finding that Plaintiff may not seek a declaratory judgment as a remedy for its
surviving claims.

27

iii.

Sixth Cause of Action: Permanent Injunction

It is well settled that an “injunction is a remedy, not a cause of action,
and therefore can issue only on the basis of an independent claim for relief.”
Pitcairn Props., Inc. v. LJL 33rd Street Assocs., LLC, No. 11 Civ. 7318 (JSR),
2013 WL 705861, at *2 n.1 (S.D.N.Y. Feb. 21, 2013). Plaintiff counters by
reciting the test for when a permanent injunction may issue. (Pl. Opp. 18).
This argument misses the point: Even if Plaintiff were correct about the
propriety of issuing a permanent injunction in this case as a remedy for the
Remaining Defendants’ alleged wrongs, Plaintiff has not pointed to any
authority showing that an injunction is, itself, a cause of action. The
Remaining Defendants’ motion to dismiss the Sixth Cause of Action is granted.
Again, the Court’s ruling does not foreclose Plaintiff’s ability to seek a
permanent injunction as a remedy for its remaining claims.
iv.

Eighth Cause of Action: Vendee’s Lien

In its Eighth Cause of Action, Plaintiff seeks “return of the Deposits and
any additional sums paid to [D]efendants in connection with the APA” and,
toward that end, a vendee’s lien on the “Property” 8 in the amount of $400,000.
(SAC ¶¶ 178-80). The Remaining Defendants claim that “[a vendee lien] is not
a cause of action” but cites no authority for this proposition. (Def. Br. 19).
Like specific performance, a vendee’s lien is recognized in New York as an

8

Plaintiff does not define the term “property” in its pleading. “Property” is defined in the
APA as the personal property, fixtures, land, buildings, structures, and other
improvements of the nursing homes. (APA ¶ 1(a)).

28

equitable remedy available to a purchaser of real property. 1 Robert F. Dolan
and Joseph Rasch, N.Y. LAW & PRAC. OF REAL PROP. 23:61 (2d ed.); In re 85-02
Queens Blvd. Assocs., 212 B.R. 451, 456 (Bankr. E.D.N.Y. 1997) (“[W]here the
sale contract fails, absent fault of the purchaser, courts in New York will
enforce in favor of the purchaser (vendee) a lien on the subject property to the
extent of monies paid so that the purchaser ‘may assert his rights in a court of
equity to get out of the land what he paid on it.’” (citing Elterman v. Hyman,
192 N.Y. 113, 125 (1908))). Under New York law, a vendee’s lien attaches to
property “when a contract for sale of said property is executed, and the
purchaser makes partial payment of the purchase price.” In re 85-02 Queens
Blvd. Assocs., 212 B.R. at 456.
Here, Plaintiff seeks a judgment that its payment of deposits for the
nursing home properties entitles it to a vendee’s lien in the amount of its
deposits. (SAC ¶¶ 178-80). And, again like specific performance, New York
courts have traditionally recognized causes of action to impress a vendee’s lien.
See, e.g., Liselli v. Liselli, 693 N.Y.S.2d 195, 196-97 (2d Dep’t 1999) (reversing
judgment for an equitable lien on real property); Datlof v. Turketsky, 489
N.Y.S.2d 353, 354-55 (2d Dep’t 1985) (affirming order dismissing claim to
impress an equitable lien on real property); Renol Holding Corp. v. Goodman, 5
N.Y.2d 882, 882 (1959) (affirming reversal of a judgment to impress a vendee’s
lien). The Court, once again, takes no position on whether Plaintiff can
ultimately prevail on this claim, but will permit this claim to proceed. The
29

Remaining Defendants’ motion to dismiss the Eighth Cause of Action under
Rule 12(b)(6) is denied.
b.

Second Cause of Action: Breach of Contract

Mittleider alone moves to dismiss the Second Cause of Action for breach
of contract, reasoning that (i) he is not a party to the APA and (ii) “[i]t is
axiomatic that only parties to a contract can be liable for its breach under New
York law.” (Def. Br. 20). It is not disputed that Mittleider signed the APA in a
representative capacity as the president of each of the Sellers. (See Pl.
Opp. 19-23). And, indeed, it is the rule in New York that “an agent who signs
an agreement on behalf of a disclosed principal will not be individually bound
to the terms of the agreement ‘unless there is clear and explicit evidence of the
agent’s intention to substitute or superadd his personal liability for, or to, that
of his principal.’” Lerner v. Amalgamated Clothing & Textile Workers Union, 938
F.2d 2, 5 (2d Cir. 1991) (quoting Mencher v. Weiss, 306 N.Y. 1, 4 (1953)). That
said, a corporate representative who signs a contract may not benefit from this
rule where there is fraud in the use of the corporate form. See Hudson Venture
Partners, L.P. v. Patriot Aviation Grp., Inc., No. 98 Civ. 4132 (DLC), 1999 WL
76803, at *6 (S.D.N.Y. Feb. 17, 1999).
Plaintiff urges the Court to pierce the corporate veil to impose individual
liability on Mittleider under the APA. (Pl. Opp. 22-23). To review, under New
York law, a court may pierce the corporate veil where it finds that “[i] the owner
has exercised such control that the corporation has become a mere
30

instrumentality of the owner, which is the real actor; [ii] such control has been
used to commit a fraud or other wrong; and [iii] the fraud or wrong results in
an unjust loss or injury to plaintiff.” Atateks, 402 F. App’x at 625 (quoting
Freeman v. Complex Computing Co., 119 F.3d 1044, 1052 (2d Cir. 1997)). But
for substantially the same reasons identified in its consideration of the APA’s
forum-selection clause, the Court finds that the SAC does not plead facts
sufficient to support a finding that the Sellers are so completely dominated by
Mittleider to pierce the corporate veil. Plaintiff makes conclusory allegations
that Mittleider uses the companies as a “personal piggy bank” (SAC ¶ 2), and
directs the Court’s attention to numerous other courts that have pierced the
corporate veil of Mittleider-controlled entities (id. ¶¶ 50-58). But the facts of
those cases are not before this Court, and the SAC does not explain why any of
those findings compels a similar finding in this case. Indeed, what is alleged in
this case does not suggest any comingling of funds, absence of corporate
formalities and recordkeeping, or other indicia that Mittleider used the Sellers
to fraudulently manipulate the corporate form. See Wm. Passalacqua Builders,
Inc., 933 F.2d at 139. There is, simply, nothing in the SAC to suggest that
Mittleider improperly used the entities named as Defendants in this case
illegitimately to shield himself from liability. Without pleading that suffices
under Rule 8 to show that Mittleider intended to take on personal
responsibility for the APA or abused the corporate form, the Court will not bind

31

him personally to the contract. Mittleider’s motion to dismiss Plaintiff’s cause
of action for breach of contract is granted.
c.

Purportedly Duplicative Causes of Action

The Remaining Defendants move to dismiss the Third, Seventh, and
Tenth Causes of Action as, in effect, duplicative of other claims.
i.

Third Cause of Action: Breach of Express Warranty

The Remaining Defendants argue that because the warranties identified
in the SAC are in the APA, Plaintiff’s claim for breach of express warranty must
be dismissed as identical to, and thus duplicative of, its claim for breach of
contract. (Def. Br. 21). Once again, the Remaining Defendants cite no
authority for this proposition. Plaintiff counters that because the remedies for
breach of contract and breach of express warranty are distinct, the two claims
may stand together. (Pl. Opp. 15).
The Court is unaware of any rule under New York law that breach-ofcontract and breach-of-express-warranty claims cannot stand together, and
courts in this District have permitted the two to proceed together. See, e.g.,
Price v. L’Oreal USA, Inc., No. 17 Civ. 614 (LGS), 2017 WL 4480887, at *4
(S.D.N.Y. Oct. 5, 2017) (permitting plaintiff to plead breach of contract in the
alternative to breach of express warranty); Trump Int’l Hotel & Tower v. Carrier
Corp., 524 F. Supp. 2d 302, 313-14 (S.D.N.Y. 2007) (same). The Remaining
Defendants attempt to distinguish Trump International, arguing that the case is
inapposite because it involved the potential for different remedies for the
32

breach-of-contract and breach-of-express-warranty claims. (Def. Br. 21). This
is unavailing because there is, similarly, such a possibility here. While Plaintiff
may not recover for the same injury twice, see Price, 2017 WL 4480887, at *4,
Plaintiff could recover consequential damages on the breach-of-contract claim,
whereas, on the breach-of-express-warranty claim, the remedy is traditionally
limited to the repair or replacement of the item for which the warranty was
breached. See Trump Int’l, 524 F. Supp. 2d at 314; U.C.C. §§ 2-316, 2719(1)(a). The Remaining Defendants’ motion to dismiss the Third Cause of
Action as duplicative is denied.
ii.

Seventh Cause of Action: Indemnification

An action for contractual indemnification typically arises after a party
entitled to indemnification under the contract’s terms has been found liable in
a third-party action, but such an action can also encompass claims between
the contracting parties. See Mid-Hudson Catskill Rural Migrant Ministry, Inc. v.
Fine Host Corp., 418 F.3d 168, 177-78 (2d Cir. 2005) (noting that indemnity
clauses can include claims between the parties to the contract or be limited to
third party claims). Here, the indemnification clause of the APA defines the
“losses” to be indemnified as “all claims, liabilities, losses, damages, demands
and causes of action of any nature whatsoever … whether or not resulting from
third-party claims,” thereby covering claims between the parties. (APA ¶ 11).
Plaintiff’s breach-of-contract and fraudulent-concealment claims appear to fall
within the contemplation of the APA’s indemnification clause.
33

The Remaining Defendants protest that Plaintiff’s claim for
indemnification is, effectively, a request for damages — specifically, losses
arising from “certain actions or omissions by defendants” — and attorney’s
fees, and is thus duplicative of the breach-of-contract claim. (SAC ¶ 175; Def.
Br. 19). The Remaining Defendants cite no authority for this contention, but
they are in fact correct.
“Where the parties to a contract agree to indemnify each other for losses
incurred by a breach of contract, but those losses do not relate to liability to a
third party, the characterization of indemnification is no more than an epithet
for recovery for breach of contract.” Lehman XS Trust v. Greenpoint Mortg.
Funding, Inc., Nos. 12 Civ. 7935, 12 Civ. 7942, 12 Civ. 7943 (ALC), 2017 WL
1293773, at *7 (S.D.N.Y. Mar. 29, 2017) (internal quotation marks omitted);
see also Bank of N.Y. Mellon v. WMC Mortg., LLC, No. 12 Civ. 7096 (DLC), 2015
WL 4163343, at *4 (S.D.N.Y. July 10, 2015) (holding that breach and
indemnification claims are duplicative where “both arise from the same set of
facts … and the indemnification sought is identical”). Here, Plaintiff seeks
indemnification under the APA for the very same conduct it alleges constitutes
a breach of the APA, and Plaintiff seeks compensatory damages and attorney’s
fees for its breach-of-contract claim — the same relief it seeks on its
indemnification claim. The Remaining Defendants’ motion to dismiss Plaintiff’s
Seventh Cause of Action as duplicative of the breach-of-contract claim is
granted.
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iii.

Tenth Cause of Action: Estoppel

Plaintiff’s Tenth Cause of Action for “estoppel” alleges that “Defendants
made explicit promises and warrantees to [P]laintiff” on which “Plaintiff
reasonabl[y] relied.” (SAC ¶¶195-96). For this, Plaintiff states, Defendants
ought to be “estopped from cancelling the APA or from claiming that they are
unable to sell the assets that are the subject of the APA[.]” (Id. at ¶ 198). See
Cyberchron Corp. v. Calldata Sys. Dev., Inc., 47 F.3d 39, 44 (2d Cir. 1995) (“In
New York, promissory estoppel has three elements: a clear an unambiguous
promise[,] a reasonable and foreseeable reliance by the party to whom the
promise is made, and an injury sustained by the party asserting the estoppel
by reason of the reliance.” (internal quotation marks and citation omitted)).
It is well-settled that a party asserting a breach-of-contract claim cannot
also maintain an action for promissory estoppel where there is a valid
agreement between the parties. Hoeg Corp. v. Peebles Corp., 60 N.Y.S.3d 259,
262 (2d Dep’t 2017); O'Grady v. BlueCrest Capital Mgmt. LLP, 111 F. Supp. 3d
494, 504 (S.D.N.Y. 2015); Gas Nat., Inc. v. Iberdrola, S.A., 33 F. Supp. 3d 373,
386 (S.D.N.Y. 2014). Plaintiff argues that its claim for promissory estoppel
should stand as an alternative to the breach-of-contract claim. However,
Defendants do not contest the validity of the contract between Plaintiff and the
Sellers; accordingly, Plaintiff cannot prevail on a claim for promissory estoppel
against the Sellers. That said, Mittleider is not a party to the APA. Plaintiff
should be permitted, at this early stage in the litigation, to plead promissory
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estoppel in the alternative as to Mittleider. Plaintiff’s claim for promissory
estoppel against Bristol, Lynchburg, DemQuarter, and Salem is dismissed, but
Plaintiff’s claim for promissory estoppel against Mittleider survives. 9
C.

The Court Denies Defendants’ Motion to Strike
1.

Motions to Strike Under Rule 12(f)

Finally, the Remaining Defendants move to strike Paragraphs 48 to 101
of the SAC, believing that Plaintiff seeks to “harass Mr. Mittleider, paint an
unfairly unflattering picture of him to the Court and to create a basis for
abusive discovery.” (Def. Br. 23). Under Federal Rule of Civil Procedure 12(f), a
court “may strike from a pleading an insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). Motions
to strike are not to be granted “unless there is a strong reason for so doing.”
Nungesser v. Columbia Univ., No. 15 Civ. 3216 (GHW), 2017 WL 1102661, at *1
(S.D.N.Y. Mar. 23, 2017) (internal quotation marks omitted). “In deciding
whether to strike a Rule 12(f) motion on the ground that the matter is
impertinent and immaterial, it is settled that the motion will be denied, unless
it can be shown that no evidence in support of the allegation would be

9

The Remaining Defendants also argue that the merger clause in the APA bars Plaintiff
from bringing a claim for promissory estoppel based on promises or representations not
contained in the APA. Because Plaintiff’s claim against the Sellers cannot succeed in
the face of a valid contract, the Court need not assess whether the claim is also barred
under the merger clause. But as noted above, Mittleider is not a party to the APA and
the Court will not extend the operation of the merger clause to Mittleider in his personal
capacity, particularly for any alleged promises or representations made following the
execution of the APA. See Washington v. Kellwood Co., No. 05 Civ. 10034 (DAB), 2009
WL 855652, at *9 (S.D.N.Y. Mar. 24, 2009) (noting that merger clauses do not preclude
all promissory estoppel claims, including those based on alleged promises made after
the agreement was entered).

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admissible.” Lipsky v. Commonwealth United Corp., 551 F.2d 887, 893 (2d Cir.
1976). Courts in this District have found that to prevail on a motion under
Rule 12(f), the moving party must show that “[i] no evidence in support of the
allegations would be admissible; [ii] that the allegations have no bearing on the
issues in the case; and [iii] that to permit the allegations to stand would result
in prejudice to the movant.” Landesbank Baden-Württemberg v. RBS Holdings
USA, Inc., 14 F. Supp. 3d 488, 497 (S.D.N.Y. 2014) (internal quotation marks
and citation omitted).
2.

Analysis

The Remaining Defendants assert that the allegations in Paragraphs 48
to 101 of the SAC are not merely irrelevant, but also inflammatory. (Def.
Br. 23). Plaintiff counters that these allegations regarding Mittleider’s business
dealings and other litigations are “directly relevant to the issues at hand”
because (i) they are evidence of the web of business entities controlled by
Mittleider and (ii) the “primary value” of the nursing homes at issue in the APA
“is the licenses that they hold,” to which the qui tam litigation discussion is
thus directly relevant. (Pl. Opp. 25). Plaintiff also observes that this case will
be resolved in a bench trial, and opines that this mode of resolution undercuts
the Remaining Defendants’ claim of prejudice. (Id.).
Striking portions of a pleading is a “drastic remedy” and so motions to
strike under Rule 12(f) are generally disfavored. 5C Charles A. Wright et al.,
FED. PRAC. & PROC. CIV. § 1380 (3d ed.); Lipsky, 551 F.2d at 893 (“And
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ordinarily neither a district court nor an appellate court should decide to strike
a portion of the complaint on the grounds that the material could not possibly
be relevant on the sterile field of the pleadings alone.”). To prevail on a motion
to strike, the moving party must show that “no evidence in support of the
allegation would be admissible.” Lipsky, 551 F.2d at 893. As another Court in
this District has explained:
[T]here has arisen since the adoption of [Rule 12(f)]
general judicial agreement, as reflected in the extensive
case law on the subject that [motions to strike under
Rule 12(f)] should be denied unless the challenged
allegations have no possible relation or logical
connection to the subject matter of the controversy and
may cause some form of significant prejudice to one or
more of the parties to the action.
VNB Realty, Inc. v. Bank of Am. Corp., No. 11 Civ. 6805 (DLC), 2013 WL
5179197, at *3 (S.D.N.Y. Sept. 13, 2013) (second alteration in original) (quoting
5C Charles A. Wright et al., FED. PRAC. & PROC. CIV. § 1382 (3d ed.)).
Plaintiff’s allegations in Paragraphs 48 to 101 of the SAC do not, at this
juncture, appear to be directly relevant to Plaintiff’s claim, but the Court is
mindful that “[e]videntiary questions … should especially be avoided at such a
preliminary stage in the proceedings,” and that “the questions of relevancy and
admissibility in general require the context of an ongoing and unfolding trial in
which to be properly decided.” Lipsky, 551 F.2d at 893. The Court is reluctant
to find, at this early stage, that these allegations have no possible relation or

38

any logical connection to the misconduct alleged. Accordingly, the Remaining
Defendants’ motion to strike is denied. 10
CONCLUSION
For the foregoing reasons, the motion of H/P Carrington Inc.,
H/P Cambridge House, Inc., Legacy Healthcare Corporation, and Franklin
Healthcare of Peabody, LLC to dismiss the SAC in its entirety under
Rule 12(b)(2) is GRANTED without prejudice, and the Clerk of Court is directed
to terminate these parties from the case.
The motion of the Sellers and Mittleider under Rule 12(b)(6) to dismiss
the Fourth, Sixth, Seventh, and Ninth Causes of Action is GRANTED. The
motion of the Sellers and Mittleider to dismiss the First, Third, and Eighth
Causes of Action under Rule 12(b)(6) is DENIED. The motion of the Sellers and
Mittleider under Rule 12(b)(6) to dismiss the Tenth Cause of Action is
GRANTED as to the Sellers and DENIED as to Mittleider. The motion of
Mittleider under Rule 12(b)(6) to dismiss the Second Cause of Action is

10

Defendants cite Lipsky as supporting the proposition that “references to preliminary
steps in litigations and administrative proceedings that did not result in an adjudication
on the merits or legal or permissible findings of fact are, as a matter of law, immaterial
under Rule 12(f).” (Def Br. 24-25). As Judge Cote explained in VNB Realty, this
misreads Lipsky. Lipsky, ultimately, was concerned that the plaintiff in that action —
which alleged material misstatements in SEC filings — quoted alleged misstatements in
other offering documents from an SEC complaint and not from the disputed offering
documents themselves. VNB Realty, 2013 WL 5179197, at *3-4. Lipsky is easily
confined to its facts and does not stand for a blanket rule that references to other
pleadings should always be stricken under Rule 12(f). Id. at *4. The Court will not read
Lipsky with the breadth Defendants desire, and will not, at this stage, find that Plaintiff
may not make reference to other litigations regarding Mittleider’s nursing home
businesses.

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GRANTED. The motion of the Sellers and Mittleider under Rule 12(f) to strike
certain portions of the SAC is DENIED.
The Clerk of Court is directed to terminate the motions at docket entry
73.
The following claims remain active in this case:
(i)

First Cause of Action for Specific Performance against the Sellers
and Mittleider;

(ii)

Second Cause of Action for Breach of Contract against the Sellers;

(iii)

Third Cause of Action for Breach of Express Warranty against the
Sellers and Mittleider;

(iv)

Fifth Cause of Action for Fraudulent Concealment against the
Sellers and Mittleider;

(v)

Eighth Cause of Action for a Vendee’s Lien against the Sellers and
Mittleider;

(vi)

Tenth Cause of Action for Promissory Estoppel against Mittleider.

The Court has limited this Opinion and Order to the motions made by
the various Defendants, and any claim that was not the subject of a motion to
dismiss survives. The Court’s Opinion should not be construed as expressing a
position on the viability of any claims raised by Plaintiff that Defendants did
not move to dismiss. The parties are hereby ORDERED to submit a proposed
Case Management Plan by December 15, 2017. The parties should

40

contemplate that the Court will not agree to extensions of discovery deadlines,
once imposed, and should plan accordingly.
SO ORDERED.
Dated:

November 29, 2017
New York, New York

__________________________________
KATHERINE POLK FAILLA
United States District Judge

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