Reinschmidt v. Exigence L.L.C. (Del.) et al

Filing 41

REPORT AND RECOMMENDATIONS RE: 21 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Exigence Health Plan, Inc., FMB Holdings L.L.P., Gregory F. Daniel, Exigence Hospitalist Services of Western New York, PLLC, Exigence Hea lthcare Solutions of Nevada L.L.C., NYAMEKYE North America L.L.C., Multistate Holdings L.L.C. (Del.), Exigence of Sunbury L.L.C., Multistate Holdings Partnership, Exigence Hospitalist Services of Olean, PLLC, NYAMEKYE Hospitalist Services of Erie County, PLLC, Joseph D. DiVincenzo, Irving H. Levy, Exigence New York, L.L.C., Exigence New Jersey L.L.C. (N.J.), Exigence L.L.C. (Del.), Exigence Arizona L.L.C., Exigence Pennsylvania, L.L.C., Lakeway Emergency Management Servic es, L.L.C.; 20 MOTION to Dismiss filed by Exigence of Bradford, P.L.L.C., Exigence of Fremont, L.L.C., Austin Immediate Care, P.L.L.C., Buffalo Emergency Associates, L.L.P., Exigence Medical of New York, P.L.L.C., Exigence Medical of Binghamton P.L.L.C., Exigence Management Company, Inc., Exigence Medical of Hornell P.L.L.C., Pulse Occupational Medicine, L.L.C., Western New York Immediate Medical Care, L.L.C.; 8 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Exigence Health Plan, Inc., FMB Holdings L.L.P., Gregory F. Daniel, Exigence Hospitalist Services of Western New York, PLLC, Exigence New Jersey L.L.C. (N.Y.), Exigence Healthcare Solutions of Nevada L.L.C., NYAMEKY E North America L.L.C., Multistate Holdings L.L.C. (Del.), Multistate Holdings Partnership, Exigence of Sunbury L.L.C., Exigence Hospitalist Services of Olean, PLLC, NYAMEKYE Hospitalist Services of Erie County, PLLC, Joseph D. DiVincenzo, Irving H. Levy, Exigence New York, L.L.C., Exigence L.L.C. (Del.), Exigence New Jersey L.L.C. (N.J.), Exigence Arizona L.L.C., Exigence Pennsylvania, L.L.C., Lakeway Emergency Management Services, L.L.C.; and 7 MOTION to Dismiss filed by Exigence of Bradford, P.L.L.C., Exigence of Fremont, L.L.C., Exigence Medical of Binghamton P.L.L.C., Exigence Management Company, Inc., Pulse Occupational Medicine, L.L.C., Western New York Immediate Medical Care, L.L.C. , Austin Immediate Care, P.L.L.C., Buffalo Emergency Associates, L.L.P., Exigence Medical of New York, P.L.L.C., Exigence Medical of Hornell P.L.L.C. Objections due per 28 U.S.C. § 636(b) and Fed. R. Civ. P. 72.Signed by Hon. Hugh B. Scott on 1/19/2016. (GAI) Main document modified on 1/19/2016 only to correct typographical error ("comes" for "come") in line 11 on page 55 (GAI).

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
JONATHAN REINSCHMIDT, M.D.,
Plaintiff,

REPORT AND
RECOMMENDATION
14-CV-997A

v.
EXIGENCE L.L.C. (DEL.) et al.,
Defendants.
I.

INTRODUCTION ................................................................................................................ 3

II.

BACKGROUND.................................................................................................................. 4
A.

Plaintiff joins several partnerships or LLCs ................................................................ 4

B. The Partnership Agreements ........................................................................................ 5
i.

Buffalo Emergency Associates, L.L.P. ..................................................................... 5

ii.

Multistate Holdings LLC ............................................................................................ 7

iii. Multistate Holdings Partnership ............................................................................... 9
iv. Exigence Medical of Hornell PLLC ..........................................................................10
v.

Exigence Medical of Binghamton PLLC ..................................................................11

vi. Western New York Immediate Medical Care, LLC ..................................................11
vii.

Pulse Occupational Medicine PLLC .....................................................................12

C. Intimidation by Defendants..........................................................................................13
D. Plaintiff decides to leave, and his exit process ..........................................................14
E.

The Sale of Some Defendant Entities..........................................................................15

F.

Pre-litigation Communication ......................................................................................17

G. This Case ......................................................................................................................19
H. The Pending Motions ...................................................................................................22
III.

DISCUSSION .................................................................................................................26

A.

Motions to Dismiss Generally .....................................................................................26

B. Plaintiff’s Allegations Against Alter-Ego Entities.......................................................30
C. When was plaintiff’s last day as an owner? ...............................................................35
i.

Buffalo Emergency Associates, L.L.P. ....................................................................36

ii.

Western New York Immediate Medical Care PLLC .................................................39

iii. Pulse Occupational Medicine PLLC ........................................................................40
iv. Multistate Holdings Partnership ..............................................................................41
v.

Exigence Medical of Hornell PLLC and Exigence Medical of Binghamton PLLC.43

D. Effect of May 1, 2012 (or later) Ownership Date on Plaintiff’s Claims ......................44
E.

Count 15: Demand for an Accounting.........................................................................49

F.

Counts 16 and 17: Civil RICO ......................................................................................49

IV.

CONCLUSION ...............................................................................................................55

V.

OBJECTIONS ...................................................................................................................56

2

I.

INTRODUCTION
The Hon. Richard J. Arcara referred this case to this Court under 28

U.S.C. § 636(b). (Dkt. No. 9.) Pending before the Court are motions by all 29 1
defendants (Dkt. Nos. 7 and 8, updated as 20 and 21) to dismiss plaintiff’s
amended complaint (Dkt. No. 13) in its entirety under Rule 12(b)(6) of the
Federal Rules of Civil Procedure (“FRCP”). Plaintiff has alleged that hiding
information about the sale of partnerships to which he had belonged, coupled
with years of underpaid profit draws, has made defendants liable on a variety of
claims including fraud, breach of fiduciary duty, breach of contract, and even
racketeering. Defendants want the amended complaint dismissed because,
according to them, plaintiff’s claims are untimely, duplicative, or vastly overstated
given how fairly he was paid when he quit the partnerships.
The Court held oral argument on August 25, 2015. (Dkt. No. 35.) The
Court also solicited supplemental briefing (Dkt. No. 36) and thanks the parties for
their helpful responses. For the reasons below, the Court respectfully
recommends the following: 1) denying the motions with respect to Count 11, 12,
13, and 15; 2) denying the motions with respect to Count 10 for the individual
defendants and for defendants Buffalo Emergency Associates, L.L.P., Western
New York Immediate Medical Care PLLC, Pulse Occupational Medicine PLLC,
1

Plaintiff dropped three names as defendants when moving from the original to the amended
complaint: Exigence New Jersey L.L.C. (N.Y.); Exigence, LP (Pa.); and
Exigence L.L.C. (Pa.). Since plaintiff never filed a formal dismissal under Rule 41(a)(1)(A)(i),
the Court recommends dismissing these three defendants under Rule 41(a)(2).

3

Multistate Holdings Partnership, Exigence Medical of Hornell PLLC, and
Exigence Medical of Binghamton PLLC; 3) granting the motions, without
prejudice, with respect to Count 10 for any other defendants; and 4) granting the
motions with respect to all other counts.
II.

BACKGROUND
This case concerns allegations that defendants cheated plaintiff over the

years in two ways: first, by improperly reducing his quarterly partner distributions
while also increasing the number of shifts that he had to work; and second, by
refusing to tell him about a sale of the partnerships that would have increased the
value of his ownership interests had he stayed a few more months. The Court
provides further background below; to avoid repetition and in accordance with
Rule 12(b), the Court has avoided using the words “alleged” or “allegedly” when
describing plaintiff’s version of events.
A. Plaintiff joins several partnerships or LLCs
Plaintiff is an emergency room physician. After completing his residency at
the University at Buffalo, plaintiff accepted an employment offer from defendant
Buffalo Emergency Associates L.L.P. Plaintiff signed a Partnership Agreement
with that defendant on June 11, 2001. In 2004, plaintiff became a general
partner in Buffalo Emergency Associates, L.L.P. for a $75,000 capital
contribution. In December 2004, plaintiff contributed $20,000 for 4.21 units of
defendant Multistate Holdings Partnership. On January 1, 2005, plaintiff signed
4

an Operating Agreement and became a part owner of defendant Western New
York Immediate Medical Care, L.L.C.; for a $25,000 capital contribution, plaintiff
took a 5.12% interest in Class A membership, a 4.76% interest in Class B
membership, and a 5% interest in Class C membership. At an unspecified time
but possibly around 2004 or 2005, plaintiff also took a 1% share in defendants
Exigence Medical of Hornell P.L.L.C. and Exigence Medical of Binghamton
P.L.L.C. Plaintiff had one more ownership interest as well. Plaintiff does not
mention specifics in the amended complaint, but the parties agree that plaintiff
also had a 5.127% ownership interest in Pulse Occupational Medicine PLLC.
B. The Partnership Agreements
Plaintiff entered partnership or operating agreements with each of the
entity defendants that he partly owned.
i.

Buffalo Emergency Associates, L.L.P.

The Court has a copy of the 2010 Amended and Restated Master
Partnership Agreement of Buffalo Emergency Associates, L.L.P. (Dkt. No. 13-4.)
This partnership is a New York limited liability partnership and conducts its
business under New York law. Several sections potentially have some
importance to the pending motions. Section 3 defined eligibility for partnership
and different tiers of partnership. Per Attachment B to the agreement, plaintiff
was a general partner with a 3% interest. Sections 1.1 and 5.18 established
defendant Gregory Daniel as the Chief Executive Officer. Section 5.18.3
5

established defendant Joseph DiVincenzo as the Compliance Officer. Section
5.22.2 required a super-majority vote of the voting partners for the transfer, sale,
or assignment of all or a portion of a partner’s ownership interest. That same
section required a super-majority vote for a merger or sale of substantially all the
assets of the partnership. Under Section 10.1, “[a]ny General Partner shall have
the right to withdraw from the Partnership provided written notice of intent to
withdraw is given to the other Original and General Partners at the offices of the
Partnership ninety (90) days in advance.” (Id. at 34.) Section 13 states that “[a]t
the date of the withdrawal, expulsion, death or retirement of a Partner or the
termination of a Partner, such Partner shall cease to share in Partnership income
or loss and Partnership shall not be required to return the Partner’s Capital
Account except in accordance with Section 13.3. From and after the date of
such withdrawal, death, retirement, expulsion or termination, such Partner shall
cease to be a Partner without amendment of this Agreement.” (Id. at 36.)
Section 13.1 stated that the withdrawing general partner must execute an
assignment of ownership interest effective upon withdrawal. Section 13.3 stated
that, upon withdrawal of a general partner, the partnership would pay, “without
interest thereon, their capital account balance as calculated under the accrual
method of accounting as of the date of that General or Original Partner’s
withdrawal . . . As determined by the Partnership and in accordance with the
accounting practices of the Partnership applied on a consistent basis. The
6

Partnership’s internal accounting department shall make this determination
based on the books of the Partnership.” (Id. at 37.) As for payments, Section
13.3 went on to state that the balance owed to a withdrawing general partner
“shall be paid in twenty-four (24) equal monthly installments commencing March
1 of the year following year of . . . withdrawal . . . occurs [sic]. The amount
payable shall be without interest and the timing of payment may be accelerated
in the sole discretion of the Partnership. In the event of a default in the payment
of any installment that is not cured within thirty (30) days after written notice
thereof to the Partnership, the entire balance due the withdrawing Partner shall,
at the option of such Partner or such Partner’s legal representative, become
immediately due and payable.” (Id. at 37–38.) Finally, Section 13.5 stated that
the rights of any withdrawing general partner “are expressly conditioned upon the
compliance by the Partner in respect of whom such rights arise with all of the
material terms and conditions of this Agreement.” (Id. at 38.)
ii.

Multistate Holdings LLC

The Court has a copy of the operating agreement for Multistate Holdings
LLC. (Dkt. No. 13-9.) This partnership was a Delaware limited liability company
and, per Section 1.2, operated under Delaware law. Defendant Gregory Daniel
was the managing partner. As listed in the membership roster at Exhibit A, the
only member was an entity called Multistate Holdings Partnership. (Id. at 26.)
Multistate Holdings Partnership was listed as a Class A Voting Member with a
7

100% ownership interest and a $400,000 capital account; in turn, plaintiff had an
ownership interest in Multistate Holdings Partnership. Section 2.8 defined
membership interests. “A Membership Interest may be evidenced by a certificate
issued by the Company. A Membership Interest may be expressed on a
certificate as ‘Units’ where a Member’s Units bears the same relationship to the
aggregate Units of MEMBERS that the Member’s Membership Interest bears to
the aggregate Membership Interests of all Members.” (Id. at 10.) The
partnership had only three officers—an Operating Manager, a Treasurer, and a
Secretary. Gregory Daniel was the Operating Manager, and under Section 4.3,
the Operating Manager’s signature was required on all documents, instruments,
and obligations that bind the partnership. The agreement did not list who the
Treasurer and Secretary were. Section 6.1 contained some provisions regarding
resignation of membership. A resigning member would receive “only the book
value of his Ownership Interest, adjusted for profits and losses to the date of
severance, as determined under GAAP, unless otherwise agreed by written
consent of all of the other Voting Members.” (Id. at 17.) Section 6.1 also stated
that “[a]ny physician Member who is also a partner or employee of Buffalo
Emergency Associates, LLP (‘BEA’), a New York general partnership, who is
severing from BEA LLP, must tender all of his Membership Interests in Multistate
to Multistate as if he were withdrawing directly from Multistate.” (Id.) Section 7.2
set forth how members had the right, on 10 business days’ notice, to inspect the
8

partnership’s books and records. Section 7.3 set forth how each year, “the
Voting Members shall make or cause to be made a full and accurate accounting
of the affairs of the Company as of the close of that Fiscal Year and shall prepare
or cause to be prepared a balance sheet as of the end of such Fiscal Year . . . .”
(Id. at 20.) Section 10.12 set forth that the agreement uses Delaware law but
that any state or federal litigation would have to use Erie County, New York as
the exclusive venue.
iii.

Multistate Holdings Partnership

The Court has a copy of the partnership agreement for Multistate Holdings
Partnership. (Dkt. No. 21-3.) The partnership’s initial Managing Partner was
Gregory Daniel. (Id. at 18.) Article VII, Section B(1) contained a provision
governing the sale of ownership interests to third parties. “Except as otherwise
expressly set forth herein, in the event that any Partner shall at any time desire to
sell or otherwise transfer any or all of the Units, and upon his receipt of a bona
fide written offer therefor in a form suitable for acceptance, he (the ‘Selling
Partner’) shall immediately give written notice of such offer (the ‘Notice’) to each
of the other Partners and to the Partnership. The Notice shall set forth the
number of Partnership Units (‘Units’) that he proposes to sell, the name of the
Selling Partner and the offeror, the price to be paid therefor, and the other terms
and conditions upon which said offer has been made.” (Id. at 23.) Article VII,
Section G set forth that a partner would be considered terminated upon voluntary
9

resignation (id. at 30); all rights under the agreement would terminate
immediately as of the date when partner status ended (id. at 31). Section H
described how, outside of the third-party purchases explained in Section B, the
purchase price of a partner’s units “shall be the value of such Units as set forth in
the most recent Partnership valuation obtained by the Partnership from its thirdparty valuation consultant, subject to further adjustment as set forth in EXHIBIT A
above.” (Id.) Any sale would be paid in cash or by delivery of a promissory note.
(See id. at 33.) As for partnership records, each partner “shall have full,
complete and unrestricted access to all of the Partnership’s books and records
during normal business hours, upon at least 10 business days advance written
request.” (Id. at 36.) New York law governed the agreement. (Id.)
iv.

Exigence Medical of Hornell PLLC

The Court has a copy of the operating agreement for Exigence Medical of
Hornell PLLC. (Dkt. No. 21-4.) Section 1.2 placed the agreement under New
York law. Section 2.2 defined classes of members, though Exhibit A listed
Gregory Daniel as the only Class A voting member with a 99% ownership
interest. (Id. at 7, 24.) The remaining 1% ownership interest was not determined
as of the time of the writing. Gregory Daniel also was the Operating Manager per
Section 4.2. (Id. at 11.) Under Section 6.1, resigning members would receive
the book value of their ownership interests. (Id. at 15.) Under Section 6.3,
members who wanted to sell their interests first had to offer the interests to the
10

partnership. Members had the right to inspect books and records under Section
7.2 and had the right to an annual accounting under Section 7.3.
v.

Exigence Medical of Binghamton PLLC

The Court has a copy of the operating agreement for Exigence Medical of
Binghamton PLLC. (Dkt. No. 21-5.) Gregory Daniel was listed as the sole
member; he also was the Operating Manager. New York law governed the
agreement. (Id. at 6.) Section 6.3 set restrictions on the transfer of ownership
interests and gave the entity and other members the right of first refusal with
respect to any transfer of ownership interests. Sections 7.1 through 7.3 set forth
how the entity would maintain records and accountings, including records of “true
and full information regarding the status of the business and financial condition of
the Company.” (Id. at 17.) Under Section 10.1, any notices affecting any part of
the agreement had to be in writing.
vi.

Western New York Immediate Medical Care, LLC

The Court has a copy of the operating agreement for Western New York
Immediate Medical Care, LLC. (Dkt. No. 21-6.)

Among other provisions,

Section 7.1(f) required the entity to maintain “copies of all written actions of the
Members whether at a meeting or by consent in accordance with Article VII.” (Id.
at 20.) Under Section 8.4, Gregory Daniel was the initial Managing Member for a
term of 10 years. Under Section 10.4, if the entity acquired an outgoing
member’s ownership interest, then the outgoing member would be paid “the book
11

value of such Membership Interest on the last day of the month immediately
preceding the Event of Transfer, as determined by the certified public
accountants regularly retained by the Company in accordance with generally
accepted accounting principles on the accrual basis of accounting.” (Id. at 28.)
The entity and other members had a right of first refusal for any ownership
interests for sale, under Section 10.7. Under Section 12.1(a), “A Member shall
cease to be a Member upon . . . the withdrawal of the Member in accordance
with the provisions of the [New York Limited Liability Company Law].” (Id. at 31.)
Under Section 12.2, “[t]he Voluntary Withdrawal of a Member shall be permitted
with the written consent of two-thirds (2/3) in Interest of the remaining Members
holding the same class of membership or upon at least sixty (60) days’ prior
notice to the Company.” (Id.) Under Section 12.4, if a member withdrew then
the company would repurchase the ownership interest at book value in the same
way described under Section 10.4. Section 16.1 required any notices that
implicated the agreement to be in writing. New York law governed the
agreement, per Section 16.10.
vii.

Pulse Occupational Medicine PLLC

The Court has a copy of the Operating Agreement for Pulse Occupational
Medicine PLLC. (Dkt. No. 38-2.) Among other provisions, Section 6.1 required
the entity to maintain certain books and records; Section 6.3 required the entity to
make those books and records available to members. Section 10.1 contained a
12

general prohibition on transfer of a member interest. “No Member shall gift, sell,
assign, pledge, hypothecate, exchange, encumber, or otherwise transfer to
another Person all or any portion of a Membership Interest, and no Member may
withdraw from the Company at any time prior to the dissolution and winding up of
the Company, except in accordance with the provisions of this Article X.” (Dkt.
No. 38-2 at 16.) In the rest of Article X, the only events that prompted withdrawal
short of dissolution and winding up are not relevant to this case. Those events
included death or disqualification; retirement; permanent disability; adjudication
as an incompetent; and bankruptcy. The operating agreement had no other
withdrawal provision. If one of the approved withdrawal events occurred then
Section 10.3 directed that payment occur “within six (6) months of the Events of
Transfer specified in Section 10.2(a) and, in the case of death, within six (6)
months after the appointment of the executor or administrator or other legal
representative of the estate. In all other Events of Transfer, payment shall be
made in twenty-four (24) equal monthly installments to commence on March 1st
of the year following the date in which the Event of Transfer occurred.” (Id. at
17.)
C. Intimidation by Defendants
While plaintiff worked for the defendant entities, and upon information and
belief, he endured efforts to pay certain partners or members more than others,
in ways that violated the agreements in question. The efforts took several forms.
13

Defendants increased the number of shifts that plaintiff had to work while paying
him smaller quarterly distributions than partners or members who had the same
ownership interests. Defendants also lied to partners and members in their
books and records, hiding accurate information about individual and collective
revenues. The misrepresentations helped defendants move partnership assets
from one entity to another in violation of the relevant operating agreements.
Plaintiff accuses defendant Gregory Daniel in particular of diverting partnership
assets to at least one family member. Defendants punished partners who asked
too many questions by shrinking their quarterly distributions.
D. Plaintiff decides to leave, and his exit process
By 2010, plaintiff decided to leave Buffalo to pursue professional
opportunities in Tennessee, where he now resides. 2 In December 2010, plaintiff
communicated with defendant Irving Levy about the value of his ownership
interests and about his intent to withdraw as a partner or member of the entities
that he owned. Further communications led to plaintiff’s signing of exit letters to
memorialize his withdrawal from the entities that he partly owned. Plaintiff signed
an exit letter for Multistate Holdings Partnership on April 12, 2011. (Dkt. No. 13-3
at 1.) In the letter, the parties agreed that plaintiff’s exit would be retroactive to

2

There is some suggestion in the papers about a personal reason why plaintiff left for
Tennessee. (See Dkt. No. 21-2 at 10.) This information, if explored further, might have some
value in showing whether plaintiff would have left for Tennessee regardless of any sales
transactions. Because the information does not appear in the amended complaint or
documents connected to it, the Court has disregarded it when resolving the pending motions.

14

December 31, 2010. The exit letter did not address whether plaintiff gave prior
written notice of withdrawal as required by Article VII, Section B(1) of the
partnership agreement, and the record contains no other indication of such
written notice. Plaintiff entered a similar exit agreement for Western New York
Immediate Medical Care, PLLC and Pulse Occupational Medicine, PLLC (id. at
4); the agreement bore a date of August 1, 2011 and set an effective date of
August 1, 2011, but plaintiff’s signature was undated. Plaintiff signed an exit
agreement for Buffalo Emergency Associates LLP (id. at 6); again, the
agreement bore a date of August 1, 2011 and set an effective date of August 1,
2011, but plaintiff’s signature was undated. All of the exit agreements were
substantially similar, including in their silence about prior written notice. The
record does not contain exit agreements for Exigence Medical of Hornell P.L.L.C.
and Exigence Medical of Binghamton P.L.L.C. Plaintiff worked his last regular
shift for defendants on July 31, 2011. For his combined ownership interests,
plaintiff received four equal payments of $73,553 on March 27, May 20, June 2,
and June 11, 2011.
E. The Sale of Some Defendant Entities
Unbeknownst to plaintiff, and upon information and belief, defendants were
contemplating a sale of some entities even while plaintiff was still a partner or
member. Defendants, including Gregory Daniel and Irving Levy individually,
“finalized their intention to proceed with an acquisition in October 2011.” (Dkt.
15

No. 13 at 31 ¶ 196.) Negotiations for the acquisition began before then. On May
1, 2012, TeamHealth Holdings Inc. (“TeamHealth”), 3 a hospital staffing company
based in Knoxville, Tennessee, announced that it was acquiring the following
entity defendants: 4
•
•
•
•
•
•
•
•
•
•

Buffalo Emergency Associates, L.L.P.;
Exigence Medical of Hornell P.L.L.C.;
Exigence Medical of Binghamton P.L.L.C.;
Austin Immediate Care, P.L.L.C.;
Exigence Medical of New York, P.L.L.C.;
Exigence of Fremont, L.L.C.;
Exigence Management Company, Inc.;
Exigence of Bradford, P.L.L.C.;
Western New York Immediate Medical Care, L.L.C.; and
Pulse Occupational Medicine, L.L.C.

Plaintiff did not have an ownership interest in every entity that sold, but every
entity in which he had an interest was sold. The same day as the sale
announcement, May 1, 2012, defendants wrote plaintiff a check for $517,145.60.
As of the commencement of this action, defendants have paid plaintiff a total of
$811,357.60 for his ownership interests. According to plaintiff, however, his
ownership interests climbed in value to over $4 million with the sale to
TeamHealth, and he would not have withdrawn or sold his interests had he
known that the acquisition was under discussion. The record is not clear as to

3

The Court takes judicial notice that “TeamHealth” is spelled without a space, and that it is
publicly traded on the New York Stock Exchange.
4
Plaintiff claims not to have known until oral argument exactly which entities sold. (Dkt. No. 39
at 3 n.1.) Apparently, the entities that were sold break down neatly as any entities that have
been represented by Attorney Sullivan.

16

whether plaintiff feels this way in part because TeamHealth’s headquarters is
located in Tennessee, where he now lives. Plaintiff asserts that discussions
about the acquisition occurred not only while he was still a partner or member but
after defendants knew that he was contemplating withdrawal, and that
defendants intentionally withheld information from him.
F. Pre-litigation Communication
After the May 1, 2012 sale, plaintiff and defendants exchanged
correspondence concerning the value of his ownership interests. Plaintiff
appears to have taken efforts to obtain records from defendants that would allow
him to make his own calculation of value. A dispute over records led plaintiff to
send defendants a letter dated November 30, 2012. (Dkt. No. 13-1 at 1.) In the
letter, among other issues, plaintiff expresses frustration about access to certain
records and valuations that he felt he should have received. The letter suggests
a dispute over whether plaintiff had the right to certain records once his
ownership interests sold, or whether plaintiff needed the records to confirm the
price at which his interests sold.
Defendants responded with a letter dated January 31, 2013. (Dkt. No. 138.)

Defendants confirmed that “Dr. Reinschmidt never provided any formal

written notice of withdrawal required by the governing agreements and thus
himself breached same.” (Id. at 3.)

Defendants also provided a list of plaintiff’s

ownership interests:
17

• Buffalo Emergency Associates, L.L.P.: 3% ownership interest, paid by
GAAP basis book value. Defendants raised an issue about a limited
number of shifts that plaintiff worked, though the record does not contain
any formal notices about deficiencies. (Id. at 6.) Defendants also asserted
that plaintiff did not provide a formal 90-day notice of withdrawal as
required in Section 10.1 of the Master Partnership Agreement.
• Western New York Immediate Medical Care PLLC: ownership interests in
four locations, paid by GAAP basis book value:
o Transit Road, Class A: 5.40%;
o Niagara Falls Boulevard, Class B: 5%;
o Orchard Park, Class C: 5.26%; and
o Cheektowaga, Class D: 5.28%.
Defendants here also suggested that plaintiff did not work as much as was
required and that he did not provide formal 60-day notice of withdrawal as
required by Section 12.2 of the Amended and Restated Operating
Agreement.
• Pulse Occupational Medicine PLLC: 5.127% ownership interest, paid by
GAAP basis book value.
• Multistate Holdings Partnership: 3.9668% ownership interest, paid by
GAAP basis book value, with this ownership interest covering a number of
Exigence entities that Multistate Holdings Partnership fully owned.
• Exigence Medical of Hornell PLLC and Exigence Medical of Binghamton
PLLC: membership in the collective Class B Member that collectively
owned 1% of each entity. Defendants asserted that these entities retained
no assets at the end of each calendar year and that, in any event, plaintiff
“became ineligible to maintain his share in the 1% interest when he
stopped working shifts at the facilities served by these entities.” (Id. at 4–
5.)
• Ownership interests in five real estate entities: 7616 Transit Holdings
Partnership (5.40%); Slaughter Mopac LLC (2.6882%); 5014 Transit
Holdings Partnership (5.4%); 6653 Main Street Partnership (5%); and 5020
Transit Holdings Partnership (5.4%). Plaintiff did not name the real estate
18

entities as defendants in this case, and the real estate entities appear not
to be at issue in any way.
For each ownership interest, defendants provided payment information that,
depending on the point of view, either expands on or contradicts the information
appearing at paragraphs 187 and 193 of the amended complaint.
G. This Case
Plaintiff commenced this case 5 by filing his original complaint on November
26, 2014. (Dkt. No. 1.) Defendants filed the original versions of their pending
motions on April 1, 2015. (Dkt. Nos. 7, 8.) Invoking his right under Rule
15(a)(1)(B), plaintiff filed his amended complaint on April 22, 2015. (Dkt. No. 13.)
The amended complaint contains the following counts against the following
combinations of defendants:
Count No.

Claim

Defendants

1

Fraud by Omission: Willful
failure to notify plaintiff of the
TeamHealth acquisition

Gregory Daniel

2

Fraud by Omission: Willful
failure to notify plaintiff of the
TeamHealth acquisition

5

Buffalo Emergency
Associates, L.L.P., Western
New York
Immediate Medical Care,
P.L.L.C., and Pulse
Occupational Medicine, L.L.C.

Plaintiff had filed a prior case with substantially the same claims. (See Case No. 13-CV-1153.)
Adopting a recommendation from Magistrate Judge Jeremiah McCarthy, Judge Arcara
dismissed the prior case for insufficient diversity of citizenship. As written, the complaint in the
prior case stated that plaintiff remained a partner in the defendant entities, meaning that each
side of the caption had at least one citizen of Tennessee.

19

3

4

5

6

7

8

9

10

Fraud by Omission: Willful
failure to notify plaintiff of the
TeamHealth acquisition
Common-law Conversion:
Dominion and/or interference
over plaintiff’s right to a 1%
interest in Exigence
Medical of Hornell, PLLC
Common-law Conversion:
Dominion and/or interference
over plaintiff’s right to a 1%
interest in Exigence
Medical of Binghamton, PLLC
Negligent Misrepresentation:
Representations about plaintiff’s
withdrawal that did not portray
any entities as subject to
possible acquisition
Breach of Fiduciary Duty:
Failure to inform a fellow partner
of negotiations for the
TrueHealth acquisition
Breach of Fiduciary Duty:
Failure to inform a fellow partner
of the loss of his 1% interest in
Exigence Medical of Hornell,
PLLC
Breach of Fiduciary Duty:
Failure to inform a fellow
member of negotiations for the
TrueHealth acquisition
Breach of Contract: Unapproved
loans across entities without
disclosure to partners; Failure to
purchase plaintiff’s ownership in
Multistate Holdings Partnership
based on a third-party valuation
as required Article VII(H)

20

Irving H. Levy and Joseph
DiVincenzo, Esq.
Gregory Daniel and Exigence
Medical of Hornell, PLLC

Gregory Daniel and Exigence
Medical of Binghamton, PLLC

Gregory F. Daniel, M.D., Irving
H. Levy, and Joseph
DiVincenzo, Esq.
Gregory F. Daniel, M.D., as an
individual and as CEO and
Managing Partner of Buffalo
Emergency Associates, LLP
Gregory F. Daniel, M.D., as an
individual and as majority
member of Exigence Medical
of Hornell, PLLC
Irving H. Levy

All Defendants

11

12

13

14

Breach of Contract: Failure to
provide allocations of
distributions based on Sharing
Ratio on a quarterly basis as
required by Section 8.1 of the
Amended and Restated Master
Partnership Agreement
Breach of Contract: Not
calculating and providing
distributions on a pro rata basis
during or after the contract, per
Article V of Amended and
Restated Operating Agreement
Breach of Contract: Failure to
give plaintiff notice that his
share was terminated, no
knowledge of signing a
document relinquishing the
interest, and absence of
requirement that a partner
work in a particular entity or any
other provision triggering
automatic termination
of his membership interest
Unjust Enrichment: Direct
benefit from plaintiff’s
uninformed withdrawal from the
Defendant entities named
in the Amended Complaint

6

Buffalo Emergency
Associates, L.L.P.

Western New York Immediate
Medical Care, L.L.C.

Exigence Medical of Hornell
P.L.L.C.

All defendants alleged to be
alter-egos of Multistate
Holdings Partnership 6

Exigence L.L.C. (Del.); Exigence Medical of Binghamton P.L.L.C.; Austin Immediate Care,
P.L.L.C.; Exigence Medical of New York, P.L.L.C.; Exigence of Fremont, L.L.C.; Exigence New
Jersey L.L.C. (N.J.); Exigence New York, L.L.C.; Nyamekye North America L.L.C. (formerly
Exigence North America L.L.C.); Exigence of Pennsylvania L.L.C.; Exigence of Bradford,
P.L.L.C.; Exigence of Sunbury, L.L.C.; Exigence Healthcare Solutions of Nevada L.L.C.;
Exigence Health Plans, Inc.; Lakeway Emergency Management Services, L.L.C.; Pulse
Occupational Medicine, L.L.C.; Exigence Arizona L.L.C.; Exigence Management Company, Inc.;
Exigence Hospitalist Medical Services of Western New York, PLLC; Exigence Hospitalist
Medical Services of Olean, PLLC; and Nyamekye Hospitalist Medical Services of Erie County,
PLLC.

21

15

16

17

Accounting: Plaintiff is entitled to
an accounting and valuation of
his ownership interests as
All defendants
prescribed in the various
operating or partnership
agreements
Buffalo Emergency
Associates, LLP, Exigence
Civil RICO: Violations of 18
Medical of Hornell, PLLC,
U.S.C. § 1962(c) by conducting
Multistate Holdings P’ship,
affairs of “Exigence” through a
Western New York Immediate
pattern of racketeering activity
Medical Care, LLC, Irving H.
as described in paragraphs
Levy, FMB Holdings, LLP,
200–217
Joseph DiVincenzo, and
Gregory F. Daniel, M.D.
Buffalo Emergency
Associates, LLP, Exigence
Civil RICO Conspiracy:
Medical of Hornell, PLLC,
Conspiracy to violate 18 U.S.C. Multistate Holdings P’ship,
§ 1962(c) through two or more
Western New York Immediate
predicate acts as described in
Medical Care, LLC, Irving H.
paragraphs 200–217
Levy, FMB Holdings, LLP,
Joseph DiVincenzo, and
Gregory F. Daniel, M.D.

H. The Pending Motions
In response to the amended complaint, defendants filed updated versions
of their motions to dismiss. (Dkt. Nos. 20, 21.) Defendants argue that Counts
Four, Five, Six, Seven, Eight, Nine, and 14 need to be dismissed because they
are time-barred. Relying on the effective dates in the exit agreements,
defendants argue that plaintiff completed his withdrawals no later than August 1,
2011. Since the counts in question carry a three-year limitations period, plaintiff
would have needed to file his original complaint by August 1, 2014 instead of
22

November 26, 2014. The conversion counts, Counts Four and Five, need to be
dismissed for the additional reason that they are improperly duplicative of the
breach of contract claim. With respect to Counts Seven, Eight, and Nine,
defendants argue that these breach of fiduciary duty claims are time-barred if
premised on something other than fraud and duplicative of Counts One, Two,
and Three if resting on fraud allegations. Defendants would have Count Six
dismissed because it also is untimely, if not based on fraud, and not cognizable if
based on fraud. To the extent that Count Six rests on fraud, defendants would
have it dismissed because New York law does not recognize misrepresentation
involving a contingent future event. Counts One, Two, and Three fail, according
to defendants, because of a lack of particularity and because New York law
recognizes out-of-pocket loss, not speculative gain. Plaintiff in Count Two also
does not allege a true fiduciary or agency relationship. Count 10 fails because it
does not describe specific damages that resulted from any breach and because
plaintiff did not provide the written notice of withdrawal that would have prompted
the obligations in the contractual provisions that he cited. Counts 10 through 13
have the additional problem that they name the entities created by the operating
or partnership agreements in question and not the individual partners or
members themselves. As for Count 14, defendants consider it too conclusory,
time-barred, and duplicative of the breach of contract claim. Finally, defendants

23

want Counts 16 and 17 dismissed for lack of specificity regarding predicate acts
and any sort of pattern of racketeering activity.
Plaintiff opposes defendants’ motions in all respects. Plaintiff argues that
he has pled with specificity how defendants defrauded him—they discussed and
then finalized their intent to sell to TrueHealth while he still had ownership rights,
and they let him finish his withdrawal process without having any idea how much
more valuable his ownership interests had become. Since corporate or
partnership entities act through individuals, plaintiff argues that the actions of the
individual defendants can be imputed to the entities. Plaintiff rejects any
application of the “out-of-pocket rule” by arguing that it comes into play only when
an alternative contractual bargain is indeterminate and speculative. Here,
according to plaintiff, defendants know exactly how much they received from
TrueHealth. The percentages of plaintiff’s ownership interests can be applied to
that dollar figure to determine the actual value of those interests. With respect to
conversion, plaintiff argues that the supposed loss of his 1% ownership interests
never came to his attention and never was an issue until defendants’ January 31,
2013 letter. Plaintiff thus uses January 1, 2013 as the accrual date for his
conversion claims and for at least some of his breach of contract claims. Plaintiff
argues that his conversion claims are not duplicative of his breach of contract
claims because they allow for punitive damages, which he included as a demand
in his amended complaint. Plaintiff supports his negligent misrepresentation
24

claims by arguing not that defendants made a fraudulent promise but that they
fraudulently concealed or omitted information that they had a duty to disclose.
With respect to breach of fiduciary duty, plaintiff argues that New York courts
allow fraud and breach of fiduciary claims together where the breach of fiduciary
duty claims are based on allegations of fraud. Plaintiff also asserts, in the
alternative and contrary to defendants’ objections, that he is allowed to present
breach of fiduciary duty and fraud as a matter of alternative pleading. As for
breach of contract, plaintiff argues that he has pled that the individual defendants
failed to conduct a third-party valuation and made unapproved secret loans
across different entities. Plaintiff also has pled intentional alterations in quarterly
distributions that violated the operating or partnership agreements in question;
these alterations, according to plaintiff, coincide with defendants’ admissions that
alleged problems with work shifts gave them a motive to reduce his
compensation. Plaintiff would have the conduct of the individuals imputed to the
entities because they are very closely related. Plaintiff would preserve his unjust
enrichment claim as an alternative pleading. With respect to Count 15, plaintiff
notes that it is the only count that defendants have not tried to dismiss. Plaintiff
highlights that defendants concede the need for an accounting, if only as part of
a strategy to ward off any other form of relief. Finally, plaintiff stands by his
racketeering counts by noting that he has pled a complex scheme to shift assets

25

freely between entities, all the while keeping him and other partners in the dark
about the value of their ownership interests.
III.

DISCUSSION
A. Motions to Dismiss Generally
The general standard for claims and Rule 12 (b)(6) motions is well known.

“A pleading that states a claim for relief must contain . . . a short and plain
statement of the claim showing that the pleader is entitled to relief.” FRCP
8(a)(2). “‘A short and plain statement of the claim’ does not mean ‘a short and
plain statement of the eventual jury charge for that claim’ or ‘a short and plain
recitation of the legal elements for that claim.’ FRCP 8(a)(2) requires a plaintiff
to state, in concise but plausible fashion, what he currently thinks a defendant
actually did to him, subject to revision during later discovery.” Smith v. Campbell,
No. 11-CV-540A, 2011 WL 4498797, at *3 (W.D.N.Y. Sept. 27, 2011) (Arcara, J.)
(citation omitted). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face. 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. The plausibility standard is not
akin to a probability requirement, but it asks for more than a sheer possibility that
a defendant has acted unlawfully. Where a complaint pleads facts that are
merely consistent with a defendant’s liability, it stops short of the line between
26

possibility and plausibility of entitlement to relief.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (internal quotation marks and citations omitted). Courts assess
Rule 12(b)(6) motions “accepting all factual allegations in the complaint as true,
and drawing all reasonable inferences in the plaintiff’s favor.” Peter F. Gaito
Architecture, LLC v. Simone Dev. Corp., 602 F.3d 57, 61 (2d Cir. 2010) (internal
quotation marks and citation omitted). “Simply stated, the question under Rule
12(b)(6) is whether the facts supporting the claims, if established, create legally
cognizable theories of recovery.” Cole-Hoover v. Shinseki, No. 10-CV-669, 2011
WL 1793256, at *3 (W.D.N.Y. May 9, 2011) (Arcara, J.) (internal quotation marks
and citation omitted).
As a preliminary matter, the Court must decide what documents it will
consider when addressing the pending motions, beyond the amended complaint
itself. “In considering a motion to dismiss for failure to state a claim pursuant to
Rule 12(b)(6), a district court may consider the facts alleged in the complaint,
documents attached to the complaint as exhibits, and documents incorporated by
reference in the complaint. Where a document is not incorporated by reference,
the court may neverless consider it where the complaint relies heavily upon its
terms and effect, thereby rendering the document integral to the complaint.
However, even if a document is integral to the complaint, it must be clear on the
record that no dispute exists regarding the authenticity or accuracy of the
document. It must also be clear that there exist no material disputed issues of
27

fact regarding the relevance of the document.” DiFolco v. MSNBC Cable L.L.C.,
622 F.3d 104, 111 (2d Cir. 2010) (internal quotation marks and citations omitted).
Here, a number of documents qualify for consideration. The amended
complaint and its claims refer, directly or indirectly, to several documents:
• The Amended and Restated Master Partnership Agreement of Buffalo
Emergency Associates L.L.P., effective December 31, 2009; this
document also was attached to the amended complaint as Exhibit D (Dkt.
No. 13-4);
• The Operating Agreement for Multistate Holdings LLC, effective August 3,
2004; this document also was attached to the amended complaint as part
of Exhibit I (Dkt. No. 13-9);
• The Partnership Agreement for Multistate Holdings Partnership, dated
December 15, 2004 (Dkt. No. 21-3);
• The Operating Agreement for Exigence Medical of Hornell PLLC, effective
June 3, 2009 (Dkt. No. 21-4);
• The Operating Agreement for Exigence Medical of Binghamton PLLC,
effective September 1, 2006 (Dkt. No. 21-5);
• The Amended and Restated Operating Agreement for Western New York
Immediate Medical Care, LLC, amended January 1, 2009 (Dkt. No. 21-6);
and
• The Operating Agreement for Pulse Occupational Medicine PLLC,
effective April 7, 2006 (Dkt. No. 38-2).

28

Plaintiff attached several other documents to the amended complaint: 7
• Correspondence from plaintiff’s counsel to defendants’ counsel, dated
November 30, 2012, attached as Exhibit A (Dkt. No. 13-1);
• The exit agreement for Multistate Holdings Partnership, signed by plaintiff
on April 12, 2011 and by Gregory Daniel on April 29, 2011, attached as
part of Exhibit C (Dkt. No. 13-3 at 1–2);
• The exit agreement for Western New York Immediate Medical Care, PLLC
and Pulse Occupational Medicine, PLLC, dated August 1, 2011 with
undated signatures, attached as part of Exhibit C (Dkt. No. 13-3 at 4–5)
and as Exhibit E (Dkt. No. 13-5);
• The exit agreement for Buffalo Emergency Associates, LLP, dated August
1, 2011 with undated signatures, attached as part of Exhibit C (Dkt. No. 133 at 6–7);
• Letters from 2002 between Gregory Daniel and an accountant concerning
some financial transactions involving Buffalo Emergency Associates, LLP,
attached as Exhibit G (Dkt. No. 13-7); and
• Correspondence from defendants’ counsel to plaintiff’s counsel, dated
January 31, 2013, attached as Exhibit H (Dkt. No. 13-8).
Together, these documents go to the heart of the allegations that plaintiff makes
in his amended complaint. No party has disputed that the copies of these
documents appearing in the record are authentic. The parties also have raised
no dispute as to the relevance of any of these documents for purposes of the
pending motions. If the Court were to assess the merits of the case now then the
parties almost certainly would want to add other correspondence or testimony to
7

The Court has disregarded Exhibit F to the amended complaint (Dkt. No. 13-6), which appears
to be an excerpt of a transcript from an oral argument that occurred in state court. Without a full
transcript, testimony under oath, the resulting decision from state court, or any other indicia of
reliability or consensus on the substance, this excerpt is tantamount to plaintiff saying, “Look,
here are three pages of something or other that sound like what I’m saying.” Whatever
evidentiary value the excerpt might have in the future, the Court cannot do anything with it now.

29

place these documents in context. No one, however, disputes that the
documents are relevant to whether plaintiff has beliefs and allegations that cross
the threshold as legally cognizable. The Court thus will consider all of the
documents listed above as it reviews the arguments in the parties’ motion
papers.
B. Plaintiff’s Allegations Against Alter-Ego Entities
There is another issue that the Court needs to address before examining
any specific counts in the amended complaint. The issue is whether plaintiff has
pled enough information against any entity that he did not own directly. By the
Court’s count, plaintiff lists 19 defendants in paragraph 182(c) of the amended
complaint that he did not describe with a specific ownership interest:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Exigence L.L.C. (Del.);
Austin Immediate Care, P.L.L.C.;
Exigence Medical of New York, P.L.L.C.;
Exigence of Fremont, L.L.C.;
Exigence New Jersey L.L.C. (N.J.);
Exigence New York, L.L.C.;
Nyamekye North America L.L.C. (formerly Exigence North America L.L.C.);
Exigence Pennsylvania L.L.C.;
Exigence of Bradford, P.L.L.C.;
Exigence of Sunbury, L.L.C.;
Exigence Healthcare Solutions of Nevada L.L.C.;
Exigence Health Plan, Inc.;
Lakeway Emergency Management Services, L.L.C.;
Exigence Arizona L.L.C.;
Exigence Management Company, Inc.;
Exigence Hospitalist Medical Services of Western New York, PLLC;
Exigence Hospitalist Medical Services of Olean, PLLC;
30

• Nyamekye Hospitalist Medical Services of Erie County, PLLC; and
• FMB Holdings, LLP.
(Dkt. No. 13 at 29–30.) Plaintiff describes these defendants as “wholly-controlled
alter egos of Buffalo Emergency Associates L.L.P., Multistate Holdings
Partnership, and Western New York Immediate Medical Care, L.L.C.” (Id. at 29.)
To support his assertion, plaintiff then uses the rest of paragraph 182 to describe
why, upon information and belief, he believes that all the other defendants are
alter egos. “A single, undivided, office space served as the management office
for all of the entities. The above entities were collectively referred to by
Defendants as ‘The Exigence Group.’ An early 2012 press release from Western
New York Immediate Medical Care, L.L.C., stated: ‘The Exigence Group
manages over 600,000 patient visits annually, including 118,000 urgent care
visits in 2011.’” (Id. at 30.) At another point in the amended complaint, plaintiff
makes additional assertions upon information and belief to support alter-ego
liability:
• Though Multistate Holdings L.L.C. is registered in Delaware, its only
member is Multistate Holdings Partnership, with 99% of the membership
interest.
• Upon information and belief, each of the Defendants . . . share a common
set of officers, partners and staff.
• The officers include [Gregory] Daniel, [Irving] Levy and [Joseph]
DiVincenzo.

31

• The Defendants share a common principal place of business at one John
James Audubon Parkway, and a common quarterly meeting in an
undivided office space.
• Operating agreements for the other Defendants named in this Count were
not provided upon the Plaintiff’s request made to a single outside counsel
who is representing all of the entities at once in violation of the Partnership
Agreement.
• Upon information and belief, officers and entities made unapproved, secret
loans of at least $3 million to other entities at the sole discretion of Daniel.
Those loans were not disclosed to the partners of Multistate Holdings
Partnership, in contravention of the Partnership Agreement.
(Id. at 49 ¶¶ 320–322.) Plaintiff’s RICO case statement (Dkt. No. 31) adds no
further information about the alter-ego defendants.
Plaintiff’s assertions, without more, likely would not suffice to bring these
19 defendants of indeterminate ownership to trial, let alone to assess a judgment
against them. For now, though, the question is whether plaintiff has asserted
enough to satisfy Rule 12(b). The Court has not found controlling case law
directly on point, but analogous cases offer some guidance as to what plaintiff
needed to plead to assert alter-ego liability. For example, some cases involving
allegations against alter-ego entities invoke the related principle of piercing the
corporate veil. “Generally, however, piercing the corporate veil requires a
showing that: (1) the owners exercised complete domination of the corporation in
respect to the transaction attacked; and (2) that such domination was used to
commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury.
While complete domination of the corporation is the key to piercing the corporate
32

veil, especially when the owners use the corporation as a mere device to further
their personal rather than the corporate business, such domination, standing
alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is
required.” Morris v. N.Y.S. Dep’t of Taxation & Fin., 623 N.E.2d 1157, 1160–61
(N.Y. 1993) (citations omitted); cf. Baby Phat Holding Co., LLC v. Kellwood Co.,
997 N.Y.S.2d 67, 70 (App. Div. 2014) (“Allegations that corporate funds were
purposefully diverted to make it judgment proof or that a corporation was
dissolved without making appropriate reserves for contingent liabilities are
sufficient to satisfy the pleading requirement of wrongdoing which is necessary to
pierce the corporate veil on an alter-ego theory.”) (citation omitted). Even a
successful pleading of dominion and control will not suffice to keep an alleged
alter-ego defendant beyond Rule 12 motions; plaintiffs asserting alter-ego liability
also have to assert that the alter egos did something fraudulent or otherwise
harmful, by themselves or as orchestrated by other defendants. Cf. Se. Texas
Inns, Inc. v. Prime Hosp. Corp., 462 F.3d 666, 679 (6th Cir. 2006) (affirming a
dismissal of claims of alter-ego liability where “conclusory allegations, couched in
terms of a contractual breach, are not tantamount to the fraud or injustice
required to pierce the corporate veil”); see also Mincey v. World Sav. Bank, FSB,
614 F. Supp. 2d 610, 622–23 (D.S.C. 2008) (“Golden West and Wachovia cannot
be held liable for World’s actions simply because Golden West is World’s parent,
and Wachovia is Golden West’s parent. It is clear from Plaintiffs’ Amended
33

Complaint that they recognize as much because they allege ‘each of the
Defendants sued herein acted through and was the agent, servant, employer,
joint venturer, partner, division, owner, subsidiary, alias, assignee and/or alterego of each of the remaining Defendants and was at all times acting within the
purpose and scope of such agency, servitude, joint venture, division, ownership,
subsidiary, alias, assignment, alter-ego, partnership or employment and with the
authority, consent, approval and ratification of each remaining Defendant.’ (Am.
Compl. ¶ 11.) Such an allegation is a kitchen-sink approach to the task of
attempting to hold Golden West and Wachovia liable for actions of WSB.”).
Here, plaintiff’s assertions fall short of what he needed to plead to assert
alter-ego liability. In the amended complaint, plaintiff asserts that any defendants
with whom he did not have a direct ownership interest nonetheless had the same
principal place of business, officers, and legal counsel. Plaintiff further has
asserted that at least some defendants are near-exclusive owners of other
defendants. These assertions are enough, for Rule 12 purposes, to show that
the defendants with whom plaintiff had a direct ownership interest exercised
dominion and control over any other defendants. Nowhere in the amended
complaint or RICO case statement, however, does plaintiff explain what any of
the alter-ego defendants did to him. Some or all of the alter-ego defendants
might be implicated in plaintiff’s allegations about unapproved loans and asset
transfers, but no confirming information currently seems to exist. Alternatively,
34

plaintiff also fails to explain how any of the individual defendants or the
defendants that he partly owns manipulated the alter-ego defendants in ways
that caused him damages. If subsequent discovery uncovers any such
manipulation then plaintiff should be allowed to bring specific alter-ego
defendants back into the case. For now, though, the Court recommends granting
the defense motions to dismiss, without prejudice, all 19 defendants listed above.
C. When was plaintiff’s last day as an owner?
The Court has one more issue to address before moving to the counts in
the amended complaint: the exact date when each of plaintiff’s ownership
interests ended. When plaintiff’s ownership interests ended—if they have ended
in accordance with the relevant operating or partnership agreements—affects
nearly every count in the amended complaint. The dates of termination would
resolve the defense arguments about the expiration of limitations periods. The
dates of termination also would reflect compliance, non-compliance, or waiver
with respect to the relevant operating or partnership agreements. The dates of
termination additionally could be compared to what plaintiff has pled about the
timeline for the TeamHealth acquisition; as the Court hinted in its request for
supplemental briefing, an overlap of ownership interests and negotiations for
acquisition could strengthen plaintiff’s arguments that defendants violated a
fiduciary duty or contractual obligation to keep him informed. The importance of

35

the termination dates thus requires the Court to take a closer look at what
happened with each of plaintiff’s ownership interests.
i.

Buffalo Emergency Associates, L.L.P.

Under Section 10.1 of the Amended and Restated Master Partnership
Agreement, “[a]ny General Partner shall have the right to withdraw from the
Partnership provided written notice of intent to withdraw is given to the other
Original and General Partners at the offices of the Partnership ninety (90) days in
advance.” (Dkt. No. 13-4 at 34.) Stated inversely, Section 10.1 means that a
General Partner has no right to withdraw unless he satisfies four conditions: (1)
he provides notice in writing; (2) he provides that written notice to all of the other
Original and General Partners; (3) he sends the written notice to all of the other
Original and General Partners at the Partnership offices; and (4) the notice
occurs at least 90 days before any withdrawal formally takes effect. Paragraph
185 of the amended complaint notwithstanding, 8 plaintiff never provided any
written notice. Through their January 31, 2013 letter, defendants agreed that
plaintiff never provided any written notice. (See Dkt. No. 13-8 at 6.) Cf. Amidax
Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 147 (2d Cir. 2011) (“[W]here a
conclusory allegation in the complaint is contradicted by a document attached to
the complaint, the document controls and the allegation is not accepted as true.”)
(citation omitted). The exit agreement of August 1, 2011 did not waive the written
8

“In December 2010 the Plaintiff gave proper notice to Chief Financial Officer Irving H. Levy that
he sought to withdraw from ‘Exigence.’” (Dkt. No. 13 at 30 ¶ 185.)

36

notice requirement; additionally, there is no evidence in the record that any other
Original or General Partner (see Dkt. No. 13-4 at 46–47) ever signed or even
knew about the exit agreement. The exit agreement also had no date for
plaintiff’s signature. If August 1, 2011 had been intended as a retroactive date
then plaintiff chronologically would have been an owner past that date, until he
signed.
Further non-compliance with the Master Partnership Agreement came from
the method of payment that defendants attempted under the exit agreement.
Under Section 13.3, an amount owed to a withdrawing General Partner “shall be
paid in twenty-four (24) equal monthly installments commencing March 1 of the
year following year of termination, withdrawal, retirement, expulsion or death
occurs [sic].” (Dkt. No. 13-4 at 37.) Despite these provisions, defendants have
admitted to making four payments: $31,893.14 in December of 2011;
$214,296.86 in May of 2011; $23,000.00 in February of 2012; and $23,000.00 in
March of 2012. (Dkt. No. 13-8 at 6.) Defendants claimed to have calculated
these payments based on the value of plaintiff’s interests as of August 1, 2011.
This schedule did not follow what would have been the required schedule under
the Master Partnership Agreement. Defendants’ payment schedule has the
additional problem that it contradicts the purported termination date in the exit
agreement. If plaintiff ceased to be a General Partner as of August 1, 2011 then
why did defendants pay him his largest lump sum three months earlier? On top
37

of that problem, nothing in the record addresses whatever became of plaintiff’s
continuing interest as a Physician Partner. (See Dkt. No. 13-3 at 7.) Defendants
cannot possibly have understood plaintiff’s ownership interest to have ended as
of August 1, 2011, the day after his purported last day of work, if plaintiff
continued after that date as a Physician Partner.
In the face of internal contradictions and non-compliance with the Master
Partnership Agreement, and for Rule 12 purposes that can be revisited following
discovery, adhering to the amended complaint and the New York Partnership
Law is the better course. Plaintiff has pled that defendants were sending him
money for various ownership interests as late as May 1, 2012. No payments
occurred after that date. Under Rule 12, plaintiff is entitled to the assumption that
defendants completely moved on without him as of May 1, 2012. Any noncompliant attempt to have eliminated plaintiff as a General Partner or Physician
Partner before then, through exit agreements or payments, was subordinate to
the statutory directive that “[a] partner ceases to be a partner and to have the
power to exercise any rights or powers of a partner upon assignment of all of his
partnership interest. Unless otherwise provided in the partnership agreement,
the pledge of, or the granting of a security interest, lien or other encumbrance in
or against, any or all of the partnership interest of a partner shall not cause the
partner to cease to be a partner or to have the power to exercise any rights or
powers of a partner.” N.Y. P’ship Law § 121-702(a)(4) (emphasis added); see
38

also N.Y. P’ship Law § 121-402 (defining which events have to occur before “[a]
person ceases to be a general partner of a limited partnership”). For purposes of
Rule 12 and the pending motions, therefore, plaintiff still had some sort of
ownership interest in Buffalo Emergency Associates, L.L.P. at least through May
1, 2012.
ii.

Western New York Immediate Medical Care PLLC

Under Section 12.1 of the Amended and Restated Operating Agreement,
“[a] Member shall cease to be a Member upon . . . the withdrawal of the Member
in accordance with the provisions of the Act [i.e., the New York Limited Liability
Company Law].” (Dkt. No. 21-6 at 31.) A member’s right to withdraw was
limited. “The Voluntary Withdrawal of a Member shall be permitted with the
written consent of two-thirds (2/3) in Interest of the remaining Members holding
the same class of membership or upon at least sixty (60) days’ prior notice to the
Company.” (Id.) The limitation in the Operating Agreement coincided with a
statutory limitation. “A member may withdraw as a member of a limited liability
company only at the time or upon the happening of events specified in the
operating agreement and in accordance with the operating agreement.” N.Y. Ltd.
Liab. Co. Law § 606(a).
Based on the pleadings and the available documentary evidence, and
again for Rule 12 purposes, the circumstances of plaintiff’s separation from this
entity fell short of the contractual and statutory standard. Plaintiff never provided
39

the required 60-day notice. Defendants appear not to have had the authority to
waive the requirement and, in any event, showed no intention of waiving it when
they emphasized the point in the January 31, 2013 letter. (Dkt. No. 13-8 at 7.)
The record contains no indication of a two-thirds approval of other members.
Defendants also did not follow the schedule of payments set forth in the
Operating Agreement. Under Section 12.4(a), plaintiff should have received 24
equal installments beginning on March 1 of the year following the date when
withdrawal occurred. Instead, and possibly motivated by a desire to clear out the
obligation before the TrueHealth acquisition, plaintiff received one payment in
December 2011 and what defendants believed to be the balance owed in May
2012. The Court cannot rule out that plaintiff signed the exit agreement after
August 1, 2011, since his signature was undated. Defendants’ non-compliance
with multiple provisions of the Operating Agreement and the Limited Liability
Company Law means that, this early in the case, the Court cannot accept August
1, 2011 as a termination date based on the exit agreement. Plaintiff has pled
that he maintained some sort of ownership interest at least through May 1, 2012.
Subject to further developments during discovery, he is entitled to that
assumption.
iii.

Pulse Occupational Medicine PLLC

This entity also falls under the Limited Liability Company Law. Section
606(a) applies equally here. As for the Operating Agreement, Section 10.1
40

states that “no Member may withdraw from the Company at any time prior to the
dissolution and winding up of the Company, except in accordance with the
provisions of this Article X.” (Dkt. No. 38-2 at 16.) Section 10.2 then lists five
events that would prompt the termination of the membership interest. None of
the events apply here; the events concern death, disqualification, retirement,
permanent disability, incompetency, and bankruptcy. Section 10.3 covers how
payment would be made when an event in Section 10.2 occurs. In short, the
Limited Liability Company Law and Article X of the Operating Agreement, under
the circumstances of this case, completely prohibited plaintiff’s withdrawal.
Nothing in the Operating Agreement appears to have authorized defendants to
attempt to cut ties with plaintiff by way of an exit agreement with an undated
signature or by any schedule of payment apart from dissolution. Therefore, for
Rule 12 purposes that can be revisited after discovery, the Court must accept
plaintiff’s pleadings indicating that he maintained some sort of ownership interest
in this entity—at least through May 1, 2012 and possibly to the present time.
iv.

Multistate Holdings Partnership

As a general partnership, this entity falls under the Partnership Law.
Partnership Law § 121-702(a)(4) and § 121-402 thus apply. As for the
Partnership Agreement, Article VII sets restrictions on the sale or transfer of
partnership interests. “Each Partner hereby expressly covenants and agrees that
he will not sell, assign, mortgage, pledge, encumber or otherwise transfer or
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dispose of any of his Partnership Interests (referred to as “Units” in this Article
VII), except in accordance with the provisions of this Agreement. The restrictions
imposed by this Agreement shall apply to involuntary as well as voluntary
transfers, and any transfer made or attempted to be made in contravention of the
terms of this Agreement shall be void and of no effect.” (Dkt. No. 21-3 at 23
(emphasis added).) Any attempt at sale or transfer of a partnership interest
requires written notice to the other partners and to the partnership. (See id.)
Article VII(G)(1) links partner status to “employment or contractor status” with
Buffalo Emergency Associates, LLP and states that termination of employment or
contractor status ends partner status with this entity. (See id. at 30.) Article
VII(G)(4) states that “[n]otwithstanding any provision of this Agreement, if a
Partner ceases to be a Partner of the Partnership, under any provision of this
Agreement, his position as Managing Partner and any common-law employment
by the Partnership, and all his rights under this Agreement, shall terminate,
effective immediately as of the date he ceases to be a Partner.” (Id. at 31.)
Apart from the sections quoted above, the Partnership Agreement does not have
a withdrawal provision per se.
As with the entities discussed previously, the way in which defendants
handled notice clouds the issue of when plaintiff ceased to be a partner. Since
the Partnership Agreement did not have its own section explicitly covering
withdrawals, any purported withdrawal by plaintiff would have fallen under the
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more general provisions for sale or transfer. The general provisions required an
advance written notice to the other partners that did not happen here. Under the
terms of Article VII, any attempted withdrawal by plaintiff thus was null and void.
Partnership Law § 121-702(a)(4) also would apply to say that plaintiff never
assigned all of his partnership interest. Whether the payments that plaintiff
received could constitute an accord and satisfaction or some similar doctrine is
unclear at this time and will have to await more factual developments during
discovery. For Rule 12 purposes, plaintiff has pled that he retained some
residual partnership interest in Multistate Holdings Partnership at least through
May 1, 2012, and he is entitled to that assumption. Neither the Partnership Law
or any documentary evidence requires a different conclusion for now.
v.

Exigence Medical of Hornell PLLC and Exigence Medical of
Binghamton PLLC

These entities fall under the Limited Liability Company Law and have
essentially identical operating agreements. Section 6.3 of both agreements
restrict transfer of ownership interests without first offering the interests to the
company and other voting members by way of written notice. (Dkt. No. 21-4 at
15; Dkt. No. 21-5 at 15.) Under Section 10.1 of both agreements, any notice that
affects any provision of the agreements has to be in writing. (Dkt. No. 21-4 at 21;
Dkt. No. 21-5 at 21.) Since the agreements do not have an explicit withdrawal
provision, Section 606(a) of the Limited Liability Company Law defaults to the
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prohibition that “a member may not withdraw from a limited liability company prior
to the dissolution and winding up of the limited liability company.”
Plaintiff’s status with these two entities is far too ambiguous to resolve by
way of motion to dismiss. The parties agree that plaintiff was part of a collective
1% ownership interest for each entity. Plaintiff never provided written notice of
an intent to transfer or otherwise to relinquish that interest. The operating
agreements did not provide for means of withdrawal apart from dissolution and
winding up. Defendants have not paid plaintiff for either of these ownership
interests. In their January 31, 2013 letter, defendants asserted that these entities
retained no capital or equity and that plaintiff became ineligible to maintain his
ownership interests when he stopped working shifts. Defendants’ assertions
may or may not be true but are fact-intensive and must await discovery. For
now, under Rule 12, plaintiff asserted in his amended complaint that he retains
some sort of ownership interest in these entities. No uncontested documentary
evidence says otherwise. Subject to further developments in the case, plaintiff
has shown plausibly that he in fact had some kind of ownership interest in these
entities at least through May 1, 2012.
D. Effect of May 1, 2012 (or later) Ownership Date on Plaintiff’s
Claims
Plaintiff’s ability to plead some kind of continued ownership interest in his
entities at least through May 1, 2012 is critical because it reshapes the contours
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of his amended complaint. All of plaintiff’s claims become timely. Out of 17
counts in the amended complaint, the first 14 ultimately reduce to a claim that
plaintiff’s ownership interests jumped in value after October 2011, when
defendants allegedly finalized their intent to sell at least some of the entities to
TrueHealth. Every operating or partnership agreement in question contains
some kind of provision requiring the respective entities to assess the value of an
outgoing ownership interest as of the date of formal withdrawal. If the valuation
simply occurs as of May 1, 2012 instead of August 1, 2011 then the valuation
process should capture any increase in value that plaintiff has alleged. For this
reason, the Court finds not only that plaintiff has plausibly stated his claims for
breach of contract but also that the breach of contract claims are capable of
providing him full relief. The claims for fraud by omission, common-law
conversion, negligent misrepresentation, and breach of fiduciary duty might
provide context for the breach of contract but do not allege any actionable
conduct that was collateral to or extraneous to the contractual obligations under
the various operating or partnership agreements. See Rocanova v. Equitable
Life Assur. Soc. of U.S., 634 N.E.2d 940, 944 (N.Y. 1994) (assenting to the
principle that “a contract action cannot be converted to one for fraud merely by
alleging that the contracting party did not intend to meet its contractual
obligations”); Coppola v. Applied Elec. Corp., 732 N.Y.S.2d 402, 403 (App. Div.
2001) (“Assuming the truth of plaintiff’s allegations and according him every
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possible favorable inference to determine only whether the facts alleged fit within
any cognizable legal theory, it is clear that the claimed fraud was not collateral or
extraneous to the contract, did not allege any damages, including those for
foregone opportunities, that would not be recoverable under a contract measure
of damages, and failed to plead a breach of duty separate from a breach of the
contract.”) (citations omitted); Big Apple Car, Inc. v. City of N.Y., 650 N.Y.S.2d
730, 732 (App. Div. 1996) (“Plaintiff may maintain causes of action for breach of
contract and for an account stated for the services performed under those
contracts, but it may not simultaneously pursue causes of action for fraud in the
inducement to enter into those contracts.”) (citations omitted); see also Balta v.
Ayco Co., LP, 626 F. Supp. 2d 347, 361 (W.D.N.Y. 2009) (Siragusa, J.) (“Any
fiduciary duties allegedly breached by Defendant arose, expressly or impliedly,
under the contract, and the parties had no relationship of trust apart from their
contractual relationship. Whether viewed as a failure to act prudently or a failure
to disclose information, the alleged breach of fiduciary duty boils down to
Defendant’s failure to provide good investment advice, which was its primary
obligation under the contract. Accordingly, Defendant is entitled to summary
judgment on the fiduciary duty claims. For the same reasons, Plaintiffs’
constructive fraud claims are duplicative of the breach of contract claims, since
they are based on the alleged breach of the same fiduciary duties, which arose,

46

expressly or impliedly, from the parties’ contract.”) (citation omitted). Counts One
through Nine and 14 thus are superfluous compared to Counts 10 through 13.
One other argument from Attorney Sullivan’s defendants warrants a brief
comment. The argument is that plaintiff cannot accuse the entities of breach of
the partnership or operating agreements because they “are not parties to those
agreements. The individual partners or members are. An entity which is created
by an operating or partnership agreement cannot be in breach of that agreement.
Rather, an action for breach of an operating or partnership agreement is only
properly brought against the individual partners or members who signed the
agreement.” (Dkt. No. 20-3 at 17.) Plaintiff counters that he “alleges sufficient
facts to show that Defendants are not separate and distinct entities but rather a
conglomerate of shell entities controlled by a small group of individuals and/or
entities. The table in Plaintiff’s Declaration In Opposition summarizes the factual
allegations contained in the Amended Complaint and helps to illustrate the
interconnectivity of the Defendants. In sum, twenty one (21) entities have the
same princip[a]l place of business; Gregory Daniel is listed as either registered
agent or member of ten (10) entities; Joseph DiVincenzo is the officer of
‘Exigence’ and Multistate Holdings Partnership; FMG Holdings, L.L.P. is an alterego of Irving Levy and member of Multistate Holdings Partnership.” (Dkt. No. 26
at 24.) Depending on how the facts of the case develop during discovery, both
sides could be right. A partnership or limited liability company with an identity
47

distinct from its partners or members likely cannot be sued for breach of the
agreement that created it, assuming that the agreement does not somehow give
the created entity the responsibility to abide by its provisions. See Cordts-Auth v.
Crunk, LLC, 815 F. Supp. 2d 778, 798 (S.D.N.Y. 2011); Purchase Partners II,
LLC v. Max Capital Mgmt. Corp., 19 Misc. 3d 1123(A), 862 N.Y.S.2d 817 (Sup.
Ct. 2008) (table case). In contrast, based on the authorities that the Court cited
in Section III(B) above, plaintiff successfully has pled that the entities that he
partly owned were alter egos of the individual defendants. Discovery eventually
will reveal exactly what relationship the individual defendants had with the
entities that plaintiff partly owned. Since the Court cannot define that relationship
from the pleadings and motion papers alone, the argument based on Cordts-Auth
and Purchase Partners is better saved for another day. The Court respectfully
rejects defendants’ argument but without prejudice to renewing it when
information from discovery can offer more guidance.
The Court thus recommends granting defendants’ motions to dismiss
Counts One through Nine, and Count 14, in their entirety. The Court
recommends denying the motions with respect to Counts 10 through 13, except
to dismiss without prejudice the 19 alter-ego defendants from Count 10 for the
reasons stated previously.

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E. Count 15: Demand for an Accounting
The Court’s discussion of Count 15 will be brief. The defendants
represented by Attorney Sullivan did not move to dismiss Count 15 at all. (See
generally Dkt. No. 20-3.) The defendants represented by then-Attorney Vilardo 9
made only the nominal opposition that “plaintiff is not entitled to this Court’s aid in
obtaining an accounting for the simple reason that the defendants are and
always have been willing to provide the plaintiff with access to information under
their control regarding his former interests in the Exigence Group.” (Dkt. No. 212 at 42.) Without a more substantive argument in favor of dismissal, and without
a motion seeking an accounting from plaintiff at this time, the Court is content to
let the count stand. To the extent that defendants’ motions seek dismissal of
Count 15, the Court recommends denying them. The Court recommends that
the denial be without prejudice to any party to make substantive arguments for or
against any future motion to compel an accounting.
F. Counts 16 and 17: Civil RICO
Finally, the Court will assess defendants’ motions to dismiss Counts 16
and 17, which allege civil violations of 18 U.S.C. § 1962(c) and (d). Plaintiff’s
RICO case statement (Dkt. No. 31) contains three categories of misconduct
attributed in some way to all defendants. Plaintiff asserts that defendants “made
fraudulent and material omissions of fact to Plaintiff by failing to disclose plans of
9

Now a District Judge with this Court.

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the sale of the Exigence Group when it was under a duty to do so (Pl. Amend.
Compl. ¶¶ 178, 219, 233-240, 247-254); took money from other named entities
within Exigence and made secret, unapproved loans of at least $3 million to other
entities within Exigence.” (Dkt. No. 31 at 4; see also id. at 2, 3, 5, 6, 7.) Plaintiff
also alleges a pattern of racketeering activity as described in paragraphs 200–
217 of the amended complaint. According to those paragraphs, defendants
began a scheme at least 13 years ago “to illegally reward certain individuals,
such as [Gregory] Daniel, more than others.” (Dkt. No. 13 at 32.) “Upon
information and belief, to effectuate these schemes, the Defendants illegally
reduced quarterly distributions of certain partners causing a disparity with other
partners of equal standing. Upon information and belief, to effectuate these
schemes, the Defendants coerced and controlled members, partners, and
employees by threat of economic harm, physical harm, and unwarranted legal
action. Defendants exploited that fear in order to induce the partners and
members to work additional hours, accept less money, cooperate, and not
question Defendants.” (Id. at 32–33.) Plaintiff included allegations that
defendants hid and moved money and paid at least one family member. For
jurisdictional purposes, plaintiff included the allegation that defendants advanced
their scheme of improper financial management, uneven payments, and
intimidation through use of telephones and the mails. Plaintiff listed the exit
agreements and defendants’ January 31, 2013 letter as predicate acts, along
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with the 2002 correspondence to and from an accountant regarding certain
financial transactions. (See Dkt. No. 13-7.) Finally, plaintiff asserted that the
pattern of racketeering activity and the enterprise were separate. Plaintiff labeled
as the enterprise all of the entities named as defendants in Counts 16 and 17.
According to plaintiff, “[t]he ‘usual and daily activities’ of the Enterprise is that of
the operation of and staffing of emergency room contracts and the operation of
urgent care clinics and the day to day business activities that relate to the
enterprise,” (Dkt. No. 31 at 14) activities that implicated different defendant
entities across state lines.
A review of the RICO standard is in order. “It shall be unlawful for any
person employed by or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity or collection of unlawful debt.” 18
U.S.C. § 1962(c). Section 1962(d) prohibits conspiracy to violate Section
1962(c). “‘[E]nterprise’ includes any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). “The
enterprise must be separate from the pattern of racketeering activity, and distinct
from the person conducting the affairs of the enterprise. Thus, RICO
requirements are most easily satisfied when the enterprise is a formal legal
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entity.” First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 173 (2d
Cir. 2004) (citations omitted). The RICO standard “further requires that a nexus
exist between the enterprise and the racketeering activity that is being
conducted.” Id. at 174 (citations omitted). A pattern of racketeering activity
“requires at least two acts of racketeering activity, one of which occurred after the
effective date of this chapter and the last of which occurred within ten years
(excluding any period of imprisonment) after the commission of a prior act of
racketeering activity.” 18 U.S.C. § 1961(5). The various statutory provisions
coalesce into seven elements that plaintiff must plead: “(1) that the defendant[s]
(2) through the commission of two or more acts (3) constituting a ‘pattern’ (4) of
‘racketeering activity’ (5) directly or indirectly invest[] in, or maintain[] an interest
in, or participate[] in (6) an ‘enterprise’ (7) the activities of which affect interstate
or foreign commerce.” Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir.
1983). Plaintiff has to plead any fraudulent predicate acts with the particularity
required by Rule 9(b). See First Capital, 385 F.3d at 178; Anatian v. Coutts Bank
(Switzerland) Ltd., 193 F.3d 85, 88 (2d Cir. 1999) (allegations that satisfy Rule
9(b) “must (1) specify the statements that the plaintiff contends were fraudulent,
(2) identify the speaker, (3) state where and when the statements were made,
and (4) explain why the statements were fraudulent”) (internal quotation marks
and citations omitted). “[T]o serve the purposes of Rule 9(b), we require plaintiffs
to allege facts that give rise to a strong inference of fraudulent intent. The
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requisite ‘strong inference’ of fraud may be established either (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.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124,
1128 (2d Cir. 1994) (citations omitted).
Here, plaintiff’s RICO allegations fall short in several ways. Any of the
allegations about withholding information, improper valuation stemming from the
withholding of information, and partners not being paid properly amount to
violations of the respective operating and partnership agreements. As with the
counts dismissed above, plaintiff can seek full monetary relief through his breach
of contract counts. Cf., e.g., Faryniarz v. Ramirez, 62 F. Supp. 3d 240, 254 (D.
Conn. 2014) (dismissing a RICO claim in part because it rested solely on failure
to perform written and oral agreements); Helios Int’l S.A.R.L. v. Cantamessa
USA, Inc., No. 12 CIV. 8205, 2013 WL 3943267, at *9 (S.D.N.Y. July 31, 2013)
(finding that a dispute about the extent of authority to manage jewelry
merchandise “supports causes of action for breach of contract and/or fiduciary
duty, rather than federal criminal fraud that was committed as part of a ‘broadbased’ criminal racketeering scheme”). As for the allegations about how
defendants “coerced and controlled members, partners, and employees” in
various ways, plaintiff does not provide specific instances. For example, plaintiff
perhaps could have provided specific times when he attempted to exercise his
53

rights to inspect books and records and faced direct retaliation in the form of a
subsequent profit draw that was unusually low. Cf., e.g., Rothberg v. Chloe
Foods Corp., No. CV-06-5712(CPS), 2007 WL 2128376, at *15 (E.D.N.Y. July
25, 2007) (citing specific instances of fraudulent UCC-1 financing statements and
what information was fraudulent); Ctr. Cadillac, Inc. v. Bank Leumi Trust Co. of
N.Y., 808 F. Supp. 213, 230 (S.D.N.Y. 1992) (“Although the claims with respect
to these Defendants are not as precise as they might be, the complaint does
allege some rather remarkable conduct on the part of these Defendants.
Plaintiffs claim that Garvey and Levine, after consulting with Simon by phone,
presented Plaintiffs with incomplete documents and blank signature pages and
fraudulently represented that the obligations incurred would be on the same
terms as prior loans. Plaintiffs also claim that they were induced to borrow
additional money in the first place based on Bank Leumi’s misrepresentations as
to the rate of interest that would be charged. Simon allegedly personally
benefitted from the scheme by using Plaintiffs’ debt obligations to pressure
Plaintiffs into selling him a new cadillac below cost. Plaintiffs also allege that
Bank Leumi repeatedly refused to provide them with regular statements
documenting the nature of their obligations, and as a result, they continued
making payments on the fraudulent obligations.”). More importantly, plaintiff
does not provide a single example of defendants either coercing and controlling
him or directly injuring him through the coercing and controlling of others. The
54

accountant correspondence might indicate some accounting irregularities that
occurred nearly 14 years ago but do not go nearly far enough to establish
scienter for fraud. Finally, the allegation about a family member of Gregory
Daniel receiving an improper financial benefit does not specify which family
member, what the benefit was, or when the event happened.
To be candid, the record comes closer to showing that a small physician
practice group grew too much and too quickly into a bewildering array of entities
that the original physicians lacked the time or the skill to keep under control.
Some physicians may have wound up unhappy, and the people in charge of the
various entities may have violated operating or partnership agreements in the
process. None of these problems, however, comes anywhere near the pleading
standard for racketeering. For these reasons, the Court recommends granting
defendants’ motions to dismiss Counts 16 and 17 in their entirety.
IV.

CONCLUSION
For all of the foregoing reasons, the Court respectfully recommends the

following actions for defendants’ motions (Dkt. Nos. 20, 21 superseding 7, 8) : 1)
denying the motions with respect to Count 11, 12, 13, and 15; 2) denying the
motions with respect to Count 10 for the individual defendants and for defendants
Buffalo Emergency Associates, L.L.P., Western New York Immediate Medical
Care PLLC, Pulse Occupational Medicine PLLC, Multistate Holdings
Partnership, Exigence Medical of Hornell PLLC, and Exigence Medical of
55

Binghamton PLLC; 3) granting the motions without prejudice with respect to
Count 10 for any other defendants; and 4) granting the motions with respect to all
other counts.
Per note 1 supra, the Court also recommends dismissing Exigence New
Jersey L.L.C. (N.Y.); Exigence, LP (Pa.); and Exigence L.L.C. (Pa.) from this
case.
V.

OBJECTIONS
A copy of this Report and Recommendation will be sent to counsel for the

parties by electronic filing on the date below. Any objections to this Report and
Recommendation must be electronically filed with the Clerk of the Court within 14
days. See 28 U.S.C. § 636(b)(1); FRCP 72. “As a rule, a party’s failure to object
to any purported error or omission in a magistrate judge’s report waives further
judicial review of the point.” Cephas v. Nash, 328 F.3d 98, 107 (2d Cir. 2003)
(citations omitted).

SO ORDERED.

DATED: January 19, 2016

__/s Hugh B. Scott______
__
HONORABLE HUGH B. SCOTT
UNITED STATES MAGISTRATE JUDGE

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