TUCKER, Chief Judge.
Presently before this Court is Defendants Saber Healthcare Group, Saber Healthcare Holdings, LLC, Bryn Mawr Healthcare Group, LLC (collectively, "Saber"), and BHG Aviv LLC's ("Aviv")
Plaintiff submits that this "action arises out of Defendants' breach of the parties'
Brighten at Bryn Mawr is the registered fictitious name of Chateau Senior Services, LLC, which formerly operated a nursing home at 956 Railroad Avenue, Bryn Mawr, Pennsylvania. Brighten at Ambler is the registered fictitious name of Ambler Senior Services, LLC, which formerly operated a nursing home at 32 South Bethlehem Pike, Ambler, Pennsylvania. Brighten at Bryn Mawr, Brighten at Ambler, and related entities (collectively, "Brighten") were all part of the Brighten Health Group. (Landenberger Dep. 39:4-10.)
On February 9, 2007, Brighten, as Lessee, and Aviv as Lessor, entered into a Master Lease. (Defs.' Ex. F, Master Lease.) Under the lease's terms, Brighten leased from Aviv the land, facilities, and personal property used to operate, inter alia, "a 160-bed nursing facility on land commonly known as
(Id. at D02376.)
The Master Lease included a provision, Article 36, for the transfer of operations upon termination of the lease. Article 36 provides, in relevant part:
(Id. at D02383-85.)
On August 20, 2008 Brighten filed a petition for relief under Chapter 11 of the United States Bankruptcy Code. On March 5, 2010, the United States Bankruptcy Court for the Eastern District of Pennsylvania approved a joint plan of reorganization for Brighten. As contemplated in the plan of reorganization, and effective March 26, 2010, Aviv entered into several agreements with Brighten as part of the joint plan of reorganization, including: (1) a Third Amendment to the Master Lease which introduced new terms and conditions to the prior lease arrangement; (2) a Term Loan Note in the original principal amount of $3,354,773, by Brighten and in favor of Aviv as lender; (3) a Revolving Loan Note in an amount not to exceed $900,000, by Brighten and in favor of Aviv as lender; (4) a Credit Agreement and Security Agreement which, among other things, provided Aviv a first-priority lien on all assets of Brighten; and (5)
The Operations Transfer Agreements
(Defs.' Ex. M. at D00478-49; Defs.' Ex. V at D00498-99.)
The Operations Transfer Agreements also outlined the allocation of revenues and expenses among the Operator and New Operator:
(Defs.' Ex. M at D00481-82; Defs.' Ex. V at D00501.)
Furthermore, the Operations Transfer Agreements explicitly provided for the assumption of liabilities:
(Id. at D00484-85; D00504-505.)
On March 29, 2010, Aviv recorded UCC financing statements perfecting its security interests in Brighten at Bryn Mawr and Brighten at Ambler. Consistent and contemporaneously with the above agreements related to the joint plan of reorganization, particularly the Credit and Security Agreement, Brighten established "lockbox" bank accounts that it owned, and into which its payments from private pay (i.e., non-government) healthcare insurers would be deposited. Brighten established similar accounts to receive government healthcare (i.e., Medicare and Medicaid) payments. A third-party accounts receivable servicer, Gemino Healthcare Finance, managed the lockbox accounts. Per the loan and credit agreements with Aviv, the balance of Brighten's receipts in the lockbox accounts would affect Brighten's ability to draw on the line of credit provided by Aviv, and the funds in the lockbox accounts
Plaintiff is a provider of speech, language, occupational, and physical therapy services. On August 1, 2010, Plaintiff entered into Therapy Services Agreements with Brighten at Bryn Mawr and Brighten at Ambler. The Agreements required payment sixty (60) days from the invoice date. Before entering into the Therapy Services Agreements with Brighten and providing therapy services for Brighten at the nursing homes, Plaintiff did not perform public records searches regarding Brighten, did not inquire about Brighten within the professional community, did not require a credit application from Brighten, and did not perform any research of Brighten's creditworthiness. Tender Touch submitted its invoices to Brighten at Bryn Mawr and Brighten at Ambler. The invoices indicated the months during which Plaintiff provided the service corresponding with the invoices.
On February 12, 2011, Craig M. Bernfield, Chairman CEO and President of Aviv REIT, Inc., sent an email to, among others, George Repchick, Saber's co-owner, confirming that Saber was "authorized to immediately begin operating and take control of the properties and operations." (Pl.'s Ex. F, Feb. 12, 2011 email.) On February 16, 2011, Aviv declared default against Brighten under the Master Lease (as amended), the Promissory Note, the Term Loan Note, the Revolving Loan Note, the Security Agreement, the Credit Agreement, and the related March 26, 2010 agreements.
Effective March 1, 2011, Brighten entered into a Management Agreement with Saber Management, Inc. ("Saber Management"). Aviv consented to the Agreement, as memorialized in Section 8.10 of the Agreement. (Defs.' Ex. R, Management Agreement, at D01995.) Pursuant to the Management Agreement, Saber Management would assume managerial responsibilities for the Bryn Mawr and Ambler nursing home facilities operated by Brighten. Unless earlier terminated, the Agreement term would expire on the date that Saber Management obtained, among other things, a license for the operation of both facilities. (Id. at D01989.). The Agreement explicitly provided that Saber Management "shall not, by entering into and performing this Agreement, assume or become liable for any of the existing or future obligations, liabilities, or debts of [Brighten] ... or the Facilities prior to the Effective Date of this Agreement." (Id. at D01988.) Saber Management was also given the "exclusive right and power to manage the Facilities" in its business judgment, including the authority to, inter alia,: (1) "[e]xpand, contract or otherwise adjust the operations and assets of the Facilities"; and (2) "[n]egotiate, execute or otherwise enter into, adjust, compromise or otherwise deal with, vendors, contracts, agreements and documents relating to the Facilities." (Id. at D01991.) Brighten had
Effective on March 1, 2011, the same day as the Management Agreement, Aviv and Saber entities including Ambler Health, LLC and Bryn Mawr, LLC, (as "New Lessees") entered into an Assignment and Assumption Agreement. (Pl.'s Ex. M, Assignment and Assumption Agreement.) Pursuant to the Agreement, Aviv, as "the owner of the real property and certain personal property" of the Brighten facilities, assigned all its right, title and interest in, to and under the Operations Transfer Agreements, the Power of Attorney, and the Consent to Transfer Licensed Nursing Home Facility to, inter alia, Ambler HealthCare Group, LLC and Bryn Mawr Healthcare Group, LLC. Specifically, the Agreement provided that:
(Id. at D02661.)
The parties dispute Saber's role vis-à-vis Brighten during Saber's alleged management period. William Weisberg, Saber's co-owner, testified that, as manager, Saber "functioned one hundred percent entirely on what [Brighten] ... had in place," and tried to rehire a vast majority of the staff once Saber transitioned to operator. (Defs.' Ex. S, 83:13-84:6.) Although Saber did hire Christine Landenberger, former Brighten CFO, none of the other officers or any directors of any Brighten entity are, or were, officers or directors of any Saber entity. Weisberg also testified that he was unaware of Saber receiving any compensation during its alleged management period. (Weisberg Dep. 72:23-73:1.) Landenberger testified that Saber, during its alleged management period, "would take over everything" regarding operations, and, from the financial standpoint, "directed the flow of how vendors were being paid or who was being paid." (Landenberger Dep. 33:16-34:12.) James
The process through which account funds were taken in and distributed during Saber's alleged management period is somewhat intricate. Defendants assert that, as manager, Saber received Brighten's recommendations regarding which of Brighten's vendors provided critical services such that their outstanding invoices should be given priority for payment. Specifically, Weisberg stated that Saber would receive the recommendations of Landenberger regarding which of Brighten's vendors "needed to be paid." (Weisberg Dep. 85:21-23.) He continued that he would take this information, "look at it and try to factor into priority basis," and then would provide this information to Aviv's representatives "since they ultimately controlled the lockbox accounts." (Id. at 85:25-86:4.) Weisberg also testified that although "it is fair to say" that he was one of the last people discussing payables, "[he] and Christine were both the voices" presenting requests to Aviv. (Id. at 89:11-18.) Saber would then allegedly review and revise the list of vendors, and submit it to Aviv for final approval of the draw on the Brighten line of credit necessary to fund disbursements. Landenberger also expounded upon this alleged payment process in her testimony:
(Landenberger Dep. 34:24-36:21.) Landenberger continued that she believed the next step after approval was that an email would be sent to Gemino authorizing the release of the funds into the Brighten Health Group account, and then the funds would be moved internally into the individual accounts for each facility. (Id. at 38:7-22.)
The parties dispute the amount due and owing to Plaintiff. It is undisputed that Brighten did not have sufficient funds to pay all of its vendors. Defendants allege that, despite the 60-day payment provision in its services contract, and the commencement of service in August, 2010, Plaintiff had never received a payment from Brighten prior to Saber's management period in March 2011. However, Plaintiff's Customer Balance Detail, which Defendants list as an exhibit to their motion, allegedly shows that Tender Touch received two payments on or about February 28, 2011 in the amounts of $36,921.59 and $71,235.01. (Defs.' Ex. T.) According to the Customer Balance Detail, Tender Touch also received two payments on or about March 25, 2011 in the amounts of $54,346.03 and $49,085.42 for services rendered. The issue of Plaintiff's payment for its provision of services, and more specifically, whether Saber ostensibly assumed this debt, is further discussed infra.
In the current action, Tender Touch seeks to collect $250,763.57 for services allegedly provided to Brighten at Ambler from August 1, 2010 to March 31, 2011, and $418,215.31 for services allegedly provided to Brighten at Bryn Mawr for this same period. Overall, Tender Touch allegedly provided $553,942.00 in services to Brighten, of the $668,978.00 it claims is due and owing, in the period of August 1, 2010 to February 28, 2011; it also allegedly billed $115,036.88 for services provided to both facilities in March 2011. (See Defs.' Ex. T.)
Summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A "genuine" issue exists where there is a "sufficient evidentiary basis on which a reasonable jury could return a verdict for the non-moving party." Byrne v. Chester County Hosp., Civ. A. No. 09-889, 2012 WL 4108886, at *2 (E.D.Pa. Sept. 19, 2012) (citing Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir.2006)). "A factual dispute is `material' if it might affect the outcome of the case under governing law." Id. All factual doubts should be resolved, and all reasonable inferences drawn, in favor of the nonmoving party. Torretti v. Main Line Hospitals, Inc., 580 F.3d 168, 172 (3d Cir.2009) (citing DL Res., Inc. v. FirstEnergy Solutions Corp., 506 F.3d 209, 216 (3d Cir.2007)). "The inquiry performed is the threshold inquiry of determining whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Jiminez v. All Am. Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir.2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The movant is responsible for "informing the court of the basis for its motion for summary judgment and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact." Byrne, 2012 WL 4108886 at *2 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
In their Motion for Summary Judgment, Defendants argue that Plaintiff's successor
Defendants also aver that Plaintiff's civil conspiracy claim is meritless because: (1) Aviv and Saber acted lawfully and properly; (2) there is no underlying tort; and (3) this claim is incompatible with successor liability theory. Plaintiff responds by stating that, not only is there an underlying tort, but Defendants also violated applicable statutes governing the operation and management of long-term nursing facilities.
This Court will take these arguments in turn.
Under Pennsylvania law, "it is well-established that `when one company sells or
As a preliminary matter, Defendants argue that Plaintiff cannot establish that Brighten sold or transferred all or substantially all of its assets to Saber, and therefore Plaintiff's successor liability claims are "non-starters." They contend that there was no transferring transaction between Saber and Brighten at all because: (1) Aviv contracted with Brighten in March 2010 to lease the facilities to Brighten, and to loan Brighten funds on terms that included Aviv's right to remove Brighten in the event of default; (2) Brighten defaulted in February 2011; (3) Aviv thereafter terminated Brighten's lease; and (4) Brighten and Saber entered into a Management Agreement, with Aviv's consent, wherein Saber would manage the nursing facilities beginning around March 1, 2011, until it could obtain the appropriate licensing to replace Brighten as operator. Following this timeline, Defendants contend that no assets "passed hands" between Brighten and Saber. Defendants also aver that Aviv had the perfected first-position security interest in Brighten's assets, and therefore Brighten did not have the authority to transfer assets on its own. Last, Defendants contend there was no transfer of assets between Brighten and Saber because Aviv was the owner of the real estate, buildings, and equipment at the Brighten facilities, and had merely leased these assets to Brighten under the Master Lease. In its cursory response to this argument, Plaintiff cites to Schneider for the proposition that "[a] company's purchase or receipt of assets in a foreclosure sale or transaction does not bar an unsecured creditor from asserting a successor liability claim against the receiving company." (Resp. to Mot. for Summ. J. 13) (citing Schneider, 582 Pa. at 599-600, 873 A.2d 1286).
(Id.) (emphasis added).
The record thus demonstrates that there appears to have been a transfer of assets from Brighten to Saber based on Defendants' contractual agreement. When Aviv declared default in February 2011, Brighten ostensibly transferred the above-listed assets to Aviv pursuant to the Operations Transfer Agreements. Although some assets were excluded from this transfer, including accounts receivable accrued prior to the Commencement Date, it is reasonable to conclude that the assets transferred to Aviv under the Operations Transfer Agreements constituted substantially all of Brighten's assets. (See Defs.' Ex. V, Schedule 2.2(B) at D00511.) Thereafter, Aviv subsequently transferred all rights it had under the Operations Transfer Agreements to Saber on March 1, 2011, pursuant to the Assignment and Assumption Agreement. Defendants argue that this chain of events demonstrates that Brighten transferred assets to Aviv, who thereafter transferred its rights to these assets to Saber; therefore, no transfer would have actually occurred between Brighten and Saber. However, the contractual language in the Assignment and Assumption Agreement, entered into by Defendants Saber and Aviv, clearly references the transfer to the New Lessees (Saber)
The Defendants next contend that, even if there was a transfer of assets between Brighten and Saber, Plaintiff's successor liability claims must fail because Saber is not a "mere continuation" or de facto merger successor of Brighten. The Supreme Court of Pennsylvania has recognized five exceptions to the general rule of successor non-liability: (1) where the purchaser of assets expressly or implicitly agrees to assume the liabilities of the transferor; (2) where the transaction amounts to a consolidation or merger ("de facto merger"); (3) where the purchasing corporation is merely a continuation of the transferor corporation; (4) where the transaction is fraudulently intended to escape liability; and (5) where the transfer was without adequate consideration and no provisions were made for creditors of the selling corporation. Schneider, 873 A.2d at 1286 (citing Hill, 603 A.2d at 605); see also Aluminum Co. of America v. Beazer East, Inc., 124 F.3d 551, 565 (3d Cir.1997) (citing Philadelphia Electric Co. v. Hercules, Inc., 762 F.2d 303, 308 (3d Cir.1985)).
Surprisingly, Defendants contend in their motion that "mere continuation" and de facto merger are the two exceptions to the general rule of non-liability that Plaintiff relies on in this case. However, this assertion is clearly inapposite to the pleadings in this matter. In its Complaint, Plaintiff alleges that Defendants Saber, Saber Holdings, Bryn Mawr Healthcare, and Ambler Healthcare: (1) "expressly and/or impliedly agreed" to assume Brighten's debts; (2) the 2011 transactions between Brighten and Saber amounted to an "acquisition, consolidation or merger between the sellers and purchasers"; (3) Defendants are "merely a continuation" of Brighten; and (4) that there was an "absence of adequate consideration for the sale and/or transfer" between Brighten and Saber. (Compl. at ¶¶ 92-96; 99-103.) It is therefore peculiar that Defendants only discuss
Defendants argue that Plaintiff relies on the de facto merger and "mere continuation" exceptions to the general rule of non-liability. The "mere continuation" exception analyzes whether the asset transfer results in the corporation merely changing its form and ceasing to exist as a legal entity upon the creation of the successor corporation. In re Asousa P'ship, 01-12295DWS, 2006 WL 1997426, at *8 (Bankr.E.D.Pa. June 15, 2006) (citing Cont'l Ins. Co. v. Schneider, Inc., 2002 PA Super 323, 810 A.2d 127, 134 (Pa.Super.Ct.2002) aff'd, 582 Pa. 591, 873 A.2d 1286 (2005) ("Schneider II")). "The major elements of this exception are identity of the officers, directors, or shareholders, and the existence of a single corporation following the transfer." Schneider II, 810 A.2d at 134-35. The de facto merger exception identifies four comparable factors: "(1) continuity of ownership; (2) cessation of the ordinary business by, and dissolution of, the predecessor as soon as practicable; (3) assumption by the successor of liabilities ordinarily necessary for uninterrupted continuation of the business; and (4) continuity of the management, personnel, physical location, and the general business operation." Id. (citing Commonwealth v. Lavelle, 382 Pa.Super. 356, 555 A.2d 218, 228 (1989)); see also Berg Chilling, 435 F.3d at 468-69. "Though each of these factors is considered, they do not all have to be present. Rather, the factors are merely indicia of a de facto merger." In re Asousa P'Ship, 2006 WL 1997426, at *8. "A de facto merger `will always be subject to the fact-specific nature of the particular underlying corporate realities and will not always be evident from the formalities of the proximal corporate transaction.'" Lehman Bros. Holdings, Inc. v. Gateway Funding Diversified Mortgage Servs., L.P., CIV.A. 11-6089, 989 F.Supp.2d 411, 431, 2013 WL 6667733, at *15 (E.D.Pa. Dec. 17, 2013) (quoting Fizzano Bros. Concrete Products, Inc. v. XLN, Inc., 615 Pa. 242, 273, 42 A.3d 951, 969 (2012)). The "elements of the de facto merger are not a mechanically-applied checklist, but a map to guide a reviewing court to a determination that, under the facts established, for all intents and purposes, a merger has or has not occurred between two or more corporations, although not accomplished under the statutory procedure." Id.
Courts have generally treated the mere continuation and de facto merger exceptions identically; this Court will do the same. See In re Asousa Partnership, 2006 WL 1997426, at *8 (Bankr.E.D.Pa. 2006) (citing Berg Chilling Systems, Inc. v. Hull Corp., 435 F.3d 455, 464 (3d Cir. 2006)); see also Fiber-Lite Corporation v. Molded Acoustical Products of Easton, Inc., 186 B.R. 603 (E.D.Pa.1994), affirmed mem., 66 F.3d 310 (3rd Cir.1995) (noting that the continuity exception has functionally been subsumed by the de facto merger exception). Due to the similar nature of the two exceptions, this Court will only consider the de facto merger factors. See In re Asousa Partnership, 2006 WL 1997426, at *8 ("Given the identical application of the two doctrines, I will address only the de facto merger factors.").
The continuity of ownership factor of the de facto merger exception is "often stated as requiring `a continuity of shareholders which results from the purchasing corporation paying for the acquired assets
It is undisputed by the parties that none of the owners, members, or shareholders of any Saber entity are owners, members, or shareholders of any Brighten entity. Although it is true that Saber hired Brighten's former Chief Financial Officer, Christine Landenberger, none of the other officers or any directors of any Brighten entity are or were officers or directors of any Saber entity. Id. Based on this record, this Court holds that there is no genuine issue of material fact as to continuity of ownership between Brighten and Saber; there was none. The only connection between the two entities under this factor is the continued employment of Christine Landenberger, who testified that she was unsure if she even had an official title at Saber. (Landenberger Dep. 8:11-21.) Because this factor is mandatory under the de facto merger/ "mere continuation" analysis, this Court need not proceed to consideration of the other de facto merger/ "mere continuation" factors. The de facto merger or mere continuation exceptions are not applicable to the instant case.
In its Response, Plaintiff avers that Saber implicitly assumed the liabilities of Brighten, and therefore successor liability should attach. In determining whether a successor corporation implicitly assumed an obligation of its predecessor, Pennsylvania courts have found the following factors relevant: (1) "whether the successor's conduct indicated its intention to assume the debt"; (2) "whether the creditor relied on the conduct and the effect of any reliance"; and (3) "whether the successor's representatives admitted liability." Bird Hill Farms, Inc. v. U.S. Cargo & Courier Serv., Inc., 2004 PA Super 66, 845 A.2d 900, 905 (Pa.Super.Ct.2004). This Court will consider each of these factors in turn.
First, Plaintiff contends that Saber implicitly agreed to assume Brighten's debt because Saber, with Aviv's consent, paid Plaintiff's past due invoices for August and September 2010 during the transition period; these invoices were allegedly for Plaintiff's services rendered in the months preceding Saber's involvement with the facilities. According to Tender Touch's Customer Balance Detail, payments were allegedly made to Plaintiff relating to Brighten at Ambler and Brighten at Bryn Mawr on February 28, 2011 and March 25, 2011. (See Defs.' Ex. T.) Defendants aver that Saber recommended, and Aviv approved, these partial payments from Brighten's accounts towards Plaintiff's arrearage, but that any payments to Plaintiff came "from Brighten funds, in Brighten bank accounts, via Brighten checks, in an effort to keep Tender Touch from pulling
On February 28, 2011, Landenberger sent Weisberg an email in which she stated that she "informed Tendretouch [sic] that we could authorize one month of payment at this time," that she "didn't go into any specifics about any future payments," and that she believed that the payment "should hold him." (Pl.'s Ex. K.) On March 23, 2011, Weisberg sent Landenberger an email asserting, "I think we will need to get them a month payment to continue to work with us and to contract with me going forward. I threw them our contract as an olive branch as they know after this one month of payment, they may not get another dime." (Pl.'s Ex. L.) In his deposition, Weisberg testified that a conversation occurred between him and Moses Schwartz, Tender Touch's CEO, in which Schwartz agreed to work on the pre-February 28, 2011 outstanding Brighten balances, and Weisberg informed him that Saber would provide Tender Touch with a "payment in good faith to try to continue to work with" it for the time Saber was in place as manager. (Weisberg Dep. 147:10-148:10.) Weisberg testified that he tried to make clear to Schwartz that he could get him a payment "for the time I'm here managing the cash," and would "work to get [him] ... a payment because [he]... [was] a critical vendor, but [Weisberg could not] ... speak to or help right at this point because it was such a big mess prior to February 28th." (Id. at 148:5-10.) Specifically, Weisberg testified that he explicitly told Schwartz that, in terms of payments, he could work with him "moving forward" but could not make any guarantees as to any past outstanding payments. (Id. at 169:2-9.) Weisberg continued that after he made the payment to Tender Touch, Schwartz "did a 360 ... and started threats." (Id. 147:16-21.) According to Weisberg, Schwartz then began threatening him with "hostage holdings of pay me more and pay me the old or else," and Tender Touch subsequently pulled out of the facilities. (Id. at 147:16-21; 149:2-4.) Weisberg also testified that "[v]ery clearly I can tell you Saber never paid down Brighten liability," and that "at any chance we were given, we made it clear that Saber was never paying any Brighten liability. So no, I can definitively say that was never the case." (Id. at 122:17-123:7.) O'Connor also testified in his deposition that it was his understanding that preexisting payables that were already owed "were the obligation of Brighten Health Group. Saber didn't assume any debts, they assumed management." (O'Connor Dep. 80:18-25.)
Plaintiff disputes, however, that Tender Touch would continue to render services at the facilities without payment in full of its outstanding invoices. Schwartz affirmed in his testimony that he did have conversations with Weisberg, and that Saber sent him the two March 25, 2011 payments. (Schwartz Dep. 56:4-7.) During his deposition, Schwartz also testified as follows:
(Id. at 56:8-59.6.)
Schwartz continued that he only decided to discontinue provision of services after receiving an email from Weisberg on March 29, 2011, in which Weisberg allegedly stated "No, I cannot help you get payment for old invoices." (Id. at 54:9-14; 60:10-61:8.)
This Court holds that there is a genuine issue of material fact as to whether Saber's conduct in relation to the February and March 2011 payments indicated its intent to assume Brighten's debt. A reasonable jury could conclude one of two things: either these payments indicate Saber's intention of assuming responsibility for the entire past due balance, or the payments were made in good will, in the hopes that Plaintiff would continue a business relationship with Saber. Schwartz in fact testified that he believed that these payments towards the outstanding debt would continue to be paid off, and that Tender Touch only terminated its provision of services once it received Weisberg's email on March 29, 2011, four days
Second, Plaintiff also alleges that Saber collected on Brighten's accounts receivables for services rendered by Brighten prior to the transition period, and utilized these receivables to continue the uninterrupted operations of the Brighten facilities pending the approval of its license, including making payments to critical vendors. Through these actions, according to Plaintiff, Saber's conduct indicated its intention to assume Brighten's debt. Defendants counter that, with Saber as manager, the billing and collection activities continued much as they did before March 1, 2011. According to Defendants, Saber managed operations under Brighten's license, but Brighten still billed Medicare, Medicaid and private insurers for healthcare services rendered, payments still deposited into the lockbox accounts, and payments would be made from Brighten's accounts to Brighten's vendors. Defendants also
This Court agrees with Defendants that, under the
(Id. at D01993) (emphasis added). In addition, the Management Agreement gives Saber the duty and obligation to "collect revenues which relate to services rendered in the operation of the Facilities
(c) Take any and all such actions as may be necessary to grant Manager exclusive control over all bank accounts of Operator, including but not limited to payroll and operating account ...
(Def. Ex. R, D01993.) (emphasis added). Therefore, by the terms of the Management Agreement, Saber's management control did not extend to any bank accounts containing Brighten's pre-March 1, 2011 accounts receivable proceeds and revenues, which instead, ostensibly, remained under Brighten's purview.
Record evidence before this Court, however, illustrates that there is a genuine issue of material fact as to whether, in spite of the contract's non-liability provisions and the provisions that outline Brighten's apparent control over accounts containing pre-March 1, 2011 accounts receivable and revenue (which ostensibly would include funds related to Plaintiff's pre-March 1, 2011 provision of services), Saber indicated an intention to assume Brighten's debt by controlling these funds and using them to continue operations. On June 27, 2011, Joshua Kochek of Aviv sent an email to Weisberg, in which he stated "[a]s the quarter is ending we need to disentangle the Saber and Brighten funds. If we have advanced Saber more funds than you have taken in, we would
In addition, the September 19, 2011 Reconciliation Schedule, sent as an attachment in an email from Joshua Kochek of Aviv to James O'Connor and other parties, also illuminates the factual issues still at play. (Pl.'s Ex. A.) The Reconciliation Schedule is alleged to have been compiled by Aviv from information it obtained from Saber. (O'Connor Dep. 131:23-132:3; Landenberger Dep. 59:9-60:4.) This document was allegedly created in order for Aviv and Saber to differentiate between funds that should be credited to Brighten, and funds that should be credited to Saber. (O'Connor Dep. 135:8-20; 141:8-18.) The Schedule ostensibly shows that the amount owed on the Brighten loan as of September 19, 2011 was $1,474,684.89, with the outstanding amount remaining on Brighten's loan at that time (including indemnity) being $2,922,879.89. (Pl.'s Ex. A.) On what appears to be the second page of the Schedule, there is a chart with each Brighten facility and the months March-September along one axis, and the following columns along the other axis: "Total," "Before 3/1," "3/1 and After," "Difference after sheet adjustments," and "Withheld." (See Pl.'s Ex. A, D02590.) Underneath the "Before 3/1" Column, the total is listed as $5,893,264.35 for all the facilities; this amount is also listed on the first page of the Schedule as "Brighten Cash Collected into Gemino Account." In her deposition testimony, Christine Landenberger acknowledged that the Reconciliation Schedule showed that by September 19, 2011, Saber had collected nearly $6 million for services that had been provided to Brighten prior to March 1, 2011. (Landenberger Dep. 95:3-16.) The first page of the Schedule also lists "Brighten Cash Collected into non-Gemino Account" as $225,177.51, and states an Aviv Loan Repayment in the amount of $2,999,480.41, that critical vendors were paid the amount of $1,713,633.97, and that payroll was paid in the amount of $1,405.327.48. (Id.)
Initially in his deposition, O'Connor testified that the "Before 3/1" and "3/1 and After" columns in the schedule represent amounts Aviv collected into the Gemino account before and after March 1, 2011, that these dates had nothing to do with dates of service, and that they simply reflected when cash was actually received. (O'Connor Dep. 103:10-107:18.) Later, O'Connor appeared to concede, however, that "there was little or no focus" on accounting for funds that came in post-March 1, 2011 for services delivered pre-March 1, 2011, testifying that:
(O'Connor Dep. 110:25;11:1; 111:24-112:15.) O'Connor subsequently testified that in order to actually understand the numbers on the Reconciliation Schedule, there would need to be greater detail provided as to the remittance advices, and that, in September 2011, he believes either Saber or Gemino would have had this information. (O'Connor Dep. 120:16-121:8.) O'Connor then appeared to agree that it looked as if the Schedule's chart draws a distinction along revenues generated from pre- and post-March 1, 2011
In her deposition, Landenberger also spoke to potential issues with the Reconciliation Schedule, and, by implication, the effect this may have had on Saber's interaction with, and use of, Brighten's pre-March 1, 2011 accounts receivable and revenues. Landenberger noted that on or about August 2011, an issue occurred that resulted in a loss of access to the Brighten server. (Landenberger Dep. 56:8-20.) As a result of this incident, a "big, huge issue" arose in regards to what the balances were prior to losing access to the server, with Landenberger testifying that "it wasn't planned that we were losing access to the system when we did. So a lot of the reports were not current. So it definitely could have impeded on the ability to go after additional funds if they weren't already collected." (Id. at 58:11-25.) Landenberger also referred to a "detailed schedule" put together by Aviv ("ostensibly the Reconciliation Schedule") in her testimony, asserting "I know that I was aware of it, and I know there were imperfections on it, and there were issues, but I don't know where that ever went." (Id. at 59:16-60:4.) Landenberger also "leaned towards yes" in regards to the statement that any imperfections in this schedule tended to work against Brighten's debt position, and favorable to Saber's debt position. (Id. at 60:14-61:11.) More generally, Landenberger testified that "in the beginning cash that was in the bank ... prior to March 1 services was used for payroll expenses that were incurred after March 1." (Id. at 48:24-49:8.) She later agreed that in the period from March 1, 2011-July 1, 2011, Brighten was the entity entitled to generated revenue because everything during that time period was still that of the Brighten entities. (Id. at 52:15-53:17.) According to Landenberger, revenues generated from services through June 30, 2011 were to be accounted for as Brighten revenues, and that these revenues might not be collected until as late as fall 2011. (Id. at 55:10-20.)
The record therefore illustrates genuine issues of material fact also exist as to Saber's management of Brighten's pre-March 1, 2011 accounts receivable and revenue, and whether this conduct indicates its assumption of Brighten's liabilities. It would be reasonable for a jury to conclude, based on the record, that Saber's conduct in this regard equated to an attempt to assume Brighten's debt. In fact, it is a far from settled issue how the contractual non-liability provisions would be reconciled with Saber's alleged consumption of Brighten's pre-March 1, 2011 funds in seeming contravention of the same contract. The lingering inconsistencies revolving around interpretation of the Reconciliation Schedule, as well as the extent to which Saber and pre-March 1, 2011
Plaintiff also argues that it reasonably relied on Defendants' conduct. It states that it believed Defendants' actions indicated that its remaining outstanding invoices would be paid and, based on that notion, it continued to provide services at the Brighten facilities in March 2011. According to Plaintiff, the effect of this reliance was that it provided an additional $115,036.88 in services in March 2011, a time when Saber had taken over managing, and allegedly operating, the Brighten facilities. Based on this Court's foregoing analysis under the previous factor, it finds that Plaintiff has sufficiently established that it relied on Defendant's conduct.
Plaintiff also alleges that Saber admitted liability for Brighten's debt. It avers that Defendants have offered no explanation for Saber's August 23, 2011 draw on a promissory note (which was personally guaranteed by the co-owners of Saber) to repay Aviv $2,996.133.48 of the amount outstanding on the Brighten loan. Defendants counter that the internal memorandum which addressed this draw merely indicated: (1) that Saber took this draw on a working capital loan that Aviv provided to Saber; (2) that Aviv intended, for its own internal accounting purposes, to reduce Brighten's debt by the amount of the Saber loan; and (3) this internal accounting was appropriate to properly credit Brighten's debt to Aviv, because Aviv funded the loan to Saber with the proceeds that Aviv received from Brighten's activities at the skilled nursing facilities.
On July 22, 2011, Saber and Aviv agreed to a promissory note through which Saber agreed to pay back to Aviv the principal sum of up to three million dollars. (Pl.'s Ex. B, Promissory Note). On August 23, 2011, Aviv's Kyle Sweeney sent Joshua Kochek and others a memorandum stating:
(Pl.'s Ex. H) (emphasis added).
In his Declaration, Joshua Kocheck states that this email references the $3 million line of credit Aviv made available to Saber's operating entities on July 22, 2011. (Defs.' Ex. X.) He continues that this loan was made to Saber after they obtained necessary licenses to replace Brighten as operator, and "[r]ather than fund the loan from cash, ... Aviv funded the $3 million Saber loan with the accounts receivables generated during the period that Brighten operated the facilities. For purposes of internal accounting clarity and consistency,... Aviv reduced Brighten's debt by the amount of the funds used to make the $3 million Saber loan." (Id.)
A genuine issue of material fact remains as to whether Saber's draw on this promissory note equates to an admission of liability. On August 23, 2011, the amount Saber wished to draw on the loan from Aviv was $2,996,133.48. Per the September 19, 2011 Reconciliation Schedule, the remaining outstanding amount on the Brighten Loan (apparently as of September 19, 2011) was $2,922,879.89. Defendants have offered no explanation for why Saber drew on the loan in an amount so close to the
Last, Plaintiff contends that adequate consideration was not provided to Brighten, and there were no provisions for Brighten's creditors. According to Plaintiff, Saber took control of the nursing home facilities, and used Brightens' accounts receivables for personal gain and benefit, without providing any consideration to Brighten. In contrast, Defendants aver that: (1) the only agreement Brighten and Saber were parties to was the Management Agreement, which spelled out the basis for Saber's compensation and only provided for managerial control; (2) Brighten received adequate consideration from Aviv during the 2010 transactions; and (3) O'Connor himself testified that there was consideration in earlier agreements.
After reviewing the record, this Court determines that adequate consideration was given and provisions were made for creditors of the selling corporation. In his deposition, O'Connor testified that, in exchange for Aviv to replace Brighten as operator or a tenant in connection with the initial loan documents and amendments, Brighten received "a lot of cash." (O'Connor Dep. 193:6-194:19.) The Operations and Transfer Agreements also memorialized the acknowledgment of the "receipt and sufficiency" of "good and valuable consideration." (Defs.' Ex. M, D00478.) The March, 1, 2011 Assignment and Assumption Agreement provides "in consideration of the foregoing and the mutual covenants and promises contained in this Assignment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party ..." (Pl.'s Ex. M., at D02662.); this contractual text is also present in the Management Agreement. (See Defs.' Ex. R, D01988.) Moreover, the Management Agreement contains the following provision under Article 6 on Financial Arrangements:
(Defs.' Ex. R. at D01994) (emphasis added).
Based on this contractual record, this Court is satisfied that there was adequate consideration for the transaction, and provisions made for creditors; the adequate consideration exception therefore does not apply.
Nevertheless, this Court holds that, based on the preceding analysis, there are genuine issues of material fact remaining as to Plaintiff's successor liability claim relating to whether Saber implicitly agreed to assume liability for Brighten's debts. Therefore, Defendants' motion for summary judgment will be denied as to this claim.
To establish a civil conspiracy claim pursuant to Pennsylvania law, a plaintiff must establish: (1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage. Woodward v. ViroPharma Inc., 3222 EDA 2011, 2013 WL 1485110, at *11 (Pa.Super.Ct. Apr. 3, 2013). Here, Defendants challenge Plaintiff's civil conspiracy claim, averring it must fail because: (1) the claim is incompatible with the successor liability theory; (2) Aviv and Saber acted lawfully and properly; and (3) there is no underlying tort.
As a preliminary matter, Defendants argue that Plaintiff's civil conspiracy claim cannot stand because it is incompatible with its successor liability claims against Saber. Under Pennsylvania law, "[a] single entity cannot conspire with itself and, similarly, agents of a single entity cannot conspire among themselves." Grose v. Procter & Gamble Paper Products, 2005 PA Super 8, 866 A.2d 437, 441 (Pa. Super. Ct.2005) (quoting Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 211, 412 A.2d 466, 472 (1979)); see also Wells v. Thomas, 569 F.Supp. 426, 436 (E.D.Pa.1983) ("the `combination of persons' who would have conspired to interfere with plaintiff's existing or prospective business relationships were all employees of [defendant]. As such, defendants are `agents of a single corporation' who cannot conspire among themselves."); Johnson v. University of Pittsburgh, 435 F.Supp. 1328, 1370 (W.D.Pa.1977) (conspiracy among agents of a single entity, i.e., the University of Pittsburgh, not sufficient to support a cause of action under § 1985(3) since agents of a single corporation cannot conspire among themselves); Keddie v. Pennsylvania State University, 412 F.Supp. 1264, 1276 (M.D.Pa.1976) (in action by nontenured professor against the University, its president, the dean of Liberal Arts College and five members of faculty committee, court dismissed claim for conspiracy under § 1985(3) reasoning that challenged conduct was essentially act of single entity; "A university cannot conspire with itself any more than a person or corporation can.").
This Court finds Defendants' position fruitless. If Plaintiff had alleged in its Complaint that Brighten and Saber were the
As to the first element of a civil conspiracy claim, common purpose to do an unlawful act, Defendants allege that Aviv and Saber acted lawfully and properly because, in collecting Brighten's accounts receivable and contracting with Saber to manage the nursing homes and replace Brighten as operator, Aviv merely exercised its rights as a first-priority secured lender under the 2010 loan, lease, and credit and security agreements with Brighten. Defendants also aver that the arrangement whereby Brighten's healthcare receivables secured Brighten's debt to Aviv is routine in the industry. Plaintiff responds that Defendants Aviv and Saber committed unlawful acts by violating Pennsylvania statutory law governing the operation and management of long-term nursing facilities.
The Pennsylvania Health Care Facilities Act provides for the licensing of health care facilities to "protect and promote the public health and welfare through the establishment and enforcement of regulations setting minimum standards in the construction, maintenance and operation of health care facilities." 35 Pa. Stat. Ann. § 448.801a (West). Under the Act:
35 Pa. Stat. Ann. § 448.806 (West).
The Act also provides that the state may refuse to renew a license, or may suspend or revoke or limit a license for "lending, borrowing, or using the license of another, or in any way knowingly aiding or abetting the improper granting of a license." 35 Pa. Stat. Ann. § 448.811 (West).
Plaintiff contends that Defendants violated this provision of the Act by authorizing Aviv, through the Transfer Agreements, to utilize Brighten's nursing home license until such time as Aviv (or another operator designated by Aviv) obtained a license to operate the facilities. It challenges that, on its face, the assignment of Brighten's license by Brighten to Aviv, and then to Saber, was a combination of two or more persons in furtherance of an unlawful act. In response, Defendants contend that Plaintiff has misread the Operations Transfer Agreements, which merely required Brighten to cooperate in the transfer of the licenses to a new operator to the extent permissible, and to execute and file all forms needed to accomplish this end. Moreover, according to Defendants, the Management Agreement engaged Saber to operate as Brighten's manager pending transfer of the license through the Department of Health or Saber's own licensing. Defendants maintain that neither Saber nor Aviv borrowed or used Brighten's license.
The Operations Transfer Agreements between the Brighten entities and Aviv provided that, upon default, Brighten was to deliver, convey, and transfer "all intangible property, in which Operator has an interest, ... such as Operator's licenses," to Aviv (Defs.' Ex. M, at D00478.) Importantly, the Agreements also explicitly state that:
(Id. at D00479.)
Per the Management Agreement, Saber's management of the Brighten facilities was to begin on March 1, 2011, and would terminate on the date that each Saber affiliate, inter alia, obtained a license for the operation of the applicable facility. (Defs.' Ex. R, D01989.)
This Court agrees with Plaintiff, and holds that a genuine issue of material fact exists as to whether Brighten, Saber, and Aviv's acts pursuant to the Operations Transfer Agreement established a combination of two or more persons in furtherance of an unlawful act. Under the Act, no person shall maintain or operate a health care facility without first obtaining a state issued license. Pursuant to the language of the Operations Transfer Agreement, Aviv was permitted to use Brighten's license, as necessary, from the date of default, to the date it received a new license. On February 16, 2011, Aviv declared default under the Master Lease. On March 1, 2011, the same day Brighten and Saber entered into the Management Agreement, Aviv assigned its rights under the Operations Transfer Agreement, including its right to use Brighten's license, to Saber. It is undisputed that, pending receipt of the necessary licenses in or around July 1, 2011, Saber commenced management responsibilities for the Bryn Mawr and Ambler facilities, although Brighten was still, ostensibly, the legal operator of the facilities. It is therefore evident that a factual issue remains as to whether Saber's management of the Brighten facilities from March 1, 2011-July 1, 2011, while Brighten was still the legal licensee, was in violation of Pennsylvania statute, and whether Saber and Aviv conspired, pursuant to contractual agreement, to effect this unlawful act. The second and third elements of a prima facie case for civil conspiracy are also satisfied in that the signing of the agreements, subsequent transition of affairs, and Saber's management period pursuant to the Operations Transfer Agreements and Assignment Agreements constituted an overt act, and actual legal damage occurred in that Plaintiff has suffered actual legal damage caused by Defendants' refusal to pay its outstanding invoices.
Defendants also argue that Plaintiff's civil conspiracy claim cannot stand because there is no underlying tort, a prerequisite
A civil conspiracy claim requires an underlying tort. Alpart v. Gen. Land Partners, Inc., 574 F.Supp.2d 491, 506 (E.D.Pa.2008) (citing Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396, 405 (3d Cir.2000)). Civil conspiracy, though typically not an independent cause of action, is a "mechanism for subjecting co-conspirators to liability when one of their member[s] committed a tortious act"; therefore, a plaintiff need not allege an underlying tortious claim against every co-conspirator. See Smith v. Berg, 247 F.3d 532, 539 (3d Cir.2001) (quoting Beck v. Prupis, 529 U.S. 494, 503, 120 S.Ct. 1608, 146 L.Ed.2d 561 (2000)).
To establish a claim for tortious interference with contract, a plaintiff must show: (1) the existence of a contractual relationship between the plaintiff and a third party, (2) purposeful action on the part of the defendant intended to harm the relationship, (3) the absence of privilege or justification on the part of the defendant, and (4) actual damages resulting from the defendant's conduct. Stoeckinger v. Presidential Fin. Corp. of Delaware Valley, 2008 PA Super 95, 948 A.2d 828, 834 (Pa.Super.Ct.2008) (citing Hillis Adjustment Agency, Inc. v. Graham Co., 911 A.2d 1008, 1012 (Pa.Super.2006)). According to Plaintiff, the elements of the claim are satisfied because (1) a valid contract existed between it and Brighten; (2) Defendants purposefully acted to subvert that relationship through the unlawful assignment of Brighten's license to operate the facilities; (3) there was no valid justification pursuant to the Act; and (4) Plaintiff suffered substantial legal damage. This Court finds that, based on a review of the record and its foregoing analysis, Plaintiff has made a prima facie showing of tortious interference. There was a valid contract between Plaintiff and Brighten, and Defendants allegedly engaged in purposeful action to harm this relationship, mainly, the alleged unlawful assignment of Brighten's license to Saber. In addition, Defendants had no justification or privilege,
Last, Defendants allege that because Plaintiff's allegations against it flow from, and are entirely dependent upon, the underlying contractual relationship between Plaintiff and Brighten, the gist of the action doctrine bars any tort claims on the facts of this case; in this case, this would bar the tortious interference
In the instant matter, both parties agree that Tender Touch and Brighten were parties to the contract, and that Tender Touch never entered into a service agreement with Saber or Aviv. By its very nature, therefore, the instant tort claim cannot arise solely from any contract between the Plaintiff and
For the reasons set forth above, Defendants' Motion for Summary Judgment is denied in all respects.
