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Jordan v. Mirra

United States District Court, D. Delaware

September 14, 2017

GIGI JORDAN, Plaintiff,
v.
RAYMOND A. MIRRA, JR., RAM CAPITAL GROUP, LLC D/B/A RAM CONSULTING GROUP, LLC, RAM CAPITAL II, LLC, RAM REALTY HOLDINGS, LLC, JOSEPH A. TROLIO, JR., BRUCE KOLLEDA, MARK A. KOVINSKY, JOSEPH J. TROPIANO, JR., DANIELLE STEWART, RENEE M. SIGLOCH, FREDERICK FORTE, VIRGINIA L. HALL, BARIKUO, and SHELLY DEMORA, Defendants.

          REPORT AND RECOMMENDATION

          SHERRY R. FALLON UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         Presently before the court in this diversity action is the motion to dismiss for failure to state a claim filed by defendants Raymond A. Mirra, Jr. ("Mirra"), RAM Capital Group LLC, RAM Capital II, LLC, RAM Realty Holdings LLC, Joseph A. Troilo, Jr. ("Troilo"), Bruce Kolleda ("Kolleda"), Mark A. Kovinsky ("Kovinsky"), Joseph J. Tropiano, Jr. ("Tropiano"), Danielle Stewart ("Stewart"), Frederick Forte ("Forte"), Renee M. Sigloch ("Sigloch"), Virginia L. Hall ("Hall"), Bari Kuo ("Kuo"), and Shelly Demora ("Demora") (collectively, "defendants"). (D.I. 112) For the following reasons, I recommend that the court grant the motion to dismiss as to Counts 1 to 6 and 8 to 10 of the second amended complaint, and deny the motion to dismiss with respect to Count 7 of the second amended complaint.

         II. BACKGROUND [1]

         In 1991, plaintiff Gigi Jordan ("Jordan") founded Ambulatory Pharmaceutical Services, Inc. ("APS"), a healthcare company specializing in providing individualized home infusion services. (D.I. 176 at ¶ 28) Following the success of APS, Jordan entered into a business relationship with Mirra, [2] in which Jordan ran a subsidiary of Mirra's home infusion company. (Id.) On August 1, 1995, Jordan exercised an option to buy out Mirra's interests in APS, leaving her as the sole shareholder of APS. (Id. at ¶ 31) On August 29, 1997, Jordan sold APS to Integrated Health Services, Inc. ("IHS"). (Id. at ¶ 32)

         During this time, Mirra represented to Jordan that defendants Troilo and Kolleda[3]managed, controlled, and implemented Jordan and Mirra's respective business and financial affairs and acted co-equally for Jordan and Mirra as fiduciaries in the execution of their duties. (Id. at ¶¶ 33-34) In 1997, Mirra, Troilo, and Kolleda organized RAM Capital to serve as a holding company for Jordan and Mirra's joint assets and business ventures. (Id. at ¶¶ 35-36) In 2002 and thereafter, Mirra, Troilo, Kolleda, Tropiano, and Kovinsky[4] organized various holding companies and trusts to allegedly disguise the actual ownership interests of Jordan's business holdings. (Id. at ¶¶ 37-38)

         In March and December of 2003, Troilo, Mirra, and Kolleda sent Jordan two estate planning memoranda falsely representing that Jordan and Mirra remained equal owners of their joint assets and business ventures. (Id. at ¶¶ 39-42) In 2005, defendants gave Jordan a business prospectus falsely reporting the status of Jordan and Mirra's joint business holdings and assets. (Id. at ¶ 43) In 2007, Tropiano, Kolleda, and Mirra sent Jordan a schedule falsely stating that Jordan and Mirra held equal interests in companies, real estate, and other investments worth more than $241 million. (Id. at ¶ 44) Between 1997 and 2009, Tropiano, Kolleda, Mirra, Troilo, and Kovinsky sent Jordan various reports and schedules which falsely represented that her business interests, real estate holdings, and assets were co-equally owned with Mirra. (Id. at ¶ 45)

         Jordan filed the instant action in the Southern District of New York on March 9, 2012. (D.I. 1) The parties filed a joint stipulation to transfer venue to the District of Delaware on December 8, 2014. (D.I. 68) A related action was pending in the District of Delaware at the time of the transfer, asserting a RICO claim against Mirra and others ("the RICO action"). (C.A. No. 13-2083-SLR-SRF)

         On June 3, the court issued its Report and Recommendations in the RICO action, recommending that the district judge grant the pending motions to dismiss. (C.A. No. 13-2083-SLR-SRF, D.I. 457) The district judge adopted the recommendations on August 31, 2016 and dismissed the RICO action. (C.A. No. 13-2083-SLR-SRF, D.I. 472) The Third Circuit Court of Appeals affirmed the dismissal of the RICO action on May 12, 2017. (C.A. No. 13-2083-SLR-SRF, D.I. 475)

         The court issued its Report and Recommendations in the present matter on June 7, 2016, denying the pending motions to dismiss and granting the motion to amend the complaint. (D.I. 158) On August 31, 2016, the district judge accepted in part and rejected in part the recommendations, recommitting the motions to dismiss to the magistrate judge for consideration on the merits. (D.I. 175) On September 1, 2016, Jordan filed her second amended complaint in the present action. (D.I. 176) The second amended complaint asserts the following causes of action: (1) Count 1: Breach of Contract on Promissory Notes against Mirra; (2) Count 2: Accounting against Mirra, Troilo, Molieri, and Kolleda; (3) Count 3: Common Law Fraud against Mirra, Troilo, Molieri, Kolleda, Eizen, Kovinsky, Tropiano, and Walsh; (4) Count 4: Aiding and Abetting Fraud against Stewart, Sigloch, Forte, Hall, Demora, and Kuo; (5) Count 5: Fraudulent Inducement against Mirra, Troilo, Tropiano, and Kolleda; (6) Count 6: Breach of Fiduciary Duty against Mirra, Troilo, Molieri, and Kolleda; (7) Count 7: Breach of Warranties against Mirra; (8) Count 8: Unjust Enrichment against all defendants; (9) Count 9: Conversion against all defendants; and (10) Count 10: Declaratory Relief under 28 U.S.C. §§ 2201 and 2202 against Mirra, Troilo, Kolleda, and Eizen. (D.I. 176 at ¶¶ 298-351)

         A. Conversion and Misappropriation of Jordan's Bank Accounts

         1. Merrill Lynch Transactions

         Jordan opened a Merrill Lynch account based on Mirra's recommendation in 1992. (Id. at ¶ 49) Patrick J. Walsh ("Walsh")[5] became Jordan's broker and private banker at Merrill Lynch. (Id. at ¶ 50) In 1997, Walsh advised Jordan to open two additional Merrill Lynch accounts to participate in a covered writing account program intended to eliminate losses below the principal amounts invested. (Id. at ¶¶ 52-55)

         In April 2002, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano conspired with Walsh to open a new Merrill Lynch account jointly held by Jordan and Mirra. (Id. at ¶¶ 56-59) They deposited more than $ 14 million of Jordan's money into the j oint account without Jordan's knowledge or consent. (Id. at ¶¶ 60-62) Four months later, in September 2002, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano allegedly forged Jordan's signature on account opening documents for the joint account. (Id. at ¶ 63)

         In January 2003, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano conspired to convert Jordan's three individual Merrill Lynch accounts into joint accounts held with Mirra. (Id. at ¶¶ 65-70) Thereafter, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano opened additional Merrill Lynch accounts jointly held by Jordan and Mirra by forging Jordan's signature on account application forms. (Id. at ¶¶ 71-77) Between 2003 and 2006, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano forged Jordan's signature on wire transfer authorizations purporting to authorize Merrill Lynch to transfer Jordan's money to Mirra and various entities owned or controlled by defendants. (Id. at ¶¶ 78-80) Between 2003 and 2008, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano forged Jordan's signature on loan applications and wire transfer authorizations, causing Merrill Lynch to loan millions of additional dollars to Mirra, RAM Capital, and other entities owned and controlled by defendants, using Jordan's assets as collateral for the loans. (Id. at ¶¶ 81-87)

         2. Other Transactions

         On August 29, 1997, Jordan sold APS to Integrated Health Services, Inc. ("IHS") in exchange for more than $34 million in cash and stock options. (Id. at ¶ 89) Mirra subsequently urged Jordan to open a Smith Barney brokerage account in March 1998 with the proceeds from the sale. (Id. at ¶¶ 90-91) In June 1998, Mirra encouraged Jordan to execute a Smith Barney trading agreement, which was faxed to the account broker. (Id. at ¶ 92) Mirra, Troilo, Kolleda, and Tropiano then coordinated the liquidation of Jordan's stock in the Smith Barney brokerage account and fraudulently transferred the funds out of the account without Jordan's knowledge or consent. (Id. at ¶ 93)

         In 1998, Mirra conferred with Jordan regarding an "offshore asset protection" plan involving multiple offshore trusts, LLC's, and bank accounts. (Id. at ¶¶ 94-97) Pursuant to Mirra's proposal, both he and Jordan would transfer $7 million to a bank account in Geneva, Switzerland (the "BJB account"), and a Nevis-based LLC named West-Highland Company LLC ("West Highland"), solely owned by Jordan, would be established as the account holder of the offshore account. (Id. at ¶¶ 98-99) Jordan signed an agreement in accordance with Mirra's proposal. (Id. at ¶ 100) In July 1999, Mirra, Troilo, Kolleda, and Tropiano forged Jordan's authorization to transfer the funds in Jordan's Smith Barney account to the BJB account, comprising the total initial funding for West Highland's BJB account. (Id. at ¶ 103) In 2001, Mirra fraudulently induced Jordan to assign him a fifty percent interest in West Highland by falsely representing that he had contributed half of the funds deposited into the account. (Id. at ¶¶ 102, 105)

         B. Fraudulent Property Transactions

         Defendants also engaged in a scheme to divest Jordan of her equity in several real properties. (Id. at ¶ 106) On June 30, 1995, Jordan purchased a property located at 2932 North Atlantic Boulevard in Fort Lauderdale, Florida, for $1.65 million. (Id. at ¶ 107) On July 12, 1996, Mirra and Troilo forged Jordan's signature on a warranty deed purporting to add Mirra as a co-owner of the property and recorded the deed. (Id. at ¶¶ 109-111) On April 10, 2002, Mirra, Troilo, Kolleda, and Tropiano forged Jordan's signatures on mortgage loan application documents and obtained a $375, 000 mortgage on the property. (Id. at ¶¶ 112-115) On August 16, 2006, Mirra, Troilo, Kolleda, and Tropiano sold the property for $4.8 million and retained the proceeds. (Id. at ¶¶ 116-119)

         On June 23, 2000, Mirra, Troilo, Kolleda, and Tropiano caused APS, which was jointly owned by Jordan and Mirra, to purchase a property located at 2937 North Atlantic Boulevard, Fort Lauderdale, Florida, for $660, 000. (Id. at ¶ 121) On December 27, 2001, Mirra, Troilo, Kolleda, and Tropiano caused the property to be sold for $10.00 to West Highland. (Id. at ¶ 123) On April 12, 2004, Mirra, Troilo, Kolleda, and Tropiano sold the property for $1.00 to "Gigi Jordan and her Husband Raymond Mirra." (Id. at ¶ 125) Jordan was not advised of the purchase or the sales. (Id. at ¶¶ 122, 124, 126) On the same date, Mirra, Troilo, Kolleda, and Tropiano forged Jordan's signature and authorized Merrill Lynch to wire $345, 631.96 to a West Highland account to pay off the mortgage on the property. (Id. at ¶¶ 127-128) On April 28, 2004, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano forged Jordan's signature on a warranty deed selling the property for $850, 000 without Jordan's knowledge. (Id. at ¶¶ 129-131)

         In 2000, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano incorporated RAM Developers to engage in real estate investments, and falsely represented to Jordan that she was a fifty percent owner of RAM Developers. (Id. at ¶¶ 133-135) On April 4, 2001, Jordan provided $4.1 million to RAM Developers to be used to purchase a property located at 352 West End Avenue, New York, New York. (Id. at ¶ 136) On April 5, 2001, Jordan permitted the property to be titled in the name of RAM Developers, rather than in Jordan's name individually. (Id. at ¶ 139) On July 8, 2002, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano sold the property for $4.35 million. (Id. at ¶ 140)

         On April 5, 2002, a deed was recorded conveying a property in Concord, Virginia to Jordan and Mirra for $3, 265 million. (Id. at ¶ 143) On August 27, 2002, Mirra took out a $2 million mortgage from Merrill Lynch on the property without Jordan's knowledge. (Id. at ¶ 147) Between February 2003 and June 2004, Mirra, Troilo, Kolleda, and Tropiano bought additional lots to add to the existing acreage of the property without Jordan's knowledge. (Id. at ¶ 148) On June 3, 2004, Mirra and Jordan borrowed $3 million from JPMorgan Chase for payment on the purchase of the property. (Id. at ¶ 149) On March 31, 2005, the $3 million JPMorgan mortgage was increased by $1 million and converted to a home equity line of credit. (Id. at ¶ 151) On June 3, 2005, a loan was obtained on the property from Merrill Lynch in the amount of $2 million. (Id. at 160)

         On May 31, 2002, Jordan and Mirra purchased a property in North Garden, Virginia for $1.8 million. (Id. at ¶ 163) On December 4, 2003, Mirra, Troilo, Kolleda, and Tropiano forged Jordan's signature on a deed conveying the property from Jordan and Mirra to RAM Realty. (Id. at ¶ 164) RAM Realty subsequently subdivided and sold off the Taylors Gap Road Property for $2, 151 million. (Id. at ¶ 166)

         C. The Separation and Distribution Agreement

         On March 12, 2008, Jordan and Mirra executed a Separation and Distribution Agreement ("SDA"). (Id. at ¶ 169) In connection with a merger between Biomed America, Inc. ("Biomed") and Allion Healthcare, Inc. ("Allion"), on March 4, 2008, Mirra, Troilo, Kolleda, and Tropiano falsely represented that Jordan's half of the Biomed stock was valued at $4.9 million, when it was actually worth much more than that. (Id. at ¶¶ 176-179) Pursuant to the terms of the SDA, Jordan transferred her fifteen percent ownership interest in Biomed to an LLC owned by Mirra for $4.9 million. (Id. at ¶ 180) Through this transaction, Mirra received $78 million, $39 million of which was rightfully Jordan's. (Id. at ¶¶ 181-182)

         Mirra subsequently orchestrated two transactions resulting in the sale of Jordan's ownership interests in APS and Specialty Pharmacy, Inc. to AmerisourceBergen Corporation ("ABC") in 2002 for $30 million. (Id. at ¶¶ 185-188) On April 29, 2002, a fraudulent Merrill Lynch account received nearly $15 million in connection with the first transaction. (Id. at ¶ 189) In December 2002, Bioservices was acquired by ABC for $159 million, yielding $75 million more than Mirra had reported. (Id. at ¶ 191) The actual profits of the sale were routed by Mirra to another unknown account. (Id. at ¶ 195)

         On March 4, 2008, Mirra, Troilo, Kolleda, and Tropiano falsely represented to Jordan that she had a fifty percent interest in four companies, including VasGene, PrideCare, ARC, and Cancer Innovations, which had no value. (Id. at ¶ 197) Defendants falsely represented that the companies had no value to induce Jordan to surrender her rightful interests in the companies and execute the SDA. (Id. at ¶¶ 198-199) In February 2008, Mirra, Troilo, Kolleda, and Tropiano falsely represented that RAM Capital had no assets or value, causing Jordan to forfeit her fifty percent interest in the company. (Id. at ¶¶ 202-205)

         On February 29, 2008, Mirra, Troilo, Kolleda, and Tropiano sent a purportedly complete schedule of the private companies in which Jordan and Mirra held joint interests, but did not disclose the assets of subsidiaries, holding companies, or companies related to RAM Capital. (Id. at ¶¶ 206-211) The schedule also failed to disclose other companies in which Jordan and Mirra had joint interests that were active and in good standing at the time the SDA was executed. (Id.at ¶ 213)

         The SDA also misrepresented the total value of the real estate properties jointly held by Jordan and Mirra. (Id. at ¶ 216) Specifically, Mirra, Troilo, Kolleda, and Tropiano represented that a Tahoe property bought in 1999 exclusively by Jordan was jointly held, and they bought two properties in Santa Barbara, California titled in the name of RAM Realty, using money stolen from Jordan and Mirra's joint bank account in the spring of 2004. (Id. at ¶¶ 220-221, 224-227, 231-235) The SDA also represented that Jordan was responsible for fifty percent of the fraudulent encumbrances on the Concord, Virginia property, and underestimated the value of the property by at least $6 million. (Id. at ¶¶ 237-242)

         Moreover, the SDA contained misrepresentations and concealments regarding the contributions to West Highland LLC and the liabilities of the Merrill Lynch accounts, indicating that the assets were jointly held and Mirra had contributed half of the funds, and Jordan and Mirra were jointly and severally liable for any liabilities, when in fact the contributions were made solely by Jordan and the liabilities were incurred solely by Mirra. (Id. at ¶¶ 245-252) Mirra succeeded in inducing Jordan to surrender fifty percent of the value of the Merrill Lynch asset accounts by falsely assuming fifty percent of the joint liabilities, and Jordan paid Mirra $3.4 million as consideration for his assumption of the liabilities. (Id. at ¶¶ 254-255) Mirra, Troilo, Kolleda, and Tropiano also falsely represented that all of Mirra's financial obligations to Jordan prior to January 31, 2003 had been satisfied. (Id. at ¶¶ 257-262)

         Contemporaneous with the execution of the SDA, Mirra and Jordan entered into a Mutual General Release Document ("Release"), which purported to release defendants from liability arising from their fraudulent conduct. (Id. at ¶¶ 264-267) According to Jordan, she reviewed the terms and conditions of the Release in March 2008 and informed her counsel that she wanted the following portion from paragraph 3 of the Release[6] stricken:

Jordan, for and on behalf of (x) herself, her heirs and beneficiaries, (y) her affiliates and each of their limited and general partners, officers, directors, stockholders, members, managers, employees, attorneys, advisors and agents, and (z) each such foregoing person's or entity's predecessors, successors and assigns (collectively, the "Jordan Releasing Parties"), agrees to and hereby does irrevocably release and forever discharge (a) Raymond A. Mirra, Jr., (b) his heirs and beneficiaries, his affiliates and the officers, directors, stockholders, employees, agents, insurers and attorneys of each such affiliate, and (c) each such foregoing person's or entity's predecessors, successors and assigns (collectively the "Mirra Released Parties") from any and all manner of actions, causes of action, claims, offsets, demands, judgments, complaints, executions, regulatory challenges, losses, damages, expenses, fees, debts, representations, warranties or liabilities of any kind whatsoever, whether arising out of state, federal or foreign law, rule, regulation or equity, whether known or unknown, accrued or not accrued, asserted or not asserted, matured or not matured, suspected or not suspected, fixed or contingent, foreseeable or unforeseeable, direct or indirect (each, a "Claim", and collectively, "Claims"), which the Jordan Releasing Parties ever had, now have or hereafter can, shall or may have or acquire against the Mirra Released Parties, or any of them, by reason of any and all facts, circumstances, transactions, events, statements, representations, warranties, occurrences, acts, or omissions (whether or not knowingly, intentional, reckless or negligent; whether or not based on, due to or resulting from solely the conduct, action, activity, omission or fault of one or more of the Jordan Released Parties; and with or without any conduct, action, activity, omission or fault of the Jordan Releasing Parties), which occurred, arose or existed at any time on or before the date of this Release Agreement.

(Id. at ¶¶ 267-68) Mirra, Troilo, Kolleda, and Tropiano allegedly agreed to strike the language and sent signature pages to Jordan's counsel. (Id. at ¶ 270) Troilo resent the signature page of the Release for execution without removing the disputed language from the Release, and neither Jordan nor her counsel reviewed the full version of the Release prior to its execution. (Id. at ¶¶ 271-277)

         D. The Conundrum Trust

         In December 2002, Mirra and Troilo approached Jordan regarding the establishment of two grantor retained annuity trusts ("GRATs"), the Hawk Mountain Trust ("HM Trust") and the Conundrum Trust, for the benefit of Mirra and Jordan's children. (Id. at ¶ 280) Mirra and Troilo represented that Jordan would be the settlor of the HM Trust and Mirra would be the settlor of the Conundrum Trust. (Id. at ¶ 281) The trusts were allegedly intended to receive the proceeds expected from the ABC acquisition of U.S. Bioservices, and Jordan was led to believe that she would still control the assets of the Hawk Mountain LLC and that over $3.5 million would be saved in capital gains tax. (Id. at ¶¶ 282-283) Mirra and Troilo falsely represented to Jordan that she could not act as a protector of her own trust, and she acquiesced to the appointment of Mirra . as protector of the HM Trust. (Id. at ¶¶ 284-285)

         In April 2010, Eizen contacted Jordan's attorneys in his capacity as attorney for Troilo and Kolleda, as trustees of the HM Trust, and Mirra, as protector, taking a position directly adverse to Jordan's interests. (Id. at ¶¶ 286-287) On May 24, 2010, Eizen sent a letter to Jordan's attorney, falsely stating that Jordan had resigned as protector of the Conundrum Trust and attaching a fraudulent document regarding the resignation. (Id. at ¶ 288) On March 9, 2011, Eizen produced a disclaimer document dated June 30, 2009, which falsely purported that Jordan agreed to disclaim any right her son may have had to benefit from the Conundrum Trust as the adopted child of Mirra. (Id. at ¶ 289) Another fraudulent disclaimer of Jude Mirra's interests in the Conundrum Trust was dated November 19, 2009. (Id. at ¶¶ 291-292)

         III. LEGAL STANDARD

         Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Umland v. Planco Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008).

         To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.

         When determining whether dismissal is appropriate, the court must take three steps.[7]See Santiago v. Warminster Twp.,629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject conclusory allegations. Id. at 678. Third, the court should assume the veracity of the well-pleaded factual allegations identified under the first prong of the analysis, and determine whether they are sufficiently alleged to state a claim for relief. Id; see also Malleus v. George,641 F.3d 560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on [the court's] experience and common sense." Id. at 663-64; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where the well-pleaded facts do not permit the court to infer more than the ...


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