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Matthews v. Stolier

United States District Court, E.D. Louisiana

April 15, 2015




Before the Court is a Motion for Reconsideration (Doc. 81) and two Motions to Dismiss (Docs. 95 & 97). For the following reasons, the Motions are GRANTED IN PART.


Plaintiffs, Charles Matthews and his wife Sherita Matthews, filed this suit in Louisiana state court asserting a litany of claims against multiple defendants. Defendants removed the matter to this Court, invoking the Court's federal question jurisdiction, and promptly filed several motions to dismiss. The Court issued an Order granting the motions in part ("First Order"). In the First Order, the Court specifically delineated which claims were dismissed, which claims survived, and which of the dismissed claims Plaintiffs were granted leave to amend. Plaintiffs filed an Amended Complaint that added 45 pages of allegations to the already 70-page Complaint. While Plaintiffs' Amended Complaint has increased the length of the Complaint, it has had the opposite effect on its clarity. Plaintiffs also filed a Motion for Reconsideration, in which they argue that much of the First Order was incorrect. For their part, Defendants have filed a new round of motions to dismiss, arguing that the Amended Complaint does not cure any of the deficiencies identified by the Court in the First Order.

The prolix nature of the Complaint and its amendments have made the Court's review of the pleadings very difficult. This is not because the facts of this case are exceedingly complex. Rather, in the Court's view, it appears that Plaintiffs have ignored Rule 8(a)'s requirement that a complaint set out a " short and plain " statement of the claims.[1] The relevant facts are set forth as follows.

Sometime prior to the events giving rise to this suit, Lazarus Healthcare, LLC ("Lazarus") acquired ownership of Camillus Specialty Hospital, LLC ("Camillus"), [2] a long-term acute care ("LTAC") hospital in Gretna, Louisiana. Charles Matthews is the sole owner of Lazarus.

In the fall of 2012, a dispute developed between Camillus and the landlord of the building that housed the hospital. During the course of that dispute, Matthews began searching for another facility to house Camillus. While he attempted to resolve the facility issues, Matthews also sought management assistance. To that end, Matthews retained Defendant Red River Healthcare Management Company, LLC ("Red River") to provide management services to Camillus. Red River is owned and operated by Defendants Jimmy and Connie Morgan ("the Morgans").

Matthews eventually discovered that Louisiana Speciality Hospital, LLC ("LSH"), an LTAC operating in the West Jefferson Medical Center, was closing and he began to explore the possibility of moving Camillus into the space being vacated by LSH.[3] As Matthews pursued this opportunity, he learned that the then-operator of LSH might be interested in selling the entire facility, including its license to operate.[4] Matthews retained Defendant Steve Sullivan, an attorney, to negotiate the terms of the sale. Defendant Michael Schulze allegedly assisted Sullivan with the preparation of various documents.[5] Plaintiffs claim that Sullivan and Schulze are employed by several named law firms ("Law Firm Entities").[6]

Plaintiffs claim that, during the negotiations to purchase LSH, Sullivan began conspiring with the other Defendants to deprive Matthews of the opportunity to purchase LSH. Despite the alleged conspiracy, WJLT Hospital, LLC ("WJLT") was formed to purchase LSH. Matthews held a 91.1% ownership interest in WJLT, Sullivan held a 4.9% interest, and another individual held the remaining 4%. WJLT purchased LSH from the hospital's previous owner. As part of the contract to purchase LSH, Plaintiffs claim that Matthews was forced to appoint Red River as the manager of WJLT and divest himself of his interest in St. Charles Rehabilitation Hospital, LLC.[7]

After LSH was purchased, Plaintiffs claim that Sullivan and Schulze engaged in a series of fraudulent acts designed to mislead Matthews into believing that LSH was nearly insolvent. Plaintiffs allege that Defendants then exploited this situation by coercing Matthews into signing a power of attorney ("Power of Attorney") granting James Morgan the authority to sell LSH. After Matthews signed the Power of Attorney, ownership of LSH was transferred to JLTAC, LLC ("JLTAC"), an LLC owned by Sullivan and his law partner, Defendant Jack Stolier. The contract of sale was executed by Morgan, acting on behalf of WJLT pursuant to the Power of Attorney.

Plaintiffs explain that, shortly after the Power of Attorney was executed, LSH received a payment of nearly $800, 000. Plaintiffs allege that Defendants knew about the pending payment but deliberately concealed it from Matthews to secure his consent to the sale. Plaintiffs assert that Matthews would never have executed the Power of Attorney had he known that LSH was in fact financially stable.

Plaintiffs also allege that, during the brief time that Matthews owned LSH, Camillus made several loans to LSH. After JLTAC acquired ownership of LSH, Matthews demanded repayment of the loans on behalf of Camillus. Plaintiffs claim that, after Matthews demanded repayment, Defendants engaged in a second conspiracy in which they fraudulently divested Matthews of his ownership interest in Camillus, thus depriving him of the proceeds of the loans. Ultimately, Plaintiffs request that the Court undo a series of transactions and place Matthews in full ownership of both Camillus and LSH. Plaintiffs also seek damages for the various alleged wrongful acts of Defendants.

After the Court's ruling on the first motion, the following claims remained: (1) a fraud claim, sounding in tort, against Sullivan and the Morgans; (2) a claim to nullify the Power of Attorney, and any contracts executed pursuant to the Power of Attorney, on the basis of fraud; (3) breach of fiduciary duty claims against the Morgans, Red River, Sullivan, and the Law Firm Entities; (4) a breach of contract claim related to the contract selling LSH to JLTAC; (5) a legal malpractice claim against Sullivan and the Law Firm Entities; (6) negligence claims against the Morgans and Red River; and (7) claims for violations of Louisiana and federal securities laws.

Plaintiffs have taken two separate actions in an effort to revive some of the claims dismissed by the Court. First, they have filed a Motion for Reconsideration. In the Motion for Reconsideration, Plaintiffs ask the Court to reinstate the following claims:

1) All claims brought on behalf of St. Charles Rehabilitation Hospital, LLC
2) All claims brought on behalf of Lazarus Healthcare, LLC
3) All claims brought on behalf of WJLT Hospital, LLC
4) All claims brought on behalf of Camillus Specialty Hospital, LLC
5) All claims brought on behalf of Louisiana Specialty Hospital, LLC
6) Claims against Stolier for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraud, and negligence
7) Breach of contract claims for breach of a legal services agreement, an executive services agreement, and several promissory notes
8) A legal malpractice claim against Schulze
9) Unjust enrichment claims pled in the alternative
10) A claim seeking to impose solidary liability on Stolier for the alleged actions of Sullivan and the Law Firm Entities.

Second, Plaintiffs filed an Amended Complaint that purports to assert/reassert the following claims:

1) A claim against Stolier for aiding and abetting breach of fiduciary duty
2) A breach of contract claim for breach of an executive ...

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