Grado v. Med., Indus., & Sci. Prods. Corp.

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GORDON GRADO, M.D., et al., Plaintiffs, v. MEDICAL, INDUSTRIAL, AND SCIENTIFIC PRODUCTS CORPORATION, et al., Defendants.

No. 1:24-cv-158

United States District Court, S.D. Ohio, Western Division

October 31, 2024

OPINION AND ORDER

DOUGLAS R. COLE UNITED STATES DISTRICT JUDGE

Plaintiffs Gordon Grado, M.D., and Centro de Especialidad Oncologica (CdEO), have sued Defendants Jordan Medical Group, LLC (JMG), and its president Suleiman A. Refaei, as well as Medical, Industrial, and Scientific Products Corporation (MIS), and its president Jose Rodriguez in tort and contract for Defendants' failure to deliver a linear accelerator machine (LINAC). JMG and Refaei have moved to dismiss claiming that (1) the res judicata effect of a prior judgment in a different suit that MIS (the other defendant here) prosecuted against them involving the same transaction bars CdEO's current claims against them, (2) CdEO lacks standing to sue, and (3) Refaei is not a proper defendant.

For the reasons explained below, the Court concludes that CdEO has standing to sue, Grado and CdEO have alleged valid claims against Refaei, and that several of these claims are not precluded based on the prior MIS and Rodriguez suit (although others are). As a result, the Court GRANTS IN PART AND DENIES IN PART JMG's and Refaei's Motion to Dismiss for Failure to State a Claim (Doc. 20). Specifically, the Court DISMISSES WITH PREJUDICE the promissory estoppel (Count IV), unjust enrichment (Count V), trespass to chattel (Count VI), and conversion (Count VII) claims in the Amended Complaint (Doc. 11) against JMG and Refaei.

BACKGROUND^[1]

Grado owns and operates CdEO, a Mexican company running oncology centers in Mexico. Grado sought to obtain a LINAC machine to help treat CdEO's cancer patients. (Doc. 11 ¶¶ 1-2, 9-10, 30, #73-74, 78). In the past, Grado tried to work with JMG and Refaei as a source for fulfilling his medical equipment needs. (Id. ¶ 16, #76). But JMG and Refaei had proven unreliable. (Id. ¶ 17, #76). So Grado instead contracted with MIS and Rodriguez for a LINAC machine, based on Rodriguez's representation to Grado and CdEO that MIS owned a LINAC in good working condition that it could deliver immediately upon sale. (Id. ¶¶ 11, 13, #75; Doc 11-1).^[2]

Unbeknownst to Grado and CdEO, MIS and Rodriguez instead were acting as brokers for JMG and Refaei. That is, MIS and Rodriguez were planning to sell JMG's and Refaei's LINAC machine to Grado (who would then in turn transfer it to his company CdEO). (Doc. 11 ¶¶ 12, 20-26, #75-77). To accomplish this one-two, MIS and Rodriguez signed a purchase agreement with JMG and Refaei that governed the sale of the LINAC from JMG (and Refaei) to MIS (and Rodriguez), and another agreement where JMG and MIS agreed with each other that they had “joined efforts to sell a [LINAC] to ... Grado ... for a project in the city of Aguascalientes[,] [] Mexico”-the new oncology clinic Grado and CdEO planned to open. (Id. ¶¶ 2, 24-25, #73, 77; Docs. 11-2, 11-3); see supra note 2. Defendants' joint venture to sell a LINAC to Grado occurred despite Grado's expressly informing MIS and Rodriguez that he did not want to do any further business with JMG and Refaei. (Doc. 11 ¶¶ 18-19, #76). In any event, based on MIS's and Rodriguez's (mis)representing that they owned the LINAC they were selling, Grado executed a purchase agreement with MIS to personally purchase the LINAC and paid the full price for it. Grado's plan was to transfer the LINAC to CdEO when it was delivered to him. (Id. ¶¶ 13-15, 30, #75, 78; Doc. 11-1). MIS and Rodriguez accepted these payments and paid some of the funds to JMG and Refaei. (Doc. 11 ¶ 27, #77).

Rather than deliver the LINAC as agreed, though, JMG and Refaei sought another $25,000 (though the Amended Complaint does not make clear of whom they demanded this additional payment). (Id. ¶ 28, #77). And not only did no Defendant deliver the LINAC to Grado or CdEO, but no one refunded any money either. (Id. ¶ 29, #77). As a result, Grado and CdEO allege that (1) they had to buy another LINAC to replace the one they were to receive under their contract with MIS and Rodriguez, and (2) the delay in obtaining that replacement machine caused Grado and CdEO to lose business and clientele. (Id. ¶ 30, #78).

For these harms, on March 25, 2024, Grado and CdEO brought this action raising several contract and tort claims against all four Defendants.^[3] (Compl., Doc. 1). Against MIS and Rodriguez (the counterparties to Grado's contract) alone, Grado and CdEO raised claims for breach of contract (Count I), fraudulent inducement (Count II), and negligent misrepresentation (Count III). (Id. ¶¶ 31-49, #78-81). Against all four Defendants, Grado and CdEO raised claims for promissory estoppel (Count IV), unjust enrichment (Count V), fraudulent misrepresentation over the proper ownership of the LINAC machine (Count VIII), and civil conspiracy (Count X). (Id. ¶¶ 50-59, 69-75, 82-85, #81-82, 84-85, 86-87). Against just JMG and Refaei (the LINAC owners, but parties with whom Grado had no direct contract), Grado and CdEO raised claims of trespass to chattel (Count VI), conversion (Count VII), and tortious interference with contract (Count XI). (Id. ¶¶ 60-68, 86-90, #82-84, 87). And finally, against MIS, Rodriguez, and JMG, Grado and CdEO raised a breach-of-contract claim (Count IX) for Defendants' breach of the agreement recognizing Grado as the third-party beneficiary of the transfer of the LINAC from JMG and Refaei to MIS and Rodriguez. (Id. ¶¶ 76-81, #85-86).

MIS and Rodriguez have just recently been served. (Docs. 30, 31). But JMG and Refaei were served some months back, (Docs. 16, 17), and they have moved to dismiss. (Doc. 20).

Their main argument turns on their belief that this suit fails due to the res judicata effect of a judgment in a prior contract action that MIS (the company acting as the middleman) brought against JMG and Refaei (who actually owned the LINAC).^[4] (Id. at #117). That MIS suit, which the company filed on July 29, 2021, arose out of the same set of facts and involved several contract and tort claims arising out of JMG's and Refaei's failure to deliver the LINAC to MIS as agreed in the contract between them. (Compl., Med., Indus. & Sci. Prods., Inc. v. Jordan Med. Grp., LLC, No. 1:21-cv-555 (S.D. Ohio Aug. 27, 2021), Doc. 2). After some initial motions practice (that never resulted in a ruling), the Court dismissed with prejudice MIS's action against JMG and Refaei for failure to prosecute per Federal Rule of Civil Procedure 41(b). (Order Dismissing Action for Failure to Prosecute, Med., Indus. & Sci. Prods., Inc. v. Jordan Med. Grp., LLC, No. 1:21-cv-555 (S.D. Ohio Oct. 18, 2022), Doc. 22). And that Rule 41(b) dismissal was then reduced to a judgment. (J. in a Civil Case, Med., Indus. & Sci. Prods., Inc. v. Jordan Med. Grp., LLC, No. 1:21-cv-555 (S.D. Ohio Oct. 18, 2022), Doc. 23). JMG and Refaei maintain that judgment precludes all Plaintiffs' claims-even though neither Grado nor CdEO were parties to MIS's action. (Doc. 20, #120-25).

On top of believing that the judgment in that previous action bars Grado and CdEO's claims against them now, JMG and Refaei raise two other arguments. First (although failing to cite Rule 12(b)(1)), they argue that CdEO lacks standing to bring this suit. (Id. at #125-26). Beyond that they contend that Refaei is not a proper defendant because he is sued in his individual capacity for actions he took on behalf of JMG. (Id. at #126). Plaintiffs have opposed this motion in full, (Doc. 23), and JMG and Refaei have since replied, (Doc. 26). The matter is now ripe for review.

LEGAL STANDARD

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a “complaint must present sufficient facts to ‘state a claim to relief that is plausible on its face.'” Robbins v. New Cingular Wireless PCS, LLC, 854 F.3d 315, 319 (6th Cir. 2017) (quoting Bell Atl. Corp. v. Twombly, 550 U.S 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In assessing plausibility, the Court “construe[s] the complaint in the light most favorable to the plaintiff.” Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir. 2008) (quotation omitted). But while well-pleaded allegations are accepted as true, they are just that- allegations.

A court analyzing a motion to dismiss generally must confine its review to the pleadings. Armengau v. Cline, 7 Fed.Appx. 336, 343 (6th Cir. 2001). But if “a document is referred to in the pleadings and is integral to the claims, it may be considered without converting a motion to dismiss into one for summary judgment.” Com. Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335-36 (6th Cir. 2007); Fed.R.Civ.P. 10(c). These “written instruments are records falling within a narrowly defined class of legally significant documents on which a party's action or defense is based.” Anderson v. ABF Freight Sys., Inc., No. 1:23-cv-278, 2024 WL 51255, at *9 (S.D. Ohio Jan. 4, 2024) (cleaned up). “[T]hey often create or define legal rights or obligations, or define or reflect a change in legal relationships.” Id. (cleaned up). “Even so, a court will not credit a document attached to a motion to dismiss [or other briefing] that is not integral to or referenced in the complaint, or is otherwise unlike quintessential examples of written instruments-for example, when the exhibit is unsigned and undated (i.e., lacks self-verifying qualities).” Washington v. City of Cincinnati, No. 1:23-cv-230, 2024 WL 474403, at *2 (S.D. Ohio Feb. 7, 2024) (cleaned up)....