American Preferred Prescription, Inc. v. Health Management, Inc.

252 A.D.2d 414, 678 N.Y.S.2d 1, 1998 N.Y. App. Div. LEXIS 8268
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJuly 16, 1998
StatusPublished
Cited by39 cases

This text of 252 A.D.2d 414 (American Preferred Prescription, Inc. v. Health Management, Inc.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Preferred Prescription, Inc. v. Health Management, Inc., 252 A.D.2d 414, 678 N.Y.S.2d 1, 1998 N.Y. App. Div. LEXIS 8268 (N.Y. Ct. App. 1998).

Opinion

—Order, Supreme Court, New York County (Lorraine Miller, J.), entered on or about September 26, 1996, which, inter alia, granted plaintiff’s motion for leave to amend its complaint and denied the motion of defendant Preferred RX, Inc. (RX) for summary [415]*415judgment dismissing the complaint, without prejudice to renewal within 60 days of the filing of a note of issue by plaintiff, unanimously modified, on the law, plaintiffs motion for leave to amend its complaint denied insofar as it seeks to add a fifth cause of action and the motion of defendant Preferred RX, Inc. for summary judgment dismissing the complaint as to it granted and, as so modified, the order is otherwise affirmed, with one bill of costs payable to defendants-appellants. The Clerk is directed to enter judgment in favor of defendant-appellant Preferred RX, Inc. dismissing the complaint as against it.

Plaintiff and RX are competitors in the mail-order pharmacy business. In January 1993, RX obtained a $2.2 million judgment (later reversed on appeal) against plaintiff, one of its principals and two affiliated companies as a result of which plaintiff filed for Chapter 11 bankruptcy.

The original verified complaint in this action alleges four causes of action: tortious interference with existing contractual relationships; tortious interference with prospective contractual relationships; false descriptions in consumer advertising or promotion in violation of the Lanham Act (15 USC § 1125); and defamation. All of the claims are based on plaintiffs allegations that RX, as a creditor in the bankruptcy proceeding, was able to obtain confidential information about plaintiffs operation and plans, which it then shared with the other defendants to utilize in a common scheme to destroy plaintiffs business, including allegations that defendants told plaintiffs existing and potential customers and business associates that plaintiff and its principals engaged in fraudulent and illegal activities.

The fifth cause of action sought to be asserted against defendants Cost Controls, Inc., Preferred RX, Inc., Health Management, Inc., and the so-called “Ehrler defendants” alleges that, in filing a reorganization plan that was inherently unworkable and in falsely representing to the Bankruptcy Court that Health Management was capable of managing the reorganized debtor, plaintiff herein, those defendants worked a fraud on the Bankruptcy Court that was intentionally designed to delay and impede the bankruptcy process so as to keep plaintiff in bankruptcy as long as possible and to cause it to incur additional and unnecessary attorneys’ fees. It further alleges that the Ehrler defendants were allegedly induced to participate in this scheme by the promise that they would receive full payment of their claims and that they participated in the scheme by stealing confidential proprietary information from plaintiff and providing it to Preferred RX, Cost Controls and their attorneys.

[416]*416As a creditor of plaintiff, RX was entitled to file a reorganization plan (11 USC § 1121 [c]) and, to the extent plaintiff contends that the plan lacked merit or was otherwise vexatious, the proper recourse was to apply for sanctions or other relief to the Bankruptcy Court, which itself noted that if plaintiff’s claim really were for abuse of the bankruptcy process, it would be a matter for that court to decide. Plaintiff does not refute RX’s contention that plaintiff did not file a valid reorganization plan until May 1996, eight months after Cost Controls had filed its own plan, or that other third parties also submitted reorganization plans, or even that plaintiff had caused most of the delays. It is thus unclear how Cost Control’s plan hindered or prolonged the bankruptcy proceeding.

If the fifth cause of action were interpreted to allege a prima facie tort, of which abuse of process is a type (Curiano v Suozzi, 102 AD2d 759, affd 63 NY2d 113), plaintiff still fails to state a cause of action inasmuch as it fails to allege that defendants’ intent to harm plaintiff was their sole motive (Smukler v 12 Lofts Realty, 156 AD2d 161, 163, lv denied 76 NY2d 701; WFB Telecommunications v NYNEX Corp., 188 AD2d 257, 258, lv denied 81 NY2d 709). Plaintiff, in its complaints, as originally pleaded and as amended, admits that defendants, at least in part, desired to destroy plaintiff’s business in order to eliminate it as a competitor (either by wiping it out or taking it over) and thus advance their own financial interests.

In its brief, plaintiff denominates the fifth cause of action as a “conspiracy to interfere with contractual and pre-contractual relations and to destroy a business by the use of unlawful means or by the improper use of lawful means”. While there is no cognizable action for a civil conspiracy, a plaintiff may plead conspiracy in order to connect the actions of the individual defendants with an actionable underlying tort and establish that those acts flow from a common scheme or plan (Smukler v 12 Lofts Realty, supra). However, plaintiff has failed to sufficiently allege an actionable underlying tort and thus there is no support for the conspiracy allegations. The original and amended complaints, as well as Eleanor Adiel’s affidavits, reveal that all the identified contracts that defendants allegedly interfered with (and which are the predicates of the remaining causes of action) were entered into prior to September 1995, when the reorganization plan was filed. Plaintiff has failed to allege an actual breach of a contract or any specific business relationships that it was prevented from entering into by the purported tortious interference. Plaintiff only states that defendants acted “to disrupt the business of [plaintiff]”.

[417]*417Furthermore, plaintiff has not pleaded facts such as would indicate that it suffered any damages from the alleged tortious interference (NRT Metals v Laribee Wire, 102 AD2d 705, 706, appeal dismissed 63 NY2d 770). The only damages pleaded are “additional and unnecessary attorneys [sic] fees” incurred in litigating the reorganization plan, which are thus unrelated to any tortious interference with economic relations.

As to the allegations about the Ehrler defendants, RX states that plaintiff has settled all its claims against the Ehrler defendants in Bankruptcy Court pursuant to a general release. Having settled those claims and executed a general release, plaintiff is precluded from asserting them in this action.

RX’s motion for summary judgment dismissing the amended complaint should also have been granted. Although the IAS Court denied the motion solely on the ground that additional discovery should be had, the court itself noted the extensive discovery that had been undertaken in Federal court and plaintiff met the motion on the merits and does not argue on appeal that any further discovery is needed.

In its first cause of action, plaintiff asserts that defendants tortiously interfered with its existing contracts by disseminating false and misleading information about plaintiff to its “customers, business associates and potential customers and business associates”.

A claim of tortious interference with contract requires: (1) the existence of a valid contract between plaintiff and a third party, (2) defendant’s knowledge of the contract, (3) defendant’s intentional procurement of a breach of the contract without justification, (4) actual breach of the contract, and (5) resulting damages. (Lama Holding Co. v Smith Barney, 88 NY2d 413, 424, affg

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Cite This Page — Counsel Stack

Bluebook (online)
252 A.D.2d 414, 678 N.Y.S.2d 1, 1998 N.Y. App. Div. LEXIS 8268, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-preferred-prescription-inc-v-health-management-inc-nyappdiv-1998.