Elevation Health LLC v. Americare, Inc.

• Court: District Court, D. Nevada
• Decided: September 29, 2024
• Docket: 2:22-cv-01590
• Status: Unknown

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 ELEVATION HEALTH, LLC, 4 Plaintiff, Case No.: 2:22-cv-01590-GMN-NJK 5 vs. ORDER GRANTING IN PART AND 6 DENYING IN PART MOTION FOR AMERICARE, INC., et. al., 7 SUMMARY JUDGMENT

Defendants. 8 9 10 Pending before the Court is the Motion for Summary Judgment, (ECF No. 62), filed by 11 Plaintiff and Counter Defendant Elevation Health, LLC (“Elevation”). Defendants Jennifer and 12 Mario Gonzalez filed a Response, (ECF No. 65), to which Plaintiff filed a Reply, (ECF No. 13 67). 14 For the reasons discussed below, the Court DENIES Plaintiff’s Motion as to its claims 15 against both Jennifer and Mario Gonzalez and GRANTS Plaintiff’s Motion for Summary 16 Judgment as to the Americare’s counterclaims. 17 I. BACKGROUND 18 This case arises out of Elevation’s order for over-the-counter COVID-19 tests from 19 Americare, a healthcare industry “middle-man” that sources products from suppliers and 20 delivers them to healthcare providers. (Gonzalez Decl. ¶ 2, Ex. 1 to Resp., ECF No. 65-1). 21 Joe Goldsmith, CEO of Plaintiff Elevation, approached Defendant Mario Gonzalez, CEO of 22 Defendant Americare, about a need for COVID-19 antigen tests for resale over-the-counter 23 distribution to its United States’ customers. (Id. ¶ 3). Prior to this request, Elevation had 24 entered into at least two other contracts with Americare to purchase COVID-19 tests authorized 25 for sale in the United States. (Goldsmith Decl. ¶ 5, Ex. 1 to Mot. Summ. J., ECF No. 62-1). To 1 source the requested tests, Gonzalez contacted Global Health Supply and Silver Peaks 2 Holdings, (collectively, “GHS”). (Gonzalez Decl. ¶ 4, Ex. 1 to Resp.). GHS informed him that 3 they had Flowflex COVID-19 tests available that were approved for use by the United States 4 Food and Drug Administration, (“FDA”). (Id.). On October 20, 2021, Mr. Kasbee, a GHS 5 representative, sent Gonzalez an email containing several documents about the “OTC” 6 Flowflex COVID-19 Rapid Antigen Home Test, including a FDA letter stating that the tests 7 had been approved for emergency use authorization, (“EUA”). (Id.); (Kasbee Email, Ex. 2 to 8 Resp., ECF No. 65-2). The email subject line is “Flowflex EUA-ACONlab-FlowflexAG-letter, 9 Shipping Data and Specs.” (Kasbee Email, Ex. 2 to Resp.). 10 Within an hour, Gonazlez forwarded the email to Goldsmith at Elevation without any 11 additional text or changes to the original email from Kasbeee. (Gonzalez Decl. ¶ 5, Ex. 1 to 12 Resp.); (Gonzalez Email, Ex. 7 to Mot. Summ. J., ECF No. 62-7). The next day, October 21, 13 Goldsmith asked Gonzalez if he could secure the Flowflex tests for $8 per test. (Gonzalez Decl. 14 ¶ 6, Ex. 1 to Resp.). Gonzalez confirmed the price and represented that he could get the tests 15 within the week. (Id.); (WhatsApp Messages at 47–48, Ex. 3 to Resp., ECF No. 65-4). On

16 October 22, Americare sent an invoice for 59,520 “Flowflex Antigen OTC” tests for $476,160 17 payable upon receipt. (Oct. 22 Invoice, Ex. 3 to Mot. Summ. J., ECF No. 62-3). Americare 18 contracted with GHS to buy the tests at $7 per test for a total purchase price of $416,640. 19 (Gonzalez Decl. ¶ 8, Ex. 1 to Resp.). 20 The tests from GHS arrived in late November and Gonzalez met with a GHS 21 representative at a warehouse to receive them. (Id. ¶ 9). Gonzalez noticed that the tests kits 22 were marked as “CE” and were in blue boxes with white stickers stating “For use under 23 Emergency Use Authorization (EUA) only.” (Id.); (Resp. to Request for Admission, Ex. 12 to 24 Mot. Summ. J., ECF No. 62-12); (Photographs of Subject Test, Ex. 6 to Mot. Summ. J., ECF 25 No. 62-6). When Gonzalez asked about the stickers, the representative assured him that the 1 tests were fully approved as EUA in the United States and showed him a FDA letter purporting 2 as much. (Gonzalez Decl. ¶ 10, Ex. 1 to Resp.). Gonzalez called Goldsmith, showed him the 3 stickers on the boxes, and asked how he wanted to proceed. (Id. ¶ 11). Goldsmith approved the 4 delivery and instructed Gonzalez to rush the tests to Maryland. (Id.). Americare drop-shipped 5 the COVID-19 tests to warehouses beginning November 24, 2021. (Goldsmith Decl. ¶ 7, Ex. 1 6 to Mot. Summ. J.). 7 On January 9, 2022, ACON Laboratories issued a press release explaining that there 8 were two types of Flowflex COVID-19 tests, but that only one of them was approved for sale in 9 the United States. (Acon Press Release, Ex. 7 to Mot. Summ. J., ECF No. 62-7). The Flowflex 10 COVID-19 Antigen Home Tests (white box) were approved, but the Flowflex SARS-CoV-2 11 Antigen Rapid Tests (blue box) were not. (Acon Press Release, Ex. 7 to Mot. Summ. J., ECF 12 No. 62-7). On the same day, the FDA issued a recall for the CE blue-box tests. (FDA Recall, 13 Ex. 8 to Mot. Summ. J., ECF No. 62-8). This is where the conflict arises. GHS emailed 14 Gonzalez details about the approved white-box tests, which was the email that Gonzalez 15 forwarded to Goldsmith. (Kasbee Email, Ex. 2 to Resp., ECF No. 65-2). So, it appears that

16 both Americare and Elevation expected to receive the approved white-box tests. But the tests 17 that GHS sent, and Americare then shipped to Elevation, were the blue-box tests. 18 A week after the recall, Goldsmith sent Gonzalez a message stating that the Flowflex 19 tests were “blue boxed and no good.” (WhatsApp Messages at 59, Ex. 3 to Resp.). When 20 Gonzalez replied that he didn’t know there was a problem with the tests, Goldsmith wrote that 21 perhaps GHS had lied to Americare or were also lied to themselves. (Id.). The next day, 22 Goldsmith messaged, “All the tests you supplied were CE!” “This was fraud bro,” and “I never 23 ordered CE.” (Id.). Gonzalez insisted that he had no idea because the boxes said they were 24 EUA authorized, and Goldsmith responded that this was “now a legal issue.” (Id.). 25 1 Gonzalez offered to replace the blue-box tests with approved white-box tests and asked 2 Goldsmith to send back the blue-box tests. (Id. at 60–61). Goldsmith said that he would not 3 return the tests because the FDA instructed for them to be disposed of. (Id.); (Gonzalez Decl. 4 ¶¶ 19–21, Ex. 1 to Resp.). Goldsmith also declined to provide proof that the tests were actually 5 destroyed. (Id.). Gonzalez reminded Goldsmith that he called him when the tests arrived in his 6 warehouse, showed him the blue-box tests, and that Goldsmith agreed they should be shipped. 7 (WhatsApp Messages at 64, Ex. 3 to Resp.). Goldsmith asserted for the first time that he never 8 saw the goods. (Id.). Because Goldsmith did not return the tests or provide proof they were 9 disposed of, GHS and Americare did not replace the blue-box tests. (Gonzalez Decl. ¶ 21, Ex. 1 10 to Resp.). Elevation acquired replacement tests from a different supplier. (Goldsmith Decl. ¶ 11 13, Ex. 1 to Mot. Summ. J.). According to Elevation, Americare has refused to accept a return 12 of the blue-box COVID-19 tests. (Id. ¶ 15). 13 In September 2022, Elevation initiated the instant action against Americare, Gonzalez, 14 and Mrs. Gonzalez. (Compl., ECF No. 1). Americare filed an Answer and brought 15 Counterclaims against Elevation. (Ans., ECF No. 12). Americare also filed a Third-Party

16 Complaint against GHS defendants based on their representations that the Flowflex tests 17 bought by Americare could be sold in the United States and were approved by the DFA. 18 (Americare First Am. Compl., ECF No. 52). Elevation filed the instant Motion for Summary 19 Judgment on its claims against Americare, the Gonzalezes, and Americare’s counterclaims. 20 (See generally Mot. Summ. J.). About a month later, Americare filed a Chapter 11 Notice of 21 Bankruptcy. (Not., ECF No. 66). Because of the bankruptcy, Elevation dismissed its claims 22 against Americare, but its claims against Mario and Jennifer Gonzalez, as well as Americare’s 23 counterclaims, were not subject to the bankruptcy stay remain unstayed. (Stip. Dismiss, ECF 24 No. 79). 25 1 II. LEGAL STANDARD 2 The Federal Rules of Civil Procedure provide for summary adjudication when the 3 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 4 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 5 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 6 may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 7 (1986). A dispute as to a material fact is genuine if there is a sufficient evidentiary basis on 8 which a reasonable fact-finder could rely to find for the nonmoving party. See id. “The amount 9 of evidence necessary to raise a genuine issue of material fact is enough ‘to require a jury or 10 judge to resolve the parties’ differing versions of the truth at trial.’” Aydin Corp. v. Loral Corp., 11 718 F.2d 897, 902 (9th Cir. 1983) (quoting First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253, 12 288–89 (1968)). “Summary judgment is inappropriate if reasonable jurors, drawing all 13 inferences in favor of the nonmoving party, could return a verdict in the nonmoving party’s 14 favor.” Diaz v. Eagle Produce Ltd. P’ship, 521 F.3d 1201, 1207 (9th Cir. 2008). A principal 15 purpose of summary judgment is “to isolate and dispose of factually unsupported claims.”

16 Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). 17 In determining summary judgment, a court applies a burden-shifting analysis. “When 18 the party moving for summary judgment would bear the burden of proof at trial, it must come 19 forward with evidence which would entitle it to a directed verdict if the evidence went 20 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 21 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 22 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quotation marks and 23 citation omitted). In contrast, when the nonmoving party bears the burden of proving the claim 24 or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to 25 negate an essential element of the nonmoving party’s case; or (2) by demonstrating that the 1 nonmoving party failed to make a showing sufficient to establish an element essential to that 2 party’s case on which that party will bear the burden of proof at trial. See Celotex Corp., 477 3 U.S. at 323–24. If the moving party fails to meet its initial burden, summary judgment must be 4 denied, and the court need not consider the nonmoving party’s evidence. See Adickes v. S.H. 5 Kress & Co., 398 U.S. 144, 159–60 (1970). 6 If the moving party satisfies its initial burden, the burden then shifts to the opposing 7 party to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. 8 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 9 the opposing party need not establish a material issue of fact conclusively in its favor. It is 10 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 11 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 12 Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). However, the nonmoving party “may not rely on 13 denials in the pleadings but must produce specific evidence, through affidavits or admissible 14 discovery material, to show that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 15 1409 (9th Cir. 1991), and “must do more than simply show that there is some metaphysical

16 doubt as to the material facts,” Orr v. Bank of Am., 285 F.3d 764, 783 (9th Cir. 2002). “The 17 mere existence of a scintilla of evidence in support of the plaintiff’s position will be 18 insufficient.” Anderson, 477 U.S. at 252. In other words, the nonmoving party cannot avoid 19 summary judgment by “relying solely on conclusory allegations unsupported by factual data.” 20 See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go 21 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 22 competent evidence that shows a genuine issue for trial. See Celotex Corp., 477 U.S. at 324. 23 At summary judgment, a court’s function is not to weigh the evidence and determine the 24 truth but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249. 25 The evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn 1 in his favor.” Id. at 255. But if the evidence of the nonmoving party is merely colorable or is 2 not significantly probative, summary judgment may be granted. See id. at 249–50. 3 III. DISCUSSION 4 Because the Court granted the parties’ stipulation to dismiss Elevation’s claims against 5 Americare, this Order will determine whether summary judgment is appropriate on Elevation’s 6 remaining claims against the Gonzalezes and on Americare’s counterclaims against Elevation. 7 (See Order Granting Stip., ECF No. 80). 8 A. Elevation’s Claims against the Gonzalezes 9 The Court begins its analysis with Elevation’s claim against Mr. Gonzalez for fraudulent 10 misrepresentation based on communications made prior to the delivery of the blue-box 11 Flowflex SARS-CoV-2 Antigen Rapid Tests. (Compl. ¶¶ 69–80). To succeed on a fraudulent 12 misrepresentation cause of action, the plaintiff must demonstrate “(1) [a] false representation 13 made by the defendant; (2) defendant’s knowledge or belief that its representation was false or 14 that defendant has an insufficient basis of information for making the representation; (3) 15 defendant intended to induce plaintiff to act or refrain from acting upon the misrepresentation;

16 and (4) damage to the plaintiff as a result of relying on the misrepresentation.” Barmettler v. 17 Reno Air, Inc., 956 P.2d 1382, 1386 (Nev. 1998). “The plaintiff bears of the burden of proving 18 every element of fraud by clear and convincing evidence.” Hunt v. Zuffa, LLC, 694 F. Supp. 3d 19 1319, 1328 (D. Nev. 2023). As the moving party with the burden of proof at trial, Elevation 20 must present evidence “which would entitle it to a directed verdict if the evidence went 21 uncontroverted at trial” and must establish the absence of a genuine issue of fact. C.A.R. 22 Transp. Brokerage Co., 213 F.3d 474, 480 (9th Cir. 2000). 23 Elevation argues that Gonzalez, as CEO of Americare, made misrepresentations in the 24 email he forwarded to Goldsmith on October 20 and in the invoice mailed on October 22 25 because he knew he would be providing the blue-box COVID-19 tests rather than the FDA 1 approved tests. (Mot. Summ. J. 24:22–25). Gonzalez responds that neither communication 2 contains information that is actually false. (Resp. 10:2–8, ECF No. 65). The Court agrees with 3 Gonzalez. The email, originally sent by GHS to Americare, contained true information about 4 the white-box tests that were approved by the FDA. Neither party disputes this fact. And the 5 invoice only states that Americare was charging Elevation $476,160 for “Flowflex Antigen 6 OTC” tests. There are two types of Flowflex Antigen OTC tests, and although Gonzalez and 7 Goldsmith both believed they were ordering the FDA-approved Flowflex Antigen tests, the 8 invoice does not contain any actual false information. 9 But even if the invoice were construed to be false due to the omission of which Flowflex 10 test was being ordered, Elevation does not provide evidence that Gonzalez knew in October 11 that Americare would be sending Elevation the blue-box tests. Elevation’s only evidence of 12 Gonzalez’s knowledge is in a Response to a Request for Admission, where Gonzalez “admits 13 that he found out that the tests were marked CE shortly before they were delivered and that 14 Responding Party informed Joe Goldsmith of as much before their delivery.” (Resp. to Request 15 for Admission, Ex. 12 to Mot. Summ. J.). In the very next answer, Gonzalez denies that he

16 knew, prior to their delivery, that the tests were not authorized for sale by the FDA. (Id.). This 17 discovery admission does not demonstrate Gonzalez’s knowledge when the October 22 invoice 18 was sent. It shows only that he realized the boxes were marked “CE” when they arrived in 19 November, which was the reason he called Goldsmith to ensure Elevation still wanted to 20 proceed with the delivery. The admission does not provide affirmative evidence that Gonzalez 21 knew in October that Americare would be receive blue-box tests, or even that there were two 22 types of Flowflex Antigen OTC tests. 23 Elevation’s Reply seems to change course and imply that the “false misrepresentation” 24 occurred when Gonzalez “inspected the CE-marked COVID-19 tests and knew the subject 25 COVID-19 tests were marked CE before their shipment.” (Reply 12:7–9). But Elevation does 1 not explain how Gonzalez’s knowledge constitutes a false misrepresentation, and Gonzalez 2 testified that he called Goldsmith to inform him that the boxes were marked CE. Elevation 3 provided evidence that the CE tests were recalled in January 2022, but this was a month after 4 the boxes were delivered. There is no evidence to indicate that either party knew in November 5 2021 that the blue-box tests could not be resold per Americare’s initial request. In fact, 6 Elevation submitted photographs of the tests they received, and the back of the box states that 7 “This product has not been FDA cleared or approved; but has been authorized by FDA under 8 an EUA.” (Photographs of Subject Test, Ex. 6 to Mot. Summ. J.). Because Elevation failed to 9 identify a false misrepresentation, and otherwise failed to demonstrate scienter, it’s Motion for 10 Summary Judgment is DENIED as to its claim against Mr. Gonzalez. 11 Elevation’s claim for aiding and abetting fraud, brought against Mrs. Jennifer Gonzalez, 12 is similarly DENIED. To establish aiding and abetting, a plaintiff must show that (1) the 13 primary violator breached a duty that injured the plaintiff, (2) the alleged aider and abettor “was 14 aware of its role in promoting [the breach] at the time it provided assistance,” and (3) the 15 alleged aider and abetter “knowingly and substantially assisted” the primary violator in

16 committing the breach. Terrell v. Cent. Washington Asphalt, Inc., 168 F. Supp. 3d 1302, 1314 17 (D. Nev. 2016) (quoting Dow Chem. Co. v. Mahlum, 970 P.2d 98, 112 (Nev. 1998), overruled 18 in part on other grounds by GES, Inc. v. Corbitt, 21 P.3d 11, 15 (Nev. 2001). Because 19 Elevation failed to demonstrate fraud by Mr. Gonzalez, the aiding and abetting claim brought 20 against Mrs. Gonzalez also fails. 21 B. Americare’s Counterclaims against Elevation 22 Americare’s counterclaims are based on a separate transaction. Americare alleges that it 23 delivered 9,000 Indicaid COVID-19 tests valued at $41,850 to Elevation, but that Elevation 24 never paid for them. (Ans. ¶¶ 14–33). Americare therefore brought counterclaims for breach of 25 oral contract, unjust enrichment, and conversion. (Id.) Claims brought by Americare are not 1 stayed in the way that claims against Americare are. See Parker v. Bain, 68 F.3d 1131, 1138 2 (9th Cir. 1995). 3 Americare failed to oppose Elevation’s Motion for Summary Judgment. The opening 4 paragraph of the Opposition states, “Defendants MARIO GONZALEZ (“Mario”) and 5 JENNIFER GONZALEZ (“Jennifer” and collectively, “Defendants”)” oppose the Motion for 6 Summary Judgment. Americare is not mentioned. So even though the Gonzalezes share the 7 same lawyer as Americare, Americare is not an opposing defendant to the pending MSJ. 8 Because Americare, the nonmoving party, bears the burden on these claims, the Court 9 may grant summary judgment for Elevation if it can demonstrate that Americare lacks 10 sufficient evidence to its claims. See Celotex Corp., 477 U.S. at 323–24. Elevation argues that 11 it did not accept Americare’s offer of 9,000 Indicaid tests because a few days after receiving an 12 invoice, Goldsmith discovered that his separate order of Flowflex tests could not be resold in 13 the United States. (Mot. Summ. J. 29:9–13). Elevation also states that there is no evidence of 14 payment or that Americare ever shipped the Indicaid tests to Elevation. (Id. 30:2–16). Because 15 Americare did not oppose the Motion or otherwise provide evidence to demonstrate a genuine

16 issue of material fact, the Court GRANTS Elevation’s Motion for Summary Judgment as to 17 Americare’s counterclaims. 18 C. Elevation’s Request for Sanctions 19 Elevation further requests costs and sanctions associated with preparing for and 20 attending Defendants’ depositions, for which they did not appear. (Mot. Summ. J. 12:12– 21 16:16). Because Motions for Sanctions under Rule 37 are properly decided by the Magistrate 22 Judge in this case, the Court DENIES Elevation’s request without prejudice to allow Elevation 23 the opportunity to file, within 21 days of this Order, a separate Rule 37 motion if it so wishes. 24 25 1 CONCLUSION 2 IT IS HEREBY ORDERED that Plaintiff's Motion for Summary Judgment, (ECF No. 3 || 62), is DENIED in part and GRANTED in part. The Court DENIES summary judgment as 4 || to Elevation’s claims against the Gonzalezes and GRANTS summary judgment as to > || Americare’s counterclaims against Elevation. 6 IT IS FURTHER ORDERED that the parties will have thirty days from the date of this 7 |! Order to file a jointly proposed pretrial order pursuant to LR 16-3(b) using the form provided in 8 16-4. 9 DATED this _29 _ day of September, 2024. 10 11 12 Gloria varro, District Judge 5 UNITE f-ATES DISTRICT COURT

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