Jordan Health Products III, Inc. v. Osi Holdings I, LLC

CourtNew Jersey Superior Court Appellate Division
DecidedFebruary 26, 2024
DocketA-3028-21
StatusUnpublished

This text of Jordan Health Products III, Inc. v. Osi Holdings I, LLC (Jordan Health Products III, Inc. v. Osi Holdings I, LLC) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jordan Health Products III, Inc. v. Osi Holdings I, LLC, (N.J. Ct. App. 2024).

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3028-21

JORDAN HEALTH PRODUCTS III, INC., and ONCOLOGY SERVICES INTERNATIONAL, INC.,

Plaintiffs-Appellants,

v.

OSI HOLDINGS I, LLC, FOUNDERS EQUITY NY, L.P., FOUNDERS EQUITY I, L.P., UPSTATE LINAC SERVICES, LLC, TREMONT ASSOCIATES, LLC, BERNARD AMATO, JOHN CLAYBOURN, RONALD DRAKE, DOMENIC GRECO, RICHARD HALL, SCOTT JOHN, RICKY KREIDER, LES MANN, JOSEPH O'CONNOR, PHILIP PODMORE, JAMES SHARKEY, WARREN STANTON, VINCENT TERRIBILE, and WILLIAM YAEGER,

Defendants-Respondents. _______________________________

Argued January 17, 2024 – Decided February 26, 2024 Before Judges Whipple, Mayer and Paganelli.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2509-20.

Alfonse R. Muglia argued the cause for appellants (Dentons US LLP, and Jason R. Scheiderer (Dentons US LLP) of the Missouri bar, admitted pro hac vice, attorneys; Erika M. Lopes-McLeman and Jason R. Scheiderer, on the briefs).

Ari J. Silverman argued the cause for respondents OSI Holdings I, LLC, Founders Equity NY, L.P., and Founders Equity I, L.P. (Paduano & Weintraub LLP, attorneys; Anthony J. Paduano, on the brief).

Daniel Seth Eichhorn argued the cause for respondents Philip Podmore, James Sharkey, Ronald Drake, Vincent Terribile, John Claybourn, Upstate Linac Services, LLC, Rick Kreider, Domenic Greco, William Yaeger, Scott John, Warren Stanton, Les Mann, Bernard Amato and Joseph O'Connor (Cullen and Dykman LLP, attorneys; Daniel Seth Eichhorn, of counsel and on the brief; Ryan P. Duffy, on the brief).

Eric S. Latzer argued the cause for respondent Richard Hall (Cole Schotz PC, attorneys; Cameron A. R. Welch and Eric S. Latzer, of counsel and on the brief).

PER CURIAM

Plaintiffs Jordan Health Products III, Inc. (JHP) and Oncology Services

International, Inc. (OSI) (collectively, plaintiffs or Buyers) appeal from March

3, 2022 orders granting summary judgment to defendants OSI Holdings I, LLC

(Holdings), Founders Equity NY, L.P., Founders Equity I, L.P., Philip Podmore,

A-3028-21 2 James Sharkey, Ronald Drake, Vincent Terribile, John Claybourn, Upstate

Linac Services, LLC, Ricky Kreider, Domenic Greco, William Yaeger, Scott

John, Warren Stanton, Les Mann, Bernard Amato, Joseph O'Connor, and

Richard Hall (collectively, defendants or Sellers). Plaintiffs also appeal from a

January 28, 2022 order denying their motion for sanctions against defendants.

We affirm all orders on appeal.

This matter arises from a July 6, 2016 Stock Purchase Agreement (SPA)

between plaintiffs and defendants for the sale of OSI. JHP purchased

defendants' equity in OSI, a company which sold and serviced medical

equipment, for $42.5 million. Defendants signed the SPA in their individual

capacity and as the owners of OSI stock.

The sale of OSI was subject to representations and warranties in the SPA.

We recite the provisions in the SPA relevant to this dispute.

Under Section 5.21 of the SPA, entitled "Foreign Corrupt Practices Act,"

defendants represented and warranted that, as of the closing date for the sale of

OSI, Sellers had not made any payment "where such payment would constitute

a bribe, kickback or illegal or improper payment to assist [OSI] in obtaining

products or services or obtaining or retaining business for, or with, or directing

business to, any [p]erson."

A-3028-21 3 Article X of the SPA, entitled "Indemnification," governed Sellers'

obligation to indemnify Buyers. Defendants agreed to indemnify plaintiffs for

any "Losses" resulting from a breach of Section 5.21 of the SPA. The term

"Losses," defined under Section 1.1 of the SPA, included "any and all losses,

liabilities, obligations, damages, judgments, fines, penalties, fees, costs and

expenses."

The SPA further provided that a claim for indemnification could arise

based on a meritorious third-party action. Thus, Section 10.5 of the SPA

required plaintiffs to promptly notify defendants upon "becom[ing] aware of a

third party claim which [JHP or OSI] believe[d] [was] likely to result in a [c]laim

for indemnification pursuant to this Agreement."

Section 11.5 provided the SPA and all claims arising out of the SPA "shall

be governed by and construed in accordance with the laws of the State of

Delaware."

Having summarized the relevant provisions of the SPA, we recite the facts

pertinent to this appeal.

In May 2019, two related Mexican companies, Centro Oncologico

Internacional and Centro Avanzado de Radioterapia (collectively, CART), filed

a demand for arbitration. In their arbitration demand, CART alleged a breach

A-3028-21 4 of contract related to sales agreements in 2012 and 2013 between CART and

OSI. CART subsequently amended its arbitration demand to include an

allegation that OSI made certain commission payments, which constituted

"commercial bribes in violation of New York law."

In a January 15, 2020 letter, sent pursuant to section 10.5 of the SPA, OSI

included a third-party claim notice advising defendants of CART's amended

arbitration claim, which included an allegation of bribery related to the sale of

equipment by OSI. The third-party claim notice acknowledged plaintiffs'

entitlement to indemnification under Section 5.21 of the SPA was contingent

upon a determination that defendants made a payment constituting "a bribe,

kickback or illegal or improper payment."

Shortly after serving the third-party claim notice, OSI learned CART

separately filed a criminal complaint in Mexico, alleging OSI committed

bribery. As a result, OSI sent a second third-party claim notice to defendants

for indemnification. In a March 16, 2020 letter, defendants rejected plaintiffs'

demand for indemnification under the SPA.

Based on defendants' denial of plaintiffs' indemnification request, and

prior to completion of the arbitration, in April 2020, plaintiffs filed a complaint

against defendants in the Superior Court of New Jersey for indemnification

A-3028-21 5 (State court action) under the SPA. In the complaint, plaintiffs sought to recoup

legal fees and expenses associated with defending OSI in the arbitration.

In an August 14, 2020 order, the trial court dismissed plaintiffs' complaint

without prejudice. The trial court instructed plaintiffs to refile their complaint

after the arbitration, when "damages have accrued [and] are finalized."

The International Centre for Dispute Resolution (ICDR) appointed an

arbitrator. The ICDR arbitrator conducted four days of evidentiary hearings.

The record of the evidentiary hearing before the ICDR arbitrator included

several hundred exhibits and live testimony from witnesses for OSI and CART.

On March 29, 2021, the ICDR arbitrator issued a comprehensive, twenty-

eight-page final award in OSI's favor, denying and dismissing CART's claims in

their entirety. While CART alleged OSI committed fraud, bribery, and other

transgressions, the ICDR arbitrator concluded CART failed to prove its

allegations after a full evidentiary hearing. "[E]ven viewing the record from the

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