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Law360 (May 29, 2020, 9:02 PM EDT ) Adventist Health System says a California attorney and a company that failed to deliver on a $57.5 million deal for 10 million N95 masks have refused to return $2 million in escrow funds even though the deal fell apart, according to a suit filed Friday in Florida.
Altamonte Springs, Florida-based AdventHealth claims attorney Michael H. Weiss and Tomax Capital Management Inc. conspired to keep a cut of the escrow funds despite Tomax's failure to produce the N95 ventilator masks it had promised under a contract with AdventHealth.
"The defendants participated in a fraudulent scheme under which they induced AdventHealth to transfer the escrow funds to the law firm in connection with the sham paymaster agreement to allow the defendants to misappropriate the funds for their own use and purposes," AdventHealth said.
Under the terms of the contract, signed April 8, AdventHealth was to pay $57.5 million for 10 million 3M N95 masks to supply to its facilities across the United States to protect its workers during the coronavirus pandemic. The funds were deposited in Weiss' law firm account, but the masks, which were due on April 18, never appeared, according to the suit.
When the hospital asked for the money in escrow to be returned, Weiss sent just $55.5 million and told AdventHealth the remaining $2 million was in Tomax's possession, according to the suit.
The health care company says Weiss should never have transferred any funds to Tomax because the company had failed to produce the 3M distributor invoice that was a precondition for payment.
"Once it became clear the masks were not available, the defendants refused to notify AdventHealth, and conspired together to retain the escrow funds," AdventHealth said.
In addition to Weiss and Tomax, the lawsuit also targets Weiss' firm, Michael H. Weiss PC, and Tomax President Yehoram Tom Efrati. The suit makes various claims of breach of contract, conversion and civil conspiracy and requests actual damages, punitive damages and prejudgment interest.
An attorney for AdventHealth declined to comment. Weiss did not respond to requests for comment Friday, and a representative for Tomax could not be reached for comment.
AdventHealth is represented by Mayanne Downs, Jason Zimmerman and Joshua Bachman of GrayRobinson PA.
Counsel information for the defendants was unavailable.
The case is Adventist Health System Sunbelt Healthcare Corp. v. Michael H. Weiss PC et al., case number 6:20-cv-00877, in the U.S. District Court for the Middle District of Florida.
--Editing by John Campbell.
Update: This story has been updated to reflect AdventHealth's counsel's response.
For a reprint of this article, please contact reprints@law360.com.
