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Law360 (August 5, 2020, 10:05 AM EDT ) Adventist Health System rebutted a Los Angeles asset management company and its CEO's assertion that it cannot sue them in Florida over a soured $57.5 million deal to buy protective face masks, saying Monday that its allegations of a $2 million fraud conspiracy give an Orlando federal court authority over them.
Altamonte Springs, Florida-based AdventHealth argued in its response to a motion to dismiss from Tomax Capital Management Inc. and its leader Yehoram Tom Efrati that it is only required to plead the elements of a conspiracy and allege that at least one of the defendants committed the underlying fraud in order to establish that the Florida federal court has jurisdiction over all of them.
"After playing a shell game with AdventHealth's $57,500,000 intended for the purchase of [personal protective equipment] for health care workers, the defendants attempt to avoid liability for their respective roles in this illegal scheme that caused AdventHealth and its Florida operations to lose $2,000,000," AdventHealth said.
The health care system, which has hospitals in nine states, alleged in its May 28 complaint that Tomax and Efrati conspired with California attorney Michael H. Weiss and his firm to keep $2 million in escrow funds despite Tomax's failure to deliver on an April 8 contract to provide 10 million 3M N95 ventilator masks to protect its workers during the coronavirus pandemic.
In Monday's response, AdventHealth said it has sufficiently pled that each of the four defendants agreed to commit an unlawful act, performed some overt act to further the conspiracy, and that it was damaged as a result.
It also has accused Tomax, Efrati and Michael H. Weiss PC of misappropriating its funds, and the law firm did not seek dismissal of that conversion claim against it in its separate motion for dismissal, AdventHealth added.
AdventHealth also argued that Florida lies at the heart of the allegations and is where it experienced the $2 million loss.
"Performance of the contract was in Florida, delivery was to occur at AdventHealth in Florida, the defendants' misrepresentations were made in Florida, relied on in Florida, and caused injury to AdventHealth in Florida," the company said.
In addition to denying that he any ties to Florida, Efrati also has argued that he personally had nothing to do with the deal and that AdventHealth has failed to prove any of its claims against him or Tomax, including breach of contract and fiduciary duty, conspiracy, conversion and theft.
But health care system points to allegations in its complaint — which it noted the court must construe as true at this stage in the case — that claim Efrati had actual knowledge of the escrow funds and that they could not have belonged to anyone but AdventHealth and also that he received a portion of the funds.
AdventHealth also pushed back on Efrati and Tomax's argument that it has failed to provide evidence backing its claim that the company might have the missing escrow funds, saying it is not required to allege their conduct with "absolute particularity."
"Even though the defendants designed this conspiracy to keep AdventHealth in the dark, Tomax and Mr. Efrati request dismissal because AdventHealth does not know the specifics of their unlawful scheme," it said.
Weiss and his firm have also filed a motion to dismiss the claims that they are liable for the $2 million that AdventHealth says wasn't refunded from an escrow account when the mask purchase fell through.
Weiss has argued that he can't be sued individually for signing the deal, because he was acting in his capacity as his law firm's president, and that the firm was the party in the escrow agreement, not him. Like Tomax and Efrati, Weiss also has said he has no personal connection to Florida and that his firm's dealings in relation to the botched mask purchase took place in California.
Weiss' firm separately sued Tomax and Efrati in California state court, claiming they refused to pay back the $2 million upon the firm's request, leaving the firm on the hook for the unrecovered funds. But Weiss, representing his firm in the California case, has since requested that the suit be dismissed without prejudice, although court filings didn't reveal why.
Counsel for Tomax and Efrati did not immediately respond to a request for comment late Tuesday and counsel for Advent could not immediately be reached for further comment.
AdventHealth is represented by Mayanne Downs, Jason A. Zimmerman and Joshua A. Bachman of GrayRobinson PA.
Tomax and Efrati are represented by Laurence J. Pino and Sean M. Southard of Pino Nicholson PLLC.
Weiss and his firm are represented by David R. Keller of Keller Landsberg PA.
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.
--Additional reporting by Rosie Manins and Carolina Bolado. Editing by Rebecca Flanagan.
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