Bonanni v. Horizons Invs., Corp., Index Number: 17029-05, 3/9/2016, (Emerson J.)

Injunctive Relief; Breach of Fiduciary Duty, Unjust Enrichment; Breach of Contract; Conversion; Misappropriation of MRI LLC’s Assets; Corporate Opportunities.

By: Aaron Leaf | Senior Staff Writer

Plaintiff Luciano Bonanni (“Bonanni”) is the sole owner of Plaintiff MRI Enterprises, Inc. (“MRI Inc.”) as well as an executive vice president of Fonar Corporation (“Fonar”), a company that manufactures magnetic resonance imaging equipment. Fonar obtained FDA approval for a new scanner and sought to sell the scanners to hospitals. Bonanni, through MRI Inc., provided scanners to Defendant Dr. Allan Hausknecht (“Hausknecht”), who employed Defendant Solomon Kalish (“Kalish”) as a practice manager. Kalish was acquaintances with Defendant Benito Fernandez (“Fernandez”), who knew New York City Health and Hospitals Corporation (“HHC”) was interested in buying the scanners for its hospitals. The parties agreed to enter into a transaction regarding the scanners. To complete the deal, HHC, Bonanni, Kalish, Fernandez, Hausknecht each created wholly owned companies and then formed MRI Enterprises, LLC (“MRI LLC.”). The deal called for the splitting of profits and losses based on percentage of ownership (“Operating Agreement”). Fernandez’ company owned 40% of MRI LLC and the remaining three companies each owned 20%. Defendants additionally formed the Comprehensive Imaging of New York, PLLC (“CINY)” to provide MRI services to patients. The Operating Agreement prevented members from withdrawing for two years, and required all members to give notice 180-day notice before withdrawal. Later, the parties had a disagreement about the continued use of the scanners versus using the Siemens 1.5 Tesla. This put strain on the relationship between Bonanni and Fernandez, who began taking over the day-to-day management of MRI LLC and decided to pay MRI LLC fees for services rendered to the company, and not by ownership interest. Defendants proceeded to absorb Bonanni’s 20% shares of the company equally, claiming he resigned. Later, Defendants transferred all MRI LLC’s assets and employees to CINY, including a Seimens 1.5 Tesla at below market value.

In response to the change in payment plan in violation of the Operating Agreement, the forced forfeiture of ownership rights, and the perceived unlawful transfer of corporate assets, Bonanni and MRI, LLC commenced an action against Defendants Kalish, Fernandez, Hauschneckt, their individual companies and CINY for (1)an  accounting; (2) injunctive relief; (3) seeking damages for breach of fiduciary duty, (4) unjust enrichment, (5) breach of contract, (6) conversation; and a (7) derivative action to recover damages for looting, waste, and misappropriation of MRI, LLC’s assets and corporate opportunities. In opposition, Defendants counterclaimed Bonanni on the doctrine of unclean hands on the basis that Bonanni breached his fiduciary duties to MRI, LCC members by acting contrary to MRI, LLC’s best interest.

First, the Court stated that Bonanni did not withdraw from MRI LLC. The Court found that Bonanni did not withdraw because the Operating Agreement clearly stated that no withdrawal was permitted for two years after the execution of the agreement and the written communication between the parties indicated that MRI was a member of the company. Since Bonanni did not withdraw from MRI, LLC, Defendants owed a duty to Bonanni not to convert Bonanni’s shares. The Court utilized this analysis on its second point that the taking of Bonanni’s 20% ownership interest by Defendants constituted a breach of fiduciary duty and conversion. Conversion occurs when plaintiff legally owns property and defendant intentionally interferes with the use of the property to such an extent that damages result. Here, the Court found that the taking of Bonanni’s ownership interest was intentional and damaging enough to constitute conversation. Such actions were not aligned with Defendants’ fiduciary duties to Bonanni.

Third, the Court also found that Bonanni met its burden on its claim of unjust enrichment. Unjust enrichment occurs when (1) a defendant benefits at the plaintiff’s expense and (2) equity and good conscious require restitution. Here, Defendants used their corporations as conduits to siphon money from MRI, LLC to Kalish and Fernandez, such funds belonged to the Bonanni, owner of 20% of MRI, LLC.

Fourth, the Court granted Bonanni’s request for an accounting of MRI, LLC’s assets because MRI, Inc. was a member of MRI LLC and was thus entitled to an accounting of “any and all payments from CINY, MRI, LLC’s alter ego and successor-in-interest, to Horizons, Warminster, and Fernandez; Adex and Kalish; and Dr. Hausknecht.”

Fifth, the Court granted Bonanni’s derivative action because there was evidence of corporate looting and waste of MRI, LLC assets. Corporate looting and waste occurs when directors take or waste assets of the company to enrich themselves. Here, the Court pointed to the transfer of a Seimens 1.5 Tesla MRI Scanner from MRI, LLC to CINY at far below market value. Additionally, Defendants utilized funds from MRI, LLC pay for their legal representation in matters it was not required to as reasons to grant this claim.

Lastly, the Court held that Defendants failed to show Bonanni breached his fiduciary duties to MRI, LLC on the basis of unclean hands. The doctrine of unclean hands is an equity defense where a defendant argues plaintiff is not entitled to equitable relief because plaintiff behaved unethically with respect to the subject of the complaint. Here, Bonanni’s affiliation with Fonar was well known to Defendants and served as a significant reason to form MRI, LLC. Furthermore, Bonanni ultimately agreed to replace the scanners with Siemens 1.5 Tesla MRI Scanners when HHC asked. Thus, Bonanni’s advocacy for the Fonar MRI’s did not rise to the level of a conflict of interest or breach of fiduciary duty, as it never hurt MRI LLC.

Bonanni v. Horizons Invs., Corp., Index Number: 17029-05, 3/9/2016, (Emerson J.)

 

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