Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

FONAR CORP. v. TARIQ CONTR.

May 2, 1995

FONAR CORPORATION, Plaintiff, against TARIQ CONTRACTING, INC. and APPLIED MEDICAL SYSTEMS, INC., Defendants.


The opinion of the court was delivered by: DAVID G. TRAGER

 TRAGER, District Judge:

 This is a breach of contract and fraud action in which plaintiff, Fonar Corporation ("Fonar"), seeks damages for defendants', Tariq Contracting, Inc. ("TCI") and Applied Medical Systems, Inc. ("AMS"), failure and refusal to pay the final two installments due on the purchase price of a magnetic resonance imaging ("MRI") system. Fonar also seeks recovery of the additional costs incurred in installing the system due to TCI's alleged failure to insure that all installation prerequisites had been met. Before the Court are Fonar's request for a formal decision on Magistrate Judge Orenstein's Report and Recommendation ("Report"), which recommended that TCI's motion to dismiss the amended complaint for improper service of process be denied, and TCI's objections to the Report.

 Background

 Fonar is a Delaware corporation engaged in the manufacture and distribution of MRI systems used for medical diagnostic purposes. Fonar's principal place of business is in Melville, New York. TCI is a Saudi Arabian sole proprietorship with its principal place of business in Al Khobar, Saudi Arabia. AMS is a Massachusetts corporation with its principal place of business in Cambridge, MA.

 In May 1988, Fonar granted both AMS and TCI an exclusive distributorship to sell its MRI systems in the territory of Saudi Arabia. The distributorship was for a period of one year, but had a built in option to become a "permanent dealership" should AMS and TCI "be successful in selling [Fonar's] equipment in" Saudi Arabia. Fonar reserved the right to cancel the distributorship for cause with 90 days written notice.

 In September 1990, the parties entered into a written sales agreement for the sale of a Fonar Beta 3000 MRI scanner. The agreement contained a choice of law and choice of forum provision designating New York as the appropriate jurisdiction for, and law governing, any disputes arising under the contract. The agreement was signed by AMS' president, Yasmeen Husain. However, Fonar alleged that the agreement was signed by Ms. Husain in her capacity as TCI's vice president. There is no dispute that Ms. Husain signed the agreement, or that the agreement was between Fonar and TCI, or that underneath Ms. Husain's signature appears the title vice president. Contrary to these indications, however, TCI asserted that Ms. Husain signed the agreement not as TCI's vice president, but on TCI's behalf and according to the specific direction of TCI's president and Fonar.

 Subsequently, the sales agreement was modified twice. The first modification was signed by Khalid Husain, TCI's vice president, while the second was signed by Yasmeen Husain. Following the Persian Gulf War, Fonar completed the installation of the MRI system in King Faisel University Hospital. Fonar alleged that despite a provision in the sales agreement, which was never modified, TCI did not insure that the installation site was properly prepared. Fonar's employees had to wait almost two months for the site to be prepared, supervised such preparation, something which was not provided for in the sales agreement, and incurred additional costs thereby. Following the installation of the system, TCI refused repeated requests to pay the final two installments due on the purchase price.

 Fonar brought this action against AMS and TCI by serving a summons and complaint on January 15, 1993. Fonar alleged causes of action for fraud, breach of the distributorship agreement, breach of the sales agreement and for recovery of the additional costs in installing the MRI system. On April 16, 1993, defendants moved to dismiss the complaint for failure to state a cause of action upon which relief could be granted, lack of personal jurisdiction over the defendants, and for improper service of process. Defendants motion was granted for the most part, and the complaint was dismissed by Judge Spatt in an Order dated May 29, 1993. However, Fonar was given thirty days to amend the complaint and effectuate proper service of process.

 Fonar served an amended complaint on June 25, 1993, by delivering a summons and complaint to Ms. Husain in Massachusetts. In the complaint, Fonar alleged causes of action for breach of the sales agreement, fraud, and for recovery of the additional costs incurred in installing the MRI system in Saudi Arabia. Defendants again moved to dismiss the amended complaint for failure to state a cause of action upon which relief could be granted, lack of personal jurisdiction over the defendants and for improper service of process. In an order dated October 1, 1993, Judge Spatt: (1) granted defendants' motion to dismiss the breach of contract claim against AMS for failure to state a claim; (2) denied the motion as to both AMS and TCI with respect to the claim that the Court lacked personal jurisdiction over the defendants; and (3) referred the claim of improper service on TCI to Magistrate Judge Michael L. Orenstein for a Report and Recommendation.

 A hearing on the issue of the propriety of service of process was held in front of Magistrate Judge Orenstein on January 12 and 13, 1994. At the conclusion of the hearing, Magistrate Judge Orenstein read his Report into the record (Tr. 159-73). In short, Magistrate Judge Orenstein recommended that "defendant's motion be denied in all respects and that this Court find[] that the plaintiff had served process properly pursuant to New York CPLR section 311, subdivision 1" (Tr. 159-60).

 Magistrate Judge Orenstein's Report and Recommendation

 In recommending that Judge Spatt deny the motion to dismiss for improper service of process, Magistrate Judge Orenstein found that service was properly made upon Ms. Husain, a de facto vice president of TCI (Tr. at 160). Magistrate Judge Orenstein noted that although TCI is technically not a corporation, it held itself out as a corporation through the use of letterhead bearing the name "Tariq Contracting, Inc. " (emphasis added), and through the use of corporate officer titles for its employees (Tr. at 161). Further, Magistrate Judge Orenstein found that Ms. Husain was held out and acted as TCI's vice president despite her testimony, and that of Khalid Husain, that she was neither an officer nor employee of the company (Tr. at 161-62). In addition, Magistrate Judge Orenstein looked to the sales agreement, subsequent amendments, and various letters and communications between TCI and Fonar, most of which were signed by Ms. Husain as TCI's "vice president", as an indication that TCI held out Ms. Husain as vice president of the company (Tr. at 160-63).

 Alternatively, Magistrate Judge Orenstein found that even if Ms. Husain were not found to be TCI's vice president, she should be deemed "an agent of TCI, the managing agent of TCI or general agent under 311 of the CPLR, or that AMS was the managing agent of TCI in the United States" (Tr. at 163). Magistrate Judge Orenstein noted that the evidence presented at the hearing indicated that "in nearly every dealing with Fonar TCI held out Ms. Husain as their agent" (Tr. at 164). Aside from the written documents presented at the hearing, Magistrate Judge Orenstein gave great weight to the testimony of Fonar's president, Dr. Raymond Damadian (Tr. 165-66). Dr. Damadian testified that at a meeting held at Fonar's offices in Melville to discuss the sales agreement, Tariq Husain, TCI's president (and Ms. Husain's father) stated that "Yasmeen, referring to Ms. Husain, would be their representative" (Tr. at 165). Moreover, at the same meeting, Tariq Husain stated that AMS was set up to represent TCI in the United States (Tr. at 165). In addition, Magistrate Judge Orenstein noted that in almost every written communication between Ms. Husain and Fonar, she used the pronouns "we" or "our" referring to TCI and AMS collectively (Tr. 168). Magistrate Judge Orenstein pointed out that as Ms. Husain held two graduate degrees from the University of Vermont and Columbia University, he could not believe she "would not know the use of ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.