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.

QUINN v. THOMAS H. LEE CO.

August 24, 1999

MARIANNE QUINN, PLAINTIFF,
v.
THOMAS H. LEE COMPANY AND THOMAS H. LEE, INDIVIDUALLY AND JOINTLY, AND DIET CENTER WORLDWIDE, INC., AND UNITED STATES FIDELITY AND GUARANTY COMPANY AND FRANCIS TETI, CPA, JOINTLY AND SEVERALLY, DEFENDANTS.



The opinion of the court was delivered by: Sprizzo, District Judge.

  MEMORANDUM OPINION AND ORDER

Plaintiff Marianne Quinn commenced the instant action against defendants Thomas H. Lee Company and Thomas H. Lee ("Lee Defendants"), Diet Center Worldwide, Inc. ("DCWI"), United States Fidelity and Guaranty Company ("USF & G"), and Francis Teti ("Teti") (collectively "defendants"). This action arises from the termination of two of plaintiff's Diet Center, Inc. ("DCI") franchises. She alleges claims of conspiracy, breach of contract, negligence, and breach of fiduciary duty. Pursuant to Rule 56 of the Federal Rules of Civil Procedure, defendants individually move for summary judgment. For the reasons set forth below, defendants' motions for summary judgment are granted.

BACKGROUND

In 1990, plaintiff became estranged from her husband, who also had been employed at DCMC's corporate offices. See Quinn's 3(g) Stmt. ¶ 3; First Am. Compl. ¶ 13. Plaintiff's husband filed for divorce in the Circuit Court of Fairfax County, Virginia, and sought a ninety-day temporary restraining order to conserve their assets pending the outcome of the divorce proceeding. See First Am. Compl. ¶¶ 15, 18. On March 28, 1991, the Virginia Court appointed Francis Teti, a certified public accountant, as conservator and trustee of the assets of plaintiff and her husband, including DCMC and DCWC. See Teti's Local Rule 3(g) Statement, dated April 10, 1996 (Teti's 3(g) Stmt.) ¶ 2; Quinn's 3(g) Stmt. ¶ 6; First Am. Compl. ¶ 21. USF & G issued a receiver's bond in the amount of $250,000 to Teti. See USF & G's Local Rule 3(g) Statement, dated April 12, 1996 ("USF & G's 3(g) Stmt.") ¶ 3. Teti served as conservator until October 17, 1991. See Teti's 3(g) Stmt. ¶ 8; USF & G's 3(g) Stmt. ¶ 5.

On October 17, 1991, plaintiff and her husband entered into a Property Settlement Agreement, giving 49% interest and operational control of DCMC to plaintiff's husband, and giving the remaining 51% of DCMC and 100% of DCWC to plaintiff. See Quinn's 3(g) Stmt. ¶ 10; First Am. Compl. ¶¶ 24-25. Pursuant to the settlement, the order appointing Teti was rescinded. See USF & G's 3(g) Stmt. ¶ 4. He performed no services for plaintiff or her franchises after October 31, 1991, when he turned over copies of all related documents to plaintiff's attorney. See Teti's Reply Memorandum of Law, dated April 10, 1996 at 7.

In the interim, plaintiff's lawyer in her divorce proceedings, Herbert Callihan, Esq., and plaintiff's office manager at DCMC, Ingrid Bennett, incorporated Diet Centers of Potomac, Ltd. ("DCP") in February 1989. See Quinn's 3(g) Stmt. ¶ 14; First Am. Compl. ¶¶ 26-27. Plaintiff alleges that Callihan and Bennett conspired with her former husband, DCI, Teti, and the Lee Defendants, majority shareholders in DCI's parent company, to use the DCP franchise to launder money by causing DCI to accept large overpayments from DCP and issue credits to DCMC for non-existent orders for merchandise. See First Am. Compl. ¶¶ 33-34, 37, 40. Although plaintiff alleges that DCP was operated without her knowledge or consent, plaintiff also alleges that DCI fined her for operating DCP as an unauthorized subfranchise under the franchise agreement. See id. ¶ 32.

When plaintiff began to make inquiries about the DCP overpayments, DCI terminated her DCMC and DCWC franchises, allegedly in order to silence her inquiries into their scheme. See Quinn's 3(g) Stmt. ¶ 42. On January 14, 1994, DCI terminated plaintiff's DCMC franchise agreement, citing plaintiff's breach of her franchise agreements. See Lee's 3(g) Stmt. ¶ 10; Quinn's 3(g) Stmt. ¶ 40. Approximately four months later, DCI terminated the DCWC franchise agreement for the same reason. See Lee's 3(g) Stmt. ¶ 10. The Lee Defendants claim that they had no knowledge of or involvement in DCI's decision to terminate plaintiff's franchises. See id. ¶ 11.

At the time that DCI terminated plaintiff's franchises, DCI was the wholly owned subsidiary of American Health Companies ("American Health"), of which the Lee Defendants were majority shareholders. Several months after DCI terminated the DCMC and DCWC franchises, Wellness Group Acquisition Company, Inc. ("Wellness Group") purchased certain assets of DCI from a consortium of banks in a foreclosure sale held pursuant to Article 9 of New York's Uniform Commercial Code. See DCWI's Rule 3(g) Statement, dated April 12, 1996 (DCWI's 3(g) Stmt.) ¶ 2. Wellness Group subsequently changed its name to Diet Center Worldwide, Inc. ("DCWI"). See id. ¶ 2. With the exception of DCI's general counsel and one other employee, no employees, officers or directors of DCI were hired by DCWI. See id. ¶¶ 5-6.

Plaintiff filed the instant action on April 21, 1995. Plaintiff alleges that DCI, the Lee Defendants, and Teti conspired with DCP to deprive plaintiff of her franchises by causing DCP to make overpayments to DCI and that the defendants further conspired to terminate her franchise when she threatened to "go public" with her suspicions. In the alternative, she claims that the Lee Defendants acted negligently in permitting the overpayments, that DCI acted negligently in accepting the overpayments from DCP, and that Teti breached his fiduciary duty to plaintiff as conservator. She alleges that USF & G acted negligently in issuing a receiver's bond to Teti instead of a conservator's bond. Plaintiff further alleges that DCI breached the franchise agreements, and she seeks to hold DCWI liable for her claims against DCI as DCI's successor. Finally, she attempts to pierce DCI's corporate veil to impose liability on the Lee Defendants as majority shareholders in DCI's parent company.

USF & G has filed an indemnification cross-claim against Teti, who in turn has filed an indemnification cross-claim against the Lee Defendants and DCWI. All defendants individually filed motions to dismiss the plaintiff's action pursuant to Federal Rule of Civil Procedure 12(b)(6), which were subsequently converted to motions for summary judgment. See Order, dated April 9, 1996.

In support of their motion for summary judgment, the Lee Defendants contend that plaintiff's claim of conspiracy must fail because she has neither alleged nor offered any evidence of an independent tort committed by the conspirators. The Lee Defendants further argue that neither plaintiff's negligence nor her breach of contract claim can survive summary judgment because plaintiff has offered no basis for piercing DCI's corporate veil. Finally, the Lee Defendants argue that they are not liable under a breach of contract theory because they are not signatories to any contract between plaintiff and DCI.

In support of its motion for summary judgment, DCWI argues that because it purchased DCI's assets at a foreclosure sale, it did not agree to assume liability for DCI's obligations. DCWI further argues that plaintiff has no evidence to support her claim that DCWI's acquisition of DCI's assets constituted a de facto merger.

Teti argues that summary judgment should be granted in his favor because plaintiff's claims against him are barred by the Virginia and Maryland statutes of limitations for accountant's malpractice and for breach of fiduciary duty.

In support of its motion for summary judgment, USF & G argues that no cause of action exists for negligently writing the wrong type of bond. USF & G further argues that because plaintiff stipulated that the Virginia court rescind the order pursuant to which the bond was issued to Teti, USF & G cannot be liable to plaintiff.

In opposition to defendant's motions for summary judgment, plaintiff argues that the cancellation of her franchises by DCI gives rise to an inference of conspiracy by the defendants. Plaintiff further argues that, in light of her inability to conduct full discovery, plaintiff's negligence and breach of contract claims are not ripe for summary judgment. Plaintiff counters Teti's argument that her breach of fiduciary duty claim is time barred by arguing that the Court ...


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.