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Care Environmental Corp. v. M2 Technologies

January 18, 2006

CARE ENVIRONMENTAL CORP., PLAINTIFF,
v.
M2 TECHNOLOGIES, INC., DRAGON CHEMICAL CORPORATION, BURLINGTON BIO-MEDICAL CORPORATION, CMB ADDITIVES, LLC, FRANK MONTELEONE, DOMINICK SARTORIO AND ROGER BROWN DEFENDANT.



The opinion of the court was delivered by: Sifton, Senior Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff, Care Environmental Corporation ("Care"), invokes this Court's diversity jurisdiction*fn1 to bring this action against M2 Technologies Inc., ("M2"), Dragon Chemical Corporation ("Dragon"), Burlington Bio-medical Corporation ("Burlington") (collectively the "corporate defendants"), against Frank Monteleone, Dominick Sartorio and Roger Brown (collectively the "individual defendants") and against CMB Additives, LLC ("CMB"). Plaintiff's amended complaint alleges fourteen claims for relief against defendants, both individually and collectively. The first claim seeks a declaratory judgment pursuant to 28 U.S.C. §2202 et seq. against the corporate defendants declaring that plaintiff has no further obligation with respect to the removal of hazardous waste, and a preliminary injunction compelling corporate defendants to take possession of, and dispose of, the hazardous waste. Claims two through seven seek judgment against the corporate defendants for fraudulent misrepresentation (count two), breach of contract (count three), services sold and delivered (count four), quantum meruit (count five), book account (count six), and account stated (count seven). The eighth claim for relief alleges common law fraud against the corporate defendants and the individual defendants. Claims nine through eleven seek recovery against the individual and corporate defendants under New York Debtor & Creditor Laws §§276, 275, and 273, respectively. Claim twelve seeks relief against CMB and the corporate defendants for the debts and obligations with respect to the removal of hazardous waste of M2 on a theory of successor liability. Claims thirteen and fourteen seek to pierce the corporate veil and impute corporate liability to the individual defendants.

Presently before the Court is defendants' motion to dismiss claims one through twelve, as against defendant Burlington, and to dismiss in their entirety claim two, claim six and claims eight through fourteen. For the reasons set forth below, defendants' motion to dismiss is granted in part and denied in part.

BACKGROUND

The following facts are drawn from the Amended Complaint, and are viewed in the light most favorable to Care, the non-moving party. See Patel v. Searles, 305 F.3d 130, 135 (2d Cir. 2002).

The Parties

Care is, and has been at all relevant times, a New Jersey corporation, authorized to conduct business in the State of New York, with its principal place of business located at 10 Orben Drive, Landing, New Jersey, 07850. It is engaged in the business of collection, identification, storage, transportation and disposal of hazardous waste materials.

Defendant M2 is, and has been at all relevant times, a Delaware corporation with its principal place of business located at 71 Carolyn Boulevard, Farmingdale, New York, 11735-1527. Its authorization to do business in the State of New York is currently inactive. At all relevant times M2 has owned and operated Burlington.

Defendant Burlington is, and has been at all relevant times, a Delaware corporation with its principal place of business located at 71 Carolyn Boulevard, Farmingdale, New York, 11735-1527, and a location at 7033 Walrond Drive, Roanoke, Virginia 24019. Burlington acquired Dragon in 1998 and since then has owned and operated it.

Defendant Dragon is, and has been at all relevant times, a Delaware corporation with its principal place of business located at 71 Carolyn Boulevard, Farmingdale, New York, 11735-1527, and a location at 7033 Walrond Drive, Roanoke, Virginia 24019.

Defendant CMB is, and has been at all relevant times, a Delaware limited liability company with its principal place of business located at 71 Carolyn Boulevard, Farmingdale, New York 11735-1527, and an address at 2711 Centreville Road, Suite 400, Wilmington Delaware. During the pendency of this action M2 transferred substantially all its assets to CMB.*fn2 CMB operates out of the same physical location as M2 (the Farmingdale location), employs the same personnel, utilizes the same web address and website that M2 had previously used, and is owned by the same individuals as the owners of M2, namely defendants Brown and Sartorio.

Defendant Frank Monteleone is and has been at all relevant times, Chief Operating Officer of the Corporate Defendants and of CMB. He is alleged in the complaint to be a resident of New York state.

Defendant Dominick Sartorio is and has been at all relevant times, Chief Executive Officer of the corporate defendants and of CMB and a 50% shareholder of the corporate defendants and CMB.*fn3 He is alleged to reside in New York state.

Defendant Roger Brown is, and has been at all relevant times, the President of the corporate defendants and of CMB and a 50% shareholder of the corporate defendants and CMB.*fn4 He too is alleged to reside in New York state.

The Agreement

Prior to the agreement currently at issue in this litigation (the "Agreement"), Care had never conducted business with M2. Accordingly, as a pre-condition to entering into the Agreement with M2, Care required that M2 furnish Care with financial documentation demonstrating its ability to make the payments required under the Agreement. This documentation took two forms.

First, M2 provided Care with an internal draft of M2's Consolidated Income Statement and Balance Statement for the year ending September 30, 2004 (together, "M2's Financials"). These financials showed, in relevant part, that M2 had net sales in excess of $16 million and net income after taxes of more than $1.25 million. Second, Care reviewed a report on M2 prepared by Dun & Bradstreet (D&B) based on financial data provided to D&B by Brown, M2's president. Relying on this financial information, Care decided to enter into the Agreement with M2 for Care to perform environmental services, including the collection and removal of hazardous waste material at the Dragon facility in Roanoke, Virginia, and the decontamination of the premises following the removal. However, Care now asserts that this financial information was false and misleading because M2 is not in fact a profitable company with substantial assets, but rather was already insolvent, or was rendered insolvent by the obligation to pay Care under the Agreement.*fn5

The Agreement consisted of a December 28, 2004 proposal, a January 10, 2005 letter and a January 12, 2005 acceptance. Each of these documents was addressed to "M2 Technologies/Dragon Chemical." The Agreement provided that Care would dispose of the waste according to all applicable state and federal rules and regulations. Estimated costs for the disposal were calculated based on the weight of the waste to be disposed of, which M2 estimated to be 135,000 lbs. However the Agreement stated that the estimation was not binding and that actual costs would be calculated based on the actual weight of waste disposed of. Thus, the Agreement provided in relevant part:

! Care Environmental Corp. will furnish the services presented in this quotation on a per unit basis, based on the information and data provided to them. Care Environmental expects that the services in this quotation can be accomplished for the estimated fee. ! The Client is responsible for any additional charges assessed by Care Environmental, for waste which exceeds the quoted constituent limits. ! Upon receiving the D&B Business Information Progress Report, Care Environmental will base billing on Net 30 days.*fn6 Under the agreement Care would collect and transport the hazardous waste material, but would not dispose of the material itself. Rather, the disposal, accomplished by incineration, was to be performed at third party disposal sites, contracted for by Care. Because Care would have to pay the third party disposal sites, Care needed M2 to pay the invoices on a timely basis. Furthermore, the January 10 letter provided that:

It is acknowledged that payments on invoices submitted to you [M2] in connection with these services are processed upon receipt [sic] invoices, and that no other documentation is required for the remittance of payments to Care Environmental Corp. Kindly acknowledge this by signing in the space below . . . If additional documentation is required in order to remit payments on invoices, please specify what documentation is required in the space provided below and sign the acknowledgment.

M2 did not specify any additional documentation that would be required in order to remit payments on the invoices. Rather, Frank Monteleone, as COO of M2, signed the letter under a statement reading:

I hereby acknowledge, as an authorized representative, that payments on invoices are authorized as stated above.

Thereafter, Care began waste removal. Early in the project it became apparent that the volume of waste was in excess of M2's original estimate of 135,000 lbs. Care communicated this to M2's COO, Monteleone and M2's general manager, Richard Howe. M2 directed Care to remove and dispose of all the waste, notwithstanding the fact that the volume exceeded their initial estimate.

On January 13, 2005 Care issued its first invoice to M2 in the amount of $101,762.60. This invoice approached the total amount of the initial estimate for total waste collection under the Agreement, yet, at that juncture, an equivalent amount or more of waste remained to be removed. Nevertheless, Monteleone instructed Care to continue working to remove the remainder. M2 did not object to the amount of the initial invoice or the volume stated therein.

Care continued to remove and transport the waste, and accordingly issued similar invoices on January 18 and February 2, 2005. M2 did not object to the dollar amount or volume of waste listed in these invoices.

Upon completion of the project in early February, Richard Howe, Dragon's plant manager, completed a walk through of the plant with an unidentified representative of Care. Howe expressed his thanks for a job well done and voiced no complaints. The owner of the building also conducted an inspection and voiced satisfaction with the appearance of the plant. On the final evening of the project, Howe went out to dinner with Care employee Daniel Schweitzer and told him that Care had done an excellent job. Howe offered to provide a letter of recommendation concerning the excellent quality of Care's services.

On February 12, 2005 the first invoice came due and was not paid. On February 17, 2005 the second invoice came due and was not paid. On March 4, 2005 the third invoice came due and was not paid.

Once the material was collected, Care trucked the material to various disposal facilities for incineration, and the third party facilities began disposal. The facilities, in turn, invoiced Care for the cost of the disposal. Thereafter, Care began to press M2 for payment. In response, M2 raised, for the first time, an objection to payment on the basis of the excessive volume of material collected. M2 also objected to the inclusion of the weight of the pallets upon which the waste material had been stored in the disposal volume.

Care attempted to discuss these issues with Monteleone. However, numerous messages and voice mails left by Care's president, Francis McKenna Jr., and Care's operations manager Kodrowski for Monteleone were left unanswered. No payment was made even on that portion of the invoices which was uncontested. Concerned that it was incurring costs in the disposal of the waste which ...


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