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Care Environmental Corp. v. M2 Technologies Inc.

August 7, 2006

CARE ENVIRONMENTAL CORPORATION, PLAINTIFF,
v.
M2 TECHNOLOGIES INC., ET AL, DEFENDANTS.



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 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 eleven claims for relief. Claims one through four seek judgment against the corporate defendants for breach of contract (count two), services sold and delivered (count three), and account stated (count four). The fifth claim for relief alleges common law fraud against the corporate defendants and the individual defendants. Claim six 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 seven and eight seek to pierce the corporate veil and impute corporate liability to 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. Presently before the Court is defendants' motion for leave to amend their answer to assert four counterclaims. For the reasons set forth below the defendants' motion is granted in part and denied in part.

BACKGROUND

The following facts are drawn from my prior opinion addressing plaintiff's motion to dismiss the complaint and from the Second Amended Complaint.

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. 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. 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. He too is alleged to reside in New York state.

The Agreement

Prior to the agreement at issue in this litigation (the "Agreement"), Care had never done 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. Care now asserts that this financial information was false and misleading because M2 is not in fact a profitable company with substantial ...


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