Opinion
28726/05.
Decided March 24, 2008.
Gerald Padian, Esq., Tashjian Padian, New York, NY, Attorney for Plaintiff.
Eric B. Topel, Esq., Epstein Becker Green, PC, New York, NY, Attorney for Defendant (Maimonides).
Jeremy A. Welfer, Esq., Sexter Warmflash, PC, New York, NY, Attorney for Defendant (Greenberg Shneyderman).
Martin Gershon, Esq., New York, NY, Attorney for Defendant (Millennium).
In this action by plaintiffs Island Rehabilitation Services Corp. (Island Rehab) and Island Nephrology Services P.C. (Island Nephrology) (collectively, plaintiffs) against defendants Maimonides Medical Center (Maimonides), Midwood Chaim Aruchim Dialysis Sites I and II d/b/a Millennium Dialysis, LLC (Millennium), Sheldon Greenberg, M.D. (Dr. Greenberg), and Ilya Shneyderman, M.D. (Dr. Shneyderman) (collectively, defendants) alleging claims for, among others, breach of contract, breach of fiduciary duty, and tortious interference with contractual relations, in connection with an alleged unilateral termination of a joint venture with them, plaintiffs move, pursuant to CPLR 3025 (b), for leave to serve and file an amended complaint. Defendants Maimonides and Millennium cross-move for an order, pursuant to CPLR 3211, dismissing certain of plaintiffs' causes of action in the proposed amended complaint or, alternatively, in the original complaint.
Millennium, by a letter to the court, dated October 27, 2007, from its attorney, Martin Gershon, Esq., has joined in Maimonides' cross motion to dismiss.
Plaintiffs allege that they established a joint venture with Maimonides, as evidenced by a Memorandum of Understanding dated May 5, 1995 (the MOU), which reflected their obligations in regard to their decision to consolidate in developing and operating a licensed dialysis facility together. Pursuant to this alleged joint venture, Island Rehab, in conjunction with Maimonides, operated a private out-patient kidney dialysis facility at premises leased from Maimonides, in Brooklyn, New York. Island Nephrology provided medical services in connection with the dialysis activities of Island Rehab. Island Rehab and Island Nephrology were solely owned by non-party Morton Kleiner, M.D. (Dr. Kleiner), who was the medical director of the dialysis facility.
The MOU provided that Maimonides would designate a physician to serve as the Assistant Medical Director at the facility in accordance with the terms of a separately attached Assistant Medical Director Agreement (AMDA). The AMDA, dated May 5, 1995, provided, among other things, that the physician designated by Maimonides as the Assistant Medical Director at Island Rehab would enter into an employment agreement with the professional corporation owned by Dr. Kleiner that was providing medical services at Island Rehab. The AMDA was restated and amended by an Assistant Medical Director Agreement dated July 9, 1999 (the AMDA II), which provided that Maimonides was to provide an employee to serve as an Assistant Medical Director in return for Island Rehab's payment of a $2,900 monthly fee to Maimonides. Dr. Greenberg was the Maimonides employee who served as the Assistant Medical Director of Island Rehab.
In alleged reliance on the joint venture with Maimonides regarding the dialysis facility, Dr. Kleiner, on behalf of Island Nephrology, hired Dr. Greenberg, a nephrologist, pursuant to a written employment agreement dated May 19, 1995. Island Nephrology also hired Dr. Shneyderman, another nephrologist, pursuant to a written employment contract dated June 29, 2001. Plaintiffs claim that pursuant to the alleged joint venture agreement and course of dealing between them, plaintiffs and Maimonides were both entitled to enjoy the economic benefits from the performance of professional services to their patients who were treated by Dr. Greenberg and Dr. Shneyderman.
Plaintiffs claim that they operated this joint venture with Maimonides over a 10-year period, and that it had a value in excess of $25 million. Plaintiffs allege, however, that Dr. Shneyderman secretly served as the medical director of Millennium, a competing dialysis facility, in which he and Dr. Greenberg had an ownership interest. Plaintiffs claim that in or about 2004, Dr. Shneyderman and Dr. Greenberg, in breach of their contractual duties and fiduciary obligations to them, took and used confidential patient information and improperly began diverting their patients, whom they had been treating at their facility, to these nephrologists' respective practices at Millennium and also to other faculty practices, including Maimonides' faculty practice. Plaintiffs additionally allege that these defendants disparaged and defamed them, causing them damage to their reputation and good will.
Plaintiffs allege that Maimonides, in violation of the joint venture, assisted with the scheme by Dr. Shneyderman, Dr. Greenberg, and Millennium to divert their patients and take their confidential patient information. Plaintiffs claim that Maimonides, in breach of its fiduciary and contractual obligations, unilaterally destroyed and terminated the joint venture it had established with them, and entered into a venture with the other defendants to provide out-patient dialysis services at Millennium's dialysis facility or another competing facility. Plaintiffs assert that Maimonides, Millennium, Dr. Shneyderman, and Dr. Greenberg sought to eliminate them as competitors and to misappropriate the market value of plaintiffs' business to themselves. Plaintiffs state that as a result of defendants' conduct, they have been forced to close their dialysis facility.
Consequently, on September 19, 2005, plaintiffs filed this action against defendants, alleging 13 causes of action. Defendants interposed their respective answers, and some discovery has taken place. Plaintiffs, by their instant motion, now seek to amend their original complaint.
Plaintiffs' proposed amended complaint maintains the same 13 causes of action against defendants for: (1) breach of contract against Dr. Greenberg, (2) breach of contract against Dr. Shneyderman, (3) conversion against Dr.Greenberg, Dr. Shneyderman, and Millennium, and now adds Maimonides, (4) breach of fiduciary duty against Dr. Greenberg, (5) breach of fiduciary duty against Dr. Shneyderman, (6) breach of contract against Maimonides, (7) breach of fiduciary duty against Maimonides, (8) tortious interference with contract against Maimonides and Millennium, (9) tortious interference with business relations against all defendants, (10) unfair competition against all defendants, (11) interference with prospective economic opportunity against all defendants, (12) defamation against Dr. Greenberg, Dr. Shneyderman, and Millennium, and (13) equitable relief against all defendants. Defendants vehemently oppose plaintiffs' motion.
Pursuant to CPLR 3025 (b), leave to amend pleadings shall be freely granted in the absence of prejudice or surprise to the opposing party unless the proposed amendment is palpably improper or insufficient as a matter of law ( see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959; Fahey v Ontario County, 44 NY2d 934, 935; Maloney Carpentry, Inc. v Budnik , 37 AD3d 558 , 559; Nissenbaum v Ferazzoli, 171 AD2d 654, 655). Defendants argue that they will be prejudiced by the proposed amendment. In support of this argument, they contend that plaintiffs seek to radically change their factual and legal theories nearly two years after the complaint was filed.
Defendants' contention is devoid of merit. As noted above, the proposed amended complaint maintains the same 13 causes of action and legal theories as the original complaint. The proposed amended complaint simply pleads these same claims with greater specificity, and amplifies the allegations to reflect more specific facts regarding the formation of the contractual relationship between plaintiffs, Dr. Kleiner, Maimonides, and Dr. Greenberg, as related to the alleged establishment of the joint venture to open the out-patient dialysis center in Brooklyn.
A plaintiff may amend a complaint if the amendment merely updates and amplifies the facts that were already known to the defendant and does not change the fundamental nature of the complaint ( see English v Ski Windham Operating Corp., 263 AD2d 443, 444; Pepe v Tannenbaum, 262 AD2d 381, 382; Pejcinovic v City of New York, 258 AD2d 365, 366; Harding v Filancia, 144 AD2d 538, 540). Thus, since here, defendants were on notice of plaintiffs' claim by the allegations in the original complaint, they cannot legitimately claim surprise or prejudice ( see Moon v Long Beach Mem. Hosp., 173 AD2d 527, 527; Girardi v Community Hosp. of Brooklyn, 137 AD2d 788, 789-790).
Defendants also argue that plaintiffs' amendment of the complaint at this stage in the action would be unduly burdensome and prejudicial to them because they have already engaged in extensive written discovery. Contrary to this argument, however, only a limited amount of discovery has taken place and the discovery process is no where near complete in this case. Depositions have not yet been taken and document productions by defendants remain incomplete. Furthermore, it is noted that prejudice does not occur simply because there is additional discovery required after the granting of a motion to amend ( see Harding, 44 AD2d at 540; Smith v Industrial Leasing Corp., 124 AD2d 413, 414).
Defendants further argue that plaintiffs have no justification for their delay because they have known about the very agreements that allegedly created the joint venture from the inception of the action. This argument is unavailing. Mere lateness is not a barrier to amendment; only lateness coupled with significant prejudice to the other side can result in a denial of the amendment ( see Edenwald Contr. Co., 60 NY2d at 959). Moreover, defendants cannot deny that they also had knowledge of these agreements and, in any event, the allegations in the original complaint gave defendants notice of the transactions complained of by plaintiffs ( see 39 Coll. Point Corp. v Transpac Capital Corp. , 27 AD3d 454 , 455; English, 263 AD2d at 444-445). Thus, defendants were also long aware of the facts alleged in the proposed amended complaint, and have not shown how they would be prejudiced by their assertion ( see Pepe, 262 AD2d at 382; Pejcinovic, 258 AD2d at 366; Harding, 144 AD2d at 540).
As a further ground for opposing the amendment of the complaint, Dr. Greenberg contends that the proposed amended first cause of action for breach of contract against him is patently lacking in merit and the amendment of the complaint regarding the allegations which support this cause of action should be denied on this basis. Specifically, Dr. Greenberg argues that plaintiffs have no standing to assert a breach of the May 19, 1995 employment agreement with him because they were not a party to that agreement. Dr. Greenberg asserts that only Island Nephrology, P.C. (the original P.C.), a non-party to this action, entered into and executed that employment agreement with him. Dr. Greenberg further argues that the original P.C. was not technically in existence at the time it purportedly entered into the employment agreement with him on May 19, 1995 because it was dissolved, pursuant to the Tax Law, by proclamation of the Secretary of State of New York on September 28, 1994. Dr. Greenberg contends that, therefore, the original P.C. lacked the capacity to enter into the employment agreement with him or to assign it thereafter, rendering this employment agreement unenforceable.
While it is true that the May 19, 1995 employment agreement provided that Dr. Greenberg would serve as an employee of the original P.C., it is undisputed that Dr. Kleiner, who was the sole owner of the original P.C., negotiated and signed the employment agreement on behalf of the original P.C. The employment agreement is also separately executed, as "agreed to and accepted," by Dr. Kleiner, who, the amended complaint alleges, signed it in his individual capacity. The amended complaint also alleges that article 10 of the employment agreement contemplated that Dr. Greenberg's obligations would continue if the original P.C. "ceases to operate as a going practice" and a "successor P.C. owned in whole or part by the shareholders or officers of the [original] P.C. is formed." It further alleges that on August 8, 1995, Island Nephrology was formed as a successor professional corporation to the original P.C., and that Island Nephrology assumed the obligations of Dr. Kleiner and/or the original P.C. under the employment agreement with Dr. Greenberg. In addition, the amended complaint alleges that Dr. Greenberg consented to the assignment of his employment agreement from the original P.C. to Island Nephrology by accepting the compensation paid by Island Nephrology and the benefits and obligations arising from the employment agreement. Thus, these allegations set forth a sufficient basis for Island Nephrology to assert a breach of contract claim against Dr. Greenberg. Consequently, there is no basis to deny the proposed amendment regarding these allegations as to plaintiffs' first cause of action ( see generally Maloney Carpentry, Inc., 37 AD3d at 558).
Dr. Greenberg and Dr. Shneyderman further argue that plaintiffs' proposed amended fourth and fifth causes of action against them, respectively, for breach of fiduciary duty are patently without merit because they are merely duplicative of a breach of contract claim. This argument is rejected. An employee owes a fiduciary duty to his employer as a matter of law ( see Lamdin v Broadway Surface Adv. Corp., 272 NY 133, 138; Laro Maintenance Corp. v Culkin, 267 AD2d 431, 433; Louis Capital Mkts., L.P. v REFCO Group, Ltd. LLC , 9 Misc 3d 283 , 289). Even in the absence of a formal employment contract, Dr. Greenberg, acting as an employee, would still have owed a fiduciary duty of loyalty and good faith to plaintiffs as would Dr. Shneyderman ( see Louis Capital Mkts., L.P., 9 Misc 3d at 289).
While Dr. Greenberg and Dr. Shneyderman also raise arguments in opposition to plaintiffs' proposed amended third cause of action for conversion and twelfth cause of action for defamation, which will be addressed infra, these proposed amended causes of action do not differ from those pleaded in the original complaint. Thus, inasmuch as no basis has been shown to warrant a denial of the proposed amendments, the court finds that a granting of plaintiffs' motion for leave to amend the complaint is warranted ( see CPLR 3025 [b]; Maloney Carpentry, Inc., 37 AD3d at 559; Nissenbaum, 171 AD2d at 655). Since the court grants plaintiffs leave to amend the complaint, Maimonides and Millennium's cross motion to dismiss will be deemed directed to, and addressed by the court with respect to, plaintiffs' amended complaint ( see 49 West 12 Tenants Corp. v Seidenberg , 6 AD3d 243 , 244; Livadiotakis v Tzitzikalakis, 302 AD2d 369, 370; Sage Realty Corp. v Proskauer Rose LLP, 251 AD2d 35, 38).
As noted above, the causes of action in the amended complaint, in any event, are the same as those pleaded in the original complaint ( see EDP Hosp. Computer Sys. v Bronx Lebanon Hosp, Ctr., 212 AD2d 570, 571 [1995]).
The court's inquiry on a cross motion seeking to dismiss the complaint for failure to state a cause of action, pursuant to CPLR 3211 (a) (7), is limited to whether the complaint states some recognizable cause of action, however imperfectly such cause of action is stated ( see Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414; Davis v CCF Capital Corp., 277 AD2d 342, 343; Gruen v County of Suffolk, 187 AD2d 560, 562). The court must accept the facts alleged by the plaintiff as true and liberally construe the complaint, according it the benefit of every possible favorable inference ( see Sokoloff, 96 NY2d at 414; Leon v Martinez, 84 NY2d 83, 87-88; Grand Realty Co. v City of White Plains, 125 AD2d 639, 639).
Maimonides and Millennium, in support of their cross motion, argue that plaintiffs' third cause of action for conversion fails to state a legally cognizable cause of action and cannot be maintained. It is well established that in order to state a viable claim for conversion, "[t]angible personal property or specific money must be involved" ( Independence Discount Corp. v Bressner, 47 AD2d 756, 757; see also Batsidis v Batsidis , 9 AD3d 342 , 343; Long Is. Women's Health Care Assoc., M.D., P.C. v Haselkorn-Lomasky, M.D.,10 Misc 3d 1068 [A], 2005 NY Slip Op 52186 [U],*4 [2005]). No cause of action for conversion exists based on the alleged conversion of intangible property, such as confidential information contained in patient lists ( see Rao v Verde, 222 AD2d 569, 570; MBF Clearing Corp. v Shine, 212 AD2d 478, 479; Woodie v Azteca Intl. Corp., 9 Misc 3d 1104 [A], 2005 NY Slip Op 51401 [U],*5 [2005]). Here, the conversion of confidential patient information does not involve items of tangible personal property or specific money ( see Rao, 222 AD2d at 570; Prohealth Care Assoc., LLP v April, 4 Misc 3d 1017 [A], 2004 NY Slip Op 50919 [U], *7), nor have plaintiff's alleged that defendants exercised dominion or control over the alleged "assets" to the exclusion of plaintiffs' rights ( MBF Cleaning Corp. v Shine, 212 AD2d 479). Thus, dismissal of plaintiffs' third cause of action for conversion is mandated ( see CPLR 3211 [a] [7]).
Dr. Greenberg and Dr. Shneyderman, in their opposition to plaintiffs' motion to amend the complaint, join in this argument.
Maimonides argues that plaintiffs' seventh cause of action for breach of its fiduciary duties to plaintiffs fails to state a cause of action because plaintiffs have not alleged the elements of a joint venture. This argument is unavailing. Plaintiffs have alleged that there was a shared control of the dialysis facility and a sharing of profits and losses were contemplated ( see Tilden of N.J. v Regency Leasing Sys., 230 AD2d 784, 785-786). Indeed, the existence of a joint venture is the crux of the dispute between plaintiffs and Maimonides.
Maimonides also argues that plaintiffs' seventh cause of action for breach of fiduciary duty is merely duplicative of plaintiffs' breach of contract claim against it. This argument is rejected. A fiduciary relationship exists between joint venturers, and imposes upon joint venturers a duty of loyalty, good faith, and fair dealing toward each other ( see Birnbaum v Birnbaum, 73 NY2d 461, 466; Blue Chip Emerald v Allied Partners, 299 AD2d 278, 279; Madison Hudson Assoc., LLC v Neumann, 8 Misc 3d 1025 [A], 2005 NYSlipOp 51289 [U],*10 [2005]; Schlesinger v Regenstreif, 26 Misc 2d 604, 608). Thus, this cause of action may be separately maintained by plaintiffs and its dismissal must be denied ( see Apple Records v Capital Records, 137 AD2d 50, 57-58; Anderson v Weinroth, 2007 WL 4533153, 2007 NY Slip Op 10505, *9 [2007]).
Maimonides also seeks dismissal of plaintiffs' sixth cause of action for breach of contract against it. This cause of action alleges that Maimonides breached its contracts with plaintiffs, including the joint venture, the MOU, and the AMDA, by instructing Dr. Greenberg to stop working at Island Rehab immediately; failing to inform plaintiffs of the actions of Dr. Greenberg and Dr. Shneyderman in violation of the agreements and duties owed to the joint venture and plaintiffs; refusing to provide a replacement Assistant Medical Director for Dr.Greenberg; providing confidential information about plaintiffs' patients to Dr. Shneyderman, Dr. Greenberg, and Millennium, or allowing them to take such confidential information; willfully failing to properly credential Dr. Chan Ma; failing to offer plaintiffs the opportunity to participate in its venture or operations related to Millennium, Dr. Shneyderman, and Dr. Greenberg; and failing to honor its financial obligations to the joint venture and unilaterally terminating the joint venture.
In seeking dismissal of this breach of contract cause of action, Maimonides argues that plaintiffs have failed to make the requisite showing to support a cause of action based upon breach of a joint venture agreement. "The essential elements of a joint venture are an agreement manifesting the intent of the parties to be associated as joint venturers, a contribution by the coventurers to the joint undertaking (i.e. a combination of property, financial resources, effort, skill or knowledge), some degree of joint proprietorship and control over the enterprise; and a provision for the sharing of profits and losses'" ( Tilden of N.J., Inc., 230 AD2d at 785-786, quoting Ackerman v Landes, 112 AD2d 1081, 1082; see also Mendelson v Feinman, 143 AD2d 76, 78). The MOU clearly reflects all of these elements and expressly states the intent of the parties (including Kleiner individually) to establish a joint venture in which dialysis services would be provided by each of the venturers at a location leased by Island from a holding company controlled by Maimonides which would also manage the facility. Kleiner is to be the Medical Director and Maimonides is to supply the Assistant Medical Director and other physicians. Both Kleiner and Maimonides would contribute equal capital assets and Maimonides agrees to support Island's application for approval of an Article 28 license. Maimonides contends that a joint venture never came into being because no approval by the New York State Department of Health (the DOH) of a jointly owned limited liability corporation or a "Designee Corporation" jointly owned by Dr. Kleiner and a designee of Maimonides was obtained to operate the facility as the parties had contemplated and set forth in the MOU. Maimonides cites to the fact that plaintiffs remained the licensed operators of the facility, arguing that Public Health Law § 2801-a would require approval by the Public Health Council of any change in the business structure. Plaintiffs, however, allege that despite this lack of DOH approval, a joint venture existed as a result of a course of dealing between them over a 10-year period, and that, during this period, the parties continued to manage, operate, and provide out-patient dialysis in accordance with the MOU, the AMDA, and the joint venture. Paragraph 14 of the MOU makes provisions for year to year continuation of the preliminary arrangement should the DOH not approve the anticipated form of the Joint Venture within 24 months.
Maimonides also argues that plaintiffs failed to plead any sharing of profits or losses or that Maimonides had any control over the joint venture. The amended complaint, however, pleads that Maimonides and plaintiffs pooled their resources to build the infrastructure of the out-patient dialysis center and notes that paragraph 4 of the MOU set forth that services to be rendered at the professional corporation would be provided by mutually acceptable Maimonides faculty plan physicians. The amended complaint further specifies that the Assistant Medical Director, which, under the terms of AMDA II dated July 9, 1999 between Island and Maimonides, was to be provided by Maimonides from its own staff, represented Maimonides' interests in the joint venture. According to the amended complaint, Maimonides also shared in the profits of the joint venture through the payment by the facility of high market value rent. While the repayment to Maimonides of its initial capital contribution, as acknowledged in paragraph 34 of the First Amended Complaint, may prove significant upon further discovery, upon the pleading alone, this fact is not dispositive. Movants' argument that the contemplated referral arrangement by which patients in need of out-patient care would be treated at plaintiffs' facility and patients in need of hospitalization would be treated at Maimonides (Complaint Paragraph 16), would be contrary to law, is also not dispositive upon the record before the court. Plaintiffs assert that the referral arrangement was not contrary to law since they and Maimonides were partners in a joint venture and Dr. Greenberg and Dr. Shneyderman were employees of all of them ( see Education Law § 6509-a, § 6531; 8 NYCRR 29.1 [b]; Sheldon Rabin M.D., P.C. v Hirshfield, 223 AD2d 535, 536). The argument raises several factual questions which require further discovery.
Maimonides' assertion that plaintiffs cannot allege a claim for breach of contract under the AMDA II because that agreement would have expired in May 2005 is belied by section 4 of the AMDA II which was "made" on July 9, 1999, providing that AMDA II was to remain in effect for at least 10 years from the date of that agreement, and possibly much longer contingent on continued operation of the "New Facility" by a business entity jointly owned by Maimonides and Kleiner.
Maimonides argues that plaintiffs' remaining contract allegations cannot be sustained because they are premised on a joint venture which never existed. However, Maimonides' argument that a joint venture never existed is a factual question which is beyond the scope of this court's examination on a motion to dismiss ( see Grand Realty Co., 125 AD2d at 639). Thus, inasmuch as the allegations of plaintiffs' complaint adequately allege a breach of contract claim against Maimonides, dismissal of plaintiffs' sixth cause of action must be denied.
Maimonides' contention that plaintiffs cannot premise their claims upon the alleged refusal to credential Dr. Ma because Dr. Ma has failed to exhaust his administrative remedies under its bylaws and Public Health Law § 2801-b is peripheral to the issues herein and of no consequence. Plaintiffs are not seeking to reinstate Dr. Ma's privileges at Maimonides; the allegations relate only to their effort to demonstrate Maimonides' alleged bad faith and breach of its general obligations pursuant to the joint venture.
Maimonides also seeks dismissal of plaintiffs' eighth cause of action for tortious interference with contract against Maimonides and Millennium based upon their inducing Greenberg and Shneyderman to breach their employment contracts with plaintiffs. A claim of tortious interference with contract "requires proof of (1) the existence of a valid contract between plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional procuring of the breach; and (4) damages" ( Foster v Churchill, 87 NY2d 744, 749-750; see also Lama Holding Co.v Smith Barney, 88 NY2d 413, 424; Kline v Schaum, 173 Misc 2d 108, 109). Maimonides asserts that, with respect to Dr. Greenberg, plaintiffs' claim against it must fail as Dr. Greenberg was not bound by any valid contract with plaintiffs. As noted above, however, this issue is sharply disputed by plaintiffs. Plaintiffs have adequately pleaded each of the other requisite elements.
Maimonides further contends that, absent a showing of malice or illegality, it would be privileged to interfere with a contract between plaintiffs and Dr. Greenberg and/or Dr. Shneyderman because it had an economic interest in procuring such a breach. Specifically, Maimonides asserts that if, as plaintiffs allege, it facilitated and encouraged Dr. Greenberg and Dr. Shneyderman to breach their respective employment agreements and divert patients from Island Rehab in order to guarantee Maimonides the professional component of the revenue stream and the market value generated by those patients, it would be privileged in doing so because such interference would be for its own economic benefit. Citing, inter alia, Foster v Churchill, 87 NY2d 744 (1996), and WMW Mach. Co., Inc. v Koerber AG, 240 AD2d 400 (2nd Dept 1997), Maimonides argues that plaintiffs have failed to sufficiently plead that it acted with malice or illegality, and that, therefore, any claims predicated on an interference with plaintiffs' contracts with the nephrologists, even if factually accurate, cannot be sustained.
This argument is flawed. Where the alleged interference is with an existing contract, rather than a prospective economic relationship, "the defense of economic justification is inapplicable [citation omitted] and it is not necessary to allege that defendant used improper means or that its conduct was for the sole purpose of harming plaintiff [ie, malicious] . . ." Kronish Lieb Weiner Hellman LLP v Tahari, Ltd. , 35 AD3d 317 , 318; see also, Carvel Corp. v Noonan , 3 NY3d 182 , 189 (2004); NBT Bancorp Inc. v Fleet/Norstar Fin. Group Inc., 87 NY2d 614, 621 (1996); Shared Communications Servs. Of E SR, Inc. v Goldman Sachs Co., 23 AD3d 162, 163 [1st Dept 2005]. As the Court of Appeals stated in NBT Bancorp Inc. v Fleet/Norstar Fin. Group Inc. ( 87 NY2d at 621), "where there is an existing, enforceable contract and a defendant's deliberate interference results in a breach of that contract, a plaintiff may recover damages for tortious interference with contractual relations even if the defendant was engaged in lawful behavior."
The essence of the tort of tortious interference with contract is the improper frustration of contract rights by an over-zealous competitor. Balanced against the public's interest in preserving the integrity of contractual relationships, however, is the public's concern that competition not be unreasonably restricted. See Guard-Life Corp. v S. Parker Hardware Mfg. Corp., 50 NY2d 183, 190 (1980). Hence, the defense of economic justification upon which defendants rely. This defense is not applicable, however, where the contract is valid and enforceable and known to the defendant that intentionally seeks its breach for its own economic advantage. Even when at issue is a contract terminable at will and therefore not deemed to be enforceable for a definite term, recovery may be had where the means of interference deliberately employed were wrongful, consisting of fraudulent representations "or as in violation of a duty of fidelity owed to the plaintiff by the defendant by reason of a relation of confidence existing between them." Guard-Life Corp. v S. Parker Hardware Mfg. Corp., 50 NY2d at 194.
Accepting the allegations of the complaint as required upon this motion addressed exclusively to the pleading, defendant Maimonides breached a fiduciary duty to plaintiffs in diverting the business of the joint venture to an alternative facility for its own gain and induced the employees it had supplied to the joint venture as its contractual contribution to the venture to break their contracts with plaintiff in furtherance thereof. Clearly such scheme could be characterized as sufficiently both improper and wrongful to meet the pleading requirements for tortious interference with contract and to overcome an allegation of privileged economic justification as a matter of law. See generally, Carvel Corp. v Noonan, 3 NY3d 189-191, 195-197. Foster v Churchill, 87 NY2d 744, and WMW Mach. Co., Inc. v Koerber AG, 240 AD2d 400, are not to the contrary. In both of those cases the defendants acted in legitimate defense of the economic interests of their employer or subsidiary to which they owed a superior duty, against a third party to which they did not owe a contractual or fiduciary duty, unlike this case in which the defendant is alleged to have breached a duty owed directly to the plaintiff under contracts which governed the relationship of the subject employees to both parties. Plaintiffs have alleged that Maimonides conspired with Millennium to undermine the joint venture with plaintiffs by improperly misappropriating their patient base and good will for defendants' sole benefit, importuning Dr. Greenberg and Dr. Shneyderman to breach their employment contracts to facilitate the implementation of their plan. These allegations are sufficient to state a cause of action for tortious interference with contract based upon actual contracts with doctors Greenberg and Shneyderman. Thus, dismissal of plaintiffs' eighth cause of action must be denied.
As to plaintiffs' ninth cause of action for tortious interference with business relations based on the diversion of patients, it is noted that to establish such a claim, "a plaintiff must show (1) [the] existence of a business relation with a third party, (2) defendant's interference with the relation by use of dishonest, unfair, or improper means, and (3) plaintiff sustained damages" ( Gross v Empire Healthchoice Assur. Inc., 12 Misc 3d 1155 [A], 2006 NY Slip Op 50903 [U],*8 [2006]; see also M.J. K.Co., Inc. v Matthew Bender Co., Inc., 220 AD2d 488, 490); 71 Pierrepont Assocs. v 71 Pierrepont Corp., 243 AD2d 625 [2nd Dept 1997]). "The imposition of liability [for tortious interference] in spite of a defense of economic interest requires a showing of either malice on the one hand, or fraudulent or illegal means on the other." Foster v Churchill, 87 NY2d at 750, citing Felson v Sol CafÉ; Mfg. Corp., 24 NY2d 682, 687. Where the alleged interference is related to only a prospective or speculative contract, "more culpable conduct" is required. NBT Bancorp Inc. v Fleet/Norstar, 87 NY2d at 621. Maimonides argues that plaintiffs have failed to show that it has utilized dishonest, unfair, or improper means. Maimonides claims that its conduct was legitimately based on economic self-interest, however, such defense cannot, in the context of the complexity of the relationships of the various parties hereto, defeat plaintiffs' interests without further inquiry. See Carvel Corp. v Noonan, 3 NY3d 191, in which the Court noted that where parties are not competitors, as in this case where the defendants are alleged to be co-venturers with plaintiff, "there may be a stronger case that defendant's interference with the plaintiff's relationships was motivated by spite" [i.e., malice]. Clearly, the patients' continued use of plaintiffs' services was not certain and no enforceable contract existed between them and plaintiffs. Thus, defendants are correct that a further element of malice or wrongdoing is required to sustain plaintiffs' claim of tortious interference with business relations. See Guard-Life Corp. v S. Parker Hardware Mfg. Corp., 50 NY2d 191-192; Snyder v Sony Music Entertainment, Inc., 252 AD2d 294, 299 [1st Dept 1999].
Whether plaintiffs can establish that defendants acted directly towards the patients in inducing them to abandon plaintiffs (see Carvel Corp. v Noonan, 3 NY3d at 192) remains a question of fact requiring further discovery. However, plaintiffs have alleged that defendants conspired to steal proprietary patient information belonging to the joint venture to which plaintiffs were party and thus committed the independent tort of unfair competition. Such allegations are sufficient to support a claim of tortious interference with business interests if such information was used by defendants to solicit plaintiffs' patients and divert them to defendants' new facility. See Lawrence v Union of Orthodox Jewish Congregations, 32 AD3 304 [1st Dept 2006] (culpable or wrongful conduct sufficient to sustain interference with existing non-binding economic relationship includes crime or independent tort).
Although it has been held that the wrongful means necessary to sustain a cause of action for tortious interference with a prospective business interest do not include persuasion alone ( NBT Bancorp. v Fleet/Norstar, 87 NY2d at 624), the patients involved here were patients of both plaintiffs and defendants under the terms of the joint venture. Thus, the opportunity afforded defendants to transfer these patients from plaintiffs facility to defendants' competing facility far exceeded mere persuasion. Giving plaintiffs' allegations the deference to which they are due upon this motion to dismiss, the motion to dismiss the ninth cause of action is denied.
With respect to plaintiffs' tenth cause of action for unfair competition, it is noted that a claim of unfair competition is generally predicated "upon the alleged bad faith misappropriation of a commercial advantage belonging to another by exploitation of proprietary information or trade secrets" ( Beverage Mktg. USA, Inc. v South Beach Beverage Co., Inc., 20 AD3d 439, 440 [2nd Dept 2005]; see also Ruder Finn v Seaboard Sur.Co., 52 NY2d 663, 671; Bender Ins. Agency v Treiber Ins. Agency, 283 AD2d 448, 450 [2nd Dept 2001]). Maimonides argues that plaintiffs have failed to show how Maimonides acted in bad faith by allegedly exploiting their proprietary information and how the information purportedly misappropriated belonged exclusively to them.
Plaintiffs, in response, assert that they have shown Maimonides' bad faith in that it acted contrary to paragraph 20 of the MOU, which states that without the prior written consent of the other parties to the MOU, no party shall use the confidential or proprietary information of the other party, including confidential lists of patients. Plaintiffs allege that Maimonides directly benefitted from the misappropriation of confidential information for its own business interests to their detriment. Thus, plaintiffs have sufficiently pleaded a cause of action for unfair competition, and dismissal of plaintiffs' tenth cause of action must be denied (see Beverage Mktg. USA, Inc., 20 AD3d at 440; Bender Ins. Agency, 283 AD2d at 450).
Plaintiffs' eleventh cause of action for interference with prospective economic opportunity is predicated against all defendants upon the same allegations set forth in support of the ninth and tenth causes of action which are also alleged against all of the defendants and, as such, is dismissed as duplicative.
With respect to plaintiffs' twelfth cause of action for defamation against Greenberg, Shneyderman and Millennium, while Dr. Greenberg and Dr. Shneyderman address the alleged lack of merit of this claim with respect to them in their opposition to plaintiffs' motion to amend, no cross motion to dismiss has been brought by them. However, since Millennium has joined in Maimonides' cross motion to dismiss, the viability of this cause of action may properly be addressed with respect to Millennium. The argument raised is that this twelfth cause of action for defamation cannot be maintained because it fails to comply with the pleading requirements of CPLR 3016 (a). CPLR 3016 (a) requires that to sustain a defamation claim, "the particular words complained of shall be set forth in the complaint."
In the complaint, plaintiffs merely conclusorily allege, upon information and belief, that Dr. Greenberg defamed them to existing and potential patients and other nephrologists at Maimonides and elsewhere. With respect to Dr. Shneyderman, plaintiffs allege that Dr. Shneyderman falsely disparaged and defamed plaintiffs' facilities and practice to potential patients and other nephrologists at Maimonides by claiming, among other things, that at the dialysis facility, "the chairs are dirty, the machines are old, it's the only unit in the area that doesn't use Fresnius [dialysis equipment]." Plaintiffs allege, as to Millennium, that, upon information and belief, Millennium knew or was reckless in not knowing the defamatory statements made by Dr. Shneyderman and Dr. Greenberg.
No defamatory statements are actually attributed to Millennium. Therefore, plaintiffs have insufficiently pleaded this claim as against Millennium, requiring dismissal of this cause of action as against it ( see CPLR 3016 [a]; 3211 [a] [7]; Simpson v Cook Pony Farm Real Estate, Inc. , 12 AD3d 496 , 497 [2nd Dept 2004]; Schwegel v Chiaramonte , 4 AD3d 519 , 521 [2nd Dept 2004]; Bell v Alden Owners, 299 AD2d 207, 208; Sirianni v Rafaloff, 284 AD2d 447, 448; Gill v Pathmark Stores, 237 AD2d 563, 564).
Accordingly, plaintiffs' motion for leave to amend their complaint is granted. Maimonides and Millennium's cross motion to dismiss the amended complaint is granted to the extent that: (1) plaintiffs' third cause of action for conversion is dismissed, (2) plaintiffs' eleventh cause of action for interference with prospective economic opportunity is dismissed as [*13]duplicative, and (3) plaintiffs' twelfth cause of action for defamation with respect to Millennium is dismissed; the cross motion is denied in all other respects.
The parties are directed to appear for conference in Com Division I, Room 756 of the Courthouse, 360 Adams Street, Brooklyn, at 11:30 A.M. on April 30, 2008.
This constitutes the decision and order of the court.