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Ambulatory Services of Puerto Rico, LLC v. Sankar Nephrology Group, LLC

United States District Court, N.D. Texas, Fort Worth Division

May 28, 2019

AMBULATORY SERVICES OF PUERTO RICO, LLC, ON ITS BEHALF AND DERIVATIVELY ON BEHALF OF SNG NARANJITO, LLC, ET AL., Plaintiffs,
v.
SANKAR NEPHROLOGY GROUP, LLC, ET AL., Defendants.

          MEMORANDUM OPINION AND ORDER

          JOHN MCBRYDE, UNITED STATES DISTRICT JUDGE.

         Before the court for consideration and decision is the motion of plaintiffs, Carlos R. Rivera ("Rivera"), Ambulatory Services of Puerto Rico, LLC ("ASPR"), and SNG Naranjito, LLC ("Naranjito") (collectively "plaintiffs"), to disqualify counsel for defendants Sankar Nephrology Group, LLC ("SNG"), Renal Physicians of North Texas LLC ("Renal Physicians"), and PPG Health P.A. ("PPG") from representing any of the defendants in this action. The court has concluded that it should withhold a ruling on plaintiffs' motion, as well as the pending motions to dismiss, until after the hearing now scheduled for June 12, 2019, has been conducted.

         I.

         Nature of Plaintiffs' Claims

         Once the underbrush is cleared away, the heart of plaintiffs' main complaints are that SNG, at the behest of defendants Ponniah S. Sankarapandian, a/k/a Ponniah Sankar ("Ponniah Sankar"), and Balamurugan P. Sankarapandian, a/k/a Bala Sankar ("Bala Sankar")(collectively, "the Sankars"), (1) secretly and fraudulently borrowed against Naranjito's assets $3, 700, 000 for the purchase from Rivera of a sixty percent interest in Naranjito and (2) caused the mishandling and misappropriation of $7 million realized from the sale of Naranjito's assets to Fresenius Medical Care ("Fresenius") in February 2016.[1] At the time of the sale, Naranjito was jointly owned by ASPR and SNG. The second of those two complaints received the most attention in the allegations of the amended complaint.

         The first of the two, which is the basis of Count I of the complaint, arises from a transaction in early 2014 when ASPR, acting through Rivera, and SNG, acting through the Sankars, entered into an arrangement for joint ownership of Naranjito. In connection with that transaction ASPR and SNG executed a Membership Contribution Agreement ("MCA") that prohibited future financing or the encumbrance of Naranjito's assets without joint approval of ASPR and SNG. Plaintiffs alleged that SNG violated the MCA by encumbering assets of Naranjito to obtain funds to use for funding of SNG's purchase of an interest in Naranjito, in a way that did not benefit ASPR but, instead, caused ASPR to suffer damages. This alleged violation forms the basis of Count I of the complaint. Doc. 36 at 39, ¶¶ 170 & 171.[2]

         Another agreement ASPR and SNG entered into when Naranjito was formed was a Limited Liability Operating Agreement for Naranjito (the "Operating Agreement"). Count II complains that the Sankars and SNG breached the Operating Agreement in a number of respects, including causing an inappropriate distribution for the benefit of SNG and the Sankars of the funds realized from defendant Branch Banking and Trust Company ("BB&T") of the $3, 700, 000 loan they obtained from BB&T to fund SNG's purchase of an interest in Naranjito in violation of the Operating Agreement as well as in violation of the MCA. Id. at 39-41, ¶¶ 175-178.

         Interwoven into other Counts of the amended complaint are further complaints about the $3, 700, 000 loan and the disposition of the $7 million received from the sale of Naranjito's assets.

         Count III is based on a claim of breach by SNG of an agreement SNG and ASPR executed for the sale of the assets of Naranjito to Fresenius (the "Member Sale Agreement" or "MSA"). The MSA set forth the understanding of the parties relative to disposition of the sale proceeds from the sale of Naranjito to Fresenius. According to plaintiffs, ASPR was to receive no less than $2, 800, 000 from that sale and, in addition, was entitled to forty percent of the $76, 000 received for Naranjito's inventory. SNG allegedly violated the Member Sale Agreement by preventing payment to ASPR of its share of the proceeds, causing the purchaser, instead, to pay the proceeds to BB&T, rendering the proceeds inaccessible to ASPR. In the process, SNG failed to pay ASPR its forty percent share of the sale's proceeds.

         Count IV alleged breach of fiduciary duty against the Sankars and SNG based on the conduct of SNG and the Sankars in obtaining the $3, 700, 000 loan from BB&T for their personal benefit--for using Naranjito's assets and profits for personal gain.

         Count V is a breach of contract claim against defendants Renal Physicians and PPG. The MSA required Renal Physicians and PPG to provide certain business and administrative management services to Naranjito. Plaintiffs alleged that SNG breached the MSA by, among other things, failing to provide the services Renal Physicians and PPG were responsible for, and for allowing Renal Physicians and PPG to overbill Naranjito for their services for the period after ASPR took over the commercial billing and collections.

         Count VI is a civil RICO count against Ponniah Sankar and SNG based on their conduct in obtaining the lending arrangement with BB&T to fraudulently acquire an equity interest in Naranjito, as previously mentioned, and other SNG dialysis clinics, and to fund the operation of the clinics in a manner that diverted profits away from Naranjito and other clinics for the benefit of the Sankars, SNG, and other Sankar-affiliated businesses, to the damage of ASPR.

         Count VII again is described as a civil RICO count against Ponniah Sankar and SNG, this one based on their conduct and activities in acquiring and maintaining a controlling interest in what was known as "SNG Dialysis Clinics," including Naranjito. This allegation appears again to be related to the acquisition by Ponniah Sankar and SNG of the $3, 700, 000 loan from BB&T previously mentioned.

         Count VIII is another civil RICO claim against Ponniah Sankar and SNG, this time based on the relationship between those defendants and SNG Dialysis, again growing out of the transaction that resulted in the $3, 700, 000 BB&T loan as well as other allegedly unlawful loans, and related transactions, that were made or conducted despite having never obtained ASPR's approval for the loans, the proceeds of none of which were used to benefit ASPR or Naranjito, but were for the sole benefit and personal use of Ponniah Sankar and SNG.

         Count IX alleged against all defendants a conspiracy to violate civil RICO. This count alleged that defendants Bala Sankar, Renal Physicians, and PPG joined with Ponniah Sankar and SNG in a conspiracy to commit acts in violation of 18 U.S.C. § 1962(a)-(c). The respects in which that happened appear to be the same conduct previously alleged against the parties in the earlier civil RICO counts.

         Count X is an unjust enrichment count against BB&T and SNG related to the funds received from the sale of Naranjito. This count essentially restates in different words the same complaints made by plaintiffs relative to alleged inappropriate disbursement of the $7 million received from Fresenius when it purchased Naranjito's assets.

         Count XI is a fraud count against Ponniah Sankar and SNG related to the obtaining from BB&T of the previously discussed $3, 700, 000 loan that was used by SNG to purchase an interest in the assets of Naranjito.

         Count XII is a civil conspiracy claim against all defendants. At the outset of allegations under this count, the allegation is made that "[t]his is an action for damages arising from a civil conspiracy by the Defendants to defraud ASPR through Defendants' acts of promoting and perpetuating Ponniah Sankar's and SNG's self-dealing and disloyalty." Doc. 36 at 57, ¶ 270.

         Count XIII is a conversion count against BB&T and SNG. Plaintiffs describe this count as "an action for damages arising from SNG's and BB&T's conversion of property rightfully owned by ASPR as minority owner of Naranjito." Id. at 58, ¶ 2 76. The complaint in this count relates to the handling by BB&T and SNG of the proceeds from the $7 million sale of the assets of Naranjito to Fresenius.

         Count XIV is an equitable accounting claim against SNG by which ASPR seeks an accounting of the financing of Naranjito due to SNG's fraudulent activities and corporate misconduct orchestrated by its controlling member, Ponniah Sankar, as described in the amended complaint. Id. at 59, ¶ 283.

         Count XV asserted a breach of duty of good faith and fair dealing claim against BB&T. It is based on allegations that BB&T owed Naranjito a duty of good faith and fair dealing in connection with the financial services provided to Naranjito, and that BB&T violated that duty as to various transactions that are described in the amended complaint. Id., at 60, ¶¶ 287-288.

         Count XVI asserts an aiding and abetting breach of fiduciary duty claim against BB&T. This count is based on an allegation that BB&T aided and abetted the Sankars and SNG in their violations of fiduciary duties owed to ASPR and Naranjito. Id. at 61, ¶¶ 291-292. Those alleged breaches of fiduciary duty apparently pertain to various transactions that were earlier described in the amended complaint.

         Count XVII alleged violation of the Texas Deceptive Trade Practices Act against BB&T. Plaintiffs alleged that ASPR and Naranjito were consumers within the meaning of the Texas Deceptive Trade Practices-Consumer Protection Act and that the bank engaged in false, misleading, and deceptive acts, practices, and/or omissions with respect to the provision of financial services to Naranjito and ASPR, again referring to the various transactions in which BB&T were involved that previously had been described in the amended complaint. Id., at 61-62, ¶¶ 295-296.

         II.

         Mentions in the Amended Complaint of Cantey Hanger and Its Attorneys

         There was no mention of Cantey Hanger or any of the Cantey Hanger attorneys in the original complaint by which this action was initiated in November 2 018. Doc. 1. As what might be viewed to be a prelude to the late decision of the plaintiffs to seek disqualification of Cantey Hanger and its attorneys from representing any defendant in this action, plaintiffs mentioned in the amended complaint fourteen times the involvement of Cantey Hanger and its attorneys in various transactions about which plaintiff complains.

         Those mentions include the following allegations:

         (1) Naranjito hired Cantey Hanger to assist in the sale of Naranjito to Fresenius, and throughout the transaction lawyers from Cantey Hanger were in contact with Rivera regarding various aspects of the transaction and its impacts on ...


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