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Dalamagas v. Leonidas

United States District Court, D. Connecticut

March 22, 2017

PHOTIOS DALAMAGAS, Plaintiff,
v.
PETER LEONIDAS, JOHN DOE I-II, Defendants.

          ORDER RE MOTION TO DISMISS

          Alvin W. Thompson United States District Judge

         Plaintiff Photios Dalamagas (“Dalamagas”) brings this action against defendants Peter Leonidas (“Leonidas”) and John Does I and II. Dalamagas brings claims for fraudulent misrepresentation and wage theft; or, in the alternative, unjust enrichment; or, in the alternative, conversion. Dalamagas has filed a third amended complaint (Doc. No. 31) (“Third Amended Complaint”). Leonidas moves to dismiss all claims. For the reasons set forth below, his motion is being granted in part and denied in part.

         I. FACTUAL ALLEGATIONS

         “The complaint, which [the court] must accept as true for purposes of testing its sufficiency, alleges the following circumstances.” Monsky v. Moraghan, 127 F.3d 243, 244 (2d Cir. 1997).

         Dalamagas and Leonidas owned equal shares in Soma Technology, Inc., a Connecticut corporation, Soma Technology, International, Inc., Soma Investments, LLC, a Connecticut limited liability company, Soma Tech Pvt. Ltd., an Indian private limited company, Soma Medical Solutions Pvt. Ltd., an Indian private limited company (collectively “SOMA”). (See 3d Am. Compl., ¶ 1). Dalamagas and Leonidas entered into an Equity Purchase Agreement pursuant to which Leonidas purchased all of Dalamagas' interest in SOMA on November 16, 2012.

         Dalamagas alleges that, prior to execution of the Equity Purchase Agreement, Leonidas defrauded him by several means. First, Leonidas hid SOMA's money in other entities, including Axia and Bristol Med Wholesale LLC, and omitted from SOMA's financial records $967, 000 owed to SOMA by Bristol Med Wholesale LLC. Second, Leonidas and John Does I and II underreported SOMA's earnings in its 2012 tax returns and earning reports. Reported lower earnings affected Soma's Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), which was used by the appraisers upon whom Dalamagas relied to estimate the value of Dalamagas' shares before he sold them to Leonidas. Dalamagas alleges that these actions by Leonidas and John Does I and II fraudulently caused the earnings per share, and thus the value of SOMA, to appear to be less than it was, which depressed the purchase price.

         Dalamagas and “[d]efendants Leonidas and John Doe[s] I [and] II agreed that [p]laintiff would be employed by [SOMA] for one (1) year as an employee/consultant after the sale of his equity in SOMA.” (3d Am. Compl., ¶ 58). Dalamagas alleges that, in addition, Leonidas and John Does I and II “moved monies from SOMA to the personal accounts of [] Leonidas for payment of [Dalamagas'] equity in SOMA, ” (id. ¶ 51), which allowed Leonidas to pay only “$1, 020, 000 . . . for Plaintiff's shares in SOMA” (id. ¶ 47). Dalamagas alleges that Leonidas and John Does I and II withheld his last paycheck, in the amount of $8, 333.33, and also deducted his annual expenses from an earlier paycheck.

         II. LEGAL STANDARD

         When deciding a motion to dismiss under Rule 12(b)(6), the court must accept as true all factual allegations in the complaint and must draw inferences in a light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). A complaint “should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). See also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). “The function of a motion to dismiss is ‘merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.'” Mytych v. May Dept. Store Co., 34 F.Supp.2d 130, 131 (D. Conn. 1999), quoting Ryder Energy Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). “The issue on a motion to dismiss is not whether the plaintiff will prevail, but whether the plaintiff is entitled to offer evidence to support his claims.” United States v. Yale New Haven Hosp., 727 F.Supp. 784, 786 (D. Conn. 1990) (citing Scheuer, 416 U.S. at 232, 94 S.Ct. 1683).

         III. DISCUSSION

         A. First Cause of Action: Fraud

         Leonidas argues that the Third Amended Complaint does not allege scienter “beyond conclusions as to all [d]efendants” because Dalamagas “lumped Leonidas in with John Does 1 [and] II”. (Def.'s Mem. in Supp. of Mot. to Dismiss, Doc. No. 38, at 4). Ordinarily this is a serious deficiency. “Where multiple defendants are asked to respond to allegations of fraud, the complaint should inform each defendant of the nature of his alleged participation in the fraud.” DiVittorio v. Equidyne Extractive Indus., 822 F.2d 1242 (2d Cir. N.Y. 1987). However, here Dalamagas alleges that John Does I and II are alter egos of Leonidas, that they acted as one and that they should be liable as one. He also alleges that “[t]he true names and capacities of John Doe[s] I [and] II are unknown to [p]laintiff, who therefore . . . sues defendants under these fictitious names”, and he undertakes to amend the complaint when the true names and capacities of John Does I and II have been ascertained. (3d Am. Compl., ¶ 19).

         Leonidas also argues that even if the allegations are taken as being directed at him alone, Dalamages has failed to plead adequate facts to show intent, i.e. that Leonidas had motive and opportunity to commit fraud. However, the factual allegations summarized above demonstrate a motive on the part of Leonidas, namely to pay Dalamagas less money than he would have had to pay him absent the fraud. These allegations also establish that Leonidas had an opportunity to commit fraud in that he was able to influence the financial reporting of SOMA Technology, Inc. in 2012 because it was exclusively under the control of Leonidas and John Does I and II and EDITDA was being used by the appraisers who were valuing SOMA Technology, Inc..

         Leonidas argues that there are no allegations explaining how Leonidas “‘knew' the records undervalued the company, what company was undervalued, what records were involved, or how the conduct that was fraudulent”. (Def.'s Mem. in Supp. of Mot. to Dismiss, at 6). However, a reasonable inference from the factual allegations summarized above is that Leonidas knew the company was undervalued, knew what records were involved because the ...


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