United States District Court, E.D. Michigan, Southern Division
Prescription Supply, Inc. et. al., Plaintiffs,
Moussa “Mark” Musa, et. al., Defendants.
G. Grand U.S. Magistrate Judge
ORDER GRANTING IN PART MOTION TO DISMISS ;
GRANTING PLAINTIFF LEAVE TO AMEND COMPLAINT
J. Tarnow Senior United States District Judge
filed a complaint in the Northern District of Ohio on January
22, 2016 . The case was transferred to the Eastern
District of Michigan on June 7, 2016 per Plaintiffs'
request under 28 U.S.C. §1404. On July 8, 2016,
Defendant Care Home RX. Corp. (“Care Home”) filed
a Motion to Dismiss . Plaintiffs responded on August 1,
2016  and Defendant Care Home replied on August 15, 2016
. The Court finds the motion suitable for determination
without a hearing, as provided by Local Rule 7.1(f)(2), with
respect to all of Plaintiff's claims brought against
Defendant Care Home. For the reasons stated below,
Defendant's Motion to Dismiss is GRANTED in part, and
Plaintiffs' tortious interference with business
relationships, defamation, unjust enrichment, conversion and
conspiracy claims are dismissed and DENIED in part as to
Plaintiffs' claims of misappropriation of trade secrets
and unfair competition claims. Additionally, Plaintiffs are
given leave to amend complaint to reflect the Court's
determination that Michigan state law applies.
Prescription Supply Inc. (“PSI”) was ASAP RX,
Inc. (“ASAP”)'s main supplier of
prescriptions for several years prior to July 2015.
Defendants Mark Musa and Mike Musa's pharmacy, ASAP,
entered into a Credit Agreement with Plaintiffs and further
granted to Plaintiffs a security interest in all of
ASAP's inventory. Defendants Mark Musa and Mike Musa each
executed an Unconditional Personal Guaranty of the Corporate
Debt of ASAP in favor of PSI, and subsequently began falling
behind on their payments due to the credit account in
believed the likelihood of collecting the amounts due (over
$1 million) was slim, so PSI and Defendant Mark Musa and Mike
Musa entered into an Asset Purchase Agreement (APA) on July
20, 2015, which had a far less value ($300, 000) than the
debt owed to Plaintiffs. Pursuant to the APA, Defendants Mark
and Mike Musa agreed to be employed at PSI, through its
wholly owned subsidy Plaintiff LTC Pharmacy LLC
(“LTC”), for at least six months, and further
agreed to be subject to terms containing non-competition,
non-disclosure and non-solicitation provisions. Under the
APA, so long as certain conditions were met, the debt owed to
PSI would be extinguished.
complaint alleges that while working for Plaintiffs,
Defendants Mark and Mike Musa engaged in unlawful competitive
behavior prohibited by the APA and Employment Agreements.
Defendants Mark and Mike Musa are alleged to have used the
assistance of Defendant Laureen Musa and Care Home to divert
customers and opportunities to Care Home, unlawfully stealing
customers and opportunities. Plaintiffs allege, upon
information and belief, that Care Home was formed in August
2014 for the purpose of continuing the retail pharmacy
business of Defendant Mark and Mike Musa, and that it was in
competition with LTC. Plaintiffs allege that Laureen Musa and
other employees of ASAP working at Care Home diverted
Plaintiffs' customers to the new pharmacy in knowing
violation of the APA and employment agreements. Plaintiffs
further allege that Defendant Care Home is knowingly
profiting from its violation of these agreements.
move to dismiss Plaintiff's complaint pursuant to Federal
Rule of Civil Procedure 12(b)(6) and 9(b). On a Rule 12(b)(6)
motion to dismiss, the Court must “assume the veracity
of [the plaintiff's] well-pleaded factual allegations and
determine whether the plaintiff is entitled to legal relief
as a matter of law.” McCormick v. Miami Univ.,
693 F.3d 654, 658 (6th Cir. 2012) (citing Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009); Mayer v.
Mylod, 988 F.2d 635, 638 (6th Cir. 1993)).
Choice of Law
originally filed their complaint in the Northern District of
Ohio, Plaintiff's complaint contains claims raised under
Ohio state law. Defendant argues that, under Michigan choice
of law jurisprudence, Michigan state law should apply.
Defendant asserts that Michigan law applies in this diversity
case under the rule articulated in Olmstead v.
Anderson, 428 Mich. 1 (1986) and Sutherland v.
Kennington Truck Serv., 454 Mich. 274 (1997). Plaintiffs
argue that under Van Dusen v. Barrack, 376 U.S. 612,
639 (1964), Ohio state law should apply because the Court
must apply the law that the Ohio District Court would have
applied to the state law claims.
case was transferred under 28 U.S.C. §1404 from the
Northern District of Ohio at the request of the Plaintiffs,
without objection from the Defendants, in order to avoid a
possible destruction of complete diversity. . Per Van
Dusen v. Barrack, the Erie doctrine requires
that Courts apply the choice of law rules of the transferor
state if a case is transferred into their jurisdiction under
§1404. 376 U.S. 612, 639 (1964). In Ohio, the choice of
law rules dictate that “the law of the place of injury
controls unless another jurisdiction has a more significant
relationship to the lawsuit.” Pilgrim v.
Universal Health Card, LLC, 660 F.3d 943, 946 (6th Cir.
2011), citing Morgan v. Biro Mfg. Co., 15 Ohio St.3d
339, 474 N.E.2d 286, 289 (1984). When deciding which State
has the most significant relationship, Ohio courts consider:
(1) the place of the injury;
(2) the location where the conduct causing the injury took
(3) the domicile, residence, ... place of incorporation, and
place of business of the parties;
(4) the place where the relationship between the parties ...
(5) any of the factors listed in Section 6 of the Restatement
(Second) of Conflict of Laws
Pilgrim v. Universal Health Card, LLC, 660 F.3d 943,
946 (6th Cir. 2011).
case, it is clear that Michigan state law should apply. All
parties but one Plaintiff reside or maintain a principle
place of business in Michigan, and therefore any injuries
that may have occurred were also situated in Michigan. The
alleged acts of harm stemming from the violations of
contract, i.e. the taking of clients from Plaintiffs, and
misuse of trade secrets, et. al., also occurred in
Michigan, as did the underlying relationship of the various
contracts between Plaintiffs and Defendants as well as the
individual Defendants' relationship with Defendant Care
Home. Finally, as Defendants illustrate in their response
brief, there is little substantive difference between the
jurisprudence governing the claims at issue in Ohio and
Michigan. Therefore there is no risk of Plaintiffs being
entitled to greater relief if Michigan law is applicable
rather than Ohio state law. Accordingly, under Ohio choice of
law rules, Michigan law should apply in this case.
Plaintiffs' complaint contemplates claims brought under
state law, the Court grants Plaintiffs leave to amend their
complaint to reflect the choice of law decision in the
interests of justice. However, the claims that the Court has
dismissed in this complaint are not affected by this limited
amendment of the complaint, because based on the substance of
the complaint and the legal arguments made by Plaintiffs
under Michigan law in the response brief, a valid claim
cannot be stated for the claims that are dismissed under a
Michigan law analysis and any amendment that would affect
this dismissed claims would be futile based on the facts
alleged against Care Home in the complaint. Foman v.
Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d