A Bochetto & Lentz attorney recently received a very favorable opinion on behalf of a client accused of misuse of PPP funds. Ryan Kirk successfully represented Philadelphia Vascular Institute, LLC (PVI) and James McGuckin, M.D. against claims of breach of contract, unjust enrichment, fraud, and other allegations.
The case against PVI and Dr. McGuckin was filed by Stephen V. Falanga, the Chapter 11 trustee for the estate of Vascular Access Centers, L.P. (VAC). Mr. Falanga alleged that his client and PVI had agreed to an arrangement in which PVI employed VAC’s physicians and VAC would fund their payroll, but that PVI had breached the terms of this agreement by applying for and receiving funding through the Paycheck Protection Program funds made available during the global pandemic. He asserted that PVI then misappropriated the payroll funds provided by VAC and used them for other purposes.
Bochetto & Lentz filed a motion to dismiss these claims, noting that Mr. Falanga had failed to provide adequate details regarding the agreement on which he’d based his complaint, had not attached a copy of any such agreement, and had failed to cite any specific provision of the agreement to support a breach of contract claim. Attorney Ryan Kirk suggested that Mr. Falanga had based his argument on contracts that PVI had with subsidiary vascular access centers rather than with his client, and further that he was hoping to be able to enforce the terms of those other agreements and their binding arbitration requirement to VAC’s benefit.
Though Mr. Falanga objected to this argument and claimed that Dr. McGuckin had previously admitted to an established course of conduct between PVI and VAC, attorney Kirk reasserted the lack of any agreement, and pointed to the many deficiencies in the trustee’s assertion, including answers to whether the contract was oral or written; the date it was allegedly entered into; the clauses that would have prohibited PVI from applying for PPP loans or requiring them to notify VAC of their application; and even who signed such an agreement between the two parties.
In her review of the case, the Honorable Ashely M. Chan, United States Bankruptcy Judge of the U.S. Bankruptcy Court of the Eastern District of Pennsylvania, agreed with Bochetto & Lentz. Relying upon Pennsylvania law and federal rules of bankruptcy procedures, she noted that though courts must accept factual allegations in complaints as true and construe them in the light most favorable to the moving party, complaints must plead more than “labels and conclusions” and must be “enough to raise a right to relief above the speculative level.” Because Mr. Falanga’s complaint did not indicate how or by whom the promises he alleges were made, his claim fell short of the standards needed to support his claim. She dismissed the Breach of Contract Claim without prejudice.
