United States District Court, N.D. Illinois
March 2, 2004.
CITICORP VENDOR FINANCE, INC., Plaintiff,
ISA PHARMACY, INC.; DANIEL ZURAWSKI; and FRANK ROSENBAUM, Defendants FRANK ROSENBAUM, Third-Party Plaintiff, v. ISA PHARMACY, LLC, Third-Party Defendant DANIEL ZURAWSKI, Third-Party Plaintiff, v. ISA PHARMACY, LLC., Third-Party Defendant
The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Citicorp. Vendor Finance, Inc., as Successor-in-Interest by
Acquisition and Merger to Copelco. Capital, Inc. ("Citicorp"), filed suit
against Defendants, ISA Pharmacy, Inc. ("ISA Inc."), Daniel Zurawski
("Zurawski"), and Frank Rosenbaum ("Rosenbaum"), alleging breach of
lease, breach of Guaranty I (breach by Zurawski) and breach of Guaranty
II (breach by Rosenbaum).
Defendant/Third-Party Plaintiffs Zurawski and Rosenbaum filed
Third-Party Complaints against Third-Party Defendant, ISA Pharmacy LLC
("ISA LLC"). Zurawski demanded judgment against ISA LLC for any or all
amounts for which he might be found liable to Plaintiff, plus any other
or further damages or losses he may suffer or incur, including costs and
counsel fees. Rosenbaum also demanded judgment against ISA LLC for
contribution and indemnification for any and all liability of Rosenbaum
to the Plaintiff, including attorney's fees, costs of suit and interest,
and any other appropriate relief.
Presently before the Court is ISA Pharmacy, LLC's Motion to Dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(6). ISA LLC seeks
dismissal of Zurawski's and Rosenbaum's Third-Party Complaints. Zurawski
and Rosenbaum did not file a response to the Motion to Dismiss.
In reviewing a motion to dismiss, the court reviews all facts alleged
in the complaint and any reasonable inferences drawn therefrom in the
light most favorable to the plaintiff. See Marshall-Mosby v.
Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000). A
plaintiff is not required to plead the facts or the elements of a claim,
with the exceptions found in Federal Rules of Civil Procedure 9. See
Swierkiewicz v. Sorema, 534 U.S. 506, 511 (2002); Walker v.
Thompson, 288 F.3d 1005, 1007 (7th Cir. 2002) (Walker).
Dismissal is warranted only if "it appears beyond a 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
(1957). The "suit should not be dismissed if it is possible to
hypothesize facts, consistent with the complaint, that would make out a
claim." Graehling v. Vill. of Lombard, III., 58 F.3d 295, 297
(7th Cir. 1995).
When reviewing a motion to dismiss, the Court may consider exhibits
attached to the complaint as part of the pleadings. Beam v. IPCO
Corp., 838 F.2d 242, 244 (7th Cir. 1988) (Beam).
Furthermore, "[W]here the allegations of a pleading are inconsistent with
the terms of a written contract attached as an exhibit, the terms of the
latter, fairly construed, must prevail over the averments differing
therefrom." Foshee v. Daoust Constr. Co., 185 F.2d 23, 25 (7th
Cir. 1950); see also Bell v. Lane, 657 F. Supp. 815, 817
(N.D.Ill.1987) (where exhibits attached to complaint negate its
allegations, a court is not required to credit unsupported allegations).
Graue Mill Dev. Corp. v. Colonial Bank & Trust Co.,
927 F.2d 988, 991 (7th Cir. 1991).
A reading of the Complaint and the Third-Party Complaints, including
the exhibits attached to the Third-Party Complaints, support the
following summary of the alleged operative conduct of the parties.
On or about December 16, 1999, ISA Inc. and Copelco. Capital, Inc.
("Copelco") entered into a commercial Master Lease Agreement (the
"Lease"), which provided for the lease and hire of certain items of
equipment (the "Equipment"). In order to induce Copelco. to enter into
the Lease, Zurawski and Rosenbaum each made, executed and delivered a
Personal Guaranty (respectively, "Guaranty I" and "Guaranty II") to
Copelco. wherein Zurawski and Rosenbaum each individually agreed to
personally guaranty to Copelco, its successors and assigns, all payments
and other obligations owed to Copelco. under the Lease. The Lease
required Zurawski and Rosenbaum to make forty-eight (48) consecutive
monthly payments in the amount of $3,781.47 each, plus applicable taxes,
until the entire obligation was paid in full. In July 2001, ISA breached
the Lease; Zurawski breached Guaranty I, and Rosenbaum breached Guaranty
II and became in default through
failure to make the monthly payment as required by the Lease for
July 2001 and all payments due thereafter.
Citicorp. is the Successor-In-Interest to Copelco. and currently holds
all of Copelco's rights, title and interest in and to the Lease, Guaranty
I, Guaranty II, and the Equipment, including the right to institute legal
proceedings to exercise the rights and remedies of Lessor pursuant to the
Lease, Guaranty I and Guaranty II. ISA Inc., Zurawski and Rosenbaum have
failed and refused to pay the full balance due and owing to Citicorp
under the Lease, Guaranty I and Guaranty II, That balance is in the
amount of $120,962.70. To date, Citicorp. has also incurred attorney's
fees and expenses under the Lease in the amount of $632.50, thereby
increasing the total amount due Citicorp. to $121,595.20. Citicorp. filed
suit against ISA Inc. and the Defendants/Third-Party Plaintiffs for
breach of the Lease, Guaranty I and Guaranty II in New Jersey state
court. That action was removed to the District Court of New Jersey and
subsequently transferred to this Court.
On or about March 28, 2002, ISA Inc. filed a Chapter 11 proceeding in
the United States Bankruptcy Court for the Northern District of Illinois
which was converted to a Chapter 7 proceeding on November 25, 2002. On
June 11, 2002, Horizon Pharmaceuticals, LLC and ISA Pharmacy, Inc.
entered into an Asset Purchase Agreement. On July 23, 2002, as a result
of the bankruptcy proceeding, a Sale Order was entered approving an asset
sale of ISA Inc. to Horizon Pharmaceuticals, LLC, which is the parent
corporation for Horizon/ISA Merger Sub, LLC, which renamed ISA Inc. to
On June 10, 2003, Zurawski filed his Third-Party Complaint against ISA
LLC, alleging that ISA LLC assumed liability for the Citicorp. debt and
that ISA LLC failed to satisfy that assumed obligation. Therefore, as a
direct and proximate result of such breach, failure and refusal to
by ISA LLC, Zurawski alleges that he incurred expense to defend the
Plaintiff's suit against him and will continue to incur such expense and,
therefore, demanded contribution and indemnification for any liability
that might be found by the Court and any costs or expenses incurred by
him as a result of the action.
On May 19, 2003, Rosenbaum filed his Third-Party Complaint against ISA
LLC, alleging that ISA LLC acquired all leases and liabilities, including
the Lease, via the Asset Purchase Agreement and the Bill of Sale.
Therefore, as a result of that alleged breach, Rosenbaum demands judgment
against ISA LLC for contribution and indemnification for any and all
liability of Rosenbaum to Plaintiff, as well as attorney's fees, costs of
suit and interest and any other appropriate relief.
ISA LLC contends that Zurawski and Rosenbaum's Third-Party Complaints
should be dismissed for three reasons: (1) ISA LLC is not liable for any
claims asserted by Citicorp. in the underlying litigation; (2) ISA LLC
assumed no direct liability to the Defendants/Third-Party Plaintiffs for
indemnification or contribution; and (3) the Defendants/Third-Party
Plaintiffs have no standing to seek enforcement of the Asset Purchase
The Asset Purchase Agreement and July 23, 2002 bankruptcy court Sale
Order are attached to the Third Party Complaints and are considered part
of the pleadings properly considered by the Court in reviewing a motion
to dismiss. See Beam, 838 F.2d at 244.
Under Article 2.3 of the Asset Purchase Agreement, ISA LLC assumed the
"Assumed Liabilities." Article 1.2 of the Agreement defines "Assumed
Liabilities" as "All liabilities and
obligations of ISA [Inc.] (i) under the Assumed Contracts
(excluding any liabilities and obligations attributable to any
breach or default by ISA [Inc.] thereunder) . . . " (Emphasis
Article 2.4 of the Agreement provides that ISA LLC did not assume any
liability for any of the liabilities of ISA [Inc.] (other than the
assumed liabilities). Under Article 2.4(b), ISA Inc. retained:
"[A]ll Liabilities (notwithstanding the fact
that the date on which any action or claim is
commenced or made is after the Closing), including
but not limited to, any Claim (including any
Claim arising out of a breach of an Assumed
Contract, which is or includes cure amounts
and specifically including any and all "cure
payments" due in connection with the Assumed
Contracts), Lien or the like arising prior to
the Closing Date (and specifically including all
"cure payments" due in connection with the Assumed
Contracts)." (Emphasis added.)
Under Article 2.4(i) of the Agreement, ISA LLC specifically assumes no
liability for any and "all liabilities related to employee or shareholder
claims, litigation or proceedings against ISA [Inc.]." Lastly, Article
2.4(j) states that ISA LLC assumed no other liability which was not an
The above quoted language of the Asset Purchase Agreement clearly
demonstrates that ISA LLC did not assume any liability for any breach of
the Citicorp. Lease or any debt or liability arising thereunder prior to
the Closing Date. The pre-closing breaches and debts remained obligations
only of ISA Inc. and were not transferred to ISA LLC.
The July 23, 2002 bankruptcy court Sale Order further explains the
liabilities assumed by ISA LLC. Paragraph 11 of the Sale Order states
that all defaults or other obligations of the Debtor (ISA Inc.) under
each Assumed Contract and all claims for any pecuniary losses incurred in
connection with any such defaults shall be deemed cured and compensated
for by seller or the Buyer by the
payment by Seller on the Closing Date or as soon thereafter as
practicable of the Assumed Contract's cure amount. In addition, paragraph
13 of the Sale Order states that all defaults or other obligations of the
Debtor (ISA Inc.) under the Assumed Contracts arising or accruing prior
to the Closing Date have been cured or shall promptly be cured by the
Debtor such that ISA LLC shall have no liability or obligation with
respect to any default or obligation arising or accruing under any
Assumed Contract prior to the Closing Date, except to the extent set
forth in the Asset Purchase Agreement (discussed above). Both the Asset
Purchase Agreement and the Sale Order provide that the pre-closing
breaches and debts, including any breach of the Citicorp. Lease, are
obligations that remain liabilities of the Debtor, ISA Inc., and were not
transferred to ISA LLC. Even if ISA Inc. breached a Lease obligation
subsequent to the Closing Date, any such breach is not a part of the
Any claims for indemnification or contribution held by the
Defendants/Third-Party Plaintiffs against the Debtor (ISA Inc.) would
have to have been assumed by ISA under the Agreement, Sale Order or Bill
of Sale. Under Article 2.4(i) of the Agreement, ISA LLC specifically
assumes no liability for any and "all liabilities related to employee or
shareholder claims, litigation or proceedings against ISA [Inc.]." In
addition, Article 2.3, Schedule 2.3 and Schedule 5.10 set forth the
liabilities assumed by ISA LLC. The relevant provisions of the Asset
Purchase Agreement provide that ISA LLC did not assume liability for any
pre-closing date breaches or debts, including any breach of the Citicorp
Lease. ISA LLC cannot bear any liability to the Defendants/Third-Party
Plaintiffs for indemnification or contribution claims directly related to
those breaches and debts retained by ISA Inc.
Since ISA LLC is not liable for any claims asserted by Citicorp. in the
and ISA LLC assumed no direct liability to Zurawski or Rosenbaum
for indemnification or contribution, the Court need not address the
proposition that Zurawski and Rosenbaum lack standing to enforce the
Asset Purchase Agreement.
For the foregoing reasons, ISA Pharmacy, LLC's Motion to Dismiss is
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