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Elhannon Wholesale Nurseries, LLC v. Jerome Construction, Inc.

United States District Court, D. Vermont

August 11, 2016


          OPINION AND ORDER (DOCS. 7, 8)

          Geoffrey W. Crawford, Judge.

         Plaintiffs Elhannon Wholesale Nurseries, LLC ("Elhannon" or "EWN"), D. James Sutton, and Ruth Sutton sue Defendants Jerome Construction, Inc. ("JCI"), James Jerome, and former Elhannon employee Felicity Harrington Purzycki, alleging that, in 2010 and 2011, Ms. Purzycki committed fraud and theft and was unjustly enriched by orchestrating an unauthorized transaction between Plaintiffs and Defendants JCI and Mr. Jerome. (See Doc. 6.) JCI and Mr. Jerome have filed a Rule 12(b)(1) motion to dismiss the Amended Complaint, asserting that the amount in controversy does not exceed 28 U.S.C. § 1332's $75, 000 jurisdictional requirement. (Doc. 7.) Ms. Purzycki has filed a Rule 12(b)(6) motion to dismiss, asserting that Plaintiffs' claim is foreclosed by a June 20, 2011 Stipulation of Dismissal in Apex Nursery, Inc. v. Donald James Sutton, Jr., No. 204-6-11 Bncv (Vt. Super. Ct). (Doc. 8.) This court heard argument on both motions on July 6, 2016, at which time the motions were taken under advisement.


         The factual allegations in the Amended Complaint are as follows. Plaintiff Elhannon is a wholesale landscaping supply business that provides plants, trees, and shrubs to its wholesale customers. Elhannon also supplies consultants to its customers to provide expertise and knowledge regarding landscaping and Elhannon's wholesale products. At all times relevant, Plaintiffs James and Ruth Sutton owned the plants, trees, and shrubs that Elhannon would sell to its customers, and Plaintiff James Sutton was Elhannon's majority owner.

         Defendant JCI is a construction company that purchases landscaping products and supplies as part of its ordinary course of business. Defendant James Jerome is the President and majority owner of JCI. Mr. Jerome also owns property known as the Hubbell Homestead in Bennington, Vermont.

         In 2010 and 2011, Ms. Purzycki was working for Elhannon. She was responsible for maintaining Elhannon's financial books and records. She owns property on Chapel Road in Bennington, Vermont. She also owned Apex Nursery, Inc. ("Apex"), a company that provided landscaping workers and laborers to install landscaping products sold by Elhannon and other companies.

         In 2010 and 2011, Ms. Purzycki facilitated an arrangement in which Mr. Jerome, through his company JCI, entered into purchase agreements with Elhannon for the purchase of over $80, 000 in trees and other plants, as well as the provision of consultants to aid with planting. The goods and services required of Elhannon in the contract were to be used at the Hubbell Homestead. Defendants JCI and Mr. Jerome took possession of the Elhannon/Sutton goods in New York and transported them to the Hubbell Homestead. Plaintiffs assert that, at Ms. Purzycki's direction, Apex or Elhannon provided workers to install the plants and trees at the Hubbell Homestead.

         Neither JCI nor Mr. Jerome paid for the goods and services provided by Elhannon and the Suttons. Instead, JCI and Mr. Jerome provided Ms. Purzycki with construction work at her Chapel Road property. Ms. Purzycki did not inform Plaintiffs that the purchase agreements with JCI and Mr. Jerome were any different than typical purchase agreements, in which Elhannon would provide goods and services in exchange for monetary payments. Plaintiffs assert that JCI and Mr. Jerome knew that the construction work was being provided at Ms. Purzycki's personally-owned property and that the arrangement was not approved by Elhannon.

         In 2011, Apex, Elhannon, and Ms. Purzycki sued Mr. Sutton in Apex Nursery, Inc. v. Donald James Sutton, Jr., No. 204-6-11 Bncv (Vt. Super. Ct), alleging that he had "frozen" her out of Elhannon's bank account, and engaged in other actions to put her out of business, irreparably damage Apex, and usurp full ownership and control of Elhannon. (See Doc. 7-13.) Also in 2011, Mr. Sutton terminated Ms. Purzycki's relationship with Elhannon due to unrelated fraudulent transactions. At that time, Plaintiffs were not aware of the "barter" arrangement that Ms. Purzycki had facilitated.

         In 2014, under a Stipulation of Dismissal in the Apex litigation, Apex was placed into receivership and the books and accounts of both Apex and Elhannon were examined by an independent auditor. Ms. Purzycki provided the auditor with the books, accounts, and other financial information for both Apex and Elhannon. Despite inquiries and requests by the court-appointed auditor, Ms. Purzycki did not provide financial information related to the "barter" arrangement. During the audit process, Elhannon and Mr. Sutton discovered the "barter" transaction for the first time.


         I. JCI and James Jerome's Rule 12(b)(1) Motion

         "A district court properly dismisses an action under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction if the court 'lacks the statutory or constitutional power to adjudicate it'" Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.A.R.L., 790 F.3d 411, 417 (2d Cir. 2015) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). On a Rule 12(b)(1) motion, the court accepts as true '"all material allegations of the complaint[] and . . . construe[s] the complaint in favor the complaining party.'" Id. (first brackets in original) (quoting W.R. Huff Asset Mgmt. Co. v. Deloitte & louche LLP, 549 F.3d 100, 106 (2d Cir. 2008)).

         Plaintiffs assert that the court has jurisdiction under 28 U.S.C. § 1332, which confers upon the district courts original jurisdiction of "all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). JCI and James Jerome maintain that the ...

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