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Canale v. Sahara Outpatient Surgery Center, Ltd.

United States District Court, D. Nevada

March 30, 2019

PAUL B. CANALE, M.D., Plaintiff,
v.
SAHARA OUTPATIENT SURGERY CENTER, LTD., a Nevada limited partnership, et al., Defendants.

          ORDER

          Gloria M. Navarro, Chief Judge.

         Pending before the Court is the Motion to Dismiss the Complaint, (ECF No. 6), filed by Defendants Sahara Outpatient Surgery Center, Ltd. (“Sahara”) and Surgicare of Las Vegas, Inc. (“Surgicare”) (collectively “Surgery Center Parties”). Paul B. Canale, M.D. (“Plaintiff”) filed a Response, (ECF No. 12), and Surgery Center Parties filed a Reply, (ECF No. 18).

         Also pending before the Court is Defendant Lance Hickman's (“Hickman's”) Motion to Dismiss the Complaint, (ECF No. 26). Plaintiff filed a Response, (ECF No. 28), and Hickman filed a Reply, (ECF No 31).

         For the reasons discussed below, the Court GRANTS in part and DENIES in part, without prejudice, Defendants' Motions to Dismiss.

         I. BACKGROUND

         Plaintiff is a medical doctor specializing in orthopedic surgery. (Comp. ¶ 11, ECF No. 1-2). In 1992, while serving as a medical practitioner in Las Vegas, Nevada, Plaintiff received a Confidential Private Offering Memorandum, which offered an investment opportunity in a Las Vegas, Nevada hospital under the business title of Las Vegas Surgery Hospital, Ltd. (Id. ¶¶ 11- 12). That Memorandum offered Plaintiff, and other potential investors, a chance to purchase up to forty limited partnership “Units” in Las Vegas Surgery Hospital, Ltd. (Id.).

         Plaintiff subsequently purchased one Unit for the sum of $12, 000.00, and signed a Subscription Agreement to memorialize his purchased interest. (Id. ¶ 13). Surgicare, as the General Partner of Las Vegas Surgery Hospital, Ltd., accepted Plaintiff's Subscription Agreement and purchase price on February 11, 1993. (Id. ¶¶ 4, 13). Roughly eight months later, Las Vegas Surgery Hospital, Ltd. changed its name to Sahara Outpatient Surgery Center, Ltd. (“Sahara”), and began operating a hospital in Las Vegas, Nevada. (Id. ¶¶ 14-15).

         Sahara operated under a “Limited Partnership Agreement, ” dated December 28, 1992 (“LPA 1992”). (Id. ¶ 14). The LPA 1992 governed business operations, including who qualified as a “Limited Partner” and standards for changes to the LPA 1992. (Id. ¶¶ 16-21).

         The LPA 1992 underwent several amendments while Plaintiff was an investor in Sahara, the first of which occurred in 1996 and involved a “split” in Units from 100 to 1000. (Id. ¶ 22). That split meant each “currently outstanding Unit” would be divided into 10 Units. (Id.). A second amendment in 2005 again “split” each outstanding Unit into two, and also changed the standard for a “Majority in Interest” under the LPA 1992. (Id. ¶ 23).

         On September 5, 2014, Sahara sent all investors a proposed amendment to the LPA 1992. (Id. ¶ 26). Relevant to this case, that proposed amendment changed the requirements for an investor to be a Limited Partner; and it also changed the Partnership and General Partner's ability to repurchase a Limited Partner's Units at a certain, agreed-upon price. (Id.). For example, the amendment included a “Physician Eligibility Requirement” and a “Physician Investor” requirement so that an investor “must perform at least one-third of his or her procedures that are on the Medicare-approved ASC procedure list at the Center.” (Id. ¶ 31). Plaintiff alleges that he did not consent or agree to the proposed change; but the amendment nonetheless passed on November 20, 2014 (“LPA 2014”). (Id. ¶¶ 27-29).

         Roughly one year later, Hickman, acting as Surgicare's agent, sent a letter to Plaintiff explaining that, “pursuant to the terms of the [LPA 2014], ” Surgicare exercised its option to repurchase Plaintiff's Units because Plaintiff did not meet the “Physician Eligibility Requirements” as defined in the LPA 2014. (Id. ¶¶ 5, 33-34). Plaintiff accordingly received $16, 880.00 for his repurchased Units. (Id. ¶ 35).

         On April 17, 2018, Plaintiff filed his Complaint against Sahara, Surgicare, and Hickman (collectively “Defendants”) in the District Court of Clark County, Nevada (“Nevada State Court”). (Id. at 1). Plaintiff's Complaint alleges nine causes of action associated with the repurchase of his Units: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) declaratory relief; (4) accounting; (5) conversion; (6) breach of fiduciary duties; (7) securities fraud; and (8) punitive damages. (Id. ¶¶ 38-92). Defendants then removed this matter from Nevada State Court to this Court on June 5, 2018. (Pet. Removal, ECF No. 1).

         Roughly two weeks after removing Plaintiff's Complaint to this Court, Sahara and Surgicare filed their Motion to Dismiss Plaintiff's Complaint, (ECF No. 6). Hickman filed a separate Motion to Dismiss Plaintiff's Complaint, (ECF No. 26), about three months later.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the Court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).

         The Court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. GoldenState Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation is plausible, ...


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