AdventHealth, Atty Settle In Fraud Suit Over $57M PPE Deal

By Nathan Hale
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Law360 (March 2, 2021, 5:48 PM EST) -- Adventist Health System has settled its claims against a California lawyer it accused of conspiring with an asset management company to defraud it of $2 million through a failed $57.5 million deal to buy personal protective equipment during the COVID-19 pandemic.

A Florida federal court dismissed the claims against Michael H. Weiss and his firm on Tuesday, a day after the parties filed a joint stipulation saying they had agreed to resolve the claims against him. The agreement does not extend to defendants Tomax Capital Management Inc. and its principal Yehoram Tom Efrati, according to the filings.

Details of the agreement between AdventHealth and Weiss were not immediately available Tuesday. It comes a week after U.S. District Judge Paul G. Byron denied motions to dismiss filed by all of the defendants.

The health care system, which has hospitals in nine states, claimed in its May 28 complaint that when Tomax failed to deliver on an April 8 contract to provide 10 million 3M N95 ventilator masks to protect its workers from the coronavirus, it asked for the money in escrow to be returned. According to the suit, Weiss sent just $55.5 million and told AdventHealth the remaining $2 million was in Tomax's possession, but Tomax never returned the rest despite assurance from Efrati that it would.

In addition to allowing Florida-based AdventHealth's claims for breach of contract, conversion, breach of fiduciary duty, civil theft and civil conspiracy to move forward, Judge Byron ruled that his court has the authority to exercise personal jurisdiction over Weiss and Efrati under the state's long-arm statute.

In his Feb. 23 order, the Orlando-based judge ruled that the hospital owner had sufficiently alleged a $2 million fraud conspiracy.

"Plaintiff sufficiently pleads facts supporting the existence of a civil conspiracy that caused injury in Florida," the order said.

"Indeed, the alleged torts of conversion and fraud 'could not have occurred but for Mr. Efrati's [and Mr. Weiss's] misrepresentations to AdventHealth's officers and representatives who reside, work, and control the company's finances in Florida,'" the court added, quoting AdventHealth's response.

Weiss and Efrati both argued that they were shielded from possible individual liability because they were operating as agents for their respective companies, but Judge Byron said AdventHealth sued them not as agents but as direct and personal participants in the alleged conspiracy to commit conversion and fraud.

In ruling that the defendants could be hauled into court in Florida, the judge noted that if a plaintiff successfully claims that any member of an alleged conspiracy committed tortious acts in the state to further the scheme, then all of the conspirators are subject to personal jurisdiction. The complaint says Efrati and Weiss made written and verbal misrepresentations to AdventHealth personnel in Florida regarding the location and return of the missing escrow funds, prolonging the alleged wrongful deprivation of AdventHealth's funds, he said.

Judge Byron also rejected the defendants' argument that the conspiracy claims fail due to the "intracorporate conspiracy doctrine," which holds that employees of a company cannot conspire with their company or one another.

While he agreed with Weiss that he cannot conspire with his own firm, Judge Byron said his firm and Tomax are separate entities, and the defendants' argument that their paymaster agreement created an agency relationship that triggered the doctrine "stretches the doctrine beyond the bounds of reason."

Counsel for AdventHealth and Weiss did not immediately respond to requests for comment Tuesday. Counsel for Tomax declined to comment.

AdventHealth is represented by Mayanne Downs, Jason A. Zimmerman and Joshua Bachman of GrayRobinson PA.

Weiss and his firm are represented by David R. Keller of Keller Landsberg PA.

Tomax and Efrati are represented by Laurence J. Pino and Sean M. Southard of Pino Nicholson PLLC.

The case is Adventist Health System Sunbelt Healthcare Corp. v. Michael H. Weiss PC et al., case number 6:20-cv-00877, in the U.S. District Court for the Middle District of Florida.

--Additional reporting by Carolina Bolado, Rosie Manins and Kevin Penton. Editing by Adam LoBelia.

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