Law360 (March 12, 2021, 7:24 PM EST) -- A Florida company has accused New Jersey-based Apex Distribution LLC, attorneys in Texas and Michigan, and others of conspiring to defraud it of $2 million through a bogus joint venture agreement to procure personal protective equipment for Apex's government clients during the COVID-19 pandemic.
In a complaint filed Thursday in Florida federal court, MBI Services LLC, which says it is dedicated to procuring PPE for resale in the U.S. market, accused Apex of misrepresenting its ability to deliver on their agreement to import millions of protective gloves. MBI said the defendants repeatedly lied about how close the order was to being delivered and then repeatedly asked for extensions to return the funds after MBI declared a default but have yet to do so.
"The named defendants engaged in the referenced improper acts to control and convert the funds and for the purpose of depriving plaintiff of its share in revenues as mandated under the subject agreement," MBI said.
The 45-page complaint brings a long list of claims, including for breach of contract, breach of fiduciary duty, violation of civil racketeer influenced and corrupt organizations statute, conversion, unjust enrichment, fraud and fraudulent inducement.
MBI is seeking an accounting of its funds and monetary damages, including recovery of its $2 million, punitive damages and treble damages on its RICO claim, as well as attorney fees and costs.
In addition to Apex, the suit named Apex principal Hector Alvarez; Michigan-based Imitari Corp.; Imitari principals Terry Barnes and Gregory A. Jones; Michigan attorney David K. Tillman and his firm, Tillman & Tillman PLLC; and Texas attorney Jan Laurence Sadick and his firm, J.L. Sadick PC, as defendants.
According to the complaint, in late December, Jorge Garcia-Menocal, one of MBI's principals and owners, was introduced to Alvarez. Alvarez made representations that Apex had vast experience and connections for procuring and distributing PPE, including with manufacturers in Asia, global air freight and logistics carriers, and U.S. local, state and federal government customers.
Alvarez proposed that in return for MBI placing $2 million with Apex, Apex would pay the company 5 cents per box of gloves it imported for its government clients. He said Apex was ready to import 5 million boxes of gloves per week and that MBI's share of the profits would be $250,000 per week, according to the complaint.
On Jan. 19, MBI executed a joint venture agreement with Apex based on Alvarez's offer, as well as a security agreement. Alvarez also executed a personal guarantee for MBI, the complaint said.
The joint venture agreement required Apex to provide MBI will all information and documents related to its use of MBI's funds, which were to be used only for shipping costs, product inspection, customs charges and other tasks related to the glove imports, MBI said.
In the event of the agreement being terminated, Apex was required to return MBI's funds within 10 days, the complaint said.
But issues arose immediately with the shipment. On Jan. 21, Alvarez told Garcia-Menocal that the first glove shipment would arrive the next day, but then pushed the expected arrival time back to the 25th, then the 26th, the 27th and the 29th.
"At no time on the referenced dates, nor or [sic] any other dates were the gloves delivered," the complaint said.
Garcia-Menocal demanded documents to prove Apex was performing under the contract, but after promising a full report, Alvarez again failed to deliver, MBI said.
When Garcia-Menocal told Alvarez that MBI was going to declare a default, the defendants arranged a conference during which they said there had been banking issues that were resolved and that the gloves were being loaded onto planes as they spoke.
But further delay tactics followed, which would continue after MBI declared a default and demanded a refund, the suit said.
During its inquiry into the whereabouts of its funds, MBI said it became aware of a "strikingly similar" lawsuit that had been filed in Texas federal court against Jones, Barnes and Sadick, the Texas attorney.
"Alvarez conveniently concealed and withheld this crucial fact from plaintiff, one that if plaintiff had known prior to delivering the funds, would have resulted in no deal with Apex or its partners," the complaint said.
MBI also said that when it contacted Tillman, who had helped draft the agreement, and asked about the funds whereabouts, Tillman said they were delivered to Sadick. But when Garcia-Menocal called Sadick, the attorney said he received only a portion of the funds and seemed to be only vaguely aware of Apex and Alvarez.
After declaring a default on Feb. 10, MBI demanded a return of its funds and an accounting from all of the defendants, but none has complied, the complaint said.
Instead, Tillman requested several extensions of the deadline to return the funds, none of which were met, MBI said.
"Defendants' failure to return the funds to plaintiff in contravention of the [joint venture agreement] has occasioned additional consequential damages to plaintiff in the loss of other business opportunities," the complaint said.
Counsel for MBI said he had no further comment Friday. Sadick and Tillman did not immediately respond to requests for comment Friday, and the other defendants could not be reached Friday.
MBI is represented by Eduardo Ayala Maura and Luis F. Quesada Machado of Ayala Law PA.
Counsel information for the defendants was not immediately available.
The case is MBI Services LLC v. Apex Distribution LLC et al., case number 1:21-cv-20975, in the U.S. District Court for the Southern District of Florida.
--Editing by Bruce Goldman.
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