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Surgem, LLC v. Achievmed, Inc.

Superior Court of New Jersey, Appellate Division

October 16, 2013

SURGEM, LLC AND JOHN HAJJAR, M.D., Plaintiffs-Respondents,
v.
ACHIEVMED, INC., Defendant/Third-Party Plaintiff, and JOHN SEITZ, Defendant/Third-Party Plaintiff-Appellant,
v.
SURGICARE OF MANHATTAN, LLC a/k/a SOM, LLC, Third-Party Defendant-Respondent.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 12, 2013

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-191-09.

Diane L. Medcraft argued the cause for appellant (Law Offices of Bernd Hefele, attorneys; Ms. Medcraft, on the brief).

George J. Kenny argued the cause for respondent (Connell Foley, LLP, attorneys; Mr. Kenny and Philip F. McGovern, Jr., on the brief).

Before Judges Messano, Lihotz and Mantineo.

OPINION

LIHOTZ, J.A.D.

Defendant John Seitz appeals from a judgment fixing the percentage ownership and value of his interest in plaintiff Surgem, LLC (Surgem). Although we agree the judge erred in computing Seitz's percentage interest in Surgem, we affirm his determinations and conclusions in all other respects. These facts are taken from the trial record of the six-day bench trial and found by the trial judge in his written opinion.

Plaintiff John Hajjar, an accomplished board certified urological surgeon and astute businessman, recognized a need for ambulatory surgical centers (ASC), also known as outpatient or same-day surgery centers. Hajjar established his first ASC in Fair Lawn and, in the ensuing years, opened additional ASCs in Mahwah, Englewood Cliffs, Oradell, Jersey City, Carlstadt, and Wayne.

In 2002, Hajjar initially hired Seitz as a consultant to review the viability of marketing software Hajjar had developed to monitor and measure an ASC's profitability. On Seitz's recommendation, Hajjar ended the project. Thereafter, Seitz introduced Hajjar to Seitz's company, Achievmed, Inc., which provided a web-based alternative. Hajjar was convinced Seitz was an intelligent and business-savvy entrepreneur with impressive experience in the field of medical management. As the trial judge noted:

Dr. Hajjar bought into Seitz's Achievmed emotionally and eventually financially and the Seitz-Hajjar relationship warmed. Dr. Hajjar came to trust Seitz to such an extent that over 2003 and 2004[, ] Dr. Hajjar sent Seitz $650, 000 for what he believed to be a [fifty] percent interest in Achievmed. Predictably, Achievmed "just died out" according to Dr. Hajjar's testimony. Dr. Hajjar never sought nor received any proof of his ownership in Achievmed, nor any accounting [of] his $650, 000. Dr. Hajjar lost his entire investment.

Seitz moved to New Jersey in June 2004 to collaborate with Hajjar and explore the possibility of syndicating Hajjar's ASCs. At the time, Hajjar was operating his own practice, as well as three ASCs by himself. Seitz offered his help, representing he had experience in the medical management field. Hajjar trusted Seitz and the veracity of his representations.

In January 2005, Hajjar and Seitz attended a Miami law firm's one-day symposium on "how to syndicate surgery centers and how to merge and acquire surgery centers." The conference introduced a subscription formula for physician investors that Hajjar and Seitz used successfully in syndicating the New Jersey ASCs. Soon thereafter, Surgem was established to provide development and management services to individual ASCs. Hajjar owned one hundred percent of Surgem and Seitz continued as a consultant. Surgem syndicated its first ASC, Surgicare of Fair Lawn, LLC, in 2005, selling a combined eighty percent interest to various doctors for $8, 000, 000, retaining the remaining twenty percent interest and contracting for a management fee defined as six percent of facility revenues. Surgem entered into the same arrangement with Surgicare of Englewood Cliffs and Surgicare of Oradell, selling eighty percent interests for $2, 900, 000 and $3, 200, 000 respectively, and the management fee.

Hajjar hired Seitz as Surgem's president on September 6, 2005. The two had a verbal agreement providing Seitz would be paid an annual salary of $185, 000; a bonus equal to ten percent of the management fees collected from the ASCs, plus a later-determined percentage of all development fees; five percent of any Surgem profit distribution; and a potential ten percent ownership interest in Surgem, or 300, 000 shares of stock then held ...


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