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Greenberger v. Varus Ventures LLC

United States District Court, D. New Jersey

December 10, 2014






Plaintiffs, Marc and Nancy Greenberger (" Plaintiffs" or the " Greenbergers"), brought this suit, seeking damages for allegedly being induced into investing retirement funds into a sham financial vehicle. This matter comes before the Court on a motion to dismiss, or, alternatively, for a more definite statement pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(e) by Defendant David Gulian (" Defendant" or " Gulian"). Plaintiffs oppose the motion. The Court decides these matters without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, the Court grants in part and denies in part Defendant's motion.

I. Background

Starting in 2010, Nicholas Sandor (" Sandor") began soliciting Marc Greenberger to invest personal funds with a wealth advisory group in which Sandor was involved. Plaintiffs allege that, as a result of Sandor's solicitations, Mr. Greenberger invested certain personal funds with Sandor's group.

Subsequently, Sandor introduced Mr. Greenberger to Gulian. Sandor and Gulian represented to Mr. Greenberger that they were creating an investment fund to be known as " Varus Ventures." They each advised Mr. Greenberger that they would be the leaders of Varus, and that they would use Varus as a vehicle through which they would make targeted investments in companies that they, and in particular Gulian, would identify. Plaintiffs allege that Gulian represented himself as the creator of Varus and a leader of the fund. Sandor echoed this sentiment, telling Mr. Greenberger that Gulian was the " money guy, " the " fund manager, " and the " brains behind the operation" of Varus. Sandor, on the other hand, was responsible for sales.

Plaintiffs allege that Sandor and Gulian contacted Mr. Greenberger, either together or separately, no less than fifty separate occasions from late 2010 and into 2011 about investing in Varus. Often, Sandor and Gulian would bring up investing in Varus during personal visits; for example, when Sandor and Gulian visited the Greenbergers' home, they would speak in detail to Mr. Greenberger about investing in Varus. Gulian identified numerous companies for the Greenbergers to invest in, and provided Mr. Greenberger with documents and other details about these companies. Gulian also put Mr. Greenberger in touch with several of the companies that Sandor and Gulian were identifying as investments for Varus, and encouraged Mr. Greenberger to invest in them through Varus. Plaintiffs allege that Sandor and Gulian each solicited and made representations concerning the value and potential reward of the investments in order to convince the Greenbergers to invest money in Varus. Sandor and Gulian each represented that they were experienced investors and had expertise in the investment business, particularly in investment-type vehicles such as Varus. They explicitly advised Mr. Greenberger that the Greenbergers' investments with them would be made through their venture, Varus, which they purported to own and control.

On or about February 9, 2011, the Greenbergers purchased $36, 000 worth of ownership interests in Tradition, a company that purportedly manufactures golf accessorizes, allegedly as a result of the numerous representations of Gulian and Sandor. They understood and believed that this purchase was made through Varus. Subsequently, on or about August 26, 2011, the Greenbergers purchased $68, 000 worth of ownership interest in Varus. They made this purchase based upon the representations and solicitations of Gulian and Sandor, particularly their representations that they owned and controlled Varus, that they would manage Varus's investments and opportunities, and that they would provide the Greenbergers with proper documentation and reporting concerning their investments.

The Greenbergers made their respective investments through two Individuals Retirement Accounts (" IRA"), one in each of their respective names. These IRAs were administered by Entrust CAMA Self-Directed IRA, LLC PA (" CAMA"). To maintain the IRA accounts, regular administrative and custodial payments were required to be made to CAMA. Plaintiffs allege that Sandor and Gulian repeatedly assured the Greenbergers that they would cause Varus to make the necessary payments to CAMA as they became due. Plaintiffs allege that it was a condition of their investments in and through Varus that Varus would cover CAMA's administrative expenses to maintain these accounts. These administrative and custodial fees for the Greenbergers' respective IRAs were paid for approximately two years, although Sandor allegedly needed constant reminding and missed or delayed certain payments.

In the weeks and months subsequent to making these initials investments, Mr. Greenberger had difficulty contacting either Gulian or Sandor. Both ceased contacting Mr. Greenberger after the Greenbergers invested funds in Varus, and failed to return his phone calls. Despite Mr. Greenberger's numerous requests, Plaintiffs never received any unit or ownership certificates reflecting their investments in Varus. Ultimately, Plaintiffs invested a total of $213, 000 in or through Varus, allegedly in response to the solicitations of Sandor and Gulian and the representations each of them made concerning their investments.

In April 2012, Mr. Greenberger requested that Sandor and Gulian divest and return to them their respective investments. Because he received no response, he repeated this request several times over the next year. In or about the last quarter of 2012, the administrative payments to CAMA ceased, without any notice to the Greenbergers and allegedly without any justification. Thereafter, by letters dated June 3, 2013, CAMA terminated each of the accounts of the Greenbergers, based upon the failure to pay the requisite administrative fees. CAMA advised the Greenbergers that their IRA accounts were empty, with no funds left to divest or return. The Greenbergers have sustained substantial tax consequences and penalties, as a result of alleged malfeasance of Sandor and Gulian, and CAMA's premature termination of these accounts.

Over the past several months, Sandor and Gulian have failed to communicate with Mr. Greenberger, have ignored his written and oral communications for information concerning Plaintiffs' investments in and through Varus, and have failed and refused to confirm that Varus even continues to hold their respective investments. Varus has abandoned its former mailing address, and has shut down its website, and is no longer functioning as a going forward entity. Plaintiffs question whether Varus ever existed as an entity, because they never received any proof that Sandor and Gulian actually created Varus or that Varus formally existed.

Subsequent to the filing of this action, Mr. Greenberger has received text messages from Sandor, apologizing to Mr. Greenberger and claiming to have experienced some personal problems. Sandor provided no information regarding the $213, 000 that the Greenbergers had invested in and through what they believed to be Varus, based upon the representations of Sandor and Gulian. Sandor also provided an affidavit to counsel for the Greenbergers, dated February 11, 2014 (the " Sandor Affidavit"), in which Sandor claims that Gulian " formally acknowledged that the cessation of his affiliation with Varus" on January 24, 2012. See Am. Compl. ¶ 38. This circumstance, if true, was never conveyed to Mr. Greenberger. The Sandor Affidavit also contained the allegedly false assertion that " Gulian did not induce or solicit the Greenbergers to invest with Varus." Id. at ¶ 39. The Sandor Affidavit also states that Gulian never executed any " formation agreements or other documentation" concerning Varus, although he was purportedly " informally affiliated with Varus." Id. at ¶ 40. If true, these circumstances were contrary to the representations that Gulian and Sandor made to Mr. Greenberger concerning Gulian's affiliation with Varus. The Sandor Affidavit states that Gulian became affiliated with Varus " on the assumption that Varus was actually properly established on a formal basis, " and that neither he nor Varus executed formation agreements or other documentation. See Certification of James H. Steigerwald (" Steigerwald Cert.") Ex. A at ¶ 2. The Sandor Affidavit never states that Varus was properly established. See Am. Compl. at ¶ 41.

Based on the Sandor Affidavit, Plaintiffs allege that " Varus doesn't exist, may never have existed, and Gulian's role in Varus was falsely represented to the Greenbergers in order to induce them into investing monies that have disappeared into the hands of Sandor and/or Gulian." Id. at ¶ 44. To date, Plaintiffs allege they still do not know the location of the $213, 000 they invested with Sandor and Gulian, nor have Sandor or Gulian ever provided any information to the Greenbergers concerning their investment.

On January 31, 2013, Plaintiffs filed the current action, bringing seven causes of action against Defendants: breach of contract, breach of the covenant of good faith and fair dealing, negligence, breach of fiduciary duty, fraud, tortious interference with prospective economic gain, and unjust enrichment. On April 14, 2014, Plaintiffs filed an Amended Complaint, in which they bring the same seven causes of action. Defendant Gulian has moved to dismiss the Complaint, or, in the alternative, seeks a more definitive statement.

II. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint " for failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). When reviewing a motion to dismiss, courts must first separate the factual and legal elements of the claims, and accept all of the well-pleaded facts as true. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). All reasonable inferences must be made in the Plaintiff's favor. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010). In order to survive a motion to dismiss, the plaintiff must provide " enough facts to state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This standard requires the plaintiff to show " more than a sheer ...

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