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Affordable Dentures - Audubon v. Affordable Care, LLC

United States District Court, D. New Jersey

May 9, 2018

AFFORDABLE DENTURES -- AUDUBON, MICHELLE AITKEN, DDS, P.A., et al., Plaintiffs,
v.
AFFORDABLE CARE, LLC; and AFFORDABLE DENTURES DENTAL LABORATORIES, INC., Defendants.

          SCARINCI HOLLENBECK, LLC By: Joel N. Kreizman, Esq. Counsel for Plaintiffs.

          ANDERSON KILL P.C. By: Frank G. Murphy, Esq. Bruce Strong, Esq. Counsel for Defendants.

          OPINION

          RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE

         This suit arises out of disputes primarily between Plaintiff Michelle Aitken, D.D.S., and Defendant Affordable Care, LLC, which provides management services for Dr. Aitken's dental offices located in Audubon and Vineland, New Jersey. Defendant Affordable Dentures Dental Laboratories, Inc., is a subsidiary of Defendant Affordable Care, and provides on-site dental laboratory services at both of Dr. Aitken's office locations.

         Before the Court is Defendants' Motion to Compel Arbitration. For the reasons stated herein, the Motion will be granted in part, denied in part, and denied without prejudice in part.[1]

         I. FACTS

         The following facts are alleged in the Verified Complaint (“V.C.”), or found in the documents attached as exhibits to the Verified Complaint. Michelle Aitken is a dentist with two offices: one in Audubon, New Jersey, and one in Vineland, New Jersey. (V.C. ¶¶ 5) Dr. Aitken “wholly owns” the professional associations-- Plaintiff “Affordable Dentures-Audubon, Michelle Aitken, DDS, P.A.” (hereafter “the Audubon P.A.”); and Plaintiff “Affordable Dentures-Vineland, Michelle Aitken, DDS, P.A.” (hereafter “the Vineland P.A.”)-- which operate out of the offices. (V.C. ¶¶ 6-7)

         A. The Audubon Office

         In 2004, Dr. Aitken formed the Audubon P.A. to acquire a dental practice from another dentist. (V.C. ¶ 14) In connection with the acquisition of the practice, “[o]n February 1, 2004, Dr. Aitken signed” three “interlocking agreements” with Defendants[2]each of which, the Verified Complaint alleges, “is coterminous with the others.” (V.C. ¶ 16) The three agreements are: (1) “Agreement to Provide Management Services to a Dental Practice”[3]; (2) “Agreement to Provide Dental Laboratory Services”[4]; and (3) a “Facility and Equipment Lease.”[5] Many years later, on September 1, 2014, Plaintiffs and Defendants signed (4) the “Equipment Purchase and Sale Agreement, ”[6] and (5) “Agreement Regarding Venue.”[7] Each agreement is summarized in turn.

         (1) Management Services Agreement

         The Management Services Agreement is between the Audubon P.A. (designated “PC” in the agreement) and Affordable Care (designated “Manager” in the agreement). The introductory recitals to the agreement state that the Audubon P.A. “has requested Manager [Affordable Care] to act as its agent in the management of certain business aspects of the [dental] Practice.”[8] The agreement further provides that “Manager shall manage the business aspects of the Practice on [the Audubon P.A.'s] behalf and in the [the Audubon P.A.'s] name . . . Manager is obligated to manage the Practice with [the Audubon P.A.'s] best interest in mind[.]”[9] The “business aspects” Affordable Care agreed to manage include “office space, furnishing and equipment, ” “in-center laboratory, ” “staffing, ” “inventory and supplies, ” “legal services, ” “marketing, ” “financial services” (including budgeting and payroll); and “insurance” (other than professional liability insurance).[10] In exchange, the Audubon P.A. agreed to pay Affordable Care monthly management fees as set forth in Exhibit C to the agreement.[11]

         Most relevant to the instant suit and motion, the agreement contains this arbitration provision:[12]

         (IMAGE OMITTED)

         The Management Services Agreement and Exhibit C to the agreement were amended on September 1, 2014, principally to extend the term of the agreement to April 1, 2034 and to alter the management fee schedule.[13]

         (2) Laboratory Services Agreement

         The Laboratory Services Agreement is between the Audubon P.A. (designated “PC” in the agreement) and Affordable Dentures (designated “ADDL” in the agreement). The agreement provides that the Audubon P.A. will exclusively use Affordable Dentures to perform the lab services enumerated in Exhibit A of the agreement, which mainly include various types of dentures and repairs / “remakes” of such dentures.[14]

         Most relevant to the instant suit and motion are the following three provisions of the agreement. First and second, the agreement provides[15] in relevant part:

         (IMAGE OMITTED)

         Third, the agreement contains this arbitration provision[16]:

         (3) Facility and Equipment Lease

         The lease appears to be a rather straightforward commercial lease between Affordable Care as the “Landlord, ” and the Audubon P.A. as the “Tenant.” It provides that the “Tenant may use the Premises for the purpose of operating a dental practice, and for no other purpose.”[17] Most relevant to the instant suit and motion, the lease also provides that “neither Landlord nor Tenant may terminate this Lease except in connection with the termination of that certain Agreement to Provide Management Services to a Dental Practice between Landlord and Tenant of even date herewith, Termination of said Agreement will result in automatic termination of this Lease.”[18]

         The lease does not contain an arbitration clause.

         (4) Equipment Purchase and Sale Agreement

         The Audubon P.A. and Affordable Care executed the Equipment Purchase and Sale Agreement on September 1, 2014. The Audubon P.A. agreed to purchase from Affordable Care various dental equipment and furniture already in the Audubon office.

         Most relevant to the instant suit and motion are the following two provisions of the agreement. First, the agreement contains a “Repurchase Option” that provides that upon “expiration or other termination for any reason of the Agreement to Provide Management Services to a Dental Practice . . . dated as of February 1, 2004, ” Affordable Care “may at any time thereafter elect (but is not required) to purchase all or any portion of the Equipment” for “book value” plus $1.00.[19]

         Second, the agreement contains an arbitration clause, [20] which states in relevant part:

         (IMAGE OMITTED)

         (5) Agreement Regarding Venue

         The Audubon P.A., Affordable Care and Affordable Dentures executed the Agreement Regarding Venue on September 1, 2014. The introductory recitals list all of the agreements discussed above, and then the agreement states, in relevant part, “it is hereby agreed by the parties that the location or venue of any arbitration or litigation between the parties shall be in the State of New Jersey.”[21]

         B. The Vineland Office

         More than seven years after forming the Audubon P.A., in 2011 or 2012, Dr. Aitken formed the Vineland P.A. to purchase another dental practice. (V.C. ¶ 26-28) In connection with the acquisition of the practice, “[o]n September 27, 2012 Dr. Aitken signed three interlocking agreements” with Defendants, each of which, the Verified Complaint alleges, “is coterminous with the others.” (V.C. ¶ 28) The agreements are: (1) “Services Contract”[22]; (2) “Facility Lease”[23]; and (3) “Business Associate Agreement.”[24] A few years later, on September 1, 2014, Plaintiffs and Defendants signed (4) the “Equipment Purchase and Sale Agreement, ”[25] and (5) “Agreement Regarding Venue.”[26] Each agreement is summarized in turn.

         (1) Services Contract

         The Services Contract is between the Vineland P.A. (designated “PC” in the agreement), Affordable Care (designated “ACI” in the agreement), and Michelle Aitken, DDS (designated the “Practice Owner” in the agreement). The agreement is substantially similar to the Audubon Management Services Agreement. It states that “ACI shall provide business and administrative services to the PC to support the management of the business aspects of the Practice on the PC's behalf and in the PC's name.”[27] The “business and administrative services” Affordable Care agreed to provide include “office space, furnishing and equipment, ” “in-center laboratory services, ” “staffing and human resources assistance, ” “inventory and supplies, ” “legal services, ” “marketing, ” “financial services” (including budgeting and payroll); “insurance” (other than professional liability insurance), and “information technology” (including hardware and software).[28] In exchange, the Vineland P.A. and Dr. Aitken agreed to pay Affordable Care monthly management fees as set forth in Exhibit C to the agreement.[29]

         Like the Audubon Management Services Agreement, the Vineland Services Contract contains an arbitration clause[30]:

         (IMAGE OMITTED)

         The Services Contract and Exhibit C to the agreement were amended on September 1, 2014, [31] principally to delete the “Termination Without Cause” provision of the agreement, and to alter the management fee schedule.[32]

         (2) Facility Lease

         The lease appears to be a rather straightforward commercial lease between Affordable Care (designated “ACI” in the agreement) and the Vineland P.A. (designated “PC” in the agreement). It provides that the Vineland P.A. “may use the Premises for the purpose of operating a dental practice, and for no other purpose.”[33] Most relevant to the instant suit and motion, the lease also provides that “neither ACI nor PC may terminate this Lease except in connection with the termination of that certain Services Contract of even date herewith; termination of the Services Contract will result in automatic termination of this Lease.”[34]

         The lease does not contain an arbitration clause.

         (3) Business Associate Agreement

         Affordable Care and the Vineland P.A. are parties to the Business Associate Agreement which is “intend[ed] to protect the privacy of protected health information disclosed to [Affordable Care] in compliance with [HIPPA].”[35]

         The Business Associate Agreement does not contain an arbitration clause.

         (4) Equipment Purchase and Sale Agreement The Vineland P.A. and Affordable Care executed the Equipment Purchase and Sale Agreement on September 1, 2014-- the same day the Audubon P.A. executed a document bearing the same title. Except for the purchase prices, and the names of the P.A.s, the two agreements appear to be identical with respect to the two provisions-- the Repurchase Option and arbitration clause-- quoted above.[36]

         (5) Agreement Regarding Venue

         The Vineland P.A. and Affordable Care executed the Agreement Regarding Venue on September 1, 2014-- the same day the Audubon P.A. executed a document bearing the same title. The introductory recitals list all of the agreements discussed above (except the Business Associate Agreement), and then the agreement states, in relevant part, “it is hereby agreed by the parties that the location ...


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