Baron Financial Corp. v. Natanzon (Maryland U.S.D.C.)(Approved for Publication)

Issued July 7, 2006 -- Opinion of Judge Susan K. Gauvey. (Approved for publication.)

This opinion addresses a Counterclaim and Third-Party Complaint ("Natanzon's Claim") filed by Defendant Roni Natanzon ("Natanzon") against Baron Financial Corporation ("Baron") and Samuel Buchbinder ("Buchbinder"), in the above-captioned case, in which a Co-Defendant ERN, LLC ("ERN"), an LLC in which Natanzon held a membership interest, had already declared bankruptcy. A synopsis of another ruling in this case involving different procedural and substantive issues in dispute is available here.

Baron and Buchbinder moved to dismiss the two remaining counts in Natanzon's Claim: Intentional Interference with Economic Advantage ("Count I") and Unfair Competition ("Count IV.")

Regarding Count I, the Court noted that Natanzon claimed damages under three subtheories:

1. Baron and Buchbinder allegedly damaged ERN’s and Natanzon’s economic relationships with independent sales organizations (ISOs) and merchants by making statements to ISOs about their lawsuits against ERN and Natanzon and about Natanzon personally.

The Court held that since Natanzon personally lacked either a contract with the ISOs or an existing business relationship with them, he lacked standing to bring suit for any claim of tortious interference on the basis of his mere membership in ERN, and failed to allege facts sufficient to allow a defamation claim to proceed under a more liberal reading of the claim.

2. Baron interfered with Natanzon’s business interests by "frustrating ERN's and Natanzon's ability to devote" their full time to the operation of their business.

The Court held that Natanzon had failed to allege sufficient facts to establish either a contract with ISOs or a likelihood of a prospective business relationship with any identified ISOs, and dismissed the claim for failure to state a claim on which relief might be granted.

3. Baron and Buchbinder allegedly filed lawsuits and otherwise interfered in Natanzon’s attempt to rehabilitate ERN and meet his obligations under the Memorandum of Understanding between the parties.

The Court held that since Baron and Buchbinder were themselves parties to the Memorandum of Understanding, they could not commit tortious interference with their own contract against Natanzon as a matter of law. Accordingly, the Court dismissed Count I with prejudice.

Count IV of Natanson's Claim alleged the following as acts constituting "unfair competition":

(1) Buchbinder's and Baron's institution and prosecution of numerous lawsuits against Natanzon, ERN, and ERN Israel; (2) their failure to make residual payments to ISOs with respect to their Assigned Portfolios, pursuant to the terms of the MOU and the Rider; (3) their improper demands for documentation; (4) their claim that ERN failed to process the patent application even though Buchbinder is aggressively his own 'all-in-one' POS machine (which has diminishes the value of any patent ERN might obtain); and (5) [other additional matters]

The Court held that all of Natanzon's alleged damages arose out of his ownership interest in ERN, and that since Natanzon had not pled any distinct injury to himself specifically as an owner, as opposed to financial damages to ERN itself, he lacked standing to sue for Baron and Buchbinder for unfair competition under Maryland law. Accordingly, the Court dismissed Count IV.

Natanzon had previous conceded his lack of standing to bring Counts II and III of his Claim, and the Court summarily dismissed those two conceded counts. All counts having been dismissed, the Court dismissed Natanzon's Claim in its entirety.

The full memorandum opinion is available in PDF.