AETNA HEALTH INC. VS. BIODIAGNOSTIC LABORATORY SERVICES, LLC (L-2994-14, CAMDEN COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3335-17
AETNA HEALTH INC. and
AETNA LIFE INSURANCE
COMPANY,
Plaintiffs-Appellants,
v.
BIODIAGNOSTIC LABORATORY
SERVICES, L.L.C., DAVID NICOLL,
SCOTT NICOLL, KEVIN KEREKES,
CRAIG NORDMAN, DOUG HURLEY,
LUKE CHICCO, CLIFF ANTELL,
PETER BREIHOF, RJA SALES
CONSULTING, INC., DAVID
McCANN, WILLIAM DAILEY,
B.R.M.C. SALES CONSULTANTS,
INC., LEN RUBINSTEIN,
MICHAEL ZARRELLI, KMAN
SALES, LLC, ADVANTECH SALES,
SHANTI CONSULTING, LLC, PJC
CONSULTING, INC., BROWN'S
DOCK CONSULTING, FRANK
SANTANGELO, M.D.,
SANTANGELO MEDICAL
CENTER, DENNIS APONTE, M.D.,
GARY LEEDS, M.D., JOEL
FISCHGRUND, M.D.,
RICHARD GOLDBERG, M.D.,
ANGELO CALABRESE, M.D.,
WAYNE LAJEWSKI, M.D.,
DEMETRIOS GABRIEL, M.D.,
PETER DEPLAS, M.D., EUGENE
DESIMONE, M.D., DOUGLAS
BIENSTOCK, D.O., MICHELE
MARTINHO, M.D., SURENDER
GORUKANTI, M.D., ANTHONY
DELUCA, M.D., RALPH MESSO,
D.O., ANTHONY DELPIANO, M.D.,
GARY SAFIER, M.D., JOHN VITALI,
M.D., FRANZ GOYZUETA, M.D.,
LEONARD MARCHETTA, P.A., and
BRETT HALPER, M.D.,
Defendants,
and
SUSAN NICOLL and ROBERT W.
KEREKES,
Defendants-Respondents.
_________________________________
Argued March 10, 2020 – Decided October 7, 2021
Before Judges Messano, Ostrer and Susswein.
On appeal from the Superior Court of New Jersey, Law
Division, Camden County, Docket No. L-2994-14.
Matthew A. Baker argued the cause for appellants
(Connell Foley LLP, attorneys; Edward S. Wardell, of
counsel and on the briefs; Matthew A. Baker and
Robert J. Norcia, on the briefs).
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Peter W. Till argued the cause for respondent Susan
Nicoll (Law Offices of Peter W. Till, attorneys; Peter
W. Till and Louis J. Keleher, on the brief).
Kevin H. Marino argued the cause for respondent
Robert W. Kerekes (Marino, Tortorella & Boyle, PC,
attorneys; Kevin H. Marino and John A. Boyle, on the
brief).
The opinion of the court was delivered by
OSTRER, J.A.D.
Plaintiffs Aetna Health Inc. and Aetna Life Insurance Co. (collectively,
"Aetna") appeal from trial court orders dismissing for failure to state a claim
their second amended complaint, and denying as untimely their motion for leave
to file a third amended complaint, against father-daughter defendants Robert W.
Kerekes ("Kerekes") and Susan Nicoll ("Nicoll").1 The two were minority
owners of Biodiagnostic Laboratory Systems, LLC, ("BLS") which submitted
millions of dollars of fraudulent claims to Aetna. David Nicoll ("David") —
Nicoll's husband and Kerekes's son-in-law — was BLS's majority owner and
was convicted of various federal crimes related to the fraud, along with other
Nicoll and Kerekes family members and numerous physicians who participated
in the scheme.
1
To avoid confusion, we shall refer to other members of Kerekes's and Nicoll's
families by their first names, and we mean no disrespect in doing so.
A-3335-17
3
Aetna wants to recover over $32 million that BLS distributed to Kerekes
and Nicoll. Aetna contends the funds are proceeds of the fraud, and that Nicoll
and Kerekes are liable to Aetna under the New Jersey Insurance Fraud
Prevention Act ("IFPA"), N.J.S.A. 17:33A-1 to -30, because they knowingly
benefitted from BLS's fraud, see N.J.S.A. 17:33A-4(c), and they failed to
disclose the fraud to Aetna, see N.J.S.A. 17:33A-4(a)(5). Aetna also contends
that BLS's payments to Nicoll and Kerekes are voidable under the Uniform
Fraudulent Transfer Act ("UFTA"),2 N.J.S.A. 25:2-20 to -34, because BLS made
them with the actual intent to hinder, delay, or defraud Aetna, as a BLS creditor.
See N.J.S.A. 25:2-25.
The principal question here is whether, in its second amended complaint,
Aetna adequately pleaded its IFPA and UFTA claims. We conclude it did, and
the trial court erred by failing to read the complaint indulgently, see Printing
Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989), by
misapplying the heightened pleading standard applicable to fraud claims, see R.
4:5-8, and by misconstruing the meaning of "knowingly" as used in the IFPA.
2
Effective after the transactions here, the UFTA was amended and renamed the
Uniform Voidable Transfer Act (UVTA), N.J.S.A. 25:2-20 to -36. L. 2021, c.
92, § 1. Therefore, we refer to the pre-UVTA statute as it was written when the
relevant transfers were made.
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Because we reinstate the second amended complaint, we remand to the trial
court to consider anew Aetna's motion to file a third amended complaint, which
would add claims, among others, for restitution, piercing the "corporate veil,"
and imposition of a constructive trust.
I.
Aetna filed its second amended complaint after the trial court dismissed
without prejudice its initial complaint, and Aetna voluntarily dismissed a first
amended complaint.3 As with the initial complaint, Aetna asserts in the second
amended complaint claims against Nicoll and Kerekes under the IFPA and
UFTA. Aetna also asserts numerous claims against the direct participants in the
fraud, including David, Kerekes's son Kevin Kerekes ("Kevin") who was a BLS
salesperson, physicians who accepted bribes to funnel business to BLS, and
other BLS employees who paid the bribes. 4 Aetna alleges that BLS, through its
salespeople and their sham business entities, bribed physicians or paid them
3
As Aetna does not appeal from that order, we shall not address it, nor shall we
describe in detail the initial complaint. But we shall refer to the court's decision
to the extent the court incorporated its reasoning in dismissing the second
amended complaint.
4
We need not address the claims against the other parties or their disposition.
We also do not address a common law fraud claim that Aetna brought against
Nicoll and Kerekes because Aetna does not appeal from its dismissal.
A-3335-17
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kickbacks to refer Aetna's insureds to BLS for laboratory services. BLS then
submitted fraudulent insurance claims to Aetna by billing for services that BLS
did not perform, by double-billing, and by waiving patients' copays and
deductibles. Aetna included the criminal plea agreements of numerous actors in
the scheme.
As for Nicoll and Kerekes, Aetna alleges that as principals and owners of
BLS they "orchestrated, directed and/or knew of the bribery scheme," and
"knowingly benefitted from the scheme to defraud." Aetna alleges, with
supporting documentation, that Nicoll and Kerekes acquired twenty-nine and
twenty percent of BLS respectively — and David acquired fifty-one percent —
without paying anything out of pocket. The prior owner transferred the company
to the three in return for their assuming $200,000 in BLS's debt, and $300,000
taken from BLS's own cash accounts. In return for that insignificant investment
in a company that evidently had little value, Nicoll and Kerekes respectively
received disbursements from BLS topping $19 million and $13 million over an
eight-year period beginning the year following their acquisition. Aetna alleges
that under these circumstances, Nicoll and Kerekes knew that BLS was not
operating within the confines of the law and knew of the fraudulent scheme.
Aetna also alleges that Nicoll and Kerekes were closely related to other family
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members, including David, Kevin, and David's brother, Scott Nicoll, who were
directly involved in the fraud.
Furthermore, Nicoll and Kerekes were both personally named in a lawsuit
that Horizon Blue Cross Blue Shield of New Jersey (Horizon) brought during
the fourth year of their ownership, alleging many of the claims Aetna later
raised: that BLS paid kickbacks, double-billed, and waived patient
responsibility in a fraudulent scheme. Aetna alleges that Nicoll and Kerekes
received exhibits and other evidence supporting Horizon's claims, including a
text message exchange between a physician and David. In the exchange, David
evidently referred to the bribery, stating he could not "afford the 40-50,000 a
month if the girls aren't going to be drawing any blood." Evidencing their efforts
to conceal their fraudulent activities, David directed a physician in another text
exchange not to send emails about their business because someone already knew
too much. Aetna alleges that Horizon dismissed its litigation only after BLS
agreed to stop submitting claims to Horizon. However, the fraud against Aetna
and BLS's enormous payouts to Nicoll and Kerekes continued.
Aetna alleges that Nicoll and Kerekes "violated the IFPA by (1)
concealing and knowingly failing to disclose the occurrence of events which
affected BLS's initial or continued right to the insurance payments; and (2)
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knowingly and directly benefitting from the proceeds derived from a violation
of the IFPA." In its UFTA claim, Aetna alleges BLS transferred assets to Nicoll
and Kerekes "with the actual intent to hinder, delay, or defraud BLS'[s] present
and future creditors including [Aetna]." Aetna alleges that Nicoll and Kerekes
did not receive those assets in good faith or for a reasonably equivalent value.
In lieu of an answer, Nicoll and Kerekes moved to dismiss the second
amended complaint under Rule 4:6-2(e). And after oral argument, the trial court
granted the motion without prejudice.
In connection with the IFPA claim, the court concluded that Aetna did not
adequately allege knowledge of the fraud. In so doing, the court appeared to
accept defense counsel's suggestion that the Criminal Code's definition of
knowledge applied. See N.J.S.A. 2C:2-2(b)(2).
The court also concluded that the circumstantial evidence that Nicoll and
Kerekes knowingly benefitted from the fraud fell short of stating a claim. In
particular, the court rejected the suggestion that the magnitude of Nicoll's and
Kerekes's returns on investment was circumstantial evidence of their knowledge.
Referencing evidence outside the complaint that Kerekes had allegedly invested
$1 million in BLS, the court opined that Kerekes "expected to get a solid return
on his investment. Maybe he wasn't expecting . . . multiples of his investment
A-3335-17
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but maybe he hit a home run; that does happen." The court also minimized
Horizon's complaint and the exhibits attached. The judge stated the complaint
failed to put Nicoll and Kerekes on notice of the fraud; and the exhibits were
"unimpressive." Evidently referring to Rule 4:5-8, the court stated that Aetna
needed to plead fraud "specifically" and Aetna had not done so.
The court did not specifically explain its reasons for dismissing the UFTA
claim. But the judge did say Aetna's second amended complaint was not
significantly better than its initial complaint, and, regarding that, the court had
stated that Aetna failed to plead specific facts to meet the heightened pleading
standard for allegations of fraud, and Nicoll's and Kerekes's common status as
minority shareholders in a closely held corporation was an insufficient basis to
impute knowledge.
Although Nicoll and Kerekes were dismissed from the case, Aetna took
their depositions as part of discovery in the case remaining against other
defendants. Five months later, Aetna sought leave to file a third amended
complaint that repeated IFPA and UFTA claims against Nicoll and Kerekes and
added claims for a constructive trust, piercing the corporate veil, and restitution
against the two.
A-3335-17
9
In its proposed pleading, Aetna bolsters its claims by alleging additional
facts regarding BLS's formation, its operating agreement, Nicoll's and Kerekes's
respective backgrounds and levels of sophistication, their incomes from BLS,
and the Horizon litigation. Aetna alleges that in the years before the Horizon
lawsuit, Nicoll received an 8,196 percent return on investment, or about 262
percent annually. That calculation assumed a $145,000 investment (twenty-nine
percent of the $500,000 acquisition cost), even though Nicoll actually paid
nothing out of pocket for her stake in BLS. In the same period, Kerekes received
a 725 percent return, and ninety-three percent annually on his $1 million
investment (which he alleged in his deposition without documentary proof).
Aetna also acknowledges Nicoll's deposition testimony that she endorsed every
disbursement check back to her husband, David Nicoll, which Aetna alleged was
a "badge" of fraud under the UFTA.
Nicoll and Kerekes opposed Aetna's motion for leave to file a third
amended complaint, and the court — by a different judge — denied the motion.
The court did so on the grounds it was untimely — trial against the other
defendants was scheduled to begin the next day — and Aetna had not alleged
"any new information, any new facts . . . that would allow for them to be brought
in."
A-3335-17
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II.
We focus on the order dismissing the second amended complaint.
Reviewing the order de novo, applying the same standard as the trial court, and
owing no deference to the trial court's legal conclusions, Dimitrakopoulos v.
Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237 N.J. 91, 108 (2019),
we are convinced the trial court erred. In particular, the court misapplied Rule
4:5-8, requiring a heightened pleading in allegations of fraud, and mistakenly
imported the Criminal Code's definition of knowingly into the civil IFPA.
We examine the legal sufficiency of the facts alleged on the face of the
complaint, assuming the truth of those facts and granting plaintiffs every
reasonable inference. Id. at 107; Printing Mart-Morristown, 116 N.J. at 746.
We are not concerned with Aetna's "ability . . . to prove the allegation contained
in the complaint," Printing Mart-Morristown, 116 N.J. at 746, although it "must
plead the facts and give some detail of the cause of action" and may not await
discovery to "dredge[] up" missing facts, id. at 768; see also Lederman v.
Prudential Life Ins. Co. of Am., Inc., 385 N.J. Super. 324, 349 (App. Div. 2006)
(stating "nonparticularized" allegations against defendants were insufficient); R.
4:5-2 ("[A] pleading which sets forth a claim for relief . . . shall contain a
statement of the facts on which the claim is based, showing that the pleader is
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entitled to relief . . . ."). The dismissal motion must fail "if the claim has been
made out." State, Dep't of Treasury ex rel. McCormac v. Qwest Commc'ns Int'l,
Inc., 387 N.J. Super. 469, 479 (App. Div. 2006). Applying this liberal standard,
Aetna adequately pleaded facts supporting causes of action under the IFPA and
the UFTA.
A.
The IFPA "aggressively" combats insurance fraud, N.J.S.A. 17:33A-2, in
part by authorizing insurers to pursue private claims for statutory violations,
N.J.S.A. 17:33A-7(a); see Liberty Mut. Ins. v. Land, 186 N.J. 163, 173 (2006).
Here, Aetna adequately alleges that Nicoll and Kerekes committed two statutory
violations.
First, Aetna alleges that Nicoll and Kerekes "conceal[ed] or knowingly
fail[ed] to disclose the occurrence of an event which affects any person's initial
or continued right or entitlement to (a) any insurance benefit or payment or (b)
the amount of any benefit or payment to which the person is entitled ." N.J.S.A.
17:33A-4(a)(3).
Second, Aetna alleges that "due to the assistance, conspiracy or urging of
any person or practitioner" — that is, BLS and its numerous actors — Nicoll
and Kerekes "knowingly benefit[ted], directly or indirectly, from the proceeds
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derived from a violation of this act," N.J.S.A. 17:33A-4(c), that violation being
BLS's numerous acts of fraud.
The "events" that Nicoll and Kerekes allegedly concealed or failed to
disclose were BLS's fraudulent acts, including bribes, double-billing, and waiver
of patient responsibility. Aetna describes them in great detail, and explains they
affected BLS's right to payment. Put another way, Aetna alleges that had it
known that BLS bribed doctors, double-billed, and waived patient's copays and
deductibles, it alleged it would not have paid the claims.
Aetna also alleges facts supporting its claim that Nicoll and Kerekes
"concealed and knowingly fail[ed] to disclose" BLS's fraud; and it "knowingly
benefitted" from the fraud. Aetna does so by alleging circumstantial evidence
of knowledge, including the astoundingly large disbursements Nicoll and
Kerekes received, which were completely disproportionate to their investment
or stake in the company. A fact-finder may infer that Nicoll and Kerekes knew
something was not on the up-and-up on the simple theory that when something
appears too good to be true, it usually isn't.
Aetna was not obliged to allege more. Knowledge is a state of mind that
is rarely proved by direct evidence. State v. Lige, 429 N.J. Super. 490, 495
(App. Div. 2013), aff'd o.b., 220 N.J. 20 (2014). In Allstate Insurance Co. v.
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Northfield Medical Center, P.C., 228 N.J. 596, 620 (2017), the Court concluded
that IFPA incorporates a plain language understanding of the term knowing, as
opposed to a criminal law definition of that term, which the trial court evidently
adopted here. That is: "'Knowing' is well understood to be an awareness or
knowledge of the illegality of one's act." Ibid. (citing Black's Law Dictionary
950 (9th ed. 2009)).
The Court also rejected any requirement of direct evidence of knowledge,
noting that "[t]here is ample precedent supporting the proposition that a party's
knowledge as to the falsity or illegality of his conduct may be inferred from the
surrounding factual circumstances." Ibid. Thus, the Court ruled: "In a civil
action under the IFPA . . . the defendant's knowledge of a violation may be
proven by circumstantial evidence," including, for example, a defendant's
demeanor and intellect. Id. at. 620-21.
Nonetheless, Aetna presents more direct evidence of knowledge: service
of Horizon's complaint and its exhibits, which set forth evidence of BLS's
fraudulent business operations. Any defense that Nicoll and Kerekes were
oblivious to Horizon's allegations is for a jury. And, while David's texts with a
corrupt physician may not have impressed the trial judge, the judge was obliged
to assume, extending Aetna all favorable inferences, that the texts would impress
A-3335-17
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a jury. See Banco Popular N. Am. v. Gandi, 184 N.J. 161, 184 (2005) (stating,
when considering a motion to dismiss, "[t]he issue was not whether the
[plaintiff's] allegations were true or whether they could be proved, but only
whether they were made").
Rule 4:5-8 did not require a more specific pleading by Aetna regarding
the elements of its IFPA claim against Nicoll and Kerekes. The Rule states, "In
all allegations of misrepresentation, fraud, mistake, breach of trust, willful
default or undue influence, particulars of the wrong, with dates and items if
necessary, shall be stated insofar as practicable." R. 4:5-8(a). The Rule is
intended to assure that a pleading includes enough facts "to enable the person
charged to deny or disprove or explain these facts." Evangelista v. Pub. Serv.
Coordinated Transp., 7 N.J. Super. 164, 168-69 (App. Div. 1950). Heightened
standards of pleading of claims of fraud are designed to accord respect to
contracts that such claims are invoked to avoid, to shield potential defendants'
reputations, and to deter baseless suits. See 5A Charles Alan Wright & Arthur
R. Miller, Fed. Prac. & Proc. Civ. § 1296 (4th ed. 2021); 2 James W. Moore et al.,
Moore's Federal Practice § 9.03 (3d ed. 2021).
Despite its short title, the IFPA is designed to combat insurance fraud by
creating causes of action based on less than the elements of common law fraud.
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Land, 186 N.J. at 174 (noting "the Legislature in enacting IFPA did not codify
common law fraud but rather supplemented that action because, standing alone,
it had proven to be insufficient in combating and deterring insurance fraud").
Yet, "allegations that do not involve fraud do not have to be pleaded with
specificity," and when such allegations are combined with non-fraud claims,
"only the facts supporting the fraud claims must be pleaded with particularity."
2 Moore, § 9.03. Thus, in reviewing a claim under a state's consumer protection
law much like our Consumer Fraud Act, N.J.S.A. 56:8-1 to -226, the Seventh
Circuit held pleading-with-particularity did not apply to "an allegation of unfair
conduct, because fraud is not a required element under that branch of the
statute." Benson v. Fannie May Confections Brands, Inc., 944 F.3d 639, 646
(7th Cir. 2019). By contrast, "[a] complaint sounding in fraud" must satisfy
Rule 4:5-8. Qwest, 387 N.J. Super. at 484.
Likewise, here, Aetna's claims against Nicoll and Kerekes rest not on the
elements of common law fraud, but on their knowing receipt of BLS's fraud
proceeds, N.J.S.A. 17:33A-4(c), and their failure to disclose that knowledge,
N.J.S.A. 17:33A-4(b)(5). Regarding BLS's underlying fraud, Aetna pleaded
facts with great particularity, explaining who, what, when, where, and how the
bribes were paid to corrupt physicians and the claims paid for double-billing.
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Regarding Nicoll's and Kerekes's knowledge and non-disclosures, pleading with
particularity was not required. Indeed, the Rule specifically provides that
allegations of "knowledge . . . may be alleged generally." R. 4:5-8(a).
Therefore, we conclude the trial court erred in dismissing Aetna's IFPA
claims in its second amended complaint.
B.
Aetna's UFTA claim also passes pleading muster. Aetna alleges that BLS
distributed the proceeds of its fraud to Nicoll and Kerekes "with the actual intent
to hinder, delay, or defraud BLS'[s] present and future creditors including
[Aetna]." In doing so, Aetna relies on N.J.S.A. 25:2-25, which stated:
A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer
or incurred the obligation:
a. With actual intent to hinder, delay, or defraud any
creditor of the debtor . . . .[5]
5
Aetna does not allege in its second amended complaint, nor does it argue
before us, that it may void BLS's transfers under N.J.S.A. 25:2-25(b), because
BLS made the transfer
b. Without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
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The UFTA identifies several factors — "badges of fraud" — that "give[]
rise to an inference of intent" to hinder, delay or defraud. Gilchinsky v. Nat'l
Westminster Bank N.J., 159 N.J. 463, 476 (1999); N.J.S.A. 25:2-26. Aetna
relies on two of them: "[t]he transfer or obligation was to an insider," N.J.S.A.
25:2-26(a); and "[t]he value of the consideration received by the debtor was
[not] reasonably equivalent to the value of the asset transferred or the amount of
the obligation incurred," N.J.S.A. 25:2-26(h).6 With respect to the latter, Aetna
(1) Was engaged or was about to engage in a business
or a transaction for which the remaining assets of the
debtor were unreasonably small in relation to the
business or transaction; or
(2) Intended to incur, or believed or reasonably should
have believed that the debtor would incur, debts beyond
the debtor's ability to pay as they become due.
Aetna also does not allege nor argue that it may void BLS's transfers under
N.J.S.A. 25:2-27(a), which deems transfers voidable if the creditor's claim
"arose before the transfer was made or the obligation was incurred," the transfer
was made "without receiving a reasonably equivalent value in exchange," and
"the debtor was insolvent at that time or the debtor became insolvent as a result
of the transfer or obligation." See Motorworld, Inc. v. Benkendorf, 228 N.J.
311, 316 (2017) (analyzing claim of "constructively fraudulent" transfer under
N.J.S.A. 25:2-27(a)).
6
Other factors include:
b. The debtor retained possession or control of the
property transferred after the transfer;
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alleges in the second amended complaint that Nicoll and Kerekes invested
nothing out-of-pocket in return for their receipts of over $19 million and $13
million respectively. Aetna also details their insider status, as both owners and
family members. See United Jersey Bank v. Vajda, 299 N.J. Super. 161, 163-
c. The transfer or obligation was disclosed or
concealed;
d. Before the transfer was made or obligation was
incurred, the debtor had been sued or threatened with
suit;
e. The transfer was of substantially all the debtor's
assets;
f. The debtor absconded;
g. The debtor removed or concealed assets;
....
i. The debtor was insolvent or became insolvent shortly
after the transfer was made or the obligation was
incurred;
j. The transfer occurred shortly before or shortly after a
substantial debt was incurred; and
k. The debtor transferred the essential assets of the
business to a lienor who transferred the assets to an
insider of the debtor.
[N.J.S.A. 25:2-26.]
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65 (App. Div. 1997) (discussing the UFTA and stating that "[t]ransfers made to
close relatives are especially suspect").
We have found no reported New Jersey case applying Rule 4:5-8's
heightened pleading requirements to a fraudulent transfer claim, and the parties
cite none. There is some uncertainty in federal courts whether "actual intent"
claims require heightened pleading under the comparable federal rule, Fed R.
Civ. P. 9(b), because the fraudulent intent is that of the transferor, not the
defendant-transferee, see, e.g., Janvey v. Alguire, 846 F. Supp. 2d 662, 675-76
(N.D. Tex. 2011) (noting that the defendant-transferee's "conduct is simply not
an element" of the fraudulent transfer claim).
However, even assuming that heightened pleading is required, a party may
allege intent generally. R. 4:5-8(a) (stating "[m]alice, intent, knowledge, and
other condition of mind of a person may be alleged generally" (emphasis
added)). Pleading with particularity pertains not to the transferor's or
transferee's state of mind, but to the details of the transfers. 7 "In order to
adequately plead a fraudulent-conveyance claim, a complaint must plead 'the
7
The transferee's state of mind may be relevant as a defense. See N.J.S.A. 25:2-
30(a) ("A transfer or obligation is not voidable under [N.J.S.A. 25:2-25(a)]
against a person who took in good faith and for a reasonably equivalent
value . . . ").
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who, what, where, when, and how' of the challenged transactions." United
States v. Bame, 778 F. Supp. 2d 988, 992 (D. Minn. 2011). In other words, "the
complaint must allege what (or how much) was transferred, when the transfer
was made, how it was made, who made it, who received it, and under what
circumstances." In re Wolf, 595 B.R. 735, 763 (Bankr. N.D. Ill. 2018) (quoting
In re Glick, 568 B.R. 634, 657 (Bankr. N.D. Ill. 2017)).
Aetna met that test. Aetna detailed the amounts BLS transferred to Nicoll
and Kerekes each year of their ownership of BLS. Aetna alleged that the
payments were made in the form of cash distributions from BLS. And Aetna
alleged the payments were made while BLS was defrauding Aetna, by double-
billing, waiving patient responsibility for copays and deductibles, and paying
off corrupt physicians — the names and payments of which Aetna identifies in
detail.
In sum, the trial court erred in dismissing Aetna's UFTA claims in its
second amended complaint.
III.
We also vacate the trial court's order denying Aetna's motion to file a third
amended complaint. The trial court relied on the false premise that Aetna had
failed in its second amended complaint to properly plead its IFPA and UFTA
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claims, which Aetna includes in its proposed third amended complaint.
Furthermore, the trial court erred in concluding Aetna did not plead "new facts"
in its proposed pleading; it added allegations about BLS's formation, its
operating agreement, Nicoll's and Kerekes's respective backgrounds and levels
of sophistication, their incomes from BLS, and the Horizon litigation. Also, the
ill-timing of Aetna's motion was partly a function of the trial court's error in
dismissing Aetna's second amended complaint. As a result of that dismissal,
Aetna was forced to await third-party discovery in its attempt to allege
additional facts, when its previous pleading should have sufficed. Furthermore,
restoration of the second amended complaint may prompt additional discovery
and affect the timing of any trial.
However, we shall not decide in the first instance the adequacy of Aetna's
pleading regarding its new claims as set forth in its proposed third amended
complaint. Although motions for leave to amend under Rule 4:9-1 should be
granted liberally, even on a remand after appeal, unless undue prejudice would
result, Kernan v. One Wash. Park Urb. Renewal Assocs., 154 N.J. 437, 456-57
(1998), such motions are left to the sound discretion of the trial courts, in light
of the situation that exists at the time of the motion, id. at 457. "That exercise
of discretion requires a two-step process: whether the non-moving party will be
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prejudiced, and whether granting the amendment would nonetheless be futile."
Notte v. Merchs. Mut. Ins., 185 N.J. 490, 501 (2006). We remand for the trial
court to perform that role.
Reversed in part; vacated in part; and remanded. We do not retain
jurisdiction.
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