RICHARD J. LAND, in his capacity as Receiver of LINX, LTD.
CHARLES W. ROCHE, LEONEL E. CHAMPAGNE, NAPAC, INC, DAVID P. MARTLAND (nominal stakeholder defendant), and LEICESTER ASSOCIATES, LLC
Plaintiff: Robert Fine, Esq., Andre S. Digou, Esq.
Defendant: Stephen F. DelSesto, Esq., Nicholas L. Nybo, Esq.
instant matter comes before the Court on Napac, Inc.'s
(Napac) Motion to Dismiss. Napac, Charles W. Roche (Roche)
and Leonel E. Champagne (Champagne) (collectively,
Defendants) move to dismiss Plaintiff's claim for
deepening insolvency, as it is not currently a cognizable
cause of action under the laws of the State of Rhode Island.
In opposing Defendants' Motion to Dismiss, Linx, Ltd.
(Linx)-through Richard J. Land, the Receiver for Linx (the
Receiver)-urges this Court to recognize deepening insolvency
as an independent cause of action. Jurisdiction is pursuant
to Super. R. Civ. P. 12.
instant action was brought by the Receiver of Linx, who was
appointed by the Court on August 31, 2015. First Am. Ver.
Compl. ¶ 1. Roche and Champagne were shareholders and,
respectively, the president and vice president of Linx prior
to it entering receivership. Id. at ¶¶ 2,
to 2014, Linx operated either a division or product line
known as United Water Products (UWP), for which David
Belezarian, Maria Tscholl, Sharon Gray, Sharon Molleur,
Madison Poulin, Ashley Potvin (collectively, UWP Employees),
and David P. Martland, Esq. provided services. Id.
at ¶¶ 23-25. UWP sold products to customers in the
fire protection and waterworks industries. Id. at
¶ 24. In the course of its business, UWP inventory was
stored in two facilities: one in Middletown, Rhode Island and
the other in Jacksonville, Florida. See Roche Aff.
¶ 2. Napac, a Massachusetts corporation, was one of
UWP's major customers. See First Am. Ver. Compl.
¶ 6; Roche Aff. ¶ 2. Roche is a minority
shareholder of Napac and, prior to June 2014, was also a
director for Napac. See First Am. Ver. Compl. ¶
2014, Linx caused the transfer of UWP to Napac for roughly
$750, 000, "the cost-value of UWP's then-current
inventory." First Am. Ver. Compl. ¶¶ 26-27;
Roche Aff. ¶ 3. Through his affidavit, Roche claims that
this transfer was in response to the institution of various
product liability lawsuits against Linx and done so that Linx
could use these funds to assist in the defense of this
litigation. Roche Aff. ¶ 3. Before the transfer of UWP
to Napac, Roche claims that Linx had generally sold UWP
inventory to Napac at a 25% mark-up. Id. UWP was a
profitable division/product line of Linx prior to the
transfer; afterwards, however, Linx's annual net sales
reduced from approximately $14 million to $5.5 million. First
Am. Ver. Compl. ¶¶ 27, 31-32. Linx ultimately
became insolvent. Id. at ¶ 42.
via the Receiver, contends that after the completion of the
transfer of UWP from Linx to Napac, the UWP Employees
continued to provide services to UWP only to be compensated
by Linx. Id. at ¶¶ 46-47. Further,
"UWP maintained a phone line at the Linx office without
paying Linx[, and] . . . received the benefit of using
Linx's office facility, office equipment and office
utilities" as well as "UWP's goodwill,
customers and customer relationships" without paying
Linx for such benefits. Id. at ¶¶ 50-54.
addition, Roche and Champagne are the sole members of
Leicester Associates, LLC (Leicester), which is based out of
Middletown, Rhode Island. Id. at ¶¶ 7, 22.
Leicester was the record owner of real property located at
875 Aquidneck Avenue, Middletown, Rhode Island (the Property)
via warranty deed, which served as Leicester's principal
office. Id. at ¶¶ 7, 21.
sole function of a motion to dismiss is to test the
sufficiency of the complaint . . . .'" Goddard
v. APG Sec.-RI, LLC, 134 A.3d 173, 175 (R.I. 2016)
(quoting Ho-Rath v. R.I. Hosp., 115 A.3d 938, 942
(R.I. 2015)). The Court "will 'assume the
allegations contained in the complaint to be true and view
the facts in the light most favorable to the
plaintiffs.'" Id. (quoting
Ho-Rath, 115 A.3d at 942). Our Supreme Court has
noted that there is a policy to interpret the pleading rules
liberally so that "'cases in our system are not . .
. disposed of summarily on arcane or technical
grounds.'" Konar v. PFL Life Ins. Co., 840
A.2d 1115, 1118 (R.I. 2004) (quoting Hendrick v.
Hendrick, 755 A.2d 784, 791 (R.I. 2000)). While the
pleading does not need to include the ultimate facts to be
proven or the precise legal theory upon which the claims are
based, the complaint is required to provide the opposing
party with a fair and adequate notice of any claims being
asserted. Barrette v. Yakavonis, 966 A.2d 1231, 1234
(R.I. 2009). The goal is to give defendants sufficient notice
of the type of claim being asserted against them. See
Barrette, 966 A.2d at 1234; Konar, 840 A.2d at
1119. Accordingly, "'[a] motion to dismiss ...