Complaint for Damages — Finance ERC LLC v. Lee Gause DDS PC (Southern District of Florida, January 12, 2024)
Summary
A complaint for damages filed January 12, 2024, by Finance ERC LLC against Lee Gause DDS PC and Lee Gause in the U.S. District Court for the Southern District of Florida, Case 9:24-cv-80038-AMC. It alleges that Finance ERC agreed on December 21, 2022, to buy part of the dental practice's expected Employee Retention Tax Credit of $662,118.54 for a purchase price of $456,861.79, relying on amended payroll tax returns the defendants represented had been filed. The complaint states that a review of IRS tax transcripts showed the amended returns were never filed. It pleads Count I for breach of contract, Count II for breach of guaranty against Lee Gause, and Count III for fraudulent inducement. Kevin Markow of Becker & Poliakoff, P.A. signs /s/ as counsel for the plaintiff.
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“Complaint for Damages — Finance ERC LLC v. Lee Gause DDS PC (Southern District of Florida, January 12, 2024).”
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Case 9:24-cv-80038-AMC Document 1 Entered on FLSD Docket 01/12/2024 Page 1 of 11
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
WEST PALM BEACH DIVISION
www.flsd.uscourts.gov
FINANCE ERC LLC,
Plaintiff,
vs. Civil Action No. _________________
LEE GAUSE DDS PC and
LEE GAUSE,
Defendants.
_______________________________/
COMPLAINT FOR DAMAGES
The plaintiff, Finance ERC LLC (“Plaintiff,” “Finance ERC,” or “Purchaser”), sues the
defendants, Lee Gause DDS PC (“Gause DDS” or “Seller”) and Lee Gause (“Gause” or
“Guarantor,” and with Gause DDS, the “Defendants”), and in support, states as follows:
PARTIES, JURISDICTION, VENUE, AND GOVERNING LAW
1. This is an action for damages arising out of (i) Gause DDS’s breach of contract;
(ii) Gause’s breach of his guaranty that Gause DDS will provide truthful and accurate information
to Finance ERC; and (iii) Defendants’ fraudulent inducement of Finance ERC to enter into the
relevant contract.
2. This Court has diversity jurisdiction over this action under 28 U.S.C. § 1332.
3. The amount in controversy exceeds $75,000.00 (exclusive of attorneys’ fees, costs,
and interest).
4. Plaintiff Finance ERC is a Delaware limited liability company. Its three members
– David Goldin, Jeff Rubin, and Gregory Zink – are natural persons who are citizens of Florida
and are otherwise sui juris.
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5. Defendant Gause DDS is a New York Professional Service Corporation with a
principal place of business in New York County, New York.
6. Defendant Gause is a natural person who is a citizen of New York and is otherwise
sui juris.
7. Venue is proper in this judicial district pursuant to the forum selection clause
contained in the parties’ Employment Retention Credit (ERC) Purchase and Sale Agreement (the
“Purchase Agreement”) dated December 21, 2022, attached hereto as Exhibit 1, providing:
Seller and Guarantor agree that any suit, action or proceeding to
enforce or arising out of or relating to this Agreement shall be
brought in any court in Florida or in the United States District court
for the Southern District of Florida (the “Acceptable Forums”) . . . .
Ex. 1 (Purchase Agreement) § 4.4.
8. Venue is also properly in this judicial district pursuant to 28 U.S.C. § 1391(b)(2)
because the events and omissions giving rise to Plaintiff’s claims occurred (or did not occur as the
case may be) in Boca Raton, Florida.
9. Under the Purchase Agreement, Florida provides the governing law:
This Agreement and any claim, dispute or controversy (whether in
contract, tort, or otherwise) at any time arising from or relating to
this Agreement is governed by, and this Agreement will be
construed in accordance with Florida law (to the extent not
preempted by federal law) without regard to internal principles of
conflict of laws. The legality, enforceability and interpretation of
this Agreement and the amounts contracted for under this
Agreement will be governed by the laws of Florida.
Ex. 1 (Purchase Agreement) § 4.4.
GENERAL ALLEGATIONS
10. Finance ERC is a financial services industry provider that offers innovative
solutions for businesses affected by the COVID-19 pandemic and related economic shutdown.
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11. Relevant here, Finance ERC provides businesses a means to gain access to needed
capital by purchasing a portion of the business’s expected Employee Retention Tax Credit
(“ERC”).
12. The ERC was created as part of the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”), a $2.2 trillion economic stimulus bill passed to address the
fallout from the COVID-19 pandemic.
13. The ERC is a refundable tax credit offered to businesses for maintaining their
payroll during 2020 and 2021. For most employers, the ERC is in excess of the payroll taxes paid.
14. Given the benefits of the ERC, many eligible businesses take advantage of the
program, resulting in large Internal Revenue Service (“IRS”) backlogs and long wait times for
refund checks to be issued.
15. Finance ERC helps businesses hindered by this delay by purchasing a portion of
the business’s expected ERC. Finance ERC provides the business with money before the ERC is
fully processed by the IRS. In exchange, Finance ERC receives the portion of the business’s ERC
that it purchased, when ultimately later issued by the IRS.
16. Gause DDS, founded and operated by Gause, is a business that took advantage of
Finance ERC’s offer to purchase a portion of its ERC.
17. Gause DDS markets itself as a premier dental practice in New York City. It
provides implant and cosmetic dentistry to its customers, which include various celebrities,
professional athletes, and other noteworthy clientele.
18. On or around November 12, 2022, Finance ERC received through a referral source
an application to purchase Gause DDS’s ERC. The application was dated November 2, 2022.
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19. In the application, Gause, through Gause DDS, represented to Finance ERC that it
had filed amended payroll tax returns (the “Amended Tax Returns”) entitling Gause DDS to an
ERC of $662,118.54 (the “Gause ERC”).
20. The Amended Tax Returns, which were provided as part of the application, were
dated September 30, 2022.
21. On or about December 9, 2022, Gause reiterated to Finance ERC that Gause DDS
had filed the Amended Tax Returns.
22. Based on a review of the amended tax returns and Gause and Gause DDS’s
representations that Gause DDS filed the Amended Tax Returns, on December 21, 2022, Finance
ERC entered into the Purchase Agreement whereby it agreed to buy $559,665.70 (the “Purchase
Amount”) of the Gause ERC for $456,861.79 (the “Purchase Price”), minus administrative fees
(“Net Proceeds”).
23. Finance ERC paid Gause DDS the Purchase Price on December 27, 2022.
24. Article II of the Purchase Agreement contains various representations, warranties,
and covenants made by Gause DDS.
25. In Section 2.4, Gause DDS represented, warranted, and covenanted that it
has filed all returns and has paid all taxes due, except as disclosed
to Purchaser. Seller has complied with all IRS filing and other
requirements related to receiving the ERC.
Ex. 1 (Purchase Agreement) § 2.4.
26. Gause DDS also represented, warranted, and covenanted in Section 2.4 that it
will take no action to reduce or impair the ERC currently due to
Seller. The ERC due to Seller as represented in this Agreement is
correct and accurate and not subject to any set off or reduction by
the IRS. Seller will file all required tax forms and pay all taxes as
they become due.
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Ex. 1 (Purchase Agreement) § 2.4.
27. In Section 2.14, Gause DDS represented, warranted, and covenanted as to the
accuracy of the information provided to Finance ERC:
All information provided by Seller and Guarantor to Purchaser in
the Transaction Documents, including the application, in all other
Seller forms and in response to any request by Purchaser for
information whether oral or in writing, is true, accurate and
complete in all respects. Seller will promptly notify Purchaser of any
change in any information provided, including information provided
as part of the application process and including, but not limited to,
any payroll processing provided that manages employee payroll
taxes and any form submitted to the IRS authorizing the IRS to share
information with Purchaser (Form 8821).
Ex. 1 (Purchase Agreement) § 2.14.
28. Per the Purchase Agreement, a lockbox account was created for the receipt of the
Gause ERC. Ex. 1 (Purchase Agreement) § 1.3 & pages 22-38.
29. After several months, the IRS had not deposited any of the Gause ERC into the
lockbox, so Finance ERC began investigating.
30. Finance ERC reviewed Gause DDS’s IRS tax transcripts and had telephone
conversations with the IRS. The documents and conversations revealed that Gause DDS never
filed the Amended Tax Returns that established Gause DDS’s entitlement to the Gause ERC and
formed the basis for the Purchase Agreement.
31. The Purchase Agreement provides that the “following events shall constitute an
‘Event of Default’”:
a. any representation or warranty by Seller in the Transaction
Documents, including the application and any documents
submitted in connection with the application, shall prove to
have been incorrect, false or misleading in any material
respect when made;
b. Seller or Guarantor performs any act that reduces the value
of the ERC.
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Ex. 1 (Purchase Agreement) § 3.1(a)-(b).
32. Gause DDS agreed that “upon any Event of Default: (a) as liquidated damages, the
full uncollected Purchased Amount and any unpaid fees due shall become due and payable in full
immediately.” Ex. 1 (Purchase Agreement) § 3.2(a).
33. Gause DDS also agreed that it
shall pay to Purchaser all reasonable costs associated with (a) a
beach by Seller of the Transaction Documents and the enforcement
thereof, and (b) the enforcement of Purchaser’s remedies set forth
herein, including but not limited to (i) expenses, court costs and
attorneys’ fees and (ii) such other amount as allowed by law”
Ex. 1 (Purchase Agreement) § 3.3
34. Gause agreed to personally guaranty Gause DDS’s representations, warranties, and
covenants. The Guaranty signed by Gause, as a material inducement of the purchase, provides:
Each undersigned Guarantor hereby unconditionally guarantees to
Purchaser the truthfulness, accuracy and completeness of all of the
representations, warranties and covenants made by Seller in the
application, Agreement, Security Agreement and Guaranty,
(collectively, the “Transaction Documents”), as each may be
modified from time to time (the “Guaranteed Declarations”).
Guarantor shall be liable for and Purchaser may charge and collect
all costs and expenses, including but limited to attorneys’ fees and
court costs, which may be incurred by Purchaser in connection with
any Guaranteed Declaration being false, inaccurate, incompleteness
or otherwise breached, including the enforcement of Purchaser’s
rights under the Transaction Documents.
Ex. 1 (Purchase Agreement) at 11.
35. On November 28 or 29, 2023, Finance ERC member David Goldin spoke with
Gause and informed him that after a thorough review of the Gause DDS files, Finance ERC learned
that Gause DDS did not file the Amended Tax Returns and thus was in default under the Purchase
Agreement and Gause’s personal guaranty.
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36. On December 1, 2023, Finance ERC emailed Gause and reiterated the points
discussed on the November 28 or 29 call, namely that Gause DDS was in default under the
Purchase Agreement and that Finance ERC was invoking the guaranty against Gause. See
December 1, 2023 email between Finance ERC and Gause, attached hereto as Exhibit 2 (the
“Finance ERC-Gause Email”).
37. Finance ERC requested that Gause contact Finance ERC to informally resolve the
dispute. Ex. 2 (Finance ERC-Gause Email).
38. Gause did not respond to the Finance ERC-Gause Email.
39. As of the date of this filing, Gause DDS has not filed the Amended Tax Returns.
40. Defendants have breached and defaulted under the Purchase Agreement and
Guaranty, which were induced by Defendants’ material misrepresentations.
41. All conditions precedent to commencing this action have either been performed,
satisfied, or waived.
42. Plaintiff has agreed to pay undersigned counsel its attorneys’ fees and all costs
incurred in connection with this action, which pursuant to the Purchase Agreement and Guaranty
should be borne by Defendants.
COUNT I – BREACH OF CONTRACT
(Against Gause DDS)
43. Finance ERC incorporates by reference the facts alleged in Paragraphs 1 through
42 as though fully set forth herein.
44. In the Purchase Agreement, Gause DDS represented, warranted, and covenanted
that it had filed all tax returns necessary to it receiving the Gause ERC and that the information
provided to Finance ERC was accurate.
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45. Contrary to these representations, Gause DDS never filed the Amended Tax
Returns entitling it to the Gause ERC with the IRS. Nor did Gause DDS inform Finance ERC of
its failure to file the Amended Tax Returns.
46. By failing to file the Amended Tax Returns, Gause DDS has reduced or impaired
Finance ERC’s ability to collect the Gause ERC.
47. Gause DDS’s actions are Events of Default under the Purchase Agreement.
48. By failing to cure the Events of Default, Gause DDS breached the Purchase
Agreement.
49. Gause DDS’s breach has caused Finance ERC harm.
50. The harm Finance ERC has suffered is compensable in damages in the amount
agreed to by the parties in the Purchase Agreement as liquidated damages – $559,655.70.
51. Finance ERC is also entitled under Section 3.3 of the Purchase Agreement to the
costs and attorneys’ fees expended in recovering its damages from Gause DDS.
WHEREFORE, the plaintiff, Finance ERC LLC, demands judgment against the defendant,
Lee Gause DDS PC, for all damages caused by its breach of the Purchase Agreement, including
all incidental damages, consequential damages, attorneys’ fees, costs, and interest, as well as such
further relief as the Court deems just, fair, and equitable.
COUNT II – BREACH OF GUARANTY
(Against Gause)
52. Finance ERC incorporates by reference the facts alleged in Paragraphs 1 through
42 as though fully set forth herein.
53. Gause personally guaranteed the truthfulness, accuracy, and completeness of all of
the representations, warranties, and covenants made by Gause DDS to Finance ERC.
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54. Gause DDS breached its representations, warranties, and covenants in the Purchase
Agreement by providing false information to Finance ERC regarding the returns filed with the IRS
and its entitlement to the Gause ERC.
55. Gause DDS’s breaches have caused Finance ERC harm.
56. Gause has refused to comply with his guaranty and compensate Finance ERC for
the harm caused by Gause DDS, thus compounding the harm caused to Finance ERC.
57. The harm Finance ERC has suffered is compensable in damages in an amount to
be determined at trial.
58. Finance ERC is also entitled under the guaranty to the costs and expenses, including
attorneys’ fees and court costs, expended in enforcing Finance ERC’s rights under the Purchase
Agreement and guaranty.
WHEREFORE, the plaintiff, Finance ERC LLC, demands judgment against the defendant,
Lee Gause, for all damages caused by Lee Gause DDS PC’s breach of the representations and
warranties in the Purchase Agreement and Gause’s independent breach of the guaranty, including
all incidental damages, consequential damages, attorneys’ fees, costs, and interest, as well as such
further relief as the Court deems just, fair, and equitable.
COUNT III – FRAUDULENT INDUCEMENT
(Against All Defendants)
59. Finance ERC incorporates by reference the facts alleged in Paragraphs 1 through
42 as though fully set forth herein.
60. On or around November 12, 2022, Gause, on behalf of Gause DDS, submitted an
application for Finance ERC to purchase the Gause ERC.
61. The application contained the Amended Tax Returns which are dated September
30, 2022 and establish Gause DDS’s entitlement to the Gause ERC.
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62. On or around December 9, 2022, Gause, on behalf of Gause DDS, reiterated to
Finance ERC that Gause DDS had filed Amended Tax Returns.
63. Gause and Gause DDS’s representations were material because the amount of the
Gause ERC is what determined the Purchase Amount, Purchase Price, and incentive for Finance
ERC to enter into the Purchase Agreement.
64. Gause and Gause DDS’s representations were knowingly false when made. Gause
had not filed the Amended Tax Returns for Gause DDS.
65. Finance ERC actually and reasonably relied upon Gause and Gause DDS’s
representations in entering into the Purchase Agreement. Without Gause and Gause DDS’s
representations that Gause DDS had filed the Amended Tax Returns and was entitled to the Gause
ERC, Finance ERC would not have entered into the Purchase Agreement and transmitted the
Purchase Price to Gause DDS. Finance ERC had no reason to believe Gause and Gause DDS did
not file the Amended Tax Returns.
66. Finance ERC has suffered damages as a result of its reliance on the material
misrepresentations made to induce the Purchase Agreement. In reliance, it remitted the Purchase
Price to Gause DDS and invested significant resources into the transaction.
67. The harm Finance ERC has suffered is compensable in damages in an amount to
be determined at trial.
WHEREFORE, the plaintiff, Finance ERC LLC, demands judgment against the
defendants, Lee Gause DDS PC and Lee Gause, for all damages caused by its fraudulent actions,
including all incidental damages, consequential damages, costs, and interest, as well as such further
relief as the Court deems just, fair, and equitable.
Dated: January 12, 2024
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Respectfully submitted,
BECKER & POLIAKOFF, P.A.
Counsel for Plaintiff
1 East Broward Blvd., Suite 1800
Ft. Lauderdale, FL 33301
Telephone: 954.985.4174
Facsimile: 954.985.4176
kmarkow@beckerlawyers.com
dgoldman@beckerlawyers.com
ygomezrivera@beckerlawyers.com
By: /s/ Kevin Markow
Kevin Markow
Florida Bar No. 66982
Darren Goldman
Florida Bar No. 88638
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