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Baltimore Co. jury awards $1.25M in med-spa business dispute

A Baltimore County jury has awarded more than $1.25 million to a woman who alleged she was cheated out of her share of the profits of a medical spa she jointly owned and operated with a Baltimore plastic surgeon and his wife.

Dawn Richardson alleged Michael and Shari Cohen told her the Towson medical spa was essentially breaking even in order to avoid paying her half of the profits as they had agreed to. Once Richardson, who is married to former Baltimore Ravens punter Kyle Richardson, uncovered documents showing the business was more profitable than the Cohens admitted, the defendants changed the locks on the office doors and later rebranded the business in a new location, according to the lawsuit, filed in Baltimore County Circuit Court in 2012.

“That was our complaint, that they locked her out and just opened it up under a different name,” said Andrew G. Slutkin of Silverman, Thompson, Slutkin & White LLC in Baltimore, who represented Richardson at trial along with Jamison G. White.

Richardson entered into a business relationship with the Cohens in 2004, when Shari Cohen suggested she help them develop and operate a medical spa — a cross between a medical practice and a traditional spa — called Skin Beautiful that would be located within the office suite of Michael Cohen’s plastic surgery practice.

Under the agreement, which was never executed in writing, Richardson would be the med-spa’s director, responsible for the company’s growth, while Shari Cohen would maintain the accounting books and calculate annual profits to be distributed.

Although the agreement establishing Richardson’s ownership interest and her right to 50 percent of the business’ profits was drafted, it was never executed, according to the complaint. Instead, the Cohens incorporated the business as Skin Inc. without Richardson but continually referred to her as a co-owner of the business, the complaint alleged.

‘Minimal’ profits

In 2009, Sinai Hospital expressed interest in acquiring an ownership stake in the spa, which was by then known as Be Lifestyle, and creating space in its Woodholme Center office for an expansion of the business, according to the suit.

Sinai hired an accounting firm to value the business, and in a report issued in late 2009, the firm stated the spa had seen profits during the previous three years and placed a fair market value of $857,000 on the business, the suit states.

Richardson asked the Cohens why she was told there had been no profits and why she had not received a distribution, and the Cohens responded that the profits were “minimal,” according to the complaint.

In 2010, the Cohens distributed $42,000 to Richardson, which they said amounted to 50 percent of the previous year’s profits. A 2009 profit-and-loss statement for the spa showed a total profit of more than $84,000, but the Cohens told Richardson the document was inaccurate, the suit states.

But Richardson soon discovered that Shari Cohen, with her husband’s consent, had been “siphoning a significant percentage of Skin Beautiful/Be Lifestyle’s profits out of the business during the calendar years 2006-09 under the guise of unexplained ‘Management Fees’ and other line item deductions,” resulting in the spa’s appearing less profitable than it actually was, according to the complaint.

The Cohens also made no distribution to Richardson for the business’ 2010 profits, the suit states. Richardson went on maternity leave in early 2011, but when she attempted to return as planned later that year, she discovered the locks on the office had been changed.

The Cohens filed a voluntary petition for appointment of a receiver in Baltimore County Circuit Court in 2014, claiming that the spa had a net income of $0. However, the lawsuit alleged, after filing the petition the Cohens simply opened up the same business again, this time under the name Belcara Health.

“They tried to say, ‘Well, the business is gone,’” Slutkin said. “Once this litigation was filed, they basically took Skin Inc. to receivership and opened up a new business the next day with a new name.”

The case originally settled for $450,000, Slutkin said, but the defendants later claimed they had never agreed to personal guarantees. A hearing on a motion to enforce the settlement was held but the motion was ultimately denied, and the defense then offered to settle for $100,000 before trial, an offer Richardson rejected, Slutkin added.

After an eight-day trial, the jury of four men and two women deliberated for about four hours Thursday before finding in Richardson’s favor on counts of breach of contract, unjust enrichment, fraud and quantum meruit. But jurors only awarded damages for unjust enrichment and quantum meruit.

The Cohens’ lawyers subsequently filed a motion to strike the judgment, which is pending.

Matthew S. Sturtz, a principal at Miles & Stockbridge PC in Baltimore and an attorney for the defendants, did not immediately respond to a call seeking comment on the verdict on Monday.

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Dawn Richardson v. Michael Cohen, M.D., et al.

Court: Baltimore County Circuit

Case No.: 03C12006975

Judge: Michael J. Finifter

Outcome: $1.275 million for plaintiff

Dates:

Incident: 2006 to 2011

Suit filed: July 6, 2012

Verdict: May 19, 2016

Plaintiffs’ Attorneys: Andrew G. Slutkin and Jamison G. White of Silverman, Thompson, Slutkin & White LLC in Baltimore

Defendants’ Attorney: Matthew S. Sturtz and Joshua J. Gayfield of Miles & Stockbridge P.C. in Baltimore

Counts: Breach of contract, unjust enrichment, quantum meruit, fraud


About Lauren Kirkwood

Lauren Kirkwood covers the business of law beat at The Daily Record.