Jumpstart Of Sarasota LLC v. ADP Screening and Selection Services, Inc.
Filing
15
ORDER denying 6 Motion to dismiss. Signed by Judge Elizabeth A. Kovachevich on 12/9/2011. (JM)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
JUMPSTART OF SARASOTA, LLC,
Plaintiff,
v.
CASE NO. 8:11-CV-617-T-17TGW
ADP SCREENING AND
SELECTION SERVICES, INC.,
etc.,
Defendant.
ORDER
This cause is before the Court on:
Dkt. 6
Motion to Dismiss
Dkt. 7
Response
Dkt. 8
Affidavit
Dkt. 11
Reply
The Complaint in this case includes Count I, for breach of contract, and Count II
for an accounting. The Asset Purchase Agreement ("APA") dated 4/29/2004 is
attached to the Complaint. The basis of jurisdiction is diversity. This case was
removed from the Circuit Court of the Twelfth Judicial Circuit of Florida, in and for
Sarasota County, on March 24, 2011.
The Court notes that Plaintiff withdraws Count II of the Complaint (Dkt. 7, p. 6).
Plaintiff Jumpstart of Sarasota, LLC ("Jumpstart") sold the business Plaintiff
operated (then known as ClinNet Solutions, LLC, whose members were Martin Clegg,
Thomas Hartnett, and Harry Chororos) to Defendant ADP Screening and Selection
Case No. 8:11-CV-617-T-17TGW
Services, LLC. The purchase involved the sale and/or assignment of certain assets
and the assumption of liabilities as stated in the APA. The APA is a comprehensive
document (47 pages) which was negotiated at arms length between the parties. The
closing of the transaction took place in Sarasota, Florida. The price of the transaction
was subject to post-closing adjustment.
Defendant ADP Screening and Selection Services, Inc. ("ADP") moves to
dismiss Count I because the breach of contract claim is barred by the applicable statute
of limitations.
Plaintiff opposes Defendant's Motion.
I. Standard of Review
"Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short
and plain statement of the claim showing that the pleader is entitled to relief." "[Djetailed
factual allegations" are not required, Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007),
but the Rule does call for sufficient factual matter, accepted as true, to "state a claim to
relief that is plausible on its face," |q\, at 570. A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. id_., at 556. Two working principles
underlie Twombly. First, the tenet that a court must accept a complaint's allegations as
true is inapplicable to threadbare recitals of a cause of action's elements, supported by
mere conclusory statements. kL, at 555. Second, only a complaint that states a
plausible claim for relief survives a motion to dismiss. Determining whether a complaint
states a plausible claim is context-specific, requiring the reviewing court to draw on its
experience and common sense, kl, at 556. A court considering a motion to dismiss
may begin by identifying allegations that, because they are mere conclusions, are not
entitled to the assumption of truth. While legal conclusions can provide the complaint's
Case No. 8:11-CV-617-T-17TGW
framework, they must be supported by factual allegations. When there are
well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief. See Ash croft v.
Iqbal. 129 S.Ct. 1937, 1955-1956 (2009)(quoting Bell Atlantic v. Twombly. 550 U.S. 544
(2007).
As the United States Supreme Court explained:
The plausibility standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has acted
unlawfully. Where a complaint pleads facts that are merely consistent
with a defendant's liability, it stops short of the line between possibility and
plausibility of entitlement to relief.
Id. at 1949 (quotation marks and internal citations omitted) (quoting Twombly, 550 U.S.
at 557). On a Rule 12(b)(6) motion to dismiss, when a court considers the range of
possible interpretations of the defendant's alleged conduct, if the "more likely
explanations" involve lawful, non-actionable behavior, the court should find that the
plaintiffs claim is not plausible. kf at 1950-51.
II. Defendant ADP's Motion
Defendant ADP argues that Plaintiff's claim for breach of contract was not filed
within the five year statute of limitations under Rel Stat. 95.11 (2)(b). Defendant argues
that Plaintiffs claim for breach of contract accrued on March 1, 2005, when Defendant
ADP allegedly failed to provide an "Adjustment Statement" in compliance with Section
2.12 of the APA.
Defendant ADP notes the choice of law provision in the APA, Sec. 11.3.
Defendant ADP argues that the plain language of the choice of law provision excludes
any agreement to impart New York's time period for asserting a claim for breach of
contract, as the parties limited the applicability of New York law to the "validity,
Case No. 8:11-CV-617-T-17TGW
construction and performance" of the Agreement.
Defendant ADP further argues that New York's Civil Practice Laws and Rules
Section 202 provides that a cause of action accruing outside of New York but asserted
under New York law must comply with both the statute of limitations of New York and
the state in which the claim accrued. See Portfolio Recovery Assocs. LLC v. King. 14
N.Y. 3d 410, 416 (2010). New York C.P.L.R. 202 provides
An action based upon a cause of action accruing without the
state cannot be commenced after the expiration of the time
limited by the laws of either state or the place without the
state where the cause of action accrued, except that where
the cause of action accrued in favor of a resident of the state
the time limited by the laws of the state shall apply.
Defendant ADP argues that the claim accrued in Florida. Defendant ADP was
obligated to deliver an "Adjustment Statement" within Florida, and Plaintiff sustained its
alleged injury, if any, within Florida.
III. Plaintiffs Response
The transaction between the parties included the transfer of certain accounts
receivable. The parties agreed that certain post-closing adjustments would be made, in
accordance with Section 2.12 of the APA, in order to adjust the final purchase price
based on the amount of receivables ultimately collected by Defendant ADP.
The Complaint alleges that the contemplated "Adjustment Statement" was never
furnished by ADP to Plaintiff. Pursuant to Section 2.12, ADP was required to furnish
the Adjustment Statement to Plaintiff within sixty days of December 31, 2004, i.e. on or
before March 1, 2005.
Plaintiff was to be given 30 days within which to contest
Defendant ADP's calculations.
Case No. 8:11-CV-617-T-17TGW
Plaintiff Jumpstart argues that communications as to the accounting matters at
issue in this case took place between Plaintiff and ADP representatives located in New
Jersey, where Defendant ADP's parent company, Automatic Data Processing, Inc. Is
located. The accounting to be made by ADP was to be made through the New Jersey
office of Defendant ADP.
Plaintiff further argues that Complaint alleges that Defendant ADP failed or
refused to collect certain accounts receivable that were collectible, with a resulting and
unwarranted reduction in the purchase price owed to Plaintiff:
3205,779
61,290
59,865
22,294
16,293
84,904
Union Pacific
State of Illinois
Amtrak
Aviation and Small Business Consortium
Verification, Inc.
Earth Tek
Plaintiff further argues that the Complaint alleges that Defendant ADP
represented that Defendant was unable to collect certain receivables, including a
$46,000 item from Quest Diagnostics, which Plaintiff now believes that Defendant did
collect. Plaintiff argues that the purchase price was improperly adjusted downward as if
Defendant did not collect that amount.
Plaintiff further argues that, in the context of a venue analysis, the location of the
breach of contract has been held to be most determinative of the proper venue. See
Brownsberqer v. GEXA Energy. LP.. 2011 WL 197464, 5 (S.D. Fla. 2011). Plaintiff
was required by the APA to file suit either in state court in Sarasota, Florida or in the
Middle District of Florida.
Plaintiff further argues that if New York's "borrowing statute" is relevant, then
New Jersey's statute of limitations for breach of contract should apply to this case, and
Case No. 8:11-CV-617-T-17TGW
not that of Florida or New York.
N.J.S.A. 2A:14-1.
Plaintiff argues that, to the extent that the Complaint alleges in paragraphs 13
through 15 that Defendant ADP failed to collect certain collectible accounts receivable,
or improperly failed to credit Plaintiff with certain collections, it cannot be readily
determined from the face of the Complaint when those collections should have been, or
were actually, made. Plaintiff argues that the dates of any breaches of contract related
to those items cannot yet be determined.
Plaintiff further argues that Defendant's Motion to Dismiss is premature as to any
of the breach of contract issues in this case. Plaintiff argues that the statute of
limitations issue should be raised by summary judgment. Plaintiff argues that facts
such as where the cause of action accrued, or when Defendant should have and did
collect certain receivables, are disputed issues, and in the absence of further discovery,
the entry of summary judgment is premature. See American Home Assurance
Company v. Weaver Aggregate Transport. Inc.. 2011 WL 794817 (M.D. Fla. 2011).
III. Defendant's Reply
Defendant ADP argues that Florida's five year statute of limitation applies to bar
this claim, whether the Court applies Florida law because Florida is the forum state, or
because the Agreement designates New York law as its governing law, and New York
choice of law doctrine directs the Court to apply the Florida statute of limitations.
Defendant ADP argues that, if the Court looks to the APA to discover the intent
of the parties as to the appropriate statute of limitations, pursuant to Section 11.3 of the
Agreement, New York choice of law principles govern, as the contract dictates the use
of New York law (without restriction).
Defendant ADP argues that Plaintiff does not
dispute that the proper statute of limitation is determined by reference to New York's
Case No. 8:11-CV-617-T-17TGW
borrowing statute, C.P.L.R. 202.
Defendant ADP relies on Global Financial Corp. v.
Triare. 715 N.E.2d 482 (1999)(cause of plaintiffs cause of action for breach of contract
claim accrued where plaintiff sustained alleged injury). "When an alleged injury is
purely economic, the place of injury usually is where the plaintiff resides and sustains
the economic impact of the loss." id. at 529. The Complaint alleges an economic
injury. Plaintiff Jumpstart resides in Florida and has its principal place of business in
Florida.
Defendant ADP further argues that Florida follows jex joci contractus. "For
contract cases, lex Joci contractus will determine the applicable statute of limitations."
See Lanoue v. Rizk. 987 So.2d 724, 727 (Fla. 3d DCA 2008).
Defendant ADP argues
that, under this rule, the cause of action accrues in the place where the contract is
completed.
IV.
Discussion
In general, in determining a motion to dismiss, the Court considers only the
allegations of the Complaint. The Court notes that the APA is attached to the
Complaint, and is central to the breach of contract claim.
Plaintiff has filed the Hartnett Affidavit to establish that this case has a more
significant connection with New Jersey than with New York, in that all pre-and postcontract communications with Defendant ADP as to the accounts receivable were with
ADP executives in New Jersey.
In the Complaint, ADP is identified as a Colorado
corporation whose principal offices are located in Roseland, New Jersey.
The APA provides:
Case No. 8:11-CV-617-T-17TGW
11.3 Governing Law. This Agreement and its validity,
construction and performance shall be governed in all
respects by the laws of the State of New York applicable to
contracts made and wholly performed in such state.
The basis of jurisdiction of Plaintiffs breach of contract claim is diversity. The
Court therefore applies Florida conflicts of law rules to determine what law controls
substantive issues.
Under Florida law, courts will enforce contractual choice of law
provisions unless the law of the chosen forum contravenes strong public policy of the
forum. Mazzoni Farms. Inc. v. E.I. DuPontde Nemours & Co.. 761 So.2d 306, 311
(Fla. 2000).
The "strong public policy" must be a policy of sufficient importance to
outweigh the freedom of contract. A contract provision is presumed valid until it is
proved invalid; the party seeking to prove the provision invalid has the burden of proof.
L'Arbalete. Inc. v. Zaczac. 474 F.Supp.2d 1314 (S.D. Fla. 2007).
Plaintiff has not argued that the selection of New York law is merely fortuitous.
Plaintiff does not contend that the choice of law provision was included in the APA due
to some misrepresentation or fraud by Defendant, or that the selection of the statute of
limitations which applies to contracts formed and intended to be performed within the
State of New York contravenes a strong public policy of the State of Florida. The public
policy exception is narrow and does not apply unless it is necessary to protect Florida's
citizens. State Farm Mutual Automobile Ins. Co. v. Roach, 945 So.2d 1160) (Fla.
2006).
Florida law permits contracting parties to choose what law applies. This case
involves a commercial transaction between sophisticated entities who have made
explicit choices and the Court presumes the validity of the choices. The APA is an
integrated contract ( Sec. 11.2), and can only be amended by a written agreement
executed by the parties (Sec. 8.2). No written amendments have been provided to the
Court.
Case No. 8:11-CV-617-T-17TGW
The Court has noted the discussion of Restatement (Second) of Conflict of Laws
Sec. 188 in Sturiano v. Brooks, 523 So.2d 1126 (Fla. 1988)(Law Governing in Absence
of Effective Choice by the Parties). The Court also notes the provisions of Restatement
(Second) Conflict of Laws Sec. 187 (Law of the State Chosen by the Parties).
If the
parties have made an effective choice of applicable law, the Court does not remake that
choice.
For the purpose of determining the Motion to Dismiss, the Court finds that APA
is not ambiguous, and the APA's choice of law provision is to be applied as written; the
statute of limitations is an issue to which the parties agreed that the New York statute of
limitations applicable to contracts wholly made and performed within the State of New
York applies.
The statute of limitations for contracts formed and performed within the
State of New York is six years from the date of the breach.
According to the APA, the A/R Measurement Date was December 31, 2004 (Dkt.
2, p. 8). Pursuant to Section 2.12, the Adjustment Statement was due within 60 days of
December 31, 2004, on or before March 1, 2005. Plaintiff alleges that the Adjustment
Statement was never provided to Plaintiff. The date of the breach is March 1, 2005.
Plaintiff commenced this case in Sarasota County Circuit Court on 2/25/2011.
After consideration, the Court denies the Defendant's Motion to Dismiss, and
finds it unnecessary to separately consider the issue of improper adjustment of the
purchase price based on accounts receivable that were either not collected, were
improperly deemed uncollectible, or were collected but nevertheless resulted in a
downward adjustment of the purchase price. These issues may be determined when
and if dispositive motions are filed after the close of discovery, or at trial. Accordingly, it
is
:>
Case No. 8:11-CV-617-T-17TGW
ORDERED that Defendant's Motion to Dismiss (Dkt.6) is denied.
J)ONE and ORDERED in Chambers, in Tampa, Florida on this
~f gay of December, 2011.
Copies to:
All parties and counsel of record
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