CITY OF ATLANTIC CITY v. ZEMURRAY STREET CAPITAL, LLC et al

Filing 358

OPINION. Signed by Judge Noel L. Hillman on 12/1/2021. (rtm, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
THE CITY OF ATLANTIC CITY

No. 1:14-cv-05169-NLH-AMD

Plaintiff,
v.
ZEMURRAY STREET CAPITAL, LLC,
et al.,

OPINION

Defendants.
APPEARANCES:
GILBERT L. BROOKS
DUANE MORRIS LLP
1940 ROUTE 70 EAST
SUITE 200
CHERRY HILL, NJ 08003
On behalf of Cumberland River Capital, LLC
CHERYL L. COOPER
LAW OFFICES OF CHERYL L. COOPER
342 EGG HARBOR RD.
SUITE A-1
SEWELL, NJ 08080
On behalf of Lantana Family Trust 1, Tennessee Business &
Industrial Development Corporation, Gary A. Lax, Michael J.
Lax, and Zemurray Street Capital, LLC
FELIX P. GONZALEZ
3403 IRON ROCK COURT
PENNSAUKEN, NJ 08109
On behalf of W. Wesley Drummon and Zemurray Street Capital,
LLC

GREGORY ALAN LOMAX
LAULETTA BIRNBAUM LLC
591 MANTUA BOULEVARD
SUITE 200
SEWELL, NJ 08080
On behalf of Zemurray Street Capital, LLC and Gary A. Lax
JESSICA ALI MAIER
MCMANIMON, SCOTLAND & BAUMANN, LLC
75 LIVINGSTON AVENUE, SUITE 201
ROSELAND, NJ 07068
On behalf of the City of Atlantic City
JARED JAMES MONACO
ROTHSTEIN, MANDELL, STROHM, HALM & CIPRIANI
150 AIRPORT ROAD, STE 600
P.O. BOX 3017
LAKEWOOD, NJ 08701
On behalf of the City of Atlantic City
THOMAS E. MONAHAN
DASTI, MURPHY, MCGUCKIN, ULAKY, KOUTSOURIS & CONNORS
620 WEST LACEY ROAD
PO BOX 1057
FORKED RIVER, NJ 08731
On behalf of the City of Atlantic City
ROBERT S. ROGLIERI
TRENK ISABEL, P.C.
290 W. MT. PLEASANT AVE.
SUITE 2350
LIVINGSTON, NJ 07039
On behalf of the City of Atlantic City

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RICHARD D. TRENK
TRENK ISABEL, P.C.
290 W MT. PLEASANT AVE.
SUITE 2350
LIVINGSTON, NJ 07039
On behalf of the City of Atlantic City
HILLMAN, District Judge
Presently before the Court is the motion of Intervenor,
Cumberland River Capital, LLC (“Cumberland”)(ECF 350) for an
order setting aside portions of the February 23, 2021 order of
Magistrate Judge Donio (the February 2021 Order”)(ECF 349)
regarding whether Plaintiff, the City of Atlantic City
(“Atlantic City”) preserved its right to argue that Defendant,
Zemurray Street Capital, LLC (“Zemurray”) engaged in a
fraudulent transfer with Cumberland and whether District Judge
Kugler had made a final determination regarding the nature of
the transfer.

Because the February 2021 Order denied

Cumberland’s motion on timeliness grounds and because Cumberland
has not briefed that issue, the motion is denied.
BACKGROUND
The instant appeal stems from Judge Donio’s February 2021
Order denying Cumberland’s motion for reconsideration of the
Court’s September 18, 2020 order (the “September 2020
Order”)(ECF 332), which granted Atlantic City’s request to
conduct post-judgment discovery of Zemurray and denied
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Zemurray’s request for a protective order.

The September 2020

Order’s grant of post-judgment discovery allowed Atlantic City
discovery into a sale of stock from Zemurray to Cumberland. (Id.
at 14).

In its capacity as Intervenor, Cumberland filed a

motion for reconsideration of the September 2020 Order which
Defendant joined. (ECF 339, 340). On February 23, 2021, Judge
Donio issued an opinion denying the motion for reconsideration.
(ECF 349).

That opinion is the subject of the current appeal.

As a threshold matter, in the February 2021 Order, Judge
Donio denied the motion for reconsideration on the grounds that
it was untimely: the motion for reconsideration was filed on
November 17, 2020, almost two months after the September 2020
order, and well beyond the 14-day time limit to file a motion
for reconsideration under our Local Civil Rule 7.1(i). (See ECF
349 at 12 (“[T]he motion for reconsideration is thus denied on
timeliness grounds.”))
In dicta, the Court then went on to address why
Cumberland’s substantive arguments for relief also failed under
the standards for a motion for consideration.

Cumberland had

argued that Atlantic City had conceded that it would not argue
that the transaction between Zemurray and Cumberland was
fraudulent (Id. at 18 n.9), and that Judge Kugler previously
made a finding that the transfer was not fraudulent (Id. at 17
n.8), which Judge Donio overlooked in granting post-judgment
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discovery in the September 2020 Order.

(See generally id.)

First, Judge Donio noted that Cumberland never raised the
argument that the District Court had entered an order barring
post-judgment discovery prior to the entry of the September 2020
Order.

(Id. at 16).

Judge Donio noted that a motion for

reconsideration was not a vehicle to “litigate an issue that
could have been, but was not, raised prior to entry of the
September 2020 Order.” (Id.)

Second Judge Donio noted that

Cumberland had not shown “manifest injustice” warranting
reconsideration of the September 2020 Order. (Id. at 16-17).
Though not necessary to the Court’s holding, Judge Donio noted
that Judge Kugler never made a final determination as to whether
the transaction between Zemurray and Cumberland constituted a
fraudulent transfer and that Atlantic City only consented to the
transfer as long as the proceeds were held in escrow. (Id. at
17, n.7-8).

Accordingly, the Court noted that even if it had

to decide Cumberland’s motion for consideration on substantive
grounds, it would have denied the motion for consideration. (See
id. at 18).
In its instant appeal before this Court, Cumberland points
to two purported errors in the February 2021 Order, stating that
Judge Donio should have found: (1) that Atlantic City never
argued before Judge Kugler that the transaction constituted a
fraudulent transfer and (2) that Judge Kugler issued a final
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order on whether the transaction constituted a fraudulent
transfer.

(ECF 350-1 at 15, 18).

Cumberland asks this Court to

reverse those findings in the February 2021 order and hold that
Atlantic City is judicially and collaterally estopped from
arguing that the transaction constitutes a fraudulent transfer.
(Id. at 31-32).
DISCUSSION
I.

Subject Matter Jurisdiction
This Court has jurisdiction over the claims in this matter

under 28 U.S.C. § 1332.
II.

Standard for District Court Review of an Order by a
Magistrate Judge
A District Court may reconsider an order of a magistrate

judge “where it has been shown that the magistrate judge's order
is clearly erroneous or contrary to law.” 28 U.S.C. §
636(b)(1)(A).

“Under the ‘clearly erroneous’ standard,... in

the absence of clearly defined parameters, a Magistrate has wide
discretion to make interstitial rulings of law in the interests
of justice and fairness, provided that the Magistrate's opinion
is based on clearly articulated principles.”

Schroeder v.

Boeing Com. Airplane Co., a div. of Boeing Corp., 123 F.R.D.
166, 169 (D.N.J. 1988).

Before finding that a magistrate

judge’s decision was “clearly erroneous” the District Court
reviewing the decision must be “‘left with the definite and firm
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conviction that a mistake has been committed.’” Lawson v.
Praxair, Inc., 2021 WL 1207494, at *2 (D.N.J. Mar. 30,
2021)(quoting Dome Petroleum Ltd. v. Employers Mut. Liab. Ins.
Co., 131 F.R.D. 63, 65 (D.N.J. 1990)).

Similarly, the District

Court may only hold that the magistrate judge’s opinion was
“contrary to law” when “it misinterpreted or misapplied
applicable law.” Id. at *2.
III. Analysis
At the outset, this Court notes that Judge Donio disposed
of the motion for consideration based on timeliness, holding
that since Cumberland’s motion for consideration was filed
months after the September 2020 decision, the motion for
consideration was “denied on timeliness grounds.” (ECF 349 at
12).

Cumberland failed to brief the issue of timeliness in this

instant appeal (See generally ECF 350).

Therefore, the Court is

not required to consider whether Cumberland’s motion for
reconsideration was timely filed.

See Waldor v. Saul, 2020 WL

2557340, at *2 (W.D. Pa. May 20, 2020) (noting that a court is
not required to address an argument where “a party negligently
fails to address an issue in the opening brief.”); see also
Carver v. Plyer, 115 F. App'x 532, 535–36 (3d Cir. 2004)
(declining to opine on an issue where the issue was not
briefed).
However, even if Cumberland had raised the issue of whether
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its motion for reconsideration was timely filed, this Court
would uphold Judge Donio’s decision.

Under this Court’s Local

Civil Rule 7.1, “a motion for reconsideration shall be served
and filed within 14 days after the entry of the order or
judgment on the original motion by the Judge or Magistrate
Judge.” L. CIV. R. 7.1(i).

Cumberland filed its motion for

reconsideration on November 17, 2020, two months after the
September 2020 order was issued. (See ECF No. 339).

Under this

rule, Judge Donio was well within her purview when she denied
the motion on timeliness grounds. Gentle Laser Sols., Inc. v.
Sona Int'l Corp. 2008 WL 4307478, at *2 (D.N.J. Sept. 16, 2008)
(“A district court may deny a motion for reconsideration simply
because it was filed beyond the [14] days provided by Rule
7.1(i).”)

Therefore, this Court cannot say that Judge Donio’s

holding was clearly erroneous or contrary to law.
The arguments briefed by Cumberland in the instant appeal
largely turn on two factual issues: whether Atlantic City
preserved an argument that the transaction constituted a
fraudulent transfer and whether Judge Kugler entered a final
order holding that the transaction was not a fraudulent
transfer.

(See generally ECF 350-1).

As explained above, the

Court is not required to wade into these issues.

However, since

the Judge Donio offered in dicta the reasons why Cumberland’s
substantive arguments failed, this Court will briefly do the
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same.
First, the record clearly shows that Atlantic City raised
the issue of whether the transaction constituted a fraudulent
transfer at an April 18, 2019 hearing before Judge Kugler.
(See, e.g., ECF 313 (Transcript of Proceedings, Apr. 18, 2019,
p. 12:2-12.) (stating that it wanted to check whether
“reasonably equivalent value was given” in the transaction
between Cumberland and Zemurray)).

Second, the record evinces

no instance of a final order by Judge Kugler holding that the
transaction was not a fraudulent transfer.

To the contrary,

Judge Kugler explicitly acknowledged that Atlantic City could
pursue a fraudulent transfer theory. (Id. at p. 14:6-9.) (“And
if you want to proceed, you know, if you think there's been a
fraudulent transfer, well, you know, knock yourself out.”)) 1
Because Judge Donio’s factual findings are not clearly
erroneous, Cumberland’s arguments on judicial and collateral
estoppel are also unavailing.
Judicial estoppel requires as a
preliminary matter that “the party to be estopped must have
taken two positions that are irreconcilably inconsistent[.]” See
Clark v. Strober-Haddonfield Grp. Inc., 2008 WL 2945972, at *2
(D.N.J. July 29, 2008)(describing the elements of judicial
estoppel). Because Atlantic City raised the issue of fraudulent
transfer at the April 18, 20119 hearing it cannot be said that
it took two “irreconcilable” positions. Similarly, for the
doctrine of collateral estoppel to be in play, Judge Kugler
would have had to have issued “a final judgment on the merits”
regarding whether the transaction was a fraudulent transfer.
Wallace v. Keystone Printed Specialties Co., 2016 WL 5403088, at
*3 (D.N.J. Sept. 27, 2016) (describing the elements of
collateral estoppel). Judge Kugler did not do so, and it is
unnecessary to further analyze the elements of collateral
estoppel.
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Therefore, even if this Court had to reach Judge Donio’s factual
findings, it would not hold that they were clearly erroneous and
that any legal determinations stemming from them were contrary
to law.
CONCLUSION
For the reasons expressed above, Defendant’s appeal of
Judge Donio’s February 2021 Order will be denied.
An appropriate Order will be entered.

Date: December 1, 2021
At Camden, New Jersey

/s Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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