TRUSTEES OF THE UNITED FOOD AND COMMERCIAL WORKERS UNION AND PARTICIPATING FOOD INDUSTRY EMPLOYERS TRI-STATE HEALTH AND WELFARE FUND v. CONSULATE HEALTH CARE, LLC et al
Filing
54
OPINION. Signed by Chief Judge Renee Marie Bumb on 4/26/2024. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
TRUSTEES OF THE UNITED
FOOD AND COMMERCIAL
WORKERS UNION AND
PARTICIPATING FOOD
INDUSTRY EMPLOYERS TRISTATE HEALTH AND WELFARE
FUND
Plaintiffs,
v.
CONSULATE HEALTH CARE,
LLC d/b/a FROSTBURG
VILLAGE; and, STERLING CARE
FROSTBURG VILLAGE
Defendants.
APPEARANCES
Steven J. Bushinsky, Esq.
Kevin Douglas Jarvis, Esq.
O’Brien, Belland & Bushinsky
509 S. Lenola Road
Building 6
Moorestown, NJ 08057
Attorneys for Plaintiffs
Heather Weine Brochin, Esq.
Jonathan Edward Kohut, Esq.
Day Pitney LLP
One Jefferson Road
Parsippany, NJ 07054-2891
Attorneys for Defendant Sterling
No. 1:23-cv-2645-RMB-EAP
OPINION
Bumb, Chief District Judge
THIS MATTER comes before the court upon Defendant Sterling Care
Frostburg Village’s Motion to Dismiss (ECF No. 29) the Amended Complaint of
Plaintiffs Trustees of the United Food and Commercial Workers Union and
Participating Food Industry Employers Tri-State Health and Welfare Fund (ECF
No. 20). Defendant Sterling seeks dismissal on the bases that: (1) an asset purchase
does not necessarily render Sterling liable for Co-defendant Consulate’s alleged
violations under the Employee Retirement Income Security Act of 1974 (“ERISA”),
as amended, 29 U.S.C. §§ 1001, et seq. and Section 301 of the Labor Management
Relations Act (“LMRA”), 29 U.S.C. § 185; and, (2) some of Plaintiffs’ claims are
barred by the statute of limitations. For the reasons set forth below, Defendant’s
Motion will be GRANTED.
I.
BACKGROUND
A.
Procedural Background
By way of Complaint filed May 15, 2023 and amended August 29, 2023,
Plaintiffs brought the above-captioned action against Defendants Consulate and
Sterling, seeking damages pertaining to allegedly delinquent employee fringe benefit
contributions. (ECF No. 20 ¶ 1.) In response to the Amended Complaint,
Defendant Sterling submitted a Letter Request to file a Motion to Dismiss (ECF No.
25), in which it delineated the alleged deficiencies of Plaintiffs’ Amended Complaint.
Plaintiffs responded (ECF No. 27) and Defendant’s Request was ultimately granted
2
(ECF No. 28). The instant Motion to Dismiss (ECF No. 29) followed. Plaintiffs
have opposed the Motion (ECF No. 38), prompting a Reply by Sterling (ECF No.
40). The matter is now ripe for disposition.
B.
Factual Background1
1. Consulate’s Agreement with Plaintiff
At all times relevant hereto, Defendant Consulate was party to, and agreed to
abide by the terms and conditions of, a Collective Bargaining Agreement (“CBA” or
“Labor Contract”) with the United Food and Commercial Workers Union (UFCW
Local 27) and Participating Food Industry Employers Tri-State Health & Welfare
Fund (the “Fund”). (Am. Compl. ¶¶ 4, 16.) In doing so, Defendant Consulate also
contractually agreed to abide by the terms of the Agreements and Declarations of
Trust (“Trust Agreements”) which govern the Fund. (Am. Compl. ¶ 17.) The Trust
Agreements of the Fund set forth the rules and regulations with respect to
participation in, and administration of, the Fund. (Am. Compl. ¶ 17.) By virtue of
the CBA, Trust Agreements, and in accordance with relevant law, Defendant
Consulate was obligated to: (1) timely remit fringe benefit contributions to the Fund
on behalf of its eligible employees who are members of, or are represented by,
When construing the allegations set forth in Plaintiffs’ Amended Complaint, this
Court must “accept as true all well-pleaded allegations[,]” including “all reasonable
inferences that can be drawn therefrom, and view them in the light most favorable to
the plaintiff.” Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005). However, the
court need not accept “unsupported conclusions and unwarranted inferences,”
Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir.
1997), or “a legal conclusion couched as a factual allegation,” Papasan v. Allain, 478
U.S. 265, 286 (1986).
1
3
UFCW Local 27 (“bargaining unit employees”); (2) submit monthly remittance
reports to the Fund detailing all bargaining unit employees who worked in each
period, the wages paid to those employees in that period, and the amounts of fringe
benefit contributions to be remitted to the Fund on behalf of said employees based
upon the gross labor payroll paid by Defendant Consulate on behalf of its bargaining
unit employees; (3) produce upon request by the Fund all books and records deemed
necessary to conduct a Payroll Compliance Review/Audit of Defendant Consulate’s
financial/payroll records concerning its obligations to the Fund and to pay the cost
of the Audit; (4) pay liquidated damages, interest, Audit costs and all costs of
litigation, including attorney’s fees expended by the Fund to collect any amounts due
as a consequence of Defendant Consulate’s failure to comply with its contractual and
statutory obligations; and, (5) abide by the terms of the Policy for the Collection of
Delinquent Fringe Benefit Contributions for the Fund (“Collection Policy”). (Am.
Compl. ¶ 18.) 2 To that end, Defendant Consulate was required to provide access to
financial records deemed necessary for the Fund to determine if said Defendant
properly complied with its contribution obligations. (Am. Compl. ¶ 19.)
2. Audit
A Payroll Compliance Review/Audit performed for the Fund for the periods
Plaintiffs have not attached pertinent portions of these relevant documents to their
Amended Complaint or Response to the instant Motion. In its Answer to Plaintiffs’
Amended Complaint, Defendant Consulate properly points out “The allegations in
Complaint Paragraph No. 18 purport to recite the contents of written
documents – the CBAs and Trust Agreements – that speak for themselves and are the
best evidence of their terms.” (Def. Consulate Answer ¶ 18.)
2
4
of January 1, 2016 through December 31, 2016 and January 1, 2017 through
December 31, 2017, revealed benefit contribution deficiencies. (Am. Compl. ¶ 21.)3
Payment of the deficient contributions and penalties assessed against Defendant
Consulate was demanded by the Fund; however, Defendant Consulate rejected the
demand. (Am. Compl. ¶ 23.)4
3. Sterling’s Purchase of Consulate
Plaintiffs allege (upon information and belief) that Defendant Sterling
assumed, through purchase, transfer, sale or lease, Defendant Consulate’s assets,
operations, contracts, customers, employees, equipment, and liabilities. (Am.
Compl. ¶¶ 13–14, 31.)5 “Upon information and belief[,]” Plaintiffs claim Defendant
Sterling hired all or portions of Defendant Consulate’s work force, retained some or
all the patients, customers and accounts of Defendant Consulate, and retained
Again, although Plaintiffs directed the Audit and have knowledge of when it
occurred, they do not indicate same in their Amended Complaint or Response to the
instant Motion. Defendant Consulate has responded to Plaintiffs’ allegation
regarding the Audit as follows: “Defendant lacks knowledge or information specific
to form a belief as to the allegations in Complaint Paragraph No. 21, except to admit
that by letter dated December 22, 2020, ‘Consulate Health Care (Frostburg Village) . . . ’
was notified that a preliminary audit for 2016 and 2017 was conducted and
deficiencies were alleged.” (Def. Consulate Answer ¶ 21) (emphasis added).
4
Defendant Consulate further Answers “Upon information and belief, Defendant
FFO, LLC admits that commencing on or about September 19, 2022, the Fund sent
various communications to ‘Consulate Health Care (Frostburg Village) . . .’
demanding alleged delinquent contributions and penalties. Defendant denies the
remaining allegations set forth in Complaint Paragraph No. 23 and specifically
denies that Plaintiffs are entitled to any relief whatsoever.” (Def. Consulate Answer
¶ 23) (emphasis added).
5
Defendant Consulate responds “Defendant FFO, LLC admits that certain of its
assets were sold to Frostburg SNF as of September 29, 2017.” (Def. Consulate Answer ¶
31) (emphasis added).
3
5
Defendant Consulate’s service agreements and/or warranties with vendors. (Am.
Compl. ¶¶ 32–34.) Upon further “information and belief[,]” Plaintiffs aver that at
the time of the asset sale, Defendant Sterling was aware, or should have been aware,
that Defendant Consulate was delinquent in its benefit contributions to the Funds
and of the demand by Plaintiffs to Consulate for payment of the delinquent benefit
contributions revealed in the Audit. (Am. Compl. ¶¶ 35–36.) Plaintiffs say this is so
because it is “common” for the purchasing party to conduct due diligence prior to
purchasing the assets of another company. (Am. Compl. ¶ 37.) Due diligence would
include speaking with the selling company’s officers, executives and/or management
employees, reviewing the books, records, contracts, financial statements, and
financial and contractual obligations of the company to be sold or transferred prior to
any proposed asset sale or transfer. (Am. Compl. ¶ 37.) To that end, Plaintiffs claim
proper due diligence by Defendant Sterling would have included:
-
requests for controlled group information regarding any ERISA
Title IV Plans within the controlled group of Defendant Consulate,
which might not be part of the transaction with Defendant Sterling,
and should have included information requests concerning other
Plans from which Defendant Consulate may have previously
withdrawn;
-
inquiries into the existence of any collective bargaining agreement
and any potential outstanding financial obligations, delinquencies or
liabilities including, but not limited to, any potential outstanding
financial obligations, delinquencies or liabilities related to Defendant
Consulate’s CBA and participation in Funds;
-
review of company documents, including but not limited, controlled
group information, that would have generated follow-up questions
and discussions regarding benefit plan contributions and to obtain
information not readily available from the document review;
6
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requests for: (i) Fund Trust Document, Collection Policy, including
but not limited to, all amendments and restatements thereto; (ii)
communications from the Funds’ Third Party Administrator and
governmental communications, including but not limited to, Annual
Reports, Determination Letters, Audits, Requests for Audit
Materials; and, (iii) mandatory communications to Fund
participants, including but not limited to, annual reports, Summary
Plan Descriptions, Summary of Material Modifications, Benefit Plan
Notices and Forms; and,
-
inquiries regarding any potential outstanding financial obligations,
delinquencies or liabilities related to Defendant Consulate’s CBA
and participation in the Fund for purposes of determining any
potential withdrawal liability that may inure to Defendant Sterling
which could affect the sale price of Defendant Consulate.
(Am. Compl. ¶¶ 39–43.)
Based upon the due diligence Plaintiffs believe Defendant Sterling may have
conducted or should have conducted, Plaintiffs again assert Sterling should have
been aware of Consulate’s liabilities prior to acquiring their assets. (Am. Compl. ¶
44.)
4. Defendant Sterling: Post-Acquisition
Plaintiffs claim that as a result of the acquisition, Defendant Sterling
maintained a continuity of the operations of Defendant Consulate and is therefore
liable for all obligations owed by Consulate. (Am. Compl. ¶¶ 46, 48.) Plaintiffs
made a demand to Defendant Sterling for the payment of the delinquent benefit
contributions revealed in the Audit and Sterling rejected same. (Am. Compl. ¶ 45.)
The within action ensued.
II.
JURISDICTION
7
This Court exercises jurisdiction over Plaintiffs’ ERISA claim under 28 U.S.C.
§ 1331. The parties are also diverse,6 thereby conferring jurisdiction upon this Court
pursuant to 29 U.S.C. § 1132.
III.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) requires the court to dismiss a
Complaint if the plaintiff fails to state a claim upon which relief can be granted. Fed.
R. Civ. P. 12(b)(6). The party seeking dismissal of the Complaint assumes the
burden of establishing it fails to state a claim. Lesher v. Zimmerman, 822 F. App’x
116, 119 (3d Cir. 2020).
When reviewing a motion to dismiss, courts must accept the Complaint’s
factual allegations as true and afford the plaintiff “every favorable inference to be
drawn therefrom.” Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (quoting
Kulwicki v. Dawson, 969 F.2d 1454, 1462 (3d Cir. 1992)). Courts will dismiss a
Complaint if the plaintiff has failed to plead “enough facts to state a claim to relief
that is plausible on its face.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The court may
Plaintiffs’ principal place of business is in New Jersey, while Defendant Consulate’s
is in Florida and Defendant Sterling’s is in Maryland. (Am. Compl. ¶¶ 8, 11, 13.)
The amount in controversy exceeds $75,000. (ECF 29-2 at 4); see also 28 U.S.C.S. §
1332(a)(1) (“The district courts shall have original jurisdiction of all civil actions
where the matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between . . . Citizens of different States[.]”).
6
8
not accept “legal conclusions” as true, or “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements[.]” Id.; see also Malleus,
641 F.3d at 563.
In conducting its 12(b)(6) assessment, the court is restricted to consideration of
“the allegations contained in the complaint, exhibits annexed to the complaint[,] and
matters of public record.” Levins v. Healthcare Revenue Recovery Grp. LLC, 902
F.3d 274, 279 (3d Cir. 2018) (alteration in original) (quoting Pension Benefit Guar.
Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)). However,
when a Complaint references extrinsic documents, the court may consider them if
they are “undisputedly authentic” and “the complainant’s claims are based upon
[those] documents.” Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010); see also In
re Asbestos Products Liability Litigation (No. VI), 822 F.3d 125, 133 n.7 (3d Cir.
2016) (“In deciding motions under Rule 12(b)(6), courts may consider document[s]
integral to or explicitly relied upon in the complaint or any undisputedly authentic
document that a defendant attaches as an exhibit to a motion to dismiss if the
plaintiff’s claims are based on the document.”) (cleaned up). To that end,
A document forms the basis of a claim if the document is integral to or
explicitly relied upon in the complaint. The purpose of this rule is to
avoid the situation where a plaintiff with a legally deficient claim that is
based on a particular document can avoid dismissal of that claim by
failing to attach the relied upon document. Considering such a
document is not unfair to a plaintiff because, by relying on the
document, the plaintiff is on notice that the document will be
considered.
Trs. of the Local 888 Health Fund v. Kissler & Co., Civ. No. 14-8097, 2015 U.S.
9
Dist. LEXIS 129273, at *4 (D.N.J. Sept. 25, 2015) (cleaned up).
IV.
ANALYSIS
Congress enacted ERISA to establish “uniform federal standards for not only
pension plans, but also welfare plans.” Plastic Surgery Ctr., P.A. v. Aetna Life Ins.
Co., 967 F.3d 218, 225 (3d Cir. 2020). ERISA applies to “any employee benefit plan
if it is established or maintained . . . by any employer engaged in commerce or in any
industry affecting commerce.” 29 U.S.C. § 1003(a). ERISA contains “expansive preemption provisions” aimed “to ensure that employee benefit plan regulation would
be ‘exclusively a federal concern.’” Aetna Health, Inc. v. Davila, 542 U.S. 200, 208,
(2004) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)).7
Defendant Sterling has filed the instant Motion, seeking complete dismissal of
Plaintiffs’ claims against it for failure to state a claim, or in the alternative, partial
dismissal on the basis of the statute of limitations. This Court shall address the latter
first.
A. Statute of Limitations
It is well settled that:
A motion to dismiss under Rule 12(b)(6) on statute of limitations
grounds should be granted where the complaint facially shows
noncompliance with the limitations period and the affirmative defense
clearly appears on the face of the complaint. If the bar is not apparent
on the face of the complaint, then it may not afford the basis for
dismissal.
As pleaded in Plaintiffs’ Amended Complaint, Section 301 of the LMRA simply
gives federal courts the exclusive jurisdiction to hear “suits for violation of contracts
between an employer and a labor organization.” 29 U.S.C. § 185(a).
7
10
Cement Masons’ Union Local No. 592 Pension Fund v. Almand Bros. Concrete,
Inc., Civil Action No. 14-cv-5413, 2015 U.S. Dist. LEXIS 73645, at *5 (D.N.J. June
8, 2015) (cleaned up).
“New Jersey’s six-year statute of limitations applicable to contract actions
applies also to claims under ERISA to recover delinquent pension contributions.”
Stier v. Satnick Dev. Corp., 974 F. Supp. 436, 439 (D.N.J. 1997); see also Cement
Masons’ Union, 2015 U.S. Dist. LEXIS 73645, at *5 (same). In this case, Plaintiffs’
entire basis for liability is an alleged breach of Trust Agreements by Defendant
Consulate that was discovered through an Audit, the damages from which Plaintiffs
claim should now be charged against Defendant Sterling by reason of its purchase of
Consulate’s assets. However, Plaintiffs provide the court with neither the
Agreements, the date(s) upon which the Audit was conducted, the date(s) upon
which they discovered a deficiency with the Fund, nor any indication of when
Sterling purchased the business8 or the terms of the purchase.9 Also absent from the
Plaintiffs were advised of the approximate sale date on or before June 29, 2023,
when Sterling sought permission from the court to file a motion to dismiss the
original Complaint and Plaintiffs were instead granted leave to amend. (ECF No. 8
at 1 n.1; ECF No. 18.) Nevertheless, Plaintiffs did not include this information in
their subsequently filed Amended Complaint.
9
For instance, in Paragraph 22 of Plaintiffs’ Amended Complaint, Plaintiffs allege:
“Defendant Consulate has failed to make benefit contributions including, but not
limited to, the amounts set forth in the Audit and due under the Labor Contract,
Trust Agreements or Plan Documents of the Plaintiff Fund in violation of 29 U.S.C.
§ 1145 for a period not barred by an applicable statute of limitations or similar bar.”
(Am. Compl. ¶ 33.) Notwithstanding the impropriety of Plaintiffs’ conclusion of law
regarding the statute of limitations, they fail to attach the Labor Contract, Trust
Agreement, Plan Documents, or Audit to their Amended Complaint. Without
same, this Court is unable to assess the timeliness or propriety of Plaintiffs’ claims.
8
11
Amended Complaint, are the dates upon which Plaintiffs notified each defendant of
the Audit results and the dates upon which they sent demand letters, even though it
was Plaintiffs who initiated the Audit and sent the letters.10 Despite two
opportunities to do so, Plaintiffs repeatedly fail to provide the court with copies of
these items or pertinent information regarding same. Without any allegation by
Plaintiffs regarding the date(s) and circumstances of the Audit or the approximate
date upon which the asset sale occurred, it is impossible to assess whether Plaintiffs’
claims fall within the applicable statute of limitations and are properly before the
court. See Hearbest, Inc. v. Adecco USA, 13cv1026, 2013 U.S. Dist. LEXIS 127552,
at *5 (D.N.J. Sept. 6, 2013) (reiterating that in order to “survive a Motion to
Dismiss[,]” a Complaint must allege “adequate facts to establish ‘how, when, and
where[.]’”) (quoting Fowler v. UPMC Shadyside, 578 F.3d 203, 212 (3d Cir. 2009)).
In view of the foregoing, Defendant Sterling’s Motion to Dismiss any demand
This Court notes Defendant Sterling has attached a copy of the demand letter
they received to the instant Motion as Exhibit 1. (ECF No. 29-2 at 4.) Said letter is
dated September 14, 2022 and references the Audit performed for the years 2016 and
2017. Because the document is integral to the claims set forth in Plaintiffs’ Amended
Complaint, it may be considered for purposes of the instant motion without having
to convert same to a motion for summary judgment. See Pension Benefit Guar.
Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993) (“[A] court may
consider an undisputedly authentic document that a defendant attaches as an exhibit
to a motion to dismiss if the plaintiff’s claims are based on the document.”);
Turkmenler v. Almatis, Inc., Civil Action No. 11-1298, 2012 U.S. Dist. LEXIS
44027, at *8 (W.D. Pa. March 28, 2012) (“With its Motion for Partial Dismissal,
Defendant attached the written Employment Agreement . . . Although Plaintiff failed
to include the Employment Agreement in his Complaint, this Court may consider
the Employment Agreement in conjunction with Plaintiff's allegation for breach of
contract because Plaintiff's claims are based on the Employment Agreement.”).
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12
for delinquent contributions that occurred prior to May 16, 2017 (6 years prior to the
date upon which Plaintiffs initiated this action) shall be granted.
B. Successor Liability
Neither side in this case disputes the fact that the transaction between
Consulate and Sterling was an asset sale. Notwithstanding Plaintiffs’ failure to
provide a date (or even approximate date) of this sale in its Amended Complaint
(Am. Compl. ¶ 14), Defendant Sterling contests the sufficiency of Plaintiffs’
pleadings regarding Sterling’s liability under the purchase. To assess this issue,
The Third Circuit has set forth a two-part test for whether an asset
purchaser could be held liable on a theory of successor liability:
[A] purchaser of assets may be liable for a seller’s delinquent
ERISA fund contributions to vindicate important federal
statutory policy where [1] the buyer had notice of the liability
prior to the sale and [2] there exists sufficient evidence of
continuity of operations between the buyer and seller.
Einhorn, 632 F.3d at 99 (adopting Seventh Circuit’s rule in
Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac,
920 F.2d 1323 (7th Cir.1990)). “The inquiry should be effectuated on a
case by case basis balancing the equities presently before the court.” Id.
RP Baking LLC v. Bakery Drivers & Salesmen Local 194 & Indus. Pension Fund,
Civil Action No.: 10-3819, 2012 U.S. Dist. LEXIS 44875, at *8 (D.N.J. March 30,
2012).
1. Notice
Plaintiffs herein conclusively state that “at the time of the asset sale or
transfer[,] Defendant Sterling was aware, or should have been aware, of the demand
by Plaintiffs to Defendant Consulate for payment of the delinquent benefit
13
contributions ultimately revealed in the audit.” (Am. Compl. ¶ 20.) They base this
assertion on their belief that Sterling performed—or should have performed—due
diligence and therefore learned of the alleged delinquency prior to consummating the
sale with Consulate. Plaintiffs’ personal belief regarding what Sterling “should” have
done but failed to before the sale, is of no relevance. Instead, the inquiry is simply
whether or not Sterling had notice of the liability prior to the sale. To that end,
“[t]he notice requirement in such context ‘centers on whether the buyer knows about
the debts, not whether the buyer knows that the funds intend to seek recovery from
it.’” Teamsters Local 469 Pension Fund v. J.H. Reid Gen. Contrs., Civ. No. 1506185, 2020 U.S. Dist. LEXIS 192893, at *18 (D.N.J. Oct. 16, 2020). Plaintiffs do
not plausibly plead same in their Amended Complaint.
To the extent Plaintiffs rely upon an article attached to their Response to the
instant Motion,11 this document was not directly referenced in Plaintiffs’ Amended
Complaint, nor was it attached thereto. Although the document appears to be taken
from a website, Plaintiffs provide no indication as to the source, the author’s
qualifications to opine on such issues, or in what context it was written. As such,
this Court will not consider the article in assessing the instant Motion. See
Buchanan v. Ingram Content Grp., Civil Action No. 20-cv-2421, 2022 U.S. Dist.
LEXIS 102186, at *7 (D.N.J. June 8, 2022) (rejecting a plaintiff’s request to attach
documents to her 12(b)(6) opposition brief where she provided “no legal authority or
Ma’Cheries Harding, Asset Purchase Agreement Checklist: Due Diligence for
Mergers & Acquisition, Sept. 19, 2021.
11
14
explanation as to how the Court could legally consider the exhibits and
miscellaneous information provided with her motion.”); Stapperfenne v. Nova
Healthcare Adm'rs, Inc., Civil No. 05-4883, 2006 U.S. Dist. LEXIS 20711, at *8
(D.N.J. April 17, 2006) (declining to consider documents submitted by a plaintiff in
opposition to a defendant’s motion to dismiss pursuant to Rule 12(b)(6) because they
were not “directly incorporated in or attached to the Complaint or Amended
Complaint, nor are they public records.”).
Putting aside the article submitted by Plaintiffs, they provide this Court with
no legal authority to support their contention that performance of due diligence
under the circumstances involved herein, was incumbent upon Defendant Sterling.
Referring to “industry standards, common practices and common sense” (ECF No.
38 at 5), Plaintiffs cite to no relevant case law other than that which sets forth the
customary 12(b)(6) pleading standards (ECF No. 38 at 5-18). Instead, they
conclusively argue that reliance on their own belief that Sterling performed due
diligence is “reasonable” (Am. Compl. ¶¶ 40-44) because doing so is “common”
(Am. Compl. ¶ 37) and “proper” (Am. Compl. ¶¶ 38-39). This is simply not
sufficient to plausibly establish notice.
2. Continuity of Operations
Plaintiffs fare no better in adequately pleading a “continuity of operations
between the buyer and seller.” Einhorn v. M.L. Ruberton Constr. Co., 632 F.3d 89,
99 (3d Cir. 2011). As Sterling accurately points out, the allegations regarding
continuity of operations as contained in Plaintiffs’ Amended Complaint constitute
15
nothing more than pure speculation. (Am. Compl. ¶¶ 31-34.) This Court construes
these allegations as boilerplate recitations of the factors utilized to assess a
“continuity of operations” between the buyer and seller. See Einhorn, 632 F.3d at 99
(“Under the substantial continuity test courts look to, inter alia, the following factors:
continuity of the workforce, management, equipment and location; completion of
work orders begun by the predecessor; and constancy of customers.”); see also Trs.
of the B.A.C. Local 4 Pension Fund v. Demza Masonry, LLC, Civil Action No. 1817302, 2021 U.S. Dist. LEXIS 18714, at *13 (D.N.J. Jan. 31, 2021) (same). Adding
the language “upon information and belief” before each of these factors does not
make them so.
Although Plaintiffs argue the averments contained in their Amended
Complaint permit the court to infer the plausibility of their claims, a claim only has
“facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556); see also
Advanced Oral Techs., L.L.C. v. Nutrex Research, Inc., Civ. No. 10-5303, 2011
U.S. Dist. LEXIS 28625, at *10 n.6 (D.N.J. March 21, 2011) (“[M]any of Plaintiff’s
new paragraphs contain unsubstantiated charges made upon ‘information and belief.’
Allegations made upon information and belief—which are little more than
conjecture and wishful thinking—have little hope of salvaging an otherwise defective
complaint.”).
To that end,
16
Determining whether the allegations in a complaint are “plausible” is
“a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense.” Iqbal, 556 U.S. at 679
(citation omitted). If the “well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct,” the complaint
should be dismissed for failing to “show[] . . . that the pleader is entitled
to relief.” Id. (quoting FED. R. CIV. P. 8(a)(2)).
Gotham City Orthopedics, LLC v. Cigna Health & Life Ins. Co., Civil Action No.
21-1703, 2022 U.S. Dist. LEXIS 105297, at *3–4 (D.N.J. June 13, 2022); see also
NL Indus. v. Old Bridge Twp., Civil Action No. 13-3493, 2014 U.S. Dist. LEXIS
90317, at *21 (D.N.J. June 30, 2014) (“Determining plausibility is a ‘context-specific
task that requires the reviewing court to draw on its judicial experience and common
sense.’”) (quoting Iqbal, 556 U.S. at 679).
Further—and as referenced above—in order for a Complaint to proceed, it
must allege “adequate facts to establish ‘how, when, and where[.]’” Hearbest, 2013
U.S. Dist. LEXIS 127552, at *5 (quoting Fowler v. UPMC Shadyside, 578 F.3d 203,
212 (3d Cir. 2009)); see also Essex Ins. Co. v. Miles, CIVIL ACTION NO. 10-3598,
2010 U.S. Dist. LEXIS 128888, at *7–8 (E.D. Pa. Dec. 3, 2010) (“[In Partners Coffee
and Shenango,] [t]he plaintiff alleged, ‘upon information and belief,’ that the
defendant failed to observe corporate formalities, misappropriated corporate assets
for personal use, and treated the corporation as a ‘shell.’ Because these allegations
were legal conclusions devoid of ‘any facts regarding the time, place or manner of
actual conduct,’ the District Court dismissed the complaint. Like the pleadings in
Partners . . . , Essex’s complaint is merely a recitation of the legal elements[.]
Consequently, the complaint fails under the pleading standard of Rule 8 as
17
interpreted by the Supreme Court in Twombly and Iqbal. It simply does not state
sufficient facts to make out a plausible claim for relief.”) (cleaned up).
In this case, the level of speculation attributed to the continuity of operations
averments contained in Plaintiffs’ Amended Complaint far surpasses the level of
plausibility required to survive a 12(b)(6) motion.
C. Result of Deficiencies
Plaintiffs’ Amended Complaint is devoid of the dates necessary for this Court
to determine whether their claims are timely, even though the majority of those dates
are, or should be, known to Plaintiffs. See Lemoine v. Empire Blue Cross Blue
Shield, Civil Action No. 16-6786, 2018 U.S. Dist. LEXIS 62535, at *16 (D.N.J.
April 12, 2018) (dismissing a plaintiff’s ERISA claim because although she
“adequately sets forth the date of her injuries and the general dates of hospitalization
and rehabilitation . . . [Plaintiff fails to provide plausible factual allegations] as to
which actual portions of the plans were violated, when they were violated, or how
they were violated[.]”).12
Plaintiffs’ Amended Complaint is similarly deficient on both the notice and
continuity of operations requirements. Excluding all recitations of legal elements,
conclusions of law, and unreasonable speculation contained therein, Plaintiffs have
To the extent Plaintiffs seek discovery, “although ‘Rule 8 marks a notable and
generous departure from the hyper-technical, code-pleading regime of a prior era . . .
it does not unlock the doors of discovery for a plaintiff armed with nothing more
than conclusions.’” Synthes, Inc. v. Emerge Med., Inc., Civil Action No. 11-1566,
2012 U.S. Dist. LEXIS 134886, at *15 (E.D. Pa. Sept. 19, 2012) (quoting Iqbal at
678-79).
12
18
not pleaded plausible claims against Defendant Sterling. See Napolitano v. Ragan &
Ragan, Civil Action No. 15-2732, 2017 U.S. Dist. LEXIS 131335, at *27 (D.N.J.
Aug. 17, 2017) (“[P]laintiff . . . apparently rests on the . . . assumption that discovery
will prove her allegations, to satisfy her burden. However, Plaintiff cannot speculate
as to the merits of her claims by making unsupported allegations. As the Complaint
stands, it does not appear that Plaintiff conducted an adequate pre-complaint
investigation in order to properly plead her claims. While the Federal Rules permit
allegations upon information and belief, such pleading does not relieve litigants from
the obligation to conduct an appropriate investigation into the facts that is reasonable
under the circumstances; it is not a license to . . . make claims . . . without any
factual basis or justification.”) (cleaned up); United States ex rel. Whatley v.
Eastwick Coll., Civ. No. 2:13-1226, 2015 U.S. Dist. LEXIS 95862, at *18–19 (D.N.J.
July 23, 2015) (rejecting a plaintiff’s allegations made “upon information and belief”
because “[t]hese speculative, unsupported allegations fail to satisfy even the more
lenient pleading standard under Federal Rule of Civil Procedure 8(a).”).
Accordingly, Counts III and IV of Plaintiffs’ Amended Complaint shall be
dismissed.
D. Amendment
As an alternative to dismissal with prejudice, Plaintiffs seek leave to file a
Second Amended Complaint pursuant to Fed.R.Civ.P. 15(a)(2). (ECF No. 38 at 9.)
“Leave to amend must generally be granted unless equitable considerations
render it otherwise unjust.” Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006)
19
(citations omitted). Denial of leave to amend may be justified by “undue delay, bad
faith, and futility.” Id. (citing Lorenz v. CSX Corp., 1 F.3d 1406, 1414 (3d Cir. 1993)
(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). Amendment “would be futile
when ‘the complaint, as amended, would fail to state a claim upon which relief could
be granted.’” In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1332 (3d Cir. 2002)
(quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir.
1997)) (additional citations omitted).
Notwithstanding Plaintiffs’ prior opportunity to amend, this Court cannot
conclude that further amendment would be futile. Much of the information needed
to allege potentially plausible claims against Defendant Sterling is within Plaintiffs’
possession and/or knowledge and could conceivably cure the defects identified
above.
V.
CONCLUSION
For the foregoing reasons, Defendant Sterling's Motion to Dismiss is
GRANTED and the claims against said Defendant are DISMISSED without
prejudice. An accompanying Order shall issue.
Dated: _4/26/24 ___
Camden, New Jersey
/s/ Renée Marie Bumb___
Renée Marie Bumb, Chief
United States District Judge
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