GOODRICH MANAGEMENT CORP. v. AFGO MECHANICAL SERVICES, INC.

Filing 18

LETTER OPINION. Signed by Judge William J. Martini on 8/24/09. (gh, )

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY MARTIN LUTHER KING JR. FEDERAL BLDG. & U.S. COURTHOUSE 50 WALNUT STREET, P.O. BOX 419 NEWARK, NJ 07101-0419 [phone] WILLIAM J. MARTINI JUDGE LETTER OPINION A u g u s t 24, 2009 A yta n Yehoshua Bellin B e llin & Associates 8 5 Miles Avenue W h ite Plains, NY 10606 A tto r n e y s for Plaintiff Louis A. Bove Jay M. Green B o d e ll, Bove, Grace & Van Horn, P.C. 3 0 South 15th Street, 6th Floor P h ila d e lp h ia , PA 19102 K ris tin Hitsous Rosabianca & Associates PLLC 1 4 Wall Street, 20th Floor New York, NY 10005 A tto r n e y s for Defendant R e: G o o d ric h Management Corp. v. Afgo Mechanical Services, Inc. C iv il Action No. 09-00043 (WJM)

D e a r Litigants: T h is matter comes before the Court on a Motion to Dismiss pursuant to Rules 1 2 (b )(1 ) and 12(b)(6) of the Federal Rules of Civil Procedure by Defendant Afgo 1

Mechanical Services, Inc. ("Afgo"). There was no oral argument. Fed. R. Civ. P. 78. For the reasons stated below, Defendant's Motion to Dismiss is GRANTED. Further, the re q u e s t by Plaintiff Goodrich Management Corp. ("Goodrich") for class action c e rtif ic a tio n pursuant to Federal Rule of Civil Procedure 23 is DENIED. BACKGROUND P la in tif f is a New Jersey corporation with its principal place of business in E n g le w o o d Cliffs, New Jersey. Defendant is a New York corporation with its principal p la c e of business in Long Island City, NY. Defendant is in the business of installing and re p a irin g commercial air conditioning, refrigeration, heating, and ventilation systems. Plaintiff brings this action against Defendant for statutory damages and injunctive re lie f under the Telephone Consumer Protection Act of 1991 ("TCPA"), 47 U.S.C § 227. The TCPA is a statutory scheme concerned with nuisance telemarketing that provides for a private right of action, actual damages or a recovery in the amount of $500 per v io la tio n , and treble damages upon a showing that the violation was wilful or knowing. 47 U.S.C. § 227(b)(3). P la in tif f alleges that on October 17, 2007 and December 23, 2008, it received u n s o lic ite d commercial advertisements from Defendant via facsimile machine (the "fax a d v e rtis e m e n ts " ). The fax advertisements promoted Defendant's products and services. Plaintiff contends that these advertisements were sent without its express invitation or p e rm iss io n , and that it did not have a prior business relationship with Defendant. Plaintiff f u rth e r alleges that the advertisements did not contain the disclosure notices mandated by 4 7 C.F.R. §§ 227(b)(2)(D) or 64.1200(a)(3)(iii). Additionally, Plaintiff claims that D e f e n d a n t sent the fax advertisements wilfully and knowingly and has, over the past four ye a rs , sent more than 10,000 similar fax advertisements to recipients across the United S ta te s, in violation of the TCPA. P la in tif f seeks to certify the case as a class action under Fed. R. Civ. P. 23 for itself a n d all other persons to whom Defendant sent unsolicited faxes in violation of the TCPA. Plaintiff has described three classes of individuals that would be represented by the class a c tio n as follows: Class A: all persons in the United States to whom, January 5, 2005 through July 8, 2 0 0 5 , Defendant sent or caused to be sent a fax advertisement without the person's e x p re s s invitation or permission. Class B: all persons from July 9, 2005 through July 30, 2006 to whom Defendant s e n t or caused to be sent a fax advertisement which did not contain a notice m e e tin g the requirements of 47 U.S.C. § 227(b)(2)(D) without the person's express in v ita tio n or permission. C la s s C: all persons from August 1, 2006 through the present, to whom Defendant s e n t or caused to be sent a fax advertisement which did not contain a notice m e e tin g the requirements of 47 C.F.R. § 64.1200(a)(3)(iii). 2

Plaintiff asserts that its claims are typical of all three classes. Plaintiff's individual d a m a g e s amount to $3000 maximum, but Plaintiff alleges that if a class action were c e rtif ie d , aggregate damages to the entire class would total over $5,000,000. In addition to treble damages, Plaintiff seeks an injunction preventing Defendant from committing f u rth e r violations of the TCPA. A N A L Y S IS A. S ta n d a r d of Review 1. M o tio n to Dismiss for Lack of Subject Matter Jurisdiction Pursuant To Fed. R . Civ. P. 12(b)(1) A federal district court is only authorized to adjudicate cases over which it has s u b je c t matter jurisdiction. Brown v. Francis, 75 F.3d 860, 866 (3d Cir. 1996). Indeed, e v e n after a court has proceeded completely through a case to a final judgment, if the c o u rt lacked subject matter jurisdiction, the judgment must be vacated. Caterpillar Inc. v. L e w is , 519 U.S. 61, 76­77 (1996) ("[I]f, at the end of the day and case, a jurisdictional d e f e c t remains uncured, the judgment must be vacated."). A court without subject matter ju ris d ic tio n has no choice but to decline to entertain the suit. Bender v. Williamsport A re a School District, 475 U.S. 534, 541 (1986). In deciding a Rule 12(b)(1) motion to dismiss for lack of subject matter ju ris d ic tio n over the complaint, "the Court is free to weigh the evidence and satisfy itself w h e th e r it has the power to hear the case." Mortensen v. First Federal Sav. and Loan A ss 'n ., 549 F.2d 884, 891 (3d Cir.1977). As such, "no presumption of truthfulness a tta c h e s to the allegations in the complaint," and the court can consider materials beyond th e pleadings as long as they are properly before the court. Continental Ins. Co. of N.J. v.. U .S ., 335 F.Supp.2d 532, 535 (D.N.J. 2004) (citing Anjelino v. New York Times Co., 200 F .3 d 73, 87 (3d Cir.1999)). The plaintiff has the burden to prove that the court has subject m a tte r jurisdiction. Med. Soc`y of N.J v. Herr, 191 F.Supp.2d 574, 578 (D.N.J. 2002) (c itin g Gould Electronics Inc. v. U.S., 220 F.3d 169 (3d Cir. 2000)). M o tio n to Dismiss for Failure to State a Claim for Which Relief Can be G ra n te d Pursuant to Fed. R. Civ. P. 12(b)(6). In deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a c la im , all allegations in the complaint must be taken as true and viewed in the light most f a v o ra b le to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & C a s in o Resorts, Inc., v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). Further, w h e n considering a 12(b)(6) motion to dismiss, a court may take into account only the c o m p la in t, exhibits attached to the complaint, matters of public record, and undisputedly a u th e n tic documents if the plaintiff's claims are based upon those documents. See P e n s io n Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). 3 2.

If, after viewing the allegations in the complaint in the light most favorable to the p la in tif f , it appears that no relief could be granted "under any set of facts that could be p ro v e d consistent with the allegations," a court may dismiss a complaint for failure to s ta te a claim. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). Although a complaint does not need to contain detailed factual allegations, "the `g ro u n d s ' of [the plaintiff's] `entitlement to relief' requires more than labels and c o n c lu s io n s , and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). Thus, th e factual allegations must be sufficient to raise a plaintiff's right to relief above a s p e c u la tiv e level. See id. at 1964-65. Furthermore, although a court must view the a lle g a tio n s as true in a motion to dismiss, it is "not compelled to accept unwarranted in f e re n c e s , unsupported conclusions or legal conclusions disguised as factual a lle g a tio n s ." Baraka v. McGreevey, 481 F. 3d 187, 211 (3d Cir. 2007). B. T h e Telephone Consumer Protection Act of 1991 T h e TCPA provides in pertinent part that "it shall be unlawful for any person w ith in the United States, or any person outside the United States if the recipient is within th e United States¼ to use any telephone facsimile machine, computer, or other device to s e n d an unsolicited advertisement to a telephone facsimile machine." 47 U.S.C § 2 2 7 (b )(1 )(c ). An exception is made if a prior business relationship exists between the p a rtie s , and if the advertisement contains a notice informing the recipient of the ability a n d means to avoid future unsolicited advertisements. 47 U.S.C § 227(b)(1)(c)(i); (iii). Plaintiff alleges that the fax advertisements it received from Defendant were u n s o lic ite d , did not contain a proper disclosure notice, and were not the product of a pree x is tin g business relationship. Defendant does not refute these facts at this juncture but in s te a d argues in its motion to dismiss that Plaintiff cannot bring this action in federal c o u rt because subject matter jurisdiction is lacking. More specifically, Defendant argues th a t a) claims arising out of the TCPA are not supported by federal question jurisdiction, a n d b) there is no diversity jurisdiction in this case, because Plaintiff fails to meet the a m o u n t in controversy requirement as an individual and the case does not meet the re q u ire m e n ts for certification as a class action. C. F e d e r a l Question Jurisdiction Pursuant to the TCPA P la in tif f asserts that this Court has federal question jurisdiction over its complaint p u rs u a n t to 28 U.S.C. § 1331, the statute providing that district courts "shall have original ju ris d ic tio n of all civil actions arising under the Constitution, laws, or treaties of the U n ite d States." However, Defendant argues that the plain language of the TCPA a u th o riz e s state court actions only and therefore the statute does not give rise to federal q u e s tio n jurisdiction. 4

The TCPA provides in pertinent part that a "person or entity may, if otherwise p e rm itte d by the laws or rule of court of a State, bring [an action] in an appropriate court o f that State." 47 U.S.C § 227(b)(3). The Third Circuit has routinely interpreted this p ro v is io n to mean that the statute does not give rise to federal question jurisdiction. See E rie N e t v. Velocity Net, 156 F.3d 513, 519 (3d Cir. 1998) (finding that "because the T C P A reflects Congress's intent to authorize consumer suits in state courts only," a party b rin g in g a claim pursuant to the TCPA "cannot rely on the general federal question ju ris d ic tio n of § 1331."). Indeed, when faced with this same issue in Margolis v. Resort R e n ta l, LLC, this Court cited to Third Circuit precedent and held that "because the TCPA a llo w s for private enforcement suits to be brought `if permitted by the law or rules of a S ta te ... in an appropriate court of that State,' 47 U.S.C. 227(b)(3), suits brought under the T C P A cannot be filed in or removed to federal court based on federal question ju ris d ic tio n ." 2008 WL 2775494 (D.N.J.). Clearly, Plaintiff cannot bring a TCPA claim p u rs u a n t to federal question jurisdiction in this Court. D. D iv e r s ity Jurisdiction Although the TCPA does not give rise to federal question jurisdiction, this does not p re c lu d e a finding of diversity jurisdiction if the appropriate requirements are met. According to 28 U.S.C. § 1332, district courts have "original jurisdiction of all civil a c tio n s where the matter in controversy exceeds the sum or value of $75,000, exclusive of in te re s t and costs, and is between... citizens of different States." 28 U.S.C. § 1332(a)(1). The statute also grants district courts jurisdiction over class action litigation in which the a g g re g a te amount in controversy exceeds $5,000,000 and any one plaintiff is diverse from a n y one defendant. 28 U.S.C. § 1332(d)(2). Here, it is undisputed that Plaintiff and Defendant are geographically diverse for th e purposes of either 1332(a) or 1332(d). However, Plaintiff's individual damages only a m o u n t to $3,000, which is far below § 1332(a)'s monetary threshold for an individual a c tio n . Therefore, Plaintiff cannot satisfy the amount in controversy for diversity ju ris d ic tio n unless the case is certified as a class action. Plaintiff alleges that if a class is c e rtif ie d , aggregate damages will exceed $5,000,000. Defendant argues that it is not possible for Plaintiff to rely on aggregate damages to m e e t § 1332(d)(2)'s amount in controversy requirement because a) this specific TCPA c la im does not satisfy the requirements for class certification under Fed. R. Civ. P. 23, a n d b) TCPA claims cannot be certified as class actions in general. To determine whether th e re is diversity jurisdiction for Plaintiff's claim, it is necessary to consider Plaintiff's re q u e s t for class certification. F e d . R. Civ. P. 23 establishes the criteria for class certification. Rule 23 is divided in to subsections (a) and (b). The requirements of both subsections must be met. According to Rule 23(a), 5

One or more members of a class may sue or be sued as representative p a r t i e s on behalf of all members only if: (1) the class is so numerous that j o i n d e r of all members is impracticable, (2) there are questions of law or f a c t common to the class, (3) the claims or defenses of the representative p a rtie s are typical of the claims or defenses of the class; and (4) the re p re s e n ta tiv e parties will fairly and adequately protect the interests of the c la s s . In addition, under Rule 23(b), a party seeking class certification must also establish th a t: (1 ) prosecuting separate actions by or against individual class members w o u ld create a risk of: (A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of c o n d u c t for the party opposing the class; or (B) adjudications with respect to in d iv id u a l class members that, as a practical matter, would be dispositive of t h e interests of the other members not parties to the individual adjudications o r would substantially impair or impede their ability to protect their in te re s ts ; (2) the party opposing the class has acted or refused to act on g ro u n d s that apply generally to the class, so that final injunctive relief or c o rre s p o n d in g declaratory relief is appropriate respecting the class as a w h o le ; or (3) the court finds that the questions of law or fact common to c la s s members predominate over any questions affecting only individual m e m b e rs, and that a class action is superior to other available methods for f a irly and efficiently adjudicating the controversy. Here, Plaintiff cannot satisfy the requirements of Fed. R. Civ. P. 23. With respect to Rule 23(a), Plaintiff needs to satisfy all four subparts. However, even with additional d is c o v e ry, Plaintiff would not be able to demonstrate that its TCPA claim is typical of the c la im s of the entire class as required by 23(a)(3). There are too many crucial factual d e te rm in a tio n s to be made with respect to claims and defenses that will vary from party to p a rty. Most notably among these are consent to receive faxes and the existence of a prior b u s in e s s relationship with Defendant. M o re significantly, Plaintiff cannot satisfy any of the Rule 23(b) requirements. Discovery would do nothing to change this. Regarding 23(b)(1), because the claims of all p o te n tia l plaintiffs are factually distinct and dependant, there is no risk of inconsistent a d ju d ic a tio n s . Each plaintiff could bring its own individual claim in state court and a s e p a ra te determination would result for each action. Any differences in outcomes would b e the result of the factual differences underlying the different claims. Defendant would n o t be required to face incompatible standards . Additionally, again because each p la in tif f has a factually independent and distinct case, results reached in individual cases 6

would not affect the claims of other plaintiffs. W ith respect to 23(b)(2), there have been no allegations that Defendant has acted or re f u s e d to act on grounds that apply generally to the class such that injunctive relief with re s p e c t to the class as a whole is warranted. Again, each potential plaintiff can bring its in d iv id u a l claim in state court, as it sees fit. T u rn in g to 23(b)(3), this is the only requirement that Plaintiff even alleges is s a tis f ie d here. 23(b)(3) requires that questions of law or fact common to the entire class p re d o m in a te over issues specific to individual plaintiffs. The provision also requires that th e court find a class action to be superior to other methods of adjudication with respect to f a irn e s s and efficiency. Plaintiff cannot satisfy either of these subsections. F o r the reasons stated above in the analysis of Rule 23(a), there are numerous is su e s of law and fact that pertain only to individual plaintiffs and not to the class as a w h o le . Moreover, this Court finds that a class action is not a superior means of a d ju d ic a tin g this controversy. In general, class actions are useful in circumstances in w h ic h the damages suffered by any one person are not significant enough to offset legal f e e s and motivate the individual to file a claim. Class actions allow damages to be a g g re g a te d and legal fees to be split. Here, Congress has already considered these obstacles to individual actions and d ra f te d the TCPA accordingly. Although the actual out-of-pocket monetary loss to the re c ip ie n t of an unwanted fax advertisement is slight, only the cost of a few sheets of paper a n d ink, the TCPA provides for a recovery of $500 per violation or $1500 if the conduct w a s wilful or knowing. Therefore, the TCPA contains a punitive element to deter such c o n d u c t and motivate private lawsuits. Moreover, the statute allows individual plaintiffs to bring their actions in small claims court without the need to hire and pay for an a tto rn e y. The TCPA's design means that a class action would not be a superior means of a d ju d ic a tin g this controversy, because individual plaintiffs already receive many of the b e n e f its usually associated with class action litigation. F u rth e rm o re , a class action would in fact be an inferior means of adjudicating this c o n tro v e rsy. An individual plaintiff who files a TCPA action in small claims court can typ ic a lly receive damages quickly and without incurring legal fees. A class action, on the o th e r hand, is likely to lead to protracted litigation and significant legal fees that would re d u c e recoveries. D e f e n d a n t also argues that a TCPA claim can never be certified as a class action in N e w Jersey. New Jersey law would govern the substantive aspects of this case if it were b ro u g h t under diversity jurisdiction. See Erie R. Co. v. Tompkins, 304 U.S. 64 (1938); s e e also Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996) (finding that " u n d e r the Erie doctrine, federal courts sitting in diversity apply state substantive law a n d federal procedural law). Defendant supports this position by contending that New J e rs e y courts have routinely refused to certify claims brought under the TCPA as class 7

actions, because doing so would contravene the congressional intent underlying the s ta tu te . Because the Court has already found that this particular case cannot be certified a s a class action, there is no need to determine whether TCPA claims can ever be b ro u g h t as class actions. However, it is worth noting that many of the reasons why this p a rtic u la r case does not satisfy Rule 23, including the fact that a class action is not a s u p e rio r way to resolve the claim, are the same reasons that Defendant puts forth to d e m o n s tra te that TCPA claims can never be certified as class actions. B e c a u s e this case cannot be certified as a class action, it lacks diversity ju ris d ic tio n . Federal question jurisdiction is also lacking. Because Plaintiff bears the b u rd e n of demonstrating subject matter jurisdiction and has not, these claims cannot s u rv iv e a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) or Fed. R. Civ. P. 1 2 (b )(6 ). C O N C L U S IO N F o r the reasons stated above, Plaintiff's request for class action certification is D E N I E D . Without class action certification, there is no subject matter jurisdiction, and w ith o u t subject matter jurisdiction, the Court is not authorized to adjudicate this action. Therefore Defendant's Motion to Dismiss is GRANTED with prejudice. An a p p ro p ria te order follows.

/s/ William J. Martini WILLIAM J. MARTINI, U.S.D.J.

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