CARUSO v. OCCHIOGROSSO et al

Filing 67

MEMORANDUM OPINION fld. Signed by Magistrate Judge James B. Clark on 1/29/14. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SUZANNE CARUSO,

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Plaintiff,
v.
JOSEPH OCCHIOGROSSO, et al.,
Defendants.

Civil Action No. 11-1951 (DMC)

MEMORANDUM OPINION

CLARK, Magistrate Judge
Currently pending before the Court is Plaintiff Suzanne Caruso’s (“Plaintiff”) motion for
leave to file an amended complaint. [Docket Entry No. 53]. Defendant Joseph Occhiogrosso
(“Defendant”) opposes Plaintiff’s motion and has cross-moved for an order that Plaintiff is
collaterally estopped from bringing this action against Defendant. [Docket Entry No. 55]. The
Court has fully reviewed and considered all arguments made in support of, and in opposition to,
both motions. The Court considers both motions without oral argument pursuant to L.Civ.R.
78.1(b). For the reasons set forth more fully below, Plaintiff’s Motion to Amend is GRANTED
and Defendant’s motion is DENIED as moot.
I.

BACKGROUND
Plaintiff entered into a contract to work as an associate for Viridian Network, LLC

(“Viridian”), “an alternative supplier of electricity for select deregulated states and public
utilities.” Compl. at ¶8. Viridian uses a multi-level marketing model (“MLM”) in its operations.
This means that each associate endeavors to recruit other associates, and they in turn continue
recruiting their own associates. Id. at ¶18. In this regard, a “multi-level organization is built.” Id.
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For the original associate, all additional associates recruited after her are part of what is known
as that associate’s “down-line.” Id. at ¶19. An associate’s compensation is calculated based upon
his or her down-line. Id. at ¶21.
In January 2010, Plaintiff recruited Defendant as an associate in her down-line. Id. at ¶68.
Defendant, among others, was removed from Plaintiff’s down-line in February 2010. Id. at ¶84.
Plaintiff was terminated from her employment with Viridian on July 8, 2010. Id. at ¶220.
Plaintiff filed this action on April 5, 2011 alleging various unjust enrichment and tortious
interference with contract claims against Defendants. On July 18, 2011, default was entered by
the Clerk of the Court against Defendant Occhiogrosso and Defendant Shop to Earth. Defendant
Occhiogrosso subsequently filed a motion to dismiss the complaint, compel arbitration and
vacate default. [Docket Entry No. 7].
Prior to filing the instant action, Plaintiff filed an arbitration demand against Viridian,
alleging breach of contract and unjust enrichment. Defendant’s Brief in Opposition at 2; Docket
Entry No. 55-5. In evaluating Defendant’s motion to dismiss, the Court noted that “Defendant’s
essential argument is that the allegations contained in Plaintiff’s complaint should be joined as
inextricably related to claims asserted in the Pending Arbitration” and acknowledged that the
“passage of the Arbitration would at least affect, and at most moot, Defendant’s motion to
compel arbitration” and requested a status update. [Docket Entry No. 15 at 2]. On June 6, 2012
the parties notified the Court that an arbitration award (the “Award”) had been rendered in favor
of Viridian. [Docket Entry No. 16 at 1]. At this time, Defendant again reiterated his position that
collateral estoppel applied. Id.

Defendant’s motion was administratively terminated, with no

decision having been rendered on vacatur of default.
December 2012 the case had not progressed.

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It appears that from this time until

In the interim, the arbitration award in favor of Viridian was vacated in its entirety by the
Honorable Charles E. Ramos, J.S.C. of the New York Supreme Court, New York County, after
he found that Plaintiff was improperly excluded from portions of the arbitration in violation of
Rule 23 of the American Arbitration Association’s Commercial Arbitration Rules. [Docket Entry
No. 58-2 at 15:21-25]. As a result, Plaintiff moved for default judgment against Defendant on
December 22, 2012, as the entry of default against Defendant was never vacated. [Docket Entry
No. 22]. Viridian subsequently appealed the New York Supreme Court’s ruling vacating the
arbitration award. On February 5, 2013, Defendant filed a cross-motion to vacate default and
stay the litigation pending resolution of Viridian’s appeal. In an Opinion entered on July 9,
2013, the Honorable Mark Falk, U.S.M.J. vacated default against Defendant, denied Plaintiff’s
motion for default judgment and denied Defendant’s request to stay the proceedings. [Docket
Entry No. 44]. On September 10, 2013, the Appellate Division, First Department of the Supreme
Court of the State of New York reinstated the arbitration award in favor of Viridian, holding that
“[Plaintiff’s] termination was justified” and that “[t]he exclusion of [Plaintiff] from
approximately 5% of the proceedings was…harmless error, since the result would have been the
same had she been present.” [Docket Entry No. 58-3]. Plaintiff thereafter filed a motion seeking
reargument before the First Department. The case was then transferred to the undersigned, and
after a telephone conference with the parties, Plaintiff was given leave to file the instant motion.
Subsequent to the parties’ completion of all briefing in connection with this motion, the
First Department on December 19, 2013 granted Plaintiff’s motion for reargument and vacated
its September 10, 2013 order. [Docket Entry No. 65-1]. In light of this change and after
discussing the matter with counsel during a conference call on December 30, 2013, the Court
gave leave to Defendant to file supplemental briefing as to why Plaintiff’s motion should be

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denied. Defendant filed a brief on January 14, 2014 and Plaintiff filed a reply on January 17,
2014. [Docket Entry Nos. 65, 66].
II.

LEGAL STANDARD
Under Federal Rule of Civil Procedure 15(a)(1), “[a] party may amend its pleading once

as a matter of course within: (A) 21 days after serving it; or (B) if the pleading is one to which a
responsive pleading is required, 21 days after service of a responsive pleading or 21 days after
service of a motion under Rule 12(b), (e), or (f), whichever is earlier.” Otherwise, pursuant to
Rule 15(a)(2) “a party may amend its pleading only with the opposing party’s written consent or
the court’s leave. The court should freely give leave when justice so requires.”
Pursuant to FED.R.CIV.P. 15(a)(2), leave to amend the pleadings is generally granted
freely. See Foman v. Davis, 371 U.S. 178, 182 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d
Cir. 2000). Nevertheless, the Court may deny a motion to amend where there is “undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of
the amendment, [or] futility of the amendment.” Id. However, where there is an absence of
undue delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be
liberally granted. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004). The Third Circuit has
recognized that “prejudice to the non-moving party is the touchstone for the denial of an
amendment.” Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (quoting Cornell & Co. v.
Occupational Safety & Health Review Comm'n, 573 F.2d 820, 823 (3d Cir. 1978)) (internal
quotations omitted). “Delay alone is not sufficient to justify denial of leave to amend…When a
party fails to take advantage of previous opportunities to amend, without adequate explanation,
leave to amend is properly denied.” Id. (internal citations omitted).

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III.

DISCUSSION
A. Motion to Amend
Plaintiff seeks to amend her complaint to allege one count of tortious interference and

one count of unjust enrichment. As outlined in this Court’s Letter Order dated November 25,
2013, the Court finds that Plaintiff is not permitted to amend as of right. This Court found, in
pertinent part, that:
[t]he Complaint in this matter was filed on April 5, 2011. The Clerk of the Court entered
default against Defendant Joseph Occhiogrosso (“Defendant”) on July 18, 2013. On
September 9, 2011 Defendant Joseph Occhiogrosso filed a motion to vacate the entry of
default, to compel arbitration and to dismiss himself as a defendant in the action pursuant
to Fed.R.Civ.P 12(b). [Docket Entry No. 7]. Consequently, the Court finds that, under
subsection (B) of Fed.R.Civ.P. 15(a)(1), Plaintiff had twenty-one days from September 9,
2011 by which to file an amended complaint as of right. Simply because Defendant has
not filed an answer does not allow Plaintiff to amend as of right under the federal rules.
Accordingly, Plaintiff’s time-frame within which to amend as of right expired on
September 30, 2011. Therefore, the Court finds that Plaintiff must move pursuant to
Rule 15(a)(2).
[Docket Entry No. 59 at 1]. Consequently, the Court shall turn to whether amendment is proper
pursuant to Rule 15(a)(2). Plaintiff’s proposed amended complaint states that:
Defendants intentionally, maliciously and through improper means interfered with
Plaintiff’s Agreement with Viridian and caused the breach thereof. Specifically with
respect to Occhiogrosso, this was accomplished by, among other things, Occhiogrosso’s
having himself removed from Plaintiff’s downline, having two levels inserted above him
in the new Viridian Corporate downline, negotiating his private deals with Viridian and
‘stacking’ his Viridian entities.
Proposed Amended Complaint at ¶66; Docket Entry No. 53-2. Plaintiff further states that:
Upon information and belief, all Defendants have been unjustly enriched. Specifically
with respect to Occhiogrosso, it is alleged that he has been unjustly enriched by, among
other things, having himself removed from Plaintiff’s downline, having two levels
inserted above him in the new Viridian Corporate downline, negotiating his private deals
with Viridan (sic) and ‘stacking’ his Viridian entities.
Id. at ¶70.

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1. Arguments
Defendant had initially argued that Plaintiff’s motion to amend should be denied for two
reasons. First, Defendant claimed that he would be prejudiced by an amended complaint being
filed over two years after the action commenced. Deft. Br. Opp. at 18. Second, Defendant
argued that Plaintiff was collaterally estopped by the reinstated Arbitration Award from
amending the complaint or proceeding under the original.

However, the First Department’s

subsequent reversal of itself rendered Defendant’s collateral estoppel argument moot, as
Defendant concedes in his supplemental brief to this Court. See Defendant’s Supplemental Brief
in Opposition at 3-4; Docket Entry No. 65. (“Occhiogrosso cannot currently argue that Plaintiff’s
motion to amend should be denied because of the collateral estoppel consequences of the Award
in favor of Viridian.”) As such, Defendant’s opposition now rests upon grounds of prejudice, for
which Defendant proffers three arguments.
First, Defendant argues that “Plaintiff’s claims against Occhiogrosso cannot exist without
a breach of contract by Viridian.” Id. at 3 (emphasis omitted). This is because, Defendant
argues, “Viridian’s alleged breach of Plaintiff’s Agreement/contract…is an essential substantive
element of a claim against Occhiogrosso for tortious interference.” Id. In this regard, Defendant
claims that Plaintiff is attempting “place the cart before the horse” and that the arbitration, now
remanded for further proceedings, will ultimately determine the viability of Plaintiff’s claims in
the instant action. Id. Further, Defendant maintains that, given the history of the arbitration
award, it is “not beyond imagination” that the arbitration award could once again be reinstated in
favor of Viridian. Id. at 4.
Second, Defendant claims that “the sole purpose of the proposed amendment is to attempt
to frustrate a motion by Occhiogrosso to compel arbitration.” Id. As outlined in the Certification

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of Joseph J. Hocking, Esq., the vast majority of the paragraphs of the original Complaint and the
Arbitration Demand in the Viridian matter are identical. See Docket Entry No. 55-3. Defendant
claims that an amendment to the complaint is designed to eliminate the symmetry between the
pleadings and to frustrate Defendant’s attempt to compel arbitration of his claims. Deft. Supp. Br.
Opp. at 6.
Lastly, Defendant argues that Plaintiff should be estopped from amending her complaint,
in light of the fact that she was content to rely on the original complaint for purposes of filing a
motion for default judgment against Defendant just two days after the award was originally
vacated. Id. at 4. Defendant asserts that “[t]he allegations in the pending Complaint were
perfectly adequate for Plaintiff to seek to enter default judgment against Occhiogrosso when it
believed it had procedural and substantive leverage over Occhiogrosso.” Id.

However,

Defendant argues that it was only after the award was reinstated on September 10, 2013 that
Plaintiff sought leave to amend during a telephone conference with the Court on October 2,
2013. Id. at 5. As such, Defendant claims that Plaintiff has “fail[ed] to proffer any meaningful,
credible explanation for the proposed amendment” and thus, submits that the motion be denied.
Id. at 6.
In her reply, Plaintiff refutes Defendant’s arguments by contending that any motions
Defendant may make in the future with respect to collateral estoppel or compelling arbitration
are not grounds for denying Plaintiff’s motion to amend her complaint. Plaintiff notes that no
appeal has yet been filed with respect to the arbitration award and indeed, leave must first be
sought from the New York Court of Appeals to file such an appeal. Plaintiff’s Supplemental
Brief in Reply at 1, n.3; Docket Entry No. 66. Plaintiff further argues that, even if the arbitration
award were to be reinstated in favor of Viridian, Defendant’s future motion for collateral

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estoppel would still fail. Id. at 2. In response to Defendant’s argument that the arbitration should
be decided before litigation should move forward in this matter, Plaintiff notes that Judge Falk
had already previously determined that this case was not one in which a stay was warranted. Id.
at 1-2.1
Second, Plaintiff contests Defendant’s argument that the sole purpose of amending is to
frustrate Defendant’s intention to compel arbitration. Plaintiff argues that by amending, Plaintiff
is not acting in bad faith, as “under either version of Plaintiff’s complaint, [Defendant] is not
entitled to arbitrate Plaintiff’s claims.” Id. at 2. Plaintiff then engages in a lengthy argument and
analysis as to why she feels that a proposed motion to compel would fail on the merits.
Lastly, Plaintiff argues that the burden is on Defendant to show that the amendment
would result in prejudice to Defendant. Plaintiff maintains that whether or not she “fail[ed] to
proffer any meaningful, credible explanation for the proposed amendment” is irrelevant, as she
has no burden to do so. Id. at 4. Further, Plaintiff submits that Defendant has failed to make a
showing of prejudice in this instance. Plaintiff asserts that the amended complaint “merely
clarifies the factual allegations underpinning Plaintiff’s existing claims” and as such, submits
that her motion should be granted. Id. at 5.
2. Analysis
The Court finds that Plaintiff’s motion should be granted. The Court finds that it is
indeed Defendant’s burden to show prejudice and that Defendant has failed to make such a
showing and does not argue any other grounds which would permit this Court to deny Plaintiff’s
motion. First, the Court notes that, although the arbitration likely will have an impact on
Plaintiff’s complaint in this matter, there are also other issues which do not depend on the
arbitration with Viridian, as found by Judge Falk. See Docket Entry No. 44 at 6. (The reality is no
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Indeed, it does not appear that Defendant has moved for or requested a stay of litigation.

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matter what happens in the Viridian arbitration, there will almost assuredly be issues and claims
remaining in this federal lawsuit.”) Furthermore, Defendant makes no argument that a stay is
appropriate in this instance. The outcome of the remanded arbitration is only pure conjecture at

this stage of litigation and is therefore not a ground for establishing prejudice. As such, the Court
does not find that Defendant will be prejudiced by Plaintiff’s amendment of the complaint in this
respect.
Second, as Plaintiff correctly notes, any motions that Defendant intends to file in the

future carry no weight with respect to this Court’s analysis. Although this case has been pending
for almost three years and amendment of the complaint at this stage is usually rare, the Court
finds that this case presents special circumstances due to the “back and forth” nature of the
arbitration. The Court notes that Plaintiff has not previously sought to amend nor has Plaintiff
acted in bad faith in seeking to amend, especially as Plaintiff does not seek to add new counts,
but is only condensing her fourteen original counts down to two. Indeed, Defendant
acknowledges that “the proposed amended complaint…contains the same essential factual
allegations as in the pending complaint[.]” Deft. Supp. Br. Opp. at 6. However, as to Plaintiff’s
argument that a motion by Defendant to compel arbitration would unsuccessful, the Court makes
no findings as to the substantive merit of such a motion.
Lastly, as to Defendant’s argument regarding Plaintiff’s prior reliance on her complaint,
the Court finds this argument to be without merit. Plaintiff was fully entitled to rely on the
allegations set forth in her complaint for purposes of a motion for default judgment. In addition,
Plaintiff was also entitled to seek leave to amend that pleading.

Such behavior does not

constitute bad faith. Again, Plaintiff is merely condensing her complaint and Defendant has
conceded that the factual allegations remain virtually unchanged. Therefore, Plaintiff is not
estopped from amending her complaint on this ground.
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In light of the foregoing, Plaintiff’s motion to amend is GRANTED.
B. Cross-Motion for Collateral Estoppel
As outlined above, Defendant’s grounds for collateral estoppel have been rendered moot
by the First Department’s reversal of itself on Plaintiff’s petition for reargument. As such,
Defendant’s cross-motion is DENIED.
IV.

CONCLUSION
For the foregoing reasons, Plaintiff’s motion for leave to file an amended complaint is

hereby GRANTED and Defendant’s motion is DENIED as moot. An appropriate Order follows.

Dated: January 29, 2014
s/James B. Clark, III
HONORABLE JAMES B. CLARK, III
UNITED STATES MAGISTRATE JUDGE

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