RJR MECHANICAL, INC. v. VASSALLO et al
OPINION. Signed by Judge Claire C. Cecchi on 4/27/17. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
RJR MECHANICAL, INC.,
Civil Action No.: 12-cv-1810
KAREN VASSALLO, et a!.,
CECCHI, District Judge.
This matter comes before the Court on the motion (ECF No. 21) of Plaintiff RJR
Mechanical, Inc. (“Plaintiff’) for summary judgment on all nine of the affirmative defenses
pleaded in the Answer (ECF No. 6, hereinafter, “Ans.”), or alternatively to strike those defenses,
as well as the cross-motion (ECF No. 25) of Defendants Karen Vassallo (“Karen”), Harry Vassallo
(“Harry”), and Coastal $un Metals, Inc. (“C$M,” together, “Defendants”) for judgment on the
pleadings or alternatively summary judgment. The Court has considered the submissions made in
support of and in opposition to the instant motions. The motions are decided without oral argument
pursuant to Fed. R. Civ. P. 78(b).’
For the reasons set forth below, Defendants’ motion is
DENIED, and Plaintiff’s motion is GRANTED in part and DENIED in part.
The Court considers any new arguments not presented by the parties to be waived. $
Brenner v. Local 514, United Bhd. of Carpenters & Joiners of Am., 927 f.2d 1283, 1298 (3d Cir.
1991) (“It is well established that failure to raise an issue in the district court constitutes a waiver
of the argument.”).
The parties have submitted briefs, statements of material fact pursuant to Local Rule 56.1,
declarations, and exhibits, reflecting the following factual background. Because certain aspects of
the instant motions involve evaluating the sufficiency of the pleadings, where relevant, the Court
will also discuss the contents of the (operative) Amended Complaint (ECF No. 5, hereinafter,
“Compi.”) and the Answer.
Plaintiff is a New York corporation that operates as a heating, ventilation, and air
conditioning contractor. (ECF No. 2 1-1, hereinafter “Pl.’s 56.1,”
Plaintiffs president is
Roy Leibowitz (“Leibowitz”). Defendants Harry and Karen Vassallo are a married couple residing
in New Jersey. (P1. ‘s 56.1
¶ 3; Compl. ¶ 8; Ans. ¶ 8).
of which Harry is a shareholder. (Pl.’s 56.1
Defendant CSM is a New Jersey corporation,
Plaintiff claims both Harry and Karen controlled
CSM, while Defendants contend Harry was the sole shareholder, and Karen was never a
shareholder, director, officer, or employee of CSM. (Pl.’s 56.1
ECF No. 25-2, hereinafter
“Defs.’ 56.1,” ¶J 4, 31). During the relevant time period, Harry worked for Coastal Sheet Metal
Corp. (“Coastal”), a sheet metal contractor (not to be confused with CSM), although the parties
disagree about whether Harry was “officially” the president of Coastal. (P1. ‘s 56.1
¶J 5-6; Defs.’
According to the Amended Complaint, Harry and Karen secretly formed CSM, which has
the same initials as Coastal Sheet Metal, as part of a plan to steal Coastal’s receivables by directing
some of Coastal’s customers to make checks payable to “C$M,” then depositing these checks into
CSM’s bank account. (Compl. ¶ 13). Harry and Karen allegedly covered up the diversion of these
checks by intercepting Coastal’s mail and omitting transactions from Coastal’s records.
Harry and Karen allegedly used the money in the CSM bank account for their own personal use,
including the purchase of property. (Id.).
Defendants allegedly used this plan to divert money Plaintiff tried to pay to Coastal. At
issue in this case are three checks totaling $112,812.50: two that Plaintiff made payable to “CSM”
on February 12 and 27, 2001, and one that Plaintiff made payable to “Coastal Sheet Metal” in July
2001. (P1.’s 56.1
11-21; Defs.’ 56.1
¶J 9, 11-21).
Plaintiff contends it intended these checks
as payment for work Coastal performed as Plaintiffs subcontractor on a construction project at
the State University of New York Health Sciences Center (“the Project”), located in Brooklyn,
New York. (Pl.’s 56.1
11-16). According to Plaintiff, Harry instructed Roy Leibowitz—
Plaintiffs president—to make the two February checks payable to “CSM,” and deposited all three
checks in CSM’s bank account. (Id.
17, 20). Allegedly, Leibowitz agreed to give Harry
these checks because Harry “misrepresented to [Plaintiff] that he was the owner of Coastal and/or
that he had the authority to direct the maimer in which [Plaintiff] should make payments to
Coastal,” and that Harry was collecting payment for the work Coastal did on the Project. (Compl.
¶ 3 7-40).
Plaintiff claims Leibowitz did not know CSM was a company separate from Coastal or
that Harry was using it to divert Coastal’s receivables. (Pl.’s 56.1
In 2004, Coastal sued Plaintiff in Supreme Court, New York County. (Pl.’s 56.1
Coastal alleged Plaintiff had failed to pay the outstanding $397,818.74 it owed for Coastal’s
subcontracting work on the Project. (Certification of John R. Altieri, ECF No. 25-3, hereinafter
“Altieri Cert.,” Ex. C). On January 30, 2009, a jury in that action awarded Coastal $185,681.12
on a verdict sheet indicating the award was “for the work [Coastal] performed pursuant to the
terms of the contract between the plaintiff Coastal and the defendant RJR (‘contract work’), and
the additional work authorized by defendant RJR (‘extra work’)[.]”
(Altieri Cert. Ex. D).
Judgment in this amount plus $92,914.83 in interest was entered against Plaintiff on April 22,
2009. (Deci. of Roy Leibowitz in Supp. of Pl.’s Mot. for $umm. J., ECF No. 21-3, hereinafter
“Leibowitz Deci.,” Ex. D). Plaintiff contends it would not have had to pay as large a verdict had
Coastal received the checks Defendants allegedly diverted. (P1.’s 56.1
¶J 26-27; Compi. ¶ 24).
Relevant to the defenses at issue in the present motions, Defendants contend Leibowitz
was “involved with the diversion of the three checks.” (Harry Vassallo Certification, ECF No. 256, hereinafter “Vassallo Cert.” ¶ 23). According to Harry Vassallo, Leibowitz agreed to make the
three checks payable to CSM even though Leibowitz knew Plaintiff owed no money to CSM. (Id.
Defendants identifi a discrepancy between Leibowitz’s records and those of Plaintiffs
employee, Larry Karpman (“Karpman”): Leibowitz’s list of checks paid to Coastal includes the
three checks at issue, while Karpman’s does not.2 (Id.
On the other hand, Harry Vassallo
also indicates he told Leibowitz the three checks would be credited to Plaintiffs account with
8), and asserts that the three checks were in fact credited to that account, “so
[Plaintiff] never lost money due to the checks.” (Id.
¶J 8, 23).
Harry also claims CSM paid several checks to Leibowitz totaling $10,000 beginning in
April and May of 2001, possibly (it is unclear from Defendants’ submissions) in connection with
negotiating a reduction of $50,000 in the contract price owed to Coastal for its work on the Project.
Defendants also submit an excerpt of Leibowitz’s testimony from the trial
between Coastal and Plaintiff, in which Leibowitz testified he received three to four checks for
doing Coastal’s paperwork on evenings and weekends, but could not remember whether the checks
came from CSM as opposed to Coastal. (Altieri Decl. Ex. M.). This trial testimony indicates
According to Defendants’ 56.1 statement, it is the other way around: Leibowitz’s list
omits the three checks while Karpman’s list includes them. (Defs.’ 56.1 ¶ 39 (citing Vassallo
Cert. ¶ 20)).
Leibowitz exercised his Fifth Amendment right not to testify when asked at a previous deposition
(1) whether he ever received money from CSM, and (2) whether he had received “anything of
value from Mr. Vassallo as a result of moneys paid by [Plaintiff] to [CSM] on [the Project].” (Id.).
Finally, Defendants point to the testimony of a Coastal employee at the trial between
Coastal and Plaintiff, wherein the employee testified Leibowitz told him one of Coastal’s invoices
was “overstated; that Harry and himself— he, in turn, allowed Coastal to bill more than what we’re
entitled to bill. In other words, it’s like an exaggerated bill[.]” (Altieri Cert. Ex. I).
Plaintiff commenced this action on March 23, 2012 (ECF No. 1), and filed the Amended
Complaint on July 5, 2012. (ECF No. 5). In the Amended Complaint, Plaintiff brings four claims,
apparently asserting each against all three defendants: unjust enrichment (Count One), tortious
interference with contract (Count Two), fraud (Count Three), and civil violation of the federal
Racketeer Influenced and Corrupt Organizations Act (“civil RICO”) (Count Four). (jçij.
Defendants answered on July 18, 2012. (ECF No. 6). The answer lists nine “Separate
Defenses” that appear to be affirmative defenses:
1. Failure to state a claim upon which relief can be granted (First Defense);
2. Statute of limitations (Second Defense);
3. “Lack of Jurisdiction” (Third Defense);
4. Unclean hands (Fourth Defense);
5. “The answering party was not guilty of any negligence, wrongdoing or breach of duty as
claimed” (Fifth Defense);
6. Contributory or comparative negligence pursuant to N.J.S.A. 2A:15-5.1,
7. “Lack of privity between the parties” (Seventh Defense);
2. The “Entire Controversy Doctrine” (Eighth Defense); and
9. Res judicata (Ninth Defense).
On May 30, 2014, Plaintiff moved for summary judgment on all nine affirmative defenses,
or alternatively to strike them from the Answer. (ECF No. 21-2, hereinafter “Pl.’s Br.,” at 4-5).
Defendants opposed the motion and cross-moved for judgment on the pleadings or alternatively
summary judgment as to all claims, relying solely on statute of limitations grounds. (ECF No. 251, hereinafter “Defs.’ Br.,” at 6-8 (“[D]efendants do not here need to challenge Plaintiffs four
alleged claims in a dispositive fashion.
and have chosen not to move affirmatively for dismissal
based upon the separate defenses except for the statute of limitations defense.”)). Plaintiff opposed
the cross-motion and replied in support of its original motion on July 14, 2014. (ECF No. 26,
hereinafter “Pl.’s Reply Br.”). On December 16, 2014, the Court administratively terminated the
motions pending the outcome of mediation, before reinstating them on May 4, 2015. (ECF Nos.
28, 29). The parties have also submitted supplemental briefs regarding choice of state law. (ECF
No. 31, hereinafter, “Pl.’s Supp. Br.”; ECF No. 33, hereinafter, “Defs.’ $upp. Br.”).
Failure to State a Claim
The legal standard for a motion for judgment on the pleadings is the same as for a motion
to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6). Caprio v. Healthcare Revenue
Recovery Grp., LLC, 709 F.3d 142, 146-47 (3d Cir. 2013). Thus, under either standard, to survive,
a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.” Ashcrofi v. Igbal, 556 U.s. 662 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). In evaluating whether a complaint states a claim, the Court
must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable
inferences in favor of the non-moving party. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 234
(3d Cir. 200$). “Factual allegations must be enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555. “A pleading that offers labels and conclusions will not do.
Nor does a complaint suffice if it tenders naked assertion[s] devoid of further factual
enhancement.” Igbal, 556 U.S. at 67$ (internal citations omitted). However, “the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal
Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Id. Thus, when reviewing complaints for failure to state
a claim, district courts should engage in a two-part analysis: “First, the factual and legal elements
of a claim should be separated.
Second, a District Court must then determine whether the
facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for
relief.” See Fowler v. UPMC Shadyside, 578 F.3d 203, 2 10-11 (3d Cir. 2009) (citations omitted).
Because statute of limitations is an affirmative defense, a claim may be dismissed for
failure to state a claim on statute of limitations grounds only if it is apparent on the face of the
complaint that the claim is time-barred. Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014).
Summary judgment is appropriate if the “depositions, documents, electronically stored
information, affidavits or declarations, stipulations.. admissions, interrogatory answers, or other
materials” demonstrate that there is no genuine issue as to any material fact, and, construing all
facts and inferences in a light most favorable to the non-moving party, “the moving party is entitled
to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986); Pollock v.
Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986).
The moving party has the initial burden of proving the absence of a genuine issue of
material fact. 5ee Celotex, 477 U.S. at 323. Once the moving party meets this burden, the nonmoving party has the burden of identifying specific facts to show that, to the contrary, a genuine
issue of material fact exists for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586-87 (1986). In order to meet its burden, the nonmoving party must “go beyond the
pleadings and by [its] own affidavits, or by the ‘depositions, answers to interrogatories, and
admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.”
Celotex, 477 U.S. at 324; see also Luian v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990) (stating
that “[t]he object of [Rule 56(e)] is not to replace conclusory allegations of the complaint.
conclusory allegations of an affidavit”); Big Apple BMW. Inc. v. BMW of N. Am., Inc., 974 F.2d
1358, 1363 (3d Cir. 1992) (“To raise a genuine issue of material fact,” the opponent must “exceed
the ‘mere scintilla’ threshold
. . .“).
An issue is “genuine” if it is supported by evidence such that a reasonable jury could return
a verdict in the nonmoving party’s favor. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248
(1986). A fact is “material” if, under the governing substantive law, a dispute about the fact might
affect the outcome of the suit. Id. In considering a motion for summary judgment, a district court
may not make credibility determinations or engage in any weighing of the evidence; instead, the
non-moving party’s evidence “is to be believed and all justifiable inferences are to be drawn in his
favor.” Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477
U.S. at 255).
Motion to Strike
Federal Rule of Civil Procedure 12(1) states:
(f) Motion to Strike. The court may strike from a pleading an
insufficient defense or any redundant material, impertinent, or
scandalous matter. The court may act:
(1) on its own; or
(2) on motion made by a party either before responding to
the pleading or, if a response is not allowed, within 21 days
afier being served with the pleading.
Fed. R. Civ. P. 12(0.
“As a general matter, motions to strike under Rule 12(1) are highly disfavored.” FTC v.
Hope Now Modifications, LLC, 2011 WL 883202, at *1 (D.N.J. Mar. 10, 2011). “The successful
motion to strike is granted to ‘save time and expense’ by clearing away pleadings ‘which will not
have any possible bearing on the outcome of the litigation.” Id. (citing Garlanger v. Verbeke, 223
F. $upp. 2d 596, 609 (D.NJ. 2002)). Additionally, “even where the challenged material is
redundant, immaterial, impertinent, or scandalous, a motion to strike should not be granted unless
the presence of the surplusage will prejudice the adverse party.”
(citing Symbol Techs.. Inc. v.
Aruba Networks, Inc., 609 F. $upp. 2d 353, 359 (D. Del. 2009)).
If Defendants are correct that all claims in the Amended Complaint are time-barred, this
case ends. Therefore, the Court will decide Defendants’ cross-motion first.
State Law Claims
With the exception of the civil RICO claim, plaintiffs claims arise from state law. Plaintiff
contends New Jersey law applies (Pl.’s $upp. Br. at 6), while Defendants contend New York law
applies (Defs.’ Supp. Br. at 2-4).
“[A] federal court sitting in diversity must apply the forum state’s choice of law rules.”
Snyder v. Famam Cos., 792 F. $upp. 2d 712, 717 (D.N.J. 2011) (citing Klaxon Co. v. $tentor Elec.
Mfg. Co., 313 U.S. 487, 496 (1941)). UnderNew Jersey choice of law rules, “[t]he first step is to
determine whether an actual conflict of law exists, for if no conflict exists, the law of the forum
state applies.” Id. Thus, the Court will determine whether any of the state law claims would be
barred under New York’s statute of limitations but not New Jersey’s, or vice-versa.
Tort law in both New York and New Jersey recognizes that a claim does not accrue, and
therefore the statute of limitations does not begin to run, before a plaintiff has suffered damages.
See Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993) (“[A]s a general proposition, a tort cause
of action cannot accrue until an injury is sustained.”); P.T. & L Constr. Co. v. Madigan & Hyland,
Inc., 245 N.J. Super. 201, 207 (App. Div. 1991) (“A cause of action grounded in tort accrues, not
when the tortious act occurs, but when the consequential injury or the damage occurs.” (citing
Diamond v. N.J. Bell Tel. Co., 51 N.J. 594, 596 (1968))).
Plaintiff argues, persuasively, that it did not suffer an injury from Defendants’ alleged
actions until April 22, 2009, when judgment was entered against Plaintiff ordering it to pay
Coastal. (Pl.’s Br. at 6-7). Nobody disputes that Plaintiff received the benefit of Coastal’s
subcontracting work back in 2001, despite the alleged fact that Harry Vassallo and CSM had
diverted three checks owed to Coastal toward the CSM account. Nor do Defendants identify any
other injury Plaintiff suffered before the judgment was entered. Thus, under both New York and
New Jersey law, Plaintiffs tort claims accrued, at the earliest, on April 22, 2009.
Defendants’ extensive arguments about the inapplicability of the “discovery rule” are
misplaced. The Court does not rely on the discovery rule to determine this accrual date.
Defendants also argue the tort claims accrued before the jury verdict was entered because
“a claim accrues at the ‘moment of the wrong.” (Defs.’ Supp. Br. at 8 (citing Amland Properties
Corp. v. Aluminum Co. of Am., 808 F. Supp. 1187, 1190 (D.N.J. 1992); Michaels v. State of N.J.,
955 F. Supp. 315, 326 (D.N.J. 1996); IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d
132, 140-41 (2009)). But the cases Defendants cite explain that the “moment of the wrong” means
when all elements of a cause of action are present. Michaels, 955 F. Supp. at 326; Amland, 808
The statute of limitations for unjust enrichment is six years both in New York, Coombs v.
Jervier, 74 A.D.3d 724, 724 (N.Y. App. Div. 1st Dep’t 2010), and New Jersey, Rubinsky v. Zayat,
Civ. No. 2:14-01540(WJM), 2015 WL 3517629, at *3 (D.N.J. June 4, 2015) (citing N.J.S.A.
2A: 14-1). Although ordinarily, unjust enrichment is a quasi-contract claim rather than a tort,
Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511, 516 (2012); Castro v. NYT Television, 370 N.J.
Super. 282, 299 (App. Div. 2004), as discussed below, see infra Section IV.B.1.a, Plaintiff has
actually asserted a tort claim under the banner of unjust enrichment. Therefore, the Court treats
this claim as a tort claim for the purposes of determining when the cause of action accrued. çç
çg, Blystra v. fiber Tech Grp., Inc., 407 F. Supp. 2d 636, 645 n.1 1 (D.N.J. 2005) (declining to
apply the “last rendition of services” test to a purported unjust enrichment claim that was actually
a tort claim).
The statute of limitations for tortious interference is three years in New York, Amaranth
LLC v. J.P. Morgan Chase & Co., 71 A.D.3d 40, 48 (N.Y. App. Div. 1st Dep’t 2009); Mannix
Indus. v. Antonucci, 191 A.D.2d 482, 483 (N.Y. App. Div. 2d Dep’t 1993) (citing N.Y. C.P.LR.
§ 214(4)), and six years in New Jersey. Fraser v. Bovino, 317 N.J. Super. 23, 34 (App. Div. 1998)
The statute of limitations for fraud in New York is “the greater of six years from the date
the cause of action accrued or two years from the time the plaintiff.
could with reasonable diligence have discovered it.” N.Y. C.P.L.R.
discovered the fraud, or
§ 213(8). In New Jersey, it is
six years. Curtiss-Wright Corp. v. Rodney Hunt Co., 1 F. Supp. 3d 277, 284 (D.N.J. 2014) (citing
§ 2A:14-1, 14-2).
F. Supp. at 1190; IDT Corp., 12 N.Y.3d at 140. Thus, these cases are not contrary to the
proposition that, in tort, a cause of action does not start to run until a plaintiff suffers damages.
Plaintiff filed this lawsuit on March 23, 2012, less than three years after the causes of action
in tort accrued on April 22, 2009. Therefore, Counts One, Two, and Three are all timely.
RICO Claim (Count Four)
RICO claims have a four-year statute of limitations that runs from the time a plaintiff (1)
suffers an injury; and (2) knows or should know of the source of the injury. Prudential Ins. Co. of
Am. v. United States Gypsum Co., 359 F.3d 226 (3d Cir. 2004). Plaintiff did not suffer an injury
until April 22, 2009, and filed this action less than four years later. Thus, Count Four is timely.
For these reasons, Defendants have both failed to show that the Amended Complaint is
time-barred on its face under Rule 12(c), and failed to submit evidence that summary judgment is
warranted on statute of limitations grounds. Therefore, Defendants’ motion is denied.
Plaintiff moves for summary judgment on, or alternatively to strike, all nine of the
affirmative defenses asserted in the Answer.
As an initial matter, the Court declines to strike any of the defenses from the pleadings
because Plaintiff has not shown how the continued presence of any defense “may cause prejudice
to one of the parties[.]” Burke v. Weight Watchers Int’l, Inc., 983 F. Supp. 2d 478, 484 (D.N.J.
2013). Moreover, they will not “confuse the issues in the case,” see id., because in deciding this
motion, the Court will grant summary judgment on the non-meritorious defenses and leave in place
potentially meritorious ones, eliminating confusion on which defenses remain.
The Court discusses the summary judgment motion with respect to each defense in turn.
Failure to State a Claim Upon Which Relief Can Be Granted (First
Plaintiff contends there is no material issue as to whether the Amended Complaint states a
claim upon which relief can be granted. Thus, the Court must evaluate whether Plaintiff has
sufficiently pleaded claims for unjust enrichment, tortious interference with contract, fraud, and
civil RICO.4 For each claim, the Court will grant summary judgment on this defense if the
Amended Complaint states a claim, and deny summary judgment if it does not. However, because
Defendants have not moved to dismiss any of Plaintiff’s claims for failure to state a claim (except
with respect to statute of limitations, discussed above), the denial of summary judgment on the
defense of failure to state a claim will not result in that claim being dismissed.
To be clear, for each of the claims the Court has indicated state a claim, and thus granted
summary judgment as to the First Defense, Plaintiff will still need to present “a legally sufficient
evidentiary basis” on each of these claims at trial to survive a motion under Fed. R. Civ. P. 50(a).
Unjust Enrichment (Count One)
The Amended Complaint does not state a claim for unjust enrichment against any
Defendant under either New Jersey or New York law.
“[U]njust enrichment law do[es] not vary in any substantive manner from state to state.”
Snyder v. Farnam Cos., 792 F. Supp. 2d 712, 723 (D.N.J. 2011) (collecting cases). In New Jersey,
a plaintiff must show “(1) at plaintiff’s expense (2) defendant received [a] benefit (3) under
circumstances that would make it unjust for defendant to retain [the] benefit without paying for
it.” Id. (internal quotation omitted). Similarly, in New York, a plaintiff must show “(1) the other
party was enriched, (2) at [plaintiffs] expense, and (3) that it is against equity and good conscience
to permit the other party to retain what is sought to be recovered[.]” Georgia Malone & Co., 19
N.Y.3d at 516 (internal quotation omitted).
Defendants argue that Plaintiffs motion for summary judgment on this defense is moot
because Defendants filed the Rule 12(c) motion discussed above. (Defs.’ Br. at 16). It is not. The
Rule 12(c) motion was based solely on statute of limitations grounds. The defense of failure to
state a claim upon which relief can be granted is preserved through trial, regardless of whether it
is asserted in motion practice prior to trial. See Fed. R. Civ. P. 12(g)(2), (h)(2).
Typically, unjust enrichment is a quasi-contractual remedy to prevent one party from
unjustly benefiting at the other’s expense, despite the lack of a formal, enforceable contract. See
Georgia Malone & Co., 19 N.Y.3d at 516; Corsello v. Verizon New York, Inc., 1$ N.Y.3d 777,
790 (2012) (“Typical cases are those in which the defendant, though guilty of no wrongdoing, has
received money to which he or she is not entitled[.]”); Castro, 370 N.J. Super. 282, 299. That is
not this case. Plaintiff did not, for example, fail to receive payment for services rendered to
Defendants, or fail to receive services from Defendants for payment rendered. Indeed, Coastal
apparently performed the work covered by the subcontract despite not receiving the checks Harry
Vassallo allegedly diverted to the CSM account.
Instead, what Plaintiff purports to bring as an unjust enrichment claim is actually a tort: the
Amended Complaint alleges that “[a]s a result of the wrongful and illegal actions of the
Defendants,” that is, the diversion of the checks without Plaintiff’s knowledge, “the Defendants
received a benefit from the Plaintiff in the form of monies that did not belong to the Defendants.”
But under New York law, “unjust enrichment is not a catchall cause of action to
be used when others fail[,]” and is “not available where it simply duplicates, or replaces, a
tort claim[.]” Corsello, 18 N.Y.3d at 790. Likewise, New Jersey law “does not
recognize unjust enrichment as an independent tort cause of action”; rather, in tort law, avoiding
this type of “unjust enrichment” is merely “a justification for other torts such as fraud or
conversion.” Castro, 370 N.J. Super at 299.
Therefore, summary judgment on the First Defense—failure to state a claim—is not
warranted as to Count One.
Tortious Interference with Contract (Count Two)
In New Jersey, tortious interference with contract occurs when a defendant “intentionally
and improperly interferes with the performance of a contract.
between [plaintiff] and a third
person by inducing or otherwise causing the third person not to perform the contract.. [causing]
 to the [plaintiff] from the failure of the third person to perform the contract.”
Nostrame v. Santiago, 213 N.J. 109, 122 (2013) (quoting Restatement (Second) of Torts
In New York, “[t]ortious interference with contract requires the existence of a valid contract
between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s
intentional procurement of the third-party’s breach of the contract without justification, actual
breach of the contract, and damages resulting therefrom[.]” Lama Holding Co. v. Smith Barney,
28 N.Y.2d 413, 424 (1996).
Plaintiff does not state a claim for tortious interference, because it does not allege any
Defendant caused a third party to breach a contract. Rather, Plaintiff claims Defendants caused
Plaintiff to breach its contract with Coastal by paying CSM instead of Coastal. This is not tortious
interference under either New Jersey or New York law.
Accordingly, summary judgment on the FirstDefense is not warranted as to Count Two.
Fraud (Count Three)
In New Jersey, fraud requires “(1) a material misrepresentation of a presently existing or
past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other
person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages.”
Allstate New Jersey Ins. Co. v. Lajara, 222 N.J. 129, 147 (2015) (internal quotation omitted).
Similarly, in New York, fraud requires “a misrepresentation or a material omission of fact which
was false and known to be false by defendant, made for the purpose of inducing the other party to
rely upon it, justifiable reliance of the other party on the misrepresentation or material omission,
and injury.” Lama Holding Co., 88 N.Y.2d at 421.
Rule 9(b) requires “all averments of fraud or mistake” to “be stated with particularity.”
Fed. R. Civ. P. 9(b). To comply with Rule 9(b), the circumstances surrounding the alleged fraud
must be sufficiently pleaded to put the defendant on notice of the “precise misconduct with which
[it is] charged.” Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004), abrogated in part on other
grounds by Twombly, 550 U.S. at 557. A plaintiff can meet this requirement by specifying “the
who, what, when, where, and how: the first paragraph of any newspaper story.” See Advanta
Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999) abrogated on other grounds by Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (quotation omitted). A plaintiff can either
identify “the date, place or time of the fraud,” or may use “alternative means of injecting precision
and some measure of substantiation into their allegations of fraud.” Id. (citations omitted). A
plaintiff must allege “who made a misrepresentation to whom and the general content of the
misrepresentation.” [ç (citations omitted).
Accepting the Amended Complaint as true, Harry Vassallo told or led Plaintiff to believe
Harry was the owner pf Coastal and was collecting money Plaintiff owed to Coastal, for the
purpose of inducing Plaintiff to give him two checks made out to CSM and a third made out to
Coastal. Relying on Harry’s representations, Plaintiffpaid Harry the checks, and suffered damages
when, in 2009, it had to pay Coastal again as part of the jury verdict. This is sufficient to plead a
claim of fraud with specificity under either New Jersey or New York law.
However, there are no allegations in the Amended Complaint that Karen Vassallo directly
participated in any of the actions constituting fraud. Nor are there any allegations of actions CSM
itself took to defraud plaintiff. Therefore, the Amended Complaint does not state a claim for fraud
as to Karen or CSM.
Accordingly, summary judgment on the First Defense is warranted as to Count Three
against Harry, but not against Karen or CSM.
The Amended Complaint alleges Defendants violated 18 U.S.C.
§ 1962(a), (b), (c), and
(d). Section 1962(a) makes it unlawful
for any person who has received any income derived, directly or
indirectly, from a pattern ofracketeering activity.. to use or invest,
directly or indirectly, any part of such income, or the proceeds of
such income, in acquisition of any interest in, or the establishment
or operation of, any enterprise which is engaged in, or the activities
of which affect, interstate or foreign commerce.
§ 1962(a). Section 1962(b) makes it unlawful “for any person through a pattern of
to acquire or maintain, directly or indirectly, any interest in or control of
any enterprise which is engaged in, or the activities of which affect, interstate or foreign
§ 1962(b). Section 1962(c) makes it unlawful “for any person employed by or
associated with any enterprise engaged in, or the activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering activity.” Id.
unlawful for anyone to conspire to violate
At the outset,
§ 1962(c). Section 1962(d) makes it
§ 1962(a), (b), and/or (c). Id. § 1962(d).
§ 1962(a) and (b) are inapplicable to the present case. For a claim based on
§ 1962(a), which prohibits investment of income derived from racketeering activity, a plaintiffs
injury must have resulted from the investment of racketeering income, distinct from injury caused
by the racketeering activity itself. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1188 (3d Cir.
1993). The Amended Complaint does not allege that Plaintiff was injured by the investment of
Therefore, Plaintiff states no
§ 1962(a) claim. For a claim based on
§ 1962(b), which prohibits using a pattern of racketeering activity to acquire control of an
enterprise engaged in interstate commerce, there must be a “specific nexus between control of a
named enterprise and the alleged racketeering activity.” Kehr Packages, Inc. v. Fidelcor, Inc., 926
F.2d 1406, 1411 (3d Cir. 1991). The Amended Complaint specifies CSM as the enterprise engaged
in interstate commerce. (Compl.
¶ 44). But there is no allegation that any Defendant acquired
CSM through racketeering activity, only that Defendants used CSM for racketeering activity.
Therefore, Plaintiff states no
has stated a
§ 1962(b) claim. Accordingly, the Court considers whether Plaintiff
§ 1962(c) claim and/or a § 1962(d) claim for conspiracy to violate § 1962(c).
To plead a RICO claim under
§ 1962(c), a plaintiff must allege “(1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering activity.” In re Ins. Brokerage Antitrust Litig.,
612 F.3d 300, 362 (3d Cir. 2010) (internal quotations omitted). A “RICO plaintiff [must also]
show that the plaintiff suffered an injury to business or property and that the plaintiffs injury was
caused by the defendant’s violation of 18 U.S.C.
§ 1962.” In re Avandia Mktg., Sales Practices &
Prods. Liab. Litig., 804 F.3d 633, 638 (3d Cir. 2015) (citing 18 U.S.C.
Under the RICO statute, “a pattern of racketeering activity” requires at least two acts of
racketeering activity within a ten-year period. 1$ U.S.C.
§ 1961(5). “Racketeering activity” can
include, among other things, mail fraud in violation of 18 U.S.C.
§ 1341. See 18 U.S.C. § 1961(1)
(defining “racketeering activity”). The federal mail fraud statute prohibits the use of the mail for
purposes of carrying out any scheme or artifice to defraud. çç 18 U.S.C.
§ 1341. Where plaintiffs
rely on mail fraud as the basis for a RICO violation, the allegations of fraud must comply with
Federal Rule of Civil Procedure 9(b), which requires that allegations of fraud be pleaded with
As to the first two elements of the
§ 1962(c) claim, Harry Vassallo allegedly conducted
CSM’s affairs by soliciting payment from Plaintiff in the form of the three checks. Thus, the Court
examines whether he conducted these affairs through a pattern of racketeering activity. Plaintiff
alleges the following predicate acts: (1) causing Plaintiff to place the three checks at issue into the
mail (citing 18 U.S.C.
(citing 1$ u.s.c.
§ 1341); (2) transporting the three checks from New York to New Jersey
§ 2314); and (3) possessing the three checks, as well as two properties in New
Jersey (citing 18 u.s.c.
§ 2315). (Compi. ¶ 48).
As set forth above, see supra Section IV.B. 1 .C, Plaintiff has pleaded with particularity a
claim for fraud by Harry Vassallo. According to the Amended Complaint, this alleged fraudulent
scheme was carried out through use of the mail, that is, Harry Vassallo had Plaintiff mail him the
three checks he later diverted from Coastal.
¶ 48). “It is not necessary that the
[fraudulent] scheme contemplate the use of the mails as an essential element.” Pereira v. United
States, 347 U.S. 1, 8 (1954).
Rather, “[a]ll that is required is that defendant knowingly
participated in a scheme to defraud and caused a mailing to be used in furtherance of the scheme.”
United States v. Pharis, 298 f.3d 228, 234 (3d Cir. 2002). Thus, the three instances in which Harry
allegedly caused Plaintiff to mail him a check may constitute a pattern of racketeering activity.5
Additionally, Plaintiff alleges it was damaged by this pattern of racketeering activity under the
same theory of damages as its other claims, namely, that it was forced to pay twice for Coastal’s
services because Harry never credited the three checks toward Plaintiffs account with Coastal.
Thus, all the elements of a
§ 1962(c) claim appear to have been pleaded.
However, the Amended Complaint does not state a § 1962(c) claim against either Karen or
CSM. Because CSM is the enterprise engaged in interstate commerce, it cannot also be a defendant
§ 1962(c) claim. Kehr Packages, Inc., 926 F.2d at 1411. As to Karen, although the Amended
Complaint alleges she participated in racketeering activity generally, it does not allege she
At this time, the Court expresses no opinion about whether the other acts in paragraph 48
of the Amended Complaint would constitute predicate acts for civil RICO purposes.
participated in the diversion of Plaintiffs checks. Thus, Karen’s alleged violation of
did not cause Plaintiffs injury. See In re Avandia Mktg., $04 f.3d at 63$. Nor do Plaintiffs
conclusory allegations that Karen conspired with Harry in this instance give rise to a claim under
§ 1962(d). See Rose v. Bartle, $71 F.2d 331, 366 (3d Cir. 1989) (“A conspiracy claim [under §
1962(d)] must also contain supportive factual allegations.”).
Accordingly, summary judgment on the First Defense is warranted as to Count Four against
Harry Vassallo on the basis of the
§ 1962(c) claim, but not warranted as to Count Four against
Karen or CSM.
Statute of Limitations (Second Defense)
As discussed above with respect to Defendants’ motion, Plaintiffs claims are timely under
both New York and New Jersey’s statutes of limitations. Therefore, Plaintiff has shown there is
no genuine issue of material fact as to the Second Defense. Accordingly, summary judgment is
warranted on the Second Defense.
Lack of Jurisdiction (Third Defense),
Defendants concede the Court has personal and subject matter jurisdiction. (Defs.’ Br. at
18). Therefore, summary judgment is warranted on the Third Defense.
Unclean Hands (Fourth Defense)
The doctrine of unclean hands “gives expression to the equitable principle that a court
should not grant relief to one who is a wrongdoer with respect to the subject matter in suit.”
Borough of Princeton v. Bd. of Chosen Freeholders of the Cty. Of Mercer, 169 N.J. 135, 158
(2001) (internal quotation omitted). The application of this doctrine is discretionary on the part of
the Court. Id.
It appears Defendants’ unclean hands defense is that Leibowitz, Plaintiffs president, was
involved in the alleged scheme to divert to CSM the checks due to Coastal.
explanation of Leibowitz’s involvement is far from clear. See supra Section II.A. However,
Plaintiff has not met its burden to show the absence of a dispute of material fact on this defense.
See Celotex, 477 U.S. at 323. Indeed, if Leibowitz was somehow complicit on Plaintiffs behalf
in Defendants’ alleged scheme, the Court may decide in its discretion to apply the unclean hands
doctrine. Defendants’ evidence suggesting Leibowitz may have agreed to divert the checks, may
have kept inconsistent records with respect to the checks, may have agreed to overbill Coastal, and
personally received checks from CSM, taken together, is sufficient to create a genuine issue of
material fact as to this defense.6
Accordingly, summary judgment on the Fourth Defense is not warranted.
Lack of “[NJegligence, [WJrongdoing or IBireach of [DJuty as
jC]laimed” (Fifth Defense)
The Court interprets the Fifth Defense as Defendants merely stating they have done nothing
wrong—in effect, a summary denial of Plaintiffs factual and legal theories. (See Defs.’ Br. at 19
(“[The Fifth Defense] alerts, as pleadings are meant to do, the plaintiff to issues to be raised by the
defense during the case.”)). There remain many genuine issues of material fact as to whether
Defendants committed some or all of the wrongdoing alleged by Plaintiff. Therefore, summary
Plaintiffs objection that this defense is based on a “made up story” that Defendants have
never raised before now (Pl.’s Reply Br. at 8-9) is immaterial, because it bears only on credibility,
which the Court cannot consider on this motion. See Marino, 358 F.3d at 247. Plaintiff is also
incorrect that Defendants never pleaded this defense (Pl.’s Reply Br. at 15-16) because “unclean
hands” is listed in the Answer to the Amended Complaint. tAns. at 6). Moreover, Plaintiffs
argument that it has been prejudiced in discovery by Defendants’ failure to plead the specifics of
the defense, namely, Leibowitz’s involvement in the diversion of the checks (Pl.’s Reply Br. at
15-16), is unpersuasive—as explained above, see supra Section II.A, Defendants rely at least in
part on evidence adduced at the trial between Coastal and Plaintiff, which appears to have explored
Leibowitz’s role in the diversion and the possibility he was involved in Defendants’ alleged
scheme. Plaintiff ought not to have been blindsided by Defendants’ use of this evidence to contend
Leibowitz may have been complicit in the alleged scheme.
judgment is not warranted on the Fifth Defense.
Contributory or Comparative Negligence (Sixth Defense)
Plaintiff contends the defense of contributory or comparative negligence is unavailable
because it brought no actions for negligence. (Pl.’s Br. at 10). But under both New Jersey and
New York law, apportionment based on comparative fault is possible even when a plaintiff is
negligent and a defendant’s tortious conduct is intentional. Blazovic v. Andrich, 124 N.J. 90, 10708 (1991) (“[W]e reject the concept that intentional conduct is ‘different in kind’ from both
negligence and wanton and willful conduct, and consequently cannot be compared with them.”);
Arbegast v. Bd. of Educ. of S. New Berlin Cent. Sch., 65 N.Y.2d 161, 168 (1985) (“[W]hat [N.Y.
§ 1411] requires comparison of is not negligence but conduct which, for whatever reason,
the law deems blameworthy[.]”).
Therefore, summary judgment is not warranted on the Sixth Defense.
Lack of Privily (Seventh Defense)
Lack of privity is a contract defense, which is inapplicable in the present case because this
case does not involve contract claims.
Super Laundry Equip. Corp. v. Chan, No. 13-
738 1(NLH)(AMD), 2015 WL 3953887, at *4 (D.N.J. Jun. 29, 2015); Gelman v. Rosen, No. 146790 (JBS/KMW), 2015 WL 1849903, at *4..5 (D.N.J. Apr. 22, 2015).
Therefore, summary judgment on the Seventh Defense is warranted.
The Entire Controversy Doctrine (Eighth Defense)
The Third Circuit has concluded that New Jersey’s entire controversy doctrine, a state rule
of procedure that discourages successive litigation concerning the same subject matter, “is not the
right preclusion doctrine for a federal court to apply when prior judgments were not entered by the
courts of New Jersey.” Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 138 (3d Cir. 1999).
Here, the previous litigation was in Supreme Court, New York County, in New York state, not a
New Jersey state court. Therefore, the entire controversy doctrine does not apply, and summary
judgment as to the Eighth Defense is warranted.
Res Judicata (Ninth Defense)
Defendants evidently contend that both claim preclusion and issue preclusion apply to the
instant action. (Defs.’ Br. at 22-23). Defendants contend “the [e]ffect of claim preclusion is not
definitively known at this time because the jury verdict in the New York case [between Coastal
and Plaintiff] says nothing as to the determination of the outcome of the ‘[three] checks.” (j).
For this reason, according to Defendants, “Plaintiff is attempting to use a determination”—the jury
verdict—”in another court as a sword against defendants when these defendants could have been
brought in by plaintiff but were not made parties to the New York litigation.” (Id. at 23).
Federal courts must give “the same preclusive effect to state court judgments that those
judgments would be given in the courts of the State from which the judgments emerged.” R & J
Holding Co. v. Redev. Auth. of Cty. of Montgomery, 670 F.3d 420, 426-27 (3d Cir. 2011) (quoting
Kremer v. Chem. Constr. Corp., 456 U.S. 461, 466 (1982)). Because the previous judgment at
issue was entered in Supreme Court, New York County, in New York state, New York preclusion
j Under New York law, neither claim preclusion nor issue preclusion applies.
Claim preclusion bars a claim “where a judgment on the merits exists from a prior action
between the same parties involving the same subject matter.” In re Hunter, 4 N.Y.3d 260, 269
(2005). This case does not involve the same parties as the previous action in New York state.
Issue preclusion requires (1) “the identical issue necessarily must have been decided in the
prior action and be decisive of the present action,” and (2) “the party to be precluded from
relitigating the issue must have had a full and fair opportunity to contest the prior determination[.]”
Juan C. v. R.C. Cortines, $9 N.Y.2d 659, 667 (1997) (internal quotation omitted). Here, it appears
Defendants seek to apply issue preclusion to the issue of whether Coastal credited the three checks
to Plaintiffs account. But, as Defendants admit, “the [general] jury verdict in the New York case
[said] nothing” about whether the three checks were credited to Plaintiffs account with Coastal.
(See Defs.’ Br. at 22-23). For this reason, the “identical issue” of whether Plaintiff received credit
for the checks was not “necessarily.
decided in the prior action[,]” nor was it “decisive of the
prior action.” Juan C., 89 N.Y.2d at 667.
Therefore, summary judgment as to the Ninth Defense is warranted.
For the reasons above, Defendants’ motion for judgment on the pleadings or alternatively
for summary judgment is DENIED.
Plaintiffs motion to strike the affirmative defenses is
DENIED. Plaintiffs motion for summary judgment on the affirmative defenses is GRANTED in
part and DENIED in part as follows:
Plaintiffs motion for summary judgment as to the First Defense (failure to state a claim)
is GRANTED with respect to Counts Three (fraud) and Four (civil RICO) as asserted against
Harry Vassallo only. Plaintiffs motion for summary judgment as to the First Defense is DENIED
with respect to Counts One (unjust enrichment) and Two (tortious interference with contract)
against Harry Vassallo, and DENIED with respect to all claims asserted against Karen Vassallo
Defendants’ fear that Plaintiff can use the jury verdict as “a sword” is similarly
unfounded. (See Defs.’ Br. at 23). Plaintiff will still need to prove causation at trial, that is, that
it suffered damages because of Defendants’ actions. This will necessarily involve showing that
the jury verdict in the case between Coastal and Plaintiff resulted in part because of Defendants’
alleged diversion of the checks. Therefore, the jury verdict in the New York action has no
preclusive effect on either side in the present case.
Plaintiffs motion for summary judgment is GRANTED as to the Second (statute of
limitations), Third (lack of jurisdiction), Seventh (lack of privity between the parties), Eighth (the
“Entire Controversy Doctrine”), and Ninth (res judicata) Defenses. Plaintiffs motion for summary
judgment is DENIED as to the Fourth (unclean hands), Fifth (lack of “negligence, wrongdoing or
breach of duty”), and Sixth (contributory or comparative negligence) Defenses.
Accordingly, Defendants may no longer assert the following affirmative defenses pleaded
in the Answer: statute of limitations; lack of jurisdiction; lack of privity between the parties; the
“Entire Controversy Doctrine”;
iudicata; or failure to state a claim against Harry Vassallo on
the fraud and civil RICO claims.
An appropriate Order accompanies this Opinion.
CLAIRE C. CECCHI, U.S.D.J.
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