THOMAS GLOBAL GROUP L.L.C. v. WATKINS et al
Filing
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OPINION/ORDER denying 93 Motion for Reconsideration re 91 Order on Motion to Dismiss/Lack of Jurisdiction, 90 Opinion. Signed by Judge Stanley R. Chesler on 7/19/16. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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Plaintiff, :
v.
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DONALD V. WATKINS et al.,
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Defendants. :
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THOMAS GLOBAL GROUP L.L.C.,
Civil Action No. 13-4864 (SRC)(CLW)
OPINION AND ORDER
CHESLER, District Judge
This matter comes before the Court upon the motion for reconsideration of this Court’s
Opinion and Order entered February 22, 2016 (“the Opinion,” Docket Entry 90), filed by
Plaintiff Thomas Global Group L.L.C. (“Plaintiff”) [Docket Entry 93]. For the reasons discussed
below, the Court will deny the motion for reconsideration.
“A court may grant a motion for reconsideration if the moving party shows one of the
following: (1) an intervening change in the controlling law; (2) the availability of new evidence
that was not available when the court issued its order; or (3) the need to correct a clear error of
law or fact or to prevent manifest injustice.” See Banda v. Burlington Cnty., 263 F. Appx. 182,
183 (3d Cir. 2008) (citing Max’s Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999));
L. Civ. R. 7.1(i). Thus, “[t]he only proper ground for granting a motion for reconsideration,
therefore, is that the matters or decisions overlooked, if considered by the court, might
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reasonably have altered the result reached.” G-69 v. Degnan, 748 F. Supp. 274, 275 (D.N.J.
1990).
Plaintiff seeks reconsideration of the Court’s dismissal of former Defendant Donald V.
Watkins P.C. (“the P.C.”) from this action, based on the Court’s finding that it lacked in
personam jurisdiction over the P.C. Specifically, the Court found that “Plaintiff, however, offers
no evidence supporting the conclusion that this Court could exercise general or specific
jurisdiction over the P.C. itself, given that the P.C. has no offices or bank accounts in New
Jersey, is not licensed in New Jersey, has never done business in New Jersey, has never been
admitted to practice in any court in New Jersey, and has never handled a case or representation in
New Jersey.” Thomas Global Grp. L.L.C. v. Watkins, No. 13-4864, 2016 WL 706194, at *3
(D.N.J. Feb. 22, 2016). Furthermore, the Court found that Plaintiff had not adequately pled an
alter ego theory of liability for jurisdiction over the P.C., based on the Court’s alleged
jurisdiction over Donald V. Watkins (“Watkins”). Id. at *4. Plaintiff had the burden to establish
a prima facie case of in personam jurisdiction over the P.C., and since Defendants challenged
personal jurisdiction, Plaintiff was required to “respond with actual proofs, not mere
allegations,” such as sworn affidavits or other competent evidence. Patterson by Patterson v.
FBI, 893 F.2d 595, 603-04 (3d Cir. 1990); Time Share Vacation Club v. Atl. Resorts, Ltd., 735
F.2d 61, 66 n.9 (3d Cir. 1984).
Plaintiff does not object in its briefing to this Court’s jurisdictional findings about the
Court’s direct jurisdiction over the P.C. Instead, Plaintiff moves for reconsideration of the
Court’s determination that Plaintiff did not not adequately oppose Defendants’ motion to dismiss
the P.C, with respect to Plaintiff’s alter ego theory of jurisdiction over the P.C., with affidavits or
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other competent evidence. Plaintiff correctly notes that it cited in its Opposition to sworn
affidavits, submitted as evidence with other motions in this case, to support its alter ego theory of
liability [Docket Entry 93].
The Federal Rules of Civil Procedure provide that a district court may exercise personal
jurisdiction over a non-resident defendant to the extent permitted under state law. Fed. R. Civ. P.
4(k)(1). Consistent with the Due Process Clause, a court may assert personal jurisdiction so long
as the defendant has “certain minimum contacts” with the forum, such as not to “offend
‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co. v. State of Wash., 326
U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
An alter ego theory of liability applies when one entity so dominates another that,
together, the entities act as a single and cohesive economic unit. State Dep’t of Envtl. Prot. v.
Ventron Corp., 94 N.J. 473, 500-01 (1983). “[W]here appropriate, courts of New Jersey have
looked beyond the corporate form to the functional reality behind it” to determine whether
personal jurisdiction exists over a defendant. Star Video Entm’t, L.P. v. Video USA Assocs. 1
L.P., 253 N.J. Super. 216, 223 (N.J. Super. Ct. App. Div. 1992). Therefore, “[i]f the disputed
facts are resolved sufficiently to provide a basis for holding liable the individual defendants
under alter ego theory, their presence for jurisdictional purposes cannot be said to be either unfair
or unreasonable.” Id. at 223-24. New Jersey law requires that, to pierce the corporate veil, both
of the following elements must be shown: (1) “the parent [corporation] so dominated the
subsidiary that it had no separate existence but was merely a conduit for the parent” and (2) “the
parent has abused the privilege of incorporation by using the subsidiary to perpetrate a fraud or
injustice, or otherwise to circumvent the law.” Ventron, 94 N.J. at 501. “[C]omplete
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domination, not only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no separate mind, will
or existence of its own” must be shown. Craig v. Lake Asbestos of Quebec Ltd., 843 F.2d 145,
150 (3d Cir. 1988) (citation omitted). Once this showing has been made, the court may examine
the fraud or injustice issue. Ventron, 94 N.J. at 501. Courts have considered various factors to
determine if the corporate veil should be pierced, including:
gross undercapitalization . . . failure to observe corporate formalities, non-payment
of dividends, the insolvency of the debtor corporation at the time, siphoning of funds
of the corporation by the dominant stockholder, non-functioning of other officers or
directors, absence of corporate records, and the fact that the corporation is merely a
facade for the operations of the dominant stockholder or stockholders.
Am. Bell Inc. v. Fed’n of Tel. Workers, 736 F.2d 879, 886 (3d Cir. 1984) (quotations omitted).
Generally, an alter ego theory of personal jurisdiction “provides that a non-resident
parent corporation is amenable to suit in the forum state if the parent company exerts so much
control over the subsidiary that the two do not exist as separate entities but are one and the same
for purposes of jurisdiction.” Estate of Thomson v. Toyota Motor Corp. Worldwide, 545 F.3d
357, 362 (6th Cir. 2008). Plaintiff asserts a theory in which the subsidiary corporation (the P.C.)
would be subject to this Court’s jurisdiction because the controlling parent (Watkins as an
individual) is allegedly subject to personal jurisdiction in New Jersey; in effect, Plaintiff asserts a
reverse alter ego theory of jurisdiction. Plaintiff has not cited to a case applying New Jersey law
where a court found jurisdiction over a subsidiary based on its jurisdiction over a parent who is
an individual. Furthermore, this Court has not identified such a case in its research. See, e.g.,
Repetti v. Vitale, 2011 WL 3962518, at *5 (N.J. Super. Ct. App. Div. Sept. 9, 2011) (“We have
located no case employing [the reverse piercing of a corporate veil] remedy in New Jersey”). On
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this issue of whether a controlling parent’s contacts with a forum may be imputed to subsidiaries
under an alter ego theory, the Tenth Circuit has explained:
When one defendant completely controls another, the latter’s contacts with the
forum may fairly be imputed or attributed to the former. . . . In such situations,
attribution of contacts to the [controlling] individual defendant merely reflects the
reality that, although the contacts were ostensibly those of the corporation, the true
actor was the individual. The same situation obtains in those cases holding a
corporate parent to answer for conduct within the forum carried out by an alter ego
subsidiary.
But the rationale of these cases does not support the proposition that, because the
court has jurisdiction over a parent corporation or dominating individual, without
more, it has jurisdiction over the alter ego corporation. The dominated corporation
does not direct and control its dominating corporate or individual alter ego.
Accordingly, it is unfair to impute to the dominated corporation the forum contacts
of its alter ego. . . . [The alter ego defendants] have, as much as any other defendant,
a constitutionally protected liberty interest in not being subject to the binding
judgments of a forum with which [they have] established no meaningful contacts,
ties, or relations.
Home-Stake Prod. v. Talon Petroleum, 907 F.2d 1012, 1020-21 (10th Cir. 1990) (internal
quotation marks and citations omitted). The Tenth Circuit’s reasoning is sound, and therefore
this Court rejects Plaintiff’s theory of alter ego jurisdiction in this case.
Even if a reverse alter ego theory of jurisdiction was available in this case, Plaintiff’s
certifications do not adequately support it. The certifications Plaintiff offers from Bryan and
Danielle Thomas [Docket Entries 5-1, 11-3], as well as the first Kasolas certification [Docket
Entry 11-1] do not directly address the P.C.; at the time those certifications were signed, the P.C.
was not a Defendant in this action. Related to the issue of jurisdiction, Plaintiff asserts that the
second Kasolas certification alleges that: all Defendants are under the control or ownership of
Watkins, and that all Defendants share the same principal place of business; Watkins does not
respect the corporate structure of the Defendant LLCs and corporations, because he comingles
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funds from investors and economic participants by only using the P.C.’s bank account for all
money coming into or going out of Defendant entities; Watkins does not file tax returns for some
Defendant corporations; none of the Defendant companies have employees beyond Watkins,
revenues, a board of directors, and/or assets; Watkins exclusively manages the day-to-day
operations of the Defendant companies, which are not profitable; and Defendants have
intermingled or disbursed his $1 million investment amongst themselves and eventually to
Watkins, in order to convert funds and/or to ensure that Plaintiff’s investment cannot be traced
[Docket Entries 71-1, 71-2].
Even taking these allegations as true, as the Court must do on this motion, they are still
insufficient to support Plaintiff’s reverse alter ego theory of jurisdiction. It is well-established in
the case law that common ownership or control over multiple corporate entities, without more,
does not establish an alter ego relationship. See, e.g., United States v. Bestfoods, 524 U.S. 51, 69
(1998). Furthermore, Defendants’ failure to file taxes for some corporate entities in some years,
and the lack of revenue for some of the Defendant companies, do not automatically indicate a
failure to adhere to corporate formalities. Plaintiff does not allege, for example, that the
Defendant companies have failed to maintain their own financial records. Plaintiff also
emphasizes that, allegedly, the P.C. is the only bank account for all Defendant entities. Any
failure to treat the funds of individual investors distinctly does not necessarily establish one of
the factors in the alter ego analysis, and even if comingling of funds is present, this is simply not
enough to establish an alter ego relationship.
Finally, Defendants assert that Plaintiff has not attempted to demonstrate that the
privilege of incorporation has somehow been abused, because the P.C. has been used to
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perpetrate a fraud or injustice. The alter ego concept is a “tool of equity [that] is appropriately
utilized ‘when the court must prevent fraud, illegality or injustice, or when recognition of the
corporate entity would defeat public policy or shield someone from public liability for a crime.’”
Carpenters Health & Welfare Fund of Phila. v. Ambrose, 727 F.2d 279, 284 (quoting Publicker
Indus., Inc. v. Roman Ceramics Corp., 603 F.2d 1065, 1069 (3d Cir. 1979) (internal quotation
omitted)). “[T]he hallmarks of [the] abuse” that is the focus of this inquiry are “typically the
engagement of the subsidiary in no independent business of its own but exclusively the
performance of a service for the parent and, even more importantly, the undercapitalization of
the subsidiary rendering it judgment-proof.” OTR Assocs. v. IBC Servs., 353 N.J. Super. 48, 52
(N.J. Super. Ct. App. Div. 2002). Plaintiff does not allege the undercapitalization of the P.C.,
and Plaintiff has not shown by the required clear and convincing evidence standard that the P.C.
has engaged only in the service of Watkins. See Kaplan v. First Options of Chi., Inc., 19 F.3d
1503, 1522 (3d Cir. 1994).
Plaintiff has not adequately met its burden to show that this Court may exercise
jurisdiction over the P.C., whether based on the P.C.’s actions as a single entity, or through an
alter ego theory of liability. Plaintiff therefore has not satisfied the standard governing motions
for reconsideration. Plaintiff does not allege any change in controlling legal authority, nor does
it argue that any previously unavailable evidence has come to light. As discussed above, the
instant motion fails to present a basis for reconsideration, since there is no need to correct a clear
error of law or fact. The standard of review for a motion for reconsideration is high, and relief is
granted very sparingly. See NL Indus., Inc. v. Commercial Union Ins. Co., 935 F. Supp. 513, 516
(D.N.J. 1996). Plaintiff has not satisfied the Court that it is entitled to such extraordinary relief.
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Therefore,
IT IS on this 19th day of July, 2016,
ORDERED that Plaintiff’s motion for reconsideration [Docket Entry No. 93] be and
hereby is DENIED.
s/Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: July 19, 2016
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