Churchill Downs Incorporated v. NLR Entertainment, LLC et al
OPINION. Signed by Judge Kevin McNulty on 9/25/2018. (sm)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CHURCHILL DOWNS, INC.,
Civ. No. 14-3342 (KM) (MAR)
NLR ENTERTAINMENT, LLC AND
NICHOLAS L. RIBIS,
KEVIN MCNULTY, U.S.D.J.:
On February 25, 2014, plaintiff Churchill Downs, Inc. (“CDI”) filed suit
against defendants NLR Entertainment, LLC (“Entertainment LLC”) and
Nicholas Ribis, Entertainment LLC’s purported principal. CDI alleged (1) a
breach of contract claim against Entertainment LLC that arose from an
agreement that was executed in 2013; and (2) a fraud claim against Ribis for
making various representations to CDI regarding the status of negotiations
with a third party.
On March 6, 2017, this Court entered an order granting CDI’s motion for
summary judgment as to its breach of contract claim against Entertainment
LLC. CDI’s fraud claim against Ribis was dismissed. A final judgment in the
amount of $2,676,763.70 was entered against Entertainment LLC on April 4,
Now it turns out that Entertainment LLC, the judgment debtor, does not
exist and never did. Before the court is CDI’s motion to modify the judgment
under Federal Rule of Civil Procedure 60(b) to impose liability against NLR
Ventures (“Ventures LLC”) and Ribis individually.
I relate the facts that are pertinent to resolving this motion only. On
August 3, 2013, CDI and Ribis executed a “Binding Term Sheet” (“Term
Sheet”). (ECF no. 90-3). Ribis executed the agreement on behalf of NLR
Acquisitions, LLC (“Acquisitions LLC”), a “wholly owned subsidiary of NLR
Entertainment, LLC.” (Id.).
Pursuant to the term sheet, CDI was to provide online gambling services
to Showboat Atlantic City Hotel and Casino (“Showboat”), once
Acquisitions/Entertainment LLC had purchased Showboat. (Id.) CDI was to
make an initial payment of $2.5 million dollars, which eventually was supposed
to be credited towards a $10 million dollars rights fee. (Id.). In the event that
Acquisitions/Entertainment LLC failed to purchase Showboat, then it would be
required to “repay the $2.5 million dollars.” (Id.).
Thereafter, on September 4, 2013, Acquisitions LLC and CDI entered into
a License and Operating Agreement (“License Agreement”). (ECF no. 90-4). In
contrast to the Term Sheet, the only party on Ribis’s side of the License
Agreement was Acquisitions LLC (which had been identified earlier as a
subsidiary of Entertainment LLC). The terms of the License Agreement were
substantially similar to the Term Sheet.
On August 5, 2013, two days after the Term Sheet but before the
execution of the License Agreement, CDI wired $2.5 million dollars to a TO
bank account. The bank account was in Ribis’s name, which would have been
evident from the wiring instructions provided to CDI. (ECF no. 92-7). Postjudgment discovery revealed that in August 2013, after CDI had wired the
money to Ribis’s personal bank account, Ribis made a series of transfers to his
wife, various countrv clubs, and utility services. (ECF nos. 90-3, 90-14, 90-15).
He further transferred approximately $1.35 million to Ventures LLC, another
entity controlled by him. (ECF nos. 90-16, 90-17, 90-18).
CDI brought this against Ribis and Entertainment LLC as defendants,
when Acquisitions/Entertainment LLC failed to acquire Showboat and did not
return the $2.5 million dollars. (ECE no. 1-1)) In 2015, defendants produced
documents in discovery related to Acquisitions LLC’s formation, including
Acquisitions LLC’s certificate of formation, its LLC agreement, and certificate of
good standing. (ECF nos. 92-2, 92-3, 92-5). Those documents revealed that
Acquisitions LLC was not formed until December 12, 2013, months after the
parties had executed the Term Sheet and License Agreement. (Id.). When asked
during his deposition on May 26, 2016 when Entertainment LLC and
Acquisitions LLC were formed, Ribis said that he did not know. (ECF no. 90-7,
at 41:14-12). He further testified that he did not know whether Entertainment
LLC or Acquisitions LLC still existed at the time of the deposition. (Id. at 42:611).
On March 6, 2017, summary judgment was granted to CDI on its breach
of contract claim. Entertainment LLC breached the contract, I found, when it
failed to return CDI’s $2.5 million dollars. (ECF nos. 69, 71 (corrected opinion)).
A final judgment in the amount of $2,676,763.70 was entered on April 4, 2017.
(ECP no. 76).
Thereafter, CDI sought post-judgment discovery in aid of execution. On
April 19, 2017, CDI served subpoenas on various NLR entities controlled by
Ribis, including Ventures LLC (ECF no. 78-5); Acquisitions LLC (ECF no. 78-6);
NH? Resort Management Co., LLC (ECF no. 78-7); and NLR Resorts
International, LLC (ECF no. 78-8). CDI also served subpoenas on TD Bank
(ECP no. 78-10) and on The Bancorp Bank (ECF no. 78-9), where, Ribis
testified, the NLR entities maintain their accounts. Last, CDI served
interrogatories on Ribis, seeking information about Ribis’s own assets. It was
during this post-judgment discovery that the Department of State for the State
of Delaware advised CDI’s counsel that it had no record of any entity named
There is no further explanation in CDI’s motion, or in the record as presented,
as to the status of Acquisitions LLC or why it was not named as a defendant.
“NLR Entertainment LLC” ever being formed under the laws of the State. (ECF
On May 3, 2017, defendants moved to quash the subpoenas served on
the four “non-party” NLR entities. Defendants also sought a protective order to
strike the interrogatories served on Ribis, a non-judgment debtor. TD Bank
apparently produced some responsive records anyway, which rendered part of
the motion moot.
On December 20, 2017, the Magistrate Judge issued a decision on the
motion to quash, which was granted in part and denied in part. (ECF no. 89).
Noting that there was no evidence that the 2013 transfers were made for the
purpose of evading a judgment (which was not entered until 2017), the court
granted the motion to quash the subpoenas on the non-party NLR entities. It
also granted the motion to strike the interrogatories served on Ribis.
Thereafter, on February 23, 2018, CDI filed this motion to modify the
judgement under Rule 60(b).
Federal Rule of Civil Procedure Rule 60(b) authorizes the Court to issue
relief from a final judgment, order, or proceeding. “The general purpose of Rule
is to strike a proper balance between the conflicting principles that
litigation must be brought to an end and that justice must be done.” Coltec
Indus., Inc. v. Hobgood, 280 F.3d 262, 271 (3d Cir. 2002) (citing Boughner u.
Sec’y of Health, Ethic., & Welfare, 572 F.2d 976, 977 (3d Cir. 1978)). The Rule
provides as follows:
On motion and just terms, the court may relieve a party or its legal
representative from final judgment, order, or proceeding for the
(1) mistake, inadvertence, surprise, or excusable negligence;
(2) newly discovered evidence that, with reasonable diligence,
could not have been discovered in time to move for a new
trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged;
it is based on an earlier judgment that has been reversed
or vacated; or applying it prospectively is no longer
(6) any other reason that justified relief.
The movant under Rule 60(b) “bears a heaw burden.” Plisco v. Union R.
Co., 379 F.2d 15, 17 (3d Cir. 1967), cen. denied, 389 U.S. 1014 (1967). Rule
60(b) motions are “extraordinary relief which should be granted only where
extraordinary justifying circumstances are present.” Id.; see also Moolenaar v.
Oov’t of the Virgin Islands, 822 F.2d 1342, 1346 (3d Cir. 1987).
CDI seeks to modify the final judgment based on facts that it knows now,
but did not know at the time of judgment. First, CDI states that the contracting
entity (and now judgment debtor), Entertainment LLC, did and does not exist.
Second, it cites Ribis’s use of the funds to pay personal expenses and transfer
of$1.35 million to Ventures LLC. CDI seeks to modify the final judgment to
impose liability on Ribis personally and upon Ventures LLC.
Rule 60(b)(3) provides for relief from a final judgment where there has
been fraud, “misrepresentation, or other misconduct of an adverse party.”2
Under this provision, “the movant must establish that the adverse party
engaged in fraud or other misconduct, and that this conduct prevented the
moving party from fully and fairly presenting his case.” Strithron v. Stridiron,
698 F.2d 204, 207 (3d Cir. 1983) (citing Rozier v. Ford Motor Co., 573 F.2d
1332, 1341 (5th Cir.1978)). “[R]elief under Rule 60(b)(3) may be warranted,
even though the newly disclosed evidence may not change the result, if such
evidence ‘would have made a difference’ in advancing the moving party’s
claim.” Floorgraphics Inc. v. News Am. Midg. In-Store Servs., Inc., 434 F. App’x
109, 111 (3d Cir. 2011) (quoting Seaboldt v. Pennsylvania RR. Co., 290 F.2d
296, 299-300 (3d Cir. 1961)). Rule 60(b)(3) “is aimed at judgments which were
unfairly obtained, not at those which are factually incorrect.” Rozier, 573 F.2d
A motion made pursuant to Rule 60(b)(3) is timely if it is filed within a year after
judgment was entered. Fed. R. Civ. P. 60(cfll). CDI’s motion was filed timely.
at 1339. “[Ijn order to sustain the burden of proving fraud and
misrepresentation under Rule 60(b)(3), the evidence must be clear and
convincing.” Floorgraphics, 434 F. App’x at 111 (alteration added) (quoting
Anderson u. Cnjovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988), remanded to,
Anderson v. Beatrice Foods Co., 127 F.R.D. 1 (D. Mass. 1989), aff’d, 900 F.2d
388 (1st Cir. 1990)).
CDI contends that it was prevented from fully and fairly presenting its
case, and was misled into obtaining a judgment against a nonexistent LLC.
Ribis, it says, falsely stated that Entertainment LLC was a genuine entity
formed under the laws of the state of Delaware in three court filings: (1) an
affidavit submitted to the Court in support of a motion to transfer venue (ECF
no. 90-5 (affirming that Entertainment LLC is “a Delaware Limited Liability
Company”)); (2) Entertainment LLC’s corporate disclosure statement that was
submitted pursuant to Rule 7.1 (ECF no. 11-1); and (3) Ribis’s answer to the
complaint (ECF no. 11, ¶3 (admitting that Entertainment LLC is a Delaware
limited liability company)).
These facts, I find, at a minimum fit the definition of “misconduct” under
Rule 60(b)(3). Relief under this Rule is not limited to “fraud,” but also
encompasses conduct that amounts to a misrepresentation or “misconduct by
an opposing party.” Most courts have taken a liberal view with the definition of
“misconduct.” See, e.g., Anderson, 862 F.2d at 923.
“Misconduct” does not demand proof of nefarious intent or purpose
as a prerequisite to redress. For the term to have meaning in the
Rule 60(b)(3) context, it must differ from both “fraud” and
“misrepresentation.” Definition of this difference requires us to
take an expansive view of “misconduct.” The term can cover even
accidental omissions—elsewise it would be pleonastic, because
“fraud” and “misrepresentation” would likely subsume it.
Id. (citing United States u. One Douglas A—26B Aircraft, 662 F.2d 1372, 1374-75
n.6 (11th Cir. 1981) (to avoid redundancy, “misrepresentation” in Rule 60(b)(3)
must encompass more than false statements made with intent to deceive)); see
Sellers v. Gen. Motors Corp., 40 Fed. R. Serv. 2d 590, 1984 WL 1345 (E.D. Pa.
1984) (ordering new trial under Rule 60(b) where non-moving party had
construed discovery request narrowly, but not in bad faith); but see Jordan i’.
Paccar, Inc., No. 95-3478, 1996 U.S. App. LEXIS 25358, at *20 (6th Cir. Sept.
17, 1996) (“the primary connotation of each of the words in Rule 60(b)(3)
suggests a requirement of some odious behavior on the part of the non-moving
CDI has made a sufficient factual showing under this provision to
warrant relief. Defendants reply that any misrepresentation could not have
been intentional, because Ribis did not personally handle the incorporation of
Entertainment LLC. That contention I find unpersuasive. If Ribis didn’t know
the facts, it was up to him and his attorneys to ascertain them before making
representations to the Court. See Lonsdotf u. Seefeldt, 47 F.Sd 893, 895 (7th
Cir. 1995) (“Fed. R. Civ. P. 60(b)(3) applies to both intentional and
unintentional misrepresentations”). It is reasonable to assume that CDI relied
on Ribis’s representations and would have amended its complaint to include a
personal liability claim against Ribis, if it had known, i.e., that Entertainment
LLC did not exist when the contracts were signed or thereafter.3 Perhaps less
persuasive, but of some concern, is the intermingling of funds and transfer of
the lion’s share of the $2.5 million, which may take on a different significance
in the context of the facts about Entertainment LLC.
Modifying the judgment to impose liability, however, would be a step too
far; I cannot award judgment on claims that were not pled or meaningfully
explored in discovent. That is not to say, however, that I will leave CDI without
recourse for conduct that appears, on the surface at least, to raise serious
“A person is individually liable for contracts he signs under a nonexistent
corporate name.” Fashion Brokerage Int’l, LLC v. Jhung Yuro Int’l LLC, No. 10-746,
2011 U.S. Dist. LEXIS 25687, at *10 (D.N.J. Mar. 14, 2011) (granting motion to amend
complaint to add individual liability claim where plaintiff was prompted to investigate
defendants’ corporate status “after they filed their respective Answers
they are limited liability companies.”) (citing Fed. Advert. Corp. v. Hundertmark, 109
N.J.L. 12, 13, 160 A. 40, 40 (1932)).
Instructive here is the case Operative Plasterers & Cement Masons Int’l
Assoc. Local8 v. AOJ Const., LLC, No. 08-6163, 2009 WL4796764 (D.N.J. Dec.
9, 2009). In that case, the plaintiffs obtained a judgment against AQJ
Construction (the “Judgment Defendant”) on April 17, 2008. Id. at *3
Thereafter, plaintiffs filed a separate action to recover against other persons or
entities (the “Non—Judgment Defendants”), on theories of “piercing the
corporate veil,” “alter-ego,” and “single employer.” Id. at *2. Plaintiffs contended
that the Judgment Defendant had been “discontinued” without paying its
obligation under the judgment. Id. at *3•
The Operative Plasterers court did not simply declare the Non-Judgment
Defendants liable. It did, however, rule that the plaintiffs could seek relief by
either filing a motion to amend the complaint or under Rule 60(b), rather than
by pursuing a separate action. Id. at *12. Seeking relief under Rule 60(b), the
court noted, would prevent piecemeal litigation, and avoid possible claim
preclusion based on the “failure to name in a single action parties who jointly
committed misconduct.” fd. at *1213
I will follow the practical approach of Operative Plasterers. I decline to
grant CDI’s motion to impose additional liability in the form presented; the
merits remain to be explored. I will, however, permit CDI to pursue
supplemental liability. I therefore grant this Rule 60(b)(3) motion to the extent
of granting CDI leave to reopen this case and amend its complaint.4 To be
clear, discovery on these amended claims will not be limited to the narrow
I conclude that CDI has made a sufficient showing under Rule 60(b)(3) to justify
relief and, therefore, I decline to address its arguments under Rule 60(bfl2) or (b)(6).
Rule 60(b)(2) applies where newly discovered evidence is “(1) material and not merely
cumulative, (2) could not have been discovered prior to trial through the exercise of
reasonable diligence, and (3) would probably have changed the outcome of the trial.”
Bohus v. Be/off 950 F.2d 919, 930 (Sd Cir. 1991) (citing Stridiron v. Stridiron, 698 F.2d
204, 207 (3d Cir. 1983); Ufloa v. City of Phi/a., 692 F. Supp. 481, 483 (ED. Pa. 1988)).
Relief under the 60(b)(6) catchall is available only when the other subsections of Rule
60(b) do not apply. See Stradley v. Cortez, 518 F.2d 488, 493 (3d Cir. 1975) (“Rule
when the relief sought is based upon ‘any other
reason’ than a reason which would warrant relief under 60(b) (1—5)”) (citing Fed.
Deposit Ins. Corp. v. Alker, 234 F.2d 113, 116-17 & n.5 (3d Cir. 1956)).
scope of discovery in aid of a judgment. I will permit exploration of the relevant
For the reasons stated above, CDI’s motion to modify the April 4, 2017
final judgment is granted. This matter will be reopened to allow CDI to amend
Dated: September 25, 2018
United States District Judge
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