LIBERTY COMMUNITY ASSOCIATES v. CITY OF PLAINFIELD et al

Filing 175

OPINION. Signed by Judge Kevin McNulty on 3/15/2019. (ld, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
LCA GP LLC, LCA LP LLC, and
ANODES PARTNERS LLC,
Plaintiffs,

Civ. No. 15-3247-KM-JBC

vs.
CITY OF PLAINFIELD, THE BANK OF
NEW YORK MELLON CORP., as
Trustee,

OPINION

Defendants.
THE BANK OF NEW YORK MELLON
CORP., as Trustee,
Third-Party
Plaintiff,
vs.
PLAINFIELD HOUSING FINANCE
CORPORATION,
Third-Party
Defendant.
KEVIN MCNULTY, U.S.D.J.:

Before the Court is the motion of third-party defendant Plainfield
Housing Finance Corporation (“PHFC9 to dismiss the third-party complaint of
defendant/third-party plaintiff The Bank of New York Mellon, as Trustee
(“Trustee”). (DE 166). The basis of PHFC’s motion is that it has “dissolved” and
“is no longer financially capable of defending” this action. Although PHFC’s
motion is framed as a Rule 12(b)(6) motion, PHFC in fact seeks dismissal on
Article III jurisdictional grounds. PHFC contends that this action is moot
because the Court is unable to grant any “effective” relief to the prevailing
party.
1

Trustee opposes the motion because (1) PHFC has not submitted any
evidence that it is, in fact, dissolved; (2) PHFC was an active corporation at the
time its motion was filed, according to a corporate status report issued by the
State of New Jersey; and (3) as a matter of law, a dissolved non-profit
corporation, organized under New Jersey Law, may be sued.
For the following reasons, PHFC’s motion is denied.

Background’

I.

Trustee is a national banking association. (3PC ¶1). PHFC is a not-forprofit corporation organized under the laws of New Jersey. (3PC ¶2).
On May 17, 2018, plaintiffs LCA GP LLC, LCA LP LLC, and Anodes
Partners LLC filed an amended complaint against defendants City of Plainfield
and Trustee alleging eight different counts related to the acquisition,
management, and development of an apartment complex located in Plainfield,
New Jersey. (AC. ¶77-S). The complex was intended to be developed as
affordable housing under Section 8 of the United States Housing Act of 1937.
(AC ¶8). PHFC issued bonds to finance the construction of the complex. (3PC
¶6).
In connection with this development project, plaintiffs entered into a
“Payment in Lieu of Taxes” Agreement (“PILOT”) with the City of Plainfield. (3PC
¶5). Plaintiffs also entered into a Lease and Management Agreement with the
Housing Authority of Plainfield (“HAP”). That agreement provided that HAP
would remit all revenue from the project, including rental proceeds, to the
National Community Bank of New Jersey (“NCBNJ”), which was the trustee at
that time. (3PC ¶7). Trustee is the successor in interest to NCBNJ. (3PC ¶1).

Key items from the record are abbreviated as follows:
Docket entry number in this case;

DE.
AC.

=

3PC

=

Amended Complaint (DE 144);
Third-Party Complaint (DE 162);

PHFC’s brief in support of its motion to dismiss (DE 166);
PBr. = Trustee’s opposition to PHFC’s motion (DE 169).
DBr.

=

2

NCBNJ placed the revenue into various funds, including a tax payment
fund that was meant to satisfy PILOT obligations. (3PC ¶8). The City would
calculate the amounts due, notify HAP of the amount, and HAP, in turn, would
notify the Trustee of the amount due. (Id.). The Trustee would then make a
payment to the City. (3PC ¶9).
Plaintiffs allege that PILOT obligations were incorrectly calculated, and
that Trustee disbursed incorrect amounts to the City of Plainfield, without
verifying the correct amounts. (3PC ¶9).
There is a Trust Agreement in place between PHFC and the Trustee,
which contains an indemnification agreement:
The Corporation shall pay the Trustee reasonable compensation for
its services hereunder, and also all its reasonable expenses and
disbursements, including attorneys’ fees, and shall indemnify the
Trustee against any liabilities which it may incur in the exercise
and performance of its powers and duties hereunder except those
caused by the Trustee’s own gross negligence or willful
misconduct.
(3PC

¶ 10).

Trustee’s complaint against PHFC seeks indemnification under this

provision in the event any damages are awarded. (3PC ¶11).
Trustee’s third-party complaint was filed on October 23, 2018. (DE 162).
The 3PC does not allege that PHFC has dissolved. PHFC filed a motion to
dismiss the 3PC on November 20, 2018. (DE 166). PHFC contends that it is a
dissolved non-profit corporation and should therefore be dismissed from the
action. (DE 166).
Trustee opposed PHFC’s motion on December 20, 2018. (DE 169). To its
opposition, the Trustee has attached PHFC’s corporate status report, which
indicates that, as of November 28, 2018 (after PHPC filed its motion to
dismiss), PHFC was still an active non-profit corporation. (DE 169-1, Ex. D).
PHFC has not filed a reply.
II.

Discussion

PHFC claims that there is not a “live case or controversy” because its
dissolved and has no money to continue defending this action. (DBr. at 4).
3

“Under Article III of the United States Constitution, the power of the
judiciary extends only to ‘Cases’ and ‘Controversies.’” Long

ii.

Se. Pa. Transp.

Auth., 903 F.3d 312, 320 (3d Cir. 2018) (quoting Spokeo, Inc. a Robins, 136 S.
Ct. 1540, 1547, 194 L. Ed. 2d 635 (2016)); see U.S. Const. art III, § 2. “The
‘case or controversy’ requirement demands that a cause of action before a
federal court present a justiciable’ controversy, and ‘no justiciable controversy
is presented

.

.

.

when the question sought to be adjudicated has been mooted

by subsequent developments.” Lusardi a Xerox Corp., 975 F.2d 964, 974 (3d
Cir. 1992) (quoting Flast v. Cohen, 392 U.S. 83, 95, 20 L. Ed. 2d 947, 88 S. Ct.
1942 (1969)).
A motion to dismiss a complaint that challenges the “actual controversy”
requirement under Article III is properly brought under Rule 12(b)(1) as “a
jurisdictional matter.” Constitution Party of Pa. a Aichele, 757 F.3d 347, 357
(3d Cir. 2014) (citation omitted). Jurisdiction must be established in order for a
case to continue. Steel Co. v. CitizensforaBetterEnu’t, 523 U.S. 83, 94, 118 S.
Ct. 1003, 140 L. Ed. 2d 210 (1998). A motion to dismiss pursuant to Rule
12(b)(1) may be brought as a facial or factual challenge. See Lincoln Ben. Life
Co. v. AEILife, LLC, 800 F.3d 99, 105 (3d Cir. 2015). Where the motion
challenges jurisdiction on the face of the complaint, the court only considers
the allegations of the complaint and documents referred to therein in the light
most favorable to the plaintiff. Gould Elecs., Inc. v. United States, 220 F.3d 169,
176 (3d Cir. 2000) (citing Mortensen v. First Fed. Say. & Loan Ass’n, 549 F.2d
884, 891 (3d Cir. 1977)).
jurisdiction is
By contrast, where the existence of subject matter
challenged factually, “no presumptive truthfulness attaches to the plaintiffs
allegations,” and the court may consider evidence outside the pleadings to
satisfy itself of its power to hear the case. Id. As the party invoking federal
jurisdiction, the plaintiff bears the burden of establishing it. See Symczyk v.
Genesis Healthcare Corp., 656 F.3d 189, 191 n.4 (3d Cir. 2011).

4

The Trustee has met its burden to establish jurisdiction here.
Jurisdiction is adequately alleged in the third party complaint, and PHFC does
not really contend otherwise. PHFC has not answered Trustee’s complaint or
otherwise presented competing facts (through, for example, affidavits,
depositions, or other evidence) to challenge the Court’s subject-matter
jurisdiction over Trustee’s claims. Counsel’s arguments that PHFC has
dissolved are presented only in a brief. (DBr. at 4) These supposed facts are not
of record, judicially noticeable, or stipulated to by the parties, and are not
cognizable. See Dominic J. v. Wyo. Valley W. High Sch., 362 F. Supp. 2d 560,
565 (M.D. Pa. 2005) (“Plaintiffs’ counsel’s statements contained in the brief in
opposition simply do not constitute evidence.”).
Moreover, PHFC, which is organized under New Jersey law, may “be sued
in all courts and participate in actions and proceedings, whether judicial,
administrative, arbitrative or otherwise, in its corporate name, and process
may issue by and against the corporation in the same manner as if dissolution
had not occurred.” N.J. Stat. Ann. § 15A:12-15. As a matter of law, PHFC
remains a juridical entity that can be sued, and again PHFC does not really
contend otherwise. Perhaps some other person or entity remains answerable
for PHFC’s obligations; perhaps not. Perhaps any judgment will be difficult to
collect; perhaps not. Those speculative possibilities do not rob the court of
jurisdiction.
Accordingly, PHFC’s motion to dismiss the third-party complaint is
denied.
Ill.

Conclusion
For the reasons stated above, PHFC’s motion (DE 166) is denied. An

appropriate Order follows.
Dated: March 15, 2018

7

Kevin McNulty
United States District Judg)
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