HANJIN SHIPPING CO., LTD. v. PORT TRANSPORT INC. et al

Filing 43

OPINION. Signed by Judge William J. Martini on 1/23/17. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 2:16-02547 (WJM)

HANJIN SHIPPING CO., LTD.,
Plaintiff,

OPINION
v.
PORT TRANSPORT INC. a/k/a PORT
TRANSPORT; ASIANA EXPRESS (NEW
YORK) CORP.; HK TECHFLOOR LLC;
WILLIAM E. ROSENTHAL; JACOB
ROSENTHAL; ABC COMPANIES 1-5,
Fictitious entities to be named later; and
DOES 1-5 fictitious individuals to be
named later,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff Hanjin Shipping Co., LTD (“Hanjin”) alleges that Defendant Port
Transport, Inc. (“Port Transport”) failed to remit payment of $255,295 for transporting
third-party merchandise by ocean freight. The Complaint includes fourteen counts
relating to fraud and breach of contract. Defendants William and Jacob Rosenthal,
owners and operators of Port Transport, now move the Court to dismiss all claims against
them as individuals. The Court GRANTS the Rosenthals’ motion to dismiss, and the
claims against them are DISMISSED without prejudice.
I.

BACKGROUND 1

Plaintiff Hanjin is an international ocean freight carrier with offices in New Jersey.
Complaint (“Compl.”) ¶ 5. Hanjin alleges that it agreed with Port Transport to ship goods
produced by Defendant HK Techfloor. Id. ¶ 24. According to the Complaint, the parties
agreed that HK Teckfloor would remit payment to Port Transport, and that Port Transport
would then pay Hanjin. Id. ¶ 55. Hanjin alleges it was never paid for its services. The
1

The following facts are drawn from the Complaint and motion papers.
1

record shows that Hanjin sent Port Transport numerous invoices totaling $255,295 for
service dates ranging from November 2014 to March 2016. See Pl. Memo, Ex. E.
Hanjin now brings fourteen claims relating to breach of contract and fraud against
Defendants Port Transport, William and Jacob Rosenthal (individuals who own and
operate Port Transport) and HK Techfloor. The Complaint alleges that Defendants
William and Jacob Rosenthal used Port Transport as an “alter ego” to perpetrate fraud
and evade personal liability. § 73. Hanjin supports its alter ego theory by showing that at
all relevant times the Rosenthals were officers and owners of Port Transport, as well as
signatories to all corporate bank accounts. §§ 9-10. Hanjin also notes that Port Transport,
a Delaware corporation, failed to obtain certification to transact business under New
Jersey law. Pl. Opp., Exs. B-C. The Rosenthals move to dismiss all claims against them
as individuals.
II.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint,
in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated. Hedges v.
United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under
Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in
the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975);
Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir.
1998). Although a complaint need not contain detailed factual allegations, “a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Factual allegations must be
sufficient to raise a plaintiff’s right to relief above a speculative level, such that it is
“plausible on its face.” See id. at 570. A claim has “facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556).
III.

DISCUSSION
A. Subject Matter Jurisdiction

United States Code § 1333 vests federal district courts with original jurisdiction
over “Any civil case of admiralty or maritime jurisdiction . . ..” 28 U.S.C. § 1333. See
Art. III § 2; Hotung v. A Cargo of a Crate Containing Nine Boxes Documents Shipped
Aboard the M/V Hanjin Nagoya, 452 F.Supp.2d 564, 567 (D.N.J. 2006) (“[W]hether or
not a contract falls within that admiralty or maritime jurisdiction depends upon the nature
and subject-matter of the contract.”). See also Rose Containerline, Inc. v. Omega
Shipping Co., No. CIV. 10-4345 WHW, 2011 WL 1253849, at *3 (D.N.J. Mar. 28, 2011)
(noting that federal common law applies to cases brought under admiralty jurisdiction).
2

The parties’ agreement to ship goods by sea brings this action within the Court’s
admiralty jurisdiction.2
B. Alter Ego Liability
A basic principle of corporate law is that shareholders and officers are not
personally liable for corporate acts. Kaplin v. First Options of Chicago, Inc., 19 F.3d
1505, 1520 (3d Cir. 1994). One exception, “alter ego” liability, applies where a corporate
entity functions as an “artifice and a sham designed to execute illegitimate purposes in
abuse of the corporate fiction and the immunity it carries.” Rose Containerline, Inc., 2011
WL 1253849, at *3 (citing Zubick v. Zubick, 384 F.2d 267, 270 n. 2 (3d Cir.1967)). “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 form a public liability for a crime.” Kaplan v.
First Options of Chicago, Inc., 19 F.3d 1503, 1521 (3d Cir. 1994) (citations omitted).
In support of its alter ego theory, Plaintiff observes that the Rosenthals owned
significant interest in Port Transport, drove its business dealings, and appeared as
signatories to its bank accounts. §§ 8-9; 73-74. But these observations do not distinguish
Port Transport from most other small, family-owned businesses. The Court cannot
disregard the corporate entity and expose the Rosenthals to personal liability merely
because their company is closely-held. See, e.g., Kirno Hill Corp. v. Holt, 618 F.2d 982,
985 (2d Cir. 1980) (citations omitted) (“That Holt is the sole owner of WatersidePennsylvania does not alone justify piercing the corporate veil . . . indeed, individuals
may incorporate for the very purpose of avoiding personal liability.”).
Plaintiff argues that Port Transport’s noncompliance with New Jersey’s business
authorization statute, N.J. Stat. Ann. § 14A:13-11 (West 2016), evinces the entity’s
“failure to observe corporate formalities.” United v. First Options of Chicago, Inc. 19
F.3d 1503, 1521 (3d Cir. 1994) (citations omitted). Yet the statute itself rejects the notion
that failure to register impairs the corporate form. See § 14A:13-11, at (2). (“The failure
of a foreign corporation to obtain a certificate of authority to transact business in this
State shall not impair the validity of any contract or act of such corporation, and shall not
prevent such corporation from defending any action or proceeding in any court of this
State.”). Plaintiff has not alleged facts plausibly showing that Port Transport was merely
an “alter ego” of the Rosenthals.

2

Subject matter jurisdiction also exists under the Interstate Commerce Act. See 49 U.S.C. §
13706.
3

IV.

CONCLUSION

For the reasons foregoing, Defendants’ motion to dismiss is GRANTED.
Plaintiff’s amended complaint is DISMISSED without prejudice as to Defendants
William and Jacob Rosenthal.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
January 23, 2017

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