LOCKWOOD BOAT WORKS, INC. v. MOTOR VESSEL, A "1060" FLYING BRIDGE SPORTSFISH, HER ENGINES, TACKLE, APPAREL & HER APPURTENANCES IN REM et al
Filing
190
OPINION filed. Signed by Judge Joel A. Pisano on 11/5/2013. (eaj)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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Plaintiff,
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v.
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MOTOR VESSEL, A “1960” FLYING
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BRIDGE SPORTFISH, HER ENGINES,
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TACKLE, APPAREL & HER
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APPURTENANCES IN REM & SIGMUND
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BATRUK IN PERSONAM & MOTOR VESSEL, :
A “1979” LUHRS, HER ENGINES, TACKLE,
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APPAREL & HER APPURTENANCES IN
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REM & SIGMUND BATRUK IN PERSONAM, :
et al.,
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Defendants.
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LOCKWOOD BOAT WORKS, INC.,
Civil Action No. 10-cv-6249 (JAP)
OPINION
PISANO, District Judge
Presently before the Court is Defendant, Sigmund Batruk’s (“Defendant”) motion to
vacate the default judgment entered against him in favor of Lockwood Boat Works, Inc.
(“Plaintiff”) [docket #175]. Plaintiff opposes this motion [docket #178] and also moves for Rule
11 sanctions [docket #179]. Defendant opposes Plaintiff’s motion for sanctions and also crossmoves for Rule 11 sanctions [docket #186-188].
Plaintiff also opposes Defendant’s cross-
motion for sanctions [docket #189]. The Court considered the papers filed by the parties and
rules on the written submissions without oral argument pursuant to Federal Rule of Civil
Procedure 78.
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For the reasons that follow, this Court DENIES Defendant’s motion to vacate default
judgment, DENIES Plaintiff’s motion for Rule 11 sanctions, and DENIES Defendant’s crossmotion for Rule 11 sanctions.
I.
BACKGROUND
On December 3, 2010, Plaintiff filed a Complaint against the instant Defendant in
personam and against Motor Vessel, a “1960” Flying Bridge Sportfish, her engines, tackle,
apparel and her appurtenances in rem, and Motor Vessel, a “1979” Luhrs, her engines, tackle,
apparel and her appurtenances in rem (collectively referred to herein as the “motor vessels”)
[docket #1].
On December 16, 1997, Defendant signed three written contracts for “winter storage,” to
cover the period November 1, 1997 through May 1, 1998. Plaintiff alleges that there were
subsequent extensions for equivalent services that were made orally.
See Plaintiff’s
Memorandum of Law in Support of Reply to Sigmund Batruk’s Motion to Vacate Judgment, p. 1.
(“Plaintiff’s Opposition”).
Plaintiff states that Defendant contracted for services totaling
$45,321.43 and that Defendant stopped paying for services rendered after September, 2007
which resulted in additional unpaid balances totaling $20,455.68. Id. at 2. Thus, Defendant
contracted for over 10 years of services incurring total charges of $65,777.11. Id.
Moreover, when Defendant began contracting with Plaintiff, he did so initially through
his purported corporate entity, Rhone-Antilles Corp., U.S.A. (“Rhone-Antilles”), and then from
2003 onward through his wife, Leigh A. Morse. Id. Importantly, however, according to New
York Department of State records, Rhone-Antilles dissolved on September 28, 1994.1 Thus,
1
Defendant argues that the purported corporate entity entering into contracts with Plaintiff was Rhone Antilles
Acceptance Corporation and therefore, Plaintiff’s arguments with respect to the dissolution of Rhone-Antilles Corp.,
U.S.A. are without merit. However, the New York Department of State records reveal that there is only one
corporate entity with the words “Rhone Antilles” in the title and it is that of Rhone-Antilles Corp., U.S.A. Further,
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Defendant was entering into contracts with Plaintiff on behalf of a dissolved entity. Further,
Defendant gave Plaintiff his personal address as the corporate address for Rhone-Antilles and
paid his bills from a personal bank account with Defendant’s wife listed as the sole account
owner.
On April 30, 2012, this Court granted Plaintiff’s motion for default judgment against
Defendant in the amount of $62,312.90, together with attorneys’ fees of $3,404.47, totaling,
$65,717.37 [docket #171]. Nearly one (1) year later, Defendant moves this Court to vacate its
entry of default judgment pursuant to Rule 60(b)(4), and argues that this Court lacked personal
jurisdiction over Defendant thereby rendering the entry of default judgment void. Defendant
raises no other arguments as to why this Court should vacate default judgment.
Further, both parties seek sanctions pursuant to Federal Rule of Civil Procedure 11.
Plaintiff asserts that Defendant’s motion to vacate default judgment is frivolous.
In turn,
Defendant claims that Plaintiff violated Rule 11 by failing to conduct a proper pre-litigation
investigation, failing to review Plaintiff’s own records, bringing a claim against Defendant where
no personal jurisdiction existed, and advancing frivolous arguments in opposition to Defendant’s
motion to vacate.
II.
DISCUSSION
a. Legal Standard – Personal Jurisdiction
Defendant has not provided any evidence which reveals the corporate existence of Rhone Antilles Acceptance Corp.
sufficient to rebut Plaintiff’s allegations. In fact, the certification of Defendant submitted in support of its motion
specifically states that Defendant was the “managing director of Rhone-Antilles Corp., U.S.A.” See Declaration of
Sigmund Batruk in Support of Motion to Vacate Default Judgment, ¶ 3. Accordingly, Defendant’s argument
regarding Rhone Antilles Acceptance Corp.’s jurisdictional corporate veil is irrelevant, as Defendant may not be
shielded by an entity that has never legally existed. Therefore, this Court need not address whether there is
jurisdiction over Defendant in his capacity as a corporate agent of Rhone Antilles Acceptance Corp. See Fashion
Brokerage Int'l, LLC v. Jhung Yuro Int'l LLC, 2011 WL 976478 (D.N.J. Mar. 14, 2011) (“A person is individually
liable for contracts he signs under a nonexistent corporate name”).
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Once personal jurisdiction is challenged the plaintiff has the burden of establishing that
the case is properly before the court. General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d
Cir.2001). In particular, “the plaintiff bears the burden of demonstrating [that] contacts with the
forum state [are] sufficient to give the court in personam jurisdiction.” Mesalic v. Fiberfloat
Corp., 897 F.2d 696, 699 (3d Cir.1990). A plaintiff may satisfy this burden through the use of
affidavits or other competent evidence. Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d
Cir.1996).
Generally, a nexus between the defendant, the forum and the litigation is the essential
foundation of personal jurisdiction. Asahi Metal Indus. Co. v. Superior Court of California,
Solano Cnty., 480 U.S. 102, 108, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). The Third Circuit has
set forth an analytical framework to determine whether personal jurisdiction over a non-resident
defendant is proper. Pennzoil Prods. Co. v. Colelli & Assocs., Inc., 149 F.3d 197, 200 (3d
Cir.1998). This analysis begins with an examination of Federal Rule of Civil Procedure 4(e). Id.
A court must then consider whether the defendant's contacts with the forum state are sufficient to
support general personal jurisdiction. Id. Absent general jurisdiction, a court should determine
whether specific personal jurisdiction exists. Id.
Federal Rule of Civil Procedure 4(e) allows a court to exercise “personal jurisdiction over
non-resident defendants to the fullest extent permissible under the law of the state where the
district court sits.” Pennzoil Prods. Co., 149 F.3d at 200 (citation omitted). New Jersey's longarm statute allows the exercise of personal jurisdiction over non-resident defendants to the fullest
extent permitted by the Due Process Clause of the Fourteenth Amendment. Nicholas v. Saul
Stone & Co., 224 F.3d 179, 184 (3d Cir.2000).
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Due Process requires that a defendant have minimum contacts with the forum state and
that an exercise of jurisdiction over the defendant comport with “‘traditional notions of fair play
and substantial justice.’” Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir.2001) (quoting Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). Further,
“minimum contacts must have a basis in ‘some act by which the defendant purposely avails itself
of the privilege of conducting activities within the forum State, thus invoking the benefits and
protections of its laws.’” Asahi Metal Indus. Co., 480 U.S. at 109 (internal citation omitted).
“Essentially, before hearing a case, a court must ask whether ‘the quality and nature of the
defendant's activity is such that it is reasonable and fair to require [that it] conduct [its] defense
in that state.’” Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir.1984)
(modifications and emphasis in original) (quoting Kulko v.Super. Ct. of Cal., 436 U.S. 84, 92, 98
S.Ct. 1690, 56 L.Ed.2d 132 (1978)). Whether sufficient minimum contacts exist to assert
personal jurisdiction depends upon “the nature of the interactions and type of jurisdiction
asserted.” Telcordia Tech Inc. v. Telkom SA Ltd., 458 F.3d 172, 177 (3d Cir.2006). Where the
cause of action “does not arise out of or relate to the [defendant]'s activities in the forum State,”
but the defendant has “continuous and systematic” contacts with the forum state sufficient to
confer personal jurisdiction, a court is said to exercise general jurisdiction over the defendant.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414–16, 104 S.Ct. 1868, 80
L.Ed.2d 404 n. 9 (1984). On the other hand, a court exercises specific jurisdiction when the
defendant has limited contacts with the forum state but the suit against him arises out of or
relates to those contacts. Id. at 414 n. 8.
b. Analysis – Personal Jurisdiction
i.
Choice of Law
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Here, Defendant contends that, despite Rhone-Antilles’ dissolution, Defendant was
winding up its corporate affairs and therefore, this Court does not have personal jurisdiction over
Defendant personally as he was still acting in his capacity as a corporate agent. In support of the
winding up argument, Defendant cites New York law and states that “[b]ecause Rhone-Antilles
is a New York corporation, New York law governs issues relating to the internal affairs of the
corporation, such as dissolution. In re McGregor, 182 B.R. 96, 99 (S.D.N.Y. 1995) (citing First
Nat’l City Bank v. Banco Para el Comercio, 462 U.S. 611, 621 (1983))” See Defendant’s Reply
Brief, p. 5. Defendant conveniently omits that the Court in First Nat’l City Bank continued on to
state that “[d]ifferent conflicts principles apply, however, where the rights of third parties
external to the corporation are at issue.” First Nat’l City Bank v. Banco Para El Comercio
Exterior de Cuba, 462 U.S. 611, 621, 103 S. Ct. 2591, 2597 (1983) (emphasis in original).
The Restatement (Second) of Conflict of Laws § 301 governs the conflict of law issue
here. § 301 states that “[t]he rights and liabilities of a corporation with respect to a third [party]
that arise from a corporate act of a sort that can likewise be done by an individual are determined
by the same choice-of-law principles as are applicable to non-corporate parties.” Comment b. to
§ 301 further provides that “[a] corporation's rights and duties under a contract are determined by
the law selected by application of the rules of §§ 187- 188.” Here, the parties did not agree to a
choice of law provision and therefore, in determining what law applies to whether Defendant
was “winding up” Rhone-Antilles’ corporate affairs, this Court will apply the rules set forth in
the Restatement (Second) of Conflict of Laws § 188. § 188 provides:
(1) The rights and duties of the parties with respect to an issue in contract are
determined by the local law of the state which, with respect to that issue, has
the most significant relationship to the transaction and the parties under the
principles stated in § 6.
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(2) In the absence of an effective choice of law by the parties (see § 187), the
contacts to be taken into account in applying the principles of § 6 to determine
the law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of
business of the parties.
These contacts are to be evaluated according to their relative importance with
respect to the particular issue.
(3) If the place of negotiating the contract and the place of performance are in the
same state, the local law of this state will usually be applied, except as
otherwise provided in §§ 189- 199 and 203.
Here, the parties entered into the contract in New Jersey. See Plaintiff’s Complaint ¶ 6.
The subject of the contract was for repair services and storage of Defendant’s vessels. Id. The
storage facility is located, and repairs were all performed, in New Jersey. Further, Plaintiff is
incorporated in New Jersey and maintains its place of business in New Jersey. The only tie to
New York is that Rhone-Antilles is incorporated under the laws of New York and Defendant
resides in New York. New York certainly does not have the type of significant relationship to
the transaction and the parties as contemplated by the Restatement (Second) of Conflict of Laws
§§ 6 and 188. Conversely, all other aspects of this case are directly connected to and/or arose in
New Jersey. Pursuant to the standard(s) set forth in the Restatement (Second) of Conflict of
Laws § 188, it is clear to the Court that New Jersey law applies to this case.
ii.
“Winding Up”
“The law in New Jersey with regard to the ability of dissolved corporations to be sued is
the New Jersey Business Corporation Act, N.J.S.A. § 14A:1-1 et seq.”
Global Landfill
Agreement Grp. v. 280 Dev. Corp., 992 F. Supp. 692, 695 (D.N.J. 1998). N.J.S.A. § 14A:12-9(1)
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provides that “[e]xcept as a court may otherwise direct, a dissolved corporation shall continue its
corporate existence but shall carry on no business except for the purpose of winding up its affairs
by (a) collecting its assets; (b) conveying for cash or upon deferred payments, with or without
security, such of its assets as are not to be distributed in kind to its shareholders; (c) paying,
satisfying and discharging its debts and other liabilities; and (d) doing all other acts required to
liquidate its business and affairs.”
Defendant contends that collecting corporate assets includes the power to “take care of
the corporation’s property”, and that here, Defendant was taking care of Rhone-Antilles’
property when he made arrangements with Plaintiff for the vessels’ storage.
Therefore,
Defendant claims, his conduct and contract negotiations with Plaintiff constituted winding up
Rhone-Antilles’ affairs.
This Court disagrees.
Winding up means that “the life of the
corporation itself is prolonged, being continued as a body corporate ‘for the purposes of
prosecuting and defending suits of enabling them to settle and close their affairs, of disposing of
and conveying their property and of dividing their capital, but not for the purpose of continuing
the business for which they were established.” Matawan Bank v. Matawan Tile Co., 2 N.J. 116,
126-27, 65 A.2d 729, 734 (1949).
Further, the property of a dissolved corporation becomes a trust fund for the benefit of
creditors and stockholders, and to be administered by the directors as statutory trustees. Id. “. . .
[T]he powers of the trustees in the administration of their trust extend only to winding up the
affairs of the corporation and distributing its assets and to such other matters as may be
necessarily incidental to the exercise of these functions.” Id.
Importantly, this “does not
contemplate the continuation of the business of the defunct corporation.” Id. Here, Defendant
merely alleges that he was “taking care” of Rhone-Antilles’ property by making storage
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arrangements with Plaintiff. Defendant does not provide any evidence that he was “taking care”
of these assets in an effort to distribute them and/or benefit Rhone-Antilles’ creditors or
stockholders, nor does he provide proof that he was acting in a position as a trustee of RhoneAntilles’ property. Rather, it is clear to this Court that Defendant entered into a contract with
Plaintiff and continued negotiations with Plaintiff for several years on behalf of a defunct
corporation, continued making payments in lieu of such negotiations, and made these payments
from a personal account, not as a corporate trustee. Defendant’s conduct can hardly be described
as winding up the corporate affairs of Rhone-Antilles; therefore, the Court finds that Defendant
was not acting as a corporate agent for purposes of personal jurisdiction.
iii.
General Jurisdiction
When a party is subject to the general jurisdiction of a state, that party may be called to
answer any claim against it, regardless of whether the subject matter of the cause of action has
any connection to the forum. Pennzoil Prods. Co., 149 F.3d at 200. Thus, a plaintiff must
demonstrate significantly more than “minimum contacts” to establish general jurisdiction over a
defendant. Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Assoc., 819 F.2d 434, 437 (3d
Cir.1987). In order to establish general personal jurisdiction, a plaintiff must show that the
nonresident defendant's contacts with the state are both “continuous and systematic.”
Helicopteros, 466 U.S. at 414–416 (1984).
Here, Plaintiff fails to allege that Defendant had contacts with the state that were both
continuous and systematic. Plaintiff claims generally that Defendant arranged for a decade of
services, but concludes this same allegation by stating that “such actions and inactions supplied
the minimum contracts [sic] needed to attain specific, personal jurisdiction…” See Plaintiff’s
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Opposition, at p. 8 (emphasis supplied). Accordingly, Plaintiff has failed to establish that
general personal jurisdiction exists over Defendant.
iv.
Specific Jurisdiction
“Specific jurisdiction exists when the claim arises from or relates to conduct purposely
directed at the forum state.” Marten v. Godwin, 499 F.3d 290, 296 (3d Cir.2007). The analysis
with respect to whether specific jurisdiction exists involves a three-part inquiry: First, the
defendant must have purposefully directed his activities at the forum. Second, the plaintiff's
claim must arise out of or relate to at least one of those specific activities. Third, courts may
consider additional factors to ensure that the assertion of jurisdiction otherwise comport[s] with
fair play and substantial justice.” Id. (citations and internal quotations omitted, alteration in
original). The analysis of questions of specific jurisdiction focuses on the relationship between
the claims and contacts. Id.
Here, the Court finds that Defendant had sufficient minimum contacts with New Jersey.
Defendant purposefully traveled to New Jersey and entered into negotiations with Plaintiff to
have his vessels stored and repaired in New Jersey. Further, the suit against Defendant arises out
of these contacts. Plaintiff’s claim(s) stems directly from Defendant’s failure to pay for the
services which were contracted for in, and to be performed in, New Jersey. Thus, a strong
relationship exists between Plaintiff’s claims and Defendant’s contacts with New Jersey
sufficient to establish specific jurisdiction, and the Court finds that allowing Defendant to be
sued in New Jersey does not offend traditional notions of fair play and substantial justice. Thus,
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because this Court has personal jurisdiction, Defendant’s argument that the entry of default
judgment is void due to lack of personal jurisdiction is rejected.2
Accordingly, Defendant’s motion to vacate default judgment is DENIED.
c. Legal Standard – Rule 11 Sanctions
“The legal standard to be applied when evaluating conduct allegedly violative of Rule 11
is reasonableness under the circumstances, with reasonableness defined as an ‘objective
knowledge or belief at the time of the filing of a challenged paper’ that the claim was wellgrounded in law and fact.” Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 289
(3d Cir. 1991) (internal citation omitted) (citing Jones v. Pittsburgh National Corp., 899 F.2d
1350, 1359 (3d Cir. 1990)). Further, sanctions are appropriate “only in the ‘exceptional
circumstance’ where a claim or motion is patently unmeritous or frivolous.” Id. (citing Doering
v. Union County Board of Chosen Freeholders, 857 F.2d 191, 194 (3d Cir.1988)) (citations
omitted).
d. Analysis – Rule 11 Sanctions
Here, Plaintiff moves the Court to enter sanctions against Defendant because Defendant’s
argument that this Court lacked personal jurisdiction when entering default judgment is frivolous
and without merit. While the Court ultimately disagrees with the choice of law and arguments
set forth in Defendant’s motion to vacate, the Court cannot agree with Plaintiff that these
arguments were unreasonable under the circumstances. Defendant provided legal support for the
assertions made throughout the motion to vacate and properly set forth the factual history of the
dispute. Merely ruling against a party’s motion does not obligate the Court to deem it frivolous,
and Defendant’s motion to vacate does not constitute the type of exceptional circumstance and/or
2
Because this Court finds that it has specific personal jurisdiction, Defendant’s alternative argument that there is no
personal jurisdiction pursuant to the Supplemental Rules for Admiralty claims, and that under attachment and
Supplemental Rule B the judgment should be reduced to $1,000.00, is moot.
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patently unmeritous motion that Rule 11 is designed to deter. Accordingly, Plaintiff’s motion for
Rule 11 sanctions is DENIED.
Similarly, Defendant cross-moves the Court to enter sanctions against Plaintiff because
Plaintiff failed to conduct a proper pre-litigation investigation, failed to review Plaintiff’s own
records, brought a claim against Defendant when no basis for personal jurisdiction existed, and
ignored statutory and case law in opposing Defendant’s motion to vacate. First, Defendant’s
contentions that Plaintiff failed to conduct a proper pre-litigation investigation and review
Plaintiff’s own records are mere conclusions. Defendant sets forth no facts to support these
theories and certainly does not bring these claims to the level of an exceptional circumstance
warranting sanctions. Second, this Court cannot find that Plaintiff should be sanctioned for
bringing a claim against Defendant when no basis for personal jurisdiction existed, as the Court
has found that personal jurisdiction over Defendant does exist in this case. Third, and finally,
this Court is unaware of how Plaintiff ignored statutory and case law in opposing Defendant’s
motion to vacate. Rather, Plaintiff cited relevant statutes and case law throughout its opposition.
Plaintiff’s claims and arguments were reasonable under the circumstances and were meritorious.
Accordingly, Defendant’s cross-motion for Rule 11 sanctions is DENIED.
III.
CONCLUSION
For the foregoing reasons, this Court DENIES Defendant’s motion to vacate default
judgment [docket #175], DENIES Plaintiff’s motion for Rule 11 sanctions [docket #179], and
further DENIES Defendant’s cross-motion for Rule 11 sanctions [docket #186]. An appropriate
Order accompanies this Opinion.
Date: November 5, 2013
/s/ Joel A. Pisano
JOEL A. PISANO
United States District Judge
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