Transystems Corporation v. Hughes Associates, Inc.
Filing
19
MEMORANDUM OPINION (Order to follow as separate docket entry) re 10 Motion to Dismiss. Signed by Magistrate Judge Martin C. Carlson on November 24, 2014. (kjn)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
TRANSYSTEMS CORPORATION
Plaintiff
v.
HUGHES ASSOCIATES, INC.,
Defendant
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Civil No. 1:14-CV-1541
(Magistrate Judge Carlson)
MEMORANDUM OPINION
I.
Statement of Facts and of The Case
This case, which comes before us for resolution of a motion to dismiss, is a
contract and contract indemnification action which arises out of an Air National
Guard base hangar construction project. According to the well-pleaded facts in the
plaintiff’s complaint on October 1, 2008, Kinsley Construction Company (“Kinsley”)
was awarded a contract to construct the this Air National Guard hangar. (Doc. 1, ¶6.)
Kinsley then retained the plaintiff, TranSystems, to serve as fire protection consultant
for the purposes of designing and installing a fire suppression system within the
hangar. (Id., ¶7.) TranSystems in turn, hired the defendant, Hughes, as a subconsultant to design the fire suppression system for the hangar.
(Id., ¶8.)
TranSystems alleges that Hughes failed to perform its engineering functions under
the contract in a timely and professionally competent manner. (Id., ¶¶15-16.) As a
result TranSystems was unable to perform its contractual obligations to Kinsley. (Id.)
Consequently, Kinsley removed TranSystems from this project and filed claims
against TransSystems alleging that the fire suppression system designs were improper
and resulted in delays. On August 17, 2012, Kinsley and TranSystems settled all
claims related to this matter. As part of this settlement, TranSystems specifically
retained the right to pursue Hughes based on its role in causing Kinsley’s damages.
(Doc. 1, ¶¶18-19.)
Cast against this factual background TranSystems brings two claims against
Hughes. First, TranSystems alleges that Hughes breached its contract with the
plaintiff by, in part, “[f]ailing to provide designs in accordance with the skill and care
required of its profession.” (Id., ¶23.c.) In addition, TranSystems brings a claim of
contractual indemnity against Hughes arising out of this allegedly deficient
performance of professional services under the agreement between these parties. (Id.,
¶¶26-29.)
TranSystems filed this complaint against Hughes on August 6, 2014. (Doc. 1.)
Following service of the complaint, Hughes moved to dismiss this complaint on
October 10, 02014. (Doc. 10.) Citing the language of TranSystems’ complaint,
which couched this contractual dispute in terms of a breach resulting from Hughes
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“[f]ailing to provide designs in accordance with the skill and care required of its
profession,” (Doc. 1, ¶23.c), Hughes contends in its motion to dismiss that the
complaint should be dismissed because TranSystems had failed to timely file a
certificate of merit with respect to these claims which alleged that Hughes failed to
meet the level of skill and care required in the profession, as required under
Pennsylvania state practice by Rule 1042.3 of the Pennsylvania Rules of Civil
Procedure.
Within six days of the filing of this motion, on October 16, 2014, TranSystems
responded to this motion to dismiss by filing a certificate of merit certifying “that an
appropriate licensed professional has supplied a written statement to the undersigned
that there is a basis to conclude that the care, skill or knowledge exercised or
exhibited by Hughes Associates, Inc. in the above-captioned action in the practice
relating to their contract with TranSystems Corporation that is the subject of the
instant Complaint, fell outside acceptable professional standards and that such
conduct was a cause in bringing about the harm.” (Doc. 12.) Thus, the deficiency
cited by Hughes in its motion to dismiss has now been fully addressed by
TranSystems, and was addressed within 71 days of the filing of this lawsuit.
Notwithstanding this fact, the parties have continued to litigate this matter, in
part because defendant Hughes contends that a dismissal of this action for failure to
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comply with Rule 1042.3 may, in turn, bar this complaint under the applicable statute
of limitations. TranSystems contests this suggested assertion of the statute of
limitations, and argues that this motion to dismiss should be denied in light of its
current compliance with Rule 1042.3.
For the reasons set forth below, the motion to dismiss will be denied.
II.
Discussion
A.
Motion to Dismiss–Standard of Review
A motion to dismiss tests the legal sufficiency of a complaint. Rule 12(b)(6)
of the Federal Rule of Civil Procedure 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), and dismissal is appropriate only
if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed
to plead “enough facts to state a claim to relief that is plausible on its face,” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The facts alleged must be
sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S.
544, 555. This requirement “calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence” of necessary elements of the plaintiff’s cause of
action. Id. at 556. Furthermore, in order to satisfy federal pleading requirements, the
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plaintiff must “provide the grounds of his entitlement to relief,” which “requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)
(brackets and quotation marks omitted) (quoting Twombly, 550 U.S. at 555).
In practice, consideration of the legal sufficiency of a complaint entails a threestep analysis: “First, the court must ‘tak[e] note of the elements a plaintiff must plead
to state a claim.’ Iqbal, 129 S.Ct. at 1947. Second, the court should identify
allegations that, ‘because they are no more than conclusions, are not entitled to the
assumption of truth.’ Id. at 1950. Finally, ‘where there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.’ Id.” Santiago v. Warminster Tp., 629
F.3d 121, 130 (3d Cir. 2010).
As the court of appeals has observed: “The Supreme Court in Twombly set
forth the ‘plausibility’ standard for overcoming a motion to dismiss and refined this
approach in Iqbal. The plausibility standard requires the complaint to allege ‘enough
facts to state a claim to relief that is plausible on its face.’ Twombly, 550 U.S. at 570,
127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual
pleadings ‘allow[ ] the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.’ Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550
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U.S. at 556, 127 S.Ct. 1955). This standard requires showing ‘more than a sheer
possibility that a defendant has acted unlawfully.’ Id. A complaint which pleads
facts ‘merely consistent with’ a defendant's liability, [ ] ‘stops short of the line
between possibility and plausibility of “entitlement of relief.” ’ ” Burtch v. Milberg
Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011) cert. denied, 132 S. Ct. 1861, 182
L. Ed. 2d 644 (U.S. 2012).
In considering a motion to dismiss, the court generally relies on the complaint,
attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263,
268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s]
that a defendant attached as an exhibit to a motion to dismiss if the plaintiff’s claims
are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White
Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose
contents are alleged in the complaint and whose authenticity no party questions, but
which are not physically attached to the pleading, may be considered.” Pryor v. Nat’l
Collegiate Athletic Ass’n, 288 F.3d 548, 560 (3d Cir. 2002); see also, U.S. Express
Lines, Ltd. v. Higgins, 281 F.3d382, 388 (3d Cir. 2002) (holding that “[a]lthough a
district court may not consider matters extraneous to the pleadings, a document
integral to or explicitly relied upon in the complaint may be considered without
converting the motion to dismiss in one for summary judgment.”). However, the
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court may not rely on other parts of the record in determining a motion to dismiss.
Jordan v. Fox, Rothschild, O’Brien &Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
B.
The Application of Rule 1042.3 To This Dispute
As a federal court exercising diversity jurisdiction in this case, we are obliged
to apply the substantive law of Pennsylvania to this dispute. Chamberlain v.
Giampapa, 210 F.3d 154, 158 (3d. Cir. 2000). In this case we must consider how a
substantive requirement of Pennsylvania law, which directs that parties bringing
professional liability claims file a certificate of merit attesting that they possess
evidence of a breach of a professional standard of care, applies to this particular
contractual dispute.
Under Pennsylvania law, when parties bring claims that licensed professionals
deviated from an acceptable professional standard, the attorney for the plaintiff must
file with the complaint, or within sixty days after the filing of the complaint, a
certificate of merit signed by the attorney or party. This requirement is imposed upon
parties bringing professional negligence claims by Pa.R.C.P. No. 1042.3 ("Rule
1042.3") which provides in pertinent part as follows:
Rule 1042.3. Certificate of Merit
(a) In any action based upon an allegation that a licensed
professional deviated from an acceptable professional
standard, the attorney for the plaintiff, or the plaintiff if not
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represented, shall file with the complaint or within sixty
days after the filing of the complaint, a certificate of merit
signed by the attorney or party that either
(1) an appropriate licensed professional has supplied a
written statement that there exists a reasonable probability
that the care, skill or knowledge exercised or exhibited in
the treatment, practice or work that is the subject of the
complaint, fell outside acceptable professional standards
and that such conduct was a cause in bringing about the
harm, or
(2) the claim that the defendant deviated from an
acceptable professional standard is based solely on
allegations that other licensed professionals for whom this
defendant is responsible deviated from an acceptable
professional standard, or
(3) expert testimony of an appropriate licensed professional
is unnecessary for prosecution of the claim.
The requirements of Rule 1042.3 are deemed substantive in nature and,
therefore, federal courts in Pennsylvania must apply these prerequisites of
Pennsylvania law when assessing the merits of a professional liability claim. LiggonReading v. Estate of Sugarman, 659 F.3d 258 (3d Cir. 2011); Iwanejko v. Cohen &
Grigsby, P.C., 249 F Appx. 938, 944 (3d Cir.2007); Ramos v. Quien, 631 F. Supp. 2d
601, 611 (E.D. Pa. 2008); Stroud v. Abington Memorial Hosp., 546 F.Supp.2d 238,
248 (E.D.Pa.2008) (noting that Pennsylvania federal courts “have uniformly held that
the COM requirement is a substantive rule of law that applies in professional liability
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actions proceeding in federal court”). Moreover, this requirement has been expressly
applied by federal courts to cases, like the instant lawsuit, which involve claims of
breach of contract where those breach of contract allegations are grounded in the
alleged failure of a licensed professional to perform in accordance with the skill and
care required of the profession. See Perez v. Griffin, 304 F. App'x 72, 75 (3d Cir.
2008)(breach of contract claim against attorney, Rule 1042.3 applied) citing Varner
v. Classic Cmtys. Corp., 890 A.2d 1068, 1074 (Pa. Super. Ct.2006) (explaining that
“it is the substance of the complaint rather than its form” that controls whether a
claim is for professional liability and whether a certificate of merit is required).
In contrast to the substantive clarity of this rule, the procedural aspects of
enforcement of Pennsylvania Rule 1042.3 to cases in federal court are somewhat
murky. Several factors contribute to this procedural uncertainty. Most notably, this
confusion is a function of the fact that the procedural mechanisms for ensuring
compliance with the dictates of Rule 1042.3 vary widely between the state and federal
courts. For example, we note that the sanction imposed under state law for a violation
of this rule is entry of a non pros by the prothonotary. Therefore, “[i]n Pennsylvania,
the prothonotary enters judgment of non pros as soon as the Defendant files a
praecipe that complies with the requirements of Rule 1042.7 without court
involvement. Pa. R. Civ. P. 1042.7.” Keel-Johnson v. Amsbaugh, No. 1:07-CV-s00,
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2009 WL 648970, at *3 (M.D. Pa. Mar. 10, 2009). This state procedure has no
precise analogue in the federal system. Rather, federal courts address this state
practice by analogy, and have held in this context that “the entry of non pros is a
default judgment that does not bar the plaintiff from commencing another suit based
upon the same cause of action.” Bresnahan v. Schenker, 498 F.Supp.2d 758, 762
(E.D. Pa. 2007)(quoting, Scaramuzza v. Sciolla, 345 F.Supp.2d 508, 511 (E.D. Pa.
2004). Moreover, under Pennsylvania law, a party can seek relief from a non pros
dismissing a case under Rule 1042.3, by coming into compliance with the rule,
showing that there is a meritorious cause of action, and providing a reasonable
explanation or legitimate excuse for then earlier non-compliance. See Womer v.
Hilliker, 908 A.2d 269 (Pa. 2006); see also Pa.R.C.P. No. 3051.
Furthermore, Pennsylvania practice also expressly provides plaintiffs with
notice of Rule 1042.3's requirements and an opportunity to cure any failure to file a
certificate of merit before a matter is dismissed. Under Pennsylvania Rule 1042.6:
(a) . . . a defendant seeking to enter a judgment of non pros under Rule
1042.7(a) shall file a written notice of intention to file the praecipe and
serve it on the party's attorney of record or on the party if unrepresented,
no sooner than the thirty-first day after the filing of the complaint.
Pa. R. Civ. P. 1042.6(a). No judgment of non pros can be entered against the plaintiff
for failure to timely file a certificate of merit until the defendant has complied with
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the notice requirements of Rule 1042.6(a). Pa. R. Civ. P. 1042.7(a)(4); Keel-Johnson
v. Amsbaugh, No. 1:07-CV-200, 2009 WL 648970, at *4 (M.D. Pa. Mar. 10, 2009).
Unlike the substantive requirements of Rule 1042.3, which are uniformly
construed to require the filing of a certificate of merit in diversity cases brought in
federal court, the notice provisions of Rule 1042.6 have been viewed in different
ways by the federal courts. Some courts seem to endorse expressly extending this
notice requirement to state claims brought into federal court under diversity
jurisdiction. Fabian v. United States, No. CIV.A. 13-1656, 2013 WL 5525647, at *2
(E.D. Pa. Oct. 7, 2013). In contrast, Rule 1042.6's notice provisions have been
construed by a number of other federal courts to be state procedural rules which are
not binding upon the federal courts. See e.g., Keybank Nat'l. Ass'n. v. Reidbord, No.
CIV.A. 05 144, 2005 WL 3184781, at *11 (W.D. Pa. Nov. 29, 2005); Abdulhay v.
Bethlehem Med. Arts, L.P., No. CIV.A. 03-CV-04347, 2005 WL 2416012, at *11
(E.D. Pa. Sept. 28, 2005). However, it is not necessary to resolve this particular
debate in the instant case because, in practice, those federal courts that have eschewed
direct application of Rule 1042.6 to diversity cases have still embraced the concepts
of notice, fairness and prejudice which inform the requirements of Rule 1042.6 in
their resolution of these claims. Thus, federal courts have frequently declined to
dismiss cases pursuant to Rule 1042.3 where the plaintiff has timely cured the failure
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to file a certificate of merit by filing a certificate of merit after receiving notice of this
deficiency from the defendant. See Robles v. Casey, No. 1:10 CV 2663, 2012 WL
382986, at *3 (M.D. Pa. Feb. 6, 2012) (denying dismissal based on the untimely filing
of the certificate of merit, which plaintiff filed eight days after defendant raised the
issue); Keybank Nat'l. Ass'n. v. Reidbord, No. CIV.A. 05-144, 2005 WL 3184781,
at *10 (W.D. Pa. Nov. 29, 2005); Scaramuzza v. Sciolla, 345 F. Supp. 2d 508, 511
(E.D. Pa. 2004).
In reaching this result, those federal cases which have declined to directly
apply Pennsylvania Rule 1042.6 to cases involving an initial failure to comply with
Rule 1042.3 have instead held that in this setting a motion to dismiss should be
judged against the standards set by Rule 41(b) of the Federal Rules of Civil Procedure
for the dismissal of a case for failure to prosecute. See, e.g., Keel-Johnson v.
Amsbaugh, No. 1:07-CV-200, 2009 WL 648970, at *4 (M.D. Pa. Mar. 10, 2009);
Keybank Nat'l. Ass'n. v. Reidbord, No. CIV.A. 05-144, 2005 WL 3184781, at *12
(W.D. Pa. Nov. 29, 2005); Abdulhay v. Bethlehem Med. Arts, L.P., No. CIV.A. 03CV-04347, 2005 WL 2416012, at *1 (E.D. Pa. Sept. 28, 2005). Rule 41(b) of the
Federal Rules of Civil Procedure, in turn, authorizes a court to dismiss a civil action
for failure to prosecute, stating that: “If the plaintiff fails to prosecute or to comply
with these rules or a court order, a defendant may move to dismiss the action or any
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claim against it.” Fed. R. Civ. P. 41(b). Decisions regarding dismissal of actions for
failure to prosecute rest in the sound discretion of the Court, and will not be disturbed
absent an abuse of that discretion. Emerson v. Thiel College, 296 F.3d 184, 190 (3d
Cir. 2002)(citations omitted). That discretion, however, while broad is governed by
certain factors, commonly referred to as Poulis factors. As the United States Court
of Appeals for the Third Circuit has noted:
To determine whether the District Court abused its
discretion [in dismissing a case for failure to prosecute], we
evaluate its balancing of the following factors: (1) the
extent of the party's personal responsibility; (2) the
prejudice to the adversary caused by the failure . . . ; (3) a
history of dilatoriness; (4) whether the conduct of the party
or the attorney was willful or in bad faith; (5) the
effectiveness of sanctions other than dismissal, which
entails an analysis of alternative sanctions; and (6) the
meritoriousness of the claim or defense. Poulis v. State
Farm Fire and Cas. Co., 747 F.2d 863, 868 (3d Cir.1984).
Emerson, 296 F.3d at 190.
In exercising this discretion “there is no ‘magic formula’ that we apply to
determine whether a District Court has abused its discretion in dismissing for failure
to prosecute.” Lopez v. Cousins, 435 F. App'x 113, 116 (3d Cir. 2011)(quoting
Briscoe v. Klem, 538 F.3d 252 (3d Cir. 2008)). Therefore, “[i]n balancing the Poulis
factors, [courts] do not [employ] a . . . ‘mechanical calculation’ to determine whether
a District Court abused its discretion in dismissing a plaintiff's case. Mindek v.
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Rigatti, 964 F.2d 1369, 1373 (3d Cir.1992).” Briscoe v. Klaus, 538 F.3d at 263.
Consistent with this view, it is well-settled that “ ‘no single Poulis factor is
dispositive,’ Ware, 322 F.3d at 222, [and it is] clear that ‘not all of the Poulis factors
need be satisfied in order to dismiss a complaint.’ Mindek, 964 F.2d at 1373.”
Briscoe v. Klaus, 538 F.3d at 263.
Here, an assessment of the factors which guide our consideration of this motion
under Rule 41 strongly weighs against dismissal of this action on the basis of a brief
delay by TranSystems in filing a certificate of merit under Rule 1042.3. At the outset,
we note that three of the Poulis factors which would favor dismissal–the degree of the
plaintiff’s personal responsibility; any history of dilatoriness; and whether the
conduct of the party or the attorney was willful or in bad faith–simply are not present
in this case. There is no showing of willful, culpable, dilatory conduct by the
plaintiff. Quite the contrary when the potential application of Rule 1042.3 was
brought to the plaintiff’s attention, the plaintiff moved with alacrity, curing this
failure to file a certificate of merit within 6 days of receiving notice of this matter
through the filing of the defendant’s motion to dismiss, and a mere 71 days after the
filing of the complaint. On similar facts, courts have frequently declined invitations
to dismiss cases pursuant to Rule 1042.3. See Robles v. Casey, No. 1:10 CV 2663,
2012 WL 382986, at *3 (M.D. Pa. Feb. 6, 2012) (denying dismissal based on the
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untimely filing of the certificate of merit, which plaintiff filed eight days after
defendant raised the issue); Keybank Nat'l. Ass'n. v. Reidbord, No. CIV.A. 05-144,
2005 WL 3184781, at *10 (W.D. Pa. Nov. 29, 2005); Scaramuzza v. Sciolla, 345 F.
Supp. 2d 508, 511 (E.D. Pa. 2004).
Furthermore, we find that at least two other Poulis factors–the effectiveness of
sanctions other than dismissal and the meritoriousness of the claim–are either
inapplicable or incapable of meaningful measurement in this case. For example, since
we find nothing culpable about the brief delay in filing this certificate of merit, we
need not assess whether lesser sanctions than dismissal are appropriate. Instead, we
find that no sanction is necessary or appropriate in this case. We also conclude that
the potential merit of the plaintiff’s claim is not subject to any informed assessment
at this early stage in the litigation and, therefore, this factor does not contribute in a
meaningful way to a Rule 41(b) dismissal analysis.
Finally, while the defendant suggests that it will suffer prejudice if this motion
to dismiss is not granted because Hughes contends that this claim is barred by the
statute of limitations, Hughes does not persuasively explain how it would be
prejudiced in advancing this statute of limitations claim if we declined to dismiss this
action under Rule 1042.3. Indeed, Hughes’ argument seems to be that TranSystems’
complaint was time-barred in August 2014, when it was first filed, since Hughes
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contends that the four year statute of limitations “began to accrue in July 2010.”
(Doc. 18, p. 6.) While we need not resolve this statute of limitations claim, which is
not directly before us at the present time, suffice it to say that if Hughes is correct in
its assessment of when this claim accrued in July 2010, then a decision to deny this
motion to dismiss would not prejudice Hughes’ presentation of this statute of
limitations defense, since the original complaint would have been untimely in any
event. Likewise, if TranSystems is correct that the four-year limitations period does
not expire until October 2015, then our decision to deny this motion to dismiss would
not materially effect consideration of the merits of any statute of limitations claim.
Therefore, Hughes simply has not shown any prejudice to this legal defenses which
might arise due to the denial of this motion to dismiss.
Indeed, it is difficult to perceive what demonstrable prejudice could arise in
this case since the period of TranSystems’ non-compliance with Rule 1042.3 was
fleeting, fixed and finite. TranSystems filed this complaint on August 6, 2014.
(Doc. 1.) Since Rule 1042.3 allows a plaintiff to file a certificate of merit within 60
days after the filing of a complaint, TranSystems was not delinquent in this regard
until 60 days had elapsed, on or after October 5, 2014. Within 5 days of falling into
non-compliance with this rule, TranSystems was placed on notice that Hughes
regarded this matter as a material non-compliance when Hughes filed this motion to
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dismiss on October 10, 2014. Six days later, on October 16, 2014, TranSystems came
into compliance with Rule 1042.3 by filing a certificate of merit.
On these facts, where the alleged failure to comply with Rule 1042.3 extended
over a duration of only 11 days, we cannot find that Hughes has suffered the form of
direct, concrete prejudice which would justify dismissal of this action. Therefore,
since the Poulis factors which guide our discretion under Rule 41(b) plainly do not
support dismissal of this action, the motion to dismiss will be denied.
An order consistent with this memorandum opinion shall issue separately.
S/MARTIN C. CARLSON
Martin C. Carlson
United States Magistrate Judge
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