Alliance Shippers Inc v. Midland West Inc.

• Decision Date: 13 May 2011
• Docket Number: Civil Action 2:10-cv-03729 (DMC)(JAD)
• Court: U.S. District Court — District of New Jersey
• Parties: ALLIANCE SHIPPERS, INC., Plaintiff, v. MIDLAND WEST, INC. Defendant

ALLIANCE SHIPPERS, INC., Plaintiff, v. MIDLAND WEST, INC. Defendant

Civil Action 2:10-cv-03729 (DMC)(JAD)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Dated: May 13, 2011

NOT FOR PUBLICATION

Hon. Dennis M. Cavanaugh

OPINION

DENNIS M. CAVANAUGH, U.S.D.J.:

This matter comes before the Court upon motion by Midland West, Inc. ("Defendant") pursuant to Fed. R. Civ. P. 12(b)(6), 12(b)(2) and 12(b)(3), as well as Defendant's motion for sanctions pursuant to Fed. R. Civ. P. 11 and 28 U.S.C. § 1927. Pursuant to Fed. R. Civ. P. 78, no oral argument was heard. For the reasons stated herein, Defendant's motion to dismiss is granted with prejudice, and Defendant's motion for sanctions is denied.

I. BACKGROUND

Alliance Shippers, Inc. ("Plaintiff") is an intermodal freight transportation company headquartered in Englewood Cliffs, New Jersey. Midland West, Inc. ("Defendant") is a California corporation with a principal place of business in Montebello, California. Between 2005 and 2007, Plaintiff engaged Defendant to transport freight on behalf of Plaintiff's customers. Plaintiff alleges that with the exception of twelve shipments that form the basis of this case, Defendant paid all ofPlaintiff's invoices to Plaintiff's corporate headquarters in New Jersey. Plaintiff alleges that it is owed $29,410.20, an amount which Defendant disputes and claims was offset by overcharges and unpaid shipments.

In March, 2009 Plaintiff filed a complaint in the New Jersey Superior Court, Middlesex County, Docket No. MID-L-2642-09. Defendant moved to dismiss based on lack of personal jurisdiction. The motion was granted by the Superior Court by Order dated June 26, 2009. On Plaintiff's motion for reconsideration, the Superior Court issued an Order granting Plaintiff leave to obtain discovery on the issue of personal jurisdiction. Plaintiff's state court complaint was dismissed by Order, dated January 8, 2010. Although Plaintiff filed a notice of appeal, that appeal was withdrawn when the instant suit was filed in Federal court. The Federal case is entirely duplicative of the state court complaint.

II. LEGAL STANDARD

A. Fed. R. Civ. P. 12(b)(1) Rule 12(b)(1) provides for dismissal of an action based on lack of subject matter jurisdiction. See Fed.R.Civ.P. 12(b)(1). When the existence of subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff bears the burden to show that the court has the requisite jurisdiction to hear the case. See, e.g., Hedges v. United States, 404 F.3d 744, 750 (3d Cir.2005); Mortensen v. First Federal Savings and Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977). In adjudicating such a Rule 12(b)(1) motion, the court may not presume that the plaintiff's allegations are true, but instead, must conduct an evaluation of the merits of the jurisdictional claims. See, e.g., Hedges, 404 F.3d at 750.B. Fed. R. Civ. P. 12(b)(2)

Pursuant to Fed.R.Civ.P. 4(e), a district court may exercise jurisdiction over a non-resident defendant to the extent permitted by the law of the state where the district court sits. See Fed.R.Civ.P. 4(e). "A federal court sitting in New Jersey has jurisdiction over parties to the extent provided under New Jersey state law." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 96 (3d Cir.2004). "New Jersey's long-arm statute provides for jurisdiction coextensive with the due process requirements of the United States Constitution." Id. (citing N.J. Ct. R. 4:4-4(c)). Pursuant to Fed.R.Civ.P. 12(b)(2), a plaintiff must demonstrate by a preponderance of the evidence facts sufficient to support the assertion of personal jurisdiction over a defendant. Ameripay, LLC v. Ameripay Payroll, Ltd., 334 F.Supp.2d 629, 632 (D.N.J.2004) (citing Carteret Savings Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir.1992)). "A court must accept as true the allegations in the complaint and resolve disputed issues of fact in favor of the plaintiff[,]" for purposes of jurisdiction, plaintiff cannot rely on pleadings alone, but instead must provide actual proofs. Id. (citing Time Share Vacation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 66 n. 9 (3d 1984)). "Once the plaintiff has shown minimum contacts, the burden shifts to the defendant, who must show that the assertion of jurisdiction would be unreasonable." Id. (citing Mellon Bank (East) PFSF, Nat'l Assoc. v. Farino, 960 F.2d 1217, 1221 (3d Cir.1992)). "Once challenged, a plaintiff bears the burden of establishing personal jurisdiction." Pro Sports Inc. v. West, 639 F.Supp.2d 475, 478 (D.N.J.2009) (citing General Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir.2001) (finding the plaintiff must demonstrate "[a] nexus between defendant, the forum, and the litigation.")).

C. Fed. R. Civ. P. 12(b)(60 and res _ judicataWhen a prior case has been adjudicated in state court, federal courts must give full faith and credit to the state court's judgment. 28 U.S.C. § 1738; Balthazar v. Atlantic City Med. Ctr., 279 F.Supp.2d 574, 584 (D.N.J.2003). The doctrine of res judicata embodies this principal and bars re-litigation of an issue that has already been determined on the merits by a court of competent jurisdiction. Balthazar at 585. In order for res judicata to apply, there must [1] be a valid, final judgment on the merits in the prior action, [2] the same parties in both actions, and [3] the claim in the second action must arise out of the same transaction as the claim in the first action. United States v. 5 Unlabled Boxes, 572 F.3d 169, 173 (3d Cir.2009); EEOC v. United States Steel Corp., 921 F.2d 489, 493 (3d Cir.1990). See Alliance Shippers, Inc. v. Blue Line Distribution, Ltd. 2010 WL 2951448, 2 (D.N.J.) (D.N.J.,2010).

D. Fed. R. Civ. P. 11(b)

Federal Rule of Civil Procedure 11 sets out the standard that counsel and unrepresented parties must satisfy when filing pleadings, motions, or other documents. Whenever an attorney makes such a filing, he or she is certifying to the best of his or her knowledge, information, and belief, formed after reasonable inquiry under the circumstances, that:

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary or needless increase in the cost of litigation;

(2) the claims, defenses and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evidentiary support after a reasonable opportunity for further investigation or discovery; and(4) the denials of factual contentions are warranted on the evidence, or if specifically so identified, are reasonably based on a lack of information or belief.

This rule can be judicially viewed as "impos[ing] on counsel a duty to look before leaping" or as a "litigation version of the familiar railroad crossing admonition to 'stop, look, and listen.' " Lieb v. Topstone Indus., Inc., 788 F.2d 151, 157 (3d Cir.1986). Stated differently, Rule 11 requires that an attorney who files a complaint certifies that there is a reasonable basis in fact and law for the claims. The clear purpose of the rule is to discourage the filing of frivolous, unsupported, or unreasonable lawsuits. The Court of Appeals for the Third Circuit has held that Rule 11 sanctions are appropriately imposed "only if the filing of the complaint constituted abusive litigation or misuse of the court's process." Teamsters Local Union No. 430 v. Cement Exp., Inc., 841 F.2d 66, 68 (3d Cir.1988).

In this Circuit, "the legal standard to be applied when evaluating conduct allegedly violative of Rule 11 is reasonableness under the circumstances." Ford Motor Co. v. Summit Motor Prod., Inc., 930 F.2d 277, 289 (3d Cir.1991); see also Teamsters Local Union No. 430 841 at 68 (same). "Reasonableness" in the context of Rule 11 has been defined as "an objective knowledge or belief at the time of the filing of a challenged paper that the claim was well-grounded in law and fact." Ford Motor Co., 930 F.2d at 289. Significantly, the moving party is not required to make a showing of bad faith. Martin v. Brown, 63 F.3d 1252, 1264 (3d Cir.1995). An "empty head, pure heart" excuse cannot be used by the accused party as justification for filing a frivolous motion. Acevedo, 2006 WL 2594877 at *2; see also, Lanqer v. Monarch Life Ins. Co., 966 F.2d 786, 810 (3d Cir.1992). To comply with the mandates of Rule 11, counsel is required to conduct a "reasonable inquiry into both the facts and law supporting a particular pleading." In re Prudential Ins. Co. Am.Sales Practice Litig. Actions, 278 F.3d 175, 187 n. 7 (3d Cir.2002).

E. 28 U.S.C. § 1927

It has been well settled in the Third Circuit that 28 U.S.C. § 1927 requires a finding of four elements for the imposition of sanctions: "(1) multiplied proceedings; (2) unreasonably and vexatiously; (3) thereby increasing the cost of the proceedings; (4) with bad faith or with intentional misconduct." LaSalle Nat'l Bank v. First Connecticut Holding Group, 287 F.3d 279, 288 (3d Cir.2002). See Also In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 278 F.3d 175, 180 (3d Cir.2002); Hackman v. Valley Fair, 932 F.2d 239, 242 (3d Cir.1991); Williams v. Giant Eagle Markets, Inc., 883 F.2d 1184, 1191 (3rd Cir.1989); Baker Industr. Inc. v. Cerberus, Ltd., 764 F.2d 204, 208 (3d Cir.1985). Moreover, "[T]he principal purpose of imposing sanctions under 28 U.S.C. § 1927 is the deterrence of intentional and unnecessary delay in the proceedings." Zuk v. Eastern Pa. Psychiatric Inst., 103 F.3d 294, 297 (3d Cir.1996) (citation omitted). See In re Jazz Photo Corp., 312 B.R. 524, 540 (Bkrtcy.D.N.J.,2004).The imposition of sanctions for misconduct by attorneys is a power which the "courts should exercise only in instances of a serious and studied disregard for the orderly process of justice." Williams v. Giant Eagle Markets, Inc., 883 F.2d 1184, 1191 (3d Cir.1989) (quoting Overnite Transp. Co. v. Chicago...