Bar-David v. Econ. Concepts, Inc.
Decision Date | 22 September 2014 |
Docket Number | Civ. No. 2:13–5885 KMMCA. |
Citation | 48 F.Supp.3d 759 |
Court | U.S. District Court — District of New Jersey |
Parties | Dani BAR–DAVID, Michal Bar–David, and Octal Corporation, Plaintiff, v. ECONOMIC CONCEPTS, INC., Kenneth Hartstein, Nati Financial, LLC, Amir Abramov, Arthur D. Shankman & Co., Arthur D. Shankman, Pension Strategies, LLC, and David Burke, Defendants. |
Arthur L. Porter, Jr., Alan C. Thomas, Fischer, Porter & Thomas PC, Englewood Cliffs, NJ, for Plaintiff.
Kenneth R. Rothschild, Golden Rothschild Spagnola Lundell Levitt & Boylan, Bridgewater, NJ, Joel M. Wertman, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia, PA, William Gaynor Winget, Harris Bruce Katz, Winget Spadafora & Schwartzberg, LLP, Bennet Dann Zurofsky, Newark, NJ, Eric William Swartz, Winget, Spadafora & Schwartzberg, LLP, New York, NY, Garry Thomas Stevens, Winget, Spadafora & Schwartzberg LLP, Jersey City, NJ, for Defendants.
This matter comes before the court on the Report and Recommendation (“R & R”) (ECF No. 57) of Hon. Madeline C. Arleo, United States Magistrate Judge, recommending that the Plaintiffs' motion to remand this action to State court (ECF No. 13–1) be granted. For the reasons set forth below, the R & R will be adopted, and the motion to remand will be granted.
Plaintiffs Dani Bar–David, Michal Bar–David, and Octal Corporation (collectively “Bar–David”) allege that Defendants1 fraudulently induced Bar–David to set up and continue to fund a defined benefit pension plan (“Plan”) by misrepresenting and omitting material facts about the legal status of such a plan under 26 U.S.C. § 412(i). (Compl. at ¶¶ 1, 3–6, 10–13, ECF No. 1—Exhibit A). Bar–David alleges that, contrary to Defendants' misrepresentations, the Plan was an abusive tax shelter that was not was compliant with the Internal Revenue Code (IRC) and Internal Revenue Service (IRS) regulations and therefore did not qualify as a tax deductible and safe investment. (Id. at ¶ 10). Bar–David further alleges that Defendants knew or should have known that the Plan did not comply with the IRC. Bar–David alleges that after an IRS audit revealed the Plan's non-compliance with the tax code, Bar–David was forced to pay back taxes, penalties, and interest. (Id. at ¶¶ 54–58).
The Complaint alleges that Defendant Amir Abramov (“Abramov”) gave Dani Bar–David insurance, retirement, and investment advice, and first suggested that Dani Bar–David meet with Arthur D. Shankman, an attorney and financial planning expert. (Id. at ¶ 39). Shankman, holding himself out as an expert in 412(i) plans, became Dani Bar–David's financial adviser. (Id. at ¶ 40). After a series of meetings, Abramov and Shankman allegedly induced Dani Bar–David to participate in the Plan. (Id. at ¶¶ 40, 41).
During those meetings, Bar–David alleges, Shankman, individually and on behalf of Arthur D. Shankman & Co. (collectively “Shankman”) and Abramov made, inter alia, the following misrepresentations to Bar–David:
(R & R at 767–68, citing Compl. at ¶¶ 41, 63). Bar–David further alleges that Abramov and Shankman fraudulently omitted the following in their representations of the Plan:
(R & R at 768–69, citing Compl. at ¶¶ 47, 53, 66).
Bar–David also alleges that Pension Strategies, LCC (“Pension Strategies”), the third-party administrator of the Plan, knew or should have known material facts about the Plan that Pension Strategies failed to disclose. (Compl. at ¶¶ 51–53).
Bar–David filed this Complaint on August 28, 2013, in Superior Court in Essex County, New Jersey, asserting claims against all Defendants for: 1) fraud, 2) negligent misrepresentation; 3) breach of fiduciary duty; 4) negligence; 5) unjust enrichment; 6) money had and money received; 7) violation of the New Jersey Consumer Fraud Act; 8) violation of the New Jersey RICO Act; 9) breach of contract; and 10) breach of the duty of good faith and fair dealing. (R & R at 769; Compl. at ¶¶ 62–101).
Pension Strategies then removed the action to this Court on October 3, 2013, asserting, inter alia, that: 1) the Employee Retirement Income Security Act of 1974 (ERISA) preempts Bar–David's state law claims, and 2) federal tax questions appear on the face of the Complaint. (ECF No. 1). Bar–David then moved to remand the action to state court, asserting that this federal court did not have subject matter jurisdiction over the action. (ECF No. 13). Only defendants Pension Strategies and Shankman opposed Bar–David's motion to remand. (ECF Nos. 18, 21).
Magistrate Judge Arleo issued a Report and Recommendation, recommending that the Court grant the motion to remand because the prerequisites of federal question jurisdiction did not appear on the face of the Complaint. See 28 U.S.C. § 1331. (ECF No. 57). She reasoned, soundly, that the Plan did not qualify as an ERISA plan, and therefore that ERISA preemption did not apply. Judge Arleo did not need to carry her analysis any further to establish that federal court jurisdiction was not appropriate.
Pension Strategies and Shankman objected to the R & R, arguing that Judge Arleo's ERISA analysis was flawed and that she did not address their arguments that federal question jurisdiction arose from federal tax issues appearing on the face of the Complaint. (ECF Nos. 58, 59).
Based on the objections of Pension Strategies and Shankman, I now address the issues of whether ERISA preemption applies and whether potential federal tax issues warrant this court's exercising federal question jurisdiction over the case pursuant to 28 U.S.C. § 1331. For the reasons set forth below, I find that the Court does not have subject matter jurisdiction, and remand the case to state court.
Pursuant to the federal removal statute, “any civil action brought in a State court of which the district courts of the United States have original jurisdiction” may be removed by the defendants to the appropriate district court where the action is pending. 28 U.S.C. § 1441(a). Removal is not appropriate if the case does not fall within the district court's original federal question jurisdiction and the parties are not diverse. See U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 389 (3d Cir.2002) (citing Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 8, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) ). The party that asserts jurisdiction bears the burden of showing at all stages of the litigation that subject matter jurisdiction is proper in the federal court. Samuel–Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir.2004) (citing Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 (3d Cir.1993) ).
The Third Circuit has cautioned that 28 U.S.C. § 1441 must be strictly construed against removal. Samuel–Bassett, 357 F.3d at 396, 403 (citing Boyer v. Snap–On Tools Corp., 913 F.2d 108, 111 (3d Cir.1990) ). To that end, all doubts should be resolved in favor of remand. Id.; Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir.1985) (internal citations omitted); Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir.1987). Accordingly, “[w]e presume that federal courts lack jurisdiction unless the contrary appears affirmatively from the record.” Phila. Fed'n of Teachers, Am. Fed'n of Teachers, Local 3, AFL–CIO v. Ridge, 150 F.3d 319, 323 (3d Cir.1998) (quoting Renne v. Geary, 501 U.S. 312, 316, 111 S.Ct. 2331, 115 L.Ed.2d 288 (1991) ).
A party may object to a Magistrate Judge's report and recommendation within 14 days of being served with a copy of the recommended disposition. L. Civ. R. 72.1(c)(2); Fed.R.Civ.P. 72(b) ; 28 U.S.C. § 636(b)(1)(C). The district court “shall make a de novo determination of those portions to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the Magistrate Judge.” L. Civ. R. 72.1(c)(2); 28 U.S.C. §...
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Dani Bar-David, Michal Bar-David, & Octal Corp. v. Econ. Concepts, Inc., Civ. No. 2:13–5885 (KM)(MCA).
...48 F.Supp.3d 759Dani BAR–DAVID, Michal Bar–David, and Octal Corporation, Plaintiff,v.ECONOMIC CONCEPTS, INC., Kenneth Hartstein, Nati Financial, LLC, Amir Abramov, Arthur D. Shankman & Co., Arthur D. Shankman, Pension Strategies, LLC, and David Burke, Defendants.Civ. No. 2:13–5885 (KM)(MCA)......