Debreceni v. Bru-Jell Leasing Corp.

• Decision Date: 21 March 1989
• Docket Number: Civ. A. No. 85-3087-T.
• Parties: Helen DEBRECENI, Fund Manager for the New England Teamsters and Trucking Industry Pension Plan, Plaintiff, v. BRU-JELL LEASING CORPORATION, J.B. Consolidators, Inc., and Bernard Kerner, Defendants.
• Court: U.S. District Court — District of Massachusetts

710 F. Supp. 15

Helen DEBRECENI, Fund Manager for the New England Teamsters and Trucking Industry Pension Plan, Plaintiff, v. BRU-JELL LEASING CORPORATION, J.B. Consolidators, Inc., and Bernard Kerner, Defendants.

Civ. A. No. 85-3087-T.

United States District Court, D. Massachusetts.

March 21, 1989.

COPYRIGHT MATERIAL OMITTED

Kevin Hern, Jr., Gabriel O. Dumont, Jr., Grady, Dumont & Dwyer, Boston, Mass., for plaintiff.

Lori J. Holik, Paul E. Heimberg, Riemer & Braunstein, Boston, Mass., and Michael J. Hanlon, Allan M. Dabrow, David E. Rosenbaum, Pechner, Dorfman, Wolfee, Rounick & Cabot, Philadelphia, Pa., Frank J. Weiner, Weiner & Chused, Boston, Mass., Alan B. Pearl, Pearl & Chaiet, Westbury, N.Y., for defendants.

MEMORANDUM

TAURO, District Judge.

Plaintiff, manager of the Teamster's Pension Fund ("Fund"), brings this action¹ to collect money allegedly owed to the Fund by J.B. Williams Express, Inc. ("Express").

I.

There is no dispute as to the material facts contained in plaintiff's first amended complaint. On April 17, 1981, Express withdrew its participation in the Fund. This triggered withdrawal liability under the MPPAA. See 29 U.S.C. § 1381. Plaintiff computed the amount of withdrawal liability, $96,622, and notified Express of the amount due. See 29 U.S.C. §§ 1382, 1391. Express did not request arbitration. The dollar amount of liability, therefore, is not in dispute.² Subsequently, the Fund declared Express in default of its obligations.

Plaintiff's initial complaint sought to recover the withdrawal liability from Express directly, and from its two sister companies, defendants Bru-Jell Leasing Corporation and J.B. Consolidators, Inc. (hereinafter "the sister companies"). Plaintiff amended her complaint after learning that creditors were seeking to liquidate Express, pursuant to chapter 7 of the bankruptcy code.³ See 11 U.S.C. § 701 et seq.

Count I of plaintiff's first amended complaint seeks to recover the amount of Express' withdrawal liability from the sister companies, as companies under common control. See 29 U.S.C. § 1301(b)(1) (companies under common control are treated as a single employer).⁴ Count II seeks to hold defendant Kerner liable for the withdrawal liability under an economic reality theory of liability that is predicated upon the undisputed fact that Kerner owns 95% of all three companies. See Kerner's Answers to Plaintiff's First Set of Interrogatories, Interrogatory Answer # 2.

II.

Plaintiff has filed a motion for leave to further amend her complaint.⁵ The second amended complaint would eliminate the economic reality claim and, in its place, substitute two other counts against Kerner. Count II of the second amended complaint alleges that Kerner engaged in a transaction to evade or avoid MPPAA liability in violation of 29 U.S.C. § 1392(c).⁶ Count III of the second amended complaint alleges a fraudulent conveyance in violation of N.Y. Debt. & Cred.Law § 273 (McKinney).⁷ Both of these new claims revolve around Kerner's alleged misappropriation of Express' book of accounts. Additionally, both new counts add three new defendants, Michael Cohen, Kernco, Inc., and System Freight, Inc., to this action. They are alleged to have been involved with Kerner in the misappropriation of Express' book of accounts.

Kerner opposes plaintiff's motion for leave to file the second amended complaint on the grounds that neither new claim is legally cognizable. Accordingly, Kerner urges this court to deny the motion to amend as futile, and to rule on previously filed summary judgment motions that address both counts in the first amended complaint.

III.

The threshold issue raised by Kerner's opposition to plaintiff's motion to further amend the complaint is whether a court may deny leave to amend if it would have to dismiss the newly added claims upon a properly interposed motion to dismiss. While the issue has not been squarely addressed in the First Circuit, this court concludes that leave to amend may properly be denied when the proffered claim is futile. Cf. Vargas v. McNamara, 608 F.2d 15, 18 (1st Cir.1979) (suggesting in dicta that futility might justify denying leave to amend).

Fed.R.Civ.P. 15(a) provides: "a party may amend the complaint ... by leave of court ... and leave shall be freely given when justice so requires." In Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962), the Court explained the policies underlying Rule 15(a):

If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be `freely given.'

Id. at 182, 83 S.Ct. at 230 (emphasis added).

There has been some debate outside this circuit as to whether a court should deny leave to amend solely because the amendment does not state a claim upon which relief can be granted. Compare Reaves v. Sielaff, 382 F.Supp. 472, 473-76 (E.D.Pa. 1974) (legal insufficiency of amendment is a basis for denying leave to amend); Wobb v. Ford Motor Co., 76 F.R.D. 452, 455-58 (W.D.Pa.1977) (same) with Cravatts v. Klozo Fastner Corp., 16 F.R.D. 454, 455 (S.D. N.Y.1954) (legal insufficiency of amendment not a proper basis for denying leave to amend); Alloy Cast Steel Co. v. United Steel Workers of America, 70 F.R.D. 687, 687-89 (N.D.Ohio 1976) (same). See also 3 J. Moore, Moore's Federal Practice ¶ 15.084, at 15-78/15-81 (2d ed. 1987) ("Conflict has existed as to whether legal insufficiency of the proposed amendment is a proper ground for denying leave to amend.") (collecting cases). This court believes that the better approach is to deny leave to amend when there is no merit to the new claims. In so doing, the court should treat the opposition to a motion to amend as a motion to dismiss the new claims and then evaluate them on their merits. See Connors v. Marontha Coal Co., Inc., 670 F.Supp. 45, 46 (D.D.C.1987) ("In evaluating whether amendment would be futile, we treat the opposition to the motion to amend as a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1), (2), (6)."). This approach is particularly appropriate where, as here, the legal sufficiency of the proposed amendment has been fully briefed by the parties.

For a court to grant a motion to amend, only to turn around and dismiss the claims upon the filing of a properly interposed motion to dismiss, would be a waste of time for both the court and counsel. See Fed.R. Civ.P. 15(a). See also 3 J. Moore, Moore's Federal Practice ¶ 15.084, at 15-78/15-81 (2d ed. 1987) ("it would be an idle move for the court to allow such an amendment over the objection of the opposing party who could simply make a formal motion to dismiss ... after leave to amend is granted. Accordingly, leave to amend in such circumstances properly may be denied.").

Having taken this procedural position, the court now turns to the issue as to whether the two new claims contained in the second amended complaint are legally cognizable.

IV.

Both of the new claims that plaintiff seeks to assert against Kerner and the putative defendants revolve around the same allegation. Plaintiff claims that after organizing Kernco, Inc., Kerner and Cohen misappropriated Express' book of accounts. They then used it through Kernco, Inc. to generate business for System Freight, Inc., pursuant to an agreement among these parties. Plaintiff claims that the agreement and misappropriation is a fraudulent conveyance under New York law. Additionally, the activity is alleged to be a transaction to "evade or avoid" withdrawal liability in violation of 29 U.S.C. § 1392(c).

Kerner claims that this court lacks personal jurisdiction over him to hear either claim. Alternatively, Kerner contends that the claims are not cognizable in this court, because they allege a misappropriation of an asset of a bankrupt company and, therefore, should be litigated in the bankruptcy proceeding currently pending in the Eastern District of New York.⁸ Each of Kerner's arguments will be addressed seriatim.

A. Personal Jurisdiction

Personal jurisdiction is a hybrid concept. It is comprised of two prongs, one statutory and the other constitutional. See Bond Leather Co. v. Q.T. Shoe Mfg Co., 764 F.2d 928, 931 (1st Cir.1985); Good Hope Industries, Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6, 389 N.E.2d 76, 79 (1979). Where the underlying claim arises under a federal statute, federal law governs both aspects of the analysis. See Driver v. Helms, 577 F.2d 147, 154-57 (1st Cir.1978), rev'd on other grounds sub nom. Stafford v. Briggs, 444 U.S. 527, 100 S.Ct. 774, 63 L.Ed.2d 1 (1980). But where the court exercises pendant subject matter jurisdiction over a state law claim, state law controls the statutory analysis for purposes of determining personal jurisdiction. Cf. Hahn v. Vermont Law School, 698 F.2d 48, 49 (1st Cir.1983) ("The law of the forum ... applies in determining the amenability to suit of a nonresident in a diversity action.").

Where a complaint contains two claims, only one of which arises under federal law, there must be an independent basis for the assertion of personal jurisdiction for each claim. Jurisdiction over one claim does not imply jurisdiction over another. A party may not rely on the doctrine of pendent jurisdiction to obtain personal jurisdiction over a defendant. That doctrine refers only to the power of a court to hear a particular type of case, not to the power of a court to enter a judgment that binds a particular defendant. See Connors v. Marontha Coal Co., 670 F.Supp. 45, 47 (D.D.C.1987) (requiring an independent basis for the assertion of personal...