Hoffman v. Nordic Naturals, Inc.

• Decision Date: 14 September 2016
• Docket Number: No. 15–1362,15–1362
• Citation: 837 F.3d 272
• Parties: Harold M. Hoffman, individually and on behalf of those similarly situated, Appellant v. Nordic Naturals, Inc.
• Court: U.S. Court of Appeals — Third Circuit

837 F.3d 272

Harold M. Hoffman, individually and on behalf of those similarly situated, Appellant

v.Nordic Naturals, Inc.

No. 15–1362

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit L.A.R. 34.1a February 9, 2016

Filed: September 14, 2016

Harold M. Hoffman, Esq., 240 Grand Avenue, Englewood, NJ 07631, Pro Se Attorney

Michael R. McDonald, Esq., Jennifer M. Thibodaux, Esq., Gibbons, One Gateway Center, Newark, NJ 07102, Counsel for Appellee

Before: FUENTES,^* KRAUSE, and ROTH, Circuit Judges

OPINION OF THE COURT

FUENTES, Circuit Judge.

Harold M. Hoffman is a serial pro se class action litigant from New Jersey who frequently sues under the New Jersey Consumer Fraud Act. In a previous opinion, we noted that Hoffman is "an attorney who has made a habit of filing class actions in which he serves as both the sole class representative and sole class counsel."¹ According to the record in this case, Hoffman has sued nearly 100 defendants in New Jersey state court in a period of less than four years.² These defendants include Target, Whole Foods Market, GNC, Trader Joes, Barleans Organic Oils LLC, Paradise Herbs & Essentials Inc., Honest Tea Inc., Time Warner Cable, American Express, Bio Nutrition Inc., and many more.³

In this case, Hoffman chose to sue Nordic Naturals, Inc. for its allegedly false and misleading advertisements for fish oil supplements. Prior to bringing the present action, Hoffman filed a similar lawsuit against Nordic, asserting virtually identical claims based on the same set of facts. The District Court dismissed that first lawsuit for failure to state a claim. The District Court accordingly dismissed this second lawsuit as procedurally barred by the first. For the following reasons, we will affirm.

I.

In August 2012, Harold Hoffman filed a putative class action lawsuit pro se against Nordic Naturals in New Jersey state court for violations of the New Jersey Consumer Fraud Act ("Hoffman I ").⁴ He alleged that Nordic misrepresented the "safety, quality, testing, constituent ingredients and purity" of its product "Ultimate Omega," a fatty acid fish oil supplement.⁵ Specifically, Hoffman claimed that, contrary to Nordic's product labeling and marketing representations, Ultimate Omega is "tainted by an undisclosed overdose of a potentially harmful ingredient."⁶ Thus, according to Hoffman, Nordic's representations that it is committed to delivering the "world's safest" omega oils and has achieved "award-winning" purity levels are false.⁷ The putative class consisted of all nationwide purchasers of Ultimate Omega within a six-year period.⁸

Nordic removed Hoffman I to federal court pursuant to the Class Action Fairness Act ("CAFA").⁹ CAFA gives federal district courts original jurisdiction over class actions in which (i) the aggregate amount in controversy exceeds $5 million, (ii) there are at least 100 members in the putative class, and (iii) there is minimal diversity between the parties.¹⁰ Hoffman filed a motion in the District Court to remand the case back to state court, which the District Court denied.¹¹ Nordic moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c).¹² The District Court dismissed Hoffman I without prejudice and gave Hoffman leave to file an amended complaint within 30 days.¹³

But rather than file an amended complaint in the District Court, Hoffman filed a new class action lawsuit against Nordic in New Jersey state court within the 30-day window given to amend Hoffman I . This second lawsuit ("Hoffman II ") arose from facts identical to those in Hoffman I —Hoffman's purchase of Ultimate Omega in May 2012—and it asserted virtually identical claims under the New Jersey Consumer Fraud Act.¹⁴ But there was one significant difference: the putative class size was substantially smaller. Rather than a class consisting of all nationwide purchasers of all available sizes of Ultimate Omega within a six-year period, the putative class in Hoffman II was restricted to New Jersey consumers who purchased only a 60-count bottle of Ultimate Omega (as opposed to a 120-count or 180-count bottle) within a one-year period.¹⁵ The purpose of this change was, it seems, to reduce the amount recoverable and therefore defeat federal jurisdiction.

Undeterred by Hoffman's tactics, Nordic removed Hoffman II back to the District Court. Nordic then moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), claiming that Hoffman II was barred by New Jersey's entire controversy doctrine, which is New Jersey's "application of traditional res judicata principles."¹⁶ In the alternative, Nordic argued that the complaint failed to state a claim under the New Jersey Consumer Fraud Act.¹⁷ Hoffman moved for limited discovery to determine whether subject matter jurisdiction existed under CAFA.¹⁸ He argued that, given the significantly reduced class size in Hoffman II , limited discovery would help the court ascertain whether the amount in controversy exceeded the $5 million jurisdictional minimum.¹⁹

The District Court granted Nordic's motion and dismissed Hoffman II with prejudice.²⁰ It held that the action was procedurally barred under New Jersey's entire controversy doctrine and, in the alternative, that Hoffman's claims under the New Jersey Consumer Fraud Act failed for substantially the same reasons they failed in Hoffman I .²¹ The District Court then dismissed as moot Hoffman's motion for limited discovery, explaining that Hoffman's artificial narrowing of the putative class was a "poorly disguised attempt" to destroy CAFA jurisdiction.²² Hoffman appealed to this Court.²³

II.

Hoffman challenges (1) the District Court's subject matter jurisdiction under CAFA; (2) the District Court's application of New Jersey's entire controversy doctrine; and (3) the District Court's alternative conclusion that the complaint failed to state a claim upon which relief could be granted. We review these issues de novo .²⁴

A. Subject Matter Jurisdiction

Hoffman devotes much of his appeal to challenging the District Court's subject matter jurisdiction. According to him, the District Court was required to make jurisdictional findings of fact to ensure that the amount in controversy met the jurisdictional minimum under CAFA. Hoffman is incorrect.

It is true that a federal court may not rule on the merits of an action without first ascertaining whether it has subject matter jurisdiction to do so.²⁵ But in Sinochem International Co. v. Malaysia International Shipping Corp. ,²⁶ the Supreme Court held that a court is not required to establish jurisdiction before dismissing a case on non-merits grounds, since such a dismissal "means that the court will not proceed at all to an adjudication of the cause."²⁷ In other words, "jurisdiction is vital only if the court proposes to issue a judgment on the merits."²⁸ In Sinochem itself, the district court dismissed the case on the ground of forum non conveniens , which the Supreme Court explained is merely "a determination that the merits should be adjudicated elsewhere."²⁹

In this case, the District Court dismissed Hoffman II on claim preclusion grounds, which is not technically a judgment on the merits.³⁰ Rather, claim preclusion is merely "a determination that the merits [have already been] adjudicated elsewhere."³¹ Indeed, for reasons of fairness, finality, and judicial economy, claim preclusion prohibits a court from reaching the merits of a claim. The District Court was therefore permitted to "bypass" the jurisdictional inquiry in favor of a non-merits dismissal on claim preclusion grounds.³² Accordingly, we reject Hoffman's subject matter jurisdiction challenge on appeal.³³

B. Claim Preclusion

The District Court operated under the assumption that New Jersey's entire controversy doctrine—"a state rule of procedure that discourages successive litigation concerning the same subject matter"³⁴ —applies in this case. However, in Paramount Aviation Corp. v. Agusta ,³⁵ we held that the entire controversy doctrine "is not the right preclusion doctrine for a federal court to apply when prior judgments were not entered by the courts of New Jersey."³⁶ Upon conducting an extensive Erie analysis, we concluded that federal, not New Jersey, claim preclusion principles apply in successive federal diversity actions.³⁷ That is, when the first judgment is rendered by a federal district court in New Jersey sitting in diversity, as it was here, federal claim preclusion, not New Jersey's entire controversy doctrine, determines whether a successive lawsuit is permissible.³⁸ Indeed, courts in our Circuit have routinely applied Paramount Aviation to reject applying New Jersey's entire controversy doctrine when the first judgment was not rendered by a New Jersey state court.³⁹

The Supreme Court's decision in Semtek International Inc. v. Lockheed Martin Corp.⁴⁰ creates an interesting doctrinal question vis-à -vis Paramount Aviation .⁴¹ In Semtek , the Supreme Court held that we apply the claim preclusion law "that would be applied by state courts in the State in which [a] federal diversity court sits," unless "the state law is incompatible with federal interests."⁴² This seems to suggest that we should apply New Jersey's entire controversy doctrine to judgments rendered by federal diversity courts in New Jersey. Yet Paramount Aviation tells us that the entire controversy doctrine is procedural rather than substantive and that, therefore, consistent with Erie , we should apply federal claim preclusion principles to federal diversity judgments. We need not resolve this conflict, however, because under either New Jersey or federal claim preclusion principles we come to the same result.⁴³

"Both New Jersey and federal law apply res judicata or claim preclusion when three circumstances are present: (1) a final judgment on the merits in a prior suit involving (2) the same parties or their privies and (3) a subsequent suit based on the same cause of action."⁴⁴ The third...