In re Norvergence, Inc.
| Decision Date | 24 February 2010 |
| Docket Number | Adversary No. 04-2941(RG).,Adversary No. 04-2974(RG).,Adversary No. 04-2966(RG).,Adversary No. 04-2963(RG).,Bankruptcy No. 04-32079(RG).,Adversary No. 08-1615(RG).,Adversary No. 04-2939(RG).,Adversary No. 04-2975(RG).,Adversary No. 04-2962(RG).,Adversary No. 04-2942(RG).,Adversary No. 04-2944(RG).,Adversary No. 08-1323(RG).,Adversary No. 08-1616(RG).,Adversary No. 04-2971(RG). |
| Citation | 424 B.R. 663 |
| Parties | In re NORVERGENCE, INC., Debtor. A-1 Advanced Moving & Storage, Inc., et al., Plaintiffs, v. NorVergence, Inc. and Celtic Bank Corp., et al., Defendants. AM Jewelers, Inc., et al., Plaintiffs, v. NorVergence, Inc. and Dolphin Capital Corp., et al., Defendants. AAAA at Your Service, et al., Plaintiffs, v. NorVergence, Inc. and National City Commercial Capital Corporation d/b/a Information Leasing Corp., et al., Defendants. B-Com Group, et al., Plaintiffs, v. NorVergence, Inc. and Credential Leasing, et al., Defendants. Balmes Flower Shop and Greenhouse, et al., Plaintiffs, v. NorVergence, Inc. and Liberty Bank, et al., Defendants. Builders Post-Tension, Inc., et al., Plaintiffs, v. NorVergence, Inc. and PEG Commercial Finance, et al., Defendants. American Energy Services, Inc., et al., Plaintiffs, v. NorVergence, Inc. and OFC/ALFA, et al., Defendants. DC & Associates, P.A., et al., Plaintiffs, v. NorVergence, Inc., and ALFA Financial d/b/a OFC Capital, Defendants. 1<SUP>st</SUP> Step Financial Services, Inc., et al., Plaintiffs, v. NorVergence, Inc. and Sterling National Bank, et al., Defendants. Accessories of Tampa Bay/CRB, Inc., et al., Plaintiffs, v. NorVergence, Inc., Preferred Capital, Inc., The Huntington National Bank, and United Midwest Savings Bank, Defendants. Natha Hospitality Group, L.P. d/b/a Super 8 Motel, et al., Plaintiffs, v. NorVergence, Inc. and Preferred Capital Inc. and United Midwest Savings Bank, et al., Defendants. 3D Street Marketing, Inc., et al., Plaintiffs, v. NorVergence, Inc. and Popular Leasing USA, Inc., Defendants. Whole House Cabinet, Inc., et al., Plaintiffs, v. NorVergence, Inc. and Information Leasing Corporation d/b/a National City Commercial Capital Corporation, et al., Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Weir & Partners, LLP by Marc J. Zucker, Esq., Susan Verbonitz, Esq., Robert D. Greenbaum & Associates by Robert D. Greenbaum, Esq., Philadelphia, PA, for Plaintiffs.
Deeb Petrakis Blum & Murphy, P.C., by Inez M. Markovich, Esq., Louise S. Melchor, Esq., Cherry Hill, NJ, for Defendants.
Barbara Lanza Farley, P.C. by Barbara Lanza Farley, Esq., Haddonfield, NJ, 08033 for Credential Leasing Corporation.
Norris, McLaughlin & Marcus, P.C., by Robert L. Schmidt, Esq., Bridgewater, NJ, for Preferred Capital, Inc.
Nudelman, Nudelman & Ziering, P.C., by Gary S. Lewis, Esq., Roseland, NJ, for The Huntington National Bank.
In a number of related but separately commenced adversary proceedings, captioned as A-1 Advanced Moving v. NorVergence, Inc. and Celtic Bank Corp., et al, designated as Adv. Pro. No. 04-2939; AM Jewelers, Inc. v. NorVergence, Inc. and Dolphin Capital Corp., Adv. Pro. No. 04-2941; AAAA At Your Service v. NorVergence, Inc. and National City Commercial Capital Corporation d/b/a Information Leasing Corp., Adv. Pro. No. 04-2942; B-Com Group, et al v. NorVergence, Inc. and Credential Leasing, et al, Adv. Pro. No. 04-2944; Balmes Flower Shop and Greenhouse v. NorVergence, Inc. and Liberty Bank, et al, Adv. Pro. No. 04-2962; Builders Post-Tension, Inc. v. NorVergence, Inc. and PFG Commercial Finance, et al, Adv. Pro. No. 04-2963; American Energy Services, Inc. v. NorVergence, Inc. and OFC/.ALFA. and DC Associates, P.A., et al v. NorVergence and ALFA Financial d/b/a OFC Capital et al, Adv. Pro. No. 04-2966, and DC & Associates, P.A., et al v. NorVergence and ALFA Financial d/b/a OFC Capital, et al, Adv. Pro. 08-1616 (consolidated); 1st Step Financial Services Inc., et al v. NorVergence, Inc. and Sterling National Bank, et al, Adv. Pro. No. 04-2971; Accessories of Tampa Bay/CRB, Inc. v. NorVergence, Inc. and Preferred Capital, Inc., Huntington National Bank, United Midwest Savings Bank, Adv. Pro. No. 04-2974, and Natha Hospitality Group, L.P. d/b/a Super 8 Motel, et al v. NorVergence, Inc., Preferred Capital, Inc. And United Midwest Savings Bank, Adv. Pro. 08-1615 (consolidated), 3rd Street Marketing, Inc. v. NorVergence, Inc. and Popular Leasing U.S.A., Inc., Adv. Pro. No. 04-2975 and Whole House Cabinet, et al v. NorVergence, Inc. and Information Leasing Corporation d/b/a National City Commercial Capital Corp., et al, Adv. Pro. No. 08-1323, the Defendants have each initiated a motion to dismiss the Second Amended Complaints filed by the Plaintiffs in the respective cases.1 Generally, the Defendants invoke Fed.R.Civ.P. 8, 9, and 12(b)(6) as grounds for the dismissal of Count IV (Fraud Under the New Jersey Consumer Fraud Act (NJCFA)) and Count V (Unconscionability Under the NJCFA). In addition to Count IV and V's alleged failure to meet the "notice" and "particularized fraud pleading" standards, the Defendants also assert the NJCFA to be inapplicable to out of state plaintiffs.
With regard to claims pursued by newly added Plaintiffs, the Defendants request dismissal thereof on the grounds that the Plaintiffs never obtained permission pursuant to Fed.R.Civ.P. 15 to include additional Plaintiffs. Additionally, the Defendants also seek dismissal of the claims of Plaintiffs with whom the Defendants have settled.
The Plaintiffs in the respective Adversary Proceedings filed papers in opposition and during a June 2, 2009 hearing also verbally moved for Court permission to add the newly amended plaintiffs to the cases at hand on a nunc pro tunc basis. In response to Plaintiffs' verbal motion, the Court decided to take the matter under advisement.
Before the Court is also a summary judgment motion brought by Defendant Credential Leasing, Inc. ("Credential") in Adversary Proceeding No. 04-2944, captioned as B-Com Group, LLC, et al v. NorVergence, Inc. and Credential Leasing, Inc. This motion is based on the content of the Second Amended Complaint filed by Plaintiff B-Com Group LLC ("B-Com"), and Richard Lewin, a guarantor of certain B-Com financial obligations as well as by DCC Corporation ("DCC") and Joseph Marshall, a guarantor of certain DCC financial obligations. Apart from advancing the same arguments as the other Movants, Credential also asserts dismissal is proper due to the absence of any Equipment Rental Agreements ("ERA") assignment documentation showing Credential took assignment of a NorVergence ERA. Credential also asserts that the matter should be adjudicated in the courts of Pennsylvania due to the terms of a floating forum selection clause in the ERA contract. Plaintiffs have opposed Credential's motion.
In Adv. Pro. Case 04-2974, captioned Accessories of Tampa Bay/ CRB. Inc., et al v. NorVergence, Inc., Preferred Capital Inc., The Huntington National Bank and United Midwest Savings Bank. Defendants have also raised the issue of Preferred Capital, Inc.("PCI")'s Ohio receivership as a grounds for mandatory dismissal of the Second Amended Complaint.
In addition, with respect to Count VII, entitled "Debts or Obligations Fraudulently Contracted or Incurred Pursuant to N.J.S.A. 2A:32-1," Defendants argue that it fails to meet the requirements of Rule 9(b) and must therefore be dismissed. The Plaintiffs refer to defenses related to the Uniform Commercial Code ("UCC") and the Holder in Due Course status. Because the issue has not been briefed in detail, the Court will not address the merits of these defenses in this Opinion.
In Adv. Pro. Case 04-2974, United Midwest Savings Bank also seeks dismissal of Count VI of the Second Amended Complaint for Unjust Enrichment, asserting that Plaintiffs have failed to meet the Rule 8(a) pleading requirements. Defendant alleges that the Second Amended Complaint alleges only that United Midwest Savings Bank took assignments of the ERAs, enforced payments thereunder and had knowledge or should have had knowledge of the alleged unconscionable nature of the ERAs and payment practices of NorVergence but does not aver specific facts as to the actions of Defendant. At oral argument counsel for Defendants noted that United Midwest Savings Bank purchased its ERAs from PCI, as did Defendant Huntington National Bank ("HNB"), so it is twice removed from NorVergence and as a good faith purchaser for value, should not be subject to an unjust enrichment claim. Tr. of June 2, 2009 at 48.
The Court entertained oral arguments on the pending motions on June 2, 2009. The following constitutes this Court's findings of fact and conclusions of law.
NorVergence, Inc. (referenced herein as "Debtor" or "NorVergence"), a re-seller of telecommunications equipment and services, allegedly induced customers to enter into two separate agreements (the "Matrix Leases") with NorVergence in connection with the purchase of telecommunication services. One agreement governed the provision of services, the other contract concerned an ERA, pursuant to which the customer leased the Matrix Box that purportedly facilitated the provision of discounted telecommunications services by Debtor. These agreements required customers to lock themselves in for a five year term even though NorVergence had no long term agreements with carriers to support a five year commitment.
While continuing to recruit clients, Debtor also entered into various Master Program Agreements ("MPA") with the Leasing Company Defendants. These contracts provided for the sale and/or assignment of the ERAs to the Defendants.
In sum, Debtor's business model consisted of enticing clients to sign five...
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