JPMorgan Chase Bank, N.A. v. Neu
| Decision Date | 26 September 2019 |
| Docket Number | Civil Action No. 17-3475 |
| Parties | JPMORGAN CHASE BANK, N.A., Plaintiff, v. RICHARD W. NEU, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Not for Publication
Presently before the Court are the following motions: (1) Defendant Warren L. Dean's motion to dismiss (D.E. 210); (2) the Richard Neu Defendants'1 motion for judgment on the pleadings (D.E. 220); and (3) the Richard Neu Defendants' motion to dismiss Amy Neu's State-Law Crossclaims (D.E. 229). The Court reviewed the parties' submissions in support and in opposition2 and decided the motions without oral argument pursuant to Fed. R. Civ. P. 78(b) andL. Civ. R. 78.1(b). For the reasons stated below, the Richard Neu Defendants' motions are GRANTED, and Dean's motion is DENIED as moot.
JP Morgan Chase Bank, N.A. ("Chase") initially filed this statutory interpleader matter pursuant to 28 U.S.C. § 1335 because of competing claims from Richard and Amy Neu regarding the ownership of funds held in Chase bank accounts. D.E. 1. On May 24, 2017, the Court granted Chase's interpleader request, concluding that Chase had a legitimate fear of conflicting claims and potential liability due to state court actions filed by Richard in the Superior Court of New Jersey and Amy in the Surrogate's Court of New York. D.E. 43, 44. The Court ordered Chase to deposit the funds into the Federal Registry and stayed the pending state court actions. D.E. 44. After Chase deposited the funds into the Federal Registry, Chase was formally dismissed as a party from this action on November 3, 2017. D.E. 155.
The Richard Neu Defendants and Dean filed an Answer to the Complaint and the Richard Neu Defendants asserted crossclaims against Amy, Judd Burstein, and Judd Burstein, P.C. D.E. 46. Amy also answered the Complaint and asserted crossclaims against the Richard Neu Defendants and Dean. D.E. 48. The parties have subsequently amended their crossclaims; the operative crossclaims (the "Amended Crossclaims") were filed on January 28, 2019. D.E. 206, 207. The Richard Neu Defendants, Amy, Judd Burstein, and Judd Burstein, P.C., filed their respective answers and affirmative defenses on February 15, 2019. D.E. 211-13. Dean filed amotion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). D.E. 210.
As discussed, Chase initiated this statutory interpleader pursuant to 28 U.S.C. § 1335. "The general purpose of an interpleader action is to decide the validity and priority of existing claims to a res." Domus, Inc. v. Davis-Giovinazzo Const. Co., Inc., No. 10-1654, 2011 WL 3666485, at *6 (E.D. Pa. Aug. 22, 2011). Actions brought pursuant to § 1335 are typically resolved in two steps. NYLife Distribs., Inc. v. Adherence Grp., Inc., 72 F.3d 371, 375 (3d Cir. 1995). At the first step, a district court determines whether the statutory requirements have been met and whether the stakeholder can be relieved of liability. Id. at 375. As noted, this has already occurred. D.E. 43, 44. At the second step, the district court "actually adjudicates the defendants' adverse claims to interpleaded funds[,]" which results in "the entry of a judgment in favor of the claimant who is lawfully entitled to the stake." NYLife Distribs., Inc., 72 F.3d at 375.
In this instance, the Richard Neu Defendants seek such a judgment through a motion for judgment on the pleadings. Rule 12(c) provides that "[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Thus, "Rule 12(c) permits an adjudication based purely on the allegations of the pleadings, the complaint and answer." In re FleetBoston Corp. Sec. Litig., No. 02-4561, 2007 WL 4225832, at *17 (D.N.J. Nov. 28, 2007). Pleadings are "closed" after the complaint and answer are filed. Horizon Healthcare Servs., Inc. v. Allied Nat'l Inc., No. 03-4098, 2007 WL 1101435, at *3 (D.N.J. Apr. 10, 2007). "Under Rule 12(c), judgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgmentas a matter of law." Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988)).
A Rule 12(c) motion based on the defense that a plaintiff fails to state a claim is governed by the same standard that applies in a motion to dismiss under Rule 12(b)(6). Revell v. Port Auth. of N.Y. & N.J., 598 F.3d 128, 134 (3d Cir. 2010). Therefore, to withstand such a motion under Rule 12(c), a plaintiff must allege enough facts to "state a claim to relief that is plausible on its face." In re Lipitor Antitrust Litig., 336 F. Supp. 3d 395, 406 (D.N.J. 2018). A complaint is plausible on its face when there is enough factual content "that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In evaluating the sufficiency of a complaint, a court must "accept all well-pleaded factual allegations . . . as true and draw all reasonable inferences in favor of the nonmoving party." In re Lipitor Antitrust Litig., 336 F. Supp. 3d at 406. A court, however, is "not compelled to accept unwarranted inferences, unsupported conclusions[,] or legal conclusions disguised as factual allegations." Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007) (citation omitted). As such, a Rule 12(c) motion should not be granted "unless it appears beyond doubt that the facts alleged in the complaint, even if true, fail to support the claim." In re Lipitor Antitrust Litig., 336 F. Supp. 3d at 406.
Although it is not clearly stated in their motion, the Richard Neu Defendants appear to seek a judgment on the pleadings as to Count One of their Amended Crossclaims and Count Four of Amy's Amended Crossclaims. MJOP Br. at 2-3. Count One of the Richard Neu Crossclaims seeks "a declaratory judgment confirming that [the Richard Neu Defendants] possess the sole right to ownership and control of the Funds and enter an Order directing the release of the Funds . . . ." Richard Neu Defs' Am. Crossclaims ¶ 39, D.E. 206. Count Four of Amy's Amended Crossclaimsalso seeks a declaratory judgment regarding control of the interpleaded funds. Amy Am. Crossclaims ¶¶ 147-57, D.E. 207. To grant declaratory relief, there must be "a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maniscalco v. Brother Int'l Corp. (USA), 627 F. Supp. 2d 494, 504 (D.N.J. 2009) (quoting Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330, 1336 (Fed. Cir. 2007)). The fact that a substantial controversy exists is not disputed. Instead, Amy maintains that a declaratory judgment regarding ownership of the interpleaded funds is premature.
At the second stage of an interpleader action, courts "determine the rights of the parties at the time the action was commenced." Deutsche Bank Trust Co. Ams. v. Elliot Int'l, L.P., No. 09-5242, 2011 WL 2421297, at *3 (S.D.N.Y. June 6, 2011) (emphasis in original); see also Avant Petroleum, Inc. v. Banque Paribas, BP, 853 F.2d 140, 143 (2d Cir. 1988) ; Texaco, Inc. v. Ponsoldt, 118 F.3d 1367, 1370 (9th Cir. 1997) (). Accordingly, "[a] claim not existing at the time the fund was created thus could not take precedence over preexisting claims." Avant Petroleum, Inc., 853 F.2d at 143.
XL Specialty Insurance Company v. Lakian, 243 F. Supp. 3d 434 (S.D.N.Y. 2017), is instructive. XL Specialty involved the remaining funds of an insurance policy that covered certain officers and directors of a financial services fund. Id. at 436-37. Two of the covered individuals were named in a civil suit that involved an alleged breach of their fiduciary duties, and the suitwas filed prior to the interpleader matter. Id. at 439-40. More than a year after the interpleader complaint was filed, an arbitration award from the civil suit was reduced to a judgment against the two individuals and in favor of Pangea Capital Managements, LLC. Id. at 439. At the second stage of the interpleader, the court determined that Pangea's claim to the interpleaded funds was barred as untimely because Pangea had no right to any of the funds when the interpleader action was filed and the funds were initially deposited with the court. Id. at 447 ().
Amy is in a similar position to Pangea. The Richard Neu Defendants plead that as of May 15, 2017, the date that Chase commenced this action, they owned and controlled the Chase accounts that held the interpleaded funds and "Amy did not possess any right of ownership or control over the Funds." Richard Neu Defs' Am. Crossclaims ¶¶ 29-30. Amy does not deny these allegations. Answer to Richard Neu Defs' Am. Crossclaims ¶¶ 29-30, D.E. 211 (). Moreover, Amy admits that on April 6, 2017, she was removed from her positions with the Neu companies (id. ¶¶ 22, 30).
Amy's Amended Crossclaims also fail to allege that she had an existing right to the interpleaded funds when this action started. Amy pleads that "[e]ach of the accounts from which the Interpleaded Funds came was in the name of either Neu Holdings, or a company that is controlled by Neu...
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