Nicholas J. Delzotti, Von Morris Corp. v. Eric Morris, Shirley Morris, Mark Wojcik, Cpa, VM Decorative, LLC
| Decision Date | 09 September 2015 |
| Docket Number | Civil No. 14-7223 (JBS/AMD) |
| Parties | NICHOLAS J. DELZOTTI, as Assignee for and on behalf of VON MORRIS CORPORATION Plaintiff, v. ERIC MORRIS, SHIRLEY MORRIS, MARK WOJCIK, CPA, VM DECORATIVE, LLC, ERIC MORRIS AND COMPANY, LLC, VON MORRIS DECORATIVE HARDWARE, LLC, ABC CORPS 1-10, Defendants. |
| Court | U.S. District Court — District of New Jersey |
HONORABLE JEROME B. SIMANDLE
APPEARANCES:
Eric R. Perkins, Esq.
Alfred R. Brunetti, Esq.
MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP
40 West Ridgewood Avenue
Ridgewood, NJ 07450
Attorneys for Plaintiff
Marshall T. Kizner, Esq.
Timothy P. Duggan, Esq.
STARK & STARK PC
993 Lenox Drive
Attorneys for Defendants Eric Morris, Shirley Morris, VM Decorative Company, LLC, Eirc Morris and Company, LLC, and Von Morris Decorative Hardware, LLC
Adam E. Gersh, Esq.
John G. Koch, Esq.
FLASTER GREENBERG PC
1810 Chapel Avenue West
Cherry Hill, NJ 08002
Attorneys for Defendant Mark Wojcik, CPA
I. INTRODUCTION
Von Morris Corporation ("VMC") was a company that manufactured, distributed, and sold decorative hardware for many years, and its sole shareholder was Eric Morris. After VMC began to experience financial difficulties in 2011, it was forced in February of 2013 to deed its assets to Plaintiff Nicholas Delzotti through a Deed of Assignment for the Benefit of Creditors. Delzotti, on behalf of VMC, brings this action alleging that Defendants Eric Morris and his mother, Shirley Morris, along with VMC's CPA, Mark Wojcik, devised and carried out a fraudulent scheme to transfer VMC's remaining assets out of the company after VMC first began to experience financial trouble, in order to avoid paying VMC's creditors. Delzotti alleges that between 2011 and 2013, Defendants transferred an excess of $1.5 million, concealed as loans and repayments, out of VMC's coffers to Eric Morris, his mother Shirley Morris, and three Limited Liability Companies1 created by the Defendants for the sole purpose of facilitating the scheme. Plaintiff brings a variety of state law claims against Defendants, including violations of the New Jersey Uniform Fraudulent Transfer Act(Counts One and Two), N.J.S.A. 25:2-25(a) & (b), and the New Jersey RICO statute (Count Three), N.J.S.A. 2C:41-2, conspiracy to commit a tort (Count Four), aiding in the commission of a tort (Count Five), conversion (Count Six), accounting (Count Seven), alter ego liability (Count Eight), and successor liability (Count Nine).
Presently before the Court is the motion of all Defendants except Wojcik under Rule 12(b)(6), Fed. R. Civ. P., to dismiss the Complaint in full. [Docket Item 5.] For the reasons explained below, the Court will dismiss the New Jersey RICO claim (Count Three) because Plaintiff has failed to explain how the conduct here constitutes "racketeering activity" defined in N.J.S.A. 2C:41-1a. The Court will also dismiss the claim for conspiracy to commit a tort (Count Four) because Plaintiff has not pleaded special damages, and will dismiss the claim for accounting (Count Seven) because an adequate remedy exists through the normal discovery process. The Court will deny Defendants' motion with respect to all other claims.
II. BACKGROUND
The facts below are taken from Plaintiff's Complaint.2[Docket Item 1.] Eric Morris was the principal and sole shareholder of Von Morris Corporation ("VMC"), a business entity formerly engaged in the manufacture, sale, anddistribution of decorative hardware and ornamentals. (Compl. ¶¶ 8-9.) VMC operated for several years but began to experience financial trouble in 2011. Finally, in February of 2013, after determining that VMC no longer had the means to continue its business, VMC's Board of Directors authorized Morris to surrender all of the company's assets and liabilities to an assignee, Plaintiff Nicholas Delzotti, for the benefit of VMC's creditors. (Id. ¶¶ 12-17.)
Plaintiff alleges that VMC's financial difficulties "were the manifestations of a façade" facilitated by Morris and his mother, Shirley Morris, and VMC's long-time accountant, Mark Wojcik. (Id. ¶¶ 19, 22-23.) All three are named as defendants in the Complaint.
Plaintiff alleges that all three defendants participated in a fraudulent scheme "to abscond with VMC's assets and shed VMC's lawful creditors." (Compl. ¶ 20.) The financial scheme "was designed to divert valuable property and significant sums of money beyond the reach of VMC's lawful creditors and to related entities and alter egos controlled and/or held by defendants Eric Morris and/or Shirley Morris." (Id. ¶ 25.)
According to the Complaint, in 2011 and 2012, the financial scheme "transferr[ed], divert[ed], and/or secret[ed] more than $1.5 million in monies and inventory away from VMCcoffers and out of the reach of VMC creditors." (Id. ¶ 26.) Between 2011 and 2013, the financial scheme successfully transferred, diverted, and secreted a "currently unknown amount of valuable property and inventory." (Id. at 32.)
Defendants directed "[p]ortions" of the $1.5 million to be unlawfully transferred to Eric and Shirley Morris and another individual.3 (Id. ¶¶ 27, 35.) Other "[p]ortions" of the $1.5 million were diverted to business entities controlled by Eric and Shirley Morris, including VM Decorative, LLC, Eric Morris and Company, LLC, and Von Morris Decorative Hardware, LLC (collectively, "LLCs"), all of which are named as defendants in the Complaint. (Id. ¶¶ 27-28.)4 Plaintiff asserts that Defendants created the companies during the period leading up to VMC's insolvency specifically "for the purpose of facilitating and concealing the unlawful actions undertaken by defendants." (Id. ¶ 29.)
The transfers were not properly disclosed. (Id. ¶ 45.) Plaintiff alleges that the transfers were done with the intentto hinder, delay, and defraud the creditors of VMC and deprive them of money to which they were entitled. (Id. ¶¶ 42, 43, 70.) He further alleges that the assets were transferred "beyond the reach of VMC creditors" and "for less than adequate and full compensation." (Id. ¶¶ 32, 37.) The transfers "represented . . . all of the assets of VMC" and caused VMC to become insolvent. (Id. ¶ 33.)
Finally, he asserts that Defendants "misappropriated and unlawfully utilized the industry reputation and assets of VMC to the detriment of VMC's lawful creditors. (Id. ¶ 39.)
Plaintiff brings nine causes of action. He asserts claims of fraud under the New Jersey Fraudulent Transfer Act, N.J.S.A. 25:2-25(a) & (b) (Counts One and Two) and a claim under New Jersey's RICO statute, N.J.S.A. 2C:41-2 (Count Three). He also brings common law claims for conspiracy to commit a tort (Count Four); aiding in the commission of a tort (Count Five); conversion (Count Six); accounting (Count Seven); alter ego (Count Eight); and successor liability (Count Nine).
Defendants move to dismiss the Plaintiff's Complaint [Docket Item 5] primarily on the basis that the Complaint does not contain enough factual allegations to plausibly support each cause of action, and fails to plead the allegations of fraud with sufficient specificity to meet the heightenedpleading requirement under Fed. R. Civ. P. 9(b).
III. STANDARD OF REVIEW
When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the nonmoving party. A motion to dismiss may be granted only if a court concludes that the plaintiff has failed to set forth fair notice of what the claim is and the grounds upon which it rests that make such a claim plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
Although the court must accept as true all well-pleaded factual allegations, it may disregard any legal conclusions in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Iqbal, 556 U.S. at 678.
In addition, the complaint must contain enough well-pleaded facts to show that the claim is facially plausible. This "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678. The plaintiff must plead sufficient facts to "raise areasonable expectation that discovery will reveal evidence of the necessary element," Twombly, 550 U.S. at 556. If the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not "show[n]" - "that the pleader is entitled to relief." Id. at 679.
Rule 9(b) of the Fed. R. Civ. P. requires particularized pleading for the conduct underlying fraud claims. Under Rule 9(b), the "circumstances" of the alleged fraud must be pled with enough specificity to "place defendants on notice of the precise misconduct with which they are charged." Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). Although the rule states that "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally," and does not require the plaintiff to plead every material detail of the fraud, the plaintiff must use "alternative means of injecting precision and some measure of substantiation into their allegations of fraud." In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir.2002) (internal quotations and citations omitted).
IV. DISCUSSION
The Court will apply New Jersey law to all claims.5 Counts One and Two of Plaintiff's Complaint contain claims under the New Jersey Uniform Fraudulent Transfer Act ("NJUFTA"), N.J.S.A. 25:2-20 et seq. Plaintiff alleges that Defendants fraudulently transferred funds or property in violation of N.J.S.A. 25:2-25(a) and (b).6
"The purpose of the [NJUFTA] is to prevent a...
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