Rahemtulla v. Hassam

• Decision Date: 24 March 2008
• Docket Number: Civil Action No. 3:05-0198.
• Citation: 539 F.Supp.2d 755
• Parties: Alnoor RAHEMTULLA and Shyrose Rahemtulla, Plaintiffs v. Nazim HASSAM, a/k/a Nazim B. Hassam, a/k/a Hazim B. Hassam, a/k/a Nazim Hasiam, t/a Howard Johnson Inn; Shamshad N. Hassam, a/k/a Shamim B. Hassam, a/k/a Shami-Hassam; Omsrishi, Inc., a fictitious entity; Kilimanjaro Steakhouse Bar & Grill; John and Jane Does 1-100, fictitious persons; ABC and XYZ Corporations 1-100, fictitious entities, Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

539 F.Supp.2d 755

Alnoor RAHEMTULLA and Shyrose Rahemtulla, Plaintiffs v. Nazim HASSAM, a/k/a Nazim B. Hassam, a/k/a Hazim B. Hassam, a/k/a Nazim Hasiam, t/a Howard Johnson Inn; Shamshad N. Hassam, a/k/a Shamim B. Hassam, a/k/a Shami-Hassam; Omsrishi, Inc., a fictitious entity; Kilimanjaro Steakhouse Bar & Grill; John and Jane Does 1-100, fictitious persons; ABC and XYZ Corporations 1-100, fictitious entities, Defendants.

Civil Action No. 3:05-0198.

United States District Court, M.D. Pennsylvania.

March 24, 2008.

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Robert Michael Vreeland, Newton, NJ, Walter T. Grabowski, Holland, Brady & Grabowski, P.C., Wilkes-Barre, PA, for Plaintiffs.

Joseph A. O'Brien, Karoline Mehalchick, Oliver Price & Rhodes, Clarks Summit, PA, for Defendants.

MEMORANDUM AND ORDER

MALACHY E. MANNION, United States Magistrate Judge.

Pending before the court is the defendants' Motion to Dismiss the Amended Complaint, (Doc. No. 65), and the plaintiffs' Motion for partial¹ Summary Judgment, (Doc. No. 70). After careful review of the pleadings and evidence submitted in support thereof, as well as the applicable law that governs this case, the defendants' motion will be granted in part and denied in part, and the plaintiffs' motion is denied.

I. Procedural History

This matter arises out of the formation and operation of the Kilimanjaro Steak House Bar & Grill, a Pennsylvania General Partnership between the plaintiff, Alnoor Rahemtulla — a resident of New Jersey, and the defendant, Nazim Hassam — a resident of Pennsylvania. More specifically, the case involves allegations that Mr. Hassam fraudulently induced. Mr. Rahemtulla into entering a partnership, which through a calculated plan of making empty promises and withholding crucial information, caused Mr. Rahemtulla to invest $340,000 towards what he believed to be his contribution to the partnership, when such funds were instead misappropriated and commingled, with the other defendants for other purposes. On March 31, 2004, the plaintiffs commenced this action in the United States District Court for the District of New Jersey, claiming, inter alia, fraud, misappropriation, conversion, breach of fiduciary duties, and unjust enrichment, and seeking an invalidation of the partnership documents, a disgorgement and return of the monies which they invested in the partnership, compensatory and punitive damages, and attorney's fees and costs. (Doc. No. 1). Id. The defendants having filed a motion to dismiss and/or change venue, by order dated January 10, 2005, the District of New Jersey directed that the matter be transferred to the Middle District of Pennsylvania. Upon transfer, the parties consented to the jurisdiction of the undersigned on March 29, 2005. (Doc. No. 9).

On June 11, 2007, the plaintiffs filed an amended complaint, which sets forth the following fourteen counts: Count I — Intentional Fraud; Count II — Equitable Fraud; Count III — Misappropriation; Count IV — Conversion; Count V-Intentional Violation of Fiduciary Duties; Count VI — Breach of Fiduciary Duties; Count VII — Breach of the Implied Covenant of Good Faith & Fair Dealing; Count VIII — Declaratory Relief Invalidating the Partnership Documents; Count IX — Invalidation of Partnership Documents for the lack of a Proper Party; Count X — Rescission Based on Conflict of Interest; Count XI — Unjust Enrichment; Count XII — Intentional Impairment of Income / Loss of Income; Count XIII — Accounting; and Count XIV — Violation of the Lanham Act. (Doc. No. 61). They continue to seek a disgorgement and return of the $340,000 they invested in the partnership, as well as declaratory and injunctive relief, monetary damages, and attorney's fees and costs. Id. On July 3, 2007, the plaintiffs filed the instant motion for partial² summary judgment, (Doc. No. 70), together with a supporting brief, (Doc. No. 71), and statement of material facts, (Doc. No. 72). Various exhibits were also filed. (Doc. Nos. 77-81). On July 6, 2007, the defendants filed the instant motion to dismiss the amended complaint. (Doc. No. 65). The defendants also filed a brief in opposition to the plaintiffs' motion for summary judgment, (Doc. No. 86), a statement of material facts and response to the plaintiffs' statement of facts, (Doc. Nos. 88-89), and two affidavits, (Doc. Nos. 90-91), on August 17, 2007. The defendants filed a brief in support of their motion to dismiss on August 21, 2007. (Doc. No. 92).³ On September 14, 2007 the plaintiffs filed a reply to the defendants' opposition to summary judgment. (Doc. No. 97). This matter is now ripe for disposition.

II. Applicable Law

The parties disagree as to whether the court should apply New Jersey or Pennsylvania law in this case. It is well settled that in diversity actions, a federal court determines which state's substantive law governs by applying the choice of law rules of the forum state in which it sits. Garcia v. Plaza Oldsmobile Ltd., 421 F.3d 216, 219 (3d Cir.2005) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Pennsylvania courts generally apply a two-step analysis: "[F]irst, the court must look to see whether a false conflict exists. Then, if there is no false conflict, the court determines which state has the greater interest in the application of its law." Le-Jeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir.1996) (citing Cipolla v. Shaposka, 439 Pa. 563, 267 A.2d 854 (1970)); see also Hughes v. Prudential Lines, Inc., 425 Pa.Super. 262, 624 A.2d 1063, 1066 n. 2 (Pa.Super.Ct.1993). However, where there is a contractual choice of law or forum selection clause set forth by the parties, Pennsylvania courts will enforce the contractual provision

unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue.

Gay v. CreditInform, 511 F.3d 369, 389 (3d Cir.2007) (quoting Restatement (Second) of Conflict of Laws § 187(2)(1988)); see also Novus Franchising Inc. v. Taylor, 795 F.Supp. 122, 126 (M.D.Pa.1992); Schifano v. Schifano, 324 Pa.Super. 281, 471 A.2d 839, 843 n. 5 (Pa.Super.Ct.1984). In this case, the Kilimanjaro Steak House Bar & Grill (hereinafter "the Partnership") executed a commercial property lease of premises within the Howard Johnson Inn, located in Bartonsville, Pennsylvania. (Doc. No. 79-7 Ex. F). The final paragraph of the lease agreement states as follows: "Controlling Law. This lease shall be governed by the laws of the Commonwealth of Pennsylvania." Id. ¶ 32.

The court will honor this contractual choice of law provision because neither exception in Restatement (Second) of Conflict of Laws § 187(2) applies.⁴ First, Pennsylvania clearly has a substantial relationship to both the parties and the transactions. Not only is the Howard Johnson Inn located in Pennsylvania, but the Partnership was also registered in Pennsylvania, the parties executed the Partnership Agreement and the Commercial Property Lease in Pennsylvania, the bank accounts at issue were located in Pennsylvania, and the parties were to carry out their respective Partnership obligations in Pennsylvania. See (Doc. Nos. 79-5, 79-7 Exs. D, F). Although the plaintiffs argue that many of the predicate acts of fraud occurred in New Jersey, there is clearly a reasonable basis to apply Pennsylvania law. Second, while the plaintiffs rightfully maintain that New Jersey has a strong governmental interest in protecting its citizens from fraud, Pennsylvania holds the materially greater interest due to the nature of the Partnership, the location, of where the parties executed the agreements, and the situs of the property which is the subject of the transaction. Accordingly, this court sees no reason to disturb the parties' contractual choice of law. Pennsylvania substantive law shall apply to this case.

III. Standard of Review

Motion to Dismiss

The defendants' motion to dismiss is brought pursuant to Federal Rule of Civil Procedure 12(b)(6). This rule provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. Fed. R.Civ.P. 12(b)(6). Review of a motion to dismiss is limited to the face of the plaintiff's complaint, whereby the court must accept all factual allegations as true and draw all reasonable inferences therefrom in the plaintiff's favor. Langford v. City of Atlantic City, 235 F.3d 845, 847 (3d Cir. 2000) (citing Nami v. Fauver, 82 F.3d 63, 65 (3d Cir.1996)); NAPA Transp., Inc. v. Travelers Prop. Cas., No. 06-cv-1866, 2006 U.S. Dist. LEXIS 84166, at *4 (M.D.Pa. Nov. 20, 2006). A court may also consider the exhibits attached to the complaint, matters of public record, and "undisputably authentic" documents which the plaintiff has identified as the basis of his or her claim. Delaware Nation v. Pennsylvania, 446 F.3d 410, 413 n. 2 (3d Cir.2006) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993)).

To prevail on a Rule 12(b)(6) motion, the defendant bears the burden of establishing that the plaintiffs complaint fails to state a claim upon which relief can be granted. Martella v. Wiley, No. 06-cv-1702, 2007 WL 1140644, at *3, 2007 U.S. Dist. LEXIS 28242, at *9 (M.D.Pa. Apr. 17, 2007) (citing Gould Elecs., Inc. v. United States, 220 F.3d 169, 178 (3d Cir.2000)); see also F.R. Civ. P. 12(b)(6). Under the federal notice pleading standard, "a complaint requires only `a short and plain statement' to show a right to relief, not a detailed recitation of the proof that will in the end establish such a right."...