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Letter Opinion & Order Re: Falato, et al. v. Fotografixusa

December 21, 2010

LETTER OPINION & ORDER RE: FALATO, ET AL.
v.
FOTOGRAFIXUSA, L.L.C., ET AL.,



The opinion of the court was delivered by: Tonianne J. Bongiovanni United States Magistrate Judge

(609) 989-2040

CHAMBERS OF U.S. COURTHOUSE

402 E. STATE STREET, RM 6052 TRENTON, NJ 08608

Dear Counsel and Mr. Hoather:

Pending before the Court are Defendant Fotografixusa, L.L.C.'s ("Fotografixusa, LLC") motion to set aside default and Plaintiffs Deidre Falato, David McKee, Mildred Mastroberte, Mary Ann Pieshala and Barbara David's (collectively "Plaintiffs") motion for leave to file an Amended Complaint. The Court has reviewed all arguments made in support of and in opposition to both motions and considers the motions without oral argument pursuant to FED.R.CIV.P. 78. Because Plaintiffs' motion to amend may impact Fotografixusa, LLC's motion to set aside default, the Court considers Plaintiffs' motion first.

I. Plaintiff's Motion to Amend

Plaintiffs seek to amend their Complaint in order to add Fotografixusa, Inc. as a defendant. Plaintiffs argue that they initially sued Fotografixusa, LLC because that was how the company was identified in Defendants' prospectus. Initially, despite certain references to Fotografixusa, Inc., such as on the stock certificates, Plaintiffs did not believe it was necessary to name Fotografixusa, Inc. as a defendant. As a result, in February 2010, Plaintiffs informed the Court that they did not believe it was necessary to join Fotografixusa, Inc. as a defendant and that they, therefore, had no intention of amending the Complaint to name Fotografixusa, Inc. Plaintiffs, however, contend that when Fotografixusa, LLC retained counsel and filed its Corporate Disclosure Statement, which described Fotografixusa, LLC as, "FOTOGRAFIXUSA, LLC N/K/A FOTOGRAFIXUSA, INC. (IMPROPERLY PLED AS FOTOGRAFIXUSA, LLC)[,]" they realized it was necessary to name Fotografixusa, Inc. as a defendant in order to ensure a complete and full adjudication of the merits of this case. (Fotografixusa, LLC's Disclosure Statement; Docket Entry No. 32).

Plaintiffs argue that they did not unduly delay in seeking to join Fotografixusa, Inc. as a defendant since they filed their motion to amend well within the time limits set in the Court's Pretrial Scheduling Order and since it was not until Fotografixusa, LLC filed its Corporate Disclosure Statement that there was sufficient factual support for the proposed amendment. In addition, Plaintiffs claim that Defendants will not be prejudiced by the proposed amendment because fact discovery is still in its early stages (indeed, there is currently a discovery dispute between Plaintiffs and Defendant Hoather, Fotografixusa, LLC has yet to engage in the discovery process and no depositions have been taken) and "there would be no additional discovery expenses by adding defendant Fotografixusa, Inc. as a named defendant." (Pl. Reply at 3). Plaintiffs also argue that Fotografixusa, LLC's claim that it would be prejudiced if Plaintiffs are permitted to join Fotografixusa, Inc. because of the exorbitant costs and time that would be involved in defending this matter in New Jersey is completely unsubstantiated. For these reasons, Plaintiffs also argue that their proposed joinder of Fotografixusa, Inc. is not being sought in bad faith.

Further, Plaintiffs claim that their proposed joinder of Fotografixusa, Inc. as a defendant is not futile. In this regard, Plaintiffs argue that their proposed Amended Complaint contains numerous specific allegations with supporting attached exhibits of "misrepresentations and/or fraudulent statements/e-mails from defendant Raymond Hoather pertaining to Fotografixusa, Inc." (Id. at 14). In addition, Plaintiffs argue that in the prospectus for Fotografixusa, Inc., there are numerous references to the company Fotografixusa, LLC. As such, Plaintiffs contend that it is necessary for Fotografixusa, Inc. to be joined as a defendant in order for the Court to accord full and complete relief among the existing parties.

Fotografixusa, LLC opposes Plaintiffs' motion to amend arguing that the company will be unduly prejudiced if Plaintiffs are permitted to amend their Complaint at this juncture and that Plaintiffs' proposed Amended Complaint "would never survive a motion to dismiss." (Fotografixusa, LLC Opp. Br. at 5).

Fotografixusa, LLC argues that Plaintiffs, who "were actually officers of the corporation and held positions on the Board of Directors[,]" knew prior to the commencement of this lawsuit that Fotografixusa had been converted from an LLC to a corporation. (Id. at 6-7). Indeed, Fotografixusa, LLC notes that in Feburary 2010, Plaintiffs were aware of the existence of Fotografixusa, Inc. and specifically informed the Court that they were not going to seek to add the corporation to this matter. As such, Fotografixusa, LLC claims that Plaintiffs' motion has been brought in bad faith and is the product of a dilatory motive. Consequently, because Plaintiffs "had multiple opportunities to state a claim or discover an additional party but . . . failed to do so" in a timely fashion, Fotografixusa, LLC argues that Plaintiffs' motion to amend should be denied. (Id. at 15).

Moreover, Fotografixusa, LLC argues that it would be prejudiced if Plaintiffs are permitted to join Fotografixusa, Inc. as a defendant. In this regard, Fotografixusa, LLC argues that "the prejudice would be the exorbitant costs and time involved in defending this matter in New Jersey." (Id. at 11). Fotografixusa, LLC goes on to argue that "[t]he corporation is a Florida corporation with its legal counsel, books, records and all manner of documentation in Florida. The costs would effectively cripple the start-up company. So, unless venue was changed to Florida, the prejudice would remain." (Id.) Thus, Fotografixusa, LLC argues that Plaintiffs' motion to amend the Complaint to join Fotografixusa, Inc. should be denied.

In addition, Fotografixusa, LLC claims that Plaintiff's motion to amend should be denied because the proposed Amended Complaint would not withstand a motion to dismiss. Specifically, Fotografixusa, LLC argues that Plaintiffs, themselves, are complicit in all of the bad acts allegedly undertaken by Fotografixusa, LLC and Defendant Hoather. Indeed, Fotografixusa, LLC argues that Plaintiffs "have in fact advanced the financial problems of the corporation and caused not only harm to their own ...


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