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Re: Marketvision/Gateway Research, Inc., et al. v. Priority Pay Payroll

April 29, 2011


The opinion of the court was delivered by: Michael A. Shipp United States Magistrate Judge


Not for Publication



All counsel of record

Dear Counsel:

This matter comes before the Court by way of Plaintiffs Marketvision/Gateway Research, Inc. and Marketvision/Gateway Research of California, Inc.‟s (collectively, "Plaintiffs") application for leave to file and serve an Amended Verified Complaint. (Docket Entry Number ("Doc. No.") 37-2 ("Pls.‟ Moving Br.").) Defendant Jerry Carter ("Carter" or "Defendant") opposes Plaintiffs‟ motion. (Doc. No. 41 ("Def.‟s Opp‟n Br.").)

For the reasons set forth below, Plaintiffs‟ motion for leave to file and serve an Amended Verified Complaint is granted.


As the parties are well versed in the facts underlying this matter, the Court will address only those facts relevant to the motion currently pending before this Court. This matter pertains to Plaintiffs‟ allegations that Carter and Defendant Priority Pay Payroll, LLC ("Priority Pay")*fn1

(collectively, "Defendants") failed to comply with a Payroll and Tax Impounding Agreement ("Agreement") entered into between Plaintiffs and Priority Pay where, amongst other things, Priority Pay was to provide payroll services, make timely tax filings and tax deposits and handle direct deposits for Plaintiffs. (Doc. No. 1 ("Verified Compl.") ¶¶ 9-13.) The Agreement also grants Priority Pay limited power of attorney. (Id. at ¶ 13.) In the Verified Complaint, Plaintiffs assert that Defendants failed to properly file Plaintiffs‟ taxes, failed to notify Plaintiffs that Priority Pay‟s Vice President of Operations had embezzled tax funds and improperly continued to impound funds without notifying Plaintiffs of the deficiencies and violations of the Agreement. (See generally id.)

On July 28, 2010, this Court granted Carter‟s motion to dismiss and granted Plaintiffs permission to file a renewed motion to amend the Verified Complaint. (Doc. No. 35.) With regard to Plaintiffs‟ claims that rely upon a piercing of the corporate veil theory, or Counts II, IV, VI and VIII, the Court held that Plaintiffs‟ initial proposed Amended Verified Complaint failed to set forth factual assertions to support the legal conclusions. (Doc. No. 36 ("Tr.") 9:7-10:22.) With regard to Plaintiffs‟ fraud claims against Carter under Count V,*fn2 the Court noted that there were two bases to assert fraud: affirmative misrepresentations and nondisclosure. (Id. at 20:23-21:1.) To successfully demonstrate nondisclosure fraud, the Court explained that Plaintiffs are required to demonstrate "that there‟s . . . a legal obligation to in fact disclose, as opposed to false representations which, assuming all other elements of fraud exist, are actionable." (Id. at 21:2-6.) Material representations, on the other hand, require demonstration that a party misrepresented "an existing fact with intent that it be relied upon, that it‟s material, that it‟s relied upon to the detriment of the plaintiff and that the plaintiff suffers damages as a result." (Id. at 21:16-19.) Thus, for purposes of surviving a motion to dismiss, the Court noted that Plaintiff needed to add sufficient facts to support the legal conclusion that Plaintiffs had suffered damages after the alleged fraudulent, material representations were made (Id. at 22:22-23:3) or otherwise demonstrate that Carter had an obligation to disclose the embezzlement or misconduct to Plaintiffs, because "the complaint[,] as it‟s currently drafted does not adequately plead facts which support a New Jersey cause of action for common law fraud." (See id. at 23:9-12, 24:18-25:6, 25:17-20.)

Accordingly, Plaintiffs filed the motion currently pending before this Court, seeking to add factual allegations against Carter, which allegedly support the fraud and conversion claims, as well as their piercing of the corporate veil theory. (Pls.‟ Moving Br. 1-2; see generally Doc. No. 37-1 ("Katcoff Decl.") Ex. A ("Proposed Amend. Compl.").)


Under the Federal Rules of Civil Procedure, "a party may amend its pleading only with the opposing party‟s written consent or the court‟s leave. The court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). The decision as to whether leave to amend a complaint should be granted "is a matter committed to the sound discretion of the district court." Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174 (3d Cir. 1993). The Third Circuit has adopted a particularly liberal approach in favor of permitting pleading amendments so as to ensure that "a particular claim will be decided on the merits rather than on technicalities." Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990). Thus, "[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits." Foman v. Davis, 371 U.S. 178, 182 (1962).

However, leave to amend a pleading may be denied if the Court finds: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice to the non-moving party; or (4) futility of the amendment. Id.; Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000). Notably, if a complaint is vulnerable to dismissal for failure to state a claim upon which relief may be granted under Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)") or futility grounds, and a party moves to amend the complaint, "leave to amend generally must be granted unless the amendment would not cure the deficiency." Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). In assessing whether any deficiency has been cured, a court must consider whether the amended complaint would "survive a motion to dismiss for failure to state a claim[,]" under the applicable Rule 12(b)(6) standard. Keller v. Schering-Plough, Corp., No. 04-669, 2007 U.S. Dist. LEXIS 75318, at *7 (D.N.J. Oct. 9. 2007) (citing In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1332 (3d Cir. 2002)); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). Importantly, the Court must "accept as true all of the factual allegations in the [proposed amended] complaint as well as the reasonable inferences that can be drawn from them[,]" when conducting its futility analysis. Brown v. Philip Morris Inc., 250 F.3d 789, 796 (3d Cir. 2001) (citing Moore v. Tartler, 986 F.2d 682, 685 (3d Cir. 1993)).

When asserting that an amended complaint would or would not survive a Rule 12(b)(6) motion to dismiss, the parties are not required "to engage in the equivalent of substantive motion practice upon the proposed new claim . . . ; [instead,] the newly asserted [claims must] appear to be sufficiently well-grounded in fact or law that it is not a frivolous pursuit." Harrison Beverage Co. v. Dribeck Imp., Inc., 133 F.R.D. 463, 468 (D.N.J. 1990). Stated differently, the proposed amended complaint does "not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face" or that otherwise "raise[s] a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Certainly, mere legal conclusions or naked assertions without factual support will not enjoy a presumption of truth and, thus, will not survive a Rule 12(b)(6) motion to dismiss. Id. at 555-56; Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).

However, the aforementioned plausibility standard "does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence . . . ." of the requisite elements. Bell Atl. Corp., 550 U.S. at 546, 556. Notably, "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and "that a recovery is very remote and unlikely.‟" Id. Thus, a claim will be considered facially plausible when a party "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement,‟ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft, 129 S. Ct. 1949 (internal citations omitted). Indeed, in determining whether claims are plausible and would survive a Rule 12(b)(6) motion to dismiss, this Court has reasoned:

First, courts exercise discretion that permits the pleading standards to be adapted to the circumstances at hand. When determining whether a claim is "plausible," district courts are not bound by a rigid code-pleading regime requiring a plaintiff to recite the magic words or plead every element of a claim, but instead the courts rely on "judicial experience and common sense" applied to the particular circumstances of the case at hand. Courts determine what inferences can be reasonably drawn from circumstantial facts, and also what degree, depending on the case, other factual possibilities must be ruled out in order to make legal liability plausible. Often, the very same circumstantial evidence that leads a plaintiff to believe that a defendant is in control of the relevant direct evidence forms the basis of reasonable inferences supporting a plausible claim.

Second, a party need not have evidentiary support in order to allege a fact in the Complaint. A plaintiff may allege a fact when to the "best of the person's knowledge, information, and belief," there is reason to believe that discovery would "likely" find evidence for the fact. While something more than a mere hunch or guess is needed, the requirement is also not one necessitating evidentiary support prior to discovery.

Thus, far from requiring that a plaintiff be in possession of the relevant evidence in order to plead a claim, a plaintiff need only have some good reasons-even if circumstantial and inferential-for believing that the defendant has engaged in some identifiable legal wrong, sufficient to convince the Court of the claim's plausibility ...

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