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N.V.E., Inc v. Jesus Palmeroni

May 11, 2011


The opinion of the court was delivered by: Esther Salas United States Magistrate Judge



Pending before this Court is a Motion by Plaintiff N.V.E., Inc. ("Plaintiff" or "NVE") to amend its complaint to add thirty-four new defendants ("New Defendants") and two additional claims against Defendants Jesus J. Palmeroni ("Mr. Palmeroni"), Ronald Sumicek and Sunbelt Marketing (collectively the "Defendants"). (Docket Entry No. 160, the "Motion"). Having considered the parties' submissions, including the Court-requested supplemental submissions dated February 21, 2011, the Court GRANTS Plaintiff's motion for leave to file an amended complaint.


In November 2006, Plaintiff instituted this action against Defendants seeking damages for Defendants' conspiracy to defraud. (Docket Entry No. 1, the "Complaint"). The Complaint included thirteen causes of action, such as claims under the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), New Jersey RICO, Fraud, Civil Conspiracy, Conversion, Interference with Property Rights, Breach of Duty of Loyalty and Breach of Contract. (Id.). Thereafter, in November 2007, Mr. Palmeroni sought to dismiss this action. (Docket Entry No. 30). In October 2008, Chief Judge Brown transferred this matter to the Bankruptcy Court and in October 2009, the Court withdrew the reference. (Docket Entry Nos. 66 & 71). Thereafter, in January 2010, the Court entered a Case Management Order setting deadlines for, among other things, fact and expert discovery. (Docket Entry No. 78). Since October 2009, the Court has ruled on multiple motions to quash and informal discovery disputes. The parties are currently engaged in discovery.


Plaintiff manufactures, distributes and sells nutritional supplements and energy drinks. (Docket Entry No. 160, Certification of Ellen W. Smith, Esq., Exhibit 1, the "Proposed Amended Complaint" at ¶ 7). Plaintiff sells its products through brokers, who get paid a commission on sales directly to consumers, and to distributors, who resell the product to retailers. (Id. at ¶ 39). Plaintiff employed Mr. Palmeroni from 1999 to 2006, first as a salesman and later as Vice President of Sales. (Id. at ¶ 37).

NVE alleged that Mr. Palmeroni entered into secret arrangements with certain brokers who purchased NVE products for payments in exchange for assignment or manipulation of NVE accounts. (Id. at ¶ 40). In addition to the kickback scheme, Mr. Palmeroni and a fellow NVE employee, Vincent Rosarbo, formed an entity called Smart World, Inc. ("SW US"). (Id. at ¶ 16). NVE already maintained a relationship with a European distributor located in the Netherlands, also called Smart World ("SW Netherlands"). (Id. at ¶ 33). NVE contends that Mr. Palmeroni used SW US to purchase NVE products at a lower international sales price without ever intending to export them and resold the products in the United States, undercutting NVE's sales. (Id. at ¶ 16). NVE also contends that SW Netherlands received commissions for permitting SW US to place orders in the United States under the guise that it was placing the orders for SW Netherlands. (Id. at ¶ 33).

In the Motion, NVE seeks to add thirty-four defendants and two causes of actions to the existing thirteen. The thirty-four defendants include Mr. Palmeroni's wife, Mr. Rosarbo, Mr. Rosarbo's wife and daughter, Mr. Palmeroni and Mr. Rosarbo's companies (National Retail Consulting Group, SW US, American Wholesale Distributors, Foremost International, Global Marketing & Sales Group, LLC and VAR), the brokers and distributors allegedly involved in the kickback scheme and SW Netherlands. (Id. at ¶ ¶ 8 - 36). NVE seeks to add the New Defendants to the existing RICO and common law claims.


Fed. R. Civ. P. 15(a)(2) allows a party to amend its pleading by leave of court when justice so requires. Leave to amend pleadings is to be freely given. Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 371 U.S. 178, 182 (1962). The decision to grant leave to amend rests within the discretion of the court. Foman, 371 U.S. at 182. Pursuant to Foman, leave to amend may be denied on the basis of: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice to the opposing party; and (4) futility of amendment. Id. "Only when these factors suggest that amendment would be 'unjust' should the court deny leave." Arthur v. Maersk, Inc., 434 F.3d 196, 203 (3d Cir. 2006) (internal citations omitted). Here, Mr. Palmeroni is opposing Plaintiff's motion on the basis of undue delay, prejudice and futility of the proposed amendment. These arguments will be addressed in turn.

A. Undue Delay and Prejudice

In determining whether an amendment should be denied for undue delay, the Court must "focus on the plaintiffs' motives for not amending their complaint to assert [the proposed] claim earlier[.]" Adams v. Gould, 739 F.2d 858, 868 (3d Cir. 1984). "There is no presumptive period in which a motion for leave to amend is deemed 'timely' or in which delay becomes 'undue.'" Coulson v. Town of Kearny, No. 07-5893, 2010 U.S. Dist. LEXIS 3711, at *8 (D.N.J. Jan. 19, 2010). "The passage of time, without more, does not require that a motion to amend a complaint be denied; however, at some point, the delay will become 'undue,' placing an unwarranted burden on the court[.]" Adams, 739 F.2d at 868. "Delay may become undue when a movant has had previous opportunities to amend the complaint." Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001). In other words, the Court should also consider whether "new information came to light or was available earlier to the moving party." In re Adams Golf, Inc. Secs. Litig., 381 F.3d 267, 280 (3d Cir. 2004).

In essence, Mr. Palmeroni contends that Plaintiff unduly delayed in filing the Motion because Plaintiff knew or should have known the facts underlying the amendment since 2006. See Legal Memorandum in Opposition to Plaintiff's Motion to Amend Complaint ("Def. Brief") at 11. Mr. Palmeroni argues that Plaintiff had access to documents and witnesses since the inception of this lawsuit or shortly thereafter, which, if Plaintiff had examined, would have provided the basis for Plaintiff's claims. See id. at 15. Finally, Mr. Palmeroni argues that this case is four years old and an amended complaint will only delay the litigation further. In opposition, Plaintiff argues that it did not know the facts underlying its claims against the New Defendants until March 2010. See Reply Brief in Support of Plaintiff's Motion for Leave to File An ...

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