The opinion of the court was delivered by: Hon. Jerome B. Simandle
SIMANDLE, District Judge:
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . 2
II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Parties.. . . . . . . . . . . . . . . . . . . . . . . 5
1. Law Firm Defendants .. . . . . . . . . . . . . . 6
2. Bank Defendants. . . . . . . . . . . . . . . . . 8
3. Other Moving Defendants. . . . . . . . . . . . . 9
4. Non-moving Defendants .. . . . . . . . . . . . 10
B. Facts . . . . . . . . . . . . . . . . . . . . . . . 11
C. Procedural History .. . . . . . . . . . . . . . . . 21
III. DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . 21
A. Arbitration Motions.. . . . . . . . . . . . . . . . 22
1. Arbitration Clause in ARA .. . . . . . . . . . 23
2. Arbitration Clause in AADS . . . . . . . . . . 32
3. Motion to Stay . . . . . . . . . . . . . . . . 41
B. Motions to Dismiss - Personal Jurisdiction .. . . . 43
1. Standard of Review . . . . . . . . . . . . . . 43
2. Bank Defendants .. . . . . . . . . . . . . . . 45
3. Remaining Defendants . . . . . . . . . . . . . 49
C. Motions to Dismiss - Failure to State a Claim . . . 49
1. Standard of Review . . . . . . . . . . . . . . 49
2. Bank Defendants Global and RMBT .. . . . . . . 51
3. Remaining Defendant LHP .. . . . . . . . . . . 55
D. Non-Moving Defendants . . . . . . . . . . . . . . . 56
IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . 56
This case is a putative class action alleging a conspiracy to commit unlicensed debt adjustment services in violation of the New Jersey Debt Adjustment and Credit Counseling Act, N.J. Stat. Ann. § 17:16G-1, et seq., the New Jersey RICO statute, N.J. Stat. Ann. § 2C:41-1, et seq., the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-2, et seq., and various other common law causes of action. Plaintiff names twenty two defendants and charges all defendants collectively with eight different causes of action.
Essentially, Plaintiff alleges that she was deceived into contracting with Defendants in the hopes that they would convince her unsecured creditors to settle her consumer debts without requiring that she declare bankruptcy. Instead, Plaintiff alleges that they participated in a conspiracy to fleece her (and others similarly situated) of her remaining assets without negotiating with her creditors or protecting her from her creditors when they sued to collect on their debts.
Presently before the Court are six motions filed by eighteen of the twenty two Defendants. Nine of the Defendants (the "Law Firm Defendants") have moved to compel arbitration and to dismiss for lack of personal jurisdiction and for failure to state a claim. [Docket Items 20 & 21.] Four of the Defendants (the "Bank Defendants") have similarly moved to compel arbitration and to dismiss. [Docket Items 26 & 27.] Finally, a group of five other Defendants have moved to stay the action pending the arbitration requested by the other Defendants, and to dismiss for lack of personal jurisdiction and for failure to state a claim. [Docket Items 23 & 24.] All three of the motions to dismiss [Docket Items 20, 23 & 26] include an as-applied constitutional challenge to the New Jersey Debt Adjustment and Credit Counseling Act ("NJDACCA").
Plaintiff responded to these motions with two combined briefs in opposition, one opposing the motions regarding arbitration and one opposing the motions to dismiss. [Docket Items 48 & 49.] The moving defendants filed their reply briefs for both the motions to dismiss [Docket Items 72, 74 & 75] and the motions regarding arbitration [Docket Items 73, 76 & 77], and subsequently filed a notice of supplemental authority regarding the arbitration issues [Docket Item 78]. Plaintiff was later granted leave to file a sur-reply brief to the Bank Defendants' reply brief [Docket Item 83], and the Bank Defendants were then granted leave to file a sur-sur-reply brief [Docket Item 88].
Additionally, the four Defendants that did not participate in the instant motions filed letters with the Court requesting that they be permitted to join in the motions, with the leave of the moving parties' counsel. [Docket Items 89 & 96.] Plaintiff has notified the Court of her opposition to permitting these nonmoving Defendants to join in the motions, explaining that these additional Defendants raise different issues than the moving Defendants and, therefore, would require additional opposition from Plaintiff which she has not filed. [Docket Item 90.]
The Court heard oral argument on these motions on November 21, 2011. The motions require the Court to decide issues of whether to enforce either of two different arbitration clauses. Depending on how the Court decides those issues, the Court may also have to then decide whether Plaintiff has proven that the various out-of-state corporations and corporate officers named as Defendants in this action have established the minimum contacts with New Jersey necessary to exercise personal jurisdiction over these Defendants. Finally, for those Defendants that the Court determines are subject to its personal jurisdiction, the Court must determine whether Plaintiff's Amended Complaint has alleged sufficient facts to state a claim under any of the eight asserted theories, and whether doing so, as applied to those remaining Defendants, would violate the United States Constitution, specifically its Contracts Clause (Art. I, Sec. 10, Cl. 1) and the Dormant Commerce Clause (Art I, Sec. 8, Cl. 3).
For the reasons stated below, the Court will grant the Law Firm Defendants' motion to compel arbitration (and consequently deny their motion to dismiss as moot); deny the Bank Defendants' motion to compel, and deny the remaining Defendants' motion to stay the action. The Court will further grant in part and deny in part the Bank Defendants' motion to dismiss, and will grant in its entirety the Remaining Defendants' motion to dismiss.
Because Plaintiff's Amended Complaint names so many parties, and the alleged connections between the parties are so intricate, the Court will begin with a description of the Defendants and how they relate to each other. Because the moving Defendants have organized themselves into three groups, the Court will begin by identifying the Defendants that belong to each of those groups, as well as the four remaining Defendants that were not among the moving parties.*fn1
1. The Law Firm Defendants
The first group of Defendants is the Law Firm Defendants. The nine Defendants in this group connect to this action through Plaintiff's contract for legal and debt negotiation services. This group includes two organizational entities, Legal Helpers Debt Resolution, LLC ("LHDR") and Eclipse Servicing, Inc. ("Eclipse"). Additionally, Plaintiff named seven individual lawyers and corporate officers affiliated with these organizations. Specifically, Plaintiff named as Defendants the four managing members of LHDR: Thomas G. Macey, Jeffrey J. Aleman, Jason E. Searns, and Jeffrey Hyslip. None of these four attorneys are alleged to be residents of New Jersey, and Plaintiff alleges that they are not licensed to practice law in New Jersey. Am. Compl. ¶¶ 7-10. Plaintiff also named Thomas M. Nicely, who is a member of the New Jersey Bar, and alleges that he is a "managing member of or partner of LHDR", a citizen of New Jersey, and that he "claims to have an office" in Cherry Hill, New Jersey, which Plaintiff alleges is not a "bona fide" office for the practice of law in New Jersey. Am. Compl. ¶¶ 11, 51. Finally, also included in the Law Firm Defendants Group are two corporate officers of Eclipse: Harry Hedaya (the President of Eclipse) and Amber N. Duncan (the Vice President of Eclipse). Am. Compl. ¶ 3.
Plaintiff alleges that LHDR is a national law firm, incorporated in Nevada with its main office in Chicago, Illinois. Am. Compl. ¶ 2. Plaintiff alleges that LHDR markets itself as "the nation's largest debt resolution law firm maintaining partners in all 50 states." Id. ¶ 13. Also, Plaintiff alleges that LHDR claims to "work in professional alliance with many of the nations [sic] top reputable debt negotiation companies . . . to provide consumers with debt resolution services similar to those provided by large corporate law firms for their business clients." Id. ¶ 13(C).
Plaintiff alleges that Eclipse is one such debt negotiation company with which LHDR works. Plaintiff alleges that Eclipse markets itself as a "back office solution for debt settlement companies looking to outsource their customer service and debt management and negotiation requirements." Id. ¶ 14. Plaintiff alleges that LHDR contracted with Eclipse to provide customer service, creditor negotiation services, provide online client account access and electronic signature services. Id. In Plaintiff's attorney retainer agreement ("ARA"), Plaintiff agreed with LHDR that "LHDR shall subcontract certain tasks including negotiations with creditors and collectors and certain customer support responsibilities" to Eclipse, to be performed "under the direct supervision of LHDR." Retainer Agreement ¶¶ V, VIII, Bratter Cert. Ex. C.
The second group of Defendants, of which there are four, connect to this action through Plaintiff's contract to open and operate a special bank account out of which she would pay LHDR and Eclipse's fees and in which she would save money that was intended ultimately to be paid to her settling creditors. Plaintiff names Rocky Mountain Bank & Trust ("RMBT" or "Rocky") as the financial institution where she opened this account and Global Client Solutions ("Global") as the "processing agent" that would operate the automatic fund transfers into this account and automatic payments out of it to LHDR and Eclipse. Am. Compl. ¶
4. Plaintiff additionally names as Defendants the corporate officers of RMBT and Global, Douglas L. McClure, who Plaintiff alleges is the President of RMBT, and Michael Hendrix, who Plaintiff alleges is the President of Global.*fn2 Plaintiff alleges that Global and Rocky maintain and operate debt management accounts for hundreds of third party businesses that offer debt adjusting services, electronically withdraw funds from a debtors [sic] account or receive funds forwarded by other means from the debtor and deposit these funds in a Special Purchase [perhaps intended to be "Purpose"] Account in Rocky, administered and maintained by Global.
3. Other Moving Defendants
Finally, an additional five Defendants have filed a pair of motions to dismiss and to stay pending arbitration. Unlike the previous two groups, the Defendants in this group are not contractually connected with Plaintiff, but are individuals or organizations that Plaintiff alleges are part of the larger nationwide conspiracy with the previous two groups of defendants to commit illegal debt adjustment services.
Defendant Legal Helpers P.C. ("LHP") is alleged to be a national bankruptcy law firm headquartered in Illinois, managed by Defendant Macey, that lists an office at the same address as the address listed for the office of Defendant LHDR in Newark, New Jersey. Am. Compl. ¶ 11.
Defendant Legal Services Support Group, L.L.C. ("LSSG") is allegedly a Nevada Corporation that funnels customers seeking debt relief services, such as Plaintiff (though not, specifically, Plaintiff herself), to lawyers and law firms such as LHDR. Id. ¶¶ 6, 19. Defendants Century Mitigations, L.P. ("CMIT"), JEM Group ("JEM"), and Lynch Financial Solutions ("LYNCH") are alleged to be the managing members of LSSG. Id. ¶
6. All four of these corporations are alleged to be headquartered and located in states other than New Jersey. Id.
Finally, four Defendants were named in this action but did not join in the instant motions (though all four have, after the extensive briefing was completed, requested permission to join in the motions to dismiss of Groups 2 and 3, discussed above).
These Defendants include: JG Debt Solutions, L.L.C., Joel Gavalas, Reliant Account Management, L.L.C. and Stephen Chaya. Defendant Gavalas is apparently an employee or officer of JG Debt Solutions, and was the employee with whom Plaintiff allegedly spoke when she initially sought out debt settlement assistance in 2009, who referred her to LHDR and Eclipse. Am. Compl. ¶¶ 21-22. Defendant Reliant Account Management is allegedly a California corporation that engages in similar business as Defendant Global, and Defendant Chaya is allegedly the managing member of Reliant. Id. ¶¶ 12, 16(B).
In September of 2009, Plaintiff had amassed approximately $19,550 in unsecured consumer and credit card debt. Am. Compl. ¶ 21; Attorney Retainer ...