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Mskp Oak Grove, LLC v. Venuto

United States District Court, D. New Jersey

September 5, 2014

MSKP OAK GROVE, LLC, Plaintiff,
v.
CAROL VENUTO, individually and as executrix of the Estate of RALPH A. VENUTO, Sr., et al., Defendants.

Robert A. Vort, Hackensack, NJ, Attorney for Plaintiff.

Dimitri Luke Karapelou, LAW OFFICES OF DIMITRI L. KARAPELOU, LLC, Philadelphia, PA, Attorney for Defendants.

OPINION

JEROME B. SIMANDLE, Chief District Judge.

I. INTRODUCTION

This matter comes before the Court on a motion for judgment on the pleadings by Defendants Carol Venuto, Ralph A. Venuto, Jr., Carol Rebbecchi, Richard P. Venuto, and Hollywood Tanning Systems, Inc. ("HTS"). [Docket Item 41.] In this action, Plaintiff MSKP Oak Grove, LLC ("MSKP") asserts claims under the New Jersey Uniform Fraudulent Transfer Act, N.J.S.A. § 25:2-20 et seq. ("NJUFTA"), arising from an allegedly fraudulent transfer of assets through which Defendants intended to avoid payment to certain creditors, including Plaintiff. Plaintiff is a commercial landlord to which HTS is indebted by a 2009 judgment in the amount of $411, 573.45. Plaintiff alleges that following an asset purchase agreement with another corporation, Tan Holdings, LLC, in 2007, HTS fraudulently distributed $16 million to its shareholders, Defendants Carol and Ralph A. Venuto, Sr., [1] Ralph A. Venuto, Jr., Carol Rebbecchi, and Richard P. Venuto ("the Shareholders"), and rendered HTS without sufficient assets to satisfy future obligations to creditors, including HTS's obligation to Plaintiff relating to a defaulted lease agreement.

In the instant motion, Defendants assert that they are entitled to judgment on the pleadings as to Plaintiff's NJUFTA claims because Plaintiff's claims are time-barred by the NJUFTA's four-year statute of repose in N.J.S.A. § 25:2-31. The parties agree that Plaintiff timely filed its initial Complaint, but dispute whether the Amended Complaint was filed more than four years after the allegedly fraudulent transfer. In the event the Amended Complaint was filed more than four years after the allegedly fraudulent transfer, Plaintiff maintains that the Court must allow the Amended Complaint to relate back to the timely filing of the original Complaint pursuant to New Jersey Court Rule 4:9-3. The outcome turns on whether the NJUFTA statute of repose prohibits relation back, and if not, whether Plaintiff has demonstrated that the Amended Complaint should relate back under New Jersey Court Rule 4:9-3.

For the reasons discussed below, the Court will deny Defendants' motion for judgment on the pleadings because the Amended Complaint relates back and is timely.

II. BACKGROUND

A. Facts

The Court accepts as true the following facts in Plaintiff's Amended Complaint for purposes of Defendants' motion for judgment on the pleadings. Prior to the events alleged in this action, Defendant HTS was a New Jersey corporation that operated tanning salons and sold franchises and tanning equipment to independent tanning salons. (Am. Compl. ¶¶ 7-8.) In 2003, HTS leased a commercial retail space in a shopping center in Florida from TSO Oak Grove, LLC ("TSO"), a predecessor in interest to Plaintiff MSKP. ( Id. ¶ 19.) In 2004, TSO consented to HTS's request to sublease the space to a franchisee of HTS (a non-party entity known as Altamonte Chick Shades, Inc.), though HTS remained liable on the lease in the event of Altamonte's default. ( Id. ¶ 21.) Plaintiff acquired the landlord's rights under the lease agreement in January 2007. ( Id. ¶ 23.)

On April 18, 2007, HTS entered into an asset purchase agreement with non-party Tan Holdings, LLC, in which Tan Holdings acquired almost all of HTS's assets in exchange for $40 million, 25% of the issued and outstanding preferred units of Tan Holdings, and certain contingency payments depending on Tan Holdings' future earnings. ( Id. ¶¶ 9-10, 12.) HTS remained liable on its lease with Plaintiff despite the sale to Tan Holdings. ( Id. ¶ 21.)

On June 22, 2007, the asset purchase agreement closed between HTS and Tan Holdings, and HTS ceased operations shortly thereafter. ( Id. ¶¶ 14-15.) After the closing, HTS used "much of" the $40 million acquisition price to settle all thenoutstanding debts owed to creditors; Tan Holdings did not assume liability for HTS's debts that were due and owing at the time of the closing. ( Id. ¶¶ 13, 16.) The remainder was distributed to the shareholders "at or subsequent to the closing of title on June 22, 2007" in the aggregate amount of approximately $16 million. ( Id. ¶ 17.)

After HTS paid the company's debts that were due and owing at the time of the closing, and subsequently distributed the $16 million to its shareholders, HTS's remaining assets were the 25% ownership stake in Tan Holdings and the possibility of additional payments based upon Tan Holdings meeting certain earnings thresholds. In support of Plaintiff's fraudulent transfer claim, Plaintiff alleges that following the shareholder distribution, HTS's remaining assets were "insufficient to satisfy claims against [HTS], such as the claim of Plaintiff[, ]" and were "not liquid" and "speculative." ( Id. ¶¶ 38, 40.) Plaintiff also implies that HTS's 25% ownership in Tan Holdings had minimal real value, alleging that Tan Holdings did not succeed after the acquisition; in May 2009 it turned over its assets to its creditors. ( Id. ¶ 37.)

On July 3, 2008, Plaintiff notified HTS that Altamonte, its sublettor franchisee, had defaulted on its lease. ( Id. ¶ 24.) Plaintiff sued HTS and Altamonte in Florida state court to recover damages for breach of the lease. ( Id. ¶ 25.) Plaintiff subsequently won a judgment against HTS for $411, 573.45, which was recorded in the Superior Court of New Jersey on July 30, 2009 and remains unpaid. ( Id. ¶¶ 26-28.) In addition to Plaintiff, at least 14 other landlord creditors have sought to collect on various liabilities of HTS after the shareholder distribution. ( Id. ¶ 39.)

B. Procedural history

Plaintiff filed the original Complaint in this action on December 13, 2010, naming only the individual shareholders as defendants. [Docket Item 1.] Defendants moved to dismiss the Complaint for failure to state a claim and for failure to join a necessary party, namely HTS, which the Court granted on August 8, 2011, dismissing the Complaint without prejudice to Plaintiff filing a motion to amend and to join the new party. [Docket Items 11 & 12.] Plaintiff subsequently filed an Amended Complaint on November 14, 2011. [Docket Item 24.] The Amended Complaint asserted six counts against Defendants: Counts One through Four involved claims under the NJUFTA, Count Five sought to recover under a theory of improper distribution under N.J.S.A. § 14:6-12(1)(c), and Count Six sought to recover under a theory of unjust enrichment.[2] Defendants again moved to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). The Court denied Defendants' motion as to the first three counts, holding that Plaintiff had sufficiently alleged a fraudulent transfer under three subsections of the NJUFTA, but granted Defendants' motion as to Counts Four, Five, and Six. MSKP Oak Grove, LLC v. Venuto , 875 F.Supp.2d 426, 443 (D.N.J. 2012). Following entry of an Order granting in part and denying in part Defendants' motion to dismiss [Docket Item 34], Defendants filed an Answer to the Amended Complaint on July 13, 2012. [Docket Item 40.]

On July 18, 2012, Defendants filed the instant motion for judgment on the pleadings due to untimeliness [Docket Item 41], which Plaintiff opposes [Docket Item 46.] In January, 2013, the Court issued an Order [Docket Item 59] staying all scheduling deadlines and administratively terminating the instant motion without prejudice until factual findings were issued in a related case pending before Judge Noel ...


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