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Demetro v. National Association of Bunco Investigations

United States District Court, D. New Jersey

September 7, 2017

CLARK DEMETRO, Union County, New Jersey, and CLARK & SONS CONSTRUCTION, LLC, Union County, New Jersey, Plaintiffs,
NATIONAL ASSOCIATION OF BUNCO INVESTIGATIONS, Baltimore County, Maryland, and ROBERT POCHEK, individual capacity, Middlesex County, New Jersey, and TOWNSHIP OF WOODBRIDGE, NEW JERSEY, and JOHN DOE, Defendants.


          HON. KEVIN MCNULTY, U.S.D.J.


         The plaintiffs, Clark Demetro ("Demetro") and Clark & Sons Construction, LLC ("Clark & Sons") brought this action against Defendants National Association of Bunco Investigators ("NABI"), [1] Robert Pochek, and the Township of Woodbridge, NJ, based on allegedly defamatory statements and violations of Demetro's rights under the constitutions and laws of the United States and New Jersey. Plaintiffs' amended complaint (ECF no. 21, referred to herein as the "Complaint" and cited as "AC") asserts claims of (1) common law defamation and false light (Counts 1, 3, and 4); (2) commercial disparagement (Count 2); (3) violations of 42 U.S.C. § 1983 and the New Jersey Civil Rights Act ("NJCRA"), N.J. Stat. Ann. § 10:6-1 etseq. (Count 5); (4) violation of the New Jersey Law Against Discrimination ("NJLAD"), N.J. Stat. Ann. § 10:5-12(f) based on discrimination in a place of public accommodation (Count 6); and (5) civil conspiracy under 42 U.S.C. § 1985 and the NJLAD (Count 7).

         Now before the Court is NABI's motion (1) to vacate entry of default pursuant to Fed.R.Civ.P. 55(c); (2) to dismiss the amended complaint for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2); and (3) to dismiss the AC for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). (ECF no. 47)


         A. Factual Background [2]

         The allegations of the Complaint are taken as true for purposes of this motion. Plaintiff Clark Demetro is a New Jersey citizen residing in Union County. (AC p. 2) Plaintiff Clark & Sons Construction, LLC, is a New Jersey limited liability company owned by Demetro. (Id.) Defendant NABI is a 501(c)(3) organization, incorporated in Maryland. (Id.) Defendant Robert Pochek ("Pochek") is a New Jersey citizen, a member of NABI, and is a police officer in the Township of Woodbridge, New Jersey. (Id. at 3)

         According to the Complaint, NABI is an organization primarily composed of law enforcement personnel "who work in concert to operate as a 'Gypsy Task Force.*" (AC, Facts Common to All Counts, ¶ 6) The term "Gypsy" is a derogatory epithet used to describe Romani, a distinct ethnic population of Asian origin. (Id. ¶¶ 1, 5) Historically, Romani individuals "have suffered discrimination based on assumed connection between criminality and their race/national origin." (Id. ¶ 1) NABI refers to Romani as "Gypsies." (Id. ¶ 3)

         NABI recruits law enforcement officers to join, regular membership is open only to law enforcement personnel.[3] NABI encourages its regular membership to share information on "Gypsies" to "better enable its law enforcement members to identify, target, capture and prosecute 'Gypsies' but in reality to advance its agenda of illegally profiling and targeting persons of Romani descent." (Id. ¶¶ 10, 13, 15) NABI's law enforcement members share their information on "Gypsy 'criminals'" by submitting postings on Gypsies to the NABI website as well as other, more traditional means." (Id. ¶ 16) NABI's methods of distributing the information include training seminars, a bimonthly bulletin, a weekly intelligence log, and a database of suspects, "substantially all of whom are 'Gypsies' or persons of Romani etiinicity." (Id. ¶ 18) The shared information often includes confidential personal identifiers such as social security numbers or FBI identification numbers. (Id. ¶ 17)

         Particularly relevant to the claims in this action is the "'Gypsy' Gallery" on NABI's website. (Id. ¶¶ 26-29) The Gallery includes color photos of individuals with their names, social security numbers and FBI numbers, dates of birth, last known address or location, and an "[i]nformative paragraph describing (through the 'colored' language of the submitter and NABI) the crimes the individual has [allegedly] committed." (Id. ¶ 27) (parentheticals in original) This information is provided by NABI's law enforcement members, who are encouraged by NABI to "share data obtained in the course of the performance of their official State sanctioned activities." (Id. ¶ 29)

         Plaintiff Demetro is ethnically Romani, and "by virtue of his physical appearance and surname, is readily identified as Romani by other Romani, the police, and NABI." (Id. ¶¶ 45-46) Starting as early as 2002, and through 2014, NABI, "by and through its law enforcement members, " has posted on its website confidential information about Demetro, such as his social security number and FBI identification number, together with a photograph of Demetro. The website has "[f]alsely labeled Demetro as a 'Gypsy' criminal, who uses his construction business to commit fraud and who has a propensity to assault police officers and women." (Id. ¶ 48)

         The Complaint specifically identifies three different statements about Demetro that NABI has shared with its members between 2002 and 2014. First, around April 12, 2002, NABI published on its website, and e-mailed to its regular membership, a statement that "Demetro has an extensive record for assaulting police and resisting arrest when police are called to domestic situations involving him." (AC, Count 4, ¶¶ 1-9) Second, around March 30, 2012, NABI published on its website a statement that "Demetro is involved in several scams involving Auto body work and Psychic readings." (Id., Count 3, ¶¶ 1-9) Third, around May 22, 2014, NABI published information provided by Defendant Robert Pochek that Demetro "uses his home improvement company, Clark & Son Construction, to scam victims into paying for work that is never performed." (Id., Count 1, ¶¶ 1-9)

         The AC alleges that "Police officers, primarily in the State of New Jersey, have targeted Demetro based on the false perception, taught by NABI, that 'Gypsies' are inherently criminal." (Id., Facts Common to All Counts, ¶ 49) As a result, Demetro has been charged with around 26 crimes since 1998. All but three of those criminal proceedings "terminated in Demetro's favor." (Id. ¶ 79)

         B. Procedural Background

         On October 21, 2014, the plaintiffs filed their original complaint in this action. (ECF no. 1) On November 4, 2014, the original complaint was served on Pochek at the Woodbridge Police Department. (ECF no. 3) On December 26, 2014, Plaintiffs served the original complaint on Keith Striffolino ("Striffolino"), a member of NABI's board of directors, through Kathy Hassan ("Hassan"), a clerk at the Bayonne Police Department, where Striffolino works as a Detective. (ECF no. 6) On January 22, 2015, the Clerk of Court entered default against NABI. (ECF no. 8)

         On November 24, 2015, Plaintiffs filed an amended complaint. (ECF no. 21} On January 12, 2016, Plaintiffs served the amended complaint on Striffolino, who at that time was still a member of NABI's board of directors. (ECF no. 29) On March 17, 2016, the Clerk of Court entered default as to NABI for failure to plead or otherwise defend. (ECF no. 30)

         On December 9, 2016, counsel for NABI entered notices of appearance. (ECF nos. 43, 44, 46) On January 6, 2017, NABI filed its motion to vacate the entry of default and to dismiss all claims for lack of personal jurisdiction and failure to state a claim. (ECF no. 47) That motion is now before the Court.


         A. Rule 55(c) Motion to Vacate Default

         1. Standard Under Fed.R.Civ.P. 55(c), a district court "may set aside an entry of default for good cause." The decision whether to vacate a default judgment is left "to the sound discretion of the trial court." Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 245 (3d Cir.1951). In exercising this discretion, a court must consider (1) "whether the plaintiff will be prejudiced, " (2) "whether the defendant has a meritorious defense, " and (3) "whether the default was the result of the defendant's culpable conduct." Budget Blinds, Inc. v. White, 536 F.3d 244, 256-57 (3d Cir. 2008) (quoting United States v. $55, 518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984)). In essence, the factors to be considered in determining whether to vacate the entry of default are the same as those to be considered with respect to a default judgment; the parties' positions are simply flipped.

         When a parly moves to set aside a default, any doubts as to whether the default should be vacated "should be resolved in favor of setting aside the default and reaching a decision on the merits." Gross v. Stereo Component Sys. Inc., 700 F.2d 120, 122 (3d Cir. 1983). "Less substantial grounds may be adequate for setting aside a default than would be required for opening a judgment." Feliciano v. Reliant Tooling Co., 691 F.2d 653, 656 (3d Cir. 1982).

         2. NABI's Motion to Vacate Default

         I find that the evaluation of these three factors weighs in favor of granting NABI's motion to vacate the Clerk's entry of default.

         a. Factor 1 - Prejudice to the Plaintiff

         Prejudice is found where "a plaintiffs ability to pursue the claim has been hindered by, for example, loss of available evidence, increased potential for fraud or collusion, or substantial reliance upon the judgment." Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 F.App'x 519, 523-24 (3d Cir. 2006) (citing Feliciano v. Reliant Tooling Co., 691 F.2d 653, 657 (3d Cir. 1982)). Mere delay in the adjudication of a claim does not by itself establish prejudice. See Feliciano, 691 F.2d at 656-57 ("Delay in realizing satisfaction on a claim rarely serves to establish die degree of prejudice sufficient to prevent the opening a default judgment entered at an early stage of die proceeding.").

         Here, there is no discernible prejudice to the Plaintiffs that would result from setting aside the default. The parties identify nothing of significance that has occurred in the interim. Plaintiffs state in conclusory fashion that for nearly two years they have "relied on the entry of the default judgment against NABI in making strategic decisions regarding discovery, witnesses, [and] evidence in support of its claims against NABI." (PI. Opp. 3-4) There is no indication, however, that evidence has been lost or witnesses have become unavailable. Similarly, the contention that "the Plaintiffs have incurred costs in obtaining the defaults in this matter and in developing this matter for trial while relying on the previously entered default, " [id.), is insufficient. Mere delay is not a sufficient basis for finding prejudice; obtaining a clerk's entry of default is a fairly simple and routine process; and if the cost of obtaining entry of default counted as prejudice, then no default could be vacated. Further, as NABI notes (Def. Reply 4), Plaintiffs have not taken the next step of seeking an actual default judgment against NABI.

         Accordingly, I find that this factor weighs in favor of vacating the entry of default.

         b. Factor 2 - Meritorious Defense

         In determining whether to vacate the entry of default, a court must determine whether the "allegations of defendant's answer, if established at trial, would constitute a complete defense to the action." $55, 518.05 in U.S. Currency, 728 F.2d at 195. The defendant need not prove that he will prevail at trial, but merely demonstrate that he has a defense which is meritorious on its face. Id. Here, NABI presents facially meritorious defenses.

         First, NABI argues that Plaintiffs' defamation and false light claims (Counts 1, 3, and 4) are barred by the applicable statute of limitations. Specifically, NABI contends that Plaintiffs' defamation claims are untimely under N.J. Stat. Ann. § 2A:14-3. As to Counts 3 and 4 at least, that defense is meritorious on its face and justifies dismissal. See Section III.C.2, infra.

         Second, NABI presents defenses on the merits. NABI contends, for example, that the allegedly defamatory statements were true, which of course is a complete defense to defamation. NABI also pleads more specific defenses to individual counts. Some are upheld in relation to NABI's motion to dismiss; others may have to await factual development. See Section III.C, infra, passim.

         Whether or not NABI will ultimately prevail, it has presented facially meritorious defenses. Accordingly, I find that this factor weighs in favor of setting aside the entry of default.

         c. Factor 3 - Culpability

         Finally, I consider whether the default was the result of NABI's culpable conduct. $55, 518.05 in U.S. Currency, 728 F.2d at 195. Culpable conduct means "more than mere negligence, " and connotes willfulness, bad faith, and intentionally avoidance of compliance with court procedures, or "reckless disregard for repeated communications from plaintiffs and the court." Hritz v. Woma Corp., 732 F.2d 1178, 1182-83 (3d Cir. 1984). The failure to respond to a claim, especially where it is the result of miscommunication or ignorance, rather than bad faith or defense gamesmanship, will generally not be considered culpable conduct. Malibu Media, LLC v. Waller, No. 15CV03002WHWCLW, 2016 WL 184422, at *4 (D.N.J. Jan. 15, 2016) (citing Wingate Inns Intern,, Inc. v. P.G.S., LLC, 2011 WL 256327, at *4 (D.N.J. Jan. 26, 2011)).

         According to NABI, it never answered Plaintiffs' original or amended complaints because it was never properly served with either. (Def. Br. 3-4) That is so, says NABI, because "Ms. Hassan has never been NABI's registered agent and has never been authorized to accept service of process on behalf of NABI, " and Detective Striffolino has never "been NABI's registered agent." (Id.) In fact, "[t]o date, neither [NABI Executive Director Peter] Robinson nor NABI's registered agent authorized to accept service of process on behalf of NABI ha[s] been served with plaintiffs' Summonses and/or Complaints, (Id. at 4) NABI says it "learned about this lawsuit and entries of default through information provided to its Executive Director, Mr. Robinson, by co-defendant Robert Pochek, a member of NABI." (Id.)

         However, as Plaintiffs note (PI. Opp. 1-2), service of process upon a director of a corporation in New Jersey is effective, irrespective of whether the corporation specifically designated that person to accept service. Fed.R.Civ.P. 4(h)(1) governs service of process upon corporations. Rule 4(h)(1) incorporates Rule 4(e)(1), which allows service "following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made." Fed.R.Civ.P. 4(e)(1). Process was delivered within this State, and New Jersey State Court Rule 4:4-4(a)(6) provides in relevant part that service may be made "[u]pon a corporation, by serving a copy of the summons and complaint in the manner prescribed by paragraph (a)(1) of this rule on any officer, director, trustee or managing or general agent. . . ." Id. (emphasis added).

         Thus, the efficacy of Demetro's service of the original and amended complaints upon NABI turns on whether each service attempt complied with New Jersey State Court Rule 4:4-4(a)(1), which provides for service

by delivering a copy of the summons and complaint to the individual personally, or by leaving a copy thereof at the individual's dwelling place or usual place of abode with a competent member of the household of the age of 14 or over then residing therein, or by delivering a copy thereof to a person authorized by appointment or by law to receive service of process on the individual's behalf.


         First, NABI raises doubts as to whether service of the original complaint on December 26, 2014, complied with the requirements of New Jersey State Court Rule 4:4-4(a)(1). The process server purported to serve Detective Striffolino. Striffolino, in turn, is a director of NABI, so valid service on him would be service on NABI.

         What the process server did, however, was deliver the complaint to Hassan, intending that it reach Striffolino. Woodbridge Police Department is Striffolino's place of employment, not his dwelling place or usual place of abode. The affidavit of service states that the process server "[l]eft a copy with a person authorized to accept service . . . ." (ECF no. 6) NABI does not challenge Hassan's authorization to receive service of process for Striffolino; it only argues that she is not authorized to receive service of process for NABI, which is not plaintiffs claim. (See Def. Br. 3) I will assume for purposes of argument that the original complaint was properly served, through Hassan, on NABI's director Keith Striffolino, who is authorized by New Jersey State Court Rule 4:4-4(a)(6) to receive process on NABI's behalf.[4]

         Another possible route to a finding of proper service is through Rob Pochek, NABI's codefendant. Although Pochek was not specifically identified in his capacity in the organization, he was served, and is alleged to be a Board member. (AC ¶ 21 & Ex. 11) See 4A Charles Alan Wright 8b Arthur R. Miller, Federal Practice & Procedure § 1102 (4th ed.) (citing Chan v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1404 (9th Cir. 1994) (Service of process on the president and sole shareholder of a corporation was effective service on die corporation, even though the president was himself a defendant named in the complaint, and affidavit of service did not refer to his corporate capacity.)).

         NABI argues for purposes of this motion to vacate default that, even if it erred, it acted in good faith. Its Executive Director, "Peter Robinson, who is not a lawyer, was acting under the good faith belief that NABI was not previously served with plaintiffs' pleadings." (Def. Reply 4; see also Robinson Aff., ECF no. 48-2, ¶ 18) Plaintiffs offer a different perspective, arguing that given the fact that both Striffolino, a director, and Pochek, a trustee, "were served with copies of the complaint, " and Pochek "not only was served, but is named as a Defendant, and has defended this action in his personal capacity . . . NABI cannot deny knowledge of the complaint or the pending action and could have answered die Complaint earlier." (PL Opp. 2)

         NABI, if it meant to contest service, could have done so-not just ignored the Complaint, of which it surely must have had actual notice. (It admits learning of this action from Pochek. (Def. Br. ...

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