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New Jersey Performing Arts Center Corporation v. ZMAN Time Productions, Inc.

United States District Court, D. New Jersey

February 9, 2018

NEW JERSEY PERFORMING ARTS CENTER CORPORATION, Plaintiff,
v.
ZMAN TIME PRODUCTIONS, INC., and ALTER WAGSCHAL, Defendants.

          MEMORANDUM OPINION & REPORT AND RECOMMENDATION OF REMAND

          LEDA DUNN WETTRE, UNITED STATES MAGISTRATE JUDGE

         Before the Court are the motions of plaintiff New Jersey Performing Arts Center Corporation ("NJPAC") for leave to amend the Complaint (ECF No. 18) and of defendants ZMAN Time Productions, Inc. ("ZMAN Time") and Alter Wagschal ("Alter") to amend or correct their Answer (ECF No. 19). This motion is decided without oral argument, pursuant to Federal Rule of Civil Procedure 78. Having considered the parties' submissions, for the reasons set forth herein, and for good cause shown, plaintiffs motion to amend is GRANTED IN PART AND DENIED IN PART. It is further respectfully recommended that as the Court will lack subject matter jurisdiction upon the filing of the Amended Complaint, the case be remanded to the Superior Court of New Jersey at that time.[1] As defendants will have an opportunity to file an answer to the Amended Complaint upon remand, their motion for leave to amend the Answer is DENIED AS MOOT.

         I. BACKGROUND

         This action concerns defendants' alleged failure to compensate NJPAC in the principal amount of $216, 599.32 under a written agreement governing defendants' use of NJPAC's facilities and services for rehearsals and performances of a play at NJPAC's Prudential Hall in December 2016. NJPAC commenced the action in the Superior Court of New Jersey, Essex County, Law Division in March 2017. ECF No. 1 -1. Defendants timely removed the action to this Court on the grounds of diversity of citizenship jurisdiction, 28 U.S.C. § 1332. Plaintiff NJPAC is a New Jersey not-for-profit corporation with a principal place of business in Newark, New Jersey, ECF No. 1-1 ¶ 2, and both defendants are citizens of the State of New York. ECF No. I ¶ 5. The amount in controversy exceeds the $75, 000 jurisdictional threshold. Id. ¶ 7.

         The Court initially ordered fact discovery to commence in June 2017 and to conclude in September 2017. ECF No. 9. In August 2017, following an unsuccessful settlement conference, the parties sought and received permission to file motions for leave to amend their respective pleadings on or before August 25, 2017. ECF No. 17. Within that deadline, the parties filed the instant motions. ECF Nos. 18, 19.

         Plaintiff seeks to file an Amended Complaint that would add four defendants and several claims to the current Complaint. Presently, the Complaint alleges that defendant ZMAN Time entered into a Short Term License Agreement to use NJPAC's Prudential Hall for rehearsals and performances in late December 2016 under which the principal sum of $216, 599.32 remains due and owing to NJPAC after a check tendered by defendant ZMAN Time was returned for insufficient funds. ECF No. 1-1 ¶¶ 5-12. Plaintiff further avers that defendant Alter personally guaranteed ZMAN Time's obligations, in writing, on December 29, 2016. Id. ¶ 14. The Complaint asserts claims for breach of contract against ZMAN Time, for breach of personal guaranty against Alter, and for account stated and unjust enrichment against both defendants. Id. ¶¶ 17-33.

         The proposed Amended Complaint includes the foregoing allegations, as well as additional factual allegations and proposed new claims against the four additional defendants, ZMAN Productions, Inc. ("ZMAN Productions"), Yiztchok Wagschal ("Isaac"), Faigy Wieder and Aron Weinberger. NJPAC avers in the proposed Amended Complaint that the agreement with ZMAN Time concerned rehearsals and performances of a Hanukkah play called "Zusman" to take place at NJPAC between December 19 through 23, 2016 and December 26 to 29, 2016. Amended Complaint ("Am. Compl.") ECF No. 18-2 ¶ 1. The agreement provided for certain payments to be made no later than December 15, 2016, failing which NJPAC could terminate the agreement and thus not allow defendants to use its facilities for the play. Id. ¶¶ 14-16.

         Plaintiff alleges in the Amended Complaint that, on December 12, 2016, proposed defendant Isaac tendered to an NJPAC Manager, Kitab Rollins, a ZMAN Productions check postdated December 28, 2016 in the amount of $140, 000.00. Id. ¶29. Plaintiff alleges that Isaac knew at the time he tendered the check that there were insufficient funds for it to be honored, id. ¶ 31, but Isaac nevertheless "led Mr. Rollins to believe that [the check] was a valid check in order to induce NJPAC to forbear from terminating the [agreement], as it was entitled to do under paragraph 4(c) of the Agreement." Id. ¶ 33. Allegedly in reliance on Isaac's representations, plaintiff did not terminate the agreement on December 15, 2016 as it was entitled to do. Id. ¶¶ 33, 34.

         After the check was returned for insufficient funds, NJPAC so advised Isaac and Alter, reminding them that Isaac had represented the check "would be a good check." Id. ¶¶ 35-37. NJPAC further informed Isaac and Alter that it "could not let people into Prudential Hall as a result of ZMAN's material breach of its payment obligations under the [agreement]." Id. ¶ 37. Consequently, Alter offered to personally guarantee payment of the debt to NJPAC and signed such a guaranty. Id. ¶¶ 38-40. In alleged reliance on Alter's guaranty, NJPAC permitted the performances of Zusman to go forward. Id. ¶ 42. To date, the principal balance of $216, 599.32 has not been paid. Id. ¶ 44.

         Based on the foregoing allegations concerning proposed defendant Isaac's tendering of an invalid check from proposed defendant ZMAN Productions to fulfill ZMAN Time's obligations under the agreement, plaintiff seeks leave to assert additional claims for fraud, negligent misrepresentation and breach of oral guaranty against Isaac and ZMAN Productions. Id. ¶¶ 67-87. Plaintiff also seeks leave to implead ZMAN Productions, Isaac, Wieder and Weinberger as alleged alter egos of defendant ZMAN Time. See Id. ¶¶ 19-28.

         II. DISCUSSION

         Defendants argue the Court should deny plaintiffs motion to amend because the new claims against the additional defendants in its proposed Amended Complaint are futile, made in bad faith, and would prejudice defendants. See Defendant's Opposition ("Def. Opp."), ECF No. 20. For the reasons set forth below, the Court grants in part and denies in part plaintiffs motion to amend the Complaint. Further, as the permitted amendments will implead in this action an additional defendant who resides in New Jersey, Isaac, thus destroying diversity of citizenship jurisdiction, the Court recommends to the District Court that this case be remanded for lack of subject matter jurisdiction upon the filing of the Amended Complaint.

         A. Plaintiffs Motion To Amend

         Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that a court should "freely give leave [to amend] when justice so requires." Fed.R.Civ.P. 15(a)(2). Courts grant leave to amend liberally in light of "the principle that the purpose of pleading is to facilitate a proper decision on the merits." Foman v. Davis, 371 U.S. 178, 182 (1962). The United States Supreme Court holds that leave to amend under Rule 15 may be denied in cases of: (1) undue delay; (2) bad faith or dilatory motive; (3) undue prejudice; or (4) futility of amendment. Id., "The burden is generally on the party opposing the amendment to demonstrate why the amendment should not be permitted." Luppino v. Mercedes-Benz USA, LLC, Civ. No. 09-5582 (DMC) (JAD), 2012 WL 850743, at *2 (D.N.J. Mar. 8, 2012).

         1. Undue Delay

         After the settlement conference on August 14, 2017, the Court extended the date by which the parties were to file their motions for leave to amend to August 25, 2017. ECF No. 17. As plaintiff filed its motion within that deadline, and as defendants fail to set forth any basis on which the Court could conclude that plaintiff unduly delayed in seeking leave to amend, the Court finds no undue delay. See, e.g., Astra Zeneca AB v. Perrigo Co. PLC, Civ. No. 15-1057 (MLC) (TJB), 2015 WL 8483298, at *4 (D.N.J. Dec. 8, 2015) ("The Court would ...


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