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Linus Holding Corp. v. Mark Line Industries, LLC

United States District Court, D. New Jersey

March 25, 2019

LINUS HOLDING CORP., Plaintiff,
v.
MARK LINE INDUSTRIES, LLC, et. al. Defendants.

          OPINION

          Freda L. Wolfson, United States District Judge.

         This matter comes before the Court on five separate motions to dismiss filed by (1) MCG Cane Bay, LLC ("MCG Cane Bay"); (2) BMB-MCG, LLC ("BMB-MCG"); (3) BMB Investments, LLC ("BMB Investments") and BOMA LC ("BOMA"); (4) Kory Reimann ("Mr. Reimann"); and (5) Mark Brown ("Mr. Brown") (cumulatively, the "moving defendants").[1]Specifically, these defendants seek to dismiss Plaintiff Linus Holding Corp.'s ("Plaintiff or "Linus") First Amended Complaint pursuant to, inter alia, Federal Rule of Civil procedure 12(b)(2) for lack of personal jurisdiction. Plaintiff attempts to impose liability upon the moving defendants based on an alleged contractual breach of an agreement entered into with defendant Mark Line by claiming that the moving defendants are alter egos of Mark Line. For the reasons set forth below, the moving defendants' motions to dismiss are GRANTED.

         I. BACKGROUND AND PROCEDURAL HISTORY

         Plaintiff is a New York Corporation with a principal place of business in Asbury Park, New Jersey, that acquires and develops real property. Amended Complaint ("Am. Compl."), ¶ 1. Mark Line, a limited liability company ("LLC"), is a custom fabricator of modular units and buildings, and its principal place of business is located in Indiana. Id. ¶ 2. The other defendant entities are affiliated with Mark Line and also maintain their principal places of business outside of New Jersey, in Florida, Utah, or Minnesota. Id. ¶¶ 2-10. Moreover, the individual defendants, all of whom served in a corporate capacity at either Mark Line or an affiliated entity, do not reside in New Jersey. M ¶¶ 11-15.

         As alleged in the Amended Complaint, on January 13, 2016, Linus entered into a Manufacturer's Development Agreement ("MDA") with Mark Line. Id. ¶ 22. Pursuant to its terms, Linus tendered $37, 125 in exchange for Mark Line agreeing to produce design documents for modular units. Id. Linus intended to utilize those documents in connection with the development of a mixed-use building, including forty-eight residential units, in Asbury Park, New Jersey (the "Project"). Id. ¶¶ 21-22.

         On October 7, 2016, Linus entered into an additional contract with Mark Line (the "Agreement"), for the production and purchase of modular units for the Project. Id. ¶ 23. According to Plaintiff, Mr. Remke and Mr. Blockno, as the "Manager, Director, Principal, and/or President" of Mark Line, negotiated the terms of the Agreement. Id. ¶¶ H, 13, 24. Pursuant to Paragraph 35 of the contract, Mark Line was required to secure Performance and Payment Bonds ("Bonds") in order to guarantee its obligations under the Agreement and protect Linus's interests. Id. ¶¶ 24-25. The Bonds also served as a prerequisite to Linus's obligation to tender a 20% deposit in the amount of $790, 000, the payment of which was allegedly necessary for Mark Line to purchase Project materials. Id. ¶¶ 26-27.

         On October 12, 2016, notwithstanding the receipt of Linus's deposit, Plaintiff alleges that Mark Line failed to obtain the Bonds. Id. ¶ 30. In fact, according to Plaintiff, Mark Line did not possess such an ability when it executed the Agreement, because it had a negative cash flow and insufficient funds. Id. ¶ 32. In that connection, Mark Line allegedly required Linus's deposit for the purpose of covering payroll, as opposed to the purchase of materials for the Project. Id. ¶ 33. On March 24, 2017, Linus ultimately terminated the Agreement, as a result of Mark Line's alleged failure to obtain the Bonds and, in turn, demanded the immediate reimbursement of the $790, 000 deposit and initial $37, 125 payment. Id. ¶ 39. However, Mark Line allegedly refused to comply with these requests. Id. ¶ 40.

         Moreover, Plaintiff alleges that from 2016 through 2017, Mark Line transferred "for little or no consideration" significant sums of money to its corporate parents and other related entities, including: (a) $28, 000 to BMB Investments and BMB-MCG in October of 2016; (b) $770, 000 to Mosaic Capital in 2016 and 2017; (c) $130, 000 to Dignicare in 2016; (d) $390, 000 to Earth Trades in March and April of 2016; (e) $100, 000 to Mosaic Development Corp. in the fall and winter of 2016; and (f) $304, 000 to MCG Cane Bay in 2016 and 2017. Id. ¶ 43(a-g). According to Plaintiff, these transfers violated Mark Line's Operating Agreement, [2] and, as a consequence, it became undercapitalized and "unable to satisfy [the] bonding condition" under the terms of the Agreement. Id. ¶¶ 53-54. Plaintiff alleges that, at the direction of Mr. Reimann and Mr. Blockno, Mark Line manipulated its financial statements in order to appear financially sound and sufficiently liquid. Id. ¶ 60.

         On May 24, 2017, as a result of these events, Plaintiff filed the instant action. The thirteen-count Amended Complaint asserts the following claims against the corporate and individual defendants: (1) breach of contract; (2) conversion; (3) unjust enrichment; (4) breach of the duty of good faith and fair dealing; (5) alter ego; (6) piercing the corporate veil; (7) fraudulent inducement and misrepresentation; (8) negligent misrepresentation; (9) fraud pursuant to the New Jersey Consumer Fraud Act; (10) accounting of funds; (11) fraudulent transfers; (12) breach of fiduciary duties; and (13) corporate waste.

         Currently, MCG Cane Bay, BMB-MCG, BMB Investments, BOMA, as well as Mr. Reimann and Mr. Brown, separately move for dismissal. The moving defendants, among other things, challenge this Court's lack of personal jurisdiction over them. Plaintiff has opposed the motions.

         II. DISCUSSION

         A. Standard of Review

         To withstand a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), a plaintiff bears the burden of establishing the court's personal jurisdiction over the moving defendant by a preponderance of the evidence. D 'Jamoos ex rel. Estate of Weingeroff v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir. 2009); see Cerciello v. Canale, 563 Fed.Appx. 924, 925 n.l (3d Cir. 2014) (noting that the plaintiff'"bears the burden to prove, by a preponderance of the evidence,' that personal jurisdiction is proper.") (citation omitted). "However, when the court does not hold an evidentiary hearing on the motion to dismiss, the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004). Still, to meet its burden, the plaintiff must establish "jurisdictional facts through sworn affidavits or other competent evidence. . . . [A]t no point may a plaintiff rely on the bare pleadings alone in order to withstand a defendant's Rule 12(b)(2) motion to dismiss for lack of in personam jurisdiction." Id. at 101 (citation and internal quotation marks omitted). If the plaintiff meets this burden, "the burden shifts to the defendant to establish the presence of other considerations that would render the exercise of personal jurisdiction unreasonable." Display Works, LLC v. Bartley, 182 F.Supp.3d 166, 172 (D.N.J. 2016); Mellon Bank (E.) PSFS, Nat. Ass'n v. Farino, 960 F.2d 1217, 1226 (3d Cir. 1992).

         "A district court sitting in diversity may assert personal jurisdiction over a nonresident defendant to the extent allowed under the law of the forum state." Metcalfe v. Renaissance Marine, Inc.,566 F.3d 324, 330 (3d Cir. 2009); see Fed. R. Civ. P. 4(e). In assessing whether personal jurisdiction exists, the Court's analysis is twofold: "[t]he court must first determine whether the relevant state long-arm statute permits the exercise of jurisdiction; if so, the court must then satisfy itself that the exercise of jurisdiction comports with due process." Display Works, 182 F.Supp. at 172. "Since New Jersey's long-arm statute allows 'the exercise of personal jurisdiction to the fullest limits of due process,' [the Court must] 'look to federal law for the interpretation of the limits on ...


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