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Pre-Settlement Finance, LLC v. Ellis

United States District Court, D. New Jersey

August 2, 2019




         This matter comes before the Court on motions by all parties. Defendant Theresa M. Ellis has moved to dismiss the complaint; her husband, defendant Scott A. Zukowski, has moved to be "removed" from the case. (DE 13, 14). Both motions, brought pro se after answers were filed, are construed by the court as motions for judgment on the pleadings. See Fed. R. Civ. P. 12(c). The plaintiff, Pre-Settlement Finance, LLC ("PSF"), previously filed an identical suit in New York state court. See Pre-Settlement Fin., LLC v. Ellis, 2017 N.Y. Misc. LEXIS 2811 (N.Y. Sup. Ct June 23, 2017). The court in that action granted the defendants' motion to dismiss based on forum non conveniens grounds "conditioned on leave to commence the action in New Jersey." Based on that ruling, the court also denied PSF's motion for default. The defendants' motions before this Court contend that the New York state court's decision effectively amounted to a decision on the merits and that the current action is barred by res judicata and the Rooker-Feldman abstention doctrine.

         PSF has opposed the defendants' motions and cross-moved for summary judgment. (DE 16). The basis of PSF's complaint is as follows. In 2005, Ellis and Zukowski filed suit against Ellis's former employer, Ethicon, Inc., claiming that Ethicon had violated the Americans with Disabilities Act ("ADA") by failing to provide Ellis with a reasonable accommodation for her disability related to a mild traumatic brain injury. See Ellis v. Ethicon, Inc., 529 Fed.Appx. 310 (3d Cir. 2013). While that action was pending, Ellis contracted with PSF for litigation financing. PSF advanced Ellis $29, 000 for the underlying litigation and agreed that it would be compensated from the proceeds if judgment was entered in favor of Ellis or if the matter settled. Under the agreement, PSF was entitled to a return of the principal amount of the advance plus interest, which was calculated at a very substantial annual rate of 51.1%. In the event that Ellis was unsuccessful in the underlying action, however, she was not required to repay the advance and would have "no liability whatsoever to PSF."

         PSF claims that the underlying litigation settled, and that Ellis received settlement proceeds without paying off the amount due on the advance in violation of their agreement. PSF's complaint alleges breach of contract against Ellis, breach of the covenant of good faith and fair dealing against Ellis, conversion against Ellis and Zukowski, unjust enrichment against Ellis and Zukowski, aiding and abetting against Zukowski, and tortious interference with a contract against Zukowski. (DE 1).

         For the reasons stated below, the motions are all denied. (DE 8, 10, 16).

         I. Rule 12(c) Motions[1]

         A. Allegations of Complaint

          In 2005, Ellis filed a complaint against Ethicon, Inc., her former employer, alleging that Ethicon violated the ADA by failing to accommodate her cognitive disability. See Ellis v. Ethicon, Inc., Civ. No. 05-726(FLW), 2009 U.S. Dist. LEXIS 106620, at *l (D.N.J. Nov. 13, 2009), aff'd, 529 Fed.Appx. 310 (3d Cir. 2013). In September of 2010, Ellis contacted PSF and requested financing for her litigation. (Compl ¶ 15). At the time, Ellis was represented by Jill Fisher, Esq. (Compl ¶ 17).

         On or about September 23, 2010, PSF and Ellis executed a contract. (DE 16-5).[2] PSF agreed to advance $29, 000 to Ellis. (Compl ¶19). The interest rate was compounded monthly at 3.5% or 51.1% annually. (DE 16-5). This was, however, a contingent arrangement. Ellis was required to repay PSF only if she was successful in the underlying case, and either received a settlement or verdict. (Compl ¶20). In the event that Ellis was unsuccessful in the litigation, she was not required to pay any principal or interest on the loan. (Id.).

         The agreement also contained an "Attorney Acknowledgement," which was signed by Fisher, who was the attorney for Ellis in the underlying litigation. (Compl ¶25). Fisher agreed to distribute any proceeds received from the litigation to PSF, after attorney fees and any liens which had priority over that of PSF were paid off. (Id.; DE 16-5). Only after PSF was paid would any remaining balance of proceeds from the litigation be paid to Ellis. (DE 16-5). On September 28, 2010, PSF wired the $29, 000 advance to Ellis. (Compl ¶27).

         The employment litigation lasted some ten years. It resulted in a jury verdict in favor of Ellis, including an award of back pay and reinstatement to the same or similar position that Ellis had held prior to her termination. See Ellis v. Ethicon, Civ. No. 05-0726 (PGS) (DEA), 2014 U.S. Dist. LEXIS 186881, at *6 (D.N.J. June 2, 2014), aff'd, 614 Fed.Appx. 613 (3d Cir. 2015). After the jury verdict was rendered, the parties filed a series of motions before the trial court and appealed to the Third Circuit. Id. Thereafter, the parties agreed to mediate before the magistrate judge and ultimately settled the matter on March 7, 2014. Id. The settlement amount has been sealed. Ellis v. Ethicon, Civ. No. 05-0726 (D.N.J. May 12, 2014) (DE 232).

         On or about May 13, 2014, PSF was notified that Ellis had replaced Fisher with a new attorney, Patricia Barasch. PSF notified Barasch of its interest in the litigation, (Compl ¶¶28-29). After Barasch submitted an application for attorneys' fees (in the amount of $14, 894.14 related to the settlement proceedings), Ellis submitted a supplemental certification requesting that the Court also award an additional $100, 057.52 to cover the amount due to PSF. (Compl ¶¶32-33); Ellis v. Ethicon, Civ. No. 05-0726 (D.N.J. May 12, 2014) (DE 246). Barasch withdrew as counsel on August 11, 2015. (Compl ¶38).

         On September 9, 2015, the Court ordered that the settlement proceeds be deposited with the Court. (Compl ¶39). The Order directed that $14, 894.14 be distributed to Barasch and that the remainder of die proceeds be distributed directly to Ellis. (Compl ¶¶40-41).

         During the pendency of the underlying litigation, Zukowski provided updates on the litigation to PSF. (Compl ¶¶44-5O). On December 22, 2015, Zukowski advised PSF that Barasch, as successor attorney, "became legally responsible for addressing the issues of Theresa [Ellis]'s relationship with PSF." (Compl ¶5l). PSF reached out to Barasch; she advised PSF that the matter had been settled and that the Court had directed that die proceeds be distributed directly to Ellis. (Compl ¶¶52-53). Barasch indicated that she had never received Ellis's portion of die settlement. (Compl ¶53).

         On December 24, 2015, PSF contacted Ellis and requested that she pay the amount due on the loan, which at that time was $262, 168.42. (Compl ¶55). Ellis has not paid the amount due, prompting PSF to file this action.

         Before the Court are three motions. Both defendants have separately moved to dismiss the complaint. (DE 13, 14). Zukowski and Ellis argue that this action is barred under the Rooker-Feldman doctrine[3] and principles of res ...

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