United States District Court, D. New Jersey
WILLIAM J. MARTINI, U.S.D.J.
Atlas Acquisitions, LLC. ("Atlas") filed this
diversity action against Defendant Porania, LLC
("Porania"), Jonathan Koop, and Jeffrey S. Dunn,
alleging under New Jersey law, breach of contract, fraudulent
inducement, negligent misrepresentation, and violation of the
New Jersey Consumer Fraud Act. The matter comes before the
Court on Defendant Porania's motion to dismiss. ECF No.
25. For the reasons stated below, Defendant's motion to
dismiss is GRANTED IN PART and
DENIED IN PART.
Atlas Acquisitions, LLC is a third-party purchaser of
defaulted consumer debts. Am. Compl. ¶ 8, ECF No. 9.
Defendant Porania, LLC is a purchaser of defaulted consumer
debts, and seller to third parties like Atlas. Id.
Jonathan Koop was the Chief Executive Officer of Porania, and
Jeffrey S. Dunn was the Managing Member of Porania.
Id. at ¶¶ 3-4. On December 17, 2015, Atlas
and Porania entered into a Purchase and Sale Agreement
("the Agreement"), in which Porania agreed to sell
to Atlas all rights, title, and interest in unsecured
consumer account receivables, including unsecured consumer
credit card accounts, lines of credit, installment loans, and
other similar accounts owned by Porania. See
Def.'s Mot., Ex. 2, ECF No. 25-4.
alleges that prior to execution of the Agreement, Koop, with
the knowledge of Dunn, made false representations about their
vetting of and due diligence concerning the validity of
accounts that were the subject of the Agreement. Id.
at ¶¶ 10-12. Atlas contends that because of a lack
of due diligence or misrepresentations on the part of
Porania, it purchased an assortment of loans, some of which
lacked sufficient documentation, were issued by fictitious
entities, or were issued by creditors not licensed to make
loans. See Id. at ¶¶ 13, 19, 29. These
defects, Atlas claims, prevented it from filing claims on
accounts, required it to withdraw certain claims, subjected
it to litigation costs including settlement payments,
caused Atlas to lose business opportunities. Id. at
¶¶ 17, 22, 24, 27, 30, 34, 35. Now before the Court
is Porania's motion to dismiss all four counts pursuant
to Federal Rule of Civil Procedure ("FRCP")
12(b)(6). ECF No. 25.
STANDARD OF REVIEW
Rule of Civil Procedure 12(b)(6) provides for the dismissal
of a complaint, in whole or in part, if the plaintiff fails
to state a claim upon which relief can be granted. The moving
party bears the burden of showing that no claim has been
stated. Hedges v. United States, 404 F.3d 744, 750
(3d Cir. 2005). In deciding a motion to dismiss under Rule
12(b)(6), a court must take all allegations in the complaint
as true and view them in the light most favorable to the
plaintiff. See Warth v. Seldin, 422 U.S. 490, 501
a complaint need not contain detailed factual allegations,
"a plaintiffs obligation to provide the grounds of his
entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do." Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Thus, the factual
allegations must be sufficient to raise a plaintiffs right to
relief above a speculative level, such that it is
"plausible on its face." See Id. at 570;
see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d
59, 64 (3d Cir. 2008). "A claim has facial plausibility
when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556).
Porania moves to dismiss Atlas's Amended Complaint in its
entirety for failure to state a claim and argues that: (1)
Atlas's claims are barred by the entire controversy
doctrine; (2) Atlas fails to state a claim for fraudulent
inducement; (3) Atlas fails to state a claim for breach of
contract; (4) Atlas fails to plead a cause of action for
negligent misrepresentation; (5) Atlas fails to plead a cause
of action under the New Jersey Consumer Fraud Act; and (6)
Atlas's alleged damages fail to meet the amount in
controversy requirement for diversity jurisdiction. The Court
addresses each in turn.
The New Jersey Entire Controversy Doctrine
Porania argues that Atlas's claims are precluded under
New Jersey's entire controversy doctrine because they
should have been raised before the United States Bankruptcy
Court for the Southern District of Texas. Def.'s Mot.
10-13, ECF No. 25. New Jersey's entire controversy
doctrine is that state's "idiosyncratic application
of traditional res judicata principles" that
'"embodies the principle that the adjudication of a
legal controversy should occur in one litigation in only one
court; accordingly, all parties involved in a litigation
should at the very least present in that proceeding all of
their claims and defenses that are related to the underlying
controversy.'" Rodrigues v. Wells Fargo Bank,
N.A., 751 Fed.Appx. 312, 316 (3dCir. 2018) (quoting
Wadeerv. N.J. Mfrs. Ins. Co., 110 A.3d 19, 27 (NJ
2015)). The doctrine applies in federal courts "when
there was a previous state-court action involving the same
transaction." Ricketti v. Barry, 775 F.3d 611,
613 (3d Cir. 2015) (citing Bennun v. Rutgers State
Univ., 941 F.2d 154, 163 (3d Cir. 1991)). The entire
controversy doctrine, however, "is not the right
preclusion doctrine for a federal court to apply when prior
judgments were not entered by the courts of New Jersey."
Paramount Aviation Corp. v. Augusta, 178 F.3d 132,
138 (3d Cir. 1999) (conducting an Erie analysis and
concluding that federal, not New Jersey, claim preclusion
principles apply in successive federal court actions);
see, e.g., Bach v. McGinty, No. 12-5853, 2015 WL
1383945, at *2 (D.N.J. Mar. 25, 2015) ("The entire
controversy doctrine will preclude claims brought in federal
court only if the preclusive judgment came from a New Jersey
court."); Yantai N. Andre Juice Co. v.
Kupperman, No. 05-CV-1049, 2005 WL 2338854, at *3
(D.N.J. Sept. 23, 2005) ("In this case, the issuing
court in 2002 was the United States District Court for the
District of New Jersey. Therefore, the New Jersey Entire
Controversy Doctrine is inapplicable.").
case involves the invocation of the entire controversy
doctrine in federal court where the previous case was in
another federal court-the United States Bankruptcy Court for
the Southern District of Texas. Therefore, the entire
controversy doctrine is inapplicable.
order to plead a claim for fraudulent inducement in New
Jersey, "a plaintiff must allege: '(1) a material
misrepresentation of a presently existing or past fact; (2)
knowledge or belief by the defendant of its falsity; (3) an
intention that the other person rely on it; (4) a reasonable
reliance thereon by the other person; and (5) resulting
damages.'" Ceballo v. Mac Tools, Inc., No.
CIV.A. 11-4634 MLC, 2011 WL 4736356, at *4 (D.N.J. Oct. 5,
2011) (citing Gennari v. Weichert Co. Realtors, 148
N.J. 582, 610, 691 A.2d 350 (1997)). Atlas argues that
Porania made two specific fraudulent representations: (1)
statements regarding the due diligence and vetting of the
accounts at issue; and (2) the availability of supporting
documents, status, and enforceability of the accounts. Am.
Compl. at¶¶ 10-12, 53. Porania argues that
Atlas's fraudulent inducement claim fails for four
reasons: (1) it is barred by the economic loss doctrine; (2)
it is barred by the parole ...