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Atlas Acquisitions, LLC v. Porania, LLC

United States District Court, D. New Jersey

November 14, 2019



          WILLIAM J. MARTINI, U.S.D.J.

         Plaintiff 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.

         I. BACKGROUND

         Plaintiff 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.

         Atlas 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, [1] and 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.


         Federal 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 (1975).

         Although 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).


         Defendant 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.

         A. The New Jersey Entire Controversy Doctrine

         Defendant 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.").

         This 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.

         B. Fraudulent Inducement

         In 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 ...

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