Opinion
01-CV-0201E(F).
October 18, 2004
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
Robbins Meyers ("RM") sued J.M. Huber Corp. ("Huber") and Milton Hoff for, inter alia, fraud arising out of a Stock Purchase Agreement ("the Agreement") dated November 20, 1997 governing RM's acquisition of the stock of Flow Control Equipment Corp. ("FCE") from defendants. FCE manufactured certain off-specification closures that were allegedly not adequately disclosed by defendants. In an Order dated August 23, 2001, this Court denied defendants' motion to dismiss the Complaint. On February 5, 2004 RM filed a motion seeking leave to file an amended complaint. On March 4, 2004 RM filed a Notice of Substitution of First Amended Complaint proffering a proposed superceding amended complaint. In an Order dated April 27, 2004, this Court granted RM's motion seeking leave to file an amended complaint. RM filed a First Amended Complaint on April 28, 2004 — i.e., the proposed pleading that RM submitted on March 4, 2004. RM filed a revised or supplemental First Amended Complaint on April 29 adding certain language in paragraph 44. On May 21, 2004 defendants filed a motion to dismiss seeking dismissal of counts II and V of the First Amended Complaint. This motion was argued and submitted on July 22, 2004. For the reasons set forth below, defendants' motion to dismiss will be denied.
Defendants asserted a counterclaim against RM and filed a third-party complaint against RM Energy Systems, Inc. and Berkeley Forge Tool, Inc. ("Berkeley") for indemnification.
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("FRCvP"), this Court "must accept the material facts alleged in the [Amended Complaint] as true and construe all reasonable inferences in the plaintiff's favor." Moreover, a motion to dismiss cannot be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Accordingly, this Court must not consider whether the claims will ultimately be successful, but merely "assess the legal feasibility of the [Amended Complaint]." Moreover, when reviewing a motion to dismiss, this Court must of course limit its review to the face of the Amended Complaint and documents incorporated therein that are properly subject to judicial notice.
Phelps v. Kapnolas, 308 F.3d 180, 184 (2d Cir. 2002) (citation omitted).
Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998).
Newman Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 662 (2d Cir. 1996).
As a preliminary matter, this Court must address which document is the operative pleading — the First Amended Complaint filed on April 28 or the revised First Amended Complaint filed on April 29. This Court finds that the former is the operative pleading because it is the document that was submitted in conjunction with RM's motion seeking leave to file an amended complaint. Nonetheless, this Court also finds the difference between the two documents to be material. Consequently, to avoid yet another motion seeking leave to file a second amended complaint, — and to avoid having this case litigated based upon a pleading that does not accurately reflect the case being litigated — this Court will grant RM leave to file the revised First Amended Complaint (hereinafter "the Amended Complaint") nunc pro tunc April 29, 2004.
Berkeley objects to RM's revised First Amended Complaint as having inserted information in ¶ 44 that was not contained in RM's proposed Amended Complaint (i.e., the document submitted on March 4, 2004), for which RM received permission to file. Berkeley contends that the revised First Amended Complaint is a nullity. RM, however, contends that Berkeley is not a party and lacks standing to object to the First Amended Complaint. This Court need not address either objection because it will address the issue sua sponte and would have done so absent an objection in any event.
RM contends that "this Court granted RM's motion to amend its Complaint after the `more likely to fail' language now disputed by Berkeley Forge was expressly argued during the hearing on that motion." Res. of RM to Berkeley Aff., at 3. Although the "more likely to fail" language may have been referenced during oral argument — RM fails to cite to the transcript of such hearing that has been filed as docket no. 103 —, this Court granted RM's motion with respect to the most recent proposed amended pleading that it had submitted.
RM's serial filing of proposed amended pleadings — including a pleading for which it had no authorization to file — is delaying this case and testing this Court's patience. No more delays will be tolerated.
Turning to the merits of defendants' motion to dismiss, defendants seek to dismiss Counts II (negligent misrepresentation) and V (declaratory judgment) of RM's Amended Complaint. Defendants' motion to dismiss will be denied with respect to Count V for the same reasons this Court denied defendants' motion to dismiss the declaratory judgment claim in the original Complaint. Despite the initial confusion concerning which pleading was operative, the Amended Complaint contains the "more likely to fail" language and defendants' argument for dismissal of Count V is thus undermined. Accordingly, defendants' motion to dismiss Count V will be denied.
Defendants contend that declaratory judgment in favor of plaintiffs would neither (1) "serve a useful purpose in clarifying or settling the legal relations in issue" nor (2) "afford relief from the uncertainty, insecurity, and controversy giving rise to the lawsuit." Defs.' Mem. of Law, at 9-10. This Court disagrees. A declaratory judgment in plaintiff's favor would clarify who is responsible for off-specification closure liability (albeit of a presently undetermined scope) and that such knowledge would afford plaintiff relief from the uncertainty presently facing it. Although defendants are correct that future litigation stemming from the failure of an off-specification closure will require parties to litigate "a myriad of issues that simply cannot be anticipated or addressed at this stage," the parties to this case can and will litigate the question that can be addressed at this stage: who is responsible under the Agreement for any off-specification closure liability that may arise? Moreover, the status of RM's recall involves a factual determination that cannot be resolved on the pleadings. See, e.g., Pl.'s Mem. in Opposition, at 2 (noting that RM's recall "remains an incomplete and ongoing project today"). Furthermore, the status of RM's recall was not essential to this Court's holding in the August 23, 2001 Order denying defendants' motion to dismiss the Complaint. This Court discussed RM's recall dilemma — i.e., whether or not to continue a recall effort — as an example of the type of "avoidable damages" that declaratory judgment is designed to avoid. Aug. 23, 2001 Order, at 18-21. The first example of such damages discussed in the August 23, 2001 Order was an action for damages — which RM would avoid if it obtains declaratory judgment in its favor. Ibid.
Defendants' motion to dismiss Count II of the Amended Complaint will be denied. Hoff is not a party to the Agreement. Consequently, his motion to dismiss will be denied because the Exclusive Remedies clause in paragraph 10.6 of the Agreement ("Exclusive Remedies Clause") does not appear to inure to his benefit and defendants have not argued otherwise. This Court assumes arguendo that New Jersey law applies with respect to the interpretation of the Exclusive Remedies Clause. Nonetheless, Huber's motion to dismiss will be denied because the Amended Complaint alleges sufficient information to sustain a claim of gross negligence — which may not be subject to an exculpatory clause under New Jersey law. Accordingly, this Court will deny defendants' motion to dismiss Count II at this stage.
Cf. Gershon v. Regency Diving Ctr., Inc., 845 A.2d 720, 726 (N.J.Super. 2004) ("An exculpatory release agreement, like any contract, can only bind the individuals who signed it.").
See, e.g., Morgan Home Fashions, Inc. v. UTI, United States, Inc., 2004 WL 1950370, at *4-7 (D.N.J. 2004) (noting that New Jersey law recognizes exculpatory clauses subject to certain exceptions, including that such clauses "cannot protect a party from its gross negligence" or an "intentional tort"). Although Morgan is in conflict with a decision that it cites in support of its holding, Tessler and Son, Inc. v. Sonitrol Sec. Sys. of N. New Jersey, Inc., 203 N.J. Super. 477, 483 (App.Div. 1985), this Court declines to resolve this split of authority at this stage given the paucity of New Jersey authorities discussed in the briefs. Furthermore, the parties did not address whether defendants' alleged negligent misrepresentations caused damages "under or with respect to this Agreement or the transactions contemplated hereby." Agreement ¶ 10.6. It is also unclear whether defendants' alleged negligent misrepresentations are a "Liability" within the meaning of paragraph 10.2 of the Agreement — an issue that was not briefed by the parties.
Accordingly, it is hereby ORDERED that the First Amended Complaint filed on April 29, 2004 is deemed filed as of that date and that defendants' motion to dismiss is denied.