Opinion
Civil No. 08-5473 (AET), Civil No. 08-5725 (AET).
August 17, 2009
MEMORANDUM ORDER
This matter is before the Court upon Plaintiffs John Bava and Joseph Matina's motion "for reconsideration and/or clarification" of the Court's June 22, 2009 order dismissing Counts II through IX of Plaintiffs' Amended Complaints for failure to state a claim upon which relief can be granted. In the alternative, Plaintiffs request that the Court certify its dismissal order for interlocutory appeal to the Third Circuit.
The Court dismissed these counts after considering the parties' arguments at a June 22, 2009 hearing on Defendants' motion to dismiss as well as their submissions. The Court will now briefly review its reasoning as to each dismissed count, and, for those reasons, the Court will deny Plaintiffs' motion for reconsideration. Further, because the Court finds no "substantial ground for difference of opinion" with respect to the questions of law regarding each dismissed Count, the Court denies Plaintiffs' request to certify this Order or its June 22, 2009 Order for interlocutory appeal. 28 U.S.C. § 1292(b).
1. Count II: New Jersey Consumer Fraud Act
The Consumer Fraud Act, N.J.S.A. § 56:8-1 et seq., applies to "goods or services generally sold to the public at large." Cetel v. Kirwan Fin. Group, Inc., 460 F.3d 494, 514 (3d Cir. 2006). The golf club memberships Plaintiffs here purchased are not the kind of good sold to the public at large. Instead, the memberships are offered by invitation only, with the sponsorship of an existing member. Further, the club limits the number of members it will allow at any given time and requires a deposit of more than $200,000. The club adopted these procedures for the purpose of maintaining the exclusivity of the membership, that is, to not make membership available to the public at large.
2. Count III: "Fraud and Operation of Ponzi Scheme"
Plaintiffs' third count appears to be for common law fraud. However, in this Count (as distinct from Count VII), Plaintiffs rely solely on their allegation that Defendants engaged in a ponzi scheme to establish that Defendants committed fraud. Plaintiffs do not directly plead the elements of common law fraud; they do not specifically identify any material misrepresentation Defendants made, that Defendants knew the statement was false and that Defendants intended Plaintiffs to rely on the statement. Banco Popular N. Am. v. Gandi, 876 A.2d 253, 260 (N.J. 2005) ("To establish common-law fraud, a plaintiff must prove: (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) reasonable reliance thereon by the other person; and (5) resulting damages.") (citations and internal quotations omitted).
But, alleging facts purportedly establishing a ponzi scheme, without also pleading particular facts constituting the elements of fraud, is insufficient to state a claim for fraud. Fed.R.Civ.P. 9(b).
To the extent Plaintiffs are asserting a cause of action called "Operation of Ponzi Scheme," separate from their claim of fraud, that claim is dismissed. The Court is not aware of any such independent cause of action, and Plaintiffs have cited no authority recognizing it.
3. Count IV: Securities Act of 1933 and Securities Exchange Act of 1934
4. Count V: New Jersey Uniform Securities Law
S.E.C. v. Edwards,540 U.S. 389395-96United Hous. Found., Inc. v. Forman, 421 U.S. 837 Id. Id. 49:3-47et seq., Forman. See AMR Realty Co. v. State of N.J., Bureau of Secs.,373 A.2d 10021005-07Forman,421 U.S. 837
While the contract does provide for the return of the purchase price of the memberships at the close of the license period, the funds are returned without interest.
5. Count VI: Breach of Implied Covenant of Good Faith and Fair Dealing
Under New Jersey law, a party to a contract may be found to have breached the duty of good faith and fair dealing where the party has engaged in conduct that is "unfair" or "inequitable" with a "malice-like" state of mind, but a party will not be found to have breached the duty without such allegations of "bad faith or dishonesty." See Black Horse Lane Assocs., L.P. v. Dow Chem. Corp., 228 F.3d 275, 288 (3d Cir. 2000) (citing Sons of Thunder, Inc. v. Borden, Inc., 690 A.2d 575, 587 (N.J. 1997)); see also Elliot Frantz, Inc. v. Ingersoll-Rand Co., 457 F.3d 312, 329 (3d Cir. 2006) ("[B]ad motive or intention is essential" to finding a breach of the duty of good faith and fair dealing.).
Here, Plaintiffs have alleged facts establishing a breach of contract claim, which the Court has allowed to proceed, but Plaintiffs have not alleged facts suggesting the intentional bad faith or dishonesty required for a claim of breach of the covenant of good faith and fair dealing.
Plaintiffs indicate in their brief that they are unclear as to whether the June 22 order dismissed Count VI for breach of the covenant of good faith and fair dealing and whether Plaintiffs may pursue that claim together with their claim for breach of contract in Count I. The Court now clarifies: the claim for breach of the covenant of good faith and fair dealing is dismissed, and Plaintiffs cannot pursue it.
6. Count VII: "Intentional Fraud, Equitable Fraud and Material Misrepresentation"
7. Counts VIII: Equitable Estoppel
See Lum v. Bank of Am.,361 F.3d 217223-24 Knorr v. Smeal,836 A.2d 794799 VRG Corp. v. GKN Realty Corp.,641 A.2d 519526
The Court also notes that both the Bava and Matina Complaints contain the identical allegation of misrepresentation, without alleging that the Plaintiffs were in fact together when club representatives allegedly spoke with them, further highlighting that this allegation fails to "place the defendants on notice of the precise misconduct with which they are charged." Lum, 361 F.3d at 223-24.
Further, equitable estoppel is generally invoked to either bar a party from asserting certain legal positions in litigation or bar a governmental entity from enforcing certain regulations, where doing so would be unfair. It is not generally an independent cause of action and basis for money damages for breach of contract. See, e.g., Hakimoglu v. Trump Taj Mahal Assocs., 876 F. Supp. 625, 638 (D.N.J. 1994) (considering application of equitable estoppel to bar affirmative defense of intoxication in breach of contract case); Toll Bros., Inc. v. Township of Moorestown, 2006 WL 2660792, at *7 (N.J.Super. A.D. 2006) (considering application of equitable estoppel to bar enforcement of zoning ordinance).
CONCLUSION
For the foregoing reasons, and for good cause shown,IT IS on this 17th day of August, 2009,
ORDERED that Plaintiffs' motion for reconsideration (docket # 35 in case 08-5473 and docket # 31 in 08-5725) is DENIED; and it is further
ORDERED that Plaintiffs' request to certify the dismissal of Counts II — IX for interlocutory appeal is DENIED.