NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1037-18T4
1ST AND MAIN, LLC,
Plaintiff-Appellant,
v.
PREMIER WEALTH ADVISORS, LLC, PREMIER WEALTH ADVISORY, LLC, LIFELONG INVESTMENTS, LLC, FIRST ALLIED SECURITIES, INC., FIRST ALLIED ADVISORY SERVICES, INC, HIRO WAKATSUKI, in his individual and official capacity, and BRAD KATZ, in his individual and official capacity,
Defendants-Respondents. _____________________________
Submitted April 30, 2020 – Decided October 27, 2020
Before Judges Suter and DeAlmeida.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2623-15. The McHattie Law Firm, LLC, attorneys for appellant (Christopher J. McHattie and Michael V. Gattoni, on the briefs).
Winget, Spadafora & Schwartzberg, LLP, attorneys for respondents First Allied Securities, Inc. and First Allied Advisory Services, Inc. (David H. Feldstein, on the brief).
Gruber, Colabella, Liuzza & Thompson, attorneys for respondents Lifelong Investments, LLC and Brad Katz (Chris H. Colabella and Racquel G. Hiben, on the brief).
The opinion of the court was delivered by
SUTER, J.A.D.
Plaintiff First and Main, LLC (plaintiff) appeals the September 18, 2018
order that dismissed its amended complaint with prejudice following a jury trial,
arguing the trial court committed reversible error by not permitting certain
discovery, by granting summary judgment in favor of defendants dismissing
many of the counts, and by barring certain documents from use at the trial. We
are not persuaded by these arguments and affirm the challenged orders.
I.
Plaintiff owns a commercial office building in Boonton, New Jersey. Its
managing member is Christopher J. McHattie (McHattie). Defendant Premier
Wealth Advisors, LLC (PWA) was a tenant at the property where it maintained
A-1037-18T4 2 an office. PWA's managing members were defendants Hiro Wakatsuki
(Wakatsuki) and Brad Katz (Katz). They co-founded PWA in 2010, funding it
with personal assets and from commissions Wakatsuki obtained from life
insurance sales. PWA was a tenant in the building when it was acquired by
plaintiff in 2012. The lease did not include any personal guaranties by Katz or
Wakatsuki.
In November 2013, plaintiff filed a landlord tenant complaint against
PWA seeking a judgment of possession for its non-payment of additional rent
and late fees. Plaintiff certified no other parties needed to be added to the
litigation. Relevant here, plaintiff contends the lease permitted occupancy by
only "the [t]enant and the employees of the [t]enant," but that PWA was a shell
entity and that Katz and Wakatsuki allowed other companies to use the space.
Katz resigned as a member of PWA in December 2014, leaving only Wakatsuki
as a managing member.
In January 2015, plaintiff and PWA arbitrated the landlord tenant
complaint, resulting in an award for plaintiff. PWA moved out of the premises,
wound up its affairs and was officially dissolved as of February 23, 2015 .
Plaintiff alleged that Wakatsuki opened defendant Premier Wealth
Advisory LLC (PWA2) and Katz re-opened and re-named a dormant company
A-1037-18T4 3 to become defendant Lifelong Investments, LLC (LI). Plaintiff alleges PWA2
and LI perform the same services as PWA.
The arbitration award—as amended—was confirmed by the Superior
Court and in October 2015, a judgment for $93,788.28 was entered against PWA
in plaintiff's favor.
In November 2015, plaintiff filed a complaint in the Superior Court
against defendants, PWA, PWA2, LI, Wakatsuki and Katz alleging improper
dissolution and winding up of PWA, a violation of the Uniform Fraudulent
Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34, and unjust enrichment. In the
discovery that followed, Katz and Wakatsuki advised that PWA's only assets
were the capital contributions they had made to it, and that PWA had not
transferred these assets. PWA's bank statements were produced.
Plaintiff amended the complaint in September 2016, to add defendants
First Allied Securities, Inc. and First Allied Advisory Services, Inc. (collectively
First Allied), and causes of action for piercing the corporate veil and common
law fraud.
A-1037-18T4 4 First Allied Securities, Inc. is registered with the Financial Industry
Regulatory Authority, Inc. (FINRA) 1 as a broker-dealer. First Allied Advisory
Services, Inc. is a registered investment advisor.
Plaintiff claimed a search of a FINRA website showed both Wakatsuki
and Katz were "employed" by First Allied. Also, it contended First Allied
Advisory Services, Inc. was operating in New Jersey under the business names
PWA2 and LI. The amended complaint alleged the PWA had "accounts
receivables, active bank accounts, contract rights, customer/investor lists and
other substantial assets." Plaintiff alleged PWA was dissolved to avoid paying
debts and its assets transferred to or distributed to Wakatsuki and Katz,
rendering it "defunct [and] without assets." It alleged the judgment had not been
paid. The amended complaint sought judgment against PWA, PWA2, LI, First
Allied, and Katz and Wakatsuki jointly and severally, alleging claims for
1 First Allied described that FINRA "is a private corporation that acts as a self- regulatory organization for all securities brokerage firms doing business in the United States." See Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 183 (2013) (describing FINRA as "an organization 'created through the consolidation of NASD and the member regulation, enforcement and arbitration operations of the New York Stock Exchange' in July 2007").
A-1037-18T4 5 improper dissolution of PWA, a violation of the UFTA, unjust enrichment,
piercing the corporate veil as to PWA, PWA2 and LI, and common law fraud.
Plaintiff served discovery on Wakatsuki and Katz, and thereafter filed a
motion to compel responses. Among other issues, plaintiff complained Katz and
Wakatsuki would not disclose their customer lists, that these were assets of PWA
and that the transfer of this business to another company was an "identifiable
badge of fraud."
In December 2016, plaintiff served subpoenas on First Allied seeking
discovery. The subpoenas "generally [sought] information concerning
compensation paid by First Allied, First Allied's agreements with the other
named [d]efendants, customers' identities, any leads/referrals associated with
those customers, and quantitative information concerning the trades and
transactions of the customers."
Defendants filed motions to quash the subpoenas and First Allied sought
a protective order. First Allied also filed a motion to dismiss plaintiff's
complaint with prejudice for failure to state a claim. Plaintiff opposed all the
motions.
On July 31, 2017, the court denied without prejudice First Allied's motion
to dismiss because it was "possible" at this stage of the litigation that First Allied
A-1037-18T4 6 may have "directed or assisted . . . other named defendants in avoiding
payment." (The court quashed the subpoenas to First Allied and ordered
plaintiff to provide discovery responses to First Allied and Katz. ("[T]here has
to be more specificity [in the answers] . . . .")) The court denied plaintiff's motion
to compel discovery but did direct Katz and Wakatsuki to produce PWA bank
statements and tax returns.
Plaintiff requested reconsideration. Plaintiff alleged the court's orders
precluded it from conducting appropriate discovery. Plaintiff claimed the court
erred by not requiring Wakatsuki and Katz to produce customer and client lists.
And, it argued the court should have ordered the same discovery from First
Allied.
Plaintiff's motion for reconsideration was denied on October 20, 2017.2
The court found plaintiff's "initial request for defendant's customer lists was
clearly overbroad, and . . . amounted to . . . a fishing expedition." The court
concluded the "clients['] accounts have nothing to do with . . . satisfaction of a
judgment . . . ." The court further explained plaintiff had been provided with
the information previously ordered (PWA’s tax and banking information) but
still had not been able to show "any specific instance of the defendants[']
2 We thereafter denied plaintiff's motion for leave to appeal. A-1037-18T4 7 fraudulent transfers." Thus, the court found plaintiff did not show on
reconsideration "any reason to show that the [court’s] determination was
incorrect, that it lacked merit or that it was mistaken, or that there was anything
that didn’t support that decision." The court also denied without prejudice
motions to dismiss by Katz, Wakatsuki and First Allied. Plaintiff was provided
additional time to respond to discovery.
Wakatsuki testified in his November 2017 deposition that PWA did not
have revenue, clients, employees, an operating agreement, or meeting minutes.
He testified he and Katz "funded the company personally with personal assets."
Insurance commissions were received in his personal name. He testified:
[o]ur attempt was to build a business, bring in advisors and eventually create an income stream into [PWA], which never worked out. We were going to build, and bring in advisors, and take commissions. And we were able to share commissions with advisors that we recruit in and we never got to that point. There was no income created. We dissolved the company.
Katz testified in his November 2017 deposition that PWA did not have
assets, revenues, clients, employees contracts, an operating agreement, keep
meeting minutes, although it did have meetings for "day-to day strategy, training
for the people that we were trying to get to do some business." He testified
"[t]he purpose of [PWA] was to offer financial planning services to other
A-1037-18T4 8 advisors, who would ultimately have the opportunity to utilize [his] expertise
for their clients." He contrasted this with LI. "It's different in that at [LI] I
advise my clients." He testified that PWA had a few advisors, who he named,
but none of them generated revenue for PWA. Katz left PWA at the end of 2014
because "the business was simply just not working. And it became obvious . . .
that it wasn't going to work and [he] should just focus on [LI]."
McHattie was deposed in November 2017. He did not know whether Katz
was a member of PWA when it was dissolved. He never specified what assets
were transferred from PWA, referring merely to documents that defendants had
provided. He also alluded to "comments and statements they made to people at
or about the time." McHattie testified PWA was undercapitalized because the
income tax return that was produced said it had no income. He was aware that
Katz occasionally would pay the rent. He had no evidence to support the claim
that Katz commingled personal and corporate assets.
In February 2018, Katz and LI filed a motion for summary judgment as
did First Allied. Katz alleged in the statement of material facts that plaintiff was
aware Katz and Wakatsuki had a relationship with First Allied because First
Allied's name was on the door of PWA's office space. Katz was no longer a
member of PWA when the October 2015 judgment was entered. Also, by that
A-1037-18T4 9 time, Wakatsuki had dissolved PWA. Katz alleged McHattie could not provide
the factual basis for the allegations in the complaint.
First Allied alleged in its statement of material facts that PWA did not
have a relationship with First Allied. First Allied did not sign the lease. Both
Wakatsuki and Katz were independent contractors of First Allied who had their
own businesses. They both signed independent contractor agreements with First
Allied. First Allied explained that "First Allied advisors are required to conduct
their securities business through First Allied . . . ." Its role is to supervise the
securities activity within the business. First Allied noted that any money First
Allied received for an advisor's sales was paid to the advisor directly. First
Allied denied any control over PWA. First Allied did not receive any
compensation from Wakatsuki's sale of insurance products. It did not have an
affiliation with PWA2 or LI. First Allied identified all business names "under
which [their] affiliated advisors engaged in securities transactions" based on
their understanding of the Security and Exchange Commission's (SEC's) rules.
It alleged that none of the discovery showed PWA, PWA2, or LI were the alter
egos of First Allied. And, nothing showed defendants transferred assets to First
Allied. The statement was supported by certifications from Kevin Keefe, the
A-1037-18T4 10 President and CEO of First Allied Securities, Inc., and of David Feldstein, Esq.,
counsel for First Allied.
In March 2018, plaintiff filed a cross-motion for summary judgment.
Plaintiff's response to Katz and LI alleged defendants transferred to themselves
whatever assets PWA had, which included client lists and office equipment.
Plaintiff alleged PWA was a holdover tenant because it would not accept the
terms of a new lease and Wakatsuki and Katz represented PWA was a viable
business. Plaintiff made a separate but similar response to First Allied's motion.
On April 12, 2018, the trial court granted summary judgment to First
Allied and LI, dismissing them from the case. It granted partial summary
judgment to Katz, dismissing the UFTA and the improper dissolution claim, but
otherwise denying summary judgment. Plaintiff's cross-motion was denied.
The trial court rejected defendants' claims that plaintiff's claims were
barred by the entire controversy doctrine because it reasoned that this was an
action to collect on a judgment that was separate from the landlord tenant action.
The court declined to pierce the corporate veil to assert liability against First
Allied because there was no evidence that First Allied "'dominated' PWA" or
that First Allied used PWA for fraud, injustice or to violate the law. The "mere
connection" between defendants was not adequate to pierce First Allied's "veil."
A-1037-18T4 11 The court found there was no factual basis for any of the other claims against
First Allied or LI.
The trial court declined to grant this relief for Katz, however, because
giving plaintiff the benefit of reasonable inferences, a fact-finder could find
Katz was the alter ego of PWA. And, the court also found there were disputed
issues of fact.
The court granted Katz summary judgment on the UFTA claim,
dismissing it, because it was not factually supported and was inconsistent with
plaintiff's theory of the case. Katz was granted summary judgment on the claim
of improper dissolution because he no longer was with PWA when it was
dissolved. Plaintiff's cross-motion for summary judgment was denied.
Plaintiff was denied reconsideration on May 25, 2018, because the court
found it did not satisfy the reconsideration standard. However, the
reconsideration motion by Katz was granted in part. The court dismissed the
unjust enrichment claim based on the entire controversy doctrine. It held that
"as [p]laintiff has clarified that its claim against Katz is based on the same set
of facts, i.e., the rental payments, as the underlying action, it is barred by the
entire controversy doctrine." The court concluded that if plaintiff wanted to
"hold Katz responsible for his use of the rental property, then that claim should
A-1037-18T4 12 have been asserted in the underlying action . . . ." Katz also was granted
summary judgment dismissing the common law fraud claim because plaintiff's
claim was based on just one "lone comment Katz allegedly made inviting Mr.
McHattie to join the PWA network . . . ." The court found this "self-serving"
allegation was not enough to support the fraud claim. At this point in the
litigation, the only claim remaining against Katz was piercing the corporate veil.
On September 6, 2018, the trial court granted Katz's in limine motion,
barring plaintiff from using documents at trial that were provided in discovery
after the December 5, 2017 discovery end date. The parties had more than 700
days for discovery. The court also barred plaintiff from using documents that
had been quashed based on pretrial motions, although the court indicated it could
reconsider if defendants "open[ed] the door" at trial.
Plaintiff provided only one transcript—September 13, 2018—from the
four-day trial. The independent contractors who worked at PWA testified they
did not receive any income from PWA.
Wakatsuki testified he and Katz wanted to "create a business around our
specialties of developing brokers . . . ." His specialty was insurance; Katz's was
primarily trading stocks. Katz and he were independent contractors for First
Allied. They found a location and began to recruit advisors. The advisors were
A-1037-18T4 13 there for a commission; PWA was the tenant on the lease. PWA intended to stay
in the lease, but McHattie demanded a $48,000 payment, of which $3000 was
for back rent and the balance for legal fees. PWA left the premises shortly after
this.
Wakatsuki denied trying to solicit business from McHattie. He testified
he did receive $21,952.21 from First Allied in 2012 for the sale of a variable
annuity, which is an insurance type of product.
Following a multi-day jury trial, concluding September 18, 2018, the jury
unanimously found in favor of Katz on the remaining counts against him,
declining to pierce the corporate veil of PWA. The jury found plaintiff did not
prove by clear and convincing evidence that Katz exercised dominion and
control over PWA such that they should be treated as one entity. It also found
in favor of Wakatsuki on every issue in the amended complaint. It found
Wakatsuki did not exercise dominion and control, should not be held personally
liable for the judgment, did not misrepresent any fact to plaintiff that he knew
to be false, did not cause harm to plaintiff nor did he make any transfer with the
intent to defraud any creditor of PWA. On September 18, 2018, the trial court
A-1037-18T4 14 entered judgment against plaintiff and in favor of defendants, dismissing the
case with prejudice.3
Plaintiff appeals the no-cause judgment entered on September 18, 2018,
and the orders entered on July 31, 2017, October 20, 2017, April 12, 2018, May
25, 2018, and September 6, 2018.
On appeal, plaintiff raises the following issues:
A. The Trial Court Erred in Denying Plaintiff’s Motion to Compel Because Plaintiff Had The Right to Pretrial Discovery.
B. The Trial Court Erred in Granting First Allied Securities, LLC and First Allied Advisory Services, LLC['S] Motion to Quash Plaintiff’s Subpoenas because Customer Lists are Assets of an Entity.
C. The Trial Court Erred in Denying Plaintiff’s Motion for Reconsideration on the Motion to Compel Because Permitting Plaintiff Discovery was Likely to Lead to the Discovery of Admissible Evidence.
D. The Trial Court Erred in Granting Summary Judgment for Defendants Brad Katz, First Allied Securities, LLC, First Allied Advisory Services, LLC and Lifelong Investment Because Complete Discovery Was Not Permitted.
E. The Trial Court Erred in Granting Summary Judgment [to] Defendants First Allied Securities, LLC,
3 There were post-judgment motions for sanctions that are not detailed herein. The September 18, 2018 judgment was amended in February 2019.
A-1037-18T4 15 First Allied Advisory Services, LLC and Lifelong Investment Because They Were Unjustly Enriched by Being the Beneficial Tenants of the Premise and Not Paying Rent.
F. The Trial Court Erred in Granting Defendants Summary Judgment on their Motion for Reconsideration Based on the Entire Controversy Doctrine and Common Law Fraud.
i. The Trial Court Erred in Granting Defendants Summary Judgment on their Motion for Reconsideration based on the Entire Controversy Doctrine (Appealable Ruling at Pa-15).
ii. [The] Trial Court Erred in Granting Defendants Summary Judgment on their Motion for Reconsideration based on Common Law Fraud.
G. The Trial Court Erred in Granting Defendant Katz’s Motion in Limine.
II.
A.
Plaintiff appeals pre-trial discovery orders entered on July 17, 2017,
denying plaintiff's motion to compel and quashing plaintiff's subpoenas to First
Allied, and the September 6, 2018 order that granted Katz's in limine motion to
bar certain documents. We find no abuse of discretion by the trial court.
A-1037-18T4 16 We generally "defer to a trial judge's discovery rulings absent an abuse of
discretion or a judge's misunderstanding or misapplication of the law." Capital
Health Sys., Inc. v. Horizon Healthcare Servs., Inc., 230 N.J. 73, 79-80 (2017).
An abuse of discretion "arises when a decision is 'made without a rational
explanation, inexplicably departed from established policies, or rested on an
impermissible basis.'" Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002)
(quoting Achacoso-Sanchez v. I.N.S., 779 F.2d 1260, 1265 (7th Cir. 1985)).
"Discovery is intended to lead to facts supporting or opposing an asserted legal
theory; it is not designed to lead to formulation of a legal theory." Camden Cty.
Energy Recovery Assocs., L.P. v. N.J. Dep’t of Envtl. Prot., 320 N.J. Super. 59,
64 (1999).
1.
Plaintiff requested client lists of PWA2 and LI. Plaintiff argues the July
17, 2017 orders constituted reversible error, and it should have been allowed
discovery against the other entities.
We discern no abuse of discretion by the trial court. The documents
requested were overly broad considering they predated the 2015 judgment by
nearly four years. Plaintiff alleged the fraud occurred after the 2015 judgment.
Plaintiff was never specific about what assets were transferred or what was
A-1037-18T4 17 improper. Given the lack of specificity by plaintiff, it was not an abuse of
discretion to deny the disclosure of customer lists of PWA2 and LI just because
those limited liability companies were associated with Katz and Wakatsuki in
some fashion. The court ordered PWA to produce its bank statements and tax
returns. The trial court also explained plaintiff would have the "opportunity
. . . to request additional information" if after reviewing those documents , it
would have found something of interest. This was a reasonable limitation.
2.
Plaintiff requested customer lists from First Allied, arguing the court
committed reversible error by quashing these subpoenas. Plaintiff argues that
First Allied is the alter ego of PWA and that it was unjustly enriched by using
the premises because its employees generated income there.
We are not persuaded the July 17, 2017 orders constituted an abuse of
discretion. The judgment was entered against PWA. There was no contract
between First Allied and PWA. Ordinarily, assets in brokerage accounts remain
the personal property of the customer, not of the broker. Newbro v. Freed, 409
F. Supp. 2d 386, 395 (S.D.N.Y. 2006). Plaintiff presented no evidence to
dispute First Allied's argument that the client lists of First Allied would only
identify customers who had brokerage accounts with First Allied, not with PWA.
A-1037-18T4 18 We also agree with the trial court the subpoenas were overly broad because
plaintiff's claim is that PWA improperly transferred assets after the 2015
judgment.
3.
Plaintiff argues the trial court erred on September 6, 2018, by granting
Katz's in limine motion to bar the use of certain documents at trial. Plaintiff
contends these documents included records of defendants' website, and licensure
and registration records at the SEC and FINRA. Plaintiff argues there was no
prejudice to defendants.
The trial court did not abuse its discretion in granting this relief. The court
excluded documents provided after the discovery end date and those that were
quashed in connection with the subpoenas. The discovery end date was
extended multiple times for a total of more than 700 days. Plaintiff contends
the excluded information was publicly available. However, that simply means
that it could have been obtained with due diligence prior to the multiple extended
discovery end dates. See R. 4:17-7 (permitting amendments to interrogatories
after the discovery end date if "not reasonably available or discoverable by the
exercise of due diligence prior to the discovery end date."). The production of
documents after the extended period for discovery should not be used as a further
A-1037-18T4 19 extension, or—as in this case—a means to alter prior rulings of the court limiting
discovery or quashing subpoenas.
B.
Plaintiff argues the trial court erred on October 20, 2017, by not granting
it reconsideration on the motion to compel because PWA was undercapitalized
and failed to follow corporate formalities.
We review for abuse of discretion a trial court's order deciding a motion
for reconsideration. Granata v. Broderick, 446 N.J. Super. 449, 468 (App. Div.
2016). Governed by Rule 4:49-2, reconsideration is appropriate for a "narrow
corridor" of cases in which either the court's decision was made upon a "palpably
incorrect or irrational basis," or where "it is obvious that the [c]ourt either did not
consider, or failed to appreciate the significance of probative, competent evidence."
Fusco v. Bd. of Educ. of Newark, 349 N.J. Super. 455, 462 (App. Div. 2002)
(quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990)).
Here, the trial court took into consideration the bank statements and tax
returns that plaintiff presented, but the motion was denied because plaintiff still
was not specific about what transfers were alleged to be fraudulent. The court
did not abuse its discretion in rejecting the claim for reconsideration.
A-1037-18T4 20 C.
Plaintiff argues the trial court erred by granting summary judgment on
April 12, 2018, before it had a fair chance to conduct discovery. Plaintiff
maintains the list of customers was material and the court erred by not
compelling it. Plaintiff contends it showed the presence of disputed material
facts on each of the counts in the complaint that were dismissed.
Our review of an order granting or denying summary judgment is de novo
using the same standard as the trial court. Conley v. Guerrero, 228 N.J. 339,
346 (2017). Summary judgment must be granted if "the pleadings, depositions,
answers to interrogatories and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact challenged and
that the moving party is entitled to a judgment or order as a matter of law."
Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224
N.J. 189, 199 (2016) (quoting R. 4:46-2(c)).
We agree with the trial court that there were no disputed issues of fact
regarding the claims in the amended complaint for which summary judgment
was granted. Count one alleged that PWA was dissolved improperly because it
did not pay its liabilities and that defendants were liable. The record did not
show First Allied or LI were involved in dissolving PWA. Katz was no longer
A-1037-18T4 21 a member of PWA as of December 2014, which was months before it was
dissolved. There was no evidence he was involved in its dissolution.
Count two alleged a violation of the UFTA. Our review of the record
shows there was no genuine issue of material fact raised that First Allied, Katz
or LI transferred or conveyed property of PWA fraudulently away from the reach
of plaintiff with the intent to defraud in violation of the UFTA. See Gilchinsky
v. Nat'l Westminster Bank N.J., 159 N.J. 463, 475 (1999) (requiring clear and
convincing proof that an asset has been put "beyond the reach of creditors which
would have been available to them" and this was done with the "intent to
defraud, delay or hinder the creditor.").
Count three alleged unjust enrichment by defendants from PWA's
tenancy. Plaintiff argues Wakatsuki and Katz used First Allied email addresses,
they were listed as First Allied employees on the SEC/FINRA filing, and First
Allied conducted business in New Jersey under the name PWA.
"'[T]he doctrine of unjust enrichment . . . rests on the equitable principle
that a person shall not be allowed to enrich himself unjustly at the expense of
another.'" Inv'rs Bank v. Torres, 457 N.J. Super. 53, 62 (App. Div. 2018)
(alteration and omission in original) (quoting Callano v. Oakwood Park Homes
Corp., 91 N.J. Super. 105, 108 (App. Div. 1966)). A claim for unjust enrichment
A-1037-18T4 22 involves proof "'(1) that the defendant has received a benefit from the plaintiff,'
and '(2) that the retention of the benefit by the defendant is inequitable.'"
Wanaque Borough Sewerage Auth. v. West Milford, 144 N.J. 564, 575 (1996)
(quoting Judy Beckner Sloan, Quantum Meruit: Residual Equity in Law, 42
DePaul L. Rev. 399, 408 (1992) (footnote omitted)).
The record did not show that First Allied received PWA's assets without
consideration, that PWA's assets were transferred to First Allied or that First
Allied was unjustly enriched. It was not disputed that Allied did not sign the
lease. The record did not support that First Allied owned any of the websites in
issue or that First Allied controlled PWA, PWA2, or LI. Wakatsuki and Katz
signed independent contractor agreements with First Allied, received 1099's and
testified in their depositions they were not employees. The record did not show
that First Allied had an ownership interest in PWA, PWA2 or LI or that these
entities were under common control with First Allied. In addition, the unjust
enrichment claim fails because there was no indication plaintiff had an
expectation First Allied would pay the lease or that First Allied expected to pay
it.
A-1037-18T4 23 Count four alleged defendants should be liable for PWA's judgment by
piercing its corporate veil. Count five alleged that defendants should be liable
because LI and PWA2 were successors to PWA.4
"[I]n order to warrant piercing the corporate veil of a parent corporation,
a party must establish two elements: 1) that the subsidiary was dominated by the
parent corporation, and 2) that adherence to the fiction of separate corporate
existence would perpetrate a fraud or injustice, or otherwise circumvent the
law." Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 199-
200 (App. Div. 2006).
Plaintiff did not show that there was a basis to pierce the corporate veil to
hold First Allied responsible for PWA's judgment. A genuine issue of fact was
not raised that First Allied dominated PWA or treated it as a subsidiary. First
Allied did not create PWA. They had separate tax filings. There was no
evidence it owned or controlled PWA, PWA2 or LI. And, plaintiff did not show
evidence that First Allied was using PWA to commit a fraud or that it made any
material misrepresentations that were relied on by plaintiff. The unreported case
relied on by plaintiff was not precedential and it was distinguishable factually
4 These counts proceeded to trial against Katz and Wakatsuki. A-1037-18T4 24 because it did not involve a separate company being held liable for a judgment
against another.
Similarly, there was no evidence to show that LI was a successor to PWA.
LI was formed years before PWA was dissolved.
D.
Plaintiff argues the trial court erred by granting Katz's motion for
reconsideration on May 25, 2018, which dismissed count three, unjust
enrichment, and count six, common law fraud.
The court found the entire controversy doctrine applied to the unjust
enrichment claim once it was clear plaintiff's claim against Katz was based on
his use of the property and not on his alleged failure to pay the judgment. "The
entire controversy doctrine requires that all claims between parties 'arising out of or
relating to the same transactional circumstances . . . be joined in a single action.'"
Brennan v. Orban, 145 N.J. 282, 290 (1996) (omission in original) (quoting Brown
v. Brown, 208 N.J. Super. 372, 377-78 (App. Div. 1986)). That mandate applies
"'not only to matters actually litigated, but to all aspects of a controversy that might
have been thus litigated and determined.'" Vision Mortg. Corp. v. Patricia J.
Chiapperini, Inc., 307 N.J. Super. 48, 52 (App. Div. 1998) (quoting Mori v. Hartz
Mountain Dev. Corp., 193 N.J. Super. 47, 56 (App. Div. 1983)).
A-1037-18T4 25 McHattie testified at his deposition that he was aware Katz and Wakatsuki
were members of PWA. He was aware that First Allied's name was on the door.
Because plaintiff's revised claim against Katz for his use of the premises arose "out
of or relating to the same transactional circumstances" as the underlying action for
failure to make additional rent payments, plaintiff's claims against Katz and all other
defendants should have been raised in the initial action. See Brennan, 145 N.J. at
290.
Plaintiff contends the court erred by reconsidering and then granting Katz's
motion for summary judgment on count six, the common law fraud claim. We find
no error in granting summary judgment on this claim given the lack of evidence as
previously described supported only by "self-serving allegations" which were "not
sufficient to survive a motion for summary judgment." Also, Wakatsuki testified
contrary to this at trial, and in light of the verdict, the jury apparently believed him.
All the remaining claims against Katz and Wakatsuki were tried to
completion, resulting in a verdict in their favor. Plaintiff does not directly challenge
the jury's findings, only the discovery, reconsideration and summary judgment
orders that preceded the trial. Having affirmed these orders, we also affirm the
September 18, 2018 judgment.
A-1037-18T4 26 Affirmed.
A-1037-18T4 27