LEGEND MOVIE POSTERS CORPORATION VS. JERRY OHLINGER'S MOVIE MATERIAL STORE, INC. (C-000123-16, PASSAIC COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: October 22, 2018
• Docket: A-3553-16T1
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-3553-16T1

LEGEND MOVIE POSTERS CORPORATION, a Nevada corporation, and XINGLING HU, a New Jersey resident,

Plaintiffs-Appellants,

v.

JERRY OHLINGER'S MOVIE MATERIAL STORE, INC., and JERRY OHLINGER,

Defendants-Respondents. __________________________

Argued October 1, 2018 – Decided October 22, 2018

Before Judges Gooden Brown and Rose.

On appeal from Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. C- 000123-16.

Anthony N. Iannarelli, Jr., argued the cause for appellants. Douglas M. Schneider argued the cause for respondents (Summers & Schneider, PC, attorneys; Douglas M. Schneider, on the brief).

PER CURIAM

Plaintiffs Legend Movie Posters Corporation and Xingling Hu

(collectively plaintiffs) appeal from Chancery Division orders entered on

January 11 and March 28, 2017, essentially dismissing plaintiffs' complaint on

comity grounds. The January 11, 2017 order denied plaintiffs' order to show

cause and granted Jerry Ohlinger's Movie Material Store, Inc. (JOMMS) and

Jerry Ohlinger's (collectively defendants) cross-motion "to dismiss or stay"

plaintiffs' complaint "in favor of a prior action commenced by [d]efendants in

the New York County Supreme Court." The March 28, 2017 order superseded

the January 11, 2017 order, clarified that plaintiffs' complaint was dismissed,

rather than stayed, and denied plaintiffs' motion for reconsideration. For the

reasons that follow, we affirm.

We recite that part of the procedural history and record pertinent to this

appeal. On October 22, 2014, JOMMS filed a complaint in the U.S. District

Court for the District of New Jersey against Legend Movie Posters Corporation

(Legend Corporation), Legend Movie Posters Enterprise Corporation (Legend

Enterprise), Sean Chatoff, and Xingling Hu (collectively Legend). In the

A-3553-16T1 2 complaint, JOMMS, a New York corporation owned and operated by Jerry

Ohlinger, alleged that Legend Corporation, a Nevada corporation doing business

in New Jersey, and Legend Enterprise, a New Jersey corporation, both owned

and operated by Chatoff and Hu, husband and wife, breached their joint venture

agreement involving the sale of "movie memorabilia, including scripts, studio

photos, posters, [and] promotional materials." According to the complaint,

pursuant to their oral agreements, Legend agreed to lease warehouse space in

New Jersey to store JOMMS's inventory of collectible movie memorabilia worth

millions of dollars. JOMMS agreed to pay the costs of moving the inventory to

the warehouse as well as "all expenses for the [w]arehouse, including rent,

common charges and insurance," and "Legend agreed to provide staff at the

[w]arehouse to service sales from the inventory." Under their agreement,

JOMMS was permitted to sell items from the inventory at its discretion without

any obligation to share the net profits generated from the sales with Legend. On

the other hand, Legend was only permitted to sell select items from the

inventory, subject to JOMMS's consent and pricing directives, and was allowed

to keep only twenty-five percent of the proceeds of such sales with the remaining

seventy-five percent to be paid to JOMMS.

A-3553-16T1 3 The complaint stated further that when Legend "unilaterally determined

that JOMMS had fallen behind on repaying monies allegedly owed to [Legend],"

Legend "unlawfully and improperly took complete control over the [i]nventory,

. . . and began selling items without JOMMS's consent or pricing input."1

According to the complaint, Legend also "refused to pay" JOMMS's "share of

the net profits [generated] from such sales," claimed that "they had 'purchased'

the complete [i]nventory years earlier for a mere $70,000," and "refused to

permit JOMMS to continue to sell items from the [i]nventory." As a result,

Legend allegedly "unlawfully converted approximately $5 million worth of

[i]nventory," and "interfere[d] with . . . a tentative agreement . . . with a third

party to purchase the entire [i]nventory at market value." In the eleven-count

complaint alleging causes of action for conversion, prima facie tort, breach of

contract, breach of fiduciary duties, and tortious interference with prospective

economic advantage, JOMMS sought "a writ of replevin for possession of the

[i]nventory," an accounting of all transactions, injunctive relief, and a

declaratory judgment.

1 Although JOMMS acknowledged in the complaint that Legend had, in fact, made loans to JOMMS amounting to "approximately $80,000" to "provide working capital," the parties had allegedly agreed that "any monies owed by [JOMMS] to Legend would be repaid from [JOMMS's] seventy-five percent share of sales made by Legend from the [i]nventory." A-3553-16T1 4 Following mediation, on September 14, 2015, the parties entered into a

settlement agreement resolving all claims. In the agreement, the parties agreed

that JOMMS would take possession of and remove designated items from the

warehouse by December 31, 2015, and would pay one half of the monthly rent

and utilities for the warehouse through December 31, 2015, regardless of when

the property was removed. Further, the parties agreed that JOMMS would

execute a promissory note in the amount of $162,500, payable in eighteen

months and secured by the personal guarantee of Jerry Ohlinger and a security

agreement granting Legend a second priority security interest in JOMMS's

assets. Paragraph nine of the settlement agreement provided that

"[s]imultaneous[ly] with [the] execution of the Note, Security Agreement and

Guarantee[,] the parties shall execute mutual Releases of all claims they have

against each other accruing prior to the date hereof, except for claims to enforce

this Agreement."

Upon receiving notice of the settlement, on July 9, 2015, the district court

entered an order dismissing the case "without prejudice to the right, upon good

cause shown within sixty (60) days," to reopen the case "solely to enforce the

terms of the settlement agreement." On September 4, 2015, the court entered an

order extending the deadline until November 9, 2015. The note, security

A-3553-16T1 5 agreement and guarantee required under the settlement agreement were executed

on December 11 and 12, 2015. However, the mutual releases were never

executed as required by paragraph nine of the agreement. On March 24, 2016,

JOMMS and Ohlinger (collectively JOMMS) 2 filed a complaint in the Supreme

Court of New York seeking to rescind the settlement agreement and damages

for its breach. On April 7, 2016, Legend removed the action on diversity

grounds to the U.S. District Court for the Southern District of New York.

While JOMMS's motion to remand the case to the New York state court

based on deficient removal was pending, on June 24, 2016, Legend moved to

reopen the case in the U.S. District Court for the District of New Jersey based

upon JOMMS's failure to provide a release as required under the settlement

agreement. On December 5, 2016, the court denied Legend's motion to reopen

the case, concluding that it was "without jurisdiction" because the prior

dismissal orders "provided deadlines" that had expired and Legend could

"present their position" in the "ongoing" New York proceedings. The court

noted further that "the interests of judicial economy" were "served by avoiding

duplicative parallel proceedings." Thereafter, on February 7, 2017, JOMMS's

2 For purposes of clarity, we interchange references to JOMMS and Legend, collectively defendants and plaintiffs, respectively, depending upon the particular action and the specific parties involved. A-3553-16T1 6 motion to remand the case from the U.S. District Court for the Southern District

of New York to the Supreme Court of New York was granted because the

amount in controversy was "below the minimum threshold for federal

jurisdiction."

While JOMMS's New York complaint was pending, on September 30,

2016, Legend Corporation and Hu (collectively Legend) filed a verified

complaint and order to show cause in New Jersey Superior Court seeking to

enjoin JOMMS from "misappropriating" its assets and seeking to "foreclose

upon Legend's security interest in [JOMMS's] inventory and assets" based upon

JOMMS's default of the settlement agreement. JOMMS filed a cross-motion to

dismiss or stay the complaint in favor of the pending New York case, arguing

that Legend could assert their claims in the New York action as a counterclaim.

On January 11, 2017, Judge Thomas J. LaConte denied Legend's order to show

cause and granted JOMMS's motion to dismiss or stay the action.

On January 31, 2017, Legend moved for reconsideration. In its supporting

certification, Legend's counsel stated the New York action was "immaterial" to

the relief Legend sought in this court and the New York litigation would likely

"go on for years" while "[Legend's] interests [would] be at great risk." On March

28, 2017, in an oral decision, Judge LaConte denied Legend's motion for

A-3553-16T1 7 reconsideration. However, acknowledging that the "January 11, 2017 [order]

was not artfully drafted," at Legend's request, the judge issued a superseding

order to clarify that Legend's complaint was dismissed, rather than stayed.

After recounting at length the litigation's "tortured" procedural history,

Judge LaConte determined that Legend "fail[ed] to establish grounds for

reconsideration under [Rule] 4:49-2," failed to "point[] out any facts . . . or

controlling decisions that have been overlooked," and only "repeat[ed] the

arguments previously made to and rejected by the [c]ourt." The judge explained

that other than expressing "dissatisfaction with the . . . result of the prior

proceedings," Legend "offered no reason why this [c]ourt instead of the New

York Supreme Court [was] the proper tribunal" to adjudicate the action. The

judge also determined that Legend presented no evidence "that JOMMS [was]

liquidating [its] inventory in violation of the security agreement" to warrant

injunctive relief.

The judge pointed out that "[JOMMS] chose to bring their claims in New

York and commence their action long before [Legend] sued here." According

to the judge,

[Legend] can assert defenses and counterclaims in the . . . earlier pending New York action for the relief they seek. The New York Supreme Court has all the parties before it, so it is just as well positioned as this

A-3553-16T1 8 [c]ourt to issue an enforceable interim order if appropriate providing the relief sought in this . . . proceeding before this [c]ourt.

Relying on Yancoskie v. Delaware River Port Authority, 78 N.J. 321 (1978), the

judge explained that "New Jersey law is clear that where a party commences a

later action in New Jersey that duplicates a prior action between the same parties

in another jurisdiction, [the] New Jersey action should be dismissed or stayed

pending resolution of the prior action."

The judge rejected Legend's assertion that "the settlement agreement or

related documents prohibit[ed] litigation in the New York Supreme Court of the

parties['] dispute over . . . [their] respective rights and responsibilities

thereunder." According to the judge,

All the . . . settlement agreement states is that the parties consent to jurisdiction of the Superior Court of the State of New Jersey or the United States District Court for the District of New Jersey.3 An agreement conferring

3 Paragraph fifteen of the security agreement executed by JOMMS in connection with the settlement agreement provided:

Law Governing. All terms herein contained and the rights, duties and remedies of the parties shall be governed by the laws of New Jersey. In any action brought by [Legend] to enforce this Security Interest, . . . [JOMMS] knowingly, voluntarily and intentionally . . . consents . . . to the jurisdiction of the Superior Court of the State of New Jersey or the United States District Court for the District of New Jersey . . . . A-3553-16T1 9 jurisdiction in one for[u]m will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion. That is a quote from [City of New York v. Pullman, Inc., 477 F. Supp. 438 (S.D.N.Y. 1979)].

The security agreement and guaranty in this case do not purport to require [JOMMS] to sue in any particular court. Thus, they are free to use the New York Court to remedy [Legend's] breach of the settlement agreement.

This appeal followed.

We begin by setting forth the principles that guide our analysis. When a

substantially similar lawsuit is pending in two jurisdictions, the first -filed rule

generally requires that the court in the later-filed action defer to the court that

first acquired jurisdiction over the dispute. Yancoskie, 78 N.J. at 324. The rule

reflects the principle that any comity analysis begins with the presumption that

"the court that first obtains possession of the controversy, or of the property in

dispute, must be allowed to dispose of it without interference or interruption

from the co-ordinate court." Riggs v. Johnson Cty., 73 U.S. 166, 196 (1868).

Like many states, New Jersey adheres to the first-filed rule and ordinarily will

stay or dismiss a civil action in deference to the jurisdiction in which the

substantially similar litigation was first filed. See Exxon Research & Eng'g Co.

v. Indus. Risk Insurers, 341 N.J. Super. 489, 506 (App. Div. 2001); see also CTC

A-3553-16T1 10 Demolition Co. v. GMH AETC Mgmt./Dev. LLC, 424 N.J. Super. 1, 6 (App.

Div. 2012).

Even where the New Jersey court has jurisdiction to hear the case, "[i]f

we are to have harmonious relations with our sister states, . . . comity and

common sense counsel that a New Jersey court should not interfere with a

similar, earlier-filed case in another jurisdiction that is 'capable of affording

adequate relief and doing complete justice.'" Sensient Colors, Inc. v. Allstate

Ins. Co., 193 N.J. 373, 387 (2008) (quoting O'Loughlin v. O'Loughlin, 6 N.J.

170, 179 (1951)); see also Century Indem. Co. v. Mine Safety Appliances Co.,

398 N.J. Super. 422, 426 (App. Div. 2008). The litigation of duplicative lawsuits

is wasteful of judicial resources and undermines recognition of the authority of

the other jurisdiction to adjudicate the matter. See Sensient, 193 N.J. at 387.

A "clear entitlement to comity-stay relief" is established by proof: "(1)

that there is a first-filed action in another state, (2) that both cases involve

substantially the same parties, the same claims, and the same legal issues, and

(3) that plaintiff will have the opportunity for adequate relief in the prior

jurisdiction." Am. Home Prods. Corp. v. Adriatic Ins. Co., 286 N.J. Super. 24,

37 (App. Div. 1995) (footnote omitted). Under such circumstances, "the judge

should grant the stay unless plaintiff demonstrates 'special equities.'" Ibid.

A-3553-16T1 11 "[E]xtenuating circumstances sufficient to qualify as special equities" arise

when there are "compelling" reasons "that favor the retention of jurisdiction by

the court in the later-filed action." Sensient, 193 N.J. at 387. Such

circumstances are present "if an injustice would be perpetrated on a party in the

first-filed action and no hardship, prejudice or inconvenience would be inflicted

on the other by proceeding in the second-filed case." Id. at 389 (internal

citations omitted). A trial court's decision to apply the doctrine of comity

requires "a fact-specific inquiry that weighs considerations of fairness and

comity," which we review under an abuse of discretion standard. Id. at 389-90.

Similarly, our standard of review on a motion for reconsideration is

deferential. "Motions for reconsideration are governed by Rule 4:49-2, which

provides that the decision to grant or deny a motion for reconsideration rests

within the sound discretion of the trial court." Pitney Bowes Bank, Inc. v. ABC

Caging Fulfillment, 440 N.J. Super. 378, 382 (App. Div. 2015). Reconsideration

is not appropriate merely because a litigant is dissatisfied with a decision of the court or wishes to reargue a motion, but

should be utilized only for those cases which fall into that narrow corridor in which either 1) the [c]ourt has expressed its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious that the [c]ourt either did not consider, or failed to

A-3553-16T1 12 appreciate the significance of probative, competent evidence.

[Palombi v. Palombi, 414 N.J. Super. 274, 288 (App. Div. 2010) (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990).]

Thus, we will not disturb a trial judge's denial of a motion for

reconsideration absent a clear abuse of discretion. Pitney Bowes Bank, 440 N.J.

Super. at 382. An "abuse of discretion only arises on demonstration of 'manifest

error or injustice,'" Hisenaj v. Kuehner, 194 N.J. 6, 20 (2008) (quoting State v.

Torres, 183 N.J. 554, 572 (2005)), and occurs when the trial judge's decision is

"made without a rational explanation, inexplicably departed from established

policies, or rested on an impermissible basis." Milne v. Goldenberg, 428 N.J.

Super. 184, 197 (App. Div. 2012) (quoting Flagg v. Essex Cty. Prosecutor, 171

N.J. 561, 571 (2002)).

Here, we discern no abuse of discretion in Judge LaConte's dismissal of

Legend's complaint on comity grounds, or denial of Legend's motion for

reconsideration, which was predicated only on Legend's dissatisfaction with the

judge's decision. We affirm substantially for the reasons expressed by the judge

in his March 28, 2017 oral decision. Legend argues the judge erred in imposing

the "extreme sanction" of dismissal, thereby "putting their interests in the

settlement at risk." Finding no support in the record for the arguments, we are

A-3553-16T1 13 satisfied that Legend's arguments are without sufficient merit to warrant

discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

A-3553-16T1 14