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

NOT FOR PUBLICATION WITHOUT THE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 The March 28, 2017 order superseded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