Sync Labs LLC v. Fusion Manufacturing ( 2020 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 19-3122
______________
SYNC LABS LLC; CODRUT RADU RADULESCU,
Appellants
v.
FUSION-MANUFACTURING; MICHAEL R. FERCHAK
______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 2-11-cv-03671)
District Judge: Honorable Susan D. Wigenton
______________
Submitted under Third Circuit L.A.R. 34.1(a)
November 10, 2020
BEFORE: HARDIMAN, GREENBERG, and SCIRICA, Circuit Judges.
(Filed: November 18, 2020)
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OPINION*
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GREENBERG, Circuit Judge.
____________________
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
I. INTRODUCTION
This matter comes on before this Court on the appeal of Plaintiffs-Appellants Sync
Labs LLC and Codrut Radu Radulescu, a citizen of New Jersey. Although both of those
parties are appellants, we will refer to Appellant in the singular meaning Radulescu.
Appellant appeals from multiple orders of the District Court following the Court’s
August 15, 2019 order granting Defendants-Appellees’ Fusion Manufacturing and
Michael Ferchak (together “Appellees”), citizens of Florida, motion to dismiss for lack of
prosecution. For the reasons set forth below, we will affirm.
II. STATEMENT OF FACTS AND PROCEDURAL HISTORY
We only recite the facts and procedural history necessary to resolve this appeal.
This case arose from a failed business relationship between Radulescu and Ferchak. In
2007, Radulescu began operating Sync Labs,1 a New Jersey limited liability company in
which he originally was the sole member. Ferchak is the owner and managing director of
defendant Fusion Manufacturing.2 Appellant contends that Sync Labs at the times
material to this case was a citizen of both New Jersey and Florida as Radulescu and
Ferchak were its members and respectively are citizens of those states. Ferchak entered
into an Agreement with Sync Labs which provided that he would work for Sync Labs in
1
Sync Labs originally operated under the company name Phoenix Labs LLC.
2
Although not addressed substantially in the parties’ briefs, Appellant named Fusion
Manufacturing as a defendant because, inter alia, Ferchak signed a non-disclosure
agreement on behalf of himself and Fusion Manufacturing, which Appellant alleges
Ferchak breached.
2
exchange for hourly compensation and receipt of 8.33 Class B units of Profit Interest
(“BUPIs”) in Sync Labs, which were non-transferrable and did not give Ferchak voting
rights. He also entered into a “Funding Agreement”, in which he agreed to provide
“matching funds” to Sync Labs to make it eligible for a New Jersey Commission on
Science and Technology grant and would give him an ownership interest in Sync Labs.
Later Ferchak agreed to pay Sync Labs $20,000 in exchange for 4,000 Class A UPIs
(“AUPIs”). The New Jersey Commission on Science and Technology awarded Sync
Labs the grant, but shortly thereafter the relationship between Appellant and Ferchak
deteriorated. On May 30, 2010, Ferchak tendered his resignation from Sync Labs,
effective April 1, 2010.
On May 31, 2011, Radulescu and Sync Labs filed this action against Ferchak and
Fusion-Manufacturing in the New Jersey Superior Court setting forth claims arising
under state law. On June 27, 2011, Appellees removed the matter to the District of New
Jersey on the basis of diversity of citizenship jurisdiction.
After Sync Lab’s original counsel withdrew his representation, Radulescu, who is
an attorney, filed a Notice of Appearance on behalf of Sync Labs. On June 7, 2012, the
District Court disqualified Radulescu from representing Sync Labs and granted Sync
Labs thirty days to retain new counsel. Sync Labs failed to obtain new counsel, and after
protracted motion practice, the Court dismissed Sync Labs from the case with prejudice.
On November 16, 2016, the Court entered an order partially, but largely, granting a
motion for summary judgment that Appellees had filed.
3
Radulescu proceeded pro se until April 20, 2017, when counsel appeared on behalf
of him and Sync Labs. The attorney filed a motion to remand the case to the state court
but the District Court denied the motion on June 13, 2017. On April 2, 2019, the Court
administratively closed the matter and set a June 3, 2017 deadline for the parties to move
to reopen the action. On the day of the deadline, Radulescu filed a motion to reopen.
Thereafter Appellees cross-moved to dismiss the case for lack of prosecution, and the
Court granted this motion on August 15, 2019. Thus, the matter came to an end in the
District Court.
III. ANALYSIS
Appellant first argues that the District Court lacked jurisdiction over the case at
the time of removal and therefore the Court was required to remand the case to the state
court. He further argues that the Court erred when it granted summary judgment in favor
of Appellees and abused its discretion when it dismissed the action for lack of
prosecution. We address those issues in the same order in this opinion.
a. The June 13, 2017 Order denying Appellant’s Motion to Remand
“[J]urisdiction to hear cases in diversity arises under 28 U.S.C. § 1332(a), which
provides that district courts ‘have original jurisdiction of all civil actions where the matter
in controversy exceeds the sum or value of $75,000 . . . and is between . . . citizens of
different States.’” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 419 (3d Cir.
2010). But “[c]omplete diversity requires that, in cases with multiple plaintiffs or
multiple defendants, no plaintiff be a citizen of the same state as any defendant.” Id.
4
(citation omitted). “[T]he citizenship of an LLC is determined by the citizenship of its
members.” Id. at 420.
We “review[] the question of whether the District Court had subject matter
jurisdiction de novo.” Babcock & Wilcox Co. v. Kan. City. S. Ry., 557 F.3d 134, 137
(3d Cir. 2009) (citation omitted). If we determine “that the District Court lacked subject
matter jurisdiction, we will direct it to dismiss the case even at [a] late stage of the
litigation.” Id. (internal quotation marks omitted); see also Caterpillar Inc. v. Lewis, 519
U.S. 61, 76-77 (1996) (“[I]f, at the end of the day and case, a jurisdictional defect
remains uncured, the judgment must be vacated.”).
Notably, however, in Caterpillar, the Supreme Court held that a district court may
entertain jurisdiction over an action if the jurisdictional flaw is cured prior to the point of
final judgment. See Caterpillar, 519 U.S. at 73-77. In this case, even if we assume that
there was not complete diversity of citizenship when Appellees removed the case,3 when
the District Court dismissed Sync Labs from the case the jurisdictional defect was cured
as the remaining plaintiff, Radulescu, is a citizen of New Jersey, and Appellees are
citizens of Florida.
3
We find it concerning that after nearly a decade of litigation, the record seems not to
include any document definitively identifying Sync Labs’ members. In fact, the District
Court noted that “[a]bsent Sync Lab’s operating agreement, the court cannot determine
Sync Lab’s membership as of the filing of the Complaint . . . .” (App. 34.) The Court,
however, noted that Appellant, “the only other Sync Lab member as of April 2010,
asserts that Ferchak resigned,” accordingly, “complete diversity would have existed from
the case’s inception if Ferchak’s resignation had been effective.” (Id.) Ultimately, the
Court concluded that it likely lacked subject matter jurisdiction at the time of removal.
At this point that does not matter because the jurisdictional problem was cured when the
Court dismissed Sync Labs from the case.
5
Appellant attempts to distinguish this case from Caterpillar by focusing on the
procedural distinctions between the two cases. Those differences, however, are
immaterial in light of Caterpillar’s clear message emphasizing “considerations of finality,
efficiency, and economy.” Caterpillar, 519 U.S. at 75; see also id. at 77 (“To wipe out
the adjudication postjudgment, and return to state court a case now satisfying all federal
jurisdictional requirements, would impose an exorbitant cost on our dual court system, a
cost incompatible with the fair and unprotracted administration of justice.”). The District
Court appropriately found that such policy considerations would be frustrated if it
remanded the case “especially when subject matter jurisdiction exists now, has existed
for nearly three years, and existed when the Court entered judgment [against Appellant]
on [most of Appellant’s] ten claims.” (App. 37.)
Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (2004), on which
Appellant relies, does not save his argument. In fact, Grupo Dataflux illuminated the
distinction between that matter, in which the jurisdictional defect was cured by a “change
in the citizenship of a continuing party,” id. at 575, and the issue discussed in Caterpillar,
where, as here, the party whose presence created the jurisdictional defect had been
dismissed from the case. Caterpillar, 519 U.S. at 73. Thus, contrary to Appellant’s
arguments, Caterpillar governs the jurisdictional issue in this case because after the
District Court dismissed Sync Labs, there was complete diversity between the remaining
parties. See, e.g., Grupo Dataflux, 541 U.S. at 573-74 (distinguishing cases in which a
6
continuing party changes citizenship and cases where the presence of the party that
created the jurisdictional defect is dismissed).4
Finally, Appellant argues Sync Labs was an indispensable party in this case and
therefore the District Court should not have dismissed it as a party. But Appellant did not
advance this argument in the District Court and thus it is raising that issue for the first
time on appeal even though six years have passed since the Court dismissed Sync Labs
from the action. Moreover, the Court warned Appellant on numerous occasions that his
failure to retain counsel for Sync Labs would result in its dismissal. Therefore, there are
no compelling reasons to warrant our consideration of the indispensable party argument
on the appeal. See, e.g., Page v. Schweiker, 786 F.2d 150, 153 (3d Cir. 1986) (internal
quotation marks and citation omitted) (“It is well-established that, absent compelling
circumstances, an appellate court will not reverse on grounds raised for the first time on
appeal . . . .”).
In view of the above considerations we will affirm the District Court’s June 13,
2017 order and hold that the Court was not required to remand the case to the state court
because the jurisdictional defect has been cured and following Sync Labs’ dismissal there
was complete diversity of citizenship between the remaining parties.
4
Appellant argues that the order dismissing Sync Labs from the case was ultra vires
because there was not complete diversity of citizenship when the Court entered the order.
Appellant points to no case or authority supporting such a retrospective approach, which
taking into account the facts here, we find unpersuasive.
7
b. The November 16, 2016 Order granting Appellees’ Motion for Summary
Judgment
Appellant next argues that the District Court erred when it granted partial
summary judgment to Appellees. Appellant mainly challenges the Court’s refusal to
permit him to pursue claims against Appellees on Sync Labs’ behalf under an alleged
assignment from Sync Labs.
We review de novo a district court’s award of summary judgment. Marten v.
Godwin, 499 F.3d 290, 295 (3d Cir. 2007). “Summary judgment is appropriate when the
moving party is entitled to judgment as a matter of law and there is no genuine dispute of
material fact.” Hampton v. Borough of Tinton Falls Police Dep’t, 98 F.3d 107, 112 (3d
Cir. 1996); see also Fed. R. Civ. P. 56. Further, we view the evidence in the light most
favorable to the non-moving party and refrain from making credibility determinations or
weighing the evidence. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); see
also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
The District Court found that the alleged assignment document, even assuming it
was a binding legal document, cannot
establish the individual claims alleged in [Appellant’s] complaint
because: (1) [Appellant’s] assigned claims are distinct from any
individual claims he might have as a result of [Appellees’] alleged
harmful conduct; (2) [Appellant] waived the assigned claims by
failing to raise them before his opposition brief to [Appellees’]
[M]otion for [S]ummary [J]udgment, and (3) [Appellant] cannot
reassert claims that were already dismissed with prejudice by the
Court.
(App. 17.)
8
We are satisfied that the District Court appropriately granted summary judgment
to Appellees. The Court correctly found that Appellant’s introduction of the alleged
assignment document was merely “an attempt to avoid the Court’s dismissal of Sync
Labs’ claims.” (App. 20.) As noted above, the Court repeatedly warned Appellant that
his failure to retain counsel for Sync Labs would result in its dismissal from the case.
After years of motion practice, and Appellant’s failure to abide by various of the Court’s
directives, the Court dismissed Sync Labs with prejudice. Appellant cannot now
resurrect claims on behalf of a party that was dismissed as a result of his own behavior by
asserting—for the first time in approximately five years of litigation and in opposition to
Appellees’ motion for summary judgment—that there was an alleged assignment
supporting his claims.5 Accordingly, we will affirm the Court’s order for summary
judgment.6
5
We express no opinion as to whether the assignment document constitutes competent
evidence because even if it was competent it was not effective for the purpose for which
Appellant advances. See, e.g., Williams v. Borough of West Chester, 891 F.2d 458, 467
(3d Cir. 1989) (Garth, J., concurring) (emphasis omitted) (“To defeat a motion for
summary judgment, competent evidence must be produced . . . which reveal[s] a material
dispute of fact that can only be resolved by a trier of fact at a trial.”).
6
We limit our review to the District Court’s award of summary judgment to counts one,
five, and eight of the Amended Complaint because Appellant limits its arguments on
appeal with respect to the summary judgment to those counts. (See, e.g., Appellant’s Br.
33 (“Accordingly, summary judgment held against [Appellant’s] first count for breach of
contract, fifth count for breach of implied duties and covenants of loyalty, care and fair
dealing . . . , and eight[h] count for promissory estoppel, which [is] related to the
contracts and agreements assigned to [Appellant,] should be reversed.”).)
9
c. The August 15, 2019 Order Dismissing for Lack of Prosecution
Finally, Appellant argues that the District Court abused its discretion when it
dismissed the case for lack of prosecution. He contends that the Court’s “cursory”
decision “relie[d] on findings that were not supported by the record and did not consider
the motion in light of this Court’s strong policy in favor of deciding cases on the merits.”
(Appellant Br. 24.)
We review a district court’s order for dismissal for lack of prosecution for an
abuse of discretion. See Link v. Wabash R.R. Co., 370 U.S. 626, 633 (1962). The
factors that we first set forth in Poulis v. State Farm Fire and Casualty Insurance Co., 747
F.2d 863, 868 (3d Cir. 1984) determine whether dismissal for lack of prosecution is
warranted. Those factors are as follows:
(1) the extent of the party’s personal responsibility; (2) the
prejudice to the adversary caused by the failure to meet
scheduling orders and respond to discovery; (3) a history of
dilatoriness; (4) whether the conduct of the party or the
attorney was willful or in bad faith; (5) the effectiveness of
sanctions other than dismissal, which entails an analysis of
alternative sanctions; and (6) the meritoriousness of the claim
or defense.
Id. (emphasis omitted); see also Hildebrand v. Allegheny Cty., 923 F.3d 128, 132 (3d Cir.
2019).
On an appeal, “we do not have a magic formula or mechanical calculation to
determine whether a District Court abused its discretion in dismissing a plaintiff’s case.”
Hildebrand, 923 F.3d at 132 (internal quotation marks and citation omitted). A court
considering the Poulis factors should not consider any particular factor dispositive, but “it
10
is also true that not all of the factors need to be satisfied to justify dismissal of a
complaint for lack of prosecution.” Id. District courts, however, in considering the
imposition of sanctions must keep in mind the “strong policy favoring decisions on the
merits” and recognize that “dismissals with prejudice or defaults are drastic sanctions that
must be a sanction of last, not first, resort.” Id. (internal quotation marks and citations
omitted). “If the case is close, doubts should be resolved in favor of reaching a decision
on the merits.” Id. (internal quotation marks and citation omitted).
We conclude that the District Court did not abuse its discretion when it dismissed
with prejudice for lack of prosecution what remained of the case. Primarily, the record
demonstrates that the delay in this matter was largely due to Appellant’s own behavior.
See id. at 135 (citing Nat’l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639,
643 (1976)). In fact, the Court appropriately noted that although Appellant’s counsel
“attempt[ed] to take the blame” for the nearly twenty-two months this matter remained
inactive, Appellant himself was registered on ECF and therefore received all electronic
notices. See, e.g., id. at 135-36 (discussing the difference between a plaintiff who is
personally responsible for a “hiatus” versus his or her counsel). Accordingly, Appellant
was fully apprised of the Court’s docketed entries and of the matter’s inactive status.
We recognize that the District Court’s analysis might be regarded as not
particularly comprehensive with respect to Poulis factor five, which requires an analysis
of the appropriateness of alternative sanctions. See 747 F.2d at 868. On the other hand,
however, Appellees had moved, though unsuccessfully, for sanctions previously. We are
concerned that in dismissing the matter for lack of prosecution, the Court did not provide
11
an analysis that might have led it to impose less severe alternative sanctions to dismissal.
But it did indicate that “[g]iven [Appellant’s] prior conduct and the Court’s prior
admonitions, this Court is not satisfied that alternative sanctions would be effective.”
(App. 40.) Our consideration of the entire record leads us to conclude that the District
Court did not abuse its discretion in its analysis of the Poulis factors, particularly in light
of Appellant’s personal responsibility for the case’s delay and the prejudice caused to
Appellees in being required to defend against “protracted litigation” caused largely by
Appellant’s “harassing tactics.” See Poulis, 747 F.2d at 868. (App. 40.)
For the foregoing reasons, we will affirm the orders of November 16, 2016, June
13, 2017, and August 15, 2019.7 Accordingly, the case remains dismissed.
7
We have considered certain other arguments that Appellant raises and find that they
lack merit and do not require discussion.
12