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granting the defendant's motion to dismiss for lack of subject matter jurisdiction where the plaintiff only obtained a certificate of authority during the litigation
Summary of this case from Clyde Assocs. v. Mckesson Corp.Opinion
CIVIL ACTION DOCKET NO.: BER-L-5804-17
01-25-2019
SMS Financial P, LLC, assignee of PNC Bank NA, Plaintiff(s), v. M.P. Gallagher, LLC and Mark P. Gallagher, Defendant(s).
Janet L. Gold, Esq. and Christopher J. Macchi, Esq., attorneys for plaintiff (Eisenberg, Gold & Agrawal, P.C., attorneys). Edmund V. McCann, Esq., attorney for defendants (McCann & McCann, attorneys).
NOT TO BE PUBLISHED WITHOUT THE APPROVAL OF THE COMMITTEE ON OPINIONS Defendant's Motion to Strike and Dismiss Complaint Hon. Robert L. Polifroni, P.J.Cv. Janet L. Gold, Esq. and Christopher J. Macchi, Esq., attorneys for plaintiff (Eisenberg, Gold & Agrawal, P.C., attorneys). Edmund V. McCann, Esq., attorney for defendants (McCann & McCann, attorneys). MOTION TO BE CONSIDERED
This matter comes before the court by way of defendant's motion to strike and dismiss complaint due to lack of subject matter jurisdiction. Opposition and reply have been reviewed by the court. BACKGROUND
The complaint was filed on August 28, 2017, sounding in contract/commercial transaction. The discovery end date in this matter was September 21, 2018. This matter had scheduled for trial on December 5, 2018, adjourned by this court.
By way of brief background, plaintiff alleges that defendants breached the terms and conditions of a note and amendment thereto, and defaulted by failing to make timely payments.
On November 30, 2018, parties participated in oral argument before this court where plaintiff's motion for summary judgment was denied and defendant's motion to dismiss for failure to provide discovery was withdrawn. At that point, it was established that the only remaining issue was defendant's motion to discuss the complaint for lack of subject matter jurisdiction. (Defendants had filed a standalone motion to dismiss which was returnable on December 21, 2018 despite the December 5, 2018 trial date.) The court agreed parties could submit further papers and the trial date was adjourned. LEGAL ARGUMENTS
Defendants' Motion to Strike and Dismiss Complaint
Defendants move to strike and dismiss plaintiff's complaint for lack of subject matter jurisdiction. On November 9, 2018, this court entered an order substituting SMS Financial P, LLC as plaintiff. Defendant has conducted a search of the records of the Secretary of State in order to obtain a status report for the substituted plaintiff SMS Financial P, LLC. As evidenced by and detailed in report obtained from the New Jersey Business Gateway website, SMS Financial, LLC was originally formed on August 26, 2003 but its charter was subsequently revoked on March 16, 2009 and no record was found for the substituted plaintiff having registered to do business in New Jersey.
Defendants argue that pursuant to New Jersey Statutes N.J.S.A. 42:2C-65:
"Effect of failure to have certificate of authority.
a. A foreign limited liability company transacting business in this State may not maintain an action or proceeding in this State unless it has a certificate of authority to transact business in this State."
N.J.S.A. 42:2C-65 is jurisdictional because it defines the right of a foreign company to use the state courts. This statute specifically restricts access to those foreign companies transacting business in New Jersey if they fail to comply with the provisions of the Act and register to do business in the state.
In Seven Caesars, Inc. v. Dooley House, the Appellate Division faced a similar situation with regard to a corporation and instructed that a similar statute restricting access to the courts of New Jersey to foreign corporations which had registered with the state was jurisdictional in nature.
Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222 (Sept. 11, 2014 App. Div.).
In Seven Caesars, the corporation was not in good standing in New Jersey when the matter was initiated but subsequently Seven Caesars cured the deficiency and was restored to good standing. Despite the effort to restore the status to good standing, the Appellate Division stated:
N.J.S.A. 14A:13-11 (1) is jurisdictional as it defines the right of a foreign corporation to use the state courts. The statute specifically restricts access to those foreign corporations transacting business in New Jersey that fail to comply with the very defined, and not very burdensome provisions of the Act.
Subject matter jurisdiction refers to 'the power of a court to hear and determine cases of the class to which the proceeding in
question belongs.'" N.J. Citizen Action v. Riviera Motel Corp., 296 N.J. Super. 402, 411 (App. Div. 1997) (quoting State v. Osborn, 32 N.J. 117, 122 (1960)). Jurisdiction allows the court the power to act and must exclusively "rest[s] upon the court's having been granted such power by the Constitution or by valid legislation [.]" Ibid. (quoting Osborn, supra, 32 N.J. at 122). Jurisdiction "cannot be vested by agreement of the parties." Ibid. (quoting Osborn, supra, 32 N.J. at 122). Understood in this light, considerations of judicial efficiency and preferences for substance over form cannot justify the court's action when it lacks inherent authority to do so.
Here, the lapse in valid corporate status deprived Seven Caesars of its ability to file suit and prevented the court from considering its claims for relief. N.J.S.A. 14A:13-11(1). As a matter of law, Seven Caesars's complaint could not be considered and its suit should have been dismissed.
The court held further that, despite the fact that Seven Caesars might easily cure the defect, it does not vitiate the fact that the court is unable to act because of the initial failure tom comply with the statutory requirements and to have authorization to conduct business in New Jersey. The Appellate Division continued to instruct in Seven Caesars
However, without a valid certificate to do business in this state, its stake in the action is insufficient to overcome the jurisdictional bar to suit imposed by N.J.S.A. 14A:13-11(1).
Dismissal of the complaint is precisely the result which the court should reach in this matter when construing the analogous statute with respect to the requirement of foreign limited liability companies to register with the State in order to receive authorization to do business in the state and to gain access to our courts.
Opposition
Plaintiff opposes defendants' motion to strike and dismiss complaint and contends that on November 9, 2018, upon plaintiff's motion to substitute plaintiff to correct a typographical error made by counsel, this court ordered and correctly substituted SMS Financial P, LLC as the proper plaintiff in this matter.
Defendants filed a motion to strike and dismiss the complaint for plaintiff's failure to register as a foreign business entity with the State of New Jersey pursuant to N.J.S.A. 42:2C-65, citing jurisdictional issues. The statute states, "A foreign limited liability company transacting business in this State may not maintain an action or proceeding in this State unless it has a certificate of authority to transact business in this State." N.J.S.A. 42:2C-65.
Defendants referenced an unpublished case, Seven Caesars, Inc. v. Dooley House, in support of their position. The court in Seven Caesars held that "a foreign corporation which loses its certificate of authority to transact business in New Jersey may not file suit to enforce claims arising from the business transacted during the period of its lapse. Moreover, curing the defect and obtaining a reissued certificate to conduct business will not retroactively validate the prior action."
Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222 (Sept. 11, 2014 App. Div.),
Plaintiff argues that it should be noted that the facts in this matter differ significantly from the facts in the case referenced by the defendants. First, plaintiff in this matter did not file suit. It purchased a note that was in litigation. Second, plaintiff did not allow its certificate to lapse. It obtained its certificate during the litigation. Finally, plaintiff is not transacting business within the State of New Jersey. It is participating in interstate commerce as foreign entity.
Regardless, on November 29, 2018, to cure the potential defect noted by the defendants for the first time, plaintiff's counsel filed a Certificate of Formation for a New Jersey Foreign Limited Liability Company with the State of New Jersey on behalf of the plaintiff. Counsel also registered the business with the New Jersey Department of Revenue.
Plaintiff argues that conversely and more relevant to the instant matter, in Materials Research Corp. v. Metron, Inc. 64 N.J. 74 (1973), a Supreme Court case in which the appellant, a foreign corporation, sought the review of a judgment of the Appellate Division, which affirmed the trial court's dismissal of appellant's tort action against respondents due to its failure to obtain a certificate of authority to transact business within the State, the court reached a different conclusion based on the foreign corporation's activities within the State. The Court held that the foreign corporation "was not required to obtain a certificate to transact business within the State because its activities were in interstate commerce and it was not transacting business in the State."
Similarly, in this matter, the plaintiff is not transacting business within the state. Plaintiff purchased a Note from a former creditor of the defendants. The purchase of the note is an activity of interstate commerce, not intrastate commerce, as the plaintiff is not transacting business in this state. Therefore, although plaintiff obtained a certificate of authority to transact business within the state, plaintiff was not required to do so.
Defendant Post Argument Briefing
Defendant's supplemental submission largely reiterates the letter brief summarized above with a few notable additions.
Defendant counters that plaintiff in its reply relies heavily and almost exclusively on Materials Research Corp., a case in which the plaintiff therein manufactured and distributed scientific equipment and related items. Although that plaintiff maintained offices throughout the world, it did not maintain an office in New Jersey, but it solicited customers and sold product to New Jersey customers. The New Jersey salesperson did not "write" or accept orders and all orders obtained by the salesperson were subject to approval at its New York office. The trial court interpreted this as merely solicitation of business. The Materials Research plaintiffs position had been that its activities were in interstate commerce and it was not transacting business in New Jersey. Therefore, the requirement of licensure of foreign corporations is violative of the constitution. The United States Constitution, art. 1, § 8, c. 3. prohibits a state from imposing any qualification statute which unduly burdens interstate commerce.
The Court found "MRC has no New Jersey office. Its telephone listing is in the regular section only of the New Jersey directory, giving a New York address, and the number ties into a New York line. MRC's sales engineer is compensated on a salary and commission basis and deals only with MRC customers" and the Court concluded "that this case is akin to the line of so called "drummer" decisions. The leading case is Robbins v. Shelby County Taxing Dist., 120 U.S. 489 (1887), wherein plaintiff, a citizen of Ohio, failed to take out a license in Tennessee. He was engaged in the business of "drumming," i.e. soliciting trade by the use of samples for the film for which he worked. The Court held that the bare solicitation of orders did not constitute the transacting of business for qualification purposes.
However, the court in MRC did go on to further instruct that "solicitation with some additional elements may take a case across the threshold of intrastate commerce. Without attempting to catalogue all those "additional elements," we suggest weight might be given to such factors as a salesman's having binding authority or approving contracts himself rather than forwarding them to a sales office or home office for approval."
In the present case, there is a long history of this plaintiff, SMS, purchasing what have become known as junk notes from New Jersey financial institutions, pursuing collection activities in New Jersey, (presumably against New Jersey individuals and entities) and litigating on numerous occasions claims against those individuals and entities. Based upon these multiple and continuous additional elements characterizing this plaintiff's activities, it most clearly establishes that this plaintiff is transacting business in this state. Therefore, the protections afforded in the Commerce Clause of the U.S. Constitution are not violated by the New Jersey statutory scheme requiring registration and authorization to do business in the state as a pre-condition of an entity's attempt to avail itself of New Jersey state court.
The indisputable objective of this statute [N.J.S.A. 42:2C-65, which is similar to N.J.S.A. 14A: 13-11 (1)] is to encourage foreign entities that conduct business in this State to make their presence formally known, through the Secretary of State, to state regulators and taxing authorities, and further to assure, among other things, that such companies designate a registered agent in New Jersey upon whom they may be served with process. Clearly, SMS, a foreign entity, was "transacting business" as used in the Act because it was engaged in local collection activity within New Jersey. Materials Research Corp., at 79; Davis & Dorand v. Patient Care Med. Servs., 208 N.J. Super. 450, 455 (Law Div. 1985). Further, SMS pursued the instant action when its status in New Jersey was unauthorized.
Defendant stresses that contrary to plaintiff's assertion in its reply that it does not transact business in New Jersey and that its activities merely involve interstate commerce, a search of the court documents belies the truth of those assertions. The court records indicate that this plaintiff has sought the intervention of the New Jersey courts on numerous occasions to implement its collection activities in this state.
Plaintiff Post Argument Briefing
Plaintiff's supplemental certification is also virtually identical to the certification summarized above. He distinguishes the present matter from the Seven Caesars case that defendant cites.
Plaintiff argues that it was not doing business in New Jersey. Pursuant to N.J.A.C. 18:7-1.9, the definition of "doing business in New Jersey" for the purposes of assessing taxes to foreign corporations is addressed directly by statute. N.J.A.C. 18:7-1.9(b) states:
"Whether a foreign corporation is doing business in New Jersey .... is determined by the facts in each case. Consideration is given to such factors as:
(1) The nature and extent of the activities of the corporation in New Jersey;
(2) The location of its offices and other place of business;
(3) The continuity, frequency, and regularity of the activities of the corporation in New Jersey;
(4) The employment in New Jersey of agents, officers, and employees; and
(5) The location of the actual seat of management or control of the corporation.
N.J.A.C. 18: 7-1 .9(b).
Consideration and analysis of the forgoing factors clearly shows that plaintiff was not required to register as a foreign business entity with the State of New Jersey because the Plaintiff was not "doing business in New Jersey" under the definition. Therefore, because plaintiff was not "doing business in New Jersey" and only conducted business with the State of New Jersey through interstate commerce, plaintiff was not required to obtain a certificate of authority to maintain its action in this matter.
However, should the court dismiss this action pursuant to the defendants' position in this matter, plaintiff intends to refile the complaint on the merits of this matter as the merits are sound and irrefutable: (a) plaintiff and defendants maintain a contractual relationship; (b) the contract between the parties was breached by the defendants; and (c) damages are owed to plaintiff as a result of defendants' breach. A determination to strike and dismiss the complaint by the court would only result in a waste of judicial economy. DECISION
Following oral argument on November 30, 2018, the court permitted an adjournment of defendant's motion to dismiss plaintiff's complaint for lack of subject matter jurisdiction to allow parties to provide the court with supplemental briefings.
The relevant undisputed facts in this matter are as follows. On June 22, 2006, defendant M.P. Gallagher, LLC, executed and delivered to PNC Bank, NA a promissory note to secure $50,000. Defendant Mark Gallagher signed note as the personal guarantor. On February 22, 2007, defendant M.P. Gallagher, LLC executed and delivered to PNC Bank, NA an amended promissory note which increased the previous loan amount to $75,000. Defendant Mark Gallagher signed amendment as the personal guarantor. The last payment made by defendant was on June 11, 2012.
On August 28, 2017, PNC Bank, NA filed suit against defendant for breach of contract for defaulting on the promissory note. On April 12, 2018, SMS Financial P purchased the note and guaranty from PNC Bank, NA via loan sale agreement, transferring all creditor rights pursuant to the note and guaranty from PNC Bank, NA to SMS Financial P.
The loan agreement lists both SMS Financial LLC and SMS Financial P LLC on the signature page.
On July 20, 2018, this court entered an order stating:
SMS Financial, LLC, be substituted as plaintiff, and that the complaint and all pleadings in this action be amended to substitute SMS Financial, LLC, in the place and stead of the original plaintiff PNC Bank NA
SMS Financial LLC is the parent company of SMS Financial P LLC. SMS Financial, LLC was originally formed on August 26, 2003 but its charter was subsequently revoked on March 16, 2009.
On November 9, 2018, this court entered an order correcting an apparent typographical error stating:
SMS Financial P, LLC, assignee of PNC Bank NA, be substituted as plaintiff, and that the complaint and all pleadings in this action be amended to substitute SMS Financial P, LLC, assignee of PNC Bank, NA, in the place and stead of plaintiff SMS Financial, LLC, assignee of PNC Bank, NA.
SMS Financial P LLC was incorporated in Arizona on April 10, 2018 - two days before the loan purchase occurred.
On November 29, 2018, plaintiff's counsel registered SMS Financial P LLC with the State of New Jersey.
The precise issue before this court is whether this court lacks subject matter jurisdiction to adjudicate this matter.
Pursuant to R. 4:6-2(a), defendant's motion to dismiss for lack of subject matter jurisdiction is timely as it is a non-waivable defense, and thus may be raised at any time, even on appeal. Macysyn v. Hensler, 329 N.J. Super. 476, 481 (App. Div. 2000). See also Lall v. Shivani, 448 N.J. Super. 38, 48 (App. Div. 2016); Hanisko v. Billy Casper Golf Mgmt., 437 N.J. Super. 349, 359 (App. Div. 2014).
SMS Financial P LLC is in the business of buying and collecting debt incurred by financial institutions, here, PNC Bank, N.A. The very nature of its business is to purchase defaulted loans and to pursue collection of those loans, including loans arranged in New Jersey with New Jersey persons and entities. Plaintiff is pursuing collection of these debts through the New Jersey state court system. Therefore, the success of ultimately collecting these loans is contingent on transacting business within the court system by way of the judicial process. Litigating cases in New Jersey is a critical component of plaintiff's very business. The fact that plaintiff conducts this business in other states does not result in the conclusion that the plaintiff need not register in New Jersey because the transaction is part of interstate commerce
Plaintiff's counsel asserted at the first oral argument that the instant matter is a "one off" and that this singular transaction is insufficient to qualify as transacting business within New Jersey. However, this court finds that assertion to be inaccurate.
Defense counsel has submitted proof that SMS Financial P LLC has never been registered with the State of New Jersey - prior to November 29, 2018. Yet, defense counsel was also able to find numerous New Jersey court cases wherein SMS Financial P LLC has either been previously involved or is currently involved. Therefore, plaintiff's characterization of this transaction as a "one off" has been effectively rebutted by defendants.
In addition to the research submitted by defense counsel, the court conducted its own independent research on e-courts (public information) where it found seven other active matters where SMS Financial P, LLC is a plaintiff and or plaintiff assignee of PNC Bank.
1. In the first matter, on September 18, 2018, plaintiff SMS Financial P, LLC AKA SMS Financial P, LLC, Assignee of PNC Bank, NA filed a complaint captioned SMS Financial P, LLC Vs Fischl Robert under SOM L-1164-18. To the court's dismay, despite counsel's representations in court and in its papers, court records indicate that SMS Financial P, LLC is represented by Eisenberg Gold & Agrawal PC in that matter as well.
2. In the second matter, PNC Bank NA vs Dr. Donald R Kaplan LLC et al, MON L-3366-15. Eisenberg Gold & Agrawal PC filed a substitution of attorney on behalf of SMS Financial P, LLC to become plaintiff assignee of PNC Bank NA on September 24, 2018.
3. In the third matter, on October 2, 2018, Eisenberg Gold & Agrawal PC filed a complaint on behalf of plaintiff SMS Financial P LLC in Sms Financial P Llc vs Shedlock Robert, HNT L-380-18.
4. In the fourth matter, Pnc Bank Na Vs Remax Community Llc, ATL L-2199-18, Eisenberg Gold & Agrawal PC filed an amended complaint on behalf of plaintiff SMS Financial P, LLC, assignee of PNC Bank NA on October 5, 2018. And on November 2, 2018, filed a request for default on behalf of plaintiff SMS Financial P, LLC, assignee of PNC Bank NA
5. In the fifth matter, PNC Bank Na vs Baratta Brothers Inc., BER L-6642-15 Eisenberg Gold & Agrawal PC filed a motion to turn over funds on behalf of plaintiff SMS Financial P LLC, assignee of PNC Bank, N.A. as recently as October 19, 2018.
6. In the sixth matter, Pnc Bank Vs Sasha Apparel, SOM L-815-16, Eisenberg Gold & Agrawal PC filed a substitution of attorney on behalf of SMS Financial P, LLC to become plaintiff assignee of PNC Bank NA on September 24, 2018.
7. In the seventh matter, on September 28, 2018, Eisenberg Gold & Agrawal PC filed a complaint on behalf of plaintiff SMS FINANCIAL P, LLC in Sms Financial P Llc Vs Krisanda Et Al, WRN L-307-18.
Therefore, despite plaintiff's counsel's representation that his client informed him that SMS Financial P, LLC has not been conducting business in the State of New Jersey and the instant matter is a "one off," the facts reveal that this is simply not accurate.
Plaintiff relies on Materials Research Corp. v. Metron, Inc., a Supreme Court case in which the appellant, a foreign corporation, sought the review of a judgment of the Appellate Division, which affirmed the trial court's dismissal of appellant's tort action against respondents due to its failure to obtain a certificate of authority to transact business within the State, the court reached a different conclusion based on the foreign corporation's activities within the State.
Plaintiff Materials Research Corporation was a NY corporation, with its principal office in Orangeburg, New York. Plaintiff manufactured and sold scientific equipment, instruments, and ceramics, and it processes metals. It had offices throughout the world, and its products were sold directly to customers throughout this country, including New Jersey; however, it did not maintain any New Jersey office. Plaintiff MRC's New Jersey orders approximated $250,000, or about 4.4% of total sales of the preceding year. The Material Research court found the circumstances of plaintiff MRC's sales engineer living within New Jersey rather than elsewhere and his employer's maintaining a telephone number in this state with a tie line to the New York office as being conditions under which he conducted his business rather than determinatives of the essential nature of that business. The court noted that bare solicitation of orders did not constitute the transacting of business for qualification purposes. 64 N.J. at 82. The court further noted:
To be sure, solicitation with some additional elements may take a case across the threshold of intrastate commerce. Without attempting to catalogue all those "additional elements," we suggest weight might be given to such factors as a salesman's having binding authority or approving contracts himself rather than forwarding them to a sales office or home office for approval, and the foregoing discussion of the distinguishing features of Lilly illustrates the kind of evidentiary material which has led this Court to find intrastate activity, not present here.
Materials Research Corp. v. Metron, Inc., 64 N.J. at 83. (Emphasis added.)
The Court ultimately held that the foreign corporation "was not required to obtain a certificate to transact business within the State because its activities were in interstate commerce and it was not transacting business in the State." (Emphasis added.)
Here, plaintiff assumed debt of PNC Bank, N.A., located at Two Tower Center Blvd, East Brunswick New Jersey, 08816 in New Jersey superior court collection action on New Jersey loan agreement. SMS Financial P, LLC an Arizona Limited Liability Corporation (incorporated on April 10, 2018) with its corporate office in Phoenix, Arizona. It is in the business of commercial lending and financial services. SMS Financial P LLC purchased a loan agreement between defendants (New Jersey individual and New Jersey Corporation) and PNC Bank. SMS Financial P, LLC is now prosecuting enforcement of default on New Jersey defendants within a New Jersey court. Rather than simply being the conditions under which plaintiff or its employees conducted business (Materials Research), SMS Financial P, LLC is utilizing the New Jersey state court system to conduct its business of collecting on loans it has purchased. Therefore, this court finds that Materials is distinguishable from the present matter because, as explained above, plaintiff SMS Financial P LLC has been transacting business in the state.
Plaintiff argues that defendant's use of Seven Caesars, Inc. v. Dooley House is distinguishable from the instant matter and this court agrees but for different reasons than those cited by plaintiff. First, Seven Caesars is an unpublished Appellate Division case, and is therefore not binding on this court. Nevertheless, the precise issue in question here was addressed by that court, and the analysis is informative and persuasive to this court. The court in Seven Caesars held that "a foreign corporation which loses its certificate of authority to transact business in New Jersey may not file suit to enforce claims arising from the business transacted during the period of its lapse. Moreover, curing the defect and obtaining a reissued certificate to conduct business will not retroactively validate the prior action." Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222, This case is inapplicable to the instant matter because plaintiff SMS Financial P, LLC did not lose its certificate to transact business within New Jersey. On the contrary, and as demonstrated by defense counsel and admitted by plaintiff's counsel, SMS Financial P, LLC never had a certificate or registration with the State of New Jersey prior to counsel's filing on November 29, 2018 in response to defendant's instant motion to dismiss. The certificate did not lapse because it did not exist.
Notwithstanding the above, this court does find the Appellate Divisions discussion relating to subject matter jurisdiction and the repercussions of a plaintiff corporation without proper certification to be persuasive. The Appellate Division when discussing a Delaware statute which permitted retroactive certification stated:
By its terms, N.J.S.A. 14A:13-11(1) unmistakably demands "[i]f the foreign corporation fails to procure the required certificate of authority, then it is prohibited by law from maintaining any action in any court of this State." Davis & Dorand, supra, 208 N.J. Super. at 454-55 (citing N.J.S.A. 14A:13-11). Moreover, N.J.S.A. 14A:13-11(1) does not provide for retroactive validation of a foreign corporate registration.
If Seven Caesars held a valid certificate of authority to do business in New Jersey at the time it filed the complaint, it would have had a sufficient stake and adverseness to meet threshold jurisprudential standing requirements. However, without a valid certificate to do business in this state, its stake in the action is insufficient to overcome the jurisdictional bar to suit imposed by N.J.S.A. 14A:13-11(1). That is precisely the intent of the statute. The Legislature has decided it will not condone foreign corporations transacting business in New Jersey without meeting the requirements of the Act.
Seven Caesars, Inc. v. Dooley House, 2014 N.J. Super. Unpub. LEXIS 2222 * 24-26
The Appellate Division revisited this issue in Bonnier Corp. v. Jersey Cape Yacht Sales, Inc., wherein the court reversed the dismissal of plaintiff's collection action for lack of standing because plaintiff had not obtained a certificate of authority to do business in New Jersey pursuant to N.J.S.A. 14A:13-11. Bonnier Corp. v. Jersey Cape Yacht Sales, Inc., 416 N.J. Super. 436, 437 (App. Div. 2010). The court held that because the record did not establish that plaintiff engaged in intrastate business within New Jersey, plaintiff could not be constitutionally deprived of its ability to sue in the courts of this State. Id. The Bonnier Corp. court's analysis was governed by the Supreme Court's holding that the State's power to compel a foreign corporation to obtain a certificate under N.J.S.A. 14A:13-11 is constitutionally limited under the Commerce Clause, U.S. Constitution, art. 1, § 8, cl. 3. In Eli Lilly, the Court considered the application of N.J.S.A. 14A:15-4 to an Indiana pharmaceutical company that had filed an action in the Superior Court without first obtaining a certificate of authority. The company argued that the state's imposition of the certificate requirement unduly burdened interstate commerce, and therefore violated the Commerce Clause. The Court majority in Eli Lilly it is critical whether the foreign corporation's presence in the State is confined to interstate business or whether the corporation also engages in intrastate commerce, stating "[i]t is well established that New Jersey cannot require [a foreign corporation] to get a certificate of authority to do business in the State if its participation in [its] trade is limited to its wholly interstate sales to New Jersey wholesalers." Id., 366 U.S. at 278. The Court observed that a foreign corporation
The Supreme Court examined this issue in Eli Lilly & Co. v. Sav-On-Drugs, Inc ., 366 U.S. 276 (1961).
is free to send salesmen into New Jersey to promote this interstate trade without interference from regulations imposed by the State. On the other hand, it is equally well settled that if [the foreign corporation] is engaged in intrastate as well as interstate aspects of the . . . business, the State can require it to get a certificate of authority to do business.
Id., 366 U.S. at 279.
The Eli Lilly Court concluded that the plaintiff was doing business in New Jersey and therefore the plaintiff was required to comply with New Jersey statutes. In applying this framework, the Bonnie Corp. court found that the magazines published by plaintiff were national publications not purely local in nature, and there was no indication that the ads placed by defendant were selectively inserted only in New Jersey editions of the magazine. Ultimately, the Bonnie Corp. court concluded that the defendant invoked the windfall benefits of N.J.S.A. 14A:13-11 but failed to sustain its burden by demonstrating that plaintiff has engaged in intrastate commerce within the State.
Although the Bonnie Corp. court reached the opposite conclusion, the analysis applied by Bonnie Corp., as laid out by Eli Lilly, is consistent with this court's finding here. As discussed above, plaintiff SMS Financial P, LLC's proposition that it is conducting interstate commerce, rather than intrastate commerce, because it pursues loans across the country is unpersuasive. SMS Financial P, LLC is essentially attempting to reap the benefits of New Jersey without abiding by its laws. Unlike the defendant in Bonnie Corp., defendants in this case have successfully proven that SMS Financial P, LLC is engaging in intrastate commerce by pursuing debts from New Jersey citizens and corporations via the New Jersey courts.
Clearly, this court had subject matter jurisdiction at the time the complaint was filed with PNC Bank, N.A. as plaintiff. However, the subsequent purchase by SMS Financial P, LLC on April 12, 2018 did not transfer subject matter jurisdiction to SMS Financial P, LLC. Jurisdiction cannot be conferred on the court by agreement of the parties. Hendry v. Hendry, 339 N.J. Super. 326, 335 (App. Div. 2001); Bless v. Bless, 318 N.J. Super. 90 (App. Div. 1998). Nor can it be conferred by the parties' waiver. Bor. of Closter v. Abram Demaree, 365 N.J. Super. 338, 352 (App. Div.), certif. denied, 179 N.J. 372 (2004). See also Royster v. New Jersey State Pol., 439 N.J. Super. 554, 568 (App. Div.), certif. granted 223 N.J. 161 (2015).
Therefore, subject matter jurisdiction did not exist for the present plaintiff when the substitution of attorney was granted on July 20, 2018 (despite the typographical error) or on November 9, 2018 when the court amended the complaint to reflect the proper plaintiff name. Subject matter jurisdiction must exist at the time of filing and cannot be cured after the fact. Thus, plaintiff's counsel registering with the state on November 29, 2018 is irrelevant to the current motion to dismiss.
Pursuant to N.J.S.A. 14A:13-3(1), in order to transact business in the state, foreign corporations are required to procure a certificate of authority from the Secretary of State. See Bonnier Corp., supra, 416 N.J. Super. at 440. A foreign corporation that fails to obtain the required certificate of authority is subject to the consequences of N.J.S.A. 14A:13-11. Id. Subsection (1) of the statute recites in relevant part: "No foreign corporation transacting business in this State without a certificate of authority shall maintain any action or proceeding in any court of this State, until such corporation shall have obtained a certificate of authority." Id.
Defendant cites N.J.S.A. 42:2C-65, "A foreign limited liability company transacting business in this State may not maintain an action or proceeding in this State unless it has a certificate of authority to transact business in this State." --------
This court finds that plaintiff SMS Financial P, LLC is a foreign corporation actively transacting business within New Jersey by way of purchasing New Jersey debt and prosecuting claims against defendant debtors - including defendants here - without being registered or certified with the state. This court rejects the glib argument that said registration, required by New Jersey law, is a mere technicality.
For the above reasons, defendants' motion to strike and dismiss complaint is GRANTED.