Hoy v. Hoy

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EDWARD T. HOY, Plaintiff, v. JOHN J. HOY, III; JOHN J. HOY JR.AND JEANETTE N. HOY FAMILY LIMITED PARTNERSHIP; and HOYS HOLLY HILL, INC. Defendants.

No. 1:22-cv-00425-NLH-EAP

United States District Court, D. New Jersey

November 22, 2022

BRIAN WILLIAM CARROLL GREGORY JOSEPH HINDY ROBERT A. MINTZ MCCARTER & ENGLISH LLP FOUR GATEWAY CENTER 100 MULBERRY STREET NEWARK, N.J. 07102 On behalf of Plaintiff

JONATHAN ALBERT DELGADO WILSON ELSER MOSKOWITZ EDELMAN AND DICKER LLP TWO COMMERCE SQUARE 2001 MARKET SQUARE SUITE 3100 PHILADELPHIA, PA. 19103 On behalf of Defendants

OPINION

NOEL L. HILLMAN, U.S.D.J.

Pending before the Court is John J. Hoy, III (“Hoy”) John J. Hoy Jr. and Jeanette N. Hoy Family Limited Partnership (“FLP”); and Hoys Holly Hill Inc.'s (“HHH”) (collectively “Defendants”) motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), (6), and (7). For the reasons expressed below, Defendants' motion will be granted.

I. Background

FLP is a Pennsylvania limited partnership and HHH is a corporation organized under Pennsylvania law. (ECF 1 at ¶¶ 78). Hoy is a Pennsylvanian, limited partner in FLP, and HHH shareholder. (Id. at ¶ 6). Plaintiff Edward T. Hoy (“Plaintiff”) is a New Jersey resident who is a limited partner in FLP and HHH shareholder. (Id. at ¶ 5).

Plaintiff, Hoy, and two non-parties are siblings and the children of John J. Hoy, Jr. and Jeanette Hoy. (Id. at ¶ 11). In 1985, the parents acquired an eighty-one-acre parcel (“the property”) in Pennsburg, Pennsylvania, (id. at ¶¶ 1, 12), and in 2000 the parents established FLP and transferred ownership of the property to it, (id. at ¶¶ 13-15). The parents served as general partners with the children as limited partners. (Id. at ¶ 16). Equal lifetime gifts were made to the children and each's interest in FLP stood at 24.75% as of 2009, including an equally distributed 1% general partnership share transferred from John J. Hoy, Jr. (Id. at ¶¶ 17, 19). The remaining 1% general partnership share remained with Jeanette.

After John J. Hoy, Jr. died in March 2011, Hoy allegedly formed HHH and transferred to it the 1% general partnership stake of his mother and the 1% general partnership stake his father had distributed to his four children, including Plaintiff's portion, without an operating agreement or explanation. (Id. at ¶¶ 20-21). To Plaintiff's knowledge, Hoy has never called a shareholder or director's meeting,^[1] issued corporate minutes, or adopted bylaws or a shareholder agreement. (Id. at ¶¶ 25-28). Through the formation of HHH, Plaintiff, Hoy, and their siblings and mother are shareholders in HHH rather than general partners of FLP, (id. at ¶ 23), and Plaintiff alleges that, by appointing himself as sole director and officer of HHH without Plaintiff's knowledge, Hoy has consolidated control and become the de facto general partner of FLP, (id. at ¶¶ 24, 31-32).

Additionally, a limited partnership, HHH 1200 LPA, was formed by Hoy in July 2011 with Hoy as the sole general partner and, despite being listed as a limited partner, Plaintiff claims to have had no prior knowledge of HHH 1200 LPA's existence. (Id. at ¶¶ 38-41). Hoy's limited partnership interest is 62.49375% with 12.49875% each for Plaintiff and his other two siblings. (Id. at ¶¶ 42-43). Plaintiff alleges that FLP's signature page was appended to HHH 1200 LPA to give the appearance that it was executed by the entire family. (Id. at ¶¶ 44-45). Upon discovering HHH 1200 LPA, Plaintiff allegedly demanded that it be dissolved, which has not yet taken place. (Id. at ¶ 48).

In or around March 2021, Hoy contacted Plaintiff to inform him that the house on the property required significant repairs and a capital call would be issued for the siblings to pay into FLP. (Id. at ¶ 61). A few days later, Plaintiff received an unsolicited email from Hoy's son with a copy of an appraisal and offer to purchase Plaintiff's equity in the property for $172,500 with an offer deadline of April 15, 2021. (Id. at ¶¶ 59-60). Plaintiff was previously unaware that the property had been appraised. (Id. at ¶ 58). The appraisal, which took place in early 2021, appraised the property as undeveloped farmland for $690,000. (Id. at ¶¶ 49-50). Plaintiff claims that Hoy knew or should have known that a sanitary sewer line had been approved in the area and that other parcels near the property have sold for higher-value residential development. (Id. at ¶¶ 59-60). Plaintiff alleges that the capital call and Hoy's son's email were intended to convince Plaintiff to sell his equity for below market value. (Id. at ¶¶ 64-65). After Plaintiff revealed his knowledge of HHH 1200 LPA to Hoy, the offer from Hoy's son was rescinded, (id. at ¶ 67), and Plaintiff believes that the property recently lost its only tenant and, rather than market or rent the property, Hoy has allowed his son to live and operate his business there rent-free, (id. at ¶¶ 68-70).

Plaintiff filed the instant Complaint alleging four counts: (1) breach of fiduciary duty of loyalty and care pursuant to 15 Pa. Cons. Stat. § 8649, (id. at ¶¶ 78-82); (2) common-law breach of contract, (id. at ¶¶ 84-90); (3) common-law fraud, (id. at ¶¶ 92-97), and (4) shareholder oppression pursuant to 15 Pa. Cons. Stat. § 1767, (id. at ¶¶ 99-102). Plaintiff seeks the appointment of a provisional director to manage HHH, liquidation of the property, and dissolution of FLP, HHH, and HHH 1200, among other relief. (Id. at pg. 15).

Defendants responded with the presently pending motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), (6), and (7), asserting lack of subject-matter and personal jurisdiction and arguing that Plaintiff improperly seeks to dissolve FLP, which requires the unanimous consent of all partners. (ECF 7). Additional briefing from both parties followed. (ECF 10; ECF 11).

II. Discussion

Pursuant to the Federal Rules of Civil Procedure, a responding party may assert by motion lack of subject-matter jurisdiction, lack of personal jurisdiction, failure to state a claim upon which relief can be granted, and failure to join a party. Fed.R.Civ.P. 12(b)(1), (2), (6), (7). “To survive a motion to dismiss, a complaint must provide ‘a short and plain statement of the claim showing that the pleader is entitled to relief,'” Doe v. Princeton Univ., 30 F.4th 335, 341-42 (3d Cir. 2022) (quoting Fed.R.Civ.P. 8(a)(2)), and - accepting the plaintiff's factual assertions, but not legal conclusions, as true - “‘plausibly suggest[]' facts sufficient to ‘draw the reasonable inference that the defendant is liable for the misconduct alleged,'” id. at 342 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and applying the standard to a motion to dismiss under Rule 12(b)(6)).

When lack of subject-matter jurisdiction is alleged on the face of the complaint, courts utilize the same standard as a motion to dismiss pursuant to Rule 12(b)(6), again accepting the allegations in the complaint to be true. Zitter v. Petruccelli, 213 F.Supp.3d 698, 705 (D.N.J. Sept. 30, 2016) (citing Const. Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014) and CNA v. United States, 535 F.3d 132, 140 (3d Cir. 2008)). Similarly, when a court does not hold an evidentiary hearing, a plaintiff “need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor.” Linus Holding Corp. v. Mark Line Indus., 376 F.Supp.3d 417, 422 (D.N.J. Mar. 25, 2019) (quoting Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004)).

Finally, a challenge under Federal Rule of Civil Procedure 12(b)(7) requires a three-step analysis to determine (1) whether it is necessary to join the absent party, (2) whether it is possible for the absent and necessary party to be joined, and (3) if joinder is not possible, whether the action should proceed or, if the absent and necessary party is indispensable, be dismissed. Gaines v. Sec. Guard, Inc., No. 18-16853, 2019 WL 5445997, at *1 (D.N.J. Oct. 24, 2019) (citing Fed.R.Civ.P. 19).

III. Analysis

Central to the parties' dispute is whether subject-matter jurisdiction exists. District courts possess original jurisdiction over matters in which the amount in controversy exceeds $75,000 and the parties are citizens of different states. See 28 U.S.C. § 1332(a). “To establish diversity jurisdiction under 28 U.S.C. § 1332, ‘the party asserting jurisdiction must show that there is complete diversity of citizenship among the parties,'” Barrett v. Tri-Coast Pharmacy, Inc., 518 F.Supp.3d 810, 820 (D.N.J. Feb. 10, 2021) (quoting Schneller v. Crozer Chester Med. Ctr., 387 Fed.Appx. 289, 292 (3d Cir. 2010)) and “[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,” Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 419 (3d Cir. 2010) (citing Exxon Mobil Corp. v. Allapattah Servs. Inc., 545 U.S. 546, 553 (2005) and Kaufman v. Allstate N.J. Insur. Co., 561 F.3d 144, 148 (3d Cir. 2009)).

For the purposes of determining diversity, an individual's citizenship is determined by domicile - the individual's “true, fixed and permanent home and place of habitation,” Park v. Tsiavos, 165 F.Supp.3d 191, 198 (D.N.J. Feb. 29, 2016) (quoting Vlandis v Kline, 412 U.S. 441, 454 (1973)), and “[a] corporation is a citizen of its state of incorporation and its principal place of business,” Bell v. KA Indus. Servs., LLC, 567 F.Supp.2d 701, 704 n.1 (D.N.J. July 25, 2008) (citing 28 U.S.C. § 1332(c)). A partnership, however, “takes on the citizenship of each of its partners.” Zambelli...