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Case 2:12-cv-07225-JLL-JAD Document 23 Filed 06/04/13 Page 1 of 7 PageID: 538

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

Civil Action No. 12-7225 (JLL) (JAD)

OPINION

W A S TERMINALS CORP,

Plaintiff,

v.

DAVID LANDAU,

Defendant.

L1NARES, District Judge.

This matter comes before the Court by way of Defendant David Landau (“Landau”)’s

motion to:

(1) stay this matter pending the determination by the United States Bankruptcy Court

for the District of New Jersey (the “Bankruptcy Court”) of disputed claims between Plaintiff

W.A.S. Terminals Corp. (“WAS Terminals”) and 126 LLC; (2) dismiss this matter pursuant to
Fed. R. Civ. P. 12(b)(7) for failure to join 126 LLC as a party under Fed. R. Civ. P. 19; (3)

dismiss this matter for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) for
failure to plead that the amount in controversy exceeds the jurisdictional amount; and (4) dismiss
the third and fourth causes of action for failure to state a claim pursuant to Fed. R. Civ. P.
12(b)(6). (CMIECF No. 12-1). The Court has considered the parties’ submissions in support of
and in opposition to the instant motion and decides this matter without oral argument pursuant to
Fed. R. Civ. P. 78. For the reasons set forth below, Landau’s motion to dismiss this matter for
lack of subject matter jurisdiction is DENIED. In addition, Landau’s motion to stay this

proceeding pending the determination by the Bankruptcy Court of disputed claims between WAS

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Terminals and 126 LLC is GRANTED. Accordingly, the Court declines to address Landau’s
other motions at this time.

1.

BACKGROUND1

WAS Terminals, a New Jersey corporation, is the former owner of a tank farm and office
building located at 126 Passaic Street in Newark, New Jersey (the “Premises”). (CM/ECF No. 1-
2 ¶ 1.01). The president and sole shareholder of WAS Terminals is Sande Wische (“Wische”).
(CM/ECF No. 1-4). On August 21, 2006, WAS Terminals executed an agreement of sale (the
“Agreement of Sale”) to sell the Premises to 126 LLC, a New Jersey limited liability
corporation, for $ 5.5 million. (CMIECF No. 1-2 ¶ 2.01). The sole member of 126 LLC is 8921
153rd Owners Corp. (CM!ECF No. 12-1 at 5). Landau is the President of 8921 153rd Owners
Corp. (Id.) On October 31, 2006, WAS Terminals and 126 LLC closed the sale. (CM/ECF No.
1-3).

At the closing, 126 LLC obtained a loan in the principal sum of $3 million from WAS
Terminals, evidenced by a promissory note (the “Note”). (Id.). 126 LLC had already paid $2.5
million of the $5.5 million purchase price to WAS Terminals before executing the Note. The
Note is secured by a mortgage encumbering the Premises, assignment of leases and rents, and a
security agreement (collectively the “Mortgage”). (See CMJECF No. 1-4).

Also at the closing, Landau executed a guaranty (the “Guaranty”) in favor of WAS

Terminals. (CM/ECF No. 1-1). The Guaranty is governed by New Jersey law.
(Id. at ¶ 16).
Pursuant to the Guaranty, Landau “absolutely, unconditionally and irrevocably” guaranteed to
WAS Terminals:

“(a) the 1I.ill and prompt payment of all debts and other sums heretofore due and
owing and hereafter to become due and owing from [126 LLC] to [WAS
Terminals] under the Note, the Mortgage and all other documents executed by

The following facts are accepted as true for purposes of the instant motion.

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[126 LLC} in connection with or related to the Loan (collectively, the “Loan
Documents”);” and

“(b) the full and timely performance and observance of each and every obligation,
term, condition, provision, covenant, representation and warranty of [126 LLC]
under the Note, Mortgage and the Loan Documents.”

(Id. at ¶ 1). Landau also guaranteed to WAS Terminals that he would not convey certain
business assets or interests during the term of the Guaranty without WAS Terminals’s consent.
(Id. at ¶J I 8(e)-(f)). The Guaranty does not require WAS Terminals to bring a legal action
against 126 LLC in the event of a default before proceeding against Landau. (See Id. at ¶J 5(g),
6). However, pursuant to the Guaranty, Landau reserved the right to assert any defense available
to 126 LLC under the Agreement of Sale. (Id. at ¶ 12).

Ultimately, 126 LLC defaulted on its obligations under the Note and Mortgage.

(CM/ECF No. 1-4). Tn response, 126 LLC entered into an agreement with WAS Terminals on
August 7, 2009 (the “Default Agreement”). (Id.). Pursuant to the Default Agreement, WAS
Terminals settled its then current claims against 126 LLC under the Note in exchange for 126
LLC’s commitment to pay all remaining accrued and unpaid interest and other amounts owed.
(See Id. at ¶ 1). 126 LLC also agreed to pay Wische the sum of $350,000 in full settlement of all
amounts due under Wiche’s consulting agreement with 126 LLC. (Id. at ¶ 7). Of note, WAS
Terminals reserved the rights and remedies available to it pursuant to the Note and Mortgage
should 126 LLC fail to make the payments required by the Default Agreement. (Id. at ¶ 10).

On October 16, 2012, 126 LLC filed a voluntary petition for relief under chapter 7 of title

11 of the United States Code. (CM/ECF No. 12-Il). The filing of 126 LLC’s petition in
Bankruptcy Court operates as an automatic stay pursuant to 11 U.S.C. § 362, prohibiting other
actions from proceeding against 126 LLC. (CM/ECF No. 12-1 at 16). As a result, 126 LLC is
not a defendant in this action. (CMJECF No. 12-1 at 16; CM/ECF No. 17 at 7).

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On November 21, 2012, WAS Terminals brought this action to enforce Landau’s

obligations under the Guaranty to pay WAS Terminals on behalf of 126 LLC. (CM/ECF No. I).
WAS Terminals alleges that 126 LLC has failed to make the payments required by the Note and
Default Agreement. (Id.). Subsequently, on February 1, 2013, 126 LLC brought an adversary

proceeding against WAS Terminals in the Bankruptcy Court. (CM/ECF No. 12-11). The Court
is mindful that this adversary proceeding in bankruptcy is not a distinct piece of litigation, but is,
instead, a component of 126 LLC’s bankruptcy petition.

In the adversary proceeding, 126 LLC
seeks to recover damages resulting from WAS Terminals’s alleged breach of the Agreement of
Sale and wrongful conduct. (Id. at ¶ 1). Specifically, 126 LLC contends that WAS Terminals is
liable to 126 LLC for environmental cleanup costs and funds recovered from third parties under
the Agreement of Sale. (CM/ECF No. 12-1 ¶J 41-53). Said liability, Landau maintains, stems
from the environmental remediation of the Premises necessitated by the accidental discharge of
hazardous and toxic materials on site before 126 LLC owned the Premises. (CM/ECF No. 1-2 ¶
8.01). Landau requests that the Court stay this matter pending the resolution of the adversary
proceeding in the Bankruptcy Court. (CM/ECF No. 12-1 at 3).

II.

JURISDICTION

Federal district courts have original jurisdiction over civil actions in which the parties are

citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. §
133 2(a)( 1). A court may dismiss a case for failure to meet the amount in controversy
requirement if it appears to a “legal certainty” that the claim is for less than the jurisdictional
amount. St. Paul Mercun’ Indem. Co. v. Red Cab to., 303 U.S. 283, 289, 58 5. Ct. 586, 82 L.
Ed. 845 (1938); Columbia Gas Transmission Corp. v. Tarbuck, 62 F.3d 538, 541 (3d Cir. 1995).
Here, Landau contends that “there is no way for the Court or Landau to know the amount of

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damages claimed by WAS Terminals” from the Complaint or the annexed documents. (CM/ECF

No. 12-1 at 19). Landau argues that the “mere existence of the $3 million promissory Note” that
he allegedly owes WAS Terminals pursuant to the Guaranty does not reflect the amount in

controversy. (CM/ECF No. 19 at 11). At best, Landau’s argument casts doubt over the total

amount that he may owe WAS Terminals. Landau has not demonstrated to a “legal certainty”
that Plaintiff’s claim is for less than the jurisdictional amount as required by St. Paul Mercury

Indemnity Co., 303 U.S. at 541. Consequently, Landau’s motion to dismiss WAS Terminals’s
Complaint for lack of subject matter jurisdiction is denied.

III.

LEGAL STANDARD

“The power to stay [proceedings] is incidental to the power inherent in every court to

dispose of cases so as to promote their fair and efficient adjudication.” US. v. Breyer, 41 F.3d
884, 893 (3d Cir. 1994) (citing Gold v Johns-Manville Sales Corp., 723 F.2d 1068, 1077 (3d
Cir. 1983)); see also Clinton v. Jones, 520 U.S. 681, 706-07, 117 S. Ct. 1636, 137 L. Ed. 2d 945
(1997) (“the District Court has broad discretion to stay proceedings as an incident to its power to
control its own docket”) (citation omitted).

In determining whether to grant a stay, courts “must
weigh [the] competing interests [of the parties] and maintain an even balance.” Landis v. North
American Co., 299 U.S. 248, 254-55, 57 S. Ct. 163, 81 L. Ed. 153 (1936) (citations omitted).
Courts also consider whether the stay “will simplify issues and promote judicial economy,” and
“the length of the requested stay.” Hicks v. Swanhart, No. 12-1633, 2012 WL 6152901 (D.N.J.
Dec. 10, 2012) (quoting Smithkline Beecham C’orp. v. Apotex Corp., No. 03-3365, 2004 WL
1615307, *7 (E.D. Pa. July 16, 2004)).

IV.

DISCUSSION

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Landau asserts that the Court should stay this action pending the resolution of the

adversary proceeding in the Bankruptcy Court. (CM/ECF No. 12-1 at 3). Because Landau’s
liability under the Guaranty is “coextensive with and no greater than that of 126 LLC,” Landau
argues that the “real dispute” underlying the Guaranty “concerns the liability, if any, of 126 LLC
to WAS Terminals.” (CM!ECF No. 12-i at 12). In support of his argument, Landau highlights
the following language from paragraph 12 of the Guaranty:

“This Guaranty sets forth the entire agreement and understanding of [WAS
Terminals] and [Landau], and [Landau] absolutely, unconditionally and
irrevocably waives any and all right to assert any defense, setoff, counterclaim or
crossclaim of any nature whatsoever with respect to the Guaranty or the
obligations of [Landau] under this Guaranty. .
. except as otherwise providedfor
in the Agreement ofSale (as defined in the Note) or mandatory counterclaims.”

(CM/ECF No. 19 at 3-4). Landau asserts that the Agreement of Sale provides him with a
defense to this action. Specifically, Landau maintains that pursuant to the Agreement of Sale
WAS Terminals is liable to 126 LLC for environmental cleanup costs and funds recovered from
third parties. (CM/ECF No. 12-1 at 6-7). The extent of 126 LLC’s liability to WAS Terminals
under the Agreement of Sale, Landau contends, is the subject of the adversary proceeding in
Bankruptcy Court. Therefore, Landau asserts that staying this action while the Bankruptcy Court
resolves the related adversary proceeding will promote judicial economy and make this matter
easier to resolve. (CM/ECF No. 12-1 at 14; CM/ECF No. 19 at 9).

The Court exercises its broad discretion to stay this proceeding pending the determination
by the Bankruptcy Court of the adversary proceeding. Staying this case will simplify issues and
promote judicial economy for both the parties and the Court. Resolution of the adversary
proceeding will narrow the issues for both parties in this case by construing the extent of WAS
Terminal’s liability to 126 LLC for environmental remediation costs, if any, under the
Agreement of Sale. Consequently, this Court will not have to determine the merits of the

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defenses available to 126 LLC under the Agreement of Sale related to the environmental

remecliation of the Premises that Landau reserved the right to assert pursuant to the Guaranty.

Moreover, staying this case eliminates the possibility of both duplicative proceedings and

inconsistent interpretations of key provisions of the Agreement of Sale that would impact

Landau’s obligations under the Guaranty.

V.

CONCLUSION

For the foregoing reasons, Landau’s motion to stay the proceeding pending the outcome

of the adversary proceeding in Bankruptcy Court is granted. An appropriate order follows this

Opinion.

DATED:

of June, 2013.

JO-t LINARES
uES DISTRICT JUDGE

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