ASAPP HEALTHCARE, INC. v. SERRANO et al, No. 1:2018cv04012 - Document 77 (D.N.J. 2020)
Court Description: OPINION. Signed by Judge Joseph H. Rodriguez on 12/7/2020. (tf, )
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ASAPP HEALTHCARE, INC. v. SERRANO et al Doc. 77 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 1 of 23 PageID: 810 U N ITED S TATES D ISTRICT COU RT D ISTRICT OF N EW JERSEY ASAPP HEALTHCARE, INC., Plaintiff, v. LILLIAN SERRANO, GEORGE WORRELL, LINDA SOUZA, and ALLIED BEHAVIORAL HEALTH d/ b/ a ABC THERAPY SERVICES, : Hon. J oseph H. Rodriguez : Civil Action No. 18-40 12 : OPIN ION : : Defendants. : This m atter com es before the Court on Defendants’ Motion to Dism iss the Com plaint or in the Alternative for Sum m ary J udgm ent [Dkt. No. 20], which the Court converted, pursuant to Rule 56(f), to a Motion for Sum m ary J udgm ent [Dkt. No. 27]. The Court has considered the written subm issions of the parties pursuant to Fed. R. Civ. P. 78 (b). For the reasons stated below, Defendants’ Motion [Dkt. No. 20 ] will be granted. I. Background This case arises out of the ongoing com plex business disputes between Plaintiff, ASAPP Healthcare, Inc. (“Plaintiff” or “ASAPP”)—a non-profit com pany providing “behavioral health counseling services to at-risk youth”—its form er em ployees, Lilian Serrano (“Serrano”), George Worrell (“Worrell”), and Linda Souza (“Souza”); and Allied Behavioral Healthcare Services, Inc. (“ABC Therapy”), the com pany established by the individual defendants (Collectively “Defendants”). [Dkt. No. 1 (“Com pl.”) ¶24]. A. Th e Cu rre n t Co m p lain t Plaintiff filed a Com plaint against Defendants on March 22, 20 18 , based on their alleged “concerted and unlawful schem e to usurp, plunder, and raid ASAPP’s em ployees 1 Dockets.Justia.com Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 2 of 23 PageID: 811 and in dependent contractors and, ultim ately, its client base an d business.” (Id. at ¶ 1). The com plaint asserts, inter alia, that Defendants’ wrongfully interfered with ASAPP and m isappropriated its confidential and proprietary business inform ation. In particular, it alleges that together, Worrell, Souza, and Serrano, accessed protected com puters, disclosed trade secrets, and solicited form er ASAPP em ployees and independent contractors. (Id. at ¶¶3-5). In addition, ASAPP claim s that “Defendant Souza contacted Verizon in an attem pt to transfer the ASAPP phone num bers assigned to her and Worrell from ASAPP’s corporate account to her personal account;” and that “Defendant Worrell had been disconnecting and rem oving his ASAPP com puter from ASAPP’s office” and “failed to return his ASAPP com puter.” (Id. at ¶¶ 40 -55). Based on these actions, ASAPP asserts sixteen (16) counts for: violation of the Com puter Fraud and Abuse Act (Count I), Conspiracy to Violate the Com puter Fraud and Abuse Act (Count II), violation of the New J ersey Com puter Related Offenses Act (Count III), Conspiracy to Violate the New J ersey Com puter Related Offenses Act (Count IV), violation of the Electronic Com m unications Privacy Act (Count V), Civil Violation of the New J ersey Wiretapping and Electronic Surveillance Control Act (Count VI), violation of the Stored Com m unications Act (Count VII), violation of the New J ersey Wiretapping and Electronic Surveillance Control Act (Count VIII), violation of the New J ersey Trade Secrets Act (Count IX), Tortious Interference with Prospective Econom ic Advantage/ Contractual Relations (Count X), Misappropriation of Confidential Inform ation (Count XI), Conversion (Count XII), Unfair Com petition (Count XIII), Unjust enrichm ent (Count XIV), Breach of the Duty of Loyalty (Count XV), and Civil Conspiracy (Count XVI). 2 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 3 of 23 PageID: 812 Defendants m oved to dism iss the Com plaint, or in the alternative for sum m ary judgm ent, based on three argum ents: (1) ASAPP’s claim s are barred by res judicata and settlem ent and release; (2) ASAPP’s claim s are barred by the entire controversy doctrine and Federal Rule of Civil Procedure 13(a); an d (3) even if ASAPP’s claim s are not barred, ASAPP’s federal claim s fail under either Rule 12(b)(6) or Rule 56. [See gen erally Dkt. Nos. 20 , 34]. B. H is to ry o f th e D is p u te s be tw e e n W o rre ll, So u za, an d CEO o f Plain tiff ASAPP Considering the argum ents before the Court, the previous disputes between Worrell, Souza, and the CEO of ASAPP, Prajakta Harshe (“Harshe”), are relevant to the present m otion. Defendants Worrell an d Souza in itially filed a lawsuit against Harshe in federal court on April 28, 20 16, alleging libel and slander, an d violations of the Electronic Com m unications Protection Act and Stored Com m unications Act (“Worrell I”). 1 [Dkt. No. 34-1, Defendants’ Rule 56.1 Statem ent of Facts (“Def. SMF”) ¶ 1]. The com plaint asserted that Worrell, Souza, and Harshe were associated in a num ber of entities, an d due to “fundam ental disagreem ents over the operation of the businesses,” dem anded m ediation. (Id. at ¶2). Worrell, Souza, and Harshe were all em ployees of ASAPP and had ownership interests in the following entities: Rehabilitative Adolescent Program s, LLC ("RAP"), Am ethyst Personal Growth & Counseling Services, LLC (“Am ethyst"), PGL Associates, LLC (“PGL"), and Atlantacare Behavioral Health ("Atlantacare"). RAP provides the m anagem ent services to ASAPP, and PGL owns the building ASAPP operates out of. [Dkt. No. 20 -7 ¶¶ 8 -11; Pl. SMF ¶¶ 6-7]. 1 Worrell et. al v. Harshe, Docket No. 1:16-cv-0 2398-NLH-KMW. 3 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 4 of 23 PageID: 813 On May 2, 20 16, the parties and their respective counsel attended a m ediation session before the Honorable Michael Winkelstein, J .A.D. (Ret.). At the end of this m ediation session, a handwritten m ediation agreem ent was drafted and signed by Worrell, Souza, and Harshe (the “Mediation Agreem ent”). The Mediation Agreem ent states: The parties hereby agree to the following: 1. All ownership in ASAPP, RAP, Am ethyst, PGL shall be transferred from Worrell and Souza to Harshe-Pathkar (“Praj”). 2. Praj or the entities will pay to Worrell and Souza pursuant to their percentage interests 1.25 m illion dollars, payable with $ 250 ,0 0 0 at signing and $ 10 0 ,0 0 0 for each of the next ten m onths. Praj will personally guarantee the paym ents. 3. Praj will refinance building, m ortgage or otherwise cause Souza an d Worell to be released from any obligations and pay Worrell and Souza their equity interest in the property. 4. Praj will pay to Worrell and Souza their outstanding salary through date of term ination and outstanding quarterly distribution ($ 148,0 0 0 ). 5. Worrell and Souza will dism iss federal lawsuit. 6. Worrell and Souza will return to Praj all corporate codes, passwords, files, em ail addresses less any personal inform ation therein contained, to the extent possible by May 6, 20 16. 7. Parties agree not to disparage each other to any third party or entity or agency of any governm ent. 8 . Praj will represent she has not and will not in any way attem pt to interfere with Worrell and Souza’s attem pts to obtain a Medicaid num ber. 9. Parties agree to confidentiality. 10 . Praj will not tortuously interfere with Worrell’s and Souza’s relationship with Lillian Serano. 11. There is no non -com pete nor non-solicitation agreem ent between or am ong any of the parties. 4 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 5 of 23 PageID: 814 12. Parties will execute m utual releases. 13. Parties will split in two the Mediator’s fee. 14. Counsel for parties will prepare a fin al settlem ent agreem ent [and] release based on these term s. [Dkt. No. 20 -5, Ex. C (“Mediation Agreem ent”)]. Pursuant to the Mediation Agreem ent, counsel for the parties drafted a form al settlem ent agreem ent, and set a closing date. [Dkt. No. 20 -6, Ex. D]. According to Plaintiff, “for a host of reasons, including its im proper overbreadth and fraud by defendants Worrell and Souza, the draft was n ever signed by anyone, and Ms. Harshe expressly rejected it.” [Dkt. No. 37-1, Pl. Response to Def. SMF (“Pl. Resp.”) ¶ 6]. Thereafter, the parties attended a second m ediation session on May 20 , 20 16, to try and resolve their issues. (Id.). That sam e day, Worrell and Souza m oved to enforce the Settlem ent Agreem ent against Harshe, and on J une 13, 20 16, Harshe m oved to dism iss the Worrell I com plaint. Worrell and Souza subsequently filed an am ended com plaint. [Dkt. No. 20 3]. The am en ded com plaint alleged that Harshe violated the Electronic Com m unications Protection Act (“ECPA”), New J ersey Identity Theft Statute, and Stored Com m unications Act (“SCA”) by interspersin g the account inform ation for Worrell and Souza’s yahoo account without authorization to access their em ail history and generate em ails. The am ended com plaint further alleged that Harshe com m itted libel an d slan der when Harshe told a bank that plaintiffs had stolen things or m onies from “the com pany,” told Serrano plaintiffs em bezzled funds, and told the Ham m onton Police that plaintiffs were guilty of vandalism , conversion, and theft. Finally, the am ended com plaint claim ed that Harshe deactivated the plaintiffs’ Verizon phones an d “switched the phone num bers to her own iphones” in further violation of the New J ersey Identity 5 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 6 of 23 PageID: 815 Theft Statute. [See generally Dkt. No. 20 -9, Worrell I’s First Am ended Com plaint]. Harshe m oved to dism iss the am ended com plaint. The Court then directed the parties to participate in further m ediation, which they did on Decem ber 16, 20 16. (Pl. Resp. ¶ 6). On J anuary 13, 20 16, Harshe filed a supplem ental brief in opposition to the thenpending m otion to enforce settlem ent. In her declaration, Harshe stated that she is the CEO of ASAPP, that ASAPP is a non-profit, and that Worrell and Souza were em ployees of ASAPP. Harshe adm itted that the m ediation on May 2, 20 16 was the parties’ attem pt to resolve the “outstanding business dispute and to term inate [their] existing partnership in various entities.” [Dkt. No. 20 -7, ¶ 7]. She then claim ed that she learned Worrell, Souza, and Serrano form ed “a com peting com pany” ABC Therapy, that Worrell “had been disabling security cam eras at night and rem oving corporate equipm ent and files and that [Souza] had transferred two of the corporate cell phone num bers to her personal account.” (Id. at ¶¶ 3-4). In her declaration, Harshe further claim ed that: • Im m ediately after the m ediation, she discovered that Worrell and Souza had taken ASAPP corporate property and destroyed corporate records, “crippling business operations and irreparably dam aging the non-profit com pany.” (Id. at ¶ 17). • “[W]hile Mr. Worrell and Ms. Souza were em ployed by ASAPP they had solicited em ployees of ASAPP and independent contractors who worked for ASAPP, RAP, and Am ethyst.” (Id. at ¶ 23). • Worrell had “m isallocated tens of thousands of dollars to the detrim ent of the 'non-profit corporation, ASAPP, and for his own benefit.” (Id. at ¶ 25). • “October 28, 20 16, Mr. Worrell disabled the dom ain for ASAPPHealthcare.org, taking down both the corporate website and all corporate em ails. He disabled the dom ain for ten days, causing substantial hardship and econom ic loss to both ASAPP and to m e personally.” (Id. at ¶ 26). 6 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 7 of 23 PageID: 816 The Honorable Noel L. Hillm an dism issed Worrell and Souza’s m otion to enforce settlem ent for lack of jurisdiction, on February 28, 20 17. (Def. SMF. ¶ 16). Shortly thereafter, J udge Hillm an also denied Harshe’s m otion to dism iss the am ended com plaint. (Id. at ¶ 17). On May 2, 20 17, Harshe filed an Answer to the am ended com plaint. (Id. at ¶19). The Answer did not in clude any counterclaim s.[Dkt. No. 20 -10 , Ex. H]. Following these rulings, Worrell and Souza m oved to withdraw their com plaint, and dism iss their claim s against Harshe with prejudice. At the sam e tim e, they com m enced a second action against Harshe in the Superior Court of New J ersey, Atlantic County, to enforce settlem ent (“Worrell II”). [Dkt. No. 20 -11, Ex. I, Worrell II Com plaint]. The m otion to withdraw Worrell I was granted and the case was closed on October 5, 20 17. [See Dkt. No. 20 -3]. Worrell II, filed in March 20 17, “arose while the parties were negotiating to resolve their ongoing business dispute concerning certain entities known as ASAPP, RAP, Am ethyst and PGL.” (Worrell II Com plaint at ¶ 4 (em phasis added)). Initially, the state court in Worrell II enforced the Mediation Agreem ent. (Def. SMF ¶¶ 22-24). On “May 21, 20 18, after m otion practice and several hearings, the state court reversed and vacated any and all prior rulings that m ight have suggested that there was an enforceable m ediation agreem ent between Ms. Harshe an d defendants Worrell and Souza.” (Pl. SMF ¶ 50 ). This ruling allowed the parties to conduct discovery an d prepare for trial. (Def. SMF ¶ 29). Thereafter, Plaintiff ASAPP initiated the present suit on March 22, 20 18. [Dkt. No. 1]. While Worrell III was pending, Worrell and Souza m oved for sum m ary judgm ent in Worrell II. On August 21, 20 20 , the Honorable J udge J ohn C. Porto granted that 7 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 8 of 23 PageID: 817 m otion, holding that Worrell, Souza, and Harshe reached a binding agreem ent at the May Mediation, and en forced the relevant Mediation Agreem ent. C. Ord e r to Sh o w Cau s e Having been inform ed that J udge Porto issued an opinion and order enforcing the Mediation Agreem ent, this Court issued an Order to Show Cause, requiring Plaintiff to provide the effect of the Mediation Agreem ent on this m atter. 2 [Dkt. No. 55]. Plaintiff responded to the Order sim ply arguing that the Mediation Agreem ent has no bearing on the present action, because Plaintiff ASAPP was not a party to that Agreem ent. [Dkt. No. 74]. Defendants’ filed a response, m aintaining their position that the agreem ent forecloses this action entirely, to which Plaintiff replied that ASAPP is a non-party an d “defendants’ reliance on the Mediation Agreem ent here is further m isplaced as m uch of the wrongdoing alleged in ASAPP’s com plaint was not discovered—and in m any cases did not even occur—until after the May 2, 20 16 Worrell/ Souza/ Harshe Mediation Agreem ent.” [Dkt. Nos. 75, 76]. II. Sum m ary J udgm ent Standard A court will grant a m otion for sum m ary judgm ent if there is no gen uine issue of m aterial fact and if, viewing the facts in the light m ost favorable to the non-m oving party, the m oving party is entitled to judgm ent as a m atter of law. Pearson v. Com ponent Tech. Corp., 247 F.3d 471, 482 n.1 (3d Cir. 20 0 1) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 ( 1986)); accord Fed. R. Civ. P. 56 (c). Thus, this Court will 2 The Court notes that while both Worrell II and III were pending sim ultaneously, this Court directed the parties to appear for oral argument, so as to develop a full and informed record— considering the lack of inform ation this Court had pertaining to the State Court Action. At the parties own requests, and then for reasons related to the ongoing Covid-19 Pandem ic, the argument was adjourned num erous times. Ultim ately, the State Court rendered a decision and this Court entered an Order to Show Cause. 8 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 9 of 23 PageID: 818 enter sum m ary judgm ent only when “the pleadings, depositions, answers to interrogatories, and adm issions on file, together with the affidavits, if any, show that there is no genuine issue as to any m aterial fact and that the m oving party is entitled to judgm ent as a m atter of law.” Fed. R. Civ. P. 56 (c). An issue is “genuine” if supported by evidence such that a reasonable jury could return a verdict in the nonm oving party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is “m aterial” if, under the governing substantive law, a dispute about the fact m ight affect the outcom e of the suit. Id. In determ ining whether a genuine issue of m aterial fact exists, the court m ust view the facts and all reasonable inferences drawn from those facts in the light m ost favorable to the nonm oving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Initially, the m oving party has the burden of dem onstrating the absence of a genuine issue of m aterial fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (198 6). Once the m oving party has m et this burden, the n onm oving party m ust identify, by affidavits or otherwise, specific facts showing that there is a genuine issue for trial. Id.; Maidenbaum v. Bally’s Park Place, Inc., 8 70 F. Supp. 1254, 1258 (D.N.J . 1994). Thus, to withstand a properly supported m otion for sum m ary judgm ent, the nonm oving party m ust identify specific facts and affirm ative evidence that contradict those offered by the m oving party. Andersen, 477 U.S. at 256– 57. Indeed, the plain language of Rule 56(c) m andates the entry of sum m ary judgm ent, after adequate tim e for discovery and upon m otion, against a party who fails to m ake a showing sufficient to establish the existence of an elem ent essential to that party’s case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. 9 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 10 of 23 PageID: 819 In deciding the m erits of a party’s m otion for sum m ary judgm ent, the court’s role is not to evaluate the evidence and decide the truth of the m atter, but to determ ine whether there is a gen uine issue for trial. Anderson, 477 U.S. at 249. Credibility determ inations are the province of the finder of fact. Big Apple BMW, Inc. v. BMW of N. Am ., Inc., 974 F.2d 1358, 1363 (3d. Cir. 1992). III. Analysis For the reasons that follow, this Court finds that the Mediation Agreem ent, the principles of res judicata, and Federal Rule of Civil Procedure 13(a), preclude Plaintiff’s claim s against all Defendants. The doctrin e of claim preclusion, or res judicata, prohibits a plaintiff from relitigating the sam e claim again st the sam e parties, provided the claim s have previously been fairly litigated an d determ ined. First Union Nat'l Bank v. Penn Salem Marin a, Inc., 921 A.2d 417, 423 (N.J . 20 0 7); In re Mullarkey, 536 F.3d 215, 225 (3d Cir. 20 0 8). “A party seeking to invoke res judicata m ust establish three elem ents: ‘(1) a final judgm ent on the m erits in a prior suit involving (2) the sam e parties or their privies and (3) a subsequent suit based on the sam e cause of action.”’ Duhaney v. Attorney Gen. of U.S., 621 F.3d 340 , 347 (3d Cir. 20 10 ) (quoting In re Mullarkey, 536 F.3d at 225). In this case, the prior suit at issue is Worrell I—the federal court action involving Worrell, Souza, and Harshe. Worrell I involved a final judgm ent on the m erits. For purposes of res judicata, “judgm ent on the m erits” is a “term of art . . . it does not require an actual verdict or sum m ary judgm ent . . . .” Papera v. Pen nsylvania Quarried Bluestone Co., 948 F.3d 60 7, 610 (3d Cir. 20 20 ) (citing Fed. R. Civ. P. 41(b) and Sem tek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 50 2, 121 S. Ct. 10 21, 10 25, 149 L. Ed. 2d 32 (20 0 1)). In Worrell I, Worrell and Souza filed a m otion to withdraw their federal 10 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 11 of 23 PageID: 820 com plaint, which the court ultim ately granted. In granting that m otion, the court dism issed the action with prejudice. [See Dkt. No. 20 -3]. Generally, “a prior dism issal with prejudice (whether voluntary or involuntary) precludes later relitigating the dism issed claim s.” Papera v. Pennsylvania Quarried Bluestone Co., 948 F.3d 60 7, 610 (3d Cir. 20 20 ) (explaining that a dism issal with prejudice “operates as an adjudication on the m erits, so it ordin arily precludes future claim s.” (quoting Landon v. Hunt, 977 F.2d 829, 832– 33 (3d Cir. 1992))). ASAPP, however, contends that there was no final judgm ent. It asserts that “defendants Worrell and Souza abruptly abandoned and term in ated the federal case (over [Harshe’s] objections) after just a few m onths before the claim s there could be litigated or anything else substantive could be done, including the addition of any good faith counterclaim s or the im pleader of any additional parties, had that arguably even been appropriate.” [Dkt. No. 30 , p. 18 of 26]. The record before the Court proves otherwise. In fact, Harshe subm itted a declaration in Worrell I, on J anuary 13, 20 17, providing sim ilar, if not identical, allegations presently before this Court. [See Dkt. No. 20 -7 (stating inter alia that Worrell and Souza took ASAPP property, destroyed records, solicited em ployees of ASAPP and independent contractors, enticed the staff to transition to their new com pany, ABC Therapy, and disabled the ASAPP dom ain “causing substantial hardship and econom ic loss to both ASAPP and to [Harshe] personally”)]. ASAPP’s Com plaint further dem onstrates that Harshe was aware of the alleged wrongdoings at som e point in 20 16, and well before the dism issal of Worrell I, on October 5, 20 17. (See e.g, Com pl. ¶¶ 53-55, 57, 59, 61). Even if the judgm ent in Worrell I alone was not “final,” that judgm ent in conjunction with the Mediation Agreem ent constitutes a final judgm ent on the m erits. 11 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 12 of 23 PageID: 821 In Worrell I, the parties engaged in m ediation, which resulted in an executed Mediation Agreem ent. Worrell and Souza sought enforcem ent of that Agreem en t in Worrell II and succeeded. The state court in Worrell II held, “the parties negotiated and agreed to a binding m ediation agreem ent that settled their dispute,” and found that the Mediation Agreem ent “resolved the federal court action [Worrell I].” [Dkt. No. 53, pp. 9, 5 of the Mem orandum of Decision]. To be sure, the Mediation Agreem ent states, “Worrell and Souza will dism iss federal lawsuit.” [Mediation Agreem ent ¶ 5]. “When a prior case has been adjudicated in a state court, federal courts are required by 28 U.S.C. § 1738 to give full faith and credit to the state judgm ent.” Edm undson v. Borough of Kennett Square, 4 F.3d 186, 189 (3d Cir. 1993) (citations om itted).3 Thus, it is established that the parties Mediation Agreem ent is binding, and their disputes settled. [Dkt. No. 53]. The Third Circuit has held that settlem ent can bar later actions when the district court term inates the action with prejudice. Nobel v. Morchesky, 697 F.2d 97, 10 2 n. 8 (3d Cir. 1982); see also Toscano v. Connecticut Gen. Life Ins. Co., 288 F. App'x 36, 38 (3d Cir. 20 0 8) (“J udicially approved settlem ent agreem ents are considered final judgm ents on the m erits for the purposes of claim preclusion.”); Covington v. Equifax Info. Servs., Inc., No. 18 -15640 , 20 19 WL 4254375, at *5 (D.N.J . Sept. 9, 20 19). Notwithstanding, Plaintiff argues that there is no preclusion because Worrell I and the Mediation did not involve the sam e parties. [See Dkt. No. 74]. There is no 3 Though the State Court action was pending sim ultaneously with this m atter, “federal cases recognize the general rule that as between actions pending at the sam e time, res judicata attaches to the first judgm ent regardless of the sequence in which the actions were com menced.” 18 C. Wright A. Miller & E. Cooper, Fed. Prac. & Proc. J uris. § 44o4 (3d ed. 20 20 ); see also U.S. ex rel. Sheldon v. Kettering Health Network, 816 F.3d 399, 416 (6th Cir. 20 16) ("[T]he relevant inquiry for res judicata is which action resulted in judgment first, not which action was filed first."). 12 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 13 of 23 PageID: 822 dispute that this action involves a num ber of different parties—ASAPP, ABC Therapy, and Serrano were not parties in Worrell I. Defendants, however, argue that privity exists. Both Defendants and Plaintiff acknowledge that res judicata applies to nonparties in privity with those nam ed in the first litigation, and focus alm ost exclusively on whether there is privity between Harshe and ASAPP. To that end, Plaintiff stresses that it cannot be in privity with Harshe because ASAPP, as a non-profit com pany, “is not— and cannot be – owned or controlled by any one person, including its CEO or any of its em ployees.” [Dkt. No. 23, p. 22 of 38]. The Court disagrees. Privity requires “a prior legal or representative relationship between a party to the prior action and the nonparty against whom estoppel is asserted;” an d thus, exists when the non-party ‘adequately represented by som eone with the sam e interests who [wa]s a party.’ ” Nationwide Mut. Fire Ins. Co. v. George V. Ham ilton, Inc., 571 F.3d 299, 312 (3d Cir. 20 0 9). Essentially, privity is “a word used to say that the relationship between one who is a party on the record and another is close enough to include that other within the res judicata.” Marran v. Marran, 376 F.3d 143, 151 (3d Cir. 20 0 4) (quoting EEOC v. United States Steel Corp., 921 F.2d 489, 493 (3d Cir. 1990 )) Here, the adm issions of Ms. Harshe and ASAPP alone dem onstrate the close relationship Harshe has to the non-profit ASAPP. In Worrell II, Harshe acknowledged that ASAPP brings the pending causes of action (Worrell III) “through Ms. Harshe as the CEO.” [Dkt. No. 20 -16, Ex. N, p. 12]. The Com plaint in this case alleges that Harshe: (1) incorporated ASAPP; (2) sits as its CEO (since 20 0 7); (3) “has held the Medicaid ID num ber under which ASAPP provides children and adolescents with em otional and behavioral counseling services . . .”; (4) was ASAPP’s initial registered agent and the sole m em ber of its board of directors; and (5) was an original board trustee. (Com pl. ¶¶ 2413 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 14 of 23 PageID: 823 27). To be sure, as Defendants point out, ASAPP’s Com plaint m entions Harshe at least thirty (30 ) tim es. (See generally Id.). Notably, the Com plaint further indicates that it was Ms. Harshe who “purchased two Dell com puters for Defendants Worrell and Souza to use in connection with their full-tim e em ploym ent with ASAPP”, “[c]oncerned about the integrity of ASAPP’s business” logged into the ASAPP corporate em ail accounts, reviewed ASAPP’s security footage, and filed fraud claim s with Verizon after alleged changes to ASAPP’s corporate account. (Compl. ¶¶ 48 -52 (em phasis added)). This record shows that the interests of Harshe and ASAPP are aligned. Indeed, Harshe personally brought the facts underlying her present claim s to the attention of the Worrell I Court, in opposition to the enforcem ent of the Mediation Agreem ent. [See Dkt. No. 20 -7 (noting that Defendants’ action caused “substantial hardship and econom ic loss to both ASAPP and to [Harshe] personally”)]. Regardless of ASAPP’s status as a non-profit, the relationship between Harshe and ASAPP is close enough for res judicata purposes. See Goel v. Heller, 667 F. Supp. 144, 151 n.7 (D.N.J . 1987) (“[T]he question of privity does turn on the status of certain individuals and entities—questions of fact—the question of privity is really one of law.”); Wood v. Borough of Lawnside, No. CIV. 0 8-2914, 20 0 9 WL 3152114, at *3 (D.N.J . Sept. 28, 20 0 9) (finding privity between a New J ersey non-profit organization and m em ber of that non-profit). Therefore, the Court finds privity between Harshe and ASAPP. Sim ilarly, there is privity between Defendants Worrell and Souza—nam ed in Worrell I—and their com pany, ABC Therapy. Worrell and Souza had established ABC therapy at the tim e Worrell I com m enced, an event contem plated by the Mediation Agreem ent between the parties. (Mediation Agreem ent ¶ 11). Defendant Serrano also established ABC Therapy, along with Worrell and Souza. To the extent that she is also in 14 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 15 of 23 PageID: 824 privity, Defendants subm it that the “broadly worded release” of the settlem ent agreem ent provided that “Ms. Harshe, ASAPP, RAP, PGL, Am ethyst, and Atlanta Cares were releasing Ms. Souza, Mr. Worrell, and any associated entity (which would include Allied and by extension Ms. Serrano) from any claim s and causes of action.” [Dkt No. 20 -1, pp. 32-33 of 57]. This settlem ent agreem ent was not executed. The Court, however, will not ignore the unique facts of this case, in which Worrell and Souza are intertwined with Serrano, who was also an em ployee of ASAPP. Together, Serrano, Worrell, and Souza are the trustees of ABC Therapy. (Com plaint ¶ 45). ASAPP’s Com plaint alleges no claim s against Serrano individually. Instead, it refers to Serrano’s involvem ent in any alleged wrongdoing as part of a “schem e” or “conspiracy” with Worrell and Souza. (See generally Com pl.); Goel v. Heller, 667 F. Supp. 144, 152 (D.N.J . 198 7) (“[C]o-conspirators are by definition in privity”). Even when the Com plaint attem pts to separate “Serrano’s Actions,” it states Serrano acted “with the help of Worrell and Souza.” (Id. at ¶ 210 ). Finally, the binding Mediation Agreem ent provides that Harshe would “not tortuously interfere with Worrell’s and Souza’s relationship with Lillian Serrano,” calls for the execution of m utual releases, an d states that “Counsel for parties will prepare a final settlem ent agreem ent [and] release based on th[ose] term s.” (Mediation Agreem ent ¶¶ 10 , 12, 14 (em phasis added)). The term “privity” is used m erely as “a way to express the conclusion that nonparty preclusion is appropriate on any ground.” Salerno v. Corzine, 449 F. App'x 118, 122 (3d Cir. 20 11) (quoting Taylor v. Sturgell, 553 U.S. 8 80 , 894 n. 8 , 128 S. Ct. 2161, 171 L.Ed.2d 155 (20 0 8)). Accordingly, this Court finds that the relationship between Serrano, Worrell and Souza, is enough to afford Serrano the benefit of claim preclusion. Lubrizol Corp. v. Exxon Corp., 929 F.2d 960 , 966 (3d Cir. 1991) (“We note 15 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 16 of 23 PageID: 825 that a lesser degree of privity is required for a new defen dant to ben efit from claim preclusion than for a plaintiff to bind a new defendant in a later action.”). To hold otherwise would im pede a fair result by allowing Harshe (through ASAPP) to potentially recover dam ages against Serrano, based on the actions of Worrell, Souza and ABC Therapy. Therefore, the only rem aining question for the Court is whether this present action is based on the sam e “cause of action” as Worrell I. The Court finds that this elem ent is m et. “A single cause of action m ay com prise claim s under a num ber of different statutory and com m on law grounds. Rather than resting on the specific legal theory invoked, res judicata generally is thought to turn on the essen tial sim ilarity of the underlying events giving rise to the various legal claim s, although a clear definition of that requisite sim ilarity has proven elusive.” Davis v. U.S. Steel Supply, Div. of U.S. Steel Corp., 68 8 F.2d 166, 171 (3d Cir. 1982) (citations om itted). Under the Third Circuit’s “broad view,” the following factors are relevant in assessing whether there is a “single cause of action:” 1) whether the acts com plained of and the dem and for relief are the sam e (that is, whether the wrong for which redress is sought is the sam e in both actions); (2) whether the theory of recovery is the sam e; (3) whether the witnesses and docum ents necessary at trial are the sam e (that is, whether the sam e evidence necessary to m aintain the second action would have been sufficient to support the first); and (4) whether the m aterial facts alleged are the sam e. United States v. Athlone Indus., Inc., 746 F.2d 977, 984 (3d Cir. 1984) (citations om itted); Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 277 (3d Cir. 20 14). Im portantly, “res judicata bars not only claim s that were brought in a previous action, but also claim s that could have been brought.” Duhaney, 621 F.3d at 347. 16 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 17 of 23 PageID: 826 Generally, this m atter arises out of the sam e fundam ental dispute in Worrell I, the sam e dispute that led to m ediation—the deteriorating business relationship between Worrell, Souza, and Harshe. (Worrell I Am ended Com pl. ¶ 7). In particular, the claim s in this m atter rely on the sam e underlying events and facts giving rise to those at issue in Worrell I. The com plaint here provides that “Worrell and Souza rerouted ASAPP corporate em ail accounts, ASAPP corporate electronic facsim ile (“eFax”) num bers, an d ASAPP corporate telephone n um bers in order to divert ASAPP contracts and referrals to ABC Therapy, the com pany that Defendants Serrano, Worrell, and Souza established to com pete with ASAPP.” (Com pl. ¶6). The com plaint further provides that in relation to those alleged acts, Harshe contacted Verizon, began reviewing ASAPP’s security footage, logged into the ASAPP corporate em ail accounts assigned to Worrell and Sousa, and contacted the police. (Id. at ¶¶ 48-53). These allegations form the basis for a num ber of ASAPP’s claim s including its claim s that Worrell and Souza violated the ECPA and the SCA, and analogous state statutes. (See Id. at Counts V-VIII). The Com plaint further discusses that Harshe again contacted the police about an allegedly stolen com puter, and that she term inated Defendants before the Ham m onton police as a result of their allegedly taking corporate property an d breaching their duties of loyalty. (Id. at ¶ 52). Likewise, the com plain t in Worrell I alleged that Harshe violated the ECPA and the SCA when she “accessed the Yahoo em ail accounts without Plaintiff’s authority or consent in an effort to gain advantage in the negotiations and to obtain attorney client com m unications.” (Worrell I Am ended Com pl.¶ 10 ). The third count in Worrell I further alleged libel and slander claim ing Harshe “told a representative of TD bank . . . that plaintiffs had stolen things or m onies from the com pany”; telephoned Serrano “and 17 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 18 of 23 PageID: 827 told her that both plaintiffs em bezzled funds from the com pany”; an d “told the Ham m onton Police Departm ent that plaintiffs were guilty of vandalism , conversion and theft.” (Id. at ¶¶ 40 -43 (em phasis added)). Finally, Count 4 in Worrell I alleges violations of New J ersey’s Identity Theft Statute based on Harshe’s contact with Verizon to inquire about deactivating phones. (Id. at ¶¶ 45-52). It is, therefore, evident on the face of the com plaints alone that the persons and evidence n ecessary to m aintain both Worrell I and Worrell III are the sam e; “[t]he fact that several new and discrete [related] events are alleged does not com pel a different result. ‘A claim extinguished by res judicata includes ‘all rights of the plaintiff to rem edies again st the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.’ ” Elkadrawy v. Vanguard Grp., Inc., 584 F.3d 169, 174 (3d Cir. 20 0 9) (em phasis in original) (quoting Restatem ent (Second) of J udgm ents § 24(1) (198 2)). ASAPP’s claim s are also precluded by the Mediation Agreem ent. As previously stated, there is no dispute that Worrell, Souza, and Harshe engaged in Mediation during Worrell I to resolve the outstanding business disputes between these parties and term inate the existing partnerships in shared entities. [Dkt. No. 30 -3 ¶ 34; 20 -7 ¶ 7]. 4 As a result, the parties entered into an enforceable Mediation Agreem ent settling their differences. Thus, the express term s of the Mediation Agreem ent will determ in e the 4 Harshe attempts to separate ASAPP from the entities and disagreements at issue in the 20 16 Mediation, again stressing that ASAPP was not a party. The Court, as detailed above, finds that Harshe is in privity with ASAPP. Moreover, the language of the Mediation Agreement also forecloses such an argument. The agreem ents first term indicates the parties interest in ASAPP and indicates the com pany m ust have been at issue in the m ediation. Indeed, the other entities undisputedly involved in the mediation are related to ASAPP—RAP provides m anagement services to ASAP, PLG owns ASAPP’s building. The fact that ASAPP is a non-profit is inapposite. The record shows that Harshe and ASAPP’s interests were the sam e. 18 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 19 of 23 PageID: 828 extent of preclusion. See Toscano v. Connecticut Gen. Life Ins. Co., 288 F. App'x 36, 38 (3d Cir. 20 0 8). The term s of the Agreem ent contem plate the issues here by directly addressing that “[t]here is no non-com pete nor non-solicitation agreem ent between or am ong any of the parties,” and that Harshe would not “tortuously interfere with Worrell’s and Souza’s relationship with Lillian Serano.” (Mediation Agreem ent ¶¶ 10 -11 (em phasis added)). In the words of J udge Porto, the “mediation agreem ent . . . acknowledged the [Worrell and Souza] were going to set up a com peting firm . . . .” And all parties agreed to execute m utual releases based on these term s. Now, ASAPP com es before this Court with claim s against that com peting firm , Serrano, and Worrell and Souza, alleging that that the parties conspired and solicited em ployees from ASAPP, breaching their duty of loyalty and interfering with ASAPP’s econom ic advantage an d contractual relations. ASAPP further claim s that ABC Therapy has engaged in unfair com petition and been unjustly enriched. (See Com pl. Counts X, XII-XVI). The Court cannot perm it Harshe to m ake an end-run around the Mediation Agreem ent by bringing these claim s, as the related entity. Accordingly, the Court finds that such claim s are precluded by the term s of the Mediation Agreem ent. 5 Moreover, despite Plaintiff’s persistent suggestion that ASAPP was not involved in Worrell I or the m ediation, Harshe was fully aware that the non -profit ASAPP was “at the center” of these litigations. [Dkt. No. 20 -16, Ex. N, p. 12]. 6 Indeed, ASAPP does not 5 When given the opportunity to further explain why the pending claim s before this Court were not precluded by the Mediation Agreement, Plaintiff focused on the difference in parties in the first litigation and this matter. [Dkt. No. 74]. 6 The Court also notes that while Plaintiff points out that ASAPP is not mentioned by nam e in Worrell I, a comparison of the Worrell I com plaint and the Worrell II complaint, along with 19 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 20 of 23 PageID: 829 distinguish the cause of actions so m uch as it argues that defendants’ reliance on the Mediation Agreem ent is m isplaced. ASAPP contends that “m uch of the wrongdoing alleged in ASAPP’s com plaint was not discovered—and in m any cases did not even occur—until after the May 2, 20 16 Worrell/ Souza/ Harshe Mediation Agreem ent.” [Dkt. Nos. 75, 76]. The record, however, shows that substantial events alleged as wrongdoing were discovered prior to the May 2, 20 16 m ediation. (See Com pl. ¶¶ 40 -55). Harshe was aware as early as April 27, 20 16, that Worrell and Souza were allegedly rem oving corporate property, nam ely a com puter. Adm ittedly, issues surrounding this com puter, and its contents, were discussed in m ediation and addressed in the agreem ent: “Worrell and Souza will return to Praj all corporate codes, passwords, files, em ail addresses less any personal inform ation therein contained, to the extent possible by May 6, 20 16.” (Mediation Agreem ent ¶ 6; Dkt. No. 20 -14, 41:1-12). To the extent that wrongdoing did occur after the Mediation Agreem ent was signed, Harshe still knew of the alleged wrongdoings m onths prior to her Answer in Worrell I (filed on May 2, 20 17), which asserted no counterclaim s. Federal Rule of Civil Procedure 13(a) provides that: A pleading shall state as a counterclaim any claim which at the tim e of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject m atter of the opposing party's claim and does not require for its adjudication the presen ce of third parties of whom the court cannot acquire jurisdiction. (em phasis added). Accordingly, “[f]ailure to assert a counterclaim that is m ade com pulsory by Rule 13(a) precludes a later action . . .” 18 C. Wright A. Miller & E. Cooper, Fed. Prac. & Proc. J uris. § 4414 (3d ed. 20 20 ). In “m any cases” such as the one additional documents in the record, reveals that when Worrell I’s complaint refers to the “com pany” it is referring to ASAPP. 20 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 21 of 23 PageID: 830 before this Court, where the form er defendant becom es the plaintiff (here, by way of privity) “the com pulsory counterclaim provisions of Civil Rule 13(a) supersede other principles of preclusion.” Id.; see also Tagayun v. Citibank, N.A., No. CIV.A. 0 5-430 2, 20 0 6 WL 510 0 512, at *6 (D.N.J . J une 9, 20 0 6). Rule 13(a)’s purpose is “to prevent m ultiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of com m on m atters.” Southern Construction Co. v. Pickard, 371 U.S. 57, 60 , 8 3 S. Ct. 10 8, 9 L.Ed.2d 31 (1962). The Court Finds that Plaintiff’s claim s against Defendants are further barred by Federal Rule 13(a). In deciding whether a counterclaim is com pulsory under Rule 13, courts ask, “whether the counterclaim ‘bears logical relationship to an opposing party’s claim .’” Transam erica Occidental Life Ins. Co. v. Aviation Office of Am ., Inc., 292 F.3d 384, 389 (3d Cir. 20 0 2) (quoting Xerox Corp. v. SCM Corp., 576 F.2d 10 57, 10 59 (3d Cir. 1978 )). The Third Circuit has held that the term “opposing party” used in Rule 13, “should include parties in privity with the form ally nam ed opposing parties. . . . The rationale is that if the adjudication of an action is binding on parties in privity with the parties form ally nam ed in the litigation, then any claim s against parties in privity should be brought in the sam e action lest the door be kept open for subsequent relitigation of the sam e claim s.” Id. (citations om itted). The Circuit has further explained: a counterclaim is logically related to the opposing party’s claim when separate trials on each of their respective claim s would involve a substantial duplication of effort and tim e by the parties and the courts. Where m ultiple claim s involve m any of the sam e factual issues . . . the doctrin e of res judicata com pels the counterclaim ant to assert in the sam e suit . . . . Great Lakes Rubber Corp. v. Herbert Cooper Co, 286 F.2d 631, 634 (3d Cir. 1961). 21 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 22 of 23 PageID: 831 Not only do the claim s addressed above bear a logical relation to those asserted in Worrell I, but as do Plaintiff’s rem aining claim s. Those claim s allege violations of the CFAA, conspiracy to violate the CFAA, violation of the New J ersey Com puter Related Offenses an d conspiracy to violate the New J ersey Com puter Related Offenses, violation of the New J ersey Trade Secrets Act, and m isappropriation of confidential Inform ation. (Com pl. Counts I-IV, IX, XI)—all of which stem from Defendants’ alleged use of inform ation obtained through ASAPP’s com puter, em ail, fax and solicitation of ASAPP em ployees/ in dependent contractors. Separate trials would undoubtedly involve a substantial duplication of effort and tim e by the parties and the courts. Even viewing all facts in a light m ost favorable to Plaintiff, the Court finds that Harshe—in privity with ASAPP—should have asserted its present claim s as counterclaim s in Worrell I. Failure to do so precludes this separate action under Rule 13(a). See Tagayun v. Citibank, N.A., No. CIV.A. 0 5-430 2, 20 0 6 WL 510 0 512 (D.N.J . J une 9, 20 0 6) (finding that plaintiff and defendant in previous state court m atter were in privity with the additional parties in the federal court m atter; and res judicata precluded the m atter before the federal court because plaintiff was aware of, and raised the sam e violations of law as defendant in the previous state court action, that should have been raised as com pulsory counterclaim s). In sum , the Mediation Agreem ent and the present com plaint, together, reveal “that the factual underpinnings, the theory of the action, and the relief sought, are nearly identical to those issues previously resolved.” Toscano v. Connecticut Gen. Life Ins. Co., 288 F. App'x 36, 39 (3d Cir. 20 0 8). To be sure, “[f] litigation is not a repechage round for losers of earlier contests, or for those who overslept and m issed the starters' gun.” Ham burg Music Corp. v. Winter, No. 0 4-2738, 20 0 5 WL 2170 0 10 , at *4 (3d Cir. 20 0 5) (alteration in origin al) (quoting River Park, Inc. v. City of Highland 22 Case 1:18-cv-04012-JHR-AMD Document 77 Filed 12/07/20 Page 23 of 23 PageID: 832 Park, 23 F.3d 164, 167 (7th Cir. 1994)). Therefore, the Complaint in this case against Worrell and Souza, and their privies, is barred. IV. Conclusion For the forging reasons, the Court will grant Defendants’ Motion to Dism iss the Com plaint or in the Alternative for Sum m ary J udgm ent [Dkt. No. 20]. An appropriate order shall issue. Dated: Decem ber 7, 20 20 _ _ _ / s/ J oseph H. Rodriguez_ _ _ _ _ _ Hon. J oseph H. Rodriguez, UNITED STATES DISTRICT J UDGE 23
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