NITZA I. QUIÑONES ALEJANDRO, District Judge.
Before this Court is a motion to dismiss the complaint for failure to state a claim
The issues raised in the motion have been fully briefed and are ripe for consideration.
When ruling on a motion to dismiss, this Court must accept as true all factual allegations in Plaintiffs complaint and construe the facts alleged in the light most favorable to Plaintiff. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Briefly, the facts relevant to the disposition of the underlying motion to dismiss are as follows:
When considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), the court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Fowler, 578 F.3d at 210. The court must determine "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a `plausible claim for relief.'" Id. at 211 (quoting Ashcroft, 556 U.S. at 679, 129 S.Ct. 1937). The complaint must do more than merely allege the plaintiff's entitlement to relief; it must "show such an entitlement with its facts." Id. (citations omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct the complaint has alleged — but it has not `show[n]' — `that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (quoting Fed. R. Civ. P. 8(a)) (alterations in original). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S.Ct. 1937 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice." Id. To survive a motion to dismiss under Rule 12(b)(6), "a plaintiff must allege facts sufficient to `nudge [his] claims across the line from conceivable to plausible.'" Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).
Complaints and submissions filed by pro se litigants are subject to liberal interpretation and are held "`to less stringent standards than formal pleadings drafted by lawyers.'" Fantone v. Latini, 780 F.3d 184, 193 (3d Cir. 2015) (citing Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972)). However, the court must still ensure that a pro se complaint contains "`sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937).
In this matter, Plaintiff essentially challenges Conrail's 2005 sale of the Property to the eight LLCs identified in Plaintiff's complaint. Plaintiff was neither a party to the 2005 transaction nor a member of the LLCs. Plaintiff, however, asserts that he has legal standing to ask this Court to declare that Conrail's conveyances to the LLCs were unlawful. To support his standing argument, Plaintiff relies on the 2015 Assignment Agreement obtained, not from the LLCs, but from Steve Hyman, the husband of the sole member of the LLCs.
In its motion, Defendant argues various grounds for dismissal, including, inter alia, that the Assignment Agreement is unenforceable under the Pennsylvania champerty
When a federal court exercises federal question jurisdiction, as is the case here, the court must apply the choice-of-law rules of the forum state. Neopart Transit, LLC v. Management Consulting, Inc., 2017 WL 714043, at *11 (E.D. Pa. Feb. 23, 2017) (citations omitted); Noye v. Johnson & Johnson, 310 F.Supp.3d 470, 475 (M.D. Pa. 2018) (applying Pennsylvania choice-of-law rules in action premised on federal question jurisdiction).
The Pennsylvania Supreme Court in Griffith v. United Air Lines, 416 Pa. 1, 203 A.2d 796 (1964) adopted a flexible choice-of-law rule requiring an "analysis of the policies and interests underlying the particular issue before the court" and a determination of which jurisdiction has the greater interest in the application of its law. Id. at 806; see also Specialty Surfaces Int'l, Inc. v. Cont'l Cas. Co., 609 F.3d 223, 229 (3d Cir. 2010). Under this analysis, this Court finds that Pennsylvania law applies. In making this determination, this Court finds persuasive the decision of the United States District Court for the District of Columbia in Koro Co., Inc. v. Bristol-Myers Co., 568 F.Supp. 280 (D.D.C. 1983). In Koro, the court determined that New York law of champerty, rather than New Jersey law (which did not recognize the champerty doctrine), applied to invalidate the assignment of claims. Applying a similar "significant relationships test," the Koro Court wrote:
Koro, 568 F.Supp. at 286-87.
Here, Plaintiff chose to file his action against Defendant, a Pennsylvania corporation, in a federal court in Pennsylvania. Plaintiff's purported standing to bring this action rests entirely upon the validity of the assignment of the LLC's purported rights to Plaintiff by Steve Hyman, the husband of the sole member of the LLCs and a resident of New York. In applying the champerty doctrine, Pennsylvania has a clearly enunciated public policy against the enforcement of assignments of legal claims that violate champerty. Though New Jersey no longer recognizes the champerty doctrine, the application of Pennsylvania law of champerty would not frustrate any New Jersey policy. While on the other hand, the application of New Jersey law would impair Pennsylvania's long settled application of the doctrine to preclude certain claims assignments. In addition, Pennsylvania has a significant interest in applying its own laws to its citizens, including Defendant. In light of these factors, this Court finds that Pennsylvania has the greater interest in applying its law to the present issue and, accordingly, will apply Pennsylvania's champerty doctrine to the underlying Assignment Agreement.
Under Pennsylvania law, an assignment offends the public policy against champerty and is unenforceable if the assignment provides for the institution of litigation by and at the expense of a person who, but for the agreement, has no interest in the litigation, with the understanding that his or her reward is to be a share of whatever proceeds the litigation may yield. Richette v. Pennsylvania R.R., 410 Pa. 6, 187 A.2d 910, 918 (1963). Thus, Pennsylvania's champerty doctrine invalidates an assignment of claims "when the party involved: (1) has no legitimate interest in the suit, but for the agreement; (2) expends his own money in prosecuting the suit; and (3) is entitled by the bargain to share in the proceeds of the suit." Dougherty v. Carlisle Transp. Products, Inc., 610 F. App'x 91, 93 (3d Cir. 2015) (quoting Frank v. TeWinkle, 45 A.3d 434, 438-39 (Pa. Super. Ct. 2012)).
Here, Plaintiff has proffered no interest in this litigation against Defendant Conrail beyond that which he purportedly acquired by the assignment of claims by Steven Hyman, on behalf of the LLCs. The assignment itself provides that Plaintiff is to finance the lawsuit with his own funds and that he is entitled to share in the proceeds of the suit. These facts make this assignment fall squarely within the applicable champerty doctrine; the assignment is, therefore, invalid. Accordingly, Plaintiff lacks the standing to bring any claims against Defendant Conrail. Consequently,
For the reasons stated herein, the Assignment Agreement on which Plaintiff relies to support his standing to assert the claims in this matter is invalid under the champerty doctrine. As such, Defendant's motion to dismiss is granted. An Order consistent with this Memorandum Opinion follows.
At the outset, this Court finds that an actual conflict exists between the law of Pennsylvania and the law of New Jersey with respect to the application of the champerty doctrine. Pennsylvania has long applied this doctrine to invalidate certain assignments of claims, while New Jersey no longer applies this doctrine.
