3:25-cv-01397
D.N.J.Sep 10, 2025Background
- AMJ Capital OZ Fund I, LLC and AMJ Partners (Plaintiffs) formed a JV (Prospect Perry Holdings, LLC) in May 2022 with Prospect Capital and MZF Trust to develop a multi-family project in Perry, Florida; the JV is governed by a Delaware LLC Operating Agreement (JV Agreement) containing a broad arbitration clause (Section 9.8).
- Plaintiffs contributed their capital fully; they allege PREG (Prospect Capital + MZF Trust), BCC Construction, and the Zahns misrepresented contributions, diverted funds, issued an unauthorized $1,325,000 JV loan to BCC, and later dissolved BCC to avoid repayment.
- Plaintiffs assert nine claims (breach of contract, fiduciary duty, fraud, conspiracy, veil-piercing, negligent misrepresentation, breach of good faith, unjust enrichment, conversion) and sought access to JV records and two TRO/PI orders (including an asset freeze).
- Defendants moved to compel arbitration under the JV Agreement and to dismiss for lack of personal jurisdiction; plaintiffs opposed and separately moved for preliminary relief; the court struck defendants’ sur-reply as unauthorized.
- Court found sufficient specific personal jurisdiction over each defendant based on solicitation, meetings, and repeated communications directed to New Jersey, then considered whether the arbitration clause binds non-signatories (Michele, Richard, BCC).
- Applying Delaware law, the court held non-signatories are bound under equitable estoppel because plaintiffs allege concerted, interdependent misconduct by signatories and non-signatories; the JV Agreement’s arbitration clause is broad and covers the asserted claims; the court granted the motion to compel arbitration, denied both TRO/PI motions for lack of irreparable harm and stayed the action pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over defendants in NJ | Plaintiffs: defendants solicited and maintained dealings with NJ (meetings, calls, emails), so specific jurisdiction exists | Defendants: allegations are group-pleading and insufficient; lack minimum contacts | Court: PJ exists — plaintiffs showed purposeful availment, claims relate to NJ contacts, defendants failed to show unreasonableness |
| Enforceability of arbitration clause as to signatories | Plaintiffs: JV Agreement governs signatories but some claims are non-arbitrable or outside scope | Defendants: JV Agreement is valid and broad as to signatories | Court: Signatories (MZF Trust, Prospect Capital) are bound; clause is valid and broad |
| Binding non-signatories to arbitration (Michele, Richard, BCC) | Plaintiffs: non-signatories did not sign and shouldn’t be compelled; some tort/extra-contractual claims not meant for arbitration | Defendants: equitable estoppel and related doctrines bind non-signatories due to concerted misconduct | Court: Equitable estoppel applies (claims allege interdependent, concerted misconduct) — non-signatories bound to arbitrate |
| Preliminary injunctive relief (access to records, asset freeze) | Plaintiffs: denial of records and alleged asset transfers will cause irreparable harm and make recovery illusory | Defendants: arbitration is required; monetary damages adequate; courts lack authority to freeze assets pending money judgment | Court: Denied TRO/PI and asset freeze — plaintiffs failed to show irreparable harm that would render arbitration meaningless; arbitration can provide injunctive relief and will proceed first |
Key Cases Cited
- Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324 (3d Cir.) (plaintiff bears burden to prove personal jurisdiction once raised)
- Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93 (3d Cir.) (in contract cases, analyze totality of circumstances for specific jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S.) (purposeful availment and forum contacts test for specific jurisdiction)
- Guidotti v. Legal Helpers Debt Resol., L.L.C., 716 F.3d 764 (3d Cir.) (motion to compel arbitration standard; when to permit discovery on arbitrability)
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (U.S.) (FAA compels courts to enforce arbitration agreements)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S.) (liberal federal policy favoring arbitration; doubts resolved in favor of arbitration)
- Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, (Del. Ch. decision cited in opinion) (Del. Ch.) (equitable estoppel binds non-signatories where misconduct is interdependent) [Note: court applied Delaware equitable-estoppel doctrine]
- Grupo Mexicano De Desarrollo v. Alliance Bond Fund, 527 U.S. 308 (U.S.) (federal courts lack authority to issue preliminary injunctions to freeze defendant assets pending a damages claim)