ERGOWERX INTERNATIONAL LLC, D/B/A SMARTFISH TECHNOLOGIES, LLC VS. MAXELL CORPORATION OF AMERICA (L-8914-15, BERGEN COUNTY AND STATEWIDE)
A-0197-16T3
N.J. Super. App. Div. UJul 26, 2017Background
- Smartfish (Ergowerx) manufactured ergonomic keyboards/mice and entered a December 22, 2009 distribution/sales agreement with Maxell; Hitachi is Maxell's corporate affiliate.
- Smartfish sued in federal court asserting multiple state and federal claims (breach of contract; promissory estoppel; various torts; IP claims; consumer-type claims, etc.).
- In Ergowerx I the SDNY dismissed twelve of thirteen counts with prejudice on Rule 12(b)(6) grounds (leaving a limited breach-of-contract claim tied to an initial 18‑month purchase obligation); the Second Circuit affirmed.
- In Ergowerx II the district court dismissed the remaining breach claim without prejudice for lack of supplemental jurisdiction, expressly preserving Smartfish’s right to sue in state court.
- Smartfish filed in New Jersey Law Division adding Hitachi and a New Jersey Consumer Fraud Act claim; defendants moved to dismiss under R. 4:6‑2 asserting federal res judicata and claim preclusion.
- The Appellate Division reversed the Law Division, holding federal judgments in Ergowerx I precluded the state claims dismissed there, but allowing the limited breach‑of‑contract claim (one 18‑month term) to proceed against Maxell.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal dismissals in Ergowerx I have preclusive effect in state court | Smartfish argued the federal rulings did not bar its state action (and Ergowerx II lack of jurisdiction dismissal preserved its rights) | Maxell argued federal dismissals with prejudice under Rule 12(b)(6) were judgments on the merits and bar re-litigation (res judicata) | Federal dismissal in Ergowerx I was on the merits and precludes relitigation of the same claims in state court |
| Whether adding Hitachi (affiliate) and reframed claims avoids preclusion | Smartfish contended adding Hitachi and a NJCFA count created distinct claims | Maxell argued Hitachi is in privity and the new allegations arise from the same transaction, so preclusion applies | Addition of Hitachi and NJCFA allegations did not avoid res judicata; privity and sameness of transaction govern preclusion |
| Whether claims dismissed for insufficient specificity (fraud, conversion) can be repleaded in state court | Smartfish asserted more detailed allegations in state complaint cure prior defects | Maxell argued those claims were substantively dismissed and therefore precluded | Claims dismissed on the merits for failure to plead with specificity are precluded from reassertion |
| Scope of surviving breach‑of‑contract claim after federal decisions | Smartfish sought broader contract damages/ongoing obligations | Maxell argued any contract liability was limited by the federal court’s interpretation (only the initial 18‑month minimum purchases) | The only breach claim allowed to proceed is the limited breach tied to the eighteen‑month term against Maxell; other claims are barred |
Key Cases Cited
- Ergowerx Int'l, LLC v. Maxell Corp. of Am., 18 F. Supp. 3d 430 (S.D.N.Y. 2014) (district court decision dismissing most claims with prejudice)
- Ergowerx Int'l, LLC v. Maxell Corp. of Am., 18 F. Supp. 3d 453 (S.D.N.Y. 2014) (district court decision dismissing remaining breach claim without prejudice for lack of supplemental jurisdiction)
- Velasquez v. Frank, 123 N.J. 498 (N.J. 1991) (dismissal with prejudice operates as adjudication on the merits for res judicata purposes)
- Watkins v. Resorts Int'l Hotel & Casino, 124 N.J. 398 (N.J. 1991) (preclusive effect of federal judgments governed by federal law; pendent jurisdiction principles)
- Moitie v. United States, 452 U.S. 394 (U.S. 1981) (Rule 12(b)(6) dismissal is a judgment on the merits)
- SEC v. First Jersey Sec., Inc., 101 F.3d 1450 (2d Cir. 1996) (preclusion applies where same evidence and transactions support both claims)