Morgan v. Hartman

Background

Michael Morgan, who was representing himself, sued Scott Hartman, Mario Monello, Vincent Puma, Thae Kweon, Thomas Pinou, St. Mark’s World Acquisitions LLC, NPM Management, LLC, and Flex Employee Services LLC. He alleged that the defendants fraudulently induced him to sell 80% of the stock of St. Mark’s World, violated several agreements, failed to pay the full purchase price and distributions, made false statements in court proceedings, used company assets to obtain loans through misrepresentations, and involved him in a Small Business Administration Paycheck Protection Program loan-fraud scheme. He sought $10 million in damages.

Morgan invoked federal-question jurisdiction under 28 U.S.C. § 1331 and identified 18 U.S.C. § 1341, the federal mail-fraud statute, as the basis for his claims. The opinion also described possible state-law claims, including fraud and misrepresentation.

Federal-question jurisdiction

The court explained that federal-question jurisdiction requires a claim arising under the Constitution, a federal law, or a treaty. It held that 18 U.S.C. § 1341 does not create a private right of action, meaning that a private individual cannot use that criminal statute to bring a damages claim. The court also explained that a private individual cannot initiate a criminal prosecution or ask the court to order one. It therefore concluded that Morgan had no legally recognized claim arising under federal criminal law.

Diversity jurisdiction

The court considered whether Morgan’s possible state-law claims could proceed under diversity jurisdiction. That form of jurisdiction generally requires complete diversity of citizenship between the plaintiff and defendants and an amount in controversy exceeding $75,000. The court stated that Morgan indicated that he and many defendants were domiciled in New York, so complete diversity was absent. Morgan also provided no information about the citizenship of the members of the defendant limited liability companies, whose citizenship depends on the citizenship of their members.

The court noted that Morgan identified some defendants as domiciled in New Jersey and that he might be able to establish diversity jurisdiction if he amended his complaint and removed defendants whose citizenship was the same as his. The opinion also stated that Morgan might instead pursue his state-law claims in state court.

Pleading requirements

The court found that many of Morgan’s allegations were legal conclusions rather than factual descriptions of what happened. Federal Rule of Civil Procedure 8 requires a complaint to provide a short and plain statement showing a plausible entitlement to relief. If Morgan pursued fraud claims, Rule 9 requires him to describe the alleged fraudulent statements and circumstances with particularity. The court further explained that fraud and negligent misrepresentation claims require facts showing reliance on the alleged misrepresentations.

Disposition

The court granted Morgan leave to file an amended complaint within 60 days. The amended complaint had to state facts supporting federal subject-matter jurisdiction, provide a short and plain statement of the claims, and plead any fraud claim with particularity. The court directed Morgan to submit it to the Pro Se Intake Unit, label it “Amended Complaint,” and use docket number 22-CV-3367 (LTS). No summons would issue at that time. The court stated that if Morgan did not comply and could not show good cause, the complaint would be dismissed for failure to state a claim. The court also certified that an appeal would not be taken in good faith and denied permission to appeal without prepaying fees.