IN THE UNITED STATES DISTRICT COURT FOR THE NORTHE

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION

CAR CHARGING GROUP, INC. a Nevada Corporation and 350 HOLDINGS, LLC, a Florida limited liability company
Plaintiffs,

Case No. 13 CV 03124 v. Hon. Elaine E. Bucklo

JNS HOLDING CORPORATION, a Delaware Corporation, and
JNS POWER & CONTROL SYSTEMS, INC., an Illinois Corporation
Defendants.

MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS
PURSUSANT TO FED. R. CIV. P. 12(b)(6) AND 12(b)(7)

Defendants, JNS Holding Corporation and JNS Power & Control Systems, Inc. (collectively, “JNS”), by their attorneys, hereby submits this Memorandum in support of their Motion to Dismiss the Complaint of Car Charging Group, Inc. and 350 Holdings, L.L.C. (collectively, “Plaintiffs”) in its entirety.

INTRODUCTION

JNS moves to dismiss the Plaintiffs’ Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that this action is barred by the doctrine of res judicata based on the dismissal with prejudice of an action filed by Plaintiffs against JNS in the Southern District of New York, and because Plaintiffs lack standing to seek declaratory relief with respect to a contract to which they are not a party. In addition, JNS moves to dismiss Count II pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure, based on Plaintiffs’ failure to join 350 Green LLC as necessary party under Rule 19 of the Federal Rules of Civil Procedure.

BACKGROUND FACTS

I. The Parties and 350 Green LLC.
JNS Holding is a Delaware Corporation with a principal place of business in Arlington Heights, Illinois. (Complaint, ¶4). JNS Power & Control Systems, Inc., is an Illinois corporation with its principal place of business in Arlington Heights, Illinois.(Complaint, ¶5). JNS Power & Control Systems, Inc. is a service provider for electric vehicle (“EV”) charging stations. Car
Charging Group, Inc. (“CCGI”), is a Nevada corporation with a principal place of business in Miami, Florida. (Complaint, ¶2). 350 Holdings, LLC is a Florida limited liability company whose sole member is CCGI. (Complaint, ¶3).

350 Green LLC (“350 Green”), a non-party to this lawsuit, also provides services for EV charging stations. (Complaint, ¶10). 350 Green was awarded a grant for $1,911,000 by the City of Chicago to install and maintain EV charging stations in the Chicago area (the “Chicago Project”) and executed a contract with the City on or about October 18, 2010, which called for the Chicago Project to be completed on or about December 31, 2013. (Complaint, ¶13).

II. The Asset Purchase Agreement Between JNS and 350 Green LLC.
JNS and 350 Green entered into negotiations, prior to February 2013, for JNS’s purchase of certain assets of 350 Green, namely one hundred sixty eight (168) completed and installed electric car chargers and fifty one (51) Coulomb or equivalent Level II Chargers (the “Chargers”). (Complaint, ¶¶19, 41). On or about February 11, 2013, JNS and 350 Green entered into a Formal Letter of Intent (“LOI”) for JNS to acquire the Chargers and rights to the Chicago Project from 350 Green. (Complaint, ¶19). JNS and 350 Green ultimately entered into an Asset Purchase Agreement (“APA”) on or about April 17, 2013. (Complaint, ¶41).

III. CCGI’s Negotiations With 350 Green LLC.
CCGI began negotiations with 350 Green to purchase all of the membership interests of 350 Green and executed a terms sheet agreement on or about July 5, 2012. (Complaint, ¶10). In August 2012, CCGI requested 350 Green to enter into a new term sheet. (Complaint, ¶15). On or about March 8, 2013, CCGI and 350 Green entered into an Equity Exchange Agreement. (Complaint, ¶26).

IV. Plaintiffs’ Prior Complaint And Its Dismissal.
On April 10, 2013, Plaintiffs filed a complaint in the District Court for the Southern District of New York, which named JNS Power & Control Systems, Inc., and JNS Holding Corporation as defendants (SDNY Case. No. 13cv2389) (“SDNY Lawsuit”), and also named 350
Green and its principal members Mariana Gerzanych and Timothy Mason as defendants.1 A copy of Plaintiffs’ complaint (SDNY Case. No. 13cv2389, Dkt. 1) in the SDNY Lawsuit is attached hereto as Exhibit A. After receiving a letter from CCGI indicating that CCGI had reached a settlement with 350 Green, on April 23, 2013, Judge Jesse M. Furman entered an order dismissing the SDNY Lawsuit (“Dismissal Order”). A copy of the April 23, 2013 dismissal
order (SDNY Case. No. 13cv2389, Dkt. 30), which includes a copy of Plaintiff’s April 23, 2013 letter, is attached hereto as Exhibit B. The Dismissal Order dismissed the SDNY Lawsuit, in its entirety, “without prejudice to the right to reopen the action within thirty (30) days if the settlement is not consummated.” Exhibit B. Based on a review of the PACER docket in the SDNY Lawsuit, to date, Plaintiffs have not sought leave to reinstate the SDNY Lawsuit as to JNS or otherwise amend the Dismissal Order. A copy of the SDNY Lawsuit Docket, dated May 1 “A Court may take judicial notice of public records, including public court documents filed in other lawsuits, without converting a motion to dismiss pursuant to Rule 12(b)(6) to a motion for summary
judgment.” PharMerica Chicago, Inc. v. Meisels, 772 F. Supp. 2d 938, 947 (N.D. Ill. 2011). 30, 2013 is attached hereto as Exhibit C. Pursuant to the applicable case law, infra, pp. 5-8, the dismissal of the SDNY Lawsuit is now a dismissal with prejudice.

ARGUMENT

I. Standard of Review.

A court looks to the sufficiency of the complaint in reviewing a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Autry v. Northwestern Premium Servs. Inc., 144 F.3d 1037, 1039 (7th Cir. 1998). In examining a motion to dismiss, a court accepts all well-pleaded allegations in the complaint as true, Flannery v.Recording Indus. Ass’n of Am., 354 F.3d 632, 637 (7th Cir. 2004), and views plaintiff’s factual allegations and any inferences reasonably
drawn therefrom in the light most favorable to the plaintiff. Yasak v. Ret. Bd. of the Policemen’s Annuity Fund, 357 F.3d 677, 678 (7th Cir. 2004). A complaint should be dismissed pursuant to
Rule 12(b)(6) when “it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Weizeorick v. Abnamro Mortgage Group, Inc., 337 F.3d
827, 830 (7th Cir. 2003).

Moreover, “if the court determines that there is no way to structure a judgment in the absence of the party that will protect both the party's own rights and the rights of the existing
litigants, the unavailable party is regarded as ‘indispensible’ and the action is subject to dismissal under Rule 12(b)(7).” Int'l Union of Operating Engineers, Local 150, AFL-CIO v. Team 150
Party, Inc., 07C3972, 2008 WL 4211561, at *1 (N.D. Ill. Sept. 5, 2008)

II. Choice Of Law For Collateral Estoppel Or Res Judicata.
Because this is a diversity action, the Northern District of Illinois will look to the state law choice of law rules of the forum in which it sits, Illinois. Tuteur Assocs., Inc. v. Taubensee Steel & Wire Co., 861 F.Supp. 693, 695 (N.D. Ill. 1994). Under Illinois state law, the choice of law rule is that “the collateral estoppel or res judicata effect of a judgment is determined by the law of the jurisdiction where the judgment is rendered.” Id. at 696 (citing Instituto Nacional de
Comercializacion Agricola v. Continental Ill. Nat’l Bank & Trust Co., 858 F.2d 1264, 1271 (7th Cir. 1988)). Because the Dismissal Order was rendered in a federal jurisdiction, i.e., the Southern District of New York, the Court should apply the federal common law of res judicata. Graebell/Los Angeles Movers, Inc. v. Johnson, No. 04 C 8282, 2006 WL 533360, at *3 n.3 (N.D. Ill. Mar. 1, 2006). Thus, any issues involving interpretations of the law of collateral estoppel or res judicata should be made by utilizing federal common law.

III. Plaintiffs’ Claims Against JNS Are Barred Under The Doctrine Of Res Judicata. Plaintiffs first sought relief against JNS in the Southern District of New York by filing the SDNY Lawsuit on April 10, 2013, seeking damages for tortious interference with contractual relations and injunctive relief, and additional claims against 350 Green. (Ex. A, Case No. 13cv2389, Dkt. 1, pp. 1-7, 14-16). Based upon Plaintiffs’ representations to the court regarding
resolution of the claims, the court entered the Dismissal Order. The court limited Plaintiffs’ right to reinstate within 30 days, only “if the settlement was not consummated.” (Ex. B, Dismissal
Order). A settlement agreement was reached on or about April 22, 2013. (Complaint, ¶38).2 An order of dismissal with leave to reinstate becomes a final dismissal, with prejudice, when the
plaintiff fails to seek reinstatement during the period allotted. Kaplan v. Zenner, 956 F.2d 149, 150 (7th Cir. 1992) (holding the case had not been reinstated and the order dismissing it with
prejudice became final). Therefore, on May 23, 2013 (thirty days after entry of the Dismissal Order), the SDNY Lawsuit was dismissed, with prejudice.

2 In its Complaint, CCGI includes only skeletal information concerning the settlement agreement reached in the SDNY Lawsuit, failing to allege any facts concerning any of the material terms or even the parties involved. Plaintiffs are barred from now pursuing claims against JNS which were or could have been fully and finally adjudicated in the SDNY Lawsuit, because its prior complaint has been dismissed with prejudice. “The doctrine of res judicata provides that a final judgment rendered by a court of competent jurisdiction on the merits is conclusive as to the rights of the parties and their privies, and as to them constitutes an absolute bar to a subsequent action involving the same claim, demand or cause of action.” Licari v. City of Chicago, 298 F.3d 664, 666 (7th Cir. 2002). “A dismissal with prejudice is as conclusive of the rights of parties as an adverse judgment after trial, being res judicata of all questions which might have been litigated in the suit.” Kraly v. Nat'l Distillers & Chem. Corp., 502 F.2d 1366, 1368 (7th Cir. 1974). “Res judicata, also known as “claim preclusion,” refers to the “preclusive effect of a judgment in foreclosing litigation of matters that were or could have been raised in an earlier suit.” Paragon Sales & Serv., Inc. v. Onyx Arms Int'l, 93 C 4039, 1997 WL 89230, at *2 (N.D. Ill. Feb. 25, 1997). Notably, “res judicata applies even if the dismissal was the result of a settlement or compromise.” Torres v.
Rebarchak, 814 F.2d 1219, 1223 (7th Cir. 1987)

The defense of res judicata is applicable to Plaintiffs’ current claims for tortious interference with contractual relations (Count I) and declaratory judgment (Count II). The doctrine of res judicata applies where three separate elements are met: (1)identical parties, or their privies, (2) a final judgment on the merits, and (3) identity of causes of action. Paragon, 1997 WL 89230, at *3. First, there can be no question that Plaintiffs are the same plaintiffs in the SDNY Lawsuit and in the instant Complaint and that JNS are the same defendants in both. Second, there is no question that a final judgment on the merits was reached in the SDNY Lawsuit, as the complaint was dismissed with prejudice pursuant to a settlement. “An order of dismissal with prejudice is generally considered to be a final judgment on the merits for purposes of res judicata.” Wilson v. Bob Watson Chevrolet, Inc., 03 C 5535, 2004 WL 432493, at *3 (N.D. Ill. Mar. 2, 2004); see also Torres, 814 F.2d at 1223.

The third requirement for application of res judicata, identity of causes of action, is also met here. The tortious interference claim alleged here by Plaintiffs is nearly identical to the
tortious interference claim Plaintiffs stated in the SDNY Lawsuit. In fact, Paragraphs 79-84 of the SDNY Lawsuit are reiterated, word for word, in Paragraphs 45-50 of the instant Complaint; and Paragraphs 86, 88, and 89 of SDNY Lawsuit closely mirror Paragraphs 54, 57, and 58 of the instant Complaint. “If the same facts are essential to maintain both proceedings or the same
evidence is necessary to sustain the two, there is identity between the causes of action asserted, and res judicata bars the later one.” Paragon, 1997 WL 89230, at *3. There can be no question of the identity of causes of action of the tortious interference claims. Therefore, Count I (tortious interference with contractual relations) of the Complaint should be dismissed.

Further, Plaintiffs could have alleged a claim seeking declaratory judgment with respect to the JNS agreement with 350 Green in the SDNY Lawsuit, as said claim arises out of the same set of operative facts that formed the basis of its claim of tortious interference with contractual relations filed against JNS in the SDNY Lawsuit. “Under the federal common law of res judicata, a subsequent suit is barred if the claim on which it is based arises from the same incident, events, transaction, circumstances, or other factual nebula as a prior suit that had gone to final judgment.” Lurz v. Monahan, 04C6307, 2006 WL 2349724, at *5 (N.D. Ill. Aug. 11, 2006). “Once a transaction has caused injury, all claims arising from that transaction must be brought in one suit. Thus, a mere change in the legal theory does not create a new cause of action.” Petit v. City of Chicago, 90 C 4984, 1991 WL 44830, at *2 (N.D. Ill. Mar. 22, 1991). Dismissal of Count II (declaratory judgment) is also proper here, as there can be no question that operative facts supporting the current declaratory judgment claim are part of “the same incident, events, transaction, circumstances, or other factual nebula” as the tortious interference with contractual relations alleged in the SDNY Lawsuit. Compare generally Paragraphs 1-43 and 60- 80 of the Complaint with Paragraphs 1-33, 78-89, and 91-100 of the SDNY Complaint.

Plaintiffs are barred from now bringing any claims that were or could have been raised previously because, “claims from the current complaint all arise from the same nucleus of operative fact [as the SDNY Lawsuit], they are foreclosed by the Settlement Agreement under the principles of res judicata.” U.S. ex. rel. Sarafoglou v. Weill Medical College of Cornell Univ., 451 F. Supp. 613, 620 (S.D.N.Y. 2006). Accordingly, Plaintiffs’ complaint should be dismissed, with prejudice, in its entirety under the doctrine of res judicata.

IV. Plaintiffs Lack Standing To Seek Declaratory Judgment Against JNS. Should the Court find one or both of Plaintiffs’ claims are not barred by the doctrine of res judicata, Count II of the Complaint should still be dismissed as Plaintiffs lack standing to
bring a claim for declaratory judgment in connection with the APA. As a non-party to the contract between JNS and 350 Green, Plaintiffs lack standing to seek declaratory judgment against JNS concerning the validity or enforceability of the APA. “Only parties to a contract or those in privity with the parties have rights under the contract.” Am. Gen. Fin. Servs. of Illinois,
Inc. v. Riverside Mortgage Co., Inc., 02 C 3518, 2005 WL 1211583, at *3 (N.D. Ill. May 19, 2005). “Under Illinois law, a cause of action based on a contract may be brought only by a party to that contract, by someone in privity with such a party, or by an intended third-party beneficiary of the contract. Privity of contract has been defined as mutual or successive relationship to the same rights of property.” Kaplan v. Shure Bros. Inc., 266 F.3d 598, 602 (7th Cir. 2001).

First, Plaintiffs are not a party to the Asset Purchase Agreement between 350 Green and JNS. Second, Plaintiffs are not a third-party beneficiary of the APA. Notably, Plaintiffs have not alleged any facts demonstrating they were an intended third-party beneficiary of the APA. “Plaintiffs must allege express language in the contract identifying the third-party beneficiary or
imply a showing where the implication that the contract applies to third parties [is] so strong as to be practically an express declaration.” Doe v. Franco Prods., 99 C 7885, 2000 WL 816779, at
*5 (N.D. Ill. June 22, 2000). Plaintiffs have made no such allegations asserting standing as an intended third-party beneficiary of the APA

Third, Plaintiffs are not in privity with either party to the APA and have alleged no facts which suggest CCGI established privity with 350 Green or JNS to rights or obligations under the APA. See Kaplan, 266 F.3d at 602 (finding plaintiff’s failure to plead facts that rights to a specific contract were transferred to him was fatal to a claim of privity based on an assignment of beneficial interest). Plaintiffs’ lack of standing to challenge the April 17, 2013 APA is not affected by the fact that CCGI later entered into the Equity Exchange Agreement with 350 Green. (Complaint, ¶¶39-40). Notwithstanding the Equity Exchange Agreement between 350 Green and CCGI, 350 Green remains an active Illinois limited liability corporation and the only party with rights and obligations under the APA. Plaintiffs have alleged no facts which would establish privity – that CCGI is a successor to 350 Green or that the Equity Exchange Agreement provided CCGI with 350 Green’s rights or obligations under the APA.

Based on the allegations as stated in the Complaint, Plaintiffs are not proper parties in interest who could bring a claim for declaratory judgment concerning the rights of the parties to the APA. There are no allegations in the Complaint that establish Plaintiffs have the requisite standing to assert claims related to the APA, including any claims of 350 Green. Plaintiffs have not alleged any rights as a successor corporation of 350 Green or alleged that 350 Green has made any assignment to Plaintiffs of 350 Green’s rights or obligations under the APA. In the absence of any such allegations, Plaintiffs remain strangers to the APA who lack standing to pursue the claim for declaratory judgment alleged in the Complaint. See Wallis v. Card Servs. Int'l, Inc., 10 C 7250, 2012 WL 1866374, *6 (N.D. Ill. May 22, 2012) (finding plaintiff lacked standing to bring claims against defendant as plaintiff was not a party to the contract at issue).

Plaintiffs’ failure to allege any facts necessary to establish proper standing to bring a claim for declaratory judgment against JNS is fatal to the claim for declaratory judgment. Accordingly, for this additional reason, Count II of the Complaint for declaratory judgment should be dismissed with prejudice pursuant to Fed. R. Civ. P. 12(b)(6).

V. Plaintiffs’ Claim For Declaratory Judgment Should Be Dismissed For Failure To Name A Necessary Party Pursuant to Fed. R. Civ. P. 12(b)(7).

Plaintiffs seek declaratory relief in the form of a finding by this Court that the APA between JNS and 350 Green is void. Plaintiffs have named only JNS as defendants in the claim for declaratory judgment. Pursuant to Fed. R. Civ. P. 19, however, 350 Green is a required party to such a claim, as 350 Green is a party to the APA.

Rule 19 of the Federal Rules of Civil Procedure provides:

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:

(A) in that person's absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may:

(i) as a practical matter impair or impede the person's ability to
protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

Fed R. Civ. P. 19. “The purpose of Rule 19 is to permit joinder of all materially interested parties to a single lawsuit so as to protect interested parties and avoid waste of judicial resources.” Bahlenhorst v. Vrdolyak, 08 C 5474, 2009 WL 65180, *2 (N.D. Ill. Jan. 9, 2009). Plaintiffs’ claim for declaratory judgment (Count II) is premised on the fact that a valid and binding agreement for Plaintiffs’ purchase of 350 Green’s membership interests existed at the time of 350 Green’s negotiations and ultimate agreement with JNS. The Seventh Circuit has held, “A judicial declaration as to the validity of a contract necessarily affects, as a practical
matter, the interests of both parties to the contract.” U.S. ex rel. Hall v. Tribal Dev. Corp., 100 F.3d 476, 479 (7th Cir. 1996). “When the absent party is a party to the contract at issue in the claim, the Seventh Circuit has held that the party is a necessary one.” Elmhurst Consulting, LLC v. Gibson, 219 F.R.D. 125, 127-28 (N.D. Ill. 2003). Accordingly, 350 Green is a necessary party to the claim for declaratory judgment as stated by Plaintiffs, because 350 Green has a protectable interest in any contract to which it is a party, including the APA and the Equity Exchange Agreement.

The Complaint puts at issue not only the validity of the APA between JNS and 350 Green but also the validity and enforceability of any agreements between 350 Green and Plaintiffs at the time 350 Green entered into the APA with JNS. In order to reach a determination on whether the APA between JNS and 350 Green is valid, the Court must also determine whether the terms of any valid and enforceable contract between Plaintiffs and 350 Green prohibited or limited 350 Green’s ability to enter into the APA with JNS. “An unjoined party is necessary if it claims an interest relating to the subject of the action and is so situated that disposing of the action in the [party's] absence would adversely affect its ability to protect the claimed interest.” Hall, 100
F.3d at 479.; citing Fed. R. Civ. P. 19(a)(1)(B)(i).

350 Green is an indispensable party to Plaintiffs’ claim for declaratory judgment against JNS. In order for the Court to reach an decision on the merits of Plaintiffs’ claims, the Court will
surely reach certain determinations regarding multiple contracts to which 350 Green is a party. There can be no question that 350 Green has an interest in such rulings, as the Court’s rulings
may “impair or impede” 350 Green’s ability to protect its interest in the APA. Further, any ruling on Plaintiffs’ claims could also result in a potentially adverse ruling concerning any agreement or agreements between 350 Green and Plaintiffs. Accordingly, pursuant to Fed. R. Civ. P. 12(b)(7), Plaintiffs’ complaint should be dismissed for failure to name 350 Green as a necessary party.

WHEREFORE, defendants, JNS Holding Corporation and JNS Power & Control Systems, Inc., respectfully request that the court grant their motion to dismiss, enter an order dismissing Plaintiffs’ Complaint with prejudice, and grant such other relief as the court deems just and appropriate.

Respectfully submitted,

Defendants, JNS Holding Corporation and
JNS Power & Control Systems, Inc.,
/s/ Evan J. Haim

One of their attorneys
Kelly McCloskey Cherf
Patrick E. Deady
Evan J. Haim
HOGAN MARREN, LTD.
321 N. Clark Street, Suite 1301
Chicago, Illinois 60654
312-946-1800