GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

United States District Court

Eastern District of Pennsylvania

Case Number: 2:04-cv-04280-CG

Commerce Commercial Leasing, LLC, as

assignee of NorVergence, Inc.,

Plaintiff,

vs.

Broward Title Company, a Florida

corporation,

Defendant.

/

Defendant’s Motion to Stay Proceedings Until Related Suits

Are Resolved

Defendant, Broward Title Company, by and through its undersigned attorneys, requests that

this court enter its order staying these proceedings until such time as related suits are resolved, and

in support thereof states:

Background

1. By this action, Plaintiff seeks to enforce an “equipment rental agreement” (“ERA”) entered

into between Defendant, Broward Title Company, (“Broward”) a Florida resident, and

NorVergence, a bankrupt reseller of telephone services, a New Jersey resident, which

agreement was assigned to Plaintiff, Commerce Commercial Leasing, LLC, (“CCL”) a

Pennsylvania resident.

2. The suit was originally filed by Plaintiff in the Court of Common Pleas of Montgomery

County, Pennsylvania, and was removed to this court based upon diversity of citizenship and

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

amount in controversy.

3. Broward sought dismissal of Plaintiff’s action based upon a claimed lack of in personnam

jurisdiction, or an alternative transfer of the action to the Southern District of Florida.

4. Plaintiff defended against the motion, asserting proper venue based upon a contractual venue

provision.

5. This court denied the Broward’s motion, finding the venue provision to be enforceable.

6. While Broward’s motion to dismiss was pending, the State of Florida filed suit in state court

against Plaintiff and eleven other leasing companies seeking to enforce “leases” against

Florida residents, assigned to them byNorVergence. The suitseeks an injunction against the

companies to prevent the companies from enforcing the leases. Specifically, the State of

Florida seeks to enforce Florida law in Florida courts to prevent the leasing companies,

including Commerce Commercial Leasing, from violating Florida law by enforcing leases

the Attorney General of the State of Florida has determined to arise from violations of

Florida law—particularly, a statutory scheme to prevent deceptive and unfair trade practices,

§§ 501.201, et seq., FLA. STAT. (2004).

7. A true and correct copy of the suit filed in Florida state court is attached hereto as

Defendant’s Exhibit 1, and by reference, is made a part hereof.

8. A true and correct copy of the docket of the suit filed in Florida state court is attached hereto

as Defendant’s Exhibit 2, and by reference, is made a part hereof, showing the date of filing,

the case number, and the proceedings to date.

9. In connection with the state court action, the State of Florida has sought a temporary

injunction.

10. A true and correct copy of the motion for temporary injunction filed in the suit filed in

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

Florida state court is attached hereto as Defendant’s Exhibit 3, and by reference, is made a

part hereof.

11. A hearing on the motion for temporary injunction is scheduled to be heard by the Florida

state court on December 7, 2004.

12. Prior to November 22, 2004, a group of 133 NorVegence customers similar to Broward,

whose ERAs were assigned to CCL, conducted discovery in the NorVergence bankruptcy,

to obtain copies of documents material to the group’s claims which, if successful, would bar

enforcement of the ERAs.

13. On or about November 22, 2004, the group of 133 NorVegence customers similar to

Broward, whose ERAs were assigned to CCL, filed an adversary proceeding in the

NorVergence bankruptcy, against NorVergence and CCL, in ten counts, seeking the

following relief pertinent to this motion:

a. Count I: a declaratory judgment that the equipment rental agreements, identical to

that of Broward’s, do not document or evidence the rental or lease of the telephone

equipment, labeled by NorVergence as a “Matrix” device, being known within the

telecommunications industry as a channel bank.

b. Count II: a declaratory judgment that the equipment rental agreements, identical to

that of Broward’s, do not qualify as a “lease” nor as a “finance lease” under New

Jersey’s enactment of the Uniform Commercial Code (“UCC”);

c. Count III: a claim for money damages for conversion against CCL;

d. Count IV: a claim for money damages for violations of New Jersey Consumer Fraud

Act, against CCL;

e. Count V: a claim for money damages for federal RICO violations against CCL;

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

f. Count VI: a claim for money damages for unjust enrichment against CCL;

g. Count VII: a claim for money damages for violation of N.J.S.A. 2A:32-1, Debts or

Obligations Fraudulently Contracted or Incurred, against CCL;

h. Count IX: equitable subordination of CCL’s claim against NorVergence in the

bankrupt estate.

14. A true and correct copy ofthe adversaryproceeding is attached hereto as Defendant’s Exhibit

4, and by reference, is made a part hereof.

15. Adversary proceedings against approximately eleven other leasing companies, identical in

allegations and relief sought, have been filed to date in the bankruptcy proceeding. More are

presently being prepared.

16. On or about November 4, 2004, the Federal Trade Commission filed suit against

NorVergence, in United States District Court for the District of New Jersey, for injunctive

and other equitable relief, asserting that the ERAs assigned to the leasing companies,

including CCL, resulted from unfair and deceptive acts or practices, in violation of Section

5(a) of the FTC Act, 15 U.S.C.A. § 45(a).

17. A true and correct copy of the FTC Complaint is attached hereto as Defendant’s Exhibit 5,

and by reference, is made a part hereof.

18. Prior to November 22, 2004, counsel for the Plaintiffs in the adversary proceedings,

including Defendant’s Exhibit 4, the assistant attorney general assigned to the Florida state

court action, and the attorney for the Federal Trade Commission, met for hours to review the

documents gathered to date in support of their various claims.

19. At the conclusion of said meeting, the attorney for the FTC stated that the FTC intended to

file suit against the leasing companies, including CCL, for violation of Section 5(a) of the

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

FTC Act, 15 U.S.C.A. § 45(a), for injunctive and other relief.

20. Attorneys General in approximately eleven states have either filed actions similar to

Defendant’s Exhibit 1, or are in the investigatory phases prior to filing similar actions.

21. Best estimates place the number of “lessees” defrauded by NorVergence and the leasing

companies at 11,000, with the total dollar amount of those leases equal to approximately

$200,000,000.

22. On August 16, 2004, a putative class action was filed in Superior Court of New Jersey,

Monmouth County, Law Division, entitled Exquisite Caterers, LLC v. Popular Leasing USA,

Inc., et al., assigned case number 3686-04. The original complaint, attached as Defendant’s

Exhibit 6, would include Broward as a class member, and would include CCL as an unnamed

defendant. The amended complaint, attached hereto as Defendant’s Exhibit 7, specifically

names CCL as a defendant.

23. Plaintiffs’ counsel in the New Jersey state court putative class action suit has been in

conversations with the assistant attorney general for the State of Florida assigned to the State

of Florida case, and the Plaintiffs’ counsel in the Florida federal putative class action suit

(described below), as well as counsel for the leasing company defendants. An amended

complaint is to be filed in the New Jersey action, at which time class certification will be

sought.

24. On September 23, 2004, a putative class action was filed in the United States District Court

for the Southern District of Florida, entitled Sterling Asset & Equity Corp. v. Preferred

Capital, Inc., and was assigned case number 04-22399. CCL was not originally a partyDefendant to that action. However, on October 15, 2004, an amended complaint was filed

which joined CCL as a named party-Defendant. A true and correct copy of the amended

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However, given the number of Defendants in the state court action who have not 1

responded to either the complaint or motion for temporary restraining, it would not be

unexpected for the hearing to be continued. Beyond the motion for temporary restraining order,

“all pending motions” are set to be heard by the state court on that same date. (See Defendant’s

Exhibit 2.)

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

complaint in the Florida federal, putative class action is attached hereto as Defendant’s

Exhibit 8, and by reference, is made a part hereof.

25. Broward would constitute a member of the class of the Florida federal district court action,

and CCL is a named Defendant. 

26. Informal discovery by Plaintiffs’ counsel in the Florida federal district court action has

progressed farther than the progress of the instant case.

Allegations of Motion

27. It would be wise judicial administration to stay this proceeding pending, first, the outcome

of the Florida state court action, second, the outcome of the adversary proceeding, and third,

the outcome of either of the two putative class actions, or both.

28. It would be wise judicial administration to stay this proceeding pending the outcome of any

action filed by the FTC, should the FTC file such an action.

29. Staying this action pending the outcome of the above proceedings would avoid piecemeal,

and potentially contrary results of the pending, litigation.

30. The only progress made in the instant litigation is the briefing and disposition of Broward’s

motion to dismiss. However, the progress made in the Florida state court action, the

adversary proceedings, and the putative class actions is greater. First, the Florida state court

action is set for hearing on a motion for a temporary restraining order within three weeks .

1

Second, the adversary proceedings were filed after plaintiff’s counsel obtained discovery

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

through the bankruptcy proceeding.

31. The Florida state court action is dependent upon the application of state, not federal, law.

32. If the State of Florida is successful in the action, this action can not proceed without CCL

being in violation of the state court’s order. Principles of comity would have this court

respect the decision of the state court.

33. The Florida state action is obviously an effort by the State of Florida to implement control

of offensive conduct occurring within the State of Florida.

34. The adversary proceedings are dependent upon the application of state law for the majority

of the complaint, although one federal count (federal RICO) is involved, and federal

bankruptcy law is involved in two counts.

35. Broward’s undersigned counsel has requested that CCL’s counsel advise him of CCL’s

position on this motion. CCL opposes the motion.

Memorandum of Law

Power to Stay Proceedings

This court has the power to stay proceedings:

[T]he power to stay proceedings is incidental to the power inherent in every

court to control the disposition of the causes on its docket with economy of time

and effort for itself, for counsel, and for litigants. How this can best be done

calls for the exercise of judgment, which must weigh competing interests and

maintain an even balance.

Pirkle v. Ogontz Controls Co., 1987 WL 19882, p. 3 (E.D.Pa.), citing Landis v. North American Co.,

299 U.S. 248, 254-55 (1936).

Burford Abstention Doctrine

In Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098 (1976), the Supreme Court discussed

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

the circumstances under which it would be appropriate for a federal court to abstain from exercising

jurisdiction. One such circumstance occurs when a state seeks to establish and enforce a coherent

policy which concerns complicated local matters. Under those circumstances, “a sound respect for

the independence of state action requires the federal equity court to stay its hand.” Burford, at 334,

at 1107.

The third circuit interpreted Burford to hold “[i]f the exercise of federal review would be

disruptive of state efforts to establish a coherent policy, and the policy concerns complicated local

matters, abstention may be justified.” United Servs. Auto. Ass’n v. Muir, 792 F.2d 356, 364 (3d Cir.

1986), cert. denied sub nom. Grode v. United Servs. Auto. Ass’n, 479 U.S. 1031, 107 S.Ct. 875

(1987).

Under Florida law, the administrative agency having enforcement powers of the Florida

Deceptive and Unfair Trade Practices Act is the Department of Legal Affairs when the violation

occurs in or affects more than one judicial circuit in the State of Florida. § 501.203(2), FLA.

STAT. (2004). The Dept. of Legal Affairs, through the Office of the Attorney General of the State

of Florida, has concluded, and therefore alleged in the pending suit against the leasing companies,

that the following representations and provisions of the equipment rental agreement are deceptive,

unfair and/or unconscionable—in short, they violate Florida law:

1. Removing any obligations by NorVergence assignees to the consumer;

2. Requiring that all legal actions relating to the contract be brought exclusively in the state

where NorVergence had its principal offices, i.e., New Jersey, or if assigned, in the state

where the assignee’s principal offices are located, a location unknown at the time of

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This latter fact is what caused the state court in Copelco Capital, Inc. v. Shapiro, 750 2

A.2d 773 (Supr. Ct. N.J. 2000) to disagree with the federal district court of New Jersey, and

hold that the forum selection clause like the one in the case at bar was unenforceable.

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

execution of the contract ;

2

3. Characterizing the vast majority of the total fees agreed to by the consumer as payments for

the Matrix box which grossly exceeds its commercial value;

4. Characterizing the agreement as a finance lease under Article 2A of the Uniform Commerical

Code (“UCC”), in an unconscionable effort to gain the protection for finance leases; and,

5. Waiving all the consumer’s defenses to demands for payment, even if the promised services

were terminated or never provided.

Defendant’s Exhibit 1, p. 9, ¶ 28.

The state administrative agency charged with enforcing the Florida law to the benefit of all

statewide consumers is seeking to do so by enjoining enforcement of the ERAs. Clearly, Buford

does not require abstention whenever there exists a state regulatory process, or even in all cases

where there is a potential for conflict with state regulatory law or policy. New Orleans Public Serv.,

Inc. v. Council of City of New Orleans, 491 U.S. 350, 359, 109 S.Ct. 2506, 2514 (1989) cited in

Southeastern Pennsylvania Transp. Auth. v. Pennsylvania Public Utility Comm., 826 F.Supp. 1506,

1513 (E.D.Pa. 1993). However, we have already experienced a conflict between the state regulatory

authority and this federal court: the state regulatory authority determined, and asserted, that the

overly broad choice of venue provision in the contracts was unfair and unconscionable—just as the

Superior Court of New Jersey found in Copelco, and contrary to the holding in Danka Funding, LLC

v. Page, Scrantom, Sprouse, Tucker & Ford, P.C., 21 F.Supp.2d 465, 467-68 (D.N.J. 1998).

Defendant’s Exhibit 1, p. 9, ¶¶ 28.b., and 29. This court has ruled that such clause is “not

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

unreasonable under the circumstances.” (DE #11.) As the Copelco concurring opinion expressed,

“In my view the result of a case such as this should not turn, as it does here, on whether the

defendant removed the matter to federal court on the basis of diversity.” Copelco, at 777-78.

Broward believes, and therefore asserts, that under Burford, especiallywhen teamed with the

Colorado River doctrine, this court should stay this action.

Colorado River Doctrine

Whether this court should exercise its power to stay proceedings rests on considerations of

“wise judicial administration, giving regard to conservation of judicial resources and comprehensive

disposition of litigation.” Pirkle v. Ogontz Controls Co., 1987 WL 19882, p. 3 (E.D.Pa.), citing

Colorado River Water Conservation District v. United States, 424 U.S. 800, 817 (1976). It seems

clear that wise judicial administration would weigh in favor of a stay. Should the Florida state court,

before whom the State of Florida has brought an action for injunction to prevent enforcement efforts

by CCL, enter an injunction, CCL could not proceed with this action without violating that court’s

injunction. A hearing on the state’s motion for temporary injunction is set for December 7, 2004.

While a denial of the temporary injunction would not prevent the entry of a permanent injunction

entered at the conclusion of the action, the entry of a temporary injunction would end this litigation.

This court has interpreted and applied the Colorado River doctrine in the following fashion:

Although plaintiffs are correct in asserting that “[a]bstention from the

exercise of federal jurisdiction is the exception, not the rule,” Colorado River

Water Conservation District v. United States, 424 U.S. 800, 813 (1976), I find

that the exceptional circumstances of the instant case calls for judicial deference

to the pending state proceeding.

In Colorado River, the Supreme Court recognized that

there are principles unrelated to considerations of proper

constitutional adjudication and regard for federal-state relations

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

which govern in situations involving the contemporaneous

exercise of concurrent jurisdictions, either by federal courts or by

state and federal courts. These principles rest on considerations

of "[w]ise judicial administration, giving regard to conservation

of judicial resources and comprehensive disposition of litigation."

424 U.S. at 817 (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342

U.S. 180, 183 (1952)). In accordance with this recognition, the Court

determined that circumstances permitting the dismissal of a federal suit in

response to parallel state proceedings for reasons of wise judicial administration,

"though exceptional, do nevertheless exist." 424 U.S. at 818.

The "exceptional circumstances" test as formulated by the Court in

Colorado River and restated in its subsequent decision in Moses H. Cone

Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983), requires

a consideration of the inconvenience of the federal forum, the desirability of

avoiding piecemeal litigation and the order in which jurisdiction was obtained

by 15. Two additional factors highlighted in Moses H. Cone are the

comparative progress made in each proceeding and whether federal or state law

provides the rule of decision governing the issues in dispute. 460 U.S. at 16.

* * *

... First it is a waste of judicial resources for this court to rehear

extensive evidence and arguments already presented before the state court with

regard to the issue of ownership. Second, it is unfair to impose on either party

the burden of litigating the identical issue of ownership in two forums. ...

Where as here, a state court has decided that the patents were to the contrary

owned by the alleged infringer it would be both injudicious as well as contrary

to principles of comity for this court to proceed on the infringement claim in the

absence of a final ruling from the state court. ...

* * *

Finally, where as here, the rules of decision with regard to the ownership

of the patents are governed by state law, and the state court has substantially

progressed with the task of deciding issues of state law of critical importance to

a parallel action in federal court, principles of comity in addition to those of wise

judicial administration strongly counsel deference to the state court

determination by staying the federal action.

Pirkle v. Ogontz Controls Co., 1987 WL 19882 (E.D.Pa.) (Emphasis added).

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

First, it is a waste of judicial resources for this court to rehear extensive evidence and

arguments which will have already been presented to the state court with regard to the issue of

whether the contracts sought to be enforced were violative of Florida’s Deceptive and Unfair

Trade Practices Act at the time they were entered into, and therefore, unenforceable. 

Second, it is unfair to impose on either party the burden of litigating the identical issue

of enforceability in two fora. CCL certainly has an incentive to present all of its evidence

mitigating against such a finding by the state court. The State of Florida is seeking an

injunction to prevent CCL and the other Defendants from enforcing all of their Florida

agreements.

Finally, whether the contracts violate Florida’s Deceptive and Unfair Trade Practices

Act at the time they were entered into, and therefore, are unenforceable is governed by state

law. The state court has progressed to the point where an evidentiary hearing is to be held

shortly, even though it was filed after the present action. The evidentiary hearing, and the

court’s ruling based thereon, may bring both the state court action, and this action, to an end.

Therefore, it would be prudent for this court to stay this action until the Florida state

court action is concluded.

Putative Class Actions Pending

Large groups of former NorVergence customers have banned together to litigate the

enforceability of the ERAs—133 in the adversary proceeding suing CCL alone in the

bankruptcy action venued in New Jersey with hundreds others suing leasing companies other

than CCL, a substantial number (although uncounted) in the Florida federal district court

putative class action, and another substantial number (although uncounted) in the New Jersey

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GOSSETT & GOSSETT, P.A. 4700 Sheridan Street, Building I, Hollywood, Florida 33021 • (954) 983-2828 • Fax (954) 983-2850

state court putative class action.

Additionally, groups are forming in California, Texas, Illinois, Missouri, New York, and

other states, urging their attorneys general to file suit, and such groups are contemplating filing

their own class actions. Many attorneys general have already filed suit, and some, such as

Texas, are in the stage of collecting information from the leasing companies to enable suit to

be brought. Suits in California and Texas are said to exist, but the undersigned has not found

them, and CCL has not been served with them.

The Florida Attorney General estimates that there are 700 Florida residents affected by

the suit it has brought.

While these cases may ultimately find their way to a multi-district litigation panel under

28 U.S.C.A. § 1407, certainly to proceed with the instant case in light of the foregoing would

be unwise, and potentially wasteful of judicial resources.

WHEREFORE, Broward Title Company, by and through its undersigned attorneys, requests

that this court enter its order staying these proceedings until such time as related suits are resolved,

and requests that this court grant it such further relief as this court deems just.

Certificate of Mailing

I HEREBY CERTIFY that a true and correct copy of the foregoing has been mailed by

United States mail, postage prepaid, this 24 day of November, 2004, to: Stephen Levin, th

Esq., of the law offices of Lamm, Rubenstone, Totaro & David, LLC, Attorneys for Plaintiff

Commerce Commercial Leasing, 4 Greenwood Square, Suite 200, Bensalem, PA 19020-8544;

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