STATE OF NEW JERSEY VS. LUIS A. DIAZ(13-04-0589, BERGEN COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1040-15T4
KAREN DEMARTINI and ANDREW
HAVEN,
Plaintiffs-Appellants,
v.
ROBERT BERLIN, individually and
t/a T.F.J. FITNESS LLC, EDWARD
LEVIN, FERNANDO BARRESE, JILL
BERLIN, individually and T.F.J.
FITNESS LLC,
Defendants,
and
RETROFITNESS, LLC,
Defendant-Respondent.
Argued April 5, 2017 – Decided May 8, 2017
Before Judges Alvarez, Manahan, and Lisa.
On appeal from the Superior Court of New
Jersey, Law Division, Monmouth County, Docket
No. L-3888-10.
Craig Hilliard argued the cause for appellants
(Stark & Stark, attorneys; Mr. Hilliard and
Gene Markin, of counsel and on the briefs).
Justin M. Klein argued the cause for
respondent (Marks & Klein, LLP, attorneys; Mr.
Klein, on the brief).
PER CURIAM
Plaintiffs Karen DeMartini and Andrew Haven appeal from the
Law Division's October 24, 2014 grant of summary judgment to
defendant Retrofitness, LLC (Retro), dismissing their third
amended complaint.1 For the reasons stated by Judge Dennis O'Brien
in his thoughtful and cogent decision, we affirm.
Plaintiffs initially contacted Retro, a gym franchisor, in
2007 regarding their interest in opening a franchise at their
athletic facility premises. Retro's corporate office sent Berlin,
who owned a franchise in Wallington and served as a salesman for
the company, to meet with them regarding the process. Because
acquisition of a franchise would have called for retrofitting the
building DeMartini had just renovated, plaintiffs did not pursue
the matter further.
In December 2008, after selling the building they previously
owned, plaintiffs again contacted Retro regarding a franchise and
met with Berlin, who delivered a franchise application. In mid-
January 2009, DeMartini gave Berlin $49,220 in cash to deliver to
1 A footnote in plaintiffs' brief states that the matter was later
tried against defendant Robert Berlin. Plaintiffs obtained a
judgment totaling $496,771.48, based on claims of fraud, breach
of contract, and breach of fiduciary duty.
2 A-1040-15T4
Retro for the franchise purchase, and she later signed the
agreement at Retro headquarters.
Some weeks after that, Berlin contacted plaintiffs regarding
another business proposition. He visited their home, and told
them that Retro wanted to expand its East Coast presence into
Margate, Florida, and that for a $500,000 initial investment in
the project, they could acquire a twenty-five percent interest.
Berlin mischaracterized Retro's awareness of plaintiffs'
involvement in the Margate project. He also incorrectly assured
them that they could indefinitely delay developing the New Jersey
franchise they had already purchased. Plaintiffs believed,
mistakenly, that Berlin was selling them a share in a successful
enterprise in which he had a financial stake.
Plaintiffs gave Berlin a total of $240,000 as the down payment
for their interest in the Margate project by September 23, 2009.
The balance of $260,000 was to be paid into the business from
their twenty-five percent share of the profits.
In May 2010, Berlin obtained an additional $50,000 from
plaintiffs as a short-term loan, on the pretense that the money
was urgently needed by one of Berlin's partners. He gave them
post-dated checks to pay the money back, which did not clear. By
August 2010, the checks had failed to clear and plaintiffs learned
3 A-1040-15T4
that they had no interest whatsoever in the Margate venture, which
had collapsed.
When Berlin was engaged by Retro to act as their salesman,
the company was apparently unaware that his life insurance license
had been revoked for questionable practices by New Jersey's
Department of Banking and Insurance. Berlin's responsibility as
a Retro salesperson was limited to providing prospective
franchisees with purchase documents and explaining the process,
as he did with plaintiffs regarding their New Jersey venture. He
did not evaluate applicants, and had no review or approval role
with the company as to franchise applications. Berlin's status
was as an independent contractor, not an employee.
DeMartini acknowledged in deposition that Retro became aware
of plaintiffs' involvement in the Margate project only months
after she had paid Berlin the $240,000 towards the investment.
Retro's chief financial officer certified that the company had no
knowledge of the problems at the failed Margate gym until September
2010, approximately one year after plaintiffs' investment in the
business. Nor was Retro aware of Berlin's involvement with the
site, as he was neither a franchisee nor an owner. In his
deposition, Berlin stated he was "sure" that he had "told somebody
at Retrofitness Corp. that [plaintiffs] were going to be []
partner[s] in Margate . . . . I think I mentioned it to somebody."
4 A-1040-15T4
Judge O'Brien held that plaintiffs could not establish an
agency relationship between Retro and Berlin, actual or apparent,
nor could they demonstrate negligent hiring. He carefully
considered each and every cause of action alleged, concluding that
even viewing the facts in the light most favorable to plaintiffs,
they had no legal basis for imposing legal liability upon Retro.
The franchisor/franchisee relationship alone was not sufficient.
The franchise agreement, with which plaintiffs were familiar, as
they had signed one with regard to their New Jersey project,
explicitly made franchisees independent contractors and
"completely separate entities . . ." from Retro. The agreement
further stated that neither party was the agent of the other "in
any sense."
DeMartini acknowledged that when she invested in the Florida
gym, she understood that the business was a franchise, an entity
distinct and separate from Retro. She also understood that when
Berlin approached plaintiffs, he was acting on behalf of the
Florida franchise and not on behalf of Retro. As a result, Judge
O'Brien held "[t]hese uncontested facts demonstrate there was not
enough control exerted by [Retro] over the Margate location or
[the entity that operated the gym] to constitute a
principal[-]agency relationship." Plaintiffs could not
demonstrate actual authority on these facts.
5 A-1040-15T4
Since Retro had not acted with regard to the Margate site
after the franchise was purchased, and Berlin did not represent
that he was acting as Retro's agent with regard to it, he did not
have apparent authority which would bind the company. His
statement that Retro wanted to expand its East Coast presence did
not vest him with apparent authority to act in the company's
behalf.
The judge reached a similar conclusion with regard to the
negligent hiring claim. The financial losses suffered by
plaintiffs as a result of their interaction with Berlin did not
arise "from Berlin's actions [as] an independent contractor
salesman for Retro." The harm they suffered flowed from his
representation of the Margate venture, which plaintiffs knew was
a franchise of Retro, and therefore a separate entity. Retro in
turn was unaware of plaintiffs' investments in the Florida gym
made at Berlin's urging. Plaintiffs did not consult the company
regarding their decision. Accordingly, the judge found the claim
of negligent hiring was not supported by the facts. He also
discussed and dismissed plaintiffs' remaining causes of action
against Retro, which dismissals are not being appealed.
Plaintiffs reiterate that there were sufficient issues of
material fact regarding agency and negligent hiring that summary
judgment should not have been granted. They take the position
6 A-1040-15T4
that, as a matter of law, they have demonstrated sufficient
circumstances supporting their theories of recovery against Retro
to warrant reversal.
I.
We review the grant of summary judgment employing the same
standard as the motion judge. Bhagat v. Bhagat, 217 N.J. 22, 38
(2014). We consider "the competent evidential materials submitted
by the parties to identify whether there are genuine issues of
material fact and, if not, whether the moving party is entitled
to summary judgment as a matter of law." Ibid.; R. 4:46-2(c).
The facts are viewed in the light most favorable to the non-
moving party, Robinson v. Vivirito, 217 N.J. 199, 203 (2014),
keeping in mind that an issue is "genuine only if, considering the
burden of persuasion at trial, the evidence submitted by the
parties on the motion, together with all legitimate inferences
therefrom favoring the non-moving party, would require submission
of the issue to the trier of fact." R. 4:46-2(c). More is
necessary than bare conclusions lacking factual support, Petersen
v. Twp. of Raritan, 418 N.J. Super. 125, 132 (App. Div. 2011),
self-serving statements, Heyert v. Taddese, 431 N.J. Super. 388,
413-14 (App. Div. 2013), or disputed facts "of an insubstantial
nature." Pressler & Verniero, Current N.J. Court Rules, comment
2.1 on R. 4:46-2 (2016).
7 A-1040-15T4
When the evidence is so one-sided that the moving party must
prevail as a matter of law, summary judgment should be granted.
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
II.
Plaintiffs claim that an agency relationship existed, and
that Berlin's interactions as a Retro salesman established the
franchisor's legal liability despite the franchisor/franchisee
relationship. The standard form franchise agreement, however,
between Retro and plaintiffs regarding their New Jersey
investment, clearly stated that the franchisor and franchisee are
separate entities, not responsible for the actions of the other.
Thus despite Berlin's status as a salesman for Retro when
plaintiffs were purchasing their New Jersey franchise, they had
no basis to believe he was acting in that capacity with regard to
the Margate site, an already established franchise. Plaintiffs
do not suggest any action taken by Berlin regarding the Margate
project which demonstrated actual authority. The grant of summary
judgment was proper on this theory of recovery as it is not
supported by facts.
With regard to apparent authority, we agree with the trial
judge that to bind the principal, the principal must have acted
in such a way as to mislead a third party into believing an agency
relationship existed. See Mercer v. Weyerhaeuser Co., 324 N.J.
8 A-1040-15T4
Super. 290, 317 (App. Div. 1999). The doctrine focuses on the
reasonable expectations of innocent third parties. In making the
determination, the totality of the circumstances are taken into
consideration. N.J. Lawyer's Fund for Client Prot. v. Stewart
Title Guar. Co., 203 N.J. 208, 220 (2010). The determination
requires scrutiny of "the actions of the principal, not the alleged
agent." Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 497 (App.
Div.), certif. denied, 177 N.J. 224 (2003).
After full discovery, plaintiffs cannot refute Retro's
position that it was not aware of Berlin's involvement with
Margate, as he was neither a franchisee nor an owner. Nor was
Retro aware of plaintiffs' involvement with the project until
months after they had made their investment. Plaintiffs cannot
identify any conduct by Retro that would have caused them to
believe that Retro authorized Berlin to engage in the transaction.
As DeMartini admitted at deposition, Berlin did not say he
was acting on Retro's behalf. Retro played no role in the decision
to invest in Margate. See Sears Mortg. Corp. v. Rose, 134 N.J.
326, 345 (1993).
III.
Plaintiffs' claim for negligent hiring also fails. Whether
Retro was aware of Berlin's past history is not relevant because
when he convinced plaintiffs to invest in Margate, he was not
9 A-1040-15T4
acting in his capacity either as a salesman or a franchise holder
for Retro. His communications with plaintiffs in that capacity
were limited to the New Jersey transaction, about which plaintiffs
do not complain. Even in his capacity as salesman, Berlin's role
was limited to an initial meeting with potential franchisees and
the delivery of documents. He did not review applicants or process
their applications.
Berlin's contacts with plaintiffs with regard to the Margate
investment were different from his conduct when they purchased a
franchise in New Jersey. He did not present documents for their
signature. Berlin actively pursued their investment, and made no
mention of Retro other than his initial statement that the company
wanted to begin marketing outside of New Jersey. Berlin was not
an employee, but an independent contractor. His discussions with
plaintiffs regarding the Margate property were unrelated to
plaintiffs' purchase of a franchise. DeMartini acknowledged that
Berlin's representations were solely on behalf of the Margate gym,
not Retro. Retro was entitled to summary judgment on this cause
of action as well.
IV.
In the absence of any proof that Retro solicited, condoned,
or had knowledge that Berlin procured plaintiffs' investment in
Margate, summary judgment was properly granted. Looking at the
10 A-1040-15T4
facts in the light most favorable to the non-moving party, they
are simply insufficient to establish actual authority, apparent
authority, or negligent hiring. We agree with Judge O'Brien that
there are no genuine issues of material facts. No reasonable jury
could decide the issue in plaintiffs' favor, and Retro was entitled
to judgment as a matter of law. Brill, supra, 142 N.J. at 540.
Affirmed.
11 A-1040-15T4