CHERYL A. GALLO VS. ROBERT A. GALLO (L-0058-16, BERGEN COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE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-2642-17T3
CHERYL A. GALLO,
Plaintiff-Appellant,
v.
ROBERT A. GALLO and
CHERYL A. GALLO,
Defendants-Respondents.
______________________________
Argued January 23, 2019 – Decided February 15, 2019
Before Judges Hoffman and Firko.
On appeal from Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-0058-16.
W. James Mac Naughton, appellant pro se and attorney
for Cheryl A. Gallo.
David E. Sklar argued the cause for respondent Robert
A. Gallo (Scura, Wigfield, Heyer, Stevens &
Cammarota, LLP, attorneys; David E. Sklar, of counsel
and on the brief).
PER CURIAM
Plaintiff Cheryl A. Gallo and her attorney, W. James Mac Naughton, Esq.,
appeal from a January 12, 2018 trial court order awarding trial and appellate
counsel fees and costs in favor of defendant Robert Gallo in the amount of
$35,407.50, based upon the frivolous litigation statute, N.J.S.A. 2A:15-59.1, and
Rule 1:4-8(a). Because the trial court lacked jurisdiction to award counsel fees
and costs for appellate services, and since that application is now time-barred,
we reverse the order and remand for a determination of counsel fees and costs
for trial level services performed.
I.
The parties are familiar with the procedural history and facts of this case,
and, therefore, they will not be repeated in detail here. 1 This appeal emanates
from defendant's claim that the second complaint was unnecessary and frivolous
because he was assured that all debts between plaintiff and her mother, Ms.
Marcia Czaya, were settled. In her written decision, the trial judge found "that
plaintiff and her attorney both fail to present any cogent or persuasive argument
that their actions were reasonable or made in good faith basis to believe that the
1
The chronology is set forth in this court's unpublished opinion entered on
August 11, 2017, in which we affirmed the April 22, 2016 Law Division order
dismissing plaintiff's complaint against defendant, who is her ex-husband. We
incorporate, by reference, the facts stated in our prior opinion. The same judge
presided over both matters.
A-2642-17T3
2
December 28, 2015 [c]omplaint had merit." The judge further concluded that:
"The inquiry made by plaintiff['s] counsel before signing and filing the instant
[c]omplaint was not reasonable under the circumstances, having just freshly
dismissed that same claim against that defendant only twenty-six days prior
thereto."
The trial judge reviewed defendant's attorney's certification of services
which states, "this litigation was litigated at both the Law Division and
Appellate Division, which required extensive knowledge of the New Jersey
Court Rules and skill . . . ." The certification further provided that: "The [f]irm
was successful in obtaining a dismissal of this litigation with prejudice at the
[t]rial [l]evel on behalf of the [d]efendant." "The dismissal with prejudice was
subsequently upheld at the Appellate Division . . . . [and] the [f]irm also had to
work extensively to uphold that dismissal in preparing and drafting appellate
briefs."
The invoices for professional services rendered by defendant's counsel
included trial and appellate level work, and the trial judge determined that the
lodestar – which equals the number of hours reasonably expended by counsel,
"multiplied by a reasonable hourly rate" – applied. Rendine v. Pantzer, 141 N.J.
292, 333 (1995) (quoting Hensley v. Eckerhart, 461 U.S. 424, 499 (1983)).
A-2642-17T3
3
R.P.C. 1.5(a) was also considered by the trial judge, and she found the attorney's
hourly fees charged for trial and appellate work were "fair and customary in this
locality for similar hourly-billed legal services." She denied three entries in the
award "because they appear to have been billed by individuals other than the
two attorneys and the paralegal described in Mr. Sklar's [c]ertification."
On appeal, plaintiff and her attorney argue that frivolous lawsuit sanctions
were unwarranted because there was no showing of bad faith; rather they acted
in good faith believing their insufficient consideration claim, Ms. Czaya's
claims, and their holder in due course arguments were meritorious. They also
contend that the Law Division lacked jurisdiction to award counsel fees relative
to appellate services. Defendant seeks affirmance.
II.
The affidavit2 of services must also include "a detailed statement of the
time spent and services rendered by paraprofessionals, a summary of the
paraprofessionals' qualifications, and the attorney's billing rate for
paraprofessional services to clients generally[,]" and a statement as to how much
the client had paid, and "what provision, if any, has been made for the payment
of fees to the attorney in the future." R. 4:42-9(b) to (c).
2
We use affidavit and certification interchangeably.
A-2642-17T3
4
In our August 11, 2017 decision, we affirmed the trial court's April 22,
2016 order dismissing plaintiff's complaint against defendant, and rejected her
arguments that he gave no consideration for a promise to dismiss an earlier
action with prejudice, and that a previous payment did not constitute an accord
and satisfaction of the $50,000 note at issue. The Law Division litigation was
frivolous and we are satisfied that frivolous lawsuit sanctions were warranted
by plaintiff's continued prosecution of meritless claims that had no evidential
support whatsoever for the cogent reasons stated by the trial judge.
Accordingly, the trial judge did not abuse her discretion in awarding sanctions
insofar as it related to trial court professional services rendered by defendant's
counsel. We part company with the trial judge in awarding counsel fees and
costs for defendant's appellate counsel fees and costs.
III.
We review a judge's decision on a motion for frivolous lawsuit sanctions
under an abuse of discretion standard. United Hearts, LLC v. Zahabian, 407
N.J. Super. 379, 390 (App. Div. 2009) (citing Masone v. Levine, 382 N.J. Super.
181, 193 (App. Div. 2015)). We will reverse a decision when "the discretionary
act was not premised upon consideration of all relevant factors, was based upon
consideration of irrelevant or inappropriate factors, or amounts to a clear error
A-2642-17T3
5
in judgment." Masone, 382 N.J. Super. at 193 (citing Flagg v. Essex Cty.
Prosecutor, 171 N.J. 561, 571 (2002)).
N.J.S.A. 2A:15-59.1(a)(1), which governs frivolous lawsuit claims
against parties, provides that:
[a] party who prevails in a civil action, either as
plaintiff or defendant, against any other party may be
awarded all reasonable litigation costs and reasonable
attorney fees, if the judge finds at any time during the
proceedings or upon judgment that a complaint,
counterclaim, cross-claim or defense of the
nonprevailing party was frivolous.
The frivolous litigation statute is interpreted restrictively. DeBrango v. Summit
Bancorp, 328 N.J. Super. 219, 226 (App. Div. 2000).
Litigation is considered frivolous when it is "commenced, used or
continued in bad faith, solely for the purpose of harassment, delay or malicious
injury[,]" or if the non-prevailing party "knew, or should have known, that the
complaint, counterclaim, cross-claim or defense was without any reasonable
basis in law or equity and could not be supported by a good faith argument for
an extension, modification or reversal of existing law." N.J.S.A. 2A:15-
59.1(b)(1) to (2). Counts of a complaint may be severed "for purposes of
determining whether [the counts are] 'frivolous.'" Lake Lenore Estates, Assocs.
A-2642-17T3
6
v. Twp. of Parsippany-Troy Hills Bd. of Ed., 312 N.J. Super. 409, 421 (App.
Div. 1998).
A motion for sanctions under Rule 1:4-8 will be denied where the pleading
party had an objectively reasonable and good faith belief in the merits of the
claim. First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App.
Div. 2007) (citing DeBrango, 328 N.J. Super. at 227). However, litigation may
become frivolous, and therefore sanctionable, by continued prosecution of a
meritless claim, even if the initial pleading was not frivolous or brought in bad
faith. See DeBrango, 328 N.J. Super. at 227-28, 230. This is because the
"requisite bad faith or knowledge of lack of well-groundedness may arise during
the conduct of the litigation." United Hearts, 407 N.J. Super. at 390 (quoting
Iannone v. McHale, 245 N.J. Super. 17, 31 (App. Div. 1990)). In such cases,
the party seeking sanctions would only be entitled to fees and/or costs incurred
from the time the litigation became frivolous, rather than from the inception of
the litigation. DeBrango, 328 N.J. Super. at 230.
The court may award "reasonable" expenses and attorney's fees to the
prevailing party on a motion for frivolous lawsuit sanctions. R. 1:4-8(b)(2). In
order to establish reasonableness, the moving party's attorney must submit an
affidavit of services, which shall include the following information:
A-2642-17T3
7
(1) the time and labor required, the novelty and
difficulty of the questions involved, and the skill
requisite to perform the legal services properly;
(2) the likelihood, if apparent to the client, that the
acceptance of the particular employment will preclude
other employment by the lawyer;
(3) the fee customarily charged in the locality for
similar legal services;
(4) the amount involved and results obtained;
(5) the time limitations imposed by the client or by the
circumstances;
(6) the nature and length of the professional relationship
with the client;
(7) the experience, reputation, and ability of the lawyer
or lawyers performing the services.
(8) whether the fee is fixed or contingent.
[R.P.C. 1.5(a).]
Rule 2:11-4 provides in pertinent part:
An application for a fee for legal services rendered on
appeal shall be made by motion supported by affidavits
as prescribed by R[ule] 4:42-9(b) and (c), which shall
be served and filed within [ten] days after the
determination of the appeal. The application shall state
how much has been previously paid to or received by
the attorney for legal services both in the trial and
appellate courts or otherwise, including any amount
received by way of pendente lite allowances, and what
A-2642-17T3
8
arrangements, if any, have been made for the payment
of a fee in the future.
[(Emphasis added).]
Defendant never filed a motion in the Appellate Division for counsel fees
and costs, and it is now time-barred. See R. 2:11-4. Therefore, defendant
improvidently moved before the Law Division for appellate fees and costs, and
we reverse that portion of the January 12 order. Further, the trial court may not
award a fee for services in the Appellate Division. See Tarr v. Bob Ciasulli's
Mack Auto Mall, 390 N.J. Super. 557, 570 (App. Div. 2007) (citing R. 2:11-4).
The appellate court will not determine fees for trial court services. See Pressler
& Verniero, Current N.J. Court Rules, cmt. 2 on R. 2:11-4 (2019) (citing Dotsko
v. Dotsko, 244 N.J. Super. 668 (App. Div. 1990)).3
In sum, we agree that frivolous lawsuit sanctions were warranted for
professional services provided but for trial court services only. The litigation
was frivolous because the insufficient consideration, Ms. Czaya's claims, and
holder in due course theory were without any basis in law or equity and could
not be supported by a good faith argument for extension, modification, or
3
We have held that N.J.S.A. 2A:15-59.1, commonly referred to as the frivolous
litigation statute, is inapplicable to appeals. Zavodnick v. Leven, 340 N.J.
Super. 94, 103 (App. Div. 2001).
A-2642-17T3
9
reversal of existing law. N.J.S.A. 2A:15-59.1(b). Accordingly, the trial judge
did not abuse her discretion in finding frivolous lawsuit sanctions were
warranted but her decision should have been limited to the trial court fees only
and not appellate fees. Defendant failed to timely file a motion under Rule 2:11-
4 in the Appellate Division for counsel fees and costs. Therefore, he is now
barred from doing so and the trial judge lacked jurisdiction to consider and
award appellate counsel fees and costs.
We reverse and remand for further proceedings consistent with this
opinion and for the trial judge to determine the amount of counsel fees and costs
that should be awarded to defendant for trial court services only.
Affirmed in part, reversed and remanded in part. We do not retain
jurisdiction.
A-2642-17T3
10