Borough of Englewood Cliffs v. Thomas J. Trautner ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2765-21
BOROUGH OF
ENGLEWOOD CLIFFS,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
April 22, 2024
v. APPELLATE DIVISION
THOMAS J. TRAUTNER, ALBERT
WUNSCH, 800 SYLVAN AVENUE,
LLC, and CHIESA SHAHINIAN &
GIANTOMASI, PC,
Defendants-Respondents,
and
JEFFREY R. SURENIAN, JOSPEH
MARINIELLO, JR., JEFFREY R.
SURENIAN AND ASSOCIATES,
LLC, and MARINIELLO &
MARINIELLO, PC,
Defendants.
_______________________________
Submitted November 8, 2023 – Decided April 22, 2024
Before Judges Sumners, Rose and Smith.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-5785-21.
King, Moench & Collins, LLP, attorneys for appellant
(Jerry J. Dasti and Patrick F. Varga, on the briefs).
Lowenstein Sandler, LLP, attorneys for respondents
Thomas J. Trautner and Chiesa Shahinian &
Giantomasi PC (A. Matthew Boxer, Peter Matthew
Slocum, and Stephanie Ashley, on the brief).
Beattie Padovano, LLC, and Hill Wallack LLP,
attorneys for respondent 800 Sylvan Avenue, LLC
(Antimo Anthony Del Vecchio and Thomas Francis
Carroll, of counsel and on the brief; Daniel L.
Steinhagen and Keith Arnold Loughlin, on the brief).
Albert H. Wunsch, III, respondent pro se, joins in the
brief of respondents Thomas J. Trautner, and Chiesa
Shahinian & Giantomasi PC.
The opinion of the court was delivered by
SUMNERS, JR., C.J.A.D.
This appeal requires us to settle whether a public entity is immune from
sanctions for filing a frivolous lawsuit in accordance with the Frivolous
Litigation Statute (FLS), N.J.S.A. 2A:15-59.1, and Rule 1:4-8. The only
published cases regarding this issue are two divergent Chancery Division rulings
issued in 1993 and 1997. If immunity does not apply, we must then determine
whether the trial court abused its discretion by imposing sanctions.
The Borough of Englewood Cliffs retained Thomas J. Trautner and Chiesa
Shahinian & Giantomasi PC, (collectively CSG), Albert Wunsch III, Jeffrey
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Surenian and Jeffrey Surenian and Associates, LLC, (collectively Surenian) to
represent it in affordable housing litigation. After judgment was entered for
developer 800 Sylvan Avenue, LLC. (Sylvan), a settlement was reached between
the Borough and Sylvan. Thereafter, political control of the Borough Council
majority changed hands and the newly constituted Council sued CSG, Wunsch,
and Surenian, alleging professional malpractice, breach of contract, unjust
enrichment, civil conspiracy, and aiding and abetting arising from their
representation of the Borough in the litigation. The Borough also sued Sylvan,
alleging claims of conspiracy and aiding and abetting.
The trial court granted defendants' Rule 4:6-2(e) motions to dismiss the
Borough's complaint with prejudice. The trial court subsequently granted
defendants' motion for sanctions, ordering the Borough to pay their attorney's
fees and costs for filing a frivolous lawsuit. The Borough appeals, arguing the
sanction applications were procedurally deficient; as a public entity, it is
immune from paying sanctions under the FLS; and the trial court abused its
discretion in finding the Borough's lawsuit was frivolous.1
1
On August 25, 2023, the Borough and Surenian filed a stipulation of dismissal
dismissing all claims and counterclaims against each other.
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3
The court rejects the Borough's arguments and affirms based on our
interpretation of the FLS that the Borough is not immune from sanctions,
defendants' applications for sanctions were procedurally compliant with Rule
1:4-8, and the trial court did not abuse its discretion in imposing sanctions
against the Borough.
I.
The genesis of this litigation is a declaratory judgment action2 by the
Borough seeking a trial court order that it complied with its state constitutional
affordable housing obligations. After Sylvan intervened in the action, the
Borough hired CSG, Surenian, and Wunsch (collectively "defendant
attorneys").3 We need not fully detail that action or other related litigation
because they are unnecessary to resolve this appeal.4 Suffice it to say, the trial
court––the same court which entered the order under review––entered judgment
2
In the Matter of the Application Englewood Cliffs, No. BER-L-6119-15.
3
The Borough also retained and sued Joseph Mariniello, Jr. and Mariniello &
Mariniello PC, but they are not included because they did not seek fees or costs,
were dismissed as defendants, and are not parties to this appeal.
4
800 Sylvan Ave. LLC v. Planning Bd. of Englewood Cliffs, No. A-2309-19
(App. Div. Aug 16, 2023); 800 Sylvan Ave., LLC v. Borough of Englewood
Cliffs, No. A-4019-17 (App. Div. Feb. 19, 2020); Borough of Englewood Cliffs
v. Surenian, No. BER-L-787-21 (Law Div. May 21, 2021).
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in favor of Sylvan by awarding it a builder's remedy.5 This led to a settlement
agreement between Sylvan and the Borough resolving the number of affordable
housing units that Sylvan could build in the Borough and related issues.
Relevant to this appeal, the agreement provided that if "either party . . . seeks
any relief related to the [declaratory judgment action] in any court of the State
of New Jersey . . . , the non-breaching party may move to enforce this provision
of the [a]greement and the breaching party shall be liable for all legal fees
incurred."
Prior to approving the settlement, the Borough Council passed Resolution
20-132, praising defendant attorneys who represented it in the declaratory
judgment action for recommending a settlement prior to trial, and censuring the
mayor, who was a member of an opposing political party, for "thwart[ing] the
work of the Borough to resolve the affordable housing litigation matter . . .
through the filing of needless lawsuits and allegations."
5
"A builder's remedy provides a developer with the means to bring 'about
ordinance compliance through litigation.'" In the Matter of the Application of
Bordentown, 471 N.J. Super. 196, 221 (App. Div. 2022) (quoting Mount Olive
Complex v. Township of Mount Olive (Mount Olive II), 356 N.J. Super. 500,
505 (App. Div. 2003)).
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In the subsequent municipal election, political control of the Borough
Council majority changed hands. About nine months later, the Borough sued
defendant attorneys alleging legal malpractice. In its first amended complaint,
as to defendant attorneys, the Borough alleged professional malpractice, breach
of contract, unjust enrichment, civil conspiracy, and aiding and abetting. As to
defendant Sylvan, the Borough alleged only conspiracy and aiding and abetting.
Within six weeks of being served the complaint, each defendant sent the
Borough's attorneys notices demanding the lawsuit be voluntarily dismissed
because it was frivolous. The Borough did not comply.
Defendants successfully moved under Rule 4:6-2(e) to dismiss the
Borough's complaint with prejudice. In its written decision, the trial court
found the: (1) malpractice claims were without basis in law or fact; (2) lawsuit
was barred by the entire controversy doctrine; (3) public documents controlled
and evinced the Borough's satisfaction with the defendant attorneys'
representation; (4) conspiracy and aiding and abetting claims were without
basis in law or fact; and (5) Borough's attorney "was without an authorized
resolution to commence and prosecute this litigation and was unable to secure
[authorization] retroactively." The Borough did not appeal.
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Defendants next timely moved for attorney's fees due to the Borough's
failure to withdraw the lawsuit as they demanded. See R. 1:4-8(b)(2) (motions
for reimbursement of attorney's fees are to be filed within twenty days of the
final judgment). In a written decision, the court awarded fees to defendant
attorneys pursuant to Rule 1:4-8, but Wunsch was only entitled to costs because
he was self-represented. After defendants submitted their certificates of legal
services and costs, the court's orders awarded: Sylvan $75,634.75; Wunsch
$327.20; and CSG $113,264.50. 6
Before us, the Borough contends: (1) defendants failed to satisfy the
procedures in Rule 1:4-8 and N.J.S.A. 2A:15-59.1 to collect attorney's fees; (2)
it is immune from frivolous litigation sanctions as a municipality; and (3) the
trial court abused its discretion in finding the Borough engaged in frivolous
litigation.7 Before addressing the first and third contentions, we first determine
whether the Borough is immune from sanctions.
6
The court also awarded attorney's fees of $27,258 to Surenian, which as noted
is no longer a party to this appeal.
7
The Borough also contends the trial court erred in finding its attorneys, Stone
& Magnanini LLP (SM), in the action lacked authorization to sue defendants.
However, given the court's decision not to impose sanctions against SM––who
is not participating in this appeal––and SM's authorization was not relevant to
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II.
The FLS "serves a punitive purpose, seeking to deter frivolous litigation,"
and "a compensatory purpose, seeking to reimburse 'the party that has been
victimized by the party bringing the frivolous litigation.'" Toll Bros., Inc. v.
Township of West Windsor, 190 N.J. 61, 67 (2007) (quoting Deutch & Shur,
P.C. v. Roth, 284 N.J. Super. 133, 141 (Law Div. 1995)). The statute provides:
a.
(1) 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 person was
frivolous.
(2) When a public entity is required or
authorized by law to provide for the defense of a
present or former employee, the public entity
may be awarded all reasonable litigation costs
and reasonable attorney fees if the individual for
whom the defense was provided is the prevailing
party in a civil action, and if there is a judicial
determination at any time during the
proceedings or upon judgment that a complaint,
counterclaim, cross-claim, or defense of the
nonprevailing party was frivolous.
the granting of sanctions against the Borough, the trial court's ruling that SM
was not authorized to sue defendants is not an issue we need address.
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b. In order to find that a complaint, counterclaim,
cross-claim or defense of the nonprevailing party was
frivolous, the judge shall find on the basis of the
pleadings, discovery, or the evidence presented that
either:
(1) The complaint, counterclaim, cross-claim or
defense was commenced, used or continued in
bad faith, solely for the purpose of harassment,
delay or malicious injury; or
(2) The nonprevailing 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.
c. A party or public entity seeking an award under this
section shall make application to the court which heard
the matter. The application shall be supported by an
affidavit stating in detail:
(1) The nature of the services rendered, the
responsibility assumed, the results obtained, the
amount of time spent by the attorney, any
particular novelty or difficulty, the time spent
and services rendered by secretaries and staff,
other factors pertinent in the evaluation of the
services rendered, the amount of the allowance
applied for, an itemization of the disbursements
for which reimbursement is sought, and any
other factors relevant in evaluating fees and
costs; and
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(2) How much has been paid to the attorney and
what provision, if any, has been made for the
payment of these fees in the future.
[N.J.S.A. 2A:15-59.1 (emphasis added).]
A trial court's decision to order frivolous lawsuit sanctions is reviewed
under an abuse of discretion standard. Wolosky v. Fredon Township, 472 N.J.
Super. 315, 327 (App. Div. 2022) (citing McDaniel v. Man Wai Lee, 419 N.J.
Super. 482, 498 (App. Div. 2011)). An abuse of discretion "arises when a
decision is 'made without a rational explanation, inexplicably departed from
established policies, or rested on an impermissible basis.'" Flagg v. Essex Cnty.
Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigr. &
Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)). "Reversal is
warranted when 'the discretionary act was not premised upon consideration of
all relevant factors, was based upon consideration of irrelevant or inappropriate
factors, or amount[ed] to a clear error in judgment.'" Ferolito v. Park Hill Ass'n,
408 N.J. Super. 401, 407 (App. Div. 2009) (quoting Masone v. Levine, 382 N.J.
Super. 181, 193 (App. Div. 2005)).
A. Public Entity Immunity
Whether a State and its agencies and political subdivisions are immune
from the FLS is unsettled law. The only published cases are two divergent
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Chancery Division rulings issued almost four years apart, the most recent being
some twenty-seven years ago. The Chancery court held In the Matter of K.L.F.,
275 N.J. Super. 507, 511 (Ch. Div. 1993), that N.J.S.A. 2A:15-59.1 applies to
governmental bodies. Almost four years later, another Chancery court reached
a contrary result in Div. of Youth & Fam. Servs. v. P.M., 301 N.J. Super. 80,
82 (Ch. Div. 1997). The Borough cites P.M. to support its immunity contention.
We examine these two decisions.
i. In the Matter of K.L.F.
In K.L.F., the court examined the policy behind the FLS because it
determined, in applying our statutory construction rules, the statute's plain
meaning as suggested in the Legislature's clear directive "that a party may seek
sanctions against 'any other [non-prevailing] party'" does not resolve if
sanctions are limited to a private party and not a public entity. 275 N.J. Super.
at 513, 515 (alteration in original). The court determined the statute is "punitive
in nature and seeks the elimination of baseless litigation and pleadings, without
express exceptions," and considered the adage "expressio unius est exclusio
alterius," meaning "the express mention of one thing necessarily implies the
exclusion of all others." Id. at 517. (citation omitted).
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To avoid "the sua sponte creation of an exception which would certainly
not advance the legislative purpose," the court reasoned "[t]he Legislature's
failure to carve out an exception [to public entities] within N.J.S.A. 2A:15-
59.1" demonstrated an intent not "to immunize the State from . . . sanction[s]."
Id. at 519. Combining the statute's policy and "[its] technical construction," the
court maintained "it [was] patently evident that the Legislature did not intend
to exempt the State, as party to a civil action, from the same standards of 'good
faith' and 'reasonable basis in law' as would be expected of a private party in
the same action." Id. at 520.
The K.L.F. court's analysis did not end there. It next considered the
impact of N.J.S.A. 2A:15-60, which is "seemingly incompatible with N.J.S.A.
2A:15-59.1." Ibid. N.J.S.A. 2A:15-60 provides, in pertinent part:
In an action brought by the state, or the
governor, or any person for the use of the state, the
plaintiff shall recover costs as any other plaintiff; but
the defendant in such an action shall not recover any
costs against such plaintiff, whether the action is
dismissed, judgment shall pass in favor of the
defendant or any other proceeding is taken.
The court recognized the "well-established rule that where two statutes
appear to be in conflict, and one is general in nature and the other more specific,
the conflict is resolved in favor of the more specific statute 'as a more precise
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manifestation of legislative intent.'" Id. at 521 (quoting State v. Gerald, 113
N.J. 40, 83 (1988)). It determined N.J.S.A. 2A:15-60 "has been circumvented
when the basis for assessing counsel fees against the State has been identified
narrowly and with particularity" and is "a general provision which has remained
essentially unchanged since its original enactment ninety years ago ," thus
"bring[ing] into serious question its relevance nearly a century after its
enactment." Id. at 521. Considering "the relative ages of the statutes,[8] and the
strength and force of the legislative mandate enunciated in N.J.S.A. 2A:15-
59.1, as adduced by the foregoing discussion of legislative intent," the court
reasoned "N.J.S.A. 2A:15-59.1 supersedes N.J.S.A. 2A:15-60 and operates as
an implied modifier of the latter and is, therefore, controlling." Id. at 522.
Hence, the court held "that the State and its agencies and political subdivisions
do indeed fall within the purview and operation of the [FLS]." Id. at 530.
ii. Division of Youth & Family Services v. P.M.
8
N.J.S.A. 2A:15-60 was enacted in 1903. L. 1903, c. 247. N.J.S.A. 2A:15-
59.1 was enacted in 1988 . L. 1988, c. 46.
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In P.M., a different Chancery court disagreed with K.L.F., holding that a
state agency was immune from FLS sanctions.9 301 N.J. Super. at 82. In
reaching this holding, the court discerned a distinction between a "party" and
"person" in N.J.S.A. 2A:15-59.1(a)(1). Id. at 84-87. The court determined the
statute provided that a "party who prevails . . . against any other party . . . [who
is a] non-prevailing person" may be awarded fees. Id. at 85 (alteration in
original) (quoting N.J.S.A. 2A:15-59.1). The court held the distinction between
the two terms is significant, noting that under N.J.S.A. 1:1-2, whose definitions
apply to the FLS, a "person" includes "corporations, companies, associations,
societies, firms, partnership and joint stock companies as well as individuals,"
but "does not include the State of New Jersey unless the word 'person' is used
'to designate the owner of property.'" Id. at 86-87.
The P.M. court also relied upon the 1995 amendment to the statute, which
was enacted after K.L.F., and added subsection (a)(2) to N.J.S.A. 2A:15-59.1.
Id. at 87. Subsection (a)(2) allows a public entity to obtain attorney's fees when
the law required it to defend a prevailing present or former employee when the
9
Given its finding that the state agency was immune, the P.M. court did not
reach the issue of whether the "complaint was actually frivolous, or commenced
or continued in bad faith." 301 N.J. Super. at 82-83.
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nonprevailing party pursued a frivolous complaint, counterclaim, cross -claim,
or defense. N.J.S.A. 2A:15-59.1(a)(2). The court reasoned the Legislature
would not have added this provision if "the terms used in the pre-existing statute
were intended to include the state and its agencies." P.M., 301 N.J. Super. at
87.
The court further maintained that "[t]he 1995 amendment to subsection
(c) lays any doubt to rest." Id. at 88. Subsection (c) previously provided "a
party seeking an award," but was changed to provide "a party or public entity
seeking an award." Ibid. The court reasoned "if the word 'party' is, as K.L.F.
suggests, broad enough to include the state or its subdivisions, why did the
Legislature feel a need to include the phrase 'or public entity' in expanding the
class of litigants who could seek an award?" Ibid. According to the P.M. court,
"The answer is obvious: the Legislature's use of the word 'party' was never
intended to include the [S]tate or its subdivisions. A contrary conclusion would
mean that the 1995 amendments had no substantive consequence." Ibid.Lastly, the P.M. court found that because the FLS does not clearly
extinguish our State's "modern thought" that sovereign "immunity exists unless
expressly waived by the Legislature," id. at 92 (citing N.J.S.A. 59:1-2), it does
not upset the presumption that public entities are immune from the statute's
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sanctions, ibid. The court relied on a provision in the Environmental Rights
Act, N.J.S.A. 2A:35A-1 to 35A-14, which permits a counsel fee award in
certain prescribed circumstances, subject to a limit set forth
in N.J.S.A. 2A:35A-10, as an example of an express legislative undertaking to
create liability within that limit. Id. at 92-93. Thus, the Legislature's intent to
allow liability against the State must be done "in an unambiguous manner." Id.
at 92-93 (challenging the K.L.F. court's view that "an affirmative and explicit"
provision is required to limit the State's liability).
iii. Lack of Immunity
K.L.F. and P.M. both express sound reasoning in reaching their
respective rulings, making our decision a close call. We, however, conclude as
did K.L.F. and the trial court, that a public entity is not immune from the
sanctions that can be imposed under the FLS.
The plain language in N.J.S.A. 2A:15-59.1(a)(1) leads us to conclude that
the unqualified term, "party," in the phrase, "[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," does not exclude a
public entity "party." See Lippman v. Ethicon, Inc., 222 N.J. 362, 380-81
(2015) (emphasizing "the statute's plain language, . . . is generally the best
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indicator of the Legislature's intent" (quoting Donelson v. DuPont Chambers
Works, 206 N.J. 243, 256 (2011))). Nonetheless, we appreciate the P.M. court's
analysis highlighting how N.J.S.A. 2A:15-59.1(a)(1)'s subsequent use of
"person" leads to ambiguity because a public entity is not a "person" under
N.J.S.A. 1:1-2 unless it is being "used to designate the owner of property which
may be the subject of an offense." Yet, the distinction between these terms for
interpretative purposes is less significant because other portions of the FLS,
specifically N.J.S.A. 2A:15-59.1(a)(2) and (b), expressly allow recovery of fees
against a "nonprevailing party" whose litigation conduct was frivolous .
If we conclude, and we do not, that the plain language of the FLS is
ambiguous as to the definition of "party," then we must look to extrinsic
evidence to inform our analysis, "including legislative history." Parsons by
Parsons v. Mullica Twp. Bd. of Educ., 226 N.J. 297, 308 (2016) (quoting State
v. Marquez, 202 N.J. 485, 500 (2010)). The Legislature's objective in enacting
the FLS was "punitive in nature," K.L.F., 275 N.J. Super. at 516 (quoting
Somerset Trust Co. v. Sternberg, 238 N.J. Super. 279, 286 (1989)), to deter the
filing of frivolous claims by allowing a judge to impose attorney's fees
sanctions against the non-prevailing party, ibid. (citing Chernin v. Mardan
Corp., 244 N.J. Super. 379, 382 (Ch. Div. 1990)). There is no indication in the
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statute's legislative history that public entities were meant to be exempt from
sanctions if they filed claims determined to be frivolous. See S. Cmty. Affs.
Comm. Statement to S. Comm. Substitute for A. 1012, S. 1399 & S. 1290 (Oct.
13, 1994). Absent that clear indication, a public entity should be subject to the
FLS to satisfy the legislative goal of curbing frivolous litigation. If the
Legislature intended to afford immunity to public entities, it would have clearly
stated so.
After the K.L.F. court held public entities were not immune to FLS
sanctions, the Legislature did not amend the statute to clarify whether public
entities were immune.10 Rather, post-K.L.F., N.J.S.A. 2A:15-59.1 was
amended in 1995 to add: subsection (a)(2)––allowing a public entity to obtain
attorney's fees when defending a present or former employee; and subsection
(c)–– providing a public entity could seek an attorney's fees award like other
parties in a civil case. L. 1995, c. 13, § 1. Neither amendment declared a
public entity was immune from sanctions under the statute. Thus, unlike P.M.,
we view the amendments as interrelated: making it clear that since a public
entity was now allowed to seek sanctions when paying for the defense of a
10
We also recognize that after P.M. was issued, the Legislature took no action
to clarify whether public entities were not immune.
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present or former employee when it was not a party, it was subject to the same
procedures as a party to the litigation when seeking sanctions. We thus
conclude the FLS allows for sanctions against public entities.
III.
Having concluded the Borough is not immune to FLS sanctions, we
address its contention that defendants did not comply with the procedural
requirements of Rule 1:4-8 and N.J.S.A. 2A:15-59.1. The Borough argues that
only CSG "properly addressed relief" under both Rule 1:4-8 and N.J.S.A.
2A:15-59.1. Yet, the Borough claims, neither defendants nor the trial court
addressed whether attorney's fees should be imposed against the Borough, as a
party, "to the extent practicable," as prescribed by Rule 1:4-8. The Borough
further asserts defendants' motions for sanctions failed to comply with N.J.S.A.
2A:15-59.1, which requires certifying: (1) the amount of fees requested; (2)
itemized disbursements; (3) "any other factors relevant in evaluating fees and
costs"; and (4) "[h]ow much has been paid to the attorney and what provision[s],
if any, ha[ve] been made for the payment of these fees in the future." (quoting
N.J.S.A. 2A:15-59.1(c)(1) to(2)). Because CSG did not certify who paid their
litigation fees in defending the Borough's malpractice claims and the court did
not inquire who did pay such fees, the Borough asserts it was likely paid by
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malpractice insurance companies and such disclosure should have been made.
Hence, defendants' motions for fees and sanctions should have been denied with
prejudice. We are unpersuaded.
Our Supreme Court through its rulemaking authority imposed procedural
requirements in Rule 1:4-8, which are not in the FLS. Toll Bros., 190 N.J. at
65. The FLS and Rule 1:4-8 are interpreted restrictively because "the right of
access to the court should not be unduly infringed upon, honest and creative
advocacy should not be discouraged, and the salutary policy of the litigants
bearing, in the main, their own litigation costs, should not be
abandoned." Wolosky, 472 N.J. Super. at 327 (quoting Gooch v. Choice
Entertaining Corp., 355 N.J. Super. 14, 18 (App. Div. 2002)).
Sanctions can be imposed against an attorney or pro se party who files a
frivolous pleading with an "improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of litigation," R. 1:4-8(a)(1),
or by asserting a claim or defense that lacks the legal or evidential support
required by Rule 1:4-8(a)(2), (3) and (4). When sanctions are sought against a
party, Rule 1:4-8(f) provides that "'[t]o the extent practicable,' the procedures
governing applications for frivolous litigation sanctions against attorneys and
pro se parties shall apply also to applications against parties." Toll Bros., 190
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N.J. at 64 (alteration in original). To issue sanctions, the court must first
"assess[] . . . the practicability of compliance" with the Rule. Id. at 73.
Before moving for FLS sanctions, a prevailing party "is required to
comply with Rule 1:4-8(b)(1)'s safe harbor provision." Id. at 69. A written
notice must specifically state why the pleading is frivolous and demand it be
withdrawn within twenty-eight days, and if not, sanctions will be sought. R.
1:4-8(b)(1). These "timeframes [are] for bringing frivolous behavior to the
attention of the offending party, . . . so that the behavior could be corrected
promptly and litigation costs kept to a minimum, thereby preserving judicial,
lawyers', and litigants' resources." Toll Bros., 190 N.J. at 71. A subsequent
motion for sanctions must "describe the specific conduct alleged to have
violated" Rule 1:4-8 and "include[] a certification that the applicant served
written notice and demand pursuant to Rule 1:5-2 to the attorney or pro se party
who signed or filed the paper objected to." R. 1:4-8(b)(1).
To sanction the Borough by ordering it to pay defendants' attorney's fees,
the trial court must "assess whether it is practicable under all the circumstances
to require strict adherence to the requirements of Rule 1:4-8." Toll Bros., 190
N.J. at 72. "The most fact-sensitive aspect of such an inquiry undoubtedly will
involve compliance with the safe harbor requirement that is designed to bring
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an early stop to offending behavior." Ibid. "By insisting on compliance as soon
as practicable, the salutary benefits of adhering to the notice requirement will
more promptly rid the judicial forum of frivolous litigation behavior and will
concomitantly provide reimbursement for the fees and costs actually
attributable to an adversary's uncorrected offending conduct." Ibid.A. Adherence to Rule 1:4-8
i. Safe Harbor Compliance
We agree with the trial court that defendants complied with the "safe
harbor" provision by notifying the Borough within weeks of being served the
first amended complaint that the litigation should be withdrawn because the
claims are frivolous. Thus, contrary to the Borough's argument, the court
assessed under Rule 1:4-8(f) whether "[t]o the extent practicable, the
procedures prescribed by this rule shall apply to the assertion of costs and fees
against a party other than a pro se party pursuant to N.J.S.A. 2A:15-59.1."
Sylvan's notice contended: (1) the Borough's claims are frivolous and
sanctions will be sought under Rule 1:4-8 and N.J.S.A. 2A:15-59.1 if not
withdrawn; (2) as an adverse party in the Borough's declaratory judgment
action, there was no legal support for the Borough's effort to disgorge it from
the builder's remedy and related relief it received from the alleged malpractice
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by defendant attorneys; (3) there is no evidence that it engaged in conspiracy
or aided and abetted tortious activity against the Borough; (4) there is no good
faith argument to expand the law to support the Borough's claims; (5) the
Borough's complaint interfered with its protected rights under the First
Amendment of the United States Constitution and Article I of the New Jersey
Constitution to seek judicial relief against the Borough; (6) the tort claims are
barred by the Noerr-Pennington11 doctrine; and (7) the Borough's complaint
constitutes a SLAPP12 claim.
Wunsch's notice asserted: (1) Borough counsel was not authorized to file
the complaint; (2) the retainer agreement for Borough counsel to represent the
Borough was not properly executed as it was signed by the mayor, not the
Borough's Deputy Clerk as required, and only listed New York attorneys
11
Noerr-Pennington stems from E. R.R. Presidents Conf. v. Noerr Motor
Freight, Inc., 365 U.S. 127, 136-40 (1961), and United Mine Workers v.
Pennington, 381 U.S. 657, 669-70 (1965). "Under the . . . doctrine, those who
engage in conduct aimed at influencing the government, including litigation,
are shielded from retaliation provided their conduct is not a sham." Cordova v.
Cline, 396 P.3d 159, 167 (N.M. 2017) (citing Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. 545, 555-57 (2014)).
12
An acronym for Strategic Lawsuits Against Public Participation, whereby
litigation is filed for the main purpose of stifling free speech rights by imposing
"the expense and burden of defending a lawsuit." LoBiondo v. Schwartz, 323
N.J. Super. 391, 418 (App. Div. 1999).
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Nicholas Gravante and Karen Dyer of Cadwalader, Wickersham & Taft LLP as
the Borough's attorney, but their pro hac vice applications were denied ceasing
their involvement in the litigation; and (3) the settlement agreement the
complaint seeks to overturn was authorized by the Borough Council and cannot
be invalidated.
CSG's notice stated: (1) the complaint "violate[d] the frivolous litigation
standards of . . . Rule1:4-8 and N.J.S.A. 2A:15-59.1"; (2) the complaint was
ultra vires given the Borough Council did not approve its initiation by the mayor
before the Borough retained counsel; (3) the attorney's fees incurred by the
Borough's counsel far exceeded the $100,000 cap set forth in counsel's retainer
agreement as authorized by the Borough Council;13 and (4) the malpractice
claims are without basis in fact or law.
The record supports the trial court's findings that defendants' notices
"pass[ed] muster" under Rule 1:4-8 by "specif[ying] the basis for the belief that
the [Borough's] pleading is frivolous and providing [an] opportunity for
remediation." Although Sylvan's notice, unlike the other defendants', did not
specifically mention the complaint must be withdrawn within twenty-eight days
13
According to CSG's notice, the most recent invoice showed the Borough's
counsel had billed $723,416.33 in fees.
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per Rule 1:4-8(b)(1), in repeatedly referencing Rule 1:4-8, it sufficiently
notified the Borough that an application for sanctions would be made under the
Rule. Moreover, Sylvan is entitled to attorney's fees independent of N.J.S.A.
2A:15-59.1 and Rule 1:4-8 based upon its settlement agreement with the
Borough that if the municipality unsuccessfully seeks judicial relief related to
the declaratory judgment action it is liable for Sylvan's attorney's fees. Lastly,
the Borough did not provide any evidence demonstrating it could not withdraw
its complaint in response to defendants' demands.
ii. Certification of Services
Defendants did not provide certifications of services with their motions
for sanctions, N.J.S.A. 2A:15-59.1(c), but filed them in accordance with the
court's order after it granted their motions. We reject the Borough's argument
that this process warrants reversal of the attorney's fees awards.
The trial court did not abuse its discretion in requesting the certifications
after ordering sanctions. The Borough, which did not challenge defendants'
certifications of service, cites no authority for its assertion that the procedure
was contrary to the law. The court complied with the FLS by initially deciding
whether the Borough engaged in frivolous litigation under N.J.S.A. 2A:15-
59.1(b) and then considering the amount of reasonable fees that should be
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awarded based on defendants' certifications, which included the information
listed in N.J.S.A. 2A:15-59.1(c). The court limited attorney's fees for services
rendered after the twenty-eight-day safe harbor period.
As for the Borough's assertion that defendant attorneys' malpractice
insurance coverage must be considered in calculating attorney's fees, it cites no
authority or reasonable basis for its position. Neither N.J.S.A. 2A:15-59.1 nor
Rule 1:4-8 require any disclosure by prevailing parties concerning the payment
of attorney's fees by a malpractice insurance carrier.
IV.
Finally, we address the Borough's contention that the trial court abused
its discretion in finding the Borough engaged in frivolous litigation . The FLS
contemplates two bases for a trial court to find frivolous litigation. The
"nonprevailing party" must have advanced its claim in "bad faith, solely for the
purpose of harassment, delay or malicious injury," or "[t]he nonprevailing party
knew, or should have known," its claim had no "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).
"For purposes of imposing sanctions under Rule 1:4-8, an assertion is
deemed 'frivolous' when 'no rational argument can be advanced in its support,
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or it is not supported by any credible evidence, or it is completely untenable.'"
United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 389 (App. Div. 2009)
(quoting First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App.
Div. 2007)). "The nature of litigation conduct warranting sanction under [Rule
1:4-8] has been strictly construed." Pressler & Verniero, Current N.J. Court
Rules, cmt. 2 on R. 1:4-8 (2024). An attorney's fees sanction pursuant
to Rule 1:4-8 "is not warranted where the plaintiff has a reasonable good faith
belief in the merit of [their] action." J.W. v. L.R., 325 N.J. Super. 543, 548
(App. Div. 1999).
Accordingly, sanctions will not be imposed against an attorney who
mistakenly files a claim in good faith. Horowitz v. Weishoff, 346 N.J. Super.
165, 166-67 (App. Div. 2001). Sanctions should be awarded only in
exceptional cases. Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1991).
The party seeking sanctions must "prov[e] that the non-prevailing party
acted in bad faith." Ferolito, 408 N.J. Super. at 408 (quoting McKeown-Brand
v. Trump Castle Hotel & Casino, 132 N.J. 546, 559 (1993)). A prevailing
party's allegation that the non-prevailing party's claim lacked "a reasonable
basis in law or equity," when the non-prevailing party is represented by an
attorney, cannot sustain an award without proof the non-prevailing party
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"'act[ed] in bad faith in asserting' or pursuing the claim." Ibid. (quoting
McKeown-Brand, 132 N.J. at 549). Thus, a non-prevailing party whose
"conduct bespeaks an honest attempt to press a perceived, though ill-founded
and perhaps misguided, claim, [absent] . . . bad faith," cannot be ordered to pay
sanctions. Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div. 1999)
(citing McKeown-Brand, 132 N.J. at 563).
Applying these principles, we discern no abuse of discretion in the trial
court's finding that the Borough's litigation was frivolous, as it was supported
by credible evidence in the record and consistent with the law. In its written
decision, the court found:
The [Borough's] bad faith was demonstrated by the
fact that it knew or should have known, when it filed
suit against its former attorney[s] and the developer
which had successfully sought and obtained a builders
remedy seeking $10,000,000 in damages, that its
claims were contrary to the clear evidence of its
satisfaction with the representation of its counsel and
that in refusing to settle the underlying litigation and
thereby disregarding their attorneys' advice the
Borough lacked proximate cause for its alleged injuries
due to the alleged malpractice and alleged civil
conspiracies. As to the alleged civil conspiracies and
aiding and abetting there was no foundation for such
claims and the court concludes the sole purpose of the
litigation was to harass, delay and cause malicious
injury to . . . Sylvan particularly, as well as . . . attorney
defendants.
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Support for the court's findings of frivolous litigation was grounded in its
decision dismissing the Borough's complaint for failure to state a claim. The
court determined:
[T]he record is replete with evidence that the Borough
resolved to pursue a trial in the affordable housing
litigation despite the attempts of their attorneys to
dissuade them.
....
. . . [T]he Borough's undisputed refusal to settle
and in so doing disregarding [defendant] attorneys'
advice, the Borough cannot establish proximate cause
for their alleged injury. Without proximate cause the
action must fail.
....
. . . The Borough has acknowledged that . . .
defendant attorneys handled the litigation with
knowledge, skill and diligence, and that their advice
was reasonable. That is all that is required of counsel.
....
. . . [H]aving failed to allege facts showing . . .
defendant[] [attorneys], or any of them committed an
underlying wrong, there is no basis upon which the
Borough can sustain a civil conspiracy claim. Further,
there is no basis upon which the Borough may sustain
a claim for aiding and abetting liability as the
pleadings fail to allege facts which demonstrate . . .
defendant[] [attorneys] performed a wrongful act
which caused injury, that . . . defendant[] [attorneys]
were generally aware of their role in the part of an
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overall illegal or tortious activity at the time of their
representation, or that . . . defendant[] [attorneys]
knowingly and substantially assisted the principal
violation.
It is apparent that when political control of the Borough Council changed
hands after the election, the newly constituted Council took issue with the prior
Council's action in resolving the affordable housing controversy. But in suing
defendants, the Borough's former attorneys and the developer, the Borough
proffered no facts and articulated no law to substantiate its allegations. There
was no honest, creative advocacy in the Borough's claims. See Ellison v.
Evergreen Cemetery, 266 N.J. Super. 74, 85 (App. Div. 1993).
We find no support for the Brough's argument that a "fact[-]sensitive
review" indicates that "it is clear that [its] intent, purpose and actions . . . could
not possibly be deemed frivolous." The Borough relies upon an unproduced
email between its attorney and the new Council after the first amended
complaint was filed, stating an affidavit of merit will be provided by another
attorney that "based upon . . . review of [the] amended complaint, documents,
briefing and other materials, it appears . . . [d]efendant attorneys deviated from
a standard of care and committed malpractice." Because the email was neither
part of the trial court record nor supported by counsel's certification from
counsel as required by Rule 1:6-6, it cannot be considered. Moreover, because
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the email was sent three months after the amended complaint was filed, it was
not a basis for the Borough's decision to sue defendant attorneys.
We recognize that a trial court should only award sanctions for frivolous
litigation in exceptional cases. Iannone v. McHale, 245 N.J. Super. 17, 28
(App. Div. 1990). This is one such case.
To the extent we have not addressed any of the Borough's arguments, it
is because they lack sufficient merit to warrant discussion in a written
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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