Fountain Plaza, LLC v. Petrock's Liquors, Inc. ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-1522-23
FOUNTAIN PLAZA, LLC,
Plaintiff-Appellant,
v.
PETROCK'S LIQUORS, INC.,
Defendant-Respondent.
__________________________
Submitted July 30, 2024 – Decided November 19, 2024
Before Judges Rose and Gummer.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Chancery Division, Somerset
County, Docket No. C-012021-23.
Fred S. Dubowsky, attorney for appellant.
Goldberg Segalla, LLP, attorneys for respondent
(Anthony J. Golowski II, on the brief).
PER CURIAM
On leave granted, plaintiff Fountain Plaza, LLC, appeals from an order
disqualifying attorney Arthur L. Skaar, Jr., as its counsel in this case based on
Rule 1:21-1(c) and Rule of Professional Conduct (RPC) 3.7 as well as an order
denying its subsequent reconsideration motion. Based on our de novo review
and reading of the plain language of those rules, we reverse.
Skaar is and always has been plaintiff's sole member. He also is an
attorney with a solo practice and has certified he does not practice law through
plaintiff. According to Skaar, plaintiff is "a passive business owning title to real
estate."
On June 23, 1998, Skaar entered into and executed on his own behalf an
easement agreement with defendant Petrock's Liquors, Inc. (PLI). In a
certification he submitted in support of plaintiff's reconsideration motion, Skaar
confirmed he had entered into that agreement and certified he had negotiated its
terms with defendant's attorney.
As set forth in the easement agreement, Skaar owned property located on
Amwell Road in Hillsborough, known as Block 163, Lot X5 on Hillsborough's
tax map; PLI owned property located on Amwell Road, known as Block 163,
Lot X4.A on Hillsborough's tax map. Skaar apparently years later transferred
his interest in his property to plaintiff. PLI owns a building on its property that
was constructed in 1978.
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According to the easement agreement, Skaar had "a pending application
for development before the Hillsborough Township Planning Board," which
"call[ed] for a shared driveway and parking with [PLI]," an arrangement the
parties to the agreement found "mutually beneficial." Under the agreement,
Skaar was responsible for "construct[ing] the shared driveway and parking
spaces at his sole cost and expense, but . . . the cost of maintenance and repair
of the driveway and parking spaces [would] be shared by the parties equally."
Attached to the agreement was an unsigned "Declaration of Cross-Access and
Parking Easement."
In support of PLI's disqualification motion, Nicholas Petrock, the vice
president of PLI, certified Skaar had approached him "to discuss a Cross-Access
and Parking Easement (the 'Easement')," stating he would "arrange for the
construction of, and all work related to, the Easement as he wanted patrons of
his building to be able to park alongside PLI's building so they could enter the
side of [plaintiff's] building." According to Petrock, Skaar "was solely
responsible for constructing the Easement" and had "hired the contractors who
designed and/or constructed the Easement." Petrock believed Skaar had
arranged for the construction of a building owned by plaintiff on his Amwell
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Road property. According to Petrock, construction of that building began in
2000 and was completed in February of 2001.
On February 15, 2001, Skaar on his own behalf and Petrock on behalf of
PLI executed the Easement. Skaar also signed the Easement as the person who
had prepared it. The Easement provided that Skaar owned property on Amwell
Road, had obtained development approvals calling for a shared driveway and
parking between Skaar and PLI, was receiving from PLI "a perpetual, non-
exclusive easement," was granting to PLI a similar easement, and would
"construct the shared driveway at his sole cost and expense." Skaar executed on
his own behalf and entered into with PLI a "Corrective Amendment" to the
Easement, on August 2, 2001, and a "Second Amendment" to the Easement on
January 22, 2002.
According to Petrock, more than twenty years later in March of 2022,
plaintiff demanded PLI divert water from its downspouts at its expense. In 2023,
Skaar on behalf of plaintiff filed a complaint for a declaratory judgment and
later an amended complaint in which, according to Skaar, plaintiff alleged its
"consent to the discharge of water from defendant's property was terminated in
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2022."1 Plaintiff contends PLI had to have but does not have a written document
supporting the grant of a "drainage easement over plaintiff's property." PLI
counterclaimed, asserting causes of action based on breach of contract, breach
of the covenant of good faith and fair dealing, unjust enrichment, and
negligence.
PLI moved to disqualify Skaar from representing plaintiff in this matter.
Plaintiff moved to dismiss the counterclaim. In a brief he prepared on plaintiff's
behalf in opposition to the disqualification motion, Skaar conceded the court
would have to conduct a hearing pursuant to Lopez v. Swyer, 62 N.J. 267 (1973),
and that "the possibility of an evidentiary hearing and/or a trial of this matter
[could not] be excluded."
On August 25, 2023, the trial court issued an order with an accompanying
statement of reasons granting the disqualification motion based on Rule 1:21-
1(c) and RPC 3.7 and denying the dismissal motion. The court held Skaar, as
plaintiff's "100% sole owner," could not represent plaintiff in this action
pursuant to Rule 1:21-1(c). The court characterized Rule 1:21-1(c) as making
clear an "entity other than a sole proprietorship" could not appear in court
1
The parties did not include copies of their pleadings in the appellate record.
We base our description of their pleadings on their submissions and the trial
court's opinions.
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without counsel and as "not allow[ing] attorneys to represent their own LLCs
except for limited liability companies for the practice of law," citing Rule 1:21-
1B. The court also held RPC 3.7 prevented Skaar from representing plaintiff,
finding:
Attorney Skaar was the owner of [XXX] Amwell
Road . . . at the time the easement was created; he
drafted the easement; he arguably designed the disputed
easement; he conveyed his interest in the property to
[plaintiff] by deed dated May 12, 2003; and he is the
sole member of the LLC that owns the property and
holds the easement. Attorney Skaar will undoubtedly
be required to testify at trial wherein [plaintiff] must
prove that PLI's discharge of water from its downspouts
onto the easement is not a reasonable use of the
easement. Because attorney Skaar will be a primary
witness at trial, he is barred from representing his LLC
under [RPC 3.7].
Plaintiff moved for reconsideration of the provision of the order
disqualifying Skaar. On October 20, 2023, the court entered an order with an
attached statement of reasons denying the reconsideration motion, finding
plaintiff had failed to bring to the court's attention "new evidence or arguments
. . . that would warrant reconsideration."
With leave granted, plaintiff argues in its merits brief that the trial court
interpreted incorrectly Rule 1:21-1(c) and RPC 3.7. In its responsive brief, PLI
contends the trial court correctly interpreted those rules, but this court does not
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need to decide that issue because the parties have "substantively settled" the
case, rendering the appeal moot. In reply, plaintiff denies the parties settled the
case. This court's subsequent efforts to determine the status of the parties'
settlement efforts have not been fruitful. Accordingly, we address the merits of
this appeal.
"[W]e review a trial court's decision on a motion for reconsideration under
an abuse of discretion standard." In re Est. of Jones, 477 N.J. Super. 203, 216
(App. Div. 2023); see also Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582
(2021). A court abuses its discretion when its "decision [is] made without a
rational explanation, inexplicably depart[s] from established policies, or rest[s]
on an impermissible basis." United States v. Scurry, 193 N.J. 492, 504 (2008)
(quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). "A trial
court's interpretation of the law and the consequences that flow from established
facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995). "[A] trial court's legal
conclusions are reviewed de novo." State v. Erazo, 254 N.J. 277, 297 (2023).
We also "review a decision to disqualify counsel de novo." Escobar v.
Mazie, 460 N.J. Super. 520, 526 (App. Div. 2019); see also City of Atl. City v.
Trupos, 201 N.J. 447, 463 (2010) (finding "a determination of whether counsel
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should be disqualified is, as an issue of law, subject to de novo plenary appellate
review"). In reviewing a disqualification order, we are mindful that "a person's
right to retain counsel of his or her choice is limited in that 'there is no right to
demand to be represented by an attorney disqualified because of an ethical
requirement.'" Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 218 (1988)
(quoting Reardon v. Marlayne, Inc., 83 N.J. 460, 477 (1980)). We are equally
mindful that disqualification motions should be "viewed skeptically in light of
their potential abuse to secure tactical advantage." Escobar, 460 N.J. Super. at
526.
In reviewing the trial court's disqualification order, we consider the direct
and unambiguous language of Rule 1:21-1(c) and RPC 3.7. "[W]e review the
meaning or scope of a court rule de novo . . . ." DiFiore v. Pezic, 254 N.J. 212,
228 (2023). "In that review, we apply 'ordinary principles of statutory
construction to interpret the court rules.'" In re Protest of Cont. for Retail
Pharmacy Design, 257 N.J. 425, 436 (2024) (quoting DiFiore, 254 N.J. at
228). Our review begins with the plain language of the rule, and we "ascribe to
the [words of the rule] their ordinary meaning and significance . . . and read
them in context with the related provisions so as to give sense to the [court rules]
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as a whole." DiFiore, 254 N.J. at 228 (alterations in original) (quoting Wiese v.
Dedhia, 188 N.J. 587, 592 (2006)).
Rule 1:21-1(c) states that, unless otherwise permitted by other court rules,
"an entity, however formed and for whatever purpose, other than a sole
proprietorship shall neither appear nor file any paper in any action in any court
of this State except through an attorney authorized to practice in this State."
Thus, "Rule 1:21-1(c), with certain exceptions not applicable here, provides that
a business entity, other than a sole proprietorship, is required to appear in court
through an attorney authorized to practice law in the State." Gobe Media Grp.,
LLC v. Cisneros, 403 N.J. Super. 574, 576 (App. Div. 2008); see also Senna v.
City of Wildwood, 23 N.J. Tax 275, 278 (App. Div. 2006) (finding "[t]he
prohibition of lay representation of limited liability companies under Rule 1:21-
1(c) is clear and unambiguous."); Pressler & Verniero, Current N.J. Court Rules,
cmt. 3 on R. 1:21-1(c) (2025) (discussing Rule 1:21-1(c)'s "bar on lay
representation of corporations").
The trial court held "Rule 1:21-1(c) does not allow attorneys to represent
their own LLCs, except for limited liability companies for the practice of law."
But the Rule doesn't say that. The Rule requires "an entity, however formed and
for whatever purpose" to appear in court "through an attorney authorized to
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practice law in this State." R. 1:21-1(c). It is undisputed Skaar is "an attorney
authorized to practice law in the State." Ibid. The Rule bars a lay person from
appearing on behalf of a business entity in court. But this case isn't about "lay
representation" of a business entity. Senna, 23 N.J. Tax at 278. And nothing in
Rule 1:21-1(c) prevents an attorney from representing a business entity in which
the attorney has an ownership or membership interest. Rule 1:21-1B, which the
court also cited, concerns "Limited Liability Companies for the Practice of
Law." That rule does not apply because plaintiff is not a limited liability
company for the practice of law. The trial court erred in applying Rule 1:21-
1(c) to disqualify Skaar from representing plaintiff.
RPC 3.7 states:
(a) A lawyer shall not act as advocate at a trial in which
the lawyer is likely to be a necessary witness unless:
(1) the testimony relates to an uncontested issue;
(2) the testimony relates to the nature and value of legal
services rendered in the case; or
(3) disqualification of the lawyer would work
substantial hardship on the client.
(b) A lawyer may act as advocate in a trial in which
another lawyer in the lawyer's firm is likely to be called
as a witness unless precluded from doing so by RPC 1.7
or RPC 1.9.
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The trial court held that "[b]ecause attorney Skaar will be a primary witness at
trial, he is barred from representing his LLC under RPC 3.7."
Based on the undisputed facts of the case, we agree Skaar "is likely to be
a necessary witness." RPC 3.7(a). That finding, however, does not require
Skaar's immediate disqualification. RPC 3.7 prevents a lawyer who "is likely to
be a necessary witness" from acting "as advocate at a trial." (Emphasis added).
We reviewed RPC 3.7's language in Escobar, 460 N.J. Super. at 527, and
held "RPC 3.7 is a rule addressed only to a lawyer acting as an advocate at trial."
Based on our determination of the meaning of RPC 3.7's language, we found the
trial court had erred in relying on RPC 3.7 to bar the attorney-witnesses from
representing the defendant "at depositions or in any other pre-trial matters."
Ibid.
In reaching that conclusion, we considered the American Bar
Association's comments to the Model Rule of Professional Conduct 3.7 and the
Association's concern that
Because "[a] witness is required to testify on the basis
of personal knowledge, while an advocate is expected
to explain and comment on evidence given by others,"
the jury may not understand "whether a statement by an
advocate-witness should be taken as proof or as an
analysis of the proof."
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[Escobar, 460 N.J. Super. at 527 (quoting Model Rules
of Prof'l Conduct r. 3.7 cmt. 2 (Am. Bar Ass'n 2018)).]
See also In re Op. No. 17-2012 of the Advisory Comm. on Prof'l Ethics, 220
N.J. 468, 478 (2014) (noting "[t]he official ABA comments to the RPCs can
assist in interpreting them.").
We also considered Main Events Productions v. Lacy, 220 F. Supp. 2d
353 (D.N.J. 2002), an opinion written by Judge Dickinson R. Debevoise, who
had "chaired the committee appointed by our Supreme Court in 1982 to review
the ABA's proposed Model Rules of Professional Conduct and recommend to
the Court whether they should be adopted in New Jersey in whole or part,
thereafter commonly referred to as 'the Debevoise Committee.'" Escobar, 460
N.J. Super. at 528 n.4 (citing A. v. B., 158 N.J. 51, 59 (1999)). In Main Events,
Judge Debevoise held "RPC 3.7(a) is a prohibition only against acting as an
'advocate at a trial'" and reversed as premature a magistrate judge's order
immediately disqualifying the plaintiff's attorney. 220 F. Supp. 2d at 356.
Judge Debevoise compared the language of RPC 3.7 with the language of
the attorney-witness rules in the Disciplinary Rules of the Code of Professional
Responsibility, which preceded the Rules of Professional Conduct. Ibid. He
found that "[u]nlike RPC 3.7, [the prior rules] clearly provided that an attorney
could not accept employment where he could be a witness, or must immediately
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withdraw upon learning or believing he would be a witness for his client or
another party." Ibid. (citing DR 5-101(B), DR 5-102(A), and DR 5-102(B)).
Judge Debevoise held that construing RPC 3.7 to bar an attorney-witness from
acting as an advocate only at trial
not only is in accord with the plain language of the
Rule, it also is consistent with its intent. The Rule is
designed to prevent a situation in which at trial a lawyer
acts as an attorney and as a witness, creating the danger
that the fact finder (particularly if it is a jury) may
confuse what is testimony and what is argument, and
otherwise creating an unseemly appearance at trial.
Limiting the disqualification to advocacy at trial
achieves these objectives and at the same time respects
a client's right to be represented generally by an
attorney of his choice.
[Id. at 357.]
Judge Debevoise recognized an attorney-witness could be called to testify "at a
pre-trial evidentiary hearing" and suggested "[t]he better rule would probably
be to treat the hearing as if it were a trial and . . . in this case, retain other
counsel to represent the client for the purpose of the hearing." Ibid.Citing factual distinctions between Escobar and this case, the trial court
declined to apply our holding in Escobar and granted PLI's motion seeking
Skaar's immediate disqualification. But the factual differences between the
cases does not change our interpretation of the plain language of RPC 3.7. And
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by disregarding the phrase "at a trial" in the language of RPC 3.7, the trial court
failed to follow the "bedrock assumption [in statutory interpretation] that [the
scrivener] did not use 'any unnecessary or meaningless language.'" Jersey Cent.
Power & Light Co. v. Melcar Util. Co., 212 N.J. 576, 587 (2013) (quoting Patel
v. N.J. Motor Vehicle Comm'n, 200 N.J. 413, 418-19 (2009)); see also Patel,
200 N.J. at 418 (in statutory construction, courts "strive 'to give effect to every
word.'" (quoting Med. Soc'y of N.J. v. N.J. Dep't of Law & Pub. Safety, 120
N.J. 18, 26 (1990))).
Because the trial court erred in applying Rule 1:21-1(c) to disqualify Skaar
and erred in applying RPC 3.7 to disqualify him immediately, we reverse the
October 20, 2023 order and the disqualification provision of the August 25, 2023
order. Defendant is free to renew, at an appropriate time, a motion to disqualify
Skaar from acting as counsel at trial or a pretrial evidentiary hearing in which
Skaar "is likely to be a necessary witness" in accordance with RPC 3.7.
Reversed and remanded for proceedings consistent with this opinion. We
do not retain jurisdiction.
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