Myrna B. Tagayun and Robert S. Mandell v. Americhoice of New Jersey, Inc.

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1628-13T1
MYRNA B. TAGAYUN and
ROBERT S. MANDELL,
Plaintiffs-Appellants,
v.
APPROVED FOR PUBLICATION
AMERICHOICE OF NEW JERSEY, INC., SEPTEMBER 20, 2016
a New Jersey corporation, d/b/a
United Healthcare Community Plan; APPELLATE DIVISION
MICHELE NIELSEN, individually
and as an officer of AmeriChoice
of New Jersey, Inc., d/b/a United
Healthcare Community Plan; STRADLEY
RONON STEVENS & YOUNG, LLP, a
Pennsylvania Limited Liability
Partnership; FRANCIS X. MANNING,
ESQUIRE, an attorney at law, licensed
in the State of New Jersey,
individually and as an officer and/or
employee of Stradley Ronon Stevens &
Young, LLP; MARISSA PARKER, ESQUIRE,
an attorney at law, licensed in the
State of New Jersey, individually and
as an officer or employee of Stradley
Ronon Stevens & Young, LLP; L. JOHN
VASSALOTTI 3, JR., an attorney at law,
licensed in the State of New Jersey,
individually and as an officer and/or
employee of Stradley Ronon Stevens &
Young, LLP,
Defendants-Respondents.
_______________________________________
Submitted September 17, 2015 – Decided June 28, 2016
Before Judges Lihotz, Fasciale and Higbee.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-
5348-12.
Myrna B. Tagayun and Robert S. Mandell,
appellants pro se.
Stradley Ronon Stevens & Young, LLP,
attorneys for respondents (Francis X.
Manning, on the brief).
The opinion of the court was delivered by
HIGBEE, J.A.D.
Plaintiffs, Dr. Myrna B. Tagayun, and Robert S. Mandell,
her husband and office manager, appeal (1) a May 1, 2013 order
awarding defendant, AmeriChoice, counsel fees as a sanction for
pursuing a frivolous claim in their original complaint pursuant
to Rule 1:4-8; (2) a May 9, 2013 order dismissing plaintiffs'
amended complaint and declaring it was also a frivolous pleading
pursuant to N.J.S.A. 2A:15-59.1; and (3) an October 22, 2013
order granting defendant's motion for additional fees and
amending the May 1, 2016 money judgment against plaintiffs to
include legal fees incurred in responding to the amended
complaint. Plaintiffs state in their brief they are limiting
their appeal only to whether sanctions and fees should have been
awarded against them.
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For the reasons that follow, we affirm in part and reverse
in part and remand for amendment of the amount of the judgments
against plaintiffs.
We first set forth the germane facts and procedural
history. Plaintiffs filed a complaint against defendants,
AmeriChoice of New Jersey Inc., Michele Nielsen, an officer of
AmeriChoice, and various other associated entities they allege
did business as AmeriChoice, as well as other fictitiously named
defendants. The dispute concerned a contract entered into by
Tagayun and AmeriChoice whereby Tagayun, a neurologist, became a
participating provider for AmeriChoice HMO members.
AmeriChoice sent Tagayun notice she would be terminated as
a provider. Plaintiffs filed their pro se complaint against
defendants and requested an order to show cause for injunctive
relief to prevent Tagayun's termination. Defendants' counsel
sent a letter rescinding the notice to terminate, thus
plaintiffs were temporarily successful in preventing the
termination. Defendants and plaintiffs appeared before the
court where Mandell argued that defendants would just terminate
Tagayun again in a few months. Nonetheless, the judge found
there was no longer a need for injunctive relief. Additionally,
defendants had not filed an answer to the original complaint in
a timely fashion and were ordered to file an answer. Although
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they were ordered to do so, defendants never filed an answer to
the original complaint. Nor did they file an answer to the
amended complaint.
AmeriChoice did subsequently terminate the services of
Tagayun by not renewing her contract and filed a motion to
dismiss the original complaint and transfer the matter to
arbitration.
Defendants notified Tagayun that her complaint was
frivolous, pursuant to Rule 1:4-8(b)(1), because the contract
required arbitration of all disputes between the parties.
Defendants, at the same time, also notified Mandell his claim
was frivolous as he was not a party to the contract and
therefore, had no standing to enforce the contract.
When plaintiffs refused to dismiss their claims, defendants
filed a motion to dismiss. Defendants were ultimately
successful and then filed a motion for sanctions under Rule 1:4-
8(b)(1).
After oral argument, the judge entered the January 11,
2013 order dismissing the original complaint without prejudice
as to Tagayun and sending her claims to arbitration. The judge
also dismissed Mandell's claims with prejudice for lack of
standing. Plaintiffs filed an amended complaint on January 14,
2013, which was substantively the same as the original
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complaint, except the law firm and individual attorneys for
defendants were added as additional named defendants.
On January 15, 2013, plaintiffs appealed from the January
11, 2013 order dismissing their original complaint. The appeal
proceeded despite the filing of the amended complaint. While
that appeal was ongoing, the Law Division judge continued to
consider and rule on motions filed by defendants related to the
original complaint being frivolous and on similar motions
related to the amended complaint. We issued an opinion on
August 30, 2013, affirming the January 11, 2013 order sending
Tagayun's claims to arbitration.1 That final Appellate order may
not be challenged in this subsequent appeal.
In the interim, defendants moved to have both complaints
declared frivolous and sought an award of attorney fees as a
sanction against plaintiffs. Oral argument was scheduled for
February, but was adjourned at plaintiffs' request. Plaintiffs
claim no hearing was ever held on the motions. However, because
plaintiffs filed no opposition to the two motions requesting
sanctions, no oral argument was required. In an order dated May
1, 2013, the judge concluded the original complaint was
frivolous and entered an order granting a fee award of
1
Mandell's appeal was dismissed as interlocutory.
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$10,073.20 in favor of defendants against plaintiffs jointly,
severally, and in the alternative.2
On May 9, 2013, the judge dismissed the amended complaint,
found it was frivolous, and ordered defendants to submit an
application for fees related to the amended complaint. The
judge made very limited findings simply writing on the May 1 and
May 9 orders that each was granted for the reasons set forth in
defendants' papers.
Plaintiffs filed an appeal from the May 1 and May 9, 2013
orders. We granted defendants' motion to remand for entry of a
final judgment with the addition of the fees assessed relating
to the amended complaint and dismissed the appeal by plaintiffs
as interlocutory.
Judge Stephen Taylor, who did not enter the prior orders,
was assigned to the case and heard oral argument solely on the
issue of the amount of fees to be awarded related to the amended
complaint. Defendants requested fees in the amount of $6,539.40
and $60 in disbursements, totaling $6,599.40. Judge Taylor
carefully reviewed each invoice on the record and required
2
For the benefit of pro se plaintiffs we note that "jointly,
severally in the alternative" means that the judgment can be
collected from either Tagayun or Mandell or part of the judgment
can be collected from one of them and part from the other,
however the total amount collected from both cannot exceed the
amount awarded. Defendants cannot collect the amount of the
judgment twice.
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defense counsel to explain the amounts billed.3 The judge
ascertained the billing rate and hours for each attorney
involved. The judge was advised none of the billing involved
time devoted to defending the law firm, but only the amounts
billed to the client relating to the amended complaint. The
judge found both the attorneys' rates and the number of hours
were reasonable. Tagayun argued plaintiffs' actions were not
frivolous, but she did not address the amount of the fees.
Judge Taylor awarded the amount of fees requested. Although
Mandell was not given an opportunity to speak at the hearing, he
has presented no argument on appeal that suggests the amount of
the legal fees imposed at the end of the hearing was improper.
We review a trial court's imposition of frivolous
litigation fees for an abuse of discretion. Masone v. Levine,
382 N.J. Super. 181, 193 (App. Div. 2005). 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 amounts
to a clear error in judgment." Ibid.
3
Plaintiffs in their brief state they requested the transcript
for the hearing but had not received it. Defendants in their
brief argued we should dismiss the appeal of the October 22,
2013 order because no transcript was supplied. On November 12,
2014 the transcript was provided to the Clerk of the Appellate
Division and we review the appeal from that order on its merits.
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To begin our analysis of the applicable law regarding
frivolous litigation, we turn to relevant provisions of Rule
1:4-8(a):
By signing, filing or advocating a pleading,
. . . an attorney or pro se party certifies
that to the best of his or her knowledge,
information, and belief, formed after an
inquiry reasonable under the circumstances:
(1) the paper is not being
presented for any improper
purpose, such as to harass or to
cause unnecessary delay or
needless increase in the cost of
litigation;
(2) the claims, defenses, and
other legal contentions therein
are warranted by existing law or
by a non-frivolous argument for
the extension, modification, or
reversal of existing law or the
establishment of new law[.]
An award of fees against a party, as opposed to a lawyer or
a self-represented litigant, engaging in frivolous litigation is
governed by N.J.S.A. 2A:15-59.1(a)(1), which requires a judge to
determine whether a pleading filed by a non-prevailing party was
frivolous. In order to award fees under the statute, the court
must find that a claim or defense was either pursued "in bad
faith, solely for the purpose of harassment, delay or malicious
injury" or that the non-prevailing party knew or should have
known it "was without any reasonable basis in law or equity and
could not be supported by a good faith argument for an
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extension, modification or reversal of existing law." N.J.S.A.
2A:15-59.1(b)(1), (2).
There was no evidence presented that plaintiffs filed their
original complaint simply to harass defendants. Defendants
urged the court to find the original complaint was frivolous
because Mandell lacked standing and Tagayun signed a contract
that contained a provision that all disputes would go to
arbitration. The judge found these were sufficient reasons to
dismiss the original complaint. The dismissal based on the
arbitration clause was affirmed on appeal.
Plaintiffs argued before the trial court and on appeal that
Tagayun had not waived her right to a jury trial because this
explicit language or similar language was not in the contract's
arbitration clause.
When plaintiffs filed their complaint there were some
appellate decisions enforcing arbitration provisions that did
not have explicit language waiving rights to access to the
courts or juries decided prior to the decision in this case.
See Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515,
518 (App. Div. 2010); EPIX Holdings Corp. v. Marsh & McLennan
Cos., 410 N.J. Super. 453, 476, overruled in part on other
grounds by Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 192-
93 (2013).
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However, the Supreme Court, in Atalese v. U.S. Legal
Services Group, L.P., 219 N.J. 430 (2014), cert. denied, __ U.S.
__, 135 S. Ct. 2804, 192 L. Ed. 2d 847 (2015), while stressing
that arbitration was favored by the law, explained that even
under prior existing law relating to arbitration provisions in
contracts, a knowing waiver of constitutional rights to a jury
trial must be explicit in order to enforce the arbitration
clause.
Therefore, we cannot support the trial court's conclusion
that Tagayun's contention that she had not waived her right to
litigate her contract claims in court was frivolous even though
her claim was unsuccessful. Although Tagayun is bound by the
decision of the Appellate Division affirming the dismissal of
her action, the fact she lost that battle does not mean her
contentions were frivolous. In light of the holding in Atalese,
her position cannot be described as frivolous under the
controlling legal standards set forth above, which apply both to
the rule and statute governing frivolous litigation.
As to Mandell, it is clear he was not a party to the
contract. The trial court properly dismissed his claims for
lack of standing. He was advised by letter from defendant's
counsel that he was not a party to the contract and lacked
standing. His refusal to accept this fact and to agree to be
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dismissed as a party to the action, however, was not frivolous
under the controlling legal standards we set forth below which
apply to both the rule and the statute governing frivolous
litigation. The primary difference being that the rule governs
awards against attorneys and self-represented litigants while
the statute governs sanctions against parties.
The rule and statute must both be interpreted strictly
against the applicant for an award of fees. See LoBiondo v.
Schwartz, 199 N.J. 62, 99 (2009); DeBrango v. Summit Bancorp,
328 N.J. Super. 219, 226 (App. Div. 2000). This strict
interpretation is grounded in "the principle that citizens
should have ready access to . . . the judiciary." Belfer v.
Merling, 322 N.J. Super. 124, 144 (App. Div.), certif. denied,
162 N.J. 196 (1999). "The statute should not be allowed to be a
counterbalance to the general rule that each litigant bears his
or her own litigation costs, even when there is litigation of
'marginal merit.'" Ibid. (citation omitted). Sanctions should
be awarded only in exceptional cases. See Iannone v. McHale,
245 N.J. Super. 17, 28 (App. Div. 1990). "When the plaintiff's
conduct bespeaks an honest attempt to press a perceived, though
ill-founded and perhaps misguided, claim, he or she should not
be found to have acted in bad faith." Belfer, supra, 322 N.J.
Super. at 144-45. The party seeking sanctions bears the burden
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to prove bad faith. Ferolito v Park Hill Ass'n, 408 N.J. Super.
401, 408 (App. Div.), certif. denied, 200 N.J. 502 (2009).
Moreover, the grant of a dispositive motion, without more, does
not suffice to establish a losing party's bad faith. Ibid.
Sanctions for frivolous litigation are not imposed because
a party is wrong about the law and loses their case. The nature
of conduct warranting sanction under Rule 1:4-8 and under the
statute has been strictly construed. The term frivolous should
not be employed broadly or it could limit access to the court
system. First Atl. Fed. Credit Union v. Perez, 391 N.J. Super.
419, 432-33 (App. Div. 2007). Imposing sanctions is not
appropriate where a party "has a reasonable good faith belief in
the merit of his action." J.W. v. L.R., 325 N.J. Super. 543,
548 (App. Div. 1999). In discussing the frivolous litigation
statute, the Supreme Court, in McKeown-Brand v. Trump Castle
Hotel & Casino, 132 N.J. 546, 561-62 (1993), explained the
legislative history as follows:
The predecessor bill, A. 1086, allowed the
prevailing party to recover fees from the
non-prevailing party if that party's
pleading was "not substantially justified."
In the course of the legislative process,
the term "frivolous" replaced "not
substantially justified." Senate Judiciary
Committee Statement to Assembly Committee
Substitute for A. 1086, 2029, 783, and 1260
(Oct. 2, 1986). Indeed, the Governor's
conditional veto message noted the "bill's
restrictive definition of 'frivolous.'" The
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replacement of "not substantially justified"
with "frivolous" reflects the legislative
intent to limit the application of the
statute. That limitation is consistent with
the premise that in a democratic society,
citizens should have ready access to all
branches of government, including the
judiciary. See Iannone, supra, 245 N.J.
Super. at 27 (stating that limitation on
award of counsel fees "promotes the goal of
equal access to the court irrespective of
economic status"). In brief, the
Legislature resolved the tension between the
competing goals of equal access to the
courts and the avoidance of the costs of
unnecessary litigation by favoring access
over cost-avoidance.
Since we conclude the trial judge's finding that the
original complaint was frivolous is unsupported, we reverse and
vacate the order of May 1, 2013. As to Mandell, we are also
constrained to reverse the order of the trial judge that awarded
sanctions against him in connection with the original complaint.
He presented an argument to the court that he had standing as a
third-party beneficiary of the contract. The judge properly
declined to accept that argument, but an award of sanctions was
not warranted simply because Mandell misconstrued the law.
However, we find the trial judge did not abuse her
discretion in finding the filing of an amended complaint by both
plaintiffs asserting the same claims that had just been
dismissed by the court and adding defendants' counsel as parties
was frivolous. Tagayun had been advised by the court their
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claims had to be arbitrated. Plaintiffs had a right to appeal
those decisions and in fact they availed themselves of that
right the day after they filed their amended complaint. They
had no right to force the defendants to defend an amended
complaint asserting the same claims that had just been
dismissed. At that point, Mandell had been told by the judge he
had no standing to assert any claims under the contract and he
was not a beneficiary of the contract. We therefore affirm the
May 9, 2013 order finding the amended complaint was frivolous
and imposing sanctions.
We conclude Judge Taylor properly limited his role to
determining the amount of fees that should be awarded.
Plaintiffs' first appeal of the sanctions was dismissed as
interlocutory and remanded for determining the total amount of
the attorney fees. Plaintiffs' argument that Judge Taylor
should have reconsidered the prior decision of the first judge
lacks sufficient merit to address in a written opinion. R.
2:11-3(e)(1)(E).
As to the amount of fees awarded by Judge Taylor, we affirm
for the reasons he expressed in his comprehensive oral decision
from the bench on October 22, 2013.
The judgment of $10,073.20 for frivolous filing of the
original complaint is vacated as to both plaintiffs. We affirm
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the May 9, 2013 order ordering sanctions for frivolous filing of
the amended complaint and affirm the October 30, 2013 order
imposing sanctions in the amount of $6,599.40. We remand to the
trial judge to reduce and amend the final judgment to $6,599.40
against both plaintiffs jointly, severally, and in the
alternative.
Affirmed in part, reversed in part, and remanded for
amendment of the amount of the judgment. We do not retain
jurisdiction.
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