Arthur J. Lesemann, J.s.c.
ARTHUR J. LESEMANN, J.S.C.
A motion to dismiss a third-party complaint for lack of personal jurisdiction in this corporate dissolution case has led to a request for the award of counsel fees under N.J.S.A. 2A:15-59.1, the so called "frivolous claims" statute. The application raises issues which have not yet been fully resolved under that relatively new enactment.
The complaint alleged that plaintiff Ibelli and defendant Maloof were the sole shareholders in a New Jersey corporation, defendant BelMed Advertising, Inc. (BelMed). It charged that no stock of the corporation had ever been issued, that corporate meetings had not been held, that promised agreements had not been signed and that there was a dispute between the two principals as to the amount of shares to which each was
entitled. It sought, with other incidental relief, dissolution of the corporation.
The defendants, Maloof and BelMed, filed an answer and counterclaim against Ibelli and also filed a third-party complaint against a New York corporation owned by Ibelli, which bore the same name as the defendant's New Jersey corporation -- BelMed Advertising, Inc. (For clarity, the New Jersey corporation will be referred to as "BelMed" or "BelMed New Jersey"; the New York corporation as "BelMed New York.") The counterclaim and third-party complaint alleged that plaintiff Ibelli had surreptitiously organized the New York corporation in early 1990 and diverted BelMed's business to it. It charged that between June and August, 1990, after Ibelli had his New York corporation organized and in place, he then caused the New Jersey corporation to cease operations, moved the three employees of the New Jersey firm to his New York corporation, moved over $100,000 in BelMed bank accounts to his New York operation, and thus completed his usurpation of the assets and business of BelMed. Maloof and BelMed charged that those acts constituted breach of contract and breach of Ibelli's fiduciary obligations to BelMed. They sought injunctive relief, an accounting and damages.
Ibelli's New York corporation then moved to dismiss the third-party complaint, asserting lack of personal jurisdiction over it because, it claimed, the New York corporation had done no business in New Jersey. In his certification submitted with the motion, Ibelli (who identified himself as the sole director and shareholder of the New York corporation) set out the basis of the claim:
BelMed of New York has no ties to the (S)tate of New Jersey. It has no office in New Jersey; it is incorporated under the laws of the State of New York; its registered office is in New York; its only office is in New York. BelMed of New York has no employees in New Jersey; it owns no property (real or personal) in New Jersey; it does not even have a New Jersey telephone number. BelMed of New York conducts all of its business out of its New York office.
In its brief in support of the motion BelMed New York amplified those claims and concluded its argument with the following summation:
BelMed of New York employs no personnel whatsoever, including sales persons whose territories include the state of New Jersey . . . . The corporation transacts no business whatsoever within the borders of the (S)tate of New Jersey. No percentage of profits earned by BelMed of New York reflect activities conducted within the (S)tate of New Jersey. (emphasis added)
The answering arguments of Maloof and BelMed, sought to show sufficient "contacts" between the New York corporation and the State of New Jersey to establish this court's jurisdiction. They emphasized BelMed New York's advertising in certain periodicals that circulated in New Jersey, and they also claimed that the New York corporation had made other efforts to solicit business in New Jersey. (But they did not claim that those efforts were successful.) Finally they charged, in essence, that some of Ibelli's alleged unlawful acts which had occurred in New Jersey should be treated as the equivalent of actions by the New York corporation since they were designed to benefit BelMed New York.
BelMed New York's reply repeated the factual claims it had already submitted. The advertising stressed by Maloof and the New Jersey corporation, it said, was not sufficient to ground jurisdiction in this court:
The acts of BelMed New York in advertising in two medical marketing publications are isolated, random, and attenuated contacts which are insufficient to create general jurisdiction over this defendant.
The motion to dismiss was presented to the court on that basis. However, at oral argument something new developed. The attorney for Maloof and BelMed said that just three days earlier he had completed the deposition of a former employee of BelMed New York, who had provided information totally inconsistent with what had been claimed by the New York corporation. She (it was said) testified that BelMed New York had, and still has, just two customers which it services. One of those customers was, and is, in New Jersey, and -- contrary to the claims of Ibelli and the submissions on behalf of BelMed
New York -- throughout the period described in the third-party complaint, BelMed New York had regularly done business with that corporation in this State. Counsel also said that when he became aware of that information he asked counsel for the New York corporation to dismiss the pending motion, but that request was denied.
In response to that presentation, and when invited to explain the apparent disparity between the factual contentions he had submitted and the facts just called to the court's attention, counsel for the movant made the following startling statement:
Judge, we have an adversarial system; we have rules; we have time limits; it's not up to my client to offer information on this issue, it's up to the other side to come up and establish jurisdiction, and they haven't done it.
The long and short of that claim is that it is perfectly proper for a moving party to misrepresent facts to his adversary and to the court, and it is the obligation of the adversary to dig out the real facts and uncover the lie in the presentation made against it!
That contention violates the most fundamental precepts governing the conduct of attorneys. It is a blatant violation of R.P.C. 3.1 and 3.3, which prohibit an attorney from asserting any issue, unless he "reasonably believes that there is a basis for doing so that is not frivolous"; that prohibit a lawyer from "knowingly" making a "false statement of material fact or law" to a court; and prohibit an attorney from failing "to disclose to the tribunal a material fact with knowledge that the tribunal may tend to be misled by such failure".
In the face of that extraordinary development, the court adjourned hearing of the motion for two weeks, to permit formal submission, by certification of the claims made by Maloof and BelMed and any answer ...