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MRUZ v. CARING

United States District Court, District of New Jersey


March 23, 1999

JOHN H. MRUZ, VASILIKE D. NIKA, AND JANE A. JOHNSON, PLAINTIFFS,
v.
CARING, INC., CARING RESIDENTIAL SERVICES, INC., CARINGHOUSE PROJECTS, INC., CARING MEDICAL DAY SERVICES, INC., CARING FELLOWSHIP CENTERS, INC., CARING INTERNATIONAL, INC., COMPREHENSIVE ELDERCARING, INC., COASTAL SUPPORT SERVICES, INC., ANN J. UNDERLAND, CARLISLE W. UNDERLAND, GARFIELD L. GREENE, LEWIS W. FIELD, MARY E. HAYNIE, IAN MEKLINSKY, ESQ, O'BRIEN & FRANKEL, DEFENDANTS.

The opinion of the court was delivered by: Orlofsky, District Judge.

OPINION

This case presents the novel question of whether a litigant may pursue a state law remedy for the filing of a frivolous claim when the claim arises under federal law and this Court's subject matter jurisdiction is based upon a federal question.*fn1 For the reasons set forth below, I hold that, because the jurisdictional basis for the alleged frivolous claim is this Court's federal question jurisdiction, litigants who seek relief for such "litigation abuse" must pursue the arsenal of federal remedies available to address such misconduct. Accordingly, I shall grant Plaintiffs' motion to dismiss the counterclaim. Alternatively, I shall grant the motion to dismiss the counterclaim because a party seeking relief under New Jersey's Frivolous Claims Act may only do so by the filing of a motion, and not by the assertion of a counterclaim.*fn2

On March 21, 1997, Plaintiffs, John H. Mruz, Vasilike D. Nika, and Jane A. Johnson ("Plaintiffs"), filed this action, which arises out of Plaintiffs' discovery and investigation of alleged Medicaid and tax fraud by their employers, and Plaintiffs' subsequent termination. On January 28, 1998, in an Opinion and Order resolving the defendants' motions to dismiss, this Court dismissed Plaintiffs' claims for violation of the Federal False Claims Act, 31 U.S.C. § 3730(h) (Count I), and various state common law claims (Count V). Mruz, et al. v. Caring, Inc., et al., 991 F. Supp. 701, 720 (D.N.J. 1998). After Plaintiffs filed an amended complaint on February 17, 1998, Defendants, Ian Meklinsky, Esq., and Fox, Rothschild, O'Brien & Frankel (the "Attorney Defendants"), answered the Amended Complaint and filed a counterclaim pursuant to the New Jersey Frivolous Claims Act, N.J. Stat. Ann. § 2A:15-59.1, for attorneys' fees and costs incurred in defense of Count I of the Complaint. Plaintiffs have now moved to dismiss the counterclaim for failure to state a claim upon which relief can be granted. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331, 1367.*fn3

I. PROCEDURAL BACKGROUND

The facts and procedural history giving rise to this litigation are set forth in detail in this Court's January 28, 1998, opinion, Mruz, et al. v. Caring, Inc., et al., 991 F. Supp. 701 (D.N.J. 1998) ("Mruz I"), and, therefore, shall not be repeated here. What follows below is the procedural history relevant to Plaintiffs' motion to dismiss the Attorney Defendants' counterclaim for failure to state a cause of action upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn4

On August 8, 1997, Defendants, CARING, Inc., CARING Residential Services, Inc., CARINGhouse Projects, Inc., CARING Medical Day Services, Inc., CARING Fellowship Centers, Inc., Caring International, Inc., Comprehensive ElderCARING, Inc., Coastal Support Services, Inc., Ann J. Underland, Carlisle W. Underland, Garfield L. Greene, Lewis W. Field, Mary E. Haynie (collectively, "Corporate Defendants"), and Defendants, Fox Rothschild, O'Brien & Frankel ("Fox"), and Ian Meklinsky, Esq. ("Meklinsky"), filed motions to dismiss Counts I, II, IV, and V of the Complaint. See Corporate Defendants' Notice of Motion (filed Aug. 8, 1997); see also Attorney Defendants' Notice of Motion (filed Aug. 8, 1997). On January 28, 1998, this Court granted in part and denied in part defendants' motions. See Mruz I, 991 F. Supp. at 704, 721. Specifically, I dismissed Plaintiffs' claim for violation of the Federal False Claims Act, 31 U.S.C. § 3730(h), Count I of the Complaint; denied defendants' motions to dismiss Plaintiffs' claims for violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and the New Jersey Racketeer Influenced and Corrupt Organizations Act, N.J. Stat. Ann. § 2C:41-1 et seq., Counts II and IV; and granted defendants' motions to dismiss Count V of the Complaint, Plaintiffs' state law cause of action, "without prejudice to Plaintiffs' right to file an amended Count V of the Complaint within twenty days. . . ."*fn5 See Order of the Court (filed Jan. 28, 1998); see also Mruz I, 991 F. Supp. at 707-21.

In Mruz I, after concluding that the touchstone of liability under section 3730(h) of the False Claims Act is an "employment relationship," see Mruz I, 991 F. Supp. at 709, I went on to "determine whether Plaintiffs ha[d] pled facts [in Count I of the Complaint] from which an inference of an employment relationship between Plaintiffs and the Attorney Defendants . . . [could] be drawn." See id. at 710 (footnote omitted). In making this determination, I wrote:

  A review of the Complaint confirms that no such
  inference can reasonably be drawn. First and perhaps
  most important, Plaintiffs allege that they were
  employed by various corporate entities, not by the
  Attorney Defendants. . . . [T]here is nothing in the
  Complaint suggesting an employment relationship
  between the Attorney Defendants and Plaintiffs . . .
  Therefore, Count I of the Complaint will be dismissed
  with prejudice . . . as to [the Attorney Defendants].

See id.; see also Order of the Court (filed Jan. 28, 1998).

On February 17, 1998, Plaintiffs filed an Amended Complaint. See Amended Complaint (filed Feb. 17, 1998). On March 25, 1998, the Attorney Defendants answered the Amended Complaint, and filed the counterclaim, which forms the subject matter of this Opinion. See Answer and Counterclaim (filed Mar. 25, 1998). The counterclaim asserts a cause of action, under the New Jersey Frivolous Claims Act ("NJFCA"), N.J. Stat. Ann. § 2A:15-59.1 (West 1998),*fn6 for the recovery of attorneys' fees and costs incurred by the Attorney Defendants in defense of Count I of the Complaint, Plaintiffs' False Claims Act claim. See Answer and Counterclaim ("Counterclaim") (filed Mar. 25, 1998). In the counterclaim, the Attorney Defendants allege:

  Plaintiffs asserted that Fox and Meklinsky . . . were
  liable to Plaintiffs under . . . § 3730(h) [of the
  False Claims Act] despite the fact that (a) there has
  never been any employment relationship between one or
  more of the Plaintiffs, on the one hand, and either
  Fox or Meklinsky, on the other hand; and (b) the
  complaint does not even allege that there is or was
  any [such] employment relationship. . . . The [False
  Claims Act claim] was filed against Fox and Meklinsky
  in bad faith and solely for the purpose of
  harassment, delay or malicious injury. . . .
  Plaintiffs knew, or should have known, that the
  [False Claims Act

  claim] against Fox and Meklinsky 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. By Opinion
  dated January 28, 1998, and Order dated January 28,
  1998, [this Court] dismissed the [False Claims Act
  claim] as against . . . Fox and Meklinsky. As a
  direct result of being named defendants on the [False
  Claims Act claim], Fox and Meklinsky have been
  damaged and have had to expend litigation costs and
  attorneys' fees to defend against the [False Claims
  Act claim]. [The Attorney Defendants] demand judgment
  against [Plaintiffs] pursuant to N.J.S.A. 2A:15-59.1
  for an award of all reasonable litigation costs and
  attorneys' fees for being compelled to defend against
  the [False Claims Act claim].

See Counterclaim, ¶¶ 1-5.

In lieu of answering the counterclaim, on June 26, 1998, Plaintiffs filed a motion to dismiss the counterclaim for failure to state a cause of action upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Plaintiffs' Notice of Motion (filed Jun. 26, 1998). In support of their motion, Plaintiffs first contend that the counterclaim is procedurally defective because: (a) the claim for attorneys' fees is not ripe, (b) the right to attorneys' fees under the NJFCA must be asserted in the form of a motion, not as a counterclaim, and (c) the Attorney Defendants did not submit an affidavit in support of the counterclaim as required by § 2A:15-59.1(c). See Plaintiffs' Brief in Support of Motion to Dismiss ("Pl.Brief") at 3-7. Plaintiffs also contend that the Attorney Defendants do not fall within the definition of "prevailing party," as used in the NJFCA, because the Complaint as a whole was not frivolous. See Pl. Brief at 8-9. Finally, Plaintiffs contend that, on the merits, Count I of the Complaint was not alleged in "bad faith solely for the purpose of harassment, delay or malicious injury; [nor] . . . without any reasonable basis in low or equity. . . ." See N.J. Stat. Ann. § 2A:15-59.1; see also Pl. Brief at 9-17.

In opposing the motion, the Attorney Defendants contend:

  [P]laintiffs argue that any claim under the [NJFCA],
  even in federal court, must be brought by motion. In
  doing so, plaintiffs purposefully confuse the
  distinction between a state court procedural rule and
  a substantive cause of action . . . Plaintiffs'
  attempt to elevate form over substance must fail. Fox
  and Meklinsky are not required to adhere to New
  Jersey procedural rules in pleading a cause of action
  in federal court . . . [B]y arguing that Fox and
  Meklinsky must assert their claim under the [NJFCA]
  by motion instead by way of counterclaim, plaintiffs
  are essentially claiming that a New Jersey procedural
  rule trumps the Federal Rules of Civil Procedure.
  Such an argument fails as a matter of law [under
  Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14
  L.Ed.2d 8 (1965)].

See Attorney Defendants' Brief in Opposition to Motion to Dismiss ("Def.Brief") at 4-7 (filed Jun. 26, 1998). In addition, the Attorney Defendants contend that they are "prevailing parties" within the meaning of the NJFCA. See Def. Brief at 7-9. Finally, combing my January 28, 1998, Opinion, for adjectives, such as "misguided" and "unprecedented," the Attorney Defendants contend that, because I dismissed Plaintiffs' False Claims Act claim, the claim was asserted in bad faith and without a reasonable basis in law or equity. See Def. Brief at 7-15 (citing Mruz I, 991 F. Supp. at 716, 719, 722 n. 10).

Curiously, after vigorously contending that they may assert their right to attorneys' fees and costs under the NJFCA by counterclaim, the Attorney Defendants state:

  Fox and Meklinsky always intended to and will file a
  motion pursuant to the [NJFCA]. However, consistent
  with New Jersey Supreme Court precedent,

  Fox and Meklinsky will do so at the end of the
  litigation after the Court has considered the
  totality of the case. Thus, plaintiffs' assertion
  that the counterclaim must be dismissed because Fox
  and Meklinsky did not present their claims under the
  [NJFCA] by motion must be rejected.

See Def. Brief at 7, 9 (citing McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 562, 626 A.2d 425 (1993)).

II. LEGAL STANDARD GOVERNING A RULE 12(B)(6) MOTION TO DISMISS
    FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE
    GRANTED

In considering a motion to dismiss under Rule 12(b)(6), the Court may dismiss the Complaint if it appears certain that the Plaintiffs cannot prove any set of facts in support of their claims which would entitle them to relief. See, e.g., Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988). While all well-pled allegations of fact are accepted as true and all reasonable inferences are drawn in the Plaintiffs' favor, see, e.g., Gomez v. Toledo, 446 U.S. 635, 636, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980); Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir. 1991); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990), the Court may dismiss the Complaint where, under any set of facts which could be shown to be consistent with a complaint, the Plaintiffs are not entitled to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). In addition, "Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law." Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989) (noting that this procedure "streamlines litigation by dispensing with needless discovery and factfinding").

Although I must assume the truth of the facts alleged in the Complaint, it is nonetheless improper to assume that a party "can prove facts that [they have] not alleged or that the [non-moving party has] violated . . . laws in ways that have not been alleged." Associated Gen'l Contractors of Calif. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983). Nor are legal conclusions made under the guise of factual allegations to be given the presumption of truthfulness. See Casper v. Paine Webber Group, Inc., 787 F. Supp. 1480, 1490 (D.N.J. 1992) (citing cases). Applying this well established standard, I now turn to the merits of Plaintiffs' motion to dismiss the Attorney Defendants' counterclaim.

III. DISCUSSION

The Attorney Defendants have pleaded a counterclaim for attorneys' fees and costs under the NJFCA, alleging that Plaintiffs' previously dismissed False Claims Act claim was frivolous because it was asserted in bad faith for the purpose of harassment, delay and malicious injury, and because the False Claims Act claim lacked a reasonable basis in law or equity. See Counterclaim; see also Mruz I, 991 F. Supp. at 720. Plaintiffs contend that the counterclaim fails to state a claim because the Attorney Defendants have failed to comply with the procedural requirements of the NJFCA, and because their False Claims Act claim, although dismissed by this Court, was not asserted in bad faith, and had a reasonable basis in law. See Pl. Brief at 3-17.

In pleading their state law counterclaim for attorneys' fees and costs under N.J. Stat. Ann. 2A:15-59.1, the Attorney Defendants have unwittingly thrust this litigation into the sometimes nebulous divide separating the spheres of authority of state and federal courts. This motion to dismiss requires that the Court decide whether the Attorney Defendants may assert a state statutory procedural remedy*fn7 to recover attorneys' fees and costs which were incurred in defense of an allegedly frivolous federal cause of action in federal court, when equivalent federal remedies are available. The counterclaim at issue implicates fundamental principles of Federalism and Comity, which instruct federal and state courts to avoid infringing upon each other's prerogatives, and to maintain the federal-state balance Justice Black once described as "Our Federalism." See generally Younger v. Harris, 401 U.S. 37, 44-45, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971); see also Thomason v. Lehrer, 183 F.R.D. 161, 171 (D.N.J. 1998) (Orlofsky, J.). In resolving this motion, I hold that, where the jurisdictional basis for the alleged frivolous claim is this Court's federal question jurisdiction, the aggrieved parties must avail themselves of the arsenal of federal remedies available to punish litigation abuse. These federal remedies include Rule 11 of the Federal Rules of Civil Procedure, 28 U.S.C. § 1927, and the inherent powers of a federal court to redress a party's bad faith conduct. Consequently, I shall grant Plaintiffs' motion to dismiss the Attorney Defendants' NJFCA counterclaim.

A. The Purpose and Scope of the NJFCA

The NJFCA is codified in Title 2A of the New Jersey Code, Administration of Civil and Criminal Justice. See N.J. Stat. Ann. § 2A:15-59.1. The NJFCA provides, in relevant part:

  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.

See id. The purpose of the statute is to deter baseless, or "frivolous" litigation through the "imposition of [an] attorney-fee sanction either because of improper motives or lack of well-foundedness." See Iannone v. McHale, 245 N.J. Super. 17, 25,29-30, 583 A.2d 770 (App. Div. 1990) (analogizing the purpose of the NJFCA to the purpose of Rule 11 of the Federal Rules of Civil Procedure, namely, "deterring groundless suits");*fn8 see also N.J. Stat. Ann. § 2A:15-59.1. Under the NJFCA, a claim or defense is "frivolous" if:

  [A] judge . . . find[s] on the basis of the
  pleadings, discovery, or the evidence presented that
  either: (1)[t]he 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)[t]he 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.

See N.J. Stat. Ann. § 2A:15-59.1(b); see also Lake Lenore Estates, Assocs. v. Township of Parsippany-Troy,
312 N.J. Super. 409, 424, 712 A.2d 200 (App. Div. 1998).

In McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 626 A.2d 425 (1993), the New Jersey Supreme Court stated:

  [Generally], the award of counsel fees has been
  considered a procedural matter for the courts. . . .
  [T]he [New Jersey] Legislature has passed numerous
  statutes allowing the award of counsel fees. . . .
  The award of counsel fees [authorized by most state
  statutes] . . . differs from that in N.J.S.A.
  2A:15-59.1 because [most] statutes authorize fees as
  part of the substance of a statutory cause of action.
  In contrast, N.J.S.A. 2A:15-59.1 permits the award of
  counsel fees due to the improper manner in which a
  party conducts litigation.

McKeown-Brand, 626 A.2d at 429-30. Thus, the NJFCA provides an aggrieved party with a right to seek an award of attorneys' fees from an adversary-party when the adversary-party asserts a cause of action or defense in bad faith, or without a reasonable basis in law or equity. See id.; see also N.J. Stat. Ann. § 2A:15-59.1(b). Where the alleged frivolous claim is a federal cause of action, pursued in federal court, however, the state statutory right created by the NJFCA does not apply.

  B. Federal Law Provides the Exclusive Remedies for Bad Faith
    Conduct Arising Out of the Pleading of an Allegedly Frivolous
    Federal Cause of Action in Federal Court

In Thomason v. Lehrer, 183 F.R.D. 161 (D.N.J. 1998) ("Thomason II"), this Court crafted a rule, based upon the inherent powers of a federal court, that "[a]n attorney who alleges claims of `litigation abuse' by another attorney-adversary, arising out of conduct which occurred in a pending proceeding in this Court, must seek redress in this Court." Id. at 171-72. In so holding, I stated that "[t]o hold otherwise would unreasonably permit litigious attorneys to divest this Court of its inherent power to discipline attorneys who practice before it and to fashion appropriate remedies for abuse of its process." Id. at 172 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 44-45, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)).

This Court's holding in Thomason II was rooted in the inherent powers of a federal court which are of necessity vested in "Courts of justice from the nature of their institution, powers which cannot be dispensed within in a Court, because they are necessary to the exercise of all others." Chambers, 501 U.S. at 43, 111 S.Ct. 2123 (quoting United States v. Hudson 7 Cranch 32, 34, 3 L.Ed. 259 (1812) (additional citations and internal alterations omitted)). In Thomason II, I wrote:

  District Courts are vested with inherent powers,
  enabling them to fashion appropriate remedies to
  uphold the integrity of federal judicial
  proceedings. . . . District Courts under their
  inherent

  powers have developed a wide range of tools to
  promote efficiency in their courtrooms and to achieve
  justice in their results. A partial list of these
  tools includes: the power to control admission to its
  bar, discipline attorneys, punish for contempt,
  vacate its own judgment upon a finding of fraud, bar
  a criminal defendant from a courtroom for disruptive
  behavior, dismiss a suit on forum non conveniens
  grounds or failure to prosecute, and assess
  attorney's fees. This list is not exhaustive because
  the permissible scope of inherent powers is somewhat
  unclear. . . . "Courts of justice are universally
  acknowledged to be vested, by their very creation
  with power to impose silence, respect, and decorum,
  in their presence, and submission to their lawful
  mandates. These powers are governed not by rule or
  statute but by the control necessarily vested in
  courts to manage their own affairs so as to achieve
  the orderly and expeditious disposition of cases. . .
  . A primary concern of that discretion is the
  ability to fashion an appropriate sanction for
  conduct which abuses the judicial process."

See Thomason II, 183 F.R.D. at 169-70 (quoting Chambers, 501 U.S. at 43-45, 111 S.Ct. 2123) (additional citations omitted, emphasis added).

While Thomason II dealt with "where" a party may seek redress for the abuse of a federal court's process, this case presents raises the question of "how" a party may seek such redress. Specifically, in Thomason II, I was called upon to decide whether a party may proceed in state court on a cause of action for alleged abuse of this Court's process, when to do so would strip this Court of its fundamental authority to uphold the integrity of its process. See Thomason, 183 F.R.D. at 171-72. I held that a party seeking redress for an abuse of this Court's process must proceed in this Court, and not in state court. See id. Similarly, in this case, I must decide whether an aggrieved party may pursue a state remedy for abuse of this Court's process, when the Court's original subject matter jurisdiction is grounded upon a federal question, and the sanctionable conduct arises out of an allegedly frivolous federal cause of action asserted in this Court. I conclude that, where the alleged frivolous claim is a cause of action arising under federal law, see 28 U.S.C. § 1331, to seek redress for such "litigation abuse," a party must pursue the available federal remedies in this Court.

Permitting the Attorney Defendants to seek attorneys' fees and costs by way of a counterclaim pursuant to the NJFCA would deprive this Court of its inherent power "to fashion an appropriate sanction for conduct which abuses the judicial process[,]" namely, Plaintiffs' allegedly frivolous claim for violation of the False Claims Act. Chambers, 501 U.S. at 45, 111 S.Ct. 2123; see also Thomason, 183 F.R.D. at 170. The Attorney Defendants' counterclaim places this Court in the untenable position of having to apply state statutory law in sanctioning Plaintiffs in a federal court action for allegedly having filed a frivolous federal cause of action. Such an outcome "unreasonably . . . divest[s] this Court of its inherent power to discipline [individuals who appear] before it and to fashion appropriate remedies for abuse of its process." Thomason, 183 F.R.D. at 172; see also Chambers, 501 U.S. at 44-45, 111 S.Ct. 2123. This is the case because state, not federal law, would supply the rule of law controlling how this Court could sanction a party whose allegedly frivolous cause of action invoked only this Court's federal question jurisdiction. The New Jersey Legislature enacted the NJFCA to control "litigation abuse" in the Courts of New Jersey, not in New Jersey federal courts.*fn9

It is axiomatic that a federal court, whose federal question jurisdiction has been invoked, applies federal law, not state law. Cf. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) (stating that "[e]xcept in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state" (emphasis added)). Because the allegedly frivolous cause of action, Plaintiffs' False Claims Act claim, was based on federal law, the Attorney Defendants' right to seek attorneys' fees and costs can only arise from the allegedly frivolous federal claim. Thus, under the circumstances of this case, the Attorney Defendants' right to seek attorneys' fees and costs is based on federal, not state law. Consequently, to obtain the relief they seek, the Attorney Defendants must pursue their federal remedies.*fn10

Other federal courts presented with similar questions have reached the same conclusion. For example, in Reitz v. Dieter, 840 F. Supp. 353 (E.D.Pa. 1993), Judge Hutton was confronted with the question of whether Pennsylvania's analogue to the NJFCA, the Dragonetti Act, 42 Pa. Cons. Stat. Ann. § 2503(9),*fn11 was "applicable in federal court where the court's original subject-matter jurisdiction is grounded upon a federal question." Reitz, 840 F. Supp. at 355. Judge Hutton reasoned that, because the Dragonetti Act was part of a statutory scheme establishing a "unified [state] judicial system," the act did not apply to federal courts in Pennsylvania, adjudicating federal causes of action.*fn12 See id. at 353-55. In addition, Judge Hutton wrote:

  [E]ven if the [Dragonetti Act, itself,] did not
  compel the conclusion that the statute is unavailable
  to civil litigants in federal court, the Court would
  still reach the same conclusion. [The Dragonetti Act]
  is a procedural rule applicable in Pennsylvania's
  courts. Similar concerns to those addressed by [the
  Dragonetti Act] are addressed by [Rule 11 of the
  Federal Rules of Civil Procedure]. Accordingly, [the
  Dragonetti Act] has no force or application in
  federal court where the Federal Rules of Civil
  Procedure control. Based upon the foregoing
  considerations, the Court concludes that the
  defendant has failed to state a claim under [the
  Dragonetti Act].

  Reitz, 840 F. Supp. at 355 (citations omitted); cf.
  McKeown-Brand, 626 A.2d at 429 (interpreting the
  NJFCA, and stating that "the award of counsel fees
  has been considered a procedural matter for the
  courts . . ."); see also Raymark Industries, Inc. v.
  Baron, Civ. Action No. 96-7625, 1997 WL 359333, at
  *1, *12 (E.D.Pa. Jun. 23, 1997) (Cahn, J.)
  (dismissing Dragonetti claim for attorneys' fees
  because the state statutory remedy was not available
  to litigant in federal court where federal cause of
  action at issue); accord Jones v. Credit Bureau of
  Garden City, Inc., 703 F. Supp. 897, 898-99 (D.Kan.
  1988) (holding that Kansas statute, which is
  analogous to the NJFCA, is inapplicable in federal
  court where original jurisdiction is predicated on
  the existence of a federal question, parties must
  avail themselves of the remedy provided by Rule 11).

As the Reitz and Jones opinions point out, the appropriateness of denying litigants the right to assert a state cause of action for attorneys' fees incurred in defending against an allegedly frivolous federal cause of action is further demonstrated by the fact that the aggrieved party may obtain the same relief by pursuing their federal remedies under Rule 11 of the Federal Rules of Civil Procedure, and the Court's inherent powers.*fn13 See Fed. R.Civ.P. 11; see generally Chambers, 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27; In re Tutu Wells Contamination Litigation, 120 F.3d 368 (3d Cir. 1997); see also Reitz, 840 F. Supp. at 355 n. 2 (noting that party prevented from asserting a state law claim for attorneys' fees, "is, of course, at liberty to raise the[] issue[] by way [of Rule 11; § 1927; or the Court's inherent powers]").

Rule 11 specifically provides for the recovery of "all of the reasonable attorneys' fees and other expenses incurred as a direct result of" a party's improper attempts "to harass or cause unnecessary delay or needless increase in the cost of litigation[.]" See Fed.R.Civ.P. 11(b)(1)(c)(2) (providing that "the court may . . . impose an appropriate sanction upon the attorneys, law firms, or parties . . ."); see also Willy v. Coastal Corp., 503 U.S. 131, 135 n. 1, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992) (noting propriety of awarding attorneys' fees pursuant to Rule 11).

Moreover, federal courts, in exercising their inherent powers, may award an aggrieved party attorneys' fees where a party-opponent has acted in bad faith. See Chambers 501 U.S. at 50, 111 S.Ct. 2123 (stating that "a court must . . . exercise caution in invoking its inherent power, . . . determining that the requisite bad faith exists . . ."); see also Landon v. Hunt, 938 F.2d 450, 454 (3d Cir. 1991); see e.g., DLC Management Corp. v. Town of Hyde Park, 163 F.3d 124, 136 (2d Cir. 1998) (stating that "this court has required a finding of bad faith for the imposition of sanctions under the inherent powers doctrine"); Matta v. May, 118 F.3d 410, 416 (5th Cir. 1997) (stating that a "court may assess attorneys' fees under its inherent powers when a party has acted in bad faith, vexatiously, wantonly, . . . [or] has defiled the very temple of justice" (citations and internal quotations omitted)); Primus Automotive Financial Serv., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997) (stating that "[w]hen a losing has acted in bad faith, vexatiously, wantonly, or for oppressive reasons sanctions under the court's inherent powers may take the form of attorneys' fees").

Therefore, I hold that, because the jurisdictional basis supporting Plaintiffs' alleged frivolous claim was this Court's federal question jurisdiction, the Attorney Defendants must avail themselves of the federal remedies available to recover the attorneys' fees and costs associated with defending against Plaintiffs' allegedly bad faith conduct.*fn14 Accordingly, because the Attorney Defendants may not assert a state law cause of action to recover attorneys' fees and costs associated with defending against a federal claim in federal court, I shall grant Plaintiffs' motion to dismiss the Attorney Defendants' NJFCA counterclaim for failure to state a claim upon which relief can be granted.

  C. The Attorney Defendants' Counterclaim Fails Under State
    Law

Even if this Court were to disregard the issues of Federalism and Comity raised by the Attorney Defendants' NJFCA counterclaim, dismissal of the NJFCA claim would still be warranted because the plain language of the NJFCA requires that a party pursue their statutory right to seek attorneys' fees by "application," not by counterclaim.

As I stated in Mruz I, "I begin my analysis where all questions of statutory interpretation begin, the plain language of the statute." Mruz I, 991 F. Supp. at 708 (citing Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 409, 113 S.Ct. 2151, 124 L.Ed.2d 368 (1993); see also Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 118 S.Ct. 956, 962, 140 L.Ed.2d 62 (1998) (stating that a court's "job [is to] read[] the statute [as a] whole, . . . giv[ing] effect to [its] plain command") (citing Estate of Cowart v. Nicklos Drilling co., 505 U.S. 469, 476, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992))). In addition, where a statute uses the mandatory term "shall," it normally creates an obligation "impervious to judicial discretion." Lexecon, Inc., 118 S.Ct. at 962 (citing Anderson v. Yungkau, 329 U.S. 482, 485, 67 S.Ct. 428, 91 L.Ed. 436 (1947)).

The relevant text of the NJFCA provides:

  A party . . . seeking an award under this section
  shall make application to the court which heard the
  matter. The application shall be supported by an
  affidavit. . . .

See N.J. Stat. Ann. § 2A:15-59.1 (emphasis added). Thus, the Court's inquiry is whether the meaning of the term "application" is broad enough to encompass a counterclaim.

Construing the statute as a whole, clearly the NJFCA does not permit a party to seek attorneys' fees by means of a counterclaim. This conclusion is supported by the restrictive construction the New Jersey courts have consistently given to the terms of the NJFCA. For example, the NJFCA repeatedly lists various procedural mechanisms, such as "complaint, counterclaim, cross-claim or defense. . . ." See N.J. Stat. Ann. § 2A:15-59.1(a-b). Interpreting this list, the New Jersey Supreme Court stated:

  The statute refers to only a "complaint,
  counterclaim, cross-claim or defense." By its terms,
  the statute does not apply to motions. In the face of
  such unambiguous language, we decline to interpret
  the statute to apply to motions. Nothing in the
  legislative history suggests that the statute should
  so apply. We conclude, therefore, that the statute
  does not apply to motions.

Lewis v. Lewis, 132 N.J. 541, 545-46, 626 A.2d 422 (1993) (citations); Dziubek v. Schumann, 275 N.J. Super. 428, 646 A.2d 492 (App. Div. 1994); cf. McKeown-Brand, 132 N.J. at 561, 626 A.2d 425 (applying a restrictive interpretation to the term "frivolous," as used in the NJFCA); see also Evans v. Prudential Property and Casualty Ins. Co., 233 N.J. Super. 652, 654, 559 A.2d 888 (Law Div. 1989) (dismissing counterclaim asserted under the NJFCA by applying New Jersey Court Rule 1:6-2(a) definition of "application," which meant a motion). Applying a similar interpretation to the term "application," surely, if the New Jersey Legislature intended for a party to be able to recover attorneys' fees under the NJFCA by counterclaim, the legislature would have said as much in the text of the statute.

Accordingly, because the Attorney Defendants may not assert their rights to seek attorneys' fees under the NJFCA by means of a counterclaim, Plaintiffs' motion to dismiss the counterclaim for failure to state a claim shall also be granted on this alternative ground.

IV. CONCLUSION

For the reasons set forth above, Plaintiffs' motion to dismiss the Attorney Defendants' counterclaim for failure to state a claim upon which relief can be granted shall be granted. In the alternative, I shall dismiss the Attorney Defendants' counterclaim because the Attorney Defendants may not assert their rights to seek attorneys' fees under the NJFCA by means of a counterclaim. The Court will enter an appropriate order.

Finally, in Mruz I, I took the "opportunity to remind counsel of their obligations under Rule 11 of the Federal Rules of Civil Procedure, and of their duties to this Court." Mruz I, 991 F. Supp. at 721. Specifically at issue, were the "ad hominem attacks on Defendants . . ." contained in Plaintiffs' brief. See id. Unfortunately, it appears that counsel for Fox and Meklinsky assumed that my words of caution were directed solely at Plaintiffs' counsel. They were not.

In their brief in opposition to Plaintiffs' motion to dismiss the NJFCA counterclaim, counsel for Fox and Meklinsky state:

  Fox and Meklinsky always intended to and will file a
  motion pursuant to the [NJFCA]. However, consistent
  with New Jersey Supreme Court precedent, Fox and
  Meklinsky will do so at the end of the litigation
  after the Court has considered the totality of the
  case. Thus, plaintiffs' assertion that the
  counterclaim must be dismissed because Fox and
  Meklinsky did not present their claims under the
  [NJFCA] by motion must be rejected.

See Def. Brief at 7; see also Def. Brief at 9 (stating "Fox and Meklinsky will wait until the conclusion of the litigation to file a motion under the [NJFCA]"). Apparently, counsel for Fox and Meklinsky intended to file a motion to seek relief under the NJFCA, in addition to seeking the identical relief in their NJFCA counterclaim. This position makes little, if any, sense, and raises the question of why the counterclaim was ever filed.

In Thomason v. Lehrer, 183 F.R.D. 161 (D.N.J. 1998) ("Thomason II"), in chastising an overly litigious attorney, I wrote: "It is ironic that [Plaintiff], who contends that [Defendant] has engaged in inappropriate `litigation abuse,' has no compunction about . . . do[ing] so himself." See id. at 171. The practice of law, unlike Newton's Third Law of Motion, does not require a "reaction" for every "action." See Sir Isaac Newton, Philosophiae Naturalis Principia Mathematica (Alexander Koyre ed., Harvard Univ. Press 1972) (1687). Attorneys who reflexively react to "litigation abuse" by engaging in similar conduct disserve their clients and burden the dockets of busy courts. For the second time in this case, I admonish counsel that such conduct is unprofessional, unwarranted and unseemly. It will not be tolerated in the future.

ORDER

This matter having come before the Court on the motion of Plaintiffs, John H. Mruz, Vasilike D. Nika, and Jane A. Johnson, to dismiss the counterclaim of Defendants, Ian Meklinsky, Esq., and Fox, Rothschild, O'Brien & Frankel, for failure to state a claim upon which relief can be granted, Susan B. Pliner, Esq., Gary Green, Esq., Steven H. Griffiths, Esq., Sidkoff, Pincus & Green, P.C., appearing on behalf of Plaintiffs, John H. Mruz, Vasilike D. Nika, and Jane A. Johnson, and Paul A. Rowe, Esq., Alan S. Naar, Esq., Gary K. Wolinetz, Esq., Andrew M. Baer, Esq., Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, L.L.P., appearing on behalf of Defendants, Ian Meklinsky, Esq., and Fox, Rothschild, O'Brien & Frankel; and,

The Court having considered the submissions of the parties, for the reasons set forth in the OPINION filed concurrently with this ORDER;

IT IS, on this 23rd day of March, 1999, hereby ORDERED that the motion of Plaintiffs to dismiss the counterclaim of Defendants, Ian Meklinsky, Esq., and Fox, Rothschild, O'Brien & Frankel, for failure to state a claim upon which relief can be granted is GRANTED.


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