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Cipriani Builders, Inc. v. Madden

December 11, 2006

CIPRIANI BUILDERS, INC. AND JAY CIPRIANI, PLAINTIFFS-APPELLANTS,
v.
THOMAS MADDEN AND NEW JERSEY REMODELERS ASSOCIATION, INC., DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1053-03.

The opinion of the court was delivered by: Skillman, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued September 12, 2006

Before Judges Skillman, Holston, Jr. and Grall.

This appeal arises out of a trade association's expulsion of one of its members. The member filed suit claiming that the expulsion was wrongful and that the trade association's executive director made statements during the period preceding the expulsion that defamed him. The trial court granted summary judgment dismissing these claims. We affirm the dismissal of the member's defamation claims but reverse the dismissal of his wrongful expulsion claim.

Defendant New Jersey Remodelers Association, Inc. (NJRA) is a trade association composed of more than 100 individuals and corporations involved in the remodeling industry in southern New Jersey. The NJRA provides various benefits to members, including networking with other persons involved in the industry, referrals of work, access to educational programs and seminars, discounted insurance, free or discounted legal and accounting services, and supplier discounts. NJRA members also participate in a Consumer/Contractor Arbitration Board, under which customer claims against members are arbitrated.

Defendant Thomas Madden was the executive director of the NJRA. As executive director, Madden was a member of the NJRA's Board of Directors.

Plaintiffs Jay Cipriani and his company, Cipriani Builders, Inc., became members of the NJRA in 1981.*fn1 Cipriani was appointed to the NJRA Board of Directors in 1996 and became its Second Vice President in 1999. In late 2000 or early 2001, the President appointed a five person Administrative Committee of the Board, which included Cipriani, to study and make recommendations regarding the NJRA's organization and operations. On March 24, 2001, the Administrative Committee issued a report that recommended various changes, including a reduction in Madden's responsibilities.

Madden reacted hostilely to the Administrative Committee's report and blamed Cipriani and two other members of the Committee for its recommendations. Beginning shortly after submission of this report, Madden sent a series of memoranda to the NJRA Board that criticized the Committee's recommendations. These memoranda, which were written during the period between July 8, 2001 and November 14, 2001, personally attacked three members of the Committee including Cipriani. Cipriani claims that some of the statements in these memoranda defamed him.

Cipriani and the other two Administrative Committee members who Madden blamed for the recommendation that he be relieved of certain responsibilities were renominated as candidates for the NJRA Board in the fall of 2001. Three of Madden's memoranda to the Board containing alleged defamatory statements were directed at Cipriani's and the other two Committee members' candidacies for the NJRA Board. Madden also proposed an alternative slate of candidates.

In the NJRA election held in November 2001, Cipriani and the other two Committee members were defeated and Madden's slate of candidates were elected to the contested positions. Following this election, Madden allegedly continued to campaign against Cipriani with the intention of forcing him out of the NJRA.

On July 14, 2002, Madden sent a lengthy memorandum to the entire NJRA membership that praised the NJRA, criticized a competing trade association called the NARI, set forth his achievements as executive director, and urged members to encourage their subcontractors and competitors to join the NJRA. Several paragraphs of this memorandum were apparently directed at Cipriani and the two other Committee members who had been defeated in the November 2001 election. Those paragraphs, which are the primary foundation of Cipriani's defamation claims, are quoted later in this opinion.

In January 2003, the President of the NJRA decided not to send an invoice for renewal of Cipriani's membership in the NJRA. However, the President did not take any formal action to expel Cipriani.

Even though he had not received an invoice for renewal of his membership, Cipriani sent the NJRA an unsolicited check representing his then due membership fees. At the April 1, 2003 board meeting, the NJRA's treasurer moved to accept the check. However, this motion was defeated, and the NJRA returned the check to Cipriani.

After he received notice that the Board had refused to renew his membership, Cipriani retained counsel, who sent a letter to the Board alleging that Cipriani's membership in the NJRA had been wrongfully terminated. The letter asserted that Cipriani satisfied all membership requirements set forth in the NJRA by-laws and that Cipriani was unaware of any justification for termination of his membership. The letter demanded that the NJRA notify Cipriani of "the basis upon which his membership has been terminated." The letter also requested the NJRA to furnish Cipriani with a copy of "the most recent version of the [NJRA] By-Laws and a description of any grievance or appeal procedure that was in place at NJRA on or before April 1, 2003." In addition to objecting to the termination of Cipriani's membership, this letter alleged that Madden had "repeatedly and consistently defamed Mr. Cipriani" both in official NJRA correspondence and verbally. The letter concluded by expressing Cipriani's desire to amicably resolve the dispute under terms that would involve reinstatement of his membership and retraction of Madden's alleged defamatory statements.

The Board did not respond to this letter, and on July 7, 2003, Cipriani and his company filed this action against the NJRA and Madden. The complaint asserted claims for both wrongful expulsion from the NJRA and defamation. Cipriani's defamation claims were based primarily on the memoranda Madden had sent to the NJRA Board and general membership. The complaint sought reinstatement of Cipriani's membership in the NJRA and compensatory and punitive damages. Defendants' answers asserted, among other things, that Cipriani's defamation claims were barred by the statute of limitations.

After completion of discovery, defendants moved for summary judgment. Defendants contended that Cipriani's defamation claims that were based on statements Madden made more than a year before the filing of the complaint were barred by the one- year statute of limitations applicable to defamation claims, and that even accepting all of Cipriani's factual allegations, defendants were entitled to summary judgment on his other claims.

The trial court concluded in a written opinion that "[t]o the extent that [Cipriani's] slander and libel claims against defendants NJRA and Thomas Madden are based on oral statements or writings that were published before June 7, 2002 [one year before the complaint was filed], they are barred by the [one-year] statute of limitations [provided by N.J.S.A. 2A:14-3]." The court also concluded that the statements Madden made after June 7, 2002 were not susceptible of a defamatory meaning. The court rejected Cipriani's wrongful expulsion claim on the grounds that the "NJRA's interest in harmony and moving beyond its contested election outweighs plaintiffs' interest in continued membership" and that "[e]ven if the Board violated [the] NJRA by-laws in declining to renew plaintiffs' membership, judicial action is not warranted because there is no overriding public interest in the affairs of NJRA." Accordingly, the court granted summary judgment dismissing Cipriani's complaint.

Cipriani appeals from the dismissal of both his wrongful expulsion and defamation claims.

I.

Private associations do not have unfettered discretion with respect to their membership decisions. See Rutledge v. Gulian, 93 N.J. 113, 118-24 (1983); Higgins v. Am. Soc'y of Clinical Pathologists, 51 N.J. 191, 198-204 (1968); Falcone v. Middlesex County Med. Soc'y, 34 N.J. 582, 588-98 (1961). When judicial intervention is sought regarding a private association's membership decision, the court must determine whether "plaintiff [has] an interest sufficient to warrant judicial action," and if such an interest is shown, whether "that interest [has] been subjected to an unjustifiable interference by the defendant[.]" Rutledge, supra, 93 N.J. at 118.

In determining whether a plaintiff has an interest sufficient to warrant judicial intervention, our courts distinguish between an application for membership in a private association and the expulsion of a present member: "While the general rule is that courts will not compel admission of an individual into a voluntary association, they have been willing to intervene and compel the reinstatement of a member who has been wrongfully expelled[.]" Higgins, supra, 51 N.J. at 199; see also Baugh v. Thomas, 56 N.J. 203, 207-09 (1970).

Our courts also distinguish between membership decisions of private associations whose activities are primarily social or fraternal, such as the Masons and Elks, and membership decisions of associations whose activities directly affect the economic interests of their members, such as professional societies and trade associations. See Falcone, supra, 34 N.J. at 588-89. If a professional society or trade association exercises "virtually monopolistic control" over a form of economic activity, a court will be especially vigilant in protecting the interests of members and prospective members. Id. at 596. When a membership decision of such an association is challenged, "[t]he intimate personal relationships which pervade[] the social, religious and fraternal organizations [are] hardly in evidence and [an] individual's opportunity of earning a livelihood and serving society in his chosen trade or profession appear[s] as the controlling policy consideration." Ibid. Consequently, the interest in membership in such an association is sufficient to warrant judicial review of not only an expulsion of a present member but also a denial of admission to membership. See id. at 596-98; see also Greisman v. Newcomb Hosp., 40 N.J. 389, 395-404 (1963).

Even if a private association does not exercise monopolistic control over a profession or trade, a court will extend greater protection to membership in a professional or trade association than to membership in a fraternal or social organization. See Higgins, supra, 51 N.J. at 198-202. If membership in a trade or professional association provides tangible economic benefits, those benefits may create a property interest or contract right in continued membership that protects a member from arbitrary expulsion. See id at 199-200. Even if a member receives no tangible economic benefits from membership, the loss of reputation or status resulting from expulsion may be sufficient to warrant judicial review. Id. at 200-02.

If a plaintiff establishes a sufficient interest in membership in a private association to be entitled to judicial review, a court must determine whether the procedures the association followed in making the membership decision were fundamentally unfair. Rutledge, supra, 93 N.J. at 120. In making this determination, a court will consider whether the association complied with its own internal rules. Ibid.; Baugh, supra, 56 N.J. at 208-10. If a private association failed to follow its rules in making a membership decision, a court will "balance the organization's interest in autonomy and its reason for straying from its rules against the magnitude of interference with the member's interest in the organization and the likelihood that the established procedures would safeguard that interest." Rutledge, supra, 93 N.J. at 123.

A court also will review the substance of a private association's membership decision, but this review is "limited." Higgins, supra, 51 N.J. at 202. Generally, courts will provide relief from an expulsion from membership in a private association on substantive grounds only if the association's rules or its actions with respect to an individual member "conflict with public policy." Ibid.; see also Matthews v. Bay Head ...


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