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Lobiondo v. Schwartz

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 1, 2007

JAMES LOBIONDO, JR. AND DENISE LOBIONDO, INDIVIDUALLY AND T/A D. LOBI ENTERPRISES, INC., PLAINTIFFS-RESPONDENTS,
v.
GRACE SCHWARTZ, JANICE DEMARCO, KAREN SCHWARTZ AND MARILYN KALLAREOU, DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
v.
GIORDANO HALLERAN & CIESLA, P.C., MICHELE A. QUERQUES, ESQ. AND STEVEN BERLIN, ESQ., THIRD-PARTY DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-7699-91.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 23, 2006

Before Judges Lintner, Seltzer and C.L. Miniman.

Grace Schwartz and her three adult daughters, Karen Schwartz, Marilyn Kallareou and Janice DeMarco (collectively "Schwartz"), appeal from an April 18, 2005, summary judgment dismissing their counterclaim against James Lobiondo, Jr. and Denise Lobiondo (collectively "Lobiondo") and a March 9, 2005, summary judgment dismissing her third-party complaint against Lobiondo's attorneys, Giordano, Halleran & Ciesla, P.C., Michelle A. Querques, and Steven Berlin (collectively "Giordano"). We affirm the order of March 9, 2005; we affirm in part and reverse and remand in part the order of April 18, 2005.

The factual background of the dispute giving rise to this appeal has been recounted in our published opinion, Lobiondo v. Schwartz, 323 N.J. Super. 391 (App. Div.), certif. denied, 162 N.J. 488 (1999), and we need not repeat it here. For purposes of this opinion, it is sufficient to note that Lobiondo owned "a modest one-story beach club directly across the street from [Grace] Schwartz." Id. at 395. Schwartz objected to Lobiondo's attempts to increase the size of the beach club and intensify its function. Ibid. Her objections took the form of communications to local officials and to the community in general. Seven of her written communications were described in our prior opinion. Id. at 405-07. As the result of Schwartz's activities, Lobiondo retained Giordano and filed a complaint alleging defamation, intentional infliction of emotional distress and tortuous interference with business advantage. Id. 395-96. Schwartz "counterclaimed, asserting causes of action sounding in malicious abuse of process, malicious prosecution, and intentional infliction of emotional distress." Id. at 396. The jury verdict resulted "in a judgment against Grace Schwartz for both compensatory and punitive damages and a modest judgment in favor of two of her daughters on their counterclaims." Ibid.

We reversed, holding that Schwartz's activities were nondefamatory, id. at 412, did not constitute a tortuous interference, id. at 415, and were not so outrageous as to permit a verdict imposing liability for intentional infliction of emotional distress. Id. at 416. We also held that the facts were sufficient to justify, although not compel, a conclusion, as Schwartz had alleged in the counterclaim, that Lobiondo had committed the tort of malicious abuse of process. Id. at 422.

Accordingly, we reversed and remanded for a dismissal of Lobiondo's claims with prejudice and for further consideration of the counterclaims, including those of the daughters who had received only a modest verdict.

On remand, Schwartz filed an amended counterclaim against Lobiondo alleging that Lobiondo had "abused and misused the litigation process" in filing the original complaint and had intentionally inflicted emotional distress upon them. Schwartz also filed a third-party complaint against Giordano alleging malicious use of process by "intentionally and in bad faith institut[ing] this litigation" and continuing "this litigation after they knew or should have known that there was no reasonable basis for doing so." The complaint also alleged Giordano's action was "an improper, illegal and perverted use of the legal process" which was intended to inflict emotional harm*fn1

and was undertaken "in concert with the Lobiondos to abuse the litigation process." On motions for summary judgment by Schwartz and Lobiondo, the motion judge, in separate orders, dismissed all claims and Schwartz appealed.

Because the dismissals were reached on motions for summary judgment, we apply the same standard as did the motion judge to resolve the issue, Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), without affording any special deference to the judge's interpretation of the law. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). That is, we review the record in the light most favorable to plaintiff and determine if the record thus viewed requires judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

I.

We consider first the dismissal of the counterclaim against Lobiondo. The counterclaim alleged causes of action for malicious use of process,*fn2 malicious abuse of process and intentional infliction of emotional distress. To prevail on a claim of malicious use of process, a plaintiff must produce proof that: "(1) the suit was brought without probable cause, (2) it was actuated by malice, (3) it has been terminated favorably to plaintiff and (4) plaintiff suffered a special grievance." Penwag Prop. Co. v. Landau, 148 N.J. Super. 493, 500 (App. Div. 1977) (citing Mayflower Indus. v. Thor Corp., 15 N.J. Super. 139, 151-52 (Ch. Div. 1951), aff'd o.b., 9 N.J. 605 (1952)), aff'd, 76 N.J. 595 (1978).

We need not analyze the elements of the cause of action against the evidence produced because we have previously held that Schwartz had made a sufficient showing to require submission to a jury of the claim that Lobiondo's original suit constituted a malicious use of process. Lobiondo, supra, 323 N.J. Super. at 423-24. The motion judge, nevertheless, dismissed this claim accepting an "advice of counsel" defense that had not been considered previously and by referring to "facts that were brought to my attention in this litigation that weren't brought to the attention of the Appellate Division."

A party acting upon advice of counsel has "a complete defense to an action for malicious prosecution . . . where it appears that the prosecution was instituted in reliance in good faith on such advice given after a full and fair statement to the attorney of all the facts." Weinstein v. Klitch, 106 N.J.L. 408, 409 (E. & A. 1929). The defense necessarily requires a showing that "all the facts [were] submitted fully and truthfully to counsel." Mayflower Indus., supra, 15 N.J. Super. at 172. We agree that in this case there is no question that Lobiondo provided to counsel the seven documents upon which the defamation and related actions were based. Nothing in this record, however, suggests that Lobiondo made the affirmative (and arguably correct) disclosure that each of the statements made by Schwartz was, in fact, truthful. See Lobiondo, supra, 323 N.J. Super. at 412-13 (noting that "generally speaking, [Schwartz's] communications constituted fairly accurate recitations of the history of the goings-on" at Lobiondo's property). Absent such a disclosure, the complaint contained the false statement that Schwartz had defamed Lobiondo. Nor is there any evidence that Lobiondo advised counsel that the purpose of the litigation was to inhibit Schwartz's exercise of her expressive rights, raising a factual question of whether the advice of counsel was sought and relied upon in good faith.*fn3

Under these circumstances, we believe a jury question arises as to the existence of the necessary conditions of the advice of counsel defense. See Helstowski v. Greenberg, 2 N.J. Misc. 1094, 1096 (Sup. Ct. 1924) (untrue statements made in a complaint undermine the advice of counsel defense), aff'd o.b., 101 N.J.L. 560 (E. & A. 1925). Nor are we persuaded by Lobiondo's claim that Giordano admits having received all of the "facts" of the case before filing suit. We think that is an expansive reading of the record, but in any event it is a claim that requires a jury's evaluation. See D'Amato v. D'Amato, 305 N.J. Super. 109, 115 (App. Div. 1997) (noting that, under some circumstances, even uncontradicted testimony may be rejected) (citing Ferdinand v. Agricultural Ins. Co. of Watertown, N.Y., 22 N.J. 482, 494 (1956)).

The judge also relied on "facts" known to him but not to us when we remanded for trial of the malicious use claim. The judge identified those facts "as the explanation, further explanation as to the testimony before Judge Labrecque concerning what was said in 1987 when a restaurant open to the public was an allowed use and so forth as brought to m[]y attention in the depositions and so forth and so on." We put aside, for a moment, the inadequacy of the identification of the "facts" on which the judge relied. So far as we can tell from the description provided, however, this is a reference to nothing more than additional testimony that may, or may not, be accepted by a jury. Ibid. It has no dispositive effect on a motion for summary judgment.

The judge also dismissed Schwartz's claims for malicious abuse of process. This cause of action requires a showing "that the litigator perform[ed] further acts after the issuance of process which represent the perversion or abuse of the legitimate purposes of that process." Penwag Prop. Co., supra, 148 N.J. Super. at 499 (citing Mayflower Indus., supra, 15 N.J. Super. at 151).

Our prior opinion did not discuss the adequacy of Schwartz's proofs with respect to abuse of process. The further acts necessary to sustain this cause of action include "'attachment, execution, garnishment, seqestration proceedings, arrest of the person and criminal prosecution and even such infrequent cases as the use of a subpoena for the collection of a debt.'" Baglini v. Lauletta, 338 N.J. Super. 282, 294 (App. Div.) (quoting Prosser and Keeton on Torts § 121 at 899 (5th ed. 1984) (footnotes omitted)), certif. denied, 169 N.J. 607, 608 (2001). The alleged further acts must constitute some "'coercive or illegitimate use of the judicial process.'" Ibid. (quoting Penwag Prop. Co., supra, 148 N.J. Super. at 499).

Schwartz points to the use of two statements in the litigation claimed to have been inaccurate, the filing of an amended complaint shortly before trial, harassing conduct of Lobiondo, owner's interrogatories, continuing the suit after it was known to be frivolous and a settlement offer by which Lobiondo would dismiss the original complaint and Schwartz would drop any opposition to an extension of the beach bar. None of these actions are sufficient to sustain the cause of action.

We have previously held that an offer of settlement cannot constitute the needed element of a malicious abuse complaint. Settlements are strongly encouraged and the offer to dismiss one suit in exchange for the dismissal of another does not constitute the perversion of the judicial process necessary to support a cause of action for malicious abuse. Baglini, supra, 338 N.J. Super. at 296. We perceive no difference between an offer to dismiss one suit in return for the dismissal of another and the offer to dismiss one suit in return for the cessation of behavior deemed objectionable. None of the other actions alleged constitute a coercive use of the litigation process. They are, at most, and to the extent they constitute actions taken in the litigation, an attempt to utilize evidence that may ultimately be rejected or to obtain information through the use of extensive requests.

Finally, we return to the judge's dismissal of the intentional infliction of emotional distress claim. To prevail, Schwartz was required to show that Lobiondo acted intentionally or recklessly both in doing the act and producing the emotional distress; the conduct was so outrageous in character and extreme in degree as to go beyond all bounds of decency; the defendant's actions were the proximate cause of the emotional distress; and the distress suffered was so severe that no reasonable person could be expected to endure it. [Turner v. Wong, 363 N.J. Super. 186, 199 (App. Div. 2003) (citing Buckley v. Trenton Sav. Fund Soc'y, 111 N.J. 355, 366 (1988)).]

The motion judge did not deal with this issue and we do not have the benefit of his analysis. See R. 1:7-4. Although the briefs suggest a deficiency in the proofs, out of deference to the motion judge, and because the matter will be remanded in part in any event, we remand this issue as well to allow the judge to consider the proofs available to Schwartz with respect to this cause of action.

We add only that the emotional injuries suffered, whether as the result of negligent or intentional acts must be "truly genuine and substantial." Decker v. Princeton Packet, Inc., 116 N.J. 418, 430 (1989). "'[C]complaints amount[ing] to nothing more than aggravation, embarrassment, an unspecified number of headaches, and loss of sleep" are insufficient as a matter of law to support a cause of action for intentional infliction of emotional distress.'" Ibid. (quoting Buckley, supra, 111 N.J. at 368).

We affirm the judge's dismissal of Schwartz's claim for malicious abuse of process and reverse and remand the dismissal of the malicious use of process and emotional distress claims.

II.

We consider next the claim that Giordano, while representing Lobiondo in the litigation against Schwartz, committed the tort of malicious use of process against Schwartz. That claim requires an analysis of the circumstances in which an attorney, representing a client, may be held liable for instituting litigation. We approach this question mindful of the tension between an attorney's obligation to represent zealously his client's interest, see In re Forrest, 158 N.J. 428, 433 (1999), and the obligation to refrain from any position unless "the lawyer knows or reasonably believes that there is a basis in law and fact for doing so that is not frivolous."

R.P.C. 3.1. See Gaar v. N. Myrtle Beach Realty Co. 339 S.E.2d 887, 889-90 (S.C. Ct. App. 1986) (discussing the competing interests on the viability of a malicious use suit against attorneys).

We are also aware that malicious use of process is a disfavored action. Epperson v. Wal-Mart Stores, Inc., 373 N.J. Super. 522, 534 (App. Div. 2004) (citing Penwag Prop. Co., supra, 76 N.J. at 598). The reason for the lack of encouragement given to such suits "is embedded deeply in our jurisprudence. The courts must be freely accessible to the people. Extreme care must be exercised so as to avoid the creation of a reluctance on their part to seek redress for civil or criminal wrongs for fear of being subjected to a damage suit if the action results adversely." [Penwag Property Co., supra, 76 N.J. at 598 (quoting Mayflower Indus., supra, 15 N.J. Super. at 153).]

See also Baglini, supra, 338 N.J. Super. at 299 (noting that the tort "is disfavored out of fear that its use could chill free access to the courts") (quoting Tedards v. Auty, 232 N.J. Super. 541, 549 (App. Div. 1989)). The need to exercise that care must be heightened to ensure that a litigant, having chosen to seek redress for a perceived injury, will not be limited in the choice of representation by counsel's fear of a later damage suit.

Having said that, we recognize that there are circumstances in which an attorney should be held liable for the malicious use of process. At least one trial court has held that attorneys are not immunized from such claims "where it can be shown that their malicious use of the judicial process has injured third parties." Ackerman v. Lagano, 172 N.J. Super. 468, 473 (Law Div. 1979). That formulation, however, begs the question of what constitutes malicious use of process by an attorney, as opposed to a litigant.

We have found no reported case dealing with this issue and counsel has not identified such a case for us. In the absence of guiding authority from our courts, New Jersey has recognized the authority of the Restatement of the Law. "New Jersey typically gives considerable weight to Restatement views, and has, on occasion, adopted those views as the law of the State when they speak to an issue our courts have not yet considered." Citibank, N.A. v. Estate of Simpson, 290 N.J. Super. 519, 530 (App. Div. 1996) (citing H. John Homan Co. v. Wilkes-Barre Iron & Wire Works, Inc., 233 N.J. Super. 91, 98 (App. Div. 1989); Dziedzic v. St. John's Cleaners & Shirt Launderers., Inc., 99 N.J. Super. 565, 573 (App. Div. 1968), rev'd on other grounds, 53 N.J. 157 (1969); A. v. M., 74 N.J. Super. 104, 118-19 (Cty. Ct. 1962)). See also Maisonave v. Newark Bears Prof'l Baseball Club, Inc., 185 N.J. 70, 89 (2005) (noting that "[w]e often look to the Restatement for guidance in declaration of the common law"); Center 48 Ltd. P'ship v. May Dep't Stores Co., 355 N.J. Super. 390, 410 n.2 (App. Div. 2002); N.J. Econ. Dev. Auth. v. Pavonia Rest., Inc., 319 N.J. Super. 435, 448 (App. Div. 1998)."

The Restatement rule provides:

A lawyer representing a client in a civil proceeding . . . is not liable to a non- client for wrongful use of civil proceedings . . . if the lawyer has probable cause for acting or if the lawyer acts primarily to help the client obtain a proper adjudication of the client's claim in that proceeding. [Restatement (Third) of the Law Governing Lawyers § 57(2) (2000) (emphasis added).]

Comment d explains the import of the rule and we quote it at length:

d. Wrongful use of civil proceeding; abuse of process; false arrest. A person who takes an active part in the initiation, continuation, or procurement of civil proceedings is liable in tort to the defendant for wrongful use of civil proceedings if the person acts without probable cause and primarily for a purpose other than securing a proper adjudication of the claim and if (except for ex parte proceedings) the proceedings have terminated in favor of the defendant (see Restatement Second, Torts § 674). In many jurisdictions, only those suffering certain kinds of harm known as special injury may recover. The tort is called malicious prosecution in many jurisdictions.

The effect of the rule stated in this Section is that, in a claim for wrongful use of civil proceedings, the existence of probable cause and of an improper purpose are assessed separately for a lawyer and for the client on whose behalf the civil proceeding was brought. A lawyer is liable only if there was no probable cause for bringing the civil proceeding, the lawyer did not act primarily to aid the client in securing a proper adjudication of the client's claim, and the civil proceeding has terminated in favor of the defending party. Probable cause exists if the lawyer has a reasonable belief that the facts on which the claim is based can be established to the satisfaction of the trier of fact and has a reasonable belief that there is a sound chance that under those facts the claim may be held valid (see Restatement Second, Torts § 675 & Comments d & e thereto). . . . Whether probable cause existed is determined on the basis of the facts known to the lawyer at the time. When there is no dispute as to what facts were so known, the existence of probable cause is an issue of law to be decided by the tribunal, not a jury issue (see Restatement Second, Torts § 681B(1)(c)). . . .

Similarly, regardless of the client's purpose, even if a lawyer "has no probable cause and is convinced that his client's claim is unfounded, he is still not liable [for wrongful use of civil proceedings] if he acts primarily for the purpose of aiding his client in obtaining a proper adjudication of his claim" (Restatement Second, Torts § 674, Comment d; see also id. § 676). A desire to earn a contingent or other fee does not constitute an improper motive. But if a lawyer acts without probable cause "and for an improper purpose, as, for example, to put pressure upon the person proceeded against in order to compel payment of another claim of his own or solely to harass the person proceeded against by bringing a claim known to be invalid, he is subject to the same liability as any other person" (Restatement Second, Torts § 674, Comment d). . . . The lawyer's motive is assessed separately from that of the client. However, the client's motives, if known to a lawyer, may constitute evidence bearing on the lawyer's motives.

We conclude that the Restatement approach best resolves the competing interests of insuring representation for marginal claims and preventing attorneys from filing claims that are both baseless and intended to further the attorney's own improper ends. Requiring that the elements of the tort be proven against the attorney without permitting the imputation of the clients goals insures that representation will be available when the client's claim has only marginal merit and may be pursued by the client for other than legitimate purposes.

We read the Restatement to require, as a condition of attorney liability, proof that the attorney (a) knew the client's claim was baseless and either (i) knew the client was litigating for an improper purpose which furthered the lawyer's improper purpose or (ii) litigated for the attorney's own improper purposes. We accept both the rationale and result of the Restatement.

It seems evident that any other result would inhibit, for example, attorneys from undertaking representation of one party where there is both animus between the litigants and the possibility of an adverse summary judgment. In such case, the summary judgment might show lack of probable cause and the animus might be proof of improper motive. This does not mean, as Schwartz argues, that the approach we now adopt will give "attorneys carte blanche to knowingly, without probable cause, harm adverse parties if in their clients' interests." Attorneys remain liable, in appropriate circumstances for the sanctions available pursuant to R. 1:4-8 and for appropriate discipline for violations of the Rules of Professional Conduct.

Given the requirement that Giordano had to be shown to have acted for its own illegitimate purpose, we conclude that the judge properly dismissed the malicious use claim. Even assuming Giordano could have been found to know that Lobiondo was litigating for an improper purpose - a doubtful proposition - no reasonable fact finder could determine that Giordano pursued this litigation with the intent to further its own illegitimate purpose or that it had adopted an illegitimate purpose of the client.

The remaining claims against Giordano merit little discussion. The same analysis of the deficiency in proof of a "further act" necessary to support the malicious abuse claim against Lobiondo applies as well in the claim against Giordano. Because Giordano may not be liable for either malicious use or malicious abuse of process, it cannot be held liable for a conspiracy to commit either tort. Said another way, an attorney's representation of a client cannot constitute proof of a conspiracy to commit an abuse or malicious use of process unless the attorney's action in the representation constitutes the tort.

In sum, we reverse and remand for further consideration of the claim of intentional infliction of emotional distress against Lobiondo; reverse and remand for trial Schwartz's claim of malicious use of process against Lobiondo; and affirm in all other respects the judgments of March 9, 2005, and April 18, 2005.

Affirmed in part; reversed and remanded in part.


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