On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1574-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 24, 2007
Before Judges A.A. Rodríguez, C.S. Fisher and C.L. Miniman.
After a non-jury trial, the judge dismissed all claims. Plaintiffs seek our review, among other things, of that part of the judgment that denied their claim to an interest in a limited liability company known as KO is OK, LLC. Defendants have cross-appealed, arguing that the trial judge erred in failing to enforce a contract stipulation, which authorized a fee award to the prevailing party in any litigation alleging a breach of contract. In light of his fact findings, to which we defer, we conclude that the judge correctly resolved the disputes about the parties' nascent business venture, but we conclude that the judge mistakenly rejected defendants' claim for counsel fees and remand for additional proceedings.
The record reveals that plaintiff Zachary Glickman (Zach) had been a manager of performers in the music business for many years; he and his wife, plaintiff Alice Glickman (Alice), lived in California. Defendant Theodore H. Sollod (Ted) was self-employed in the apparel business; he and his wife, defendant Kyounghee Sollod (Kay), lived in New Jersey. The parties had been friends since the 1960's.
In 2001, KO is OK opened what was described in testimony as a "snowball stand quasi gift shop" on the Trautwein Farm in Closter. KO is OK's operating agreement revealed that Kay was its sole member and manager. In 2002, due to ill health and advancing age, the operators of the farmstand indicated an intention to retire. Sensing a business opportunity, Ted approached his friend Zach.
Zach and Alice had owned and operated a chain of Häagen Dazs(r) ice cream stores for eight to ten years. Ted testified that he believed Zach's involvement in the farmstand would constitute a good fit because Zach "had experience and knowledge [about] running a food operation and running the inside of a food business and had the computer knowledge and infrastructure to help us get this thing off the ground." Indeed, the judge found as a fact that Zach was "a sophisticated entrepreneur, well versed in both the accounting and legal aspects of corporate management."
Ted advised Zach that the former operators earned approximately $300,000 per year from the farmstand business, and he provided Zach with copies of the operators' tax returns, which showed gross receipts of $779,280 in 1999, and $742,870 in 2000. As a result, Zach visited the farm in October 2002.
After various discussions and communications with Ted, and other visits by Zach to New Jersey, the details of which were thoroughly discussed in the trial judge's opinion and need not be repeated here, the parties moved forward. KO is OK paid $13,000 from its account to the former farmstand operators for their assets, and "The Farm in Closter, LLC"*fn1 entered into a three-year lease of the premises. Ted and Kay also executed personal guarantees in favor of the lessor. Zach sent Ted $25,000 to be used for the security deposit and the first and last month's rent, but refused to provide a personal guarantee.
After further discussions, Zach wrote to Ted and Kay on February 18, 2003, indicating the need to provide structure to their undertaking and suggesting sixteen proposed items to be agreed upon. Zach followed this with a letter to Ted and Kay, dated February 19, 2003, which stated in full:
This letter when signed by you below shall serve as an agreement between us regarding our relationship in KO is OK LLC, 'The Farm in Closter' and 'The Trautwein Farm and Garden Store'. The principals of the agreement shall be Ted and Kyounghee Sollod . . . and Zach and Alice Glickman. . . . Whereas it is agreed as follows:
1. The parties will jointly own the corporation KO is OK LLC (or any successor corporation) in equal amounts for the purpose of operating the retail establishment currently known as The Trautwein Farm and Garden Store.
2. Zach Glickman will work at the farm for two (2) weeks a month. Ted Sollod will work at the farm full time.
3. There will be two (2) principal salaries - Sollod 100% and Glickman 66 2/3% with any other working party being paid an ...