February 5, 2008
JUST NEW HOMES, INC. AND D. RICHARD TONGE, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
SUN MANAGEMENT, INC., D/B/A SUNRISE COMMUNITIES, DEFENDANT-RESPONDENT/CROSS-APPELLANT, AND NVR INC. D/B/A RYAN HOMES; REGAL HOMES; SGS COMMUNITIES; PAPARONE HOMES OF NEW JERSEY, INC.; AND CENTEX HOMES, LLC., DEFENDANTS.
On appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-9313-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 23, 2007
Before Judges Coburn, Grall and Chambers.
Plaintiffs, Just New Homes, Inc. (JNH) and D. Richard Tonge, appeal from an order dated December 13, 2005, imposing monetary sanctions in the sum of $13,750, for filing a frivolous lawsuit. Defendant, Sun Management, Inc., d/b/a Sunrise Communities (SM), has filed a cross-appeal from the denial of its request for a permanent injunction to have its name removed from plaintiff's website. In light of the number of other cases brought by plaintiff under similar theories to the ones in this case which terminated adversely to plaintiff, we affirm the award of monetary sanctions. Based on the record below, we also affirm the granting of summary judgment dismissing the counterclaim for a permanent injunction.
Plaintiff Tonge is a real estate broker and principal of JNH. JNH has an internet website containing information on new residential construction projects in numerous areas in the country, including areas in New York, New Jersey, Pennsylvania, Florida and Texas. Potential purchases of new homes may register as clients of JNH, authorizing JNH to serve as their agent entitled to a commission. By sorting through the information on the website, the potential buyers may identify new home construction projects of interest to them. The website advises the potential buyers that they will receive a "Cash-Back Bonus" of one percent of the base price of the home if the sale goes through. In order to receive the bonus, the potential purchaser must print out a Bonus Coupon and Registration Certificate and present the latter to the sales office of the builder. The potential purchaser is instructed to tell the builder's sales officer that JNH is their real estate agent. The cash-back bonus is payable from the commission JNH seeks from the builder. The website further advises that if the commission JNH receives on the sale is less than one and one-half percent of the base price, the buyer will receive only one-half of the commission received by JNH. This means that if JNH does not receive any commission, the buyer will not receive any cash-back bonus, although the website does not explicitly advise the prospective purchasers of this fact.
The builder in this case, SM, will pay a flat referral fee of $2,000 to a broker provided three criteria are met: (1) the broker personally accompanies the prospective buyer to the sales office; (2) the prospective buyer had not earlier registered with the builder or visited the sales office; and (3) the buyer subsequently purchases a house. This practice is typical of many new residential construction builders.
Plaintiff Tonge maintains that he is unable to accompany the prospective buyers to the sales offices and sign registration forms as their broker because he suffers from progressive osteoarthritis, a chronic disease. As a result, when one of his clients seeks to visit a site, he requests, as a reasonable accommodation, acceptance of a faxed registration in lieu of an in person visit. SM denies these requests. Also, as the trial judge noted, due to the extensive geographical area covered by JNH's website, it is unlikely a single person with no disability could accompany clients to all of these sites anyway.
On December 22, 2003, plaintiffs filed this lawsuit against SM and five other new home builders who had failed to provide the requested accommodation. With respect to all defendants, the complaint alleged violations of the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, and tortious interference with contractual relations. The claims against the other defendants have been dismissed and are not part of this appeal.
In February 2004, defendant filed a counterclaim seeking, among other relief, a permanent injunction enjoining plaintiffs from representing to clients that they may receive a rebate or discount if they purchase a home from defendant.
This was not the first suit plaintiffs filed against a builder in New Jersey for failure to provide an accommodation under these circumstances. In December 2001, plaintiffs filed a similar pro se action in the Special Civil Part in Camden County against RJP Builders (RJP), alleging that RJP failed to provide Tonge with a reasonable accommodation and failed to pay plaintiffs a commission when they referred a buyer to RJP. After the trial was held on March 5, 2002, the trial court found that plaintiffs were entitled to the referral fee of $500 which RJP provided to brokers who did not come to the premises, but plaintiffs were not entitled to further monies under a breach of contract theory. The trial court specifically found that plaintiffs had not set forth a viable discrimination claim under the LAD.
In December 2001, plaintiffs filed another pro se suit against RJP, in the Special Civil Part, Gloucester County, seeking commissions on a sale involving other purchasers under similar circumstances. Plaintiffs argued that they were entitled to a commission based on real estate broker commission law and argued that RJP's practices violated the LAD as well as the Americans With Disabilities Act. That case ended with summary judgment being granted for RJP. While RJP was awarded counsel fees by the trial court under Rule 1:4-8, on the basis that plaintiffs' suit was frivolous, the award was reversed on appeal on September 3, 2003, because RJP's application for the fees had been untimely.
In July 2001, plaintiff Tonge, appearing pro se, filed a complaint with the New Jersey Division of Civil Rights (the Division) against RJP for its failure to provide him with a reasonable accommodation in violation of the LAD. On October 1, 2002, the Division issued a letter opinion dismissing the complaint under principles of collateral estoppel since the issue had already been addressed adversely to plaintiff in the Camden County case. The letter opinion stated:
Under the specific circumstances of this dispute, the record does not appear to support a finding that Respondent's refusal to modify its broker policies violated the LAD. It is unlikely that Respondent's requirement that a broker accompany a buyer to its sales office in order to qualify for a commission rather than a referral fee can be construed as a failure to do business with Complainant because of his disability as contemplated by the provisions of the LAD governing discriminatory refusal to engage in economic transactions. N.J.S.A. 10:5-12.
In June 2002, plaintiff Tonge, again appearing pro se, filed a claim with the Division alleging discrimination in violation of the LAD by J.S. Hovnanian & Sons, another new home builder who refused to provide plaintiff with his requested accommodation. The Division dismissed the complaint, finding that plaintiff had failed to make out a claim under the LAD, writing:
[T]he fact that a business offers to engage in a contractual relationship only at a particular site does not render the offer to contract an unlawful refusal to do business with a person with disabilities who is unable to travel to the site. . . . [T]he LAD does not require the resolution of this business dispute, because there is insufficient evidence that Respondent is obligated by the LAD, beyond ensuring that its office is physically accessible to people with disabilities, to offer commissions to brokers who are unable to comply with its contractual term of appearing at its sales office to show the homes to their clients.
In light of these earlier cases, on August 23, 2004, the trial court in this case granted defendant's motion for summary judgment and dismissed plaintiffs' complaint with prejudice, but ordered the matter to continue with respect to SM's counterclaim. In a twenty-page written decision, the trial judge found that the LAD claims were barred by the doctrine of collateral estoppel due to the previous litigation. The judge also found that no contract existed between the parties to support a breach of contract claim and that plaintiffs could not prove the elements of a claim for tortious interference with economic rights. This decision dismissing the complaint was appealed; however, in January 2005, the parties entered into a consent order dismissing the appeal as interlocutory, and remanding the case to the trial court.
The case then proceeded on the counterclaim. Defendant withdrew all of its claims in the counterclaim except the request for a permanent injunction, asserting that plaintiffs continued to send prospective buyers to defendant. Because defendant refused to pay plaintiffs a referral fee or commission, the prospective purchasers would not receive the expected cash-back bonus. Defendant argued that as a result, prospective purchasers would believe that defendant, not plaintiffs, were engaging in misleading marketing practices.
On August 25, 2005, on motions for summary judgment, the trial court rejected defendant's request for a permanent injunction, and dismissed the counterclaim. Defendant appeals that decision.
On September 16, 2005, defendant moved for sanctions against plaintiffs and plaintiffs' former counsel, Peter W. Baker, pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8, contending that plaintiffs' complaint was frivolous. The motion against Baker was withdrawn due to his chapter 7 bankruptcy filing. In light of the prior unsuccessful litigation, the court found that "this is the kind of bad faith and harassing litigation which the frivolous litigation statute, N.J.S.A. 2A:15-59.1, as well as the sanctions Rule 1:4-8(b)(2) are intended to address." While defendant was seeking as a sanction $23,107, which represented its attorneys fees, the court imposed a sanction of $13,750. On appeal, plaintiff challenges the imposition of this sanction and also argues that if any sanction is imposed, it should be against plaintiffs' attorney and not the plaintiffs themselves.
We will first address plaintiffs' appeal of the sanctions. A litigant who brings a frivolous lawsuit may be required to pay the reasonable attorney fees and litigation costs incurred by the prevailing adversary. N.J.S.A. 2A:15-59.1(a)(1). A lawsuit is considered frivolous if it is brought in "bad faith, solely for the purpose of harassment, delay or malicious injury," or if the litigant knew or should have known that the claim "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." Id. at 2A:15-59.1(b). The statute serves the dual purpose of deterring frivolous litigation and compensating the victims of such litigation. Toll Bros., Inc. v. Twp. of West Windsor, 190 N.J. 61, 67 (2007). This statute is read restrictively so that citizens will have free access to the courts. McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561-62 (1993). The statute should not be utilized to deter creative, honest advocacy. Ellison v. Evergreen Cemetery, 266 N.J. Super. 74, 85 (App. Div. 1993), certif. denied, 142 N.J. 516 (1995). "In approaching the issue of deterring baseless litigation, while not discouraging honest and creative advocacy, the focus is upon the objective reasonableness of the action of a party under the circumstances." Ibid.
Prior to the commencement of this litigation, plaintiffs had brought two civil actions against another builder and two complaints before the Division based on the same theory; namely, that the builders had a legal duty to provide Tonge with the accommodation he requested for his disability. All of those actions terminated adversely to plaintiffs. As a result, plaintiffs had no objectively reasonable basis to believe that this lawsuit would be any more successful. Further, sanctions for frivolous litigation had been assessed against plaintiffs in one of those suits. While those sanctions were set aside because the application was not timely made, that case certainly put plaintiffs on notice that they were running the risk of sanctions if they brought another lawsuit under the same theory.
Here the sanctions were appropriately assessed against plaintiffs rather than their counsel. A client will not be sanctioned for frivolous litigation where the client relied in good faith on his attorney's faulty advice. See McKeown-Brand v. Trump Castle Hotel & Casino, supra, 132 N.J. at 563. Plaintiff Tonge, however, had proceeded pro se in the earlier litigation, and was aware of the unfavorable result of those cases as well as the earlier sanction for frivolous litigation. Assessing sanctions against plaintiffs was appropriate.
Sanctions could not be considered against plaintiffs' attorney under Rule 1:4-8 because his bankruptcy filing triggered the automatic stay under 11 U.S.C.A. § 362. That statute did not stay the entire fee application, but only that portion of the application that applied to him. See 11 U.S.C.A. § 362(a)(1) (stating that the bankruptcy stay under this section halts all judicial action "against the debtor"); 3 Collier on Bankruptcy ¶ 362.03 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.) ("Litigation in which the debtor is not a party and that only collaterally affects the debtor is not stayed"); Id. at ¶ 362.03[d] ("The stay of litigation does not protect nondebtor parties who may be subjected to litigation for transactions or events involving the debtor. Thus, for example, a suit against a co-defendant is not automatically stayed by the debtor's bankruptcy filing.").
In the cross-appeal, defendant SM appeals from the dismissal of its counterclaim seeking injunctive relief. Defendant contends that the trial judge should have imposed a permanent injunction preventing plaintiffs from representing to prospective customers that they will receive any rebate, discount or financial incentive with respect to homes sold by defendant.
This issue came before the trial court on cross-motions for summary judgment. In reviewing appeals from a decision on summary judgment motions, this court employs the same standard applied by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Such a motion will be granted where "no genuine issue of material fact" is present, and the movant is entitled to judgment as a matter of law. R. 4:46-2(c). The motion will be granted where, after viewing the evidence in the light most favorable to the nonmoving party, no rational fact finder could hold in that party's favor. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
A court of equity has the discretion to provide injunctive relief. Horizon Health Ctr. v. Felicissimo, 135 N.J. 126, 137 (1994). An injunction is considered "primarily a preventive remedy intended to afford relief against future acts or conduct which are against equity and good conscience . . . rather than to remedy what is past and done or to punish for wrongs already committed." Loigman v. Twp. Comm. of Middletown, 185 N.J. 566, 593 (2006) (quoting Devine v. Devine, 20 N.J. Super. 522, 527 (Ch. Div. 1952)). The injunction should be only so broad as reasonably necessary to achieve its goal. Verna v. Links at Valleybrook Neighborhood Ass'n, 371 N.J. Super. 77, 89 (App. Div. 2004). Some factors to be considered when determining whether or not to issue an injunction are:
(1) [T]he character of the interest to be protected; (2) the relative adequacy of the injunction to the plaintiff as compared with other remedies; (3) the unreasonable delay in bringing suit; (4) any related misconduct by plaintiff; (5) the comparison of hardship to plaintiff if relief is denied, and hardship to defendant if relief is granted; (6) the interests of others, including the public; and (7) the practicality of framing the order or judgment. [Paternoster v. Shuster, 296 N.J. Super. 544, 556 (App. Div. 1997) (citing Restatement (Second) of Torts § 936 (1977)).]
In making its decision, the court must weigh these factors in a "qualitative manner" and make a "sensitive evaluation of the entire situation." Ibid. For a permanent injunction to issue, the court must find that a legal right to the relief exists and that "the injunction is necessary to prevent a continuing, irreparable injury." Loigman v. Twp. Comm. of Middletown, supra, 185 N.J. at 593 (quoting Verna v. Links at Valleybrook Neighborhood Ass'n., supra, 371 N.J. Super. at 89).
Here defendant has not come forward with sufficient proofs to establish "a continuing, irreparable injury." As the trial judge noted:
[Defendant] has no specific evidence to support its assertions of harm, other than that it finds Tonge and JNH annoying. There is no proof that sales have been lost because of Plaintiffs' actions . . . . Sun has not demonstrated any substance to its generalized allegations of business harm in its moving papers . . . . [T]here is simply no evidence in the record that this course of conduct has actually interfered with [defendant's] business in any material way or that it is likely to do so.
The trial court left open the opportunity for defendant to come back to court for injunctive relief if plaintiffs' future conduct causes harm to defendant.
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