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Foxtons, Inc. v. Cirri Germain Realty


February 22, 2008


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-1421-06.

Per curiam.


Argued September 19, 2007

Before Judges Axelrad, Sapp-Peterson and Messano.

Plaintiff Foxtons, Inc. (Foxtons) appeals from the motion judge's order of June 27, 2006, dismissing its complaint against defendants Cirri Germain Realty and Santo Cirri. Foxtons contends that the motion judge mistakenly converted defendants' motion to dismiss for failure to state a claim, R. 4:6-2(e), into a motion for summary judgment, R. 4:46, because no discovery had taken place. It further argues that the motion judge erroneously applied the standards governing a motion to dismiss concluding its complaint was insufficient as a matter of law. We have considered these arguments in light of the motion record and applicable legal standards. We affirm.

This lawsuit arose from a single letter or flyer (the flyer) admittedly drafted and circulated on February 1, 2006, by defendants, a licensed real estate agency and its principal. Prepared on the agency's letterhead, and signed by Santo Cirri, the flyer in its entirety read:

The Misleading 6% v. 3% Commission Myth

Dear Home Owner:

Please don't be fooled with the advertised concept that there is a 3% saving in real estate commission fees that will put thousands of dollars in your pocket!

Keep in mind commissions by law are negotiable. There are no set fees. Claiming that most other offices charge 6% fees is ridiculous! Most offices do not charge what is asserted. So why then is this type of advertising continued? This is easy to answer, to mislead and to gain a competitive advantage over quality offices. Most reputable offices will not emphasize or advertise that they too are full service, and will not place a commission fee and state full service on signs. Why? A highly regarded office doesn't have to! Remember all commissions are negotiable; we evaluate each situation and then discuss a fair commission fee that will generate maximum exposure by all agents in our Multiple Listing System.

Since home values have escalated, the real estate industry has overwhelmingly made adjustments in reducing fees to home owners. Most offices like ours today negotiate on an average 4.5%-5% commissions.

But if your house sits below towers or power lines, or adjacent to a busy highway, it's only logical to negotiate with your real estate agent a commission that will cause more agents to show your home.

Don't be fooled by the 3% commission, which offers 1% for agents to sell your home. Real estate agents must earn a living like anyone else. What is the likelihood of an experienced agent bringing their buyer to view a house for a 1% commission? Well the probability is not good at all, extremely risky and time consuming to you, which results in fewer showings, less offers and less money in your pocket.

Today homeowners and buyers are more prone to use an experienced well-trained real estate agent. Our sales staff for example averages 18 years of real estate experience. Given honest facts, you decide what is best if you're looking to buy or sell a home. Feel free in calling our office. My agents have a wealth of information to help in your real estate needs.


Santo Cirri

Plaintiff filed its complaint on February 9, 2006. Describing itself as a "full-service real estate brokerage" that offered the public a "discounted commission rate of three percent," plaintiff alleged defendants' flyer was defamatory and libelous per se, and it also sought damages under the theories of tortious interference with a prospective economic advantage and product disparagement. Although the complaint claimed to have attached a copy of the flyer and incorporated its contents "pro hac verba," no copy was attached and only limited snippets of its contents were recited in the pleading.

On May 5, 2006, defendants moved to dismiss the complaint for failure to state a claim and in support of the motion attached three exhibits. The first was a complete copy of the flyer. The second exhibit, a reprint of a Wall Street article dated September 20, 2004, noted plaintiff "recently announced that it [was] raising its standard commission to 3% from 2%." The third exhibit, a downloaded article from the Asbury Park Press dated February 6, 2005, quoted plaintiff's new executive officer, Van Davis, as stating, "The 2 percent model failed, and it failed in every respect of the word." He went on to explain that increasing the commission percentage to three percent would hopefully reinvigorate the company's financial outlook.

Defendants argued that the flyer was not defamatory because the statements it contained were merely opinions expressed by a competitor and were privileged speech. Defendants further contended that because the real estate business was highly regulated, plaintiff must plead actual malice in the publication of the flyer and had failed to do so.

Defendants further noted that the flyer never mentioned Foxtons by name. Relying upon the motion's exhibits which demonstrated plaintiff had recently changed its commission structure, defendants claimed that plaintiff had failed to demonstrate any exclusive relationship between itself and any particular commission rate--specifically the three percent rate referenced in the flyer. Defendants argued the complaint must fail as a matter of law because plaintiff could not demonstrate the allegedly defamatory statements were "of and concerning" plaintiff. Lastly, defendants contended that plaintiff failed to plead with the requisite specificity that it actually suffered damages as a result of the flyer's dissemination.

As to the two remaining counts of the complaint, defendants argued that the claim of tortious interference with a prospective economic advantage must fail because plaintiff failed to plead actual malice and specifically identify those "clients or transactions" that were lost because of the flyer's contents. Lastly, defendants contended plaintiff's product disparagement claim also must fail because plaintiff failed to plead with specificity the falsity of the flyer's statements, actual malice, or "special damages."

In a comprehensive written opinion that accompanied his order, the motion judge considered the arguments raised and plaintiff's opposition as to each of the three counts in the complaint. As to the defamation claim, the judge reasoned the complaint was inadequate for a number of reasons. First, he found that since the flyer never mentioned Foxtons by name, and because "plaintiff could not lay claim to exclusive identification with a particular commission rate," the complaint failed to establish that the defamatory statements "concern[ed] the complaining party as required." Because "extrinsic facts [were] obviously necessary to draw some connection between the alleged defamatory statements and plaintiff," the flyer was not "defamatory per se," and plaintiff failed to adequately plead actual damages were suffered, instead, making only "conclusory allegations" of harm. He further found the complaint failed to "plead actual malice." Lastly, he reasoned that "[b]y actively taking a public position on the relative merits of discount brokers, plaintiff invited a public response," and could not complain if that consisted of "opinion, comment or criticism . . . adverse to its own views on the subject."

The judge then considered the remaining two counts of the complaint. As to the claim for tortious interference, he found that plaintiff had not sufficiently pled malice, or claimed that defendants' conduct was "legally wrongful . . . and not sanctioned by the rules of the game." With respect to the product disparagement claim, the judge determined plaintiff failed to allege malice, "failed to plead the publication of false allegations concerning its property, product or business, and special damages." He found defendants' statements were "intended to persuade potential customers to use the competitor's services rather than those of plaintiff," and concluded, "By commencing this litigation, plaintiff seeks to be able to comment on commission rates and level of service while attempting to foreclose [defendants'] First Amendment rights from doing the same." The judge entered an order dismissing the complaint in its entirety, and this appeal followed.

We first consider plaintiff's claim that the judge erroneously converted defendants' motion to dismiss into one for summary judgment. While conceding that this procedure is specifically provided for by Rule 4:6-2, plaintiff argues that it was unfairly utilized in this case because no discovery whatsoever had taken place.

The materials supporting defendants' motion were submitted to prove a single fact--that plaintiff had only recently raised its own commission rates from two to three percent. Therefore, it was defendants' argument that the flyer which referred to "the 3% commission," a phrase plaintiff claims to extensively employ in its advertising, would not be understood by anyone reading it necessarily as a reference to plaintiff. In short, defendants argued, and the motion judge found, "plaintiff could not lay claim to exclusive identification with a particular commission rate," and therefore could not demonstrate the flyer was "of or concerning" Foxtons. See Durski v. Chaneles, 175 N.J. Super. 418, 420 (App. Div.)(holding that "[a]n indispensable prerequisite to an action for defamation is that the [ ] statements must be of and concerning the complaining party"), certif. denied, 85 N.J. 146 (1980).

Plaintiff acknowledges the flyer did not contain its name but contends that with further discovery, it could have demonstrated that those reading the flyer would have known it was about Foxtons. We note that plaintiff's objection below to the conversion of the motion to one seeking summary judgment was cursory at best. Instead, in opposition to the motion, it furnished its own exhibits, a copy of the National Association of Realtors' Code of Ethics, and an unreported Appellate Division decision, but nothing else.

At oral argument before us, plaintiff conceded that it did not seek an adjournment of the motion to furnish other materials or otherwise specifically demonstrate how further discovery was important to resisting defendant's motion. See R. 4:6-2 (permitting all parties "a reasonable opportunity to present all material pertinent to such a motion"). Plaintiff posited no other reason--beyond the need to demonstrate the flyer was "of and concerning" Foxtons---why discovery was necessary to resist defendants' motion.

In Dijkstra v. Westerink, we noted, "[T]he actual naming of plaintiff is not a necessary element in an action for libel. It is enough that there is such reference to him that those who read or hear the libel reasonably understand the plaintiff to be the person intended." 168 N.J. Super. 128, 133 (App. Div.) (citing Restatement (Second) of Torts, § 564 comment a (1977)), certif. denied, 81 N.J. 329 (1979). Additionally, if the defamatory comment fails to mention any specific name but is directed toward a group or class of individuals, a plaintiff may still establish a claim for libel. Mick v. American Dental Assoc., 49 N.J. Super. 262, 285 (App. Div.), certif. denied, 27 N.J. 74 (1958). Under such circumstances, a successful plaintiff must show "he is a member of the defamed class and must establish some reasonable application of the words to himself." Ibid.

We accept plaintiff's contention that further discovery on this sole issue could have adduced sufficient facts to demonstrate it was the flyer's intended target. For example, it may have been able to demonstrate that its advertising was uniquely identifiable by the public, or that the population that received the flyer was targeted to overlap a geographical area where its own efforts were extensive and without significant other competition.

It is clear to us, however, that with the exception of the flyer itself, the motion judge did not rely on the other exhibits attached to defendants' motion to decide the issue. Instead, he applied the standards of review that govern a motion to dismiss under Rule 4:6-2(e). Our review, therefore, employs the same standard as the trial court. Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App. Div.), certif. denied, 185 N.J. 297 (2005).

A motion to dismiss under Rule 4:6-2(e) should be "approach[ed] with great caution" and should only be granted in "the rarest of instances." Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 771-72 (1989). We view the allegations in the complaint with liberality and without concern for the plaintiff's ability to prove the facts alleged in the complaint. Id. at 746. "A motion to dismiss a complaint under Rule 4:6-2(e) for failure to state a claim upon which relief can be granted must be evaluated in light of the legal sufficiency of the facts alleged in the complaint." Donato v. Moldow, 374 N.J. Super. 475, 482 (App. Div. 2005). The plaintiff's obligation on a motion to dismiss is "not to prove the case but only to make allegations, which, if proven, would constitute a valid cause of action." Leon v. Rite Aid Corp., 340 N.J. Super. 462, 472 (App. Div. 2001).

In defamation actions, which by their nature implicate the potential curtailment of cherished freedoms of expression, a plaintiff must plead its cause of action with a greater level of specificity. Darakjian v. Hanna, 366 N.J. Super. 238, 248-49 (App. Div. 2004). As the Supreme Court has noted,

In addition to alleging defamatory statements, the complaint must plead facts sufficient to identify the defamer and the circumstances of publication. Also, the circumstances must show that the statements are "of and concerning" plaintiff. It must appear that a third person understood the statements to relate to the plaintiffs.

It is not enough for plaintiffs to assert . . . that any essential facts that the court may find lacking can be dredged up in discovery. A plaintiff can "bolster a defamation cause of action through discovery, but not [] file a conclusory complaint to find out if one exists." Zoneraich v. Overlook Hosp., 212 N.J. Super. 83, 101-02 (App. Div.), certif. denied, 107 N.J. 32 (1986) . . . . [A] plaintiff must plead the facts and give some detail of the cause of action. [Printing Mart-Morristown, supra, 116 N.J. at 767-768 (emphasis added)(other internal citations omitted).]

In other words, it was plaintiff's significant burden to plead with specificity sufficient facts to demonstrate that the flyer was "of and concerning" Foxtons without any further discovery. This it clearly failed to do.

Plaintiff's complaint claimed that "[r]easonable persons of ordinary intelligence who read defendants' libelous writing could only understand that plaintiff was the sole target." But, there were no facts asserted to support that rather broad claim. For example, though not a mandatory requirement, the complaint did not assert that any specific third party thought the flyer was referring to Foxtons. At most, the complaint contained a general statement that "upon information and belief [Foxtons is] the only real estate brokerage concern in New Jersey that actively markets and advertises itself as providing 'full service' . . . at a discounted commission rate of '3%'."

Plaintiff pled no facts to support its belief as to the exclusivity of its marketing campaign. In fact, as defendants have argued, real estate commissions are by law entirely negotiable. Therefore, it is difficult to imagine how one could claim that a reference to a particular commission rate in the flyer could be interpreted as applying only to plaintiff. We note plaintiff's own belief that it was the flyer's intended target is insufficient; the test is whether reasonable third parties who read the flyer would surmise it referred to Foxtons. See Taj Mahal Travel v. Delta Airlines, 164 F.3d 186, 189 (3d. Cir. 1999) (reviewing court must place itself "in the position of the expected reader" to determine whether the alleged defamatory statement sufficiently identifies plaintiff).

We also agree with the motion judge that the contents of the flyer were not defamatory but were rather fair comment by a competitor extolling the virtues of its own services in comparison to those provided by other brokers. Whether a statement is defamatory is a matter of law to be determined by the court. Dello Russo v. Nagel, 358 N.J. Super. 254, 262 (App. Div. 2003). "When determining if a statement is defamatory on its face 'a court must scrutinize the language according to the fair and natural meaning which will be given it by reasonable persons of ordinary intelligence.'" Id. at 263 (quoting Romaine v. Kallinger, 109 N.J. 282, 290 (1988)). In deciding whether a statement is defamatory a court examines its content, verifiability, and context. Ibid. In Nagel, we explained:

[First, a] statement's content is judged by its objective meaning to a reasonable person of ordinary intelligence. Secondly, only verifiable statements can be defamatory. Finally, a statement's meaning can be affected by its context. The focus is on the effect of the alleged defamatory statement on third persons, that is, whether they viewed the plaintiff in a lesser light as a result of hearing or reading the offending statement. [Nagel, 358 N.J. Super. at 263-64 (citations omitted).]

"In assessing the language, the court must view the publication as a whole and consider particularly the context in which the statement appears." Romaine, supra, 109 N.J. at 290 (emphasis added).

Plaintiff's complaint cited five specific portions of the flyer's contents and alleged these were defamatory. In each instance, however, those allegations were taken out of the full context of the flyer or otherwise recited in incomplete fashion. As we noted above, plaintiff failed to include the flyer as an exhibit to the complaint.

As a result, this truncated version of the flyer's contents unfairly skews its overall thrust--that contrary to plaintiff's assertions, defendants were willing to negotiate their commission charges, frequently agreeing to accept less than six percent, and that defendant's fee structure and experience would more likely produce a sale for the client.

Whether the flyer's allegedly defamatory statements are "verifiable" requires an examination of whether they reflect facts or opinions. "Factual statements, unlike non-factual statements, are uniquely capable of objective proof of truth or falsity. Opinion statements, in contrast, are generally not capable of proof of truth or falsity because they reflect a person's state of mind." Ward v. Zelikovsky, 136 N.J. 516, 530-31 (1994). "Harm from a defamatory opinion statement is redressable when the statement implies underlying objective facts that are false." Id. at 531.

It is clear from a review of the entire flyer that by and large it contains expressions of defendants' opinions regarding the value of its services and those offered by others claiming to charge a lesser commission rate. Our Supreme Court has noted that boasts of a competitor concerning the prices of goods and services offered and their value are not defamatory. See Printing Mart-Morristown, supra, 116 N.J. at 767 (1989).

These observations also inform our consideration of the context of defendants' statements, which helps us ascertain how a reasonable person would interpret the flyer. Ward, supra, 136 N.J. at 532. The flyer was circulated on defendants' agency stationary and signed by Cirri himself. Plaintiff's complaint alleges it was mailed to "consumers in, among other areas, Middlesex County." We note defendants' place of business is Edison, which is located in that county. Therefore, the context of the flyer's dissemination further supports the conclusion that it was in the nature of a solicitation of prospective customers with which defendants sought to place a positive spin on there own virtues, and that it was not defamatory.

We therefore affirm the motion judge's dismissal of plaintiff's defamation claim without considering the other reasons set forth in his written opinion.

Plaintiff argues that its complaint adequately stated a claim for tortious interference with prospective economic advantage. To establish such a claim, a plaintiff must prove:

1) actual interference with a contract; 2) that the interference was inflicted intentionally by a defendant who is not a party to the contract; 3) that the interference was without justification; and 4) that the interference caused damage. Nagel, supra, 358 N.J. Super. at 268. Interference with a contract is intentional "if the actor desires to bring it about or if he knows that the interference is certain or substantially certain to occur as a result of his action." Id. at 268 (citing Restatement (Second) of Torts, § 766A comment e (1977)).

However, the fact that a party acted to advance its own interest and financial position does not establish the necessary malice or wrongful conduct. Ibid. A claim for tortious interference with the performance of a contract must be based on facts claiming that the interference was done intentionally and with 'malice'. . . .

For purposes of this tort, '[t]he term malice is not used in the literal sense requiring ill will toward plaintiff' . . .

Rather, malice is defined to mean that the harm was inflicted intentionally and without justification or excuse. [Id. at 269 (citing Printing Mart-Morristown, supra, 116 N.J. at 751).]

When a business targets its competitor's customers, it exercises a valid business judgment and that alone does not constitute tortious interference with prospective economic advantage. Nagel, supra, 358 N.J. Super. at 268. Rather, a plaintiff must demonstrate the defendant's "conduct was [not] sanctioned by the 'rules of the game,' for where a plaintiff's loss of business is merely the incident of healthy competition, there is no compensable tort injury." Lamorte Burns & Co. v. Walters, 167 N.J. 285, 306 (2001)(quoting Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 282 N.J. Super. 140, 199 (App. Div.), certif. denied, 141 N.J. 99 (1995)).

Although plaintiff's complaint alleged defendants "acted intentionally and without justification of excuse," precisely the terms we used to define malice in Ideal Dairy Farms, ibid., it fails to set forth any facts regarding defendants' conduct other than the publication of the flyer. Considering our prior discussion, we agree with the motion judge that plaintiff's complaint failed to plead with sufficient specificity the acts of defendants demonstrating malice and therefore the claim for tortious interference with a prospective economic advantage was properly dismissed.

Lastly, plaintiff argues that it sufficiently pled a prima facie claim for trade libel. The elements of trade libel are:

1) publication; 2) with malice; 3) of false allegations concerning plaintiff's property, product or business; and 4) special damages--pecuniary harm. Mayflower Transit, L.L.C. v. Prince, 314 F. Supp. 2d 362, 378 (2004). Even a most liberal reading of this count of plaintiff's complaint demonstrates a complete failure to allege that defendants acted with malice. We therefore affirm the motion judge's decision to dismiss this count of plaintiff's complaint.



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