June 9, 2008
REGINA R. HAGUE, HELEN HAGUE AND ROBERT HAGUE, INDIVIDUALLY AND DERIVATIVELY, PLAINTIFFS,
THEODORE P. RICA, JR., MAUREEN RICA, HIS WIFE, FRANK VINCENDESE, ANTHONY VINCENDESE, ALAN DIESSO, SALVATORE SCALORA, DINO S. POLIZOIS, GEORGE POLIZOIS, JOSEPH WILLIAMS, ALAN SCHWARTZ, WILLIE CICCONE, KYLE MELE, ANTHONY DELIA, ANTHONY LEONE, BRANDON BORN, JERRY KELLY, AMERICAN ASSET MANAGEMENT CORPORATION, CAPITAL FINANCIAL CORPORATION, AMERICAN ASSET DEVELOPMENT CORPORATION, RICHARD G. GAGLIARDI, STEVE GAGLIARDI, MICHAEL J. RUBINO, FRANK S. LAFORGIA, CPA, BRIAN GONNELI, INDIVIDUALLY AND D/B/A DIAMOND HILL, DEFENDANTS, AND JEFFREY W. MACCARELLI, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
JUDITH M. DELIA, R.J. DIQUOLLO & COMPANY, CPA, ROBERT J. DIQUOLLO, ROBERT J. CRIGLER, JEAN MARIE NOLAN MILLER, AND ROBERT TOKASH, THIRD-PARTY DEFENDANTS, AND ANN SCALORA AND THEODORE P. RICA, SR., THIRD-PARTY DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Union County, Docket No. C-42-99.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 29, 2008
Before Judges Fuentes, Grall and Chambers.
Defendant and third-party plaintiff Jeffrey W. Maccarelli appeals from the order of September 4, 2003, approving the statutory receiver's settlement with third-party defendants Ann Scalora and Theodore P. Rica, Sr., and dismissing all claims against them. On appeal, Maccarelli contests the settlement, contending that the proceedings below were biased and unfair due to numerous perceived procedural irregularities. He further contends that he should have been allowed to pursue his individual claims against these third-party defendants, despite the settlement they reached with the receiver. We find nothing in the record that would require the settlement to be overturned. Further, since Maccarelli's claims against these third-party defendants were derivative, the trial court properly dismissed them once the receiver's settlement was approved. We therefore affirm.
This complex derivative action, brought pursuant to N.J.S.A. 42:2B-60 to -64, was commenced by plaintiffs, members of Mountain Valley Group, L.L.C. and The Berkely Group, L.L.C., both formed for the purpose of developing real estate. The complaint contained various allegations, including assertions of mismanagement, fraud, and conversion. Among the relief sought was an accounting, the appointment of a receiver to wind up the affairs of the companies, and compensatory and punitive damages.
Appellant Jeffrey Maccarelli was a member of both companies and was named as a defendant in the complaint. He, in turn, filed a third-party complaint against Ann Scalora, Theodore P. Rica, Sr., and others. Maccarelli contended that Scalora participated in fraudulent conduct when doing accounting work for the companies. Maccarelli also contended that Scalora was wrongfully given $22,000 of Mountain Valley Group funds by her brother, defendant Theodore P. Rica, Jr., a member of both companies. Scalora acknowledged that she had received these funds and used them to purchase stock, and she stated in her answer that she held the stock for the benefit of Mountain Valley Group, L.L.C. The third-party complaint also asserts that $9,000 was wrongfully diverted from Mountain Valley Group, L.L.C. to Rica, Sr.
We will not repeat the complex procedural history of this case, but will focus only on those aspects relevant to this appeal. The trial court appointed William Heller, Esq., as custodial receiver for the companies on April 15, 1999, and on September 10, 1999, the court authorized Heller to retain Ronald DeMaria, Esq., as counsel for the custodial receiver. DeMaria also served as discovery master for the court, and attempted to resolve the case in mediation in September 2000. Thereafter, Edward Dauber, Esq., was appointed mediator. In September 2001, Heller resigned as custodial receiver, and was replaced by Eugene Cooper. On October 23, 2001, the court appointed Cooper liquidating statutory receiver for the companies, and appointed DeMaria as his counsel.
The statutory receiver reached a settlement with Rica, Sr. In his third-party complaint, Maccarelli had contended that $9,000 of Mountain Valley monies had wrongfully been used to pay Rica, Sr.'s personal tax returns and other debts. It appears that Rica, Jr., had used his father's name and social security number on certain tax documents and as a result, Rica, Sr. maintained that the income had been wrongfully attributed to him. He contended that the monies in question had been used for the benefit of Mountain Valley. Further, he contended that in 1997 he had paid Maccarelli $7,992 by check, and any obligation he has to Mountain Valley should be offset by this amount.
Thus, according to his calculation, at most, he owed $1,010 on this obligation. The receiver settled the claim against Rica, Sr., for $1,500.
The statutory receiver also reached a settlement with Scalora and the accounting firm that employed her. Scalora acknowledged that she had been given $22,000 of corporate funds to purchase American Asset stock in 1995, which she did. She sold a portion of the shares in 1997, and turned $8,000 over to the corporation and kept $2,000 in repayment of a loan she had made to the corporation. She acknowledged that the balance of the stock she held plus $864 in money market funds should be turned over to the receiver. The receiver settled the claim against Scalora for $3,000 and her continued cooperation in turning over the remaining stock and the money market funds. We note that thereafter Maccarelli reached a settlement with Scalora and her accounting firm on the accounting issues and that settlement is memorialized in a consent order dated January 8, 2004. However, he did not release his claim against her for the $22,000, and that claim is a subject of this appeal.
In June 2003, the receiver moved for approval of various settlements, including his settlement with Rica, Sr., and Scalora. Counsel for Rica, Sr., and Scalora also moved to approve the settlement, and to dismiss Maccarelli's third-party claims against them as derivative. The court found the settlements fair and reasonable and approved them by order of September 4, 2003. In addition, the judge granted summary judgment to Scalora and Rica, Sr., on Maccarelli's third-party claims against them on the basis that the claims were derivative.
In this appeal, Maccarelli contends that the appointment of DeMaria as counsel for the receiver, as discovery master, and as mediator resulted in an unfair and biased proceeding. However, the record does not support this contention. Maccarelli complains that the appointment of DeMaria as discovery master was not approved by the assignment judge pursuant to Rule 4:41-1. However, nothing in the record indicates that Maccarelli was prejudiced by that oversight. He points to no discovery that he sought and was denied. He fails to establish that the conduct of discovery prejudiced him in any specific way. As to the mediation, counsel for Scalora and Rica, Sr., did not attend the mediation session conducted by DeMaria. Nothing in the record demonstrates that Maccarelli's claims against these third-party defendants were prejudiced by that mediation.
Maccarelli's counsel also argues that the trial judge was biased against him and his client. The only specific instance he references involves his client's failure to appear for his deposition. The trial judge sent a letter scheduling a hearing for May 7, 2001, and stating that she was appalled by Maccarelli's contumacious behavior in failing to attend a court ordered deposition. He had also missed an earlier deposition. At the hearing, Maccarelli's counsel said a number of times that he was "appalled" and "offended" by the judge's questions to him, and he repeatedly said that she did not appreciate what an experienced criminal defense counsel does. He made that remark again, even after the judge stated that she had been a criminal attorney once. Indeed, the judge in question had also sat as a criminal judge. The trial judge then remarked "I have heard that you bait judges." Counsel went on to state that the judge should recuse herself, that she had treated him with disrespect, that the judge had maligned him, and that she had conducted the proceedings unfairly. Despite this verbal assault, the judge proceeded to deny his oral motion to recuse and to deal with the issue at hand in an evenhanded manner. The judge required that Maccarelli attend his deposition and pay the counsel fees incurred by the other attorneys due to the aborted deposition. Her order memorializing that decision has not been appealed. We find no bias on the part of the judge.
We note that Maccarelli points to no provisions of the settlements with Scalora and Rica, Sr., that are unreasonable or unfair under the circumstances.
Maccarelli maintains that he has direct individual claims against Scalora and Rica, Sr., which were improperly dismissed by the trial court as derivative. A derivative action is an action brought by a shareholder to assert rights of the corporation, or, in the case of a limited liability company, an action brought by a member on behalf of the L.L.C. See In re PSE & G Shareholder Litig., 173 N.J. 258, 277-78 (2002) (explaining that a shareholder derivative action is a suit brought by shareholders on behalf of a corporation); N.J.S.A. 42:2B-60 to -64 (permitting a member to bring a derivative action on behalf of a limited liability company). Shareholders cannot sue individually for a diminution in the value of their shares. Strasenburgh v. Straubmuller, 146 N.J. 527, 550 (1996). A shareholder, however, can sue for his individual rights where he has sustained a "special injury," which is a wrong not suffered by all of the shareholders or a wrong involving a contractual right of the shareholders. Ibid. When determining whether the action is derivative or an individual claim, courts look at the nature of the wrong alleged in the complaint and not the designation or claimed intent of the plaintiff. Id. at 551.
In the case at hand, the wrong alleged, namely the taking of company monies, was a wrong to the companies, and Maccarelli suffered no special injury not suffered by other members. Accordingly, his claims were derivative, that is, he was asserting claims of the companies, and once those claims were settled by the receiver, they no longer existed.*fn1 Accordingly, the trial court properly dismissed Maccarelli's third-party complaint.
Maccarelli's remaining arguments, including that he had a right to a jury trial on all legal issues prior to any equitable determination, are not of sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).