June 23, 2008
LUAN QUALLIU, FRANK DIRAIMONDO, MATTHEW IMPARATO, PLAINTIFFS-RESPONDENTS,
RIG MANAGEMENT, L.L.C., A NJ LIMITED LIABILITY CO., WILLIAM POTTER, BEN CALA, GLEN HAUMAN, MARIE ANN SEGICH, FIDELITY NATIONAL TITLE COMPANY, DEFENDANTS, AND MARISA IMPARATO, CARMINE NADDEO, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, C-135-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted June 3, 2008
Before Judges Winkelstein and Yannotti.
Defendants Carmine Naddeo and Marisa Imparato appeal from the trial court's January 19, 2007 order denying their motion for sanctions pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1. We affirm.
Plaintiffs Luan Qualliu and Frank Diraimondo are members of RIG Management, a limited liability company formed in 2001 to invest in and develop real estate. Although the complaint also designates plaintiff Matthew Imparato as a member, the RIG Management operating agreement does not list him as a member of the company.
Defendants are also named in the operating agreement as members of the company. Plaintiffs claim that Marisa Imparato was responsible for maintaining the accounting and other operating documents of the company, and Carmine Naddeo was responsible for acquiring properties for the company.
In March 2006, plaintiffs filed a complaint, asserting that defendants acted fraudulently with regard to RIG Management's investment activities. By letter of June 4, 2006, defendants demanded, pursuant to Rule 1:4-8, that the complaint be withdrawn. Plaintiffs did not respond to the demand.
During the course of the litigation, defendants answered plaintiffs' interrogatories, provided plaintiffs with copies of RIG Management's books and records, and were deposed on September 28, 2006. On November 1, 2006, defendants moved for summary judgment. On November 3, 2006, plaintiffs' counsel received documents from defendants' counsel that had been requested at the depositions. On November 21, 2006, plaintiffs' counsel forwarded a signed stipulation of dismissal to defendants' counsel.
On December 1, 2006, the court granted defendants' motion for summary judgment and dismissed plaintiffs' complaint against Naddeo and Imparato. Defense counsel filed a motion for sanctions on December 19, 2006, which the trial court denied. The record supports the trial court's decision.
Defendants seek counsel fees pursuant to the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, and Rule 1:4-8. N.J.S.A. 2A:15-59.1 "permits a court to award reasonable counsel fees and litigation costs to a prevailing party in a civil action if the court determines 'that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous.'" Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 67 (2007) (quoting N.J.S.A. 2A:15-59.1a(1)). The Court further observed:
A complaint, counterclaim, cross-claim, or defense is deemed frivolous if it was "commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury," N.J.S.A. 2A:15-59.1(b)(1), or if "[t]he non-prevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense 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," N.J.S.A. 2A:15-59.1(b)(2). [Ibid.]
Rule 1:4-8(b)(1) establishes a "procedure for seeking sanctions against an attorney or pro se party who files a frivolous 'pleading, written motion, or other paper.'" Id. at 69 (quoting Rule 1:4-8(b)). The rule also establishes a procedure that gives the attorney for the party against whom fees are sought a procedural "safe harbor." Ibid. Here, the issue is not whether defendants complied with the procedural constraints of the rule, but whether the court erred in finding that plaintiffs' actions were not frivolous so as to warrant counsel fees under either the statute or the rule.
In rendering his decision, the judge explained that he was familiar with the case, having handled it from the filing of the initial order to show cause. The judge concluded that the filing of the complaint was not frivolous, and the pendency of the action was not unduly protracted. He essentially found that plaintiffs did not exhibit bad faith in filing the complaint, nor did they act in bad faith by waiting until defendants' depositions were taken and they received the additional documents requested at the deposition before submitting the signed stipulation of dismissal.
Plaintiffs claim that they reasonably believed that defendants, who plaintiffs assert were involved with the management of the company's properties, were conspiring to defraud RIG Management in violation of their fiduciary duty. The judge apparently credited plaintiff Qualliu's certification, in which he indicated that plaintiffs believed that defendants were participating with other members of the company in defrauding plaintiffs. Although plaintiffs' conduct may have been ill-founded or misguided, that conduct does not necessarily bespeak bad faith. Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div.), certif. denied, 162 N.J. 196 (1999); see also McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 563 (1993) (conduct "bespeak[ing] an honest attempt to press a perceived, if ill-founded, claim" insufficient to warrant a finding of bad faith).
A decision by a trial court whether to award fees is discretionary. Discretionary decisions of the trial court are entitled to deference and will not be reversed absent a showing of an abuse of discretion involving a clear error in judgment. State v. Marrero, 148 N.J. 469, 484 (1997); Harris v. Peridot Chem. (N.J.), Inc., 313 N.J. Super. 257, 283 (App. Div. 1998). Here, given the trial court's involvement with the parties during the course of the litigation, we conclude that the court did not abuse its discretion in determining that plaintiffs' actions did not justify an award of counsel fees.
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