On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The Court must consider the rights and remedies that will be available, and how they will operate as against different potential defendants, in the unique context of litigation referred to as Strategic Lawsuits Against Public Participation (SLAPP) suits, which are intended to silence lawful speech and participation in democratic processes.
In 1986, James LoBiondo, Jr. and his wife Denise (collectively, LoBiondo) purchased the Surfrider Beach Club in Sea Bright and began their operation of the business as D. LoBi Enterprises, Inc. Shortly thereafter, they met their across-the-street neighbor, Grace Schwartz, who came to visit the club and who immediately started an argument with them about whether she and her grandchildren should be exempted from the usual admission price.
About a year after purchasing the Club, LoBiondo wanted to expand the business and filed a site plan application with the Planning Board. Schwartz appeared with an attorney at the Planning Board meeting in April 1987 to oppose the application. At the meeting, LoBiondo assured the Planning Board that he intended to operate a restaurant that would be open only to Club members and would have no liquor license or on-premises cooking capabilities. The site plan application was approved in June 1987.
A 1989 amendment to a zoning ordinance eliminated restaurants as a permitted use in the zone. Notwithstanding, LoBiondo applied in May 1990 for a certificate of occupancy for a dining room at the Club. While the application was pending, LoBiondo began advertising the restaurant to prospective members. Eventually, LoBiondo sought relief from the Planning Board., which concluded that a public restaurant at the Club constituted a pre-existing non-conforming use. Schwartz attempted to stop LoBiondo from expanding the Club. Although not a member, she and her daughters, Janice DeMarco, Karen Schwartz, and Marilyn Kallareou, came onto the property to inspect the parking areas, bathroom facilities and living premises without permission. In addition, Schwartz distributed flyers urging others to join her in opposing the expansion and wrote letters to the Planning Board's attorney and to the State Departments of Community Affairs (DCA) and Transportation complaining about municipal actions in connection with the property. Schwartz thereafter filed a complaint in lieu of prerogative writs, seeking to challenge the Planning Board's pre-existing non-conforming use determination. The trial court overturned the decision of the Planning Board, finding its determination arbitrary and unreasonable.
In June 1991, while the prerogative writ matter was pending, LoBiondo met with Norman Hobbie, an attorney with the law firm of third-party defendant, Giordano, Halleran & Ciesla, P.C., to discuss any rights he might have against Schwartz and others. According to LoBiondo, Hobbie stated that he has a "very strong case" against Schwartz and her daughters. LoBiondo retained the Giordano law firm to represent him. After the initial consultation, Michelle Querques, an associate with the law firm, investigated the facts reported by LoBiondo. She reviewed two internal DCA memoranda relating to the Club, and interviewed DCA's Director of Division of Codes and Standards. She also met with LoBiondo to discuss his claims, later describing him as "very upset and emotional" over what he perceived to be a "campaign" and "vendetta" by Schwartz and her daughters to ruin his reputation and business. A summer associate prepared a written memorandum, that addressed possible causes of action against Schwartz.
After meeting with LoBiondo, completing her investigation, considering the summer associate's memorandum, and conducting supplemental legal research, Querques, in October 1991, filed suit in Superior Court against Schwartz and her three daughters. The complaint sought damages on behalf of LoBiondo, his wife, and their business, based on claims sounding in defamation, tortious interference with economic opportunities, intentional infliction of emotional distress, and loss of consortium. All of the claims against Marilyn Kallareou and Karen Schwartz were dismissed prior to a verdict and the jury returned a verdict in favor of LoBiondo against the other defendants. Among other things, the jury found that Schwartz had defamed the LoBiondos, intentionally interfered with their business, and intentionally caused LoBiondo mental anguish, awarding compensatory damages and punitive damages.
On appeal, the Appellate Division reversed the verdict in favor of the LoBiondos, finding 1) that the claim should not have gone forward because Schwartz's statements were not defamatory, and 2) that the trial court should have applied the actual malice standard. On Schwartz's counterclaim, the panel concluded that defendants made a prima facie showing that the LoBiondo action against them was a SLAPP suit. The court declined to recognize a new cause of action to combat SLAPP suits and instead looked to the disfavored, common law tort of malicious use of process. The panel made two alterations to the traditional proofs a party would need in order to prevail under that cause of action. First, the burden of proof on the required element of "actuated by malice" could be satisfied by proof of intent to retaliate against defendants from exercising their rights of expression and petition and/or to stop them from further exercise of those rights. Second, the court identified a "bundle of freedoms," including freedom of speech and freedom to petition, that were threatened by a SLAPP suit, equating a loss of those rights with the "special grievance" element essential to prove the common law cause of action. The panel presented Schwartz and her daughters with two options on remand: pursue a claim for frivolous litigation or proceed with a SLAPP-back suit through a reinstated counterclaim for malicious use of process.
In May 2000, Schwartz and her daughters filed an amended counterclaim against LoBiondo, in which they demanded damages for malicious use and abuse of process and the intentional infliction of emotional distress. They also filed a third-party complaint against the Giordano law firm and several of its lawyers (the Giordano defendants), charging them with malicious use and abuse of process, conspiracy to maliciously use and abuse process, and intentional infliction of emotional distress. Following discovery, the LoBiondo defendants separately moved for summary judgment, which was granted. The motion judge reasoned that the Giordano defendants should not be liable if a reasonable attorney would feel that there was a probable basis or probable cause to bring a complaint. Using that reasoning, the court rejected Schwartz's attack on probable cause and found that there was no evidence of malice on the part of the Giordano defendants. The court also dismissed the claim against LoBiondo, recognizing that one who seeks the advice of counsel, who explains the relevant facts to counsel, and who proceeds to file suit based on the attorney's advice, has demonstrated probable cause and, therefore, enjoys an absolute defense.
On appeal, the Appellate Division affirmed the dismissal of the claims against the Giordano defendants, but reversed the dismissal as to LoBiondo and remanded for further proceedings. The appellate panel agreed that advice of counsel would be an absolute defense but noted that there were genuine issues of material fact on whether LoBiondo acted in good faith and truthfully conveyed all facts to counsel. On the claims against the Giordano defendants, the panel concluded that there were other mechanisms available to courts to address frivolous litigation and unethical behavior and reasoned that they would be adequate to deter and respond to an attorney who files a SLAPP suit. The court looked to the Restatement (Third) of the Law Governing Lawyers for guidance in identifying circumstances in which a claim for malicious use of process should be permitted to be brought against an adversary's attorney. In affirming the grant of summary judgment in favor of the Giordano defendants, the panel found no evidence that the attorneys pursued the litigation with the intent of furthering their own purpose and no evidence that the Giordano defendants were aware of, or had adopted, an illegitimate purpose of LoBiondo's.
The Supreme Court granted certification.
HELD: The common law cause of action for malicious use of process, although disfavored, is a viable response to Strategic Lawsuits Against Public Participation (SLAPP) suits. The required elements of the tort, namely, the filing of a complaint, without probable cause, that was actuated by malice, that terminated in favor of the party now seeking relief, and that caused the party now seeking relief to suffer a special grievance must all be proven but are refined by the Court to meet the circumstances of a SLAPP suit. Thus, one who can demonstrate that his or her right of free speech or to petition was actually infringed will satisfy the special grievance element of the cause of action. Moreover, the advice-of-counsel defense is a viable defense to a SLAPP suit. If and when that defense is asserted, the party seeking relief may also pursue a cause of action against the attorney who was the source of the advice. When the target is the attorney, a separate evaluation of the proof that the original claim was actuated by malice is required, focusing on the motivation of the attorney, with the need to demonstrate that the attorney's primary motive was an improper one.
1. The goal of a SLAPP suit is not to prevail but to silence or intimidate the target, or to cause the target sufficient expense so that he or she would cease speaking out. SLAPP suits are an improper use of our courts. While a large number of states have enacted anti-SLAPP legislation, our legislature has not. The Appellate Division in LoBiondo I rejected the argument that such legislation was needed, viewing the SLAPP suit as a modern-day example of the tort of malicious use of process, and elected to utilize it accordingly. Malicious use of process requires the plaintiff to prove the civil counterpart to each of the elements found in the tort of malicious prosecution but adds one other element - the plaintiff has suffered a special grievance caused by the institution of the underlying civil claim. (Pp. 20-32)
2. The traditional cause of action for malicious use of process affords a remedy to one who has been victimized by a SLAPP suit. If SLAPP-action plaintiff can establish the traditional elements of malicious use of process, he or she should be permitted to do so, because that cause of action by its very nature will suffice to appropriately balance the rights of both parties. Proof of probable cause may be relevant to proof of malice. In an appropriate case, malice may be inferred from a lack of probable cause. A reasonable belief by the original plaintiff that he or she had probable cause to file a complaint will defeat the malicious abuse of process claim entirely and reliance on the advice of counsel is a complete defense. To benefit from that defense, the original plaintiff must prove that the advice was given after full and fair presentation to counsel of all the relevant facts. The special grievance element of the cause of action relates to proof of a deprivation of the bundle of freedoms relating to free speech and the right to petition the government. (Pp. 32-40)
3. The regulation of attorney conduct is found in the Rules of Professional Conduct and in the disciplinary system that enforces those rules. RPC 3.1 and 4.4(a), together impose on all attorneys the ethical requirement of a good faith belief in an actionable claim and the obligation to refrain from pursuing litigation for an improper purpose. In addition Rule 1:4-8 ensures that attorneys do not initiate or pursue litigation that is frivolous and imposes specific sanctions. Generally, there is a reluctance to permit a non-client to sue an adversary's attorney because of the concerns that such lawsuits could chill the zealous advocacy an attorney owes his or her client. However, there are circumstances, including an attorney's acts to encourage and assist a client in wrongdoing, which could directly injure a non-client and would support an independent remedy. (Pp. 40-50)
4. Only when the advice-of-counsel defense is raised can the non-client also seek relief through the vehicle of a cause of action for malicious use of process against the attorney involved in the SLAPP suit. The permission to allow non-client to sue the attorney is a limited one and the elements of the cause of action will sufficiently cabin in the claim so that it will neither supplant nor replace the remedies found in the RPCs or in Rule 1:4-8. The grounds for the claim are limited to those in which the client has already called the attorney's advice into issue. Moreover, the claim for malicious use of process may only be brought after the underlying matter has been concluded. (Pp. 50-53)
5. The judgment of the Appellate Division as to LoBiondo must be reversed. The panel erred when it concluded that there were issues to be tried concerning the completeness of LoBiondo's disclosures to counsel. The panel in LoBiondo II erred to the extent that it deprived LoBiondo of the advice-of-counsel defense. The test utilized by the Appellate Division in its evaluation of that defense also was in error. The record leaves no doubt that LoBiondo's disclosures were full and fair; he provided his attorneys with all of the documentary evidence attributed to Schwartz and presented counsel with all other facts relevant to his attorneys' evaluation about probable cause. (Pp. 53-56)
6. In regard to the elements of malicious use of process against the adversary's attorney, the probable cause analysis will be based on the attorney's evaluation of the facts provided by the client, the attorney's investigation, and the evaluation of those facts as against existing law or a reasonable good faith extension of the law. The element of "actuated by malice" must be separately proven and the court must look to the motivation of the attorney rather than to the motivation of the client. The concepts found in the Restatement (Third) of the Law Governing Lawyers and the Restatement (Second) of Torts inform the Court's evaluation of the proofs required in respect of the attorney's motive for filing suit. Consistent with these principles, in order to demonstrate that the attorney's actions were "actuated by malice," the non-client must prove that the attorney's primary purpose was an improper one. In addition, a non-client must prove that the attorney's filing caused a special grievance in order to proceed against that attorney. The plaintiff in the SLAPP-back suit must demonstrate that he or she indeed suffered the special grievance by demonstrating that those essential rights included in the "bundle" referred to in LoBiondo I were infringed. The primary purpose of the Giordano defendants in filing suit was a proper one; therefore, the claim was properly dismissed. (Pp. 56-71)
Judgment of the Appellate Division dismissing the malicious use of process claim against the Giordano defendants is AFFIRMED AS MODIFIED, and the judgment of the Appellate Division reinstating the malicious use of process claim as to the LoBiondo parties is REVERSED.
CHIE JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE and RIVERA-SOTO join in JUSTICE HOENS' opinion.
The opinion of the court was delivered by: Justice Hoens
Argued September 23, 2008
One of our most cherished, carefully guarded rights is freedom of speech. When exercised in the context of a protest directed to a governmental authority, it gains greater weight because the speech implicates other important principles, including our right to petition and seek redress for our grievances. Efforts, particularly by the more powerful in our society, to limit the free exercise of one's speech are appropriately viewed with suspicion and distaste.
Equally important to our society, however, is the right of our citizens to freely access our courts, that they may there achieve a vindication of rights or a recovery sufficient to remedy damage done to person or reputation. Although tempered by a variety of rules and procedural safeguards, our society would be the poorer were those rights not also carefully safeguarded.
The matter now before us centers on all of those rights being exercised by the parties in such a way as to put them on a collision course; more to the point, it demonstrates the need for a careful balancing of the ways in which the parties may exercise their rights and of the remedies that might pertain when, in that exercise, the rights of different parties are in conflict.
During the tortured path that this matter has taken prior to our grant of certification, the parties have battled before municipal planning authorities, tried a part of their dispute to a verdict, seen that verdict reversed and a new theory of law applied to the matter, expanded their dispute to include new parties pursuant to the new legal theory, engaged in extensive motion practice that resulted in a dismissal of the new claims, and found some, but not all, of those claims revitalized with yet another explanation of the new and expanded legal theory on appeal. In the end, the dispute is both an exceptionally local battle between neighboring landowners and a surprisingly public one between parties who disagree about the very existence of the rights that each insists is his or hers to assert.
Viewed in its narrowest terms, the matter before the Court calls upon us to consider rights and remedies that will be available, and how they operate as against different potential defendants, in the unique context of litigation referred to as Strategic Lawsuits Against Public Participation (SLAPP) suits. Although the matter might be seen in far broader terms, and although our analysis has wider implications, it is this more modest focus that frames and motivates our decision.
We frame our holding accordingly, in light of the inescapable reality that our decision will have broader impact than merely its application to these parties or to SLAPP suits.
Today we hold that our common law cause of action for malicious use of process, although a disfavored one, is a viable response to a SLAPP suit, a vehicle often referred to as a SLAPP-back suit. Consistent with longstanding precedents, we require that its assertion abide the favorable resolution of the litigation to which it responds.
More specifically, we hold that the required elements of the tort, namely, the filing of a complaint, without probable cause, that was actuated by malice, that terminated in favor of the party now seeking relief, and that caused the party now seeking relief to suffer a special grievance, must all be proven, but we refine them to meet the circumstances of a SLAPP suit. In particular, we recognize that one who can demonstrate that as a result of the SLAPP suit his or her right to free speech or to petition was actually infringed will thereby satisfy the special grievance element of the cause of action.
We also note that traditionally one who can prove that the original complaint was filed based on the advice of counsel after a full and fair presentation of the facts is entitled to the benefit of a complete defense, because he or she can demonstrate it was not filed without probable cause. We find no basis on which to vary from that approach, and we recognize the viability of that defense in the SLAPP-back context.
However, we hold that if and when the advice-of-counsel defense is asserted, the party seeking relief may then pursue a cause of action against the attorney claimed to have been the source of that advice as well. We do so mindful that the attorney's primary duty is to be a zealous advocate for his or her own client and recognizing the potential for harm that may arise from permitting a suit by a non-client arising from the attorney's role in representing a client. We therefore require a separate evaluation of the proof that the original claim was actuated by malice when the target is the attorney. In that event, the proof must focus on the motivation of the attorney and must demonstrate that his or her primary motive was an improper one. Only when the required elements of proof are interpreted in this fashion will they be consistent both with the usual elements of the malicious use of process cause of action, and with the role that our disciplinary process and sanction powers ordinarily occupy.
The decision in this matter, and the analytical framework within which we reach it, can only be understood in the context of the rather lengthy course of the dispute in which these parties have been embroiled. Although some of the facts and allegations were described in an earlier published appellate decision, we include them for completeness and context.
This appeal has its origins in 1986 when plaintiffs James LoBiondo*fn1 and his wife Denise purchased the Surfrider Beach Club in Sea Bright and began their operation of the business as D. LoBi Enterprises, Inc. Shortly thereafter, they met their across-the-street neighbor, defendant Grace Schwartz*fn2, who came to visit the club and who immediately started an argument with them about whether she and her grandchildren should be exempted from the usual admission price.
A year after purchasing the club, plaintiff, who wanted to expand the business, filed a site plan application. Schwartz, who opposed any expansion, appeared with an attorney at the Planning Board meeting in April 1987 to oppose the application. At that meeting, LoBiondo assured the Planning Board that he intended to operate a restaurant that would be open only to Club members and that it would have no liquor license and no on-premises cooking capabilities. The site plan application was approved in June 1987.
In 1989, a zoning ordinance amendment eliminated restaurants as a permitted use in the zone. Notwithstanding that, in May 1990, LoBiondo applied for a certificate of occupancy for a dining room at the Club. While the application was pending, the Club began a membership campaign, advertising to prospective members that the Club would "be serving a complete menu" and "opening [a] dining room" from 6:00 p.m. to 2:00 a.m. in the summer and for lunch and dinner in the winter. In addition, the membership invitations advertised that "[a] private club liquor license has been approved by the State of New Jersey ABC." In fact, no license had been approved, and the State Division of Alcoholic Beverage Control so advised LoBiondo when it learned of the membership invitation through a "citizen complaint" in July 1990.
Although in fact the Club was not serving food to non-members and was not serving alcohol at all, it then began advertising that it was offering free pizza delivery from an on-premises pizza parlor. After being told by the Building Inspector that "pizza take out" was not a permitted use for the Club, LoBiondo sought relief from the Planning Board. That body concluded that a public restaurant at the Club constituted a pre-existing non-conforming use.
Schwartz, who had objected all along, then began her attempts to stop LoBiondo from expanding the Club. Although she had refused to purchase a membership in the Club and therefore was not entitled to be there, according to LoBiondo, she and her daughters, defendants Janice DeMarco, Karen Schwartz, and Marilyn Kallareou, came onto the property to inspect the parking areas, bathroom facilities and living premises without permission. In addition, Schwartz distributed flyers*fn3 urging others to join her in opposing LoBiondo's efforts to "put a year round public club-restaurant in our residential area," and she wrote letters to the Planning Board's attorney and to the State Departments of Community Affairs (DCA) and Transportation complaining about municipal actions in connection with the property. Her efforts, based upon her daughters' observations, to convince the Planning Board that there was insufficient parking were unsuccessful.
Schwartz then filed a complaint in lieu of prerogative writs, seeking to challenge the Planning Board's pre-existing non-conforming use determination. That complaint succeeded in 1992. In short, the trial court concluded that the Planning Board's decision was "arbitrary and unreasonable" because it had relied on LoBiondo's representations about the historical uses of the property, when they were contradicted by neighbors' testimony and by some of his own testimony as well.
In June 1991, while the prerogative writ matter was pending, LoBiondo met with Norman Hobbie, an attorney at the law firm of third-party defendant Giordano, Halleran & Ciesla, P.C., in Middletown, to learn about what rights he might have against Schwartz and others. According to LoBiondo, Hobbie advised him that he should not pursue litigation against municipal officials, but stated that he had a "very strong case" against Schwartz and her daughters. LoBiondo then retained the Giordano firm to represent him.
After that initial consultation, Michele Querques, then an associate at the Giordano law firm, investigated the facts as reported by LoBiondo. She reviewed two internal DCA memoranda relating to the Club, one of which indicated that there were, at least at one time, "serious code violations with respect to this project," and the other of which noted that "Mr. LoBiondo has not been completely forthcoming in [h]is dealings with the Bureau and the Borough of Sea Bright." After interviewing DCA's Director of Division of Codes and Standards, Querques concluded that there was "some substance" to Schwartz's complaints to DCA. In addition, she met with LoBiondo to discuss his claims. She later described him as "very upset and very emotional" over what he perceived to be "a campaign, [and] a vendetta" by Schwartz and her daughters to ruin his business and reputation.*fn4
As part of the law firm's analysis of the matter, Stephanie Fox, a summer associate at the Giordano firm, prepared a memorandum, dated July 9, 1991, in which she discussed various potential causes of action against Schwartz. She expressed reservations about a potential defamation claim by LoBiondo, commenting that the newspaper articles and zoning board minutes that he had supplied did not contain defamatory statements and that Schwartz's letters and flyers might be privileged. Her memo nonetheless suggested that LoBiondo might have a basis for his defamation claim and also commented that there were grounds for claims of tortious interference with a prospective economic advantage and tortious interference with contractual relations.
In October 1991, Querques, after meeting with LoBiondo, completing her investigation, considering the Fox memorandum, and conducting supplemental legal research of her own, filed a complaint in Superior Court against Schwartz and her three daughters. The complaint demanded damages on behalf of LoBiondo, his wife, and their business, based upon claims sounding in defamation, tortious interference with economic opportunities, intentional infliction of emotional distress, and loss of consortium.
Schwartz and her daughters counterclaimed for malicious prosecution and malicious abuse of process, asserting that LoBiondo's complaint was a SLAPP suit, and for intentional infliction of emotional distress. In March 1996, LoBiondo filed an amended complaint, adding a new count alleging that the counterclaim constituted an abuse of process. After settlement discussions proved to be unfruitful, the attorneys at the Giordano firm informed LoBiondo that they "no longer felt there was a strong likelihood of success in connection with his affirmative claims." Although LoBiondo also expressed reluctance about proceeding, when the parties were unable to settle, the case proceeded to trial in 1996, with attorney Steven Berlin as lead counsel for LoBiondo.
In what subsequently became a significant focal point of the parties' dispute, LoBiondo testified about his reasons for suing Schwartz and her daughters. The parties point to different parts of his trial and deposition testimony concerning his motives to support their positions. Schwartz, for example, points out that when LoBiondo was asked if he had "an agenda in pursuing this suit that you have filed through your attorney against Mrs. Schwartz" and "an agenda to silence her voice against concerns she has expressed about your premises," he conceded that silencing future opposition from Schwartz and her daughters was at least part of his reason for suing her. LoBiondo and his attorneys point out that he denied that his purpose was to prevent her from exercising her rights to speak, responding when asked that such an intention would be "terrible."
All of the claims against Marilyn Kallareou and Karen Schwartz were dismissed prior to a verdict, but the jury returned a verdict for LoBiondo against the other defendants. The verdict was complicated by the variety of parties, claims, and counterclaims. Concluding that Schwartz had defamed the LoBiondos, intentionally interfered with their business, and intentionally caused LoBiondo mental anguish, the jury awarded D. LoBi Enterprises $66,300 in compensatory damages for defamation and $30,000 (reduced by the trial court to $3,000) for intentional interference. Based on the same theories, the jury also awarded LoBiondo $100,000 in punitive damages. At the same time, the jury found for Karen Schwartz and for Marilyn Kallareou, the two ...