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Talented IT, Inc. v. Data Group


October 28, 2009


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-10232-07.

Per curiam.


Argued October 7, 2009

Before Judges Sabatino and J. N. Harris.

This appeal questions whether an Illinois temporary help service firm will be denied access - as a plaintiff - to New Jersey's courts for enforcement capacity of an indebtedness if it has not registered pursuant to the Private Employment Agency Act (Act), N.J.S.A. 34:8-43 to -66.*fn1 Our answer to the question is yes. Hence, we reverse.

The Law Division granted partial summary judgment to plaintiff by striking defendant's affirmative defense that plaintiff's unregistered status deprived it of the right to "bring or maintain an action in any court of this State for the collection of a fee, charge or commission for the performance of any of the activities regulated by this act." N.J.S.A. 34:8-45(b). At the same time, the court also denied defendant's cross-motion for summary judgment that sought to dismiss the complaint by actualizing the affirmative defense. In a subsequent motion, plaintiff sought summary judgment on the actual indebtedness, which defendant did not oppose; the court granted the motion and entered judgment. Finally, as part of a reconsideration motion by plaintiff, contractual attorneys fees were added in favor of plaintiff as the prevailing party. Defendant appealed all of these determinations.


Plaintiff Talented IT, Inc. (Talented) is a Delaware corporation with its principal place of business in Naperville, Illinois. It is a professional staffing firm, providing workforce solutions for high tech companies requiring personnel with esoteric or cutting edge skills in the information technology industry. For purposes of this litigation, Talented conceded that it is a temporary help service firm as defined by the Act. N.J.S.A. 34:8-43.

Defendant Data Group, Inc. (Data), is a New Jersey corporation with its principal place of business in Iselin. It too is engaged in the business of furnishing qualified computer/data processing professionals to other businesses for the purpose of performing computer consulting and programming services. Accordingly, Data recognizes that it also is a temporary help service firm as defined by the Act.

On September 12, 2006, Talented and Data executed a Subcontractor Agreement, nominally titled a "Non-Disclosure Agreement" (Agreement). The Agreement provided that Talented, as an independent subcontractor, would assist Data in performing services required by separate contracts between Data and its clients. Talented promised that it would provide specially skilled and trained individuals to perform services directly on Data's behalf for Data's clientele. The Agreement plainly noted that it was governed by the laws of the State of New Jersey.

The Agreement did not specifically identify or make provisions for any particular project or client. Instead, the Agreement would be implemented by future purchase orders that would be executed on an as-needed basis. At the time the Agreement was negotiated and signed, the identity of Data's clients, the identities of the employees supplied by Talented to perform the required services, and the locations where Talented's employees would be deployed were all unknown.

On October 30, 2006, the parties signed a purchase order that resulted in Talented providing one of its employees, Sujimol Chirayil, a resident of Illinois, to fill a projected six-month position in Tennessee on behalf of Data's client, the State of Tennessee Department of Labor and Work Force Development. Data agreed to pay Talented forty dollars per hour for Chirayil's services. Ultimately, Data was paid for the services it supplied to its Tennessee client.

About six months later, on April 25, 2007, the parties signed another purchase order that resulted in Talented supplying one of its employees, Pranev Patel, a resident of Illinois, to fill a projected three to six-month position on behalf of Data's client Latrobe Specialty Steel located in Pennsylvania. Data agreed to pay Talented sixty-seven dollars per hour for Patel's services. In due course, Data was paid for the services it supplied to Latrobe Specialty Steel.

Data claims that before Talented's employees began working on behalf of its clients, they signed agreements not to compete with Data. That is, the individuals agreed not to become employed by or consult with, either directly or indirectly, any customers or clients of Data during the term of their respective projects and for a period of one year after termination. We have not been provided with copies of those agreements with Chirayil and Patel. Apparently, those agreements were the foundation of the now-moribund third-party claims by Data against Chirayil and Patel in Data's third-party complaint.

Talented billed Data $42,484 for services rendered by Chirayil and Patel, but payment was refused. All of the services rendered by Chirayil and Patel were accepted, respectively, by the State of Tennessee and Latrobe Specialty Steel, and consequently payment was made to Data. Neither Chirayil's nor Patel's services were performed in New Jersey.

On or about June 30, 2007, Data claims that it learned that Chirayil and Patel had prematurely terminated their assignments and entered into employment agreements directly with Data's clients for whom they had been working. This conduct, according to Data, exposed Chirayil and Patel each to $10,000 in liquidated damages pursuant to their agreements not to compete with Data. More significantly, this impelled Data to refuse to pay Talented for the outstanding balance due pursuant to the Agreement.

None of Talented's employees, agents, or representatives physically entered New Jersey in connection with the negotiation or execution of the Agreement; the Agreement was negotiated remotely by telephone and email. Chirayil and Patel were neither interviewed in New Jersey nor were their direct services rendered to businesses or institutions in this state.

On December 4, 2007, Talented filed its action in the Law Division. The complaint sought remedies based upon the theories of breach of contract and unjust enrichment arising out of the temporary help services rendered by plaintiff on defendant's behalf in connection with the Agreement. Data filed an answer and third-party complaint on March 4, 2008, containing separate defenses asserting that "[t]he parties agreement is unenforceable on the ground that it is an illegal contract and violated public policy" and that "[p]laintiff's Complaint is barred due to its failure to comply with licensing and registration provisions of the Employment and Personnel Services Act codified in N.J.A.C. 13:45B-1.1. et seq."

Talented filed a series of motions, the first being a motion for partial summary judgment, which sought to strike Data's separate defenses that touched on the validity and enforceability of the Agreement in New Jersey. Talented argued that Data "did nothing more than act as a middleman by placing non-New Jersey-based employees of the non-New Jersey based-plaintiff temporarily in positions with non-New Jersey-based establishments located outside of New Jersey." Data cross-moved for summary judgment on the dispositive grounds raised in its separate defenses; specifically, it sought to dismiss the complaint on the basis that Talented's failure to comply with the registration obligations of the Act barred recovery of its invoices through New Jersey judicial processes.

Talented's response was to acknowledge that although it acted as a temporary help service firm within the definition of N.J.S.A. 34:8-43 and N.J.A.C. 13:45B-1.2, it was not required to register in New Jersey as such a company because it was never "operating within the State of New Jersey," as required by N.J.S.A. 56:8-1.1(a).

The first motion judge granted Talented's motion to strike the separate defenses and denied Data's motion to dismiss the complaint. Orders memorializing these decisions were entered on June 13, 2008.

Shortly thereafter, Talented moved for summary judgment seeking $42,484, the amount of its unpaid invoices. Data did not contest this motion and responded with its attorney's letter to the court stating, "[i]n view of Your Honor's prior ruling to strike certain of my client's Separate Defenses, as set forth in your Order of June 13, 2008, I am not in a position to defend against the summary judgment motion." Therefore, on September 26, 2008, an order and judgment was entered by a second judge confirming a judgment in Talented's favor for $42,484.

Talented then moved for reconsideration of the order that denied its application for an award of prejudgment interest, attorney's fees, and costs of suit. Data submitted opposition, but the second motion judge entered an order and amended judgment granting the motion in part by awarding attorney's fees of $9,771.32, plus taxed costs, but denying Talented's request for pre-judgment interest.

On December 8, 2008, Data filed this appeal, seeking review of the following orders: granting Talented's motion for partial summary judgment (June 13, 2008), denying Data's motion for summary judgment (June 13, 2008), granting summary judgment (September 26, 2008), and granting reconsideration (November 7, 2008).


Because the essential result in the Law Division was reached on Talented's motion for partial summary judgment, we apply the same standard to resolve the issue as did the first motion judge, Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), without affording any special deference to the judge's interpretation of the law. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). That is, we are to review the record in the light most favorable to Data and determine if the record thus viewed requires judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

Talented was not registered as a temporary help service firm with the Attorney General, as required by N.J.S.A. 56:8-1.1(a), either when the parties first entered into the Agreement or at any time since. Talented rejects the idea that it was required to register, at least under the facts of this case, because it was not "operating" in New Jersey at any time, even though it concedes that the services it provided caused the company to meet the definition of a temporary help service firm:

"Temporary help service firm" means any person who operates a business which consists of employing individuals directly or indirectly for the purpose of assigning the employed individuals to assist the firm's customers in the handling of the customers' temporary, excess or special work loads, and who, in addition to the payment of wages or salaries to the employed individuals, pays federal social security taxes and State and federal unemployment insurance; carries worker's compensation insurance as required by State law; and sustains responsibility for the actions of the employed individuals while they render services to the firm's customers. A temporary help service firm is required to comply with the provisions of P.L.1960, c.39 (C.56:8-1 et seq.). [N.J.S.A. 34:8-43.]

The Act prohibits any action in this State "for the collection of a fee, charge or commission for the performance of any of the activities regulated by this act without alleging and proving licensure or registration, as appropriate, at the time the alleged cause of action arose." N.J.S.A. 34:8-45(b). The Act evinces "a legislative mandate which precludes otherwise possibly meritorious causes of action in order to insure enforcement of a statutory scheme which serves the greater good." Data Informatics, Inc. v. AmeriSOURCE Partners, supra, 338 N.J. Super. at 80. Contract and tort claims are precluded if a plaintiff acts "contrary to the regulatory scheme designed to preclude unlicensed agencies or services from benefiting from unlawful conduct." Id. at 78.

We recognize a rational argument for construing the parties' actual course of conduct as foreign to New Jersey, except for the happenstance that Data is located in Iselin. Such an argument becomes less compelling when we obey the direction to construe a statutory phrase to further the legislative purpose expressed in the statute. See, e.g., Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 513 (2002) (noting, "words may be expanded or limited according to the manifest reason and obvious purpose of the law." (quoting State v. Ochoa, 314 N.J. Super. 168, 171-72 (App. Div. 1998))); Thomas Group, Inc. v. Wharton Senior Citizen Hous., Inc., 163 N.J. 507, 517 (2000) (directing a statutory phrase to be interpreted "in furtherance of the underlying legislative purpose").

The legislative policy of the Act is "to preclude unlicensed agencies or services from benefiting from unlawful conduct." Data Informatics, Inc., supra, 338 N.J. Super. at 78. That purpose would be furthered by an expansive construction of N.J.S.A. 34:8-45(b) to prohibit plaintiff's suit.

When the parties first became contracting partners, neither knew where the employees of Talented would ultimately be deployed. Talented cannot seriously argue that registration could be avoided had its placement of employees been required in New Jersey. Therefore, it cannot establish that any undue or unfair burden would be placed upon it if it had to register under such circumstances. In a global - or at least, national - economy that requires highly trained individuals to manage and maintain high technology, the accord reached in the parties' Agreement touches and concerns New Jersey, rendering Talented as operating under New Jersey's laws. Talented's promises directly affect Data's conduct of business and impacts employment decisions that are of concern to the Act. That Talented's employees did not set foot in New Jersey and actively toiled out of state are not as significant as the close connection in New Jersey between Talented and Data in assisting Data fulfill its obligations as a registered temporary help service firm. Moreover, the parties' nexus to New Jersey is fortified by Data's obligation, performed in this state and necessarily known to Talented, to monitor and oversee the work of Chirayil and Patel to ensure that their services were properly rendered.

The Act "is a regulatory measure intended to alleviate abuses in the employment-agency industry." Accountemps Div. of Robert Half of Philadelphia, Inc. v. Birch Tree Group, Ltd., 115 N.J. 614, 623 (1989). The "remedial purpose" of the Act is furthered by "the licensing of all entities" whose activities are regulated by the Act. Ibid. Moreover, "[o]ur courts have consistently held that public policy precludes enforcement of a contract entered into in violation of [a] licensing statute." Id. at 626.

Pursuant to the Act's regulations, the purpose of the Act is to regulate "the operation of persons offering, promising, attempting to procure and/or supplying, procuring, obtaining or assisting in procuring or obtaining employment or personnel services or products in the State of New Jersey." N.J.A.C. 13:45B-1.1(a). Its scope applies to "any person engaging in any of the activities regulated by [the Act], including persons whose residence or principal place of business is located outside of this State." N.J.A.C. 13:45B-1.1(b).

Because the Act is regulatory and penal in nature, and has its purposes directly linked - through N.J.S.A. 56:8-1.1*fn2 - to the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -106, we must also apply the CFA gloss to decide whether Talented's arrangement with Data resulted in Talented "operating" in New Jersey.

The CFA was enacted "to protect [the consumer] against fraudulent and unconscionable practices in the sale of consumer goods and services." Marascio v. Campanella, 298 N.J. Super. 491, 500 (App. Div. 1997). The CFA imposes liability upon any person who uses "any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission[.]" N.J.S.A. 56:8-2.

The CFA is routinely and expectedly applied liberally, and "has three main purposes: to compensate the victim...; to punish the wrongdoer through the award of treble damages...; and, by way of the counsel provision, to attract competent counsel to counteract the community scourge of fraud[.]" Lettenmaier v. Lube Conn., 162 N.J. 134, 139 (1999) (internal citations omitted). Thus, the CFA seeks "not only to make whole the victim's loss, but also to punish the wrongdoer and to deter others from engaging in similar fraudulent practices." Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 12 (2004) (citing Cox v. Sears Roebuck & Co., 138 N.J. 2, 21 (1994)). "The available legislative history demonstrates that the Act was intended to be one of the strongest consumer protection laws in the nation." New Mea Const. Corp. v. Harper, 203 N.J. Super. 486, 501-02 (App. Div. 1985) (citing Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 471-73 (App. Div. 1982) (internal quotations omitted)). The primary purpose of the CFA is "to protect the consumer against imposition and loss as a result of fraud and fraudulent practice by persons engaged in the sale of goods and services." Scibek v. Longette, 339 N.J. Super. 72, 77 (App. Div. 2001) (internal quotations and citations omitted).

Our courts, from time to time, have addressed the enforcement capacity by violators of the CFA. The results are uneven. In Huffmaster v. Robinson, 221 N.J. Super. 315, 322-23 (Law Div. 1987), cited with approval by the Supreme Court in CoX v. Sears Roebuck & Co., supra, 138 N.J. at 19, the court held that a party who violates the CFA may not recover any damages for services performed, regardless of its good faith in the transaction.

After Huffmaster, we decided D'Egidio Landscaping, Inc. v. Apicella, 337 N.J. Super. 252 (App. Div. 2001). In D'Egidio, the plaintiff landscaper prepared a contract for services and presented it for signature. Id. at 255. The defendant refused to sign the contract, contending he was insulted at the proposition of a formal contract since "he had known [the landscaper] from the time that he [] was eight years old and that they were related through marriage." Id. at 255-56. The plaintiff performed the services without a contract, but after a dispute arose between the parties, the defendant refused to pay the balance owed, and the plaintiff sued. Id. at 256. The defendant counterclaimed for damages. Ibid. Although the plaintiff's failure to obtain a contract violated the CFA, we invoked the doctrine of equitable estoppel to prevent the defendant from recovering damages under the CFA, concluding, "one who induces the alleged wrongdoing should not benefit as a result of it." Id. at 257.

Thereafter, we decided Scibek v. Longette, supra, 339 N.J. Super. at 72, involving an automobile repair shop as in Huffmaster. We noted that "[i]t is at least arguable that the somewhat mechanical and rigid approach adopted in Huffmaster should not be followed where the consumer has obtained the benefit of his bargain and attempts to use the Act as a sword rather than a shield." Id. at 82. However, in reversing, we did not address that issue; rather, we determined that, "[w]hile perhaps defendant's conduct was less than exemplary, [the court] perceive[s] no sound basis to deny him the benefit of the Act's protection." Id. at 85. We explained that "[t]he overriding fact is that plaintiff's violation of the Act created the climate for the dispute that ultimately developed. In other words, plaintiff's failure to provide a written estimate and obtain a written authorization placed the cost of his services in doubt." Id. at 82.

Thus, there is a recognition by our courts that noncompliance with the CFA may have severe consequences. The Legislature has made this plainly evident in the correlative provisions of the Act, N.J.S.A. 34:8-45(b), where it shuts and locks the courthouse doors to violators. We have no qualms about refusing to provide semantic keys to Talented for its failure to register in the face of its "operating" in New Jersey within the meaning of the Act.

In light of our construction of the CFA and the Act, we conclude that the first motion judge erred in striking the separate defense of Data that asserted a bar to Talented's complaint. To permit Talented to enforce the contract in our courts - in the face of its regulatory violations and failure to operate with the mandated registration - and recover the unpaid sums otherwise due would strip the CFA and the Act of the gravitas intended by the Legislature as remedial statutes. See Artistic Lawn & Landscape Co., Inc. v. Smith, 381 N.J. Super. 75, 89 (Law Div. 2005).

The same judge also mistakenly refused to grant Data summary judgment on its claim that the Act barred Talented's litigation in New Jersey. Based upon this compound error, the second motion judge, deferring to his predecessor's rulings, understandably granted Talented's motions for summary judgment and reconsideration to which it was not entitled.


Accordingly, all of the Law Division orders are vacated, and the matter is remanded for the entry of a judgment dismissing the complaint pursuant to the mandate of N.J.S.A. 34:8-45(b). Our ruling is not intended to foretell the outcome of any future litigation between the parties in another jurisdiction. All that we decide is that the courts of New Jersey shall not allow an unregistered temporary help service firm - in the words of our Legislature - to "bring or maintain an action in any court of this State for the collection of a fee, charge or commission for the performance of any of the activities regulated by this [A]ct."

Reversed and remanded for the entry of a judgment dismissing the complaint without costs.

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