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In re Award of Sanctions Against Compass Group

March 16, 2010


On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-334-08.

Per curiam.


Argued: January 27, 2010

Before Judges Cuff, C.L. Miniman and Waugh.

In this appeal, we review orders dismissing two complaints seeking attorneys' fees and costs incurred in an allegedly frivolous and baseless administrative proceeding initiated by a displaced food services provider that challenged the award of a contract by a board of education to another provider. We also review the order denying the application for fees and costs incurred in the Superior Court action by the law firm that represented the displaced food services provider in the administrative proceeding.*fn1 We affirm.

On June 7, 2007, Miller & Gallagher filed a petition with the Commissioner of Education on behalf of Compass Group, USA, Inc. d/b/a Chartwells (Chartwells). In its petition, Chartwells sought to rescind a contract for food services between Sodexho School Services (Sodexho) and the Atlantic City Board of Education (BOE). In its petition, Chartwells also named Fredrick Nickles, the Superintendent of Schools, and RaShun Stewart, President of the BOE, in their individual capacities. The BOE, Nickles and Stewart responded collectively with a notice that asserted the petition was frivolous, demanded its dismissal, and informed Chartwells and its attorney that they would seek attorneys' fees and costs pursuant to Rule 1:4-8. Chartwells refused to dismiss the petition and the matter proceeded as a contested case in the Office of Administrative Law (OAL).

By order dated August 15, 2007, the Administrative Law Judge (ALJ) dismissed the petition against Nickles and Stewart with prejudice. Following further discovery, including submission of a third set of interrogatories by Chartwells to the BOE, on October 25, 2007, the ALJ granted the BOE's motion to dismiss. The ALJ found that the decision to award the contract to Sodexho was not arbitrary, capricious, unreasonable or the product of fraud or mistake. Therefore, the ALJ concluded the contract should not be rescinded.

Chartwells filed exceptions with the Commissioner of Education. On December 7, 2007, the Commissioner adopted the findings of fact and recommendations of the ALJ. She also rejected the application by Sodexho for attorneys' fees and costs citing a lack of authority to award fees and costs to a successful party in an administrative proceeding.

Thereafter, on August 31, 2007, Nickles and Stewart filed a complaint*fn2 in the Superior Court, Law Division against Chartwells and its attorneys, Miller & Gallagher, in which they alleged that the recently completed administrative proceeding was frivolous and sought sanctions in the form of attorneys' fees and costs pursuant to N.J.S.A. 2A:15-59.1, commonly referred to as the frivolous litigation statute, and Rule 1:4-8. On January 28, 2008, the BOE filed a verified complaint against the same defendants.*fn3 It asserted similar claims and sought similar relief. Judge Perskie thereafter consolidated the complaints.

All parties but Sodexho, which dismissed its claims against Miller & Gallagher, filed motions for summary judgment. On December 19, 2008, Judge Perskie granted summary judgment in favor of Miller & Gallagher and dismissed the complaint. Although he found that the claims asserted in the administrative challenge to the contract awarded to Sodexho were frivolous and would warrant fees if prosecuted in the Superior Court, the judge concluded that neither N.J.S.A. 2A:15-59.1 nor Rule 1:4-8 permitted the award of attorneys' fees for matters conducted in the OAL. The judge noted that the Legislature confined the scope of the frivolous litigation statute to matters pending in the courts of this state. The Legislature could, but did not, bestow authority on the OAL or final decision-makers in the Executive Branch, such as the Commissioner of Education, to impose such sanctions.

Miller & Gallagher then moved to amend the December 19, 2008 order to allow an award in its favor of attorneys' fees and costs incurred in the Superior Court actions. Judge Perskie denied the motion in an order dated February 6, 2009. It is from this order that Miller & Gallagher appeal; the BOE, Nickles and Stewart appeal from the December 19, 2008 order granting summary judgment to Miller & Gallagher.

We affirm substantially for the reasons expressed by Judge Perskie in his December 19, 2008 oral decision and his February 6, 2009 memorandum of decision. We add the following brief comments.

In their complaints, Nickles, Stewart and the BOE seek to engraft remedies to sanction and deter frivolous litigation in the courts of this State on administrative proceedings. By its terms, the frivolous litigation statute governs civil actions proceeding in the courts of this State. N.J.S.A. 2A:15-59.1a(1). It has no applicability to contested administrative matters heard in the OAL. Similarly, Rule 1:4-8 allows the imposition of sanctions against an attorney, a law firm or a pro se party who pursues litigation for an improper purpose, or asserts claims, defenses or other legal contentions unsupported by existing law or a reasonable extension, modification or reversal of existing law, or asserts facts without evidentiary support. The rule, however, applies only to matters filed in the courts of the State of New Jersey. R. 1:1-1.

The petition filed by Chartwells with the Commissioner of Education invoked the authority of the Commissioner, an officer in the Executive Branch of government, to resolve controversies and disputes arising under the education laws. N.J.S.A. 18A:4-34. A contested matter is referred to the OAL, an adjudicative body established by the Legislature to resolve contested matters within the authority of various executive departments and agencies. N.J.S.A. 52:14B-3. The OAL resolves disputes in accordance with the procedures adopted by it within the limits of the authority bestowed on it by the Legislature. See Uniform Administrative Procedure Rules, N.J.A.C. 1:1-1.1 to 21.5. It is one thing for the OAL to borrow from the rules governing practice in the courts of this state, see, e.g., N.J.A.C. 1:1-5.3, and an entirely different matter for this court to impose rules intended solely for use in the Judicial Branch on matters pending in the OAL. The latter action ignores the different responsibilities and authority of the Executive and Judicial branches of government. Moreover, the ...

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