May 25, 2010
TORGRO LIMOUSINE SERVICE, INC., PLAINTIFF,
76 CARRIAGE COMPANY, INC. D/B/A PHILADELPHIA TROLLEY WORKS, DEFENDANT-RESPONDENT, AND MICHAEL SLOCUM AND MICHAEL KATES, DEFENDANTS.
IN THE MATTER OF MELISSA HOFFMAN, ESQ., APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Camden County, No. L-5008-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 9, 2010
Before Judges Wefing and LeWinn.
Melissa Hoffman, Esq., an attorney admitted to the practice of law in the State of New Jersey, appeals from a trial court order entered May 8, 2009, directing her to pay defendants $6,500 as a sanction for filing a frivolous pleading. After reviewing the record in light of the contentions advanced on appeal, we have concluded we are constrained to reverse.
This appeal had its genesis in litigation filed in Pennsylvania by defendant 76 Carriage Company, Inc. ("76") against plaintiff Torgro Limousine Service, Inc. ("Torgro") for breach of contract. In May 2007, 76 obtained a default judgment in Pennsylvania against Torgro for $51,277.30. 76 later had that judgment docketed in New Jersey.
Torgro, through counsel, attempted to reopen the default judgment in Pennsylvania, but those efforts were unsuccessful. Torgro then, through the same counsel, filed suit in New Jersey in December 2007 against 76 for breach of that same contract, and 76 moved to dismiss on the basis of res judicata. Torgro then retained Ms. Hoffman, who submitted a certification opposing the motion to dismiss. She outlined the procedural missteps taken by her predecessor and requested that Torgro have the opportunity to litigate its contract dispute with 76. Her certification was unavailing and Torgro's complaint was dismissed on September 12, 2008.
On October 2, 2008, Torgro, through Ms. Hoffman, filed another complaint against 76. This complaint contained seven counts; it again alleged breach of the same contract, as well as breach of the covenant of good faith and fair dealing, and consumer fraud. It also named two individual defendants. Torgro also filed an order to show cause, seeking to restrain 76 from enforcing a discovery order it had obtained in conjunction with its efforts to execute upon the judgment it had obtained against Torgro.
76 responded by filing a "Notice & Demand Pursuant to R. 1:4-8." It asserted that the October complaint was filed in disregard of the Pennyslvania judgment and the order entered several weeks earlier dismissing Torgro's complaint. It also asserted that various allegations contained within the most recent complaint were false and known by Torgro to be false. It demanded that the complaint and application for restraints be withdrawn and stated that if they were not withdrawn within twenty-eight days, sanctions would be sought.
Ms. Hoffman responded to this notification by advising the attorney for 76 that Torgro had just filed a petition with the Bankruptcy Court and that until a trustee was appointed, it could not withdraw the pending litigation. She also outlined her legal theories as to why this litigation could not properly be deemed frivolous.
76, in turn, filed a motion to dismiss. The trial court, after considering Torgro's opposition, granted the motion in December 2008. 76 followed up by filing a motion for sanctions pursuant to Rule 1:4-8; in its moving papers, it requested a sanction of $5,000. Ms. Hoffman opposed the motion, noting that she had advised 76's attorney of the bankruptcy filing, which precluded the complaint being withdrawn without court approval. She also noted that the October order dismissing Torgro's complaint did not state that it had been dismissed with prejudice, thus leading her to conclude that she could refile. She also contended that 76 had not strictly complied with the time limits of Rule 1:4-8. She also stressed her own financial limitations, which precluded her from satisfying such a sanction order.
After hearing oral argument, the trial court granted the motion and ordered the attorney for 76 to submit a certification of services. A further hearing was held after the attorney for 76 submitted a certification of services which indicated that he had billed his client more than $8,000 for his services in this matter. Following that hearing, the trial court settled on $6,500 as the amount to be awarded, and this appeal followed.
Rule 1:4-8 provides in pertinent part that an attorney who signs or files a pleading "certifies that to the best of his or her knowledge . . . [it] is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation . . . [and] the factual allegations have evidentiary support . . . ." Subsection (d) of the rule limits the award of sanctions "to a sum sufficient to deter repetition of such conduct."
Case law has amplified the rule. An award of sanctions under the rule is dependent upon a finding that the attorney filed the offending pleading in bad faith. Port-O-San Corp. v. Teamsters, Local Union No. 863 Welfare & Pension Funds, 363 N.J. Super. 431, 437 (App. Div. 2003) (noting that "[w]e have construed . . . that rule to authorize sanctions in instances in which the rule has been violated in bad faith.") Further, we have explained that the concept of bad faith in relation to an application for sanctions under Rule 1:4-8 means "that the harm was inflicted intentionally and without justification or excuse." Id. at 438 (quoting Printing Mart-Morristown v. Sharp Elecs., 116 N.J. 739, 751 (1989). In addition, we have stressed the necessity of a trial court making detailed factual findings when it determines that an award under Rule 1:4-8 is appropriate. See Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 547 (App. Div. 2009).
Here, the trial court made no finding that Ms. Hoffman acted in bad faith when the second action was filed or in bad faith when she did not withdraw it upon receipt of the notice that 76 would seek sanctions. At the conclusion of the first motion, the trial court summarized the respective arguments that had been presented on both sides and then simply stated, "based on the foregoing, and having had the opportunity to review the moving papers, and there being opposition, the Court is satisfied that, indeed, there has been a violation" of the rule. The trial court made no ruling with respect to Ms. Hoffman's contention that after she received the Rule 1:4-8 notification from the attorney for 76, she was unable to withdraw the pending action until the Bankruptcy Court had appointed a trustee with authority to authorize such a move. If that contention is correct, a question we do not address on this appeal, we are uncertain as to how she could be sanctioned.
The trial court did not clarify matters when the parties appeared for the second argument, addressed to the amount of the sanction. At the conclusion of that argument, the trial court clearly enunciated the test it said it had utilized earlier when it decided sanctions were in order; it stated that the basis of its earlier determination that Ms. Hoffman was subject to sanctions under Rule 1:4-8 was its opinion that she "did deviate from the standard of professional conduct associated with an individual of this profession." That, however, is the standard to be utilized when considering whether there has been legal malpractice; it has no bearing on an application under Rule 1:4-8. An act of professional negligence is, standing alone, insufficient to trigger Rule 1:4-8.
We have considered whether this second statement by the trial court is a sufficient basis to obviate a remand and concluded that it is not. We reach this conclusion because of the facially-troubling act of filing this second complaint immediately upon the dismissal of the first complaint on the grounds of res judicata.
In connection with the remand, the trial court must determine whether this was done for an improper purpose and whether Ms. Hoffman knew, or should have known, that the complaint's factual allegations lacked any evidentiary support. It must also consider whether the bankruptcy filing precluded her withdrawing the complaint absent court approval. Finally, if the trial court does conclude that sanctions are in order it must explain how it concluded that the amount of sanctions selected were needed "to deter repetition," that is, why a lesser sum would not have achieved that same result.
The order under review is reversed, and the matter is remanded for further proceedings. We do not retain jurisdiction.
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