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State v. Assets and Accounts in the Name of Sussman Drugs

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 11, 2010

STATE OF NEW JERSEY, PLAINTIFF,
v.
ASSETS AND ACCOUNTS IN THE NAME OF SUSSMAN DRUGS, 422 10TH AVENUE, PATERSON, NJ; WILLIAM STRACHER; ANTONIA STRATCHER; AND ANY OTHER ACCOUNTS IDENTIFIED AS BELONGING TO THE AFOREMENTIONED BUSINESS OR INDIVIDUALS, THAT ARE OTHERWISE NOT LISTED IN THIS APPLICATION, WHICH ARE HELD WITH THE FOLLOWING FINANCIAL INSTITUTIONS, ET AL., DEFENDANTS, AND ROBERT EDWARD AUCTIONS, LLC, AND ROBERT LIFSON, DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLANTS,
v.
JOHN MOLINELLI, INDIVIDUALLY AND IN HIS CAPACITY AS PROSECUTOR OF BERGEN COUNTY; ROBERT ZIEGELHEIM, INDIVIDUALLY AND IN HIS CAPACITY AS DEPUTY EXECUTIVE ASSISTANT PROSECUTOR OF BERGEN COUNTY; MARY ANN SALEMI, INDIVIDUALLY AND IN HER CAPACITY AS ASSISTANT PROSECUTOR OF BERGEN COUNTY; AND JOHN FRAZER, INDIVIDUALLY AND IN HIS CAPACITY AS A DETECTIVE/INVESTIGATOR IN THE OFFICE OF THE BERGEN COUNTY PROSECUTOR, THIRD-PARTY DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9123-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 12, 2010

Before Judges Fuentes, Gilroy and Simonelli.

Defendants Robert Edward Auctions, LLC (REA), and Robert Lifson, REA's president and sole owner, appeal from the April 3, 2009 order that dismissed their counterclaim against the State of New Jersey and their third-party complaint against John Molinelli, the Bergen County Prosecutor; Jeffrey Ziegelheim, a Deputy Executive Assistant of the Bergen County Prosecutor; Mary Ann Salemi, Assistant Bergen County Prosecutor; and John Frazer, a Bergen County Prosecutor Office investigator (collectively, referred to as "the BCPO"). We affirm.

William Stracher owned and operated a drug store in the City of Paterson. While operating the store, Stracher illegally sold prescription legend drugs to third parties and purchased sports memorabilia with the proceeds from the sale of the drugs. On July 17, 2007, Stracher entered into a written consignment agreement (the agreement) with REA to sell specific items from his sports memorabilia collection via REA's spring 2008 online auction. Upon signing the agreement, Stracher delivered approximately 41,678 items of his sports memorabilia collection to REA, and REA commenced examining, authenticating, photographing, cataloging, insuring, advertising, and promoting the items for the auction.

Under the terms of the agreement, Stracher was only entitled to receive proceeds from the sale "net of REA's commissions and expenses, allowing for the return of any unsold items" to Stracher. At the time of execution of the agreement, REA was unaware that items in the memorabilia collection had been purchased with proceeds from the illegal sale of prescription legend drugs.

On November 13, 2007, the BCPO arrested and charged Stracher with distribution, or possession with the intent to distribute prescription legend drugs without lawful authorization, N.J.S.A. 2C:35-10.5a(4), and with financial facilitation, N.J.S.A. 2C:21-25. On the same day, the BCPO executed a search warrant at Stracher's home in Vermont and seized numerous items from his sports memorabilia collection. After his arrest, Stracher admitted the charges.

Following Stracher's arrest, Lifson read a newspaper article concerning the seizure of some of Stracher's sports memorabilia collection. Lifson contacted the BCPO and informed the agency that REA possessed items from Stracher's sports memorabilia collection. REA provided the BCPO with an itemized list of the inventory it had on consignment.

On November 9, and 14, 2007, the BCPO obtained orders restraining funds in various investment accounts in the name of Stracher, his drugstore, or related third parties. On November 21, 2007, the BCPO obtained a third order authorizing the agency to seize and restrain the items contained in Stracher's sports memorabilia collection then in possession of REA, "as property subject to forfeiture and as evidence pending criminal prosecution, pursuant to N.J.S.A. 2C:64-1a and [-1]b, pending the termination of forfeiture proceedings to be instituted within 90 days of the seizure and restraint of the captioned property, pursuant to N.J.S.A. 2C:64-1 et seq."

On December 14, 2007, the State filed a complaint seeking to, among other things, extinguish any and all property rights that Stracher and REA possessed in any of the seized sports memorabilia and to forfeit the property to the State pursuant to the civil forfeiture statutes, N.J.S.A. 2C:64-1 to -9 (collectively referred to as the forfeiture statute). On the same day, the court entered an order to show cause (OTSC) directing Stracher and REA to show cause on January 7, 2008, why the court should not grant the relief requested by the State. Lifson filed a certification in opposition to the OTSC, contending that REA would suffer damages and irreparable harm to its good will if the court granted the relief requested. Lifson also agreed that if REA was permitted to proceed with the auction, it would "account for sales receipts and deposit with the [c]court the net proceeds derived from the sale (after payment of the commissions due to REA at the rates as prescribed in the consignment contract)."

On the return date of the OTSC, the court determined that the State had failed to establish a nexus between the sports memorabilia in possession of REA and Stracher's illegal activities as charged in the criminal complaint, concluding that many items of the sports memorabilia collection may have been purchased prior to Stracher's charged criminal activities.

Accordingly, the court denied the State's application to seize the sports memorabilia in the possession of REA, dismissed the prior temporary restraining orders concerning disposition of the property, and authorized REA to proceed with the auction of Stracher's sports memorabilia collection. The court conditioned REA's proceeding with the auction, upon REA turning over the net proceeds from the auction to the BCPO's Seized Asset Trust Account, and upon remitting any unsold items from the collection to the BCPO, with the BCPO holding the funds and the items in escrow pending further order of the court. On January 29, 2008, the court entered a confirming order.

On February 19, 2008, REA and Lifson filed an answer and counterclaim seeking damages for alleged violation of their federal and state constitutional rights "arising from the State's efforts to terminate REA's rights under the consignment agreement and an artisan's lien, without paying just and reasonable compensation."*fn1 Among other things, REA sought reimbursement for its legal fees and expenses incurred in defending against the forfeiture action.

On February 20, 2008, the State filed a motion seeking reconsideration of the January 29, 2008 order. On March 14, 2008, the trial court entered an order supported by a memorandum of decision denying the motion. The court determined that "[a] cancellation of REA's auction will have a dramatic, if not disastrous impact, on REA's business. Such an irreparable harm must be prevented so long as the [State's] rights to the sports memorabilia have not been conclusively settled while REA possesses an artisan's lien that technically allows it to sell the memorabilia in satisfaction of the lien."

On May 6, 2008, REA filed an amended answer and counterclaim asserting additional causes of action for tortious interference with its contractual relations and tortious interference with its prospective economic advantage. On May 30, 2008, REA conducted the online auction of the memorabilia collection and remitted $315,000 to the BCPO, along with any unsold items of memorabilia, to be held in escrow pending further order of the court. On July 18, 2008, the court entered an order, supported by a written decision, dismissing REA's counterclaim without prejudice to re-file after September 3, 2008, REA having filed its counterclaim within six months of filing its notice of tort claim on February 29, 2008, in violation of N.J.S.A. 59:8-8.

On September 29, 2008, REA filed a second amended counterclaim against the State, together with a third-party complaint against the BCPO, alleging that filing of the civil forfeiture action violated its due process rights under the U.S. Const. amend. V and the N.J. Const. art. I, ¶ 20; and tortiously interfered not only with its contractual rights but also with its prospective economic advantage under the agreement. REA also impliedly sought a declaratory judgment that its asserted artisan's lien for enhancing the value of the sports memorabilia collection through its labor, services, and material, was "entitled to the same level of constitutional respect and protection as the liens and security interests specifically and expressly recognized in N.J.S.A. 2C:64-5a."

On February 17, 2009, the State and the BCPO filed a motion seeking to dismiss the second-amended counterclaim and third-party complaint for failing to state a cause of action upon which relief could be granted pursuant to Rule 4:6-2(e), contending that, among other things, they were immune from suit. On April 3, 2009, the trial court, having considered documents outside the pleadings, converted the motion to one for summary judgment. On the same day, the court entered an order supported by an oral decision and a nine-page memorandum of decision, granting summary judgment. In so doing, the trial court reasoned in pertinent part:

Regarding the claim for violations of [S]tate and federal constitutional rights (Count I), as the United States Constitution does not provide a direct cause of action independent from a Section 1983 [claim], and this court has previously asserted that the Section 1983 Claim is dismissed, the alleged violation of the federal constitutional rights, must be dismissed as well. The State is only implicated if the Fourteenth Amendment is asserted, and even then, there must be a "taking." Here, the Fourteenth Amendment was not invoked. Nevertheless, there has been no showing of an unconstitutional "taking." The allegation at best is an attempt to take the contract rights and property of [ROA] without payment. [T]he general rule is that acts done in the proper exercise of governmental powers, or pursuant to authority conferred by a valid act of the legislature, and not directly encroaching on private property, although their consequences may impair its use or value, do not constitute a taking [and] do not entitle the owner of such property to compensation. [H]ere, REA was not the owner, but the consignee, and the third party defendants acted under the authority of N.J.S.A. 2C:64-1, et seq. Further, the [c]court notes that the alleged violations concern an "attempted taking." As no such taking occurred and the auction proceeded, there is further no substantive basis for this claim. [(Internal citations and quotations omitted).]

On appeal, REA argues:

POINT I.

THE TRIAL COURT ERRED IN FAILING TO DISTINGUISH BETWEEN THE STATE OF NEW JERSEY AND BERGEN COUNTY'S PRE-LITIGATION ACTIONS WHICH GIVE RISE TO LIABILITY UNDER 42 [U.S.C.A.] §1983 FOR REA'S DAMAGES SUSTAINED IN THIS MATTER.

A. THERE WAS AN UNCONSTITUTIONAL TAKING IN THIS CASE.

POINT II.

REA SUSTAINED DAMAGES WHICH ARE COMPENSABLE UNDER THE NEW JERSEY TORT CLAIMS ACT AND WHICH ARE RECOVERABLE AGAINST THE THIRD PARTY DEFENDANTS.

A. THE BCPO HAS NO TORT IMMUNITY.

B. REA'S TORT CLAIMS STATED A LEGALLY

COGNIZABLE CAUSE OF ACTION.

POINT III.

REA'S CLAIM FOR LEGAL FEES AS A RESULT OF THE IMPROPER UTILIZATION OF THE FORFEITURE ACT IS AN ACTUAL CONTROVERSY UNDER [N.J.S.A.] 2A:16-52.

POINT IV.

THE COURT BELOW ERRED IN DISMISSING REA'S CLAIMS BEFORE DISCOVERY WAS COMPLETED AND BASED ON A CONSENT JUDGMENT THAT HAD BEEN NEGOTIATED BETWEEN THE STATE AND STRACHER BUT NOT ENTERED OR DISCLOSED TO REA.

A trial court will grant summary judgment to the moving party "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c).

On appeal, "the propriety of the trial court's order is a legal, not a factual, question." Pressler, Current N.J. Court Rules, comment 3.2.1 on R. 2:10-2 (2010). "Appellate courts employ the same standard when reviewing summary judgment orders." Block 268, LLC v. City of Hoboken Rent Leveling & Stabilization Bd., 401 N.J. Super. 563, 567 (App. Div. 2008).

We have considered REA's arguments in light of the record and applicable law. We conclude that none of the arguments are of sufficient merit to warrant discussion in a written opinion.

R. 2:11-3(e)(1)(E). We affirm substantially for the reasons expressed by Judge Miller in his oral and written decisions of April 3, 2009. Nonetheless, we add the following comments.

REA argues the trial court erred in determining that no unconstitutional "taking" had occurred. REA contends that the BCPO's attempt to seize the sports memorabilia items in its possession impaired its contractual rights with Stracher, and thus, constituted an unlawful taking. We disagree.

REA's claim is predicated on proving it suffered an unconstitutional taking of its property interests. REA contends that "the filing and prosecution of the Civil Forfeiture Complaint and in seeking to have the [c]court to authorize the seizure . . . of those items in the Stracher sports memorabilia collection . . . in the possession and custody and control" of REA, constituted "an attempt to take the contractual rights and property of [REA] . . . without payment of just . . . compensation." Contrary to REA's assertion, no actual taking occurred.

With the Court construing the forfeiture statute as "exclud[ing] innocent owners who [do] not consent to or know of the illegal use of their property and who did all that reasonably could be expected to prevent that use," the statute "survives the constitutional attack that it constitutes an unlawful taking of property without just compensation." State v. 1979 Pontiac Trans. Am. Color Grey, 98 N.J. 474, 485 (1985). The forfeiture statute "recognizes a distinction between two kinds of contraband," prima facie and non-prima facie, "also known as derivative contraband." State v. Seven Thousand Dollars, 136 N.J. 223, 233 (1994). Derivative contraband "is itself innocent in nature but has been used or is intended to be used in furtherance of an unlawful activity or is the proceeds of illegal activities." Ibid. (emphasis added). Under the forfeiture statute, for the State to seek forfeiture of derivative contraband, it must file a complaint against the property sought to be forfeited, N.J.S.A. 2C:64-3a, and provide notice "to any person known to have a property interest in the [property]." N.J.S.A. 2C:64-3c. This is exactly what occurred in this matter.

REA was named in the action as a party possessing a possible interest in the property, and was provided due notice and an opportunity to be heard. Following a hearing on the State's application to seize the property, the court determined that the State failed to establish a nexus between the property sought to be seized and the criminal activities as charged in Stracher's complaint. Seven Thousand Dollars, supra, 136 N.J. at 234-35. Accordingly, the court denied the State's application to seize the property and permitted REA to proceed with the online auction under its agreement with Stracher. REA concluded the online auction as scheduled and received all the commission it was entitled to under the agreement. As such, no unconstitutional taking of REA's property occurred. While REA incurred litigation costs defending its rights under the terms of the agreement, that alone does not demonstrate an unconstitutional taking.

Affirmed.


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