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The Staubach Company of Pennsylvania v. Galloway Automotive


December 3, 2010


On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-9598-06.

Per curiam.


Argued November 9, 2010 - Decided Before Judges Payne, Baxter and Koblitz.

Plaintiff, The Staubach Company of Pennsylvania, appeals from a Law Division order awarding counsel fees and costs to defendant, Eastern Reach, LLC, pursuant to the Frivolous Litigation statute, N.J.S.A. 2A:15-59.1(b). We affirm.


On November 25, 2005, defendants Gabe Staino and James Daniels, who were the owners of Galloway Automotive, LLC (Galloway), a motor vehicle dealership in Egg Harbor City, signed a listing agreement with plaintiff. The agreement afforded plaintiff an exclusive listing for the sale of Galloway Automotive and the property upon which the dealership was located. In relevant part, paragraph eight of the November 2005 listing agreement specified that "[a]ny and all inquiries received by SELLER [Galloway Automotive] during the life of this Agreement for the sale of the above business will be referred to BROKER [Staubach]." Thus, paragraph eight prohibited Galloway or its owners from directly entering into an agreement of sale with any purchaser and from thereby denying Staubach the broker's fee or commission that the November 25, 2005 exclusive listing agreement had guaranteed.*fn1

At some point during the six-month term of the Agreement, Staino and Daniels received an inquiry from defendant Eastern Reach for the sale of the dealership and real estate. Instead of referring the prospective purchaser to plaintiff, Staino and Daniels negotiated the sale of the franchises and business assets directly with Eastern Reach, thereby denying Staubach a commission. Upon learning of the May 1, 2006 sale to Eastern Reach, Staubach demanded payment of its broker's fee from Staino, Daniels and Eastern Reach, all of whom refused to pay.

In particular, Eastern Reach asserted that Staino and Daniels repeatedly assured Eastern Reach that there was no listing agreement in effect with any real estate broker, and Eastern Reach pointed to the agreement of sale between Galloway and Eastern Reach, which contained an express provision so stating.

Staubach filed suit against Galloway Chrysler-Dodge, Staino and Daniels on August 21, 2006, alleging breach of contract and a breach of the implied covenant of good faith and fair dealing. The court granted plaintiff's motion for summary judgment against Staino and Daniels, ordering them to pay Staubach the real estate commissions that were guaranteed to Staubach by the November 2005 listing agreement. Not until June 25, 2007 did Staubach file an amended complaint naming Eastern Reach as a defendant and alleging "tortuous [sic] interference with a contract." Approximately seven months later, on February 5, 2008, Eastern Reach filed an answer and served Staubach with a "Demand to Cease Frivolous Litigation R. 1:4-8" (Demand to Cease).

In its Demand to Cease, Eastern Reach asserted: 1) it had no knowledge of the listing agreement between Staubach and Galloway; 2) there was no privity of contract between Eastern Reach and Staubach; and 3) the legal claims asserted by Staubach in the amended complaint were "not warranted by existing law." Eastern Reach notified Staubach that "if this frivolous pleading [the amended complaint] is not withdrawn within 28 days of service of this demand," Eastern Reach would make application for frivolous litigation sanctions in accordance with Rule 1:4-8.

Despite the February 5, 2008 Demand to Cease, Staubach did not dismiss its complaint against Eastern Reach, causing Eastern Reach to move for summary judgment and sanctions. On May 9, 2008, the court granted the summary judgment motion of Eastern Reach, thereby dismissing all claims Staubach had asserted against it. By subsequent order of July 18, 2008, the judge granted Eastern Reach's request for sanctions against Staubach, awarding counsel fees of $9,019. On September 12, 2008, the judge awarded Eastern Reach an additional $1,000 for the expenses it incurred in defending against Staubach's unsuccessful motion for reconsideration. On November 6, 2008, the judge entered judgment in favor of Eastern Reach in the amount of $10,019.

In a written opinion awarding counsel fees to Eastern Reach under the Frivolous Litigation statute and Rule 1:4-8, Judge Johnson observed that the undisputed facts demonstrated at the time Michael Schwartz, the owner of Eastern Reach, contacted Staino and Daniels, they assured him there was no broker representing Galloway in the sale of the dealership. The undisputed facts also showed the Asset Purchase Agreement of April 14, 2006 between Galloway and Eastern Reach contained an express representation that the "transactions contemplated [by the Asset Purchase Agreement] have been carried on without the intervention of any person acting on behalf of Seller or [Eastern Reach] in such manner as to give rise to any valid claim against [Eastern Reach] for any brokerage or finders' commission, fee or similar compensation."

Consequently, the judge held there were no facts in the record upon which to base a conclusion that Eastern Reach knew, or had reason to know, of Staubach or of its exclusive listing agreement with Galloway at the time Eastern Reach was negotiating with Galloway. Judge Johnson held that because Eastern Reach had no knowledge of the listing agreement, no cause of action by Staubach for tortious interference with a contractual relationship could be maintained because such a cause of action requires proof that the defendant was aware the other two parties had established a contractual business relationship. Therefore, according to the judge, "[a]bsent direct testimony that Eastern [Reach] knew of Staubach and tortiously encouraged [Galloway] or conspired with [Galloway] to violate the exclusive listing agreement, Eastern [Reach] could not possibly have any liability to Staubach."

Turning to whether Staubach's complaint against Eastern Reach was frivolous, the judge observed:

An assertion is deemed frivolous when no rational argument can be advanced in its support, or it is not supported by any credible evidence, or is completely untenable. That some of the allegations made at the outset of litigation later proved to be unfounded does not render frivolous a complaint that also contains some non-frivolous claims. (Internal citations and quotations omitted).

Judge Johnson noted that he had carefully searched Staubach's complaint against Eastern Reach to find a "non-frivolous claim" and had been unable to do so because the "entire history of the litigation reveals that there were never at any time any facts upon which to support a claim by Staubach against Eastern Reach for tortious interference with the listing agreement." Finding that the February 4, 2008 Demand to Cease served notice upon Staubach that the continued maintenance of the complaint against Eastern Reach was frivolous, Judge Johnson concluded that any fees awarded to Eastern Reach under N.J.S.A. 2A:15-59.1(b) would start to run on February 4, 2008, but not before. In reviewing the statement of services submitted by Eastern Reach's counsel for all services rendered subsequent to that date, the judge awarded $9,019 based upon 25.7 hours of work.


When determining a motion for summary judgment, the trial judge must decide whether "the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with 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. When reviewing an order granting or denying summary judgment, we apply the same standard used by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

To prove a cause of action for either tortious interference with a prospective contractual relationship or for tortious interference with an existing contract, a plaintiff must prove that the interference was "inflicted intentionally and without justification." 214 Corp. v. Casino Reinvestment Dev. Auth., 280 N.J. Super. 624, 628 (Law Div. 1994). See also Russo v. Nagel, 358 N.J. Super. 254, 268 (App. Div. 2003). In Russo, we described the elements of a cause of action for tortious interference with a contractual relationship as follows:

(1) actual interference with a contract; (2) that the interference was inflicted intentionally by a defendant who is not a party to the contract; (3) that the interference was without justification; and (4) that the interference caused damage. [Ibid.]

We also observed in Russo that interference with a contract will be deemed intentional if the defendant "'desires to bring it about or if he knows that the interference is certain or substantially certain to occur as a result of his action.'" Ibid. (quoting Restatement (Second) Torts, § 766A, comment e (1977)). The interference with a contract must include an element of malice, but not "in the literal sense requiring ill will toward [the] plaintiff." Id. at 269 (internal citation and quotation omitted). Rather, "'malice is defined to mean that the harm was inflicted intentionally and without justification or excuse.'" Ibid. (quoting Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 751 (1989)).

A judge is authorized to impose sanctions against a party whose pleading is "frivolous." N.J.S.A. 2A:15-59.1(a)(1). A complaint will be deemed "frivolous" under the statute if:

The non-prevailing party knew, or should have known, that the complaint . . . was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law. [N.J.S.A. 2A:15-59.1(b)(2).]

With these principles as background, we turn to Point I, in which Staubach maintains that the judge erred by granting summary judgment because there were numerous disputes of material fact. In support of that argument, Staubach asserts that it was entitled to a second deposition of Schwartz and should also have been permitted to depose the lawyers who drafted the Asset Purchase Agreement between Galloway and Eastern Reach. Other than pointing to the depositions that it was not able to pursue, Staubach makes no showing of any facts that were actually in controversy. Notably, Staubach presents no proof to dispute the judge's central finding that nothing in the record established that Eastern Reach was aware of Galloway's listing agreement with Staubach. Perhaps recognizing this defect in its proofs, Staubach urges us to accept its argument that "without full discovery to determine what actually occurred, . . . the only reasonable conclusion is that there are genuine disputed issues of material fact."

We recognize that when the discovery end date has not yet passed, and discovery has therefore not been completed, a judge should not grant a summary judgment motion as the matter "is not ripe for such consideration." Driscoll Constr. Co., Inc. v. Dep't of Transp., 371 N.J. Super. 304, 317-18 (App. Div. 2004). This is not, however, such a case.

Here, the discovery end date had already passed, and discovery was complete, at the time Judge Johnson granted summary judgment in favor of Eastern Reach. Thus, at the time the motion was heard, Staubach failed to raise any genuine issues of material fact. For that reason, because there was no genuine issue of material fact, the judge was certainly entitled to grant Eastern Reach's motion for summary judgment provided that Eastern Reach demonstrated that it was entitled to judgment in its favor. Brill, supra, 142 N.J. at 540. We therefore reject Staubach's contention that because disputed material facts existed, the judge erred by granting Eastern Reach's summary judgment motion.


We turn next to Point II, in which Staubach maintains that its complaint against Eastern Reach was viable and the judge erred when he held to the contrary. As we have noted, a cause of action for tortious interference cannot succeed in the absence of proof of an intentional interference with a contract. Here, Staubach presented not an iota of evidence that Eastern Reach knew, or had any reason to know, that Galloway had signed an exclusive listing agreement with Staubach and that such agreement was still in effect. Indeed, the record establishes that the first time Schwartz saw the listing agreement was when it was shown to him on December 1, 2006 during his deposition. Thus, in the absence of any evidence demonstrating that Eastern Reach intentionally interfered with Staubach's ability to earn a commission, the judge was correct when he concluded that Staubach's filing of a tortious interference cause of action against Eastern Reach was without any basis in law or fact. We thus reject the argument Staubach advances in Point II.


Last, Staubach maintains that the award of counsel fees to Eastern Reach was improper in the absence of a finding of bad faith on the part of Staubach's counsel in maintaining the litigation against Eastern Reach. Contrary to Staubach's arguments, a party seeking sanctions under the Frivolous Litigation statute is not required to demonstrate that the opposing party acted with bad faith or maliciously. Instead, a party seeking sanctions need only demonstrate that the pleading was "frivolous," N.J.S.A. 2A:15-59.1(a)(1), which merely requires a showing that "[t]he non-prevailing party knew, or should have known, that the [pleading] was without any reasonable basis in law . . . and could not be supported by a good faith argument for an extension, modification or reversal of existing law." N.J.S.A. 2A:15-59.1(b)(2). Staubach presented no proof that Eastern Reach knew of the listing agreement and conspired with Galloway to circumvent its terms. Thus, in the absence of proof of the intentional conduct required by Russo, supra, 358 N.J. Super. at 268, Staubach's complaint against Eastern Reach satisfied the definition of "frivolous" established by N.J.S.A. 2A:15-59.1(b)(2). Eastern Reach made such a showing and the award of counsel fees in its favor was therefore proper.


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