December 23, 2010
FESTA AND INGENITO, LLC, PLAINTIFF RESPONDENT,
OPEN MRI AND IMAGING OF ROCHELLE PARK, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. DC-018863-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 16, 2010 - Decided Before Judges Wefing and Payne.
Defendant, Open MRI and Imaging of Rochelle Park (Open MRI), appeals from a January 8, 2010 order denying, upon reconsideration, defendant's motion for imposition of sanctions against the law firm of plaintiff, Festa and Ingenito, LLC, pursuant to the frivolous litigation provisions of Rule 1:4-8(b). We reverse.
The history of this matter is significant to our resolution of this appeal. The record reflects that Open MRI retained Charles Ingenito, a partner in the plaintiff law firm, to pursue through arbitration assignments of claims for reimbursement of medical diagnostic fees incurred by Open MRI's patients from the patients' automobile insurance carriers in accordance with the personal injury protection (PIP) coverage afforded by their auto insurance policies. However, no retainer agreement between Open MRI and Ingenito or his firm was signed, and no agreement was reached regarding the reimbursement of costs incurred in connection with the arbitrations.
Among the matters referred to Ingenito by Open MRI was a claim for benefits from State Farm Insurance Company (State Farm) resulting from services provided to a patient named Edib Djakovac. An arbitration was instituted against State Farm, and a filing fee of $250 was paid by Ingenito's firm in connection with that arbitration. Thereafter, under circumstances that are not explained in the record, the claim was paid in full by a different carrier, Electric Insurance Company (Electric).
While the arbitration action remained pending, Ingenito's firm filed suit, under its name and the name of Open MRI, against State Farm and Electric in the Special Civil Part of the Law Division, ostensibly to recover the filing fees incurred in instituting the arbitration. Electric sought summary judgment in that action, and State Farm moved for an order vacating a default judgment entered against it. Ingenito, likewise, sought summary judgment.
The motions were argued on January 23, 2009, at which time it became apparent to the judge that the arbitration remained pending, and that an arbitration hearing was scheduled before the National Arbitration Forum on April 28, 2009. As a consequence, in an order dated February 13, 2009, the judge dismissed the Superior Court action, finding jurisdiction to have been improperly assumed. Additionally the judge awarded attorney's fees to the two defendant insurers, granting Electric fees of $2163 and costs of $146.25 and granting State Farm fees of $1468.50 and no costs. After each award, the judge hand wrote on the order the following: "Client is not to pay for attorney's fees." A motion by Ingenito's firm for reconsideration of the attorney's fee award was denied by order dated March 5, 2009.
According to the certification of Stephen Conte, the Administrator of Open MRI and the person responsible for retaining attorneys to file PIP arbitrations, on two occasions during March 2009, Ingenito appeared at Conte's office and advised him that a Superior Court judge had ordered Open MRI to pay counsel fees to the defendant insurers incurred in an action against them. However, Ingenito did not produce the order imposing those sanctions, despite Conte's requests. Conte refused payment, indicating that he had not authorized the institution of a Superior Court action.
By letter dated March 25, 2009, one day after Ingenito's second visit, Ingenito wrote to Conte to advise him of his right to an appeal from the Superior Court's order and to inform him that the sanctions were awarded for "pursuing billing and arbitration proceedings against the incorrect insurance company and never appropriately billing Electric Insurance Company." Although Conte denies authorizing such an appeal, one was filed by Ingenito's firm in the name of Festa and Ingenito LLC and Open MRI.
Following the March incidents, Conte directed Open MRI's general counsel, Joseph Ariyan, to investigate the matter. On April 6, 2009, Ariyan advised Conte of the true contents of the Superior Court's sanctions order.
On April 9, 2009, a motion was filed by Electric to dismiss the appeal. The motion was granted on May 8, 2009. The order of dismissal stated:
The motion and allegations therein are uncontested. See also the trial judge's letter of April 8, 2009. The appeal is dismissed as neither the complaint nor appeal were authorized by plaintiff, and in any event, based on the failure of appellant to order the transcript of January 23, 2009. An application for counsel fees, in the proper form, may be submitted by respondents with respect to this motion.
In a further order of June 11, 2009, we held that the application for fees could proceed in the Law Division.
Additionally, at times that are not specified in the record, both Conte and Electric filed grievances against Ingenito with the Supreme Court's District Ethics Committee.
On May 26, 2009, Ingenito wrote to Ariyan, enclosing a copy of the Appellate Division order and Electric's motion and seeking a response by Open MRI. The letter stated:
Apparently, the Appellate Division has accepted the "fact" that Mr. Sarlo, yourself and Mr. Conte did not suggest that an appeal be filed. Although this conclusion by the appellate decision [sic] is 100% incorrect, it is their findings.
The letter then concluded with the following:
In the event that this matter is not resolved by June 5, 2009 to my firm's satisfaction, I will institute a lawsuit seeking damages, reimbursement for time spent, attorney's fees, interest and costs of suit against all appropriate parties for forwarding a file for arbitration against the wrong insurance company and what has transpired since.
Ariyan responded in a letter dated June 2, 2009, in which he indicated that there was no reason for Open MRI to oppose a motion for sanctions filed by Electric against Ingenito, personally. He then stated: "I respectfully request that you refrain from any further contact with my client or any of the legal action proposed in your letter. . . . I do not believe that Mr. Stephen Conte or Open MRI & Imaging of Rochelle Park is responsible for your damages in this case."
A handwritten, telefaxed response by Ingenito to Ariyan stated:
Your letter is a bit confusing. We have not contacted your client.
In any event, I have responded to Mr. Conte's filed grievance and will prosecute to the fullest extent of the law unless a resolution, satisfactory to my office is reached.
On June 23, 2009, Electric's motion for sanctions on appeal was considered by the initial motion judge, who entered an additional order awarding Electric the sum of $1320. That order, like its predecessor, provided: this sum is to be paid by Festa & Ingenito, and is not to be paid by Open MRI of Rochelle Park or any officer or principal of Open MRI of Rochelle Park.
Three days later, on June 26, 2009, Ingenito, on behalf of his firm, filed a handwritten complaint against Open MRI in the Superior Court, Special Civil Part, claiming damages of $15,000 and alleging: "Defendant has caused damage to Plaintiff due to PIP arbitrations [sic] files that defendant has referred to Plaintiff to pursue against incorrect Insurance Companies and/or monies previously collected."
On July 24, 2009, Ariyan notified Ingenito, pursuant to Rule 1:4-8(b)(1), that the complaint constituted frivolous litigation, and its withdrawal was demanded. In particular, the letter stated:
[I]t is believed that the finder of fact (i.e., whichever Judge is assigned to this case in the Special Civil Part of Bergen County) will conclude that your Complaint is
(1) presented for an improper purpose, with an intent to harass my client, inter alia;
(2) is not warranted by existing law (i.e., baseless with no legal grounds or theory); and (3) not based in any factual evidentiary support.
Ingenito did not respond. On September 11, 2009, Ariyan sent a further letter to Ingenito demanding withdrawal of the litigation. In the alternative, Ariyan requested that Ingenito consent to the vacation of the default entered against Open MRI. Ingenito did neither. However, on October 5, 2009, a motion by Open MRI to vacate default and file an answer and counterclaim was granted, and that answer and counterclaim seeking damages pursuant to the frivolous litigation provisions of Rule 1:4-8(b)(1) and N.J.S.A. 2A:15-59.1(b)(1) and (2) was filed that day.
Shortly thereafter, Open MRI filed motions to dismiss the complaint instituted against it by Festa and Ingenito and for sanctions. On November 18, 2009 the motion judge entered an order dismissing the complaint with prejudice and indicating that Open MRI's motion was unopposed. However, Open MRI's unopposed motion for sanctions was denied without a statement of reasons for that denial.
Upon receipt of the order denying sanctions, on November 30, 2009, Open MRI moved for reconsideration, noting that the basis for entry of the order had not been provided. Additionally, Festa and Ingenito moved for reconsideration of the order dismissing the firm's complaint, claiming that the judge had failed to consider its opposition to the motion to dismiss as set forth in a letter dated November 10, 2009.*fn1
Both motions for reconsideration were denied. In a rider to a January 8, 2010 order denying reconsideration of the sanctions motion, the judge stated that the parties had not entered into an agreement for the payment of counsel fees and mistakenly stated that Open MRI had not offered any statute that permitted the court to award such fees. In an order of the same date denying reconsideration of the dismissal, the judge again noted that the firm of Festa and Ingenito, not Open MRI, was ordered to pay the attorney's fees at issue.
Open MRI appealed the denial of its sanctions motion. Following the filing of that appeal, the motion judge submitted a letter, pursuant to Rule 2:5-1(b), which she termed "an amplification" of the prior ruling. In it, the judge recounted the history of the litigation, stating that Festa and Ingenito's most recent complaint had been dismissed because she concluded that the firm was the party responsible for doing due diligence and investigating the appropriate party for purposes of instituting an arbitration proceeding.
With respect to the sanctions motion, the judge stated that, although Open MRI had complied with the procedural requirements of Rule 1:4-8(b), it had not established "specific conduct" that would warrant the issuance of sanctions. In this regard, Open MRI had alleged that Ingenito filed the firm's complaint against it in retaliation for Conte's filing of a grievance against him. However, the judge found that Open MRI had not submitted sufficient evidence to support that contention. In connection with Open MRI's claim that the litigation was frivolous, the judge held:
As stated in N.J.S.A. 2A:15-59.1(b)(2), a complaint is "frivolous" if the party filing it "knew, or should have known, that the complaint . . . was without any reasonable basis in law or equity." The court found that there is insufficient evidence to conclude that Plaintiff "knew or should have known that the complaint . . . was without any reasonable basis in law or equity." Id. Plaintiff filed suit against Open MRI because Open MRI submitted the initial paperwork to Plaintiff to initiate PIP arbitration. Therefore, Plaintiff could have assumed that he sustained "damages" because his client provided inadequate initial information about the insurance carriers involved.
Rule 1:4-8(a) provides that, by signing a pleading, an attorney certifies that the pleading "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," that "the claims . . . and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law," and that "the factual allegations have evidentiary support." If this paragraph is violated, a judge may order sanctions "sufficient to deter repetition of such conduct." R. 1:4-8(d).
As the preceding factual recitation demonstrates, this matter arises from a mistake as to the identity of the auto insurance carrier for a patient of Open MRI. As a consequence, an arbitration was instituted by Ingenito against the wrong carrier, State Farm. After payment had been made by Electric but while the arbitration remained pending, Ingenito filed a lawsuit against State Farm and Electric to obtain payment of costs incurred in the arbitration. During the course of oral argument on cross-motions for summary judgment and sanctions in that litigation, Ingenito stated the following:
We think that the conduct of [Open MRI] was reasonable when you take the totality of the circumstances which occurred here, which is what the standard needs to be.
You have a client who came in to the. . . MRI facility with an insurance card. With an insurance card that they brought in. With an insurance card that matched the police report, from the referring doctor. The services were provided. The billing was done accordingly . . . with absolutely no response at all from State Farm Insurance
Following argument, suit was dismissed, and defendants' attorney's fees were assessed against the firm of Festa and Ingenito. An appeal was similarly dismissed as unauthorized by Open MRI, and additional fees were imposed against Ingenito's firm as a sanction.
Despite Ingenito's prior admission regarding the reasonable nature of Open MRI's conduct and despite the terms of the judge's sanctions orders, Ingenito thereupon filed suit against Open MRI, now claiming that it was negligent in identifying State Farm as the proper carrier and seeking not only the filing fees incurred in the arbitration (a remedy that was not specified in a retainer agreement or other contract) but also payment of the sanctions imposed upon the firm for its misconduct and other unspecified damages. Unquestionably, Ingenito's effort to obtain indemnification from Open MRI for the attorney's fees incurred by State Farm and Electric in the Law Division action and on appeal was improper, and it violated Rule 1:4-8(a)(1).
Further, we conclude that the judge's determination that Ingenito could reasonably have believed that his suit was warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law was unsupported. In this regard, we note that, in dismissing Ingenito's suit with prejudice, the judge properly imposed the duty to determine the appropriate party defendant in proposed litigation upon Ingenito himself.
McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 557 (1993) ("Generally, parties rely on their attorneys to evaluate the basis in 'law or equity' of a claim or defenses. Although the client determines the objectives of an attorney's representation, the attorney determines the means for pursuing those objectives."). Thus, the judge's simultaneous denial of sanctions for seeking to reverse that burden is difficult to justify; particularly, since no argument was made at the time by Ingenito that, in the circumstances presented, the duty should have been transferred from attorney to client and since Ingenito had previously acknowledged that Open MRI had acted reasonably in determining on the basis of the police report and the insurance information proffered by Djakovac that State Farm was its client's carrier.
Additionally, it is evident that, upon reconsideration, the judge misperceived the basis for Open MRI's motion, since in a relatively lengthy rider to her order denying sanctions, she stated that Open MRI had proffered no contractual or statutory basis for the relief sought, when in fact, its motion was premised on a violation of a rule authorizing such relief. Following receipt of Open MRI's notice of appeal from her adverse decision, the judge properly reviewed her prior decision and, recognizing its limitations, she supplemented her reasoning in a further opinion issued pursuant to Rule 2:5-1(b).
However, in that supplemental opinion, the judge makes frequent reference to prior findings that we have been unable to locate in the record provided to us on appeal. Moreover, it appears to us that the judge's conclusion that Open MRI failed to establish "specific conduct" that would warrant frivolous litigation sanctions cannot be reconciled with Open MRI's unopposed legal and factual arguments and the judge's own decision that the burden of investigating the factual basis for a claim was on Ingenito. Accordingly, we reverse the judge's determination to deny sanctions in this matter.
Exercising our original jurisdiction pursuant to Rule 2:10-5 in this matter, we conclude, as did the motion judge, that although Ingenito's filing of a complaint against Open MRI appears to have occurred shortly after Conte filed an ethics complaint against him, the evidence is insufficient to demonstrate that the complaint was filed for an improper retaliatory purpose prohibited by Rule 1:4-8(a)(1). Compare, e.g., Port-O-San Corp. v. Teamsters Local Union No. 863, 363 N.J. Super. 431, 438-39 (App. Div. 2003). Nonetheless, as we stated previously, to the extent that Ingenito sought reimbursement of sanctions imposed against his firm, the complaint was improper and violated Rule 1:4-8(a)(1).
In contrast to the motion judge, we further conclude that at the time the complaint was filed, Ingenito lacked a good faith belief that the action was warranted by existing law or a non-frivolous argument for the law's extension or modification. As we have noted, in part, it was flatly prohibited as the result of the motion judge's prior orders. In all other respects, it was legally unsupported. Accordingly, sanctions were warranted.
We therefore reverse and remand for a determination of the appropriate sanctions.