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Advisors Financial Center, L.L.C v. Gary Goldberg Planning Services


February 8, 2011


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1381-05.

Per curiam.


Argued telephonically January 5, 2011

Before Judges Carchman and Graves.

Plaintiff Advisors Financial Center, L.L.C. (AFC), appeals from a final order entered October 23, 2009, awarding counsel fees to defendants Gary Goldberg Planning Services, Inc., and Gary Goldberg (collectively GGPS) in the amount of $28,608.70 as a sanction for frivolous litigation. After reviewing the record and applicable law, we reverse.

Both parties provide clients with financial services and advice, and they entered into an agreement under which GGPS would refer clients to AFC in exchange for a fee. As a result of a fee dispute, AFC filed a complaint against GGPS on June 14, 2004, seeking compensatory and punitive damages. Although the initial complaint was dismissed after the parties executed a compromise and settlement agreement (CSA) on July 9, 2004, AFC filed a second complaint to enforce the CSA. Following a bench trial, the court entered a judgment for GGPS, and damages were subsequently determined by an arbitrator. The court entered a final judgment in favor of GGPS in the amount of $224,738.84 on February 21, 2008, and AFC appealed.

Thereafter, the court entered a consent order staying GGPS's efforts to enforce the judgment during the pendency of the appeal. The order also required AFC to provide GGPS with a $340,000 letter of credit in lieu of a supersedeas bond and an escrow in the sum of $18,000. However, the parties agreed that the letter of credit would terminate if "the Appellate Division remand[ed] the matter back to the lower Court for a new trial or new findings by the Court below in favor of AFC."

AFC obtained a letter of credit from M&T Bank (M&T) that was scheduled to expire on October 29, 2009. The letter stated:

It is a condition of this credit that it shall be deemed automatically extended without amendment for sixty (60) days from the expiration date hereof, or any future expiration date, unless thirty (30) days prior to any expiration date M&T Bank notifies the beneficiary [GGPS] in writing that M&T Bank elects not to consider this credit renewed for any additional period.

On appeal, we affirmed the trial court's judgment in an unpublished opinion but remanded the matter for reconsideration of damages based on two portions of the CSA. Advisors Fin. Center, L.L.C. v. Gary Goldberg Planning Servs., Inc., No. A-3649-07 (App. Div. Sept. 3, 2009) (slip op. at 3). Specifically, the case was remanded for "reconsideration of the amount of the judgment and . . . reconsideration of counsel fees available pursuant to the CSA."*fn1 Ibid.

On September 9, 2009, AFC filed a motion to vacate the February 21, 2008 judgment in favor of GGPS "pending adjudication of the remanded litigation." In an accompanying certification, Jack Zakim (Zakim), counsel for AFC, also stated that AFC was entitled to the release of its "security for the stay of execution inclusive of the $340,000.00 Letter of Credit . . . and $18,000[.]00 plus accrued interest escrowed with defense counsel."

David R. Strickler (Strickler), counsel for GGPS, opposed the motion, asserting that Zakim "misstated the effect of the Appellate Division decision, apparently in a futile bad-faith attempt to snatch for AFC an imaginary victory from the jaws of a decision adverse to his client." Strickler also sent Zakim a "safe harbor letter," in which he demanded that Zakim withdraw the motion to vacate and threatened to cross-move for sanctions if he did not. The letter alleged that the Appellate Division decision neither vacated nor reversed the trial court's February 21, 2008 judgment and that Zakim had no "legal authority" to support his position. In response, Zakim claimed that the motion was "well supported by the facts and law," and he refused to withdraw it. Shortly thereafter, GGPS cross-moved for sanctions pursuant to Rule 1:4-8.

Strickler sent Zakim another letter on September 25, 2009, stating that M&T "ha[d] notified GGPS that it ha[d] elected not to extend" the letter of credit, which would expire on October 29, 2009. Strickler demanded that AFC provide GGPS with $340,000 to be placed in Reiter's escrow account, a supersedeas bond, or a new letter of credit. In addition, Gary Goldberg personally attempted to collect on the original letter of credit on October 7, 2009.

On October 9, 2009, the trial court denied AFC's motion to vacate and ordered AFC to pay GGPS "reasonable attorneys' fees and expenses incurred . . . as a direct result of [AFC's] violation of [Rule] 1:4-8." It ultimately awarded counsel fees and costs to GGPS in the amount of $28,608.70 on October 23, 2009.

On October 30, 2009, the parties entered into a written agreement that resolved all outstanding issues except for the counsel fees and costs awarded to GGPS pursuant to Rule 1:4-8. Thereafter, AFC filed a motion for reconsideration of the order granting GGPS counsel fees and costs. In response, Strickler sent Zakim a second "safe harbor letter," again threatening a motion for sanctions if AFC's motion was not withdrawn.

Although Zakim initially refused to withdraw the motion, he did so on November 13, 2009. Nevertheless, GGPS subsequently filed a cross-motion for further sanctions under Rule 1:4-8.

The court denied GGPS's cross-motion on December 4, 2009, reasoning as follows:

The facts before the Court do not set forth sufficient evidence that the plaintiff filed its motion for reconsideration in "bad faith, solely for the purpose of harassment, delay or malicious injury." In fact, the plaintiff had carefully researched the case law and had a reasonable belief that the motion was supported by the law. Therefore, the Court finds that there was a reasonable basis for the plaintiff to file a motion for reconsideration on the disputed issues and that there was no evidence of bad faith or malice on the part of the plaintiff.

In a letter dated December 10, 2009, Strickler advised the trial court that it had failed to state the reasons for the orders entered on October 9, 2009, and October 23, 2009. Because Strickler expected AFC to appeal these orders, he urged the court to "avoid a procedural reversal by filing an opinion permitted by [Rule] 2:5-1(b)."

In January 2010, AFC appealed from the October 9, 2009, and October 23, 2009 orders, and GGPS cross-appealed, contesting the court's denial of additional sanctions on December 4, 2009.*fn2

Pursuant to Rule 2:5-1(b), the trial court filed a written decision on January 28, 2010, that included the following:

The Appellate Division remanded the issue of counsel fees to the Trial Court for further review. In particular, the Appellate Division held that "[o]ur modification requires a remand for reconsideration of the amount of the judgment and warrants reconsideration of counsel fees pursuant to the CSA." Following the Appellate Court's decision, [GGPS] filed a motion for counsel fees.

This Court found that the amount specified in [GGPS's] certification was reasonable and granted [GGPS's] motion.

Rule 1:4-8 requires an attorney to "certif[y] to the best of his or her knowledge" that "the claims, defenses, and other legal contentions [in any paper filed with the court] are warranted by existing law or a non-frivolous argument for extension, modification, or reversal of existing law or the establishment of new law." R. 1:4-8(a)(2); see also Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 543 (App. Div. 2009) (stating that frivolous conduct "includes pursuing litigation that has no legal basis, [and] filing papers to harass or cause unnecessary delay"), certif. denied, 203 N.J. 93 (2010). "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 it is completely untenable.'" First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App. Div. 2007) (quoting Fagas v. Scott, 251 N.J. Super. 169, 190 (Law Div. 1991)).

Moreover, "[t]he nature of conduct warranting sanction under [Rule] 1:4-8 has been rather strictly construed." Wyche v. Unsatisfied Claim and Judgment Fund of N.J., 383 N.J. Super. 554, 560 (App. Div. 2006) (citing K.D. v. Bozarth, 313 N.J. Super. 561, 574-75 (App. Div.), certif. denied, 156 N.J. 425 (1998)). "Where a party has reasonable and good faith belief in the merit of the cause, attorney's fees will not be awarded." First Atl., supra, 391 N.J. Super. at 432 (citing DeBrango v. Summit Bancorp., 328 N.J. Super. 219, 227 (App. Div. 2000); K.D. v. Bozarth, supra, 313 N.J. Super. at 574-75; Iannone v. McHale, 245 N.J. Super. 17, 29 (App. Div. 1990)).

In addition, for all motions "decided by a written order that [are] appealable as of right," the court must "by an opinion or memorandum decision, either written or oral, find the facts and state its conclusions of law thereon." R. 1:7-4(a); see also Strahan v. Strahan, 402 N.J. Super. 298, 310 (App. Div. 2008) (discussing the importance of this function). More specifically, a court imposing frivolous litigation sanctions must "describe the conduct determined to be a violation of [the] rule and explain the basis for the sanction imposed." R. 1:4- 8(d); see also Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, supra, 410 N.J. Super. at 543-44 (applying R. 1:4-8(d)).

In this case, it is undisputed that the trial court failed to include any findings of fact or conclusions of law in the October 9, 2009, and October 23, 2009 orders. Moreover, the supplement filed by the court failed to properly address the sanction award. Instead of "describ[ing] the conduct determined to be a violation of [Rule 1:4-8] and explain[ing] the basis for the sanction imposed," R. 1:4-8(d), the court rested its decision on our remand for "reconsideration of counsel fees available pursuant to the CSA." However, GGPS's cross-motion did not seek counsel fees under the CSA; it sought "an Order for sanctions, pursuant to [Rule] 1:4-8." Therefore, the court was obligated to evaluate the issue of fees on that basis, and it failed to do so.

We recognize that a remand is often the appropriate remedy where a trial court fails to state the basis for its decision. E.g., Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 24 (2004); Barnett & Herenchak, Inc. v. N.J. Dep't of Transp., 276 N.J. Super. 465, 473 (App. Div. 1994). However, given the clarity of the issue here, we will exercise our original jurisdiction pursuant to Rule 2:10-5 to conclude this litigation, which has extended over six years. See Allstate Ins. Co. v. Fisher, 408 N.J. Super. 289, 301 (App. Div. 2009) (noting that the exercise of original jurisdiction was appropriate "to resolve a single issue to conclude litigation, or to end perpetual or lengthy litigation").

Based on the record before us, we find that once the matter was remanded for reconsideration of the damages, GGPS no longer had a valid final judgment, and the letter of credit terminated pursuant to the parties' express agreement. Under these circumstances, neither the motion to vacate nor the withdrawal of the letter of credit indicate any bad faith by AFC. Indeed, the record contains no evidence to support such a finding. Therefore, we reverse the orders of October 9, 2009, and October 23, 2009, because AFC's motion to vacate was not frivolous.


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