August 17, 2011
ROBERT DUBLIRER, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
2000 LINWOOD AVENUE OWNERS, INC., DAVID HOCHSTADT, WAYNE KOBY, THEODORE TOMASZEWICZ, ETHEL BLUMENTHAL, SANDY KOEPPEL, JUDITH ROSENTHAL AND JOSEPH VENTURA, DEFENDANTS-RESPONDENTS/ CROSS-APPELLANTS.
On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-113-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 24, 2011
Before Judges A.A. Rodriguez, Grall and LeWinn.
Plaintiff Robert Dublirer is a shareholder of defendant Linwood Avenue Owners, Inc., and a resident of one of the 483 co-op units in a building known as Mediterranean Towers South in Fort Lee (Med South). A shareholder's proprietary lease provides for governance by a board of directors, in conformity with the lease, by-laws and "reasonable" house rules appended to the lease, which may be amended by the board as it deems advisable. The individual defendants have been elected and served as members of the board at various times since 2002, when Dublirer became a shareholder and leased his unit. *fn1
In 2008, Dublirer filed this action seeking declaratory and injunctive relief; declaring invalid and enjoining enforcement of a house rule prohibiting solicitation and dissemination of written information in Med South; and enjoining the board's system for collection of proxy votes by an employee rather than the board's secretary as provided in the by-laws. With their answer, defendants filed a counterclaim seeking counsel fees pursuant to Section 28 of the proprietary lease.
On cross-motions for summary judgment, the judge rejected Dublirer's challenges to the house rule restricting solicitation and dissemination of written material under the Federal and State Constitutions and the business judgment rule; determined that the board's practice for collection of proxy votes was not consistent with the by-laws and directed the board to either amend or conform with the pertinent by-law "or otherwise bring practice and by-law into alignment"; and denied defendant's request for counsel fees on the ground of ambiguity in the lease provision defining the scope of that entitlement.
Dublirer appeals, challenging the judge's determination on both of his claims and the judge's rulings on discovery. Defendants cross-appeal, contending that the judge's denial of its request for fees rests on a misinterpretation of the proprietary lease. We reverse the judgment upholding the house rule; affirm the judgment on proxy votes; and affirm the order denying counsel fees for reasons different than those expressed by the trial judge.*fn2
The facts are drawn from the evidence submitted on the cross-motions for summary judgment. As noted above, Med South has house rules that are referenced in and appended to a proprietary lease. Paragraph thirteen of the lease provides that breach of a house rule "shall be a default under [the] lease." Section 8 of the by-laws authorizes the board to make and amend "reasonable" house rules as it deems advisable.
The rule entitled "Soliciting/Notices" provides:
There shall be no solicitation or distribution of any written materials anywhere upon the premises without authorization of the Board of Directors. Without prior consent of the Board of Directors, no sign or notice shall be placed upon the bulletin board, [in] the mail room, in the halls, lobby, elevators or on the doorways. A bulletin board for residents['] use is provided [near] the rear door.*fn3
The term "solicitation" is not defined, and this rule applies to all solicitation and distribution of written materials throughout the premises. The board has applied it when warning agents of businesses delivering take-out food, who distribute advertisements to residents other than the customer, that they will be barred from the building if they repeat the conduct.
Board members assert that the purposes of this rule are protection of the residents' quiet enjoyment of their apartments and reduction of clutter that papers stuck underneath doors and in hallways would create. Nevertheless, the board has, de facto as far as we can discern from this record, granted itself an exemption. At least once and sometimes as many as three times per year, the board distributes shareholder updates by leaving the literature at or under apartment doors in an effort to avoid payment of postage. Some of those "updates" address topics related to election of board members. For example, one stated: "Can you imagine the disaster that would befall upon Med South and all of us if this group of selfish people ever got control of the Med South Board?" The author of that update described the dissidents as "chronic complainers." Another of the board's advisories warned, "a very small[,] vociferous group of mean[-] spirited residents/shareholders has apparently commenced a campaign of spreading what can only politely be described as misinformation and untruths about our co-op corporation, Board and Management."
The board grants other exceptions to the house rule on distribution of written materials. A Co-op Conversion Committee, which was established by the board to study a proposal to convert the building to a condominium complex, has communicated with the shareholders by leaving information at their doors. In addition, monthly maintenance invoices and notices about occurrences like water outages and elevator repair are regularly distributed in that manner.
The board also permits some solicitation. Local police and firefighters' associations solicit donations on the premises during their fundraising drives. Those organizations may do so if they give notice to Rita Neary, the building manager. In addition, board members solicit proxy votes for elections to ensure that a quorum for the annual election meeting is achieved.
The record provides additional evidence of the board's procedures and practices for exercising its discretion to grant exemptions from the rule. Requests from shareholders are not common. In fact, the only recent request the board's president could recall was one from Dublirer. The process commenced when Dublirer inquired as to whether the rule would apply to his distribution of materials in furtherance of his plan to run for a position on the board. The board, through its attorney, advised Dublirer that the rule applied, and Dublirer made a formal request for authorization.
The members of the board have different understandings of their role in addressing requests like the one made by Dublirer. One member took the position that the rule applied without exception and denial required no discussion. Other members claimed that the requests are routinely denied without any consideration in the following fashion: Neary, the building manager, refers all requests to the board's attorney; the board is notified; and the lawyer denies the request unless the board directs a grant.
According to the board members, Dublirer's request was denied without any discussion. It is undisputed, however, that the board's attorney sent this concise response denying the request: "The Board of Directors has reviewed your request and has asked me to advise you that that request has been denied."
Dublirer did not request authorization to solicit proxy votes, but the board members assert that they would have permitted him to do so by going door-to-door. They acknowledged, however, that the prohibition against solicitation would bar him from simultaneously promoting his own or another's candidacy. The board members assert that no co-op employee or agent has ever been asked to solicit proxies on behalf of an incumbent member.
Shareholders may communicate with one another without running afoul of the house rule in these ways. First, as the rule states, a shareholder may post any written material on a bulletin board located near the building's rear entrance. That bulletin board is near the service elevator. Second, a shareholder may use regular mail, at a cost of about two hundred dollars per mailing, to reach all shareholders. Third, at semi- annual meetings held off the Med South premises, residents may disseminate information. Dublirer has used that forum to distribute his newsletter on co-op politics, The Med South Gadfly, which includes articles openly criticizing the board and its attorney and pieces detailing Dublirer's investigations of the co-op's finances and his legal efforts to redress his own grievances. Fourth, at the annual shareholder meeting to elect board members, a candidate may speak.
As the preceding discussion of proxy voting suggests, a shareholder need not attend the meeting to vote. By practice and custom, shareholders submit a proxy to the building manager, the board's counsel, or a Med South doorman. Pursuant to Section 5 of the by-laws, however, a shareholder who wants to vote by proxy must file it with the secretary of the board prior to or at the meeting. Neary has taken on the responsibility of holding proxy votes. As she collects them, Neary inspects the forms to ensure they are complete and signed, fills in missing data such as apartment numbers and returns forms that do not name the proxy if the election is contested. Neary, a long-time friend of the board's president, admits she supports re-election of the incumbent board.
Over the years, few of the elections for board positions have been contested. The 2000 and 2005 elections are exceptions, and in both cases, the incumbents were re-elected. Although Dublirer denies feeling intimidated, he attributes the outcome of those elections to an atmosphere of intimidation created by present members of the board to enhance the board's power. He supports that assertion with anecdotal evidence of alleged threats.
On review of a grant of summary judgment, the trial court and this court must consider the facts in the light most favorable to the non-moving party and determine whether the prevailing party was entitled to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We consider defendants' entitlement to summary judgment on the house rule first.
The controlling legal principles are set fourth in Committee for a Better Twin Rivers v. Twin Rivers Homeowners' Ass'n, 192 N.J. 344 (2007). In that case, the Court addressed challenges to restrictions on "political-like speech aimed at affecting the manner in which" that "common interest" condominium community "is managed" by its homeowner's association. Id. at 365, 367. The Court addressed restrictions limiting residents' ability to display signage, use a community room and submit materials for publication in the association's newsletter. Id. at 351-52.
Twin Rivers compels the grant of summary judgment in favor of defendants on Dublirer's federal constitutional claim. Indeed, Dublirer cannot establish a requisite element of the federal claim, state action. Id. at 356-57. This issue requires no further discussion.
In contrast, Dublirer's state constitutional claim does not require state action. In Twin Rivers, the Court determined that the absence of state action was not determinative and claimed violations of Article I, Paragraph 6 of the New Jersey Constitution must be analyzed under the standards enunciated in State v. Schmid, 84 N.J. 535 (1980), appeal dismissed, 455 U.S. 100, 102 S. Ct. 867, 70 L. Ed. 2d 855 (1982), and New Jersey Coalition Against the War in the Middle East v. J.M.B. Realty Corp., 138 N.J. 326 (1994), cert. denied, 516 U.S. 812, 116 S. Ct. 62, 133 L. Ed. 2d 25 (1995). 192 N.J. at 364-65. Under these standards, "'[i]t is the extent of the restriction, and the circumstances of the restriction that are critical, not the identity of the party restricting free speech.'" Id. at 365 (quoting Coalition, supra, 138 N.J. at 369).
Schmid requires courts to consider
(1) the nature, purposes, and primary use of such private property, generally, its "normal" use, (2) the extent and nature of the public's invitation to use that property, and (3) the purpose of the expressional activity undertaken upon such property in relation to both the private and public use of the property. [84 N.J. at 563.]
This test is applied "to ascertain whether in a given case owners of private property may be required to permit, subject to suitable restrictions, the reasonable exercise by individuals of the constitutional freedoms of speech and assembly." Ibid.
The Supreme Court's application of those factors in Twin Rivers informs our decision. With respect to the first factor, the Court concluded that status as a common-interest residential community - the nature, purpose and use of which were primarily residential and private - "does not favor a finding that the Association's rules and regulations violated [the Committee's] constitutional rights." 192 N.J. at 365-66. Nothing in this record provides a basis for a different conclusion here.
In considering the second factor, the Court focused on the absence of evidence that the association invited members of the public to use the property. It concluded that invitations extended by residents to their guests and to persons interested in purchasing their property was too limited in nature to favor a finding that the association's rules restricting speech and assembly violated the plaintiff's rights under the State Constitution. Id. at 366. Again, this record does not support a different conclusion.
Turning to the third Schmid factor, the Court recognized that the expressional activity involved in Twin Rivers was "political-like speech" that was related to the management of the property and its private use. Id. at 367. Based on that determination, the Court concluded it "must look to the fairness of the restrictions imposed by the Association." Id. at 366-67. In this case, Dublirer's speech is equally related to management and governance of this common interest community. Accordingly, we must consider the fairness of the restriction.
In Twin Rivers, the Court deemed the contractual relationship between the homeowners and their association, which included an agreement to be bound by mutually beneficial and reciprocal rules, did not favor a conclusion that those rules violated a constitutional right by "unreasonably" restricting "expressional activities." Id. at 367. There is no basis for reaching a different conclusion in this case on that aspect of the Court's analysis of the reasonableness of the restrictions.
In Twin Rivers, however, the Court considered other factors relevant to the reasonableness of the association's restrictions given the nature of the communications and their relationship to the purposes and use of the common-interest community. Before ending its inquiry, the Court considered alternate means of expression not prohibited by the association's rules and whether the rules, viewed in light of those alternatives, were "reasonable 'concerning the time, place and manner of' such restrictions." Id. at 368 (quoting and applying Coalition, supra, 138 N.J. at 362, a case where, unlike Twin Rivers, each of the three Schmid standards was satisfied). In concluding that the regulations were reasonable concerning time, place and manner, the Court noted that the unit owners could advance their views by posting signs on their own doors and windows, walking through their neighborhood, ringing their neighbors doorbells, distributing their own newsletter rather than contributing to the association's publication, and participate in the "elective process." Id. at 367-68.
Recognizing that its decision would bear not only on the concerns about the rights of the plaintiffs in Twin Rivers but also residents of other common interest communities, the Court provided direction: "At a minimum, any [such] restrictions . . . must be reasonable as to time, place and manner." Id. at 368.
The evidence in this case does not permit the same conclusion. The regulation prohibits posting of written material on one's own door or window, distribution of written material anywhere on the premises, contribution to the board's newsletter and, as understood by the members of the board, delivery of political-like speech related to board elections by going door-to-door. In contrast to the variety of means available for the Twin Rivers' plaintiffs to "seek to garner a majority to change the rules and regulations to reduce or eliminate these restrictions" or change association leadership, Dublirer has no means of distributing his newsletter other than circulation at a semi-annual meeting held off-site, posting on a bulletin board near the service elevator or using the U.S. mail. Ibid. With respect to speaking, as opposed to writing, the only apparent permissible places and circumstance for oral advocacy of competing views are: inside an apartment on unsolicited invitation; in a common area during an unsolicited conversation; or off-site in a speech given as a candidate at the annual meeting for election of officers.
These facts, viewed in the light most favorable to Dublirer preclude the judgment entered in favor of defendants as a matter of law and compel entry of judgment in favor of plaintiff. The restrictions are not reasonable and do not meet Twin Rivers' minimum requirement of reasonableness as to time, place and manner. Beyond that, this rule, reserving the board's right to grant exceptions as it deems fit, does not limit the board's discretion to granting exceptions related to time, place and manner. Also, it is applied with reference to the content of the message, as is done with the exception for solicitation by approved charitable organizations that have the same impact on the residents' quiet enjoyment and clutter in the building's hallways.
Our determination on the constitutional issue makes it unnecessary for us to consider Dublirer's arguments on the business judgment rule.
We turn to consider Dublirer's objection to the judge's ruling on defendants' violation of the by-law governing proxy votes. Defendants conceded and the judge found that the board's practice was not in compliance with the governing by-law. Although Dublirer acknowledged the adequacy of that remedy during argument on the motions in the trial court, he now contends that it is inadequate and that the judge should have entered an order requiring the board to appoint an independent firm to conduct the elections. But the remedy he now suggests would also be contrary to the by-law. The judge's order cannot be read, as Dublirer reads it, to compel or permit an amendment of the by-laws that would violate statutory or decisional law.
That said, we have considered the arguments Dublirer presents relevant to this claim, including his objections to the judge's rulings on discovery, and conclude they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Our decision in favor of Dublirer makes it unnecessary for this court to address the propriety of the trial judge's reading of the lease provision governing counsel fees. That provision could not be understood to require an award of counsel fees where, as here, the board has not prevailed on any issue. Where counsel fees are available because of a contract provision, a court must consider the reasonableness of the fee. See N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., a Div. of Keller Systems, Inc., 158 N.J. 561, 570 (1999). "The threshold issue in determining whether an attorneys' fee award is reasonable is whether the party seeking the fee prevailed in the litigation." Ibid.
In summary, the order granting plaintiff summary judgment and directing the board to comply with or amend its by-law is affirmed; the order entering judgment in defendants' favor on Dublirer's state constitutional claim is reversed and remanded for entry of judgment in Dublirer's favor on that claim as well as an award of such equitable relief as the judge may deem appropriate; and the order denying defendants' award of counsel fees is affirmed.
Affirmed in part; reversed in part; and remanded.