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George Goldsworthy v. Eric Browndorf

August 24, 2011


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2177-04.

Per curiam.


Argued May 23, 2011

Before Judges A. A. Rodriguez, Grall and LeWinn.

George Goldsworthy appeals from the November 4, 2010 summary judgment in favor of Eric Browndorf, Esq. and Cooper, Levenson, April, Niedelman & Wagenheim, P.A. (collectively "the Cooper firm"); and the December 3, 2010 denial of his motion for reconsideration. We affirm.

We detailed the facts giving rise to this appeal in our January 16, 2008 unpublished opinion.*fn1 We reiterate only those facts that are relevant to the present appeal.

Goldsworthy owned and operated four McDonald's franchises in southern New Jersey. After several financially difficult years, Goldsworthy hired the Cooper firm to assist with refinancing his debt. With Browndorf's help, Goldsworthy filed a Chapter 11 bankruptcy petition on May 12, 1998, that listed tax liabilities exceeding $500,000. He owed the City of Wildwood $17,400; Middle Township, $13,561; North Wildwood $11,181; the Internal Revenue Service, $202,546; the State of New Jersey, $260,578; and various other state taxes in the amount of $49,245. New Jersey had also obtained a judgment for unpaid taxes against Goldsworthy on July 6, 1998, in the amount of $102,983.81.

During the bankruptcy proceedings, McDonald's sought an order authorizing Goldsworthy to sell his assets. In connection with this motion, McDonald's submitted the certification of David T. Murphy (the Murphy certification), a senior regional manager. Murphy certified that a sale of the restaurants was necessary because those restaurants were "continuing their trend of losing sales, which reflects an erosion of the goodwill at the location caused by mismanagement."

Murphy also certified that McDonald's had sent Goldsworthy "a Notice of Default/Termination requesting cure" of two defaults: a debt of $58,533.42 owed to McDonald's; and a $200,000 unsecured debt owed to MetLife Capital. The notice instructed Goldsworthy to cure these defaults within sixty days. Instead of curing those defaults, Goldsworthy had "exacerbated the default" by "fail[ing] to report and pay sales tax."

Goldsworthy ultimately entered into a settlement agreement with MetLife and McDonald's in which he agreed to sell his McDonald's restaurants. He sold all four restaurants and his bankruptcy petition was dismissed on October 22, 1998.

Goldsworthy sued the Cooper firm for malpractice on August 19, 2004. He alleged that Browndorf had not apprised him of the New Jersey Franchise Practices Act (NJFPA), N.J.S.A. 56:10-1 to -29 and other causes of actions that he may have had against McDonald's relating to the termination of his franchises.

The Cooper firm moved for summary judgment on September 2, 2010. It argued that Goldsworthy's failure to pay taxes was a substantial breach of the franchise agreement that would have provided McDonald's with a valid defense to any NJFPA claim asserted by Goldsworthy, pursuant to N.J.S.A. 56:10-9.*fn2

Therefore, Goldsworthy could not have suffered any damages from the Cooper firm's alleged malpractice.

Judge Thomas W. Sumners Jr. found that "the failure of the plaintiff to pay . . . state sales tax constitute[d] a material breach of the franchise agreement," that would have precluded any NJFPA claim as a matter of law. Thus, "a reasonable fact finder would conclude" that McDonald's would have terminated Goldsworthy's franchises had he not filed a bankruptcy petition.

Further, Goldsworthy did not rebut the Cooper firm's evidence that Goldsworthy "did not have the financial capacity to satisfy" his debts in 1998. Thus, the judge granted summary judgment to the Cooper firm.

Goldsworthy moved for reconsideration, arguing that the testimony of his expert, Peter Broege, Esq., demonstrated his ability to pay the sales tax he owed. He also contended that the Murphy certification was inadmissible hearsay.

Judge Sumners denied the motion. He explained that the Murphy certification had not been introduced to prove the truth of its contents, but rather to prove that McDonald's was aware that Goldsworthy had "defaulted on his payment of taxes, and it was one of the bases that [McDonald's] used in determining [that Goldsworthy] should no longer have a franchise." Because McDonald's was aware of Goldsworthy's breach, N.J.S.A. 56:10-9 clearly afforded it a defense to any NJFPA claim.

The Murphy Certification

On appeal, Goldsworthy contends that the judge erred in admitting the Murphy certification because it was inadmissible hearsay. We disagree.

We typically afford "substantial deference to a trial court's evidentiary rulings." State v. Morton, 155 N.J. 383, 453 (1998). Consequently, we review those decisions subject to the abuse of discretion standard, reversing only where the judge's decision was a "'clear error of judgment.'" Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 383-84 (2010) (quoting State v. ...

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