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Coast Automotive Group, Ltd v. Withum Smith & Brown

May 30, 2012


On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-2464-06.

Per curiam.


Argued April 16, 2012

Before Judges Grall, Alvarez and Skillman.

This litigation was commenced in July 2006. It involves a dispute between litigants who retained an accounting firm to provide expert services in connection with a lawsuit they filed alleging bad faith on the part of the insurer of a premises used as a car dealership that was damaged by fire. The plaintiffs are the dealership, Coast Automotive Group, Ltd.; its landlord, Shansab Realty, Inc.; and Shansab's president, Tamim Shansab (collectively plaintiffs). The defendant accounting firm is Withum Smith & Brown (WSB) and the individual defendants are members or employees of WSB.

Plaintiffs' complaint and amendment to that complaint against WSB include nine counts, all related to a dispute about the sufficiency of WSB's billing records. That dispute arose after WSB provided its report on the damages plaintiffs should recover in the action against their insurer. Following extensive unsuccessful discussions about the bill, WSB notified plaintiffs that they would not provide additional services unless they were paid for work completed. Thereafter, plaintiffs settled the suit with the insurer without notice to WSB. In this action, plaintiffs sought to avoid paying WSB for its services and to recover consequential damages based on what they viewed as an inadequate settlement with their insurer.

Plaintiffs' nine-count complaint asserts eight theories for recovery: breach of contract; breach of the duty of good faith and fair dealing; fraud; tortious interference with economic advantage; estoppel; breach of fiduciary duty; consumer fraud; and malpractice. It also includes a request for a declaration that WSB is not entitled to any fee. WSB filed a counterclaim charging plaintiffs with breach of their agreement to arbitrate, false and fraudulent misrepresentation, unjust enrichment and estoppel. WSB also filed a third-party complaint against plaintiffs' attorney, and the attorney filed a fourth-party complaint against WSB's attorney.

Pursuant to a clause in the retainer agreement providing for "binding arbitration to resolve any and all fee-related disputes," all claims related to the fee dispute, including claims for reduction of the fee, were dismissed to be addressed by the arbitrator. Coast Auto. Group, Ltd. v. Withum Smith & Brown, 413 N.J. Super. 363, 370-71 (App. Div. 2010). Affirmative claims for consequential damages attributable to the quality of performance, lack of good faith and fair dealing and malpractice were left for resolution by the trial court. Ibid. We recently affirmed the trial court's order confirming the arbitrator's award. Withum, Smith & Brown v. Coast Automotive Group, Ltd., No. A-2026-10 (App. Div. Feb. 16, 2012).

This third appeal concerns the claims not resolved in arbitration. Plaintiffs appeal from an order entered on May 5, 2007 dismissing counts of their complaint alleging fraud and tortious interference with economic advantage.*fn1 They also appeal from an order of September 21, 2010 granting WSB summary judgment and dismissing their claims for consequential damages based on malpractice and breach. WSB cross-appeals from an order entered on October 29, 2010 denying its application for counsel fees based on N.J.S.A. 2A:15-59.1. In addition, WSB urges us to reverse the dismissal of its third-party complaint if plaintiffs prevail on any issue, and fourth-party plaintiff urges us to reinstate its complaint if the third-party complaint is reinstated.


We first consider plaintiffs' objections to the trial court's dismissal of counts alleging fraud and tortious interference with economic advantage. Those claims were dismissed on WSB's motion for failure to state a claim. R. 4:6-2(e). Our review is limited to determining whether the facts alleged are sufficient to establish those claims. Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989). Where the complaint fails to state a claim, dismissal with prejudice is appropriate if amendment would be futile. Johnson v. Glassman, 401 N.J. Super. 222, 246-47 (App. Div. 2008). These claims rest on nothing other than allegations subsumed in the fee dispute, the alleged breaches of contract and the covenant of good faith and fair dealing - alleged misrepresentations of WSB's intention to provide detailed billing records and minimize hours spent, charges for work not done and WSB's demand of payment for services performed. The factual allegations do not support these tort claims.

With respect to fraud, plaintiffs must establish "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Banco Popular N.A. v Gandi, 184 N.J. 161, 172-73 (2005) (quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997)). Their factual allegations do not suffice. Plaintiffs assert fraud based on WSB's intentional misrepresentation of its intention to perform as required by the terms of the retainer agreement. The only factual allegation supporting that claim is a failure to perform as promised, but it is well-settled that proof of intention "not to perform an agreement cannot be established solely by proof of its nonperformance . . . ." Restatement (Second) of Torts cmt. d § 530 (1977). Plaintiffs also assert fraud based on billing for services not rendered. But plaintiffs cannot show that they were damaged by relying on the billing statement because they did not pay the bill, and they could not establish reliance on receiving a lesser bill because the amount is within the range specified in WSB's retainer agreement.

Plaintiffs' claim of tortious interference with prospective economic advantage was properly dismissed because this cause of action requires them to prove that they lost an economic advantage that they reasonably expected to obtain. Patel v. Soriano, 369 N.J. Super. 192, 242 (App. Div.), certif. denied, 182 N.J. 141 (2004). Plaintiffs asserted no facts indicating that they would have obtained a more advantageous settlement from the insurer but for WSB's alleged interference. They do not ...

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