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Luis Perez v. Zagami

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 12, 2012

LUIS PEREZ, PLAINTIFF-APPELLANT,
v.
ZAGAMI, LLC D/B/A THE LANDMARK AMERICANA TAP AND GRILL, D/B/A LANDMARK LIQUORS, D/B/A THE SPOT, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1248-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 6, 2012

Before Judges Carchman, Baxter and Maven.

This appeal, in this self-characterized "SLAPP*fn1 -back" action, requires us to review the propriety of an order of the Law Division (1) granting defendant Zagami, LLC's motion to dismiss plaintiff Luis Perez's complaint alleging malicious use of process for failure to state a cause of action, R. 4:6-2(e); and (2) denying plaintiff's motion to amend his complaint to add parties, additional facts, and a second count alleging violation of the New Jersey Civil Rights Act (CRA), N.J.S.A. 10:6-1 to -2. Plaintiff appeals. We reverse as to both issues and remand for further proceedings.

I.

The current dispute between Perez and Zagami represents a continuum of litigation between these parties, including an action wherein Zagami sued Perez for defamation and other related allegations. In a reported decision, which sets forth the genesis of the present dispute, we briefly described the relationship between these parties. See Zagami, LLC v. Cottrell, 403 N.J. Super. 98 (App. Div. 2008), certif. denied, 198 N.J. 309 (2009).

In 2006, Zagami, the owner of a restaurant, bar and grill, and night club in Glassboro, applied for renewal of its liquor license. Id. at 101-02. Perez wrote to Glassboro's Borough Council opposing that renewal. Id. at 102.*fn2 As a result, the Borough Council scheduled a hearing, provided Perez and Zagami written notice of the hearing, and invited both to testify and submit evidence with respect to the renewal application. Ibid. Both Perez and Zagami participated in the hearing, which was presided over by the mayor and was recorded. Ibid. Perez presented his arguments as to why Zagami's liquor license should not be renewed, including concerns that Zagami had violated municipal fire codes, alcohol beverage control (ABC) regulations, and criminal laws. Ibid. Zagami, who was represented by counsel, disputed these allegations. Ibid. Afterward, the Borough Council authorized renewal of Zagami's liquor license. Ibid.

One year later, Zagami filed a defamation complaint against Perez based upon the statements made by Perez in connection with his opposition of the license renewal and the ensuing hearing. Id. at 103. Perez, who has characterized Zagami's litigation as a SLAPP suit, moved to dismiss, arguing that his statements were entitled to absolute immunity as made in the course of a quasi-judicial proceeding. Ibid. The trial judge denied the motion as premature. Ibid. Following our denial of Perez's motion for leave for interlocutory appeal, the Supreme Court reversed and summarily remanded the issue to us for consideration on the merits. Ibid.

Ultimately, we held that the litigation privilege applied to Perez's statements. Id. at 112. We noted that past New Jersey courts had expanded the privilege "beyond strictly judicial proceedings to encompass so-called 'quasi-judicial' proceedings[,]" id. at 105 (quoting Hawkins v. Harris, 141 N.J. 207, 216 (1995)), so long as those proceedings had "attendant safeguards similar to those in strictly judicial proceedings" such as "notice and hearing; neutral oversight; availability of review on appeal; and presence of 'retarding influences[,]'" ibid. (quoting Rainier's Dairies v. Raritan Valley Farms, Inc., 19 N.J. 552, 562 (1955)).

We also recognized that "[t]he absence of any one or more of the conventional safeguards . . . is not fatal to the application of the absolute privilege." Id. at 106. For example, "the privilege [is not] limited necessarily to statements made under oath." Id. at 107 (citing as examples Hawkins, supra, 141 N.J. 207; Pollinger v. Loigman, 256 N.J. Super. 257 (App. Div. 1992); and DeSantis v. Employees Passaic Cnty. Welfare Ass'n, 237 N.J. Super. 550 (App. Div.), certif. denied, 122 N.J. 164 (1990)). In DeSantis, we emphasized that as long as the allegedly defamatory matter would not have been published except to inform the legislative body, and the material is relevant to the legislative proceeding, the privilege attaches regardless of whether the material is solicited or subpoenaed and regardless of whether it is given under oath. [DeSantis, supra, 237 N.J. Super. at 554.]

After noting this State's "strong public policy . . . '[t]o strictly regulate alcoholic beverages to protect the health, safety and welfare of the people of this State[,]'" Zagami, supra, 403 N.J. Super. at 109 (citing N.J.S.A. 33:1-3.1(b)(1)); the "comprehensive[] . . . procedures and standards for the renewal of municipal ABC licenses[,]" ibid. (citing N.J.A.C. 13:2-2.6 to -2.11 and N.J.A.C. 13:2-17.1); and the fact that Perez's allegedly defamatory statements "all dealt with the manner in which plaintiff operates its licensed liquor establishment and business," id. at 111; we held that "extension [of the litigation privilege] in the present situation w[ould] help promote the development and exchange of information and foster proper resolution of the licensure issue[,]" id. at 112. As a result, we ordered that Zagami's complaint be dismissed with prejudice. Ibid.

On July 26, 2010, Perez filed a complaint against Zagami for malicious use of process. This complaint, which is the subject of this appeal, alleged that Zagami's defamation complaint lacked probable cause, was actuated by malice, was resolved in Perez's favor, caused Perez to incur substantial attorney's fees, and discouraged Perez from participating in future public proceedings.

Zagami moved to dismiss this complaint pursuant to Rule 4:6-2(e), arguing that Zagami's defamation allegations were made with probable cause, were not actuated by malice, and were absolutely privileged based on advice of counsel. Perez opposed the motion, and cross-moved to amend the complaint naming Zagami's attorney in the defamation suit as a defendant, stating additional facts, and adding a second count alleging violation of the CRA.

The Law Division granted Zagami's motion to dismiss and denied Perez's cross-motion to amend the complaint. In so doing, the court concluded, as a matter of law, that Zagami "had probable cause" for filing its defamation complaint. In particular, the court reviewed "the leading reported [absolute immunity] cases before June 27, 2007" and found that "the applicable law in this area was [neither] clear [nor] well-settled at the time Zagami filed its lawsuit." The judge focused on the analysis in Rainier's Dairies, supra, 19 N.J. 552, and Hawkins, supra, 141 N.J. 207. He opined that it was "far from clear that the alleged defamatory statements of Mr. Perez would be entitled to . . . absolute immunity" because "[t]he subject liquor license renewal hearing had neither the 'comprehensive control' of a trial judge nor the 'retarding influences such as false swearing and perjury prosecutions' since the witnesses were not placed under oath."

The judge also noted that the Zagami opinion "undercut" Perez's argument, since we had said in Zagami:

As we examine the policy considerations underlying the litigation privilege, it becomes obvious that its extension in the present situation will help promote the development and exchange of information and foster proper resolution of the licensure issue. [Zagami, supra, 403 N.J. Super. at 112 (emphasis added).]

The judge concluded that "[t]he use of the term 'extension' . . . was an implicit acknowledgement that its ruling was not a foregone conclusion."

The judge then discussed the elements of defamation with respect to Perez's conduct and found that probable cause existed to support Zagami's belief that Perez engaged in defamatory conduct, his absolute immunity notwithstanding. In addressing the issues on this motion to dismiss on the pleadings, the judge considered a letter produced by Zagami "which verifie[d] [Zagami's] contention that the allegations of [Perez] with regard to fines for underage drinking were false." In the end, the judge found that, "[g]iven the factual history in this case, as well as the unsettled state of the law as to the applicability of absolute privilege to the proceedings in question, it is clear that [Zagami] had probable cause to believe that it had a viable defamation claim against [Perez.]"

With regard to Perez's motion to amend his complaint, the judge addressed the merits of the CRA claim and concluded that Perez had no viable CRA claim against Zagami because the CRA is "limited to acts under color of law." The judge denied as moot Perez's motion to join Zagami's former counsel as co-defendants.

II.

We first address the dismissal of Perez's malicious use of process complaint.

Rule 4:6-2(e) provides that a complaint may be dismissed for "failure to state a claim upon which relief can be granted[.]" This Rule tests "the legal sufficiency of the facts alleged on the face of the complaint." Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989).

On a motion to dismiss, a plaintiff need not prove the case, but need only "'make allegations which, if proven, would constitute a valid cause of action.'" Kieffer v. High Point Ins. Co., 422 N.J. Super. 38, 43 (App. Div. 2011) (quoting Leon v. Rite Aid Corp., 340 N.J. Super. 462, 472 (App. Div. 2001)). On such a motion, plaintiff is entitled to "every reasonable inference of fact." Printing Mart, supra, 116 N.J. at 746 (citing Indep. Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956)).

A reviewing court must "'search[] the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.'" Ibid. (quoting Di Cristofaro v. Laurel Grove Mem. Park, 43 N.J. Super. 244, 252 (App. Div. 1957)). This review should be "at once painstaking and undertaken with a generous and hospitable approach." Ibid.

A motion to dismiss should only be granted in "'the rarest of instances.'" Kieffer, supra, 422 N.J. Super. at 43 (App. Div. 2011) (quoting Printing Mart, supra, 116 N.J. at 771-72). Only where "'even a generous reading of the allegations does not reveal a legal basis for recovery'" should the motion be granted. Ibid. (quoting Edwards v. Prudential Prop. & Cas. Co., 357 N.J. Super. 196, 202 (App. Div.), certif. denied, 176 N.J. 278 (2003)).

If, on a motion to dismiss for failure to state a claim, the court considers matters outside the pleading, "the motion shall be treated as one for summary judgment . . . , and all parties shall be given reasonable opportunity to present all material pertinent to such a motion." R. 4:6-2. Under that standard, "summary judgment should be granted only if the record demonstrates there is 'no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.'" Perrelli v. Pastorelle, 206 N.J. 193, 199 (2011) (citations omitted). In the absence of any genuine issues of material fact, we must review the court's legal conclusions, which are "'not entitled to any special deference.'" Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010) (quoting Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995)).

Perez's complaint alleged malicious use of process, a SLAPP-back suit. To survive a motion to dismiss, Perez's complaint must contain allegations which, if proven, would constitute a valid malicious use of process cause of action. See Kieffer, supra, 422 N.J. Super. at 43.

The required elements of a malicious use of process cause of action are (1) the filing of a complaint, (2) without probable cause, (3) that was actuated by malice, (4) that terminated in favor of the party now seeking relief, and (5) that caused the party now seeking relief to suffer a special grievance. LoBiondo v. Schwartz, 199 N.J. 62, 72 (2009).

The question of whether defendants proceeded on probable cause is a matter of law, and is only submitted to the jury if factual disputes essential to that determination exist. Paul v. Nat'l Educ. Ass'n, 195 N.J. Super. 426, 429 (App. Div. 1984). The test for whether probable cause exists is an objective one. Westhoff v. Kerr S.S. Co., 219 N.J. Super. 316, 321 (App. Div.) (noting a person "is justified in bringing a civil suit when he reasonably believes that he has a good chance of establishing it to the satisfaction of the court or the jury") (citation omitted), certif. denied, 109 N.J. 503 (1987).

Here, the Law Division judge found that Perez failed to meet the second condition -- that Zagami's defamation complaint lacked probable cause. We conclude that at this stage of the proceedings, this decision was in error. Contrary to the court's decision, Perez's entitlement to absolute immunity was not "far from clear" before Zagami filed its defamation complaint.

As explained by the Supreme Court over fifty years ago in Rainier's Dairies, where a proceeding is actually conducted in manner and with safeguards similar to a judicial proceeding and dealt with issues of significant public concern there would, under this or any other plausible view, be no basis for refusing to invoke the doctrine of absolute privilege or immunity to the same extent that it would be applicable in court proceedings. [Rainier's Dairies, supra, 19 N.J. at 562.]

Since Rainier Dairies, our courts have held that this absolute privilege applies in such situations as: pretrial discussions with private investigators hired by one party in litigation, Hawkins, supra, 141 N.J. at 221; a report of a background check performed on behalf of township personnel as part of a quasi-judicial determination, Pollinger, supra, 256 N.J. Super. at 265; and statements made at public hearing before a local legislative advisory commission, DeSantis, supra, 237 N.J. Super. at 552.

Regardless of our use of the term "extension" in describing the absolute privilege attaching to liquor license renewal applications in Zagami, supra, 403 N.J. Super. at 112, based upon the past cases, Zagami knew or should have known when it filed its defamation complaint that liquor license renewal applications and the resulting hearings "are now a vital part of American life and perform important public duties," and that it would be "only just that, to the extent they discharge a function comparable to the judicial function, they and the participants in the proceedings before them be vested with [absolute] immunity." Rainier's Dairies, supra, 19 N.J. at 562-63. As we noted in Zagami, New Jersey has a strong public policy interest in regulating alcoholic beverages, and has established comprehensive procedures for the renewal of such licenses. Zagami, supra, 403 N.J. Super. at 109. Also, all of Perez's allegedly defamatory statements related to that renewal application. Id. at 111. Glassboro's liquor license renewal procedures, and Perez's participation in those procedures, more than meet the long-established test for quasi-judicial proceedings, and no reasonable person would have believed otherwise at the time Zagami filed its defamation complaint.

As noted by Perez, to conclude otherwise would effectively require New Jersey courts to rule on absolute immunity with regard to each category of quasi-judicial proceeding before a malicious use of process action related to that proceeding would be viable, thereby "free[ing] special interests to use litigation to silence opposition so long as the specific hearing at issue had not yet been the subject of a reported decision."

We again disagree with the Law Division judge's conclusion that, our use of the word "extension" of absolute liability to Perez's situation, was an "implicit acknowledgement that [our] ruling was not a foregone conclusion."

Given our conclusion as to this issue, we need not address whether Zagami had probable cause to believe that Perez's statements were defamatory, and we express no opinion regarding the facts underlying such a claim.*fn3

With respect to the Law Division's finding that Zagami had probable cause, we note two additional matters.

First, this was a motion to dismiss on the pleadings, and the judge improperly made findings regarding the facts underlying Perez's allegations rather than limit the analysis to whether Perez's complaint "'ma[de] allegations which, if proven, would constitute a valid cause of action.'" Kieffer, supra, 422 N.J. Super. at 43 (citation omitted). See also Paul, supra, 195 N.J. Super. at 429 (noting that factual disputes essential to determining whether probable cause existed are to be decided by the jury).

Second, the judge considered evidence outside of the pleadings, namely, a letter produced by Zagami "which verifie[d] [Zagami's] contention that the allegations of [Perez] with regard to fines for underage drinking were false." As a result, the judge converted Zagami's motion to dismiss into a motion for summary judgment without acknowledging it did so or giving Perez "reasonable opportunity to present all material pertinent to such a motion," R. 4:6-2, including an opportunity for discovery prior to consideration of such a motion.

We conclude that the dismissal of Perez's complaint was reversible error.

III.

We next address whether the Law Division judge properly denied Perez's motion to amend the complaint. Rule 4:9-1 allows a party to amend a pleading more than ninety days after the original pleading is served "only by written consent of the adverse party or by leave of court which shall be freely given in the interest of justice." Motions for leave to amend should be "granted liberally." Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006) (citation omitted). A ruling on such a motion rests in the court's sound discretion, which requires an analysis of "whether the non-moving party will be prejudiced, and whether granting the amendment would nonetheless be futile." Ibid.

Here, the Law Division judge made no finding with regard to prejudice; instead, the court found that although the CRA provides a remedy against both public and private defendants, it "plainly limits its protections against 'persons acting under color of law,' and plaintiff has presented no authority to the contrary." We disagree.

The CRA provides that Any person who has been deprived of any substantive due process or equal protection rights, privileges or immunities secured by the Constitution or laws of the United States, or any substantive rights, privileges or immunities secured by the Constitution or laws of this State, or whose exercise or enjoyment of those substantive rights, privileges or immunities has been interfered with or attempted to be interfered with, by threats, intimidation or coercion by a person acting under color of law, may bring a civil action for damages and for injunctive or other appropriate relief. [N.J.S.A. 10:6-2c.]

No New Jersey court had ruled whether the phrase "by a person acting under color of law" applies to all, or only some, of N.J.S.A. 10:6-2c. However, as Perez notes, in Felicioni v. Administrative Office of Courts, 404 N.J. Super. 382, 400 (App. Div. 2008), certif. denied, 203 N.J. 440 (2010), we held that N.J.S.A. 10:6-2c contemplates two independent causes of action -- one for the "deprivation" of a right, and another for the "interference" with a right.

[P]lacement of a comma after "laws of this State" and before the word "or" divides the clause into two separate, independent phrases that do not act to modify nor qualify one another. Thus, properly read, the statute provides a person may bring a civil action under the Act in two circumstances: (1) when he's deprived of a right, or (2) when his rights are interfered with by threats, intimidation, coercion or force. [Ibid.]

We found that this view "comports with the broad remedial purpose" of the CRA. Id. at 400-01 (citing Owens v. Feigin, 194 N.J. 607, 613-14 (2008)).

Our holding in Felicioni is instructive regarding the scope of the phrase "by a person acting under color of law." There, the fact that the "deprivation" phrase was separated from the "interference" phrase by a comma signaled that the legislature intended to "divide[] the clause into two separate, independent phrases that do not act to modify nor qualify one another." Id. at 400. Here, similarly, the fact that the phrase "by threats, intimidation or coercion" was not separated by a comma from the phrase "by a person acting under color of law" signals that the legislature intended the latter phrase to modify only the former, but not the independent "deprivation" phrase that came before. As in our decision in Felicioni, such an interpretation "comports with the broad remedial purpose" of the CRA. Id. at 400-01. Perez's CRA count alleging that Zagami "deprived" him of "his substantive due process right of free speech at public proceedings" would not fail for lack of "a person acting under color of law," Perez's CRA claim is not legally futile on its face, and the amendment should have been permitted.

With respect to Perez's request to name Zagami's former counsel as additional parties, we note that, in a SLAPP-back suit, "if and when the advice-of-counsel defense is asserted, the party seeking relief may then pursue a cause of action against the attorney claimed to have been the source of that advice as well." LoBiondo, supra, 199 N.J. at 73. Zagami raised such a claim in its motion to dismiss, and Perez was entitled to pursue that claim.

Reversed and remanded. We do not retain jurisdiction.


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