August 24, 2012
DARRYL DENMAN, PLAINTIFF-APPELLANT,
PUBLIC SERVICE ELECTRIC & GAS COMPANY AND CAROLYN BAYNES; DEFENDANTS, AND THOMAS KIERNAN, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-5137-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 28, 2012
Before Judges Messano and Espinosa.
Plaintiff appeals from an order that imposed sanctions upon his attorney, William A. Feldman, pursuant to Rule 1:4-8. For the reasons that follow, we affirm.
Plaintiff was employed by Public Service Electric & Gas Company (PSE&G) when a woman he supervised, defendant Carolyn Baynes, filed a sexual harassment complaint against him. Thereafter, in November 2003, Baynes received obscene and threatening correspondence, warning her she "better keep [her] mouth shut." Baynes filed a complaint against plaintiff with the Franklin Township Police Department, charging him with harassment, in violation of N.J.S.A. 2C:33-4(c). The charges were ultimately dismissed for lack of prosecution.
Plaintiff's employment was terminated by PSE&G over three years later, in May 2007. On June 25, 2007, plaintiff filed the complaint in this action against PSE&G, Baynes and defendant Thomas Kiernan. The complaint alleged various claims under the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, i.e., sex/gender discrimination (count one - against all defendants), failure to provide a reasonable accommodation for plaintiff's handicap (count two - against PSE&G), and a violation of the anti-retaliation provisions of the LAD (count three - against all defendants). In addition, the complaint alleged intentional infliction of emotional harm (count four - against all defendants), tortious interference of contractual and/or economic relations (count five - against Baynes and Kiernan) and malicious prosecution (count six - against Baynes). Plaintiff claimed he was "terminated involuntarily after an extended period of illness and disability occasioned by a pattern of harassment, hostility, and mistreatment directed against him by PSE&G and its employees." Plaintiff alleged he was terminated in part because of the sexual harassment complaint Baynes filed against him and because the anonymous letters were attributed to him. The complaint alleged that Kiernan authored and sent the letters "for the purpose of falsely implicating Plaintiff as the purported author thereof, falsely lending increased credibility and substance to Baynes' charges."
The matter was resolved with PSE&G and a stipulation of dismissal with prejudice was filed in October 2008. Baynes did not answer the complaint. A default was entered against her and the complaint was dismissed for lack of prosecution.
Kiernan wrote seven letters to plaintiff, asking him to withdraw the complaint against him. Kiernan's attorney, Gregory A. Devero, wrote a letter, dated September 29, 2007, to Feldman, demanding the dismissal of the complaint as frivolous litigation. His letter stated in part:
As you are aware, the undersigned represents the defendant, Mr. Kiernan in above referenced matter. Mr. Kiernan adamantly denies all of the claims asserted by your client. These claims have no basis in law or fact and irrefutably constitute frivolous litigation in violation of [R.] 1:4-8 and [N.J.S.A.] 2A:15-59.1. We hereby provide you with notice that these claims against my client must be dismissed within 28 days from today or sanctions will be sought pursuant to the Rules of Court and New Jersey law.
These untimely allegations assert that my client was responsible for sex/gender discrimination, aiding and abetting, intentional infliction of emotional distress and tortuous interference of a contract. The facts giving rise to these allegations occurred in November of 2003. Further, my client never participated in any activity that resulted in Mr. Denman's termination and there is no evidentiary basis to support this contention.
Pursuant to [Rule] 1:4-8, this serves as notice to you and your law firm that the above counterclaims filed by your firm in this matter constitute frivolous litigation and expressly violate the provisions of [Rule] 1:4-8. The defendants' claims are not warranted by existing law and your allegations have no evidentiary support. [See Rule] 1:4-8(a).
Pursuant to [Rule] 1:4-8(b), you are hereby notified that we will, within a reasonable period of time thereafter, apply by motion for sanctions, including an award for attorney fees and costs, against you, your law firm and your client if these counterclaims are not withdrawn within 28 days from your receipt of this letter. As an attorney licensed in New Jersey, you and your law firm have a joint responsibility not to pursue claims that you know are wholly unjustified under the law. Pursuant to [Rule] 1:4-8(f), my client also expressly reserve our right to proceed against the defendants' individually and separately for the recovery of attorney fees and costs pursuant to the New Jersey Frivolous Lawsuits Statute, [N.J.S.A.] 2A:15-59.1.
Please be guided accordingly. [(Emphasis added).]
Counsel discussed the matter by telephone and, by letter dated October 10, 2007, Feldman declined to dismiss the complaint. He rejected Devero's contention that, pursuant to Tarr v. Ciasulli, 181 N.J. 70 (2004), Kiernan could not be held liable for aiding and abetting the commission of the torts against plaintiff because he was not a supervisor. Feldman also rejected Devero's statement that the claims were time-barred, stating that the statute of limitations did not apply because there had been a continuing wrong.
Kiernan filed a motion to dismiss and for an award of sanctions and fees in November 2007. The motion was converted to a summary judgment motion. Summary judgment was granted, dismissing the complaint against Kiernan in its entirety, by order dated July 29, 2008. In her statement of reasons, the trial judge stated that counts one, three and four, which alleged LAD violations and the intentional infliction of emotional distress were barred by the two-year statute of limitations applicable to those claims. The trial judge dismissed count five, which alleged tortious interference, because plaintiff had "failed to assert the existence of a protectable right." Plaintiff does not appeal from the order granting summary judgment.
The trial judge denied Kiernan's motion for sanctions on procedural grounds, explaining that Rule 1:4-8(b)(1) requires that an application for sanctions be "by motion made separately from other applications." Kiernan filed a second motion seeking the award of sanctions, counsel fees and costs pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1 in August 2008. In support of the application, Kiernan submitted his attorney's invoice, which set forth $31,348.12 in fees and disbursements and noted $20,000 in payments. The court ruled that fees would be awarded as to the LAD and intentional infliction of emotional distress claims because plaintiff's counsel had notice of the statute of limitations issue, as reflected in his letter:
This issue was hammered on by defendant to deaf ears. The law on statutes of limitations is longstanding and unambiguous, and according to the October 10, 2007, letter, that law was [understood] by plaintiff and his counsel.
Moreover, the judge observed that in opposition to the motion, "plaintiff presented no theory for how plaintiff could prevail on this issue, nor did plaintiff argue for any extension or change in the law, frivolous or not." The judge concluded:
The Court is left with no choice other than to grant reasonable attorneys' fees and costs for that portion of work that defendants' counsel did with regard to Counts One, Three, and Four, counts that were clearly barred by the statute of limitations.
However, the court found that defendant had failed to provide plaintiff with adequate notice that the tortious interference claim was frivolous and therefore stated that no award was permitted for that claim, even though plaintiff had failed to oppose its dismissal in the summary judgment motion.
The court left the precise calculation of the award to counsel but provided explicit instructions for the manner of calculation. The court excluded all fees incurred prior to defense counsel's October 10, 2007 letter demanding dismissal. The judge specifically addressed each charge on the affidavit of services, noting whether each charge was included, whether only half of the charge would be included or whether the charge was excluded. The court then ruled that defendant would be awarded seventy-five percent of the allowed charges in light of the court's ruling that defendant had provided inadequate notice that the tortious interference claim was frivolous.
Plaintiff filed a motion for reconsideration. Kiernan filed a cross-motion for reconsideration to correct the award of fees and costs and to seek additional costs and fees that were incurred after October 22, 2008, the date of his reply brief on the original motion. The judge denied plaintiff's motion, and granted Kiernan's motion for additional fees and costs in part, resulting in an award of $23,789.59. In so doing, the judge observed that she had "never found there was any bad faith."
Plaintiff filed a second motion for reconsideration, which was denied. In her statement of reasons, the judge noted that, at the time she had instructed counsel on how to calculate the award, her instructions were unambiguous; "the parties were to engage in a purely mathematical calculation." But, she noted:
[p]laintiff's counsel refused to do so and continued to maintain that no amount had been awarded. Even plaintiff's counsel's current notice of motion maintains the fiction that the court's award was never memorialized.
Kiernan had paid his attorney $35,000, owed him over $50,000 more and was now appearing pro se. As to the reasonableness of the award, the judge stated:
According to [plaintiff's attorney], he is a successful and experienced trial attorney who had been practicing for forty-two years as of March 2009. He was listed as a Super Lawyer in 2006 and 2010 practicing in the area of employment law. For a successful attorney practicing in an area that allows for fee-shifting, [the amount awarded] does not seem unduly oppressive. Requiring the attorney to pay for the defendant's legal expenses has the benefit of some predictability; due to his experience, plaintiff's counsel would have a good idea of how much money his frivolous complaint could costs the defendant. Since the sanction was ordered on March 25, 2008 plaintiff's counsel has not submitted any proofs of an inability to pay or any law on how the court is supposed to calculate the amount to deter a re-occurrence. The amount awarded is not excessive. Moreover, subsequent events have made it clear that it was not an amount that sufficed to deter repetition as plaintiff's counsel has continued to file frivolous papers and to make frivolous arguments, especially in maintaining that the court did not award an amount to be paid.
In this appeal, plaintiff argues that the trial court abused its discretion in imposing sanctions pursuant to Rule 1:4-8(b) because counsel had acted in good faith, advanced claims and arguments supported by substantial facts and law and no adequate pre-application notice letter was sent. We review the decision to award fees pursuant to Rule 1:4-8 under an abuse of discretion standard. United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.), certif. denied, 200 N.J. 367 (2009). An abuse of discretion is demonstrated if the discretionary act "was not premised upon consideration of all relevant factors," "was based upon consideration of irrelevant or inappropriate factors" or amounts "to a clear error of judgment." Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (internal quotation marks and citations omitted).
Plaintiff argues that no sanction was warranted here because the court found that Feldman did not act in bad faith. N.J.S.A. 2A:15-59.1(b) defines the grounds upon which a frivolous litigation award may be made:
In order to find that a complaint, counterclaim, cross-claim or defense of the non-prevailing party was frivolous, the judge shall find on the basis of the pleadings, discovery, or the evidence presented that either:
(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or
(2) The non-prevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law. [(Emphasis added).]
Thus, bad faith is but one of two alternative grounds for an award in a case of frivolous litigation as opposed to a necessary prerequisite for an award. In this case, the trial judge found that the alternative ground existed, concluding that the allegations for all claims lacked a reasonable legal basis and observing that plaintiff had not argued for any modification of existing law. See United Hearts, supra, 407 N.J. Super. at 390. Specifically, she noted that the LAD and intentional infliction of emotional distress claims were barred by the statute of limitations. Although the judge did not award any fees as to the tortious interference claim, she found no legal basis for that claim, noting that plaintiff had failed to present any facts to "support the existence of a contract or of a protectable right, even a prospective one." Indeed, plaintiff did not oppose summary judgment on the tortious interference claim. Since the court relied upon a statutorily authorized basis for the imposition of a sanction, it was not an abuse of discretion to do so, even in the absence of bad faith.
Plaintiff further argues that: defendant's Rule 1:4-8 notice and warning letter was grossly deficient; the claims asserted were warranted by existing law or a non-frivolous argument for its extension, modification, reversal or the establishment of new law; and that the facts and caselaw supported a good faith argument for gender discrimination and for a continuing violation theory. After reviewing the record in light of the applicable legal principles, we are satisfied that these arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Finally, plaintiff argues that the sanctions ordered were grossly excessive and unjustified to "deter repetition." The sanction imposed here was made based upon a finding that Feldman violated Rule 1:4-8(a), which provides, in pertinent part:
By signing, filing or advocating a pleading, written motion, or other paper, an attorney or pro se party certifies that to the best of his or her knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law[.]
Rule 1:4-8(d) provides that a sanction imposed for a violation of this paragraph "shall be limited to a sum sufficient to deter repetition of such conduct."
Plaintiff argues that, in imposing the sanction here, the trial court failed to consider Feldman's long career as a distinguished member of the bar, which includes his status as a certified civil trial attorney, the fact that he has never been disciplined and his certification that he has never knowingly maintained any frivolous action or defense either before or since this matter. He also contends that the trial court "failed to identify what precise 'conduct' was sanctionable other than her disagreement with Feldman's arguments on behalf of Plaintiff."
Contrary to plaintiff's assertions, the trial court explicitly identified the statute of limitations as the bar to plaintiff's LAD and intentional infliction of emotional distress claims. The conclusion that these claims were procedurally barred did not reflect a "disagreement" on a debatable point of law. In finding the tortious interference claim not legally justified, the court specifically noted the absence of facts to support an essential element of the claim, that there was a contract or protectable right. Plaintiff did not oppose summary judgment on that claim and has not appealed from the order dismissing it.
The trial judge also specifically acknowledged Feldman's status as an experienced and respected attorney. She considered the conduct here within the context of his experience, observing that he could anticipate the nature of the costs defendant would incur. She observed that defendant had paid his attorney $35,000 and owed him $50,000 more, a factor that was within her discretion to consider. See Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 545 (App. Div. 2009) ("While it is clear that Rule 1:4-8 has a punitive purpose in seeking to deter frivolous litigation, it also seeks to compensate a party that has been victimized by another party bringing frivolous litigation."). The judge also observed that Feldman had needlessly contributed to those costs by, for example, refusing to acknowledge the application of the statute of limitations and persistently maintaining that the court had not "award[ed] an amount to be paid." The court's statement of reasons for denying plaintiff's second motion for reconsideration noted that such motion was not authorized by the Rules of Court and that Feldman continued to file and make frivolous arguments, even after the award.
The amount of the sanction imposed is also a matter that lies within the discretion of the trial court. We will disturb its determination only when there has been a clear abuse of discretion. See Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001); Rendine v. Pantzer, 141 N.J. 292, 317 (1995). Such an abuse of discretion exists where "the 'decision [was] made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Saffos v. Avaya Inc., 419 N.J. Super. 244, 271 (App. Div. 2011) (quoting U.S. v. Scurry, 193 N.J. 492, 504 (2008)). Measured against this standard, we discern no grounds to disturb the trial court's award.
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