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State ex rel. Campagna v. Post Integrations, Inc.

Superior Court of New Jersey, Appellate Division

July 19, 2017

STATE OF NEW JERSEY ex rel. LEONARD M. CAMPAGNA, Plaintiff-Appellant,
v.
POST INTEGRATIONS, INC., EBOCOM, INC., and MARY GERDTS, Defendants-Respondents.

          Argued March 28, 2017

         On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6341-14.

          Luis G. Zambrano (Miller, Egan, Molter & Nelson, LLP) of the Texas bar, admitted pro hac vice, argued the cause for appellant Leonard M. Campagna (Clayton Giles (Law Offices of Joshua Parkhurst) and Mr. Zambrano, attorneys; Mr. Giles and Mr. Zambrano, of counsel and on the briefs).

          Carla S. Pereira, Deputy Attorney General, argued the cause for respondent State of New Jersey (Christopher S. Porrino, Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Joan Karn and Marlene G. Brown, Deputy Attorneys General, on the brief).

          John L. Sinatra, Jr. (Hodgson Russ LLP) of the New York bar, admitted pro hac vice, argued the cause for respondents Post Integrations, Inc., Ebocom, Inc., and Mary Gerdts (Jacquelyn R. Trussell (Hodgson Russ LLP) and Mr. Sinatra, attorneys; Daniel C. Oliverio, Mr. Sinatra, and Ms. Trussell, on the brief).

          Before Judges Reisner, Rothstadt and Sumners.

          OPINION

          ROTHSTADT, J.A.D.

         In this qui tarn action, we are asked to determine whether a claim against a corporation arising from its alleged failure to pay certain statutory obligations owed to the State relates to taxes that are expressly excluded from the purview of the New Jersey False Claims Act (NJFCA or the Act), N.J.S.A. 2A:32C-1 to -18. For the reasons stated herein, we hold that such obligations are taxes and, therefore, the Law Division properly dismissed plaintiff's complaint.

         Plaintiff, Leonard M. Campagna, the relator, appeals from the Law Division's November 6, 2015 order allowing the Attorney General to appear in support of defendants' motion to dismiss and from the order of the same date dismissing his complaint. The complaint alleged that defendants, Post Integrations, Inc., Ebocom, Inc., and Mary Gerdts, were out-of-state credit card processors who served New Jersey based hotels, and that they violated the NJFCA by making false statements in order to avoid paying New Jersey "assessments, fees, license costs and other charges." In response to plaintiff's complaint, the Attorney General filed a notice of his decision not to intervene in the action and defendants filed a motion to dismiss the complaint for failure to state a cause of action upon which relief could be granted, R. 4:6-2(e), and for failing to plead a fraud claim with particularity, R. 4:5-8(a). The State sought leave to file a statement of interest and to participate in oral argument in further support of defendants' motion. Judge Michelle Hollar-Gregory allowed the State to participate, over plaintiff's objection, even though Attorney General had declined to intervene in the action.

         After considering the parties' and the State's arguments, Judge Hollar-Gregory dismissed the complaint, concluding that plaintiff's allegations related to false statements that were made to avoid paying taxes and similar liabilities and that the NJFCA, N.J.S.A. 2A:32C-2 (the tax bar), expressly excluded "claims, records, or statements made in connection with state tax laws." The judge rejected plaintiff's contention that his claims were excluded from the tax bar because N.J.S.A. 2A:32C-3(g), which sets forth conduct prohibited under the NJFCA, does not include the word "claim." Relying on DiProspero v. Penn, 183 N.J. 477 (2005), the judge observed that reading section (g) in isolation as plaintiff argued would "not give sense to the legislation as a whole." Judge Hollar-Gregory also rejected plaintiff's argument that even if the tax bar applied to "claims" such as those he asserted, the other fees he alleged defendants avoided were not taxes. The judge disagreed finding that the fees were alternative minimum assessments (AMA) required as a tax on corporate income by the "Corporation Business Tax Act [(CBT), N.J.S.A. 54:10A-1 to -40]."

         On appeal, plaintiff argues that the judge erred by applying the NJFCA's tax bar to his claim and by concluding that the AMA "is a tax under New Jersey's tax laws." He also contends that other unpaid "non-tax fees" alleged in his complaint were not subject to the tax bar. In addition, plaintiff argues that the judge should not have allowed the State to participate in the argument of defendants' motion.

         Our review of the judge's order entered under Rule 4:6-2(e) is de novo. See Major v. Maquire, 2 24 N.J. 1, 2 6 (2016). Having reviewed the record in light of that standard, we affirm the dismissal of the complaint substantially for the reasons expressed by Judge Hollar-Gregory in her oral decision. We add only the following comments.

         Plaintiff's primary argument about the applicability of the tax bar relies upon two separate provisions of the NJFCA. As plaintiff acknowledges, the NJFCA's definition of a prohibited "claim" expressly excludes matters addressed by state tax laws. It states:

"Claim" means a request or demand, under a contract or otherwise, for money, property, or services that is made to any employee, officer, or agent of the State, or to any contractor, grantee, or other recipient if the State provides any portion of the money, property, or services requested or demanded, or if the State will reimburse the contractor, grantee, or other recipient for any portion of the money, property, or services requested or ...

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