NJ Supreme Court Declines To Affirm Prima Facie Tort Remedy in NJ
Richard A. Pulaski Construction Co., Inc. v. Air Frame Hangars, Inc. (A-40-07, July 1, 2008).
The New Jersey Supreme Court leaves open the question of whether New Jersey common law recognizes a prima facie tort claim. The legal definition of "prima facie" is evidence sufficient in law to establish a fact unless rebutted.
In this case the New Jersey Supreme Court had to decide whether New Jersey common law provides a remedy for misconduct that did not meet the traditional standards of a tort cause of action (i.e., such as fraud). This was not the first time the Court confronted this issue, for 10 years earlier in Taylor v. Metzger, 152 N.J. 490 (1998), the Court expressly declined to recognize a prima facie tort claim under New Jersey common law. However, in Taylor the Court noted that a leading treatise (Restatement) explained that such a cause of action encompasses the intentional, willful and malicious harms that "fall within the gaps of the law" and have been most frequently permitted only in limited situations in which a plaintiff would have no other cause of action.
The facts of the Pulaski case are quite complex, and must be abbreviated for purposes of this article. In simple terms, the defendant Air Frame Hangars ("Air Frame") entered into a lease with Mercer County for the development of "condominium-style" aircraft hangars. Air Frame retained Pulaski to perform certain site development work for the construction of these aircraft hangers. It was undisputed that Pulaski faithfully and dutifully performed its contractual services and that Air Frame failed to pay Pulaski all amounts due under their contract.
Pulaski proceeded to file a construction lien claim with the Mercer County Clerk's office in August 1997; the lien was subsequently ruled to be defective because the lien specified the wrong property address location. After Pulaski filed the construction lien claim but before it was declared defective, the parties engaged in a series of settlement discussions. When those discussions failed, in October 1997 Pulaski filed a demand for arbitration as required under the terms of the parties' written contract. While the arbitration was pending, in February 1998 Pulaski filed a separate lawsuit against Air Frame and Mercer County. The parties agreed to dismiss that lawsuit without prejudice with the applicable statutes of limitations period tolled (or preserved) pending the outcome of the arbitration.
In April 1999, Pulaski obtained a favorable arbitration award and thereafter filed a separate suit in the Superior Court of New Jersey to confirm the arbitration award. Prior to the conclusion of Pulaski's lawsuit to confirm the arbitration award and before Pulaski's construction lien was declared "defective", Air Frame sold 9 of its 9 aircraft hangers to various third party purchasers. In connection with each aircraft hangar sale Air Frame's principal (Mr. Ritterson) executed and delivered to each purchaser an Affidavit of Title affirmatively representing that he, as principal of Air Frame, was not aware of any adverse claims or liens against each particular aircraft hangar. Mr. Ritterson's representations were untruthful because Air Frame was in the midst of litigating its disputes with Pulaski.
The trial court determined that Ritterson's misrepresentations were deliberately intended to close title on the properties without having to pay Pulaski's unpaid lien claim. Not surprisingly, the evidence at trial revealed that Air Frame was insolvent. Refusing to let Air Frame and Ritterson "get away with it", the trial court concluded that Pulaski established a prima facie tort claim and entered judgment in Pulaski's favor in the amount of $105,932 plus an additional $39,000 in prejudgment interest and counsel fees. On defendant's appeal, the Appellate Division affirmed the trial court's opinion.
The New Jersey Supreme Court reversed the Appellate Division's decision and remanded the matter to the trial court with instructions to enter judgment in defendant's favor. In declining to address the utlimate issue (whether NJ common law recognizes a prima facie tort claim), the Court explained that Pulaski had other remedies that were available to him to redress his monetary loss:
Despite the apparent malicious conduct of Air Frame and its principal Ritterson the justices unanimously concluded that because Pulaski had other remedies available Pulaski could not satisfy the Restatement test for establishing a prima facie tort regardless whether or not New Jersey common law supports this cause of action.
Apparently for this unscrupulous business owner "crime does pay." It is rather surprising that the New Jersey Supreme Court, long a zealous victims rights advocate, saw fit to reverse the Appellate Division thus allowing the defendants, in the trial court's words, "to get away with it."
The New Jersey Supreme Court leaves open the question of whether New Jersey common law recognizes a prima facie tort claim. The legal definition of "prima facie" is evidence sufficient in law to establish a fact unless rebutted.
In this case the New Jersey Supreme Court had to decide whether New Jersey common law provides a remedy for misconduct that did not meet the traditional standards of a tort cause of action (i.e., such as fraud). This was not the first time the Court confronted this issue, for 10 years earlier in Taylor v. Metzger, 152 N.J. 490 (1998), the Court expressly declined to recognize a prima facie tort claim under New Jersey common law. However, in Taylor the Court noted that a leading treatise (Restatement) explained that such a cause of action encompasses the intentional, willful and malicious harms that "fall within the gaps of the law" and have been most frequently permitted only in limited situations in which a plaintiff would have no other cause of action.
The facts of the Pulaski case are quite complex, and must be abbreviated for purposes of this article. In simple terms, the defendant Air Frame Hangars ("Air Frame") entered into a lease with Mercer County for the development of "condominium-style" aircraft hangars. Air Frame retained Pulaski to perform certain site development work for the construction of these aircraft hangers. It was undisputed that Pulaski faithfully and dutifully performed its contractual services and that Air Frame failed to pay Pulaski all amounts due under their contract.
Pulaski proceeded to file a construction lien claim with the Mercer County Clerk's office in August 1997; the lien was subsequently ruled to be defective because the lien specified the wrong property address location. After Pulaski filed the construction lien claim but before it was declared defective, the parties engaged in a series of settlement discussions. When those discussions failed, in October 1997 Pulaski filed a demand for arbitration as required under the terms of the parties' written contract. While the arbitration was pending, in February 1998 Pulaski filed a separate lawsuit against Air Frame and Mercer County. The parties agreed to dismiss that lawsuit without prejudice with the applicable statutes of limitations period tolled (or preserved) pending the outcome of the arbitration.
In April 1999, Pulaski obtained a favorable arbitration award and thereafter filed a separate suit in the Superior Court of New Jersey to confirm the arbitration award. Prior to the conclusion of Pulaski's lawsuit to confirm the arbitration award and before Pulaski's construction lien was declared "defective", Air Frame sold 9 of its 9 aircraft hangers to various third party purchasers. In connection with each aircraft hangar sale Air Frame's principal (Mr. Ritterson) executed and delivered to each purchaser an Affidavit of Title affirmatively representing that he, as principal of Air Frame, was not aware of any adverse claims or liens against each particular aircraft hangar. Mr. Ritterson's representations were untruthful because Air Frame was in the midst of litigating its disputes with Pulaski.
The trial court determined that Ritterson's misrepresentations were deliberately intended to close title on the properties without having to pay Pulaski's unpaid lien claim. Not surprisingly, the evidence at trial revealed that Air Frame was insolvent. Refusing to let Air Frame and Ritterson "get away with it", the trial court concluded that Pulaski established a prima facie tort claim and entered judgment in Pulaski's favor in the amount of $105,932 plus an additional $39,000 in prejudgment interest and counsel fees. On defendant's appeal, the Appellate Division affirmed the trial court's opinion.
The New Jersey Supreme Court reversed the Appellate Division's decision and remanded the matter to the trial court with instructions to enter judgment in defendant's favor. In declining to address the utlimate issue (whether NJ common law recognizes a prima facie tort claim), the Court explained that Pulaski had other remedies that were available to him to redress his monetary loss:
"At its core, plaintiff's complaint is for breach of contract. It sought to prosecute that claim against Air Frame by demanding contract arbitration, procuring an arbitration award in its favor, and seeking to enforce its construction lien. Although plaintiff's construction lien was procedurally defective, plaintiff nevertheless had a judgment entered in its favor and against Air Frame for the amount of the arbitration award. Thus, plaintiff had successfully prosecuted a traditional cause of action at law for its breach of contract claim and was awarded a judgment in the full amount it sought."The Court further stated that a defendant's insolvency does not in-and-of-itself give rise to a prima facie tort claim. "Stated differently, a prima facie tort may be triggered by the absence of a cause of action, but not by the lack of an effective remedy," the Court remarked. Lastly, the Court held that an unperfected construction lien claim is a "nullity" and cannot serve as an independent basis to support a prima facie tort claim.
Despite the apparent malicious conduct of Air Frame and its principal Ritterson the justices unanimously concluded that because Pulaski had other remedies available Pulaski could not satisfy the Restatement test for establishing a prima facie tort regardless whether or not New Jersey common law supports this cause of action.
Apparently for this unscrupulous business owner "crime does pay." It is rather surprising that the New Jersey Supreme Court, long a zealous victims rights advocate, saw fit to reverse the Appellate Division thus allowing the defendants, in the trial court's words, "to get away with it."
Comments