New Jersey Attorney Law Review Blog

New Jersey Law Prevents Judgment Creditors From Forcing Sale of Jointly Held Real Estate Unless Judgment Is Against Both Property Owners

2011-08-03T10:54:00.005-05:00

This question frequently arises in the context of consulting with married couples who own jointly held real estate and a creditor has obtained a civil money judgment against only one of them. The most typical example is when either the husband or wife personally guarantees a business debt, the business ultimately fails or the husband or wife defaults on the loan, and the creditor files suit and recovers a judgment on the personal guaranty. Under New Jersey law can the judgment creditor of one spouse compel a court to order the sale of their jointly held marital residence?

The short answer is "no," provided that the non-debtor spouse survives the debtor spouse. When the debtor spouse passes away, the creditor's judgment goes to the grave with him/her and the surviving spouse holds the marital residence free and clear of the judgment.

However, during the lifetime of the debtor spouse the judgment creditor is still permitted to levy and execute against the debtor spouse's right of survivorship and his/her life estate. Should the non-debtor spouse predecease the debtor spouse, then the judgment creditor will take ownership of the property vis-a-vis ownership of the debtor spouse’s right of survivorship.

“A tenancy by the entirety is an estate held by husband and wife by virtue of title acquired by them jointly after marriage.” Dorf v. Tuscadora Pipe Line Co., 48 N.J. Super. 26, 31 (1957). “The tenancy is the creature of common law, created by legal fiction and based wholly on the common law doctrine that husband and wife are one. Id. Under New Jersey law, tenants by the entireties have certain specific rights. For example, tenants by the entireties each hold their estate as tenants in common for their joint lives subject to each spouse’s right of survivorship against one another. Upon the death of one of the spouses, the surviving spouse becomes the sole owner. In the Matter of Horace G. Houghton, 75 N.J. 462 (1978).

What About Splitting The House in Half?

So long as the non-debtor spouse does not predecease the debtor spouse, the judgment creditor cannot force a sale of the home by exercise of the remedy of partition, i.e., physically splitting the house in half and selling the debtor spouse’s half. Under New Jersey law, there may not be a partition with respect to lands held as tenants by the entirety. See Newman v. Chase, 70 N.J. 254, 260 (1976). See also Dvorken v. Barrett, 100 N.J. Super. 306, 309 (App. Div. 1968) (court has no power to order sale of property free of wife’s entirety interest); Citizens First National Bank of Ridgewood v. Grull, 122 N.J.Super. 562 (Ch. Div.1973) (levying creditor who had judgment against a tenant by the entirety could not compel a partition of the fee by sale or otherwise which would destroy the wife’s common law right of survivorship).

In King v. Greene, 30 N.J. 395, 412 (1959), the judgment creditor of the debtor spouse was allowed to levy and sell that spouse’s right of survivorship and his one-half (1/2) interest in the life estate for their joint lives. Such a sale, however, remains subject to the survivorship interest of the non-debtor spouse. Dvorken, 100 N.J. at 266. See also Freda v. Commercial Trust Co. of N.J., 118 N.J. 36 (1990) (a mortgage given by one tenant was deemed only to encumber that tenants interest where the mortgaged property was held as a tenancy by the entirety). In other words, a judgment creditor levying against the debtor spouse acquires no greater rights then that spouse had - which is one-half interest in life estate for their joint lives and debtor spouse’s right of survivorship. Guttermuth v. Ropiecki, 59 N.J. Super. 139, 142 (Ch. Div. 1977).

However, none of the above applies if the creditor has recovered a judgment against both the husband and wife.

No Class Action Status for Junk Fax Lawsuit, Says NJ Appeals Court

2011-07-22T09:01:00.006-05:00

In a case of first impression in New Jersey which I am dubbing as the "Bakery vs. the Bagelry," the Appellate Division held that a plaintiff could not maintain a class action lawsuit to enforce a private cause of action seeking damages for transmission of an unsolicited fax. Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., Docket No. A-3923-09T2 (App. Div. 2011).

In this case, the plaintiff Local Baking Products received an unsolicited one-page fax from defendant Kosher Bagel Munch promoting Bagel Munch's local restaurant in Passaic, New Jersey. This fax was sent by a marketing company hired by Bagel Munch as part of a "blast fax" campaign advertising Bagel Munch's food services to over 6000 phone numbers - the fax was ultimately received by approximately 4649 fax machines.

In response to receiving this unsolicited fax, the bakery filed a complaint against Bagel Munch seeking damages for itself and on behalf of all the other approximate 4649 recipients of the same fax - otherwise known as a class action lawsuit - for violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C.A. § 227. Enacted by Congress in 1991, the TCPA prohibits the use of any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement. . . ." 47 U.S.C.A. § 227(b)(1)(C). The TCPA provides for a private cause of action entitling a prevailing plaintiff to receive either actual damages for each violation or $500 for each violation, whichever amount is greater. 47 U.S.C.A. § 227(b)(3).

At the trial court level, the defendant successfully argued that the bakery could not maintain a class action lawsuit under the TCPA to enforce its private cause of action for damages. Accordingly, the trial court granted Bagel Munch's motion to dismiss the class action claim for failure to state a cause of action. The bakery did, however, receive a judgment for $500 in statutory damages as permitted under the TCPA. On Appeal, the New Jersey Appellate Division affirmed finding that the bakery cannot maintain a class action.

The Appellate Division began its analysis by remarking about the simplicity of the provisions of the TCPA that prohibit the sending of any unsolicited advertisements via facsimile. After recounting the statutory definition of an unsolicited advertisement set forth in § 227(a)(5), the appeals court identified the TCPA's three exceptions for imposing liability on the sender of an unsolicited fax:

(1) if a prior business relationship exists between the parties;

(2) if the recipient voluntarily makes its fax number available for "public distribution"; or

(3) if the advertisement contains a notice informing the recipient of the ability and means to avoid future unsolicited advertisements.

47 U.S.C.A. § 227(b)(1)(C).

Reciting the legislative history of the TCPA and ether cases decided in federal courts, the NJ Appellate Division noted that the purpose behind the private cause of action remedy is to allow consumers to appear without an attorney in small claims court and provide a $500 minimum amount of damages without having to prove actual damages. Specifically, the Appellate Division explained:

The drafters [of the TCPA] recognized that damages from a single violation would ordinarily amount to only a few pennies worth of ink and paper usage, and so believed that the $500 minimum damage award would be sufficient to motivate private redress of a consumer's grievance through a relatively simple small claims court proceeding, without an attorney. See 137 Cong. Rec. S16205-06 (daily ed. Nov. 7, 1991) (statement of Sen. Hollings)("[I]t would defeat the purposes of the bill if the attorneys' costs to consumers of bringing an action were greater than the potential damages.").

Class actions are governed by R. 4:32-1 of the New Jersey Court Rules. This Rule provides that class action certification is appropriate only if:

(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the
class.

R. 4:32-1(a).

The appeals court explained that the issues in this lawsuit “are whether the proposed class raises ‘questions of law or fact common to the members of the class [that] predominate over any questions affecting only individual members [(commonality and predomination)], and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy [(superiority)].”

After discussing the standards that governed its analysis of the class action issues, the appeals court rejected the bakery's argument that the trial court’s ruling was inconsistent with United Consumer Financial Services v. Carbo, 410 N.J. Super. 280 (App. Div. 2010), which considered a class action under the Truth-in-Consumer Contract, Warranty and Notice Act.

Acknowledging that no published New Jersey decision had resolved the issue of class actions under the TCPA [though the court did cite several unpublished decisions in New Jersey involving class action certification under the TCPA which are not binding or of precedential pursuant to New Jersey Court Rule 1:36-2], the Appellate Division looked to decisions from other state and federal courts, finding that there was a “lack of uniformity as to approach and result.” For example, courts in seven states have published decisions allowing class certification for TCPA claims: Arizona, California, Florida, Indiana, Missouri, North Carolina and Oklahoma. Whereas, courts in five other states have published decisions denying class action certification under the TCPA: Colorado, Connecticut, New York, Ohio, and Texas. The appeals court also noted a split in decisions published by federal district courts.

Expressing its doubt that the plaintiff could satisfy the commonality and typicality requirements of New Jersey Court Rule 4:32-1 governing class actions, the NJ Appellate Division ultimately concluded that the bakery could not satisfy the predominance and superiority factors. Specifically, the court declared that “a class action suit is not a superior means of adjudicating a TCPA suit.” The court stressed that by providing consumers with a statutory award of $500, Congress had offered aggrieved parties with an adequate incentive to pursue their claims without having to resort to a class action in order to aggregate many small claims.

Furthermore, the appellate court emphasized out that “[t]he combination of the TCPA’s design and New Jersey’s procedures suggests that the benefit of a class action has been conferred on a litigant by the very nature of the procedures employed and relief obtained. The cost of litigating for an individual is significantly less than the potential recovery.” Lastly, the court reasoned that the facts that were necessary to succeed on an individual claim would be identical to the facts needed simply to be identified as a class member.

Federal Appeals Court Reinstates Copyright and Defamation Case against NJ Shock Jocks

2011-06-21T14:51:00.004-05:00

A New Jersey federal appeals court has reinstated a copyright and defamation lawsuit against a New Jersey radio station and its DJ's, one of whom is currently a co-host of the popular WFAN Sports talk radio show of Boomer & Carton. Access to the U.S. Third Circuit Court of Appeals written opinion issued in Murphy v. Millennium Radio Group, Case No. 10-2163, can be found here.

In this case the plaintiff, Peter Murphy, alleges that the defendants violated the Digital Millennium Copyright Act for failure to post his credit for a photograph appearing on the radio station's website. In addition, Murphy alleges that both DJ's defamed him during a 45 minute broadcast of their radio show by calling him a "man not to be trusted" in business dealings and suggesting he is gay.

Murphy had taken a photo of 101.5 FM DJ's Craig Carton and Ray Rossi for the New Jersey Monthly magazine, which had named them New Jersey's "best shock jocks." At the time, Carton and Rossi were known as the "Jersey Guys" on New Jersey 101.5 radio show. The photo (shown here) depicted them standing behind a plcard bearing the station's name, with no other visible apparel - essentially giving the impression that both men were naked but for the sign in front of them.

The radio station invited website visitors to alter the picture with photo-editing software, and displayed the altered versions on its website. Twenty-six (26) of the altered photos eventually were posted, according to the decision. However, the website did not include the credit to Murphy, which had appeared in the print version of the original unaltered photo. (Murphy’s photo credit and copyright information was contained in the inner margin of a page in the New Jersey Monthly magazine, not as embedded data.) Murphy claimed the omission violated the Digital Millennium Copyright Act.

When Murphy first filed suit in U.S. District Court in 2008, attorneys for the shock jocks argued they did not violate any copyright infringement laws because the photo on the website constituted fair use of his work.

As codified in 17 U.S.C. § 107, the factors governing whether a particular use of copyrighted material is “fair” are: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

Deciding the photo met the court’s four-pronged test for fair use and that the alleged defamatory remarks were nonactionalbe, rhetorical hyperbole, U.S. District Judge Joel Pisano dismissed the suit.

However, a three-judge panel of the 3rd Circuit Court of Appeals concluded Judge Pisano got it wrong and reinstated Murphy’s lawsuit, including the defamation claim.

The appeals court said the lower court erred in finding that the defendants' reproduction of the unaltered image on the website was a fair use, and that the trial judge was too quick to dismiss the defamation claim without first giving Murphy the opportunity to depose Carton and Rossi.

New Jersey’s previous court ruling had said the copyright information has to be part of that automated system and Pisano followed that ruling. But the 3rd Circuit said the copyright information does not have to be part of an automated system.

Although Murphy had asked the appeals court to rule on whether an allegation of homosexuality is susceptible of a defamatory meaning under New Jersey law, the panel declined to decide that issue.

Blogger Must Reveal Sources, Says NJ Supreme Court

2011-06-20T17:42:00.006-05:00

New Jersey Supreme Court says bloggers are not journalists! Unless a blogger is connected to a traditional media outlet, there is no protecting a blogger's sources.

In a February 9, 2011 post I discussed the case of Too Much Media LLC v. Hale which was argued before the New Jersey Supreme Court concerning the issue of whether a blogger is protected by New Jersey’s shield law from revealing her sources for her allegedly defamatory Internet postings about a Freehold, NJ software company.

Several weeks ago, the NJ Supreme Court unanimously held against the blogger, concluding that bloggers do not fall within the definition of "journalists" entitled to a privilege against revealing their sources. Finding that Hale's blogging comments to be synonymous to online message boards, Chief Justice Stewart Rabner did not find legislative intent to provide an absolute privilege in these circumstances:

"We do not find that online message boards are similar to those types of news entities listed in the statute, and do not believe that the Legislature intended to provide an absolute privilege in defamation cases to people who post comments on message boards," Justice Rabner commented.

Explaining further, Justice Rabner noted that "Internet bulletin boards are not news organizations, but rather public forums that provide a 'looser, more relaxed communications style.'" "In essence, message boards are little more than forums for conversations. Those forums allow people a chance to express their thoughts on matters of interest. But they are not the functional equivalent of the types of news media outlets outlined in the Shield Law," said Justice Rabner.

The Court did, however, find disagreement with the lower court's decisions requiring that a full evidentiary hearing should be held to determine whether a report is covered by the privilege. The Court explained that in most cases, a simple certification (or affidavit as is sometimes referred to) stating the reporter's connection to a news outlet, his or her purpose in gathering information and a clarification stating that the information was gathered in the course of his or her professional activities should suffice. "However, self-appointed journalists or entities with little track record who claim the privilege require more scrutiny," the Court remarked.

The American Civil Liberties Union of New Jersey joined with Hale on the appeal, urging the Court to adopt an "intent test," by which Hale would be able to show that she intended to publish news stories about the subject matter.

Hale maintained that she was in the course of investigating criminal activity in the Internet porn industry and that her comments, made on Oprano.com, were meant to inform the public about frauds, scans and misuse of technology.

Hale accused Too Much Media of fraud and "illegal and unethical use of technology," violating New Jersey's Identity Theft Protection act and profiting from the theft of e-mail addresses stolen by hackers in a 2007 security breach. Discussing a competitor's suit against Too Much Media, she said the company's principals "may threaten your life if you report any of the specifics."

Too Much Media filed suit against Hale in the Superior Court of New Jersey in Ocean County and was intending to take Hale's deposition when Hale unsuccessfully filed for a protective order. The trial court found that she was simply posting her messages on a bulletin board and rejected Hale's claim that she was investigating Too Much Media for her own website, Pornmafia.com which hadn't even been launched at the time.

The Appellate Division agreed, as did the NJ Supreme Court, that Hale exhibited none of the recognized qualities or characteristics traditionally associated with the news process, nor demonstrated an established connection or affiliation with any news entity.

As Justice Rabner observed, ". . . the popularity of the Internet has resulted in millions of bloggers who have no connection to traditional media. Any of the, as well as anyone with a Facebook account, could try to assert the privilege."

Being a blogger myself, I suppose I am not entitled to any protection from disclosing my sources unless the source is my client. After all, the last time I checked the attorney-client privilege is alive and kicking in New Jersey!

NJ Supreme Court Says Orders Compelling Arbitration Are Considered Final Orders Which Are Appealable As Of Right

2011-04-04T15:29:00.004-05:00

"All orders compelling and denying arbitration shall be deemed final for purposes of appeal, regardless of whether such orders dispose of all issues and all parties, the time for appeal therefrom starts from the date of the entry of that order," said the New Jersey Supreme Court in a recent ruling issued in the case of GMAC v. Rosanna Pittella v. Pine Belt Enterprises, Inc. (March 23, 2011, A-15-10).

The relevant facts of the case are as follows: On February 27, 2003, Pittella entered into a “retail installment sale contract” with Pine Belt to finance the purchase of a car she bought at the Pine Belt auto dealership. Pittella simultaneously signed an arbitration agreement entitled “Option to Arbitrate Disputes,” which obligated Pitella to submit to binding arbitration any dispute arising out her financing, leasing or acquisition of the vehicle. In addition, the arbitration provision of the retail installment contract specifically informed Pitella that:

IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, DISPUTE OR CONTROVERSY, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM, OR TO ENGAGE IN PRE-ARBITRATION DISCOVERY, EXCEPT AS PROVIDED IN THE ARBITRATION RULES. FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIMS SUBJECT TO ARBITRATION. THE ARBITRATOR’S DECISION WILL GENERALLY BE FINAL AND BINDING. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION. IT IS IMPORTANT THAT YOU READ THE ENTIRE ARBITRATION PROVISION CAREFULLY BEFORE SIGNING THESE DOCUMENTS.

As is typical in the auto industry, Pine Belt assigned the contract to GMAC which financed Pitella's purchase. On February 12, 2008, GMAC repossessed the car for non-payment and filed suit against Pittella in the Special Civil Part for a deficiency balance of $14,013.15.

In response to GMAc's lawsuit, Pittella filed an answer, a counterclaim, and a third-party complaint against Pine Belt.alleging violations of the New Jersey Consumer Fraud Act, breach of contract, fraud and breach of implied covenant of good faith and fair dealing,” Pittella claimed that Pine Belt charged an excessive price for the extended warranty on the car, and that “the disclosures and representations regarding the cost of the extended warranty [were] false, inaccurate or misleading” because Pine Belt retained “a substantial percentage” of the $3,400 warranty purchase price as profit for itself. Pittella also asserted “class action allegations” against Pine Belt on behalf of a proposed class of individuals who had purchased similar extended warranty plans from Pine Belt during the previous six years.

The action was transferred to the Law Division. In lieu of filing an answer, Pine Belt moved for summary judgment to compel arbitration and to dismiss the class action claims.

On July 31, 2008, the trial court partially granted Pine Belt’s motion and entered an order compelling “binding arbitration” of Pittella’s individual claims against Pine Belt, but did not stay GMAC’s claims pending the arbitration. The court initially denied the motion to dismiss Pittella’s class action claim because it found the class action waiver clause unenforceable. However, Pine Belt moved for reconsideration and, on August 29, 2008, the Law Division reversed itself, dismissing Pittella’s class action claim “with prejudice.”

Pittella and GMAC subsequently resolved their dispute in the pending litigation and, on March 5, 2009, executed a “stipulation of dismissal with prejudice” thus conclusively ending the entire litigation.

Within forty-five days of the March 5, 2009 dismissal, on April 14, 2009 Pittella filed a notice of appeal from the July 31, 2008 and August 29, 2008 orders. Pine Belt moved to dismiss the appeal “as untimely,” arguing that Pittella was required to file her appeal within forty-five days of the July 31, 2008 orders compelling binding arbitration and the dismissal of the class action claims.

NJ Court Rule 2:2-3 governs the filing of appeals brought as a matter of right final judgments. Under R. 2:2-3(a)(3), ". . .an order compelling arbitration, whether the action is dismissed or stayed, shall also be deemed a final judgment of the court for appeal purposes."

The Rule itself makes it clear that any order compelling arbitration should be considered a final judgment subject to appeal as of right under R. 2:2-3(a)(3). And in fact, prior New Jersey Supreme Court precedent held exactly that, in Wein v. Morris, 194 N.J. 364, 380 (2008) - that an order compelling arbitration as to all parties and all issues is indeed a final judgment appealable as a matter of right under R. 2:2-3(a)(3).

So it would seem to have been a slam dunk for Pine Belt to have prevailed before the New Jersey Supreme Court because clearly Pitella did not file her appeal within 45 days of the July 31, 2008 order compelling arbitration. Not so, said the Supreme Court.

Pittella countered that the July 31, 2008 orders did not dispose of all issues as to all parties, and therefore were not final judgments appealable as of right. For its part, Pine Belt argued Pine Belt argues Pittella’s appeal was not timely because all orders compelling arbitration are deemed final for appeal purposes under the express wording of Rule 2:2-3(a), including orders that do not dispose of all issues as to all parties.

The NJ Supreme Court elected to decide only the following issue:

Whether orders compelling arbitration as to some, but not all parties, in a litigation are excepted from this Court’s unconditional holding in Wein v. Morris, 194 N.J. 364 (2008) that all orders compelling arbitration are deemed final and immediately appealable as of right.

Ultimately, the Supreme Court agreed with Pitella's argument - that the July 31, 2008 order compelling arbitration could not be considered a final judgment subject to appeal as of right under R. 2:2-3(a)(3) because at the time that order was entered the trial court still had to decide GMAC's deficiency claim against Pitella. Therefore, the order compelling arbitration did not resolve all disputes as to all parties which distinguished this case from the fact pattern of Wein v. Morris.

Said the Supreme Court:

Because it addressed less than all issues as to all parties, it was not clear that the order compelling arbitration of Pittella’s claims against Pine Belt was final under Rule 2:2-3(a) and Wein. That question and its resolution are now crystal clear: orders compelling or denying arbitration are deemed final and appealable as of right as of the date entered. Based on the prior lack of clarity, we affirm that portion of the Appellate Division decision denying the motion to dismiss the appeal from the final judgment. We do so with the following warning: as of today, litigants and lawyers in New Jersey are on notice that all orders compelling and denying arbitration shall be deemed final for purposes of appeal, regardless of whether such orders dispose of all issues and all parties, and the time for appeal therefrom starts from the date of the entry of that order.

The case is important for lawyers and their clients because the Supreme Court has now made clear that any order compelling arbitration is considered final and appealable, and therefore any appeal from such an order must be filed within 45 days of the date it is entered.

NJ Wineries Claim Sour Grapes By Federal Appeals Court Ruling

2011-02-12T11:02:00.006-05:00

In Freeman v. Corzine (United States Court of Appeals for the Third Circuit, Nos. 08-3268 and 08-3302, December 2010), the plaintiffs – two New Jersey wine enthusiasts, a New Jersey couple seeking access to more Kosher wines, and a California winery – brought suit in the United States District Court for the District of New Jersey against Jerry Fischer, New Jersey’s Director of Alcoholic Beverage Control, alleging that several aspects of New Jersey’s Alcoholic Beverage Control Law (“ABC Law”) infringe on the dormant Commerce Clause in violation of 42 U.S.C. § 1983.

The suit challenged the constitutionality of parts of New Jersey’s alcohol beverage control laws permitting certain New Jersey farmers and wineries to bypass wholesalers and sell directly to retailers and consumers.

Currently, out-of-state wineries must exclusively go through wholesale distributors to sell their products in New Jersey, but in-state vineyards can sell to customers directly in on-site tasting rooms, in its own storefronts and in larger retail stores throughout the state. The plaintiffs argue that such rules provide in-state wineries with a competitive advantage.

The Court of Appeals agreed with the plaintiffs, upholding the decision of the lower federal court which found the laws to be unconstitutional. The appeals court sent the case back to the District Court level to determine the solution: (1) either give all vineyards the same rights to sell directly to consumers in New Jersey, or (2) order all wineries to go through wholesalers. Thus, the District Court will decide who the winner is - New Jersey farmers or New Jersey wholesalers.

Fearing that the District Court may choose option # 1, the Garden State Wine Growers Association, which represents New Jersey’s 29 wineries, retained counsel and is contemplating petitioning the court to intervene in the case. According to news coverage of the case, if the rules change and all vineyards must sell their products through wholesalers, the vintners say the future of the state’s wine business could be in jeopardy. No matter which side the District Court finds in favor of, additional appeals will likely follow.

New Jersey's Three-Tier Alcohol Distribution Laws

New Jersey, like most other states, has a three-tier alcohol distribution system. Pursuant to that structure, alcoholic beverages are sold by (1) suppliers and manufactures to (2) wholesalers, who in turn sell to (3) retailers, who then sell alcohol to consumers.

The United States Supreme Court has held that such a three-tier system is legitimate. Granholm v. Heald, 544 U.S. 460 (2005); and North Dakota v. United States, 495 U.S. 423 (1990). The Granholm Court nevertheless cautioned that “straightforward attempts to discriminate in favor of local producers” of alcoholic beverages by, for instance, “subjecting out-of-state [producers], but not local ones, to the three-tier system,” are “contrary to the Commerce Clause and . . . not saved by the [states’ authority to regulate alcoholic beverages under] the Twenty-first Amendment.” Id. at 474, 489.

New Jersey’s Alcoholic Beverage Control Laws (“ABC Laws”), which are enforced by the Director of the Division of the Alcoholic Beverage Control (“ABC”), have allowed certain New Jersey farmers and wineries to skip the wholesalers and sell directly to retailers and consumers. Out-of-state wineries and wine aficionados cried foul and challenged the special privileges given to New Jersey producers, arguing that permitting them to operate outside the rigid three-tier distribution gave NJ businesses an unfair advantage.

The Third Circuit Appeals Court recognized that when “all out-of-state wine, but not all in-state wine [must] pass through an in-state wholesaler and retailer before reaching consumers, the discriminatory character of the system is obvious.” The Third Circuit Court further found that there was no legitimate purpose for this unequal treatment. As a result, the Third Circuit Court held that the privileges that allowed plenary or farm winery licensees to sell directly to retailers or consumers are unconstitutional.

The Third Circuit also invalidated a provision of the ABC Laws that required individuals to obtain a special permit from the ABC before importing more than a gallon of wine for personal use.

Parents Didn't Commit Child Neglect For Slapping Teen and Taking Her Paycheck, Says NJ Supreme Court

2011-02-10T10:06:00.003-05:00

According to the unanimous decision published by the New Jersey Supreme Court on January 26, 2011, the parents of a teenage girl did not commit child abuse by slapping their daughter and taking a portion of her part-time wages to pay family bills. New Jersey Division of Youth and Family Services v. P.W.R. (A-79-09, January 26, 2011).

The Court found the state Division of Youth and Family Services ("DYFS") lacked sufficient evidence to remove the teenager (Alice) from her father and stepmother’s home in 2008, and vacated the abuse and neglect judgment against her stepmother (Pam).

DYFS removed the girl from the home after her grandfather reported the parents for taking her earnings from her part-time job and "slapping her around." A DYFS worker also found the home was without heat and authorized an emergency removal.

The father told a DYFS representative that his wife (Pam) had slapped his daughter (Alice) once two years earlier, and that part of Alice's earnings went to the cable bill. The couple said their central heating was broken, and they were using space heaters. The family members were not named the decision.

The Supreme Court found that an occasional slap, "although hardly admirable ... does not fit a common sense prohibition against ‘excessive’ corporal punishment." And classifying as abuse and neglect the requirement of a working-aged child to contribute to the family finances is "simply wide of the mark," LaVecchia wrote. The Court further remarked:

The dominant allegation of abuse was that Pam slapped Alice in the face, which conduct, although abhorrent to a sixteen-year-old young woman, and hardly admirable, does not fit within the statutory definition of abuse.

* * *

In sum, although no parenting awards are to be won on this record, neither was actionable abuse or neglect proven. As stated at the outset, DYFS has many serious cases, and even more numerous referrals that necessitate investigations requiring the agency to wade into difficult family problems in order to protect children. Its task is hard and it must be vigilant, but it must be vigilant within the limitations of the law that empowers the agency’s actions. The record here simply did not demonstrate proof of actionable abuse or neglect of Alice by Pam. It was an error for the courts below to have sustained the findings of abuse and neglect entered against Pam.

The girl is no longer a minor, so the Court’s decision did not affect her custody. A full copy of the NJ Supreme Court's published opinion can be found here.

NJ Supreme Court Reviews Journalism Shield Laws in Pornographic Blogger Case

2011-02-09T23:40:00.006-05:00

Attention Bloggers! In a case that could have far-reaching effects on online commentary in the media, the NJ Supreme Court heard arguments today on whether a blogger from Washington state is protected by New Jersey’s so-called shield law concerning her writings about out Freehold-based Too Much Media Inc. ("TMM"), a maker of software used by many adult entertainment websites to track sales.

According to the court filings, the blogger Shellee Hale, a former Microsoft employee and a private investigator, maintains she was working as a journalist in 2008 when she set out to investigate organized crime infiltration of the online porn industry. Hale created a website under the domain name Pornafia.com (which now forwards to shellehale.com) to report her findings, and even planned to publish a book on the subject.

Hale chose not to publish any articles on her website (Pornafia.com) because she claims TMM principals threatened her. However, she posted comments on an online bulletin board (Oprano.com) accusing TMM of engaging in fraudulent practices and threatening the life of someone who divulged details about it.

TMM, based in Manalapan, New Jersey and operating a website under the domain toomuchmedia.com, filed a defamation lawsuit against Hale in New Jersey in 2008. When TMM pressed Hale to reveal the identity of her confidential source, Hale invoked New Jersey's shield law to avoid identifying the person who was threatened and another source who first told her of the threats.

New Jersey's shield law is found at N.J.S.A. 2A:84A-21, and states in relevant part:

[A] person engaged on, engaged in, connected with, or employed by news media for the purpose of gathering, procuring, transmitting, compiling, editing or disseminating news for the general public or on whose behalf news is so gathered, procured, transmitted, compiled, edited or disseminated has a privilege to refuse to disclose, in any legal or quasilegal proceeding or before any investigative body, including, but not limited to, any court, grand jury, petit jury, administrative agency, the Legislature or legislative committee, or elsewhere
a. The source, author, means, agency or person from or through whom any information was procured, obtained, supplied, furnished, gathered, transmitted, compiled, edited, disseminated, or delivered; and

b. Any news or information obtained in the course of pursuing his professional activities whether or not it is disseminated.

N.J.S.A. 2A:84A-21.

The term "news media" is defined as "newspapers, magazines, press associations, news agencies, wire services, radio, television or other similar printed, photographic, mechanical or electronic means of disseminating news to the general public." N.J.S.A. 2A:84A-21a.

Although Hale admits she was not working for a traditional news organization when she made the online postings in 2008, she insists she is a journalist and should not have to reveal her source. The trial court rejected Hale's argument and characterized her comments as the rants of "a private person with unexplained motives for her postings."

A New Jersey appeals court agreed, writing that Hale's postings on the website Oprano.com, which bills itself as "The Wall Street Journal of the Porn Industry," "were not made in the context of any recognized aspect of the news process nor, we conclude, by a 'newsperson' in the course of her professional activities." The New Jersey Supreme Court agreed to hear the case on a further appeal.

During oral argument before New Jersey's highest court on February 9, 2011, Justice Helen Hoens remarked that "[T]his is unregulated territory."

According to various news reports, much of the nearly two-hour oral argument in Trenton revolved around the shield law statute (N.J.S.A. 2A:84A-21) enacted in 1977, which the justices and attorneys agreed is outdated and does not address new forms of media on the Internet. The Justices and attorneys also agreed that New Jersey's shield law is one of the broadest in the country in its protection of journalists' sources.

But the justices appeared reserved about carving out a new definition of a journalist. "We have to be clear what we’re deciding here," Justice Barry Albin commented. He said the issue before the courts is ‘‘who the shield law pertains to — that’s all.’’ Referring to the most popular social networking site Facebook, Justice Albin questioned whether a person posting reckless writings on Facebook is protected if he first announces he is a reporter conducting an investigation. ‘‘Do you really think the legislation intended the shield law to protect everyone?’’ Justice Albin asked.

Stay tuned for the outcome of this most important decision by the New Jersey Supreme Court. If this case demonstrates anything, our New Jersey legislature has some homework to do in updating some of New Jersey's antiquated laws which predate the explosion of the Internet as a medium for anyone to publish and disseminate their thoughts, ideas, and opinions.

NJ Bankruptcy Court Says State Court Default Judgment For Fraud Not Binding

2011-02-03T18:10:00.014-05:00

Assume the following scenario: A client consults with a NJ bankruptcy lawyer about filing a bankruptcy case. During the course of their initial meeting, the client discloses that one of his largest creditors recently filed a lawsuit in the Superior Court of New Jersey (“NJ Court”) accusing him of engaging in fraud, and that he failed to respond to the lawsuit which resulted in the Court entering a judgment by default (or default judgment) against him for $200,000 predicated on fraud.. “How does this default judgment affect my bankruptcy case?,” the client asks the lawyer.

The lawyer explains that while bankruptcy will discharge or wipe out most unsecured debts that the Bankruptcy Code provides a remedy for creditors to challenge the discharge of a particular debt grounded in fraud. To secure an exception to discharge, the Bankruptcy Code requires the creditor to file a separate lawsuit (called an adversary proceeding) in the Bankruptcy Court challenging the discharge of the creditor’s debt. An adversary proceeding to except a debt from discharge on the grounds of fraud must be filed within a very limited time frame set by the Bankruptcy Code, and if the creditor fails to meet this deadline then his fraud claim is considered discharged.

Since the NJ Court already has determined the client to have engaged in fraud, will that finding be binding upon the client in a subsequently filed bankruptcy case? In other words does the NJ Court’s default judgment predicated on fraud conclusively establish that the client committed fraud so that the creditor will automatically be able to except the $200,000 debt from being discharged in a subsequently filed bankruptcy case? As discussed herein, the answer is “no” according to several published decisions issued by the United States Bankruptcy Court for the District of New Jersey.

A judgment is the final part of a court case. A valid judgment resolves all the contested issues and terminates the lawsuit, since it is regarded as the court's official pronouncement of the law on the action that was pending before it. It states who wins the case and what remedies the winner is awarded. Remedies may include money damages, injunctive relief, or both. A judgment also signifies the end of the court's jurisdiction in the case, except for post-judgment collection proceedings in aid of execution on the judgment.

A default judgment results from a defendant's failure to appear in court or from one party's failure to take appropriate procedural steps. A default judgment is entered upon the failure of the party to appear or to plead at an appropriate time in response to a complaint filed with the Court. Before a default judgment is entered, the defendant must be properly served notice of the pending action. The failure to appear or answer is considered an admission of the truth of the opposing party's pleading, which forms the basis for a default judgment.

In cases filed in the Law Division of the NJ Court, there is a 35-day period for a defendant to file an answer once served with the Complaint. There could be several reasons why a defendant may not respond to a lawsuit, including excusable neglect – i.e., defendant simply forgets to respond within the 35-day time period,or the family member living in the defendant’s household who gets served with the Complaint forgets to give it to the defendant, the process server never actually serves the defendant but submits a false affidavit of service, the defendant is unable to afford the services of a lawyer, the defendant was in the military service, etc.

The NJ Court Rules provide the defendant with an opportunity to petition the State Court to have the default judgment vacated.R. 4:50-1 offers several different bases to vacate a default judgment, including excusable neglect. A motion to vacate a default judgment must be brought within in a reasonable time, and usually not more than 1 year after entry of the judgment.

The decision whether to vacate a default judgment, brought under R. 4:50-1, also rests in the discretion of the court. Marder v. Realty Constr. Co., 84 N.J.Super. 313, 318 (App. Div. 1964). Since the main scope of this article addresses whether a default judgment is binding in a subsequently filed bankruptcy case, I will not be addressing the myriad of factors that courts consider when considering a defendant’s application to vacate a default judgment under R. 4:50-1.

Is a Default Judgment Binding on the Bankruptcy Court?

The Bankruptcy Code ("Code") is designed to relieve debtors from the weight of oppressive indebtedness and to provide them with a "fresh start." In re Cohn, 54 F.3d 1108, 1113 (3rd Cir.1995). This "fresh start" is available only to the "honest but unfortunate debtor." Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 659, 112 L.Ed.2d 755 (1991); In re Fegeley,118 F.3d 979, 983 (3rd Cir.1997); In re DeBaggis, 247 B.R. 383, 388 (Bankr.D.N.J.1999).

However, not all debts owed by an individual debtor are discharged in bankruptcy. Certain debts, listed in 11 U.S.C. §523 are excepted from discharge, including actual fraud. The plaintiff has the burden of establishing all elements of a section 523 exception to discharge by a preponderance of the evidence. Grogan, 498 U.S. at 287-88, 111 S.Ct. at 659-60. Exceptions to discharge are to be construed strictly against creditors and liberally in favor of debtors.

In most instances, a default judgment issued by a court of competent jurisdiction is final as to all issues raised in the lawsuit. In fact, the legal doctrine of collateral estoppel (or issue preclusion) prevents the parties to a lawsuit from getting a “second bite at the apple” by subsequently relitigating the same issues previously raised and litigated between them.

Under New Jersey law, the doctrine of collateral estoppel, which prohibits the relitigation of issues that have been resolved in a prior lawsuit, applies in bankruptcy discharge proceedings. See Grogan v. Garner, 498 U.S. 279, 284-85 n.11 (1991); In re Docteroff,133 F.3d 210, 214 (3^rd Cir. 1997).

"A federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was entered." Walker v. Horn,385 F.3d 321 (3^rd Cir. 2004) (internal citations and quotations omitted). See also 28 U.S.C. § 1738 (requiring federal courts to give state court judgments the same full faith and credit they have in the state of origin.). There are limitations on the application of collateral estoppel, however, because NJ law treats a default judgment to be a final or conclusive adjudication between the parties only as to such matters or issuable facts as were properly alleged in the complaint. Girard Trust Co. v. McGeorge, 128 N.J.Eq. 91, 101 (Ch. 1940).

Under New Jersey law, a party asserting collateral estoppel must satisfy five elements: 1) the issue to be precluded is identical to the issue decided in the prior proceeding; 2) the issue was actually litigated in the prior proceeding; 3) the court in the prior proceeding issued a final judgment on the merits; 4) the determination of the issue was essential to the prior judgment; and 5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding. In re Estate of Dawson, 136 N.J. 1, 20 (1994).

Whether these requirements have been met should be decided "by the bankruptcy judge after a careful review of the record of the prior case, a hearing at which the parties have the opportunity to offer evidence, and the making of findings of fact and conclusions of law." In Re Ross, 602 F.2d 604, 607 (3^rd Cir. 1979).

In several published decisions, the United States Bankruptcy Court for the District of New Jersey has held that a state court default judgment based on fraud is not conclusive in a subsequently filed adversary proceeding brought under the fraud exception to discharge provision set forth in Bankruptcy Code Section 523(a)(2)(A). Mattson v. Hawkins (In re Hawkins),. 231 B.R. 222 (D.N.J. 1999); and Grumbine v. Azeglio (In re Azeglio), 422 B.R. 490 (Bankr. D.N.J. 2010).

Make no mistake, the Bankruptcy Court will apply the doctrine of collateral estoppel when a matter is “actually litigated” in state court. However, because the fraud exception to a bankruptcy discharge is an independent federal law that requires evaluation of a different set of criteria, the Bankruptcy Court does not view a state court default judgment as satisfying the “actual litigation” factor for collateral estoppel to apply because the state court could not have considered the discharge issue pre-bankruptcy.

In the Grumbine case, the defendant actually participated in the case but failed to appear on the scheduled trial date. Another co-defendant also failed to appear on the trial date. Following a proof hearing (or evidentiary hearing), the state court judge entered a default judgment against both defendants for the sum of $772,419 plus attorneys’ fees, finding that they violated the New Jersey Consumer Fraud Act regarding their failure to disclose the existence of an underground storage tank in connection with the sale of a residential property.

When one of the defendants (Nicholas Azeglio) filed for bankruptcy, the plaintiffs in the state court case filed an adversary proceeding objecting to the discharge of their debt and argued that the state court default judgment was binding on the issue of fraud. U.S. Bankruptcy Judge Judith H. Wizmur rejected the plaintiffs’ argument, finding that collateral estoppel did not apply because the issue of fraud was not litigated in the state court:

Here, although the debtor participated actively in pretrial proceedings, he did not participate at all at the trial, and had no opportunity to present a defense to the trier of fact. Although the court accepted proofs from the plaintiff in the action, the proceeding was akin to the entry of a default judgment against the debtor. The debtor did not have his day in court. No preclusive effect may attach to the judgment.

While every case is decided on its own set of facts, when it comes to the serious matter of weighing a debtor’s right to a fresh start versus a creditor’s right to challenge discharge of his/her debt on the grounds of the fraud exception to discharge, the New Jersey Bankruptcy Court will not apply collateral estoppel to give conclusive effect to a state court default judgment predicated on fraud.

NJ Supreme Court Justices Put On Their Boxing Gloves Over Abstention by Associate Justice

2010-12-16T16:31:00.002-05:00

Argues Chief Justice did not have power to fill vacant seat

In an unprecedented move that jolted New Jersey's legal community, on December 10, 2010 New Jersey Supreme Court Justice Roberto A. Rivera-Soto announced that he will abstain from the New Jersey Supreme Court's decisions claiming that the Court's Chief Justice, the Honorable Stuart Rabner, did not have the constitutional power to appoint a temporary justice (appeals court Justice Edwin Stern) to temporarily fill a vacant seat on the seven-member Court.

The dispute stems from a controversy that has been boiling since May 2010 when Republican New Jersey Governor Christie refused to renominate Democratic-appointed Justice John Wallace to the Court and, instead, nominated Anne Patterson, a Morristown attorney and a Republican.

Democratic legislative leaders charged that Governer Christie's action was unparalleled and Senate President Stephen M. Sweeney (D-Gloucester) declared the upper house of the New Jersey legislature would not consider a replacement for Wallace until he would have retired from the court in March 2012. Chief Justice Rabner then appointed an appeals court judge to temporarily fill Wallace's seat.

In two routine decision made public on December 10, 2010, Rivera-Soto declared it was not necessary to appoint a temporary justice, and announced that he is abstaining from decisions because the Court's current makeup is unconstitutional. He argued that only the governor has the power to appoint a NJ Supreme Court justice.

"The assignment of a Superior Court judge to serve on this Court to fill a vacancy resulting from a political impasse between the executive and the legislative branches thrusts the judiciary into that political thicket, all the while improperly advancing one side's views in preference over the other's,"

Justice Rivera-Soto wrote. "The Constitution, sober and reflective court practice, and everyday common sense each counsels against the foolhardy steps the Court today takes," Justice Rivera-Sota remarked.

Chief Justice Rabner, in obvious disagreement with Justice Rivera-Soto's responded that the creators of the state's Constitution did not make an ironclad standard that only the governor could name a justice.

"The court today has only six members — one short of its full complement — and it is unclear when that will change," Chief Justice Rabner wrote. "In the interim, the current assignment is necessary to address the court's substantial workload and meet the needs of the public."

Justices Virginia Long, Jaynee LaVecchia and Barry T. Albin agree with Rabner, while Justice Helen Hoens raised concerns with both arguments.

Justice Hoens stated that her colleague Rivera-Soto is taking a narrow view of Rabner's constitutional powers, but added that Stern's appointment is questionable because "the only apparent reason for the temporary assignment of a judge is to have someone help the others to carry the court's heavy workload."

The state Constitution declares, "Five members of the court shall constitute a quorum. When necessary, the chief justice shall assign" the highest-ranking Superior Court judge "to serve temporarily."

The Supreme Court's year ends June 30th. Rivera-Soto was appointed to the court by Democratic Gov. James E. McGreevey in 2004. Indeed, politics is alive and well in New Jersey's jurisprudence.

NJ Supreme Court Rejects Tea Party's Efforts to Recall U.S. Senator Menendez

2010-11-18T23:36:00.004-05:00

In a 4-2 vote, New Jersey's Supreme Court in The Committee to Recall Robert Menendez v. Nina Wells (A-86-09) held that a tea-party group can't continue with its effort to recall U.S. Sen. Robert Menendez. The group, amongst Menendez's critics, argued that the states have the power to regulate recall efforts because the U.S. Constitution is silent on the issue. Specifically, the tea party group maintained that an amendment to New Jersey's state constitution later implemented by statute provides for the recall of any elected official “in this State or representing this State in the United States Congress.”

The Judges sided with lawyers for the New Jersey Democrat, who said a recall would violate the U.S. Constitution. Menendez is up for re-election in 2012. According to news reports, the Committee says it will be appeal to the U.S. Supreme Court.

The facts and procedural history of the case are as follows: In 1993, New Jersey voters approved an amendment to the State Constitution that provides for the recall of any elected official “in this State or representing this State in the United States Congress.” N.J. Const. art. I, para. 2(b). The constitutional amendment further provides for the enactment of laws to include the requirement that a recall election be held on the petition of 25 percent of the registered voters in a district.

The Uniform Recall Election Law (UREL), N.J.S.A. 19:27A-1 to -18, which went into effect on May 17, 1995, implemented the constitutional amendment and established procedures for New Jersey citizens to seek to recall “any United States Senator or Representative elected from this State or any State or local elected official.” N.J.S.A. 19:27A-2.

On November 7, 2006, Robert Menendez was elected to represent New Jersey in the U.S. Senate for a 6 year term. Senator Menendez took the required oath of office and was officially seated in the Senate on January 4, 2007. His term is set to end on January 3, 2013.

On September 25, 2009, pursuant to the UREL, a tea group party calling themselves the Committee to Recall Robert Menendez from the Office of U.S. Senator (Committee), submitted to the New Jersey Secretary of State (Secretary), and the Director of the Division of Elections (Director of Elections), a notice of intention to recall Senator Menendez.

On January 11, 2010, acting on the advice of the New Jersey Attorney General, the Secretary issued a final agency determination declaring that the notice of intention would not be accepted for filing or review. The Secretary explained that the qualifications and election of United States Senate Member is a matter of exclusive jurisdiction of federal authority, and neither the United States Constitution nor federal statute provides for a recall proceeding for a federally-elected official.

The Committee then filed an application with the Appellate Division seeking temporary injunctive relief and expedited review. On February 4, 2010, the Appellate Division granted the Committee’s motion to accelerate the appeal, as well as the application of the American Civil Rights Union (ACRU) to participate as a friend of the Court.

Before the appellate panel, the Committee advocated the following arguments: the Secretary improperly denied the notice of intention even though the notice complied with all statutory requirements; the Secretary, as an agent of the executive branch, was in no position to opine on the validity of the UREL; the constitutionality of the UREL would not be ripe for judicial review until (1) the Committee obtained roughly 1.3 million signatures of registered voters needed to force a recall election, (2) a majority of voters voted to recall Senator Menendez, and (3) the Secretary ordered his recall; and the Committee must be allowed to proceed with the recall process because it is a matter of “core political speech” protected by the Federal and State Constitutions.

Both the Attorney General, on behalf of the Secretary and the Director of Elections, and Senator Menendez asserted that the Federal Constitution is the sole legal authority that governs the qualifications and right to expel a Member of Congress, and that the UREL and the Recall Amendment, which extend to Members of Congress, are therefore unconstitutional, and that the issue was ripe for adjudication.

In a published decision, the Appellate Division questioned the constitutionality of the UREL but declined to rule on the ultimate validity of the recall process regarding a United States Senator and ordered the current Secretary of State to accept and file the petition and to proceed under the statute. 413 N.J. Super. 435 (App. Div. 2010).

The appeals panel framed the issue as whether New Jersey’s constitutional and statutory recall measures, as applied to a United States Senator, are so manifestly invalid under the Federal Constitution that they must depart from the norms of judicial restraint and compel that the Committee’s process in circulating a recall petition be halted. In light of the constitutional ambiguity identified by the appeals panel, the Appellate Division was not convinced that it could safely predict what the United States Supreme Court would do if it were presented with the issue. Without ruling on the ultimate validity of the recall process, the Appellate Division found a sufficient basis for the Committee to proceed with its initiative and for the Secretary of State to perform her ministerial function. In other words, the Appellate Division ordered the Secretary of State to accept the petition and proceed with the recall procedures set forth in the UREL without deciding the law’s validity. In essence then, the Appellate Division “punted” the football.

Dissatisfied with the Appellate Division’s ruling, Senator Menendez petitioned the New Jersey Supreme Court for further review. After granting the Senator’s petition for review, the Court reversed the Appellate Division’s judgment and vacated the order requiring the Secretary of State to accept the notice of intention.

The Court disagreed with the Appellate Division’s decision to punt on adjudicating the law’s validity, finding that the matter is ripe for adjudication and the text and history of the Federal Constitution, as well as the principles of the democratic system it created, do not allow the states the power to recall U.S. Senators. Accordingly, the NJ Supreme Court declared those portions of the UREL and the State Constitution which authorize the recall of U.S. Senators are unconstitutional.

Upcoming Cases on NJ Supreme Court Case Docket

2010-11-11T12:59:00.003-05:00

The following appeals were recently added to the docket of the New Jersey Supreme Court. We will report the outcome of these decisions when the the Court publishes their opinions, which could take 4 to 6 months or more.

A-34-10 O Builders & Associates, Inc. v. Yuna Corp. of NJ d/b/a Baden Baden Restaurant (066490)
Did the prior consultation between the defendant and plaintiff’s attorney create a conflict that required the attorney to be disqualified from representing plaintiff in this litigation?
Certification granted 10/28/10

A-27-10 Peter Risko v. Thompson Muller Automotive Group t/a Hammonton Chrysler Jeep Dodge (066502)
In this wrongful death case arising from a slip-and-fall, did the cumulative effect of plaintiff’s attorney’s comments during summation, including telling the jury that they would be “ignoring the law” if they had an issue with “a million dollar case,” violate the prohibition against suggesting a verdict?
Leave to appeal granted 10/21/10

A-23-10 In the Matter of Opinion No. 12-08 of the Supreme Court Committee on Extrajudicial Activities (066271)
Consistent with the Canons of Judicial Conduct, can a part-time municipal court judge be actively engaged in an entertainment career as a comedian?
Petition for review granted 10/08/10

A-7-10 Too Much Media, LLC v. Shellee Hale (066074)
Is this blogger, who operated a website she claimed was intended for investigative reporting on issues of public importance, and who posted information about plaintiffs on another website’s bulletin board, a journalist entitled to the protections of New Jersey’s Shield Law and the First Amendment?
Leave to appeal granted 9/10/10

Securities Brokerage Firm Owes No Duty to Non-Customers in Ponzi Scheme Case, Says New Jersey Appeals Court

2010-11-09T23:47:00.006-05:00

In a case of first impression, the New Jersey Appellate Division affirmed the dismissal of negligence claims brought against securities brokerage firm Merrill Lynch, finding that Merrill Lynch owed no duty of care to third parties who claimed the company should have policed its customer's account for fraud. Frederick vs. Smith, et als., Superior Court of New Jersey, Appellate Division, Docket A-1620-09T2 (November 9, 2010).

In this case the plaintiffs alleged that defendant Maxwell Baldwin Smith (Smith) convinced them to invest in Healthcare Financial Partnership (HFP), a fictitious entity. As part of the fraud, Smith instructed plaintiffs to convey the invested funds to an account that he maintained with Merrill Lynch. Plaintiffs were not Merrill Lynch clients, yet Merrill Lynch accepted payment directly from the plaintiffs and the funds were deposited into Smith's account. In support of their negligence claims, plaintiffs alleged that Smith convinced them to invest in HFP, which he claimed was "a secure tax-free investment which paid a high level of interest through investment in a diversified portfolio of high yielding income projects." According to their Complaints, plaintiffs collectively invested approximately $10 million in HCP over a number of years. Smith instructed plaintiffs to make their checks payable to "Merrill Lynch A/C #36641" or "directly to Merrill Lynch," in the process misrepresenting to them that Merrill Lynch was the security's underwriter.

According to plaintiffs, Smith opened up this personal account at Merrill Lynch "for the sole purpose of furthering the Ponzi scheme." Once plaintiffs' checks were deposited in Smith's personal Merrill Lynch account, Smith remitted to plaintiffs phony correspondence memorializing the deposit and then used the funds for his own benefit. By the time plaintiffs discovered what was happening, they lost their entire investment.

Even though Smith was not employed by Merrill Lynch, and plaintiffs maintained no legal relationship with Merrill Lynch, plaintiffs alleged Merrill Lynch was negligent for failing to discover Smith's use of his MerrillLynch account to perpetrate a fraud. At the trial lever, plaintiffs conceded that ordinarily a bank only owes duties to its customers, but claimed that a fiduciary relationship was established in this case because they wrote checks directly to Merrill Lynch when investing in HCP.

The trial court dismissed the negligence claims against Merrill Lynch, finding that under applicable Merrill Lynch only owes a duty to its customers. In affirming the trial court's dismissal, the NJ appellate court explained:

Although our courts have not previously considered whether a brokerage firm owes a duty towards non-customers in this context, our Supreme Court has expressed a "reluctance to impose a duty of care on banks in respect of a total stranger." Brunson v. Affinity Fed. Credit Union, 199 N.J. 381, 403 (2009); see also City Check Cashing v. Mfrs. Hanover Trust Co., 166 N.J. 49, 60 (2001).

The appeals court concluded that the absence of any relationship between plaintiffs and Merrill Lynch precludes the imposition of a duty on Merrill Lynch to periodically or regularly police the personal account maintained by Smith for indicia of fraud.

"The fact that plaintiffs may have at times submitted checks directly to Merrill Lynch, as instructed by Smith, did not create a relationship where none previously existed," the Court remarked.

Merrill Lynch deposited the checks in Smith's account as directed; it issued no statements to plaintiffs and derived no financial benefit from the fact that checks may have been written directly to Merrill Lynch instead of Smith. In the absence of no greater nexus between plaintiffs and Merrill Lynch, or between Smith and Merrill Lynch, plaintiffs possessed no viable negligence claim against Merrill Lynch.

Accordingly, the appeals court affirmed the dismissal of the negligence claims against Merrill Lynch.

NJ Appellate Court Upholds Arbitration Remedy for Patient/Doctor Disputes

2010-11-08T15:10:00.008-05:00

Share | In Moore v. Woman to Woman Obstetrics & Gynecology, a New Jersey appellate court ruled that arbitration is a valid forum for resolution of disputes between doctors and their patients. The court found that some patient-physician agreements to arbitrate are enforceable, but enforceability will be determined based on whether certain substantive and procedural requirements have been met.

The relevant facts of the case are as follows: The Plaintiffs Monica and Kevin Moore are the parents of Koral Moore, who has Down Syndrome. Due to Monica's age, her pregnancy was considered high risk. Her doctor, defendant Lisa Vernon, M.D., practicing with defendant Woman to Woman Obstetrics & Gynecology, L.L.C., referred Monica to defendants Carlos Fernandez, M.D., and Premier Perinatal, L.L.C. (Premier).

During Monica's first appointment with Dr. Fernandez at Premier, an ultrasound was to be administered due to her high-risk pregnancy. The receptionist gave Monica a clipboard with forms she was to complete, including a medical questionnaire, and an arbitration agreement. Monica completed the forms, but maintained that no one called the arbitration agreement to her attention. Monica was not given a copy of the agreement after she signed it or when she left the office.

The arbitration agreement consisted of four pages, and was captioned in bold and capital letters as follows: "ARBITRATION AGREEMENT FOR CLAIMS ARISING OUT OF OR RELATED TO MEDICAL CARE AND TREATMENT."

Immediately above the signature line the following notice was provided:

NOTICE: BY SIGNING THIS CONTRACT, YOU ARE AGREEING TO HAVE ANY ISSUE OF ALLEGED MEDICAL NEGLIGENCE OR BREACH OF CONTRACT BETWEEN YOU AND YOUR MEDICAL CARE PROVIDER DECIDED BY A BINDING ARBITRATION PROCESS IN WHICH BOTH PARTIES ARE GIVING UP THEIR RIGHT TO A TRIAL BY JURY, OR A TRIAL BY JUDGE.

At the bottom of the same page beneath the signature lines that warning is repeated as follows:

BY ENTERING INTO THIS AGREEMENT, THE PATIENT AND THE MEDICAL CARE PROVIDERS ARE WAIVING ALL RIGHTS TO A JURY TRIAL IN A COURT OF COMPETENT JURISDICTION AND ARE AGREEING TO RESOLVE BY BINDING ARBITRATION ALL DISPUTES ARISING OUT OF OR RELATED TO [A] PATIENT'S DIAGNOSIS, MEDICAL CARE AND TREATMENT.

Monica and her husband filed a complaint on behalf of themselves and their child Koral against Dr. Fernandez and Premier alleging medical malpractice and seeking damages, including special damages for extraordinary medical expenses that they will incur during the child's infancy and by Koral thereafter. The trial court granted summary judgment in the defendants favor by compelling arbitration, and the plaintiffs appealed.

On appeal, the Moore court found that an expectant mother could bind her unborn child with an agreement to arbitrate the wrongful life claim. In contrast, the appeals court held that the father, who was not present in the doctor's office and did not sign the agreement, was not bound to arbitrate and could therefore instead sue the physician in court. In reversing the trial court's decision, the appeals court held it was improper for the trial court to grant summary judgment to the defendants based on the totality of the circumstances, which included:

No one in the doctor's office alerted Monica to the fact that a contract waiving her rights and the rights of her husband and child was among the forms she was asked to complete during her first visit to the practice.
Although the arbitration agreement informed Monica of her right to seek the advice of counsel and a right to withdraw from the agreement within fifteen days, the medical staff did not give her a copy of the agreement, which was essential to the exercise of those contractual rights.
While arbitration has been approved by the New Jersey Legislature and, for that reason, cannot be deemed inconsistent with public policy, the waivers exacted in this agreement are overreaching in one aspect. This agreement to arbitrate includes waivers of the rights of persons who are not parties to the agreement — the patient's spouse and unborn child.

In health care cases, enforcement of agreements to arbitrate depends on the circumstances surrounding execution of the contract. In particular, the question is whether the patient was given adequate notice of the existence of the agreement and also provided a copy of the agreement after signing.

NJ Appeals Court Clears Way for Century 21 Class Action Case

2010-11-08T14:08:00.001-05:00

Share |A class-action lawsuit filed by Century 21 franchisees against Century 21 Real Estate Corp. and parent company Cendant is moving forward following a decision of the NJ Appellate Division.

In August 2010, New Jersey Superior Court Judge Robert J. Brennan certified a class of current and former Century 21 franchisees in a lawsuit alleging breach of contract and other claims against their franchisor, Century 21 Real Estate Corp., as well as its parent company, Cendant Corp. Currently, Century 21 is owned by Cendant spin-off Realogy Corp.

Following Judge Brennan's ruling, Cendant asked the New Jersey Appellate Division to reconsider the class certification decision. On October 15, 2010, the appellate court announced it would not hear the appeal, thus clearing the way for the case to go to trial.

According to the lawsuit, Cendant failed to provide the level of services to Century 21 franchisees required by their agreements. Additionally, the lawsuit claims that contributions to a national advertising fund, which topped more than $40 million annually, were misappropriated and diverted to uses other than the benefit of Century 21, including the promotion of Century 21's Cendant-owned real estate competitors. Shortly after the purchase of Century 21, Cendant also acquired Coldwell Banker and ERA.

Judge Brennan's order certified a class of current and former Century 21 franchisees during the period from August 1995 to April 2002 whose franchise agreements contain a New Jersey jurisdiction clause.

NJ Appeals Court Allows Googling of Potential Jurors During Jury Selection Process

2010-11-01T14:23:00.006-05:00

As one recent New Jersey appeals decision confirms, the Internet can serve as a valuable tool for trial attorneys and litigants to research information about potential jurors. The concept of "Googling" someone's name has now become part of New Jersey trial practice.

In Carino v. Muenzen, M.D., No. 5491-08, 201 N.J. Super. LEXIS 2154 (Aug. 30, 2010), the appeals court determined that the trial court erred in prohibiting the plaintiff's lawyer from conducting Internet research on potential jurors at the counsel table. More specifically, the Carino court reasoned that there is nothing that "requires attorneys to notify the court or opposing counsel in advance of their intention to take advantage of the internet access made available by the Judiciary." Id. at *26.

The Carino court determined that the fact that plaintiff's counsel "had the foresight to bring his laptop computer to court, and defense counsel did not, simply cannot serve as a basis for judicial intervention in the name of 'fairness' or maintaining 'a level playing field.'" Id. at *27. On the contrary, the playing field was already level "because Internet access was open to both counsel, even if only one of them chose to utilize it." Id. In addition, the Carino court reasoned that prohibiting attorneys from using the Internet in court would have little practical effect because "counsel could have researched the prospective jurors overnight or during breaks." Id.

This ruling is one of the latest examples of how the use of advanced technology in the courtroom can reshape and significantly impact New Jersey trial practice.

Carino was a medical malpractice case where the plaintiff, as executor of his decedent wife's estate, alleged that the defendant doctor committed malpractice by failing to timely diagnose a brain hemorrhage. During jury selection, plaintiff's counsel was observed using a laptop computer to access the Internet via the court's Wi-Fi connection. Defense counsel, who did not bring a laptop computer to the trial, objected to this tactic and the following exchange occurred between the trial judge and the plaintiff's lawyer:

THE COURT: Are you Googling these [potential jurors]?

[PLAINTIFF'S COUNSEL]: I’m getting information on jurors — we’ve done it all the time, everyone does it. It’s not unusual. It’s not. There’s no rule, no case or any suggestion in any case that says —

THE COURT: No, no, here is the rule. The rule is it’s my courtroom and I control it.

[PLAINTIFF'S COUNSEL]: I understand.

THE COURT: I believe in a fair and even playing field. I believe that everyone should have an equal opportunity. Now, with that said there was no advance indication that you would be using it. The only reason you’re doing that is because we happen to have a [Wi-Fi] connection in this courtroom at this point which allows you to have wireless internet access.

[PLAINTIFF'S COUNSEL]: Correct, Judge.

THE COURT: And that is fine provided there was a notice. There is no notice. Therefore, you have an inherent advantage regarding the jury selection process, which I don’t particularly feel is appropriate. So, therefore, my ruling is close the laptop for the jury selection process.

The trial judge, however, noted that it would have been acceptable for plaintiff's counsel to use his laptop to access such information if he had provided advance notice to the court and defense counsel, and that the failure to do so resulted in giving the plaintiff an inherent advantage during jury selection.

After the jury returned a no-cause-of-action verdict, the plaintiff filed an appeal on several grounds, including the trial judge's preclusion of using the laptop to access information about potential jurors during jury selection. On appeal, plaintiff contended that the trial judge deprived him of one of the fundamental rights of litigation as it related to jury selection by precluding research about potential jurors.

The New Jersey Appellate Division acknowledged that trial judges have broad discretion regarding the manner in which jurors are selected, but it also noted that the New Jersey Court Rules do not address the issue of laptop use to access the Internet during jury selection. The appeals court explained that in April 2008 wireless Internet access in courtrooms first became available, and noted the absence of any administrative orders or instructions requiring counsel to notify the court and opposing counsel of the intent to use the Internet during jury selection.

The appellate court concluded that the trial judge acted unreasonably in prohibiting plaintiff's counsel from using his laptop to access the Internet during the jury selection process. The appellate court emphasized that there was not any suggestion in the record that plaintiff's counsel was disruptive while accessing the Internet with his laptop. The appeals court addressed the "level playing field" rationale cited by the trial judge in his ruling below by noting that plaintiff's counsel had the foresight to utilize a laptop during jury selection, while defense counsel chose not to. The court also remarked that the use of a laptop computer "simply cannot serve as a basis for judicial intervention in the name of 'fairness' or maintaining 'a level playing field.'"

Notwithstanding this finding, the appellate court refused to reverse the trial court's decision on this issue, concluding that plaintiff failed to demonstrate any prejudice based on the lower court's ruling. Plaintiff did not point to "a single juror who was unqualified or as to whom he claims he would have exercised a peremptory challenge, even though he has subsequently had the opportunity to perform an Internet search concerning each juror," the appeals court explained.

This appellate decision highlights the ever-increasing use of technology in the courtroom and how our trial and appellate courts continue to wrestle with issues that stem from the use of such technology. Want to find out more about your potential jurors who may decide your New Jersey case? Try "Googling" them at the counsel table.

Federal Appeals Court Ruling Has New Jersey Singing The Blues in Music Case

2010-08-11T16:07:00.002-05:00

In a precedential ruling issued on August 5, 2010, Singer Management Consultants Inc. v. Milgram, No. 09-2238, the United States Court of Appeals for the Third Circuit - the appellate tribunal to the United States District Court for the District of New Jersey - held that New Jersey will have to pay the legal fees for a music promoter that sued the State to stop it from enforcing its "truth-in-music" law.

The Third Circuit held that the promoter, Live Gold Operations, Inc. (“Live Gold”), which accused the State of violating its constitutional and trademark rights, was a prevailing party in the underlying litigation thus triggering the fee-shifting statute requiring the State to reimburse the promoter for its attorneys’ fees. The full reported decision can be found here.

The United States District Court initially dismissed the case and denied fees, finding the case moot because the State did an about-face once it became clear it would lose the case. Thus, the promoter, Live Gold, never obtained an order on the merits.

The District Court relied on Buckhannon Bd. & Care Home v. W. Va. Dep't of Health & Human Res., 532 U.S. 598 (2001), where the U.S. Supreme Court held prevailing party fees are not available for plaintiffs who do not win a judgment but act as the catalyst for a voluntary change in defendants' conduct.

The appeals court found Buckhannon allowed a fee award even though no judgment on the merits was reached because the State's action in backing off its initial stance was not voluntary but resulted from the action of the District Court.

The fee dispute grew out of the State's attempt in 2007 to enforce the newly enacted New Jersey Deceptive Practices in Musical Performances statute (truth-in-music law"), N.J.S.A. 2A:32B-1 et seq., which states as follows:

A person shall not advertise or conduct a live musical performance or production through the use of an affiliation, connection or association between the performing group and the recording group unless:

(a) The performing group is the authorized registrant and owner of a federal service mark for the group registered in the United States Patent and Trademark Office; or

(b) At least one member of the performing group was a member of the recording group and has a legal right by virtue of use or operation under the group name without having abandoned the name or affiliation of the group; or

(c) The live musical performance or production is identified in all advertising and promotion as a salute or tribute; or

(d) The advertising does not relate to a live musical performance or production taking place in this State; or

(e) The performance or production is expressly authorized by the recording group.

N.J.S.A. 2A:32B-2.

The truth-in-music law is aimed at impostor groups that perform under a name they have no right to use. It creates a separate offense subject to a $10,000 civil penalty for a first offense, $20,000 for a repeat and treble damages, and makes a violation illegal under the New Jersey Consumer Fraud Act.

Live Gold had organized a two-week concert series starting Aug. 18, 2007, at the Hilton Hotel in Atlantic City featuring two bands that dated back to the 1950s, the Platters and the Coasters. Shortly before the first show, the attorney general notified Live Gold that its use of the bands' names might violate the truth-in-music law.

Live Gold provided the State with evidence that it owned a common-law unregistered trademark in the names, but the State insisted that to avoid liability the concerts should be billed as a "tribute" or "salute."

The Hilton Hotel complied, but a day before the first show, Live Gold sued New Jersey Attorney General Anne Milgram seeking a temporary restraining order and injunctive relief. On the same day, U.S. District Judge Dickinson Debevoise, in Newark, granted a temporary restraining order, finding that Live Gold was likely to succeed on the merits of its claims. Judge Debevoise said the State's decision to treat unregistered trademarks differently from registered ones under the law posed a "very serious problem" and might impair "substantial federal rights," including freedom of speech.

When the parties returned before Judge Debevois for the preliminary injunction hearing on Sept. 7, 2007, the State’s deputy attorney general at first continued to assert that unregistered trademarks were not the same for purposes of the truth-in-music law, but during the argument she switched her position after Judge Debevoise repeatedly rejected it. Although Judge Debevoise did not issue a preliminary injunction he declared the State would be "bound by" its new view of the law.

On March 16, 2009, after getting the State to confirm what it said at the preliminary injunction hearing, Judge Debevoise dismissed the case, saying nothing else needed to be decided because Live Gold had effectively won the case.

But Judge Debevoise denied Live Gold's request for fees on April 7, 2009, agreeing with an earlier ruling by Magistrate Judge Esther Salas that Live Gold was not a prevailing party because he never issued a preliminary injunction or other order on the merits.

In vacating Judge Debevoise’s dismissal order, Third Circuit Judge Jane Roth, joined by her colleague Judge Ruggero Aldisert, concluded that Live Gold did prevail because it obtained complete relief based on the State's concession to its view of the law. The temporary restraining order alone might have been enough to confer prevailing party status, but the District Court went beyond that at the preliminary injunction hearing, remarked Judge Roth.

The Third Circuit returned or remanded the case back to the District Court for a determination of reasonable attorneys' fees.

Talk about a waste of the State's tax dollars! This case couldn't provide a better example.

NJ Supreme Court Refuses to Punish Part-Time Municipal Court Judge for His Law Firm's Political Campaign Donations

2010-08-09T14:42:00.013-05:00

A recent New Jersey Supreme Court decision serves as a wake-up call to part-time municipal court judges and the law firms which employ them: Do not use the law firm’s checking account to make political contributions.

In In the Matter of Philip N. Boggia, Judge of The Municipal Court, (D-118-08)(July 27, 2010), the Advisory Committee on Judicial Conduct (“ACJC”) found by clear and convincing evidence that Philip N. Boggia, a part-time municipal court judge for the Borough of Moonachie, NJ and a practicing lawyer who is partner in his own law firm, violated Canon 7A(4) of the Code of Judicial Conduct and Rules 2:15-8(a) (5) and (6) of the New Jersey Court Rules because his law firm made political contributions to several local Democratic organizations.

Canon 7A(4) of the NJ Code of Judicial Conduct states that “[A] judge shall not . . . solicit funds for or pay an assessment or make a contribution to a political organization or candidate, or purchase tickets for political party dinners or other functions.” See also R. 117-1(a)(barring judges from holding elected public office or engaging in “partisan political activity”); R. 1:17-2 (barring judges from non-partisan political activity). Further, Canon 2(A) of the Code of Judicial Conduct requires judges “to act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.”

Under R. 2:15-8(a), the ACJC is directed to review any grievance that alleges a municipal court judge “is guilty of . . . (5) engaging in partisan politics, or (6) conduct prejudicial to the administration of justice that brings the judicial office into disrepute.”

The undisputed facts in this grievance demonstrated that the law firm of Durkin & Boggia made three contributions to the Edgewater Democratic Campaign Fund from June 2004 to July 2005, totaling $1600. The checks were all drawn on the “ATTORNEY BUSINESS ACCOUNT” for “DURKIN & BOGGIA,” as that information appears in the upper-left portion of each check. The twist: while all three checks were drawn on Durkin & Boggia’s “Attorney Business Account,” it was Boggia’s partner Durnkin who signed each check. Further, in January 2005 Boggia made a $600 contribution to the Bergen County Democratic Organization. At the time these political contributions were made, Boggia was simultaneously serving as the Borough of Moonachie’s municipal court judge. At the ACJC hearing, Boggia testified that he was unaware of the contribution checks signed by his partner until he learned of them via the ACJC.

Although Boggia admitted he had made political contributions as an attorney and knew of his firm’s practice of doing so before January 30, 2004, he testified that he understood he “was no longer allowed to be involved in politics” and “not allowed to make political contributions” as a municipal court judge. As a result, he testified that when he became a judge he gave oral instructions to his law partner and office staff to stop making political donations from the firm’s joint business account. The evidence that Boggia submitted to the ACJC included a certification from his law partner in which he stated that the contributions “were drawn on . . . the law firm’s checking account by mistake and it was due to inadvertence on my part.” For his part, Boggia acknowledged to the ACJC that it was not appropriate for his firm to be making political contributions. Boggia also testified that he did not know whether the firm’s political contributions were attributable to his partner’s salary or treated as a law firm expense.

The ACJC found Boggia reprehensible for violating Canon 7A (4) of the Code of Judicial Conduct and Rules 2:155-8(a) (5) and (6) of the New Jersey Court Rules. The ACJC wrote, in part:

The actual issued checks reflect “Durkin & Boggia” as the payor. Respondent is one of only two partners in the Firm, and his last name is featured in the Firm’s name. Under these facts, Respondent cannot avoid responsibility for the contributions at issue by simply indicating that he was not aware of them. Even if Respondent did not possess actual knowledge of the various political donations made, we find that the appearance was created that he, with his law partner, were responsible for the political contributions. The appearance is strictly prohibited under the Code of judicial Conduct as well as binding case law.

Upon the conclusion of the ACJC’s investigation, the NJ Supreme Court issued an Order to Show Cause requiring Boggia to demonstrate why he should not be publicly admonished. Boggia conceded that he is barred from engaging in political activity as a municipal court judge, but argued that under the case law the prohibition requires some purposeful, knowing, or reckless conduct on his part. Instead, he argued that the ACJC’s finding rendered him vicariously liable for his partner’s acts, and that imposing a strict liability standard would effectively ban part-time municipal judges from employment at firms that make political contributions. In addition to raising First Amendment concerns, Boggia recommended that the New Jersey Court Rules be modified to ban firms that employ part-time judges from making political contributions only in the county where the part-time judge hears cases.

The Court remarked that over a 103 year period from 1844 to 1947 the New Jersey Constitution demonstrates a radical shift in promoting the public confidence and independence of the judicial branch of government. Under the 1844 Constitution, “it was not considered unethical for a judge . . . to participate rather directly in the political process, at least to the extent of making campaign speeches and contributions.” In re Gaulkin, 69 N.J. 185, 192 (1973). However, the 1947 Constitution brought in a new era, one that continues today, by ensuring “complete separation of politics from the judiciary.” In re Randolph, 101 N.J. 425, 427 (1986).

In reviewing the ACJC’s decision, the Court noted that “[T]he possibility of political influence is especially great in the municipal courts.” . . . because “[M]unicipal judges are appointed by the major or local governing body for a term of three years.” “…the need to detach municipal court judges from politics remains patent,” the Court remarked.

Although the NJ Supreme Court indicated that the “facts present a close case as to whether respondent violated Canon 7A)(4) of the Code of Judicial Conduct, a unanimous Court reversed the ACJC’s ruling by concluding that the facts of this particular case did not meet the clear and convincing evidentiary standard required to sustain a finding that Boggia violated this judicial Canon. The Court recognized that Boggia took some steps to avoid what happened, which ultimately proved ineffective, when upon being appointed as a municipal court judge he verbally informed his partner and staff to stop making political contributions from the law firm. The Court also took note that Boggia’s law partner accepted responsibility for all of the political contributions made by the firm.

Instead of slapping Boggia on the wrist, the Court used this case as an opportunity to provide prospective guidance to part-time municipal court judges and their employers. From now on, both part-time municipal court judges and the lawyers and firms with whom they practice with are banned from making political contributions from a law firm’s business account. In response to Boggia’s claim as to the violation of his partner’s First Amendment rights, the court noted that lawyers in practice with part-time municipal court judges can still make political contributions from personal funds. The Court referred the matter to the Professional Responsibility Rules Committee and the Advisory Committee on Extrajudicial activity to develop appropriate rules to implement this decision.

Had Boggia’s judicial career been marked with other indiscretions, perhaps the NJ Supreme Court would have ruled differently. Here, however, aside from this case Boggia appears to enjoy an impeccable judicial record. The Court’s ruling in this case demonstrates a trend not to punish distinguished members of the judiciary for a single unintentional lapse in judgment, as is reflected by the Court’s prior decision declining to discipline a former Bergen County Chancery Judge whose years of dedicated service were blemished when, contemplating his retirement from the bench, he discussed potential employment with an attorney who was trying a case before him. We previously reported on the outcome of that underlying case in this post: http://newjerseylawreview.blogspot.com/2008_09_01_archive.html

A special thanks to Noah Feit who contributed to this article. Mr. Feit, a summer intern at LoFaro & Reiser, L.L.P., will be matriculating at the University of Pennsylvania as a freshmen in September 2010.

US Supreme Court Decides Text Messaging Case

2010-06-23T11:51:00.002-05:00

While we normally do not report on United States Supreme Court decisions, we feel that the Court's recent decision issued on June 17, 2010 involving a public employee’s expectation of privacy concerning text messages merits discussion in view of our coverage of a recent NJ Supreme Court decision involving an employee's rights to privacy in Yahoo e-mails sent over the workplace computer. http://newjerseylawreview.blogspot.com/2010_04_01_archive.html

In a unanimous decision issued on June 17, 2010, the U.S. Supreme Court in City of Ontario, California v. Quon ventured into the privacy rights of public employees who transmit and receive text messages through government-owned electronic communication devices. In this particular case, the Court held that a California police department’s search of one of its police officer’s sexually explicit text messages sent and received through his department-issued pager did not violate the officer’s 4th Amendment constitution rights against unreasonable searches and seizures. The paging service carrier revealed the officer’s text messages (to his then-wife and his girlfriend, a police department employee) to the police department after the chief requested an audit of the department’s text message usage to determine whether the text character limit was sufficient to meet its officers’ work communications needs.

After an internal affairs investigation, the police department disciplined the officer, Jeff Quon. Quon and another police officer then sued the police department’s paging service provider (Arch Wireless) for privacy breaches. The wife and mistress also joined the lawsuit as plaintiffs. A jury sided with the defendants. However, the Ninth Circuit Court of Appeals reversed, holding that the search was unreasonable. The Supreme Court then agreed to review the Ninth Circuit's appellate court decision.

The police department maintained a written policy warning officers that use of department email, Internet and computer resources could be monitored. Although the police department permitted limited personal use of these resources, its policy also stated that officers should not expect that their electronic communications made through department resources were private or confidential. The officer Quon admitted he was aware that the policy applied to him, but argued that it did not include text messaging. Further, Quon argued that his employer permitted use of his pager for personal messages as long as he paid the over-limit charges on the account.

New Ground for the Supreme Court

This case marks the Supreme Court’s first venture into the arena of public employees’ electronic privacy rights in communications through public employer resources. The Court was asked to weigh the officers’ privacy rights and right to be free from unreasonable seizures of their communications against the government’s interest in managing the public workplace. Two decades ago, in Ortega v. O’Connor, the Supreme Court considered the search of a public employee’s desk. The Court held in that case that a public employer enjoys broad authority to search the physical workplace as long as the employer had a “work-related purpose” for the search and the search is not “unduly intrusive.”

In Quon, the Court now provides some limited guidance for a public employer’s right to search the cyber-workplace. Justice Kennedy’s opinion for the Court assumes that the officers held a reasonable expectation of privacy in their text messages. However, the Court did not conclusively resolve this issue and therefore public employers are free to argue in future cases that a public employee does not have an expectation of privacy in electronic communications facilitated with agency resources. The Court easily identified a work-related purpose for reading the text messages. The department “had a legitimate interest in ensuring that employees were not being forced to pay out of their own pockets for work-related expenses, or on the other hand that the city was not paying for extensive personal communications.” The Court noted that the officers held, at best, only "a limited privacy expectation" in the text messages. Justice Stevens wrote that Quon “should have understood that all of his work-related actions–including all of his communications on his official pager — were likely to be subject to public and legal scrutiny.” The Court held that the search was not excessive in scope, and that therefore the search was reasonable.

The Quon decision signals that the continued development of electronic communications through use of ever-changing technology of smart phones, text messages, social media websites, blogs, photo-sharing and file-sharing websites, and the like are fair game for battles over who controls privacy rights for communications posted or sent by public employees using some government resources.

Quon also puts agencies on notice that they must provide a written agency policy up front, train employees on the policy, and be very careful to have the policy-monitoring capability to stay on top of developments in this rapidly-evolving area of the law. An agency without a solid policy, backed by constant monitoring, is asking for trouble when it comes time to enforce or defend the policy. Policy issues such as work-related social media, email and Internet use are rapidly changing.

NJ Federal Court Says Comedian's Jewish Mother-in-Law Jokes Protected Free Speech

2010-05-24T10:21:00.003-05:00

This is no joke! A stand-up comedian sued by her husband's family for making Jewish mother-in-law jokes gets to enjoy the punchline after a federal judge threw the case out of court. The comedian's descriptions of her in-laws, though laced with implications of racism, were merely "colorful, figurative rhetoric," U.S. District Judge Mary Cooper said in dismissing the suit, Edelman v. Croonquist, 09-cv-1938.

Sunda Croonquist, whose comedy routine for years has been to describe her life as a half-black, half-Swedish woman who looks Puerto Rican and marries into a Jewish family, was sued two years ago after her mother-in-law, sister-in-law and brother-in-law claimed her jokes were subjecting them up to public ridicule.

On her website, Croonquist published video clips of her routines about her in-laws and also made online postings to her blog and on MySpace. In one clip called "Jewish Friends"Croonquist says the voice of her sister-in-law Shelley Edleman sounds like a cat in heat. Croonquist also did an impersonation of Edelman saying to her husband Neil: "Oh my God, Neil, look at her; she's got light eyes and light hair, what kind of black person is she?"

In another clip, titled "Jewish Mother-in-law," Croonquist referred to her husband's mother Ruth Zafrin, as 'Ruthie" and accused her of being racist, the Complaint alleged. She also allegedly admitted to "ill feelings" toward Zafrin, stating: "Have you ever met someone and in the first five seconds you say through your teeth, 'I hate this bitch.

On MySpace, Croonquest said that her mother-in-law Zafrin treated her other grandchildren better "probably because they're white, they're better in her eyes" and "called out" Zafrin for "not addressing her racist family."

In addition, her blog allegedly referred to Edelman as "the dumbest thing with two eyes" and labeled her "racist" because she "calls black people 'colored' and tries to give the impression that she's better than everyone else."

The plaintiffs claimed Croonquist was not joking but was attacking them under the guise of comedy. They also claimed that people knew who Croonquist was talking about because she used their names and identified where they lived. According to the plaintiff in-laws, one person allegedly forwarded Zafrin blog posts about her and Croonquist allegedly reacted on her blog by thanking whoever did it, along with her friends and fans who sent e-mails telling her "how great I am for finally standing up for my family and outing my racist in laws."

In a 21-page ruling dismissing the lawsuit, Judge Cooper said that many of the jokes were clearly statements of opinion and not fact and therefore protected by the First Amendment of the United States Constitution which governs free speech. The cat-in-heat joke, the judge said, quoting from a previous court decision, was "colorful, figurative rhetoric that reasonable minds would not take to be factual."

The suit was filed in New Jersey because two of the plaintiffs, Croonquist's brother-in-law and sister-in-law, Neil and Shelley Edelman, live there. Croonquist lives in Beverly Hills and her mother-in-law, Ruth Zafrin, lives in the New York City borough of Brooklyn.

Adding another family twist to the case was the fact Croonquist's husband, Mark Zafrin, is a partner in the law firm that successfully represented her. After learning of her court victory, when asked if she would continue making jokes about her in-laws Croonquist was quoted in the media saying,

"In honor of Henny Youngman, why would I stop?" she asked, citing the legendary comedian whose signature line was "Take my wife — please."

NJ Supreme Court Says NJ Employee's Yahoo E-Mails Protected By Attorney-Client Privilege

2010-04-13T21:47:00.007-05:00

In an extremely important case that we have followed closely over the past year, the New Jersey Supreme Court recently confirmed that the attorney-client privilege protects an employee's e-mails sent to her attorney through her private Yahoo account while accessing her work computer. Stengart v. Loving Care Agency, Inc. (A-16-09)(March 30, 2010).

We first reported on this case in March 2009, when the trial judge found in favor of the employer by holding that the employee's e-mails to her attorney were discoverable in her wrongful discharge case against her employer. On appeal, in July 2009, the New Jersey Appellate Division reversed the trial court, finding that the employee had a reasonable expectation of privacy when she used her private Yahoo e-mail account to communicate with her attorney, notwithstanding that she used her company's computer to access her Yahoo account.

The New Jersey Supreme Court, an ardent advocate of protecting its citizens' individual rights, unanimously affirmed the Appellate Division's decision. Writing for the unanimous Court, Chief Justice Rabner commented:

In the past twenty years, businesses and private citizens alike have embraced the use of computers, electronic communication devices, the Internet, and e-mail. As those and other forms of technology evolve, the line separating business from personal activities can easily blur. In the modern workplace, for example, occasional, personal use of the Internet is commonplace. Yet that simple act can raise complex issues about an employer’s monitoring of the workplace and an employee’s reasonable expectation of privacy.

Each e-mail that the employee's attorney sent to his client contained the following confidentiality clause warning readers that:

THE INFORMATION CONTAINED IN THIS EMAIL COMMUNICATION IS INTENDED ONLY FOR THE PERSONAL AND CONFIDENTIAL USE OF THE DESIGNATED RECIPIENT NAMED ABOVE. This message may be an Attorney-Client communication, and as such is privileged and confidential. If the reader o2f this message is not the intended recipient, you are hereby notified that you have received this communication in error, and that your review, dissemination, distribution, or copying of the message is strictly prohibited. If you have received this transmission in error, please destroy this transmission and notify us immediately by telephone and/or reply email.

The subject matter of the e-mail messages exchanged between Stengart [the employee] and her attorney "appears to relate to Stengart’s working conditions and anticipated lawsuit against Loving Care," the Court recognized.

At least two attorneys from the law firm representing the employer (the “Firm”), reviewed the e-mail communications between Stengart and her attorney. The Firm did not advise opposing counsel about the e-mails until months later.

In responding to the employee's pretrial discovery demands the Firm stated that it had obtained certain information from “e-mail correspondence” -- between Stengart and her lawyer -- from Stengart’s “office computer on December 12, 2007 at 2:25 p.m.” In response, Stengart’s attorney sent a letter demanding that the Firm identify and return all “attorney-client privileged communications” in its possession. The Firm identified and disclosed the e-mails but asserted that Stengart had no reasonable expectation of privacy in files on a company-owned computer in light of the company’s policy on electronic communications.

The employer and its counsel relied on an Employee Handbook that they maintain contains the company’s Electronic Communication policy (Policy). The record contains various versions of an electronic communications policy, but Stengart argued that none applied to her as a senior company official.

The company's Policy states, in relevant part:

The company reserves and will exercise the right to review, audit, intercept, access, and disclose all matters on the company’s media systems and services at any time, with or without notice. . . . . E-mail and voice mail messages, internet use and communication and computer files are considered part of the company’s business and client records. Such communications are not to be considered private or personal to any individual employee.

The principal purpose of electronic mail (e-mail) is for company business communications. Occasional personal use is permitted; however, the system should not be used to solicit for outside business ventures, charitable organizations, or for any political or religious purpose, unless authorized by the Director of Human Resources.

In reviewing the company's Policy, the New Jersey Supreme Court concluded that the Policy does not address personal e-mail accounts at all. "In other words, employees do not have express notice that messages sent or received on a personal, web-based e-mail account are subject to monitoring if company equipment is used to access the account," the Court explained. "The Policy also does not warn employees that the contents of such e-mails are stored on a hard drive and can be forensically retrieved and read by [the employer] Loving Care," the Court further remarked. The Court also opined that "the Policy creates ambiguity about whether personal e-mail use is company or private property."

Noting the lack of any precedent in New Jersey law, the Court referred to cases from other states, and in particular was persuaded by a Massachusetts court case, National Economic Research Associates v. Evans, 21 Mass. L. Rptr. No. 15, at 337 (Mass. Super. Ct. Sept. 25, 2006), which contained very similar facts. In Evans, the employee used a company laptop to send and receive attorney-client communications by e-mail. As did Stengart, this employee also used his personal, password-protected Yahoo account and not the company’s e-mail address. The e-mails were automatically stored in a temporary Internet file on the computer’s hard drive and were later retrieved by a computer forensic expert. The expert recovered various attorney-client e-mails; at the instruction of the company’s lawyer, those e-mails were not reviewed pending guidance from the court.

The employer in Evans also had a similar company written policy that governed the use of the company's laptop computers, which warned that compute resources were the company's property and that e-mails were not confidential and could be read during "routine checks." However, the policy did not expressly declare, or implicitly suggest, that all Internet communications would be monitored - such as e-mails sent from an employee's personal e-mail account. Consequently, the Evans court found that the employee had a reasonable expectation of privacy when communicating with his attorney through his private e-mail account with Yahoo.

Applying the reported decisions from other states, including the Massachusetts court in Evans, the NJ Supreme Court held that under these circumstances Stengart [the employee] could reasonably expect that e-mail communications with her lawyer through her personal, password-protected, web-based e-mail account would remain private, and that sending and receiving them using a company laptop did not eliminate the attorney-client privilege that protected them. As the NJ Supreme Court explained:

Stengart plainly took steps to protect the privacy of those e-mails and shield them from her employer. She used a personal, password-protected e-mail account instead of her company e-mail address and did not save the account’s password on her computer. In other words, she had a subjective expectation of privacy in messages to and from her lawyer discussing the subject of a future lawsuit.

This decision by the NJ Supreme Court will have profound effects for the employer/employee relationship going forwards, as well as how employees communicate with their attorneys during the work day.

For employers, this decision suggests that companies must have a clear and comprehensive written policies that provide sufficient notice or warning that accessing private e-mail accounts on the employer's computers is expressly prohibited, and that such e-mails will constitute company property if transmitted through the company's computer system.

For employees, careful attention must be paid to employer handbooks and company policies governing the use of computers and e-mail communications.

One must wonder whether the NJ Supreme Court would have reached the same decision had Loving Care's Policy governing employees' e-mail communications expressly incorporated e-mails sent through private e-mail accounts. Regardless, it is hard to imagine the NJ Supreme Court declining to apply the attorney-client privilege in circumstances like these.

Vacating Sheriff's Foreclosure Sale - Lack of Notice to Homeowner

2010-01-13T10:33:00.011-05:00

In this article I discuss the rights and remedies available to a New Jersey homeowner who has lost his or her property to a sheriff's sale because the lender failed to provide actual notice of the sheriff's sale date. The state of confusion that can be created by the lender's failure to communicate with the borrower can be grounds to vacate a sheriff's sale under New Jersey law. But the homeowner must get to the court quickly upon learning of the sale.

For purposes of this article I ask my readers to make the following assumptions: (1) a foreclosure suit has been filed in New Jersey; (2) the borrower has requested a loan forbearance/modification from the lender either by initiating the court ordered mediation process or by participating in any of the lender's voluntarily homeowner assistance programs; (3) during the period of time when the borrower and lender are in the midst of the loan forbearance/modification process a sheriff's sale is scheduled in the foreclosure case; (4) the lender agrees to adjourn the sheriff's sale periodically over several months to permit the borrower with the opportunity to comply with the conditions of any interim loan forbearance/modification agreement; (5) after several adjournments of the sheriff's sale the bank ultimately denies the borrower's forbearance/modification request and a new sheriff sale date is scheduled; (6) the lender neglects to inform the borrower in writing of the new sheriff's sale date, and consequently the borrower is unaware that his or her property is scheduled for sale; and (7) consequently the property is sold at the sheriff's sale and the homeowner learns about it after the fact.

Typically, lenders will offer a 3-month interim forbearance agreement to test the borrower's ability to pay while the lender reviews the borrower's current financial information. If the borrower fully complies with the conditions imposed by the 3-month forbearance agreement, then the lender will provide a formal loan modification agreement. Obviously, the borrower is at a serious disadvantage in terms of having any leverage to negotiate with the bank, instead finding himself or herself in a "take it or leave it" situation. Meanwhile, the foreclosure case is proceeding forward and eventually a sheriff's sale is scheduled. Most borrowers, being prudent persons, will either hire counsel to negotiate an adjournment of the sheriff's sale or are able to secure the cooperation of the lender to adjourn the sale either voluntarily or through the court ordered mediation process now available to homeowners in New Jersey.

In the current mortgage foreclosure practice, there are multiple factors at play which often create a circuitous series of events leaving the borrower in a complete state of confusion about the status of the sheriff's sale on his or her property. The bank usually employs an outside loan servicing company to handle the loan and an attorney to process the foreclosure case. These two (2) factions do not necessarily communicate properly with the borrower, often passing the buck to one another. So for example, if the borrower calls the bank directly to find out what the status of his or her loan modification or the sheriff's sale date the bank will likely direct the borrower to contact the loan servicing company. Because most loan servicing companies use automated phone systems it can be extremely difficult for the borrower to reach a live voice; even if the borrower is fortunate enough to get through to a customer service representative they will often instruct the borrower to call the bank's attorney. If the bank's attorney is a firm that is processing hundreds or thousands of foreclosure cases, good luck in getting a return phone call!

So what happens in the scenario when after numerous months of waiting for an answer on a loan modification the bank denies the borrower's loan modification request, proceeds with a rescheduled sheriff's sale but neglects to provide the homeowner with written notice of the adjourned sheriff's sale, and the property is acquired by the bank or another third party purchaser at the sale?

Under Jersey law, a homeowner is entitled to receive actual notice of a sheriff's sale date including any postponements or adjournments of the sale. This is an important due process right because a sheriff's sale triggers the 10-day redemption period under NJ law for the homeowner to redeem or repurchase the property by paying off the full amount of the foreclosure judgment, or for the homeowner to file a Chapter 13 bankruptcy within the same 10-day period which extends the 10-day redemption period for an additional 60 days pursuant to 11 U.S.C. 109(g).

In the absence of the lender's compliance with this actual notice requirement, the prudent homeowner should consider filing a motion to vacate the sheriff's sale and invalidate the sheriff's deed. But time is of the essence for the homeowner to preserve his or her remedies, especially if an innocent third party has purchased the property at a sheriff's sale and the sheriff is in the process of, or has delivered, the deed thus consummating the sale.

It is well settled that New Jersey Chancery courts have the authority to set aside a sheriff’s sale based on “considerations of equity and justice.” First Trust National Assoc. v. Merola, 319 N.J. Super. 44, 49 (App. Div. 1999). Our Chancery courts have long recognized “that a judicial sale may be set aside ‘by reasons of fraud, accident, surprise, or mistake, irregularities in the conduct of the sale, and so on’….” Id., quoting Karel v. Davis, 122 N.J. Eq. 526, 529 (E. & A. 1937).

New Jersey Cour Rule 4:65-2 (R. 4:65-2) requires that notice of a sheriff's sale be posted by the sheriff in the sheriff's office and also on the property being sold. See also N.J.S.A. 2A:61-1 (requiring posting on the premises of the property being sold at least three weeks prior to the sale). In addition, the party who obtained the order for the sale must serve the owner of the property with notice of the sale at least ten days in advance of the sale by registered or certified mail, return receipt requested. R. 4:65-2. The Rule is clear – it requires that the property owner receive “actual notice” of the sale. See New Brunswick Sav. Bank v. Markouski, 123 N.J. 402, 426 (1991) (Court held that readily identifiable holders of property interests adversely affected by the sale are entitled to actual notice of the sale).

In a case that merits close attention in this current economic crisis, in First Mut. Corp. v. Samojeden, 214 N.J. Super. 122 (App. Div. 1986), the Appellate Division extended the actual notice requirement under R. 4:65-2 to apply to adjourned sheriff sale dates, concluding that effective notice is the guiding principle of procedural due process:

Although we recognize that our rules do not expressly provide for the giving of notice of adjourned sales, we are nevertheless persuaded that their implicit predicate is the affording of actual knowledge of the effective sale date to those persons whose interests would be irrevocably affected by the sale and, most particularly, the owners and encumbrancers of the property whose equity and investment are likely to be lost unless they take the protective action of either redeeming after the sale or purchasing at the sale. . . We so conclude for obvious jurisprudential reasons. Effective notice is the cornerstone of procedural due process. Our rules of court are constructed on that cornerstone and the focus of their interpretation must be consistent with that overriding concern.

214 N.J. Super. at 126.

Faced with a circumstance where the notice provisions of R. 4:65-2 have not been met, a New Jersey foreclosure court may either set the sale aside or allow a period of redemption. Orange Land Co. v. Bender, 96 N.J. Super. 158, 164 (App.Div.1967); see United States v. Scurry, 193 N.J. 492, 506 (2008) (allowing borrower a reasonable period of time to redeem her property, which had been sold at a sheriff's sale, because she had not received the required ten days of notice of the sale). But, when there is no intervening bidder at a sheriff’s sale and the homeowner does not have actual notice of any adjourned sale date then vacation of the sale is the appropriate remedy. See First Mut. Corp. v. Samojeden, 214 N.J. Super. at 128-129.

I recently succeeded in vacating a sheriff's sale for one of my clients based on the principles set forth in this article. Results of any court case may vary depending upon the circumstances, however.

Prominent NJ Law Firm Sues Former Associate for Website Infringement

2009-11-12T23:40:00.009-05:00

(November 2009) Levinson Axelrod, a prominent New Jersey personal injury law firm, has filed suit against its former disgruntled associate, Edward Heyburn, who in September 2009 registered and published a website domain using Levinson Axelrod's name for the purpose of airing his grievances against them. The firm filed suit in the Superior Court of New Jersey on an emergent basis, seeking to shut down the website, www.levinsonaxelrod.net, alleging, among other claims, that the content posted on the site is defaming the firm's reputation, the site is diverting traffic from the firm's legitimate website, www.levinsonaxelrod.com, and the use of the firm's name in the domain registration constitutes cybersquatting and trademark infringement.

However, Heyburn quickly removed the lawsuit to the United States District Court for the District of New Jersey because Levinson Axelrod’s complaint provides a federal question basis for removal by claiming violations of the federal Anticybersquatting Consumer Protection Act and the Lanham Act on trademarks. Two state law counts of the firm's Complaint allege unfair competition and breach of the duty of loyalty by Heyburn, who worked at Levinson Axelrod from 1998 to 2004. Although Heyburn’s site does not disclose client names, the firm is accusing him of disclosing confidential communications by providing enough case specifics to identify clients.

The "gripe site", www.levinsonaxelrod.net, includes videos from Heyburn in which he sharply criticizes the firm's partners, describing one of them to have a "1970's porno mustache," and contains various blog posts where he accuses the firm of engaging in unethical conduct such as trying to "stiff attorneys on referral fees" for cases referred by lawyers from other firms. In one prominent blog post, Heyburn boasts that he's created a group on the social networking site Facebook called, "Levinson Axelrod Really Sucks."

In an attempt to fend off Heyburn from publishing additional websites using the Levinson Axelrod name, the firm purchased www.levinsonaxelrodsucks.com, and www.levinsonaxelrodsucks.net. In an open letter to Levinson Axelrod's litigation counsel which he conveniently publishes on the "gripe site," Heyburn openly mocks the firm for purchasing these domains:

Unfortunately, your client’s Web Master has already purchased levinsonaxelrodsucks.com and levinsonsexaxelrodsucks.net through Go Daddy. * * * Do they really need 2 LevinsonAxelrodSucks websites? I can only assume that they plan to launch a competing LevinsonAxelrodSucks.com website and steal my web traffic. I applaud you for your creativity. Clearly, they have an inside tract to what sucks. If I am incorrect and they merely plan to park the domains for eternity, then I have a proposal for you. I will give Levinson Axelrod the levinsonaxelrod.net domain name in exchange for the levinsonaxelrodsucks.com domain. My viewers would like continuity between the URL and the content anyway. This would satisfy both your client and my readers.

In his defense, Heyburn claims that he has no intention to profit from the "gripe site," but rather only to air his grievances against the firm. According to Heyburn, he launched the site because "(the firm's partners) have such an elitist attitude."

The case has gained significant news coverage in New Jersey, including the Newark Star Ledger and New Jersey Law Journal, and contains fascinating legal issues about the developing law of online defamation between former employee and employer, cybersquatting, diversion of website traffic, and trademark infringement. Thus far, the firm's interim attempts to force an immediate shut down of the "gripe site" have been unsuccessful.

I will continue to monitor this case in future posts.

Attorney-Client Privilege Attaches to Employee Yahoo! E-Mails Sent Through Employer's Computer

2009-07-29T22:40:00.016-05:00

In a published decision issued on June 26, 2009 in an employment litigation case, a New Jersey appeals court held that the attorney-client privilege applies to e-mails that the employee sent to her attorney while accessing the company's computer to send the e-mails through her private Yahoo! e-mail account. (Stengart v. Loving Care Agency Inc., A.-35-6-08T1).

With all due respect to the trial court, in my March 9, 2009 post discussing this case I expressed my opinion that the trial judge's decision was incorrect and predicted that an interlocutory appeal would be forthcoming because of the far-reaching effects of the trial court's decision. Both predictions turned out to be accurate.

For the convenience of our readers, although I extensively commented on the facts of this case in my March 9, 2009 post, the brief facts of the case are as follows: The plaintiff was the executive director of nursing at Loving Care Inc. ("Loving Care"). During her employment, Loving Care provided plaintiff with a laptop computer and a work e-mail address. Loving Care apparently had a company wide policy indicating that all e-mails sent through the company's computer system constitute the company's personal property.

Plaintiff resigned from her position at Loving Care on or about January 2, 2008. Prior to her resignation, she was communicating with her attorneys about filing a lawsuit against Loving Care and used the company's laptop to send e-mails to her attorney by accessing her Yahoo! e-mail account. In other words, instead of using her personal e-mail account at the company to communicate with her lawyers, the plaintiff instead chose to send the e-mails through her private Yahoo! e-mail account.

Approximately 1 month after resigning from her positition at Loving Care, plaintiff filed an employment discrimination suit against Loving Care. This prompted Loving Care to create a forensic image of the hard driver from plaintiff's lap top computer. When Loving Care ultimately shared this information its attorneys they discovered numerous communications between plaintiff and her lawyers during the time period preceding her resignation. This discovery was not made immediately known to plaintiff or her attorneys.

A few months later when responding to plaintiff's written discovery demands in the course of pretrial discovery, Loving Care referenced and attached some of the e-mails exchanged between plaintiff and her lawyers thus prompting plaintiff to demand the return of this confidential information. When Loving Care refused, plaintiff filed a motion before the trial court contending that all such e-mails were protected by the attorney-client privilege and could not be used in the case. The trial court rejected plaintiff's argument, finding that no attorney-client privilege attached to the disputed e-mails because the company's electronic communications policy put plaintiff on sufficient notice that her e-mails would be treated as company property. The trial court determined that plaintiff "took a risk of disclosure" when in view of the company policy she nevertheless proceeded to send e-mails to her counsel through her work computer.

Nonsense said the Appellate Division, which granted leave to appeal the interlocutory decision of the trial court - a remedy that is sparingly granted due to the preference that appeals not be filed until the entire case has concluded.

". . . merely because the company owned the computer used to make private communications or used to access such private information during work hours -- furthers no legitimate business interest, " the Appellate Division concluded. Although the appellate court recognized that New Jersey employers may unilaterally establish company rules and policies through handbooks or manuals, the court opined that the regulated conduct should concern the terms of employment and "reasonably further the legitimate business interests of the employer."

The Appellate Division's opinion reveals a rather pragmatic view toward the realities of how much sensitive personal information is readily available to individuals by simply pointing and clicking on computers connected to the Internet:

Using a computer, individuals may access their medical records, examine activities in their bank accounts and phone records, file income tax returns, and engage in a host of other private activities, including, as here,e-mail an attorney regarding confidential matters. Regardless of whereor how those communications occur, individuals possess a reasonable expectation that those communications will remain private.

Weighing the company's claimed interest in ownership and access to all e-mail communications transmitted over its computers against the attorney-client privilege, the appellate court concluded that the attorney-client privilege must prevail because of the important societal considerations that underpin the privilege.

In this author's opinion, the fact that plaintiff thought carefully enough to send the e-mails through her Yahoo! account, as opposed to using her employee e-mail account, demonstrates that she expected those communications to remain private and not become property of the company.

To obtain a free copy of this appellate case, please contact our New Jersey attorneys.

The case is now before the New Jersey Supreme Court, which accepted appellate review.

Bergen County Judge Rules No Attorney-Client Privilege Attaches to E-Mail Sent by Employee’s Personal Yahoo! Account While Using Company’s Computer

2009-03-09T12:11:00.006-05:00

Before Maria Stengart quit her job, she was already making plans to sue her employer. She e-mailed her lawyer during business hours from her company-issued laptop, though she was circumspect enough to use her personal Web-based Yahoo e-mail account. It was not until discovery in the ensuing hostile-workplace, constructive-discharge case that she learned company lawyers had a copy of the message, which was automatically saved on the laptop's hard drive as a temporary file.

Now a Bergen County judge, Estella De La Cruz, has held the e-mail isn't protected as an attorney-client communication, finding Stengart waived the privilege by using the company computer and network even though she sent the e-mail from her personal e-mail account with Yahoo!. The ruling, in Stengart v. Loving Care Agency , BER-L-858-08, is a first for a New Jersey state court and one of only a few across the country to deal with the factual scenario presented.

The other cases cited by De La Cruz turned on whether the employer had a clear policy putting the employee on notice that e-mails sent on company systems are not private. One of the cases De La Cruz cited was Kaufman v. SunGard Investment Systems , 05-Civ.-1236, a New Jersey federal case in involving e-mails between an employer and her lawyers recovered from company laptops after the employee deleted them. In 2006, U.S. District Judge Jose Linares upheld a U.S. magistrate judge's ruling that the employee waived the privilege by failing to take reasonable steps to protect the e-mails and by using the company network with knowledge that company policy allowed searching and monitoring e-mails.

Stengart was employed by Loving Care Agency (“Loving Care”), a home health-care company based in Fort Lee, New Jersey. Loving Care maintains an employee handbook which is distributed to staff and made available on the company’s computer servers, which warned that e-mail and voice-mail messages "are considered part of the company's business and client records" and "are not to be considered private or personal to any employee." The handbook prohibits using the e-mail system for job searches, "other employment activities outside the scope of the company business" or for "solicitation of outside business ventures." It allows "[o]ccasional personal use."

Stengart, the director of nursing, had worked for Loving Care since 1994 and helped create and distribute the handbook. "Consequently, when plaintiff decided to use company time, equipment and resources to communicate with her attorney regarding the terms of her resignation from Loving Care, she proceeded with knowledge that such computer use and communications would not be private or personal to her," Judge De La Cruz remarked. Stengart took the risk of waiver by the method of communication she chose, said De La Cruz, finding Stengart's avowed unawareness of the policy "not persuasive" in light of her high position, long tenure at Loving Care and her work on the handbook.

With all due respect to Judge De La Cruz, I respectfully disagree with her decision. The attorney-client privilege is one that is deeply rooted in American jurisprudence. The central purpose behind the privilege is that a client should be allowed to communicate with his/her attorney without fear of the communication being disclosed to others. The fact that Stengart used her own personal Yahoo! e-mail account as opposed to the company’s e-mail server undoubtedly establishes that she did not use the “company’s e-mail system” as contemplated by the employee handbook Consequently, the attorney-client privilege should apply. Due to the far-reaching aspects of this ruling, I expect that an interlocutory appeal will be forthcoming.

NJ Trial Court Tosses Defamation Case Against Hot Chicks With Douchebags

2009-02-26T22:08:00.008-05:00

A Superior Court judge in Bergen County New Jersey dismissed a defamation case against a number of defendants based on the claims of two women who sued over photographs taken of them clubbing at a Clifton, NJ bar which were included in a book titled, "Hot Chicks With Douchebags," published by a Simon & Schuster division.

In a 9-page written opinion granting summary judgment, the trial judge dismissed the complaint finding there was no actionable defamation claim because the photographs and accompanying text are used for humorous social commentary and the book is protected by the First Amendment.

The photos showed the women with one or more men described as "douchebags", which the book's author describes as men with "Greasy foreheads, spiked frosted hair, oiled up faces dripping with Tag Shot spray", dressed in "Armani Exchange T-shirts and rank cologne wafting off their backs like fetid pollen clouds as they pump their fists and attempt to grind into any hotties nearby."

The book's author, who also runs a website with the domain name http://www.hotchickswithdouchebags/, defines "hot chicks" as "young beauties oblivious to the hulking monstrosity clutching at their butts like snapping turtles on a Red Bull."

The plaintiffs appear together in a photo with a man reclining across their laps. One of the women is shown blowing a kiss at the camera, with a spiked-haired man throwing his arm around her. The photos were taken by a nightclub promotion company. The plaintiffs did not consent to the use of their photos and were not asked to give consent. Although neither of the women's names were identified in the photos or the book they objected being depicted as "females who date dubious men", and alleged that the book damaged their career prospects.

In addition to alleging defamation, the plaintiffs' complaint sought recovery for negligent infliction of emotional distress, conspiracy to commit fraud, and invasion of privacy.

As one would expect from a lawsuit with a defendant named “Hot Chicks With Douchebags”, the Court's decision contains some humorous quotes:

A reasonable person would conclude a book named "Hot Chicks With Douchebags" is meant to be satirical, and, while some would consider it vulgar, it is not an assertion of fact, the trial judge said.
Citing passages from the book as examples, the trial judge remarked that a reasonable person would not believe that "in 1981 archaeologist Renee Emile Bellaqua uncovered in a cave in Gali Israel a highly controversial Third Century religious scroll suggesting that the 'douchey/hotty' coupling was a troublesome facet in early social religious structures" or that "Jean-Paul Sartre stated 'man is condemned to be douchey because once thrown into the world he is responsible for every douchey thing that he does.'"

One has to wonder whether the attorney defending "Hot Chicks With Douchebags" was able to keep a straight face while announcing his client's name during his opening appearance before the trial judge at the motion hearing. "Good morning Your Honor. I represent Hot Chicks With Douchebags."

NJ Supreme Court Orders New Trial Due To Appearance of Impropriety Created by Retiring Trial Judge Negotiating Employment With Trial Counsel

2008-09-24T16:08:00.002-05:00

In an important decision that provides guidelines for retiring judges seeking future employment in the legal profession, on September 24, 2008 the New Jersey Supreme Court ordered that a new trial must be conducted because of the appearance of impropriety created by a then soon-to-be retiring Chancery Court trial judge who, before the case had been concluded, began negotiating employment with an attorney appearing before him whose firm represented one of the litigants in the same case. DeNike v. Cupo (A-61-07, September 24, 2008).

In so ruling, the New Jersey Supreme Court reversed the decision of the lower court (Appellate Division) which had determined that the trial judge's conduct, although inappropriate, did not influence the outcome of the case because the trial judge already had issued his substantive rulings in several written opinions and that his remaining functions as the presiding judge in this case were "ministerial."

The NJ Supreme Court concluded that the public trust in the judicial system would be compromised in the absence of a new trial. Specifically, the NJ Supreme Court held:

Judges must avoid actual conflicts as well as the appearance of impropriety to promote confidence in the integrity and impartiality of the Judiciary. Unfortunately, the negotiations between trial judge and lawyer in this case created an appearance of impropriety. Stated simply, the conduct here fell far short of the high standards demanded of judges and fellow members of the legal profession and had the capacity to erode the public's trust. Because any lesser remedy would allow reasonable doubts to linger about the fairness of the outcome of the case, the judgment of the Appellate Division is reversed and the matter is remanded for a new trial.

Although there was no evidence that this respected trial judge acted out of actual bias in favor of the firm whom he was in the midst of negotiating terms of employment, the NJ Supreme Court was of the opinion that the appearance of impropriety generated by these employment negotiations and the prospect of a financial relationship between the law firm and the judge raises doubts about those decisions and the judge's impartiality in general.

Regrettably, from the standpoint of a knolwedgeable, objective observer, the brief negotiations toward the end of the litigation could reasonably have infected all that occurred beforehand. As a result, a full trial is required to restore public confidence in the integrity and impartiality of the proceedings, to resolve the dispute in particular, and to promote generally the administration of justice.

Recognizing that the existing Rules of Professional Conduct and Code of Judicial Conduct do not specifically provide instructions for post-retirement employment discussions between judges facing mandatory retirement and private employers in the legal profession, the NJ Supreme Court offers the following guidelines:

1. Judges may not discuss or negotiate for employment with any parties or attorneys involved in a matter in which the judge is participating personally and substantially. If the subject is raised in any fashion, judges should put a halt to the conversation at once, rebuff any offer, and disclose what occurred on the record.

2. Judges who engage in retirement discussions while still on the bench - with attorneys who do not have a matter pending before them - must proceed in a way that minimizes the need for disqualification and upholds the integrity of the courts. To that end, judges should delay starting any discussions until shortly before their planned retirement, and should discuss post-retirement employment opportunities with the fewest possible number of of prospective employers.

3. Judges must disqualify themselves from matters involving parties or attorneys with whom they have discussed future employment, whether or not those discussions lead to a future relationship.

4. Judges should wait a reasonable period of time before discussing employment with an attorney or law firm that has appeared before the judge.

The NJ Supreme Court referred the matter to the Professional Responsibility Rules Committee and the Advisory Committee on Extrajudicial Activities for their recommendations.

NJ Appeals Court Says Commercial Bank Subject to Consumer Fraud Act Claim

2008-09-23T21:15:00.000-05:00

A bank employee who misappropriates a customer's cash deposit can expose the bank to a claim under the New Jersey Consumer Fraud Act, a NJ appeals court ruled in Lee v. First Union National Bank, et al., App. Div., Case No.: 09-2-1547.

In this case, the plaintiff, an existing customer of First Union National Bank, alleged she paid $2,000 in cash to a bank employee who worked in the bank's brokerage services unit which was supposed to be used to purchase shares of a mutual fund. Instead of depositing these funds into her brokerage account, the plaintiff claimed the bank's employee misappropriated her $2,000 cash tender for his own personal use which resulted in an overdraft in her checking account. The bank covered the shortfall by taking money from plaintiff's checking account and liquidating some of the mutual fund shares.

Plaintiff's complaint alleged violation of the Consumer Fraud Act (CFA) and common-law conversion. The trial judge granted summary judgment in favor of the bank and its brokerage arm, holding that the CFA was not applicable to a sale of securities and the count for misappropriation was barred by the two-year statute of limitations under the Blue Act, N.J.S.A. 49:3-71(g).

On appeal, the New Jersey Appellate Division reversed on the following grounds: (1) The transaction is not exempt from the CFA prohibition on deceptive sales practices because the claim relates to misrepresentation as to performance of services and not the nature or existence of the security; (2) N.J.S.A. 49:3-71(g) is not applicable because the gravaman of this count of the complaint concerns the unlawful "taking, detaining, or converting of personal property," which is subject to the six-year statute of limitations.

NJ Appellate Court Says Banks Owe Duty Of Care To Victims Of Identity Theft

2008-09-17T21:06:00.004-05:00

Banks beware! In a case of first impression, a New Jersey appeals court held that a bank that pursues criminal charges against an innocent third party whose identify is stolen and used to defraud the bank can be sued civilly for negligence and malicious prosecution.

In this particular case, Brunson v. Affinity Federal Credit Union, A-4439-06, the bank employed a fraud and loss prevention specialist (Mr. Wilcox) who happened to be a certified fraud examiner. According to the appellate record, an imposter posing as the plaintiff Brunson opened an Affinity account in Brunson's name using Brunson's social security number and an out-of-state driver's license bearing Brunson's date of birth and a Paterson, NJ address (misspelled with two "t's".) Within days of opening this account, the imposter successfully cashed $9,506 in phony checks drawn against a corporation known as Viva International Group.

The bank's fraud and loss prevention specialist Wilcox was provided with surveillance tapes and still photographs depicting the imposter as a black male about five feet six inches tall. Wilcox verified that Viva International Group did not employ anyone named "Brunson" on its payroll nor was there any "Brunson" authorized to sign company checks. Wilcox also learned that Brunson had a criminal record. Hastily reaching the conclusion that Brunson was responsible for this fraud, Wilcox filed two criminal complaints against Brunson for uttering a forged document and for theft by deception and testified before the grand jury that ultimately indicted Brunson. Critically, Wilcox didn't bother to review police photographs of Brunson to compare against the surveillance images maintained by the bank, nor did he show the bank's tellers who dealt with the imposter a photo of Brunson to confirm the identification. Had he taken these extra precautions, Wilcox would have learned that Brunson is six foot three, nine inches taller than the imposter.

Brunson, a New York City resident, was arrested in Virginia, was extradited to New Jersey and was released after spending 13 days in jail. The charges were ultimtaely dropped.

At the trial level, the Superior Court judge dismissed Brunson's suit against Affinity and Wilcox on motion practice without the case having reached a jury, labeling the incident as an innocent mistake and finding that Wilcox did not willfully withhold or misrepresent information in his grand jury testimony. Brunson timely appealed the granting of summary judgment in defendants' favor, arguing that there were disputed factual issues and that a grand jury indictment did not preclude a claim for malicious prosecution.

The appeals court agreed with Brunson, ruling that financial institutions and fraud investigators have a duty to "pursue with reasonable care their responsibility for protecting not only their own customers, but non-customers who may be victims of identity theft." In the absence of any reported New Jersey legal precedent supporting a duty of care in this particular setting, the 3-judge appellate panel was persuaded to follow the holding of the Alabama Supreme Court in similar decision where that court ruled that a bank could be liable for the false arrest of someone whose stolen identity was used to open an account. Patrick v. Union State Bank, 681 So.2d 1364 (Ala. 1995).

The New Jersey Appellate Division concluded that the trial court erroneously granted summary judgment in favor of Affinity and Wilcox, noting that the facts surrounding whether Wilcox had probable cause to file criminal complaints against Brunson were in dispute, and that the mere existence of a grand jury indictment against Brunson does not bar Brunson's claim for malicious prosecution.

"Because of the foreseeability of harm, fairness and public policy require financial institutions to be accountable when they negligently put individuals at risk by failing to exercise reasonable care in undertaking investigations of fraud claims," the Appellate Panel remarked ... [even when the person is not an account holder].

Only a civil jury can determine "whether the grand jury would have indicted plaintiff [Brunson] if it had been presented with photographs of the imposter along with the disparity in their [physical] descriptions," the 3-Judge Appellate Panel concluded. In remanding the case back to the trial court for further proceedings, Brunson will have to demonstrate the following elements to sustain a civil claim for malicious prosecution arising out of a criminal prosecution: (i) the ciminal proceeding was instituted by the defendant, (ii) the criminal proceeding was actuated by malice, (iii) there was no probable cause for the proceeding, and (iv) the proceeding was terminated in his favor.

New Jersey Supreme Court Applies Full Faith & Credit to Tennessee Class Action Settlement

2008-08-13T08:34:00.005-05:00

In Simmermon v. Dryvit Systems, Inc. (A55-07), the New Jersey Supreme Court was presented with determining whether the full faith and credit clause of the US Constitution requires a New Jersey court to give preclusive effect to a nationwide class action consumer fraud settlement approved by a Tennessee circuit court. (View the video of oral argument before the NJ Suprem Court http://njlegallib.rutgers.edu/supct/args/A_55_07.php)

The New Jersey Supreme Court held that the Tennessee court is the appropriate forum to determine whether Simmermon should be bound by the settlement entered in that court and thus barred from pursuing his own individual case in New Jersey. However, because of tactical gamesmanship employed by the principal defendant in Simmermon's individual lawsuit, the New Jersey Supreme Court held that the defendant will be responsible for Simmermon's attorneys' fees and litigation expenses.

In the New Jersey lawsuit, the plaintiff asserted the same types of claims against the same defendant named in the Tennessee class action, Dryvit Systems, Inc. ("Dryvit"), a manufacturer of a synthetic stucco exterior installation and finishing system. In 1995, plaintiff Simmermon purchased Dryvit's synthetic stucco system from one of Dryvit's distributors for installation in his custom-made home in New Jersey. Approximately 4 years later in 1999, Simmermon discovered that the stucco was defective due to observable bubbling and peeling. Simmermon filed suit in 2001 against Dryvit, its distributor, and the company that installed the system on his custom-made home.

THE TENNESSEE CLASS ACTION LAWSUIT

Only a year before Simmermon filed his New Jersey lawsuit, a group of Tennessee homeowners filed a class action against Dryvit in the Tennessee Circuit Court, asserting the same basic claims that Simmermon alleged in his Complaint. On April 8, 2002 - 7 months after Simmermon filed his New Jersey complaint - the Tennessee class action, which until then had been limited to Tennessee homeowners, was converted into a nationwide homeowners' class action. On the same day, representatives of the now nationwide class action and Dryvit entered into a settlement agreement that received preliminary approval by the Tennessee Circuit Court. The principal terms of the settlement agreement obligated Dryvit to provide class members with property inspections, 3-year limited warranties, and reimbursement of repair costs as determined by a certain formula.

In furtherance of the settlement, in June 2002 the claims administrator of the settlement sent all identifiable class members a first-class mailing containing settlement information, a claim form, and an opt-out form. Additionally, information about the class action and settlement terms was published in advertisements in national and local newspapers, national magazines, trade publications, and online at http://www.stuccosettlement.com/. Homeowners could opt-out of the class and thus be free to pursue their own individual lawsuits against Dryvit by timely completing and returning the opt-out form to the claims administrator. According to records maintained by the claims administrator in the Tennessee class action, on June 24, 2002 a notification letter was mailed to Simmermon's home in New Jersey as per the terms of the settlement. The letter sent to Simmermon was not among those returned by the US postal service as undeliverable, and Simmermon was not among the class members who filed a request to opt out of the proposed settlement.The Tennessee Circuit Court held a hearing on October 1, 2002 addressing the objections from certain objectors challenging the fairness and adequacy of the notice procedures of the proposed settlement.

On January 14, 2003, the Tennessee Circuit Court approved the class action settlement and determined that the notification to class members "constituted the best practicable notice" and was "reasonably calculated . . . to apprise class members of the pendency of [the] class action, [and of] their right to exclude themselves from the class and the proposed settlement. In addition, the Tennessee Circuit Court ordered that any class member who had not returned the opt-out form to the claims administrator were "permanently barred and enjoined" from obtaining "any benefits or other relief" in a lawsuit filed in another jurisdiction related to claims asserted in the class action."

The Tennessee Court of Appeals stayed enforcement of the class action settlement through January 2005 to allow homebuilders the opportunity to intervene in order that their rights could be determined under the settlement. In April 2005, the Tennessee Circuit Court dismissed the homebuilders' objections, confirmed the fairness of both the settlement notification procedures and the settlement terms, and entered final judgment approving the settlement in all respects.

SIMMERMON'S NEW JERSEY LAWSUIT

Just 3 weeks before the Tennessee Circuit Court certified the nationwide class action against Dryvit and preliminarily approved the class action settlement, on March 15, 2002 Dryvit filed its answer in Simmermon's New Jersey litigation but made no mention of the class action lawsuit as required by New Jersey Court Rule 4:5-1(b)(2). In accordance with this New Jersey pleading rule, in answering a complaint defense counsel is required to certify "whether the matter in controversy [was] the subject of any other action pending in any court . . . or whether any other action . . . [was] contemplated." R. 4:5-1(b)(2). The rule also requires the defendant to file with the "[plaintiff] and with the court an amended certification if there is a change in the original certification." Ibid.

It was undisputed that Dryvit did not comply with R. 4:5-1(b)(2) by informing Simmermon or the Court in its initial answer. or by way of a subsequent amended certification, that the subject matter of Simmermon's lawsuit was also the subject of the previously filed and existing nationwide class action suit in Tennessee.On March 25, 2003, 1 year after filing its answer in the New Jersey case, 11 months after preliminary approval of the nationwide class action settlement, 6 months after the opt-out deadline had expired, and 2 months after the Tennessee court entered its final approval of the settlement, Dryvit's counsel first sent a letter to Simmermon's counsel informing him of the nationwide class action settlement and that it was Dryvit's position that because Simmermon did not opt-out of the settlement that he was "barred and enjoined" from continuing his litigation against Dryvit in New Jersey. It was not until some 2 months later on May 30, 2003 that Dryvit's counsel finally notified the trial court about the Tennessee class action settlement and that it barred Simmermon from proceeding with his claims in New Jersey.

TRIAL COURT LEVEL

At the trial court level, Dryvit moved to dismiss Simmermon's claims based on the terms of the Tennessee class action settlement which by that time was considered as a final judgment in Tennessee. In other words, Dryvit asserted that the New Jersey court should give full faith and credit to the final judgment of a sister state - Tennessee. The trial court agreed with Dryvit, finding that the Tennessee court properly exercised jurisdiction over the class action and that Simmermon was subject to jurisdiction as a class member in Tennessee, the settlement notification procedure and opt-out provision satisfied federal due process requirements, and Simmermon's failure to opt-out rendered him bound by the settlement.

APPELLATE DIVISION

On appeal, the Appellate Division reversed the trial court, holding that Dryvit's failure to timely disclose to Simmermon and to the court its knowledge of the class action settlement, pursuant to R. 4:5-1(b)(2), prevented Dryvit from invoking the preclusive effect of the Tennessee judgment. The Appellate Division declined to address the due process analysis conducted by the trial court because the Appellate Division panel concluded that Dryvit's violation of R. 4:5-1(b)(2) was an independent legal basis for not enforcing the Tennessee judgment.

SUPREME COURT HOLDING

On petition for certification, the New Jersey Supreme Court reversed the Appellate Division's decision, holding that the Tennessee judgment is entitled to full faith and credit in the absence of Simmermon obtaining relief therefrom in a Tennessee court. This means that Simmermon must apply to a Tennessee court to avoid the preclusive effect of the settlement entered in the nationwide Tennessee class action. If Simmermon is unsuccessful in Tennessee, then the New Jersey courts must abide by the terms of the nationwide class action settlement reduced to judgment in Tennessee. On the other hand, if Tennessee excludes Simmermon from the class action settlement, then he may proceed with his New Jersey claims against Dryvit, the New Jersey Supreme Court declared.

Under either scenario (i.e., should Simmermon's succeed or fail in his future application to the Tennessee court), the New Jersey Supreme Court at least put Simmermon in a position to recoup his attorneys' fees and litigation expenses. The Court was particularly critical of Dryvit's failure to comply with the certification requirements of R. 4:5-1(b)(2), noting that Simmermon would have avoided unnecessary legal fees and costs and the New Jersey courts' resources had been spared had Dryvit simply been more forthcoming in its disclosure about the Tennessee class action lawsuit and settlement.

About the author: Glenn R. Reiser is a New Jersey attorney and partner at the law firm of LoFaro & Reiser, LLP with offices in Montclair and Hackensack, N.J. Mr. Reiser did not represent any party to this lawsuit. To visit LoFaro & Reiser's official websites, go to www.njlawconnect.com and www.new-jerseylawyers.com.

NJ Supreme Court Declines To Affirm Prima Facie Tort Remedy in NJ

2008-07-01T20:57:00.005-05:00

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:

"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."

NJ Supreme Court Declares Substance Over Form in Breach of Contract Case

2008-06-04T09:08:00.002-05:00

On June 4, 2008, the New Jersey Supreme Court in Romagnola v. Gillispie, Inc. (A-57-07), held that a litigant who complied with a procedural court rule that was subsequently amended was entitled to enforce the rule as it existed pre-amendment. The plaintiff in this case availed himself of the offer of judgment rule, R. 4:58-2, which allows a litigant to recover his/her counsel fees if the litigant offers to accept a judgment for a specific amount, the defendant rejects the offer, and the litigant prevails at trial. Prior to September 1, 2004, to trigger an award of counsel fees R. 4:58-2 required that the litigant obtain a money judgment for a sum "as least as favorable as the rejected offer." On September 1, 2004, R. 4:58-2 was amended to increase the money judgment requirement to be "an amount that is 120% of the offer or more."

In 2002 plaintiff sued the defendants for breach of contract and other related claims. The parties engaged in extensive pretrial discovery and motion practice. During the course of the case, on March 20, 2002 plaintiff submitted an offer of judgment to defendant, offering to accept judgment in the amount of $1,165,000. In compliance with R. 4:58-2, plaintiff's offer of judgment notified defendants that they had 10 days before trial started or 90 days after service of the offer, whichever expired sooner, to accept the offer or it would be withdrawn. Defendants did not accept plaintiff's offer of judgment, and the offer was deemed rejected as of June 28, 2002. Under R. 4:58-2 as it existed then, plaitniff would have been entitled to recoup all of his litigation expenses and reasonable attorney's fees incurred after June 28, 2002 plus 8% interest on the judgment from the date of completion of discovery.

The case was tried without a jury between October 2003 and March 2004. Post-trial written submissions were completed by June 2004. Before the trial court ruled on the outcome, R. 4:58-2 was amended effective September 1, 2004, so that the qualifiying amount of money judgment required to trigger the remedies under the Rule was increased from a sum "at least as favorable as the rejected offer" to an "amount that is "120% of the offer or more." 3 weeks later the trial court returned a a judgment in favor of plaintiff and against defendants for the sum of $1,315,909.63, excluding pre-judgment interest. Significantly, the judgment satisifed the prior version of R. 4:58-2 in that it was "at least as favorable as the rejected offer" of $1,165,000, but did not satisfy the amended version of R. 4:58-2 because it was not "120% of the offer or more."

The trial court denied plaintiff's post-judgment application for attorneys' fees and expenses, finding that although the result was harsh it had no choice but to enforce the current version of R. 4:58-2 thereby barring plaintiff's remedy even though plaintiff fully complied with the Rule as it existed at the time he submitted his offer of judgment. Defendants appealed the underlying judgment and plaintiff cross-appealed. The Appellate Division agreed with the trial court's decision to enforce R. 4:58-2, as amended, reasoning that the Rule is procedural in nature, and normally, procedural rules in effect on the date a judgment is entered govern. The Appellate Division determined that plaintiff had no vested right in the pre-amendment operation of R. 4:58-2.

In a victory of substance over form, the Supreme Court reversed the Appellate Division's decision denying plaintiff a remedy under R. 4:58-2 by applying R. 1:1-2 -also known as the "relaxation rule". R. 1:1-2 provides that the NJ Rules of Court "shall be construed to secure a just determination, simplicity in procedure, fairness in adminstration and the elimination of unustifiable expense and delay." If further provides that, "unless otherwise stated, any rule may be relaxed ... if adherence to it would result in an injustice." "Determining whether relaxtion [under R. 1:1-2] is appropriate ... requires an examination and balancing of the interests that are at stake." State v. Williams, 184 N.J. 432, 433 (2005). Nevertheless, our courts have held that resort to R. 1:1-2 "should be used sparingly..." See Bender v. Adelson, 187 N.J. 411, 431 (2006).

Circumstances as unique as those presented here -- where a party fully complies with the letter and spirit of a Rule but the Rule changes after a party can no longer alter or modify its position to comply with the amended Rule -- animate the more flexible approach Rule 1:1-2 embodies and weigh heavily in favor of relaxation. At its core, plaintiff's plea is that, once trial had started, his offer of judgment was fixed and could not be changed and, hence, the application of the rules other than those under which the offer of judgment was made violates fundamental principles of fairness. In this limited instance, we agree.

This case represents a strong example of the New Jersey Supreme Court's willingness to reward substance over form. In my opinion, it is difficult to comprehend why 2 courts (trial court and appellate court) did not share the view espoused by the NJ Supreme Court. A question not addressed here, however, is whether the plaintiff would be entitled to recover his attorneys' fees and expenses incurred in the appeals to the Appellate Divison and NJ Supreme Court. The NJ Supreme Court remanded (or returned) the case to the trial court for furthe proceedings.

New Jersey Predatory Lending Practices Associated with NJ Foreclosure Bailout Questioned by NJ Appellate Court

2008-05-22T14:07:00.002-05:00

Score a victory for homeowners in New Jersey who have been duped by “white knight” lenders on the eve of sheriff’s foreclosure sale! In a published opinion issued by the New Jersey Appellate Division on May 19, 2008, Nowoleska vs. Steele, et als., Appellate Div. 2008, Docket No.: A-5759-06T15759-06T1, the Court came to the rescue of an elderly lady and her daughter and son-in-law who unwittingly gave up title to their family home in order to avoid a sheriff’s sale thinking they would be able to get the property back.

In this case, the Appellate Division was presented with the question of whether to vacate a default judgment entered against defendants that resulted in awarding possession of the family home to a subsequent purchaser who acquired title to the property based upon prior predatory lending practices of predecessors in title. Defendants, including an 83-year old woman named Marjorie Steele, faced ejectment from the house that was occupied as the family home for 43 years. Originally, the property was occupied as Ms. Steel’s marital residence, and thereafter ownership was shared with her daughter and son-in-law. Defendants lost title to the house through a series of questionable lending transactions.

In June 2003, defendants borrowed $95,000 to make home improvements and repairs, and to consolidate other debts. The loan was secured by a mortgage. At some point in time, defendants defaulted on this mortgage by failing to make regularly scheduled payments. The mortgage holder filed a foreclosure suit, obtained a judgment, and received a sheriff's sale date of February 7, 2006. Defendants avoided the sheriff’s sale, however, by borrowing funds from an entity known as Property Vestors. In exchange for this “white knight” loan, defendants executed a promissory note with Property Vestors requiring them to pay back the loan plus interest within 30 days (or by February 28, 2006 which was 21 days from the date of the scheduled sheriff’s sale). Defendants expected to repay this loan by borrowing from their 401(k) accounts. In any event, defendants believed that Property Vestors would be required to commence a new foreclosure case if they failed to repay the monies within 30 days. However, as part of the transaction with Property Vestors, the defendants signed a Deed in Lieu of Foreclosure to Property Vestors as security for the loan. The promissory note provided that if the monies were not paid by February 28, 2006, Property Vestors would pay defendants $20,000 and, upon payment of an outstanding mortgage, would have all rights to the property.

Once again faced with the prospect of losing their property, on February 24, 2006 defendants obtained new financing through Lenny Hernandez and Michael Figler of Equity Solutions, L.L.C. (collectively “Equity Solutions”) and paid off their prior loan to Property Vestors As a result this transaction with Equity Solutions, Figler took title to the property, paid off Property Vestors’ mortgage along with other liens and judgments against the property, which totaled approximately $145,000, plus title and closing costs of approximately $10,000. In addition, Figler included as part of his "purchase price" for the property the sum of $50,000 representing a fee to his company Equity Solutions. Defendants signed a use and occupancy agreement with their new lender allowing them to remain on the premises for 1 year provided they made monthly payments of $2,200 to Figler, and they had an option to buy back the property for $202,400 within one year (before February 24, 2007).

On April 24, 2006, after defendants defaulted on the payments to Figler, he transferred title to the property to plaintiff Ewelina Nowosleska for $260,000. Nowosleska subsequently transferred title to Jean Sidibe for $405,000, and a mortgage in that amount was recorded with the County clerk’s office. Defendants asserted that both parties (plaintiff Nowosleska and Sidibe) were connected with Figler's business. Assuming that $405,000 represents the value of the property, defendants were thus induced to part with title to property valued at $405,000 in order to pay off debts totaling a mere $145,000

Since defendants made no payments under the use and occupancy agreement with Figler, plaintiff (who had acquired the property from Figler) commenced an action to eject or remove defendants from the property. Defendants were served with the lawsuit on August 24, 2006, but failed to file an answer. Consequently, default was entered against them, and plaintiff's unopposed motion for a default judgment was granted. The default judgment entered on January 9, 2007, gave plaintiff possession of the premises.

Approximately 4 months later, on April 25, 2007, defendant filed an emergency application before the trial court asking to vacate the default judgment. The trial court denied their application on May 11, 2007. Defendants filed a motion for reconsideration, which the trial court also denied. Thereafter, defendants appealed and the trial court issued a stay of the ejectment pending the outcome of the appeal.

In their appeal, defendants argued that Figler misrepresented that the monthly payments would be only slightly higher than their current $1,200 mortgage payment and that a portion of their home equity would be used to make these payments. They contend that they signed the documents understanding that they were obtaining a loan and that only later did they discover that they had signed a deed transferring title to the house to Figler. Figler arranged for an attorney to represent defendants for the transaction and, not surprisingly, argued that defendants understood the nature of the transaction and agreed to it.

Defendants maintained that the trial court should have vacated the judgment for ejectment pursuant to subsection (f) of New Jersey Court Rule 4:50-1, which allows the court to set aside a judgment in “exceptional situations.” In determining whether relief is warranted under this section of the rule, courts focus on equitable considerations. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 294 (1994). In Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 100-01 (App. Div. 1998), certif. denied, 158 N.J. 686 (1999), this court stated, in the context of an application to vacate a default judgment, that:

As the Appellate Division explained, R. 4:50-1(f) calls for the exercise of sound discretion, "guided by equitable principles, and in conformity with the prescription that 'any doubt should be resolved in favor of the application to set aside the judgment to the end of securing a trial upon the merits.'" (quoting Goldfarb v. Roeger, 54 N.J. Super. 85, 92 (App. Div. 1959). An application for relief from a default judgment under subsection (f) is treated "indulgently." Mancini v. EDS, 132 N.J. 330, 335 (1993). The decision on whether to vacate a judgment under the terms of this rule is left to the sound discretion of the trial court and will not be overturned on appeal absent a mistaken exercise of that discretion. Mancini v. EDS, 132 N.J. at 334.

In this instance, the Appellate Division put down its foot on these types of predatory lending practices by reversing the trial court’s decision and vacating the judgment of ejectment. “Since the loss of the home may have resulted from predatory lending practices, in the interests of justice and due to these extraordinary circumstances, the default judgment should be set aside under Rule 4:50-1(f), so that the dispute can be resolved on the merits, and, if necessary, appropriate legal and equitable adjustments be made,” the Appellate Division held. “Allowing the default judgment to stand in this case may result in a grave injustice. These defendants may have been the victims of predatory lending practices,” the Appellate Division further remarked.

It remains to be seen whether the defendants will ultimately prevail on their predatory lending claims at a trial on the merits, but the Appellate Division determined that they at least deserve the opportunity.

"Not in the Cards," says NJ Appellate Court to Self-Professed Problem Gambler

2008-03-25T21:09:00.003-05:00

A self-professed problem gambler who voluntarily placed himself on the New Jersey Casino Control Commission's lifetime self-exclusion list is not entitled to removal from that list on becoming aware that out-of-state casinos affiliated with New Jersey casinos would also exclude him from their gaming facilities, the Appellate Division ruled on March 20, 2008 in The Matter of the Petition of S.D. for Removal From the Voluntary Self-Exclusion List, A-3427-06T2.

In this particular case, on July 26, 2004 the gambler (S.D.) submitted a "self-exclusion questionnaire" for lifetime placement on New Jersey's self-exclusion list. In signing the questionnaire, S.D. acknowledged that he was a problem gambler; that he authorized the New Jersey casino and casino simulcasting facilities to exclude him from all gaming activities; that he read and understood the instructions appearing on the questionnaire; and affixed his initials to to a question explaining that by choosing a lifetime ban he could not request to be taken off the list.

Only a month later, on August 24, 2004, S.D. sent the division a letter requesting that his lifetime ban be rescinded or downgraded. According to S.D., he claimed he agreed to ban himself only from Atlantic City, which was near his home, so that he would force himself to restrict his gambling to Vegas trips. S.D. having received a letter from Ceasers, which maintains casinos in Atlantic City and Las Vegas, notifying him that his voluntary submission to New Jersey's resulted in his being banned in its Las Vegas casino, S.D. claimed that he never would have voluntarily banned himself if he knew the ban would extend to other gaming facilities in other parts of the United States.

Ultimately, S.D. filed a formal petition with the New Jersey Casino Control Commission seeking an order removing his lifetime ban from the SEL. According to his petition, S.D. argued that he did not knowingly and voluntarily waive his rights because the questionnaire did not inform him that putting himself on New Jersey's SEL would result in his being excluded from other affiliated casinos throughout the USA. The Commission denied S.D.'s petition for, among other reasons, that there was no regulation justifying removal of a person who voluntarily chooses a lifetime self-exclusion ban, or any regulation directing casinos in other states to allow a voluntary participant in a New Jersey SEL to gamble at their facilities.

Dissatisfied, S.D. appealed the Commission's denial of his petition to the Superior Court of New Jersey, Appellate Division, which has appellate jurisdiction from final orders of administrative agencies. Applying an "abuse of discretion standard", the Appellate Division found that the Commission's decision was supported by ample facts, law and public policy. Recognizing that there is no fundamental right to gamble, either by statute or by constitution, the Appellate Division concluded that S.D. voluntarily surrendered whatever right he had to participate in gaming activities in New Jersey when he placed himself on lifetime SEL. That S.D.'s decision to submit to New Jersey's SEL resulted in his banishment from casinos in other jurisdictions was a collateral consequence of his contract or agreement with the State of New Jersey, the Appellate Division reasoned.

Further, the appellate court remarked that the voluntary exclusion policies of the private parent companies of New Jersey casino licensees was not something within the purview or jurisdiction of the New Jersey Casino Control Commission. Hence, the appellate court held that the Commission had no obligation to inform S.D. of any collateral consequences of his New Jersey SEL.

What does this case mean for NJ gamblers? Think carefully before folding your hand.

NJ Supreme Court Rules in Favor of Homeowner in Challenge to Foreclosure Sale Based on Deficient Sheriff's Sale Notice

2008-02-29T14:28:00.002-05:00

In a victory for homeowners, the New Jersey Supreme Court has ruled that where notice of a sheriff's sale was procedurally deficient, the equitable doctrine of laches will not serve to bar relief to the homeowner. U.S. v. Scurry, A-14 September Term 2007.

In this case, the homeowner was sued in foreclosure by her lender after falling behind in her mortgage payments. The homeowner subsequently filed Chapter 13 bankruptcy in an effort to save her home, however she also fell behind in her post-petition mortgage payments resulting in the bank obtaining relief from the automatic stay of the bankruptcy case. The bank then returned to the foreclosure court, obtained final judgment and received notice of a sheriff's sale date. Pursuant to NJ Court Rule 4:65-2, the bank was required to provide the homeowner with at least 10 days' prior written notice of the sheriff's sale by registered or certified mail return receipt requested. The bank was unable to prove that it satisfied this requirement, failing to produce a return receipt card. Notwithstanding, the sheriff's sale was held and the bank was the successful bidder.

Approximately 3 months after the sheriff's sale had concludedd, the sheriff's department served the homeowner with a writ of possession which prompted the homeowner to immediately contact her bankruptcy lawyer. The homeonwer then deposited the post-bankruptcy mortgage arrears with her lawyer, and her lawyer promptly notified the bank's foreclosure counsel that he was holding the funds necessary to cure the post-petition arrears. The bank's counsel never responded, and on September 8, 2005 the homeowner and her personal belongings were removed from the property.

Three months after the lockout, the homeowner filed a motion before the Chancery Court seeking to vacate the sheriff's sale on the basis of lack of proper notice. Not surprisingly, the bank opposed the motion claiming it had incurred $3000 in costs to enforce the lockout and that it would be prejudiced by the inordinate delay - the sheriff's sale having occurred some 7 months earlier. The trial court denied the homeowner's motion, and after an unsuccessful motion for reconsideration she appealed to the Appellate Division. The Appellate Division affirmed, finding that even though the bank didn't properly provide notice of the sheriff's sale the trial court did not abuse its discretion given the delay caused by the homeowner's bankruptcy case, the further delay after she became aware of the sheriff's sale, and the absence of any evidence of her financial ability to rectify the situation. The Appellate Division concluded that the equitable doctrine of laches, which will deny a party enforcement of a known right when the party engages in an inexcusable delay in exercising that right to the prejudice of the other party, barred relief to the homeowner.

Championing the rights of substantive due process, the New Jersey Supreme Court overturned the Appellate Division's decision. The Court found, in balancing the equities, the prejudice, alleged by the bank did not match the prejudice sustained by the defendant who had been dispossessed from her home without the bank's compliance with the procedural notice requirements. The Supreme Court therefore concluded that application of the equitable doctrine of laches to bar relief to the defendant constituted an abuse of discretion.

In this author's opinion, this represents a substantial victory for homeowners. Too many times, lenders' foreclosure attorneys don't comply with procedural rules and get away with it because most litigants in this position don't have the financial resources to mount a challenge. The Supreme Court apparently was not willing to overlook such a substantial defect in the notice requirements imposed by the New Jersey Court Rules.

NJ Tax Sale Foreclosure Doesn't Strip Municipality From Obtaining Dedicated Land

2008-01-24T22:34:00.000-05:00

In a decision rendered on January 15, 2008, the New Jersey Supreme Court held that a tax sale certificate and subsequent foreclosure by the purchaser of a tax sale certificate did not prevent the municipality from obtaining the land, which prior owners had dedicated for public use as a park 78 years ago. However, the township must reimburse the tax sale certificate holder for its expenses plus interest, the Supreme Court ruled.

The irony of this case is that the township sold the lot at a municipal tax sale without realizing that the property was previously dedicated for public use. After the sale, the township approached the purchaser on several occasions offering to buy the lot back so that it could be dedicated as a park. The purchaser declined, and thereafter successfully obtained title to the property in a separately filed foreclosure suit, and contracted to sell the property to a construction company for the building of a residence.

The township filed a separate lawsuit against the tax sale certificate holders and the construction company, claiming that the park lot was dedicated to the township for public use and that the conversion of the lot for private use would violate the rights of the public in the property. In its complaint, the township asked the court to fix the amount it should pay to the certificate holders to reimburse them for the amounts paid on the certificates, the subsequent taxes they paid, plus a reasonable interest rate. Although losing at the trial level, the township was successful on appeal and the Supreme Court affirmed.

It is rather remarkable that the Supreme Court allowed the township to belatedly accept a 78-year old dedication after the township sold the property at a tax sale and the purchaser completed the foreclosure process. In my opinion, this decision reflects the Supreme
Court's desire to protect open space in New Jersey.

NJ Foreclosure Ruling - Final Judgment Merges Mortgage

2007-09-24T20:38:00.000-05:00

In a case that merits attention by banks and lawyers practicing debtor and creditors' rights, the Chancery Division in Middlesex County held that upon satisfaction of a final judgment of foreclosure a mortgagor is entitled to receive only a warrant of satisfaction of judgment, not a discharge of the mortgage in the County recording office.

Washington Mutual, FA v. Wroblewski, F-1865-05. In this case, the bank sought reconsideration of an order issued by the Chancery Court requiring that it provide a discharge of mortgage to the defendant mortgagor based on the mortgagor's satisfaction/payment of the final judgment of foreclosure. The applicable statute, N.J.S.A. 2A:50-32 provides that when a judgment of foreclosure is satisfied, a warrant of satisfaction shall be entered. The defendants argued that upon satisfaction of a final judgment of foreclosure the lender should no longer have a claim for monies due and the mortgage should therefore be discharged.

The bank's counter argument centered on the merger doctrine (where it has been held that the mortgage merges into the final judgment of foreclosure) and N.J.S.A. 2A:50-32 which clearly states that a warrant of satisfaction "shall be entered" when a final judgment of foreclosure is satisfied. More specifically,

the bank contented that the purpose of New Jersey's merger doctrine is to avoid the inequitable result of a defaulting mortgagor paying the lesser amount of a foreclosure judgment, while also receiving the same benefit as a non-defaulting mortgagor who pays the full contractual obligation.

Finding in favor of the bank, the trial court reasons that when a judgment is entered, a final foreclosure judgment in New Jersey establishes rights in property distinct from those conferred by the mortgage. For example, "the judgment fixes the amount due under the mortgage and directs the sale of the real estate to raise funds to satisfy that amount. Further, all the terms, including the rights and obligations under the mortgage merge into the foreclosure judgment and the only thing remaining is the foreclosure judgment itself," the court rermarked. The trial court was persuaded by the bank's equitable argument,

that granting a discharge of the mortgage would "reward" a defaulting mortgagor who ultimately redeems the mortgage simply by paying the sheriff because it gives the defaulting mortgagor what a party who contractually pays its obligations in full received.

LoFaro & Reiser, LLP represents lenders and borrowers in foreclosure cases throughout the State of New Jersey. The firm did not represent either party to this action. This article is not intended to be a full description of the case, but rather just a brief informative summary.

NJ Supreme Court Issues Significant Ruling in Medical Malpractice Case Involving Termination of Pregnancy

2007-09-14T23:09:00.000-05:00

September 12, 2007

In this case, the New Jersey Supreme Court was faced with the difficult question of determining whether a physician is required to inform a patient, who was in the 6th to 8th week of her pregnancy, that an abortion procedure will kill not just potential life, but an actual existing human being. In this case, the plaintiff filed a medical malpractice action claiming that her physician, an obstetrician-gynecologist, performed an abortion without her informed consent. Specifically, the plaintiff alleged in her Complaint that the doctor breached his duty to her by failing to inform her of "the scientific and medical fact [that her six-to-eight-week-old embryo] was a complete, separate, unique, and irreplaceable human being" and that an abortion would result in "killing an existing human being."

In finding in favor of the doctor,

the New Jersey Supreme Court concluded that there is no common law duty requiring a physician to inform a pregnant patient that an embryo is an existing, living human being and that an abortion results in the killing of a family member

. Click here to read the full case opinion.

NJ Supreme Court Justice Now Admits Ethics Violation

2007-06-02T11:25:00.001-05:00

June 1, 2007. New Jersey Supreme Court Justice Roberto Rivera-Soto conceded that he violated judicial ethics rules by creating an appearance of impropriety in contacting school, police and court authorities in a dispute involving his son, but denied any deliberate misconduct. In a letter to the Advisory Committee on Judicial Conduct, he stated that in order to "prevent any further harm to the Court's reputation" he would waive a formal hearing and stipulate that the charges against him be decided on the basis of the investigatory record and his statement in lieu of formal testimony.

"I deeply regret that my actions in defense of my son have raised questions about my integrity, and have created the potential to undermine the public's trust and confidence in the Court," Rivera-Soto remarked, adding he was "profoundly sorry" for his actions and their effect.

But Rivera-Soto did not recede his position asserted in his May 18 answer that he sought no preferential treatment when he pressured Haddonfield Township school officials to act, called the town police chief's cell phone, reached out to a prosecutor and two judges and handed his business card to a court employee. Rivera-Soto explained that he was trying to have the matter handled "in the ordinary course" and that in hindsight, "I underestimated the capacity that my position has to influence others."

Rivera-Soto's actions occurred last fall in response to alleged bullying of Rivera-Soto’s 15-year-old son Christian by C.L., an older teammate on the Haddonfield Township High School football team. A juvenile delinquent complaint filed by Rivera-Soto against C.L. in Camden County Family Part was resolved on Dec. 15 when the parties agreed to let the matter rest if there were no further incidents between the youths by June 19, 2007, the end of the school year. In his answer to the complaint, Rivera-Soto said he used his own stationery, not the Court's, when he wrote to Camden County Presiding Family Judge Charles Rand about the case against C.L. and implied that the limitations imposed by his position on the Court left his son unable to defend himself against C.L.'s "assaults." He also says, in his letter, that he was not seeking revenge, only "that my son be left alone."

The complaint in In the Matter of Roberto Rivera-Soto, ACJC 2007-097, filed May 11, accuses Rivera-Soto of violating Judicial Canons 1, 2A and 2B and a rule, 2:15-8(a)(6), that bars conduct bringing the judicial office into disrepute. Rivera-Soto, appointed to the Court by Gov. James McGreevey in 2004, will be reviewed for tenure in 2011.

New Jersey Supreme Court Justice Faces The Heat in Judicial Ethics Charges

2007-05-22T11:13:00.000-05:00

A New Jersey judicial ethics committee filed a Complaint against New Jersey associate Supreme Court Justice Roberto River-Soto on May 11, 2007 accusing him of violating certain Judicial Canons, and R. 4:15-8(a)(6) which bars conduct that brings the judicial office into disrepute. The Complaint stems from Justice Rivero-Soto's involvement with his son's juvenile delinquency complaint filed in municipal court against another high school football player accused of harassment.

Rivera-Soto's son accused the captain of the Haddonfield Memorial High School football team of assaulting him during practice. According to the ethics committee complaint — just the second ethics complaint filed against a state Supreme Court justice in more than three decades — Rivera-Soto made phone calls or wrote letters to team and school officials, the local police chief, two judges and the Camden County prosecutor on behalf of his son.

At times, the ethics complaint charged, Rivera-Soto alluded to his office while placing calls. When introducing himself to a detective sergeant, Rivera-Soto handed out his business card. He also asked a Camden County Superior Court assignment judge to treat his charges the same as any other, but asked him "to make certain his complaint received attention." He did the same with Camden County's acting prosecutor.

When a court hearing was delayed without his knowledge or prior notice, Rivera-Soto allegedly asked a court employee "if she knew who he was" and gave her a business card, then wrote the presiding judge to complain about the postponement.

Rivera-Soto admitted contacting the Haddonfield police chief, the acting Camden County prosecutor, and judges in the case. But, the response says, he did not mean to improperly influence them and in one circumstance wrote to a judge on personal letterhead bearing his name and home address.

“It was never his purpose or intention to influence the acts of anyone by reference to his judicial position," the response says of Rivera-Soto. "His intent at all times was to avoid any appearance of impropriety," and he regrets any misunderstanding.

A hearing remains to be scheduled and conducted by the judicial ethics committee.

NJ Internet Users' Aliases Are Private, Appellate Court Rules

2007-01-26T10:41:00.001-05:00

Computer users in New Jersey can expect that personal information they give their Internet service providers will be treated as private, a state appellate court decided yesterday in the first such case considered in the state.

The court ruled that a computer user whose screen name hid her identity had a "legitimate and substantial" interest in anonymity.

As a result, New Jersey and several other states will give greater privacy rights to computer users than do most federal courts, and law-enforcement officers in New Jersey will need to obtain valid subpoenas or search warrants to obtain the information.

The appellate panel's unanimous ruling stemmed from the indictment of Shirley Reid, who was suspected of breaking into the computer system of her employer in Cape May County in 2004 and changing its shipping address and password for suppliers.

The decision upholds a lower court ruling suppressing information from Reid's Internet service provider that linked her with a screen name that did not reveal her identity. Lower Township police obtained the information after having the township's Municipal Court administrator issue a subpoena to the provider, Comcast Internet Service.

However, the appellate panel found that the subpoena was invalid because the crime being investigated was not within that court's jurisdiction and the subpoena was not issued, as required, in connection with a judicial proceeding.

And because "New Jersey is among the few states to have found an implied right to privacy in its state charter," a proper subpoena or search warrant is required to obtain private information, the appeals court decided.

By using a coded screen name, the "defendant manifested an intention to keep her identity publicly anonymous. She could have used her own name or some other ISP address that would have readily revealed her identity, but she did not. Having chosen anonymity, we conclude that defendant manifested a reasonable expectation of privacy in her true identity, known only to Comcast," Appellate Judge Harvey Weissbard wrote for the panel.

The court said it was not issuing blanket protection for computer-based criminals.
"Just as with telephones or bank records, computers cannot be used with impunity for unlawful purposes. When there is probable cause to believe unlawful use has occurred, law enforcement has the tools to respond," the court said.

Federal courts have held that Internet subscribers have no right of privacy under Fourth Amendment protections against illegal search and seizure regarding identifying information on file with their service providers. That stems from U.S. Supreme Court decisions that held that a person cannot expect privacy for information voluntarily given to others, the New Jersey court said.

"However, the right to privacy of New Jersey citizens under our state constitution has been expanded to areas not afforded such protection under the Fourth Amendment," the court added.

"Judge, Don't Interrupt My Client's Testimony To Warn About Criminal Implications"

2007-01-11T23:46:00.000-05:00

A trial court judge's actions in interrupting a litigant's testimony during cross-examination to warn him about possible criminal implications if his testimony revealed tax fraud was improper, the Appellate Division held in All Modes Transport Inc. v. Hecksteden, A-0361-05T5, December 27, 2006. Combined with this warning, the trial court suggested the parties settle the case. After this exchange by the trial judge, the defendants agreed to settle the case for a substantial sum of money. Shortly thereafter, the defendants filed a motion requesting the trial court to vacate the settlement arguing that they were coerced into the settlement by the trial judge's threat of criminal prosecution. The trial court denied defendants' motion, concluding that the settlement agreement was not procured by coercion. The trial court was of the opinion that it had a duty to warn to warn the defendant that continuation of his testimony on cross-examination could result in self-incrimination.

The defendants appealed, and the Appellate reversed the decision and remanded the matter back to the trial court for reconsideration of whether the defendants voluntarily entered into the settlement. In so ruling, the Appellate Division remarked that the proper judicial course for the trial judge to have followed would be to leave the matter of suspicion of criminality for such attention at the end of the case, including referral to the appropriate prosecuting authority. The appellate court further commented that it was the responsibility of defendant's counsel, not the trial court, to advise him about his legal rights and potential liabilities flowing from his testimony. Evaluating the impact of the trial judge's warning, the Appellate Division believed that such statements had to have exerted substantial pressure on him to settle the case in order to avoid criminal prosecution.

New Jersey Passes Same Sex Civil Unions

2006-12-21T21:46:00.000-05:00

On December 21, 2006 New Jersey became the third U.S. state to provide equal rights for same-sex couples in committed relationships known as civil unions.

Gov. Jon Corzine, signing the Civil Unions bill into law, said the state has an obligation to give such partnerships the same legal rights as married couples.

"We must recognize that many gay and lesbian couples in New Jersey are in committed relationships, and deserve the same benefits and rights as every other family in the state," Corzine said in a statement.

The bill was passed by lawmakers last week following a ruling by the state Supreme Court affirming equal rights for same-sex couples, but deferring to the legislature a decision on whether to call their relationships "marriage."

Lawmakers opted to call them "civil unions."

Massachusetts is the only U.S. state to have legalized same-sex marriage, which supporters say is necessary to establish true equality for homosexual partnerships. Connecticut and Vermont have civil union laws.

New Jersey Supreme Court Rules that Same Sex Couples Entitled to Same Rights as Married Couples

2006-10-30T23:21:00.000-05:00

On October 25, 2006, the New Jersey Supreme Court ruled in a 4-3 decision that New Jersey must extend all the rights of marriage to gay couples. But the Supreme Court justices left it to the New Jersey legislature to decide whether to provide those rights in the form of marriages, civil unions or something else — and gave the Legislature 180 days to reach a decision.

The New Jersey Supreme Court ruling is similar to the 1999 high-court ruling in Vermont that led that state to create civil unions, which confer all of the rights and benefits available to married couples under state law.

"Although we cannot find that a fundamental right to same-sex marriage exists in this state, the unequal dispensation of rights and benefits to committed same-sex partners can no longer be tolerated under our state Constitution," New Jersey Supreme Court Justice Barry T. Albin wrote for New Jersey's four-member majority.

The court said the Legislature "must either amend the marriage statutes to include same-sex couples or create a parallel statutory structure" that gives gay couples all the privileges and obligations afforded to married couples.

The three dissenting justices, including outgoing Chief Justice Deborah Poritz who was serving her last day on the Court, argued that the majority did not go far enough. They demanded gay couples be given the right to marry.

Insurance Brokers Excluded From New Jersey Consumer Protection Act

2006-09-13T11:03:00.000-05:00

Plemmons v. Blue Chip Insurance Services, A-0414-04T3, Appellate Division (August 21, 2006). An insurance broker is excluded from liability under the New Jersey Consumer Fraud Act for the performance of brokerage services, the Appellate Division held in a published opinion approved for publication on August 21, 2006.

In this particular case, the plaintiff entered into a contract to purchase residential property in New Jersey, which he planned to convert to commercial use. In anticipation of a closing, plaintiff paid a $361 premium to obtain homeowner's insurance coverage from defendant Blue Chip Insurance, and Blue Chip issued a policy declaration sheet providing for homeowner's coverage. The policy was ultimtely voided because of a delay in the closing date, however Blue Chip never refunded plaintiff his $361 premium.

A new closing date was arranged,and prior thereto an insurance representative with Blue Chip advised plaintiff's representative that plaintiff needed to obtain a business operations policy rather than a homeowner's policy. Plaintiff never paid a premium for a business operations policy, and Blue Chip neither issued a business operations policy nor a homeowner's policy. Consequently, the property was uninsured at the time it was damaged by a storm and by the alleged negligence of contractors who performed work required to convert the property from residential to commercial use. Blue Chip never returned the $361 premium paid by plaintiff and alegedly failed to inform plaintiff that he did not have the coverage that such a policy would have provided.

The full Appellate Division opinion can be downloaded here

Because insurance brokers are semi-professionals, subject to testing, licensing and regulation by the State of New Jersey they cannot be sued under the Consumer Fraud Act, the Appellate Division concluded.

New Jersey Judge Facing Ethics Charges Seeks to Recuse 2 NJ Supreme Court Justices

2006-08-30T22:40:00.000-05:00

A New Jersey judge facing a Supreme Court hearing on charges he made inappropriate comments to jurors and about other judges is asking that two members of the New Jersey Supreme Court recuse themselves due to alleged bias.

Superior Court Judge Wilbur Mathesius filed a motion on Aug. 23, 2006 urging that Chief Justice Deborah Poritz and Justice Jaynee LaVecchia not participate in his disciplinary case because they have criticized him in the past. Mathesius is challenging the Advisory Committee on Judicial Conduct's findings that he committed ethics violations the committee said warranted a six-month suspension, half without pay.

At issue is Mathesius' conduct in Mercer County's Criminal Part in 2004 and 2005 and conduct resulting in two admonitions while he was a municipal court judge. ACJC Chairman Alan Handler found that ethics prosecutors proved by clear and convincing evidence allegations in a four-count complaint charging that Mathesius:

• berated a jury for acquitting a defendant of illegal handgun possession;
• talked ex parte to jurors in the midst of deliberations in a murder case;
• made derogatory comments, some in public, about appellate judges; and
• made gratuitous remarks that show bias about cases or defendants.

A September 25, 2006 hearing is scheduled, but Mathesius argues that Justices Poritz and LaVecchia should not be sitting. In Mathesius' certification that he filed supporting his recusal motion, he claims both justices have accused him or made findings of wrongdoing, which means they are predisposed to find against him.

We will report further on the outcome of this hearing.

New Jersey Supreme Court Committee on Attorney Advertising

2006-07-20T21:50:00.000-05:00

What are the limitations imposed on New Jersey attorney advertisements? Read online opinions issued by the Supreme Court of New Jersey Committee on attorney advertising at http://lawlibrary.rutgers.edu/cgi-bin/ethics.cgi#caa

New Jersey Electronic Recording of Land Documents

2006-03-27T15:48:00.000-05:00

Several County Clerk's offices in New Jersey are currently accepting electronic recording/filing of land documents, with 7 more counties expected to join the program in 2006. Currently accepting online filings are Passaic County, Ocean County, Monmouth County, and Cape May County. Read more about this and apply for a free sign-up at
http://www.njcountyrecording.com/njcr/home.aspx

2005 Bankruptcy Reform Act

2005-08-19T20:40:00.000-05:00

The 2005 Bankruptcy Reform Act becomes effective October 17, 2005, making it more difficult for individual consumer debtors to obtain relief from their financial problems under Chapter 7 or Chapter 13 of the Bankruptcy Code.

Major Intent of Bankruptcy Reform:
The major intent of bankruptcy reform is to require people, who can afford to make some payments towards their debt, to make these payments, while still affording them the right to have the rest of their debt erased. These people must file Chapter 13.

Status of the Bills:
The Senate passed the Bill on March 11, 2005 and the Congress on April 14, 2005.

When will this be Law:
The bill was signed into law by the president on April 20, 2005. Sections 308, 322 and 330, all concerning the homestead exemption, take effect immediately. This is law now: The exemption is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period)

The rest of the provisions of the law will come into effect on October 17, 2005.

Major Changes:

Means Test:
This will identify debtors who have the financial capacity to pay some money to their creditors. The test will work as follows:

TEST # 1:
Is the family earning above the average income for their state?
· 1997 US average for a family of one = $18,762;
· 1997 US average for a family of two = $39,343;
· 1997 US average for a family of three = $47,115;
· 1997 US average for a family of four = $53,165.
If the answer is "No" Chapter 7 can be filed!

TEST # 2:
If the answer is "Yes" to TEST # 1 , do you have excess monthly income of more than $166.66/month to pay $10,000 of debt over 5 years?
If the answer is "No" you must answer another question, if "Yes" Chapter 7 cannot be filed but Chapter 13 may be filed!

TEST # 3:
If the answer is "No" to TEST # 2 do you have excess income of greater than $100/month to pay over the next 60 months at least 25% of your unsecured debt?
If the answer is "No" you can file Chapter 7, if "Yes" chapter 7 cannot be filed but Chapter 13 may be filed!

Proof of Income:
Debtors filing Chapter 7 or Chapter 13 bankruptcy, must provide to the trustee, at least seven days prior to the 341 meeting, a copy of a tax return or transcript of a tax return, for the period for which the return was most recently due.

State Exemptions:
You cannot use the exemptions in your state of residence unless you have lived there at least 2 years.

Homesteads:
This goes into effect as soon as the bill is signed by the president! The exemption is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor's previous principal residence (which was acquired prior to the beginning of such 1215-day period)

Counseling:
You must have finished counseling within the last 6 months before you can file.

Child Support and Alimony:
These debts would go from a priority of 7th to 1st.

Speak with our New Jersey Bankruptcy attorneys and find out how the 2005 Bankruptcy Reform Act may affect your decision on whether or not to file for bankruptcy protection.
www.njlawconnect.com/newjerseybankruptcy.htm

NJ Supreme Court to Webcast Oral Arguments

2005-01-10T13:45:00.000-05:00

As reported by newsday.com:

It won't have the flair and chatty commentary of Court TV, but anyone with a computer, Windows Media player software and good Internet connection will get to see gavel-to-gavel action of the New Jersey Supreme Court. Starting at 10 a.m. Monday, oral arguments before the seven-justice court will be webcast over the World Wide Web. The first scheduled arguments concern what documents are covered by the state's Open Public Records Act.

Webcast arguments will be carried live and archived for 30 days, officials said. Renovations done last summer for safety reasons enabled court officials to install at the rear of the courtroom seven sound-actived cameras _ one trained on each justice. Behind Chief Justice Deborah Poritz are two more cameras, one focused on where lawyers arguing before the court typically stand, and the other providing a wide-angle view of the courtroom. Court officials say the webcast will be helpful to law students, judges whose rulings are on appeal and lawyers involved in cases with similar issues before the court. The webcast also will benefit the general public, which rarely gets a glimpse of New Jersey's highest state court on the bench. The 62-seat courtroom can fill up quickly, denying some people the opportunity to observe cases they're interested in. According to the National Center for State Courts, 12 state supreme courts air their proceedings over radio, television or the Internet, with 10 using webcasts. ___

On the Net: www.judiciary.state.nj.us

Internet Law Jurisdiction New Jersey

2005-01-04T13:13:00.000-05:00

New Jersey recognizes that an interactive web site can establish a basis for jurisdiction over a company who does not have a physical presence in New Jersey. For the full article click onto this link. Requires Adobe Acrobat Reader.

http://www.njlawconnect.com/documents/Internet%20Jurisdiction_New%20Jersey.pdf

Review New Jersey Attorney Law Review Blog

Internet Jurisdiction in New Jersey

2005-01-03T23:21:00.000-05:00

We are pleased to announce our link partnership with Blogstreet.

New Jersey Law Review Blog Featured on Blogorama

2005-01-03T23:16:00.000-05:00

I am pleased to announce that the New Jersey Attorney Law Review Blog has been featured in Blogorama.

Free New Jersey Civil Practice Forms

2004-12-31T21:24:00.000-05:00

Persons wishing to represent themselves, or act "pro se", may obtain free legal forms through the New Jersey Judiciary's web site of www.judiciary.state.nj.us.

The page containing forms is http://www.judiciary.state.nj.us/forms.htm.

Member of www.blogwise.com

New Jersey Case Law Update - NJ Attorneys

2004-11-29T15:18:00.000-05:00

New Jersey Case Law Update Courtesy of Rutgers UniversitySchool of Law - Camden Recent Decisions of the New Jersey Appellate Courts from 2004-11-15 to 2004-11-29.

These case summaries originate from http://lawlibrary.rutgers.edu/cgi-bin/recent.cgi. Please come back and visit us again for additional New Jersey law updates, or visit our web sites www.new-jerseylawyers.com, www.njlawconnect.com.

Supreme Court Cases

Docket No.: a-67-03Decided: 2004-11-22Caption: Information Spectrum, Inc. v. The HartfordSummary:PER CURIAM In this matter, the Court determines whether claims of Lanham Act violations and copyright infringement were covered by the insured's commercial general liability policy, thereby triggering the insurer's obligation to defend. Information Spectrum (the insured) filed a federal action seeking a declaratory judgment to dispel assertions by Facstore, Inc. (Facstore), that it had misappropriated Facstore's product—a computerized police reporting system. Facstore contended that the insured sold "knock-offs" of the product to prospects to whom Facstore had attempted to market the system. In response to the insured's declaratory judgment action, Facstore filed a counterclaim alleging, among other claims, copyright infringement, Lanham Act violations, pursuant to 15 U.S.C.A. § 1125 (a), and misappropriation of trade secrets. The jury in that matter rendered a verdict in favor of the insured.

Docket No.: a-97-01_1Decided: 2004-11-18 Caption: In the Matter of the Guardianship of J.N.H., a MinorSummary:PER CURIAM C.H.G. is the biological mother of J.N.H. Almost from the time J.N.H. was born, C.H.G was abusing illegal substances. The Division of Youth and Family Services (DYFS) began monitoring the family in early 1995. Eventually, J.N.H. was placed with his current foster parents in June 1996; he was two years and three months old. On August 18, 1997, DYFS transferred supervision of J.N.H. to the Adoption Resource Center unit because of C.H.G.’s long-term noncompliance with court orders. At the time, J.N.H. had been residing with his foster parents for just over one year. In September 1997, C.H.G. was incarcerated in the Edna Mahon Correctional Facility for Women for a probation violation. She remained incarcerated until March 20, 1998. J.N.H. had no visitation with his mother during that time. On December 8, 1997, DYFS filed an action seeking guardianship of J.N.H. and terminating C.H.G.’s parental rights. At the time of the proceeding, C.H.G. also had two older children: Jeremy, age ten, and Benjamin, age nine. Jeremy and Benjamin lived with their maternal grandmother. Three-year-old J.N.H. was living with his foster parents who sought to adopt him. On October 26, 1998, the trial court entered an order terminating the parental rights of C.H.G. over J.N.H. as a result of C.H.G.’s inability to overcome her alcohol and drug addictions and to provide a safe home for her son. In terminating parental rights, the court found that DYFS provided C.H.G. with various services, including foster care for J.N.H., drug and alcohol evaluations and treatment, and parenting skills training. Despite those efforts, C.H.G. remained homeless, unemployed, continued to abuse illegal substances, and lived in and out of various places. The court noted that C.H.G. failed to cooperate with various programs, including substance-abuse treatment programs, and was ultimately terminated from all programs, remaining in denial about her drug problem. According to the court, C.H.G. provided no care, comfort or nurturing to J.N.H. and had failed in all respects to parent the child. The court did note that since her release from the correctional facility to the Intense Supervision Program in March 1998, C.H.G. showed signs of improvement. Nonetheless, the court concluded that, in light of her conviction of abuse and neglect and the strong expert testimony regarding the harm to J.H.N. in separating him from his foster parents, the requirements for termination of parental rights had been met. In 2001, C.H.G., who by then had completely transformed her life, moved for vacation of the 1998 Order terminating parental rights pursuant to Rule 4:50-1(e) and (f). At the time, J.N.H. was seven years old and had been living with his foster family for five years. The trial court denied the motion and the Appellate Division affirmed on appeal.

Docket No.: a-77-03Decided: 2004-11-15Caption: Furst v. Einstein Moomjy, Inc.Summary:ALBIN, J., writing for a unanimous Court. In this Consumer Fraud Act case, pursuant to N.J.S.A. 56:8-1 to –20, the Court determines whether plaintiff's ascertainable loss was the replacement value or the purchase price of the defective product.

Appellate Division Cases

Docket No.: a1421-03Decided: 2004-11-29Caption: DELORES FAIRWEATHER v. PUBLIC EMPLOYEES' RETIREMENT SYSTEMSummary:AXELRAD, J.T.C. (temporarily assigned). Petitioner, Delores Fairweather, appeals from the final administrative action of the Board of Trustees of the Public Employees' Retirement System (Board) that denied her application for accidental disability retirement benefits. She sustained the injuries that served as the basis for her claim when a frightened mental patient, who she was trying to evacuate from a burning cottage, jerked his hand away from hers and they slid down the icy steps to the ground. As a result of the fall, petitioner sustained serious and permanent injuries. The Board found petitioner to be permanently disabled and awarded her ordinary disability retirement benefits under N.J.S.A. 43:16A-6. It held, however, that the injuries did not result from a "traumatic event" as required by N.J.S.A. 43:15A-43, and denied petitioner accidental disability retirement benefits. We reverse.

Docket No.: a1743-03Decided: 2004-11-29 Caption: STATE OF NEW JERSEY v. RUSSELL BREITWEISER Summary:FUENTES, J.A.D. In State v. Zeidell, 154 N.J. 417 (1998), the Supreme Court defined second-degree-tender-years sexual assault as an intentional touching by the actor of his or her intimate parts, for arousal or sexual gratification, in the view of an underage child, whom the actor knows to be present. Id. at 431 (citing N.J.S.A. 2C:14-2b, 14-1d). The central question we must answer in this appeal is: can a defendant be convicted of this offense when it is undisputed that the underage victim did not actually view the allegedly offensive conduct? After consideration of the arguments advanced by the parties and in light of prevailing legal standards, we conclude that the answer is "yes."

Docket No.: a3470-02Decided: 2004-11-29 Caption: STATE OF NEW JERSEY v. SONIA HARRISSummary:HOLSTON, JR.In this matter of first impression, we hold that N.J.S.A. 2C:21-25b(1) encompasses in its definition of money laundering any possession of property known to be derived from criminal activity with the intention to promote further criminal activity. No independent predicate offense is necessary to the promotion prong of New Jersey's money laundering statute.

Docket No.: a4661-02Decided: 2004-11-29Caption: LINDA PONDEN v. WILLIAM E. PONDEN, et al.Summary:FISHER, J.A.D.In this appeal, we consider the extent of a trial court's discretion, in the wake of the 2000 rule amendments known as

Docket No.: a6444-02Decided: 2004-11-29Caption: PAUL A. ORAS v. THE HOUSING AUTHORITY CITY OF BAYONNE, et al.Summary:WINKELSTEIN, J.A.D.
Plaintiff, Paul Oras, is a forty-eight-year-old paraplegic who suffered lower extremity paralysis in a motorcycle accident in 1977. He appeals from a June 20, 2003 summary judgment that dismissed his complaint alleging violations of state and federal disability discrimination laws by defendant Bayonne Housing Authority (the Authority) and its employees. He claims the Authority discriminated against him by not providing him with a handicap-accessible apartment, and by not permitting him to keep a dog that he claims assisted him with his daily activities. We reverse.

Docket No.: a1093-04Decided: 2004-11-24 Caption: SAFARI CLUB INTERNATIONAL et al. v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION et al. Summary:SKILLMAN, P.J.A.D. This appeal challenges the validity of a notice issued by the Commissioner of Environmental Protection on October 26, 2004, which directed the Division of Fish and Wildlife not to issue black bear hunting permits for the 2004 hunting season, and also "directed the Assistant Commissioner for Natural and Historic Resources to close all lands owned, managed, or controlled by the Department, whether through [the Division of Fish and Wildlife] or Division of Parks and Forestry, to the hunting of black bears[.]" In another appeal, filed three weeks before this one, we held that the Commissioner lacks statutory authority to direct employees of the Division of Fish and Wildlife not to issue permits for a hunt authorized by the Fish and Game Council and directed the Commissioner to complete the processing of all applications for bear hunting permits by December 2, 2004. U.S. Sportsmen's Alliance Found. v. N.J. Dep't of Envtl. Prot., N.J. Super. (App. Div.), certif. granted, N.J. (2004).

Docket No.: a1106-03Decided: 2004-11-24 Caption: MAUREEN A. GRASSO et al. v. THE BOROUGH OF SPRING LAKE HEIGHTS, et al. Summary:LEFELT, J.A.D. Plaintiffs Maureen Grasso and R.G. Grasso, Jr., Inc. appeal from two judgments: (1) upholding Spring Lake Heights Borough's denial of plaintiffs' application for a height variance, and (2) declining to estop the Borough from enforcing its zoning ordinance. We affirm the estoppel judgment, but because we articulate, for the first time, the standard to be applied in reviewing an application for a height variance under N.J.S.A. 40:55D-70(d)(6), we vacate the variance denial and remand to the Board of Adjustment for reconsideration of plaintiffs' application.

Docket No.: a3278-03Decided: 2004-11-24Caption: STATE OF NEW JERSEY v. TATIANA CHIROKOVSKCIC Summary:HOENS, J.A.D. The State of New Jersey, by leave granted, appeals from an order granting defendant Tatiana Chirokovskcic's motion to suppress certain statements made by her while in police custody. We affirm.

Docket No.: a3867-02Decided: 2004-11-24 Caption: WENDY ZUIDEMA et al. v. JAMES J. PEDICANO, M.D. et al. Summary:PETRELLA, P.J.A.D. Defendants James J. Pedicano, M.D. and James J. Pedicano, M.D., P.A. appeal from an adverse jury verdict of $150,000 in an action originally instituted by plaintiffs Wendy and John Zuidema as a malpractice action, but which was amended to assert additional claims of sexual assault and "medical negligence." This appeal presents the issue of whether sexual relations by a physician with a patient can be considered medical malpractice or "medical negligence" as opposed to an assault where the medical malpractice claims were dismissed before trial and the jury found no sexual assault. Plaintiffs See footnote 1 cross-appeal the judge's calculation of prejudgment interest using the filing date of the amended complaint.

Docket No.: a4419-03Decided: 2004-11-24Caption: EDWARD K. WOODWORTH v. PETER E. JOYCE Summary: WINKELSTEIN, J.A.D. The issue presented in this opinion is whether a driver who causes an accident while under the influence of alcohol is entitled to the benefits of the verbal threshold provision of an injured plaintiff's insurance policy. In this case, defendant Peter Joyce had a blood alcohol level of .16 at the time he caused an accident injuring plaintiffs. He pleaded guilty to driving under the influence. As a consequence, the Law Division ordered that he was "precluded from asserting the verbal threshold, and that all claims against [him] are governed by 'no threshold. . . .'" We granted defendant leave to appeal and now reverse.

Docket No.: a6006-02Decided: 2004-11-24Caption: JOSEPH RODD v. RARITAN RADIOLOGIC ASSOCIATES, P.A., STUART KOTLER, M.D. Summary:PARRILLO, J.A.D. In this medical malpractice wrongful death action, defendants, Stuart Kotler, M.D., and Raritan Radiologic Associates, P.A., appeal from entry of judgment, after a jury verdict in favor of plaintiff, Joseph Rodd, individually and as administrator ad prosequendum of the Estate of Maria Rodd, in the amount of $3,240,000, and from denial of their motion for a new trial. For the following reasons, we reverse and remand for a new trial.

Docket No.: a6279-02Decided: 2004-11-19Caption: BRUNO BUMBACA v. TOWNSHIP OF EDISON, TOWNSHIP OF EDISON FIRE DEPARTMENT et al. Summary:WEISSBARD, J.A.D. Plaintiff, Bruno Bumbaca, appeals from an order of summary judgment dismissing his complaint against defendants, Township of Edison, Township of Edison Fire Department (EFD), and Fire Chief Robert Campbell, which had alleged that defendants discriminated against plaintiff based upon familial status in violation of the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, by failing to hire plaintiff as a full-time paid firefighter (count one), breached a contract by failing to hire him (count two), and discharged him wrongfully in violation of public policy (count three). Plaintiff sought specific performance appointing him as a full-time firefighter with pay retroactive to the date of original hire, lost wages, benefits and monetary loss, compensatory and punitive damages, and counsel fees and costs. See footnote 1 We affirm.

Docket No.: a0514-03Decided: 2004-11-18 Caption: MICHAEL J. PRON v. CARLTON POOLS, INC. Summary:HOLSTON, JR., J.A.D. In this Consumer Fraud Act (CFA) case, defendant, Carlton Pools, Inc., appeals from the May 12, 2003 order awarding plaintiff, Michael J. Pron, attorneys' fees in the amount of $16,848.01 for a technical violation of the CFA. The violation was defendant's misrepresentation in its advertising not to use subcontractors in the construction of an in-ground pool. Defendant also appeals the July 15, 2003 order denying its motion for reconsideration. We reverse.

Docket No.: a3114-02 Decided: 2004-11-18 Caption: PETER SINGER, et al. v. THE TOWNSHIP OF PRINCETON Summary:PARRILLO, J.A.D. At issue is the constitutionality of a Princeton Township (Township) ordinance prohibiting the purposeful or knowing feeding of wild deer on public and private lands throughout the Township. Plaintiffs are twenty-one Township residents who challenge the ordinance on the grounds that it arbitrarily and unreasonably deprives them of their property right to feed wild deer on their land; is not sufficiently clear; and extends further than is necessary to fulfill the municipality's interest. We are satisfied that there is no constitutional infirmity inherent in the ordinance.

Docket No.: a4252-03Decided: 2004-11-17 Caption: STATE OF NEW JERSEY v. JONATHAN DANIEL GILBERTI Summary:SKILLMAN, P.J.A.D. The question presented by this appeal is whether defendant's alleged offensive comment to one of the victims of his crimes shortly after the trial judge pronounced sentence provided an adequate basis for the judge to vacate the sentence. We conclude that defendant's alleged comment did not warrant the judge vacating the orally pronounced sentence.

Docket No.: a4289-03Decided: 2004-11-17 Caption: STATE OF NEW JERSEY v. MICHAEL J. NATALE Summary:STERN, P.J.A.D. On remand from the Supreme Court, and after the State declined to try defendant on the No Early Release Act (NERA) predicates for second-degree aggravated assault, defendant was sentenced for second-degree aggravated assault to a nine-year term with four and one-half years to be served before parole eligibility. See footnote 1 He also received concurrent five-year sentences for third-degree terroristic threats and third-degree criminal restraint, to be served consecutively to the sentence for aggravated assault. The aggregate sentence therefore is fourteen years with four and one-half years to be served before parole eligibility.

Docket No.: a0744-04Decided: 2004-11-16Caption: U.S. SPORTSMEN'S ALLIANCE FOUNDATION, et al. v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, et al.Summary:SKILLMAN, P.J.A.D. The issue presented by this appeal is whether the Commissioner of Environmental Protection has statutory authority to direct employees of the Division of Fish and Wildlife not to issue permits for a hunt authorized by the Fish and Game Council. We conclude that the Commissioner lacks authority to subvert the Council's authorization of a hunt by such a ....

Docket No.: a4599-03Decided: 2004-11-16Caption: STATE OF NEW JERSEY v. JAMES BADESSA Summary:PARKER, J.A.D. In this appeal, defendant challenges the stop of his vehicle after he made a lawful turn at an intersection within a two-block DWI checkpoint zone. He argues that, in the absence of signs prohibiting turns, the police lacked probable cause to stop his vehicle and that evidence of his refusal to submit to a breathalyzer test after the stop should have been suppressed. After the municipal court judge denied defendant’s motion to suppress, the matter was tried and defendant was found not guilty of driving while intoxicated (DWI), N.J.S.A. 39:4-50, but guilty of refusal to submit to a breathalyzer test (refusal), N.J.S.A. 39:4-50.4(a). Defendant appealed to the Law Division, which also denied his motion to suppress and found him guilty of refusal after a de novo review.

Docket No.: a5597-02 Decided: 2004-11-16Caption: IN RE AUTHORIZATION FOR FRESHWATER WETLANDS GENERAL PERMITS Summary:CONLEY, P.J.A.D.Appellant, Preserve Old Northfield (POND), challenges a Letter of Interpretation (LOI) and a Freshwater Wetlands General Permit No. 6 (GP6) issued by the New Jersey Department of Environmental Protection (DEP) for activities near or adjacent to the properties of POND's members.

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