NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0255-15T3
ALLIANCE SHIPPERS, INC.,
Plaintiff-Appellant/
Cross-Respondent,
v.
CASA DE CAMPO, INC.; PEDRO PEREZ,
individually and as an agent of CASA
DE CAMPO, INC.; ARTHUR DE PINTO;
FELIX PRODUCE CORP.; FELIX CEBALLO,
individually and as an agent of FELIX
PRODUCE CORP.; GFP DISTRIBUTORS, INC.
t/a GARDEN FRESH PRODUCE; JOSEPH T.
GUARRACINO, individually and as an
agent of GFP DISTRIBUTORS, INC. t/a
GARDEN FRESH PRODUCE; JOSEPH KOLINEK,
individually and t/a C&M PRODUCE;
LIONXEN CORP. AND PRODUCE BIZ LLC
t/a POSEIDON FOOD SERVICE; XENOFON
GIALIAS, individually and as agent
of LIONXEN CORP. AND PRODUCE BIZ LLC
t/a POSEIDON FOOD SERVICE; VILLAGE
PRODUCE, INC.; MOHAMMED HADI,
individually and as agent of VILLAGE
PRODUCE, INC.; ALEX PRODUCE CORP.;
ALEX BONILLA a/k/a ALEJANDRO BONILLA,
individually and as an agent of ALEX
PRODUCE CORP.; HEE JAE PARK d/b/a
J&S PRODUCE COMPANY; LUIS JOSE BONILLA
d/b/a LUIS JOSE PRODUCE; ZEF DELJEVIC;
HENRY GARLAND, individually and t/a
PRO QUALITY PRODUCE and BALMANGAN
PRODUCE, INC.; GEORGE V. ROUSSOS;
SANANJOS PRODUCE CORP. d/b/a FRIEMAN
BROS.; KOREAN PRODUCE CORP.; PAUL KIM
a/k/a PIL JUNG KIM and STELLA KOUFALIS,
individually and t/a KMS FRUIT &
VEGETABLES; and HAVANA PRODUCE, INC.,
Defendants,
and
ERNESTO REGUITTI, individually
and as an agent of SANANJOS
PRODUCE CORP. d/b/a FRIEMAN BROS.,
Defendant-Respondent/
Cross-Appellant.
_______________________________
Argued December 1, 2016 - Decided April 24, 2017
Before Judges Lihotz and Hoffman.
On appeal from Superior Court of New Jersey,
Law Division, Middlesex County, Docket No. L-
2650-13.
Ronald Horowitz argued the cause for
appellant/cross-respondent.
Mark C. H. Mandell argued the cause for
respondent/cross-appellant.
PER CURIAM
This mundane collection action involving extremely litigious
parties has blossomed into a procedurally complex matter, which
includes removal and remand to federal court, disjointed review
by two Law Division judges, and ended with an order for sanctions.
Not surprisingly, the parties filed cross-appeals from that order.
2 A-0255-15T3
Plaintiff, Alliance Shippers, Inc. (Alliance) appeals from
two Law Division orders: a May 29, 2015 order imposing sanctions
and an August 21, 2015 order denying reconsideration of that order.
Defendant Ernesto Reguitti filed a cross-appeal challenging the
same orders, arguing the attorney's fees awarded were
insufficient. We reverse both orders and remand the matter for
further proceedings as discussed in this opinion.
Alliance initiated a collection action against Kris-Pak Sales
Corp. (Kris-Pak), for outstanding freight transportation services
(Docket No. MID-L-2024-12). Judgment was entered against Kris-
Pak (Judgment No. J-155860-12) and Alliance commenced discovery
in aid of execution. Alliance learned various entities owed
receivables to Kris-Pak. Alliance sought to collect those sums
to satisfy its judgment.
Kris-Pak's debtors include Sananjos Produce Corp. d/b/a
Frieman Bros. (Sananjos) and its principal, Ernesto Reguitti,
individually. This debt for purchased produce was governed by the
Perishable Agricultural Commodities Act (the Act), 7 U.S.C.A. §
499(c)(5). The Act includes provisions imposing personal
liability on the principals who fail to satisfy corporate debts.
Although Sananjos was formally dissolved, a portion of its debt
due Kris-Pak was assessed personally against Reguitti, as
Sananjos' principal.
3 A-0255-15T3
A February 24, 2010 consent judgment entered by the United
States District Court for the District of New Jersey (USDC
judgment) memorialized Reguitti's obligation. Under the terms of
the USDC judgment, Reguitti made monthly payments to an escrow
agent, who would allocate the monies received among the respective
creditors entitled to payment. Included among those debtors was
Kris-Pak, which was owed $77,172.50, but only entitled to receive
$54,020.75 under the USDC judgment. Additionally, the USDC
judgment provided: "The [j]udgment [h]older[] shall refrain and
forbear for [sic] any enforcement of their rights under the consent
judgment."
In the Law Division, Alliance moved for an order requiring
the escrow agent to turnover monies due Kris-Pak. The motion
served on Sananjos and Kris-Pak was unopposed. The July 26, 2013
order, entered under Docket No. MID-L-2024-12, provided the debt
of $77,172.50 due by Sananjos to Kris-Pak shall be paid to
Alliance, not Kris-Pak. Further, Sananjos and Kris-Pak were
enjoined from compromising the debt and Kris-Pak's rights to
payment were transferred to Alliance, which could execute and
liquidate same.
When he received the turnover order, counsel for Reguitti
took the position Sananjos was dissolved, and because Sananjos had
not made payments to the escrow agent, the order did not bind his
4 A-0255-15T3
client. He also contended Alliance's judgment against Kris-Pak
was defective.
Alliance filed a new complaint under Docket No. MID-L-2650-
13, naming as defendants the entities it believed were indebted
to Kris-Pak, which included Reguitti. Alliance explained "[t]he
action [sought] to reduce the obligations . . . into judgments
against the [Kris-Pak] account debtors and their principles."
Reguitti's counsel issued correspondence dated December 2,
2013. He reiterated Alliance should contact the escrow agent and
not sue Reguitti, advising:
[T]his letter shall serve to notify you that
your Superior Court action against my client
constitutes a direct violation of the
settlement and the District Court order above
noted. Demand, therefore, is herewith made
upon you to discontinue said action against
my client, with prejudice, not later than
December 9[,] and to forward a filed-stamped
copy of such discontinuance for receipt in
this office not later than December 11, 2013.
If you fail or refuse to do so, an appropriate
application will be made to the District Court
and my fees and costs to do so will be deducted
from any amount [that] may remain due to Kris-
Pak under the settlement.
"Please guide yourself accordingly."
Alliance had not received payment. Counsel wrote to the
escrow agent demanding the release of payments made toward Kris-
Pak's debt, as required by the July 26, 2013 turnover order. The
letter suggested failure to do so could trigger contempt
5 A-0255-15T3
proceedings. Counsel for Reguitti, who received a copy of the
letter, responded again warning Alliance's "litigation style"
violated the USDC judgment. He informed Alliance Reguitti would
continue making monthly payments to the escrow agent to discharge
his personal liability, and would not do otherwise unless directed
by "a new" District Court order. Kris-Pak's counsel, who was also
copied with the pleadings and correspondence, wrote to the escrow
agent asserting an attorney charging lien against the funds.
Because of the disputes, the escrow agent declined to remit funds
to Alliance.
Next, Reguitti issued a petition to remove the Law Division
action to the District Court, maintaining the original obligation
arose pursuant to the Act. In the District Court, Reguitti filed
an answer and counterclaim alleging Alliance, standing in the
shoes of Kris-Pak, breached the terms of forbearance stated in the
USDC judgment when it initiated litigation seeking to recover more
than the amount stipulated, sought to accelerate payments, and
acted to harass Reguitti, forcing him to incur unnecessary counsel
fees. Reguitti additionally filed a motion to stay Alliance's
action against Reguitti and sought to deposit all funds with the
court to determine the various claims against the funds. Alliance
opposed the motion and requested remand. The federal judge
reviewed the application and concluded Reguitti's removal was
6 A-0255-15T3
improper and the motion was denied. She ordered the matter
remanded to the Law Division.
A second turnover motion was filed by Alliance and granted
over Reguitti's opposition. The February 14, 2014 order (Docket
No. MID-L-2024-12) required the escrow agent turn over all monies
paid by Reguitti to Alliance. Reguitti was enjoined from
compromising the agreed settlement amount in the USDC judgment or
from paying the sums to others. Immediately thereafter, Alliance
requested entry of default against Sananjos, under Docket No. MID-
L-2650-13.
Counsel for Reguitti sent a letter to Alliance and the escrow
agent tendering the balance of the amount due under the USDC
judgment. The transmittal letter stated payment was conditioned
on "full and final [s]atisfaction of the [c]onsent [j]udgment," a
"general release" from Alliance, and stipulation of dismissal of
the Law Division action, including Reguitti's previously filed
counterclaim. Reguitti's payment by the escrow agent was delayed
stating Alliance failed to respond to the "time sensitive" letter.
Alliance accepted the escrow agent's May 2014 warrant to satisfy
the obligation, but declined Reguitti's demand for a general
release. Alliance requested the Law Division enter default against
Reguitti.
7 A-0255-15T3
On July 2, 2014, Reguitti moved for default on his previously
filed counterclaim. Alliance responded, asserting Reguitti's
action was frivolous, and requested Reguitti withdraw his
application within twenty-eight days because no Law Division
responsive pleadings were served upon Alliance, and no factual or
legal basis existed for relief. This engendered additional motion
practice.
Alliance moved to dismiss its action as to Reguitti and to
dismiss Reguitti's counterclaim. Alliance explained Reguitti
filed no pleadings in the Law Division, and it never received the
District Court pleadings, which likely were electronically filed.
Further, Alliance maintained Reguitti's recent request for default
was moot, as a stipulation to dismiss with prejudice was circulated
as to all claims between Alliance and Reguitti regarding the Kris-
Pak debt. However, Reguitti cross-moved for a judgment on its
counterclaim.
The motion judge issued an order on September 8, 2014. The
order dismissed Alliance's complaint against Sananjos and denied
Alliance's request for sanctions. Further, the order denied
Alliance's request to dismiss the counterclaim, because default
was entered. Apparently, judgment on the counterclaim was also
denied. The record contains no statement of reasons.
8 A-0255-15T3
Civil case management assigned a September 22, 2014 trial
date. Alliance wrote to the Clerk's office explaining default
judgments were entered against all but one recently named defendant
(not Reguitti), and default against that defendant was pending.
Alliance closed its letter stating "this case should be removed
from the trial list."
On September 22, 2014, a different judge (the trial judge)
considered the matter. On that date, Reguitti appeared, Alliance
did not. The record on appeal does not contain a transcript of
this proceeding, and the recited facts are gleaned from the court's
decisions and counsel's pleadings.
The judge called Alliance's counsel, who was in Florida; he
did not answer. Counsel later returned the call, which the trial
judge declined to accept because Reguitti's counsel had left the
courthouse.
During the hearing, Reguitti's counsel moved for entry of a
default judgment against Alliance on its counterclaim. He sought
an award of sanctions amounting to attorney's fees and costs
expended as a result of Alliance's violation of the USDC judgment.
The trial judge allowed Reguitti to submit proof of the amount
due.
Alliance moved to vacate default on October 22, 2014, stating
default was improvidently granted and restated its position.
9 A-0255-15T3
Believing Alliance did not file opposition to the requested amount
of sanctions, the trial judge entered final judgment, ordering
Alliance to pay $21,750. That same day, Alliance filed a letter
memorandum explaining it was unaware a trial was held, as it relied
on its prior correspondence explaining trial was unnecessary.
The motion judge was assigned to review Alliance's
application to vacate default and dismiss the counterclaim. The
October 10, 2014 order denied the request as moot because a default
judgment was entered. Alliance then moved to vacate the default
judgment. Reguitti opposed the motion. The matter returned to
the trial judge, who issued an order and written opinion on
December 2, 2014. The order vacated default and default judgment
and scheduled an evidentiary hearing, on a date agreed to by
counsel.
Subsequent correspondence and orders reflect the trial
judge's intention was to limit Alliance's challenge to the amount
of fees paid as sanctions. Alliance objected insisting once the
court vacated default judgment and default, the right to challenge
the validity of the underlying counterclaim remained. Alliance
urged there was no basis to award relief on the counterclaim
because there was no violation of the USDC judgment. This
disagreement prompted Alliance to again move to dismiss Reguitti's
counterclaim and request sanctions for advancing frivolous
10 A-0255-15T3
litigation. On March 20, 2015, the motion judge granted the motion
to dismiss the counterclaim, as unopposed, but denied Alliance's
request for frivolous suit sanctions.
The trial judge scheduled the previously ordered evidentiary
hearing for April 22, 2015. However, because of his schedule, he
modified the proceeding to allow oral argument on April 24, 2015,
and reserved decision.
In a May 29, 2015 opinion, the trial judge stated "this court
conferred with [the motion judge] about this matter. Clearly her
order of March 20, 2015, was entered in error. Accordingly, she
has signed an order dated May 6, 2015, vacating it." The trial
judge's opinion addressed the pending issue, which he defined as
limited to the amount of sanctions. The trial judge again noted
Alliance's failure to appear for the scheduled trial date or
immediately move to open the default judgment. He stated the
order allowed Alliance to challenge the quantum of damages.
Instead of "addressing the merits of the counterclaim
calculations," Alliance's counsel chose to again move to vacate
the counterclaim. The trial judge found the motion represented
an impermissible attack on a prior court order, as two prior
requests to dismiss the counterclaim were denied. Reguitti's
request for additional attorney's fees incurred since the
11 A-0255-15T3
September 22, 2014 trial was denied. Alliance's subsequently
filed motion for reconsideration was also denied.
We begin by addressing Alliance's appeal from the May 29,
2015 order imposing sanctions and the August 21, 2015 order denying
reconsideration. Alliance argues the final settlement of the
matter precludes Reguitti from thereafter raising a counterclaim.
Alliance maintains it was required to file this complaint to secure
funds Reguitti owed to Kris-Pak because Reguitti objected to the
initial turnover order sent to the escrow agent. Also, Alliance
asserts it never sought to collect more than Kris-Pak was entitled
to receive and insists the matter was settled, resolving all
claims; however, Reguitti's resistance and insistence Alliance
issue a "New York form" of general release rather than a
stipulation of dismissal caused additional motion practice.
Alliance notes Reguitti improperly moved for removal, which was
denied as was its motion to dismiss its action, and never filed
responsive pleadings or an appearance in the Law Division, urging
the trial judge incorrectly assumed the federal pleadings were
transferred to the Law Division. Finally, Alliance urges reversal
because the trial judge erroneously concluded Alliance violated
the USDC judgment, a position presented and denied by the District
Court judge.
The nature of this court's review is clear.
12 A-0255-15T3
In considering the legal and substantive
issues raised on appeal, we stress at the
outset our limited scope of review of the
trial court's findings of fact . . . . It is
well-settled that the factual findings of a
trial judge sitting without a jury are
"considered binding on appeal when supported
by adequate, substantial and credible
evidence."
[539 Absecon Blvd., L.L.C. v. Shan Enter. Ltd.
P'ship, 406 N.J. Super. 242, 272 (App. Div.)
(quoting Rova Farms Resort, Inc. v. Inv'rs
Ins. Co., 65 N.J. 474, 483-84 (1974)), certif.
denied, 199 N.J. 541 (2009).]
This same deference is not afforded "[a] trial court's
interpretation of the law and the legal consequences that flow
from established facts," which we review de novo. Manalapan
Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
We reject Alliance's first argument stating settlement of the
underlying obligation due Kris-Pak mooted Reguitti's counterclaim.
R. 2:11-3(e)(1)(E). We also decline to examine substantive claims
regarding each party's conduct during the litigation.
Briefly, we address whether the counterclaim filed in the
District Court automatically becomes part of the Law Division
record, despite the lack of a formal action to do so. We find no
specific record reference demonstrating the court considered this
issue.
The District Court may require the party petitioning for
removal to file copies of the state court record with the clerk
13 A-0255-15T3
of the federal court, pursuant to 28 U.S.C.A. § 1447(b); however,
neither federal nor state law specifically addresses the procedure
following remand. Indeed, 28 U.S.C.A. § 1447(c) provides:
If at any time before final judgment it
appears that the case was removed
improvidently and without jurisdiction, the
district court shall remand the case, and may
order the payment of just costs. A certified
copy of the order of remand shall be mailed
by its clerk to the clerk of the State court.
The State court may thereupon proceed with
such case.
The effect given pleadings filed in the federal court remains
a matter of state policy, which is not subject to federal
determination. Edward Hansen, Inc. v. Kearny Post Office Assocs.,
166 N.J. Super. 161, 165 (Ch. Div. 1979); see also Ayres v.
Wiswall, 112 U.S. 187, 190-91, 5 S. Ct. 90, 92, 28 L.Ed. 693, 695
(1884) ("It will be for the State court, when the case gets back
there, to determine what shall be done with the pleadings filed
and testimony taken during the pendency of the suit in the other
[federal] jurisdiction.").
Our sister states have not uniformly adopted a policy on the
effect of federal pleadings once a matter is remanded. For
example, some state a strict position not to accept pleadings
filed in federal court. See Steve Standridge Ins. v. Langston,
900 S.W. 2d 955, 958 (Ark. 1995) (reinforcing policy that whatever
happens in a federal court has no bearing on the proceedings in
14 A-0255-15T3
state court once the case has been remanded after an unsuccessful
removal attempt); Tract Loan & Trust Co. v. Mutual Life Ins. Co.,
7 P. 2d 280, 292 (Utah 1932) (concluding an answer filed in federal
court was "without effect" after a remand); Citizens' Light, Power
& Telephone Co. v. Usnik, 194 P. 862, 863-64 (N.M. 1921) (holding
filing of a petition for removal of a cause from the state to the
federal court . . . does not extend the time to appear and plead
therein). Many of these cases are aged.
States addressing the issue more recently have chosen to give
effect to all federal pleadings filed before remand. See Laguna
Vill. v. Laborers' Int'l Union of N. Am., 672 P. 2d 882, 885-86
(Cal. 1983) (holding a timely answer filed in District Court
following timely removal of the action is sufficient to prevent a
default in a state court if the case is subsequently remanded);
Williams v. St. Joe Minerals Corp., 639 S.W.2d 192, 194-95 (Mo.
App. 1982) (amended complaint filed in federal court properly
permitted in state court on remand, absent refiling); Armentor v.
General Motors Corp., 399 So.2d 811, 812 (La. App. 1981) (answer
filed in federal court treated as if filed in state court); Shelton
v. Bowman Transp., Inc., 230 S.E.2d 762, 764 (Ga. App. 1976)
(affirming vacation of state court default of defendant who filed
an answer in federal court before remand); Citizens Nat. Bk.,
15 A-0255-15T3
Grant Cty. v. First Nat. Bk., Marion, 331 N.E.2d 471, 476-77 (Ind.
App. 1975) (same).
New Jersey's jurisprudence addressing the subject is
surprisingly limited. Other than the Chancery Division's
discussion in Edward Hansen, supra, 166 N.J. Super. at 165, we
locate no other New Jersey case directly addressing this issue
and, frankly, none is identified by the parties on appeal.
Alliance notes Rule 4:24-1(d) now requires the Law Division
to conduct a case management conference, within thirty days of the
remand from federal court. Certainly, application of this process
could have obviated what appears to be motion practice driven by
entrenched divergent positions. However, the rule's effective
operational date was January 1, 2015, which postdated the February
18, 2014 remand.
Because we perceive more clarity may be necessary, we refer
the issue to the Supreme Court's standing Committee on Civil
Practice, requesting it consider whether Rule 4:24-1 should
specifically address the post-remand review and adoption of filed
federal court pleadings.
No specific motion requested the Law Division accept or reject
the District Court pleadings. Although Alliance asserted the
District Court considered and denied Reguitti's motion to enforce
the USDC judgment and award it damages, perhaps the issue of the
16 A-0255-15T3
status of the federal filings was not well articulated, and
unfortunately, the effect of the federal filings in the Law
Division was never squarely addressed. Instead, the trial judge
accepted the pleadings because Alliance was aware an answer was
filed. In doing so, we note the trial judge did not consider
whether the District Court's order denying Reguitti's motion for
relief, touched on the counterclaim's asserted violation of the
USDC judgment. These procedural lapses do not determine the result
we now order, but certainly they fueled the parties' fire for
continued disagreement.
Our conclusion to reverse the May 29, 2015 order and denial
of reconsideration is more fundamentally based. We reverse the
orders because they are insufficiently supported and legally
incorrect.
The judge noted Alliance's prior motions to dismiss
Reguitti's counterclaim were denied, and he concludes, without
review, Reguitti was granted relief because Alliance purportedly
violated an order entered by the District Court. The trial judge
labeled the award as one for sanctions for what Reguitti
characterized as "the 'scorched earth' conduct of Alliance and its
counsel during February 2014." On appeal, Reguitti maintains the
award was not one for frivolous litigation sanction under Rule
1:4-8 or N.J.S.A. 2A:15-59.1(a)(1), but merely compensation for
17 A-0255-15T3
the breach of the USDC judgment. The terms of judgment did not
specifically contain provisions for an award of compensatory
damages and we reject Reguitti's attempt to parse the facts, noting
the trial judge made no findings to suggest the award represented
attorney's fees under Rule 4:42-9.
Here, the judge ordered sanctions, but failed to review the
merits of the substantive claims advanced by either party or to
determine if sanctions were appropriate under the statute or the
rule. Accordingly, the unsupported order represents an abuse of
discretion, which must be reversed. Tagayun v. AmeriChoice of
N.J., Inc., 446 N.J. Super. 570, 577 (App. Div. 2016).
Rule 1:4-8(a) provides:
By signing, filing or advocating a pleading,
. . . an attorney or pro se party certifies
that to the best of his or her knowledge,
information, and belief, formed after an
inquiry reasonable under the circumstances:
(1) the paper is not being presented
for any improper purpose, such as to
harass or to cause unnecessary delay
or needless increase in the cost of
litigation;
(2) the claims, defenses, and other
legal contentions therein are
warranted by existing law or by a
non-frivolous argument for the
extension, modification, or
reversal of existing law or the
establishment of new law[.]
18 A-0255-15T3
Prior to issuing an award of sanctions under the rule,
subsection (c) requires the court issue "an order describing the
specific conduct that appears to violate this rule and directing
the attorney or pro se party to show cause why he or she has not
violated the rule." R. 1:4-8(c).
As we noted, the trial judge did not identify what conduct
violated the rule, nor did he consider Alliance's position
expressing its pursuit of direct relief against Reguitti resulted
because of Reguitti's refusal to acknowledge the validity of the
turnover order as well as Reguitti's challenge to the escrow
agent's release of funds to Alliance. Frankly, we find several
instances where positions articulated by each side fail to advance
reasonableness or respect. That said, we cannot determine, and
the trial judge did not articulate, specific findings establishing
Alliance filed its complaint simply to harass Reguitti.
We also note, the trial judge imposed sanctions against
Alliance, not counsel, without mention of the requisites mandated
by N.J.S.A. 2A:15-59.1(a)(1). "An award of fees against a party,
as opposed to a lawyer or a self-represented litigant, engaging
in frivolous litigation is governed by N.J.S.A. 2A:15-59.1(a)(1),
which requires a judge to determine whether a pleading filed by a
non-prevailing party was frivolous." Tagayun, supra, 446 N.J.
Super. at 578.
19 A-0255-15T3
In order to award fees under the statute, the
court must find that a claim or defense was
either pursued "in bad faith, solely for the
purpose of harassment, delay or malicious
injury" or that the non-prevailing party knew
or should have known it "was without any
reasonable basis in law or equity and could
not be supported by a good faith argument for
an extension, modification or reversal of
existing law."
[Ibid. (quoting N.J.S.A. 2A:15-59.1(b)(1),
(2)).]
Moreover, we determine the trial judge mistakenly suggested
Alliance unnecessarily refiled its motion to dismiss Reguitti's
counterclaim as a basis for relief. The judge also mentioned his
particular displeasure with Alliance for "proceed[ing] before two
judges simultaneously without making each aware of the other.
[Alliance’s] motions to dismiss the counterclaim raised before me
did not note that [the motion judge] . . . denied a similar motion
earlier." This apparently rejected Alliance's position that the
order vacating default judgment and default allowed a substantive
attack on the merits of Reguitti's counterclaim.
We remain puzzled by these comments. Alliance's first motion
to dismiss the counterclaim was denied because default was entered,
a fact of which Alliance was not aware. The second motion,
although filed first, was denied because the trial judge entered
default judgment. The third motion granted relief after Reguitti
did not file opposition. However, the motion judge vacated her
20 A-0255-15T3
order on May 6, 2015, without notice to the parties, or a statement
of reasons for doing so.
We reject the imposition of sanctions purportedly based on
the suggestion Alliance improperly moved to dismiss Reguitti's
counterclaim once default and default judgment were vacated. A
review of the procedural history reveals neither the motion nor
the trial judge considered the merits of this request.
Sanctions for frivolous litigation are
not imposed because a party is wrong about the
law and loses his or her case. The nature of
conduct warranting sanction under Rule 1:4-8
and under the statute has been strictly
construed. The term frivolous should not be
employed broadly or it could limit access to
the court system. First Atl. Fed. Credit
Union v. Perez, 391 N.J. Super. 419, 432-33
(2007). Imposing sanctions is not appropriate
where a party "has a reasonable good faith
belief in the merit of his action." J.W. v.
L.R., 325 N.J. Super. 543, 548 (1999). In
discussing the frivolous litigation statute,
the Supreme Court, in McKeown-Brand v. Trump
Castle Hotel & Casino, 132 N.J. 546, 561-62
(1993), explained the legislative history as
follows:
The predecessor bill, A. 1086,
allowed the prevailing party to
recover fees from the non-
prevailing party if that party's
pleading was "not substantially
justified." In the course of the
legislative process, the term
"frivolous" replaced "not
substantially justified." Senate
Judiciary Committee Statement to
Assembly Committee Substitute for
A. 1086, 2029, 783, and 1260 (Oct.
21 A-0255-15T3
2, 1986). Indeed, the Governor's
conditional veto message noted the
"bill's restrictive definition of
'frivolous.'" The replacement of
"not substantially justified" with
"frivolous" reflects the
legislative intent to limit the
application of the statute. That
limitation is consistent with the
premise that in a democratic
society, citizens should have ready
access to all branches of
government, including the
judiciary.
[Tagayun, supra, 446 N.J. Super. at 579-81.]
In our review, the court, not Alliance, is responsible for
the confusion created by assigning two judges to handle separate
aspects of a single matter. The record suggests each judge
reviewed a single aspect of the case without regard to other
pending issues.
Another troubling aspect contained in the trial judge's
opinion is the reference to his consultation with the motion judge,
which resulted in her sua sponte vacation of her prior order to
dismiss Reguitti's counterclaim. Although a judge has the right
to amend or vacate an interlocutory order, he or she may not do
so without complying with due process requisites. The Supreme
Court has instructed:
It is well established that "the trial
court has the inherent power to be exercised
in its sound discretion, to review, revise,
reconsider and modify its interlocutory orders
22 A-0255-15T3
at any time prior to the entry of final
judgment." Johnson v. Cyklop Strapping Corp.,
220 N.J. Super. 250, 257 (App. Div. 1987),
certif. denied, 110 N.J. 196 (1988) (emphasis
added); see also Marconi v. Wireless Telegraph
Co. of Am. v. United States, 320 U.S. 1, 47,
63 S. Ct. 1393, 1415, 87 L. Ed. 1731, 1757
(1943) (finding trial court has "power at any
time prior to entry of its final judgment
. . . to reconsider any portion of its decision
and reopen any part of the case"). That power,
which is rooted in the common law, see, e.g.,
Lyle v. Staten Island Terra Cotta Lumber Co.,
62 N.J. Eq. 797, 805 (E & A 1901), is broadly
codified in Rule 4:42-2, which provides
expansively that "any order . . . which
adjudicates fewer than all the claims as to
all the parties shall not terminate the action
as to any of the claims, and it shall be
subject to revision at any time before the
entry of final judgment in the sound
discretion of the court in the interest of
justice." (Emphasis added); see also R. 1:7-
4(b) ("Motions for reconsideration of
interlocutory orders shall be determined
pursuant to R. 4:42-2."). That Rule, like the
jurisprudence on which it is based, sets forth
no restrictions on the exercise of the power
to revise an interlocutory order.
. . . .
Although the rule is expansive, the power
to reconsider an interlocutory order should
be exercised "only for good cause shown and
in the service of the ultimate goal of
substantial justice." Johnson, supra, 220
N.J. Super. at 263-64 . . . .
[Lombardi v. Masso, 207 N.J. 517, 534, 536,
(2011).]
In doing so:
23 A-0255-15T3
Procedurally, where a judge is inclined
to revisit a prior interlocutory order, what
is critical is that he [or she] provide the
parties a fair opportunity to be heard on the
subject. It is at such a proceeding that the
parties may argue against reconsideration and
advance claims of prejudice, . . . . Moreover,
once the judge has determined to revisit a
prior order, he [or she] needs to do more than
simply state a new conclusion. Rather, he [or
she] must apply the proper legal standard to
the facts and explain his reasons.
[Id. at 537.]
Here, even if the motion judge determined she entered the
order of dismissal in error, Lombardi's procedural safeguards must
be followed. They were not.
For all of these reasons, we vacate the order imposing
sanctions. The matter is remanded for further proceedings
including case management and scheduling of Alliance's motion to
dismiss Reguitti's motion seeking judgment on the counterclaim.
To the extent Alliance raises other arguments not specifically
addressed in our opinion, we have determined further discussion
was not warranted. R. 2:11-3(e)(1)(E).
In his cross-appeal, Reguitti argues the trial judge erred
when he denied the request to supplement proof of attorney's fees
and costs incurred since September 21, 2014. The identified
deficiencies requiring the order to be vacated, obviate
consideration of this claim.
24 A-0255-15T3
Finally, based on our opinion, which includes setting aside
the order based on deficient or erroneous factual findings, we
require the case be reassigned by the Presiding Judge of the Civil
Division to a different judge to conduct the remand proceedings.
See In re Baby M., 109 N.J. 396, 463 n.19 (1988) ("The original
trial judge's potential commitment to [his] findings and the extent
to which a judge has already engaged in weighing the evidence,
persuade us to make that change." (citations omitted)).
Reversed and remanded for further proceedings consistent with
this opinion.
25 A-0255-15T3