MAXIMUS REAL ESTATE FUND, LLC v. LIBERO D. MAROTTA

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5459-07T15459-07T1

A-5501-07T1

MAXIMUS REAL ESTATE FUND, LLC

and MAXIMUS OKC REAL ESTATE

FUND LLC,

Plaintiffs-Respondents,

v.

LIBERO D. MAROTTA and

LARRY PRICE,

Defendants-Appellants.

_________________________________________________

 

Argued May 6, 2009 - Decided

Before Judges A. A. Rodr guez and Payne.

On appeal from Superior Court of New Jersey,

Law Division, Hudson County, Docket No. L-1127-07.

William Z. Shulman argued the cause for

appellant Libero D. Marotta.

Ira Karasick argued the cause for appellant Larry Price (New Jersey Appleseed Public Interest Law Center, attorney; Diana H. Jeffrey, of counsel and on the brief).

Law Offices of Steve M. Kalebic, attorneys for respondents Maximus Real Estate Fund, LLC and Maximus OKC Real Estate Fund, LLC (Mr. Kalebic, of counsel and on the brief).

PER CURIAM

In these appeals, which were argued back-to-back and we decide jointly, defendants Larry Price and his attorney, Libero D. Marotta, claim that the motion judge abused her discretion in denying their motions for attorneys' fees incurred in defending against the action instituted by Maximus Real Estate Fund, LLC and Maximus OKC Real Estate Fund, LLC (jointly, Maximus), arguing that the action was a frivolous SLAPP suit.

I.

The record discloses that the plaintiffs are developers who planned to construct a ten-story multifamily condominium in Union City consisting of ninety-six residential units and 116 off-street parking spaces a plan that was later amended to include eighty units with 106 off-street parking spaces. The plan required a "d" floor area ratio variance to permit a ratio of 7:2, whereas 3:1 was permitted; a "d" density variance to permit a density of 181 units per acre whereas 110 units were allowed; a "c" minimum lot size variance to permit a lot of 19,352 square feet in size whereas a minimum of 20,000 square feet was required; and a "c" lot coverage variance to permit 97.4% of the lot to be covered, rather than the permissible 55%. See N.J.S.A. 40:55D-70c and d. Price unsuccessfully opposed plaintiffs' variance applications, which were granted by the Union City Board of Adjustment in a resolution dated January 12, 2006.

On March 2, 2006, Price, represented by Marotta, filed a verified complaint in lieu of prerogative writs challenging the Board of Adjustment's action in granting the variances as arbitrary, capricious and unreasonable. In a letter dated August 18, 2006, counsel for Maximus informed Marotta that he deemed the action to be frivolous, and he demanded its dismissal pursuant to Rule 1:4-8. The request was declined in a letter from Marotta dated August 23, 2006. On November 17, 2006, an order was entered denying the relief sought by Price in his complaint and, on December 29, 2006, Price filed a notice of appeal.

On March 1, 2007, while Price's appeal was pending, Maximus filed suit against Marotta and Price, alleging the procedural history that we have recited and stating:

To date, Defendants Price and Marotta continue to refuse to withdraw their ongoing and pervasive course of conduct in challenging Plaintiffs' legitimate zoning approval. The actions of Defendants Price and Marotta continue to have a devastating and detrimental impact upon Plaintiffs' ability to develop the Subject Property.

Maximus asserted causes of action for malicious prosecution/abuse of process (Count One) and tortious interference with prospective economic advantage (Count Two). In connection with Count Two, Maximus made the following allegations:

27. Upon information and belief, the course of conduct being undertaken by Defendants Price and Marotta in continuing their frivolous challenges to Plaintiff's zoning approvals is being undertaken primarily with the intent of extracting a financial settlement from Plaintiff.

28. Upon information and belief, Defendants Price and Marotta have, over the course of a five (5) year period, prosecuted a substantial number of zoning appeals arising out of approvals issued by the Union City Zoning Board of Adjustment. In the course of said zoning challenges, Defendants Price and Marotta have extracted financial settlements from various real estate developers in the City of Union City in exchange for withdrawing contemplated and/or filed appeals of zoning approvals.

No factual support for these allegations of misconduct has ever been provided, despite requests for such information. It is true, however, that Price challenged in court numerous determinations of the Board of Adjustment.

Following service of suit, Marotta and Price retained separate counsel. By letter dated May 4, 2007, addressed to counsel for Maximus, counsel for Marotta claimed that the complaint filed by Maximus was frivolous, and demanded its withdrawal pursuant to Rule 1:4-8. The letter stated:

It is my considered opinion that the lawsuit that you have filed is in violation of [Rule 1:4-8] and is otherwise deemed frivolous, insofar as there is sufficient case law in this jurisdiction whereby it is impermissible for a land use applicant to retaliate against an objector to an application by filing a lawsuit, such as you have done in this case alleging claims such as defamation, tortious interference with prospective economic advantage or abuse of process. Actions of this nature have been dubbed Strategic Lawsuits Against . . . Public Participation or otherwise known as SLAPP suits, which are disfavored because of the chilling effect they have on the willingness of other citizens to participate in the process of local government and public planning. See for example the discussion in the cases of LoBiondo v. Schwartz, 323 N.J. Super. 391, 395 (App. Div.) certif. denied, 162 N.J. 488 (1999), and other cases referenced there, as well as in Cox On Planning, at pages 598-599.

A similar Rule 1:4-8 notice and demand for withdrawal of Maximus's complaint was sent by counsel for Price on July 26, 2007. In that letter, counsel argued that Price had a constitutionally protected right to petition government that immunized his conduct in bringing suit. Additionally, counsel claimed that the first count of Maximus's complaint, insofar as it alleged malicious use of process, was not ripe, because Price's action remained on appeal and insofar as it alleged malicious abuse of process, it was defective because no "further act" had been alleged. As to the second count, alleging tortious interference with prospective economic advantage, counsel claimed that "it is clear that Mr. Price did not act without justification, and his actions [were] not 'transgressive of generally accepted standard of morality.'" According to counsel: "It is established that Mr. Price's court filings alleging violations of land use ordinances cannot serve as the basis of tort liability. Fraser v. Bovino, 317 N.J. Super. 23, 37 (App. Div. 1998)[, certif. denied, 160 N.J. 476 (1999)]."

The complaint was not withdrawn, and the matter proceeded to arbitration, which was unsuccessful.

On July 20, 2007, Marotta moved for summary judgment. However, the motion was adjourned on several occasions at the request of Maximus's counsel, eventually receiving a hearing date of October 19, 2007. One day before that hearing, counsel for Maximus faxed a stipulation of dismissal "with prejudice and without costs" to the attorneys for Marotta and Price. Marotta's attorney executed the stipulation, while noting that he did not represent Price. Counsel for Price did not agree to the stipulation's terms, claiming an entitlement to attorney's fees. Nonetheless, the action was mistakenly dismissed against both parties on December 6, 2007.

Thereafter, a motion was filed on behalf of Price to correct the clerical error, and after it was granted, a stipulation of dismissal with prejudice, but not without costs, was executed on behalf of Price and Maximus.

On January 22, 2008, Marotta filed a motion for sanctions against Maximus pursuant to the frivolous litigation statute, N.J.S.A. 2A:15-59.1 and Rule 1:4-8. A hearing was held, and the motion was denied by order dated February 15, 2008. In an oral decision, the motion judge determined that the complaint filed by Maximus did not constitute a SLAPP suit, because Maximus recognized that Marotta could not be intimidated, and that Marotta had not successfully demonstrated bad faith on Maximus's part. Rather, the judge held, the suit was a legitimate response to the many suits filed by Marotta on Price's behalf challenging determinations by the Union City Board of Adjustment to grant variances to various developers to permit increases in density beyond those permitted by applicable zoning ordinances. While recognizing that Price was merely exercising his constitutional right in that regard, the judge held that fact did not insulate either Price or Marotta from Maximus's challenge. According to the judge, "[t]hey had a right to file this complaint, they had a right to roll the dice, take a chance, see if they could pierce that 'almost absolute immunity,' the right of any person to petition the government for redress."

Following the denial of Marotta's motion, Price moved for clarification and reconsideration, but the motion was denied for lack of standing on April 22, 2008. Price then moved independently for sanctions, and his motion, likewise, was denied in a written decision dated June 5, 2008. In that decision, the motion judge found that Maximus's complaint was not filed to harass or intimidate Price. She stated:

Based on this court's independent review, Mr. Price filed at least six (6) more Prerogative Writ actions in Hudson County since the filing of his Answer to this lawsuit. Thus, Price's argument that he was intimidated or harassed by such a suit is without merit and unsupported by the evidence.

The judge further found that, as the result of Price's practice of challenging the determinations of the Board of Adjustment, there were "genuine issues" as to whether Price was entitled to the immunity from retaliatory litigation afforded to "ordinary citizens" by the Noerr-Pennington doctrine. Although the judge agreed that, because the complaint was filed before the appeal from the dismissal of the prerogative writ action had been determined, the first count of the complaint could not stand, the judge ruled that the claim of tortious interference with economic advantage remained. In this regard, the judge acknowledged Price's argument that Maximus could not prove malice because his challenge to the granting of variances was constitutionally protected. Nonetheless, she again suggested that Price's conduct could constitute an exception to that constitutional protection, and she determined that an action by Maximus premised on a potential exception to immunity "was not objectively baseless as a matter of law, but instead a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law as permitted under R. 11:4-8." The judge further observed: "While Maximus' counsel may have later described their position as 'dead in the water' with regard to the Noerr-Pennington immunity, Maximus' independent determination regarding the merits of his case does not preclude this Court from finding that a different result was cognizable."

In the meantime, on April 28, 2008, we issued an opinion affirming the judge's dismissal of the prerogative writ action, substantially on the basis of the reasons given by the motion judge.

II.

Rule 1:4-8 provides, in relevant part, that an attorney, by signing a pleading, certifies that (1) it is not being presented for an improper purpose; (2) the claims are warranted by existing law or by a non-frivolous argument for the extension, modification or reversal of existing law; and (3) the factual allegations have evidentiary support. If proper notice is given to a party that a pleading is deemed frivolous, and that pleading is not withdrawn within twenty-eight days of a written demand for withdrawal, a motion for sanctions may be filed, but no later than twenty days following the entry of final judgment. The necessary steps to perfect a right to sanctions were undertaken by both Marotta and Price in this matter.

A grant of sanctions is discretionary. Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005). We held there that:

Although the ordinary "abuse of discretion" standard defies precise definition, it arises when a decision is "made without a rational explanation, inexplicable departed from established policies, or rested on an impermissible basis." In other words, a functional approach to abuse of discretion examines whether there are good reasons for an appellate court to defer to the particular decision at issue. It may be "an arbitrary, capricious, whimsical, or manifestly unreasonable judgment.

[Ibid. (quoting Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002) (citations omitted).]

We regard the motion judge's orders to have resulted from a abuse of discretion as it has been defined.

We are satisfied, following our review of the record, that the complaint filed by Maximus was, in fact, a frivolous SLAPP suit, and that the motion judge was mistaken in determining otherwise. An examination of the complaint itself discloses that its purpose was to cause Price and Marotta to "withdraw their ongoing and pervasive course of conduct" in challenging Maximus's zoning approvals. That the defendants were not deterred is of no moment. The focus of inquiry should have been on Maximus, not on Price and Marotta. In LoBiondo, Judge Pressler set forth the scholarly view of SLAPP suits in the following terms:

[T]here is an increasing and extremely troublesome national phenomenon of litigation being commenced by commercial interests for the purpose of intimidating ordinary citizens who exercise their constitutionally protected right to speak out. In this way, commercial interests seek to quell effective opposition. In other words, protesting citizens are being sued into silence. Ultimately prevailing in the litigation is not the point rather the litigation exercise is undertaken in order to impose upon these citizens the expense and burden of defending a lawsuit against them. This phenomenon is consequently viewed as a serious and significant threat to the free, open and vigorous debate on public issues that the courts have so scrupulously protected as a bedrock principle of the First Amendment and as an imperative to a democratic form of government.

[LoBiondo, supra, 323 N.J. Super. at 418.]

That such suits, like the one here, may occasionally fail in their objective of silencing the challenges of those objecting to conduct as illegal or unauthorized is not a relevant concern, particularly in light of the economic consequences of such litigation. What is significant is the commercial entity's motivation in filing suit in the first place. And here, there is an admission in the pleadings themselves that the purpose of the action was to obtain defendant's silence. Further, at oral argument on Price's sanction motion, counsel for Maximus admitted that suit had been filed in an attempt to avoid the delay and the direct and consequential costs of extended litigation challenging the underlying zoning approvals.

In the Supreme Court's decision in the most recent iteration of LoBiondo v. Schwartz, 199 N.J. 62 (2009), the Court approved the use of the frivolous litigation statute and rule, together with their attorney's fee sanctions, as a means to combat SLAPP suits. Id. at 97-100. That relief was inappropriately denied in this case. such relief provides a recognized remedy against the economic consequences of SLAPP actions. The motion judge's rationale for denying its benefits was insufficient to overcome the public policy considerations supporting such a grant.

In this regard, we reject the motion judge's conclusion that, despite the pervasive application of the Noerr-Pennington doctrine by New Jersey's courts in land use contexts and the lack of any decisional support for its position, Maximus's legal contentions were warranted by a non-frivolous argument for the extension or modification of existing law. R. 1:4-8(a)(2). Although Supreme Court precedent in this area is lacking, we have uniformly expressed the view "that the same principles which form the basis of the Noerr-Pennington doctrine entitle those who have standing to object to land use applications to immunity from claims for damages based upon the exercise of their right to object." LoBiondo, supra, 323 N.J. Super. at 416 (quoting Fraser, supra, 317 N.J. Super. at 38). As we stated in Baglini v. Lauletta, 338 N.J. Super. 282 (App. Div. 2001):

In the context of a challenge to a land-use approval involving rezoning of the applicant's property, interested parties have a firmly rooted constitutional privilege of speaking out and protesting in good faith against what they perceive to be a legally erroneous legislative use of the governing body's zoning powers. The problem in many cases such as this is "not too much citizen involvement but too little." Brownsville [Golden Age Nursing Home, Inc. v. Wells], 839 F.2d [155,] 160 [(3d Cir. 1988)].

[Baglini, supra, 338 N.J. Super. at 302, certif. denied and appeal dismissed, 169 N.J. 607-08 (2001).]

See also Village Supermarket v. Mayfair, 269 N.J. Super. 224, 229-30 (Law Div. 1993).

Under the Noerr-Pennington doctrine, participation in judicial and administrative proceedings is protected unless it is "objectively baseless," thereby falling within the "sham" exception to the doctrine. See Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 113 S. Ct. 1920, 1928, 123 L. Ed. 2d 611, 624 (1993). To constitute a "sham," "the lawsuit must be objectively baseless in the sense that no reasonable litigant . . . could conclude that the suit is reasonably calculated to elicit a favorable outcome." Id. at 60, 113 S. Ct. at 1928, 123 L. Ed. 2d at 624. Our examination of Price's underlying challenge to the grant of variances in this case, as well as the motion judge's decision in that matter, satisfies us that Price's challenge was not a sham, but was instead properly founded and appropriately supported.

We find no relevance to the fact that Price has brought other challenges to other Board decisions involving other developers of other properties. Price's position that population density in Union City should not be increased in violation of City zoning ordinances is not an unreasonable one, and he is entitled to pursue it by the legal means that he has chosen. That this particular challenge was unsuccessful is likewise irrelevant to our conclusion that Price's conduct was immunized. Success on the merits of the underlying action has never been a requirement for Noerr-Pennington immunity. Structure Bldg. Corp. v. Abella, 377 N.J. Super. 467, 471-72 (App. Div. 2005) (establishing principle in context of three prerogative writ actions brought to unsuccessfully challenge development); Fraser, supra, 317 N.J. Super. at 39.

Further, we find it irrelevant that Price does not reside in close proximity to the subject property a consideration upon which the motion judge relied. Statutes conferring standing to challenge land use applications have no such proximity requirement. See N.J.S.A. 40:55D-4 and -18. Moreover, in our decisions we have not required that proximity be demonstrated, but have merely noted proximity when it was present as part of the factual complex giving rise to the litigation. See Structure Bldg., supra, 377 N.J. Super. at 469 (noting objectors complained of subdivision of "neighboring property") and at 472 (recognizing that Noerr-Pennington gave protection to "residents and to persons who wish to object to the actions of developers.").

Turning to Maximus's suit against Marotta, we note that, in addition to the protections afforded by Noerr-Pennington, he is protected by the absolute litigation privilege, which applies to "any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Hawkins v. Harris, 141 N.J. 207, 216 (1995) (quoting Silberg v. Anderson, 786 P.2d 365, 369 (Cal. 1990)); see also Loigman v. Tp. Comm. of Middletown, 185 N.J. 566, 583-84 (2006) (holding that "the litigation privilege protects attorneys not only from defamation actions, but also from a host of other tort-related claims" including actions for tortious interference). Although the privilege does not protect against professional discipline for an attorney's unethical conduct or protect a witness or party from a perjury prosecution, Hawkins, supra, 141 N.J. at 215, neither of these narrow exceptions to the privilege is applicable here. Instead, Marotta's actions in connection with his representation of Price fit squarely within the conditions articulated by the Hawkins opinion for application of the privilege.

Turning from the immunities available to defendants Price and Marotta to the underlying merits of Maximus's suit against them, we likewise find no grounds for action, and instead, a frivolous pleading. We have previously noted that the motion judge correctly concluded that there was no legal or factual basis for the First Count of Maximus's complaint, alleging malicious prosecution/abuse of process. With respect to the Second Count, we find no evidence that defendants' interference with the rights of Maximus was "malicious," as that term has been defined in this context to mean "the harm was inflicted intentionally and without justification or excuse." Printing Mart-Morristown v. Sharp Electronics, 116 N.J. 739, 751 (1989) (citing Rainier's Dairies v. Raritan Valley Farms, Inc., 19 N.J. 552, 563 (1955)). In this regard, we cannot discern how Price's challenge to the actions of Union City's Board of Adjustment, which we have found to be legitimate and constitutionally protected under Noerr-Pennington, can ever be deemed malicious, because to permit that characterization would wholly undermine the significant immunities that the Noerr-Pennington doctrine provides.

In sum, we find that both Price and Marotta have established their right to obtain attorney's fees from Maximus as the result of its frivolous litigation. We acknowledge in this regard that Marotta agreed to a stipulation of dismissal with prejudice and "without costs." We do not understand that agreement to have encompassed attorneys fees, particularly in light of the concession by counsel for Maximus that the subject never arose, and thus was not part of the bargain between the parties. See also N.J.S.A. 22A:2-9 (defining allowable costs).

We also recognize Maximus's argument that Price's counsel unnecessarily prolonged the action by refusing to agree to the dismissal as framed by Maximus. However, we disagree with that position, determining that, in light of Price's proper assertion that the Maximus litigation was frivolous, Price was entitled to preserve his right to the reimbursement of his attorney's fees.

 
Reversed and remanded for further proceedings in light of this opinion. Jurisdiction is not retained.

Strategic Lawsuits Against Public Participation.

Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 135-38, 81 S. Ct. 523, 528-30, 5 L. Ed. 2d 464, 470-71 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 669-70, 85 S. Ct. 1585, 1593, 14 L. Ed. 2d 626, 636 (1965).

This legal conclusion was most recently expressed by the Supreme Court in LoBiondo v. Schwartz, 199 N.J. 62, 105 (2009).

(continued)

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August 13, 2009