JANET ROWAN v. HARTFORD PLAZA LTD

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0107-11T3

JANET ROWAN, KATHLEEN LOWNES,

NANCY HEIDLER,

Plaintiffs-Appellants/

Cross-Respondents,

v.

HARTFORD PLAZA LTD, LP; LAND &

GROUND REALTY, LLC; PINE EDGE

ASSOCIATES, LLC; LINE LIV, LLC;

LINE LIV, LP; JOSEPH SAMOST,

individually and as the corporate

alter ego of HARTFORD PLAZA LTD,

LP; LAND & GROUND REALTY, LLC;

PINE EDGE ASSOCIATES, LLC; LINE LIV,

LLC; LINE LIV, LP;

Defendants-Respondents,

and

IVA SAMOST, individually and as

the corporate alter ego of HARTFORD

PLAZA LTD, LP; LAND & GROUND

REALTY, LLC; PINE EDGE ASSOCIATES,

LLC; LINE LIV, LLC; LINE LIV, LP;

Defendant-Respondent/

Cross-Appellant.

 

____________________________________

April 5, 2013

 

Argued December 4, 2012 - Decided

 

Before Judges Alvarez, Waugh, and St. John.

 

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3106-09.

 

Deborah L. Mains argued the cause for appellants/cross-respondents (Costello & Mains, P.C., attorneys; Kevin M. Costello, of counsel; Nancy A. Valentino, on the briefs).

 

Steven E. Angstreich argued the cause for respondents (Weir & Partners LLP, attorneys; Mr. Angstreich and Lauren N. Schwimmer, on the brief).

 

Gary P. Lightman argued the cause for respondent/cross-appellant (Lightman & Manochi, attorneys; Mr. Lightman and Glenn A. Manochi, on the brief).

 

PER CURIAM

Plaintiffs Janet Rowan, Kathleen Lownes, and Nancy Heidler appeal the Law Division's orders granting summary judgment and dismissing their claims against individual defendants Joseph Samost and Iva Samost, as well as corporate defendants Hartford Plaza, Ltd., L.P. (Hartford), Land & Ground Realty, L.L.C. (Land & Ground), Pine Edge Associates, L.L.C. (Pine Edge), Line Liv, L.L.C. (Liv L.L.C.), and Line Liv, L.P. (Liv L.P.). They also appeal the denial of their motions for reconsideration and to amend the complaint. Iva1 cross-appeals the order denying her motion for counsel fees. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

We discern the following facts and procedural history from the record on appeal.

Plaintiffs worked on a part-time basis for one or more of the corporate defendants, which are owned by one or both of the individual defendants. For about two years and eight months, Rowan worked three nights a week for Land & Ground, Hartford, Pine Edge, and Liv L.P., for approximately three and a half hours a night. For about seven months, Lownes worked three nights per week for Land & Ground and Hartford, for approximately three hours a night. For about one year and four months to two years and four months, Heidler worked for Land & Ground and Pine Edge on Saturday mornings and three week nights, for between three and five hours a week.

Plaintiffs began working for the corporate defendants after responding to newspaper advertisements. According to Heidler, the position she took was advertised as a part-time opening for a "[s]ecretary, office duties, filing."

According to Joseph's deposition testimony, he gave Lownes "work which handled a lot of different companies," including "Pine Edge or Hartford or Land [&] Ground." Joseph testified that Rowan worked for "the three companies [Hartford, Pine Edge and Land & Ground] that are in charge of all the books." Heidler primarily worked for Land & Ground, and also did work for Pine Edge and possibly Hartford.

In June 2009, plaintiffs filed a complaint against the individual and corporate defendants, alleging that Joseph subjected them to sexual harassment, entitling them to damages under the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49. They alleged that Joseph engaged in a course of conduct that created a hostile workplace. In their joint answer,2 defendants admitted that each plaintiff "was employed by" one or more of the corporate defendants.

Following discovery, Iva moved for summary judgment, as did the remaining defendants. After hearing argument on June 24, 2011, the motion judge granted Iva's motion, entering an order of dismissal as to her. He also granted Joseph's motion with respect to plaintiffs' claim based on intentional infliction of emotional distress, as well as their claim that he was directly liable for the acts of the corporations he controlled.

The judge reserved decision on the LAD claims. After noting that the LAD was not applicable to independent contractors, the judge requested counsel to address further the issue of whether plaintiffs were employees or independent contractors.

Both sides submitted additional briefs. On July 22, the judge granted summary judgment to Joseph and the corporate defendants. The implementing order was apparently entered that day, although it is dated June 24. Due to a problem with the court's recording equipment, there is no record of the judge's oral opinion.

On July 11, Iva filed a motion seeking attorney's fees and costs, alleging that plaintiffs' complaint was frivolous within the meaning of Rule 1:4-8. That motion was denied on August 5.

On August 17, plaintiffs filed a motion for reconsideration. They also sought leave to file an amended complaint to include a claim under N.J.S.A. 10:5-12(l), the LAD provision governing discrimination in contracting. Both motions were denied on September 2. This appeal followed.

II.

Plaintiffs' primary contention on appeal is that the judge erred in determining, as a matter of law, that they were independent contractors rather than employees. They also argue that, assuming they were independent contractors, they should have been permitted to pursue a claim under N.J.S.A. 10:5-12(l). Finally, they challenge the judge's determination that there was no basis to pierce the corporate veil to pursue direct claims against Joseph and Iva. In her cross-appeal, Iva contends that the judge abused his discretion in denying her motion for frivolous-litigation fees and expenses.

A.

We start our analysis with the issue of whether plaintiffs were employees or independent contractors.

Because we are reviewing a grant of summary judgment, our review is de novo, applying the same standard governing the trial judge under Rule 4:46-2(c).3 Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-40 (1995); Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009) (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). In addressing a motion for summary judgment, a judge must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill, supra, 142 N.J. at 540; see also R. 4:46-2(c).

The LAD provides that "[a]ll persons shall have the opportunity to obtain employment . . . without discrimination because of race, creed, color, national origin, ancestry, age, marital status, affectional or sexual orientation, familial status, disability, nationality, [or] sex . . . subject only to conditions and limitations applicable alike to all persons." N.J.S.A. 10:5-4.

N.J.S.A. 10:5-12(a) makes it an unlawful discrimination

 
[f]or an employer, because of the . . . sex . . . of any individual . . . to refuse to hire or employ or to bar or to discharge . . . from employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment[.]

 

[(Emphasis added).]

Although the LAD does not explicitly include sexual harassment as a form of discrimination, "there is no doubt that the LAD proscribes sexual harassment in the workplace, because it creates a hostile or abusive working environment for the affected person." Pukowsky v. Caruso, 312 N.J. Super. 171, 177 (App. Div. 1998) (citing Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587, 600-01 (1993)).

The term "employee" is not defined in the LAD, other than to exclude "any individual employed in the domestic service of any person." N.J.S.A. 10:5-5(f). However, we have interpreted the term "employee" to exclude a bona fide independent contractor. Pukowsky, supra, 312 N.J. Super. at 180.

To assist in evaluating a worker's status as an employee or an independent contractor, the Pukowsky court adopted the twelve-point test, id. at 182-83, enumerated in Franz v. Raymond Eisenhardt & Sons, Inc., 732 F. Supp. 521, 528 (D.N.J. 1990) and EEOC v. Zippo Mfg. Co., 713 F.2d 32, 37 (3d Cir. 1983). Under that test, the following points must be evaluated:

(1) the employer's right to control the means and manner of the worker's performance; (2) the kind of occupation--supervised or unsupervised; (3) skill; (4) who furnishes the equipment and workplace; (5) the length of time in which the individual has worked; (6) the method of payment; (7) the manner of termination of the work relationship; (8) whether there is annual leave; (9) whether the work is an integral part of the business of the "employer;" (10) whether the worker accrues retirement benefits; (11) whether the "employer" pays social security taxes; and (12) the intention of the parties.

 
[D'Annunzio v. Prudential Ins. Co. of Am., 192 N.J. 110, 123 (2007) (quoting Pukowsky, supra, 312 N.J. Super. at 182-83).]

 

"[T]he Pukowsky test requires more than the listing of factors on either side of the ledger with victory going to the side garnering the most factors." Chrisanthis v. Cnty. of Atl., 361 N.J. Super. 448, 456 (App. Div.), certif. denied, 178 N.J. 31 (2003). The most important of the twelve Pukowsky factors "is the first, the employer's right to control the means and manner of the worker's performance." Id. at 455 (quoting Franz, supra, 732 F. Supp. at 528) (internal quotation mark omitted). However, the importance of each factor varies depending on the particular circumstances of each case. See id. at 456. Therefore, "[a] 'principled application' of the factors and a consideration of which factors are more important under the peculiar circumstances of each case are required." Ibid.

The corporate defendants contend that factors six (method of payment), eight (annual leave benefits), ten (whether retirement benefits accrue), and eleven (whether the "employer" pays social security taxes) compel a determination that plaintiffs were independent contractors. They argue that each of the plaintiffs expected to receive a 1099 form at the end of the year, a tax form traditionally provided to independent contractors, and that none of the plaintiffs received any retirement benefits, paid vacation, or sick time. In addition, the corporate defendants did not pay social security taxes on behalf of the plaintiffs.

Plaintiffs contend that factors one (employer's ability to control the worker's performance), two (the type of job), three (the level of skill involved in the job), four (the party providing the equipment and workplace), five (the length of employment), six (the method of payment), seven (how the work relationship was terminated), and nine (the integral nature of the work to the business) support a finding that plaintiffs were, in fact, employees and not independent contractors.

Plaintiffs argue that, because part-time employees are frequently ineligible for paid-leave or retirement benefits, those factors should not be weighed in favor of the corporate defendants. Although it is undisputed that plaintiffs did not receive paid-leave or retirement benefits, the record is silent as to whether other persons working for the corporate defendants, who were considered part-time employees, were eligible for those benefits. Consequently, factors eight and ten are indeterminative.

With respect to the nature of her duties, Rowan testified that Joseph told her during her initial interview that "sometimes he hires women to work in the evening" to file documents and that he could "use [her] for that." She further testified that she did "filing for . . . [Joseph's] legal actions," about "[ninety-nine] percent of the time" she was working for the corporate defendants.

Lownes testified that she was hired to "file in the legal department." Lownes said that Rowan's job also consisted of "call[ing] people sometimes," and that all three would receive various instructions from Joseph. She stated that he constantly "would scream at us to go get something for him," often yelling from one end of the office to the other, "Kathleen, get me something."

According to Heidler, Joseph initially described the position as "filing and helping out with other people in the office," in addition to working in the section that dealt with land acquisition and development. She testified that she was "doing filing, sorting of papers, hundreds and hundreds of papers, and filing," during the time she worked for the corporate defendants. There were

many boxes of just papers thrown in and . . . plastic bags thrown in, and I had to sort them by, first, the different land that he owned and the different properties that he owned, that way, and then you actually had to go into real filing, into the file cabinet, into vendors, legal, some of the legal things. And these were old, old documents[.]

 

Heidler further testified that she also performed other tasks requested by Joseph, such as faxing, making copies, or helping a co-worker. Occasionally Rowan requested Heidler's help, but normally sought Joseph's permission before doing so. She also made calls to solicit new employees because "[i]t was part of my job. [Joseph] told me I had to make those calls." She did not know what would happen if she refused but said that "[y]ou did what [Joseph] asked."

Although the parties differ to some extent in their descriptions of plaintiffs' duties, the duties are essentially those performed by office or clerical workers, charged with performing relatively menial tasks necessary to support a successful business, such as filing, faxing, copying, and making phone calls. The lack of skill involved in those activities (factor three) and plaintiffs' overall supervision by Joseph (factors one and two) are indicative of employee rather than independent-contractor status.

The fact that plaintiffs were permitted to work at home is not inconsistent with employee status or particularly indicative of independent-contractor status. Many corporations and governmental entities permit employees to work from home.

According to Heidler and Lownes, they were not terminated based on completion of a specified job. Rather, Heidler stated Joseph told her "not to come in" because "they were restructuring the office." Lownes stated she was told "not to come in" and that Joseph or his assistant would "call [her] to come back" when they wanted her to return; but they did not subsequently contact her. The record does not conclusively support a finding that plaintiffs' positions were temporary or project based, conditions which might suggest plaintiffs were independent contractors. See Chrisanthis, supra, 361 N.J. Super. at 459 (relying on the expiration of a county contract as one factor supporting a finding that the plaintiff was an independent contractor with the county, and not a county employee). Therefore, factors five (the length of time the individual has worked) and seven (the manner of termination of the relationship) are at best indeterminate, rather than indicative of independent-contractor status.

Factors six, the method of payment, and eleven, whether the "employer" paid social security taxes, are also indeterminate. Each plaintiff was paid on an hourly basis, receiving a check after submitting the number of hours worked to Joseph. No taxes were withheld and the corporate defendants did not file W-2 forms. However, none of the plaintiffs received a 1099 form. In fact, none of the plaintiffs included income from the corporate defendants on her tax returns.

Rowan testified that she requested a W-2 form from Joseph, but was told "[n]ot to worry about it." Heidler testified that, when she requested a 1099 form, Joseph responded "[i]t's not of your concern." She pressed him and was told not to worry. Lownes stated she never asked if she needed to complete a W-4 form and could not recall whether she gave Joseph her social security number. While she expected to receive a 1099 form and not a W-2 at the end of the year, she received neither.

Joseph testified that he did not withhold state or federal taxes, including social security, from plaintiffs' paychecks because "[t]hey were 1099 employees," meaning that "[t]hey were self-employed people." However, as noted, the record reflects that the corporate defendants did not, in fact, file any 1099 forms concerning plaintiffs. Consequently, we find these factors to be indeterminate. On the current record, the method of payment could be seen as reflecting nothing more than that the corporate defendants employed plaintiffs "off the books."

We view factor nine, whether the work is an integral part of the business of the "employer," as favoring a finding that plaintiffs were employees. Although filing was certainly not the central purpose of corporate defendants' business, the tasks performed by plaintiffs are an integral aspect of any business operation.

Finally, we cannot conclusively determine factor twelve, the "intention of the parties," on the current record. To a large extent, the testimony of the parties on the issue is self-serving. Nevertheless, we note that, when discussing Rowan, Joseph referred to her as a "legal secretary" and referred to himself as "the boss." Each plaintiff obtained the position after answering an advertisement for a secretarial position. In addition, the answer filed by defendants admitted that each plaintiff was "employed by" one or more of the corporate defendants.

Consequently, we conclude that the motion judge incorrectly determined that there were no genuine issues of material fact with respect to whether plaintiffs were employees of one or more of the defendant corporations. That issue will have to be presented to and decided by the jury. See Model Jury Charge (Civil), 5.10I, "Agency" (2011).

B.

We next address plaintiffs' claims that the individual defendants were personally liable because they engaged in or condoned the discriminatory conduct.

N.J.S.A. 10:5-12 specifies that it is

an unlawful employment practice, or, as the case may be, an unlawful discrimination: . . . (e) For any person, whether an employer or an employee or not, to aid, abet, incite, compel or coerce the doing of any of the acts forbidden under this act, or to attempt to do so.

 

Our Supreme Court has held that "individual liability of a supervisor for acts of discrimination or for creating or maintaining a hostile environment can only arise through the 'aiding and abetting' mechanism that applies to 'any person'" under N.J.S.A. 10:5-12(e). Cicchetti v. Morris Cnty. Sheriff's Office, 194 N.J. 563, 594 (2008). Nevertheless, the Court has stressed the significance of supervisory positions,

recogniz[ing] that "[a] supervisor has a unique role in shaping the work environment. Part of a supervisor's responsibilities is the duty to prevent, avoid, and rectify invidious harassment in the workplace." "An employer [through its supervisors] has a clear duty not only to take strong and aggressive measures to prevent invidious harassment, but also to correct and remediate promptly such conduct when it occurs."

 

[Id. at 592 (alterations in original) (quoting Taylor v. Metzger, 152 N.J. 490, 503-04 (1998)).]

 

The "aiding and abetting" analysis under N.J.S.A. 10:5-12(e) requires a finding of "active and purposeful conduct." Tarr v. Ciasulli, 181 N.J. 70, 83 (2004). To support this finding, a plaintiff must demonstrate that

(1) the party whom the defendant aids . . . perform[ed] a wrongful act that cause[d] an injury; (2) the defendant must be generally aware of his role as part of an overall illegal or tortious activity at the time that he provides the assistance; [and] (3) the defendant must knowingly and substantially assist the principal violation.

 

[Id. at 84 (internal quotation marks omitted) (quoting Hurley v. Atl. City Police Dep't, 174 F.3d 95, 127 (3d Cir. 1999), cert. denied, 528 U.S. 1074, 120 S. Ct. 786, 145 L. Ed. 2d 663 (2000)).

 

Five factors must be considered to evaluate whether a defendant "knowingly and substantially assist[ed] the principal violation." Ibid. "Those factors are: (1) the nature of the act encouraged, (2) the amount of assistance given by the supervisor, (3) whether the supervisor was present at the time of the asserted harassment, (4) the supervisor's relations to the others, and (5) the state of mind of the supervisor." Ibid. (citing Restatement (Second) of Torts 876(b) comment d (1979); Hurley, supra, 174 F.3d at 127 n.27).

This aiding and abetting analysis can lead to a "somewhat awkward theory of liability," because it appears to permit a supervisor to be held liable for "aiding and abetting" another individual, while letting a supervisor escape liability when the supervisor is the sole harasser. Hurley, supra, 174 F.3d at 126. In Hurley, the Third Circuit acknowledged that "we have not fully elucidated the principles that might allow a harassing supervisor to be individually liable for aiding and abetting . . . when the challenged conduct is failing to stop the supervisor's own harassment." Ibid.

The Third Circuit, therefore, found that a "supervisor, under New Jersey law, has a duty to act against harassment. This duty can be violated by deliberate indifference or affirmatively harassing acts. When a supervisor flouts this duty, he subjects himself and his employer to liability." Ibid. (citation omitted). Therefore, under Hurley and Cicchetti, a supervisor can be individually liable for his or her own affirmative LAD violations. Ivan v. Cnty. of Middlesex, 612 F. Supp. 2d 546, 552-53 (D.N.J. 2009). In Ivan, the judge noted that "the Cicchetti court cited Hurley for the aiding and abetting standard without expressly rejecting th[e] theory" of imposing individual liability for a supervisor's own LAD violations and therefore, Cicchetti "demonstrates that this theory of liability remains." Ivan, supra, 612 F. Supp 2d at 553 n.1.

The LAD is "broad and pervasive," Melick v. Twp. of Oxford, 294 N.J. Super. 386, 398 (App. Div. 1996), and should be "liberally construed in combination with other protections available under the laws of this State," N.J.S.A. 10:5-3. By enacting the LAD, the Legislature intended to "eradicate[e] . . . the cancer of discrimination" in the workplace. Lehmann, supra, 132 N.J. at 600 (internal quotation marks omitted) (quoting Fuchilla v. Layman, 109 N.J. 319, 334, cert. denied, 488 U.S. 826, 109 S. Ct. 75, 102 L. Ed. 2d 51 (1988)).

Based on the "broad and pervasive" reach of the LAD, and the requirement that it be "liberally construed" to effectuate its purpose, any suggestion that N.J.S.A. 10:5-12(e) permits individual liability for a supervisor who encourages or facilitates another employee's harassing conduct, while precluding individual liability for the supervisor based on his or her own discriminatory or harassing conduct, appears to us to be untenable.

It has been recognized that the use of discriminatory or harassing statements by supervisors "impacts the work environment far more severely than use by co-equals." Taylor, supra, 152 N.J. at 504 (internal quotation mark omitted) (quoting Rodgers v. Western-Southern Life Ins. Co., 12 F.3d 668, 675 (7th Cir. 1993)). In addition, "a single incident of sexual harassment by the highest-ranking employee of the company could reasonably be found 'sufficiently severe to alter the conditions of employment and to create an abusive or hostile work environment.'" Ibid. (quoting Nadeau v. Rainbow Rugs, Inc., 675 A.2d 973, 974 (Me. 1996)). Consequently, we conclude that Joseph cannot escape individual liability for his own allegedly egregious conduct based on a narrow construction of the "aiding and abetting" provision of the statute. We reverse the dismissal of the claims seeking to establish personal liability as to Joseph.

In contrast, the evidence concerning Iva's knowledge and awareness of Joseph's conduct is insufficient to warrant reversal of the dismissal of the claims against her.4 Heidler testified that she did not know definitively if Iva knew about Joseph's behavior but believed that she did because "I . . . understood that she worked in the office a lot, prior to my coming with the company." Rowan claimed Iva knew of Joseph's behavior because she overheard him tell Rowan, "[F]at ass, shut up" while Rowan spoke with Iva on a speaker phone. She knew Iva heard Joseph because Iva yelled back, "[D]o not talk to her that way." Neither Iva's response to the comment Joseph allegedly made to Rowan nor her purported presence in the office before Heidler worked there can be characterized as aiding and abetting. Consequently, we affirm the dismissal of the individual claims against Iva.

C.

Plaintiffs also argue that the judge erred in precluding their effort to pierce the corporate veil to hold the individual defendants directly liable for the alleged hostile work environment. Because we have held that Joseph is, at least potentially, directly liable under N.J.S.A. 10:5-12(e), we consider the issue moot as to him.

It is well-established that courts may pierce the "corporate veil" in order to "prevent an independent corporation from being used to defeat the ends of justice, to perpetrate a fraud, to accomplish a crime, or otherwise to evade the law." Tung v. Briant Park Homes, Inc., 287 N.J. Super. 232, 239 (App. Div. 1996) (citing N.J. Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983)). The party seeking to pierce the corporate veil "bears the burden of proving that the court should disregard the corporate entity." Id. at 240 (citing Touch of Class Leasing v. Mercedes-Benz Credit of Can., Inc., 248 N.J. Super. 426, 441 (App. Div.), certif. denied, 126 N.J. 390 (1991)).

Here, plaintiffs' only allegations connecting Iva to the purported misuse of the corporate entities are that she was involved in the various corporations and knew of Joseph's behavior. Rowan testified that "we faxed [Iva] documents at home in regards to different entities and different lawsuits," and "her name [was] on [the corporate entities] as general manager[]." However, Rowan could not identify anything Iva did to "create[] confusing, intermingling of corporate activity" or if she "did anything in the context of creating these corporate entities."

Lownes testified that she never met or saw Iva, but that she regularly put calls from Iva through to Joseph, and that after these calls, Joseph would tell her to fax documents to Iva. Heidler also believed that Iva frequently reviewed the corporate operations because Joseph "had me fax her many documents," and Iva would call to let her know if a fax did not go through.

We agree with the motion judge that plaintiffs failed to establish a prima facie case as to Iva. Their allegations against Iva do not point to specific instances of "fraud, injustice, or the like" that would justify piercing the corporate veil. Ventron, supra, 94 N.J. at 500. Consequently, we affirm the dismissal of those claims.

However, our affirmance is without prejudice to plaintiffs' right to argue that they should be able to pierce the corporate veil as to Joseph or Iva in the event they obtain a judgment against one or more of the corporate defendants that proves to be uncollectible. The considerations applicable to piercing the corporate veil for that purpose are different, inasmuch as the issue at that juncture is whether there was an abuse of the corporate form to shield funds rather than to perpetrate wrongful conduct. In an appropriate case, the doctrine may be applied to hold an individual liable for an otherwise-uncollectible judgment against a corporation. Karo Mktg. Corp. v. Playdrome Am., 331 N.J. Super. 430, 442-443 (App. Div.), certif. denied, 165 N.J. 603 (2000). Such a determination would be premature at this point.

D.

Plaintiffs sought to amend their complaint to plead an additional cause of action against defendants in the event they were found to be independent contractors rather than employees. The motion judge denied their motion, finding that the proposed claim did not state a cause of action.

Rule 4:9-1 provides that, once a responsive pleading is served, a complaint may be amended "only by written consent of the adverse party or by leave of court which shall be freely given in the interest of justice." Generally, a decision on a motion to amend is "left to the sound discretion of the trial court, and its exercise of discretion will not be disturbed on appeal, unless it constitutes a 'clear abuse of discretion.'" Franklin Med. Assocs. v. Newark Pub. Sch., 362 N.J. Super. 494, 506 (App. Div. 2003) (citation omitted) (citing Salitan v. Magnus, 28 N.J. 20, 26 (1958)). Leave to amend is to be liberally granted. Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006). Nevertheless, the motion judge must engage in a two-step evaluation, weighing "whether the non-moving party will be prejudiced, and whether granting the amendment would nonetheless be futile." Ibid. Where "the amendment is so meritless that a motion to dismiss . . . would have to be granted," a judge may deny the motion to amend under "the so-called futility prong of the analysis." Pressler & Verniero, Current N.J. Court Rules, comment 2.2.1 on R. 4:9-1 (2013).

We agree with the motion judge that the proposed cause of action as pled by plaintiffs would not provide a basis for liability for harassment endured by plaintiffs, if they were independent contractors. N.J.S.A. 10:5-12(l) does not apply to discrimination during the ongoing execution of a contract. However, N.J.S.A. 10:5-12(l) prohibits refusal to contract with a person on the basis of a number of protected classifications, including sex. We have interpreted that statutory language as prohibiting refusal to contract or to continue contracting with an independent contractor on the basis of quid-pro-quo sexual harassment. J.T.'s Tire Serv., Inc. v. United Rentals N. Am., Inc., 411 N.J. Super. 236, 240-42 (App. Div.), certif. denied, 201 N.J. 441 (2010). We see no reason why the same principle would not apply to refusals to continue contracting with a contractor who has made allegations of a hostile work environment under appropriate factual circumstances.

It is not clear from the record, however, that plaintiffs contend or can allege facts that support a contention that they were terminated because of complaints they made about Joseph's alleged sexual harassment. They did not specifically allege retaliatory discharge. Nevertheless, termination of their independent-contractor relationship could, if based on a discriminatory purpose, be considered a refusal to continue to contract under N.J.S.A. 10:5-12(l) or a reprisal under N.J.S.A. 10:5-12(d).

On remand, plaintiffs may again seek to amend their complaint along those lines, but only if they can make the required factual allegations in accordance with the requirements of Rule 1:4-8.

III.

In her cross-appeal, Iva argues that the motion judge erred in denying her application for counsel fees pursuant to Rule 1:4-8.

Rule 1:4-8 . . . is designed to ensure that attorneys do not initiate or pursue litigation that is frivolous. The [r]ule, which is comprehensive, . . . . imposes an obligation on the attorney or party pro se to certify, based on a reasonable inquiry, that the pleading "is not being presented for any improper purpose," that the assertions "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," and that there is "evidentiary support" for the allegations being made. R. 1:4-8(a)(1), (2), (3). Second, the [r]ule imposes a continuing duty on the attorney or party pro se who filed the pleading to correct or withdraw the allegations or the denials contained therein based upon further investigation and discovery. R. 1:4-8(a)(3), (4). Third, it creates an enforcement mechanism by which a party who believes that a pleading or filing violates the [r]ule may so advise the adversary, giving the adversary the opportunity to withdraw the pleading without penalty, failing which, that party may seek or the court may impose a variety of sanctions. R. 1:4-8(b)(1).

 
[LoBiondo v. Schwartz, 199 N.J. 62, 98 (2009).]

 

The sanctions permitted by Rule 1:4-8 will not be imposed against an attorney who mistakenly filed a complaint in good faith. See First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App. Div. 2007) ("Where a party has reasonable and good faith belief in the merit of the cause, attorney's fees will not be awarded.").

A trial court's determination granting or denying fees and costs for frivolous litigation is reviewed for abuse of discretion. Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 407 (App. Div.), certif. denied, 200 N.J. 502 (2009).

Although we have upheld the dismissal of the substantive claims against Iva, we see no abuse of discretion in the motion judge's determination not to award fees.

IV.

In summary, we reverse the dismissal of the LAD claims against the corporate defendants, having determined that the jury must decide whether plaintiffs are employees or independent contractors. We also reverse the dismissal of the sexual-harassment based hostile-workplace claim against Joseph, having determined that plaintiffs have stated a viable claim pursuant to N.J.S.A. 10:5-12(e) for aiding and abetting.

We reverse the denial of plaintiffs' motion to file an amended pleading, but only in part. The trial judge correctly determined that plaintiffs, if they are independent contractors, have no claim under N.J.S.A. 10:5-12(l) for the alleged hostile work environment. However, if they were terminated because they complained about the hostile work environment, they have a potential claim against the corporate defendants and Joseph under N.J.S.A. 10:5-12(l) and -12(d). Whether they can make such factual allegations is not clear from the record.

We affirm the dismissal of the claims seeking to pierce the corporate veil to allow a direct claim against Joseph and Iva, but without prejudice to plaintiffs' ability to raise the theory again if they obtain a judgment against one or more of the corporate defendants that proves to be uncollectible.

Finally, we affirm the dismissal of all other substantive claims against Iva, as well as the denial of her motions for counsel fees under Rule 1:4-8.

We remand for further proceedings consistent with this opinion. We do not retain jurisdiction.

Affirmed in part, reversed in part, and remanded.

1 Because the two individual defendants, who are husband and wife, share the same last name, we refer to them by their first names for the sake of convenience.

2 Iva subsequently retained separate counsel.

3 Because our review is de novo, we have not sought a reconstruction of the motion judge's untranscribed oral decision.

4 Rule 2:5-1(f)(3)(A) requires the notice of appeal to "designate the judgment, decision, action or rule, or part thereof appealed from." Although we note that the June 24, 2011 order was not listed in the notice of appeal, it was referred to in the contemporaneously filed case information statement. For that reason, we reach the merits.