TRIPLE S. PRODUCTION INC v. HIT WEAR, INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NOS. A-0887-11T1

A-0981-11T1

TRIPLE S. PRODUCTION, INC.

a/k/a BARE FOX,

Plaintiff-Appellant,

v.

HIT WEAR, INC., JEONG H. KIM,

HYE OK LEE, CLOSET FASHION,

INC., SEONG OK SPRING, SEONG

PIL LEE and BYUN SUN LEE,

Defendants-Respondents.

_______________________________

TRIPLE S. PRODUCTION, INC.

a/k/a BARE FOX,

Plaintiff-Respondent,

v.

HIT WEAR, INC., JEONG H. KIM,

HYE OK LEE, CLOSET FASHION,

INC., SEONG OK SPRING, SEONG

PIL LEE and BYUN SUN LEE,

Defendants-Appellants.

_______________________________

February 28, 2013

Argued November 15, 2012 - Decided

Before Judges Grall, Simonelli and Koblitz.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5052-09.

Robert H. Yu argued the cause for appellant (A-0887-11)/respondent (A-0981-11) Triple S. Production, Inc.

Michael K. Chong argued the cause for respondents (A-0887-11)/appellants (A-0981-11) Hit Wear, Inc., Jeong H. Kim, Hye Ok Lee, Closet Fashion, Inc., Seong Ok Spring, Seong Pil Lee and Byun Sun Lee.

PER CURIAM

Both sides appeal1 in this book account case that was tried to conclusion, resulting in a verdict for plaintiff Triple S. Production, Inc. (Triple S.), an apparel manufacturer, of $4,363.83 against Hit Wear, Inc. (Hit Wear) and $26,284.06 against Closet Fashion, Inc. (Closet Fashion). Triple S. sued Hit Wear and Closet Fashion, as well as various employees of the corporate entities, although no personal guarantees had been made by the employees. In its complaint against the corporate and individual defendants, Triple S. asserted claims for breach of contract, unjust enrichment, fraud, and fraudulent transfers, and alleged that the individual employees were surreptitiously converting the corporate defendants' assets for their own personal gain. The same attorney represented other corporate plaintiffs in three related actions making the same claims and involving the same or related entities and employees.2

Orders were placed between plaintiff and Hit Wear from November 9, 2007 to April 28, 2008. From September 4, 2007 to April 28, 2008, orders were placed between plaintiff and Closet Fashion.

During discovery, the first among many issues in this contentious litigation arose. Plaintiff alleges that when it served document requests upon corporate and individual defendants, defendants refused to comply. The motion judge, upon application, issued a discovery order compelling defendants to produce a broad array of documents "[f]or the fiscal years ended June 30, 2006 through to the present[,]" including tax returns, bank statements, and corporate records.

Plaintiff asserts that defendants did not comply with the discovery order and participated in discovery abuses. Plaintiff claims it received only a small fraction of documents responsive to the discovery order from the corporate defendants and none from the individual defendants. Accordingly, plaintiff asserts that its motion to dismiss defendants' defenses with prejudice should have been granted.

By contrast, defendants assert that they were responsive to the discovery order, as they supplied "over 1177 documents." Defendants assert that they could not provide all requested documents because certain documents were destroyed by a former employee known as "Nina Chang"3 who allegedly stole thousands of dollars from the corporate defendants, as well as stole or destroyed a significant number of defendants' financial documents. Defendants also assert that the individual defendants should not have had to turn over personal financial documents because no personal guarantees were made on any of the corporate obligations.

The motion judge denied plaintiff's request to dismiss defendants' defenses with prejudice, determining that "[s]ubstantial compliance [was] shown by [defendants] in [response to] [d]iscovery [r]equests."

At trial, Chang was scheduled to testify, but her criminal attorney indicated that she would not appear. The trial judge did not permit plaintiff to present evidence to the jury concerning defendants' lack of cooperation with discovery to support the argument that a negative inference should arise. The trial testimony centered on the alleged debts that were owed and the operations of the corporate defendants. Prior to submitting the case to the jury, the trial judge dismissed all counts against the individual defendants and dismissed the fraud and unjust enrichment counts against all defendants, leaving only the collection case.

After the verdict, the trial judge denied defendants' motion for counsel fees for frivolous litigation pursuant to Rule 1:4-8, indicating that because defendants made no offer to pay the debts owed, the litigation was not frivolous even if the counts alleging fraud and unjust enrichment, as well as the counts against the individual defendants, did not have a sound basis.

On appeal, plaintiff argues that the motion and trial judges erred in denying plaintiff relief due to discovery violations and that the trial judge erred in not allowing plaintiff's counsel to argue in his opening statement that defendants made fraudulent transfers. These arguments are without sufficient merit to require a written opinion. R.2:11-3(e)(1)(E). We note only that a trial court's determinations regarding discovery are reviewed for an abuse of discretion. Pressler & Verniero, Current N.J. Court Rules, comment 4.5 on R.2:10-2 (2013); seeRivers v. LSC P'ship, 378 N.J. Super.68, 80 (App. Div.), certif. denied, 185 N.J.296 (2005) (stating that "generally [the appellate court will] defer to a trial court's disposition of discovery matters unless the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law" (citation omitted)).

Similarly, a trial judge has "wide discretion" in conducting a trial including the limitation of opening arguments. State v. Tilghman, 385 N.J. Super. 45, 53-54 (App. Div.) (citing Sullivan v. State, 46 N.J.L.446, 447 (Sup. Ct. 1884), aff'd, 47 N.J.L.151 (E. & A. 1885)), certif. granted and remanded on other grounds, 188 N.J.269 (2006). The trial judge did not abuse this discretion in either area.

Defendants' argue that the trial judge should have awarded frivolous litigation counsel fees pursuant to Rule 1:4-8 because plaintiff pursued the fraud and fraudulent transfer claims. Defendants rely upon United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 389 (App. Div.), certif. denied, 200 N.J. 367 (2009), to argue that plaintiff's counsel filed a frivolous complaint, and that the allegations were unsupported by any credible evidence. Defendants also quote LoBiondo v. Schwartz, 199 N.J. 62, 98 (2009), for the proposition that Rule 1:4-8 is "designed to deter the filing or pursuit of frivolous litigation[.]" Sanctions are appropriate where the attorney files a pleading or a motion with an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. See State v. Franklin Sav. Account No. 2067, 389 N.J. Super. 272, 281 (App. Div. 2006).

The crux of defendants' argument is that because plaintiff's counsel had already been sanctioned in Xpekt Corp. v. Fame of New York, Inc., No. A-0857-10 (App. Div. Apr. 19, 2011),4 plaintiff was aware that these counts were frivolous and should have withdrawn the offending counts. However, in Xpekt plaintiff's counsel told defense counsel he would withdraw the fraudulent transfer claim. When defense counsel did not appear, plaintiff's counsel pursued a default judgment on the fraudulent transfer claim. We reversed and remanded for the imposition of counsel fees, determining that plaintiff's counsel's conduct clearly warranted such a penalty.

We consider the imposition of frivolous litigation counsel fees under the abuse of discretion standard. United Hearts, L.L.C., supra, 407 N.J. Super at 390. The trial judge did consider "all relevant factors" and his decision did not "amount[] to a clear error of judgment." Ibid. (quoting Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)). In light of the failure of defendants to make an offer of judgment, R. 4:58-1, given the clear proof of the funds owed, it was within the judge's discretion to deny counsel fees based on the overreaching counts of the complaint.

Affirmed.

1 Rather than filing a cross-appeal, R. 2:3-4, both sides appealed. We consolidate these appeals for the purpose of this decision.

2 Defendants provided complaints associated with: K.S. Trading Corp. v. Fame of NY, Inc., BER-L-5060-09 (Law Div.); Xpekt Corp. v. Fame of NY, Inc., DC-016827-09 (Special Civil Part); Int'l Basic Source, Inc. v. Fame of NY, Inc., BER-L-5049-09 (Law Div.).

3 Defendants allege that Nina Chang's real name is Aenan Binongcal. We refer to her as Chang to avoid confusion.

4 We cite this unpublished case as an exception to Rule 1:36-3 because defendants argue that the unpublished decision put plaintiff's counsel on notice of the frivolous nature of the claims in this related matter.