THOMAS A. RIZK v. GEORGE BROWN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

THOMAS A. RIZK, LINDA RIZK,

KELLY MCBRYDE, COLE POWELL,

BEN HORNSBY, ROGER GLASS, EARL

STANLEY CAUMMISAR, JR., ERMINE

PARTNERS, LLC, LBCW LIMITED

PARTNERSHIP, LBCW HOLDINGS, L.P.

and ACREWOOD 2011 LP (with all

Plaintiffs suing individually and

on behalf of and in the right of

TractManager, Inc. and TractManager

Holdings, LLC),

Plaintiffs-Appellants,

and

JOHN DOUGLAS,

Plaintiff-Respondent,

v.

GEORGE BROWN, LISA BROWN, DAVID

PASCHALL, ARSENAL CAPITAL

PARTNERS, ARSENAL CAPITAL PARTNERS

III, LP, ARSENAL CAPITAL PARTNERS

III-B, LP, ARSENAL CAPITAL

MANAGEMENT, L.P., STEPHEN MCLEAN,

DONALD DEIESO, EUGENE GORBACH, and

MADISON CAPITAL FUNDING LLC,

Defendants-Respondents,

and

PENSIONSKASSERNES ADMINISTRATION

A/S, PKA ALTERNATIVE INVESTMENT

PARTNERS, PENSIONSKASSEN FOR

SYGEPLEJERSKER, PENSIONSKASSEN FOR

SUNDHEDSFAGLIGE, PENSIONSKASSEN

FOR KONTORPERSONALE, PENSIONSKASSEN

FOR LAEGESEKRETAERER, and

PENSIONSKASSEN FOR SOCIALRADGIVERE

OG PAEDAGOGER,

Defendants,

v.

TRACTMANAGER, INC., TRACTMANAGER

HOLDINGS, LLC,

Nominal Defendants.

______________________________________________________

April 25, 2014

Argued April 8, 2014 Decided

Before Judges Fisher, Espinosa and Koblitz.

On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. C-40-13.

Peter R. Bray argued the cause for appellants (Bray & Bray, L.L.C., attorneys; Mr. Bray, on the brief).

Jamie R. Hacker argued the cause for respondent John Douglas (Dechert, LLP, attorneys, join in the brief of appellants).

Michael L. Banks (Morgan, Lewis & Bockius, LLP) of the Pennsylvania bar, admitted pro hac vice, argued the cause for respondents George Brown, Lisa Brown, David Paschall, Arsenal Capital Partners, Arsenal Capital Partners III, LP, Arsenal Capital Partners III-B, LP, Arsenal Capital Management, LP, Stephen McLean, Donald Deieso and Eugene Gorbach (Morgan, Lewis & Bockius, LLP, and Carmagnola & Ritardi, LLC, attorneys; Domenick Carmagnola and Steven F. Ritardi, of counsel; Mr. Banks, Troy S. Brown, and Jeffrey A. Sturgeon (Morgan, Lewis & Bockius, LLP) of the Pennsylvania bar, admitted pro hac vice, on the brief).

Robert W. Ferguson, III, argued the cause for respondent Madison Capital Funding, LLC (DLA Piper, attorneys, join in the brief of respondent Arsenal Capital Management, LP).

PER CURIAM

We granted leave to review an interlocutory order that denied plaintiffs' motion to transfer this matter to another vicinage. We now vacate the order under review, direct the transfer of the matter to another vicinage, and remand to the acting assignment judge for the entry of an order designating the vicinage to which the matter should be sent.

The circumstances are uncomplicated. On April 9, 2013, plaintiff Thomas A. Rizk, Ermine Partners, LLC, and others commenced this action against defendants in General Equity in the Passaic Vicinage. On the same day, other plaintiffs filed a separate action against some of the same defendants, also in General Equity in the Passaic Vicinage. The parties have referred to the former as the "domestic action" and the latter as the "international action."

Although the action was not very old when the order under review was entered, the record does reveal the complaint in the domestic action was amended three times. Also, plaintiffs had unsuccessfully moved both for interlocutory injunctive relief and the disqualification of Morgan, Lewis & Bockius, LLP. We are told that, although not consolidated, the domestic and international actions have been managed together. And we are told that additional proceedings have since occurred in the trial court despite the fact that our grant of leave to appeal divested the trial court of jurisdiction pending the issuance of our mandate. See R. 2:9-1(a).

Of relevance to the issue before us is the fact that a superior court judge, who normally sits in Passaic but was then assigned to the Essex bench, is a shareholder in plaintiff Ermine Partners. On July 30, 2013, plaintiffs' counsel wrote to the chancery judge, who is presiding over these matters, to advise of this fact and to suggest that the shareholder-judge's "interest in the outcome of this case creates issues on several levels, including whether these cases should remain venued in Passaic County." Defense counsel1 immediately responded, asserting that plaintiffs were obviously aware of this circumstance when they filed the domestic action in Passaic and that there was no basis for a transfer. The chancery judge directed the parties to brief the issue. Those briefs were timely submitted and the chancery judge heard oral argument. On August 23, 2013, the chancery judge issued a letter opinion rejecting plaintiffs' request. No order was entered.

Undaunted, plaintiffs immediately filed a motion for a transfer of the action and forwarded that motion to the assignment judge; their attorney's cover letter of September 4, 2013, advised that the motion was sent to the assignment judge's attention because of AOC Directive #07-11, which suggests that the shareholder-judge's "supervising judge" should determine whether the circumstances require transfer. In this letter, plaintiffs' counsel advised the assignment judge that one of the two law firms representing defendants is Carmagnola & Ritardi, which represents the assignment judge in another lawsuit. The assignment judge denied the motion, and plaintiff then successfully moved for leave to appeal.

There is no question that Canon 3(C) of the Code of Judicial Conduct required the disqualification of the assignment judge. One of the two law firms representing defendants in this action currently represents the assignment judge in another lawsuit. Defendants argue, however, that the assignment judge's recusal was unnecessary. They claim an assignment judge is somehow authorized to rule on a motion to transfer notwithstanding a conflict of interest that would otherwise bar his involvement because such a motion poses only "administrative," not "substantive," questions. In a similar vein, defendants argue that any error in the assignment judge's involvement was harmless. Both contentions are foreign to the principles embodied in the Code of Judicial Conduct. This is not a circumstance where no other judge was available to rule, see DePascale v. State, 211 N.J. 40, 44-45 (2012); the General Assignment Order identifies an acting assignment judge for each vicinage, and Rule 4:3-3(a) designates other judges empowered to rule on motions to transfer. And a harmless-error analysis is utterly inconsistent with the concept of appearance of impropriety2 the harm is the judge's involvement, regardless of the soundness of the ruling. Similarly, we observe that an existing conflict cannot be waived. See Code of Judicial Conduct, Canon 3(D) (declaring that "[a] judge disqualified by the terms of this Canon may not avoid disqualification by disclosing on the record the disqualifying interest and securing the consent of the parties"). We hasten to observe that the assignment judge suggested none of the arguments defendants now pose. The assignment judge, in fact, said nothing in explanation, relying entirely on the chancery judge's opinion; we assume the judge simply overlooked the circumstance that compelled his disqualification. There being no merit in the arguments posed by defendants to excuse the assignment judge's mistaken involvement in this case, we vacate the order under review.

We also conclude that the shareholder-judge's financial interest in this action, as well as other circumstances mentioned by the chancery judge in her opinion namely, the close friendship between the lead plaintiff and another Passaic judge, and defense counsel's representation of the assignment judge in another matter compel a transfer of the matter to another vicinage. Our concern is with the appearance of impropriety not with any specific concern that fair and just decisions cannot be rendered in this case. As Chief Justice Rabner expressed for the Court in DeNike v. Cupo, 196 N.J. 502, 506 (2008), "[t]he Judiciary derives its authority from the State Constitution but earns the public's confidence through acts of unquestioned integrity." Because "[a]n independent and honorable judiciary is indispensable to justice in our society," the standards governing judicial conduct impose "high standards of conduct." Code of Judicial Conduct, Canon 1. Judges "must avoid all impropriety and appearance of impropriety." Id., comment on Canon 2. As Justice Frankfurter concisely expressed what our Code of Judicial Conduct unmistakably manifests: "justice must satisfy the appearance of justice." Offutt v. United States, 348 U.S. 11, 14, 75 S. Ct. 11, 13, 99 L. Ed. 11, 16 (1954); see also DeNike, supra, 196 N.J. at 514; State v. Deutsch, 34 N.J. 190, 206 (1961). These principles compel a transfer to another vicinage.

The September 17, 2013 trial court order is vacated, and the matter is remanded to the acting assignment judge3 for the entry of an order transferring the matter to another vicinage. The acting assignment judge should designate the vicinage to which this matter is sent and she should also determine whether the international action should also be transferred.4 We do not retain jurisdiction.

1Unless otherwise specified, when mentioning "defendants," we refer only to defendants George Brown, Lisa Brown, David Paschall, Arsenal Capital Partners, Arsenal Capital Partners III, LP, Arsenal Capital Partners III-B, LP, Arsenal Capital Management, LP, Stephen McLean, Donald Deieso and Eugene Gorbach, and when mentioning "defense counsel" we refer only to those defendants' attorneys. Defendant Madison Capital Funding, LLC, appears to have joined in the motion in the trial court and has joined in the positions urged by defendants in this court. Other defendants have not appeared in the proceedings in this [continued]

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court. And we lastly note that plaintiffs in the international action have expressed their concurrence in the brief submitted by plaintiffs' counsel in the domestic action; leave to appeal, however, was not sought or granted in the international action, and those parties have not sought leave to appear or the right to be heard in the domestic action now before us.

2Defendants argue that plaintiffs' failure to advise the assignment judge of the conflict is fatal to the relief they now seek. We reject this. Plaintiffs' counsel should not be faulted for being tactful in advising the assignment judge of the information he required.

3No party has asserted that the acting assignment judge has a conflict or is otherwise unable to act in this matter.

4We note that counsel for plaintiffs in the international action wrote to the assignment judge to advise of their joinder in the motion to transfer the domestic action. Their attorney argued that, in his view, and for reasons expressed by the chancery judge at an earlier conference during which she said that judicial economy required that "if one case goes they both go" the international action ought to be transferred as well.