Khafagy et al v. Jersey Girls Gentlemen's Club et al, No. 2:2010cv02422 - Document 44 (D.N.J. 2014)
Court Description: OPINION & ORDER that Plaintiffs' 43 Motion to enforce late fees is GRANTED in part and Plaintiffs' request for attorney fees is DENIED, etc. Signed by Magistrate Judge Joseph A. Dickson on 12/4/14. (gmd, )
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Khafagy et al v. Jersey Girls Gentlemen&#039;s Club et al Doc. 44 NOT FOR PUBLICATION THE UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY HOSAM KHAFAGY and MARGARET KHAFAGY, Civil Action No. 2:10-cv-02422 (ES) (JAD) Plaintiffs, OPINION AND ORDER v. JERSEY GIRLS GENTLEMEN'S CLUB, LYNN PALEY, and 167 BAYWAY AVENUE CORP., Defendants. JOSEPH A. DICKSON, U.S.M.J. This matter comes before the Court upon Plaintiffs Hosam Khafegy and Marg Khafegy's Motion to enforce late fees and related charges. (ECF No. 43). With the parti ' consent, the Hon. Esther Salas, U.S.D.J. authorized this Court to "conduct all proceedings enter a final order on the [Motion to enforce late fees] in accordance with 28 U.S.C. § 636( " (ECF No. 40). Pursuant to Rule 78 of the Federal Rules of Civil Procedure, no oral argument heard. Upon consideration of the parties' submissions, and for the reasons stated below, Plainti request to enforce late fees is GRANTED in part and Plaintiffs' request for attorneys' fee DENIED. I. BACKGROUND Plaintiffs Hosam Khafagy and Margaret Khafagy, husband and wife, commenced t s action by filing a Complaint in the United States District Court, Southern District of New Y 1 Dockets.Justia.com against defendants, Jersey Girls Gentlemen's Club and Lynn Paley, on May 3, 2010. (ECF JI o. 1). The case was transferred to this Court pursuant to 28 U.S.C. §1406(a) on May 5, 2010. (B F No. 3). On the evening of January 19, 2009, Mr. Khafagy, a professional chauffer for Spei, el Limousine Services, was instructed by his employer to travel to Newark, New Jersey and pick lp three passengers. (Id. at 2). The passengers requested that Mr. Khafagy drive them to Jersey Gi ls Gentlemen's Club located in Elizabeth, New Jersey. (Id.). After arriving at the club, 1 ~e passengers asked Mr. Khafagy to wait for them in the parking lot. (@. About thirty minu es later, Mr. Khafagy observed an altercation amongst a number of club patrons, including ~s passengers. (Id.). The passengers attempted to enter the vehicle and leave the premises. (.il p. Gun shots were fired and Mr. Khafagy was struck and injured by one of the bullets. (Id.). Plaintiffs sought monetary damages for physical, emotional, and psychological damai es sustained as a result of the incident. (ECF No. 1, at 1). The suit was settled for $220,000J 0, which the parties documented in a written Stipulation of Settlement ("the Settlement"). (ECF 1' o. 31). The Hon. Esther Salas, U.S.D.J. "So Ordered" the Settlement on November 30, 2011. (Ei F No. 33). The Settlement stated that the sum would be attributed to the Plaintiffs' claims as follov s: i. Plaintiff HOSAM KHAFAGY: One Hundred Sixty Five ($165,000.00) Thousand Dollars; ii. Plaintiff MARGARET KHAFAGY: Fifty Five ($55,000.00) Thousand Dollars. The sums aforesaid shall be paid as follows: a. Simultaneous with the Effective Date of this Stipulation of Settlement, the Defendants shall pay the sum of Thirty ($30,000.00) Thousand Dollars, receipt of which is hereby acknowledged; b. On or before February 15, 2012 the Defendants shall pay the sum of One Hundred Ninety ($190,000.00) Thousand Dollars. (ECF No. 33, at 2). The Settlement also included a "Late Payment Penalty," which states, 2 All payments shall be paid by check or money order payable to the firm of Gallo, Feinstein & Naishtut, LLP ("GFN") as attorneys for the Plaintiffs and shall be deemed to be timely made if received by GFN on or before five (5) days of the due dates set forth herein. In the event the payments set forth above are not received by GFN within the time constraints set forth above, said payment shall be deemed to be "Late." If any payment or part thereof remains unpaid more than 30 days after the due date set forth herein, the Plaintiff shall receive from the Defendants and the Defendants shall pay to the Plaintiffs, in addition to any and all sums due and owing in accordance with this Stipulation of Settlement, an additional Late Penalty equal to $5,000.00 for each and month [sic] (defined herein as 30 days) that said Late payment is not completely cured up to a total of not more than Twenty Five ($25,000.00) in late payments. (ECF No. 33, at 2). In accordance with the Settlement, Defendants made the initial payment $30,000.00 at the time the Settlement was executed in September of201 l. (ECF No. 43, at 3). A week before the second payment of $190, 000 was due, Plaintiffs' counsel contacted Defend counsel, at which time Plaintiffs were informed that Defendants did not have the full amount and "the best [Defendants] could do was pay $25,000 then the remaining $165,000 within 60 d s from February 15, 2012. [Plaintiffs' counsel] neither agreed with nor rejected this position reported same to [Plaintiffs]." CI!h). A few days later, Plaintiffs' counsel received a letter fr Defendants' counsel dated February 10, 2012 confirming their "agreement" along with a check r $25,000, which Plaintiffs' counsel accepted. (Id. at 3-4). The next payment was made on April 27, 2012, where Defendants mailed a check $20,000 along with a letter stating, "[a]s indicated, until [Defendants] liquidate[ ] the balan e, [Defendants] will be paying the sum of $20,000 per month payable at the end of the month." at 4). Defendants subsequently made payments of $20,000 on May 31, 2012, June 28, 2012 July 27 2012, all of which Plaintiffs accepted. (ECF No. 42, at 2). There was no payment m e in August of2012. (Id.). On September 13, 2012, Defendants' counsel sent Plaintiffs' counsel a letter enclosin a check for $50,000, which Plaintiffs accepted. (Id.). On November 6, 2012 Defendants mad a 3 $10,000 payment and on November 12, 2012 Defendants made a $5,000 payment. (Id.). Both these payments were accepted by Plaintiffs, totaling a $15,000 payment made in the month November. (Id.). No payment was made in the month of December. (ECF No. 43, at 5). A fi payment of$20,000 was sent to Plaintiffs on January 10, 2013 along with a letter that stated, "[p my previous correspondence, enclosed please find checks totaling $20,000.00 that remains from the settlement between the parties." (ECF No. 42, at 2). Plaintiffs accepted the final paym and deposited the check with no further correspondence until September 5, 2013 when Plainti ' counsel sent Defendants' counsel a letter demanding $25,000 as a late payment penalty. @). Plaintiffs submitted to this Court a memorandum of law in support of their application r the imposition oflate fees and related charges on May 27, 2014, (ECF No. 41), which was refi on May 28, 2014. (ECF No. 43). Defendants responded on May 27, 2014 requesting that e Court deny Plaintiffs' application. (ECF No. 42). II. LEGAL ANALYSIS The essential issues raised by Plaintiffs' application are: did the parties, either y agreement or by operation of law, modify the Settlement? If so, what exactly was modified? addition, regardless of whether the contract was modified, did Plaintiffs waive the Late Paym Penalty provision in the Settlement agreement, thereby absolving Defendants of any late liability? For the reasons stated below, the Court finds that the parties modified the paym schedule, and Plaintiff did not waive the Late Payment Penalty provision. a. Modification Plaintiffs appear to argue that there was no modification in this case and that even if th e was a modification, neither that nor the conduct of the parties could override the provisions of e contract. (ECF No. 43, at 7). The Court can, however, enforce modifications in the contract wh e 4 those modifications were made by the parties. "Under New Jersey law, parties to an existi g contract, by mutual assent, may modify their contract, and modification can be proved by explicit agreement to modify, or ... by the actions and conduct of the parties, so long as intention to modify is mutual and clear." Elliott & Frantz, Inc. v. Ingersoll-Rand Co., 457 F. d 312, 322 (3d Cir. 2006) (quotations omitted). The Court finds that the settlement was in f: t modified by the parties as to the payment schedule. "A proposed modification by one party t a contract must be accepted by the other to constitute mutual assent to modify. Unilateral stateme s or actions made after an agreement has been reached or added to a completed agreement cle do not serve to modify the original terms of a contract." McGrath v. Poppleton, 550 F. Supp. d 564, 571 (D.N.J. 2008) (citing Cnty. of Morris v. Fauver, 153 N.J. 80 (1998)). The Court finds, however, that the conduct of the parties in this case constitutes bilat actions and, therefore, rise to the level of mutual assent necessary for contract modification. contract was modified on April 27, 2012 when Defendants sent Plaintiffs a letter stating t payments of $20,000 will be made each month payable at the end of each month. (See ECF 43, at 4). Plaintiffs accepted the proposed modification when they accepted the payment remained silent on the amended payment schedule. See The Flying by, 4 F. Supp. 884, 889 (D. 1933) ("There may be situations in which standing mute imputes acceptance and silence gi s assent"). In fact, Plaintiffs proceeded to patiently wait and accept the payments made y Defendants for each and every payment, all of which were made pursuant to a modified sched e proposed by Defendants. It is clear to the Court that the conduct of the parties constitute bilat action, which is sufficient to modify the terms of the agreement. 5 1 b. Waiver Defendants argue that Plaintiffs waived their right to enforce the late payment clause of e Settlement because Plaintiffs were aware of their right to charge Defendants with a late paym penalty and neither informed Defendants of such intentions to do so, nor did Plaintiffs invo · e Defendants for such charges. (ECF No. 42, at 3). The Court finds that Plaintiffs never waived e Late Payment Penalty clause. The Settlement states, "[n]o waiver shall be binding unless it be made in writing that will be signed by the Party making the waiver." (Id. at 4). Plaintiffs ne signed a written waiver and the Court cannot modify the contract to allow a waiver where th e was no writing. The modification that did occur, as discussed above, was a result of the cond of the parties, not Court intervention. The modification in the payment schedule only affects t clause, leaving the remainder of the contract unmodified. The original terms of the contra t, therefore, remain intact and continue to apply to the modified provisions. Furthermore, there no course of conduct that the Court has seen that modified the late payment clause. Neither this discussed by the parties. For this reason, the Late Payment Penalty clause remained applica e to the modified payment schedule resulting in the accrual of late fees, and the waiver provisi n retained the writing prerequisite. c. Laches and Equitable Estoppel Defendants further assert that the "doctrine of laches requires that Plaintiffs forfeit th ·r right to enforce the late payment penalty against Defendants." (Id. at 4). "Laches has been fo where an inexcusable and unexplainable delay in enforcing a known right prejudiced the ot r party because of such delay." In re Kietur, 332 N.J. Super. 18, 28 (App. Div. 2000). Defend allege that Plaintiffs' inexcusable and unexplainable sixteen month delay in demanding late :6 s caused Defendants to be harmed. (ECF No. 42, at 4-5). Defendants posit that had Plainti s 6 -- - - - - - - - ----------------------------. exercised their right in a timely manner, Defendants would have had an opportunity to cure e deficiency and not incur $25,000 in late fees. (Id. at 5). The Court finds that the doctrine oflaches is not applicable. The terms of the Settlem never explicitly state when the late payment penalty may be enforced. In fact, the Settlement sta s that, "[n]othing contained herein shall limit or qualify the Plaintiffs' rights to enforce the terms this Stipulation of Settlement." (ECF No. 33, at 2). Because Plaintiffs' request for the imposif n of late fees and related charges was made within a reasonable amount of time, Defendants w e not harmed as a result of Plaintiffs' "delay" as they allege, but rather Defendants were harmed s a result of their own failure to remit payment in a timely manner pursuant to the contract. Finally, Defendants argue that Plaintiffs should be estopped from collecting late paym penalties according to the doctrine of equitable estoppel. (Mh). On the other hand, Plaintiffs ass that there is no place for the doctrine under these circumstances arguing, "[i]t cannot be said t justice, morality or common fairness would be offended by requiring the defendants to eit r comply with the terms of the Stipulation of Settlement regarding payment or comply with the te of the Stipulation of Settlement when seeking to amend the Stipulation or obtain a waiver of e right to enforce the late payment penalty." (ECF No. 43, at 8). The Court agrees with Plaintiffs and finds that the doctrine of equitable estoppel is no a ban to Plaintiffs' Motion under these circumstances. "The doctrine of equitable estoppel is appl only in very compelling circumstances, where the interests of justice, morality and comm n fairness clearly dictate that course." Phillips v. Borough of Keyport, 107 F.3d 164, 182 (3d 1997) (citing Palatine Iv. Planning Bd. of Township of Montville, 133 N.J. 546 (1993) (citati s and quotations omitted)). The interests of justice, morality and common fairness dictate t Defendants should generally be held liable for late payments given the terms of the Settleme t. 7 When interpreting contracts, the Court's obligation is clear: "[f]irst and foremost, fundame canons of contract construction require that we examine the plain language of the contract and parties' intent, as evidenced by the contract's purpose and surrounding circumstances." Hi e 1 Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J. 99, 115 (2006) (citations and quotati s omitted). When reading a contract, the Court's goal is to "discover the intention of the parti s. Generally, [courts] consider the contractual terms, the surrounding circumstances, and the purp e of the contract." Marchak v. Claridge Commons, Inc .. 134 N.J. 275, 282 (1993) (citati s omitted). The plain language of the contract requires that the Defendants pay a penalty for ev month the payment is late in order to deter late payments. As a result, the Court has no pow modify the contract to remove the Late Payment Penalty provision. Rather, the Court shall uph d the clause, as agreed upon by the parties. d. The Contract as Modified Following the April 2012 modification, Defendants upheld the contract as modified remitted $20,000 payments for the months of May, June, and July in 2012. (ECF No. 43, at There was no payment made in August of2012, (ECF No. 42, at 2), arguably causing Defend to accrue the first late fee of$5,000. On September 13, 2012, however, Defendants sent Plainti s a check in the amount of$50,000. (ECF No. 43, at 5). Because the September payment was m e within thirty (30) days of the August due date, the Court finds that $20,000 of that $50,000 appl s to the month of August and another $20,000 applies to the month of September, leaving a surp s of $10,000. 1 1 As noted above, the Late Payment Penalty clause states, If any payment or part thereof remains unpaid more than thirty (30) days after the due date set forth herein, the Plaintiff shall receive from the Defendants and the Defendants shall pay to the Plaintiffs, in addition to any and all sums due and owing 8 Defendants did not make any payments in the month of October, (Id.), thereby incurri g $5,000 in late fees. On November 6, 2012 Defendants made a $10,000 payment followed b a $5,000 payment on November 13, 2012 for a total of $15,000 paid in the month ofNovemb @). The contract as modified called for $20,000 to be paid each month at the end of the mon , making Defendants $5,000 short for the month of November. There remains, however, $10,000 surplus from the month of September, $5,000 of which can be applied to the month November, making the required payment for that month complete. Accordingly, no late fees w e incurred in November. Defendants failed to make a payment in December of2012, (Id.), addi g an additional $5,000 late payment penalty. Defendants submitted their final payment of $20, on January 10, 2013. (ECF No. 43, at 5). The Court, therefore, finds that given the contr modification in April of 2012, the Late Payment Penalty provision from the original contract t remained applicable to the contract as modified, and the lack of payments made in October, 20 , and December, 2012, Defendants owe $10,000.00 in late payment penalties. e. Attorneys' Fees In addition to the enforcement of late fees, Plaintiffs request that Defendants also re it payment of"reasonable counsel fees incurred by the Plaintiffs in the enforcement of the Stipulati n in accordance with this Stipulation of Settlement, an additional Late Penalty equal to $5,000.00 for each and month [sic] (defined herein as 30 days) that said Late payment is not completely cured up to a total of not more than Twenty Five ($25,000.00) in late payments. (ECF No. 33, at 2). This clause, in essence, contains a 30 day grace period. The first payment made pursuant to the modification was on April 27, 2012, thereby making all future payments due on or about the 27th of every month. The payments that followed were made on May 31, 2012, June 28, 2012, and July 27, 2012, all of which were made on time in accordance with the modified payment schedule. The August payment, therefore, was due on or about August 27, 2012. Because the September 13, 2012 payment was made within thirty (30) days of August 27, 2012 it was timely. 9 of Settlement along with such other and further relief as to this Court seems just and proper." (E No. 43, at 9). The Settlement's Late Payment Penalty provision states, "[i]n the event the Plain shall undertake legal action to enforce the terms hereof, Plaintiffs shall be entitled to receive fr the Defendants in addition to any and all sums then outstanding, all reasonable counsel fees costs incurred by the Plaintiffs in connection with their efforts to enforce the terms hereof." (E No. 33). The Court finds, however, that there was a good faith dispute between the part s regarding whether Plaintiffs waived their right to enforce the Late Payment Penalty provisi Although the Court agreed with Plaintiffs and found that there was no waiver, Defendan ' assertion was not unreasonable. The Court finds, therefore, that awarding Plaintiffs attorneys' fi s would be improper given the good faith dispute. III. CONCLUSION For the foregoing reasons, Plaintiffs' Motion to enforce late fees is GRANTED in p and Plaintiffs' request for attorneys' fees is DENIED. Defendants shall make a $10,000. payment to Plaintiffs in late payment penalties. In order to alleviate any future delays, confusi or wasteful litigation, the Court Orders the $10,000.00 late fee to be paid by Defendants to coun for Plaintiffs no later than January 31, 2015. SO ORDERED cc: Hon. Esther Salas, U.S.D.J. 10 ,
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