SARMASTI PLLC v. JOSHUA EMANUEL

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1667-11T1

SARMASTI PLLC, a professional

service limited liability

company, and VAFA SARMASTI,

an individual,

Plaintiffs-Appellants,

v.

JOSHUA EMANUEL,

Defendant-Respondent.

__________________________________________________

December 27, 2012

Argued September 19, 2012 - Decided

Before Judges Messano and Lihotz.

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-6190-09.

Vafa Sarmasti argued the cause for appellants (Sarmasti PLLC, attorneys; Mr. Sarmasti, on the brief).

Michael J. Epstein argued the cause for respondent (The Epstein Law Firm, P.A., attorneys; Mr. Epstein, of counsel and on the brief; James L. Fant, on the brief).

PER CURIAM

On July 30, 2009, plaintiffs Sarmasti PLLC, a law firm, and its principal, Vafa Sarmasti (collectively, Sarmasti), filed a complaint against defendant, Joshua Emanuel, alleging causes of action sounding in defamation, slander, libel and false light invasion of privacy (counts one, four, five, six, seven, eight and ten), tortious interference with prospective economic advantage (count two), and tortious interference with existing business relations (count three).1 Prior to answering, defendant moved to dismiss, claiming that the complaint failed to state a cause of action. R. 4:6-2(e).

The judge entered an order dated November 20, 2009, dismissing with prejudice "[a]ny and all allegations of defamation prior to July 30, 2008 (Counts 1, 4, 5, 6, 7, 8, and 10) . . . because plaintiff's complaint contains allegations of defamation outside the Statute of Limitations for defamation of one . . . year." See N.J.S.A. 2A:14-3. The order also permitted Sarmasti to file an amended complaint within ten days which alleged "[t]he remaining claims of defamation . . . with more specificity."

Sarmasti filed an amended complaint on December 8, 2009 alleging the same causes of action. In an attempt to comply with the prior order requiring "more specificity," Sarmasti alleged that during a meeting held on July 31, 2008, defendant met with one of Sarmasti's clients, identified only as "K.V.," and stated that Sarmasti had "engaged in fraudulent billing, and willfully and falsely billed for services . . . not provided." Defendant filed an answer denying the allegations and asserting various affirmative defenses. Discovery ensued.

Defendant moved for summary judgment on August 8, 2011 before a different Law Division judge. In an order dated October 21, 2011 (the 2011 order), the judge granted summary judgment and dismissed Sarmasti's amended complaint with prejudice. In an oral opinion, she first addressed the defamation claims and concluded that any allegedly defamatory statements made by defendant prior to July 30, 2008 were "moot" because they were beyond the one-year statute of limitations.

Focusing on the alleged conversation of July 31, 2008, the judge concluded that even if it occurred, it was "merely business partners disputing an attorney's bill and no negligence will be imputed from this exchange." The judge further determined that any defamatory statements "were entitled to protection . . . [because] the statements were made in regard to a common interest."

Regarding the claims of tortious interference, the judge noted that Sarmasti failed to prove "malice on . . . defendant's part." She noted that defendant was "a party to the business relationship" and "entitled to dispute any attorney's bills." This appeal followed.

Before us, Sarmasti contends that the judge erred in entering the 2011 order because the "common interest privilege" was not raised by defendant in his answer, the record did not support application of the privilege and defendant was not entitled to the privilege because defendant acted with malice, i.e., with reckless disregard for the truth or falsity of his statements. Sarmasti also argues that to the extent the judge relied upon the "litigation privilege," that was error because the statement was made one year before the amended complaint was filed.2 Sarmasti further contends that the record did not support summary judgment on the tortious interference counts and the "summary judgment process was seriously flawed." Additionally, for the first time on appeal, Sarmasti argues that the complaint alleged a cause of action for "trade libel," which is subject to a six-year statute of limitations and should have survived dismissal.

We have considered these arguments in light of the record and applicable legal standards. We affirm.

I.

"In an appeal of an order granting summary judgment, appellate courts 'employ the same standard [of review] that governs the trial court.'" Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010) (alteration in original) (quoting Busciglio v. DellaFave, 366 N.J. Super. 135, 139 (App. Div. 2004)). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006).

[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to 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 v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]

We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231. In doing so, we owe no deference to the motion judge's conclusions on issues of law, and review those de novo. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

We have said that "if the summary judgment turns on a question of law, or if further factual development is unnecessary in light of the issues presented, then summary judgment need not be delayed." United Sav. Bank v. N.J. Dep't of Envtl. Prot., 360 N.J. Super. 520, 525 (App. Div.), certif. denied, 177 N.J. 574 (2003). Moreover, "[p]ublic policy considerations favor the use of summary judgment motions to eliminate baseless defamation claims." Feggans v. Billington, 291 N.J. Super. 382, 395 (App. Div. 1996); see also Costello v. Ocean Cnty. Observer, 136 N.J. 594, 605 (1994) (calling summary judgment an "important tool for disposing of non-meritorious [defamation] lawsuits").

"[A] statement is defamatory if it is false, communicated to a third person, and tends to lower the subject's reputation in the estimation of the community or to deter third persons from associating with him." W.J.A. v. D.A., 210 N.J. 229, 238 (2012) (quotation marks and citation omitted). "A defamatory statement may consist of libel or slander." Ibid. (citations omitted).3

"The tort of intentional interference with prospective economic relations proscribes inducing a third person not to 'continue' a 'prospective relation.'" MacDougall v. Weichert, 144 N.J. 380, 403-04 (1996) (quoting Restatement (Second) of Torts, 766B(a) (1979)). The complaint must present facts alleging: (1) some reasonable expectation of economic advantage; (2) that the interference was done intentionally and with malice; (3) that in the absence of interference, there was a reasonable probability that the victim would have received the anticipated economic benefits; and (4) that the injury caused damage. Id. at 404 (citations omitted).

Similarly, "[t]he tort of interference with a business relation or contract contains four elements: (1) a protected interest; (2) malice -- that is, defendant's intentional interference without justification; (3) a reasonable likelihood that the interference caused the loss of the prospective gain; and (4) resulting damages." DiMaria Const., Inc. v. Interarch, 351 N.J. Super. 558, 567 (App. Div. 2001) (citing MacDougall, supra, 144 N.J. at 404), aff'd o.b., 172 N.J. 182 (2002). The statute of limitations applicable to both causes of action is six years. N.J.S.A. 2A:14-1.

With these principles in mind, we turn to the motion record in this case, considering only those portions that are relevant to the issues raised on appeal.

II.

In his certification in support of defendant's motion for summary judgment, Khash Vosough, M.D., referenced as "K.V." in Sarmasti's amended complaint, stated he was a principal in Comprehensive Women's Healthcare Corporation (CWHC). Vosough was also "one of three owners" of SA Healthcare Management, LLC (SA), along with defendant and Susan Cohen. Vosough also founded and was one of the owners of the SurgiAide companies (SurgiAide). Defendant and Vosough were the sole owners of SAIP Investments (SAIP), a "holding company created to own all of the intellectual property for SurgiAide . . . ."

Vosough met Sarmasti in 2005 and began utilizing his legal services to represent his various entities. Vosough certified that he and his partners decided to terminate Sarmasti's representation in 2006 because of a lack of knowledge regarding their business and intellectual property, delays in performing the services and a belief that "we were [not] a priority to [Sarmasti]."

In February 2009, Sarmasti sent a letter to Vosough and other doctors presumably affiliated with him in CWHC. Sarmasti withdrew from representation of CWHC in pending litigation against St. Joseph's Hospital, citing the reason as "rumors circulating within the Iranian community . . . that I am overcharging your group for the services . . . provided . . . ."4 The letter consisted of ten pages in which Sarmasti defended his actions in the representation provided to CWHC and SurgiAide. The letter concluded: "For the reason first noted above, I have no choice but to terminate our professional relationship." Defendant's certification in support of the summary judgment motion likewise stated that he owned SA with Vosough and Cohen. SA provided "all of the administrative, marketing, and operations for [SurgiAide]." Although defendant was not an owner or an officer of SurgiAide, he was "involved in the daily operations of and decisions for SurgiAide." Defendant and Vosough were the owners of SAIP which owned the intellectual property of SurgiAide and provided all its financing. Defendant corroborated Vosough's statement of reasons for terminating Sarmasti's representation of the various entities.

In his deposition, Sarmasti testified that he first became aware of allegations that he was overbilling Vosough on July 28, 2008, during a phone conversation with defendant. Sarmasti stated that defendant told him "you were . . . billing us for work you hadn't performed." As to the critical July 31, 2008 conversation with Vosough, Sarmasti testified that Vosough told him "[defendant] is here with the bill showing me . . . when you billed us for time you hadn't worked." Sarmasti could "hear [defendant] in the background . . . ." Sarmasti testified that defendant was "ranting" but he could not "remember exactly" what was said. Vosough certified that defendant "never said to me that . . . Sarmasti fraudulently billed him or . . . anyone else for that matter."

Sarmasti's opposition to the motion included an email he sent to defendant on July 28, 2008, memorializing the earlier phone conversation on the same date. Sarmasti recounted a specific claim defendant made that one of SurgiAide's invoices "contained improper billing" for a phone conference. Defendant questioned its accuracy because he believed he was in Malta on that date. In fact, when deposed, defendant admitted he was mistaken, and that he was in Florida on the date in question. Defendant also admitted that he told Vosough about the alleged improper billing.

III.

Sarmasti contends that summary judgment was improperly granted as to his defamation claims because defendant failed to establish that the "common interest privilege" applied under these facts, a material factual dispute existed as to whether defendant abused the privilege, and, in any event, defendant was not entitled to assert the privilege because he did not assert it as an affirmative defense. We disagree.

It is undisputed that defendant did not plead the affirmative defense of common interest privilege. Rule 4:5-4 requires a party to plead certain affirmative defenses, although the list contained in the Rule is illustrative and not exhaustive. Pressler & Verniero, Current N.J. Court Rules, comment 1.1 on R. 4:5-4 (2013). Assertion of a privilege is an affirmative defense to a defamation complaint. See, e.g., Barr v. Matteo, 360 U.S. 564, 579, 79 S. Ct. 1335, 1343, 3 L. Ed. 2d 1434, 1446 (1959) (Warren, C.J., dissenting).

However, "the pleading requirement is not absolute." McNeil v. Legislative Apportionment Comm'n, 177 N.J. 364, 399 (2003); see also Pressler & Verniero, supra, comment 1.2.3 on R. 4:5-4. "[A]ffirmative defenses have been permitted to be raised either sua sponte or untimely by a party when the interests of justice or public policy were at stake." McNeil, supra, 177 N.J. at 399. While this appeal does not raise important issues of public policy, we are convinced that the interests of justice were served by the judge's consideration of the issue based upon the motion record before her.

Sarmasti contends that even if the defense was not waived, the summary judgment process was flawed because he was unfairly prejudiced by consideration of the privilege since defendant's motion brief did not specifically argue the point. While it is true the issue was not asserted, we fail to see how Sarmasti can claim prejudice.

We have cited those portions of the motion record that extensively explained defendant's integral relationship to the Vosough business entities. During oral argument on the motion, defense counsel cited to defendant's ownership interests in the various entities, as well as his responsibility "for running the day to day affairs of" SurgiAide. As we discuss in further detail below, defendant also argued that he did not tortiously interfere with Sarmasti's existing or prospective business relationship because defendant was an owner of SA and involved in the operations of SurgiAide.

Sarmasti contends that he was unprepared to rebut assertion of the privilege because he was surprised, and he would have conducted discovery in a different manner had he known it was an issue. However, this flies in the face of reason and Sarmasti's essential claims, i.e., that he first confronted defendant about alleged improper billing of SurgiAide on July 28, 2008, and that conversation was followed by the allegedly defamatory statements overheard during a phone conversation Sarmasti had with Vosough on July 30. Clearly, Sarmasti viewed defendant as the person he should confront about the allegation precisely because of defendant's intimate knowledge of Vosough's interests and involvement with the business entities.

Moreover, to the extent Sarmasti asserts he would have conducted further discovery on the issue of defendant's legal relationship with those businesses, the claim rings hollow. Sarmasti never deposed Vosough but did depose defendant and Cohen. He has failed to demonstrate how additional discovery would have provided any further evidence to dispute the claims of Vosough and defendant regarding defendant's direct involvement with the various business entities.

We turn to Sarmasti's substantive arguments about the common interest privilege and its application to this case. In New Jersey, it has been long-recognized that "in particular situations, . . . private people [should] be able freely to express private concerns to a limited and correlatively concerned audience . . . ." Bainhauer v. Manoukian, 215 N.J. Super. 9, 36 (App. Div. 1987). Thus, otherwise defamatory comments are accorded a privilege "where the publisher is . . . protecting . . . an interest common to [him] and the recipient." Ibid.; accord Feggans, supra, 291 N.J. Super. at 392. Whether an otherwise defamatory statement may be immunized by a qualified privilege turns on consideration of three factors: first, the "appropriateness of the occasion on which the defamatory information is published"; second, "the legitimacy of the interest thereby sought to be protected or promoted"; and third, "the pertinence of the receipt of that information by the recipient." Bainhauer, supra, 215 N.J. Super. at 37. Id.at 40.

Applying the Bainhauerfactors to the facts presented, it is apparent that defendant's statements allegedly made to Vosough during the phone conversation of July 31, 2008 were privileged. The occasion was appropriate since Sarmasti was discussing the bill with Vosough; the interest sought to be protected charging for services allegedly not performed was legitimate; and the information was pertinent to Vosough.

Sarmasti first contends the record did not support application of the privilege because defendant failed to demonstrate he had "an interest or duty sufficient to support the common interest privilege." For the reasons set forth above, that argument lacks sufficient merit to warrant extensive discussion in this opinion. R.2:11-3(e)(2)(E).

Sarmasti next argues that the record presented a genuine factual dispute as to whether defendant abused the privilege. Even when a qualified privilege applies, "[a] plaintiff may [still prevail] by proving that the immunized defendant abused [the] privilege." Govito v. W. Jersey Health Sys., Inc., 332 N.J. Super. 293, 312 (App. Div. 2000). Abuse of the privilege occurs:

[I]f "(1) the publisher knows the statement is false or the publisher acts in reckless disregard of its truth or falsity; (2) the publication serves a purpose contrary to the interests of the qualified privilege; or (3) the statement is excessively published."

[Ibid. (quoting Williams v. Bell Tel. Labs. Inc., 132 N.J. 109, 121 (1993)).]

"The privilege will also be abused if the publisher does not reasonably believe the matter to be necessary to accomplish the purpose for which the privilege is given." Ibid. (quotations omitted). Plaintiff bears the burden of proving "[a]buse of a qualified privilege . . . by clear and convincing evidence." Ibid. And, we have recognized that in general, "[t]he jury determines whether the defendant abused a special-interest privilege." Ibid. (citing Bainhauer, supra, 215 N.J. Super. at 40-41; Restatement, supra, 619(2)).

However, it is equally clear that where "there [i]s not sufficient evidence of an abuse of the . . . privilege," "submission of that issue to the jury" is unnecessary. Jorgensen v. Penn. R.R. Co., 25 N.J. 541, 569 (1958); see also Murphy v. Johns-Manville Prod. Corp., 45 N.J. Super. 478, 495 (App. Div.) (the issue should not be submitted to the jury when there is "not more than a scintilla of evidence[] of malice"), certif. denied, 25 N.J. 55 (1957).

"When applying the actual malice standard through the prism of summary judgment, the court must consider whether, even when considering the evidence in the light most favorable to the plaintiff, reasonable factfinders could not find clear and convincing evidence of actual malice." Ricciardi v. Weber, 350 N.J. Super. 453, 471 (App. Div. 2002); see also Gulrajaney v. Petricha, 381 N.J. Super. 241, 259 (App. Div. 2005) (affirming grant of summary judgment on grounds of qualified privilege). "Essentially, the clear and convincing standard adds additional weight to a plaintiff's burden to defeat a summary judgment motion." Ricciardi, supra, 350 N.J. Super. at 47.

Sarmasti argues there was clear and convincing evidence that would have permitted a jury to find defendant acted with actual malice when he told Vosough during the July 30, 2008 conversation that the bill contained an erroneous entry. Sarmasti contends that, before telling Vosough about the improper billing, defendant could have checked his cell phone records, as he eventually did, which demonstrated defendant was not in Malta as he originally claimed.

"Reckless disregard for the truth means that the statements were made with a high degree of awareness of their probable falsity or with serious doubts as to their truth. It must approach the level of publishing a knowing and calculated falsehood." Id. at 472 (citations omitted). This record fails to raise a jury question as to whether clear and convincing evidence exists demonstrating that defendant made his statements to Vosough with reckless disregard for their truth.

In sum, summary judgment on Sarmasti's defamation claims was properly granted.

IV.

We consider the balance of Sarmasti's other arguments. He contends that summary judgment was improperly granted on his tortious interference claims because the motion record contained evidence of his adequate representations of Vosough's interests before 2008, and defendant's false allegation of improper billing "poisoned the well," leading ultimately to Sarmasti's resignation in February 2009.

However, as we said in DiMaria, supra, 351 N.J. Super. at 568, "a clear-cut consensus has emerged that if an employee or agent is acting on behalf of his or her employer or principal, then no action for tortious interference will lie." Sarmasti contends that the record fails to demonstrate that defendant was acting as Vosough's agent and was, instead, motivated "by his desire to turn . . . Vosough against Sarmasti and effect his termination."

As we said above, the record demonstrates that defendant was not only acting as Vosough's business agent throughout, but also that Sarmasti himself viewed defendant as the person he needed to speak to about the billing discrepancy. The issue requires no further discussion.

Sarmasti also argues that he established a cause of action for trade libel which was not barred by any statute of limitations. The issue was never raised below, and we refuse to consider it for the first time on appeal. See Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234 (1973) ("It is a well-settled principle that our appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available . . . .").

A

1 Count nine was misnumbered as the final count in the complaint and simply reserved the right to amend the complaint as necessary.

2 Defendant correctly concedes the litigation privilege does not apply to the facts presented and we need not discuss the issue further.

3 The historical distinctions between the two and the notion of presumed damages, discussed at length in W.J.A., supra, 210 N.J. at 238-41, are irrelevant to the issues presented in this appeal.

4 Sarmasti and Vosough are both of Iranian descent.