Myrna B. Tagayun and Robert S. Mandell v. Americhoice of New Jersey, Inc.

• Court: New Jersey Superior Court Appellate Division
• Decided: September 20, 2016
• Docket: A-1628-13T1
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1628-13T1

MYRNA B. TAGAYUN and ROBERT S. MANDELL,

Plaintiffs-Appellants,

v. APPROVED FOR PUBLICATION AMERICHOICE OF NEW JERSEY, INC., SEPTEMBER 20, 2016 a New Jersey corporation, d/b/a United Healthcare Community Plan; APPELLATE DIVISION MICHELE NIELSEN, individually and as an officer of AmeriChoice of New Jersey, Inc., d/b/a United Healthcare Community Plan; STRADLEY RONON STEVENS & YOUNG, LLP, a Pennsylvania Limited Liability Partnership; FRANCIS X. MANNING, ESQUIRE, an attorney at law, licensed in the State of New Jersey, individually and as an officer and/or employee of Stradley Ronon Stevens & Young, LLP; MARISSA PARKER, ESQUIRE, an attorney at law, licensed in the State of New Jersey, individually and as an officer or employee of Stradley Ronon Stevens & Young, LLP; L. JOHN VASSALOTTI 3, JR., an attorney at law, licensed in the State of New Jersey, individually and as an officer and/or employee of Stradley Ronon Stevens & Young, LLP,

Defendants-Respondents. _______________________________________

Submitted September 17, 2015 – Decided June 28, 2016 Before Judges Lihotz, Fasciale and Higbee.

On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L- 5348-12.

Myrna B. Tagayun and Robert S. Mandell, appellants pro se.

Stradley Ronon Stevens & Young, LLP, attorneys for respondents (Francis X. Manning, on the brief).

The opinion of the court was delivered by

HIGBEE, J.A.D.

Plaintiffs, Dr. Myrna B. Tagayun, and Robert S. Mandell,

her husband and office manager, appeal (1) a May 1, 2013 order

awarding defendant, AmeriChoice, counsel fees as a sanction for

pursuing a frivolous claim in their original complaint pursuant

to Rule 1:4-8; (2) a May 9, 2013 order dismissing plaintiffs'

amended complaint and declaring it was also a frivolous pleading

pursuant to N.J.S.A. 2A:15-59.1; and (3) an October 22, 2013

order granting defendant's motion for additional fees and

amending the May 1, 2016 money judgment against plaintiffs to

include legal fees incurred in responding to the amended

complaint. Plaintiffs state in their brief they are limiting

their appeal only to whether sanctions and fees should have been

awarded against them.

2 A-1628-13T1 For the reasons that follow, we affirm in part and reverse

in part and remand for amendment of the amount of the judgments

against plaintiffs.

We first set forth the germane facts and procedural

history. Plaintiffs filed a complaint against defendants,

AmeriChoice of New Jersey Inc., Michele Nielsen, an officer of

AmeriChoice, and various other associated entities they allege

did business as AmeriChoice, as well as other fictitiously named

defendants. The dispute concerned a contract entered into by

Tagayun and AmeriChoice whereby Tagayun, a neurologist, became a

participating provider for AmeriChoice HMO members.

AmeriChoice sent Tagayun notice she would be terminated as

a provider. Plaintiffs filed their pro se complaint against

defendants and requested an order to show cause for injunctive

relief to prevent Tagayun's termination. Defendants' counsel

sent a letter rescinding the notice to terminate, thus

plaintiffs were temporarily successful in preventing the

termination. Defendants and plaintiffs appeared before the

court where Mandell argued that defendants would just terminate

Tagayun again in a few months. Nonetheless, the judge found

there was no longer a need for injunctive relief. Additionally,

defendants had not filed an answer to the original complaint in

a timely fashion and were ordered to file an answer. Although

3 A-1628-13T1 they were ordered to do so, defendants never filed an answer to

the original complaint. Nor did they file an answer to the

amended complaint.

AmeriChoice did subsequently terminate the services of

Tagayun by not renewing her contract and filed a motion to

dismiss the original complaint and transfer the matter to

arbitration.

Defendants notified Tagayun that her complaint was

frivolous, pursuant to Rule 1:4-8(b)(1), because the contract

required arbitration of all disputes between the parties.

Defendants, at the same time, also notified Mandell his claim

was frivolous as he was not a party to the contract and

therefore, had no standing to enforce the contract.

When plaintiffs refused to dismiss their claims, defendants

filed a motion to dismiss. Defendants were ultimately

successful and then filed a motion for sanctions under Rule 1:4-

8(b)(1).

After oral argument, the judge entered the January 11,

2013 order dismissing the original complaint without prejudice

as to Tagayun and sending her claims to arbitration. The judge

also dismissed Mandell's claims with prejudice for lack of

standing. Plaintiffs filed an amended complaint on January 14,

2013, which was substantively the same as the original

4 A-1628-13T1 complaint, except the law firm and individual attorneys for

defendants were added as additional named defendants.

On January 15, 2013, plaintiffs appealed from the January

11, 2013 order dismissing their original complaint. The appeal

proceeded despite the filing of the amended complaint. While

that appeal was ongoing, the Law Division judge continued to

consider and rule on motions filed by defendants related to the

original complaint being frivolous and on similar motions

related to the amended complaint. We issued an opinion on

August 30, 2013, affirming the January 11, 2013 order sending

Tagayun's claims to arbitration.1 That final Appellate order may

not be challenged in this subsequent appeal.

In the interim, defendants moved to have both complaints

declared frivolous and sought an award of attorney fees as a

sanction against plaintiffs. Oral argument was scheduled for

February, but was adjourned at plaintiffs' request. Plaintiffs

claim no hearing was ever held on the motions. However, because

plaintiffs filed no opposition to the two motions requesting

sanctions, no oral argument was required. In an order dated May

1, 2013, the judge concluded the original complaint was

frivolous and entered an order granting a fee award of

1 Mandell's appeal was dismissed as interlocutory.

5 A-1628-13T1 $10,073.20 in favor of defendants against plaintiffs jointly,

severally, and in the alternative.2

On May 9, 2013, the judge dismissed the amended complaint,

found it was frivolous, and ordered defendants to submit an

application for fees related to the amended complaint. The

judge made very limited findings simply writing on the May 1 and

May 9 orders that each was granted for the reasons set forth in

defendants' papers.

Plaintiffs filed an appeal from the May 1 and May 9, 2013

orders. We granted defendants' motion to remand for entry of a

final judgment with the addition of the fees assessed relating

to the amended complaint and dismissed the appeal by plaintiffs

as interlocutory.

Judge Stephen Taylor, who did not enter the prior orders,

was assigned to the case and heard oral argument solely on the

issue of the amount of fees to be awarded related to the amended

complaint. Defendants requested fees in the amount of $6,539.40

and $60 in disbursements, totaling $6,599.40. Judge Taylor

carefully reviewed each invoice on the record and required

2 For the benefit of pro se plaintiffs we note that "jointly, severally in the alternative" means that the judgment can be collected from either Tagayun or Mandell or part of the judgment can be collected from one of them and part from the other, however the total amount collected from both cannot exceed the amount awarded. Defendants cannot collect the amount of the judgment twice.

6 A-1628-13T1 defense counsel to explain the amounts billed.3 The judge

ascertained the billing rate and hours for each attorney

involved. The judge was advised none of the billing involved

time devoted to defending the law firm, but only the amounts

billed to the client relating to the amended complaint. The

judge found both the attorneys' rates and the number of hours

were reasonable. Tagayun argued plaintiffs' actions were not

frivolous, but she did not address the amount of the fees.

Judge Taylor awarded the amount of fees requested. Although

Mandell was not given an opportunity to speak at the hearing, he

has presented no argument on appeal that suggests the amount of

the legal fees imposed at the end of the hearing was improper.

We review a trial court's imposition of frivolous

litigation fees for an abuse of discretion. Masone v. Levine,

382 N.J. Super. 181, 193 (App. Div. 2005). Reversal is

warranted when "the discretionary act was not premised upon

consideration of all relevant factors, was based upon

consideration of irrelevant or inappropriate factors, or amounts

to a clear error in judgment." Ibid.

3 Plaintiffs in their brief state they requested the transcript for the hearing but had not received it. Defendants in their brief argued we should dismiss the appeal of the October 22, 2013 order because no transcript was supplied. On November 12, 2014 the transcript was provided to the Clerk of the Appellate Division and we review the appeal from that order on its merits.

7 A-1628-13T1 To begin our analysis of the applicable law regarding

frivolous litigation, we turn to relevant provisions of Rule

1:4-8(a):

By signing, filing or advocating a pleading, . . . an attorney or pro se party certifies that to the best of his or her knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) the paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein 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[.]

An award of fees against a party, as opposed to a lawyer or

a self-represented litigant, engaging in frivolous litigation is

governed by N.J.S.A. 2A:15-59.1(a)(1), which requires a judge to

determine whether a pleading filed by a non-prevailing party was

frivolous. In order to award fees under the statute, the court

must find that a claim or defense was either pursued "in bad

faith, solely for the purpose of harassment, delay or malicious

injury" or that the non-prevailing party knew or should have

known it "was without any reasonable basis in law or equity and

could not be supported by a good faith argument for an

8 A-1628-13T1 extension, modification or reversal of existing law." N.J.S.A.

2A:15-59.1(b)(1), (2).

There was no evidence presented that plaintiffs filed their

original complaint simply to harass defendants. Defendants

urged the court to find the original complaint was frivolous

because Mandell lacked standing and Tagayun signed a contract

that contained a provision that all disputes would go to

arbitration. The judge found these were sufficient reasons to

dismiss the original complaint. The dismissal based on the

arbitration clause was affirmed on appeal.

Plaintiffs argued before the trial court and on appeal that

Tagayun had not waived her right to a jury trial because this

explicit language or similar language was not in the contract's

arbitration clause.

When plaintiffs filed their complaint there were some

appellate decisions enforcing arbitration provisions that did

not have explicit language waiving rights to access to the

courts or juries decided prior to the decision in this case.

See Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515,

518 (App. Div. 2010); EPIX Holdings Corp. v. Marsh & McLennan

Cos., 410 N.J. Super. 453, 476, overruled in part on other

grounds by Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 192-

93 (2013).

9 A-1628-13T1 However, the Supreme Court, in Atalese v. U.S. Legal

Services Group, L.P., 219 N.J. 430 (2014), cert. denied, __ U.S.

__, 135 S. Ct. 2804, 192 L. Ed. 2d 847 (2015), while stressing

that arbitration was favored by the law, explained that even

under prior existing law relating to arbitration provisions in

contracts, a knowing waiver of constitutional rights to a jury

trial must be explicit in order to enforce the arbitration

clause.

Therefore, we cannot support the trial court's conclusion

that Tagayun's contention that she had not waived her right to

litigate her contract claims in court was frivolous even though

her claim was unsuccessful. Although Tagayun is bound by the

decision of the Appellate Division affirming the dismissal of

her action, the fact she lost that battle does not mean her

contentions were frivolous. In light of the holding in Atalese,

her position cannot be described as frivolous under the

controlling legal standards set forth above, which apply both to

the rule and statute governing frivolous litigation.

As to Mandell, it is clear he was not a party to the

contract. The trial court properly dismissed his claims for

lack of standing. He was advised by letter from defendant's

counsel that he was not a party to the contract and lacked

standing. His refusal to accept this fact and to agree to be

10 A-1628-13T1 dismissed as a party to the action, however, was not frivolous

under the controlling legal standards we set forth below which

apply to both the rule and the statute governing frivolous

litigation. The primary difference being that the rule governs

awards against attorneys and self-represented litigants while

the statute governs sanctions against parties.

The rule and statute must both be interpreted strictly

against the applicant for an award of fees. See LoBiondo v.

Schwartz, 199 N.J. 62, 99 (2009); DeBrango v. Summit Bancorp,

328 N.J. Super. 219, 226 (App. Div. 2000). This strict

interpretation is grounded in "the principle that citizens

should have ready access to . . . the judiciary." Belfer v.

Merling, 322 N.J. Super. 124, 144 (App. Div.), certif. denied,

162 N.J. 196 (1999). "The statute should not be allowed to be a

counterbalance to the general rule that each litigant bears his

or her own litigation costs, even when there is litigation of

'marginal merit.'" Ibid. (citation omitted). Sanctions should

be awarded only in exceptional cases. See Iannone v. McHale,

245 N.J. Super. 17, 28 (App. Div. 1990). "When the plaintiff's

conduct bespeaks an honest attempt to press a perceived, though

ill-founded and perhaps misguided, claim, he or she should not

be found to have acted in bad faith." Belfer, supra, 322 N.J.

Super. at 144-45. The party seeking sanctions bears the burden

11 A-1628-13T1 to prove bad faith. Ferolito v Park Hill Ass'n, 408 N.J. Super.

401, 408 (App. Div.), certif. denied, 200 N.J. 502 (2009).

Moreover, the grant of a dispositive motion, without more, does

not suffice to establish a losing party's bad faith. Ibid.

Sanctions for frivolous litigation are not imposed because

a party is wrong about the law and loses their case. The nature

of conduct warranting sanction under Rule 1:4-8 and under the

statute has been strictly construed. The term frivolous should

not be employed broadly or it could limit access to the court

system. First Atl. Fed. Credit Union v. Perez, 391 N.J. Super.

419, 432-33 (App. Div. 2007). Imposing sanctions is not

appropriate where a party "has a reasonable good faith belief in

the merit of his action." J.W. v. L.R., 325 N.J. Super. 543,

548 (App. Div. 1999). In discussing the frivolous litigation

statute, the Supreme Court, in McKeown-Brand v. Trump Castle

Hotel & Casino, 132 N.J. 546, 561-62 (1993), explained the

legislative history as follows:

The predecessor bill, A. 1086, allowed the prevailing party to recover fees from the non-prevailing party if that party's pleading was "not substantially justified." In the course of the legislative process, the term "frivolous" replaced "not substantially justified." Senate Judiciary Committee Statement to Assembly Committee Substitute for A. 1086, 2029, 783, and 1260 (Oct. 2, 1986). Indeed, the Governor's conditional veto message noted the "bill's restrictive definition of 'frivolous.'" The

12 A-1628-13T1 replacement of "not substantially justified" with "frivolous" reflects the legislative intent to limit the application of the statute. That limitation is consistent with the premise that in a democratic society, citizens should have ready access to all branches of government, including the judiciary. See Iannone, supra, 245 N.J. Super. at 27 (stating that limitation on award of counsel fees "promotes the goal of equal access to the court irrespective of economic status"). In brief, the Legislature resolved the tension between the competing goals of equal access to the courts and the avoidance of the costs of unnecessary litigation by favoring access over cost-avoidance.

Since we conclude the trial judge's finding that the

original complaint was frivolous is unsupported, we reverse and

vacate the order of May 1, 2013. As to Mandell, we are also

constrained to reverse the order of the trial judge that awarded

sanctions against him in connection with the original complaint.

He presented an argument to the court that he had standing as a

third-party beneficiary of the contract. The judge properly

declined to accept that argument, but an award of sanctions was

not warranted simply because Mandell misconstrued the law.

However, we find the trial judge did not abuse her

discretion in finding the filing of an amended complaint by both

plaintiffs asserting the same claims that had just been

dismissed by the court and adding defendants' counsel as parties

was frivolous. Tagayun had been advised by the court their

13 A-1628-13T1 claims had to be arbitrated. Plaintiffs had a right to appeal

those decisions and in fact they availed themselves of that

right the day after they filed their amended complaint. They

had no right to force the defendants to defend an amended

complaint asserting the same claims that had just been

dismissed. At that point, Mandell had been told by the judge he

had no standing to assert any claims under the contract and he

was not a beneficiary of the contract. We therefore affirm the

May 9, 2013 order finding the amended complaint was frivolous

and imposing sanctions.

We conclude Judge Taylor properly limited his role to

determining the amount of fees that should be awarded.

Plaintiffs' first appeal of the sanctions was dismissed as

interlocutory and remanded for determining the total amount of

the attorney fees. Plaintiffs' argument that Judge Taylor

should have reconsidered the prior decision of the first judge

lacks sufficient merit to address in a written opinion. R.

2:11-3(e)(1)(E).

As to the amount of fees awarded by Judge Taylor, we affirm

for the reasons he expressed in his comprehensive oral decision

from the bench on October 22, 2013.

The judgment of $10,073.20 for frivolous filing of the

original complaint is vacated as to both plaintiffs. We affirm

14 A-1628-13T1 the May 9, 2013 order ordering sanctions for frivolous filing of

the amended complaint and affirm the October 30, 2013 order

imposing sanctions in the amount of $6,599.40. We remand to the

trial judge to reduce and amend the final judgment to $6,599.40

against both plaintiffs jointly, severally, and in the

alternative.

Affirmed in part, reversed in part, and remanded for

amendment of the amount of the judgment. We do not retain

jurisdiction.

15 A-1628-13T1