STATE OF NEW JERSEY VS. LUIS A. DIAZ(13-04-0589, BERGEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: October 18, 2017
• Docket: A-1400-15T1
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1040-15T4

KAREN DEMARTINI and ANDREW HAVEN,

Plaintiffs-Appellants,

v.

ROBERT BERLIN, individually and t/a T.F.J. FITNESS LLC, EDWARD LEVIN, FERNANDO BARRESE, JILL BERLIN, individually and T.F.J. FITNESS LLC,

Defendants,

and

RETROFITNESS, LLC,

Defendant-Respondent.

Argued April 5, 2017 – Decided May 8, 2017

Before Judges Alvarez, Manahan, and Lisa.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3888-10.

Craig Hilliard argued the cause for appellants (Stark & Stark, attorneys; Mr. Hilliard and Gene Markin, of counsel and on the briefs). Justin M. Klein argued the cause for respondent (Marks & Klein, LLP, attorneys; Mr. Klein, on the brief).

PER CURIAM

Plaintiffs Karen DeMartini and Andrew Haven appeal from the

Law Division's October 24, 2014 grant of summary judgment to

defendant Retrofitness, LLC (Retro), dismissing their third

amended complaint.1 For the reasons stated by Judge Dennis O'Brien

in his thoughtful and cogent decision, we affirm.

Plaintiffs initially contacted Retro, a gym franchisor, in

2007 regarding their interest in opening a franchise at their

athletic facility premises. Retro's corporate office sent Berlin,

who owned a franchise in Wallington and served as a salesman for

the company, to meet with them regarding the process. Because

acquisition of a franchise would have called for retrofitting the

building DeMartini had just renovated, plaintiffs did not pursue

the matter further.

In December 2008, after selling the building they previously

owned, plaintiffs again contacted Retro regarding a franchise and

met with Berlin, who delivered a franchise application. In mid-

January 2009, DeMartini gave Berlin $49,220 in cash to deliver to

1 A footnote in plaintiffs' brief states that the matter was later tried against defendant Robert Berlin. Plaintiffs obtained a judgment totaling $496,771.48, based on claims of fraud, breach of contract, and breach of fiduciary duty.

2 A-1040-15T4 Retro for the franchise purchase, and she later signed the

agreement at Retro headquarters.

Some weeks after that, Berlin contacted plaintiffs regarding

another business proposition. He visited their home, and told

them that Retro wanted to expand its East Coast presence into

Margate, Florida, and that for a $500,000 initial investment in

the project, they could acquire a twenty-five percent interest.

Berlin mischaracterized Retro's awareness of plaintiffs'

involvement in the Margate project. He also incorrectly assured

them that they could indefinitely delay developing the New Jersey

franchise they had already purchased. Plaintiffs believed,

mistakenly, that Berlin was selling them a share in a successful

enterprise in which he had a financial stake.

Plaintiffs gave Berlin a total of $240,000 as the down payment

for their interest in the Margate project by September 23, 2009.

The balance of $260,000 was to be paid into the business from

their twenty-five percent share of the profits.

In May 2010, Berlin obtained an additional $50,000 from

plaintiffs as a short-term loan, on the pretense that the money

was urgently needed by one of Berlin's partners. He gave them

post-dated checks to pay the money back, which did not clear. By

August 2010, the checks had failed to clear and plaintiffs learned

3 A-1040-15T4 that they had no interest whatsoever in the Margate venture, which

had collapsed.

When Berlin was engaged by Retro to act as their salesman,

the company was apparently unaware that his life insurance license

had been revoked for questionable practices by New Jersey's

Department of Banking and Insurance. Berlin's responsibility as

a Retro salesperson was limited to providing prospective

franchisees with purchase documents and explaining the process,

as he did with plaintiffs regarding their New Jersey venture. He

did not evaluate applicants, and had no review or approval role

with the company as to franchise applications. Berlin's status

was as an independent contractor, not an employee.

DeMartini acknowledged in deposition that Retro became aware

of plaintiffs' involvement in the Margate project only months

after she had paid Berlin the $240,000 towards the investment.

Retro's chief financial officer certified that the company had no

knowledge of the problems at the failed Margate gym until September

2010, approximately one year after plaintiffs' investment in the

business. Nor was Retro aware of Berlin's involvement with the

site, as he was neither a franchisee nor an owner. In his

deposition, Berlin stated he was "sure" that he had "told somebody

at Retrofitness Corp. that [plaintiffs] were going to be []

partner[s] in Margate . . . . I think I mentioned it to somebody."

4 A-1040-15T4 Judge O'Brien held that plaintiffs could not establish an

agency relationship between Retro and Berlin, actual or apparent,

nor could they demonstrate negligent hiring. He carefully

considered each and every cause of action alleged, concluding that

even viewing the facts in the light most favorable to plaintiffs,

they had no legal basis for imposing legal liability upon Retro.

The franchisor/franchisee relationship alone was not sufficient.

The franchise agreement, with which plaintiffs were familiar, as

they had signed one with regard to their New Jersey project,

explicitly made franchisees independent contractors and

"completely separate entities . . ." from Retro. The agreement

further stated that neither party was the agent of the other "in

any sense."

DeMartini acknowledged that when she invested in the Florida

gym, she understood that the business was a franchise, an entity

distinct and separate from Retro. She also understood that when

Berlin approached plaintiffs, he was acting on behalf of the

Florida franchise and not on behalf of Retro. As a result, Judge

O'Brien held "[t]hese uncontested facts demonstrate there was not

enough control exerted by [Retro] over the Margate location or

[the entity that operated the gym] to constitute a

principal[-]agency relationship." Plaintiffs could not

demonstrate actual authority on these facts.

5 A-1040-15T4 Since Retro had not acted with regard to the Margate site

after the franchise was purchased, and Berlin did not represent

that he was acting as Retro's agent with regard to it, he did not

have apparent authority which would bind the company. His

statement that Retro wanted to expand its East Coast presence did

not vest him with apparent authority to act in the company's

behalf.

The judge reached a similar conclusion with regard to the

negligent hiring claim. The financial losses suffered by

plaintiffs as a result of their interaction with Berlin did not

arise "from Berlin's actions [as] an independent contractor

salesman for Retro." The harm they suffered flowed from his

representation of the Margate venture, which plaintiffs knew was

a franchise of Retro, and therefore a separate entity. Retro in

turn was unaware of plaintiffs' investments in the Florida gym

made at Berlin's urging. Plaintiffs did not consult the company

regarding their decision. Accordingly, the judge found the claim

of negligent hiring was not supported by the facts. He also

discussed and dismissed plaintiffs' remaining causes of action

against Retro, which dismissals are not being appealed.

Plaintiffs reiterate that there were sufficient issues of

material fact regarding agency and negligent hiring that summary

judgment should not have been granted. They take the position

6 A-1040-15T4 that, as a matter of law, they have demonstrated sufficient

circumstances supporting their theories of recovery against Retro

to warrant reversal.

I.

We review the grant of summary judgment employing the same

standard as the motion judge. Bhagat v. Bhagat, 217 N.J. 22, 38

(2014). We consider "the competent evidential materials submitted

by the parties to identify whether there are genuine issues of

material fact and, if not, whether the moving party is entitled

to summary judgment as a matter of law." Ibid.; R. 4:46-2(c).

The facts are viewed in the light most favorable to the non-

moving party, Robinson v. Vivirito, 217 N.J. 199, 203 (2014),

keeping in mind that an issue is "genuine only if, considering the

burden of persuasion at trial, the evidence submitted by the

parties on the motion, together with all legitimate inferences

therefrom favoring the non-moving party, would require submission

of the issue to the trier of fact." R. 4:46-2(c). More is

necessary than bare conclusions lacking factual support, Petersen

v. Twp. of Raritan, 418 N.J. Super. 125, 132 (App. Div. 2011),

self-serving statements, Heyert v. Taddese, 431 N.J. Super. 388,

413-14 (App. Div. 2013), or disputed facts "of an insubstantial

nature." Pressler & Verniero, Current N.J. Court Rules, comment

2.1 on R. 4:46-2 (2016).

7 A-1040-15T4 When the evidence is so one-sided that the moving party must

prevail as a matter of law, summary judgment should be granted.

Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

II.

Plaintiffs claim that an agency relationship existed, and

that Berlin's interactions as a Retro salesman established the

franchisor's legal liability despite the franchisor/franchisee

relationship. The standard form franchise agreement, however,

between Retro and plaintiffs regarding their New Jersey

investment, clearly stated that the franchisor and franchisee are

separate entities, not responsible for the actions of the other.

Thus despite Berlin's status as a salesman for Retro when

plaintiffs were purchasing their New Jersey franchise, they had

no basis to believe he was acting in that capacity with regard to

the Margate site, an already established franchise. Plaintiffs

do not suggest any action taken by Berlin regarding the Margate

project which demonstrated actual authority. The grant of summary

judgment was proper on this theory of recovery as it is not

supported by facts.

With regard to apparent authority, we agree with the trial

judge that to bind the principal, the principal must have acted

in such a way as to mislead a third party into believing an agency

relationship existed. See Mercer v. Weyerhaeuser Co., 324 N.J.

8 A-1040-15T4 Super. 290, 317 (App. Div. 1999). The doctrine focuses on the

reasonable expectations of innocent third parties. In making the

determination, the totality of the circumstances are taken into

consideration. N.J. Lawyer's Fund for Client Prot. v. Stewart

Title Guar. Co., 203 N.J. 208, 220 (2010). The determination

requires scrutiny of "the actions of the principal, not the alleged

agent." Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 497 (App.

Div.), certif. denied, 177 N.J. 224 (2003).

After full discovery, plaintiffs cannot refute Retro's

position that it was not aware of Berlin's involvement with

Margate, as he was neither a franchisee nor an owner. Nor was

Retro aware of plaintiffs' involvement with the project until

months after they had made their investment. Plaintiffs cannot

identify any conduct by Retro that would have caused them to

believe that Retro authorized Berlin to engage in the transaction.

As DeMartini admitted at deposition, Berlin did not say he

was acting on Retro's behalf. Retro played no role in the decision

to invest in Margate. See Sears Mortg. Corp. v. Rose, 134 N.J.

326, 345 (1993).

III.

Plaintiffs' claim for negligent hiring also fails. Whether

Retro was aware of Berlin's past history is not relevant because

when he convinced plaintiffs to invest in Margate, he was not

9 A-1040-15T4 acting in his capacity either as a salesman or a franchise holder

for Retro. His communications with plaintiffs in that capacity

were limited to the New Jersey transaction, about which plaintiffs

do not complain. Even in his capacity as salesman, Berlin's role

was limited to an initial meeting with potential franchisees and

the delivery of documents. He did not review applicants or process

their applications.

Berlin's contacts with plaintiffs with regard to the Margate

investment were different from his conduct when they purchased a

franchise in New Jersey. He did not present documents for their

signature. Berlin actively pursued their investment, and made no

mention of Retro other than his initial statement that the company

wanted to begin marketing outside of New Jersey. Berlin was not

an employee, but an independent contractor. His discussions with

plaintiffs regarding the Margate property were unrelated to

plaintiffs' purchase of a franchise. DeMartini acknowledged that

Berlin's representations were solely on behalf of the Margate gym,

not Retro. Retro was entitled to summary judgment on this cause

of action as well.

IV.

In the absence of any proof that Retro solicited, condoned,

or had knowledge that Berlin procured plaintiffs' investment in

Margate, summary judgment was properly granted. Looking at the

10 A-1040-15T4 facts in the light most favorable to the non-moving party, they

are simply insufficient to establish actual authority, apparent

authority, or negligent hiring. We agree with Judge O'Brien that

there are no genuine issues of material facts. No reasonable jury

could decide the issue in plaintiffs' favor, and Retro was entitled

to judgment as a matter of law. Brill, supra, 142 N.J. at 540.

Affirmed.

11 A-1040-15T4