Category Archives: New Jersey

Does the Omission of Drink Prices on a NJ Restaurant’s Menu Violate the NJ Truth in Consumer Contract Warranty And Notice Act?

Does a restaurant menu constitute a notice or sign pursuant to New Jersey’s Truth in Consumer Contract Warranty and Notice Act (“Act”)? If so, would the omission of prices from a menu violate the Act? In Watkins v. DineEquity Inc., 11-7182 (D.N.J. August 28, 2012),  the District Court of New Jersey recently answered the former question in the positive, and the latter question in the negative.

In that case, a class action was brought against DineEquity Inc., Applebees Neighborhood Grill and Bar and International House of Pancakes, LLC (collectively “Defendants”). Defendants offered certain drinks on their menu without listing the prices.   Candice Watkins (“Plaintiff”) alleged in her
complaint that Defendants’ practice of omitting drink prices from their menu violated the Act. Id. at 2.

Plaintiff filed her complaint in the Superior Court of New Jersey, Law Division (“State Court”). Subsequently, Defendants removed the action from the State Court to the United States District Court for the District of New Jersey (“Federal Court”) based on diversity jurisdiction. Plaintiff argued that “offering such beverages for sale without indicating the prices violates New Jersey Law, in the [Act], and is contrary to clearly established New Jersey law requiring point-of-purchase notice of an item’s
selling price.” Id.  at 2.  Defendants filed a Rule 12(b)(6) motion to dismiss the lawsuit for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6); Id.

The Court explained that in order for the case to survive Defendants’ motion to dismiss, Plaintiff needed to establish on its face that Defendant violated the Act. Plaintiff was required to show that the
following four (4) elements were met:

(1) the plaintiff was a consumer within the statute’s definition;

(2) the defendant was a seller, lessor, creditor, lender or bailee;

(3) the defendant (a) offered or entered into a written consumer contract or (b) gave or displayed any written consumer warranty, notice, or sign; and

(4) the offer or written contract, warranty, notice or sign included a provision that violated any clearly established legal right of a consumer or responsibility of a seller

Id. at 6.

Element One

The Court addressed element one minimally. It merely stated that the Act defined “consumer” as “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.”  N.J. Stat. Ann. § 56:12-15. The Court presumed element one was satisfied and did not proceed further with its analysis. Id. at 6 n.3.

It is possible that it based its determination on the fact that Plaintiff was an individual who purchased drinks for personal consumption rather than resale.

Element Two

The Court did not address element two. However, presumably Plaintiff was able to satisfy it because Defendants were considered “sellers” of food and drink items to the public.

Element Three

The Court held that element three was satisfied. It explained that a menu “fits within the definition of a notice or sign, or both, as presented in the [Act’s] context of a consumer transaction because a restaurant menu is a written document that announces menu items and identifies the specific food and
beverage products offered for sale by the restaurant.” Id. at 15.

Further, the Court considered Black’s Law Dictionary’s definition of “offer” which was, “The act or instance of presenting something for acceptance.” Black’s Law Dictionary 1189 (9th ed. 2009);  Id.
at 10. On this basis, it held that “a restaurant menu may be considered an offer, a notice, and a sign for [Act] purposes.” Id. at 15.

Element Four

Element four was not satisfied. It held the Act applied solely to illegal terms and provisions that are included, in writing, in the statutorily significant documents (i.e. an offer, notice, or a sign). Omitted
language was not sufficient to invoke the Act’s protections. Id. at 19. The Court reasoned that the
phrase in element four, “which includes any provision”, refered to inclusions not omissions. Id. at 16.

The Court highlighted a very interesting distinction between something that is omitted and something that is included. It explained that when something is omitted, that can include a very large range of possible items. However, when something is included, the range of possible items is much more narrow. Therefore, since the statute was limited solely to items that were included on the menu, it would have been an unfair expansion of the intent of the statute to include items that were omitted, as well. The Legislature was “concerned with contracts, warranties, notices and signs that include illegal
provisions intended to ‘deceive[] a consumer into thinking that they are enforceable . . . .’” (in other words, items that were included).  Id. at 14.

Accordingly, the Court found that merely omitting drink prices from a restaurant menu without more did not state a claim under the Act. Id. at 23.  The Court did not find that omissions posed the “same risk of misleading a consumer into failing to enforce her legal rights as an affirmative misrepresentation . . . .” Id. at 22. Thus, it granted Defendants’ Rule 12(b)(6) motion to dismiss the lawsuit. It held that Plaintiff, under these circumstances, failed to make a claim upon which relief could be granted. Fed. R. Civ. P. 12(b)(6). Id. at 23.

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© 2013 Nissenbaum Law Group, LLC

What Types of “Housing-Related Disputes” Are Subject to Mandatory Alternate Dispute Resolution?

Under New Jersey’s Condominium Act, housing-related disputes are required to be settled via arbitration or a similar method of alternative dispute resolution (“ADR”). In a recent decision, the Appellate Division of the Superior Court of New Jersey clarified the types of disputes to which this applies and, hence, when ADR is and is not required. Bell Tower Condominium Association v. Haffert, Docket No. A-3218-10T2.

In that case, the plaintiff, Bell Tower Condominium Association (“Association”) owned a five-unit condominium in Sea Isle. The defendants, Pat Haffert and Terry Downey, owned one of the units. In May 2010, the Association’s Board approved an $80,000 special assessment for repairs. The Defendant Haffert was the fifth of the five Board members. Unfortunately, he was not present at the 2010 meeting during which the Board approved the assessment. Four of the unit owners were each assessed $14,400, but the defendants were assessed $22,400 because their unit was substantially larger than the other four. The defendants subsequently refused to pay the amount assessed to them.

The Association filed a complaint, demanding judgment in favor of the Association in the amount of $22,400 for the unpaid special assessment, as well as attorney’s fees and costs. The defendants filed a counterclaim asserting that the Association had failed to adhere to the Association’s Master Deed, bylaws and applicable statutes, and sought an order requiring arbitration or mediation of the dispute. The defendants relied heavily on a section of the Planned Real Estate Development Full Disclosure Act (“PREDFDA”), which requires condominium associations to establish an arbitration mechanism to resolve disputes between a condominium board and its unit owners. See N.J.S.A. 45:22A-44. However, a lower court determined that the PREDFDA requirements were inapplicable to condominiums containing fewer than ten units, and Bell Tower had only five. The lower court also concluded there was no genuine dispute about the validity of the assessment or the defendant’s obligation to pay their share. The court granted summary judgment in favor of the Association. The defendants appealed.

Upon review, the Appellate Division of the Superior Court of New Jersey considered whether the lower court erred when refusing to send the Association’s claim for judgment to arbitration. First, the Appellate Court noted that there is a strong public policy favoring arbitration, citing prior case law that held that “[l]itigation ought to be a last resort, not a first one.” Billig v. Buckingham Towers Condominium Association I, Inc., 287 N.J. Super. 551, 564 (App. Div. 1996). Additionally, the Appellate Division had previously construed the PREDFDA statute to require condominium associations to provide a means of resolving “housing-related disputes” as an alternative to litigation. See Finderne Heights Condominium Association, Inc. v. Rabinowitz, 390 N.J. Super. 154, 163 (App. Div. 2007).

The Bell Atlantic Court determined that the resolution of the appeal turned on whether the dispute between the Association and the defendants was a “housing-related dispute” within the meaning of N.J.S.A. 46:8B-14(k) (the statute did not define the term).  If the dispute was housing-related, the Association conceded that arbitration or some other method of ADR would be required.

Though the Court noted that the term “housing-related disputes” is broad, it is not ambiguous:

“In light of the autonomy that unit owners surrender by choosing to live in a condominium, we cannot agree with the Association that its management of the condominium’s common elements, and its imposition of special assessments, should be carved out as an exception to the broad right of unit owners to demand arbitration to resolve ‘housing related disputes.’…The term ‘housing-related disputes’ signifies that only disputes that arise from the parties’ condominium relationship are subject to the arbitration provisions of N.J.S.A. 46:8B-14(k). Any other dispute would be resolved either in the Law Division or in the municipal courts.”

Bell Tower at x.

The Court differentiated other disputes – such as an auto accident in a condominium parking lot – as examples of matters that would not be treated as “housing-related disputes.” The Court concluded that the dispute between the Association and the defendants did qualify as such a dispute under the language of the statute, and consequently, arbitration or other ADR was required to resolve the dispute.

“In sum, the strong public policy of this State favoring arbitration, the broad and unconditional language chosen by the Legislature when it used the term ‘housing-related disputes,’ and the present dispute’s origins in the disagreement over the scope of the special assessment, all compel the conclusion that under the statute, arbitration or other form of alternative dispute resolution is required.” Id. at x

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© 2012 Nissenbaum Law Group, LLC

When Does a Landlord’s Flat Legal Fee Violate the New Jersey Consumer Fraud Act?

May a landlord charge a tenant a fixed rate each time the landlord has to consult its lawyers for matters related to a lease agreement, even if that fixed rate is higher than the costs the landlord actually incurs?

The Appellate Division of the Superior Court of New Jersey considered this issue in a recent decision. Green v. Morgan Properties, Superior Court of New Jersey: Appellate Division (A-3203-10). In that case, the plaintiffs – tenants of apartment complexes owned by the defendant and landlord, Morgan Properties – were subject to a lease provision that required them to pay attorney’s fees of $400 plus costs anytime the landlord used the services of an attorney for any lease-related matter. The $400 fee applied regardless of whether or not litigation was commenced or whether the attorney was a member of the landlord’s in-house counsel. The landlord owned 131 apartment complexes in 10 states and filed an average of 200 evictions a month in Camden County alone.

The plaintiffs were sued on eviction complaints. In addition to alleging wrongful eviction, the plaintiffs also brought a claim under the Consumer Fraud Act (“CFA”), claiming that the attorney’s fees provision was unconscionable and that the landlord misrepresented the nature of the fees. The Law Division of the Superior Court of New Jersey in Camden County granted the defendant’s motion to dismiss, holding that a landlord is allowed to collect reasonable legal fees incurred in an eviction. The Court found the $400 fee to be reasonable. The plaintiffs appealed.

The Appellate Division rejected the plaintiffs’ claim that the landlord was barred from collecting attorney’s fees from tenants because it is represented by in-house counsel. However, the Court also found that the plaintiffs stated a claim upon which relief could be granted when they alleged that the landlord acted unlawfully in seeking legal fees that exceeded the costs incurred.

The Rules of Professional Conduct bar a non-lawyer from sharing in the fees of an attorney. R.P.C. 5.4 (a). An agreement between a lawyer and non-lawyer regarding the sharing of fees is void and unenforceable “because it is founded upon prohibited activity and is against public policy.” Green at 5 (citing Infante v. Gottesman, 233 N.J.Super. 310, 315 (App. Div. 1989).

Citing a Professional Ethics Opinion that dealt with this Rule of Professional Conduct, the Court stated that the “only situations in which a lawyer may properly permit a client to receive and retain fees paid by others on account of his legal services are when such payments are to reimburse the client in whole or in part for the client’s legal expenses actually incurred in the specific matter for which they are paid.” N.J. Adv. Comm. On Prof’l Ethics Opinion 93, 89 N.J.L.J. 248 (1966).

Though an attorney’s violation of the Rules of Professional Conduct does not give rise to a private cause of action against an attorney, the plaintiffs’ claims were directed instead against the non-attorney defendants, resting on an alleged illegality of the lease’s fees provision and misrepresentation of the nature of the fees sought. The Court held that the plaintiffs adequately alleged misrepresentation of the nature of the fees by showing that the defendants required legal costs of $400 when they had actually incurred costs much smaller than that. While fee-shifting provisions that set fixed amounts are sometimes allowable, they are subject to court review for their reasonableness. Id. at 6. The Appellate Court reversed and remanded the lower court’s decision on that basis.

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© 2012 Nissenbaum Law Group, LLC

Which state has jurisdiction when the sale of New Jersey real estate is handled by a New York law firm?

The Appellate Division of the New Jersey Superior Court  has refortified the commitment to holding persons responsible for actions they take in one state but knowing it will or might have a tendency to have an effect in another. Lee v. Rah, 2011 WL 2802794 (N.J.Super.A.D.,2011).

This case is about Rah, a New York attorney, who did not practice in New Jersey, but drafted documents for his clients regarding the ownership and sale of a piece of real estate in New Jersey. Rah performed all the work in his New York office. He also claimed that at all times the deed for the real estate was held in escrow in New York, and it was never recorded in New Jersey. Also, the fees for his services were paid by a New York Corporation. When the Lees tried to sell their real estate, the transaction went sour because the documents Rah drafted had not been recorded and, even if they had been, were improper because they were drafted on a New York form. Thereafter, the Lees sued Rah in New Jersey for malpractice.

Rah moved to dismiss the action on the grounds that he was not subject to the Court’s jurisdiction in New Jersey. The lower court agreed and dismissed the complaint on the grounds of lack of in personam (personal) jurisdiction. The Appellate Division disagreed and reinstituted the lawsuit. The Court held that Rah provided legal services for the transfer and sale of a New Jersey property. Although all of Rah’s activities occurred in New York, he was handling a New Jersey transaction for New Jersey residents. Therefore, even though Rah had no presence in the state of New Jersey, he “was well aware that his legal activities ‘would have direct consequences in New Jersey’”. Id. at 5.  This meant that Rah could not avoid a New Jersey lawsuit by remaining in New York to do work related to New Jersey real estate. Any malpractice attributed to him regarding the real estate would have a predictable impact in New Jersey and, thus, New Jersey was well within its rights to exercise its judicial authority over Rah.

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© 2011 Nissenbaum Law Group, LLC

May an oral settlement agreement reached through mediation be enforced by the court?

In a recent case, the Appellate Division of the Superior Court of New Jersey held that an oral settlement agreement reached during a mediation session could be enforced. However, the party seeking to enforce the mediator’s decision would need to waive his right to confidentiality of the mediation proceedings.  N.J. Ct. Rule 1:40-4(d).  Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C.  421 N.J. Super. 445 (N.J. Super. 2011).

On Feb. 2, 2005, plaintiff agreed to sell a Willingboro Township property to defendants. Id. at 449.  In a separately executed indemnification agreement, the defendants also agreed to pay the fines and penalties imposed on the property by the township. Id. On Aug. 22, 2005, plaintiff filed a foreclosure complaint alleging that the defendants defaulted on their obligation to pay the fines and penalties.  Id.  Defendants responded by asserting that foreclosure should not be granted because no such default had occurred. Id.

The General Equity Judge referred the parties to mediation. Id.  On November 6, 2007, the parties and their attorneys attended a mediation session at which the parties reached a settlement. Id. Three days after the mediation session, the defendant’s attorney sent a letter memorializing the terms of the settlement.  Id. Two weeks later, the defendants’ attorney sent another letter to the court and the plaintiff informing them that he had placed $100.000 in the escrow as settlement funds. Id. at 450.

Plaintiff claimed that no final, binding settlement agreement was reached at the mediation session. Id. Defendants’ responded by filing a motion to enforce the mediation settlement. Id.  Following discovery, five witnesses including the mediator testified at a hearing.  Id. at 451. The lower court held that the parties had reached a final, binding settlement at the mediation session. Id.  Plaintiff appealed, arguing that under Rule 1:40-4(i), the oral settlement was not enforceable because it did not meet the following criteria:

1)      It was not reduced to writing at the mediation session.

2)      A copy of the settlement was not given to each party.

3)      The parties did not sign the writing at the mediation session.

Id.

The Court considered the express terms of the rule governing mediation which states:
If the mediation results in the parties’ total or partial agreement, it shall be reduced to writing and a copy thereof furnished to each party. The agreement need not be filed with the court, but if formal proceedings have been stayed pending mediation, the mediator shall report to the court whether agreement has been reached. If an agreement is not reached, the matter shall be referred back to court for formal disposition.
            R. 1:40-4(i)

The Court held that the rule does not require the parties to reduce the settlement agreement to writing at the mediation session, nor does it provide that all parties should receive a copy of the writing before leaving the mediation session. Id. at 453. “A delay of three days to memorialize a settlement reached through mediation does not vitiate the settlement.” Id. at 454. Thus, the Court rejected the plaintiff’s argument that the rule requires “contemporaneous reduction of the terms to writing and obtaining signatures on the document at the mediation” session.  Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C.,  421 N.J. Super.  445, 453 (N.J. Super. 2011).

Accordingly, the oral agreement was enforceable.

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© 2011 Nissenbaum Law Group, LLC

May Attorneys Fees Be Awarded to a Prevailing Party Even When a Case Doesn’t Reach Trial?

In a recent case, the Appellate Division of the Superior Court of New Jersey held that a plaintiff can be awarded fees even when a case does not reach trial if the suit itself helped encourage a defendant to correct an unlawful practice. Sika Corp. v. Hostler, 2011 N.J. Super. LEXIS 1202 (App. Div. May 11, 2011).

In 2004, the plaintiff, Sika Corporation (“Sika”), hired the defendant, Joseph Hostler (“Hostler”), as the national sales manager of its chemical manufacturing company. Upon being hired, Hostler signed a contract that included a non-compete clause preventing him from disclosing the company’s confidential information; soliciting Sika customers or employees on behalf of a different employer within a year of being terminated; or working, without consent, with a competitor anywhere Sika does business. Id. The agreement also stated that “[i]n the event of a breach… , [plaintiff] shall be entitled to such injunctive relief and damages and also shall be entitled to reimbursement…of [plaintiff’s] reasonable attorneys’ fees and costs incurred by [plaintiff] in enforcing” the agreement. Id. at 2, 3.

In April 2009, Hostler notified Sika that he was leaving the company in order to take a position at BASF Group (“BASF”). Shortly after, Sika filed a complaint against Hostler, alleging that he breached his contract with Sika by emailing a customer contact list to his private email address; soliciting Sika’s customers on behalf of BASF while still employed by Sika; and soliciting Sika employees to work with him at BASF.

The lower court entered a preliminary injunction against Hostler and BASF in June 2009 and the parties reached a settlement embodied in a final consent order in September 2009. Sika later applied for attorney’s fees, arguing “that there had been “certain breaches” of the confidentiality agreement that caused it to file suit to enforce the agreement. Finally, plaintiff argued that Hostler had violated his duty of good faith and loyalty, which caused plaintiff to incur costs to enforce the agreement.” Id. at 7. On that basis, Sika argued that Hostler should pay Sika’s attorney’s fees.

However, the Court denied the motion and a subsequent motion for reconsideration. The Court  reasoned that it had been settled prior to moving past the preliminary injunction, and therefore, the Court had not made a final ruling on the merits of the case. On that basis, there was no finding that bad faith had occurred.

In a 2008 case, the New Jersey Supreme Court addressed the question of whether a litigant is entitled to exercise its right to attorneys fees on the basis of a contract that states attorneys fees will be paid to the “prevailing party.” The issue is how to determine who is the prevailing party if the case was settled before anyone could prevail in the conventional sense.

The test for determining whether someone is a prevailing party is whether the claimant can demonstrate:

1) a factual causal nexus between the plaintiff’s litigation and the relief ultimately achieved, and

2) that the relief ultimately secured by plaintiffs had a basis in law.

Mason v. City of Hoboken, 196 N.J. 51, 76 (2008). (“Put differently, a party prevails “when actual relief on the merits of [the] claim materially alters the relationship  [*18]  between the parties by modifying the defendant’s behavior in a way that directly benefits the plaintiff.” Id. at 73.)

In Sika, the Appellate Division decided that the lower court had raised the bar of the second prong too high. The Appellate Division agreed with Sika’s argument that the focus should be on whether the “plaintiff’s lawsuit acted as a catalyst that prompted defendant to take action and correct an unlawful practice.” Sika at 19. The Court held that

“[w]hether that resolution involves ‘a judicial decree, a quasi-judicial determination, or a settlement [is] not a factor.” Id.

The Court’s decision is significant because it allowed attorneys fees to a prevailing party that did not actually prevail in the conventional sense. In other words, it highlights the legal concept that a party can prevail (and be entitled to legal fees) even if it settles the case.

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© 2011 Nissenbaum Law Group, LLC