Tagayun v. AmeriChoice of N.J., Inc.

• Decision Date: 28 June 2016
• Citation: 144 A.3d 909,446 N.J.Super. 570
• Court: New Jersey Superior Court — Appellate Division
• Parties: Myrna B. Tagayun and Robert S. Mandell, Plaintiffs-Appellants, v. AmeriChoice of New Jersey, Inc., a New Jersey corporation, d/b/a United Healthcare Community Plan; 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.

446 N.J.Super. 570

144 A.3d 909

Myrna B. Tagayun and Robert S. Mandell, Plaintiffs-Appellants,

v.AmeriChoice of New Jersey, Inc., a New Jersey corporation, d/b/a United Healthcare Community Plan; 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.

Superior Court of New Jersey, Appellate Division.

Submitted September 17, 2015

Decided June 28, 2016

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

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

Before Judges Lihotz, Fasciale and Higbee.

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.

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 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 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 $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 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, 887 A .2d 1191 (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.

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 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...