Kaye v. Rosefielde

• Decision Date: 16 August 2013
• Citation: 432 N.J.Super. 421,75 A.3d 1168
• Parties: Bruce KAYE, Individually and as Trustee of the Bruce Kaye Revocable Trust and the Bruce Kaye Dynasty Trust, Jason Kaye, Flagship Resort Development Corporation, First Resorts Management Company, Inc., Atlantic Palace Development, LLC, and LA Sammana Ventures, LLC, Plaintiffs–Respondents/Cross–Appellants, v. Alan P. ROSEFIELDE, Plumrose Company, Inc., and Rose Associates, Inc. of Miami, Defendants/Third–Party Plaintiffs–Appellants/Cross–Respondents, and LA Sammana Management, LLC, and BA Management, LLC Defendants, v. Deborah Kaye and 2000 Bruce Kaye Dynasty Trust, Third–Party Defendants, and Howard Alter, Susan Tunney, Michael Valenti, Ronnie Stransky, Kenneth Wolfe, and Dennis Richard, Third–Party Defendants/Respondents.
• Court: New Jersey Superior Court

432 N.J.Super. 421

75 A.3d 1168

Bruce KAYE, Individually and as Trustee of the Bruce Kaye Revocable Trust and the Bruce Kaye Dynasty Trust, Jason Kaye, Flagship Resort Development Corporation, First Resorts Management Company, Inc., Atlantic Palace Development, LLC, and LA Sammana Ventures, LLC, Plaintiffs–Respondents/Cross–Appellants,

v.Alan P. ROSEFIELDE, Plumrose Company, Inc., and Rose Associates, Inc. of Miami, Defendants/Third–Party Plaintiffs–Appellants/Cross–Respondents,andLA Sammana Management, LLC, and BA Management, LLC Defendants,

v.Deborah Kaye and 2000 Bruce Kaye Dynasty Trust, Third–Party Defendants,andHoward Alter, Susan Tunney, Michael Valenti, Ronnie Stransky, Kenneth Wolfe, and Dennis Richard, Third–Party Defendants/Respondents.

Superior Court of New Jersey, Appellate Division.

Argued Nov. 2, 2011.

Decided Aug. 16, 2013.

Steven J. Fram argued the cause for appellants/cross-respondents (Archer & Greiner, and Marshall, Dennehey, Warner, Coleman & Goggin, attorneys; Mr. Fram and John L. Simm, of counsel; Mr. Fram, John C. Connell, and Benjamin D. Morgan, Haddonfield, on the brief).

Edwin J. Jacobs, Jr., argued the cause for respondents/cross-appellants (Jacobs & Barbone, attorneys; Mr. Jacobs, Louis M. Barbone, and Stephen F. Funk, Atlantic City, on the brief).

Zucker Steinberg Sonstein & Wixted, P.C., attorneys for respondents Susan Tunney, Howard Alter, Ronnie Stransky, and Michael Valenti, join in the brief of respondent/cross-appellant, Bruce Kaye.

Before Judges FUENTES, GRAVES, and HARRIS.

The opinion of the court was delivered by

FUENTES, P.J.A.D.

This case has been besieged by an inordinate amount of complications, some inherent to the issues raised by the parties, others created by a series of unfortunate and misguided decisions of the first judge who presided over the case. We are compelled to address some of the root causes of these problems to adequately review and resolve the legal issues raised by the parties in this appeal. While going about this task, we are mindful to prevent matters extraneous to the appellate process from interfering with our overriding responsibility to provide the parties in this controversy what they are entitled to receive from us: a fair and impartial application of the law to the factual record developed before the trial court.

Although technically there are a number of parties named as litigants in this case, distilled to its essence, this is a civil dispute between two main actors, plaintiff Bruce Kaye and defendant Alan Rosefielde. These two men once enjoyed each other's company and respected each other's business acumen. Their professional association appeared mutually beneficial at its inception and held great promise for continued prosperity. Since matters went awry, however, Kaye and Rosefielde have pursued their respective claims against each other with the same passion and zeal that once characterized their success in business. With these observations as prologue, we will now identify the other parties in the case.

In addition to Kaye, plaintiffs include: La Sammana Ventures, LLC (La Sammana); First Resorts Management Company, Inc.; Flagship Resort Development, Corp. (Flagship); Atlantic Palace Development, LLC (Atlantic Palace); two trusts created by Kaye, the Bruce Kaye Irrevocable Trust and the Bruce Kaye Dynasty Trust; and Kaye's son, Jason Kaye (Jason).¹ In addition to Rosefielde, defendants include: two companies under his ownership and control, Plumrose Company, Inc. (Plumrose), and Rose Associates, Inc. (Rose Associates); and two other companies that he co-owned with entities or individuals that were associated with Kaye, La Sammana Management, LLC, and BA Management, LLC (BA Management).²

Rosefielde had an employment relationship with Flagship, Atlantic Palace, and La Sammana, three entities that sold timeshares to consumers. Kaye hired Rosefielde to be the chief operating officer (COO) of Flagship. Rosefielde also assisted Kaye in managing Atlantic Palace and its related companies. Although the parties disagree as to when Rosefielde assumed the role of general counsel, it is not disputed that, at some point prior to 2005, Rosefielde assumed this role with respect to all of the entities that Kaye had an ownership interest in.

In 2005, plaintiffs filed a complaint in the Atlantic County Chancery Division, alleging that Rosefielde breached his fiduciary responsibility to plaintiffs “[d]uring his tenure as General Counsel,” was an unfaithful servant, committed civil fraud, illegally practiced law in New Jersey, and committed legal malpractice through a series of unethical machinations and fraudulent transactions. Plaintiffs alleged that Rosefielde committed these civil wrongs to conceal his unethical, illegal schemes and to improperly enrich himself at plaintiffs' expense.³

Rosefielde filed a responsive pleading, denying all wrongdoing, and a counterclaim, alleging that he was terminated from his employment as Flagship's COO in violation of an oral contract and in retaliation for objecting to what he reasonably believed were criminal and unethical activities engaged in or directed by Kaye to defraud the Federal Trade Commission and bribe Atlantic City officials. Rosefielde also grounded his counterclaim on the protections afforded to whistleblowers in the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19–1 to –8. Rosefielde demanded a jury trial in his responsive pleading to Kaye's complaint and reiterated the demand for a jury trial in his counterclaim, which raised independent affirmative claims for relief. Kaye also demanded a jury trial in his answer to Rosefielde's counterclaim.

I

This case was first assigned for case management and, if necessary, trial to Judge Steven P. Perskie.⁴ For reasons explained in detail by the Supreme Court in In re Perskie, 207 N.J. 275, 24 A.3d 277 (2011), the case was transferred in October 2006 from Judge Perskie and reassigned to Judge William E. Nugent. 207 N.J. at 281–84, 24 A.3d 277. After an eight-week bench trial, Judge Nugent decided the case primarily in plaintiffs' favor. Although Judge Nugent denied plaintiffs' application to compel Rosefielde to disgorge his salary, Judge Nugent rescinded Rosefielde's interests in three Kaye entities, awarded plaintiffs compensatorydamages, punitive damages, and counsel fees, and dismissed Rosefielde's counterclaim.

On appeal, defendants assert that: (1) Judge Nugent erred in finding that Rosefielde violated certain sections of the Rules of Professional Conduct governing the practice of law in this State, specifically with respect to the La Sammana entities; (2) Rosefielde was entitled to indemnification; (3) the punitive damages award was unwarranted; (4) the facts did not establish that Rosefielde breached any fiduciary duty; (5) plaintiffs' “fraudulent deed” claims should have been barred pursuant to the entire controversy doctrine; (6) the decision in plaintiffs' favor improperly reliedon inadmissible evidence; (7) the trial court improperly denied Rosefielde's right to a jury trial on his CEPA and breach of contract claims; and (8) the integrity of the trial was compromised by Judge Perskie's recusal and subsequent appearances at the proceedings before Judge Nugent. Defendants seek a complete and total reversal of the outcome of the bench trial conducted by Judge Nugent, and request that the case be remanded to a different venue to allow Rosefielde's claims that are entitled to be decided by a jury to be tried separately from the claims that assert purely equitable relief.

On cross-appeal, plaintiffs contend that the trial court erred in not ordering disgorgement of Rosefielde's salary based on his breach of fiduciary duty and disloyalty to Kaye and his business entities. Plaintiffs also seek disgorgement of Rosefielde's salary as general counsel (a/k/a in-house counsel ⁵ ), because he did not adhere to the ethical rules and procedural safeguards established by the Supreme Court to regulate this particular aspect of the legal profession and was not otherwise authorized to practice law in this State. Finally, plaintiffs argue that the trial court should have compelled defendants to reimburse three of the individuals who were deposed by Rosefielde in connection with this case for their out-of-pocket expenses and consequential loss of pay.

After carefully reviewing the massive record ⁶ developed by the parties before the trial court, we affirm, in part, reverse in part, and remand for further proceedings.

As a threshold issue, we affirm Judge Nugent's invocation and application of the doctrine of ancillary jurisdiction to deny Rosefielde's motion to enforce his demand for a jury trial on his breach of contract and CEPA claims, which were asserted in his counterclaim. Although, under Article I, paragraph 9 of the New Jersey Constitution, a legal action alleging a breach of contract is ordinarily tried before a jury, and notwithstanding the legislative language that “[u]pon the application of any party, a jury trial shall be directed to try the validity of any claim under” CEPA, N.J.S.A. 34:19–5, we are satisfied that Judge Nugent correctly construed the Supreme Court's holding in Lyn–Anna Properties v. Harborview Development Corp., 145 N.J. 313, 678 A.2d 683 (1996), and properly exercised his discretionary authority to adjudicate the counts in Rosefielde's counterclaim that sought purely legal relief in the form of compensatory damages.

With this holding as backdrop, we affirm Judge Nugent's decision to rescind Rosefielde's ownership interests in La Sammana, La Sammana Management, and BA Management, three business entities principally owned by Kaye, as well as the compensatory damages awarded to Kaye in connection with these transactions. With respect to plaintiffs' claims of legal malpractice and civil fraud, there is sufficient competent evidence in the record to support Judge Nugent's findings that Rosefielde violated his...