Robert T. Winzinger, Inc. v. Management Recruiters of Bucks County, Inc.

• Decision Date: 29 February 1988
• Docket Number: No. 87-5470,87-5470
• Citation: 841 F.2d 497
• Parties: ROBERT T. WINZINGER, INC. v. MANAGEMENT RECRUITERS OF BUCKS COUNTY, INC. and Theodore M. Mashack, Appellants, State of New Jersey, Intervenor.
• Court: U.S. Court of Appeals — Third Circuit

Page 497

841 F.2d 497

56 USLW 2518

ROBERT T. WINZINGER, INC. v. MANAGEMENT RECRUITERS OF BUCKS COUNTY, INC. and Theodore M Mashack, Appellants State of New Jersey, Intervenor.

No. 87-5470.

United States Court of Appeals Third Circuit.

Argued Jan. 7, 1988.

Decided Feb. 29, 1988.

Donald L. Goldman (argued), Cleveland, Ohio, for appellants.

Kathleen M. Calemmo (argued), Farr, Wolf & Lyons, P.C., Bellmawr, N.J. for appellee.

W. Cary Edwards, Atty. Gen. of N.J., Andrea M. Silkowitz, Asst. Atty. Gen., Margery F. Nathanson (argued), Deputy Atty. Gen., Newark, N.J. for intervenor.

Jerrold V. Moss, Robert P. Style, Catherine Panchou, Rubin, Quinn & Moss, Philadelphia, Pa., for amici curiae National Ass'n of Personnel Consultants, Indiana Ass'n of Personnel Consultants, Mid-Atlantic Ass'n of Personnel Consultants, New Jersey Ass'n of Personnel Consultants, Ohio Ass'n of Personnel Consultants, and Pennsylvania Ass'n of Personnel Consultants.

A. Bernard Frechtman, James E. O'Donnell, Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for amicus curiae Association of Personnel Consultants of New York State, Inc.

Before SEITZ, HUTCHINSON, and GARTH, Circuit Judges.

OPINION OF THE COURT

SEITZ, Circuit Judge.

Defendants Management Recruiters of Bucks County, Inc. ("Management Recruiters") and Theodore M. Mashack appeal the order of the district court granting summary judgment in favor of plaintiff Robert T. Winzinger, Inc. ("Winzinger"). This court has jurisdiction under 28 U.S.C. Sec. 1291 (1982).

I.

Winzinger is a New Jersey corporation engaged in the construction business, with its principal office in Hainesport, New Jersey. Management Recruiters, a Pennsylvania corporation, is a personnel placement service located in Newtown, Pennsylvania. Defendant Mashack is president of Management Recruiters.

The record contains the following undisputed facts. In early 1986, Management Recruiters learned that Winzinger was interested in hiring an estimator. An account executive from Management Recruiters telephoned Winzinger with information about a candidate for the position. Winzinger eventually filled the position with an individual who had been referred to the firm by Management Recruiters. In its dealings with Winzinger, Management Recruiters made approximately eight telephone calls and several mailings from its Pennsylvania office, but no representative of Management Recruiters physically entered New Jersey in connection with the transaction.

After Winzinger filled the estimator position, Management Recruiters demanded payment from Winzinger of an $11,100 placement fee pursuant to an alleged fee agreement. In anticipation of efforts to collect this fee, Winzinger filed an action against Management Recruiters and Mashack in the Superior Court of New Jersey. Winzinger sought a declaratory judgment that any alleged fee agreement between itself and Management Recruiters was void and unenforceable because Management Recruiters had not complied with the requirements of the New Jersey Private Employment Agency Act ("the Act"), N.J.Stat.Ann. Secs. 34:8-24 to -38 (West Supp.1987). Winzinger also sought to have Management Recruiters enjoined from attempting to enforce the alleged agreement.

The defendants removed the action to the district court on the basis of diversity of citizenship. In their answer to the complaint, they alleged, inter alia, that application of the Act to an employment agency located outside of New Jersey would be unconstitutional. They also filed a counterclaim seeking payment of the $11,100 placement fee.

Winzinger subsequently moved for summary judgment. During the pendency of that motion, the State of New Jersey, through the Attorney General, intervened to defend the applicability of the Act to the defendants and the constitutionality of this application.

The district court granted summary judgment in favor of Winzinger. The court held that the Act applied to out-of-state agencies doing business in New Jersey, that the Act as thus applied did not violate the commerce clause of the Constitution, and that Management Recruiters' failure to comply with the Act rendered the alleged fee agreement with Winzinger void and unenforceable. See Robert T. Winzinger, Inc. v. Management Recruiters of Bucks County, Inc., 668 F.Supp. 389 (D.N.J.1987). This appeal followed.

II.

Our review of a district court's grant of summary judgment is plenary. In this case we must determine whether the Act applies to out-of-state employment agencies. ¹ Neither the Supreme Court of New Jersey nor any other New Jersey court has had occasion to address this issue. As a federal court sitting in diversity, we must therefore predict how the Supreme Court of New Jersey would construe the Act.

The applicability of the Act to out-of-state agencies is, of course, entirely a matter of legislative intent. To ascertain this intent, we must examine the statutory language and policy; the recorded legislative history of the Act is silent on this question.

The Act was enacted in 1951 and amended in minor respects on three subsequent occasions. In general terms, it requires both owners and employees of employment agencies to obtain a license from the State and to conform their business practices to certain substantive standards. The basic purpose of the Act is to protect New Jersey employers and job seekers from unscrupulous or incompetent employment agencies. Administration and enforcement of the Act is committed to the Attorney General. N.J.Stat.Ann. Sec. 34:8-36 (West Supp.1987).

Section 3 of the Act states that "[n]o person shall either directly or indirectly open, conduct or maintain an employment agency or perform any of the functions of an employment agency without first obtaining such license or licenses as is or are required by the provisions of this act." Id. Sec. 34:8-26. Section 1 defines an employment agency as "the business of procuring or offering to procure help or employment, or the giving of information as to where help or employment may be procured." Id. Sec. 34:8-24. Section 1 requires the owner of an employment agency to obtain an "employment agency owner's license." Id. This section also requires that an "employment agency operator's license" be obtained by every employee who manages or carries on the business of an employment agency. Id. Section 2 exempts several types of entities from the requirements of the Act. Id. Sec. 34:8-25. None of these exemptions is relevant to the present case.

Applicants for either type of license must submit an application, id. Sec. 34:8-27, and affidavits from other individuals attesting to the good moral character of the applicant, id. Sec. 34:8-28. ² An applicant for an operator's license must also demonstrate by means of a written examination his familiarity with the labor laws of New Jersey and the fields of employment in which he wishes to act as an employment agent. Id.

A license does not automatically issue to an applicant who complies with these requirements. Upon receiving an application for an owner's license, the Attorney General must provide notice and an opportunity to be heard to every holder of an owner's license in the county in which the proposed agency is to be located. Id. Sec. 34:8-27. In the case of an application for an operator's license, similar notice and opportunity to be heard must be given to every holder of a owner's license in the county in which the applicant is to be employed. Id. The Attorney General may withhold any license if it appears that "the needs of employers and employees of any given municipality in which the employment agency is sought to be licensed are adequately served" by existing agencies and that "the granting of any additional license for an employment agency to be located in any given municipality is contrary to the best interest and welfare of the public." Id. Sec. 34:8-34.

License holders must pay an annual fee. The amount of the fee for an owner's license is tied to the population of the municipality in which the agency is located. These fees range from $360 per year (for an agency in a municipality with a population of 150,000 or more) to $90 per year (for one in a municipality with a population of less than 50,000). Id. Sec. 34:8-31. All holders of an operator's license must pay an annual fee of $15. Id.

The Act prohibits employment agencies from engaging in a number of specific acts and practices. Id. Sec. 34:8-33. It also imposes on agencies certain affirmative duties as to the conduct of their business. Id. Sec. 34:8-32. Among these duties are the requirements that a licensed agency post on its business premises its fee schedule, id. Sec. 34:8-32(2), and a copy of the owner's license, id. Sec. 34:8-28; N.J.Admin.Code Sec. 13:45B-2.1 (1987).

To date, two out-of-state employment agencies have been licensed under the Act.

III.

The district court set forth three principal reasons in support of its holding that the Act applies to out-of-state employment agencies. Examining the wording of the statute, the court observed that both the definition of "employment agency" in section 1 and the prohibitory language of section 3 focus on the function of an employment agency without any reference to location. From this the court inferred that the Act should be read to reach any agency performing the specified functions in transactions with individuals or entities located in New Jersey, regardless of the location of the agency. The court also noted that the list of exempted entities in section 2 of the Act does not mention out-of-state employment agencies.

The court also asserted that application of the Act to out-of-state agencies is dictated by the legislative purpose of the statute: "Clearly, the statute is a consumer protection statute. It would be incongruous for the Legislature to have desired the statute to apply to New Jersey agencies, while allowing foreign agencies to avoid its requirements while providing the...