Court Opinion

ID: 4696341
Source: CourtListenerOpinion
Date Created: 2021-06-17 14:09:26.339881+00
Date Added: 2024-06-11T08:05:39.644773
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-4562-18

CAJOECO LLC, CAJOECO LLC
PROFIT       SHARING       TRUST,
CAJOECO LLC PROFIT SHARING
PLAN, JEST TEXTILES, INC.,
JEST TEXTILES, INC. DEFINED
BENEFIT PLAN AND TRUST,
NORMAN MAIS, individually, as
Trustee,     Administrator   and/or
Beneficiary of Cajoeco LLC Profit
Sharing Trust and as Trustee,
Administrator and/or Beneficiary of
Jest Textiles, Inc. Defined Benefit
Plan and Trust, CARMEN MAIS,
individually    and    as  Trustee,
Administrator and/or Beneficiary of
Cajoeco LLC Profit Sharing Trust,

          Plaintiffs-Appellants/
          Cross-Respondents,

v.

BENSI  ENTERPRISES,  LLC,
BENSI OF OLD TAPPAN, LLC,
BENSI OF OLD BRIDGE, LLC,
BENSI OF HAMILTON, LLC,
BENSI RESTAURANT GROUP,
INC., BENSI MANAGEMENT
ASSOCIATES,  LLC,   BENSI
DEVELOPMENT GROUP LLC,
BENSI INC., BENSI OF CLIFTON,
LLC, BENSI OF DENVILLE, LLC,
BENSI OF ENGLISH VILLAGE,
LLC, BENSI OF FLEMINGTON,
LLC, BENSI OF GILLETTE, LLC,
BENSI OF GLOUCESTER, LLC,
BENSI OF HAMPTON, LLC,
BENSI         OF       HASBROUCK
HEIGHTS, LLC, BENSI OF HH,
LLC, BENSI OF HILLSDALE,
INC., BENSI OF MANSFIELD,
LLC,      BENSI       OF     NORTH
ARLINGTON, INC., CENTANNI
RISTORANTE, LLC, BENSI OF
PARAMUS PARK, LLC, BENSI OF
ROSELAND, LLC, BENSI OF
ROXBURY, LLC, BENSI OF
WHIPPANY, LLC, SCALOPINI OF
WHIPPANY, LLC, BENSI OF
WHITEHOUSE STATION, LLC,
BENSI OF WYOMISSING, LLC,
AJO MANAGEMENT, LLC, TPR
RESTAURANT PIZZERIA, INC.,
JOHN OSSO, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
NANCY OSSO, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
ELSA OSSO, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
JORGE RAMIREZ, individually, as
limited liability company member

                                             A-4562-18
                                         2
and/or manager, and as shareholder,
officer, director, or corporate agent,
OSCAR BENITEZ, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
ROBERT DaSILVA, individually,
as limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
JAMES KELLY, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
FRANCESCO               BERNARDO,
individually, as limited liability
company member and/or manager,
and as shareholder, officer, director,
or corporate agent, DENISE
DiMEGLIO, individually, as limited
liability company member and/or
manager, and as shareholder, officer,
director, or corporate agent,

      Defendants-Respondents,

and

BENSI OF NORTH BRUNSWICK,
LLC, BENSI OF GARWOOD, LLC,
RUDY'S OF GARWOOD, LLC,
BARBARA              BEN-YISHAY,
individually, as limited liability
company member and/or manager,
and as shareholder, officer, director,
or    corporate    agent,    MARIO
BERNARDO,         individually,     as
limited liability company member

                                             A-4562-18
                                         3
and/or manager, and as shareholder,
officer, director, or corporate agent,
ARI BEN-YISHAY, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,
JOSE       DARIO       FERNANDEZ,
individually, as limited liability
company member and/or manager,
and as shareholder, officer, director,
or corporate agent, CLEMENTE
OSSO, individually, as limited
liability company member and/or
manager, and as shareholder, officer,
director, or corporate agent, and,
RIZZIERO OSSO, individually, as
limited liability company member
and/or manager, and as shareholder,
officer, director, or corporate agent,

     Defendants-Respondents/
     Cross-Appellants.
_______________________________

ARI BEN-YISHAY,

      Plaintiff,

v.

NORMAN MAIS,

      Defendant.

_______________________________

            Submitted March 8, 2021 – Decided June 17, 2021

                                                              A-4562-18
                                         4
            Before Judges Rothstadt and Mayer.

            On appeal from the Superior Court of New Jersey, Law
            Division, Bergen County, Docket Nos. L-3477-16 and
            L-6139-16.

            Diktas Gillen, P.C., attorneys for appellants/cross-
            respondents (Christos J. Diktas, of counsel; Michael L.
            Kingman and Christine Gillen, on the briefs).

            Sills Cummis & Gross, P.C., attorneys for
            respondents/cross-appellants Rizziero Osso and Mario
            Bernardo (Joseph B. Fiorenzo and Andrew W.
            Schwartz, of counsel and on the briefs).

            Robert G. Ricco, attorney for respondent/cross-
            appellant Ari Ben-Yishay.

            Frederic C. Goetz, attorney for respondent/cross-
            appellant Clemente Osso.

PER CURIAM

      Plaintiffs appeal from the March 21, 2019 dismissal of their complaint on

summary judgment. Four defendants cross-appeal from the motion judge's May

10, 2019 denial of their motion for fees and sanctions.1 The parties dispute arose

from plaintiffs' unsuccessful investments in a restaurant franchise. Plaintiffs'

1
   Although plaintiffs sued numerous individuals and entities, this appeal and
cross-appeal involve only individual defendants John Osso, his nephew Rizzerio
"Rick" Osso, John's brother-in-law Mario Bernardo, John's youngest brother
Clemente "Clem" Osso, and an unrelated investor, Ari Ben-Yishay. We refer to
the individual plaintiffs and the Osso family individual defendants by their first
names to avoid any confusion caused by their common last names.
                                                                            A-4562-18
                                        5
complaint asserted numerous claims, including fraud, misrepresentation, breach

of contract, conversion, unjust enrichment, negligence, conspiracy, and tortious

interference with contractual relations. The motion judge, Robert G. Wilson,

issued the orders under appeal, setting forth his reasons for the dismissal of the

complaint in a thorough and comprehensive forty-seven-page opinion on March

21, 2019, and for the denial of the motion for fees and sanctions in a written

decision dated May 10, 2019.

      On appeal, plaintiffs assert that "credibility issues" and "available

inferences" should have resulted in the denial of summary judgment. The cross

appealing defendants assert that frivolous litigation sanctions should have been

awarded because there was no merit to any of plaintiffs' claims.

      We have considered the parties' contentions in light of the record and the

applicable principles of law. We affirm the orders under appeal substantially

for the reasons stated by Judge Wilson in his written decisions.

                                        I.

      We summarize the facts from the record leading to plaintiffs' failed

investments and their ensuing claims, viewed in the light most favorable to

plaintiffs as the parties who opposed the entry of summary judgment. Ben

Elazar v. Macrietta Cleaners, Inc., 230 N.J. 123, 135 (2017).

                                                                            A-4562-18
                                        6
                             Plaintiffs' Investments

      In an earlier unpublished opinion relating to the same failed investments,

we described plaintiffs as follows:

            Plaintiffs, Norman and Carmen Mais, are spouses,
            former owners of plaintiff Jest Textiles, Inc. (Jest), the
            current owners of plaintiff Cajoeco, LLC (Cajoeco),
            and the administrators and beneficiaries of the two
            companies' retirement and profit sharing plans,
            plaintiffs Defined Benefit Plan and Trust (Jest Plan),
            Cajoeco LLC Profit Sharing Plan (Cajoeco Plan), and
            Cajoeco LLC Profit Sharing Trust (Cajoeco Trust).

            [Cajoeco LLC v. Benefit Plans Admin. Servs., No. A-
            4364-16 (App. Div. April 25, 2019) (slip op. at 1-2).]

      Norman was solely responsible for directing the investments and loans at

issue in this litigation and he used, in part, funds taken from his companies'

plans. He had no experience in owning or operating restaurants.

      The investments at issue arose from Norman's relationship with his friend

John.2 The two became friends through Norman's frequenting of a restaurant

that John owned and operated with others between 1983 and 2004.

2
   On November 27, 2018, John filed for bankruptcy in the United States
Bankruptcy Court for the District of New Jersey (Case No. 18-33328).
Accordingly, all claims against him were stayed pending resolution of his
bankruptcy proceeding. 11 U.S.C. § 362(a). Upon the filing of this appeal,
plaintiffs' counsel advised our clerk that all of the claims against John were

                                                                          A-4562-18
                                        7
      In 2004, John sought to expand his businesses by forming defendant Bensi

Enterprises, LLC (Bensi Enterprises) and soliciting investors through a Private

Placement Memorandum (PPM). Bensi Enterprises sought to raise $4.5 million

by offering for sale 30,000 units of Class B membership interests at $150 per

unit seeking to raise a total of $4.5 million.3 About $3 million was ultimately

raised through sale of the Class B units. The PPM contained explicit warnings

about the risk of investing in Bensi Enterprises, including the loss of all

investment funds.    The PPM recommended investors perform their own

resolved in the bankruptcy proceeding and that plaintiffs dismissed their claims
against him in this action.
3
  The investment plan under the PPM called for Bensi Enterprises to act as a
holding company for individual LLC's that owned various Bensi restaurants.
There were to be two classes of shareholders, Class A and Class B. Only Class
A members had voting rights. 70,000 Class A units were previously issued to
the "founding members" of Bensi Enterprises. Their contribution was to total
approximately $1,925,000 while Class B members total investment was to be
approximately $4,000,000.

The PPM identified the founding members as John, who held 40,000 Class A
units, Rick, Bernardo, and defendants Jorge Ramirez, and Oscar Benitez. John
recruited the other Class A members to assist him in operating the business,
based upon their skills and experience, and it was his decision to describe them
as "founding members." Although Class A members were to contribute
approximately $1,925,000, many of them, including John, never made their total
contribution and instead made partial payments and delivered promissory notes
for the balance.

                                                                          A-4562-18
                                       8
investigations and evaluations of the investment, including consulting with

legal, financial, and accounting advisors. At all times, as the majority holding

Class A member and Managing Member of Bensi Enterprises, John controlled

the business.

      Because he trusted John, in August 2004, without reading the PPM or

Bensi Enterprise's operating agreement, Norman made an initial investment of

$210,000 into Bensi Enterprises, purchasing 1,400 Class B units. Later, Bensi

Enterprises offered new Class AA units at $115 per unit to Class B members on

a pro rata basis, seeking to raise an additional $3,450,000. On March 9, 2007,

Norman purchased 1,500 Class AA units, investing an additional $172,500 in

Bensi Enterprises.

      Norman invested without seeking any independent legal or financial

advice, understanding there was a "high degree of risk of loss." Moreover, he

understood that John would be in charge and make the ultimate decisions for the

business. Also, Norman did not rely upon any representations made by anyone

else, including any of the other individual defendants. He relied only on his

conversations with John.

                                                                          A-4562-18
                                       9
      After the 2004 investment, Bensi Enterprises opened new Bensi

restaurants in multiple locations. 4 John managed each of the restaurants through

his company, defendant Bensi Restaurant Group, Inc. (BRG). John was BRG's

sole shareholder and President. In exchange for these services, each restaurant

was required to pay BRG a management fee.

      In 2007, John decided to open larger Bensi restaurants in "lifestyle

shopping centers." The investment model for these restaurants was different

than that used for those owned by Bensi Enterprises. Each of these restaurants

was to be a separate entity, owned directly by investors, with John being the

majority owner and manager of each entity. Bensi Enterprises had no ownership

interest in these second-generation Bensi restaurants.5

      Norman made initial investments totaling approximately $1,632,500 in

these new Bensi restaurants, again relying solely on his conversations with John

and without reviewing any documents or seeking professional advice. Between

2008 and 2014, and again without reading any documents or consulting with

anyone but John, Norman made additional loans of $560,000 to John and

4
  The locations included Garwood, Gillette, Roxbury, Roseland, Whippany,
Paramus, Clifton, Mansfield, English Village, and Wyomissing.
5
 These restaurants were located in Old Bridge, North Brunswick, Flemington,
Hamilton, Old Tappan, Gloucester, and Hampton, Virginia.
                                                                           A-4562-18
                                      10
approximately $345,000 to specific Bensi restaurants.        All the loans were

undocumented, unsecured, and based on "handshake" agreements.

                           The Individual Defendants

      Rick, Clem, and Ben-Yishay worked or invested in the restaurants or

related companies.     Specifically, Rick was a fourteen percent Class A

shareholder in Bensi Enterprises, worked as the general manager of Bensi of

Wayne, and was a part-owner in some of John's restaurants unrelated to Bensi

Enterprises.

      Rick also served as Director of Operations at BRG between 2004 and

2011. In that capacity, he primarily supervised operations for several Bensi

restaurants, but he was not involved in the transfer of funds for any of the Bensi

entities.

      Clem was not an investor in Bensi Enterprises but held an ownership

interest in three individual restaurants. He was also employed by BRG between

August 2006 and August 2012, handling bookkeeping, payroll, and tax reporting

for the various Bensi restaurants. While working at BRG, Clem met with the

business's accountants and was designated on BRG bank account documents as

chief financial officer of the company; however decision-making responsibility

                                                                            A-4562-18
                                       11
or authority remained solely with John. In 2013, months after he left BRG's

employment, Clem worked part-time for two Bensi restaurants.

      Ben-Yishay, a medical doctor, was a Class B and Class AA minority

shareholder in Bensi Enterprises, having invested a total of $1,687,500. He also

invested $2,035,750 in eight individual Bensi restaurants. In addition, he made

loans to Bensi Enterprises, John, and some of the restaurants that totaled at least

four million dollars. According to Ben-Yishay, he lost more than $6,000,000 to

the Bensi entities and John.

      Beginning in 2008, the Bensi venture began to struggle, causing its bank

accounts to be overdrawn. In response to the overdrawn accounts, John directed

intercompany loans and fund transfers to cover the shortages.

      Ben-Yishay later learned business was not good.            He retained an

accountant, Gary Levy, who specialized in hospitality related businesses, to

evaluate the viability of the businesses and whether to fund future investments.

      Levy determined that BRG's records were "very poorly put together," and

the reporting system for the various restaurants was inconsistent, "incomplete,

inaccurate, [and] very hard to decipher to make any type of business assessment

off of it. Inconsistency between what the books, the chart of accounts, what an

income statement would say on one restaurant would be different than how it

                                                                             A-4562-18
                                       12
would be on another." Levy recommended that Ben-Yishay not invest or loan

any additional funds to the businesses.

      In 2010, BRG retained Levy and later another consultant in the industry,

Michael Jacobs, to make recommendations on improving cash flow.              In a

November 2, 2010 email sent to investors, including Norman, John stated that

he had retained Levy "to help us institute better controls and reporting," and was

"in the process of acting on many of [his] recommendations." While John

accepted Levy's recommendation to bring in an operations consultant, he

rejected closing unprofitable restaurants. Jacobs similarly recommended that

John implement certain operational changes, and close eight unprofitable

restaurants to cut losses. He also recommended that John proceed with his plans

to sell two restaurants to raise cash.      John did not agree with Jacobs's

recommendations.

      Instead of following the recommendations, John opened new restaurants.

Ultimately, John opened additional Bensi restaurants, stopping only when the

bank ceased issuing loans.

      All of the businesses suffered cash flow shortages as a result of

operational losses and a lack of equity capital. To cover cash flow shortages,

John transferred funds between various entities, including BRG, providing

                                                                            A-4562-18
                                       13
money to individual restaurants even though the restaurants were supposed to

pay management fees to BRG.

      John attributed the failure of the Bensi venture to economic downturn in

2009-2010, which resulted in a failure of certain strip-malls with Bensi

locations.   Conversely, plaintiffs alleged the failure was attributable to

undercapitalization, commingling of funds, failure to follow corporate

formalities, and mismanagement.

                                  The Litigation

      In 2016, plaintiffs filed their complaint, which they later amended three

times. In counts one and two of the third amended complaint, plaintiffs asserted

claims for legal and equitable fraud, and negligent misrepresentation. In count

three, they alleged breach of contract, asserting that the operating agreements of

Bensi Enterprises and the individual Bensi restaurants constituted contra cts, and

the individual defendants breached the contracts "[b]y their fraudulent conduct

and self-dealing." In count four, plaintiffs asserted a claim for breach of the

implied covenant of good faith and fair dealing, premised upon the same alleged

contracts and same alleged misconduct.

      In count five, plaintiffs alleged that the individual defendants, as officers,

managers, and promoters of the Bensi venture, breached fiduciary duties of

                                                                              A-4562-18
                                       14
loyalty and their obligation to transact the business of the Bensi venture with the

highest degree of care, good faith, and integrity, and to act at all times in

accordance with the applicable law and the best interests of the company and its

members, and particularly to refrain from fraud and self-dealing.

      In count six, plaintiffs asserted claims of conversion, corporate waste, and

self-dealing against defendants individually and collectively, premised upon the

alleged undercapitalization of the Bensi entities; self-dealing; mismanagement

and promotion of preferred insiders; commingling funds between the Bensi

entities; and misappropriation, transfer, and conversion of the assets of the Bensi

entities to plaintiffs' detriment and for defendants' exclusive benefit.

      Plaintiffs seventh count asserted a claim for unjust enrichment, alleging:

that "each of the Bensi entities, the founders, promoters, management team,

preferred insiders and those conspiring with/aiding and abetting them have been

unjustly enriched at the expense and to the detriment of plaintiffs." In count

eight they claimed negligence, premised upon the same misconduct alleged in

prior counts of the complaint. In count nine, they asserted defendants "conspired

and agreed between and among themselves to accomplish, aid or abet the

transfer of the assets of and/or membership units in the various Bensi entities."

                                                                             A-4562-18
                                       15
      In count ten (incorrectly designated eleven), plaintiffs claimed tortious

interference with contract, premised upon the same misconduct as alleged in

prior counts.    In count twelve (incorrectly designated thirteen), plaintiffs

asserted claims for indemnification and contribution and that the individual

defendants were not entitled to the protections of the corporate veil because the

various Bensi entities acted as a single entity.

      Rick, Clem, and Ben-Yishay filed responsive pleadings, including cross

claims, denying liability. Ben-Yishay also filed a separate suit against Norman

seeking repayment of a loan he made that Norman used at John's request to

infuse cash into one restaurant. Norman filed an answer denying liability and

Ben-Yishay's suit was consolidated with plaintiffs' matter.

                                    Discovery

      Norman did not dispute he relied solely upon John's statements in making

the investments and loans.      However, plaintiffs still alleged the individual

defendants engaged in a pattern of undercapitalization, commingling of funds,

failure to follow corporate formalities, and mismanagement. Plaintiffs claimed

their investments and loans were transferred to other entities to cover "cash flow

shortfalls," pay expenses, and "make distributions to members of related

entities."

                                                                            A-4562-18
                                       16
      According to Norman, the distributions he received on his investments

were akin to Ponzi-type payments because they were made "without regard for

the true financial condition of the entities." Plaintiffs explained that Bensi

Enterprises reported losses for 2005 through 2014, yet it made distributions for

the years 2005 through 2009 using money from new investors and borrowings

from businesses owned by the corporation.

      Norman also claimed that the individual defendants should have informed

him about Levy's and Jacob's recommendations and the financial problems the

businesses were experiencing. He claimed that had he been made aware of these

issues, he would not have made the investments or loans at issue.

      However, Norman acknowledged that he was warned of the business's

financial difficulties. Despite that knowledge, Norman made no attempt to

investigate, review any financial documents, or take any steps to monitor the

status of his investments. Norman trusted and supported John until 2014. Their

relationship broke down only when John asked Norman for an additional loan

of $150,000, which Norman declined when John refused to provide collateral

for the loan.

      Plaintiff's allegations as to the individual defendants other than John were

also based upon Norman's perception that he was being treated differently than

                                                                            A-4562-18
                                      17
the other investors. For example, as to Ben-Yishay, plaintiffs challenged a 2009

consolidation of Bensi Enterprises's and John's $2,750,000 indebtedness to Ben-

Yishay into a single promissory note and Ben-Yishay's 2011 agreement to

forebear from pursuing collection on the note in exchange for John's agreement

to collateralize the loan with equity positions in various restaurants, including a

location in North Brunswick. Later, when the indebtedness was not being

repaid, and John told Norman and Ben-Yishay that the North Brunswick

restaurant in which they had invested could not pay its rent and needed an

infusion of cash, John disclosed that his equity in the business was already

pledged to Ben-Yishay as collateral. When, under the advice of counsel, Ben-

Yishay refused to loan John more money, Ben-Yishay ultimately agreed to make

a $110,000 loan to Norman, which Norman then loaned to John together with

an additional $55,000.

      When John defaulted on the North Brunswick restaurant's debt in October

2012, Ben-Yishay ended up owning ninety percent of the restaurant, leaving

plaintiffs with a ten percent interest, as memorialized in an amended operating

agreement that Norman's wife Carmen signed on behalf of the Cajoeco Plan.

John later transferred his interest in another location in Hillsdale, giving Ben-

Yishay a sixty percent interest in that location and leaving the remaining

                                                                             A-4562-18
                                       18
investors with forty percent. Ben-Yishay essentially ended up owning one

restaurant but the North Brunswick restaurant he invested in with Norman failed

without Norman repaying his loan from Ben-Yishay.

      Ben-Yishay ultimately lost a total of $6,372,750 as a result of his

investments and loans, including:     $2,950,000 in combined loans to Bensi

Enterprises and John; $1,687,000 in equity purchases in Bensi Enterprises; and

$1,735,750 in equity purchases in various Bensi restaurants.

      Plaintiffs' allegations against Rick related to his 2011 purchase of Bensi

of Garwood. Plaintiffs' experts opined that this transaction was structured in a

way that was detrimental to Bensi Enterprises, and therefore harmful to

plaintiffs as shareholders of Bensi Enterprises.

      At the time Bensi of Garwood was formed in 2004, Bensi Enterprises

owned a fifty-five percent membership interest in the restaurant. Six years later,

in May 2010, Rick purchased 500 units and became a part-owner of Bensi of

Garwood through a private placement memorandum.             In 2011, after John

unsuccessfully attempted to sell Bensi Enterprises's interest in Bensi of

Garwood to one of the restaurant's suppliers, John asked Rick if he would be

interested in purchasing Bensi Enterprises's fifty-five percent membership

                                                                            A-4562-18
                                       19
interest in Bensi of Garwood for $800,000 and selling to John his interests in

three other locations.6

      Thereafter, John and Rick negotiated the terms of sale for Bensi of

Garwood over a period of months, with both sides represented by counsel. In

September 2011, the transaction closed with a purchase price of $660,000,

structured to include some cash payments and some assumption of debt, and

Rick relinquishing his interest in Bensi Enterprises. Thereafter, Rick owned

Bensi of Garwood with defendant Jose Dario Fernandez, and the restaurant was

renamed Rudy's of Garwood, LLC.

      Norman admitted that John advised him of the Garwood transaction, albeit

not the details, and Norman understood Rick was no longer involved in the Bensi

venture. After September 27, 2011, Rick had no further involvement with Bensi

Enterprises or any of the Bensi restaurants.

               Summary Judgment and Frivolous Claim Motions

      In February 2019, various defendants including Rick, Clem, and Ben-

Yishay filed motions for summary judgment, which plaintiffs opposed. Ben-

Yishay also sought summary judgment on his claim against Norman.

6
   The sale of the Garwood location was one of the two restaurant sales
recommended by Jacobs.
                                                                         A-4562-18
                                      20
      Judge Wilson heard arguments on March 1, 2019, and on March 21, 2019,

he issued a single opinion and multiple orders granting the summary judgment

motions and dismissing plaintiffs' claims.7 Judge Wilson concluded that many

of the causes of action pled in the third amended complaint failed for lack of

standing because they were derivative claims and, regardless of standing, for

lack of proof on the elements of each claim. Specifically, the judge found fraud

was not specifically pleaded as required by Rule 4:5-8 and there was no evidence

that Rick, Clem, or Ben-Yishay made misrepresentations to plaintiffs to support

the fraud-based claims, especially because Norman never relied on

representations other than those made by John.        Similarly, there were no

contracts between plaintiffs and the individual defendants to support the

contract-based claims. As to the remaining claims, the judge provided a detailed

explanation as to why they were without any merit.

7
  On April 1, 2019, the judge entered another order: (1) continuing the stay of
all claims against John; (2) accepting Ben-Yishay's voluntary dismissal of his
claims against Norman; (3) dismissing Clem's counterclaims for lack of
prosecution; and (4) accepting plaintiffs' voluntary dismissal of their remaining
claims against every corporation and LLC defendant except Bensi of North
Brunswick and Bensi of Hillsdale. On April 4, 2019, he entered an amended
order, accepting the voluntary dismissal of plaintiffs' remaining claims against
two individual defendants.
                                                                           A-4562-18
                                      21
      Thereafter, Rick, Bernardo, Clem, and Ben-Yishay, filed motions for

sanctions under the Frivolous Claims Act, N.J.S.A. 2A:15-59.1, and Rule 1:4-8,

which plaintiffs opposed. By opinion and orders dated May 10, 2019, the judge

denied the motions. These appeals followed.

                                        II.

      On appeal, plaintiffs generally allege that the summary judgment record

contained sufficient facts for inferences to be drawn that established Rick, Clem,

and Ben-Yishay's liability as to each count of their complaint. 8 As plaintiffs

aver in their single brief point, "While it is convenient to defendants that one

version of the events which transpired stars John [] as the single minded

mastermind of all of the schemes which defrauded plaintiffs, reasonable

inferences from available evidence, much of which is undisputed, can also lead

to the conclusion that each of the [individual defendants] aided and abetted

John." We disagree.

8
  We note that although Bernardo was served with a copy of plaintiff's notice
of appeal, the notice of appeal indicates plaintiffs are appealing the judge's grant
of summary judgment only as it pertains to Rick, Clem, and Ben-Yishay.
                                                                              A-4562-18
                                        22
                                        A.

      We begin our review by addressing plaintiffs' challenge to Judge Wilson's

award of summary judgment. We review a grant of summary judgment using

the same standard that governs the motion judge's decision.          RSI Bank v.

Providence Mut. Fire Ins., 234 N.J. 459, 472 (2018) (citing Bhagat v. Bhagat,

217 N.J. 22, 38 (2014)). Under that standard, summary judgment will be granted

when "the competent evidential materials submitted by the parties," viewed in

the light most favorable to the non-moving party, show that there are no

"genuine issues of material fact" and that "the moving party is entitled to

summary judgment as a matter of law." Grande v. Saint Clare's Health Sys., 230

N.J. 1, 23-24 (2017) (quoting Bhagat, 217 N.J. at 38); accord R. 4:46-2(c). "An

issue of material fact 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.'" Id. at 24 (quoting Bhagat, 217 N.J.

at 38). We owe no special deference to the motion court's legal analysis or its

interpretation of a statute. RSI Bank, 234 N.J. at 472; Hitesman v. Bridgeway,

Inc., 218 N.J. 8, 26 (2014).

                                                                             A-4562-18
                                       23
                                        B.

                                     Standing

      Judge Wilson first concluded that summary judgment was warranted

because plaintiffs lacked standing as their alleged losses could only be addressed

through a shareholder's derivative action. In doing so, he noted the "special

injury" exception, which permits shareholders to pursue individual claims where

they suffered a wrong not suffered by all shareholders generally, and explained

that the Revised Uniform Limited Liability Company Act's (RULLCA)

"provisions regarding standing to bring a cause of action are similar to

established principles of corporation law."       He concluded that any claims

belonged to the various Bensi corporate entities that suffered harm as a result of

John's misdeeds and, "if allegedly misappropriated funds were recovered, they

would go to the business entity, and following that perhaps to . . . equity holders.

The Plaintiffs would not be solely entitled to such funds."

      Plaintiffs argue they were entitled to pursue the lost value of their

investments in Bensi Enterprises, and seven individual Bensi restaurants, which

they alleged ultimately closed due to breach of fiduciary duty on the part of

corporate officers through corporate waste, mismanagement, and negligence.

We disagree.

                                                                              A-4562-18
                                        24
      The issue of standing is a legal one, reviewed de novo. Tully v. Mirz, 457

N.J. Super. 114, 123 (App. Div. 2018). "A corporation is regarded as an entity

separate and distinct from its shareholders," ibid. (quoting Strasenburgh v.

Straubmuller, 146 N.J. 527, 549 (1996)), and, as a matter of corporate law, suits

by shareholders to redress injuries to the corporation, which secondarily har m

all shareholders alike, must be pursued as derivative actions on behalf of the

corporation; individual shareholders may not recover for the injury to their

investments alone. 9 Strasenburgh, 146 N.J. at 549-50. Accord Delray Holding,

LLC v. Sofia Design & Dev. at S. Brunswick, LLC, 439 N.J. Super. 502, 510

(App. Div. 2015); Pepe v. Gen. Motors Acceptance Corp., 254 N.J. Super. 662,

666 (App. Div. 1992). The "[r]easons of policy and practicality" that "underlie

the principle," include "maintaining the investment resources of the corporation,

avoiding a multiplicity of suits, providing equal benefit for all shareholders and

avoiding partial dividends or partial liquidation." Strasenburgh, 146 N.J. at 549-

9
   The RULLCA restricts the ability of an LLC member to assert claims that
belong to the LLC. N.J.S.A. 42:2C-67 to -68. In that respect, it is similar to
corporation law, which restricts a corporation's shareholder from asserting
claims of the corporation. See, e.g., Delray, 439 N.J. Super. at 510 (noting that
"[s]hareholders in a corporation may only sue individually when they suffer a
'special injury'"; that is to say, some injury distinct from that suffered by all
shareholders in the corporation).

                                                                            A-4562-18
                                       25
50. However, courts may in some instances waive the requirement that claims

be pursued in a derivative action, including in the context of closely held

corporations.10 Tully, 457 N.J. Super. at 125, 127; Brown v. Brown, 323 N.J.

Super. 30, 36-38 (App. Div. 1999).

      Plaintiffs' claims in counts five, six and eight allege classic causes of

action that must be pursued as derivative claims. Strasenburgh, 146 N.J. at 551-

52; Tully, 457 N.J. Super. at 126-27. The losses suffered by the corporations as

a result of the alleged misconduct were incurred by corporate shareholders of

Bensi Enterprises generally, not specially by plaintiffs. Thus, these allegations

should have been pursued in the form of derivative claims. Under N.J.S.A.

42:2C-67 an LLC member pursuing an individual claim must "plead and prove

an actual or threatened injury that is not solely the result of an injury suffered . . .

by the limited liability company" when the member seeks to "maintain a direct

action against another member, a manager, or the limited liability company to

10
   The court may do so if it finds that doing so "will not (i) unfairly expose the
corporation or the defendants to a multiplicity of actions, (ii) materially
prejudice the interests of creditors of the corporation, or (iii) interfere with a fair
distribution of the recovery among all interested persons." Tully, 457 N.J.
Super. at 125 (quoting Principles of Corporate Governance: Analysis and
Recommendations, § 7.01(d) (Am. Law Inst. 1992)). See also N.J.S.A. 42:2C-
68(a) (stating an LLC member "may maintain a derivative action to enforce a
right of a limited liability company" if demand is made and "the managers or
other members do not bring the action within a reasonable time").
                                                                                 A-4562-18
                                         26
enforce the member's rights and otherwise protect the member's interests,

including rights and interests under the operating agreement or [the] act or

arising independently of the membership relationship." (Emphasis added). See

also Delray Holding, 439 N.J. Super. at 510 (requiring plaintiffs to show "special

injury" in the LLC context).

      Nevertheless, to the extent plaintiffs' remaining causes of action against

the individual defendants for breach of contract, fraud, misrepresentations, and

withholding of information that influenced Norman's investment decisions arose

from plaintiffs suffering special damages, plaintiffs had standing to pursue them

in this action. See Strasenburgh, 146 N.J. at 552; Tully, 457 N.J. Super. at 126.

           Fraud, Equitable Fraud, and Negligent Misrepresentation
      "Although the word 'fraud' is used in common parlance to connote any

practice involving shady or underhanded dealing, in the law it is a term of art

with a clear definition." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 175

(2005). A claim of fraud requires proof of: "(1) a material misrepresentation of

a presently existing or past fact; (2) knowledge or belief by the defendant of its

falsity; (3) an intention that the other person rely on it; (4) reasonable reliance

thereon by the other person; and (5) resulting damages." Id. at 172-73 (quoting

                                                                             A-4562-18
                                       27
Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997)); Jewish Ctr. of

Sussex Cnty. v. Whale, 86 N.J. 619, 624 (1981).

      A plaintiff seeking to prove equitable fraud is required to establish the

same elements, save for the elements of knowledge of the falsity and an intention

to obtain an undue advantage. Jewish Ctr., 86 N.J. at 625. Also, a successful

equitable fraud claim will yield only equitable relief, and not monetary damages.

Ibid.; Enright v. Lubow, 202 N.J. Super. 58, 72 (App. Div. 1985). A claim of

negligent misrepresentation requires proof of "[a]n incorrect statement,

negligently made and justifiably relied upon, [and] . . . injury sustained as a

consequence of that reliance." Green v. Morgan Props., 215 N.J. 431, 457

(2013) (alterations in original) (quoting H. Rosenblum, Inc. v. Adler, 93 N.J.

324, 334 (1983)).

      Finally, under Rule 4:5-8(a): "In all allegations of misrepresentation,

fraud, mistake, breach of trust, willful default or undue influence, particulars of

the wrong, with dates and items if necessary, shall be stated insofar as

practicable. Malice, intent, knowledge, and other condition of mind of a person

may be alleged generally."

      Here, Judge Wilson properly dismissed plaintiffs' claims based on fraud

and misrepresentation. The third amended complaint did not contain any details

                                                                             A-4562-18
                                       28
about the alleged misrepresentations by Rick, Clem, or Ben-Yishay, as required

under Rule 4:5-8(a). Furthermore, the summary judgment record is devoid of

any allegation that these individual defendants made any affirmative

misrepresentations to plaintiffs, or that plaintiffs detrimentally relied upon

affirmative misrepresentations made by these individuals. To the contrary,

Norman testified that he relied exclusively upon his communications with John

in making investments in, and loans to, John and the Bensi entities.

      Plaintiffs also allege Rick, Clem, and Ben-Yishay fraudulently withheld

information from plaintiffs, including, for example, John's failure to fully

capitalize the various Bensi corporations, his mismanagement of the various

Bensi businesses and intermingling of funds between corporations, the poor

financial status of the corporations, the retention of Levy and Jacobs and their

recommendations, and the transfer of certain restaurants to Rick and Ben-

Yishay. However, plaintiffs never established that these individual defendants

had any affirmative duty to provide such information to plaintiffs.

      In terms of fraudulent withholding of information, the record reflects that

Norman communicated almost exclusively with John, who specifically notified

Norman about the retention of Levy, as well as the transfers of restaurants to

Rick and Ben-Yishay. Moreover, it was John who controlled all business

                                                                           A-4562-18
                                      29
decisions, including capitalization of the corporations and the alleged

intermingling of funds between corporate entities. Thus, to the extent there were

any misrepresentations made to plaintiffs by virtue of a failure to provide

complete and accurate information about these subjects, the record reflects that

those misrepresentations were made by John, and not the individual defendants.

See, e.g., Walid v. Yolanda for Irene Couture, Inc., 425 N.J. Super. 171, 180-86

(App. Div. 2012) (finding sufficient evidence to support fraud claim premised

upon seller's misrepresentation to purchaser of business's financial status and

withholding of complete and accurate information).

            Breach of Contract and Breach of the Implied Covenant
                       of Good Faith and Fair Dealing

      The judge also properly granted summary judgment as to plaintiffs'

contract claims. In order to maintain their cause of action for breach of contract

or breach of the implied covenant of good faith, plaintiffs had to minimally

demonstrate there was a contract between them and the individual defendants.

Proving breach of contract requires plaintiffs to show that the parties entered

into a valid contract containing certain terms, defendants failed to perform their

obligations under the contract, and plaintiffs sustained damages as a result.

Globe Motor Co. v. Igdalev, 225 N.J. 469, 482 (2016). Additionally, as every

contract contains an implied covenant of good faith and fair dealing, providing

                                                                            A-4562-18
                                       30
that neither party will do anything that has the effect of destroying or injuring

the rights of the other party to receive the benefits of the contract, a claim for

breach of the covenant also requires proof of a contract. Sons of Thunder, Inc.

v. Borden, Inc., 148 N.J. 396, 420 (1997).

      Here, the summary judgment record does not support these causes of

action because, as found by Judge Wilson, there is no evidence of any

contractual relationship between plaintiffs and the individual defendants other

than the loan from Ben-Yishay to Norman, and the evidence shows no breach of

that contract other than the breach by Norman, who failed to repay the loan.

      Even if, as plaintiffs argue, we viewed the operating agreements as

contracts, there is still no evidence to support plaintiffs' causes of action for

breach of contract and breach of the implied covenant of good faith and fair

dealing. Plaintiffs did not share any ownership interests with Clem, and there

was therefore no relationship between them pursuant to a corporate operating

agreement. Plaintiffs shared membership interests with Rick and Ben-Yishay in

Bensi Enterprises. However, the Bensi Enterprises operating agreement vested

John, as the "Managing Member" of the LLC, with exclusive authority to

manage the LLC.      See N.J.S.A. 42:2C-37(a) (stating an LLC is manager-

managed if the operating agreement indicates as such). Thus, Bensi Enterprises

                                                                            A-4562-18
                                       31
was manager-managed, and the operating agreement did not establish any

obligations between and among its members. Rather, all such obligations were

imposed upon John. N.J.S.A. 42:2C-39(i).

      Plaintiffs also had a shared membership interest with Ben-Yishay in Bensi

of North Brunswick.       Until October 2012, this business was managed

exclusively by John, and Ben-Yishay had no fiduciary obligation to plaintiffs.

N.J.S.A. 42:2C-37(c) and -39(i).      After October 2012, the restaurant was

managed by Ben-Yishay. However, plaintiffs have not identified any breach of

contract or the covenant of good faith and fair dealing by Ben-Yishay during the

time of his management, and the record does not reflect any such breach. Under

these circumstances, the dismissal of plaintiffs' contract claims in summary

judgment was correct.

                Conversion, Corporate Waste, and Self-Dealing

      In granting summary judgment dismissing plaintiffs' claims of conversion,

waste, and self-dealing, Judge Wilson noted that the claims of corporate waste

and self-dealing were shareholder derivative claims that could not be pursued

by plaintiffs individually. Putting aside the standing issue, the judge found that

Ben-Yishay was a passive investor and creditor, and not a business "insider,"

potentially liable for these claims. To the extent that after October 2012 Ben-

                                                                            A-4562-18
                                       32
Yishay was the managing member of Bensi of North Brunswick, in which

plaintiffs were invested, the record reflected that Ben-Yishay "was forthright

and honest with [Norman]" and, in winding down the restaurant, received only

funds that were due to him as a secured creditor.

      Regarding Rick, the judge found his involvement was limited to his

purchase of Bensi Enterprises's ownership interest in Bensi of Garwood. The

judge found that the record did not establish any valid claim for corporate waste

relating to this transaction, as there was no proof that the consideration Rick

paid for the restaurant was unreasonable. He also rejected any claim of self-

dealing with respect to the Bensi of Garwood transaction for the same reasons,

and because any claim was appropriately pursued against John, who negotiated

the transaction at arms-length with Rick.

      Finally, regarding Clem, the judge found that he did not owe plaintiffs any

fiduciary duty, and there was no nexus between Clem and the alleged acts of

conversion, corporate waste, and self-dealing.

      Conversion is defined as the intentional exercise of dominion or control

over another's property that is inconsistent with the owner's rights. Bondi v.

Citigroup, Inc., 423 N.J. Super. 377, 431 (App. Div. 2011); LaPlace v. Briere,

404 N.J. Super. 585, 595 (App. Div. 2009). The property at issue may be money,

                                                                           A-4562-18
                                      33
promissory notes, or other forms of securities, but the funds must be identifiable

and must clearly belong to the injured party. Bondi, 423 N.J. Super. at 431-32.

      Corporate waste is defined as "an exchange of corporate assets for

consideration so disproportionately small as to lie beyond the range at which

any reasonable person might be willing to trade." Seidman v. Clifton Sav. Bank,

S.L.A., 205 N.J. 150, 173 (2011) (quoting Lewis v. Vogelstein, 699 A.2d 327,

336 (Del. Ch. 1997)). Finally, self-dealing may constitute a breach of the

fiduciary duty of loyalty. Kaye v. Rosefielde, 223 N.J. 218, 230 (2015).

      Here again Judge Wilson correctly concluded that plaintiffs did not have

standing to pursue these claims. Even if they did, only John owed any duty to

plaintiffs, since the record is undisputed John exclusively controlled th e Bensi

entities, including those in which plaintiffs were invested. N.J.S.A. 42:2C -37

and -39. Thus, only John could be held liable for self-dealing. Furthermore, the

summary judgment record reflects that only John engaged in the misconduct

about which plaintiffs complain.

      Regarding Clem, the summary judgment record contains no evidence that

he played any role in the acts about which plaintiffs complain, even assuming

that he was the CFO of BRG, as plaintiffs assert. He did not share any corporate

ownership interests with plaintiffs, nor was he invested in Bensi Enterprises or

                                                                            A-4562-18
                                       34
any of the individual restaurants in which plaintiffs were invested. Moreover,

the record contains no evidence of any transfer of corporate assets by or to Clem.

Therefore, plaintiffs cannot sustain any individual claims against him for

conversion, corporate waste, or self-dealing.

      Regarding Ben-Yishay, the record does not reflect that he engaged in any

acts of conversion, corporate waste, or self-dealing. The record reflects that he

was not actively involved in managing Bensi Enterprises, or any restaurant in

which plaintiffs were invested, other than Bensi of North Brunswick in 2012.

      Reviewing the record as it relates to Ben-Yishay's October 2012

acquisition of a majority interest in Bensi of North Brunswick, there is no

evidence that it was anything but beneficial to Bensi Enterprises, which

unburdened itself of a failing restaurant as well as a substantial amount of debt,

which Ben-Yishay forgave. Nor is there any evidence that the transaction was

beneficial to Ben-Yishay at plaintiffs' expense. To the contrary, Ben-Yishay

lost his investment in Bensi of North Brunswick when the restaurant failed, as

well as some of the money he had loaned to the entity, notwithstanding that he

was a secured creditor. The record also reflects that Ben-Yishay was transparent

in dealing with plaintiffs in his management and winding down of Bensi of

                                                                            A-4562-18
                                       35
North Brunswick. He did not engage in any conversion, corporate waste, or

self-dealing.

      Finally, regarding Rick, the only act about which plaintiffs complain that

could conceivably be perceived as conversion, corporate waste, or self-dealing

is his purchase of Bensi Enterprises's ownership interest in Bensi of Garwood.

The summary judgment record reflects that this transaction was the result of a

months-long, arms-length negotiation between John and Rick, with both sides

represented by counsel.

      The record does not support a conclusion that Rick paid less than a fair

value for the business. At most, plaintiffs' experts' analysis suggested that the

transaction was structured in such a way as to benefit John individually, at the

expense of Bensi Enterprises, in that John allegedly wrongfully transferred

funds that were paid by Rick to BRG rather than Bensi Enterprises and did not

repay certain promissory notes that were used to reimburse Rick for his having

relinquished his equity interests in certain Bensi entities. The experts also

suggested that in completing the transaction, John ignored a certain individual's

ownership interest in Bensi of Garwood; however, there is no allegation this was

harmful to plaintiffs. The dismissal of these claims against the individual

defendants on summary judgment was appropriate.

                                                                           A-4562-18
                                      36
                              Unjust Enrichment

      We also conclude that the dismissal of plaintiffs' unjust enrichment claims

was correct. A claim for unjust enrichment requires proof that defendants

"received a benefit and that retention of that benefit without payment [to

plaintiffs] would be unjust." Thieme v. Aucoin-Thieme, 227 N.J. 269, 288

(2016) (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 110 (2007)). It is

a claim grounded in quasi-contract doctrine, requiring proof that plaintiffs

expected remuneration from defendants for a benefit conferred upon them, and

that failure of remuneration would unjustly enrich "defendants beyond [their]

contractual rights." Ibid.

      For the reasons previously discussed, there is no evidence supporting a

conclusion that Rick, Clem, or Ben-Yishay unjustly enriched themselves at the

expense of plaintiffs. To the contrary, the record contains no evidence that Rick

paid anything other than fair market value for Bensi of Garwood, and no

corporate assets were transferred to Clem and that Ben-Yishay lost a great deal

of money from his investments in and loans to the various Bensi entities and his

loan to Norman.

                                                                           A-4562-18
                                      37
                                      Negligence

      Judge Wilson also correctly dismissed plaintiffs' negligence claims. A

claim for negligence requires proof that defendants owed plaintiffs a duty of

care, defendants breached that duty causing injury to plaintiffs, and resulting

damages. Shields v. Ramslee Motors, 240 N.J. 479, 487 (2020); J.H. v. R&M

Tagliareni, LLC, 239 N.J. 198, 218 (2019). As previously discussed, the entities

in which plaintiffs were invested were managed exclusively by John, and

therefore, only John owed any duties to plaintiffs. N.J.S.A. 42:2C-37 and -39.

Without owing a duty, the individual defendants could not have been negligent.

      Furthermore, the record does not support plaintiffs' contention that Rick

and Clem owed plaintiffs any duty due to their allegedly holding executive-level

positions at BRG. In that capacity, Rick and Clem were subordinate to John,

who wholly owned and operated BRG and exclusively managed BRG and all

other Bensi entities. There is no evidence in the record that Rick or Clem had

any decision-making authority with respect to any Bensi entity, or that they

exercised any supervisory or oversight authority over John. See, e.g., Francis

v. United Jersey Bank, 87 N.J. 15, 28-45 (1981) (allowing for personal liability

in negligence of corporate director who breached her duty to provide oversight

of corporate affairs and policies).

                                                                          A-4562-18
                                         38
      Even if we accept the existence of a duty, plaintiffs have not produced any

evidence that any individual defendant but John breached a duty owed to them.

The record contains no evidence of tortious conduct in which Rick, Clem, or

Ben-Yishay participated. Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 303-09

(2002) (addressing potential liability of corporate officers for their participation

in corporation's tortious conduct). Finally, as previously discussed, the record

does not reflect that Ben-Yishay breached any duty owed to plaintiffs after

assuming control of Bensi of North Brunswick.

               Conspiracy, and Aiding and Abetting a Conspiracy

      "In New Jersey, a civil conspiracy is 'a combination of two or more

persons acting in concert to commit an unlawful act, or to commit a lawful act

by unlawful means, the principal element of which is an agreement between the

parties to inflict a wrong against or injury upon another, and an overt act that

results in damage.'" Banco Popular, 184 N.J. at 177 (quoting Morgan v. Union

Cnty. Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993));

LoBiondo v. Schwartz, 199 N.J. 62, 102 (2009). The gist of the claim is the

underlying wrong, absent which there would be no liability, and not the

agreement to commit the wrong. Banco Popular, 184 N.J. at 177-78.

                                                                              A-4562-18
                                        39
      To establish liability, it is enough that a defendant "understand the general

objectives of the scheme, accept them, and agree . . . to do [his or her] part to

further them." Banco Popular, 184 N.J. at 177 (quoting Jones v. City of Chicago,

856 F.2d 985, 992 (7th Cir. 1988)). Circumstantial evidence of an agreement is

sufficient. Morgan, 268 N.J. Super. at 365. Finally, "[c]ivil conspirators are

jointly liable for the underlying wrong and resulting damages." Banco Popular,

184 N.J. at 178.

      The summary judgment record contains no evidence that Clem engaged

in any preferential transfer of assets or ownership interests in any Bensi entity,

or that he engaged in a conspiracy to do so. Also, the record does not reflect

that Rick's acquisition of Bensi of Garwood, or Ben-Yishay's acquisitions of

Bensi of Hillsdale and Bensi of North Brunswick, were unlawful, obtained

through unlawful means, or the result of a conspiracy to inflict a wrong or injury

upon plaintiffs, or upon the shareholders generally. To the contrary, the record

reflects that these transactions were negotiated at arms-length between the

parties' attorneys, and Bensi Enterprises received substantial value from these

transactions in the form of cash and cancellation or transfer of debts. This is

true notwithstanding plaintiffs' expert's assertion that John did not fulfill his e nd

                                                                               A-4562-18
                                        40
of the bargain with respect to the Bensi of Garwood transaction, thereby

allegedly causing harm to Bensi Enterprises.

                       Tortious Interference with Contract

      We conclude there is no merit to plaintiffs' claims of tortious interference

with a contract. "To establish a claim for tortious interference with contractual

relations, a plaintiff must prove: (1) actual interference with a contract; (2) that

the interference was inflicted intentionally by a defendant who is not a party to

the contract; (3) that the interference was without justification; and (4) that the

interference caused damage." Dello Russo v. Nagel, 358 N.J. Super. 254, 268

(App. Div. 2003). Accord Nostrame v. Santiago, 213 N.J. 109, 122 (2013).

      Here, plaintiffs have not identified any contract with which the individual

defendants allegedly interfered.        Furthermore, plaintiffs' allegations of

interference are unfounded because the record reflects that the alleged improper

acts were committed by John, and not by Rick, Clem, or Ben-Yishay.

                        Indemnification and Contribution

      Plaintiffs' claims that the Judge Wilson erred by dismissing their claims

for indemnification and contribution are without sufficient merit to warrant

discussion in a written opinion. R. 2:11-3(e)(1)(E). We simply note the judge's

decision was legally correct. See N.J.S.A. 2A:53A-3 (describing contribution);

                                                                              A-4562-18
                                        41
T & E Indus. v. Safety Light Corp., 123 N.J. 371, 397-98 (1991) (describing

indemnification).

                           Breach of Fiduciary Duty

      Judge Wilson also correctly granted summary judgment dismissing

plaintiffs' breach of fiduciary duty claims after finding no evidence that Rick,

Clem, or Ben-Yishay were in a dominant or superior position such that they

owed plaintiffs a fiduciary duty, or that these defendants breached any such

duty. Elsewhere in the opinion, the judge found that the term "founder" used in

the 2004 PPM had "no legal significance" because only John had control over

Bensi Enterprises and its financial affairs.    He also found no preferential

transfers to Clem, Rick, or Ben-Yishay.

      The judge's conclusions are supported by the law and the factual record.

The law does not impose a fiduciary duty upon Rick, Clem, or Ben-Yishay to

the extent they had shared membership interests with plaintiffs—which Clem

did not. To the contrary, as previously discussed, members of a limited liability

company that is manager-managed do not owe each other fiduciary duties.

N.J.S.A. 42:2C-39(i). Only John, who was identified as the managing member

of Bensi Enterprises, owed any fiduciary duty to plaintiffs. N.J.S.A. 42:2C-37

and -39(i).

                                                                           A-4562-18
                                      42
      The common law also does not support imposition of a fiduciary duty

upon Rick, Clem, or Ben-Yishay. Fiduciary duties are imposed where necessary

to protect the vulnerable from exploitation and abuse by those in a superior,

dominant, or controlling position. McKelvey v. Pierce, 173 N.J. 26, 57 (2002);

F.G. v. MacDonell, 150 N.J. 550, 563 (1997).

      Here, however, the only defendant who was in a superior, dominant, or

controlling position with respect to plaintiffs was John.        Even accepting

plaintiffs' contention that Rick and Clem held executive-level positions at BRG,

the record reflects that they did not make any of the decisions about which

plaintiffs complain. Rather, John had complete control over business decisions

made for all Bensi entities, and these defendants had no authority to oversee or

countermand those decisions.

      The only exception is that Ben-Yishay arguably owed a fiduciary duty to

plaintiffs during the time he managed Bensi of North Brunswick. However, as

previously discussed, the summary judgment record does not contain any

evidence that Ben-Yishay breached any duty owed to plaintiffs.

      Finally, even if we accepted that these individual defendants owed

plaintiffs a fiduciary duty, for the reasons previously discussed, the record does

                                                                            A-4562-18
                                       43
not support plaintiffs' contentions about alleged preferential transfers of

corporate ownership interests or assets to these defendants.

                           Piercing the Corporate Veil

      A corporation is a separate entity from its shareholders, and a primary

reason for incorporation is to insulate shareholders from the corporation's

liabilities. State, Dep't of Env't Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983).

Therefore, courts generally will not pierce the corporate veil, absent

extraordinary circumstances such as fraud or injustice. Ibid. The party seeking

to pierce the corporate veil "bears the burden of proving that the court should

disregard the corporate entity." Tung v. Briant Park Homes, Inc., 287 N.J.

Super. 232, 240 (App. Div. 1996). Accord Richard A. Pulaski Constr. Co. v.

Air Frame Hangars, Inc., 195 N.J. 457, 472-73 (2008).

      Piercing the corporate veil is not a mechanism by which legal liability is

imposed; rather, it is an equitable remedy employed "to prevent an independent

corporation from being used to defeat the ends of justice, to perpetrate fraud, to

accomplish a crime, or otherwise to evade the law." Ventron Corp., 94 N.J. at

500 (citations omitted); see also Verni ex rel. Burstein v. Harry M. Stevens, Inc.,

387 N.J. Super. 160, 199 (App. Div. 2006).

                                                                             A-4562-18
                                       44
      The summary judgment record suggests it might be appropriate to pierce

the corporate veil and potentially impose liability upon John individually for

failing to adequately capitalize the corporate entities, disregarding for the

entities' corporate forms, altering of shareholder ownership interests without

documentation, and using corporate funds for personal expenses. Stochastic

Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 394 (App. Div. 1989)

(noting that "New Jersey courts have . . . pierced the corporate veil of a closely

held corporation to impose liability on the owner individually"); see also Sean

Wood, LLC v. Hegarty Group, Inc., 422 N.J. Super. 500, 517-19 (App. Div.

2011) (piercing corporate veil to hold owner personally liable where owner used

corporation as alter ego). Whether John committed these acts to perpetrate a

fraud or injustice presents a debatable question of fact, but not one that would

prevent the award of summary judgment to the other individual defendants—

especially since the record is clear that these defendants did not perpetrate nor

benefit from any of the alleged misconduct.

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                                       45
                                       III.

      We turn to the cross-appeal filed by Rick, Bernardo, Clem, and Ben-

Yishay in which they contend Judge Wilson erred in denying their motions for

counsel fees and sanctions under the frivolous litigation statute, N.J.S.A. 2A:15 -

59.1, and Rule 1:4-8. We disagree.

      In his opinion denying defendants' motions for sanctions, the judge found

that plaintiffs' claims were not frivolous as defined by N.J.S.A. 2A:15-59.1. He

found that plaintiffs did not bring their claims in bad faith, as there was no

indication of malicious intent or wrongful purpose.        He further found that

plaintiffs' claims were initially founded on credible information, and they were

well-grounded in established law, notwithstanding the judge's ultimate

conclusion that they should be dismissed on summary judgment.

      We review the judge's ruling for an abuse of discretion, considering

whether he applied the correct law, considered the relevant and appropriate

factors, and whether the judge's ruling reflects a clear error of judgment. Bove

v. AkPharma Inc., 460 N.J. Super. 123, 146 (App. Div.), certif. denied, 240 N.J.

7 (2019); Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 407 (App. Div. 2009).

      N.J.S.A. 2A:15-59.1(a)(1) provides:

            A party who prevails in a civil action, either as plaintiff
            or defendant, against any other party may be awarded

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            all reasonable litigation costs and reasonable attorney
            fees, if the judge finds at any time during the
            proceedings or upon judgment that a complaint,
            counterclaim, cross-claim or defense of the
            nonprevailing person was frivolous.

      The term "frivolous" is defined at N.J.S.A. 2A:15-59.1(b), which

provides:

            In order to find that a complaint, counterclaim, cross-
            claim or defense of the nonprevailing party was
            frivolous, the judge shall find on the basis of the
            pleadings, discovery, or the evidence presented that
            either:

            (1) The complaint, counterclaim, cross-claim or
            defense was commenced, used or continued in bad
            faith, solely for the purpose of harassment, delay or
            malicious injury; or

            (2) The nonprevailing party knew, or should have
            known, that the complaint, counterclaim, cross-claim or
            defense 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.
      Rule 1:4-8 also permits the imposition of sanctions against counsel for

filing frivolous pleadings. United Hearts, LLC v. Zahabian, 407 N.J. Super.

379, 389 (App. Div. 2009); Masone v. Levine, 382 N.J. Super. 181, 192-93

(App. Div. 2005). Specifically, Rule 1:4-8(a) provides:

            (a) The signature of an attorney . . . constitutes a
            certificate that the signatory has read the pleading,

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            written motion or other paper. By signing, filing or
            advocating a pleading, written motion, or other paper,
            an attorney . . . 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;

            (3) the factual allegations have evidentiary support or,
            as to specifically identified allegations, they are either
            likely to have evidentiary support or they will be
            withdrawn or corrected if reasonable opportunity for
            further investigation or discovery indicates insufficient
            evidentiary support; and

            (4) the denials of factual allegations are warranted on
            the evidence or, as to specifically identified denials,
            they are reasonably based on a lack of information or
            belief or they will be withdrawn or corrected if a
            reasonable opportunity for further investigation or
            discovery indicates insufficient evidentiary support.

      The burden of proof rests with the party seeking sanctions. Ferolito, 408

N.J. Super. at 408. In general, however, courts should interpret both N.J.S.A.

2A:15-59.1 and Rule 1:4-8 restrictively, recognizing the principle that litigants

should have ready access to the courts, and as a general matter, litigants should

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bear their own costs, even when their claims have little merit. Tagayun v.

AmeriChoice of N.J., Inc., 446 N.J. Super. 570, 580 (App. Div. 2016); Belfer v.

Merling, 322 N.J. Super. 124, 144 (App. Div. 1999). "Sanctions should be

awarded only in exceptional cases." Tagayun, 446 N.J. Super. at 580.

      "A claim will be deemed frivolous or groundless when no rational

argument can be advanced in its support, when it is not supported by any credible

evidence, when a reasonable person could not have expected its success, or when

it is completely untenable." Belfer, 322 N.J. Super. at 144. Even "[f]alse

allegations of fact will not justify a fee award unless they are made in bad faith,

for the purpose of harassment, delay, or malicious injury." Ibid. "When the

plaintiff's conduct bespeaks an honest attempt to press a perceived, though ill -

founded and perhaps misguided claim, he or she should not be found to have

acted in bad faith." Id. at 144-45.

      Furthermore, litigants are permitted to rely upon their counsel in

evaluating the legal sufficiency of their claims. Ferolito, 408 N.J. Super. at 408.

That some allegations made at the outset of the litigation ultimately prove to be

unfounded does not render frivolous a complaint that also contains non-frivolous

claims. First Atl. Fed. Credit Union v. Perez, 391 N.J. Super. 419, 432 (App.

Div. 2007). Thus, "a grant of a motion for summary judgment in favor of a

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defendant, without more, does not support a finding that the plaintiff filed or

pursued the claim in bad faith." Ferolito, 408 N.J. Super. at 408. Accord

McKeown-Brand, 132 N.J. at 563. "Sanctions for frivolous litigation are not

imposed because a party is wrong about the law and loses his or her case."

Tagayun, 446 N.J. Super. at 580.

      Here, the record reflects that, in denying the motion for sanctions, Judge

Wilson applied the correct law and considered the relevant factors, and his ruling

does not reflect a clear error of judgment. Accordingly, there was no abuse of

discretion.

      We add only the following. Defendants take issue with plaintiffs' choice

to assert claims against them as individuals, particularly noting Norman's

inability to identify any fraudulent or negligent misrepresentations made by

them. However, even if the fraud and negligent misrepresentation claims were

meritless, the remaining claims still needed to be resolved. In this regard, to the

extent plaintiffs sought to pierce the corporate veil and require the disgorgement

of proceeds from the alleged fraudulent transfer of corporate assets, it was not

unreasonable to bring suit against the other shareholders in the various Bensi

corporations, the corporate officers who allegedly assisted or conspired in the

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wrongdoing, and the parties to the alleged fraudulent transfers. Plaintiffs were

entitled to rely upon their counsel in making such pleading decisions.

      Ultimately, discovery revealed that plaintiffs' claims against Bernardo,

Rick, Clem, and Ben-Yishay should be dismissed. The alleged misconduct was

committed by John alone, and the Garwood, North Brunswick, Hillsdale

transactions were not fraudulent.    Thus, there was no basis to hold these

defendants liable. However, there was much to unravel to reach that conclusion.

That summary judgment was granted to these defendants does not warrant a

conclusion that the litigation against them was frivolous as defined by N.J.S.A.

2A:15-59.1 and Rule 1:4-8.

      Affirmed.

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