Court Opinion

ID: 7804751
Source: CourtListenerOpinion
Date Created: 2022-08-30 14:07:12.981982+00
Date Added: 2024-06-11T16:29:53.722896
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NOT FOR PUBLICATION WITHOUT THE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-1041-20

SLAWOMIR KIELCZEWSKI,

          Plaintiff-Appellant/
          Cross-Respondent,

and

SLAWOMIR KIELCZEWSKI,
d/b/a BE CONSTRUCTION,
and BE CONSTRUCTION, d/b/a
BE CONSTRUCTION
CORPORATION,

          Plaintiffs,

v.

BARBARA REED,

          Defendant-Respondent/
          Cross-Appellant,

and

RAFAL SKRZYPCZAK, SERHIY
DROZDYAK, PIOTR CYBURA,
BRAHMA CONSTRUCTION,
H&S CONSTRUCTION
AND MECHANICAL,
HANNON FLOORS,
M&M CONSTRUCTION
COMPANY, PRECISION
BUILDING AND
CONSTRUCTION, LLC,
SEAWOLF CONSTRUCTION,
SISTERS OF CHARITY, TILCON
NEW YORK, INC., UNIMAK LLC,
VIACO CONSTRUCTION,
WALLKILL GROUP, and
YMCA OF THE ORANGES,

     Defendants.
______________________________

DARIUS A. MARZEC,

     Respondent.
______________________________

         Argued March 16, 2022 – Decided August 30, 2022

         Before Judges Gilson, Gooden Brown, and Gummer.

         On appeal from the Superior Court of New Jersey,
         Chancery Division, Morris County, Docket No.
         C-000032-18.

         David W. Fassett argued the cause for appellant/cross-
         respondent (Arseneault & Fassett, LLC, attorneys;
         David W. Fassett and Gregory D. Jones, on the briefs).

         Daniel B. Tune argued the cause for respondent/cross-
         appellant (Martin & Tune, LLC, attorneys; Daniel B.
         Tune, of counsel and on the briefs).

         Darius A. Marzec, respondent, argued the cause pro se.

                                                                  A-1041-20
                                   2
PER CURIAM

       Plaintiff Slawomir Kielczewski appeals the $77,5691 judgment entered

against him on November 2, 2020, as sanctions for frivolous litigation.

Defendant Barbara Reed cross-appeals the June 4, 2020 order denying sanctions

against Kielczewski's former counsel, Darius Marzec. For the reasons that

follow, we reverse the order entering judgment against Kielczewski and affirm

the order denying sanctions against Marzec.

       We glean these facts from the record.      In 2018, Kielczewski filed a

complaint against Reed and others alleging numerous claims, including breach

of contract, breach of covenant of good faith and fair dealing, misappropriation

of trade secrets, breach of fiduciary duty, unjust enrichment, conversion, fraud,

tortious    interference   with   prospective   economic    benefit,   negligent

misrepresentation of material facts, and civil conspiracy, among other claims.

       In the complaint, Kielczewski alleged that Reed had unlawfully taken

control of his company, Be Construction Corporation (Be Construction).

According to the complaint, Kielczewski formed Be Construction in 2013 and

transferred the then-existing contracts of his former company, Kielczewski

Corporation, to the new business. Kielczewski alleged that he authorized Reed,

1
    We round all monetary amounts to the nearest dollar.
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                                        3
who was initially hired as a bookkeeper and office manager, to "handle

administrative aspects" of the new business because of his ailing health.

However, according to Kielczewski, Reed subsequently held herself out to be

the owner of the company and took control of its accounts and other property.

      Reed filed a contesting answer with affirmative defenses and

counterclaims, alleging tortious interference with economic advantage,

defamation, and unjust enrichment.         Reed claimed she was the sole

"incorporator," "director," "shareholder," and "registered agent" of Be

Construction. Reed's attorney also served Marzec with a Rule 1:4-8 notice and

demand letter (safe-harbor notice) asserting that the complaint was frivolous and

should be withdrawn. He included with the notice copies of canceled checks

representing purported payments from Reed to Kielczewski for company

vehicles and equipment. The notice also asserted that Kielczewski was estopped

from claiming ownership of the company due to his previous denials of

ownership.      In support, the notice included interrogatory responses from

Kielczewski's 2015 divorce proceedings in which he denied ownership of Be

Construction.

      Notwithstanding the safe-harbor notice, Kielczewski and Marzec elected

to proceed with the lawsuit.      Kielczewski certified that he disputed the

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                                       4
authenticity of the purported interrogatory responses, averring he had not

previously seen them. Later, Marzec certified that he had questioned whether

the interrogatory responses were even admissible, as they might have been

obtained in violation of the attorney-client privilege. Additionally, Kielczewski

showed Marzec a March 19, 2018 decision from the National Labor Relations

Board (NLRB), in which the NLRB had found Kielczewski owned Be

Construction. According to the NLRB:

                   About December 13, 2013, . . . B[e] Construction
            was established by . . . [Kielczewski Corporation] as a
            disguised continuation of [Kielczewski Corporation]
            for the purpose of evading its responsibilities under the
            [National Labor Relations Act (Act)]. . . . [Kielczewski
            Corporation] and . . . B[e] Construction are, and have
            been at all material times, alter egos and a single
            employer within the meaning of the Act.

      Subsequently, the trial judge allowed Marzec to withdraw as counsel

because Kielczewski had accrued more than $50,000 in overdue legal fees.

Thereafter, Reed moved for summary judgment. In support, Reed submitted a

deposition transcript showing that Kielczewski had denied ownership of Be

Construction under oath in another lawsuit involving a bank. She also presented

documents from Kielczewski's divorce proceedings, tax returns, and application

for social security benefits further demonstrating he had previously denied

ownership. Kielczewski opposed the motion pro se and submitted an affidavit

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                                       5
in which he admitted "misrepresent[ing his] relationship with Be Construction

. . . in the past in order to avoid union obligations." However, Kielczewski

averred that Reed "was never the owner of Be Construction" but only "agreed

that she would . . . act as a stand in owner" so that he could "avoid labor union

obligations." He also submitted a copy of the NLRB decision.

      During oral argument on the summary judgment motion, the judge

acknowledged she was "struggling with" whether the NLRB decision precluded

summary judgment in the matter.           After defense counsel presented his

arguments, the judge explained:

            I agree with almost everything you've said. And a party
            cannot create a genuine issue of material fact by simply
            offering a sworn statement that contradicts earlier
            sworn testimony.

                  ....

                  . . . However, there's a finding in the . . . NLRB
            case. And that's a court finding. That he was the
            owner. . . . [I]s that sufficient in and of itself to raise a
            genuine issue of material fact[] precluding summary
            judgment.

                   I'm not saying he . . . will prevail or won't prevail
            at trial. I understand that he has a very high burden
            given these facts. But does that preclude this [c]ourt
            from granting summary judgment?

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      In response, defense counsel argued Reed was not bound by the NLRB

decision because she "was not a party" to the case. In turn, Kielczewski argued

that the NLRB decision precluded the court from granting Reed summary

judgment, citing a case from 1914, which purportedly stated that "two sources

of power cannot regulate the same thing." Therefore, Kielczewski contended,

"if NLRB being a federal agency ruled already that this is . . . my company, I

don't see how it could be that somebody else could rule that it's not."

      Nonetheless, in an order entered October 31, 2019, the judge granted Reed

summary judgment. In an accompanying written opinion, the judge determined

that the NLRB's findings had no preclusive effect and, therefore, did not create

a genuine issue of material fact. The judge also observed that Kielczewski had

"perjured himself either in this matter or previous legal matters" and reasoned

he could not "create a genuine issue of fact merely by offering a new sworn

statement now that contradicts a multitude of earlier testimony." The judge also

pointed out that Kielczewski was unable to produce affidavits from others

supporting his ownership claims, and "[Kielczewski's] affidavit [did] not clarify

his prior sworn testimony, it expressly and indubitably contradict[ed] it."

Therefore, the judge found that Kielczewski "[did] not present any evidence to

demonstrate he own[ed] the company" and held his "conclusory assertions

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                                        7
[were] insufficient to overcome a meritorious motion for summary judgment."

Kielczewski did not appeal the decision.

      Reed subsequently moved for sanctions against Kielczewski and Marzec

for frivolous litigation. Reed requested the court award $77,569 for attorney's

fees, $504,927 in consequential damages, and $350,000 as "a coercive sanction

to deter future frivolous litigation." Reed also submitted evidence of Marzec's

allegedly fraudulent conduct in other unrelated matters.      Kielczewski and

Marzec both opposed the motion.

      In a June 4, 2020 order, the judge granted the motion in part as to

Kielczewski, but denied the motion as to Marzec. In an accompanying statement

of reasons, as to Marzec, the judge found the evidence did not clearly show that

Marzec's allegedly fraudulent tactics in unrelated matters paralleled what

occurred in this case.    The judge also determined that Marzec had not

commenced the litigation in bad faith or for a wrongful purpose, finding that

"[Kielczewski's] position, as it was conveyed to [Marzec], was not completely

untenable as to warrant sanctions." Moreover, the judge reasoned that during

Marzec's representation, "there was not enough evidence" to show that

Kielczewski's claims were frivolous.

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                                       8
      However, as to Kielczewski, the judge declared Kielczewski "knew at the

commencement of this lawsuit he had previously represented his relationship to

the company in a completely different light, and did not withdraw his pleadings,

even though, as this litigation continued, it was clear plaintiff had insufficient

evidence to support his claims." Moreover, referencing Kielczewski's previous

contradictory sworn statements, the judge stated that "[i]t is indisputable

plaintiff perjured himself throughout the course of this litigation ."

Consequently, the judge reasoned that Kielczewski could not "make the

argument he relied upon his former attorney's assessment of his claims to escape

the misrepresentations he made under oath."

      Although the judge concluded Kielczewski had "acted in contravention of

[Rule] 1:4-8 and N.J.S.A. 2A:15-59.1 when he continually pursued this

litigation, despite having no evidence to support his claims and despite making

contradictory statements under oath[,]" the judge found the sanctions request

excessive and granted Reed only $77,569 in legal fees in a judgment entered on

November 2, 2020.

      In this ensuing appeal and cross-appeal, Kielczewski contends the judge

made several errors including: (1) finding that he had lied in this litigation and

offered no evidence to support his claim; (2) ignoring that Reed's safe-harbor

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                                        9
notice was deficient because it proffered an erroneous legal theory that was not

the basis of the summary judgment decision; (3) concluding he was not entitled

to rely on Marzec's assessment of his claim; and (4) failing to specify when his

complaint became frivolous and awarding fees only from that date. Reed argues

the judge erred in not granting sanctions against Marzec.

      "We review a trial court's imposition of frivolous litigation fees for an

abuse of discretion. Reversal is warranted when 'the discretionary act was not

premised upon consideration of all relevant factors, was based upon

consideration of irrelevant or inappropriate factors, or amounts to a clear error

in judgment.'" Tagayun v. AmeriChoice of N.J., Inc., 446 N.J. Super. 570, 577

(App. Div. 2016) (citation omitted) (quoting Masone v. Levine, 382 N.J. Super.

181, 193 (App. Div. 2005)).

      The Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, provides that a

court may award a prevailing party in a civil action 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 statute establishes two bases for concluding an action was

frivolous:

             (1) The complaint, counterclaim, cross-claim or
             defense was commenced, used or continued in bad

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                                      10
            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.

            [N.J.S.A. 2A:15-59.1(b).]

      Judges are to interpret the statute restrictively, McKeown-Brand v. Trump

Castle Hotel & Casino, 132 N.J. 546, 561 (1993), and we have explained that

"[s]anctions 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.

Furthermore, "[t]he statute should not be allowed to be a counterbalance to the

general rule that each litigant bears his or her own litigation costs, even when

there is litigation of 'marginal merit.'" Belfer v. Merling, 322 N.J. Super. 124,

144 (App. Div. 1999) (quoting Venner v. Allstate, 306 N.J. Super. 106, 113

(App. Div. 1997)).

      Sanctions under N.J.S.A. 2A:15-59.1 are applicable against parties, not

their attorneys. Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 68 (2007).

However, Rule 1:4-8 authorizes sanctions against attorneys and pro se parties

for frivolous litigation. "For purposes of imposing sanctions under Rule 1:4-8,

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                                      11
an assertion is deemed 'frivolous' when 'no rational argument can be advanced

in its support, or it is not supported by any credible evidence, or it is completely

untenable.'" Bove v. AkPharma Inc., 460 N.J. Super. 123, 148 (App. Div. 2019)

(quoting United Hearts, LLC, v. Zahabian, 407 N.J. Super. 379, 389 (App. Div.

2009)).

      An attorney or pro se party who violates the Rule may incur sanctions,

including "an order directing payment to the movant of some or all of the

reasonable attorneys' fees."     R. 1:4-8(d).    However, "the Rule imposes a

temporal limitation on any fee award, holding that reasonable fees may be

awarded only from that point in the litigation at which it becomes clear that the

action is frivolous." Wolosky v. Fredon Twp., 472 N.J. Super. 315, 328 (App.

Div. 2022) (quoting LoBiondo v. Schwartz, 199 N.J. 62, 99 (2009)).

      Rule 1:4-8 also declares that a movant may not seek sanctions for

frivolous litigation without having first served written notice and demand to the

opposing attorney or pro se party. R. 1:4-8(b)(1). Likewise, a movant seeking

to obtain fees from a represented party under N.J.S.A. 2A:15-59.1 must comply

with this safe-harbor provision "[t]o the extent practicable."         R. 1:4-8(f).

Critically, the safe-harbor notice must "set forth the basis" for the belief that an

attorney or party violated Rule 1:4-8 "with specificity." R. 1:4-8(b)(1)(ii).

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                                        12
      The safe-harbor provision's specificity requirement obligates those

seeking awards for frivolous litigation to have alerted the opposing attorney or

party "about the frivolous nature of the complaint on which they prevailed" in

court. Ferolito v. Park Hill Ass'n, Inc., 408 N.J. Super. 401, 410 (App. Div.

2009). Because "a notice and demand articulating an objection on one legal

theory does not serve to alert the client or the attorney to other weaknesses,"

failure to identify the dispositive issue "preclude[s] an award of fees and costs."

Id. at 409-10; see also Bove, 460 N.J. Super. at 155 (concluding that failure to

notify the plaintiff that his claims were statutorily barred, as the trial court had

determined, provided reason to reverse a sanctions award). Moreover, "even if

a non-prevailing party does not complain about a deficiency regarding a safe -

harbor notice, the judiciary itself has an institutional interest in assuring that the

safe-harbor prerequisite to fee-shifting is strictly enforced." Bove, 460 N.J.

Super. at 155.

      In Tagayun, we decided that a pro se plaintiff should not be sanctioned for

frivolous litigation, even though the defendant's safe-harbor notice had correctly

warned the plaintiff that he lacked standing. 446 N.J. Super. at 575, 581. The

plaintiff mistakenly believed he had standing as a third-party beneficiary to the

contract at issue. Id. at 581. We reasoned "[t]he judge properly declined to

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                                         13
accept that argument, but an award of sanctions was not warranted simply

because [the plaintiff] misconstrued the law." Ibid. Similarly, in Belfer, we

explained that "[w]hen 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." 322 N.J. Super. at 144-45.

      Here, the judge concluded Kielczewski's claim was frivolous because he

failed to produce any evidence to demonstrate that he owned Be Construction.

However, at the summary judgment hearing, the judge acknowledged struggling

with whether the NLRB's finding that Kielczewski owned the company was

sufficient to create an issue of material fact precluding summary judgment.

Given that acknowledgment, there is insufficient evidence to support the judge's

later declaration that "as this litigation continued, it was clear [Kielczewski] had

insufficient evidence to support his claims." Moreover, although Kielczewski

was mistaken about the significance of the NLRB decision, that alone does not

support a finding that he commenced or continued the litigation in bad faith.

See ibid.

      Additionally, in light of the judge's initial doubts about granting summary

judgment, it would be contradictory to conclude that Kielczewski "knew, or

should have known" that his claim "was without any reasonable basis in law or

                                                                              A-1041-20
                                        14
equity." N.J.S.A. 2A:15-59.1(b)(2). Given the NLRB decision, it was not

unreasonable for Kielczewski to have believed he would unearth more

evidentiary support for his claim through discovery. See R. 1:4-8(a)(3). Thus,

Kielczewski's complaint was not so untenable as to warrant sanctions.

      Furthermore, Reed's safe-harbor notice was deficient. The safe-harbor

notice warned Kielczewski and Marzec that the litigation was frivolous because

Kielczewski was estopped from claiming ownership of the company, given his

previous denials. However, in deciding the summary judgment motion, the

judge did not rule that Kielczewski's claim failed due to any estoppel doctrine.

Instead, the judge held that Kielczewski did not produce any evidence to show

he had a legitimate claim to the company, and thus Reed was entitled to

summary judgment as a matter of law. Because Reed's safe-harbor notice did

not specify that the claim was frivolous for the reasons the judge ruled in her

favor, the notice was deficient, and Reed was not entitled to an award of

attorney's fees.    Bove, 460 N.J. at 155 (emphasizing "the safe-harbor

prerequisite to fee-shifting is strictly enforced").

      Therefore, we conclude the judge mistakenly exercised her discretion in

imposing frivolous litigation sanctions on Kielczewski because Kielczewski's

complaint was not completely untenable, and Reed's safe-harbor notice was

                                                                          A-1041-20
                                        15
deficient. Accordingly, we vacate the $77,569 judgment. Reed's cross-appeal

fails for the same reasons.

      Affirmed in part; reversed in part. We do not retain jurisdiction.

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                                      16