Court Opinion

ID: 4427980
Source: CourtListenerOpinion
Date Created: 2019-08-20 18:58:57.227303+00
Date Added: 2024-06-11T14:23:13.668005
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NOT FOR PUBLICATION WITHOUT THE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-5881-17T4

GURBIR S. GREWAL, Attorney
General of the State of New Jersey,
and PAUL R. RODRÍGUEZ, Acting
Director of the New Jersey Division
of Consumer Affairs,

          Plaintiffs-Appellants,

v.

ATLANTIC COAST HOUSE LIFTING
LIMITED LIABILITY COMPANY, a/k/a
ATANTIC COAST HOUSE LIFTING,
LLC, a/k/a ATLANTIC COAST HOUSE
LIFTING, a/k/a ATLANTIC COAST HOUSE
LIFTERS, GEORGE REX CONSTRUCTION,
LLC, a/k/a GEORGE REX CONTRACTING,
LLC, a/k/a GEORGE REX CONTRACTING,
a/k/a GFR CONTRACTING, LLC, and GEORGE
REX, individually and as owner, officer, director,
founder, member, manager, representative and/or
agent of ATLANTIC COAST HOUSE LIFTING
LIMITED LIABILITY, and GEORGE REX
CONSTRUCTION, LLC,

     Defendants-Respondents.
__________________________________________

                   Argued March 11, 2019 – Decided July 18, 2019
            Before Judges Sabatino, Sumners and Mitterhoff.

            On appeal from an interlocutory order of the Superior
            Court of New Jersey, Chancery Division, Atlantic
            County, Docket No. C-000003-17.

            Jeffrey Alan Koziar, Deputy Attorney General, argued
            the cause for appellants (Gurbir S. Grewal, Attorney
            General, attorney; Jason Wade Rockwell, Assistant
            Attorney General, of counsel; Lorraine K. Rak, Deputy
            Attorney General, and Mark E. Critchley, Deputy
            Attorney General, on the briefs).

            Katrine L. Hyde argued the cause for respondents
            (Kennedys CMK LLP, attorneys; David M. Kupfer,
            Katrine L. Hyde and Elizabeth H. Rohan, of counsel
            and on the brief).

PER CURIAM

      In this matter, we are asked to address one of the unfortunate situations

allegedly caused by unscrupulous contractors following the tremendous

property devastation caused by Superstorm Sandy. By leave granted, plaintiffs

Gurbir S. Grewal, New Jersey Attorney General (the AG), and Paul R.

Rodríguez, Acting Director of the New Jersey Division of Consumer Affairs

(the Division) (collectively, the State), appeal from a June 29, 2018 Chancery

court order that stayed their Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 and -

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2, lawsuit against defendants George Rex and Atlantic Coast House Lifting 1

pending disposition of potential criminal charges against Rex; and issued an

order to show cause (OTSC) on October 17, 2018, requiring aggrieved

homeowners to show cause as to why they should not be barred from filing any

criminal or municipal complaints 2 against defendants. For the reasons expressed

below, we reverse.

                                       I.

      Following Superstorm Sandy in November 2012, the Division created the

Reconstruction, Rehabilitation, Elevation and Migration (RREM) Program to

provide homeowners with up to $150,000 in grant money to repair damage to

their homes. Under the program, homeowners were permitted to select an

approved private contractor of their choice. Many homeowners hired defendants

to repair their homes. Over the course of four years, the Division received nine

complaints from homeowners that defendants' repairs were carelessly

1
   Defendants include Rex, and all business entities that he owns as sole
shareholder. For sake of convenience, they will be referred to collectively as
defendants.
2
  For the sake of simplicity, all references hereafter to "criminal charges" or
"criminal complaints" shall include both indictable and municipal court charges.

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completed, incomplete, or non-compliant with state and municipal building

codes. Consequently, the State filed a lawsuit against defendants in February

2018, alleging violations of the CFA and other state laws, 3 seeking to

permanently enjoin defendants' business operations and monetary damages.

      Simultaneously, three of the nine homeowners who filed complaints with

the Division, also filed municipal court complaints against Rex. 4         Their

complaints were later dismissed.      In addition, a total of six complaining

homeowners have been financially compensated by RREM for the money they

lost to defendants. Thus, it would seem that their interest in filing criminal

complaints is lacking.

      Concerned about the prospects of future criminal complaints in municipal

court and the Superior Court, Rex invoked his Fifth Amendment right against

self-incrimination, and refused the State's requests to depose him as part of the

CFA action. Defendants also moved for a stay of the civil action pending tolling

3
  The Contractors' Registration Act, N.J.S.A. 56:8-136, -152, and regulations
governing: contractor registration, N.J.A.C. 13:45A-17.1, -17.4, and home
improvement practices, N.J.A.C. 13:45A-16.1, -16.2.
4
  The third-degree theft complaints were transferred to the Superior Court, but
administratively dismissed. The disorderly persons theft offense complaint was
dismissed by the municipal court for lack of prosecution.
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of the five-year statute of limitations period for criminal complaints the nine

homeowners could potentially file under N.J.S.A. 2C:1-6.

      Following argument, the court reserved decision. About three weeks later,

relying upon State v. Kobrin Sec., Inc., 111 N.J. 307 (1988), the court granted

defendant's motion to stay the civil proceedings. In his oral decision, the court

stated,

            There is no[] significant harm to the [nine homeowners]
            in granting [the motion to stay] as six of the nine . . .
            have been reimbursed.

                   ....

                   It is clear that the issues involve the same or
            similar type of conduct. It is clear that with the specter
            of criminal prosecution hanging over [Rex's] head that
            he is forced to make a decision an[d] it is clear . . . that
            he would be prejudiced if he had to proceed to a
            deposition and answer questions under oath and
            proceed to trial . . . recognizing that anything he said
            [could] be used against him in a pending criminal
            proceeding.

                   ....

            . . . [T]he filing of this litigation, [and] the media
            attention that may have attached has, to some extent,
            helped the public policy if these are proven and his
            business has been significantly diminished.

      In addition, to further support its decision to grant the stay and in an effort

to bring some finality to the possibility of the nine homeowners filing criminal

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charges against defendants, the court ordered defendants to serve an OTSC on

the homeowners to show cause as to why they have not brought criminal charges

against defendants, and whether they intend to bring any such claims in the

future. Defendants followed the court's directive.

      Within a month, the court issued the OTSC, which provided that the nine

homeowners would be barred from asserting a claim in "any police report and/or

[criminal] complaint to any law enforcement agency" against defendants arising

from the work performed at their homes if they failed to come forward with a

claim on or before October 17, 2018. The judge commented that if other

homeowners were to bring criminal complaints against defendants at a later

time, "they have a right to [file complaints] and I'm gonna continue the stay and

then we'll have to talk about it, but we could have, you could argue it again, but

my gut reaction is under these circumstances I would continue the stay until

completion . . . ."

      The OTSC has been stayed pending this appeal.

                                       II.

      Before us, the State raises two arguments. First, it contends the Chancery

court abused its discretion when he granted defendants' motion to stay the civil

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proceedings. Second, it contends the court erred as a matter of law in granting

the OTSC. We address these arguments in the order presented.

                                         A.

      The decision to stay a civil action due to the pendency of a criminal action

is not constitutionally required but rather rests in the sound discretion of the trial

court. Kobrin, 111 N.J. at 314. It is not a violation of the Fifth Amendment or

Due Process to require a defendant to make the choice to testify, even though

giving testimony at a civil proceeding may help criminal prosecutors, as opposed

to invoking his Fifth Amendment rights and suffering any adverse civil

consequences that flow therefrom. Id. at 312-13. "[W]hatever the difficulties

of invoking the fifth-amendment privilege, there is no constitutional inhibition

that a defendant in a criminal case not 'be put to the difficult choice of having to

assert the privilege in a related civil case . . . .'" Id. at 313 (quoting De Vita v.

Sills, 422 F.2d 1172, 1178 (3d Cir. 1970)).          In other words, as long as a

defendant has the right to invoke his Fifth Amendment privilege in the civil

proceeding, there is no constitutional right to be relieved of the burden of that

choice. United States v. Simon, 373 F.2d 649 (2d Cir.), cert. granted sub nom.

Simon v. Wharton, 366 U.S. 1030, vacated as moot, 389 U.S. 425 (1967).

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      Of course, "[t]here may be cases where the requirement that a criminal

defendant participate in a civil action . . . [may] violate[] concepts of elementary

fairness in view of the defendant's position in an inter-related criminal

prosecution." Kobrin, 111 N.J. at 314 (citation and internal quotations omitted).

"On the other hand, the fact that a [person] is indicted cannot give [the person]

a blank check to block all civil litigation on the same or related underlying

subject matter." Ibid.

      Rather, in the exercise of its discretionary judgment, a trial court "must

weigh competing interests and maintain an even balance." Landis v. N. Am.

Co., 299 U.S. 248, 254-55 (1936); see also Procopio v. Gov't Emps. Ins. Co.,

433 N.J. Super. 377, 380 (App. Div. 2013). "The court, in its sound discretion,

must assess and balance the nature and substantiality of the injustices claimed

on either side[,]" with the understanding that "[j]ustice is meted out in both civil

and criminal litigation." Kobrin, 111 N.J. at 314 (quoting Gordon v. Fed.

Deposit Ins. Corp., 427 F.2d 578, 580 (D.C. Cir. 1970)). Where the risk of

exposing a defendant exercising the constitutional privilege to adverse

consequences is slight, then "[t]he overall interest of the courts that justice be

done may very well require that the compensation and remedy due a civil

plaintiff should not be delayed (and possibly denied)." Ibid.

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      Accordingly, several considerations guide a trial court in resolving the

question of a stay. The court must determine "whether refusing to stay discovery

would impose undue hardship on a defendant and would thereby expose to

unnecessary adverse consequences the defendant exercising his constitutional

privilege." Kobrin, 111 N.J. at 314. The status of the criminal case, including

whether the defendant has been indicted, must be examined. Nat'l Freight, Inc.

v. Ostroff, 133 N.J. Super. 554, 558-59 (Law Div. 1975).

      In National Freight, over one hundred criminal complaints were filed

against the defendant and forwarded to the grand jury, but no indictments were

presented as of the date of the court's decision. Id. at 555. The court reasoned

that a stay was against the interests of justice because a criminal trial may never

occur at all, noting that "[i]ndictments have not yet been found . . . nor is there

any certainty that any will be." Id. at 558. In denying the defendant's application

to stay the civil action that was based on the same facts giving rise to the criminal

complaints against him – which were placed on the inactive list – the court

concluded:

             to say that the civil suit must remain in statu[s] quo
             indefinitely is to import to the courts an impotency
             unworthy of them. To compel other parties to sit
             supinely by while their rights or possibility of recovery
             are eroded is to invite contempt for the law as well as

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            permit any guilty party to secrete or dissipate the fruits
            of his wrongdoing.

            [Id. at 559.]

      The State contends that proceeding with the CFA action would not impose

any undue hardship because there are no known ongoing criminal investigations

or indictments, and defendant failed to cite any case law that supports the

proposition that a stay in a civil proceeding is appropriate. To the contrary, Rex

asserts there is a "real danger" that the information gained during the civil

proceedings could potentially be used to "fully prosecute the next criminal case

against [him]."

      From our perspective, the State's position is prevailing. Rex is in the same

boat as the defendant in National Freight, no indictment has been returned

against him and no criminal charges are apparently pending against him. The

superior and municipal court complaints against Rex have been dismissed, and

defense counsel essentially admitted there were no known ongoing

investigations, rendering defendants' concerns to be speculative. There is no

indication that the State has a "hidden agenda" to obtain incriminating

statements from Rex through the Division's efforts to enforce the CFA. See

State v. P.Z., 152 N.J. 86, 120 (1997); Kobrin, 111 N.J. at 317. Thus, we discern

no undue hardship or adverse consequences on defendants in staying this matter.

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                                       10
      The court must also consider "whether the civil proceeding seeks only a

monetary recovery by government against a defendant." Kobrin, 111 N.J. at

314. Related to that is the need to consider whether the relief sought is to protect

the public interest. Id. at 314-315. The State argues that it seeks injunctive

relief to permanently cease defendants' business operations and to revoke their

licenses.   It also seeks monetary relief from defendants not only for the

homeowners who were allegedly affected by defendants' allegedly fraudulent

practices, but also to replenish the funds paid to homeowners through the RREM

program, which is funded by state taxpayers. Defendants claim that the negative

media coverage has significantly damaged Rex's business 5 and there will be no

harm to the public as the homeowners have already received additional funds to

complete construction after filing their complaints with the Division. They

further posit that the media attention has "dealt a blow" to their business; thus

there is no need to cease additional harm to the public.

      Again, we agree with the State's position. In exercising its statutory

responsibility under the CFA, the State is seeking to protect the public from

5
  At the time of the June 8, 2018 hearing, defense counsel stated that he did not
have the exact figures, but that Rex informed a different court and the State
during mediation that "his receipts[] are a fraction of what they were before the
[CFA] litigation was filed and . . . the local media attention." No documentation
was provided to the trial court or is in the appellate record.
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defendants due to their alleged violations by enjoining their contracting

businesses from operating, and recouping taxpayer monies paid to homeowners

under the RREM program. This clearly weighs in favor of allowing this matter

to proceed to conclusion without waiting for the indefinite period of a stay and

resulting in the possibility of delaying civil justice to the citizens of New Jersey.

      We conclude the reasoning that the public interest concerns were satisfied

by the impact of media coverage on defendants' businesses, as suggested by the

court, is flawed. The State's position is that defendants' violations of state law

were so egregious that they should no longer be allowed to operate. This

salutary goal cannot be accomplished by the "black eye" they may have received

from negative media attention. There is a reasonable prospect that uninformed

homeowners or property owners may be unaware of the reports of defendants'

alleged misdeeds. In the event that the court found they violated the CFA, the

court may avoid future harm by prohibiting defendant from conducting business

in the future.

      Another consideration is "whether the two actions are nearly identical in

scope." Kobrin, 111 N.J. at 314. The court was correct in finding that this civil

matter and any potential criminal charges would involve the same issues arising

from the same transaction or occurrence. There is mutual identity between the

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parties in the civil and criminal actions because the nine homeowners who

brought the municipal court complaints are the same individuals for whom the

State is initiating this consumer protection action. Defendants are also the same

parties, as Rex is the sole shareholder and owner of the various defendant

business entities.

      Nevertheless, "when relief is sought to prevent continued injury to the

public, such as that caused by the continued dissemination of unapproved drugs,

United States v. Kordel, 397 U.S. 1, 11 (1970), the civil proceedings should not

be stayed except in the most unusual circumstances." Kobrin, 111 N.J. at 314.

Only when particular civil matters "would expose a litigant to undue risk of

losing the civil case or facing criminal prosecution[,]" should they be stayed.

Id. (citing Arden Way Assocs. v. Boesky, 660 F. Supp. 1494, 1499 (S.D.N.Y.

1987)). Since, as noted above, we do not conclude there is any indication that

Rex is exposed to criminal prosecution, the common identity should not have

been a basis for staying this action.

      Based upon all these reasons, we conclude that the Chancery court

mistakenly applied its discretion in ordering a stay.

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                                        B.

      The State next contends that the Chancery court's imposition of an OTSC

requiring the nine homeowners to show cause – why they did not file or pursue

criminal complaints against defendants, and if they did not do so, they would be

"forever barred" from filing future complaints if not raised by a set date – was

"impermissible under the law and unduly benefits defendants at the expense of

the [homeowners]," and punishes the homeowners "because the State filed suit."

We agree.

      Our standard of review is whether, in granting or denying the order to

show cause, the trial court erred as a matter of law. Waste Mgmt. of New Jersey,

Inc., 399 N.J. Super. at 516-18; Solondz, 317 N.J. Super. 16, 20-21 (App. Div.

1998). An OTSC is appropriate where a party is seeking any "form of emergent,

temporary, interlocutory, or other form of interim relief," such as to stay a civil

proceeding. Solondz v. Kornmehl, 317 N.J. Super. 16, 20 (1998) (citing R. 4:52-

1 and -2); see Chalom v. Benesh, 234 N.J. Super. 248, 254 (Super. Ct. 1989).

      Usually, parties request an OTSC where (1) they seek "entry of an order

requiring a party to show cause why a temporary restraint or an interlocutory

injunction should not issue," and (2) at the commencement of an action

"requir[ing] a defendant to show cause why final judgment should not be

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                                       14
entered[,]" often referred to as a "summary action." Waste Mgmt. of New

Jersey, Inc. v. Union Cty. Utilities Auth., 399 N.J. Super. 508, 516 (App. Div.

2008). An OTSC, however, may never be instituted for the entry of a permanent

injunction. Ibid.; see also Solondz, 317 N.J. Super. at 20-21; Chalom, 234 N.J.

Super. at 254 (criticizing an OTSC that provided for ex parte "instant, complete

and final relief.").

      In assessing the court's decision to stay this civil matter, we appreciate

that it wanted to expedite the filing of criminal complaints against defendants to

minimize the length of the stay.     Defendants assert the court "fashioned a

mechanism by which the homeowners at issue were afforded a complete

opportunity to be heard had they wished to challenge any aspect of the

requirement that they cause a criminal action to commence by October 17,

2018." However, even though our courts have the ability to establish parameters

to determine whether a claim has been filed within the statute of limitations, the

OTSC impermissibly shortens the requisite five-year statute of limitations under

N.J.S.A. 2C:1-6 for filing criminal claims.      As the State argues, the court

"[t]hrough its own deliberative process and consideration of public policy[]"

disregarded the time frame mandated by the Legislature; without any supporting

case law that would allow such an order. Moreover, while the OTSC does not

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specifically mention a complete bar, it was essentially a permanent injunction

against the homeowners filing criminal complaints against defendants if they

did not assert any criminal or quasi-criminal complaints; as it directs that any

such complaints "must be filed" by the specified date.

      We further find favor with the State's argument that the OTSC was

overbroad. It barred homeowners from asserting a claim in "any police report

and/or [criminal] complaint to any law enforcement agency," and any claims

against defendants arising from the work performed at their homes, despite the

fact that such claims may not be ripe prior to the court's mandated cut-off date.

While the homeowners were compensated under the RREM program, this does

not extinguish their right to file criminal complaints against defendants and

pursue punitive measures under the law. 6 Consequently, the OTSC would

clearly benefit defendants to the prejudice of the homeowners. We discern no

viable purpose for giving this advantage to defendants over the individuals they

allegedly took advantage of who were already dealing with the trauma and life

changing experience they suffered by their hurricane-ravaged homes.

      Reversed and remanded.

6
  If Rex were charged with third-degree theft by deception, N.J.S.A. 2C:20-4(a),
he could be charged with up to 364 days in county jail, placed on probation, and
be subject to fines.
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