Court Opinion

ID: 9961999
Source: CourtListenerOpinion
Date Created: 2024-04-22 14:06:26.198864+00
Date Added: 2024-06-11T08:19:38.922820
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                                   SUPERIOR COURT OF NEW JERSEY
                                   APPELLATE DIVISION
                                   DOCKET NO. A-2765-21

BOROUGH OF
ENGLEWOOD CLIFFS,
                                          APPROVED FOR PUBLICATION
      Plaintiff-Appellant,
                                                  April 22, 2024

v.                                           APPELLATE DIVISION

THOMAS J. TRAUTNER, ALBERT
WUNSCH, 800 SYLVAN AVENUE,
LLC, and CHIESA SHAHINIAN &
GIANTOMASI, PC,

      Defendants-Respondents,

and

JEFFREY R. SURENIAN, JOSPEH
MARINIELLO, JR., JEFFREY R.
SURENIAN AND ASSOCIATES,
LLC, and MARINIELLO &
MARINIELLO, PC,

     Defendants.
_______________________________

            Submitted November 8, 2023 – Decided April 22, 2024

            Before Judges Sumners, Rose and Smith.

            On appeal from the Superior Court of New Jersey, Law
            Division, Bergen County, Docket No. L-5785-21.
            King, Moench & Collins, LLP, attorneys for appellant
            (Jerry J. Dasti and Patrick F. Varga, on the briefs).

            Lowenstein Sandler, LLP, attorneys for respondents
            Thomas J. Trautner and Chiesa Shahinian &
            Giantomasi PC (A. Matthew Boxer, Peter Matthew
            Slocum, and Stephanie Ashley, on the brief).

            Beattie Padovano, LLC, and Hill Wallack LLP,
            attorneys for respondent 800 Sylvan Avenue, LLC
            (Antimo Anthony Del Vecchio and Thomas Francis
            Carroll, of counsel and on the brief; Daniel L.
            Steinhagen and Keith Arnold Loughlin, on the brief).

            Albert H. Wunsch, III, respondent pro se, joins in the
            brief of respondents Thomas J. Trautner, and Chiesa
            Shahinian & Giantomasi PC.

      The opinion of the court was delivered by

SUMNERS, JR., C.J.A.D.

      This appeal requires us to settle whether a public entity is immune from

sanctions for filing a frivolous lawsuit in accordance with the Frivolous

Litigation Statute (FLS), N.J.S.A. 2A:15-59.1, and Rule 1:4-8.         The only

published cases regarding this issue are two divergent Chancery Division rulings

issued in 1993 and 1997. If immunity does not apply, we must then determine

whether the trial court abused its discretion by imposing sanctions.

      The Borough of Englewood Cliffs retained Thomas J. Trautner and Chiesa

Shahinian & Giantomasi PC, (collectively CSG), Albert Wunsch III, Jeffrey

                                                                          A-2765-21
                                       2
Surenian and Jeffrey Surenian and Associates, LLC, (collectively Surenian) to

represent it in affordable housing litigation. After judgment was entered for

developer 800 Sylvan Avenue, LLC. (Sylvan), a settlement was reached between

the Borough and Sylvan. Thereafter, political control of the Borough Council

majority changed hands and the newly constituted Council sued CSG, Wunsch,

and Surenian, alleging professional malpractice, breach of contract, unjust

enrichment, civil conspiracy, and aiding and abetting arising from their

representation of the Borough in the litigation. The Borough also sued Sylvan,

alleging claims of conspiracy and aiding and abetting.

      The trial court granted defendants' Rule 4:6-2(e) motions to dismiss the

Borough's complaint with prejudice.        The trial court subsequently granted

defendants' motion for sanctions, ordering the Borough to pay their attorney's

fees and costs for filing a frivolous lawsuit. The Borough appeals, arguing the

sanction applications were procedurally deficient; as a public entity, it is

immune from paying sanctions under the FLS; and the trial court abused its

discretion in finding the Borough's lawsuit was frivolous.1

1
  On August 25, 2023, the Borough and Surenian filed a stipulation of dismissal
dismissing all claims and counterclaims against each other.

                                                                          A-2765-21
                                       3
       The court rejects the Borough's arguments and affirms based on our

interpretation of the FLS that the Borough is not immune from sanctions,

defendants' applications for sanctions were procedurally compliant with Rule

1:4-8, and the trial court did not abuse its discretion in imposing sanctions

against the Borough.

                                        I.

       The genesis of this litigation is a declaratory judgment action2 by the

Borough seeking a trial court order that it complied with its state constitutional

affordable housing obligations.    After Sylvan intervened in the action, the

Borough hired CSG, Surenian, and Wunsch (collectively "defendant

attorneys").3 We need not fully detail that action or other related litigation

because they are unnecessary to resolve this appeal.4 Suffice it to say, the trial

court––the same court which entered the order under review––entered judgment

2
    In the Matter of the Application Englewood Cliffs, No. BER-L-6119-15.
3
 The Borough also retained and sued Joseph Mariniello, Jr. and Mariniello &
Mariniello PC, but they are not included because they did not seek fees or costs,
were dismissed as defendants, and are not parties to this appeal.
4
   800 Sylvan Ave. LLC v. Planning Bd. of Englewood Cliffs, No. A-2309-19
(App. Div. Aug 16, 2023); 800 Sylvan Ave., LLC v. Borough of Englewood
Cliffs, No. A-4019-17 (App. Div. Feb. 19, 2020); Borough of Englewood Cliffs
v. Surenian, No. BER-L-787-21 (Law Div. May 21, 2021).

                                                                            A-2765-21
                                        4
in favor of Sylvan by awarding it a builder's remedy.5 This led to a settlement

agreement between Sylvan and the Borough resolving the number of affordable

housing units that Sylvan could build in the Borough and related issues.

Relevant to this appeal, the agreement provided that if "either party . . . seeks

any relief related to the [declaratory judgment action] in any court of the State

of New Jersey . . . , the non-breaching party may move to enforce this provision

of the [a]greement and the breaching party shall be liable for all legal fees

incurred."

      Prior to approving the settlement, the Borough Council passed Resolution

20-132, praising defendant attorneys who represented it in the declaratory

judgment action for recommending a settlement prior to trial, and censuring the

mayor, who was a member of an opposing political party, for "thwart[ing] the

work of the Borough to resolve the affordable housing litigation matter . . .

through the filing of needless lawsuits and allegations."

5
   "A builder's remedy provides a developer with the means to bring 'about
ordinance compliance through litigation.'" In the Matter of the Application of
Bordentown, 471 N.J. Super. 196, 221 (App. Div. 2022) (quoting Mount Olive
Complex v. Township of Mount Olive (Mount Olive II), 356 N.J. Super. 500,
505 (App. Div. 2003)).

                                                                           A-2765-21
                                        5
      In the subsequent municipal election, political control of the Borough

Council majority changed hands. About nine months later, the Borough sued

defendant attorneys alleging legal malpractice. In its first amended complaint,

as to defendant attorneys, the Borough alleged professional malpractice, breach

of contract, unjust enrichment, civil conspiracy, and aiding and abetting. As to

defendant Sylvan, the Borough alleged only conspiracy and aiding and abetting.

Within six weeks of being served the complaint, each defendant sent the

Borough's attorneys notices demanding the lawsuit be voluntarily dismissed

because it was frivolous. The Borough did not comply.

      Defendants successfully moved under Rule 4:6-2(e) to dismiss the

Borough's complaint with prejudice. In its written decision, the trial court

found the: (1) malpractice claims were without basis in law or fact; (2) lawsuit

was barred by the entire controversy doctrine; (3) public documents controlled

and evinced the Borough's satisfaction with the defendant attorneys'

representation; (4) conspiracy and aiding and abetting claims were without

basis in law or fact; and (5) Borough's attorney "was without an authorized

resolution to commence and prosecute this litigation and was unable to secure

[authorization] retroactively." The Borough did not appeal.

                                                                           A-2765-21
                                       6
      Defendants next timely moved for attorney's fees due to the Borough's

failure to withdraw the lawsuit as they demanded. See R. 1:4-8(b)(2) (motions

for reimbursement of attorney's fees are to be filed within twenty days of the

final judgment). In a written decision, the court awarded fees to defendant

attorneys pursuant to Rule 1:4-8, but Wunsch was only entitled to costs because

he was self-represented. After defendants submitted their certificates of legal

services and costs, the court's orders awarded: Sylvan $75,634.75; Wunsch

$327.20; and CSG $113,264.50. 6

      Before us, the Borough contends: (1) defendants failed to satisfy the

procedures in Rule 1:4-8 and N.J.S.A. 2A:15-59.1 to collect attorney's fees; (2)

it is immune from frivolous litigation sanctions as a municipality; and (3) the

trial court abused its discretion in finding the Borough engaged in frivolous

litigation.7 Before addressing the first and third contentions, we first determine

whether the Borough is immune from sanctions.

6
  The court also awarded attorney's fees of $27,258 to Surenian, which as noted
is no longer a party to this appeal.
7
  The Borough also contends the trial court erred in finding its attorneys, Stone
& Magnanini LLP (SM), in the action lacked authorization to sue defendants.
However, given the court's decision not to impose sanctions against SM––who
is not participating in this appeal––and SM's authorization was not relevant to

                                                                            A-2765-21
                                        7
                                       II.

      The FLS "serves a punitive purpose, seeking to deter frivolous litigation,"

and "a compensatory purpose, seeking to reimburse 'the party that has been

victimized by the party bringing the frivolous litigation.'" Toll Bros., Inc. v.

Township of West Windsor, 190 N.J. 61, 67 (2007) (quoting Deutch & Shur,

P.C. v. Roth, 284 N.J. Super. 133, 141 (Law Div. 1995)). The statute provides:

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

                  (2) When a public entity is required or
                  authorized by law to provide for the defense of a
                  present or former employee, the public entity
                  may be awarded all reasonable litigation costs
                  and reasonable attorney fees if the individual for
                  whom the defense was provided is the prevailing
                  party in a civil action, and if there is a judicial
                  determination at any time during the
                  proceedings or upon judgment that a complaint,
                  counterclaim, cross-claim, or defense of the
                  nonprevailing party was frivolous.

the granting of sanctions against the Borough, the trial court's ruling that SM
was not authorized to sue defendants is not an issue we need address.

                                                                            A-2765-21
                                        8
b. 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.

c. A party or public entity seeking an award under this
section shall make application to the court which heard
the matter. The application shall be supported by an
affidavit stating in detail:

      (1) The nature of the services rendered, the
      responsibility assumed, the results obtained, the
      amount of time spent by the attorney, any
      particular novelty or difficulty, the time spent
      and services rendered by secretaries and staff,
      other factors pertinent in the evaluation of the
      services rendered, the amount of the allowance
      applied for, an itemization of the disbursements
      for which reimbursement is sought, and any
      other factors relevant in evaluating fees and
      costs; and

                                                          A-2765-21
                           9
                   (2) How much has been paid to the attorney and
                   what provision, if any, has been made for the
                   payment of these fees in the future.

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

      A trial court's decision to order frivolous lawsuit sanctions is reviewed

under an abuse of discretion standard. Wolosky v. Fredon Township, 472 N.J.

Super. 315, 327 (App. Div. 2022) (citing McDaniel v. Man Wai Lee, 419 N.J.

Super. 482, 498 (App. Div. 2011)). An abuse of discretion "arises when a

decision is 'made without a rational explanation, inexplicably departed from

established policies, or rested on an impermissible basis.'" Flagg v. Essex Cnty.

Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigr. &

Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)).          "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 amount[ed] to a clear error in judgment.'" Ferolito v. Park Hill Ass'n,

408 N.J. Super. 401, 407 (App. Div. 2009) (quoting Masone v. Levine, 382 N.J.

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

      A. Public Entity Immunity

      Whether a State and its agencies and political subdivisions are immune

from the FLS is unsettled law. The only published cases are two divergent

                                                                             A-2765-21
                                       10
Chancery Division rulings issued almost four years apart, the most recent being

some twenty-seven years ago. The Chancery court held In the Matter of K.L.F.,

275 N.J. Super. 507, 511 (Ch. Div. 1993), that N.J.S.A. 2A:15-59.1 applies to

governmental bodies. Almost four years later, another Chancery court reached

a contrary result in Div. of Youth & Fam. Servs. v. P.M., 301 N.J. Super. 80,

82 (Ch. Div. 1997). The Borough cites P.M. to support its immunity contention.

We examine these two decisions.

            i. In the Matter of K.L.F.

      In K.L.F., the court examined the policy behind the FLS because it

determined, in applying our statutory construction rules, the statute's plain

meaning as suggested in the Legislature's clear directive "that a party may seek

sanctions against 'any other [non-prevailing] party'" does not resolve if

sanctions are limited to a private party and not a public entity. 275 N.J. Super.

at 513, 515 (alteration in original). The court determined the statute is "punitive

in nature and seeks the elimination of baseless litigation and pleadings, without

express exceptions," and considered the adage "expressio unius est exclusio

alterius," meaning "the express mention of one thing necessarily implies the

exclusion of all others." Id. at 517. (citation omitted).

                                                                             A-2765-21
                                       11
      To avoid "the sua sponte creation of an exception which would certainly

not advance the legislative purpose," the court reasoned "[t]he Legislature's

failure to carve out an exception [to public entities] within N.J.S.A. 2A:15-

59.1" demonstrated an intent not "to immunize the State from . . . sanction[s]."

Id. at 519. Combining the statute's policy and "[its] technical construction," the

court maintained "it [was] patently evident that the Legislature did not intend

to exempt the State, as party to a civil action, from the same standards of 'good

faith' and 'reasonable basis in law' as would be expected of a private party in

the same action." Id. at 520.

      The K.L.F. court's analysis did not end there. It next considered the

impact of N.J.S.A. 2A:15-60, which is "seemingly incompatible with N.J.S.A.

2A:15-59.1." Ibid. N.J.S.A. 2A:15-60 provides, in pertinent part:

                   In an action brought by the state, or the
            governor, or any person for the use of the state, the
            plaintiff shall recover costs as any other plaintiff; but
            the defendant in such an action shall not recover any
            costs against such plaintiff, whether the action is
            dismissed, judgment shall pass in favor of the
            defendant or any other proceeding is taken.

      The court recognized the "well-established rule that where two statutes

appear to be in conflict, and one is general in nature and the other more specific,

the conflict is resolved in favor of the more specific statute 'as a more precise

                                                                             A-2765-21
                                        12
manifestation of legislative intent.'" Id. at 521 (quoting State v. Gerald, 113

N.J. 40, 83 (1988)). It determined N.J.S.A. 2A:15-60 "has been circumvented

when the basis for assessing counsel fees against the State has been identified

narrowly and with particularity" and is "a general provision which has remained

essentially unchanged since its original enactment ninety years ago ," thus

"bring[ing] into serious question its relevance nearly a century after its

enactment." Id. at 521. Considering "the relative ages of the statutes,[8] and the

strength and force of the legislative mandate enunciated in N.J.S.A. 2A:15-

59.1, as adduced by the foregoing discussion of legislative intent," the court

reasoned "N.J.S.A. 2A:15-59.1 supersedes N.J.S.A. 2A:15-60 and operates as

an implied modifier of the latter and is, therefore, controlling." Id. at 522.

Hence, the court held "that the State and its agencies and political subdivisions

do indeed fall within the purview and operation of the [FLS]." Id. at 530.

            ii. Division of Youth & Family Services v. P.M.

8
  N.J.S.A. 2A:15-60 was enacted in 1903. L. 1903, c. 247. N.J.S.A. 2A:15-
59.1 was enacted in 1988 . L. 1988, c. 46.

                                                                             A-2765-21
                                       13
      In P.M., a different Chancery court disagreed with K.L.F., holding that a

state agency was immune from FLS sanctions.9 301 N.J. Super. at 82. In

reaching this holding, the court discerned a distinction between a "party" and

"person" in N.J.S.A. 2A:15-59.1(a)(1). Id. at 84-87. The court determined the

statute provided that a "party who prevails . . . against any other party . . . [who

is a] non-prevailing person" may be awarded fees. Id. at 85 (alteration in

original) (quoting N.J.S.A. 2A:15-59.1). The court held the distinction between

the two terms is significant, noting that under N.J.S.A. 1:1-2, whose definitions

apply to the FLS, a "person" includes "corporations, companies, associations,

societies, firms, partnership and joint stock companies as well as individuals,"

but "does not include the State of New Jersey unless the word 'person' is used

'to designate the owner of property.'" Id. at 86-87.

      The P.M. court also relied upon the 1995 amendment to the statute, which

was enacted after K.L.F., and added subsection (a)(2) to N.J.S.A. 2A:15-59.1.

Id. at 87. Subsection (a)(2) allows a public entity to obtain attorney's fees when

the law required it to defend a prevailing present or former employee when the

9
  Given its finding that the state agency was immune, the P.M. court did not
reach the issue of whether the "complaint was actually frivolous, or commenced
or continued in bad faith." 301 N.J. Super. at 82-83.

                                                                              A-2765-21
                                        14
nonprevailing party pursued a frivolous complaint, counterclaim, cross -claim,

or defense. N.J.S.A. 2A:15-59.1(a)(2). The court reasoned the Legislature

would not have added this provision if "the terms used in the pre-existing statute

were intended to include the state and its agencies." P.M., 301 N.J. Super. at

87.

      The court further maintained that "[t]he 1995 amendment to subsection

(c) lays any doubt to rest." Id. at 88. Subsection (c) previously provided "a

party seeking an award," but was changed to provide "a party or public entity

seeking an award." Ibid. The court reasoned "if the word 'party' is, as K.L.F.

suggests, broad enough to include the state or its subdivisions, why did the

Legislature feel a need to include the phrase 'or public entity' in expanding the

class of litigants who could seek an award?" Ibid. According to the P.M. court,

"The answer is obvious: the Legislature's use of the word 'party' was never

intended to include the [S]tate or its subdivisions. A contrary conclusion would

mean that the 1995 amendments had no substantive consequence." Ibid.

      Lastly, the P.M. court found that because the FLS does not clearly

extinguish our State's "modern thought" that sovereign "immunity exists unless

expressly waived by the Legislature," id. at 92 (citing N.J.S.A. 59:1-2), it does

not upset the presumption that public entities are immune from the statute's

                                                                            A-2765-21
                                       15
sanctions, ibid. The court relied on a provision in the Environmental Rights

Act, N.J.S.A. 2A:35A-1 to 35A-14, which permits a counsel fee award in

certain   prescribed     circumstances,       subject    to   a   limit   set   forth

in N.J.S.A. 2A:35A-10, as an example of an express legislative undertaking to

create liability within that limit. Id. at 92-93. Thus, the Legislature's intent to

allow liability against the State must be done "in an unambiguous manner." Id.

at 92-93 (challenging the K.L.F. court's view that "an affirmative and explicit"

provision is required to limit the State's liability).

             iii.   Lack of Immunity

      K.L.F. and P.M. both express sound reasoning in reaching their

respective rulings, making our decision a close call. We, however, conclude as

did K.L.F. and the trial court, that a public entity is not immune from the

sanctions that can be imposed under the FLS.

      The plain language in N.J.S.A. 2A:15-59.1(a)(1) leads us to conclude that

the unqualified term, "party," in the phrase, "[a] party who prevails in a civil

action, either as plaintiff or defendant, against any other party may be awarded

all reasonable litigation costs and reasonable attorney fees," does not exclude a

public entity "party." See Lippman v. Ethicon, Inc., 222 N.J. 362, 380-81

(2015) (emphasizing "the statute's plain language, . . . is generally the best

                                                                                A-2765-21
                                         16
indicator of the Legislature's intent" (quoting Donelson v. DuPont Chambers

Works, 206 N.J. 243, 256 (2011))). Nonetheless, we appreciate the P.M. court's

analysis highlighting how N.J.S.A. 2A:15-59.1(a)(1)'s subsequent use of

"person" leads to ambiguity because a public entity is not a "person" under

N.J.S.A. 1:1-2 unless it is being "used to designate the owner of property which

may be the subject of an offense." Yet, the distinction between these terms for

interpretative purposes is less significant because other portions of the FLS,

specifically N.J.S.A. 2A:15-59.1(a)(2) and (b), expressly allow recovery of fees

against a "nonprevailing party" whose litigation conduct was frivolous .

      If we conclude, and we do not, that the plain language of the FLS is

ambiguous as to the definition of "party," then we must look to extrinsic

evidence to inform our analysis, "including legislative history." Parsons by

Parsons v. Mullica Twp. Bd. of Educ., 226 N.J. 297, 308 (2016) (quoting State

v. Marquez, 202 N.J. 485, 500 (2010)). The Legislature's objective in enacting

the FLS was "punitive in nature," K.L.F., 275 N.J. Super. at 516 (quoting

Somerset Trust Co. v. Sternberg, 238 N.J. Super. 279, 286 (1989)), to deter the

filing of frivolous claims by allowing a judge to impose attorney's fees

sanctions against the non-prevailing party, ibid. (citing Chernin v. Mardan

Corp., 244 N.J. Super. 379, 382 (Ch. Div. 1990)). There is no indication in the

                                                                           A-2765-21
                                      17
statute's legislative history that public entities were meant to be exempt from

sanctions if they filed claims determined to be frivolous. See S. Cmty. Affs.

Comm. Statement to S. Comm. Substitute for A. 1012, S. 1399 & S. 1290 (Oct.

13, 1994). Absent that clear indication, a public entity should be subject to the

FLS to satisfy the legislative goal of curbing frivolous litigation.      If the

Legislature intended to afford immunity to public entities, it would have clearly

stated so.

      After the K.L.F. court held public entities were not immune to FLS

sanctions, the Legislature did not amend the statute to clarify whether public

entities were immune.10      Rather, post-K.L.F., N.J.S.A. 2A:15-59.1 was

amended in 1995 to add: subsection (a)(2)––allowing a public entity to obtain

attorney's fees when defending a present or former employee; and subsection

(c)–– providing a public entity could seek an attorney's fees award like other

parties in a civil case. L. 1995, c. 13, § 1. Neither amendment declared a

public entity was immune from sanctions under the statute. Thus, unlike P.M.,

we view the amendments as interrelated: making it clear that since a public

entity was now allowed to seek sanctions when paying for the defense of a

10
   We also recognize that after P.M. was issued, the Legislature took no action
to clarify whether public entities were not immune.
                                                                           A-2765-21
                                      18
present or former employee when it was not a party, it was subject to the same

procedures as a party to the litigation when seeking sanctions.        We thus

conclude the FLS allows for sanctions against public entities.

                                      III.

      Having concluded the Borough is not immune to FLS sanctions, we

address its contention that defendants did not comply with the procedural

requirements of Rule 1:4-8 and N.J.S.A. 2A:15-59.1. The Borough argues that

only CSG "properly addressed relief" under both Rule 1:4-8 and N.J.S.A.

2A:15-59.1. Yet, the Borough claims, neither defendants nor the trial court

addressed whether attorney's fees should be imposed against the Borough, as a

party, "to the extent practicable," as prescribed by Rule 1:4-8. The Borough

further asserts defendants' motions for sanctions failed to comply with N.J.S.A.

2A:15-59.1, which requires certifying: (1) the amount of fees requested; (2)

itemized disbursements; (3) "any other factors relevant in evaluating fees and

costs"; and (4) "[h]ow much has been paid to the attorney and what provision[s],

if any, ha[ve] been made for the payment of these fees in the future." (quoting

N.J.S.A. 2A:15-59.1(c)(1) to(2)). Because CSG did not certify who paid their

litigation fees in defending the Borough's malpractice claims and the court did

not inquire who did pay such fees, the Borough asserts it was likely paid by

                                                                           A-2765-21
                                      19
malpractice insurance companies and such disclosure should have been made.

Hence, defendants' motions for fees and sanctions should have been denied with

prejudice. We are unpersuaded.

      Our Supreme Court through its rulemaking authority imposed procedural

requirements in Rule 1:4-8, which are not in the FLS. Toll Bros., 190 N.J. at

65. The FLS and Rule 1:4-8 are interpreted restrictively because "the right of

access to the court should not be unduly infringed upon, honest and creative

advocacy should not be discouraged, and the salutary policy of the litigants

bearing,   in   the   main,   their   own   litigation   costs,   should   not   be

abandoned." Wolosky, 472 N.J. Super. at 327 (quoting Gooch v. Choice

Entertaining Corp., 355 N.J. Super. 14, 18 (App. Div. 2002)).

      Sanctions can be imposed against an attorney or pro se party who files a

frivolous pleading with an "improper purpose, such as to harass or to cause

unnecessary delay or needless increase in the cost of litigation," R. 1:4-8(a)(1),

or by asserting a claim or defense that lacks the legal or evidential support

required by Rule 1:4-8(a)(2), (3) and (4). When sanctions are sought against a

party, Rule 1:4-8(f) provides that "'[t]o the extent practicable,' the procedures

governing applications for frivolous litigation sanctions against attorneys and

pro se parties shall apply also to applications against parties." Toll Bros., 190

                                                                             A-2765-21
                                       20
N.J. at 64 (alteration in original). To issue sanctions, the court must first

"assess[] . . . the practicability of compliance" with the Rule. Id. at 73.

      Before moving for FLS sanctions, a prevailing party "is required to

comply with Rule 1:4-8(b)(1)'s safe harbor provision." Id. at 69. A written

notice must specifically state why the pleading is frivolous and demand it be

withdrawn within twenty-eight days, and if not, sanctions will be sought. R.

1:4-8(b)(1). These "timeframes [are] for bringing frivolous behavior to the

attention of the offending party, . . . so that the behavior could be corrected

promptly and litigation costs kept to a minimum, thereby preserving judicial,

lawyers', and litigants' resources." Toll Bros., 190 N.J. at 71. A subsequent

motion for sanctions must "describe the specific conduct alleged to have

violated" Rule 1:4-8 and "include[] a certification that the applicant served

written notice and demand pursuant to Rule 1:5-2 to the attorney or pro se party

who signed or filed the paper objected to." R. 1:4-8(b)(1).

      To sanction the Borough by ordering it to pay defendants' attorney's fees,

the trial court must "assess whether it is practicable under all the circumstances

to require strict adherence to the requirements of Rule 1:4-8." Toll Bros., 190

N.J. at 72. "The most fact-sensitive aspect of such an inquiry undoubtedly will

involve compliance with the safe harbor requirement that is designed to bring

                                                                              A-2765-21
                                       21
an early stop to offending behavior." Ibid. "By insisting on compliance as soon

as practicable, the salutary benefits of adhering to the notice requirement will

more promptly rid the judicial forum of frivolous litigation behavior and will

concomitantly provide reimbursement for the fees and costs actually

attributable to an adversary's uncorrected offending conduct." Ibid.

      A. Adherence to Rule 1:4-8

            i. Safe Harbor Compliance

      We agree with the trial court that defendants complied with the "safe

harbor" provision by notifying the Borough within weeks of being served the

first amended complaint that the litigation should be withdrawn because the

claims are frivolous. Thus, contrary to the Borough's argument, the court

assessed under Rule 1:4-8(f) whether "[t]o the extent practicable, the

procedures prescribed by this rule shall apply to the assertion of costs and fees

against a party other than a pro se party pursuant to N.J.S.A. 2A:15-59.1."

      Sylvan's notice contended: (1) the Borough's claims are frivolous and

sanctions will be sought under Rule 1:4-8 and N.J.S.A. 2A:15-59.1 if not

withdrawn; (2) as an adverse party in the Borough's declaratory judgment

action, there was no legal support for the Borough's effort to disgorge it from

the builder's remedy and related relief it received from the alleged malpractice

                                                                            A-2765-21
                                       22
by defendant attorneys; (3) there is no evidence that it engaged in conspiracy

or aided and abetted tortious activity against the Borough; (4) there is no good

faith argument to expand the law to support the Borough's claims; (5) the

Borough's complaint interfered with its protected rights under the First

Amendment of the United States Constitution and Article I of the New Jersey

Constitution to seek judicial relief against the Borough; (6) the tort claims are

barred by the Noerr-Pennington11 doctrine; and (7) the Borough's complaint

constitutes a SLAPP12 claim.

      Wunsch's notice asserted: (1) Borough counsel was not authorized to file

the complaint; (2) the retainer agreement for Borough counsel to represent the

Borough was not properly executed as it was signed by the mayor, not the

Borough's Deputy Clerk as required, and only listed New York attorneys

11
    Noerr-Pennington stems from E. R.R. Presidents Conf. v. Noerr Motor
Freight, Inc., 365 U.S. 127, 136-40 (1961), and United Mine Workers v.
Pennington, 381 U.S. 657, 669-70 (1965). "Under the . . . doctrine, those who
engage in conduct aimed at influencing the government, including litigation,
are shielded from retaliation provided their conduct is not a sham." Cordova v.
Cline, 396 P.3d 159, 167 (N.M. 2017) (citing Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. 545, 555-57 (2014)).
12
    An acronym for Strategic Lawsuits Against Public Participation, whereby
litigation is filed for the main purpose of stifling free speech rights by imposing
"the expense and burden of defending a lawsuit." LoBiondo v. Schwartz, 323
N.J. Super. 391, 418 (App. Div. 1999).

                                                                             A-2765-21
                                       23
Nicholas Gravante and Karen Dyer of Cadwalader, Wickersham & Taft LLP as

the Borough's attorney, but their pro hac vice applications were denied ceasing

their involvement in the litigation; and (3) the settlement agreement the

complaint seeks to overturn was authorized by the Borough Council and cannot

be invalidated.

      CSG's notice stated: (1) the complaint "violate[d] the frivolous litigation

standards of . . . Rule1:4-8 and N.J.S.A. 2A:15-59.1"; (2) the complaint was

ultra vires given the Borough Council did not approve its initiation by the mayor

before the Borough retained counsel; (3) the attorney's fees incurred by the

Borough's counsel far exceeded the $100,000 cap set forth in counsel's retainer

agreement as authorized by the Borough Council;13 and (4) the malpractice

claims are without basis in fact or law.

      The record supports the trial court's findings that defendants' notices

"pass[ed] muster" under Rule 1:4-8 by "specif[ying] the basis for the belief that

the [Borough's] pleading is frivolous and providing [an] opportunity for

remediation." Although Sylvan's notice, unlike the other defendants', did not

specifically mention the complaint must be withdrawn within twenty-eight days

13
   According to CSG's notice, the most recent invoice showed the Borough's
counsel had billed $723,416.33 in fees.
                                                                            A-2765-21
                                       24
per Rule 1:4-8(b)(1), in repeatedly referencing Rule 1:4-8, it sufficiently

notified the Borough that an application for sanctions would be made under the

Rule. Moreover, Sylvan is entitled to attorney's fees independent of N.J.S.A.

2A:15-59.1 and Rule 1:4-8 based upon its settlement agreement with the

Borough that if the municipality unsuccessfully seeks judicial relief related to

the declaratory judgment action it is liable for Sylvan's attorney's fees. Lastly,

the Borough did not provide any evidence demonstrating it could not withdraw

its complaint in response to defendants' demands.

            ii. Certification of Services

      Defendants did not provide certifications of services with their motions

for sanctions, N.J.S.A. 2A:15-59.1(c), but filed them in accordance with the

court's order after it granted their motions. We reject the Borough's argument

that this process warrants reversal of the attorney's fees awards.

      The trial court did not abuse its discretion in requesting the certifications

after ordering sanctions. The Borough, which did not challenge defendants'

certifications of service, cites no authority for its assertion that the procedure

was contrary to the law. The court complied with the FLS by initially deciding

whether the Borough engaged in frivolous litigation under N.J.S.A. 2A:15-

59.1(b) and then considering the amount of reasonable fees that should be

                                                                             A-2765-21
                                       25
awarded based on defendants' certifications, which included the information

listed in N.J.S.A. 2A:15-59.1(c). The court limited attorney's fees for services

rendered after the twenty-eight-day safe harbor period.

      As for the Borough's assertion that defendant attorneys' malpractice

insurance coverage must be considered in calculating attorney's fees, it cites no

authority or reasonable basis for its position. Neither N.J.S.A. 2A:15-59.1 nor

Rule 1:4-8 require any disclosure by prevailing parties concerning the payment

of attorney's fees by a malpractice insurance carrier.

                                       IV.

      Finally, we address the Borough's contention that the trial court abused

its discretion in finding the Borough engaged in frivolous litigation . The FLS

contemplates two bases for a trial court to find frivolous litigation.      The

"nonprevailing party" must have advanced its claim in "bad faith, solely for the

purpose of harassment, delay or malicious injury," or "[t]he nonprevailing party

knew, or should have known," its claim had no "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).

      "For purposes of imposing sanctions under Rule 1:4-8, an assertion is

deemed 'frivolous' when 'no rational argument can be advanced in its support,

                                                                           A-2765-21
                                       26
or it is not supported by any credible evidence, or it is completely untenable.'"

United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 389 (App. Div. 2009)

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

Div. 2007)). "The nature of litigation conduct warranting sanction under [Rule

1:4-8] has been strictly construed." Pressler & Verniero, Current N.J. Court

Rules, cmt. 2 on R. 1:4-8 (2024).        An attorney's fees sanction pursuant

to Rule 1:4-8 "is not warranted where the plaintiff has a reasonable good faith

belief in the merit of [their] action." J.W. v. L.R., 325 N.J. Super. 543, 548

(App. Div. 1999).

      Accordingly, sanctions will not be imposed against an attorney who

mistakenly files a claim in good faith. Horowitz v. Weishoff, 346 N.J. Super.

165, 166-67 (App. Div. 2001).         Sanctions should be awarded only in

exceptional cases. Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1991).

      The party seeking sanctions must "prov[e] that the non-prevailing party

acted in bad faith." Ferolito, 408 N.J. Super. at 408 (quoting McKeown-Brand

v. Trump Castle Hotel & Casino, 132 N.J. 546, 559 (1993)). A prevailing

party's allegation that the non-prevailing party's claim lacked "a reasonable

basis in law or equity," when the non-prevailing party is represented by an

attorney, cannot sustain an award without proof the non-prevailing party

                                                                            A-2765-21
                                       27
"'act[ed] in bad faith in asserting' or pursuing the claim."           Ibid. (quoting

McKeown-Brand, 132 N.J. at 549).              Thus, a non-prevailing party whose

"conduct bespeaks an honest attempt to press a perceived, though ill-founded

and perhaps misguided, claim, [absent] . . . bad faith," cannot be ordered to pay

sanctions. Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div. 1999)

(citing McKeown-Brand, 132 N.J. at 563).

      Applying these principles, we discern no abuse of discretion in the trial

court's finding that the Borough's litigation was frivolous, as it was supported

by credible evidence in the record and consistent with the law. In its written

decision, the court found:

            The [Borough's] bad faith was demonstrated by the
            fact that it knew or should have known, when it filed
            suit against its former attorney[s] and the developer
            which had successfully sought and obtained a builders
            remedy seeking $10,000,000 in damages, that its
            claims were contrary to the clear evidence of its
            satisfaction with the representation of its counsel and
            that in refusing to settle the underlying litigation and
            thereby disregarding their attorneys' advice the
            Borough lacked proximate cause for its alleged injuries
            due to the alleged malpractice and alleged civil
            conspiracies. As to the alleged civil conspiracies and
            aiding and abetting there was no foundation for such
            claims and the court concludes the sole purpose of the
            litigation was to harass, delay and cause malicious
            injury to . . . Sylvan particularly, as well as . . . attorney
            defendants.

                                                                                A-2765-21
                                         28
     Support for the court's findings of frivolous litigation was grounded in its

decision dismissing the Borough's complaint for failure to state a claim. The

court determined:

           [T]he record is replete with evidence that the Borough
           resolved to pursue a trial in the affordable housing
           litigation despite the attempts of their attorneys to
           dissuade them.

                    ....

                 . . . [T]he Borough's undisputed refusal to settle
           and in so doing disregarding [defendant] attorneys'
           advice, the Borough cannot establish proximate cause
           for their alleged injury. Without proximate cause the
           action must fail.

                    ....

                 . . . The Borough has acknowledged that . . .
           defendant attorneys handled the litigation with
           knowledge, skill and diligence, and that their advice
           was reasonable. That is all that is required of counsel.

                    ....

                  . . . [H]aving failed to allege facts showing . . .
           defendant[] [attorneys], or any of them committed an
           underlying wrong, there is no basis upon which the
           Borough can sustain a civil conspiracy claim. Further,
           there is no basis upon which the Borough may sustain
           a claim for aiding and abetting liability as the
           pleadings fail to allege facts which demonstrate . . .
           defendant[] [attorneys] performed a wrongful act
           which caused injury, that . . . defendant[] [attorneys]
           were generally aware of their role in the part of an

                                                                           A-2765-21
                                      29
             overall illegal or tortious activity at the time of their
             representation, or that . . . defendant[] [attorneys]
             knowingly and substantially assisted the principal
             violation.

      It is apparent that when political control of the Borough Council changed

hands after the election, the newly constituted Council took issue with the prior

Council's action in resolving the affordable housing controversy. But in suing

defendants, the Borough's former attorneys and the developer, the Borough

proffered no facts and articulated no law to substantiate its allegations. There

was no honest, creative advocacy in the Borough's claims. See Ellison v.

Evergreen Cemetery, 266 N.J. Super. 74, 85 (App. Div. 1993).

      We find no support for the Brough's argument that a "fact[-]sensitive

review" indicates that "it is clear that [its] intent, purpose and actions . . . could

not possibly be deemed frivolous." The Borough relies upon an unproduced

email between its attorney and the new Council after the first amended

complaint was filed, stating an affidavit of merit will be provided by another

attorney that "based upon . . . review of [the] amended complaint, documents,

briefing and other materials, it appears . . . [d]efendant attorneys deviated from

a standard of care and committed malpractice." Because the email was neither

part of the trial court record nor supported by counsel's certification from

counsel as required by Rule 1:6-6, it cannot be considered. Moreover, because

                                                                                A-2765-21
                                         30
the email was sent three months after the amended complaint was filed, it was

not a basis for the Borough's decision to sue defendant attorneys.

      We recognize that a trial court should only award sanctions for frivolous

litigation in exceptional cases. Iannone v. McHale, 245 N.J. Super. 17, 28

(App. Div. 1990). This is one such case.

      To the extent we have not addressed any of the Borough's arguments, it

is because they lack sufficient merit to warrant discussion in a written

opinion. R. 2:11-3(e)(1)(E).

      Affirmed.

                                                                          A-2765-21
                                      31