Opinion
DOCKET NO. A-5863-10T3
05-16-2013
212 MARIN BOULEVARD, LLC, a New Jersey limited liability company; 247 MANILA AVENUE, LLC, a New Jersey limited liability company; 280 ERIE STREET, LLC, a New Jersey limited liability company; 317 JERSEY AVENUE, LLC, a New Jersey limited liability company; 354 COLE STREET, LLC, a New Jersey limited liability company; 389 MONMOUTH STREET, LLC, a New Jersey limited liability company; 415 BRUNSWICK STREET, LLC, a New Jersey limited liability company; and 446 NEWARK AVENUE, LLC, a New Jersey limited liability company; Plaintiffs-Appellants/ Cross-Respondents, v. CHARLES MONTANGE, ESQ., an Attorney At Law and resident of the State of Washington; ANDREA FERSTER, ESQ., an Attorney at Law of Washington, D.C.; CITY OF JERSEY CITY, a Municipal Corporation of the State of New Jersey; DONNA MAUER, in her official Capacity as Chief Financial Officer of the City of Jersey City, JACK KELLY, in his official capacity as Business Administrator of the City of Jersey City; RAILS TO TRAILS CONSERVANCY, a Not-for-Profit Corporation of the District of Columbia; and PENNSYLVANIA RAILROAD HARSIMUS STEM EMBANKMENT PRESERVATION COALITION, a Not-for-Profit Corporation of the State of New Jersey, Defendants-Respondents/ Cross-Appellants.
Eric D. McCullough argued the cause for appellants/cross-respondents (Waters, McPherson, McNeill, P.C., attorneys; Daniel E. Horgan, of counsel; Mr. McCullough and Jorge R. De Armas, on the brief). Renée Steinhagen argued the cause for respondent/cross-appellant Charles Montange, Esq. (New Jersey Appleseed PILC, attorneys; Ms. Steinhagen, on the brief). John J. Curley argued the cause for respondents/cross-appellants City of Jersey City, Donna Mauer and Jack Kelly (John J. Curley, L.L.C., attorneys; Louis M. Flora, on the brief). Tobin A. Butler argued the cause for respondent/cross-appellant Rails to Trails Conservancy (Litchfield Cavo L.L.P., attorneys; Mr. Butler, on the brief). John Robertelli argued the cause for respondent/cross-appellant Pennsylvania Railroad Harsimus Stem Embankment Preservation Coalition (Rivkin Radler L.L.P., attorneys; Mr. Robertelli, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad, Sapp-Peterson and Haas.
On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2196-11.
Eric D. McCullough argued the cause for appellants/cross-respondents (Waters, McPherson, McNeill, P.C., attorneys; Daniel E. Horgan, of counsel; Mr. McCullough and Jorge R. De Armas, on the brief).
Renée Steinhagen argued the cause for respondent/cross-appellant Charles Montange, Esq. (New Jersey Appleseed PILC, attorneys; Ms. Steinhagen, on the brief).
John J. Curley argued the cause for respondents/cross-appellants City of Jersey City, Donna Mauer and Jack Kelly (John J. Curley, L.L.C., attorneys; Louis M. Flora, on the brief).
Tobin A. Butler argued the cause for respondent/cross-appellant Rails to Trails Conservancy (Litchfield Cavo L.L.P., attorneys; Mr. Butler, on the brief).
John Robertelli argued the cause for respondent/cross-appellant Pennsylvania Railroad Harsimus Stem Embankment Preservation Coalition (Rivkin Radler L.L.P., attorneys; Mr. Robertelli, on the brief). PER CURIAM
In this action in lieu of prerogative writs, plaintiffs challenge defendant City of Jersey City's (City's) renewal of its contract with defendant Charles Montange, Esq., who had been representing the City, along with other defendants, in federal litigation in which defendants seek to nullify plaintiffs' purchase of property comprising an old railroad embankment. Plaintiffs alleged Montange's joint legal representation of the City, and two non-profit corporations, Rails to Trails Conservancy (RTC) and Pennsylvania Railroad Harsimus Stem Embankment Preservation Coalition (the Coalition), involved an impermissible conflict of interest and that the renewal of the contract violated both the constitution and the Local Public Contracts Law (LPCL). N.J.S.A. 40A:11-1 to -51.
Plaintiffs, 212 Marin Boulevard, LLC, 247 Manila Avenue, LLC, 280 Erie Street, LLC, 317 Jersey Avenue, LLC, 354 Cole Street, LLC, 389 Monmouth Street, LLC, 415 Brunswick Street, LLC, and 446 Newark Avenue, LLC, are a group of eight related limited liability corporations (LLCs).
Judge Maurice J. Gallipoli disagreed and, in a series of orders entered on July 18, 2011, he dismissed plaintiffs' complaint against each of the defendants. In a second series of orders filed on October 25, 2011, the judge denied defendants' motions for counsel fees and sanctions. Plaintiffs appeal the dismissal of their complaints and defendants have each filed a cross-appeal from the judge's denial of their requests for counsel fees and sanctions. After reviewing the record in light of the contentions advanced on appeal, we affirm both rulings substantially for the reasons set forth by Judge Gallipoli in his written opinions. However, for the reasons more fully discussed in Section II.D., we direct the City to promptly review the current Resolution and contract retaining Montange, and if they do not include the one-year limitation required by N.J.S.A. 40A:11-15, to cure that defect as directed in this opinion.
I.
The parties have been embroiled in litigation in the federal courts since 2005. We set forth the essential facts of this case by primarily referring to the decisions of the federal courts which have dealt with different aspects of this matter. The subject of the litigation is the "Harsimus Embankment" (Embankment), a six-block, half-mile long stone structure in the heart of the City's downtown district. City of Jersey City v. Conrail (Conrail III), 668 F.3d 741, 742 (D.C. Cir. 2012). This structure was built between 1901 and 1905 and used to carry seven rail lines "as high as twenty-seven feet above street level." Ibid. However, the Embankment was closed in the early 1990s and "is now covered in foliage[.]" Ibid.
Last year, we decided a case involving a request made by plaintiffs' general manager under the Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13 for certain records maintained by the City. Hyman v. City of Jersey City, No. A-0789-10T4 (August 27, 2012).
The City expressed an interest in acquiring the property from its owner, Consolidated Rail Corporation (Conrail), but the negotiations stalled when a group of citizens successfully petitioned the State of New Jersey to include much of the property in the New Jersey State Register of Historic Places. Id. at 743.
In 2003, Conrail began accepting bids for the property. Ibid. In 2004, the City passed an ordinance authorizing the City to purchase or condemn the Embankment. Ibid. However, upon the advice of its legal counsel, the City determined "it could neither purchase nor condemn the [Embankment] because it was 'railroad line' that Conrail could lawfully abandon only with" the authorization of the Surface Transportation Board (STB). Ibid. The City's determination was based upon 49 U.S.C. § 10903(a), which requires STB approval before a rail carrier, such as Conrail, may "abandon any part of its railroad lines." Conrail had not sought or obtained the STB's approval and, therefore, the City took the position it could not "abandon" or sell the Embankment to anyone. Ibid.
By insisting that Conrail formally "abandon" the Embankment with the approval of the STB, the City hoped to obtain several benefits it would not obtain if it sought to obtain the property through condemnation. First, N.J.S.A. 48:12-125.1a requires a railroad company, like Conrail, to notify the State and its municipalities when it seeks to "abandon" a rail line. The company may not sell the property "for a period of 90 days from the date of approval by the [STB] of the application for abandonment" unless the municipality in which the rail line is located files "a written disclaimer of interest" in acquiring the property. N.J.S.A. 48:12-125.1b. If the municipality is interested in the property, the company is required to "negotiate in good faith" with the municipality for the sale of the property. N.J.S.A. 48:12-125.1c. In this fashion, the City hoped to be able to acquire the Embankment at a lower price than it would if it condemned the property and was required to pay "just compensation" to plaintiffs for it. N.J. Const. art. 1, § 20.
If it could void Conrail's sale of the property to plaintiffs, the City also hoped to make use of 49 U.S.C. § 10904, which permits any person, including a public entity, to offer to purchase a rail line that is about to be abandoned, provided the purchaser operates the line for at least two years. This would provide another mechanism for the City to acquire the property at a lower price than it would have to pay plaintiffs to condemn it. In addition, by requiring Conrail to formally abandon the property, the City would ensure clear title, unclouded by the possibility of Conrail or a third party raising the issue of the necessity of abandonment at a later time.
However, Conrail decided that STB approval was not required because it classified the Embankment as "spur, industrial, team, switching, or side tracks[,]" rather than as a "rail line." Therefore, it believed it could abandon the property without STB approval and it sold the Embankment to plaintiffs. Id. at 743-44. Each of the eight plaintiffs owned a parcel of the property and they began to dismantle the tracks and other rail structures in order to develop it. Id. at 744.
On November 18, 2005, the City retained Montange to represent it. Montange is an attorney based in Washington State and is an expert in the field of federally-regulated rail abandonment and the acquisition of rail property. Montange also represented, and had been one of the founders of, RTC, "a non-profit corporation based in Washington, D.C., whose mission is to create a nationwide network of trails from former rail lines and connecting corridors to build healthier places for healthier people." In addition, Montange represented the Coalition, a New Jersey non-profit corporation, which was created to attempt to "protect" the Embankment. Under the terms of the contract, Montange charged the City a "reduced rate" of $200 per hour for his representation. He represented RTC and the Coalition on a pro bono basis. These two groups provide "research assistance" to Montange and, "as funds were available," also reimburse him for his travel, copying and other "out of pocket" expenses.
The contract was entered pursuant to City Resolution 05-815, dated September 28, 2005.
With Montange's assistance, the City successfully petitioned the STB for a declaratory judgment that Conrail's sale of the Embankment to plaintiffs was void because Conrail had failed to first obtain the STB's permission to abandon the property as a rail line. Consol. Rail Corp. v. Surface Transp. Bd. (Conrail I), 571 F.3d 13, 14 (D.C. Cir. 2009). Conrail and plaintiffs appealed the STB's order and, on April 20, 2009, it was reversed by the Circuit Court of Appeals. Id. at 20. The court found the federal district court, rather than the STB, had jurisdiction to determine whether Conrail could abandon the Embankment. Id. at 18-20.
The City, RTC and the Coalition, jointly represented by Montange, then filed a complaint in the United States District Court for the District of Columbia for the same relief it had sought before the STB. Plaintiffs intervened in the action. As the litigation progressed, the City continued to retain Montange and adopted Resolution 06-407, published on May 24, 2006; Resolution 09-355, published on May 20, 2009; and Resolution 09-571, published on July 15, 2009 in order to enable it to do so.
The district court dismissed the complaint for lack of standing, reasoning that the City could demonstrate no tangible benefit from success in that litigation to its efforts in acquiring the property by condemnation. City of Jersey City v. Conrail (Conrail II), 741 F. Supp. 2d 131, 141 (D.D.C. 2010), rev'd, 668 F.3d 741 (D.C. Cir. 2012). On the contrary, the court explained, the City's litigation strategy--that the embankment constituted a "railroad line" subject to federal jurisdiction until formal abandonment--hindered rather than furthered those efforts, because the City could otherwise immediately condemn the property, likely without challenge that the property remained subject to federal jurisdiction. Id. at 139-41.
The City, RTC and the Coalition appealed and the circuit court reversed, finding that the City pursued its litigation strategy on the ostensibly good faith belief that immediate condemnation would be unlawful and that a declaration of the property as a "railroad line" would afford the City a host of statutory benefits in acquiring the property. Conrail III, supra, 668 F.3d at 744-46. The matter was remanded to the district court for trial, where it remains pending. Id. at 746.
On April 13, 2011, while the appeal was pending, the City adopted Resolution 11-223, which continued Montange as the City's attorney in the ongoing litigation. Two weeks later, on April 27, 2011, plaintiffs filed a complaint in lieu of prerogative writs against the City, RTC and the Coalition seeking to void Resolution 11-223 and prevent Montange from continuing to lead the City's litigation efforts against them. Plaintiffs asserted that, because Montange also represented RTC and the Coalition, he had an incurable conflict of interest that prevented him from continuing to represent the City. Plaintiffs also alleged the City's payments to Montange had the effect of subsidizing his representation of RTC and the Coalition and thus violated Article VIII, § 3, ¶ 2 of the New Jersey Constitution. Because the City had failed to renew Montange's contract on an annual basis each year since 2005, and the contract entered pursuant to Resolution 11-223 was not limited to a one-year period, plaintiffs also argued the Resolution was void under N.J.S.A. 40A:11-15 of the LPCL.
The City's chief financial officer, Donna Mauer, and its business administrator, Jack Kelly, were also named as defendants. The municipal defendants will be referred to collectively as "the City."
On April 29, 2011, the City sent plaintiffs a safe harbor letter pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8, alleging that the complaint was frivolous and demanding that it be withdrawn. RTC sent plaintiffs a letter to the same effect on May 26, 2011, and Montange and the Coalition followed suit the next day. Plaintiffs refused the first of those demands on May 9, 2011, and the rest on June 15.
Montange filed a notice of motion for summary judgment on June 13, 2011, and the City filed one for the same relief on June 17. On June 16 and 17, 2011, respectively, RTC and the Coalition each filed a notice of motion to dismiss pursuant to Rule 4:6-2(e).
The City's motion was titled as one for dismissal pursuant to Rule 4:6-2(e), but was accompanied by a statement of undisputed material facts and abundant materials outside the pleadings, and explicitly invoked the summary judgment rule.
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Following oral argument on the motions, Judge Gallipoli granted defendants' motions on July 18, 2011 and entered orders dismissing plaintiffs' complaint against each of them. In his written opinion, the judge found Montange had no conflict of interest as a result of his representation of the City, RTC, and the Coalition. The judge stated:
In this case, there is no conflict of interest readily apparent and [the court's] questions to [p]laintiffs' counsel aimed at identifying the conflict(s) resulted in accusations and theories, but no substantive evidence. The interests of Montange's clients are unambiguous: (1) void the deed between Contrail and [plaintiffs] for failure to properly obtain abandonment authorization; (2) facilitate [the] City's purchase of the land; and (3) convert the land into public space.The judge further found that "[s]hould the [d]efendants' goals or means of achieving those goals eventually diverge, Montange's joint representation could potentially become problematic. However that scenario remains hypothetical. Currently, there is substantial overlap in the joint strategy of [the] City, RTC and the Coalition."
The judge also found that the City's payments to Montange for his legal services did not constitute an unconstitutional gift to either RTC or the Coalition. The judge determined the payments clearly served a public purpose since, with Montange's assistance, the City was attempting to acquire the Embankment at a lower cost to the public than it would have to expend if it determined to condemn the property. While paying Montange for his representation, albeit at a reduced rate than what he charges to other municipal clients, benefited RTC and the Coalition, the judge found this benefit to be merely "incidental" and, therefore, not unconstitutional.
Finally, the judge found the City had violated the LPCL because it did not renew Montange's contracts on an annual basis, or include the one-year term limitation required by N.J.S.A. 40A:11-15 in each contract. However, the judge viewed these violations as "minor." Therefore, the judge found no basis for preventing Montange from continuing to represent the City in its ongoing litigation with plaintiffs.
Following additional oral argument on October 21, 2011, Judge Gallipoli denied the City's, RTC's, and the Coalition's motions for counsel fees under N.J.S.A. 2A:15-59.1 and Rule 1:4-8. The plaintiffs were unsuccessful in their litigation. Although the judge was "unconvinced that harassment was not in fact at least one purpose which motivated the filing of the April 27, 2011 verified complaint," he was "unable to conclude based upon the evidence before [him] that [p]laintiffs did not . . . truly believe that there was an impermissible conflict of interest and therefore initiated this action to vindicate that legal position." The judge also determined plaintiffs had a good faith basis for their unconstitutional gift argument and that he had found minor violations of the LPCL. Under those circumstances, the judge declined to find that plaintiffs' action was frivolous and, therefore, he denied defendants' motions for counsel fees and sanctions. He did, however, grant each defendant's costs of suit. This appeal followed.
II.
On appeal, plaintiffs repeat the arguments they unsuccessfully raised in opposition to defendants' motions for summary judgment and to dismiss the complaint. Plaintiffs assert Montange had an improper conflict of interest which should have prohibited him from continuing to represent the City. They also contend the City should not have been permitted to continue to pay Montange for his services because to do so constituted an unconstitutional gift to RTC and the Coalition and because the City had not followed the LPCL in its contracts with Montange.
At the outset, we note that the City and Montange each filed a motion for summary judgment and RTC and the Coalition filed motions to dismiss plaintiffs' complaint. The primary distinction between a motion to dismiss for failure to state a claim pursuant to Rule 4:6-2(e) and a motion for summary judgment pursuant to Rule 4:46-2 "is that the former is based on the pleadings themselves." Pressler & Verniero, Current N.J. Court Rules, comment 4.1.2 on R. 4:6-2 (2012).
In assessing a Rule 4:6-2(e) motion, courts should view the complaint indulgently, assume the truthfulness of the allegations in the complaint and afford the complainant every reasonable inference. NCP Litig. Trust v. KPMG L.L.P., 187 N.J. 353, 365 (2006). A court's inquiry at such an early stage in the proceedings is limited to the adequacy of the pleadings, not the complaining party's ability to prove its allegations. See Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). To this end, a court should search "'the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.'" Ibid. (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)). Accordingly, a complaint will be sustained as long as a cause of action is "suggested" by the allegations. Ibid.
If, however, a moving party relies on material outside the pleadings, our rules provide that such motion should be "treated as one for summary judgment and disposed of as provided by [Rule] 4:46, and [that] all parties . . . be given reasonable opportunity to present all material pertinent to such a motion." R. 4:6-2. Thereafter, a motion for summary judgment will be granted only if the pretrial record "show[s] that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c).
Here, the City, Montange, RTC and the Coalition each relied upon materials outside the pleadings. Indeed, the record on appeal consists of over 1,000 pages of documents. Thus, defendants' motions must be treated as motions for summary judgment. Cnty. of Warren v. State, 409 N.J. Super. 495, 504 (App. Div. 2009), certif. denied, 201 N.J. 153, cert. denied sub nom. Shope v. New Jersey, _____ U.S. ______, 130 S. Ct. 3508, 177 L. Ed. 2d 1092 (2010).
When reviewing an order for summary judgment, we utilize the same standard as the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 3 07 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). When determining whether there is a genuine issue of material fact, the court must consider "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational fact-finder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Applying these well-established standards of review here, we discern no basis to set aside the judge's rulings in this matter.
A.
Plaintiffs first argue that the motions were not ripe for adjudication because discovery had not been completed. We disagree. A party challenging a motion for summary judgment on grounds that discovery is as yet incomplete must show that "'there is a likelihood that further discovery would supply . . . necessary information' to establish a missing element in the case." Mohamed v. Iglesia Evangelica Oasis De Salvacion, 424 N.J. Super. 489, 498 (App. Div. 2012) (citing J. Josephson, Inc. v. Crum & Forster Ins. Co., 293 N.J. Super. 170, 204 (App. Div. 1996)). Plaintiffs fail to identify any specific information that could be obtained from discovery or the manner in which discovery would have inured to their benefit. Under these circumstances, we perceive no basis to disturb Judge Gallipoli's decision not to delay summary judgment in order to allow for additional discovery.
B.
Plaintiffs next challenge the City's renewal of its contract with Montange on the ground that Montange's joint representation of the City, RTC, and the Coalition is infected with an impermissible conflict of interest. Again, we disagree.
The Rules of Professional Conduct generally prohibit a lawyer, without informed consent, to "represent a client if the representation involves a concurrent conflict of interest"--that is, if
(1) the representation of one client will be directly adverse to another client; orWhere one such client is a public entity, the rules further specify that the lawyer
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person or by a personal interest of the lawyer.
[R.P.C. 1.7(a).]
shall not undertake the representation of another client if the representation presents a substantial risk that the lawyer's responsibilities to the public entity would limit the lawyer's ability to provide independent advice or diligent and competent representation to either the public entity or the client.Moreover, where such a conflict exists, a public entity cannot consent to representation. R.P.C. 1.8(1).
[R.P.C. 1.8(k).]
Our Supreme Court has concluded that "the joint representation of clients with potentially differing interests is permissible provided there is a substantial identity of interests between them" in defending or pursuing the litigation, and that "[t[he elements of mutuality . . . preponderate over the elements of incompatibility." In re Petition for Review of Op. 552 of Advisory Comm. on Prof'l Ethics, 102 N.J. 194, 204 (1986). Potential conflicts of interest must be evaluated in light of the circumstances of each case, in the first instance by the attorney undertaking joint representation. Id. at 205-06.
In so doing the attorney must consider, "based on objective reasonableness," whether there is any direct adversity among the clients, and whether joint representation would adversely affect the clients' relationship or materially limit the attorney's professional responsibilities to any of them. Id. at 206; see also In re Supreme Court Advisory Comm. on Prof'l Ethics Op. 697, 188 N.J. 549, 568 (2006) (adding that attorney must consider whether representation would present substantial risk that responsibilities to public entity would limit ability to provide independent advice to public entity or other client). The attorney, of course, does not have the final say on the matter, and may be subject to disqualification from joint representation on application to the court or to discipline for violation of the ethics rules should the circumstances of the joint representation indicate that an impermissible conflict does in fact exist. Goodwin Motor Corp. v. Mercedes-Benz of N. America, Inc., 172 N.J. Super. 263, 273 (App. Div. 1980).
Here, the judge noted that plaintiffs had claimed in their complaint only a violation of R.P.C. 1.8(1), which merely forbids a public entity from providing its informed consent to otherwise prohibited joint representation, yet "telling[ly]" declined to specify which prohibition Montange's representation transgressed. Nonetheless, the judge recognized that the likeliest such prohibition would have been R.P.C. 1.8(k), but concluded that no conflict pursuant to that provision was "readily apparent" and that "questions to [p]laintiffs' counsel aimed at identifying the conflict(s) resulted in accusations and theories, but no substantive evidence."
Indeed, the City, RTC, and the Coalition had a common goal throughout the litigation. They each wanted to void Conrail's sale of the property to plaintiffs, thereby facilitating the City's acquisition of the Embankment at a lower cost than it would have to pay plaintiffs in "just compensation" if it attempted to condemn the property. Thus, there is no readily discernible conflict in Montange's representation of all three of his clients.
Plaintiffs argue that the legal strategy being advanced by Montage on behalf of the City is not a wise one. They assert the City does not need to force Conrail to abandon the Embankment because Conrail, itself, has determined abandonment is not required. Thus, in plaintiffs' view, the City can acquire the property more quickly, and without incurring any litigation costs, if it simply condemns it and pays them compensation.
Not coincidentally, the strategy plaintiffs propose the City follow is the one that is most advantageous to them. If the City is successful in voiding plaintiffs' deal with Conrail, it is unlikely they will ever be able to reacquire the Embankment for themselves. In addition, they would not be able to demand the City pay them "just compensation" in any amount, much less an amount much greater than what they paid Conrail for the property. As Judge Gallipoli noted, "the prudence of Montange's legal strategy is more appropriately evaluated by Montage's clients, not counsel for the [p]laintiffs here. If the vehement backing of Montange, particularly on behalf of [the] City, is an accurate indicator, then this strategy has clearly garnered significant support."
Plaintiffs also argue that, if defendants are successful in voiding their purchase of the property, RTC and the Coalition could effectively "turn on" the City by attempting to have the Embankment dedicated to trail or renewed railroad use, rather than to open space or planned development as possibly envisioned by the City. This argument, however, is purely speculative. The key fact remains that the City, RTC, and the Coalition are all currently pursuing a shared goal through a common legal strategy. We agree with Judge Gallipoli's observation that
[i]t is the responsibility of [p]laintiffs, as the parties alleging conflicts of interest, to identify those conflicts with some specificity. They have failed to do so. It is simply not the province of this court, in the instant context, to analyze the strategy employed by Montange or identify [every] possible permutation of conflict that could arise. In the absence of any clear evidence of a present or probable conflict, beyond [p]laintiffs' negative treatment of Montange's strategy or any per se prohibitions on dual representation, I find that there is no conflict of interest necessitating Montange's disqualification.Therefore, we reject plaintiffs' contentions on this point.
C.
Plaintiffs' contention that the City's payment for Montange's legal services constitutes an unconstitutional gift to RTC and the Coalition also lacks merit. The New Jersey Constitution provides that, "no county, city, borough, town, township or village shall hereinafter give any money or property, or loan its money or credit to or in aid of any individual, association or corporation[.]" N.J. Const. art. VIII, § 3, ¶ 2. The underlying principle of the "gift clause" is that "public money should be raised and used only for public purposes." Roe v. Kervick, 42 N.J. 191, 207 (1964). The "concept of public purpose is a broad one," and connotes "an activity which serves as a benefit to the community as a whole, and which, at the same time is directly related to the functions of government." Ibid.
In Roe, the Supreme Court fashioned a two-part test to determine if the expenditure of public funds constitutes a prohibited donation. First, the provision of financial aid must be for a public purpose, and second, the means to accomplish it must be consistent with that purpose. Id. at 212. Thus, "the funded activity must be one that serves a benefit to the community as a whole and at the same time is directly related to the functions of government." Bryant v. City of Atlantic City, 309 N.J. Super. 596, 612 (App. Div. 1998). In particular, where an expenditure confers a private as well as a public benefit, the private one must be merely incidental to the public. Roe, supra, 42 N.J. at 223; see, e.g., Hoglund v. City of Summit, 28 N.J. 540, 552 (1959) (holding expenditure for improvement of public road constitutional notwithstanding improvement's benefit to adjacent non-profit organization). Its constitutionality thus hinges on its primary objective. Roe, supra, 42 N.J. at 223.
Plaintiffs argue that, because the City pays Montange for the legal services he provides to it, this has the effect of subsidizing his representation of RTC and the Coalition. However, the use of public funds is permissible so long as its primary objective is a public one and the means of achieving that objective are consistent with it. Bryant, supra, 309 N.J. Super. at 612. Here, Judge Gallipoli observed that the City's litigation strategy, "to acquire the land at the lowest constitutional cost through an attempt to obtain the benefits of federal rail legislation, certainly satisf[ied] the expansive first prong and seem[ed] adequately tailored enough to satisfy the second prong" of that standard. The judge therefore concluded that any benefit that the City's contract with Montange conferred on RTC or the Coalition was merely incidental and therefore did not render the expenditure unconstitutional.
We agree with the judge's analysis. Montange charges the City a reduced rate to advance the litigation strategy it has chosen to acquire the Embankment. The acquisition of this property at the lowest cost possible would clearly benefit the public. The City's retention of Montange to assist it in accomplishing this goal is clearly consistent with the public purpose underlying the City's determination to pursue the acquisition. Thus, we conclude the City's retention of Montange passes constitutional muster.
D.
Finally, plaintiffs argue that the City's 2011 contract with Montange should have been voided because the City did not comply with the LPCL. N.J.S.A. 40A:11-15 provides that "contracts for professional services . . . shall be awarded for a period not to exceed 12 consecutive months." Here, the City first retained Montange in 2005. Thus, by 2011, the City should have been required to approve and enter six annual contracts with Montange. It had, however, only passed five, and not six, such contract resolutions at the time plaintiffs commenced this litigation. In addition, the City's 2011 contract with Montange does not specifically state it is only valid for a twelve-month period. Thus, plaintiffs argue the judge should have voided the 2011 contract and required Montange to return all of the funds he had received. We disagree.
It is well established that not every failure to comply with the provisions of the LPCL leads inexorably to a conclusion that the contract must be voided in its entirety. Wanaque Borough Sewerage Auth. v. Twp. of W. Milford, 144 N.J. 564, 575 (1996). Here, the City did fail to pass annual resolutions each year to continue the contract as required by the LPCL. However, irregularities in public contracts occasioned by minor violations of the LPCL are often subject to cure by subsequent ratification by the appropriate governing body. Such was the case in Riddlestorffer v. City of Rahway, 82 N.J. Super. 36, 53-54 (Law Div. 1963), where the Law Division held that an ultra vires contract otherwise within the municipality's authority to authorize was subject to ratification, even by inaction, as by acceptance of the benefits of the contract. Likewise, in Township Committee of Edgewater Park v. Edgewater Park Housing Authority, 187 N.J. Super. 588, 600-02 (Law Div. 1982), where the housing authority contracted for the services of an attorney without an initial plan pursuant to the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-31, or any actual written contract or public notice thereof pursuant to the LPCL, ratification was nonetheless permissible, contingent on the housing authority's compliance with the MLUL and LPCL.
Similarly, in De Muro v. Martini, 1 N.J. 516, 519-22 (1949), the Court upheld a contract into which a mayor had entered with an architect without any public notice, because the municipality's governing body had passed a resolution approving the architect's plans and specifications months later. The Court explained, as particularly pertinent here, that "[a]n ordinance directing payment of a just claim previously incurred by a municipality constitutes effective ratification to bind the municipality as though the obligation had been first properly authorized." Id. at 522.
Here, the City cured the prior defect of not renewing Montange's contract on an annual basis by passing Resolution 11-223 on April 13, 2011. Thus, we reject plaintiffs' contention that the City was required to discontinue Montange's legal services because of its prior failure to comply with the LPCL.
Somewhat more problematic, however, is the City's failure to specifically include the one-year term limitation in the the 2011 contract. Plaintiffs rely on Casamasino v. City of Jersey City, 158 N.J. 333, 345 (1999), where the Supreme Court explained that "ratification of irregular contracts for goods or services is permitted only after full compliance with all statutory conditions precedent." Because the 2011 contract does not include the one-year term required by N.J.S.A. 40A:11-15, plaintiffs contend the contract is for an "indefinite period" and, therefore, the contract should be declared void.
We decline to do so here. There is no dispute that Montange has performed work under the contract and is entitled to be compensated by the City for his efforts. See Hudson City Contracting Co. v. Jersey City Incinerator Auth., 17 N.J. 297, 309 (1955) (stating that "where the power to contract lies within the competence of the municipal corporation and there has been an irregular exercise of that power in good faith, recovery on a quantum meruit may be had, although the express contract is void"). Thus, voiding the 2011 contract would not require Montange to reimburse the City for the monies he earned and, moving forward, the City could rather easily adopt a Resolution and enter a contract which specifically included the one-year term requirement. In short, plaintiffs would not achieve their goal of preventing Montange from leading the City's litigation efforts against them even if the 2011 Resolution and contract were voided.
Two years have passed since the 2011 renewal contract was entered, with Montange continuing to provide legal services to the City in this now, eight-year-long litigation. The record does not disclose whether the City has already cured the defect in the 2011 contract by including a specific one-year term limitation in any subsequent Resolutions it has adopted and in any contracts entered into with Montange in 2012 or 2013. In order to ensure compliance with the LPCL, however, we direct the City to immediately review the current Resolution and contract and, if they do not include the one-year term limitation required by N.J.S.A. 40A:11-15, to cure that defect within ninety days of the date of this opinion.
E.
We turn now to defendants' cross-appeals. The City, RTC, and the Coalition claim the judge erred in denying their motions for counsel fees and sanctions for frivolous litigation as permitted, in appropriate cases, under Rule 1:4-8 and N.J.S.A. 2A:15-59.1(a). We disagree.
"A trial judge's decision to award attorney's fees pursuant to Rule 1:4-8 is addressed to the judge's sound discretion and will be reversed on appeal only if it '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.'" McDaniel v. Man Wai Lee, 419 N.J. Super. 482, 498 (App. Div. 2011) (citations omitted) (quoting Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)). Rule 1:4-8 authorizes a judge to order sanctions against an attorney where the attorney, by signing a pleading, falsely certifies that
(1) the paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; [or]
(3) the factual allegations have evidentiary support or, as to specifically identified allegations, they are either likely to have evidentiary support or they will be withdrawn or corrected if reasonable opportunity for further investigation or discovery indicates insufficient evidentiary support[.]
Rule 1:4-8 supplements N.J.S.A. 2A:15-59.1, which permits the trial judge to award
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.To find a complaint frivolous, the judge must conclude:
[N.J.S.A. 2A:15-59.1(a)(1).]
(1) The complaint . . . was commenced, used or continue 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 . . . 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).]
The sanctions permitted by Rule 1:4-8 and N.J.S.A. 2A:15-59.1 "are not to be issued lightly; they are reserved for particular instances where a party's pleading is found to be 'completely untenable,' or where 'no rational argument can be advanced in its support[.]'" McDaniel, supra, 419 N.J. Super. at 499 (citing United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 389 (App. Div.), certif. denied, 200 N.J. 367 (2009)). Simply because "some of the allegations made at the outset of litigation later proved to be unfounded does not render [the complaint] frivolous[.]" Iannone v. McHale, 245 N.J. Super. 17, 32 (App. Div. 1990). Applying these standards to the circumstances of this case, we perceive no abuse of discretion on the part of the judge in denying defendants' requests for counsel fees and sanctions.
Defendants argue plaintiffs filed their action in lieu of prerogative writs purely as a tactic in their wider litigation strategy and sought to deprive the City of Montange's services at a critical point in the federal litigation. To be sure, as Judge Gallipoli found, this tactic may have been one purpose of the litigation.
However, we are unable to conclude that the judge abused his discretion in finding plaintiffs nevertheless had a good faith basis for instituting their lawsuit. As to plaintiffs' claim that Montange had a conflict of interest, we agree with the judge's assessment that the circumstances of Montange representing the City, as well as RTC and the Coalition, while not improper, were "admittedly unique." In addition, in Conrail II, the federal district court had questioned the legal strategy employed by Montange on behalf of the City. 741 F. Supp. 2d at 139-41. Under those circumstances, it is difficult to conclude that plaintiffs or their attorneys did not sincerely believe they had a good faith claim to make on this issue.
If there was a conflict, plaintiffs' arguments under the gift clause of the New Jersey Constitution may have succeeded. Moreover, the judge found the City had committed minor violations of the LPCL in its agreements with Montange. Therefore, we conclude plaintiffs failed to establish their claim for counsel fees and sanctions under Rule 1:4-8 and N.J.S.A. 2A:15-59.1.
RTC and the Coalition argue they should not have been named as defendants in this matter because plaintiffs sought relief only from the City. We disagree. At this point in the proceedings, the resolution of plaintiffs' claims carried significant consequences for both RTC and the Coalition, particularly with respect to their continued representation by Montange, to justify naming each of them as a party.
Finally, defendants argue plaintiffs' complaint constituted a "Strategic Lawsuit Against Public Participation" (SLAPP), a term coined to describe a lawsuit where the goal is to "silence or intimidate the target, or to cause the target sufficient expense so that he or she would cease speaking out." LoBiondo v. Schwartz, 199 N.J. 62, 72, 85 (2009). Our Supreme Court has acknowledged the SLAPP categorization and sanctioned the filing of common-law causes of action for malicious use of process as an appropriate response to such lawsuits. Id. at 85-86.
However, as we have already held, the circumstances of this case fully support the judge's finding that plaintiffs' lawsuit was not frivolous and that it was not brought for the sole purpose of harassing or intimidating defendants. Thus, we reject defendants' contention they were entitled to sanctions under this theory.
In sum, we affirm the judge's July 18, 2011 orders dismissing plaintiffs' complaint against each of the defendants. On the cross-appeal, we affirm the judge's October 25, 2011 orders denying defendants' motions for counsel fees and sanctions. Finally, we direct the City to immediately review the current Resolution and contract and, if they do not include the one-year term limitation required by N.J.S.A. 40A:11-15, to cure that defect within ninety days of the date of this opinion. We do not retain jurisdiction.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION