Opinion
CIVIL ACTION NO. 96-1883 (JBS).
December 27, 1999
Dennis La Fiura, Esq., Pitney, Hardin, Kipp Szuch, Morristown, N.J., Attorney for Plaintiffs/Counter-defendants Ramada Franchise Systems, Inc. and Franchise Holding Systems, Inc.
George B. Henkel, Esq., Soriano, Henkel, Biehl Matthews, Esqs., Roseland, N.J., Attorney for Defendant/Counterclaimant/Third-Party Plaintiff/Cross-Defendant Atlantic Palace Rental Corp., Fourth-Party Defendant Atlantic Palace Condominium Assn., and the individual Fourth-Party Defendants.
Kevin J. Thornton, Esq., Horn, Goldberg, Gorny, Plackter, Weiss Perskie, P.C., Atlantic City, N.J., Attorney for Defendant/Cross-Claimant Atlantic Palace Condominium Assn.
Anthony Paul Pasquarelli, Esq., Methfessel Werbel, Rahway, N.J., Attorney for Third-Party Defendants/Fourth-Party Plaintiffs, Ira Trocki and Michael Di Francesco.
Don P. Foster, Esq., Mesirov Gelman Jaffee Cramer Jamieson, LLP, Philadelphia, PA, Attorney for Third-Party Defendants/Fourth-Party Plaintiffs/Counter-Defendants.
Charles H. Nugent, Jr., Esq., Cherry Hill, N.J., Attorneys for Fourth-Party Defendants Atlantic Palace Condominium Assn, Dr. Vasfi Uyar, Paul Mensch, and Rudy Mazurosky.
Contrary to Trocki's assertion that Mr. Nugent does not represent Dr. Uyar, Mr. DiMauro, Mr. Mensch, and Mr. Mazurosky, the Answer to the Complaint, filed by Mr. Nugent, specifically states that he represents those individual defendants. The reply brief in support of Association and Association Directors' motion for summary judgment filed by Mr. Nugent also makes clear that it is filed on behalf of both Association and the above-named individuals.
Table of Contents
INTRODUCTION 4
I. BACKGROUND 5
A. Historical Background 5
1. Formation of the Property 6
2. Creation of Rental 7
3. The Settlement Agreement 8
4. Meridian's Sale of Units to Trocki 10
5. Trocki Becomes a Ramada Licensee 11
6. June 16, 1996 Meeting 11
7. Litigation About the Lobby 13
8. Renewal of the Rental Management and Lease Agreement 14
9. Election of Association Board of Trustees 15
10. Telephone Charge Litigation 16
11. Evidence Regarding Defamation 17
B. Procedural Background 22
II. DISCUSSION 28
A. Summary Judgment Standard 28
B. Motions to Dismiss and/or For Summary Judgment 31
1. Counts Sixteen, Twenty, and Twenty-Two 31
2. Count One 31
3. Count Two 35
4. Counts Three and Eight 35
a. Count Three 35
b. Count Eight 36
5. Counts Four and Nine 41
6. Counts Five, Twelve, Thirteen, Seventeen, Twenty-Two, and Twenty-Four 44
a. As to Association and Association Directors 44
b. As to Rental and Rental Directors 49
7. Count Six 49
8. Count Seven 52
9. Counts Ten and Fourteen 55
10. Count Eleven 58
11. Count Fifteen 58
a. Lease for Use of Lobby Desk 59
b. The Rental Management and Lease Agreement 62
12. Count Eighteen 65
13. Count Nineteen 68
14. Count Twenty-One 73
III. CONCLUSION 75
OPINION
INTRODUCTION
Third-party defendants/Fourth Party Plaintiffs, Ira Trocki, Michael DiFrancesco, IMT Management, Inc., Trocki Hotels, and IS Associates, LLC. (collectively "Trocki"), brought a 25-count third-party counterclaim/fourth-party complaint, 24 counts of which are asserted against fourth-party defendants Atlantic Palace Condominium Association ("Association"), Dr. Vasfi Uyar, Angelo DiMauro, Paul Mensh, Rudy Mazurosky, Subal Sarkar, Carolyn Turco, Don Wright, Angela Bianco, and John Roes 1-100, and/or third-party counterclaim defendant Atlantic Palace Rental Corporation ("Rental"). The 24-counts assert a veritable cornucopia of claims, including Lanham Act violations, intentional interference with contractual relations and prospective economic advantage, contract and by-laws disputes, and defamation.
The 25th count is an indemnification claim against Ramada Franchise Systems, Inc. and Ramada Holding Systems, Inc.
Currently before the Court are four motions. First, Trocki filed a motion asking this court to continue the other summary judgment motions until Magistrate Judge Joel B. Rosen reached a decision on a discovery matter. Second, there is an unopposed Trocki motion for partial summary judgment dismissing all third- party complaint claims against Trocki alleging defamation. Third, fourth-party defendants Association, Uyar, DiMauro, Mensch, and Mazurosky (collectively referred to as the "Association Directors" or the "Association Board members") seek summary judgment on all claims against them in the fourth-party complaint. Finally, third-party counterclaim defendant Rental and fourth-party defendants Sukar, Turco, Wright, and Bianco (collectively referred to as the "Rental Directors" or the "Rental Board members") seek partial summary judgment dismissing Counts Five, Twelve, Thirteen, and Seventeen of the third-party counterclaim/fourth-party complaint. For the reasons stated herein, this Court will dismiss as moot Trocki's motion for a continuance, dismiss as moot Trocki's motion for partial summary judgment on defamation claims against it, grant Association and Association Directors' motion for summary judgment, and grant Rental and Rental Directors' motion for partial summary judgment.
I. BACKGROUND
The facts are taken from Association's Local Civil Rule 56.1 Statement of Undisputed Material Facts or Rental's Local Civil Rule 56.1 Statement of Undisputed Material Facts, unless otherwise noted, without specific reference to the paragraph in which each fact is stated. Unless specifically noted otherwise, Trocki has not contested any of these facts, and they are thus deemed admitted.
The instant case revolves around disputes between two competing hotel owners in a condominium building known as the Atlantic Palace (the "Property") and the building's condominium association.
1. Formation of the Property
Association is a New Jersey non-profit corporation responsible for the administration, operation, and management of the Property, a 31-story condominium building located at New York and the Boardwalk in Atlantic City, New Jersey consisting of 293 residential units and 12 commercial units. The Property and the actions of the Association and its members are governed by the By-Laws of the Association as well as the Master Deed. Every unit owner is automatically a member of the Association.
The Association is administered and managed by a Board of Trustees which has broad discretion to exercise all lawful powers and duties for the proper conduct and administration of the affairs of the Association, and the administration of the condominium and its property. The Board is empowered to do all lawful acts not otherwise precluded by the Master Deed, the By- Laws, or the New Jersey Condominium Act. Pursuant to By-Law Article VI, Indemnification of Officers and Trustees, ¶ 6.01, "the Trustees and Officers of the Association shall not be liable to the unit owners for any mistake of judgment, negligence or otherwise, except for their own individual willful misconduct or bad faith."
The Property was constructed over a period of years, beginning around 1984 and substantially ending in 1987. It was developed by Resorts Development Corporation ("RDC"), a South Carolina corporation, which planned to sell units and then have the unit owners lease back their units to a rental agent, who would be located on site to conduct rental activities to condominium unit owners, thereafter distributing profits to unit owners. The entity that was to act as rental agent was First Resorts of New Jersey, Inc. ("First Resorts"). The Rental Management and Lease Agreement between RDC and First Resorts was for a term of 10 years, with an agreed upon renewal for two successive five year periods. The Agreement also provided that First Resorts would lease from RDC the lobby of the Property, commonly known as commercial units 11 and 12, in order to conduct the rental program.
2. Creation of Rental
After construction of the Property and sale of approximately 2/3 of all units in the Property, however, RDC filed for bankruptcy protection in South Carolina. After the bankruptcy, Rental, a New Jersey non-for-profit organization, was formed to conduct the activities of the rental agent and to perform the duties previously contemplated and performed by First Resorts. In the bankruptcy, Rental and the Association were assigned the Rental Management and Lease Agreement (Association Ex. 17), such that the Association agreed that Rental would conduct the activities of a rental agent for units owned by others who chose to include their units in the rental program. Many, but not all of the unit owners (all of whom are members of the Association) participate in the rental program.
On December 16, 1992, plaintiffs Ramada Franchise Systems, Inc. and Holding Systems, Inc. ("Ramada") entered into a license agreement with Rental. Association was not formally listed as a party to the license agreement with Ramada and did not have a contractual relationship with Ramada.
Association avers that it was not a party to the Agreement, and Trocki argues that Association and Rental are the alter egos of each other.
3. The Settlement Agreement
As a result of significant construction defects occurring during the course of, and subsequent to, the construction of the Property, litigation was instituted by various parties, including Meridian Mortgage Corporation, as co-lender on the project, Association, and unit owners, against various entities, including the developer, architects, general contractors, and subcontractors. As a result of the litigation, a September 8, 1993 Settlement Agreement was entered into between numerous parties. It resulted in the dismissal of all claims against all parties and a settlement of in excess of 13 million dollars being paid to Association. That money was to be used to pay for repairs and construction, with any leftover funds being given to Meridian and to the settling unit owners, at specified percentages. The Settlement Agreement also provided that there would be a twelve-month grace period, beginning the first day of the first month after construction began, during which time the settling unit owners holding their mortgages through Meridian would not be required to make monthly mortgage payments of interest and principal. During that same time period, those unit owners whose mortgages were not held by Meridian would receive payments from the Association, at a rate of 1/12th of 8% of 80% of the unit purchase price every month for twelve months.
Subsequent to the receipt of the settlement monies, the same were invested with Summit Bank and then transferred to First Fidelity Bank for management. The banks invested the funds in US Treasury bonds and conservative bond funds. According to Association, an audit done around 1997 determined the investments to be prudent and appropriate and failed to reveal any improprieties with regard to the investments and the returns. (Pandit Certif. ¶ 8.) There is no evidence to the contrary regarding the audit. Trocki does point out, however, that a partner in the accounting firm hired by the Association was on the Advisory Board of Summit Bank (Trocki Certif. Ex. 3), that no investment expert was ever hired, that certain bankers stated that improper investment of the settlement money resulted in $130,000 to $150,000 in lost income (Foster Surreply Certif. Ex. 32), and that the Association's return on its investment did not even equal the 91 Day Treasury Bill rate in effect at that time.
Thereafter, the long process began of hiring construction managers, general contractors, sub-contractors, etc. Construction began in or around 1994 and ended in approximately the end of 1997. During the course of construction, the entire exterior of the building was replaced, and much of the interior of the building, including all 31 stories, were renovated. In addition, carpeting, drapes, etc., were replaced. During the course of construction, entire floors were taken out of commission, and unit owners were not permitted to use their units during the period that contractors were working on particular floors. Construction would result in certain unit owners being unable to use their units for weeks at a time.
4. Meridian's Sale of Units to Trocki
Around August 25, 1995, Meridian Mortgage Corporation, which owned 84 residential condominium units and five commercial condominium units at the Property by virtue of RDC's bankruptcy, conveyed those units to Dr. Ira M. Trocki, whose signature appears on the Agreement of Sale. Dr. Trocki owned these units through IS Associates, LLC ("IS"), and the units were to be partially managed by IMT Management, Inc. ("IMT"). Dr. Trocki was aware of that the building leaked and that there was an agreement of $13 million to repair it, but he believed that it was not that bad of a building because otherwise the city would have condemned it.
5. Trocki Becomes a Ramada Licensee
Around September or October of 1995, Ramada declared a breach of the License Agreement with Rental and terminated the License Agreement. On October 25, 1995, Ramada entered into a License Agreement with IS Associates, LLC, a Trocki party. Trocki Hotels, through related entities, owns or manages a substantial number of units at the Property. On October 28, 1995, as a result of negotiations between Trocki and the Association, Trocki and the Association entered into an Indemnification Agreement which granted to IMT Management, Inc., the limited license to utilize an area within the lobby at the Property for the purpose of operating the leasing of units. That limited license was subject to termination for any reasons whatsoever with or without cause, upon 24 hours notice. Trocki signed on behalf of IMT Management, Inc. and IS Associates. On November 5, 1995, the limited license was terminated and Trocki was required to vacate the lobby no later than Monday, November 6, 1995, which he did.
6. June 16, 1996 Meeting
On May 1, 1996, all unit owners were advised that a meeting would be held on Sunday, June 16, 1996. That notice read:
Dear Unit Owner,
Your Condominium Association has requested an Owner's Meeting to be held on Sunday, June 16, 1996, 10:00am, here at the Hotel.
The primary reason for said meeting is to inform you on the progress of Construction. To do this, Mr. Jim Hunt from Burt Hill, Mr. Craig Gianotti and Mr. George Mote from Lehrer McGovern Bovis will be in attendance.
We hope to see you all here on June 16th.
Sincerely,
Atlantic Palace Condominium Association Board of Directors
(Association Ex. 11.)
On June 16, 1996, the unit owners meeting was held. The first portion of the meeting consisted of the invited guests informing unit owners of the progress of construction, and the Association Board additionally entertained questions about enclosing the pool, the budget of the Project Manager, installation of new windows, costs, bonding of contractors, stress fractures in units, and balconies. (Id. Ex. 12.) Thereafter, a Board member informed the owners that the construction portion of the meeting was over and that no agenda existed, but that questions would be taken. (Id.) Thereafter, discussion ensued about Dr. Uyar's term as President of the Association, Board member Manny Moore's restaurant and new attorneys for the Association. (Id.) Additionally, Dr. Trocki took the floor and made several motions, including a vote to eliminate maintenance fees until construction was over, and a vote to permit Trocki to have a desk, telephone, and appropriate signage in the lobby of the Property to conduct business, as well as to put signage on doors to designate non-smoking rooms and Ramada-designated rooms. Trocki claims that a vote was taken on all three motions and that he voted his 89 units in support of his three motions, which were supported by another unit owner, Marla Rubenstein. He claims that the votes carried 98 to 3. The minutes of the meeting indicate that the Association Board stated that a vote could not be taken because the Board was unaware of who was delinquent in their rents and because this meeting was to be strictly construction. (Association Ex. 12.) A letter written by Manny Moore on June 24, 1996 indicates that other Board members determined that this was an owner's meeting and not just a construction update. (Foster Certif. Ex. 25.)
7. Litigation About the Lobby
As a result of the June 16, 1996 meeting, Trocki attempted to move furniture and other items into the lobby of the Property for purposes of establishing a commercial presence. As a result, the Association filed an Order to Show Cause, which was entered by the Honorable L. Anthony Gibson, J.S.C. on June 25, 1996. Thereafter, the case was transferred to Cape May County, and on August 28, 1996, the Honorable John F. Callinan, J.S.C., entered an Order Granting Preliminary Injunction and Other Relief. The preliminary injunction enjoined and restrained Trocki and related parties from conducting hotel business in the lobby of the condominium or in other common areas of the condominium. Trocki was also precluded from maintaining any commercial presence in the lobby area. Trocki's cross-motion to utilize a desk in the lobby area or a concierge's desk or to establish and independent phone system was also denied. Judge Callinan did, however, permit Trocki to place a small sign in the lobby directing guests to its business office and to use a bellman dressed in a Ramada uniform in the lobby to assist guests who were checking in or out.
8. Renewal of the Rental Management and Lease Agreement
In February 1997, the ten-year term of the Rental Management and Lease Agreement which had been assigned to Rental expired. Unit owners met at a January 11, 1997 meeting to discuss "lease expiration, renewal, terms, conditions, etc. regarding commercial units 11 12." According to Michael DiFrancesco, a third-party defendant/fourth-party plaintiff who is an officer in IMT Management, Trocki Hotels, and IS Associates, Trocki Entities did not get proper notice of the meeting but attended nonetheless. (DiFrancesco Certif. ¶ 9.) Mr. DiFrancesco says that Dr. Trocki put in a bid in response to Rental's bid to be a rental agent for the building in commercial units 11 and 12 and that an unidentified Association Board member later told him that Trocki's bid was better than Rental's. (Id.) Nonetheless, Rental's bid was accepted and approved by the unit owners. On April 5, 1997, the Association entered into a new Rental Management and Lease Agreement for commercial units 11 and 12. Additionally, Rental and the Association entered into a second agreement. In this second Rental Management and Lease Agreement, Association and Rental incorporated the terms of the prior Agreement in renewing the lease for five years, and they additionally agreed that Rental would pay Association 3% of Rental's gross rental revenue per year, with a guaranteed minimum rent of $100,000 per annum, as rent for commercial units 11 and 12. (Association Ex. 17.)
9. Election of Association Board of Trustees
On June 1, 1997, the Association held its annual election for Board of Trustees. All five of the board seats were up for election. Trocki nominated several persons, as did the Rental Corporation and the Association. All parties had an opportunity to campaign. As a result of the election, in which the Trocki nominees lost, Trocki challenged the results by filing a multitude of motions. Ultimately, he pared his challenge down to one, a motion to invalidate proxy voting at the annual election. On July 29, 1997, the Honorable John F. Callinan, J.S.C., entered an Order denying that motion. Atlantic Palace Condominium Association v. Ira Trocki et al., No. ATL-C-100-96 (N.J.Super.Ct. Ch. Div. July 29, 1997). Trocki thereafter filed an appeal. On October 27, 1998, the Superior Court of New Jersey, Appellate Division, rendered an opinion affirming Judge Callinan's Order in all respects. Atlantic Palace Condominium Association v. IS Associates, No. A-710-97T2 (N.J.Super.Ct., App. Div. Oct. 27, 1998).
10. Telephone Charge Litigation
In 1996, disputes arose between Trocki, Rental, and the Association concerning telephone and television cable systems, operations, charges, etc. Thereafter, litigation was instituted by Picasso's, Inc. a New Jersey corporation, which was owned and controlled by Trocki. Several lawsuits were filed over the telephone and television issues, and resulted in the following: Picasso's Inc. v. Atlantic Palace Rental Corp. et al., N.J. Super. Ct., Docket No. ATL-C-157-96; Atlantic Palace Rental Corp. v. Picasso's Inc., et al., N.J. Super. Ct., Chancery Division, Docket NO. ATL-L-45-98; Picasso's v. Atlantic Palace Rental Corp., N.J. Super. Ct., Docket No. ATL-L-2305-98; and Atlantic Palace Rental Corp. v. Ramada IS, N.J. Super. Ct. Atlantic County, Docket No. ATL-L-51-98. In the case docketed Picasso's Inc. v. Atlantic Palace Rental Corp. et al., N.J. Super. Ct., Docket No. ATL-C-157-96, Picasso's, the Trocki-owned organization, claimed, among other things, "denied access," breach of contract, improper interference with existing telephone service, conversion, intentional altering and tampering with equipment, obstructing the business and seizing the telephone system, that Picasso's was being punished by Rental and Association as retribution against Trocki, and that Trocki seeks compensatory and punitive damages for the interference. (Association Reply Br. Ex. 1.)
Picasso's Inc. v. Atlantic Palace Rental Corp. et al . , N.J. Super. Ct., Docket No. ATL-C-157-96, originally bore the docket number CPMC-62-96 when it was filed in Cape May County. According to the Clerk of the Cape May County Municipal Court, Chancery Division, Equity Part, the case was transferred to Atlantic County and given the new docket number on October 25, 1996 because the complaint had accidentally been filed in the wrong court. Association has attached that complaint to its reply brief as Exhibit 1.
On July 20, 1998, Judge Callinan entered an Order dismissing three of the four lawsuits as a result of a settlement on the merits. Picasso's, N.J. Super. Ct., Docket No. ATL-C-157-96. Only one lawsuit was permitted to continue, captioned Rental v. Picasso's, which was a separate allegation by Rental that Picasso's had intentionally interfered with a contract between Rental and Lodgenet.
11. Evidence Regarding Defamation
Various counts of Trocki's fourth party complaint and third party counterclaim allege defamation, libel, and/or slander against the Association, Rental, and their agents, employees, and representatives. In response to summary judgment motions, Trocki has specifically a number of communications which he believes defamed him. First, there is a November 28, 1995 letter from then-Association Board President Rudy Mazurosky to Ira Trocki which was carbon copied to all Association Board members and Ramendra Pandit, General Manager of the Atlantic Palace Condominium Association, regarding Trocki's removal of Atlantic Palace Condominium Association door signs on doors to Trocki- owned units and replaced them with Ramada signs and Trocki unilateral decision to change two residential units to commercial units; Mazurosky questioned whether employees of Dr. Trocki's company were thieves and said that Dr. Trocki was a "no good person." (Foster Certif. Ex. 2.) Further, the letter stated:
It is with shock and sadness that we must take the time and energy to advise you of your obvious transgressions here. You have transgressed against your fellow owners. These are the same folks that you have asked to believe and put trust in you and/or your fellow owners. Well, Ira, trust must be earned and you are not going to earn it by stealing property (or covering same) belonging to all of the owners and the dastard conversion of a residential unit for commercial use. We expect this lapse in judgment on your part will not happen again.
We expect your action concerning the above transgressions will speak wonders and help your [Association] Board of Directors and, indeed, all owners know the character of our fellow owner, Dr. Ira M. Trocki. Only God may judge you. Us poor mortals, . . . owners one and all, must just ponder and wonder at it all.
(Id.)
Second, Trocki alleges that an Association Board of Trustees member, Vasfi Uyar, made defamatory comments at the June 16, 1996 meeting, including that Dr. Trocki was a thief and a crook who had stolen information, was trying to hurt everybody, and was trying to destroy the property, and that no body should do business with him. (Foster Certif. Ex. 1, Trocki Dep. 110, 152.) He further alleges that Uyar made similar comments at every major meeting of the Board or the larger Association. (Id.)
Third, Trocki claims that people who ran for office for the Association Board wrote and said inflammatory, slanderous things about Dr. Trocki; Dr. Trocki was not specific about the statements made. (Foster Certif. Ex. 1, Trocki Dep. 153.) He additionally claims that defamatory statements were made about him at a meeting in October or November of 1995, meetings in 1996, and meetings in 1997, and that those statements were republished in minutes, information letters to unit owners, and in election letters. (Id., Trocki Dep. 153-154.) Dr. Trocki was not specific about the statements made. (Foster Certif. ¶ 4d.) However, the minutes of the November 5, 1995 Association meeting do indicate that Mr. Subal Sarkar, President of Rental Corporation, thought everyone should be aware of the incidents Dr. Trocki provoked, and that another owner noted that she was scared that Dr. Trocki could take over the hotel and damage the future for all unit owners, so "[p]hone calls were going to be made, to the owners not present, to inform them that it would be in their best interest not to accept Dr. Trocki's proposal." (Foster Certif. Ex. 3, pages 1 and 3.)
Fourth, Trocki points out that on January 31, 1996, Mr. Sarkar, Carolyn Turco (Vice President of Rental Corporation) and Robert Skolnik (a Rental Board Member) wrote a letter to the unit owners on behalf of the Rental Corporation which stated, in part, that "toward the latter part of the year we had to face significant obstacles that reduced our success from a banner year to a still successful year. The significant obstacles included: . . . . Loss of about 90 units from the rental pool from Trocki Hotels purchase." (Foster Certif. Ex. 4, page 1.) The letter continued by stating that Rental would accept a "management proposal from Trocki Hotels and, if satisfied, would submit it to unit owners for consideration. . . To date, [Rental] is not in a position to recommend any such contract." (Id. at Ex. 4, page 2.) Finally, the letter stated that "[i]n the meantime, two hotels are being run in the same building. Trocki Hotels engaged a bellman and a cart bearing a large `Ramada Check-In' sign, and using certain commercial units to run its operation. This operation continues to burden [Rental] staff and resources. [Association] has failed to have this improper conduct enjoined." (Id. at Ex. 4, page 3.)
Fifth, Trocki claims that Dr. Uyar sent a letter to Michael DiFrancesco, Chief Operating Officer of IMT Management, Inc., with copies to the Association Board and the Rental Board which states, in part, "IMT Management units are not being cleaned upon check out for four or five days. . . . Such un-hygienic and unsanitary conditions within the building would fester and provide a breeding ground for roaches and other rodents." (Id. at Ex. 5.)
Sixth, Trocki claims that Association's General Manager, Mr. Pandit, as well as Mr. Mazurosky, Mr. DiMauro, and others, wrote a letter dated June 4, 1996 to Dr. Trocki, carbon copied to all Association Board members, which stated "we trust that you will now cooperate with your Association's maintenance personnel as well as the necessary commercial and/or governmental inspectors in their assessment of the operation, management, maintenance, replacement, repair, care, cleaning and upkeep of the aforementioned Association property." (Id. at Ex. 6.)
Seventh, Trocki points to a June 20, 1996 memorandum from Mr. Pandit to Mr. DiFrancesco, with copies to the Association Board, which stated: "I just noticed there was a table and chair set up in the lobby, not authorized by the Condo Board. Please have removed immediately. Such blatant disregard of Condo authority is unacceptable." (Id. at Ex. 7.)
Eight, Trocki points to another June 20, 1996 memorandum from Mr. Pandit to Mr. DiFrancesco with copies to the Association Board which stated "[y]ou are not licensed or privileged to operate from the lobby, and the Condo Association has not given you authority. We demand you remove all your belongings from the lobby, if you fail to do so, we will call the police." (Id. at Ex. 8.) Manny Moore's June 24, 1996 memorandum states in part that he "was approached by a representative of [Association] who demanded that [he] come to [the Property] and witness and verify arrest warrants for members of the IMT Management team, who were setting up a desk in the Lobby as they indicated they would do after the motion and affirmative vote." (Id. at Ex. 9.)
Finally, Trocki points to a May 15, 1997 letter from Mr. Sarkar to "Rental Unit Owners and Friends" which states, in part, "Remember, it is not another election, it is our chance for survival. Losing to the other interest means losing your property sooner or later." (Id. at Ex. 10.) The letter asked recipients to contact Don Wright, Carolyn Turco, and Angelo Bianco. (Id.)
The Third-Party Counterclaim and Fourth-Party Complaint does not give any specifics of the alleged defamation, but states only that Rental and Association and Dr. Uyar defamed Trocki, intentionally or negligently.
B. Procedural Background
Ramada instituted the present action against Rental, Atlantic Palace Condominium Association ("Association") (of which all unit owners are members), and John Does 1-100, alleging that defendants violated the original license agreement by continuing to market, promote, and rent units at the Property through the use of the Ramada Marks in violation of §§ 32 and 43 of the Lanham Act after Ramada terminated those defendants' right to use the Ramada name and marks. Rental filed counterclaims against Ramada for breach of contract, libel, and tortious interference with contract, as well as a third-party complaint against Ira Trocki, Michael DiFrancesco, Trocki Hotels, IMT Management Corporation, Inc., and IS Associates, LLC (the "Trocki" parties) for malicious interference with contract, libel, and conspiracy. The counterclaim lists seven counts. Though the first six all complain about actions taken by Trocki in combination with Ramada, including defamation, they seek judgment only against "plaintiff," which is Ramada. Count Seven seeks to enjoin Trocki from malicious behavior but does not mention defamation as a basis for the claim.
The Trocki defendants filed a combined Fourth-Party Complaint and counterclaim to the Third-Party Complaint, consisting of 24 counts, alleging as follows.
One: Rental and Association are liable for trademark infringement under Sections 32, 43(a), and 43(c) of the Lanham Act, 15 U.S.C. § 1114, 1125(a)(c).
Two: Rental and Association engaged in unfair competition in violation of the New Jersey Fair Trade Act, N.J.S.A. 56:4-1.
Three: Trocki alleges that Rental and Association intentionally and maliciously interfered with Ramada's contractual relationships with Trocki.
Four: Rental and Association interfered with Trocki's reasonable expectation of a prospective economic advantage from patronage from the public.
Five: Rental and Association, by and through individual defendants Angelo DiMauro, Vasfi Uyar, Paul Mensch, and Rudy Mazurosky (collectively referred to as the "Association Directors"), and individual defendants Subal Sarkar, Carolyn Turco, Don Wright, and Angelo Bianco (collectively referred to as the "Rental Directors"), "participated in and were an efficient cause of the publication of false and defamatory material as it relates to Trocki with the intent to harm Trocki and to impute dishonest and fraudulent conduct by Trocki and to further to injure Trocki in its respective business operations," and thus judgment should be entered against Rental, Association, Association Directors, and Rental Directors.
Six: Association has failed to abide by the terms and conditions of a Settlement Agreement, thus harming Trocki.
Seven: This Court should declare that any and all votes taken at a June 20, 1986 meeting were valid and enforceable, despite Association's assertion to the contrary.
Eight: Rental, Association, Association Directors, and Rental Directors have conspired to take actions which harm Trocki and to gain economic benefit for Rental and the Association.
Nine: Rental, Association, Association Directors, and Rental Directors, together and separately, have taken actions designed to interfere with Trocki's prospective economic advantage.
Ten: Rental, Association, Rental Directors, and Association Directors have breached their fiduciary duties to Trocki.
Eleven: A constructive trust should be placed on moneys wrongfully diverted by Rental, Association, Association Directors, and Rental Directors.
Twelve: Association, Rental, Association Directors, and Rental Directors have made statements which defame Trocki to harm Trocki.
Thirteen: Association, Rental, Association Directors, and Rental Directors have knowingly and intentionally made false statements and published false information about Trocki to gain economic advantage for Association and Rental and to defame the personal reputations of Ira Trocki and Michael DiFrancesco.
Fourteen: Association, Rental, Association Directors, and Rental Directors are liable because the individuals are using Association and Rental as their alter ego to benefit their economic advantage at the cost of the economic advantage of Trocki, thereby breaching fiduciary duties to Trocki.
Fifteen: Agreements entered into between Rental and Association are illegal and violative of the New Jersey Condominium Act and are null and void.
Sixteen: Rental, Association, Association Directors, and Rental Directors have conspired to create a monopoly in violation of the New Jersey Anti-Trust Act as set forth in N.J.S.A. 56:9-1 et seq. .
Seventeen: Rental, Association, Association Directors, and Rental Directors have participated in and were an efficient cause of the dissemination of false and defamatory material as it relates to Trocki.
Eighteen: Association engaged in malfeasance in the investment of settlement funds.
Nineteen: Association, Rental, Association Directors, and Rental Directors have refused to allow Trocki to install its own telephone system and other related utilities and have improperly billed Trocki for use of the utilities, in violation of the by-laws and master deed.
Twenty: Association violated the by-laws in an effort to frustrate Trocki from presenting an alternate slate of candidates in an election.
Twenty-One: This Court should declare that any binding votes taken at meetings held in violation of N.J.S.A. 46:8B-13 are void, and should grant damages to Trocki.
Twenty-Two: Any agreements entered between Association and Rental while the Board of the Association was allegedly illegally constituted and acting ultra vires, such as a renewed contract, are null and void. Rental, Association, Association Directors, and Rental Directors should be ordered to pay damages.
Twenty-Three: Dr. Vasfi Uyar defamed Trocki intentionally.
Twenty-Four: Dr. Vasfi Uyar defamed Trocki negligently and carelessly.
Twenty-Five: Ramada is responsible for contractually indemnifying Trocki.
Association counterclaimed against Trocki, in five counts. Count One alleges that Trocki's advertisement and use of units for commercial purposes without the express permission of the Board of Trustees violates the Master Deed, By-Laws, and/or rules and regulations of the Association. Count Two alleges that Trocki's refusal to pay for security, costs, and other expenses violates the Master Deed and By-Laws. Count Three alleges that Trocki conspired with Ramada to interfere with proper administration and management of the Association. Count Four alleges that Trocki negligently, intentionally, and wilfully interfered with Association's contractual rights. Finally, Count Five alleges that Trocki breached its fiduciary duty and obligation to unit owners and to the Association. Association also cross-claims against Rental for contribution.
In an Opinion filed March 15, 1999, this Court denied Association's motion for summary judgment on Count Two of its fourth-party counterclaim, noting that there are genuine issues of material fact as to whether security guard costs are reasonably related to hotel operations and whether Trocki specifically requested additional security guards so that a special assessment of the Association against Trocki was appropriate under the Master Deed. The Court did note that it was not truly controversial that Trocki owed at least its proportionate share of the security costs and that the Court might have been inclined to grant partial summary judgment to Association for that amount if the Court had been presented evidence of what that amount would be. (03/15/99 Slip Op. at 10.) The Court invited the parties to submit a form of order to this Court granting partial summary judgment in the proportionate amount, pursuant to Fed.R.Civ.P. 56(d), if they could agree on what Trocki's proportionate share would be. The parties did not submit such an order. Thus, Count II remains open for resolution; a reasonable factfinder must determine if Trocki owes more than its proportionate share, and if it owes only its proportionate share, what that amount is.
A host of motions were filed by the various parties. Ramada and Rental filed cross-motions for summary judgment. Association moved against Trocki for summary judgment and to dismiss for failure to state a claim on Trocki's fourth-party complaint. Third-party counterclaim defendant Rental and individual fourth- party individual defendants Subal Sarkar, Carolyn Turco, Don Wright, and Angelo Bianco moved for summary judgment on counts five, twelve, thirteen, and seventeen of Trocki's third-party counterclaim and fourth-party complaint. Trocki moved for partial summary judgment dismissing all claims of defamation contained in the third-party complaint. Finally, Trocki asked this Court to hold off ruling on Association's motion to dismiss and for summary judgment until Magistrate Judge Joel B. Rosen ruled on the admissibility of a damages expert's report that had bearing on the summary judgment motion.
By Consent Order dated December 9, 1999, Ramada and Rental settled the claims between them, thus mooting the motions pending between them, and this Court thus dismissed those motions as moot by order dated December 9, 1999. Judge Rosen ruled on the expert opinion issue prior to this Court reaching these motions, and thus Trocki's motion to continue the ruling on Association's summary judgment motion is likewise moot.
On October 29, 1997, a consent order was signed dismissing claims between Ramada and Association.
This motion appears on the docket as entry 114-1.
Trocki's motion for partial summary judgment in its favor on all defamation claims in the third-party complaint is unopposed. However, as explained above, the only counts of the third-party complaint which mention defamation by Trocki seek judgment against Ramada. None of the first six counts seek judgment against Trocki, and Rental could not, at this late date, seek to amend to obtain judgment against Trocki. Because all claims between Rental and Ramada have been settled, those first six counts no longer exist. Count Seven of the third-party complaint, which does seek judgment against Trocki, does not mention defamation as a basis for the claim. Therefore, Trocki's motion for partial summary judgment dismissing all claims of defamation against it in the third-party complaint is irrelevant, and it will be dismissed as moot. The remainder of this Court's opinion will discuss the facts relevant to the remaining two motions and address the parties' arguments on those motions.
This motion appears on the docket as entry 104-1.
The two remaining motions to be decided appear on the docket as entries 93-1 and 106-1.
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law.Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id.
In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996);Kowalski v. L F Prods., 82 F.3d 1283, 1288 (3d Cir. 1996). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250; Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-330 (3d Cir. 1995) (citing Anderson, 477 U.S. at 248) ("[T]he nonmoving party creates a genuine issue of material fact if it provides sufficient evidence to allow a reasonable jury to find for him at trial.").
The moving party, here the defendant, always bears the initial burden of showing that no genuine issue of material fact exists, regardless of which party ultimately would have the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Jalil v. Avdel Corp., 873 F.2d 701, 706 (3d Cir. 1989), cert. denied, 493 U.S. 1023 (1990). However, where the nonmoving party bears the burden of persuasion at trial, as in the present case, "the burden on the moving party may be discharged by `showing' _- that is, pointing out to the district court _-that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325.
The non-moving party, here the plaintiff, "may not rest upon the mere allegations or denials of" its pleading in order to show the existence of a genuine issue. Fed.R.Civ.P. 56(e). It must do more than rely only "upon bare assertions, conclusory allegations or suspicions." Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985), cert. denied, 474 U.S. 1010 (1985) (citation omitted); see Liberty Lobby, 477 U.S. at 249-50; Celotex, 477 U.S. at 324-25. Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249-50.
Though some motions were listed as a motion to dismiss, all parties have attached evidence to their memorandum and thus this Court will consider all motions as motions for summary judgment.
B. Motions to Dismiss and/or For Summary Judgment
1. Counts Sixteen, Twenty, and Twenty-Two
Association has moved for summary judgment on Counts Sixteen Twenty, and Twenty-Two. Trocki, in its opposition brief to the motion for summary judgment, agrees that each of these claims should be dismissed. Thus, summary judgment will be entered in favor of Association on each of these counts. Additionally, because Counts Sixteen and Twenty-Two were also stated against Rental, and because Trocki agrees that these claims should be dismissed, summary judgment will be entered in Rental's favor on Counts Sixteen and Twenty-Two.
2. Count One
In Count One, Trocki seeks to hold Rental and Association liable for violations of the Lanham Act, 15 U.S.C. § 1114, 1125(a)(c). Association asks this Court to grant summary judgment in its favor on this Count for lack of standing to sue and for lack of evidence to support the claim.
More specifically, Association argues that under §§ 1114 and 1125(c), Trocki does not have standing to sue Association for infringement of the Ramada mark because only the owner, registrant, and/or legal holder of the Ramada mark may sue under § 1114 and only the "owner of the famous mark" may sue under § 1125(c). Trocki's opposition brief admits that Trocki is not the owner or registrant of the Ramada mark but argues that Trocki has standing to sue so long as Ramada, the owner and registrant of the mark, is a party in the case. Even if Trocki's assertion that it has standing so long as the registrant is also in the lawsuit is correct, Ramada has settled its claims with Rental and is no longer a party to the lawsuit. Therefore, this Court finds that Trocki does not have standing to sue Association under §§ 1114 and 1125, and this Court will grant summary judgment to Association on the §§ 1114 and 1125(c) bases of Count One.
If Trocki does not have standing to sue Association under §§ 1114 and 1125(c), then Trocki also does not have standing to sue Rental under those two sections of the Lanham Act. Though Rental has not sought summary judgment on Count One, standing is a matter of subject-matter jurisdiction, an integral issue in the case-or-controversy requirement, and this Court, pursuant to Fed.R.Civ.P. 12(h), should sua sponte dismiss an action for which the Court lacks jurisdiction. Therefore, this Court will also dismiss the §§ 1114 and 1125(c) bases of Count One against Rental, leaving only the § 1125(a) basis of Count One against Rental.
As for Trocki's claim that Association is liable under 15 U.S.C. § 1125(a), Association argues that while Trocki theoretically has standing because "any person" can bring action to stop another's use of a name in commerce if confusion is likely, this Court should nonetheless grant summary judgment for Association because there is no evidence to contradict Association's evidence, by way of the Certification of Ramendra Pandit, that Association has never used Ramada's marks in commerce. Indeed, while there may be evidence that Rental improperly continued to use the Ramada marks in commerce, an issue which this Court need not reach today, there is no evidence of record that Association ever used Ramada's name in commerce because while Rental is involved in the hotel business, Association is not.
Trocki responds that this Court should impute Rental's actions to the Association because they are alter egos of each other. As support for this claim, Trocki points out that the boards of both entities have held joint meetings (Foster Certif. Ex. 2 [minutes of joint meetings in 1992 and 1993]), that there were joint committees between the two entities (id. at Ex.4), that there were contracts between the two entities (id.), and that the two entities share the same general manager, Ramendra Pandit (id.). Further, Trocki points out that Rental is "a pass- through corporation" (Id. at Ex. 5), and that the lines between the two entities are often blurred.
It may well be true that the two organizations have worked closely together. A majority of the unit owners, all of whom are members of Association, participate in Rental's program. Rental is a pass-through organization, but its profits are passed on only to those unit owners participating in Rental's hotel program, not all unit owners. Rental represents only certain unit owners, while Association represents all unit owners. The Boards of the two organizations have worked together to rehabilitate the building and to act in the best interest of a majority of the members. This relationship pre-dates Trocki's ownership of units, and Trocki knew the relationship between the two entities in advance of his purchasing units.
While the two organizations have worked closely together, they are not one and the same. Not all unit owners participate in Rental, including but not limited to Trocki. Rental and Association have, from time to time, had disputes; they do not always see eye to eye. There is simply no legal support for the idea that, absent evidence of conspiracy, when two different organizations work closely together, each's conduct can be imputed to the other.
For example, the minutes of a November 5, 1995 Rental unit owners meeting notes that Rental objected to the installation of washers and dryers in the building, an action taken by Association. (Foster Certif. Ex. 17.) A January 31, 1996 letter from the Rental Directors to unit owners participating in the Rental program noted that Rental was not pleased that Association "failed to have [Trocki's] improper conduct enjoined.
Therefore, there is no evidence that Association misappropriated the Ramada marks, and Trocki's claim against Association under 15 U.S.C. § 1125(a) must be dismissed. As Trocki's claims under 15 U.S.C. § 1114 and 1125(c) also cannot stand, summary judgment will be granted for Association on Count One.
3. Count Two
Association seeks summary judgment on Count Two of the Fourth-Party Complaint, arguing that Association could not have violated N.J.S.A. 46:4-1 by passing off guest lodging services as being authorized by Ramada because Association does not provide guest lodging to anyone. There is no evidence that Association provides guest lodging, and, as explained above, Association and Rental are not alter egos such that Rental's alleged behavior can be imputed to Association. Therefore, summary judgment will be granted for Association on Count Two.
4. Counts Three and Eight
Association and the Association Directors seek summary judgment on Count Three, which alleges that Association intentionally and maliciously interfered with Ramada's contractual relationships with Trocki, and Count Eight, which alleges that Association and Association Directors engaged in conduct designed to obstruct and interfere with Trocki's contractual rights.
a. Count Three
In Count Three of the Fourth-Party Complaint, Trocki argues that Association interfered with Ramada's contractual relationship with Trocki by misappropriating Ramada's name, reputation, and goodwill, and offering substandard units at prices below those offered by Trocki. Again, as there is no evidence from which a reasonable factfinder could find that Association operates any hotel or uses the Ramada marks, this claim cannot stand, and summary judgment will be granted for Association on Count Three.
b. Count Eight
Count Eight, however, is broader. In it, Trocki goes beyond arguing that Association is liable because it is the alter ego for Rental, which is alleged to have misappropriated the Ramada mark, arguing instead that Association, Rental, the Association Directors, and the Rental Directors have all conspired together to bring economic advantage through certain contracts to the unit owners who participate in Rental at the expense of those who are not a part of Rental, and that these actions were taken in order to force Trocki to cease operations at the facility. Essentially, Trocki argues that Association and the Association Directors "played favorites toward Rental's unit owners at the expense of Trocki's units, by engaging in detrimental actions against Trocki, by trying to intimidate and obstruct Trocki, trying to force him to cease operations at Atlantic Palace . . . and to force him to sell his units." (Trocki Br. Opp'n Association Mt. Summ. J. at 18.) The particular contract with which Association and Association Directors allegedly interfered was Trocki's franchise agreement with Ramada. The Association and Association Directors seek summary judgment on Count Eight, arguing that there is no evidence of either conspiracy or an underlying wrong.
Under New Jersey law, a civil conspiracy is not actionable absent an independent wrong. Eli Lilly Co. v. Roussel Corp., 23 F. Supp.2d 460 (D.N.J. 1998). The essential elements of the tort are: (1) combination of two or more persons; (2) an agreement or confederation with a common design; (3) an overt act in furtherance of the conspiracy; (4) the existence of an unlawful purpose, or of a lawful purpose to be achieved through wrongful means; and (5) consequential damages. Morgan v. Union County Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App.Div. 199 3). There must be an overt, unlawful underlying act. Here, that act is alleged to be tortious interference with the contract between Trocki and Ramada.
Association argues that the By-Laws grant immunity to the Association and Association Directors. To the contrary, the By-Laws, Art. VI, § 6.01, grants immunity to the Trustees and Officers against suits brought by unit owners "for any mistake of judgment, negligence, or otherwise, except for their own individual wilful misconduct or bad faith." This clause does not immunize the Association. Further, it does not immunize the officers if they have acted in bad faith. If the allegation that the Association Directors intentionally interfered with Ramada's contract with Trocki is proven, that would evidence bad faith, and the immunity clause would not apply.
Association's argues that summary judgment should be granted to it on Count Eight because there is no evidence of tortious interference and because there is no evidence of conspiracy. More specifically, Association and the Association Directors note that they are assuming that the underlying conduct allegedly supportive of the claim is that Association allegedly conspired with Rental to interrupt telephone service or overcharge for telephone service, that Association allegedly conspired to fix the elections, and that Association allegedly wrongfully prevented him from having a front desk in the lobby of the building after a vote passed allowing him to do so. None of these allegations stick. Trocki has agreed that the election issues (also the basis of Count Twenty, which Trocki agrees should be dismissed as a matter of res judicata) are barred by res judicata, and as explained below in Part II.B.13, Trocki is barred from relitigating the telephone issues as a matter of res judicata as well. As for the allegation about the right to use the lobby, Trocki could not have established a commercial presence in the lobby without permission of the Association Board or membership. Trocki alleges that a vote passed at the June 16, 1996 meeting allowing him to establish that presence, but as this Court has found that the notice (and non-existent agenda) for the June 16, 1996 meeting was not broad enough to give fair warning that votes would be taken, as required by the By-Laws, that vote cannot serve as the basis of Trocki's right to have a presence in the lobby (commercial units 11 and 12, which had already been leased to Rental for a fee that serves to benefit the entire Association membership). Therefore, none of those allegations of facts constituting tortious interference are supported by admissible evidence.
In his brief opposing Association's motion for summary judgment, Trocki says that additional facts support his claim, namely that despite the fact that Association never actually communicated with Ramada to dissuade Ramada from contracting with Trocki, Rental was renting rooms "while pretending to be a Ramada," keeping a Ramada sign on the front desk and continuing the use the same telephone number that it used as a Ramada franchise. (Trocki Br. Opp'n Association Mtn. Summ. J. at 16.) Additionally, Trocki says, Association's answer to Interrogatory No. 20 states, in part, that when Trocki was no longer allowed to have a desk in the lobby, "an offer came from Vasfi Uyar on July 12, 1996 offering to purchase the holdings of I S Associates for a purchase price of $3,4000,000. . . . On several occasions, Dr. Uyar mentioned to Michael DiFrancesco that Dr. Trocki should just sell the unit to Dr. Uyar." (Foster Certif. ¶ 18.) However, these two assertions do not constitute evidence of unlawful conduct. As stated earlier, Association is not Rental's alter ego, and thus any alleged wrongdoing by Rental in continuing to use the Ramada mark is not wrongdoing by Association. Even if Dr. Uyar did offer to buy Trocki's units, that itself is not evidence of any wrongdoing; it is not illegal to offer to buy another's property, even if the offer is made out of dislike for the offeree.
Rental's conduct could be imputed to association for tortious interference if there was evidence of conspiracy. There need not be direct evidence of conspiracy; such evidence is rarely found. Morgan, 268 N.J. Super. at 364-65. Here, however, after several years of discovery and pretrial practice, there is no evidence from which a reasonable jury could find conspiracy. Though this Court has been presented with evidence of joint meetings of Rental and Association, the minutes with which this Court has been presented predate Trocki's entry into the building. The minutes and agendas of all meetings thereafter do not reveal anything that would show combination for an unlawful purpose. Trocki may or may not have evidence that Rental Board members "conspired" among themselves; this Court is not called upon to decide that in the instant motions. However, there is no evidence that the Association Directors committed a tortious interference, and there is no evidence from which a reasonable finder of fact could find that Association Directors conspired with Rental such that Association and its Directors are liable for Rental's actions.
There is no evidence, therefore, of tortious interference. As there is no evidence of an underlying wrong, there can be no claim for civil conspiracy, and this Court need not address whether there is any evidence of conspiracy to commit an unlawful act. Mere allegations of Dr. Trocki do not suffice to keep this claim alive in the absence of any evidence from which a reasonable factfinder could find in his favor. Summary judgment is entered for Association and the Association Directors on Count Eight.
5. Counts Four and Nine
Association and the Association Directors seek summary judgment on Count Four, which alleges that Association intentionally and maliciously interfered with Trocki's relationships with potential customers, and on Count Nine, which alleges that Association and the Association Directors engaged in conduct designed to interfere with Trocki's prospective economic advantage.
Count Four is based in Trocki's claim that Rental and Association misappropriated Ramada's name and goodwill and thereby interfered with Trocki's reasonable expectation of prospective economic advantage from patronage from the public. Again, while there may or may not be evidence that Rental wrongfully continued to use the Ramada mark, there is no evidence that Association used the Ramada mark, Association is not Rental's alter ego, and there is no allegation of conspiracy in the Count. Therefore, summary judgment must be granted for Association on Count Four.
In Count Nine, Trocki again alleges that Association, Rental, Association Directors, and Rental Directors intentionally interfered with Trocki's prospective economic advantage. Unlike the Count Four claim, Count Nine does not specify that it is based in Association's and Rental's alleged misappropriation of the Ramada mark, but it does allege that they acted both together (conspiracy) and separately. In order to support a claim for tortious interference with prospective economic advantage, a plaintiff must show (1) some reasonable expectation of economic advantage, (2) that the plaintiff was in the pursuit of business and the defendant was aware of that, (3) that the interference was done intentionally and with "malice" (meaning intentionally and without justification) (4) that had there been no interference, there was a reasonable probability that the plaintiff would have received the anticipated economic benefit, and (5) damage beyond a mere allegation of lost business. Eli Lilly, 23 F. Supp.2d at 493-94. The plaintiff bears the burden of proving that there was an absence of justification at step three.
There is no debate that Trocki can prove prospective economic advantage with their parties (customers) and that Association and Association Directors were aware of that. However, there is no evidence that Association acted with malice, meaning intentionally and without justification or excuse. There is evidence, as Trocki points out, that certain Association members were not pleased with Trocki. For example, various of the Association Directors wrote letters to Trocki noting that Trocki's units were unsanitary and that Trocki removed signs from doors and put up a sign and a table in the lobby based on a vote that the Board had already declared invalid for lack of notice. There is also evidence that various Rental Directors were not pleased with Trocki; they told the unit owners who operated through Rental that they believed Trocki was engaging in improper conduct and that they were not in a position to recommend a management proposal from Trocki Hotels, and Mr. Sarkar wrote a campaign letter to unit owners saying that losing to Trocki eventually means losing their property.
Despite both Association's and Rental's apparent dislike for Trocki, however, there is no evidence from which a reasonable factfinder could find that they took unjustified, intentional actions against Trocki. As explained above in the discussion of Count Eight, to the extent to which Trocki's claim is based upon supposed malicious conduct of elections and telephone charges, the claim is barred by res judicata. To the extent to which the claim is based upon disputes over signs and tables in the lobby and signs on the unit doors, there is no claim because Trocki's actions in the lobby and with regard to unit doors were not taken after a properly noticed vote. To the extent to which it is based upon alleged continued misappropriation of the Ramada mark, there is no evidence that Association ever used the Ramada mark, and there is no evidence that Association did anything to encourage Rental to continue to use the Ramada mark. Simply put, there is no evidence from which a reasonable jury could determine that Association intentionally interfered with Trocki's prospective economic advantage from customers. Moreover, as explained above, there is no evidence that Association or its board members conspired with Rental such that any action by Rental or its Board members could be imputed to Association or the Association Directors. Therefore, summary judgment will be entered for Association and Association Directors on Count Nine as well.
6. Counts Five, Twelve, Thirteen, Seventeen,
Twenty-Two, and Twenty-Four
a. As to Association and Association DirectorsCounts Five, Twelve, Thirteen, and Seventeen allege that Rental, Association, Rental Directors, and Association directors all defamed the Trocki entities, or Ira Trocki or Michael DiFrancesco personally, either negligently or intentionally. Counts Twenty-Two and Twenty-Three allege that Vasfi Uyar defamed Trocki, either negligently or intentionally. Association and Association Directors seek summary judgment on all of claims of defamation, arguing that those claims should be dismissed because the complaint does not state the alleged defamatory words, the dates on which they were said, and (with the exception of Counts Twenty-Two and Twenty-Three) the speakers of the words. Association and Association Directors also argue that the defamation claims are barred by the statute of limitations.
A defamatory statement is "one that tends to so harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him." Ward v. Zelikovsky, 136 N.J. 516 (1994).
To prevail on a defamation claim, a plaintiff must prove (1) a false and defamatory statement concerning plaintiff; (2) an unprivileged publication to a third party; (3) fault amounting to at least negligence on the part of the publisher; and (4) damages. . . . The threshold inquiry in a defamation action is whether the statement is reasonably susceptible of a defamatory meaning, and this is a question of law.Ditzel v. University of Medicine and Dentistry of New Jersey, 962 F. Supp. 595, 605 (D.N.J. 1997). Trocki argues that it need not show special damages because the record contains evidence of defamation per se, including statements which impute occupational incompetence or misconduct and statements which impute the commission of crimes, all of which were made within the relevant statute of limitations period.
Association and Association Directors are asking for judgment based on those pleadings, contending that Trocki did not properly assert a claim in the first place. While notice pleading is generally in effect, there is a requirement of more specific pleading in cases of defamation. To state a claim for defamation, the plaintiff must allege in particular the defamatory words, the person or persons who uttered them, and when, where, and to whom they were published. Doug Grant, Inc. v. Great Bay Casino, 3 F. Supp.2d 518, 538 (D.N.J. 1998) (citing Miele v. Rosenblum, 254 N.J. Super. 8, 12 (App.Div. 1991) (motion for summary judgment granted where plaintiff failed to plead any specify facts with regard to defamation)). See also Fed.R.Civ.P. 9(f) (requires specific statement of time and place of publication when that is material to a claim). Under New Jersey law, a vague conclusory allegation of defamation in a complaint is not enough. Zoneraich v. Overlook Hospital, 212 N.J. Super. 83, 101 (App.Div.), cert denied, 107 N.J. 32 (1986). See also Kotok Building v. Charvine Company, 183 N.J. Super. 101, 105 (L. Div. 1981); Doug Grant, 3 F. Supp.2d at 538. While discovery may be used "to bolster a defamation cause of action," a plaintiff cannot "file a conclusory complaint to find out if one exists." Zoneraich, 212 N.J. Super. at 101-102.
In the instant case, the defamation counts of the Second Amended Complaint are thoroughly conclusory. Never once do the counts identify the types of statements made or when they were made, and with the exception of Counts Twenty-Three and Twenty- Four, the counts never identify who the speaker is alleged to be. Trocki simply alleges generally, several times, that all of the Association and Rental Directors were defaming him.
Trocki was not even much more specific about its allegations at the time that Dr. Trocki was deposed on July 21, 1998. At that time, all he said was that Dr. Uyar called him a "thief and a crook and a few unsavory things" and that Uyar claimed that Ira "Trocki stole information and was trying to hurt everyone." (Association Ex. 23 [Trocki Dep. 110:10 — 112:2, and 152:10 — 154.2].) Dr. Trocki also said that Association trustee Rudy Mazurosky defamed him in a November 28, 1995 letter, but that he would otherwise have to "reflect" and "review" notes to determine who else defamed him, because everyone associated with Association defamed him at every meeting, in every letter, and on every occasion. (Id.) He did not identify comments with any more specificity.
Trocki simply did not meet its burden of alleging time and place with specificity. Association and Association Directors had the right to clear and specific notice of Trocki's allegations of defamation as required by New Jersey law. Trocki did not tell them that in the complaint, and he did little better in his deposition. Under Zoneraich, Trocki could not simply make a conclusory allegation in the complaint and use discovery to find out if any claim existed at all. This is especially true because the apparent backbones of Trocki's defamation claims are comments made by Dr. Uyar at a meeting at which Ira Trocki was present or by Rudy Mazurosky in a letter which Ira Trocki received, well before the relevant Trocki pleading was filed in this case.
Trocki argues that it is irrelevant that its Second Amended Complaint did not identify specific defamatory statements because there are documents identified during discovery or which were otherwise known to the Association, which show that defamatory statements were published and the dates of publication. The only support that Trocki offers for that proposition is a quote from a treatise:
The formal issues framed by the pleadings are not controlling on a motion for summary judgment; the court must consider the issues presented by the other material offered by the parties on the motion to determine whether the Rule 56 request should be granted. Thus, the court will examine the pleadings to ascertain what issues of fact they present and then consider the affidavits, depositions, admissions, answers to interrogatories and similar material to determine whether any of these issues are real and genuine and whether any of the post pleading material suggests the existence of any other triable genuine issues of material fact.
C. Wright, A. Miller, M. Kane, Federal Practice and Procedure, Civil § 2721 at 365-66 (1998).
Trocki is correct that formal issues in the pleadings are not necessarily controlling. However, "a summary-judgment motion may be made on the basis of the pleadings alone, and if this is done it functionally is the same as motion to dismiss for failure to state a claim or for a judgment on the pleadings." Id. § 2713 at 222-223. Moreover, asZoneraich and Miele show, summary judgment is an appropriate mechanism for disposing of defamation claims which were not properly plead under the law of New Jersey because plaintiffs can only use discovery to bolster their defamation claims (for example, with additional evidence of damages), not to find out if defamatory comments were ever made. Therefore, this Court will grant summary judgment to Association and Association Directors on Counts Five, Twelve, Thirteen, and Seventeen, and to Dr. Uyar on Counts Twenty-Three and Twenty- Four.
As a result, this Court need not reach the issue of the statute of limitations.
b. As to Rental and Rental Directors
Rental and Rental Directors seek summary judgment on Counts Five, Twelve, Thirteen, and Seventeen, the four defamation counts which apply to them. For the reasons stated above, Trocki failed to present any specifics as to time, place, or speakers in his fourth-party complaint/third-party counterclaim, and thus his defamation claims must be dismissed. See Zoneraich, 212 N.J. Super. 83. Trocki did not set forth defamatory statements, and thus summary judgment must be granted to Rental and Rental Directors on Counts Five, Twelve, Thirteen, and Seventeen.
7. Count Six
Association seeks summary judgment on Trocki's claim that Association wantonly and maliciously failed to abide by the terms of the Settlement Agreement which resulted in over $13 million being paid to Association from litigation arising out of construction defects. The parameters of this claim are unclear from the face of the Fourth-Party Complaint, as well as from Ira Trocki's answers to deposition questions. From Trocki's opposition brief, it would appear that Trocki is claiming that Association never paid him benefits which he is owed under ¶ 10 of the Settlement Agreement, which provides that during the Grace Period, "all other settling unit owners shall receive a monthly payment from the [Association] in lieu of the benefits received by the settling unit owners whose mortgages are held by Meridian." (Association Ex. 6.) That amount would be 1/12th of 8% of 80% of the unit purchase price each month for twelve months. (Id.)
The grace period began to run on January 1, 1996 (the first day of the first month after work began, which was on December 11, 1995), and ran through December 31, 1996. By and during that time, Trocki owned a number of units in the Property, including the 89 units it purchased from Meridian, and various other units purchased on December 1, 1995, May 23, 1996, June 12, 1996, and August 27, 1996. Thus, Trocki argues that he is entitled to the monthly payments by the Association for all units he owned during that time period.
Trocki's argument, however, fails, because Trocki was not a settling party. The Settlement Agreement was entered on September 8, 1993, more than two years prior to Trocki even purchasing units. The Settlement Agreement clearly states that it is intended to benefit the Settling Parties in order to settle their claims against each other (Association Ex. 6 at S-10), and Trocki is not listed as a Settling Party in ¶ 1 of that Agreement. (Id. at S-12.) Paragraph 10 specifically says that payments are due from the Association to "settling unit owners;" the compensation follows the settling unit owners, not the units themselves. Trocki simply was not one of those settling unit owners, and there is absolutely no language in the Settlement Agreement from which a reasonable factfinder could infer that the Settlement Agreement was intended to benefit future owners. Therefore, he is not entitled to funds under ¶ 10.
Moreover, there is no evidence of any agreement between Trocki and the sellers of the units which Trocki bought that Trocki was to collect the sellers' rights under the Settlement Agreement. Trocki has provided the Court with a list of units he purchased and those units' prices (Trocki Certif. Ex. 1), but he has only provided the Court with a copy of the deed to one of those units, and that deed says nothing about Trocki's right to collect amounts due to the seller under the Settlement Agreement. (Id. at Ex. 2.) The Court does have a copy of the sale agreement between Meridian and Trocki for the other 89 units, but it too does not contain language providing Trocki with the right to collect any money to which Meridian was owed under the Settlement Agreement. To the contrary, the sale agreement between Trocki and Meridian provides that
Buyer expressly acknowledges and agrees that none of Seller's rights under the Settlement Agreement are being sold to Buyer under this Agreement and that such rights are being specifically retained by Seller, including, without limitation, the right to receive any distributions of the settlement proceeds payable to Seller or to the owner(s) of the units.
(Association Ex. 7, p. 12.)
Because Trocki was not a party to the Settlement Agreement, because there is no language in the Agreement from which it could be inferred that the Agreement was intended to benefit non- settling parties, and because there is no language in the contracts of sale of Trocki's units that Trocki inherited any settling party's rights under the Settlement Agreement, Trocki's claim for funds under the Agreement cannot stand. Summary judgment will be granted in favor of the Association on Count Six.
8. Count Seven
Count Seven of the Fourth-Party Complaint asks this Court to determine that actions taken at a June 16, 1996 Association meeting are valid and enforceable. The parties have agreed that at the June 16, 1996 meeting, Ira Trocki made several motions, including a vote to eliminate maintenance fees until construction was over, a vote to permit Trocki to have a desk, telephone, and appropriate signage in the lobby of the Property to conduct business, and a vote to put signage on doors to designate non- smoking rooms and Ramada-designated rooms, and Trocki claims that those votes passed. Trocki asks this Court to enforce those votes.
Trocki's claim, however, must fail because, as Association has pointed out, there was not proper notice that such votes would been taken at the meeting. According to Association's By- Laws, Article III, § 3.10,
[n]otice and agenda of meetings of the Members of the Association shall be in writing. Notice of all meetings of the Association shall also be given to those holders of mortgages on Units in the Condominium who have advised the Association, in writing, of their desire to receive such notices. Notice and agenda of the meetings other than the annual meeting shall indicate and state that it is being issued by or at the direction of the person or persons calling the meeting . . . .
(Id.) All unit owners received the following notice of the June 16, 1996 meeting:
Dear Unit Owner,
Your Condominium Association has requested an Owner's Meeting to be held on Sunday, June 16, 1996, 10:00am, here at the Hotel.
The primary reason for said meeting is to inform you on the progress of Construction. To do this, Mr. Jim Hunt from Burt Hill, Mr. Craig Gianotti and Mr. George Mote from Lehrer McGovern Bovis will be in attendance.
We hope to see you all here on June 16th.
Sincerely,
Atlantic Palace Condominium Association Board of Directors
(Association Ex. 11.)
Trocki has presented some evidence that the June 16, 1996 meeting was a unit owners meeting, rather than a meeting intended to exclusively discuss construction-related matters. (See, e.g., Assn's Answer to ¶ 70 of Second Amended Fourth-Party Complaint [meeting was primarily, but not exclusively, to discuss construction-related matters]; Foster Certif. Ex. 25 [Manny Moore June 24, 1996 letter indicating that Association Board decided at caucus during the June 16, 1996 meeting that it was a unit owners meeting].) However, that it was a unit owner's meeting does not mean that there was proper notice that votes would be taken to eliminate condominium fees, to allow Trocki to put up signs, and to change door signs. Moreover, while unit owners brought up several different topics for discussion at the meeting, no other votes were taken. Trocki's argument, which appears to be that his vote was included in the notice because it was not specifically excluded, does not hold water. Moreover, there was no agenda for the meeting, written or otherwise.
Without proper notice and a written agenda, under the By- Laws, the meeting could not be considered a special unit owners meeting in which votes were binding. (See Association Ex. 3, Article III, § 3.10.) The Association's By-Laws are clear, and the rule could scarcely be otherwise, lest an attendee controlling many votes, having a stealth agenda, could call for a "vote" upon his surprise items. Trocki is not entitled to the relief it seeks in Count Seven, and thus this Court will grant summary judgment to Association on Count Seven.
This Court therefore need not reach the parties' disputes as to whether there was a quorum, whether Ira Trocki was in arrears at the time of the meeting, and whether the Association acted in good faith in disallowing the votes.
9. Counts Ten and Fourteen
In Count Ten, Trocki alleges that Association and the Association Directors breached their fiduciary duty to Trocki by taking unspecified actions in contradiction of the By-Laws and Master Deed of the Property to "punish and destroy" Trocki, to force Trocki to sell its investment in the Facility at a reduced price, and to make more money for Rental. Count Fourteen alleges that the Association and Association Directors have acted in concert with Rental and the Rental Directors in a way that provides rights to Rental to operate a Rental pool but which passes on certain costs of that improperly to all unit owners as a general common assessment.
Association and the Association Directors seek summary judgment on both counts. They concede that they act in a fiduciary role to all members of the Association, including Trocki. See Billig v. Buckingham Towers Condo Association, Inc., 287 N.J. Super. 551, 563 (App.Div. 1996). There is no breach of that fiduciary duty if (1) the Association's actions are authorized by the Condominium Act, its By-Laws, and/or the master deed, and (2) if the action is not fraudulent, self-dealing, or unconscionable. Id. at 563-64.
Here, there is no evidence that the Association took any actions that went against the New Jersey Condominium Act, the By- Laws, or the Master Deed. Trocki argues that the evidence supporting this claim is that the Association removed Trocki from the lobby and the front desk (and threatened arrest if Trocki did not leave the lobby), that it denied IS's use of the telephone system, that it refused to lower condominium fees, that it refused to pay Trocki its money under the Settlement Agreement, and that it failed to hold a proper election. Trocki further alleges that the claim is supported by all actions which Rental took as Association's alter ego, including refusing to check in and out guests of IS at the front lobby. Again, Rental and Association were not each other's alter egos, and nor is there any evidence that Association or the Association Directors conspired with Rental or the Rental Directors to have Rental refuse to check in and out Trocki guests, and thus one's actions cannot be imputed to the other. The election and telephone issues are barred by res judicata. As explained above, ¶ 10 of the Settlement Agreement did not entitle Trocki, a non-settling party, to any funds, and, as explained infra, to the extent that the general settlement funds might have been poorly invested, that investment is protected by the business judgment rule and does not constitute a breach of fiduciary duty. The Association Board's actions in not lowering and eliminating condominium fees during the grace period after a vote passed to eliminate and lower such fees does not constitute a breach of fiduciary duty because the By-Laws require that any such vote have effect only if proper notice and agenda of the meeting at which the vote is taken are given, and there was not such proper notice and agenda here.
As for Trocki's allegation concerning the use of the lobby, this Court has already determined that the Association Board did not act contrary to the Condominium Act, By-Laws, or Master Deed because use of the lobby had to be authorized by a vote at a meeting with proper notice and agenda, which were not present here. Trocki contends, however, that the Association and the Association Directors still violated their fiduciary duties because the lobby was a common element which Trocki had the right to use. To the contrary, the lobby was made up of two commercial units, which the Association had the right to lease out. (See Association Exs. 3 [By-Laws, Art. IV, § 4.10(q)] and 2 [Master Deed, p. 17 ("The Association may additionally lease or license the use of the Common Elements in a manner not inconsistent with the rights of Unit Owners.")].) The Association did lease it out to Rental, which paid fees that then went to benefit all Association members, meaning all unit owners, not just those unit owners who participated in the Rental program.
There is no evidence of a breach of fiduciary duty. Additionally, there is no evidence that Association acted with fraud, self-dealing, or unconscionable conduct. Thus summary judgment must be granted for Association on Count Ten and Association and Association Directors on Count Fourteen._
10. Count Eleven
In Count Eleven, Trocki seeks a constructive trust over money wrongfully taken by Association, Rental, Association Directors, and Rental Directors. A constructive trust may be imposed where "title to property . . . is acquired or retained in violation of a fiduciary duty."Hyland v. Simmons, 152 N.J. Super. 569 (Ch.Div. 1977), aff'd, 163 N.J. Super. 137 (App.Div. 1978), cert. denied, 79 N.J. 479 (1979). As explained above, however, there was no breach of fiduciary duty by Association or Association Directors, and thus there is no basis for granting a constructive trust against Association or Association Directors. Summary judgment will be granted for them on Count Eleven.
11. Count Fifteen
In Count Fifteen, Trocki argues that two of Association's leases violate the New Jersey Condominium Act: first, an April 5, 1997 lease in which Rental and Association agreed that Rental could operate and maintain the front desk solely for Rental's benefit, so long as Rental provided incidental services to all residential unit owners (including those unit owners who use their units for primarily commercial purposes), such as taking phone messages, assisting callers, and accepting mail (Association Ex. 4, Bates Nos. 000617-618); and second, Association's April 5, 1997 lease with Rental which renewed a previous agreement dated February 23, 1987 for five years and established rent which Rental would paid Association for commercial units 11 and 12 (the lobby) (Id. Bates Nos. 000619- 620). Trocki argues that the former lease is invalid because the lease deprives Trocki of its proportionate undivided interest in the lobby, a common element under N.J.S.A. 46:8B-3d(ii), as guaranteed by N.J.S.A. 46:8B-6. Trocki argues that the latter lease is invalid under N.J.S.A. 46:8B-12.2.
a. Lease for Use of Lobby Desk
N.J.S.A. 46:8B-3d(ii) defines "common elements" to include lobbies. N.J.S.A. 46:8B-6 establishes that unit owners have a proportionate undivided interest in the common elements, "a right in common with all unit owners (except to the extent that the master deed provides for limited common elements)," so long as the common element is used for a reasonable purpose without encroaching upon other unit owners' lawful rights. Trocki argues that the April 5, 1997 lease which gave Rental the exclusive use of the front desk violates § 46:8B-6 because it precludes Trocki from using the common element for a reasonable purpose: placing a desk for the Trocki-Ramada hotel.
Trocki is incorrect. Here, the lobby is not a common element. Rather, it is made up of two commercial units, 11 and 12, which are owned by the Association and can be leased out. The Master Deed provides that commercial unit 11 and 12 are the lobby, including the manager's office, secretarial and registration areas, a bellman's area, valet, and associated service corridors, as well as meeting rooms, a prefunction area, laundry, housekeeping and related facilities. (Association Ex. 2, at p. 6.) By virtue of the assignment of the Rental Management Lease Agreement to Rental and the Association by the bankruptcy court, and by virtue of the Settlement Agreement, Association became the owner of commercial units 11 and 12. Commercial units 11 and 12 had been leased to First Resorts of New Jersey, Inc. in the 1987 Rental Management and Lease Agreement (Association Ex. 4) and was assigned to Rental by the bankruptcy court. The 1997 Rental Management and Lease Agreement (which, as described below, is a valid agreement) renewed the 1987 agreement and set the rental price for commercial units 11 and 12 for the next five year. The lobby desk, or registration desk, is within that space, and Association, the owner of that commercial unit, is entitled to enter an agreement concerning the use of that space.
That a lobby is listed as a common element in the Condominium Act does not change the legality of the agreement; a lobby loses its characterization as a common element if it is actually a commercial unit owned by the association, separate and apart from any individual unit owner's ownership. This same reasoning was followed by the New Jersey tax court in Wedgewood Knolls Condominium Association v. Borough of West Patterson, 11 N.J. Tax 514 (1991). In Wedgewood, a condominium association was assessed a separate tax for clubhouse property and argued that the clubhouse could not be separately assessed because it is a common element. Id. at 528. The tax court reviewed N.J.S.A. 46:8B-3d, noting that it stated that the definition of common elements included "such other elements and facilities as are designated in the master deed as common elements," id. at 46:8B- 3d(viii), and that the condominium's master deed included recreational facilities among the common elements. 11 N.J. Tax. at 528. Despite that designation, however, the tax court find that the clubhouse, which was clearly the condominium's recreational facilities, was not a common element because "[t]he evidence shows that the building in which the clubhouse is located is owned by the association. Such separate ownership precludes qualification of the clubhouse as a common element, as by law, ownership of a unit is inseparable from ownership of its proportionate share of the common elements." Id. Similarly, in the instant case, though a lobby is typically a common element, the desk area lobby at the Property is not a common element, for all registration desk space is within commercial units owned separately by the Association and leased out to Rental (for a monthly rental fee plus a share of the taxes).
Additionally, pursuant to N.J.S.A. 46:8B-15(c), a condominium association may "lease or license the use of common elements in a manner not inconsistent with the rights of unit owners." Therefore, even if the lobby itself is a common element, there was nothing improper about its decision to lease out the use of that space so long as it did not prevent the ingress and egress of other unit owners or prevent them from the typical benefit of that space, including getting telephone calls and messages. The Rental Management and Lease Agreement carefully protected all unit owners in that regard. Therefore, the lease of the front desk to Rental is not invalid under the New Jersey Condominium Act.
b. The Rental Management and Lease Agreement
Trocki contends that the 1997 renewal of the Rental Management and Lease Agreement is invalid under N.J.S.A. 46:8B- 12.2. That statute places limitations on management contracts which are "directly or indirectly made by or on behalf of the association, prior to the unit owners having elected at least 75% of the members of the governing board . . . of the association," such that any such contract cannot exceed two years in length. Id. Additionally, any such contract cannot be renewed or extended for a period in excess of two years. Id. Because the 1997 Rental Management and Lease Agreement was a renewal for five years, and because the Rental Management and Lease Agreement entered into between RDC and First Resorts in 1987 was a ten year management agreement entered into before 75% of the Association's board had been elected, Trocki argues that the 1997 Agreement is invalid.
Contrary to Association's contention that this provision only applies to contracts for the "supply of equipment or material," it applies to management contracts as well. N.J.S.A. 46:8B-12.2.
Trocki also asks for damages, in addition to asking this Court to declare 1997 Rental Management and Lease Agreement invalid.
The 1987 agreement may well have been invalid. It was created prior to the election of 75% of the Association Directors, and it was a term greater than two years. However, Trocki is not seeking to invalidate the 1987 agreement, nor could he, as the time has passed and any such claim would be moot. What Trocki seeks to do is to invalidate the 1997 agreement because he believes that it is a renewal of any agreement created prior to the election of 75% of the Association Directors for greater than two years, invalid under the statute. Trocki specifically relies upon the fact that the 1997 agreement states among its recitals that "[t]he parties agree that the lease is renewed for a term of five years from the date of execution of this Rider . . . ." (Association Ex. 17.)
Despite this language, however, the 1997 agreement was not a renewal. The 1987 agreement was entered into by two totally different parties, and it was simply assigned to Association and Rental. By "renewing" an agreement which was entered into by different parties, Association and Rental did not renew a contract between themselves, but rather entered into their first agreement with one another, and that agreement incorporated the terms of the agreement that had previously been assigned to them. In fact, reading the 1997 contract as a whole, as this Court is duty-bound to do, it continues by noting that "[a]ll other terms and conditions of the prior Agreement are hereby incorporated by reference, and the parties are bound by such terms and condition as if more fully set forth herein." (Id.) The 1997 agreement was a new contract that incorporated the terms of a contract entered into by other parties, and the word "renewed" in the 1997 agreement is merely surplusage.
Additionally, Trocki's reading of N.J.S.A. 46:8B-12.2 is not in line with the purpose or logical reading of the statute. There is no case law interpreting this statute, and thus this Court must attempt to discern the statute's meaning. It is clear from the language of N.J.S.A. 46:8B-12.2, read as a whole, that the statute's purpose is to prevent condominium unit owners from being burdened by long-term management and service contracts entered into by developers or other individuals before a governing body had been elected. It was not intended to prevent condominium associations from choosing to continue contracts. This reading is buttressed by language in the statute to the effect that any "management contract . . . shall terminate 90 days after the first meeting of a governing board or other form of administration in which the unit owners constitute a majority of the members, unless the board or other form of administration ratifies the contract or agreement." Id. If the board so chooses, it can continue with the contract. This Court does not know whether or not the Association board in this case had a meeting in which it ratified the 1987 agreement after the agreement was assigned to Association, nor is it particularly relevant. What is clear is that this Association wanted to ratify the contract, and it in fact did so by entering into a new agreement in 1997, incorporating the terms of the 1987 agreement.
The Governors Reconsideration and Recommendation Statement on this statute in 1979 notes that the provision provides "that unless ratified, management contracts terminate 90 days after the first meeting of the governing board in which the unit owners constitute a majority. In this way the provision permits unit owners to take control of the management of the association at an yearly date and represents sound public policy." The statement continues to note that once the unit owners make up 75% of the governing board, the board can enter into long-term contracts.
To grant the relief Trocki seeks would contravene the purpose of the statute. Association's motion for summary judgment on Count Fifteen will be granted.
12. Count Eighteen
In Count Eighteen, Trocki argues that Association has maliciously and wantonly failed to abide by the terms and conditions of the Settlement Agreement as it relates to benefits that would inure to Trocki, including, but not limited to, malfeasance in the investment of the settlement funds. As explained above, Trocki has no right to funds under ¶ 10 of the Settlement Agreement, and thus, to the extent that Count Eighteen is based on Association's failure to pay funds due under ¶ 10, summary judgment is granted to Association. Count Eighteen is also based, however, on an alleged malicious malfeasance in the investment of funds, a claim for which Trocki does have standing.
Trocki does have standing to challenge the use of the funds because under the Settlement Agreement, if there is any money from the Settlement left over after the building is repaired and numerous payments are made to Meridian and the other settling parties, that money should be paid to the Association to be used to improve the appearance of the Property. (Association Ex. 6, at S-17.) Because Trocki is a member of the Association, it can challenge the handling of the funds that could inure to the benefit of all members.
In support of its claim, Trocki argues that despite Association's assertion that an audit revealed that the settlement monies were appropriately and conservatively invested (Association Ex. 1), Association is guilty of malfeasance because it never hired an expert, because its choice as to how to invest the money made no sense, and because it received a bad return on its investment. However, a corporation's decision on how to invest corporate funds is subject to the Business Judgment Rule ("BJR"). The BJR is a common law rules that exists to promote the full and free exercise of the power of management given to directors, Maul v. Kirkman, 270 N.J. Super. 596, 613 (App.Div. 1994), including the directors of condominium associations. Walker v. Briarwood Condo Association, 274 N.J. Super. 422, 426 (App.Div. 1994). It protects directors' decisions from being questioned or second guessed when the decisions involve corporate affairs, except in instances of fraud, self-dealing, or unconscionable conduct. Maul, 270 N.J. Super. at 613. The burden does not shift to the directors to show that the transactions were inherently fair unless there is a showing of some sort of fraud or self-dealing. Unless there is evidence of fraud, self-dealing, or unconscionable behavior, the claim should be dismissed.
Here, there is no evidence whatsoever from which a reasonable finder of fact could find that the Association invested these funds fraudulently, unconscionably, or in some sort of self-dealing manner. The only evidence from which there could even be a suggestion of self-dealing is that a partner in the accounting firm which Association hired is also on the Advisory Board of the bank where the money was first invested. However, the money was moved from that bank, and the self- dealing, if at all, would be by the accounting firm. It is not evidence of self-dealing by Association. It was in the Association's interest to wisely invest the money, not only for Trocki's sake, but for the sake of having additional funds to spend on all settling unit owners and the appearance of the Property altogether. There is no evidence from which a reasonable jury could find fraud, bad faith, or unconscionable behavior, and thus this Court cannot, as Trocki suggests, send this to a jury to determine bad faith. In hindsight, the Association may well have exercised poor judgment in not consulting an investment advisor or in putting all of the money into one location, but the BJR prevents this Court from questioning the wisdom of those decisions. Summary judgment will be granted for the Association on Count Eighteen.
13. Count Nineteen
In Count Nineteen, Trocki alleges that Association and the Association Directors, along with Rental and the Rental Directors, acted in concert to deprive Trocki of the ability to use the common elements of the facility, more specifically preventing the use of Trocki's own telephone system and related utilities and billing Trocki for the use of related utilities.
The fourth-party complaint/third-party counterclaim does not specify of which common elements Trocki feels it was deprived. It would appear from Trocki's surreply brief, which this Court did not give Trocki permission to submit, that the majority of this claim is based upon telephone usage and surcharges. As Association points out, however, this claim is barred by res judicata. In determining whether claims in the instant matter are barred by res judicata, this Court looks to the well-settled rule recited in Paramount Aviation Corporation v. Augusta, 178 F.3d 132, 135-36 (3d Cir. 1997), that "federal courts should apply the general rule that the preclusive effect of a judgment is determined by the preclusion law of the issuing court . . . ." Here, the issuing court was a New Jersey state court.
According to Trocki's surreply brief, the acts in question are denial of telephone line for Trocki's commercial unit, 50% surcharges for use of telephone system, $1.00 access fee to call within the building, giving Rental exclusive use of the lobby and front desk by Rental, heat and air conditioning were terminated in the IS building on numerous occasions, denial of use of telephone system in the building; refusal to provide an extension within the building so that IS guests could contact the IS office without incurring the $1.00 surcharge, denial of IS's right to place its own telephone system to service its own units, and denied access to the telephone system in order tor reprogram the system so that IS rooms could communicate with each other. As discussed above, Trocki has no claim based on Rental's usage of the front desk and lobby, as Association owned those commercial units which made up the lobby and could rent it out. As for the alleged lack of heat in the Trocki commercial unit, this Court has not been presented with evidence to support that. This section of the Opinion will explain why all telephone issues could and should have been resolved in the state lawsuit, because of res judicata and the entire controversy doctrine. Moreover, Local Civil Rule 7.1 does not provide for the filing of surreply briefs, and they may be disregarded by the Court. Trocki did not seek permission before filing a surreply brief. Trocki had the opportunity in its very lengthy brief opposing the Association's motion for summary judgment to lay out in more detail the bases of the common elements at issue in Count Nineteen. Rather than doing so, Trocki chose to limit its discussion to pointing out that Association had not attached the complaint from any state action to its motion and that none of the state lawsuits which had been specified by Association "involved Trocki's claim here against the Association and against Rental that the two of them `acted in concert and individually' to deprive Trocki of the ability to use the facility's common elements, the ability to install its own telephone system." (Trocki Opp. Br. at 52.) Only after Association attached the relevant complaint to its reply brief, which shows, as discussed below, that a state court action did dispose of telephone issues, did Trocki manage to elucidate what it meant when it said "common elements." Trocki simply did so too late in the game.
New Jersey courts apply essentially the same analysis as federal courts do for res judicata: "(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one." Watkins v. Resorts Int'l Hotel and Casino, Inc., 124 N.J. 398, 412 (1991) (quoting Moitie, 452 U.S. at 398, as consistent with New Jersey law). A cause of action "that has been finally determined on the merits by a tribunal having jurisdiction cannot be relitigated by those parties or their privies in a new proceeding." Velasquez v. Franz, 123 N.J. 498, 505 (1991). Thus, if a claim could have been presented in the first action (because the court would have had jurisdiction), it will be precluded in the second action,Watkins, 124 N.J. at 413.
In the instant case, the judgment in Picasso's Inc. v. Atlantic Palace Rental Corp. et al., N.J. Super. Ct., Docket No. ATL-C-157-96 was final and on the merits: Judge Callinan dismissed that case with prejudice based on a settlement agreement. See Bandai Am., Inc. v. Bally Midway Mfg. Co., 775 F.2d 70, 74 (3d Cir. 1985) (res judicata precludes relitigation of claims which were raised, or could have been raised, in litigation resolved by settlement), cert. denied, 475 U.S. 1047 (1986). The plaintiff of the earlier suit, Picasso's, is not listed identically to the Trocki Entities here, Ira Trocki, Michael DiFrancesco, Trocki Hotels, IMT Management Corporation, Inc., and IS Associates. However, the Trocki parties are in privity with Picasso's. Privity "is merely a word used to say that the relationship between the one who is a party on the record and another is close enough to include that other within the res judicata." Collins v. E.I. DuPont de Nemours Co., 34 F.3d 172, 176 (3d Cir. 1994) (quoting Bruszewski v. United States, 181 F.2d 419, 423 (3d Cir.), cert. denied, 340 U.S. 865 (1950)).
Generally, one person is in privity with another and is bound by and entitled to the benefits of a judgment as though he was a party when there is such an identification of interest between the two as to represent the same legal right, or if a person who is not a party controls or substantially participates in the control of the presentation on behalf of a party, Restatement, Judgments 2d, § 39 . . . .Collins, 34 F.3d 176 (quoting Moore v. Hafeeza, 212 N.J. Super. 399, 515 A.2d 271, 273 (1986)). Ira Trocki owns and controls Picasso's, Inc. The earlier litigation revolved around his claims against Rental and Association and was controlled by him. Therefore, there is privity. Finally, Count Nineteen's facts grew out of exactly the same series of transactions as the facts alleged in the previous lawsuit(s). Therefore, res judicata bars relitigation of those issues which were or could have been decided in the previous suit.
Moreover, even if there was not privity, making res judicata inapplicable, this claim would be barred by the wider entire controversy doctrine. While similar to res judicata principles, the entire controversy doctrine, which is unique to New Jersey, "encompasses traditional concepts of claims joinder as well as party joinder . . . ."Fornarotto v. American Waterworks Co., Inc., 144 F.3d 276, 278 (3d Cir. 1998).
The fundamental principle behind the inclusion policy of the entire controversy doctrine is that the adjudication of a legal controversy should occur in one litigation in one court; accordingly, all parties involved in a litigation should at the very least present in that proceeding all of their claims and defenses that are related to the underlying controversy.Id. (quoting Venuto v. Witco Corp., 117 F.3d 754, 761 (3d Cir. 1997)). As explained by the New Jersey Supreme Court, the main test under the entire controversy doctrine is whether "the claims against the different parties arise from related facts or the same transaction or series of transactions. It is the core set of facts that provides the link between distinct claims against the same or different parties and triggers the requirement that they be determined in one proceeding." DiTrolio v. Antiles, 142 N.J. 253, 267-68 (1995) (internal citations omitted). Thus, though the parties and the claims in the second suit may be different than those in the first suit, the second suit may nonetheless be barred because it concerns the series of transactions already at issue in the first suit. It is through this formula, which is broader than traditional res judicata, that the New Jersey Legislature, in adopting the doctrine through Rule 4:30A of the New Jersey Rules of Civil Procedure, seeks to promote "judicial economy and efficiency by avoiding fragmented, multiple and duplicative litigation." Fornarotto, 144 F.3d at 278 (citing Venuto, 117 F.3d at 761).
Though the instant claims are brought by the Trocki entities, not Picasso's, and though the instant claim may be read as having been brought against the Rental Directors and the Association Directors as well, who were not named in the earlier suit, the entire controversy doctrine would bar this claim nonetheless, for the series of transactions at issue are exactly the same.
Therefore, this Court will grant summary judgment to Association and Association Directors on Count Nineteen because that count is barred by res judicata and the entire controversy doctrine.
14. Count Twenty-One
In Count Twenty-One, Trocki alleges that Association held meetings without providing notice to all unit owners, including Trocki, and without providing minutes of those meetings to unit owners before the next open meeting, as required by N.J.S.A. 46:8B-13, so that any action taken at those meetings are illegal, non-binding, and void. Trocki also seeks damages. The Association admits that it technically failed to provide notice to unit owners between late 1995 and early 1996, but, as Association has pointed out, the Fourth-Party Complaint speaks in general terms and does not explain which meetings were held without notice and which minutes Association refused to release.
There may well have been technical violations of the notice rules. However, there is no authority under the New Jersey Condominium Act or By-Laws for Trocki to be awarded damages for such technical violations. Moreover, this Court cannot issue a blanket ruling that all decisions from all meetings are null and void because of blanket violations. There must be evidence of the specific votes from specific meetings which Trocki seeks to nullify. Here, there is no such evidence.
In opposition to the Association's motion to dismiss Count- Twenty One, Trocki asks this Court to exercise its equitable powers to order the Association to turn over every document regarding all Association meetings from October 1995 to the present so that Trocki can determine what votes were taken in secret that affect the Trocki entities. Association explains, however, that all minutes from unit owners meetings and Board of Trustees meetings have already been turned over, either prior to or during discovery, and these documents have been in Trocki's possession for approximately two years. Therefore, there is no basis for this Court to order Association to turn over documents.
Trocki, which has amended its Fourth-Party Complaint twice, has not challenged any particular vote or decision from a meeting for which it did not receive notice or minutes. There is no evidence from which this Court could invalidate specific votes or decisions for lack of notice. Therefore, summary judgment will be granted for Association on Count Twenty-One.
III. CONCLUSION
For the reasons stated above, this Court will dismiss as moot Trocki's motions for partial summary judgment on all defamation claims against it in the third-party complaint and for a continuation of the summary judgment rulings pending resolution of expert reports issues by Judge Rosen. This Court will grant Association's and Association Directors' motion for summary judgment on Counts One through Twenty-Four of the fourth-party complaint, and will also grant Rental's and Rental Directors' motion for partial summary judgment as to Counts Five, Twelve, Thirteen, and Seventeen of the fourth-party complaint/third-party counterclaim. Because Trocki agrees that Counts Sixteen and Twenty-Two should be dismissed, they will be dismissed against Rental as well. Additionally, this Court will dismiss the 15 U.S.C. § 1114 and 1125(c) bases of Count One against Rental because Trocki lacks standing to sue under those provisions.
The following aspects of Trocki's fourth-party complaint/third-party counterclaim remain to be resolved:
Count One: whether Rental is liable to Trocki for infringement of 15 U.S.C. § 1125(a).
Count Two: whether Rental engaged in unfair competition in violation of N.J.S.A. 56:4-1.
Count Three: whether Rental intentionally and maliciously interfered with Ramada's contractual relationship with Trocki
Count Four: whether Rental interfered with Trocki's reasonable expectation of a prospective economic advantage of patronage from the public
Count Eight: whether Rental and Rental Directors conspired to take actions which harm Trocki.
Count Nine: whether Rental and Rental Directors have taken actions designed to interfere with Trocki's prospective economic advantage.
Count Ten: whether Rental and Rental Directors have breached their fiduciary duties to Trocki.
Count Eleven: whether a constructive trust should be placed on moneys wrongfully diverted by Rental and Rental Directors.
Count Fourteen: whether Rental and Rental Directors are liable because the individuals are using Association and Rental as their alter ego to benefit their economic advantage at the cost of the economic advantage of Trocki, thereby breaching fiduciary duties to Trocki.
Count Nineteen: whether Rental and Rental Directors have refused to allow Trocki to install its own telephone system and other related utilities and have improperly billed Trocki for use of the utilities, in violation of the by-laws and master deed.
Count Twenty-Five: whether Ramada is responsible for contractually indemnifying Trocki.
This Court recognizes that many of the rulings in the instant Opinion may, by the law of the case doctrine, bar some of counts against Rental and Rental Directors which remain in the case. However, because Rental did not seek summary judgment on those counts, and because this Court would have subject-matter jurisdiction over those counts, this Court could not sua sponte dismiss any other Counts against Rental and Rental Directors.
This Court also must still decide Count Seven of the third- party complaint, Association's fourth-party cross-claim against Rental for contribution, and all five counts of Association's fourth-party counterclaim against Trocki.
The other six counts seek judgment only against Ramada, and all claims between Ramada and Rental have been settled.
The accompanying Order is entered.
ORDER
This matter having come before the Court upon the motions of fourth-party plaintiffs/third-party counterclaimants Ira Trocki, Michael DiFrancesco, IMT Management, Inc., Trocki Hotels, and IS Associates, LLC (collectively "Trocki") for partial summary judgment in Trocki's favor on defamation bases of the third-party complaint for a continuance of the summary judgment motions pending a ruling on experts' reports by Magistrate Judge Joel B. Rosen; and upon the motion of fourth-party defendant Atlantic Palace Condominium Association ("Association") and individual fourth-party defendants Dr. Vasfi Uyar, Angelo DiMauro, Paul Mensch, and Rudy Mazurosky ("Association Directors") for summary judgment on all claims brought against them in the fourth-party complaint; and upon the motion of third-party counterclaim defendant Atlantic Palace Rental Corporation ("Rental") and individual fourth-party defendants Subal Sarkar, Carolyn Turco, Don Wright, and Angela Bianco ("Rental Directors") for partial summary judgment as to Counts Five, Twelve, Thirteen, and Seventeen of the fourth-party complaint/third-party counterclaim; and the Court having considered the parties submissions; and for the reasons expressed in an Opinion of today's date;
IT IS this day of December 1999 hereby
ORDERED that Trocki's motion for partial summary judgment as to defamation bases of the third-party complaint, which appears on the docket as entry 104-1, be, and hereby is, DISMISSED AS MOOT; and it is
ORDERED that Trocki's motion to continue the summary judgment motion, which appears on the docket as entry 114-1, be, and hereby is, DISMISSED AS MOOT; and it is
ORDERED that Association's and Association Directors' motion for summary judgment, which appears on the docket as entry 93-1, be, and hereby is, GRANTED, and JUDGMENT shall be entered on behalf of Association and Association Directors on all counts against them in the fourth-party complaint, namely Counts One through Twenty-Four; and it is
ORDERED that Rental's and Rental Directors' motion for partial summary judgment as to Counts Five, Twelve, Thirteen, and Seventeen, which appears on the docket as entry 106-1, be, and hereby is, GRANTED; and JUDGMENT is entered on behalf of Rental and Rental Directors on Counts Five, Twelve, Thirteen, and Seventeen of the fourth-party complaint/third-party counterclaim; and it is
ORDERED that Counts Sixteen and Twenty-Two of the fourth- party complaint/third-party counterclaim be, and hereby are, DISMISSED against Rental; and it is
ORDERED that Count One of the fourth-party complaint/third- party counterclaim be, and hereby is, DISMISSED IN PART against Rental for lack of standing to the extent that it is based in alleged violations of 15 U.S.C. § 1114 and 1125(c), but it is alive to the extent to which it is based in alleged violations of 15 U.S.C. § 1125(a).
_________________________ Date
_________________________ JEROME B. SIMANDLE U.S. District Judge