The Appellate Division, in an unpublished opinion, reviewed a challenge by a company seeking to enjoin an ex-contractor from soliciting business from a specific third-party client. The contractor ceased working with the company in 2016 and was precluded by contract from soliciting business from former clients. In 2017, the parties were ensconced in a legal suit seeking to prevent competition. At that time the parties came to an enforceable agreement regarding the ex-contractor's ability to solicit former clients and created a list of untouchable clients. To note, there was no language concerning any clients "successors and/or assigns."
Between 2016 and 2018 one third-party client merged with another unrelated entity. This entity reorganized its internal governance, the IRS issued it a new tax identification number, though the business office address remained the same, and, important to the facts of this case, new account numbers were issued to this new entity for its electric service. In addition, this merged entity was not named as a former client in the settlement agreement.
The trial court held that the parties' prior settlement agreement did not include this new entity and that the ex-contractor could contact and solicit business from it. The Appellate Division agreed and upheld the trial court's decision relying on the facts that the merged entity reorganized its internal governance, was issued a new tax id from the IRS, was assigned new account numbers for electric service, and the parties' settlement agreement did not specifically include former clients and their "successors and/or assigns." A court must not rewrite an agreement to create more favorable terms for one party. Capital Energy Inc. v. MT
New Jersey's Multifamily Housing Preservation and Receivership Act, N.J.S.A. § 2A:42-114-142 (the "Act"), was created to give municipalities tools to address and protect tenants living in multi-family housing from deadbeat landlords. The statute permits a court to appoint a receiver when a building is, "in violation of any State or municipal code to such an extent as to endanger the health and safety of the tenants . . . and the violation or violations have persisted, unabated, for at least [ninety] days preceding the date of the filing of the complaint[,]" or "[t]he building is the site of a clear and convincing pattern of recurring code violations, . . .." N.J.S.A. § 2A:42-117(a), (b).
In a recent unpublished decision, the Appellate Division upheld Union City's ability to have a receiver appointed for a building that was literally falling onto the tenants and causing injuries which required hospitalization. This building had many violations over the course of years, up to and including illegal apartments. The record showed that despite both the tenants and the city providing notice of the conditions to the landlord, such violations were not cured and negatively affected the safety of the building and its tenants. Accordingly, the city properly and successfully used the process set forth in the statute to have a receiver being appointed. In addition, fees and costs were assessed against the landlord. (City of Union City v. Zaky Tadros)
In an unpublished decision issued earlier this week, the Appellate Division reaffirmed that mere puffery regarding a contractor does not amount to an actionable statement under New Jersey Consumer Fraud Act. (“CFA”) The judgment had been entered against Jeff Sands (“Sands”), who met with the Plaintiffs as a result of them contacting Stanley’s Home Improvement LLC (“Stanley’s”). Sands took notes during the meeting, gave his sales pitch about the great work that Stanley’s did and the company’s terrific reputation, but indicated that someone else would be in touch with the Plaintiffs in order to give them a cost estimate.
After the Plaintiffs decided to hire Stanley’s, Fed Zappolo (“Zappolo”) met with Plaintiffs and provided them a cost estimate of $28,000. Although Zappolo introduced himself as Stanley’s foreman, the agreement given to the Plaintiffs to sign was with Zappolo’s company named Fred Allen Builders, not Stanley’s. When Fred Allen Builders failed to complete the work, the Plaintiffs contacted Sands who advised that he was no longer with Stanley’s and that they had gone out of business. Eventually, the Plaintiffs were forced to hire another contractor at a cost of $39,600 to complete the unfinished work and correct the deficient work.
The trial court entered a judgment against all of the defendants, including Sands individually, for over $200,000. Sands was the only party to appeal, and the court agreed that there was no basis to find that Sands violated the Consumer Fraud Act. The court noted that being an officer of a business entity, without more, does not amount to liability under the CFA. Instead there must be an affirmative act, knowing omission or administrative violation personally committed by an individual. Here, the court determined that Sands’ statements in his sales pitch that Stanley’s stood by their work, had a terrific reputation, etc. were mere puffery and did not provide a basis for liability under the CFA. Consequently, the over $200,000 judgment was vacated as to Mr. Sands. (Pellegrino v. Fred Allen Builders, et. al.)
A recent unpublished decision from the Appellate Division exhibits why caution should be used when incorporating prime contracts into subcontracts “by reference”. In this matter, a General Contractor ("GC") had an agreement with an Owner to construct two grocery stores. The prime contract between GC and Owner contained a forum selection which directed any disputes to be filed in courts in upstate New York. The GC subcontracted the electrical work to a Subcontractor (“SC"), but the subcontract had no such forum selection clause. Instead, there was language directing mediation for disputes in the same upstate New York locale, and further language that all disputes were to be, "settled according to the dispute resolution procedures in the Prime Contract."
As is unfortunately too common in the construction realm, SC completed work but was not paid. Prompting SC to file construction lien claims against the GC and Owner along with a lawsuits in the New Jersey counties where each property was located seeking damages under the Prompt Payment Act ("PPA") and enforcement of the construction liens. The Owner objected to jurisdiction in New Jersey based on the prime contract's language and incorporation into the subcontract. At the trial level, each judge held that the selected New Jersey venues were proper and rooted their decisions on the PPA's language whereby it states, such an "action shall be conducted inside of this State."
On appeal, the Appellate Court would not endorse a complete preclusion from contracting away venue selection. Instead, the appellate panel conducted an in-depth review of the language of both contracts, and noted that there was a great deal of ambiguity and confusion as to the terms of each. The court noted that the subcontract included a venue provision only for mediation and was silent as to the terms of any other form of dispute resolution if mediation was unsuccessful. While there was reference to the prime contract, the court found that the prime contract contained very little instruction for a how to resolve subcontractor disputes, and specifically focused on the resolution of disputes between the Owner and GC. To apply those terms to a subcontractor was nonsensical in the courts mind, and therefore the Appellate Division found there to be no forum selection clause in the subcontract as to litigation and permitted the two lawsuits to proceed. (Sal Electric Company, Inc. v. The Pike Co., Inc, et. al.)
In a recent unpublished case from the Appellate Division, the court upheld a trial judge's piercing of the corporate veil, and held the individual defendants personally liable to repay monies loaned to their company. Despite the funds having been paid to a corporation, the court noted that there were no stock certificates, no financial reports, no tax documents filed with the state or the IRS, and cash withdrawals that were allegedly for business purchases but for which the defendants produced no documentation. The trial judge stated that the defendants used the plaintiffs' money for whatever expenses they had without any accounting whatsoever and ruled that the corporation was just a "mere facade" for the defendants' "personal gain". The Appellate Division agreed, and held the individual defendants liable to repay the Plaintiffs. This case enforces the importance of following the proper corporate formalities when operating any business entity in order to preserve the shield against personal liability. (Longmuir v. Kickin' It, Inc., et. al.)
The Appellate Division has upheld an arbitration award of $552,202 in favor of a general contractor who was not paid in full after completing a five-million dollar contract to construct a medical facility in Paterson. After the contractor's success at arbitration, the owner petitioned the Superior Court to vacate the arbitration award, while the contractor cross-moved to confirm the award. At the trial level, the trial court judge read the award and stated, "quite frankly, I can't follow it," and found that the arbitrator did not give a well-reasoned decision. Therefore the trial court vacated the award and ordered re-arbitration, prompting the contractor's appeal. On appeal, the three-judge panel cited N.J.S.A. 2A:23B-22 for the proposition that an arbitration award can only be vacated in six specific situations, and found that none of the six were present in this matter. Consequently, whether or not the court thought the arbitrator's decision was well-reasoned, it was not fraudulent, corrupt, or in line with any of the other grounds for vacating an arbitration award, and the $552,202 award in favor of the contractor was updheld. (Paterson Medical Plaza LLC v. Litana Development, Inc.)
In a split bench (4-3), the NJ Supreme Court has established that an aggrieved property owner need to show a diminution of property value prior to being entitled to restoration damages when a neighbor illicitly cuts down generic foliage (trees, shrubs or bamboo) on another's property. This game changer of a case flies in the face of property rights.
At issue in this case was a lot of bamboo. As one may know, bamboo is not easily contained once planted. It easily spreads and does not adhere to drawn property lines. In this case, Neighbor planted bamboo years ago which ultimately spread across his property and onto that of Next-door Neighbor's. Neighbor did not claim this bamboo held a "peculiar value" to him but rather referred to this bamboo as a "fence" used for privacy. One day Next-door Neighbor's landscapers came and removed all the bamboo from both properties. Neighbor sued seeking damages to replace the torn down bamboo.
The Supreme Court held that although a trespass occurred and foliage was undisputedly removed, without showing the property's value had been diminished, Neighbor was out of luck in seeking restoration damages. The Majority suggests that Neighbor should have shown either the bamboo was near and dear to him or that the value of his property was reduced by the removal. This holding seems very wrong when viewed through the lens of property rights and the dissent took this position. The evidence here established Next-door Neighbor's landscapers removed all of the bamboo from Neighbor's property without permission. Damages should be the cost to replace what was removed regardless of a personal attachment and regardless if the property value was diminished. (Kornbleuth v. Westover)
In a recently-published opinion from the Appellate Division, the court found that the plain language of the County Improvement Authorities Law exempts county improvement authorities from the provisions of the Municipal Mechanics’ Lien Law which permit liens to be filed for unpaid work on public projects. Relying upon the definitions of a “public agency” in the lien law, as well as language in the statute permitting county improvement authorities and stating that they are not, “a county or municipality or agency or component of a municipality for the purposes of any other law,” the Court found that the plain language of the applicable laws exempted county improvement authorities from being subject to the lien law. Consequently, contractors and sub-contractors should be aware that there is no ability to file a lien on any projects funded by a county improvement authority. (Mastec Renewables Construction Co. Inc. v. Sunlight General Mercer Solar LLC)
The NJ Supreme Court recently affirmed an Appellate Division's decision that medical providers' claims for reimbursement, related to and arising from treatment rendered in a workers' compensation context, are not time barred by the two-year statue of limitations as found in the enabling workers compensation statute but rather remain legally viable for the full six-year period allotted for contracts per N.J.S.A. § 2A:14-1.
The genesis of the challenge was a 2012 amendment to the WC enabling statute which "granted the Division of Workers' Compensation . . . exclusive jurisdiction over claims brought by medical providers for payment of services rendered to injured employees." The employers, by and through their insurance providers, argued that the Legislature must have also truncated the statue of limitations for medical providers' claims for reimbursement, related to and arising from treatment rendered in a workers' compensation context, because of the 2012 amendment.
The Court disagreed with that argument after an examination of the Legislature's intent when it amended N.J.S.A. § 34:15-51. Since the amended statute remained silent as to altering the statute of limitations, and because for many, many years prior the SOL was a six-year period, there could be no finding that the medical providers' claims should be time barred after two-years. The Court noted the Legislature can reexamine this issue and could truncate the SOL, however it did not do so with the 2012 amendment. (The Plastic Surgery Center, PA v. Malouf Chevrolet-Cadillac, Inc. )
NJ Supreme Court Rejects Appellate Division's Attempt at Expanding a Commercial Landlord's Non-delegable Duty
In a recently decided case, the NJ Supreme Court rejected the Appellate Division's attempt at expanding a commercial landlord's non-delegable duty (a duty that cannot be assigned). Over the course of decades, our courts have created certain duties for commercial landlord's which cannot be assigned to a tenant. One such duty is that of maintaining a safe sidewalk for the general public to use. However no court has ever found that same duty exists for any private area of the leased property.
In the case at bar, the plaintiff slipped and fell on a portion of icy driveway which was separated by a fence from the sidewalk. The tenant had been assigned all the duties to maintain the property and was even declared the "de facto owner" per the lease terms. Further, the tenant testified that he was solely responsible for clearing snow and ice from the property. Regardless of the weight of evidence, the Appellate Division still found the commercial landlord had liability in not verifying that the driveway was free of the transient condition of snow and ice prior to plaintiff's fall.
However, the Supreme Court disagreed and prevented such holding from overturning years of precedent. In doing so, the Court held (1) a driveway is private property, open to invitees, and not akin to a sidewalk which is used by the general public, (2) this particular lease assigned complete control of the property to the tenant even where the landlord reserved a right to enter to make repairs or in the case of emergency, and (3) even under alternative analysis of Hopkins v. Fox & Lazo Realtors the landlord here did not have a duty to protect the plaintiff (especially since plaintiff did recover for his injuries from the tenant).
In sum, a commercial landlord has certain duties which it cannot delegate to its tenant. Maintaining a private portion of the leased premises is not one of those items - yet. (Shields v. Ramslee Motors)
Peter J. Vazquez, Jr.