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NJ Appellate Court Weighs in on Frivolous Litigation

September 29, 2016

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As anyone familiar with our legal system knows, anyone can file a complaint at any time.  While our court rules includes a provision for frivolous litigation filed to harass a party, it is difficult to prevail on the court to dismiss an action on this basis.  The courts are especially mindful of the need to have open access to the judicial system for everyone to have their case heard.  Recently, the Appellate Division addressed the standard for imposing sanctions for frivolous conduct in <a href="http://blog.wcmlaw.com/wp-content/uploads/2016/09/Tagayun-v.-Americhoice-of-NJ.pdf">Tagayun v. Americhoice of NJ</a> pursuant to Rule 1:4-8 and N.J.S.A. § 2A:15-59.1.
The case arose out of a contractual relationship between a doctor and an HMO.  Americhoice terminated Dr. Tagayun, a neurologist, as a participating provider for HMO members.  In response, the neurologist filed a complaint against Americhoice requesting injunctive relief to prevent the termination.  The defendants notified the plaintiff that the contract required arbitration of all disputes and, therefore, the pleading was frivolous.  When Dr. Tagayun refused to withdraw her complaint, the defendants filed a motion to dismiss and sought attorney’s fees.  The Judge dismissed the complaint without prejudice and ordered the parties to arbitration based upon the contractual arbitration provision but declined to award frivolous litigation sanctions.
In response, the plaintiff filed an amended complaint, which was substantively the same as the original complaint, with added defendants.  At the same time, plaintiff appealed the Order dismissing the initial complaint.  The Appellate Division affirmed the Order sending the plaintiff’s claim to arbitration.  In the meantime, the defendants filed a motion to have both complaints declared frivolous and sought attorney’s fees.  The Court agreed with the defendants that the original complaint was frivolous and granted a fee award of $10,073.20.  Additionally, the Court dismissed the plaintiff’s amended complaint holding it was also frivolous and, although the Judge made very limited findings, awarded reimbursement of defendant’s counsel fees in the amount of $6,599.40.
Attorney’s fees as a form of sanctions are rarely granted and, when permitted, there must be a specific a finding of bad faith, in other words, the litigation must have been designed solely for the purposes of harassment, delay or malicious injury.  “Sanctions for frivolous litigation are not imposed because a party is wrong about the law and loses his or her case.”  In <em>Tagayun</em>, the Court vacated the first award of attorney’s fees against plaintiff for filing the initial complaint even though arbitration was ultimately required pursuant to the contract.  On the other hand, the Court affirmed the award of fees for the defense costs incurred in connection with the amended complaint because they merely asserted the same claims that had already been dismissed.  However, the Court cautioned that the “term frivolous should not be employed broadly or it could limit access to the court system.”
This decision demonstrates that even when the party ultimately succeeds, the cost of defense cannot be typically be recouped.  However, if a party persists in pursuing a theory that the Court has dismissed, there may be a chance of recovery if there is a specific finding of bad faith based upon a pattern of conduct that was unreasonable.
Thanks to Ann Marie Murzin for her contribution.
For more information, contact Denise Fontana Ricci at <a href="mailto:dricci@wcmlaw.com"><u>dricci@wcmlaw.com</u></a>.

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