Public Entities Are Not Immune From Frivolous Sanction Litigation

In Borough of Englewood Cliffs v. Trautner, 2024 N.J. Super. LEXIS 37 (App. Div. Apr. 22, 2024), in a published decision, the Appellate Division settled the issue of whether a public entity is immune from sanctions for filing a frivolous lawsuit in accordance with the Frivolous Litigation Statute N.J.S.A. 2A:15-59.1 (hereinafter FLS). The issue stemmed from the Borough’s retention of Thomas J. Trautner and Chiesa Shahinian & Giantomasi, PC (hereinafter CSG), Albert Wunsch III,  Jeffrey Surenian and Jeffrey Surenian and Associates, LLC (hereinafter Surenian) to represent it in affordable housing litigation.

The affordable housing matter was eventually settled but after change of political control in the Borough’s Council, the newly constituted Council sued CSG, Wunsch, and Surenian alleging professional malpractice, breach of contract, unjust enrichment, civil conspiracy, and aiding and abetting in course of their representation of the Borough in the litigation.  Shortly after being served the complaint, each defendant sent the Borough’s attorneys notices demanding the lawsuit be voluntarily dismissed because it was frivolous. Later, the trial court granted defendants’ motion to dismiss the Borough’s complaint with prejudice.

The defendants then filed a motion to recover attorney’s fees on the ground that the Borough failed to withdraw the lawsuit as they demanded. The trial court awarded fees to the defendant attorneys, and one of the basis for this appeal was the Borough’s contention that as a municipality it was immune from frivolous litigation sanctions.

The Appellate Division observed that the issue of whether a State, its agencies and political subdivisions are immune from frivolous litigation sanctions under the FLS statute is an unsettled law with only two prior divergent rulings that address the issue. The Court considered the ruling in In the Matter of K.L.F., 275 N.J. Super. 507, 511 (Ch. Div. 1993), where the Chancery court had concluded that the “ the State and its agencies and political subdivisions do indeed fall within the purview and operation” of FLS. In reaching this conclusion, the court had noted that the legislative intent underlying the statute was to reimburse the party that was victimized by frivolous litigation and, because the legislature did not carve out an exception immunizing state agencies within the language of the statute, it is evident that the legislative intent was not to exempt the state and its agencies from the sanctions.

The Appellate also discussed a different conclusion reached by another Chancery court in Division of Youth & Family Services v. P.M.,  301 N.J. Super. 80, 82 (Ch. Div. 1997). In this case, the court had concluded that a state agency was immune from FLS sanctions focusing on the language of the statute, “A party who prevails in a civil action . . . against any other party may be awarded all reasonable litigation costs and reasonable attorney fees or defense  . . . if the [claim] of the nonprevailing person was frivolous” and holding that the word person does not include the State of New Jersey unless used to designate the owner of property.

The Appellate Division agreed with the reasoning of the Chancery court in K.L.F., holding that a public entity is not immune from sanctions that can be imposed under the FLS. The Court noted that, given the plain language in the statute and the unqualified use of the term, “party,” leads it to conclude that the term does not exclude a public entity “party.” The Court also observed that the legislative objective in enacting the statute was punitive in nature and there is no indication in the statute’s legislative history that public entities were meant to be exempt from sanctions if they filed claims determined to be frivolous. The Court noted that even in subsequent amendments to the statute, after the decision in P.M., the Legislature did not amend the statute to clarify whether public entities were immune. Therefore, based on the plain language of the statute, backed by legislative history, the Appellate Division concluded that FLS allows for sanctions against public entities and affirmed the decision of the trial court.

Tags: frivolous lawsuits, immunity, public entity, sanctions