Under New Jersey law, fees may be obtained against attorneys for the filing of a frivolous lawsuit based upon a court rule, Rule 1:4-8. Attorneys fees for the filing of a frivolous pleading may be obtained against a party based upon a statute, N.J.S.A. 2A:15-59.1. The published decision of Tagayun v. AmeriChoice of New Jersey, 2016 N.J. Super. LEXIS 127 (App. Div. Sept. 20, 2016), demonstrates the difficulty in successfully obtaining attorneys fees under this statute.
This case involved a claim by Dr. Tagayun and Robert S. Mandell, her husband and office manager, against defendant AmeriChoice, contesting her termination as a provider. The Plaintiffs filed their complaint pro se. AmeriChoice contended that the complaint was frivolous because the contract between the parties provided for arbitration of all disputes and, as to Mandell, his claim was frivolous because he was not a party to the contract. Thus, he had no standing to enforce the contract.
The trial judge dismissed the original complaint without prejudice, sending the claim to arbitration as to Tagayun. The judge dismissed Mandell’s claim due to lack of standing. However, the plaintiffs filed an amended complaint, which was substantively the same, except they added the law firm and individual attorneys representing AmeriChoice as additional named defendants.
The trial court judge concluded that both the original complaint and the amended complaint were frivolous. As a sanction for the filing of these frivolous pleadings, the trial judge awarded fees in the amount of $10,073.20 for the filing of the original complaint and $6,599.40 for the filing of the amended complaint. The plaintiffs appealed both fee awards to the Appellate Division.
To award fees under N.J.S.A. 2A:15-59.1, the court must find that the claim was pursued “in bad faith, solely for the purpose of harassment, delay or malicious injury” or that the non-prevailing party knew or should have known it “was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.”
There was no evidence that the complaints were filed for the purpose of harassment, delay or malicious injury. Rather, the defendants argued that they were frivolous because they lacked a legal basis, i.e., the contract contained an arbitration clause which mandated all disputes would go to arbitration and Mandell lacked standing.
However, the Appellate Division found that the complaint by Tagayun was not frivolous because of the Supreme Court’s decision in Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), holding that arbitration provisions which did not contain a knowing waiver of the constitutional right to a jury trial were unenforceable. Based upon Atalese, even though Tagayun’s complaint was dismissed, it was deemed not frivolous.
As to Mandell, the court noted that it was clear that he was not a party to the contract and, thus, the trial court properly dismissed his claim. However, the Appellate Division found that his claim was not frivolous. Although his claim may have been ill-founded, it was not filed in bad faith. He had presented an argument that he was a third party beneficiary. Although the court declined to accept that argument, it showed that an award of sanctions was not merited.
Just because a party loses their case, it does not mean that sanctions for frivolous litigation should be imposed. The Appellate Division emphasized that “the term frivolous should not be employed broadly or it could limit access to the court system.”
However, the Appellate Division did find that the award of fees for the filing of the Amended Complaint was merited. By that point in the litigation, Tagayun had been advised by the court that her claim had to be arbitrated and Mandell had been told that he had no standing to assert a claim under the contract. Thus, the Appellate Division did affirm the award of fees as to the amended complaint.
This case demonstrates the difficulty in obtaining fees for the filing of a frivolous lawsuit against a pro se party. The frivolous lawsuit statute has a more stringent standard to meet than pursuing fees against an attorney under the court rule, Rule 1:4-8. If there is at least a colorable argument as to the basis of the complaint filed by a pro se party, the court will likely find that it was not filed in bad faith and, hence, no award of fees would be merited.
