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MELLINGER KARTZMAN LLC
ATTORNEYS AT LAW
101 GIBRALTAR DRIVE
SUITE 2F
MORRIS PLAINS, N.J. 07950
(973) 267-0220
LOUIS P. MELLINGER FAX (973) 267-3979
STEVEN P. KARTZMAN
JOSEPH R. ZAPATA, JR.
JUDAH B. LOEWENSTEIN
SEYMOUR RUDENSTEIN (1933-1983) www.msklawyers.com
JACOB MELLINGER (1928-2001)
E-MAIL: wluger7@gmail.com
OF COUNSEL
WALTER G. LUGER
PETER ROSEN
ROBERT D. ROSEN
April 6, 2023
Via E-Courts
Hon. Owen C. McCarthy, J.S.C.
Monmouth County Courthouse Re: Fortune Funding Concierge, LLC. and Mark Jones v.
74 Monument Park, 2" Floor Louis Mercatanti and Nassau Marina Holdings, LLC.
Freehold, New Jersey 07728 Docket Mo. MON-L- 1522-22
Motion Return Date: April 14, 2023
Dear Judge McCarthy:
As the Court is aware, this firm represents the Plaintiffs, Fortune Funding Concierge,
Inc., (‘Fortune Funding” or “FF”), and its member, Mark Jones, (‘Jones’), (jointly referred to as
“Plaintiffs” or “FF/Jones”). Please accept this letter brief in opposition to the Defendants’
improvident Motion for Sanctions pursuant to R. 1:4-8 (b) (the “Frivolous Litigation Rule” or
“Rule”) and pursuant to N.J.S.A. 2A:15-59.1 (the “Frivolous Litigation Statute” or “Statute”). At all
times relevant, FF/Jones and their attorney, Walter G. Luger, Esq., ("Luger"), caused the
Complaint in issue to be filed and prosecuted in good faith and in accordance with applicable
law. There is nothing frivolous involved in this litigation and, at all times relevant, both Plaintiffs
and their counsel had a reasonable good faith belief in the merits of its position, such that the
Defendants’ Motion for Sanctions was improvidently brought and must be denied like almost all
frivolous claims motions that are constantly denied by our courts.
Nassau/Mercatanti still owed FF/Jones about another $122,500.00 and the State Court
lawsuit was filed in order to attempt to recover this amount earned by FF/Jones but never paid
to them by Nassau/Mercatanti.
STATEMENT OF RELEVANT FACTS AND PROCEDURAL HISTORY
CONCERNING THE DEFENDANTS’ IMPROVIDENT MOTION FOR
SANCTIONS
The facts set forth herein have been taken from the facts set forth in the Plaintiffs’
Summary Judgment Opposition Brief which facts were certified as true by the Plaintiff, Mark
Jones (“Jones”). ' In 2020, Nassau sought to obtain at least $5 million dollars or more to
' See Luger and Jones Opposition Certifications which also provide facts and procedural history that is important in
this Motion.
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refinance two of its South Jersey Marinas. In early 2020, Fortune Funding Concierge, LLC..,
(“Fortune Funding’ or “FF”) and its representative, Jones, were acting in their capacities as
Georgia commercial loan brokers. This means that FF/Jones specialized in locating commercial
lenders who were interested in financing various commercial “projects” that were presented to
them by FF/Jones. In April 2020, Defendant, Mercatanti signed a written Fee Agreement with
both Taub and Fortune Funding who were designated as exclusive “Co-Correspondents” for
Nassau/Mercatanti who were empowered by Mercatanti to seek financing for the two Marinas.
In accordance with the Agreement, both Taub and Fortune Funding were entitled to a
commission of 1.5% each (or 3% in total) based on the gross loan amount obtained. A loan in
the amount of $10,500,000 was eventually obtained and closed in September of 2020. Both
Taub and Fortune Funding were contractually entitled to a commission of 1.5% each of the
gross amount of the loan and the commission due to Taub and FF/Jones was approximately
$164,000.00 to each of them. But, Nassau/Mercatanti unilaterally and significantly reduced the
amount of the commissions they paid to Taub ($7,500 instead of about $164k), FF/Jones
($41,400 instead of about $164k), and Grace/LaCava who presumably was also paid a
significantly reduced commission as well. By significantly under-paying Taub, FF/Jones, and
Grace/LaCava, the Nassau Defendants materially breached their written Agreement to pay
about $164k each to Taub and to FF/Jones. (See also, Luger & Jones Opposition Certifications)
But all is not barred by the Statute as set forth by the Appellate Division in Sammarone
v. Bovino, 395 N.J. Super. 132 (App. Div. 2007), where the court held that an unlicensed New
Jersey real estate broker was barred from suing for addition commissions due to him by the
Statute. However, because the court felt that Sammarone was cheated by his sophisticated but
dishonest employer, the court also ruled that the broker could still sue his former client for
commissions earned. The latter part of this ruling is what FF/Jones has referred to as the
“Sammarone exception.”
A. Before The State Court Complaint Was Filed, FF/Jones and Its Lawyer, Carefully
Considered Whether To File the Suit
Before FF/Jones and Luger decided to file this State Court Complaint, they were aware
of the real estate statute in issue, N.J.S.A. 45:15-3. The potential impact of the Statute was
discussed by FF/Jones and its counsel. The pros and cons of filing the State Court Complaint
were also discussed. And, the legitimate and viable claims set forth in the State Court were also
discussed. Both FF/Jones and Luger knew that in every litigated matter, there are litigation risks
involved as well. Nevertheless, both Luger and FF/Jones determined that they could file this
Complaint in State Court to attempt to recover the almost $122,500.00 owed to them by
Nassau/Mercatanti. The purpose of the State Court Complaint was to provide FF/Jones with
another available opportunity to seek to obtain the substantial amount of money owed to them
by the Nassau Defendants. And another principal reason for filing the State Court Complaint
was because both Luger and FF/Jones had and continued to have a reasonable good faith
belief in the merits of its position in the State Court Complaint. As a result, there can be no
finding that this lawsuit was frivolous or should have been withdrawn after the Nassau
Defendants sent two “safe harbor’ letters to Plaintiffs. (Id. Luger & Jones Opp. Certs.)
B. The Mercatanti/Fortune Funding Agreement And The September 2020
Nassau/Mercatanti Loan Closing
In or about April 2020, Mercatanti, as President of Nassau, signed an Agreement, (the
“Agreement’), with Fortune Funding and Bruce A. Taub, P.A., (“Taub”), designating FF and
Taub as “co-correspondents” or co-exclusive agents for Nassau/Mercatanti in its efforts to
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obtain the money required by Nassau to refinance its two South Jersey Marinas. In the
Agreement, Nassau/Mercatanti promised to pay both FF and Taub a certain commission
amount based on a percentage of the gross amount of the loan obtained to refinance the
Marinas. Both Taub and Fortune Funding provided valuable services to Nassau/Mercatanti in
their ongoing efforts to obtain loan financing for them. A loan amount of about $10,500,000.00,
(the “Loan”), was obtained for Nassau which resulted in commissions due to Taub of
approximately $164k and to Fortune Funding of another $164k --- pursuant to the terms of the
Agreement which is attached to the Luger Certification as Exhibit A.
The loan closing took place in September of 2020, at which time the refinance was
completed. In breach of the Agreement, FF/Jones paid a significantly lower commission of
about $41,500.00 to Fortune Funding and a token commission payment of $7,500.00 was
offered to but rejected by Taub. Again, there was no explanation from Nassau/Mercatanti and its
attorneys about why the commissions were significantly and unilaterally reduced in violation of
the Agreement and there was no explanation about how the reduced commission amounts were
calculated. FF/Jones received the $41,500 as a partial broker’s commission and understood
that it was still owed another $122,500 from Nassau/Mercatanti. During discovery, FF/Jones
intended to answer these questions and to find out why and on what legal basis they were
denied the full amount of their earned commissions. However, the Court’s premature summary
judgment motion dismissing the Plaintiff's Complaint put an obvious end to the required
discovery sought by FF/Jones and, interestingly, the discovery end date is still open until July 2,
2023 under the latest Case Management Order.
As for Taub, it took a much more aggressive action by filing a very comprehensive
Complaint in the District Court of New Jersey, seeking, inter alia, the balance of the broker's
commission due to it as well as damages against FF/Jones and several other parties based on
a variety of legal claims. FF/Jones filed an Answer denying any and all liability to Taub or to any
other party involved in the federal court action (“federal action”). Discovery commenced but was
never completed because one by one each of the federal Defendants settled with Taub. At
some point in time in the federal action, Nassau/Mercatanti filed a Motion for Summary
Judgment to dismiss Taub's federal Complaint on the ground that the Statute in issue, N.JS.A.
45:15-3 (“Statute”) prohibits unlicensed real estate brokers and salespersons from
obtaining any real estate commission in New Jersey and therefore Taub's federal Complaint
should be dismissed. (Id. Luger & Jones Opp. Certs.).
Before the federal Motion to Dismiss Taub's Complaint could be heard, both
Nassau/Mercatanti and Taub reached a confidential settlement whereby Nassau/Mercatanti was
dismissed from the federal suit. Importantly, the federal court never adjudicated or decided the
Motion to Dismiss filed by Nassau/Mercatanti. The federal court concluded that the Motion to
Dismiss was rendered moot by the Nassau/Taub settlement. A few months after
Nassau/Mercatanti settled with Taub, FF/Jones reached a settlement and the federal lawsuit
was dismissed.
In or about early 2023, FF/Jones filed a several count Complaint naming
Nassau and its principal, Mercatanti as Defendants (the “State Action”). The State Complaint
sought to obtain the remaining amount of broker’s commissions that were earned by Fortune
Funding but never paid to them. A true copy of the State Complaint is attached to the Luger
Certification as Exhibit B. In lieu of filing an Answer, Nassau/Mercatanti filed a State Court
Motion to Dismiss the Complaint on the grounds that the State law claims should have been
adjudicated in the federal court action. In its response to the Motion to Dismiss, FF/Jones cited
overwhelming legal authority that supported its legal position that the unadjudicated claims
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could absolutely be litigated in the State Court Action. The trial court agreed with FF/Jones and
denied the Motion to Dismiss. Interestingly, at no time before, during, or after the Motion to
Dismiss was filed and decided did the trial court ever even suggest that the State Court Action
was in any way frivolous.
From an objectively reasonable standpoint, before filing the Motion to Dismiss, both
Nassau/Mercatanti and its lawyer knew that the applicable law was clearly in favor of FF/Jones
and against the Nassau Defendants. Nevertheless, the Nassau Defendants acted in an
objectively unreasonable manner by filing a motion that was frivolous and designed to delay and
harass FF/Jones from proceeding with the State Court action. Unfortunately, Rule 1:4-8 does
not apply to motions, however, the requirement that a litigant act in good faith, and by definition
in an objectively reasonable manner, does not prevent FF/Jones from raising the fact that the
Defendants’ State Court Motion to Dismiss was frivolous. Even though Nassau/Mercatanti knew
that the facts and law were against them, they nonetheless filed a frivolous Motion to Dismiss
for an improper purpose to harass FF/Jones or to cause unnecessary delay or needless
increase in the cost of the litigation. (Id. Luger & Jones Opp. Certs.).
Most interestingly, however, is that Nassau/Mercatanti chose not to argue, in the
alternative, that this State Action is or was barred by the Statute. At the time the Motion to
Dismiss was pending, Nassau/Mercatanti admittedly knew about the Statute but they never
raised the potentially case dispositive argument in their first Motion to Dismiss. This raises the
issue of the objective reasonableness of defense counsel's failure to use what the Defendants
apparently claim to be the “silver bullet” which should have ended all litigation involving
FF/Jones. Had the Defendants used the silver bullet in the first instance in their first Motion to
Dismiss, at least in hindsight, or in an objectively reasonable manner, they could have saved
both parties the additional time and expense incurred by the continuing litigation. ? It certainly
appears that Nassau/Mercatanti made a major strategic blunder or that there was some
trepidation in the Nassau/Mercatanti camp about whether the Statute was in fact dispositive as
later claimed by Nassau/Mercatanti.
At the time that Nassau/Mercatanti filed their Summary Judgment Motion in federal court
to bar Taub’s Complaint based on the Statute, the decision in Sammarone v. Bovino, 395 NJ.
Super. 132 (App. Div. 2007), (“Sammarone”), was raised as one of the defenses to the Motion
by Taub. As previously noted, the Nassau/Mercatanti Summary Judgment Motion was never
decided by the federal court because the Nassau Defendants settlement rendered the Motion
moot and it was dismissed by the federal court. In this State Action, FF/Jones also raised the
Sammarone decision in opposition to the State Court Summary Judgment Motion filed by
Nassau/Mercatanti. Because the federal court never decided the import and impact of
Sammarone in the federal action, or its exception to the Statute, there was no ruling that
prevented FF/Jones from continuing to rely upon Sammarone in this State Court matter.
After due consideration before filing the State Court action, FF/Jones and their attorney
concluded that because of the similar facts contained in Sammarone and the narrow exception
Sammarone, that the decision was an important part of the efforts of FF/Jones to
carved out in gammarone,
continue to pursue their claims for additional broker's commissions in the State Court Action in
good faith. In Sammarone, the court decided a lawsuit concerning whether an unlicensed New
Jersey real estate broker or salesperson was entitled to maintain an action for commissions due
> See, Toll Bros., Inc. v. Tp. of West Windsor, 190 N.J. 61 (2007) (if a court decides that compliance with the
procedural requirements for award of attorney fees and costs against a party under the frivolous litigation statute, the
sanction should be reduced concomitantly or relief may be denied in its entirety).
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against his former land development who cheated the young unlicensed broker from receiving
the full commission amount due to him by his less-than-honest clients. The Court's ruling was
two-fold. First, the Court held that the unlicensed broker was barred from seeking to obtain
additional commissions by N.J.S.A. 45:15-3 of the New Jersey Real Estate Brokers and
Salesmen Act, N.J.S.A. 45:15-1 to 45:15-29.5 (the “Statute”).
Second, and importantly, the Sammarone Court created a narrow exception to the
Statute or created an equitable pathway by permitting the broker to continue to pursue his claim
for additional commissions owed to him even though he was barred by the Statute. This has
been referred to by FF/Jones as the “Sammarone exception”. The Court examined several
factors including the fact that the developer had been in prior litigation involving the Statute and
the Court decided that the unlicensed broker could be provided the opportunity prove his
entitlement to the additional commissions even though he was barred from doing so under the
Statute. The Court was disturbed that the developer-client had previously been involved in
litigation in which the Court ruled that the unlicensed broker in the prior lawsuit was barred by
the Statute from obtaining a broker’s commission in New Jersey. In that prior matter, the Court
was also concerned that the developer-client had reversed its strategy by using the Statute as a
sword in the prior lawsuit to bar an unlicensed broker from receiving a commission and as a
shield in the Sammarone suit. The developer's inconsistent use of the Statute bothered the
court which ruled that the Sammarone exception still permitted the unlicensed broker to attempt
to prove his case on equitable grounds. Based on the apparent bad faith conduct of the
developer-client, Sammarone carved out a narrow exception to the Statute on equitable
grounds.
In filing the State Court Complaint in this suit, the Plaintiffs, FF/Jones, and their lawyer,
Luger, reasonably believed in good faith that the facts and law in this matter were analogous or
similar to those facts in Sammarone. Also, it did not appear that the Statute was recently
examined by another court under the same or similar facts thus providing FF/Jones with an
opportunity to perhaps have another court review the Statute and attempt to create a broader
interpretation or another exception to the Statute’s bar as in Sammarone. Additionally, FF/Jones
sought to complete additional discovery from Nassau/Mercatanti in order to bring the facts in
this matter even closer to those in Sammarone. Had Sammarone and its exception not existed
when the State Court Complaint was filed, FF/Jones would have had no choice but to
withdraw their Complaint. FF/Jones has also filed a Motion for Reconsideration of this Court’s
February 28, 2023 decision granting summary judgment which is returnable on April 14, 2023. If
this reconsideration motion is not successful, FF/Jones may file an appeal from the trial court’s
dismissal of the State Court Complaint. The legal position of FF/Jones was and continues to be
that the Sammarone exception is applicable to this lawsuit and like the unlicensed broker in
Sammarone, FF/Jones should be able to continue to move forward to prove their entitlement to
additional commissions. Another important legal point is that even today, the Plaintiffs and their
lawyer continue to have a reasonable good-faith belief in the merits of its legal position. (Id.
Luger & Jones Opp. Certs.).
On February 28, 2023, the trial court granted summary judgment to Nassau/Mercatanti
dismissing the Complaint with prejudice. The court carefully analyzed the Sammarone decision
but did not find that the facts involved in this suit were analogous to the facts in Sammarone or
to the Sammarone exception. Once again, it bears emphasis that in deciding the State summary
judgment motion, the trial court never made any comment that the legal position of FF/Jones
was in any way frivolous. Likewise, in its argument to the Court, Nassau/Mercatanti never
argued that the defenses raised by FF/Jones were in any way frivolous or that the continued
prosecution of this State Court Complaint was in any way frivolous.
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Plaintiffs’ counsel and FF/Jones very strongly disagree with the Plaintiffs’ request for
sanctions. The State Court Complaint was filed and prosecuted in good faith and it was not filed
for any improper purpose such as to harass, cause unnecessary delay, or needless increase in
litigation costs. The Complaint and its several claims were supported by applicable law and it
was objectively reasonable for FF/Jones to pursue their claims in State Court. Lastly, the
overwhelming number of case decisions have denied motions for sanctions because such
motions chill creative advocacy and can bar deserving litigants from the courthouse door. Like
the overwhelming body of case decisions, this improvidently filed Motion for Sanctions should
be promptly denied too because it has no merit whatsoever.
LEGAL ARGUMENT
POINT ONE
The Defendants Are Not Entitled To Any Sanctions Under Rule 1:4-8 Because
The Complaint Was Filed And Prosecuted In Good Faith And In Accordance With
Applicable Law; The Complaint Had Reasonable Bases In Law; Plaintiffs’ Counsel Never
Acted In Bad Faith; And The Defendants’ Rule 1:4-8 Notice Lacked Merit
As the Court is aware, the overwhelming majority of motions for sanctions under Rule
1:4-8 and under the Frivolous Litigation Rule have been denied every year. Sanctions for
frivolous litigation should only be awarded in exceptional circumstances. Wolosky v. Fredon,
472 N.J. Super. 315 (App. Div. 2022). Both the Rule and the Statute must be narrowly
interpreted so as not to discourage creative advocacy or access to the courts. Port-O-San Corp.
v. Teamsters Local Union No. 863, 363 N.J. Super. 431(App. Div. 2003). Sanctions for
frivolous pleadings are not to be issued lightly; they are reserved for particular instances where
a party’s pleading is found to be completely untenable, or where no rational argument can be
advanced in its support. McDaniel v. Man Wai Lee, 419 N.J. Super. 482 (App. Div. 2011).
A. The Applicable Law
Rule 1:4-8 is strictly construed to ensure that persons are not dissuaded from
accessing the courts. (emphasis added). Thus, sanctions may be imposed only when the court
is convinced that the plaintiff lacked an objectively reasonable, good faith belief in the merits of
the action. Wyche v. Unsatisfied Claim & Judgment Fund of NJ, 383 N.J. Super. 554, 561 (App.
Div. 2006). On the other hand, a sanction will not be awarded where the plaintiff legitimately
sought to extend the law to a previously undecided issue because “honest and creative
advocacy should not be discouraged.” Id. quoting, lannone v. McHale, 245 N.J. Super. 17, 28
(App. Div. 1990). Attorney fee sanctions are not warranted where plaintiff has a reasonable
good faith belief in the merit of its position. S & R Associates v. Lynn Realty Corp., 338 N.J.
Super. 350 (App. Div. 2001). And, a pleading will not be considered frivolous under R. 1:4-8
unless the pleading as a whole is frivolous. United Hearts, 407 N.J. Super. at 394. Even when
some allegations are later proved unfounded, a complaint is not rendered frivolous if it also
contains non-frivolous claims. Estate of Ehrlich, 427 N.J. Super. at 77 (citing, United Hearts, 407
N.J. Super. at 390). Even where some of the allegations made at the outset of litigation later
prove to be unfounded does not render frivolous a complaint that also contains some non-
frivolous claims. lannone v. McHale, 245 N.J. Super. 17, 32 (App. Div. 1990); See, K.D. v.
Bozarth, 313 N.J. Super. 561, 574-75 (App. Div. 1998) (declining to award attorney's fees where
there is no showing the attorney acted in bad faith).
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The nature of litigation conduct warranting sanctions under R. 1:4-8 has been strictly
construed. Bove v. AkPharma, Inc., 460 N.J. Super. 123, 148 (App. Div. 2019). Rule 1:4-8
sanctions will not be imposed against an attorney who mistakenly files a claim in good faith. Id.
See, Ellison v. Evergreen Cemetery, 266 N.J. Super. 74 (App. Div. 1993) (lawsuit filed by
lessees of cemetery land to challenge the validity of a lease agreement was not essentially
frivolous; and even if lessees were overly optimistic in seeking a remedy no award of attorney's
fees was warranted); See also, First Atlantic Federal Credit Union v. Perez, 391 N.J. Super.
419, 425 ((App. Div. 2007) (holding that an objectively reasonable belief in the merits of the
claim precludes an award of attorney's fees); K.D. v. Bozarth, 313 N.J. Super. 561, 574-575
(App. Div. 1998) (declining to award attorney's fees where there is no showing the attorney
acted in bad faith); Wyche v. Unsatisfied Claim & Judgment Fund, 383 N.J. Super. 554, 560
(App. Div. 2006) (finding fees properly denied where plaintiff was legitimately seeking to extend
the law on a theretofore undecided issue).
An attorney's fee sanction pursuant to the frivolous litigation rule is not warranted where
the plaintiff has a reasonable good faith belief in the merit of its action. DeBrango v. Summit
Bancorp., 328 N.J. Super. 219 (App. Div. 2000). (emphasis added); Masone v. Levine, 382 N.J.
Super. 181 (App. Div. 2005) (same). A court should only award sanctions for frivolous litigation
in exceptional circumstances. Wolosky v. Fredon Twp., 31 N.J. Tax 373, 379 (2019). When
some allegations are later proved unfounded, a complaint is not rendered frivolous, for purposes
of the rule allowing an attorney to be sanctioned for asserting frivolous claims, if it also contains
non-frivolous claims. In re: Estate of Ehrlich, supra.
An award of attorney’s fees as a sanction under the rule requires findings of facts and
conclusions of law as to each element of the award. PRESSLER & VERNIERO, Current N.J
COURT RULES, Comment 2 to R. 1:4-8 (GANN); citing, Alpert Goldberg v. Quinn, 410 N.J
Super. 510, 547 (App. Div. 2009), certif. den. 203 N.J. 93 (2010). In the comments to R. 1:4-8, it
has been stated that “[tlo assert a paper is frivolous does not make it so. Advocates often use
Federal Rule 11 to intimidate their adversaries. In filing a motion for sanctions, the attorney
signing the paper also certifies that it is not being used for an improper purpose, such as
intimidation. Threatening to use the rule but not filing the motion is also an intimidation practice.”
1 N.J. Prac., Court Rules Annotated R. 1:4-8, comment 2 (2023 ed.) (emphasis added).
Moreover, sanctions for frivolous pleadings are not to be issued lightly; they are reserved for
particular instances where a party’s pleading is found to be completely untenable, or where no
rational argument can be advanced in its support. McDaniel v. Man Wai Lee, 419 N.J. Super.
482 (App. Div. 2011).
B. Rule 1:4-8
Rule 1:4-8 states in relevant part that:
(a) Effect of Signing, Filing or Advocating a Paper. The signature of an attorney or pro
se party constitutes a certificate that the signatory has read the pleading, written motion
or other paper. By signing, filing or advocating a pleading, written motion, or other
paper, an attorney or pro se party certifies that to the best of his or her knowledge,
information, and belief, formed after an inquiry reasonable under the circumstances:
(1) the paper is not being presented for any improper purpose, such as to harass or
to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, contentions and other legal contentions therein are warranted by
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existing law or by a non-frivolous argument for the extension, modification or
reversal of existing law or the establishment of new law;
(3) the factual allegations have evidentiary support or, as to specifically identified
allegations, they are either likely to have evidentiary support or they will be
withdrawn or corrected if reasonable opportunity for further investigation or discovery
indicates insufficient evidentiary support; and
(4) the denials of factual allegations are warranted on the evidence or, as to
specifically identified denials, they are reasonably based on a lack of information or
belief or they will be withdrawn or corrected if a reasonable opportunity for further
investigation or discovery indicates insufficient evidentiary support.
In subsection (e) of the Rule, (“Frivolous Litigation Rule” or “Rule”), the following is
stated:
(e) Exceptions. This rule does not apply to disclosures and discovery requests,
responses, objections, and discovery motions that are subject to the provisions of
R. 4:23.
The rationale for requiring proof of bad faith is that clients generally rely on their
attorneys to “evaluate the basis in law or equity of a claim or defenses” and “a client who relies
in good faith on the advice of counsel cannot be found to have known that his or her claim was
baseless.” McKeown-Brand, 132 N.J. at 557-58.
Applying these controlling principles to this matter, both FF/Jones and their lawyer state
that the State Court Complaint was not filed and prosecuted for any improper purpose. (Luger
Opp. Cert., pars. 36-48; 49-67; 68-84); (Jones Opp. Cert., pars. 29-36). FF/Jones and their
lawyer also state that the claims, contentions, and other legal contentions made in the
Complaint are warranted by existing law or by a non-frivolous argument for the extension of the
Sammarone exception. (Luger Opp. Cert., pars. 68-84);(Jones Opp. Cert., pars. 37-46).
C. Response To Allegations Made By Nassau/Mercatanti Against Plaintiff's Counsel,
Walter G. Luger, Esq.
In an effort to provide a more substantive response to the unfounded and untrue
allegations made against Luger, this brief response has been prepared. Nassau/Mercatanti
appear to make two claims that Luger violated Rule 1:4-8 by (1) signing the state court
Complaint in issue while knowing about the Statute and (b) by not withdrawing the Complaint
after receiving Defendants’ two “frivolous claim” letters.
First, it is true that Luger signed the State Court Complaint after having been made
aware that the Statute was potentially applicable to some or all of the claims set forth in the
Complaint. When the State Court Complaint was filed, it is important to remember that in the
prior federal action Nassau/Mercatanti filed a similar Motion to Dismiss the Plaintiff, Taub’s
federal Court Complaint based on the Statute. The issue was briefed but Nassau/Mercatanti
settled with Taub before the Motion could be heard. Once Nassau/Mercatanti had settled in the
federal court action, the federal court dismissed the Motion as being moot. As a result, the
district court never reached the merits of the federal Motion and never had any opportunity to
review the Sammarone decision or to determine the nature, extent, and applicability of the
Sammarone exception. The federal Motion put all of the federal defendants on notice that the
Statute might be a bar to a subsequent suit to obtain additional earned commissions. But, the
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Statute was not a bar to FF/Jones still moving forward with its State Law Complaint based on
the analogous facts and holding that caused the court to create the Sammarone exception.
Likewise, the federal Motion did nothing else to cause FF/Jones to discontinue their efforts to
right a $120k wrong caused by Nassau/Mercatanti at the loan refinance closing in
September/October 2020 by unilaterally and significantly reducing the brokers’ commissions
earned by FF/Jones and other federal Defendants.
At the time the State Court Complaint was filed, there had been judicial determination
made by the federal court --- which left FF/Jones with the opportunity and ability in good faith to
bring suit for the balance of the broker's fees contractually earned by them from
Nassau/Mercatanti. The federal court’s failure to rule left the Statute still open to interpretation
under the facts of this matter. Perhaps even more importantly, when the State Court Complaint
was filed, the judicially created Sammarone exception remained in issue and the Plaintiffs
strenuously and consistently believed in good faith that the “Sammarone exception” applied to
the analogous facts involved in this matter. The trial court disagreed with FF/Jones about the
applicability of the Sammarone exception. But even so, the mere fact that a party prevails in a
summary judgment is not proof a frivolous claim. Further, the State Court Complaint contained
several claims against Nassau/Mercatanti, including breach of contract, breach of the implied
covenant, conversion, and unjust enrichment which were all legally viable claims that any
federal court ruling could have left open for discovery purposes and/or for adjudication.
After the State Court Complaint was filed, the Defendants, Nassau/Mercatanti, filed a
Motion to Dismiss the State Court Complaint arguing that it was somehow barred because the
claim was raised but not adjudicated in federal court. It is most interesting to note that
Nassau/Mercatanti and its counsel were charged with knowledge of the Statute in 2020 when
the $10.5 million in loan refinancing took place. Conspicuously omitted from the State Court
Motion to Dismiss was any claim or alternate claim by Nassau/Mercatanti that the Statute
barred the prosecution of the state court action. Certainly if this is the Defendants’ so-called
“silver bullet,” then the failure to allege that the Statute barred the State Court Complaint
bespeaks either defense counsel error or oversight and defense counsel’s uncertainty that the
Statute would carry the day. For these reasons, the State Court Complaint was brought in good
faith and with the main purpose to invoke Sammarone exception. At all times relevant, Luger
acted in a reasonably objective manner and he had a reasonable and good faith belief in the
merits of the State Court cause of action and there can be no sanctions imposed on Luger.
Furthermore, during and after the time Nassau/Mercatanti filed its Motion to Dismiss the
State Court Complaint, there was no argument raised by defense counsel that the State Court
Complaint and action was frivolous. Likewise, the trial court did not raise any issue or comment
that the State Court Complaint was in any way frivolous. Both of these actions are telling and
must preclude the issuance of any Rule 1:4-8 sanctions against Luger
The second and final argument made by Nassau/Mercatanti is apparently that FF/Jones
should have withdrawn the State Court Complaint based on defense counsel’s notices to
withdraw the Complaint. The Plaintiffs received, reviewed, and discussed the Rule 1:4-8 letters
served by defense counsel. The conclusion reached was that there was no good reason
presented by Nassau/Mercatanti for Plaintiffs to be obligated to withdraw their Complaint
because the Plaintiffs and their lawyer still had a reasonable good faith belief in the merit of its
action. In fact, even after the Rule 1:4-8 notices were served on Plaintiffs counsel, the facts had
not changed, discovery was open until July of 2023, and FF/Jones sought additional discovery
into inter alia, the reasons it was not paid its full commission in 2020 and why
Nassau/Mercatanti unilaterally and significantly slashed the amount of the commissions In sum,
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there was no good or objectively reasonable reason for the Plaintiffs and their counsel to
withdraw their claims. Sanctions for frivolous litigation are not to be issued lightly; they are
reserved for particular instances where a party's pleading is found to be completely untenable or
where no rational argument can be advanced in its support. McDaniel v. Man Wai Lee, 419 N.J.
Super. 482 (App. Div. 2011).
Once again, sanctions for frivolous litigation should be awarded only in exceptional
cases. Wolosky v. Fredon Tp., 472 N.J. Super. 315, 328 (App. Div. 2022), citing, Fagas v. Scott,
251 N.J. Super. 169, 181 (Law Div. 1981); See, Masone v. Levine, 382 N.J. Super. 181,192
(App. Div. 2005); DeBrango v. Summit Bancorp, 328 N.J. Super. 219, 227 (App. Div. 2000); In
re Estate of Ehrlich, 427 N.J. Super. 64, 77 (App. Div. 2012); J.O. v. Tp. of Bedminster, 433 N.J.
Super. 199, 221(App. Div. 2013), certif. denied, 217 N.J. 295 (2014), First Atlantic Credit Union
v. Perez, 391 N.J. Super. 419, 433 (App. Div. 2007); S & R Associates v. Lynn Realty Corp.,
338 N.J. Super. 350, 364 (App. Div. 2001; J.W. v. L.R., 325 N.J. Super. 543, 548 (App. Div.
2001).
One of the greatest principles available to a lawyer alleged to have filed or maintained
a frivolous complaint is that sanctions are not warranted where, as here, the plaintiff has a
reasonable good faith belief in the merits of its action. The cases supporting this view are many
and the Plaintiffs and their lawyer state those at all times relevant, they had a reasonable good
faith belief in the merits of their State Court action. As a result, the Defendants are not entitled to
any sanctions and their Motion must be denied.
POINT TWO
The Plaintiffs Relied On Their Attorney At All Times Relevant and They Are
Blameworthy And No Sanctions Should Be Imposed Against Them
The New Jersey Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, provides for sanctions
against a party who engages in frivolous litigation. The Statute applies only to parties and it
does not apply to counsel as does Rule 1:4-8. The Statute provides that:
Any party who prevails in a civil action, either as plaintiff or defendant, against any
another party may be awarded all reasonable litigation costs and reasonable attorney
fees, if the judge finds at any time during the proceedings or upon judgment that a
complaint, counterclaim, cross-claim, or defense of the nonprevailing person was
frivolous.
In order to find that a complaint, counterclaim, cross-claim or defense of the
nonprevailing was frivolous, the judge shall find on the basis of the pleadings,
discovery, or other evidence presented that either:
(1) The complaint, counterclaim, cross-claim, or defense was commenced, used or
continued in bad faith, solely for the purpose of harassment, delay or malicious injury;
or
(2) The nonprevailing party knew, or should have known, that the complaint,
counterclaim cross-claim or defense 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.
Under the Statute, a party can be sanctioned by an award of reasonable attorney's fees
in only two instances. First, if a pleading has been filed used or continued in bad faith, solely for
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the purpose of harassment, delay or malicious injury. At no time did the trial court rule or even
state in any way that the Complaint in issue was filed in violation of paragraph (1) of this Statute.
Likewise, it does not appear that the Defendants, Nassau/Mercatanti have made any argument
that the Complaint was filed and prosecuted by Plaintiffs, FF/Jones, “solely for the purpose of
harassment, delay or malicious injury’. Therefore, the Court need not spend any time on
paragraph (1) because it is inapplicable to the Defendants’ Motion for Sanctions. And, even if it
were part of the Defendants’ argument, there is nothing in the record to support any finding that
the Complaint was filed solely for the purpose of harassment, delay or malicious injury.
Under paragraph (2) of the Statute, a pleading is frivolous if the nonprevailing knew, or
should have known, that the pleading was (i) without any reasonable basis in law or equity and
(ii) could not be supported by a good faith argument for an extension, modification or reversal of
existing law. Thus, in order to prevail against a party under paragraph 2, the moving party must
prove both elements in order to meet the requirements of this paragraph. Here, there is no
evidence in the record to conclude that the FF/Jones knew that the Complaint was filed by their
lawyer without any basis in law or equity. This is partially corroborated by the Defendants’
12(b)(6) Motion to Dismiss the Complaint as being barred from prosecution because of the
earlier federal court lawsuit. This Court denied the Motion to Dismiss by concluding that there
was no legal basis to bar or to prevent the claims set forth in the Complaint from moving
forward. Thus, the Court's apparent primatur is more than enough for FF/Jones to conclude that
its State law claims set forth in its State law Complaint, had a reasonable basis in law or equity.
There was no mention by the Court that the Complaint was frivolous or any warning by the
Court as in other cases cautioning the Plaintiff that attorney's fees and costs could be imposed if
the allegations became without any basis in law or equity. Had the Court thought the pleading
was anything other than filed in good faith with a reasonable basis in law or equity, the Court
surely would have put the Plaintiffs and their lawyer on such notice.
Just like Rule 1:4-8, the Frivolous Litigation Statute (“Statute”), is interpreted strictly
against the moving party. DeBrango, 328 N.J. Super. at 226. Sanctions should be awarded only
in exceptional cases. Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1991). (emphasis
added). The burden of proving that the non-prevailing party acted in “bad faith” is on the party
who seeks fees and costs pursuant to the Statute. Ferolito, 408 N.J. Super. at 408. However,
when a prevailing party’s allegation is based on an assertion that the non-prevailing party’s
claim lacked “a reasonable basis in law or equity” and the non-prevailing party is represented by
an attorney, “an award cannot be sustained if the [non-prevailing party] did not act in bad faith in
asserting or pursuing the claim.” McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J.
546, 559 (1993).
When the [non-prevailing party's] conduct bespeaks an honest attempt to press a
perceived though ill-founded and perhaps misguided claim, he or she should not be found to
have acted in bad faith. Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div. 1999). “Thus,
a grant of a motion for summary judgment in favor of a [prevailing party], without more, does not
support a finding that the [non-prevailing party] filed or pursued a claim in bad faith. Ferolito, 408
N.J. Super. at 408. And, where the pleading party had an objectively reasonable and good faith
belief in the merits of the claim, [as here] attorney's fees will not be awarded. First Atlantic, 391
N.J. Super. at 433.
In this State Court matter, both the Plaintiffs and their counsel were generally familiar
with the Defendants’ federal court Motion to Dismiss the Complaint and with
Nassau/Mercatanti’s claim that the Statute barred Taub’s right to use the New Jersey courts as
unlicensed brokers or salespersons. At the same time, FF/Jones and their lawyer were also
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familiar with the Sammarone decision and with the Sammarone exception. The impact of the
Statute was discussed by FF/Jones and its counsel but it was concluded in a good faith belief in
the merits of its position, that the State Court litigation should still be prosecuted because (a) the
facts in Sammarone were similar and (b) the facts involved were reasonably similar to permit
FF/Jones to assert that its claims fell within the Sammarone exception. Also, the Sammarone
facts involved an unlicensed broker who was cheated out of a commission and the broker was
still permitted to prosecute his claim for a commission even though the court concluded that the
Statute barred Sammarone’s claims. The Sammarone decision and its outcome were the same
or very similar to the issues involved in this matter. As a result, FF/Jones and their attorney
concluded that advancing the prosecution of this lawsuit was in no way frivolous. See, Port-O-
San Corp. v. Teamsters Local No. 863, 363 N.J. Super. 431 (App. Div. 2003) (both frivolous
claim statute and rule must be interpreted restrictively so as not to discourage creative
advocacy or access to the courts).
Further, the failings of the plaintiff's lawyer may not be imputed to the plaintiff wnen a
frivolous claim motion has been filed; however, reliance on the advice of counsel will not
insulate a party who acts in bad faith. Wolosky, 31 N.J. Tax at 391. When a prevailing
defendant's allegation is based on the absence of “a reasonable basis in law or equity” for the
plaintiff's claim and the plaintiff is represented by an attorney, an award cannot be sustained if
the plaintiff did not act in bad faith in asserting or pursuing the claim. Ferolito v. Park Hill Ass'n,
408 N.J. Super. 401, 408 (App, Div. 2009), quoting, McKeown-Brand, supra. A party,
represented by counsel, who loses on summary judgment is not automatically subject to
sanctions. Id. The attorney’s failings ... may not be imputed to the client, however, reliance on
the advice of counsel will not insulate a party who acts in bad faith. McKeown-Brand, 132 N.J. at
563. The burden is on the prevailing party to prove that the non-prevailing party acted in bad
faith. Id. at 559.
Applying these principles, FF/Jones vigorously denies that they are in an way
responsible for filing and maintaining the subject lawsuit. The lawsuit was filed after discussion
by the Plaintiffs and their counsel. The fact that a court could perhaps conclude that the
Sammarone exception applied was the driving force behind the prosecution of the State Court
lawsuit. The Plaintiffs were also aware that a court could conclude, after discovery was
undertaken but not concluded, that the Plaintiffs’ claims were barred by the Statute. In sum,
both the Plaintiffs and their counsel were aware of the litigation risks involved with regard to the
Statute being applied as a defense. But even so, there is no proof at all that FF/Jones filed or
used the State Court Complaint “in bad faith, solely for the purpose of harassment, delay or
malicious injury.” N.J.S.A. 2A:15-59.1(b) (1). There is nothing in the record that bespeaks bad
faith, and there is absolutely nothing in the record to show that FF/Jones knew or should have
known that the Complaint was without any basis in law or equity, and could not be supported by
a good faith argument for the extension or modification of existing law. N.J.S.A. 2A:15-59.1
(b)(2). As both a matter of fact and a matter of law, Nassau/Mercatanti have not and cannot
show that the prosecution of the State Court Complaint violated the Frivolous Claims Statute.
In addition, to the extent that there has been any failing by the Plaintiffs’ lawyer, if any,
the failing is not imputed to the client. As long as the client has a reasonable good faith belief in
the merits of its position, as here, no sanctions can be sustained against the party. For this
additional reason, FF/Jones have not violated the Frivolous Claim Statute and the Defendants’
motion for sanctions must be denied.
POINT THREE
IF THE COURT CONCLUDES THAT ANY FRIVOLOUS CLAIMS WERE FILED OR
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MAINTAINED BY FF/JONES OR THEIR LAWYER, IT IS REQUESTRED THAT THE COURT
PERMIT FF/JONES ADDITIONAL TIME TO CONTEST THE AMOUNT OF THE ATTORNEY'S
FEES AND COSTS SOUGHT TO BE PAID TO THE DEFENDANTS; OR, IN THE
ALTERNATIVE THAT A HEARING B
Preview
MON-L-001522-22 04/06/2023 10:31:41PM Pglof4 Trans ID: LCV20231205028 MELLINGER KARTZMAN LLC ATTORNEYS AT LAW 101 GIBRALTAR DRIVE SUITE 2F MORRIS PLAINS, N.J. 07950 (973) 267-0220 LOUIS P. MELLINGER FAX (973) 267-3979 STEVEN P. KARTZMAN JOSEPH R. ZAPATA, JR. JUDAH B. LOEWENSTEIN SEYMOUR RUDENSTEIN (1933-1983) www.msklawyers.com JACOB MELLINGER (1928-2001) E-MAIL: wluger7@gmail.com OF COUNSEL WALTER G. LUGER PETER ROSEN ROBERT D. ROSEN April 6, 2023 Via E-Courts Hon. Owen C. McCarthy, J.S.C. Monmouth County Courthouse Re: Fortune Funding Concierge, LLC. and Mark Jones v. 74 Monument Park, 2" Floor Louis Mercatanti and Nassau Marina Holdings, LLC. Freehold, New Jersey 07728 Docket Mo. MON-L- 1522-22 Motion Return Date: April 14, 2023 Dear Judge McCarthy: As the Court is aware, this firm represents the Plaintiffs, Fortune Funding Concierge, Inc., (‘Fortune Funding” or “FF”), and its member, Mark Jones, (‘Jones’), (jointly referred to as “Plaintiffs” or “FF/Jones”). Please accept this letter brief in opposition to the Defendants’ improvident Motion for Sanctions pursuant to R. 1:4-8 (b) (the “Frivolous Litigation Rule” or “Rule”) and pursuant to N.J.S.A. 2A:15-59.1 (the “Frivolous Litigation Statute” or “Statute”). At all times relevant, FF/Jones and their attorney, Walter G. Luger, Esq., ("Luger"), caused the Complaint in issue to be filed and prosecuted in good faith and in accordance with applicable law. There is nothing frivolous involved in this litigation and, at all times relevant, both Plaintiffs and their counsel had a reasonable good faith belief in the merits of its position, such that the Defendants’ Motion for Sanctions was improvidently brought and must be denied like almost all frivolous claims motions that are constantly denied by our courts. Nassau/Mercatanti still owed FF/Jones about another $122,500.00 and the State Court lawsuit was filed in order to attempt to recover this amount earned by FF/Jones but never paid to them by Nassau/Mercatanti. STATEMENT OF RELEVANT FACTS AND PROCEDURAL HISTORY CONCERNING THE DEFENDANTS’ IMPROVIDENT MOTION FOR SANCTIONS The facts set forth herein have been taken from the facts set forth in the Plaintiffs’ Summary Judgment Opposition Brief which facts were certified as true by the Plaintiff, Mark Jones (“Jones”). ' In 2020, Nassau sought to obtain at least $5 million dollars or more to ' See Luger and Jones Opposition Certifications which also provide facts and procedural history that is important in this Motion. MON-L-001522-22 04/06/2023 10:31:41 PM Pg2of4 Trans ID: LCV20231205028 refinance two of its South Jersey Marinas. In early 2020, Fortune Funding Concierge, LLC.., (“Fortune Funding’ or “FF”) and its representative, Jones, were acting in their capacities as Georgia commercial loan brokers. This means that FF/Jones specialized in locating commercial lenders who were interested in financing various commercial “projects” that were presented to them by FF/Jones. In April 2020, Defendant, Mercatanti signed a written Fee Agreement with both Taub and Fortune Funding who were designated as exclusive “Co-Correspondents” for Nassau/Mercatanti who were empowered by Mercatanti to seek financing for the two Marinas. In accordance with the Agreement, both Taub and Fortune Funding were entitled to a commission of 1.5% each (or 3% in total) based on the gross loan amount obtained. A loan in the amount of $10,500,000 was eventually obtained and closed in September of 2020. Both Taub and Fortune Funding were contractually entitled to a commission of 1.5% each of the gross amount of the loan and the commission due to Taub and FF/Jones was approximately $164,000.00 to each of them. But, Nassau/Mercatanti unilaterally and significantly reduced the amount of the commissions they paid to Taub ($7,500 instead of about $164k), FF/Jones ($41,400 instead of about $164k), and Grace/LaCava who presumably was also paid a significantly reduced commission as well. By significantly under-paying Taub, FF/Jones, and Grace/LaCava, the Nassau Defendants materially breached their written Agreement to pay about $164k each to Taub and to FF/Jones. (See also, Luger & Jones Opposition Certifications) But all is not barred by the Statute as set forth by the Appellate Division in Sammarone v. Bovino, 395 N.J. Super. 132 (App. Div. 2007), where the court held that an unlicensed New Jersey real estate broker was barred from suing for addition commissions due to him by the Statute. However, because the court felt that Sammarone was cheated by his sophisticated but dishonest employer, the court also ruled that the broker could still sue his former client for commissions earned. The latter part of this ruling is what FF/Jones has referred to as the “Sammarone exception.” A. Before The State Court Complaint Was Filed, FF/Jones and Its Lawyer, Carefully Considered Whether To File the Suit Before FF/Jones and Luger decided to file this State Court Complaint, they were aware of the real estate statute in issue, N.J.S.A. 45:15-3. The potential impact of the Statute was discussed by FF/Jones and its counsel. The pros and cons of filing the State Court Complaint were also discussed. And, the legitimate and viable claims set forth in the State Court were also discussed. Both FF/Jones and Luger knew that in every litigated matter, there are litigation risks involved as well. Nevertheless, both Luger and FF/Jones determined that they could file this Complaint in State Court to attempt to recover the almost $122,500.00 owed to them by Nassau/Mercatanti. The purpose of the State Court Complaint was to provide FF/Jones with another available opportunity to seek to obtain the substantial amount of money owed to them by the Nassau Defendants. And another principal reason for filing the State Court Complaint was because both Luger and FF/Jones had and continued to have a reasonable good faith belief in the merits of its position in the State Court Complaint. As a result, there can be no finding that this lawsuit was frivolous or should have been withdrawn after the Nassau Defendants sent two “safe harbor’ letters to Plaintiffs. (Id. Luger & Jones Opp. Certs.) B. The Mercatanti/Fortune Funding Agreement And The September 2020 Nassau/Mercatanti Loan Closing In or about April 2020, Mercatanti, as President of Nassau, signed an Agreement, (the “Agreement’), with Fortune Funding and Bruce A. Taub, P.A., (“Taub”), designating FF and Taub as “co-correspondents” or co-exclusive agents for Nassau/Mercatanti in its efforts to MON-L-001522-22 04/06/2023 10:31:41 PM Pg3of4 Trans ID: LCV20231205028 obtain the money required by Nassau to refinance its two South Jersey Marinas. In the Agreement, Nassau/Mercatanti promised to pay both FF and Taub a certain commission amount based on a percentage of the gross amount of the loan obtained to refinance the Marinas. Both Taub and Fortune Funding provided valuable services to Nassau/Mercatanti in their ongoing efforts to obtain loan financing for them. A loan amount of about $10,500,000.00, (the “Loan”), was obtained for Nassau which resulted in commissions due to Taub of approximately $164k and to Fortune Funding of another $164k --- pursuant to the terms of the Agreement which is attached to the Luger Certification as Exhibit A. The loan closing took place in September of 2020, at which time the refinance was completed. In breach of the Agreement, FF/Jones paid a significantly lower commission of about $41,500.00 to Fortune Funding and a token commission payment of $7,500.00 was offered to but rejected by Taub. Again, there was no explanation from Nassau/Mercatanti and its attorneys about why the commissions were significantly and unilaterally reduced in violation of the Agreement and there was no explanation about how the reduced commission amounts were calculated. FF/Jones received the $41,500 as a partial broker’s commission and understood that it was still owed another $122,500 from Nassau/Mercatanti. During discovery, FF/Jones intended to answer these questions and to find out why and on what legal basis they were denied the full amount of their earned commissions. However, the Court’s premature summary judgment motion dismissing the Plaintiff's Complaint put an obvious end to the required discovery sought by FF/Jones and, interestingly, the discovery end date is still open until July 2, 2023 under the latest Case Management Order. As for Taub, it took a much more aggressive action by filing a very comprehensive Complaint in the District Court of New Jersey, seeking, inter alia, the balance of the broker's commission due to it as well as damages against FF/Jones and several other parties based on a variety of legal claims. FF/Jones filed an Answer denying any and all liability to Taub or to any other party involved in the federal court action (“federal action”). Discovery commenced but was never completed because one by one each of the federal Defendants settled with Taub. At some point in time in the federal action, Nassau/Mercatanti filed a Motion for Summary Judgment to dismiss Taub's federal Complaint on the ground that the Statute in issue, N.JS.A. 45:15-3 (“Statute”) prohibits unlicensed real estate brokers and salespersons from obtaining any real estate commission in New Jersey and therefore Taub's federal Complaint should be dismissed. (Id. Luger & Jones Opp. Certs.). Before the federal Motion to Dismiss Taub's Complaint could be heard, both Nassau/Mercatanti and Taub reached a confidential settlement whereby Nassau/Mercatanti was dismissed from the federal suit. Importantly, the federal court never adjudicated or decided the Motion to Dismiss filed by Nassau/Mercatanti. The federal court concluded that the Motion to Dismiss was rendered moot by the Nassau/Taub settlement. A few months after Nassau/Mercatanti settled with Taub, FF/Jones reached a settlement and the federal lawsuit was dismissed. In or about early 2023, FF/Jones filed a several count Complaint naming Nassau and its principal, Mercatanti as Defendants (the “State Action”). The State Complaint sought to obtain the remaining amount of broker’s commissions that were earned by Fortune Funding but never paid to them. A true copy of the State Complaint is attached to the Luger Certification as Exhibit B. In lieu of filing an Answer, Nassau/Mercatanti filed a State Court Motion to Dismiss the Complaint on the grounds that the State law claims should have been adjudicated in the federal court action. In its response to the Motion to Dismiss, FF/Jones cited overwhelming legal authority that supported its legal position that the unadjudicated claims MON-L-001522-22 04/06/2023 10:31:41 PM Pg4of4 Trans ID: LCV20231205028 could absolutely be litigated in the State Court Action. The trial court agreed with FF/Jones and denied the Motion to Dismiss. Interestingly, at no time before, during, or after the Motion to Dismiss was filed and decided did the trial court ever even suggest that the State Court Action was in any way frivolous. From an objectively reasonable standpoint, before filing the Motion to Dismiss, both Nassau/Mercatanti and its lawyer knew that the applicable law was clearly in favor of FF/Jones and against the Nassau Defendants. Nevertheless, the Nassau Defendants acted in an objectively unreasonable manner by filing a motion that was frivolous and designed to delay and harass FF/Jones from proceeding with the State Court action. Unfortunately, Rule 1:4-8 does not apply to motions, however, the requirement that a litigant act in good faith, and by definition in an objectively reasonable manner, does not prevent FF/Jones from raising the fact that the Defendants’ State Court Motion to Dismiss was frivolous. Even though Nassau/Mercatanti knew that the facts and law were against them, they nonetheless filed a frivolous Motion to Dismiss for an improper purpose to harass FF/Jones or to cause unnecessary delay or needless increase in the cost of the litigation. (Id. Luger & Jones Opp. Certs.). Most interestingly, however, is that Nassau/Mercatanti chose not to argue, in the alternative, that this State Action is or was barred by the Statute. At the time the Motion to Dismiss was pending, Nassau/Mercatanti admittedly knew about the Statute but they never raised the potentially case dispositive argument in their first Motion to Dismiss. This raises the issue of the objective reasonableness of defense counsel's failure to use what the Defendants apparently claim to be the “silver bullet” which should have ended all litigation involving FF/Jones. Had the Defendants used the silver bullet in the first instance in their first Motion to Dismiss, at least in hindsight, or in an objectively reasonable manner, they could have saved both parties the additional time and expense incurred by the continuing litigation. ? It certainly appears that Nassau/Mercatanti made a major strategic blunder or that there was some trepidation in the Nassau/Mercatanti camp about whether the Statute was in fact dispositive as later claimed by Nassau/Mercatanti. At the time that Nassau/Mercatanti filed their Summary Judgment Motion in federal court to bar Taub’s Complaint based on the Statute, the decision in Sammarone v. Bovino, 395 NJ. Super. 132 (App. Div. 2007), (“Sammarone”), was raised as one of the defenses to the Motion by Taub. As previously noted, the Nassau/Mercatanti Summary Judgment Motion was never decided by the federal court because the Nassau Defendants settlement rendered the Motion moot and it was dismissed by the federal court. In this State Action, FF/Jones also raised the Sammarone decision in opposition to the State Court Summary Judgment Motion filed by Nassau/Mercatanti. Because the federal court never decided the import and impact of Sammarone in the federal action, or its exception to the Statute, there was no ruling that prevented FF/Jones from continuing to rely upon Sammarone in this State Court matter. After due consideration before filing the State Court action, FF/Jones and their attorney concluded that because of the similar facts contained in Sammarone and the narrow exception Sammarone, that the decision was an important part of the efforts of FF/Jones to carved out in gammarone, continue to pursue their claims for additional broker's commissions in the State Court Action in good faith. In Sammarone, the court decided a lawsuit concerning whether an unlicensed New Jersey real estate broker or salesperson was entitled to maintain an action for commissions due > See, Toll Bros., Inc. v. Tp. of West Windsor, 190 N.J. 61 (2007) (if a court decides that compliance with the procedural requirements for award of attorney fees and costs against a party under the frivolous litigation statute, the sanction should be reduced concomitantly or relief may be denied in its entirety). MON-L-001522-22 04/06/2023 10:31:41PM Pglof4 Trans ID: LCV20231205028 against his former land development who cheated the young unlicensed broker from receiving the full commission amount due to him by his less-than-honest clients. The Court's ruling was two-fold. First, the Court held that the unlicensed broker was barred from seeking to obtain additional commissions by N.J.S.A. 45:15-3 of the New Jersey Real Estate Brokers and Salesmen Act, N.J.S.A. 45:15-1 to 45:15-29.5 (the “Statute”). Second, and importantly, the Sammarone Court created a narrow exception to the Statute or created an equitable pathway by permitting the broker to continue to pursue his claim for additional commissions owed to him even though he was barred by the Statute. This has been referred to by FF/Jones as the “Sammarone exception”. The Court examined several factors including the fact that the developer had been in prior litigation involving the Statute and the Court decided that the unlicensed broker could be provided the opportunity prove his entitlement to the additional commissions even though he was barred from doing so under the Statute. The Court was disturbed that the developer-client had previously been involved in litigation in which the Court ruled that the unlicensed broker in the prior lawsuit was barred by the Statute from obtaining a broker’s commission in New Jersey. In that prior matter, the Court was also concerned that the developer-client had reversed its strategy by using the Statute as a sword in the prior lawsuit to bar an unlicensed broker from receiving a commission and as a shield in the Sammarone suit. The developer's inconsistent use of the Statute bothered the court which ruled that the Sammarone exception still permitted the unlicensed broker to attempt to prove his case on equitable grounds. Based on the apparent bad faith conduct of the developer-client, Sammarone carved out a narrow exception to the Statute on equitable grounds. In filing the State Court Complaint in this suit, the Plaintiffs, FF/Jones, and their lawyer, Luger, reasonably believed in good faith that the facts and law in this matter were analogous or similar to those facts in Sammarone. Also, it did not appear that the Statute was recently examined by another court under the same or similar facts thus providing FF/Jones with an opportunity to perhaps have another court review the Statute and attempt to create a broader interpretation or another exception to the Statute’s bar as in Sammarone. Additionally, FF/Jones sought to complete additional discovery from Nassau/Mercatanti in order to bring the facts in this matter even closer to those in Sammarone. Had Sammarone and its exception not existed when the State Court Complaint was filed, FF/Jones would have had no choice but to withdraw their Complaint. FF/Jones has also filed a Motion for Reconsideration of this Court’s February 28, 2023 decision granting summary judgment which is returnable on April 14, 2023. If this reconsideration motion is not successful, FF/Jones may file an appeal from the trial court’s dismissal of the State Court Complaint. The legal position of FF/Jones was and continues to be that the Sammarone exception is applicable to this lawsuit and like the unlicensed broker in Sammarone, FF/Jones should be able to continue to move forward to prove their entitlement to additional commissions. Another important legal point is that even today, the Plaintiffs and their lawyer continue to have a reasonable good-faith belief in the merits of its legal position. (Id. Luger & Jones Opp. Certs.). On February 28, 2023, the trial court granted summary judgment to Nassau/Mercatanti dismissing the Complaint with prejudice. The court carefully analyzed the Sammarone decision but did not find that the facts involved in this suit were analogous to the facts in Sammarone or to the Sammarone exception. Once again, it bears emphasis that in deciding the State summary judgment motion, the trial court never made any comment that the legal position of FF/Jones was in any way frivolous. Likewise, in its argument to the Court, Nassau/Mercatanti never argued that the defenses raised by FF/Jones were in any way frivolous or that the continued prosecution of this State Court Complaint was in any way frivolous. MON-L-001522-22 04/06/2023 10:31:41 PM Pg2of4 Trans ID: LCV20231205028 Plaintiffs’ counsel and FF/Jones very strongly disagree with the Plaintiffs’ request for sanctions. The State Court Complaint was filed and prosecuted in good faith and it was not filed for any improper purpose such as to harass, cause unnecessary delay, or needless increase in litigation costs. The Complaint and its several claims were supported by applicable law and it was objectively reasonable for FF/Jones to pursue their claims in State Court. Lastly, the overwhelming number of case decisions have denied motions for sanctions because such motions chill creative advocacy and can bar deserving litigants from the courthouse door. Like the overwhelming body of case decisions, this improvidently filed Motion for Sanctions should be promptly denied too because it has no merit whatsoever. LEGAL ARGUMENT POINT ONE The Defendants Are Not Entitled To Any Sanctions Under Rule 1:4-8 Because The Complaint Was Filed And Prosecuted In Good Faith And In Accordance With Applicable Law; The Complaint Had Reasonable Bases In Law; Plaintiffs’ Counsel Never Acted In Bad Faith; And The Defendants’ Rule 1:4-8 Notice Lacked Merit As the Court is aware, the overwhelming majority of motions for sanctions under Rule 1:4-8 and under the Frivolous Litigation Rule have been denied every year. Sanctions for frivolous litigation should only be awarded in exceptional circumstances. Wolosky v. Fredon, 472 N.J. Super. 315 (App. Div. 2022). Both the Rule and the Statute must be narrowly interpreted so as not to discourage creative advocacy or access to the courts. Port-O-San Corp. v. Teamsters Local Union No. 863, 363 N.J. Super. 431(App. Div. 2003). Sanctions for frivolous pleadings are not to be issued lightly; they are reserved for particular instances where a party’s pleading is found to be completely untenable, or where no rational argument can be advanced in its support. McDaniel v. Man Wai Lee, 419 N.J. Super. 482 (App. Div. 2011). A. The Applicable Law Rule 1:4-8 is strictly construed to ensure that persons are not dissuaded from accessing the courts. (emphasis added). Thus, sanctions may be imposed only when the court is convinced that the plaintiff lacked an objectively reasonable, good faith belief in the merits of the action. Wyche v. Unsatisfied Claim & Judgment Fund of NJ, 383 N.J. Super. 554, 561 (App. Div. 2006). On the other hand, a sanction will not be awarded where the plaintiff legitimately sought to extend the law to a previously undecided issue because “honest and creative advocacy should not be discouraged.” Id. quoting, lannone v. McHale, 245 N.J. Super. 17, 28 (App. Div. 1990). Attorney fee sanctions are not warranted where plaintiff has a reasonable good faith belief in the merit of its position. S & R Associates v. Lynn Realty Corp., 338 N.J. Super. 350 (App. Div. 2001). And, a pleading will not be considered frivolous under R. 1:4-8 unless the pleading as a whole is frivolous. United Hearts, 407 N.J. Super. at 394. Even when some allegations are later proved unfounded, a complaint is not rendered frivolous if it also contains non-frivolous claims. Estate of Ehrlich, 427 N.J. Super. at 77 (citing, United Hearts, 407 N.J. Super. at 390). Even where some of the allegations made at the outset of litigation later prove to be unfounded does not render frivolous a complaint that also contains some non- frivolous claims. lannone v. McHale, 245 N.J. Super. 17, 32 (App. Div. 1990); See, K.D. v. Bozarth, 313 N.J. Super. 561, 574-75 (App. Div. 1998) (declining to award attorney's fees where there is no showing the attorney acted in bad faith). MON-L-001522-22 04/06/2023 10:31:41 PM Pg3of4 Trans ID: LCV20231205028 The nature of litigation conduct warranting sanctions under R. 1:4-8 has been strictly construed. Bove v. AkPharma, Inc., 460 N.J. Super. 123, 148 (App. Div. 2019). Rule 1:4-8 sanctions will not be imposed against an attorney who mistakenly files a claim in good faith. Id. See, Ellison v. Evergreen Cemetery, 266 N.J. Super. 74 (App. Div. 1993) (lawsuit filed by lessees of cemetery land to challenge the validity of a lease agreement was not essentially frivolous; and even if lessees were overly optimistic in seeking a remedy no award of attorney's fees was warranted); See also, First Atlantic Federal Credit Union v. Perez, 391 N.J. Super. 419, 425 ((App. Div. 2007) (holding that an objectively reasonable belief in the merits of the claim precludes an award of attorney's fees); K.D. v. Bozarth, 313 N.J. Super. 561, 574-575 (App. Div. 1998) (declining to award attorney's fees where there is no showing the attorney acted in bad faith); Wyche v. Unsatisfied Claim & Judgment Fund, 383 N.J. Super. 554, 560 (App. Div. 2006) (finding fees properly denied where plaintiff was legitimately seeking to extend the law on a theretofore undecided issue). An attorney's fee sanction pursuant to the frivolous litigation rule is not warranted where the plaintiff has a reasonable good faith belief in the merit of its action. DeBrango v. Summit Bancorp., 328 N.J. Super. 219 (App. Div. 2000). (emphasis added); Masone v. Levine, 382 N.J. Super. 181 (App. Div. 2005) (same). A court should only award sanctions for frivolous litigation in exceptional circumstances. Wolosky v. Fredon Twp., 31 N.J. Tax 373, 379 (2019). When some allegations are later proved unfounded, a complaint is not rendered frivolous, for purposes of the rule allowing an attorney to be sanctioned for asserting frivolous claims, if it also contains non-frivolous claims. In re: Estate of Ehrlich, supra. An award of attorney’s fees as a sanction under the rule requires findings of facts and conclusions of law as to each element of the award. PRESSLER & VERNIERO, Current N.J COURT RULES, Comment 2 to R. 1:4-8 (GANN); citing, Alpert Goldberg v. Quinn, 410 N.J Super. 510, 547 (App. Div. 2009), certif. den. 203 N.J. 93 (2010). In the comments to R. 1:4-8, it has been stated that “[tlo assert a paper is frivolous does not make it so. Advocates often use Federal Rule 11 to intimidate their adversaries. In filing a motion for sanctions, the attorney signing the paper also certifies that it is not being used for an improper purpose, such as intimidation. Threatening to use the rule but not filing the motion is also an intimidation practice.” 1 N.J. Prac., Court Rules Annotated R. 1:4-8, comment 2 (2023 ed.) (emphasis added). Moreover, sanctions for frivolous pleadings are not to be issued lightly; they are reserved for particular instances where a party’s pleading is found to be completely untenable, or where no rational argument can be advanced in its support. McDaniel v. Man Wai Lee, 419 N.J. Super. 482 (App. Div. 2011). B. Rule 1:4-8 Rule 1:4-8 states in relevant part that: (a) Effect of Signing, Filing or Advocating a Paper. The signature of an attorney or pro se party constitutes a certificate that the signatory has read the pleading, written motion or other paper. By signing, filing or advocating a pleading, written motion, or other paper, an attorney or pro se party certifies that to the best of his or her knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) the paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, contentions and other legal contentions therein are warranted by MON-L-001522-22 04/06/2023 10:31:41 PM Pg4of4 Trans ID: LCV20231205028 existing law or by a non-frivolous argument for the extension, modification or reversal of existing law or the establishment of new law; (3) the factual allegations have evidentiary support or, as to specifically identified allegations, they are either likely to have evidentiary support or they will be withdrawn or corrected if reasonable opportunity for further investigation or discovery indicates insufficient evidentiary support; and (4) the denials of factual allegations are warranted on the evidence or, as to specifically identified denials, they are reasonably based on a lack of information or belief or they will be withdrawn or corrected if a reasonable opportunity for further investigation or discovery indicates insufficient evidentiary support. In subsection (e) of the Rule, (“Frivolous Litigation Rule” or “Rule”), the following is stated: (e) Exceptions. This rule does not apply to disclosures and discovery requests, responses, objections, and discovery motions that are subject to the provisions of R. 4:23. The rationale for requiring proof of bad faith is that clients generally rely on their attorneys to “evaluate the basis in law or equity of a claim or defenses” and “a client who relies in good faith on the advice of counsel cannot be found to have known that his or her claim was baseless.” McKeown-Brand, 132 N.J. at 557-58. Applying these controlling principles to this matter, both FF/Jones and their lawyer state that the State Court Complaint was not filed and prosecuted for any improper purpose. (Luger Opp. Cert., pars. 36-48; 49-67; 68-84); (Jones Opp. Cert., pars. 29-36). FF/Jones and their lawyer also state that the claims, contentions, and other legal contentions made in the Complaint are warranted by existing law or by a non-frivolous argument for the extension of the Sammarone exception. (Luger Opp. Cert., pars. 68-84);(Jones Opp. Cert., pars. 37-46). C. Response To Allegations Made By Nassau/Mercatanti Against Plaintiff's Counsel, Walter G. Luger, Esq. In an effort to provide a more substantive response to the unfounded and untrue allegations made against Luger, this brief response has been prepared. Nassau/Mercatanti appear to make two claims that Luger violated Rule 1:4-8 by (1) signing the state court Complaint in issue while knowing about the Statute and (b) by not withdrawing the Complaint after receiving Defendants’ two “frivolous claim” letters. First, it is true that Luger signed the State Court Complaint after having been made aware that the Statute was potentially applicable to some or all of the claims set forth in the Complaint. When the State Court Complaint was filed, it is important to remember that in the prior federal action Nassau/Mercatanti filed a similar Motion to Dismiss the Plaintiff, Taub’s federal Court Complaint based on the Statute. The issue was briefed but Nassau/Mercatanti settled with Taub before the Motion could be heard. Once Nassau/Mercatanti had settled in the federal court action, the federal court dismissed the Motion as being moot. As a result, the district court never reached the merits of the federal Motion and never had any opportunity to review the Sammarone decision or to determine the nature, extent, and applicability of the Sammarone exception. The federal Motion put all of the federal defendants on notice that the Statute might be a bar to a subsequent suit to obtain additional earned commissions. But, the MON-L-001522-22 04/06/2023 10:31:41PM Pglof5 Trans ID: LCV20231205028 Statute was not a bar to FF/Jones still moving forward with its State Law Complaint based on the analogous facts and holding that caused the court to create the Sammarone exception. Likewise, the federal Motion did nothing else to cause FF/Jones to discontinue their efforts to right a $120k wrong caused by Nassau/Mercatanti at the loan refinance closing in September/October 2020 by unilaterally and significantly reducing the brokers’ commissions earned by FF/Jones and other federal Defendants. At the time the State Court Complaint was filed, there had been judicial determination made by the federal court --- which left FF/Jones with the opportunity and ability in good faith to bring suit for the balance of the broker's fees contractually earned by them from Nassau/Mercatanti. The federal court’s failure to rule left the Statute still open to interpretation under the facts of this matter. Perhaps even more importantly, when the State Court Complaint was filed, the judicially created Sammarone exception remained in issue and the Plaintiffs strenuously and consistently believed in good faith that the “Sammarone exception” applied to the analogous facts involved in this matter. The trial court disagreed with FF/Jones about the applicability of the Sammarone exception. But even so, the mere fact that a party prevails in a summary judgment is not proof a frivolous claim. Further, the State Court Complaint contained several claims against Nassau/Mercatanti, including breach of contract, breach of the implied covenant, conversion, and unjust enrichment which were all legally viable claims that any federal court ruling could have left open for discovery purposes and/or for adjudication. After the State Court Complaint was filed, the Defendants, Nassau/Mercatanti, filed a Motion to Dismiss the State Court Complaint arguing that it was somehow barred because the claim was raised but not adjudicated in federal court. It is most interesting to note that Nassau/Mercatanti and its counsel were charged with knowledge of the Statute in 2020 when the $10.5 million in loan refinancing took place. Conspicuously omitted from the State Court Motion to Dismiss was any claim or alternate claim by Nassau/Mercatanti that the Statute barred the prosecution of the state court action. Certainly if this is the Defendants’ so-called “silver bullet,” then the failure to allege that the Statute barred the State Court Complaint bespeaks either defense counsel error or oversight and defense counsel’s uncertainty that the Statute would carry the day. For these reasons, the State Court Complaint was brought in good faith and with the main purpose to invoke Sammarone exception. At all times relevant, Luger acted in a reasonably objective manner and he had a reasonable and good faith belief in the merits of the State Court cause of action and there can be no sanctions imposed on Luger. Furthermore, during and after the time Nassau/Mercatanti filed its Motion to Dismiss the State Court Complaint, there was no argument raised by defense counsel that the State Court Complaint and action was frivolous. Likewise, the trial court did not raise any issue or comment that the State Court Complaint was in any way frivolous. Both of these actions are telling and must preclude the issuance of any Rule 1:4-8 sanctions against Luger The second and final argument made by Nassau/Mercatanti is apparently that FF/Jones should have withdrawn the State Court Complaint based on defense counsel’s notices to withdraw the Complaint. The Plaintiffs received, reviewed, and discussed the Rule 1:4-8 letters served by defense counsel. The conclusion reached was that there was no good reason presented by Nassau/Mercatanti for Plaintiffs to be obligated to withdraw their Complaint because the Plaintiffs and their lawyer still had a reasonable good faith belief in the merit of its action. In fact, even after the Rule 1:4-8 notices were served on Plaintiffs counsel, the facts had not changed, discovery was open until July of 2023, and FF/Jones sought additional discovery into inter alia, the reasons it was not paid its full commission in 2020 and why Nassau/Mercatanti unilaterally and significantly slashed the amount of the commissions In sum, MON-L-001522-22 04/06/2023 10:31:41 PM Pg2of5 Trans ID: LCV20231205028 there was no good or objectively reasonable reason for the Plaintiffs and their counsel to withdraw their claims. Sanctions for frivolous litigation are not to be issued lightly; they are reserved for particular instances where a party's pleading is found to be completely untenable or where no rational argument can be advanced in its support. McDaniel v. Man Wai Lee, 419 N.J. Super. 482 (App. Div. 2011). Once again, sanctions for frivolous litigation should be awarded only in exceptional cases. Wolosky v. Fredon Tp., 472 N.J. Super. 315, 328 (App. Div. 2022), citing, Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1981); See, Masone v. Levine, 382 N.J. Super. 181,192 (App. Div. 2005); DeBrango v. Summit Bancorp, 328 N.J. Super. 219, 227 (App. Div. 2000); In re Estate of Ehrlich, 427 N.J. Super. 64, 77 (App. Div. 2012); J.O. v. Tp. of Bedminster, 433 N.J. Super. 199, 221(App. Div. 2013), certif. denied, 217 N.J. 295 (2014), First Atlantic Credit Union v. Perez, 391 N.J. Super. 419, 433 (App. Div. 2007); S & R Associates v. Lynn Realty Corp., 338 N.J. Super. 350, 364 (App. Div. 2001; J.W. v. L.R., 325 N.J. Super. 543, 548 (App. Div. 2001). One of the greatest principles available to a lawyer alleged to have filed or maintained a frivolous complaint is that sanctions are not warranted where, as here, the plaintiff has a reasonable good faith belief in the merits of its action. The cases supporting this view are many and the Plaintiffs and their lawyer state those at all times relevant, they had a reasonable good faith belief in the merits of their State Court action. As a result, the Defendants are not entitled to any sanctions and their Motion must be denied. POINT TWO The Plaintiffs Relied On Their Attorney At All Times Relevant and They Are Blameworthy And No Sanctions Should Be Imposed Against Them The New Jersey Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1, provides for sanctions against a party who engages in frivolous litigation. The Statute applies only to parties and it does not apply to counsel as does Rule 1:4-8. The Statute provides that: Any party who prevails in a civil action, either as plaintiff or defendant, against any another party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim, or defense of the nonprevailing person was frivolous. In order to find that a complaint, counterclaim, cross-claim or defense of the nonprevailing was frivolous, the judge shall find on the basis of the pleadings, discovery, or other evidence presented that either: (1) The complaint, counterclaim, cross-claim, or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or (2) The nonprevailing party knew, or should have known, that the complaint, counterclaim cross-claim or defense 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. Under the Statute, a party can be sanctioned by an award of reasonable attorney's fees in only two instances. First, if a pleading has been filed used or continued in bad faith, solely for 10 MON-L-001522-22 04/06/2023 10:31:41 PM Pg3of5 Trans ID: LCV20231205028 the purpose of harassment, delay or malicious injury. At no time did the trial court rule or even state in any way that the Complaint in issue was filed in violation of paragraph (1) of this Statute. Likewise, it does not appear that the Defendants, Nassau/Mercatanti have made any argument that the Complaint was filed and prosecuted by Plaintiffs, FF/Jones, “solely for the purpose of harassment, delay or malicious injury’. Therefore, the Court need not spend any time on paragraph (1) because it is inapplicable to the Defendants’ Motion for Sanctions. And, even if it were part of the Defendants’ argument, there is nothing in the record to support any finding that the Complaint was filed solely for the purpose of harassment, delay or malicious injury. Under paragraph (2) of the Statute, a pleading is frivolous if the nonprevailing knew, or should have known, that the pleading was (i) without any reasonable basis in law or equity and (ii) could not be supported by a good faith argument for an extension, modification or reversal of existing law. Thus, in order to prevail against a party under paragraph 2, the moving party must prove both elements in order to meet the requirements of this paragraph. Here, there is no evidence in the record to conclude that the FF/Jones knew that the Complaint was filed by their lawyer without any basis in law or equity. This is partially corroborated by the Defendants’ 12(b)(6) Motion to Dismiss the Complaint as being barred from prosecution because of the earlier federal court lawsuit. This Court denied the Motion to Dismiss by concluding that there was no legal basis to bar or to prevent the claims set forth in the Complaint from moving forward. Thus, the Court's apparent primatur is more than enough for FF/Jones to conclude that its State law claims set forth in its State law Complaint, had a reasonable basis in law or equity. There was no mention by the Court that the Complaint was frivolous or any warning by the Court as in other cases cautioning the Plaintiff that attorney's fees and costs could be imposed if the allegations became without any basis in law or equity. Had the Court thought the pleading was anything other than filed in good faith with a reasonable basis in law or equity, the Court surely would have put the Plaintiffs and their lawyer on such notice. Just like Rule 1:4-8, the Frivolous Litigation Statute (“Statute”), is interpreted strictly against the moving party. DeBrango, 328 N.J. Super. at 226. Sanctions should be awarded only in exceptional cases. Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1991). (emphasis added). The burden of proving that the non-prevailing party acted in “bad faith” is on the party who seeks fees and costs pursuant to the Statute. Ferolito, 408 N.J. Super. at 408. However, when a prevailing party’s allegation is based on an assertion that the non-prevailing party’s claim lacked “a reasonable basis in law or equity” and the non-prevailing party is represented by an attorney, “an award cannot be sustained if the [non-prevailing party] did not act in bad faith in asserting or pursuing the claim.” McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 559 (1993). When the [non-prevailing party's] conduct bespeaks an honest attempt to press a perceived though ill-founded and perhaps misguided claim, he or she should not be found to have acted in bad faith. Belfer v. Merling, 322 N.J. Super. 124, 144-45 (App. Div. 1999). “Thus, a grant of a motion for summary judgment in favor of a [prevailing party], without more, does not support a finding that the [non-prevailing party] filed or pursued a claim in bad faith. Ferolito, 408 N.J. Super. at 408. And, where the pleading party had an objectively reasonable and good faith belief in the merits of the claim, [as here] attorney's fees will not be awarded. First Atlantic, 391 N.J. Super. at 433. In this State Court matter, both the Plaintiffs and their counsel were generally familiar with the Defendants’ federal court Motion to Dismiss the Complaint and with Nassau/Mercatanti’s claim that the Statute barred Taub’s right to use the New Jersey courts as unlicensed brokers or salespersons. At the same time, FF/Jones and their lawyer were also 11 MON-L-001522-22 04/06/2023 10:31:41 PM Pg4of5 Trans ID: LCV20231205028 familiar with the Sammarone decision and with the Sammarone exception. The impact of the Statute was discussed by FF/Jones and its counsel but it was concluded in a good faith belief in the merits of its position, that the State Court litigation should still be prosecuted because (a) the facts in Sammarone were similar and (b) the facts involved were reasonably similar to permit FF/Jones to assert that its claims fell within the Sammarone exception. Also, the Sammarone facts involved an unlicensed broker who was cheated out of a commission and the broker was still permitted to prosecute his claim for a commission even though the court concluded that the Statute barred Sammarone’s claims. The Sammarone decision and its outcome were the same or very similar to the issues involved in this matter. As a result, FF/Jones and their attorney concluded that advancing the prosecution of this lawsuit was in no way frivolous. See, Port-O- San Corp. v. Teamsters Local No. 863, 363 N.J. Super. 431 (App. Div. 2003) (both frivolous claim statute and rule must be interpreted restrictively so as not to discourage creative advocacy or access to the courts). Further, the failings of the plaintiff's lawyer may not be imputed to the plaintiff wnen a frivolous claim motion has been filed; however, reliance on the advice of counsel will not insulate a party who acts in bad faith. Wolosky, 31 N.J. Tax at 391. When a prevailing defendant's allegation is based on the absence of “a reasonable basis in law or equity” for the plaintiff's claim and the plaintiff is represented by an attorney, an award cannot be sustained if the plaintiff did not act in bad faith in asserting or pursuing the claim. Ferolito v. Park Hill Ass'n, 408 N.J. Super. 401, 408 (App, Div. 2009), quoting, McKeown-Brand, supra. A party, represented by counsel, who loses on summary judgment is not automatically subject to sanctions. Id. The attorney’s failings ... may not be imputed to the client, however, reliance on the advice of counsel will not insulate a party who acts in bad faith. McKeown-Brand, 132 N.J. at 563. The burden is on the prevailing party to prove that the non-prevailing party acted in bad faith. Id. at 559. Applying these principles, FF/Jones vigorously denies that they are in an way responsible for filing and maintaining the subject lawsuit. The lawsuit was filed after discussion by the Plaintiffs and their counsel. The fact that a court could perhaps conclude that the Sammarone exception applied was the driving force behind the prosecution of the State Court lawsuit. The Plaintiffs were also aware that a court could conclude, after discovery was undertaken but not concluded, that the Plaintiffs’ claims were barred by the Statute. In sum, both the Plaintiffs and their counsel were aware of the litigation risks involved with regard to the Statute being applied as a defense. But even so, there is no proof at all that FF/Jones filed or used the State Court Complaint “in bad faith, solely for the purpose of harassment, delay or malicious injury.” N.J.S.A. 2A:15-59.1(b) (1). There is nothing in the record that bespeaks bad faith, and there is absolutely nothing in the record to show that FF/Jones knew or should have known that the Complaint was without any basis in law or equity, and could not be supported by a good faith argument for the extension or modification of existing law. N.J.S.A. 2A:15-59.1 (b)(2). As both a matter of fact and a matter of law, Nassau/Mercatanti have not and cannot show that the prosecution of the State Court Complaint violated the Frivolous Claims Statute. In addition, to the extent that there has been any failing by the Plaintiffs’ lawyer, if any, the failing is not imputed to the client. As long as the client has a reasonable good faith belief in the merits of its position, as here, no sanctions can be sustained against the party. For this additional reason, FF/Jones have not violated the Frivolous Claim Statute and the Defendants’ motion for sanctions must be denied. POINT THREE IF THE COURT CONCLUDES THAT ANY FRIVOLOUS CLAIMS WERE FILED OR 12 MON-L-001522-22 04/06/2023 10:31:41 PM Pg5of5 Trans ID: LCV20231205028 MAINTAINED BY FF/JONES OR THEIR LAWYER, IT IS REQUESTRED THAT THE COURT PERMIT FF/JONES ADDITIONAL TIME TO CONTEST THE AMOUNT OF THE ATTORNEY'S FEES AND COSTS SOUGHT TO BE PAID TO THE DEFENDANTS; OR, IN THE ALTERNATIVE THAT A HEARING B