SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
A-3399-98T2
LINDA M. GRAZIANO, M.D.
Plaintiff-Respondent,
v.
GERALD GRANT, M.D.,
Defendant/Third-Party
Plaintiff-Appellant,
and
SOUTH JERSEY ALLERGY
ASSOCIATES, P.A.,
Defendant-Respondent,
v.
MARLA TIFFANY, M.D.,
Third-Party Defendant-
Respondent.
Argued: September 23, 1999 - Decided December 9, 1999
Before Judges Stern, Kestin and Steinberg.
On appeal from the Superior Court of New
Jersey, Chancery Division, Camden County.
Steven G. Wolschina argued the cause for
defendant/third-party plaintiff-appellant
(Brown & Connery, attorneys; Mr. Wolschina
and Joseph A. Zechman, on the brief).
William J. DeSantis argued the cause for
plaintiff-respondent (Kenney & Kearney,
attorneys; Mr. DeSantis and Joseph H. Kenney,
on the brief).
Audrey B. Winograd argued the cause for third-
party defendant-respondent (Philip T. Ciprietti,
attorney; Mr. Ciprietti, on the brief).
South Jersey Allergy Associates, P.A. did not
participate in this appeal.
The opinion of the court was delivered by
STEINBERG, J.A.D.
Defendant/third-party plaintiff Dr. Gerald Grant appeals from
the following orders of the Chancery Division: (1) order of
December 15, 1998, granting summary judgment in favor of third
party defendant Dr. Marla Tiffany, dismissing Grant's third-party
complaint and all claims associated with it; (2) order of January
4, 1999, requiring Grant and defendant South Jersey Allergy
Associates, P.A. (South Jersey or the corporation) to pay Tiffany's
attorney's fees in the amount of $7,500 and costs in the amount of
$514.60, as well as an order of January 20, 1999, extending the
time for payment of those fees, and further directing that the
corporation shall not be responsible for payment of costs or
counsel fees; (3) order of January 21, 1999, granting summary
judgment to plaintiff, Dr. Linda M. Graziano; and (4) order of
January 25, 1999, requiring Grant to pay Graziano $25,071.81 for
attorney's fees and costs. The order of January 21, 1999, mandated
specific performance of an agreement Graziano alleges Grant entered
into calling for his retirement and Graziano's succeeding him in
the practice. That order also required Grant to turn over his
stock certificates in the corporation and any other corporate
documents within ten days; permitted Graziano's attorney to return
to her $9,000 held in escrow pursuant to a prior order of the
court; required Grant to pay Graziano $3,276 for automobile
expenses; prohibited Grant from treating his former patients of the
corporation anywhere for a period of three years from December 11,
1998; prohibited Grant from practicing medicine for three years
from December 11, 1998, within a twenty mile radius of the
corporation's office; and dismissed, with prejudice, Grant's cross
claim against the corporation and his counter-claim against
Graziano. The trial judge denied Grant's request for a stay
pending appeal. We subsequently stayed the orders pending appeal.
We now affirm in part; reverse in part, and remand for further
proceedings.
The corporation is a medical practice specializing in allergy
and asthma treatment. It had been established by Grant and his
brother, Dr. Norman Grant, each of whom had twenty-five shares
prior to the retirement of Norman Grant. Tiffany had entered into
an employment contract with the corporation in 1987. Tiffany's
employment contract provided that if the relationship was mutually
satisfactory, Grant would sell her nine shares of stock at a
purchase price of $5,800 per share. The agreement further provided
that the corporation would redeem seven shares of Grant's stock,
resulting in Grant and Tiffany each owning nine shares of stock.
In September 1992, Tiffany paid Grant $52,200 for the purchase of
nine shares of the corporation's stock. Apparently, the
corporation never redeemed Grant's seven additional shares.
In 1993, Graziano became a part-time employee of the
corporation. Sometime in 1994, Grant and Tiffany agreed that
Graziano was doing a good job and would be a good addition to the
practice. Accordingly, Grant discussed with the corporation's
accountant, Isidore A. Francescone, the preparation of a document
that would enable Graziano to become a shareholder in the
corporation. According to Tiffany and Graziano , Grant intended to
retire. Grant testified at a deposition that he had serious health
problems and was concerned that he would not survive three years.
According to Grant, the parties contemplated that he would sell his
shares of stock, but he contemplated working in some capacity for
the corporation. However, that fact was not communicated to
Tiffany or Graziano. Francescone prepared a document which began
with the phrase "Preliminary proposed conditions".
According to Grant, the document was merely a proposal. On
the other hand, Tiffany and Graziano contend that the document (the
proposal) was an agreement. One of the "preliminary proposed
conditions" contemplated that Grant would stop practicing at South
Jersey on October 1, 1994, and would then be paid deferred
compensation for three years. However, the proposal also noted
that Grant's duties and services for the three-year period "needed
to be discussed." The proposal also provided that each share of
stock was valued at $8,236. Although the proposal provided that
Graziano would acquire nine shares of "corporate stock" for $74,124
and that the corporation would redeem his remaining seven shares
for $57,652, the parties appear to agree that in essence Graziano
was purchasing the nine shares from Grant. Accordingly, Grant was
to receive a total of $131,776, nine-sixteenths to be paid by
Graziano for nine of his shares, and the remaining seven-sixteenths
of that amount to be paid by the corporation for the redemption of
Grant's remaining seven shares.See footnote 1 The proposal further provided
that "[a]ltogether, [Graziano] must pay $74,124 and [Grant] must
receive $131,776". In addition, the proposal provided that "[a] 3
year period beginning October 1, 1994 is established to accomplish
above".
The proposal further provided that Grant would receive a
"deferred compensation contract for three years" paying him $3,750
per month for the first year, for a total of $45,000; $3,250 per
month for the second year, for a total of $39,000; and $2,650 per
month for the third year, for a total of $31,800. The deferred
compensation package was therefore $115,800. However, the deferred
compensation package was not in addition to the $131,776, but
appears to be a method of funding the pay-out to Grant since the
next paragraph provided that the $115,800 in deferred compensation
left [Grant] $15,976 "short of the total $131,776 agreed upon price
of his sixteen shares". Moreover, the proposal provided that a
value of $1,000 per share would be placed on the stock, presumably
for redemption purposes, and further provided that Grant would
receive $7,000 from the corporation for the redemption of his seven
shares, and $9,000 from Graziano for her purchase of his nine
shares. That $16,000, coupled with the deferred compensation of
$115,800, would totally compensate him in accordance with the
proposal.
The proposal went on to provide that in addition to the $9,000
payment Graziano was required to make for her purchase of the
shares, the balance of her obligation of $74,000 would be
accomplished through reduced salary for the three years. According
to the proposal, at the expiration of the three-year period Tiffany
and Graziano would own nine shares of the corporate stock and be
equal shareholders.
As previously indicated, the proposal further provided that
"[t]he continued duties and services expected of [Grant] for the
three year period should be discussed." In addition, it
specifically provided that "[t]he timing of the actual redemption
of the $7,000 by the corporation and the $9,000 payment by
[Graziano] to [Grant] must also be discussed." Although the basic
intendment of the parties was clearly expressed in the "proposal",
some issues were left unresolved.
Since the proposal appears to contemplate that Graziano's
salary for three years would have been reduced by a total of
$65,000, which would have been her contribution towards the
corporation's deferred compensation package to Grant, the parties
appear to have permitted Grant to receive $2,000 per month, and
Graziano's pay check was correspondingly reduced. At his
deposition, Grant testified that this was done in order for
Graziano to satisfy her obligation with "before-tax dollars".
Grant did not retire in October 1994. Apparently his health
had improved. He contended that he worked two days per week, and
Tiffany and Graziano worked three days per week. We cannot
determine from the record if there is a factual dispute regarding
that contention. In addition, the parties appear to agree that
Grant continued to be the administrator of the practice. In
addition to his salary, Grant continued to pay sums of money to
himself as bonuses.
The parties appear to agree that in early 1997, the
relationship between Tiffany and Graziano, on the one hand, and
Grant, on the other, became strained. Tiffany and Graziano took
the position that Grant should completely stop practicing with them
effective October 1, 1997. In April 1997, a meeting took place at
Francescone's office in an effort to resolve the lack of harmony.
The meeting was attended by Tiffany, Graziano, Grant, Francescone
and Graziano's husband, a practicing New Jersey attorney. The
differences were not resolved and, on September 26, 1997, Graziano
filed suit seeking specific performance of what she contended was
the agreement, together with damages, both compensatory and
punitive. Simultaneously, the judge signed an order to show cause
which prohibited Grant from: (1) entering the offices of the
corporation after September 30, 1997, and (2) contacting or
attempting to contact, directly or indirectly, patients of the
corporation; and requiring Grant to return lists of patients of the
corporation which were in his possession. Grant filed an answer,
counter-claim and cross-claim. He also filed a third-party
complaint against Tiffany. Tiffany filed an answer and cross-claim
against Grant and the corporation. Ultimately, the orders were
entered that resulted in this appeal.
An appellate court applies the same standard that governs
trial courts in determining whether summary judgment was properly
granted. Prudential Property Ins. v. Boylan,
307 N.J. Super. 162,
167 (App. Div. 1998). We must determine whether the competent
evidential materials presented to the motion judge, when viewed in
the light most favorable to the non-moving party, are sufficient to
permit a rational fact-finder to resolve the alleged disputed issue
in favor of the non-moving party. Brill v. Guardian Life Ins. Co.
of Am.,
142 N.J. 520, 540 (1995). The motion judge may not weigh
the evidence and determine the truth of the matter. Ibid. It is
the role of the judge to determine whether there is a genuine issue
for trial. Ibid. The moving party must show that there is no
genuine issue as to any material fact challenged and that he or she
is entitled to a judgment or order as a matter of law. R. 4:46
2(c).
In that context, we first consider Grant's contention that the
proposal is not sufficiently definite and certain as to have been
the basis of the order for summary judgment requiring specific
performance. To be sure, the terms of a contract must be definite
and certain so that a court may order with precision what the
parties must do. Barry M. Dechtman, Inc. v. Sidpaul Corp.,
89 N.J. 547, 552 (1982). However, the fact that when read literally, an
agreement may seem indefinite does not necessarily require a
conclusion that it may not be specifically enforced. Ibid. The
judge must also examine the situation of the parties and the
surrounding circumstances to determine the meaning of the agreement
and whether it is capable of specific performance. Ibid.
Reasonable certainty of the terms is all that is required. Ibid.
We reject Grant's contention that no enforceable contract
exists because the negotiations were preliminary in nature and the
terms contained in the proposal are inconsistent with each other
and with the parties' performance. We agree that the proposal
could have been clearer. Indeed, Francescone's label "Preliminary
proposed conditions" necessarily implies that the writing does not
constitute the final agreement of the parties, but is merely a
proposal. Moreover, the proposal identifies a number of issues
that required further discussion, including the continued duties
and services expected of Grant, as well as the timing of the
redemption. Nevertheless, we conclude that the record supports the
judge's conclusion that the parties chose to perform the essential
terms of the proposal thereby constituting it an agreement that
Grant would sell his interest in the corporation to Graziano and
retire on October 1, 1997. If an agreement is reached through an
offer and acceptance, and is sufficiently definite so that the
performance to be rendered by each party can be ascertained with
reasonable certainty, a contract arises. Weichert Co. Realtors v.
Ryan,
128 N.J. 427, 435 (1992). If the parties agree on essential
terms and further manifest an intention to be bound by those terms,
they have created an enforceable contract. Ibid. On the other
hand, if the parties do not agree to one or more essential terms,
the agreement is unenforceable. Ibid. Stated another way, there
must be an unqualified acceptance of the offer in order for there
to be a contract. Id. at 435-36.
Acceptance may come either from words, creating an express
contract, or from conduct, creating a contract implied-in-fact.
Id. at 436. Silence alone does not ordinarily manifest acceptance.
"Silence does not ordinarily manifest assent, but the relationships
between the parties or other circumstances may justify the offerors
expecting a reply and, therefore, assuming that silence indicates
asset to the proposal." Ibid. Moreover, "when an offeree accepts
the offeror's services without expressing any objection to the
offer's essential terms, the offeree has manifested assent to those
terms." Ibid.
While the agreement of these parties may not have been drafted
with precision, it clearly contemplates Grant's retirement. For
example, at the expiration of the three-year period, all corporate
stock would be owned by the corporation, Tiffany or Graziano. None
would be owed by Grant. Although the manner of payment by Graziano
to Grant set forth in the agreement was not complied with, Grant
does not deny that he was paid $72,000 by Graziano in the form of
reduced compensation for a three-year period. In addition,
Graziano alleged in the complaint that Grant indicated he wanted to
retire and offered to sell his share of the practice to her. Grant
admitted that allegation in his answer. The judge did not err in
concluding as a matter of law that Grant offered to retire and sell
his interest in the corporation to Graziano. Moreover, Graziano's
performance in paying Grant for his shares constitutes an
acceptance of the offer. Grant's acceptance of the $72,000 from
Graziano precludes him from arguing that the agreement is
unenforceable because the parties did not "follow the terms set out
in the Preliminary proposed conditions memo". It would have been
unjust and inequitable for the judge, sitting in a court of equity,
to conclude, in the face of all the circumstances, that the
acceptance of a method of payment other than specified in the
proposal precluded the formation of a contract for the sale and
purchase of Grant's shares. Graziano paid for those shares and
Grant accepted those payments.
We next consider Grant's contention that the Statute of
Frauds, N.J.S.A. 25:1-5, renders the oral agreement unenforceable
since it could not be performed in one year. We reject that
contention. Initially, N.J.S.A. 25:1-5(e), which is the section of
the Statute of Frauds Grant relied upon, was repealed in 1995,
after the agreement was prepared, but prior to the hearing on the
motion. We need not decide whether the repeal after the agreement
was reached renders the Statute inapplicable, since it is well
settled that an oral contract or agreement which might otherwise be
barred by the Statute of Frauds is enforceable where there has been
performance by one party and to do otherwise would work an inequity
on the party who has performed. Klockner v. Green,
54 N.J. 230,
236 (1969). Here, Graziano has performed by paying $72,000 to
Grant. It would be unjust and inequitable to permit Grant to
retain the funds and not require him to perform his obligations.
The Statute of Frauds cannot be invoked to work an injustice.
Ibid. Grant's conduct in accepting the benefits of the agreement
precludes him from denying the existence of an agreement merely
because it is oral. The Statute of Frauds is designed to prevent
fraud and, therefore, a court of equity may not permit it to be
used to accomplish a fraud. Ibid.; Lahue v. Pio Costa,
263 N.J.
Super. 575, 599 (App. Div.), certif. denied,
134 N.J. 477 (1993).
Moreover, the motion judge did not err in restraining Grant
from remaining in the practice. While Grant contends that he
anticipated being able to remain as an employee, there is nothing
in the record to indicate he communicated that expectation to
Tiffany and Graziano. Moreover, Grant's expectation that he would
be permitted to remain as an employee is unreasonable in light of
the fact that the agreement clearly contemplated that he would no
longer be a stockholder after October 1, 1997. At that time,
Tiffany and Graziano had the right to deny Grant continued
employment.
We next consider Grant's contention that the trial judge erred
in enjoining him from treating former patients of the practice for
a period of three years, and further enjoining him from practicing
medicine for a period of three years within twenty miles of the
practice's office. Grant contends that the judge could not place
restrictions upon his right to practice medicine because the
agreement did not expressly provide for a covenant against
competition.
We recognize that it is not the function of the court to make
a better contract for the parties, or to supply terms that have not
been agreed upon. Schenck v. HHI Associates,
295 N.J. Super. 445,
450 (App. Div.), certif. denied,
149 N.J. 35 (1996). If the terms
of a contract are clear, we must enforce the contract as written
and not make a better contract for either party. Ibid. However,
a contract must be interpreted considering the surrounding
circumstances and the relationships of the parties at the time it
was entered into, in order to understand their intent and to give
effect to the nature of the agreement as expressed by them. Id. at
450-51. In addition, a court of equity should not permit a rigid
principle of law to smother the factual realities to which it is
sought to be applied. Grieco v. Grieco,
38 N.J. Super. 593, 598
(App. Div. 1956). Equity will not permit a wrong to be suffered
without affording the appropriate remedy. Roberts v. Roberts,
106 N.J. Super. 108, 109 (Ch. Div. 1969); Orlando Properties, Inc. v.
Broderick,
94 N.J. Super. 307, 313-14 (Ch. 1967). Finally, equity
regards as done that which ought to be done. Wohlegmuth v. 560
Ocean Club,
302 N.J. Super. 306, 312 (App. Div. 1997).
Applying principles of fairness and justice, a judge sitting
in a court of equity has a broad range of discretion to fashion the
appropriate remedy in order to vindicate a wrong consistent with
principles of fairness, justice, and the law. The judge correctly
concluded that since the agreement contemplated Grant's retirement,
the parties did not formally agree to a restrictive covenant.
Moreover, the judge correctly concluded that the essence of the
shares of stock in a medical practice is the patient base. The
judge also correctly concluded that he lacked the authority to
require Grant to retire against his will. We agree with the
judge's ultimate conclusion that it would be unfair and inequitable
to permit Grant to retain the benefits of the bargain without being
subject to some reasonable limitation upon his right to retract his
agreement to retire and compete with Tiffany and Graziano. The
imposition, under these circumstances, of a reasonable covenant
against competition is consistent with the broad equitable powers
entrusted to him. We therefore conclude that the judge did not
mistakenly exercise his discretion in deciding to impose a
restrictive covenant against Grant.
Although we have concluded that the judge had the inherent
equitable power to impose a restrictive covenant upon Grant, we are
concerned with the breadth of the covenant he actually imposed. In
order to be enforceable, a restrictive covenant must be reasonable
under all the circumstances in the case. Karlin v. Weinberg,
77 N.J. 408, 417 (1978); Solari Industries, Inc. v. Malady,
55 N.J. 571, 585 (1970). The validity and enforceability of a covenant
against competition is fact-sensitive and must be determined in
light of the facts of the case. Platinum Management v. Dahms,
285 N.J. Super. 274, 294 (Law Div. 1995).
Resolution of the scope of the covenant against competition
requires a delicate, fact-sensitive balancing of the interests of
the purchasers, Tiffany and Graziano; the right of the seller,
Grant, to pursue his profession; the interests of the public in
general; and those of the patients in particular. Ordinarily, and
certainly here, these issues can only be resolved after an
evidentiary hearing rather than disposition by way of summary
judgment. Apparently, relying to some extent upon the covenant
Grant entered into with his brother when his brother retired from
the practice some years earlier, the judge enjoined Grant from
treating any patients he formerly treated with the practice for a
period of three years, and further enjoined Grant from practicing
medicine for a period of three years within twenty miles of the
practice's office. He made no findings of fact or conclusions of
law as required by R. 1:7-4 to support those determinations,
thereby hindering our ability to determine whether he properly
exercised the broad discretion given him. See Curtis v. Finneran,
83 N.J. 563, 569-70 (1980). Accordingly, we are constrained to
reverse that portion of the judgment setting forth the period of
time the restraint should cover and the territorial limitations.
We are particularly concerned with the twenty-mile limitation,
in addition to the prohibition from treating former patients for
the three-year period. A restrictive covenant ancillary to an
employment contract between physicians is enforceable to the extent
that it protects a legitimate interest of the employer, imposes no
undue hardship on the employee, and is not injurious to the public.
Karlin v. Weinberg, supra, 77 N.J. at 411-12. A physician has a
legitimate interest in the protection of patient relationships. We
perceive no difference between a covenant ancillary to an
employment agreement and a covenant ancillary to the sale of a
medical practice. Indeed, a covenant against competition ancillary
to the sale of a practice may be entitled to broader protection
than one that is ancillary to an employment agreement. See id. at
417. We conclude that a physician who purchases a practice from a
retiring physician has the right to expect that the seller will
indeed retire, and if the selling physician changes his mind, the
purchasing physician has a legitimate interest in protecting the
patient list he or she has acquired. That protection, however,
must be reasonable, taking into account the selling physician's
right to change his mind and to continue to practice, and
considerations of patients' interests, as well as those of the
public generally. Therefore, the express or implied covenant
against competition must be sufficiently broad to protect the
purchasing physician's interest, yet sufficiently limited to
protect the withdrawing physician's right to practice medicine, to
also protect the interests of the public, as well as the interests
of the individual patients.
While we recognize that in Karlin, supra, the covenant did not
prevent the employee from seeing former patients, we conclude that
it is entirely appropriate for the judge, consistent with the broad
equitable powers afforded him, to distinguish a post-employment
covenant from a covenant ancillary to the sale of a practice. If
that were not the case, a physician could sell his practice, renege
on a promise to retire, retain the benefits of the bargain, and yet
open an office nearby the next day and continue to treat his former
patients. Equity cannot permit such an unjust result.
Accordingly, upon remand, the judge must consider all relevant
factors and fashion a remedy which protects the legitimate
interests of Tiffany and Graziano, yet imposes no undue hardship
upon Grant, and also considers the interest of the public, and the
patients. Karlin v. Weinberg, supra, 77 N.J. at 422. The judge
should consider the legitimate interests of Tiffany and Graziano in
protecting their relationship with the patients of the practice
considering the fact that they purchased the right to seek to
continue treating those patients. Id. at 423. The covenant shall
not be for a period of time beyond that which Tiffany and Graziano
need to protect the patient base. Ibid. Moreover, the covenant
should not extend beyond the territorial area needed to protect the
interests of Tiffany and Graziano, taking into account the fact
that the covenant ultimately imposed may enjoin Grant from treating
former patients of the practice. Ibid. Great care must be taken
to assure the fact that the legitimate interests of Tiffany and
Graziano are protected while, at the same time, Grant is not
restricted from engaging in activities which are not, in fact,
unfairly competitive with them. Ibid. The judge must also
consider any undue hardship that may be imposed upon Grant, and the
interests of the public, and the patients. Of particular
significance may be the territorial limitations of the covenant.
In addition, the judge should consider whether Grant should be
totally restricted from treating former patients, or merely
restricted from soliciting them. For example, if a territorial
limitation is to be imposed, the judge should consider whether the
preferences of patients who wish to be treated by Grant and are
willing to travel a distance for that purpose, should not be
frustrated.
We next consider Grant's contention that the trial judge erred
in requiring him to turn over all of his shares in the corporation
while dismissing his claims for additional compensation.See footnote 2 He
contends that it was inconsistent for the judge to find an
enforceable agreement, require him to turn over his shares pursuant
to that agreement, yet deny his claim for the additional
compensation due him under the agreement. On the other hand,
Tiffany and Graziano claim that the document contemplated that the
corporation would redeem Grant's stock prior to October 1, 1997.
They argue that any other conclusion would require them to pay the
balance of the pay-out since they would then be controlling the
corporation. In fact, Tiffany argues that her agreement with Grant
required the corporation to redeem the same shares in 1987.
Tiffany and Graziano contended, and the motion judge agreed, that
Grant was required to have the corporation redeem the shares before
he drew bonuses.
We conclude that the record does not support the grant of
summary judgment on this issue since there are genuine issues of
material fact that require resolution, thus precluding a grant of
summary judgment. See R. 4:46-2(c); Brill v. Guardian Life Ins.
Co. of Am., supra, 142 N.J. at 540. Initially, we point out that
the proposal does not clearly indicate that the shares must be
redeemed prior to the taking of bonuses. Indeed, the proposal by
its very terms provides that "[t]he timing of the actual redemption
of the $7,000 by the corporation and the $9,000 payment by
[Graziano] to [Grant] must also be discussed." That language
demonstrates the existence of a genuine factual issue regarding the
timing of the redemption, i.e., what was contemplated or is fair.
There are other potential factual issues that require resolution.
For example, were Tiffany and Graziano aware of the fact that Grant
was taking bonuses? Did Tiffany receive any bonuses during the
same time period? Did Tiffany and Graziano acquiesce in Grant's
remaining in the practice? If they did, for how long a period of
time did they acquiesce? An important factor to consider may be
the amount of income Grant generated in proportion to the income
generated by Tiffany and Graziano while Grant remained in the
practice.
Tiffany and Graziano also argue that Grant is precluded from
seeking to have the corporation redeem the seven shares since they
should have been redeemed in conjunction with Tiffany's stock
purchase years earlier. While that argument has some initial
attraction, the fact remains that under Grant's agreement with
Tiffany, the corporation was required to redeem the shares. If the
corporation did not, it may be that Graziano did not get the
benefit of the bargain. If that is correct, and the corporation
had never redeemed the shares, Grant may have had the right to
include in the agreement with Graziano and the corporation, an
obligation that the corporation now redeem the shares in
conjunction with the sale to Graziano. These are illustrations of
material facts that are genuine, and not insubstantial, which
preclude the grant of summary judgment on the question of Grant's
entitlement to the balance of funds he alleges are still due him
under the agreement. A remand is necessary for an evidentiary
hearing to resolve these issues, as well as any other factual
issues developed by the parties before a determination can be made
regarding Grant's entitlement to additional funds.
We next consider the award of counsel fees to Tiffany and
Graziano under N.J.S.A. 2A:15-59.1, which is sometimes referred to
as the Frivolous Litigation Act (the Act). Under the Act, the
judge may award the prevailing party reasonable litigation costs
and reasonable attorney fees if the judge concludes that a
complaint, counterclaim, cross-claim or defense asserted by the
non-prevailing party was frivolous. N.J.S.A. 2A:15-59.1(a)(1). In
order to find that a complaint, counterclaim, cross-claim or
defense of the non-prevailing party was frivolous, the judge must
conclude either that it was commenced, used or continued in bad
faith, solely for the purpose of harassment, delay or malicious
injury, N.J.S.A. 2A:15-59.1(b)(1), or that the non-prevailing party
knew, or should have known, that it was without any reasonable
basis in law or equity and could not be supported by a good faith
argument for an extension, modification or reversal of existing
law, N.J.S.A. 2A:15-59.1(b)(2).
This record does not support a conclusion that Grant acted in
bad faith, solely for the purpose of harassment, delay or malicious
injury, or that his position 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. In
considering an application for fees and costs under the Act, we
must be mindful of the fact that "the right of access to the court
should not be unduly infringed upon, honest and creative advocacy
should not be discouraged, and the salutary policy of litigant's
bearing, in the main, their own litigation costs, should not be
abandoned". Iannone v. McHale,
245 N.J. Super. 17, 28 (App. Div.
1990). "[I]n a democratic society, citizens should have ready
access to all branches of government, including the judiciary."
McKeown - Brand v. Trump Castle Hotel & Casino,
132 N.J. 546, 561
62 (1993). Here, Graziano's complaint sought specific performance
of the alleged oral agreement and further sought to restrain Grant
from entering the corporate premises. It must be borne in mind
that this had been Grant's office for a number of years and that he
was one of the founders of the corporation. In addition, the
complaint sought to restrain him from contacting patients of the
practice. Furthermore, the complaint sought to impose upon Grant
a restrictive covenant for a period of five years and twenty-five
miles notwithstanding the fact that the parties had never discussed
a restrictive covenant. Moreover, the complaint sought
compensatory and punitive damages against Grant.
Certainly, Grant had the right to defend the action and this
record does not support a conclusion that he acted in bad faith,
solely for the purpose of harassment or delay, or that his defense
was without any reasonable basis in law. After all, the nature of
the action justified his defending it. Although we have concluded,
contrary to Grant's contention, that a contract did exist, we
cannot conclude that his denial of the existence of a contract is
cause to award litigation costs against him. In addition, although
we agree that the judge properly exercised his discretion in
limiting Grant's practice of medicine, the oral agreement did not
contain a covenant. Certainly, Grant had the right to resist that
application. Moreover, we have remanded for reconsideration the
breadth of the covenant imposed. Furthermore, in light of our
conclusion that the grant of summary judgment regarding the balance
Grant contends is due him under the agreement was issued
prematurely, any award of litigation costs based upon Grant's
asserting that position was improper. For all these reasons, we
vacate the award of litigation costs in favor of Tiffany and
Graziano.
Finally, we consider Grant's request that if we remand we
direct that the case be assigned to a different judge since the
motion judge inferred that Grant engaged in "chicanery, artifice,
sharkness" and "shady conduct". Grant also bases his request upon
the fact that the judge made a finding that he was pursuing
frivolous litigation. We recognize that we have the authority to
direct that a case be assigned to a new judge upon remand. New
Jersey Div. of Youth and Family Services v. A.W,
103 N.J. 591, 617
(1986). That power may be exercised when there is a concern that
the trial judge has a potential commitment to his or her prior
findings. Ibid. In Carmichael v. Bryan,
310 N.J. Super. 34, 49
(App. Div. 1998), we directed that on remand a case be assigned to
another judge where the motion judge had expressed opinions
regarding the intent of one of the parties. In J.L. v. J.F.,
317 N.J. Super. 418, 438 (App. Div.), certif. denied,
158 N.J. 685
(1999), we directed that a remand hearing be conducted by a
different judge since the motion judge had made determinations
regarding credibility.
Although we have the authority to direct the assignment of the
case to a different judge, we believe that authority should be
sparingly exercised. This case does not clearly call for the
assignment of the matter to another judge. In addition,
consideration must be given to the fact that, to some extent, it
would be counterproductive to require a new judge to acquaint
himself or herself with the litigation. Rather, we believe that an
application for disqualification pursuant to R. 1:12-1 should
initially be made to the motion judge himself. Bonnet v. Stewart,
155 N.J. Super. 326, 330 (App. Div.), certif. denied,
77 N.J. 468
(1978). If the judge believes that he is committed to the findings
he has previously made, or there is any other reason which might
preclude a fair and unbiased hearing and judgment or which might
reasonably lead counsel or the parties to believe so, R. 1:12-1(f),
we have every confidence that the judge will recuse himself.
Affirmed in part, reversed in part, and remanded for further
proceedings consistent with this opinion.See footnote 3
Footnote: 1These are the same seven shares that the corporation was supposed to redeem pursuant to Grant's agreement with Tiffany. Footnote: 2We note that the order requires Grant to turn over his shares in the corporation to Graziano, and further requires that he turn over his stock certificates for the corporation, and other corporate documents to Graziano. That may be an error. Graziano is only entitled to nine shares. Any other shares held by Grant were to have been redeemed by the corporation and do not belong to Graziano. If our impression is correct, this should be addressed on remand. Footnote: 3We previously reserved decision on Grant's motion to strike portions of the brief and appendix filed by Tiffany and Graziano, and to grant leave to file an over-length reply brief. We also reserved decision on Graziano's motion to supplement the record. We grant Grant's motion to file an over-length reply brief and deny Graziano's motion to supplement the record. We also grant Grant's motion striking from the brief and appendix those matters that were not part of the record before the trial judge. R. 2:504(a); Venner v. Allstate, 306 N.J. Super. 106, 111 (App. Div. 1997)(the record before an appellate court should consist only of filings in the trial court; matters not part of the record in the trial court cannot be considered on appeal).