Client Advisory

In a unanimous decision, the New Jersey Supreme Court clarified that municipalities and municipal corporations that engage in frivolous litigation are subject to sanctions under the FLS.

Borough of Englewood Cliffs (Borough) commenced a lawsuit against former attorneys who represented the Borough in a prior litigation. As part of that prior litigation, the attorneys advised the Borough to settle, but the Borough ultimately proceeded to trial and did not prevail. After turnover of members within the Borough’s Council, however, the Borough filed suit against the attorneys asserting, inter alia, malpractice. The Borough’s lawsuit against its former attorneys was ultimately dismissed with prejudice on a motion to dismiss for failure to state a claim. Additionally, the trial judge granted the defendants’ motion for sanctions and awarded attorney fees and costs totaling $216,484.45, finding that the Borough acted in bad faith to harass, delay, and cause malicious injury by filing frivolous pleadings in violation of N.J.S.A. 1:1-2, otherwise known as the New Jersey Frivolous Litigation Statute (FLS).

The Borough appealed the award of sanctions, arguing that the plain text of the FLS refers to a “party” or a “person,” and not a “public entity”. The Borough further argued that state sovereign immunity, which it argued the Legislature has not expressly waived in the FLS, insulates the Borough from liability.

The New Jersey Supreme Court assessed the legislative history and the historical text of the FLS and found that the Borough, as the plaintiff, is a “party” as contemplated by the FLS, and that the word “person” as it is found in the statute is interchangeable with “party.” The Court further held that, in any event, the Borough would be considered both a “party” and a “person” under the statute, which itself defines “person” to include “corporations,” and further defines a municipality as a “municipal corporation.” Finally, the Court rejected the Borough’s argument that it is immune through state sovereignty by, inter alia, citing Jinks v. Richland County, 538 U.S. 456, 466 (2003), which states that, “municipalities, unlike States, do not enjoy a constitutionally protected immunity from suit.” The Court addressed judicially created immunity. which protects municipalities from liability when carrying out governmental functions, as well as the New Jersey Tort Claims Act, which addressed the immunity of public entities and circumstances in which immunity is waived in negligence actions, but held that the instant case arises from a context entirely outside the New Jersey Tort Claims Act, and judicially created municipal immunity is not a barrier to holding the Borough liable under the FLS.

Key Takeaway: Municipalities should consult with counsel who are familiar with frivolous litigation rules when pursuing affirmative complaints or crossclaims and should ensure they are following all procedures and steps to protect their interests when served with notice pursuant to N.J.S.A. 1:1-2, during the course of litigation.