Opinion
DOCKET NO. A-4038-10T3 DOCKET NO. A-6125-10T3 DOCKET NO. A-1719-11T3
07-22-2013
IRA KLEMONS, DDS, PHD, PC a/s/o SUZANNE MASCOLA, Plaintiff-Appellant/Cross-Respondent, v. GEICO, Defendant-Respondent, and NATIONAL ARBITRATION FORUM, Defendant-Respondent/Cross-Appellant. KIMBA MEDICAL SUPPLY a/s/o PEGGY ELLIS-PHELPS, Plaintiff-Respondent, v. GEICO and NATIONAL ARBITRATION FORUM, Defendants-Appellants. KIMBA MEDICAL SUPPLY a/s/o PEGGY ELLIS-PHELPS, Plaintiff-Appellant, v. GEICO and NATIONAL ARBITRATION FORUM, Defendants-Respondents.
Sean T. Hagan argued the cause for appellant/cross-respondent Ira Klemons, DDS, PHD, PC (A-4038-10T3); respondent Kimba Medical Supply (A-6125-10T3); and appellant Kimba Medical Supply (A-1719-11T3). Stanley G. Wojculewski argued the cause for respondent Geico (A-4038-10T3 and A-1719-11T3); and respondent Geico has not filed a brief in A-6125-10T3 (Law Office of Anthony P. Castellani, attorneys; Mr. Wojculewski, on the briefs). Arthur J. Timins argued the cause for appellant National Arbitration Forum (A-6125-10T3); as respondent/cross-appellant in (A-4038-10T3); and as respondent in (A-1719-11T3) (Shiriak & Timins, attorneys; Mr. Timins, on the briefs).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Graves, Espinosa and Guadagno.
On appeal from Superior Court of New Jersey, Law Division, Monmouth County (A-4038-10T3), Docket No. L-6058-10 and Ocean County (A-6125-10T3 and A-1719-11T3), Docket No. L-1601-11.
Sean T. Hagan argued the cause for appellant/cross-respondent Ira Klemons, DDS, PHD, PC (A-4038-10T3); respondent Kimba Medical Supply (A-6125-10T3); and appellant Kimba Medical Supply (A-1719-11T3).
Stanley G. Wojculewski argued the cause for respondent Geico (A-4038-10T3 and A-1719-11T3); and respondent Geico has not filed a brief in A-6125-10T3 (Law Office of Anthony P. Castellani, attorneys; Mr. Wojculewski, on the briefs).
Arthur J. Timins argued the cause for appellant National Arbitration Forum (A-6125-10T3); as respondent/cross-appellant in (A-4038-10T3); and as respondent in (A-1719-11T3) (Shiriak & Timins, attorneys; Mr. Timins, on the briefs). PER CURIAM
These back-to-back appeals, which are consolidated for purposes of opinion, concern two separate arbitration awards issued by a Dispute Resolution Professional (DRP) pursuant to the Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30. In each case, a GEICO insured assigned her right to receive payment of Personal Injury Protection (PIP) benefits to her medical provider. The medical providers, Kimba Medical Supply (Kimba) and Ira Klemons, D.D.S., Ph.D., P.C. (Klemons) (collectively, plaintiffs), filed demands for arbitration with the National Arbitration Forum (NAF). In each case, GEICO asserted that the policy issued to its insured had PIP benefits of $15,000, which had been exhausted. Following the arbitration award, plaintiffs filed summary actions pursuant to N.J.S.A. 2A:23A-13 to vacate the award. In each case, the trial court denied the motion to vacate the arbitration award.
As of April 1, 2011, NAF does business as "Forthright Solutions." We use NAF to be consistent with the references in the appellate briefs and in the record.
Plaintiffs appeal from these orders. In their appeals, both Klemons and Kimba argue that the trial court and the DRP erred as a matter of law in finding that a signed coverage selection form is not required for coverage to be maintained at the previously selected level; and that the trial court erred as a matter of law in its application of the standard of review under N.J.S.A. 2A:23A-13 and in dismissing the complaint. In addition, Kimba argues that we should review this matter because the constitutionality of a statute is at issue and that, if the DRP's interpretation of law is correct, N.J.A.C. 11:3-15.4 and 11:3-15.7 are ultra vires to the enabling statutes and unconstitutional. For the reasons that follow, we dismiss these appeals.
In addition, plaintiffs named NAF as a defendant in each of these cases, but did not allege any cause of action against NAF. NAF served notice to each plaintiff to dismiss it as a defendant pursuant to Rule 1:4-8, and sought fees and expenses from the court upon the dismissal of the complaints. NAF appeals from the trial courts' decisions to deny its request for sanctions against plaintiffs pursuant to N.J.S.A. 2A:15-59.1(a)(1) and Rule 1:4-8. For the reasons that follow, we reverse the trial courts' decisions and remand for further proceedings.
I.
N.J.S.A. 2A:23A-18(b) states:
Upon the granting of an order confirming, modifying or correcting an award, a judgment or decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree. There shall be no further appeal or review of the judgment or decree.
[(Emphasis added).]
As a result of this explicit language, the general rule is that a plaintiff has no right to appeal from a judge's order issued pursuant to the APDRA. Morel v. State Farm Ins. Co., 396 N.J. Super. 472, 475 (App. Div. 2007). There are exceptions to the prohibition. Fort Lee Surgery Ctr., Inc. v. Proformance Ins. Co., 412 N.J. Super. 99, 102 (App. Div. 2010); see also Faherty v. Faherty, 97 N.J. 99, 109 (1984) (recognizing the prohibition does not apply to child support orders because "courts have a nondelegable, special supervisory function in the area of child support that may be exercised upon review of an arbitrator's award"); Allstate Ins. Co. v. Sabato, 380 N.J. Super. 463, 473 (App. Div. 2005) (finding counsel fee awards are not subject to the prohibition against appellate review). The Supreme Court also recognized that "'rare circumstances' grounded in public policy . . . might compel this Court to grant limited appellate review." Mt. Hope Dev. Assocs. v. Mt. Hope Waterpower Project, L.P., 154 N.J. 141, 152 (1998); see also Kimba Med. Supply v. Allstate Ins. Co., _ N.J. Super. _, _ (App. Div. 2013) (Kimba) slip op. at 29 "[O]ur role is to determine whether the trial judge acted within APDRA's bounds. If so, then we are bound by N.J.S.A. 2A:23A-18(b) to dismiss the appeal." Fort Lee, supra, 412 N.J. Super. at 103.
In Kimba, we found it appropriate to review two separate appeals to consider the authority of the trial court to remand the matter to the arbitration forum for further proceedings after vacating the arbitration award. Unlike here, in each of those appeals, the DRP failed to resolve a contested factual or legal issue.
Plaintiffs' motions before the trial courts were governed by N.J.S.A. 2A:23A-13(c), which provides limited grounds for vacating the arbitration award:
The award shall be vacated on the application of a party . . . if the court finds that the rights of that party were prejudiced by:
(1) Corruption, fraud or misconduct in procuring the award;
(2) Partiality of an umpire appointed as a neutral;
(3) In making the award, the umpire's exceeding their power or so imperfectly executing that power that a final and definite award was not made;
(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection; or
(5) The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution.
Although plaintiffs alleged each of these grounds in their pleadings, each of the trial judges concluded that the only applicable provision was subsection (c)(5). Under this subsection, the umpire's decision on the facts "shall be final if there is substantial evidence to support that decision[.]" N.J.S.A. 2A:23A-13(b).
The essential facts here were undisputed. In each case, the insured had selected $15,000 in PIP benefits and submitted a Coverage Selection Form (CSF) reflecting that selection to GEICO for a coverage period prior to the period in which the accident occurred. In each case, the insured had not submitted a CSF to GEICO for the period in which the accident occurred. Plaintiffs did not dispute these facts, but argued that the legal significance of these facts was that the insured's PIP benefits reverted to $250,000 because the insured had not submitted a new CSF when renewing the policy. In each case, the DRP determined that the effective PIP benefits at the time of the accident was $15,000.
The trial judges' review pursuant to APDRA was therefore limited to the question whether the DRP "committ[ed] prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution." N.J.S.A. 2A:23A-13(c)(5). In each case, the trial judge articulated the legal question before the DEP, i.e., whether the PIP benefits of an insured who submitted a CSF selecting $15,000 PIP benefits for an earlier policy increased to $250,000 on a renewal policy for which no CSF was submitted. The Klemons trial judge reviewed relevant law, e.g., N.J.S.A. 39:6A-23(a); N.J.A.C. 11:3-15.7(a)(b) and (d); Baldassano v. High Point Ins. Co., 396 N.J. Super. 448, 455 (App. Div. 2007) (in which we noted that N.J.A.C. 11:3-15.7 does not require the insured to complete and return a signed CSF "unless the insured elects to alter the coverage"), and concluded that the DRP had not erred. The Kimba trial judge concluded that the arbitrator considered the facts before her and acted "within her authority" in determining that the $15,000 PIP benefits applied. Although it would have been preferable for the Kimba trial judge to explicitly state there had been no prejudicial error in the application of the law by the DRP, we are satisfied that the review here sufficiently complied with APDRA standards. Accordingly, the statutory bar to further appeal applies.
In Kimba, supra, we rejected Kimba's argument that the insurer is required to obtain the insured's signature on a CSF for every renewal and the failure to do so results in a default to a $250,000 PIP policy limit. _ N.J. Super. at _ (slip op. at 44-45).
We are satisfied that any arguments raised by plaintiffs that are not specifically addressed in this opinion lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Plaintiffs' appeals are dismissed.
II.
In each of these cases, plaintiffs included NAF as a co-defendant in their verified complaints for declaratory judgment. Plaintiffs concede that the complaints did not seek any monetary claims against NAF. They argue that the inclusion of NAF as a co-defendant was proper because NAF has moved to intervene in other cases when a court has ordered a remand of the matter to NAF. Because they sought a remand of the matters to NAF, plaintiffs argue NAF is "an interested and necessary party[.]"
The fact that NAF has filed motions to intervene in other cases fails to support a contention that it is an "interested and necessary" party in this action. As we observed in Allstate New Jersey Ins. Co. v. Neurology Pain Assocs., 418 N.J. Super. 246 (App. Div. 2011) (Allstate), there is a fundamental difference between cases like this one, in which a party challenges the outcome of an individual arbitration, and those in which NAF may intervene as of right pursuant to Rule 4:33-1 because it has an interest in the integrity of the arbitral process, such as in a challenge to the validity of an NAF rule or "the application of its procedural rules to [a] PIP arbitration proceeding and the right to judicial review of its decision regarding the application of those rules." Id. at 256.
In Allstate, we noted:
[A]rbitrators and arbitral forums "have no interest in the outcome of [a] dispute between [parties to arbitration], and they should not be compelled to become parties to that dispute." . . . [A]rbitrators, like judges, have no interest in the outcome of an arbitration, and therefore, their joinder in an action challenging an arbitration award is not appropriate.
[Ibid. (citing Caudle v. Am. Arbitration Ass'n, 230 F.3d 920, 922 (7th Cir. 2000) (internal citations omitted).]
Allstate was decided on January 31, 2011. Klemons and Kimba included NAF in their challenges to the outcomes of their individual arbitrations on December 6, 2010 and May 4, 2011, respectively. NAF served Klemons and Kimba with demands for the withdrawal of the complaint against it pursuant to Rule 1:4-8 on or about January 31, 2011 and May 5, 2011, respectively. In the notices, NAF stated the basis for the demand was "Lack of Support of Existing Law; and There Being No Non-Frivolous Argument for the Extension of Existing Law or the Establishment of New Law." Klemons did not provide a written response to this demand. In addition, by letter dated May 5, 2011, counsel for NAF cited Allstate to plaintiffs' counsel as "confirm[ing]" NAF's position that it "is not an appropriate party and should not be named in this lawsuit, and other lawsuits." By letter dated May 25, 2011, counsel advised, on behalf of Kimba, that the complaint would not be withdrawn, stating, in part:
The same attorney represented each of the plaintiffs.
At a minimum, they are a party of interest. Unless your client is willing to concede that the court is permitted to remand the matter back to NAF for a new and/or further hearing, National Arbitration Forum is a necessary party.Rather than show that NAF was indeed a necessary party, this argument demonstrates an intent to use the institution of litigation against NAF as leverage to secure a concession on a legal issue not necessarily raised in the controversy, i.e., whether the court had the authority to remand the matter to NAF for additional proceedings.
NAF subsequently filed motions for sanctions pursuant to Rule 1:4-8. In each case, plaintiffs' counsel argued that he names NAF preemptively, as a matter of course, in each challenge to an arbitration award based upon NAF's prior motions to intervene in other cases.
The Kimba trial judge provided the following reasons for denying relief to NAF:
The Court finds that there was a good faith application on behalf of [plaintiff's counsel] when he notified the arbitration forum and listed them as a party to the same; that there has been a prior history between the plaintiff. [sic] And the Arbitration Association, though counsel, . . . candidly admitted that if the Court were to remand this matter back to the
Arbitration Association . . . that the [A]ssociation would refuse to handle such a dispute and would seek to have affirmative relief from this Court.
The Court finds that while it was not appropriate to name them as a party defendant, certainly the fact that they were placed on notice of this dispute was well reasoned. There could have been other methods selected, but the Court does not find that it was frivolous and/or punitive for the plaintiff, through counsel . . . to name them as a defendant. The Court does dismiss the complaint against the Arbitration Association. However, declines to order any affirmative relief such as legal fees and/or sanctions. So ordered.
The Klemons trial judge observed that NAF had intervened in other matters, but made no specific findings regarding the pleadings. In her statement of reasons for denying plaintiff's subsequent motion for reconsideration, the court attached a rider in which she addressed NAF's request for a ruling that it should not have been included as a party in the action, stating, "Since the court has dismissed the Plaintiff's complaint, this issue is moot." The Kimba trial judge acknowledged that it was improper for plaintiff to name NAF as a defendant, an observation consistent with Allstate, but nonetheless found that counsel acted in good faith because it was "well reasoned" to put NAF on notice of the action.
The dismissal of the complaint did not render the frivolous litigation sanction moot. An application for a sanction under Rule 1:4-8 must be made separately from other applications and must follow the entry of final judgment. See R. 1:4-8(b)(1) and (2).
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Under the Frivolous Litigation Statute, a complaint may be found to be frivolous if either
(1) The complaint . . . was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; orSimilarly, Rule 1:4-8 provides sanctions for engaging in frivolous litigation "that has no legal basis, filing papers to harass or cause unnecessary delay, and it prohibits attorneys . . . from engaging in such conduct." Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 543 (App. Div. 2009), certif. denied, 203 N.J. 93 (2010).
(2) The nonprevailing party knew, or should have known, that the complaint . . . 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).]
While it might be "well reasoned" to put NAF on notice of an action so it may move to intervene if and when appropriate, that does not provide a good faith basis for inflicting the expense of litigation on a party against whom the plaintiff has no claim. Ordinarily, the review of R. 1:4-8 applications requires a consideration of whether there is a reasonable and good faith belief in the merits of the claim asserted. In this case, neither plaintiff even contends that it has any "claims [against NAF that] are warranted by existing law[.]" See R. 1:4-8(a)(2). In fact, each plaintiff concedes that no claims against NAF are alleged in its complaint. Rather, plaintiffs' counsel candidly admitted that his sole purpose in naming NAF -- as a routine matter in each challenge to an arbitration award -- was to avoid any delay that might be caused by a motion to intervene if a court ordered a remand. Plaintiffs' counsel also admitted he used the pleading as a means of attempting to extract a concession from NAF that a remand will be permitted.
In Port-O-San Corp. v. Teamsters Local Union No. 863, Welfare & Pension Funds, 363 N.J. Super. 431 (App. Div. 2003), we noted that "the bad faith necessary for sanctions here can be demonstrated . . . if litigation was used in bad faith 'solely for the purpose of harassment, delay or malicious injury.'" Id. at 438 (quoting N.J.S.A. 2A:15-59.1(b). We further found that a violation of Rule 1:4-8 had been "demonstrated unequivocally" when counsel joined an attorney "under specious theories of liability when the absence of such liability was manifest" for the purpose of obtaining "unwarranted and legally unjustifiable concessions" from his client. Id. at 439; see also Hreshko v. Harleysville Ins. Co., 337 N.J. Super. 104, 110-11 (App. Div. 2001) (finding, in an underinsured motorist action, that the joinder of all persons involved in the accident, irrespective of fault, would have violated Rule 1:4-8).
The admitted absence of any cognizable cause of action against NAF and the admission that NAF was named as a defendant in an attempt to secure a concession regarding the court's authority to remand the matter for further proceedings show that the joinder of NAF in these cases amounted to frivolous litigation within the meaning of the statute. Since neither trial judge reached the question of what, if any, sanction is appropriate, we remand that issue for the trial courts' determination. We note that the sanctions permitted by Rule 1:4-8(d)(2) are specifically described as "a sum sufficient to deter repetition of such conduct." LoBiondo v. Schwartz, 199 N.J. 62, 99 (2009). The trial courts may consider whether the likelihood that such conduct will be repeated will be affected by our decision in Kimba, and also whether the conduct of NAF contributed to the tenor of the litigation. See Horowitz v. Weishoff, 318 N.J. Super. 196, 207 (App. Div. 1999), modified, 346 N.J. Super. 165 (App. Div. 2001).
The appeals of Klemons and Kimba are dismissed. We reverse the denial of NAF's application for a sanction pursuant to Rule 1:4-8 and remand for further proceedings consistent with this opinion. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION