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Immunity from frivolous litigation sanctions? Not for public entities

6/24/24

By: Jenna N. Lofaro

The New Jersey Appellate Division recently issued an opinion settling previously undecided law. In Borough of Englewood Cliffs v. Trautner, the Court held that public entities are not immune from sanctions under the state’s Frivolous Litigation Statute N.J.S.A. 2A:15-59.1 (FLS). No. A-2765-21, 2024 WL 1708605 (N.J. App. Div. Apr. 22, 2024). Prior to the ruling, the issue was the subject of two Chancery Division opinions – published in 1993 and 1997 – which came to opposite conclusions. 

The Borough of Englewood Cliffs lawsuit stems from a previous action between the Borough and a construction developer, during which judgment was entered in favor of the developer. The defendants were the attorneys for the Borough in the previous action. Following judgment for the developer, the Borough brought this action against its former attorneys alleging professional malpractice, breach of contract, unjust enrichment, civil conspiracy, and aiding and abetting. The defendants successfully moved to dismiss the action in the trial court. Following dismissal of the action, the trial court also granted the defendants’ motion for sanctions for frivolous litigation. The Borough then appealed contending, inter alia, that it is immune from sanctions under the FLS as a municipality.

The Appellate Division analyzed the divergent Chancery Division opinions – In the Matter of K.L.F, 275 N.J. Super. 507 (Ch. Div. 1993) and Division of Youth & Family Services v. P.M., 301 N.J. Super 80 (Ch. Div. 1997). In In the Matter of K.L.F, the Chancery Division reasoned that because the Legislature did not specifically carve out an exception for public entities, it did not intend those public entities be immune from the purview of the statute. The Chancery Division reached the opposition conclusion in Division of Youth & Family Services, ruling that a state agency was immune from FLS claims.  

While acknowledging the sound reasoning for both Chancery Division opinions, the Appellate Division held that a public entity is not immune from sanctions under the FLS. The Court emphasized that the statute’s plain language – generally the best indicator of the legislature’s intent – did not afford immunity to public entities. Had the legislature intended to shield public entities from the FLS, it would have included express language to that effect in the statute. The Court also emphasized the legislature’s intent to create a punitive statute in order to reduce baseless litigation. The Court did not find anything in the statute’s legislative history to indicate that public entities were meant to be exempt from its reach if they filed a frivolous action. Therefore, the Court held that public entities are not immune from sanctions under the FLS. 

The Court’s decision provides clarity to litigants and attorneys in New Jersey handling matters involving public entities. The FLS has long served as a shield against frivolous and baseless claims, and attorneys handling matters involving public entities must now take into consideration the potential new consequences, and potential new defenses, for claims asserted by public entities.  

Please do not hesitate to contact Jenna N. Lofaro at Jenna.Lofaro@fmglaw.com or your local FMG relationship partner to discuss this important opinion or for any related Tort questions.