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Employers May Recover Attorneys Fees for Frivolous Claims

Article

The Employment and Labor Law Alert

May 30, 2003

In Savona v. DiGiorgio Corporation, __ N.J. Super.__, 2003 WL 2006092 (App. Div. May 2, 2003), the New Jersey Appellate Division reversed and remanded a trial court’s refusal to award counsel fees under the Frivolous Claim Statute, N.J.S.A. 2A:15-59.1, and the analogous Court Rule, R. 1:4-8, to a defendant who had been awarded summary judgment at the close of discovery in a wrongful termination case. On remand, the trial court was instructed to make specific findings on what portion of the plaintiff’s claim had colorable merit and what facts were sufficient to support the cause of action.

The factual and procedural circumstances of this case are not unlike what is often seen in employment litigation. In June 1998, Plaintiff Jeanne Savona was hired by Defendant DiGiorgio Corporation as a routing clerk. The application completed by Savona and the Employee Handbook contained language warning Savona that she was an “at will” employee. In addition, the Handbook indicated that it was not a contract of employment, that Savona could be disciplined or terminated at any time, and that certain instances of misconduct could result in termination. The Handbook contained an orientation provision, which provided as follows: “The first three (3) months of employment is the Orientation Period. During this time the employee is evaluated to determine his ability to adequately perform his job duties and for the employee to see how he fits within the Company. At the end of this time period the employee will generally receive a formal or informal performance appraisal.” According to the Handbook, during the Orientation Period all new employees had limited benefits. In addition, the Handbook clearly stated that “[c]ompletion of the Orientation Period in no way entitles employees to employment of any fixed duration. All employees are ‘at will’ and can be terminated at any time, including during the Orientation Period, for any reason or no reason at all except as prohibited by law.”

Savona made it through the 3-month orientation period and, in October 1999, was transferred to an office position, where she became friendly with a co-worker. In January 2000, the two employees were involved in an incident where the co-worker sprayed Savona in the face and eye with Windex. The next day, their supervisor warned them that if this type of conduct continued, they would be subject to termination. A memorandum was prepared concerning the incident and both employees were asked to sign it. The co-worked complied but Savona refused, dissatisfied with the description of her conduct. An argument erupted between Savona and her co-worker during which the co-worker is alleged to have threatened Savona. Savona left the premises and did not return. She was subsequently terminated.

Savona retained counsel who wrote to DiGiorgio contending that DiGiorgio had violated the provisions of the Handbook and subjected Savona to a hostile working environment. Attorneys for DiGiorgio responded to the letter and quoted the “at will” provision in the Handbook. The DiGiorgio letter also made reference to two cases, Nicosia v. Wakefern Food Corp., 136 N.J. 401 (1994) and Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284, modified, 101 N.J. 10 (1985), both of which stand for the proposition that an employer can avoiding creating an implied contract by including a clear and unmistakable provision in the Handbook that the employee can be terminated at any time, with or without cause. The letter warned that DiGiorgio would seek fees if Savona proceeded. With her claims.

Savona did not heed this warning. Instead, she filed suit and alleged that DiGiorgio had violated several provisions of the Handbook and that she had been wrongfully terminated. The case proceeded through discovery. After discovery had been completed, DiGiorgio’s attorneys sent a letter to Savona’s attorney citing the provisions of New Jersey’s Frivolous Claims Statute and the analogous court rule and demanding that the suit be withdrawn with prejudice. Undeterred by this warning, Savona forged ahead. The Court granted DiGiorgio’s subsequent motion for summary judgment and relied upon the very cases cited by DiGiorgio’s attorneys in their initial letter to Savona’s attorneys. The Court found that the orientation provision relied upon by Savona could not reasonably be interpreted to create an expectation of employment. In addition, the Court determined that the “at will” disclaimer in the Handbook was sufficiently prominent and negated any reasonable expectation of employment the Handbook may have created.

Following summary judgment, DiGiorgio’s attorneys filed a motion for counsel fees alleging that there was no legal or factual basis for the claims Savona asserted. Her attorney responded, via certification, by reciting certain provisions of the handbook concerning safety, misuse of equipment and prohibition of horseplay, harassment, fighting and assault. The certification also stated that DiGiorgio had an obligation to protect Savona from harassment by her co-worker and that its decision to terminate Savona was in violation of that obligation. The Court denied the application for fees, finding that the Frivolous Claim Statute should be given a narrow interpretation and should not “counterbalance the general rule that each litigant bears it own litigation costs. Even when the litigation is of marginal merit, if the plaintiff’s conduct bespeaks of an honest attempt to press a perceived, though ill0founded and perhaps misguided claim, he or she should not be found to have acted in bad faith.” The Court concluded that where a plaintiff relies upon the advice of her attorney, litigation could not be deemed frivolous. DiGiorgio appealed.

The Appellate Division revered and remanded for more specific findings. In doing so, the Court rejected Savona’s argument, advanced before the trial court, that DiGiorgio should have moved to dismiss her Complaint earlier in the litigation. According to the Appellate Division, Savona was on notice both prior to and during the litigation that DiGiorgio perceived her claims to be meritless. Moreover, it would have been futile and expensive to file the summary judgment motion any earlier.

The Appellate Division also summarized the requirements of the frivolous claim statute and rule. To be frivolous, a party must show either that the action was commenced or maintained in bad faith, N.J.S.A. 2A:15-59.1b(1), or was without any reasonably 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:15-59.1b(2). According to the Court, DiGiorgio never alleged bad faith; rather, it argued that Savona’s claims were baseless. Although the trial court correctly determined that the statute and rule should be construed narrowly, the Appellate Division was disturbed by the trial court’s conclusory remarks. The trial court did not state what portions of Savona’s argument had colorable merit. In the Appellate Division’s words, “we are without articulated findings under the statute, even under a restrictive construction, that something Savona argued could reasonably and in good faith support ‘an extension, modification, or reversal of existing law.'”

In addition, the Appellate Division opined that a suit might still be frivolous even where the plaintiff is following the advice of her attorney. It is for the court to determine whether the suit was frivolous on its merits, in which case the plaintiff who pursued the action may be liable under the statute, or whether the plaintiff was “genuinely unaware or uninformed of the frivolous nature of her claims and it was being pursued by her lawyer,” in which case the lawyer may be liable under Rule 1:4-8. Once the Court finds that an action is frivolous, it must then determine responsibility as between the plaintiff and her counsel.