BONEFISH CAPITAL, LLC v. AUTOSHRED, LLC (L-1782-16 and L-2804-17, OCEAN COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1280-19
BONEFISH CAPITAL, LLC,
Plaintiff,
v.
AUTOSHRED, LLC, and
C. BRUCE RUSH, individually,
Defendants-Respondents,
and
PELAS CAPITAL
MANAGEMENT, INC. d/b/a
WALKER FOREST, IMWOTH,
LLC d/b/a AUTOSHRED NJ, and
PETER LEVITT, individually,
Defendants-Appellants,
and
K-2 PARTNERS, LLC, and
VLADIMIR R. VASAK, individually,
Defendants.
_______________________________
AUTOSHRED, LLC, and
CHARLES B. RUSH,
Plaintiffs,
v.
IMWOTH, LLC, and PETER D.
LEVITT,
Defendant.
______________________________
Submitted October 6, 2021 – Decided February 22, 2022
Before Judges Hoffman, Whipple, and Susswein.
On appeal from the Superior Court of New Jersey, Law
Division, Ocean County, Docket Nos. L-1782-16 and
L-2804-17.
Brown McGarry Nimeroff, LLC, attorneys for
appellants (Sigmund J. Fleck and Christopher
Dolotosky, of counsel and on the briefs).
Mensching & Lucarini, PC, attorneys for respondents
(John J. Mensching, on the brief).
PER CURIAM
Defendant-appellants Peter Levitt, Pelas Capital Management Inc. d/b/a
Walker Forest, and Imwoth LLC d/b/a Autoshred NJ (the Levitt defendants)
appeal from the denial, both on summary judgment and after a plenary hearing,
of their claim seeking indemnification from defendants-respondents, Autoshred,
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LLC and its owner, C. Bruce Rush (the Rush defendants), under the terms of an
Asset Purchase Agreement (APA).
The Levitt defendants also contend the trial court erred in granting
summary judgment in favor of the Rush defendants on their breach of contract
claim.1 Regarding that claim, the final judgment also required the Levitt
defendants to pay attorney's fees and costs in the amount of $38,423.76.2 For
the reasons that follow, we affirm as to the Rush defendants' breach of contract
claim and the award of counsel fees relating to that breach; however, we vacate
the denial of the Levitt defendants' indemnification claim and remand for further
findings.
I.
We discern the following facts from the record. In early 2016, defendant
Peter Levitt, the owner of an executive recruiting business known as Pelas
Capital Management Inc. d/b/a Walker Forest (Pelas), decided to exit the
recruiting industry and purchase a document destruction company. To this end,
1
This claim was based on the Levitt defendants' non-payment of a promissory
note (the Note) issued pursuant to the APA.
2
After the Levitt defendants filed a supersedeas bond, the trial court entered an
order staying any execution on the judgment pending resolution of this appeal.
A-1280-19
3
Levitt contacted a business broker named Vladimir Vasak of K-2 Partners, LLC
(K-2), with whom Levitt had prior business dealings.
Coincidentally, Vasak had just learned that defendant-respondent C.
Bruce Rush, a longstanding contact, was ready to sell his document destruction
company, Autoshred LLC (Autoshred). On February 15, 2016, Vasak e-mailed
Rush, advised that he might have a prospective buyer, and asked if they could
update a prior non-disclosure agreement (NDA) and sign an engagement letter.
Rush replied, informing Vasak that he was already working with an unnamed
broker to sell Autoshred, but that he would talk to that broker to see if an
arrangement could be made. Rush knew that he could not work with Vasak
without that broker's "blessing."
The unnamed broker referenced by Rush was Paul Zaidins, the owner of
plaintiff Bonefish Capital LLC (Bonefish), with whom Rush had an exclusive
nation-wide brokerage agreement (the Bonefish Agreement), dated February 2,
2016, to sell Autoshred. Notably, the Bonefish Agreement, which remained in
effect through June 30, 2016, included the following provision:
[F]or a period of 90 days from termination, [Autoshred]
shall remain obligated to pay 100% of Transaction Fees
. . . for any transaction arranged, negotiated or
introduced for [Autoshred] by Bonefish as illustrated
by a formal offer presented in the form of a Letter of
Intent (LOI). For a period of 91 days to 180 days from
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termination, [Autoshred] shall remain obligated to pay
50% of Transaction Fees . . . for any transaction
arranged, negotiated or introduced for [Autoshred] by
Bonefish as illustrated by a formal offer presented in
the form of a [LOI].
Bonefish's transaction fee was five percent of the sale price up to and
including $1,575,000, plus eight percent of the sale price in excess of
$1,575,001. Additionally, Rush was obligated to pay Bonefish's attorney's fees
if Bonefish had to bring suit to enforce its rights under the agreement.
Rush subsequently contacted Zaidins to request a "carve-out" from the
Bonefish Agreement so that he could engage Vasak for the sole purpose of
presenting an offer from his prospective buyer, without breaching the Bonefish
Agreement. According to Rush, Bonefish never would have found Vasak's
prospective buyer because that buyer was not in any way associated with the
document-destruction industry and was known only to Vasak. While Rush
claimed that Zaidins consented to his request, 3 Zaidins denied the existence of
any such verbal agreement. Zaidins continued to work on Rush's behalf for a
deal with other potential buyers, including a company named Stericycle.
On March 7, 2016, Rush formally engaged K-2 and Vasak to pursue a
possible sale of Autoshred to Levitt and Pelas; thereafter, the parties executed
3
The alleged amendment was not in writing, contrary to the Bonefish agreement.
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an NDA. Vasak proceeded to act as an intermediary between Rush and Levitt.
Vasak informed Levitt that Rush was also utilizing the services of an additional
unnamed broker, and that, per Rush, other unnamed firms were interested in
buying Autoshred.
A. Levitt Letter of Intent
On May 9, 2016, Levitt, on behalf of Pelas, submitted an LOI to purchase
Autoshred's assets for $1,700,000. Rush signed the LOI, and then he and Levitt
spoke directly for the first time, and it appeared the parties had a deal.
Nevertheless, Rush subsequently contacted Zaidins and pressed him to find out
whether Stericycle was going to make an offer. According to Zaidins, this was
when Rush admitted to him that he had breached the Bonefish exclusivity
agreement and had signed an LOI with another broker's buyer.
On May 11, 2016, Levitt and Rush met in person for the first time, over
lunch. During the meal, Rush showed Levitt an unsigned draft LOI he had
received from Stericycle that morning offering to purchase Autoshred for
$2,000,000. Rush said that he was considering this offer. Levitt understood that
Rush wanted a better offer from him, notwithstanding their signed LOI.
As a result, Levitt submitted a revised LOI that same day, wherein he
increased his offer to $1,754,000. After speaking with Rush and in the interests
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of closing the deal, Vasak also agreed to reduce his commission by $25,000
thereby sweetening the deal by a total of $79,000. Rush, who did not like some
of the terms of the Stericycle unsigned draft LOI, accepted Levitt's offer on May
12, 2016, and the parties set a closing date of July 15, 2016.
B. Bonefish demand
On May 19, and June 20, 2016, Bonefish sent letters to Rush asserting that
he had breached the Bonefish Agreement by pursuing potential buyers for
Autoshred without Bonefish's assistance, and demanding payment of a
transaction fee in the amount of $112,750. Rush refused to make this payment ,
which he described as a "shakedown." Rush claimed that he told Vasak at this
time about the May and June letters and that Bonefish was trying to collect a fee
for "services that were not completed." Rush told other business associates that
Zaidins broke his word about the carve-out and was a "real dirt bag." At his
deposition, Rush stated that Zaidins should have tried to work something out
with Vasak if he had "some contention."
On July 5, 2016, Bonefish filed a complaint under Docket No. L-1782-16
against Rush and Autoshred, alleging: 1) breach of contract; 2) violation of the
covenant of good faith and fair dealing; 3) unjust enrichment; and 4) interference
with prospective economic advantage. Bonefish sought damages and counsel
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fees. Bonefish also included in its complaint several counts alleging tort and
conspiracy claims against the unknown prospective buyer of Autoshred and its
broker.
On July 11, 2016, Rush's counsel sent Levitt's counsel an e-mail
addressing the terms of their deal and also advising for the first time of the June
(but not the May) demand letter from Bonefish. Counsel wrote that Autoshred
has received correspondence threatening litigation by
[Bonefish] in connection with this transaction.
Bonefish is another business broker firm from Dallas,
Texas. Bonefish alleges that Autoshred had an
exclusive broker agreement to utilize its services as the
sole agent to solicit and present an LOI for the sale of
the business. Bonefish also has threatened claims
against "the buyer of the Competing LOI for tortious
interference with Bonefish's contractual relations and
unlawful interference with prospective economic
advantage."
He attached a copy of the letter to his e-mail.
After Levitt, who had no prior knowledge of the names Bonefish and
Zaidins, read the e-mail and letter, he called Rush for an explanation,
specifically asking if he was going to be sued. According to Levitt, Rush
responded that the dispute with Bonefish "should not concern" Levitt because
of the "verbal carve-out" from the Bonefish exclusivity agreement, and that
Bonefish's claim against Rush was without merit and that there was no risk to
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Levitt in proceeding to closing on the APA. 4 Per Levitt, Rush further stated that
Levitt was also protected by the indemnification provision in their draft APA.
Rush acknowledged that Levitt had testified to the former statement
allegedly made by him (without confirming or denying whether he actually made
the statement); however, he denied making the latter statement regarding the
indemnification provision because the APA was still in draft form. He did not
recall any communication with Levitt regarding the Bonefish complaint. Rush
knew that Levitt and Vasak had not acted to intentionally harm Bonefish.
Levitt forwarded the e-mail and attached letter to Vasak, who assured
Levitt that he would be protected by the indemnification provision. In Vasak's
view: 1) Levitt was not involved because he had nothing to do with the
arrangement between Rush and Bonefish; 2) there was no reason to doubt Rush's
assurances that there was a carve-out with respect to K-2 and Levitt; and 3) in
any event, the tail in the Bonefish Agreement only applied to post-termination
deals that had been negotiated, arranged or introduced by Bonefish, and the deal
with Pelas did not qualify.
4
Zaidins understood that Rush told Levitt that Bonefish did not have a valid
claim.
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On July 13, 2016, Levitt's counsel sent an e-mail to Rush's counsel,
advising that Levitt, who had now read the Bonefish complaint, consented to
Rush's request that they postpone the closing so that Rush could have additional
time to resolve the dispute with Bonefish. Rush claimed not to remember this.
According to Vasak, Rush also asked Vasak to contribute some of his transaction
fee towards a settlement offer to Bonefish. Rush later claimed not to remember
who came up with this idea but acknowledged that he was interested in reaching
a compromise with Zaidins. In any event, in an agreement with Rush dated July
18, 2016, Vasak agreed to place $10,000 in escrow for this purpose.
C. July 20, 2016, closing
On July 20, 2016, Pelas assigned its rights under the LOI to Imwoth LLC
(Imwoth), an entity created by Levitt prior to the sale specifically for the
purchase of Autoshred. 5 That same day, Imwoth completed the purchase of
Autoshred's assets, which included two trucks. The APA between Autoshred,
Rush and Imwoth provided that Imwoth would pay $1,525,000 in cash to
Autoshred and execute the Note for the remaining balance of $229,000. Imwoth
granted Autoshred a first lien/security interest in the trucks as collateral security.
5
Levitt dissolved Pelas in the first quarter of 2017.
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Levitt, as Imwoth's principal member, signed a personal Guaranty as collateral
security for Imwoth's performance.
1. APA
The APA contains several provisions important to this case. Section 7.10
provides that "[n]either the Seller nor anyone acting on its behalf has incurred
any liability or obligation to any broker, finder or agent for any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement for which the Buyer shall be responsible in whole or in part ."
Section 13.02 of the APA contained an indemnification provision that
states:
13.02 Indemnity by the Seller. The Seller agrees to
unconditionally indemnify and hold harmless the Buyer
and its successors . . . on demand, in each case past,
present, or as they may exist at any time after the date
of this Agreement (the "Buyer Indemnitees") against
and in respect of any and all claims, suits, actions,
proceedings (formal and informal), investigations,
judgments, deficiencies, damages, settlements,
liabilities, losses, costs and legal and other expenses
arising out of or based upon:
(a) any breach of any representation, warranty,
covenant or agreement of the Seller contained in this
Agreement or in any other Transaction Documents
executed and delivered by the Seller; and
(b) losses, liabilities, deficiencies, penalties,
interest, claims, damages, actions, suits, proceedings,
A-1280-19
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settlements, judgments, costs and expenses (including
reasonable attorneys' fees) arising out of, in connection
with or incident to:
(i) any breach by the Seller of any
covenant, promise, agreement, representation
and/or warranty contained in this Agreement;
(ii) any false, incorrect or misleading
representation or warranty or breach thereof
made by or on behalf of the Seller or any Owner
in this Agreement . . . or in any of the Transaction
Documents;
....
(iv) any and all debts, liabilities,
obligations and duties of the Seller of any nature
whatsoever, including any liabilities which arise
from or relate to any property, Business,
occupation, withholding or similar taxes, and
any interest or penalty thereof, prior to the
Closing Date, whether known or unknown and
not expressly assumed by the Buyer pursuant to
this Agreement, and any and all actions and
conduct by or on behalf of the Seller or its
employees, contractors or agents which occurred
on or prior to the Closing Date;
(v) any attempt (whether or not successful)
by any third party to cause or require the Buyer
to pay any liability of, or claim against, the
Seller of any kind in respect to the operation of
the Business prior to the Closing Date,
including, without limitation, any of the
Excluded Liabilities.
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Pursuant to Section 13.04 entitled "Defense of Claims":
Any Buyer Indemnitee or Seller Indemnitee (the
"Indemnified Party") seeking indemnification
under this Agreement shall give to the party
obligated to provide indemnification to such
Indemnified Party (the "Indemnitor") a written
notice (a "Claim Notice") describing in
reasonable detail the facts giving rise to any
claim for indemnification hereunder promptly
upon learning of the existence of such claim.
(a) Third Party Claims. The obligations
and liabilities of an Indemnifying Party under
this Section 13 with respect to claims of any third
party which are subject to the indemnification
provided for in this Section 13 ("Third Party
Claims") shall be governed by and contingent
upon the following additional terms and
conditions:
(i) Upon receipt by the
Indemnitor of a Claim Notice from an
Indemnified Party with respect to any
claim of a third party, such Indemnitor may
assume the defense thereof with counsel
reasonably satisfactory to the Indemnified
Party and, in such event, shall agree to pay
and otherwise discharge with the
Indemnitor's own assets all judgments,
deficiencies, damages, settlements,
liabilities, losses, costs and legal and other
expenses related thereto; and the
Indemnified Party shall cooperate in the
defense or prosecution thereof and shall, at
the Indemnitor's expense, furnish such
records, information and testimony and
attend all such conferences, discovery
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proceedings, hearings, trials and appeals as
reasonably may be requested in connection
therewith. If the Indemnitor does not
assume the defense thereof, the Indemnitor
shall similarly cooperate with the
Indemnified Party in such defense or
prosecution. If it would be detrimental to
the defense of the Indemnified Party for the
same counsel to represent both the
Indemnified Party and the Indemnitor, then
the Indemnified Party shall be entitled to
retain its own counsel, . . . at the expense
of the Indemnifying Party.
(ii) If the Indemnitor shall have
failed to assume the defense of any claim
in accordance with the provisions of this
Section, then the Indemnified Party shall
have the absolute right to control the
defense of such claim and, if and when it is
finally determined that the Indemnified
Party is entitled to indemnification from
the Indemnitor hereunder, the fees and
expenses of the Indemnified Party's
counsel shall be borne by the Indemnitor
and paid by the Indemnitor to the
Indemnified Party within five (5) business
days of written demand therefor, but the
Indemnitor shall be entitled, at its own
expense, to participate in (but not control)
such defense.
Pursuant to subsection (b) of Section 13.05 entitled "Limitations of
Indemnity Obligations":
Notwithstanding any provision contained herein
to the contrary, no Indemnified Party shall be entitled
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to indemnification hereunder with respect to any false,
incorrect or misleading representation or warranty in
this Agreement (including the Exhibits and Schedules
hereto) or in any of the transaction Documents or
breach thereof made by an Indemnifying Party that such
Indemnified Party had actual knowledge of on the
closing Date, where such actual knowledge was
acquired because of the events, circumstances and
consequences thereof were clear on its face from
materials actually provided to or obtained by the
Indemnified Party prior to Closing.
2. Promissory Note
Under the Note, Imwoth promised to pay Autoshred $229,000 plus interest
in twenty-five monthly payments with the final payment due on August 14,
2018. If Imwoth defaulted, Autoshred was authorized to: 1) declare the full
amount outstanding immediately due, plus seven percent interest until full
payment was made; and 2) recover its costs and fees, including reasonable
attorney's fees, in enforcing its rights under the Note.
3. Guaranty
As collateral security for Imwoth's performance under the Note, Levitt
executed a personal Guaranty, which provided, in pertinent part, as follows:
1. As a material inducement to the Lender [Autoshred]
to make the Loan to the Borrower [Imwoth], with
knowledge that the Lender is making the Loan in
reliance upon this Guaranty, . . . and intending to be
legally bound hereby, the undersigned, hereby
guarantees as surety, absolutely and unconditionally, to
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the Lender the prompt payment when due, whether at
maturity, by acceleration or otherwise, or as the same
may be renewed, modified or extended from time to
time, of all indebtedness which the Borrower may now
or hereafter owe to the Lender under the Promissory
Note evidencing the Loan.
2. Payment hereunder shall be made in any coin or
currency which, at the time of payment, is legal tender
in the United States of America for public and private
debts. The Guarantor further agrees that this Guaranty
may be enforced by the Lender in accordance with the
provisions hereof without first making demand upon or
proceeding against the Borrower.
3. Except as otherwise provided herein, the Guarantor
hereby waives notice of any of the Borrower's
Obligations heretofore or hereafter incurred, or
contracted or renewed or extended, and the Guarantor
further waives: (i) notice of acceptance of this
Guaranty by the Lender and any and all notices and
demands of every kind which may be required to be
given by any statute, rule or law, (ii) any defense, right
of set-off or other claim which the Guarantor may have
against the Borrower (until such time as the Borrower's
Obligations to the Lender have been fully and
completely satisfied), and (iii) presentment for
payment, demand for payment (other than as provided
for herein), notice of nonpayment or dishonor, protest
and notice of protest, diligence in collection and any
and all formalities which otherwise might be legally
required to charge the Guarantor with liability.
4. This shall be an agreement of suretyship as well as a
guaranty and the Guarantor agrees that this Guaranty
may be enforced by the Lender without the necessity at
any time of resorting to or exhausting any other security
or collateral given in connection herewith or with the
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Note through foreclosure or other proceedings or
actions otherwise and recovery hereunder shall not be
limited to such security or collateral.
5. Until this Guaranty shall terminate as herein set
forth, the undersigned shall have no right of
subrogation and waives any right to enforce any remedy
which it now has or may hereafter have against the
Borrower and any benefit of, and any right to
participate in, any security now or hereafter held by the
Lender.
6. Upon an Event of Default by the Borrower under the
Promissory Note and the expiration of any grace
periods applicable thereto, all existing and future
indebtedness of the Borrower to the undersigned will
be and is hereby subordinated to all of the Borrower's
Obligations and, so long as this Guaranty is in effect,
without the prior written consent of the Lender, shall
not be paid or withdrawn in whole or in part.
7. The obligations of the undersigned hereunder are
independent of the obligations of the Borrower and, in
the event of any default hereunder, a separate action or
actions may be brought and prosecuted against the
undersigned whether or not the Borrower is joined
therein or a separate action or actions is or are brought
against the Borrower. The Lender may maintain
successive actions for other defaults. The Lender's
rights hereunder shall not be exhausted by the Lender's
exercise of any of the Lender's rights or remedies or by
any such action or by any number of successive actions
until and unless all obligations hereby guaranteed have
been fully performed.
8. This Guaranty is a present, continuing, absolute and
unconditional guaranty and notice of its acceptance is
waived.
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9. This Guaranty shall remain in full force and effect
until full performance by the Borrower pursuant to all
of the terms of the Promissory Note, at which time this
Guaranty and the obligations of the Guarantor
hereunder shall cease and determine without any
further action by the parties hereto and the Lender shall
thereafter promptly return this Guaranty to the
Guarantor. No provision of this Guaranty or right of
the Lender hereunder can be waived nor shall the
undersigned be released from its obligations hereunder
except as set forth in the preceding sentence.
....
15. Except as provided in any other written agreement
now or at any time hereafter in force between the
Lender and the undersigned, this Guaranty shall
constitute the entire agreement of the undersigned with
the Lender with respect to the subject matter hereof and
no representation, understanding, promise or condition
concerning the subject matter hereof shall be binding
upon the Lender unless expressed herein.
....
21. THE GUARANTOR AND THE LENDER
HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF, OR OTHERWISE
RELATING TO THE NOTE, THIS AGREEMENT OR
ANY OTHER DOCUMENT OR INSTRUMENT
NOW OR HEREAFTER EXECUTED IN
CONNECTION THEREWITH OR WITH THE LOAN.
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D. Amended complaint in Bonefish action
On April 13, 2017, almost nine months after the closing, Bonefish filed
an amended complaint wherein it added Levitt, Pelas, Imwoth, Vasak and K-2
to its action and asserted claims against them for: 1) tortious interference with
prospective economic advantage; 2) tortious interference with contractual
relations; and 3) civil conspiracy. Zaidins later acknowledged that if Rush had
paid him, he would have had no claim against the Levitt defendants. In early
May, Rush and Autoshred filed an amended answer to this complaint.
On May 16, 2017, Levitt and Imwoth made a formal demand for defense
and indemnity from Autoshred under Sections 13.02(b)(iv) and (v) of the APA.
Rush denied this request based upon Section 13.05(b) of the APA because Levitt
had "actual knowledge" of Bonefish's potential claims against him and Imwoth
prior to the July 20, 2016, closing.
As a result, on June 8, 2017, Levitt and Imwoth advised Rush that he wa s
in breach of the APA, and that Levitt and Imwoth were going to
"prophylactically" set-off their counsel fees in the Bonefish action against the
remaining payments due on the Note. Imwoth made its last payment under the
Note on May 10, 2017, leaving a remaining principal balance of $136,627.57,
and retained possession of the two trucks.
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On July 28, 2017, Rush advised Levitt that Imwoth was in default on the
Note and that he had elected to accelerate the loan obligation and declare the
full amount due, with interest and costs and fees, plus return of the two trucks.
On August 21, 2017, in a letter to Levitt's counsel, Rush's counsel reiterated that
Section 13.05(b) was controlling and that contracts for indemnification were
construed against the indemnitee and would not be construed to indemnify the
indemnitee against losses resulting from its own tortious conduct .
On October 2, 2017, Levitt and Imwoth filed an answer to Bonefish's
complaint. They also filed a five-count crossclaim against Rush and Autoshred
seeking indemnification for any liability or legal fees incurred by them in the
Bonefish action pursuant to Section 13.02 of the APA. 6 They demanded a trial
by jury as to all issues.
Vasak and K-2 also filed an answer, wherein they asserted that Rush had
assured K-2 that, while Autoshred had retained another broker, there was no
problem with proceeding with the Pelas/Autoshred transaction. They also
asserted a crossclaim against Rush and Autoshred.
On August 29, 2017, Rush and Autoshred filed an answer to Levitt and
Imwoth's crossclaim. Then, on October 5, 2017, Rush and Autoshred filed a
6
Levitt and Imwoth later abandoned counts III, IV and V of their crossclaim.
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separate lawsuit against Levitt and Imwoth under Docket No. L-2804-17. In
their complaint, Rush and Autoshred asserted claims for: 1) breach of the Note
by Imwoth; 2) breach of the Guaranty by Levitt; 3) replevin seeking the return
of two trucks that Imwoth had acquired under the APA; and 4) conversion for
Imwoth's wrongful possession of the trucks.
On November 10, 2017, Levitt and Imwoth filed an answer to this
complaint, alleging as an affirmative defense that: 1) Rush and Autoshred had
materially breached the APA by refusing to indemnify and defend Levitt and
Imwoth in the Bonefish action; and 2) this breach excused the performance
obligations of Imwoth and Levitt under the Note and Guaranty. They demanded
a jury trial.
Thereafter, Levitt and Imwoth filed a motion to dismiss Rush's complaint
which the trial court denied by order dated March 20, 2018. In that same order,
the court consolidated the two actions under the docket number assigned to the
Bonefish complaint and directed that "[d]efendants' request for [t]rial by jury is
hereby stricken, defendants having waived same in open court on the record ."
E. Summary judgment motions
On June 19, 2018, the trial court denied Autoshred's first motion for
summary judgment, finding that there was a genuine dispute as to whether the
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APA required Autoshred to defend and indemnify Levitt and Imwoth under the
broad language in Section 13.02(a)(b)(v) referencing claims "arising out of, in
connection with or incident to" Autoshred's business operations prior to closing.
The court found that this language could arguably include the brokerage
agreement between Autoshred and Bonefish, but that it was not entirely clear.
The court noted that discovery was not complete and directed the parties to
complete the depositions of Zaidins, Vasak, Levitt and Rush.
Thereafter, on October 31, 2018, Levitt and Imwoth filed a motion for
summary judgment as to: 1) Bonefish's three tort claims against them; 2) their
claim for indemnification and legal expenses against the Rush defendants; and
3) the Rush defendants' claims against them alleging breaches of the Note and
the Guaranty, replevin and conversion. On November 20, 2018, the Rush
defendants filed a cross-motion seeking summary judgment on the four claims
they had asserted against Levitt and Imwoth.
In an order filed on February 25, 2019, with an accompanying opinion,
the trial court: 1) granted summary judgment in favor of Levitt, Imwoth, Vasak
and K-2 as to Bonefish's three tort claims and dismissed them with prejudice
based upon Bonefish's failure to prove malicious intent or that defendants had
acted in concert to commit an unlawful act or inflict injury on Bonefish; 2)
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denied summary judgment to Levitt and Imwoth on their indemnification claim
against Rush and Autoshred because there remained a genuine issue of fact as
to whether Section 13.02(a)(b)(i) of the APA required Autoshred to defend and
indemnify Levitt and Imwoth in the Bonefish action; and 3) granted summary
judgment to Autoshred and Rush on their claims for breach of the Note and
Guaranty by Imwoth and Levitt. 7
The trial court ordered Levitt to pay Autoshred $146,191.50 (the
remaining principal due on the Note plus interest) within forty-five days. It
reserved ruling on Rush and Autoshred's claims for conversion and replevin,
stating that it would dismiss these claims with prejudice if Levitt made timely
payment to Autoshred. The court also directed counsel for Rush and Autoshred
to submit an affidavit of services in support of an award of counsel fees and
costs pursuant to the default provision of the Note. 8
On March 8, 2019, Levitt and Imwoth filed a motion for reconsideration
arguing that the trial court: 1) had prematurely granted summary judgment
against them for a default on the Note and Guaranty because a jury could have
7
On April 5, 2019, Rush and Autoshred entered into a stipulation of dismissal
without prejudice as to all claims with Vasak and K-2.
8
Counsel for Rush and Autoshred submitted an affidavit of services dated
March 11, 2019, wherein he sought a counsel fee award of $38,423.76.
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23
found that the Rush defendants' refusal to indemnify them under the APA
excused their failure to perform; 2) had erred in finding that the Rush defendants
did not materially breach the APA by failing to honor the indemnification
provision; and 3) had erred in requiring Levitt to pay $146,191.50 within forty -
five days because its order was interlocutory and not subject to execution
pursuant to Rule 4:59. Rush and Autoshred filed a cross-motion for
reconsideration of the trial court's ruling that the import of the indemnification
provision could not be resolved on summary judgment. On April 18, 2019, the
trial court entered an order with an accompanying opinion denying the motion
for reconsideration filed by Rush and Autoshred as to the first two points raised;
however, the court did grant the final request and extended the time period for
payment of the amount due on the Note until forty-five days after entry of final
judgment. The court also denied the Rush defendants' cross-motion for
reconsideration.
F. Jury Trial and Bench Trial
On June 24, 2019, the day trial was to commence, the trial court decided,
over the objections of the Levitt defendants, to sever Levitt and Imwoth's claim
for indemnification and hold a plenary hearing on that claim on a later date.
Counsel for Rush and Autoshred supported the court's decision, asserting that it
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24
was for the court to interpret contracts of indemnification and that there was a
court order stating that Levitt and Imwoth had waived their right to a jury trial.
The subsequent trial of Bonefish's claims against Rush and Autoshred
resulted in a jury verdict finding Rush and Autoshred liable for breaching the
Bonefish agreement. The jury awarded Bonefish $75,000; in addition, the court
awarded Bonefish counsel fees of $57,504.42.
On August 20, 2019, the trial court held a bench trial solely on the claims
of Levitt and Imwoth against Rush and Autoshred seeking indemnification and
reimbursement of their legal expenses in the Bonefish action. At the trial, Levitt
repeated his version of events through July 11, 2016, when he first learned of
the Bonefish/Autoshred dispute. Levitt maintained that, during a phone call on
July 11, Rush told him that he "had nothing to worry about" and that Levitt was
protected by the indemnification language in the APA. Levitt stated that Vasak
also offered his assurances.
Levitt confirmed that he did not ask for any changes to the APA based
upon the Bonefish/Autoshred dispute prior to the closing. He stated that there
was no further discussion about Bonefish prior to the closing. Rush did add to
Section 7.06 of the APA the phrase "that have not been previously disclosed to
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25
the buyer." Levitt understood this to refer to Bonefish. Levitt claimed he had
spent $170,000 to date defending himself.
Rush denied that he had any phone conversation with Levitt on July 11,
2016, let alone a conversation about the indemnification provision in the draft
APA. Rush claimed he and Levitt did not talk about Bonefish at any point
between July 11 and July 20 and had no e-mail communications on the subject.
Additionally, Rush insisted that he and Levitt did not discuss the Bonefish
claims or the indemnification provision of the APA at the closing.
G. Judgment
On September 17, 2019, the trial court issued a written opinion denying
the Levitt defendants' claim for indemnification. On October 16, 2019, the trial
court issued an order dismissing with prejudice the claims of Levitt and Imwoth
against Rush and Autoshred. On the same date, the trial court entered judgment
with an accompanying opinion ordering Levitt and Imwoth to pay: 1)
$151,589.23 to the Rush defendants for the remaining amount of principal and
interest due on the note; and 2) $38,423.76 in counsel fees. It directed that these
amounts were due within forty-five days of the court's order, and that if Levitt
and Imwoth failed to comply, it would consider the Rush defendants' remaining
claims for conversion and replevin against the Levitt defendants.
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26
II.
On November 27, 2018, the Levitt defendants filed this appeal asserting
six claims of trial court error. We address each argument in turn.
A. Default on the Note and Guaranty
Levitt and Imwoth contend the trial court erred in prematurely granting
summary judgment to the Rush defendants on their claim for default on the Note
and Guaranty. They claim that a "jury may have determined that . . . Autoshred's
refusal to indemnify the Levitt Defendants under the APA excused their
performance obligations under the Note and Guaranty." They argue that the trial
court erred in deeming inapplicable our decision in Chance v. McCann, 405 N.J.
Super. 547 (App. Div. 2009). We disagree.
We review a grant of summary judgment de novo, applying the same
standard governing the trial court under Rule 4:46. Liberty Surplus Ins. Corp.
v. Nowell Amoroso P.A., 189 N.J. 436, 445-46 (2007); New Gold Equities Corp.
v. Jaffe Spindler Co., 453 N.J. Super. 358, 372 (App. Div. 2018). Summary
judgment is appropriate when there is no genuine issue as to any material fact
and the moving party is entitled to judgment as a matter of law. Brill v. Guardian
Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
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27
Generally, the court must "consider whether the competent evidential
materials presented, when viewed in the light most favorable to the non-moving
party, are sufficient to permit a rational factfinder to resolve the alleged disputed
issue in favor of the non-moving party." Ibid. A moving party is entitled to
judgment as a matter of law when the evidence presented is so one-sided that it
does not require submission to a jury. Id. at 533.
We review the interpretation of a contract de novo. Kieffer v. Best Buy,
205 N.J. 213, 222-23 (2011). In interpreting a contract, a court must try to
ascertain the intention of the parties as revealed by the language used, the
situation of the parties, the attendant circumstances, and the objects the parties
were striving to attain. Matter of Cnty. of Atlantic, 230 N.J. 237, 254 (2017);
Mantilla v. NC Mall Assocs., 167 N.J. 262, 272 (2001); Bosshard v. Hackensack
Univ. Med. Ctr., 345 N.J. Super. 78, 92-93 (App. Div. 2001); Nester v.
O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997). The judicial task is
merely interpretive; it is not to rewrite for the parties a different or better
contract. Kieffer, 205 N.J. at 222. To this end, a court must give contractual
terms their plain and ordinary meaning. Zacarias v. Allstate Ins. Co., 168 N.J.
590, 595 (2001).
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28
In granting summary judgment to Autoshred for the alleged default by
Imwoth and Levitt on the Note and Guaranty, the trial court found that there was
nothing in the Note indicating that Imwoth was excused from paying simply
because it asserted entitlement to indemnification for damages and attorney's
fees. Rather, when Imwoth stopped paying in May 2017, Imwoth defaulted on
the terms of the Note.
The trial court also rejected Levitt's contention that he did not breach the
Guaranty because there was no breach by Imwoth. In the court's view:
In the present matter, this court agrees with
Autoshred; Levitt did breach the Guaranty because
their [sic] obligations arose when Imwoth defaulted on
the Note. Additionally, the Guaranty provides an
express waiver of any defense right of set-off, or other
claim in which Levitt may have against Autoshred (¶ 3
of Guaranty). Not only did Levitt clearly sign the
Guaranty, as evidenced on page five (5), the Guaranty
is absolute and unconditional, and holds time is of the
essence in respect to payment. As it is clear to the court
that Levitt did not have a right to setoff, the outstanding
balance and interest on the Note is due and owing.
In its decision denying reconsideration, the trial court provided this further
explanation:
In granting Autoshred's motion for summary
judgment under the [N]ote and [G]uarant[y] however,
the court has also determined that even if Autoshred
breached the indemnification provision, Imwoth would
not be relieved of its obligations of the underlying
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29
transaction of the APA, i.e., the purchase of the
Autoshred business. That transaction is now complete.
Autoshred has sold all of its assets to Imwoth and
Imwoth has fully paid Autoshred, in the form of cash
and a promissory note, the full amount due. No claim
is being advanced by Imwoth that the purchased assets
were not as represented. Nor are the Imwoth defendant
seeking recission of the underlying business sale.
Unlike the circumstance in the Chance case
where there was a claim that one party did not perform
its obligations under the essential contract, i.e., to
promote the firm to existing clients, the Autoshred
parties have, save for the still unresolved
indemnification issue, fully performed its obligation
under the APA. The asset transaction has closed- the
assets have been delivered as promised and payment
has been tendered and received. The indemnification
issue, as indisputably intended by the parties, has
survived the asset closing. Thus, in that sense the
indemnification provision is severable from the
underlying asset transaction. That is not unusual and
[is] in fact common since whether indemnification is
due from one party to another often dependent, as it
would be here, on the outcome of the litigation.
There is no basis or even an attempt by Imwoth
to unwind the asset transaction. Rather, Imwoth claims
it has the right, by virtue of the unresolved
indemnification provision to offset its potential
damages against the amount due under the [N]ote; to
essentially treat the [N]ote as a kind of escrow fund
reserved to protect Imwoth against claims asserted by
Bonefish. That right, however, does not exist by law or
fact in this case and that is true even if its claims for
indemnification are successful. The . . . [N]ote
executed by Imwoth does not provide that it may be
relieved of its obligation under the note in the event
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30
Autoshred breached its obligation to indemnify
Imwoth. The accompanying [G]uarant[y] signed by the
principal, on the other hand specifically provides that
the principal waives any right to an offset.
....
If Imwoth wished that its obligations under the
Note could be offset against the breach of Autoshred's
indemnification duties, it should have ensured that the
APA or the Note itself explicitly stated so. Neither do.
As such, . . . the Levitt parties' motion . . . [is] hereby
DENIED.
Before this court, Levitt and Imwoth renew their contention that the trial
court erred in granting summary judgment to the Rush defendants on their claim
for default on the Note and Guaranty. We disagree.
Preliminarily, we note that both the trial court in its decisions and
Autoshred in its brief on appeal misstate to whom Levitt waived a right of set-
off. According to paragraph three of the Guaranty, Levitt waived "any defense,
right of set-off or other claim which the Guarantor may have against the
Borrower (until such time as the Borrower's Obligations to the Lender have been
fully and completely satisfied)." The "Borrower" was Imwoth, not Autoshred.
As such, Levitt did not expressly waive a right of set-off against Autoshred.
Nevertheless, in reading the Guaranty, we do not discern how Levitt could
have claimed a right of set-off in the event of a breach of the APA by Imwoth.
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31
In the Guaranty, Levitt agreed: 1) "absolutely and unconditionally" to pay on
demand to Autoshred whatever Imwoth owed under the Note; 2) that Autoshred
could enforce the Guaranty without first proceeding against Imwoth; 3) that his
obligations under the Guaranty were "independent of the obligations" of
Imwoth; 4) that Autoshred could sue Levitt for breach of the Guaranty without
joining Imwoth; 5) that no provision in the Guaranty could be waived, "nor shall
the undersigned be released from its obligations hereunder" until full
performance by Imwoth under the Note; and 6) that the Guaranty constituted the
entire agreement between Levitt and Autoshred and that no other conditions
applied unless expressed therein.
Thus, we are satisfied that Levitt did in fact breach the Guaranty, and that
he should have paid Autoshred on demand after Imwoth stopped paying on the
Note. We do not find it relevant for purposes of the Guaranty whether Imwoth
was in the right or in the wrong in stopping performance and claiming a right of
set-off. Levitt's obligations were separate and absolute. As such, we affirm that
portion of the trial court's order directing Levitt to pay the remaining balance on
the Note plus interest, i.e., $151,589.23.
As to Imwoth's breach, both the APA and the Note are silent as to any
right of Imwoth, upon an alleged breach of the APA by Autoshred, to stop
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32
payment under the Note and set-off its expenses in connection with the alleged
breach against the amount owed. Rather, Section 13.04(a)(ii) of the APA
provides that, in the event of a third-party claim against Imwoth, the fees and
expenses of Imwoth's counsel shall be borne and paid by Autoshred "if and when
it is finally determined that [Imwoth] is entitled to indemnification." The Note
simply defines a "default" as Imwoth's failure to comply with any term of the
Note whereupon Autoshred was authorized to accelerate all amounts due. We
therefore conclude that Imwoth breached the Note by ceasing to pay Autoshred
and engaging in self-help to ensure its counsel fees in the Bonefish case were
paid prior to any determination that it was entitled to indemnification.
In making its argument, Imwoth relies upon Galpen v. Galpen, 221 N.J.
Super. 532, 538-39 (Ch. Div. 1987), for the proposition that "[a] right of set-off
exists between two parties each of whom under an independent contract owes
an ascertained amount to the other and a claim for payment is made permitting
each party to set-off his respective debt by way of mutual deduction against such
a claim." Here, though, there are not two independent contracts as the Note was
made an exhibit to the APA, and there was no "ascertained" amount due to
Imwoth, but rather an alleged claim by Imwoth for an unspecified amount of
money.
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33
Additionally, we find that Imwoth's reliance upon the Chance case is
unavailing since that case did not involve a third-party suit and a severable claim
for indemnification, but instead dealt with an alleged breach of a primary
material obligation by one of the parties to the at-issue agreement. Chance, 405
N.J. Super. at 566-67.
In sum, we reject the claims of Imwoth and Levitt that the trial court
prematurely entered summary judgment against them on Autoshred's claims of
default on the Note and Guaranty.
B. Summary Judgment - Indemnification
Levitt and Imwoth contend that the trial court erred by denying their
motion for summary judgment on their claim for indemnification against Rush
and Autoshred. We disagree, but for different reasons than those expressed by
the trial court. 9
"The objective in construing a contractual indemnity provision is the same
as in construing any other part of a contract – it is to determine the intent of the
9
See Hayes v. Delamotte, 231 N.J. 373, 387 (2018), "[I]t is well-settled that
appeals are taken from orders and judgments and not from opinions, oral
decisions, informal written decisions, or reasons given for the ultimate
conclusion." (quoting Do-Wop Corp. v. City of Rahway, 168 N.J. 191, 199
(2001)).
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34
parties." New Gold, 453 N.J. Super. at 385 (quoting Kieffer, 205 N.J. at 222).
The interpretation of a contract cannot be decided on summary judgment where
there is uncertainty, ambiguity or the need for parol evidence to aid in
interpretation. Serico v. Rothberg, 234 N.J. 168, 178 (2018). An ambiguity in
a contract exists if the terms of the contract are susceptible to at least two
reasonable alternative interpretations. Nester, 301 N.J. Super. at 210.
An ambiguous indemnity provision must be "strictly construed against the
indemnitee." Kieffer, 205 N.J. at 225; Mantilla, 167 N.J. at 272. Moreover, a
contract will not be construed to indemnify the indemnitee against losses
resulting from its own independent fault, active wrongdoing or tortious conduct,
unless such an intention is expressed in unequivocal terms in the contract.
Kieffer, 205 N.J. at 224; Mantilla, 167 N.J. at 269.
"In determining whether an action alleges 'active wrongdoing,' the
'[a]llegations in the pleadings may be a starting point . . . , but the actual facts
developed during trial should control.'" New Gold, 453 N.J. Super. at
387. Pursuant to this "after-the-fact" approach, an indemnitee may recover
counsel fees "'so long as the indemnitee is [adjudicated] free from active
wrongdoing regarding the injury to the plaintiff and has tendered the defense to
the indemnitor at the start of the litigation.'" Mantilla, 167 N.J. at 271 (quoting
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35
Central Motor Parts Corp. v. E.I. duPont deNemours, 251 N.J. Super. 5, 11 (App.
Div. 1991)).
In the portion of its February 25, 2019, opinion denying summary
judgment to Levitt and Imwoth on their indemnification claim against the Rush
defendants, the trial court found as follows:
In the present matter, the court again finds that a
genuine issue of fact exists as to whether the APA
requires Autoshred to defend and indemnify Imwoth in
the Bonefish litigation. Section 13.02(a)(b)(i) of the
APA provides Autoshred "agrees to unconditionally
indemnify and hold harmless Defendant Imwoth
against any claims, suits, actions or proceedings . . .
arising out of, in connection with or incident to any
breach of any representation contained in the APA."
The parties' additional discovery has not clarified in
what instances the indemnification clause specifically
and narrowly applies, nor has discovery made the
phrasing of section 13.02 any less broad and
ambiguous. As such, the question of whether the APA
requires Autoshred to defend and indemnify Imwoth in
the Bonefish litigation creates a genuine issue of fact
that must be determined at the time of trial. Therefore,
the Levitt defendants' motion for summary judgment is
hereby DENIED as to contractual defense and
indemnification.
In its April 18, 2019, opinion denying the Levitt defendants' motion for
reconsideration, the trial court first noted that the Levitt defendants argued that
the court had not considered the deposition testimony from Levitt and others, or
the fact that the indemnification provision already existed in the draft APA when
A-1280-19
36
Levitt learned of the Bonefish demand letter on July 11, 2016. The court then
reiterated that discovery had not made the phrasing of Section 13.02 any less
broad or ambiguous, and that "[t]o make a definitive ruling on the defense and
indemnification issue when the intent of the parties is so muddied would be
against the basic tenets of Brill."
On appeal, Levitt and Imwoth renew their contention that Sections
13.02(b)(iv) and (v) of the APA clearly and unambiguously required the Rush
defendants to defend and indemnify them for the expenses they incurred in the
Bonefish action. They insist that the record before the trial court on summary
judgment unequivocally showed that the Bonefish action arose solely as the
result of the conduct of the Autoshred defendants prior to closing. Without yet
taking into account the limiting provision of Section 13.05(b), we agree.
Based upon our review of the APA, we agree with the Levitt defendants
that Section 13.02 is not ambiguous and that it allowed for indemnification by
Autoshred in connection with the claims asserted by Bonefish. Bonefish's
claims in the amended complaint clearly implicated Section 7.10 of the APA
wherein the Rush defendants asserted that they had not incurred any liability to
any broker for any brokerage fees with respect to the transaction contemplated
by the APA for which Levitt and Imwoth shall be responsible in whole or in
A-1280-19
37
part. In Section 13.02, the Rush defendants agreed to unconditionally indemnify
for any claims or liabilities, including legal expenses arising out of a breach of
any representation in the APA.
Although the Rush defendants argued (and the trial court ultimately found
in its decision following the plenary hearing) that indemnification was
nonetheless precluded because Bonefish alleged tortious misconduct and
conspiracy on the part of the Levitt defendants themselves, we cannot agree. It
is true that the APA does not contain an unequivocal provision extending
indemnification for active wrongdoing or tortious conduct on the part of the
indemnitee. However, as noted by the Levitt defendants, the trial court granted
summary judgment and dismissed Bonefish's claims against them, thus
adjudicating them to be free from active wrongdoing under the after -the-fact
approach in Mantilla and Central Auto Parts. Thus, the conduct of the Levitt
defendants was no longer at issue at the time the court considered their motion
for summary judgment on the indemnification provision. As previously noted,
the pleadings in a case are only a starting point and an indemnitee may recover
counsel fees from the indemnitor so long as the indemnitee is adjudicated free
from active wrongdoing regarding the injury to the plaintiff. Thus, the Levitt
A-1280-19
38
defendants were not precluded from indemnification because of Bonefish's tort
and conspiracy claims alleged against them.
However, while we do not find Section 13.02 to be ambiguous or that the
Levitt defendants were precluded from indemnification because of the nature of
the Bonefish pleadings against them, we do conclude a question of fact remained
as to whether Rush properly notified the Levitt defendants of the Bonefish
action, given the conflicting deposition testimony of Levitt, Vasak, Rush and
Zaidins. As a result, we affirm the trial court's denial on summary judgment of
the Levitt defendant's claim for indemnification.
C. Denial of Indemnification after Plenary Hearing
Levitt and Imwoth also contend that the trial court erred in denying their
claim for indemnification following the bench trial. This argument has merit.
We therefore vacate the dismissal of their indemnification claim and remand the
matter to the trial court for additional findings.
In reviewing a trial court's conclusions in a non-jury case, we give
substantial deference to the lower court's findings of fact and conclusions of law.
Cesare v. Cesare, 154 N.J. 394, 412 (1998) (citing Rova Farms Resort v. Inv.
Ins. Co., 65 N.J. 474, 483-84 (1974)). An appellate court should disturb these
findings only where there is no doubt they are inconsistent with the relevant,
A-1280-19
39
credible evidence presented below, such that a manifest denial of justice would
result from their preservation. Ibid. It is of no consequence that the reviewing
court suspects that it might have reached a different result, or that all testimonial
or evidentiary issues were resolved in favor of one side. State v. Johnson, 42
N.J. 146, 162 (1964).
In its September 17, 2019, opinion denying the Levitt defendants' claim
for indemnification, the trial court found as follows:
Paragraph 13.02 of the APA governs the extent
and nature of the indemnity by seller Autoshred to
Buyer Imwoth. This paragraph covers not only the
liabilities of Autoshred but also "any and all claims,
suits, actions, proceedings (formal and informal)."
Clearly therefore this indemnity language would cover
attorney fees and court costs incurred by Imwoth in
connection with any litigation where a third party sued
Imwoth for actions taken or liabilities incurred by
Autoshred.
However, while the language of the APA
addresses that type of litigation, it does not address
third party actions taken against Imwoth for its own
actions or liabilities. Here, all the claims made by
Bonefish against Imwoth had to do with Imwoth's own
alleged actions, e.g. Imwoth's tortious interference with
the contract between Bonefish and Autoshred, its
engaging in a civil conspiracy against Bonefish and the
like. If Imwoth wanted indemnification from
Autoshred for its own actions, it was necessary to
provide for the same in the APA. Furthermore, Imwoth
cannot reasonably claim that it was the intention of the
parties to extend the indemnity to that extent. As stated
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40
above, Imwoth knew of Bonefish's claims against
Autoshred before the closing and, more specifically,
also knew that Bonefish intended to sue Imwoth for its
own alleged actions and even knew the nature of the
causes of action Bonefish intended to bring.
At the plenary hearing, Mr. Levitt confirmed he
was aware of the likelihood of the Bonefish litigation
and also that he and/or his company would be sued as
well. It was incumbent on him then, if he wished to be
indemnified for his or the company's own alleged
actions, to have the contract amended to so provide.
That was not done and the court cannot provide a more
advantageous agreement for Imwoth than the one it
negotiated with Autoshred.
The Levitt defendants argue that, in dismissing their claim after the
plenary hearing, the trial court failed to make necessary credibility
determinations and findings of fact given the conflicting deposition and trial
testimony in this case. We agree as to the issue of whether Levitt was properly
notified by Rush of the Bonefish action and had, at the time of the closing,
"actual knowledge" of a breach of the APA as that phrase was defined in the
APA.
Throughout this litigation, Rush and Autoshred maintained that
subsection (b) of Section 13.05 negated the indemnification claim Levitt and
Imwoth might otherwise have had because it precluded indemnification "with
respect to any false, incorrect or misleading representation or warranty in this
A-1280-19
41
Agreement . . . or in any of the transaction Documents or breach thereof made
by an Indemnifying Party that such Indemnified Party had actual knowledge of
on the closing Date." (emphasis added). According to the APA, this "actual
knowledge" had to have been acquired "because of the events, circumstances
and consequences thereof were clear on its face from materials actually provided
to or obtained by the Indemnified Party prior to Closing."
Based on our review of the record, while counsel for Rush and Autoshred
undeniably forwarded the Bonefish demand letter to Levitt prior to the closing,
this did not necessarily mean that Levitt had "actual knowledge" of a breach by
Rush since the "circumstances and consequences" of Bonefish's claims were
arguably not made "clear" to Levitt. A significant portion of the record indicated
that Rush denied the validity of Bonefish's "frivolous" claims at the time they
were made known to Levitt. In both his deposition and hearing testimony, Levitt
insisted that Rush told him that the dispute with Bonefish was without merit and
"should not concern" Levitt because of the verbal carve-out. According to
Vasak, Rush told him that Zaidins was trying to collect a fee for "services that
were not completed" and in disregard of the carve-out. Rush admitted telling
others that Zaidins was a "real dirt bag," who was breaking his word regarding
the verbal carve-out and trying to "shake down" Rush.
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42
The mutually corroborative testimony of Levitt, Vasak and Zaidins was
juxtaposed against Rush's deposition and hearing testimony wherein he first did
not recall conversing with Levitt about the Bonefish suit, and then maintained
that he never discussed the ramifications of the suit or the indemnification clause
in the APA with Levitt. Based on our review of the record, Rush's testimony
defied belief. Levitt surely would have amended the APA to further protect
himself, had he not been reassured that Rush would take care of him.
Thus, to the extent Rush disclosed a possible breach of Section 7.10 of the
APA which assured that Rush and Autoshred had not incurred any liability to
any broker for brokerage fees with respect to the sale of Autoshred for which
Levitt and Imwoth would be responsible, he arguably also undercut this
disclosure and the clarity of the consequences by indicating that the claim was
frivolous. Levitt and Imwoth had no independent knowledge of the contract
negotiated by Rush and Zaidins or of any amendments thereto. Even Zaidins
admitted that he knew he had no independent claims against Levitt and Imwoth
and that his suit rested upon Rush's actions.
Given the lack of findings by the trial court, especially on the issue of
credibility, we vacate the denial of Imwoth's claim for indemnification, and
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43
remand for more findings regarding the applicability of Section 13.05(b) of the
indemnification provision.
D. Waiver of Jury Trial
Levitt and Imwoth further contend that the trial court erred in denying
their demand for a jury trial on their indemnification claim. They assert that,
although there is a court order stating that they waived their right to a jury trial
"in open court," this waiver applied only to the default claim asserted against
them in Rush and Autoshred's complaint, not to their crossclaim for
indemnification against the Rush defendants in the Bonefish action. We
disagree.
We acknowledge that Levitt and Imwoth demanded a jury trial in their
answer to the Bonefish complaint and in their crossclaim against the Rush
defendants wherein they alleged that they were entitled to indemnification under
the APA. Levitt and Imwoth similarly asserted as an affirmative defense in the
Rush action that Rush breached the APA by failing to defend and indemnify
them in the Bonefish complaint and demanded a jury trial. However, Levitt and
Imwoth have produced nothing indicating that the jury trial waiver set forth in
the trial court's order consolidating the two cases applied only to the Rush action.
A-1280-19
44
As a result, we reject the Levitt defendants' contention that the trial court erred
in denying their demand for a jury trial on their indemnification claim.
E. Hearing on Indemnification Claim
Levitt and Imwoth also contend that the trial court erred in holding a
summary hearing under Rule 4:67-1 on their claim for indemnification. We
disagree. The court held a plenary hearing/bench trial on a severed claim under
Rule 4:35-3. There was no motion to convert the plenary hearing into a
summary hearing. The parties did not agree to such a conversion. The Levitt
defendants' contention to the contrary lacks merit.
F. Counsel Fees
Levitt and Imwoth next contend that the trial court erred in its counsel fee
award to the Rush defendants based upon the fee-shifting provision in the Note.
We disagree.
Each litigant in New Jersey is required to pay his own fees and costs,
unless otherwise provided by court rule, statute or contract. In re Niles Trust,
176 N.J. 282, 294 (2003); Henderson v. Camden Cnty. Mun. Util. Auth., 176
N.J. 554, 564 (2003). The granting of counsel fees is a matter left to the trial
court's discretion and fee determinations should be disturbed only where there
has been a clear abuse of discretion. Giarusso v. Giarusso, 455 N.J. Super. 42,
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51 (App. Div. 2018). A trial court decision will constitute an abuse of discretion
where "the decision [was] made without a rational explanation, inexplicably
departed from established policies, or rested on an impermissible basis." Saffos
v. Avaya Inc., 419 N.J. Super. 244, 271 (App. Div. 2011).
In making a fee award, a court must first calculate the "lodestar," i.e., "the
number of hours reasonably expended multiplied by a reasonable hourly rate."
Rendine v. Pantzer, 141 N.J. 292, 334-35 (1995). "Trial courts should not accept
passively the submissions of counsel to support the lodestar amount" but should
instead inquire as to what a reasonable amount of time expended should have
been, as opposed to the hours actually expended by counsel. Id. at 335;
Giarusso, 455 N.J. Super. at 51.
In determining the reasonableness of a fee application, the court must
consider
(1)[t]he time and labor required, the novelty and
difficulty of the questions involved, and the skill
requisite to perform the legal service properly; (2) the
likelihood, if apparent to the client, that the acceptance
of the particular employment will preclude other
employment by the lawyer; (3) the fee customarily
charged in the locality for similar legal services; (4) the
amount involved and the results obtained; (5) the time
limitations imposed by the client or by the
circumstances; (6) the nature and length of the
professional relationship with the client; (7) the
experience, reputation, and ability of the lawyer or
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lawyers performing the services; and (8) whether the
fee is fixed or contingent.
[R.P.C. 1.5(a).]
The trial court can "'reduce the hours claimed by the number of hours
spent litigating claims on which the party did not succeed and that were "distinct
in all respects from" claims on which the party did succeed.'" Rendine, 141 N.J.
at 335 (quoting Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)). It
can also exclude time that is not explained in sufficient detail to determine its
reasonableness. Rendine, 141 N.J. at 337. Ultimately, the final fee award need
not be proportionate to the amount of damages recovered. Id. at 336.
According to Rule 1:7-4, a court in non-jury trials and on motions must
"by an opinion or memorandum decision, either written or oral, find the facts
and state its conclusions of law." In particular, the court must give reasons when
awarding attorney's fees. Gordon v. Rozenwald, 380 N.J. Super. 55, 79 (App.
Div. 2005); Clarke v. Clarke ex rel. Costine, 359 N.J. Super. 562, 572 (App.
Div. 2003). The absence of adequate findings will generally warrant a reversal
of the lower court's decision. Heinl v. Heinl, 287 N.J. 337, 347 (App. Div.
1996).
After obtaining summary judgment on Autoshred's claim of default on the
Note, counsel for Rush and Autoshred submitted a certification seeking
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$38,423.87 in fees and costs based upon a fee of $350 per hour. Counsel
acknowledged that there was some overlap with the Bonefish action, but
asserted that he had tried to parse out what was billed in connection with the
Imwoth default. He noted that "the entries relating to depositions set forth the
total time spent, which included the Bonefish litigation. I have not included
services relating to the depositions of Bonefish's representative (Zaid ins) and
the co-defendant broker (Vasak), and have only included one of three deposition
transcript costs." Imwoth opposed such an award.
On October 16, 2019, the trial court entered judgment requiring the Levitt
defendants to pay $38,423.76 (the full amount sought) to the Rush defendants
pursuant to the fee-shifting provision in the Note. The court explained its award
as follows:
Initially, the court confirms that Autoshred is
entitled to reasonable attorney fees and costs related to
Imwoth's breach of the promissory note. The parties
freely and clearly contracted to include a provision for
the payment of such fees and costs in the event of a
breach.
Moreover, the court finds the total of 106.10
hours expended by Autoshred's attorney in pursuit of
this matter were reasonable. All the billing entries
appear to be related to Autoshred's suit on the
promissory note. The hourly rate of $350.00 is
commensurate with the rate of other attorneys of
reasonably comparable skill, experience and reputation.
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Finally, the court finds the fee reasonable based upon
the attorney's success on the merits. The fee of
$37,135.00 in relation to the judgment on the note of
$146,191.50 is appropriate.
Accordingly, the court awards Autoshred
attorney fees in the amount of $37,135.00 together with
costs of $1288.76 as set forth in the affidavit of
Autoshred's attorney for a total amount of $38,423.76.
Imwoth now contends that the trial court erred in awarding fees for: 1)
the eighteen hours counsel spent attending the depositions of Rush and Levitt
because those depositions were almost exclusively related to the Bonefish
action; 2) travel time to the court house on seven occasions; 3) ten phone
conferences with Rush between February 2017 and March 2019 for which the
subject matter was not identified; and 4) preparing for and attending a two-day
mediation where there was virtually no discussion of the Autoshred action
against Imwoth and Levitt. We disagree.
First, counsel addressed the deposition overlap by charging for only two
of the four depositions taken. Next, reimbursement for travel time is not
inappropriate even if great distances were not involved. Also, ten brief phone
calls generally discussing the case over a span of nearly two years resulting in
fees of $840 hardly seems unreasonable. Lastly, given how the Bonefish and
Rush actions were interwoven, we reject the contention that the court erred in
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awarding fees for the mediation. We therefore reject the Levitt defendants'
contention that the trial court erred in its counsel fee award.
Any claims not addressed lack sufficient merit to warrant discussion in a
written opinion. R. 2:11-3(e)(1)(E).
Affirmed, in part, and vacated and remanded, in part. We do not retain
jurisdiction.
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