Kielczewski v. Reed

SLAWOMIR KIELCZEWSKI, Plaintiff-Appellant/ Cross-Respondent, and SLAWOMIR KIELCZEWSKI, d/b/a BE CONSTRUCTION, and BE CONSTRUCTION, d/b/a BE CONSTRUCTION CORPORATION, Plaintiffs, v. BARBARA REED, Defendant-Respondent/ Cross-Appellant, and RAFAL SKRZYPCZAK, SERHIY DROZDYAK, PIOTR CYBURA, BRAHMA CONSTRUCTION, H&S CONSTRUCTION AND MECHANICAL,HANNON FLOORS, M&M CONSTRUCTION COMPANY, PRECISION BUILDING AND CONSTRUCTION, LLC, SEAWOLF CONSTRUCTION, SISTERS OF CHARITY, TILCON NEW YORK, INC., UNIMAK LLC, VIACO CONSTRUCTION, WALLKILL GROUP, and YMCA OF THE ORANGES, Defendants. DARIUS A. MARZEC, Respondent.

No. A-1041-20

Superior Court of New Jersey, Appellate Division

August 30, 2022

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.

Argued March 16, 2022

On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-000032-18.

David W. Fassett argued the cause for appellant/cross-respondent (Arseneault & Fassett, LLC, attorneys; David W. Fassett and Gregory D. Jones, on the briefs).

Daniel B. Tune argued the cause for respondent/cross-appellant (Martin & Tune, LLC, attorneys; Daniel B. Tune, of counsel and on the briefs).

Darius A. Marzec, respondent, argued the cause pro se.

Before Judges Gilson, Gooden Brown, and Gummer.

PER CURIAM

Plaintiff Slawomir Kielczewski appeals the $77,569^[1] judgment entered against him on November 2, 2020, as sanctions for frivolous litigation. Defendant Barbara Reed cross-appeals the June 4 2020 order denying sanctions against Kielczewski's former counsel, Darius Marzec. For the reasons that follow, we reverse the order entering judgment against Kielczewski and affirm the order denying sanctions against Marzec.

We glean these facts from the record. In 2018, Kielczewski filed a complaint against Reed and others alleging numerous claims including breach of contract, breach of covenant of good faith and fair dealing, misappropriation of trade secrets breach of fiduciary duty, unjust enrichment, conversion fraud, tortious interference with prospective economic benefit, negligent misrepresentation of material facts, and civil conspiracy, among other claims.

In the complaint, Kielczewski alleged that Reed had unlawfully taken control of his company, Be Construction Corporation (Be Construction). According to the complaint, Kielczewski formed Be Construction in 2013 and transferred the then-existing contracts of his former company, Kielczewski Corporation, to the new business. Kielczewski alleged that he authorized Reed, who was initially hired as a bookkeeper and office manager, to "handle administrative aspects" of the new business because of his ailing health. However, according to Kielczewski, Reed subsequently held herself out to be the owner of the company and took control of its accounts and other property.

Reed filed a contesting answer with affirmative defenses and counterclaims, alleging tortious interference with economic advantage, defamation, and unjust enrichment. Reed claimed she was the sole "incorporator," "director," "shareholder," and "registered agent" of Be Construction. Reed's attorney also served Marzec with a Rule 1:4-8 notice and demand letter (safe-harbor notice) asserting that the complaint was frivolous and should be withdrawn. He included with the notice copies of canceled checks representing purported payments from Reed to Kielczewski for company vehicles and equipment. The notice also asserted that Kielczewski was estopped from claiming ownership of the company due to his previous denials of ownership. In support, the notice included interrogatory responses from Kielczewski's 2015 divorce proceedings in which he denied ownership of Be Construction.

Notwithstanding the safe-harbor notice, Kielczewski and Marzec elected to proceed with the lawsuit. Kielczewski certified that he disputed the authenticity of the purported interrogatory responses, averring he had not previously seen them. Later, Marzec certified that he had questioned whether the interrogatory responses were even admissible, as they might have been obtained in violation of the attorney-client privilege. Additionally, Kielczewski showed Marzec a March 19, 2018 decision from the National Labor Relations Board (NLRB), in which the NLRB had found Kielczewski owned Be Construction. According to the NLRB:

About December 13, 2013, . . . B[e] Construction was established by . . . [Kielczewski Corporation] as a disguised continuation of [Kielczewski Corporation] for the purpose of evading its responsibilities under the [National Labor Relations Act (Act)]. . . . [Kielczewski Corporation] and . . . B[e] Construction are, and have been at all material times, alter egos and a single employer within the meaning of the Act.

Subsequently, the trial judge allowed Marzec to withdraw as counsel because Kielczewski had accrued more than $50,000 in overdue legal fees. Thereafter, Reed moved for summary judgment. In support, Reed submitted a deposition transcript showing that Kielczewski had denied ownership of Be Construction under oath in another lawsuit involving a bank. She also presented documents from Kielczewski's divorce proceedings, tax returns, and application for social security benefits further demonstrating he had previously denied ownership. Kielczewski opposed the motion pro se and submitted an affidavit in which he admitted "misrepresent[ing his] relationship with Be Construction . . . in the past in order to avoid union obligations." However, Kielczewski averred that Reed "was never the owner of Be Construction" but only "agreed that she would . . . act as a stand in owner" so that he could "avoid labor union obligations." He also submitted a copy of the NLRB decision.

During oral argument on the summary judgment motion, the judge acknowledged she was "struggling with" whether the NLRB decision precluded summary judgment in the matter. After defense counsel presented his arguments, the judge explained:

I agree with almost everything you've said. And a party cannot create a genuine issue of material fact by simply offering a sworn statement that contradicts earlier sworn testimony.

. . . .

. . . However, there's a finding in the . . . NLRB case. And that's a court finding. That he was the owner. . . . [I]s that sufficient in and of itself to raise a genuine issue of material fact[] precluding summary judgment.

I'm not saying he . . . will prevail or won't prevail at trial. I understand that he has a very high burden given these facts. But does that preclude this [c]ourt from granting summary judgment?

In response, defense counsel argued Reed was not bound by the NLRB decision because she "was not a party" to the case. In turn, Kielczewski argued that the NLRB decision precluded the court from granting Reed summary judgment, citing a case from 1914, which purportedly stated that "two sources of power cannot regulate the same thing." Therefore, Kielczewski contended, "if NLRB being a federal agency ruled already that this is . . . my company, I don't see how it could be that somebody else could rule that it's not."

Nonetheless, in an order entered October 31, 2019, the judge granted Reed summary judgment. In an accompanying written opinion, the judge determined that the NLRB's findings had no preclusive effect and, therefore, did not create a genuine issue of material fact. The judge also observed that Kielczewski had "perjured himself either in this matter or previous legal matters" and reasoned he could not "create a genuine issue of fact merely by offering a new sworn statement now that contradicts a multitude of earlier testimony." The judge also pointed out that Kielczewski was unable to produce affidavits from others supporting his ownership claims, and "[Kielczewski's] affidavit [did] not clarify his prior sworn testimony, it expressly and indubitably contradict[ed] it." Therefore, the judge found that Kielczewski "[did] not present any evidence to demonstrate he own[ed] the company" and held his "conclusory assertions [were] insufficient to overcome a meritorious motion for summary judgment." Kielczewski did not appeal the decision.

Reed subsequently moved for sanctions against Kielczewski and Marzec for frivolous litigation. Reed requested the court award $77,569 for attorney's fees, $504,927 in consequential damages, and $350,000 as "a coercive sanction to deter future frivolous litigation." Reed also submitted evidence of Marzec's allegedly fraudulent conduct in other unrelated matters. Kielczewski and Marzec both opposed the motion.

In a June 4, 2020 order, the judge granted the motion in part as to Kielczewski, but denied the motion as to Marzec. In an accompanying statement of reasons, as to Marzec, the judge found the evidence did not clearly show that Marzec's allegedly fraudulent tactics in unrelated matters paralleled what occurred in this case. The judge also determined that Marzec had not commenced the litigation in bad faith or for a wrongful purpose, finding that "[Kielczewski's] position, as it was conveyed to [Marzec], was not completely untenable as to warrant sanctions." Moreover, the judge reasoned that during Marzec's representation, "there was not enough evidence" to show that Kielczewski's claims were frivolous.

However as to Kielczewski, the judge declared Kielczewski "knew at the commencement of this lawsuit he had previously represented his relationship to the company in a completely different light, and did not withdraw his pleadings, even though, as this litigation continued, it was clear plaintiff had insufficient evidence to support his claims." ...