Borough of Englewood Cliffs v. Trautner, ___ N.J. ___ (2025). This appeal presented the question of whether municipalities can be liable to pay sanctions for frivolous litigation, under the Frivolous Litigation Statute, N.J.S.A. 2A:15-59.1 (“the FLS”). In a 5-0 opinion written by Justice Fasciale (Chief Justice Rabner and Justice Hoffman did not participate), the Court affirmed, as modified, the decision of the Appellate Division that upheld the Law Division’s imposition of FLS sanctions against the Borough.
This case grew out of affordable housing litigation that began when the Borough filed an action seeking a declaration that it had satisfied its constitutional affordable housing obligations. A builder intervened in opposition to the Borough. The builder also filed its own lawsuit seeking a builder’s remedy.
As Justice Fasciale recounted, the Borough retained counsel (“the attorney defendants”), who” urged the Borough to settle. The Borough declined that advice and went to trial, but did not prevail. Thereafter, the Borough settled with [the builder]. The Borough Council subsequently passed Resolution 20-132 censuring the mayor for pursuing ‘needless’ litigation against the ‘accurate’ warnings of the attorney defendants.” The Resolution stated that “The Council supports the actions of [the attorney defendants] and finds that they have been appropriate, professional and ethical.”
But after a municipal election that saw some new members elected to the Borough Council, Borough filed a new case against the attorney defendants and the builder. The Borough alleged professional malpractice, breach of contract, and a number of other claims. Defendants demanded that the Borough withdraw its case, “described in detail the frivolous nature of the Borough’s pleadings and warned that if the Borough failed to withdraw the complaints, they would file motions to dismiss and seek sanctions. Despite those warnings, the Borough forged ahead.”
Defendants then filed motions to dismiss for failure to state a claim. Highlighting the positive language of Resolution 20-132 about the performance of the attorney defendants, and explaining that the “record is replete with evidence” that the Borough ignored the advice of those defendants, the Law Division granted those motions. The Borough did not appeal.
Defendants then sought FLS sanctions against the Borough. The Law Division concluded that the Borough was not immune from FLS sanctions and, finding that the Borough had “acted in bad faith” and that “the sole purpose of the litigation was to harass, delay and cause malicious injury to” defendants, the Law Division awarded attorneys’ fees and costs.
The Borough appealed. In an opinion summarized here, the Appellate Division affirmed, ruling that the Borough was not immune from FLS sanctions and upholding the sanctions imposed. The Borough sought certification only as to the question of immunity from FLS sanctions, no longer contesting the ruling that the Borough acted in bad faith to harass, delay, and cause malicious injury by filing its frivolous pleadings. The Supreme Court granted certification.
The Borough made two arguments. First, it quoted the language of N.J.S.A. 2A:15-59.1(a)(1), the basis for the sanctions imposed. That provision states that “a party who prevails in a civil action . . . against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds . . . that a complaint, counterclaim, cross-claim or defense of the nonprevailing person was frivolous.” The Borough contended that it was neither a “person” nor a “party,” but a “public entity,” a term that was added elsewhere in the FLS by 1995 amendments but not in the provision at issue. Second, the Borough argued that sovereign immunity protected the Borough against FLS sanctions, since nothing in the FLS waived sovereign immunity.
The Court did not agree. Justice Fasciale observed that the issue presented was one of statutory interpretation, which called for de novo review. After a detailed analysis of the FLS, and reading the statute as a whole, he concluded that the Borough was both a “person” and a “party,” both of whom are sanctionable under N.J.S.A. 2A:15-59.1(a)(1). And “the plain language of the 1995 amendments does not immunize municipalities, such as the Borough” because that wording refers only to circumstances “[w]hen a public entity is required or authorized by law to provide for the defense of a present or former employee.” Legislative history confirmed that the intent of those amendments was to “allow a public entity to recover costs under the FLS when it is not itself a party.”
The Borough’s sovereign immunity argument also failed. After a detailed discussion concluding with the ruling that the Eleventh Amendment to the United States Constitution did not apply in state courts, Justice Fasciale turned to whether the Tort Claims Act (“TCA”) or judicially created immunity insulated the Borough from FLS sanctions. Neither did so.
“This case arises from a context entirely outside the TCA, and judicially created municipal immunity, to the extent it still exists, serves no barrier to holding the Borough liable under the FLS. First, there is no historical analogue to immunizing a municipality from sanctions when it initiates frivolous litigation. Second, doing so would be contrary to public policy and would undermine the basis for judicially created municipal immunity, which insulated municipalities so they could govern without fear of litigation. Here, the Borough’s actions were neither legislative nor the exercise of official judgment or discretion, but rather, were in direct contravention to Resolution 20-132. That is not the type of official conduct that judicially created municipal immunity existed to insulate. Indeed, as opposed to insulating municipalities from filing bad faith claims, the very purpose of the FLS is to deter such conduct.”