Municipalities are not immune from sanctions under the state’s Frivolous Litigation Statute, the New Jersey Supreme Court has ruled in an appeal that stemmed from affordable housing litigation.
In a unanimous decision, the court upheld more than $200,000 in sanctions against the Borough of Englewood Cliffs, which pursued claims against its former legal counsel that the justices found were filed in bad faith.
The case arose from a separate action that began in 2015 in which a developer challenged the borough’s lack of compliance with its affordable housing mandate.
During that dispute, the borough’s attorneys advised the municipality to settle because of the weaknesses in the borough’s case. Ignoring its attorneys, the borough opted to go to trial anyway, where it ultimately lost. The borough later settled with the developer to address its affordable housing obligations.
However, after a change in political leadership and resulting shake-up, the borough filed a new lawsuit against its former attorneys and the property developer, asserting claims of professional malpractice, breach of contract and civil conspiracy.
Immunity Defense Rejected
The trial court dismissed the case as frivolous and imposed sanctions. The borough appealed, arguing that as a municipality, it could not be held liable under the statute.
Now the Supreme Court has rejected that argument. It held that municipalities are subject to sanctions like any other litigant and are not protected by sovereign immunity for engaging in frivolous litigation.
The court found that the “sole purpose” of the borough’s lawsuit “was to harass, delay and cause malicious injury” to the borough’s former lawyers and the developer. As a result, the court held that sanctions upwards of $200,000 were appropriate.
The court’s decision sends a strong message to municipalities that they must turn square corners and are not above the law. As the affordable housing process heats up in New Jersey’s Fourth Round, municipalities should take note that they cannot escape liability for bad faith and frivolous filings.
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