A&F Secures Affirmance On Appeal Of Summary Dismissal Of “Sham Litigation” Claims Against CEO Of Publicly Traded Corporation


On January 13, 2020, a unanimous Appellate Division panel affirmed the summary dismissal of tort claims against the CEO of a publicly-traded corporation alleging that the company had abused process and tortiously interfered with a competitor’s development project through multiple “sham” lawsuits. Egg Harbor Associates, LLC v. Village Supermarkets, Inc., 2020 WL 132768 (App. Div. Jan. 13, 2020).

Our firm represented the CEO throughout the case and persuaded both the Law Division and the Appellate Division that the developer’s tort claims were time-barred because they were filed over six years after the underlying lawsuits had been filed and the developer had acknowledged its awareness of those claims by alleging, in its answers to those lawsuits, that the lawsuits were frivolous and filed for an improper, anti-competitive purpose.

The developer instead argued that its tort claims were timely because they were filed just two years after the underlying lawsuits had concluded on appeal, contending that the company’s appeals were additional tortious acts and that the developer’s tort claims were “continuing torts” which did not accrue until those appeals concluded. Id. at *3. Rejecting that argument, the Appellate Division found that the developer’s claims “fall outside the scope of the narrowly delineated contexts in which the continuing tort doctrine has been recognized,” i.e., “workplace discrimination” and “continuing nuisance” claims. Id. (citations omitted). Whereas such claims arise from “the continuous nature of the conduct,” claims alleging “sham litigation” are not continuing torts because “the discrete act of filing a frivolous lawsuit is immediately actionable, especially where” the plaintiff had exhibited, through its filings in that prior lawsuit, that it “‘knew or should have known [the conduct] was actionable.’” Id. (citation omitted).

The developer also argued that its tort claims were timely because they were filed just months after a different Appellate Division panel issued a precedential decision in another matter which, the developer argued, created its “legal remedy” by narrowing the defense of Noerr-Pennington immunity. Id. at *4. Rejecting that argument as well, the Appellate Division noted that this prior decision “simply re-examined an already-existing body of law regarding the showing a plaintiff must make in order to rebut a defendant’s assertion of Noerr-Pennington immunity.” Id. Because that decision merely construed an affirmative defense, it “has no bearing on the accrual of plaintiff’s claims,” which accrued when the underlying lawsuits were filed. Id.

Finally, the developer argued that the limitations period governing its claims should be equitably tolled because, by deferring its action until after the underlying lawsuits concluded on appeal and the Appellate Division issued its decision clarifying the Noerr-Pennington immunity defense, the developer “prudently” waited “until it was certain its claims against defendants were viable” Id. at *5. Rejecting that argument, the Appellate Division stated that equitable tolling applies only where the defendant engaged in some “inequitable conduct” that “tricked or induced a plaintiff to allow the filing deadline to pass,” or to file his claims timely but “mistakenly by defective pleading or in the wrong forum.” Id. (citation omitted). “Because defendants did not engage in any ‘inequitable conduct’ that caused ‘plaintiff to withhold filing a complaint until after the statute[s] ha[d] run, … the doctrine cannot revive plaintiff’s causes of action here.” Id. (citations omitted).

The Appellate Division’s per curiam opinion establishes that tort claims alleging “sham litigation” normally accrue when the underlying “sham” lawsuit is filed, that subsequent changes in caselaw narrowing defenses to such claims will not affect those claims’ accrual, and that equitable tolling will not salvage such claims that were filed out of time based on factors other than defendants’ inequitable conduct.

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