Thank You, Captain Obvious — It Is Improper To Throw Your Records In A Dumpster In Advance Of A Lawsuit

 by:  Peter J. Gallagher (@pjsgallagher)

When most litigators hear the term “spoliation” nowadays, they probably think of emails, servers, document retention policies, and back-up tapes. But the Appellate Division recently reminded us that old-fashioned spoliation is still alive and well (and improper).

In Hess Corporation v. American Gardens Management Company, plaintiff sued various single-purpose entities with which plaintiff had contracted to sell oil and gas. Plaintiff also sued the individual owner of all of these entities, which were essentially judgment proof, arguing that it was entitled to pierce the corporate veil and hold him liable because he had co-mingled funds and fraudulently conveyed and diverted assets from the various corporate entities for his personal use.

During discovery, plaintiff served the individual defendant with a document request. The individual defendant failed to respond and his answer was stricken. He later moved to reinstate his answer, first arguing that he could not answer the discovery request without implicating his Fifth Amendment right against self incrimination (which the court rejected) and then claiming that he did not have many of the documents requested. Based on the latter, the court vacated its prior order and reinstated his answer.

 

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In Life, There Are No [Personal] Guarantees (Especially When They Are Buried In An Ambiguous Provision Of A Contract)

by: Peter J. Gallagher (@pjsgallagher)

In a recent unpublished decision, the Law Division refused to enforce a purported personal guarantee in a commercial contract. Individuals and entities that include such guarantees in their contracts with customers should read the decision (or just continue reading below).

In Century Star Fuel Corp. v. Jaffe, defendant entered into a contract with plaintiff whereby defendant obtained a line of credit from plaintiff that defendant could use to purchase heating oil from plaintiff. The one-page contract, which was prepared by plaintiff, contained a single signature line for defendant’s president to sign on behalf of defendant. It also contained what the court described as “boilerplate language” providing the following: “Applicant . . . agrees and acknowledges that the person who signs this Application has the Authority to do so; and Personally Guarantees all present and future extensions of credit.” Defendant was identified as the “Applicant” in the signature line. Plaintiff alleged that this clause was unambiguous and rendered defendant’s president personally liable for defendant’s debts. Defendant disagreed and argued that the clause was unenforceable because its president never intended to be personally bound. Both parties moved for summary judgment. The trial court sided with defendant.

 

Continue reading “In Life, There Are No [Personal] Guarantees (Especially When They Are Buried In An Ambiguous Provision Of A Contract)”

Digging Behind The Veil: New Jersey Supreme Court Decision Threatens To Impose Increased Liability On Home Improvement Contractors

Eric L. Probst represented several non-profit home improvement associations as amicus curiae on an important issue of first impression before the New Jersey Supreme Court.  The question before the Court was whether a homeowner has to pierce the corporate veil to hold individual shareholders of home improvement contractors personally liable for violations of New Jersey’s Home Improvement Practices regulations under the State’s Consumer Fraud Act.  In his article,  New Jersey Supreme Court Hears Oral Argument On Whether To Impose Personal Liability Against Corporate Shareholders Of Home Improvement Company For Violating New Jersey’s Home Improvement Practices Regulations, published in Community Builders and Remodelers Association newsletter, Eric reviews the oral argument from the case, Allen v. V and A Brothers, Inc., and predicts that the Supreme Court will likely uphold the Appellate Division's decision imposing personal liability against individual shareholders.  Eric further predicts that such a decision will cause an increase in lawsuits against corporate shareholders for violations of the CFA and HIP.  Stay tuned to the blog for more information about the Supreme Court's decision in this case, which should be handed down in the next 60-90 days.