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Tuesday, July 31, 2012

VSG Acquisition Corp. v SM and SP Inc.

DOCKET NO. A-6208-10T1



SM & SP, INC.,

July 9, 2012

Submitted April 25, 2012 - Decided

Before Judges Sapp-Peterson and Ostrer.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2651-11.

Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, attorneys for appellant (Gary E. Roth, of counsel and on the briefs).

Archer & Greiner, P.C., attorneys for respondent (Patrick Papalia, of counsel; Mr. Papalia and Patrick A. Ascolese, on the brief).


Plaintiff VSG Acquisition Corp. (VSG), a temporary help service firm, N.J.S.A. 34:8-43, sued defendant SM & SP, Inc. (SMSP), also a temporary help service firm, for services rendered by VSG's employee. VSG appeals from Judge Heidi Currier's order granting SMSP's motion for summary judgment, dismissing VSG's complaint. Judge Currier held that because VSG was then unregistered, it was barred from maintaining its collection action, N.J.S.A. 34:8-45b, and not entitled to equitable relief in lieu of a contractual remedy. We affirm.
The facts are undisputed. VSG and SMSP are in the business of providing computer training, analysis, and management consulting to clients. VSG was formed in 2010 to acquire Vision Systems Group. Although VSG applied in March 2010 to register with the New Jersey Division of Consumer Affairs as a consulting and temporary help services firm, VSG did not timely respond to the agency's request for additional information. As a result, VSG was not registered until May 2011, after completing the services that are at issue.
In May 2010, VSG and SMSP entered into an agreement for one of VSG's employees to be placed temporarily with one of SMSP's end clients. The agreement stated that VSG would provide SMSP with the services of qualified consultants, employed by VSG. VSG agreed not to compete with SMSP or solicit its customers, and agreed that it would obtain a signed non-compete, non-solicitation agreement from its employee. SMSP agreed to pay VSG an hourly rate for the consultant's services as provided in an attached purchase order, with payment due within thirty days of invoicing. According to the purchase order, VSG provided Subhash Chand, a software architect, at the rate of $70 an hour, starting March 15, 2010.
The project ended October 15, 2010 and VSG sent an invoice to SMSP for a total of $76,160 for Chand's services. After SMSP refused to pay, VSG filed it complaint for collection in April 2011; SMSP filed its answer in May; and then, before the production of discovery (although mutual requests were served), SMSP moved for summary judgment on June 14, 2011 on the basis that VSG was not registered as a temporary help services firm.
After oral argument on August 5, 2011, Judge Currier issued an oral opinion granting the motion. Judge Currier first considered VSG's argument that it was exempt from the registration requirement under N.J.S.A. 34:8-46h, which provides that the act shall not apply to:
h. Any temporary help service firm which does not:

(1) Charge a fee or liquidated charge to any individual employed by the firm or in connection with employment by the firm;

(2) Prevent or inhibit, by contract, any of the individuals it employs from becoming employed by any other person;

(3) Knowingly send individuals it employs . . . for the purpose of replacing individuals who are striking or who are locked out . . . .

[N.J.S.A. 34:8-46(h).]

It was undisputed that VSG did not collect fees or charges as described in N.J.S.A. 34:8-46h(1), and did not knowingly send individuals to replace striking or locked out workers, as described in N.J.S.A. 34:8-46h(3). VSG argued that was sufficient to qualify VSG for exemption, because a temporary help services firm need only meet one of the three conditions to be exempt. The judge rejected this argument, relying on the statute's use of semicolons between the provisions and the absence of the word "or." 1
Judge Currier also rejected VSG's claim that since SMSP was also an unregistered temporary help service firm, and VSG had begun the registration process, equitable principles should have allowed it to collect the invoiced amount. Judge Currier noted the registration delay resulted from VSG's own failures. Also, although SMSP's conduct was "less than exemplary," its failure to register was not a ground for denying it the benefit of the Act's protection. The judge also noted that SMSP was not the party filing a claim. Relying in part on Data Informatics, Inc. v.Amerisource Partners, 338 N.J. Super. 61 (App. Div. 2001), she held that equitable relief was unavailable.
VSG appeals and raises the following points:
A. The Trial Court Erred In Granting Summary Judgment Based on Plaintiff's Failure To Register As A Temporary Help Services Firm.

1. Plaintiff Is Exempt From The Registration Requirements Under N.J.S.A. 34:8-46h.

a. A temporary help services firm should not be required to meet all three exemption criteria.

2. Assuming Arguendo That Plaintiff Is Not Exempt From The Registration Requirements Under N.J.S.A.34:8-46h, The Trial Court Should Have Denied Summary Judgment Based On Application Of Equitable Principles.


We review the trial court's grant of summary judgment de novo applying the standard set forth in Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Lapidoth v. Telcordia Tech., Inc., 420 N.J. Super. 411, 417 (App. Div. 2011); Agurto v. Guhr, 381 N.J. Super. 519, 525 (App. Div. 2005). Judgment shall be granted if the evidence in the motion record shows "there is no genuine issue as to any material fact challenged and that the moving party is entitled to judgment or order as a matter of law." R. 4:46-2(c). Having reviewed the record and applicable law in light of that standard, we affirm substantially for the reasons set forth by Judge Currier in her cogent oral opinion. We add the following comments on the two issues raised by plaintiff.
Plaintiff concedes that it is a temporary help services firm as defined by N.J.S.A. 34:8-43, and that it was not registered pursuant toN.J.S.A. 56:8-1.1 when its cause of action arose. Plaintiff also concedes that unless it is exempt from the law, it was barred from bringing a collection action because it was unregistered. N.J.S.A. 34:8-45b (stating that a person "shall not bring or maintain an action" in a New Jersey court to collect "a fee, charge or commission" for services regulated by the act "without alleging and proving licensure or registration, as appropriate, at the time the alleged cause of action arose"). Plaintiff argues it was exempt from registration under the act because it met two of three grounds for exemption, N.J.S.A. 34:8-46h, which it argues should be read in the disjunctive. As a result, it was not subject to the provision barring unregistered firms from bringing actions to collect a fee, charge, or commission. We disagree.
The statute includes three grounds for exemption, but, as it omits "or" or "and" before the third exemption, the statute does not expressly state whether the exemptions should be read in the disjunctive, or conjunctive. We implicitly construed the provision to condition exemption on satisfaction of all three grounds in Data Informaticssupra, 338 N.J. Super. at 78. Although we were unpersuaded that the plaintiff qualified as a temporary help service firm, we also held it was not exempt. It may have satisfied one of the grounds for exemption dealing with replacement workers, but it failed to satisfy the two remaining grounds. We stated:
[E]ven if plaintiff were a "temporary help service firm," it could not prevail as (1) the statutory exemption from the Act's requirements for certain temporary help service firms does not apply to plaintiff because it charged a fee in connection with Balawat's employment and inhibited Balawat from becoming employed by Alliance by virtue of the "Master Service Contract[.]"

[Ibid. (citing N.J.S.A. 34:8-46h(1), (2)).]

Our reading is consistent with legislative intent. See Cast Art Indus., LLC v. KPMG LLP209 N.J. 208, 222 (2012) ("[I]f the language selected by the Legislature is ambiguous or admits of more than one plausible interpretation, courts may turn to extrinsic evidence such as legislative history to discern the legislative intent."); Pine Belt Chevrolet v. Jersey Cent. Power & Light Co.132 N.J. 564, 578 (1993) (whether a statute should be read in the conjunctive or disjunctive is primarily a question of legislative intent). The current statute is the product of a comprehensive modernization of the law on employment service providers, which repealed and replaced the prior statute. See Statement to A3018AS (January 12, 1990). The new law extended regulation to cover "consulting firms, career placement, outplacement, and prepaid computer job matching services." Ibid. However, in general, the drafters' intent was to continue existing law. "Most of the substitute's provisions regarding the regulation of private employment agencies are similar to the provisions of P.L. 1951, c. 337 (C. 34:8-24 et seq.), which is repealed by the substitute." Ibid.
Therefore, it is instructive to consider the provision in the prior law governing exemptions of temporary help service firms, which the 1989 law repealed and replaced. It is evident that the prior law required that, in order to be exempt from registration, a temporary help service firm had to satisfy all three of the grounds now set forth in N.J.S.A. 34:8-46h. The prior law stated:
Provisions of act not applicable.

2. The provisions of this act shall not apply to:

. . . .

(6) Any temporary help service firm; provided, that no fee or liquidated charge is charged any employee employed by the temporary help service firm or in connection with such employment. In addition, no temporary help service firm shall by contract with any of its temporary employees, prevent or inhibit any of such employees from becoming employed by any other person, firm or entity; further provided, that no temporary help service firm shall knowingly send its employees to, or knowingly continue to render services to, any plant or office where a strike or lockout is in progress for the purpose of replacing striking or locked out employees.

[L. 1981, c. 1, § 2, codified at N.J.S.A. 34:8-25, repealed by L. 1989, c. 331, § 28.]

In the first sentence of the old provision, the exemption was conditioned solely on not imposing charges or fees on employees; but, the next sentence added that the firm could not interfere with an employee's subsequent employment, and could not send its employees to replace striking or locked out workers. In short, the prior law treated the exemption grounds conjunctively.
There is no evidence the Legislature, in enacting the 1989 modernization of the law, intended to alter pre-existing policy on exempting temporary help service firms from the law. "There is authority for a presumption that amendatory acts do not change existing law further than is expressly declared or necessarily implied." Norman J. Singer & J.D. Shambie Singer, Sutherland Statutory Construction § 22.30 (7th ed. 2009). In addition, exceptions are to be strictly construed and doubts resolved in favor of the general rule rather than the exception. AsburyPark Press, Inc. v. City of Asbury Park19 N.J. 183, 197 (1955).
Finally, if one were to adopt plaintiff's construction of the statute, the exemption would have an unreasonably broad effect. Simply by eschewing the assignment of replacements for striking or locked-out workers — a relatively rare circumstance — a temporary help service firm could avoid complying with the remedial provisions of the Act. "Courts will not construe a clause in a statute in such fashion as to charge the Legislature with deliberately rendering impotent the clear and unambiguously expressed intention of the whole act." Asbury Park Press, Inc.,supra, 19 N.J. at 196 (quotation omitted).
In sum, we conclude, as did the trial court, that plaintiff was not exempt from the law, and, as an unregistered firm, was barred from bringing a collection action. N.J.S.A. 34:8-45(b).
We also reject plaintiff's argument that it is entitled to equitable relief, to avoid unjustly enriching SMSP, which itself had unclean hands because it was an unregistered temporary help service firm. Unclean hands is an equitable principle requiring that a court deny relief to a party who is guilty of inequitable conduct in the controversy. Seee.g.Glasofer Motors v. Osterlund, Inc., 180 N.J. Super. 6, 13 (App. Div. 1981). However, SMSP is not seeking relief. Plaintiff is.
We rejected a similar plea for equitable relief by an unlicensed employment agency in Data Informatics, Inc.supra, 338 N.J. Super. at 79-80. Our explanation in that case applies with equal force here:
While we appreciate plaintiff's argument that enforcement of the Act should not benefit alleged wrongdoers, ultimately, we must balance that concern against a legislative mandate which precludes otherwise possibly meritorious causes of action in order to insure enforcement of a statutory scheme which served the greater good. Such legislative trade-offs are not unknown, and where well-grounded in legitimate public policy considerations, will be enforced.

[Id. at 79-80.]

See also Accountemps Div. of Robert Half of Philadelphia, Inc. v. Birch Tree Group, Ltd.115 N.J. 614, 626 (1989) ("Our courts have consistently held that public policy precludes enforcement of a contract entered into in violation of [a] licensing statute."); cf. McCann v. Biss65 N.J. 301, 310 (1974) (where a claim in quantum meruit would substantially undermine a law and its spirit — in that case, the Statute of Frauds — "[i]t cannot be allowed"); Tanenbaum v. Sylvan Builders, Inc.29 N.J. 63, 71-72 ("the legislative objective in closing the courts to the unlicensed broker" barred pursuit of tort claims, as well as contract claims arising out of unlicensed activities). The provision barring collection actions also serves the goal of general deterrence — discouraging covered firms from ignoring the registration mandate. Granting equitable relief would undermine that goal.
1 Judge Currier also rejected VSG's argument that it actually satisfied all three grounds for exemption, as a VSG representative had certified that, to the best of her knowledge, Shand had never actually signed the non-compete and non-solicitation agreement. However, VSG has abandoned this argument on appeal. See also Data Informatics, Inc. v. Amerisource Partners, 338 N.J. Super. 61, 78 (App. Div. 2001) (restrictive provisions in a master contract serve to inhibit employment even when there is no agreement signed by the individual employee).

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