Burns v. Hoboken Rent Leveling & Stabilization Board, A-2621-11T4; Appellate Division; opinion by Lihotz, J.A.D.; decided and approved for publication February 6, 2013. Before Judges Messano, Lihotz and Ostrer. On appeal from the Law Division, Hudson County, L-474-11. DDS No. 27-2-8942 [17 pp.]

Plaintiffs Megan Burns and Joseph Nieves are tenants in a rent-controlled apartment in a building owned by Bloomfield 206 Corporation. In response to their inquiry, a Hoboken rent regulation officer issued a "Legal Rent Calculation" showing that the legal base monthly rent for their apartment was $669, not the $1,550 charged by Bloomfield. Bloomfield appealed that determination to the Hoboken Rent Leveling & Stabilization Board, arguing the calculation omitted three applicable vacancy decontrols. The board concluded Bloomfield was entitled to credit for one additional vacancy decontrol and recalculated plaintiffs’ base rent as $944 per month. Bloomfield did not appeal that determination.

Plaintiffs filed this prerogative writ action (PWA) against the board and Bloomfield, alleging the board’s grant of decontrols violated the municipal rent ordinance, various court directives and orders, and the board’s regulations. Using the $669 rent calculation, they also filed a separate complaint alleging Bloomfield violated New Jersey’s Consumer Fraud Act, N.J.S.A. 56:8-1 to -195.

While these legal actions were pending, Hoboken adopted and the mayor approved Ordinance No. Z-88. It allowed landlords to more easily obtain vacancy decontrols and limited the extent to which a tenant could collect rental overcharges. After a referendum to repeal it was rejected, Bloomfield moved for an order remanding plaintiffs’ challenge to the board for an updated rent calculation pursuant to Z-88. It also moved for leave to file a cross-claim demanding, as against the board, an order declaring Z-88 is a curative amendment that should be applied to the rent calculation giving rise to plaintiffs’ PWA.

Prior to the court’s consideration of Bloomfield’s motions, plaintiffs and the board executed a stipulation of dismissal with prejudice of the PWA. Bloomfield was neither informed of nor made a party to the stipulation. On learning of it, Bloomfield moved to vacate the stipulation and continue the PWA, arguing that the stipulation violated Rule 4:37-1(a).

The motion judge denied Bloomfield’s motions to vacate the stipulation and to file a cross-claim and granted plaintiffs’ cross-motion to dismiss the complaint with prejudice.

Bloomfield’s appeal followed.

Held: Under Rule 4:37-1(a), because Bloomfield answered plaintiffs’ complaint prior to the execution of the stipulation, and it was an interested party concerning the claims being dismissed, plaintiffs’ voluntary dismissal of the action, with or without prejudice, could not be effective without Bloomfield’s consent or a court order, both absent here. Consequently, the denial of Bloomfield’s challenge to vacate the voluntary dismissal was erroneous. However, the litigation is not reinstated because the judge simultaneously considered and granted plaintiffs’ cross-motion to dismiss pursuant to 4:37-1(b).

The voluntary dismissal of pending actions is governed by 4:37-1. It allows for (1) unilateral dismissals on notice by the plaintiff provided neither an answer nor a summary judgment motion has been filed, (2) dismissals at any time provided they are pursuant to a stipulation signed by all parties, or (3) dismissals by the court on motion.

The panel says Bloomfield answered plaintiffs’ complaint prior to the execution of the stipulation. Further, Bloomfield was an interested party concerning the claims being dismissed, as the outcome of the litigation would have a direct and significant effect on its exposure in the CFA action. Therefore, plaintiffs’ voluntary dismissal of the action, with or without prejudice, could be effective only with Bloomfield’s consent or if ordered by the court. Consequently, the judge’s denial of Bloomfield’s challenge to vacate the voluntary dismissal was erroneous.

If the filed stipulation omitting Bloomfield’s consent was the sole basis for dismissal of plaintiffs’ action, the panel says it likely would reverse the court’s order. However, it concludes reinstatement of the litigation is not warranted because the judge simultaneously considered and granted plaintiffs’ cross-motion to dismiss pursuant to 4:37-1(b).

The panel says Rule 4:37-1(b), requiring court review prior to granting dismissal, was adopted to protect defendants from the duplication of litigation costs. It also avoids manipulation of the court’s calendar. The judge below correctly noted that but for the filing of the PWA, Bloomfield had no standing to pursue any complaints because it did not appeal the board’s decision. Its failure to appeal cannot be circumvented by a cross-claim for remand of the rent calculation to the board. Moreover, the panel says dismissal of plaintiffs’ action would not impede Bloomfield’s pursuit of its right to petition the board directly for recalculation of the base rental following the adoption of Z-88.

Further, plaintiffs sought dismissal with prejudice, eliminating the concern that Bloomfield could be subject to duplicative future litigation and costs. Dismissal with prejudice also precluded any possibility plaintiffs sought to manipulate the court’s calendar. Finally, dismissal of the PWA has no effect on Bloomfield’s opportunity to defend the CFA action by asserting retroactive application of Z-88 under the time-of-decision rule or by adding the board as a third party to the litigation.

The panel also rejects Bloomfield’s argument that the judge erred in denying its request to file a cross-claim as permitted by 4:7-5, noting that the 45-day limitation governing the initiation of any PWA applies to Bloomfield’s purported cross-claim against the board.

For appellant — Sean A. Smith (Brach Eichler; Charles X. Gormally of counsel). For respondents — Cathy C. Cardillo.