(John Disney/Daily Report)

A New Jersey appeals court has ordered the plaintiffs in a business dispute to pay a $175,000 sanction for fees racked up by lawyers in two states battling what was determined to be frivolous litigation.

The fees are payable to Weingarten Brown, a Los Angeles firm recently acquired by Venable LLP, and Newark’s McCarter & English.

The Appellate Division, in its July 25 decision, said the high sum was “reasonable given the extensive nature of plaintiffs’ actions, including the harassment, deliberate attempts to extend the litigation and involvement of multiple defendants.”

“The invoices for defense counsel reveal the extensive work required to successfully defend against plaintiffs’ vexatious litigation,” the court added.

The dispute stemmed from 2011 sales contracts providing for purchase of software and servers from Grange Consulting Group and MD Tablet—health care technology firms owned by plaintiff Parmjit Singh Parmar—by Pineboard Holdings Inc., according to the court.

Pineboard is a medical services company created for the purpose of acquiring software that had been under development by Parmar’s companies, lead defense counsel Alex Weingarten of Weingarten Brown said.

Pineboard ended up paying $4.1 million, plus a $1 million settlement connected to a post-sale dispute, according to the opinion.

The contentiousness didn’t end there. In May 2012, Parmar, a New Jersey resident, filed a complaint in Monmouth County, N.J., Superior Court against former MD Tablet employee Grishma Gangar demanding the return of stolen servers.

The suit, as later amended, accused Gangar of aiding Pineboard and its principals in the theft.

As it turned out, those were the same servers Parmar had previously sold to Pineboard via the sales contracts—an exchange in which Gangar wasn’t personally involved, according to court documents.

Parmar, without informing the court of the prior sales contracts, obtained an order to show cause requiring Gangar to return the servers to an East Brunswick, N.J., office, according to documents.

Parmar later urged the court to issue a warrant for Gangar’s arrest—though she already had filed an affidavit denying that she possessed the servers—and sent emails threatening her and stating that her immigration work visa was in jeopardy, the opinion stated. Parmar had been Gangar’s immigration sponsor, Weingarten said.

The Appellate Division said the initial filing against Gangar apparently “was envisioned by Parmar as the first step in an expanding web of expensive and time-consuming litigation against a litany of defendants.”

The court pointed to an email from Parmar stating that the “first step was the [order to show cause] against [Gangar]” and to “expand from there, but also we need to keep the[m] busy and engaged with us.”

The May 24, 2012, email was sent to Parmar’s counsel, Pomona, N.Y.-based solo Ryan Karben, according to court documents. The documents identified Karben’s local counsel as Elchanan Dulitz of Teaneck, N.J.

In June 2012, Gangar sent a frivolous-litigation notice to Parmar, who nonetheless amended his complaint and added other defendants, including Pineboard. Also, Parmar “unilaterally” scheduled a deposition in New Jersey, though defense counsel were based in California, and demanded documents related to Gangar’s work status, some of them personal records, the opinion said.

The court documents contain a string of more than a dozen emails between Karben, Dulitz and Weingarten and his co-counsel, attempting, unsuccessfully, to schedule a deposition and set a discovery schedule. The defendants ended up filing a motion to establish a single responsive pleading date for all of the numerous defendants, which was granted.

This process involved “contentious and time-consuming motion practice” that “explains, in significant part, the high legal fees defendants incurred defending plaintiffs’ claims,” the Appellate Division said.

In August 2012, Parmar, without notice, withdrew the complaint and instead lodged an action in the U.S. District Court for the Southern District of New York, which contained many of the same allegations, according to the opinion. That suit, Weingarten said, was dismissed.

The defendants moved for sanctions, which Superior Court Judge Patricia Del Bueno Cleary granted, ordering Parmar to hand over $197,321 for defense counsel’s legal fees.

Cleary found that Parmar’s suit was brought in bad faith, calling it a “shakedown of the defendants,” according to the opinion.

She cited, among other things, Parmar’s failure to inform the court that ownership of the servers was controlled by the sales agreements and the threats against Gangar.

The fee request was high but reasonable given the amount of work required, Cleary said.

Parmar appealed, calling the sanction excessive and challenging Cleary’s findings.

At that time, Robinson Brog Leinwand Greene Genovese & Gluck of New York replaced Karben as plaintiffs counsel, Weingarten said.

On July 23, Appellate Division Judges Marie Lihotz and Richard Hoffman affirmed, though they did exclude $21,686 in fees accrued in legal work done for a related but separate lawsuit. The modified sanction was $175,635.

“The hostile nature of the communications, especially the threats of deportation, arrest and the eleventh-hour dismissal of their complaint clearly constituted bad faith,” the judges said in a per curiam decision, noting “evidence of a broader scheme to keep defendants engaged in litigation.”

Weingarten called the amount “an extraordinarily high sanction,” especially at such an early stage of litigation.

“I haven’t seen that before,” Weingarten said.

Parmar has filed a third lawsuit over the alleged server theft, in federal court in Trenton, N.J., and Weingarten said he is currently seeking Rule 11 sanctions in that case. Robinson Brog is handling that suit.

“He’s filed three of these lawsuits, all about the same thing,” Weingarten said. “He’s relentless. He’s unethical.”

Weingarten estimated that about 80 percent of the fees were amassed by his firm and 20 percent by McCarter & English.

Clement Farley—the McCarter & English partner who served as the defendants’ local counsel, along with firm associate Daniel Seaman—said he’s “very pleased” and “happy the matter has been brought to a close.”

Neither Karben nor Dulitz returned calls.

Parmar’s current lead counsel, A. Mitchell Greene of Robinson Brog, also didn’t return calls.

Contact the reporter at dgialanella@alm.com.