NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

Plaintiffs Grange Consulting Group (Grange Consulting), MD Tablet, LLC (MD Tablet) and Parmjit Singh Parmar (Parmar) appeal from the November 16, 2012 Chancery Division order requiring them to pay defendants frivolous litigation sanctions in the amount of $197,320.46. We affirm, in part, and modify, in part.

I.

We discern the following facts from the record. Between August 2011 and March 2012, a series of agreements were executed relating to defendant Pineboard Holdings, LLC's (Pineboard Holdings) purchase of all MD Tablet's assets.1 We briefly describe the agreements and the underlying litigation.

A letter of intent dated August 17, 2011, provided that Pineboard was to purchase several assets, including "[a]ll of the assets . . . of MD Tablet . . . free and clear of all liens and encumbrances[.]" These assets were identified as "[a]ll assets owned by [MD Tablet] . . . including but not limited to: . . . [h]ardware and supporting software[,]" which further included "[a]ll Dell servers," "Microsoft Advanced Servers," "Microsoft SQL Server 2008 Servers," and "Microsoft Replication Servers."

A September 9, 2011 purchase agreement provided for the delivery and transfer to Pineboard of "all of the properties and assets of MD Tablet," and represented and warranted that the assets being transferred were "free and clear of all [l]iens or other restrictions on transfer." The agreement provided for a purchase price of $4,850,000 and scheduled a closing for later that month. By letter dated November 17, 2011, Parmar acknowledged receipt of payments from Pineboard totaling $4,100,000, which represented "in full[,] all payments due under the Purchase Agreement until September 20, 2012."

After disputes arose between the parties, they entered into a March 16, 2012 settlement agreement, which provided for additional payments by Pineboard in excess of $1,000,000. The agreement reaffirmed the intent to transfer all MD Tablet's assets to Pineboard "[t]o the extent . . . not already complete[d]." In addition, the March 2012 agreement set forth terms for continued employment of Parmar and of the employees of MD Tablet (including Gangar). Specifically, the agreement provided for the termination of "each and every employee, consultant and contractor" by March 15, 2012. After this date, Pineboard had "sole and absolute discretion" to "hire[], engage[], or otherwise retain[]" any of these employees.

On May 24, 2012, plaintiffs initiated the underlying lawsuit based on allegations Gangar wrongfully removed computer equipment from MD Tablet's offices. Plaintiffs initially sued only Gangar and applied for an order to show cause (OTSC) requiring Gangar to return the servers. During the May 30, 2012 OTSC hearing, plaintiffs represented that Gangar removed the servers, was an employee of MD Tablet at the time of their removal, and that she had confirmed she possessed the servers. Plaintiffs further claimed the immediate return of the servers was critical because they contained private patient medical information. Plaintiffs, however, did not inform the motion court the servers were the subject of a preexisting asset sale agreement, instead only indicating to the court that Gangar may have removed the servers in connection with an anticipated sale.

On June 1, 2012, plaintiffs obtained an amended OTSC, before serving Gangar, stating "[s]hould [d]efendant fail to return the servers by June 5, 2012 at 4 p.m.[,] then the Sheriff's Office is hereby directed to arrest the [d]efendant Grishma Gangar immediately, upon certification of plaintiff's counsel." Plaintiffs asked the motion court to deem the amended OTSC as served after three days, regardless of whether service was actually effected, and to then issue an arrest warrant.

On June 5, 2012, plaintiffs' counsel made ex parte contact with the court in an attempt to persuade the court to issue a warrant. This request was made after Gangar had provided plaintiffs with an affidavit stating she neither took any servers from plaintiffs nor had any servers in her custody, control, or possession. On the same day, during a fifteen minute span, Parmar sent Gangar four separate emails stating there were two judgments already against her, the judgment is on her record for life, Parmar still held her H1 work visa, she is in violation of the H1 agreement, and he had a recording of her being asked to steal the laptops and machines.

On June 18, 2012, Gangar served plaintiffs with a frivolous litigation notice (FLN), pursuant to Rule 1:4-8(b)(1). The FLN stated plaintiffs' claims against Gangar relating to the alleged theft of computer servers were baseless because plaintiffs and their counsel were aware "she did not have possession of [the servers] and never took [the servers] in the first place." The FLN incorporated by reference the facts and arguments included in documents previously filed in the underlying action and demanded plaintiffs dismiss their claims within twenty-eight days.

Plaintiffs did not withdraw their claims against Gangar. Instead, plaintiffs twice amended their complaint, ultimately asserting claims against eight additional defendants based on the same allegation that MD Tablet's computer servers were stolen. Specifically, plaintiffs asserted claims for: (1) breach of the duty of loyalty; (2) breach of fiduciary duty; (3) conversion; (4) consumer fraud; (5) tortious interference with contract rights; and (6) fraudulent concealment of evidence.

With respect to Gangar, plaintiffs alleged she was an employee of MD Tablet at the time of the alleged theft. According to plaintiffs, Gangar worked with other named defendants in a scheme to steal computer equipment and physically removed three computers from the shared offices of Grange and MD Tablet on or before May 2, 2012.

Apparently, the initial filing of the action against Gangar was envisioned by Parmar as the first step in an expanding web of expensive and time-consuming litigation against a litany of defendants, as evidenced by an email from Parmar to his counsel. In the email, which includes a forwarded discussion of the underlying agreements, Parmar states, "the first step was the [OTSC] against [Gangar] and expand from there, but also we need to keep the[m] busy and engaged with us."

On June 26, 2012, defendants received discovery requests from plaintiffs, who unilaterally scheduled Gangar's deposition for July 13, 2012 in Teaneck, New Jersey, without prior notice to Gangar or her counsel; notably, Gangar's lead counsel was based in California. Plaintiffs also demanded numerous categories of private documents such as any documents and/or correspondence relating to Gangar's work permit status, her 2012 personal and business phone records, and all her 2012 travel records including, but not limited to, gas receipts, tolls, EZ-PASS statements, plane tickets, and hotel accommodations specifying the dates of said travel.

Contentious and time-consuming motion practice ensued between the parties, which explains, in significant part, the high legal fees defendants incurred defending plaintiffs' claims. Eventually, in July 2012, defendants filed motions seeking a single responsive pleading date and a stay on discovery pending resolution of defendants motion to dismiss. With respect to the motion for a single responsive pleading date, defendants stated they intended to file a consolidated motion to dismiss. The court then granted both of defendants' motions, setting a single response deadline of September 28, 2012, and staying discovery until after resolution of defendants' motion to dismiss.

On the morning of September 28, 2012, without prior notification, defendants' counsel received by mail a copy of plaintiffs' notice of dismissal, dated September 27, 2012. Later that day, defendants' counsel discovered plaintiffs had filed a new complaint, on August 30, 2012, against defendants and additional affiliated entities and individuals in the United States District Court for the Southern District of New York. No defendants were notified of the federal court complaint until after plaintiffs voluntarily dismissed this action. The federal action dealt primarily with Parmar's alleged right to a percentage ownership interest in Pineboard; however, it devoted significant discussion to the agreements and alleged taking of computer servers.

On October 17, 2012, defendants filed a motion for frivolous lawsuit sanctions, pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8. The motion court heard and decided the motion on November 16, 2012. The court found defendants had complied with the requirements of N.J.S.A. 2A:15-59.1 and Rule 1:4-8 in bringing the motion. Specifically, the court found the FLN was properly served by email, pursuant to prior agreement. The court found the FLN remained valid despite defendants' amendment of the original complaint because the amended pleadings did not correct or withdraw the frivolous claims asserted against Gangar. Further, the court found defendants prevailed when plaintiffs voluntarily dismissed their action, on the eve of defendants' filing a motion to dismiss, because it "lacked[ed] merit," consistent with the holding in First Atl. Fed. Credit Union v. Perez, 391 N.J.Super. 419, 432 (App. Div. 2007).

The motion court further found plaintiffs' claims were "commenced, used, or continued in bad faith solely for the purpose of harassment, delay, or malicious injury." Further, the court found plaintiffs "knew or should have known that the claims[s] had no reasonable, legal, or equitable basis, nor could be supported by a good faith argument for a change of the law."

Specifically, the motion court determined plaintiffs acted in bad faith by improperly commencing the lawsuit against Gangar without notifying the motion court of the underlying agreements that controlled ownership of the computer servers at issue. Plaintiffs' harassment, deportation threats to Gangar, and using the court to threaten Gangar with arrest "based on allegations that the plaintiffs knew were wrong," all further constituted bad faith. Additionally, the court found plaintiffs acted with bad faith in commencing the federal court action without notice to defendants, and then dismissing the underlying action on the eve of defendants' deadline for filing their answer or other responsive pleading. Finally, by commencing and maintaining their frivolous claims as part of a larger litigation scheme, the court found plaintiffs continued to act in bad faith.

Based on the evidence and argument presented, the motion court concluded that plaintiffs "prosecuted their claims in bad faith. This was . . . a shakedown of the defendants." The motion court held defendants "were forced to incur substantial litigation costs and attorney's fees" as a result of plaintiffs' frivolous claims. It noted defendants' request for attorneys' fees and costs was high, but found that such expenses were reasonable:

The judge granted the motion and issued an award of sanctions against plaintiffs in the amount of $197,320.46. This appeal followed, with plaintiffs raising the following argument on appeal:

We reject plaintiff's argument they did not engage in frivolous litigation warranting sanctions, but modify the award on other grounds.

II.

In reviewing the award of sanctions pursuant to Rule 1:4-8, we apply an abuse of discretion standard. Masone v. Levine, 382 N.J.Super. 181, 193 (App. Div. 2005). An "abuse of discretion is demonstrated if the discretionary act was not premised upon considerations of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error of judgment." Ibid. (citing Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). Reversal is necessary "only when the exercise of discretion was `manifestly unjust' under the circumstances." Newark Morning Ledger Co. v. N.J. Sports & Exposition Auth., 423 N.J.Super. 140, 174-75 (App. Div. 2011).

Rule 1:4-8 permits sanctions for asserting frivolous claims on behalf of a client. A motion court may impose sanctions if an attorney files a paper that does not conform to the requirements of Rule 1:4-8(a), and fails to withdraw the paper within twenty-eight days of service of a demand for its withdrawal. R. 1:4-8(b)(1).

Under Rule 1:4-8, an assertion is "frivolous" when "`no rational argument can be advanced in its support, or it is not supported by any credible evidence, or it is completely untenable.'" Perez, supra, 391 N.J. Super. at 432, (App. Div. 2007) (quoting Fargas v. Scott, 251 N.J.Super. 169, 190 (Law Div. 1991)). "Where a party has [a] reasonable and good faith belief in the merit of the cause, attorney's fees will not be awarded." Ibid. (citing DeBrango v. Summit Bancorp., 328 N.J.Super. 219, 227 (App. Div. 2000).

N.J.S.A. 2A:15-59.1, which addresses the frivolous conduct of litigants, provides that a plaintiff or defendant who prevails in a case "may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous." N.J.S.A. 2A:15-59.1(a)(1). Frivolous conduct exists where a motion judge finds "on the basis of the pleadings, discovery, or the evidence presented" that either:

Sanctions are warranted "only when the pleading as a whole is frivolous or of a harassing nature[.]" Iannone v. McHale, 245 N.J.Super. 17, 32 (App. Div. 1990) (citations and internal quotation marks omitted). "We must interpret this statute strictly to ensure that our citizens are not dissuaded from accessing the courts." DeBrango, supra, 328 N.J. Super. at 226 (citing McKeown Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561-62 (1993)).

We discern no indication the motion court abused its discretion in finding plaintiff's underlying claim was commenced, used, and continued in bad faith. The judge correctly found multiple instances of bad faith pursuant to N.J.S.A. 2A:15-59.1(b) and accordingly awarded fees for frivolous litigation. The hostile nature of the communications, especially the threats of deportation, arrest and the eleventh-hour dismissal of their complaint clearly constituted bad faith. See Iannone, supra, 245 N.J. Super. at 32. Additionally, the record clearly indicates agreements for the sale of the servers between plaintiffs and Pineboard, revealing the true ownership of the servers and plaintiffs' knowledge of this ownership. Specifically, Parmar's emails demonstrate plaintiffs' awareness of the contractual nature of this dispute at the time plaintiffs filed their complaint; moreover, this is also evidence of a broader scheme to keep defendants engaged in litigation.

Plaintiffs further argue that the amount of fees awarded was "manifestly unreasonable" and unsupported by the record. In the main, we disagree. As noted by the judge, the fees were 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 only evidence of mistaken exercise of discretion concerns the judge's review of the billing records submitted. The judge mistakenly included amounts incurred by defendants for work on the separate case of Pineboard v. Parmar. While arguably related, these amounts, apparently paid by defendants for the prosecution of a separate cause of action against Parmar, did not directly result from the case under review and should not have been included in the award of fees to defendants. The total fees listed for the Pineboard v. Parmar case amount to $21,685.50. Thus, the amount of the award must be reduced by that amount to $175,634.96, reflecting the subtraction of those fees.

Consistent with this opinion, we remand to the Chancery Division for the entry of an amended judgment in the amount of $175,634.96. We do not retain jurisdiction.

Affirmed, in part, modified and remanded, in part.