Zoning: Is Cannabis the New Alcohol in New York and New Jersey?

By Anthony Sango

On December 5, 1933, the United States rejected years of moral panic and repealed alcohol prohibition by passing the 21st Amendment. Just under 88 years later, on November 3, 2020, the people of New Jersey rejected decades of a similar moral panic by voting “Yes” on Public Question 1, legalizing recreational cannabis. Five months later, on March 30, 2021, New Jersey’s neighbor, New York, approved legislation to legalize recreational cannabis. These two states were part of a wave of legalization in late 2020 and early 2021, with six other states and various tribal nations reflecting what so many Americans already knew: cannabis is safe, commonplace, and ordinary to consume.

Though New Jersey and New York both legalized cannabis around the same time, the two states took different approaches on the path toward legalization and destigmatization. By regulating cannabis similarly to alcohol, New York seems to acknowledge the reality that cannabis is the second most commonly used recreational drug after alcohol. New Jersey, on the other hand, has chosen to treat cannabis differently than it treats alcohol, though there are threads of alcoholic beverage control in its cannabis regulations. These divergent regulatory approaches are reflected in how each state addresses the zoning and regulation of cannabis businesses.

New York: Following the Cannabis Golden Rule 

New York abides by cannabis advocates’ Golden Rule: treat cannabis as you would want the state to treat alcohol. The Marihuana Regulation and Taxation Act (MRTA)  repeatedly mentions maintaining equal or comparable regulations for the two substances. In fact, cannabis and alcohol are so intertwined that the state’s Office of Cannabis Management was established within the Division of Alcoholic Beverage Control.  

Local Zoning and Fees

The MRTA and its regulations govern how a city or town can zone for and tax cannabis businesses. For example, a town or city can only impose fees on a dispensary or consumption lounge in a similar amount and manner as it would on a liquor store, bar, or club. The MRTA also prohibits special fees and taxes for cultivation, processing, manufacturing, and distribution businesses unless those special fees and taxes are also applied to similarly situated businesses. The best point of comparison is cultivation: a town or city can only impose a special fee or tax on a cannabis grower if that town or city imposes the same special fee or tax on a farm, plant nursery, or similar agricultural business.

Similarly, as with bars and liquor stores, dispensaries and consumption lounges are restricted from operating too close to houses of worship, schools, and public facilities used by youths. The distances range from 200 feet to 500 feet, measured from the center of the door of the cannabis business to the nearest entrance or structure of the restricted facility. What constitutes an “entrance” depends on the building’s specific use and design.

Consumption Lounges

No, your neighbor didn’t run over a skunk – that might be the new consumption lounge in town. Unlike their smoke-free, alcohol counterparts, consumption lounges emit the characteristic, potent, and familiar smell of cannabis, presenting a unique challenge for regulators.

To address this issue, New York borrowed from laws governing another commonly used recreational substance: tobacco. In New York, a town or city can impose ventilation and odor control laws on indoor consumption lounges only insofar as those laws apply to cigar lounges or any other business that permits smoking or vaping tobacco. In fact, the MRTA specifically invokes the Clean Indoor Air Act. Outdoor consumption lounges get more leeway – they only need to maintain a setback of 20 feet from a public walkway or road.

However, regulators borrowed the permitted hours of operation from bars and clubs in regulating consumption lounges. A consumption lounge – whether indoor or outdoor and regardless of the size of the city or town – must be closed between 4:00 a.m. and 8:00 a.m. This mirrors the restriction on bars and clubs, requiring them to have last call at 4:00 a.m. (or earlier if desired by the local government).

Overall, New York’s approach to regulating cannabis seems to acknowledge its legal status, widespread use, and acceptability in American life and society, just like alcohol, while maintaining comparable restrictions for the public’s health.

Lack of Guidance and Clarity in New Jersey Cannabis Zoning Regulation

New Jersey takes a different approach to cannabis zoning and regulation than the Empire State. With no explicit language instructing towns and cities to treat cannabis like alcohol (or at least not placing any unusual and onerous fees, taxes, and regulations on cannabis), New Jersey’s Cannabis Regulatory Enforcement Assistance and Marketplace Modernization Act (CREAMM Act) provides towns and cities – as well as courts – with a lot of leeway as to the interpretation of the law and regulation of cannabis.

The theme throughout the CREAMM Act is deference to the local government. For example, as in New York, the CREAMM Act allows towns and cities to require cannabis businesses to be set back from certain sensitive areas. Unlike the MRTA, however, the CREAMM Act provides no guidance regarding how to measure those setbacks. Effectively, towns and cities are left to decide for themselves how to do so. The CREAMM Act similarly provides almost no guidance on consumption lounges and instead leaves it up to local zoning boards to regulate these businesses.   

Unfortunately, because part-time members run most local zoning boards, measurement guidelines and other minor but essential guidance are often treated as afterthoughts or left unaddressed. If zoning boards do not provide a clear method for measurement, some courts have turned to a “reasonable pedestrian” standard that measures the distance borrowed from cases involving the Alcoholic Beverage Control Board. But as anyone who has ever driven in our crowded cities and towns knows, otherwise reasonable people can become unreasonable pedestrians, jaywalking, cutting through parking lots, or even hopping over fences. Courts will strain to find some definition or guidance in the ordinance itself.

The CREAMM Act also fails to define what an entrance is – further complicating any setback measurements. Similarly, local ordinances often forget to define “entrance,” leading some courts to assume that any exterior door constitutes an entrance. Many cannabis businesses have faced challenges to their Resolutions of Support because their entrances were deemed too close to sensitive areas or because the board tried to reassign or redefine what an entrance is.  

For example, challengers have claimed that a building’s “emergency exit” is, in fact, a regular entrance and that the “emergency” designation was just a way to circumvent a setback requirement. In other instances, cannabis businesses seeking to comply with a setback requirement have reassigned an emergency exit as the entrance with mixed results.

The situation for consumption lounges is no better. The only zoning requirement in the CREAMM Act for a consumption lounge is that a town or city issue an endorsement for a consumption area in or adjacent to a dispensary. Curiously, the CREAMM Act allows a dispensary-turned-consumption lounge to sell a customer as much cannabis as the customer is otherwise permitted to buy at a dispensary. This stands in contrast to bars, where a bartender would likely refuse to serve a patron several beers at once unless that patron had several friends with him. But just as bar patrons can’t walk out of the bar with a half-finished beer, the CREAMM Act prohibits consumption lounge patrons from leaving with leftover cannabis. 

New Jersey cannabis businesses are left with generic ordinances that may mirror alcohol ordinances but lack the explicit instruction to treat cannabis like alcohol or to measure setbacks in specific ways. The patchwork of local cannabis regulations creates a maze of red tape for even the savviest cannabis business entrepreneur. As a result, New Jersey courts have been flooded with lawsuits challenging so-called Resolutions of Support for cannabis businesses that allegedly violate one local ordinance or another.

While New York has been more orderly in defining zoning considerations for the legal cannabis industry, New Jersey has been more hands-off, leaving it to the towns and cities – and the courts – to determine what it means to comply with the CREAMM Act.

If you have questions or concerns regarding zoning or other regulatory issues involving cannabis in New York or New Jersey, please contact Anthony Sango. Join Anthony and Kelsey Barber on December 18, 2023, as they present at the National Business Institute’s Marijuana Business Operations in New York program. Learn more about the full day continuing legal education seminar and register to attend.

Asbury Park Zest Profiles Michael Benedetto in Fall Green Life NJ Edition

President and Managing Shareholder Michael V. Benedetto is featured in the Fall/Holiday 2023 Green Life NJ edition, published by Asbury Park Zest. A prominent lifestyle publication, Asbury Park Zest was created to highlight one of the most unique oceanfront cities in America and the businesses and people who call it home.

In this issue, Michael sat down with the magazine to discuss the sprawling, diverse real estate landscape along New Jersey’s coastline. He shares his insights on recent trends, the importance of building trust with his clients, and what makes New Jersey such a special place. Read the interview here.

In addition to his Firm leadership role, Michael serves as co-chair of the Commercial Real Estate and Corporate, Finance & Banking Departments. He has built a distinguished practice working with clients throughout the northeast and across the country, focusing on complex commercial real estate, corporate and commercial matters, business organizations, and banking matters.

Early Endgames: What Is the Difference Between a Motion To Dismiss and a Motion for Summary Judgment in New Jersey Litigation?

By Nicole D. Miller

There is a big difference between a lawsuit and a trial. While tens of thousands of lawsuits are filed every year in state and federal courts here in New Jersey and across the country, only a small percentage of those cases ever reach the point where the parties present all their evidence and testimony in person before a judge or jury, ending in a judgment. While many cases end before trial because the litigants have reached a negotiated settlement, others conclude with a pretrial ruling by a judge. In New Jersey, most of these rulings come after one of the parties files either a motion to dismiss or a motion for summary judgment.

A judge granting either motion effectively ends a case – at least temporarily. That is why they are both called dispositive motions — the movant requests that the judge dispose of the case in their favor before trial. In state court, these motions follow the same 28-day schedule for filing moving papers, opposition, and reply, which was a recent amendment to N.J. Ct. R. 4:6-2, the rule governing motions to dismiss.  But there are significant differences between a dismissal and summary judgment in terms of what the movant is asking the court to do, when such motions are filed, and the basis for granting or denying the motion. 

Motion To Dismiss

No matter the subject – a commercial dispute, a personal injury case, or a divorce – all civil litigation begins with the plaintiff filing a complaint against a defendant. The primary purpose of a complaint is to inform the defendant – and the court – of three things:

  • The factual allegations that support the plaintiff’s legal claims against the defendant;
  • What those legal claims are; and
  • What the plaintiff is asking for in damages or other relief.

Every defendant served with a complaint must file a timely response with the court. That response can be an answer in which the defendant admits or denies the specific factual allegations in the complaint. But if the complaint doesn’t include essential elements of a valid legal claim – even if all the facts alleged are taken as true – a defendant can file a motion to dismiss for failure to state a claim upon which relief can be granted. As noted, motions to dismiss for failure to state a claim in New Jersey state court are governed by N.J. Ct. R. 4:6-2, while Fed. R Civ. P. 12(b)(6) forms the basis for such motions in federal court. Both rules are essentially the same, as is the analysis of a complaint’s legal sufficiency.

Motions to dismiss are usually filed early in the case as the defendant’s initial response to the complaint. That means the parties have yet to engage in discovery or develop evidence to either support or refute the plaintiff’s allegations. It also means a judge considering a motion to dismiss will only look at the allegations contained in the complaint when making their determination as to the complaint’s sufficiency. And to decide whether the complaint sets forth a cognizable legal claim, the judge will assume that each factual allegation is true. In the event the defendant includes facts or documents outside the complaint, the court is required to convert the motion to a motion for summary judgment.

A judge will grant a motion to dismiss if those facts don’t or couldn’t form the basis of a legal action, even if the complaint’s allegations were true. In effect, the judge looks at all the allegations and concludes, “So what?”

A dismissal can be either with or without prejudice. A dismissal without prejudice means the plaintiff may be able to fix the shortcomings of the initial complaint by filing an amended complaint, and the court is giving the plaintiff the chance to do just that. In most cases where a motion to dismiss is granted, the judge will grant it without prejudice. In entering a dismissal with prejudice, a judge has determined that the complaint’s flaws are insurmountable and conclusively dismisses the case with no opportunity for the plaintiff to refile.

Motion for Summary Judgment

While a motion to dismiss focuses on allegations, a motion for summary judgment is all about evidence. While a motion for summary judgment can be filed earlier, most often it is filed after the conclusion of discovery (when the parties produce and exchange documents, take depositions, and develop other evidence). A motion for summary judgment asks the court to look at the evidence and conclude there is no issue of material fact in dispute. In other words, the moving party argues there is no point in the case going to trial because all the relevant facts of the case, as reflected in the evidence, are undisputed. Since trials involve ascertaining the truth behind the parties’ claims and defenses, a trial is unnecessary if the truth is already apparent.

According to N.J. Ct. R. 4:46-2, a judge will grant summary judgment “if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.” Importantly, the rule requires the moving party to submit a statement of facts as to which there is no genuine dispute. Each fact in this statement must be supported by citation to the record, i.e., documents produced, deposition transcripts, written discovery responses, etc.

An issue of fact is genuine only if “the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact.”

The entry of summary judgment in favor of the moving party conclusively ends the case at the trial court level. There is no second chance or do-over for the non-moving party as there often is when a court grants a motion to dismiss. However, in certain instances, a party may file a motion for reconsideration if the party believes the court overlooked something or erred, or requests that the court invoke its discretion in the interest of justice pursuant to R. 4:49-2 or R. 4:42-2(b). Nonetheless, motions for reconsideration are rarely granted.

When appropriate, filing a motion to dismiss or for summary judgment offers the movant the chance for an early resolution of a case without the cost, disruption, and risk of going to trial. Conversely, the party on the receiving end of such a motion faces the prospect of their lawsuit being thrown out or shut down without being given the opportunity to present their case at trial. Accordingly, these two motions are enormously consequential in New Jersey litigation. 

 If you have any questions about motions to dismiss or motions for summary judgment in New Jersey, please contact Nicole Miller.

Rite-Aid’s Shuttering of Numerous Stores Illustrates the Challenges Faced by Commercial Landlords When a Tenant Files for Bankruptcy

By Anthony J. D’Artiglio

Pharmacy giant Rite-Aid’s bankruptcy and proposed reorganization plans have had wide-ranging and cascading impacts from coast to coast. But perhaps the most immediate and acute effects of the company’s insolvency are felt by the commercial landlords that host the scores of leased locations that Rite-Aid intends to close as part of its restructuring strategy. This includes its planned sale of 78 Rite Aid and Bartell Drugs neighborhood pharmacy leases in free-standing buildings and retail shopping centers across nine states.

The challenges and uncertainty now faced by Rite-Aid’s lessors illustrate those regularly confronted by commercial landlords when a tenant’s bankruptcy or insolvency leaves them with unoccupied spaces and significantly diminished cash flow. As such, landlords must understand their options, rights, and remedies under the Bankruptcy Code to minimize the fallout and avoid inadvertent and costly mistakes when a tenant suddenly shutters its doors during a current lease term.

Assumption, Rejection, and Assignment of Lease Under Bankruptcy Code Section 365

Bankruptcy Code Section 365 governs the treatment of commercial leases in bankruptcy cases. Since the automatic stay, at least initially, limits the remedies and actions a landlord can take regarding the defaulting tenant, what happens next is largely up to the tenant. 

A tenant typically has 120 days after filing its bankruptcy petition to either reject, assume, or assume and assign or sell the lease.  

While a bankruptcy judge can extend the 120-day deadline for an additional 90 days for good cause without the lessor’s consent, the landlord’s assent is required for any further extension requests. 

During this period, the tenant must continue to satisfy its ongoing lease obligations, including paying rent, with post-petition rent obligations prioritized as an administrative claim. Notably, the lessor must continue to comply with the lease’s terms during this time or risk running afoul of the automatic stay.

If the debtor does not assume or reject its lease within the applicable time, the court will consider the lease rejected, and the tenant must then immediately vacate the leased premises.

Option 1: Rejecting the Lease

If a debtor elects to reject the lease, it essentially defaults and, accordingly, must vacate the premises. Upon rejection, the lessor can assert a “rejection damage” claim, which is considered a prepetition unsecured claim—sharing pro rata with other general unsecured creditors. Unlike other rejection damage claims, however, Bankruptcy Code Section 502(b)(6) caps the lessor’s rejection claims to the greater of one year’s rent or 15% of the rent of the remaining term of the lease, capped at no more than three years of total rent.

Option 2: Assuming the Lease

If the lessee opts to assume the lease, it essentially agrees to continue the lease, comply with its terms going forward, and cure any defaults. The lessee will identify the defaults to be cured and afford the lessor the opportunity to object to the proposed cure if it is insufficient. The debtor must also compensate the lessor for “any actual pecuniary loss” caused by the debtor’s default and provide the lessor with “adequate assurance of future performance.”

Option 3: Assuming and Assigning (or Selling) the Lease

Notwithstanding any anti-assignment language in the lease or any landlord objections, the debtor can elect to assume the lease and assign or sell it to a third party, as Rite Aid seeks to do with several leases. As with all lease assumptions, the tenant (and its assignee) must cure any outstanding defaults and provide adequate assurances of the assignee’s future performance of its lease obligations. 

Additional Protections and Assurances for Shopping Center Lessors

Many, if not most, of the leases Rite-Aid seeks to unload are in retail shopping centers. The Bankruptcy Code provides special protections for shopping center lessors when a debtor assumes and assigns its lease. 

Specifically, Section 365(b) requires debtors and assignees to provide the landlord with “adequate assurance” that: 

  • The source of rent and other consideration due under the lease and the financial condition and operating performance of the proposed assignee and its guarantors, if any, will be similar to the financial condition and operating performance of the debtor and its guarantors, if any, as of the time the debtor started its tenancy.
  • Any percentage of rent due under the lease will not decline substantially.
  • Assumption or assignment of such lease is subject to all lease provisions, including those relating to radius, location, use, or exclusivity, and the assignment will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to the shopping center.
  • Assumption or assignment of the lease will not disrupt any tenant mix or balance in such shopping center.

Failure to deliver any such assurances can support a lessor’s objection to any proposed assumption or assignment of the lease.

If you have concerns about your options as a landlord regarding an insolvent or bankrupt tenant or need assistance protecting your rights in a pending bankruptcy proceeding, please contact Anthony D’Artiglio at Ansell.Law.

James Aaron Co-Chairs Benefit to Support Israel

Shareholder Emeritus James G. Aaron recently co-chaired a successful fundraising benefit to support Israel. Inspired by his rabbi’s sermon following the October 7, 2023, attack in Israel, Jim felt compelled to organize a benefit to raise humanitarian aid for the victims of terror. As vice president of the Axelrod Performing Arts Center, Jim partnered with the Jewish Federation in the Heart of NJ to invite Israeli artists to perform. 

Guy Mintus, pianist and composer, and Naama Nachum, vocalist and actress, traveled to the United States to perform at the October 29 event at the Axelrod Performing Arts Center. Jim gave a passionate welcome to kick off the benefit performance before more than 250 attendees. 

The concert was a success and raised significant funds, with 100 percent going directly to the Jewish Federation’s Israel Emergency Fund. This important event drew national and local politicians, including United States Representative John Pallone, State Senator Vin Gopal, and Ocean Township Mayor John P. Napolitani, Sr.

The acclaimed Israeli artists will perform for other benefit concerts in the tri-state area before returning home to Israel in November.

New Jersey CRC Proposes New Regulations for Edibles and Ingestibles

By Anthony Sango

On September 25, 2023, New Jersey’s Cannabis Regulatory Commission (CRC) released proposed regulations for the manufacturing and marketing of edible and ingestible cannabis products in the state. The proposed rules would allow Class 2 cannabis manufacturers to develop and offer an expanded range of products. The proposed regulations also seek to protect New Jersey consumers by extending federal, state, and local food-related health and safety standards to cannabis products.

The proposal represents an exciting expansion of New Jersey’s cannabis market. Soon, the New Jersey market will see the wide offerings of products found in the flagship states of cannabis legalization, like California and Colorado. The proposed regulations discuss edibles and ingestibles already commonly found in New Jersey dispensaries – such as pills and gummies – but provide several new categories, namely, syrups, single-serving beverages, oral suspensions, and shelf-stable foods. For shelf-stable foods, the proposal gives the example of “chocolates, …baked goods, butters, jams, and jellies.” Given the broad language used, New Jerseyans can expect much more, from cannabis-infused peanut butter to lozenges to ketchup.

THC Limits and Prohibition of Other Substances

However, these new categories are not without limitations. Each package cannot contain more than 100 mg in total of active THC, with each serving containing no more than 10 mg of active THC. Further, the regulation limits single-serving beverages to only 5 mg of active THC.

In addition to limits on the amount of THC an ingestible product may contain, the proposed regulations also establish strict prohibitions as to what these products cannot contain. Specifically, a finished product cannot contain alcohol, tobacco, nicotine, or a controlled dangerous substance. Manufacturers would also be prohibited from distributing products that require cooking or baking by the consumer or require sterile storage conditions.

New Health, Safety, and Packaging Standards

The proposal also features new health and safety standards aimed at protecting consumers. Manufacturers must obtain various certifications from the Department of Health and ensure that equipment complies with applicable health regulations. The proposed regulations further require manufacturers to educate their employees on preventing foodborne illnesses and ensuring safe food handling, including major food allergens. The proposed regulations also incorporate federal law by requiring compliance with the FDA’s “Generally Recognized as Safe” standard for ingredients.

If finalized in their current form, the regulations would make the packaging of cannabis products look much like the back of a box of macaroni and cheese. The packaging must include an ingredient list, providing every ingredient in descending order of predominance by weight or volume. Manufacturers must also apply a nutritional label to the packaging and list any major allergens found in the cannabis products. If the product needs refrigeration, the packaging must indicate “refrigerate after opening” and any timelines for consuming opened products. The proposed regulations continue to prohibit the marketing of cannabis products by using realistic or fictional humans, animals, or fruit. However, fruit and vegetable flavors are permitted, and manufacturers may package products with a cannabis leaf.

The CRC invites public comment at this link until December 15, 2023. If you have questions about the proposed regulations or would like assistance submitting a comment, please contact Anthony Sango at Ansell.Law.

Ansell.Law Welcomes New Attorney to Woodland Park

Ansell.Law is pleased to announce that Richard L’Altrelli has joined the firm’s Woodland Park office. His practice encompasses complex corporate, finance & banking, and commercial real estate matters.

With a background in law and finance, Richard handles sales, acquisitions, leases, and financings involving different real estate types. Following several years as general counsel for an international private equity firm in New York, he founded a firm and focused his practice on complex commercial real estate and corporate matters. 

A seasoned attorney, Richard’s clients appreciate his thoughtful counsel as he guides them through the transaction. Additionally, he counsels privately held companies on corporate governance, operating agreements, shareholder agreements, and employment agreements.

Licensed in both New York and New Jersey, Richard earned his law degree from Brooklyn Law School and his undergraduate degree, cum laude, from Seton Hall University. 

Law360 Covers Closely Watched Verizon Cell Tower Litigation in Monmouth County

In a hotly contested and closely watched litigation matter, Verizon Wireless applied to place cell towers along a New Jersey boardwalk in Monmouth County. Verizon sued the county and its board when their request was denied, claiming the denial was not supported by substantial evidence. Proposed Intervenors now seek to join the case, asking the courts to dismiss Verizon’s claims against the county. A recent Law360 article covered the case.

Ansell.Law partner Anthony J. D’Artiglio and associate Layne A. Feldman, attorneys in the Firm’s Litigation Department, represent the intervenors in the case.

Anthony’s practice encompasses complex litigation, bankruptcy, controlled substances and regulatory law, and labor and employment. Layne handles a diverse range of complex commercial and civil litigation matters.

Click here to read the Law360 article (subscription required).

Default Judgments: What Happens When You Fail to Respond to a Lawsuit

By Seth M. Rosenstein

One of the brightest minds of our time once said, “Half the battle is just showing up.” While “showing up” and responding promptly to a lawsuit filed against you doesn’t necessarily give you an edge in winning the case, failing to respond gives you close to a 100% chance of losing and having a default judgment entered against you.

Whether in state court, federal court or arbitration forums, a defendant in a civil action who does not file a response to the complaint against them within the time set forth by law effectively forfeits their right to defend the action. The court will accept the allegations in the complaint as true, enter a default judgment against the wayward defendant, and allow the plaintiff to take all steps needed to collect on their judgment.

That is why you should never ignore a complaint served upon you or your business and contact legal counsel as soon as possible. We cannot wish a lawsuit away, and nothing is accomplished by putting a complaint in your junk drawer like some people crumble up parking tickets and shove them in their glove compartment. When that first wage garnishment hits, a lien is put on your home, or your assets are seized, it will likely be too late for a do-over. 

Here is what you need to know about default judgments and their consequences.

What Is a Default Judgment?

To understand a default judgment, you need to understand the basics of how lawsuits work. They start with a plaintiff filing a complaint with the court that describes their claims against the defendant and the relief or amount of damages they want a judge to award. The complaint is then served on the defendant.

Once a defendant is properly served, the clock starts ticking on their time to respond. In New Jersey, that time is 35 days. It is either 20 or 30 days in New York, depending on how the complaint was served. In federal cases, defendants have 21 days to respond. Typically, that response will either be an answer to the complaint, a motion to dismiss the complaint, or a request for more time to respond. As long as the defendant “shows up” with a timely response and continues to participate in the case, the matter will proceed, and the defendant will be able to fight the allegations if they so choose.

When a defendant doesn’t respond promptly, the plaintiff can ask the court to enter a default judgment against the defendant. Unless the defendant has a legal basis for vacating that judgment, and seeks to vacate that judgment with the time set by court rules, the judgment will effectively close the door on any efforts to dispute the truth or accuracy of the complaint’s allegations. 

How Does a Plaintiff Obtain a Default Judgment?

The procedures for requesting and requirements for obtaining a default judgment are slightly different in New York and New Jersey (and in federal court). In some New York cases, a plaintiff can receive a judgment for all the damages they requested in the complaint without proving they actually incurred those damages. In other cases, the plaintiff must present evidence regarding their damages before a judge will enter a final judgment in the requested amount.

In New Jersey, the first step after a defendant fails to respond to a complaint is to ask the court for an entry of default. The plaintiff must then provide the defendant with notice of the entry and again when they subsequently file a motion for judgment by default. In this motion, the plaintiff must show the defendant was properly served notice of the proceedings, the defendant failed to answer, and the defendant is not an active member of the military. If they do so, the court may enter a final judgment by default, which definitively establishes the defendant’s liability.

In some cases, the court will hold a “proof” hearing at which the plaintiff will present evidence supporting the amount of damages they seek. The defendant must be given notice of this hearing as well. If the defendant shows up, they can dispute the damages amount. At the end of the hearing, the judge may enter a final judgment for a set amount, and the plaintiff is free to begin efforts to collect on the judgment.

What Can a Defendant Do After Entry of a Default Judgment?

As much as courts – and the law – do not favor defendants who ignore properly served complaints, they also loathe default judgments. They prefer resolving lawsuits on the merits of the claims and defenses, as opposed to disposition on procedural bases.

That is why the court rules provide a way for a defendant to ask a court for relief from a default judgment. But that relief is far from automatic. There are specific and limited bases for having a default judgment vacated, most of which involve flaws with the judgment itself. But short of a problem with the judgment (other than the substance of the claims), a defendant in New Jersey can get relief from a judgment if they show their failure to respond was due to “mistake, inadvertence, surprise, or excusable neglect” and that they have a meritorious defense to the allegations in the complaint. Similarly, in New York, a defendant must show they had a “reasonable excuse” for their failure to appear and also show they have a meritorious defense.

What qualifies as “excusable neglect’ and a “reasonable excuse” is largely up to the judge’s discretion, but simply forgetting or ignoring a complaint will unlikely be sufficient to support an application to vacate a default judgment. Rather than digging yourself into a hole that may be impossible to escape, the best course of action after being served with a complaint is to take the matter seriously and meet with experienced counsel who can preserve your right to mount a defense.

If you have questions about a pending default judgment against you or your business, please contact Seth Rosenstein at Ansell.Law.

Anthony J. D’Artiglio Elevated to Litigation Team Leader

Ansell.Law is pleased to announce that partner Anthony J. D’Artiglio has been elevated to Litigation Team Leader for North New Jersey. This new role complements his mentoring and leadership abilities within the Firm. D’Artiglio will manage the Firm’s North New Jersey litigation presence. Additionally, he will work closely with Firmwide Litigation Department Chair Lawrence H. Shapiro to shape the department’s future.

Based in the Firm’s Woodland Park office, D’Artiglio’s practice encompasses litigation, bankruptcy, controlled substances and regulatory law, and labor and employment. A seasoned attorney, he litigates a broad range of commercial matters, including commercial lease disputes, class actions, Consumer Fraud Act claims, corporate and shareholder disputes, employment disputes, and secured property actions. He also routinely represents creditors in bankruptcy matters.

D’Artiglio is licensed in New York and New Jersey. Best Lawyers in America has recognized him as a “One to Watch” since 2021.