STATE OF NEW JERSEY VS. LUIS A. DIAZ(13-04-0589, BERGEN COUNTY AND STATEWIDE), A-1400-15T1

Karen DeMartini and Andrew Haven bought a Retrofitness, LLC (Retro) franchise for a New Jersey gym in early 2009 after contact with Robert Berlin, a Retro salesperson and independent contractor.
Later in 2009 Berlin solicited plaintiffs to invest $240,000 for a 25% interest in a Margate, Florida gym project; plaintiffs were told Retro wanted East Coast expansion and could delay their New Jersey development.
Plaintiffs learned in 2010 the Margate venture collapsed, that they had no ownership interest, and that promised repayment checks from Berlin bounced; they later obtained a judgment against Berlin alone.
Retro asserted it had no knowledge of Berlin’s Margate activities or plaintiffs’ investment until months after the payments; Berlin was not a Retro franchisee or owner and Retro’s franchise agreement expressly treated franchisees as independent contractors.
The Law Division granted summary judgment to Retro dismissing plaintiffs’ third amended complaint; plaintiffs appealed claiming genuine issues of fact existed as to agency and negligent hiring.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Retro is liable under an actual agency theory for Berlin’s Margate conduct	Berlin acted as Retro’s agent regarding Margate; Retro should be bound	Berlin was an independent contractor and Retro exercised no control over Margate activities	No actual agency; insufficient facts to show Retro exerted control or authorized Berlin
Whether Retro is liable under apparent authority	Berlin’s statements (Retro wanted expansion) led plaintiffs to reasonably believe he had authority	Retro took no action to create that appearance and was unaware of Margate dealings	No apparent authority; plaintiffs can’t show principal’s conduct created reasonable belief
Whether Retro is liable for negligent hiring/supervision	Retro knew or should have known about Berlin’s misconduct and is responsible	Berlin’s Margate solicitations were unrelated to his limited salesman role; Retro lacked notice or involvement	No negligent hiring; Berlin’s conduct was outside the role Retro retained and Retro lacked knowledge
Whether summary judgment was improper due to factual disputes	There are genuine issues of material fact that should preclude summary judgment	Evidence is one-sided; even viewed favorably to plaintiffs, facts don’t support liability theories	Summary judgment affirmed; no genuine issues that could reasonably support plaintiffs’ claims

Bhagat v. Bhagat, 217 N.J. 22 (standard of review for summary judgment)
Robinson v. Vivirito, 217 N.J. 199 (viewing facts in light most favorable to non-moving party)
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (summary judgment when evidence is one-sided)
Mercer v. Weyerhaeuser Co., 324 N.J. Super. 290 (apparent authority focuses on principal’s conduct)
N.J. Lawyer's Fund for Client Prot. v. Stewart Title Guar. Co., 203 N.J. 208 (totality of circumstances for apparent authority)
Lobiondo v. O'Callaghan, 357 N.J. Super. 488 (determinative inquiry is actions of the principal)
Sears Mortg. Corp. v. Rose, 134 N.J. 326 (principal must have role in creating agent’s apparent authority)