Full Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3. SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1708-25 ALL SERVE COMMUNICATIONS LLC, a/a/o INTELECT SOLUTIONS, Plaintiff-Appellant, v. COLDSTAT REFRIGERATION & HVAC, SSSS, LLC d/b/a COLDSTAT REFRIGERATION, and ION SARKISIAN, individually, Defendants-Respondents. Submitted October 26, 2026 – Decided November 4, 2026 Before Judges Sabatino and Berdote Byrne. On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5701-24. Anthony J. Graceffo, attorney for appellant. Bertone Piccini LLP, attorneys for respondents (Donald C. Pierce, of counsel and on the brief). PER CURIAM This is an appeal of a trial court order granting a motion under Rule 4:6- 2(e) to dismiss with prejudice a claim for damages in a breach of contract action. For the reasons that follow, we vacate the dismissal and remand for further proceedings. Plaintiff, All Serve Communications LLC ("All Serve"), is a provider of what is known as Voice over Internet Protocol ("VoIP") hardware and software. Defendant, Coldstat Refrigeration & HVAC ("Coldstat") was one of plaintiff's customers. The second amended complaint also listed as codefendants "SSSS, LLC d/b/a Coldstat Refrigeration" ("SSSS") and Ion Sarkisian, individually. The pleading described Sarkisian, who signed the contract, as "the managing member, agent, and authorized representative of SSSS, LLC d/b/a Coldstat Refrigeration." Our analysis of the enforceability of the early termination clause extends to all three named defendants, and they have not been distinguished in the appellate briefs. All Serve acquired a company called InTelect Solutions in March 2024. Several years before that acquisition, InTelect Solutions entered into a written contract with Coldstat on February 8, 2018 to provide Coldstat with certain VoIP equipment and services for sixty months. The contract, labeled a "Master A-1708-25 2 Agreement," was on an InTelect Solutions form, and it was signed by representatives of both companies. The fifth unnumbered paragraph of the contract set forth an early termination provision. It stated, in pertinent part, as follows: Early termination of this master agreement for applicable services order by customer will result in customer being liable for early termination penalties. The early termination penalties will be the total of the nonrecurring charges and any monthly reocurring charges multiplied by the number of months remaining on the agreement service order, plus the monthly average of any usage-based charges as determined by averaging the charges incurred by the previous three months multiplied by the number of months remaining on the agreement service order. [(Emphasis added).] According to All Serve, the monthly charge to Coldstat under the contract was $721.11, including taxes and fees. The contract automatically renewed after the initial sixty-month period. All Serve alleges that thirteen months into the renewed contract period, Coldstat switched providers and stopped paying. All Serve filed a breach-of-contract case in the Law Division to recover the full amount of revenue it would have received if Coldstat had made payments A-1708-25 3 for the rest of the contract period. Based on the formula set forth in the early termination clause, All Serve calculated the sum owed as $33,840.00. In response to the complaint, Coldstat argued the early termination clause imposed an unenforceable penalty. Coldstat accordingly moved to dismiss the complaint under Rule 4:6-2(e) for failing to state a claim upon which relief may be granted. The trial court dismissed without prejudice the original complaint. All Serve amended the complaint a first time and the court dismissed that complaint for similar reasons, for failure to state a claim because it regarded the amount sought as "liquidated damages." The court instructed All Serve to revise the complaint and assert a claim for actual damages. All Serve lastly filed a second amended complaint that sought the same $33,840.00 sum. This time it described the claimed damages as "substantial economic damages, which include the total non-recurring charges and any monthly reoccurring charges multiplied by the number of months remaining on the agreement service order." The trial court dismissed the second complaint, this time with prejudice, because the amount and the formula used to reach that amount were the same as in All Serve's previous complaints. In a handwritten notation on the dismissal A-1708-25 4 order, the court stated, "The claim is premised on an unenforceable penalty clause." On appeal, All Serve argues the trial court erred in dismissing its second amended complaint, which was asserted against all defendants, for failure to state a claim. Coldstat argues in response the court correctly determined the contract's early termination clause imposes an unenforceable penalty. Procedurally, Coldstat argues All Serve has appealed the incorrect order. 1 The relevant legal principles are well established. A reviewing court "appl[ies] a plenary standard of review from a trial court's decision to grant a motion to dismiss." Gonzalez v. State Apportionment Comm'n, 428 N.J. Super. 333, 349 (App. Div. 2012) (quoting Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div. 2011)). We "owe[] no deference to the trial court's conclusions." Ibid. "We review de novo a trial court's denial of a motion to dismiss a complaint for failure to state a claim under Rule 4:6- 2(e)." W.S. v. Hildreth, 252 N.J. 506, 518 (2023) (citing Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237 N.J. 91, 108 (2019)). 1 We reject this procedural argument as without merit. The trial court's final order of December 19, 2025 is properly before us on appeal. See Rule 2:2- 3(a)(1). A-1708-25 5 As the Supreme Court has instructed, a reviewing court assessing the dismissal of a complaint under Rule 4:6-2(e) must "search[] the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)); see also Am. C.L. Union of N.J. v. Cnty. Prosecutors Ass'n of N.J., 257 N.J. 87, 100 (2024). The review must be performed in a manner that is "generous and hospitable." Printing Mart, 116 N.J. at 746. Our role is simply to determine whether a cause of action is "suggested" by the complaint. Ibid. (quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)). Substantively, the governing law regarding contractual liquidated damage and penalty clauses is also clear. The distinction between a liquidated damages clause and a penalty clause is an important one, because "'[p]arties to a contract may not fix a penalty for its breach. The settled rule in this State is that such a contract is unlawful.'" Westmount Country Club v. Kameny, 82 N.J. Super. 200, 205 (App. Div. 1964) (quoting Suburban Gas Co. v. Mollica, 131 N.J.L. 61, 62 (1943)). However, a liquidated damages clause may be enforceable if, as the A-1708-25 6 Supreme Court has stated, the clause "is reasonable under the totality of the circumstances." MetLife Cap. Fin. Corp. v. Washington Ave. Assocs. L.P., 159 N.J. 484, 495 (1999). The Court has recognized that the intent of a party drafting a liquidated damages or penalty clause "has little bearing on whether the clause is objectively reasonable." Wasserman's Inc. v. Twp. of Middletown, 137 N.J. 238, 250 (1994) (internal quotation marks omitted). The Court further instructed that "the parties' characterization of stipulated damages as 'liquidated damages' or as a 'penalty' should not be dispositive." Id. at 251. Courts should rely instead on the "circumstances of the case and not on the words used by the parties" in determining the enforceability of stipulated damages clauses. Gibbs v. Cooper, 86 N.J.L. 226, 227–28, (E. & A. 1914); see also Farnsworth [on Contracts], supra, § 12.18 at 939 ("the parties' own characterization of the sum as 'liquidated damages' or as a 'penalty' is not controlling") . . . . [Ibid.] This approach under our state law generally aligns with Section 356(1) of the Restatement (Second) of Contracts, which states: (1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated A-1708-25 7 damages is unenforceable on grounds of public policy as a penalty. Our Supreme Court has adopted this test. See MetLife Cap. Fin. Corp., 159 N.J. at 495; Wasserman's Inc., 137 N.J. at 252. The Supreme Court has stated that, while "[t]reating reasonableness 'as the touchstone,'" it also considers "the difficulty in assessing damages, intention of the parties, the actual damages sustained, and the bargaining power of the parties" when assessing the validity of a stipulated damages clause. MetLife Cap. Fin. Corp., 159 N.J. at 495. None of those factors are dispositive. Ibid. With respect to reasonableness, courts should assess reasonableness either at the time of contract formation or at the time of the breach. Calamari & Perillo [on Contracts], supra, § 14–31 at 642 (stating, "there are two moments at which the liquidated damages clause may be judged rather than just one"). Actual damages, moreover, reflect on the reasonableness of the parties' prediction of damages. "If the damages provided for in the contract are grossly disproportionate to the actual harm sustained, the courts usually conclude that the parties' original expectations were unreasonable." [Wasserman's Inc., 137 N.J. at 251.] Additionally, "the party challenging such a clause should bear the burden of proving its unreasonableness." Wasserman's Inc., 137 N.J. at 252. A-1708-25 8 Applying these principles, we conclude the trial court erred in dismissing with prejudice All Serve's lawsuit. The series of complaints set forth, at least at this pleading stage, "the fundament" of a viable cause of action. Printing Mart, 116 N.J. at 746. The trial court was unduly swayed by the contract's labeling of the early termination consequences as "penalties." Wasserman's Inc., 137 N.J. at 250–51. In order to appropriately evaluate the reasonableness of the damages formula, the record must be developed to quantify such things as the costs, if any, that All Serve would no longer need to incur to provide the services once the contract was prematurely terminated, in comparison with the costs it had already incurred. In addition, the record should be developed to identify what, if any, other expenses would be triggered by the termination. In short, the record at this pleadings stage is inadequate to assess the enforceability factors set forth in Wasserman's Inc. and associated case law. Consequently, we vacate the dismissal order as to all defendants and remand for discovery and other necessary proceedings. Vacated and remanded. We do not retain jurisdiction. A-1708-25 9