Opinion
DOCKET NO. A-5314-14T3
11-03-2016
J. ANTHONY KING, Plaintiff-Respondent, v. HOBOKEN RENT LEVELING AND STABILIZATION BOARD, Defendant-Respondent, and KRISTIN BROWN, Defendant-Appellant.
Brach Eichler, L.L.C., attorneys for appellant (Charles X. Gormally, of counsel; Sean A. Smith, on the brief). Respondent J. Anthony King has not filed a brief. Respondent Hoboken Rent Leveling and Stabilization Board has not filed a brief.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Leone and O'Connor. On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5078-14. Brach Eichler, L.L.C., attorneys for appellant (Charles X. Gormally, of counsel; Sean A. Smith, on the brief). Respondent J. Anthony King has not filed a brief. Respondent Hoboken Rent Leveling and Stabilization Board has not filed a brief. PER CURIAM
Defendant Kristin Brown ("Brown") is the owner of an apartment in Hoboken. Plaintiff J. Anthony King rented the apartment from 2010 through 2012, paying $1950 per month. In 2012, plaintiff sought a legal rent calculation from defendant Hoboken Rent Leveling and Stabilization Board ("Board") under the rent control ordinance ("Ordinance") in the City of Hoboken Code ("Code") Chapter 155. In 2014, plaintiff filed an action in lieu of prerogative writ before the Law Division challenging the Board's grant of a 2005 vacancy decontrol rent increase. On June 12, 2015, the Law Division vacated the Board's decision. We reverse.
I.
In 1993, Brown purchased Unit #4 in a four-unit apartment building located in Hoboken which had been renovated and turned into condominiums. In 1994, the Board sent Brown a notice advising she was required to register Unit #4 with the Board annually. See Code § 155-30. Brown registered Unit #4 as owner-occupied in 1994, 1995, 1996, 2004, and on January 20, 2005. Brown failed to register Unit #4 from 2006 through 2009.
The registration requirement applies to any dwelling rented or offered for rent, with certain exemptions. Code §§ 155-1, -2, -30.
The issues before us are whether the Board properly credited Brown's evidence that she rented Unit #4 to a tenant from 2005 to 2008, and whether she is judicially estopped from so arguing.
It is undisputed that in April 2008 Brown began renting Unit #4 to Rudolph DiLieto at a rental rate of $1950 per month. DiLieto voluntarily vacated Unit #4 in March 2010.
In March 2010, Brown registered that she had rented Unit #4 to plaintiff for $1950 per month. Plaintiff and Brown entered into a lease agreement, commencing April 1, 2010, in which plaintiff agreed to pay $1950 per month. The lease was renewed for a second year on April 1, 2011.
On August 13, 2011, Brown sent plaintiff a letter advising that the rent was increasing by $75 per month. Plaintiff argued the mid-term increase in rent was illegal, and continued to pay $1950 per month. On December 23, 2011, Brown sent plaintiff a second letter advising "that due to unforeseen circumstances I will not be able to renew your lease of [Unit #4]." The letter directed plaintiff to vacate the unit no later than March 31, 2012. Plaintiff vacated the unit on March 26, 2012.
On March 30, 2012, plaintiff requested a legal rent calculation from the Board's Rent Control Officer ("Officer"). On May 3, 2012, the Officer found the $1950 charged to plaintiff was legal rent under the Ordinance.
Plaintiff appealed to the Board. The Board held a hearing on June 13, 2012. Brown's lawyer argued the renovation of Unit #4 in 1993 made it "new construction." Under the Ordinance, "[n]ewly constructed dwellings" are exempt from rent control when they "are rented for the first time." Code § 155-2(B). "[S]uch dwellings shall be exempt for this initial rent or lease agreement, but all subsequent rents shall be subject to the provisions of this chapter." Ibid.
At the hearing, it was suggested Unit #4 might be exempt under the Board's Regulation 18:62. Regulation 18:62 provided if a condominium unit was "personally occupied by the owner of record for a period of not less than one (1) year and then vacated[,] . . . [t]he unit shall be then decontrolled and exempt . . . for the new tenant[']s initial rent." However, "[a]dditional increases beyond the initial rental of the new tenant shall be subject to the provisions of this Chapter." Ibid.
By resolution dated June 27, 2012, the Board upheld the Officer's May 3, 2012 legal rent finding. The resolution provided that (1) the Board had relied on its Regulation 18:62 since its adoption in 1997; (2) the Officer relied on Regulation 18:62 in good faith in determining the legal rent for Unit #4, and, (3) as such, the Board exercised its equitable authority under Code § 155-19 to depart from the provisions of the Ordinance "in the interests of fairness and equity and in keeping with the . . . Officer's good faith and longstanding reliance upon the aforementioned Regulation."
Code § 155-19 permits the Board to exercise "equitable authority to depart from the strict interpretation of the provisions of this chapter in instances where fairness requires equitable intervention."
Plaintiff filed an action in lieu of prerogative writ in the Law Division challenging the Board's June 27, 2012 decision that $1950 was a proper rent for Unit #4. On February 7, 2013, in a letter opinion, Judge Lourdes I. Santiago held that (1) "Regulation 18:62, decontrolling condominiums from rent control, was ultra vires because it was beyond the legislative powers bestowed upon the Board through the Ordinance"; (2) the 1993 renovations of Unit #4 did not make it eligible for a rent control exemption as a "newly constructed dwelling"; and (3) equitable estoppel did not bar the judge from overturning the Officer's calculation. Judge Santiago declared the Board's action to be "arbitrary and capricious," and reversed and remanded the matter to the Board for a new legal rent calculation.
Both the Board and Brown, through new counsel, filed motions for leave to appeal Judge Santiago's decision. We denied both motions in April 2013.
The Board administratively remanded the matter to the Officer. On May 23, 2013, the Officer issued a decision recalculating the legal rent as $1399.
Brown appealed the recalculation to the Board. However, on July 18, 2013, the Officer dismissed Brown's appeal for lack of prosecution because Brown's brief was e-mailed after hours on the due date. Brown appealed that dismissal to the Board. By a December 11, 2013 resolution, the Board reinstated Brown's appeal.
During the reinstated appeal, in a February 7, 2014 letter to the Board, Brown's new counsel indicated for the first time that Brown rented Unit #4 to Beatrice Faughnan from 2005 through 2008. Brown also submitted, for the first time, an April 23, 2005 lease agreement between Brown and Faughnan renting the unit for $1625 per month.
The Board held a hearing on Brown's reinstated appeal on March 12, 2014. The Board again remanded, directing the Officer to "consider all alternative proof" submitted by the parties. Brown submitted Faughnan's lease as well as Faughnan's January 22, 2008 letter indicating she wished to voluntarily terminate the lease effective April 30, 2008.
On August 4, 2014, the Officer issued a decision recalculating the legal rent based on "vacancy decontrol increases of 25% each as documented in the alternative proofs verifying that Beatrice Faughnan moved in April 2005, and Rudy DiLieto moved [in] May, 2008." The Officer calculated that the legal rent for the tenant after plaintiff would be $2187.
The Ordinance describes a "vacancy decontrol" increase as follows:
[U]pon the vacation of a residential apartment unit by a tenant, the apartment unit shall become decontrolled and exempt from the provisions of this chapter for the new tenant's initial rental; provided, however, that said rental shall be limited to an increase of 25% over the last rental paid by the tenant who voluntarily vacated the rental unit[.]
[Code § 155-31; see also Code § 155-4(D).]
Plaintiff appealed to the Board, challenging the 2005 vacancy decontrol increase. The Board upheld the Officer's August 4, 2014 recalculation in a November 12, 2014 resolution.
Also on November 12, 2014, the Board denied Brown's appeal of the Officer's denial of a vacancy decontrol increase for 1993.
Plaintiff filed a second action in lieu of prerogative writ before the Law Division, this time challenging the Board's affirmance of a 2005 vacancy decontrol increase and alleging Brown fraudulently concealed evidence. On May 22, 2015, a hearing was held before a different judge ("the trial court"). The trial court reversed the Board's November 12, 2014 resolution, holding (1) Brown was judicially estopped from receiving a vacancy decontrol increase for 2005 and (2) the Board's decision granting the 2005 vacancy decontrol was arbitrary, capricious, and unreasonable.
Brown and the Board appealed, but the Board did not file a brief. Plaintiff also failed to file a brief on appeal.
II.
Parties may use an action in lieu of prerogative writ to "seek 'review, hearing and relief in the Superior Court of all actions of municipal agencies." Rivkin v. Dover Twp. Rent Leveling Bd., 143 N.J. 352, 378 (quoting N.J. Const. art. VI, § 5, ¶ 4, cert. denied, 519 U.S. 911, 117 S. Ct. 275, 136 L. Ed. 2d 198 (1996)). "A court may set aside a municipal board decision if it is shown to be arbitrary, capricious or unreasonable, not supported in the evidence, or otherwise contrary to law." Ibid. However, a municipal entity's "decision is 'invested with a presumption of validity,'" 62-64 Main St., L.L.C. v. Mayor of City of Hackensack, 221 N.J. 129, 157 (2015) (citation omitted), and "the burden of proof [is] placed on the plaintiff challenging the action." Grabowsky v. Twp. of Montclair, 221 N.J. 536, 551 (2015). "'When reviewing the decision of a trial court that has reviewed municipal action, we are bound by the same standards as was the trial court.'" Price v. Strategic Capital Partners, LLC, 404 N.J. Super. 295, 301-02 (App. Div. 2008) (citations omitted). We must hew to that de novo standard of review.
III.
We first consider the trial court's decision that the Board and the Officer acted unreasonably by crediting Brown's proofs that she rented Unit #4 to Faughnan from 2005 to 2008.
At the March 12, 2014 hearing before the Board, Brown testified as follows: Brown purchased Unit #4 in 1993 and lived there until 2005 when she rented it out, for the first time, to Faughnan for $1625 per month. Faughnan lived in the unit for three years. Faughnan left the unit in 2008 because she was getting married and felt the unit was too small to live in with her future husband. Faughnan vacated the unit voluntarily and without harassment or pressure. Plaintiff testified he had no evidence to contradict Brown's testimony.
The Board remanded to the Officer, who considered Brown's alternative proofs, including Faughnan's April 23, 2005 lease and Faughnan's January 22, 2008 letter, as well as the testimony at the March 12, 2014 hearing. The Officer credited Brown's alternative proofs and awarded the 2005 vacancy decontrol increase. The Board found the Officer's determination was not arbitrary, capricious, or unreasonable.
The trial court faulted the Board for shifting the credibility determination to the Officer. However, under the Ordinance, determination of rents "shall be made by the . . . Officer." Code §§ 155-3, -4. Moreover, the Officer has "the right to exercise" powers of the Board, Code § 155-22, including the power to "adjudicate applications from landlord [or] tenants," Code § 155-19(C). "[I]n the absence of a filed and timely submitted registration statement and/or the absence of a filed and timely submitted vacancy decontrol certificate, a landlord shall be permitted to submit credible alternative proofs for consideration by the . . . Officer or the . . . Board." Code § 155-4(D). The "Officer and/or the . . . Board shall have absolute discretion to determine the reliability of any such alternative proofs." Ibid.
The Officer was present during Brown's transcribed testimony on both June 13, 2012, and March 12, 2014. The Officer also reviewed Faughnan's lease and letter. Thus, the Officer was in as good a position as the Board to judge credibility. Further, it was appropriate for the Board to review whether "the Officer's determination was in error or arbitrary, capricious and unreasonable." Code § 155-23.
The trial court criticized the Officer for not articulating how she reached her credibility determination. However, the Officer explained to the Board she found Faughnan rented the unit from 2005 to 2008, based on the testimony and "the alternative proofs verifying that Beatrice Faughnan moved in April, 2005." No greater elaboration was necessary. See State v. Locurto, 157 N.J. 463, 475 (1999) (holding a factfinder need not "articulate detailed, subjective analyses of factors such as demeanor and appearance to support credibility determinations").
The Ordinance explicitly provides the "alternative proofs may consist of, but are not limited to, leases showing vacancies, and/or statements under oath from reliable sources." Code § 155-4(D). The Officer considered and credited Faughnan's lease as corroborated by Brown's testimony under oath. Contrary to the trial court's view, the Ordinance does not require the lease be certified, witnessed, or notarized. The trial court noted the lease was signed only by Faughnan, but Brown testified the lease was her tenancy agreement with Faughnan. The trial court pointed out the lease and letter were provided "at a very late date." That did not prevent the Officer from crediting the evidence.
As the trial court noted, "[i]n presenting alternative proofs for a vacancy, a certified statement from the landlord should be submitted indicating that the tenant vacated the apartment voluntarily without harassment, duress or unreasonable pressure from the landlord or his agents." Ibid. However, Brown testified Faughnan vacated the unit in 2008 voluntarily and without harassment or pressure, and her testimony was corroborated by Faughnan's 2008 letter. The Officer could find Brown's testimony under oath served the purpose of a certified statement from Brown.
Finally, the trial court noted "[t]he only support for these documents was Brown's own self-serving testimony." However, the Officer and the Board saw and heard Faughnan's testimony, the Officer found her credible, and the Board upheld the Officer's decision. The trial court, which did not hear Brown's testimony, was in an inferior position to make a credibility determination. See Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 587 (1988) ("It was the ALJ, and not the Director, who heard the live testimony, and who was in a position to judge the witnesses' credibility."). Thus, "it is not for us or the [trial court] to disturb that credibility determination, made after due consideration of the witnesses' testimony and demeanor during the hearing." H.K. v. Dep't of Human Servs., 184 N.J. 367, 384 (2005).
Therefore, the trial court exceeded the scope of review. "The scope of review of an administrative decision" is "'"whether the findings made could reasonably have been reached on sufficient credible evidence present in the record" considering "the proofs as a whole," with due regard to the opportunity of the one who heard the witnesses to judge of their credibility.'" In re Taylor, 158 N.J. 644, 656 (1999) (citations omitted). "Accordingly, if in reviewing an agency decision [a reviewing] court finds sufficient credible evidence in the record to support the agency's conclusions, that court must uphold those findings even if the court believes that it would have reached a different result." Id. at 657.
Accordingly, we reverse the trial court's ruling that the Officer and the Board acted unreasonably in crediting Brown's evidence that she rented Unit #4 to Faughnan from 2005 to 2008.
IV.
We next address whether the trial court properly applied the doctrine of judicial estoppel to prevent Brown from asserting that she rented Unit #4 to Faughnan from 2005 to 2008, even though that assertion was credited as fact by the Officer and the Board. "We review a trial court's decision to invoke judicial estoppel using an abuse of discretion standard." In re Declaratory Judgment Actions Filed by Various Municipalities, 446 N.J. Super. 259, 291 (App. Div. 2016), appeal granted, ___ N.J. ___ (Sept. 8, 2016); see Div. of Motor Vehicles v. Caruso, 291 N.J. Super. 430, 438 (App. Div. 1996).
"Although the doctrine of judicial estoppel is most frequently invoked in judicial proceedings, it is also applicable in the administrative process." Bray v. Cape May City Zoning Bd. of Adjustment, 378 N.J. Super. 160, 166 (App. Div. 2005) (citing Dep't of Law & Pub. Safety v. Gonzalez, 142 N.J. 618, 632 (1995)). "Therefore, a party may not 'play fast and loose' with an administrative agency by asserting a position before the agency that is inconsistent with a position the party has successfully asserted before a court or other administrative tribunal." Id. at 166-67 (quoting Gonzalez, supra, 142 N.J. at 632). A court reviewing a ruling by an agency acting in a quasi-judicial capacity may invoke judicial estoppel where necessary to "protect[] the integrity of . . . the judicial process." Gonzalez, supra, 142 N.J. at 632.
"Judicial estoppel is an extraordinary remedy" which "should be invoked only to prevent a miscarriage of justice." Bhagat v. Bhagat, 217 N.J. 22, 37 (2014). "[J]udicial estoppel is applied with caution to avoid impinging on the truth-seeking function of the court," Commercial Ins. Co. of Newark v. Steiger, 395 N.J. Super. 109, 115 (App. Div. 2007) (quoting Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990)), "because the doctrine precludes a contradictory position without examining the truth of either statement." Teledyne, supra, 911 F.2d at 1218; see Ali v. Rutgers, 166 N.J. 280, 288 (2000) (quoting Kimball Int'l, Inc. v. Northfield Metal Prods., 334 N.J. Super. 596, 608 (App. Div. 2000) (citing this language from Teledyne), certif. denied, 167 N.J. 88 (2001))). "Judicial estoppel is not a favored remedy because of its draconian consequences." In re Declaratory Judgment Actions, supra, 446 N.J. Super. at 292. Therefore, "[t]he showing of judicial acceptance must be a strong one." Perry v. Blum, 629 F.3d 1, 11 (1st Cir. 2010).
Under the doctrine of judicial estoppel, "[a] party who advances a position in earlier litigation that is accepted and permits the party to prevail in that litigation is barred from advocating a contrary position in subsequent litigation to the prejudice of the adverse party." Bhagat, supra, 217 N.J. at 36.
"The purpose of the judicial estoppel doctrine is to protect 'the integrity of the judicial process.'" Ali, supra, 166 N.J. at 287 (quoting Kimball, supra, 334 N.J. Super. at 608 (quoting Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996))); see Bhagat, supra, 217 N.J. at 37. "A threat to the integrity of the judicial system sufficient to invoke the judicial estoppel doctrine only arises when a party advocates a position contrary to a position it successfully asserted in the same or a prior proceeding." Ali, supra, 166 N.J. at 287 (quoting Kimball, supra, 334 N.J. Super. at 608). "'[A]bsent judicial acceptance of the inconsistent position, application of [judicial estoppel] is unwarranted because no risk of inconsistent results exists. Thus, the integrity of the judicial process is unaffected[.]'" Kimball, supra, 334 N.J. Super. at 607 (citation omitted). Thus, "the doctrine is not invoked unless a court has accepted the previously advanced inconsistent position and the party advancing the inconsistent position prevails in the earlier litigation." Bhagat, supra, 217 N.J. at 37.
In applying judicial estoppel, the trial court erroneously repeated "dictum in Cummings, supra, that '[p]rior success does not mean that a party prevailed in the underlying action, it only means that the party was allowed by the court to maintain the position.'" Kimball, supra, 334 N.J. Super. at 609 (quoting Cummings, supra, 295 N.J. Super. at 387). However, we have rejected that dictum:
If a court has not accepted a litigant's prior position, there is no threat to the
integrity of the judicial system in allowing the litigant to maintain an inconsistent position in subsequent litigation or at a later stage of the same litigation, and thus the doctrine of judicial estoppel does not apply.Our Supreme Court has agreed that "to be estopped [a party must] have convinced the court to accept its position in the earlier litigation. A party is not bound to a position it unsuccessfully maintained." Ali, supra, 166 N.J. at 288 (quoting Kimball, supra, 334 N.J. Super. at 608). The trial court erred to the extent it relied on the discredited dictum in Cummings.
[Id. at 610.]
The trial court ruled judicial estoppel precluded Brown from proving that Faughnan rented Unit #4 from 2005 to 2008 based on statements made (1) to the Board in Brown's May 21, 2012 letter brief and in her testimony and argument at the June 13, 2012 hearing; (2) to Judge Santiago in Brown's January 31, 2013 argument and the repetitions of those statements in Judge Santiago's February 7, 2013 opinion; (3) to this court in the motions for leave to appeal by Brown and the Board; and (4) to the Board in Brown's August 26, 2013 brief appealing the Officer's July 13, 2013 order dismissing Brown's appeal for lack of prosecution.
However, only the first set of statements could be a possible basis for judicial estoppel because only the first proceeding resulted in a favorable ruling on the merits for Brown. The second, third, and fourth proceedings did not result in rulings on the merits in Brown's favor. As the trial court recognized, Judge Santiago "ruled for plaintiff." Moreover, we denied the motions for leave to appeal by Brown and the Board. Finally, the Board's reinstatement of Brown's dismissed appeal was "a purely procedural ruling necessitated by the late filing . . . rather than a substantive decision that [Brown had lived in the unit until 2008], such as would be required to conclude that [Brown] had 'succeeded in maintaining that position.'" Kimball, supra, 334 N.J. Super. at 609-10 (citation omitted). Indeed, there was no mention of that position in the Board's September 23, 2013 and November 13, 2013 hearings addressing whether Brown's appeal should be reinstated.
Accordingly, the trial court erred to the extent it based its judicial estoppel ruling on the statements by Brown's attorneys in their unsuccessful advocacy before Judge Santiago, in the unsuccessful motions for leave to appeal, or in the appeal which resulted solely in a procedural reinstatement.
Therefore, we examine whether the trial court's invocation of judicial estoppel can be supported by the statements to the Board in Brown's May 21, 2012 letter brief and in Brown's testimony and argument at the June 13, 2012 hearing which preceded the Board's June 27, 2012 resolution favorable to Brown.
The parties have not supplied us with any briefs, submissions, or other advocacy leading up to the Officer's May 3, 2012 decision or with the decision itself. The parties have also supplied us with only the same five pages of the June 13, 2012 transcript plaintiff used to argue to the Board that Brown took inconsistent positions. The trial court did not find Brown or her lawyer made any inconsistent statements before the Officer or any other inconsistent statements to the Board elsewhere in the transcript.
In the May 21, 2012 letter brief to the Board, Brown's lawyer asserted that Unit #4 was a newly-constructed unit when Brown purchased the unit in 1993 and that Brown "lived in the unit for a number of years until she vacated." Brown's lawyer concluded his "client resided in the unit, filed Rent Registration Statements and ultimately rented the unit, establishing a rental for the first time, pursuant to the terms of the Ordinance." The letter brief listed thirteen attachments, including the 2008 DiLieto lease. However, the letter brief did not assert when Brown vacated the unit or when or to whom she first rented the unit.
Brown's letter brief "was not 'clearly inconsistent' with the position that [she] now takes." Zedner v. United States, 547 U.S. 489, 505, 126 S. Ct. 1976, 1988, 164 L. Ed. 2d 749, 767 (2006). Generally, "a party's later position must be 'clearly inconsistent' with its earlier position" before courts apply judicial estoppel. New Hampshire v. Maine, 532 U.S. 742, 750, 121 S. Ct. 1808, 1815, 149 L. Ed. 2d 968, 978 (2001); see Ramer v. N.J. Transit Bus Operations, Inc., 335 N.J. Super. 304, 313 (App. Div. 2000) (finding it "not at all clear" that the plaintiff's former position was "so contradictory" to her current position as to warrant application of judicial estoppel).
Similarly, Brown's testimony at the June 13, 2012 hearing was not clearly inconsistent with her subsequent testimony. Brown was asked on direct:
Q So in — so in 2008 you charged an individual when you, after you moved out, $1,950, correct?On cross-examination, Brown was asked:
A Correct.
Q Okay. You submitted with your documentation that you let to a tenant in 2008; is that correct?On redirect, Brown was asked:
A Yes.
Q Okay. And then you resided in it until the '80s, correct — I mean, I'm sorry — until 20 — until the late 2000s, right?
A Yes.
Technically, none of those statements were inconsistent with Brown's later testimony. The garbled question on redirect did not define when in "the late 2000s" Brown stopped residing in the unit. That Brown "let to a tenant in 2008" did not mean she did not let to a tenant in 2005. Brown's 2008 rental to DiLieto occurred "after she moved out," whether she moved out in 2005 or 2008. Thus, the trial court went beyond the literal language of Brown's testimony when it found "Brown testified she first rented the apartment in 2008 to Mr. [DiLieto] at a rate of $1,950 per month and had herself resided in the apartment until 2008."
At the March 12, 2014 Board hearing, plaintiff cross-examined Brown about her June 13, 2012 testimony. Brown responded that she never testified she lived in Unit #4 until 2008 and that she was never asked about Faughnan or if there was a renter before DiLieto in 2008. Her response was literally accurate, and the Officer found her 2014 testimony credible.
Finally, at the June 13, 2012 hearing, Brown's lawyer argued his "client resided in the — in the building for over 15 (ph) years then rents it out. 2008, she rents it out for $1,950." This argument was not inconsistent on its face. However, when coupled with the undisputed fact that Brown began residing in Unit #4 in 1993, it did suggest Brown resided in the building until 2008. In light of her lawyer's argument, Brown's testimony could have conveyed the impression that she resided in the unit until 2008 when she rented to DiLieto.
That was the impression given, and the argument made, in the unsuccessful proceeding before Judge Santiago, in the unsuccessful motion for leave to appeal, and in the brief seeking procedural reinstatement. Even if Brown and her lawyer were "playing fast and loose" with the Board, "[t]o be estopped a party must have convinced the court to accept its position in the earlier litigation." State v. Jenkins, 178 N.J. 347, 359 (2004) (quoting Kimball, supra, 334 N.J. Super. at 606-07).
Nonetheless, the lawyer's one-sentence argument is a weak basis for judicial estoppel. Brown's testimony before the Board was not "clearly inconsistent" with her current position, and her lawyer's arguments were not inconsistent on their face. Zedner, supra, 547 U.S. at 505-06, 126 S. Ct. at 1988, 164 L. Ed. 2d at 766-67 (finding a defendant's request for a continuance "was not 'clearly inconsistent'" with his later position that the continuance was impermissible under the Federal Speedy Trial Act); Ramer, supra, 335 N.J. Super. at 318 (finding "[a] claim for insurance benefits based upon [plaintiff's] disability assessment is not irreconcilably inconsistent with plaintiff's LAD claim that at the time she was fired she could perform her job").
In any event, the Board's June 27, 2012 resolution did not expressly accept or even mention Brown's argument or testimony. Nor were they mentioned in Judge Santiago's summary of the rationales of the various Board members, who were divided on whether Unit #4 had been exempt as a condominium under Regulation 18:62 or as a newly-constructed dwelling under Code § 155-2. In its resolution, the Board simply ruled it would exercise its "equitable authority to depart from the provisions of . . . [the] Ordinance in the interests of fairness and equity" to uphold the Officer's legal rent calculation in light of the longstanding reliance by the Board and the Officer on Regulation 18:62.
The trial court stated Brown and her lawyer argued to the Board that Unit #4 was exempt as a condominium under Regulation 18:62, that DiLieto was the first tenant, that $1950 per month was thus a legal rent for DiLieto, and that $1950 remained a legal rent for plaintiff. However, nothing in the partial June 13, 2012 transcript supplied to us shows Brown or her lawyer making that argument. Rather, it shows Brown's lawyer telling the Board it need not consider Regulation 18:62. Indeed, Judge Santiago found a "lack of reliance [on Regulation 18:62] by the landlord."
The trial court also noted Brown and her lawyer argued to the Board that Unit #4 was new construction. If the unit was a "[n]ewly constructed dwelling," it similarly would have been exempt for the "initial rent or lease agreement." Code § 155-2(B). However, the Board's resolution did not even mention Brown's argument that the unit was a newly-constructed dwelling. As Judge Santiago found, "the Board did not make the factual finding that Unit #4 met the definition of 'Newly Constructed Dwelling' provided under [Code] § 155-1 as advocated by Defendant Brown."
According to Judge Santiago, only one Board member felt it would be equitable to consider Unit #4's renovation as a "newly constructed dwelling" even though Brown could not show "the exterior structure [and] the exterior" walls were "new." Code § 155-1. --------
Our Supreme Court has "emphasize[d] that the doctrine of judicial estoppel may be invoked only when a position advanced in prior litigation concerning the subject matter of the current litigation has been accepted by a court and led to a judgment in favor of that party." Bhagat, supra, 217 N.J. at 27. Here, plaintiff failed to make a "strong" showing of judicial acceptance. Perry, supra, 629 F.3d at 11-12 (rejecting as "speculative" a claim of judicial acceptance).
"The need for a strong showing derives from the maxim that '[j]udicial estoppel is applied with caution to avoid impinging on the truth-seeking function of the court because the doctrine precludes a contradictory position without examining the truth of either statement.'" Id. at 11 (quoting Teledyne, supra, 911 F.2d at 1218); see Ali, supra, 166 N.J. at 288. The trial court's invocation of judicial estoppel "imping[ed] on the truth-seeking function" by precluding the Board from considering Brown's subsequent testimony which the Officer properly found credible. Steiger, supra, 395 N.J. Super. at 115 (quoting Teledyne, supra, 911 F.2d at 1218).
Furthermore, this was not a situation where Brown's position or the Board's June 27, 2012 resolution ultimately "led to a judgment in favor of that party." Bhagat, supra, 217 N.J. at 27. Judge Santiago ruled Unit #4 was not exempt, either as a "newly constructed dwelling" or under Regulation 18:62, and set aside the Board's resolution upholding Brown's $1950 rent as "null and void and unenforceable." Because the earlier, favorable Board resolution was vacated, the Board's later acceptance of Brown's testimony concerning Faughnan "cannot create 'inconsistent court determinations' in [her] favor." See Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 170, 130 S. Ct. 1237, 1249, 176 L. Ed. 2d 18, 33 (2010) (quoting New Hampshire, supra, 532 U.S. at 751, 121 S. Ct. 1808, 149 L. Ed. 2d 968). Thus, "application of [judicial estoppel] is unwarranted because no risk of inconsistent results exists." See Kimball, supra, 334 N.J. Super. at 607; see Jenkins, supra, 178 N.J. at 358-59 ("The evil to be avoided is untoward control of the system, leading to inconsistent results.").
The federal courts are split on whether judicial estoppel can be invoked where the decision procured by the party's initial position has been reversed by a reviewing court. Compare Coal Res., Inc. v. Gulf & W. Indus., Inc., 865 F.2d 761, 773 (6th Cir. 1989) (rejecting a "judicial estoppel argument because CRI was not successful in the prior trial [as the] verdict was reversed on appeal"), with Carnegie v. Household Int'l, Inc., 376 F.3d 656, 660 (7th Cir. 2004) (finding "reversal need not affect the application of judicial estoppel"). It has been argued persuasively that "[i]f an appellate court reverses a decision that relied on a party's earlier position, then the risk of inconsistent court determinations evaporates. . . . Without a risk that court or agency decisions will contradict, courts should resist muzzling a party with judicial estoppel." Trs. in Bankr. of N. Am. Rubber Thread Co. v. United States, 593 F.3d 1346, 1358-59 (Fed. Cir. 2010) (Gajarsa, J., dissenting).
No New Jersey court has expressly addressed whether it is appropriate to use judicial estoppel to muzzle a party whose favorable ruling has been reversed on appeal. In McCurrie ex rel. Town of Kearny v. Town of Kearny, 174 N.J. 523 (2002), the town "successfully defended [its] counsel-fee resolution" in the trial court, the Appellate Division reversed, and in the Supreme Court the town took "the position, entirely contrary to its position in the trial court, that the counsel-fee resolution was invalid." Id. at 533. The Court viewed it as "a blatant violation of the principle of judicial estoppel" for the town "to seek the reversal of that favorable ruling." Id. at 533-34. Nonetheless, our Court "opted to consider the meritorious issue despite the Town's improper litigation posture." Id. at 534.
Here, unlike McCurrie, Brown did not "seek the reversal of [the Board's] favorable ruling," nor was that ruling still on appeal. Ibid. Rather, it was plaintiff who convinced Judge Santiago to void Regulation 18:62, reject Brown's "new construction" argument under Code § 155-2(B), and vacate the Board's ruling. Both Brown and the Board were unsuccessful in obtaining leave to appeal Judge Santiago's unfavorable ruling, and the Board started the calculation anew. With the favorable ruling vacated, Brown was not bound to the position she unsuccessfully maintained, and advocating a new position posed no threat to the integrity of the judicial system from inconsistent results. See Ali, supra, 166 N.J. at 288 (quoting Kimball, supra, 334 N.J. Super. at 608).
Thus, it was improper for the trial court to apply judicial estoppel to prevent Brown from advancing a credible alternative position after she unsuccessfully maintained her earlier position. "Under these [changed] circumstances, the equitable doctrine of judicial estoppel should not apply[.]" See Naporano Assocs., L.P. v. B & P Builders, 309 N.J. Super. 166, 175 (App. Div. 1998).
"[C]ourts must analyze each case by considering the totality of circumstances to determine whether the extraordinary remedy of [judicial] estoppel should be invoked." Ali, supra, 166 N.J. at 288. Here, Brown's testimony was not clearly inconsistent, Brown's arguments before the June 27, 2012 Board decision were not explicitly inconsistent, the Board did not base its decision on Brown's position, and the Board's decision was subsequently vacated by Judge Santiago. Thus, there was "no threat to the integrity of the judicial system in allowing" her to advance a credible alternative position on remand. Ibid. Therefore, there were "no compelling circumstances or injustice to defendant to warrant . . . invoking the doctrine of judicial estoppel." Id. at 288-89.
Accordingly, "[w]e conclude that the trial court erred in holding that [Brown] is precluded by the doctrine of judicial estoppel" from advancing that position. Kimball, supra, 334 N.J. Super. at 604. The trial court's erroneous ruling was "an abuse of discretion." In re Declaratory Judgment Actions, supra, 446 N.J. Super. at 291-92.
Therefore, we reverse the trial court's June 12, 2015 order vacating and remanding the Board's November 12, 2014 resolution, which is hereby reinstated.
Reversed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION