Opinion
DOCKET NO. A-0230-14T4
08-10-2016
MARINA DEL REY ASSOCIATES, LLC, Plaintiff-Respondent/Cross-Appellant, v. COMMUNITY REALTY MANAGEMENT, INC., Defendant/Third-Party Plaintiff-Appellant/Cross-Respondent, v. WESSEX MANAGEMENT, LLC, and HAMILTON VENICE APARTMENTS, LLC, Third-Party Defendants.
Jacob S. Perskie argued the cause for appellant/cross-respondent (Fox Rothschild, LLP, attorneys; Timothy J. Bloh, of counsel; Mr. Perskie, on the brief). Howard E. Drucks argued the cause for respondent/cross-appellant (Cooper Levenson, P.A., attorneys; Mark Soifer and Mr. Drucks, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Hoffman, Leone and Whipple. On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-4695-12. Jacob S. Perskie argued the cause for appellant/cross-respondent (Fox Rothschild, LLP, attorneys; Timothy J. Bloh, of counsel; Mr. Perskie, on the brief). Howard E. Drucks argued the cause for respondent/cross-appellant (Cooper Levenson, P.A., attorneys; Mark Soifer and Mr. Drucks, on the brief). PER CURIAM
Defendant Community Realty Management, Inc. ("CRM" or "Agent") appeals from the trial court's July 11, 2014 order dismissing its counterclaim for legal fees and costs, and the denial of reconsideration of that order on July 25, 2014. Plaintiff Marina Del Rey Associates, LLC ("Marina" or "Owner") cross-appeals from the trial court's June 19, 2014 order ruling on motions in limine and dismissing its complaint. We affirm.
I.
Marina was the owner of an apartment complex (Premises). In September 2002, Marina entered into a Management Agreement with CRM to manage the Premises. This indemnification lawsuit arises out of a lawsuit brought by the Estate of Joshua Barksdale, through its administratrix Garland Nellom, under Docket No. L-1357-08 ("the Barksdale lawsuit"). From 2000 to 2006, Nellom and her son Barksdale resided in an apartment in the Premises. Sadly, on May 3, 2006, Barksdale died.
The Estate's 2008 complaint in the Barksdale lawsuit alleged that: there was dangerous mold growing on the ceiling of the apartment; Marina was on notice of the mold and its effect on Barksdale; Marina failed to repair or remove the dangerous condition; and, as a result of Marina's negligence, Barksdale died. An amended complaint added a similar count against CRM. Marina and CRM filed crossclaims against each other.
A partial settlement was reached in the Barksdale lawsuit after mediation with a retired judge. In an April 30, 2012 consent order, the Estate's complaint was dismissed with prejudice as to Marina and CRM. The consent order provided that "[a]ll crossclaims by and between [Marina] and [CRM] are dismissed without prejudice and will be adjudicated in a subsequent action . . . , and are intended to survive this Stipulation of Dismissal."
In July 2012, Marina filed this indemnification lawsuit against CRM. In an amended complaint, Marina alleged that in the settlement of the Barksdale lawsuit, Marina had paid $120,000 on behalf of itself and CRM, and CRM paid nothing. Marina claimed that the Estate's allegations and evidence in the Barksdale litigation, "if believed, demonstrate a breach of CRM's obligations to [Marina] under the Management Agreement and entitle [Marina] to indemnification for the amount it contributed to the Barksdale settlement." CRM counterclaimed, alleging Marina breached the Management Agreement by refusing to defend CRM, and seeking CRM's legal fees and costs in defending itself in the Barksdale lawsuit.
In depositions, Nellom had testified that when spots reappeared on her son's bedroom ceiling, she reported it to Nichole Gupton, the property manager at the Premises. Gupton testified that Nellom had never complained of any mold. The parties disputed whether Gupton was employed by Marina or CRM.
Marina and CRM filed motions in limine shortly before the June 2, 2014 trial date, which on that date was adjourned to July 28, 2014. On June 19, 2014, in an order and memorandum of decision, Judge Allen J. Littlefield ruled on the motions in limine, and then dismissed Marina's complaint. The court dismissed CRM's counterclaim for legal fees and costs on July 11, 2014, and denied CRM's motion for reconsideration on July 25, 2014.
II.
We initially address Marina's cross-appeal challenging the trial court's ruling on several motions in limine, and its dismissal of Marina's complaint.
A.
Marina claims the trial court erred in denying its motion in limine requesting a ruling that Marina was not obligated to prove the elements of the Barksdale case in a "case within a case" format, but rather the reasonableness of the Barksdale settlement. The case-within-a-case format (also called the "suit within a suit" format) is commonly employed in New Jersey when the plaintiff in the current lawsuit (most typically alleging legal malpractice) seeks recompense based on what the result would have been in a prior lawsuit if it had been properly litigated to a verdict. Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343, 358 (2004).
Here, Marina's right to indemnification by CRM was premised on Paragraph 16 of the Management Agreement, which stated:
16. AGENT'S LIABILITY
Agent assumes no liability whatsoever for any acts or omissions of Owner, or any previous management or other agent of Owner or the Premises. . . . Nor does Agent assume any liability for violations of environmental, construction, occupational safety, health, sanitation or other laws, rules or regulations, regardless of when such violations may become known. Notwithstanding any provision herein to the contrary, however, Agent shall be responsible for and shall indemnify Owner against any loss, damage, cost, claim, liability or expense resulting from the negligence or willful misconduct of Agent's own employees in the performance of this Agreement (it being acknowledged that the foregoing indemnity shall not apply to the acts or omissions of property-level employees, who shall be the employees of Owner as set forth in Paragraph 10, above).
Under Paragraph 16, CRM must indemnify Marina only if Marina's "loss, damage, cost, claim, liability or expense result[ed] from the negligence or willful misconduct of [CRM's] own employees." Because the Barksdale lawsuit was settled before a court determined that either Marina or CRM were negligent, the trial court ruled Marina must prove that CRM's own employees were negligent, and that their negligence caused the harm to Marina, using a case-within-a-case format.
Whether CRM's employees were negligent, and whether CRM caused the alleged environmental condition, were also relevant under the two other indemnity provisions in Paragraphs 14 and 20 of the Management Agreement, discussed in Section III.
Marina argued that it did not have to use a case-within-a-case format or establish negligence, but only had to show the reasonableness of the Barksdale settlement using expert testimony. Even in legal malpractice litigation, "the traditional 'suit within a suit' format is not the only way to proceed." Garcia, supra, 179 N.J. at 346. The possible methods "include the 'suit within a suit' approach or any reasonable modification thereof," or "the use of expert testimony as to what as a matter of reasonable probability would have transpired at the original trial." Lieberman v. Emp'rs Ins. of Wausau, 84 N.J. 325, 343-44 (1980). "Where the matter is presented to the court because the defendant interposes a legal objection to the plaintiff's proposed trial strategy, it is within the court's discretion to declare an appropriate trial model." Garcia, supra, 179 N.J. at 361. The "determination of the court is a discretionary judgment that is entitled to deference." Id. at 346. The court's choice must be upheld absent an "abuse of discretion." Albee Assocs. v. Orloff, Lowenbach, Stifelman and Siegel, P.A., 317 N.J. Super. 211, 224 (App. Div.), certif. denied, 161 N.J. 147 (1999). We must hew to that standard of review.
We find no abuse of discretion. The trial court required Marina to prove CRM's negligence in a case-within-a-case, because "[a]llowing [Marina] to try the issue of the reasonableness of the settlement without having to demonstrate [CRM's] underlying negligence would be in direct conflict with the Management Agreement, because the agreement calls for CRM to indemnify [Marina] only if CRM acts negligently."
Marina argues that its expert and other proofs would have shown that "the Barksdale settlement was a reasonable resolution of the risk commonly shared by [Marina] and [CRM] with respect to the Gupton misconduct claims . . . and that Gupton was [CRM's] employee at the time of her alleged misconduct." However, under Paragraph 16, it was not common risks or alleged misconduct which triggered CRM's obligation to indemnify, but only the negligence of CRM's own employees. Even if Gupton was CRM's employee, CRM would not be liable to indemnify Marina unless Gupton was shown to be negligent.
Marina cites cases involving lawsuits settled by the insured followed by suits against the insurer, where "a settlement may be enforced against an insurer" if the insured shows the settlement was "reasonable in amount and entered into in good faith." Griggs v. Bertram, 88 N.J. 347, 368 (1982); Fireman's Fund Ins. Co. v. Sec. Ins. Co. of Hartford, 72 N.J. 63, 71 (1976). However, in those cases, the insurer's liability to cover the claim had already been established, because the "insurer wrongfully refused coverage." Griggs, supra, 88 N.J. at 364 (insurer was estopped) (quoting Fireman's Fund, supra, 72 N.J. at 71 (insurer acted in bad faith)). Here, CRM's liability to indemnify would not be established unless Marina proved CRM was negligent. Only then would the reasonableness of the settlement be relevant.
Marina argues it should not have to prove the Estate's case. A party's "'reversal of roles'" from defendant in the original lawsuit to plaintiff in the subsequent lawsuit lessens the "'parallel between the two actions as to the identity of the witnesses and the nature of the evidence,'" but it remains "within the court's discretion to declare [that a suit-within-a-suit is] an appropriate trial model." Garcia, supra, 179 N.J. at 360-61 (quoting Lieberman, supra, 84 N.J. at 342-43).
Moreover, Marina is not being required to prove against a non-party a claim that Marina never would have had to prove in the original lawsuit. Rather, in the indemnification lawsuit, Marina was raising the same indemnity claim against CRM that it raised in its crossclaim against CRM in the Barksdale lawsuit. If the Barksdale lawsuit had proceeded to trial, Marina would have had to present proof of the negligence of CRM's own employees to support its indemnification allegations. The trial court properly could require Marina "to come forward with evidence to support those allegations" here. Fireman's Fund Ins. Co. v. Imbesi, 361 N.J. Super. 539, 571 (App. Div.), certif. denied, 178 N.J. 33 (2003).
Cf. Lieberman, supra, 84 N.J. at 342-44 (noting that a doctor's "role reversal" from defendant to plaintiff, which required him to prove the claims of the malpractice claimant in a suit against his prior attorney and his insurer, could make a suit-within-a-suit "awkward and impracticable").
Marina argues that the case-within-a-case format discourages settlement. The suit-within-a-suit format "has been subjected to criticism" on the basis that "'the rule wholly ignores the possibility of settlement.'" Garcia, supra, 179 N.J. at 358 (quoting Gautam v. De Luca, 215 N.J. Super. 388, 398 (App. Div.), certif. denied, 109 N.J. 39 (1987)). However, in Garcia, our Supreme Court upheld "a full 'suit within a suit,' providing evidence to support the jury verdict," where the earlier litigation had settled. Id. at 362-63. Similarly, we have found the suit-within-a-suit format appropriate where the plaintiff had "settle[d] the underlying case." Prospect Rehab. Servs., Inc. v. Squitieri, 392 N.J. Super. 157, 169 (App. Div.), certif. denied, 192 N.J. 293 (2007). Similarly, the trial court could require Marina to establish CRM's negligence using the case-within-a-case format.
B.
Marina alleges the mediator in the Barksdale lawsuit could testify that Marina and CRM entered into a stipulation during mediation under which Marina would not have to prove a case-within-a-case, but only the reasonableness of the settlement. Marina claims the trial court erred in granting CRM's motion in limine precluding Marina from introducing testimony and evidence from the mediator, and denying Marina's motion in limine that the mediator's testimony was not barred by the confidentiality provisions governing mediation communications.
"The success of mediation as a means of encouraging parties to compromise and settle their disputes depends on confidentiality," so "our court and evidence rules and the Mediation Act confer a privilege on mediation communications, ensuring that participants' words will not be used against them in a later proceeding." Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215 N.J. 242, 254-55 (2013). "A mediation communication is not subject to discovery or admissible in evidence in any subsequent proceeding except as provided in the New Jersey Uniform Mediation Act, N.J.S.A. 2A:23C-1 to -13." R. 1:40-4(c). The Act provides that "[e]xcept as otherwise provided in [N. J.S.A. 2A:23C-6], a mediation communication is privileged . . . and shall not be subject to discovery or admissible in evidence in a proceeding." N.J.S.A. 2A:23C-4(a); accord N.J.R.E. 519(a).
Marina cites the exception in N.J.S.A. 2A:23C-6(b)(2):
There is no privilege . . . if a court . . . finds, after a hearing in camera, that . . . the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and that the mediation communication is sought or offered in: . . . (2) . . . a proceeding to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation.
"The burden is on defendant to satisfy these requirements, and he can only prevail if he meets each condition." State v. Williams, 184 N.J. 432, 445 (2005). However, Marina failed to do so. In particular, Marina failed to show "a defense to avoid liability on a contract arising out of the mediation." N.J.S.A. 2A:23C-6(b)(2). This refers to "the mediated settlement agreement," Uniform Mediation Act § 6, comment 11, 7A U.L.A. 132 (2006), which the rules and statutes mandate must be in writing and signed, see N.J.S.A. 2A:23C-6(a)(1); N.J.R.E. 519(c); R. 1:40-4(i); see also N.J.S.A. 2A:23C-2. No written agreement arose out of the mediation except the consent order, which preserved the crossclaims between Marina and CRM without providing how they would be proven.
In Willingboro Mall, supra, the Supreme Court warned, "[t]o be clear, going forward," that "parties that intend to enforce a settlement reached at mediation must execute a signed written agreement," and "a settlement that is reached at mediation but not reduced to a signed written agreement will not be enforceable." 215 N.J. at 245, 263. Even if those warnings did not apply here, the pre-existing statutes and rules did apply.
Regardless, Marina failed to show the parties reached the agreement it claims. It cited a March 20, 2012 email from the mediator to Marina's counsel. The email stated only the mediator's formulation of what he understood CRM's counsel contemplated, which he suggested CRM confirm with Marina. As the trial court found, the email did not establish an agreement between the parties. See Uniform Mediation Act, supra, § 6, comment 2, 7A U.L.A. at 126 ("a participant's notes about an oral agreement would not be a signed agreement," unlike "an e-mail exchange between the parties in which they agree to particular provisions").
In any event, the email's statement of CRM's position is consistent with CRM's position here, that Marina would have to prove not only that the settlement was reasonable, but also that the loss was the result of acts for which CRM agreed to indemnify Marina, namely the negligence of CRM's own employees. Accordingly, the trial court did not abuse its discretion in excluding the mediator's testimony and email from evidence, or in ruling that Marina had to establish CRM's negligence.
C.
"To sustain a cause of action for negligence, a plaintiff must establish four elements: (1) a duty of care, (2) a breach of that duty, (3) proximate cause, and (4) actual damages." Townsend v. Pierre, 221 N.J. 36, 51 (2015) (internal quotation marks omitted) (citation omitted). Marina claims the trial court erroneously granted CRM's motion in limine precluding Marina from introducing any evidence of breach of the standard of care, or the mold's causation of the harm, without expert testimony.
"In most negligence cases, the plaintiff is not required to establish the applicable standard of care." Davis v. Brickman Landscaping, Ltd., 219 N.J. 395, 406 (2014). However, in some cases, the plaintiff must "'establish the requisite standard of care and [the defendant's] deviation from that standard' by 'present[ing] reliable expert testimony on the subject.'" Id. at 407 (alterations in original) (citations omitted). Expert testimony is necessary if "'the matter to be dealt with is so esoteric that jurors of common judgment and experience cannot form a valid judgment as to whether the conduct of the [defendant] was reasonable.'" Ibid. (alteration in original) (citation omitted).
The trial court found that "issues concerning the standard of care and causation of mold exposure are beyond the knowledge and experience of a juror of common knowledge." We agree. Experts are commonly used in cases alleging exposure to toxic substances. E.g., Heller v. Shaw Indus., Inc., 167 F.3d 146, 153 (3d Cir. 1999). Moreover, "in toxic-tort litigation, a scientific theory of causation . . . . must be proffered by an expert." Rubanick v. Witco Chem. Corp., 125 N.J. 421, 449 (1991); see Phillips v. Gelpke, 190 N.J. 580, 591 (2007).
Marina argues that if CRM failed to respond to a resident's complaint of mold, "'a layperson's common knowledge is sufficient to permit a jury to find that the duty of care has been breached without the aid of an expert's opinion.'" Davis, supra, 219 N.J. at 407 (citation omitted). However, given the esoteric nature of exposure to mold, "[a] lay jury does not have the training, skill, or knowledge to determine whether, based on plaintiff's complaints . . . , the required standard of care necessitated further inquiry," and also "could not determine what additional tests or examinations needed to be performed to satisfy the standard of care." Kelly v. Berlin, 300 N.J. Super. 256, 267 (App. Div. 1997) (finding that a failure to respond to complaints of lower back pain required expert testimony on the standard of care). In any event, Marina has not challenged the trial court's conclusion that expert testimony was required to show causation.
Marina cites the Management Agreement, but that imposed an obligation to fix any mold problem on Marina, not CRM. Paragraph 11(a) allowed, but did not require, CRM to make "ordinary repairs" if "reasonably necessary, in [CRM's] sole discretion, to preserve the Premises in its present [2002] condition." Paragraph 11(c) provided that CRM "shall not have any obligation . . . to ascertain, investigate, correct or repair the structural or environmental condition of the Premises," but if an "Executive Employee" of CRM "is actually made aware of such condition," then CRM "shall notify [Marina] of such defect or deficiency." Paragraph 20 stated that CRM had "no responsibility, for the environmental or structural condition of the Premises . . . , except to notify Owner promptly of, or to forward to Owner promptly of, . . . any complaints, warnings, notices, or summonses received by the Agent relating to such matters." While these provisions could impose a contractual duty to notify, Paragraph 16 did not require CRM to indemnify Marina if it breached a contractual duty, unless it was negligent.
This was not a case where CRM's negligence was clear and clearly caused the harm. Cf. Palanque v. Lambert-Woolley, 168 N.J. 398, 401 (2001) (finding no expert required because the doctor admitted she misread lab reports and thus ordered unnecessary surgery). Thus, the trial court did not abuse its discretion in requiring expert testimony to establish the standard for negligence and causation in a mold exposure case.
D.
Marina challenges the trial court's grant of CRM's motion in limine to preclude Marina's use of expert testimony by Louis Niedelman, Esq., a partner in the law firm representing Marina. On March 7, 2014, shortly before the March 20, 2014 discovery end date, Marina notified CRM that Niedelman had "knowledge regarding the settlement agreement reached at the mediation in the underlying Barksdale Litigation and the rationale therefor." However, Marina did not identify him as an expert, and no expert report was provided until June 6, 2014, after CRM filed its motion in limine and after the June 2, 2014 trial date.
Rule 4:17-4(a) requires a party to identify its experts in its answers to interrogatories, and to append a copy of the expert's reports. "The court at trial may exclude the testimony of a treating physician or of any other expert whose report is not furnished pursuant to R. 4:17-4(a)[.]" R. 4:23-5(b). Moreover, Marina failed to comply with Rule 4:17-7's requirement that such disclosures be made "not later than 20 days prior to the end of the discovery period." "'[A] party has a continuing duty to disclose the opinions of its experts and a failure to do so may, in the trial judge's discretion, result in the exclusion of that expert's opinion evidence.'" McKenney v. Jersey City Med. Ctr., 167 N.J. 359, 370 (2001) (citation omitted).
Appellate courts "apply an abuse of discretion standard to decisions made by our trial courts relating to matters of discovery." Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371 (2011). The trial court found that Marina "was well aware that it needed an expert for determining the reasonableness of the settlement even under its own theory of the case," and could have disclosed Niedelman as an expert in a timely manner, but it did not. The court found that to allow Marina to call Niedelman "would substantially prejudice CRM," would require the reopening of discovery, and "would be inconsistent with the rules of court and fundamental fairness." The court did not abuse its broad discretion. Catando v. Sheraton Poste Inn, 249 N.J. Super. 253, 257 (App. Div.), certif. denied, 127 N.J. 550 (1991).
E.
After ruling on the motions in limine, the trial court dismissed Marina's complaint on summary judgment. The court cited its rulings that Marina had the burden of proving the negligence of CRM, and that Marina had to establish the elements of standard of care and causation using expert testimony. Because Marina had failed to proffer any expert testimony regarding negligence, it could not establish a prima facie case for indemnification. Thus, the court found CRM was entitled to summary judgment "as a matter of law." R. 4:46-2(c). We agree. See Davis, supra, 219 N.J. at 414. Accordingly, we affirm on Marina's cross-appeal.
III.
Next, we turn to CRM's appeal, which challenges the trial court's subsequent dismissal of CRM's counterclaim for legal fees and costs, after the court excluded CRM's evidence of those legal fees and costs as not timely produced in discovery.
In January 2010, after the Estate amended its complaint against Marina to also sue CRM, CRM requested that Marina defend it under Paragraph 14 of the Management Agreement, which provided:
Owner shall indemnify, defend, and save harmless Agent and its principals, officers, directors, agents and employees from all loss, damage, cost, expense (including
attorneys' fees), liability or claims of any kind (including without limitation, claims for personal injury or property damage) incurred or occurring in, on, or about the Premises, except for matters involving the gross negligence or willful misconduct of Agent or its employees.
We note that the final clause of Paragraph 14 would appear to require Marina to indemnify CRM for loss involving simple negligence of CRM's employees, in contradiction to Paragraph 16's requirement that CRM indemnify Marina for loss caused by the negligence of CRM's employees. We have no need to resolve that contradiction.
After Marina refused to defend CRM, CRM defended itself in the Barksdale lawsuit. When Marina later sued CRM for indemnification, CRM filed a counterclaim alleging that Marina's refusal breached Paragraphs 14 and 20 of the Management Agreement, and that CRM suffered damages because "CRM was obligated at great expense and effort to defend itself" in the Barksdale lawsuit "until the matter settled" in 2012.
In Paragraph 20, Marina "agree[d] to indemnify, defend, and hold Agent, its representatives, servants, and employees harmless of and from all loss, cost, expenses and liability whatsoever which may be imposed by reason of any present or future structural or environmental condition not actually caused by Agent[.]"
In 2012, Marina filed interrogatories asking CRM to describe "the nature and amount of damages" and how they were calculated. CRM responded that "[t]he damages are ongoing and mounting," and reserved the right to amend the answer. Marina specifically asked the amount of legal fees and costs CRM paid or was billed "in connection with the Barksdale Litigation and/or the instant litigation," and to provide copies of all bills and proof of payment. CRM responded: "to be supplied."
CRM also objected to these interrogatories, but has not shown that those objections justified its belated responses. --------
In an October 26, 2012 letter, Marina's counsel complained that CRM's answers to those interrogatories were non-responsive, and requested answers by a date certain. Four months later, on March 8, 2013, CRM's counsel responded:
As far as the calculation of damages and the attorneys fees information you seek, that information will be provided in the course of the litigation but those damages continue to accrue and cannot be absolutely quantified at this time. Suffice it to say that the attorneys fees from the underlying litigation will be included in my client's claim for damages. Thus, you can expect that my client's damages would include fees similar to the amount you charged your client in the underlying litigation before it settled.
[(emphasis added).]
Fourteen months later, on May 29, 2014, four days before the June 2, 2014 trial date, CRM provided a one-page chart summarizing its payment of $58,377.32 in legal fees and costs in the Barksdale lawsuit from 2010 to 2012, and $46,159.60 in fees and costs in the indemnification lawsuit from 2012 to February 2014. The chart did not list the counsel providing services, the services rendered, the hours spent, or the hourly rate.
In a June 9, 2014 email, Marina's counsel complained that CRM had not produced any documentation of its fees until the eve of trial when further discovery could not be conducted, and that its chart was inadequate documentation. After CRM rejected Marina's request for further discovery, Marina moved to dismiss on June 25, 2014. On June 26, 2014, CRM finally produced invoices for legal fees and costs "in the underlying Barksdale matter, as well as in the current litigation."
Ruling on Marina's motion, the trial court stressed that CRM's damages under its counterclaim were its legal fees and costs in the Barksdale lawsuit. The court found that, "despite being on notice of [Marina's] request for the billing information since 2012, CRM did not provide any relevant discovery until the eve of trial, and did not provide the substantive documents until after the filing of [Marina's] motion." The court found that "to allow such a late filing of the records would be inconsistent with the rules of court and fundamentally unfair," would require the reopening of discovery and depositions, and would greatly prejudice Marina.
The trial court then ruled that, "because CRM cannot present any evidence of [its] legal costs, it cannot succeed on its claims for reimbursement of legal fees as a matter of law." Accordingly, the court dismissed CRM's counterclaim for legal fees and costs on July 11, 2014, and denied reconsideration.
A.
We first address the trial court's discovery ruling excluding the untimely evidence. CRM now contends that the standard of review is de novo. However, "[a]n appellate court applies 'an abuse of discretion standard to decisions made by [the] trial courts relating to matters of discovery.'" C.A. ex rel. Applegrad v. Bentolila, 219 N.J. 449, 459 (2014) (quoting Pomerantz Paper Corp., supra, 207 N.J. at 371). "A trial court's resolution of a discovery issue is entitled to substantial deference and will not be overturned absent an abuse of discretion." State v. Stein, ___ N.J. ___, ___ (2016) (slip op. at 12). "We need not defer, however, to a discovery order that is . . . 'based on a mistaken understanding of the applicable law.'" Ibid. (citations omitted); cf. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597, 604 (2012) (applying a de novo standard of review because the issue turned on the interpretation of contractual and statutory provisions).
The trial court did not abuse its discretion. Despite Marina's interrogatory requests, and CRM's 2012 and 2013 responses that answers and the requested documents were "to be supplied," CRM never amended its interrogatory answers, which under Rule 4:17-7 must be done "not later than 20 days prior to the end of the discovery period." Indeed, CRM failed to produce any discovery of its legal fees and costs until more than two months after the March 20, 2014 discovery end date. Even then, on the Thursday before the Monday trial date, it produced only a one-page chart which lacked the information necessary to determine the reasonableness of the fees. CRM did not produce the invoices themselves until more than three months after the discovery end date, more than three weeks after the original trial date, and after Marina had filed its motion to dismiss.
Moreover, CRM made no effort to extend the discovery time period or excuse its untimely responses. Rule 4:17-7 allows subsequent amendments "only if the party seeking to amend certifies therein that the information requiring the amendment was not reasonably available or discoverable by the exercise of due diligence prior to the discovery end date." The invoices for CRM's legal fees and costs from the Barksdale lawsuit, which ended in early 2012, had been available even when CRM first declined to answer to Marina's interrogatories later in 2012.
CRM argues that counsel fee requests are traditionally addressed in post-trial applications. See R. 4:42-9. However, "[a] claim for attorney's fees pursuant to a contractual agreement is not an award of fees under R. 4:42-9." Belfer v. Merling, 322 N.J. Super. 124, 141 (App. Div.), certif. denied, 162 N.J. 196 (1999). "Rather, it is an element of damages which must be proved in the same manner as any other item and which must be assessed by the finder of fact as a matter of right and in the actual amount established by the proofs." Ibid. (citing Jennings v. Cutler, 288 N.J. Super. 553, 567 (App. Div. 1996)). As CRM's counsel again acknowledged in rejecting Marina's June 9, 2014 request for further discovery, CRM's legal fees and costs from the Barksdale lawsuit were "part of the damages I have to present in my main case" because "this isn't statutory fee shifting. It is an obligation of the contract."
Under Rules 4:17-4 and -7, CRM was required to provide timely discovery of those damages, but failed to do so. "Thus, the trial judge did not err in excluding attorney's fees as part of damages, nor did the judge abuse his discretion in declining to reopen the record to permit the admission of further proofs." Jennings, supra, 288 N.J. Super. at 567.
CRM also failed to provide timely discovery of available information concerning the counsel fees and costs it sought in the indemnification lawsuit. See Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 215-17 (App. Div. 1987) (a party has "the right to discovery with respect to [another party's] claim for legal fees"). All of the information in CRM's summary chart, belatedly provided on May 29, 2014, had been available before the last date to amend under Rule 4:17-7. All but three of the approximately fifty invoices CRM ultimately provided on June 26, 2014, were available before the last day to amend. CRM offered no excuse for not providing the invoices and information available at that time, nor did CRM seek to extend the discovery time period under Rule 4:24-1(c).
"A precise explanation that details the cause of delay and what actions were taken during the elapsed time is a necessary part of proving due diligence as required by Rule 4:17-7 for untimely amendments to interrogatory answers and exceptional circumstances as required by Rule 4:24-1(c)[.]" Bender v. Adelson, 187 N.J. 411, 429 (2006). As CRM "failed to show 'due diligence,' Rule 4:17-7, or 'exceptional circumstances,' Rule 4:24-1(c)," we "see no reason to upset the trial court's exercise of discretion." Id. at 428.
Rule 4:17-7 provides that, "[i]n the absence of said certification, the late amendment shall be disregarded by the court and adverse parties." Thus, Rule 4:17-7 itself provided the trial court with the authority, indeed the command, to disregard the untimely chart and even more belated invoices. See State v. Sorensen, 439 N.J. Super. 471, 488 n.6 (App. Div. 2015) ("the words 'must' and 'shall' are generally mandatory"). Thus, the court did not abuse its discretion in excluding CRM's untimely evidence. See Bender, supra, 187 N.J. at 428 (upholding the exclusion of three experts under Rule 4:17-7).
Nonetheless, CRM argues Marina had to resort to the two-step procedures for dismissal for discovery violations under Rules 4:23-1 and -2. However, Rule 4:17-7 itself provides that untimely responses "shall be disregarded." Thus, CRM's untimely responses could be excluded without Marina invoking Rule 4:23-1, which provides that a party "may" apply for an order to compel discovery, and then seek a sanction for failing to comply with that order under Rule 4:23-2(b).
CRM similarly claims that Marina was required to invoke the two-step procedure under Rule 4:23-5(a). Rule 4:23-5(a) provides that a party whose interrogatories have not been answered "may" move for an order dismissing without prejudice, and then, if the opponent has not provided answers and vacated the order, "may, after the expiration of 60 days from the date of the order, move on notice for an order of dismissal or suppression with prejudice." R. 4:23-5(a)(1), (2). Rule 4:23-5(a)'s drafters stated that its "main objective is to compel the answers" using the threat of dismissal. Pressler & Verniero, Current N.J. Court Rules, comment 1.1 on R. 4:23-5 (2016) (quoting 1990 Report of the Committee on Civil Practice, 125 N.J.L.J. Index page 421 (1990)).
However, nothing suggests the drafters intended to require use of Rule 4:23-5(a)'s two-part mechanism in the situation when the discovery end date has passed, the trial date is imminent, or the initial trial date has passed. Indeed, Rule 4:23-5(a)'s mechanism is ill-suited for that situation, because it would automatically give an additional sixty-day period in which to answer interrogatories to parties who had ignored Rule 4:17-7's last day for amendment, the discovery end date, and even the trial date. Such automatic and lengthy extensions would neuter the discovery end date, invite requests to reopen discovery, demolish trial dates and trial calendars, "open the door to gamesmanship in the trial of cases, and defeat one objective of 'Best Practices' to promote trial-date certainty." Smith v. Schalk, 360 N.J. Super. 337, 345 (App. Div. 2003) (reversing due to the admission of evidence not disclosed in interrogatories).
In that situation, "the applicable rule is Rule 4:17-7." Id. at 344. The trial court properly followed Rule 4:17-7 and disregarded evidence not produced until four days before, and several weeks after, the scheduled trial date. Id. at 345-46. Scrambling to accommodate CRM's unjustified dilatoriness "would revert to the pre-Best Practices approach to discovery -- an approach that litigants, courts, and the public at large all found highly unsatisfactory." Bender, supra, 187 N.J. at 429.
CRM disputes the trial court's finding that Marina was greatly prejudiced by its discovery violation. CRM notes that it produced the invoices one month before the rescheduled July 28, 2014 trial date. However, CRM's dilatoriness had deprived Marina of any opportunity to conduct discovery concerning the reasonableness of CRM's fees and costs. See Smith, supra, 360 N.J. Super. at 345 (reversing even though the trial date was postponed, because "this case should have been fully trial-ready when it was listed" for trial originally).
Given the "prejudice which would result from the admission of the evidence" of CRM's damages without any opportunity for Marina to conduct discovery, the court was not required to suspend the sanction called for by Rule 4:17-7. See Wymbs v. Twp. of Wayne, 163 N.J. 523, 544 (2000) (reversing due to the admission of an expert as the defendant's only evidence where "[t]he incomplete and inaccurate answers to interrogatories prevented counsel for plaintiffs from taking necessary depositions") (citation omitted).
Because the exclusion of the untimely evidence was authorized by Rule 4:17-7, we need not consider the trial court's "inherent discretionary power to impose sanctions for failure to make discovery," including dismissal for failing to answer interrogatories. Abtrax Pharms., Inc. v. Elkins-Sinn, 139 N.J. 499, 513, 516-17 (1995). Moreover, because the discovery sanction imposed here was exclusion of untimely evidence, not dismissal regardless of the sufficiency of CRM's remaining evidence, we need not address CRM's arguments that dismissal solely for a discovery violation requires that the violation be "'deliberate and contumacious.'" Id. at 514 (citation omitted).
In any event, under a trial court's inherent power, "'[t]he dismissal of a party's cause of action, with prejudice,'" may also be invoked as a discovery sanction where "'the order for discovery goes to the very foundation of the cause of action.'" Id. at 514 (citation omitted). Here, CRM's legal fees and costs for defending the Barksdale lawsuit were the very foundation of its counterclaim for indemnification. See Fik-Rymarkiewicz v. Univ. of Med. & Dentistry of New Jersey, 430 N.J. Super. 469, 482 (App. Div. 2013). This was "not a situation where plaintiff failed to produce discovery on a minor issue." Ibid. Moreover, CRM was admittedly content to forego indemnification for its legal fees and costs from the Barksdale lawsuit until Marina sued for indemnity. Given CRM's refusal for two years to provide the available invoices evidencing its damages until after its scheduled trial date, it was "'just and reasonable'" to return it to that pre-suit status quo. See Abtrax Pharms., supra, 139 N.J. at 513 (citation omitted).
Finally, we reject CRM's complaint that the trial court analogized its ruling excluding its invoices to its ruling excluding Niedelman's expert testimony. First, the analogy was apt, as each offending party without excuse failed to provide the requested documents until after the original trial date and after a sanctions motion had already been filed. The court's application of the "same principles" to exclude each party's untimely evidence was even-handed and appropriate.
Second, the trial court did not dismiss either party's claims as a discovery sanction. Rather, in both instances, the court's sanction was solely the exclusion of the untimely evidence. The court then examined the remaining evidence, concluded that the party could not establish its cause of action as a matter of law, and granted summary judgment.
B.
We now examine that conclusion. After the trial court ruled that CRM could not present any evidence of its legal fees or costs, it concluded CRM could not prove its counterclaim "as a matter of law," again applying summary judgment principles.
Summary judgment must be granted if "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." R. 4:46-2(c). Summary judgment may be denied "only where the party opposing the motion has come forward with evidence that creates a 'genuine issue as to any material fact challenged.'" Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529 (1995) (quoting R. 4:46-2(c)). Appellate courts "review the trial court's grant of summary judgment de novo under the same standard as the trial court." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189, 199 (2016).
Absent the untimely and properly-excluded evidence of CRM's legal fees and costs in the Barksdale lawsuit, CRM was "unable to satisfy [its] burden of establishing" damages and thus failed to satisfy that necessary element of its counterclaim. Therefore, Marina was "entitled to judgment as a matter of law" under Rule 4:46-2(c). See Davis, supra, 219 N.J. at 414. Accordingly, we affirm on CRM's appeal.
The remaining arguments of the parties are without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(3).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION