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Woodward-Clyde Consultants v. Chemical and Pollution Sciences Inc.

Decided: April 9, 1987.

WOODWARD-CLYDE CONSULTANTS, PLAINTIFF-APPELLANT,
v.
CHEMICAL AND POLLUTION SCIENCES, INC., A CORPORATION, DEFENDANT-RESPONDENT



On certification to the Superior Court, Appellate Division.

For affirmance as modified and remanded -- Chief Justice Wilentz and Justices Pollock, Clifford, Handler, O'Hern, Garibaldi and Stein. Opposed -- None. The opinion of the Court was delivered by Pollock, Justice.

Pollock

[105 NJ Page 466] This appeal requires us to decide whether a dismissal of a counterclaim for failure to comply with a discovery order was with or without prejudice and whether the dismissal violates the entire controversy doctrine. The Law Division's order recited that the counterclaim is "dismissed for failure to comply" with an earlier order directing the defendant to make discovery. In an unreported decision, the Appellate Division assumed that the counterclaim was dismissed with prejudice, modified the dismissal to one without prejudice, and affirmed. We granted certification, 104 N.J. 454 (1986), and now modify and affirm the judgment of the Appellate Division. We conclude that the order of the Law Division, although it did not so state, was entered pursuant to Rule 4:37-2(a) for defendant's failure to comply with "an order of court" and, in the absence of a specification to the contrary, was without prejudice. We conclude further that the defendant did not violate the entire controversy doctrine by subsequently instituting an independent

action asserting the same claims as those asserted in its counterclaim.

I

Defendant, Chemical and Pollution Sciences, Inc., retained plaintiff, Woodward-Clyde Consultants, as an expert in a civil action instituted by the New Jersey Department of Environmental Protection (DEP) against defendant, alleging that defendant spilled toxic wastes on its property in Old Bridge, New Jersey. Plaintiff was to evaluate the merits of the DEP claim and to testify on defendant's behalf at trial. Accordingly, plaintiff tested groundwater samples taken from wells it installed on defendant's premises to determine the extent of contamination, if any, caused by defendant. From tests performed on those samples, plaintiff concluded that defendant was not the source of the contamination. Shortly before June 15, 1981, the date of the trial of the DEP action, however, plaintiff learned that on nights preceding the days on which plaintiff took its samples, defendant's employees had flushed the wells with fresh water to conceal the contamination. When defendant failed to comply with plaintiff's request for either a full disclosure of the facts to all parties and the court or a new series of tests, plaintiff withdrew as an expert. The trial proceeded without plaintiff's services, and on July 31, 1981, the Law Division entered a judgment in excess of $5,000,000 against defendant.

Subsequently, on March 22, 1983, plaintiff instituted a contract action against defendant for services rendered. Nine months later, defendant filed an answer and a counterclaim for $5,000,000, alleging that plaintiff was liable for breach of contract, breach of fiduciary duties, disclosure of confidential information, negligence, and unjust enrichment.

Meanwhile, a state grand jury began an investigation of the allegations that defendant had tampered with the wells, and issued a subpoena to one of defendant's vice presidents, Joseph [105 NJ Page 468] Kolmer. On May 19, 1983, Kolmer invoked the attorney-client privilege before the grand jury. Consistent with that invocation, defendant, claiming a fifth amendment privilege against self-incrimination, refused to answer plaintiff's interrogatories or to produce its president, Phillip Meisel, for depositions. In particular, defendant refused to answer interrogatories pertaining to its counterclaim.*fn1 With that refusal, the parties embarked

upon a sea of motions, leading to the entry of the order dismissing the counterclaim.

Although defendant applied for a protective order staying discovery until the outcome of the grand jury proceedings, on February 21, 1984, the Law Division denied the application, ordered defendant to answer the interrogatories by March 11, 1984, and further ordered defendant to produce its president for depositions by March 31, 1984. A subsequent order of April 2, 1984, which extended the deadlines for answers to interrogatories, provided that if defendant failed to comply, the court would dismiss the answer and counterclaim and conduct a hearing on plaintiff's damages.

Defendant failed to comply with the April 2, 1984, order, and the Law Division conducted a proof hearing on June 15, 1984, after which it entered a judgment for plaintiff in the amount of $60,940.35 plus interest. That judgment, defendant's counsel informs us, has been satisfied.

Thereafter, on October 11, 1984, the Law Division entered another order denying defendant's application to reinstate the answer, entering default against defendant retroactively to June 15, 1984, and denying defendant's motion to vacate proofs. The court, however, granted defendant's motion to reinstate the counterclaim on condition that defendant supply certified answers to interrogatories within twenty days of September 26, 1984, and that it produce its president for depositions before October ...


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