On appeal from the Office of Administrative Law.
King, Gruccio and Brochin. The opinion of the court was delivered by King, P.J.A.D.
This case involves a discovery dispute which resulted in the imposition of a $4,300 sanction, representing costs, expenses and attorneys' fees, by an administrative law judge against the appellant law firm, Thatcher & Lanza. The appellant raises these issues: (1) the ALJ exceeded her authority in imposing compensatory monetary sanctions on the law firm; (2) the motion for sanctions was procedurally defective and the ALJ's order improper; (3) the calculation of the sanction of $4,300 was erroneous.
This matter began when the Board of Public Utilities (BPU) issued an order to show cause against Timofai Sanitation Company, Robert Timofai, and Delores Timofai (Timofai respondents) on April 26, 1989, for alleged violations of our statutes and regulations regarding solid waste disposal. A second order to show cause was issued on October 25, 1989. Appellant Thatcher & Lanza, a law firm, was retained by the Timofai respondents to represent their interests in the proceedings. The matter was assigned to the Office of Administrative Law (OAL) for hearing. On June 8, 1989 a prehearing conference was held and a discovery and motion schedule was set by the presiding ALJ.
Discovery began on June 23, 1989 when the BPU served interrogatories on the Timofai respondents. The Timofai Sanitation Company and Robert Timofai answered the interrogatories on July 26, 1989. Delores Timofai answered on August 26, 1989. According to the BPU, 95 of the 101 interrogatories directed to the corporation contained unresponsive or incomplete answers. Robert and Delores Timofai each failed to provide responsive answers to 97 of 101 of their respective interrogatories. The Timofai respondents in turn objected to interrogatory answers received from the BPU. On August 21, 1989 the presiding ALJ ordered the BPU staff to provide more responsive answers.
The presiding ALJ cautioned all parties to detail any discovery problems in a motion no later than September 22, 1989. On September 22 the BPU staff filed a motion to compel each of the Timofai respondents to provide more specific answers to the staff's interrogatories. The Timofai respondents did not file any motion objecting to the alleged insufficiency of the BPU staff's previous answers. Responses to the BPU staff's motion to compel were required by September 29, 1989. No responses were given however.
The parties appeared before the presiding ALJ on October 23, 1989 to argue the BPU staff's motion of September 22, 1989. She granted the BPU's motion to accept the staff's initial interrogatory answers as "complete" since the Timofai respondents did not file a motion objecting to the BPU's answers. Mr. Thatcher, of the appellant law firm, signed a consent at that time to the entry of an order compelling the Timofai respondents to provide more specific interrogatory answers.
More responsive answers to the interrogatories were due by October 31, 1989. The answers were not provided, however, until November 9, 1989. No motion for an extension of time was made nor was any explanation for the delay given by the Timofai respondents or their attorneys.
Discovery problems persisted; again the BPU staff objected to the supplementary answers provided by the Timofai respondents. The BPU claimed that the respondents failed to answer the interrogatories within the relevant time period and objected to over half the responses that required a more specific answer. The Timofais either did not answer or gave nonresponsive answers to the remainder of the interrogatories. As a result of these deficiencies, the BPU on December 8, 1989 filed another motion to compel discovery. In addition to seeking more responsive answers, the motion sought sanctions against the Timofai respondents and Thatcher & Lanza for their failure to answer.
Mr. Bernot of Thatcher & Lanza, on behalf of the Timofai respondents, filed an answer to the December 8, 1989 motion, himself objecting that many of the interrogatories propounded by the BPU staff were unrelated to the matter under investigation. The BPU staff replied to the respondents' answer on January 8, 1990, requesting compliance with the ALJ's order for more specific answers.
On February 21, 1990 respondents were again ordered by the presiding ALJ to fully answer the BPU's June 1989 interrogatories and to provide the documents requested by the staff no later than February 29, 1990. No sanctions were imposed. These answers were provided on February 26, 1990 and resulted in two subsequent meetings with the presiding ALJ regarding the adequacy of the responses. Although the prior discovery problems were not fully resolved, on March 15, 1990 the BPU staff was given oral permission by the ALJ to serve additional supplementary discovery on the Timofai respondents by March 26. Answers to the supplemental discovery were due on April 5.
On April 4, 1990, one day before supplemental discovery answers were due, Thatcher & Lanza initiated a telephone conference call between the presiding ALJ and the Deputy Attorneys General representing the BPU about the firm's representation of the Timofai respondents. Thatcher & Lanza apprised the ALJ for the first time that relations with their clients had deteriorated to such a degree that the firm was withdrawing as counsel and the Timofai respondents were obtaining substitute counsel. The deterioration of the attorney-client relationship was attributed primarily to the Timofai respondents' failure to pay the substantial legal fees, perhaps as much as $100,000, that had accumulated. The presiding ALJ advised Thatcher & Lanza that the firm must file a motion for withdrawal and that until the firm was officially substituted it would still be responsible for supplying the outstanding discovery due the following day.
Despite the ALJ's directive, no answers were provided on April 5, 1990. As a result, the BPU filed a motion on April 9, 1990 for an order imposing sanctions on Thatcher & Lanza for failure to comply with the ALJ's order. The BPU's motion was argued before the presiding ALJ on April 27, 1990. After each side presented argument on the issue of sanctions, the ALJ ruled that monetary sanctions were warranted against the law firm. The Attorney General's office was directed to prepare an affidavit of legal services to facilitate computation of sanctions. The affidavit and supporting documents were filed on June 6, 1990.
The presiding ALJ issued an order imposing sanctions in the amount of $4,300 against the firm on August 1, 1990. In her order, the ALJ noted that the sanctions were imposed for the "failure of Thatcher & Lanza to comply with court orders, and for their failure to request relief from either the requests by the staff, or the order of this court." According to the ALJ, the proper procedure was for the attorneys to make a motion, instead of simply ignoring court orders as they had done on several occasions.
Thatcher & Lanza appealed the decision to the Office of Administrative Law (OAL) pursuant to N.J.A.C. 1:1-3.2(c) and 1:1-14.10(k)(4), which provide for review of sanction awards by the OAL Director. These provisions, in pertinent part, state:
N.J.A.C. 1:1-3.2 Jurisdiction of the Office of Administrative Law
(c) Matters involving the administration of the Office of Administrative Law as a State agency are subject to the authority of the Director. In the following matters as they relate to proceedings before the Office of Administrative Law, the Director is the agency head for purposes of review: . . .
4. Sanctions under N.J.A.C. 1:1-14.14 consisting of the assessment of costs or expenses. . . .
N.J.A.C. 1:1-14.10 Interlocutory Review
(a) [A]n order or ruling may be reviewed interlocutorily by an agency head at the request of a party. . . .
(k) In the following matters as they relate to proceedings before the Office of Administrative Law, the Director is the agency head for purposes of interlocutory review: . . . .
4. Sanctions under N.J.A.C. 1:1-14.14 consisting of the assessment of costs or expenses.
The OAL Director and Chief Administrative Law Judge granted the request for interlocutory review on August 17, 1990, noting that Thatcher & Lanza's recent withdrawal from the case made the issue of sanctions ripe for review at this time. Thatcher & Lanza had been promptly replaced in the enforcement proceeding upon their withdrawal on April 6, 1990 by the firm of Hannoch & Weismann. The enforcement proceeding was soon settled for a fine of $125,000.
The Director and Chief Judge reviewed the transcript of the oral argument held before the presiding ALJ, as well as the supporting documentation provided by Thatcher & Lanza and the Attorney General's office. On August 24, 1990, based upon her review of the record, the Director and Chief Judge affirmed the imposition of sanctions ...