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D.J. Miller & Associates, Inc. v. State

December 23, 2002

D.J. MILLER & ASSOCIATES, INC., APPELLANT,
v.
STATE OF NEW JERSEY, DEPARTMENT OF THE TREASURY, DIVISION OF PURCHASE AND PROPERTY, RESPONDENT.



On appeal from Department of the Treasury, Division of Purchase and Property.

Before Judges Skillman, Lefelt and Winkelstein.

The opinion of the court was delivered by: Skillman, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 13, 2002

The issue presented by this appeal is whether a State contracting agency can require in its contracts that any claim of breach must be pursued by an appeal to the Appellate Division rather than by an action in the appropriate trial court. We conclude that the court rules require an action for breach of contract under the Contractual Liability Act, N.J.S.A. 59:13-1 to -10, to be brought in a trial court and that a State agency may not alter this allocation of jurisdiction among divisions of the Superior Court by contract.

On September 25, 2001, after a competitive bidding process, the Division of Purchase and Property (Division) awarded a contract to appellant for a "Disparity Study to Investigate Minority & Women Business Contracting Practices." The contract provided for a one-year term to run from October 15, 2001 to October 14, 2002. The contract also contained a provision for termination before expiration of the one-year term, which stated in pertinent part: a. Change of Circumstances Where circumstances and/or the needs of the State significantly change, or the contract is otherwise deemed no longer to be in the public interest, the Director may terminate a contract entered into as a result of this Request for Proposal, upon no less than 30 days notice to the contractor with an opportunity to respond.

On April 23, 2002, the Division sent a letter to appellant terminating the contract, which stated in pertinent part:

Pursuant to Section 3.5(a) of the Standard Terms and Conditions of your contract, this letter is notice to you that the State of New Jersey is terminating your contract effective May 23, 2002: As you may be aware, this section allows the Division to terminate a State contract in the public interest or due to a change in circumstances or a change in the needs of the State. For the reasons stated, it is in the public interest to permit the Secretary of State to review and evaluate the State's policy and goals in the area of the contract subject matter. It is anticipated, that upon completion of this process, a revised Request for Proposal ("RFP") will be issued.

On May 14, 2002, appellant's counsel sent a letter requesting the Division to "inform us, in writing, of precisely each and every change of circumstance, change of needs, and/or reason that the contract is no longer in the public interest, which the State of New Jersey claims to support its action of 'terminating' [the] contract. . . ." The Division did not respond to this letter.

On May 24, 2002, appellant filed an action in the Chancery Division challenging the termination and seeking a temporary restraining order. The trial court denied temporary restraints and signed an order to show cause, returnable June 25, 2002, on appellant's application for a preliminary injunction. However, on May 29, 2002, appellant dismissed its Chancery Division action, without prejudice, and on that same day filed a notice of appeal to this court from the termination of the contract.

Appellant did not seek a stay of the termination in this court but did file a motion for acceleration, which we granted. At oral argument, appellant indicated that it is no longer seeking reinstatement of the contract; the only relief it now seeks is money damages for the termination. The Division indicated that it intends to solicit bids within a few weeks for two new contracts to replace the terminated contract with appellant.

In its appellate brief, appellant argues that "[t]he Division's termination constituted a breach of the contract" and that the termination "was arbitrary, capricious, unreasonable, and not supported by substantial credible evidence in the record." Appellant also argues that the Division violated its "due process rights and the purpose of the public bidding laws" by terminating the contract without affording appellant "an opportunity to respond." The Division argues that this court should apply a "good faith" standard in determining whether it breached the contract, and that because appellant does not assert the Division acted in bad faith, we should affirm the termination. We do not address these arguments because we conclude that this is an action for breach of contract which must be heard in the Law Division.

Rule 2:2-3(a)(2) confers jurisdiction upon the Appellate Division "to review final decisions or actions of any state administrative agency or officer[.]" This rule contemplates that any challenge to state administrative agency action or inaction shall be made by appeal to the Appellate Division. Pascucci v. Vagott, 71 N.J. 40, 52 (1976).

However, some actions or inactions of State agencies and officers do not constitute "administrative" agency action or inaction that is subject to review by the Appellate Division under Rule 2:2-3(a)(2). The most obvious example is tortious conduct that subjects a State agency or officer to liability under the Tort Claims Act, N.J.S.A. 59:1-1 to 12-3. Another example previously recognized by this court is the taking of private property without payment of just compensation that subjects a State agency to an action to compel condemnation, sometimes referred to as an inverse condemnation action. Pfleger v. State Highway Dep't, 104 N.J. Super. 289 (App. Div. 1968). Yet another ...


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