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Cipala v. Lincoln Technical Institute

March 16, 2004


On certification to the Superior Court, Appellate Division, whose opinion is reported at 354 N.J. Super. 247 (2002). Mandy R. Steele argued the cause for appellant.


(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

WALLACE, J., writing for a unanimous Court.

In this appeal, the Court addresses whether the creation of a trust fund is an appropriate remedy for an employee when there has been a wrongful breach of a disability contract by her employer.

In 1996, Andrea E. Cipala began working as an Admission Representative for the Cittone Institute, which is owned by Lincoln Technical Institute (LTI). As part of her benefits package, Cipala was told that she would receive long-term disability insurance and was given a disability plan booklet.

On July 20, 1999, Cipala injured her left knee on the job. She left work on disability and underwent knee surgery in August 1999. Thereafter, Cipala sought long-term disability benefits from LTI under its long-term disability plan. LTI claimed that she was not covered by the policy.

Cipala filed an action against LTI, alleging breach of her employment contract and violation of the New Jersey Law Against Discrimination (LAD). A jury trial followed, limited to the question of liability. After presentation of the evidence, the trial court dismissed the LAD claim. The jury then found LTI had breached its contract with Cipala by failing to provide long-term disability benefits pursuant to LTI's insurance plan.

Cipala filed a summary judgment motion, seeking compensation in the amount of her accumulated benefits from the onset of her disability, and an order requiring LTI to purchase an annuity for her to ensure payment of the full entitlement period under the plan. In the alternative, Cipala requested a lump sum payment equal to the present value of the monetary benefits she could receive until age sixty-five. Cipala also sought counsel fees.

LTI conceded that the disability-benefits plan entitled Cipala to $1869.08 per month until she reached sixty-five, as long as she survived and remained disabled. LTI also stipulated to the amount of past due benefits. LTI objected to any lump sum payment for future benefits or the purchase of an annuity because Cipala might overcome her disability or die prematurely. LTI argued that Cipala was only entitled to a judgment for specific performance of the obligation to pay future benefits. LTI also objected to an award of counsel fees because Cipala failed to establish any statutory basis, court rule, or legal precedent permitting such an award in a breach of contract action.

The trial court denied Cipala's request for an annuity or lump sum damages of future benefits and counsel fees, but ordered LTI to fund a trust for payment of future benefits. A later order outlined the details for funding the trust, including, among other things; that any funds remaining in the trust on termination would revert to LTI.

Cipala appealed the denial of lump sum damages, the dismissal of her LAD claim, and the denial of counsel fees. LTI cross-appealed on this issue of its requirement to fund a trust for contingent future benefits. The Appellate Division affirmed the judgment for specific performance and rejected Cipala's present value damage claims. The panel denied Cipala's demand for counsel fees because the action was not based on a liability or indemnity policy. The appellate panel noted its inability to review the LAD claim because the dismissal of that claim was not confirmed by an order and Cipala did not provide a transcript of the ruling. On the cross-appeal, the Appellate Division reversed, concluding that the trust device went beyond the remedies provided for in case law.

The Supreme Court granted certification.

A-65-02 Andrea E. Cipala v. Lincoln Technical Institute et als. 2.

HELD: Cipala is entitled to a judgment for specific performance but she may not recover lump sum damages for the present value of future disability payments because her disability was not shown to be permanent. Under the circumstances of this case, the imposition of a trust device is an appropriate remedy.

1. On the record before the Court, Cipala failed to prove permanent disability. Because LTI is only obligated to pay during Cipala's disability, she is entitled only to a judgment for specific performance and may not recover the present value of future payments. Cipala's benefits will end if she recovers from her disabilities or dies before reaching age sixty-five. Because Cipala has not demonstrated that her disability is permanent, she has not fulfilled the condition precedent entitling her to a lump sum payment. (Pp. 5-9)

2. In the typical case in which a third-party insurer is involved, the remedy of specific performance is adequate. When an insurance carrier is not involved, the remedy of acquiring a comparable insurance or annuity is also appropriate. When those remedies are not feasible because a substitute insurance policy or an annuity is impractical, as here, the trial court may employ other non-traditional remedies to achieve the goal of placing Cipala in the position she would have been in if the contract had been performed. The trial court struck a fair balance by imposing a trust to be funded over the course of four years. Even if the imposition of the trust places Cipala in a better position than if a third-party insurer were involved, that does not alter the analysis. The trust device gives Cipala no more than she would have received if the contract had not been breached. (Pp. 9-12)

3. The trust imposes an additional burden on LTI. However, in light of LTI's breach of contract, and the fact that LTI will receive any remaining corpus of the trust, the Court does not find the trust unfair or unduly burdensome. Thus, under the special circumstances found here, the imposition of a trust device on the breaching employer to take the place of a third-party insurer is an appropriate remedy. (Pp. 12-13)

4. Cipala's deficiency in failing to submit either a final order dismissing her LAD claim or a transcript of the trial proceedings prohibits review of her LAD claim. Therefore, the Court affirms the Appellate Division's decision on this issue. (Pp. 13-14)

5. Under the "American Rule," the prevailing litigant is ordinarily not entitled to collect reasonable attorney's fees from the loser. There is no justification to reach a different result in this case. Thus, Cipala may not recover counsel fees from LTI. (Pp. 14-15)

Judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART and the judgment of the ...

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