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Dialamerica Marketing, Inc. v. Keyspan Energy Corp.

February 1, 2005

DIALAMERICA MARKETING, INC., A DELAWARE CORPORATION, PLAINTIFF-APPELLANT,
v.
KEYSPAN ENERGY CORPORATION, A NEW YORK CORPORATION; THE BROOKLYN UNION GAS COMPANY, A NEW YORK CORPORATION; KEYSPAN ENERGY SERVICES, INC., A DELAWARE CORPORATION AND KEYSPAN ENERGY SERVICES, LLC, A DELAWARE LIMITED LIABILITY COMPANY, DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Bergen County, L-8452-99.

Before Judges Fall, Payne and C.S. Fisher.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 27, 2004

In this appeal from an award of prejudgment interest, we are, as we once previously were (see Benevenga v. DiGregorio, 325 N.J. Super. 27, 34-35 (App. Div. 1999), certif. denied, 163 N.J. 79 (1999)), called upon to construe the prejudgment interest provisions of R. 4:42-11(a), applicable in tort actions, in the context of a suit claiming contractual damages. In doing so, we reach a result similar to that in Benevenga, while clarifying the holding of that case.

During the period from April 1996 through September 1999, appellant DialAmerica Marketing, Inc. provided on a cost plus overhead basis marketing and sales, billing and collection, and customer services to respondent KeySpan Energy Corporation*fn1 in anticipation of the execution of a joint venture agreement and, when that did not occur, under a court injunction that was in effect from December 18, 1997 to September 9, 1999. In an action instituted in the Chancery Division, DialAmerica sought among other things payment for its services on theories of breach of contract and quantum meruit.

Following transfer to the Law Division and a four-day bench trial before Judge Charles J. Walsh, the court issued an opinion on November 16, 2001 finding DialAmerica to be entitled to an award of compensatory damages in the amount of $10,760,789, subject to certain adjustments. In that opinion, Judge Walsh also awarded prejudgment interest"based on the State of New Jersey Cash Management Fund rate pursuant to R. 4:42-11(a)(ii)." He stated:

While the award of prejudgment interest is appropriate here, the court believes that prejudgment interest should be set at a risk-free rate. This is designed to insure that DialAmerica will not receive a windfall. The rate will be based on the State of New Jersey Cash Management Fund rate for the years in question.

Shortly after receipt of the opinion, counsel for DialAmerica queried whether the reference to the use of R. 4:42- 11(a)(ii) constituted a typographical error, since"[s]ubsection (a)(ii) states that it is applicable to judgments not exceeding the monetary limit of the Special Civil Part. Subpart (a)(iii) of that rule is applicable to judgments exceeding the monetary limit of the Special Civil Part." Judge Walsh concurred, and the parties thereafter submitted a judgment calculating compensatory damages to be $10,779,914 and prejudgment interest to be $2,685,292 pursuant to R. 4:42-11(a)(iii). Subsection (a)(ii) provides for interest to be calculated in accordance with the State of New Jersey Cash Management Fund rate; subsection (a)(iii) adds two percent per annum to that rate.

The judgment was signed by Judge Walsh immediately upon its receipt on December 6, 2001. However, because"the amount surprised the court" the judge sought to review the interest calculations and, upon determining that they had been based on the higher rate of interest authorized by subsection (a)(iii), he requested that prejudgment interest be recalculated utilizing the New Jersey Cash Management Fund and the short-term federal government lending rates. Interest recalculated in accordance with the Cash Management Fund rate was determined to be $1,956,097. Following receipt of the revised figures, on March 1, 2002, Judge Walsh entered an amended judgment incorporating the $1,956,097 amount. A further technical correction to the judgment was made on March 12, 2002. Although the judge acknowledged that appeals had been filed in the interval between December and March, he determined that he retained jurisdiction to correct his error under McNair v. McNair, 332 N.J. Super. 195, 199 (App. Div. 2000).

On appeal, we confirmed the compensatory damage award substantially for the reasons articulated by Judge Walsh. DialAmerica Marketing Inc. v. KeySpan Energy Corp., Docket Nos. A-2401-01T3 and A-2404-01T3 (App. Div. May 20, 2003) (slip op. at 22). However we vacated the prejudgment interest award contained in the March 1 and March 12, 2002 judgments and remanded the matter to Judge Walsh"for the exercise of the court's discretion in awarding prejudgment interest after consideration and weighing of the equities involved, and for issuance of a statement of its findings and conclusions pursuant to R. 1:7-4(a)." Id. at 32.

In our decision, we rejected KeySpan's argument that no prejudgment interest was warranted and its alternative argument that it should not be charged with prejudgment interest during the period that the injunction was in effect, holding:

We find no misapplication of discretion in the trial court's conclusion that an award of prejudgment interest was warranted. We reject as without merit defendants' contention that prejudgment interest on payment for services that they were judicially compelled to accept amounts to punishment. While the injunction remained in effect, defendants were under a legal duty to accept those services, from which they benefitted, yet they made no payments. DialAmerica was entitled to compensation, but defendants--not DialAmerica--had the use of those funds. Accordingly, the judge properly concluded that suspending the interest during the period that the injunction was in effect would have unfairly penalized DialAmerica. [Id. at 29-30.]

We further found no misapplication of discretion by the court in declining to award prejudgment interest at the prime lending rate, as DialAmerica had argued on appeal to have been proper. Ibid. However, after noting the court's determination to change the basis for the prejudgment interest calculation from that provided by R. 4:42-11(a)(iii) to that provided by R. 4:42- 11(a)(ii), we observed that"other than expressing surprise at the amount of the prejudgment interest award when calculated by adding the additional two percent, the judge did not explain the equitable considerations that ...


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