On appeal from Superior Court of New Jersey, Law Division, Atlantic County, L-2747-03.
The opinion of the court was delivered by: Payne, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically May 25, 2006
Before Judges Axelrad, Payne and Sabatino.
In this subrogation action, defendant Woodbine Board of Education appeals from an order of summary judgment entered against it by the trial court and a subsequent order holding it liable pursuant to N.J.S.A. 18A:16-6 for payment of the legal fees and costs in the amount of $94,279.45 incurred by Certain Underwriters of Lloyds of London, the legal malpractice insurer of their appointed board counsel, plaintiff Ronald Sahli, in the defense of an action in the Federal District Court instituted by T. Maureen Toy against the Board and various individuals, including Sahli. Toy's action was premised upon the Board's rejection of Toy's complaints that the school's special education program violated relevant statutory guidelines and that the Superintendent of Schools had uttered racist comments; the Boards' requirement that she obtain a mental evaluation; and Toy's allegedly involuntary resignation from employment. It was settled without contribution to the settlement by Sahli.
Sahli cross-appeals from the court's order denying his motion for summary judgment insofar as it sought coverage under insurance agreements with the defendant Atlantic and Cape May Counties Association of School Business Officials Joint Insurance Fund (JIF).*fn1 He also cross-appeals from an order denying recovery of attorney's fees and costs in connection with this subrogation action.
Sahli, an attorney licensed to practice in the State of New Jersey, is employed by Ronald W. Sahli, P.A., a partner in the firm of Sahli and Padovani. At all relevant times, he conducted a general law practice concentrating on educational, transactional and construction law. In that connection, he represented several boards of education in New Jersey. On June 22, 2000, Sahli entered into an agreement to provide legal advice and assistance to the Woodbine Board of Education as its solicitor at a fee of $85 per hour plus reimbursement of certain expenses. He had served the Board as its solicitor for approximately six years before this appointment, while also representing other school boards in the same capacity.
Sahli's duties pursuant to the agreement with the Woodbine Board of Education included attending Board meetings, providing counsel and advice to Board members and carrying out the Board's specific instructions as related to legal matters involving the District. He was also required under the contract to represent the Board in labor negotiations and to prepare and deliver to the Board relevant contracts arising from such negotiations. Sahli received no health or pension benefits from the Board, no withholding was taken from his compensation, and he did not receive a W-2 form.
Toy, the plaintiff in the employment suit in which Sahli was a defendant, had been employed as an Administrative Assistant in the Special Education Department of the Woodbine School District. Toy and Woodbine School Superintendent Bruce Kinter clashed repeatedly during her tenure over the District's alleged failure to comply with federal and State laws governing the special education program. In August 2000, Toy formally requested that the State conduct an investigation into the Special Education Department. Toy additionally accused Kinter of making racial comments regarding parents of District students.
On October 12, 2000, Toy appeared at a meeting of the Board to discuss her complaints regarding the Special Education Department, Kinter and others. The Board met in executive session to hear Toy, and because of confidentiality concerns, designated Sahli, rather than the Board's usual secretary, as secretary pro tem, responsible for providing the minutes of the session, as well as performing his usual duties as solicitor. The minutes, which were not complimentary to Toy and strongly suggested that she was emotionally imbalanced in her presentation,*fn2 disclosed advice by Sahli to the Board on various subjects as they related to Toy, including advice as to her removal. The minutes stated:
The Board requested that Sahli explain to them what the rights of the Board are to have [Toy] removed from her position. Sahli explained to the Board that if, in the judgment of the Board, the employee shows evidence of deviation from normal physical and mental health the Board can request the employee to undergo a physical and/or a psychiatric evaluation.
On November 20, 2000, Kinter sent a letter to Toy regarding her appearance before the Board, in which he stated:
As a result of your combative demeanor, rage and aggressive attitude, which was described as disjointed, unintelligible and confused demonstrating a lack of both physical and mental control and/or stability during the aforesaid meetings, the Board has directed me to send this letter. As a result of the aforesaid, the Board has directed me to arrange appointments with qualified medical personnel to have you examined physically and mentally in regards to your fitness to perform in the administrative position that you currently hold, and determine from their evaluations any risks with regard to students, their parents and other employees[.] [U]ntil such time as these reports are received you are on paid leave from the District.
Pursuant to New Jersey Statutes and Administrative Code, I paraphrase: a board of education [may] require you to undergo a physical and/or psychiatric and/or psychological examination, when in the judgment of the board, the employee [shows] evidence of the deviation from normal physical ...