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County of Hudson v. State

June 28, 2007


On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4918-04.

Per curiam.


Argued March 6, 2007

Before Judges Lisa, Holston, Jr. and Grall.

The County of Hudson (Hudson) appeals from an order dismissing its civil action alleging breach of contract by the State of New Jersey, Department of Corrections (DOC). Hudson alleged that DOC paid Hudson less than it agreed to pay for housing state prisoners in its county correctional facility. The payments were made on a monthly basis pursuant to two contracts executed in 1987 and 1988.

The merits of Hudson's claim were not addressed below and are not at issue here. The trial court determined that Hudson did not file a timely notice of claim as required by N.J.S.A. 59:13-5 and, on that ground, concluded that its entire action was barred by the Contractual Liability Act (CLA), N.J.S.A. 59:13-1 to -10. We conclude that Hudson complied with its obligation to give notice of its claim on September 4, 2003. Accordingly, Hudson's claims based on payments made more than ninety days prior to September 4, 2003, which is June 6, 2003, are barred and claims based on payments made on or after June 6, 2003 are viable. See County of Morris v. Fauver, 153 N.J. 80, 111 (1998).

This dispute arises under contracts authorized by the County Correctional Policy Act (CCPA), N.J.S.A. 30:8-16.3 to -16.12. Pursuant to both contracts Hudson agreed to reserve fifty beds in each of its two new county correctional facilities for state prisoners. See N.J.S.A. 30:8-16.7b(1). In return, DOC agreed to make per diem payments at a rate specified in the contract. Ibid. DOC calculated and made the payments on a monthly basis and in accordance with the number of prisoners housed. Hudson claimed that it is entitled to payments at the per diem rate for every one of the beds it must reserve, regardless of occupancy.

By letter dated May 21, 2003, DOC notified Hudson that payments DOC made for the period between July 1, 2001 through March 31, 2003 were calculated using a per diem rate that was $2.93 too high. DOC advised that it would make the retroactive adjustment, a total of $157,109.53, as a credit against monthly payments during the following year.

By letter from the Hudson County Administrator received by DOC on September 4, 2003, Hudson raised the contract dispute that led to this litigation. The Administrator wrote:

[I]t is the opinion of [Hudson's] Law Department that the State is obligated to pay the County for the 100 cells contracted for by the parties in their [1987 and 1988 contracts]. By the terms of those agreements the County is obligated to make available to the State the 100 cells for the housing of its inmates. Consequently, due to that obligation the County could not dedicate those cells to any other use and thus lost its right to generate revenue from the cells.

Furthermore, upon review of this matter it was determined that the State has underpaid the Count during the period July 1, 2001 through March 31, 2003. . . . The reimbursement was arrived at by calculating the number of cells underpaid by the State and deducting the amount of reimbursement owed to the State.

Hudson continued to press its claim through correspondence. By letter dated January 5, 2004, Hudson advised the Attorney General of the parties' ongoing efforts to resolve the issue of reimbursement under the contracts, indicated its intention to "institute suit for collection of the money due and owing," and sought the Attorney General's assistance in resolving the matter.

On February 24, 2004, Hudson advised the Attorney General that it would commence litigation within two weeks. By letter of July 8, 2004, DOC disputed Hudson's interpretation of the agreements and reaffirmed its position -- payment was not required for cells not used. Hudson reiterated its disagreement in a letter dated August 26, 2004. DOC restated its view of the contractual formula for payments in a letter dated September 23, 2004, and since that date has made payments based on the number of beds used.

Hudson commenced this litigation before it received DOC's letter of September 23. On September 21, 2004, Hudson filed a complaint alleging breach of contract. DOC answered and ...

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