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County of Hudson v. State

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 28, 2007

COUNTY OF HUDSON, PLAINTIFF-APPELLANT,
v.
STATE OF NEW JERSEY, DEPARTMENT OF CORRECTIONS, DEFENDANT-RESPONDENT.

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

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

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 asserted that the action was barred by the CLA.

On September 9, 2005, with leave of court, Hudson filed a second amended complaint asserting claims in addition to DOC's failure to pay the per diem rate for 100 beds per month. The new claims were as follows: DOC failed to pay for more than 100 beds when Hudson housed more than 100 DOC prisoners; DOC never paid for the first fifteen days of any prisoner's stay in its facility; DOC did not make full payment for state parole violators.

On DOC's motion to dismiss Hudson's claims, the court concluded that Hudson's claim for payments owed between July 1, 2001 and March 31, 2003 were barred because Hudson did not comply with its obligation pursuant to N.J.S.A. 59:13-5. While we agree that those claims were barred because they accrued prior to June 6, 2003, we conclude that Hudson gave adequate notice of its claim that the contracts required payment based on the number of beds reserved rather than the number of beds used to permit Hudson to pursue all claims on that ground that accrued on or after June 6, 2003.

The CLA requires a party that contracts with the State to "promptly notify the State in writing of any situation or occurrence which may potentially result in the submission of a claim against the State." N.J.S.A. 59:13-5. "[N]o notice of claim for breach of contract, either express or implied in fact, shall be filed with the contracting agency later than 90 days after the accrual of such claim." Ibid. "Accrual of claim" occurs on "the date on which the claim arose . . . ." N.J.S.A. 59:13-2. The Supreme Court has determined the accrual date of claims based on monthly payments made pursuant to contracts governing the housing of DOC prisoners in county facilities. A new claim accrues every time the "State does not pay the correct amount." County of Morris, supra, 153 N.J. at 111. Because Hudson did not give DOC notice of any contractual claim until September 4, 2003, all claims that accrued prior to June 6, 2003 are barred.

The question remains whether the letter of September 4, 2003 is sufficient to satisfy Hudson's obligation to give notice pursuant to N.J.S.A. 59:13-5. The notice must be given to the "contracting agency" and include: "the name of the claimant, the nature of the claim, specific reasons for making the claim, and the total dollar amount of the claim if known." N.J.S.A. 59:13-5. The purpose is to give the State time to investigate and prepare a proper defense. Frapaul Constr. Co. v. New Jersey Dep't of Transp., 175 N.J. Super. 84, 92 (App. Div. 1980); Housing Auth. of Newark v. Sagner, 142 N.J. Super. 332, 343 (App. Div. 1976).

The letter of September 4, 2003 was sent to DOC, the contracting agency, and includes the information required by N.J.S.A. 59:13-5. It identifies the County of Hudson as the claimant. It states the nature of the claim by identifying the contracts at issue and Hudson's interpretation of DOC's obligations under the pertinent provisions, which is that DOC is obligated to pay Hudson the per diem rate for all 100 beds every month. The letter also includes Hudson's demand for additional payments for months previously paid by DOC in a dollar amount. While the letter does not include an express demand for future payments in the full amount, that demand is implicit in a fair reading of the letter asserting a demand for DOC to meet what Hudson views as DOC's obligation under the continuing contracts.

We reject DOC's contention that the letter was inadequate because it did not include an express reference to the potential for "submission of a claim" or state that its purpose was to give notice pursuant to the CLA. The statute lists the express requirements, and this letter meets them. The statute does not require notice in specified language or form. N.J.S.A. 59:13-5. It specifies the required content. Ibid.

In County of Morris, the Court held that Morris, having filed a notice of claim that was untimely with respect to some claims was adequate to permit Morris to recover for claims based on the same assertion that accrued less than ninety days before the notice and thereafter. 153 N.J. at 111. County of Morris controls this decision. Accordingly, we hold that Hudson is not barred from pursuing any claim that accrued on or after June 6, 2003 and is based on its contention that the contracts at issue require payment for all 100 beds at the per diem rate regardless of occupancy.

We do not express any view on the merits of Hudson's contractual claim or the availability of any other defense. We leave for the trial court's consideration when and whether Hudson gave notice of the new claims asserted in its amended complaint: underpayment for months during which it housed more than 100 DOC prisoners; failure to pay for the first fifteen days of an inmate's stay; and failure to pay for inmates who were incarcerated due to revocation of parole. We further note that N.J.S.A. 59:13-5 requires a claimant to give notice of claim more than ninety days before filing a complaint.

We have considered Hudson's argument that DOC waived its right to assert a defense based on late notice of claim. Given DOC's answer and assertion of an affirmative defense based on the CLA, that argument lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed in part; reversed in part and remanded.

20070628

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