August 7, 2007
GLORIA BURKE-SCHAF AND GLORIA BURKE INSURANCE AGENCY, INC., PLAINTIFFS-APPELLANTS,
HARRY J. DEVINE, NICHOLAS SAN FILIPPO, AND HARRY J. DEVINE AGENCY, INC., DEFENDANTS-RESPONDENTS, AND STEVEN HAINES, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-1433-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 9, 2007
Before Judges Lefelt and Sapp-Peterson.
Plaintiff Gloria Burke-Schaf appeals from three orders entered by the Law Division that (1) denied her motion to compel discovery and to extend discovery, (2) granted defendants' summary judgment motion, and (3) denied her cross-motion for summary judgment. We affirm.
The dispute arose out of a complaint plaintiff filed seeking to recover real estate commissions to which plaintiff claimed she was entitled after she sold her insurance broker business to defendants Harry J. Devine, Nicholas San Filippo, and the Harry J. Devine Agency, Inc. (collectively referred to as "defendants"). The purchase agreement for the business provided that plaintiff would retain certain of her commissions for a period of time. Plaintiff claimed that defendants unlawfully withheld those commissions.
Plaintiff filed her complaint against defendants and Steven Haines (Haines), a former employee, on March 29, 2004. Because the fundament of plaintiff's claim sounded in contract, the complaint was designated a Track I case with 150 days of discovery. See R. 4:5A-1; R. 4:24-1. On April 8, 2004, a summons and copy of the complaint were served upon Haines who, as the first defendant served, triggered Rule 4:24-1, which provides that the time period for the completion of discovery commences on the date an answer is filed or ninety days after the first defendant is served, whichever occurs first. Thus, in this case discovery commenced July 6, 2004, and the initial 150 days of discovery was slated to end December 4, 2004.
The record reveals that the parties, prior to commencement of the action, were involved in informal negotiations, and these negotiations continued after the complaint was filed. None of the defendants, however, filed a responsive pleading during the initial discovery period and plaintiff did not move for the entry of default pursuant to Rule 4:43-1. As a result, the complaint was administratively dismissed pursuant to Rule 1:13-7, but restored to the active trial calendar on November 19, 2004, after plaintiff filed a motion to reinstate the complaint. The October 21, 2004 certification of plaintiffs' counsel submitted in support of the motion stated that discovery had been ongoing between the parties and that plaintiffs had retained a forensic accountant to evaluate their claims.
Discovery ended December 4, 2004, and because none of the defendants had filed an answer by that date, no consensual sixty-day extension of discovery could be filed. Moreover, plaintiffs failed to separately move to extend discovery prior to the expiration of discovery. See Rule 4:24-1(c). On December 16, 2004, defendants filed their answer to the complaint.
The court issued a notice for mandatory non-binding arbitration to take place on February 23, 2005. On January 18, 2005, plaintiffs filed a request for entry of default against Haines for failure to file an answer. Thereafter, by letter dated February 10, 2005, defendants' attorney advised plaintiffs' counsel that plaintiffs' accountant never appeared for a scheduled document inspection. A week later, plaintiffs' counsel, on behalf of all parties, requested that the arbitration be adjourned "in order for the parties to engage in discovery and review documents from the parties['] experts." The arbitration was adjourned to March 16, 2005.
By letter dated March 11, 2005, defendants' attorney requested a second adjournment of the arbitration because the previous defense attorney had been replaced and plaintiffs had yet to serve the expert report of their accountant showing the purported damages. Plaintiffs consented to this request. On March 14, 2005, the court confirmed that the arbitration had been rescheduled for April 27, 2005.
On March 18, 2005, defendants' attorney sent a letter to plaintiffs' counsel advising that he was concerned that the parties would not be ready to arbitrate, as plaintiffs' accountant was "repeatedly canceling dates to review documents." Counsel's letter specifically noted that the accountant "canceled two dates this week" and requested that plaintiffs' counsel "set a date certain by which [defendants could] expect [plaintiffs'] expert report."
On April 13, 2005, having received no response, defense counsel sent a follow-up letter to plaintiffs' counsel which specifically addressed reports about the accountant's alleged conduct:
My client informs me that the accountants were last at its offices on April 8, 2005, having canceled two dates in March, once on March 14, 2005 and again on March 18, 2005. Yesterday, the accountant called my client and asked for copies of six years of commission statements; I understand arrangements are set to have the statements copied tomorrow. In light of the foregoing, I assume the expert report is not ready to be served any time soon.
As you know, the arbitration is scheduled for April 27, 2005, two weeks from today. . . . Even if you intend to serve your damages report between now and April 27, 2005 we will not have enough time to respond to it or present a rebuttal report in time for the arbitration.
On April 19, 2005, plaintiffs' counsel received a report from their accounting experts advising that they could not provide a written report offering their opinion as to what commissions, if any, were due to plaintiff Burke-Schaf because "Mr. Devine prevented [them] from inspecting many of the documents that [they] needed to complete [their] report." Specifically, the accountants reported that they were unable to "determine and quantify the commissions due to Ms. Burke-Schaf from 1998 through 2004." The report indicated that defendant Devine had impeded the process by "den[ying] access to files that Mr. Devine designated as customers that Ms. Burke-Schaf did not originate[,]" that he had moved the active files of plaintiff to "file cabinets holding the active files that Mr. Devine assert[ed] Ms. Burke-Schaf did not originate[,]" and denied access to the unredacted commission statements the insurance companies had sent to the Devine Agency. The report concluded that plaintiff "did not receive commissions from files that she transferred to the Buyers," and as to those files, the accountants could not "quantify the amounts due to her."
Throughout the time period between February 2004 and April 2004, when defense counsel sent various letters to plaintiff's counsel expressing concerns about the accountant's missed appointments and the absence of an expert report, the record does not reveal that plaintiffs' counsel responded orally or in writing to these concerns. However, when plaintiff's counsel received the report on April 19, 2005, a copy was provided to defense counsel on that same date. Defense counsel, also on that same date, faxed a response in which he stated that the accountants "were rightfully denied access to all files relating to commissions for clients that did not have existing insurance policies or replacement of existing insurance policies and renewal policies at the time of the closing on the sale of the business." Defense counsel stated further that there was "no reason why [plaintiffs'] expert [could not] complete the damages report." The letter also confirmed that the report would be served by April 22, 2005. Plaintiffs did not seek to compel production of the withheld documents. R. 4:24-2.*fn1
On April 27, 2005, the date of the arbitration hearing, plaintiffs' counsel appeared without an expert report that quantified the alleged damages. A no cause was entered against plaintiffs. Plaintiffs filed a notice of demand for trial de novo the following month.
On September 19, 2005, plaintiffs filed a motion to compel production of documents, assess sanctions pursuant to Rule 4:23-1(c), and to extend discovery. In support of the motion, plaintiffs' counsel submitted a certification explaining that the delay in seeking relief was due to his health. Counsel stated the following:
15. I would like to advise the Court that there has been a delay in filing this motion based on my health problems.
16. I am under treatment by the Jefferson University Hospital Headache Center in the Department of Neurology. This treatment has been extensive and has been intended to reduce the intensity and frequency of migraine headaches.
17. These headaches have made it nearly impossible for me to put in a full days work and do work at home at night.
18. I am in a study at the Hospital for the implantation of a new device called an Occipital Nerve Simulator that works much the same way a T.E.N.S. unit works.
19. My physician . . . a world renowned specialist in migraine studies and therapies, is hopeful that this will get me back to working a full 18 hour day that I am used to do doing [sic] prior to the onset of the increase[d] pain and frequency over the past few years.
20. I have also been diagnosed with another health problem that has hindered my ability to perform work and that became evident over the past few months.
21. If necessary, I would like to discuss that with the Court in camera, because it impacts on the delay in getting this matter before this Court but is, quite frankly, no one else's business other than the Court who would have to decide if my health problems are relevant to the delay in getting this motion before the Court.
Plaintiffs' forensic accountant also submitted a certification that included his April 19, 2005 report and a Document Access List. Defendants, excluding Haines, opposed the motion, submitting their own certification and exhibits. Defendants argued that plaintiffs' motion was untimely and that sanctions should be imposed against plaintiffs. The court, in an oral opinion, denied the motion, finding that plaintiffs had failed to demonstrate exceptional circumstances. Plaintiffs' motion before the Appellate Division for leave to file an interlocutory appeal of the court's order was denied.
On February 23, 2006, defendants moved for summary judgment, dismissing plaintiffs' complaint, claiming that plaintiffs were unable to show any damages as a result of defendants' alleged breaches. Thereafter, by letter, defendant Haines, whose complaint had been reinstated by consent on March 21, 2005, joined in the summary judgment motion.*fn2
On March 27, 2006, new counsel was substituted as plaintiffs' counsel, despite the pending summary judgment motions returnable April 28, 2006, and a trial date set for June 12, 2006. On April 24, 2006, plaintiffs filed their notice of cross-motion for summary judgment, seeking an order compelling a formal accounting of all commissions Burke-Schaf earned and received and/or was still owed from May 11, 1998 through May 11, 2004.
The motion judge first granted summary judgment in favor of Haines.*fn3 Next the court addressed plaintiffs' cross-motion for summary judgment, noting that the newly substituted attorney was handicapped by the court's earlier discovery rulings and therefore was advancing "a rather interesting theory, creative, because he has the problem that there's no discovery and no proof." The court rejected plaintiffs' theory that because the contract spoke of an accounting, the court should grant their cross-motion for summary judgment mandating an accounting and then, if damages were forthcoming as a result of the accounting, proceed to trial. The court stated, So three times an appointment was set up to allow access to whatever records were in the office of the defendants and each time the plaintiffs' accountants were unable to keep the appointment. When he was able to attend, Mr. Devine says he, the accountant, was provided the entire back room and an employee who normally works in the back room was relocated to another room. He was given a round table and two chairs and according to Mr. Devine he was provided complete access to all of the active and expired insurance files.
He does admit they denied them the right to access to insurance files which were written after the date the business was purchased from plaintiff. There was no motion forthcoming from the plaintiffs suggesting that they should also have access to those files, so I will leave that issue where it is.
So even if I determine that an accounting was somehow called for here and somehow if I determine that the discovery failure didn't vitiate that right, I would have to find based on the evidence before me that the accounting that they sought would have been certainly substantially if not fully complied with, based on the absence of certifications from anyone, particularly the plaintiff, with any specificity.
On appeal, plaintiffs claims that the medical condition of their prior attorney and the conduct of defendants during discovery constituted exceptional circumstances for an extension of discovery and an order compelling defendants to comply with discovery demands. In addition, plaintiffs claim that because defendants failed to provide an accounting in accordance with the contract, their cross-motion for summary judgment should have been granted and defendants' summary judgment motion should have been denied.
Our review of a trial court's pre-trial discovery orders is "limited to a determination of whether the trial court mistakenly exercised its discretion in denying plaintiffs' motion for an extension of discovery period under Rule 4:24-1(c)." Huszar v. Greate Bay Hotel & Casino, Inc., 375 N.J. Super. 463, 471-72 (App. Div.), certif. granted and remanded, 185 N.J. 290 (2005) (citing Tucci v. Tropicana Casino and Resort, Inc., 364 N.J. Super. 48, 51 (App. Div. 2003)).
There is no dispute in this case that plaintiffs' motion to extend discovery was filed several months after arbitration had been completed and one month prior to trial. Thus, the trial court's resolution of the discovery extension motion was governed by that portion of Rule 4:24-1(c) which provides, "[a]bsent exceptional circumstances, no extension of the discovery period may be permitted after an arbitration or trial date is fixed." In Vitti v. Brown, 559 N.J. Super. 40 (Law Div. 2003), the court articulated four prongs to be satisfied where an arbitration or trial date has been set and the discovery end date has lapsed:
[F]our inquiries are appropriate with respect to any such request, presented after the discovery end date. First, as with motions considered within the original discovery period, any application should address the reasons why discovery has not been completed within time and counsel's diligence in pursuing discovery during that time. Any attorney requesting additional time for discovery should establish that he or she did make effective use of the time permitted under the rules. A failure to pursue discovery promptly, within the time permitted, would normally be fatal to such a request. Second, there should be some showing that the additional discovery or disclosure sought is essential, that is that the matter simply could not proceed without the discovery at issue or that the litigant in question would suffer some truly substantial prejudice. Third, there must be some explanation for counsel's failure to request an extension of the time for discovery within the original discovery period. Finally, there generally must be some showing that the circumstances presented were clearly beyond the control of the attorney and litigant seeking the extension of time. [Id. at 51.]
The exceptional circumstances offered here included plaintiffs' prior attorney's medical condition as set forth in his certification in support of the motion, namely that he suffered from chronic migraines, chronic pain syndrome and sleep apnea, which prevented him from working a full day. In addition, plaintiffs' counsel argued that in April 2005, defendants prevented their accountant from reviewing certain relevant documents.
After conducting oral argument, the court placed its reasons for denying the motion on the record stating,
[N]o formal motion was filed with the Court until five months after the arbitration and four months after the de novo petition was filed.
Now, plaintiff's counsel does indicate in his certification, and I asked some questions at oral argument, because the subject came up, that he was at some point experiencing some physical problems. But as with so many issues in the matter, very little definitive detail is provided. Counsel does say, he does tell me he is currently under treatment for migraine headaches.
He says he cannot put in a full day's work and also do work at home at night.
. . . I asked him whether or not he was working during the period, in other words, continuing to practice and continuing to address his files and he said yes.
However, what I haven't received here is some sort of an explanation that would account for essentially the April to September period or approximately five months. From the point that his accountant told him there was a problem, through the arbitration, through the de novo appeal, he was obviously practicing. He appeared at the arbitration. He participated in the arbitration. He filed the request for a de novo hearing based upon the result.
He told me at oral argument he had missed no time from work and frankly, there were no calls or letters during the spring of this past year that I can see other than one to adjourn the arbitration from his office.
So I'm left unfortunately in a position where his work product may have been impacted but frankly, I have no basis to determine that he was not working for six months or four months or something that would allow me to conclude that he should be given some sort of extraordinary courtesy.
I have no medical documents or anything that would indicate as I said before that he was in the hospital or unable to work.
The record demonstrates that during the discovery period, plaintiffs did not make "effective use of the time permitted under the rules." Vitti, supra, 359 N.J. Super. at 51. Specifically, the record shows that plaintiffs were dilatory in conducting discovery prior to the end of the initial discovery period. For example, defendants failed to serve a timely response to the complaint, but plaintiffs failed to move for the entry of default, resulting in an administrative dismissal of the complaint. Additionally, once the complaint was reinstated and the defendants filed an answer in mid-December 2004, no motion to extend discovery was ever filed.
There is also no indication that plaintiffs' counsel ever responded to any of the letters defense counsel sent in early 2006 expressing concerns about the expert report. Most important, in the certification filed in October 2004 in support of plaintiffs' motion to reinstate the complaint, plaintiffs' counsel certifies that discovery was on-going. However, in the certification filed nearly one year later in support of the motion to extend discovery, no explanation is given as to why discovery was not completed during the initial discovery period, any particular problems encountered during this period, and why no relief was sought by way of formal motion to extend discovery, which was obviously incomplete, prior to the expiration of the initial discovery period. Ibid.
Under these circumstances, we find no abuse of the court's discretion in denying the motion to extend discovery. Huszar, supra, 375 N.J. Super. at 471-72.
Plaintiffs argue that the trial court erred in denying plaintiffs' cross-motion for summary judgment which sought to compel a formal accounting of all commissions plaintiff Burke-Schaf earned and received and/or was still owed from May 11, 1998 through May 11, 2004. Plaintiffs argue that such an accounting was their absolute right pursuant to the contract of sale and the Rider Agreement. Plaintiffs contend that as defendants have no defense to this claim, summary judgment should have been granted.
Defendants urge that plaintiffs have not established a basis justifying an "accounting in equity." Rather, defendants assert that before the court is a case of breach of contract which plaintiffs, having lost the matter by failing to provide expert testimony showing damages, now attempt to keep alive.
In an appeal of a summary judgment order, the Appellate Court employs the same standard of review as the trial court.
Busciglio v. DellaFave, 366 N.J. Super. 135, 139 (App. Div. 2004). The standard of review is de novo, and this court is not obligated to accept any legal determinations made by the trial court. Singer v. Beach Trading Co., 379 N.J. Super. 63, 80 (App. Div. 2005) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Summary judgment under Rule 4:46-2 is appropriate if the motion judge finds, after accepting the facts as true and viewing them in the light most favorable to the non-moving party, that there are no genuinely disputed issues of fact presented sufficient to warrant denial of the motion. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). The court must "consider whether the competent evidential materials presented . . . are sufficient to permit a rational factfinder [sic] to resolve the alleged dispute in favor of the non-moving party." Coyne v. N.J. Dep't of Transp., 182 N.J. 481, 490 (2005) (quoting Brill, supra, 142 N.J. at 540).
Plaintiffs' cross-motion sought summary judgment on the basis that the contract called for an accounting and that no accounting was ever performed. The court's dismissal of the complaint, however, left no vehicle to enforce the accounting provisions of the contract. In addition, we agree with the judge's conclusion that the cross-motion was a creative attempt by new counsel to get around the court's earlier order denying the discovery extension.
Further, plaintiffs offered no proof by way of certifications, depositions, or interrogatories that set forth the specific facts supporting their claim that an accounting was not performed in accordance with the contract's provisions. On the other hand, defendant Harry Devine submitted a certification describing his efforts to cooperate with plaintiffs' accounting requests:
In October 2003, I received a letter from Edward Licciardi, who indicated that he had been retained by Plaintiff to "perform a reconciliation" of the payments the Devine Agency remitted to Plaintiff pursuant to the contract of sale of the insurance business.
A copy of the letter from Mr. Licciardi is attached hereto as Exhibit A.
I offered to Mr. Licciardi then that he was welcome to come to the Devine Agency and review the books and records.
After receiving Mr. Licciardi's letter, I never heard from him and no one ever contacted me to set up an appointment to review the Devine Agency's books and records.
The next time I heard from Plaintiff was when she filed her complaint in March 2004, in which she disputed her commission payments.
While this certification does in fact confirm that the accounting was not performed, Devine's explanation raised a material fact as to why it was not done. A trier of fact could, based upon Devine's certification, reasonably conclude that there was no breach of defendants' obligation to perform the accounting. As such, denial of plaintiffs' cross-motion was appropriate on this basis as well.