March 12, 2008
ONYX ACCEPTANCE CORPORATION, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
TRUMP HOTEL & CASINO RESORTS, INC., IND. AND T/A TRUMP TAJ MAHAL CASINO RESORT; TRUMP TAJ MAHAL ASSOCIATES, LTD. PARTNERSHIP, IND. AND T/A TRUMP TAJ MAHAL CASINO RESORT, DEFENDANT-APPELLANT/ CROSS-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-811-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 28, 2008
Before Judges S.L. Reisner, Baxter and King.
In 2001, plaintiff Onyx Acceptance Corporation (Onyx) planned a holiday party as a reward for its most valued customers in New Jersey and Pennsylvania. The party was planned for December 1, at the Trump Taj Mahal Casino Resort (Trump) in Atlantic City. Onyx prepaid for a banquet and for sixty hotel rooms, at a cost of approximately $29,000. Trump represented to Onyx that the room reservations were guaranteed.
Trump significantly overbooked its hotel for that night and on the day of the party Trump was short of the reserved number of rooms. Trump attempted to remedy the situation by booking twenty-six of Onyx's guests at other hotels in the area and by providing complimentary transportation between the Taj Mahal and these hotels. Trump offered this remediation only after several heated exchanges between Onyx's representatives and the hotel staff. Meanwhile, Onyx's banquet proceeded, but unsuccessfully.
Onyx sued Trump for breach of contract, common-law fraud, punitive damages, and violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. The judge granted summary judgment in Onyx's favor on the breach of contract claim. At trial, the judge granted a directed verdict in Onyx's favor on the CFA claim and awarded damages, which were later trebled, based upon the amount Onyx prepaid for the banquet and hotel rooms. The judge granted a directed verdict in Trump's favor on Onyx's claim for common-law fraud and punitive damages, and on Onyx's claim for recovery of lost profit damages.
Post-trial, the court granted Onyx's motion for counsel fees, but for much less than the amount Onyx requested. The court also granted Trump's motion to recover counsel fees and costs incurred in defending against Onyx's allegedly frivolous claim for lost profit. The court also denied Onyx's requests for costs and prejudgment interest.
Trump appeals from: the directed verdict on the CFA claim; the damage award on the CFA claim; the amount of the counsel fee award to Onyx; and two evidentiary rulings. Onyx cross-appeals from: the directed verdict on its common-law fraud and punitive damages claim; the directed verdict on its claim for lost profit damages; the counsel fees and costs awarded to Trump based upon Onyx's allegedly frivolous lost profit claim; the reduction of its counsel fee award; and the denial of its motions for costs and prejudgment interest.
We affirm the judgment, in part, reversing those portions of the judgment in which the court awarded frivolous litigation sanctions to Trump with respect to Onyx's claim for lost profit damages, and denied Onyx's motions for costs under the CFA and for prejudgment interest. We increase and modify the award of counsel fees to Onyx from $60,000 to $90,000.
This is the procedural background. On March 13, 2002 Onyx filed a six-count complaint against Trump, asserting claims of common-law fraud (count one), rescission and unjust enrichment (count two), violation of the CFA (count three), breach of the covenant of good faith and fair dealing (count four), breach of contract (count five), and negligence (count six). On May 2, 2002 Trump filed an answer, denying liability.
In February 2006, the court granted Onyx's motion for partial summary judgment on its claim for breach of contract, and denied Trump's motions to dismiss the claim for lost profit damages. In March 2006, during the days leading up to trial, Onyx withdrew its negligence claim and the court denied Trump's motion for summary judgment on the CFA claim. The case was tried for twenty-four days before a jury from March 20 to May 1, 2006. At the close of all evidence, the court granted Trump's motion for judgment, in part, and dismissed the claims for lost profit damages, common-law fraud, and punitive damages. The court also granted Onyx's motion for judgment, in part, holding that Trump violated the CFA and that Onyx suffered an ascertainable loss of $29,754.05. The court refused to award Onyx prejudgment interest.
Trump filed a motion post-trial to recover counsel fees and expenses incurred in defending against Onyx's "frivolous" claim for lost profit. Onyx opposed that motion and filed a cross-motion seeking sanctions against Trump. Onyx also sought recovery of its counsel fees and costs under the CFA.
The final judgment is formalized in three separate orders, all dated August 18, 2006. In one order, the court entered judgment in favor of Onyx on the CFA claim, and ordered Trump to pay a total of $149,262.15, consisting of $89,262.15 in treble damages (three times the underlying damage award of $29,754.05) and $60,000 in counsel fees, but no costs. In a second order, the court awarded Onyx $89,262.15 as treble damages under the CFA, and awarded Trump $30,000 pursuant to N.J.S.A. 2A:15-59.1 as its reasonable counsel fees spent defending against Onyx's alleged frivolous claim for lost profit. And, in a third order, the court denied Trump's motion for sanctions, but granted Onyx's cross-motion for sanctions, and ordered Trump to pay Onyx $60,000 in "attorneys fees and costs."
Trump filed a notice of appeal on June 15, 2006, after the trial concluded but before the entry of final judgment, and an amended notice of appeal on September 22, 2006, after the entry of final judgment. On September 29, 2006 Onyx filed a notice of cross-appeal.
This is the factual picture presented to the jury. Onyx is an "indirect auto finance company" that specializes in used car purchases by buyers with "less than perfect credit." Onyx purchases loan contracts from car dealerships. On a quarterly basis, Onyx bundles the loan contracts based upon their credit rating (i.e., AAA, AA, BBB, etc.) and "securitizes" them on the bond market.
From this "securitization" Onyx earns income which is measured by the difference between the annual percentage rate on the loans and the yield on the bundled contracts. Onyx does not measure its profit on a contract-by-contract basis, or on a dealer-by-dealer basis, nor can it. However, Onyx has "dealer penetration goals," and "volume goals" relating to the number of loan contracts it purchases from dealers and the dollar amount of those contracts, which it tracks on a daily, weekly, and monthly basis.
Because of the nature of its business, Onyx works hard to develop close-knit relationships with automobile dealers, who are the source of Onyx's profits -- the loan contracts. To enhance their relationships, Onyx employees frequently visit dealers, meet with them regarding their needs, and invite them to complimentary social events.
In 2001, Onyx planned a Christmas party intended to reward the three dealerships in New Jersey and Pennsylvania which referred the most business to Onyx between October 15 and November 15, 2001. The party, which consisted of a banquet and a night's stay at the Trump Taj Mahal in Atlantic City, was the prize in a marketing contest run by Onyx designed to generate business. In 2000 Onyx held a similar event at Bally's in Atlantic City; it was a great success, resulting in good will and additional business.
The Onyx employee responsible for the Trump party arrangements was Noelle Weinman. She initially contacted Bally's to host the event. However, Bally's would not guarantee rooms on the Saturday night Weinman requested, December 1, 2001. Therefore, Weinman began calling other hotels in Atlantic City, including the Taj Mahal.
Weinman's contact at Trump was Carlos Vasquez. In her first conversation with him, Weinman explained Onyx's needs and Vasquez stated that Trump could satisfy them. Weinman specifically asked Vasquez about room availability. Vasquez said that the Taj Mahal was a "huge hotel" and there would be no problem.
Weinman then made an appointment to go to Atlantic City to visit with Vasquez and check on Trump's facilities. During that visit, Vasquez took Weinman on a tour of the hotel, casino, and banquet facilities, and gave her an advertising brochure which praised the virtues of the Taj Mahal.
Meeting with Vasquez in person, Weinman stated that the hotel rooms were an essential part of Onyx's party and Vasquez indicated no problem with the number of rooms Onyx requested. Indeed, Vasquez stated that Trump considered Onyx's party a "small event," something Trump "could easily take care of."
According to Vasquez, Onyx's rooms "were guaranteed." They would be prepaid and reserved under the individual guests' names, so the guests could simply walk up to the front desk and pick up their keys. Vasquez advised Weinman of the date by which she was obligated to provide Trump with the guests' names, in order to guarantee the rooms, and Weinman paid a $1000 onthe-spot non-refundable deposit.
On October 24, 2001 Onyx and Trump entered into a written contract with respect to the December 1 party. Addressing the issue of rooms, the contract provided that Trump had "tentatively blocked" seventy-five rooms, at a specified rate, "on a first option basis for ONYX ACCEPTANCE with a decision date of Wednesday November 7, 2001."
The contract further stated:
It is our understanding you will submit a rooming list of attendees requiring overnight accommodations. The cut-off date for all reservations will be Friday, November 16, 2001. After this date, reservations will be accepted on an availability basis only and subject to prevailing rates.
Cancellation of individual reservations not received by Trump Taj Mahal at least 48 hours in advance of arrival date will be charged one night's room revenue. This charge will be applied to either the individual's credit card or the group master account accordingly.
Finally, the contract concluded that: "Upon our receipt of this signed letter of agreement and your deposit, all accommodations will be held on a definite basis."
On November 14, 2001 Trump issued a "DEFINITE BOOKING SHEET," pursuant to which it reserved seventy-five rooms for Onyx on December 1, 2001 and extended the cut-off date for room reservations from November 16 to November 23, 2001. The purpose of this document was to block the rooms and set them aside for Onyx's guests.
On November 15, 2001 Onyx submitted a first list of invitees to Trump and on November 26, 2001 Onyx submitted the names of additional invitees. The two lists indicated a need for a total of sixty hotel rooms, as opposed to the original estimate of seventy-five.
Also on November 26, 2001 Onyx submitted to Trump two checks in the amounts of $18,154.05 and $10,600. These payments, plus the $1000 initial deposit, amounted to a $29,754.05 prepayment for the banquet and hotel rooms.
Meanwhile, within the Trump organization, by internal hotel documents dated November 20, 2001 Trump prepared a rooming list of Onyx's guests and confirmed Onyx's banquet and room reservations, at that time, a block of seventy-five rooms. Per the hotel's documentation, the rooms were deemed "GTD," meaning guaranteed.
According to Trump, the term "guaranteed" meant only that Trump may not cancel the reservation until 7 a.m. of the day after arrival. As such, the fact that Onyx's rooms were "guaranteed" did not mean that Onyx's guests were guaranteed a room at the hotel, because Trump promised to hold only "the reservation, not the room."
Moreover, according to Trump, the fact that Onyx had reserved a "block" of "guaranteed" rooms did not mean that the rooms would be preassigned, or that guests would be preregistered. At Trump, rooms are generally assigned at check-in. Only "blocked" rooms are preassigned (as opposed to a "block" of rooms), and that occurs only in rare instances, for example, when a guest has special needs. And, preregistration occurs only when a group of guests is expected to arrive en masse, making individual check-in unwieldy.
Trump's Orwellian definitions of these words, however, were not shared with Onyx. At no time during the planning process did Vasquez indicate any problem in the availability of the reserved rooms, or their guaranteed nature. At no point did Vasquez indicate that Onyx's rooms could be given to other people.
Trump also does not share with guests its practice of overbooking the Taj Mahal by approximately ten-percent. According to Trump's witnesses, the purpose of overbooking is to ensure that the hotel maximizes its room usage, since there is a historical no-show rate of about twenty-to-twenty-five-percent. Overbooking also has the effect of keeping down room rates, particularly in the casino industry, where a large number of rooms are "comped."
Significant to this case, Trump had no policy against excluding guaranteed rooms or blocks of rooms reserved for prepaid groups from its practice of overbooking, to prevent a situation in which guests with guaranteed reservations might not receive a room. In other words, if the hotel runs out of rooms, it does not "discriminate on who doesn't get a room . . .
[W]hether they're cash paying or somebody who is a casino guest, if we don't have a room, we don't have a room. So, unfortunately, they get relocated to another property."
Thus, in this case, Onyx's guaranteed block of sixty prepaid rooms was subject to the hotel's overbooking practice. In the case of an overbooking, Onyx's guests would be treated no differently than any other guests of the hotel, and would be subject to relocation to another hotel.
On November 30, 2001, one day before Onyx's party, Trump realized that the hotel was overbooked and had more reservations for December 1 than it had rooms. On that day hotel staff "pre-walked" twenty casino guests to another hotel "to hopefully insure that everyone that was arriving in on the first [of December] had [a] room available to them." They did not achieve this goal, however, because the following day there were still significantly more reservations than rooms. Nevertheless, at no time did anyone at Trump notify Onyx that the hotel was overbooked and that there might not be sufficient rooms for Onyx's guests.
On December 1, 2001 John Lorti, Onyx's regional vice president, arrived at the hotel at about 2 p.m. and Weinman arrived between 4 and 4:30 p.m. While neither Lorti nor Weinman had any difficulty checking in, nobody from the hotel informed them that there would be any problem accommodating Onyx's guests.
As Onyx's other employees and guests began arriving and attempted to check in at the front desk, they were advised there were no rooms available. They were told the hotel was "sold out" and "overbooked," although Trump's policy was that the term "sold out" is "never to be used with a guest" because the phrase has negative connotations.
Weinman's first notice of the problem came at approximately 6 p.m., when she received a call from one of Onyx's account representatives, who was in the hotel lobby and unable to check in. She immediately went to the lobby, bringing her paperwork to the front desk. She advised the front desk staff that Onyx had "pre-registered, prepaid rooms"; moreover, Onyx was "having a party upstairs," and its rooms "have to be available."
The staff's response was that they were "sorry," but the hotel was "oversold and overbooked, and there's nothing [they] can do." Weinman emphasized that Onyx had prepaid nearly $30,000. However, the front desk clerk was unimpressed with that figure and responded by saying, "ma'am, we have people who spent $30,000 a hand."
As Weinman continued to argue with the hotel staff, Onyx's guests continued to arrive and were unable to obtain rooms. No explanation was given as to why the prepaid rooms were unavailable. Initially, the front desk staff did not provide the guests with any alternatives or solutions to the problem. Weinman described the situation this way:
Q: Okay. Did the Trump offer to get rooms during the time you were arguing with them?
A: In the first hour, no.
Q: Did they offer to give you any kind of service for your guests, such as limousine service?
A: In the first hour of arguing, no.
Q: . . . [B]y the way, what were your guests doing [during] this period of time?
A: A lot of them were still arriving with their suitcases in their sweats, you know, not ready, not showered to go to the party, standing there, going, you know, what are we going to do? The party was supposed to start at seven. It was past 7:00. We were handing out keys here, you can take my room and shower and change and get ready. And it was just a complete nightmare, chaos. People were everywhere. They were already at the banquet. They were in the casino. They were in the lobby. They were in the rooms. I mean, they were just, people were -- our people were everywhere.
Other Onyx witnesses similarly described the situation as "chaotic," "chaos," and "very disorganized." When told there were no rooms, Onyx's guests did not know what to do. They were upset, unhappy, frustrated, angry, even furious, and they wondered how the situation was going to be rectified -- whether they were going to be given rooms, or whether they should just go home. Guests who had been assigned rooms were asked to permit other guests to use their rooms to shower and dress for the evening, and Onyx employees doubled and tripled up in rooms, giving up their rooms for their invited guests to use.
All the while, Onyx's staff observed other people checking in and receiving rooms. Trump, however, maintained that those guests had checked in earlier that day, before their rooms were ready, and were merely picking up keys.
Weinman spent about one hour arguing with the front desk staff before she contacted Lorti, her superior, who immediately came from his room to assist her. When he arrived in the lobby, Lorti took charge and spent an hour or hour-and-a-half arguing with the front desk staff. As he argued, he became increasingly frustrated with the staff's failure to provide an explanation as to what had gone wrong and their failure to respond with rooms in the hotel or any other solution to the problem. Only after Lorti asked to speak to a manager, and after he engaged in a lengthy discussion with the hotel's general manager, Kurt Ohlson, did Trump suggest that it might be able to provide Onyx's guests with alternative accommodations in other hotels in the area.
Trump maintained that it offered solutions to Onyx's problem in as timely a manner as possible. For example, it offered Onyx's guests use of the hotel's health club in order to shower and dress for the banquet. And, behind the scenes, efforts were made to find rooms in the hotel for Onyx's guests, or to obtain alternative accommodations for them in other hotels.
In any event, while this drama unfolded in the hotel lobby, Onyx's banquet, scheduled for 7 to 11 p.m., was proceeding. The event was deemed a failure. The banquet did not follow the planned agenda due to the chaos with the rooms. A number of people were stuck in the lobby trying to resolve the issue with the rooms, or spent time going back and forth from the banquet to the lobby to check on the status of their rooms. Others simply left the hotel. The main topic of conversation at the banquet tables was about what had gone wrong with the hotel reservations and where everyone was sleeping that night.
Ultimately, of the sixty rooms Onyx had reserved, at least twenty-six were not provided, and Trump reserved twenty-six rooms for Onyx's guests in area hotels. The total number of rooms not provided is a bit unclear from the record, however, because it is unclear how many of those off-site rooms were actually used, how many of Onyx's guests chose not to stay in Atlantic City that night, or how many of Onyx's employees doubled and tripled up in rooms to provide on-site accommodations for Onyx's guests.
Of the Onyx guests provided with alternative accommodations that evening, six were registered at the Trump Plaza in Atlantic City, twenty at the Days Inn in Atlantic City, and one at the La Sammana hotel in Brigantine. Trump claimed that these hotels provided comparable rooms, albeit not comparable amenities, to the Taj Mahal. However, Onyx was not satisfied. The alternative accommodations were not what Onyx wanted or what it had paid for, and they were not even offered until after Onyx had argued with the hotel staff for several hours. Moreover, some of Onyx's guests were upset at the idea of relocating to a lesser hotel, such as the Days Inn.
Trump also attempted to ameliorate the situation by offering the relocated guests free transportation between the hotels, the opportunity to stay at Trump another night for free, and complimentary buffet coupons for use the following day. However, according to Onyx, the free transportation offer was extended only after an initial unacceptable offer that the guests pay for their own taxis and submit receipts to the hotel for reimbursement. And, the free transportation was substandard. One guest who took advantage of the offer was driven around Atlantic City and Absecon for about forty-five minutes, until approximately 2 a.m., because the driver did not know the correct Days Inn where the reservations had been made.
The day after the party, Onyx was charged for food in the amount of $7,043.40 and drinks in the amount of $4,779.45. The record is unclear whether Onyx paid those amounts in addition to the $29,000 prepaid for the event.
Onyx presented two experts: one on the hospitality industry, the other on lost profit. Onyx's expert on the hospitality industry, Richard J. Welsh, testified that, in the industry, the term "guaranteed" is used when a guest pre-pays for a hotel room and the hotel "guarantees" the room by taking it out of inventory. As a matter of industry standard and Trump's manual on front office terminology, a guaranteed room is held from 6 p.m. on the scheduled date of arrival until 7 a.m. the following morning. The guaranteed room would not be subject to the hotel's overbooking policy.
Welsh further opined that prepaid rooms may be "preassigned" or "preregistered," meaning that the hotel designates a specific room for the prepaid guest. And often a guaranteed room will be preassigned, particularly for groups.
In this case, in Welsh's opinion, Onyx prepaid for a block of guaranteed rooms that should have been preassigned to Onyx's guests. Trump violated industry standards and the standard of care by: (1) misrepresenting to Onyx that its rooms would be guaranteed, as that term is understood in the industry; (2) failing to advise Onyx that the guaranteed rooms would be subject to Trump's policy of overbooking and "walking" guests to other hotels that were not comparable to Trump; (3) subjecting Onyx's guaranteed rooms to its overbooking policy; (4) relocating Onyx's guests, who were members of a group; and (5) relocating Onyx's guests to substandard hotels. Welsh stated that in his thirty-seven years in the industry he had never seen a group "so misrepresented and lied to" as occurred in this case.
Onyx claimed it lost profit in December 2001 as a result of the described fiasco at its Trump Christmas party. In support of this claim, Onyx employees testified that after the party they observed significant drop-offs in the volume of business, particularly, but not exclusively, from dealers who attended the party.
In addition, one dealer stated that the fiasco at Trump was a topic of conversation among dealers, including those who did not attend. Dealers who attended the party testified that they took transactions away from Onyx as a result. However, these dealers could not identify with specificity the deals that they sent to other lenders, or the exact number of deals diverted.
Onyx also produced letters from dealers, stating their intent to reduce the amount of business they gave to Onyx, or their intent to stop doing business with Onyx altogether as a result of their treatment at the party. For example, by letter dated December 5, 2001, Dan Cucunato, of Good Wheels, wrote that he understood he had been invited to the party due to his status as one of Onyx's top dealers. However, he "firmly believ[ed]" that, due to the events of December 1, he would not fall into the category of "top dealer" the next year. "Not by a longshot" [sic].
Similarly, by letters dated December 7, 2001, Sansone's Auto Mall indicated that it was "no longer contributing business" to Onyx and Pine Belt Enterprises advised Onyx that it would "not be forwarding Onyx any business in the year 2002." And, by letters dated December 11, 2001 and December 13, 2001 respectively, Rafferty Subaru and Chester Pike Auto Sales expressed their intent to "dramatically reduce" the amount of business they sent to Onyx.
There were several reasons to doubt the validity of the letters, however, or their significance. For example, the record reflects that certain factual allegations contained in the letters were incorrect. In addition, testimony suggested that the letters from Good Wheels, Pine Belt Enterprises, and Rafferty Subaru were solicited by Onyx. Specifically, Lorti instructed Weinman to pull together documentation of the problems she was experiencing as a result of the party, and she asked her account representatives to obtain letters from the dealers who were unhappy. One Onyx employee even typed Pine Belt Enterprise's letter on behalf of the dealership.
Also, Paul Sansone, owner of Sansone's Auto Mall, stated that he did not authorize the letter sent to Onyx, nor did he sign it; indeed, he did not even know about the party in Atlantic City or the letter until after this litigation began. The only Sansone employee who attended the party attended as the guest of his wife, who was employed by Onyx.
Finally, on this issue, Onyx presented the testimony of expert Robert Haas, who testified that as a result of the party at Trump, Onyx lost $131,000 in profits in December 2001. Haas's calculation was very simple. He first determined Onyx's projected volume of business and profits from its New Jersey and Pennsylvania offices for December 2001, based upon the market for used automobiles that existed at that time and the level of business Onyx achieved in the surrounding months. He compared the projected volume of business and profits to the actual volume of business and profits, and attributed the entire difference to the party.
Haas also considered other potential causes for the lost profit, such as the effects of the overall economy in 2001, the terrorist attacks on September 11, 2001, and the zero-percent and low interest rate automobile financing that was used as an incentive for new-car purchases after those attacks. However, he discredited those factors as reasons for Onyx's losses; he believed that the entire $131,000 loss could be attributed to the party.
Haas also said it was not possible to conduct a dealer-by-dealer analysis of Onyx's losses in December 2001, for example, to determine what contracts the dealers had not sent to Onyx in that month as a result of the party. As to this issue, he stated:
I . . . moved to whether I could calculate the damages by going dealer to dealer. Who were the . . . dealerships that, either, attended this function, heard about what happened, what have you. Could I, literally, go to the hundreds of dealerships and dealers that did business with Onyx, each Onyx branch -- and there's five -- they each have five territories within Pennsylvania and five within New Jersey. Each has, I think, 80 to 100 dealers they deal with. So, we're talking hundreds of dealers who could have heard of this, some of which actually attended.
Could I, literally, go to each of these dealerships, a year and a half, two years after the incident, and try to work my way backwards into determining which contracts did they decide not to forward to Onyx because of what happened with the rooms?
And I determined that was completely without any merit, because, eventually, . . . you had too many hurdles. You have to go back to people at the dealerships and the credit managers, in particular, and identify all the deals that they did not provide to Onyx during some portion of December of '01.
Then, if you are lucky enough that this whole group could identify them, did they have sufficient records to be able to allow somebody to review them. And, most importantly, would I find personnel, two years subsequent, ever getting permission from the individuals themselves who applied for . . . credit to buy a used car. Why, in good heavens, would those people ever allow their personal financial information to be scrutinized by somebody like myself and made public in a courtroom for litigation that they had no part of, and then risk being subpoenaed and having to appear here. That -- that wasn't going to happen.
Thus, Haas made no attempt to determine whether any individual dealers sent less business to Onyx in December 2001 as a result of the party.
Trump's damages expert, Thomas James, was employed as the comptroller at the Taj Mahal and he was critical of Haas's analysis. He opined that Haas's analysis was flawed because Haas did not consider the myriad factors that could have caused a reduction in Onyx's business in December 2001, other than the party at Trump. Those factors, all of which were cited in Onyx's public accounting reports as causes for the company's overall losses during the relevant time period, included the actions of Onyx's competitors, a change in Onyx's lending standards, the sluggish economy, and the zero-percent financing incentives offered by automobile manufacturers after September 11, 2001.
James also found significant volatility and no predictability to Onyx's performance for different months of the year; in other words, Onyx's results for July would be dissimilar than its results for December. Therefore, James was critical of Haas's attempt to project Onyx's expected profits for December 2001 based upon the results Onyx achieved in the surrounding months. For his part, James found that Onyx's results for December 2001 appeared consistent with the company's performance in Decembers of other years.
Trump first appeals from the judgment entered in Onyx's favor on the CFA claim. Trump argues that Onyx failed to prove liability under the CFA and, alternatively, that the court erred by finding liability as a matter of law, entering judgment on a motion rather than submitting the issue to the jury. We disagree and affirm on this point.
At the close of Onyx's case, the parties filed cross-motions under R. 4:37-2(b) for a directed verdict on the CFA claim. The court reserved decision. Thereafter, at the close of all evidence, the parties filed cross-motions for judgment on the CFA claim under R. 4:40-1. At that time, the court entered judgment in Onyx's favor.
The standards for resolving the motions is the same. Motions for judgment made under R. 4:37-2(b), or under R. 4:40-1, should be denied if the evidence and all legitimate inferences that may be deduced therefrom could sustain a judgment in favor of the opposing party. Verdicchio v. Ricca, 179 N.J. 1, 30 (2004); Dolson v. Anastasia, 55 N.J. 2, 5 (1969). In reviewing a trial judge's decision on a motion for judgment under R. 4:40-1, we apply the same legal standard. Zive v. Stanley Roberts, Inc., 182 N.J. 436, 441-42 (2005); Frugis v. Bracigliano, 177 N.J. 250, 269 (2003).
On the merits of Onyx's CFA claim, the purpose of the Act is "to prevent deception, fraud or falsity, whether by acts of commission or omission, in connection with the sale and advertisement of merchandise and real estate." Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 376-77 (1977). To that end, the statute provides, in pertinent part, that:
The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; . . . [N.J.S.A. 56:8-2.]
Without dispute, the CFA applies to the rental of hotel rooms. The statute defines the term "merchandise" broadly to include "any objects, wares, goods, commodities, services or anything offered, directly or indirectly, to the public for sale." N.J.S.A. 56:8-1(c) (emphasis added). And, the term "sale" is defined broadly to include "any sale, rental or distribution, offer for sale, rental or distribution or attempt directly or indirectly to sell, rent or distribute." N.J.S.A. 56:8-1(e) (emphasis added).
Consumer fraud violations are divided into three categories: (1) affirmative acts; (2) knowing omissions; and (3) regulatory violations. Cox v. Sears Roebuck & Co., 138 N.J. 2, 17 (1994); Monogram Credit Card Bank of Ga. v. Tennesen, 390 N.J. Super. 123, 133 (App. Div. 2007). "The first two [categories] are found in the language of N.J.S.A. 56:8-2, and the third is based on regulations enacted under N.J.S.A. 56:8-4." Cox, supra, 138 N.J. at 17.
If a plaintiff proceeds under a theory that the defendant committed consumer fraud through either an affirmative act or a regulatory violation, intent is not an element of the cause of action. Id. at 17-18; Fenwick, supra, 72 N.J. at 377-78; Feinberg v. Red Bank Volvo, Inc., 331 N.J. Super. 506, 510 (App. Div. 2000). "[T]he requirement that knowledge and intent be shown is limited to the concealment, suppression or omission of any material fact." Fenwick, supra, 72 N.J. at 377. See also N.J.S.A. 56:8-2; Cox, supra, 138 N.J. at 18-19.
Here, Onyx claims that Trump violated the CFA by making affirmative misrepresentations about the guaranteed nature of the reserved hotel rooms, and by violating a regulation enacted under the CFA, N.J.A.C. 13:45A-9.2(a)(9). The trial judge appears to have accepted both arguments as a basis for the judgment in Onyx's favor. The court concluded that Trump "guaranteed these rooms," which was "a misrepresentation" upon which Onyx relied and that Trump violated N.J.A.C. 13:45A-9.2(a)(9) by falsely advertising the availability of the rooms through the brochure Vasquez gave to Weinman in October 2001 and through the assurances that were given to Weinman regarding the guaranteed nature of the rooms.
First, addressing the affirmative misrepresentation issue, we conclude the record supports no other reasonable conclusion but that Trump falsely represented the guaranteed nature of Onyx's rooms. Without dispute, Trump guaranteed Onyx's rooms on numerous occasions throughout the party-planning process. For example, Vasquez explicitly advised Weinman that the rooms would be "guaranteed" during her personal visit to the hotel. Moreover, Vasquez gave Weinman more generalized assurances about the guaranteed nature of the rooms, stating that Trump could easily satisfy Onyx's needs because Onyx's event was a small one, and the Taj Mahal was a huge hotel. Still further, the language of the parties' contract also indicated the guaranteed nature of the rooms by providing that upon receipt of the executed contract and the $1000 deposit, "all accommodations will be held on a definite basis."
The representation of a guarantee was a misrepresentation. In reality, the rooms were not guaranteed. Onyx's guests were not assured of having a room available for them at the Taj Mahal because the rooms were subject to Trump's overbooking policy, which entailed the possibility of guests relocating to another hotel.
This misrepresentation of a guarantee was material to the transaction. Onyx had made clear to Trump the importance of the room guarantee. Because Onyx was hosting a banquet party at the Taj Mahal, it wanted the guests to receive overnight accommodations in that same hotel. Trump's ability and willingness to guarantee the rooms was significant to Onyx's decision to book the party at the Taj Mahal, as opposed to the other hotels in Atlantic City it had considered. See, e.g., Gennari v. Weichert Co. Realtors, 148 N.J. 582, 607 (1997) (to be actionable under CFA, misrepresentation must be material to transaction and must have induced buyer to make purchase).
All of these facts clearly demonstrated the existence of an affirmative misrepresentation of material fact that induced Onyx to engage in the transaction with Trump and supported judgment as a matter of law in Onyx's favor.
In contrast, Trump's defense to the CFA claim was seriously flawed. Trump's defense was three-fold. First, Trump maintained that the term "guaranteed" meant only that Trump could not cancel Onyx's room reservations until 7 a.m. of the day after arrival. Thus, the fact that the rooms were guaranteed did not mean that Onyx's guests were guaranteed a room at the hotel, because Trump promised to hold only "the reservation, not the room."
Second, Trump maintained that it did not misrepresent the guaranteed nature of the rooms because, at the time it made the guarantee, it believed the rooms would be available. It had no reason to know that the hotel would be overbooked on the night in question.
Third, Trump maintained that it acted in good faith, and not egregiously, because it made good faith efforts to remediate the problem after the fact, providing Onyx's guests with complimentary rooms in nearby hotels, complimentary transportation to those other hotels, the opportunity to stay another night at the Taj Mahal for free, and breakfast buffet vouchers.
We conclude that Trump's internal definition of guaranteed, including its claim that only the reservation was guaranteed, not the room, defies any commonsense understanding of the term guaranteed. The trial judge wisely rejected this argument as a valid defense to Onyx's CFA claim as a matter of law.
Under the CFA, it is the customer's reasonable expectations that control, and not the seller's unreasonable definitions of commonplace terms. "The consumer fraud statute is aimed at promoting truth and fair dealing in the market place." Feinberg, supra, 331 N.J. Super. at 512. As such, "[t]he statutory and regulatory scheme is also designed to promote the disclosure of relevant information to enable the consumer to make intelligent decisions in the selection of products and services." Div. of Consumer Affairs v. Gen. Elec. Co., 244 N.J. Super. 349, 353 (App. Div. 1990). And, as remedial legislation, the CFA and its regulations must be liberally construed in favor of consumers. Cox, supra, 138 N.J. at 15; Div. of Consumer Affairs, supra, 244 N.J. Super. at 352. It is the "capacity to mislead" that "is the prime ingredient of all types of consumer fraud." Cox, supra, 138 N.J. at 17.
Applying those principles to the present case, we conclude that when a customer reserves a hotel room and prepays for that room with the understanding that the reservation is guaranteed, that person may reasonably expect a guarantee to receive a room in the hotel. No reasonable consumer would believe, as Trump suggests, that she had received a guarantee only that the hotel would not cancel the reservation until 7 a.m. on the day after anticipated arrival.
We have found no case law directly on point interpreting the CFA or any other consumer fraud statute in the context of a hotel overbooking. The court in Rainbow Travel Serv., Inc. v. Hilton Hotels Corp., 896 F.2d 1233, 1240-41 (10th Cir. 1990), upheld a jury verdict on common-law fraud claim arising from hotel's false assurances that reserved rooms would be available. Looking beyond the hotel overbooking context, in New Jersey, in Leon v. Rite Aid Corp., 340 N.J. Super. 462, 471-72 (App. Div. 2001), we found that the plaintiff had pleaded a valid CFA claim based upon the defendant pharmacy's advertisement that it sold pharmaceuticals for "the lowest and best price," but in reality the pharmacy allegedly had a two-tier pricing system for customers who were insured versus those who were uninsured that was "not only undisclosed, but was actively covered up." Presented with those allegations, the court found that:
Contrary to the emphasis of the trial court, the graveman of plaintiff's complaint is not Rite Aid's failure, as such, to inform its customers of specific prices or of a variable pricing policy. The absence of that information only becomes relevant when juxtaposed against Rite Aid's advertising. Plaintiff contends "best and lowest" price advertising contains an essential assurance that those who patronize Rite Aid will receive consistent prices that are not modified for reasons that would be unsuspected by the average customer. [Id. at 472 (emphasis added).]
Similarly, in this case, plaintiff is not complaining, per se, of Trump's failure to disclose its definition of the term "guaranteed," or Trump's failure to disclose its policy of subjecting guaranteed rooms to its overbooking policy. Those omissions only become relevant when juxtaposed against Trump's affirmative representation that the rooms were guaranteed. An average, unsuspecting customer would believe that a room represented as guaranteed would be available upon arrival at the hotel. That Trump's representation of a guaranteed room is really a misrepresentation only becomes obvious when one considers Trump's undisclosed definition of the term guaranteed, and its undisclosed application of its overbooking policy to guaranteed rooms.
Contrary to Trump's argument, we conclude that Trump's affirmative misrepresentations regarding the guaranteed nature of the rooms constituted an unconscionable business practice violative of the CFA, N.J.S.A. 56:8-2, separate and apart from Trump's breach of contract. The distinction between a CFA violation and a breach of contract has been explained by our Supreme Court as follows:
In respect of what constitutes an "unconscionable commercial practice," this Court explained in Kugler v. Romain, 58 N.J. 522, 279 A.2d 640 (1971), that unconscionability is an "amorphous concept obviously designed to establish a broad business ethic." Id. at 543, 279 A.2d 640. . . . However, "a breach of warranty, or any breach of contract, is not per se unfair or unconscionable . . . and a breach of warranty alone does not violate a consumer protection statute." D'Ercole Sales, [Inc. v. Freuhauf Corp., 206 N.J. Super. 11,] 25, 501 A.2d 990 [(App. Div. 1985)]. Because any breach of warranty or contract is unfair to the non-breaching party, the law permits that party to recoup remedial damages in an action on the contract; however, by providing that a court should treble those damages and should award attorneys' fees and costs, the Legislature must have intended that substantial aggravating circumstances be present in addition to the breach. . . . [Cox, supra, 138 N.J. at 18.]
See also Palmucci v. Brunswick Corp., 311 N.J. Super. 607, 615-17 (App. Div. 1998).
Here, Trump's affirmative misrepresentations occurred throughout October and November 2001, and on December 1, 2001. The breach of contract occurred solely on December 1, 2001 when Trump failed to provide the rooms for which Onyx contracted. Thus, the affirmative misrepresentations which form the basis of the CFA claim are separate and distinct from the alleged breach of contract.
We do not conclude that the CFA prohibits Trump from applying its own unique definition of the term guaranteed. In such a case, however, in order to comply with the CFA's obligation of truth in the marketplace, Trump is obliged to advise its customers of that unusual definition so they may make a fully-informed decision in booking a room at Trump. See Div. of Consumer Affairs, supra, 244 N.J. Super. at 353 (CFA designed to promote disclosure of relevant information so consumer may make intelligent decisions in selection of products and services).
Trump's second defense to the CFA claim is also ineffective. We conclude it irrelevant that when Trump made the representation of guaranteed rooms, it did not know that the hotel would be oversold on December 1, 2001, because our Supreme Court has held that a CFA defendant's intent to deceive or even knowledge of the falsity is not relevant to liability for an affirmative misrepresentation. "One who makes an affirmative misrepresentation is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive." Gennari, supra, 148 N.J. at 605. Accord Vagias v. Woodmont Props., L.L.C., 384 N.J. Super. 129, 133 (App. Div. 2006); Scibek v. Longette, 339 N.J. Super. 72, 80 (App. Div. 2001); Ji v. Palmer, 333 N.J. Super. 451, 461-62 (App. Div. 2000).
Trump's alleged good faith in making its early, but revoked, guarantee, believing it probably would have sufficient rooms available on the night in question, is not relevant to the question of its liability. The CFA "is designed to protect the public even when a merchant acts in good faith." Cox, supra, 138 N.J. at 16. See also Gennari, supra, 148 N.J. at 604 ("Throughout its history, the Act has protected consumers from deception and fraud, even when committed in good faith"); Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 470 (App. Div. 1982) (CFA "is broadly designed to protect the public, even when a merchant acts in good faith").
In this case, the defendant's conduct is sufficient to establish liability for a false representation that, when Trump represented that the rooms were guaranteed, Trump did not really mean that the rooms would be guaranteed, at least not in the way any reasonable consumer would understand, because Trump defined the term guaranteed in a way that no reasonable consumer could predict. Or, in other words, it also is sufficient to establish liability for a false representation that Trump knew at the time of its representation that the hotel had a policy of overbooking by ten-percent, and of not excluding prepaid, guaranteed rooms from its overbooking policy. Therefore, Trump knew that the rooms it represented as guaranteed were not really guaranteed at all. The guaranteed rooms were subject to the overbooking policy, and, in the case the hotel was oversold, Onyx's guests would be treated no differently than any other hotel guests with non-guaranteed, non pre-paid rooms. They would be shuffled off-site from the boardwalk Taj Mahal to other locations, such as Days Inn.
Finally, Trump's third defense to the CFA claim fails because the hotel's after-the-fact good faith efforts to remediate the problem are irrelevant to its liability under the CFA. Liability arises from the misrepresentations Trump made in the booking process, between October and December 1, 2001, and is not diminished by Trump's after-the-fact attempts to remediate a problem of its own making. Trump's allegedly ex post good faith is simply not relevant to its liability under the CFA. Gennari, supra, 148 N.J. at 604; Cox, supra, 138 N.J. at 16; Skeer, supra, 187 N.J. Super. at 470.
The facts necessary to support judgment in Onyx's favor were undisputed and Trump's defenses to the CFA claim were legally insufficient. Judgment was appropriately entered in Onyx's favor under R. 4:40-1, based upon Trump's affirmative misrepresentation regarding the guaranteed nature of Onyx's prepaid reserved rooms. Because of our disposition on Onyx's CFA claim we eschew discussion of the regulatory violation claim.
The term "advertisement" is defined for purposes of N.J.A.C. 13:45A-9.2 as any attempt by an advertiser, other than by use of a price tag, catalog or any offering for the sale of a motor vehicle subject to the requirements of N.J.A.C. 13:45A-26A, to directly or indirectly induce the purchase or rental of merchandise at retail, appearing in any newspaper, magazine, periodical, circular, in-store or out-of-store sign or other written matter placed before the consuming public, or in any radio broadcast, television broadcast, electronic medium or delivered to or through any computer. [N.J.A.C. 13:45A-9.1.]
Here, the brochure given to Weinman, extolling the virtues of the Trump Taj Mahal clearly falls within the regulatory definition of an advertisement. However, the brochure does not violate N.J.A.C. 13:45A-9.2(a)(9) because it does not make "false or misleading representations of facts concerning . . . the nature of [the] offering or the quantity of advertised merchandise [hotel rooms] available for sale." The brochure says nothing about guaranteed rooms.
The question is whether Vasquez's representations to Weinman regarding the guaranteed availability of hotel rooms violate the regulation. We conclude that a reasonable jury could conclude that Vasquez's representations were "false or misleading . . . concerning . . . the quantity of advertised merchandise [hotel rooms] available for sale." Nevertheless, his representations would not violate N.J.A.C. 13:45A-9.2 because they could not be considered an "advertisement" as defined by the applicable regulation, N.J.A.C. 13:45A-9.1, since they did not appear "in any newspaper, magazine, periodical, circular, in-store or out-of-store sign or other written matter placed before the consuming public, or in any radio broadcast, television broadcast, electronic medium or delivered to or through any computer." Vasquez's representations could not form the basis for judgment in Onyx's favor based upon a regulatory violation.
Vasquez's representations still may constitute an advertising violation of the CFA because the Act's definition of "advertisement" is more general than the definition contained in N.J.A.C. 13:45A-9.1, which is directly applicable to N.J.A.C.
13:45A-9.2.*fn1 And, Vasquez's representations could fall within the broad statutory definition of an advertisement as the attempt directly or indirectly by publication, dissemination, solicitation, endorsement or circulation or in any other way to induce directly or indirectly any person to enter or not enter into any obligation or acquire any title or interest in any merchandise or to increase the consumption thereof or to make any loan. [N.J.S.A. 56:8-1(a) (emphasis added).]
The case was not tried on that theory of liability, however. Onyx never argued in the trial court that Vasquez's representations were advertisements that violated the CFA generally. Onyx argued only that Vasquez's representations were affirmative misrepresentations and advertisements that violated N.J.A.C. 13:45A-9.2(a)(9) in particular. We have held that "[a]dvertisements allegedly in violation of the Act, but not the subject of a specific regulation, are best left for jury determination." Leon, supra, 340 N.J. Super. at 468.
Although there may be some circumstances in which an advertisement is so patently deceptive that a violation of the Consumer Fraud Act may be found as a matter of law, the determination whether an advertisement is misleading is ordinarily for the trier of fact--here the jury--to decide. Indeed, a jury would appear especially well suited to determine the impact of an advertisement upon "an average consumer." [Chattin v. Cape May Greene, Inc., 216 N.J. Super. 618, 639 (App. Div.), certif. denied, 107 N.J. 148 (1987).]
In any event, analysis of Vasquez's statements as advertisements under N.J.S.A. 56:8-1(a) would be virtually identical to the affirmative misrepresentation analysis above.
Trump next contends argues that the trial court erred by not holding a hearing on Onyx's damages (i.e., its "ascertainable loss") from Trump's violation of the CFA. Trump maintains that Onyx received the banquet it paid for, as well as some hotel rooms for its guests. Therefore, the proper measure of Onyx's damages "should have been limited to those individuals for whom rooms were not provided or who were obliged to accept clearly inferior accommodations," and a hearing should have been held to determine the amount associated with that loss. Alternatively, Trump argues that there were questions of fact as to Onyx's losses that should have been submitted to the jury rather than resolved by the court on a motion for judgment.
Onyx cross-appeals from the court's entry of judgment in Trump's favor on its claim for lost profit damages. It claims such damages were appropriate on both its CFA claim and the claim for breach of contract, because they were a reasonably foreseeable result of Trump's conduct and because Haas's calculation of lost profit was reasonably accurate, fair, supported by the factual evidence, and not speculative.
The trial court granted Onyx's motion for judgment on the amount of its ascertainable loss for violation of the CFA, concluding that Onyx suffered damages in the amount of $29,754.05, the amount Onyx prepaid for the entire event, including the banquet and hotel rooms. The court found no "issue with regard to mitigation or reducing [for services received] because . . . the cases indicate that an ascertainable loss is the out of pocket expenses that the plaintiff may have experienced."
Our governing law supports this conclusion. In terms of damages, the CFA provides that:
Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefor in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. . . . [N.J.S.A. 56:8-19.]
The CFA's damage provision has multiple purposes, including compensating the victim for loss, punishing the wrongdoer, and serving as a deterrent. Cox, supra, 138 N.J. at 21. "Therefore, in determining whether plaintiff has established a loss under the Act, [the court is] guided by but not bound to strict contract principles." Ibid.
In all cases, however, the plaintiff must establish an "actual loss," meaning a loss that is "quantifiable or measurable," or "real and demonstrable," as opposed to "hypothetical or illusory" or "speculative." Thiedemann v. Mercedes-Benz, USA, LLC, 183 N.J. 234, 248, 252, 255 (2005). "In cases involving breach of contract or misrepresentation," for example, "either out-of-pocket loss or a demonstration of loss in value will suffice to meet the ascertainable loss hurdle and will set the stage for establishing the measure of damages." Id. at 248. See also Chattin v. Cape May Greene, Inc., 243 N.J. Super. 590, 605 (App. Div. 1990) (trial court properly instructed jury that damage award should be limited to what plaintiffs would have received absent defendant's misrepresentations, i.e., only those damages proximately caused by defendant's alleged consumer fraud), certif. denied, 127 N.J. 325 (1991). Similarly, in cases involving the purchase of goods or services, an ascertainable loss is established where the plaintiff receives "something less than, and different from," what he or she reasonably expected to receive. Miller v. Am. Family Publishers, 284 N.J. Super. 67, 87-91 (Ch. Div. 1995).
The plaintiff also must establish a causal connection between its loss and the defendant's unlawful conduct. Cox, supra, 138 N.J. at 23; Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 473 (1988). For example, in Cox, supra, 138 N.J. at 7-8, 21-22, the plaintiff had contracted with the defendant to renovate his kitchen, and he established a violation of the CFA through the defendant's violation of consumer fraud regulations relating to the obtainment of permits, inspections, and certificates. The Court held that the plaintiff's ascertainable loss was the amount necessary to repair the kitchen, as found by the jury, with that amount then trebled by the court under N.J.S.A. 56:8-19. Id. at 22-24.
In Cox, the full contract price was not the correct measure of the plaintiff's damages under the CFA "because the consumer fraud occurred in the course of performance, and not in the actual contracting for the home-improvement work." Id. at 23. The full contract price was incurred prior to the unlawful consumer fraud. Therefore, the full contract price was not caused by the consumer fraud, and the plaintiff was not entitled to have that amount trebled as consumer fraud damages. Id. at 23-24.
Nevertheless, the Supreme Court found that the trial court had properly cancelled the plaintiff's debt to the defendant, and the lien against the plaintiff's house, based upon the breach of contract claim. And, on the defendant's counterclaim for breach of contract, the trial court correctly awarded the defendant only the amount the jury determined as the value of the defendant's performance. Ibid.
Applying these principles to the facts before us, the trial court correctly determined Onyx's damages for the CFA violation. This was a breach of contract and misrepresentation case. As a result of the breach and misrepresentation, the event, for which Onyx paid in full, was a fiasco. Thus, Onyx's down-payment in full was its out-of-pocket loss and was an acceptable measure of its damages for this substantial misrepresentation and substantial breach. Thiedemann, supra, 183 N.J. at 248.
Moreover, Trump's violation of the CFA occurred at the inception of the parties' contractual relationship, when OnyX was booking the event at the Taj Mahal. This distinguishes the present case from Cox, wherein the consumer fraud occurred during the course of the defendant's performance of the contract. Here, absent Trump's false representation regarding the guaranteed nature of the rooms, Onyx would not have contracted with Trump at all. Onyx surely would have contracted with some other hotel in Atlantic City which could guarantee the necessary rooms. The prepayment of $29,754.05 was a fair measure of Onyx's "ascertainable loss" in this context where the early misrepresentation affected Trump's entire performance of the contract. Trump's defensive posture of a "partial performance" just does not fit this situation.
With respect to Onyx's claim for lost profit damages, the court granted Trump's motion for judgment, finding that the evidence was speculative and did not support a causal connection between the event at Trump on December 1, 2001 and Onyx's lost profit in New Jersey and Pennsylvania in December 2001. The court found there was insufficient evidence to show that the dealers in New Jersey and Pennsylvania reduced their business with Onyx as a result of the December event, particularly since only a small fraction of the dealers were even invited to the party. The court found no basis for concluding that all of Onyx's lost profit for December 2001 was attributable to the party at Trump. The court stated:
I believe that in New Jersey, there were approximately 375 dealers, if my memory is correct, and in Pennsylvania, 385.
The persons that were not invited who do business with Onyx, I believe 760 total were not invited. It would be stretching it a bit . . . to permit the jury to go to deliberate on an issue with regard to lost profits, when, in fact, all of the dealers were not involved cumulatively in loss of profit in this case.
Giving all inferences on behalf of the plaintiff in this case, the Court concludes that there was no genuine issue of fact. In fact, in this case, I believe that all that we have is speculation. There's no causal connection between the loss of profit and any deficiencies that Onyx has experienced. The only thing you can say is there has been a microscopic analysis in this case, which lacked a comprehensive analysis of the dealerships -- all the dealerships that Onyx has dealt within Pennsylvania and New Jersey.
So, I find that there was a deficiency in the analysis, and as a result, I will grant defendant her application.
The court concluded: "[T]here is a lack of nexus between this party event and the loss of profit" and "a reasonable jury could not make the determination with regard to that issue at all, based on what was heard."
We conclude the factual record supports the court's judgment. The standard for proving an ascertainable loss under the CFA was discussed above. For a loss to be recoverable under the CFA, the damages must be "quantifiable or measurable," or "real and demonstrable," as opposed to "hypothetical or illusory" or "speculative." Thiedemann, supra, 183 N.J. at 234, 248, 252. Moreover, the damages must have been caused by the defendant's consumer fraud. Cox, supra, 138 N.J. at 23; Meshinsky, supra, 110 N.J. at 473.
On a breach of contract claim, three types of remedies are available: restitution, compensatory damages, and performance, although compensatory damages are most often the measure. Totaro, Duffy, Cannova & Co., L.L.C. v. Lane, Middleton & Co., L.L.C., 191 N.J. 1, 12-13 (2007). The goal is to make the plaintiff whole. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 13 (2004)
Lost profit may be recovered as compensatory or consequential damages for a breach of contract if they were reasonably foreseeable at the time the contract was made. Totaro, Duffy, Cannova & Co., supra, 191 N.J. at 13-14; Magnet Resources, Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 293 (App. Div. 1998); George H. Swatek, Inc. v. N. Star Graphics, Inc., 246 N.J. Super. 281, 285 (App. Div. 1991); Restatement (Second) of Contracts, § 351 (1981). The plaintiff also must show causation, "that [the] profits were lost as a result of the actionable conduct complained of." Cromartie v. Cartaret Sav. & Loan, 277 N.J. Super. 88, 103 (App. Div. 1994).
Additionally, the amount of lost profit cannot be speculative. Rather, "[i]t is fundamental that '[t]here must always be a reasonably accurate and fair basis for the computation of alleged lost profits.'" J.L. Davis & Assocs. v. Heidler, 263 N.J. Super. 264, 276 (App. Div. 1993) ((quoting Borbonus v. Daoud, 34 N.J. Super. 54, 61 (Ch. Div. 1955)). Absolute precision is not required in the calculation, however.
V.A.L. Floors, Inc. v. Westminster Cmtys., Inc., 355 N.J. Super. 416, 424, 427 (App. Div. 2002). "Although we require a 'reasonably accurate and fair basis for the computation of alleged lost profits,' the 'fact that a plaintiff may not be able to fix its damages with precision will not preclude recovery of damages.'" Id. at 424 (internal citations omitted). "Loss of profits, where based on sound fact and not on mere opinion evidence without factual support, is recognized as a proper measure of damages if 'capable of being estimated with a reasonable degree of certainty.'" Stanley Co. of Am. v. Hercules Powder Co., 16 N.J. 295, 314 (1954) (quoting Rempfer v Deerfield Packing Corp., 4 N.J. 135, 144 (1950)).
Here, Onyx failed to show a reasonably probable causal connection between its lost profit and the party held at the Taj Mahal. Onyx deals in loan contracts. It earns its profits from bundling loan contracts and "securitizing" them on the market. The fundamental basis for Onyx's lost profit claim was a reduction in the number and quality of loan contracts it was able to purchase during December 2001 from car dealerships in New Jersey and Pennsylvania, which resulted in a reduction in the profits it could earn from "securitizing" such loan contracts on the market.
However, except with respect to the few automobile dealers who testified at trial, Onyx could not establish any causal connection between the party at the Taj Mahal and the quantity and quality of loan contracts that it was able to purchase in December 2001. The dealers who testified represented only a small subset of the dealers invited to the party, and they represented an even smaller subset of the hundreds of dealers in New Jersey and Pennsylvania with whom Onyx did business. While it may have been reasonably foreseeable that invited dealers would reduce the quantity and quality of business they gave to Onyx in December 2001, it probably was not reasonably foreseeable in this situation that uninvited dealers would do so. But see Rainbow Travel Serv., supra, 896 F.2d at 1239-40, 1242-43 (travel agency recovered for loss of good will in context of hotel overbooking and displacement of travel agency's clients, where agency argued that dissatisfied customers had tendency to tell others about their experience, creating "rippling effect" on agency's reputation).
Onyx provided no legitimate or logical basis from which the jury could conclude that the hundreds of dealers who were not invited to the party chose to reduce the quantity and quality of their business with Onyx as a result of the shabby treatment of the dealers who attended the party. As such, Onyx provided no legitimate basis from which the jury could find causation: a conclusion that the full extent of Onyx's alleged lost profit damages in December 2001, in the New Jersey and Pennsylvania markets, should be attributed to the ill-fated party on December 1.
The problem is not that Haas's calculation of Onyx's lost profits was too speculative. Rather, the problem was with Haas's attribution of all of those lost profit to the ill-fated party, an attribution not sustainable based upon the facts presented. We affirm the trial court's judgment awarding Onyx $29,754.05 in damages under the CFA, trebled per N.J.S.A. 56:8-19, and dismissing Onyx's claim for lost profit damages.
We now turn to Onyx's cross-appeal from the imposition of $30,000 in frivolous claim sanctions based upon the pursuit of its claim for lost profit damages. Onyx argues that the claim was grounded in law and adequately supported by the factual evidence. Trump claims that the trial court properly invoked the frivolous claims statute to award sanctions, but that the court should have awarded Trump the full amount it requested, $69,727.30.
We review an award of sanctions for an abuse of discretion. Mandel v. UBS/PaineWebber, Inc., 373 N.J. Super. 55, 82-84 (App. Div. 2004), certif. denied, 183 N.J. 213 (2005). We conclude that the statutory requirements for the imposition of sanctions were not met. We reverse on this point.
The record reflects that pretrial, by letter of May 1, 2002, Trump's counsel requested that Onyx "reconsider" its claims for lost profit and punitive damages, which Trump maintained were without legal or factual support. Trump's counsel cited R. 1:4-8 and N.J.S.A. 2A:15-59.1 for the proposition that a party may not file frivolous claims, and remarked that Onyx could be held responsible for Trump's legal fees should Trump ultimately prevail on the frivolous claims. See R. 1:4-8(b) (procedure for filing motion for frivolous litigation sanctions); Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 69 (2007) (litigants seeking counsel fees and costs under N.J.S.A. 2A:15-59.1 must comply with R. 1:4-8(b)(1)'s "safe harbor" provision to the extent practicable).
Onyx proceeded with the lost profit claim and successfully defended against pretrial motions in which Trump sought dismissal of the claim. As noted, at the close of trial, the court granted Trump's motion for judgment on the claim, finding that Onyx had not proven sufficient causation.
Post-trial, Trump filed a motion to recover $69,727.30 in counsel fees and expenses, which Trump claimed to have incurred in defending against Onyx's alleged frivolous claim for lost profit. Onyx opposed that motion and filed a cross-motion seeking sanctions against Trump and the recovery of counsel fees and costs under the CFA. The court held a hearing on the cross-motions. Unfortunately, the record contains no findings of fact or conclusions of law reflecting the judge's resolution of this issue.
In the final judgment, by order dated August 18, 2006, the court awarded Trump $30,000 pursuant to N.J.S.A. 2A:15-59.1 as reasonable counsel fees spent defending against Onyx's alleged frivolous claim for lost profit. In another order of the same date, the court stated that it was denying Trump's motion for sanctions.
Frivolous litigation sanctions may be imposed under N.J.S.A. 2A:15-59.1, which provides, in pertinent part, as follows:
a. (1) A party who prevails in a civil action, either as plaintiff or defendant, against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous.
b. In order to find that a complaint, counterclaim, cross-claim or defense of the non-prevailing party was frivolous, the judge shall find on the basis of the pleadings, discovery, or the evidence presented that either:
(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or
(2) The non-prevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.
c. A party . . . seeking an award under this section shall make application to the court which heard the matter. The application shall be supported by an affidavit stating in detail:
(1) The nature of the services rendered, the responsibility assumed, the results obtained, the amount of time spent by the attorney, any particular novelty or difficulty, the time spent and services rendered by secretaries and staff, other factors pertinent in the evaluation of the services rendered, the amount of the allowance applied for, an itemization of the disbursements for which reimbursement is sought, and any other factors relevant in evaluating fees and costs; and
(2) How much has been paid to the attorney and what provision, if any, has been made for the payment of these fees in the future.
See also R. 1:4-8.
"Relief under this statute has been approached cautiously," however. Gooch v. Choice Entertaining Corp., 355 N.J. Super. 14, 18 (App. Div. 2002). The statute must be interpreted "restrictively," Debrango v. Summit Bancorp, 328 N.J. Super. 219, 226 (App. Div. 2000), and sanctions should be awarded in only "exceptional cases." Fagas v. Scott, 251 N.J. Super. 169, 181 (Law Div. 1991). See also Iannone v. McHale, 245 N.J. Super. 17, 28 (App. Div. 1990) ("the counsel-fee sanction must not be made available for every litigation infraction"). As explained by this court:
The term "frivolous" as used in the statute must be given a restrictive interpretation. McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561, 626 A.2d 425 (1993). This is in recognition of the principle that citizens should have ready access to all branches of government, including the judiciary. Rosenblum v. Borough of Closter, 285 N.J. Super. 230, 239, 666 A.2d 1006 (App. Div. 1995), certif. denied, 146 N.J. 70, 679 A.2d 656 (1996). The statute should not be allowed to be a counterbalance to the general rule that each litigant bears his or her own litigation costs, even when there is litigation of "marginal merit." Venner v. Allstate, 306 N.J. Super. 106, 113 (App. Div. 1997).
A claim will be deemed frivolous or groundless when no rational argument can be advanced in its support, when it is not supported by any credible evidence, when a reasonable person could not have expected its success, or when it is completely untenable. Fagas v. Scott, 251 N.J. Super. 169, 189 (Law Div. 1991) (citation omitted). False allegations of fact will not justify a fee award unless they are made in bad faith, for the purpose of harassment, delay, or malicious injury. McKeown-Brand v. Trump, supra, 132 N.J. at 561. When the plaintiff's conduct bespeaks an honest attempt to press a perceived, though ill-founded and perhaps misguided, claim, he or she should not be found to have acted in bad faith. Id. at 563. [Belfer v. Merling, 322 N.J. Super. 124, 144-145 (App. Div.), certif. denied, 162 N.J. 196 (1999).]
In this case, we conclude the applicable standards have not been met to impose sanctions under the frivolous claims statute.
We see no evidence in the record that the claim for lost profit "was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury." N.J.S.A. 2A:15-59.1(b)(1). To the contrary, we find that Onyx pursued the claim in good faith, believing that it had a valid claim under the law, supported by facts. Onyx's conduct "bespeaks an honest attempt to press a perceived, though ill-founded and perhaps misguided, claim," as opposed to "bad faith." Belfer, supra, 322 N.J. Super. at 145.
We perceive no evidence in the record that Onyx "knew, or should have known, that the complaint . . . was without any reasonable basis in law or equity . . ." N.J.S.A. 2A:15-59.1(b)(2). As discussed above, as a general matter, the law allows a claim for lost profit damages for violation of the CFA or for breach of contract. The record reflects that at all times, Onyx fervently believed in the merits of its lost profit claim, including the adequacy of its evidence. Indeed, Onyx went to great lengths and great expense to support its claim, presenting the testimony of many lay witnesses and an expert witness. See Debrango, supra, 328 N.J. Super. at 227 (sanctions should not be awarded where plaintiff has reasonable good faith belief in merits of claim).
The problem in this case was a failure to establish sufficient causation. In essence, Onyx reached too far. It could have limited its lost profit claim to the dealers who attended the event at the Taj Mahal. Having chosen to include all New Jersey and Pennsylvania dealers in its analysis, however, Onyx was obligated to demonstrate that the dealers who did not attend the event actually learned of the misfortune with the rooms and, as a result, withheld business from Onyx. It did not do so. Thus, the claim failed. However, being "overly optimistic in seeking a remedy . . . does not mean that the litigation was essentially frivolous." Ellison v. Evergreen Cemetery, 266 N.J. Super. 74, 86 (App. Div. 1993).
Significantly, there was no fabricated evidence in this case, as in Weed v. Casie Enter., 279 N.J. Super. 517, 529-34 (App. Div. 1995), where sanctions were deemed appropriate. True, Trump attempted to demonstrate that the letters Onyx received from disgruntled dealers may have been advanced overzealously by Onyx for the purpose of pressing a lost profit claim in this litigation. However, Trump did not succeed in showing "false allegations of fact" that were "made in bad faith, 'for the purpose of harassment, delay or malicious injury,'" such that sanctions would be appropriate under N.J.S.A. 2A:15-59.1. McKeown-Brand, supra, 132 N.J. at 561 (quoting N.J.S.A. 2A:15-59.1(b)(1)).
At most, Trump established that: one, Onyx solicited the letters from dealers who orally expressed their displeasure regarding the events of December 1, 2001; and two, Onyx may have "ghost written" one of the letters at the behest of the dealer. These facts do not demonstrate a fabricated cause of action for lost profit, in light of the testimony of Onyx employees who described the complaints they received from dealers after the party and the perceived substantial drop-off in business, and the testimony of dealers who described their unhappiness with the events at the Taj Mahal and their decision to withhold business from Onyx as a result.
The facts of this case, taken as a whole, do not establish that Onyx's lost profit claim was frivolous within the meaning of N.J.S.A. 2A:15-59.1, nor do they render this the extraordinary case in which sanctions are appropriate. We conclude the trial court erred in imposing sanctions and reverse the $30,000 sanction on this point.
At the close of evidence, the trial court granted Trump's motion for judgment and dismissed Onyx's claim for common-law fraud and its claim for punitive damages, finding no egregious conduct on the part of Trump. Onyx appeals from that ruling, urging that the same conduct that established a violation of the CFA also established a cause of action for common-law fraud and supported an award of punitive damages. We disagree and affirm.
Onyx was entitled to pursue a claim of common-law fraud as a cumulative remedy to its CFA claim. See N.J.S.A. 56:8-19; Zorba Contractors, Inc. v. Hous. Auth. of City of Newark, 362 N.J. Super. 124, 139 (App. Div. 2003); Cybul v. Atrium Palace Syndicate, 272 N.J. Super. 330, 335 (App. Div.), certif. denied, 137 N.J. 311 (1994). "Every fraud in its most general and fundamental conception consists of the obtaining of an undue advantage by means of some act or omission that is unconscientious or a violation of good faith." Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619, 624 (1981).
To prevail on a claim of [common-law] fraud, a plaintiff must allege and prove five elements: a material misrepresentation of a presently existing or past fact; knowledge or belief that the representation was false; the intention that the other party rely on the representation; reasonable reliance by the other party; and resultant damages. [Banco Popular N. Am. v. Gandi, 360 N.J. Super. 414, 421 (App. Div. 2003), aff'd in part, rev'd in part, 184 N.J. 161 (2005).]
Accord Gennari, supra, 148 N.J. at 610; Jewish Ctr. of Sussex County, supra, 86 N.J. at 624-25; Triffin v. Automatic Data Processing, Inc., 394 N.J. Super. 237, 246 (App. Div. 2007). The burden of proving fraud is by clear and convincing evidence. Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989), certif. denied, 121 N.J. 607 (1990).
Onyx's common-law fraud claim fails for a lack of intent. As discussed, Trump affirmatively misrepresented the guaranteed nature of Onyx's hotel rooms. In using the term "guaranteed," Trump meant only that the hotel would not cancel the reservation until 7 a.m. on the day after the scheduled arrival. Trump did not share that definition with its customers, and the definition surely was unreasonable from the perspective of the average consumer. While these facts establish consumer fraud under the CFA, they do not establish common-law fraud because they do not establish intent. As discussed, under the CFA, intent is not an element of an affirmative misrepresentation claim.
Thus, in this case, the misrepresentation that constitutes a violation of the CFA does not constitute common-law fraud, because there was no knowledge or belief on the part of Trump that its representation of a guarantee was false, and there was no evidence that Trump guaranteed the reservations while not intending to provide the rooms to Onyx, or while knowing that there was a reasonable likelihood that the reservations would be dishonored. See, e.g., Stochastic Decisions, supra, 236 N.J. Super. at 396 (in context of the intent element of a common-law fraud claim, finding that "mere proof of nonperformance does not prove a lack of intent to perform").
Courts in other jurisdictions have upheld fraud claims in the context of hotel overbookings. See, e.g., Rainbow Travel Serv., supra, 896 F.2d at 1240-41; Marriott Corp. v. Am. Academy of Psychotherapists, Inc., 277 S.E.2d 785, 787 (Ga. Ct. App. 1981). However, the facts of those cases are significantly different than the facts presented in this case.
For example, in Rainbow Travel Service, supra, 896 F.2d at 1240-41, the Tenth Circuit affirmed a jury's verdict on a common-law fraud claim based upon these facts: the hotel's agents assured the plaintiff that rooms would be available; the hotel accepted reservations for more rooms than were available on the date in question because it had a policy of overbooking up to 115 percent of capacity based upon a historic fifteen percent no-show rate; although the hotel insisted that this overbooking policy allowed it to honor a high percentage of reservations, the evidence showed that "on fifty percent of those occasions when the hotel was operating at capacity the hotel had to dishonor reservations"; the hotel was aware of "a substantial likelihood that [the plaintiff's] reservation might be dishonored," because it was a very busy week for the hotel, the hotel "knew at least one month in advance that a large number of rooms would be closed for maintenance" during the relevant time period, "the hotel knew that a substantial number of people would stay over past their announced departure date," and, on the date in question the hotel gave a block of rooms to a group even though the group did not have reservations; and the hotel did not inform the plaintiff of its practice of overbooking or that there was a possibility that "guaranteed" reservations might be dishonored, instead assuring the plaintiff that the rooms would be available.
Similarly, in Marriott, supra, 277 S.E.2d at 787, the court upheld a jury verdict on a fraud claim because the jury could reasonably conclude from the evidence presented that defendant was aware of its having overbooked the hotel to such an extent as to create a substantial likelihood that it would be unable to meet plaintiff's needs during its convention, and yet defendant continued to represent to plaintiff that plaintiff's convention could and would be handled by defendant as planned by plaintiff.
Here, by contrast to Rainbow Travel Service, there was no evidence that Trump routinely dishonored reservations as a result of its overbooking policy. Moreover, unlike both Rainbow Travel Service and Marriott, there was no evidence that Trump was aware of a substantial likelihood that Onyx's reservations might be dishonored on December 1. To be sure, Trump was aware of the overbooking. However, on the day before Onyx's arrival, Trump had made affirmative attempts to avoid dishonoring Onyx's reservations by pre-walking other reserved guests to nearby hotels.
Thus, the case before us is more akin to Wells v. Holiday Inns, Inc., 522 F. Supp. 1023, 1025-26 (W.D. Mo. 1981), in which the court found no common-law fraud claim based on the defendant hotel's dishonoring of the plaintiffs' reservation due to its overbooking policy. The court there reasoned that:
Absent a showing that defendant knowingly or willfully misrepresented a material fact to plaintiffs or intended not to reserve a room, there is no fraud. The failure to perform a contract cannot be transmuted into fraud or misrepresentation absent that intent. Although there may be a duty to disclose material facts, concealment of a remote possibility of nonperformance does not seem to be considered deceitful at common law.
A promissory statement may of course be deceitful if the promisor actually had no intention of performing. In addition, the promisor impliedly represents that he "knows of nothing which will make the fulfillment of his prediction or promise impossible or improbable." . . . But one asserting fraud has generally been put to a difficult test of showing that the promisor "knew that the possibilities (of performance) were so remote . . . as to render (it) almost certainly unable to perform its obligations."
[Id. at 1026 (internal citations omitted).]
There was no fraud presented in Wells because overbooking was a "recognized and accepted practice within the hotel industry," and the defendant's practice of overbooking was "reasonable under the circumstances and not generally a significant factor in whether it could fulfill its promises." Ibid.
We affirm the trial court's judgment dismissing Onyx's common-law fraud claim and the cognate punitive damage claim.
Trump argues that the judgment in Onyx's favor on the CFA claim should be reversed because the trial court erred by refusing to admit the testimony of Trump's proposed expert on liability, Charles Reece. Trump maintains that Reece should have been permitted to testify about the industry-wide practice of overbooking, and that his testimony would have militated against a finding of unconscionability. We disagree.
At trial, Trump proposed to introduce the testimony of Charles H.D. Reece. Reece was employed as the Vice President of Hotel Operations at Foxwoods Resort Casino in Connecticut; he had significant experience in the hotel industry.
Reece's expert opinion, as set forth in his report, would have been that "the Taj Mahal satisfied the standard of care in the industry." The basis for his opinion was his knowledge of the industry, including the practice of overbooking, and his understanding of the events of December 1, 2001 and the events leading up to that date, which he gleaned from reading Trump's answers to interrogatories and the deposition transcripts of Trump employees Kathleen McSweeney and Sallye Hershman.
Onyx objected to Reece's testimony on the ground that he had reviewed the deposition testimony of only two of Trump's witnesses. Reece had not spoken to or reviewed the deposition testimony of Vasquez, the Trump employee who booked the event, nor had he reviewed the deposition testimony of any of Onyx's witnesses, such as Weinman and Lorti.
The court excluded Reece's testimony. It found that Reese had "been in the hotel industry for a very long time" and was qualified to testify regarding hotel operations and procedures, including overbooking. However, he was not qualified to issue an expert opinion regarding the specific facts of this case, because he had not "read relevant information connected with this case," which was "necessary for him to reach a conclusion as an expert."
Thus, two related issues are presented: (1) Reese's qualifications as an expert; and (2) whether Reese's opinion was based upon sufficient facts and data. Under N.J.R.E. 104(a), both issues are to be determined by the trial judge. See also Rosenberg v. Tavorath, 352 N.J. Super. 385, 401 (App. Div. 2002) ("In addition to determining whether a witness is qualified to testify as an expert, the trial court must also decide the closely related issue as to whether the expert's opinion is based on facts and data").
We review the trial court's decision for a palpable abuse of discretion. Brenman v. Demello, 191 N.J. 18, 31 (2007); Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 492 (1999). We will not overturn a trial court's discretionary determination regarding the sufficiency of an expert's qualifications, or the sufficiency of the factual data supporting the expert's opinion, unless there has been a manifest error and injustice. State v. Torres, 183 N.J. 554, 572 (2005); Carey v. Lovett, 132 N.J. 44, 64 (1993); Rosenberg, supra, 352 N.J. Super. at 401; Rubanick v. Witco Chem. Corp., 242 N.J. Super. 36, 51 (App. Div. 1990), modified, 125 N.J. 421 (1991).
As to the issue of qualifications, N.J.R.E. 702 (emphasis added) provides that: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise." See, e.g., State v. Torres, supra, 183 N.J. at 567-68.
An expert may be qualified by the court based upon his knowledge, training, or experience and have his qualifications challenged by the opposing party. In that case, any deficiencies in the expert's qualifications may be weighed by the jury. Rubanick, supra, 242 N.J. Super. at 48. Subject to appropriate instructions by the trial judge, "[i]t is for the jury to determine the credibility, weight and probative value of the expert's testimony, and the opinion of an expert can rise no higher than the facts and reasoning upon which it is based." Id. at 48 (internal citations omitted).
As to the factual bases of an expert's opinion, N.J.R.E. 703 provides that:
The facts or data in the particular case upon which an expert bases an opinion or inference may be those perceived by or made known to the expert at or before the hearing. If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible in evidence.
This rule recognizes that, for an expert's testimony to be of any value, it must have a proper foundation. Peer v. City of Newark, 71 N.J. Super. 12, 21 (App. Div. 1961), certif. denied, 36 N.J. 300 (1962). As such, a net opinion, meaning an expert opinion that is unsupported by factual evidence, is inadmissible. See Buckelew v. Grossbard, 87 N.J. 512, 524 (1981); Rosenberg, supra, 352 N.J. Super. at 401; Rubanick, supra, 242 N.J. Super. at 49; Peer, supra, 71 N.J. Super. at 21. "[A]n expert cannot give an opinion without considering all the data, facts and circumstances pertinent to the inquiry being made." Rempfer, supra, 4 N.J. at 144-45. Accord Vuocola v. Diamond Shamrock Chems. Co., 240 N.J. Super. 289, 299-300 (App. Div.), certif. denied, 122 N.J. 333 (1990); Peer, supra, 71 N.J. Super. at 21-22.
Here, we perceive no abuse of discretion in the trial court's conclusion that Reece's opinion was so lacking in a factual basis that it was inadmissible. Contrary to Trump's argument on appeal, Reece did not propose to testify only generically regarding the hotel industry's practice of overbooking. Clearly, he was qualified and competent to testify regarding that limited issue.
Rather, Reece proposed to testify that Trump, in its treatment of Onyx, satisfied the standard of care in the industry. However, Reece lacked sufficient factual basis for reaching that conclusion. He had no information as to Trump's booking of Onyx's event, and the nature of the guarantees given to Onyx, because he had not reviewed the testimony of Vasquez and Weinman. Moreover, his knowledge of the events of December 1, 2001 was limited to the perspective of two of Trump's witnesses, without considering the alternative perspectives of the numerous witnesses Onyx presented, who testified regarding their experiences with the hotel's front desk staff, managerial employees, and the driver who transported guests to their alternative accommodations at the Days Inn. We find no reversible error in the trial court's exclusion of Reece's testimony.
Trump next argues that the judgment in Onyx's favor on the CFA claim should be reversed because the court erred in excluding evidence relating to the refund it proffered to Onyx after the party. Trump maintains that the evidence was relevant to its liability under the CFA: "whether Trump had acted unconscionably" and thus "whether the severe statutory penalties [of the CFA] were warranted." The evidence also was relevant to the damages awarded under the CFA because "the receipt of such funds would have diminished the extent of the benefit-of-the- bargain losses for which Onyx arguably would have been entitled."
Onyx maintains that there was no error but that the purported "refund" was actually a settlement offer. Therefore, it was inadmissible under N.J.R.E. 408. We review this evidentiary issue under an abuse of discretion standard. Brenman, supra, 191 N.J. at 31; Green, supra, 160 N.J. at 492. We find no error warranting reversal of the judgment.
The record reflects these facts: On January 18, 2002 Onyx sent a letter to Trump, demanding the payment of $129,754.05 in damages resulting from the December 1, 2001 party, and threatening litigation if its demand was not met. By letter dated January 22, 2002 Trump responded that it would consider compensating Onyx for its out-of-pocket expenses, but nothing more. On January 28, 2002 Trump prepared an invoice which it sent to Onyx, suggesting that the value of the rooms Onyx prepaid but did not receive was $10,682.55.
Thereafter, on February 20, 2002 Trump issued a check to Onyx in the amount of about $10,682.55. On March 3, 2002 Onyx filed its complaint. Onyx's counsel represented that Onyx did not receive the check until after the complaint was filed, and that Onyx never cashed the check.
Both pretrial and at numerous points during trial, Trump argued for admission of the correspondence between the parties and the February 20, 2002 check, contending that it was a refund check for the hotel rooms Onyx paid for but did not use, and that it was issued independently of any settlement negotiations. Onyx maintained that the check was an offer of settlement, inadmissible on either liability or damages.
On each occasion, the court ruled that the check constituted a settlement offer and excluded it under N.J.R.E. 408. The court also ruled that the proffered check was a collateral issue that was not relevant and would only confuse the jury. And, the court ruled that Trump could not use its expert witness, James, to testify about the matter, because he had never been identified as a fact witness in pretrial discovery.
We perceive no error with the court's rulings. Under N.J.R.E. 408:
When a claim is disputed as to validity or amount, evidence of statements or conduct by parties or their attorneys in settlement negotiations, with or without a mediator present, including offers of compromise or any payment in settlement of a related claim, shall not be admissible to provide liability for, or invalidity of, or amount of the disputed claim. Such evidence shall not be excluded when offered for another purpose; and evidence otherwise admissible shall not be excluded merely because it was disclosed during settlement negotiations.
This rule encompasses the long-accepted notions that offers of compromise are not factually relevant and that there is significant value in keeping settlement discussions confidential, not permitting their use to establish liability or damages. See, e.g., Wyatt v. Wyatt, 217 N.J. Super. 580, 586-87 (App. Div. 1987); Winfield Mut. Hous. Corp. v. Middlesex Concrete Prods. & Excavating Corp., 39 N.J. Super. 92, 100-01 (App. Div. 1956); Brown v. Pica, 360 N.J. Super. 565, 568-70 (Law Div. 2001), appeal dismissed, 360 N.J. Super. 490 (App. Div. 2003).
Here, the February 20, 2002 check was issued in the context of the parties negotiating a settlement of Onyx's threatened litigation. Onyx claimed damages of over $100,000, Trump offered to pay its estimate of Onyx's out-of-pocket losses, and Trump issued a check to Onyx representing the value Trump placed on those out-of-pocket losses. Onyx disagreed that this amount represented either its out-of-pocket losses or its total losses from the December 1, 2001 party.
Under these circumstances, the check was not clearly a refund check, issued independently of the parties' settlement discussions, as argued by Trump. And, the trial court did not err in concluding that the check was an "offer of compromise" or a "payment in settlement." Moreover, as is clear from Trump's appellate brief and the appellate record, Trump intended to use the check to dispute the validity of Onyx's CFA claim, to establish that Trump did not act unconscionably and to dispute the amount of Onyx's damages. The court did not abuse its discretion in excluding evidence relating to the check under N.J.R.E. 408.
The court also did not err in excluding the evidence under N.J.R.E. 401 and 402, because it was irrelevant, and under N.J.R.E. 403, because it was collateral and its probative value was substantially outweighed by the risk of confusing the issues and misleading the jury. The check was irrelevant to the question of Trump's liability under the CFA because it was issued long after the allegedly unconscionable conduct that formed the basis for CFA liability, namely, Trump's affirmative misrepresentation that the hotel rooms were guaranteed.
The check could be considered relevant to damages, i.e., Onyx's out-of-pocket losses. However, as discussed earlier, under the circumstances of this case, the court did not err in assessing Onyx's damages under the CFA as the total amount Onyx prepaid for the event. The amount of the prepayment was undisputed, and the check Trump sent to Onyx in February 2002 represented only a portion of that amount. Even if Onyx had accepted the check, it would have represented only a prepayment of a portion of Onyx's CFA damages.
Trump next challenges the court's award of $60,000 in counsel fees to Onyx, arguing that the amount awarded was excessive and should be reduced further to reflect Onyx's lack of success on its claims. Onyx cross-appeals from the amount of the counsel fee award, arguing that the court erred by not explaining the basis for the amount awarded, and in awarding less than the $200,593.25 requested, because Onyx was substantially successful in pursuing its CFA and breach of contract claims, and should have been found successful on its claim for lost profit damages. Onyx also cross-appeals from the denial of its request for non-expert costs totaling $32,897.59.
The court's ruling is reviewed in this context for "a clear abuse of discretion." Rendine v. Pantzer, 141 N.J. 292, 317 (1995). We increase the counsel fee from $60,000 to $90,000 and award costs of $32,897.59.
Post-trial, Onyx moved to recover $200,593.25 in counsel fees and $108,674.99 in costs, and submitted an affidavit from an attorney, Carlo Scaramella, who opined that the requested amounts were reasonable because the total hours expended on the litigation was "consistent with a significantly contested, complex consumer fraud case that took six weeks to try," and the hourly rate of $175 was modest.
In opposing the motion, Trump argued that the counsel fee and costs requested should be reduced to reflect the substantial amount of time Onyx spent pursuing its unsuccessful claim for lost profit damages. Trump also argued that Onyx was not entitled to recover expenses associated with the expert witnesses.
In the final judgment, the court awarded $60,000 in counsel fees, but no costs. In an oral opinion issued prior to the final judgment, the court found that Onyx was entitled to recover counsel fees under the CFA, but not in the full amount requested due to its failure to recover on the lost profit claim. The court explained its intent to start with the lodestar and "shave" that figure to eliminate expenses associated with the claim for lost profit. However, the court never explained the basis for its calculation of the $60,000 award, nor did it explain the reasoning for its denial of Onyx's request for costs.
The law and the appellate record support the trial court's decision to make an award on counsel fees. Under R. 4:42-9(a)(8), a counsel fee may be awarded "[i]n all cases where counsel fees are permitted by statute." The CFA mandates an award of counsel fees to successful plaintiffs, stating: "In all actions under this section, including those brought by the Attorney General, the court shall also award reasonable attorneys' fees, filing fees and reasonable costs of suit." N.J.S.A. 56:8-19 (emphasis added).
The purpose of the CFA's fee-shifting provision is that "plaintiffs should be able to pursue consumer-fraud actions without experiencing financial hardship." Cox, supra, 138 N.J. at 25. In determining the amount of a counsel fee award, courts are directed to apply the general principles developed under other fee-shifting statutes. Chattin, supra, 243 N.J. Super. at 610.
The starting point in awarding counsel fees is a determination of the lodestar: the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. Thereafter, the lodestar may be enhanced or reduced based upon a number of factors. See, e.g., R.M. v. Supreme Court of N.J., 190 N.J. 1, 4, 10-12 (2007); Furst, supra, 182 N.J. at 21-23; Rendine, supra, 141 N.J. at 334-44; Chattin, supra, 243 N.J. Super. at 610-12. For example, the court may consider the plaintiff's overall success on the merits, and may reject compensation for hours spent on unsuccessful or meritless claims that are independent, factually or legally, of the meritorious claims. And, the court may consider the amount of damages awarded versus the amount sought. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 446 (2001); Furst, supra, 182 N.J. at 23; Rendine, supra, 141 N.J. at 336; Scullion v. State Farm Ins. Co., 345 N.J. Super. 431, 437-38 (App. Div. 2001); Silva v. Autos of Amboy, Inc., 267 N.J. Super. 546, 554-58 (App. Div. 1993); Chattin, supra, 243 N.J. Super. at 616. In all cases, however, the court should avoid a mechanical approach, for example, by reducing the amount requested by a specific percentage of claims lost, or by the percentage of damages sought but not recovered. Furst, supra, 182 N.J. at 23; Szczepanski v. Newcomb Med. Ctr., 141 N.J. 346, 366 (1995); Silva, supra, 267 N.J. Super. at 551, 554-58.
Here, Onyx requested $200,593.25 in counsel fees. A review of the fee request reveals that a considerable percentage of counsel's time was expended on the unsuccessful lost profit claim, both during pretrial discovery and motion practice, and at trial.
Moreover, the unsuccessful lost profit claim accounted for $131,000 of the $160,754.05 ($131,000 $29,754.05) in total damages sought by Onyx, which amounts to approximately eighty percent of the total damages requested. In the end, however, Onyx recovered only $29,754.05 in damages. Although the lost profits were sought as damages for the successful CFA and breach of contract claims, the facts and law necessary to establish a successful claim for lost profit damages were largely distinct from the underlying CFA and breach of contract claims.
In light of these facts, a counsel fee award of $90,000 appears reasonable. This represents roughly forty-five percent of the total claim for fees, at the very fair hourly rate of $175 per hour. This represents about 515 hours, a fair estimate of time spent on a case of this complexity, even though the lost profit claim failed, though vigorously pursued. Realistically, the trial judge may have unduly reduced the counsel fee award because she had ruled that the lost profit claim was "frivolous," a view we do not share.
In terms of costs, however, the law does not support the court's denial of Onyx's costs in full. Under N.J.S.A. 56:8-19, an award of "reasonable costs of suit" is mandatory to a successful plaintiff, Branigan v. Level on the Level, Inc., 326 N.J. Super. 24, 31 (App. Div. 1999), although expert witness fees are not recoverable. Josantos Constr. v. Bohrer, 326 N.J. Super. 42, 47-48 (App. Div. 1999). The court clearly mistakenly exercised its discretion in not awarding any costs to Onyx. We conclude that an award of reasonable costs of $32,897.59 independent of expert witness costs, is appropriate here. The record contains detailed explanations of the time and materials involved in this protracted matter. We reach these fee and costs conclusions as a matter of original jurisdiction because the trial judge is now retired. R. 2:10-5. A remand to a new judge would seem pointless and yield only a review of the cold record, which we have already reviewed.
We modify and increase the counsel fee award to Onyx to $90,000; we reverse the denial of costs to Onyx and award costs under the CFA of $32,897.59.
Onyx finally argues on its cross-appeal that the trial judge erred by not awarding prejudgment interest on the compensatory damage award. We agree and reverse on this point.
Onyx moved below for prejudgment interest with respect to the $29,754.05 awarded on its CFA claim. The court denied the motion in the final judgment but issued no opinion on the matter.
Prejudgment interest is allowed on contractual claims, in accordance with equitable principles. Meshinsky, supra, 110 N.J. at 478. "The equitable purpose of awarding prejudgment interest is compensatory, 'to indemnify the claimant for the loss of what the moneys due him would presumably have earned if the payment had not been delayed.'" County of Essex v. Waldman, 244 N.J. Super. 647, 667 (App. Div. 1990) (quoting Busik v. Levine, 63 N.J. 351, 358 (1973)), certif. denied, 126 N.J. 332 (1991).
We review such issues for a mistaken exercise of discretion, and do not reverse unless we find a manifest denial of justice. County of Essex v. First Union Nat'l Bank, 186 N.J. 46, 61 (2006); In re Estate of Lash, 169 N.J. 20, 34 (2001); Meshinsky, supra, 110 N.J. at 478; County of Essex v. Waldman, supra, 244 N.J. Super. at 666-67; Bd. of Educ. v. Levitt, 197 N.J. Super. 239, 244 (App. Div. 1984). There was never any doubt about the liquidated amount of the Onyx downpayment to Trump, $29,754.05 paid in advance in 2001, almost five years before final judgment was entered in August 2006. This element of damage was fully ascertainable throughout. No computation was necessary. No dispute over this amount ever arose. These damages were liquidated and clearly ascertainable at the outset. See Meshinsky, supra, 110 N.J. at 428.
In conclusion, we affirm in large part. We reverse those portions of the judgment in which the trial judge awarded litigation sanctions to Trump and denied Onyx's motion for costs; we award costs of $32,897.59 to Onyx. We also modify the award of counsel fees to Onyx of $60,000 and increase the award to $90,000, and we reverse the denial of prejudgment interest and order the award of prejudgment interest on the sum of $29,754.05.
Because of the retirement of the trial judge we remand to Assignment Judge Sweeney for entry of an appropriate order for judgment.
Affirmed in part; reversed in part, and remanded. We do not retain jurisdiction.