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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
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 ...