On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
This appeal involves the rare situation in which a Rule of Court is amended while a lawsuit is pending; a party to that suit who properly invoked the Rule in its pre-amendment form is unable to modify its position to comply with the amended Rule; and as a result the party is unable to enjoy the advantage that its compliance with the earlier version of the Rule would have provided. The specific issue is whether the effect of the September 1, 2004 amendment to Rule 4:58-2, the offer of judgment rule, should be relaxed in this case.
Plaintiff Richard A. Romagnola sued defendants Gillespie, Inc., Richard Gillespie, and The Interpublic Group of Companies, Inc., alleging breach of contract and other claims. The parties engaged in extensive discovery and motion practice. During these proceedings, on March 20, 2002, plaintiff submitted an offer of judgment to defendants, offering to take judgment against defendants in the amount of $1,165,000. The offer of judgment provided that defendants had until ten days before trial started or ninety days after service of the offer, whichever expired sooner, to accept the offer or it would be withdrawn. Defendants did not accept plaintiff's offer of judgment. Under the offer of judgment rule as it existed when plaintiff made his offer of judgment, plaintiff would have been entitled to the following if he recovered a judgment equal to or greater than $1,165,000: all of his litigation expenses and reasonable attorneys' fees incurred after June 28, 2002 (the date by which the offer was deemed not accepted), together with eight per cent interest on the judgment from the date of completion of discovery.
The case was tried without a jury between October 2003 and March 2004. Post-trial submissions were completed by June 2004. While the matter stood submitted, Rule 4:58-2 was amended effective September 1, 2004, so that the qualifying amount of money judgment recovered required to trigger the remedies under the Rule was increased from a sum "at least as favorable as the rejected offer" to "an amount that is 120% of the offer or more." Three weeks later, on September 24, 2004, the trial court rendered its judgment in favor of plaintiff and against defendants in the aggregate sum of $1,315,909.63, excluding pre-judgment interest. Significantly, the judgment was "at least as favorable as the rejected offer" of $1,165,000, but it was not "120% of the offer or more."
Plaintiff moved for an award of expenses, fees and pre-judgment interest under the offer of judgment rule. The trial court concluded that plaintiff's rights had not vested at the time Rule 4:58-2 was amended, and that under controlling precedent, it had no other choice than to bar plaintiff from recovery. The trial court noted, however, that the result was harsh: through no fault of his own, plaintiff was precluded from a substantial recovery of counsel fees; he had no opportunity to amend his offer of judgment under the Rules of Court and thus was without a remedy to protect his rights under the prior version of the Rule.
Defendants appealed, and plaintiff cross-appealed. In an unpublished opinion, the Appellate Division affirmed in part and reversed in part and remanded the cause to the Law Division. In respect of plaintiff's claim, the panel agreed with the trial court's application of the time-of-decision rule to deny plaintiff's request for an award under the offer of judgment rule. The panel reasoned that Rule 4:58-2 is a procedural rule, and normally, procedural rules in effect on the date a judgment is entered govern. The panel understood plaintiff's argument that he was unfairly denied the benefits of the prior version of the rule and was powerless to avoid the detriment caused by the rule amendment; however, the panel agreed with the trial court that plaintiff had no vested right in the pre-amendment operation of Rule 4:58-2. The panel also saw no basis to apply Rule 1:1-2 in the interests of justice to relax the effect of the September 1, 2004 amendment to Rule 4:58-2. The panel reasoned that to do so would subject defendants to an increased judgment through no fault of their own.
The Supreme Court granted certification, limited solely to the issue of the application of the September 1, 2004 amendment to Rule 4:58-2, to the March 20, 2002 offer of judgment by plaintiff. 192 N.J. 597 (2007).
HELD: The Court applies Rule 1:1-2 to relax Rule 4:58-2, as amended effective September 1, 2004, in this rare instance where plaintiff fully complied with the letter and spirit of a Rule, but that Rule changed after plaintiff could no longer alter or modify his position to comply with the amended Rule. Application of the amended Rule would violate fundamental principles of fairness. Plaintiff's entitlement to an award of remedies under the offer of judgment rule is to be gauged by the provisions of Rule 4:58-2 as it existed on the last day plaintiff could make a timely offer of judgment.
1. For the limited purposes of its opinion, the Court assumes that the trial court correctly determined that Rule 4:58 is a rule of procedure applicable to actions pending on or instituted after its effective date; and that plaintiff's rights had not vested at the time Rule 4:58-2 was amended. In light of the harshness of the result visited on plaintiff by the rule amendment, however, the Court questions whether the effect of the amendment should be relaxed. (pp. 9-10)
2. Rule 1:1-2 provides that the Rules of Court "shall be construed to secure a just determination, simplicity in procedure, fairness in administration and the elimination of unjustifiable expense and delay." It further provides that, "unless otherwise stated, any rule may be relaxed . . . if adherence to it would result in an injustice." Relief under the relaxation provision of Rule 1:1-2 will be granted only sparingly and only after an appropriate examination and balancing of the interests at stake has occurred. (pp. 10-11)
3. The facts are undisputed. In March 2002, plaintiff tendered a valid offer of judgment consistent with the provisions of the Rule then in effect. Defendants did not accept the offer. Once trial started in October 2003, plaintiff could no longer amend his offer of judgment as, in order to be timely, the offer must be made no later than twenty days before the trial date. The complex evidence portion of the trial was completed by March 2004, and all post-trial submissions had been made by June 2004. Three months later, on September 24, 2004, the trial court entered its judgment in plaintiff's favor. Unfortunately, three weeks earlier, Rule 4:58-2 had changed in a manner that fundamentally shifted plaintiff's entitlement to its remedies: under the pre-amendment version of the Rule, plaintiff would have been entitled to an award of remedies, whereas plaintiff would not have qualified for relief under the post-amendment version of the Rule. (pp. 11-12)
4. Circumstances as unique as those presented here -- where a party fully complies with the letter and spirit of a Rule but the Rule changes after the party can no longer alter its position to comply with the amended Rule -- animate the more flexible approach Rule 1:1-2 embodies and weigh heavily in favor of relaxation. Once trial had started, plaintiff's offer of judgment was fixed and the application of rules other than those under which the offer of judgment was made violates fundamental principles of fairness. Had the trial court advanced its decision by three weeks, or had the amendments to Rule 4:58-2 been deferred by an equal period, this controversy would not have arisen. The Court's decision does not prejudice defendants. The Court's finding means nothing more than defendants simply must abide by the rules as they existed when, well knowing the consequences, defendants elected not to accept plaintiff's offer of judgment. Thus, plaintiff's entitlement to an award of remedies under the offer of judgment rule is to be gauged by the provisions of Rule 4:58-2 as it existed on the last day he could make a timely offer of judgment: twenty days before the trial started. (pp. 12-13)
5. The Court emphasizes that Rule 1:1-2 is not intended to serve as a cure-all. Proponents seeking relief under the relaxation provisions of Rule 1:1-2 bear a heavy burden, as relief under that Rule will be granted only sparingly and only after an appropriate examination and weighing of all relevant factors has occurred. This is one of those rare cases qualifying for such special relief. (pp. 13-14)
The judgment of the Appellate Division is REVERSED IN PART, and the cause is REMANDED to the Law Division for further proceedings consistent with the unaffected portions of the judgment of the Appellate Division, as further ...