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Pathmark Stores, Inc. v. JSM at Somerville

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 24, 2008

PATHMARK STORES, INC., PLAINTIFF-APPELLANT,
v.
JSM AT SOMERVILLE, LLC, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County, Docket No. C-12034-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 7, 2008

Before Judges Lisa, Lihotz and King.

Pathmark Stores, Inc. (Pathmark) has filed two appeals from final judgments in two separate trial court actions arising out of redevelopment plans affecting its store in the Landmark Shopping Center in the Borough of Somerville (Somerville). This opinion disposes of the appeal from the Chancery Division action Pathmark brought against JSM at Somerville, LLC (JSM). In a separate opinion, issued on this date, we also dispose of Pathmark's other appeal, Borough of Somerville v. Pathmark Store, Inc., No. A-5578-06T2 (App. Div. ____________, 2008), from the Law Division action brought by Somerville against Pathmark to condemn Pathmark's lease.

Pathmark's lease began in 1977 and, with renewal options, runs through 2018. In May 2002, JSM purchased the shopping center for the purpose of redevelopment. In 2003, the Somerville Planning Board (Board) passed a resolution stating that the location is an "area in need of redevelopment," and the Somerville Borough Council (Council) adopted a similar resolution and designated JSM as the redeveloper.

After hearings in February 2004, the Council adopted a redevelopment plan for the West Main Street area where the shopping center is located. In April 2005, the Board approved JSM's site plan, which provides for the demolition of the entire shopping center except the Pathmark store, and the creation of new buildings and parking structures, with a mixture of retail, office, and residential uses.

This course of events gave rise to three separate lawsuits. On May 13, 2005, Pathmark sued JSM in this Chancery Division action seeking an injunction to prevent JSM from acting as redeveloper, and raising claims that JSM breached Pathmark's lease, the implied covenant of good faith and fair dealing, and the covenant of quiet enjoyment contained in the lease. On June 2, 2005, Pathmark filed a complaint in lieu of prerogative writs seeking to overturn approval of the site plan. On February 13, 2007, Somerville filed a condemnation action, seeking to condemn Pathmark's lease.

In the condemnation case, Judge Ciccone upheld Somerville's right to condemn and issued a judgment appointing condemnation commissioners. As stated, Pathmark's appeal of that decision, now docketed as A-5578-06T2, is disposed of in a separate opinion issued today.

In the action in lieu of prerogative writs, Judge Kumpf first dismissed all claims challenging the adoption or validity of the redevelopment plan, and later dismissed the remaining claims that addressed parking issues. Pathmark has not filed an appeal in that case.

Pathmark's three-count complaint in this case alleged that:

(1) JSM's actions constituted a breach of the lease; (2) JSM's actions constituted a breach of the implied covenant of good faith and fair dealing; and (3) proceeding with the development would cause substantial interference to the permanent detriment of Pathmark's business, constituting a breach of the covenant of quiet enjoyment contained in the lease. Pathmark sought to enjoin JSM temporarily, preliminarily, and permanently from proceeding with its development plans, violating the lease, or interfering with Pathmark's business including access of Pathmark's customers. Pathmark requested compensatory damages, interest, counsel fees, costs of suit, and any other relief deemed just and equitable.

After JSM answered, Judge Coyle entered a consent order on September 22, 2006 temporarily restraining JSM from demolishing or attempting to demolish any portion of the shopping center. On October 20, 2006, the judge entered an order to continue the consent order until either party applied for a return date in the event of a change in circumstances.

In November 2006, Pathmark and JSM cross-moved for summary judgment. After oral argument on February 9, 2007, Judge Coyle issued a written opinion granting JSM's motion in part, and denying Pathmark's cross-motion. He determined there were genuine issues of material fact: (1) whether JSM violated article 44 of the lease; (2) whether JSM engaged in activities that interfered with Pathmark's beneficial enjoyment of the premises breaching the covenant of quiet enjoyment; and (3) whether JSM caused the shopping center to be a "virtual ghost town" and whether that has had a substantial impact on Pathmark's ability to generate a profit. In addition, Judge Coyle found a factual issue as to whether JSM crossed the line of mere planning and had taken steps that destroyed Pathmark's legitimate expectations under the lease.

Regarding Pathmark's cross-motion for a permanent injunction, Judge Coyle denied summary judgment, finding genuine issues of material fact of whether JSM breached either the implied covenant of good faith and fair dealing or the express covenant of quiet enjoyment.

After seven days of trial, on May 2, 2007, Judge Coyle determined that although there had been actual notice of Somerville's planned redevelopment of the shopping center, JSM breached articles 44 and 25 of the lease. However, he found that JSM did not violate the implied covenant of good faith and fair dealing. He granted an injunction prohibiting JSM from implementing the redevelopment plan further, but noted that if Somerville filed a declaration of taking, JSM could move to vacate the injunction and he would be inclined to lift it. In all other respects, the judge dismissed the complaint and all claims for damages with prejudice. He stated that the issue whether Pathmark is entitled to money damages for the value of the remainder of its lease would be determined in the condemnation case that was then pending.

On June 28, 2007, Pathmark filed a timely notice of appeal. On September 28, 2007, in the condemnation action, Judge Ciccone entered an order granting Somerville immediate and exclusive possession of the Pathmark store, free of all right, title, interest and liens of all tenants. We were advised at oral argument that Pathmark has vacated the premises.

Pathmark argues on appeal that Judge Coyle erred in determining: (1) that JSM did not breach the implied covenant of good faith and fair dealing; and (2) that Pathmark did not prove that it lost the ability to assign the lease as a result of improper actions by JSM. We reject these arguments and affirm.

I.

This is the factual background underlying the dispute. On July 7, 1977, Supermarkets General Corporation (Pathmark's predecessor) entered into a lease with Landmark at Somerville for a store in the shopping center, which is located on Main Street. There were originally 700 parking spaces in the lot, but with the construction of a McDonald's and the enlargement of the Pathmark store, that number decreased to about 599. The lease has been amended six times. It was in effect when these events occurred and contained options to renew until 2018.

The first tenants took occupancy in the shopping center in November 1978. In 1990, the Pathmark store was enlarged with an additional 7500 square feet at a cost of approximately $2.2 million. In addition, there were renovations in 1994 that cost Pathmark $600,000, and more renovations in 2003-04 that cost approximately $1.7 million.

The Pathmark store presently has a total of approximately 57,500 square feet. The shopping center covered about thirteen acres of area with about 140,000 square feet of retail space. It was laid out in a horseshoe shape, with most of the stores fronting a large parking field in the middle of the horseshoe. Bernard Navatto, Jr., a Board member since 1989 and chairperson of the Board since 1995, stated that Somerville officials recognized in 1989 that the shopping center's configuration was not appropriate for a Main Street setting. It was designed as a suburban shopping center with access for cars, and it was not pedestrian friendly. The large setback with single-story buildings was an inefficient use of space. Brian Gallagher, mayor of Somerville, noted that the shopping center "turned its back on downtown [and] you can't gain access to it from Main Street."

Somerville officials and local businesses prepared a "Downtown Vision Plan" that Somerville adopted as part of its master plan. The Vision Plan called for the development of two mixed-use development sites on each end of Main Street and redevelopment of the shopping center in two phases. A Somerset County study recommended that the shopping center be intensely developed as a mixed-use development.

On May 8, 2002, JSM purchased the shopping center for the purpose of redevelopment. JSM thus became Pathmark's landlord. We set forth relevant portions of the lease.

Article 34(A) of Pathmark's lease, addressing eminent domain, states:

In the event of a taking for any public or quasi-public use by any lawful power or authority by exercise of the right of condemnation or of eminent domain or by agreement between Landlord and those having the authority to exercise such right (hereinafter called Taking) of the whole of the Tenant's Building, then (1) this Lease and the term hereof shall cease and expire as of the date of vesting of title or transfer of possession, whichever occurs earlier, as a result of the Taking, and (2) any fixed annual rent and additional rent paid for a period after such date of termination shall be refunded to Tenant upon demand.

Article 34(B)(1) provides:

In the event of a Taking of any part of the Demised Premises or a Taking of the Whole or any part of the Common Area, then this Lease and the term hereof shall cease and expire in respect of the portion of the Tenant's Building and/or the Common Area taken upon the date of vesting of title or transfer of possession, whichever occurs earlier, as a result of the Taking. In the event of a Taking of any part of the Demised Premises, or in the event of a Taking resulting in a reduction of more than 10% of the parking spaces (unless Landlord provides adequate and sufficient additional parking areas in substitution therefor), or in the event of a Taking resulting in a divided Shopping Center, or in the event of a denial of adequate vehicular access to the Shopping Center at the grade of streets adjoining the Shopping Center whether or not a Taking shall have occurred . . ., Tenant may elect to terminate this Lease by giving notice of termination to Landlord on or before the date which is 30 days after receipt by Tenant of notice from Landlord or the condemning authority that the Taking or the denial of access occurred. . . .

Article 34(D) of the lease reads:

Except as otherwise provided, in the event of a Taking, and whether or not this Lease is terminated, Tenant shall have no claim in respect of the award or payment for the value of the unexpired term of this Lease, except that (1) Tenant may interpose and prosecute in any proceeding in respect of the Taking, independent of any claim of Landlord, claims for the reasonable value of Tenant's trade fixtures, for damages for interruption or dislocation of business in the Demised Premises and loss of good will, and for moving and remodeling expenses, and (2) if this Lease is terminated on account of a Taking, Landlord shall pay to Tenant, promptly after the award or payment is made for such Taking, the depreciated book value of any leasehold improvements made by Tenant on or to the Demised Premises.

Article 25 of the Lease provides: "Landlord covenants and agrees that Tenant may peaceably and quietly enjoy the Demised Premises, subject, however, to the terms, covenants and conditions contained in this Lease."

Article 44 provides:

Landlord shall promptly forward to Tenant any notice or other communication received by Landlord from any owner of property adjoining or adjacent to the Land or from any municipal or governmental authority in connection with any hearing or other administrative procedure relating to the use of the Land or any adjoining or adjacent property.

The lease also provides in article 9(B) that the Landlord agreed that improvements in the shopping center would conform to a site plan attached to the lease. With subsequent amendments, the site plans changed, and the newer plans were attached to the amendments. In addition, article 9(B) states that the aggregate gross floor area of certain buildings would not exceed certain limits. Requirements also addressed the size of pad uses (for the construction of additional buildings) and approval of those uses by the tenant.

Article 9(G) provides:

In doing any construction work, making any repairs or doing any maintenance in the Shopping Center after Tenant takes possession of the Demised Premises, Landlord shall use its best efforts to prevent any interference with the operation of the Shopping Center and the business of Tenant or any subtenant or licensee of Tenant.

Article 11(B), addressing common areas such as parking, states that "[t]he layout of, and striping in, the Common Area . . . shall not be changed without Tenant's consent." Under article 22, Pathmark could assign or sublet all or any part of its premises.

Article 23 prohibits the landlord from leasing space to drugstores, other supermarkets, offices (except those that are necessary for the operation of, or ancillary to, permitted businesses in the shopping center), and restaurants. There were certain exceptions to the ban on restaurants, which allowed for one Italian restaurant no larger than 2000 square feet, a delicatessen-style restaurant no closer than 170 feet from the supermarket, a bagel store no larger than 1500 square feet, an ice cream store no larger than 1000 square feet, and use of the pad sites for restaurants with certain requirements.

On August 4, 2003, the Council adopted a resolution authorizing the Board to undertake a preliminary investigation whether the area including the shopping center was an "area in need of redevelopment," pursuant to the Local Redevelopment and Housing Law (LRHL), N.J.S.A. 40A:12A-1 to -49. On October 7, 2003, the Atlantic Group, retained by the Board to preliminarily investigate the Main Street study area, issued a report. The report determined that the shopping center was in need of redevelopment based on four of the factors set forth in N.J.S.A. 40A:12A-5. The report noted a vacancy rate of twenty-six percent that had been rising since 1993.

At an October 22, 2003 meeting, the Board adopted a resolution concluding that the Main Street area qualified as an "area in need of redevelopment." On November 3, 2003, the Council adopted a resolution designating the Main Street area as an "area in need of redevelopment" and designating JSM as the redeveloper of the West Main Street area.

On February 17, 2004, the Council passed an ordinance adopting the redevelopment plan for the West Main Street area that was substantially consistent with Somerville's master plan. The redevelopment plan calls for the development at the shopping center of approximately 275 residential units, 143,000 square feet of retail space, 73,500 square feet of office space, a residential parking deck, a public parking deck, and surface parking. In response to Pathmark's concerns as to needed parking, the redevelopment plan was amended to eliminate the construction of one of the proposed buildings.

The Board held hearings for the proposed "Somerville Town Center" on six days in January, February, and March 2005. On March 23, 2005, the Board approved JSM's application for preliminary and final site plan and preliminary and final major subdivision approval for the shopping center. On April 13, 2005, the Board adopted a resolution memorializing the approval.

Under the plan, all existing buildings in the shopping center would be torn down except the Pathmark building. To be built would be: (1) more than 100,000 square feet of retail and restaurant space; (2) 74,600 square feet of office space; (3) approximately 272 residential units; (4) a four-story building replacing the one-story buildings along Main Street; (5) four-story buildings along South Doughty Avenue and Veterans Memorial Drive West where there currently are none; and (6) a through street down the middle of the existing parking lot. The plan also lowers the existing surface parking to approximately 363 spaces and adds parking in two parking garages.

Harvey Gutman, in charge of all of Pathmark's real estate functions for sixteen years, testified that JSM's actions destroyed Pathmark's unlimited right to assign the lease or sublet. He had "sole responsibility for . . . finding locations, negotiating on obtaining locations, on negotiating the contract to buy the location or to lease to procure the location." Gutman testified that nobody else in the industry had encountered a situation like the one here, where there was a four to five-year period of demolition and construction during which a supermarket continued to operate.

Gutman stated that despite a very broad assignment and sublet clause, it would be impossible for Pathmark to assign or sublet. No tenant would want to be put in the position of accepting an assignment and then perhaps losing it to eminent domain or of having to put up with four to five years of demolition and construction, and then end up with a shopping center that has insufficient parking.

II.

In his February 9, 2007 written opinion granting JSM's summary judgment motion in part, and denying Pathmark's cross-motion, Judge Coyle determined that although the redevelopment plan would violate the lease if construction had commenced, construction had not commenced. He did find that JSM may have violated article 44 of the lease, which he declared a genuine issue of material fact. He further found a factual question as to whether JSM engaged in activities that interfered with Pathmark's beneficial enjoyment of the premises breaching the covenant of quiet enjoyment.

In addition, Judge Coyle found a genuine issue of material fact as to whether JSM caused the shopping center to be a "virtual ghost town" and whether that had a substantial impact on Pathmark's ability to generate a profit. Because every lease is subject to appropriation for public use and this lease had a provision for eminent domain, Judge Coyle concluded that he could not find that JSM breached the duty of good faith and fair dealing by planning the redevelopment of the shopping center. However, he found a factual issue whether JSM crossed the line of mere planning and had taken steps that destroyed Pathmark's legitimate expectations under the lease.

Regarding Pathmark's cross-motion for a permanent injunction, Judge Coyle denied summary judgment, finding genuine issues of material fact. Such issues included whether JSM breached either the implied covenant of good faith and fair dealing or the express covenant of quiet enjoyment. He could only grant the injunction if Pathmark was successful on the merits.

After trial, on May 2, 2007, Judge Coyle issued a written decision. He rejected Gutman's testimony because Pathmark never attempted to assign the lease and Gutman had no basis for his assertions. Further, there was no basis for Gutman's testimony as to sublet value and it was a net opinion because Pathmark never attempted to sublet the property. He stated that the issue as to damages for the under-market lease value would be determined in the condemnation case that was then pending.

The judge determined that although there had been actual notice of Somerville's planned redevelopment of the shopping center, JSM had breached article 44, the notice provision, and article 25, the covenant of quiet enjoyment. However, he found JSM did not violate the implied covenant of good faith and fair dealing. He granted an injunction prohibiting JSM from implementing the redevelopment plan further, but noted that if Somerville filed a declaration of taking, he would be inclined to lift the injunction.

III.

We now address Pathmark's contention that Judge Coyle erred in determining that JSM did not breach the implied covenant of good faith and fair dealing. Pathmark argues that the judge erred because the issue before him was not whether condemnation, as a general proposition, was foreseeable to Pathmark. Instead, Pathmark claims the issue was whether it had a reasonable expectation that its own landlord would not cause the condemnation of the lease to discharge its leasehold obligations, and would not do so and deprive Pathmark of the value of the lease.

Pathmark argues that the judge's legal conclusion regarding the implied covenant is inconsistent with the factual findings he made elsewhere in his opinion. Pathmark relies on the judge's statement that "JSM intentionally kept Pathmark in the dark until it was safely designated a redeveloper on a redevelopment plan that met JSM's expectations. This is not only violative of the spirit of the lease, but the express provision contained in paragraph 44." Pathmark also relies on the judge's statement that, "[t]herefore, if anything, the public interest lies in favor of granting a limited injunction to ensure that lessees in the future are not bullied by a landlord's status as a redeveloper."

It is well established that "[e]very party to a contract . . . is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract." Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). In Wade v. Kessler Institute, 172 N.J. 327, 340 (2002), the Court explained that every contract contains an implied covenant of good faith and fair dealing. However, this duty of fair dealing does not "alter the terms of a written agreement." Rudbart v. N. Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 366, cert. denied, 506 U.S. 871, 113 S.Ct. 203, 121 L.Ed. 2d 145 (1992). "[I]nstead of altering or overriding an express term, the implied covenant requires that a contracting party act in good faith when exercising either discretion in performing its contractual obligations or its right to terminate." Seidenberg v. Summit Bank, 348 N.J. Super. 243, 258 (App. Div. 2002) (internal citations omitted). The implied covenant mandates that "'neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.'" Sons of Thunder v. Borden, Inc., 148 N.J. 396, 420 (1997) (quoting Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965)).

"Proof of 'bad motive or intention' is vital to an action for breach of the covenant." Brunswick Hills Racquet Club, Inc., supra, 182 N.J. at 225 (quoting Wilson v. Amerada Hess Corp., 168 N.J. 236, 251 (2001)). Thus, "[t]he party claiming a breach of the covenant of good faith and fair dealing 'must provide evidence sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties.'" Ibid. (quoting 23 Williston on Contracts § 63.22 at 513-14 (Lord ed. 2002) (footnote omitted by the court)).

The Brunswick Court explained:

We have warned that "'an allegation of bad faith or unfair dealing should not be permitted to be advanced in the abstract and absent an improper motive.'" Wade, supra, 172 N.J. at 341, 798 A.2d 1251 (quoting Wilson, supra, 168 N.J. at 251, 773 A.2d 1121). "'Contract law does not require parties to behave altruistically toward each other; it does not proceed on the philosophy that I am my brothers keeper.'" Wilson, supra, 168 N.J. at 251, 773 A.2d 1121 (quoting Original Great Am. Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th Cir. 1992)). We stress that while a commercial party does not have to act with benevolence towards an opposing party, it cannot behave inequitably. [Id. at 231.]

Pathmark agrees that Judge Coyle set forth an accurate recitation of this area of law in his opinion. However, Pathmark contends the evidence establishes that JSM breached the implied covenant of good faith and fair dealing because before its purchase of the shopping center, JSM knew Pathmark had been the anchor tenant since the center opened in 1978, and that Pathmark had a lease substantially below market rents. Pathmark claims that JSM purchased the shopping center for the purpose of becoming the redeveloper and JSM knew its contemplated redevelopment violated Pathmark's lease. Pathmark relies on the clause in the lease that prohibited JSM from doing "ANYTHING" without Pathmark's consent.

Pathmark states that in a meeting in June 2003, JSM outlined its plan in general terms and Pathmark responded that it would not consent. Nevertheless, JSM pushed ahead with negotiation and adoption of the redevelopment plan in February 2004. Pathmark claims that after this meeting, and without notice to Pathmark, JSM proceeded to have Somerville declare the shopping center in need of redevelopment.

However, Pathmark was aware of JSM's intentions and the intentions of Somerville before the declaration. Pathmark is correct that there is an inherent inconsistency with a party's acting as both a landlord and a redeveloper of the same property, but that does not necessarily cause a violation of the covenant of good faith and fair dealing. This is not the only situation in which a company buys a property and then seeks to act as landlord and redeveloper. Pathmark and the public generally were aware of redevelopment plans before JSM entered as buyer of the shopping center and then as the redeveloper for the property. Further, JSM attempted to keep Pathmark as a tenant while redeveloping the shopping center according to Somerville's plans for this area.

The record well establishes the give and take of negotiations between Pathmark and JSM, and JSM's attempts to proceed with the redevelopment and keep Pathmark as the anchor supermarket in this location. Pathmark claims JSM pressured Somerville to offer Pathmark only the value of its trade fixtures and ultimately Somerville caved into this demand and condemned the lease offering only the value of fixtures and equipment. However, the decision to offer no compensation for the remainder of the period of the lease was based on article 34 of the lease that does not provide for compensation for the remainder of the term of the lease when the property is condemned. Therefore, a legitimate basis existed for the decision, derived from a contractual provision to which Pathmark is a party. This decision does not support a finding of bad motive or intention.

Pathmark states that because Somerville can only condemn if JSM as the redeveloper asks for it, JSM's request to condemn (or JSM's acquiescence to a Somerville condemnation) constitutes a breach by JSM of its obligations as landlord. We disagree. Because the lease includes a provision for eminent domain and discusses the taking of property, this type of situation was contemplated and thus condemnation is not inherently a breach of JSM's duty as landlord.

JSM responds that redevelopment of the shopping center was a long-standing goal of Somerville's and it was not orchestrated by JSM. JSM asserts, without any citation to the record, that the redevelopment was an attempt to effectuate Somerville's plans after Somerville's discussions with a prior redeveloper had terminated. Despite the lack of a citation for this fact, there is sufficient evidence in the record showing Somerville's desire to create a town center and redevelop this area.

JSM argues that despite Somerville's long-desired redevelopment of the shopping center, JSM and Somerville tried very hard to keep Pathmark at the shopping center. JSM emphasizes that Somerville and JSM tried to address Pathmark's concerns over parking and construction of a building that would occupy parking spaces. The parties ultimately agreed that the building would be eliminated from initial construction plans, and that it would only be built later if a parking study after completion of the rest of the town center showed adequate parking. JSM points out that Somerville amended the redevelopment plan to show this change. Further, JSM asserts that Somerville wanted retail development on both sides of the extension of Davenport Street. JSM states that it convinced Somerville that such development would be too intensive, so the approved site plan shows development on only one side of Davenport Street.

There is evidence in the record of attempts by JSM to meet the demands of Pathmark. Gutman admitted to Mayor Gallagher in a conversation on October 29, 2004 that Pathmark's professionals had advised him that JSM had adequately addressed most of Pathmark's engineering, phasing, and construction issues. For example, Somerville and JSM agreed that Pathmark employees would receive free parking in the municipal parking deck so they would not occupy the surface deck in front of the Pathmark store.

JSM sets forth elements of the negotiations with Pathmark over parking needs for the supermarket. JSM argues that it acted in good faith and went to extraordinary lengths with Somerville to meet Pathmark's concerns and keep Pathmark in the shopping center.

The implied covenant of good faith and fair dealing is not necessarily breached by a party acting as both landlord and redeveloper. There is sufficient evidence in the record to show that JSM wanted to redevelop and keep Pathmark in its building, and that there was a give and take through negotiations that eventually broke down.

We therefore reject Pathmark's argument that Judge Coyle erred in determining that JSM did not breach the implied covenant of good faith and fair dealing. The judge's finding that JSM did not breach the covenant is amply supported by adequate, substantial and credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).

IV.

Pathmark asserts that Judge Coyle erred in determining that Pathmark did not prove that it lost the ability to assign the lease as a result of improper actions by JSM. Gutman, in charge of all of Pathmark's real estate functions for sixteen years, testified that JSM's actions destroyed Pathmark's unlimited right to assign the lease or sublet. Pathmark claims Judge Coyle erred in finding that Pathmark never attempted to assign or sublease this store, Gutman had no basis to make his assertions, and his opinion was a net opinion.

Pathmark relies on Scully v. Fitzgerald, 179 N.J. 114, 129 (2004), in which the Court held that a fire investigator could render an opinion on the course of a fire. In reaching this conclusion, the Court explained that an opinion based on mere possibility is inadmissible. Id. at 128-29. The Court explained:

N.J.R.E. 703 requires that an expert opinion be supported by facts or data either in the record or of a type usually relied on by experts in the field. The net opinion rule reflects the well-established notion "that an expert's bare conclusions, unsupported by factual evidence, [are] inadmissible." Buckelew v. Grossbard, 87 N.J. 512, 524, 435 A.2d 1150, 1156 (1981). [Id. at 129.]

Under N.J.R.E. 703, information and data described by an expert need not be independently admissible so long as it is "of a type reasonably relied upon by experts in the particular field." The court itself can review the underlying information, to "determine whether the expert's opinion is derived from a sound and well-founded methodology that is supported by some expert consensus in the appropriate field." Landrigan v. Celotex Corp., 127 N.J. 404, 417 (1992).

"The net opinion rule is a prohibition against speculative testimony." Grzanka v. Pfeifer, 301 N.J. Super. 563, 580 (App. Div.) (citing Vuocolo v. Diamond Shamrock Chems. Co., 240 N.J. Super. 289, 300 (App. Div.), certif. denied, 122 N.J. 333 (1990)), certif. denied, 154 N.J. 607 (1997). "Under this doctrine, expert testimony is excluded if it is based merely on unfounded speculation and unquantified possibilities." Vuocolo, supra, 240 N.J. Super. at 300.

The rule requires an expert "to give the why and wherefore" of his or her opinion rather than a mere conclusion. Jimenez v. GNOC, Corp., 286 N.J. Super. 533, 540 (App. Div.), cert. denied, 145 N.J. 374 (1996). Experts "must be able to identify the factual bases for their conclusions, explain their methodology, and demonstrate that both the factual bases and the methodology are scientifically reliable." Landrigan v. Celotex Corp., supra, 127 N.J. at 417. They must be able to point to a generally accepted, objective standard of practice and "not merely to standards personal to the witness." Fernandez v. Baruch, 52 N.J. 127, 131 (1968). If there is no factual basis for an expert's opinion, then it is lacking in foundation and is "worthless." State v. One Marlin Rifle, 319 N.J. Super. 359, 370 (App. Div. 1999).

In Taylor v. DeLosso, 319 N.J. Super. 174, 180 (App. Div. 1999), we said:

[O]pinion testimony "must relate to generally accepted . . . standards, not merely to standards personal to the witness." Fernandez v. Baruch, 52 N.J. 127, 131, 244 A.2d 109 (1968). In other words, plaintiff must produce expert testimony upon which the jury could find that the consensus of the particular profession involved recognized the existence of the standard defined by the expert. Ibid. It is insufficient for plaintiff's expert simply to follow slavishly an "accepted practice" formula; there must be some evidential support offered by the expert establishing the existence of the standard. Buckelew v. Grossbard, 87 N.J. 512, 528-29, 435 A.2d 1150 (1981). A standard which is personal to the expert is equivalent to a net opinion. Crespo v. McCartin, 244 N.J. Super. 413, 422-23, 582 A.2d 1011 (App. Div. 1990).

We discussed an expert opinion in Kaplan v. Skoloff & Wolfe, P.C., 339 N.J. Super. 97, 104 (App. Div. 2001):

[Liability expert, Anthony] Ambrosio failed to render a comparison of similar property settlement agreements, other than one anecdotal reference to a case he had recently handled. Moreover, he failed to provide an analysis of how legal issues would have affected the settlement amount.

In the final analysis, Ambrosio's opinion can be reduced to the bald assertion that if he had represented plaintiff, he could and would have effectuated a more favorable settlement on her behalf. Even if that were so, that does not establish a standard by which to judge defendants' conduct.

The situation here is different from Scully, supra, 179 N.J. at 129, where the Court concluded that a fire investigator had sufficient specialized knowledge and experience in fire investigation and prevention to render an opinion as to the probable cause of a fire. Because the expert's report was based on facts set forth in other reports, interrogatory answers, and deposition testimony, his report did not express a net opinion. Ibid.

Here, Pathmark argues that Gutman has more than sufficient specialized knowledge and experience in retail real estate to render an opinion. Gutman opined that any attempt to assign the lease would have been unsuccessful. However, he offered no analysis or hard evidence that this was, in fact, the case. Thus, this was at best a personal opinion and a standard which is personal to the expert is equivalent to a net opinion. Crespo, supra, 244 N.J. Super. at 422-23.

Gutman admitted that Pathmark made no attempt to assign its lease and that he did not call even one supermarket chain to ask about any interest in taking over the lease. His opinion lacked foundation to support the claim that JSM's actions caused Pathmark to lose the ability to assign the lease.

We find no error in Judge Coyle's determination that Pathmark did not prove that it lost the ability to assign the lease as a result of improper actions by JSM.

Affirmed.

20080624

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