August 13, 2008
MACK-CALI B PROPERTIES, LLC PLAINTIFF-APPELLANT,
NEW PROVIDENCE BOROUGH, DEFENDANT-RESPONDENT.
On appeal from the Tax Court of New Jersey, Docket Nos. 004577-04 & 002825-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 4, 2008
Before Judges Winkelstein, Yannotti and LeWinn.
This is an appeal from an order of the Tax Court dismissing with prejudice plaintiff's complaints challenging defendant's 2004 and 2005 tax assessments upon one of its commercial properties. The dispute giving rise to the dismissal order occurred during the pre-trial discovery period, and related to plaintiff's opposition to defendant's request for production of certain leases.
Plaintiff presents the following issues for our consideration:
POINT I THE TAX COURT JUDGE ERRED IN DISMISSING PLAINTIFF'S COMPLAINT BECAUSE PLAINTIFF FULLY COMPLIED WITH THE TAX COURT'S ORDER OF APRIL 28, 2006
POINT II THE TAX COURT JUDGE ERRED IN FAILING TO FOLLOW THE TWO-STEP PROCESS TO DISMISS WITH PREJUDICE PURSUANT TO R. 4:23-5(a)
POINT III THE INFORMATION SOUGHT WAS PROTECTED BY THE TAXPAYER'S CONSTITUTIONAL RIGHT TO PRIVACY AND AS SUCH SHOULD, AT THE VERY LEAST, HAVE BEEN PROTECTED BY A PROTECTIVE ORDER POINT IV IN THIS CASE, NEW PROVIDENCE HAS FAILED TO TURN SQUARE CORNERS
Having reviewed the entire record, we agree with plaintiff's argument that the Tax Court judge erred in dismissing its complaints with prejudice under Rule 4:23-5(a). Therefore, we reverse, reinstate plaintiff's complaints, and remand for further proceedings.
Plaintiff is the owner and lessor of numerous commercial properties throughout New Jersey. The property that is the subject of this litigation is an 81,600-square foot, multi- tenanted office building located at Block 382, Lot 1, 890 Mountain Road, New Providence, Union County. In 2004 and 2005, defendant assessed that property at $9,079,300. Plaintiff's appraiser valued the property at $8,746,000 in 2004, and at $8,171,000 in 2005.
Plaintiff filed two tax appeals, one in 2004 and the other in 2005. Defendant propounded discovery requests upon plaintiff as to the 2004 assessment on April 19, 2004, and as to the 2005 assessment on May 5, 2005. Both discovery requests sought information and documentation regarding the sales, leasing and construction of office properties owned by plaintiff in Union, Middlesex, Somerset, Morris and Hudson counties. Plaintiff filed responses in May 2004 and May 2005, objecting to those discovery requests as "burdensome and improper."
On March 10, 2006, defendant filed a motion to compel more specific answers to interrogatories, demanding responses to the supplemental interrogatories seeking the disputed lease information. In response, plaintiff asserted that the gathering, copying and transporting of the requested information would be unjustifiably time-consuming and costly. Plaintiff further asserted that defendant should be able to obtain the same information from other data sources. Plaintiff also expressed concern about the use of the requested information for improper purposes and argued that, should defendant's motion be granted, the information provided "should be protected as confidential internal business matters."
Oral argument on defendant's motion to compel discovery occurred via telephone on April 28, 2006. During that argument, the Tax Court judge stated that the requested information was clearly relevant, but also noted that plaintiff had certain "privileges" regarding confidentiality. In an effort to balance the parties' positions, the judge ordered plaintiff to provide a list of the office properties including information regarding sales, leases, size, age and construction of those buildings. The judge further noted that "there may . . . be the need for protective orders or redaction of certain materials, and the parties will . . . deal with that issue and come back to me when it's appropriate, when we know what we want."
At the conclusion of argument, the judge ordered plaintiff to "produce the information outlined by the court[,]" identified as: a list of all Mack-Cali office properties in Union, Middlesex, Somerset, Morris and Hudson Counties (plaintiff has represented there are 63) which shall specify the address, size in square feet, age, and number of leases as well as whether there has been a sale of each property between January 2001 and December 2005 and whether there has been any substantial construction on each property during that time period.
On May 2, 2006, plaintiff provided a list of the properties pursuant to the order. Defendant then requested full copies of the leases for twenty-one of the listed properties. Plaintiff refused to supply copies of full leases, again citing the voluminous nature of the request and confidentiality concerns. Plaintiff wrote to the court requesting a conference call to address these issues. Defendant asserted that a conference call was unnecessary, contending that plaintiff should produce the requested leases in conformance with court's April 28, 2006 order. No conference call took place.
On October 13, 2006, defendant filed a motion to dismiss plaintiff's complaints with prejudice for failure to comply with the court's order, based upon plaintiff's refusal to provide the requested leases. Plaintiff responded that it had fully complied with the court's order and, if required to provide the complete leases, it would seek a protective order.
On November 3, 2006, the Tax Court judge again held oral argument via telephone. Plaintiff contended that it had complied with the court's order and reiterated its concerns regarding volume and confidentiality. Defendant asserted that plaintiff was not entitled to any protection and should produce copies of the leases.
The judge adjourned the motion to allow plaintiff an opportunity to file additional papers substantiating the volume of documents involved and plaintiff's purported need for a protective order. The judge indicated that he would review the papers and schedule further argument.
Plaintiff thereafter filed a letter brief reiterating its prior contentions, including the need for confidentiality. In support of those arguments, plaintiff submitted certifications from its Director of Real Estate Tax and its appraiser. Defendant responded that plaintiff's submission lacked factual and legal support.
On December 29, 2006, without scheduling further argument, the Tax Court judge granted defendant's motion and dismissed plaintiff's complaints with prejudice pursuant to Rule 4:23-5. In an oral opinion, the judge stated that plaintiff appeared to be "attempting to resist any disclosure of information which might lead to relevant evidence, or to make it so difficult and impossible that the defendant will give up." The judge noted that he had deemed the requested information to be relevant and the production of that information was completely within plaintiff's control. The judge also noted plaintiff's failure either to provide a proposed protective order or to file a motion seeking such relief.
The judge stated that he would reinstate plaintiff's complaints if plaintiff would supply the requested leases "that it feels it can disclose. It shall not cite as irrelevant the denial of any lease, and it shall prove [the copying cost to be] burdensome."
Plaintiff contends that the Tax Court judge erred by failing to follow the two-step process for dismissal with prejudice set forth in Rule 4:23-5(a). Specifically, plaintiff contends that the judge failed first to dismiss the complaint without prejudice and to allow plaintiff time to comply fully with the discovery requests, as provided in Rule 4:23-5(a)(1). Defendant contends that the judge was not obligated to follow the two-step process of Rule 4:23-5(a) because the dismissal was pursuant to Rule 4:23-2 for failure to comply with the April 28, 2006 discovery order.
The December 29, 2006 order, prepared by defendant, states that the dismissal was "for failing to comply with the Court's order[.]" However, the Tax Court judge specifically referenced Rule 4:23-5 as the basis for his decision, stating:
Under Rule 4:23-5, failure to comply with discovery leads initially to a dismissal without prejudice. And the non-compliant party has up to 90 days to provide information and seek reinstatement of the case.
At the expiration of the 90 day period, the party seeking discovery may move for [an order] to dismiss with prejudice. And that is, indeed, what the defendant has done in its motion to the Court filed on October 16th, and in which argument was heard in November, as previously discussed in this matter.
It would appear that the [plaintiff] is attempting to resist any disclosure of information which might lead to relevant evidence, or to make it so difficult and impossible that the defendant will give up.
It is the plaintiff who has chosen to bring this suit and it is the plaintiff that must comply with the rules of court and the previous court orders. [Emphasis added.]
The decision to dismiss a complaint with prejudice pursuant to Rule 4:23-5 rests within the sound discretion of the court. Cooper v. Consol. Rail Corp., 391 N.J. Super. 17, 22-23 (App. Div. 2007). An appellate court "will 'decline to interfere with [such] matters of discretion unless it appears that an injustice has been done.'" Id. at 23 (quoting Comeford v. Flagship Furniture Clearance Ctr., 198 N.J. Super. 514, 517 (App. Div. 1983), certif. denied, 97 N.J. 581 (1984)).
It is well settled that discretion means legal discretion, in the exercise of which the judge must take account of the law applicable to the particular circumstances of the case and be governed accordingly. If the trial judge misconceives the applicable law or misapplies it to the factual complex, in total effect the exercise of legal discretion lacks a foundation and becomes an arbitrary act. When this occurs it is the duty of the reviewing court to adjudicate the controversy in light of the applicable law in order that a manifest denial of justice be avoided. [State v. Steele, 92 N.J. Super. 498, 507 (App. Div. 1966).]
Pursuant to Rule 4:23-5(a)(1), if a party fails to comply with a discovery demand and does not move for an extension or a protective order, the party seeking discovery may "move, on notice, for an order dismissing or suppressing the pleading of the delinquent party." If such a motion is granted, counsel for the delinquent party must serve a copy of that order upon the client. Ibid. The delinquent party has ninety days from the date of the order to move to vacate it. Ibid.
If that order is not vacated within ninety days, the party entitled to the discovery may then move for a dismissal with prejudice, under Rule 4:23-5(a)(2). That motion will be granted on the return date unless a motion to vacate was previously filed and either (1) the requested discovery has been fully provided, or (2) "exceptional circumstances are demonstrated." Ibid.; see Universal Folding Box Co. v. Hoboken City, 351 N.J. Super. 227, 233 (App. Div.) (noting that Rule 4:23-5 is applicable to Tax Court proceedings pursuant to Rule 8:6-1(a)), certif. denied, 174 N.J. 545 (2002).
Rule 4:23-5 is intended to elicit information "rather than to punish the offender by the loss of his cause of action or defense." Zimmerman v. United Servs. Auto. Ass'n, 260 N.J. Super. 368, 374 (App. Div. 1992). Recognizing the potentially adverse impact upon litigants, we have often insisted upon strict compliance with the rule's two-step process prior to a dismissal with prejudice. Ibid. "Dismissal with prejudice is prescribed by paragraph (a)(2) of the rule and requires the offended party to make a second motion if answers are not forthcoming within 90 days after entry of the without prejudice order." Id. at 375.
The Tax Court judge correctly articulated the two-step process of Rule 4:23-5(a). However, the judge misapplied the rule. The only order prior to the December 29 dismissal order was that of April 28, 2006, requiring plaintiff to provide certain discovery in response to defendant's motion to compel. Plaintiff complied with that order. The required list was provided to defendant on May 2, 2006.
In his December 29, 2006 decision, the judge reprimanded plaintiff for refusing to supply defendant with copies of the requested leases. However, the April 28, 2006 order imposed no such obligation upon plaintiff. In fact, during the April 28 argument, the judge recognized that defendant may not have the right to discovery of all of the leases it had requested; the judge asked that the parties discuss a protective order.
As of the time of the second argument, on November 3, 2006, those issues had yet to be resolved. In fact, defendant's motion to dismiss was adjourned at that time to afford plaintiff a further opportunity to support its contentions that production of the leases would be unduly burdensome and that confidentiality issues existed.
In the absence of the first step of a dismissal without prejudice, R. 4:23-5(a)(1), plaintiff was deprived of an opportunity to remedy any claimed deficiency. Thus, the Tax Court judge's order of December 29, 2006 failed to follow both the letter and the purpose of Rule 4:23-5.
In support of its motion to dismiss, defendant contended that, pursuant to the April 28, 2006 order, it was entitled to "select which leases it desires," and that plaintiff was "required to produce copies of said leases[.]" However, this misstates the parameters of the court's order. As noted, that order required plaintiff to furnish a "list" of the properties that were the subject of the disputed interrogatories. There is no provision in that order for defendant, upon receipt of that list, to "select" and demand actual leases from plaintiff. In fact, in his ruling, the Tax Court judge anticipated the need for further proceedings once plaintiff produced that list. The judge stated:
The plaintiff also argues the discovery is not meant to be a source of comparable sales and leases that's to be used in other matters . . . . That obviously is not an appropriate use of discovery. There may, indeed, be the need for protective orders or redaction of certain material and the parties will, as I've indicated, deal with that issue and come back to me when it's appropriate, when we know what we want. [(Emphasis added).]
Under the circumstances, we conclude that the trial judge erred by imposing the ultimate sanction of dismissal with prejudice.
[A]chievement of the salutary scheme of the . . . rule requires meticulous attention to its critical prescriptions, and particularly to those provisions which are intended to afford a measure of protection to the party who is faced with the ultimate litigation disaster of termination of his cause. Those provisions were not complied with here, and hence the order of dismissal with prejudice was improvidently granted. [Zimmerman, supra, 260 N.J. Super. at 376-77.]
Even assuming the judge concluded that plaintiff's refusal to produce copies of leases following its compliance with the April 28, 2006 order constituted a failure to comply with discovery, the appropriate procedure at that juncture was a dismissal without prejudice, pursuant to Rule 4:23-5(a)(1).
Plaintiff's remaining arguments "are without sufficient merit to warrant discussion in a written opinion[.]" R. 2:11-3 (e)(1)(E). We add only the following comments.
Plaintiff's contention that the Tax Court judge erred by dismissing the complaints for failure to comply with the April 28, 2006 order misstates the record. Plaintiff clearly complied with the terms of that order. The subsequent dismissal with prejudice was entered pursuant to Rule 4:23-5(a)(2).
Plaintiff's claim that the judge erred by failing sua sponte to enter a protective order governing discovery of the requested leases, ignores the clear directive of Rule 4:10-3, which provides:
On motion by a party or by the person from whom discovery is sought, the court, for good cause shown or by stipulation of the parties, may make any order that justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.] [(Emphasis added).]
Plaintiff's final argument accuses defendant of bad faith by engaging in a "hunt and destroy mission with no other rational basis . . . ." For this reason, plaintiff requests that "any remand order contain a directive that [defendant]. . . give a counter-settlement proposal with reasons." This argument was neither raised before the Tax Court nor addressed in either of the judge's orders and opinions. Therefore, we do not address it here. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
The order of December 29, 2006 is reversed. Plaintiff's complaints are reinstated and the matter is remanded for further proceedings.
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