September 25, 2008
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-1383-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 8, 2008
Before Judges Lisa, Reisner and Alvarez.
Defendant J.E.G. appeals from a February 2, 2007 trial court order granting summary judgment to the State and imposing $72,500 in civil penalties and $48,500 in counsel fees under the Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30. He also appeals from a June 24, 2005 order dismissing his counterclaim against the State*fn1 and from orders dated September 23, 2005 and October 31, 2005, denying his motions for reconsideration.
We affirm the order dismissing defendant's counterclaim. We reverse the order granting summary judgment on the State's penalty claim, vacate the monetary judgment, and remand this matter to the trial court to hold an evidentiary hearing on whether the State waived civil penalties as part of a plea bargain resolving related criminal charges against defendant. If the State did not waive the civil penalties, the court must nonetheless reconsider the amount imposed, employing the standards set forth in Kimmelman v. Henkels & McCoy, 108 N.J. 123 (1987).*fn2
This case has a long and complicated history which includes two prior remands from this court to the trial court. We set forth the history in some detail in our previous opinion in State v. J.E.G., Docket No. 1274-03 (App. Div. September 24, 2004). To summarize, defendant pled guilty to second-degree theft by deception, N.J.S.A. 2C:5-1, 2C:20-4, in connection with a series of staged automobile accidents and fraudulent insurance claims.
Defendant made his plea agreement with the Attorney General's Office of Insurance Fraud. As part of the plea agreement, which was signed on September 25, 2002, the parties clearly agreed that civil penalties under the Insurance Fraud Prevention Act would be resolved as part of the criminal plea agreement. The State's attorney also made a representation to that effect to the judge at the plea hearing. To that end, the State agreed to resolve its civil penalty claim for $50,000, an amount defendant was then willing to pay as part of a global resolution of the State's criminal and civil charges against him. In fact, in a later certification, Janice Lucas, a civil investigator employed by the Office of the Insurance Fraud Prosecutor, attested that her office gave to the criminal prosecutor in charge of the criminal case a copy of a proposed consent order to be used to resolve the civil penalties.
After the plea allocution, but before sentencing, defendant began cooperating with a different agency of the Attorney General's Office. During the course of that cooperation he put his life in jeopardy and rendered very valuable assistance to the State. As a result, the State eventually agreed to recommend to the judge in the theft by deception case that defendant receive a probationary sentence, provided defendant continued his cooperation.
However, when defendant appeared for sentencing on September 19, 2003, the judge questioned whether there was in fact a binding agreement for a probationary sentence and questioned the legality of sentencing defendant to probation for a second-degree crime. The State had refused to enter into a new plea agreement to allow defendant to plead to a third-degree crime. As a result, despite his extensive cooperation with the State, at peril to his life and safety, defendant was sentenced to seven years in prison. At that same sentencing hearing, defendant declined to pay the $50,000 civil penalty since he was clearly not getting the benefit of his plea agreement.
At the end of the sentencing hearing, the State's criminal attorney specifically asked the judge to also impose the civil penalty, arguing that "Your Honor certainly has the jurisdiction as a superior court judge to impose [the civil penalty]." Defense counsel did not object but asked for a hearing on defendant's ability to pay. After the judge requested briefing on the issue of the penalty amount, the State sent the court and defense counsel a letter on October 17, 2003, withdrawing "its request that civil insurance fines, pursuant to N.J.S.A. 17:33A-5, be imposed as part of the defendant's sentence for his conviction" and indicating that the State would "consider pursuing any such fines in a separate civil proceeding." Defendant appealed the seven-year sentence.
While the appeal was pending, the State filed a civil complaint on March 8, 2004, seeking penalties for violations of the Insurance Fraud Prevention Act. By this time, defendant was incarcerated and pro se; he was served with the complaint in prison, and attempted to file a pro se answer on or about September 29, 2004. His answer included a statement of affirmative defenses and a counterclaim.
On September 24, 2004, we reversed and remanded the criminal case to the trial court for an evidentiary hearing at which defendant would have an opportunity to "establish the nature of any promises the State made in exchange for his continued cooperation after the entry of his plea." In reaching our decision we noted the apparent "lack of coordination or communication among the several attorneys involved" in the case (slip op at 3 n.1). We also recognized that defendant had risked his life to cooperate with the State, and we emphasized the State's obligation to "turn square corners," even with criminal defendants, and to honor its plea agreements. (slip op. at 10).
The hearing on remand began on October 13, 2004, with testimony from a State investigator who confirmed the great value of defendant's cooperation and his understanding that the State would agree to recommend a probationary sentence. Prior to the second day of the hearing on November 3, 2004, the State and defendant reached a revised plea agreement whereby defendant would plead to a third-degree offense and receive probation, conditioned on his continued cooperation in certain unrelated criminal cases. During the hearing, the court indicated that "[t]he . . . renegotiated plea form mentions the maximum and the maximum includes a $7500 fine. I take it that's not a part of the plea agreement though?" The prosecutor replied, "No. That's correct, Your Honor." The State's attorney did not mention that the State was seeking any other monetary penalty. The judge also confirmed that there would be a $50 Violent Crimes assessment, $75 Safe Streets assessment, and $30 LEOPA assessment.
In May 2005, the State filed a motion in the civil case seeking to dismiss defendant's counterclaim and to strike his affirmative defenses. Because the motion relied on extensive certifications and other evidence outside the pleadings, it was in fact a motion for summary judgment. See R. 4:6-2. In opposition to the motion, defendant, acting pro se, filed a certification setting forth his understanding that the State had waived the civil penalty as part of the November 2004 resolution of the criminal case. He explained that "[a]t the remand hearing, the State offered to meet its original representations; however, the State made no mention of the civil judgment being executed this time," as it had at the first plea hearing in 2003. Therefore, defendant "assumed that the State had waived the civil penalty in view of the fact that I had risked my life in the undercover operations and the State did not mention that a civil penalty was part of the re-negotiated plea."
The motion was argued on June 24, 2005, with defendant arguing pro se. By order dated that same day, the Law Division judge dismissed defendant's counterclaim and, significantly, struck defendant's affirmative defense based on his claim that the State waived the penalties as part of the November 2004 criminal plea bargain. Defendant moved for leave to appeal. In a decision and order filed June 5, 2006, we granted leave to appeal only as to the affirmative defense issue. We summarily reversed the portion of the order striking the affirmative defenses. While we rejected the trial judge's conclusion that the affirmative defenses were subject to the Tort Claims Act, we also clearly indicated that, as to the affirmative defense, there were material factual issues that made summary judgment inappropriate:
Defendant's defense is that the civil penalty now sought by the State was implicitly waived by the State as part of defendant's post-remand plea agreement in the criminal proceeding. Such a defense is not an affirmative cause of action subject to the Tort Claims Act, and raises questions of fact that preclude summary disposition.
Notwithstanding our 2006 decision and order, the State once again moved for summary judgment on its civil penalty complaint. In his opposition to the motion, defendant filed another certification asserting once again his understanding, based on the 2002 and 2004 negotiations, that the State waived the civil penalties. He also certified that he had a then-pending motion "seeking discovery which is necessary for me to establish my defense that the State waived the civil penalties."*fn3 Reasoning that once defendant had been served with the State's March 2004 civil complaint, he could not assume that the State had waived its civil penalty claim as part of the November 2004 criminal plea bargain, the judge concluded that summary judgment was appropriate. The trial court then imposed very substantial civil penalties and counsel fees without specifically considering whether the amounts were reasonable.
On this appeal, defendant raises the following points for our consideration:
I. THE TRIAL COURT ERRED BY REFUSING TO FOLLOW THE APPELLATE DIVISION RULING THAT DEFENDANT'S DEFENSE OF THE STATE'S WAIVER RAISES QUESTIONS OF FACT THAT PRECLUDE SUMMARY JUDGMENT.
II. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN THE ORDER OF FEBRUARY 2, 2007 SINCE THERE WERE NO MERITORIOUS GROUNDS.
A. Defendant's Waiver Defense Does Not Lack Merit As A Matter Of Law.
B. The State Was Not Entitled To Judgment Against Defendant Since There Are Material Issues Of Fact.
C. The Court Erred In Awarding Civil Penalties Based On All Of The Relevant Circumstances.
III. THE TRIAL COURT ERRED IN DISMISSING DEFENDANT'S COUNTERCLAIM IN THE ORDER OF JUNE 24, 2005.
IV. THE TRIAL COURT ERRED IN STRIKING DEFENDANT'S AFFIRMATIVE DEFENSES.
Our review of a trial court's decision granting summary judgment is de novo using the same standard employed by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We first determine whether the evidence on the motion presented genuine issues of material fact, and if none existed, whether the trial court's legal conclusions were correct. Ibid. In conducting this analysis, it is fundamental that the motion evidence must be construed in the light most favorable to the non-moving party. Brill, supra, 142 N.J. at 540; Agurto v. Guhr, 381 N.J. Super. 519, 525 (App. Div. 2005). We also bear in mind that, absent exceptions not present here, our decision of an issue is the law of the case and binding on the trial court on remand. See Baker v. National State Bank, 353 N.J. Super. 145, 170-71 (App. Div. 2002).
Having carefully reviewed the entire record, we conclude that, giving defendant the benefit of all favorable inferences from the evidence, there were material disputes of fact as to whether the State implicitly waived its claim for civil penalties when it failed to assert the claim in the course of negotiating the second plea bargain.
We also conclude that the most relevant evidence was already before us in the record when we rendered our June 5, 2006 order remanding this matter to the trial court with direction that material factual disputes precluded summary disposition. We appreciate that the trial court was at a disadvantage because defendant's counsel did not appear for the oral argument of the motion, and therefore the court heard a one-sided presentation, and because defendant's submissions could have been more artfully drafted. However, we also conclude that the law of the case doctrine should have led the court to hold an evidentiary hearing on the waiver issue rather than granting summary judgment. See Baker, supra, 353 N.J. Super. at 170; Slowinski v. Valley Nat'l Bank, 264 N.J. Super. 172, 179-80 (App. Div. 1993)(quoting State v. Hale, 127 N.J. Super. 407, 410-11 (App. Div. 1974)).
As illustrated by our factual discussion, the State's current contention that it could not have sought civil penalties in the criminal proceeding, without defendant's consent to resolve them in that context, is beside the point. The State's reliance on State v. McLaughlin, 310 N.J. Super. 242 (App. Div.), certif. denied, 156 N.J. 381 (1998), is therefore misplaced. It is apparent from the earliest hearing in this matter, in 2002, that the State had sought to resolve the civil penalty claim in the criminal action and defendant had consented to that procedure. Moreover, given the prior negotiations in which both the civil and criminal matters were resolved at the same time, defendant could reasonably have understood that the post-remand negotiations in 2004 included the State's civil claims.
During the November 2004 plea hearing, the trial judge mentioned a possible $7500 fine, which the State indicated it would not seek; significantly, the State's attorney did not indicate that the State was not looking to collect the $7500 because it intended to collect civil penalties in a separate action. Moreover, by the time of the November 2004 hearing, defendant had already served more than a year in prison in a case in which both sides had agreed he would receive probation. Finally, because the State had previously sought to resolve both the civil and criminal penalties together, through one deputy attorney general, defendant may reasonably have understood that the attorney who appeared on the State's behalf on November 2004 was appearing for purposes of resolving all of the State's claims.
We emphasize that we are not deciding the merits of defendant's waiver claim. We are only deciding, consistent with our June 5, 2006 order, that the evidence viewed in the light most favorable to defendant raises a material dispute of fact on the waiver issue. Defendant is, therefore, entitled to complete discovery on that issue and to have an evidentiary hearing.
Moreover, as the State conceded at oral argument, if the trial court determines that the State did not waive its civil penalty claim, the trial court must consider whether the amounts sought are reasonable. In Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123 (1987), the Court delineated a series of seven factors to be considered in determining the reasonableness of a proposed civil penalty. As the State concedes, the court did not articulate its consideration of any of theses factors in setting the penalty. Significantly, among the Kimmelman factors is the following:
Existence of criminal or treble damages actions. The court should consider whether the conduct underlying the civil action also has given rise to a criminal action . . . .
A large civil penalty may be unduly punitive if other sanctions have been imposed for the same violation [Id. at 139.]
This factor may weigh heavily in this case, because defendant not only rendered valuable and risky service to the State, but also served more than a year in prison despite the State's agreement to a probationary sentence.
Finally, we turn to defendant's contention that the trial court erred in dismissing his counterclaim. Defendant's arguments on this point are without sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E), beyond the following comments. The crux of the counterclaim is that the prosecution failed to honor the plea bargain and thereby caused defendant to spend time in prison. However, it was the trial judge who declined to sentence defendant to probation. The prosecution could not bind the trial judge to impose a particular sentence, see State v. Kovack, 91 N.J. 476, 484-85 (1982); Sheil v. N.J. State Parole Bd., 244 N.J. Super. 521, 528-29 (App. Div.), certif. granted, 126 N.J. 320, appeal dismissed, 126 N.J. 308 (1991), and defendant's remedy, as here, was to appeal the sentence or to seek to withdraw his plea. Defendant cites no authority for a novel tort cause of action based on a prosecutor's failure to abide by a plea agreement. We affirm the dismissal of defendant's counterclaim.
Affirmed in part, reversed and remanded in part.