May 1, 2009
INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL NO. 68 WELFARE FUND, PLAINTIFF-RESPONDENT,
ASTRAZENECA PLC; ASTRAZENECA PHARMACEUTICALS LP; ASTRAZENECA LP; ZENECA, INC.; TAP PHARMACEUTICAL PRODUCTS, INC.; ABBOTT LABORATORIES; TAKEDA CHEMICAL INDUSTRIES, LTD; G.D. SEARLE COMPANY; SANOFI-SYNTHELABO, INC.; JOHNSON & JOHNSON; ALZA CORPORATION; CENTOCOR, INC.; ORTHO BIOTECH, INC.; ALPHA THERAPEUTIC CORPORATION; HOFFMAN LA-ROCHE INC.; AVENTIS PHARMACEUTICALS, INC.; AVENTIS BEHRING L.L.C.; HOECHST MARION ROUSSEL, INC.; BOEHRINGER INGELHEIM CORPORATION; BEN VENUE LABORATORIES, INC.; BEDFORD LABORATORIES; ROXANNE LABORATORIES, INC.; NOVARTIS INTERNATIONAL AG; NOVARTIS PHARMACEUTICAL CORPORATION; WYETH; WYETH PHARMACEUTICALS, DEFENDANTS-APPELLANTS, AND BAYER AG; BAYER CORPORATION; MILES LABORATORIES, INC.; CUTTER LABORATORIES, INC.; GLAXOSMITHKLINE, P.L.C.; SMITHKLINE BEECHAM CORPORATION; GLAXO WELLCOME, INC.; PHARMACIA CORPORATION; PHARMACIA & UPJOHN, INC.; MONSANTO COMPANY; AMGEN, INC.; IMMUNEX CORPORATION; CENTEON, L.L.C.; ARMOUR PHARMACEUTICALS; BAXTER INTERNATIONAL INC.; BAXTER HEALTHCARE CORPORATION; IMMUNO-U.S., INC.; BRISTOL-MYERS SQUIBB COMPANY; ONCOLOGY THERAPEUTICS NETWORK CORPORATION; APOTHECON, INC.; DEY, INC.; FUJISAWA PHARMACEUTICAL CO., LTD.; FUJISAWA HEALTHCARE, INC.; FUJISAWA USA, INC.; SANDOZ PHARMACEUTICAL CORPORATION; SCHERING-PLOUGH CORPORATION; WARRICK PHARMACEUTICALS CORPORATION; SICOR, INC.; GENSIA SICOR PHARMACEUTICALS, INC.; SAAD ANTOUN, M.D.; STANLEY C. HOPKINS, M.D.; ROBERT A. BERKMAN, M.D., DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-3136-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 17, 2009
Before Judges Winkelstein, Fuentes and Gilroy.
On leave granted, defendants appeal from an order of the Law Division denying their motion to dismiss plaintiff's putative class action complaint with prejudice for failure to comply with class certification discovery, and granting plaintiff's motion to vacate the previously entered dismissal without prejudice and to reinstate the complaint. We affirm.
On June 30, 2003, plaintiff, International Union of Operating Engineers, Local No. 68 Welfare Fund (the Welfare Fund), filed a class action complaint alleging that defendants, pharmaceutical companies, engaged in a fraudulent scheme and conspiracy that caused plaintiff and others similarly situated to overpay for certain prescription drugs. The trial court entered an order appointing a Special Master, Retired Judge William G. Bassler, to "facilitate the resolution of existing and future disputes between and among the parties." The court ordered that all discovery disputes between the parties be resolved by Judge Bassler, who had the authority to recommend discovery schedules, supervise compliance with discovery obligations, and make rulings on all discovery disputes. The court also authorized Judge Bassler to decide any other matters by consent of the parties or as referred by the court.
On November 12, 2007, pursuant to Judge Bassler's recommendation, the trial court entered a case management order, requiring the parties to complete class certification fact discovery by February 29, 2008. To comply with that order, defendants served plaintiff with a notice of deposition for February 5, 2008. The notice required plaintiff to designate "one or more officers, directors, managing agents or other persons to testify on [plaintiff's] behalf." Defendants also served separate deposition notices for three of plaintiff's executives, including its president, Dennis Giblin, noticing his deposition for February 25, 2008.
On February 1, 2008, not having received a response to their request for production of documents previously served on plaintiff, defendants postponed the corporate designee deposition to February 13, 2008. Defendants also requested that plaintiff provide them with the names of the witnesses expected to testify as to each topic identified in the deposition notice. In letters dated February 6 and 7, 2008, defendants again requested plaintiff to respond to their request for production of documents and identify the corporate designees who would be deposed on February 13, 2008. Still having received no response, defendants advised plaintiff on February 8, 2008, that they would proceed with the February 13, 2008, deposition, despite not having received responses to their discovery requests or plaintiff's identification of the corporate designee. On February 12, 2008, without defendants' consent, plaintiff's counsel adjourned the deposition.
At a February 14, 2008, discovery conference, plaintiff's counsel told Judge Bassler that plaintiff was also represented by separate defense counsel in a criminal investigation, and that plaintiff's criminal defense attorney indicated to plaintiff's counsel that it may be impossible for plaintiff to comply with certain discovery requests. Accordingly, plaintiff's counsel advised Judge Bassler that he had "good reason to believe that Local 68 will be withdrawing from [the] case as lead plaintiff." Plaintiff would then "seek a stay of all matters pending so as to allow for an opportunity for lead plaintiff counsel to amend the pleadings to substitute in . . . an acceptable lead plaintiff before . . . we go any further." Judge Bassler ordered a moratorium on all document production until February 19, 2008, and ordered plaintiff's counsel to inform him and the parties by that date as to whether plaintiff would remain in the case as lead plaintiff.
The parties and Judge Bassler reconvened on the latter date. Plaintiff's counsel told him that plaintiff would "seek to be substituted out as the named representative," and counsel would proceed with a motion to stay the case pending an application to substitute the named representative plaintiff for the class action. Judge Bassler continued the moratorium on the exchange of discovery pending plaintiff's motion for a stay.
On February 26, 2008, plaintiff filed a motion for a stay of discovery for ninety days "to fully evaluate the situation and undertake the best course of action, including substituting the named class representative plaintiff if necessary to protect the interests of the putative class." Defendants responded with a motion to dismiss the complaint based on plaintiff's failure to comply with discovery. A class had not been certified as of the date of defendants' motion. On March 28, 2008, the trial court granted plaintiff's motion for a stay, allowing an additional sixty days from the date of the court's order on defendants' motion to dismiss.
During oral argument on the motion to dismiss, the court identified two grounds for defendants' motion: plaintiff's withdrawal from the case and plaintiff's failure to comply with discovery. Defendants argued that plaintiff failed to produce a witness for the corporate designee deposition, or Dennis Giblin, the president of the Welfare Fund. Although plaintiff claimed that it was "ready and prepared" to produce a representative to respond to defendants' corporate designee deposition notice, it did not do so. Plaintiff continued to refuse to produce Dennis Giblin for a deposition. Plaintiff's counsel admitted that defendants were entitled to depose Giblin, but advised the court that Giblin's criminal defense attorney "advised us that we should put a hold on this," as Giblin was apparently a target of a federal investigation. As a result of plaintiff's failure to produce Giblin to be deposed and comply with discovery, on April 11, 2008, the court granted defendants' motion to dismiss without prejudice. The court stated that plaintiff could move to reinstate the complaint if, within ninety days, it complied with defendants' discovery demands and paid $300.
On July 9, 2008, plaintiff moved to vacate the court's April 11, 2008 order dismissing the complaint without prejudice, and to reinstate the complaint. Although plaintiff had not produced Giblin for a deposition, plaintiff represented in its motion that two other unions, Local 690 and Local 322, had "agreed to act as a class representative and to fully participate in all aspects of litigation, including discovery." Plaintiff argued that the complaint should be reinstated and the dismissal order vacated because the two new proposed class representatives "intend[ed] to and [would] provide the outstanding class discovery."
Defendants filed their opposition to plaintiff's motion to vacate the dismissal and, pursuant to Rule 4:23-2(b) and Rule 4:23-4, filed a cross-motion to dismiss plaintiff's complaint with prejudice. Defendants argued that more than ninety days had passed since the April 11, 2008 order had been entered, and that plaintiff failed to cure the discovery deficiencies. Defendants further asserted that the purported substitute class representatives were not parties to the case, and defendants had not served discovery on them.
The trial court granted plaintiff's motion to vacate the dismissal order and to reinstate the complaint and denied defendants' motion to dismiss the complaint with prejudice. In so ruling, the court relied on Rule 4:23-5, making the following findings:
The rule we're dealing with is [Rule] 4:23-5. I already dismissed it without prejudice pursuant to [Rule 4:23-5a(1)]. Therefore, the rule I'm now dealing with, with respect to whether it's with prejudice or I vacate it, is based upon [Rule] 4:23-5[a](2). An order of dismissal without prejudice has been entered pursuant to [a](1), which is what I've done in April, and . . . the party entitled to discovery may, and this is the defendants, may after expiration of 90 days from the date of the order, move on notice for an order of dismissal with prejudice. And that's what the defendants have done in this case.
Now, the last sentence of that rule reads as follows. The motion to dismiss with prejudice shall be granted, not may be granted, shall be granted unless a motion to vacate the previously entered order of dismissal without prejudice has been filed by the delinquent party, which has been done, and either the demanded and fully responsive discovery has been provided, which it hasn't been, or exceptional circumstances are demonstrated.
The court found exceptional circumstances to exist as the "case has been going on for years" and "a lot of years and lot of efforts, motions, time, expense would indeed be lost" should the case be dismissed on a "technical procedural ground."
Although we do not fully endorse the trial court's reliance on Rule 4:23-5(a)(2) as a basis to reinstate the complaint, we do not find that the court's order reinstating plaintiff's complaint was an abuse of discretion.
"The dismissal of a party's cause of action, with prejudice, is drastic and is generally not to be invoked except in those cases in which the order for discovery goes to the very foundation of the cause of action, or where the refusal to comply is deliberate and contumacious." Abtrax Pharms. v. Elkins-Sinn, 139 N.J. 499, 514 (1995) (quoting Lang v. Morgan's Home Equip. Corp., 6 N.J. 333, 339 (1951)).
"The varying levels of culpability of delinquent parties justify a wide range of available sanctions against the party violating a court rule. . . . If a lesser sanction than dismissal suffices to erase the prejudice to the non-delinquent party, dismissal of the complaint is not appropriate and constitutes an abuse of discretion." Georgis v. Scarpa, 226 N.J. Super. 244, 251 (App. Div. 1988). Appropriate sanctions for a breach of discovery rules must be just and reasonable. Conrad v. Robbi, 341 N.J. Super. 424, 441 (App. Div.) (quotation omitted), certif. denied, 170 N.J. 210 (2001). The dismissal of a claim for failure to comply with discovery is the "last and least favorable option."
Il Grande v. DiBenedetto, 366 N.J. Super. 597, 624 (App. Div. 2004).
Whether to grant or deny a motion to reinstate a complaint lies within the sound discretion of the trial court. Sullivan v. Coverings & Installation, Inc., 403 N.J. Super. 86, 93 (App. Div. 2008). An appellate court will decline to interfere with such matters of discretion unless it appears that an injustice has been done. Ibid. Guided by these principles, we conclude that the court did not abuse its discretion in reinstating plaintiff's complaint.
The court initially dismissed plaintiff's complaint without prejudice pursuant to Rule 4:23-2, for plaintiff's failure to comply with an order to make discovery. Specifically, plaintiff failed to produce corporate representatives for depositions. When a party fails to attend a deposition, Rule 4:23-4 provides that the court may make such orders "as are just," including, but not limited to, those authorized pursuant to Rule 4:23-2(b), which includes an order "dismissing the action or proceeding or any part thereof with or without prejudice." R. 4:23-2(b)(3).
The court subsequently ordered that the complaint be reinstated. That order too was just, given that class certification was still pending, and that plaintiff proffered that other unions were willing to become class representatives, and those unions would comply with defendants' discovery requests.
Although plaintiff did not produce Giblin for his deposition as the class representative, in its motion to vacate the dismissal order, plaintiff proffered two alternative plaintiffs to act as the class representative and "to fully participate in all aspects of litigation, including discovery." In considering plaintiff's proffer during the argument on defendants' motion to dismiss without prejudice, the court expressed its interest in preserving years of litigation effort that the parties had already expended, explaining that it did not "want this to start all over again if there's been stuff done for six years that applies to this case, I want it to be able to continue with some new plaintiff if they find one." Defense counsel represented to the court that "if the claims [by the new class representative] were the same . . . there would be no reason to have to redo [discovery]."
Thus, the court did not abuse its discretion in deciding that plaintiff's failure to produce Giblin for a deposition was cured by plaintiff's proffer of two substitute class representatives who would provide the class certification discovery demanded by defendants. And, as plaintiff points out, the requested discovery related to class certification, not the merits of the class action; thus, the corporate designee of the substitute class representative could provide the requested discovery.
That said, although Rule 4:23-5 is not, by its own terms,*fn1 specifically applicable to a dismissal based upon Rule 4:23-2(b), nothing in the rule precludes that analysis from being applied in a situation like the one we face here.
The underlying purpose of Rule 4:23-5 also supports the trial court's decision to apply the rule in this case. "[T]he main objective is to compel the [discovery] answers rather than to dismiss the case . . . ." Pressler, Current N.J. Court Rules, comment 1.1 on R. 4:23-5 (2009) (quoting Report of the Committee on Civil Practice, 125 N.J.L.J. Index page 421 (1990)). Moreover, "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." Zimmerman v. United Services Auto Ass'n, 260 N.J. Super. 368, 376-77 (App. Div. 1992). Thus, the "critical prescriptions" of the rule relate not to the specific discovery deficiency at issue, but to the procedural steps to be followed before imposing "the ultimate litigation disaster," ibid., that is, an order dismissing a complaint with prejudice. Consequently, the trial court did not abuse its broad discretion relying on the provisions of Rule 4:23-5 to analyze whether to reinstate plaintiff's complaint.
Defendants next argue that even if Rule 4:23-5(a)(2) is applicable, the court erred in finding exceptional circumstances to justify reinstating the complaint. We disagree.
Rule 4:23-5(a)(2) provides that a motion to dismiss with prejudice shall be granted unless the delinquent party files a motion to vacate and either fully responds to the demanded discovery or demonstrates exceptional circumstances. To show exceptional circumstances, "there would have to be proved the existence of external factors (such as poor health or emergency) which substantially interfered with the party's ability to meet the discovery obligations. A mere showing of ordinary 'good cause' would not be sufficient." Rodriguez v. Luciano, 277 N.J. Super. 109, 112 (App. Div. 1994) (quoting Suarez v. Sumitomo Chemical Co., 256 N.J. Super. 683, 688-89 (Law Div. 1991)).
Although a reviewing court may reach a different result than the motion judge, "there is some breadth of discretion encompassed within the 'exceptional circumstances' language of the rule." Martin Glennon, Inc. v. First Fidelity Bank, N.A., 279 N.J. Super. 48, 54 (App. Div.), appeal dismissed, 142 N.J. 510 (1995). In Martin, we held that the trial court did not abuse its discretion in finding exceptional circumstances where the discovery deficiency resulted from counsel of record's reliance on an attorney retained by the insurance carrier to conduct discovery who was later fired for inaction. Id. at 53-54. We explained that although it was the attorney of record's responsibility to supervise discovery, the deficiency was more than an administrative problem within the attorney's office. Id. at 53. Although we admitted that we may have reached a different result, we concluded that the motion judge acted within his discretion in reinstating the defendant's answer, especially where granting the motion did not materially affect the outcome of the case. Id. at 54.
A similar result is warranted here. The trial court found exceptional circumstances to exist, recognizing that plaintiff's president was subject to a potential criminal indictment. As such, plaintiff could not function as the class representative. Further, the court found that because the class had not been certified, plaintiff's dismissal from the class would result in dismissal of the entire potential class. The court's ruling was intended to avoid this result and prevent the loss of years of litigation and expense by all of the parties involved. It was not an abuse of the court's discretion to find exceptional circumstances where dismissing the complaint with prejudice would require the parties to begin anew a class action that had already been through six years of litigation.
Defendants' remaining arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
In sum, we affirm the trial court's order reinstating plaintiff's complaint and we remand for further proceedings.