January 15, 2010
KVL AUDIO VISUAL SERVICES, INC., PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
MICHAEL HACKWORTH, DEFENDANT-RESPONDENT, AND ESPLANADE LIVINGSTON LLC, D/B/A THE WESTMINSTER HOTEL, DEFENDANT-RESPONDENT/CROSS-APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4379-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 9, 2009
Before Judges Sabatino and Lyons.
Plaintiff, KVL Audio Visual Services, Inc. (KVL), appeals a trial court's order granting summary judgment in favor of defendants Michael Hackworth and Esplanade Livingston, LLC, d/b/a Westminster Hotel (the Hotel) on all of KVL's claims, except for its claim for liquidated damages against the Hotel; granting the Hotel $68,544.49 in counsel fees on its offer of judgment; and granting KVL $9,900 as liquidated damages against the Hotel. The Hotel cross-appeals the amount of counsel fees awarded to it. The following factual and procedural history is relevant to our consideration of the issues advanced on appeal.
Plaintiff provides audio-video services in the hotel and conference center industry. The Hotel, which also acts as a conference and banquet center, entered into a written contract with plaintiff on October 17, 2002, in which plaintiff agreed to provide audio-visual rental services to the Hotel's banquet and conference room customers. The contract, drafted by plaintiff, did not give plaintiff the exclusive right to provide the Hotel with audio-visual services. It did, however, require that the Hotel "recommend KVL exclusively for all audio visual equipment and services." The contract, which was effective for a three-year term, commenced on January 1, 2003, and was set to expire on December 31, 2005. The parties agreed that an extension of the contract would require "further agreement" at a later date.
The contract contained a restrictive covenant with respect to the non-solicitation of employees and trade secrets:
10. Non-Solicitation and Trade Secrets: The parties hereto understand and agree that the other party's employment policies and practices, training methods, compensation schedules and methods, marketing techniques, specifications of equipment and services, suppliers, methods of determining its charges, and all forms, contracts and other writings pertaining to any of the foregoing are proprietary and constitute confidential business information (referred to as "Trade Secrets"). Each party further understands and agrees that the unauthorized use or disclosure by either party of the Trade Secrets of the other party could cause such party irreparable harm and injury. Consequently, each party hereto covenants and agrees that for a period commencing as of the date hereof and terminating one (1) year after termination hereof, each party shall not, (except in furtherance of its duties hereunder), whether as a sole practitioner, partner, investor or stockholder, consultant, independent contractor, employer or otherwise:
a. disclose or divulge any of the other party's Trade Secrets;
b. hire or engage or attempt to hire or engage, any individual who is an employee of the other party at the time during the term of this Agreement; or
c. employ or utilize for itself or for the benefit of any other person or business entity, directly of [sic] indirectly, any of the other party's Trade Secrets.
In the event either party breached subparagraph (b) quoted above, the contract provided for a payment of liquidated damages to the non-breaching party: the defaulting party shall pay to the non-defaulting party, thirty percent (30%) of the employee's annual salary . . . . Notwithstanding the foregoing, nothing herein shall preclude either party from pursuing a claim against the other for any actual and/or consequential damages sustained, as a result of a breach of any of the other terms of this agreement.
During the first two years of the contract's term, the Hotel's management staff was dissatisfied with the on-site audio-video managers plaintiff assigned to the Hotel and expressed this dissatisfaction to plaintiff. In June 2004, plaintiff assigned Michael Hackworth, the co-defendant in this case, as the on-site manager. Hackworth was hired by plaintiff on February 10, 2004, with a salary of $33,000 per year. The Hotel management was very pleased with Hackworth's performance.
In November 2005, Kevin Swill, the Hotel's president, instructed Michael Polese, the Hotel's general manager, to review the contracts for all of its outsourced work, including the audio-visual contract with plaintiff, to determine if any of the outsourced functions should be moved in-house. Polese stated during his deposition that, at that time, he had no interest in the Hotel taking in-house its audio-visual work because he was very happy with Hackworth.
In December of 2005, Hackworth expressed to Polese that he was unhappy with his current employment with plaintiff, specifically with regard to his compensation. He kept Polese informed of his negotiations with plaintiff. Polese became concerned that he would lose Hackworth as the on-site audio-visual manager if he left plaintiff's employment.
In mid-December of 2005, Polese contacted plaintiff's executive vice president, Bruce Borland, to discuss the possibility of extending the contract. Polese informed Borland that the Hotel would not renew the contract unless plaintiff could guarantee that Hackworth would remain the on-site manager. Borland stated that he could not promise that but indicated that he would make an attempt to keep Hackworth in his current position. Borland also offered to incorporate a provision into the new contract that would "make it easier" for the Hotel to terminate the contract if Hackworth ever left.
According to Swill, "at the end of '05," he decided not to renew the contract with plaintiff. Swill stated that he based this decision on Polese's audit of the Hotel's outsourced contracts as well as his own research on the cost of retaining plaintiff as the Hotel's audio-visual provider. Swill believed the most cost-effective plan was to bring the audio-visual services in-house.
On December 21, 2005, plaintiff submitted a proposal to the Hotel for a new three-year contract. The Hotel did not respond to the proposal. In January 2006, Polese contacted another audio-visual service provider to discuss the possibility of entering into a contract with them, but the negotiations never progressed beyond the preliminary phase.
In early 2006, during the course of his negotiations with plaintiff concerning his salary, Hackworth created a chart that outlined "all the bills between KVL and the [H]otel" in order to illustrate the various profits and expenses associated with that customer relationship. Hackworth used 2005 data to create a financial "forecast" for plaintiff's business with the Hotel for 2006. Hackworth accessed this data using plaintiff's computer system. He hoped that by showing plaintiff's representatives how profitable the Hotel's contract was, he would be more likely to receive an increase in his pay. Despite Hackworth's efforts, plaintiff refused to increase his pay to his desired amount.
On February 3, 2006, Hackworth contacted Polese via e-mail to inform him that plaintiff had refused to meet his salary demands and that he intended to leave the company. Hackworth formally tendered his resignation on February 21, 2006. When Polese learned that Hackworth had left plaintiff's employment, Polese immediately asked Hackworth if he would be interested in working for the Hotel as part of an in-house audio-visual department. Hackworth told Polese that "if the package [was] good, he would consider it." Polese also asked Hackworth if he had any agreement with plaintiff that would restrict his ability to work for the Hotel. Hackworth responded that he did sign such an agreement but that he believed it only prevented him from working for a competing audio-visual company.
Hackworth had in fact signed a non-compete agreement upon being hired by plaintiff. That contract stated the following:
In the event that you leave the employ of KVL, you agree to respect the confidentiality of the foregoing types of information pertaining to our business, including not accepting employment by or rendering services to any other business competing with KVL within a fifty mile radius of KVL's Westin Morristown location, for a period of one year. Within said period: you agree not to do business with any KVL customer for your own account while in our employ or for one year thereafter. You further agree not to induce any customer of KVL to terminate its relationship with us and not to disclose any confidential or proprietary information such as the identity of customers, the principal contact in position of authorize who gives or has given business to KVL, customers of the Company, their credit worthiness and other information relating to KVL's customers, business and manner of operations.
Hackworth was never able to produce a copy of the non-compete agreement. Ultimately, plaintiff provided the contract during a meeting with the Hotel in September 2006.
The Hotel made Hackworth a formal offer of employment on March 6, 2006, which he accepted. Hackworth's salary was set at $55,000. His work as an employee of the Hotel was the same as the work he performed while employed by plaintiff.
Hackworth testified at his deposition that he did not take anything, other than his personal belongings, from plaintiff when he left. He specifically stated that he did not share any of plaintiff's employment forms or manuals with the Hotel upon being hired. However, after Hackworth started in his new position, the Hotel management asked him what he estimated the 2006 profits would be for the in-house audio-visual department. In response, Hackworth gave the Hotel the chart he created which outlined plaintiff's profits from the Hotel's contract.
On May 23, 2006, plaintiff filed its complaint against Hackworth and the Hotel. Plaintiff asserted the following causes of action against both parties: fraud and conspiracy to convert business; conspiracy to commit conversion; breach of contract and the implied covenant of good faith and fair dealing; unjust enrichment; tortious interference with economic advantage; unfair competition; and constructive trust. Plaintiff also asserted the following causes of action against Hackworth individually: conversion; breach of the duty of loyalty; and misappropriation and disclosure of confidential and proprietary information.
In response to the Hotel's interrogatories, plaintiff identified the following "confidential proprietary trade secrets" it claimed Hackworth divulged to the Hotel, in contravention of his employment contract:
a. Employee handbook
b. Customer lists
c. Rental contract software
d. Various company licensed software such as Office 2003, Windows 2003, Norton Antivirus, Spysweeper, etc.
e. Purchase orders
f. Estimate template
g. Knowledge of vendors and pricing
h. Rental contract terms, language, etc.
i. Company e[-]mail account
j. Hotel pricing brochure
k. Knowledge of AV Equipment specific to Hotel Operations
l. Knowledge and lists of KVL office locations, warehouses, etc.
m. Various KVL forms such as time sheets, equipment transfer paperwork, credit memo's, employee application, application waiver form, employee references, DMV background check authorization, technical survey, KVL Census form, I-9 Employment eligibility verification, payroll record, 4-4 [sic], direct deposit form, theft policy, Internet and Electronic Communications Use policy and handbook acknowledgment letter
n. Wage information for Freelance employee's [sic] and names
o. Hotel contract and knowledge of terms[.] Hackworth testified at his deposition that he did not take any "tangible" property from plaintiff, including any documents or forms.
On December 16, 2006, the Hotel filed an offer of judgment in the amount of $20,000 with the Superior Court Clerk, in accordance with Rule 4:58. Plaintiff never accepted the offer.
The trial court set the discovery end date as September 18, 2007. On October 4, 2007, the Hotel filed a motion for summary judgment seeking dismissal of plaintiff's complaint. On October 19, 2007, Hackworth also filed a motion for summary judgment seeking the dismissal of plaintiff's claims. On November 1, 2007, plaintiff filed a cross-motion for summary judgment against the Hotel and Hackworth on liability.
Judge Donald S. Goldman rendered his decision on November 16, 2007. The judge explained that there were two main aspects to plaintiff's complaint: (1) that the Hotel breached paragraph 10(b) of its contract with plaintiff by hiring Hackworth within one year of the termination of plaintiff's contract with the Hotel; and (2) that Hackworth breached his employment contract by going to work for the Hotel within one year of his termination of employment with plaintiff.
Regarding plaintiff's argument that Hackworth breached his non-compete agreement, Judge Goldman found that the non-compete agreement at issue only limited Hackworth's employment by plaintiff's competitors, not customers. The judge then held that "[t]he undisputed facts establish that the Hotel is not a competitor of KVL. The Hotel is in the hospitality industry, [and] doesn't offer audio[-]visual services as its primary form of business or in any way to people other than persons staying at or utilizing its facilities." As such, the judge determined that Hackworth's employment by the Hotel was not restricted.
Judge Goldman found plaintiff's claim that Hackworth converted plaintiff's confidential information was likewise unfounded but held that, "even if [Hackworth did share confidential information], KVL was not harmed thereby" because the Hotel was free to hire whomever it chose to provide its audio-visual services once plaintiff's contract expired. The judge further found that the liquidated damages clause in plaintiff's contract with the Hotel illustrated that plaintiff contemplated losing its employees to the Hotel in the future. Based on this, Judge Goldman granted Hackworth's motion for summary judgment and granted partial summary judgment in favor of the Hotel, dismissing all of plaintiff's claims against it, except the claim for liquidated damages based on the Hotel, hiring Hackworth contrary to its contract with plaintiff. Plaintiff's cross-motion for summary judgment was denied.
On December 6, 2007, the Hotel filed a motion for summary judgment to establish the quantum of liquidated damages as $9,900. On December 17, 2007, plaintiff cross-moved for summary judgment, contending that it was entitled to a higher amount of damages.
On January 18, 2008, Judge Goldman denied both motions without prejudice. At plaintiff's request, the court re-opened discovery through February 15, 2008, for the limited purpose of determining whether there were any negotiations between the parties regarding the liquidated damages provision in the contract at issue. The parties agreed during a March 13, 2008 case management conference to present the issue of liquidated damages during a plenary hearing.
On April 10, 2008, the parties submitted joint "stipulated facts" to the trial judge. The plenary hearing commenced on April 17, 2007.
Judge Goldman heard oral argument on the issue of liquidated damages on April 17, 2007. The Hotel argued that damages should be based on thirty percent of Hackworth's former salary from plaintiff, which was $33,000 per year. Plaintiff asserted that the liquidated damages clause contemplated that damages should be based on the employee's current salary, in this case, the $55,000 Hackworth earned per year from the Hotel. Judge Goldman entered an order on July 15, 2008, setting plaintiff's liquidated damages at $9,900, which equaled thirty percent of Hackworth's salary while employed by plaintiff.*fn1
On May 30, 2008, the Hotel filed an application for attorney's fees and costs in the amount of $107,463.86, pursuant to the offer-of-judgment rule, Rule 4:58. Plaintiff opposed the motion. The Hotel later submitted further proof of fees on June 16, 2008, increasing the amount of attorneys' fees to $99,633.51, plus $12,634.98 in litigation costs, for a total of $112,268.49. Judge Goldman heard oral arguments on that motion on June 24, 2008, and determined that the Hotel was entitled to counsel fees but reserved judgment on the amount, thereby allowing plaintiff to file an opposition brief.
Plaintiff filed an opposition brief on July 3, 2008, in which it argued that the Hotel inflated the amount of time necessary to perform specific legal work. After reviewing the Hotel's submission, Judge Goldman found that much of the work the attorneys billed was "duplicative." Some work, such as "arranging the file and compiling documents" could have been performed by secretaries or paralegals with a lower billing rate, but the Hotel's attorneys performed the work themselves. The judge also found that many of the descriptions for the time billed were vague and unclear. As such, the judge opted to "deduct 20% for the hours spent" working on the case prior to the order granting summary judgment on November 17, 2007. Judge Goldman reduced the hours by fifty percent for all post-summary judgment work. This reduced the total amount of counsel fees to $57,946.50.
Judge Goldman also found the Hotel's counsel had over-billed for certain costs, such as charging $5.00 to send a facsimile. As such, the judge reduced the total amount of costs to $10,597.99.
On July 15, 2008, having reduced the Hotel's requested amount of attorneys' fees to $57,946.50 and the costs to $10,597.99, the judge entered an award of $68,544.49 to the Hotel.
Plaintiff filed a notice of appeal on August 25, 2008. The Hotel filed a cross-appeal on September 5, 2008, on the issue of the attorneys' fees awarded in Judge Goldman's July 15, 2008 order.
On appeal, plaintiff presents the following arguments for our consideration:
THE COURT IMPROPERLY GRANTED SUMMARY JUDGMENT IN FAVOR OF HACKWORTH. IF ANYTHING, THE ADMITTED FACTS REQUIRED A GRANT OF SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF
THE COURT IMPROPERLY GRANTED SUMMARY JUDGMENT IN FAVOR OF THE HOTEL. IF ANYTHING, THE ADMITTED FACTS REQUIRED A GRANT OF SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF
Defendant's Argument is premised on a Negative Mr. Hackworth's Annual Salary includes His Entire Compensation package The liquidated Damage Provision Was Intended to Serve as a Disincentive to the Defaulting Party Construction of the Operative Provision Required an Analysis of the Party's [sic] Intention and the Surrounding Circumstances The liquidated Damage Provision, at the Very Least was Intended to Service [sic] as a Disincentive, Not a Reward to the Defaulting Party
HACKWORTH'S RESTRICTIVE COVENANT WAS ENFORCEABLE
Hackworth Breached his Duty of Loyalty Hackworth Tortuously [sic] Interfered with KVL's Economic Advantage
THE WESTMINSTER HOTEL WAS NOT ENTITLED TO COUNSEL FEES AS A RESULT OF ITS OFFER OF JUDGMENT
Rule 4:58-3(c)(1)(2) Precludes an Award of Fees on an Offer of Judgment Where a Litigant's Claim is Dismissed Westminster's Offer of Judgment was for Plaintiff's Entire Claim, the Bulk of Which as [sic] Dismissed Defendant's Unclean Hands Preclude an Award of Counsel Fees Rule 4:58-3 Precludes an Award of Counsel Fees to Defendant Rule 1:1-2 Provides authority for this Court to Otherwise Entertain Defendant's Request for Counsel Fees In its cross-appeal, the Hotel raises the following arguments for our review:
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT REDUCED THE AMOUNT OF ATTORNEYS' FEES AND COSTS REQUESTED BY THE HOTEL PURSUANT TO THE OFFER OF JUDGMENT RULE, R. 4:58-3.
A. The Trial Court Erred When It Reduced The Hourly Rate Submitted By Counsel In The Fee Application.
B. The Trial Court Erred By Eliminating Fifty Percent Of The Hours Expended By Counsel After The Hotel's First Summary Judgment Motion Was Granted.
C. The Trial Court's Remaining Reductions To The Hotel's Fee Award Are Unsupported By The Record, And Amount To Reversible Error.
D. The Specific Objections Raised By Plaintiff To The Amount Of Hours Expended By The Hotel's Counsel Only Required, If Fully Sustained By The Trial Court Would Only Have Required A Reduction of $11,682.00.
E. The Hotel Is Entitled to Additional Attorneys' Fees and Costs Totaling $28,692.75 As A Result Of The Instant Appellate Proceedings.
Based upon our thorough review of the record, the briefs submitted, and the arguments of counsel, we affirm the judgment entered by Judge Goldman substantially for the reasons set forth by him in his oral and written decisions. We note the following in further support of our affirmance.
We use the same standard as the trial court when deciding a summary judgment motion. Jolley v. Marquess, 393 N.J. Super. 255, 267 (App. Div. 2007); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment may be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c).
Plaintiff argues that there were two genuine issues of material fact that should have precluded summary judgment in favor of Hackworth and partial summary judgment in favor of the Hotel. According to plaintiff, these issues are: (1) "the intention of the parties at the time the agreement was constructed" with regard to whether Hackworth and plaintiff intended for the non-compete clause to include customers; and (2) whether plaintiff and the Hotel intended for the liquidated damages clause in their service contract to refer to thirty percent of the employee's salary with plaintiff or the employee's new salary with the Hotel. We discern no facts in the record that support any of plaintiff's arguments.
Judge Goldman held that Hackworth did not violate his employment contract with plaintiff by going to work for the Hotel because that contract only restricted his ability to work for "any other business competing with KVL within a 50 mile radius" of its Westin Morristown location. The trial judge found that the Hotel was not a "competitor" because it did not provide audio-visual services and was not in the same industry as plaintiff. As such, Judge Goldman granted Hackworth's motion for summary judgment.
Plaintiff contends that Hackworth's non-compete agreement "needed to be interpreted so as to give meaning to the document." Plaintiff argues that, because Hackworth's employment by the Hotel essentially nullified the Hotel's need for an outside contractor to provide audio-visual services, Hackworth's actions damaged plaintiff far more than if he simply went to work for a "competitor." Plaintiff asserts that "[b]y concluding the Employment Agreement was only meant to prevent Hackworth from going to work for another audio visual firm, [the court] interpreted the agreement in a manner that rendered the covenant virtually worthless."
There are no disputed issues of material fact with regard to Hackworth leaving plaintiff's employment and going to work for the Hotel. Therefore, the issue that required resolution was one of contract interpretation, and we must decide whether the trial court's ruling on the law was correct.
Because non-compete agreements are, by definition, anticompetitive, the courts tend to take a narrow view when interpreting such contracts. Marvin Goldstein & Stanley Goodman, 18 New Jersey Practice: Employment Law, § 11.3 at 363 (2d ed. 2005). The cardinal rule in the interpretation of any contract is to "ascertain and give effect to the common intention of the parties so far as it may be effectuated without infringing legal principles." Corn Exch. Nat'l Bank & Trust Co. v. Taubel, 113 N.J.L. 605, 608-09 (E. & A. 1934). However, "where the parties have composed a written memorial of their bargain, the intent that controls is that expressed or apparent in the writing." Medivox Prods., Inc. v. Hoffmann-LaRoche, Inc., 107 N.J. Super. 47, 55 (Law Div. 1969) (quoting Moscowitz v. Middlesex Borough B. & L. Ass'n, 18 N.J. Super. 182, 186 (App. Div. 1952)). The parties are normally bound by the language employed regardless of some different intent or divergent understanding entertained by either party. Ibid. "[C]court[s] will not write a new contract for the parties or vary, enlarge, alter or distort its terms for the benefit of one to the detriment of the other under the guise of judicial interpretation." Camden Bd. of Educ. v. Alexander, 181 N.J. 187, 197 (2004) (quoting Standard Refinery Union, Inc. v. Esso Standard Oil Co., 31 N.J. Super. 548, 552 (App. Div. 1954)).
In this case, the language used by plaintiff in the non-compete clause was not ambiguous. It clearly stated that Hackworth is restrained from working for "any other business competing with KVL." Plaintiff defines its business as "providing audio[-]visual equipment and services for meetings, conferences and affairs, primarily to hotel guests pursuant to contract with hotels to offer Plaintiff's services to the hotel's patrons." Thus, plaintiff's clients are the hotels themselves, not the hotel guests who are the end user of plaintiff's audio-visual services. The Hotel did not seek to provide audio-visual services to other hotels. It merely sought to provide audio-visual services within its own facility to its own customers. As such, the Hotel was clearly not in competition with plaintiff. Plaintiff is simply attempting to have the court "re-write" its contract because it did not bargain for a specific clause regarding employment by Hotel customers. The plain language of the contract, even in light of the circumstances at the time the agreement was entered into, does not support the expansion of the restrictive clause's scope as significantly as plaintiff seeks.
Plaintiff's complaint alleged that because of defendant's conduct, "KVL lost its reasonable expectation of the economic advantage in that the business of KVL was lost and KVL did not realize the full amount of profits from its business." Plaintiff thus alleges that Hackworth "interfered" with the Hotel's renewal of plaintiff's contract to provide audio-visual services. Plaintiff also generally alleges that the Hotel interfered with Hackworth's employment contract. We agree with Judge Goldman's reasoning in rejecting these claims.
In this case, plaintiff's claims against both Hackworth and the Hotel are clearly not supported by the record. With regard to Hackworth, plaintiff cannot claim that Hackworth "interfered" with his own employment contract by resigning from plaintiff's employ and going to work for the Hotel. If Hackworth breached his employment agreement in some way, the appropriate remedy would be in contract law, not tort. Mandel v. UBS/PaineWebber, Inc., 373 N.J. Super. 55, 80 (App. Div. 2004), certif. denied, 183 N.J. 213 (2005). Further, based on the facts in this case, it is clear that plaintiff did not have a "reasonable expectation of economic advantage" with the Hotel. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 751 (1989).
The Hotel had implicitly rejected plaintiff's attempts to renew the contract, and therefore, Hackworth's employment by the Hotel as the in-house audio-visual manager was irrelevant to plaintiff's business relationship with the Hotel. As such, the alleged "interference" did not "cause the loss of the prospective gain." Ibid.
As to plaintiff's claim of tortious interference against the Hotel, it was clearly established that the Hotel did not "lure" Hackworth away from his position with plaintiff. As such, there was no "interference" by the Hotel. There was also no indication in the record that Hackworth breached any duty of loyalty to plaintiff by going to work for the Hotel. As the Hotel is not a competitor of plaintiff, Hackworth did nothing to harm plaintiff's business. Further, there is nothing to indicate that any trade secrets had been disclosed. Many of the items pointed to by plaintiff do not even qualify as trade secrets.
The pricing information which the Hotel obtained from Hackworth does not give rise to a claim for providing a competitor with trade secrets. The billing information belonged to the Hotel, and hence, Hackworth did not provide the Hotel with anything that it did not have in its own financial records.
We find no merit with respect to the remaining arguments of plaintiff with respect to its claims against Hackworth and the Hotel. R. 2:11-3(e)(1)(A),(E).
As we have already noted, the liquidated damages clause in the contract between plaintiff and the Hotel stated that should either party breach the agreement and hire an employee within one year of the contract's expiration, "the defaulting party shall pay to the non-defaulting party, thirty percent (30%) of the employee's annual salary." The Hotel has never contested that it breached its contract with plaintiff by hiring Hackworth within a year of the contract's expiration. As such, plaintiff made an offer of judgment to plaintiff on December 16, 2006, in the amount of $20,000, in accordance with Rule 4:58. Plaintiff never accepted the offer.
Plaintiff argued that the liquidated damages clause required the breaching party, in this case the Hotel, to pay thirty-percent of Hackworth's current salary in his new position. Plaintiff also argued that the term "salary" encompassed not only Hackworth's "base" salary, but also the value of Hackworth's "medical benefits, 401k savings plan and annual bonus incentive plan." As such, plaintiff asserted that it was entitled to thirty percent of Hackworth's $55,000 salary plus thirty percent of the added value of his benefits, not Hackworth's $33,000 salary from when he was employed by plaintiff. Judge Goldman rejected this argument and entered the July 15, 2008 order that set plaintiff's liquidated damages at $9,900, thirty percent of Hackworth's salary while employed by plaintiff. Plaintiff now appeals.
The crux of plaintiff's argument on this issue is that the liquidated damages clause was meant to act as a "disincentive" to the defaulting party. Therefore, plaintiff argues, the contract implicitly called for the court to apply the subject employee's new salary, which plaintiff argues would have to be higher in order to "lure" that employee from his current job. Plaintiff also argues that the very term "salary" is ambiguous, because it could be interpreted to mean an employee's "base" pay or his pay after yearly bonuses and commissions. As with plaintiff's argument concerning Hackworth's employment contract and its applicability to customers, plaintiff asserts that the trial court did not consider "the intention of the parties" based on "the language used in the instrument as a whole" as well as the "situation of the parties, the attendant circumstances, and the objects they sought to attain." Great Atl. & Pac. Tea Co., Inc. v. Checchio, 335 N.J. Super. 495, 501 (App. Div. 2000).
Plaintiff's argument is one of contract interpretation. As stated above, the touchstone for the interpretation of any contract is to ascertain and "give effect to the common intention of the parties so far as it may be effectuated without infringing legal principles." Corn Exch. Nat'l Bank, supra, 113 N.J.L. at 608-09. However, the intent that the parties express in their "written memorial of their bargain" controls. Medivox, supra, 107 N.J. Super. at 55. In other words, the obligation of a contractor depends upon his expressed, not his actual, intention. See ibid. Importantly, the court will not make a better contract for the parties than the one they bargained for. Levin v. Frishman, 73 N.J. Super. 324, 330 (App. Div. 1962).
Unlike Hackworth's employment agreement, which Judge Goldman determined was clear and unambiguous, the liquidated damages clause in plaintiff's contract with the Hotel is arguably susceptible to more than one interpretation. "Generally, the terms of an agreement are to be given their plain and ordinary meaning . . . [b]ut when the terms of the [agreement] are susceptible to at least two reasonable alternative interpretations, the language is ambiguous." Highland Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J. 99, 123 (2006) (internal quotation and citation omitted). We have recognized that "[w]here an ambiguity appears in a written agreement, the writing is to be strictly construed against the draftsman." In re Estate of Miller, 90 N.J. 210, 221 (1982) (citing Terminal Constr. Corp. v. Bergen County Hackensack River Sanitary Sewer Dist. Auth., 18 N.J. 294, 302 (1955)).
The term "salary" in the parties' liquidated damages clause could arguably apply to Hackworth's annual pay while working for plaintiff or his annual pay while working for the Hotel. However, plaintiff drafted the agreement between itself and the Hotel. Had plaintiff wanted to ensure that Hackworth's salary at the Hotel as the subsequent employer applied to the liquidated damages clause, then plaintiff, as the drafter of the agreement, could have included such language. Plaintiff did not do so and, in accordance with the precepts of contract interpretation, Judge Goldman interpreted the subject clause against plaintiff. Estate of Miller, supra, 90 N.J. at 221. We agree with his analysis.
Plaintiff's argument that the term "salary" referred to Hackworth's "total compensation package," including his bonuses and benefits, is likewise unfounded. Plaintiff cites Black's Law Dictionary 1337 (6th ed. 1990), which defines salary as "a reward or recompense for services performed. [Salary is] [a] stated compensation paid periodically as by the year, month, or fixed period, in contrast to wages which are normally based on an hourly rate." Plaintiff also cites Black's Law Dictionary's definition of "fixed salary," which is "[o]ne which is definitely ascertained and prescribed as to amount and time of payment, and does not depend upon the receipt of fees or other contingent emoluments . . . ." Id. at 638. Plaintiff argues that the Hotel agreed to pay thirty percent of the employee's "annual salary," not plaintiff's "fixed annual salary." Therefore, plaintiff argues that benefits and bonuses should have been included in Judge Goldman's calculation.
Our Supreme Court has defined the term "salary" to mean "monies received by a person on a fixed and continuous basis, i.e., normally paid in regular periodic intervals in specific regular amounts." Koribanics v. Bd. of Educ. of Clifton, 48 N.J. 1, 6 (1966); Wilson v. Bd. of Trs. of the Police and Firemen's Ret. Sys., 322 N.J. Super. 477, 481 (App. Div. 1998). "This is the commonly understood meaning of the term." Siri v. Bd. of Trs. of the Teachers' Pension and Annuity Fund, 262 N.J. Super. 147, 156 (App. Div. 1993) (quoting Koribanics, supra, 48 N.J. at 6). Thus, under the plain reading of that definition, the term "salary" does not encompass bonuses or other forms of compensation that are not "fixed." In holding that bonuses are not part of an employee's salary for pension benefit purposes, we stated that the term "bonus" has "been recognized in our case law as 'something given or paid in addition to the usual or expected.'" Chapel v. Bd. of Trs. of the Pub. Employees' Ret. Sys., Div. of Pensions, 258 N.J. Super. 389, 393 (App. Div. 1992) (quoting In re Estate of Gregoriou, 142 N.J. Super. 465, 468 (Cty. Ct. 1976), rev'd on other grounds, 153 N.J. Super. 44 (App. Div. 1977)).
While plaintiff has argued that the definition of "salary" contained in Black's Law Dictionary is applicable, clearly the Supreme Court has already created and applied its own definition which does not include bonuses and benefits. New Jersey courts have historically interpreted the word "salary," standing alone, to mean "base" salary. Siri, supra, 262 N.J. Super. at 156; Chapel, supra, 258 N.J. Super. at 393. Moreover, the ordinary meaning of the word "salary" is one's fixed rate of pay. The term certainly does not traditionally include health benefits or bonuses for exemplary work performance.
Plaintiff contends that the Hotel was not entitled to counsel fees pursuant to the offer-of-judgment rule because plaintiff's complaint was ultimately dismissed. Plaintiff argues that "this Court may not entertain a request for an award of counsel fees pursuant to the clear mandate of [Rule 4:58-3](c)(1) . . . which precludes an award of fees where a litigant's claim is dismissed for no cause." In the alternative, plaintiff also asserts that the Hotel's motion for attorney's fees should have been rejected because it willfully violated its contract with plaintiff, and therefore had "unclean hands." Plaintiff also argues that it should not be ordered to pay counsel fees due to the "hardship" it will create.
The offer-of-judgment rule "creates a bright, monetary line in determining when fees will or will not be shifted." Kas Oriental Rugs, Inc. v. Ellman, 407 N.J. Super. 538, 549 (App. Div. 2009), certif. denied, ___ N.J. ___ (Oct. 14, 2009). Its purpose "was intended as a procedural mechanism to facilitate the settlement of cases." Wiese v. Dedhia, 188 N.J. 587, 593 (2006). The Rule states:
Except in a matrimonial action, any party may, at any time more than 20 days before the actual trial date, serve on any adverse party, without prejudice, and file with the court, an offer to take a monetary judgment in the offeror's favor, or as the case may be, to allow judgment to be taken against the offeror, for a sum stated therein (including costs). The offer shall not be effective unless, at the time the offer is extended, the relief sought by the parties in the case is exclusively monetary in nature.
The consequences of non-acceptance are spelled out in Rules 4:58-2 and 4:58-3. Both rules provide that if the judgment is within a twenty percent margin of error, the party whose offer was rejected is entitled to attorney's fees and actual litigation expenses incurred after the date of non-acceptance unless a stated exception to the Rule applies. See Sovereign Bank v. United Nat'l Bank, 359 N.J. Super. 534, 542 (App. Div.), certif. denied, 177 N.J. 489 (2003).
Specifically, if the claimant receives a "favorable determination," with regard to the offeror, the offeror will be entitled to: (1) the costs of the suit; (2) all reasonable litigation expenses incurred following non-acceptance; (3) prejudgment interest of eight percent on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later; and (4) a reasonable attorney's fee, "which shall belong to the client, for such subsequent services as are compelled by the non-acceptance." R. 4:58-2(a). Rule 4:58-3(b) defines a "favorable determination" as one that is eighty percent of the offer or less, excluding prejudgment interest and counsel fees.
The Rules make it clear that a fee allowance is appropriate if its terms are met and the amount of the fee is to be fixed by the court upon consideration of the relevant circumstances. Dedhia, supra, 188 N.J. at 592-93. The offer-of-judgment rule does not apply when "the claimant's claim is dismissed." R. 4:58-3(c). The fee allowance may also be waived if it "would impose undue hardship" on the claimant. Ibid.
Plaintiff's assertion that its case was dismissed is not supported by the record. On December 15, 2006, the Hotel made plaintiff an offer of judgment in the amount of $20,000 "on all claims" asserted in the matter. Plaintiff rejected the offer. Upon the Hotel's summary judgment motion, Judge Goldman dismissed all of plaintiff's claims against the Hotel except for plaintiff's claim for liquidated damages on the issue of the Hotel hiring Hackworth. Therefore, plaintiff's claim against the Hotel was not dismissed in its entirety. The liquidated damages claim was never dismissed. In fact, plaintiff won on that issue when Judge Goldman entered a judgment in its favor in the amount of $9,900.
Plaintiff's actual judgment was less than fifty percent of the $20,000 the Hotel offered. Therefore, the Hotel received a "favorable determination" pursuant to the offer-of-judgment rule, and Judge Goldman was required to award the Hotel attorney's fees and costs. Dedhia, supra, 188 N.J. at 592-93. As such, plaintiff's argument that the offer-of-judgment rule actually barred an award of attorney's fees is incorrect and should be rejected. Plaintiff's remaining arguments on this point are without merit. R. 2:11-3(e)(1)(E).
As we have previously stated, the Hotel requested counsel fees in the amount of $99,633.51 and costs in the amount of $12,634.98. During oral argument regarding this issue, plaintiff only addressed whether the Hotel was entitled to counsel fees pursuant to the offer-of-judgment rule, arguing that there was no basis for a fee award because its claim had been dismissed. Plaintiff did not address the reasonableness of the Hotel's fees. Judge Goldman held that the Hotel was entitled to counsel fees pursuant to the offer-of-judgment rule and permitted plaintiff to file an opposition brief on the quantum on those fees, which it did.
Upon reviewing the Hotel's certifications in support of its fee application, Judge Goldman found that much of the work the attorneys billed was "duplicative" and that many of the descriptions for the time billed were vague and unclear. Therefore, Judge Goldman "deduct[ed] 20% for the hours spent" working on the case prior to the order granting summary judgment. All post-summary judgment work was reduced by fifty percent by the judge. Judge Goldman also considered the rates for the Hotel's counsel, which ranged from $325 per hour to $250 per hour. The judge reduced those rates to a "blended rate" of $225 per hour. The total total amount of counsel fees was reduced to $57,946.50.
The Hotel argues that plaintiff's July 3, 2008 opposition brief did not address the specific rates of the attorneys, and therefore, the judge had no authority to reduce those rates "sua sponte." The Hotel also argues that the judge's finding that the work was duplicative and not consistently cost-effective is not supported by the record and should therefore be reversed.
The decision to award counsel fees rests "within the sound discretion of the trial court" and will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion. Shore Orthopaedic Group, LLC v. Equitable Life Assurance Soc'y of the U.S., 397 N.J. Super. 614, 624 (App. Div. 2008), aff'd, 199 N.J. 310 (2009).
The Hotel argues that, despite this broad discretion, Judge Goldman did not have the authority to reduce the hourly rate of the Hotel's attorneys because plaintiff did not specifically challenge those rates. In support of this contention, the Hotel cites federal precedent but fails to point to any New Jersey case law. See Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990); Bell v. United Princeton Props., Inc., 884 F.2d 713, 719 (3d Cir. 1989). It does not appear that there is any case law from this State to support such a proposition.
Despite the Hotel's arguments to the contrary, our Rule for calculating attorneys' fees implicitly suggests that the judge has discretion to modify counsel fee requests. Rule 4:42-9(b) states that "all applications for the allowance of fees shall be supported by an affidavit of services addressing the factors enumerated by R.P.C. 1.5(a)." Twp. of W. Orange v. 769 Assocs., LLC, 198 N.J. 529, 542 (2009). The fact that an affidavit must be submitted to the court suggests that the judge has the discretion to modify the fees as necessary in order to comport with R.P.C. 1.5(a), which prescribes that "[a] lawyer's fee shall be reasonable." See Glen v. June, 344 N.J. Super. 371, 381-82 (App. Div. 2001) (holding that the filing of a conforming affidavit is ordinarily a prerequisite to an allowance under the Rule).
Moreover, our Supreme Court has held that when a motion for counsel fees and costs is properly presented, the trial court must exercise its discretion within careful confines to determine the 'lodestar'--that is, the number of hours reasonably expended multiplied by a reasonable hourly rate--and then determine whether any adjustments to the product are required." [R.M. v. Supreme Court of N.J., 190 N.J. 1, 4 (2007).]
Thus, the trial court is specifically called upon to make a determination regarding the reasonableness of the hourly rate billed every time it makes a decision regarding a counsel fee award.
In his written decision, Judge Goldman noted that he "cannot blindly accept submissions of counsel to support the lodestar amount. Instead I must carefully and critically evaluate the specific hourly rates advanced." The judge then looked at the experience level for each of the Hotel's attorneys and, after considering the average rates for comparable legal counsel, assigned them an hourly rate of $225. Based on Rule 4:42-9(b) and the above-referenced case law, the judge was required to make such a evaluation of the fee and he acted within his discretion in making such a reduction.
Lastly, the Hotel argues that it should be entitled to counsel fees in the amount of $28,692.75 associated with this appeal. Rule 2:11-4 states that:
[a]n application for a fee for legal services rendered on appeal shall be made by motion supported by affidavits as prescribed by R. 4:42-9(b) and (c), which shall be served and filed within 10 days after the determination of the appeal. The application shall state how much has been previously paid to or received by the attorney for legal services both in the trial and appellate courts or otherwise.
Compensation for appellate services are within the jurisdiction of the appellate court. R. 2:11-4; Trocki Plastic Surg. Ctr. v. Bartkowski, 344 N.J. Super. 399, 407 (App. Div. 2001), certif. denied, 171 N.J. 338 (2002). The Appellate Division also has the discretion to remand to the trial court an authorization for the trial court to award counsel fees for appellate services.
However, our discretion to award counsel fees on appeal "was not meant to take the place of Rule 4:58-2, which serves the unique and particular purpose of imposing financial consequences on parties who unwisely reject an offer of settlement and insist on a trial." Dedhia, supra, 188 N.J. at 593. The Supreme Court has held that "all costs as a result of the rejection of an offer of judgment, including those incurred in Appellate Division and Supreme Court proceedings, fall within the scope of Rule 4:58-2." Id. at 593-94.
Based on this, it is appropriate to grant the Hotel attorney's fees pursuant to the offer-of-judgment rule for the additional fees incurred associated with opposing plaintiff's appeal. The amount of such an award, however, shall not include any fees associated with challenging the trial judge's reduction in the Hotel's attorney's fees because that determination was within the trial judge's discretion and those fees were not expended in connection with plaintiff's rejection of the Hotel's Offer of Judgment. The Hotel's attorneys, if they wish to be awarded attorney's fees on appeal, shall file a motion, together with a new detailed affidavit of services, within thirty days of the filing of this opinion.