On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2771-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Stern, Graves and Sabatino.
Plaintiff, Correctional Medical Services, Inc. ("CMS"), appeals from a judgment of the Law Division dated January 30, 2009, dismissing plaintiff's verified complaint against the State of New Jersey and other State defendants,*fn1 without prejudice to plaintiff's right to pursue claims against the State, under the Contractual Liability Act, N.J.S.A. 59:13-1 to -10 ("the CLA"), arising out of the same subject matters. We affirm.
We need not recite at length the pertinent factual and procedural background. In 2004 CMS was awarded a contract with the State to provide health care services to inmates housed in various facilities by the Department of Corrections. The contract had an original term of two years, but was extended for a third year, ultimately running from April 1, 2005 through September 30, 2008. The contract allowed the State to audit CMS's performance, as the vendor of those services, in accordance with the contract's stated terms, as well as under generally accepted standards of care. If the audit results revealed deficiencies in the performance of services, then the contract authorized the State to calculate and deduct liquidated damages from future payments, subject to CMS's right to an administrative review process.
In October 2007, the New Jersey Office of the Inspector General ("OIG") released a report detailing the results of its investigation into apparent discrepancies and contractual non-compliance by CMS, particularly with respect to dental services. The OIG report, in part, prompted the Division of Purchase and Property in the spring of 2008 to decline to exercise the State's option to continue the CMS contract for an additional year. The State ended its relationship with CMS and instead awarded the inmate health services contract to a different provider, the University of Medicine and Dentistry of New Jersey ("UMDNJ"), commencing on October 1, 2008.
In a letter dated July 31, 2008, the Acting Director of the Division of Purchase and Property ("the Division") advised CMS that the State intended to assess the company liquidated damages in the amount of $3,405,979.10,*fn2 as determined by the Division's Contract Compliance and Audit Unit. The Division then began withholding portions of those claimed liquidated damages from periodic installments otherwise owed to CMS under the contract.
CMS disputed the State's findings of irregularities and contractual breaches. It requested the State to cease withholding or deducting from payments due to it. The State declined to do so. Meanwhile, the OIG released a second report in December 2008 detailing additional findings of alleged failures of performance by CMS.
The present litigation began on November 10, 2008, when CMS filed a verified complaint and an order to show cause in the Law Division, styled as an action in lieu of prerogative writs. The complaint contained two counts: the first count challenged the merits of the State's final agency decision to withhold sums for liquidated damages, and the second count alleged due process violations and the unconstitutional taking of CMS's property contrary to 42 U.S.C.A. § 1983 ("Section 1983"). As part of its contentions, CMS alleged that the State had failed to follow certain procedural steps called for under its contract with CMS and pertinent regulations. CMS sought temporary restraints to prevent the State from withholding future payments.
Shortly after filing its initial complaint in the Law Division, CMS filed a notice of claim with the State on November 20, 2008. The notice was filed pursuant to N.J.S.A. 59:13-5, a provision within the CLA which states that "[a]fter the expiration of 90 days from the date the notice of claim is received by the contracting agency, the claimant may file suit in a court of competent jurisdiction of the State of New Jersey." Ibid.
In response to CMS's complaint, the State filed a motion to dismiss, arguing that CMS's claims for money were only cognizable under the CLA, and were not appropriately brought as an action in lieu of prerogative writs or under Section 1983. The State also pointed out that CMS had filed its complaint prematurely, because it had not waited for ninety days after serving its notice of claim as required by N.J.S.A. 59:13-5.
After hearing oral argument, Assignment Judge Linda R. Feinberg granted the State's motion to dismiss, without prejudice to CMS's ability to file a proper action for relief under the CLA. CMS moved for reconsideration, which was denied.
Thereafter, on April 8, 2009, CMS filed a second complaint in the Law Division under a new docket number (L-0904-09), asserting a cause of action against the State for breach of contract under the CLA. On that same day, CMS filed a notice of appeal of the trial court's respective orders granting the State's ...