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Walters v. Breathless 2000


July 23, 2010


On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-3130-07.

Per curiam.


Submitted June 22, 2010

Before Judges Carchman and Parrillo.

Defendants Breathless 2000 (Breathless) and Christofis Kontos appeal from an order of the Law Division confirming an arbitration award in favor of plaintiff William Walters and denying their motion for leave to file a demand for trial de novo out of time. Additionally, defendant Kontos argues that the judgment against him must be set aside because plaintiff's amended complaint adding him as a named defendant was barred by the statute of limitations and the arbitrator made no finding of his liability. We affirm in part and reverse and remand in part.

On September 4, 2007, plaintiff filed a complaint against Breathless, a gentlemen's club in Rahway, ABC Corp. 1-10, and John Does 1-10, seeking recovery for injuries suffered from a slip and fall in the men's restroom of the facility on December 18, 2005. Plaintiff alleged he slipped on a slick substance that smelled like cleaning fluid in the men's restroom. The complaint alleged defendants negligently and carelessly owned, leased, managed, controlled, possessed, repaired, occupied, operated and/or maintained the [] premises so as to cause a dangerous condition, namely a slipper[y] substance and/or water on the bathroom floor, to exist thereon creating a hazard to exist as a result of which [p]laintiff [] was caused to fall and sustain serious personal injuries.

The complaint further alleged defendants "negligently and carelessly failed to make proper and timely inspections" of the premises, particularly the bathrooms. Breathless answered on November 5, 2007.

On November 11, 2008, almost a year after the statute of limitations expired, plaintiff moved for leave to amend his complaint to add Kontos, Breathless' principal shareholder, as a defendant. Plaintiff also sought to add a second claim alleging that Kontos (and/or Breathless) "negligently supervised, trained and/or hired its employees by failing to properly and adequately supervise, instruct, manage and/or train its employees regarding proper cleaning protocol, bathroom maintenance, cleaning and/or general maintenance." The Law Division granted plaintiff's motion.

Thereafter, the matter proceeded to compulsory arbitration, pursuant to Rule 4:21A-1(a)(2), on March 19, 2009, and the arbitrator awarded $500,000 in damages against "Breathless[.]" The "Report and Award of Arbitrator(s)" (Award) does not list Kontos as a defendant in the case caption, refer to him in the brief statement of reasons, nor assess any liability against him. The Award simply lists "Breathless" as the defendant, includes only that party under the party listing of defendants, and attributes 100% liability to "Breathless" alone. The Award states:

Plaintiff a [p]atron and invitee in defendant's bar. Goes to the bathroom and slips and falls on a wet substance on the floor of a stall. Said it smelled like a cleaning fluid. There was a bathroom attendant in the bathroom area. Fracture to left hip, necessitating a left hip anthroplasty, left [indiscernible]. Medical bills over [$]200,000. Medicare lien. Judgment for plaintiff $500,000.00.

According to defendants, their counsel's paralegal sent a demand for trial de novo to the Union County's civil division manager, by regular mail, on April 17, 2009, which is one day prior to the expiration of the thirty-day deadline set by Rule 4:21A-6(b)(1) and Rule 1:3-1.*fn1 In fact, the thirty-day period actually ended the next business day after Saturday, April 18, 2009, which was Monday, April 20, 2009. Defendants claim the United States Postal Service (USPS) returned the envelope on April 28, 2009, seven business days later, bearing the mark "insufficient postage." In this regard, the paralegal's certification states:

6. The envelope was returned by the postal service advising for insufficient postage [sic]. The notice was initially mailed within the time permitted by R. 4:21A-6(b)(1). The office[']s postal meter machine indicated that the postage was correct[.] [T]his device is a sealed unit and indicates the postage to be applied. The postal meter machine is unlike the devices of some years ago where one would first place the item on [a] mechanical scale and then read the weight and then read down a chart and then apply postage from a sheet of stamps or dial the postage from a USPS postal meter machine.

8. Our bookkeeper received the returned envelope from the Woodbridge Post Office on Tuesday, April 28, 2009 and placed the returned item in a new envelope and again sent it to the Court. Unfortunately, I was not aware that the mailing was returned because I was out of the country. When I returned I was advised by the Court that they received our demand for trial de novo out of time and the[y] were not accepting it because it was late. I advised that I did, in fact, send same on time, however, they would not accept it. . . .

Moreover, defense counsel's bookkeeper certifies: "I opened the envelope, took out the contents and addressed a new envelope and sent it out to the court on April 28, 2009 . . . Unfortunately, I was unaware as to the time sensitivity of the contents of the envelope, and I did not keep the original envelope that was marked insufficient postage." Apparently, plaintiff's counsel never received service of the demand within the thirty-day period as required under Rule 4:21A-6(b)(1).

Accordingly, on April 23, 2009, plaintiff moved to confirm the arbitration award, and on May 5, 2009, defendants cross-moved for leave to file a demand for trial de novo out of time, claiming that the office postage meter had indicated that the postage was correct. In granting plaintiff's motion to confirm and denying defendants' cross-motion for relief, the judge reasoned:

In this instance, for the purposes of this motion the court is accepting the fact that it was mailed on April 17th.

And if it was, it certainly is within the 30 days and that's what the rule specifically says. The rule specifically says that under 4:21-A6 subsection B it must be - it says within 30 days after the filing of the arbitration award the trial de novo request must be served or filed.

And in this instance we acknowledge for reasons it was not. And it apparently was not actually filed until sometime after April 28th because according to the defendant's explanation, the papers went out, they came back on or about April 28th and the secretary repackaged the papers and sent them back out again by mail.

The comments of that rule clearly addresses the relevant law covering this matter. The demand is to be filed with the court within 30 days. A relaxation of the time requirement is only upon extraordinary circumstances. And case law has determined the negligence of an attorney or his office staff does not meet the standard for relaxation of the filing rule. The Hartsf[i]eld [v. Fantini, 149 N.J. 611, 619 (1997)] case provides some guidance to this court where it stated:

"We agree with those courts that have found that attorney's failure to supervise staff or heavy work load to be insufficient to satisfy the extraordinary circumstance requirement. The circumstances must be exceptional and compelling." [(internal quotations and citations omitted).]

And in the Martinelli [v. Farm-Rite, Inc., 345 N.J. Super. 306, 310 (App. Div. 2001), certif. denied, 171 N.J. 338 (2002)] case even there a computer malfunction was not sufficient justification for late submission of documents to the court.

This court gets no pleasure or comfort in having to rule in this particular matter, but I am satisfied that the guidance that the Supreme Court provided in the Hartsf[i]eld case and then in the Martinelli case lead me only to the conclusion that in fact at no time within 30 days was the trial de novo filed.

Now if that's incorrect, at a minimum it was more than some time post April 28th that they maybe had become aware of that.

Therefore, the court is led to the only conclusion that I can conclude in that the plaintiff's application confirming the arbitration award and appropriate interest is granted, the cross motion is denied.

An order confirming the arbitration award was entered the same day against both defendants in the amount of $541,142.71, inclusive of pre-judgment interest. The caption of the order includes "Breathless 2000, Christofis Kontos and ABC Corp. 1-10 and John Does 1-10[.]"

On appeal, defendants raise the following issues:






We disagree with all these contentions save the last.


Defendants contend that they "substantially complied" with the filing requirement and that the circumstances surrounding the postage "error" are extraordinary, justifying relief from the time restriction of Rule 4:21A-6(b)(1). We disagree.

Rule 4:21A-6(b)(1) provides the deadline for filing a demand for trial de novo following arbitration: within 30 days after filing of the arbitration award, a party thereto files with the civil division manager and serves on all other parties a notice of rejection of the award and demand for a trial de novo and pays a trial de novo fee as set forth in paragraph (c) of this rule[.] [(Emphasis added).]

In Mazakas v. Wray, 205 N.J. Super. 367 (App. Div. 1985), we cautioned that, when neither party has made a timely motion for a trial de novo, the court's power to extend the time frame "must be sparingly exercised with a view to implementing both the letter and spirit of the compulsory arbitration statute and the rules promulgated pursuant thereto, to the end that the arbitration proceeding achieve finality." Id. at 372; see also Martinelli, supra, 345 N.J. Super. at 310. To that end, the thirty-day rule for filing a demand for a trial de novo may be relaxed only upon a showing of "extraordinary circumstances." Wallace v. JFK Hartwyck at Oak Tree, Inc., 149 N.J. 605, 607 (1997); Hartsfield, supra, 149 N.J. at 619.

While the relaxation standard for service upon opposing counsel is governed by Rule 1:3-4 and, consequently, will be satisfied by "interests of justice" or "good cause," relaxation of the time requirement for filing the demand with the court is subject to the more stringent "extraordinary circumstance" standard. Pressler, supra, comment 7.2.1 on R. 4:21A-9; Jones v. First Nat'l Supermarkets, Inc., 329 N.J. Super 125, 127 (App. Div.) ("The express language of R. 4:21A-6(b)(1) provides that both filing and service of the demand must be accomplished within thirty days of the entry of an arbitration award[;] . . . the requirement of [such] service should be strictly enforced."), certif. denied, 165 N.J. 132 (2000).*fn2

Generally speaking, more than just "substantial compliance" is required to relax the thirty-day deadline for filing a trial de novo demand. Lo Bianco v. Harleysville Ins. Co., 368 N.J. Super. 515, 525 (Law Div. 2003). In Hartsfield, supra, the Court held that substantial compliance with the statutory filing deadline in N.J.S.A. 39:6A-31 was insufficient absent "extraordinary circumstances." 149 N.J. at 618. Although we later applied the "substantial compliance" rule to relax the thirty-day deadline with respect to service of the demand upon opposing counsel, see Corcoran v. St. Peter's Med. Ctr., 339 N.J. Super. 337, 343 (App. Div. 2001); Nascimento v. King, 381 N.J. Super. 593, 599-609 (App. Div. 2005), the time requirement for the filing of a demand is more strictly construed and enforced. This relief is warranted only under the "extraordinary circumstances" standard.

"A fact-sensitive analysis is necessary in each case to determine what constitutes an extraordinary circumstance." Martinelli, supra, 345 N.J. Super. at 310; see also Hartsfield, supra, 149 N.J. at 618. Such a circumstance does not arise from an attorney's "mere carelessness[,]" heavy workload, or "lack of proper diligence." Martinelli, supra, 345 N.J. Super. at 310 (quoting Hartsfield, supra, 149 N.J. at 618 (attorney's failure to supervise his secretary and review his diary was not considered an extraordinary circumstance) (internal citations omitted)).

In Martinelli, "defense counsel's computer failure did not qualify as an extraordinary circumstance to allow extension of the time within which to file for a trial de novo." 345 N.J. Super. at 312. There, counsel had "been unable to conclusively determine the cause of the system failure[,]" which "may have been attributable to human error, a hardware or software malfunction, or the conversion of the system[.]" Ibid. We reasoned "[w]hatever their nature, however, system failures are common occurrences in a modern office environment[,]" and therefore, a computer failure "must be treated the same as a wrong date marked on a calendar or the failure of an attorney to properly supervise staff. It is an occurrence that can be anticipated and guarded against." Id. at 312-13.

We noted in Martinelli that "'the arbitration program has been well-established for several years and attorneys are well aware of the thirty-day rule.'" Id. at 313 (quoting Hartsfield, supra, 149 N.J. Super. at 620). Accordingly, "[a]n attorney is compelled to determine the appropriate method to assure compliance with the thirty-day rule." Ibid. Therefore, "[t]o permit a computer failure to constitute an excuse to file late is contrary to the underlying goals of the arbitration process-to bring about an inexpensive, expeditious adjudication of disputes and to help ease the caseload of the courts." Ibid. (citing Behm v. Ferreira, 286 N.J. Super. 566, 573-74 (App. Div. 1996) (finding that an attorney's failure to supervise staff is generally insufficient to allow a late demand for a trial de novo)).

Here, defendants contend that either postal service error or malfunction in the postage meter machine was responsible for the filing delay and in either case could not have been reasonably anticipated, therefore constituting an "extraordinary circumstance." We disagree. The situation here is akin to the computer malfunction in Martinelli, which could have been reasonably anticipated and avoided with due care. In fact, there is no evidence of due care in this case inasmuch as defense counsel waited until the final day to file the demand for trial de novo, leaving no margin for error, and failed to serve opposing counsel with notice as also required by the rule.

Moreover, contrary to defendants' belated assertion, a plenary hearing into the cause of the insufficient postage was neither required nor indicated. First, defendant never requested such a hearing below. Second, the critical piece of evidence as to whether sufficient postage was affixed to the envelope in which the demand was allegedly mailed before the deadline was discarded by defense counsel's office staff and defendants have not identified any other fact that a plenary hearing would elucidate. Lastly, the actual cause of the "insufficient postage" is really immaterial to the timeliness issue since we have already determined such an event is insufficient to satisfy the "extraordinary circumstance" requirement.


Defendants next argue the Law Division erred in granting plaintiff's leave to amend his complaint to add Kontos as the amended claim is barred by the statute of limitation, N.J.S.A. 2A:14-2, does not "relate back," and is futile. We disagree.

Rule 4:9-1 provides, in pertinent part, that:

A party may amend any pleading as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is to be served, and the action has not been placed upon the trial calendar, at any time within 90 days after it is served. Thereafter a party may amend a pleading only by written consent of the adverse party or by leave of court which shall be freely given in the interest of justice.

A motion for leave to amend is to be liberally granted and without consideration of the ultimate merits of the amendment. Pressler, supra, comment 2.1 on R. 4:9-1.

"[T]he granting of a motion to file an amended complaint always rests in the court's sound discretion." Kernan v. One Wash. Park Urban Renewal Assocs., 154 N.J. 437, 457 (1998); Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994) ("While motions for leave to amend pleadings are to be liberally granted, they nonetheless are best left to the sound discretion of the trial court in light of the factual situation existing at the time each motion is made."). "That exercise of discretion requires a two-step process: whether the non-moving party will be prejudiced, and whether granting the amendment would nonetheless be futile." Notte v. Merchants Mut. Ins. Co., 185 N.J. 490, 501 (2006).

A motion to amend is properly denied where its substance is generally irrelevant to the main claim, its merits are marginal, and allowing the amendment would unduly protract the litigation. Pressler, supra, comment 2.2.1 on R. 4:9-1. See also Webb v. Witt, 379 N.J. Super. 18, 28-29 (App. Div. 2005) (noting that where proposed cause of action is not sustainable as a matter of law, court may refuse leave to amend). Such a denial is also sustainable when made on the eve of trial, particularly if the motion seeks to add new parties. Morales v. Academy of Acquatic Sc., 302 N.J. Super. 50, 56 (App. Div. 1997); Globe Motor Car Co. v. First Fid. Bank, N.A., 291 N.J. Super. 428, 429 (App. Div.) (court did not abuse its discretion in denying motion to amend made on eve of trial and three years after the complaint was filed), certif. denied, 147 N.J. 263 (1996). "Nevertheless, in particularly compelling circumstances, the court retains discretion to permit a late amendment where the opposing party will not be prejudiced thereby." Pressler, supra, comment 2.2.2 on R. 4:9-1; Fox v. Twp. of West Milford, 357 N.J. Super. 123, 130-31 (App. Div.) (reversing the denial of a "grossly" late motion to amend to add an indispensable party since complete relief could not otherwise be granted), certif. denied, 176 N.J. 279 (2003).

"[T]he factual situation in each case must guide the court's discretion, particularly where the motion is to add new claims or new parties late in the litigation." Bonczek v. Carter-Wallace, Inc., 304 N.J. Super. 593, 602 (App. Div. 1997) (finding no abuse of discretion in denial of motion to amend where the defendant's existence and corporate function were known), certif. denied, 153 N.J. 51 (1998); Verni ex rel. Burstein v. Harry M. Stevens, Inc., 387 N.J. Super. 160, 195-203 (App. Div. 2006) (finding that the trial court erred in granting the motion to amend since "the late amendment caused prejudice to [the possible new parties] because they received insufficient notice to assert a defense to plaintiff's claims but also that the record did not supply sufficient evidence to hold as a matter of law that the corporate distinctions between [the named defendants and proposed defendants] must be disregarded"), certif. denied, 189 N.J. 429 (2007). But see State, Dep't of Envtl. Prot. v. Std. Tank Cleaning Corp., 284 N.J. Super. 381, 396 (App. Div. 1995) (finding that if claim does not arise until after complaint was filed, leave to amend should be granted if the moving party exercised due diligence and the amendment will not cause undue delay).

On review, the trial judge's determination will not be disturbed unless it constitutes a "clear abuse of discretion." Salitan v. Magnus, 28 N.J. 20, 26 (1958); Franklin Med. Assocs. v. Newark Pub. Schs., 362 N.J. Super. 494, 506 (App. Div. 2003). This court will reverse a trial court's exercise of discretion only "if the discretionary act was not premised upon consideration of all relevant factors, was based upon consideration of irrelevant or inappropriate factors, or amounts to a clear error in judgment." Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005). Stated differently, a trial court abuses its discretion where its decision is arbitrary or capricious, is "made without a rational explanation, inexplicably depart[s] from established principles, or rest[s] on an impermissible basis." Ibid. (quoting Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002) (internal citations omitted)).

The fact that the amendment is sought to be filed after the expiration of the statute of limitations is not necessarily fatal to the application for relief. Rule 4:9-3, governing the relation back of amended pleading, states:

Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading; but the court, in addition to its power to allow amendments may, upon terms, permit the statement of a new or different claim or defense in the pleading. An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied and, within the period provided by law for commencing the action against the party to be brought in by amendment, that party (1) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (2) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party to be brought in by amendment.

"The key to relation back of added claims is whether or not they are germane, that is, whether they arose out of the same occurrence or transaction or series of transaction set forth in the original pleading." Pressler, supra, comment 2 on R. 4:9-3. Additionally, a court is permitted to relate back an amendment to change or correct a party's name if, in addition to the general criteria of the rule of relation back, (1) the new party had such notice, albeit informal, of the action prior to the running of the statute of limitations that he would not be prejudiced in maintaining his defense on the merits, and (2) knew or should have known that but for an error of identification, the action would have been brought against him. [Id. at comment 4 on R. 4:9-3.]

Governed by these standards, we discern no abuse of discretion in allowing the amended complaint. The request was made less than fourteen months after the institution of litigation. The added claim for negligent hiring, training and supervision clearly arose out of the conduct set forth in the original complaint and therefore, related back to the initial pleading so as to be timely. R. 4:9-3. Furthermore, Kontos, as the newly added party, has a sufficient identity of interest with the original party for purposes of relation back. Otchy v. City of Elizabeth Bd. of Educ., 325 N.J. Super. 98, 108 (App. Div. 1999), certif. denied, 163 N.J. 79 (2000). Consequently, Kontos, as Breathless' principal shareholder, may be held personally liable by reason of his own acts or omissions, N.J.S.A. 14A:5-30(2), or where he uses the corporate form as a vehicle for evading responsibility for plaintiff's injuries. Just as important, Kontos, as the principal shareholder, clearly had notice of the institution of the action against Breathless, as the original complaint expressly included in the fictional "John Does," "owners" of the company. See R. 4:26-4.*fn3 Under these circumstances, the granting of plaintiff's motion to amend the pleading was proper.


Lastly, defendants contend that the court erred in including Kontos in the order confirming the arbitration award and entering judgment for plaintiff because the arbitration award excluded Kontos. We agree.

As noted, the March 19, 2009 Award does not list Kontos as a party or find liability against him. Neither does the arbitrator's statement of reasons mention Kontos. Rather, it states, "plaintiff [was] a patron and invitee in defendant's bar . . ." and assesses 100% liability against "Breathless."

Initially, we note that defendants never moved in the Law Division under either Rule 4:50-1 for relief from final judgment or Rule 1:13-1 to correct a clerical error. In fact, the scope of the arbitration award was not raised in the parties' cross-motions heard in the Law Division on May 15, 2009, where the focal issue was the alleged failure of defendants to file a timely demand for a trial de novo pursuant to Rule 4:21A-6(b)(1). The proper form of the order and the arbitrator's underlying findings were not considered.

Accordingly, there is no basis in the record to equate the arbitrator's award with a judgment on the merits against defendant Kontos. As noted, the arbitration award does not even mention Kontos in its caption or textual body, and no facts have been adduced upon which to base a finding as to his individual liability.

On this score, an arbitration award is presumed valid. Del Piano v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 372 N.J. Super. 503, 510 (App. Div. 2004), certif. granted, 183 N.J. 218, certif. dismissed as improvidently granted, 195 N.J. 512 (2005). Consequently, to ensure "finality, as well as to secure arbitration's speedy and inexpensive nature, there exists a strong preference for judicial confirmation of arbitration awards[.]" N.J. Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007) (internal citations and quotations omitted).

The confirmation of the award is merely a "pro forma step to convert the award into a judgment[.]" Allen v. Heritage Court Assocs., 325 N.J. Super. 112, 118 (App. Div. 1999); Schor v. FMS Financial Corp., 357 N.J. Super. 185, 195 (App. Div. 2002). "A plaintiff who has obtained an arbitration award has already expended the time and money required to present evidence at an arbitration hearing, and the arbitrator or arbitrators who heard the evidence have determined that plaintiff is entitled to a recovery." Allen, supra, 325 N.J. Super. at 118.

"Under R. 4:21A-6(b)(3), the court's authority in adjudicating a motion to confirm an arbitration award is limited to reducing to judgment the amount of damages found by the arbitrator, supplemented only by prejudgment interest provided in R. 4:42-11(b)." SWH Funding Corp. v. Walden Printing Co., 399 N.J. Super. 1, 15 (App. Div. 2008). In SWH Funding Corp, we agreed with the defendant that "the trial court did not have the legal authority to increase the amount of damages awarded by the arbitrator." Ibid. There, the trial court "entered a final judgment increasing the damages reflected in the arbitration award by $89,974.17." Id. at 9. The trial court increased the award after denying the defendants' motions for reconsideration and vacation of the arbitration award and "order[ing] a plenary hearing on damages to modify the amount of the award." Id. at 5. "Pursuant to evidence presented by plaintiff at the plenary hearing, the court entered an order increasing the amount of the original arbitration award to $416,508.54." Ibid. "Thereafter, the court issued a supplemental opinion, making findings of fact as to damages from the record developed at the hearing." Id. at 9. On appeal, we "reversed the order fixing the amount of damages[,]" finding the trial court erred in considering evidence not before the arbitrator, and "remand[ed] for the court to enter judgment in the amount reflected in the original arbitration award." Id. at 3.

Here, defendants never raised the issue below and plaintiff to date has not addressed the arbitration award's failure to identify Kontos as a party defendant or to make any fault determination as to his individual liability. Accordingly, we remand the matter to the Law Division to consider whether its entry of judgment against Kontos either constitutes a clerical error, Rule 1:13-3, or is otherwise one from which the individual defendant should be relieved, Rule 4:50-1.

Affirmed in part; reversed and remanded in part. We do not retain jurisdiction.

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