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Joseph Cottrell v. Mid State Moving Company and the Uninsured Employer's Fund


February 10, 2011


On appeal from the Division of Workers' Compensation, Department of Labor, Claim Petition No. 1994-45486.

Per curiam.


Submitted January 12, 2011

Before Judges R. B. Coleman and J. N. Harris.

Appellant Avraham Herskowitz*fn1 appeals the denial of his motion to vacate a default judgment entered by the Division of Workers' Compensation (the Division), in favor of petitioner Joseph Cottrell. We reverse and remand for an evidentiary hearing.


Mid-State Moving Company (Mid-State) is a moving and delivery company that was incorporated under the name Mid-State Moving & Delivery Service, Inc. in 1989. Mid-State's Certificate of Incorporation denominates Sam Eizikovitz as its sole incorporator and director. Cottrell was employed by Mid-State as a mover from October 1992 until November 1994. He claimed that the owner of the company and his boss was Herskowitz. Cottrell's rate of pay during that time was approximately $600 per week.

According to the testimony received at the proof hearing, Cottrell injured his back while moving a piano in the course of his employment on November 13, 1994. After seeking medical care and consulting with an orthopedic physician, he filed a workers' compensation claim naming his employer, "Mid-State Moving Co.," as the sole respondent on December 5, 1994. Upon discovering that the employer did not have workers' compensation insurance,*fn2

Cottrell successfully moved to join the Uninsured Employers' Fund (UEF) in March 1995. See N.J.S.A. 34:15-120.1; N.J.A.C. 12:235-7.2.

On March 8, 1995, a copy of Cottrell's petition -- listing Mid-State as the sole respondent -- was delivered to Bryna Herskowitz, described in the proof of service as the wife of appellant. Six weeks later, on April 13, 1995, another copy of the petition was handed to Herskowitz, the corporation's nominal registered agent, but he refused to accept service.

In the ensuing decade, Cottrell sought and received various medical treatments amounting to over $100,000 in medical fees. All known medical bills were paid by the UEF. The workers' compensation litigation remained open and unresolved.

On January 8, 2004, Herskowitz was served with a copy of an amended petition naming him individually as a respondent. Inexplicably, the order permitting the amendment pursuant to N.J.S.A. 34:15-79,*fn3 was not signed by a judge of compensation until weeks later, on February 14, 2008. Cottrell's and the UEF's attorneys represented that several copies of motions for a default judgment were mailed to Mid-State and Herskowitz, to which there was neither a reply nor an appearance entered.

Also, according to those attorneys, the certified mail was returned as unclaimed or refused, but the regular mail was not.

On May 8, 2008, an order entering a default judgment was signed by the judge of compensation.*fn4 The body of the order indicated that the judgment was entered only against Mid-State, due to its failure to file an answer. Herskowitz's name was handwritten into the caption -- apparently with the assent of the judge of compensation -- confirming that Herskowitz individually was a named respondent, but the single ordering paragraph did not mention Herskowitz's liability or status.

The workers' compensation court then scheduled a proof hearing for June 19, 2008. Notwithstanding the plain language of the order entering default judgment (or, as the judge of compensation had it, just default) against Mid-State only, Cottrell's attorney sent Mid-State and Herskowitz a letter, dated May 15, 2008, notifying them that "a default [j]udgment has been entered against Mid-State Moving and you, Abba Herskowitz, individually."

On June 19, 2008, the judge of compensation heard testimony from Cottrell on the nature and extent of his injuries. Herskowitz neither attended the hearing nor sent a representative to protect his interests. Cottrell testified to the manner in which he initially incurred his back injury by moving a piano. He related that after an MRI revealed disc herniations in his back, he underwent various surgeries in 1995 and received epidural injections and acupuncture treatments.

Cottrell also testified about three motor vehicle accidents following his back injury. He reported an injury to his right shoulder resulting from a 1997 incident; injuries to his neck, right shoulder, and back from a 2005 accident; and an injury to his lip in a 2006 mishap. Throughout those years, Cottrell underwent numerous medical procedures and operations. In describing his situation, Cottrell testified, "ever since [1994], I have seen just about every kind of doctor there is. I have been through acupuncture, chiropractor, physical therapy, epidurals, psychiatrist, anger management, [and] family counseling."

Cottrell further related that he attempted to resume work at a roofing company for about four months in 1998 but was unable to continue due to physical limitations associated with his injury and the various medications required to manage his pain. When asked if he worked after 1998, Cottrell stated that he had purchased a construction company with the proceeds from the lawsuit related to the 1997 car accident, but terminated the business after six months when he "physically couldn't do the work [him]self." Cottrell claimed that he has been unable to work since.

In his current condition, Cottrell testified that he was unable to walk without a walker or cane, and would "definitely" need a walker or wheelchair if he were leaving his home. He also testified that he continues on several medications, which he takes to treat pain and depression.

Notwithstanding Cottrell's subsequent injuries arising out of automobile accidents (clearly unrelated to his employment with Mid-State), as well as his limited ability to work for brief periods in the late 1990s, the judge of compensation concluded that Cottrell's injuries were "to a material degree produced by [the] accident that he had back in November 1994" and that he was "100 percent totally and permanently disabled." The judge of compensation awarded Cottrell total disability damages at a weekly rate of $420 for a total judgment of $189,000 plus attorneys fees and costs against both Mid-State and Herskowitz whom he noted, did not "[have] the decency to even show up for court or enter any appearance here as far as I know." The judge of compensation entered an order memorializing his decision on July 8, 2008.

Seven months later, on February 5, 2009, in response to an application to enforce litigants' rights, Herskowitz appeared before the judge of compensation without counsel to explain that the various claim petitions over the years had been sent to him in error. He stated that he refused to file an answer because he was no longer Mid-State's registered agent, and at those times the petition named Mid-State as the only respondent.*fn5 He also claimed that he had been advised by an attorney not to respond to the petition since he was not a party to the action. The hearing was concluded without changing the posture of the case.

On March 10, 2009, Herskowitz formally moved to vacate the default judgment that had been lodged against him individually. He asserted that, at most, he was merely the registered agent for Mid-State, not a corporate officer or director, and in any event, the company had been sold to a third-party in February 1994, prior to Cottrell's injury.

The motion was first considered by the judge of compensation on June 11, 2009, and continued to a date in August 2009. After reviewing the arguments of counsel and without the benefit of an evidentiary hearing,*fn6 the judge of compensation denied the motion to vacate the default judgment, and refused to stay the judgment pending appeal. An order memorializing the denial of relief was entered on August 13, 2009.

On September 23, 2009, Herskowitz filed a notice of appeal challenging the entry of the order that denied the application to vacate the default judgment. In October 2009, Herskowitz filed a motion in this court for a remand on grounds of newly discovered evidence of misrepresentation and fraud. Herskowitz's brief in support of the motion for remand was supported by various exhibits, including a certification by a former employee of Mid-State and co-worker of Cottrell, which alleged that Cottrell was not acting in the scope of his employment when he was injured in 1994. Herskowitz also included various proofs that Cottrell was actually able to work in 1996 and 2004, and that Herskowitz had personally observed Cottrell perform manual labor without physical restrictions. We denied the motion for remand on November 20, 2009.

On March 15, 2010, Herskowitz filed a motion to supplement the record on appeal to include a certification and exhibits explaining his relationship with Mid-State, the hiring of an attorney to give him advice about Cottrell's workers' compensation claim, and his personal knowledge that Cottrell was able to perform physical labor as late as June 2004. We granted the motion permitting such supplementation on April 9, 2010.



Our review of workers' compensation decisions is limited to "'whether the findings made could reasonably have been reached on sufficient credible evidence present in the record, considering the proofs as a whole, with due regard to the opportunity of the one who heard the witnesses to judge of their credibility.'" Lindquist v. City of Jersey City Fire Dep't, 175 N.J. 244, 262 (2003) (quoting Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)); see also Cooper v. Barnickel Enters., Inc., 411 N.J. Super. 343, 348 n.4 (App. Div.) (a "judge of compensation's findings are binding when based . . . on 'sufficient credible evidence in the record'"), certif. denied, 201 N.J. 443 (2010).

Accordingly, we will not upset the determinations of a judge of compensation "unless they are 'manifestly unsupported by or inconsistent with competent, relevant, and reasonably credible evidence as to offend the interests of justice.'" Lindquist, supra, 175 N.J. at 262 (quoting Perez v. Monmouth Cable Vision, 278 N.J. Super. 275, 282 (App. Div. 1994), certif. denied, 140 N.J. 277 (1995)). The judge of compensation's ultimate determination must be based on articulated reasons sustained by proofs in the record. Lewicki v. N.J. Art Foundry, 88 N.J. 75, 89-90 (1981).

Notwithstanding the foregoing, if an appellate court finds that the workers' compensation court's decision is arbitrary, capricious or unreasonable, and "[w]here our review of the record leaves us with the definite conviction that the judge went so wide of the mark that a mistake must have been made, we may appraise the record as if we were deciding the matter at inception and make our own findings and conclusions." Manzo v. Amalgamated Indus. Union Local 76B, 241 N.J. Super. 604, 609 (App. Div.), certif. denied, 122 N.J. 372 (1990) (citations and internal quotations omitted); see also In re Taylor, 158 N.J. 644, 657-58 (1999).


We start with the jurisprudential framework of Herskowitz's motion to vacate the default judgment for total disability that was entered following the proof hearing. The attorneys who argued the motion plainly assumed that the motion would be decided by application of the Rules of Court. During oral argument before the judge of compensation, an express reference was made to the notice requirements for the entry of default pursuant to Rule 4:43-1, and one attorney argued the two-pronged paradigm of excusable neglect and a meritorious defense pursuant to Rule 4:50-1. Herskowitz's attorney went so far as to highlight that the motion to vacate was filed less than one year after the entry of the May 8, 2008 order, suggesting the application of Rule 4:50-2's one-year limitation "for reasons (a), (b), and (c) of R. 4:50-1."

The judge of compensation did not specifically address these references to the Rules of Court, perhaps because he felt that they were not applicable in the Division, or for other reasons. The rationale for denying the motion stated the following:

I have reviewed the documents in the file. I mean I remember this case. I remember Mr. Herskowitz coming in here long after a default judgment was entered against him and he was upset about it, you know, I remember him writing or I remember there was one telephone call back I think in January [2008] from Mr. Herskowitz, and I believe we adjourned the case. I don't have all the case records but certainly he had more than ample opportunity to come in here and to defend the claim against him, and I am not going to allow him at this point to come back here and ask me to set aside an order of judgment or any execution that arose out of that. I think he was, he certainly did not act promptly or in a timely way. I think it's reasonable to infer from the fact that he was refusing to accept these documents that he was ducking us and I am not going to, I am not going to grant any motion to set this order aside. The judgment as it was entered will stand.

We gather from this determination that the judge of compensation was animated by reciprocal forces: on the one hand, Herskowitz did not demonstrate excusable neglect for his lack of participation in the proceedings because, on the other hand, he intentionally avoided the jurisdictional pull of the paperwork that had been served upon him during the fourteen years that the case was pending.

We part ways with the judge of compensation, not because we would inevitably make contrary factual findings, but because the court failed to address the myriad of evidence suggesting potentially legitimate reasons why Herskowitz failed and refused to participate in the proceedings, including Herskowitz's uncontradicted assertion that he was following the advice of counsel. The judge of compensation essentially made credibility findings against Herskowitz without an evidentiary hearing and solely on the scant documentary record. We cannot defer to the court's credibility assessment of Herskowitz, as we do not find it to be supported by the record.

Given the unusually long duration that this matter had languished in the Division before Herskowitz was formally added as a respondent by order in 2008, we do not share the judge of compensation's confidence that Herskowitz's assertions may be blithely ignored and disbelieved. An evidentiary hearing was plainly required before the judge of compensation could properly make relevant findings of fact, and then balance appropriate factors in deciding whether to vacate the default judgment.

We have already noted that the parties believed that the Rules of Court provided the appropriate framework for deciding the motion to vacate the default judgment. However, the Rules of the Division, N.J.A.C. 12:235-1.1 to -14.2, make no mention about motion practice being globally governed by the Rules of Court. In fact, the Division's Rules have little to say about motion practice at all, limiting their discussion for the most part to applications for temporary disability and/or medical benefits, N.J.A.C. 12:235-3.2; emergent medical care, N.J.A.C. 12:235-3.3; and miscellaneous motions, N.J.A.C. 12:235-3.5. The only reference in the Division's Rules to a motion for the entry of default provides, in relevant part:

Where a motion for default has been filed, the petitioner must provide proof that the claim petition and motion for default have also been personally served on the respondent, its agents, and/or corporate officers as applicable, pursuant to [Rule] 4:4-4 of the New Jersey Rules of Court. [N.J.A.C. 12:235-3.1(g).]

The Division's Rules, however, make other references to the Rules of Court, but do not incorporate them as principles of general applicability. See, e.g., N.J.A.C. 12:235-1.3(b) (use of certifications in lieu of oath); N.J.A.C. 12:235-3.12(r) (service of subpoenas); and N.J.A.C. 12:235-7.2(d)(2) (motion for substituted service). Notably, however, the construction of the Division's Rules mirrors Rule 1:1-2:

The rules contained in this chapter shall be construed to secure a just determination, simplicity in procedure, fairness in administration and the elimination of unjustifiable expense and delay. Unless otherwise stated, any rule may be relaxed or dispensed with if strict adherence would cause an injustice. [N.J.A.C. 12:235-1.2.]

In Waters v. Island Transportation Corporation, 229 N.J. Super. 541, 550 (App. Div. 1989) we noted the following:

While New Jersey court rules do not directly control the actions of a compensation judge, nevertheless, . . . 'since there are pronounced similarities in the exercise of judicial and quasi-judicial powers, it has been recognized that court-fashioned doctrines for the handling of litigation do in fact have some genuine utility and relevance in administrative proceedings.'" [Ibid. (quoting City of Hackensack v. Winner, 82 N.J. 1, 29 (1980)).]

In similar vein, we observed:

Irrespective of the absence of express statutory authority and a one-year limitation imposed upon such a reopening in certain circumstances, N.J.S.A. 34:15-54, it is abundantly clear that the Division has the inherent power, "comparable to that possessed by the courts (R.R. 4:62-2 [now R. 4:50]), to reopen judgments for fraud, mistake, inadvertence, or other equitable ground." Beese v. First National Stores, 52 N.J. 196, 200 (1968). See also Estelle v. Red Bank Bd. of Ed., 14 N.J. 256 (1954); Stone v. Dugan Brothers of N.J., 1 N.J. Super. 13 (App. Div. 1948).

On the other hand, it is equally clear that a decision to reopen must not be arbitrary or based on whim. The presence of a legally adequate motivating element must be manifest. We are satisfied, as we were almost three decades ago in Stone, supra, that the practice in the Division is this respect ought to be tailored after that to which the courts adhere in response to R. 4:50. It follows that in consideration of such procedure, attention to the equities involved is imperative. Beese v. First National Stores, supra 52 N.J. at 200-201. [Hyman v. Essex Cnty. Carpet Cleaning Co., 157 N.J. Super. 510, 516 (App. Div. 1978).]


Rule 4:50-1 governs relief from judgments and orders. It is grounded upon and its implementation is guided by equitable principles. Hodgson v. Applegate, 31 N.J. 29, 37 (1959); Shammas v. Shammas, 9 N.J. 321, 328 (1952). This source of equitable power has proven particularly advantageous when addressing judgments emanating from default. Our courts have consistently held that motions to vacate judgments produced by a party's default should be "viewed with great liberality, and every reasonable ground for indulgence [should be] tolerated to the end that a just result is reached." Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964); accord Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283-84 (1994); Mancini v. EDS, 132 N.J. 330, 334 (1993); Reg'l. Constr. Corp. v. Ray, 364 N.J. Super. 534, 540-41 (App. Div. 2003); Jameson v. Great Atl. & Pac. Tea Co., 363 N.J.

Super. 419, 430 (App. Div. 2003), certif. denied, 179 N.J. 309 (2004). Nonetheless, the decision to grant or deny an application to vacate a default judgment is accorded substantial deference and will not be disturbed absent a "clear abuse of discretion." Little, supra, 135 N.J. at 283.

In general, a party seeking relief from a default judgment must demonstrate both excusable neglect, Jameson, supra, 363 N.J. Super. at 425-26, and a meritorious defense. Dynasty Bldg. Corp. v. Ackerman, 376 N.J. Super. 280, 285 (App. Div. 2005); see also Pressler and Verniero, Current N.J. Court Rules, comment 4.1 on R. 4:50-1 (2011). Moreover, a movant who relies on Rule 4:50-1(f), which grants relief for "any other reason justifying relief from judgment or order," as Herskowitz does here, must ordinarily show "that enforcement of the order or judgment would be unjust, oppressive, or inequitable." Piscitelli v. Classic Residence by Hyatt, 408 N.J. Super. 83, 102-03 (2009).

Herskowitz squarely presented equitable issues that, if true, would have entitled him to vacate the default judgment against him. First, he claimed that he had no individual liability for workers' compensation benefits under N.J.S.A. 34:15-79 because, at most, the evidence showed him to be Cottrell's supervisor from 1992 to 1994, and not an officer or director of Mid-State when its insurance lapsed and Cottrell was injured. See Morales v. Santiago, 217 N.J. Super. 496 (App. Div. 1987) (vacating a default judgment when the plaintiff failed to produce sufficient proof of liability).

Second, with regard to excusable neglect, Herskowitz argued that because the first several motion papers received at his home address listed Mid-State as the sole respondent, and not him individually, he should be excused for the failure to respond. His position was that although he once acted as MidState's registered agent until its corporate status was revoked in late February 1994 or when "the business was transferred to an individual in New York" in February or March of that year, he no longer had any connection to the company as of that date.

Lastly, citing Goldhaber v. Kohlenberg, 395 N.J. Super. 380 (App. Div. 2007), in which an attorney's misadvice to defendant that New Jersey lacked jurisdiction over defendant constituted excusable neglect when defendant failed to answer, id. at 391, Herskowitz contends that because an attorney advised him not to answer, the judgment should be set aside.

Rule 4:50-1(a) states that a court may relieve a party from a final judgment for "mistake, inadvertence, surprise, or excusable neglect." Excusable neglect is carelessness "attributable to an honest mistake that is compatible with due diligence or reasonable prudence." Mancini, supra, 132 N.J. at 335. Here, there was evidence from which the judge of compensation could have concluded that Herskowitz's repose was the product of either reasonable reliance upon counsel or other excusable neglect. We are not satisfied that the court's decision was made after consideration of the totality of the circumstances.

In Siwiec v. Financial Resources, Inc., 375 N.J. Super. 212 (App. Div. 2005), we vacated a default judgment notwithstanding defendant's inability to demonstrate excusable neglect, on the grounds that (1) defendants had raised a meritorious defense, (2) plaintiffs had presented insufficient proofs to support their claim for damages, and (3) the Special Civil Part judge failed to make adequate findings of fact before deciding the issue of damages. Id. at 218-219. Although vacation of a default judgment must ordinarily be premised upon a finding of excusable neglect and a meritorious defense, we noted that "[i]n some circumstances, . . . these requirements may be relaxed in the interests of justice under R[ule] 4:50-1(f)." Id. at 219. An application to vacate a default judgment may be granted "[w]here either the defendant's application to re-open the judgment or the plaintiffs' proofs presented at the proof hearing raise sufficient question as to the merits of plaintiffs' case . . . even where defendant's proof of excusable neglect is weak." Id. at 220.

Although Herskowitz's claim of excusable neglect arguably is weak, significant questions remain as to whether he is the appropriate party contemplated under N.J.S.A. 34:15-79(a). Allowing the default judgment to stand against him in this case may result in a grave injustice. As such, we reverse and remand for an evidentiary hearing to give the judge of compensation a full opportunity to explore, and then rule upon, all of Rule 4:50's relevant parameters.*fn7 In so doing, we do not intend to signal any particular result that must be achieved. Rather, we leave it to the expertise of the workers' compensation court to test Herskowitz's claims under the dual lens of Title 34 and Rule 4:50.

Reversed and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.

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