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66 Vmd Associates, LLC and Atlantic Delta Corporation At Montgomery, Inc v. Melick-Tully and Associates

August 11, 2011

66 VMD ASSOCIATES, LLC AND ATLANTIC DELTA CORPORATION AT MONTGOMERY, INC., PLAINTIFFS-APPELLANTS,
v.
MELICK-TULLY AND ASSOCIATES, P.C.; RICHARD D. LEV, C.P.G., EUGENE M. GALLAGHER, JR., P.E., AND RICHARD PAGANO, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-6584-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 1, 2010

Before Judges Rodriguez, Grall and Miniman.

66 VMD Associates, LLC (VMD) and Atlantic Delta Corporation at Montgomery, Inc. (Atlantic), appeal from the summary judgment limiting their recovery against Melick-Tully and Associates, P.C. (MTA), Richard D. Lev, C.P.G., Eugene M. Gallagher, Jr., P.E. and Richard Pagano (collectively "Consultants") for breach of a contract for environmental consultation to $25,000. We affirm.

Atlantic entered a contract to purchase a lot in Somerville (the Property) for $155,000 on March 11, 1998. Because the Property was environmentally contaminated, Atlantic contracted with MTA to provide a remediation plan. Between March 17 and September 9, 1998, MTA sent Robert Weiss, VMD's president, five contracts. Each contract limited MTA's liability for professional negligence to $25,000. Although Weiss is an experienced developer and a member in several real estate holding companies and a construction company, the Property was to be his first commercial development project.

On June 19, 1998, MTA issued a report estimating that remediation would cost between $13,000 and $17,000. Following receipt of this report, Atlantic closed on the Property and assigned its rights to VMD on September 14, 1998.

By 2003, VMD had not performed any remediation. Instead, VMD had contracted to sell the Property. Before closing, however, the buyer cancelled the sale because tests revealed that remediation costs could exceed $100,000. After the sale collapsed, VMD sued MTA for $2,000,000 alleging professional negligence.

MTA moved for summary judgment on the issue of damages arguing that, pursuant to their contract, their liability was limited to $25,000. Judge Diane Pincus agreed and granted summary judgment limiting VMD's recovery to $25,000.

After the judge denied a motion for reconsideration, VMD entered a consent judgment and appealed. On appeal, VMD argues that the limitation of liability clause is invalid because it was unsigned, inequitable, provided inadequate economic compulsion for MTA to perform diligently and violates public policy.

Each MTA proposal included a "GENERAL TERMS AND CONDITIONS" page with separate signature lines. This page contained a section entitled "RISK ALLOCATION":

14.1 Many risks potentially affect MTA by virtue of entering into this agreement for Consulting Services on behalf of Client. The principal risk is the potential for human error by MTA. For Client to obtain the benefit of a fee which includes a nominal allowance for dealing with MTA's liability, Client agrees to limit MTA's liability to Client and to all other parties for claims arising out of MTA's performance of the services described in this Agreement. The aggregate liability of MTA will not exceed $25,000 for negligent professional acts, errors, or omissions . . . .

Despite not signing several proposals or the "TERMS AND CONDITIONS" pages, VMD's representatives returned the documents to MTA each time without objection and paid MTA according to the proposals.

MTA issued a June 19, 1998 report estimating remediation costs between $13,000 and $17,000. After VMD received the Property from Atlantic, NJDEP conditionally approved the MTA remediation plan on March 30, 1999. Despite paying MTA $19,826.35 for the report, VMD never performed the planned remediation.

Intending to develop the property, VMD sought site approvals that delayed the project for several years. VMD eventually abandoned their development plans and entered a July 24, 2003 contract to sell the Property to Gordon Somerville MAB Associates (Gordon). In 2004, NJDEP reassigned the Property file to another case manager. The new case manager rescinded the 1998 conditional approval because the MTA plan did not meet the "Technical Requirements for Site Remediation."

In response, MTA issued a 2005 report which projected remediation costs near $109,000. Wary of the increase, Gordon hired The Whitman Companies, Inc., (Whitman) for a second opinion.

Whitman estimated in August 2005 that remediation would cost $94,000. Consequently, Gordon cancelled the contract of sale with VMD on September 20, 2006. VMD hired Whitman to issue another report for submission to the NJDEP in 2006. In that submission, ...


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