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Radiac Research Corp v. Bernadette Pasqua

August 17, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Warren County, Docket No. C-16022-07.

Per curiam.


Submitted May 18, 2011

Before Judges Nugent and Kestin.

Plaintiff, Radiac Research Corp. ("plaintiff" or "the corporation"), appeals from the June 17, 2010 Chancery Division order that denied its motion to reinstate the complaint, which had been administratively dismissed for lack of prosecution "under Rule 1:13-7 or 4:43-2"; schedule a proof hearing; and compel defendant, Bernadette Pasqua, to convey to plaintiff her corporate stock. Plaintiff requests "that the [June 17] [o]rder be reversed, that the [c]omplaint be reinstated and that the matter be permitted to go forward for an adjudication on the merits." We reverse that part of the order that denied plaintiff's motion to reinstate the complaint and we remand for further proceedings.

Plaintiff is a closely held New York corporation that is engaged in the business of hazardous waste disposal, operates throughout the northeastern United States, and is licensed to do business in New Jersey. Plaintiff alleges that since defendant inherited her husband's stock, which represents one-third ownership in the corporation, she has refused to execute financial statements and other documents required by plaintiff to maintain its licenses and bid on government contracts, thereby jeopardizing its ability to conduct business.

On October 15, 2007, plaintiff filed a three-count complaint against defendant alleging causes of action for specific performance, breach of fiduciary duty, and breach of the duty of loyalty. The complaint sought judgments directing defendant to cooperate in the preparation, execution, delivery and filing of the documents necessary to operate the business, as well as mandating the sale of her interest in the business to the corporation.

Defendant filed an answer and counterclaim denying the allegations in the complaint and demanding repayment of a loan she or her late husband made to plaintiff. Although defendant subsequently refused to provide discovery, the parties attended mediation. Defendant cooperated with neither the mediator nor her attorney, who was subsequently relieved as counsel.

Following unsuccessful mediation, the Chancery Division scheduled a case management conference for December 10, 2008. Defendant failed to appear. The court subsequently denied plaintiff's motion to strike defendant's answer, but awarded plaintiff $1,903 in counsel fees. The court scheduled another case management conference for February 9, 2009, and defendant failed to appear.

On April 13, 2009, on plaintiff's motion, the Chancery Division entered an order striking defendant's answer and counterclaim for failing to appear at the February case management conference, but "without prejudice to reinstatement upon motion for good cause shown." The court ordered "the clerk [to] enter default against [d]efendant as if no responsive pleading on behalf of [d]efendant had been filed." The court also ordered defendant to pay plaintiff additional counsel fees.

After obtaining the default, plaintiff did not timely move for a default judgment and on August 14, 2009, the court entered an administrative order dismissing plaintiff's complaint for lack of prosecution under Rules "1:13-7 or 4:43-2." According to plaintiff, neither plaintiff nor its counsel recall receiving a copy of the order until the spring of 2010 when counsel contacted the court and learned that the case had been dismissed. Meanwhile, in preparation for a proof hearing, plaintiff had hired two expert witnesses to appraise defendant's stock.

On May 4, 2010, plaintiff filed a motion seeking an order reinstating the complaint, compelling the sale of defendant's stock, and scheduling a proof hearing. On June 17, 2010, the Chancery Division entered an order denying the motion, explaining in the order, among other things, that ten months had expired since the administrative dismissal and that the relief sought for conveyance of defendant's interest in the business was "beyond what was sought in the complaint." The court also noted that plaintiff "is a New York corporation with its principal place of business in New York" and stated that, if plaintiff wished to pursue the relief for conveyance of defendant's interest in the business, "a new action in an appropriate forum" should be commenced.

Plaintiff contends that it has established good cause to reinstate its complaint, that defendant will suffer no prejudice if the complaint is reinstated, but the corporation will suffer substantial prejudice if the complaint is not reinstated. Plaintiff maintains that public policy favoring adjudications on the merits supports reinstatement of its complaint. Additionally, plaintiff argues that the Chancery Division mistakenly ruled that the relief it sought was beyond that sought in the complaint. Finally, plaintiff contends that the court's ruling that proceedings should take place in New York was an issue that the court raised on its own without requesting briefing or argument. Plaintiff points out that it is authorized to conduct business in New Jersey and defendant lives in the State.

We review an order denying reinstatement of a complaint dismissed for lack of prosecution under a misapplication of discretion standard. See Weber v. Mayan Palace Hotel & Resorts, 397 N.J. Super. 257, 262 (App. Div. 2007); ...

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