November 22, 2011
ACBB-BITS, L.L.C., PLAINTIFF-APPELLANT,
550 BROAD STREET, L.P., DEFENDANT-RESPONDENT, AND CLANCEY REALTY GROUP AND FRANK CLANCEY, DEFENDANTS-THIRD PARTY PLAINTIFFS-RESPONDENTS,
BART LOMBARDO, ESQ. AND FRIERI, CONROY & LOMBARDO, L.L.C., THIRD PARTY DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-93-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 26, 2011
Before Judges Graves, Harris, and Koblitz.
This appeal arose from a routine economic dispute between a property owner and its prospective commercial tenant. The fulcrum of their disagreement concerned rent, which was to be calculated based upon the measurement of the rentable area for the seventh floor premises of a multi-tenanted office building in Newark. Notwithstanding a mutual failure to resolve this lingering dispute, the property owner and prospective tenant serially executed a lease agreement and a first amendment to the lease within a three-month period in 2006, providing that the ultimate leased premises consisted of "12,990 rentable square feet."
Within thirty-five days of signing the last of the lease documents, the parties' difference of opinion spawned a lawsuit by the tenant -- not against its landlord, but against its real estate broker -- seeking remedies for injuries allegedly caused by tortious conduct, breach of contract, and violation of consumer protection laws. The broker then joined the tenant's attorney as a third-party defendant, claiming that the lawyer was a joint tortfeasor. The litigation expanded again when the tenant commenced suit against the landlord for, among other things, reformation or rescission of the lease and breach of the implied covenant of good faith and fair dealing.
We have this matter on appeal after the tenant's third amended complaint was dismissed with prejudice following two successful motions for summary judgment by the broker and landlord. The tenant's attorney was also successful in dismissing the broker's third-party complaint. The only party prosecuting an appeal, however, is the tenant. After a review of the record generated by the multiple motions, we affirm both the dismissal of the tenant's causes of action against the landlord and the dismissal of the broker's third-party complaint against the attorney. However, we reverse and remand the tenant's tort, breach of contract, and statutory claims against the broker for further proceedings. I.*fn1
Plaintiff ACBB-BITS, L.L.C. (BITS) provides telecommications services to community banks. In 2005, it decided to move some of the company's operations from Pennsylvania to New Jersey. For that purpose, BITS's chief executive officer, Charles P. Daniels, engaged defendant Clancey Realty Group (Clancey Realty) to locate permanent office space in Newark.*fn2
A representative of Clancey Realty initially arranged a short-term, eleven-month sublease for BITS to sublet "3,101 rentable square feet" in the Gateway I building in Newark to be used for office space. According to a certification authored by a representative of Gateway I, BITS actually obtained only 2,552 "usable square feet."*fn3 The Clancey Realty representative insisted that Daniels was informed about the difference between rentable square footage and usable square footage, sometimes called a loss factor. Daniels denied that a loss factor attributable to the Gateway I premises was ever discussed.
In February 2006, BITS entered into a second leasing arrangement: a sublease for "approximately Two Thousand Five Hundred (2,500) square feet of rentable space on the 7th floor" of a building at Halsey Street in Newark. The Halsey Street location was intended to be used for the storage of telecommunications equipment, not office space, and (according to Daniels who had it measured) actually consisted of 2,502 square feet.
Third-party defendant Bart Lombardo, affiliated with third-party co-defendant law firm Frieri, Conroy & Lombardo, L.L.C., (collectively Lombardo) reviewed both subleases.
Shortly after BITS moved into the Gateway I premises, Daniels commenced the search for permanent space in Newark. Daniels advised defendant Frank Clancey, the president of Clancey Realty, that he wished to sever their companies' business relationship. Clancey offered to personally handle BITS's account, emphasizing that he had thirty-five years of experience in the real estate business. According to Daniels, Clancey also stated that no other real estate broker would be willing to work with BITS because of their supposed retention agreement. Claiming to be without options, Daniels accepted Clancey's offer. Clancey denied that he coerced Daniels into acceding to the deal.
In April 2006, BITS became interested in leasing office space in a building located at 550 Broad Street in Newark, which was owned by defendant 550 Broad Street, LP (550 Broad). Clancey introduced Daniels to Jeffrey Greenberg, a representative of 550 Broad.
On May 5, 2006, Daniels was sent a floor plan of the building's seventh floor, which indicated that the aggregate available space was "approximately 12,800 'R.S.F.'" On May 26, 2006, Greenberg sent a letter to Daniels offering proposed terms for a lease with BITS and identifying the "Floor/Area" to be let as the following:
Approximately 9,000 rentable square feet located on the Seventh (7th) floor. Exact measurement to be confirmed by Landlord.
The term "rentable square feet" was not defined in the letter. 550 Broad proposed a "Base Rent" of "$21.00 per rentable square foot" plus "$1.50 per rentable square foot" for "Tenant Electric." The proposal offered rent credits "for each month prior to November 31[sic], 2006 that [BITS] occupies the premises." Additionally, BITS was offered two months of "free rent to be used in 2006 or 2007." BITS was also offered an option (called "a right of first offer") to lease "all future available space on the Seventh (7th) floor." Finally, 550 Broad agreed to pay BITS's broker's fee as follows: "one (1) commission in accordance with a separate agreement to [BITS's] authorized representative."*fn4
Soon thereafter, a draft lease agreement was circulated among the parties. On June 13, 2006, Clancey forwarded his handwritten, marked-up copy to Greenberg and Daniels. In particular, Clancey wrote, "what is the net usable area?" next to the typed provision indicating that the "Rentable Area of Premises" was "8990 rentable square feet." Greenberg claimed that he subsequently told Clancey that "the loss factor of the building is approximately [eighteen] percent for a multi-tenanted floor." Greenberg, however, did not communicate this information directly to Daniels because "[BITS] was represented by a broker," adding that he "communicate[d] [only] through the broker. [He did not] review lease comments with a tenant." He also discussed the loss factor with his attorney, Michael Woodruff, who wrote it on his own copy of the draft lease. Thereafter, Woodruff spoke with Clancey and confirmed the eighteen percent loss factor.
Clancey contends that he advised Daniels of this loss factor and that it was within the acceptable range for similar office buildings in Newark. He noted that rent in multi-tenanted office buildings was never based upon usable square footage, and explained to Daniels how the loss factor was calculated. Clancey recalled that "Daniels had no issue with same and accepted these calculations." To the contrary, Daniels denied that Clancey explained these matters to him. He claimed that although he received the draft lease agreement marked up by Clancey, he never reviewed it.
On June 29, 2006, Daniels, Woodruff, Greenberg, and Clancey participated in a conference call regarding the draft lease agreement. According to Greenberg, all of Clancey's comments regarding the lease were reviewed and discussed by the participants. Daniels testified at his deposition that the loss factor was never discussed:
Q. In any of those conversations that you recall that you had with Frank Clancey he never once mentioned anything regarding rentable square feet, usable square feet, loss factor, common area factor, and add-on factor, correct?
A. Not a word.
In July 2006, Lombardo reviewed the draft lease agreement. According to Daniels and Lombardo, Lombardo's review of the lease agreement was limited to those aspects connected with a related guaranty to be signed by BITS's parent company, Atlantic Central Bankers Bank. At his deposition, Lombardo did not specifically testify that he explained the meaning of "rentable square feet" to Daniels. He noted that it was his general practice to advise clients to measure the area of leased premises for themselves, in order to confirm the size of the demised premises.*fn5
In early September 2006, the parties executed the fully-negotiated lease agreement. Among its final provisions were the following:
* Rentable area of premises: "8,990 rentable square feet."
* BITS's percentage share of the building's operating expenses and taxes: "3.18% based on 282,500 rentable square feet in the Building."
* BITS's electric charge: "13,485.00 per annum ($1.50 per rentable square foot)."
* BITS's option to lease additional space located on the seventh floor of the building.
Serendipitously, additional space on the seventh floor became available, even before the parties' signatures on the lease agreement were inked. In a letter to Daniels dated August 16, 2006, Greenberg confirmed that BITS and 550 Broad had tentatively reached an agreement regarding a possible future lease amendment for "the adjacent 4,000 rentable square feet." Specifically, upon receipt of written notice from BITS by October 5, 2006, 550 Broad agreed to lease this "[e]xpansion
[p]remises" and to pay for all of the costs to renovate the space for BITS's use. 550 Broad also agreed that it would give the following eighteen-month rent concession -- related to the 4,000 square feet only -- if the option were exercised: (1) free rent for the first six months of the lease; (2) reduced rent at a rate of one-third of the base rent for the second six months of the lease; and (3) reduced rent at a rate of two-thirds of the base rent for the third six months.
Also on August 16, 2006, 550 Broad e-mailed Daniels a digital file containing a drawing of the proposed improvements for both the original and the adjacent premises. Daniels also received a digital file containing the floor plans in computer aided design (CAD) format.*fn6 Daniels, however, did not secure access to the AutoCAD software necessary to open and use the CAD file. Had he done so, or asked an expert such as an architect*fn7
to do so, he would have learned that the useable space of the entire premises (original plus expansion premises) was only 9,678 square feet.
A detailed floor plan of the leased premises was included as an exhibit to the final lease agreement. Lombardo confirmed at his deposition that "[he] would think" this floor plan was sufficient to calculate the rentable square feet of the premises. The dimensions depicted on this floor plan were substantially the same as those on the drawing sent to Daniels on August 16, 2006.
On September 29, 2006, Daniels wrote to Greenberg advising that BITS wanted to exercise its right to take tenancy of the adjacent premises "consisting of 4,000 rentable square feet." 550 Broad immediately incorporated the adjacent premises into the customized physical improvements already underway. Thereafter, in November 2006, but prior to the execution of the lease amendment for the added space, Daniels asked Ryan Patrick, BITS's Manager of Information Technology and Security, to measure the leased space and begin planning the layout for cubicles and other office equipment and furniture. That same day, Patrick advised Daniels that his measurements indicated that there was an "inside footage" of "about 9149 [square feet]," and "outside" square footage of approximately 9,400 for the entire premises. Daniels immediately contacted Clancey for an explanation.
On November 7, 2006, Clancey e-mailed Greenberg requesting that Greenberg's architect provide him with the correct dimensions for net usable and gross rentable square footage of the entire premises.*fn8 That same day, Clancey also sent an invoice to Greenberg requesting Clancey Realty's commission of $64,697.50 based upon BITS's lease of "12,990 s[quare] f[eet]."
Greenberg obtained a floor plan from the architect indicating in tabular form that the "gross rentable square footage" was "12,990 RSF" and the "new [sic] usable square footage" was "10,782 USF." Arithmetically, these figures reflected a seventeen percent loss factor. Greenberg communicated this information to Clancey and Daniels within days.
Subsequently, Daniels expressed to Lombardo that he felt there was a discrepancy in the amount of space being leased to BITS. Daniels also spoke to Clancey, who opined that "a [seventeen] percent loss factor was customary." According to Daniels, this was the first time that Clancey had ever used the phrase loss factor regarding the leasing arrangements.
According to Greenberg, Clancey called him and told him that Daniels was very angry with Clancey. Greenberg then called Daniels, who said that he was not upset with 550 Broad, but that Clancey had never advised him of the loss factor. Daniels and Greenberg later met at Greenberg's office where Greenberg explained how a loss factor was calculated. When Daniels stated that he "never had a lease with a loss factor," Greenberg explained that Gateway I's loss factor was probably around eighteen percent. Daniels did not ask either Clancey or Greenberg if he could independently confirm the size of the space at 550 Broad.
On November 13, 2006, in writing, BITS terminated its relationship with Clancey Realty because of Clancey's "gross negligence in the handling of [BITS's] lease for 550 Broad Street." Similarly, BITS advised Greenberg of the termination and requested that 550 Broad withhold Clancey Realty's commission. Greenberg was advised that BITS intended to sue its broker and was requested to do the following:
Provide drawings of 550 Broad Street to [BITS] so that we can retain a licensed architect, at [BITS's] sole expense, to calculate the total gross rentable square footage, total common space square footage, and resulting loss factor for 550 Broad Street, as well as the actual square footage of the [BITS] space on the [seventh] floor.
Greenberg did not respond to this request.
That same day, Greenberg sent a copy of the draft lease amendment to Daniels. Daniels forwarded the document to Lombardo for his review and comments. On November 15, 2006, an attorney affiliated with Lombardo sent Daniels an e-mail message suggesting that the dispute about the area of the demised premises should be resolved before executing the lease amendment.*fn9
On November 22, 2006, Daniels and Greenberg met at Greenberg's office. At the meeting, Daniels asked if he could measure the building and Greenberg replied that Daniels could measure BITS's leased space, but not that of the other tenants in the building. According to Daniels, Greenberg also advised that if Daniels did not sign the lease amendment, BITS could not move in and Greenberg would sue BITS's parent company for the rent due -- more than one million dollars -- for the entire lease term. Based upon what Greenberg told him, Daniels executed the lease amendment. Greenberg denied that he coerced Daniels, explaining that he merely told Daniels that the lease amendment simply memorialized the option Daniels had previously exercised, which Greenberg considered "self-operative" in amending the original lease agreement.
The lease amendment, dated November 22, 2006, acknowledged that the parties had previously entered into an original lease agreement in September, which pursuant thereto BITS leased "approximately 8,990 rentable square feet of space," and that BITS now intended to rent an additional "4,000 rentable square feet of space." The lease amendment further provided that, as of the date of signing, "the term 'Premises' as used in the Lease and this Amendment shall be deemed to include the Expansion Space and the Premises shall be deemed to consist of 12,990 rentable square feet." BITS agreed that "all of [550 Broad's] obligations accrued to date have been performed" and that there were "no defaults or breaches on the part of [550 Broad] under the Lease." BITS took actual possession of the leased premises on December 1, 2006.
On December 26, 2006, BITS (then represented by Lombardo's law firm) filed its complaint in the Chancery Division. The only defendants were Clancey Realty and Frank Clancey, individually (the Clancey defendants).*fn10 On July 27, 2007, with its present counsel the attorney of record, BITS filed a second amended complaint, which for the first time added two specific counts for relief against 550 Broad seeking a declaratory judgment and reformation of the leasing agreements to reflect that the rent be based upon 10,782 square feet rather than 12,990 square feet.
During the litigation, BITS hired LASERtech® Floorplans Ltd. (LASERtech) to measure the leased premises. On May 2, 2008, LASERtech provided BITS with a report indicating that the total usable area of the leased premises measured only 9,680 square feet.*fn11
On September 23, 2008, BITS filed its third amended complaint adding new claims against 550 Broad of fraud, duress, and breach of the implied covenant of good faith and fair dealing. The newly-configured pleading (now containing a limited demand for a jury trial) sought for the first time compensatory and punitive damages, as well as rescission of the lease agreements. BITS also sought damages against the Clancey defendants for: (1) negligence (count five); (2) breach of fiduciary duties through a material misrepresentation in the form of an omission (count six); and (3) a violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, (count seven).
Defendants filed answers to the various complaints. The Clancey defendants also filed a third-party complaint against Lombardo and his law firm alleging that they were responsible for advising BITS regarding the lease documents and seeking contribution pursuant to New Jersey's Joint Tortfeasors Contribution Law (JTCL), N.J.S.A. 2A:53A-1 to -5, and common law indemnification.
Following the filing of their third-party complaint, the Clancey defendants successfully moved to pierce the attorney-client privilege between BITS and Lombardo, a determination that remains contested on appeal. The motion court initially ordered the privilege pierced "for discovery purposes." It ordered that certain documents withheld during discovery under a claim of privilege be delivered to the court for its in camera inspection. Subsequently, after its review of the documents, the court ordered several items "discoverable."
Pursuant to a case management order, defendants and third-party defendants were permitted to move for summary judgment before the expiration of the discovery period. The managing judge heard the three motions on May 1, 2009. On June 25, 2009, the judge signed several orders and issued a written opinion granting summary judgment as follows:
* All claims of BITS against the Clancey defendants were dismissed with prejudice.
* All claims of the Clancey defendants against Lombardo were dismissed with prejudice.
* BITS's demand for a declaratory judgment (count one) and its prayer for a declaration that the lease agreements were void (count two) were dismissed with prejudice.
* BITS's remaining counts remained viable; summary judgment as to counts three and four was denied.
On November 19, 2009, 550 Broad filed a second motion for summary judgment as to counts three and four. On January 8, 2010, a different judge heard argument on the motion. At the conclusion of this hearing, the judge ruled in favor of 550 Broad. Three months later, on May 25, 2010, the judge signed an order and issued a written opinion confirming summary judgment. This appeal by BITS followed. The Clancey defendants did not seek review of the order dismissing their third-party complaint with prejudice.*fn12
We start our legal analysis with familiar principles. Because we are reviewing several grants of summary judgment, our scope of review is de novo, and we apply the same legal standard as the Law Division. Canter v. Lakewood of Voorhees, 420 N.J. Super. 508, 515 (App. Div. 2011). Thus, we consider, as the motion judges did, "'whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.'" Ingraham v. Ortho-McNeil Pharm., 422 N.J. Super. 12, 20 (App. Div. 2011) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).
Notwithstanding the generality of the foregoing, before facing the summary judgment record, we must address two specific preliminary issues raised by BITS. The first is its claim that both motion judges improperly relied upon inadmissible evidence -- including materials protected by the attorney-client privilege -- in deciding the motions. The second issue revolves around BITS's contention that it was improper to consider, much less grant, 550 Broad's second motion for summary judgment because it constituted a lateral appeal of the decision of one Law Division judge to a co-equal Law Division judge.
The latter issue is easier to resolve than the former. In Lombardi v. Masso, 207 N.J. 517 (2011), the Supreme Court interred any doubts about the propriety or the breadth of a trial judge's discretionary capacity, "at any time prior to the entry of final judgment," to re-analyze and modify interlocutory rulings and correct whatever error is recognized in an earlier ruling. Id. at 534 (quoting Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 257 (App. Div. 1987), certif. denied, 110 N.J. 196 (1988)). See also R. 4:42-2. Even though Lombardi involved reconsideration by the same trial judge, we are convinced that 550 Broad was fully entitled to make its second motion for summary judgment here, and the second motion judge was fully empowered to decide it completely. The second motion judge was careful to "provide the parties a fair opportunity to be heard on the subject," and to apply all other fairness standards required in such circumstances. Lombardi, supra, 207 N.J. at 537.
We further do not view the law of the case doctrine as an insurmountable barrier to the second motion or to its outcome. In Lombardi, the Court noted the following:
The law of the case doctrine teaches us that a legal decision made in a particular matter "should be respected by all other lower or equal courts during the pendency of that case." Lanzet v. Greenberg, 126 N.J. 168, 192 (1991) (citing State v. Reldan, 100 N.J. 187, 203 (1985); State v. Hale, 127 N.J. Super. 407, 410-11 (App. Div. 1974)). It is a non-binding rule intended to "prevent relitigation of a previously resolved issue." In re Estate of Stockdale, 196 N.J. 275, 311 (2008) (citing Pressler, Current N.J. Court Rules, comment 4 on R. 1:36-3 (2008)). "A hallmark of the law of the case doctrine is its discretionary nature, calling upon the deciding judge to balance the value of judicial deference for the rulings of a coordinate judge against those 'factors that bear on the pursuit of justice and, particularly, the search for truth.'" Hart v. City of Jersey City, 308 N.J. Super. 487, 498 (App. Div. 1998) (quoting Reldan, supra, 100 N.J. at 205). [Id. at 538-39.]
Our review of the record satisfies us that the second motion judge's decision to reconsider the renewed motion for summary judgment was not an abuse of her substantial discretion. Furthermore, in light of the complicated nature of the dispute, the further development and collection of discovery materials, and the intricacies of the applicable principles of law, the second motion judge's discretion to reach a conclusion at odds with the first motion judge was not a misuse or misapplication of judicial authority.
Rule 1:6-6 and Rule 4:46-2(c) contemplate that "competent evidential materials" will be the foundation of summary judgment motion practice. Ziemba v. Riverview Medical Center, 275 N.J. Super. 293, 301 (App. Div. 1994). BITS contends that since both motion judges relied upon information obtained in violation of its attorney-client privilege with Lombardo, the rulings cannot stand. This requires us to evaluate whether the first motion judge properly allowed the privilege to be pierced "for discovery purposes," and then permitted those discovery materials to become part of the summary judgment record.
Our review of evidentiary determinations of trial courts is limited. See Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 383 (2010). Generally, we examine whether a trial court's determination of the admissibility of evidence reflects a misapplication of discretion "because, from its genesis, the decision to admit or exclude evidence is one firmly entrusted to the trial court's discretion." Id. at 383-84 (citing Green v. N.J. Mfrs. Ins. Co., 160 N.J. 480, 492 (1999)). However, a motion to compel waiver of the privilege is more than a discovery application. We further emphasize that a literal application of the [In re Kozlov, 79 N.J. 232 (1979)] test is inappropriate without an appreciation that only compelling, that is "grave," circumstances, will justify piercing the privilege. [Dontzin v. Myer, 301 N.J. Super. 501, 511 (App. Div. 1997) (citation omitted).]
Accordingly, trial court decisions revolving around the attorney-client privilege are legal determinations, which we review de novo. Paff v. Div. of Law, 412 N.J. Super. 140, 149 (App. Div.) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)), certif. denied, 202 N.J. 45 (2010)).
Here, the first motion judge permitted the Clancey defendants to inquire about privileged communications between BITS and Lombardo as part of the third-party action against Lombardo seeking contribution and indemnification, as well as the direct action against them by BITS, which claimed that the Clancey defendants engaged in fraudulent conduct by omission. The judge determined that pursuant to Kozlov, supra, 79 N.J. at 243-44, he would first conduct an in camera review of BITS's withheld discovery materials.*fn13 Later, albeit without providing the parties a detailed explanation, the judge then entered an order finding a multitude of those materials "discoverable" and required that they "shall be provided to defendants and third-party defendants" forthwith. We agree in part with what the motion judge decided.
The attorney-client privilege is not absolute. Matter of Nackson, 114 N.J. 527, 532 (1989). Kozlov requires that in order to pierce a claim of attorney-client privilege there must be (1) a legitimate need by the requesting party for the evidence sought to be shielded; (2) a showing of relevance and materiality of that evidence to the issues before the court; and
(3) a demonstration that the information could not be secured
from any less intrusive source. Koslov, supra, 79 N.J. at 243-44.
These requirements are met as the result of BITS's assertions of fraud
and misrepresentation against the Clancey defendants, which can be
proven, if at all, only through clear and convincing evidence of
reliance by BITS upon the Clancey defendants. The Clancey defendants
were entitled to defend against that theory of liability by
demonstrating BITS's substantial reliance upon Lombardo. See Blitz v.
970 Realty Assocs., 233 N.J. Super. 29, 34-36 (App. Div. 1989)
(allowing discovery of a client's relevant conversations with her
counsel prior to signing a contract to purchase real estate, because
the client had placed in issue in the litigation her alleged lack of
knowledge prior to signing); but cf. Dontzin, supra, 301 N.J. Super.
at 510 (observing that we did not address the correctness of the trial
court's decision to pierce the privilege, because plaintiff did not
We do not, however, share the same view regarding the Clancey defendants' need for privileged materials regarding the third-party complaint against Lombardo. The reason for the difference in our determinations does not simply stem from the fact that Lombardo enjoys a final judgment of dismissal that has not been appealed. Rather, it grows out of our view that the Clancey defendants' assertions against Lombardo have no basis in law.
The Clancey defendants and Lombardo cannot be deemed joint tortfeasors and the JTCL has no application here. See, e.g., New Milford Bd. of Educ. v. Juliano, 219 N.J. Super. 182, 185 (App. Div. 1987). Their alleged torts were separate in nature and time, and the policy interest in distributing liability for BITS's loss among joint tortfeasors is not implicated. See, e.g., Cherry Hill Manor Assoc. v. Faugno, 182 N.J. 64, 75 (2001); Brodsky v. Grinnell Haulers Inc., 181 N.J. 102, 114 (2004).
Additionally, the Clancey defendants neither claim that they relied upon any representations of Lombardo nor that his firm represented them. Accordingly, New Jersey law does not provide a cause of action for the Clancey defendants to pursue. Cf. Banco Popular No. Amer. v. Gandi, 184 N.J. 161 (2005); Petrillo v. Bachenberg, 139 N.J. 472 (1995).
Thus, to the extent either of the motion judges relied upon privileged information as part of their analyses of the various claims during summary judgment motion practice, it depends upon the nature of the disclosure to determine if an evidentiary error was committed. Because of our ultimate conclusions in this case, those evidentiary rulings are immaterial to our decision. However, because aspects of the case will return to the Law Division, our conclusions are not advisory opinions.
We now return and address the grant of summary judgment in favor of the Clancey defendants by the first motion judge. In his June 25, 2009 decision granting summary judgment to the Clancey defendants, the judge noted that BITS claimed that Clancey was negligent when he failed to explain the meaning of the term "rentable square footage," disclose the applicable loss factor, and confirm the size of the leased space. Noting also that Clancey and BITS were in a fiduciary relationship, the judge was satisfied that Clancey did not violate his duty of full disclosure. This conclusion was debatable. Clancey arguably may have put Daniels on notice that rentable square footage was different from usable square footage through the various requests for proposals, which were approved by Daniels, and when Clancey provided his lease comments to Daniels for Daniels's review. Daniels denied that such information (1) was communicated by Clancey and (2) was adequately explained. This was the friction point of a genuine issue of material fact in dispute.
The relative level of sophistication and experience each man may have enjoyed does not inevitably gauge how a reasonable trier of fact would assess the believability of their disparate contentions. It was not for the motion judge to decide, particularly before expert opinions were obtained, that Clancey's conduct was sufficiently complete and competent to dispel any negligence, much less breach of fiduciary duties.
As to count seven of the third amended complaint alleging a violation of the CFA by "conduct [that] rises to the level of unconscionable business practices," the judge made no findings. Instead, he treated the claim as one sounding in common law fraud and found that "no proofs were set forth that shows Clancey intentionally made a material misrepresentation or omission and [BITS's] opposition fails to cite to any evidence that supports these claims." The judge ultimately granted summary judgment in favor of the Clancey defendants on this count. Because the Law Division never addressed the CFA claim, we must reverse to allow the proper resolution of the issue in the trial court.
A fiduciary duty exists between a real estate broker and its client. Mango v. Pierce-Coombs, 370 N.J. Super. 239, 256 (App. Div. 2004). A broker, as a fiduciary, "is required to exercise fidelity, good faith and primary devotion to the interests of his principal. Included in this duty is the duty of full disclosure." Ibid. (internal citations omitted).
BITS insists that Clancey failed to explain the concept of "rentable square feet" and "did nothing at all to discover . . . the true cost of this deal," i.e., that BITS would actually be paying what it computed to be $27.50 per square foot, rather than $21.50 per square foot. Also, Clancey neither properly negotiated the loss factor nor suggested that BITS have the CAD file reviewed by an architect before signing the lease agreement and lease amendment.
Finally, BITS argues that the record confirmed that Clancey's motivation in failing to advise Daniels of the loss factor was to inflate his commission. Clancey's rebuttal that that it was industry standard for commercial real estate brokers to base commissions upon the rentable square feet of the leased premises is not dispositive of the issue.
Because the Clancey defendants' motion was permitted to be argued before the discovery period ended, BITS was unable to present expert opinion that might affect the outcome of the motion. We need not tarry long in recognizing that summary judgment was not only incorrectly granted in favor of the Clancey defendants, but was premature as well. We reverse the dismissal of counts five, six, and seven of the third amended complaint and remand for further proceedings.
We next review the serial grant of summary judgment by the two motion judges, starting with the first judge's decision to dismiss the claims for a declaratory judgment seeking that (1) "rent [be] calculated on the basis of the size of the demised space (9,680 square feet) and not 12,990 square feet, or (2) "the lease agreement is void and unenforceable and BITS is due a refund of payments made for excess rent, electrical payments and additional rent and the payment of any future rent according to the principles of quantum meruit."
The motion judge found BITS's argument to be unpersuasive that the original lease agreement's use of the phrase "rentable square feet" was ambiguous. He additionally discounted the contention that the absence of a reference to, or definition of, a loss factor rendered the lease arrangement unclear. The judge also found that because Clancey was fully apprised of the loss factor, principles of agency caused BITS to be constructively aware of the concept, thereby negating a legal basis to treat the lease agreement and lease amendment as void. We agree.
On appeal, BITS's reprises its ambiguity argument and fortifies it with the after-acquired architectural expert opinion of Douglas F. Korves indicating that 550 Broad did not adhere to any bona fide method of measuring the leased space. Korves confirmed that the CAD file supplied by 550 Broad in August 2006 revealed that the entire leased premises comprised 9,678 usable square feet, which were merely two square feet less than LASERtech's measurement of 9,680 square feet. He further noted that both the American Institute of Architects (AIA) and the Building Owners and Management Association (BOMA) had developed written methods to measure commercial office space and that LASERtech's measurement was done in accordance with BOMA's standards. Korves conceded that commercial landlords in New Jersey were not required by statute or regulation to use a particular methodology to measure leased premises. He insisted, however, that 550 Broad "did not use a conventional method of measurement" in admeasuring BITS's leased premises. As a result, his opinion was that BITS's lease actually incorporated a loss factor of approximately 25.50 percent rather than the unwritten seventeen percent.
The lease agreement and lease amendment at the center of this appeal are contracts. Interpretation and construction of contracts are subject to de novo review. Kieffer v. Best Buy, 205 N.J. 213, 222 (2011). Although the motion judge's factual findings will be upheld when supported by "sufficient credible evidence" in the record, Real v. Radir Wheels, Inc., 198 N.J. 511, 527 n.11 (2009), no deference is owed to the legal conclusions drawn from established facts and accordingly the contract is reviewed "with fresh eyes[,]" Kieffer, supra, 205 N.J. at 223; see also Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009).
We conclude that the first motion judge was correct in determining that Clancey's agency status, coupled with his understanding of the contours of the lease agreement, shields 550 Broad from a declaration that the lease agreement is void for want of a meeting of the minds. Clancey's knowledge is imputed to his principal BITS. See NCP Litig. Trust v. KPMG L.L.P., 187 N.J. 353, 366 (2006) (a principal is deemed to know facts that are made aware to its agent in order to protect third parties with whom an agent deals on the principal's behalf). Accordingly, questions of ambiguity in the lease agreement, at least in terms of whether a contract was ever formed, evaporate.
The first motion judge properly exercised summary judgment jurisprudence in deciding to dismiss the first two counts of the third amended complaint. However, as noted, that judge denied summary judgment as to the third and fourth counts, which sought
(1) reformation or rescission of the lease agreements due to mistake, misrepresentation, fraud, and duress and (2) reformation and damages for breach of the implied covenant of good faith and fair dealing.
The second motion judge revisited the denial of summary judgment on the last two theories of liability. We repeat that the judge's engagement in the process of reconsideration was unremarkable and well within the mainstream of her reservoir of discretion. See Lombardi, supra, 207 N.J. at 534 (emphasizing that a motion court has the inherent power -- to be exercised in its sound discretion -- to review, revise, reconsider, and modify interlocutory orders at any time prior to the entry of final judgment).
In granting summary judgment, BITS insists that the second judge erred in the following ways: (1) 550 Broad's second motion for summary judgment was an improper lateral appeal; (2) the judge improperly relied upon an inadmissible, privileged communication; (3) the judge improperly relied upon Daniels's supposed sophistication as a businessman; (4) the judge mistakenly found that the lease amendment constituted a settlement; and (5) the defense of laches was not applicable in this case. Although we agree that some of the judge's expressed reasons were mistaken, summary judgment was nevertheless the appropriate disposition of BITS's claims against 550 Broad. An order will be affirmed on appeal if it is correct, even if we do not adopt the specific reasoning of the motion judge. Isko v. Planning Bd. of Livingston, 51 N.J. 162, 175 (1968); see also Serrano v. Serrano, 367 N.J. Super. 450, 461 (App. Div. 2004).
BITS's main argument against 550 Broad is steeped in its claims that 550 Broad employed an ad hoc, unconventional method of measuring leased space. It further contends that 550 Broad provided BITS with inaccurate and misleading information concerning the actual area of the premises. Even if this were all true, which for summary judgment purposes we assume to be the case, BITS always maintained a fool-proof safeguard against such idiosyncrasy: it could have actually reviewed the CAD file and deployed someone to physically measure the space before committing itself to a multi-million dollar lease arrangement. Its failure to do so dooms its fraud-based claims.
To establish liability for common law fraud, BITS must demonstrate "a material representation of a presently existing or past fact, made with knowledge of its falsity and with the intention that the other party rely thereon, resulting in reliance by that party to his detriment." Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 624 (1981). Equitable fraud does not require proof of scienter; rather it requires only that BITS prove reasonable reliance on a material misrepresentation of fact. See Daibo v. Kirsch, 316 N.J. Super. 580, 588 (App. Div. 1998).
The issue on appeal is whether, viewing the evidence in the light most favorable to BITS, a rational factfinder could find that the elements of fraud were met. We find that such a trier of fact could not find reasonable reliance.
The deliberate suppression of a material fact that should be disclosed is equivalent to a material misrepresentation. Strawn v. Canuso, 140 N.J. 43, 62 (1995). That is, silence, in the face of a duty to disclose, may be a fraudulent concealment. See Berman v. Gurwicz, 189 N.J. Super. 89, 93 (Ch. Div. 1981), aff'd o.b., 189 N.J. Super. 49 (App. Div.), certif. denied, 94 N.J. 549 (1983). Fiduciary relationships, such as those between an attorney and a client or a principal and an agent, may call for disclosure. Berman, supra, 189 N.J. Super. at 93 (quoting Pomeroy, Equity Jurisprudence § 902 at 552-54 (5th ed. 1941)). An ordinary business transaction such as that between BITS and 550 Broad, however, will rarely give rise to a duty to disclose since the parties are adversarial. Globe Motor Car Co. v. First Fidelity Bank, 273 N.J. Super. 388, 393 (Law Div. 1993), aff'd, 291 N.J. Super. 428 (App. Div.), certif. denied, 147 N.J. 263 (1996). Moreover, where information is equally available to both parties, neither has a duty to disclose it to the other. Id. at 395.
We are unable to discern any clear and convincing evidence that 550 Broad's representatives had a specific, deliberate intent to defraud BITS, and that there was detrimental reliance. "Where both parties to a contract have or can acquire the same amount of knowledge regarding its subject matter, one party may not attack the contract by alleging reliance on representations made by the other." Middlesex Cnty. Sewerage Auth. v. Borough of Middlesex, 74 N.J. Super. 591, 605-06 (Law Div. 1962) (quoting Condon v. Sandhowe, 97 N.J. Eq. 204, 206-07 (Ch. 1925)), aff'd, 79 N.J. Super. 24 (App. Div.), certif. denied, 40 N.J. 501 (1963). Thus, a party "is not justified in relying on representations made  when [it had] ample opportunity to ascertain the truth" before acting. Fleming Cos., Inc. v. Thriftway Medford Lakes, Inc., 913 F. Supp. 837, 844 (D.N.J. 1995).
We find applicable here the principle that if a party to whom representations are made nevertheless chooses to investigate the relevant state of facts for itself after becoming aware of a discrepancy, it will be deemed to have relied on its own investigation (or lack thereof) and will be charged with knowledge of whatever it could have discovered by a reasonable investigation. See DSK Enter., Inc. v. United Jersey Bank, 189 N.J. Super. 242, 251 (App. Div.), certif. denied, 94 N.J. 598 (1983). BITS had ample opportunity to engage in due diligence before signing the lease agreement in September and then ratifying the original undertaking by taking an additional 4,000 square feet under its wing as part of the lease amendment two months later. It may not now attack 550 Broad because of its own oversight.
We reject as meritless BITS's argument regarding duress.
R. 2:11-3(e)(1)(E). "Economic duress occurs when the party alleging it is 'the victim of a wrongful or unlawful act or threat,' which 'deprives the victim of his unfettered will.'" Quigley v. KPMG Peat Marwick, L.L.P., 330 N.J. Super. 252, 263 (App. Div.)(quoting 13 Williston on Contracts, § 1617 (Jaeger ed. 1970)), certif. denied, 165 N.J. 527 (2000). In Continental Bank of Pennsylvania v. Barclay Riding Academy, Inc., 93 N.J. 153 (1983), the Supreme Court, referencing Williston on Contracts, discussed the doctrine of economic duress as it applies to arm's length business transactions, and stated that economic duress is comprised of two basic elements: (1) "[t]he party alleging economic duress must show that he has been the victim of a wrongful or unlawful act or threat, and (2) [s]uch act or threat must be one which deprives the victim of his unfettered will." Id. at 176 (citing 13 Williston on Contracts, § 1617 at 704 (3d ed. 1970)). Other than its naked subjective views, there is no evidence in this record to warrant the presentation of a theory of duress to a trier of fact.
We also find little merit in BITS' claim that 550 Broad breached the implied covenant of good faith and fair dealing. Every contract entered into under the laws of this state contains an implied covenant of good faith and fair dealing. See Kalogeras v. 239 Broad Ave., L.L.C., 202 N.J. 349, 366 (2010). "'Good faith'" imports "'standards of decency, fairness or reasonableness'" and "requires a party to refrain from 'destroying or injuring the right of the other party to receive' its contractual benefits." Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 109-10 (2007) (internal citations omitted). "The party claiming a breach of the covenant of good faith and fair dealing 'must provide evidence sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties.'" Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 225 (2005) (quoting 23 Williston on Contracts § 63:22, at 513-14 (Lord ed. 2002)).
The implied covenant of good faith and fair dealing focuses on the performance and enforcement of a valid agreement more than it regulates contract formation. See id. at 224; Restatement (Second) of Contracts § 205 (1981) ("Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement."). The implied covenant of good faith and fair dealing does not require "either side in negotiations to reveal any and all information that might help the adversary and hurt his or her own client," Brundage v. Estate of Carambio, 195 N.J. 575, 609 (2008), but directs that "'neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract[,]'" once it is entered into. Sons of Thunder v. Borden, Inc., 148 N.J. 396, 420 (1997) (quoting Palisades Props., Inc. v. Brunetti, 44 N.J. 117, 130 (1965)).
In this case there is no evidence that 550 Broad suddenly attempted to frustrate BITS's right to the full measure of the leased premises or "destroy[ ] [its] reasonable expectations and right to receive the fruits of the contract[.]" Sons of Thunder, supra, 148 N.J. at 425. Under the demising documents, BITS was entitled to receive a quantum of rentable square feet, and no more. Because 550 Broad's interpretation of the arrangement does not strip BITS of the benefit of the bargain, there can be no breach of the implied covenant of good faith and fair dealing.
In conclusion, we determine that the grants of summary judgment in favor of 550 Broad and Lombardo were ultimately correct, and therefore they are affirmed. The dismissal in favor of the Clancey defendants must be reversed.
Affirmed in part, reversed in part, and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.