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Haynes Security, Inc. and John D'agostino v. Port Authority of New York and New Jersey

June 13, 2012

HAYNES SECURITY, INC. AND JOHN D'AGOSTINO, PLAINTIFFS-APPELLANTS,
v.
PORT AUTHORITY OF NEW YORK AND NEW JERSEY, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9165-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 30, 2011 -

Before Judges Fuentes, Nugent and Newman.

Plaintiffs Haynes Security, Inc. and John D'Agostino appeal from two Law Division orders: the March 22, 2010 order denying their motion to bar defendant the Port Authority of New York and New Jersey from using or relying upon documents it produced after discovery ended; and the March 26, 2010 summary judgment order dismissing their complaint with prejudice. Plaintiffs contend the trial court committed numerous procedural and substantive errors, including relying on the belatedly-produced documents, when it dismissed their claim that defendant orally extended for an additional two years, their four-year, multi-million-dollar contract for security services at two airports. We agree with the trial court that, as a matter of law, defendant was not bound by, and plaintiffs could not have reasonably relied upon, oral promises to extend the contract allegedly made by defendant's high-ranking employees. Accordingly, we affirm.

I.

A.

The Port Authority of New York and New Jersey (the Port Authority) is a bi-state agency consisting of twelve commissioners who constitute a board that is authorized to adopt by-laws for its management. N.J.S.A. 32:1-4, -5, and -6. Plaintiff John D'Agostino (D'Agostino) and his wife, Carol Ann, were, respectively, the president and chief executive officer of Haynes Security, Inc. (Haynes), as well as its majority shareholders. In December 2002 the Port Authority's Executive Director, Joseph J. Seymour, signed a "Memorandum of Justification" authorizing the Port Authority's Director of Procurement to enter into a four-year contract with Haynes to provide unarmed, uniformed guard services at two airports.*fn1 The memorandum also authorized "the Director of Procurement, at the discretion of the Director of Aviation, to exercise up to two, two-year renewal options . . . ." Discretion to exercise the renewal options was thus vested in the Director of Aviation, who at the time was William DeCota.

On January 10, 2003, the Port Authority and Haynes entered into a written agreement (the Contract) under which Haynes was to provide the specified services at John F. Kennedy International Airport and LaGuardia Airport, for which it would be paid $89,340,649.41. D'Agostino signed the Contract on behalf of Haynes. Andrea Roitman, the Port Authority's then Manager of Purchasing Services, signed the Contract on behalf of the Port Authority. The initial term of the Contract was four years beginning on February 1, 2003, and ending on January 31, 2007 (the termination date). The Contract provided that, "unless sooner terminated or revoked (or extended)[, the Contract] shall expire at 11:59 p.m. on or about January 31, 2007 . . . ."

The Port Authority had the unilateral right to extend the Contract. The Contract's extension option provided:

The Port Authority shall have the unilateral right, upon sixty (60) days notice to the Contractor to extend this contract for two (2) additional two (2) year periods (herein the "option periods" or "options years") from the Expiration Date originally fixed herein, as the same may have been previously extended on terms stated herein subject only to adjustment of charges as herein provided. Prior to exercising any such option to extend, the Port Authority shall advise the Contractor, in writing, at least sixty (60) days prior to the expiration of the original term thereof, as the same may have been extended that it intends to exercise such extension. The Port Authority makes no guaranty that the extensions will be exercised. . . . The Port Authority shall have the absolute right to extend this Contract as the same may have been previously extended as provided in sub-paragraph B. above, for up to an additional one hundred twenty (120) day period subsequent to the Expiration Date hereinbefore established, on the same terms and conditions as the original Contract Term. The charges in effect for the previous Contract year shall remain in effect during this extension period without escalation. The Port Authority shall notify the Contractor in writing, at least thirty (30) days prior to the Expiration Date hereinbefore established that the Contract term is so extended.

The Contract also authorized the Port Authority to cancel the Contract before the termination date. The cancellation clause provided:

In addition to all other rights of revocation or termination hereunder and notwithstanding any other provision of this Contract the Port Authority may terminate this Contract and the rights of the Contractor hereunder without cause at any time upon five (5) days written notice to the Contractor and in such event this Cont[r]act shall cease and expire on the date set forth in the notice of termination as fully and completely as though such dates were the original expiration date hereof and if such effective date of the termination is other than the last day of the month, the amount of the compensation due to the Contractor from the Port Authority shall be prorated when applicable on a daily basis. Such cancellation shall be without prejudice to the rights and obligations of the parties arising out of portions already performed but no allowance shall be made for anticipated profits.

The Contract also contained an integration clause:

This Agreement consists of the following: Part I (Sections 1 through 38) Part II and Part III and Exhibits 1, 2, 3, 4, 5 and Attachments. It constitutes the entire agreement of the parties on the subject matter hereof and may not be changed, modified, discharged or extended except by written instrument duly executed by the Port Authority and the Contractor. The Contractor agrees that no representation or warranties shall be binding upon the Port Authority unless expressed in writing in this Agreement.

The Port Authority vested responsibility for the Contract's management in the Director of the Office of Operations & Emergency Management (OEM), who was responsible for security standards, and the Director of Aviation, who was responsible for the operational aspects of the Contract. John Paczkowski was the Director of OEM. As previously indicated, William DeCota was the Director of Aviation.

The parties' relationship was uneventful until Haynes, D'Agostino, and D'Agostino's wife, Carol Ann, were indicted. On February 2, 2004, one year after commencement of the Contract, a New Jersey grand jury returned an indictment charging Haynes with one count of conspiracy, two counts of commercial bribery, and one count of theft by deception; D'Agostino with one count of conspiracy, one count of misconduct by a corporate official, two counts of commercial bribery, and two counts of theft by deception; and Carol Ann D'Agostino with one count of misconduct by a corporate official and one count of theft by deception. As a result of the indictment, in July 2004, Haynes was suspended from bidding on any New Jersey government contracts. In September 2004, the charges against D'Agostino's wife were dismissed, as were the conspiracy and theft by deception charges against Haynes and D'Agostino relating to another agreement between Haynes and the Port Authority for unarmed, uniformed security services at Newark Liberty International Airport.

By April 2005, the Port Authority's Chief of Staff, Edmond Schorno, was seriously considering terminating the Contract. Schorno commented in emails that the Port Authority should "have a plan in place that will allow [it] to proceed at will if necessary[,]" and that "[b]eing prepared to put out a new RFP just makes good business sense and represents good stewardship." Schorno also wrote, "If Haynes performs in an admirable fashion and the principals are never convicted of any crime, we will have been more diligent throughout the term of the indictment and there is nothing wrong with that."

To address Schorno's concerns, Steven Pasichow, the Port Authority's Assistant Inspector General, recommended that the Port Authority require Haynes to enter into a monitoring agreement to assure that Haynes's performance under the Contract complied with the law. Pasichow selected a three-year term for the monitoring agreement because when he was "with New York City that was generally the routine number of years that we would have a monitorship agreement." During the time Pasichow was preparing the monitoring agreement, Paczkowski was coordinating with OEM the preparation of a new request for proposal (RFP) for the services Haynes was providing under the Contract.

The parties met on April 20, 2005 to discuss the monitoring agreement. They dispute what took place at that meeting. D'Agostino and his attorney, Eric Tunis, attended the meeting. The participating Port Authority representatives included Assistant Inspector General Pasichow; Director John Paczkowski and Charles Agro from OEM; Deputy Director Reiss and James Oliver from Aviation; and Herb Somerwitz, Esq. from the Port Authority's law department. According to Reiss, the purpose of the meeting was to discuss the monitoring agreement. In exchange for Haynes agreeing to enter into the monitoring agreement, the Port Authority would not terminate the Contract under the clause that permitted the Port Authority to cancel the Contract without cause. The extension option was not discussed because it was "way to soon to discuss any renewal option in 2005 with the Contract expiring in 2007."

D'Agostino's version of the meeting differed from that of Reiss. According to D'Agostino, in response to Paczkowski's statement that the Port Authority wanted Haynes to enter into a monitoring agreement, D'Agostino asked if "by me doing this, Haynes . . . is going to keep the Contract through the extension[,] and [Paczkowski] said, yes." No one else at the meeting recalled any discussion about an extension of the Contract. Paczkowski, in his deposition, denied "any discussion at the meeting by Mr. D'Agostino about the fact that he would execute a monitoring agreement if the Port Authority agreed to the extension or the option period set forth in the original Contract[.]" Paczkowski also denied that D'Agostino had addressed "any questions to [him] directly about whether or not execution of the monitoring agreement would in any way tie into the option period or the renewal period in the Contract[.]"

The deposition testimony of D'Agostino's attorney concerning the purpose of the meeting was consistent with that of the Port Authority employees. When asked whether D'Agostino told him that he, D'Agostino, had to enter into the monitoring agreement or lose the Contract, Tunis responded, "That was the whole point of these discussions." Tunis explained that Haynes was in jeopardy of losing all its customers as a result of the indictment, and that D'Agostino was concerned most about losing the Port Authority Contract because it constituted a large percentage of Haynes's revenue.

D'Agostino signed the monitoring agreement on June 29, 2005, and Roitman signed it on behalf of the Port Authority on July 11, 2005. Between April 20 when he met with the Port Authority employees, and June 29 when he signed the monitoring agreement, D'Agostino had another attorney, not Tunis, review and negotiate the terms of the monitoring agreement. The other attorney later testified at his deposition that D'Agostino had struck a deal with the Port Authority that would allow Haynes to continue to fulfill the Contract. Although retained solely in connection with the monitoring agreement, the attorney did not recall being told that Haynes was entering into the monitoring agreement in exchange for a two-year extension of the Contract. The attorney testified that had he been told that, "[t]hat would be something that I would assume would be in writing somewhere[,] . . . I don't think I ever saw the [C]ontract. I didn't even know that the Contract was getting ready to terminate or that there was an option for [a] two-year extension."

The monitoring agreement required that Haynes, at its sole expense, retain an "Independent Private Sector Inspector General" (IPSIG) to be selected by the Port Authority. The primary responsibility of the IPSIG would be to design and implement a corruption prevention program for Haynes. Paragraph 2 of the monitoring agreement, entitled "John D'Agostino," provided that D'Agostino would continue with his "normal activities on behalf of Haynes related to [the Contract]" until there was a "disposition of the criminal charges" pending against him. In the event of a deferred prosecution or disposition other than criminal conviction, the monitoring agreement would "continue for one year from the termination of the period of the 'deferred prosecution.'" In the event of the complete dismissal of the criminal charges, the term of the monitoring agreement and IPSIG would discontinue, subject to the IPSIG completing any ongoing audits or investigations.

Paragraph 3 of the monitoring agreement, entitled "Independent Private Sector Inspector General," contained terms for the duration of the IPSIG. Paragraph 3(a)(ii) stated that the term of the IPSIG would expire upon the occurrence of one of four events. Two of those events were a deferral or dismissal of the criminal charges against D'Agostino. The third event occurred "[a]fter final payment by the Port Authority to Haynes and resolution of all claims of Haynes in connection with the Contract." The final terminating event had to do with the Port Authority completing pending audits or investigations.

Paragraph 7 of the monitoring agreement, entitled "Miscellaneous," provided: "The term of this Agreement, except as otherwise stated, shall be three years from the date of the execution of this Agreement by Haynes."

Roitman signed the monitoring agreement on behalf of the Port Authority. Like the Contract, the monitoring agreement contained an integration clause providing that the agreement constituted the "full agreement between the parties." The monitoring agreement contained no reference to an extension of the Contract.

Sometime in 2005, after the monitoring agreement was in place, D'Agostino retained Edward Bilinkas, Esq., and Haynes retained Vincent J. Nuzzi, Esq., to represent them in the criminal action. According to Bilinkas, he learned from D'Agostino that "the Port Authority represented approximately seventy percent . . . of Mr. D'Agostino's revenues for his company, and he was always concerned about the Port Authority and keeping the contracts with them." Bilinkas also learned from D'Agostino "that there was an extension that had been promised to Haynes Security."

During the months between his retention by D'Agostino and June 2006, Bilinkas had numerous conversations with Pasichow about the Contract extension. Bilinkas did not recall the names of any other employee of the Port Authority with whom he had any conversations. When asked at his deposition about specific conversations with Pasichow, the following exchange took place:

Q. [By Counsel] Did anybody from the Port Authority ever say in your presence or in a phone conversation that the Port Authority had promised Mr. D'Agostino on behalf of Haynes Security that he would automatically ...


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