On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2659-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner, Simonelli and Hayden.
Defendant, Dr. Joseph Leone (Leone or defendant), appeals from a July 9, 2010 final order entering judgment totaling $313,026.80 in favor of plaintiff, Gemini Restoration, Inc. (Gemini or plaintiff), and denying defendant's post-trial motions. He also appeals from two interlocutory orders: an August 10, 2007 order denying his summary judgment motion and dismissing his counterclaim under the Consumer Fraud Act, and an August 13, 2008 order denying reconsideration.
By way of background, this case arises from a contract to perform extensive renovations to Leone's multi-million-dollar house in Spring Lake. A previous contractor had begun the work but had not completed the job, and Leone retained Gemini to finish the project. Under the supervision of Christine Miseo, an architect whom Leone had retained to oversee the renovation project, Gemini completed extensive renovations. Leone paid for the work, except for a portion of the last invoice. Although Miseo had approved the work reflected in Gemini's invoices, Leone withheld payment, claiming that Gemini had charged excessive labor rates.
Plaintiff filed suit against Leone for the balance due, and Leone filed a counterclaim alleging that the contract violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (the CFA or the Act), and that some of the work was defective. Plaintiff also filed an amended complaint naming Miseo as an additional defendant. In 2007, on the parties' summary judgment motions, the court dismissed Leone's CFA counterclaim on equitable grounds, but did not dismiss his affirmative defense that plaintiff's suit was barred because the contract violated the CFA.
Beginning in May 2006, Gemini served Leone with a series of three
offers of judgment (OOJ), each offering to accept $70,000 to resolve
Gemini's contract claim. The last two also specifically offered $0 to
resolve Leone's remaining counterclaim concerning defective
workmanship. The case proceeded to a jury trial in 2009.*fn1
At the close of plaintiff's evidence, Leone moved for an
involuntary dismissal of the complaint pursuant to Rule 4:37-2(b). The
court dismissed the breach of contract claim because the contract
violated the CFA regulations governing home improvement contractors,
plaintiff to proceed in quantum meruit for the reasonable value of its
services. The jury returned a $92,000 verdict in plaintiff's favor.
On this appeal, Leone contends that the trial court erred in dismissing his counterclaim, allowing plaintiff to proceed in quantum meruit, failing to properly instruct the jury on quantum meruit, denying him counsel fees under the CFA, and awarding plaintiff counsel fees under the offer of judgment rule. Finding no merit in any of these contentions, we affirm the July 9, 2010 order and judgment.
Because the principal issues in the case turn on the pre-trial summary judgment motion and cross-motion, we address the summary judgment record first.
In September 2004, Gemini contracted with Leone to complete renovation work on his house in Spring Lake. Miseo recommended Gemini to Leone for the renovation project in 2004. She was familiar with plaintiff's president, Kermit "Kim" Abrahamson, and had worked with him before. Miseo had also worked with Leone on some projects in the past by "draw[ing] up the plans after [Leone] . . . [told] her what [he] would like to have done." At his deposition, Leone confirmed that he had worked with Miseo a number of times over the past fifteen years, including a project on his home in Short Hills, work on his office in Millburn, and a shopping center in Madison.
The Gemini contract estimated a total of $221,738.55 for the proposed renovation work, based on "labor, material and supervision costs plus cumulative 10% [and] 10% overhead and profit." The contract stated it did not include a price for "fiberglass decking" or "exterior handrailings or decks," but estimates for those items would be "provided at a later time." The contract also provided that "[i]f changes are made or requested they will be performed only after a credit or debit memo has been supplied."*fn2
Abrahamson did not consider the contract a time and materials contract because it contained a lump sum estimate for proposed renovation work. In other words, the $221,000 was "a hard number . . . to do the work described." Abrahamson did not define the term "labor" in the contract "[b]ecause [he] wasn't aware there were going to be so many change orders on the job" and he "was never asked that" question at the time. According to Abrahamson, he did not provide a breakdown of the components of the hourly rate he charged for labor, because he did not think "it [was] anyone['s] business [as to] how [he] ma[d]e a living or what or how [he] mark[ed] up [his] labor and materials because that's what" was done in the industry. According to Miseo, in the industry the term "labor" was understood to include "any insurance, FICA, contributions, 401K contributions, [and] miscellaneous monies that  directly or indirectly go to the employee." In other words, she agreed that a charge for "labor" would include considerably more than the net hourly amount the contractor paid to the worker. She agreed that Gemini's rates were consistent with the industry standard.
Abrahamson testified that the labor rates he charged Leone were based on the Xactimate*fn3 computer program which was "widely used" in the construction industry. However he discounted those rates and charged Leone less than the rates Gemini "would be paid by a company such as State Farm Insurance" for similar reconstruction work.
After Gemini's renovations began, the scope of the project changed significantly as Miseo and Leone sought a series of additions to the work. In October 2004, Abrahamson orally agreed with Miseo that, going forward, he would bill Leone monthly for his services "on a model of labor, material, supervision, plus overhead and profit." Abrahamson did not prepare any subsequent contracts for Leone's execution because Leone persistently declined to discuss the subject with him and instead directed him to discuss the work modifications with Miseo. As Abrahamson put it, he "always turned back to . . . Miseo because doctors [such as Leone] have a great way of avoiding questions when they don't have the time or the energy to answer it, and in [ninety-five] percent of the time it would be speak to . . . Miseo, she's pretty much handling the project."
When asked during his deposition whether he considered the original contract voided as of October 15, 2004, Abrahamson responded "[y]eah." In his certification on summary judgment, Abrahamson explained that he "was saying . . . that there were so many change orders and additional work . . . became a part of the contract."
Abrahamson certified that Miseo was "hired . . . to serve as [Leone's] design professional and to review the work being performed, review the bills for the labor and materials and to address issues related to the additions/change orders."
According to Abrahamson, his invoices for the work completed during the months of October 2004 through February 2005 were presented to Leone and Miseo. Those invoices fully disclosed the hourly rates he was charging for labor. Leone and Miseo "both advised [Abrahamson] that further formalities were not necessary because [Leone] was relying upon Miseo to be his professional advocate in the matter and to review the work and the bills." Miseo "approved each and every one of the bills for labor and materials submitted by [plaintiff]."
In his affidavit, Leone admitted that Gemini disclosed the hourly rates it was charging for labor: "Gemini sent me invoices for its services, . . . dated October 15, 2004, November 16, 2004, December 20, 2004, January 31, 2005 and February 9, 2005. The invoices provided a breakdown of items such as . . . cost of labor."
Miseo testified that invoices "would be faxed to [Leone] and [her] monthly[,]. . . [Leone] would call [her] up and ask [her] if [she] thought the [bills] looked fair . . . [a]nd [they] would discuss it and that's how [plaintiff] would get paid." At his deposition, Leone testified that he did not recall reviewing invoices with Miseo. But when asked whether he had reason to dispute the truthfulness or accuracy of the aforementioned portion of Miseo's testimony, Leone responded, "[n]o."
According to Miseo, she approved all of the invoices except the last one. Miseo did not have her notes with her at her deposition, which would have confirmed her recollection regarding which invoices she reviewed.
Leone claimed that it was not until he received Gemini's last bill in February 2005 that he began to believe that Abrahamson had been overcharging him for labor. Miseo testified that Leone told her in February that the last invoice "[was not] going to be paid until some of the numbers had been looked at and some of the wages had been looked at."
For all of the completed renovation work, plaintiff was paid $221,738.55, representing the original contract price, and $130,261.36 of the $219,842.81 in charged invoices for subsequent completed work. Leone refused to pay the remaining $89,581.36. The gist of Leone's objection to the rates was his alleged belief that Gemini was only going to charge him the hourly wage it paid to its workers, plus ten percent for overhead and ten percent as profit.
On August 10, 2007, immediately following oral argument on the motion, Judge Joseph P. Quinn placed an opinion on the record. He found as fact that Leone originally bought the house for "one and a half million dollars," and hired a contractor to perform some renovations. He then hired Gemini to perform extensive additional work, amounting to about a half million dollars. He found that Miseo, an architect, was Leone's friend and also had a "longstanding" professional relationship with him. She "was the ...