GREG NOREN v. HEARTLAND PAYMENT SYSTEMS, INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2897-08T12897-08T1

GREG NOREN,

Plaintiff-Appellant,

v.

HEARTLAND PAYMENT SYSTEMS, INC.,

Defendant-Respondent,

and

ROBERT O. CARR, CEO OF HPS,

ROBERT BALDWIN, CFO OF HPS,

ROBERT MICHAELS, VICE-PRESIDENT

OF HPS, ROBERT MARTIN, REGIONAL

DIRECTOR OF HPS, SANFORD BROWN,

VICE-PRESIDENT OF HPS,

Defendants.

____________________________________

 

Argued: January 4, 2010 - Decided:

Before Judges Axelrad and Fisher.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4528-06.

Steven I. Adler argued the cause for appellant (Cole, Schotz, Meisel, Forman & Leonard, P.A., attorneys; Mr. Adler of counsel and on the briefs; Kathryn E. Dugan, on the briefs).

Michael J. Conlan argued the cause for respondent (Blank Rome, LLP, attorneys; Mr. Conlan and Seth J. Lapidow, of counsel and on the brief).

PER CURIAM

Plaintiff Greg Noren appeals from the November 7, 2008 order dismissing his complaint with prejudice pursuant to Rule 4:23-2 for failure to comply with discovery orders, and the January 9, 2009 order denying reconsideration. We reverse.

The complaint was originally filed by the law firm of Rosemary DiSavino on June l6, 2007, against defendant, Heartland Payment Systems (HPS). On October 5, 2007, an amended complaint was filed by substituted counsel, Eric Kleiner, which included officers and managers of HPS as additional defendants, asserting the following claims: (1) violation of the New Jersey Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8; (2) intentional harassment; (3) wrongful discharge; (4) intentional infliction of emotional distress; (5) defamation; (6) false light; (7) fraud; (8) negligent misrepresentation; and (9) breach of contract. On February l4, 2008, plaintiff filed a second amended complaint, which essentially pleaded the same counts as the amended complaint. The case was heavily litigated; there were a "volley of motions" filed by the parties and they exchanged voluminous interrogatories and documents. Three orders extending the discovery period were entered by the court, with the last discovery end date set for October l7, 2008.

Plaintiff's CEPA claim included the allegation that he was retaliated against based on conversations he had with co-employees and HPS' customers. A transcription of several of the tapes was provided by DiSavino to HPS. HPS requested production of all of plaintiff's tape recordings, and counsel thereafter discussed the logistics. By letter of May l, 2008, HPS' counsel reiterated his request and suggested the tapes be copied to a single CD. On May 9, 2008, the court entered an order compelling plaintiff to produce his tape recordings of conversations with HPS' employees and third party witnesses within thirty days and to appear for a deposition within that time and continue to appear until it was completed. Plaintiff traveled from his home in Arizona to appear for his deposition in New Jersey on two consecutive days in July 2008. Despite requests by HPS in August and September to schedule additional days, plaintiff's deposition was not completed.

On June 24, 2008, Kleiner sent HPS several CDs purporting to contain copies of sixteen tapes made by plaintiff of several telephone conversations. Defense counsel ascertained that one tape had been recorded at a very high speed and some were inaudible or silent, including three for which transcripts had been provided. He returned the deficient disks to Kleiner who agreed at the deposition to follow up on the problem. Kleiner never supplied new audible copies of the tapes.

On May l9, 2008, HPS had also served a request for production of plaintiff's federal and state tax returns for l999 through 2007, with copies of worksheets, schedules, notes, W-2s, l099s and other related documents. The apparent reason for the request pertained to plaintiff's claim that what was reported in the W-2 from HPS did not accurately reflect what was paid to him. Prior to plaintiff's deposition, copies of various W-2s and l099s were produced, but not the actual tax returns. Thereafter, HPS filed a cross-motion to compel discovery of this information within ten days, which was granted by court order of September 26, 2008.

On the same date, the court also granted Kleiner's motion to be relieved as counsel and denied plaintiff's motion to extend the discovery end date. On October 7, HPS advised plaintiff by letter that a motion to dismiss would be filed if the tax returns were not provided by October l3, 2008, and if he did not respond to the third request for production of documents (which apparently included plaintiff's personal bank statements for his years of employment with HPS) that had been served after his deposition. On October 8 and l5, 2008, HPS filed motions, respectively, to dismiss counts two through eight of the complaint and dismiss the complaint for failure to comply with discovery orders. On October 21, 2008, following the completion of discovery, the court generated a notice of trial for January 5, 2009, directed only to HPS' counsel.

At the time these motions were pending, plaintiff had contacted his current law firm, Cole Schotz, to obtain representation, but the attorneys were still reviewing the case files to determine whether to represent him. On November 5, 2008, after defense counsel denied its request for an adjournment of the motions, Cole Schotz wrote to the court requesting the motions be adjourned one cycle so it could complete its review of the case files before entering an appearance. In his pro se status, plaintiff also wrote a letter to the court the next day with the same request.

On November 7, 2008, the court entered an order denying plaintiff's adjournment request, stating:

Plaintiff's request to adjourn was received November 6, 2008 (for November 7, 2008 motion) "to give new counsel an opportunity to complete discovery." First of all, new counsel has not been retained and substituted in. Secondly, plaintiff was aware, at least as of August 8, 2008 from his fifth (or sixth) attorney, Mr. Kleiner, that he should hire another attorney but failed to do so. Plaintiff was also aware from the Court's Order relieving Mr. Kleiner that plaintiff would be representing himself unless he retained new counsel. Plaintiff filed no opposition to these motions. Third, discovery ended October l7, 2008 and plaintiff has still not complied with this Court's Orders of May 9, 2008 and September 26, 2008. . . .

By order of the same date, the court also dismissed plaintiff's complaint with prejudice for failure to comply with discovery orders, stating:

Discovery ended on l0-17-08, after at least 3 prior discovery extensions. [Plaintiff] has failed to comply with this Court's 9-26-08 order, and 5-9-08 order. In addition, [plaintiff] has not complied with the [defendant's] third request for production of documents nor given dates for the continuation of his deposition. None of the discovery failures set forth in the moving papers have been cured.

The court designated the order as "unopposed."

On December 5, Cole Schotz entered an appearance on plaintiff's behalf. On the same day it filed a motion for reconsideration. Plaintiff certified, in part, he never received the trial notice; he only had two attorneys in the litigation, DeSavino, who was retained to file suit to preserve the one-year CEPA statute of limitations, and Kleiner; and the motion was opposed, as he filed a response, albeit late. He further claimed he complied with the May 9 order as he produced the tape recordings and appeared for two days of depositions and cooperated in scheduling their continuance. Plaintiff referenced his October 8, 2008 email that asked defense counsel to choose three more dates to complete his deposition and the October l5 response declining to conduct depositions prior to the return date of the motions and requesting plaintiff to provide dates after November 7, 2008.

With regard to the September order compelling him to produce tax returns, plaintiff explained he had previously given Kleiner the returns and did not keep copies, and when he asked Kleiner for the returns after the order was entered, Kleiner claimed not to have them. Plaintiff then obtained tax return transcripts from the IRS for 2003 through 2007 and sent them to defense counsel by express mail on October 21, 2008. He later obtained the transcripts for 2001 and 2002, which he attached to his certification, and explained the IRS told him it did not maintain information that he could access dating back to 2000. Plaintiff recently had obtained duplicate copies of his 2000 to 2007 tax returns from his accountant, which he provided to Cole Schotz. He did not have his l999 return but offered to execute an authorization for HPS to request it from the IRS. Plaintiff also questioned the relevance of the information requested in the third request for production and noted that HPS had never moved to compel their production. Nevertheless, Cole Schotz was prepared to "immediately provide formal written responses to the request" if his motion for reconsideration were granted.

Plaintiff's new attorney from Cole Schotz argued that plaintiff did what he could and thought he was compliant with the discovery requests and there was no evidence in the record that plaintiff intentionally flaunted the orders. Noting the drastic remedy of dismissal without prejudice, he proposed lesser sanctions, such as finding in HPS' favor that its W-2s accurately reflected the payments made to plaintiff, barring plaintiff from using the tapes to cross-examine or prove his claim, and directing plaintiff to appear for depositions on a date certain or have his complaint dismissed. He also represented that he possessed plaintiff's federal and state returns and would immediately provide them to defense counsel, and after a "short window" would be ready to try the case.

By order of January 9, 2009, the court denied reconsideration, finding the motion was untimely filed, reconsideration was inappropriate where plaintiff did not oppose the discovery motion, plaintiff failed to comply with the May 9 and September 26, 2008 discovery orders, undue delay occurred as plaintiff did not complete discovery within 780 days, and plaintiff's failure to comply unduly prejudiced HPS by hampering its ability to prepare for the January 5, 2009 trial. This appeal ensued.

On appeal, plaintiff contends he complied to the best of his ability with the discovery orders, and the court erred in imposing the drastic sanction of dismissal with prejudice over minor discovery issues without a hearing to determine whether plaintiff's conduct was intentional or willful and without considering lesser sanctions. He also asserts error by the court in dismissing the complaint for failure to respond to the third request for documents when HPS had not yet moved to compel their production. Plaintiff further asserts the court erred in denying reconsideration as it ignored controlling decisions requiring it to hold a hearing and to consider lesser sanctions than a dismissal with prejudice, and overlooked plaintiff's compliance with previous discovery orders. See Cummings v. Bahr, 295 N.J. Super. 374, 384-85 (App. Div. 1996).

"A trial court has inherent discretionary power to impose sanctions for failure to make discovery, subject only to the requirement that they be just and reasonable in the circumstances." Abtrax Pharm., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 513 (1995) (citations and quotation omitted). Rule 4:23-2(b) provides for various remedies available to the court for failure to comply with discovery orders:

(1) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;
 
(2) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting the introduction of designated matters in evidence;
 
(3) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof with or without prejudice, or rendering a judgment by default against the disobedient party;
 
(4) In lieu of any of the foregoing orders or in addition thereto, an order treating as a contempt of court the failure to obey any orders.

 
In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.

The Supreme Court has provided guidance in determining the appropriate sanction under this rule:

In respect of the ultimate sanction of dismissal, this Court has struck a balance by instructing courts to impose that sanction "only sparingly." Zaccardi [v. Becker], 88 N.J. [245,] 253 [(1982)]; see Georgis [v. Scarpa], 226 N.J. Super. [244,] 250 [(App. Div. l988)]. "The dismissal of a party's cause of action, with prejudice, is drastic and is generally not to be invoked except in those cases in which the order for discovery goes to the very foundation of the cause of action, or where the refusal to comply is deliberate and contumacious." Lang [v. Morgan's Home Equip. Corp.], 6 N.J. [333,] 339 [(1951)] (citations omitted); see Allegro [v. Afton Vill. Corp.], 9 N.J. [156,] 160-61 [(l952)], Johnson v. Mountainside Hosp., 199 N.J. Super. 114, 119 (App. Div. 1985). "Since dismissal with prejudice is the ultimate sanction, it will normally be ordered only when no lesser sanction will suffice to erase the prejudice suffered by the non-delinquent party, or when the litigant rather than the attorney was at fault." Zaccardi, supra, 88 N.J. at 253 (citations omitted); see Johnson, supra, 119 N.J. Super. at 119. Moreover, the "imposition of the severe sanction of dismissal is imposed not only to penalize those whose conduct warrant it, but to deter others who [might] be tempted to violate the rules absent such a deterrent." Zaccardi v. Becker, 162 N.J. Super. 329, 332 (App. Div.), certif. denied, 79 N.J. 464, 401 (1978).

[Abtrax, supra, 139 N.J. at 514-15 (Atlantic citations omitted).]

We, too, have repeatedly held that the sanction of dismissal is the sanction of last resort, to be imposed only when no lesser penalty would be sufficient in view of the nature of noncompliance and the prejudice caused to the other parties. See e.g., Rabboh v. Lamattina, 312 N.J. Super. 487, 492-93 (App. Div. l998), certif. denied, l 60 N.J. 88 (1999); Irani v. K-Mart Corp., 281 N.J. Super. 383, 387 (App. Div. l995).

Here, the court did not make a finding that plaintiff's failure to provide the discovery or appear for additional depositions was deliberate and contumacious or that the discovery orders went to the very foundation of the cause of action. Nor did the court indicate that it considered and weighed the propriety of each available alternative sanction suggested by Cole Schotz or explain why the draconian sanction of dismissal was the only sanction that would cure the prejudice suffered by HPS. In fact, the court made no specific findings of any significant prejudice to HPS' trial preparation but only made the conclusory statement that plaintiff's noncompliance "hampered" HPS' ability to prepare for the January 5, 2009 trial date.

While we are satisfied that plaintiff did not comply with the discovery orders within the expanded 780-day discovery period, we are also satisfied his conduct did not reach the contumacious level sufficient to justify dismissal of his complaint with prejudice. We are mindful of the legitimate goals of the "Best Practices" rules to dispose of cases timely and efficiently. See Pressler, Current N.J. Court Rules, comment 4 on R. 1:1-2 (2009). We recognize the pressures on trial courts to reduce case backlog and increase case clearance. Leitner v. Toms River Regional Schools, 392 N.J. Super. 80, 91 (App. Div. 2007). We also can understand the trial court's concern with the waste of judicial resources and frustration with plaintiff for failing to complete discovery after additional extensions were granted. HPS additionally has a legitimate interest in disposing of the case without incurring unnecessary counsel fees. The fundamental goal, however, is a fair and just determination following a trial on the merits.

We are not convinced that HPS demonstrated sufficient prejudice to justify the ultimate sanction of dismissal of plaintiff's case for minor discovery issues after over two years of extensive litigation. HPS already had the transcripts of some of the tapes which, according to counsel at oral argument, demonstrated that at least one conversation occurred after plaintiff's termination. HPS also had receipts for the wire transfers made to plaintiff to substantiate the W-2s it issued. Moreover, the January 2009 trial date was a first listing and, in fact, trial had not as yet been scheduled when HPS filed its motion to dismiss. Moreover, the pro se plaintiff had retained new counsel who represented that it would promptly provide the requested tax returns to defense counsel, and after a "short window" would be ready to try the case.

If the court were not inclined to allow plaintiff to cure his discovery violations and adjourn the trial date, there were still a number of viable alternatives that would have penalized plaintiff and deterred others from similar violations. As suggested by plaintiff's new counsel on reconsideration, the court would have been within its discretionary power to bar plaintiff from using the recordings at trial, determine as a fact that the W-2 forms reflected what HPS paid plaintiff, and direct plaintiff to complete his deposition on specified dates or suffer the ultimate sanction of dismissal with prejudice.

At this juncture, however, it would serve no purpose to remand for consideration of a lesser sanction. Accordingly, we remand this matter for further proceedings on the merits of plaintiff's claim. We suggest the trial court promptly schedule a case management conference to set a reasonable period for completion of discovery and a trial date.

 
Reversed and remanded.

By order of September 26, 2008, plaintiff's claims against the individual defendants were dismissed with prejudice. On November 7, 2008, the court granted HPS' summary judgment motion to dismiss counts two through eight of plaintiff's second amended complaint. Plaintiff does not appeal that order.

According to the September 11, 2008 certification of Kleiner in support of his motion to withdraw as plaintiff's counsel, this was an "extremely complex" case with approximately l0,000 pages of documents exchanged in discovery at that time. Moreover, HPS had recently indicated it had over 80,000 more pages of discovery related to plaintiff's demand for raw data regarding his damage and retaliatory claims that it would provide upon payment of copying costs.

Kleiner had requested to be relieved because of the demands of the case on his solo practice and plaintiff's refusal to fund the necessary experts in accordance with the retainer agreement.

Plaintiff had sent an email to defense counsel on October l3, representing that the tax returns would be produced by October 24, 2008. Counsel responded that if the documents were received prior to the return date of the motion, that portion of the motion would be withdrawn. The tax returns were not provided by that date.

HPS served the order of dismissal on plaintiff pro se by ordinary mail and email on November l3, 2008, not by certified mail as required by Rules 1:5-1 and -2. Plaintiff's motion for reconsideration was timely filed within twenty-two days. See R. 1:5-4(b) (service by ordinary mail is deemed complete upon mailing) and R. 1:3-3 (allowing a party receiving service by ordinary mail an additional three days to respond).

(continued)

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A-2897-08T1

January 21, 2010