SEA CREST ENTERPRISES, L.L.C. v. THE CITY OF ELIZABETH

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4094-03T14094-03T1

SEA CREST ENTERPRISES, L.L.C.,

Plaintiff-Appellant,

vs.

THE CITY OF ELIZABETH,

Defendant-Respondent,

and

THE MAYOR AND CITY COUNCIL

OF THE CITY OF ELIZABETH,

Defendants.

_________________________

DOCKET NO. A-4109-03T1

SEA CREST ENTERPRISES, L.L.C.,

Plaintiff-Respondent,

vs.

THE CITY OF ELIZABETH,

Defendant-Appellant,

and

THE MAYOR AND CITY COUNCIL

OF THE CITY OF ELIZABETH,

Defendants.

__________________________________

 

Argued: October 17, 2005 - Decided August 8, 2006

Before Judges Cuff, Parrillo and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-4727-00.

Marvin J. Brauth argued the cause for appellant/respondent Sea Crest Enterprises, L.L.C. (Wilentz, Goldman & Spitzer, attorneys; Mr. Brauth, of counsel and on the brief; Jeffrey J. Brookner, on the brief).

Janyce M. Wilson argued the cause for respondent/appellant City of Elizabeth (Ascione & Wilson, attorneys; Ms. Wilson and Lisa M. Black, of counsel; Joseph A. Ascione, on the brief).

PER CURIAM

This appeal and cross-appeal arise from a breach of contract claim by the designated redeveloper of a downtown redevelopment plan in the City of Elizabeth (the City). Following a bench trial, Judge Beglin found that the City breached the contract between it and the designated redeveloper and awarded the redeveloper damages. The City argues that there was insufficient evidence to support the finding of a breach and that no damages should have been awarded due to evidence of criminal activities by the redeveloper in another state. In its cross-appeal, the redeveloper argues that the trial judge erred when he failed to specifically enforce the contract or to award lost profits. We affirm.

In 1989, the City Council of the City adopted a resolution designating a sixteen-acre parcel, known as the Midtown Redevelopment Tract, as a blighted area pursuant to N.J.S.A. 40:55-21.1 to -21.14. The resolution was amended and another area, the Price Street Tract, was added to the project and known as the Midtown Redevelopment Plan (Plan).

During the designation process, companies submitted proposals for selection as the redeveloper for the Plan. Plaintiff Sea Crest Enterprises, L.L.C. (Sea Crest) was eventually chosen and entered into negotiations with the City to create a Redeveloper Agreement (Agreement) in which Sea Crest was designated the exclusive developer of the Plan for six months. The parties executed the Agreement on January 27, 1995. At the time of the designation, part of the land encompassed by the Plan was owned by New Jersey Transit Corporation (NJ Transit).

The Agreement provided a general outline for the redevelopment of the entire Redevelopment Area. It identified the types of projects set for construction and refurbishing, including construction of parking facilities, market and senior housing, a new train station and other commercial properties, and the refurbishment of the historic train station.

Article III of the Agreement required the City to acquire title to all properties required for the Plan by specified dates, and to pay for and implement environmental remediation of the affected properties upon approval from the New Jersey Department of Environmental Protection (DEP). Sea Crest claimed these were conditions precedent to the beginning of construction.

The Agreement also designated the parking garage as the first project for completion. The garage was important because at the time much of the Plan site was surface parking area for NJ Transit use, and NJ Transit was hesitant to relinquish title to its property without confirmation that a new facility would be constructed to accommodate its passengers.

Financing for the Garage

The Agreement allocated the burden of financing the parking garage to both parties. Sea Crest was to obtain a mortgage and the City was to provide a loan. The City anticipated that the $3,300,000 loan would be obtained by an assignment of the City's Urban Enterprise Zone (UEZ) funds. Shortly after the Agreement was finalized, the City informed Sea Crest that the UEZ funds would not be available. Sea Crest claims that the City knew this was going to occur, but continued to represent that the funds were available. The City claims that even with the funds, Sea Crest could not complete the parking garage without further tax-exempt financing.

Over two years later, the Elizabeth Development Company of New Jersey (EDC), a not-for-profit corporation, agreed to undertake Sea Crest's obligation to own and operate the parking facility during the financing period to secure the tax-exempt loans. This agreement was secured through efforts by both parties, including Hugh DeFazio, a consultant to Sea Crest.

A feasibility study for the construction of the garage was delivered eight months after the Agreement was signed. Although not required under the Agreement, the City had requested the study. Stanley I. Pilshaw, Sea Crest's manager for the Plan, testified that Sea Crest was busy in the post-agreement period while the parties were attempting to secure financing. Specifically, he stated that Sea Crest assembled a team to work on the Plan; negotiated with Amtrak to discuss the effects the new garage would have on the Amtrak Right-of-Way; and obtained preliminary and final site plan approval for construction of the garage.

The Agreement was amended after the change in financing was finalized. Most importantly, EDC became the owner of the garage, Sea Crest could no longer reserve parking spots for tenants, the City entered into a deficiency agreement directly with the EDC, and the City had to make the deficiency agreement a general obligation of the City.

Sea Crest obtained final site plan approval for the parking garage on October 11, 1996. The transaction financing closed in May 1997 and construction commenced in the summer of 1997. In the early stages of construction, Sea Crest notified the City that a forty-eight-inch water main that supplied water to the City of Newark was located under the garage and as a result redesign of the foundational support for the structure was required. Workers also encountered unsuitable soil and debris that affected the bearing capacity of elements of the foundation. In addition, in late 1997, inspections conducted by Sea Crest revealed cracks in structural concrete elements. Construction was forced to stop while these issues were addressed. As a result of the problems and subsequent integrity tests, Sea Crest learned that there was a severe structural defect which required further redesign and new components to construct the garage. In light of these structural problems, Sea Crest discharged its architectural and engineering firm.

In February 1999, the parking garage was issued a certificate of occupancy, twenty-one months following the availability of financing. The City alleged that the February 1999 completion date was thirty-seven weeks beyond the contracted completion date and in breach of the Agreement.

Other Aspects of the Plan

Market Housing

In 1995, plans for the Market Rate Housing Project commenced. The Agreement anticipated a minimum of 240 units. An architectural firm produced preliminary studies and designs for these units of housing. In April 1996, Sea Crest also submitted an application for financing under the Urban Homeownership Recovery Program (UHORP). In July 1996, UHORP issued Sea Crest a $1,000,000 grant and a $2,910,000 construction loan commitment. To retain UHORP financing, construction had to begin within nine months of the July 1996 approval. Sea Crest representatives testified they were informed that the City wanted to change the location of this housing project. The City testified that the housing could be constructed more quickly in a new area.

Pilshaw testified that Sea Crest obtained new architectural studies to accommodate this request. He further testified that the City decided to remain at the original location after Sea Crest presented the negative consequences of relocation. Sea Crest stated that this was the cause for the delay in finalizing the market rate housing plans. Further delays occurred when plans were not approved by the City and EDC officials, a new architectural firm had to be secured, and the concept plan was changed from market rate housing to commercial use.

Once the City recognized that another round of State approval was required, the City decided to maintain the original plan. Peter Vander Schuyt, vice-president of operations for Sea Crest Construction, and Edward Kolling, an agent of EDC during the Plan, testified that by this time Sea Crest could not meet the UHORP deadline because the City had yet to obtain environmental remediation as required in the Agreement. Consequently the UHORP funding was lost.

Sea Crest's witnesses testified to similar delays, indecision, and change of focus in regard to the various other construction projects under the Plan, including the senior housing units, the Union County College Building, and the new and historic train stations. Sea Crest points to a letter sent by an employee of the City, which stated that the City would not assist Sea Crest in addressing the various funding, environmental, and structural issues at each of these sites because it had already decided to terminate its relationship with Sea Crest.

The City's witnesses testified that the numerous delays were a result of Sea Crest's ineptitude in reaching agreements with the necessary parties, such as NJ Transit, and developing feasible housing plans. The City also maintained that it was not responsible for subsidizing the short-falls in funding.

Termination of the Agreement

On November 22, 1999, the City served Sea Crest with a notice of breach. The City asserted that: Sea Crest failed to prepare marketing studies as required under the Agreement; failed to build model homes for the market housing by the 1995 deadline in the Agreement; and failed to provide monthly written reports regarding the status of governmental approvals. Sea Crest asserted that the City never complained of the alleged problems between the parties prior to the breach letter and also that the City was responsible for some of the significant delays in construction of the model homes. On August 22, 2000, the City Council adopted a resolution terminating the Agreement and withdrawing Sea Crest as the designated redeveloper for the Plan.

On October 6, 2000, Sea Crest filed an action in lieu of prerogative writs claiming wrongful termination of the Agreement. Sea Crest also sought equitable relief, specific performance of the Agreement, and damages for breach of the Agreement. The City filed an answer in which it asserted that Sea Crest's complaint was barred by equitable estoppel and that the formation of the contract was founded on misrepresentations by Sea Crest. In its counterclaim, the City asserted that it had been injured by the failure of Sea Crest to timely perform its obligations under the Agreement, including the cost to obtain various parcels of real property, loss of tax revenues, payroll expenses and out-of-pocket expenditures for "counsel to the City in connection with the negotiation and supervision of the redevelopment project. . . ." It also sought reimbursement of half of the cost incurred by the City for off-site improvements and the design and construction of a pedestrian plaza. In its amended counterclaim, the City asserted that the principals of Sea Crest misrepresented their character and qualifications and that the misrepresentations caused economic damage for which it sought compensation.

Following a bench trial, Judge Beglin issued an oral opinion in which he entered judgment in favor of Sea Crest in the amount of $1,408,302. He also dismissed the counterclaim and amended counterclaim asserted by the City. Judge Beglin found that the Agreement imposed responsibilities on both parties. As an example, he found that Sea Crest was obliged to obtain preliminary and final site plan approvals, but the deadlines for the various site plan applications were measured from when the City completed the requisite property acquisitions, which obligation was not triggered until the concept plan was approved and the scope of environmental remediation was determined by DEP.

Judge Beglin found that Sea Crest met its initial obligation to produce marketing studies at its cost. The studies were forwarded to the City's Office of Policy and Planning. He also found that the City neither rejected nor questioned the studies, and he further found that "Sea Crest was entitled to assume the City found these initial market studies to be acceptable." Thus, he found the City's first asserted breach of the Agreement, failure to provide market studies, was without factual basis.

Judge Beglin also found that the City executed the Agreement that made construction of the parking garage a priority when it knew that the source of its subsidy, the UEZ grant, was not available. The City's search for alternative funding for its share of the garage was protracted and caused the alteration of the garage construction schedule. When alternative financing was procured, it required a substantial revision of the Agreement. Sea Crest produced an economic feasibility study of the garage to assist the new financing scheme, despite its belief that it was not obliged to do so.

Judge Beglin found that further delays were encountered after the financing was secured due to scheduling difficulties with Amtrak's overhead wire work, soil bearing capacity problems, debris and a forty-eight inch water main in the construction field, all of which required structural redesign. Cracks in pre-cast concrete elements of the garage delayed the project for another four to five months. Judge Beglin also found that in February 1999, when the garage was ready for occupancy, neither party sought to allocate fault or to revise or renegotiate the Agreement. Significantly, he found that many of the delays were caused by or exacerbated by the City. He found that the City lacked understanding of the enormity of the project and the impact its indecision or inaction had on Sea Crest. The judge found that "it would have been unreasonable for the City to expect [Sea Crest] to implement other Phases of the project until the key cornerstone of the initial plan was in place." Nevertheless, Sea Crest pursued other elements of the Plan, such as a concept plan for market rate housing and two office buildings. The judge found that Sea Crest applied for and obtained a construction loan commitment and a grant for subsidized market rate housing. He ascribed the delay in construction to the City which sought to relocate projects, decided to emphasize commercial over residential development, and ultimately decided to return to the original concept. By that time, the funding obtained by Sea Crest was lost.

Judge Beglin concluded that the City also breached its obligation to assist Sea Crest to secure financing and subsidies for the housing. The City's referral of Sea Crest to the local housing authority was an inadequate effort.

Judge Beglin also found that the insistence by NJ Transit to allow for a fifth track, or sleeve, in conjunction with the commercial development referred to as the Home Plate Building caused delays and that the City did not use its best efforts to dissuade NJ Transit of the scheme or to impress on the agency the negative impact on the Plan in general and the Home Plate project in particular. Without the City's assistance, Sea Crest could not market the building. The judge cited this dispute as a further example of the City's lack of understanding of its obligations under the Agreement. This lack of understanding hindered the cooperation between the City and Sea Crest that was required for the success of the Plan.

The judge also found that Article 7.01 of the Agreement allowed a sixty-day right to cure upon notice of a breach. Judge Beglin found that there was no factual basis for the first alleged breach, the absence of market studies. As to the second alleged breach, the failure to construct model homes, Judge Beglin found that the City's actions, including requests to relocate the site of the housing and rejection of the concept design for the housing, excused Sea Crest's performance of this obligation. Judge Beglin also found that failure to provide written monthly reports was without factual basis. He cited the large number of status meetings, written communications, and written agendas of meetings to support his finding.

Ultimately, Judge Beglin concluded that "the City lacked a basis to claim Sea Crest had breached the Redevelopment Agreement." Accordingly, he found the August 22, 2000 resolution terminating the Agreement and withdrawing the redeveloper designation from Sea Crest was arbitrary and unreasonable because it lacked factual basis. The judge also found that the City breached the Agreement and that Sea Crest was entitled to relief.

Following termination of the Agreement, the City learned that Joseph and Fred Scalamandre, principals of Sea Crest, pled guilty to charges of tax evasion and paying members of the Luchese crime family to alleviate their obligation to pay union dues on a construction project in New York. At trial, the City argued that the Agreement was void ab initio because neither Scalamandre brother disclosed the charges.

As to these contentions, Judge Beglin held that the convictions occurred after Sea Crest was designated the exclusive redeveloper. Therefore, the information could not have been disclosed prior to execution of the Agreement. He agreed, however, that the moral character of a contractor was a relevant concern to a public entity, and that the convictions affected the integrity and moral responsibility of the Sea Crest principals to such an extent that Sea Crest could not obtain specific performance of the Agreement.

In considering damages, Judge Beglin held that Sea Crest was not eligible for lost profits because its anticipated profits were too speculative because it was a new venture. Relying principally on a decision of this court, Bell Atlantic v. P.M. Video Corp., 322 N.J. Super. 74 (App. Div.), certif. denied, 162 N.J. 130 (1999), Judge Beglin found that the law requires reasonable certainty to recover lost profits and the evidence failed to establish that certainty. He noted that Sea Crest had never engaged in a redevelopment project before the failed Elizabeth venture. He also observed that the Agreement was multifaceted, complex and contingent on obtaining satisfactory agreements with various agencies, including NJ Transit. Many contingencies had to be fully satisfied in order for the project to succeed. Furthermore, market conditions were untested. Thus, Judge Beglin concluded that "[i]t is not the newness, itself, in the final analysis that defeats the claim, it is the speculative and unproven aspects of the totality of the undertaking."

On the other hand, Judge Beglin held that the City was required to reimburse Sea Crest for the cost and expenses it incurred, other than for the garage, up to the point of termination. He found that Sea Crest proved that it incurred costs and expenses in the total amount of $1,408,302. In doing so, he accepted the testimony and exhibits prepared by Sea Crest's expert Paul Pocalyko.

We address the City's appeal first. Although the City raises five arguments, the overriding contention is that Sea Crest is not entitled to damages due to the conduct of the Scalamandre brothers in New York. The City does not take issue with the various findings about its failure to perform its responsibilities and obligations under the Agreement.

The Scalamandre brothers are the principal owners (98%) of Sea Crest Construction, the parent company of Sea Crest, L.L.C. They have numerous other companies which operate throughout New York and New Jersey. While conducting business with their other companies in New York, the Scalamandre brothers were involved in criminal conduct in connection with bribes to alleviate their obligation to pay union dues. The City claims that it put Sea Crest on notice that a heightened standard of moral integrity was a material term of the contract and that not disclosing the above activities constituted misrepresentation and fraud. The City admits that no standard existed to compel the Scalamandre brothers to disclose their unrelated illegal activities in New York.

Breach of a material term of a contract allows the non-breaching party to rescind the contract and prevent the breaching party from recovering on that contract. Medivox Prods. Inc. v. Hoffman-LaRoche, Inc., 107 N.J. Super. 47, 58-59, 73 (Law Div. 1969). In determining whether a breach is material the following factors should be considered:

(a) the extent to which the injured party will be deprived of the benefit which he [or she] reasonably expected;

(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he [or she] will be deprived;

(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;

(d) the likelihood that the party failing to perform or to offer to perform will cure his [or her] failure, taking account of all the circumstances including any reasonable assurances;

(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

[Restatement (Second) of Contracts, 241 (1981).]

A material term is incorporated into a contract when it is either explicitly stated in the contract or implicitly created during formation of the contract. Doyle v. Northrop Corp. 455 F. Supp. 1318, 1335 (D.N.J. 1978). The City claims that a material term regarding heightened moral integrity was implicit in its contract negotiations with Sea Crest.

The City relies on its actions prior to the acceptance of Sea Crest's proposal for redevelopment to demonstrate the creation of a heightened level of integrity as a material term of the contract. It points to the fact that it would not consider Sea Crest's proposal until DeFazio was removed as a principal of Sea Crest. Sea Crest claims that the City's refusal to deal with DeFazio did not imply a duty of disclosure.

DeFazio had previously been involved in a failed business venture, which led to litigation. To ensure consideration of their proposal, Sea Crest asked DeFazio to step down from his position in the company and DeFazio complied. Nevertheless, DeFazio's involvement in the Plan and execution of the Agreement did not end.

DeFazio was a constant, authorized presence during negotiations and in post-Agreement investment deals. He was an integral part of the relationship between Sea Crest and the City. The City was aware of DeFazio's involvement and conducted much of its business directly with him. Further, DeFazio met directly with the City officials after the contract to discuss strategy to entice investors to the Plan and in subsequent meetings with those potential investors. The City does not dispute that DeFazio remained as a consultant, but it still argues that its insistence on his removal from the company before considering the proposal created a material term of the contract regarding integrity. The City's behavior, however, suggests that it was interested more in form than substance. In fact, its continual involvement with DeFazio belies its present assertion that the principals of Sea Crest must be blameless.

The Agreement does not expressly state that it expected or insisted on a heightened standard of integrity. On the other hand, the City is directed by various statutes governing public contracts to deal only with responsible bidders. See N.J.S.A. 40A:11-1 to -51 (Local Public Contracts Law); N.J.S.A. 40A:12A-1 to -73 (Local Redevelopment and Housing Law). Responsibility includes moral integrity of the prospective contractor in addition to the capacity to perform the work. To that end, a public body may determine those with whom it chooses to do business and may disqualify those whose conduct is not conducive to advancing the public interest. Trap Rock Indus. v. Kohl, 59 N.J. 471 (1971), cert. denied, 405 U.S. 1065, 92 S. Ct. 1500, 31 L. Ed. 2d 796 (1972).

Here, however, there was no information to disclose at the time Sea Crest submitted its proposal, negotiated the terms of the Agreement and executed the Agreement. The criminal prosecution in New York post-dated execution of the Agreement, and there is no evidence of any misbehavior in the performance of this contract. Furthermore, the City's insistence on the removal of DeFazio from the official roster of the company, but its continued dealings with him throughout the performance of the Agreement, suggests a post hoc rationalization to avoid its obligation under the Agreement.

The City's reliance on Jewish Center of Sussex County v. Whale, 86 N.J. 619 (1981) and Jewish Center of Sussex County v. Whale, 172 N.J. Super. 165 (App. Div. 1980) (Jewish Center II), in support of its position that Sea Crest had an obligation to disclose its criminal conduct is misplaced.

Unlike Jewish Center II, in which the disqualifying charges were known to the applicant when he applied for the position, in this case, the charges post-dated the execution of the Agreement. In addition, the activities in New York did not directly relate to the contract with the City. They also did not affect Sea Crest's faithful fulfillment of its obligation under the contract.

It is clear that some nexus must exist between the criminal activity and the contract currently in dispute to find fraud or misrepresentation. Manning Eng'g, Inc. v. Hudson County Park Comm'n, 74 N.J. 113, 142 (1977). In Manning, the defendant learned that the plaintiff had been awarded the contract in question in return for its president's role as a conduit for an illegal 'kickback,' associated with an engineering project in the defendant's county. Id. at 117-18. In addressing the need for honesty in public contracts, the Court found it "'a matter of grave public concern that there be absolute honesty in the procuring of a public contract.'" Id. at 139 (citing S.T. Grand, Inc. v. City of N.Y., 298 N.E.2d 105, 108 (NY Ct. App. 1973) (quoting Jered Contr. Corp. v. N.Y. City Trans. Auth., 239 N.E.2d 197, 200-01 (NY Ct. App. 1968)). The Court found the plaintiff appropriately rescinded the contract because procurement of that contract was "permeated with `corrupting influences.'" Id. at 140. The Court further found that

"[a] bargain collaterally and remotely connected with an illegal purpose or act is not rendered illegal thereby if proof of the bargain can be made without relying upon the illegal transaction. * * * How closely a bargain must be connected with an illegal purpose in order to make the bargain illegal is a question of degree. * * * The line of proximity varies somewhat according to the gravity of the evil apprehended."

[Id. at 141 (quoting 6A Corbin on Contracts 1529, n.62 (1962) (citation omitted).]

Here, there is no connection between the criminal acts in New York and the contract between plaintiff and defendant, nor does the City allege such a connection. In Manning, the party accepting bribes did not directly determine the award of the contract, but he used his influence to secure the contract for the plaintiff firm. Id. at 141. Because there is not even a remote connection between the Scalamandre brothers' criminal activities and the procurement or performance of the Agreement, no obligation to disclose the Scalamandre brothers' criminal activities in New York existed, and the contract may not be deemed illegal and, therefore, unenforceable based on fraud or misrepresentation. Nor does the criminal activity of the Scalamandre Brothers bar an award of any damages to Sea Crest.

The City grounds its argument that the criminal activity of Sea Crest's parent corporation's principal officers bars any recovery on two cases: Polyvend v. Puckorious, 395 N.E.2d 1376 (Ill. 1979), app. dism., 444 U.S. 1062, 100 S. Ct. 1001, 62 L. Ed. 2d 744 (1980) and Brown Construction Trades, Inc. v. United States, 23 Cl. Ct. 214 (1991). Polyvend is not apposite to this issue because it concerned the rejection of a bid on moral integrity grounds. Polyvend, supra, 395 N.E.2d at 1378. Brown is also not instructive because the contractor's claim for damages was rejected because the criminal convictions of the contractor's officers were directly related to conduct during the performance of the contract. Brown, supra, 23 Ct. Cl. at 215. That is not this case. Furthermore, the City's argument ignores the rule announced in Manning, supra, 74 N.J. at 142. As previously discussed, the Court recognized that collateral or remote illegal transactions will not bar the recovery of damages for breach of contract, particularly when there is no hint that the contract at issue was the fruit of corrupting influences. Id. at 140-41. While the Court held that Manning Engineering was barred from any recovery of damages for breach of contract because the contract was awarded in a pervasive atmosphere of trafficking in public contracts and the principal of the engineering firm was inextricably involved in that behavior, id. at 140-42, that is not the situation in this case. Here, there is no evidence that the bid process, the evaluation of the proposals, or the performance of the contract was influenced at all by the criminal activities of the Scalamandre brothers in New York. Therefore, Sea Crest was not barred from recovering damages in this case.

We are also persuaded that the trial judge properly accepted the testimony of the Sea Crest damages expert, Paul Pocalyko, as well as the various exhibits on which he relied. Pocalyko listed twenty-nine documents, upon which he relied to form the basis of his opinion. The City claims the report is flawed because two of the documents listed were too general, and Sea Crest did not provide further identification of them or detail about them. The City finds the documents identified as "Cash Flow Summaries" and "Project Cost Worksheets" problematic. As a preliminary matter, this issue was not raised at trial and we consider any evidentiary error in accordance with the plain error standard. R. 2:10-2.

The City's contention is without merit. First, Judge Beglin stated that he was relying on the experts' reports in this respect because of the voluminous nature of the underlying data. He stated, "part of the opinion rule in allowing expert testimony is to recognize there are areas in cases where the finder of fact is aided by what the witness is providing them." The judge used these reports, summaries or calculations, to aid him in understanding the evidence, which is an appropriate use under N.J.R.E. 702. All of the underlying evidence was also admitted as evidence, reviewed by the judge and made available to plaintiff during discovery. Therefore, defendant's claim that the expert testimony and report should have been excluded on this basis fails.

The City also argues that it was presented with an updated report the day before plaintiff's expert was scheduled to testify, and was, therefore, prejudiced by the late submission. All of the documents referenced in the report or from which Pocalyko derived information were produced during discovery. Moreover, Sea Crest produced the late submission of the amended report at the request of the City and in response to the submission of its expert report. Further, the trial judge permitted defendant to show that the late submission caused prejudice, which it did not do. Without a showing of prejudice, the judge could properly permit the admission of the report and the testimony related to it. Therefore, exclusion on this ground would not have been appropriate.

Finally, we address the argument advanced by Sea Crest that Judge Beglin erred by denying damages for lost profits. We disagree.

In Bell Atlantic v. P.M. Video Corp., supra, we examined the continued vitality of the new business rule. Other courts, most notably the Court of Appeals for the Third Circuit, predicted that the New Jersey Supreme Court would depart from the "new business rule" that precludes an award of profits to a new and untested business venture. P.M. Video, supra, 322 N.J. Super. at 98-99. This court noted that there was insufficient authority to compel the conclusion that the "new business rule" was not the governing law. Id. at 99-100. Accord, RSB Lab. Servs., Inc. v. BSI Corp., 368 N.J. Super. 540, 560 (App. Div. 2004). We also held that P.M. Video was involved with "new, highly innovative products whose reception by the public was doubtful, to say the least." P.M. Video, supra, 322 N.J. Super. at 101. We affirmed the trial court determination that the proofs were too speculative to be submitted to a jury. Ibid.

Here, Judge Beglin found that Sea Crest was an experienced builder. He also found that this venture was its first foray into a major redevelopment project. Moreover, the numerous contingencies that had to be satisfied made the completion of the project with the anticipated profits too uncertain to form the basis for an award of damages. There is no factual or legal basis to disturb this ruling.

Finally, the City contends that it was entitled to damages on its counterclaim and amended counterclaim. These claims asserted that Sea Crest breached the agreement and that the City was entitled to recover the expenses incurred by it during the course of the project and the lost revenue incurred due to the delays. Judge Beglin found, however, that the City, rather than Sea Crest, had breached the Agreement. This ruling is well-supported by the record and does not warrant further discussion in this opinion. R. 2:11-3(e)(1)(A) and (E).

We, therefore, affirm the February 17, 2004 judgment in favor of plaintiff Sea Crest Enterprises, L.L.C. in all respects.

 

Defendant City of Elizabeth filed a notice of appeal from the judgment on April 4, 2004 which was docketed as A-4109-03T1. Plaintiff Sea Crest Enterprises, L.L.C. filed a notice of appeal on the same day which was docketed as A-4094-03T1. The matters were calendared back-to-back; we consolidate them at this time for purpose of the opinion.

Plaintiff is a limited liability company owned by Sea Crest Construction Co. Sea Crest Construction Co. is owned by brothers Joseph and Fred Scalamandre. The Scalamandre brothers own a number of construction-related companies and have prior experience with public construction projects, although never as a redeveloper.

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A-4094-03T1

August 8, 2006