MICHAEL SIMON, M.D. v. ASSOCIATES IN CARDIOLOGY AND INTERNAL MEDICINE P.A.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5010-09T4

MICHAEL SIMON, M.D. and

MESCCA, LLC,

Plaintiffs-Appellants,

v.

ASSOCIATES IN CARDIOLOGY AND

INTERNAL MEDICINE, P.A., VIBHAY

BHATNAGAR, RAAVI PATEL and

SHAUCHERT CHAUDHERY, individually,

Defendants-Respondents.

_______________________________

Argued April 13, 2011 Decided July 8, 2011

Before Judges Axelrad, Lihotz and J. N. Harris.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-4437-08.

James T. Hunt, Jr. argued the cause for appellants (Slater, Tenaglia, Fritz & Hunt, P.A., attorneys; Mr. Hunt and Emily J. Daher, on the brief).

Philip Rosenbach argued the cause for respondent (Berman Rosenbach, P.C., attorneys; Mr. Rosenbach, on the brief).

PER CURIAM

Plaintiff Michael Simon, M.D.,1 a former employee of defendant Associates in Cardiology and Internal Medicine, P.A., (Associates), a professional medical group owned by defendants Vibhay Bhatnagar, M.D.; Raavi Patel, M.D.; and Shauchert Chaudhery, M.D. (collectively defendants), initiated this action alleging a breach of the terms of a settlement agreement (the Agreement) entered into in anticipation of his resignation from Associates. Plaintiff sought payment for his final week s salary, accumulated vacation time, and a share of collected accounts receivable.

At the conclusion of the bench trial, the trial judge awarded plaintiff damages on his claims for unpaid salary and vacation time, but denied the claims for payment of accounts receivable. We affirm.

These facts are taken from the trial record. Plaintiff is a licensed physician in the State of New Jersey. At all times pertinent to this matter, Associates was a professional corporation engaged in the practice of medicine in Sayreville.2 Plaintiff joined Associates on May 20, 2002. The terms of employment were oral, as the parties did not execute a written employment agreement. Plaintiff submitted his resignation of employment on July 27, 2007.

In anticipation of his departure, plaintiff presented an Agreement and Stipulation of Settlement to defendants. When defendants failed to pay the anticipated remuneration designated in the Agreement, plaintiff initiated this action.

Plaintiff's complaint alleged claims for breach of the Agreement and unjust enrichment.3 In addition to his salary and unpaid vacation time, plaintiff sought his share of Associates' receivables. Defendants filed an answer and counterclaim, asserting plaintiff's compensation, in keeping with all past practices, "consisted of a salary and a bonus, and at no time was his compensation calculated based on accounts receivable generated by his efforts or the efforts of any other employee of the practice." Defendants admitted they had not released any sums attributable to Associates' receivables and declined to provide an accounting to plaintiff.

Prior to trial, plaintiff learned Dr. Patel pled guilty to federal criminal conspiracy charges stemming from the direction of an annual salary from Associates to his wife, who performed no services for Associates, which was designed to establish her eligibility for Social Security benefits. Additionally, the other defendants' wives received similar payments. Plaintiff moved to amend his complaint to add a fraud count. The motion judge denied the request because it was made beyond the discovery end date and trial was imminent. Additionally, he found plaintiff's proofs were insufficient to sustain the cause of action.

During the two-day trial, plaintiff and Dr. Bhatnagar testified and the parties introduced various documents. Judge Edward J. Ryan issued a written opinion finding defendants breached the Agreement by failing to pay plaintiff his last week of salary and four weeks of accumulated vacation, which totaled $14,423.08. The trial judge rejected plaintiff's claimed entitlement to a percentage of accounts receivable and dismissed his claim for unjust enrichment.

On May 11, 2010, a final judgment awarding plaintiff $14,423.08 was entered and defendants' counterclaim was dismissed. This appeal ensued.

Plaintiff argues the (1) motion judge abused his discretion in denying plaintiff's request to amend the complaint to add a fraud count; (2) the trial judge erroneously dismissed plaintiff's claim for breach of fiduciary duty; and (3) the trial judge erred by determining plaintiff failed to establish his entitlement to damages based upon Associates' accounts receivable.

We first state the standard of review informing our decision. We must defer to the trial judge's factual findings supporting the court's legal conclusions, so long as "there is sufficient credible evidence in the record to support the findings." Brunson v. Affinity Fed. Credit Union, 199 N.J. 381, 397 (2009) (quoting State v. Adams, 194 N.J. 186, 203 (2008)). Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility. Cesare v. Cesare, 154 N.J. 394, 412 (1998) (internal quotations and citations omitted). We "may not 'engage in an independent assessment of the evidence as if [we] were the court of first instance.'" In re Taylor, 158 N.J. 644, 656 (1999) (quoting State v. Locurto, 157 N.J. 463, 471 (1999)). We recognize the trial court hears the case, observes the witnesses and makes first-hand credibility judgments, which give it a more complete perspective -- a "feel of the case" -- that we can never glean from our "review of the cold record." N.J. Div. of Youth & Family Servs. v. L.L., 201 N.J. 210, 226 (2010); Cesare, supra, 154 N.J. at 412.

However, "matters of law are subject to a de novo review." Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502, 549 (2002) (internal quotations and citation omitted). Accordingly, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Guided by these principles, we examine the three issues presented on appeal. The first issue challenges a denial of a pre-trial motion by Judge Nicholas J. Stroumtsos, Jr. and the remaining issues contest decisions made by Judge Ryan.

On appeal, plaintiff argues Judge Stroumtsos abused his discretion in denying plaintiff's motion to amend the complaint to add a claim for fraud "based on defendants' criminal conduct in paying their wives $100,000 annual salaries for 'no show' jobs," which was "solely based on the passing of the discovery end date and a scheduled trial date." Plaintiff suggests any delay in the commencement of trial would not have posed an undue burden on defendants, however the denial "deprived [him] of a substantive claim subject to the entire controversy doctrine . . . which would have allowed him to seek damages against the individual defendants." We reject plaintiff's arguments, which ignore the additional substantive basis for denying his request.

The determination of a motion to amend a pleading is left to the sound discretion of the trial court, and such an exercise of discretion will not be disturbed, unless it constitutes a clear abuse of discretion. Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006). See also Franklin Med. Assoc. v. Newark Pub. Sch., 362 N.J. Super. 494, 506 (App. Div. 2003). Generally, motions for leave to amend are granted liberally. Rule 4:9-1. The court's "exercise of discretion requires a two-step process: whether the non-moving party will be prejudiced, and whether granting the amendment would nonetheless be futile." Notte, supra, 185 N.J. at 501.

The motion judge first cited calendar control considerations for denying plaintiff's motion, which had been submitted one month prior to the then scheduled trial date. Case administration may be "entitled to substantial weight," however, such a concern may certainly be overridden by a need to discern "what course of action will further the interests of justice." Brower v. Gonnella, 222 N.J. Super. 75, 80-81 (App. Div. 1987).

In accomplishing this task, a court must examine the request to determine whether allowing the filing would prejudice the other parties and "allowing the amendment would be a useless endeavor." Notte, supra, 185 N.J. at 501. "[C]ourts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law. In other words, there is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted." Ibid. (internal quotations and citations omitted).

In this matter, hindsight reveals the trial date was not firm and trial did not commence until almost five months following denial of plaintiff's motion, mitigating the described calendaring concerns cited in rejecting the request. However, the motion judge also denied the motion on an additional ground, concluding plaintiff failed to plead "fraud with specificity."

Plaintiff's proposed amended complaint stated:

From in or about late 2002 through in or about January 2007, the [d]efendants, specifically [Dr.] Patel and other member[s] of Associates . . . , willfully and falsely, with the intent to defraud the [p]laintiff and the Federal Government, knowingly submitted false, fictitious and fraudulent W-2 Wage and Tax Statement forms reflecting previous earnings purportedly earned by [Dr.] Patel s wife, to the IRS in order to qualify for Social Security benefits.

Even an indulgent reading of these facts does not establish the elements of fraud.

To successfully prove common law fraud, a party must show: "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereupon by the other person; and (5) resulting damages." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997).

As discussed in more detail below, plaintiff's compensation as a salaried employee was not dependent upon Associates' income or expenses. Plaintiff had no financial stake in Associates' profitability. Further, he failed to link defendants' conduct of directing Associates' income to their respective wives to the alleged misrepresented facts upon which he reasonably relied to his detriment. Following our review, we find no error in the motion judge's denial of the proposed amended complaint.

Next, plaintiff attacks the court's finding that his proofs on damages were insufficient to prevail. Plaintiff argues the trial court erred in ruling his evidence insufficiently established the extent of monies he was due from Associates' receivables and his productivity. Plaintiff urges reversal stating, "the trial court erred in finding plaintiff failed to establish damages with proper certainty, especially where the court had already found a breach of contract had occurred." Further, plaintiff contends the court was incorrect in stating expert testimony was necessary.

Following our review, we determine the trial judge's finding stating plaintiff failed to prove any entitlement to a percentage of Associates' collected accounts receivable is supported by the credible evidence in the record. This fact obviates the need to address whether expert testimony was necessary to prevail on such a claim.

At the time of plaintiff's separation from employment with Associates, the parties' Agreement included these terms pertinent to plaintiff's claim to be paid a portion of the receivables:

4. [Plaintiff] shall continue to receive from Associates his compensation consistent with all past practices during his tenure as an employee with Associates.

5. Associates shall continue to bill for all of [plaintiff]'s productivity as an employee continuing through to and including the effective date of his resignation and shall faithfully and diligently account for said billings and future receivables of same. Associates shall provide [plaintiff] with the same staffing, consistent with past practices, though his resignation.

6. Associates shall provide written, periodic accounting to [plaintiff] of the receivables that are received by Associates for [plaintiff]'s productivity and remit payment of same to him within fourteen (14) days of Associates' receipt thereof.

Plaintiff's interpretation of the provisions of the Agreement provided "damages should have been his normal compensation 'consistent with all past practices,' plus the receivables attributed to his productivity received by Associates after [plaintiff]'s departure from the practice, which was $165,116.38." Plaintiff's theory was that when he commenced employment with Associates he was a partner, who was paid a base salary and bonuses based on his productivity, that is, monies collected for services he performed, which were remitted following his departure. He admitted he should be paid a net sum comprised of gross revenue less overhead and expenses.

Defendants opposed this interpretation of the Agreement, asserting plaintiff was an associate physician paid a salary and bonus, just as the other associates in the practice. Dr. Bhatnagar testified plaintiff "was an employee, and [] receivables of any employee in the company [are] the property of Associates[.]" He insisted plaintiff's bonus payments were not a share of the accounts receivable but similar to those payments made to other associates in the years they were paid.

In his written opinion, Judge Ryan found:

Plaintiff did not conclusively demonstrate that he was entitled to bonuses based upon his productivity in the manner he claims. While plaintiff testified that his bonuses were "catch-up" payments for the collections attributable to his services, each payment was a perfectly round number, and therefore, could not possibly be a "catch-up" payment. Further, other doctors employed by the practice receive annual bonuses similar to those received by [] Plaintiff and none of those doctors have receivables-based contracts. As a result of this failure, Plaintiff has not carried his burden and is not entitled to recover any additional damages.

The trial court found significant the fact that plaintiff's bonuses were "a perfectly round number," and matched what other doctors were paid. Moreover, plaintiff at no time tied the bonus amounts to plaintiff's patient payments. Consequently, Judge Ryan rejected plaintiff's argument equating bonus sums to "catch-up" productivity payments. Further, he found no proof of plaintiff's right to a portion of receivables as no other doctor was paid receivables-based remuneration.

Following our review, we find no fault with Judge Ryan's rejection of plaintiff's asserted entitlement to any funds tied to fees generated from the treatment of his patients. Accordingly, we have no need to review the contentions focused on the amount of the receivables.

Finally, plaintiff argues Judge Ryan erred in dismissing his breach of fiduciary duty claim at the close of his case. We disagree.

Plaintiff insists that paragraph six of "the Agreement established a fiduciary duty" upon defendants to properly account for the collected receivables. He argues he placed "trust and confidence in defendants to fairly, truthfully and accurately account for, disclose and remit to him the receivables collected by [Associates] after [his] resignation that were attributable to his productivity."

In granting defendant's motion to dismiss, Judge Ryan stated:

The Court has reviewed and considered the arguments of counsel regarding the defendant's motion for the dismissal of the plaintiff's claims for the breach of fiduciary duty owed to [plaintiff] . . . . The court is satisfied, based upon the arguments and the testimony thus far provided, and giving the non-moving party all reasonable and favorable inferences that the plaintiff has not established a fiduciary duty as between the corporate defendants or the individual defendants. And therefore [the fiduciary duty claim] is dismissed for failure to prove a prima facie case.

Plaintiff's claim for an accounting of the receivables was based on his asserted entitlement to receive payment of those sums. Judge Ryan found plaintiff's entitlement was circumscribed by paragraph four of the Agreement, that is, "compensation consistent with all past practices during his tenure as an employee with Associates." The court enforced that contractual right. After finding no legal basis to award payment from the receivables, the court also found the fiduciary responsibility to collect, report and remit receivables did not arise.

Plaintiff also maintains the court failed to make proper findings to explain its decision. See R. 1:6-2(f) (requiring a court to make "findings of fact and conclusions of law explaining its disposition" of interlocutory motions). We are not persuaded and the ruling does not reflect a mistaken exercise of discretion. Cardell, Inc. v. Piscatelli, 277 N.J. Super. 149, 155 (App. Div. 1994).

We discern no basis to interfere with the July 17, 2009 order denying plaintiff's motion to amend his complaint or the May 11, 2010 final judgment.

A

1 Plaintiff's company MESCCA, LLC, was the owner of the premises leased by defendant, Associates in Cardiology and Internal Medicine, P.A. The claims of the professional association for breach of the lease are not at issue on appeal. Consequently, in our opinion our reference to plaintiff is limited to Dr. Simon.

2 Associates filed for bankruptcy in the District of New Jersey, Case No. 10-10979.

3 The complaint contained additional claims for breach of fiduciary duty, which was dismissed on defendants' motion, and breach of the lease terms, which was settled prior to trial.