THE PORTOFINO CONDOMINIUMS ASSOCIATION, INC v. PORTOFINO WATERFRONT URBAN RENEWAL, L.L.C.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2490-11T1

THE PORTOFINO CONDOMINIUMS

ASSOCIATION, INC.,

Plaintiff-Respondent,

v.

PORTOFINO WATERFRONT URBAN

RENEWAL, L.L.C., PORTOFINO

WATERFRONT HOLDINGS, L.L.C.,

PEIRU WEN, EREZ BASHARI,

LENNY WARSHAW,

Defendants-Appellants.

_______________________________________

May 14, 2013

 

Argued February 11, 2013 - Decided

 

Before Judges Ashrafi and Guadagno.

 

On appeal from Superior Court of New Jersey,

Law Division, Hudson County, Docket No.

L-1995-09.

 

Vito A. Gagliardi, Jr. argued the cause

for appellants (Porzio, Bromberg & Newman,

P.C., attorneys; Mr. Gagliardi, Jr., of counsel and on the brief; Frank A. Custode, on the brief).

 

Martin N. Crevina argued the cause for

respondent (Buckalew Frizzell & Crevina,

L.L.P., attorneys; Mr. Crevina, on the

brief).

PER CURIAM

Defendant Portofino Waterfront Urban Renewal, LLC, appeals from final judgment of almost $4 million entered against it by the Law Division after its pleadings were suppressed with prejudice for discovery violations. We reverse.

The court failed to follow the requirements of Rule 4:23-5(a)(2) and (3). We set forth the mandatory procedures required under the rule in Zimmerman v. United Services Automobile Association, 260 N.J. Super. 368 (App. Div. 1992), before a pleading may be dismissed or suppressed with prejudice. We recently confirmed those requirements in A & M Farm & Garden Center v. American Sprinkler Mechanical L.L.C., 423 N.J. Super. 528, 532 (App. Div. 2012), which was decided shortly after the events in this appeal. The trial court in this case failed to adhere to those requirements. Default judgment was improperly entered.

This litigation began in April 2009 when plaintiff, The Portofino Condominiums Association, Inc., filed a twelve-count complaint against several defendants.1 The complaint stemmed from the conversion of an apartment building into a condominium administered by plaintiff. Defendants jointly filed their answer to the complaint on August 28, 2009. On October 2, 2009, plaintiff served defendants with interrogatories and requests for production of documents. The trial court entered several case management orders, the first of which ordered that defendants serve discovery responses by December 18, 2009.2

After substitution of counsel for defendants, the court entered another case management order on February 17, 2010, requiring that defendants serve certified answers to interrogatories within sixty days of their service upon new counsel and responses to the request for documents within thirty days of service. Plaintiff served defendants' new counsel with duplicate interrogatories and requests for production on February 22, 2010. By case management order entered May 12, 2010, the trial court set the discovery end date for November 17, 2010.

In June 2010, plaintiff provided discovery responses to defendants' discovery demands and then immediately began enforcing plaintiff's right to discovery. Plaintiff's attorney wrote to defendants' attorney on June 17, 2010, that plaintiff's discovery demands were overdue and that motion practice would follow if responses were not promptly provided. On July 22, 2010, plaintiff filed a motion pursuant to Rule 4:23-5(a)(1) to suppress defendants' answer without prejudice. Defendants did not file opposition to the motion. The court entered an order on August 27, 2010, granting plaintiff's motion and suppressing defendants' answer without prejudice.

Within sixty days of that order, on October 21, 2010, defendants served plaintiff with discovery responses. They then filed a motion to vacate suppression of their answer. Plaintiff filed opposition, arguing that the discovery provided by defendants was not adequately responsive to plaintiff's demands. The trial court held oral argument on November 16, 2010, and denied defendants' motion to vacate suppression of their answer. In a handwritten statement on its order,3 the court explained:

By defendant's [sic] own admission at oral argument, documents requested may be available in electronic form but as of Nov. 16, 2010 defendant has been unable to cull through the hundreds of documents to properly & fully respond to plaintiff's demand. Hence, defendant has failed to demonstrate it has . . . fully & responsively provided outstanding discovery request. DED [discovery end date] is 11/17/2010.

 

Less than a week later, on November 22, 2010, plaintiff filed a motion pursuant to Rule 4:23-5(a)(2) to suppress defendants' answer with prejudice. On December 10, 2010, defendants filed a cross-motion to extend the discovery end date. Although the heading of defendants' cross-motion did not indicate that it also contained opposition to plaintiff's pending motion to dismiss their pleadings with prejudice, the text of the notice of motion made reference to plaintiff's pending motion and requested that oral argument be heard. In addition, the supporting certification filed by defense counsel clearly indicated defendants' opposition to plaintiff's motion to suppress their answer with prejudice.

Apparently, court staff did not connect defendants' cross-motion with plaintiff's motion and did not provide the cross-motion to the motion judge to whom plaintiff's motion was assigned. No oral argument was held on the pending motions, although Rule 4:23-5(a) mandates that the court conduct proceedings in open court before entering an order suppressing a pleading with prejudice. The motion judge entered an order on December 17, 2010, granting plaintiff's motion and suppressing defendants' answer with prejudice pursuant to Rule 4:23-5(a)(2). The order incorrectly marked plaintiff's motion as "unopposed."

Defendants filed a motion for reconsideration on January 19, 2011. The court heard oral argument on February 4, 2011, and denied defendants' motion. On its order of the same date, the court indicated that defendants' previously-filed opposition had now been considered, and the court provided a handwritten statement of reasons as follows for denying defendants' motion:

Court appreciate[s] difficulties with amount of electronic items to be searched but it does not give rise to exceptional circumstances. Defendant still has not provided the requisite discovery and the DED [discovery end date] having expired, plaintiff will be greatly prejudiced at this juncture on eve of trial scheduled for March 14, 2011.

 

On March 21, 2011, defendants filed a motion in this court for leave to appeal. Plaintiff opposed the motion, and we denied leave for an interlocutory appeal.

Since defendants' answer had been suppressed with prejudice, the trial court held a proof hearing in November 2011 before a different judge. Defendants participated in the proof hearing. On December 2, 2011, the judge placed an oral decision on the record with findings of fact and conclusions of law regarding plaintiff's several claims. On December 19, 2011, the court entered final judgment for $3,899,532 in favor of plaintiff and against defendant Portofino Waterfront Urban Renewal, LLC.

Within weeks after the judgment was entered, we issued our decision in A & M Farm, supra, 423 N.J. Super. 528. In that case, we confirmed that the purpose of the two-tier procedure established by Rule 4:23-5(a) is to compel discovery rather than to punish the delinquent party by dismissing or suppressing its pleading. Id. at 534; Zimmerman, supra, 260 N.J. Super. at 374. We discussed in detail the procedural obligations imposed by Rule 4:23-5(a) upon the attorney for the delinquent party and the trial court before a pleading is dismissed or suppressed with prejudice.4 A & M Farm, supra, 423 N.J. Super. at 534-38. In circumstances where no opposition had been filed to the second-tier motion to dismiss a pleading with prejudice, we held in A & M Farm:

[W]hen a court considers a motion to dismiss or suppress a pleading with prejudice, and there is nothing before the court showing that a litigant has received notice of its exposure to the ultimate sanction, the court must take some action to obtain compliance with the requirements of the rule before entering an order of dismissal or suppression with prejudice. Further, the court must set forth what effort was made to secure compliance on the record or on the order.

 

[Id. at 539.]

 

Here, the trial court's December 17, 2010 order, suppressing defendants' answer with prejudice, failed to comply with these requirements of the rule. The court proceeded under the mistaken belief that defendants had not filed opposition to plaintiff's motion. But even under that mistaken impression, the court was required under the rule and prior case law to compel the delinquent party's attorney to appear in court and to explain compliance with the procedural requirements of the rule and the circumstance of the discovery violation. See Zimmerman, supra, 260 N.J. Super. at 375.

Such a procedure was actually pre-empted in this case because defendants did not fail to respond to plaintiff's motion to suppress with prejudice. They filed a cross-motion containing opposition to the motion and a detailed explanation of the prior discovery and motion practice in the case and the reasons for their delinquency.

The certification of defendants' attorney discussed the reasons defendants had not provided timely discovery. It averred that plaintiff had demanded correspondence contained only in electronic format and intermingled with numerous other documents, perhaps numbering in the millions. Many of these documents were not relevant to this litigation, and some pertained to a different pending litigation. Counsel stated that the electronic data had been removed from defendants' servers and filed with a litigation support group for purposes of review and compliance with discovery requests in both litigations. Technology training was required to review the documents and to separate privileged materials from those that were discoverable. Counsel's certification requested an extension of at least 120 days for the overall discovery end date and at least 60 days for defendants to complete review of the electronically-stored documents and to provide the discovery plaintiff demanded. Finally, defendants requested that the court deny plaintiff's motion to suppress their answer with prejudice.

As in Zimmerman, defendants' response should have converted plaintiff's motion to suppress into a motion to resolve allegations of unresponsive discovery answers. Zimmerman, supra, 260 N.J. Super. at 377. This was not a case where the delinquent party had not provided discovery at all and was not responding to the second-tier motion to suppress its pleading with prejudice. The court should have considered and resolved the discovery dispute by compelling more responsive answers, if appropriate, and potentially imposing sanctions short of suppression of defendants' answer, again if appropriate. A & M Farm, supra, 423 N.J. Super. at 539; Zimmerman, supra, 260 N.J. Super. at 377-78.

Although the staff error in failing to provide defendants' cross-motion to the motion judge caused the court's initial failure to address the issues as we have stated, defendants' motion for reconsideration alerted the court of the true nature of the dispute. It required compliance with the second-tier procedures we have described. In A & M Farm, supra, 423 N.J. Super. at 535, we quoted our prior directive from Zimmerman, 260 N.J. Super. at 376-77, that "achievement of the salutary scheme of [Rule 4:23-5] requires meticulous attention to its critical prescriptions, and particularly to those provisions which are intended to afford a measure of protection to the party who is faced with the ultimate litigation disaster of termination of his cause." Here, the court did not adhere to the procedural requirements of the rule and our prior directive.

We reverse the court's final judgment dated December 19, 2011, its December 10, 2010 order suppressing defendants' answer with prejudice, and its February 4, 2011 order denying defendants' motion for reconsideration. The case is remanded to the trial court to address the discovery dispute and to determine an appropriate remedy for any continuing or past discovery violation.

Reversed and remanded. We do not retain jurisdiction.

1 Although four other defendants filed joint pleadings with defendant-appellant Portofino Waterfront Urban Renewal, LLC, and were represented by the same attorneys in this litigation, the judgment appealed from was entered only against the one defendant. Our record does not contain an order disposing of the complaint against the other defendants, Portofino Waterfront Holdings, LLC, Peiru Wen, Erez Bashari, and Lenny Warshaw. We proceed on appeal with the understanding that the claims against the other defendants were dismissed upon entry of judgment against the one defendant.

2 The case management orders are not included in our appellate record. The parties make reference to them in the motion papers that are included in our record.

3 The court's order is dated and marked filed on November 12, 2010, although oral argument on the motion was held on November 16, 2010, and the motion judge's handwritten statement references the latter date.

4 Rule 4:23-5 is captioned "Failure to Make Discovery." Subsection (a)(1) of the rule describes the first-tier procedure established by the rule for an aggrieved party to obtain dismissal or suppression of the delinquent party's pleading without prejudice. Subsections (a)(2) and (3) describe as follows the second tier of the procedure, in relevant part, for obtaining dismissal or suppression with prejudice:

(2) With Prejudice. If an order of dismissal or suppression without prejudice has been entered pursuant to paragraph (a)(1) of this rule and not thereafter vacated, the party entitled to the discovery may, after the expiration of 60 days from the date of the order, move on notice for an order of dismissal or suppression with prejudice. The attorney for the delinquent party shall, not later than 7 days prior to the return date of the motion, file and serve an affidavit reciting that the client was previously served as required by subparagraph (a)(1) and has been served with an additional notification, in the form prescribed by Appendix II-B, of the pendency of the motion to dismiss or suppress with prejudice. In lieu thereof, the attorney for the delinquent party may certify that despite diligent inquiry, which shall be detailed in the affidavit, the client's whereabouts have not been able to be determined and such service on the client was therefore not made. . . . Appearance on the return date of the motion shall be mandatory for the attorney for the delinquent party or the delinquent pro se party. The moving party need not appear but may be required to do so by the court. The motion to dismiss or suppress with prejudice shall be granted unless a motion to vacate the previously entered order of dismissal or suppression without prejudice has been filed by the delinquent party and either the demanded and fully responsive discovery has been provided or exceptional circumstances are demonstrated.

(3) General Requirements. . . . If the attorney for the delinquent party . . . fails to file and serve the affidavit and the notifications required by this rule, or fails to appear on the return date of the motion to dismiss or suppress with prejudice, the court shall, unless exceptional circumstances are demonstrated, proceed by order to show cause or take such other appropriate action as may be necessary to obtain compliance with the requirements of this rule.

 

[Emphasis added.]