JARWICK DEVELOPMENTS, INC v. JOSEPH WILF
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2053-13T3
JARWICK DEVELOPMENTS, INC.,
ADA REICHMANN and
JOSEF HALPERN,
Plaintiffs-Respondents/
Cross-Appellants,
v.
JOSEPH WILF and THE ESTATE OF
HARRY WILF, deceased,
individually and as partners
in the partnership known as
J.H.W. ASSOCIATES; LEONARD A.
WILF; ZYGMUNT WILF; MARK WILF;
SIDNEY WILF; RACHEL AFFORDABLE
HOUSING CO.; HALWIL ASSOCIATES,
a partnership and PERNWIL
ASSOCIATES, a partnership,
Defendants-Appellants/
Cross-Respondents,
and
MARVIN COHEN; and MIRONOV, SLOAN
& PARAZIALE, LLC (f/k/a BECK, WEISS &
COMPANY, P.A.),
Defendants.
Argued April 17, 2018 – Decided June 1, 2018
Before Judges Yannotti, Carroll and DeAlmeida.
On appeal from Superior Court of New Jersey,
Chancery Division, Morris County, Docket No.
C-000184-92.
Peter C. Harvey argued the cause for
appellants/cross-respondents (Patterson
Belknap Webb & Tyler LLP and Lasser Hochman,
LLC, attorneys; Peter C. Harvey, on the
briefs; Sheppard A. Guryan and Bruce H.
Snyder, of counsel and on the briefs).
Price O. Gielen (Neuberger, Quinn, Gielen,
Rubin & Gibber, PA) of the Maryland bar,
admitted pro hac vice, argued the cause for
respondents/cross-appellants Jarwick
Developments, Inc. and Ada Reichmann
(Lowenstein, Sandler, LP, and Price O. Gielen,
attorneys; Price O. Gielen, Michael B. Himmel,
and Michael T.G. Long, on the briefs).
Alan M. Lebensfeld argued the cause for
respondent/cross-appellant Josef Halpern
(Lebensfeld Sharon & Schwartz PC, attorneys;
Alan M. Lebensfeld and David M. Arroyo, on the
briefs).
PER CURIAM
This matter is before us a second time. In our prior
unpublished opinion, we concluded that defendants Joseph Wilf, the
Estate of Harry Wilf, J.H.W. Associates, Leonard A. Wilf, Zygmunt
Wilf, and Mark Wilf (defendants or the Wilfs) breached a
partnership agreement by excluding plaintiffs Jarwick
Developments, Inc. and Ada Reichmann (collectively Jarwick) from
2 A-2053-13T3
the partnership.1 Jarwick Devs., Inc. v. Joseph Wilf, No. A-5027-
03 (App. Div. Dec. 15, 2006) (slip op. at 11-14). We remanded the
matter to the trial court for an accounting of Jarwick's interest
in the partnership. Id. at 14.
On remand, the trial court permitted Josef Halpern (Halpern)
to join the action as a plaintiff, and granted Jarwick leave to
file an amended complaint. Jarwick and Halpern asserted various
contract and tort claims, as well as claims for civil remedies
under New Jersey's Racketeer Influenced and Corrupt Organizations
Act (RICO),
N.J.S.A. 2C:41-1 to -6.2.
The trial court conducted a bench trial in the matter, which
began on May 9, 2011, and continued for about 200 days over the
course of two years. Defendants appeal from the final judgment
entered on December 20, 2013. Jarwick and Halpern cross-appeal
from the final judgment. For the reasons that follow, we affirm
in part, reverse in part, and remand the matter to the trial court
for further proceedings.
I.
We begin with a brief recitation of the pertinent facts and
procedural history. Ada Reichmann is the sister of Halpern and his
1
We refer at times to the parties and other individuals by their
first names. In addition, although the term "Jarwick" includes two
parties, we refer to Jarwick in the singular.
3 A-2053-13T3
brother Abe. The Halperns had frequent business dealings with the
late Harry Wilf and his brother Joseph, who together comprised
J.H.W. Associates (J.H.W.). Harry's son Leonard, and Joseph's sons
Zygmunt, Mark and Sidney (now deceased) also were involved in
these business dealings.
In 1985, the Halperns and the Wilfs formed Halwil Associates
(Halwil) in order to purchase property and obtain approvals for
Rachel Gardens, a 764-unit garden apartment project in Montville,
New Jersey. The parties signed a partnership agreement dated March
1, 1985, which granted J.H.W. a fifty-percent interest, Abe a
twenty-five percent interest, and Halpern a twenty-five percent
interest in the partnership.
Thereafter, Halwil purchased property for the Rachel Gardens
project and entered into an agreement to purchase additional land.
By the end of 1986, Leonard, Zygmunt, and Sidney Wilf had acquired
half of J.H.W.'s fifty-percent interest in the partnership, with
Leonard taking a twelve-and-one-half percent share, and Zygmunt
and Sidney equally sharing the other twelve-and-one-half percent.
In 1988, the Wilfs discovered that Abe had improperly diverted
monies from certain entities in which the Wilfs and Halperns had
ownership interests. Consequently, the Wilfs removed Abe from any
role in Halwil's management. Abe eventually paid the Wilfs back
the monies he had taken.
4 A-2053-13T3
J.H.W., Josef Halpern, and the Wilf sons then formed Pernwil
Associates (Pernwil) to take title to the Halwil partnership
property. J.H.W. had a fifty-percent interest in Pernwil, Josef
Halpern had a twenty-five percent interest, Leonard had twelve-
and-one-half percent, and Zygmunt, Mark, and Sidney Wilf had equal
shares of the remaining twelve-and-one-half percent.
On June 29, 1988, Halwil assigned to Pernwil all of its
assets. It appears that Abe did not learn about the assignment
until August 1988. By the end of 1988, Abe had made capital
contributions of $220,000 to Halwil. Abe also sought financial aid
from Ada and her husband Ralph, and they made numerous loans to
him. In connection with these loans, Ralph formed Jarwick, with
Ada as the company's sole shareholder, and Abe assigned his
interest in Halwil to Jarwick.
In August 1989, Joseph Schochet and Michael Rottenberg,
acting as representatives for the Reichmanns, met with Harry,
Joseph, and Zygmunt Wilf. After this meeting, Harry wrote a letter
to Ralph, dated August 3, 1989, which recognized Abe's twenty-
five-percent interest in "the Halwil and Pernwil project" and
welcomed Ralph's involvement. Harry asked Ralph if he would agree
to provide one-third of any funds needed for the Rachel Gardens
project, with Harry providing the remaining two-thirds. By letter
dated August 4, 1989, Ralph agreed to these terms.
5 A-2053-13T3
Harry eventually informed Schochet that Pernwil did not
require funding from the Reichmanns because the Wilfs had obtained
mortgage financing for the project. Harry died in mid-1991. Early
in 1992, Schochet contacted Joseph Wilf, seeking financial
information about Pernwil. He was referred to Zygmunt, and at a
subsequent meeting, Zygmunt informed Schochet "the train had left
the station," which meant financing had been obtained and the
Reichmanns would no longer be involved in the partnership.
In September 1992, Jarwick filed a complaint in the Chancery
Division against defendants, seeking: (1) damages for the
diversion of a valuable business opportunity and fraud; (2) a
judgment declaring it had a twenty-five-percent interest in
Halwil; (3) specific performance treating Jarwick as a partner in
the Rachel Gardens project; (4) an accounting; and (5) the
appointment of a receiver.
Thereafter, a judge conducted a trial on liability, and in
January 2000, found that Jarwick had a twenty-five-percent
interest in Halwil, Pernwil, and Rachel Gardens. However, on June
14, 2002, the judge ruled that Jarwick's partnership interest
terminated in January 1992, when defendants decided Jarwick would
no longer be involved in the Rachel Gardens project. The judge
decided that a trial on damages was required, and Jarwick's
6 A-2053-13T3
partnership interest should be valued as of the date defendants
terminated Jarwick's interest in the partnership.
Another judge conducted the damages trial, and on March 22,
2004, filed an opinion finding that as of the valuation date,
Jarwick's twenty-five-percent had a negative value. The judge
therefore concluded that Jarwick was not entitled to damages. On
April 5, 2004, the court entered a judgment dismissing Jarwick's
complaint.
Jarwick appealed from the order fixing January 8, 1992, as
the valuation date for its partnership interest, and the judgment
dismissing its complaint. Jarwick, No. A-5027-03 (slip op. at 2).
Defendants cross-appealed, challenging the trial court's
determinations that Jarwick had an interest in Rachel Gardens, and
that they had breached the partnership agreement by refusing to
recognize that interest.
On December 15, 2006, this court filed its opinion reversing
the trial court's determination that the August 1989
correspondence between Harry Wilf and Ralph Reichmann created a
new and separate partnership between Jarwick and the Wilfs. Id.
at 8. The panel found the correspondence "merely served to
acknowledge the assignment of Abe's interest, to confirm Jarwick's
participation and to secure a personal commitment from Ralph to
7 A-2053-13T3
fund twenty-five percent . . . of the [p]roject, in addition to
partial funding of . . . Halpern." Ibid.
The panel concluded that: (1) Abe Halpern had an interest in
the Rachel Gardens project pursuant to the Halwil partnership
agreement; (2) "[t]he partners excluded Abe from the partnership"
and "attempted to take Abe's interest for themselves without
compensating Abe in contravention of both the partnership
agreement and the law;" (3) Abe rightfully assigned his interest
in the partnership to Jarwick; and, (4) "[b]y virtue of [Abe's]
assignment, Jarwick [held] a twenty-five percent . . . interest
in the [Rachel Gardens] [p]roject." Id. at 11-14.
As to Jarwick's remedy, the panel found that because the
"[p]roject was not a static asset" but "an evolving dynamic
venture," valuing Jarwick's "interest at a fixed moment in time
[was] inadequate as an appropriate remedy." Id. at 14. The panel
decided that Jarwick was entitled to an accounting of its
partnership interest, and remanded the matter to the trial court
to conduct such an accounting. Ibid.
Defendants then filed a petition for certification with the
Supreme Court, seeking review of our judgment. The Court denied
certification. Jarwick Devs., Inc. v. Wilf,
190 N.J. 254 (2007).
Thereafter, Jarwick filed a motion in the trial court seeking
an order recognizing it as a full partner in Pernwil, and requiring
8 A-2053-13T3
that Jarwick or Halpern sign all of Pernwil's checks. Halpern
joined in the motion, even though he was not then a party to the
litigation. The judge assigned to the matter at that time denied
the motion, ruling that this court's remand order only required
the court to conduct an accounting, which was limited to evaluating
Jarwick's interest in the partnership.
Jarwick filed a motion in this court, seeking clarification
of the court's opinion and mandate. The court denied the motion.
Another judge then was assigned responsibility for the case.
In July 2009, defendants moved to join Halpern as a defendant,
arguing that his participation was required to provide complete
relief. Defendants also sought leave to file a cross-claim for
contribution against Halpern. On August 6, 2009, Halpern consented
to his joinder as a party, but as a plaintiff rather than a
defendant. On August 14, 2009, the judge permitted Halpern to join
the case as a plaintiff.
On October 1, 2009, Halpern filed a complaint in which he
alleged, among other things, that defendants had misappropriated
"tens of millions of dollars" in partnership funds by "engaging
in organized crime type activities." Halpern also alleged that
defendants "fraudulently cover[ed]-up their malfeasance and
defalcations though the abject falsification of the
[p]artnership's books, financial statements and tax returns."
9 A-2053-13T3
Based on these allegations, Halpern asserted claims against
defendants for breach of contract; breach of the implied covenant
of good faith and fair dealing; breach of fiduciary duties;
violations of the former Uniform Partnership Act (UPA),
N.J.S.A.
42:1-1 to -49 (repealed by L. 2000, c. 161, § 59, effective Dec.
8, 2000); common law and equitable fraud; civil remedies under
RICO; conversion; and unjust enrichment. Halpern sought an
accounting, compensatory and punitive damages, interest,
attorneys' fees and costs, and dissolution of the partnership.
On October 1, 2009, Jarwick filed an amended complaint, with
new claims. Jarwick asserted claims for breach of fiduciary duties;
breach of contract; breach of the implied covenant of good faith
and fair dealing; unjust enrichment; common law and equitable
fraud; conversion, civil conspiracy, violations of the UPA; and
civil remedies under RICO. Jarwick alleged defendants had stolen
Pernwil's funds and concealed its actions by falsifying the
partnership's financial records and misclassifying expenditures.
Jarwick sought an accounting, compensatory and punitive damages,
interest, attorneys' fees and costs, and dissolution of the
partnership.2
2
Jarwick and Halpern also asserted claims against Pernwil's
accountants, Marvin L. Cohen, CPA, and the accounting firm Mironov,
Sloan & Parziale, L.L.C. These claims were resolved in May 2011.
10 A-2053-13T3
In March 2010, defendants moved to dismiss Jarwick's and
Halpern's new claims, arguing that they were not permitted by this
court's remand order and were barred by the applicable statutes
of limitations. The judge did not rule on the motion at that time.
In November and December 2010, defendants filed a motion
seeking summary judgment on various grounds. Defendants, again,
argued plaintiffs' new claims exceeded the scope of our remand
order and were time-barred. They also argued the RICO claims failed
as a matter of law, and that there was insufficient evidence to
support the fraud claims.
The judge expressed doubt as to whether it should permit
Jarwick to add new claims in the remand proceedings, and whether
Halpern should be allowed to file his claims almost twenty years
after Jarwick commenced the lawsuit. The judge decided, however,
that there was no harm in being "over-inclusive." The judge,
therefore, denied defendants' motion and permitted the new causes
of action to proceed.
In April 2011, the judge granted Jarwick's motion for partial
summary judgment, recognized Jarwick as a full partner in the
project, and ordered the parties to maintain the status quo in the
partnership's operations pending resolution of the case. The judge
conducted a bench trial in the matter for 207 days, beginning on
May 9, 2011, and ending on May 6, 2013.
11 A-2053-13T3
In August and September 2013, the judge placed an oral
decision on the record, finding that Jarwick and Halpern had
prevailed on their claims. Post-judgment proceedings followed, and
the judge addressed plaintiffs' applications for attorneys' fees
and costs. On December 20, 2013, the judge entered a final judgment
and ordered the dissolution of the partnership.3
The judge awarded Jarwick $12,624,516 in compensatory damages
and prejudgment interest of $19,435,326 on its accounting claim;
$20,370,869 in punitive damages; $17,974,491 in trebled damages
on the RICO claim; and attorneys' fees and costs in the amount of
$10,666,468.
The judge awarded Halpern $6,559,213 in compensatory damages
and $10,100,950 in prejudgment interest on his non-RICO claims;
$16,396,895 in punitive damages; $16,007,361 in trebled damages
on the RICO claims; and attorneys' fees and costs in the amount
of $6,861,098.
With respect to both Jarwick and Halpern, the judge ordered
that the trebled damages awarded under RICO were not "collectible
or payable because [they were] exceeded by the punitive damages
3
On appeal, defendants do not challenge the dissolution of the
partnership. Post-judgment proceedings between the parties, which
are the subject of separate appeals in No. A-5752-13 and No. A-
2799-14, reveal that the Rachel Gardens property has been sold and
the proceeds distributed between the parties in accordance with
their respective partnership interests.
12 A-2053-13T3
awarded." See St. James v. Future Fin.,
342 N.J. Super. 310, 335-
44 (App. Div. 2001) (holding that a plaintiff may not recover both
punitive damages and trebled damages under RICO).
Defendants appeal and argue: (1) the trial judge violated
this court's remand order which only directed an accounting of
Jarwick's partnership interest; (2) plaintiffs' claims are barred
by the applicable statutes of limitations, the entire controversy
doctrine, and other principles of law; (3) the trial judge had a
disqualifying conflict of interest and should have recused herself
sua sponte; (4) the judge erred by finding that they violated
fiduciary duties owed to plaintiffs; (5) they were entitled to
compensation for their management of and financial contributions
to the Rachel Gardens project; (6) the judge erred by finding them
liable for the common law torts asserted; (7) the judge erred by
awarding plaintiffs punitive damages, and the punitive damages
awarded were excessive; (8) the judge's RICO findings are
fundamentally flawed; (9) the judge erred by imposing tort and
RICO liability upon Mark Wilf, Leonard Wilf, Joseph Wilf, and the
Estate of Harry Wilf; (10) the judge erred by requiring public
disclosure of their minimum net worth statements; (11) they are
entitled to a credit for the monies plaintiffs obtained in their
settlements with the accounting defendants; and (12) the
attorneys' fees and costs awarded are excessive and unreasonable.
13 A-2053-13T3
In its cross-appeal, Jarwick argues that the judge erred by:
(1) excluding compensatory damages it sustained during the "carve-
out" period from June 14, 2002, to December 15, 2006, in
calculating punitive damages and damages under RICO; (2) failing
to award it the maximum amount of punitive damages permitted by
the Punitive Damages Act (PDA),
N.J.S.A. 2A:15-5.12; (3) failing
to include conduct that pre-dated January 1, 2000, in the RICO
claim; (4) imposing a capital contribution upon it for investments
made by defendants in 1988; and (5) reducing by twenty-five percent
the fees of one of the firms that served as its co-counsel.
In his cross-appeal, Halpern argues that the trial judge
erred by: (1) limiting his RICO damages; (2) failing to apply the
parties' agreed-upon contractual waiver of the statutes of
limitations; and (3) failing to award him the maximum amount of
punitive damages permitted by the PDA.
II.
We turn first to defendants' contention that the trial judge
was disqualified from handling this case on remand. Defendants did
not file a motion in the trial court seeking the judge's
disqualification, but argue on appeal that the judge should have
recused herself sua sponte.
The record shows that a few days after the judge was assigned
to this case, the Lowenstein firm, Jarwick's co-counsel, informed
14 A-2053-13T3
the judge that it had retained the judge's spouse to represent it
in an unrelated matter. In a letter dated August 20, 2009, a member
of the Lowenstein firm stated that the judge's spouse was
representing the firm in a case in which attorneys' fees and costs
had been assessed against the firm. The letter stated, however,
that the firm did not believe the judge's recusal was required.
The judge made no ruling at that time, but the issue arose
again later. The judge then stated that she thought "somebody was
going to ask" her to withdraw from the case, but none of the
parties had made such an application. A week later, the judge
commented on her spouse's representation of the Lowenstein firm,
and stated she did not believe her disqualification was required.
The judge noted that the parties had waived any such conflict.
In February 2011, the judge raised another potential conflict
of interest involving her spouse. The judge indicated that her
spouse thought that a partner in his law firm may have represented
one of the Wilfs "on something." Defendants' attorney advised the
judge he would speak to his clients about this. In May 2011, the
judge discussed this second potential conflict with counsel in
chambers and, thereafter, addressed the matter on the record. The
judge noted that it had been previously revealed that an attorney
in her husband's firm had represented Leonard Wilf at one time.
15 A-2053-13T3
Defendants' attorney informed the judge that he had checked with
Leonard and "there [was] an ongoing relationship."
Defendants' attorney told the judge the relationship did not
have anything to do with this case. He stated that the attorney
in her husband's law firm occasionally did work for Leonard. The
judge noted that her husband's firm also had represented Zygmunt
Wilf in a matter some time earlier, but the files relating to that
matter were in storage and the firm could not identify the attorney
involved.
Jarwick's attorney informed the judge his clients had no
objection to the judge's proceeding with the case. It appears that
Halpern's attorney later told the judge his client also had no
objection.
The judge ruled she was not disqualified from sitting on the
case. The judge stated:
[I] think that you know enough about me at
this point to know [I am] totally focused on
what is going on in front of me [and] except
for thunder and lightning [I am] just not
going to be distracted. That is just the way
I rule on cases. And I never wanted to be a
criminal judge because I just think I would
have difficulty with sentencing on a number
of different levels, but I think I would have
been a good one because I think if somebody
was up for the third or fourth time I would
be willing to give them a chance. It [does
not] matter who owns a football team. It [does
not] matter who is in the stadium. It [does
not] matter who is a Canadian or United States
16 A-2053-13T3
citizen or what religion anybody is or what
kind of an accent they have. It [does not]
matter to me. That is the way I was raised.
I know [I am] not going to have any trouble
being fair. I just hope [I am] going to be
able to get all of the facts together at [the]
end. That is my only worry. But [I] will take
it forward and [I] will get it done to the
best of my ability.
Rule 1:12-2 allows "[a]ny party, on motion made to the judge
before trial" to seek the judge's disqualification. The decision
on a disqualification motion is committed to the discretion of the
judge whose recusal is being sought. Chandok v. Chandok,
406 N.J.
Super. 595, 603 (App. Div. 2009) (citing Panitch v. Panitch,
339 N.J. Super. 63, 66 (App. Div. 2001)). Here, none of the parties
filed a motion seeking the judge's disqualification. On appeal,
however, defendants argue that the judge's refusal to recuse
herself sua sponte was a mistaken exercise of discretion.
Rule 1:18 requires all judges to comply with the New Jersey
Code of Judicial Conduct (Code). When the judge presided over this
matter, the Code provided in relevant part:
C. Disqualification (see [Rule] 1:12-1).
(1) A judge should disqualify himself or
herself in a proceeding in which the judge's
impartiality might reasonably be questioned,
including but not limited to instances where:
. . . .
(c) the judge knows that . . . the
judge's spouse . . . has . . . [any] . . .
17 A-2053-13T3
interest that could be affected by the outcome
of the proceeding;
. . . .
(e) the . . . judge's spouse . . .
. . . .
(iii) is known by the judge to have an
interest that could be affected by the outcome
of the proceeding . . . .
[Code of Jud. Conduct, Canon 3C.]
The Code expressly provides that "a judge disqualified by the
terms of" Canon 3 "may not avoid disqualification by disclosing
on the record the disqualifying interest and securing the consent
of the parties." Code of Jud. Conduct, Canon 3D.4 In addition,
Rule 1:12-1 states:
The judge of any court shall be disqualified
on the court's own motion and shall not sit
in any matter . . .
. . . .
(g) when there is any other reason which might
preclude a fair and unbiased hearing and
judgment, or which might reasonably lead
counsel or the parties to believe so.
4
The Supreme Court revised Canon 3 of the Code, effective
September 1, 2016. The revised Code superseded the Code in effect
at the time of the trial of this matter. Rule 3.17,
Disqualification, under the revised Canon 3, in addition to other
provisions, now provides that a judge is disqualified if his or
her spouse "is a lawyer for a party." Revised Code of Jud. Conduct,
Canon 3, Rule 3.17 (B)(3)(b).
18 A-2053-13T3
The Code "set[s] a high bar by which judges must guide
themselves." In re Advisory Letter No. 7-11,
213 N.J. 63, 71 (2013)
(citing In re Seaman,
133 N.J. 67, 95-96 (1993)). The principles
reflected in the Code "are not just aspirational yearnings but
enforceable rules." Ibid. The "overarching objective" of the Code
"is to maintain public confidence in the integrity of the
judiciary." Ibid.
Furthermore, "[n]either Canon 3C nor Rule 1:12-1 recite an
exclusive list of circumstances which [might] disqualify a judge
and require recusal from a matter." State v. Kettles,
345 N.J.
Super. 466, 470 (App. Div. 2001). Indeed, "[t]he situations in
which a judge should grant a motion for recusal are varied." State
v. Tucker,
264 N.J. Super. 549, 554 (App. Div. 1993).
Disqualification is not required only where actual bias on
the part of the judge is established. Panitch,
339 N.J. Super. at
66-68. Rather, Canon 3 and Rule 1:12-1 require disqualification
when a judge's impartiality might reasonably be questioned. In re
Advisory Letter No. 7-11,
213 N.J. at 72-73. "Even a 'righteous
judgment' will not find acceptance in the public's mind unless the
judge's impartiality and fairness are above suspicion." Id. at 75
(quoting State v. Muraski,
6 N.J. Super. 36, 38 (App. Div. 1949)).
In determining whether a judge's disqualification is required
under the Code and Rule 1:12-1, the test is "[w]ould a reasonable,
19 A-2053-13T3
fully informed person have doubts about the judge's impartiality?"
DeNike v. Cupo,
196 N.J. 502, 517 (2008). Applying that standard,
we conclude the trial judge was not disqualified from sitting on
this case.
As we have explained, while the case was pending in the trial
court, the judge's spouse represented the Lowenstein firm,
Jarwick's co-counsel, in an unrelated matter. Although the judge
ultimately ruled in Jarwick's favor and awarded Jarwick attorneys'
fees and costs, neither the judge nor her spouse had a direct or
indirect financial interest in that award.
Moreover, there is no indication on this record that
compensation the judge's spouse's received for his work on the
unrelated matter was affected in any way by the judgment entered
in this case. We, therefore, conclude that the fact that the
judge's spouse was representing the Lowenstein firm in an unrelated
matter would not lead a reasonable, fully-informed person to
believe the judge could not be fair and impartial in deciding this
case.
We also conclude that the judge was not disqualified because
a member of her husband's law firm was representing Leonard Wilf
in other unrelated matters while this case was pending before the
judge. The record indicates only that the attorney in the spouse's
firm has an ongoing attorney-client relationship with Leonard.
20 A-2053-13T3
We must presume that Leonard pays fees for the services the
attorney provides to him and that, as a member of the attorney's
firm, the judge's spouse has a financial interest in those fees.
Nevertheless, the attorney did not represent any of the defendants
in this case. Therefore, the judge's spouse had no direct or
indirect financial interest in the outcome of this matter.
In addition, we cannot assume the judge was inclined to favor
defendants in this case merely because a member of her husband's
firm was representing Leonard in unrelated matters. We conclude
that under the circumstances, a reasonable, fully-informed person
would not believe the judge could not be fair and impartial in
deciding this case.
The decision in In re Billedeaux,
972 F.2d 104 (5th Cir.
1992), is instructive. In that case, the defendant sought the
disqualification of the trial judge on the ground that the judge's
husband was a partner of a law firm that actively represented one
of the parties in other matters. Ibid. The court stated that under
federal law, a judge is disqualified in any proceeding in which
his or her "impartiality might reasonably be questioned" or the
judge has "a personal bias . . . concerning a party." Id. at 105
(quoting 28 U.S.C. § 455(a), (b)(1)).
The court pointed out that the test for the judge's
disqualification was whether a "'reasonable person, knowing all
21 A-2053-13T3
the circumstances,' would believe it improper for the judge to sit
in the case in question." Id. at 106 (quoting Liljeberg v. Health
Servs. Acquisition Corp.,
486 U.S. 847, 861 (1988)). The court
determined that the interest that could be attributed to the judge
"is so remote and speculative as to dispel any perception of
impropriety." Ibid.
Here, as in Billedeaux, the interest that could be attributed
to the trial judge is remote and speculative, thereby dispelling
any perception that it would be improper for the judge to sit on
this case. We conclude the judge was not required to recuse herself
sua sponte.
We note that if the recent revisions to the Code had been in
effect at the time this matter was pending before the judge, we
might reach a different conclusion. As noted, the Supreme Court
revised the Code and it now provides that a judge shall be
disqualified if his or her spouse "is a lawyer for a party."
Revised Code of Jud. Conduct, Canon 3, Rule 3.17 (B)(3)(b).
There is a question as to whether the revised rule requires
disqualification if the judge's spouse is a lawyer for an attorney
who is representing a party. There also is a question as to whether
the revised rule requires disqualification if the judge's spouse
is a lawyer for a party in an unrelated matter.
22 A-2053-13T3
We need not, however, address these issues in this appeal.
We hold only that under the Code in effect at the time of the
trial of this case, the judge was not disqualified.
III.
Next, defendants argue the judge was disqualified because she
had an ex parte discussion with accountants from Bederson & Company
(Bederson). The record shows that on May 26, 2010, the judge
entered a consent order appointing Bederson as an independent
accountant to assist the court in evaluating the conclusions and
opinions presented by the parties' accounting experts.
Among other things, the court's May 26, 2010, order required
Bederson to prepare a preliminary report, which then would be
submitted to the court and the parties for review and comment.
The order stated that the judge could communicate with Bederson
"at any time" after Bederson had submitted its preliminary report,
"and the parties waive[d] any objection to such communications."
It appears that the judge met accountants from the Bederson
firm the day before the firm submitted its preliminary report to
the court. According to defendants, the judge made notes concerning
issues in the case. Defendants later learned of the meeting and
filed a motion seeking the judge's and Bederson's
disqualification. The judge denied the motion.
23 A-2053-13T3
We conclude the judge did not abuse her discretion by denying
defendants' motion. As noted, the parties consented to the entry
of the order appointing Bederson, and the order allowed the judge
to have ex parte communications with Bederson's accountants after
the preliminary report was submitted.
Here, the judge reviewed a draft of the preliminary report
with Bederson's accountants before it was submitted. The attorneys
for the parties were not present for the meeting, but the
preliminary report that Bederson later submitted to the court was
essentially the same as the draft. Moreover, the judge stated on
the record that during her meeting with the Bederson accountants,
she only briefly reviewed parts of the report.
The judge decided that her ex parte meeting with the Bederson
accountants did not affect her ability to be fair and impartial
in deciding this case. The record supports the judge's
determination.
IV.
We turn to defendants' contention that the trial judge failed
to comply with the mandate in our prior opinion. Defendants argue
the mandate limited the remand proceedings to an accounting of
Jarwick's twenty-five-percent-partnership interest, and the judge
erred by allowing Jarwick and Halpern to assert new claims in
those proceedings.
24 A-2053-13T3
When an appellate court orders a remand "the trial court is
under a peremptory duty to obey the mandate of the appellate
tribunal precisely as it is written." Flanigan v. McFeely,
20 N.J.
414, 420 (1956) (emphasis added). In fact, the "terms and scope
of the remand or specific instructions it has issued regarding the
litigation bind[s] the court below whether it agrees or not."
Pressler & Verniero, Current N.J. Court Rules, cmt. 2 on R. 2:9-1
(2018).
"[T]he very essence of the appellate function is to direct
conforming judicial action. As such, the trial court has no
discretion when a mandate issues from an appellate court. It simply
must comply." Tomaino v. Burman,
364 N.J. Super. 224, 233-34 (App.
Div. 2003) (citation omitted).
In our prior opinion, we concluded that Abe Halpern had a
continuing interest in the partnership, and that under the Halwil
and Pernwil partnership agreements, Abe validly assigned his
interest to the Reichmanns, who created Jarwick "for the purposes
of receiving the assignment." Jarwick, No. A-5027-03 (slip op. at
12-13). We held that Jarwick holds a twenty-five-percent interest
in Rachel Gardens, which we characterized as "an evolving dynamic
venture." Id. at 14.
We also determined that the valuation of Jarwick's interest
"at a fixed moment in time" was not an adequate remedy for
25 A-2053-13T3
Jarwick's exclusion from the partnership, and held that Jarwick
was entitled to an accounting under the former UPA. Ibid. We
remanded the matter to the trial court for the accounting. Ibid.
On appeal, defendants argue that our mandate only allowed the
trial court to conduct an accounting of Jarwick's partnership
interest, and precluded the trial court from allowing Jarwick and
Halpern to assert new claims. We disagree. Our mandate did not
expressly bar Jarwick from asserting new claims.
Moreover, Halpern was not a party to the appeal and generally
court orders do not bind non-parties. N. Haledon Fire Co. v. N.
Haledon,
425 N.J. Super. 615, 628-29 (App. Div. 2012). Therefore,
our mandate did not bind Halpern and preclude him from asserting
claims in the remand proceedings.
V.
Defendants argue that all of Jarwick's new claims were barred
on various grounds.
A. Entire Controversy Doctrine.
Defendants contend Jarwick's new claims were barred by the
entire controversy doctrine. Our court rules provide that the
failure to join claims and parties that are "required to be joined
by the entire controversy doctrine shall result in the preclusion
of the omitted claims." R. 4:30A. "The purposes of the doctrine
are threefold: (1) the need for complete and final disposition
26 A-2053-13T3
through the avoidance of piecemeal decisions; (2) fairness to
parties to the action and those with a material interest in the
action; and (3) efficiency and the avoidance of waste and the
reduction of delay." Ditrolio v. Antiles,
142 N.J. 253, 267 (1995).
The entire controversy doctrine did not preclude Jarwick from
asserting new claims in the remand proceedings. Although the trial
court had entered a final judgment in April 2004, dismissing
Jarwick's complaint, we reversed that judgment and ordered further
proceedings. The remand proceedings did not constitute a new or
successive action, but rather the continuation of the proceedings
that Jarwick commenced in 1992.
The entire controversy doctrine did not preclude Jarwick from
filing an amended complaint asserting new claims in the ongoing
litigation. See N.J. Dep't of Envtl. Prot. v. Standard Tank
Cleaning Corp.,
284 N.J. Super. 381, 395 (App. Div. 1995) (holding
that the doctrine did not bar claims in an amended complaint
because a final judgment had not been entered).
B. Waiver.
Defendants argue that because it did not raise its new claims
in the trial court proceedings prior to the entry of the April
2004 judgment, and because it did not assert these claims in the
prior appeal, Jarwick waived the new claims. We disagree.
27 A-2053-13T3
"Waiver is the voluntary and intentional relinquishment of a
known right." Knorr v. Smeal,
178 N.J. 169, 177 (2003) (citing W.
Jersey Title & Guar. Co. v. Indus. Tr. Co.,
27 N.J. 144, 152
(1958)). Moreover, "[a]n effective waiver requires a party to have
full knowledge of his legal rights and intent to surrender those
rights." Ibid.
"The party waiving a known right must do so clearly,
unequivocally, and decisively." Ibid. (citing Country Chevrolet,
Inc. v. Twp. of N. Brunswick Planning Bd.,
190 N.J. Super. 376,
380 (App. Div. 1983)). In this case, Jarwick did not knowingly,
voluntarily, intentionally, and unequivocally relinquish the
claims it asserted in the amended complaint.
C. Laches.
Defendants further argue Jarwick's new claims are barred by
laches. Again, we disagree. The laches doctrine may be "invoked
to deny a party enforcement of a known right when the party engages
in an inexcusable and unexplained delay in exercising that right
to the prejudice of the other party." Id. at 180-81 (citing In re
Kietur,
332 N.J. Super. 18, 28 (App. Div. 2000)).
Jarwick delayed in asserting its new claims, but defendants
have not shown they were prejudiced by the delay. Defendants have
not shown their ability to defend against the new claims was in
any way adversely affected by Jarwick's delay in asserting them.
28 A-2053-13T3
We conclude the laches doctrine did not preclude Jarwick from
raising new claims in the remand proceedings.
VI.
Defendants further argue Jarwick's new non-RICO contract and
tort claims are barred by the statute of limitations applicable
to such claims. These claims are subject to
N.J.S.A. 2A:14-1,
which requires, among other things, that an action for the recovery
on a contract-based claim or the conversion of personal property
be commenced within six years after the cause of action accrued.
Here, the trial judge determined that Jarwick's new non-RICO
claims were not time-restricted for several reasons. Defendants
contend the judge erred as a matter of law in failing to apply the
statute of limitations to these claims, and assert the judge should
have dismissed all of the claims.
A. Relation Back.
The judge decided that Jarwick's new non-RICO claims were not
barred by the statute of limitations because they related back to
the claims Jarwick asserted in its initial complaint. Our court
rules permit a party to amend its pleadings when "the claim or
defense asserted in the amended pleading arose out of the conduct,
transaction or occurrence set forth or attempted to be set forth
in the original pleading." R. 4:9-3 (emphasis added).
29 A-2053-13T3
A claim arises out of the "conduct, transaction, or
occurrence" asserted in a prior pleading when it "constitutes the
same matter more fully or differently laid, or [when] the gist of
the action or the basic subject of the controversy remains the
same." Harr v. Allstate Ins. Co.,
54 N.J. 287, 299-300 (1969).
If an "amendment asserts a germane claim, it is entitled to
relation back." Wimmer v. Coombs,
198 N.J. Super. 184, 187-88
(App. Div. 1985). Nonetheless, a "distinctly new or different
claim or defense" will not be permitted if the limitation period
for asserting it has expired. Ibid.
Here, the judge erred by applying Rule 4:9-3 to Jarwick's new
non-RICO claims. These claims were not germane to the claims that
Jarwick initially asserted in 1992. Indeed, the new claims sought
"to vindicate wholly different rights and [were] based, at least
in respect of damages, on wholly different proofs." Wimmer,
198 N.J. Super. at 188.
In ruling that Rule 4:9-3 applied to Jarwick's new non-RICO
claims, the judge found that these claims merely made more specific
what was asserted generally in the original complaint. The judge
also found that the amended complaint reflected what Jarwick had
"come to know" about the manner in which defendants had
misappropriated partnership funds. We disagree with the judge's
analysis.
30 A-2053-13T3
In its initial complaint Jarwick essentially challenged its
exclusion from the partnership and sought an accounting of its
partnership interest. Jarwick's amended complaint included claims
for breach of contract, breach of fiduciary duties, fraud, and
other tort claims. These new claims had different elements and
required different proofs. Jarwick's new claims went well beyond
anything that Jarwick raised in the initial complaint.
The judge also reasoned defendants should have known they
might have to respond to the new claims in this litigation because
they would be required to account if Jarwick was found to have an
ongoing interest in the partnership. The judge's analysis is not
convincing. Defendants may have known that they might have to
account for their use of partnership funds, but the new claims
went far beyond merely seeking an accounting and sought to impose
liability on a variety of different causes of action.
We conclude the judge erred by applying Rule 4:9-3 to
Jarwick's new non-RICO claims. The new claims did not relate back
to Jarwick's initial claims and were subject to the statute of
limitations.
B. Contractual Waiver of the Statute of Limitations.
Defendants argue that the judge erred by finding that in the
Halwil and Pernwil partnership agreements, they waived their right
31 A-2053-13T3
to assert a statute-of-limitation defense. The agreements both
include the following provision:
No consent or waiver, expressed or implied,
by any [p]artner to or of any breach or default
by the other in the performance by the other
of his obligations hereunder shall be deemed
or construed to be a consent or waiver to or
of any other breach or default in the
performance by such other party of the same
or any other obligations of such partner
hereunder. Failure on the part of any
[p]artner to complain of any act or failure
to act of any of the other [p]artners or to
declare any of the other [p]artners in
default, irrespective of how long such failure
continues, shall not constitute a waiver by
such [p]artner of his rights hereunder.
The interpretation of a provision of a contract is generally
a question of law, for which we exercise de novo review. Kieffer
v. Best Buy,
205 N.J. 213, 222-23 (2011) (citing Jennings v. Pinto,
5 N.J. 562, 569-70 (1950)). Therefore, on appeal, we owe no special
deference to the trial court's interpretation of an agreement and
"look to the contract with fresh eyes." Id. at 223 (citing
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,
140 N.J. 366,
378 (1995)).
The court's objective in construing a provision of a contract
is to discern the intent of the parties. Ibid. (citing Mantilla
v. N.C. Mall Assocs.,
167 N.J. 262, 272 (2001)). The task "is not
to rewrite a contract for the parties better than or different
from the one they wrote for themselves." Ibid. (citing Zacarias
32 A-2053-13T3
v. Allstate Ins. Co.,
168 N.J. 590, 595 (2001)). The court must
give the contract terms "their plain and ordinary meaning." Ibid.
(quoting M.J. Paquet, Inc. v. N.J. Dep't of Transp.,
171 N.J. 378,
396 (2002)).
As noted, the Halwil and Pernwil agreements provide that
notwithstanding a partner's failure to complain about the acts of
another partner or to declare a default, the partner does not
waive any rights under the agreement. A statute of limitations
defense arises under the law, not under the agreements. Indeed,
the agreements do not even mention statutes of limitations.
We conclude that in the Halwil and Pernwil agreements,
defendants did not waive their right under the law to assert a
statute-of-limitations defense in litigation arising under the
agreements. The trial judge erred by concluding otherwise.
C. Equitable Tolling.
Defendants contend the trial judge erred by tolling the
statute of limitations on Jarwick's new non-RICO contract and tort
claims. Defendants contend all of these new claims accrued in the
first phase of the litigation and were time-barred when asserted
in October 2009.
In general, a cause of action accrues when a plaintiff knew
or should have known of his injury. Henry v. N.J. Dept. of Human
Servs.,
204 N.J. 320, 334 (2010). In appropriate cases, however,
33 A-2053-13T3
the discovery rule may toll the running of the statute of
limitations. McDade v. Siazon,
208 N.J. 463, 475 (2011). The test
under the discovery rule is "whether the facts presented would
alert a reasonable person, exercising ordinary diligence, that he
or she was injured due to the fault of another." Ibid. (quoting
Caravaggio v. D'Agostini,
166 N.J. 237, 240 (2001)).
Moreover, a defendant may "be denied the benefit of a statute
of limitations where, by its inequitable conduct, it has caused a
plaintiff to withhold filing a complaint until after the statute
has run." Trinity Church v. Lawson-Bell,
394 N.J. Super. 159, 171
(App. Div. 2007). Thus, courts have tolled the running of the
statute of limitations on equitable grounds where a plaintiff has
in some extraordinary way been prevented from timely asserting its
rights. Binder v. Price Waterhouse & Co.,
393 N.J. Super. 304, 312
(App. Div. 2007).
Here, there was no extraordinary reason to toll the running
of the statute of limitations on Jarwick's new non-RICO claims.
In the first phase of this case, Jarwick was afforded the ability
to engage in pre-trial discovery and it was provided with an array
of information concerning Halwil, Pernwil, and Rachel Gardens.
There is no indication that defendants withheld or fraudulently
concealed any relevant information in discovery.
34 A-2053-13T3
Furthermore, for the damages trial in the first phase of the
case, Jarwick retained William J. Morrison, a forensic accountant,
and Morrison prepared several expert reports. In his 1998 report,
Morrison reviewed the reasonableness of Pernwil's accounting
expenses and payments to certain Wilf-related entities. In
preparing his report, Morrison relied on expense and payment data
he obtained from "the tax returns, general ledgers and related
financial documents of Halwil, Pernwil" and Rachel Gardens.
In addition, in another report dated August 29, 2001, Morrison
identified what he believed were certain accounting irregularities
with regard to Pernwil. Morrison stated that defendants had made
"payments to partners (other than Jarwick) and related entities
in amounts that exceeded the fair market value of services [the
partnership] received."
Thus, in the first phase of this case, Jarwick had sufficient
evidence to assert claims based on the alleged misappropriation
of partnership funds and falsification of records. The judge erred
by tolling the statute of limitations on Jarwick's new non-RICO
claims and allowing Jarwick to assert those claims based on conduct
that occurred as far back as 1988.
The judge also reasoned that equitable tolling was justified,
in part, because Jarwick could not have asserted new claims while
its appeal was pending from the April 2004 judgment that dismissed
35 A-2053-13T3
its complaint. However, before Jarwick filed its notice of appeal,
it could have sought leave to amend the complaint to preserve any
claims for which the statute of limitations might run while the
appeal was pending.
Although we conclude the judge erred by tolling the statute
of limitations, we reject defendants' contention that all of
Jarwick's new non-RICO claims are time-barred. The new claims were
based in part on alleged wrongful conduct that dated back to 1988,
but continued during the first phase of the litigation and
thereafter. The new claims are not entirely time-barred.
Each of these alleged wrongful acts gave rise to enforceable
claims and triggered the running of the statute of limitations.
See Metromedia Co. v. Hartz Mountain Assocs.,
139 N.J. 532, 535
(1995) (holding that under contract for cleaning services, an
enforceable right arose on a monthly basis after the services were
performed and the right to payment arose). Thus, the statute of
limitations does not preclude Jarwick from asserting new non-RICO
claims based on conduct that occurred within the six years prior
to the filing of the amended complaint.
We therefore conclude
N.J.S.A. 2A:14-1 applies to Jarwick's
new non-RICO claims and barred it from asserting its new non-RICO
claims based on conduct that occurred more than six years before
it filed its complaint on October 1, 2009. The trial judge erred
36 A-2053-13T3
by allowing Jarwick to assert the new non-RICO claims based on
conduct that occurred before October 1, 2003.
VII.
Next, defendants argue the trial judge erred by allowing
Jarwick to assert its RICO claims in the remand proceedings.
Defendants argue these claims accrued during the first phase of
the litigation, and the statute of limitations applicable to RICO
claims barred Jarwick from asserting these claims in the remand
proceedings.
The judge found that Rule 4:9-3, the relation-back rule, did
not apply to the RICO claims because those claims were "specific,
unusual, and onerous" and the original complaint did not place
defendants on notice that such claims would be asserted. The judge
determined that Jarwick's RICO claims were subject to a five-year
statute of limitations.
The judge also equitably tolled the running of the statute
of limitations and allowed Jarwick to assert claims based on
injuries sustained after January 1, 2000. The judge reasoned that
tolling was required to account for the fifty-four months between
June 14, 2002, when the trial court determined that Jarwick was
no longer a partner in Halwil or Pernwil, and December 15, 2006,
when we reversed the trial court's decision and held that Jarwick
had a continuing interest in the partnerships.
37 A-2053-13T3
A. Limitations Period for RICO Claims.
Defendants argue the judge erred by finding that RICO claims
have a five-year statute of limitations. Defendants contend there
is a four-year limitations period for RICO claims. In support of
that contention, defendants rely upon In re Liquidation of
Integrity Ins. Co.,
245 N.J. Super. 133 (Law. Div. 1990).
In the Integrity case, the Law Division judge noted that
there was no specific limitations period for claims under New
Jersey's RICO law, and the judge applied the limitations period
for claims under the Federal Racketeer Influenced and Corrupt
Organizations Act (federal RICO), 18 U.S.C.A. §§ 1961-1968. Id.
at 135 (citing Agency Holding Corp. v. Malley-Duff & Assoc.,
483 U.S. 143, 146 (1987)). We are convinced, however, that in this
case, the trial judge correctly found that RICO claims are subject
to a five-year limitations period.
We must interpret the statute in accordance with the
Legislature's intent "and, generally, the best indicator of that
intent is the statutory language." DiProspero v. Penn,
183 N.J.
477, 492 (2005) (citing Frugis v. Bracigliano,
177 N.J. 250, 280
(2003)). "Our duty is to construe and apply the statute as
enacted." Ibid. (quoting In re Closing of Jamesburg High Sch.,
83 N.J. 540, 548 (1980)).
38 A-2053-13T3
N.J.S.A. 2C:1-6(g) states that, "[e]xcept as otherwise
provided in [the Code of Criminal Justice], no civil action shall
be brought pursuant to this [C]ode more than five years after such
action accrues."
N.J.S.A. 2C:41-4(c) allows persons to seek civil
remedies for damage in his business or property resulting from a
violation of
N.J.S.A. 2C:41-2.
As the Law Division recognized in Integrity, there is no
specific statute of limitations for claims brought under
N.J.S.A.
2C:41-4(c). However, the Integrity court erred by applying the
limitations period under the federal RICO law.
N.J.S.A. 2C:1-6(g)
expressly applies in this instance and requires a RICO claim to
be asserted within five years after the cause of action accrued.
B. Application of Time-Bar to all of the RICO Claims.
We reject defendants' contention that the statute of
limitations barred Jarwick from asserting any RICO claims in the
remand proceedings. Like its non-RICO claims, Jarwick's RICO
claims were based on a multiplicity of separate and discrete
actions, which occurred over time.
Each of the alleged wrongful actions allegedly caused injury
to plaintiff's business or property, and gave rise to actionable
claims under RICO. A cause of action under RICO accrues for a
specific injury when the plaintiff discovers or should have
39 A-2053-13T3
discovered the injury. See Bankers Tr. Co. v. Rhoades,
859 F.2d 1096, 1103 (2d Cir. 1988) (interpreting the federal RICO law).
Thus, the statute of limitations for RICO claims did not bar
all of Jarwick's claims, even though they were based on violations
that allegedly occurred more than five years before the amended
complaint was filed. Jarwick was not barred from asserting RICO
claims for injuries to its business or property that were sustained
within five years before the claims were asserted.
The court should only have permitted Jarwick to assert RICO
claims based on injuries to its property or business that were
sustained after October 1, 2004.
C. Equitable tolling.
Defendants contend the judge erred by allowing Jarwick to
assert RICO claims based on conduct that occurred after January
1, 2000. As we stated previously, equitable tolling is only applied
in narrowly defined and extraordinary circumstances, and nothing
extraordinary prevented Jarwick from asserting its RICO claims
earlier than October 1, 2009. The judge erred by tolling the
statute of limitations on Jarwick's RICO claims and allowing it
to assert claims based on injuries sustained after January 1,
2000.
40 A-2053-13T3
D. Relation Back.
In its cross-appeal, Jarwick argues that the judge erred by
failing to apply Rule 4:9-3 to its RICO claims. Jarwick asserts
the judge erred by refusing to allow it to assert claims that
accrued any time after 1988. We disagree.
Here, the judge correctly determined that Rule 4:9-3 does not
apply to the RICO claims. As the judge found, those claims are
substantially different from the claims Jarwick asserted in its
initial pleading. The claims do not relate back to the claims that
Jarwick asserted in the complaint filed in 1992.
VIII.
Defendants argue that the trial judge erred by allowing
Halpern to assert his non-RICO and RICO claims in the remand
proceedings.
Here, the judge applied Rule 4:9-3 and determined that
Halpern's claims related back to the claims asserted in Jarwick's
original complaint. Alternatively, the judge tolled the running
of the statutes of limitations on Halpern's non-RICO contract and
tort claims and allowed him to assert these claims based on conduct
dating back to 1988. The judge reasoned that equitable tolling was
warranted because defendants concealed their misuse of partnership
funds.
41 A-2053-13T3
The judge also determined that Halpern's RICO claims are
subject to a five-year limitations period, but the court tolled
the running of the statute of limitations for a limited period of
time. Like Jarwick, the judge allowed Halpern to assert RICO claims
based on injuries sustained after January 1, 2000. The judge found
that as of that date, Halpern had sufficient information to assert
his RICO claims.
A. Relation Back.
Defendants argue that the judge erred by finding that
Halpern's non-RICO claims relate back to the claims asserted by
Jarwick in its initial complaint. We agree. "[N]othing within the
doctrine of relations back would permit claims asserted by
litigants in one action to relate back to claims asserted by
different litigants in a different action." Fraser v. Bovino,
317 N.J. Super. 23, 34 (App. Div. 1998). Because Halpern was not a
party to the action when he filed his complaint, he did not have
a previously-filed pleading to which his claims could relate back.
Halpern argues that the judge's decision to allow him to
assert claims based on alleged wrongful acts dating back to 1988
was consistent with well-settled principles of equity and
partnership law. In her decision, the judge stated that an
accounting involves the entire partnership, and the partner will
42 A-2053-13T3
have to account to all partners, not simply the partner who called
for the accounting. We disagree with the judge's reasoning.
Because Jarwick filed its complaint in 1992, it was entitled
to an accounting of its interest in the partnership from its
inception in 1988 through to its dissolution in 2013. In
determining the damages due Jarwick for its interest in the
partnership, the court had to consider the interests of the other
partners.
This does not mean, however, that a partner who only joined
the litigation in October 2009 has a right to same relief as the
party that commenced the action in 1992. Therefore, Halpern had
the right to assert his non-RICO contract and tort claims, but his
claims do not relate back to the original complaint filed by
Jarwick. We hold that Halpern's claims are subject to the six-year
statute of limitations.
B. Equitable Tolling.
The judge found that Halpern's non-RICO claims accrued
sometime after 2006 when we decided the prior appeal because,
until that time, Halpern was not aware defendants had been misusing
partnership funds. The judge found the accrual date for Halpern's
claims was tolled because defendants fraudulently concealed their
wrongdoing.
43 A-2053-13T3
As stated previously, a cause of action accrues when a
plaintiff knew or should have known he sustained an injury. Henry,
204 N.J. at 333. Moreover, the discovery rule may be applied in
determining when a cause of action accrues. McDade,
208 N.J. at
475. "[T]he discovery rule imposes on plaintiffs an affirmative
duty to use reasonable diligence to investigate a potential cause
of action, and thus bars from recovery plaintiffs who had 'reason
to know' of their injuries." Fauver,
153 N.J. at 110.
Here, the record shows that long before he filed his complaint
in October 2009, Halpern had knowledge that defendants were
exercising unilateral control of the partnership and might be
misusing partnership funds. In 1991, defendants transferred 104
units in Rachel Gardens to a Wilf-owned entity, Rachel Affordable
Housing Company.
It is undisputed that Halpern knew of the transfer. Indeed,
he testified that he was required to sign papers to effectuate the
transfer of title. Halpern claims Zygmunt Wilf told him the
transfer was for tax purposes. However, he took no action to
determine whether that representation was accurate. He also did
not attempt to determine whether he was sharing in the income and
tax benefits related to those units.
In 1994, Halpern obtained a copy of a ledger sheet, which
showed defendants had transferred $875,000 in partnership funds
44 A-2053-13T3
to a Wilf-owned entity. Halpern said Zygmunt Wilf told him the
$875,000 payment was a loan, but Halpern made no effort to verify
whether this was so. He also did not make any inquiry to determine
whether defendants were making other, similar uses of partnership
funds.
In 1988 and 1989, Halpern received partnership financial
statements but he claims he did not thereafter receive such
statements. Halpern did not, however, ask defendants why he was
no longer receiving the partnership's financial statements. As a
partner, Halpern had the right to demand access to all of the
partnership's books and records, which would have disclosed the
payments and distributions that formed the basis for the claims
he asserted in 2009.
Halpern claims he is unsophisticated in financial matters,
and would not have understood the financial statements even if
defendants had provided them to him. However, Halpern was the
manager of Rachel Gardens, and evidence was presented at trial
showing he was heavily involved in its construction. In any event,
even if Halpern was as unknowledgeable in financial matters as he
claimed, he could have sought the advice of an attorney and an
accountant. He did not do so.
Halpern asserted that Zygmunt repeatedly provided him with
assurances about the manner in which defendants were managing the
45 A-2053-13T3
partnership. The trial judge found that Halpern's reliance on
these assurances was reasonable because Zygmunt had a fiduciary
duty to provide Halpern with accurate information about
partnership matters.
However, the fact that Zygmunt had a fiduciary duty to Halpern
did not relieve Halpern of his duty to investigate defendants'
possible misappropriation of funds and falsification of records.
Halpern had sufficient information to warrant an inquiry to
determine if he had claims against defendants for, among other
things, breach of the partnership agreement.
The judge also found that Halpern may not have acted because
he was financially dependent upon his income and distributions
from the partnership. The record shows that through 2007, Halpern
received about $7 million from the partnership in income and
distributions. His claimed dependence on this income does not,
however, excuse his failure to assert claims in a timely manner.
We conclude that under the circumstances, the judge erred by
allowing Halpern to assert his non-RICO claims based on conduct
extending back to 1988. We hold the six-year statute of limitations
applied to Halpern's non-RICO contract and tort claims, and the
trial court should not have permitted him to assert these claims
based on conduct that occurred prior to October 1, 2003.
46 A-2053-13T3
C. RICO Claims.
The trial judge found that Halpern was subject to a five-year
limitations period for the assertion of his RICO claims. Like
Jarwick, the judge found that Halpern could assert his RICO claims
based on injuries sustained after January 1, 2000. The judge found
that as of that date, Halpern had sufficient knowledge of
defendants' wrongful actions to assert claims under RICO.
We reject defendants' contention that all of Halpern's RICO
claims are barred by the statute of limitations. We conclude, as
we concluded with regard to Jarwick's RICO claims, that Halpern's
RICO claims are subject to a five-year statute of limitations, and
the judge erred by tolling the time in which Halpern was required
to assert those claims.
We hold that the judge erred by allowing Halpern to assert
RICO claims based on injuries to his property or business that
pre-dated October 1, 2004.
IX.
We turn to the trial judge's decision to award Jarwick
compensatory damages on its accounting claim in the amount of
$12,624,516, with prejudgment interest of $19,435,326. The
accounting damages were based on the judge's factual findings,
which addressed defendants' use of the partnership's funds from
its inception in 1988 to its dissolution in 2013. The award
47 A-2053-13T3
represents the judge's determination of the amount of money Jarwick
was entitled to receive for its interest in the partnership.
We note that factual determinations "made by the trial court
sitting in a non-jury case are subject to a limited and well-
established scope of review." Seidman v. Clifton Sav. Bank, S.L.A.,
205 N.J. 150, 169 (2011) (citing In re Trust Created by Agreement
Dated Dec. 20, 1961, ex. rel. Johnson,
194 N.J. 276, 284 (2008)).
We will not "disturb the factual findings and legal conclusions
of the trial judge unless we are convinced that they are so
manifestly unsupported by or inconsistent with the competent,
relevant and reasonably credible evidence as to offend the
interests of justice." Ibid. (quoting In re Trust,
194 N.J. at
284).
In reviewing the trial judge's findings, we must "accord
deference to the trial court's credibility determination[s] and
the judge's 'feel of the case' based upon [the judge's] opportunity
to see and hear the witnesses." N.J. Div. of Youth & Family Servs.
v. R.L.,
388 N.J. Super. 81, 88 (App. Div. 2006) (citing Cesare
v. Cesare,
154 N.J. 394, 411-13 (1998)). Our task is to determine
whether "there is substantial evidence in support of the trial
judge's findings and conclusions." Rova Farms Resort, Inc. v.
Inv'rs Ins. Co.,
65 N.J. 474, 484 (1974). The trial court's
48 A-2053-13T3
decisions on issues of law are, however, subject to plenary review.
Manalapan,
140 N.J. at 378.
A. Accounting Damages/Misuse of Partnership Funds.
In the lengthy oral decision placed on the record, the judge
determined that from 1989 to 2012, the partnership made cash
distributions, partner-salary distributions, and excess related-
party payments that totaled $68,439,873. The judge deducted from
that amount $14,321,148, which was the amount disbursed to
defendants to repay their advances. The balance deemed available
for distribution to the partners was $54,118,725.
The judge determined that Jarwick was entitled to twenty-five
percent of this amount, or $13,529,683. The judge then deducted
Jarwick's contribution obligation and the distributions it had
received, arriving at $12,624,516, which was the amount of
compensatory damages the judge awarded to Jarwick.
In her decision, the judge made detailed findings of fact
regarding defendants' excessive related-party payments and other
distributions of partnership funds. The judge found that
defendants had paid Wilf-related entities certain management fees.
The judge noted that defendants initially paid themselves these
funds as management fees, but later reclassified some of these
payments as other expenses. The judge pointed out that in his
testimony, Zygmunt Wilf could not provide a consistent explanation
49 A-2053-13T3
for the fees or the reclassifications. The judge found there was
no reasonable or economic basis for the management fees that
defendants paid to the Wilf-related entities.
The judge also found that defendants improperly recorded
payments of interest on certain related-party loans. In one
instance, defendants recorded an interest expense of $400,000 on
a "phantom" loan to Structural Management, an entity wholly owned
by defendants. The judge noted that the Pernwil partners never
discussed or agreed upon the amounts of interest that the
partnership should pay on these related-party loans.
The judge also observed that defendants had no formula or
standard for determining the amount of interest due on these loans,
and defendants treated many of their related entities differently
with regard to the payment of interest. The judge found that
defendants had taken "huge amounts" of money from Pernwil to pay
interest and this use of partnership funds lacked any rational
basis.
In addition, the judge determined that defendants improperly
used Pernwil's monies to pay the salaries of persons who worked
for Wilf-related entities and did little or no work for Pernwil.
The judge noted that in a response to a statement of facts
submitted on a summary judgment motion, defendants had conceded
50 A-2053-13T3
that, at that time, Pernwil was paying salaries and benefits for
persons working at the headquarters for defendants' businesses.
Defendants stated that fifty persons then were working at the
headquarters location, managing many of defendants' projects.
Defendants charged the salaries and benefits of these workers to
the various Wilf entities, including Pernwil, based on what
defendants determined to be "a fair allocation." The judge found
there was no fixed criteria for the allocation of these expenses
to Pernwil and the other defendant-related entities.
The judge further found that defendants improperly used
Pernwil's funds for rent and office expenses for defendants'
headquarters, and for office space defendants occupied in a
building in New York City. The judge stated that the evidence
showed that only a dozen of the two hundred projects that
defendants managed paid rent. At trial, Zygmunt testified that
during the construction and management of Rachel Gardens, he
charged Pernwil what he "felt" it should pay.
The judge observed that a person reviewing Pernwil's
financial statements would not know the amounts the partnership
was paying to defendants or the reasons for which those payments
were made. The judge noted that Zygmunt could not identify with
specificity the costs that were included in the category of office
expenses. The judge found that the manner in which Zygmunt handled
51 A-2053-13T3
the rent and office expenses was indicative of the way he conducted
"all of his businesses."
The judge said that "it could be paper, it could be rent, or
it could be something else that was due and owing even from another
partnership that was charged." The judge found that it was
inappropriate for defendants to take what they thought the
partnership owed and to categorize those payments "as rent or [an]
office expense."
In addition, the judge found that defendants charged Pernwil
more for insurance than they charged other entities they managed.
The evidence showed defendants obtained insurance policies which
covered numerous projects under defendants' management. Defendants
then decided the amounts that the individual projects should pay
for the insurance.
The evidence showed that some of the Wilf projects were paying
less than Pernwil for insurance coverage. The evidence also showed
that defendants were charging Pernwil amounts for insurance that
exceeded market rates for comparable coverage.
The judge found that at trial, Zygmunt Wilf essentially
testified that he believed he was "entitled to charge" the
individual Wilf-managed projects "whatever he want[ed] to charge"
for insurance. The judge stated that this was another instance
"where [Zygmunt] was simply using Pernwil as his own personal
52 A-2053-13T3
piggy bank, with no disclosure as to what he was doing[.]" The
judge also stated that Zygmunt had not been able to explain "why
he had done what he did."
The judge further found defendants improperly used Pernwil's
funds to pay so-called commissions, which were end-of-the-month
bonuses paid to certain persons employed by other Wilf entities.
The judge found that these individuals had little or nothing to
do with Pernwil or Rachel Gardens. The judge stated that there
appeared to be no rationale for the amounts paid, which were
"completely arbitrary" and not reported on the partnership's
financial statements. The judge made similar findings with regard
to defendants' use of Pernwil's funds for legal expenses,
advertising costs, and other expenses.
We are convinced there is sufficient credible evidence in the
record to support the trial judge's factual findings and
conclusions of law regarding defendants' improper use of
partnership funds. The judge's findings of fact were based upon,
among other evidence, an extensive array of documents, the
testimony of numerous witnesses, and the expert testimony.
We conclude the record fully supports the judge's
determination that defendants had misused partnership funds, and
Jarwick was entitled to damages for the monies it should have been
paid for its interest in the partnership.
53 A-2053-13T3
B. Management Fees.
On appeal, defendants argue that the judge erred by failing
to award them management fees. In our prior opinion, we stated we
were confident that on remand the trial court would consider "the
disproportionate amount of capital and man-hours" that defendants
had put into the project. Jarwick, No. A-5027-03 (slip op. at 15).
We did not, however, mandate an award of management fees to
defendants.
Here, the judge found that defendants had improperly paid
themselves management fees. The judge determined that defendants
had no right to those fees under the current Uniform Partnership
Law,
N.J.S.A. 42:1A-20 to -56. Indeed,
N.J.S.A. 42:1A-21(h) states
that "[a] partner is not entitled to remuneration for services
performed for the partnership, except for reasonable compensation
for services rendered in winding up the business of the
partnership."
The judge also found that the partnership agreements made no
provision for the payment of management fees to defendants. The
judge concluded that in the absence of such an agreement, a partner
is only entitled to its share of the partnership's profits.
The judge found that there was no economic or reasonable
basis for the management fees defendants had paid to themselves.
The judge stated that defendants had withdrawn monies from Pernwil
54 A-2053-13T3
at the end of each year and classified them as management fees.
The judge noted that at trial, Zygmunt could not say "what those
fees were taken for." The record, thus, supports the judge's
determination that defendants improperly withdrew partnership
funds to pay themselves management fees.
C. Defendants' Claims for Other Fees.
The judge also addressed defendants' claims for $19 million
in what were termed theoretical management fees and an additional
$9 million in so-called hypothetical management fees. The judge
found that defendants failed to establish any basis for the award
of these fees.
In her decision, the judge noted that the claimed theoretical
management fees had never been calculated by anyone, and Zygmunt
Wilf did not know whether some or all of these fees were included
in defendants' other claims for fees. The judge again pointed out
there were no agreements by the partners regarding the payment of
these or any other fees.
The judge further noted that Zygmunt also had acknowledged
that defendants did not charge theoretical fees to other entities
they managed or controlled. The judge found that the amount of
work defendants put into the development or management of Rachel
Gardens "was never quantified in any way whatsoever." The judge
55 A-2053-13T3
therefore concluded that there was no basis whatsoever to award
defendants the theoretical fees they were seeking.
In addition, the judge rejected defendants' claim for so-
called hypothetical management fees. The judge noted that
defendants were seeking approximately five percent of the rental
revenues at Rachel Gardens. The judge found there was no
contractual or statutory basis for these fees, and no rationale
to pay them. The judge stated that defendants had performed some
activities for Rachel Gardens but "no one was able to specifically
quantify or monetize those activities."
We conclude that there is sufficient credible evidence in the
record to support the judge's determination that defendants had
not shown they were entitled to the hypothetical and theoretical
management fees they were seeking.
D. Jarwick's Capital Contribution.
In its cross-appeal, Jarwick argues that the judge erred by
finding that they were obligated to make a retroactive capital
contribution of $345,000 to Rachel Gardens, which reduced the
amount of accounting damages awarded.
The record shows that defendants loaned Pernwil $1,035,000,
and in 1989 reclassified the loan as a capital contribution.
Jarwick argues that Ralph Reichmann and Harry Wilf only agreed
that Ralph would contribute one-third of additional monies for the
56 A-2053-13T3
project "should the need arise." Jarwick contends that the trial
judge never found that the $345,000 was needed for the project.
Jarwick also contends defendants should not get the benefit of the
retroactive capital contribution because defendants contributed
the $1,035,000 to carry out what Jarwick claims was an unlawful
scheme to deprive Abe Halpern of his interest in the project.
We are not persuaded by Jarwick's arguments. In our view, the
trial judge did not err by ordering Jarwick to make the retroactive
capital contribution. As Jarwick concedes, defendants contributed
$1,035,000 to the project. It is reasonable to assume that they
would not have done so unless there was a need for the monies.
Moreover, the record shows that Ralph Reichmann agreed to
contribute one-third of funds that might be needed for the project.
Thus, there is sufficient credible evidence in the record to
support the judge's determination that Jarwick was obligated to
make a retroactive capital contribution of $345,000 to the
partnership.
Accordingly, we affirm the award to Jarwick of compensatory
damages of $12,624,516, and prejudgment interest of $19,435,326
on Jarwick's accounting claim.
X.
The trial judge also determined that Jarwick and Halpern had
presented sufficient evidence to establish their non-RICO contract
57 A-2053-13T3
and tort claims. The judge found that Jarwick and Halpern had
established their claims for breach of fiduciary duties, breach
of contract, breach of the implied covenant of good faith and fair
dealing, unjust enrichment, equitable fraud, fraud, conversion,
and civil conspiracy.
As noted previously, the judge awarded Jarwick $12,624,516
on its accounting claim. The judge did not award Jarwick additional
damages on its non-RICO claims, to avoid what would have been a
double recovery for the same damages. Rather, the judge used the
damages on the non-RICO claims for the purpose of awarding punitive
damages. The judge calculated Jarwick's damages for punitive
damage purposes using the accounting damages found for 1989 through
2011.
For punitive damage purposes, the judge eliminated damages
for the so-called "carve-out" period. This was essentially the
time from June 14, 2002, when the trial court ruled that defendants
had excluded Jarwick from the partnership, and December 15, 2006,
when we reversed that determination and found that Jarwick had a
continuing partnership interest. The judge determined that
defendants could not be awarded punitive damages in the "carve-
out" period because their actions regarding Jarwick had been taken
in reliance upon the trial court's June 14, 2002, ruling.
58 A-2053-13T3
In addition, the judge awarded Halpern $6,559,213 in
compensatory damages on his non-RICO contract and tort claims,
along with prejudgment interest. The judge based Halpern's
compensatory damages upon the accounting damages found for the
period from 1989 to 2011, but included damages for the so-called
"carve-out" period because the court's ruling in June 14, 2002,
did not apply to Halpern.
On appeal, defendants argue that the trial judge's findings
of fact on the non-RICO claims are not supported by sufficient
credible evidence in the record. They argue that plaintiffs' tort
claims are barred by the economic loss doctrine. Defendants contend
they did not have any tortious intent, and they assert the court
assigned liability without regard to culpability. Defendants
further argue the trial court incorrectly found fraud without the
necessary showing of reliance. They claim they owed no fiduciary
duty to Jarwick, and violated no duty of disclosure with regard
to partnership records.
We are convinced these contentions lack sufficient merit to
warrant discussion. R. 2:11-3(e)(1)(E). We are convinced there is
sufficient credible evidence in the record to support the trial
court's findings of fact and conclusions of law on plaintiffs'
non-RICO claims.
59 A-2053-13T3
However, as stated previously, we have determined that the
trial judge erred by failing to apply the six-year statute of
limitations to Jarwick's and Halpern's non-RICO claims.
Accordingly, we remand the matter to the trial court solely for
the purpose of recalculating the damages on these claims.
On remand, the trial court shall recalculate the damages on
Jarwick's and Halpern's non-RICO claims, which shall be limited
to damages incurred in the period from October 1, 2003, through
December 31, 2011. The damages shall be recalculated based on the
trial court's findings of fact and the accounting damages found
by the trial judge for the relevant period, with such additional
submissions or evidence the trial court deems necessary.
XI.
The trial judge also found that Jarwick and Halpern had
established their claims under RICO. A civil action may be brought
under
N.J.S.A. 2C:41-4 by "[a]ny person damaged in his business
or property by reason of a violation of [N.J.S.A.] 2C:41-2."
N.J.S.A. 2C:41-2(c) provides that
[i]t shall be unlawful for any person employed
by or associated with any enterprise engaged
in or activity of which affect trade or
commerce to conduct or participate, directly
or indirectly, in the conduct of the
enterprise's affairs through a pattern of
racketeering activity or collection of
unlawful debt.
60 A-2053-13T3
Here, the trial judge determined that Jarwick and Halpern had
standing to assert claims under RICO, and they established
defendants had engaged in a "pattern of racketeering activity,"
as defined in
N.J.S.A. 2C:41-1(d). The judge also found that
defendants had engaged in at least two incidents of racketeering
conduct, one of which occurred after the effective date of the
act, and the last of which occurred within ten years after a prior
incident of such activity.
N.J.S.A. 2C:41-1(d)(1). In addition,
plaintiffs had shown that
[t]he incidents of racketeering activity
embrace criminal conduct that has either the
same or similar purposes, results,
participants or victims or methods of
commission or are otherwise interrelated by
distinguishing characteristics and are not
isolated incidents.
[N.J.S.A. 2C:41-1(d)(2).]
The judge further found that plaintiffs had established that
defendants committed the predicate acts of theft by unlawful
taking,
N.J.S.A. 2C:20-3; theft by failing to make the required
disposition of property,
N.J.S.A. 2C:20-9; misapplication of
entrusted property,
N.J.S.A. 2C:21-15; theft by deception,
N.J.S.A. 2C:20-4; falsification or tampering with records,
N.J.S.A. 2C:21-4; and mail and wire fraud, 18 U.S.C. §§ 1341,
1343.
61 A-2053-13T3
The judge also found that the partnership and the related
entities constituted a "racketeering enterprise" under
N.J.S.A.
2C:41-1(c), and that defendants had engaged in a conspiracy to
violate RICO, which is unlawful under
N.J.S.A. 2C:41-2(d). The
judge found there had been a high level of coordination with regard
to Pernwil, Halwil, and Rachel Gardens. Defendants made decisions
by consensus, and they functioned as "a very well oiled machine."
The judge calculated Jarwick's damages for RICO purposes
using the accounting damages found by the court for 2000 to 2011.
However, the judge did not award Jarwick damages under RICO for
the "carve out" period from June 14, 2002, to December 15, 2006.
The judge determined that Jarwick's damages under RICO were
$5,991,647. The judge trebled those damages pursuant to
N.J.S.A.
2C:41-4(c), resulting in an award of $17,974,491.
The judge also calculated Halpern's RICO damages using the
accounting damages found by the court for 2000 to 2011. The judge
awarded Halpern damages for his RICO claims in the amount of
$5,335,787. The judge trebled those damages, pursuant to
N.J.S.A.
2C:41-4(c), resulting in an award to Halpern of $16,007,361.
As noted previously, the final judgment provides that Jarwick
and Halpern could not collect the RICO damages because the punitive
damages awarded to these parties exceeded the RICO damages. That
62 A-2053-13T3
decision was consistent with St. James,
342 N.J. Super. at 335-
44.
On appeal, defendants essentially raise the same arguments
they raised with regard to plaintiffs' non-RICO claims. They argue
the trial court's factual findings on the RICO claims are not
supported by sufficient credible evidence.
Defendants contend Jarwick and Halpern were not actually or
proximately damaged under RICO. They assert plaintiffs failed to
establish causation under RICO during the "carve-out" period or
at any other time covered by the claims. They also argue the trial
judge erroneously found they committed fraud even though
plaintiffs did not establish reliance.
Furthermore, in its cross-appeal, Jarwick argues that the
trial judge erred by refusing to award it damages under RICO for
the "carve-out" period. Jarwick contends defendants may have
denied it the benefits of the partnership in that period based on
the court's June 2002 ruling, but defendants wrongfully retained
the partnership benefits even after this court reversed the June
2002, decision.
We are convinced defendants' and Jarwick's arguments
regarding the trial judge's findings of fact on the RICO claims
lack sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).
We conclude there is sufficient credible evidence in the record
63 A-2053-13T3
to support the trial court's findings of fact and conclusions of
law on plaintiffs' RICO claims. The judge did not err by refusing
to award Jarwick damages for the "carve-out" period.
However, we have determined that the trial judge correctly
found the five-year statute of limitations applies to Jarwick's
and Halpern's RICO claims, but erred by tolling the time for filing
those claims. Accordingly, we remand the matter to the trial court
solely for the purpose of recalculating the damages on those
claims.
On remand, the trial court shall recalculate the damages on
the RICO claims, which shall be limited to damages incurred from
October 1, 2004, through December 31, 2011. The RICO damages shall
be recalculated based on the trial judge's findings of fact and
the accounting damages found by the judge, with such additional
submissions or evidence the court deems necessary.
XII.
On appeal, defendants challenge on various grounds the trial
court's decision to award Jarwick and Halpern punitive damages.
They dispute the judge's finding that they engaged in conduct that
justifies the imposition of such damages. They argue that the
punitive damages that the judge awarded are excessive and
unconstitutional. In their cross-appeals, Jarwick and Halpern
64 A-2053-13T3
argue that the court should have awarded them the maximum amount
of punitive damages allowed under the PDA.
The PDA defines "punitive damages" to include "exemplary
damages and means damages awarded against a party in a civil action
because of aggravating circumstances in order to penalize and to
provide additional deterrence against a defendant to discourage
similar conduct in the future."
N.J.S.A. 2A:15-5.10. The PDA
specifically excludes both compensatory damages, which "means
damages intended to make good the loss of an injured party," and
nominal damages, which "are not designed to compensate a plaintiff
and are less than $500." Ibid.
To prevail on a claim for punitive damages, a plaintiff must
prove by clear and convincing evidence that the party suffered
harm as a "result of the defendant's acts or omissions" and that
"such acts or omissions were actuated by actual malice or
accompanied by a wanton and willful disregard of persons who
foreseeably might be harmed by those acts or omissions."
N.J.S.A.
2A:15-5.12(a). In making that determination, the relevant
considerations include:
(1) The likelihood, at the relevant time, that
serious harm would arise from the defendant's
conduct;
(2) The defendant's awareness of reckless
disregard of the likelihood that the serious
65 A-2053-13T3
harm at issue would arise from the defendant's
conduct;
(3) The conduct of the defendant upon learning
that its initial conduct would likely cause
harm; and
(4) The duration of the conduct or any
concealment of it by the defendant.
[N.J.S.A. 2A:15-5.12(b).]
Before entering judgment, the trial judge "shall ascertain
that the award is reasonable in its amount and justified in the
circumstances of the case, in light of the purpose to punish the
defendant and to deter that defendant from repeating such conduct."
N.J.S.A. 2A:15-5.14(a). The award amount is also capped so that
"[n]o defendant shall be liable for punitive damages in any action
in an amount in excess of five times the liability of that
defendant for compensatory damages or $350,000, whichever is
greater."
N.J.S.A. 2A:15-5.14(b). If necessary, "the judge may
reduce the amount of or eliminate the award of punitive damages."
N.J.S.A. 2A:15-5.14(a).
In addition to these statutory conditions, punitive damages
must satisfy due process requirements under the Fourteenth
Amendment to the United States Constitution. In State Farm Mutual
Auto Ins. Co. v. Campbell,
538 U.S. 408, 416-17 (2003), the Court
explained that because punitive damages are imposed for
retribution and deterrence, states must provide civil defendants
66 A-2053-13T3
with protections akin to what a criminal defendant would receive.
Accordingly, a plaintiff's burden of proof cannot "be satisfied
by proof of any degree of negligence including gross negligence."
N.J.S.A. 2A:15-5.12(a).
Three "guide posts" shape the analysis: "(1) the degree of
reprehensibility of the defendant's misconduct; (2) the disparity
between the actual or potential harm suffered by the plaintiff and
the punitive damages award; and (3) the difference between the
punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases." State Farm,
538 U.S.
at 418.
For these purposes, the "reprehensibility" of a defendant's
actions will depend on whether
the harm caused was physical [or] economic;
the tortious conduct evinced an indifference
to or a reckless disregard of the health or
safety of others; the target of the conduct
had financial vulnerability; the conduct
involved repeated actions or was an isolated
incident; and the harm was the result of
intentional malice, trickery, or deceit, or
mere accident.
[Id. at 419.]
However, the court should presume that "a plaintiff has been
made whole . . . by compensatory damages" and "punitive damages
should only be awarded if the defendant's culpability, after having
paid compensatory damages, is so reprehensible as to warrant the
67 A-2053-13T3
imposition of further sanctions to achieve punishment or
deterrence." Ibid.
Here, the trial judge found that punitive damages should be
awarded to plaintiffs because defendants repeatedly acted with a
"willful disregard" of their partners. The judge found defendants
acted with actual malice and a reckless indifference to the rights
of their partners, because taking money from their partners carried
"a hundred percent probability of harm."
The judge awarded Jarwick punitive damages against Zygmunt
($12,222,521), Leonard ($4,074,174), and Mark ($4,074,174) for a
total of $20,370,869. The judge calculated Jarwick's punitive
damages using the accounting damages found for the period from
1989 to 2011. The judge did not, however, award Jarwick any
punitive damages for the "carve-out" period, finding defendants'
actions regarding Jarwick in this period did not rise to the level
required for the award of punitive damages.
In addition, the judge awarded Halpern punitive damages
against Zygmunt ($9,838,137), Leonard ($3,279,379), and Mark
($3,279,379) for a total of $16,396,895. The judge calculated
Halpern's punitive damage based on the accounting damages found
for the period from 1989 to 2011. The judge awarded Halpern damages
for the "carve-out" period.
68 A-2053-13T3
The punitive damages awards to Jarwick and Halpern must be
vacated and the trial court must reconsider whether such damages
should be awarded and, if so, in what amounts.
Here, the trial judge awarded plaintiffs punitive damages
based upon the damages calculated on their respective non-RICO
claims for the period from 1989 to 2011. We have determined that
the trial court erred by failing to limit Jarwick's and Halpern's
non-RICO claims to the time required by the statute of limitations.
Because the punitive damage awards are based on compensatory
damages determined for a period beyond the time allowed by the
statute of limitations, the punitive damage awards cannot stand.
We note that in its initial complaint, Jarwick sought punitive
damages on count one of the complaint filed in 1992, the claim was
for a "diversion of opportunity." That claim was based on a
singular event, the "diversion" of Halwil's assets to Pernwil. In
the remand proceedings, Jarwick sought punitive damages not based
on that single act, but rather based on the misappropriation of
funds and other wrongdoing alleged to have occurred over many
years.
Therefore, any punitive damages awarded to Jarwick must be
based on the damages related to its new, non-RICO tort claims
which were asserted in the amended complaint, not on the damages
found in the accounting. Similarly, any punitive damages awarded
69 A-2053-13T3
to Halpern must be based on the damages found on his non-RICO tort
claims. As noted, those damages must be limited to the period
permitted by the applicable statute of limitations.
Reversal of the awards of punitive damages is also required
because in assessing whether such damages should be awarded, the
judge considered and relied upon the fact that defendants' tortious
conduct occurred over time, and was not an isolated incident. In
making that finding, which was critical to the decision to award
punitive damages, the judge considered acts that occurred outside
the period permitted by the applicable statute of limitations for
the non-RICO claims.
Accordingly, on remand, the trial court shall reconsider the
decisions to award Jarwick and Halpern punitive damages. The court
shall determine whether punitive damages should be awarded, and
if so, in what amounts. The court shall make its determinations
based on the existing trial court record, any relevant findings
of fact found by the trial judge, and such additional testimony
or evidence the court may deem necessary for its decision.
This should not be viewed as an opportunity to re-litigate
any finding of fact or conclusion made by the trial judge, which
has been affirmed on appeal. Those findings are binding on remand.
The court shall make specific findings of fact as to each
individual defendant: Zygmunt, Leonard, and Mark. The court shall
70 A-2053-13T3
determine whether each of these defendants engaged in conduct in
the period from October 1, 2003, through December 2011, which
rises to the level required for the award of punitive damages. The
court then shall decide, as to each defendant, whether punitive
damages should be awarded and the amounts to be awarded,
considering the criteria in the PDA, and the relevant factors
under State Farm.
XIII.
Defendants also challenge the awards of attorneys' fees and
costs to both Jarwick and Halpern. The trial judge awarded Jarwick
$10,666,468 in attorneys' fees and costs, which reflected a twenty-
five-percent reduction of the fees for the Lowenstein firm. The
judge awarded Halpern $6,861,098 in attorneys' fees and costs,
which reflected a twenty-five percent fee enhancement. In making
these awards, the judge adopted, with limited exceptions, the
recommendations of the court-appointed special master.
In the trial court, defendants argued that plaintiffs' fee
applications should be denied in part because the fees and costs
were awarded pursuant to RICO, and plaintiffs were seeking awards
for fees and costs incurred in litigating other claims. The special
master found that all of plaintiffs' "claims were inextricably
intertwined with successful [RICO] claims, and [that] plaintiffs
were overwhelmingly successful at trial." In addition to the shared
71 A-2053-13T3
body of facts, the special master noted that plaintiffs relied on
the same evidence and expended the same resources to prove their
claims. The trial judge agreed, explaining:
[I]n this case, virtually all of the
plaintiff[s'] claims arise from a common core
of overlapping and intertwined facts. And
those facts revolve around this particular
issue or contention by the plaintiffs. The
Wilfs [took] in excess of their pro rata share
of partnership's profits by conjuring various
improper vehicles and ruses, primarily in
adjusting journal entries, which were then
obfuscated to cover what had been done, to
conceal the improper taking of funds.
The judge next rejected defendants' objections regarding
counsels' "block billing." The judge found that the time records
the attorneys had submitted in support of their applications were
sufficiently clear to determine whether the rates were reasonable.
According to the judge, the timesheets were "superlative" and
"anyone should be able to tell what the attorney was doing and
why."
In addition, the judge awarded fees and travel expenses to
Jarwick's attorney despite his out-of-state location. The judge
reasoned that the attorney had saved "defendants an extraordinary
amount of money by charging his billable rate in Baltimore and
[that] in order to do that he had to get up to New Jersey to
conduct this trial."
72 A-2053-13T3
With regard to Lowenstein's hourly rates, the special master
recommended and the judge agreed that a twenty-five percent across-
the-board reduction was warranted. The judge found that although
Lowenstein had assumed increasing responsibility as the litigation
progressed, its role was still primarily that of supporting
counsel.
Finally, with regard to the fee enhancement for Halpern's
attorneys, the judge adopted the special master's recommendation
that an enhancement was appropriate for Halpern's attorneys
because of: (1) the favorable results the attorneys obtained on
Halpern's behalf; (2) the "tremendous risk" Halpern's attorneys
assumed when they agreed to continue representing Halpern on a
contingency basis given his rapidly declining health and
precarious financial situation; (3) the uncertain outcome; and (4)
the challenges of litigating against wealthy defendants.
The judge observed that Halpern had exhausted his financial
resources during the lengthy trial proceedings and that when the
contingency agreement was executed, his attorneys could not have
known how the litigation would conclude. For those reasons, the
judge rejected defendants' contention that the share Halpern's
lawyers received from the sale of Rachel Gardens mitigated the
need for a fee enhancement.
73 A-2053-13T3
On appeal, defendants argue that the trial judge erred by
failing to limit the award of fees to the successful pursuit of
the RICO claims. They contend the judge erroneously awarded counsel
fees based on the attorneys' "block billing." Defendants further
argue that it was unreasonable for the trial court to permit
Jarwick's attorney to recover fees and expenses incurred while
traveling.
Defendants also argue that the Lowenstein firm should not
have been awarded fees because the judge's spouse was representing
the firm in an unrelated matter while the case was pending.
Alternatively, defendants challenge the reasonableness of the fees
awarded to Lowenstein, arguing that the fees are disproportionate
to the work the firm's attorneys actually performed on the case.
Finally, defendants assert the trial judge erred by enhancing
Halpern's award. Defendants contend a fee-enhancement was not
warranted because the attorneys' compensation was contingency-
based and supplemented with a twenty-five-percent share of
Halpern's proceeds from the sale of Rachel Gardens.
In its cross-appeal, Jarwick argues that the court erred by
reducing Lowenstein's fees. Jarwick argues the across-the-board
reduction in Lowenstein's fees was unreasonable.
As noted, plaintiffs sought fees under the fee-shifting
provisions of RICO.
N.J.S.A. 2C:41-4(c). The starting point in
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awarding such fees is the determination of the "lodestar," which
is "the number of hours reasonably expended multiplied by a
reasonable hourly rate." Furst v. Einstein Moomjy, Inc.,
152 N.J.
1, 21 (2004) (quoting Rendine v. Pantzer,
141 N.J. 292, 335
(1995)).
When seeking the award of attorneys' fees, the applicant must
address the factors enumerated in Rule of Professional Conduct
1.5(a), which include the following:
(1) the time and labor required, the novelty
and difficulty of the questions involved;
(2) the likelihood, if apparent to the
client, that the acceptance of the particular
employment will preclude other employment by
the lawyer;
(3) the fee customarily charged in the
locality for similar legal services;
(4) the amount involved and the results
obtained;
(5) the time limitations imposed by the
client or by the circumstances;
(6) the nature and length of the professional
relationship with the client;
(7) the experience, reputation, and ability
of the lawyer or lawyers performing the
services;
(8) whether the fee is fixed or contingent.
Trial courts are invested "with wide latitude in resolving
attorney-fee applications." Furst,
182 N.J. at 25. Furthermore,
75 A-2053-13T3
the trial court's fee determinations "will be disturbed only on
the rarest occasions, and then only because of a clear abuse of
discretion." Rendine,
141 N.J. at 317.
We reject defendants' contentions that the trial court erred
by awarding fees based on the attorney's block billing and by
awarding fees and expenses to Jarwick's attorney for traveling.
We also reject defendants' contention that the judge erred by
awarding Halpern's attorneys a fee enhancement, and defendants'
contention that the Lowenstein firm should not have been awarded
any fees due to the firm's relationship with the judge's spouse.
In addition, we reject Jarwick's contention that the trial judge
erred by reducing Lowenstein's fees. All of these arguments lack
sufficient merit to warrant discussion in this opinion. R. 2:11-
3(e)(1)(E).
We are convinced, however, that the awards of attorneys' fees
and costs to Jarwick and Halpern must be reversed and the awards
reconsidered. As noted, the trial judge awarded the counsel fees
and costs pursuant to RICO, and the judge limited Jarwick's and
Halpern's RICO claims to conduct that occurred from 2000 to 2011.
The court nevertheless awarded counsel fees and costs based on all
of the time counsel devoted to the case.
That included the time spent by Jarwick's and Halpern's
lawyers for the pursuit of the non-RICO claims. In Jarwick's case,
76 A-2053-13T3
this included the time devoted to the pursuit of his accounting
damages, which extended back to 1988. In Halpern's case, it
included the time devoted to the pursuit of his non-RICO contract
and tort claims, which were not time-restricted.
The special master and the judge correctly noted that when a
plaintiff presents claims for which fees can be awarded along with
claims for which such fees cannot be awarded, attorneys' fees for
all of the time devoted by counsel to the case can be awarded if
the work on the unrelated claims "can[] be deemed to be part of
the pursuit of the ultimate result achieved." Silva v. Autos of
Amboy, Inc.,
267 N.J. Super. 546, 556 (App. Div. 1993) (citing
Hensley v. Eckerhart,
461 U.S. 424, 434-35 (1983)). A suit will
not be considered a collection of separate discrete claims if it
rests on "a common core of facts" or is "based on related legal
theories." Ibid. (quoting Hensley,
461 U.S. at 435).
Moreover, "[i]f a plaintiff achieves excellent results in a
lawsuit, counsel fees should not be reduced on the ground that the
plaintiff did not prevail on each claim advanced." Ibid. (citing
Hensley,
461 U.S. at 435). Litigants may in good faith raise
alternative legal theories for relief, and the court's "rejection
of or failure to reach certain grounds is not a sufficient reason
for reducing a fee." Ibid. (citing Hensley,
461 U.S. at 435).
77 A-2053-13T3
Here, the special master determined that plaintiffs had
achieved outstanding results and, therefore, they should be
awarded fees for the time their attorneys devoted to presenting
the common core of facts that pertained to both the RICO and non-
RICO claims. The trial judge agreed.
We are convinced the court erred by finding that all of
Jarwick's and Halpern's claims rested on a common core of operative
facts. That finding ignores the time-limitations that apply to the
non-RICO and RICO claims. As we have explained, the plaintiffs'
RICO claims were limited to the five years before October 1, 2009,
which was the date the RICO claims were first asserted. The
resulting awards must be reconsidered for several reasons. The
core of operative facts pertains to the claims asserted for this
period, whether those claims are asserted under RICO or on some
other legal theory.
We recognize that in determining whether plaintiff sustained
injuries actionable under RICO, the court may consider RICO
violations that occurred prior to the prescribed limitations
period. Rhoades, 859 F.2d at 1103. We are not convinced, however,
that this justifies awarding Jarwick attorneys' fees based on the
time devoted to other claims involving wrongful acts committed as
far back as 1988. Moreover, as we have determined, Halpern's non-
78 A-2053-13T3
RICO claims were limited to conduct that occurred after October
1, 2003.
Accordingly, we vacate the attorneys' fees awards to Jarwick
and Halpern and remand the matter for reconsideration of those
awards. On remand, the court shall reconsider and re-determine the
amount of attorneys' fees and costs to be awarded to plaintiffs.
The court must limit its award to the fees and costs reasonably
devoted to plaintiffs' pursuit of their respective RICO claims.
The court may consider awarding counsel fees and costs for
time spent establishing wrongful acts on the part of defendants
that pre-dated the time for which the RICO claims could be
asserted. However, the court must find that the time devoted to
presenting that evidence was reasonably required to establish the
RICO claims.
XIV.
Defendants also argue that the trial judge erred by imposing
liability upon the Estate of Harry Wilf. They also argue the judge
erred by imposing tort and RICO liability upon Mark, Leonard, and
Joseph Wilf.
The final judgment awards compensatory damages against the
Estate of Harry Wilf, but not punitive damages, RICO damages, or
attorneys' fees and costs. Defendants note that Harry Wilf died
in February 1992. Halpern agrees that imposition of liability upon
79 A-2053-13T3
the Estate in the final judgment was a clerical error. On remand,
the court should correct the judgment. Compensatory damages should
not be awarded against the Estate.
The final judgment also awards compensatory damages against
Joseph Wilf, but not punitive damages, RICO damages, or attorneys'
fees and costs. Defendants contend damages should not have been
assessed against Joseph because the trial court did not
specifically identify any tortious conduct on his part.
However, evidence presented at trial shows that Joseph was
an active participant in defendants' businesses through the late
2000's, and he was directly involved in the decision to eliminate
Jarwick from Halwil and Pernwil. We conclude there is sufficient
evidence in the record to award Jarwick compensatory damages
against Joseph Wilf. In addition, there is sufficient evidence to
award Halpern compensatory damages on his non-RICO claims, for
wrongful acts committed after October 1, 2003.
We also conclude there is sufficient evidence in the record
to support the award of compensatory, punitive, and RICO damages
against both Mark and Leonard. The record does not support
defendants' claim that Mark and Leonard only performed ministerial
functions and essentially acquiesced in Zygmunt's management of
the partnership.
80 A-2053-13T3
Rather, the record supports the trial judge's finding that
Mark and Leonard engaged in conduct that warrants imposition of
liability upon these defendants. In her decision, the judge found
that the Wilfs had operated their businesses with cooperation and
coordination. The judge noted that they worked with their
accountants in determining the monies that were and were not
available.
The judge stated that Zygmunt was the "self-described master
chef" and he was the "overseer" of Rachel Gardens and many other
Wilf projects. The judge found, however, that Zygmunt, Mark, and
Leonard worked together and operated on consensus.
The judge pointed out that the evidence showed Mark dealt
with payroll and benefits, and the hiring of key people. Mark also
reviewed the financial statements for Rachel Gardens. Leonard
reviewed the project's financial statements and other financial
documents.
We therefore reject defendants' contention that there was
insufficient evidence for the award of compensatory, punitive,
RICO damages, or attorneys' fees against Mark and Leonard.
XV.
Defendants also appeal the trial court's September 11, 2013,
order, which denied their motion to seal a stipulation that states
the minimum net worth of each Wilf defendant.
81 A-2053-13T3
The record shows that on July 1, 2013, in advance of a final
determination on punitive damages, defendants filed a stipulation
in the trial court which sets forth the minimum net worth for each
Wilf defendant. In the stipulation, each minimum net worth
statement is expressed in a dollar figure. Defendants did not
attach any financial statements, bank account numbers, bank
balances, or other supporting data.
The stipulation also contains a statement by the Wilf
defendants, both individually and collectively, "that their
liquidity and ability to pay any punitive damage award is not in
issue for the purpose of determining the amount of any punitive
damage award to be lodged against them, or any of them."
Defendants filed the stipulation conditionally under seal, with
the consent of the court and the other parties.
Prior to the start of the punitive damages phase of the trial
court proceedings, defendants filed a motion pursuant to Rule
1:38-11 to seal the stipulation. Defendants argued that public
release of the information in the stipulation would violate their
right to privacy, put them at a competitive disadvantage in
business transactions, and jeopardize their safety and the safety
of their families.
It is undisputed that defendants are active participants in
the real estate market, and a significant part of that market
82 A-2053-13T3
involves the sale and purchase of real estate. According to
defendants, real estate purchase prices are determined, in part,
by the parties' economic resources, which influence their
tolerance for risk, ability to assume liability, and desire or
need to enter into a transaction.
Defendants claimed non-disclosure of financial information
facilitates bargaining power. They asserted that public disclosure
of their minimum net worth statements would deny them valuable
leverage and weaken their positions in future business
negotiations because the parties with whom they negotiate will
have access to financial information about them, while they will
not have similar information about their negotiation counterparts.
Defendants further asserted that wealthy individuals often
have been targeted with harassment, kidnapping, and extortion by
criminal actors attempting to secure a financial payoff. Although
defendants did not claim they have been subject to such acts, they
feared that public release of their minimum net wealth statements
would attract bad actors. Defendants cited, however, a series of
media reports of such criminal activity against other wealthy
persons.
Defendants further argued that in light of their concession
that they are able to satisfy any amount of punitive damages that
might be awarded against them, the stipulation would not play a
83 A-2053-13T3
significant role in the trial court's decision on punitive damages.
Thus, defendants argued, their interest in safeguarding their
personal financial information outweighed the public's interest
in disclosure of evidence considered by courts. Plaintiffs opposed
the motion.
The judge found that defendants were not entitled to relief
under Rule 1:38-11. The judge found that public disclosure of
defendants' minimum net worth statements is unlikely to have an
impact on their business negotiations, and defendants had not
identified any specific transaction in which such harm is
anticipated.
The judge noted that the public has long known that the Wilfs
are wealthy individuals, in part because of their ownership of a
professional football franchise. The judge reasoned that
disclosure of their minimum net worth statements would not
materially alter the public's knowledge of their wealth. In
addition, the judge noted that defendants had produced no evidence
of prior or anticipated threats to them or their families, and
found that this claim of potential harm was speculative.
The judge acknowledged defendants' minimum net worth is so
far in excess of what the court would likely award as punitive
damages that the stipulation would be of little use to its legal
analysis. The judge found, however, that the public's interest in
84 A-2053-13T3
open court proceedings is paramount to the unproven and speculative
harm defendants alleged.
The judge therefore ordered that the public have access to
the stipulation, but the judge stayed her order to permit
defendants to seek relief in this court. Thereafter, we granted
defendants' motion and stayed disclosure of the stipulation
pending disposition of this appeal. As a result, the contents of
the stipulation have never been disclosed publically.
Public access to court records is firmly established and
intended to be broad. According to Rule 1:38-1,
Court records and administrative records as
defined by R. 1:38-2 and R. 1:38-4
respectively and within the custody and
control of the judiciary are open for public
inspection and copying except as otherwise
provided in this rule. Exceptions enumerated
in this rule shall be narrowly construed in
order to implement the policy of open access
to records of the judiciary.
Rule 1:38-2 defines court records include "any information
maintained by a court in any form in connection with a case or
judicial proceeding."
However, Rule 1:38-3 contains several exceptions to the rule
requiring public access to the judiciary's records. One exception
is found in Rule 1:38-11, which provides that:
(a) Information in a court record may be
sealed by court order for good cause as
defined in this section. The moving party
85 A-2053-13T3
shall bear the burden of proving by a
preponderance of the evidence that good cause
exists.
(b) Good cause to seal a record shall exist
when:
(1) Disclosure will likely cause a clearly
defined and serious injury to any person or
entity; and
(2) The person's or entity's interest in
privacy substantially outweighs the
presumption that all court . . . records are
open for public inspection pursuant to [Rule]
1:38.
The decision as to whether to seal court records is committed
to the sound discretion of the court. Hammock, Jr. ex rel. Hammock
v. Hoffmann-Laroche, Inc.,
142 N.J. 356, 380 (1995). However, the
court's discretion in this area "is not unfettered." Verni ex rel.
Burstein v. Lanzaro,
404 N.J. Super. 16, 23 (App. Div. 2008).
Our courts have not yet addressed in a published opinion the
question of whether a party's personal financial information may
be sealed pursuant to Rule 1:38-11. However, the Court's decision
in Herman v. Sunshine Chemical Specialties, Inc.,
133 N.J. 329
(1993), is instructive.
In Herman, the Court recognized that a party's financial
condition is relevant when punitive damages are to be assessed.
Id. at 341-42. Even so, the Court limited the financial information
that a party must produce in discovery when faced with a punitive
86 A-2053-13T3
damages claim. Id. at 343-44. The Court explained that "[t]empering
the normal rule favoring wide discovery of relevant issues is a
regard for the defendant's interest in maintaining the
confidentiality of information about its financial status." Id.
at 343.
The Court continued, "[i]n reviewing requests for discovery
of a defendant's financial condition, a trial court should balance
the plaintiff's need for the information with the burden on a
defendant of disclosure, and with an appreciation that a
defendant's finances 'are private matters which are normally
jealously guarded.'" Id. at 344 (citations omitted).
The Court added that "[s]ensitive balancing by the trial
court is essential to the accommodation of a plaintiff's need for
discovery and the defendant's right to maintain the
confidentiality of information about its financial condition."
Ibid. Notably, the Court recognized that "sealing [a] deposition
or answers to interrogatories may be essential for striking the
right balance of the litigants' interests" on this "sensitive
issue." Id. at 345.
The interest in preserving the confidentiality of a party's
financial information clearly extends beyond the discovery phase
of a trial court proceeding in which a punitive damage claim is
asserted. Indeed, once a document containing a party's financial
87 A-2053-13T3
information is made part of the court's open record, that
information is available for public inspection and wide
distribution.
In this case, the trial judge mistakenly exercised her
discretion by ordering the public disclosure of defendants' net
worth stipulation. The judge erred by finding defendants did not
meet their burden under Rule 1:38-11(b)(1). They established that
disclosure of the stipulation will likely result in a clearly
defined and serious injury.
Defendants credibly established that disclosure of their
minimum net worth likely would impair their ability to engage in
their business activities. Moreover, defendants established that
their interest in preserving the confidentiality of their minimum
net worth substantially outweighed the presumption that all court
records should be open for public inspection. R. 1:38-11(b)(2).
The public's interest in access to the record was diminished
here because it was unlikely the trial court would use the
information in the stipulation when awarding punitive damages
against defendants. As the trial judge noted, defendants' minimum
net worth far exceeded any amount of punitive damages that the
court might award. Defendants stipulated they had the liquidity
and ability to pay any amount of punitive damages the court might
award.
88 A-2053-13T3
We also note that the public has access to the record of this
case, which includes the transcripts of about two hundred days of
trial proceedings and related court proceedings, and an extensive
array of documents. The public also has access to the trial court's
findings of fact and conclusions of law, including those pertaining
to the award of punitive damages. Sealing the stipulation will not
limit public scrutiny of the trial court's record in a meaningful
way.
We therefore conclude the trial court's decision to deny
defendants' motion to seal the stipulation was a mistaken exercise
of discretion. We reverse the court's order of September 11, 2013.
The stipulation will remain under seal.
Accordingly, for the reasons stated, we affirm the award of
compensatory damages of $12,624,516 and prejudgment interest of
$19,435,326 to Jarwick. However, we reverse the awards of RICO
damages, punitive damages, and attorneys' fees and costs to
Jarwick. We remand the matter to the trial court for recalculation
of the damages on Jarwick's non-RICO and RICO claims, and for
reconsideration of the awards of punitive damages and attorneys'
fees and costs.
We also vacate the awards to Halpern of damages on his non-
RICO and RICO claims, as well as the awards of punitive damages
and attorneys' fees and costs. We remand the matter to the trial
89 A-2053-13T3
court to recalculate the damages on Halpern's non-RICO and RICO
claims, and for reconsideration of the awards of punitive damages
and attorneys' fees and costs.
The trial court shall be guided by the principles in St.
James,
342 N.J. Super. at 335-44, in determining whether plaintiffs
may collect the RICO damages and any punitive damages that may be
awarded.
Affirmed in part, reversed in part, and remanded for further
proceedings in conformity with this opinion. We do not retain
jurisdiction.
90 A-2053-13T3
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