Duane, Morris & Heckscher LLP, Matter of

Decision Date14 July 1998
Citation315 N.J.Super. 304,718 A.2d 244
PartiesIn the Matter of Contempt Citation Against DUANE, MORRIS & HECKSCHER LLP, a Pennsylvania Limited Liability Partnership, Appellant. STATE of New Jersey, Plaintiff, v. CRUZ CONSTRUCTION COMPANY, INC., Cruz Construction Corporation, Whitman, Requardt & Associates, et al., Defendants-Respondents.
CourtNew Jersey Superior Court — Appellate Division

Frank A. Luchak, for appellant (Duane, Morris & Heckscher, L.L.P., attorneys; Mr. Luchak, Cherry Hill and Wayne J. Martorelli, Philadelphia, PA, of counsel and on the briefs).

John F. Neary, Roseland, for defendant-respondent Cruz Construction Corp. as successor to Cruz Construction Company, Inc. (Connell, Foley & Geiser, attorneys; Mr. Neary, of counsel and on the brief).

Lawrence P. Powers, Princeton, for defendants-respondents Whitman, Requardt & Associates, Kenneth H. McCord, Frederick R. Knoop, Jr., H. Hudson Myers, William A. DeLoache, Edward A. Serp, James A. Avirett, Jr., John S. Maynes, Charles R. Lortz, Thomas J. Shafer (Hill Wallack, attorneys; Mr. Powers, of counsel; Mr. Powers and Steven W. Griegel, on the brief).

Before Judges LONG, STERN and KLEINER.

The opinion of the court was delivered by

STERN, J.A.D.

Appellant, Duane Morris & Heckscher ("DMH"), appeals from a portion of an "ORDER: RE: MOTION FOR SANCTIONS" entered on May 19, 1997 requiring it to "pay a sanction to the Clerk of the Superior Court ... Law Division ... in the amount of $5,000 ...." The order, obtained on defendants' application, also provided, among other things, that "[a] determination of any evidence exclusion as a result of the matters raised on the defendant's joint motion for sanctions shall be the subject of an evidentiary hearing to be scheduled at a later date, should the defendants wish to seek such relief." It also considered certain reports received by DMH as an answer to defendant Whitman, Requardt & Associates' interrogatory number 25 and considered the reports to embody "adoptive admissions."

The only issue before us relates to the monetary sanction, which the parties consider an adjudication of contempt appealable as of right. We were not asked to grant leave to appeal to consider the merits of the Law Division's rulings as to any of the discovery issues. In any event, it is clear that the monetary sanction was not imposed under R. 1:10-3, in aid of litigant's rights, because the monetary sanction was payable to the Clerk of the Superior Court, not a party, and was not based on the party's costs or prejudice. In fact, the question of "prejudice" was reserved for later determination.

Irrespective of what sanctions could have been imposed, we hold that the "contempt" resulting in the $5,000 sanction did not occur in the presence of the court and was not punishable summarily under R. 1:10-1. Accordingly, we reverse its imposition.

The action which underlies this appeal is detailed in State v. Cruz Const. Co. Inc., 279 N.J.Super. 241, 243, 652 A.2d 741 (App.Div.1995). In February 1993 the State commenced this action against Cruz Construction Co. Inc. and Cruz Construction Corporation (collectively "Cruz"), Safeco Insurance Company of America ("Safeco"), Whitman Requardt Associates, Inc. ("WRA") and others. Cruz and the State entered into a contract on October 10, 1975, under which Cruz was to construct a reservoir pipeline 3.6 miles in length linking the North Dam of the Round Valley Reservoir in Clifton to a release structure located in Whitehouse Station. In 1977, Cruz completed its work under the contract with the State.

"On June 15, 1988, a section of the pipeline installed by Cruz ruptured, resulting in the discharge of a claimed 40 million gallons of water and requiring closure of the pipeline until repairs could be completed." Ibid. The State alleged that Cruz breached its contract by constructing the pipeline with defective materials which failed to conform to contract specifications. Ibid. Defendants' motion to dismiss the complaint was denied by the Law Division and, pursuant to leave granted, we affirmed. Id. at 243-44, 652 A.2d 741.

The background leading to the May 19, 1997 order now before us is not in dispute. A Case Management Order dated September 3, 1996, confirmed prior rulings by providing that:

1. On or before August 30, 1996, plaintiff shall provide to defendants:

a. Responsive answers to all interrogatories served by all defendants not previously answered.

b. Al[l] test data and investigative reports respecting the rupture of the [pipeline], the cause thereof and alleged defects therein.

...

d. A fair and candid statement of the basis upon which plaintiff claims each defendant is liable to it for the damages alleged, including, without limitation, identification of each expert upon whom plaintiff relies for any such claim, and a summary of the opinions of each such expert to the extent presently available. Plaintiff will be permitted to revise or amplify its statement if necessary by reason of new information revealed in discovery.

2. Plaintiff shall complete all of its factual discovery including depositions of all fact witnesses during the months of September, October, and November 1996.

...

4. Plaintiff shall provide defendants with final experts' reports on the issues of liability and damages on or before January 2, 1997. 1

[(Footnote added).]

On or about August 30, 1996, the State served its "INITIAL STATEMENT OF THE BASIS FOR ITS CLAIMS AGAINST DEFENDANTS." The document did not comply with the August 30 deadline that it identify each expert who was expected to support each of the claims and provide a summary of each of the experts' opinions. 2

According to defendants, in October 1996, while defendants' motions to compel more specific answers to interrogatories and to compel compliance with the September 3, 1996 order were pending, the State's experts (Schultz and Lewis), "unbeknownst to the Court and defense counsel ... conduct[ed] an extensive walkthrough inspection of the inside of the pipeline during which they allegedly made videotaped observations of cracking and conducted unrecorded 'soundings.' " Unaware that such activity occurred, on November 8, 1996, the court heard defendants' motion to enforce the September 3, 1996 order and warned counsel about the need to comply with the discovery orders. 3 The judge specifically indicated he would impose a "sanction" against either party "if I start to conclude ... they're stonewalling and [demonstrating a] lack of good faith."

The court's confirming order of November 22, 1996 required the State to provide answers or more specific answers to several enumerated interrogatories. However, the State was not required to produce expert reports until January 31, 1997, provided that "[u]nderlying facts ... shall be disclosed" immediately. Moreover, the order expressly provided that the "State of New Jersey shall comply fully with the terms of the Case Management Order dated September 3, 1996 by immediately providing or making available to all defense counsel" certain designated material. The order concluded by warning that "[c]ounsel are advised that unauthorized deviation from this Court's discovery and case management orders may result in the imposition of sanctions."

The State submitted "Supplemental Responses" to WRA's interrogatories on or about December 4, 1996. It called interrogatory 11 "burdensome" in response to the request for "all persons who inspected the pipeline" "and the results of the inspection" and "all documents which reflect the result of each inspection." The State nevertheless listed the entities or persons conducting inspections. In response to Interrogatory No. 25, regarding expert witnesses, the State elaborated upon its objection to discovery of information regarding consultants and experts who were not expected to testify at trial. 4 In any event, the State disclosed the identity of its experts on or about December 23, 1996.

On or about February 24, 1997, the State produced two expert reports, including a report prepared by Schultz Engineering, the State's liability expert, which described various theories of liability against Cruz and WRA. According to defendants, they

were shocked to discover that [the report] was based, in large part, upon evidence covertly gathered by DMH's experts in October 1996. Upon realizing this, defendants ... promptly filed motions seeking sanctions ... [and] barring the use by the State of the data gathered by these activities.

[ (Citations omitted).]

On May 2, 1997, the trial court heard argument on defendants' motions for sanctions. The hearing went as follows:

MS. PAIGE [COUNSEL FOR WRA]: As we indicated in our original motion, the pieces of pipe from the ... rupture in 1988 have largely vanished. There are a few pieces of concrete left and there are a few pieces of the cylinder. ... These components were of great concern from the very beginning [and] we asked for those [pieces] informally. ...

Now ... the question of the October excavation ... was done with no notice to any of the parties. ...

THE COURT: It was a failure to accurately disclose an express interrogatory answer of what had in fact been undertaken at that time that was answered. ...

MR. NEARY [COUNSEL FOR CRUZ]: Once [the State] decide[s] to go out and start gathering evidence, start doing destructive sampling, in my view it made no difference whether he was a testifying expert, nontestifying expert. ... Once he starts tampering with evidence ... we had to be there. We had to have notice and we had to know exactly what was going to be done so that we could object, not object ... Clearly[,] we don't need an order for that. ...

MR. LUCHAK [COUNSEL FOR PLAINTIFF]: I represent the State ...

With regard to the 1988 rupture, there's no evidence that those experts were anything more than consultants who were retained by the State to assist the State in determining the cause of...

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