FRANKLIN MED. v. Newark Public Sch.

• Decision Date: 08 August 2003
• Citation: 828 A.2d 966,362 N.J. Super. 494
• Parties: FRANKLIN MEDICAL ASSOCIATES, a New Jersey Corporation, and North Essex Physical Therapy, a New Jersey Corporation, Plaintiffs, v. NEWARK PUBLIC SCHOOLS, Defendant/Third-Party Plaintiff-Respondent/Cross-Appellant, v. Donato Marucci, individually and jointly and severally, Third-Party Defendant-Appellant/Cross-Respondent, and Louis Citarelli, individually and jointly and severally, Third-Party Defendant.
• Court: New Jersey Superior Court

828 A.2d 966

362 N.J. Super. 494

FRANKLIN MEDICAL ASSOCIATES, a New Jersey Corporation, and North Essex Physical Therapy, a New Jersey Corporation, Plaintiffs, v. NEWARK PUBLIC SCHOOLS,¹ Defendant/Third-Party Plaintiff-Respondent/Cross-Appellant, v. Donato Marucci, individually and jointly and severally, Third-Party Defendant-Appellant/Cross-Respondent, and Louis Citarelli, individually and jointly and severally, Third-Party Defendant.

Superior Court of New Jersey, Appellate Division.

Submitted February 20, 2003.

Decided August 8, 2003.

Arleo & Donohue, for appellant/cross-respondent Donato Marucci (Frank P. Arleo, of counsel, Chatham; Mr. Arleo and Dawn M. Donohue, on the brief, Newark).

Porzio, Bromberg & Newman, Morristown, for respondent/cross-appellant Newark Public Schools (Vito A. Gagliardi, Jr., of counsel; Thomas J. Rattay, on the brief).

No other parties participated in this appeal.

Before Judges KESTIN, EICHEN and WEISSBARD. The opinion of the court was delivered by EICHEN, J.A.D

Third-party defendant Donato Marucci appeals from an order entered on March 23, 2001 permitting third-party plaintiff Newark Public Schools (Newark) to amend its third-party complaint to add Marucci as a third-party defendant, and from an order entered on August 31, 2001 granting summary judgment in favor of Newark in the amount of $180,000. Newark crossappeals from that aspect of the August 31, 2001 order denying it attorney's fees and costs.

Marucci and Louis Citarelli (the doctors) were medical doctors practicing as Franklin Medical Associates, P.A. (Franklin) and North Essex Physical Therapy and Rehabilitation Center, P.A. (Essex) (collectively, the medical practices). They were also approved workers' compensation panel doctors for Newark and, as such, were eligible to treat its administrators, teachers, custodians and clerical staff who had been injured on the job and to receive payment for those services directly from Newark.

On June 12, 1998, the medical practices filed a complaint in the Law Division, seeking to recover unpaid fees for medical and physical therapy services provided to public school employees between 1992 through 1998, pursuant to a contract with Newark. Specifically, Franklin claimed it was owed $213,000 for medical services, while Essex claimed it was owed $142,000 for physical therapy services.

Thereafter, as a result of a criminal investigation, Newark learned that from 1992 through 1996, Citarelli and Marucci had paid bribes in excess of $60,000 to Louis Monaco, Newark's coordinator for workers' compensation, in exchange for Monaco's assistance in "steering" workers' compensation business from Newark to the medical practices and for his further assistance in receiving expedited payment. This conduct formed the basis of Marucci's guilty plea on August 14, 1998, before the United States District Court for the District of New Jersey, to conspiracy to commit bribery in violation of 18 U.S.C.A. § 371, among other crimes not relevant here.² During the course of his plea allocution, Marucci admitted that between 1992 through April 1996, he and Citarelli paid bribes in excess of $60,000 to Monaco. He further admitted that these payments were made in exchange for Monaco steering workers' compensation patients to the medical practices and assisting them in obtaining payment from Newark.³

On September 24, 1998, Newark filed an answer denying the material allegations of the complaint, and interposing counterclaims seeking to recover damages from the medical practices for, among other things, violations of New Jersey's Racketeer Influenced and Corrupt Organizations Act, N.J.S.A. 2C:41-1 to -6.2 (NJRICO), fraud, unjust enrichment, breach of contract, and breach of the implied covenant of good faith and fair dealing.

On December 20, 1999, following oral argument, Newark was granted leave to file a third-party complaint against Monaco. This complaint was ultimately voluntarily dismissed as part of a settlement between Newark and Monaco.

On March 17, 2000, following limited discovery, Newark moved for summary judgment dismissing the complaint filed by the medical practices on the theory that they were not entitled to recover the illegally procured fees. Newark also sought summary judgment on the issue of liability with respect to a number of its counterclaims, including the counterclaim alleging NJRICO violations. On May 12, 2000, following oral argument, a Law Division judge granted partial summary judgment in favor of Newark, dismissing the complaint in its entirety, with prejudice.⁴ The judge reserved decision on Newark's request for summary judgment on its counterclaims.

On June 23, 2000, following oral argument, another Law Division judge (the initial judge)⁵ granted Newark's motion for summary judgment on the issue of liability with respect to its counterclaims for unjust enrichment, breach of contract and breach of the implied covenant of good faith and fair dealing. The judge further ordered that the medical practices make restitution to Newark in an amount equal to the combined gross profits that each made from 1992 through 1996 as a result of their contracts with Newark.⁶ However, the judge denied Newark's request for summary judgment on its NJRICO counterclaim against the medical practices, as well as its related application to pierce the corporate veil, "at this time, based upon the instant record." According to the initial judge, the NJRICO issue presented questions of fact that she could not decide as a matter of law, and there was insufficient evidence to warrant piercing the corporate veil as a matter of law.⁷

On September 19, 2000, Marucci filed a motion seeking to limit the damages that Newark could recover from the medical practices to the amounts paid as bribes. Newark cross-moved to compel the production of documents from the medical practices. On November 3, 2000, following oral argument, the initial judge denied Marucci's motion to limit damages, and granted Newark's cross-motion for production of documents.

On December 22, 2000, following additional discovery, Newark sought leave to file a third-party complaint asserting aiding-and-abetting claims against Marucci and Citarelli in their individual capacities. On January 17, 2001, Newark moved "to recover fees" incurred as a result of Marucci's failure to comply with certain discovery requests.

On March 23, 2001, following oral argument, a different Law Division judge (the motion judge) granted Newark's fee application to the extent of awarding $435. The motion judge also granted Newark's application for leave to file a third-party complaint against Marucci and Citarelli, concluding that Newark's delay in seeking leave was justified. An order incorporating these rulings was issued that same day.

The first count of the third-party complaint against Marucci alleged, among other things, that he was liable for Monaco's malfeasance under an aiding-and-abetting theory, warranting an award of compensatory damages in the amount of $60,000, the amount of the bribes paid to Monaco. The second count alleged that Marucci was guilty of racketeering activity within the meaning of NJRICO, warranting an award of treble damages, as well as reasonable attorney's fees and costs.

In July 2001, Newark moved for summary judgment on its third-party complaint. Newark's brief urged that summary judgment was warranted because, among other things, the doctors' guilty pleas established that they aided and abetted Monaco's breach of fiduciary duty to Newark. While Newark did not submit any billing records demonstrating its attorney's fees and costs, its brief indicated that it would submit a detailed fee application to the court within thirty days of any ruling in its favor.⁸

On August 31, 2001, following oral argument, the motion judge granted summary judgment to Newark, awarding it $60,000 in damages under the aiding-and-abetting theory of liability, which were then trebled under NJRICO, for a total award of $180,000, payable jointly and severally by Marucci and Citarelli.⁹ In awarding summary judgment in favor of Newark on this claim, the motion judge found that once the doctors admitted to bribing Monaco they could be held liable in their individual capacities for treble the amount of the bribes. However, the motion judge denied Newark's application for attorney's fees and costs because of its "failure to submit information on the date of hearing to the court." An order incorporating these rulings was entered that same day. This appeal and cross-appeal followed.

On appeal, Marucci raises the following arguments:

POINT I

THE TRIAL COURT ABUSED ITS DISCRETION IN GRANTING NEWARK PUBLIC SCHOOLS' MOTION TO FILE A THIRD-PARTY COMPLAINT AGAINST APPELLANT MARUCCI.

POINT II

THE TRIAL COURT'S MISAPPLICATION OF THE MESSERCOLA¹⁰ AND JACLYN¹¹ DECISIONS EXACTS AN UNFAIR PENALTY UPON DR. MARUCCI WHILE GIVING A WINDFALL TO NEWARK.

POINT III

NEWARK SHOULD NOT HAVE BEEN AWARDED TREBLE DAMAGES SINCE NEWARK WAS NOT ENTITLED TO SUMMARY JUDGMENT ON THE [NJ]RICO COUNT.

In a single point heading, Newark raises the following argument on its cross-appeal:

THE TRIAL COURT ERRED BY DENYING NEWARK'S REQUEST TO MAKE AN APPLICATION FOR ATTORNEY'S FEES AND COSTS UNDER THE [NJ]RICO STATUTE.

I.

Marucci first argues that because Newark did not seek leave to amend the pleadings to join him individually until two and one-half years after the action was commenced, the motion judge abused her discretion in permitting Newark to seek to impose personal liability on him under a new theory. Marucci also maintains that Newark failed to offer any reasonable explanation for the delay in asserting individual claims against him. We disagree.

Our review here is limited. The determination of a motion to amend a pleading is generally left to the sound discretion of the trial court, Balthazar v. Atlantic City Medical Ctr., 358 N.J.Super. 13, 27, 816 A.2d 1059, 1067 (App.Div.), ...