Nelson v. Elizabeth Bd. of Educ.

• Decision Date: 26 January 2021
• Docket Number: DOCKET NO. A-4580-18T3
• Citation: 246 A.3d 802,466 N.J.Super. 325
• Parties: Kirk C. NELSON, Plaintiff-Respondent/ Cross-Appellant, v. ELIZABETH BOARD OF EDUCATION, Defendant-Appellant/ Cross-Respondent.
• Court: New Jersey Superior Court — Appellate Division

466 N.J.Super. 325

246 A.3d 802

Kirk C. NELSON, Plaintiff-Respondent/ Cross-Appellant, v. ELIZABETH BOARD OF EDUCATION, Defendant-Appellant/ Cross-Respondent.

DOCKET NO. A-4580-18T3

Superior Court of New Jersey, Appellate Division.

Argued November 10, 2020

Decided January 26, 2021

Leslie F. Prentice argued the cause for appellant/cross-respondent (Adams, Gutierrez & Lattiboudere, LLC, attorneys; John E. Croot, of counsel and on the briefs; Leslie F. Prentice, on the briefs).

Timothy M. Donohue argued the cause for respondent/cross-appellant (Arleo & Donohue, LLC, attorneys; Timothy M. Donohue, on the briefs).

Before Judges Yannotti, Haas and Natali.

The opinion of the court was delivered by

NATALI, J.A.D.

After a non-jury trial, the Law Division entered final judgment in the amount of $260,026.88 in favor of plaintiff Kirk C. Nelson (Nelson) representing his net lost wages caused by defendant Elizabeth Board of Education's (Board) breach of the parties' employment agreement. The trial court rejected the Board's argument that the Rules of Professional Conduct (RPC) permitted it to fire Nelson, its former in-house counsel, without consequence in light of the agreement's clear and unambiguous provision that he was dischargeable only for cause. Nelson cross-appeals contending that the court incorrectly: 1) failed to award damages for the value of his medical and dental benefits, 2) mitigated the damages award, and 3) denied his request for pre-judgment interest.

We affirm in part and reverse in part. We agree that the Board improperly terminated Nelson contrary to the express terms of the agreement. Under the circumstances presented, nothing in the text of the RPCs, or applicable case law, supported the Board's decision to breach the agreement, convert Nelson to an at-will employee, and insulate itself from proximately caused damages.

We also reject plaintiff's challenge to the damages award as it was amply supported by the record. We conclude, however, that the court's decision to deny plaintiff's request for pre-judgment interest was an abuse of discretion, and therefore remand for the court to calculate the appropriate amount of pre-judgment interest.

I.

Nelson has been a licensed attorney in the State of New Jersey since 1998. In 2003 and 2004, he worked for the Board as its outside counsel without an employment agreement after he responded to a request for proposal (RFP). In 2005, the Board hired Nelson as its general counsel after he responded to a separate RFP. Again, the parties did not enter in an employment contract.

In 2009, the Board hired Nelson to a full-time, salaried in-house position as board counsel and the parties executed a one-year employment contract which was renewed annually through June 2012. In 2011 and 2012, the Board was served with several state and federal grand jury subpoenas related to its administration of the National School Lunch Program and other investigations which led to the filing of criminal charges against several Board members, including its president.

Nelson testified that in light of the criminal proceedings, District Superintendent Pablo Munoz (Superintendent Munoz) discussed with him the possibility of executing a three-year employment contract to ensure "stability in the back offices." During the subsequent contract negotiations, the Board was represented by counsel. Nelson represented himself during the negotiations.

The parties ultimately executed a three-year employment agreement naming Nelson as board counsel for an "annual salary of $175,000, with annual increases of [two and a half percent]." Nelson testified that he agreed to the three-year contract in part because it provided him with employment security and further explained that he "essentially shut ... down" his private practice after he signed the agreement.

The agreement provided that the Board could not terminate Nelson prior to the three-year term other than for cause defined as "the occurrence or existence" of:

A) a material breach of your obligations under this agreement including, without limitation, refusal or failure to comply with reasonable directions communicated to you in writing by the Board, which material breach you fail to cure within fifteen calendar days of your receipt of notice of such breach;

B) conviction of a felony or a crime involving moral turpitude; and

C) gross negligence or intentional misconduct in the performance of your duties under this agreement.

In April 2013, Nelson was arrested in connection with the ongoing investigation into the Board's administration of the National School Lunch Program. Nelson testified that the arrest stemmed from his failure to produce a single responsive document out of approximately "one million" documents requested in multiple subpoenas. Nelson promptly notified Superintendent Munoz about his arrest and he was subsequently placed on paid administrative leave pending a formal investigation. On December 9, 2013, Nelson was indicted for one count of conspiracy, two counts of official misconduct, one count of tampering with public records or information, one count of tampering with or fabricating physical evidence, and one count of hindering apprehension or prosecution.

On January 8, 2014, Nelson was notified in a two-line letter sent by the Board's new superintendent, Olga Hugelmeyer, that "[a]t a meeting of the Board of Education held on Monday, December 23, 2013, the Board approved your termination from the position [of] Board Counsel effective immediately." At the time, Nelson had eighteen months remaining on his employment contract with the Board entitling him to $273,546.88 in salary.

After he was fired, Nelson was unable to find legal employment of any kind. At one point, he was offered a management position at a local hospital, but the position was rescinded after a criminal background check. Nelson also unsuccessfully attempted to obtain employment at FedEx, UPS, Uber, and various construction jobs. In 2015, Nelson was hired through a prisoner reentry program to work overnights cleaning "vent hoods, grease traps and ... grease exhaust hoods." He testified that he worked for approximately six months, forty hours a week, and earned $13 per hour.

After a six-week jury trial, defendant was acquitted of all charges in the indictment. During the criminal trial, Nelson provided testimony regarding the underlying facts that resulted in his failure to comply with the subpoena. Nelson stated that when he was notified that a document had not been produced, he consulted with outside counsel that handled the Board's subpoena compliance. After speaking with outside counsel, Nelson believed that the missing document was produced electronically.

Nelson filed a two-count complaint against the Board asserting claims of breach of contract and promissory estoppel. After the motion court denied the Board's motion to dismiss the complaint pursuant to Rule 4:6-2(e), it filed a motion for summary judgment arguing that Nelson's claims were "subject to dismissal as a matter of law because the three-year term of his [c]ontract is in conflict with the Rules of Professional Conduct ...."

Nelson opposed the Board's motion and cross-moved for partial summary judgment on his breach of contract claim. The motion judge issued a January 7, 2019 order denying the Board's motion and partially granting Nelson's cross-motion. Although the motion court concluded that the parties entered a "valid, enforceable contract," it denied Nelson's motion to the extent it sought a pretrial determination that the Board breached the agreement.

In its accompanying written decision, the motion court reasoned that the Board "may have been free to discharge Nelson ... [but] the [RPCs] do not provide immunity for [the Board] from a breach of contract claim, or the damages stemming from said breach." The motion judge further determined that because there was an enforceable contract, it did not need to "address whether Nelson [could] recover under a promissory estoppel theory, as the issue [was] moot." We denied the Board's motion for leave to appeal the January 7, 2019 order.

Following a two-day bench trial, the trial court concluded that Nelson had "proven by a preponderance of the credible evidence that the [Board] did breach the employment contract." In its accompanying oral decision, the trial court found that "[t]he contract specifically stated that [Nelson] could be terminated only for ... cause as defined in the contract." The trial judge further noted that cause was defined as a "conviction of a felony ... for a crime involving moral turpitude or gross negligence or intentional misconduct in the performance of [Nelson's] duties under the agreement."

The trial court determined that Nelson's indictment did not establish a breach of the agreement as the "[g]rand [j]ury's return of an indictment does not establish the charges set forth." The trial judge also concluded that "not only is there no evidence of a criminal conviction, but also there's no evidence put forth that ... [Nelson] committed gross negligence or intentional misconduct."

The trial court also found that Nelson established "by a preponderance of the evidence that he suffered damages as a result of the breach of contract by the [Board]" and awarded Nelson $260,026.88, representing the net lost wages for the eighteen months remaining on the agreement. In determining that amount, the trial court rejected Nelson's claim for the cost of medical and dental benefits as he failed to submit evidence that he incurred any out of pocket medical or dental expenses. Finally, the trial judge rejected Nelson's request for prejudgment interest concluding that although the Board breached the employment agreement, Nelson "was indicted on various serious criminal offenses" and therefore had failed to prove "an exceptional circumstance" warranting an award of prejudgment interest.

II.

On appeal, the Board raises...