NORTH JERSEY MEDIA GROUP, INC. VS. IC SYSTEMSOLUTIONS, INC.,ET AL. (L-2791-13, BERGEN COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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-2898-14T1
NORTH JERSEY MEDIA GROUP, INC.,
Plaintiff-Appellant,
v.
IC SYSTEM SOLUTIONS, INC., COMPUTER
NETWORK SOLUTIONS, LLC, PHILIP NOLAN,
NANCY NOLAN, and THE ESTATE OF PETER
VAN LENTEN, JR.,
Defendants-Respondents.
______________________________________
Argued December 7, 2016 – Decided August 30, 2017
Before Judges Accurso and Manahan.1
On appeal from Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-
2791-13.
1
Hon. Carol E. Higbee participated in the panel before whom this
case was argued. The opinion was not approved for filing prior
to Judge Higbee's death on January 3, 2017. Pursuant to
R. 2:12-2(b), "Appeals shall be decided by panels of 2 judges
designated by the presiding judge of the part except when the
presiding judge determines that an appeal should be determined
by a panel of 3 judges." The presiding judge has determined
that this appeal shall be decided by two judges.
Samuel J. Samaro argued the cause for
appellant (Pashman Stein, attorneys; Mr.
Samaro and Adam B. Schwartz, on the brief).
John R. Dineen argued the cause for
respondents IC System Solutions and Philip
and Nancy Nolan (Netchert, Dineen &
Hillmann, attorneys; Mr. Dineen and Matthew
P. Posada, on the brief).
Giuseppe Franzella argued the cause for
respondent Computer Network Solutions
(Lazer, Aptheker, Rosella & Yedid, PC,
attorneys; Christina M. Rosas, on the
brief).
Respondent Laurie Van Lenten, on behalf of
the Estate of Peter Van Lenten, Jr., joins
in the brief of respondents.
PER CURIAM
Plaintiff North Jersey Media Group, Inc. appeals from the
entry of summary judgment dismissing its complaint for fraud,
consumer fraud, unjust enrichment, civil conspiracy and
conversion against defendants Computer Network Solutions, LLC,
IC System Solutions, Inc., Philip Nolan, Nancy Nolan and the
Estate of Peter Van Lenten, Jr. North Jersey also appeals from
the denial of a discovery motion and a motion to amend its
complaint.
Because we find the motion record on summary judgment
reveals material facts in dispute and that viewing the facts
most favorably to North Jersey makes clear it has produced
sufficient evidence to put its claims of fraud, consumer fraud,
2 A-2898-14T1
unjust enrichment and civil conspiracy before a jury, we reverse
the order of summary judgment on those counts. We also conclude
the trial court mistakenly exercised its discretion in denying
North Jersey's discovery motion and direct the court to consider
North Jersey's motion to amend its complaint on remand. We
affirm the grant of summary judgment dismissing North Jersey's
claim for conversion.
We present the facts in the light most favorable to North
Jersey and give it the benefit of all favorable inferences in
support of its claim. R. 4:46-2(c); Brill v. Guardian Life Ins.
Co. of Am., 142 N.J. 520, 540 (1995). North Jersey is a media
company publishing daily and weekly newspapers and maintaining
two news sites. Computer Network Solutions is a technology
company providing equipment and services designed to "maintain
and safeguard" their customers' "business-critical IT
operations." Philip Nolan is a fifty percent owner of Computer
Network Solutions.2 Nolan and his wife, Nancy, created IC
2
Nolan apparently sold his interest in Computer Network
Solutions to his partner, Alan Cook, for $2,000,000 in 2013.
Cook sold Computer Network Solutions for $10,000,000 to another
entity in 2014 during the pendency of this suit. The trial
court denied North Jersey's motion to amend its complaint to add
Cook as a defendant when it granted summary judgment to all
defendants, deeming the motion moot. In light of our
disposition of the appeal, we vacate that order and remand the
motion for consideration on the merits.
3 A-2898-14T1
System, a smaller company offering the same products and
services as Computer Network Solutions. The two companies share
office space, refer business back and forth and frequently work
projects together.
In 2009, North Jersey fired its Vice President of
Information Technology, Peter Van Lenten, Jr.,3 who had been with
the company for over twenty years. In the wake of Van Lenten's
firing, North Jersey discovered the hard drive had been removed
from Van Lenten's office computer, his administrative assistant
had a brand new company laptop she was not authorized to possess
and North Jersey could not figure out why it made three large
payments to IC System totaling over $130,000.4
3
Van Lenten died in 2010 before North Jersey instituted this
action.
4
When Bryan Shaughnessy, a network analyst responsible for
networking at North Jersey, inquired about the payments with
Phil Nolan, Nolan told him that $77,195.49 was for a two-year
Network and Security Monitoring contract and $44,298 was for an
annual On-Demand Hardware Support contract. Shaughnessy replied
that Nolan's network and security monitoring equipment "was
taken off line long ago" and that North Jersey had not
"corresponded with [Computer Network Solutions'] technical
people in possibly several years in regards to the [n]etwork and
[s]ecurity [m]onitoring," and asked whether Nolan could explain
why North Jersey "is paying for a service when it is clearly not
in use." Shaughnessy also wrote he was "shocked to see" that
North Jersey was paying for on-demand hardware support for the
network for which Shaughnessy was responsible and asked if Nolan
could tell him "if [North Jersey] has ever utilized this support
(any dates/examples)?" Nolan never responded. At deposition,
(continued)
4 A-2898-14T1
Those irregularities precipitated its investigation into
Van Lenten's management of North Jersey's multi-million-dollar
technology budget and his relationship with Phil Nolan, a
principal of both IC System and Computer Network Solutions.
What it found prompted this lawsuit.
North Jersey learned that Van Lenten had over the course of
several years regularly evaded company policy that all contracts
over $10,000 be reviewed by North Jersey's legal department, and
that he purchased millions of dollars of goods and services from
IC System and Computer Network Solutions on North Jersey's
behalf without written contracts. North Jersey also learned
that Van Lenten had a close personal relationship with Nolan.
The two met weekly for drinks, paid for by Nolan, had lunch
together at least three times a month and met for dinner four
times a year. Nolan's companies also paid for a couple of
expensive, out-of-state fishing trips for Van Lenten. Following
its investigation, North Jersey instituted this suit alleging
(continued)
Nolan asserted he contacted either Van Lenten or Joe Cuervo,
described in the papers as Van Lenten's "right-hand man," about
Shaughnessy's email, who told him they would "look into it or
don't worry about it or something to that effect." North Jersey
asserts that explanation was false as Van Lenten had been fired
six months before Nolan's email exchange with Shaughnessy and
Cuervo had left North Jersey to take a job with Nolan eighteen
months before.
5 A-2898-14T1
Van Lenten abused his position of trust and breached his
fiduciary duties to allow IC System and Computer Network
Solutions to steal more than a million dollars from the company.
Specifically, North Jersey alleged that IC System and
Computer Network Solutions swindled it in connection with at
least four different projects undertaken at Van Lenten's
request: a security camera upgrade at North Jersey's printing
facility; the sale and installation of LibertyNet software;
payment card scanning; and network security and monitoring.
North Jersey put forth the following facts in support of those
claims in opposition to defendants' summary judgment motions.
Security Camera Upgrade
Although Nolan and IC System had no experience installing
security cameras and Computer Network Solutions had never
performed a camera installation on the scale North Jersey
required, Van Lenten hired them for a project to install thirty
new cameras, ten in the press room and twenty in the mailroom in
North Jersey's Rockaway facility at a cost of $109,865 and
eighteen Pelco brand cameras and associated equipment outside
the building and in specified common areas for $172,000. Van
Lenten also authorized a purchase order for spare cameras and
accessories as well as a Pelco Constant Scan Camera and an
6 A-2898-14T1
annual maintenance contract for the camera system at a cost of
$33,000 per year.
North Jersey's facility manager, Frank Devetori, certified
that he was the one who advised his superiors that the security
camera system in Rockaway was outdated and should be replaced.
He researched options for upgrades and obtained a quote from a
vendor the company had previously used for security camera work.
Although Devetori claimed the security cameras were his
responsibility, he averred that Van Lenten took over the
project, shutting Devetori out, and brought in Computer Network
Solutions and IC System to do the work without soliciting other
bids. Devetori claimed Computer Network Solutions and IC System
performed the work on nights and weekends, a highly unusual
practice for such planned upgrades, which he posits was done to
avoid his observation of the project.
When Devetori reviewed the bills for the project after Van
Lenten was fired, he was shocked. Based on the quote he
received from the company's former vendor, he expected the
project to cost less than half of what Computer Network
Solutions and IC System billed North Jersey. He also certified
that North Jersey did not get everything it paid for. He could
only account for half the Pelco cameras Computer Network
Solutions and IC System claimed to have installed and none of
7 A-2898-14T1
the spares and accessories beyond the Constant Scan Camera.
Devetori also claimed that he was responsible for maintenance of
the system, and that neither Computer Network Solutions nor IC
System ever serviced the camera system to his knowledge.
Yigal Rechtman, a certified public accountant and certified
fraud examiner specializing in information technology, retained
by North Jersey to provide expert testimony in the matter,
reviewed the invoices Computer Network Solutions and IC System
submitted to North Jersey against Computer Network Solutions'
purchase orders for the equipment. Corroborating Devetori's
certification that North Jersey only received half of the Pelco
cameras it paid for, Rechtman could only find purchase orders
for eight Pelco cameras and associated equipment.
Rechtman also found that Van Lenten authorized payment of
IC System's invoice for $35,174.90 for a replacement camera that
should have been included in the supposed spare-parts
maintenance plan for which North Jersey paid $36,230.16. He
also reported that Van Lenten repeatedly "modified the budget
coding for the account associated with the payment for the
purported service" and that such conduct is consistent with
attempts to conceal payments and "avoid budgetary outliers, as
would be the case in a purchasing fraud."
8 A-2898-14T1
Jeffrey Zwirn, the expert North Jersey retained to testify
on the design and installation of electronic security and video
surveillance systems, inspected the Rockaway facility and
reviewed schematics provided by Computer Network Solutions and
IC System. He concluded, among other things, that neither
Company had the required New Jersey licenses for design and
installation of a closed-circuit camera surveillance system like
the one they designed and installed for North Jersey, and that
Computer Network Solutions used unlicensed electricians on the
project. Zwirn claimed the outside wiring for the cameras was
improperly performed and that instead of installing what they
represented would be provided, Computer Network Solutions and IC
System installed lower cost or substandard cameras and
equipment. He also concluded that the cameras intended for the
press room were never installed as the room was not even wired
for cameras.
LibertyNet
Phil Nolan testified at deposition that Van Lenten
approached him about purchasing document management software
called LibertyNet, for North Jersey. IC System was a designated
reseller of the software and the LibertyNet logo was on IC
System's stationery. LibertyNet was proposed for use in North
Jersey's human resources department. After trying the software,
9 A-2898-14T1
however, the human resources department rejected it and had it
removed from its computers. Van Lenten bought the software from
IC System after its rejection at a cost of $84,800. North
Jersey also contends that documents produced by IC System show
that it paid LibertyNet only $12,383 for the same software it
sold to North Jersey for $84,800.
North Jersey never issued a written purchase order for the
LibertyNet software. Instead, Nolan testified that Van Lenten
gave him "a verbal purchase order." North Jersey contends Van
Lenten circumvented North Jersey policy that no invoice be paid
for new products without a written purchase order, and further
deceived the company by having Nolan disguise the purchase by
sending five monthly invoices, each for $16,960, for "LibertyNet
Maintenance HR Project."
Rechtman, North Jersey's fraud examiner, opined that
spreading the payment over several months and mischaracterizing
the purchase as "maintenance," "indicate that Van Lenten was
intentionally attempting to conceal the purchase of the
software." He claimed that use of such an "expense smoothing
technique," by which "colluding parties . . . conceal the
magnitude of the billing for budgetary supervisory oversight" is
"common in purchasing fraud schemes."
10 A-2898-14T1
Cuervo, a former North Jersey employee who was working for
Computer Network Solutions at the time the suit was pending in
the trial court, testified at deposition that he executed the
LibertyNet licensing agreement on behalf of North Jersey three
months after the human resources department rejected the
software. Although aware that the agreement required review by
the legal department, Cuervo testified he signed the documents
without such review at Van Lenten's direction. Although North
Jersey claimed the LibertyNet software was never used by anyone
at North Jersey, Cuervo claimed he worked with North Jersey's
Weekly Division to try and implement it there. Notwithstanding
the human resources department's rejection of the software and
North Jersey's claim it was never used elsewhere in the company,
Van Lenten authorized annual payments to IC System for
"maintenance" of the software for three years at a cost of
$34,000.
Payment Card Scanning
Nolan testified at deposition that Van Lenten contacted him
to inquire as to whether IC System could perform payment card
scans for North Jersey to detect weaknesses in the company's
network that might expose the credit card information of its
subscribers to hackers. Nolan was not familiar with the
technology but his partner Cook advised that Computer Network
11 A-2898-14T1
Solutions could perform them. Computer Network Solutions,
however, had never before performed such scans and has only ever
performed them for North Jersey. North Jersey claims the reason
for that is "that it is completely unnecessary to hire an
outside vendor to perform the scans if the company has its own
IT department, as [North Jersey] does."
Cuervo acknowledged at deposition that it might be possible
for "a low-level clerk [to] actually do the scans" today, but
North Jersey could not perform the scans itself in 2007, when
Van Lenten first inquired about the service, because Qualys, the
software provider, "would not work with [North Jersey] directly"
because it was "going strictly through [its] reseller market."
North Jersey, however, produced evidence that it purchased the
Qualys software for the scans in 2007 directly from Qualys for
$2,145, and that Computer Network Solutions charged North Jersey
$10,543 to run the scans that year.
Bryan Shaughnessy, North Jersey's network analyst, averred
that he could have run the scans for North Jersey in 2007 as he
did for the company in 2008, for a fraction of the cost charged
by Computer Network Solutions and IC System. Shaughnessy also
claimed that while Computer Network Solutions performed the
scans for North Jersey in 2007, he was unaware "of any [payment
card] scanning performed by [IC System] – who billed [North
12 A-2898-14T1
Jersey] for this service – in 2008." Shaughnessy claimed that
by 2008, he "was in charge of any running [of] the [payment
card] scanning and . . . did so without any assistance from
[Computer Network Solutions] or [IC System]." IC System claims
it ran or directed the scans for North Jersey in 2008, for which
it received payment authorized by Van Lenten for $8715.15.
Network Security and Monitoring
IC System billed North Jersey approximately $75,000 per
year between 2005 and 2008 to monitor its network and detect
security intrusions. Computer Network Solutions installed two
"Intruder Detector Systems" machines, which Cook claimed cost
between $15,000 to $20,000 each. Notwithstanding that the
purchase of the machines was a one-time cost passed along to
North Jersey in the first year of the project, Cook admitted at
deposition that IC System continued to charge North Jersey
$70,000 each year thereafter.
Shaughnessy claimed the system, which was supposed to
provide notification to North Jersey whenever its network and
servers were experiencing problems, "never worked." He averred
"recall[ing] several instances when [North Jersey's] servers
went down and the monitoring service did not know about it."
Shaughnessy believed that both Computer Network Solutions and
Van Lenten had largely abandoned the project shortly after its
13 A-2898-14T1
installation and that Computer Network Solutions "was simply
billing [North Jersey] for nothing." He also certified that the
"System Administration and Network Monitoring" service for which
IC System charged North Jersey $5000 per month between November
2003 and May 2007 was simply "another ineffective service
provided by [Computer Network Solutions]."
Shaughnessy further claimed the "Extended Network Services
with On-Demand Spares" for which North Jersey paid Computer
Network Solutions and IC System approximately $31,500 in 2007
and $44,000 annually in 2008 and 2009, as authorized by Van
Lenten did not even exist. Specifically, Shaughnessy certified
that the "service literally could not have been in existence
without [him] knowing about it," and he was thus "certain [North
Jersey] was not using this service and [IC System] and [Computer
Network Solutions] were providing nothing to [North Jersey] in
return for the $44,000 annual payment."
Nolan acknowledged the service was "kind of a unique
opportunity that [North Jersey] came to [him] with, what is
considered emergency service over and above what a standard
maintenance contract would be" and not offered to other
customers. He agreed that the service "was being used without
[Shaughnessy] knowing it," but claimed that was because Van
Lenten had lost confidence in Shaughnessy's ability to restore
14 A-2898-14T1
the network in the event of an emergency. Nolan admitted he
kept no written list of the "spares" IC System maintained for
North Jersey and was not aware of whether any "spares" were used
or whether IC System or Computer Network Solutions actually
performed any emergency maintenance or repairs to North Jersey's
network during the period the company billed North Jersey for
the service. Cook likewise testified at deposition that he did
not have a list of the "spares" Computer Network Solutions
maintained for North Jersey pursuant to this contract and could
not identify any emergency maintenance or repairs to North
Jersey's network during the period the company billed North
Jersey for the service.
Having reviewed the depositions of Nolan, Cook and Cuervo,
Rechtman, North Jersey's fraud expert, opined that none could
clarify or describe the nature of these different monitoring
services, and that Computer Network Solutions and IC System's
failure to produce any evidence of "on-going exception reports
or notices of downed servers between the years 2007 and 2009"
suggests that although the "Intruder Detector" devices were
installed, they were not "deployed or used in a meaningful way."
Rechtman concluded that the network monitoring Computer Network
Solutions and IC System claim to have done is not supported by
the evidence, and that Van Lenten should have been aware that he
15 A-2898-14T1
was overpaying for services not being provided by Computer
Network Solutions and IC System and not utilized by North
Jersey.
Evidence of Motive or Intent to Collude
Although acknowledging it was not successful within the
discovery the trial court allowed in demonstrating any direct
benefit to Van Lenten from the many improvident payments he
authorized to Computer Network Solutions and IC System,5 North
Jersey claims it produced direct evidence of the collusive
scheme in the form of email exchanged between Van Lenten and
Nolan. North Jersey points in particular to exchanges between
the two in connection with a $2,000,000 upgrade to North
5
While the judge was especially critical on that point, North
Jersey points out that the judge denied its motion to compel
discovery of IC System and the Nolans, stating "[t]he current
request is unreasonable given the time constraints of the
discovery end date [sixty days remained]. Extensive discovery
has been provided as the Defendant is aware of its discovery
obligations and failure to produce may result in preclusion at
the time of trial." The judge denied plaintiff's motion for
reconsideration but extended discovery for four months. Given
that the extension provided the parties six more months of
discovery, the judge's reason for denying the request in the
first instance, the nearness of the discovery end date, no
longer had any vitality. Failure to consider the motion on its
merits was thus a mistaken exercise in discretion. See State in
Interest of A.B., 219 N.J. 542, 554 (2014). Accordingly,
plaintiff's motion to compel discovery from IC System and the
Nolans should be considered on its merits on remand.
16 A-2898-14T1
Jersey's entire computer system IC System proposed to North
Jersey in September 2008.
Following Van Lenten's review of the first of three
proposals IC System prepared for the upgrade, he sent the
following email to Nolan with a copy to Cook:
Hope your [sic] having fun getting sunburn
on the top of your head. Now that we're
going to move forward I'm digging into some
of the details in the proposals. I just
reviewed the desktop piece and have some
concerns, I've highlighted them in red.
Next week when you have some time let's get
Montoya on the phone and go over the issues
for clarity or reconciliation so we're all
on the same page. I'll send the other 2
stages when I'm done going through them.
Have fun, don't drink too much.
Twenty-two minutes later, Van Lenten sent a second email to
Nolan, this time with no copy to Cook:
Need to clean up the typo's [sic] and
misspellings as well as adjust the numbers.
This can't be sloppy. This is not a
criticism, the Finance guys don't know what
they're doing so it's the only thing they
can focus on to bust balls.
Nineteen minutes later, Van Lenten sent yet a third email,
again, only to Nolan:
Probably 100K in more room. Please strip my
comments about money from the documents
before sharing with Tom. Also need to talk
about transfer of knowledge, licensing and
maintenance.
17 A-2898-14T1
After this exchange, Nolan sent revised proposals to Van Lenten,
which contained approximately $150,000 in increased costs.
North Jersey contends these emails "demonstrate that Van Lenten
was not an IT executive interested in protecting his employer
and obtaining the best possible prices" but was instead
colluding with Nolan and Cook to swindle North Jersey.
North Jersey contends that any doubt as to whose interests
Van Lenten was promoting are put to rest by another exchange
between Cook and Van Lenten several weeks later. On December 3,
2008, Cook sent Van Lenten an email with an attached PowerPoint
entitled "Business Impact of Infrastructure," along with a note,
saying: "[I] [j]ust did this for another client. Would
something like this be helpful to you?" Van Lenten replied:
Good stuff, if they had the attention span
of more than 5 seconds it would work but
I'll try. Hoping for the best, meeting with
the family on Tuesday to pitch it.
Hopefully great holiday for all.
The trial judge assessed these proofs and the other
evidence adduced on the motions and concluded that North
Jersey's lawsuit was "clearly a classic example of 'buyer's
remorse,'" premised on the "baseless conclusions" of its "self-
proclaimed expert." He found "[t]he record [is] devoid" of any
complaints by North Jersey over the several years that the
parties did business that defendants overcharged or failed to
18 A-2898-14T1
provide the equipment or services sold, and characterized "the
instant litigation" as "then based on an inference upon another
unrelated inference." We highlight a few of the findings.
The judge dismissed the evidence that Van Lenten had not
negotiated the prices for the equipment and services it
purchased from defendants or sought competitive proposals from
other vendors, finding there was "no evidence that Van Lenten
was required to do so as Vice President of IT" and concluded
that North Jersey "cannot recover" for its "own improvident
conduct." The judge was critical of the certification of North
Jersey's long-serving facility manager Frank Devetori, in which
Devetori asserted that North Jersey did not get all the cameras
it paid for, stating "[t]he mere assertion by a witness that he
now cannot find something sold years earlier is insufficient as
a basis for an assertion that it was not tendered." The judge
dismissed what Devetori characterized as Van Lenten's highly
unusual act of having all the camera work done on nights and
weekends, which Devetori surmised as having been done to
preclude him from any involvement, as a "net suspicion, not
within the personal knowledge of the affiant."
The judge also concluded he need not consider the proofs
offered by Jeffrey Zwirn, the expert North Jersey retained to
testify on the design and installation of electronic security
19 A-2898-14T1
and video surveillance systems. Although acknowledging that
Zwirn was "qualified to opine on the characteristics of security
systems, and the appropriateness of Defendants' actions in
regard thereto," the judge found Zwirn's opinion "as regards the
issue of fraud" a net opinion and thus dismissed his entire
opinion as inadmissible. The judge thus failed to consider
Zwirn's opinion that neither Computer Network Solutions nor IC
System had the necessary New Jersey licenses to design and
install the sort of closed circuit camera monitoring system they
provided to North Jersey,6 that defendants could not have
installed the cameras they promised for the press room, as it
was not even wired for cameras, that the outdoor wiring was
improperly installed and that defendants had used unlicensed
electricians to perform the work, as bearing on North Jersey's
claims of fraud, consumer fraud, unjust enrichment and civil
conspiracy.
6
The judge found the installation of the cameras "was performed
under the direct control and supervision of [North Jersey's] IT
director who merely used co-defendants to assist in the project"
and concluded that "[t]he mere assisting in the installation of
security cameras by or at the direction of [North Jersey's] IT
director did not require a license and is not an unlawful
practice under the NJCFA [New Jersey Consumer Fraud Act]." The
judge's factual conclusion of defendants' role in the security
camera upgrade appears at odds with Cook's deposition testimony,
included in the motion record, that "[t]he role of [his]
organization was to supply the cameras, the engineering, the
design, and the installation."
20 A-2898-14T1
The judge similarly dismissed the expert opinion of North
Jersey's certified public accountant and certified fraud
examiner Yigal Rechtman. Although finding that Rechtman is
"arguably qualified to offer an opinion as to fraud and
fraudulent billing," the judge dismissed his opinions as to Van
Lenten's frequent overrides of management controls in purchasing
equipment and services from Computer Network Solutions and IC
System and those entities unusually high profits from their
sales to North Jersey as "conjecture" and not providing
sufficient information as to how he reached his conclusions.
The judge specifically dismissed Rechtman's conclusions
that Computer Network Solutions and IC System's "unreasonable
profits in the range of 200% to 415%," which were "four times as
high as [Computer Network Solutions] own gross profit margin, of
about 50%" and well exceeding the 35% for the industry based on
the NAICS [North American Industry Classification System] code
for "computer and computer peripheral equipment and software
merchant wholesalers," as "speculative," and concluded that
fraud "is simply not a legitimate inference to be drawn from the
mere existence of a large profit."
The judge concluded
The undisputed evidence, viewed in the light
most favorable to [North Jersey], only
demonstrates that the Defendant vendors were
21 A-2898-14T1
comfortable and friendly with Van Lenten;
that [North Jersey] paid large sums of money
for services that, in retrospect, it wishes
it had not, and which may not have been
needed; that the Defendants obtained very
high profits from [North Jersey] in their
business transactions; and that, in
hindsight, Van Lenten's purchasing decisions
were impecunious.
The judge found "[t]he only matter in dispute was the unfounded
conjecture that Defendants engaged in a fraudulent scheme." He
concluded that "[t]here is no provision in the laws of New
Jersey that allows for an argument that Defendants [Computer
Network Solutions and IC System] took advantage of [North
Jersey] by getting too good of a deal when they negotiated at
arms' length with the Plaintiff."
In our view, the last sentence highlights the problem here.
The judge assumed in deciding the motion that the transactions
between North Jersey and IC System were "negotiated at arms'
length," when the premise of North Jersey's case was that the
relationship between Van Lenten and Nolan and his companies was
not an arms' length one. Because the court assumed the
transactions plaintiff complained of were legitimate, it did not
view the competent evidence in the light most favorable to North
Jersey, the non-moving party, nor accord it the legitimate
inferences to be drawn from those facts. R. 4:46-2(c). Doing
so mandates reversal of the motions.
22 A-2898-14T1
We, of course, review summary judgment using the same
standard that governs the trial court. Murray v. Plainfield
Rescue Squad, 210 N.J. 581, 584 (2012). Thus, we consider
"whether the competent evidential materials presented, when
viewed in the light most favorable to the non-moving party, are
sufficient to permit a rational factfinder to resolve the
alleged disputed issue in favor of the non-moving party." Brill
supra, 142 N.J. at 540. Applying that standard here, we
conclude summary judgment was inappropriate on North Jersey's
claims of fraud, consumer fraud, unjust enrichment and civil
conspiracy.
We turn first to the trial judge's decision striking
plaintiff's expert reports as net opinions. See Estate of
Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 384-85
(2010) (noting a court confronted with an evidentiary question
on summary judgment must resolve that question before ruling on
summary judgment and appellate review follows in the same
sequence). As previously noted, the trial court found both
experts qualified to provide expert testimony in the case,
although noting Rechtman as only "arguably" so. We agree that
both experts were qualified to offer opinions in this matter,
Zwirn on electronic security and video surveillance systems and
Rechtman as a CPA and Certified Fraud Examiner. See Agha v.
23 A-2898-14T1
Feiner, 198 N.J. 50, 62 (2009) (noting an expert "must 'be
suitably qualified and possessed of sufficient specialized
knowledge to be able to express [an expert opinion] and to
explain the basis of that opinion'" (quoting State v. Moore, 122
N.J. 420, 458-59 (1991))).
We reject, however, the trial court's conclusion that the
expert reports were net opinions. Zwirn's opinions that
defendants were not qualified or licensed to install the
surveillance camera system; the system was not installed
correctly and the equipment provided was substandard or not as
represented; maintenance and spare parts for new cameras under
manufacturer's warranty were not consistent with industry
practice; the pricing grossly exceeded industry standards and
defendants' own established gross profit margins; and the press
room was not wired for cameras were not "'based merely on
unfounded speculation and unquantified possibilities,'"
Townsend v. Pierre, 221 N.J. 36, 55 (2015) (quoting Grzanka v.
Pfeifer, 301 N.J. Super. 563, 580 (App. Div. 1997), certif.
denied, 154 N.J. 607 (1998)), but on facts in the record, his
personal observations and the type of information commonly
relied on by experts forming opinions on the same subject, see
N.J.R.E. 703; Polzo v. Cty. of Essex, 196 N.J. 569, 583 (2008).
24 A-2898-14T1
We reach a similar conclusion with regard to Rechtman's
report. His opinions that Van Lenten had not followed internal
management controls in approving purchases from Computer Network
Solutions and IC System; agreed to purchase products that were
not needed, and in at least one instance, the company had
rejected; failed to obtain the best prices for goods and
services; failed to ensure Computer Network Solutions and IC
System were capable of handling projects assigned to them and
purchased goods and services from defendants at grossly inflated
rates, are all grounded in the facts and explained in his
report. To the extent the court believed that particular
conclusions of either expert were not justified, it was free to
conduct a N.J.R.E. 104 hearing, and might have been advised to
do so before rejecting wholesale the reports of qualified
experts, who defendants had elected not to depose. See Kemp v.
State, 174 N.J. 412, 426-27 (2002).
Having considered the reports of plaintiff's experts and
reviewed the voluminous record on summary judgment, we are
convinced that the competent proofs on the motion, viewed in the
light most favorable to plaintiff and according it all
reasonable inferences, establish that plaintiff put forth
sufficient proofs on its claims of fraud, consumer fraud, unjust
enrichment and civil conspiracy to have survived summary
25 A-2898-14T1
judgment.7 See In re Estate of DeFrank, 433 N.J. Super. 258, 266
(App. Div. 2013) ("'[T]he cases are legion that caution against
the use of summary judgment to decide a case that turns on the
intent and credibility of the parties.'") (quoting McBarron v.
Kipling Woods, L.L.C., 365 N.J. Super. 114, 117 (App. Div.
2004)). We do not suggest that a jury will find, at this late
date, that Van Lenten colluded with defendants to bilk North
Jersey out of millions of dollars in the course of providing it
IT equipment and services. It may well conclude, as the trial
judge did, that plaintiff failed to have adequate controls over
its purchasing in place and the case is only one of "buyer's
remorse." But it is for the jury, and not the trial judge, to
determine what evidence is credible, what inferences should be
drawn and whether defendants breached any duty owing to
plaintiff resulting in damages. See Scully v. Fitzgerald, 179
N.J. 114, 130 (2004).
Because it is not the judge's function on summary judgment
to weigh the evidence and determine the truth of the conflicting
claims but only to identify the existence of such genuine
disputes, Brill, supra, 142 N.J. at 540, we reverse the grant of
7
In the course of the panel's questions to plaintiff's counsel
at oral argument regarding the basis for its conversion claim,
counsel conceded summary judgment on that claim was appropriate.
We agree and affirm the trial court's order in that respect.
26 A-2898-14T1
summary judgment and remand the case for trial. North Jersey's
discovery motion is to be considered on the merits as is its
motion to amend its complaint to add an additional party. We do
not retain jurisdiction. Because the judge who heard the matter
has already weighed the evidence and expressed his views of the
credibility of plaintiff's experts, the matter should be
reassigned to another judge on remand. See In re Guardianship
of R.G. and F., 155 N.J. Super. 186, 195 (App. Div. 1977).
Affirmed in part; reversed in part and remanded.
27 A-2898-14T1