BERMAN, SAUTER, RECORD & JARDIM, PC, ETC. VS. ART ROBINSON (L-1181-08, MORRIS COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-4879-16T2
BERMAN, SAUTER, RECORD &
JARDIM, PC f/k/a RAMSEY
BERMAN, PC,
Plaintiffs,
v.
ART ROBINSON, AOR HOLDINGS,
INC., DTH15, LLC, OWEN PROPERTIES,
LLC, and RIGHTER EQUITIES, LLC,
Defendants,
and
DTH15, LLC,
Third-Party Plaintiff-Appellant,
v.
HERSH, RAMSEY & BERMAN, PC,
J. DAVID RAMSEY, ESQ.,
KENNETH R. SAUTER, ESQ.,
and EDWARD A. BERMAN, ESQ.,
Third-Party Defendants-Respondents.
_____________________________________
Argued September 13, 2018 – Decided March 26, 2019
Before Judges Nugent and Reisner.
On appeal from Superior Court of New Jersey, Law
Division, Morris County, Docket No. L-1181-08.
Kenneth S. Thyne argued the cause for appellant (Roper
& Thyne, LLC, attorneys; Kenneth S. Thyne, on the
brief).
Robert C. Neff, Jr., argued the cause for respondents
(Wilson, Elser, Moskowitz, Edelman & Dicker LLP,
attorneys; Kurt W. Krauss, of counsel and on the brief;
Robert C. Neff, Jr., on the brief).
PER CURIAM
Third-party plaintiff, DTH15, LLC, (DTH), appeals from an order that
excluded the testimony of its expert and dismissed its legal malpractice action
against its former attorney. The expert opined that the attorney, third-party
defendant Kenneth R. Sauter, committed malpractice when he failed to include
an express termination clause in a commercial real estate contract between DTH
and Blue & Gold Development Group, Inc. (Blue & Gold). That omission,
according to the expert, enabled Blue & Gold to engage in protracted litigation
when it could not close, thus delaying DTH's ability to sell the real estate to
others and causing DTH to sustain other damages. The trial court determined
the expert's opinion on causation was a net opinion, excluded it, and dismissed
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the complaint. Because a trial court's decision to admit or exclude expert
testimony rests within the court's sound discretion, and because our review of
the record in this case reveals no abuse of discretion, we affirm.
I.
A.
This action's lengthy procedural history is well known to the parties and
well documented in previous appeals,1 so we need not repeat it in its entirety.
In the last appeal, we concluded the trial court had improvidently granted third-
party defendants' motion in limine to bar DTH's liability expert. Berman,
Sauter, Record & Jardim, P.C., No. A-5650-11, slip op. at 2-3. We remanded
for a Rule 104 hearing. N.J.R.E. 104. DTH appeals from the order the court
entered after the hearing.
B.
The gist of DTH's malpractice claim was that Kenneth R. Sauter, an
attorney who represented DTH when it entered into a contract to sell fifteen
1
Blue & Gold Dev. Grp, Inc. v. DTH15, LLC, No. A-0278-06 (App. Div. Feb.
13, 2008); Berman, Sauter, Record & Jardim, P.C. v. Robinson, No. A-5650-11
(App. Div. Feb. 3, 2015), rev'd, 224 N.J. 278 (2016); Berman, Sauter, Record &
Jardim, P.C. v. Robinson, No. A-5650-11 (App. Div. Nov. 17, 2016).
A-4879-16T2
3
acres of land to Blue & Gold, deviated from accepted standards of legal practice
by not including an express termination clause in the agreement of sale. 2 DTH's
expert based his opinion in large part on the facts developed during the
underlying lawsuit Blue & Gold filed after it could not close and DTH
terminated the contract. These are the facts.
In a contract dated August 15, 2003, DTH agreed to sell to Blue & Gold
fifteen acres of undeveloped land in Sparta, Sussex County (the "Property"), for
$4,000,000. In Section 4.1, the contract required Blue & Gold to obtain all
governmental approvals needed to develop the property within "eight (8) months
commencing and following July 5, 2003." Section 4.2 gave Blue & Gold the
option, for consideration, to extend this approval period twice: first for ninety
days, then for an additional ninety days in thirty day increments. Critical to
DTH's malpractice claim, Section 4.3 provided in pertinent part:
In the event this Agreement shall be terminated
as a result of [Blue & Gold's] inability to obtain the
Approvals . . . the Deposit shall be returned . . . and
[Blue & Gold] shall, upon request by [DTH], assign all
its rights it may have with respect to the applications
and Approvals and any related plans, tests, studies,
investigations, reports, etc. to [DTH].
2
The third-party defendants include other attorneys and a law firm. For ease
of reference, we refer to Sauter only.
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DTH's principal had stressed to Sauter DTH's need to market the Property
quickly and not have it tied up by Blue & Gold if Blue & Gold could not close.
Notwithstanding this concern, neither Section 4.3 nor any of the contract's
sections included a provision expressly authorizing DTH to terminate the
contract.
Concerning closing, Section 7.1 provided that closing of title would take
place "on or before the day which is [fifteen] days following the date upon which
[Blue & Gold] has received the Approvals, . . . non-appealable preliminary and
final Approvals from the Sparta Township Zoning Board and any other
governmental agenc[ies.]"
Blue & Gold thus had until September 1, 2004 — if it exercised all
extension options — to obtain approvals and close on the Property. In August
2004 — the month before the extension options expired — the Governor signed
into law the Highlands Water Protection and Planning Act (Highlands Act),
N.J.S.A. 13:20-1 to -35. The Highlands Act established the Highlands Water
Protection and Planning Council, which was charged with the responsibility for
land use planning for the Highlands Region, a preservation area that included
the Property. The Highlands Act delegated to the New Jersey Department of
Environmental Protection (DEP) responsibility to establish a permitting review
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program for development in the preservation area. N.J.S.A. 13:20-31 to -35.
Blue & Gold claimed approvals it needed from DEP had been delayed in
anticipation of, and due to, the enactment of the Highlands Act.
Blue & Gold did not receive the approvals needed to develop the Property
before September 1, 2004, the expiration of the last of the extension options in
the parties' contract. Approvals not received included DEP's approval of
amendments to a New Jersey Pollutant Discharge Elimination System
(NJPDES) permit, a prerequisite to Blue & Gold obtaining a Treatment Works
Approval (TWA) for sewer treatment facilities to be built on the Property. When
Blue & Gold refused to pay consideration for further extensions, DTH's
principal instructed Sauter to schedule a closing and assert that time was of the
essence. Sauter wrote to Blue & Gold's attorney on September 8, 2004,
demanding that closing occur as provided for in paragraph 7.1 of the contract.
Blue & Gold did not respond, but three weeks later it filed a Highlands
Exemption Application and sent a copy to DTH.
On October 13, 2004, Sauter's law partner wrote to Blue & Gold's attorney
and scheduled a "time of the essence" closing for November 15, 2004. Blue &
Gold "rejected" DTH's position based on Blue & Gold's interpretation of the
contract, namely, closing need not occur until all approvals for development of
A-4879-16T2
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the Property had been obtained. On December 3, 2004, Sauter wrote to Blue &
Gold, asserted that DTH had appeared for closing but Blue & Gold had not
appeared, and terminated the contract. Blue & Gold responded by reiterating
that DTH did not have the right to terminate the contract.
The following year, in August 2005, apparently after learning that another
developer was interested in acquiring the property from DTH for more than
double the amount Blue & Gold was to pay, Blue & Gold filed a lis pendens and
a Chancery Division action against DTH. Blue & Gold sought specific
performance and other equitable relief. The Chancery Division judge entered a
preliminary restraint on September 1, 2005, but the next month, in an order dated
October 12, 2005, vacated the preliminary restraint and discharged the lis
pendens.
The Chancery Division judge also denied, in part, DTH's cross-motion for
partial summary judgment. In a written opinion, the judge explained:
The court is not persuaded that under the terms of
the Agreement, [DTH] had no power of termination.
The plain language of Paragraphs 4.1a and 4.2 supra,
reveals that the parties agreed that [Blue & Gold] would
have [eight] months to obtain the necessary approvals.
A possibility for two [ninety] day extensions was
further agreed upon. As such, [Blue & Gold] had a total
of [fourteen] months to comply with the approval
contingency. When Paragraphs 4.1a and 4.2 are read in
conjunction with the contract as a whole, including
A-4879-16T2
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Paragraph 4.3 which provides in pertinent part, "in the
event this Agreement shall be terminated as a result of
[Blue & Gold's] inability to obtain the Approvals set
forth in Section 4" it is implicit that the Agreement
could be terminated by [DTH] after the [fourteen]
month period.
Notwithstanding this finding, genuine issues of
material fact exist as to whether it was reasonable for
[DTH] to exercise its right to terminate the Agreement
under the circumstances. While the [c]ourt finds that
there is no evidence that [DTH] contributed to delaying
the approval process, [Blue & Gold] has maintained
that had it not been for the introduction, passage and
associated administrative delays in connection with the
[Highlands Act], [Blue & Gold] would have been able
to close. A finding that material issues of fact remain
precludes a grant of summary judgment in this matter.
As such the [c]ourt will deny [DTH's] [c]ross-[m]otion.
The Chancery Division judge denied DTH's cross-motion for summary
judgment on October 12, 2005, and later denied a motion for reconsideration
and transferred the case to the Law Division. On August 4, 2006, a Law Division
judge entered an order that granted summary judgment to DTH, dismissed all
Blue & Gold's claims, and closed the case. The Law Division judge agreed with
the Chancery Division judge that DTH had the implicit right to terminate the
contract after the extension periods expired. The judge rejected Blue & Gold's
"position that [Blue & Gold] had a right to pursue the missing approvals until
A-4879-16T2
8
they [were] obtained without any drop-dead date." In doing so, the Law Division
judge noted:
Also as pointed out, it was not just the approvals
with which the Highlands legislation interfered; it was
also the Department of Transportation approval, which
was not obtained until after the agreement had been
terminated. It is also interesting to note that in the
verified complaint filed August 25, 2005, [Blue &
Gold] was still not ready to close, and that was almost
a full year after the contingency period had expired.
This highlights how absurd [Blue & Gold's] position is
with regard to its interpretation of the contract
provisions.
The Law Division judge also rejected Blue & Gold's contention that DTH
had breached the implied covenant of good faith and fair dealing. The judge
explained: "The reality is that DTH terminated the agreement in response to the
inflexible and unreasonable position taken by Blue & Gold with regard to its
interpretation of the contract that DTH must simply wait indefinitely for Blue &
Gold to obtain the missing approvals."
Blue & Gold appealed from the Law Division judge's memorializing
order. The Appellate Division affirmed the order in a short opinion . After an
introductory sentence and enumeration of Blue & Gold's point headings, the
Appellate Division wrote:
After carefully considering the record, briefs, and
oral argument, we are satisfied that all of plaintiff's
A-4879-16T2
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arguments are without sufficient merit to warrant
discussion in a written opinion, R. 2:11-3(e)(1)(E), and
we affirm substantially for the reasons expressed by
Judge Farber in his thorough and well-reasoned oral
and written opinions.
Affirmed.
[Blue & Gold Dev. Grp., Inc., No. A-0278-06 (slip op.
at 2-3.)]
The Appellate Division's decision was issued more than three years after
DTH had terminated the contract with Blue & Gold. Following the Appellate
Division's decision, plaintiff in this action, Berman, Sauter, Record & Jardim,
P.C., filed a complaint against DTH and other defendants to recover unpaid fees.
DTH filed a counterclaim and third-party legal malpractice complaint. That led
to protracted litigation, the appeals we have referenced previously, the remand,
the remand hearing, and this appeal. Against this backdrop, we turn to DTH's
expert's testimony at the Rule 104 hearing that a third judge (the remand judge)
conducted following the remand.
II.
The expert, Erwin D. Apell, qualified as an expert in the field of real
estate and accepted standards of legal practice in real estate matters. Neither his
qualifications nor his opinion that Sauter deviated from accepted standards of
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legal practice are at issue on this appeal. 3 For that reason, we recount only his
testimony on proximate cause.
Apell testified that Sauter's negligence was a substantial contributing
factor to damages suffered by DTH. These damages included DTH's inability
to market the property during years of litigation, and the consequent carrying
costs. The damages also included the lost opportunity to sell the Property for a
substantial profit. In addition, DTH incurred considerable expense to defend
against Blue & Gold's lawsuit.
Apell's opinion on proximate cause was based on three possible outcomes
of Blue & Gold's dispute with DTH, and each outcome was in turn based on the
supposition the parties' contract contained an express termination clause. These
were the outcomes according to Apell. First, Blue & Gold might have refused
to enter into a contract with an express termination clause. Second, Blue & Gold
might not have filed a lawsuit because such a lawsuit would have been frivolous
and would have exposed Blue & Gold to sanctions for filing frivolous litigation.
Third, Blue & Gold would have filed the frivolous lawsuit, but the Chancery
Division judge would have granted DTH summary judgment and dismissed the
3
That is not to suggest that either Sauter or the other third-party defendants
agreed with Apell. They sharply disputed his opinion, as did their own expert
on accepted standards of legal practice in real estate matters.
A-4879-16T2
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case, because there would have been no "loophole" alleging DTH unreasonably
exercised its right to terminate in view of the unforeseeable delays caused by
the Highlands Act.
As to the first possibility — Blue & Gold would not have entered into the
contract — Apell conceded this scenario was "unlikely." He testified that
"probably . . . Blue & Gold would have caved in because they really wanted the
project and would have signed the agreement of sale. . . ."
Apell did not elaborate on the second possibility — Blue & Gold would
have been deterred from filing the lawsuit because doing so in the face of an
express termination provision would have exposed it to frivolous litigation
sanctions. He cited nothing in the record from which such a result could have
been inferred.
Apell did elaborate on the third possibility — that the Chancery Division
judge would not have denied DTH summary judgment. Apell explained that in
the Chancery judge's opinion denying DTH summary judgment, the judge
"clearly indicated . . . DTH did nothing wrong." Apell further explained that in
view of such a finding, an express termination provision would "override" any
argument based on an alleged breach of the implied covenant of good faith and
fair dealing. Apell added that even if Blue & Gold appealed such a decision,
A-4879-16T2
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the Appellate Division would have expeditiously disposed of the appeal "by
streamlining to say there [are] no facts on the appeal that we've got to h ear, and
dismiss it."
During cross-examination, Apell conceded the likelihood "[t]here would
have been litigation" even if the contract contained a termination clause, but he
stressed, "it's the time it would take to complete the litigation that is important
in this case." Although he could not say precisely how long the litigation would
have lasted, he insisted "it would be faster if the termination date was in [the
contract] than if the termination date is not in there. . . ." He added, "I'm saying
generally speaking if a contract is clear, a court should be able to dispose of
[litigation] faster than if the contract is unclear. That's all I'm saying."
Apell did not know how long it would have taken the Chancery judge to
dismiss Blue & Gold's complaint. He also conceded that even if the contract
had contained an express termination clause, such a clause would not have
foreclosed a claim "based on the duty of good faith and fair dealing[.]" On
redirect, however, in response to the question, "hasn't our Supreme Court said
that the covenant of good faith and fair dealing will not override an express
termination provision," Apell said, "I believe so."
A-4879-16T2
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Following the Rule 104 hearing, the remand judge found Apell's opinion
on proximate cause to be a net opinion. The judge noted DTH and Apell had
"not presented any evidence to suggest that if there was an express termination
clause in the Contract, Blue & Gold would not have still filed suit alleging
breaches of the implied covenant of good faith and fair dealing in light of the
introduction and passage of the Highlands Act and the resulting administrative
delays."
Concerning Apell's opinion that the Chancery Division judge would have
granted summary judgment to DTH, the remand judge determined this argument
overlooked the Chancery Division judge's opinion concerning the administrative
delays caused by the Highlands Act. Moreover, the Chancery Division judge
found DTH had an implicit right to terminate the contract, and his decision to
permit Blue & Gold to proceed with the litigation had nothing to do with the
absence of an express termination clause. The Chancery Division judge did not
find DTH's right to terminate the contract to be unclear.
Citing language in Sons of Thunder v. Borden, Inc., 148 N.J. 396, 421
(1997), the remand judge noted, "[t]he obligation to perform in good faith exists
in every contract, including those contracts that contain express and
unambiguous provisions permitting either party to terminate the contact without
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cause." For these reasons, the remand judge found that Apell's opinion was
supported by neither the Chancery Division judge's opinion nor case law.
In short, the remand judge found "Apell's opinions pertaining to proximate
causation [to be] unsupported by any relevant factual evidence or applicable
case law." Rather, according to the remand judge, Apell's opinions were based
on nothing more than speculation and possibilities. Thus Apell's opinions on
proximate cause were impermissible net opinions. DTH having presented no
other evidence concerning causation, the remand judge concluded DTH had
failed to present a prima facie case of legal malpractice against Sauter. The
judge barred Apell's net opinions and dismissed the legal malpractice complaint
with prejudice.
III.
On appeal, DTH argues that the remand judge's decision misconstrues the
Chancery Division judge's opinion concerning the implied covenant of good
faith and fair dealing. DTH also argues the remand judge's decision usurps the
province of the jury. We disagree.
To establish a prima facie case of legal malpractice, a plaintiff must prove
"(1) the existence of an attorney-client relationship creating a duty of care by
the defendant attorney, (2) the breach of that duty by the defendant, and (3)
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proximate causation of the damages claimed by the plaintiff." Granata v.
Broderick, 446 N.J. Super. 449, 469 (App. Div. 2016) (quoting McGrogan v.
Till, 167 N.J. 414, 425 (2001)). To prove proximate causation, a plaintiff must
establish that a defendant-attorney's breach of duty was a substantial factor in
bringing about plaintiff's damages. Conklin v. Hannoch Weisman, 145 N.J. 395,
422 (1996).
Here, DTH sought to prove the elements of its legal malpractice claim
through the testimony of its expert. An expert's opinion must be based on "facts
or data derived from (1) the expert's personal observations, or (2) evidence
admitted at the trial, or (3) data relied upon by the expert which is not necessarily
admissible in evidence but which is the type of data normally relied upon by
experts." Townsend v. Pierre, 221 N.J. 36, 53 (2015) (quoting Polzo v. Cty. of
Essex, 196 N.J. 569, 583 (2008)). If an expert's conclusions are unsupported by
factual evidence or other data, they are excludable as net opinions. Id. at 53-54.
The net opinion rule "mandates that experts 'be able to identify the factual
bases for their conclusions, explain their methodology, and demonstrate that
both the factual bases and the methodology are reliable.'" Id. at 55 (quoting
Landrigan v. Celotex Corp., 127 N.J. 404, 417 (1992)). Consequently, an
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expert's opinion is inadmissible if it is based on nothing more than speculation
or unquantified possibilities. Ibid.We review with deference a trial court's decision to admit or exclude
expert testimony. Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344,
371-72 (2011). That is so because "[t]he admission or exclusion of expert
testimony is committed to the sound discretion of the trial court." Townsend,
221 N.J. at 52-53 (citing State v. Berry, 140 N.J. 280, 293 (1995)). Accordingly,
"[a] reviewing court must apply an abuse of discretion standard to a trial court's
determination, after a full Rule 104 hearing, to exclude expert testimony on
unreliability grounds." In re Accutane Litig., 234 N.J. 340, 391 (2018) (citing
Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008)). Applying that standard to the case
before us, we affirm the remand judge's decision.
Preliminarily, we note that Apell was qualified as an expert in the field of
real estate and accepted standards of legal practice in real estate matters, not in
matters of trial practice or appellate practice. Yet, in rendering his opinion on
proximate cause, he implicitly and explicitly rendered opinions in the latter
areas, and he speculated about what advocates and judges might do when
confronted with certain issues and arguments.
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Apell's opinion concerning proximate cause was based on three
possibilities. The speculative nature of Apell's first supposition — that Blue &
Gold would not have signed the contract with an express termination clause —
is readily apparent from Apell's own report and testimony. He acknowledged
this scenario was unlikely and that Blue & Gold probably would have "caved in
because they really wanted the project and would have signed the agreement of
sale." No evidence, observations, or data supported the possibility that Blue &
Gold may have walked away from the deal. Apell's suggestion that such was a
possibility was thus a net opinion.
Similarly, Apell's second scenario — Blue & Gold would not have filed a
frivolous lawsuit — was unsupported by facts or data, was merely speculative,
and was thus a net opinion. Apell cited no evidence in the record from which
one could infer this was a likely scenario. The facts in the record support the
contrary inference.
When the Law Division judge dismissed Blue & Gold's complaint on
summary judgment, he noted Blue & Gold needed approvals not only from DEP
but also from the Department of Transportation. The latter approvals were not
obtained until after DTH had terminated the contract. In addition, the judge
noted that when Blue & Gold filed its complaint nearly a year after the contract's
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final contingency period had expired, it was still not ready to close. In view of
these facts, the Law Division judge characterized Blue & Gold's position as
absurd. Yet, Blue & Gold was undeterred from asserting such an "absurd"
position. No evidence in the record suggests Blue & Gold would have taken a
different course of action had the contract contained an express termination
clause.
The third scenario posited by Apell — that the Chancery Division judge
would have dismissed Blue & Gold's complaint on summary judgment and the
Appellate Division would have expedited any appeal — is also unsupported by
any evidence or data, and it is based on nothing more than speculation. The
Chancery Division judge found that DTH had not delayed the approvals and that
DTH had the implicit right to terminate the contract with Blue & Gold. Yet, the
judge believed there was a genuinely disputed issue of fact as to whether DTH
acted reasonably in light of the unforeseen delays caused by the Highlands Act.
The judge did not provide an in-depth analysis concerning this conclusion.
DTH argues that because an express termination clause would have
"overridden" the implied covenant of good faith and fair dealing, there would
have been no factual dispute, and the Chancery Division judge would have
granted summary judgment. Although "the implied covenant of good faith and
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fair dealing cannot override an express termination clause," Sons of Thunder,
148 N.J. at 419, "a party to a contract may breach the implied covenant of good
faith and fair dealing in performing its obligations even when it exercises an
express and unconditional right to terminate." Id. at 422.
The remand judge found significant the Chancery Division judge's
determinations that DTH was not responsible for any delays Blue & Gold
encountered in obtaining approvals and that DTH had the right to terminate the
contract. Nonetheless, the Chancery Division judge determined there was a
genuinely disputed material issue of fact as to whether DTH breached the
implied covenant of good faith and fair dealing in performing its obligations
when it exercised its right to terminate, particularly in view of the unforeseeable
enactment of the Highlands Act. In view of those determinations by the
Chancery Division judge, the remand judge concluded that Apell's opinion
concerning the third proposition — the outcome of DTH's motion in the
Chancery Division would have been different — was unsupported and
speculative.
We reiterate that our task is not to determine whether the Chancery
Division judge correctly or incorrectly decided DTH's summary judgment
motion, nor are we to substitute our opinion for that of the remand judge. Rather,
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we must determine whether the remand judge abused his discretion by excluding
Apell's testimony. For the reasons expressed in this opinion, we conclude he
did not. Accordingly, we affirm the order excluding Apell's testimony and
dismissing DTH's malpractice complaint with prejudice.
Affirmed.
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