KIRK C. NELSON VS. ELIZABETH BOARD OF EDUCATION (L-1377-17, UNION COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4580-18T3
KIRK C. NELSON,
Plaintiff-Respondent/ APPROVED FOR PUBLICATION
Cross-Appellant, January 26, 2021
APPELLATE DIVISION
v.
ELIZABETH BOARD OF
EDUCATION,
Defendant-Appellant/
Cross-Respondent.
_______________________
Argued November 10, 2020 – Decided January 26, 2021
Before Judges Yannotti, Haas and Natali.
On appeal from the Superior Court of New Jersey,
Law Division, Union County, Docket No. L-1377-17.
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).
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,
A-4580-18T3
2
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
A-4580-18T3
3
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
A-4580-18T3
4
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 apprehensio n
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 . . .
A-4580-18T3
5
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
A-4580-18T3
6
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
A-4580-18T3
7
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 two primary arguments.1 First, it asserts that
the trial court incorrectly determined that the parties entered an enforceable
1
The Board also asserts that the trial judge misapplied the law of the case
doctrine when he relied on the motion court's finding that there was an
enforceable contract between the parties. Because we have concluded that the
A-4580-18T3
8
contract. Relying on Cohen v. Radio-Electronics Officers Union, Dist. 3, 146
N.J. 140 (1996), the Board contends that the agreement was unenforceable as a
matter of law as it conflicts with its ability to discharge counsel under RPC
1.16(a)(3). The Board further relies on Coyle v. Board of Chosen Freeholders,
170 N.J. 260 (2002), and Taylor v. Board of Education, 187 N.J. Super. 546
(App. Div. 1983), for the proposition that RPC 1.16(a)(3) permitted it to
terminate its counsel in all circumstances except those involving a party who
was appointed pursuant to a "statutory term of appointment," a circumstance
inapplicable to Nelson's employment.
Second, the Board asserts that under the "modern rule," Nelson is not
entitled to contract damages and can only recover any incurred losses under a
quantum meruit theory. The Board further maintains that Nelson cannot
recover damages without "specific legislative entitlement," and that N.J.A.C.
6A:23A-5.2(a)(4)2 precludes an award of damages. We disagree with all these
arguments.
motion court correctly decided that issue, we need not address the Board's
argument.
2
N.J.A.C. 6A:23A-5.2(a)(4) provides that "[e]ach district board of education
of a school district . . . shall establish by polic[ies] . . . to minimize the cost of
public relations as defined in N.J.A.C. 6A:23A-9.3(c), and professional
services." The regulation further provides that all legal contracts shall include
a provision that prohibits advance payments and permits those only for "legal
services actually provided." Ibid.
A-4580-18T3
9
Because the Board appeals a final order, we also address the motion
court's January 7, 2019 order that the parties entered an enforceable
employment agreement. See Daly v. High Bridge Teachers' Ass'n, 242 N.J.
Super. 12, 15 (App. Div. 1990) (noting that "ordinarily a final order of
disposition adverse to a party renders appealable as of right all interlocutory
orders previously entered which are also adverse to that litigant").
"An appellate court reviews an order granting summary judgment in
accordance with the same standard as the motion judge." Bhagat v. Bhagat,
217 N.J. 22, 38 (2014). A motion for summary judgment will be granted "if
the pleadings, depositions, answers to interrogatories and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to
any material fact challenged and that the moving party is entitled to a
judgment or order as a matter of law." R. 4:46-2(c). We "review the trial
court's grant of summary judgment de novo under the same standard as the
trial court." Templo Fuente De Vida v. Nat'l Union Fire Ins., 224 N.J. 189,
199 (2016).
We further review a "trial court's determinations, premised on the
testimony of witnesses and written evidence at a bench trial, in accordance
with a deferential standard." D'Agostino v. Maldonado, 216 N.J. 168, 182
(2013). Moreover, "we do not disturb the factual findings and legal
A-4580-18T3
10
conclusions of the trial judge unless we are convinced that they are so
manifestly unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence so as to offend the interests of justice[.]" Ibid.
(quoting Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011))
(alteration in original).
Applying these standards of review, we first address the relevant legal
principles related to the Board's argument that the agreement is unenforceable
as inconsistent with RPC 1.16(a)(3). We next consider whether the Board
breached the agreement, and if Nelson is entitled to damages. Finally, we
resolve the arguments raised by Nelson's cross appeal.
RPC 1.16(a)(3) provides that "a lawyer shall not represent a client or,
where representation has commenced, shall withdraw from the representation
of a client if . . . the lawyer is discharged." RPC 1.16(a)(3) is consistent with
the principle that "[a] client may always discharge a lawyer, regardless of
cause and regardless of any agreement between them. A client is not forced to
entrust matters to an unwanted lawyer." Cohen, 146 N.J. at 157 (quoting
Restatement of the Law Governing Lawyers § 44 cmt. b (Am. Law Inst.
Proposed Final Draft No.1 1996)).
The RPCs, however, do not address the precise issue before us: whether
a discharged in-house counsel like Nelson, who does not seek reinstatement to
A-4580-18T3
11
his former position, is precluded from pursuing damages stemming from his
employer's breach of contract. Courts and treatises that have considered the
issue, however, have concluded that an in-house counsel is not precluded from
recovering proximately caused contract damages.
For example, in Nordling v. Northern State Power Co., the plaintiff, an
in-house attorney, filed a breach of contract action after he was fired by the
defendant contrary to the terms of an employee handbook. 478 N.W.2d 498,
501-503 (Minn. 1991). The Minnesota Supreme Court concluded that "in-
house counsel should not be precluded from maintaining an action for breach
of a contractual provision in an employee handbook, provided, however, that
the essentials of the attorney-client relationship are not compromised." Id. at
502. The court noted that traditionally a discharged "attorney is entitled to
recover in only quantum meruit for services rendered to the time of discharge
and is not entitled to breach of contract damages." Id. at 501. The court
explained, however, that "this quantum meruit remedy . . . is of no solace to
discharged in-house counsel." Ibid.
The court further explained that the quantum meruit remedy "evolved at
a time when lawyers tended to be private practitioners self-employed in a more
or less general practice." Ibid. The court found significant that the plaintiff
was not "seeking to foist himself upon an unwilling client" in contrast to RPC
A-4580-18T3
12
1.16 but only seeking monetary damages "for the breach of his contractual
rights." Id. at 503.
In addition, the Washington Supreme Court recently held that "in the
narrow context of in-house attorneys, contract and wrongful discharge suits are
available, provided these suits can be brought 'without violence to the integrity
of the attorney-client relationship.'" Karstetter v. King Cnty. Corr. Guild, 444
P.3d 1185, 1191 (Wash. 2019) (quoting Nordling, 478 N.W.2d at 502). In
Karstetter, the plaintiff worked for the defendant under "successive [five] -year
contracts that provided just cause termination." Id. at 1187. The plaintiff was
then discharged without cause and subsequently filed a suit against the
defendant alleging "breach of contract and wrongful discharge in violation of
public policy." Id. at 1188. In response, the defendant argued that "to protect
individual clients and the public generally, RPC 1.16 applies to all attorneys
without exception." Ibid.
Significantly, the court noted that "[i]mmunizing an employer in this
situation from all consequences ignores the realities of modern legal work and
risks creating unconscionable results." Id. at 1190. Moreover, the court stated
that "[w]e will not instruct in-house attorneys that our ethical rules allow
employers to take away their livelihood and then also leave them without any
legal recourse . . . ." Ibid.; see also Chyten v. Lawrence & Howell Invs., 46
A-4580-18T3
13
Cal. Rptr. 2d 459, 462 (Ct. App. 1993) (holding that discharged in-house
counsel was "entitled to enforce the termination provisions of the parties'
negotiated employment contract").
The Restatement (Third) of the Law Governing Lawyers (Restatement)
also recognizes that a "lawyer-employee also has the same rights as other
employees under applicable law to recover for bad-faith discharge . . . ."
Restatement (Third) of the Law Governing Lawyers, § 32 cmt. b (Am. Law.
Inst. 2000). Further, the Restatement provides that "[b]ecause of the
importance of . . . a lawyer's role in assuring [legal] compliance, the public
policy that supports a remedy for such discharges is at least as strong in the
case of lawyers as it is for other employees." Ibid. The Restatement explains
that permitting an in-house lawyer a contract remedy is necessary because
"[t]he power a client employer possesses over a lawyer-employee is
substantial, compared to that of a client over an independent lawyer" and that
permitting counsel "a remedy for wrongful discharge does not significantly
impair the client's choice of counsel." Ibid.; see also Parker v. M & T Chems.,
236 N.J. Super. 451, 460 (App. Div. 1989) (allowing discharged in-house
counsel to maintain a claim for monetary damages under the Conscientious
Employee Protection Act, N.J.S.A. 34:19-1 to -8).
A-4580-18T3
14
Here, both the motion and trial judges correctly concluded that the
parties entered an enforceable contract that was not vitiated by RPC 1.16(a)(3).
Nelson never sought reinstatement to his former position, he simply sought
compensation for the Board's clear breach of the agreement. Nothing in that
limited remedy impaired the Board's inherent right to hire and fire Nelson, it
simply was required to answer, like any party, for the consequences of that
breach. Nordling, 478 N.W.2d at 503.
To conclude otherwise would effectively eviscerate an in-house
counsel's basic contract rights. Indeed, arms-length negotiated employment
contracts, like the agreement here, would be rendered illusory, as an employer
would be permitted to fire counsel without cause and ramification, effectively
converting in-house lawyers with employment agreements to at-will
employees contrary to New Jersey law.
"In New Jersey, an employer may fire an employee for good reason, bad
reason, or no reason at all under the employment-at-will doctrine. An
employment relationship remains terminable at the will of either an employer
or employee, unless an agreement exists that provides otherwise." Wade v.
Kessler Inst., 172 N.J. 327, 338 (2002) (quoting Witkowski v. Thomas J.
Lipton, Inc., 136 N.J. 385, 397 (1994)). Indeed, absent an employment
agreement "providing otherwise" an employer may "terminat[e] the
A-4580-18T3
15
employment of at-will employees for cause or for no cause." Shebar v. Sanyo
Bus. Sys. Corp, 111 N.J. 276, 285 (1988). An "express employment contract
serves to create an other than at-will employment relationship." Jackson v. Ga.
Pac. Corp., 296 N.J. Super. 1, 11 (App. Div. 1996).
We reject defendant's reliance on Cohen as that case is legally and
factually distinguishable. In Cohen, the plaintiff entered a retainer agreement
that provided for $100,000 in yearly compensation and renewed annually
absent written notice between "six and seven months . . . after the anniversary
date, or January 1." 146 N.J. at 149. The defendant discharged the plaintiff
prior to the agreed upon notice of termination date. Id. at 150. In response,
the plaintiff sued for $100,000, "claiming that the [a]greement had been
automatically renewed . . . ." Ibid. The Court found that the renewal provision
"excessively burden[ed] the [defendant's] right to hire and discharge [the
plaintiff]." Id. at 160. The Court reasoned that "the burden on the
[defendant's] right to discharge [the plaintiff] arises because of the combined
effect of the provisions for notice and automatic renewal." Id. at 159. The
Court permitted the plaintiff, however, to recover damages in quantum meruit
under the modern rule "for the reasonable value of the services provided." Id.
at 164.
A-4580-18T3
16
Nelson was not an outside lawyer compensated pursuant to a retainer
agreement, rather, he worked for the Board exclusively pursuant to a three-
year employment agreement. Nordling, 478 N.W.2d at 502 (noting that in-
house counsel differs from "the traditional scenario of the self-employed
attorney representing a client"). Unlike the retainer agreement in Cohen, there
is no provision in the agreement that limited the Board's ability to terminate
Nelson or "entrust matters to an unwanted lawyer." Cohen, 146 N.J. at 157.
In addition, although the Cohen court found that the retainer agreement
impaired the defendant's right to discharge an attorney, it still allowed the
plaintiff to recover damages in quantum meruit, an equitable remedy that
effectively made the lawyer in that case whole. Id. at 164.
Here, no such remedy is available to Nelson. Indeed, because the Board
breached the agreement prior to the end of the term, a quantum meruit remedy
would be a Pyrrhic victory of no "solace." Nordling, 478 N.W.2d at 501.
Because Nelson's only practical remedy was to seek damages for breach of
contract, the payment of which having no impact on the attorney -client
relationship, we decline to extend Cohen, as the Board's requests, to the
circumstances presented in this matter.
We further find the Board's reliance on Coyle for the proposition that the
only exception to RPC 1.16(a)(3) is for "public counsel for whom the
A-4580-18T3
17
Legislature has specifically carved out a statutory term of appointment"
misplaced. In Coyle, the plaintiff was appointed to a three-year term as county
counsel pursuant to N.J.S.A. 40A:9-43. 170 N.J. at 262. Prior to the
completion of his term, the plaintiff was removed from the position and filed a
complaint seeking a "judgment declaring him to be county counsel." Ibid.
The court found that the removal was improper, and that RPC 1.16(a)(3)
"never was intended to apply to public counsel with statutory terms . . . ." Id.
at 268.
Accordingly, an attorney appointed to a public counsel position with a
statutory term cannot be removed from office prior to the expiration of that
term pursuant to RPC 1.16(a)(3). Ibid. That rule, however, does not limit
Nelson's remedy here. Again, Nelson sought monetary damages, not
reinstatement to his prior position, which would directly contravene the
principles underlying RPC 1.16(a)(3).
Nor does Taylor support the Board's position. In Taylor, the plaintiff
was discharged from his position as board counsel. 187 N.J. Super. at 551.
Plaintiff subsequently filed suit claiming he was entitled to "veteran's tenure as
school board attorney under N.J.S.A. 38:16-1 . . . ." Ibid. The court denied
plaintiff's request and held that "N.J.S.A. 38:16-1 does not govern the
attorney-client relationship" and "must give way to the [RPC]." Id. at 561.
A-4580-18T3
18
Unlike the plaintiff in Taylor, however, Nelson agreed to a fixed term of
employment and does not seek tenure rights for his position as board counsel.
Indeed, Nelson only seeks the remainder of his salary under the parties'
employment contract.
We also disagree with the Board's argument that N.J.A.C. 6A:23A-5.2
precludes the Board from compensating Nelson for its breach of the
agreement. As noted, N.J.A.C. 6A:23A-5.2 requires that each board district
establish a policy "to minimize the cost of . . . professional services" and to
incorporate in that policy a "provision that requires contracts for legal services
to comply with payment requirements" including the prohibition of advanced
payments and limiting payments for legal services to those actually provided.
N.J.A.C. 6A:23A-5.2 was promulgated to ensure accountability in
districts when drafting cost-effective policies, not to immunize boards from
damages proximately caused by their clear and undisputed breaches of
contract. Here, the only reason Nelson failed to "provide" the legal services
was because of defendant's breach.
III.
Considering our conclusion that an enforceable contract exists between
the parties, we next address the Board's challenge to the trial court's damages
award. Specifically, the Board argues that under the modern rule, a discharged
A-4580-18T3
19
attorney can only recover in quantum meruit and that as public counsel, Nelson
was not entitled to "recover damages without a specific legislative
entitlement." For the reasons previously stated, we reject the Board's
arguments and analyze the parties' agreement under traditional contract law
principles.
To establish a claim for breach of contract, a plaintiff must provide proof
of "a valid contract between the parties, the opposing party's failure to perform
a defined obligation under the contract, and a breach causing the claimant to
sustain[] damages." EnviroFinance Grp., LLC v. Envtl. Barrier Co., 440 N.J.
Super. 325, 345 (App. Div. 2015) (citing Murphy v. Implicito, 392 N.J. Super.
245, 265 (App. Div. 2007)). Accordingly, a breaching party "is liable for all
of the natural and probable consequences of the breach of that contract."
Totaro, Duffy, Cannova & Co. v. Lane, Middleton & Co., 191 N.J. 1, 13
(2007) (quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). The goal in
awarding damages is "to put the injured party in as good a position as . . . if
performance had been rendered." Ibid. (quoting Donavan v. Bachstadt, 91 N.J.
434, 444 (1982)). In addition, the damages "must be a reasonably certain
consequence of the breach although the exact amount of the loss need not be
certain." Donavan, 91 N.J. at 445.
A-4580-18T3
20
We conclude that the trial court correctly found, based on sufficient,
credible evidence in the record, that the Board breached its employment
contract with Nelson resulting in $260,026.88 in proximately caused damages.
D'Agostino, 216 N.J. at 182. Indeed, based on the record before us, it does not
appear the Board conducted any investigation regarding Nelson's conduct
before terminating him, instead basing its decision solely on the fact that he
was indicted.
Nelson could be terminated, however, only for cause defined as gross
negligence, an uncured material breach, a conviction of a felony, or a crime
involving moral turpitude. Although indicted, Nelson was not convicted of
any crime, never materially breached his obligations, and did not commit gross
negligence or intentional misconduct. The Board was therefore liable " for all
of the natural and probable consequences of the breach of that contract." See
Totaro, 191 N.J. at 13.
IV.
In Nelson's cross-appeal he asserts that the trial court failed to award
damages for the value of his medical and dental benefits, improperly reduced
the damages award, and abused its discretion when it denied his request for
pre-judgment interest. We disagree with all these arguments except for the
trial judge's decision denying Nelson's application for prejudgment interest.
A-4580-18T3
21
The trial court correctly rejected Nelson's request for the costs the Board
paid for his medical and dental benefits because he had not "submitted any
amounts paid . . . to medical or dental providers [based on his lack of]
insurance . . . ." In other words, Nelson failed to establish that he sustained
direct or consequential damages as a result of being uninsured during the
eighteen months remaining on the agreement. Totaro, 191 N.J. at 13.
The trial court also correctly reduced Nelson's award by the $13,520 he
earned while employed through the prisoner reentry program. Without citation
to any legal authority, Nelson claims that his employment in the prisoner
reentry program "should not benefit the Board." Nelson further argues that the
Board did not specifically prove the amount of wages he earned from the
reentry program. We disagree.
"It is well settled that injured parties have a duty to take reasonable steps
to mitigate damages." McDonald v. Mianecki, 79 N.J. 275, 299 (1979).
Moreover, "the burden of proving facts in mitigation of damages rests with the
defendant[]." Roselle v. La Fera Contracting Co., 18 N.J. Super. 19, 28 (Ch.
Div. 1952).
At trial, Nelson testified that he worked at the prisoner reentry program
for approximately six months, forty hours a week, for $13 an hour. Therefore,
A-4580-18T3
22
the trial judge properly calculated and mitigated Nelson's damages in the
amount of $13,520.
Nelson next contends that he was entitled to prejudgment interest to
"fully compensate [him] for the loss of salary and benefits." "[T]he award of
prejudgment interest on contract and equitable claims is based on equitable
principles." Cnty. of Essex v. First Union Nat'l Bank, 186 N.J. 46, 61 (2006).
Accordingly, the award of prejudgment interest and the rate at which
prejudgment interest is calculated is within the sound discretion of the trial
court. Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 390 (2009); see
also Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (explaining
that a decision is an abuse of discretion when it is made "without a rational
explanation") (citation omitted). In deciding to award prejudgment interest,
the courts primary consideration is whether:
the defendant has had the use, and the plaintiff has
not, of the amount in question; and the interest factor
simply covers the value of the sum awarded for the
prejudgment period during which the defendant had
the benefit of monies to which the plaintiff is found to
have been earlier entitled.
[Rova Farms Resort, Inc. v. Invs. Ins., 65 N.J. 474,
506 (1974).]
Further, when a party seeks prejudgment interest against a government
entity, "and interest in the cause is not provided for by statute, particular
A-4580-18T3
23
circumspection in the granting of pre-judgment interest is required and a
showing of overriding and compelling equitable reasons must be made in order
to justify the award." Bd. of Educ. v. Levitt, 197 N.J. Super. 239, 244 (App.
Div. 1984); Emerick v. Teaneck Bd. of Ed., 221 N.J. Super. 456, 464 (App.
Div. 1987) (noting that the defendant had use of plaintiff's money in its
decision to uphold an award of prejudgment interest). In addition, "[a]bsent . .
. unusual circumstances the prejudgment interest rate should be the same as
that provided for by the rule governing postjudgment interest." Pressler &
Verniero, Current N.J. Court Rules, cmt. 3.1 on R. 4:42-11 (2020) (citing
Benevenga v. Digregorio, 325 N.J. Super. 27, 34 (App. Div. 1999)).
Here, it is undisputed that the Board's actions prevented Nelson from the
use of $260,026.88. The fact that defendant was indicted for serious offenses
is an insufficient basis to preclude an award of prejudgment interest as it
effectively punishes Nelson for crimes he never committed and inequitably
rewards the Board for its breach of the agreement.
In sum, we conclude that the trial court's $260,026.88 final judgment is
supported by sufficient credible evidence, in accordance with applicable law,
and therefore unassailable. D'Agostino, 216 N.J. at 182. We remand,
however, solely for the trial court to calculate the appropriate amount of
prejudgment interest. To the extent we have not addressed any of the parties'
A-4580-18T3
24
remaining arguments it is because we conclude they are without sufficient
merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part, reversed in part, and remanded for calculation of the
appropriate amount of prejudgment interest and entry of an amended judgment.
We do not retain jurisdiction.
A-4580-18T3
25