Opinion
DOCKET NO. A-2046-11T4
03-14-2013
LILLIAN H. LEHMAN, Plaintiff, v. EDWARD E. REINIUS and H.A. DeHART & SON, INC., Defendants-Appellants, and DL PETERSON TRUST, PHH, KNOWLEDGE LEARNING CORPORATION, Defendants-Respondents, and NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant. NEW JERSEY MANUFACTURERS INSURANCE COMPANY as subrogee of LILLIAN LEHMAN, and NEW JERSEY MANUFACTURERS INSURANCE COMPANY, individually, Plaintiff, v. DL PETERSON TRUST, Defendant-Respondent, and KINDERCARE LEARNING CENTERS, Defendant, and EDWARD E. REINIUS, Defendant-Appellant. HARRY SMITH, JR., Plaintiff, v. LILLIAN H. LEHMAN, Defendant, and EDWARD E. REINIUS and H.A. DeHART & SON, INC., Defendants-Appellants, and DL PETERSON TRUST, PHH VEHICLE MANAGEMENT SERVICES, LLC d/b/a PHH ARVAL, and KNOWLEDGE LEARNING CORPORATION, Defendants-Respondents.
Edwin F. Gerecht, Jr., argued the cause for appellants (Law Offices of Michael C. Urciuoli, attorneys; Mr. Gerecht, of counsel and on the brief). Daniel M. Young argued the cause for respondents (Ward, Greenberg, Heller & Reidy, LLP, attorneys; Mr. Young and Amy L. Hansell, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Messano and Lihotz.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3091-09 (consolidated with DC-7942-09; L-5702-09).
Edwin F. Gerecht, Jr., argued the cause for appellants (Law Offices of Michael C. Urciuoli, attorneys; Mr. Gerecht, of counsel and on the brief).
Daniel M. Young argued the cause for respondents (Ward, Greenberg, Heller & Reidy, LLP, attorneys; Mr. Young and Amy L. Hansell, on the brief). PER CURIAM
Plaintiff Lillian H. Lehman filed a complaint in the Law Division alleging that defendant, Edward Reinius, an employee of defendant, H.A. DeHart & Son, Inc. (collectively, DeHart), was negligent in the operation of his vehicle, striking Lehman's vehicle in the rear and causing her personal injuries. Plaintiff's passenger, Harry Smith, Jr., also filed a complaint naming the same parties and Lehman as defendants. Additionally, New Jersey Manufacturers Insurance Company filed a complaint in the Special Civil Part as Lehman's subrogee, alleging property damage.
All three actions were consolidated by order dated April 27, 2010.
The vehicle driven by Reinius was a school van owned by defendant D.L. Peterson Trust (DLPT) and leased through defendant PHH Vehicle Management Services, LLC (PHH) (collectively, the Trust Defendants). Defendant Knowledge Learning Corporation (KLC) and PHH executed a "Operating Lease Agreement" (the Lease), wherein PHH agreed to lease vehicles to KLC. Pursuant to its terms, KLC was to "provide insurance for the use, operation, and possession of each of the [v]ehicles . . . ." The insurance was to "be the primary coverage, and such policy [was to] name . . . [PHH] . . . as [an] additional insured[] . . . ." (Emphasis added). Under the Lease, PHH consented to KLC's "self-insured retention of no more than $1,000,000 per accident." Discovery revealed that KLC was self-insured up to $1 million, and PHH's consent is not at issue.
A certification in the record filed by Cindy Clipper, "Litigation Administrator" for DLPT and PHH, stated that PHH was the appointed trustee for DLPT and "carries out the day-to-day transactions involving lease agreements under which [DLPT] is the lessor and owner of the leased vehicles."
The original agreement was between DLPT and Kindercare Learning Centers, Inc., which KLC subsequently acquired, assuming the obligations under the Lease.
Pursuant to a separate "Vehicle Expense Management Services Agreement" (the Management Agreement), PHH agreed to provide services to vehicles leased to KLC. The Management Agreement provided that, with the exception of PHH's "willful misconduct or negligence (which shall exclude all tort theories based on negligent entrustment, imputed negligence, agency or other forms of vicarious liability)," KLC would
defend and hold harmless PHH from any and all claims . . . arising out of PHH's performance of its obligations under th[e] Agreement or the work performed for [KLC] by employees, agents, and other representatives of the participating repair facilities and other vendors of goods and services under the programs described in this Agreement.It is undisputed that DeHart was one of the "participating repair facilities" designated under the Management Agreement.
[(Emphasis added).]
DeHart, in turn, had entered into a contract with PHH to provide certain services to vehicles that were leased through PHH ("the Supplier Agreement"). Pursuant to its terms, DeHart agreed to provide various repairs and services to "Clients," defined as "those individuals and businesses referred by PHH," such as KLC. The Supplier Agreement provided:
[DeHart] shall maintain automobile liability, collision, and comprehensive insurance coverage for all of PHH['s] vehicles, whether owned by PHH . . ., an Affiliate, or [its] Clients, that are delivered to and retrieved from drivers for the period while the vehicles are in custody, use, possession, or control of [DeHart], or its agents, employees, orAn "Affiliate" was defined as "an entity which controls, is controlled by, or is under common control with PHH . . . ." Thus, the required coverage was to provide "automobile liability, collision, and comprehensive insurance coverage" in favor of PHH, owner of the van, but not KLC, which, although a client, did not own the van.
subcontractors, in the amount of $1 Million combined single limit for liability and the actual cash value of the vehicle for collision and comprehensive coverage. With PHH['s] . . . prior written consent, [DeHart] may substitute garagekeeper's insurance coverage for liability and property damage coverage to the extent that the coverage is the same.
[(Emphasis added).]
The Supplier Agreement also provided:
[DeHart] agrees to defend, indemnify and save harmless PHH . . . and its Affiliates from and against any and all claims, losses damages and liabilities of whatsoever kind or nature, including court costs and reasonable attorneys' fees, arising out of any act or omission or any work otherwise performed under this Agreement by [DeHart] or its employees, agents, contractors, franchises or other representatives and such liabilities shall not be affected or altered by any termination of this Agreement.The Supplier Agreement was to "be governed by and construed in accordance with the laws of the State of Maryland[,]" PHH's place of business. Thus, under the Supplier Agreement, DeHart agreed to "defend, indemnify and save harmless [the Trust Defendants] . . . ." Under the provisions of both agreements, DeHart did not owe insurance coverage, defense or indemnification to KLC.
DeHart filed its answer and asserted cross-claims for contribution and indemnification against KLC and the Trust Defendants. On November 10, 2009, shortly after Lehman filed suit and before filing their single pleading, KLC and the Trust Defendants tendered their defense to DeHart, citing provisions of the Supplier Agreement. DeHart refused the tender.
As necessary, for the sake of simplicity, we sometimes refer to KLC and the Trust Defendants collectively as "defendants."
On November 23, 2009, DeHart stipulated liability for the accident. KLC and the Trust Defendants filed a single answer and asserted cross-claims against DeHart for contribution, common law and contractual indemnification, and breach of contract. KLC took over the defense of the Trust Defendants.
Discovery ensued. On January 21, 2011, counsel for DeHart advised counsel for KLC and the Trust Defendants that, although plaintiff agreed to dismiss any direct claim against them, DeHart intended to pursue its crossclaim for defense and indemnification. DeHart's counsel wrote that he therefore "believe[d] . . . we both have the same standing and legal right to depose parties in this matter."
On April 27, 2011, apparently after settlements were reached between DeHart and plaintiffs, the court entered a stipulation of dismissal with prejudice as to all claims made by all plaintiffs against all defendants. On August 11, defendants moved for summary judgment. In addition to that already set forth, the motion record revealed the following facts, much of which are undisputed.
At the time of the accident, Reinius was returning a KLC-leased van to one of KLC's learning centers, intending to "swap" that van for another that required servicing. Dennis Noon, DeHart's president and chief executive officer, testified in deposition that, pursuant to the Supplier Agreement, DeHart was not required to pick up and deliver KLC vehicles except within a fifteen-mile radius of DeHart's business, and the accident occurred well beyond that distance. Noon further asserted that DeHart provided the service as a "courtesy," and no fee was charged despite the distance. In its answers to defendants' request for admissions, DeHart denied that, at the time of the accident, it was "performing services pursuant to the Supplier Agreement . . . ."
In discovery, DeHart produced the policy applicable to this accident, which was a garage keeper's policy that provided $1 million in coverage. The policy, however, provided liability and bodily injury coverage only for accidents arising from "'garage operations.'" "'Garage operations'" were defined as "the ownership, maintenance or use of locations for garage business" and also included "all operations necessary and incidental to a garage business." DeHart claimed that the policy provided "excess," as opposed to primary coverage, for vehicles not owned by DeHart. Noon testified that DeHart produced a certificate of insurance naming PHH as an additional insured on this policy, and "[PHH] accepted that." Clipper, however, certified that she reviewed the Trust Defendant's files, and they contained "[n]o . . . documents" "authorizing" DeHart to substitute garage keeper's insurance for the general liability policy.
The exhibits in the appendices include most of the policy provisions, but we can reach no independent conclusion about DeHart's claim because the declarations page has not been provided. Nonetheless, it appears there is no dispute that, as to the KLC van, Harleysville Insurance Company, which issued the garage keeper's policy, agreed that the policy provided excess liability coverage in the amount required by the Supplier Agreement.
In arguing for summary judgment, KLC and the Trust Defendants asserted that, under both Maryland and New Jersey law, DeHart breached the Supplier Agreement by: 1) failing to indemnify and defend the Trust Defendants; and 2) not obtaining written consent to the garage keeper's policy instead of a comprehensive liability policy. KLC specifically argued that it was a "third-party beneficiary" of the Supplier Agreement, and, as such, entitled to indemnification and defense from DeHart, both contractually and under common law.
DeHart opposed the motion and cross-moved for summary judgment. It claimed that Reinius was a permissive user of the KLC vehicle and entitled to primary insurance coverage from KLC. DeHart also contended that it was entitled to defense and indemnification from KLC. DeHart further asserted that the Supplier Agreement was "ambiguous" because it "did not specifically state . . . what insurance policy [was] primary or excess." DeHart also argued that it did not breach the Supplier Agreement because there was a factual dispute as to whether PHH consented to placement of the garage keeper's policy.
In her oral decision, the judge reasoned that pursuant to the Supplier Agreement,
DeHart was to maintain automobile liability, collision and comprehensive coverage for all of PHH's vehicles whether owned by PHH or one of their affiliates or their clients that are delivered to and retrieved from drivers for the period of time while the vehicles are in the custody, use, possession or control of DeHart.The judge agreed to review KLC's counsel's "certification of services to determine if the amount sought [was] appropriate."
. . . .
Because . . . the accident arose out of the [S]upplier [A]greement triggering the requirement that DeHart indemnify PHH and
[DLPT], . . . the agreement was breached because DeHart failed to have the insurance coverage required . . . . DeHart failed to obtain written consent before substituting garage keeper's insurance . . . .
Obviously, KLC is entitled to indemnification. . . . [T]hey are an intended third party beneficiary. . . . KLC is entitled[] not only to . . . contractual indemnification, but common law indemnification as well. Clearly, KLC had no responsibility for the happening of this accident.
She executed an order granting KLC and the Trust Defendants summary judgment, awarding KLC $96,858.57 in legal fees and costs and requiring DeHart to issue a check to KLC in that amount within forty-five days. A separate order denied DeHart's cross-motion.
DeHart moved for reconsideration, arguing that the judge failed to consider all the agreements at issue and reiterating its earlier arguments. DeHart argued that the award of counsel fees was excessive and not premised upon an adequate affidavit of services. The judge denied the motion and this appeal ensued.
Before us, DeHart argues that: summary judgment should have been denied because the various agreements between the parties required KLC to defend and indemnify DeHart and the Trust Defendants; DeHart did not breach the Supplier Agreement; and, the judge failed to "strictly analyze the affidavit . . . outlining fees in support of [defendants'] motion . . . and in not holding a reasonableness hearing." Additionally, DeHart contends that its cross-motion for summary judgment should have been granted, and we should reverse to "correct the injustice" caused when the motion judge "did not consider all . . . the facts and misapplied the law."
We have considered these arguments in light of the record and applicable legal standards. We affirm.
I.
We first consider the propriety of granting summary judgment to the Trust Defendants and KLC. Before doing so, we note that the judge applied New Jersey law, and, while mentioning Maryland law in their briefs, neither party advocates its application. To the contrary, both parties almost-exclusively cite New Jersey law in their briefs. Consequently, we conduct the analysis using the law of the State of New Jersey. See Pressler & Verniero, Current N.J. Court Rules, comment 1 on R. 2:6-2 (2013) (noting that arguments raised in footnotes or in a cursory fashion are generally deemed waived).
DeHart cites to two Maryland cases for the proposition that Maryland law is similar to the law in New Jersey regarding the rights of third-party beneficiaries to a contract. KLC and the Trust Defendants cite no Maryland case law.
We review a grant of summary judgment de novo applying the same standards that governed the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010) (citation omitted). Initially, we determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006) (citation omitted). To the extent factual disputes exist, we accord the non-moving party the benefit of all favorable evidence and inferences in the motion record. Henry, supra, 204 N.J. at 329 (citation omitted); see also R. 4:46-2(c). We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231 (citation omitted). In doing so, we owe no deference to the motion judge's conclusions on issues of law. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
Initially, we note it is undisputed that, despite DeHart's claim that PHH accepted the garage keeper policy, there was no written consent to the substitution, and the Supplier Agreement expressly required "prior written consent." We disagree with DeHart's assertion that, because Noon testified the garage keeper's policy was "accepted," factual issues remained in dispute. The absence of written consent, as required by the Supplier Agreement, is fatal to DeHart's claim.
"The interpretation of a contract is subject to de novo review by an appellate court." Kieffer v. Best Buy, 205 N.J. 213, 222 (2011) (citation omitted). As the Court said:
The objective in construing a contractual indemnity provision is the same as in construing any other part of a contract — it is to determine the intent of the parties. The judicial task is simply interpretative; it is not to rewrite a contract for the parties better than or different from the one they wrote for themselves . . . . If an indemnity provision is unambiguous, then the words presumably will reflect the parties' expectations.Contrary to DeHart's arguments, the indemnification provision in the Supplier Agreement is not ambiguous. DeHart agreed to defend and indemnify the Trust Defendants against and all claims "arising out of any act or omission or any work otherwise performed under this Agreement by [DeHart] or its employees . . . ."
[Kieffer, supra, 205 N.J. at 223-24 (citations omitted).]
DeHart's insurance obligations were equally clear. It was to provide "automobile liability, collision, and comprehensive insurance coverage for all of [the Trust Defendant's] vehicles . . . ." It failed to do so. DeHart's argument that the garage keeper policy provided the same amount of excess coverage is irrelevant for purposes of this discussion. In the first instance, under the clear and unambiguous terms of the Supplier Agreement, the Trust Defendants were entitled to be insured under a general liability policy without regard to whether there was another, primary policy available or not.
For these reasons, we affirm the grant of summary judgment to the Trust Defendants.
Under the express terms of the Supplier Agreement, however, DeHart owed no contractual duty to defend and indemnify KLC, and no express duty to purchase general liability coverage for KLC's benefit. The first issue, therefore, is whether KLC was entitled to summary judgment as a third-party beneficiary of the Supplier Agreement.
Although resolution of this question was central to the issues raised before the Law Division judge, and indeed, served as the basis for her conclusion to award KLC defense costs, neither party has addressed it at any length in their briefs before us. Nevertheless, the issue requires our analysis.
"Whether contract liability to a third party exists is informed by '"whether the contracting parties intended that a third party should receive a benefit which might be enforced in the courts . . . ."'" Fackelman v. Lac d'Amiante du Quebec, 398 N.J. Super. 474, 487 (App. Div. 2008) (quoting Werrmann v. Aratusa, Ltd., 266 N.J. Super. 471, 476 (App. Div. 1993) (in turn quoting Rieder Cmtys., Inc. v. Twp. of N. Brunswick, 227 N.J. Super. 214, 222 (App. Div.), certif. denied, 113 N.J. 638 (1988))). "A court must find that the parties to the contract intended and contemplated that the contract would benefit a third party." Id. at 487-88 (citation omitted).
In Pepe v. Twp. of Plainsboro, 337 N.J. Super. 209, 211 (App. Div. 2001), we were required to determine whether an indemnification agreement between a general contractor, "Riefolo Construction Co., Inc. [(Riefolo)], to the Township of Plainsboro [(Plainsboro)], 'its officers, agents, and employees,' include[d] within its protection, as an agent of the municipality, defendant Wagner-Hohns-Inglis (WHI), the independent contractor retained by Plainsboro . . . ." We observed that "an indemnity provision is ordinarily required to be construed in accordance with the general rules for construction of contracts, and hence . . . the judicial task is to determine the intent of the parties from the language used, the surrounding circumstances, and the objectives sought to be achieved thereby." Id. at 215 (citations omitted).
In construing the scope of the indemnity provision, we "ha[d] to consider not only who is being indemnified, the question implicating WHI's agency status, but also what is being indemnified against. What is being indemnified against in the context of this case is all of the possible financial consequences to the Township" arising from the negligence of any contractor on the site, including WHI. Id. at 216. However, we also concluded the Riefolo was not required to indemnify WHI, "the very contractor whose conduct triggered Riefolo's obligation to indemnify the Township." Id. at 217. "In our view, the evident intent of the agreement was to assure the Township that the benefit of the indemnity would embrace those for whose actions it would be liable in respondeat superior." Id. at 218.
In this case, as already noted, DeHart's obligation under the Supplier Agreement to defend and indemnify the Trust Defendants is beyond cavil. But, not only is there no expressed obligation flowing from DeHart to KLC, the agreement between KLC and the Trust Defendants placed the burden upon KLC to "defend and hold harmless [the Trust Defendants] from any and all claims . . . arising out of PHH's performance of its obligations under th[e] Agreement or the work performed for [KLC] by employees, agents, and other representatives of the participating repair facilities," i.e., DeHart. (Emphasis added). Read together, the clear intention of the various agreements was to maximize indemnification for the Trust Defendants whenever one of their vehicles was involved in a claim, regardless of where the fault lay. KLC independently owed the Trust Defendants indemnification and insurance coverage. KLC was not a third-party beneficiary of the Supplier Agreement.
In a single sentence in its brief, KLC argues it was entitled to "common law indemnification." In its submissions to the motion judge, however, KLC argued more extensively that it was entitled to common law indemnification because it was free from fault and DeHart had control of the van in question for the purpose of maintaining and repairing it as necessary, and, as required under DeHart's obligations pursuant to the Supplier Agreement. We note that, early in the litigation, DeHart stipulated to its liability.
In this regard, although DeHart denied in answer to a request for admissions that it was performing services under the Supplier Agreement, Noon testified that, although the accident occurred beyond the fifteen-mile radius described in that document, DeHart provided the service to KLC as a "courtesy" without additional charge. We assume, therefore, that DeHart's stipulation of liability recognized it was performing services under the agreement.
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"Where one is obliged by another's tort to bring or defend an action, the fees are damages resulting from the tort and are recoverable as such." Central Motor Parts Corp. v. E.I. duPont deNemours & Co., 251 N.J. Super. 5, 9 (App. Div. 1991) (citation omitted). "[A]n indemnitee's recovery of counsel fees" is permissible, "'so long as the indemnitee is [adjudicated] free from active wrongdoing regarding the injury to the plaintiff and has tendered the defense to the indemnitor at the start of the litigation.'" Mantilla v. NC Mall Assocs., 167 N.J. 262, 271 (2001) (quoting Cent. Motor, supra, 251 N.J. Super. at 11).
In this case, DeHart stipulated to liability for the accident. KLC, therefore, was free from fault. It tendered its defense to DeHart, but DeHart refused the tender. Under common law principles, and despite the lack of any indemnification agreement between the parties, KLC was entitled to indemnification from DeHart. Therefore, summary judgment was properly granted on this ground.
II.
Before considering DeHart's challenge to the fee award, we consider its claim that the Law Division judge erred in denying its cross-motion.
Initially, we reject DeHart's assertion that the agreements between KLC and the Trust Defendants required KLC to defend and indemnify DeHart; the language we cited above clearly demonstrates that, although it encompassed any claim arising from "work performed for [KLC] by employees, agents, and other representatives of the participating repair facilities[,]" KLC's obligation was only to the Trust Defendants. It did not serve to indemnify DeHart for its own negligence.
DeHart's cross-motion also argued that Reinius was a "permissive driver" of the van, and, as such, was entitled to coverage under whatever insurance had been procured by the Trust Defendants or KLC. There is nothing in the record that provides us with information regarding any policy procured by the Trust Defendants. We know only that KLC was self-insured to a limit of $1 million.
More importantly, DeHart never sought declaratory relief adjudicating its rights under any policy of insurance. Issues regarding indemnification, contractual or otherwise, are essentially different from coverage questions under policies of insurance, and they require an entirely different analysis. Mantilla, supra, 167 N.J. 274-75. If DeHart had requested declaratory relief seeking an adjudication of coverage amongst competing insurance policies or KLC's self-retention, the Law Division judge may have been in a position to decide the issues. In the absence of a specific request by DeHart for that relief made in the Law Division, and in light of the record on appeal, we refuse to consider the argument.
III.
DeHart argues that the fee award was not adequately supported by the affidavit of counsel for KLC. It contends that the affidavit of services only provided "a cursory outline of the tasks performed," and "failed to provide an hourly or daily breakdown of the services provided." DeHart further argues that KLC should have sought summary judgment earlier in the litigation; KLC's failure to do so limits the amount of a "reasonable" fee award.
Reasonableness of a fee award must be informed by the factors contained in Rule of Professional Conduct 1.5(a). Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 22 (2004). The Court has highlighted some of those factors, including "the reasonableness of the rates proposed by prevailing counsel in support of the fee application[,]" and whether the time expended is reasonably proportionate to interests being vindicated. Ibid. To conduct this evaluation, "[a]n attorney's application should be sufficiently detailed to allow a trial court to determine the nature of the work performed and by whom, as well as the reasonableness of the hourly rate and hours expended." Id. at 25; see also Elizabeth Bd. of Educ. v. N.J. Transit Corp., 342 N.J. Super. 262, 272-73 (App. Div. 2001) (upholding a fee award based on an affidavit showing "the number of hours and types of services" along with a description of the billing rate). We review the award of counsel fees under an abuse of discretion standard. Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 386 (2009).
Here, the rates charged by KLC's attorneys seem reasonable, and the affidavit explained the types of services provided and the number of hours attributed to each category of work. We conclude that the basis for the award of fees was sufficiently detailed and the rates charged were reasonable under the circumstances.
DeHart also contends that that the fees requested were unreasonable because KLC and the Trust Defendants should have filed their motion for summary judgment soon after taking the deposition of Dennis Noon on November 18, 2010, as opposed to attending many other depositions and not filing for summary judgment until August 11, 2011. The argument lacks sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E). KLC notes that its summary judgment motion was filed at the close of discovery. KLC further correctly asserts that, as late as January 21, 2011, DeHart's counsel affirmed KLC's right to continued participation at depositions because DeHart continued to assert its own cross-claim for defense and indemnification.
Affirmed
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION