Opinion Summaries

Tax Court: Nicholas L. DePace M.D. v. Dir., Div. of Taxation; Docket No. 013396-2019, opinion by Cimino, J.T.C., decided December 21, 2020. Released for publication: March 10, 2021. For plaintiff – Jack A. Myerson and Matthew L. Miller (Myerson & O’Neill, attorneys).; for defendant – Ramanjit K. Chawla, Deputy Attorney General (Gurbir S. Grewal, Attorney General of New Jersey, attorney).

Held: Under existing law, Gross Income Tax is due from both the qui tam plaintiff and the attorney representing the qui tam plaintiff on the portion of the award payable to the attorney as fees. Qui tam actions are brought by private citizens on behalf of the government alleging waste and fraud. The private citizen is entitled to an award which constitutes a percentage of the government’s recovery. While an argument can be made that only the attorney is liable for Gross Income Tax on the attorney’s fee portion of the award, a recent attempt to change the law to only tax the attorney was vetoed by the Governor. The court is constrained to respect the legislative process for which the Governor is a part.

The trial court erroneously kept admissible evidence from the jury. The video rebutted what the prosecutor implied during cross-examination -- that defendant’s witnesses lied about their attempt to speak with the police at the scene. That video also contradicted the investigating detective’s testimony that she had thoroughly canvassed the area for witnesses. In summation, the prosecutor exploited the suppression of the video to present a false narrative and improperly suggested to the jury that the defense witnesses made no effort to give their accounts to the officers at the scene. The combination of the trial court’s erroneous evidentiary ruling and the prosecutor’s inappropriate remarks during summation had the clear capacity to cause an unjust result.

In this accelerated appeal arising from a municipal clerk's rejection of an initiative petition to move the school board and municipal elections to the date of the November general election, the court held that the municipal clerk violated the Faulkner Act, N.J.S.A. 40:69A-184 to -192, by repeatedly refusing to certify and file the initiative petition due to perceived minor technical noncompliance. The court also held that the municipal clerk's actions violated the right of initiative petition guaranteed by the Faulkner Act, thereby depriving the petitioners of a substantive right protected by N.J.S.A. 10:6-2(c) of the New Jersey Civil Rights Act, and entitling them to an award of reasonable attorney's fees and costs under N.J.S.A. 10:6-2(f).

The Court agrees that the PWFA recognizes for pregnant and breastfeeding employees three distinct causes of action within N.J.S.A. 10:5-12(s): 1) unequal or unfavorable treatment; 2) failure to accommodate; and 3) unlawful penalization. The Court explains the contours of those causes of action and the necessary considerations as to each upon remand.

This appeal requires us to determine if a police officer employed in a non-civil service municipality can be subpoenaed to testify in the municipality's case-in-chief at a departmental disciplinary hearing seeking his termination. The court concludes the subpoena violates neither fundamental fairness and due process nor statutory procedures governing discipline of a police officer in a non-civil service municipality. The court further concludes that absent an objection to a specific question, it is premature to determine whether there is a violation of the officer's Fifth Amendment constitutional right against self-incrimination. Accordingly, the court affirms the Law Division order granting the municipality's request to enforce the subpoena.

Plaintiff, the managing association for a high-rise condominium building, obtained monetary judgments by default against two companies involved in construction and inspection of the condominium building. Alleging the companies were insured under insurance policies issued by defendant, plaintiff filed a declaratory judgment complaint seeking coverage. Plaintiff appeals the Law Division order that dismissed its declaratory judgment complaint and required it to arbitrate its claim for insurance coverage.

The court reversed the order. Under the direct action statute, N.J.S.A. 17:28-2, plaintiff can sue defendant directly for coverage under the insurance policies when there is evidence the insureds are bankrupt or insolvent. However, plaintiff did not assent to the arbitration clause in the policy and therefore, it is not required to arbitrate its claims. The court reinstated the declaratory judgment complaint and remanded for further proceedings.

Tax Court: Washington Shopping Center, Inc. v. Washington Township;Docket Nos. 005517-2016, 002869-2017, 006408-2018, opinion by Novin, J.T.C., decided February 11, 2021, and released for publication March 2, 2021. For plaintiff – Lawrence S. Berger (Berger & Bornstein, LLC, attorneys); for defendant - Martin Allen (Di Francesco, Bateman, Kunzman, Davis, Lehrer & Flaum, P.C., attorneys).

During trial, the court concluded that plaintiff could not compel the testimony of defendant’s proposed testifying expert against the proposed testifying expert’s wishes, or without his consent. Additionally, the court determined that plaintiff offered no evidence that defendant’s proposed testifying expert witness possessed superior knowledge of the facts or that his testimony would have elicited more meaningful insight into the property than plaintiff’s testifying expert. Accordingly, the court declined to apply an adverse inference charge. The court further concluded that post-trial briefs must be confined to the facts disclosed in the trial record, or those reasonably suggested by the evidence introduced during trial. In affirming the local property tax assessments, the court found plaintiff’s expert’s highest and best use analysis flawed and his conclusion that approximately sixty-one percent of the subject property’s building area should be demolished not credible.

Plaintiff Robert Triffin appeals from an order denying his motion for reconsideration of an order, entered after a Special Civil Part trial, that dismissed his action against defendants SHS and John Sickles. Defendant SHS, a hair styling school, issued a check to one of students, codefendant Amanda Grzyb-Kelly, for living expenses. Grzyb-Kelly did not file an answer, and the judge entered default judgment against her at the conclusion of trial. Grzyb-Kelly cashed the check twice on the same day, first by electronically depositing it into her account at Wells-Fargo using photos of the front and back of the check through an application on her phone, then at United Check Cashing where it was indorsed, marked with a dated stamp, and exchanged for payment. The check was dishonored when United Check Cashing presented it for payment at defendant's bank, Bank of America. Plaintiff subsequently purchased the dishonored check, along with several others, through an assignment agreement.

Plaintiff filed a complaint pursuant to N.J.S.A. 12A:3-414(b), which entitles the holder of a dishonored check to enforce payment against the drawer. The trial judge found that N.J.S.A. 12A:3-308(b) provided a defense to plaintiff's right to payment based on the evidence that defendant had previously paid the check. Specifically, after reviewing both parties' copies of the check, the judge noted that the electronically deposited check into Wells-Fargo lacked an indorsement, whereas the check cashed at United Check Cashing was indorsed and physically relinquished. Accordingly, the court dismissed the complaint against SHS and Sickles.

In his motion to reconsider, plaintiff argued that because the check was not indorsed, negotiation and transfer, as required by N.J.S.A. 12A:3-201(b) and -203 (c), did not occur. Rather, plaintiff argued, defendant's bank made an illegitimate payment that did not satisfy defendant's obligation to pay. On reconsideration, the trial judge relied, in part, on N.J.S.A. 12A:3-414(c) and concluded the defendant's obligation to pay was discharged. N.J.S.A. 12A:3-414(c) states: "If a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained." Similar to a certified check, "acceptance" in this context refers to a process by which a bank guarantees payment of a draft, N.J.S.A. 12A:3-409(a); the statute does not use the term in its colloquial sense.

The court found that N.J.S.A. 12A:4-205 eliminates the indorsement requirement for negotiation and transfer if the customer of a depository bank delivers an item for collection. Because Grzyb-Kelly was a customer of Wells Fargo, the depository bank in this case, the unendorsed check was effectively negotiated and transferred when she made the electronic deposit. Indorsement was not required. The court affirmed the trial judge's finding that defendant had successfully proved his previously paid defense.

Affirmed.

The Commissioner of Education determined that a board of education could use unemployment benefits and payments from other employment that plaintiff, a tenured teacher, had received during a tenure-charge suspension period to offset outstanding back pay owed to him. Finding that N.J.S.A. 18A:6-14, by its express language, authorizes a board to deduct "sums" the suspended teacher had received "by way of pay or salary from any substituted employment," the court held that unemployment benefits are not "sums" received "by way of pay or salary from any substituted employment" and the Commissioner erred in finding the board could deduct unemployment benefits from the back-pay award. Thus, the court reversed the portion of the Commissioner's final administrative decision regarding unemployment benefits. The court affirmed the Commissioner's determination that plaintiff's other employment constituted "substituted employment" and that the board could use payments from that substituted employment to offset any back pay owed to plaintiff.

Tax Court: Fifth Third Equipment Finance Co. v. Dir., Div. of Taxation,span> Docket No. 013380-2018, opinion by Sundar P.J.T.C., decided February 23, 2021. For plaintiff - Kenneth R. Levine argued the cause, Kyle O. Sollie, attorney of record and on the brief; Matthew L. Setzer, on the brief (Reed Smith, LLP, attorneys); for defendant - Michael J. Duffy (Gurbir S. Grewal, Attorney General of New Jersey, attorney).

Held: N.J.S.A. 54:10A-4(k)(6)(E) (Subparagraph E) disallowed a deduction of net operating loss (NOL) carryovers for tax years 2002-2005 (100% for 2002 and 2003, 50% for 2004 and 2005), but also extended the normal seven-year period of the carryover losses for a period commensurate with the suspension period(s) “if and only to the extent” the NOL carryover deduction was disallowed under Subparagraph E. Defendant’s construction that Subparagraph E does not permit extending the carryover period if in a suspension period there was no income to absorb an NOL carryover, is reasonable. Consideration must be given to the first-in-line, first-in-time sequence of using an NOL carryover specified in N.J.S.A. 54:10A-4(k)(6)(B) for purposes of implementing Subparagraph E. While plaintiff is incorrect in arguing that the extension period for NOL carryovers is four years for each NOL carryover that could have been used to offset income in the suspension year(s), the court agrees, in part, with plaintiff’s proffered computation of the NOL carryovers and extension periods under defendant’s construction of Subparagraph E. Although defendant did not apply its regulation, N.J.A.C. 18:7-5.17(c), in computing the extension period(s) and amount of NOL carryovers but followed a 2015 bench opinion of the Tax Court in this regard, the court finds the regulation invalid as it imposes a condition beyond the scope of the language and intent of Subparagraph E. The court affirms defendant’s denial of plaintiff’s refund claim attributable to the Alternative Minimum Assessment tax credits.

Tax Court: Andrew & Laura Botwin v. Dir., Div. of Taxation, Docket No. 013411-2019; opinion by Bianco, J.T.C., decided February 23, 2021. For plaintiffs – Andrew Botwin (self-represented); for defendant – Miles Eckardt (Gurbir S. Grewal, Attorney General of New Jersey, attorney).

Plaintiffs, Andrew and Laura Botwin, sought to transfer the trade-in tax credit from the purchase of their first vehicle which was returned under the Lemon Law (N.J.S.A. 56:12-32(a)(1)), to a subsequent purchase of another vehicle from a different dealer. The court determined that the defendant, Director, Division of Taxation, was entitled to summary judgment under R. 4:46-2(c), finding that the Botwins did not qualify for a trade-in credit on the purchase of the second motor vehicle under the plain language of N.J.S.A. 54:32B-2(oo) and N.J.A.C. 18:24-7.4, because their purchase of the second vehicle and the use of their trade-in vehicle for a reduction in sales price did not occur at the same time as contemplated by the law. The court concluded that when the Botwins accepted a full refund for their first vehicle as their relief under the Lemon Law, as opposed to a replacement vehicle, they surrendered their trade-in credit on the purchase of a second vehicle from another dealer. The court also rejected the Botwins’ argument that they were double taxed because in this case there were two separate, taxable events under N.J.S.A. 54:32B-3(a), and they were reimbursed for taxes paid for the first vehicle.

The Securities Law does not bar plaintiff’s promissory estoppel claim for reliance damages. The Court affirms the liability judgment on that claim and the remand for a new damages trial in which plaintiff will have the opportunity to prove reliance damages. He is not entitled to benefit-of-the-bargain damages. To the extent that the Appellate Division relied on an alternative basis for its liability holding -- that a later-adopted federal law “family office” exception has been incorporated into our Securities Law -- the Court rejects that reasoning and voids that portion of the court’s analysis.

In this appeal, which consolidates eight cases, the court addressed the criteria for admission to Drug Court, which is a nationally acclaimed program that combats the hopelessness of addiction with the hopefulness of treatment. Defendants are admitted via two separate and distinct "tracks." A Track One defendant can only be admitted if he or she meets all of the eligibility criteria for special probation set forth in N.J.S.A. 2C:35-14(a). For Track Two candidates, the criteria enumerated in N.J.S.A. 2C:35-14(a) are relevant considerations but are not prerequisites to admission. The court ruled that a defendant is a Track One candidate if, and only if, a present offense for which he or she is to be sentenced is subject to the presumption of imprisonment set forth in N.J.S.A. 2C:44-1(d) or to a mandatory term of parole ineligibility. The court rejected the State's contention that a defendant is a Track One candidate because he or she has previously been convicted of a crime subject to the presumption of imprisonment or has previously been sentenced to State prison. The court also held that once it is determined that a defendant is legally eligible for Drug Court, the decision to grant or deny admission rests in the discretion of the sentencing court and that decision is entitled to substantial deference in view of the specialized expertise, training, and experience of Drug Court judges

NJ Transit and its bus drivers are held to the same negligence standard under the TCA as other common carriers -- to exercise the utmost caution to protect their passengers as would a very careful and prudent person under similar circumstances. See N.J.S.A. 59:2-2(a), :3-1(a). None of the TCA immunities defendants asserted abrogated their common-carrier duty to protect Maison from the dangerous and threatening conduct of the teenage passengers. The TCA leaves no doubt that an allocation of fault between a negligent public entity and its employee and an intentional tortfeasor is mandated. See N.J.S.A. 59:9-3.1. Nevertheless, to ensure that defendants’ duty to protect their passenger is not unfairly diluted or diminished, the trial court must give the jury clear guidance on the factors to consider in allocating degrees of fault. See Frugis v. Bracigliano, 177 N.J. 250, 274-75, 281-83 (2003).

Plaintiffs challenged Jersey City's adoption of a payroll tax ordinance that exempted from its calculation the "total remuneration" employers paid to Jersey City residents, and included in the calculation remuneration paid to employees who worked outside the city but were supervised by an employee in the city. Amendments to the Local Tax Authorization Act, N.J.S.A. 40:48C-1 to -42 (LTAA) in 2018 permitted the exemption of local residents and authorized the use of payroll tax revenue to augment Jersey City's loss of state educational aid resulting from 2018 amendments to the School Funding Reform Act of 2008 (SFRA), N.J.S.A. 18A:7F-43 to -63. Jersey City was the only municipality that satisfied the statutory requirements. The Law Division judge upheld the constitutionality of the ordinance and amendments to the LTAA and dismissed the complaint.

The court affirmed in most respects. However, the court concluded that plaintiffs' constitutional challenge to the supervisor provision pursuant to the Commerce Clause of the United States Constitution potentially had merit and vacated dismissal of that count of the complaint. The court remanded the matter for further proceedings.

In this residential mortgage foreclosure action, the court adopts the approach of the Third Restatement of Property: Mortgages that equitable subrogation is appropriate when loan proceeds from refinancing satisfies the first mortgage, the second mortgage is paid in full as part of the transaction, and the transaction is based on a discharge of the second mortgage, so long as the junior lienor, here defendant, is not materially prejudiced. The court concludes that under such circumstances, equitable subrogation should not be precluded by the new lender's actual knowledge of the intervening mortgage. By limiting the first lien priority of plaintiff's mortgage to the balance due on the prior first mortgage at closing, the superior lien balance owed by the borrowers was not increased. Under these circumstances, the junior lienholder is not materially prejudiced by subrogating plaintiff's mortgage.

*Section 19(f) of the CJRA offers a path for potential relief under the present circumstances. Under that provision, N.J.S.A. 2A:162-19(f), individual defendants can apply to reopen detention hearings if they can present information that was not known at the time of the initial hearing and that “has a material bearing” on the release decision.

A defendant seeking discovery in connection with a Franks hearing may -- in the trial court’s discretion and on showing a plausible justification that casts reasonable doubt on the veracity of the affidavit -- be entitled to limited discovery described with particularity that is material to the determination of probable cause. The Court affirms and modifies the Appellate Division’s judgment and remands to the trial court for consideration under the standard adopted in this decision.

The injury sustained by Kim Goulding while volunteering at her employer- sponsored event is compensable because, as to Goulding, the event was not a social or recreational activity. Even if N.J.S.A. 34:15-7 was applicable here, Goulding would still have satisfied the two-part exception set forth in that statute. Her role at the event, which was planned to be held annually, was the same as her role as an employee, and but for her employment at Friendship House, Goulding would not have been asked to volunteer and would not have been injured. Thus, Goulding’s injury was “a regular incident of employment.” See ibid. Additionally, Friendship House received a benefit from Family Fun Day “beyond improvement in employee health and morale.” See ibid . The event was not a closed event for the Friendship House team. Rather, it was an outreach event to celebrate and benefit Friendship House’s clients, creating goodwill in the community.

The judgment of the Appellate Division is reversed substantially for the reasons expressed in Judge Accurso’s dissenting opinion. The Court remands for a retrial