PER CURIAM.
Plaintiffs Haynes Security, Inc. and John D'Agostino appeal from two Law Division orders: the March 22, 2010 order denying their motion to bar defendant the Port Authority of New York and New Jersey from using or relying upon documents it produced after discovery ended; and the March 26, 2010 summary judgment order dismissing their complaint with prejudice. Plaintiffs contend the trial court committed numerous procedural and substantive errors, including relying on the belatedly-produced documents, when it dismissed their claim that defendant orally extended for an additional two years, their four-year, multi-million-dollar contract for security services at two airports. We agree with the trial court that, as a matter of law, defendant was not bound by, and plaintiffs could not have reasonably relied upon, oral promises to extend the contract allegedly made by defendant's high-ranking employees. Accordingly, we affirm.
The Port Authority of New York and New Jersey (the Port Authority) is a bi-state agency consisting of twelve commissioners who constitute a board that is authorized to adopt by-laws for its management.
On January 10, 2003, the Port Authority and Haynes entered into a written agreement (the Contract) under which Haynes was to provide the specified services at John F. Kennedy International Airport and LaGuardia Airport, for which it would be paid $89,340,649.41. D'Agostino signed the Contract on behalf of Haynes. Andrea Roitman, the Port Authority's then Manager of Purchasing Services, signed the Contract on behalf of the Port Authority. The initial term of the Contract was four years beginning on February 1, 2003, and ending on January 31, 2007 (the termination date). The Contract provided that, "unless sooner terminated or revoked (or extended)[, the Contract] shall expire at 11:59 p.m. on or about January 31, 2007...."
The Port Authority had the unilateral right to extend the Contract. The Contract's extension option provided:
The Contract also authorized the Port Authority to cancel the Contract before the termination date. The cancellation clause provided:
The Contract also contained an integration clause:
The Port Authority vested responsibility for the Contract's management in the Director of the Office of Operations & Emergency Management (OEM), who was responsible for security standards, and the Director of Aviation, who was responsible for the operational aspects of the Contract. John Paczkowski was the Director of OEM. As previously indicated, William DeCota was the Director of Aviation.
The parties' relationship was uneventful until Haynes, D'Agostino, and D'Agostino's wife, Carol Ann, were indicted. On February 2, 2004, one year after commencement of the Contract, a New Jersey grand jury returned an indictment charging Haynes with one count of conspiracy, two counts of commercial bribery, and one count of theft by deception; D'Agostino with one count of conspiracy, one count of misconduct by a corporate official, two counts of commercial bribery, and two counts of theft by deception; and Carol Ann D'Agostino with one count of misconduct by a corporate official and one count of theft by deception. As a result of the indictment, in July 2004, Haynes was suspended from bidding on any New Jersey government contracts. In September 2004, the charges against D'Agostino's wife were dismissed, as were the conspiracy and theft by deception charges against Haynes and D'Agostino relating to another agreement between Haynes and the Port Authority for unarmed, uniformed security services at Newark Liberty International Airport.
By April 2005, the Port Authority's Chief of Staff, Edmond Schorno, was seriously considering terminating the Contract. Schorno commented in emails that the Port Authority should "have a plan in place that will allow [it] to proceed at will if necessary[,]" and that "[b]eing prepared to put out a new RFP just makes good business sense and represents good stewardship." Schorno also wrote, "If Haynes performs in an admirable fashion and the principals are never convicted of any crime, we will have been more diligent throughout the term of the indictment and there is nothing wrong with that."
To address Schorno's concerns, Steven Pasichow, the Port Authority's Assistant Inspector General, recommended that the Port Authority require Haynes to enter into a monitoring agreement to assure that Haynes's performance under the Contract complied with the law. Pasichow selected a three-year term for the monitoring agreement because when he was "with New York City that was generally the routine number of years that we would have a monitorship agreement." During the time Pasichow was preparing the monitoring agreement, Paczkowski was coordinating with OEM the preparation of a new request for proposal (RFP) for the services Haynes was providing under the Contract.
The parties met on April 20, 2005 to discuss the monitoring agreement. They dispute what took place at that meeting. D'Agostino and his attorney, Eric Tunis, attended the meeting. The participating Port Authority representatives included Assistant Inspector General Pasichow; Director John Paczkowski and Charles Agro from OEM; Deputy Director Reiss and James Oliver from Aviation; and Herb Somerwitz, Esq. from the Port Authority's law department. According to Reiss, the purpose of the meeting was to discuss the monitoring agreement. In exchange for Haynes agreeing to enter into the monitoring agreement, the Port Authority would not terminate the Contract under the clause that permitted the Port Authority to cancel the Contract without cause. The extension option was not discussed because it was "way to soon to discuss any renewal option in 2005 with the Contract expiring in 2007."
D'Agostino's version of the meeting differed from that of Reiss. According to D'Agostino, in response to Paczkowski's statement that the Port Authority wanted Haynes to enter into a monitoring agreement, D'Agostino asked if "by me doing this, Haynes ... is going to keep the Contract through the extension[,] and [Paczkowski] said, yes." No one else at the meeting recalled any discussion about an extension of the Contract. Paczkowski, in his deposition, denied "any discussion at the meeting by Mr. D'Agostino about the fact that he would execute a monitoring agreement if the Port Authority agreed to the extension or the option period set forth in the original Contract[.]" Paczkowski also denied that D'Agostino had addressed "any questions to [him] directly about whether or not execution of the monitoring agreement would in any way tie into the option period or the renewal period in the Contract[.]"
The deposition testimony of D'Agostino's attorney concerning the purpose of the meeting was consistent with that of the Port Authority employees. When asked whether D'Agostino told him that he, D'Agostino, had to enter into the monitoring agreement or lose the Contract, Tunis responded, "That was the whole point of these discussions." Tunis explained that Haynes was in jeopardy of losing all its customers as a result of the indictment, and that D'Agostino was concerned most about losing the Port Authority Contract because it constituted a large percentage of Haynes's revenue.
D'Agostino signed the monitoring agreement on June 29, 2005, and Roitman signed it on behalf of the Port Authority on July 11, 2005. Between April 20 when he met with the Port Authority employees, and June 29 when he signed the monitoring agreement, D'Agostino had another attorney, not Tunis, review and negotiate the terms of the monitoring agreement. The other attorney later testified at his deposition that D'Agostino had struck a deal with the Port Authority that would allow Haynes to continue to fulfill the Contract. Although retained solely in connection with the monitoring agreement, the attorney did not recall being told that Haynes was entering into the monitoring agreement in exchange for a two-year extension of the Contract. The attorney testified that had he been told that, "[t]hat would be something that I would assume would be in writing somewhere[,]... I don't think I ever saw the [C]ontract. I didn't even know that the Contract was getting ready to terminate or that there was an option for [a] two-year extension."
The monitoring agreement required that Haynes, at its sole expense, retain an "Independent Private Sector Inspector General" (IPSIG) to be selected by the Port Authority. The primary responsibility of the IPSIG would be to design and implement a corruption prevention program for Haynes. Paragraph 2 of the monitoring agreement, entitled "John D'Agostino," provided that D'Agostino would continue with his "normal activities on behalf of Haynes related to [the Contract]" until there was a "disposition of the criminal charges" pending against him. In the event of a deferred prosecution or disposition other than criminal conviction, the monitoring agreement would "continue for one year from the termination of the period of the `deferred prosecution.'" In the event of the complete dismissal of the criminal charges, the term of the monitoring agreement and IPSIG would discontinue, subject to the IPSIG completing any ongoing audits or investigations.
Paragraph 3 of the monitoring agreement, entitled "Independent Private Sector Inspector General," contained terms for the duration of the IPSIG. Paragraph 3(a)(ii) stated that the term of the IPSIG would expire upon the occurrence of one of four events. Two of those events were a deferral or dismissal of the criminal charges against D'Agostino. The third event occurred "[a]fter final payment by the Port Authority to Haynes and resolution of all claims of Haynes in connection with the Contract." The final terminating event had to do with the Port Authority completing pending audits or investigations.
Paragraph 7 of the monitoring agreement, entitled "Miscellaneous," provided: "The term of this Agreement, except as otherwise stated, shall be three years from the date of the execution of this Agreement by Haynes."
Roitman signed the monitoring agreement on behalf of the Port Authority. Like the Contract, the monitoring agreement contained an integration clause providing that the agreement constituted the "full agreement between the parties." The monitoring agreement contained no reference to an extension of the Contract.
Sometime in 2005, after the monitoring agreement was in place, D'Agostino retained Edward Bilinkas, Esq., and Haynes retained Vincent J. Nuzzi, Esq., to represent them in the criminal action. According to Bilinkas, he learned from D'Agostino that "the Port Authority represented approximately seventy percent ... of Mr. D'Agostino's revenues for his company, and he was always concerned about the Port Authority and keeping the contracts with them." Bilinkas also learned from D'Agostino "that there was an extension that had been promised to Haynes Security."
During the months between his retention by D'Agostino and June 2006, Bilinkas had numerous conversations with Pasichow about the Contract extension. Bilinkas did not recall the names of any other employee of the Port Authority with whom he had any conversations. When asked at his deposition about specific conversations with Pasichow, the following exchange took place:
When asked if he requested anyone from the Port Authority to put the representations about the extension in writing, Bilinkas said that Pasichow declined. Bilinkas testified:
On May 1, 2006, Schorno, Reiss, Pasichow, Roitman and others met internally to discuss an inquiry Pasichow had received from D'Agostino and Bilinkas about how a recently proposed plea agreement would affect the Contract. According to internal emails between Port Authority employees, D'Agostino was contemplating pleading guilty to two fourth-degree crimes as a condition to his entry into a pre-trial intervention program, which would ultimately result in the expungement of his plea and conviction. Schorno insisted that if D'Agostino pled guilty he would have to sever any affiliation with Haynes, and suggested that D'Agostino be so informed in writing. Schorno also stated that if D'Agostino was acquitted at a trial, that would be a "totally different story than if he pleads."
Reiss was concerned about continuity of the operations that were the subject of the Contract. Those at the meeting agreed to invite D'Agostino's wife and executive team to explain why Haynes was still capable and "should be considered when renewal option comes up." In an internal email, Reiss stated that "[n]o decision was reached on whether [the] renewal option should be exercised no[w]. We discussed [the] timeline for RFP and the fifteenth floor wanted to wait to see what Haynes does next since current Haynes performance is satisfactory." In another email dated May 8, 2006, Pasichow noted that Bilinkas had contacted him, and that he, Pasichow, informed Bilinkas that the Port Authority would not want D'Agostino involved in Haynes if D'Agostino pled guilty.
The parties scheduled a meeting on June 8, 2006, the day before D'Agostino was to enter a plea in the criminal action. Bilinkas told Pasichow to "[m]ake sure everyone who has any role in the decision-making process concerning Haynes security is at the meeting."
D'Agostino and Haynes were represented at the June 8, 2006 meeting by Bilinkas and Nuzzi. The two monitors also attended the meeting. Pasichow attended the meeting along with Roitman and Larry Waxman, Procurement Contracts Manager, Purchasing Services Division. Reiss attended by phone. According to D'Agostino, when Pasichow told him that "after tomorrow you have to resign from the company, you have to get out," D'Agostino asked, "So what you're telling me is if I do this tomorrow, [plead guilty,] then the Haynes contract is going to continue and be extended[?]" According to D'Agostino, Pasichow said "Yes." D'Agostino also testified that after his conversation with Pasichow he walked over to Roitman and Waxman who were standing near a doorway and asked them, "Am I doing the right thing? Is Haynes going to keep the Contract through the extension? And they both said, yes." D'Agostino never asked about whether the extension was for 120 days or for two years.
Bilinkas said that he also asked Pasichow, "If John agrees to this, if he agrees to that, are you telling me that the Port Authority doesn't have a problem with the Contract, with the extension you know, and he said, `yes.'" Bilinkas testified in his deposition that "[h]ad they not specifically told us that what we were planning on doing the very next day would not affect the extension, we never would have gone through with that plea."
Haynes's attorney, Nuzzi, confirmed D'Agostino's deposition testimony. According to Nuzzi, D'Agostino said he would be "out today" as long as his plea did not impact the extension. Nuzzi also testified that "someone said, `There is no problem with the extension. You got to be out of there today.'"
The monitors, Edwin Stier and Gerard French, recalled no such conversation. Stier testified that he had no understanding that the Port Authority had given Haynes a two-year extension of the Contract, and French testified he was never present at any meeting, including the June 8, 2006 meeting, "where any Port Authority representative promised an extension of the agreement."
The Port Authority representatives also denied that any representation concerning the contract extension had been made at the June 8, 2006 meeting. In a certification submitted in support of the Port Authority's summary judgment motion, Roitman averred that the Contract had required the approval of the Board of Commissioners, that the only person who had the authority to extend the Contract was William DeCota, the late Director of Aviation, and that had the Contract been extended, the extension would have been memorialized in a letter. Roitman also averred that she did not have the authority to extend the Contract, and never suggested to D'Agostino or anyone from Haynes that she had such authority. She met with D'Agostino only once before the June 8, 2006 meeting, and neither he nor anyone else from Haynes had ever asked her whether she had the authority to exercise the option. According to Roitman, the Port Authority would have terminated the Contract had D'Agostino refused to resign. She acknowledged that during a break in the June 8 meeting, D'Agostino asked her if she thought he was doing the right thing, and she indicated that she thought he was.
On June 9, 2006, D'Agostino resigned as the president of Haynes and sold his shares in the company to his wife. He also entered a guilty plea in the criminal action and was placed into a pre-trial intervention program, which he subsequently completed, resulting in the dismissal of the charges.
In the fall of 2006, the Port Authority issued a new RFP for the unarmed, uniformed security contracts for John F. Kennedy and LaGuardia airports. Haynes submitted a proposal, but was not awarded a new contract. Consequently, when the Contract expired in January 2007, the Port Authority did not extend it. Roitman certified that only after Haynes was not awarded the new contract did his attorney protest the Port Authority's decision to issue a new RFP rather than exercise its option to extend the Contract for two years.
On November 16, 2007, Haynes and D'Agostino filed a complaint against the Port Authority alleging causes of action for breach of contract, promissory estoppel, fraud, negligent misrepresentation, and breach of the covenant of good faith and fair dealing. On May 2, 2008, after unsuccessfully moving to dismiss the complaint for failure to state a cause of action, the Port Authority filed an answer. Four months later, the Port Authority produced documents in response to plaintiffs' demand, but did not Bates stamp those documents. On September 26 and November 24, 2008, and on January 16, 2009, the Port Authority supplemented its response to plaintiffs' document demand by providing Bates stamped documents. On February 5, 2010, the Port Authority again produced documents. The documents were Bates stamped sequentially.
The Port Authority could not demonstrate that all of the sequentially numbered Bates stamped documents had previously been produced. Consequently, plaintiffs filed a motion to bar the belatedly-produced documents. On February 19, 2010, the Port Authority moved for summary judgment. On March 22, 2010, the court denied plaintiffs' motion to bar the use of documents produced after the discovery end date, and on March 26, 2010, the court granted summary judgment to defendant. This appeal followed.
Haynes and D'Agostino contend that the trial court erred when it granted the Port Authority's summary judgment motion. The summary judgment standard is set forth in
Haynes and D'Agostino first argue that the trial court erred by granting summary judgment as to their breach of contract claim because there were factual disputes about whether the Port Authority employees orally promised to extend the Contract, and whether those employees had the actual or implied authority to bind the Port Authority. Clearly, a factual dispute existed as to whether Port Authority employees Roitman, Pasichow, Paczkowski, and Waxman orally promised D'Agostino that the Contract would be extended beyond its termination date. Nevertheless, we conclude that the trial court correctly determined, as a matter of law, that those oral promises were not binding on the Port Authority, and that Haynes and D'Agostino did not reasonably rely upon them.
The Port Authority is "a public corporate instrumentality of New Jersey and New York,"
Although general principles of contract law apply to public corporate bodies,
Governmental bodies "must act by formal action... with respect to contracts,"
When dealing with employees of public corporations, contractors are presumed to "operate with knowledge of relevant laws constraining the procedural and substantive discretion and authority of officials with whom they deal, and where applicable provisions are not followed, any agreements entered into are unenforceable, absent lawful ratification."
A public contractor's attempt to enforce a contract based upon an oral promise can give rise to five classes of cases:
The case before us falls into the fifth category. The parties do not dispute that the Port Authority was authorized to enter into the Contract, nor do they dispute that the Port Authority could delegate to Executive Director Seymour the power to authorize the Contract. Executor Director Seymour, in turn, delegated to Director of Aviation DeCota the discretionary authority to extend the Contract for two years. That delegation is evidenced by the December 18, 2002 Memorandum of Justification that DeCota submitted to Seymour, which Seymour approved. Plaintiffs have produced no written evidence that DeCota delegated his discretionary authority to any other employee, and there is no evidence that anyone was granted explicitly the authority to orally extend the Contract. The Contract itself provided that an extension would be exercised by written notice to Haynes. In short, there is no evidence that either the Port Authority or DeCota took formal action to extend the Contract beyond the termination date.
Haynes, D'Agostino, and their representatives claim that four Port Authority employees orally promised to extend the Contract: Roitman, Pasichow, Paczkowski, and Waxman. But the authority of those employees to orally bind the corporation to an extension of the Contract was required to be explicit and direct.
Further, Haynes and D'Agostino did not "take great care to learn the nature and extent of [the] power and authority" of Roitman, Pasichow, Paczkowski, and Waxman.
Plaintiffs argue that Roitman's authority to orally extend the initial term of the Contract can be inferred from her signing the Contract and the monitoring agreement; that Paczkowski's authority to orally extend the initial term of the Contract can be inferred from his promise; and that Pasichow's authority to orally extend the initial term of the Contract can be inferred from his drafting of the monitoring agreement, his choice of a three-year term for that agreement, his demand that Haynes implement a corruption program, his insistence that D'Agostino divest himself of any interest in Haynes, and his affirmance of D'Agostino's inquiry that the Contract would be extended if Haynes entered into the monitoring agreement.
Those arguments ignore the central question: as a matter of procedural formality, how is the Port Authority's power to enter into contracts exercised and delegated to its employees? In this instance, the power to contract was delegated through a written Memorandum of Justification. The Director of Aviation was the person with the authority to exercise the extension of the Contract. D'Agostino never asked to see any document authorizing any Port Authority employee to extend the Contract. Significantly, the Contract itself stated that the Port Authority would exercise its option to extend the Contract by notifying Haynes in writing. D'Agostino's failure to make so much as an inquiry as to the authority of Roitman, Pasichow, Paczkowski, and Waxman to orally exercise the extension of a bi-state, multi-million dollar contract, when the Contract itself stated that an extension would be in writing, is, as a matter of law, insufficient to demonstrate a triable issue as to the authority of those employees.
Haynes and D'Agostino contend the Port Authority's argument that only the Director of Aviation, DeCota, was authorized to exercise the Contract option, is contradicted by the testimony of its employees, who said Schorno was the "ultimate decision-maker." But Paczkowski testified that Schorno was "reporting up to the executive director." In any event, the belief of the employees could not vest Schorno or anyone else with the authority to exercise the Contract option, and even if Schorno was the ultimate decision-maker, there is no evidence that he exercised the option to extend the Contract. To the contrary, the evidence indicates that he was in favor of terminating the Contract.
Haynes and D'Agostino next argue that "[e]ven if Andrea Roitman, John Paczkowski and Steven Pasichow did not have authority to bind the Port Authority, the [Port Authority's] second promise to grant the two-year extension on June 8, 2009, and representations made by the Assistant Inspector General in anticipation of that meeting, acted as ratifications of the prior promise to provide the extension." We disagree.
The Port Authority took no formal action with respect to the promises of their employees. There is no evidence that the Port Authority's board or Executive Director even knew about the oral promises. More significantly, the Port Authority prepared a new RFP for the services provided under the Contract, and thereafter awarded those services to another contractor.
The plaintiffs essentially suggest that employees unauthorized to make oral promises that bind a public corporate body, can ratify their initial unauthorized action by making more unauthorized promises. In light of the record, we conclude that that argument is without sufficient merit to warrant discussion in a written opinion.
Finally, Haynes and D'Agostino argue that the Port Authority waived its "lack of authority defense" by not pleading it as an affirmative defense, and by belatedly raising it in their summary judgment motion. We are unpersuaded by this argument.
Haynes and D'Agostino were aware that the Port Authority was a bi-state agency consisting of a board of commissioners. They were also aware of the Contract's express provision that if the Port Authority were to exercise its extension options, it would so advise plaintiffs in writing at least sixty days prior to the expiration of the original term. Despite that provision, plaintiffs are attempting to recover considerable damages based on alleged oral promises made by employees who were not authorized, by resolution or other written authority, to bind the Port Authority to a contract. Under those circumstances, it would be neither inequitable nor unjust to impose upon plaintiffs the burden of proving the authority of the employees with whom they dealt. It would be inequitable and unjust to conclude that the Port Authority had waived the right to assert that the employees had no such authority.
Haynes and D'Agostino contend that they established genuinely disputed facts that should have defeated the entry of summary judgment as to their claim of promissory estoppel. In addition to Haynes accepting the monitoring agreement with its considerable expense, Haynes and D'Agostino emphasize that D'Agostino chose to accept a plea rather than try his criminal case based on the promise that the Contract would be extended for an additional two years; that the term of the monitoring agreement was three years, which extended beyond the Contract's initial termination date; and that D'Agostino's plea agreement required that Haynes use the same monitor for the same period beyond the Contract's initial termination date.
The elements of promissory estoppel are: "`1) a clear and definite promise, 2) made with the expectation that the promissee will rely upon it, 3) reasonable reliance upon the promise, 4) which results in definite and substantial detriment.'"
Plaintiffs rely upon
In so holding, the Court in
Here, unlike
Next, plaintiffs argue that the trial court erred by dismissing their claims for fraud, negligent misrepresentation, and breach of the implied covenant of good faith and fair dealing. We disagree.
To establish fraud, a plaintiff must prove: "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and 5) resulting damages."
For the same reason, we affirm the trial court's summary judgment dismissal of plaintiffs' negligent misrepresentation claim. "The element of reliance is the same for fraud and negligent misrepresentation."
We also find unpersuasive plaintiffs' argument that the Port Authority breached the implied covenant of good faith and fair dealing. Plaintiffs argue that the Port Authority breached the implied covenant of good faith and fair dealing "by making representations and failing to extend the Contract by an additional two years."
The Supreme Court has "recently re-emphasized that `every contract in New Jersey contains an implied covenant of good faith and fair dealing[, t]hat is, neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract[.]'"
Lastly, Haynes and D'Agostino contend that the trial court erred by denying their motion to bar belatedly-produced documents. Discovery had ended on December 15, 2009. On January 8, 2010, the court entered orders compelling the deposition of Andrea Roitman to take place on February 5, requiring the Port Authority to file its summary judgment motion by March 19, and adjourning the trial to April 6.
The Port Authority produced documents on February 5, 2010. In the transmittal letter, the Port Authority's attorney wrote that she was enclosing "the Port Authority's document production... Bates Nos. 1-0003752[,]" and that "[m]any of these are duplicates of our earlier document productions, but it is unavoidable since the initial production was not Bates stamped." Haynes and D'Agostino insisted that the Memorandum of Justification that authorized the Port Authority to enter into the Contract, upon which the Port Authority based its summary judgment motion, had not been produced previously. The plaintiffs maintain that the Memorandum of Justification should not have been considered by the trial court. We disagree.
The parties did not Bates stamp and categorize documents produced and received during discovery. Because of that omission, the trial court was confronted with the dilemma of determining whether the Memorandum of Justification had in fact been produced. Generally, the consequences of a failure to catalogue documents produced or received during discovery fall upon the producing party. Here, however, where the plaintiffs were asserting an oral promise to extend a contract that stated extensions would occur by written notice, they had an obligation to ascertain the authority of the employees making those promises. Had plaintiffs done so, they would have been aware of the Memorandum of Justification well before litigation was commenced. Under those circumstances, we do not find that the trial court misapplied its discretion by refusing to bar the use of the document.
Affirmed.
