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'Drastic' Discovery Sanction Rolled Back in Suit Against Contractor

Judge William Nugent

New Jersey Appellate Division Judge William Nugent. Photo by Carmen Natale.

A New Jersey appeals court has reinstated a breach-of-contract suit after finding that a sanction imposed for discovery violations was overly drastic and unevenly applied.

The case was dismissed because of a decision below to bar the plaintiff's damages claims as a sanction for failing to respond to the defendants' notice to produce documents.

But the Supreme Court has called the sanction of dismissal "drastic" and has cautioned against imposing it if a lesser sanction will suffice, the Appellate Division said Monday in Salazar v. MKGC + Design, a published decision.

In addition, the sanction was not issued in an evenhanded manner because the defendant also failed to comply with discovery, the court said.

According to the decision, the plaintiffs, Josie Salazar and Bijay Shah, alleged that the defendants failed to meet the terms of a home improvement contract, leaving them a house that was uninhabitable. After the plaintiffs filed suit in 2016, the defendants served them with a counterclaim and notice to produce documents, including documentary evidence of their damage claim. The plaintiffs served the defendant with interrogatories and a notice to produce documents. Neither side answered discovery by the end date of July 25, 2017, the court said.

In October 2017, the defendants moved for discovery sanctions because the plaintiffs had not responded to discovery demands. In a cross-motion to reopen discovery, the plaintiffs informed the judge that the defendants, too, had failed to respond their discovery demands.

Nevertheless, Hudson County Superior Court Judge Jeffrey Jablonsky granted the defendants' motion and denied the plaintiffs' cross-motion. Jablonsky also denied the plaintiffs' motion for reconsideration. Later, he granted the defendants' motion for an involuntary dismissal, based on the absence of any damage proofs.

The plaintiffs appealed. Before the Appellate Division panel of William Nugent, Susan Reisner and Hany Mawla, the defendants did not dispute that they failed to comply with discovery. But they argued that Jablonsky didn't abuse his inherent discretionary power in imposing sanctions on the plaintiffs for failure to provide discovery.

Nugent, writing for the panel, said the defendants made their motion for sanctions after the discovery period was over, notwithstanding a court rule requiring such motions to be made within the discovery period. Jablonsky could have denied the motion on that basis, but had discretion to consider the motion belatedly for good cause shown. Yet the defendants never attempted to make any showing of good cause for their late submission, according to the decision.

When the judge granted their motion for sanctions, he emphasized the undue prejudice to them. But any prejudice to the defendants was not undue, Nugent wrote. "Defendants' wholesale disregard of the discovery rules refutes that proposition," the judge wrote. "Moreover, in weighing the prejudice to the parties, we fail to discern how the possible prejudice to defendants—who could still offer a defense, rely on their requests for admission, and offer proofs to support their counterclaim—was somehow greater in magnitude than the prejudice to plaintiffs, who the motion judge effectively barred from proving their case at trial."

If a trial court declines to enforce a mandatory rule, particularly one designed to provide uniformity and fairness in its application, the court should explain its reasons for doing so, the appeals court said. A brief explanation would demonstrate that the court is not acting in an arbitrary manner and would permit appropriate appellate review, the panel said.

Under Rule 4:23-5, motions for sanctions for failing to meet discovery demands are governed by a two-step procedure requiring the moving party to state that it is not in default on discovery obligations to the delinquent party, the court said. Here, "the system failed because both the motion judge and the attorney representing the moving party failed to follow the strict procedural requirements of 4:23-5," Nugent wrote.

Dismissal with prejudice is the "ultimate sanction," and should be imposed sparingly and only when no lesser sanction will suffice, Nugent wrote. Here, that admonition was overlooked when Jablonsky, in effect, dismissed plaintiffs' complaint by precluding them from presenting proofs of damage at trial, the panel ruled.

"The trial court misapplied its discretion by disregarding these mandates without an explanation for doing so and by imposing the equivalent of the ultimate sanction when the moving parties were delinquent and lesser sanctions would have sufficed to erase the prejudice to all parties," Nugent wrote.

Jessica Tracy of Curcio Mirzaian Sirot in Roseland represented plaintiffs Salazar and Shah. The firm's Benjamin Curcio, reached by phone, said they were "very pleased and looking forward to our day in court."

Robert Ball of Weber Gallager Simpson Stapleton Fires & Newby in Bedminster, representing defendants MKGC + Design and Milton Kislinger and Helen Leu, did not return a call.