Divyajit Mehta v. Emanuel Hedvat
This text of Divyajit Mehta v. Emanuel Hedvat (Divyajit Mehta v. Emanuel Hedvat) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0385-22 A-0386-22
DIVYAJIT MEHTA and DGNS CORP.,
Plaintiffs-Respondents/Cross- Appellants,
v.
EMANUEL HEDVAT, AMERICAN ANALYTICAL ASSOCIATION, INC., NJ CUBIC 29, LLC, 29 COTTAGE STREET, LLC, CHEMTECH GROUP, LLC, and EFJ REALTY LLC,
Defendants-Respondents,
and
FARIBA HEDVAT,
Defendant-Appellant/Cross- Respondent,
CHEMTECH CONSULTING GROUP, INC., MOUNTAINSIDE REALTY, LLC, and VIRTUAL INSTITUTE PERSONNEL, LLC, Defendants/Third-Party Plaintiffs- Respondents,
ARECON LTD. and GAYATRI MEHTA,
Third-Party Defendants- Respondents/Cross-Appellants. __________________________________
EMANUEL HEDVAT, AMERICAN ANALYTICAL ASSOCIATION, INC., NJ CUBIC 29, LLC, 29 COTTAGE STREET, LLC, CHEMTECH GROUP, LLC, and EFJ REALTY LLC,
Defendants-Appellants/Cross- Respondents,
Defendant-Respondent,
CHEMTECH CONSULTING GROUP, INC., MOUNTAINSIDE REALTY, LLC,
A-0385-22 2 and VIRTUAL INSTITUTE PERSONNEL, LLC,
Defendants/Third-Party Plaintiffs- Appellants/Cross-Respondents,
Third-Party Defendants. __________________________________
Argued March 25, 2025 – Decided September 4, 2025
Before Judges Smith and Vanek.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-000135-20.
Eric D. Reiser argued the cause for appellant/cross- respondent in A-0385-22 (Shapiro Croland Reiser Apfel & Di Iorio, LLP, attorneys; Eric D. Reiser, of counsel and on the briefs).
Rubin M. Sinins argued the cause for appellants/cross- respondents in A-0386-22 (Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, attorneys; Rubin M. Sinins, of counsel and on the briefs).
Michael J. Cohen argued the cause for respondents/cross-appellants Divyajit Mehta and DGNS Corp. (Winne, Banta, Basralian & Kahn, PC, and Harlan M. Lazarus (Lazarus & Lazarus, PC) of the New York Bar, admitted pro hac vice, attorneys; Michael J. Cohen and Harlan M. Lazarus, of counsel and on the briefs).
A-0385-22 3 PER CURIAM
These appeals, calendared back-to-back and consolidated for purposes of
issuing a single opinion, stem from a contentious dispute between business
partners. After a bench trial, both parties appeal the order of the Chancery
Division finding that defendants Emanuel Hedvat and Fariba Hedvat, along with
numerous companies that they controlled, diverted over $2.8 million from
businesses shared with plaintiffs Divyajit Mehta and DGNS Corp (DGNS). The
trial court found that defendants were liable for breach of contract, breach of the
covenant of good faith and fair dealing, conversion, and unjust enrichment.
Fariba appealed separately under docket A-385-22, and the remaining
parties appealed under docket A-386-22. On appeal, Fariba argues that the trial
court should have dismissed her from the action either on summary judgment or
at trial. All defendants, including Fariba, argue that the court erred when : it
found them liable; included a transaction outside the statute of limitations;
admitted certain expert testimony; determined that joint and several liability
applied; and awarded attorney's fees and costs. In cross-appeals under both
dockets, Mehta and DGNS allege that the court erred when it declined to award
prejudgment interest for each transaction linked to a misappropriation.
We affirm for the reasons which follow.
A-0385-22 4 I.
A.
Background
We gather the relevant facts from the record, including evidence adduced
during the twenty-two-day bench trial. In 1984, Mehta, a chemical engineer
from India, began working for Chemtech Consulting Group, Inc. (Chemtech), a
company that analyzed samples from contaminated environmental sites.
Emanuel, then Chemtech's laboratory manager, hired him, and over the ensuing
years, the two developed a friendship and business relationship. Mehta rose
through the ranks at Chemtech to become the laboratory manager, while
Emanuel ascended to become Chemtech's sales and marketing manager. In
1990, Mehta and Emanuel, along with other investors, purchased Chemtech. By
2007, all other investors had sold their interests to Mehta and Emanuel, leaving
them sole shareholders and co-owners of Chemtech.
During this period, Emanuel and Mehta each formed and operated other
businesses, both individually and together. Emanuel created A3I, an
environmental data analysis company. His wife, Fariba, was the sole
shareholder of A3I. Mehta's wife, Gayatri, formed DGNS, a company which
validated environmental laboratory data and was still in business at the time of
A-0385-22 5 trial. Mehta was DGNS's authorized agent. Neither A3I nor DGNS were
connected to Chemtech. In fact, the two businesses jointly owned a company
called Chemtech LLC, an environmental laboratory business, with Minority
Business Enterprise status. A3I and DGNS also formed Mountainside Realty,
LLC (MRL). MRL acquired, operated and managed real estate, including
properties that served as headquarters, office, and lab space for Chemtech. MRL
also owned other business entities related to the parties, including Cubic, 29
Cottage, and VIP. VIP was a business entity that processed payroll for Emanuel
and Mehta's virtual employment company in India. EFJ Realty was an entity
that Emanuel created with Fariba which owned various real estate exclusively
for A3I.1
B.
The Agreements and Transactions at the Heart of the Dispute
There were multiple shareholder and employment agreements between the
parties which defined the parties' obligations to each other concerning their
1 There were several companies with names similar to EFJ which were owned by Mountainside Realty. For example, Mountainside was the owner of EFJ 240 Prospect LLC; EFJ 70 East Passaic, LLC; and EFJ 275 Grand, LLC. EFJ 240 Prospect LLC owned a property located at 240 Prospect Street in Maywood. EFJ 70 East Passaic, LLC, owned the building located at 70 East Passaic Street in Maywood. EFJ 275 Grand, LLC, owned the property at 275 Grand Avenue, Leonia. A-0385-22 6 business affairs. In 2000, Fariba, on behalf of A3I, and Gayatri, on behalf of
DGNS, executed the Mountainside Realty Operating Agreement (MRL
agreement). In the MRL agreement, DGNS and A3I agreed to share all capital
contributions, profits, and surplus related to MRL. Concerning profits, the MRL
agreement stated that all profits were to be shared according to the percentage
of interest each member owned. It also specified that "[n]o member shall make
any withdrawals from capital without prior approval of [MRL]". Concerning
the maintenance of the financial books and records, "[e]ach of the parties . . .
covenants and agrees to cause all known business transactions pertaining to the
purpose of [MRL], to be entered properly and completely into [the MRL
company] book". The MRL agreement also contained an indemnification
provision which stated that members "shall also indemnify the other members
from any and all claims, demands and actions of every kind and nature
whatsoever which may arise out of or by reason of such violation of any terms
Free access — add to your briefcase to read the full text and ask questions with AI
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0385-22 A-0386-22
DIVYAJIT MEHTA and DGNS CORP.,
Plaintiffs-Respondents/Cross- Appellants,
v.
EMANUEL HEDVAT, AMERICAN ANALYTICAL ASSOCIATION, INC., NJ CUBIC 29, LLC, 29 COTTAGE STREET, LLC, CHEMTECH GROUP, LLC, and EFJ REALTY LLC,
Defendants-Respondents,
and
FARIBA HEDVAT,
Defendant-Appellant/Cross- Respondent,
CHEMTECH CONSULTING GROUP, INC., MOUNTAINSIDE REALTY, LLC, and VIRTUAL INSTITUTE PERSONNEL, LLC, Defendants/Third-Party Plaintiffs- Respondents,
ARECON LTD. and GAYATRI MEHTA,
Third-Party Defendants- Respondents/Cross-Appellants. __________________________________
EMANUEL HEDVAT, AMERICAN ANALYTICAL ASSOCIATION, INC., NJ CUBIC 29, LLC, 29 COTTAGE STREET, LLC, CHEMTECH GROUP, LLC, and EFJ REALTY LLC,
Defendants-Appellants/Cross- Respondents,
Defendant-Respondent,
CHEMTECH CONSULTING GROUP, INC., MOUNTAINSIDE REALTY, LLC,
A-0385-22 2 and VIRTUAL INSTITUTE PERSONNEL, LLC,
Defendants/Third-Party Plaintiffs- Appellants/Cross-Respondents,
Third-Party Defendants. __________________________________
Argued March 25, 2025 – Decided September 4, 2025
Before Judges Smith and Vanek.
On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-000135-20.
Eric D. Reiser argued the cause for appellant/cross- respondent in A-0385-22 (Shapiro Croland Reiser Apfel & Di Iorio, LLP, attorneys; Eric D. Reiser, of counsel and on the briefs).
Rubin M. Sinins argued the cause for appellants/cross- respondents in A-0386-22 (Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins, attorneys; Rubin M. Sinins, of counsel and on the briefs).
Michael J. Cohen argued the cause for respondents/cross-appellants Divyajit Mehta and DGNS Corp. (Winne, Banta, Basralian & Kahn, PC, and Harlan M. Lazarus (Lazarus & Lazarus, PC) of the New York Bar, admitted pro hac vice, attorneys; Michael J. Cohen and Harlan M. Lazarus, of counsel and on the briefs).
A-0385-22 3 PER CURIAM
These appeals, calendared back-to-back and consolidated for purposes of
issuing a single opinion, stem from a contentious dispute between business
partners. After a bench trial, both parties appeal the order of the Chancery
Division finding that defendants Emanuel Hedvat and Fariba Hedvat, along with
numerous companies that they controlled, diverted over $2.8 million from
businesses shared with plaintiffs Divyajit Mehta and DGNS Corp (DGNS). The
trial court found that defendants were liable for breach of contract, breach of the
covenant of good faith and fair dealing, conversion, and unjust enrichment.
Fariba appealed separately under docket A-385-22, and the remaining
parties appealed under docket A-386-22. On appeal, Fariba argues that the trial
court should have dismissed her from the action either on summary judgment or
at trial. All defendants, including Fariba, argue that the court erred when : it
found them liable; included a transaction outside the statute of limitations;
admitted certain expert testimony; determined that joint and several liability
applied; and awarded attorney's fees and costs. In cross-appeals under both
dockets, Mehta and DGNS allege that the court erred when it declined to award
prejudgment interest for each transaction linked to a misappropriation.
We affirm for the reasons which follow.
A-0385-22 4 I.
A.
Background
We gather the relevant facts from the record, including evidence adduced
during the twenty-two-day bench trial. In 1984, Mehta, a chemical engineer
from India, began working for Chemtech Consulting Group, Inc. (Chemtech), a
company that analyzed samples from contaminated environmental sites.
Emanuel, then Chemtech's laboratory manager, hired him, and over the ensuing
years, the two developed a friendship and business relationship. Mehta rose
through the ranks at Chemtech to become the laboratory manager, while
Emanuel ascended to become Chemtech's sales and marketing manager. In
1990, Mehta and Emanuel, along with other investors, purchased Chemtech. By
2007, all other investors had sold their interests to Mehta and Emanuel, leaving
them sole shareholders and co-owners of Chemtech.
During this period, Emanuel and Mehta each formed and operated other
businesses, both individually and together. Emanuel created A3I, an
environmental data analysis company. His wife, Fariba, was the sole
shareholder of A3I. Mehta's wife, Gayatri, formed DGNS, a company which
validated environmental laboratory data and was still in business at the time of
A-0385-22 5 trial. Mehta was DGNS's authorized agent. Neither A3I nor DGNS were
connected to Chemtech. In fact, the two businesses jointly owned a company
called Chemtech LLC, an environmental laboratory business, with Minority
Business Enterprise status. A3I and DGNS also formed Mountainside Realty,
LLC (MRL). MRL acquired, operated and managed real estate, including
properties that served as headquarters, office, and lab space for Chemtech. MRL
also owned other business entities related to the parties, including Cubic, 29
Cottage, and VIP. VIP was a business entity that processed payroll for Emanuel
and Mehta's virtual employment company in India. EFJ Realty was an entity
that Emanuel created with Fariba which owned various real estate exclusively
for A3I.1
B.
The Agreements and Transactions at the Heart of the Dispute
There were multiple shareholder and employment agreements between the
parties which defined the parties' obligations to each other concerning their
1 There were several companies with names similar to EFJ which were owned by Mountainside Realty. For example, Mountainside was the owner of EFJ 240 Prospect LLC; EFJ 70 East Passaic, LLC; and EFJ 275 Grand, LLC. EFJ 240 Prospect LLC owned a property located at 240 Prospect Street in Maywood. EFJ 70 East Passaic, LLC, owned the building located at 70 East Passaic Street in Maywood. EFJ 275 Grand, LLC, owned the property at 275 Grand Avenue, Leonia. A-0385-22 6 business affairs. In 2000, Fariba, on behalf of A3I, and Gayatri, on behalf of
DGNS, executed the Mountainside Realty Operating Agreement (MRL
agreement). In the MRL agreement, DGNS and A3I agreed to share all capital
contributions, profits, and surplus related to MRL. Concerning profits, the MRL
agreement stated that all profits were to be shared according to the percentage
of interest each member owned. It also specified that "[n]o member shall make
any withdrawals from capital without prior approval of [MRL]". Concerning
the maintenance of the financial books and records, "[e]ach of the parties . . .
covenants and agrees to cause all known business transactions pertaining to the
purpose of [MRL], to be entered properly and completely into [the MRL
company] book". The MRL agreement also contained an indemnification
provision which stated that members "shall also indemnify the other members
from any and all claims, demands and actions of every kind and nature
whatsoever which may arise out of or by reason of such violation of any terms
and conditions of [the agreement]."
On January 1, 2007, Mehta signed an employment agreement with
Chemtech to serve as Chemtech's Chief Operating Officer (COO) at an annual
salary of $300,000. Emanuel countersigned the agreement on behalf of
Chemtech as the President. Also on January 1, 2007, Emanuel signed an
A-0385-22 7 employment agreement with Chemtech to serve as company president for
$300,000 annually. Mehta countersigned the agreement on behalf of Chemtech
as the COO.
Seven months later, on July 1, Mehta and Emanuel signed the 2007
Chemtech Shareholder Agreement (CSA), effective July 16. As per the CSA,
Mehta held a fifty-one percent interest in Chemtech and Emanuel held a forty-
nine percent interest. The CSA stated that "[a]ll decisions regarding the
operation of the business of [Chemtech] and the expenditure of the funds thereof
shall be made by majority vote of the Stockholders." The CSA further stated
that Emanuel and Mehta, as shareholders, were directors of Chemtech. The CSA
also stated that each officer of Chemtech "shall also be a Shareholder of
[Chemtech], and that the offices of Chairman of the Board, President, Secretary,
and Treasurer shall only be filled by Stockholders." Emanuel held the title of
President of Chemtech, while Mehta held the title of Secretary.
During this period, Mehta handled lab operations and technical as well as
Minority Business Enterprise compliance at Chemtech, while Emanuel handled
business, marketing, and accounting operations. Emanuel also controlled
Chemtech's major financial records, checkbooks, and QuickBooks accounts.
Chemtech's business and finance affairs were informally managed by Emanuel,
A-0385-22 8 with Mehta involved in certain approvals. Both parties used the same
accountant, Sandy Meyers, who also provided accounting services to the related
business entities.
During 2013 and early 2014, Emanuel proposed a buyout to Mehta,
suggesting that one partner buy out the other's interest in Chemtech,
Mountainside, and related assets. Emanuel presented Mehta with financial
spreadsheets and documents purporting to show valuations for the various
business and real estate assets. The documents showed that Chemtech's value
was $1,192,363.52. By applying a multiplier of three, Emanuel reached a final
valuation of approximately $3.6 million. Mountainside, along with its
subsidiary Cubic, had a total value of about $8.4 million, leading to a total asset
value of $12.1 million dollars. Thus, according to the presented documents,
Metha's total interest in MRL, Chemtech, and Cubic was approximately $5.9
million. During the summer of 2014, Emanuel proposed to buy out Mehta for a
total of $5.6 million, then increased his proposal to $5.7 million. Ultimately,
the offer rose to approximately $6.3 million. The parties did not reach
agreement at that time.
On November 4, 2014, Mehta executed a second employment agreement
with Emanuel, who countersigned the document as the President of Chemtech.
A-0385-22 9 Mehta agreed to work for Chemtech as COO for an additional three years at an
annual salary of $120,000, ending on October 31, 2017.
On December 5, 2014, Gayatri and Emanuel executed a Membership
Interest Purchase Agreement (MIPA) through which DGNS sold its interest in
MRL to A3I for $4,960,000, effective January 1, 2015. Gayatri signed as the
President of DGNS and Emanuel signed as the President of A3I. The MIPA
noted that DGNS and A3I each owned fifty percent of Mountainside, and listed
MRL's subsidiary companies, including Cubic; 29 Cottage; EFJ 240 Prospect,
LLC; EFJ 70 E Passaic LLC; and EFJ 275 Grand, LLC. The sales agreement
listed Mountainside's primary assets as the real estate at 29 Cottage Street, 240
Prospect Avenue, 70 East Passaic Street, 275 Grand Avenue, 724 Undercliff
Avenue in Edgewater, 1151 Glen Avenue in Fort Lee, and 284 Sheffield Street
in Mountainside.
Section 5.5 of the MIPA was entitled "Personal Guaranties." It specified
that A3I, as buyer, "shall indemnify and hold [DGNS] harmless from any claims
made by any of [MRL's] Lenders with respect to such personal guaranties as set
forth in the Indemnification Agreement." In the MIPA, there were
indemnification clauses for both the buyer and the seller. As to indemnification
of DGNS, A3I agreed to:
A-0385-22 10 indemnify and hold harmless [DGNS], and will pay to [DGNS] the amount of any Damages, arising out of, resulting from, or relating to: (a) any material inaccuracy or breach of any representation or warranty of [A3I] contained in this Agreement or in any other document delivered by [A3I] as required by this Agreement; (b) any material breach or violation of the covenants or agreements of [A3I] contained in this Agreement or in any other document delivered by [A3I] as required by this Agreement; (c) one-half of any taxes of [MRL] (but not any personal taxes of [DGNS]) with respect to any tax paid prior to the Effective Date; and (d) one-half of any costs and expense of [MRL] through the Effective Date.
Further, attached to the MIPA was a personal indemnification agreement
signed by Emanuel, President of A3I, as the indemnitor. The purpose of this
Exhibit was to indemnify Mehta and Gayatri in connection with certain monies
A3I planned to borrow from TD Bank and Bank of America to purchase DGNS's
interest in MRL. As to indemnification, Exhibit C stated:
Indemnitors shall jointly and severally defend, indemnify, and hold Indemnitees harmless from and against, and shall pay to Indemnitees the amount of, or reimburse Indemnitees for, any and all obligations, costs, fines, claims, actions, injuries, demands, suits, judgments, settlements, amounts paid, proceedings, investigations, arbitrations and reasonable expenses, including reasonable attorney's fees and expenses, that Indemnitees may suffer, sustain, or become subject to, as a result of, in connection with, or relating to (a) any default or breach on or after the date of this Agreement of the loan documents with [MRL's] lenders or (b) the
A-0385-22 11 personal guarantees of the Indemnitees to [MRL's] lenders.
The indemnification agreement also permitted a claim for reasonable attorney's
fees for the prevailing party in a lawsuit to enforce or interpret the agreement in
addition to other relief that may be awarded by a court. In the assignment of
membership interest, another document attached to the MIPA, Emanuel signed
as the Secretary of A3I. This document appointed Emanuel as the attorney-in-
fact to transfer the membership interest from DGNS to A3I, and it noted that
A3I would then own one hundred percent of Mountainside.
Additionally, on December 5, Emanuel and Mehta signed the 2014 Stock
Purchase Agreement (2014 SPA) through which Mehta sold his interest in
Chemtech to Emanuel. The 2014 SPA assigned fifty-one percent of ownership
to Mehta and forty-nine percent ownership to Emanuel. The purchase price of
Mehta's shares was $740,000. The terms of the agreement called for Mehta to
receive a payment of $400,000 upon signing the SPA, then $300,000 on July 1,
2017, and $40,000 at closing on December 31, 2017. The 2014 SPA stated that
"[a]ll representations and warranties contained in Sections 3.1 [Mehta's
representations and warranties], 3.2 [Emanuel's representations and warranties]
and 4.1 [capitalization] through 4.2 [non-contravention] shall survive the
closing and continue indefinitely".
A-0385-22 12 Further, Section 8.3, entitled "Personal Guarantees," stated:
[Chemtech] and [Emanuel] shall use commercially reasonable efforts to cause all creditors to release [Mehta], on the Closing Date, from any and all personal guaranties of any loans, credit lines or other credit extended to [Chemtech]. Until [Chemtech] and [Emanuel] cause such creditors to release [Mehta] from any such personal guaranties, [Chemtech] and [Emanuel] shall jointly and severally indemnify and hold harmless [Mehta] from and against any and all losses, costs, damages (including incidental and consequential damages), liabilities or expenses (including court costs, reasonable attorney's fees, interest expenses and amounts paid in compromise or settlement), suits, actions, claims, obligations, fines, penalties or assessments (collectively, "Losses") arising out of any such personal guaranties.
The 2014 SPA also contained a personal indemnification from Emanuel
to Mehta. It stated:
[Emanuel] agrees to indemnify and hold harmless [Mehta] from and against any and all Losses incurred by [Mehta] after the date of this Agreement and arising out of, resulting from, or relating to (i) any material inaccuracy or breach of any representation or warranty of [Emanuel] contained in this Agreement, (ii) any material breach or violation of the covenants or agreements of [Emanuel] contained in this Agreement and (iii) any material inaccuracy in any certificate, instrument or other document delivered by [Emanuel] as required by this Agreement.
During the period from 2014 to December 2017, Mehta continued to run
the laboratory side and Emanuel continued to run the financial side of Chemtech.
A-0385-22 13 Before December 31, 2017, the parties changed the terms of the 2014 SPA.
Fariba was substituted for Emanuel as the buyer so that the business could
qualify as a woman-owned business enterprise. This substitution resulted in a
modified SPA (the 2017 SPA), identical in all terms except for the buyer
substitution. Mehta received the payments agreed upon in the SPA and ended
his employment with Chemtech in December 2017 as agreed upon.
In April 2019, Mehta and his wife received a tax deficiency notice, stating
they owed roughly $100,000 to the State of New Jersey (the State) in connection
with DGNS's 2014 sale of its interest in MRL. Mehta retained an accountant,
Hemant Prajapati, to investigate the matter. Prajapati discovered an irregularity
in the 2014 transaction and requested more records. Myers and Emanuel
suggested to Mehta that the delinquent tax notice was a result of an error on the
tax return. They proposed that Mehta recharacterize certain MRL transactions
originally classified as membership interest to asset sales. After Prajapati heard
Myers' and Emanuel's proposal, he became concerned that such a change would
constitute tax fraud. Although Myers sent a letter to the State claiming that a
distribution allocated to DGNS and A3I should have been made solely to A3I,
thereby negating the tax issue, the State did not refund any money to Mehta.
A-0385-22 14 Meanwhile, Emanuel failed to disclose the full financial records for MRL,
Cubic, and VIP despite Mehta's requests. After reviewing limited records for
MRL, Cubic, and VIP, Prajapati determined that there were $2.1 million in
accounting errors. Additionally, Emanuel provided Mehta with limited
Chemtech tax returns. Mehta's review of the Chemtech tax returns showed that
Emanuel never distributed certain retained earnings to him, even though Mehta
paid taxes on them. By fall 2019, Emanuel had not turned over the requested
documentation to Mehta and Prajapati, despite repeated written demands.
On January 17, 2020, having not received all the requested records from
Emanuel, Mehta and DGNS filed a complaint against Emanuel, Fariba,
Chemtech, MRL, and A3I in the Chancery Division. The initial complaint
demanded an accounting, sought damages and restitution, requested a
constructive trust, and alleged conversion, breach of contract, fraud in the
inducement, and breach of the covenant of good faith and fair dealing. After the
complaint was amended, defendants answered, counterclaimed, and filed a
third-party complaint against: Pharmachem Laboratories and Arecon Ltd.,
companies owned by Mehta; Gayatri; and Myers, the accountant.2 On
2 Myers and Pharmachem Laboratories both settled before trial, but neither settlement is included in the record.
A-0385-22 15 September 16, 2021, plaintiffs again amended their complaint to include Cubic,
29 Cottage, VIP, Chemtech LLC, and EFJ Realty as additional defendants.
Plaintiffs alleged that Cubic, 29 Cottage, VIP, Chemtech LLC, and EFJ were
entities owned or controlled by Fariba and Emanuel. Discovery was
contentious, with significant disputes between the parties over access to and
production of financial records.
Prior to trial, the court denied defendants' motion to bar or limit plaintiffs'
expert's testimony. The court granted in part and denied in part defendant's
motion for summary judgment. The trial court granted summary judgment on
the question of whether Mehta was entitled to what he alleged was unpaid
compensation. The court denied summary judgment on other issues, finding
there were genuine issues of material fact on plaintiffs' other claims, including
the fraud claims. The court also denied summary judgment on defendants'
argument that plaintiffs' claims should have been brought derivatively.
C.
The Trial
The bench trial commenced on January 18, 2022, and took place over
twenty-two non-consecutive days, concluding on March 17, 2022. During trial,
the court denied defendants' motion for a directed verdict pursuant to Rule 4:40-
A-0385-22 16 1 and denied plaintiffs' motion to dismiss defendants' counterclaim and third -
party complaint. On June 30, 2022, the court found in favor of plaintiffs.
The court reviewed the record, including witness testimony and exhibits,
and made findings. Among other things, the court found: Emanuel's corporate
role was to run Chemtech and manage the books, while Mehta's corporate role
was as a scientist; that Emanuel engaged in fraudulent activity, which he
attempted to cover up; and that Emanuel did not turn over all the financial data
Mehta requested. The court found plaintiffs' expert Prajapati credible, having
examined potentially thousands of transactions. The court, however , did not
agree with his conclusion that plaintiffs' damages were $10 million. The court
accepted defense expert Henry Fuentes's testimony that it was not proper to sum
all of the problematic transactions up and add them to the purchase price of the
buyout to calculate damages. However, the court rejected Fuentes's remaining
analysis, finding it "cursory." The court found that Fuentes could not explain
how monies ended up in accounts that were controlled by defendants. Rather,
the court found credible and accepted Prajapati's explanation that there were
conduit accounts, commingling, and step transactions that were used to divert
money to defendants without plaintiffs' knowledge.
A-0385-22 17 The court also found instances where Emanuel stated that Mehta was
given money, such as cash from rents associated with MRL, but there was no
documentation supporting that Emanuel had actually paid the money to Mehta.
Also, evidence showed there were conduit accounts which diverted money from
MRL's books, and unauthorized management fees processed through EFJ
Realty. Duplicate payroll expenses were run through Chemtech LLC and other
artificial losses also were attributed to Chemtech LLC. Further, evidence
showed that defendants had diverted money from Chemtech to Chemtech LLC.
The court found many of these transactions troubling and without sound
explanation.
The court identified transactions which the evidence showed represented
diverted income: Chemtech funds diverted to a third-party entity controlled by
Emanuel, followed by a transfer from that same third-party entity to A3I in the
amount of $629,217.85; $2 million diverted from MRL on December 26, 2008,
by Emanuel to his personal account; $500,000 diverted from MRL's account in
November 2013 to a personal account belonging to Emanuel; $75,000 on August
22, 2014, from MRL to A3I; $2.3 million on November 26, 2014, from MRL to
A3I, where Emanuel used MRL funds to buy DGNS's interest in MRL as set
forth on schedule twenty-one of Prajapati's expert report; $50,000 on December
A-0385-22 18 5, 2014, diverted into an account for A3I from Chemtech's line of credit; $50,000
on September 8, 2015 from MRL to an account maintained by Emanuel and
Fariba; $90,000 on October 7, 2015 to an account belonging to Emanuel and
Fariba; $50,000 on October 28, 2015 from Chemtech's account to A3I; and
$106,490 in unauthorized management fees.
For the above transactions the record shows the court found no evidence
that similar distributions went to plaintiffs. The court tallied the diverted
amounts and divided the sum by two, awarding compensatory damages to
plaintiffs in the amount of $2,882,244.85. The court rejected plaintiffs' punitive
damages claim. The court further declined to order an accounting of all entities
in the lawsuit, dismissing counts one and two. The court also declined to place
all of Emanuel's assets into a constructive trust, dismissing counts three and
four. The court dismissed counts nine and ten, because the damages calculation
plaintiffs sought was for the court to add the diverted funds to the purchase price.
The court next found defendants liable under plaintiffs' conversion theory,
determining that defendants engaged in the unauthorized assumption and
exercise of the right of ownership of monies belonging to plaintiffs . The court
rejected defendants' derivative suit argument, finding the facts represented an
exception to the rule that a derivative suit was required, because of the special
A-0385-22 19 relationship between Mehta and Emanuel as corporate officers of a closely held
corporation. The court found that Mehta should have received whatever
Emanuel received from Chemtech, but that did not happen.
The court next found A3I and Fariba breached their obligations under the
MRL Operating Agreement, because Emanuel, as A3I President, made capital
withdrawals from MRL without approval and authorization from plaintiffs.
Plaintiffs received no distribution from funds funneled to A3I and various
accounts shared between Fariba and Emanuel. Concerning the 2017 SPA, the
court found Emanuel used company funds without authorization and failed to
distribute profits. The court also found that plaintiffs proved by a preponderance
of the credible evidence that defendants' actions violated the covenant of good
faith and fair dealing in both contracts.
The court also found plaintiffs met their burden of proof on their unjust
enrichment claim, noting that "Mehta was shortchanged on certain monies." The
court did not award all the damages plaintiffs requested, stating that it
discounted much of the relief plaintiffs requested based on lack of proof. It also
explained that the diverted funds led to an unjust enrichment, plaintiffs had
proven that defendants received a benefit, and the retention of those benefits
was unjust.
A-0385-22 20 The court found the counterclaim and third-party complaint meritless,
finding those actions were brought as retaliation for plaintiffs' lawsuit. The
court also denied defendants' post-trial motion to modify the judgment, again
finding Mehta and Prajapati credible.
The court next found defendants were jointly and severally liable in the
amount of $2,882,244.25 on the theories of conversion, breach of contract,
breach of the covenant of good faith and fair dealing, and unjust enrichment.
However, the court rejected plaintiffs' fraud claim and their demand for an
accounting, constructive trust, and punitive damages. The court also dismissed
defendants' counterclaim and third-party complaint. 3
On September 14, the court entered judgment in the amount of
$4,258,878.69 against defendants. On September 19, the court granted in part
and denied in part defendants' motions for reconsideration and a stay. The court
modified plaintiffs' damages award to $2,872,358.93 and stayed execution of
the final judgment pending appeal.
The Chemtech defendants and Fariba appealed, and plaintiffs cross-
appealed.
3 Defendants did not appeal the dismissal of the counterclaim and third-party complaint. A-0385-22 21 II.
When reviewing an order granting summary judgment, we use the same
standard as the trial court. Sackman Enters., Inc. v. Mayor & Council of Belmar,
478 N.J. Super. 68, 75 (App. Div. 2024). Pursuant to Rule 4:46-2(c), summary
judgment should be granted if "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." A court views the evidence in the light most favorable to the
non-moving party to determine whether a genuine issue of material fact exists.
Alloco v. Ocean Beach & Bay Club, 456 N.J. Super. 124, 134 (App. Div. 2018)
(citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535, 540 (1995)).
The inquiry posed by the court is "whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law." Funtown Pier Amusements, Inc. v.
Biscayne Ice Cream, 477 N.J. Super. 499, 511 (App. Div. 2024) (quoting Brill,
142 N.J. at 536). If the court determines that no genuine issue of material fact
exists, then the reviewing court's inquiry is whether the trial court correctly
interpreted the law. Dickson v. Cmty. Bus Lines, 458 N.J. Super. 522, 530 (App.
Div. 2019). The trial court's legal conclusions are reviewed by the reviewing
A-0385-22 22 court pursuant to a de novo standard. Est. of Hanges v. Metro. Prop. & Cas. Ins.
Co., 202 N.J. 369, 385 (2010).
We apply an abuse of discretion standard when we consider whether a trial
court properly determined if a plaintiff could pursue a lawsuit as a direct action
instead of a derivative action. Brown v. Brown, 323 N.J. Super. 30, 36 (App.
Div. 1999). A trial court's decision should be affirmed when it makes a
reasonable determination based on the record below. Wadlow v. Wadlow, 200
N.J. Super. 372, 382 (App. Div. 1985).
What's more, in a non-jury case, we should not disturb the findings of the
trial judge unless they are "so wholly insupportable as to result in a denial of
justice." Jecker v. Hidden Valley, Inc., 422 N.J. Super. 155, 163 (App. Div.
2011) (quoting Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 65 N.J. 474,
483-84 (1974)). Specifically, factual conclusions should not be overturned
unless "'they are so manifestly unsupported by or inconsistent with the
competent, relevant and reasonably credible evidence as to offend the interests
of justice[.]'" Ibid. (quoting Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J.
150, 169 (2011)).
At the appellate level, "[i]nterpretation and construction of a contract is a
matter of law for the court subject to de novo review." Steele v. Steele, 467 N.J.
A-0385-22 23 Super. 414, 440 (App. Div. 2021) (quoting Fastenberg v. Prudential Ins. Co.,
309 N.J. Super. 415, 420 (App. Div. 1998)). We decide such purely legal
questions without deferring to a lower court's "interpretation of the law and the
legal consequences that flow from established facts." Camden City Bd. of Educ.
v. McGreevey, 369 N.J. Super. 592, 604 (App. Div. 2004) (quoting Manalapan
Realty, LP v. Twp. Comm., 140 N.J. 366, 378 (1995)); see also Zaman v. Felton,
219 N.J. 199, 216 (2014).
Finally, we note, "[a] Chancery judge has broad discretion 'to adapt
equitable remedies to the particular circumstances of a given case.'" Tarta Luna
Props., LLC v. Harvest Rest. Grp., LLC, 466 N.J. Super. 137, 153 (App. Div.
2021) (quoting Marioni v. Roxy Garments Delivery Co., 417 N.J. Super. 269,
275 (App. Div. 2010)).
III.
In A-386-22, Fariba argues that the court erred because plaintiffs could
not establish that they suffered a special injury in relation to their conversion
claims and, thus, those claims should have been dismissed for a lack of
derivative standing, either on summary judgment or at trial. We are
unpersuaded.
A-0385-22 24 When a shareholder sues to remedy corporate injuries, the action is in the
form of a shareholder derivative action. Strasenburgh v. Straubmuller, 146 N.J.
527, 548-49 (1996).
A shareholder derivative action is a unique and anomalous legal remedy. "The purpose of the derivative action was to place in the hands of the individual shareholder a means to protect the interests of the corporation from the misfeasance and malfeasance of 'faithless directors and managers.'" Kamen v. Kemper Financial Svcs., Inc., 500 U.S. 90, 95 (1991) (quoting Cohen v. Beneficial Loan Corp., 337 U.S. 541, 548 (1949)). The action functions as both a sword and a shield to directors. It is a sword in the hands of shareholders, yet it shields directors from direct shareholder actions for certain injuries.
[Ibid.]
Shareholders can use a derivative action if they suspect that the
corporation's management is behaving improperly or against the corporation's
interests. Ibid. However, a shareholder may bring a direct action when claiming
a special injury—a wrong not shared by other shareholders or that affects the
plaintiffs' contractual rights. Tully v. Mirz, 457 N.J. Super. 114, 124 (App. Div.
2018). It is easier for shareholders of closely held companies to demonstrate a
special injury and file a direct claim. See Mullenberg v. Bikon Corp., 143 N.J.
168, 181 (1996) (explaining that shareholders of closely held companies owe
fiduciary duties to both the company and other shareholders).
A-0385-22 25 The record supports the court's conclusion that plaintiffs were permitted
to bring a direct action instead of a shareholder derivative action. The evidence
adduced demonstrated that Emanuel, on behalf of Chemtech, A3I, and Fariba,
misappropriated funds, altered financial records, provided plaintiffs with
business records that inaccurately portrayed company value, inflated corporate
liabilities, and diverted money to entities that only he and Fariba controlled.
Fariba executed the 2017 SPA through which she purchased Mehta's shares at a
lower value than they were worth. Further, A3I, a company where Fariba was
the sole shareholder, contracted with DGNS to purchase DGNS's share of MRL.
Because plaintiffs met their burden to show that defendants violated their
fiduciary duties, it follows that the court did not abuse its discretion when it
concluded that plaintiffs suffered a special injury and had standing to pursue a
direct claim.
When a corporation is closely held, our courts have the discretion to
characterize a derivative cause of action as a direct claim if such action will not
expose the defendants to several actions, materially prejudice the interests of
creditors of the corporation, or interfere with the distribution of recovery. Tully,
457 N.J. Super. at 125. The record shows this was the case here, as the direct
action limited the number of suits that could have been pursued. Importantly,
A-0385-22 26 all the parties included in the direct suit included every interested individual and
entity, allowing recovery to be efficient.
Finally, we note that in closely held corporations, it is permissible to
depart from the standard derivative suit norms and focus on the actual
relationships of the principal shareholders. We have applied this reasoning in
Brown, where this court waived the usual derivative standing rules in a situation
involving a closely held corporation. 323 N.J. Super. at 35. In Brown, we stated
that when a cause of action presents a claim of corporate injury, the policy
behind requiring a derivative action is less applicable if a closely held entity is
involved. Id. at 37. In a derivative action, the corporation is under the control
of the individuals who would have been defendants in the direct action. Id. at
37-38. This rationale applies here, as Chemtech was controlled only by Mehta
and Emanuel, while A3I was solely controlled by Fariba.
We defer4 to the trial court’s supported factual findings and conclude it
correctly found that plaintiffs suffered a special injury, enabling the direct claim
exception to the derivative suit requirement.
4 "Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility" because of the "trial court's opportunity to hear and see the witnesses who testified on the stand." Balducci v. Cige, 240 N.J. 574, 594-95 (2020) (first quoting Cesare v. Cesare, 154 N.J. 394, 412 (1998); and then citing State v. Elders, 192 N.J. 224, 244 (2007)). A-0385-22 27 B.
Fariba and the Chemtech defendants contend that the court erred when it
determined that they were liable for conversion. Fariba alleges that plaintiffs'
failure to demand the return of the property was fatal to their claim and, also,
that the court's finding of liability was unsupported by the evidence. The
Chemtech defendants state that: plaintiffs failed to prove that the money
belonged to them and was identifiable; plaintiffs failed to demand the return of
the property; and the economic loss doctrine prohibited plaintiffs' recovery. We
are unconvinced.
The court determined that Fariba and the Chemtech defendants were liable
to plaintiffs on the conversion claims. It analyzed the questionable transactions
step-by-step and examined the diversions, finding a maze of records that made
it difficult for anyone to track the missing funds. It found that Emanuel
controlled the money, created multiple accounts to divert funds, and then altered
the financial records to prevent detection. The court recognized that defendants
were comingling money and placing it into conduit accounts, including the
personal accounts of Emanuel and Fariba. The court cited several transactions
which tended to prove that conversion occurred. Finally, the court noted that
A-0385-22 28 Fariba and Emanuel had a special relationship with plaintiffs because they were
officers.
Fariba and the Chemtech defendants both argue that plaintiffs' conversion
claim fails because they did not make a pre-suit demand for the return of the
property, but the argument fails. These arguments were not raised below, and
we need not consider the argument that a party failed to prove an element of a
cause of action for the first time on appeal. See Liebling v. Garden State
Indemnity, 337 N.J. Super. 447, 465 (App. Div. 2001); see also Nieder v. Royal
Indem. Ins. Co., 62 N.J. 229, 234 (1973); Pressler & Verniero, Current N.J.
Court Rules, cmt. 3 on R. 2:6-2 (2025). While we are not required to consider
these arguments, for completeness' sake, we comment briefly. The record shows
Emanuel resisted requests from plaintiffs to turn over the relevant financial
books and records during discovery and prior to trial. Given the evidence
adduced at trial, we conclude plaintiffs' pre-suit demand requirement would
have been futile. As to the Chemtech defendants' argument that plaintiffs failed
to demand a return of the property, the record shows defendants designed an
elaborate scheme to conceal their conversion of money from plaintiffs,
continuing their efforts even after plaintiff received the tax delinquency notice.
A-0385-22 29 Ultimately, Emanuel only turned over limited records. It follows that any
demand from plaintiffs would have been futile.
Defendants also argue that plaintiffs failed to prove that the money
belonged to them and was identifiable. We disagree, as the court found
Prajapati's testimony credible. At trial, Emanuel could not explain where certain
money went or, concerning traceable money, why it was deposited into his
personal accounts. The record shows that the nine transactions the court relied
upon when calculating damages were identifiable, the money was deposited into
accounts controlled by Emanuel and Fariba, and plaintiffs did not receive similar
amounts in the form of distributions. Moreover, the court repeatedly found that
the web of transactions was so complex that it prevented the money from being
accurately tracked. In instances where the money could not be traced to
Emanuel's and Fariba's accounts, the court did not include those transactions in
the damage calculation. Concerning the ultimate location of the money, in
Charles Bloom & Co. v. Echo Jewelers, we recognized that a party which
accepts responsibility for property should have the burden of producing
evidence as to the fate of those goods because "[t]o hold otherwise would place
an impossible burden on plaintiff." 279 N.J. Super. 372, 381 (App. Div. 1995).
A-0385-22 30 Finally, we are not persuaded that the economic loss doctrine precludes
plaintiffs' recovery under a conversion theory. In Saltiel v. GSI Consultants,
Inc., the Court held that the economic loss doctrine precludes the tort liability
of parties when the relationship between them is based on a contract, "unless the
breaching party owes an independent duty imposed by law." 170 N.J. 297, 316-
17 (2002). Here, Emanuel was the President of Chemtech, and he owed duties
to Mehta outside of the Chemtech Shareholders Agreement. Emanuel was also
the President of A3I. Similarly, Fariba owned A3I, and she owed shareholder
duties to DGNS as a fifty percent owner of MRL, outside of duties owed by A3I
to MRL. Moreover, the court heard testimony that Emanuel controlled the other
entities, namely Chemtech LLC, Cubic, EFJ Realty, 29 Cottage, and VIP, to his
own advantage to divert money into accounts that he shared with Fariba. Thus,
a special relationship existed to allow plaintiffs to obtain relief greater than what
was allowed under the terms of the various contracts including the MRL
Operating Agreement, the Chemtech Shareholder Agreement, and the MIPA. 5
The court correctly found that DGNS's claim for conversion against MRL, A3I,
Emanuel, Fariba, Chemtech LLC, Cubic, EFJ Realty, and VIP was successful.
5 Explained in more detail below, the court did not allow for a double recovery on the disputed transactions. A-0385-22 31 Likewise, Mehta's claim for conversion against Emanuel, Chemtech, Chemtech
LLC, Cubic, EFJ Realty, and VIP succeeded.
We conclude that there is more than adequate support in the record to
support the court's determination that defendants were liable for conversion.
There is no indication that the holding was manifestly unsupported by adequate,
competent evidence. Plaintiffs proved that the money belonged to them and
defendants exercised dominion over it. Any alleged failure of plaintiffs to
demand the return of the property could not have precluded liability, because
such a demand would have been futile. We discern no error by the trial court
on the conversion issue.
Fariba and the Chemtech defendants argue that the court erred when it
determined that they were liable for breach of contract. Fariba and the Chemtech
defendants contend that Fariba was not a party to the contracts cited by the court
and that the court's holding was unsupported by the evidence. As to Emanuel,
the Chemtech defendants claim that he was not a party to the MRL Operating
Agreement. The Chemtech defendants also contend that the record only
supports finding that Emanuel engaged in "sloppy bookkeeping." We disagree.
A-0385-22 32 A basic principle of contract construction is to determine the intent of the
parties based on the language in the instrument. Karl's Sales & Serv., Inc. v.
Gimbel Bros., 249 N.J. Super. 487, 492 (App. Div. 1991). When the provisions
of a contract are unambiguous, they should be enforced by the court as they are
written. Id. at 493. "The plain language of the contract is the cornerstone of the
interpretive inquiry; 'when the intent of the parties is plain and the language is
clear and unambiguous, a court must enforce the agreement as written, unless
doing so would lead to an absurd result.'" Barila v. Bd. of Educ. of Cliffside
Park, 241 N.J. 595, 616 (2020) (quoting Quinn v. Quinn, 225 N.J. 34, 45 (2016)).
"In a word, the judicial interpretive function is to consider what was written in
the context of the circumstances under which it was written, and [then] accord
to the language a rational meaning in keeping with the express general purpose."
Ibid. (quoting Owens v. Press Pub. Co., 20 N.J. 537, 543 (1956)).
A breach of contract claim requires a plaintiff to prove four elements by
a preponderance of the evidence:
first, that "[t]he parties entered into a contract containing certain terms"; second, that "plaintiff[s] did what the contract required [them] to do"; third, that "defendant[s] did not do what the contract required [them] to do[,]" defined as a "breach of the contract"; and fourth, that "defendant[s'] breach, or failure to do what the contract required, caused a loss to the plaintiff[s]."
A-0385-22 33 [Globe Motor Co. v. Igdalev, 225 N.J. 469, 482 (2016) (citing Model Jury Charge (Civil), 4.10A "The Contract Claim—Generally" (approved May 1998)).]
Regarding damages, "[a] breaching party is 'liable for all of the natural
and probable consequences of the breach of [the] contract.'" Woytas v.
Greenwood Tree Experts, Inc., 237 N.J. 501, 512 (2019) (quoting Pickett v.
Lloyd's, 131 N.J. 457, 474 (1993)). Compensatory damages for breach of
contract are designed to place the injured party in as good a monetary position
as the injured party would have been if the contract had been performed as
promised. Totaro, Duffy, Cannova & Co. v. Lane, Middleton & Co., 191 N.J.
1, 12-13 (2007). The monetary position in question depends on what the parties
reasonably expected at the time they made the contract. Id. at 14. While the
loss must be reasonably certain, the exact amount of the loss need not be certain.
Ibid. (quoting Donovan v. Bachstadt, 91 N.J. 434, 445 (1982)).
The determination as to whether a contract was breached concerns
questions of fact, which are reviewed pursuant to a deferential standard. Magnet
Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 285-86 (App. Div. 1998).
Whether a contract was breached and whether the breach was material are
ordinarily questions of fact for the jury. Id. at 286. A "material breach" of a
contract is defined as "a single occurrence or consistent recurrences which tend
A-0385-22 34 to defeat the purpose of the contract." Ibid. (quoting Medivox Productions, Inc.
v. Hoffmann-La Roche, Inc., 107 N.J. Super. 47, 59 (Law Div.1969)) (internal
quotation marks omitted).
The trial court found that defendants breached the MRL Operating
Agreement and the Chemtech Stockholders Agreement. Concerning the MRL
Operating Agreement, the court determined that Fariba, A3I, and Emanuel, as
the President of A3I, breached their contractual obligations. The court stated
that plaintiffs did not approve of withdrawals of capital from MRL by Emanuel,
were not able to share in the profits, and did not get distributions . The court
explained Fariba became part of the case when MRL became a minority-owned
business in 2017. It found there was a special relationship between Mehta and
Emanuel because there was a contractual duty between them created by the
Chemtech Stockholders Agreement. Additionally, the 2007 Chemtech
Stockholders Agreement stated that a shareholder vote was required to execute
an expenditure of funds.
The record shows that Emanuel diverted funds to accounts that he owned
with Fariba and that equal distributions were not made to plaintiffs. Emanuel
and Chemtech were liable to Mehta for breach of contract under the terms of the
Chemtech Shareholder Agreement, which stated that "[a]ll decisions regarding
A-0385-22 35 the operation of the business of [Chemtech] and the expenditure of the funds
thereof shall be made by majority vote of the Stockholders[.]" Credible
evidence shows that Emanuel diverted money through a complex maze of
accounts to prevent detection by Mehta. There was no evidence in the record to
prove these monies were approved by a vote or that Mehta was aware of the
transactions until after he received the tax notice from the State. It follows that
plaintiffs proved that Emanuel was using company funds without authorization
and failed to distribute profits in violation of the Chemtech Stockholder's
Agreement.
Likewise, MRL and A3I, both owned by Fariba and controlled by
Emanuel, were liable for breach of contract to DGNS under the terms of the
MRL Operating Agreement that was signed by Fariba. The MRL Operating
Agreement stated that "[n]o member shall make any withdrawals from capital
without prior approval of [MRL]." In addition, it stated "[e]ach of the parties to
this agreement hereby covenants and agrees to cause all known business
transactions pertaining to the purpose of [MRL], to be entered properly and
completely into [the MRL company] book[.]" The MRL Operating Agreement
was breached because the record demonstrates that Emanuel controlled MRL
and A3I, and then used those entities to divert funds to accounts that he shared
A-0385-22 36 with Fariba. Also, the MRL Operating Agreement allows for DGNS to obtain
damages from Fariba and A3I. Fariba, on behalf of A3I, indemnified DGNS
against "any and all claims, demands and actions of every kind and nature
whatsoever which may arise out of or by reason of such violation of any terms
and conditions of" the MRL Operating Agreement.
In addition to those two contracts, there was additional language in the
MIPA to hold Emanuel liable for breach of contract, as he executed the
document on behalf of A3I as the President of A3I. The terms of the MIPA
stated that A3I agreed to pay DGNS "any" damages stemming from "any
material inaccuracy or breach of any representation or warranty," material
inaccuracies "in any other document delivered by Buyer," and "any material
breach or violation of the covenants or agreements." Again, A3I was owned b y
Fariba and controlled by Emanuel, who signed the MIPA. Thus, there is
evidence in the record that MRL and A3I violated the MIPA and were liable to
DGNS for damages.
The 2017 SPA contains language to hold Fariba liable for breach of
contract. The 2017 SPA signed by Fariba and Mehta stated that Fariba agreed
to indemnify Mehta for "any and all" losses arising out of material inaccuracies
or breaches of any representation or warranty, any material breach or violation
A-0385-22 37 of the covenants or agreements, and any material inaccuracy in any certificate,
instrument or other documents. The record reflects that Emanuel, who
controlled the financial mechanics and documents for Chemtech, diverted funds
to accounts and entities controlled by himself and Fariba. Thus, there was
evidence in the record that Fariba violated the 2017 SPA and is liable to Mehta
for damages. Notably, Emanuel also executed the 2014 SPA, which contained
similar breach and indemnification terms as the 2017 SPA.
In sum, the ample record supports the trial court's findings that MRL, A3I,
Chemtech, Fariba, and Emanuel were liable for breach of contract to Mehta and
DGNS. We discern no reason to contradict those findings.
D.
Fariba and the Chemtech defendants contend that the court erred when it
held they were liable for breaching the covenant of good faith and fair dealing
because there was no support in the record to sustain that finding. We disagree.
"The implied covenant of good faith and fair dealing requires the 'parties
to a contract to refrain from doing "anything which will have the effect of
destroying or injuring the right of the other party to receive" the benefits of the
contract.'" Comprehensive Neurosurgical, P.C. v. Valley Hosp., 257 N.J. 33, 63
(2024) (quoting Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr.
A-0385-22 38 Assocs., 182 N.J. 210, 224 (2005)). "Although proof of bad motive or intention
is vital to the claim, such proof is not enough on its own. Rather, a plaintiff
must demonstrate that the defendant's alleged misdeeds prevented the plaintiff
from enjoying the full benefit of the terms of a particular bargain." Ibid.
(citation omitted) (internal quotation marks omitted). Bad faith is determined
by the trier of fact based upon proofs of the breaching party's state of mind and
the surrounding circumstances. Seidenberg v. Summit Bank, 348 N.J. Super.
243, 263 (App. Div. 2002).
We review the same portion of the record that applies to the breach of
contract analysis. There is evidence that MRL and A3I violated the MRL
Operating Agreement and, also, that Emanuel and Chemtech violated the
Chemtech Shareholders Agreement and both SPAs. Again, the MRL Operating
Agreement contained an indemnification provision that stated that A3I and MRL
were liable to DGNS for any material breaches or violations of any covenants
in the MIPA. Also, the 2014 SPA signed by Emanuel and 2017 SPA signed by
Fariba contained indemnification provisions for any material breaches of
violations of the covenants in each SPA. As to the 2014 SPA, the record shows
that Emanuel breached the covenant of good faith and fair dealing when he
A-0385-22 39 falsified data. Indeed, Emanuel relied on the same falsified documents at the
time Fariba executed the 2017 SPA with Mehta.
The court accepted as credible Prajapati's testimony that Emanuel diverted
money to outside accounts under his and Fariba's control. The court found the
record showed that Emanuel intended those diversions to be kept from plaintiffs
to their detriment. There was evidence in the record that Emanuel moved money
between the various accounts through conduit accounts, commingled monies,
and step-transactions. Emanuel could not explain at trial why the diverted
monies ended up in his personal accounts that he shared with Fariba.
In sum, there is ample credible evidence in the record to support the trial
court's finding that plaintiffs had proven that Emanuel, Fariba, Chemtech, MRL,
and A3I violated the covenant of good faith and fair dealing inherent in the
various contracts that they executed. Its conclusions are not so manifestly
unsupported by the record that affirmance would constitute a denial of justice.
E.
Fariba and the Chemtech defendants argue that the court erred when it
held that they were liable for unjust enrichment because there was no support in
the record to sustain that conclusion. We are unconvinced.
A-0385-22 40 "A cause of action for unjust enrichment requires proof that a defendant
received a benefit and that retention of that benefit without payment would be
unjust." Inv'rs Bank v. Torres, 457 N.J. Super. 53, 62 (App. Div. 2018) (quoting
Cty. of Essex v. First Union Nat'l Bank, 373 N.J. Super. 543, 549-50 (App. Div.
2004)). A party can be unjustly enriched even if there is no contract between
the parties. Insulation Contractor & Supply v. Kravco, Inc., 209 N.J. Super.
367, 376 n.4 (App. Div. 1986) ("Restitution and unjust enrichment are both
quasi-contractual in nature." (italicization omitted)). That said, "[b]ecause
unjust enrichment is an equitable remedy resorted to only when there was no
express contract providing for remuneration, a plaintiff may recover on one or
the other theory, but not both." Caputo v. Nice-Pak Prods., Inc., 300 N.J. Super.
498, 507 (App. Div. 1997).
As a threshold matter, once the trial court found breach of contract,
plaintiffs could not recover again for the same losses on a theory of unjust
enrichment. Caputo, 300 N.J. Super. at 507. However, the court did not award
double damages for the contract claims and the unjust enrichment claims.
Rather, the court discounted millions of dollars of transactions that Prajapati
claimed were improper because the money could not be traced. The final
A-0385-22 41 compensatory damages award was one lump sum based on the tally of monies
that were both diverted and traceable.
There is ample, credible evidence in the record to support the trial court's
conclusion that Fariba and the Chemtech defendants received a benefit by taking
unauthorized monies from Chemtech and MRL and, also, that the retention of
those monies was unjust. The limited bookkeeping obtained by plaintiffs in
discovery led Prajapati to conclude that the monies were inappropriately taken.
The court found that Prajapati's testimony was credible in this regard. It further
reviewed Prajapati's written report and schedules when it isolated only the
transactions where Emanuel clearly diverted money and did not make a similar
disbursement to plaintiffs. Critically, there was a special relationship between
the parties that exceeded their contractual obligations. Emanuel was the
President of Chemtech and A3I. Further, the record showed that Emanuel used
other entities that he controlled to facilitate his diversion of money, including
Chemtech LLC, Cubic, EFJ Realty and VIP. Meanwhile, Fariba was the sole
shareholder of A3I and, after the MIPA was executed, was the sole shareholder
of MRL.
We conclude the court did not err when it found Emanuel, Chemtech,
Chemtech LLC, Cubic, EFJ Realty and VIP were liable to Mehta and, also,
A-0385-22 42 MRL, A3I, Emanuel, Fariba, Chemtech LLC, Cubic, EFJ Realty, and VIP were
liable to DGNS for unjust enrichment. The court's factual findings were not so
"clearly mistaken" or "wide of the mark" to require the panel to interfere to
prevent a denial of justice. See N.J. Div. of Youth & Fam. Servs. v. E.P., 196
N.J. 88, 104 (2008).
F.
Fariba and the Chemtech defendants contend that the court's reliance on
transactions that occurred more than six years before the complaint was filed
produced an unjust result. Also, Fariba and the Chemtech defendants argue that
the claims for conversion, breach of the covenant of good faith and fair dealing,
and unjust enrichment were all barred by the six-year statute of limitations. We
are again unpersuaded.
Notably, "[t]he primary purpose of the statute of limitations is to provide
defendants a fair opportunity to defend and to prevent plaintiffs from litigating
stale claims." W.V. Pangborne & Co. v. N.J. Dep't of Transp., 116 N.J. 543,
563 (1989). A statute of limitations promotes those purposes by preventing a
plaintiff from filing those causes of action after the statutory period has expired.
O'Keeffe v. Snyder, 83 N.J. 478, 491 (1980). "However, where defendants are
on notice of the claims, and no significant prejudice results, the policy reasons
A-0385-22 43 for upholding a strict statute of limitations recede." W.V. Pangborne, 116 N.J.
at 563.
Additionally, we have recognized that the statute of limitations is tolled
until the plaintiff discovers or should have discovered by an exercise of
reasonable diligence, that he or she has an actionable claim. Catena v. Raytheon
Co., 447 N.J. Super. 43, 52 (App. Div. 2016). "Under the [discovery] rule, a
claim does not accrue until the plaintiff 'discovers, or by an exercise of
reasonable diligence and intelligence should have discovered that he may have
a basis for an actionable claim.'" Ibid. (quoting Lopez v. Swyer, 62 N.J. 267,
272 (1973)). While this rule does not generally apply for matters involving a
breach of contract, it can apply in cases involving misrepresentation. Cty. of
Morris v. Fauver, 153 N.J. 80, 110 (1998) (citing Gibbons v. Kosuga, 121 N.J.
Super. 252 (Law Div. 1972)). Under the doctrine of fraudulent concealment,
the statute of limitations can be tolled when a defendant engages in unintentional
or intentional fraud or concealment. Trinity Church v. Lawson-Bell, 394 N.J.
Super. 159, 168 (App. Div. 2007).
Review "of a trial judge's decision as to the applicable statute of
limitations is plenary and de novo." Psak, Graziano, Piasecki & Whitelaw v.
Fleet Nat'l Bank, 390 N.J. Super. 199, 203 (App. Div. 2007). Furthermore, a
A-0385-22 44 reviewing court may only reverse on an issue not raised below if the trial court
committed plain error. Johnson v. Benjamin Moore & Co., 347 N.J. Super. 71,
97 (App. Div. 2002).
On December 20, 2021, during oral argument on defendants' motion for
summary judgment, defendants argued that the statute of limitations applied to
bar plaintiffs' claim for unpaid compensation because it stemmed from a 2007
employment agreement. The court dismissed the unpaid compensation claim
due to the expiration of the statute of limitations. On June 30, 2022, when the
court rendered its decision, it recognized that, "[a]s far as any kind of statute of
limitations claim, on the discovery rule, when you find something out,
conversion has a six-year statute of limitation, as do[] the contract claims[.]" At
the time of this statement, neither Fariba nor the Chemtech defendants objected
to the court's conclusion or argued that any of the remaining claims were barred
by the statute of limitations.
Here, Fariba and the Chemtech defendants argue that seven transactions
dated prior to the filing of plaintiffs' initial complaint on January 20, 2020, were
wrongfully included in the court's computation of the judgment. Further, Fariba
and the Chemtech defendants claim that the court was on notice that they
A-0385-22 45 intended to challenge the claims as being untimely because they pled a statute
of limitations affirmative defense in their answer.
However, the record reflects that Fariba and the Chemtech defendants
only raised the statute of limitations argument as to Mehta's unpaid
compensation claim, which was dismissed on summary judgment. There is no
evidence that Fariba and the Chemtech defendants later argued, and proved by
a preponderance of the evidence, that the affirmative statute of limitations
defense applied to the remaining claims. A defendant's failure to assert a statute
of limitations defense during the proceedings waives the defense, even if was
pled in the answer. See Williams v. Bell Tel. Labs. Inc., 132 N.J. 109, 118-20
(1993). As a result, the statute of limitations defense was waived below. Thus,
their failure to assert a statute of limitations defense during the proceedings
waives the defense, even though Fariba and the Chemtech defendants pled it in
their answer.
G.
Fariba and the Chemtech defendants argue that the court erred in
permitting plaintiffs' expert to present net opinion testimony at trial . We
disagree.
A-0385-22 46 Under N.J.R.E. 703, an expert's opinion must be "grounded in 'facts or
data derived from (1) the expert's personal observations, or (2) evidence
admitted at the trial, or (3) data relied upon by the expert, which is not
necessarily admissible in evidence, but which is the type of data normally relied
upon by experts.'" Townsend v. Pierre, 221 N.J. 36, 53 (2015) (quoting Polzo
v. Cnty of Essex, 196 N.J. 569, 583 (2008)).
"The net opinion rule is a 'corollary of [N.J.R.E. 703] . . . which forbids
the admission into evidence of an expert's conclusions that are not supported by
factual evidence or other data.'" Id. at 53-54 (quoting Polzo, 196 N.J. at 583).
The rule "mandates that experts 'be able to identify the factual bases for their
conclusions, explain their methodology, and demonstrate that both the factual
bases and the methodology are reliable.'" Id. at 55 (quoting Landrigan v.
Celotex Corp., 127 N.J. 404, 417 (1992)).
"An expert's conclusion is excluded if it is based merely on unfounded
speculation and unquantified possibilities." Ibid. (quoting Grzanka v. Pfeifer,
301 N.J. Super. 563, 580 (App. Div. 1997)) (internal quotation marks omitted).
Medical-opinion testimony concerning the cause of an injury "'must be couched
in terms of reasonable medical certainty or probability; opinions as to possibility
are inadmissible.'" State v. Freeman, 223 N.J. Super. 92, 116 (App. Div. 1988)
A-0385-22 47 (quoting Johnesee v. Stop & Shop Cos., Inc., 174 N.J. Super. 426, 431 (App.
Div. 1980)). "[A]n expert offers an inadmissible net opinion if he or she cannot
offer objective support for his or her opinions but testifies only to a view about
a standard that is personal." Davis v. Brickman Landscaping, Ltd., 219 N.J. 395,
410 (2014) (quoting Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344,
373 (2011)) (internal quotation marks omitted). Expert opinion must be
excluded if it is based merely on unfounded speculation and unquantified
possibilities. Grzanka, 301 N.J. at 580. An expert's opinion that fails to address
facts in the record that directly contradict the expert’s conclusions should be
barred as a net opinion. Smith v. Est. of Kelly, 343 N.J. Super 480, 497 (App.
Div. 2001).
On December 20, 2021, the court denied Fariba's and the Chemtech
defendants' motions to preclude net opinions in relation to Prajapati's upcoming
trial testimony. The court explained that any objections to Prajapati's testimony
could be challenged in voir dire or through objections because it was premature
to exclude the testimony without considering a full record .
At trial, Fariba and the Chemtech defendants questioned Prajapati through
voir dire and challenged his qualifications as a forensic accountant. The court
accepted Prajapati as an expert in forensic accounting, explained that any
A-0385-22 48 questions as to Prajapati's experience pertained to the weight of the testimony,
and found that the testimony would assist the trier of fact.
The court found Prajapati credible, but did not agree with his conclusion
that the damages totaled $10 million. It recognized that numerous funds could
not be traced, so it was unclear how the value of the companies would have been
affected. Thus, Prajapati's decision to add the questionable transactions to the
purchase price was not a proper valuation of the companies. However, the court
found that Prajapati's testimony was credible as to the existence of conduit
accounts, step transactions, diverted monies, unauthorized management fees,
duplicable expenses, and commingled funds. It identified certain transactions
isolated by Prajapati, where the funds could be traced to Emanuel's and Fariba's
account, when computing damages.
Concerning the challenges to Prajapati's testimony, the court was
measured about what it allowed, sustaining some of Emanuel's counsel's
objections and overruling others. It allowed Prajapati to explain the basis for
his reasoning while also sustaining objections and giving less weight to
Prajapati's claims that were unsupported by evidence. Likewise, the court
rejected Prajapati's statements about the value of the business because Prajapati
did not perform a business valuation.
A-0385-22 49 At trial, Prajapati explained his methodology for determining that the data
in certain exhibits was altered. He explained that he reviewed tax returns and
compared those to the data in QuickBooks to determine that the financial books
did not match the tax returns. He explained how he concluded that various
accounts lacked important details, funds were commingled, and that the balances
in the accounts did not match when compared to other records. What is more,
he discovered fake accounts and duplicate expenses that created a web of
transactions that allowed Emanuel to divert funds. While he admitted that he
did not perform a business valuation, he concluded that plaintiffs suffered nearly
$10 million in damages. The trial court accepted Prajapati's conclusion about
transactions where the monies could be traced back to accounts that Emanuel
and Fariba controlled.
In sum, Prajapati did not offer a net opinion at trial and the court's decision
to deny defendants' motion to exclude his testimony was proper. The record
shows no abuse of discretion here.
H.
Fariba and the Chemtech defendants argue that the court erred as a matter
of law and, also, abused its discretion when it awarded plaintiffs' attorney's fees
and costs. We affirm the trial court's order.
A-0385-22 50 "Trial courts have considerable latitude in resolving fee applications, and
a reviewing court will not set aside an award of attorneys' fees except 'on the
rarest occasions, and then only because of a clear abuse of discretion.'" Grow
Co. v. Chokshi, 424 N.J. Super. 357, 367 (App. Div. 2012) (quoting Rendine v.
Pantzer, 141 N.J. 292, 317 (1995)). "[A] trial court must analyze the Rendine
factors in determining an award of reasonable counsel fees and then must state
its reasons on the record for awarding a particular fee." Furst v. Einstein
Moomjy, Inc., 182 N.J. 1, 21 (2004) (citing R. 1:7-4(a)). We reverse a fee
determination if it was "made without a rational explanation, inexplicably
departed from established policies, or rested on an impermissible basis." C.E.
v. Elizabeth Pub. Sch. Dist., 472 N.J. Super. 253, 262 (App. Div. 2022). To
determine whether a fee award is reasonable, the lawsuit must be causally
related to securing the relief obtained, the prevailing party's efforts must be
necessary, and the prevailing party's efforts must be an important factor in
obtaining the relief. Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 386
(2009).
In granting an award of attorneys' fees, "[t]he court's first step . . . is
determining the lodestar, 'which equals "the number of hours reasonably
expended multiplied by a reasonable hourly rate."'" Jacobs v. Mark Lindsay &
A-0385-22 51 Son Plumbing & Heating, Inc., 458 N.J. Super. 194, 209 (App. Div. 2019)
(quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004)). Determination
of the lodestar "is the most significant element in the award of a reasonable fee
because that function requires the trial court to evaluate carefully and critically
the aggregate hours and specific hourly rates advanced by counsel for the
prevailing party to support the fee application." Rendine, 141 N.J. at 335.
There are four considerations in setting the lodestar. The first is the reasonableness of the attorney's fee, evaluated under the factors set forth in RPC 1.5(a). Second, the court considers the reasonableness of the time billed by the attorney, since a party is not entitled to counsel fees for excessive and unnecessary hours. Third, the court determines whether the award should be decreased because the plaintiff "achieved limited success in relation to the relief he [or she] had sought." Fourth, the court must decide whether the attorney is entitled to a fee enhancement if the attorney worked under a contingency agreement.
[Heyert v. Taddese, 431 N.J. Super. 388, 443-44 (App. Div. 2013) (footnote omitted) (citations omitted).]
As a threshold matter, fee-shifting is permissible when expressly
authorized by statute, court rule, and contract. Packard-Bamberger & Co. v.
Collier, 167 N.J. 427, 440 (2001). Here, the court concluded that Fariba and the
Chemtech defendants breached the MRL Operating Agreement, including
A-0385-22 52 Section XX, which required members to indemnify other members for "any and
all claims . . . of every kind and nature whatsoever" arising from a violation.
We conclude the trial court did not err when it determined that Fariba in
the 2017 SPA and, also, the Chemtech defendants in the 2014 SPA, violated the
contracts, which then triggered the provisions containing fee-shifting language.
That fee-shifting language states that Fariba and the Chemtech defendants
agreed to indemnify and hold harmless plaintiffs "from and against any and all
Losses . . . arising out of, resulting from, or relating to" material inaccuracies,
breaches of representations or warranties, material breaches or violations of
covenants, and material inaccuracies in documents. Further, both SPAs defined
"Losses" as "any and all obligations, . . . claims, actions, injuries, demands, suits,
judgments, proceedings, investigations, arbitrations, and reasonable expenses,
including reasonable accountant's and reasonable attorney's fees and
expenses[.]" Importantly, our Court has already explained that an explicit
reference to an award of attorney's fees as part of a definition of "losses" is
sufficient for the court to award attorney's fees. Litton, 200 N.J. at 385.
We discern no error where the trial court concluded that Emanuel violated
Section 3.2(b) of the 2014 SPA when he stated that the purchase would not result
in the breach of any agreements, contracts, or arrangements that he made.
A-0385-22 53 Emanuel made a similar representation on behalf of Chemtech and stated that
Chemtech would not violate any provision. Fariba made similar representations
in the 2017 SPA.
The trial court concluded that Emanuel violated the MIPA and, therefore,
triggered the indemnity provision in that document. The MIPA stated that
Emanuel would pay Mehta "any [d]amages, arising out of, resulting from, or
relating to" any material inaccuracies, breaches of any representations, breaches
of warranties, and any material breaches or violations of covenants or
agreements. Section 6.2 of the MIPA defined damages as including attorney's
fees, costs of suit, and costs of investigation. The court's decision to award
attorney's fees was proper.
The fee award was reasonable and comports with our jurisprudence. We
note the court did not award fees without scrutiny, as it reduced the amount
sought by plaintiffs by over $8 million. The trial court carefully reviewed
plaintiffs' submissions and properly applied the law, including Rendine and RPC
1.5(a). It considered Fariba's and the Chemtech defendants' arguments.
Importantly, the court discussed the extensive record developed at trial depicting
defendants' highly complex series of transactions using conduit and commingled
accounts which made tracing the disputed funds extremely difficult.
A-0385-22 54 "Because the trial court was in the best position to weigh the equities and
arguments of the parties in this lengthy and contentious case," Packard-
Bamberger, 167 N.J. at 447, we see no reason to disturb its award of attorney's
fees and costs.
I.
On their cross-appeals, plaintiffs make a two-step argument that the court
abused its discretion when it declined to award prejudgment interest attributable
to each misappropriation for a total amount of $838,810.40. Plaintiffs first
contend that the court's application of Rule 4:42-11(b) to calculate interest only
from the date of the complaint did not fairly reflect the extent of their losses,
which dated back to when defendants misappropriated the funds. Next,
plaintiffs posit that the court committed error when it did not award prejudgment
interest for each misappropriation on the dates they occurred since Fariba and
the Chemtech defendants had the benefit of the monies to which plaintiffs were
entitled.
Rule 4:42-11(b) states that, specifically in tort actions, prejudgment
interest is calculated using "the date of the institution of the action or from a
date 6 months after the date the cause of action arises, whichever is later." Rule
4:42-11(b) permits a suspension of prejudgment interest in exceptional
A-0385-22 55 circumstances. McKeand v. Gerhard, 331 N.J. Super. 122, 127-28 (App. Div.
2000); see also Wiese v. Dedhia, 354 N.J. Super. 256, 267 (App. Div. 2002)
(stating that trial court has discretion to deny prejudgment interest, but such
decision should consider "policy, spirit, and intent of rule").
Here, the court correctly applied Rule 4:42-11(b) to determine the date
that the complaint was filed in July 2020 was the date to begin calculating
prejudgment interest. For completeness, we note that "[u]nlike prejudgment
interest in tort actions, which is expressly governed by Rule 4:42-11(b), the
award of prejudgment interest on contract and equitable claims is based on
equitable principles." County of Essex v. First Union Nat'l Bank, 186 N.J. 46,
61 (2006). An award of prejudgment interest on contract and equitable claims
is left entirely to the discretion of the trial court and should not be reversed
unless the award constitutes a manifest denial of justice. Ibid. The trial court
held that it would be unfair and not equitable, akin to "piling on," to award
prejudgment interest back to the date of each misappropriation. We are
unconvinced the trial court's reasoned judgment on this question results in a
manifest denial of justice.
Affirmed.
A-0385-22 56
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Cite This Page — Counsel Stack
Divyajit Mehta v. Emanuel Hedvat, Counsel Stack Legal Research, https://law.counselstack.com/opinion/divyajit-mehta-v-emanuel-hedvat-njsuperctappdiv-2025.