JACQUELYN FERENTZ v. MAYOR HERBERT FREDERICK BOROUGH OF WEST WILDWOOD VS. MUNICIPAL EXCESS LIABILITY JOINT INSURANCE FUND (L-0140-15 AND L-0797-08, CAPE MAY COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: July 15, 2019
• Docket: A-5628-17T2
• Status: Unpublished

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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-5628-17T2

JACQUELYN FERENTZ,

Plaintiff,

v.

MAYOR HERBERT FREDERICK, individually and in his official capacity, and THE BOROUGH OF WEST WILDWOOD,

Defendants. ________________________________

BOROUGH OF WEST WILDWOOD,

Plaintiff-Appellant,

MUNICIPAL EXCESS LIABILITY JOINT INSURANCE FUND,

Defendant-Respondent. ________________________________

Submitted July 8, 2019 - Decided July 15, 2019

Before Judges Yannotti and Haas. On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket Nos. L-0140-15 and L-0797-08.

Jacobs & Barbone, PA, attorneys for appellant (Louis M. Barbone, on the brief).

Methfessel & Werbel, attorneys for respondent (Eric L. Harrison, of counsel and on the brief; Adam N. Levitsky, on the brief).

PER CURIAM

In this liability insurance coverage case, plaintiff Borough of West

Wildwood (Borough) filed a declaratory judgment against its insurer, defendant

Municipal Excess Liability Joint Insurance Fund (Fund), seeking an order

requiring the Fund to provide the Borough with a defense and indemnification

in a pending action brought against the Borough by one of its employees under

the New Jersey Conscientious Protection Act (CEPA), N.J.S.A. 34:19-1 to -14.

On appeal, the Borough challenges the Law Division's April 25, 2018 order

granting summary judgment to the Fund and dismissing its complaint because

the Borough deliberately breached the cooperation clause contained in its

insurance policy. We affirm.

As a threshold matter, we note that the Borough's amended notice of

appeal states that it is only appealing from the trial court's July 23, 2018 order

denying its motion for reconsideration of the April 25, 2018 summary judgment

A-5628-17T2 2 order, rather than from the summary judgment order itself. "[O]nly the judgment

or orders designated in the notice of appeal . . . are subject to the appeal process

and review[.]" 1266 Apartment Corp. v. New Horizon Deli, Inc., 368 N.J.

Super. 456, 459 (App. Div. 2004). It is well established that "if the notice

designates only the order entered on a motion for reconsideration, it is only that

proceeding and not the order that generated the reconsideration motion that may

be reviewed." Pressley & Verniero, Current N.J. Court Rules, cmt. 6.1 on R.

2:5-1(e)(1) (2019) (citing W.H. Indus. v. Fundicao Balancins, Ltda, 397 N.J.

Super. 455, 458-59 (App. Div. 2008)).

Thus, the April 25, 2018 summary judgment order is not properly before

us on appeal. Nevertheless, because the Fund has not raised this jurisdictional

issue or objected to our review of this order, we will consider the merits of the

summary judgment motion. 1 W.H. Indus., 397 N.J. Super. at 459.

1 The Borough's brief does not specifically address the July 23, 2018 order denying its motion for reconsideration. Thus, we deem this issue to have been abandoned. Grubb v. Borough of Hightstown, 353 N.J. Super. 333, 342 n.1 (App. Div. 2002) (explaining that an issue raised in a notice of appeal but not briefed is abandoned). In any event, we discern no basis for disturbing the trial court's denial of the Borough's motion for reconsideration, which essentially repeated the same arguments the court previously considered and rejected in granting the Fund's motion for summary judgment. Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996) (citing D'Atria v. D'Atria, 242 N.J. Super. 392, 401-02 (Ch. Div. 1990)).

A-5628-17T2 3 The material facts of this case are fully detailed in Judge James H.

Pickering, Jr.'s comprehensive written decision granting the Fund's motion and,

therefore, we recite only the most salient facts here. The Borough has a

"commission form of government." as permitted under the Walsh Act, N.J.S.A.

40:70-1 to 40:76-27. The three members of its Board of Commissioners (Board)

are elected to serve concurrent four-year terms. In turn, the commissioners elect

one of the members as the Borough mayor.

From 1996 through June 2008, Christopher Fox served as the Bo rough

mayor. Fox's brother worked as the Borough's chief of police during this same

period. In addition, Jacquelyn Ferentz, who had lived with Fox for many years,

and who has been described as Fox's "close personal friend, political ally[,] and

supporter of the Fox administration[,]" was appointed as a police officer in 2000.

She was later promoted to the rank of lieutenant, which was the next highest

position under Fox's brother.

New commissioners were elected to the Board in 2008. 2 A majority of the

Board members chose Herbert Frederick, a political opponent of Fox, as the new

mayor. Frederick also served as the Director of Public Safety. Shortly

thereafter, Fox's brother took an extended medical leave from the police

2 Fox did not run for reelection in the 2008 election. A-5628-17T2 4 department and ultimately retired. In the brother's absence, Ferentz assumed

day-to-day responsibilities over the department.

Frederick attempted to reform the Borough government, including the

police department. Ferentz objected to these changes and, in July 2008, filed

several complaints with county and State law enforcement agencies accusing

Frederick of official misconduct.

In December 2008, Ferentz filed a CEPA complaint in the Law Division

against the Borough and Frederick. Among other things, Ferentz asserted that

Frederick had retaliated against her by conducting an internal investigation of

her conduct after she reported his alleged misconduct.

The Fund was the Borough's insurer for lawsuits like the one Ferentz filed.

Its policy with the Borough included a standard cooperation clause, which in

pertinent part stated:

SECTION IV – CONDITIONS

4. DUTIES IN THE EVENT OF POTENTIAL OR ACTUAL CLAIM

c. You and any other involved Insured must:

....

(3) Cooperate with us in the investigation, settlement or defense of the covered Claim, and not do

A-5628-17T2 5 anything that may prejudice the [Fund] or its potential or actual rights of recovery.

(d) You agree not to settle any Claim, incur any Defense Costs or otherwise assume any contractual obligation or admit any liability with respect to any claim without the [Fund's] written consent. The [Fund] shall not be liable for any settlement, Defense Costs, assumed obligation or admission to which it has not consented.

Trusting that the Borough would comply with the cooperation clause, the Fund

undertook the defense of Ferentz's lawsuit on behalf of the Borough and

Frederick.

In September 2009, Frederick completed his internal affairs investigation

of Ferentz, and a notice of disciplinary action was filed against her. The notice

charged Ferentz with a number of offenses, including making false statements

regarding the training of a law enforcement officer; unauthorized use of the

"Acting Chief of Police" and "Chief of Police" titles; and unauthorized absences

from work. The Board engaged an independent hearing officer to conduct

Ferentz's hearing and, over the next fourteen months, the hearing officer listened

to ninety-one hours of testimony over twenty-three dates, and assembled a

voluminous evidentiary record, which included 161 documents and 142 audio

A-5628-17T2 6 recordings. In July 2011, the hearing officer rendered a sixty-three-page written

decision sustaining most of the charges and recommending the termination of

Ferentz's employment. After adopting the hearing officer's recommendation,

the Board fired Ferentz in August 2011.

Ferentz responded by filing an action in lieu of prerogative writs in the

Law Division challenging her removal. The Fund did not represent the Borough

in that action because the lawsuit was not covered under the Borough's insurance

policy.

In 2012, Fox and two of his political allies won all three seats on the Board

and Fox once again assumed the position of Borough mayor. Once the Fox team

returned to office, the Borough's new solicitor contacted the Fund's attorney in

May 2012 to advise of the possibility that the newly elected Board members

might dismiss all of the charges against Ferentz. In response, the Fund's attorney

sent a letter to the solicitor reminding her that the Borough was required to

cooperate with the Fund and was barred from taking any action in the

disciplinary action against Ferentz that might prejudice the Fund's defense of

the Borough regarding Ferentz's CEPA claims. The letter also warned the

Borough that failing to consult with the Fund could result in the termination of

coverage.

A-5628-17T2 7 In spite of these warnings, the new Board members, with Fox abstaining,

proceeded to pass a series of resolutions in June 2012 castigating the former

Board members for taking disciplinary action against Ferentz, declaring her

termination to be null and void, dismissing all of the disciplinary charges against

her, reinstating her to the police department, and appointing her as the new chief

of police.

The Borough provided no notice to the Fund prior to issuing these

resolutions, did not consult with the Fund's attorney, and did not submit the

resolutions for the Fund's review prior to their issuance. Nevertheless, the Fund

did not disclaim coverage of the CEPA claim at that time. The Fund's attorney

explained in his testimony that the Board had the authority to take these actions

concerning Ferentz's employment because the CEPA and employment cases

were two separate matters.

Certainly, the Board members' decision to restore Ferentz to her former

position, and to make a number of derogatory comments against the prior

members' actions, did not help the Fund's defense of the Borough against

Ferentz's CEPA claim. That being said, the Fund would still be able to point to

the fact that Frederick and the 2008-2012 Board had relied upon a

comprehensive report prepared by an independent hearing officer, who

A-5628-17T2 8 determined that the charges lodged against Ferentz were appropriate. Further,

the Fund believed it could readily demonstrate at trial that the new Board

members' decision to rescind Frederick's actions against Ferentz was itself

politically motivated in an effort to reward Fox's housemate, long-term friend,

and political ally by returning her to her former position. In short, so long as

the Fund could continue to point to the fact that Frederick conducted an

investigation that resulted in charges that were upheld by a hearing officer, the

Fund believed it would still be able mount a viable defense against Ferentz's

CEPA claim.

The Board members soon shattered that possibility. Without consulting

with the Fund, the Borough entered into a "Negotiated Settlement and General

Release" (Release) with Ferentz in October 2012. In the Release, Ferentz agreed

to dismiss her prerogative writ action against the Borough in exchange for the

Borough's agreement to reimburse her for back pay, and other benefits from the

time she was out of work. The Release did not resolve Ferentz's pending CEPA

claim and, in fact, it expressly stated that the resolution of the employment case

"in no way affects [Ferentz's] ability to pursue her remedies" in the CEPA action.

Significantly, Paragraph 6 of the Release stated:

As part of this Negotiated Settlement Agreement and General Release, [the Borough] agree[s] not to use

A-5628-17T2 9 in any negative manner the disciplinary [action] which is, was or could have been the subject of this proceeding . . . against [Ferentz] in any other civil proceeding.

The only "civil proceeding" still pending between the Borough and Ferentz a t

that time was the CEPA case.

Thus, by agreeing to the Release, the Borough ensured that the Fund could

no longer use any aspect of the disciplinary charges in defense of Ferentz's

CEPA claim, and was now barred from referring at trial to: the hearing officer's

decision; the testimony and exhibits from the disciplinary hearings; the

testimony of Frederick; or anything else regarding the disciplinary action against

Ferentz. In short, the Fund could no longer assert that Frederick and the 2008-

2012 Board had a demonstrable, non-retaliatory, and legitimate basis for the

disciplinary actions taken against Ferentz.

The Borough solicitor never advised the Fund's attorney of the Release.

Instead, the Fund learned about it only after it made a document request in

January 2013 for pertinent information under the Open Public Records Act,

N.J.S.A. 47:1A-1 to -13. Once it knew of the Board's actions, the Fund's

attorney promptly advised the Borough that the Fund was disclaiming coverage

because the Borough had violated the policy's cooperation clause by destroying

the only viable defense the Borough had to the CEPA claim.

A-5628-17T2 10 The Borough's solicitor executed a substitution of attorney and indicated

that the Borough would not challenge the disclaimer of coverage if the Fund

continued to defend Frederick. The Fund agreed to do so. However, Ferentz

then voluntarily dismissed Frederick from the case. In March 2015, the Borough

filed this declaratory action against the Fund seeking coverage under the policy

for Ferentz's CEPA claim.

Before the declaratory action could be resolved, Ferentz's CEPA claim

went to trial and, relying on the Release, the trial court permitted Ferentz to

testify about her termination and the hardships she allegedly suffered before she

was reinstated, and barred the Borough from asserting that the disciplinary

action was justified based on the results of Frederick's investigation, and t he

independent hearing officer's report. Not surprisingly, the jury returned a

verdict in favor of Ferentz, and the court later entered a judgment against the

Borough in the amount of $1,766,687.40 for damages, counsel fees, and costs.

Following the verdict, Judge Pickering addressed the Borough's claim that

it was entitled to indemnification and the costs of its defense under its insurance

policy with the Fund. In a thorough and thoughtful thirty-six-page written

decision, the judge rejected the Borough's legal arguments and found that it,

A-5628-17T2 11 through the new Board members, had deliberately breached the policy's

cooperation clause.

In so ruling, Judge Pickering carefully reviewed the governing case law,

which provides that in order for a breach of a cooperation clause to provide a

basis for disclaiming coverage, the "clause must be deliberately breached in a

material or essential particular." Pearl Assur. Co. V. Watts, 58 N.J. Super. 483,

490 (App. Div. 1959) (emphasis omitted). That was clearly the case here. The

Fund's attorney specifically directed the Borough's solicitor that the Fund had to

be consulted before the Board took any actions that would vitiate any defense

the Fund might use in the CEPA action. Judge Pickering found that the evidence

clearly showed that "[d]espite that knowledge, [the Borough] forged ahead

unilaterally to settle the disciplinary appeal without consulting [the Fund], and

without consulting [the Fund] on the terms of the Release" the Borough accepted

in Ferentz's prerogative writs action.

As Judge Pickering explained, once the Release was secretly agreed upon

by Ferentz and the Borough, the Fund "was not able to present a defense that the

suspension and termination [of Ferentz] was justified, made for good cause, or

even in good faith. The municipality could not refer to the charges of the

A-5628-17T2 12 disciplinary appeal, the evidence that supported those charges, and the Hearing

Officer's decision."

Judge Pickering also rejected the Borough's contention that its breach was

insignificant because by the time it negotiated the Release, it had already issued

the resolutions criticizing Frederick's actions during his 2008-2012 term. The

judge stated:

[P]aragraph 6 of the Release bargained away a defense. The defense at issue is not what the [new Board members] concluded to be true in 2012 and thereafter [when they issued the resolutions supporting Ferentz and attacking the prior administration], but instead what Frederick believed to be true in 2009, 2010, and 2011. Evidence of Frederick's conduct, the hearings, and the findings of the Hearing Officer, all go to the issue of whether Frederick reasonably believed Ferentz had acted wrongfully. Paragraph 6 of the Release precluded that defense.

This appeal followed.

On appeal, the Borough raises the same arguments that Judge Pickering

carefully considered and rejected in his cogent written opinion. It again claims

that its unilateral decision to bargain away what was likely its only viable

defense to Ferentz's CEPA claim "was an immaterial and inconsequential matter

incapable of being a material and deliberate breach of the cooperation clause."

The Borough also asserts that the new Board members were merely taking

A-5628-17T2 13 corrective "governmental action" to remedy a wrong they believed Frederick

had done to Fox's housemate, long-term friend, and close political ally.

Our review of a ruling on summary judgment is de novo, applying the

same legal standard as the trial court, namely, the standard set forth in Rule 4:46-

2(c). Conley v. Guerrero, 228 N.J. 339, 346 (2017). Thus, we consider, as Judge

Pickering did, whether "the competent evidential materials presented, when

viewed in the light most favorable to the non-moving party, are sufficient to

permit a rational factfinder to resolve the alleged disputed issue in favor of the

non-moving party." Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013) (quoting

Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).

If, as here, there is no genuine issue of material fact, we must then "decide

whether the trial court correctly interpreted the law." Dickson v. Cmty. Bus

Lines, 485 N.J. Super. 522, 534-35 (App. Div. 2019) (citing Prudential Prop. &

Cas. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998)). We accord no

deference to the trial judge's conclusions of law and review these issues de novo.

Nicholas v. Mynster, 213 N.J. 463, 478 (2013). However, this court should

affirm the judgment if it concludes that the trial court's conclusions of law were

correct. Henry v. N.J. Dept. of Human Servs., 204 N.J. 320, 330 (2010).

A-5628-17T2 14 We have considered the Borough's contentions in light of the record and

applicable legal principles and conclude they are without sufficient merit to

warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E). We are

satisfied that Judge Pickering properly granted summary judgment to the Fund,

and affirm substantially for the reasons expressed in his April 25, 2018 written

opinion.

A-5628-17T2 15