NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-1834-22
PRITCHARD INDUSTRIES, INC.,
Plaintiff-Appellant,
v.
EATONTOWN BOARD OF EDUCATION,
Defendant-Respondent.
Submitted February 26, 2024 – Decided March 21, 2024
Before Judges Sabatino and Marczyk.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3648-20.
Skoloff & Wolfe, PC, attorneys for appellant (Patrick T. Collins, on the briefs).
Collins, Vella and Casello, attorneys for respondent (Dennis Anthony Collins, on the brief).
PER CURIAM This litigation stems from the nonpayment of money that defendant
Eatontown Board of Education (the "School Board") allegedly owed to a
custodial services contractor, plaintiff Pritchard Industries, Inc. ("Pritchard").
The School Board asserts Pritchard failed to meet minimum staffing
requirements and improperly billed the School Board for hours that staff had not
worked.
The trial court granted summary judgment to the School Board, dismissing
Pritchard's claim to recover $92,297.30 for staff hours not worked. Pritchard
now appeals, contending the court misinterpreted the terms of the contract
between the parties. It asserts the School Board received the benefit of its
contractual bargain because the school facilities were indisputably cleaned on
the short-staffed days. Pritchard further contends the School Board's sole
remedy under the contract is a $50 penalty per employee per shift, which has
already been withheld by the School Board. In the alternative, Pritchard argues
the trial court's award unjustly enriches the School Board.
For the reasons that follow, we vacate the entry of summary judgment and
remand for a trial or evidentiary hearing. The trial or hearing shall ascertain the
probable intent of the parties concerning the monetary consequences of
Pritchard's failure to supply the promised number of custodians on various days
A-1834-22 2 during the contract period, and, in particular, whether the $50 penalty was
intended to serve as an exclusive remedy for short-staffed days.
I.
Because we are remanding for further development of the record and
additional findings, we need not recite the facts definitively or comprehensively.
The following summary will suffice for present purposes.
After competitive bidding under the Public Schools Contracts Law,
N.J.S.A. 18A:18A-1 to -68, Pritchard was awarded a contract to serve as the
School Board's custodial services provider for a two-year period from July 1,
2016 through June 30, 2018.
Both parties agree Pritchard adequately cleaned the schools during the
contract period. However, on certain dates Pritchard did not provide, on site,
the number of custodians specified in the contract. Consequently, the School
Board withheld $92,297.30 in custodian wages that Pritchard had charged the
School Board for employees who were absent on those dates.
The School Board argues the contract entitles it to withhold such funds,
and to also assess a $50 penalty per shift when Pritchard failed to provide enough
custodial staff to meet "minimum staffing requirements" specified in the
contract. Pritchard concedes that the $50 penalty was properly imposed, but it
A-1834-22 3 appeals the trial court's finding that the School Board was also entitled to deduct
the wages of absent employees.
Pritchard contends the $50 penalty is a liquidated damages provision that
was intended to be the exclusive remedy for any failure to deploy enough
custodians. Pritchard maintains the trial court should not have made a better
contract for the School Board than the one that was bid and awarded.
The School Board, in turn, argues that the $50 penalty was not an
exclusive remedy, and that it was also entitled to withhold employee wages for
unfilled shifts when Pritchard did not furnish the promised number of
custodians.
The key contractual provisions germane to this dispute are set forth in the
bid documents and the parties' ensuing signed agreement. The following
provisions from the bid documents are particularly relevant:
Employees' Salaries and Fringe Benefits. In the proposal, bidder must state proposed wage rates for Evening/Second Shift Manager/Supervisor, custodial and maintenance staff. The Contractor will establish the Terms and Conditions under which any employees will be hired. The Contractor will have the sole responsibility to compensate its employees including all applicable taxes, insurances and Workers Compensation.
All Contractor employees will comply with all rules of the District. Employees of the Contractor must be
A-1834-22 4 thoroughly trained, qualified and capable of performing the work assigned to them. Employees of the Contractor must be capable of both understanding and speaking English in order to take direction from appropriate District personnel in the event of an emergency or under circumstances where immediate action is necessary to protect persons or property. Employees of the Contractor will not socialize with any students of the District. All penalties shall be deducted from the contract amount due upon written notification to the Contractor for any week(s) that the minimum staffing levels have not been met.
[(Emphasis added).]
The underscored last sentence of the above provision, referring to
"penalties," corresponds to the $50 "penalty" referred to in the following section
of the bid documents concerning absent employees:
Employee Absences and Penalties. The Contractor must anticipate employee absences and provide the district with an adequate backup plan for loss of work time associated with terminations, sick time and vacation. It is the expectation of the School District that the minimum staff levels will be maintained each night during the school year. Therefore an adequate supply of substitutes or coverage must be kept in order to ensure full coverage during the school year. Any time the Contractor does not provide full minimum staffing during the life of the contract, the District has the option to penalize the Contractor. The calculation shall be confirmed by reviewing detailed payroll reports, which must be provided by the Contractor monthly. The District may assess a penalty of $50.00 per employee per day for less than full minimum staffing. All penalties shall be deducted from the
A-1834-22 5 contract amount due upon written notification to the Contractor for any week(s) that the minimum staffing levels have not been met. All employees of the Contractor must punch a time card daily, including the Evening/Second Shift Manager/Supervisor.
Additionally, the bid documents address the grounds and procedures
enabling the School Board to terminate the contract, and specify the damages
that the contractor might owe the School Board upon breaching the contract:
41. Termination of Contract. If the Board determines that the contractor has failed to comply with the terms and conditions of the bid and/or proposal upon which the issuance of the contract is based or that the contractor has failed to perform said service, duties and or responsibilities in a timely, proper, professional and/or efficient manner, then the Board shall have the authority to terminate the contract upon written notice setting forth the reason for termination and effective date of termination.
Termination by the Board of the contract does not absolve the contractor from potential liability for damages caused the District by the contractor's breach of this agreement. The Board may withhold payment due the contractor and apply same towards damages once established. The Board will act diligently in accordance with governing statutes to mitigate damages. Damages may include the additional cost of procuring said services or goods from other sources.
[Emphasis added.]
A-1834-22 6 As to the final sentence of this above provision, we note the School Board does
not claim it procured replacement custodians from other sources or purchased
additional goods from others. 1
Pritchard sued to collect the sums the School Board withheld for the
understaffed days. Following document discovery without depositions, both
parties cross-moved for summary judgment.
Upon considering the above contractual terms and other documents
submitted by the parties, the motion judge granted summary judgment to the
School Board in part and denied it in part. The judge denied summary judgment
to Pritchard on its cross-motion.
First, the judge granted the School Board summary judgment dismissal of
Pritchard's claim for the $92,297.30 that the School Board deducted for
insufficient staffing of shifts.
Second, the judge denied summary judgment regarding Pritchard's claim
for $31,126.69 in additional maintenance work allegedly performed, finding
genuine factual disputes concerning the "accuracy and documentary support" for
1 Nor does it appear that the School Board ever elected to terminate the contract. The School Board's accounting of hours missed runs the entire period of the contract, including the final month of June 2018. The record does not indicate whether Pritchard was prevented from bidding for the next contract period or successfully renewed the contract. A-1834-22 7 those amounts. The parties thereafter settled this latter aspect of Pritchard's
claims.
This appeal by Pritchard ensued.
II.
In evaluating Pritchard's contractual claim to the $92,297.30 in withheld
wages, we are guided by familiar principles of summary judgment practice and
contract law.
We review the trial court's ruling on the cross-motions for summary
judgment de novo. Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582 (2021).
"[W]e determine whether 'the pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits, if any, show that 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.'" Ibid. (quoting R. 4:46-2(c)).
The court accords no special deference to the trial court's assessment of the
documentary record, as the decision to grant or withhold summary judgment
does not hinge upon a judge's determinations of the credibility of testimony
rendered in court, but instead amounts to a ruling on a question of law. See
Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
A-1834-22 8 Here, Pritchard's claim was dismissed, as the trial court phrased it,
"entirely [as] a matter of contract interpretation" because the parties agreed on
the underlying facts. Hence, the court's contract ruling is subject to de novo
review on this appeal. Kieffer v. Best Buy, 205 N.J. 213, 222-23 (2011).
When interpreting a contract, "a court must try to ascertain the intention
of the parties as revealed by the language used, the situation of the parties, the
attendant circumstances, and the objects the parties were striving to attain."
Celanese Ltd. v. Essex Cnty. Improvement Auth., 404 N.J. Super. 514, 528
(App. Div. 2009). Generally, interpretations of contract terms "are decided by
the court as a matter of law unless the meaning is both unclear and dependent
on conflicting testimony." Ibid. (quoting Bosshard v. Hackensack Univ. Med.
Ctr., 345 N.J. Super. 78, 92 (App. Div. 2001)).
If "the provision at issue is subject to more than one reasonable
interpretation, it is ambiguous, and the court may look to extrinsic evidence as
an aid to interpretation." Cypress Point Condo. Ass'n, Inc. v. Adria Towers,
LLC, 226 N.J. 403, 415-16 (2016) (quotation omitted). Where there is
ambiguity of meaning, courts "allow a thorough examination of extrinsic
evidence. . . ." Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 269 (2006).
"Such evidence may include consideration of the particular contractual
A-1834-22 9 provision, an overview of all the terms, the circumstances leading up to the
formation of the contract, custom, usage, and the interpretation placed on the
disputed provision by the parties' conduct." Ibid. (quoting Kearny PBA Local #
21 v. Town of Kearny, 81 N.J. 208, 221 (1979)).
The present dispute also implicates legal principles of contract damages.
"Under contract law, a party who breaches a contract [such as Pritchard here] is
liable for all of the natural and probable consequences of the breach of that
contract." Totaro, Duffy, Cannova & Cov. Lane, Middleton & Co., , 191 N.J. 1,
13 (2007) (quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). Although a
non-breaching party, such as the School Board here, need not demonstrate "the
exact amount of the loss," "the loss must be a reasonably certain consequence
of the breach." Id. at 14 (quoting Donovan v. Bachstadt, 91 N.J. 434, 444
(1982)). Damages must be proven with reasonable certainty. V.A.L. Floors,
Inc. v. Westminster Cmtys., Inc., 355 N.J. Super. 416, 426 (App. Div. 2002);
see also Model Jury Charge (Civil), 8.45, "Breach of Contract" (rev.Dec. 2014).
III.
We now proceed to apply these principles, de novo. At the outset, we
must underscore that Pritchard neither contests its liability for the contractually
specified penalty of $50 per employee per shift, nor claims the $50 penalty is an
A-1834-22 10 unreasonable liquidated damages clause. Such clauses are "deemed
presumptively reasonable" under New Jersey law. Wasserman's Inc. v. Twp. of
Middletown, 137 N.J. 238, 252 (1994). That reasonableness depends on
"whether the set amount 'is a reasonable forecast of just compensation for the
harm that it caused by the breach' and whether that harm 'is incapable or very
difficult of accurate estimate.'" Id. at 250 (quoting Westmount Cnty. Club v.
Kameny, 82 N.J. Super. 200, 206 (App. Div. 1964)).
As the motion judge recognized, the plain language of the bid documents
and contract makes clear that Pritchard was liable for the $50 amount, literally
denoted as a "penalty," for "[a]ny time [it did] not provide full minimum staffing
during the life of the contract." In those situations, as we noted above, the
School Board "has the option to penalize the Contractor. The calculation shall
be confirmed by reviewing detailed payroll reports, which must be provided by
the Contractor monthly." Specifically, the School Board "may assess a penalty
of $50.00 per employee per day for less than full minimum staffing. All
penalties shall be deducted from the contract amount due upon written
notification to the Contractor for any week(s) that the minimum staffing levels
have not been met." This penalty obligation, which Pritchard does not
challenge, is clear and unambiguous.
A-1834-22 11 What is unclear, however, and which propels the present appeal, is
whether the $50 penalty is the exclusive compensation recoverable by the
School Board for understaffing. The contractual provisions are silent on this
point. As we noted above, the bid documents emphasize the importance of the
contractor providing full minimum staffing of custodians. They declare that
"[i]t is the expectation of the School District that the minimum staff levels will
be maintained each night during the school year. Therefore an adequate supply
of substitutes or coverage must be kept in order to ensure full coverage during
the school year."
But the bid documents and contract do not specify what, if any, additional
sums may be recoverable by the School Board, over and above the $50 penalty,
except for the costs of replacement custodians and supplies in the event of a
termination. No such replacement custodians or supplies were obtained by the
School Board, and the School Board apparently did not terminate the contract
before it expired.
So what, then, are the School Board's additional damages? Stated
differently, what exactly did the School Board bargain for that it did not receive?
Pritchard contends that the School Board received the ultimate service it wanted,
i.e., clean school buildings. The School Board, on the other hand, contends that,
A-1834-22 12 beyond having clean schools, it bargained for a specified minimum number of
custodians on the premises. However, the consequences of Pritchard's failure to
sufficiently staff the schools are not unambiguously spelled out in the contract
documents beyond the $50 penalty. Although we might speculate here about
what those consequences might have been, the summary judgment record is
inadequate to make those assumptions.
The School Board contends in its brief the $50 penalty was only meant to
serve as a disincentive to breach, and that it was not meant to be a reasonable
approximation of the value of the absent custodial staff. The School Board
estimated that value by examining the wage rates that Pritchard would have paid
to the missing custodians had they worked those shifts. Given the paucity of the
record, we cannot tell if that approximation is a reasonable and mutually
intended method of calculating damages, or whether holding Pritchard
responsible for that sum plus the $50 penalty would be an inequitable double
recovery. See Finderne Mgmt. Co. v. Barrett, 402 N.J. Super. 546, 580 (App.
Div. 2008) (noting our State's "strong public policy against permitting double
recoveries").
The limited discovery exchanged in this case does not presently contain
adequate extrinsic proof of what the parties mutually intended. The parties have
A-1834-22 13 taken contradictory positions on the subject, which suggests that any witnesses
who are deposed or who testify in court will present conflicting assertions. 2 The
credibility of those witnesses should be evaluated, firsthand, by the trial court.
Consequently, we must vacate—without prejudice—summary judgment
and remand this matter for a trial or plenary hearing on the lingering disputes of
fact spotlighted in this opinion. On remand, the trial court shall have the
discretion to allow depositions and other supplemental discovery. A case
management conference shall be convened within thirty days to plan the
remand.3
Vacated and remanded. We do not retain jurisdiction.
2 In this regard, we note the explanation set forth in the affidavit of the School Board's business administrator, who attested that the $50 penalty was inserted "for the employees [who] were not provided to cover damages which were difficult to calculate." The affidavit does not specify the precise nature of such hard-to-calculate damages encompassed by the penalty. Meanwhile, Pritchard's director of New Jersey operations asserted in his certification that his company bid on the contract based on an assumption that "where a custodian was absent, as was sure to occur . . . [Pritchard] would be exposed to a $50 per person per day assessment" and that would comprise "the remedy" for such absences. 3 Pritchard's alternative claim of unjust enrichment can be addressed, if necessary, on remand by the trial court. A-1834-22 14