Kaye v. Rosefielde, 432 N.J. Super. 421 (App. Div. 2013). This first post of the 2013-2014 Term focuses on the longest published decision issued by the Appellate Division in the just-ended 2012-2013 Term. The opinion, written by Judge Fuentes and issued on August 16, totals 105 pages.
In very brief summary, Kaye operated some businesses in Atlantic City. He hired Rosefielde to be the General Counsel for those businesses and to serve as Chief Operating Officer for one of them. Later, in 2005, Kaye and related plaintiffs sued Rosefielde and related defendants, asserting that Rosefielde had breached his fiduciary duties, committed fraud, illegally practiced law in New Jersey, and “committed legal malpractice through a series of unethical machinations and fraudulent transactions.” Rosefielde denied any wrongdoing and counterclaimed, alleging that Kaye had wrongly fired him as COO in breach of an oral contract and in violation of the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to -8, because Rosefielde had objected to what he believed were “criminal and unethical activities engaged in or directed by Kaye to defraud the Federal Trade Commission and bribe Atlantic City officials.”
In the opening sentence of the decision, Judge Fuentes explained some of the reasons for the length of the panel’s ruling. “This case has been besieged by an inordinate amount of complications, some inherent to the issues raised by the parties, others created by a series of unfortunate and misguided decisions of the first judge who presided over the case.”
That “first judge” was Judge Perskie, whom the panel identified by name in its opinion. As Judge Fuentes noted, that action deviated from “the Appellate Division’s long-held practice of not identifying a trial judge by name in those opinions where we disagree with a judge’s ruling or decision,” a practice that is “grounded on our great respect for the hard work performed by our fellow jurists who are faced with enormous pressure on a daily basis to make extremely complex decisions in the most expeditious way possible.” The panel identified Judge Perskie because his conduct in this case had already been the subject of a published opinion of the Supreme Court, In re Perskie, 207 N.J. 225 (2011), and had been extensively covered in the legal and popular press.
For reasons that the Supreme Court explained in its ruling, and that Judge Fuentes also discussed, which involved a conflict of interest that Judge Perskie at first wrongly failed to acknowledge, Judge Perskie recused himself in 2006 and the case was transferred to Judge Nugent. Judge Perskie would later compound his improper conduct by entering Judge Nugent’s courtroom on more than one occasion during the eventual trial and speaking with Kaye’s counsel. Before the Supreme Court, Judge Perskie acknowledged that doing so was wrong.
Judge Nugent ultimately conducted an eight-week bench trial and ruled largely in favor of Kaye. Among other things, Judge Nugent “rescinded Rosefielde’s interests in three Kaye entities, awarded plaintiffs compensatory damages, punitive damages, and counsel fees, and dismissed Rosefielde’s counterclaim.” Judge Nugent did, however, reject Kaye’s demand that Rosefielde disgorge his salary.
Rosefielde appealed, and Kaye cross-appealed. The Appellate Division affirmed most of Judge Nugent’s decision, deferring to Judge Nugent’s “feel” for the case, having seen and heard the witnesses, on factual issues, but without affording deference to Judge Nugent’s legal conclusions. The panel did, however, reverse and remand for further consideration the awards to Kaye of punitive damages and attorneys’ fees.
The opinion is worth fighting through. It has a little of everything, including an issue as to whether a jury trial was required on some issues (Judge Nugent, invoking the doctrine of ancillary equitable jurisdiction, ruled that no jury trial would occur, a decision that the Appellate Division upheld), rescission, the business judgment rule, interpretation of Rules of Professional Conduct (to which Judge Fuentes rightly applied standard principles of statutory interpretation), attorneys’ fees, the issue of whether punitive damages are permissible in Chancery cases (they are, as Judge Fuentes correctly ruled, though the overall issue was remanded for further consideration), and more.
This kind of high-stakes commercial dispute normally settles and, even when tried, rarely reaches the stage of an appellate decision. The panel had to review 65 volumes of transcripts and ten volumes of appendices that totaled over 3,300 pages of documents. Small wonder that this case, which was argued in late 2011, took the prize for the longest published opinion in the 2012-2013 Term!