Chirino v. Proud 2 Haul, Inc., 458 N.J. Super. 308 (App. Div. 2017), aff’d o.b., 237 N.J. 440 (2019). There is a long-settled general rule that an appellate court will not consider issues that have not been raised below. But what if an argument was not raised below as to the issue on appeal, but was subsequently raised below as to another aspect of the matter? That was the posture of this case, which was before the Supreme Court by virtue of a dissent in the Appellate Division. The Supreme Court today affirmed, per curiam, on the basis of Judge Alvarez’s majority opinion in the Appellate Division, which was approved for publication today.
This was a class action on behalf of truck owners/operators that, as Judge Alvarez put it, “in broad terms, sought damages for defendants’ failure to have lease agreements in place, as required by federal law, enumerating deductions to be taken from their payments.” Among other things, by the terms of applicable leases, defendants were to reimburse plaintiffs and the class for taxes included in the price of diesel fuel for the trucks that delivered defendants’ products. Plaintiffs claimed that defendants did not in fact reimburse the tax amounts but instead deducted them from the amounts to be paid to plaintiffs for making their deliveries. The class was certified, and plaintiffs obtained several orders granting partial summary judgment.
On the day that trial was to begin, the parties settled the case. The settlement agreement purported to preserve defendants’ right to appeal as to two specified issues. One of them was “whether proof of ‘exact damages’ sustained by each plaintiff as opposed to a fair and reasonable estimate is required for monetary compensation” under the federal statute and regulations that formed the basis of plaintiffs’ case.
That became an issue because, as a result of damage to defendants’ records in Superstorm Sandy, plaintiffs estimated damages from records subpoenaed from the credit card company (“WEX”) whose cards were used to purchase gas for the trucks in question. Though the trucks ran only on diesel fuel, drivers were allowed to use the WEX cards to buy gas for their personal vehicles as well. Thus, the WEX figures on which plaintiffs relied to estimate their damages did not represent an exact damage amount, since non-diesel gas for vehicles other than the trucks at issue could not properly figure in the damage calculation.
However, when plaintiffs moved for summary judgment, defendants did not argue that the quantification of damages was erroneous. Nor did they contend that the applicable federal law required proof of exact damages. Instead, they asserted only that they were not bound by the lease term that required reimbursement of the taxes. The Law Division rejected that argument and awarded summary judgment for the amount that plaintiffs had put forward.
Only months later, in connection with calculation of damages on a different claim, involving non-WEX fuel purchases, did defendants for the first time argue that an exact damage calculation was required. “The argument was never raised with regard to the damage calculation for WEX users until the appeal was taken.”
On appeal to the Appellate Division, defendants argued that the WEX-based fuel tax damages were excessive because plaintiffs did not prove their “exact damages,” which defendants said was required by federal law. (There was another issue presented as well, but all three Appellate Division judges agreed in ruling against defendant on that issue, and it therefore did not go up to the Supreme Court). Judge Alvarez’s majority opinion, in which Judge Manahan joined, held that because defendants had not raised the miscalculation of fuel tax damages issue (as opposed to the subsequent argument as to miscalculation of non-WEX-related amounts) in the Law Division, instead raising it for the first time on appeal, the argument would not be considered.
Defendants asserted that, regardless of whether or when they raised their argument about the WEX-based fuel tax issue, the settlement agreement allowed them to present that issue to the Appellate Division. Judge Alvarez did not agree. “Defendants cannot, by agreement with plaintiffs, expand the universe of procedural options available upon appellate review. Defendants have the right to challenge the judge’s decision on the issue of fuel taxes owed to class members, but not with new arguments.”
In her dissent, Judge Accurso would have allowed defendants to present their fuel tax miscalculation argument, and would have remanded for a new calculation of damages. She asserted that since the issue was raised below regarding non-WEX fuel purchases, the Appellate Division should have considered it. The Supreme Court disagreed, affirming based on Judge Alvarez’s opinion.
This decision brings home two important points. First, failing to raise an argument at the trial level, at the time that the issue to which the argument applies is being decided, can be fatal. Second, the Supreme Court will allow class action plaintiffs to prove damages with a fair and reasonable estimate, as opposed to mandating proof of damages with exactitude, a demand that defendants often make in such cases.