Pritchard Industries, Inc. v. Eatontown Board of Education

NOT FOR PUBLICATION WITHOUT THE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.

[(Emphasis added).]

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