REALTY APPRAISAL COMPANY VS. CITY OF JERSEY CITY, ETC.(L-5899-13, HUDSON COUNTY AND STATEWIDE)
A-4339-15T1
| N.J. Super. Ct. App. Div. | Jun 13, 2017Background
- Jersey City issued an RFP (competitive contracting) for a citywide revaluation; Realty Appraisal Company (plaintiff) submitted the lowest bid ($3,150,000) and received the contract in February 2011.
- Former Jersey City Business Administrator Brian O’Reilly announced his recusal from the revaluation process before retirement; after retiring he was briefly hired by plaintiff. City Corporation Counsel advised O’Reilly’s employment did not violate the City’s revolving-door ordinance.
- Plaintiff’s bid omitted two principals (Neil and Steven Rubenstein) from its ten-percent ownership disclosure; the City did not raise the omission until years later after substantial performance.
- Two post-award changes were made: (1) a narrower photo requirement in the contract than in the RFP; and (2) an addendum adopting the New Jersey Real Property Appraisal Manual for certain properties in place of Marshall-Swift, following Division of Taxation guidance.
- Mayor-elect Fulop (after election, before taking office) suspended work in June 2013 citing conflict concerns, timing, methodology and Sandy’s effect; City stopped payments. Plaintiff sued for breach; trial court found City breached in bad faith, awarded lost profits ($984,511), prejudgment interest, and counsel fees; Appellate Division affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conflict of interest from hiring former BA (O’Reilly) | O’Reilly validly recused while employed; counsel’s opinion cleared post-employment work; no evidence he influenced committee | O’Reilly’s hiring created an unlawful/appearance-of-impropriety conflict that tainted the award | Court upheld contract: record supports effective recusal and written counsel approval; no statutory violation shown |
| Inaccurate ownership disclosure (N.J.S.A. 52:25-24.2) | Omission was inadvertent, immaterial, City knew identities and was not prejudiced; issue raised too late | Omission invalidates bid and contract as a material noncompliance | Court held omission immaterial given City’s knowledge, lack of prejudice, and belated challenge; contract valid |
| Post-bid modifications (photo requirement; appraisal manual) | Modifications were minor or compelled by Division of Taxation direction; did not prejudice bidders | Modifications materially altered bid terms and invalidated contract | Court held photo change was minor; appraisal-manual addendum was proper (Division of Taxation guidance); no invalidation |
| Termination for convenience and bad faith; measure of damages | City constructively invoked termination-for-convenience but acted in bad faith; plaintiff entitled to lost profits as compensatory damages | City argues no bad faith, termination allowed; damages limited to costs performed, not full expectation profit | Court found City acted in bad faith (pretextual suspension), awarded lost profits; damages sustained under contract-law principles (reasonable certainty, compensatory aim) |
Key Cases Cited
- Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150 (appellate-review standard for non-jury findings)
- Rova Farms Resort, Inc. v. Inv’rs Ins. Co., 65 N.J. 474 (deference to trial court findings where supported by substantial evidence)
- Meadowbrook Carting Co. v. Borough of Island Heights, 138 N.J. 307 (material bid noncompliance test and two-part waiver analysis)
- Muirfield Constr. Co., Inc. v. Essex Cty. Improvement Auth., 336 N.J. Super. 126 (public bidding fairness and immateriality doctrine)
- Totaro, Duffy, Cannova & Co., L.L.C. v. Lane, Middleton & Co., L.L.C., 191 N.J. 1 (contract remedies overview; compensatory damages principles)