Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
11-12-2002
Benenson Assoc Inc v. Orthopedic Network
Precedential or Non-Precedential: Non-Precedential
Docket No. 01-3746
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
Nos. 01-3746 and 02-1206
___________
MICHAEL J. BENENSON ASSOCIATES, INC.
d/b/a BENENSON & ASSOCIATES,
Appellant,
v.
ORTHOPEDIC NETWORK OF NEW JERSEY
d/b/a GARDEN STATE ORTHOPEDIC NETWORK,
JAMES W. DWYER, M.D.,
and SOMERSET ORTHOPEDIC ASSOCIATES, P.A.,
Appellees.
___________
On Appeal from the United States District Court
for the District of New Jersey
(Civil Action No. 98-3332)
District Judge: The Honorable Nicholas H. Politan
___________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
September 13, 2002
Before: ALITO and FUENTES, Circuit Judges and OBERDORFER*, District Judge
(Opinion Filed: November 8, 2002)
* The Honorable Louis F. Oberdorfer, United States District Judge for the District of
Columbia, sitting by designation.
________________________
OPINION OF THE COURT
________________________
FUENTES, Circuit Judge:
This civil action was filed in 1998 by plaintiff Michael J. Benenson Associates, Inc.
d/b/a Benenson & Associates, Inc. (BAI) against defendant Orthopedic Network of New Jersey
d/b/a Garden State Orthopedic Network (GSON), a network of physicians, to recover fees of
about $141,000 for consulting work it provided to GSON.1 Following a non jury trial and the
submission of proposed findings of fact and conclusions of law, the District Court determined
that BAI and GSON had made an oral agreement to resolve their fee dispute and that GSON had
breached that agreement. Accordingly, the court awarded BAI $51,000 with prejudgment
interest. Contending that the court erred in enforcing the oral agreement and that, instead, BAI
should have been permitted to pursue its original underlying claim for $141,000, BAI appeals.
We affirm.
I. Facts and Procedural Background
Plaintiff brought suit against defendants seeking recovery for services rendered under
various theories including book account, quantum meruit, account stated, voidable transfer,
fraudulent conveyance, piercing the corporate veil, and settlement. The District Court
conducted a bench trial over four days during which the parties presented evidence and the
court had an opportunity to assess the credibility of the witnesses. At the conclusion of the
1
BAI also brought claims against Dr. James W. Dwyer and Somerset Orthopedic Associates,
P.A.
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evidence and after considering the parties’ submissions, the District Court issued a Letter
Opinion in which it made findings of fact and conclusions of law.
The District Court found that, on March 20, 1995, defendant SOA, a network of
physicians, hired Albert J. Zdenek, a financial planner, to help SOA set up the then-nonexistent
defendant GSON, which was also to be a network of physicians. The individual defendant, Dr.
James Dwyer, then a principal of SOA, entered into a retainer agreement with Zdenek on behalf
of SOA and GSON. Zdenek then hired plaintiff to assist in the creation of defendant GSON.
Pursuant to the terms of the retainer, Zdenek included plaintiff’s bills with the invoices
defendant SOA was to pay. SOA paid these invoices in May of 1995. A month later, GSON
was legally formed. In August of 1995, GSON’s board members became concerned about the
mounting costs of establishing and operating GSON. On or about September 12, 1995, GSON
decided to terminate its relationship with Zdenek and to hire plaintiff to work for it directly.
The District Court explained that the parties disagreed as to the terms of the agreement
between plaintiff and defendant GSON. The court stated that, while plaintiff insisted that
defendant promised to pay its bills as they came due, defendant insisted that payment was
contingent on plaintiff successfully obtaining managed care contracts for the defendant. On
behalf of GSON, Dr. Dwyer asserted at trial that plaintiff was not entitled to payment because
it did not obtain managed care contracts for defendant.
The District Court found that the parties reached a settlement of plaintiff’s outstanding
bills in April of 1996. The District Court found that the settlement came about when Dr.
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Dwyer wrote to plaintiff on January 16, 1996, asking for a 50% reduction in fees. Michael
Benenson, the plaintiff’s president, needed an infusion of cash and, therefore, agreed in April
of 1996 to accept a reduced fee in exchange for immediate payment. The agreement provided
that, of the approximately $141,000 in fees outstanding, Benenson would accept $71,000, with
$51,000 to be paid immediately. Advanced Health Care, a company that purchased plaintiff,
was to pay the remaining $20,000. The District Court found that defendant GSON never paid
plaintiff the settlement amount agreed to between the parties.
Based on these findings, the District Court ruled that plaintiff was entitled to recover
$51,000, together with prejudgment interest, by virtue of the enforceable oral settlement
agreement between plaintiff and GSON. In its Letter Opinion, the court also dismissed the
remainder of plaintiff’s claims as well as defendant’s counterclaims. Thereafter, plaintiff filed
a motion for reconsideration contending that the court erred because it did not make findings
of fact and conclusions of law as to plaintiff’s alternate theories of recovery concerning the
underlying debt. The District Court rejected this contention, reasoning as follows:
[s]imply put, BAI asserted numerous alternative theories of
recovery in its Second Amended Complaint, and the Court
concluded it was entitled to recover on the settlement agreement,
to the exclusion of all other claims. As such, no additional
findings were necessary.
App. at 19-20. The District Court also rejected plaintiff’s assertion that it misapprehended the
law and the facts with respect to plaintiff’s fraudulent conveyance claim. See App. at 17.
Subsequently, the District Court denied plaintiff taxation of certain costs because plaintiff’s
motion failed to comport with Local Civil Rule 54.1. Plaintiff timely appealed the District
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Court’s final order of judgment and the order on plaintiff’s motion with respect to costs.
II. Jurisdiction and Standard of Review
The District Court exercised jurisdiction over this matter under 28 U.S.C. § 1332. We
have appellate jurisdiction under 28 U.S.C. § 1291.
We accept the trial court’s findings of fact unless clearly erroneous and exercise
plenary review of the court’s interpretation of legal precepts and its application of those
precepts to the historical facts. See Mellon Bank, N.A. v. Metro Communications, Inc., 945
F.2d 635, 642 (3d Cir. 1991) (citing Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d
98, 101-02 (3d Cir. 1981)). Taxation of costs under Federal Rule of Civil Procedure 54(d)(1)
is reviewed only for abuse of discretion. See In re Paoli Railroad Yard PCB Litigation, 221
F.3d 449, 458 (3d Cir. 2000).
III. Discussion
On appeal, plaintiff asserts that the parties’ settlement agreement constitutes an
executory accord and that, because defendant did not satisfy the accord, plaintiff is entitled to
sue on the original claims. Defendant, on the other hand, asserts that the settlement agreement
is a substitute contract. Defendant asserts that the District Court correctly decided that,
notwithstanding the breach by plaintiff, “the substitute agreement is what must be enforced
now, not [plaintiff’s] claims regarding former invoices.” Appellee’s Br. at 8.
Both the doctrines of substitute contract and accord and satisfaction come into play
when contracting parties agree to alter the terms of their original agreement by entering into
a new agreement. Whether the parties resolve their differences by entering into a substitute
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contract or through an accord and satisfaction is significant because the remedy for a breach
of the new agreement depends on its nature.
“An accord and satisfaction is a substitute contract for settlement of a debt by some
alternative other than full payment . . . [in which t]he consideration is the resolution of a
disputed claim.” Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 147-48 (3d Cir. 1999).
When an accord is breached, the nonbreaching party may elect to enforce the underlying
agreement or the accord. See id. at 148. A substitute contract, on the other hand, is an
exchange of promises which extinguishes the underlying debt. See Pan American World
Airlines, Inc. v. Midlantic National Bank/ North, Civ. A. No. 87-3404, 1990 WL 61784, at *4
(D.N.J. May 7, 1990). The exchange of promises itself, rather than performance of the
substituted obligation, is what extinguishes liability on the underlying debt. See id. We have
previously held that a novation works the same way.
In Agusta, we explained that “[i]n a novation, the new promise itself satisfies the
preexisting claims, whereas in an accord it is the performance of the new promise that does
so.” Agusta, 178 F.3d at 148. We also explained that the “essential difference between an
accord and a novation is the parties’ intent[,]” and that the “existence of a substituted contract
is essentially for the jury.”2 Id. See also Publicker Indus., Inc. v. Roman Ceramics Corp., 603
F.2d 1065, 1071 (3d Cir. 1979) (“[t]o determine whether a contract acts as a novation or an
2
In Agusta, we used the terms “novation” and “substituted contract” interchangeably. This is
consistent with Arthur Corbin’s teaching that “[a]ll novations are substituted contracts; and the converse
is also true that all substituted contracts are novations[.]” Corbin on Contracts § 1293, at 189.
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accord executory, intent of the parties is the key.”); Corbin on Contracts § 1293, at 199
(“Whether the new agreement or ‘accord’ is itself accepted as an immediate discharge of the
prior claim–as a substituted contract–or is not so accepted, is merely a question of reasonable
interpretation of the expressions of the parties.”).
In its Findings of Fact and Conclusions of Law, the District Court noted that Dr. Dwyer,
who was acting on behalf of defendant GSON, wrote a letter to plaintiff on January 16, 1996,
requesting a 50% reduction in fees and that, in April of 1996, plaintiff’s president, Michael
Benenson, agreed to accept the reduced fee in exchange for immediate payment. Dr. Dwyer
testified that the reduced bill was a means of working things out with plaintiff, as Dr. Dwyer
did not believe plaintiff to be entitled to payment of its fees because payment was contingent
on plaintiff obtaining managed care contracts for defendant GSON, and plaintiff had failed to
do so. See App. at 140:14. Dr. Dwyer also testified that he had met with Benenson on five
or six separate occasions in August of 1995 and asked for more bills to be provided because
he thought that the underlying debt was “not legitimate.” App. at 169:17.
These findings are consistent with the District Court’s conclusion that the settlement
agreement operated as a substituted contract. Given that the amount owed to plaintiff was in
dispute, there was a basis for the trier of fact, here the District Court, to conclude that the
parties intended to extinguish the underlying debt in order to liquidate the amount owed and,
therefore, that plaintiff’s recourse was limited to enforcement of the amount defendant
promised to pay it in the settlement.
Based on the foregoing, we conclude that the District Court properly dismissed Counts
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I through IV of plaintiff’s complaint, specifically, the claims for services rendered, a book
account, quantum meruit and account stated on the basis that recovery on the settlement
agreement necessarily foreclosed recovery on these alternate theories of recovery. We also
reject plaintiff’s assertion that the District Court erred in dismissing the remainder of its
claims.
Furthermore, we cannot say that the District Court’s decision to deny an award of costs
to plaintiff was an abuse of discretion in light of plaintiff’s failure to comply with Local Civil
Rule 54.13 by failing to provide invoice documentation of the items for which it sought
reimbursement. Accordingly, we affirm the District Court’s denial of the costs sought by
plaintiff.
IV. Conclusion
After carefully considering the arguments discussed above and all other arguments
3
Local Civil Rule 54.1 provides:
(b) [The] Bill of Costs shall precisely set forth each item thereof, so that
the nature of the charge can be readily understood, and shall be verified
by the attorney for the applicant, stating that (1) the items are correct,
(2) the services were actually and necessarily performed, and (3) the
disbursements were necessarily incurred in the action or proceeding.
Counsel shall append to the verified Bill of Costs copies of all invoices
in support of the request for each item.
****
(e) Upon failure of the prevailing party to comply with this Rule, all
costs shall be waived.
United States District Court for the District of New Jersey Local Civil Rule 54.1 (emphasis added).
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advanced by the Appellant, we affirm the District Court’s decision in all respects.
____________________________
TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
By the Court,
/s/ Julio M. Fuentes
Circuit Judge
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