Court Opinion

ID: 4429016
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:16:40.488568+00
Date Added: 2024-06-11T14:50:59.000308
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-4879-16T2

BERMAN, SAUTER, RECORD &
JARDIM, PC f/k/a RAMSEY
BERMAN, PC,

           Plaintiffs,

v.

ART ROBINSON, AOR HOLDINGS,
INC., DTH15, LLC, OWEN PROPERTIES,
LLC, and RIGHTER EQUITIES, LLC,

           Defendants,

and

DTH15, LLC,

           Third-Party Plaintiff-Appellant,

v.

HERSH, RAMSEY & BERMAN, PC,
J. DAVID RAMSEY, ESQ.,
KENNETH R. SAUTER, ESQ.,
and EDWARD A. BERMAN, ESQ.,

           Third-Party Defendants-Respondents.

_____________________________________
            Argued September 13, 2018 – Decided March 26, 2019

            Before Judges Nugent and Reisner.

            On appeal from Superior Court of New Jersey, Law
            Division, Morris County, Docket No. L-1181-08.

            Kenneth S. Thyne argued the cause for appellant (Roper
            & Thyne, LLC, attorneys; Kenneth S. Thyne, on the
            brief).

            Robert C. Neff, Jr., argued the cause for respondents
            (Wilson, Elser, Moskowitz, Edelman & Dicker LLP,
            attorneys; Kurt W. Krauss, of counsel and on the brief;
            Robert C. Neff, Jr., on the brief).

PER CURIAM

      Third-party plaintiff, DTH15, LLC, (DTH), appeals from an order that

excluded the testimony of its expert and dismissed its legal malpractice action

against its former attorney. The expert opined that the attorney, third-party

defendant Kenneth R. Sauter, committed malpractice when he failed to include

an express termination clause in a commercial real estate contract between DTH

and Blue & Gold Development Group, Inc. (Blue & Gold). That omission,

according to the expert, enabled Blue & Gold to engage in protracted litigation

when it could not close, thus delaying DTH's ability to sell the real estate to

others and causing DTH to sustain other damages. The trial court determined

the expert's opinion on causation was a net opinion, excluded it, and dismissed

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                                      2
the complaint. Because a trial court's decision to admit or exclude expert

testimony rests within the court's sound discretion, and because our review of

the record in this case reveals no abuse of discretion, we affirm.

                                        I.

                                       A.

      This action's lengthy procedural history is well known to the parties and

well documented in previous appeals,1 so we need not repeat it in its entirety.

In the last appeal, we concluded the trial court had improvidently granted third-

party defendants' motion in limine to bar DTH's liability expert.       Berman,

Sauter, Record & Jardim, P.C., No. A-5650-11, slip op. at 2-3. We remanded

for a Rule 104 hearing. N.J.R.E. 104. DTH appeals from the order the court

entered after the hearing.

                                       B.

      The gist of DTH's malpractice claim was that Kenneth R. Sauter, an

attorney who represented DTH when it entered into a contract to sell fifteen

1
  Blue & Gold Dev. Grp, Inc. v. DTH15, LLC, No. A-0278-06 (App. Div. Feb.
13, 2008); Berman, Sauter, Record & Jardim, P.C. v. Robinson, No. A-5650-11
(App. Div. Feb. 3, 2015), rev'd, 224 N.J. 278 (2016); Berman, Sauter, Record &
Jardim, P.C. v. Robinson, No. A-5650-11 (App. Div. Nov. 17, 2016).

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                                        3
acres of land to Blue & Gold, deviated from accepted standards of legal practice

by not including an express termination clause in the agreement of sale. 2 DTH's

expert based his opinion in large part on the facts developed during the

underlying lawsuit Blue & Gold filed after it could not close and DTH

terminated the contract. These are the facts.

      In a contract dated August 15, 2003, DTH agreed to sell to Blue & Gold

fifteen acres of undeveloped land in Sparta, Sussex County (the "Property"), for

$4,000,000. In Section 4.1, the contract required Blue & Gold to obtain all

governmental approvals needed to develop the property within "eight (8) months

commencing and following July 5, 2003." Section 4.2 gave Blue & Gold the

option, for consideration, to extend this approval period twice: first for ninety

days, then for an additional ninety days in thirty day increments. Critical to

DTH's malpractice claim, Section 4.3 provided in pertinent part:

                   In the event this Agreement shall be terminated
            as a result of [Blue & Gold's] inability to obtain the
            Approvals . . . the Deposit shall be returned . . . and
            [Blue & Gold] shall, upon request by [DTH], assign all
            its rights it may have with respect to the applications
            and Approvals and any related plans, tests, studies,
            investigations, reports, etc. to [DTH].

2
  The third-party defendants include other attorneys and a law firm. For ease
of reference, we refer to Sauter only.
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      DTH's principal had stressed to Sauter DTH's need to market the Property

quickly and not have it tied up by Blue & Gold if Blue & Gold could not close.

Notwithstanding this concern, neither Section 4.3 nor any of the contract's

sections included a provision expressly authorizing DTH to terminate the

contract.

      Concerning closing, Section 7.1 provided that closing of title would take

place "on or before the day which is [fifteen] days following the date upon which

[Blue & Gold] has received the Approvals, . . . non-appealable preliminary and

final Approvals from the Sparta Township Zoning Board and any other

governmental agenc[ies.]"

      Blue & Gold thus had until September 1, 2004 — if it exercised all

extension options — to obtain approvals and close on the Property. In August

2004 — the month before the extension options expired — the Governor signed

into law the Highlands Water Protection and Planning Act (Highlands Act),

N.J.S.A. 13:20-1 to -35. The Highlands Act established the Highlands Water

Protection and Planning Council, which was charged with the responsibility for

land use planning for the Highlands Region, a preservation area that included

the Property. The Highlands Act delegated to the New Jersey Department of

Environmental Protection (DEP) responsibility to establish a permitting review

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                                       5
program for development in the preservation area. N.J.S.A. 13:20-31 to -35.

Blue & Gold claimed approvals it needed from DEP had been delayed in

anticipation of, and due to, the enactment of the Highlands Act.

      Blue & Gold did not receive the approvals needed to develop the Property

before September 1, 2004, the expiration of the last of the extension options in

the parties' contract.   Approvals not received included DEP's approval of

amendments to a New Jersey Pollutant Discharge Elimination System

(NJPDES) permit, a prerequisite to Blue & Gold obtaining a Treatment Works

Approval (TWA) for sewer treatment facilities to be built on the Property. When

Blue & Gold refused to pay consideration for further extensions, DTH's

principal instructed Sauter to schedule a closing and assert that time was of the

essence.   Sauter wrote to Blue & Gold's attorney on September 8, 2004,

demanding that closing occur as provided for in paragraph 7.1 of the contract.

Blue & Gold did not respond, but three weeks later it filed a Highlands

Exemption Application and sent a copy to DTH.

      On October 13, 2004, Sauter's law partner wrote to Blue & Gold's attorney

and scheduled a "time of the essence" closing for November 15, 2004. Blue &

Gold "rejected" DTH's position based on Blue & Gold's interpretation of the

contract, namely, closing need not occur until all approvals for development of

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the Property had been obtained. On December 3, 2004, Sauter wrote to Blue &

Gold, asserted that DTH had appeared for closing but Blue & Gold had not

appeared, and terminated the contract. Blue & Gold responded by reiterating

that DTH did not have the right to terminate the contract.

      The following year, in August 2005, apparently after learning that another

developer was interested in acquiring the property from DTH for more than

double the amount Blue & Gold was to pay, Blue & Gold filed a lis pendens and

a Chancery Division action against DTH.         Blue & Gold sought specific

performance and other equitable relief. The Chancery Division judge entered a

preliminary restraint on September 1, 2005, but the next month, in an order dated

October 12, 2005, vacated the preliminary restraint and discharged the lis

pendens.

      The Chancery Division judge also denied, in part, DTH's cross-motion for

partial summary judgment. In a written opinion, the judge explained:

                  The court is not persuaded that under the terms of
            the Agreement, [DTH] had no power of termination.
            The plain language of Paragraphs 4.1a and 4.2 supra,
            reveals that the parties agreed that [Blue & Gold] would
            have [eight] months to obtain the necessary approvals.
            A possibility for two [ninety] day extensions was
            further agreed upon. As such, [Blue & Gold] had a total
            of [fourteen] months to comply with the approval
            contingency. When Paragraphs 4.1a and 4.2 are read in
            conjunction with the contract as a whole, including

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                                       7
            Paragraph 4.3 which provides in pertinent part, "in the
            event this Agreement shall be terminated as a result of
            [Blue & Gold's] inability to obtain the Approvals set
            forth in Section 4" it is implicit that the Agreement
            could be terminated by [DTH] after the [fourteen]
            month period.

                   Notwithstanding this finding, genuine issues of
            material fact exist as to whether it was reasonable for
            [DTH] to exercise its right to terminate the Agreement
            under the circumstances. While the [c]ourt finds that
            there is no evidence that [DTH] contributed to delaying
            the approval process, [Blue & Gold] has maintained
            that had it not been for the introduction, passage and
            associated administrative delays in connection with the
            [Highlands Act], [Blue & Gold] would have been able
            to close. A finding that material issues of fact remain
            precludes a grant of summary judgment in this matter.
            As such the [c]ourt will deny [DTH's] [c]ross-[m]otion.

      The Chancery Division judge denied DTH's cross-motion for summary

judgment on October 12, 2005, and later denied a motion for reconsideration

and transferred the case to the Law Division. On August 4, 2006, a Law Division

judge entered an order that granted summary judgment to DTH, dismissed all

Blue & Gold's claims, and closed the case. The Law Division judge agreed with

the Chancery Division judge that DTH had the implicit right to terminate the

contract after the extension periods expired. The judge rejected Blue & Gold's

"position that [Blue & Gold] had a right to pursue the missing approvals until

                                                                        A-4879-16T2
                                      8
they [were] obtained without any drop-dead date." In doing so, the Law Division

judge noted:

                   Also as pointed out, it was not just the approvals
            with which the Highlands legislation interfered; it was
            also the Department of Transportation approval, which
            was not obtained until after the agreement had been
            terminated. It is also interesting to note that in the
            verified complaint filed August 25, 2005, [Blue &
            Gold] was still not ready to close, and that was almost
            a full year after the contingency period had expired.
            This highlights how absurd [Blue & Gold's] position is
            with regard to its interpretation of the contract
            provisions.

      The Law Division judge also rejected Blue & Gold's contention that DTH

had breached the implied covenant of good faith and fair dealing. The judge

explained: "The reality is that DTH terminated the agreement in response to the

inflexible and unreasonable position taken by Blue & Gold with regard to its

interpretation of the contract that DTH must simply wait indefinitely for Blue &

Gold to obtain the missing approvals."

      Blue & Gold appealed from the Law Division judge's memorializing

order. The Appellate Division affirmed the order in a short opinion . After an

introductory sentence and enumeration of Blue & Gold's point headings, the

Appellate Division wrote:

                  After carefully considering the record, briefs, and
            oral argument, we are satisfied that all of plaintiff's

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                                         9
            arguments are without sufficient merit to warrant
            discussion in a written opinion, R. 2:11-3(e)(1)(E), and
            we affirm substantially for the reasons expressed by
            Judge Farber in his thorough and well-reasoned oral
            and written opinions.

            Affirmed.

            [Blue & Gold Dev. Grp., Inc., No. A-0278-06 (slip op.
            at 2-3.)]

      The Appellate Division's decision was issued more than three years after

DTH had terminated the contract with Blue & Gold. Following the Appellate

Division's decision, plaintiff in this action, Berman, Sauter, Record & Jardim,

P.C., filed a complaint against DTH and other defendants to recover unpaid fees.

DTH filed a counterclaim and third-party legal malpractice complaint. That led

to protracted litigation, the appeals we have referenced previously, the remand,

the remand hearing, and this appeal. Against this backdrop, we turn to DTH's

expert's testimony at the Rule 104 hearing that a third judge (the remand judge)

conducted following the remand.

                                        II.

       The expert, Erwin D. Apell, qualified as an expert in the field of real

estate and accepted standards of legal practice in real estate matters. Neither his

qualifications nor his opinion that Sauter deviated from accepted standards of

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                                       10
legal practice are at issue on this appeal. 3 For that reason, we recount only his

testimony on proximate cause.

      Apell testified that Sauter's negligence was a substantial contributing

factor to damages suffered by DTH. These damages included DTH's inability

to market the property during years of litigation, and the consequent carrying

costs. The damages also included the lost opportunity to sell the Property for a

substantial profit. In addition, DTH incurred considerable expense to defend

against Blue & Gold's lawsuit.

      Apell's opinion on proximate cause was based on three possible outcomes

of Blue & Gold's dispute with DTH, and each outcome was in turn based on the

supposition the parties' contract contained an express termination clause. These

were the outcomes according to Apell. First, Blue & Gold might have refused

to enter into a contract with an express termination clause. Second, Blue & Gold

might not have filed a lawsuit because such a lawsuit would have been frivolous

and would have exposed Blue & Gold to sanctions for filing frivolous litigation.

Third, Blue & Gold would have filed the frivolous lawsuit, but the Chancery

Division judge would have granted DTH summary judgment and dismissed the

3
  That is not to suggest that either Sauter or the other third-party defendants
agreed with Apell. They sharply disputed his opinion, as did their own expert
on accepted standards of legal practice in real estate matters.
                                                                           A-4879-16T2
                                       11
case, because there would have been no "loophole" alleging DTH unreasonably

exercised its right to terminate in view of the unforeseeable delays caused by

the Highlands Act.

      As to the first possibility — Blue & Gold would not have entered into the

contract — Apell conceded this scenario was "unlikely." He testified that

"probably . . . Blue & Gold would have caved in because they really wanted the

project and would have signed the agreement of sale. . . ."

       Apell did not elaborate on the second possibility — Blue & Gold would

have been deterred from filing the lawsuit because doing so in the face of an

express termination provision would have exposed it to frivolous litigation

sanctions. He cited nothing in the record from which such a result could have

been inferred.

      Apell did elaborate on the third possibility — that the Chancery Division

judge would not have denied DTH summary judgment. Apell explained that in

the Chancery judge's opinion denying DTH summary judgment, the judge

"clearly indicated . . . DTH did nothing wrong." Apell further explained that in

view of such a finding, an express termination provision would "override" any

argument based on an alleged breach of the implied covenant of good faith and

fair dealing. Apell added that even if Blue & Gold appealed such a decision,

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                                      12
the Appellate Division would have expeditiously disposed of the appeal "by

streamlining to say there [are] no facts on the appeal that we've got to h ear, and

dismiss it."

      During cross-examination, Apell conceded the likelihood "[t]here would

have been litigation" even if the contract contained a termination clause, but he

stressed, "it's the time it would take to complete the litigation that is important

in this case." Although he could not say precisely how long the litigation would

have lasted, he insisted "it would be faster if the termination date was in [the

contract] than if the termination date is not in there. . . ." He added, "I'm saying

generally speaking if a contract is clear, a court should be able to dispose of

[litigation] faster than if the contract is unclear. That's all I'm saying."

      Apell did not know how long it would have taken the Chancery judge to

dismiss Blue & Gold's complaint. He also conceded that even if the contract

had contained an express termination clause, such a clause would not have

foreclosed a claim "based on the duty of good faith and fair dealing[.]" On

redirect, however, in response to the question, "hasn't our Supreme Court said

that the covenant of good faith and fair dealing will not override an express

termination provision," Apell said, "I believe so."

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                                        13
      Following the Rule 104 hearing, the remand judge found Apell's opinion

on proximate cause to be a net opinion. The judge noted DTH and Apell had

"not presented any evidence to suggest that if there was an express termination

clause in the Contract, Blue & Gold would not have still filed suit alleging

breaches of the implied covenant of good faith and fair dealing in light of the

introduction and passage of the Highlands Act and the resulting administrative

delays."

      Concerning Apell's opinion that the Chancery Division judge would have

granted summary judgment to DTH, the remand judge determined this argument

overlooked the Chancery Division judge's opinion concerning the administrative

delays caused by the Highlands Act. Moreover, the Chancery Division judge

found DTH had an implicit right to terminate the contract, and his decision to

permit Blue & Gold to proceed with the litigation had nothing to do with the

absence of an express termination clause. The Chancery Division judge did not

find DTH's right to terminate the contract to be unclear.

      Citing language in Sons of Thunder v. Borden, Inc., 148 N.J. 396, 421

(1997), the remand judge noted, "[t]he obligation to perform in good faith exists

in every contract, including those contracts that contain express and

unambiguous provisions permitting either party to terminate the contact without

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                                      14
cause." For these reasons, the remand judge found that Apell's opinion was

supported by neither the Chancery Division judge's opinion nor case law.

      In short, the remand judge found "Apell's opinions pertaining to proximate

causation [to be] unsupported by any relevant factual evidence or applicable

case law." Rather, according to the remand judge, Apell's opinions were based

on nothing more than speculation and possibilities. Thus Apell's opinions on

proximate cause were impermissible net opinions. DTH having presented no

other evidence concerning causation, the remand judge concluded DTH had

failed to present a prima facie case of legal malpractice against Sauter. The

judge barred Apell's net opinions and dismissed the legal malpractice complaint

with prejudice.

                                       III.

      On appeal, DTH argues that the remand judge's decision misconstrues the

Chancery Division judge's opinion concerning the implied covenant of good

faith and fair dealing. DTH also argues the remand judge's decision usurps the

province of the jury. We disagree.

      To establish a prima facie case of legal malpractice, a plaintiff must prove

"(1) the existence of an attorney-client relationship creating a duty of care by

the defendant attorney, (2) the breach of that duty by the defendant, and (3)

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                                      15
proximate causation of the damages claimed by the plaintiff."            Granata v.

Broderick, 446 N.J. Super. 449, 469 (App. Div. 2016) (quoting McGrogan v.

Till, 167 N.J. 414, 425 (2001)). To prove proximate causation, a plaintiff must

establish that a defendant-attorney's breach of duty was a substantial factor in

bringing about plaintiff's damages. Conklin v. Hannoch Weisman, 145 N.J. 395,

422 (1996).

      Here, DTH sought to prove the elements of its legal malpractice claim

through the testimony of its expert. An expert's opinion must be based on "facts

or data derived from (1) the expert's personal observations, or (2) evidence

admitted at the trial, or (3) data relied upon by the expert which is not necessarily

admissible in evidence but which is the type of data normally relied upon by

experts." Townsend v. Pierre, 221 N.J. 36, 53 (2015) (quoting Polzo v. Cty. of

Essex, 196 N.J. 569, 583 (2008)). If an expert's conclusions are unsupported by

factual evidence or other data, they are excludable as net opinions. Id. at 53-54.

      The net opinion rule "mandates that experts 'be able to identify the factual

bases for their conclusions, explain their methodology, and demonstrate that

both the factual bases and the methodology are reliable.'" Id. at 55 (quoting

Landrigan v. Celotex Corp., 127 N.J. 404, 417 (1992)).            Consequently, an

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                                        16
expert's opinion is inadmissible if it is based on nothing more than speculation

or unquantified possibilities. Ibid.

      We review with deference a trial court's decision to admit or exclude

expert testimony. Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344,

371-72 (2011).     That is so because "[t]he admission or exclusion of expert

testimony is committed to the sound discretion of the trial court." Townsend,

221 N.J. at 52-53 (citing State v. Berry, 140 N.J. 280, 293 (1995)). Accordingly,

"[a] reviewing court must apply an abuse of discretion standard to a trial court's

determination, after a full Rule 104 hearing, to exclude expert testimony on

unreliability grounds." In re Accutane Litig., 234 N.J. 340, 391 (2018) (citing

Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008)). Applying that standard to the case

before us, we affirm the remand judge's decision.

      Preliminarily, we note that Apell was qualified as an expert in the field of

real estate and accepted standards of legal practice in real estate matters, not in

matters of trial practice or appellate practice. Yet, in rendering his opinion on

proximate cause, he implicitly and explicitly rendered opinions in the latter

areas, and he speculated about what advocates and judges might do when

confronted with certain issues and arguments.

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                                       17
      Apell's opinion concerning proximate cause was based on three

possibilities. The speculative nature of Apell's first supposition — that Blue &

Gold would not have signed the contract with an express termination clause —

is readily apparent from Apell's own report and testimony. He acknowledged

this scenario was unlikely and that Blue & Gold probably would have "caved in

because they really wanted the project and would have signed the agreement of

sale." No evidence, observations, or data supported the possibility that Blue &

Gold may have walked away from the deal. Apell's suggestion that such was a

possibility was thus a net opinion.

      Similarly, Apell's second scenario — Blue & Gold would not have filed a

frivolous lawsuit — was unsupported by facts or data, was merely speculative,

and was thus a net opinion. Apell cited no evidence in the record from which

one could infer this was a likely scenario. The facts in the record support the

contrary inference.

      When the Law Division judge dismissed Blue & Gold's complaint on

summary judgment, he noted Blue & Gold needed approvals not only from DEP

but also from the Department of Transportation. The latter approvals were not

obtained until after DTH had terminated the contract. In addition, the judge

noted that when Blue & Gold filed its complaint nearly a year after the contract's

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                                       18
final contingency period had expired, it was still not ready to close. In view of

these facts, the Law Division judge characterized Blue & Gold's position as

absurd. Yet, Blue & Gold was undeterred from asserting such an "absurd"

position. No evidence in the record suggests Blue & Gold would have taken a

different course of action had the contract contained an express termination

clause.

      The third scenario posited by Apell — that the Chancery Division judge

would have dismissed Blue & Gold's complaint on summary judgment and the

Appellate Division would have expedited any appeal — is also unsupported by

any evidence or data, and it is based on nothing more than speculation. The

Chancery Division judge found that DTH had not delayed the approvals and that

DTH had the implicit right to terminate the contract with Blue & Gold. Yet, the

judge believed there was a genuinely disputed issue of fact as to whether DTH

acted reasonably in light of the unforeseen delays caused by the Highlands Act.

The judge did not provide an in-depth analysis concerning this conclusion.

      DTH argues that because an express termination clause would have

"overridden" the implied covenant of good faith and fair dealing, there would

have been no factual dispute, and the Chancery Division judge would have

granted summary judgment. Although "the implied covenant of good faith and

                                                                          A-4879-16T2
                                      19
fair dealing cannot override an express termination clause," Sons of Thunder,

148 N.J. at 419, "a party to a contract may breach the implied covenant of good

faith and fair dealing in performing its obligations even when it exercises an

express and unconditional right to terminate." Id. at 422.

      The remand judge found significant the Chancery Division judge's

determinations that DTH was not responsible for any delays Blue & Gold

encountered in obtaining approvals and that DTH had the right to terminate the

contract. Nonetheless, the Chancery Division judge determined there was a

genuinely disputed material issue of fact as to whether DTH breached the

implied covenant of good faith and fair dealing in performing its obligations

when it exercised its right to terminate, particularly in view of the unforeseeable

enactment of the Highlands Act.        In view of those determinations by the

Chancery Division judge, the remand judge concluded that Apell's opinion

concerning the third proposition — the outcome of DTH's motion in the

Chancery Division would have been different — was unsupported and

speculative.

      We reiterate that our task is not to determine whether the Chancery

Division judge correctly or incorrectly decided DTH's summary judgment

motion, nor are we to substitute our opinion for that of the remand judge. Rather,

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                                       20
we must determine whether the remand judge abused his discretion by excluding

Apell's testimony. For the reasons expressed in this opinion, we conclude he

did not. Accordingly, we affirm the order excluding Apell's testimony and

dismissing DTH's malpractice complaint with prejudice.

     Affirmed.

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                                    21