PATTERSON, J., writing for the Court.
This appeal arises from the trial court's reliance on an indemnification obligation, designated as a condition of pretrial intervention (PTI), as evidence in a civil dispute.
Third-party defendant Dr. George Likakis was charged with aggravated arson and insurance fraud after a fire destroyed a building he owned (the Property). Plaintiff RSI Bank held a first-priority mortgage on the Property, and defendant/third-party plaintiff The Providence Mutual Fire Insurance Company (Providence) issued a commercial liability policy that covered the Property. Following the fire, Likakis and RSI Bank submitted insurance claims. Providence denied both sets of claims.
Providence's denial of coverage prompted the filing of two actions in the Law Division. The first was filed by Likakis against Providence. The second action gave rise to this appeal: RSI Bank asserted against Providence claims for breach of contract, fraudulent misrepresentation, violations of the Consumer Fraud Act, and bad faith. Providence filed a third-party complaint against Likakis, alleging claims for indemnification. Both civil lawsuits were pending when criminal proceedings commenced against Likakis.
A grand jury. indicted Likakis, who applied for admission into the PTI program. The PTI director recommended his admission and told the PTI court that "the victim, [Providence], does not object to the defendant's enrollment into PTI as long as” Likakis satisfied three conditions: restitution in the amount of $11,321.89, representing the insurance proceeds already paid to RSI Bank; Likakis's commitment to protect/compensate [Providence) from any and all claims that may be brought against Providence] by RSI Bank as the result of the... fire"; and the dismissal with prejudice of Likakis's lawsuit against Providence. The prosecutor consented to those terms.
The PTI court approved Likakis's admission into PTI and entered an order postponing further proceedings in Likakis's criminal matter for a period of one year. With Likakis's consent -- but no assessment of his ability to pay -- the court also imposed the three conditions that Providence had requested. During his PTI term, Likakis paid Providence the specific restitution amount and dismissed with prejudice his lawsuit. Likakis did not make any payment related to the separate indemnification provision. With the prosecutor's consent, the PTI court terminated Likakis's PTI supervision and dismissed his indictment.
RSI Bank and Providence settled their coverage dispute. Providence agreed to pay RSI Bank $353,536.90 in settlement of all of the bank's claims based on the insurance policy and moved for summary judgment against Likakis based on the provision of the PTI agreement in which Likakis agreed to indemnify and hold harmless Providence. The motion judge granted in part and denied in part Providence's summary judgment motion. He found genuine issues of material fact as to whether the parties to the PTI agreement intended that agreement to survive the PTI supervisory period, and the amount of any damages for which Likakis would be liable. Those undecided issues were litigated in a non-jury trial. Following the trial, the court held that the indemnification provision of the PTI agreement was enforceable against Likakis and ordered Likakis to pay Providence $232,568.71, representing the portion of the settlement funds that Providence attributed to fire damage, less $11,321.89, the amount that Likakis had paid during his PTI supervisory period. Likakis appealed, and an Appellate Division panel affirmed the trial court's judgment, rejecting Likakis's argument that the agreement could be enforced only during the one-year period of PTI supervision. The Court granted Likakis's petition for certification. 230 N.J. 414 (2017).
HELD: A PTI court may include a restitution condition in a PTI agreement only if it can quantify the financial obligation and assess the participant's current and prospective ability to meet that obligation. An open-ended agreement to indemnify the victim of the participant's alleged offense for unspecified future losses is not an appropriate condition of PTI. Moreover, a restitution condition of PTI is inadmissible as evidence in a subsequent civil proceeding against the PTI participant. The indemnification provision of the PTI agreement at issue should have played no role in this civil litigation.
1. PTI is an alternative to the traditional process of prosecuting criminal defendants. It exists to provide prosecutors an alternate method to dispose of charges levied against qualified applicants consistent with the interest of the applicant and the overall interests of society and the criminal justice system. The PTI statute, N.J.S.A. 2C:43-12 to -22, prescribes seventeen criteria for admission to PTI. When Likakis applied for PTI, Rule 3:28 and its Guidelines supplemented the statutory criteria. The PTI statute and court rule recognize the importance of a victim's concerns in PTI determinations, as does case law. (pp. 14-19)
2. Restitution serves to rehabilitate the wrongdoer and to compensate the victim of the wrongdoer's conduct. An order of restitution is designed to strip a defendant of pecuniary gain from the crime where that gain is directly related to the crime itself and the defendant has the ability (though not necessarily the immediate means) to pay. (pp. 19-20)
3. In criminal sentencing, a court imposes restitution in addition to a term of imprisonment or probation if“(1) [t]he victim ... suffered a loss; and (2) [t]he defendant is able to pay or, given a fair opportunity, will be able to pay restitution.” N.J.S.A. 2C:44-2(b). The statutory constraints ensure that the defendant will be capable of paying the restitution amount, thus achieving the rehabilitative goal. When a sentencing court has not conducted a meaningful evaluation of a defendant's ability to pay, appellate courts routinely vacate restitution orders and remand for reconsideration. Thus, in the sentencing context, a restitution order will not survive appellate review if the sentencing court has not specified the restitution amount and determined whether the defendant will be capable of paying that amount. (pp. 20-22)
4. For purposes of PTI, Rule 3:28 incorporated the core principles that govern restitution awards in criminal sentencing. First, in PTI proceedings as in sentencing, restitution exists to serve a rehabilitative goal and to compensate the victim. Second, a PTI court was authorized to impose a restitution obligation only after a careful assessment in a hearing of the defendant's ability to pay. PTI Guideline 3(k) mandated that any restitution requirement "be judicially determined at the time of enrollment." Thus, before entering a restitution order, the court was required to quantify the obligation to be imposed and determine whether the defendant would be in a position to meet that obligation. Third, the court rule governing Likakis's admission into PTI maintained a clear distinction between a PTI restitution order and any civil claim that may arise from the PTI participant's offenses against the victim. Evidence of a restitution condition imposed in PTI was not admissible against the participant] in any subsequent civil or criminal proceeding.” Pressler & Verniero, Current N.J. Court Rules, Guideline 3(k) to R. 3:28, at 1292 (2018). Consistent with its rehabilitative purpose, a PTI agreement is not intended to serve as the basis for civil liability. (pp. 23-25)
5. Here, the PTI court appropriately took into account Providence's view. The PTI court did not, however, take the steps necessary to properly impose the indemnification requirement as a condition of PTI. The record reflects no ability-to-pay hearing to assess Likak's future resources, and the PTI court did not impose a specific restitution obligation or payment schedule for any restitution amount beyond the $11,321.89 that Likakis was required to pay. The indemnification provision in Likakis's PTI agreement did not conform to the requirements of a valid restitution condition of PTI. (pp. 25-27)
6. Based on the record, there is no indication that any party or the PTI court addressed the indemnification provision at the close of Likakis's one-year PTI supervisory period. Instead, the PTI court terminated Likakis's PTI period and dismissed his indictment with no order regarding any outstanding restitution obligation. With his PTI proceedings thus concluded, Likakis had no obligation to make additional payments under the restitution provision of the PTI court's order. (pp. 27-28)
7. Even if the PTI court had imposed an appropriate restitution condition on Likakis, that condition could not have been properly admitted in this civil matter. The invalid indemnification provision of the PTI agreement was clearly inadmissible in this case, either as the basis for the motion court's grant of partial summary judgment or as the dispositive evidence in the non-jury trial. Accordingly, the trial court improperly enforced the indemnification provision and entered judgment in Providence's favor. (pp. 28-29)