On appeal from the Superior Court of New Jersey, Chancery Division, Union County.
Matthews, Ard and Polow. The opinion of the court was delivered by Polow, J.A.D.
On behalf of all appellants, the law firm of Ravin & Kesselhaut sought and obtained leave to appeal interlocutory orders denying Independent Auto Systems Co., Inc. (IAS) the right to intervene as a plaintiff in this action and disqualifying Ravin & Kesselhaut from continuing to represent the original plaintiffs, Goodwin Motor Corp. (Goodwin) and Jonathan Collins, Inc. (JCI).
In June 1978 plaintiffs started suit in the Chancery Division to enjoin a threatened termination by defendant Mercedes-Benz of North America, Inc. (MBNA) of Goodwin's automobile dealership franchise which plaintiffs had been operating in Plainfield. At that time termination of plaintiff's franchise was temporarily restrained, and shortly thereafter the parties agreed to the continued operation of the dealership pending an audit of the financial condition of plaintiff corporations. An order reflecting their agreement in the form of a further stay was filed on July 11, 1978 and remained in effect until it was ordered vacated following a hearing on November 17, 1978. However, no formal written dissolution of the stay was filed until January 3, 1979, effective nunc pro tunc as of November 26, 1978.
On December 7, 1978, after the hearing on MBNA's motion to vacate the stay but before the order had been signed and filed, plaintiffs filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. The bankruptcy court appointed a receiver and issued its own interim restraint against MBNA's effort to terminate the Goodwin franchise. On appeal to the United States District Court, the restraint was vacated based
upon a ruling that the bankruptcy court had no jurisdiction over MBNA.*fn1
On February 9, 1979 the law firm of Ravin & Kesselhaut was substituted as counsel for plaintiffs Goodwin and JCI.*fn2 On the same date IAS applied to intervene as a plaintiff and sought to compel defendant to submit to discovery. Ravin & Kesselhaut also represented IAS on its application. At the hearing on the motion the propriety of Ravin & Kesselhaut's representation of IAS while continuing to represent plaintiffs Goodwin and JCI was raised by the judge on his own motion. On May 16, 1979, Judge Ackerman, relying on the clean hands doctrine, denied IAS's motion to intervene and, noting existence of a potential conflict of interests, ordered Ravin & Kesselhaut to withdraw as counsel for the original plaintiffs, Goodwin and JCI. Leave to appeal was granted on June 29, 1979.
The issues as framed by appellants are the following:
Point I The trial court's denial of intervention for the sole reason of "unclean hands" is reversible error
Point II IAS is entitled to intervene as of right
Point III The order of the trial court that Ravin & Kesselhaut must withdraw from representing the plaintiff as a conflict of interest is reversible error
MBNA is the United States distributor of Mercedes-Benz automobiles. Goodwin, a Mercedes-Benz dealer since 1957, has been owned and operated by JCI since 1973. JCI, in turn, had been owned and controlled by Ronald ...