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Binder v. Price Waterhouse & Co.

May 30, 2007


On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1233-05.

The opinion of the court was delivered by: Lyons, J.S.C. (temporarily assigned).



Argued April 25, 2007

Before Judges Collester, Sabatino and Lyons.

Plaintiff, J. Louis Binder ("Binder") appeals the dismissal of his action for accounting malpractice and breach of contract against defendant, Price Waterhouse & Co., L.L.P. ("Price Waterhouse"). The primary issue in this case is whether tolling principles apply to preserve a state court action that was originally timely filed in, and later dismissed by, the federal courts after the normally-applicable statute of limitations had already expired. We find the proper standard to apply in this case is "equitable principles," but that because plaintiff did not act promptly to file his state court action after dismissal of the federal action, we affirm the state court's dismissal of his action. The following factual and procedural history is relevant to the issues advanced on appeal.

On November 12, 1989, creditors of Resorts International Inc. and Resorts International Financing, Inc. (collectively "Resorts") filed Chapter 11 involuntary reorganization petitions in the United States Bankruptcy Court for the District of New Jersey. On December 22, 1989, Griffin Resorts and Griffin Resorts Holding, Inc. (collectively "Griffin"), affiliates of Resorts, filed separate voluntary Chapter 11 petitions. Pursuant to an order of the Bankruptcy Court, the Chapter 11 cases were consolidated and jointly administered.

The Bankruptcy Court issued an order confirming the second-amended joint plan of reorganization on August 28, 1990. On August 29, 1990, Kenneth Feinberg ("Feinberg") was approved as the litigation trustee in the bankruptcy matter. A Final Plan and Litigation Trust Agreement were executed between Resorts, Griffin, and Feinberg to facilitate the reorganization plan on September 17, 1990. Article VIII of the Litigation Trust Agreement gave the Bankruptcy Court exclusive jurisdiction over all claims relating to the litigation trust.

The assets assigned to the litigation trust were claims originally held by Resorts against Donald J. Trump ("Trump") and affiliated entities arising from Trump's 1988 buyout of the Taj Mahal Resort. The plan authorized the trustee to prosecute claims against the Trump entities. On November 1, 1990, after confirmation of the plan, Feinberg retained Price Waterhouse to provide auditing and tax-related services to the litigation trust. On May 21, 1991, Feinberg, as trustee, entered into an agreement with Trump and affiliates, and Resorts, settling the litigation claims for $12,000,000, which funds became assets of the litigation trust. On August 17, 1994, Binder replaced Feinberg as trustee.

On April 15, 1997, nearly seven years after the Reorganization Plan was confirmed, Binder, as trustee, filed a complaint in the United States Bankruptcy Court against Price Waterhouse charging professional negligence and breach of contract and seeking damages and disgorgement fees.

Following three years of discovery, Price Waterhouse moved before the Bankruptcy Court to dismiss Binder's complaint for lack of subject matter jurisdiction. The Bankruptcy Court granted Price Waterhouse's motion to dismiss on January 4, 2002 finding there was no "related to" or "core" jurisdiction and thus, no subject matter jurisdiction.

Binder appealed to the Federal District Court, which, on December 18, 2002, reversed the Bankruptcy Court's earlier dismissal order and reinstated and remanded the matter, finding that the claims arising from the professional misconduct claim were sufficiently related to the bankruptcy case to be within the jurisdiction of the Bankruptcy Court. On June 22, 2004, the Third Circuit reversed the holding of the District Court, finding that the matter "lack[ed] a close nexus to the bankruptcy plan or proceeding and affect[ed] only matters collateral to the bankruptcy process." Binder v. Price Waterhouse & Co., L.L.P., 372 F.3d 154, 169 (3d Cir. 2004). Consequently, the District Court entered an order dismissing the bankruptcy complaint on August 9, 2004. No petition for certiorari was filed with the United States Supreme Court.

Following dismissal of the Bankruptcy Court proceedings, Binder retained new counsel ("counsel") and decided to file a new action in the Superior Court alleging identical claims and seeking identical relief to that sought in the Bankruptcy Court. On or about February 18, 2005, counsel prepared a complaint for an action in the Superior Court but failed to file or serve same. Counsel submitted a first-amended complaint to the clerk of the Superior Court for filing on or about April 29, 2005. Counsel "drafted" a second-amended complaint to correct typographical errors on or about May 31, 2005.

On September 11, 2005, a notice of administrative dismissal with prejudice for lack of prosecution was issued by the clerk of the Superior Court because as of that date, the May 31, 2005 second-amended complaint was not of record and had not been served. Consequently, on or about October 12, 2005, counsel filed a third-amended complaint. On November 11, 2005, the third-amended complaint was dismissed for failure to prosecute because service had not been timely performed. The ...

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