July 9, 2008
RONALD GILGALLON, EILEEN GILGALLON AND MARY HENNIG, AS INDIVIDUALS AND TAXPAYERS OF HUDSON COUNTY, PLAINTIFFS-APPELLANTS,
R.C. SHEA & ASSOCIATES, SHEA & NOVY, P.C., ROBERT NOVY, ROBERT SHEA, STACIE BRUSTMAN, AND COUNTY OF HUDSON, DEFENDANTS-RESPONDENTS, AND MICHAEL DERMODY, DEFENDANT.
On appeal from Superior Court of New Jersey, Law Division, Hudson County, L-4228-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 14, 2008
Before Judges Payne and Sapp-Peterson.
Plaintiffs Ronald Gilgallon, Eileen Gilgallon and Mary Henning appeal, pro se, from the dismissal of their action against Hudson County and their former attorneys, designated in the complaint as R.C. Shea & Associates, Shea & Novy, P.C., Robert Novy, Robert Shea, and Stacie Brustman. On appeal, they raise as issues (1) whether plaintiffs' complaint against defendant Hudson County was properly dismissed without prejudice as the result of the entry of a federal court injunction against further such suits; (2) whether plaintiffs were collaterally estopped from bringing their claims against their former attorneys; and (3) whether entry of summary judgment in favor of plaintiffs' former attorneys was appropriate because plaintiffs could not demonstrate that the attorneys had failed to file opposition on plaintiffs' behalf to a successful motion in federal court to dismiss plaintiffs' complaint, because they could not demonstrate in the absence of expert testimony that the attorneys' representation was negligent, and because proximate causation between the attorneys' conduct and plaintiffs' alleged damages had not been shown. Following our review of the issues raised in light of the record on appeal, the arguments of the parties, and applicable legal precedent, we affirm.
This matter has a tortured history and precedents that we describe in simplified form for purposes of this appeal. For approximately seventeen years, plaintiff Ronald Gilgallon was the owner of security services known first as Consec Security Group and then Consec Security Systems. However, on December 16, 1992, he was arrested for insurance fraud. Thereafter, on May 19, 1993, Ronald's wife Eileen, a nurse with very limited involvement in her husband's security businesses, formed Consec Security Strategies, Inc. and later merged that company into another entity designated as CFS Services. (For convenience, we will refer to Eileen Gilgallon's companies hereafter as CFS.) Although Eileen Gilgallon's companies purchased no assets from her husband's business, they occupied the same offices, utilized the same employees, and carried on the same business. It was later determined that throughout the relevant period, Ronald was either designated as an employee of CFS or, erroneously, as having left that employment, so that the company could list on its public bid applications that no officer had been arrested or convicted of a crime. Ronald Gilgallon was in fact convicted on felony charges of insurance fraud on February 22, 1995.
In 1995, Hudson County solicited bids for a contract to provide security guard services to various of its facilities, including Meadowview Hospital. Although CFS was the low bidder, the contract was awarded to Labor Management Concepts, Inc. (LMC), which had submitted the second lowest bid, following a determination that CFS was not the lowest "responsible" bidder pursuant to N.J.S.A. 40A:11-6.1. A similar result occurred in 1996. Both awards were contested in court by CFS.
Eventually, a ten-day responsibility hearing took place before Charles P. Daglian who, on April 28, 1997, issued findings and a recommendation to the Hudson County Board of Chosen Freeholders that the Board declare CFS not to have been a responsible bidder in either year. The hearing officer's recommendation was adopted on June 12, 1997, and the two contracts were retroactively awarded to LMC. That determination was upheld by Judge Gallipoli in a ruling in a CFS-initiated legal action, issued on October 23, 1997. Judge Gallipoli denied plaintiffs' motion for reconsideration in an order dated December 4, 1997.
During the pendency of the state court action, plaintiffs moved to amend their complaint to assert a taxpayer claim that an "embezzlement scheme" existed between the County and LMC. However, before plaintiffs' motion was decided, on October 16, 1997, Hudson County filed an amended answer asserting a cross-claim against LMC for unauthorized use of County telephones at Meadowview Hospital. In light of Hudson County's action and in anticipation of settlement, CFS's motion to amend was denied.
Hudson County's cross-claim was settled on December 26, 1997. The settlement agreement between the parties recited that CFS had made various allegations concerning Hudson County and LMC; among them, claims that LMC had:
(a) Made unauthorized telephone calls from telephones belonging to County of Hudson which were located at Meadowview Hospital;
(b) That Labor Management Concepts, Inc. had not been fully authorized by Freeholder Resolution to perform security guard services during the period July 1995 through the present and was thus not entitled to payment during that period; and
(c) That Labor Management Concepts, Inc. had applied for, and obtained, payments for more security guard service hours than had actually been worked.
The agreement then provided that, upon payment of $30,000 by LMC, "all claims and counterclaims that Hudson County has filed, or could have filed, against Labor Management Concepts, Inc. based on conduct that occurred prior to the date of this Settlement Agreement" were resolved.
Thereafter, plaintiffs appealed Judge Gallipoli's various orders to us, and we affirmed his decisions in an unpublished opinion. CFS Services, Inc. v. Board of Chosen Freeholders of the County of Hudson, No. 2646-97T5 (May 20, 1999). The Supreme Court denied certification in an order reported at 162 N.J. 485 (1999).
On February 4, 2000, plaintiffs filed a taxpayer suit in the United States District Court for the District of New Jersey against the Hudson County Board of Chosen Freeholders, its individual members, and LMC alleging padded bills by LMC and ultra vires payments to it by Hudson County, along with the misuse of telephones claimed in Hudson County's state court cross-claim, and alleging negligence, fraud and intentional misconduct on the part of the County. An accounting, together with compensatory and punitive recoveries were sought pursuant to various federal statutes including the Racketeer Influenced and Corrupt Organizations (RICO) Act. Additionally plaintiffs claimed violations of state law consisting of "actual fraud, malice and willful misconduct pursuant to N.J.S.A. 59:3-3 and 59:4-14" and breach of fiduciary duty.
Defendants moved to dismiss the federal complaint on various grounds, including the existence of the settlement between LMC and the County. In conduct significant to the present matter, on May 30, 2000, plaintiffs' attorneys, Stacie Brustman and Robert Shea, moved before Judge Bassler for permission to file an overlength brief exceeding fifteen pages, and on June 1, 2000, they served a fifty-one page brief on defendants. On June 8, 2000, plaintiffs were denied authorization to file an overlength brief and ordered to comply with the limitations set forth in Local Civil Rule 7.2(b), which in fact permitted filing an "opposing" brief of forty pages, limiting only a "reply" brief to fifteen pages.
By letter dated June 23, 2000, the attorneys for LMC transmitted all briefing in the case to the clerk of the court, including "Plaintiffs' Brief in Opposition to Defendants' Notice of Motion to Dismiss." It is evident from subsequent correspondence that the overlength brief was submitted at that time. However, on July 26, 2000, plaintiffs filed a revised brief of fifteen pages. A review of the docket sheet for the matter does not disclose an entry demonstrating the filing of either brief. Nonetheless, it is clear from the written opinion of Judge Bassler that plaintiffs' brief, in one form or the other, was considered by him, since the judge discussed plaintiffs' "response" at some length. After doing so, Judge Bassler dismissed plaintiffs' suit, stating:
Accepting the facts in the pleadings as true and giving them all reasonable inferences, because the County settled and released all claims it had brought or could have brought against LMC, Plaintiffs are precluded from pursuing those claims as taxpayers on behalf of the County. Accordingly, the Court need not address Defendants' alternate grounds for dismissal. [Gilgallon v. Bd. of Chosen Freeholders for the County of Hudson, No. 00-cv-591 (WGB) (January 31, 2001), slip op. at ll.]
A motion for reconsideration was denied on March 30, 2001, and on June 29, 2001, an order was entered relieving the defendant attorneys of their obligations as counsel. A further pro se motion for reconsideration was denied on March 19, 2002. However, the litigation was not concluded until multiple additional motions were filed and addressed by the judge.
Thereafter, plaintiffs filed additional similar actions in federal court,*fn1 including an action, filed on December 18, 2002 and assigned to Judge Cavanaugh, against Hudson County, the County Executive, the Board of Chosen Freeholders, LMC and its attorneys, the State of New Jersey, and various individuals. Following motions by the defendants to dismiss the complaint, Judge Cavanaugh granted the relief sought, stating: "This lawsuit represents the fourth time that Plaintiffs attempt to litigate issues already decided." Significantly for present purposes, the judge also entered an injunction, pursuant to the relitigation exception to the Anti-Injunction Act, 28 U.S.C.A. §2283, barring plaintiffs "from commencing future actions against any and all Defendants in this action without prior approval from this Court." Gilgallon v. County of Hudson, No. 02-cv-5948 (DMC) (June 2, 2003), slip op. at 28. Judge Cavanaugh's injunction was affirmed by the Court of Appeals for the Third Circuit in an unreported per curiam opinion filed on June 9, 2004.
In addition to their multiple federal court actions, plaintiffs filed a pro se complaint in state court in or around August 1, 2003 claiming malpractice in connection with the first federal complaint by their former attorneys, defendants R.C. Shea & Associates, Shea & Novy P.C., Robert Novy, Robert Shea, and Stacie Brustman. In a second amended complaint dated May 26, 2004,*fn2 Hudson County's First Assistant County Counsel, Michael Dermody, the attorney representing the County in the first federal action, was added as a party. In that complaint, plaintiffs alleged as background:
1. In and around November of 1999, the taxpayers of Hudson County engaged the professional services of Defendants Stacie Brustman and Robert Shea to represent their interests in a federal legal action.
2. The taxpayers' complaint alleged widespread fraud and corruption that costs the residents of Hudson County of $4,500,000 [sic].
3. After agreeing to represent the taxpayers, the Defendants entered into a separate agreement with the attorneys representing the Plaintiffs' adversaries.
4. The attorneys formed a secret, illegal alliance and set a primary objective to discretely manipulate the outcome of the judicial proceeding without the consent or knowledge of the taxpayers and have the complaint dismissed.
5. The attorneys met their objective by circumventing the local and federal rules of procedure and abandoning any and all ethical restrictions contained in the Rules of Professional Conduct.
6. In New Jersey, violations of the Rules of Procedure and/or the Rules of Professional Conduct constitute a claim for legal malpractice.
7. The Plaintiffs alleged that the Defendants' illegal activity caused the dismissal of the taxpayer complaint and the opportunity to recover millions of dollars in restitution.
In essence, plaintiffs claimed that their attorneys in the first action before Judge Bassler had conspired with the attorneys for defendants in that action to effect the dismissal of that suit through failing to file opposition to defendants' motions to dismiss, while assuring plaintiffs of appropriate representation by supplying them with briefs that were never filed. Claims were asserted in Count One for legal malpractice in simulating the filing of briefs, "sabotaging" plaintiffs' reconsideration motion and withdrawing an appeal. In Count Two, plaintiffs alleged that defendants engaged in a pattern of negligence by failing to seek a default against defendants and in failing to file a longer brief containing better arguments in opposition to defendants' motions to dismiss. In Count Three, plaintiffs claimed "intentional" negligence by defendants in failing to seek a default and default judgment when Hudson County was late in answering plaintiffs' complaint. In the Fourth Count, plaintiffs alleged dishonesty, fraud, deceit or misrepresentation as the result of their attorneys' alleged failure to oppose motions to dismiss. In the Fifth Count, directed also against defendant Michael Dermody, plaintiffs alleged that "[a]t the direction of the Hudson County government, defendant Michael Dermody conspired with co-defendants Robert Shea and Stacie Brustman to manipulate the outcome of a federal judicial proceeding to cover up allegations of fraud and corruption initiated by the taxpayers of Hudson County" by forming a "secret illegal alliance" to "simulate the entire motion and application process without the knowledge and consent of the Plaintiffs in this matter." The Sixth Count alleged "willful misrepresentations" by defendants in furtherance of the conspiracy, and the Seventh Count alleged vicarious liability on the part of Shea's partner, Robert Novy. Although not named as a party in the caption, references to liability on the part of the County appeared in the body of the complaint.
By order dated February 8, 2005, Judge Bassler granted a permanent injunction, pursuant to 28 U.S.C.A. § 2283, barring the existing state court action by plaintiffs against Dermody and any future state or federal action arising out of the award of the security service contract to LMC. Issuance of the injunction was affirmed on appeal by the Third Circuit in an order dated November 3, 2005.
Thereafter, on October 17, 2005, plaintiffs sought to file a third amended complaint naming Hudson County as a defendant and containing allegations against various Hudson County officials that mirrored those in Civil Action 02-cv-5948, dismissed by Judge Cavanaugh.*fn3 On January 4, 2006, Judge Cavanaugh issued a permanent injunction barring suit against Hudson County, various named employees and elected officials, LMC, LMC's counsel, and the State of New Jersey. Following denial of plaintiffs' motion for reconsideration and appeal, the judge's order was affirmed by the Third Circuit in an order dated June 19, 2007.
An amended order by the state court dismissing any claims against Hudson County without prejudice was entered by Judge Gallipoli on January 25, 2007.
In the meantime, discovery continued in plaintiffs' malpractice action. During the course of that discovery, plaintiffs were asked to provide expert reports in support of their claims. Their response of "to be announced" was never supplemented, and in oral argument opposing defendants' subsequent motion for summary judgment, Ronald Gilgallon admitted that he "[c]ouldn't get one." Summary judgment was granted on October 20, 2006 to the attorney defendants because of the lack of expert testimony and because of the operation of the doctrine of collateral estoppel.
We affirm the order of summary judgment against the attorney defendants finding no support for any claim that defendants failed to file a brief opposing dismissal of plaintiffs' first federal action, Judge Bassler having referenced such briefing in his opinion granting dismissal, and as the result of the absence of expert evidence in support of plaintiffs' claim that any briefing that was submitted was inadequate.
A claim of legal malpractice is in its essence an action for professional negligence requiring proof of (1) the existence of an attorney-client relationship creating a duty of care by the defendant attorney; (2) breach of that duty; and (3) proximate causation between the breach and damages claimed by the plaintiffs. McGrogan v. Till, 167 N.J. 414, 425 (2001). Because the standards of professional conduct and the existence of a deviation from those standards are generally beyond the knowledge of an average juror, in a legal malpractice case, expert testimony is required unless the attorney's "duty is so basic that it may be determined by the court as a matter of law." Kranz v. Tiger, 390 N.J. Super. 135, 147 (App. Div.) (quoting Brizak v. Needle, 239 N.J. Super. 415, 429 (App. Div.), certif. denied, 122 N.J. 164 (1990)), certif. denied, 192 N.J. 294 (2007). Similarly, in this context, expert testimony on the issue of proximate cause can be dispensed with only when "the causal relationship between the attorney's legal malpractice and the client's loss is so obvious that the trier of fact can resolve the issue as a matter of common knowledge." Id. at 147-48 (quoting Sommers v. McKinney, 287 N.J. Super. 1, 11 (App. Div. 1996)). Because in the present matter plaintiffs' only supportable allegations are that defendants' legal work was inadequate and that inadequacy led to the dismissal of plaintiffs' action - complex claims requiring expert assistance to assess - in the absence of such expert opinion, plaintiffs malpractice action was properly dismissed. In this connection, plaintiffs can demonstrate that the defendant attorneys mistakenly believed that their brief in opposition to the motions to dismiss was limited to fifteen pages. However, they have not demonstrated that the fifteen-page limitation was insufficient to convey relevant opposing arguments, given the narrow grounds for Judge Bassler's decision, or that, if a forty-page brief had been submitted, Judge Bassler's decision would have been in plaintiffs' favor. Even if the attorneys' conduct had been intentional (an allegation that we find factually unsupported), a finding of proximate cause would still require expert testimony.
The same analysis applies to the remainder of plaintiffs' claims, which all involve the same underlying allegations of fact and identical issues of proximate causation. See, e.g., Zorba Contractors, Inc. v. Housing Auth. of the City of Newark, 362 N.J. Super. 124, 142 (App. Div. 2003) (discussing proximate cause as an element of a claim for common-law fraud).
Because we find the lack of supporting expert testimony to provide a proper legal basis for entry of summary judgment against plaintiffs, we need not reach the motion judge's alternative holding that plaintiffs' claims were barred by operation of the doctrine of collateral estoppel.
In light of the fact that the dismissal of plaintiffs' claims against Hudson County was entered without prejudice, any appeal by plaintiffs from the dismissal order was improper. See R. 2:2-3 (permitting appeals only from final judgments); R. 2:2-4 (requiring a motion for leave to appeal from entry of an interlocutory order). We thus decline to address this aspect of plaintiffs' appeal, except to note the affirmance of the injunctions granted by Judge Bassler and Judge Cavanaugh by the Third Circuit and their solid foundation in 28 U.S.C.A. § 2283.
Under principles of comity and as the result of the operation of the full faith and credit clause of the federal constitution, we accord deference to the federal court's actions, which we find in the circumstances to have been entirely justified. Stultz v. Stultz, 15 N.J. 315, 318-20 (1954). Contrary to plaintiffs' arguments, no deprivation of due process existed as the result of Judge Gallipoli's entry of the amended order of dismissal.