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Schulman v. Wolff & Samson

July 21, 2008

DARREN J. SCHULMAN AND ALLAN SCHULMAN, PLAINTIFFS-APPELLANTS,
v.
WOLFF & SAMSON, PC, NIXON PEABODY, LLP, FRANK W. RYAN, JR., AND PAUL M. COLWELL, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-37-07.

The opinion of the court was delivered by: Messano, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued April 2, 2008

Before Judges Payne, Sapp-Peterson and Messano.

Plaintiffs Darren J. Schulman and Allan Schulman appeal from two orders entered on April 11, 2007, that dismissed their complaint against defendants Wolff & Samson PC (Wolff Samson), Paul M. Colwell, Nixon Peabody LLP (Nixon Peabody), and Frank W. Ryan, Jr., with prejudice. Plaintiffs contend that the motion judge "afforded" the Supreme Court's holding in Puder v. Buechel, 183 N.J. 428 (2005), "a scope . . . it clearly does not merit," and, thus erred as a matter of law by concluding that their complaint against defendants was "preclude[d]" by plaintiffs' earlier settlement with other defendants in the consolidated litigation. We agree and therefore reverse the orders under review.

I.

We begin by setting forth the contorted procedural history leading to defendants' motions to dismiss, and to the extent necessary, provide a factual background to the dispute by relying upon the allegations contained in plaintiffs' complaints.

Plaintiff Allan Schulman founded Van Mar, Inc. (Van Mar), a ladies intimate apparel company, in 1980. During its effective business lifespan, the shareholders of Van Mar included Allan, who held fourteen percent of the stock, his younger son, plaintiff Darren J. Schulman, who held thirty-three and one-third percent of the stock, and Allan's estranged wife, Marilyn, his older son Scott, and his daughter Vanessa Nied who collectively owned the remaining fifty-two and two-thirds percent of the stock in Van Mar.*fn1

In June 2005, Darren filed an action individually and on behalf of Van Mar naming Scott, Marilyn, Vanessa, and Elite Moulding and Design Center, Inc. (Elite), as defendants (the first action). Darren alleged breach of fiduciary duties by Marilyn, Vanessa and Scott in removing Darren and Allan from Van Mar's board of directors, breach of a certain shareholder agreement, and other claims of self-interested dealing by the defendants with Elite. Shortly thereafter, Marilyn filed for divorce from Allan, and shortly after that, Vanessa filed suit against Allan and Marilyn essentially claiming that her parents had violated an oral agreement to convey to her by inter vivos gift their respective shares of Van Mar stock (the gift action).

Leave was granted to amend the complaint in the first action to add Allan as a plaintiff, and in August 2006, plaintiffs sought leave to amend their complaint once again. In this proposed amendment, plaintiffs alleged that Scott, Marilyn, and Vanessa had surreptitiously created another corporate entity, 518 Apparel Group, Inc. (518 Apparel), and had improperly transferred Van Mar's assets and employees to this successor corporation. Although the motion to amend was denied, the judge permitted plaintiffs to file a separate lawsuit which contained these allegations (the second action).

In October 2006, plaintiffs filed a third complaint which is the subject of this appeal. While the underlying factual allegations involving Scott, Marilyn, Vanessa, Elite, and 518 Apparel were essentially restated in the new verified complaint, plaintiffs contended that Ryan, a partner at Nixon Peabody and a college friend of Darren's, had assisted the other defendants to breach their fiduciary obligations and commit the acts alleged in the first and second complaints. Plaintiffs also alleged that Ryan and Nixon Peabody had been paid for legal services that helped Scott, Marilyn, and Vanessa "develop and implement their scheme to defraud plaintiffs out of their interests in Van Mar." Plaintiffs also made various claims against Colwell and his firm, Wolff Samson, who were retained ostensibly by Van Mar to defend the corporation in relation to plaintiffs' first and second actions. Essentially, plaintiffs alleged that Colwell assisted Scott, Marilyn, and Vanessa, throughout the litigation in a manner that was in their own self-interests and inconsistent with the best interests of Van Mar.

In this third complaint, plaintiffs, individually and derivatively on behalf of Van Mar, alleged that defendants had

1) committed legal malpractice; 2) breached their contract to provide legal services to Van Mar; 3) breached their fiduciary duties to Van Mar and to plaintiffs; and 4) committed fraud. They sought compensatory and punitive damages, as well as any other necessary equitable relief.*fn2

On February 28, 2007, the plaintiffs, Scott, Vanessa, and Marilyn entered into a global settlement that ended the divorce litigation, Vanessa's gift action, and plaintiffs' first and second actions. When the settlement was placed upon the record, all the individual parties in those suits were present and represented by counsel, however, Van Mar was not. Plaintiffs acknowledged that they believed the settlement was fair and reasonable, however they specifically preserved on the record their claims against these defendants, none of whom were present or otherwise participated in the settlement.

Immediately before the settlement was reached and prior to filing any answers, Ryan, Nixon Peabody, Colwell, and Wolff Samson all moved to dismiss plaintiffs' complaint. After the February 28, 2007, settlement was entered, defendants filed amended motions to dismiss in which they essentially alleged that plaintiffs' voluntary acceptance of and agreement to the terms of the global settlement ...


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