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New Jersey Manufacturers Insurance Co. v. Prestige Health Group

April 6, 2009

NEW JERSEY MANUFACTURERS INSURANCE COMPANY, NEW JERSEY RE-INSURANCE COMPANY, AND NEW JERSEY INDEMNITY INSURANCE COMPANY, PLAINTIFFS-RESPONDENTS,
v.
PRESTIGE HEALTH GROUP, LLC, ADVANCED HEALTH GROUP, LLC, AND PAUL BABITZ, D.C., DEFENDANTS-APPELLANTS, AND OPHELIA CAIN A/K/A DENISE ADAMS CAIN, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2468-05.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Submitted on March 16, 2009

Before Judges Carchman, Sabatino and Simonelli.

Defendants Prestige Health Group, LLC, Advanced Health Group, LLC and Paul Babitz, D.C. appeal from the April 27, 2007 order denying their motion for reconsideration of the March 30, 2007 order denying their motion to vacate default. Defendants also appeal from the entry of final judgment. We reverse and remand for further proceedings.

The following facts are pertinent to our review. On June 23, 2005, defendant Paul A. Babitz, D.C. appeared for a pre-litigation examination under oath in connection with what thereafter became a Law Division action filed by plaintiffs against Babitz and numerous other medical providers. During that examination, plaintiffs were represented by the law firm representing them in this matter. Babitz was represented by Bradley J. Weil, Esq., of the Rivkind and Weil*fn1 law firm.

On September 19, 2005, plaintiffs filed a verified complaint and order to show cause in this matter. They alleged insurance fraud in connection with personal injury protection (PIP) claims, in particular with respect to referrals and billings for electromyography (EMG), nerve conduction velocity (NCV) tests and chiropractic services. Plaintiffs sought, among other things, declaratory relief, compensatory and treble damages, and attorneys' fees and costs. They also sought injunctive relief in the form of a stay of pending PIP arbitrations and the filing of new PIP arbitrations.

Plaintiffs served the verified complaint and order to show cause on defendants on October 6 and 7, 2005. On or about November 11, 2005, defendants appeared in this matter and opposed the order to show cause. Thereafter, Weil communicated with the court and with plaintiffs' counsel in his capacity as counsel of record for defendants.

On December 2, 2005, default was entered against defendants for failure to file an answer (the first default). Apparently unaware that this had happened, Weil continued representing defendants in this matter. He filed motions and continued communicating with the court and with plaintiffs' counsel as counsel of record for defendants.

With notice to Weil, on or about May 10, 2006, plaintiffs requested a proof hearing. In response, Weil filed a motion to vacate the first default, which plaintiffs did not oppose. Weil included with the motion papers a proposed answer, case information statement and check for the filing fee. The motion was granted by order entered on July 11, 2006 (the July 11 order). The order did not indicate that any further action was necessary to file the answer. The clerk's office cashed the check for the filing fee, but did not file the answer.

On October 25, 2006, plaintiffs filed an amended complaint without leave of court. They served it on defendants on November 13, 2006, but not on Weil. Because defendants assumed that plaintiffs had also served Weil, they never advised him of their receipt of the amended complaint. However, the litigation continued, with Weil filing and opposing additional motions and continuing to communicate with the court, and with plaintiffs' counsel, as attorney of record for defendants.

Notwithstanding defendants' appearance in this matter, and plaintiffs' knowledge that Weil was acting as defendants' counsel of record throughout these proceedings, on December 21, 2006, plaintiffs filed a request to enter default without notice to Weil or defendants. Default was entered in January 2007 (the second default). A proof hearing was scheduled for February 21, 2007.

Weil filed a timely motion to vacate the second default. He included with the motion papers a proposed answer, a case information statement and the filing fee. The motion judge entered an order on March 30, 2007, denying the motion. The judge concluded that defendants failed to answer the original complaint and failed to assert a meritorious defense. By order, entered on April 27, 2007, the judge denied ...


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