On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-8856-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing and Messano.
Plaintiffs Dennis and Janet Skibinski appeal from the Law Division's order that dismissed with prejudice their complaint against defendant Margaret Sullivan. We have considered the arguments raised in light of the record and applicable legal standards. We reverse.
This is a legal malpractice action that has its genesis in a real estate transaction that closed in December 2000. At the time, plaintiff Janet Skibinski was employed in defendant's law firm.*fn1 Together with her husband, Dennis, and another couple, Eli and Paula Horowitz, she contracted to purchase certain property located at 2910 North Beach Avenue, in the Township of Long Beach. Defendant represented all four purchasers.
Plaintiffs and the Horowitzes owned the property as co-tenants.*fn2 When the parties contracted to sell the property, in 2004, disputes arose. Plaintiffs essentially contended that they were owed reimbursement for services they provided or paid for in refurbishing and maintaining the property; the Horowitzes contended otherwise.
When the closing took place, the proceeds were escrowed. Plaintiffs then filed suit in the Chancery Division in Ocean County against the Horowitzes, and two related corporations that managed the properties and in which the parties shared ownership interests (the Chancery action). Plaintiffs sought an accounting, reimbursement for the services they provided, distribution of the escrow, and reimbursement from, and dissolution of, the related corporations. Plaintiffs' attorney at the time certified, pursuant to Rule 4:5-1(b)(2), that he was "not aware of any other party that [wa]s required to be joined in th[e] action." After mediation, the Chancery action settled on February 15, 2005.
Plaintiffs filed this action on November 29, 2006. Defendant answered in January 2007, and the parties engaged in discovery thereafter. The gist of plaintiffs' complaint is that defendant failed to properly advise them prior to the purchase of the property regarding the benefits a joint venture agreement with the Horowitzes, and that defendant essentially abandoned them at the time of closing. In fact, it is apparently undisputed that defendant, who was expecting twins at the time, faced a medical emergency and was unable to attend the closing. Plaintiffs sought the assistance of another lawyer whose offices were in the same building as those of defendant, and he assisted at the closing of title.
Although defendant gave Janet Skibinski a form joint venture agreement prior to closing, Janet testified in deposition that she specifically asked defendant to deal with the Horowitzes on the matter. Defendant disputed that version of events to the extent that she believed plaintiffs were dealing with the Horowitzes, and she was never asked to attend to the matter directly. In any event, the closing took place without any agreement and it is plaintiffs' contention that they suffered damages as a result, including their need to file suit and prosecute their claims in the Chancery action.
This case was scheduled for trial on December 7, 2008. On October 24, 2008, defendant moved for summary judgment. She alleged that plaintiffs failed to prove any damages as a proximate cause of her alleged malpractice, and that plaintiffs failed to comply with Rule 4:5-1(b)(2) (the Rule) by not naming her as a party who had potential liability in the Chancery action. Defendant claimed she was prejudiced as a result because Eli Horowitz, who was primarily responsible for that couple's involvement in the properties, was a resident of New York and could not now be forced to appear in court.
Plaintiffs argued that the Entire Controversy Doctrine (the ECD) did not apply to their legal malpractice claim. Additionally, they contended that their expert's report demonstrated they had suffered damages proximately caused by defendant's negligence.
After considering oral argument, the motion judge filed a written opinion that accompanied her order dismissing the complaint with prejudice. She reasoned that plaintiffs violated the Rule by failing to "disclose [in the Chancery action] the names of non-parties[,]" i.e., defendant, "who may have [had] potential liability . . . to the named parties on the basis of the same transactional facts." She further concluded that plaintiffs' conduct was "inexcusable," and "substantially prejudiced" defendant. In this regard, the judge noted the "Horowitzes . . . are key witnesses" who defendant "could have deposed . . . and obtained valuable information [from] to defend" herself. The judge determined the Horowitzes are now "unavailable." She entered the order under review dismissing plaintiffs' complaint with prejudice. This appeal ensued.
The parties have reiterated their arguments before us. We conclude that even if plaintiffs were obligated to name defendant as a party with potential liability in the Chancery action, defendant did not demonstrate substantial prejudice as a result of this failure. Therefore, it was ...