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Contel Global Marketing, Inc. v. Dreifuss

February 4, 2010

CONTEL GLOBAL MARKETING, INC., PLAINTIFF-APPELLANT,
v.
DAVID C. DREIFUSS, ESQ., DREIFUSS, BONACCI & PARKER, LLP, WELLS, DREIFUSS, JAWORSKI LIEBERMAN & PATON, LLP, N/K/A WELLS, JAWORSKI & LIEBMAN, LLP, AND NAGEL, RICE, DREIFUSS & MAZIE N/K/A NAGEL RICE, LLP, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-3363-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 5, 2010

Before Judges Parrillo and Ashrafi.

Plaintiff, Contel Global Marketing, Inc. (Contel or plaintiff), appeals from an order of the Law Division dismissing with prejudice plaintiff's legal malpractice complaint against defendants*fn1 for failure to state a claim under Rule 4:6-2(e) in that plaintiff could not prove defendants' alleged negligent conduct was the proximate cause of the damages suffered. We affirm.

According to the complaint, Contel is a New Jersey business that imports fruit from Chile during the winter months via jumbo jets. Contel believed its participants in a joint venture in Chile were overcharging it by approximately $10 million and hired Dreifuss and Nagel to bring an action against Aldo Pesce Cotera (Cotera), Clear River Corporation (Clear River), Nova Agencia DeCarga S.A. (DeCarga), and Agricola Punta Arenas Lida (Agricola) (collectively the joint venturers or Cotera defendants) for fraud, interference with contract, and RICO violations (hereinafter Cotera litigation). Dreifuss filed the complaint in federal district court on January 17, 2001. The Cotera defendants, however, were not served until one to two years later between April and November 2002. None of the joint venturers filed a responsive pleading within a year.

Service on the Chilean joint venturers was to be made pursuant to the Inter-American Convention of Letters Rogatory. Agricola was served on April 20, 2002 and DeCarga was served on August 2, 2002. Defendants Dreifuss and Nagel received notice from the United States Department of Justice (DOJ) advising them of the service on Argicola on July 15, 2002 and of completed service on DeCarga on September 18, 2002, and then filed proof of service as to both DeCarga and Agricola on October 21, 2002. Cotera was served on October 22, 2002; DOJ notice was received by defendants on November 25, 2002; and proof of Cotera's service was filed with the court on December 23, 2002. The final joint venturer, Clear River, was served on November 13, 2002; defendants received notice on December 19, 2002 from the DOJ and filed proof of service with the court on December 31, 2002.

Meanwhile, on December 18, 2002, the magistrate judge ordered Contel to show cause why Cotera and Clear River were not served and "why the Complaint should not be dismissed as to these defendants for failure to effect service." In the same order, the magistrate judge "directed [Contel] to move for entry of default and default judgment" as to Agricola and DeCarga who had been served, but failed to appear in the action at that time.

However, two days later, on December 20, 2002, counsel for the Cotera defendants appeared in the case and requested a case management conference to address what counsel contended was lack of personal jurisdiction and improper service. In other correspondence to the court two weeks later - on January 2, 2003, counsel also requested that plaintiff not be permitted to default the Cotera defendants until all jurisdictional and service of process issues were addressed at the scheduled January 29, 2003 conference. The magistrate judge granted counsel's request and in a January 30, 2003 order following the conference discharged the prior order to show cause and established a briefing schedule. Accordingly, the joint venturers filed their motion to dismiss on jurisdictional grounds pursuant to Fed. R. Civ. P. 12(b), and shortly thereafter, on June 2, 2003, Contel, through defendants Dreifuss and Nagel, cross-moved for entry of default.

On December 2, 2003, the federal district court judge, in denying both parties' motions, commented with respect to Contel's, that had Dreifuss and Nagel Rice moved for default earlier, the Court may have granted relief, setting the stage for the possible eventual execution of a final judgment of default in Chile. Specifically, in denying Contel's motion, the judge remarked:

Had Plaintiff filed its cross-motion for default in 2002 (when it says service was effective) and had the Court granted it (as it might have absent objections from then nonparticipating Defendants), Plaintiff could have carried a subsequent federal court judgment to Chile for enforcement. This would have allowed a Chilean court -with expertise - to determine the propriety of service of process under their own law. Additionally, by bringing its cross-motion seeking default after Defendant filed its motion seeking dismissal under Rule 12(b), Defendants entertained significant legal costs relating to arguments wholly unrelated to default. Had Plaintiff brought its default motion in 2002, Defendants would have been spared these costs. In these circumstances, granting default supplies all the wrong incentives- it would lead dilatory litigants to remain dilatory.

This court does not wish to make light of the timing requirements within the federal rules. Nor is this Court suggesting that an exception to those timing requirements exists for foreign-based defendants otherwise served properly. But in this posture, where the Defendants have begun to actively litigate in this forum and have participated in all pre-trial proceedings as ordered by the Court, the Court squarely favors trial on the merits, rather than by default. See Hutton v. Fisher, 359 F.2d 913, 916 (3d Cir. 1966); 10A Federal Practice and Procedure: Civil ¶2681 ("A defendant who has participated throughout the pretrial process and has filed a responsive pleading, placing the case at issue, had not conceded liability."). This is especially true when a substantial amount of money is involved. See Hutton v. Fisher, 359 F.2d 913, 916 (3d Cir. 1966); 10A Federal Practice And Procedure: Civil ¶2681.

In the same decision, the court declined to decide the propriety of service of process on the joint venturers. Thereafter, Contel fired Dreifuss and Nagel and hired the Sills Cummis law firm to take over its representation in the Cotera litigation. Subsequently, in 2006, a consent order was entered to submit the Cotera litigation to arbitration.

On October 6, 2008, plaintiff filed a legal malpractice action against defendants alleging that their failure to timely seek default caused plaintiff to incur $2 million in legal fees for the remainder of the Cotera litigation, from the point in time default should have and would have been entered. On January 9, 2009, defendants Dreifuss and Nagel filed a joint motion to dismiss the complaint in lieu of answer pursuant to Rule 4:6-2(e), in which defendants DBP and Wells later joined.

Following argument, the Law Division judge granted the motion to all defendants with prejudice, finding that "the [c]omplaint, as a matter of law, fails to state a claim for legal malpractice[,]" because "Contel cannot properly allege that the breach of any duty on the part of defendants proximately caused Contel damages." In her February 23, 2009 letter opinion, Judge Chrystal found:

Given [the district court judge's] opinion, to properly plead proximate cause on its legal malpractice claim, Contel would have to plead that (1) default could have been entered as to the joint venturers before the joint venturers began to actively litigate, (2) the federal court would have entered default against the joint venturers, (3) if default had been entered, that any potential motion to vacate default would have been denied, (4) if default had been entered, that the court would have entered default judgment, (5) any potential default judgment would not have been vacated, and (6) any potential default judgment would have been enforceable in Chile. Given the legal ruling in [the district court judge's] opinion, his reliance on Hutton v. Fisher, and the general reluctance of courts to enter default and the liberal standard for motions to vacate default, the Court finds that, as a matter of law, Contel cannot meet, as a matter of law, the proximate causation element of a legal malpractice claim. Therefore as to defendants David C. Dreifuss, Esq. and Nagel Rice, LLP, the motion to dismiss the Complaint is GRANTED. With respect to defendant Wells, Jaworski & Liebman, LLP, the Complaint merely states that David C. Dreifuss, Esq. left Nagel Rice and joined Wells, Jaworski & Liebman, LLP in April 2003. The Complaint states that Mr. Dreifuss then left Wells, Jaworski & Liebman, LLP in December 2003 and became a partner at Dreifuss Bonacci & Parker, LLP. However, the defendant law firms Wells, Jaworski & Liebman, LLP and Dreifuss Bonacci & Parker, LLP did not represent Contel during the relevant time periods. Therefore, as to defendants Wells, Jaworski & Liebman, LLP and Dreifuss Bonacci & Parker, LLP, the motion to dismiss the Complaint is GRANTED.

On appeal, plaintiff contends:

I. DEFENDANTS' MOTION TO DISMISS SHOULD HAVE BEEN DENIED AS THE COMPLAINT SETS FORTH A VALID LEGAL MALPRACTICE ACTION AS A MATTER OF LAW.

A. THE COURT SHOULD HAVE ACCEPTED THE FACTS AS TRUE AS ALLEGED IN THE COMPLAINT.

B. IF THE COMPLAINT WAS DEFECTIVE, PLAINTIFF SHOULD HAVE BEEN GRANTED AN ...


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