June 9, 2010
HARVEY JOHNSON,*FN1 PLAINTIFF-APPELLANT,
ALLSTATE INSURANCE COMPANY, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4250-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued telephonically February 19, 2010
Before Judges Payne and Miniman.
Plaintiff, Harvey Johnson, appeals from an order of summary judgment entered against him in his action for uninsured motorist (UM) benefits and in favor of his carrier, defendant Allstate Insurance Company, and from an order denying reconsideration.*fn2 We affirm.
On January 14, 2000, Johnson was rear-ended by a truck driven by Richard Domingues and owned by RPZ Trucking. Following the accident, Domingues left his truck and surveyed the damage, but then returned to his truck and fled the scene. He was apprehended two miles down the road. The police report of the accident contains a statement by witness Thomas M. Power, who stated that the truck was traveling in the road's center lane when "it appeared [Johnson] drifted in front of [Domingues]." The truck driven by Domingues then hit Johnson's car, pushing it a considerable distance down the road. A witness statement by Edward W. Foley, Jr. corroborates the fact that Johnson drifted in front of Domingues's truck, but placed the collision in the far left lane. However, the report also contains a statement by Johnson that:
He was northbound on Rt. 9 in far right lane to the right of and slightly ahead of [Domingues]. He states that a vehicle ahead of him changed lanes in front of [Domingues]. [Domingues] slowed and struck him sending him sideways and then pushed him down the road.
At the conclusion of his investigation, the responding officer stated:
Investigation revealed: Extensive damage on [Johnson's] vehicle indicates speeds near posted 50 mph limit. Dual wheel tire marks indicate that the event began and ended in the center lane. [Johnson] appears to have drifted over into the truck (V2) from the right lane. Initial contact was the left rear of [Johnson's vehicle]. . . .
At the time of the accident, Johnson was insured by a policy of automobile liability insurance issued by Allstate Insurance Company that offered personal injury protection (PIP) and UM benefits. Following the accident, Johnson made a PIP claim, attaching the police report to that claim. However, he did not seek UM benefits at the time.
On June 7, 2000, Johnson and his wife filed suit against Domingues and RPZ Trucking, alleging negligence on the part of Domingues. A Rule 4:5-1(b)(2) certification, signed by Johnson's counsel, concluded the complaint. It stated:
Pursuant to R. 4:5-1, it is hereby stated that the matter in controversy is not the subject of any other action pending in any other Court or of a pending arbitration proceeding to the best of my knowledge, information and belief. Further, other than the parties set forth in this pleading, I know of no other parties that should be joined in the above action.
In addition, I recognize the continuing obligation of each party to file and serve on all parties and the Court an Amended Certification if there is a change in the facts stated in this original Certification.
In answers to interrogatories served in the motor vehicle action, Johnson described the accident in the following terms:
The accident occurred on January 14, 2000.
Plaintiff was operating his car on Route 9 North in Woodbridge, New Jersey at or near the intersection with Aspen Lane when defendant struck plaintiff's vehicle from the rear driver's side and spun him around and pushed him down the roadside approximately 150 feet causing plaintiff to lose control of his vehicle.
Trial in the matter occurred from October 13 through 20, 2003. In his trial testimony, unlike his interrogatory responses, Johnson testified in a manner similar to his statement to the police that a phantom driver contributed to the accident. He described the events as follows:
Well, as I was going to work, okay, this car pulled out in front of me, okay, in the right lane, and like I said, it was trying to get all the way over or at least get into the middle lane, okay? This big dump truck was approaching from the rear, okay? And as this car moved from the far right lane into the center lane, this big dump truck slowed down, okay, and to avoid hitting that car, okay, he hit me in back left side.
At the conclusion of the trial, the jury entered a verdict of no cause for action, and on October 29, 2003, a judgment for defendants was entered. An unsuccessful motion for a new trial and appeal to this court followed. Neither party's statement on appeal contained any reference to a phantom vehicle.
On January 5, 2005, five years after the accident and more than one year after the jury's verdict, plaintiff, through new counsel, filed a UM claim with his insurer, Allstate. On March 3, 2005, Allstate responded that the carrier would not consent to arbitration, and that Johnson should file a complaint in the matter, which Johnson did on September 26, 2005.
A period of discovery then occurred, followed by an arbitration proceeding on June 12, 2008, after which Allstate moved for summary judgment. The motion judge heard oral argument, ordered supplemental briefing, and after those briefs were filed in January 2009 and further argument took place, the judge rendered an oral decision on the record on January 23, 2009, granting summary judgment in Allstate's favor. In that decision, the judge found that Johnson's claim against his insurer was barred by the entire controversy doctrine. He held:
The plaintiff does not have the luxury of electing to try a case in 2003, get an adverse jury verdict, go to the Appellate Division, have the verdict affirmed and then change counsel and then come back in years later and want to go after the phantom vehicle.
The judge held additionally that Johnson was aware of his potential claim arising from the alleged phantom driver at the outset, and "[t]he fact that the plaintiff and/or his attorney in the original trial elected not to pursue that, they d[id] so at their own peril." Additionally, the judge held that Allstate had been prejudiced by the conduct of Johnson and his attorney.
Thereafter, Johnson moved for reconsideration, and his motion was denied in an oral opinion delivered on April 17, 2009. The present appeal followed.
The entire controversy doctrine as it presently exists in New Jersey is set forth in Rule 4:30A, which provides:
Non-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine, except as otherwise provided by R. 4:64-5 (foreclosure actions) and R. 4:67-4(a) (leave required for counterclaims or cross-claims in summary actions).
As Judge Pressler has explained, the doctrine, originally applicable only to claims, was extended to parties in Cogdell v. Hospital Center at Orange, 116 N.J. 7 (1989). However, in 1998, as the result of substantial scholarly and other criticism, the rule was again narrowed to preclude a successive action against a person or entity not a party to the initial action only in special situations involving inexcusable conduct and substantial prejudice to the non-party resulting from omission from the first suit. Pressler, Current N.J. Court Rules, comment 1 on R. 4:30A (2010).
We discussed such a potential special situation in Hobart Bros. Co. v. Natn'l Union Fire Ins. Co., 354 N.J. Super. 229 (App. Div.), certif. denied, 175 N.J. 170 (2002). In Hobart, plaintiff sought a declaration of coverage under a comprehensive general liability insurance policy issued by National Union for environmental clean-up costs arising from contamination with trichloroethene and trichloroethane arising from the operations of Nova, an entity acquired by and merged into a subsidiary of Hobart. National Union sought dismissal of the action as barred by the entire controversy doctrine, noting that in a prior action, Hobart had instituted a legal malpractice action against the attorneys representing the sellers of Nova for failure to comply with New Jersey's Environmental Clean-up Responsibility Act (ECRA), N.J.S.A. 13:1K-6 to -13, at the time of the sale of the property to Hobart's subsidiary. Hobart had also sued the carrier affording coverage to Nova prior to the sale in question, and it had settled both the coverage and malpractice claims, receiving money in exchange for releases of any further liability. Hobart's counsel admitted that he had not pursued National Union at the time, because he sought to keep good relations with that carrier, which was defending Hobart in connection with a multiplicity of welding fume claims.
On appeal from an order of summary judgment in National Union's favor we reversed and remanded the matter to the trial court. In doing so, we noted the Supreme Court's statement that:
The application of the entire controversy doctrine requires us to consider fairness to the parties, as the "polestar of the application of the rule is judicial fairness." Consequently, "the boundaries of the entire controversy doctrine are not limitless. It remains an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases."
[Id. at 241 (quoting Oliver v. Ambrose, 152 N.J. , 395 [(1998)] (citations omitted from original)).]
We also observed that because application of the doctrine may result in preclusion of a claim, the court "must consider whether the party against whom the doctrine is sought to be invoked has had a fair and reasonable opportunity to litigate that claim." Ibid. (citing Hillsborough Twp. Bd. of Educ. v. Faridy Thorne Frayta, 321 N.J. Super. 275, 284 (App. Div. 1999)). We stated that courts must remember that the "'entire controversy doctrine is not intended to be a trap for the unwary.'" Ibid. (quoting Joel v. Morrocco, 147 N.J. 546, 554 (1997)). On the other hand, we observed, "a court must also be sensitive to the possibility that a party has purposely withheld claims from an earlier suit for strategic reasons or to obtain 'two bites at the apple.'" Ibid. (citing Hillsborough Twp., supra, 321 N.J. Super. at 284).
After determining that a successive action would be barred only upon a finding of "inexcusable conduct" and "substantial prejudice" to the nonparty arising from its omission from the first suit, id. at 242, we noted that the motion judge in Hobart had found that Hobart's failure to join National Union in its earlier suits was sufficient, in and of itself, to bar it from proceeding against it in a third action. Id. at 242. However, we also found it necessary for the judge to determine whether Hobart's conduct should be characterized as "inexcusable."
Ibid. Also, the judge had not ruled on National Union's claims of prejudice. Ibid. Accordingly, we remanded the matter to the trial court for consideration of those issues in light of various enumerated case-specific factors. Id. at 243-44. We concluded this portion of the opinion by stating:
We note, in addition that the factors of inexcusable conduct and substantial prejudice are, in a sense, interrelated. They are different points along a graded spectrum, but it is the final result they produce which must be weighed in deciding whether fairness requires that a party be precluded from presenting its claim.
Further, the judge's analysis must be guided by the recognition that "preclusion is a remedy of last resort. . . . 'Courts must carefully analyze' both fairness to the parties and fairness to the system of judicial administration 'before dismissing claims.'" Vision Mortgage Corp. v. Chiapperini, 156 N.J. 580 (1999) (citations omitted). [Id. at 244.]
Nonetheless, we did not restrict the authority of the motion judge to determine on remand that dismissal remained the appropriate remedy. Ibid.
In addition to considering the relevance of Hobart to the present matter, we view this case in light of initial counsel's noncompliance with Rule 4:5-1(b)(2), requiring each party, to include with his first pleading a certification as to whether the matter in controversy is the subject of any other action pending in any court or of a pending arbitration proceeding, or whether any other action or arbitration proceeding is contemplated; and, if so, the certification shall identify such actions and all parties thereto. Further, each party shall disclose in the certification the names of any non-party who should be joined in the action pursuant to R. 4:28 or who is subject to joinder pursuant to R. 4:29-1(b) because of potential liability to any party on the basis of the same transactional facts. Each party shall have a continuing obligation during the course of the litigation to file and serve on all other parties and with the court an amended certification if there is a change in the facts stated in the original certification. The court may require notice of the action to be given to any non-party whose name is disclosed in accordance with this rule or may compel joinder pursuant to R. 4:29-1(b).
The rule continues with a penalty provision, which states:
If a party fails to comply with its obligations under this rule, the court may impose an appropriate sanction including dismissal of a successive action against a party whose existence was not disclosed or the imposition on the non-complying party of litigation expenses that could have been avoided by compliance with this rule. A successive action shall not, however, be dismissed for failure of compliance with this rule unless the failure of compliance was inexcusable and the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action.
The requirements for dismissal pursuant to Rule 4:5-1(b)(2) are thus identical to those presently utilized in connection with the entire controversy doctrine, as to which Rule 4:5-1(b)(2) is closely allied.
We recently considered the effect of Rule 4:5-1(b)(2) in Kent Motor Cars, Inc. v. Reynolds and Reynolds Co., 412 N.J. Super. 1 (App. Div. 2010), and following the issuance of that opinion, requested supplemental briefing addressing it in the context of the present matter.
In Kent, in an underlying action, plaintiff Wilson, a car purchaser, had filed a class action against Robert Burt and companies owned by him (collectively, the Burt companies), including Kent Motor Cars, claiming that the Burt companies had violated various statutes by overcharging for title and registration fees and charging documentary fees for services that were not performed. Additionally, plaintiff claimed that a statement at the bottom of the purchase order was in too small a type font, and that it therefore violated a subsection of the Automotive Sales Practice regulations. The purchase orders at issue was purchased in bulk by the Burt companies from Reynolds and Reynolds Company. However, neither the plaintiff nor the Burt companies initially named Reynolds as a party or disclosed its interest in the party's Rule 4:5-1(b)(2) certification. Additionally, although the parties discussed the possibility of adding claims against Reynolds during the course of settlement discussions, that step was never taken. Instead, five months before the settlement was finalized, the Burt companies instituted Kent as a separate action against Reynolds and others. Thereafter, Reynolds successfully sought summary judgment on those parts of plaintiff's complaint implicating it. In doing so, the motion judge found that Reynolds had been substantially prejudiced by the Burt companies' failure to comply with the notice requirements of Rule 4:5-1(b)(2). Id. at 8.
On appeal, we declined to determine whether the two actions were, in fact, successive, determining instead that Reynolds had not demonstrated that it was substantially prejudiced by the lack of required notice. Id. at 11-12. However, before turning to that issue, we noted our agreement with Reynolds's argument that the Burt companies' failure to comply with the notice requirement of Rule 4:5-1(b)(2) was "inexcusable." Id. at 12. We stated in language relevant to the present matter:
The Burt companies knew or should have known by, at the latest, December 2003, when NJCAR informed the sales manager for Honda of Princeton that the Reynolds form did not comply with the ten-point font requirement of N.J.A.C. 13:45A-26B.2(a)(2), that they had potential indemnification or contribution claims against Reynolds.
Therefore, they could and should have given the required Rule 4:5-1(b)(2) notice to the Wilson plaintiffs and the court at that time. [Ibid.]
Turning to the issue of prejudice, we noted that Rule 4:5-1(b)(2) does not require that notice of an action be given to another potentially liable party, but only to other named parties and the trial judge. Ibid. Under the circumstances of Kent, we found it was conjectural whether the trial judge would have required that Reynolds be joined to or notified of the pending proceedings. Ibid. We further found it to be conjectural whether Reynolds would have intervened if it had received notice, and we observed that it had failed to demonstrate that it would be prejudiced by defending the successive action. Id. at 13. We thus concluded that "substantial prejudice" had not been demonstrated, and we reversed the order of summary judgment in Reynolds' favor. Id. at 14.
In a final decision of relevance to this matter, Zirger v. Gen. Accident and Ins. Co., 144 N.J. 327 (1996), the Supreme Court held that a UM/UIM carrier was bound by the damages verdict reached in an action by its injured insured against the tortfeasor, and could not, following the verdict, seek arbitration of the damages claim. Id. at 332-42. However, the Court conditioned that holding on the provision of notice to the insured, stating: "Our cases have established that plaintiffs are obligated to provide notice to their UM/UIM carrier of the institution of suit against the tortfeasor," id. at 341 (citing Rutgers Casualty Ins. Co. v. Vassas, 139 N.J. 163 (1995)), thus facilitating permissive intervention by that carrier. Ibid.
Moreover, we note that the UM/UIM provisions of Allstate's policy contained a notice provision, stating in connection with such claims for bodily injury allegedly arising from hit and run accidents with unidentified drivers:
The accident must be reported to the police within 24 hours. We must be notified within 30 days. If the insured person was occupying a vehicle at the time of the accident, we have the right to inspect it.
When we view the procedural history of the present matter in light of the precedent that we have discussed, covering applicable aspects of the entire controversy doctrine, Rule 4:5-1(b)(2) and UM/UIM insurance law, we conclude that the motion ground acted within his discretion in determining that Johnson's action should be dismissed, finding that Allstate met its burden of demonstrating both inexcusable conduct by Johnson and substantial prejudice to it. As in Kent, it is unquestionable that Johnson knew at the time of the accident that a phantom driver could be implicated in the collision. Johnson stated as much to the police, and he reiterated his phantom claim in testimony at trial. Moreover, as the result of the language in Johnson's Allstate policy requiring notice to it of any UM/UIM claim within thirty days of the accident, together with Court's decisions in Zirger and Vassas establishing that a plaintiff is obligated to provide notice to his UM/UIM carrier, Johnson's counsel should have similarly been aware of his obligation to provide prompt notice to Allstate of the collision between Johnson and Domingues and Johnson's subsequent suit. In this context, the disclosure requirements of Rule 4:5-1(b)(2) should have afforded a fail-safe that counsel ignored. We find these circumstances to be sufficient to establish that the conduct on the part of Johnson and his attorney in failing to notify Allstate of Johnson's potential UM claim for five years after the accident was "inexcusable," thus rendering a finding of claim preclusion within the motion judge's discretion.
We further find that Allstate demonstrated prejudice as the result, most particularly because as a consequence of the delay in providing notice, Allstate has forfeited its statutory right to subrogation pursuant to N.J.S.A. 17:27-1.1d, that right having been barred by the applicable statute of limitations prior to any knowledge by it of Johnson's potential claim. See also Brown v. Selective Ins. Co., 311 N.J. Super. 210, 214 (App. Div. 1998) (finding prejudice as the result of failure to provide notice of a UM claim until after the period for suit under the applicable statute of limitations had passed); Vassas, supra, 139 N.J. 169-70 (holding that the statute of limitations for a subrogation action begins to run as the same time as the limitations period for the underlying action).
Having found Johnson's UM claims to have arisen from the same factual nexus as his claims against Domingues and having found inexcusable conduct on Johnson's part in failing to name Allstate as a party in the Domingues matter, list it in his Rule 4:5-1(b)(2) certification, or provide contractual notice, and having found that Johnson's conduct caused appreciable prejudice to Allstate, we affirm.