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Naughton v. Harmelech

Superior Court of New Jersey, Appellate Division

October 16, 2013

W. JAMES MAC NAUGHTON, Plaintiff-Appellant,
v.
SHAI HARMELECH, CABLE AMERICA, INC., d/b/a SATELLITE AMERICA, and USA SATELLITE & CABLE, INC., Defendants-Respondents.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 8, 2013

On appeal from the Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-442-12.

W. James Mac Naughton, appellant, argued the cause pro se.

William T. Harvey, Jr. argued the cause for respondents (Law Office of William T. Harvey, Jr., LLC, attorneys; Mr. Harvey, of counsel and on the brief).

Before Judges Fisher and O'Connor.

PER CURIAM

Following denial of a motion to amend his complaint in a pending federal action, plaintiff filed in the trial court a complaint, which alleges the same claim the federal court would not permit. The trial judge dismissed the state complaint, holding that plaintiff "selected his forum and cannot now be allowed to pursue a simultaneous action" in state court. We reverse.

Defendants moved to dismiss the complaint in this matter pursuant to Rule 4:6-2(e). In reviewing that dismissal, plaintiff is entitled to our assumption of the truth of his allegations and the benefit of all reasonable factual inferences. Independent Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956); Seidenberg v. Summit Bank, 348 N.J.Super. 243, 249-50 (App. Div. 2002). Accordingly, we assume the truth of the following.

Plaintiff, an attorney, represented defendants in litigation in the United States District Court for the Northern District of Illinois in 2009. Defendants fell behind on the payment of his fees and, as a result, on August 12, 2009, the parties executed a promissory note and security agreement that granted plaintiff "a security interest in all of [defendants'] right, title and interest in any and all real or personal property wherever located." The parties' agreement authorized plaintiff to sign defendants' name "to any UCC-1 or other documents reasonably necessary to perfect" plaintiff's security interest. Plaintiff alleges that defendants breached the terms of the promissory note and security agreement.

In October 2009, in an effort to collect his unpaid fees, plaintiff commenced a civil action in the United States District Court for the District of New Jersey.[1] Plaintiff asserted in his federal complaint that subject matter jurisdiction was based on the parties' diversity of citizenship and that the amount in controversy exceeded $75, 000. 28 U.S.C.A. § 1332.

Defendants moved for dismissal, arguing the complaint failed to state a claim upon which relief might be granted. Fed.R.Civ.P. 12(b)(6). With respect to plaintiff's fourth count, which sought a declaratory judgment, District Judge Peter G. Sheridan held, in his written opinion of September 22, 2010, that the parties' August 12, 2009 agreement "did not create a security interest in [d]efendants' real property under either the Illinois Commercial Code or common law." Judge Sheridan explained that the description of the collateral was "supergeneric"[2] and, for that and other reasons, he dismissed the fourth count.

Plaintiff further factually asserts in the matter at hand that, on June 20, 2011, he executed an amended security agreement that cures the "supergeneric" defect found by Judge Sheridan. He then moved to amend his federal complaint to add a count for enforcement of the amended security agreement. In an opinion filed on March 30, 2012, District Judge Esther Salas denied plaintiff's motion, concluding that plaintiff unduly delayed in asserting the claim. Judge Salas did not rule on the merits of this cause of action. In her opinion, Judge Salas recognized that plaintiff's claim was based on his assertion of the right to unilaterally amend the original security and concluded that she "need not, and does not, take a position on the validity of this legal theory."

Soon after his motion to amend the federal complaint was denied, plaintiff filed his complaint in this state action, seeking a declaratory judgment regarding the validity of the amended security agreement. Before filing an answer, defendants moved to dismiss the complaint pursuant to Rule 4:6-2(e). The motion judge determined, in his oral opinion, that plaintiff "elect[ed] [his] remedies" by filing a complaint regarding the same controversy in federal court and, to the extent his state complaint contained a viable claim, it could only be asserted in federal court. In a subsequent written decision, the motion judge did not reiterate his election of remedies holding, couching his ruling instead in "entire controversy" terms:

The entire controversy doctrine requires the joinder of "virtually all causes, claims, and defenses relating to a controversy between the parties engaged in the litigation."
This dispute is already being litigated in federal court. Both the [d]istrict [c]ourt claim and the claims brought in this [c]ourt arise from a single transaction or occurrence: the creation of a promissory note in 2009. Plaintiff has selected his forum and cannot now be allowed to pursue a simultaneous action in this [c]ourt.

We reject this reasoning.

To be sure, the entire controversy doctrine is intended to preclude multiple suits. As has been said, the doctrine is centered on our Constitution's recognition of "the value in resolving related claims in one adjudication so that 'all matters in controversy between parties may be completely determined.'" Mystic Isle Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 322 (1995) (quoting N.J. Const. art. VI, § 3, ¶4). But it is important to recognize that the doctrine is ultimately "one of judicial fairness[, ] will be invoked in that spirit, " Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 343 (1984); see also Archbrook Laguna, LLC v. Marsh, 414 N.J.Super. 97, 104 (App. Div. 2010), and must be tempered by the important policy that claims be decided on their merits, not procedural niceties, Galik v. Clara Maass Med. Ctr., 167 N.J. 341, 356 (2001); Alpha Beauty Distribs., Inc. v. Winn-Dixie Stores, Inc., 425 N.J.Super. 94, 102 (App. Div. 2012).

Here, as we have outlined, the cause of action pleaded in this suit has not been adjudicated on its merits in another forum. Indeed, it cannot be adjudicated in that other forum because Judge Salas, in the exercise of her discretion, has precluded its further consideration. The rules governing civil practice in our courts, however, are not offended in all situations where multiple suits are simultaneously maintained, see Kaselaan & D'Angelo v. Soffian, 290 N.J.Super. 293, 299 (App. Div. 1996), and certainly not when the alternative is to deprive plaintiff of any forum for the adjudication of a potentially viable claim.

In short, the true concern here is not that there may be two suits relating to the same controversy pending at the same time. Indeed, this circumstance is not uncommon when a plaintiff pursues a federal forum on a dubious or questionable assertion of federal jurisdiction. Plaintiffs routinely file companion state actions to avoid the problems recognized in cases such as Galligan v. Westfield Centre Service, Inc., 82 N.J. 188 (1980), should their federal actions be dismissed on jurisdictional grounds. The concern in that instance is not the existence of two lawsuits but whether those suits present the potential for unnecessary duplication of effort or inconsistent rulings – a circumstance surmountable through sensible case management.

Accordingly, we reverse the order of dismissal and remand for consideration of the best way to manage the case to avoid the problems that the entire controversy doctrine was intended to address. For example, it may be appropriate to stay this action pending disposition – either in whole or in part – of the federal action, or vice versa. We have insufficient information regarding these claims to be able to provide greater guidance as to the future handling of this case during the pendency of the federal action. Instead, we leave the determination of whether the issuance of a stay is appropriate. In the alternative, the trial court should appropriately manage this case – perhaps through consultation with the federal court – so as to avoid multiplicity of effort and inconsistent rulings.

Reversed and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction.


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