November 4, 2013
MARK P. JIORLE, individually and on behalf of MARK P. JIORLE Self-Directed Individual Retirement Account, MID-OHIO SECURITIES, Trustee, Plaintiff-Appellant,
PHILIP J. MAENZA and PHILIP J. MAENZA, P.C., Defendants/Third-Party Plaintiffs-Respondents,
CAROLYN MORTAGE SERVICES, INC., EDWARD J. MUPO and CAROL J. MUPO, Third-Party Defendants.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 17, 2013
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-7558-08.
J. Llewellyn Mathews argued the cause for appellant (Mr. Mathews, attorney and on the brief; Kit Applegate, on the brief).
Matthew P. O'Malley argued the cause for respondents (Tompkins, McGuire, Wachenfeld & Barry, LLP, attorneys; Mr. O'Malley, Gabriella Garofalo-Johnson and Leon B. Piechta, on the brief).
Respondents Carolyn Mortgage Services, Edward J. Mupo and Carol J. Mupo has not filed a brief.
Before Judges Messano and Sabatino.
In our prior opinion, Jiorle v. Mupo, No. A-2390-06 (App. Div. Aug. 26, 2009), we detailed the facts that set the stage for this legal malpractice action filed by plaintiff Mark Jiorle against defendants Philip J. Maenza and Philip J. Maenza, P.C.Because the procedural histories of that litigation and this are important in resolving this appeal, we recite them at length.
Plaintiff filed his complaint against Carolyn Mortgage Services, Inc., Edward J. and Carol J. Mupo, and Anthony Billeci on January 24, 2005 (the Mupo action). Although defendant was not named as a party, he clearly was an important witness. See Jiorle, supra, slip op. at 4-9. Defendant was deposed on February 7, 2006.
Shortly thereafter, on March 14, plaintiff filed a "Supplemental Certification Under Rule 4:5-1." Counsel certified:
Based on testimony given by . . . [defendant] . . . at his deposition . . . [defendant] may be liable . . . on the basis of the same transactional facts which form the basis of [p]laintiff['s] claims against [the Mupos] . . . in this action. Accordingly, [defendant] may be a person who should be joined in this action pursuant to R. 4:28 or who is subject to joinder pursuant to R. 4:29-1(b). . . . [P]laintiff do[es] not intend to move to join [defendant] in this action, but reserve[s] the right to file a separate action against [defendant].
Neither the court nor any party in the Mupo action sought to join defendant in the litigation.
The Mupo action was tried between May 30 and June 20, 2006. Plaintiff was ultimately successful in obtaining a judgment against Edward J. Mupo, which we affirmed on appeal. Jiorle, supra, slip op. at 10, 24.
On September 12, 2008, while the appeal was pending, plaintiff filed this complaint against defendant alleging legal malpractice. Defendant answered on December 11, 2008 and asserted "the Entire Controversy Doctrine" (ECD) as an affirmative defense. On August 4, 2009, defendant filed a third party complaint against the Mupos. The Mupos answered and filed a counterclaim against defendant alleging legal malpractice.
Plaintiff moved for partial summary judgment on all issues except punitive damages, and the Mupos cross-moved for partial summary judgment against defendant. Although a proper motion was never filed, the judge treated defendant's brief as a motion for summary judgment. The parties all appeared for oral argument on May 25, 2012.
In his oral decision that followed, the judge concluded that the ECD applied, reasoning "certainly [defendant] could have been joined initially in the case that occurred between Jiorle and Mupo and by his not being joined we have the same parties to some degree suing each other again." He granted defendant summary judgment, entering an order that stated plaintiff violated the ECD and "R. 4:5-1." Two other orders entered the same day denied plaintiff's and the Mupos' respective motions for partial summary judgment. Since there was apparent confusion as to whether the orders disposed of all claims as to all parties, the judge entered another order on June 27, 2012 that dismissed "the entire action . . . with prejudice . . . ." This appeal followed.
Plaintiff argues that the judge erred in dismissing his complaint pursuant to the ECD or Rule 4:5-1, or, alternatively, that defendant waived the defense or should be estopped from asserting it. He also contends that his motion for partial summary judgment should have been granted because there are no genuine disputes of material facts, and he is entitled to judgment as a matter of law.
Defendant contends that the judge properly concluded the ECD and Rule 4:5-1(b)(2) barred plaintiff's complaint. Defendant also argues that material factual disputes exist as to the scope of any duty owed to plaintiff, whether that duty was breached and whether any proximately-caused damages resulted.
We have considered these arguments in light of the record and applicable legal standards. We reverse and remand the matter for further proceedings consistent with this opinion.
The ECD reflects a "long-held preference that related claims and matters arising among related parties be adjudicated together rather than in separate, successive, fragmented, or piecemeal litigation." Kent Motor Cars, Inc. v. Reynolds and Reynolds, Co., 207 N.J. 428, 443 (2011). "Originally a claim preclusion rule, over time, the doctrine evolved to require joinder of parties as well, and culminated in the 1990 adoption of Rule 4:30A." Ibid. (citations omitted).
"In its first formulation, Rule 4:30A was broad, requiring joinder of claims and parties and imposing preclusion as a penalty to ensure compliance with that mandate." Ibid. However, following "[s]cholarly criticism of the doctrine's growth, " the Court ultimately agreed with "two significant changes" recommended by the Civil Practice Committee. Id. at 444. "First, Rule 4:30A was amended to limit its scope to mandatory joinder of claims. Second, Rule 4:5-1(b)(2) was adopted to address joinder of parties." Ibid. As currently articulated, the ECD requires only that "all aspects of the controversy between those who are parties to the litigation be included in a single action." Pressler and Verniero, Current N.J. Court Rules, comment 1 on R. 4:30A (2014).
"The purpose of paragraph (b)(2) of [Rule 4:5-1] is to implement the philosophy of the [ECD]." Id. at comment 2.1 on R. 4:5-1 (citing R. 4:27-1, R. 4:29-1(b), R. 4:30A and commentary). Rule 4:5-1(b)(2) requires each party to include the following with its first pleading:
[A] certification as to whether the matter in controversy is the subject of any other action pending in any court . . ., or whether any other action . . . is contemplated; and, if so, . . . 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 disclosure requirement ensures that the "ultimate authority to control the joinder of parties and claims remains with the court." Kent Motor Cars, supra, 207 N.J. at 446.
The Rule continues:
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.
Thus, "[t]he Rule's only authorization for a dismissal relates to the preclusion 'of a successive action' that is appropriate only if '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.'" Alpha Beauty Distributors, Inc. v. Winn-Dixie Stores, Inc., 425 N.J.Super. 94, 101 (App. Div. 2012) (quoting R. 4:5-1(b)(2)).
We have explained that
a trial court deciding an entire controversy dismissal motion must first determine from the competent evidence before it whether a Rule 4:5-1(b)(2) disclosure should have been made in a prior action because a non-party was subject to joinder pursuant to Rule 4:28 or Rule 4:29-1(b). If so, the court must then determine whether (1) the actions are "successive actions, " (2) the opposing party's failure to make the disclosure in the prior action was "inexcusable, " and (3) "the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action."
[700 Highway 33 LLC v. Pollio, 421 N.J.Super. 231, 236 (App. Div. 2011) (quoting R. 4:5-1(b)(2)).]
"If those elements have been established, the trial court may decide to impose an appropriate sanction. Dismissal is a sanction of last resort." Id. at 236-37 (citing Kent Motor Cars, supra, 207 N.J. at 453-54).
Here, dismissal of plaintiff's complaint was improper because plaintiff complied with the continuing obligation to amend his original Rule 4:5-1(b)(2) certification. It is undisputed that within weeks of deposing defendant, plaintiff filed the required amended certification. Defendant argues, however, that the filing was untimely, since plaintiff knew the essential facts supporting his claim of legal malpractice before he deposed Maenza.
In order to accept defendant's argument as justification for the dismissal of plaintiff's complaint, we would need to conclude that plaintiff was so tardy that the filed supplemental certification was the equivalent of non-compliance. That is so because, pursuant to Rule 4:5-1(b)(2), dismissal was only appropriate if there were a "failure of compliance" that was "inexcusable" and "substantially prejudiced" defendant. Ibid. (emphasis added). In our minds, it is not at all clear that plaintiff had sufficient information before the deposition upon which to form a good-faith belief that he had a potential cause of action against defendant. And, we certainly cannot conclude that plaintiff failed to comply.
We are also convinced that defendant did not suffer substantial prejudice. "The phrase 'substantial prejudice' is used in Rule 4:5-1(b)(2) as a limitation on the court's exercise of the power of dismissal as a sanction. As a result, the Rule is consistent with our general preference for addressing disputes on the merits and reserving dismissal for matters in which those lesser sanctions are inadequate." Kent Motor Cars, supra, 207 N.J. at 447. We have said that "[s]ubstantial prejudice in th[e] context [of Rule 4:5-1(b)(2)] means substantial prejudice in maintaining one's defense. Generally, that implies the loss of witnesses, the loss of evidence, fading memories, and the like." Mitchell v. Procini, 331 N.J.Super. 445, 454 (App. Div. 2000) (citation omitted); see also Kent Motor Cars, supra, 207 N.J. at 446 (citing Mitchell with approval).
A claim of substantial prejudice, however, is not limited to the loss of available "evidence and proofs needed for [defendant] to defend" himself. Kent Motor Cars, supra, 207 N.J. at 448. Substantial prejudice may result from "the potential impact of the particular legal framework in which the claims in th[e] litigation have been brought." Ibid. For example, in Kent Motor Cars, supra, 207 N.J. at 450, the Court found "substantial prejudice" resulted from non-compliance with Rule 4:5-1(b)(2) because the defendant now faced exposure "to a trebling of damages already trebled" in the preceding litigation, "as well as to a trebling of attorneys' fees." See also Gelber v. Zito P'ship, 147 N.J. 561, 566 (1997) (noting prejudice where the "failure to give notice deprived both the [defendant] and the court of the opportunity to . . . manage or otherwise coordinate the two proceedings").
Defendant asserts he was substantially prejudiced because of the fading memories of witnesses and potential lost documents. The claim lacks sufficient merit to warrant discussion. R. 2:11-3 (e)(1)(E). It suffices to say that defendant has failed to identify any such witnesses or documents that are unavailable.
Defendant also argues that if the case proceeds, he "may well . . . [be] bound by the facts as they were decided in the [Mupo action] and affirmed" by this court. Defendant cites no authority for this claim. More importantly, although we do not expressly decide the issue, plaintiff's successful use of offensive collateral estoppel under these circumstances seems unlikely. See, e.g., Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521 (2006) (noting that "for the doctrine of collateral estoppel to apply to foreclose the relitigation of an issue, the party asserting the bar must show, " among other things, that "the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding") (emphasis added) (citation omitted).
Lastly, defendant claims plaintiff will seek "duplicative" counsel fees if successful, i.e., fees incurred in prosecuting the Mupo action plus fees incurred in prosecuting this action."[A] negligent attorney is responsible for the reasonable legal expenses and attorney fees incurred by a former client in prosecuting the legal malpractice action[, ]" because they "are consequential damages . . . proximately related to the malpractice." Saffer v. Willoughby, 143 N.J. 256, 272 (1996). Additionally, "[a] plaintiff has the right to recover attorney's fees incurred in other litigation with a third person, if he became involved in that litigation as a result of a breach of contract or tortious act by the present defendant." In re Estate of Lash, 169 N.J. 20, 31 (2001) (citations and internal quotation marks omitted). However, this does not amount to substantial prejudice, since, as a general rule, claims of legal malpractice were carved out of the ECD before Rule 4:5-1(b)(2) was enacted. See Olds v. Donnelly, 150 N.J. 424, 443 (1998).
Although we reverse the order dismissing plaintiff's complaint, we decline to reverse the order denying him partial summary judgment. As noted, the judge did not consider the merits of plaintiff's motion because he believed it to be moot. Plaintiff asserts that there exists no genuine dispute of material fact as to each element of his legal malpractice claim, and he is entitled to judgment as a matter of law. See Jerista v. Murray, 185 N.J. 175, 190-91 (2005) (noting that an action for legal malpractice has three elements: (1) an attorney-client relationship creating a duty of care; (2) a breach of that duty by the attorney; and (3) damages proximately caused by the breach).
We conclude that, in the first instance, the merits of plaintiff's motion for summary judgment should properly be considered by the Law Division. We therefore remand the matter. Plaintiff should be entitled to re-assert his motion for summary judgment, and if denied, the matter should proceed in due course thereafter.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.