Opinion
DOCKET NO. A-1940-14T4
09-06-2016
MARK LIEBOWITZ, Plaintiff-Appellant, v. KENNETH M. THIMMEL, Defendant, and ALBERT H. WUNSCH, III, ESQ., Defendant-Respondent.
Peter A. Ouda, attorney for appellant. Albert H. Wunsch, III, respondent pro se (Paul A. Krauss, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Kennedy and Gilson. On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5754-14. Peter A. Ouda, attorney for appellant. Albert H. Wunsch, III, respondent pro se (Paul A. Krauss, on the brief). PER CURIAM
We reverse the dismissal of plaintiff's complaint pursuant to Rule 4:6-2(e) and remand this matter to the Law Division. The motion judge entered the order of dismissal after finding that defendant, Albert H. Wunsch, III, Esq., would have been "prejudiced were he required to continue with this litigation." The judge also found that dismissal was required by the entire controversy doctrine under Rule 4:30A. We disagree.
I.
In February 2013, plaintiff brought suit against Kenneth Thimmel (Thimmel), Josephine Thimmel, and Hope for Charities, LLC, (HFC), in which he sought judgment removing Thimmel and his mother, Josephine, as members of HFC pursuant to N.J.S.A. 42:2B-24(b) because Thimmel had "fraudulently concealed" his past criminal record, "failed to account for and pay over to designated charities" money he collected through auctions of sports memorabilia, and misappropriated money from the limited liability company. Plaintiff sought money damages, punitive damages, and counsel fees and costs on behalf of himself and "derivatively" on behalf of HFC.
We note that shortly after the complaint was filed, N.J.S.A. 42:2B-24(b) was repealed by the Revised Uniform Limited Liability Company Act, N.J.S.A. 42:2C-1 to -94. The Act, however, which became effective on March 18, 2013, largely retains the language of N.J.S.A. 42:2B-24(b), save for minor changes. See N.J.S.A. 42:2C-46(e). --------
Although the complaint was fairly detailed - viz., it alleged that Thimmel "approached plaintiff" in 2011 and proposed that they form HFC to conduct online auctions of sports memorabilia and in-person events to benefit specific charities; that they raise capital for the venture through private placement offerings for subscriptions in HFC; that the LLC was formed on December 9, 2011, with plaintiff and Thimmel's infirm mother as the only members; and that Thimmel concealed the nature and extent of his criminal history to induce plaintiff to participate in the project and loan it over $190,000 with "knowingly false assurances" that the money would only be used for legitimate business purposes of HFC, and the like - it never identified Wunsch as a participant in the transaction or as a wrongdoer. Indeed, the complaint only referenced a proposal that "Thimmel's lawyer" would draft a document securing plaintiff's monetary advances against HFC's inventory of memorabilia.
Further, although Wunsch represented "defendants" in the action, and apparently filed an answer on their behalf, it appears that the parties had settled the matter by February 2014, without much, if any, discovery or motion practice. Four months later, after plaintiff hired his present counsel, he filed the action at issue here against Wunsch and Thimmel. The action against Thimmel, however, has been dismissed with prejudice, leaving Wunsch as the sole defendant.
Plaintiff alleged that Wunsch committed legal malpractice by failing to disclose Thimmel's "past improprieties" and "engag[ing] in multiple conflicts of interest which served to undermine his representation of [HFC] and [plaintiff]." He also alleged that he "understood that Wunsch would be attorney for [HFC] and would protect [his] investment." It is unclear from the record whether plaintiff submitted an affidavit of merit during the course of this litigation. Nonetheless, the complaint, fairly read, asserted claims of attorney malpractice against Wunsch.
Rather than file an answer to the complaint, Wunsch moved to have it dismissed under Rule 4:6-2(e). Though the motion was addressed to the pleadings, Wunsch submitted a certification that clearly invited the court to consider facts outside the pleadings. His certification stated in part:
2. Plaintiff was well aware of my representation of Mr. Thimmel and the charges which were pending against [him] in 2010-2011. Plaintiff even offered to post bail for [Thimmel] and make restitution payments on his behalf.
3. When plaintiff and Thimmel began to discuss going into business together I actually advised plaintiff against it and advised him to retain a lawyer.
. . . .
5. I never represented plaintiff as legal his [sic] counsel and always made it clear that I represented defendant Thimmel personally.
6. Plaintiff brought an action against defendant Thimmel and the LLC Hope for Charity in 2012-2013 regarding the exact same factual scenario described in plaintiff's complaint . . . .
Wunsch argued that the complaint was barred by res judicata and the entire controversy doctrine. Plaintiff, in opposition, submitted a certification asserting that he was not a lawyer and had been unaware of any claims that he had against Wunsch at the time the first matter was settled. He added that the first action "was resolved rather quickly" and that "there was virtually no discovery at all" in that action. Plaintiff concluded that Wunsch suffered "no prejudice" by not being named a party in the first action, and that Wunsch could raise all defenses available to him at any time.
During oral argument on the motion, Wunsch argued that he would be prejudiced in defending himself against the complaint because if he had been made a party in the first action, he "may not have taken certain positions" that he maintained while representing the Thimmel defendants. However, Wunsch never gave any examples of specific prejudice.
Following oral argument, the motion judge entered an order dismissing plaintiff's complaint and concluded that the entire controversy doctrine applied. The judge reasoned that the instant and prior action "[arose] from the same set of facts and transactions"; the exception for legal malpractice claims was "inapplicable" as Wunsch was not plaintiff's attorney in the prior action; and Wunsch would be prejudiced in defending against the complaint because "[i]f he knew he were to be named as a party, he would not have served as counsel, and/or would have defended the case in a different manner."
This appeal followed.
II.
We commence our review with a statement of the standards that guide our analysis. In considering a motion to dismiss under Rule 4:6-2(e), courts search the allegations of the pleading in depth and with liberality to determine "whether a cause of action is suggested by the facts." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)). We must therefore determine "whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Ibid. (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)). However, a pleading should be dismissed if it states no basis for relief and discovery would not provide one. Camden Cty. Energy Recovery Assocs. v. N.J. Dep't of Envtl. Prot., 320 N.J. Super. 59, 64-65 (App. Div. 1999), aff'd o.b., 170 N.J. 246 (2001).
Guided by this standard, we readily conclude that Wunsch's certification which, in large measure, denied the factual predicate of plaintiff's claims, would not have justified dismissal of the complaint for "failure to state a claim." Such factual skirmishes cannot divert the court from its task on a motion of this type, which is to examine the four corners of the complaint to ascertain if the "fundament" of a cause of action is suggested. Printing Mart, supra, 116 N.J. at 746.
Therefore, the question is whether plaintiff should have joined Wunsch as a party to the first action, or, at the very least, given the court and Wunsch notice that he had potential liability to a party, and whether the failure to do so warrants dismissal of plaintiff's claims against Wunsch now.
We address briefly the history of the entire controversy doctrine and the derivation of the present version of Rule 4:30A. By 1997, the entire controversy doctrine insofar as it required mandatory joinder of parties fell out of favor. In Olds v. Donnelly, 150 N.J. 424, 444-46 (1997), the Court acknowledged the criticism leveled at the entire controversy doctrine and mandatory joinder of parties as well as the sanction of preclusion. It directed the Entire Controversy Doctrine Subcommittee of the Committee on Civil Practice the responsibility to examine the exemptions that should apply to mandatory joinder, as well as any amendments that should be made to Rule 4:30A. Id. at 449. The Court stressed that "mandatory joinder should not be confused with mandatory preclusion." Id. at 448.
As a result, Rule 4:30A was amended effective September 1, 1998, removing the provisions related to non-joinder of parties and limiting its application to non-joinder of claims. Mitchell v. Charles P. Procini, D.D.S., P.A., 315 N.J. Super. 557, 565 (App. Div. 1998) (Mitchell I). At the same time, Rule 4:29-1(b) was adopted, which permits the court on its own motion to "order the joinder of any person subject to service of process whose existence was disclosed by the notice required by Rule 4:5-1(b)(2) or by any other means who may be liable to any party on the basis of the same transactional facts." Ibid.
Rule 4:5-1(b)(2) was also revised, requiring a two-prong analysis before dismissal for noncompliance with the rule. Id. at 564-65. Thus, dismissal is permitted only if: (1) the failure of compliance was inexcusable and (2) the undisclosed party's right to defend the successive action was substantially prejudiced. Ibid. The rule itself provides in relevant part:
Each party shall include with the first pleading a certification . . . [which] shall
disclose . . . 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. . . . 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 . . . . 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.
[R. 4:5-1(b)(2).]
In Mitchell v. Charles P. Procini, D.D.S., P.A., 331 N.J. Super. 445, 454 (App. Div. 2000) (Mitchell II), we considered the meaning of "substantial prejudice" in the second prong of the analysis. In this context, we held that "substantial prejudice" means "the loss of witnesses, the loss of evidence, fading memories, and the like." Ibid. (quoting Blank v. City of Elizabeth, 318 N.J. Super. 106, 114-15 (App. Div.), aff'd as modified, 162 N.J. 150 (1999)). We also held that mere delay does not create substantial prejudice; rather, "the lack of availability of information" resulting from the delay is determinative. Ibid. (citing Escalante v. Twp. of Cinnaminson, 283 N.J. Super. 244, 252-53 (App. Div. 1995)).
In this case, no one argues, and the motion judge did not find, that Wunsch was an indispensable party in the first action. See R. 4:28-1(a) defining an "indispensable party" as one "in [whose] absence complete relief cannot be accorded among those already parties" or who "claims an interest in the subject of the action and is so situated" that the action cannot be disposed without affecting that interest. Rather, we deal with an issue of permissive joinder, which permits joinder by a plaintiff or defendant "if the right to relief asserted by the plaintiffs or against the defendants arises out of or in respect of the same transaction, occurrence, or series of transactions or occurrences and involves any question of law or fact common to all of them." R. 4:29-1(a). Subsection (b) of that rule, as we have stated, permits the court to compel joinder of any person "who may be liable to any party on the basis of the same transactional facts." R. 4:29-1(b). Thus, the question in this appeal is whether plaintiff inexcusably ignored an obligation imposed by Rule 4:5-1(b)(2), causing Wunsch to suffer such substantial prejudice that the ultimate sanction of dismissal of plaintiff's claims is warranted.
As an equitable preclusionary doctrine, the principal aims of the entire controversy doctrine are to encourage conclusive legal determinations, avoid fragmented litigation, promote judicial economy and efficiency, and, above all, provide fairness to the parties. K-Land Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 70 (2002) (quoting Pressler, supra, comments 1-2 on R. 4:30A (2002)). An important consideration in applying the equitable doctrine with an eye toward fairness is whether the party whose claim is being barred had a fair and reasonable opportunity to fully litigate the claim in the prior proceeding. Oliver v. Ambrose, 152 N.J. 383, 396 (1968) (citing Cafferata v. Peyser, 251 N.J. Super. 256, 261 (App. Div. 1991)). Application of the doctrine is left to the discretion of the trial court based on the factual circumstances of each case. Id. at 395.
In DiMaria Constr., Inc. v. Interarch, 351 N.J. Super. 558 (App. Div. 2001), aff'd, 172 N.J. 182 (2002), we considered a circumstance that is instructive in answering our question. There, after prevailing in a suit against a bank for breach of contract, a contractor brought another suit against an interior designer and an architect for tortious interference with contract. Id. at 562. When the contractor prevailed in that suit as well, the architect appealed, claiming the complaint should have been dismissed on entire controversy grounds for the contractor's failure to name him in his certification pursuant to Rule 4:5-1(b)(2), despite the fact that it named the interior designer. Id. at 562-63, 575-76.
We held that the architect suffered no substantial prejudice because he was well aware of the earlier action between the contractor and the bank. Id. at 575. We further held that the architect's close association with the bank and the interior designer, as well as his position as the architect of the project, would have alerted him to the fact that if the designer were potentially liable to the contractor, then he would be too. Id. at 575-76. In fact, the contractor's certification stated that it had a potential action against the designer and "possibly others." Id. at 576. We reasoned that "[a] simple inquiry would have disclosed that [the architect] was one of the possible others." Ibid.
While DiMaria does not stand for the principle that parties who are aware of litigation cannot be substantially prejudiced by the failure of a party to name them pursuant to Rule 4:5-1(b)(2), our holding does suggest that a party's knowledge of the case is a factor we may consider in determining whether that party has suffered substantial prejudice. Id. at 575-76.
Substantial prejudice in the context of Rule 4:5-1(b)(2), as we have stated, is synonymous with an inability to maintain an adequate defense, such as the consequences resulting from "the loss of witnesses, the loss of evidence, fading memories, and the like." Mitchell II, supra, 331 N.J. Super. at 454 (quoting Blank, supra, 318 N.J. Super. at 114-15).
Applying these principles to the present case, we find that Wunsch's vacuous claim that he "may have" defended his clients differently in the first action had he understood that he would later be sued for his role in the transaction, does not constitute "substantial prejudice" under Rule 4:5-1(b)(2). We perceive no inability to defend against the complaint and there was no showing that any evidence has been lost or destroyed. Moreover, Wunsch obviously was aware of plaintiff's allegations, as well as his own participation in the underlying transaction, and had he wanted to participate in settlement negotiations, he could have requested the opportunity to do so.
Beyond this, we discern no inexcusable failure by plaintiff to give notice to a potentially liable party as required by Rule 4:5-1(b)(2). Plaintiff certified that he was not aware that he even had a potential claim against Wunsch until after the first suit was settled. Indeed, that settlement may ultimately inure to Wunsch's benefit in diminishing plaintiff's capacity to prove damages.
Accordingly, we reverse the order dismissing plaintiff's complaint, and we remand to the Law Division for further proceedings. Our holding is that the motion court erred in granting Wunsch's motion to dismiss under Rule 4:6-2(e), and that the action shall proceed in the ordinary course. We do not foreclose the parties from pursuing further relief as discovery progresses.
Reversed and remanded. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION