Opinion
DOCKET NO. A-4494-14T2
08-18-2016
ALICE BOSWELL, THE ESTATE OF RUTH BELTHOFF, and CHARLOTTE GANN, Plaintiffs-Appellants/Cross-Respondents, v. WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER, LLP; THOMAS QUINN, ESQ.; JOANNA PIOREK, ESQ.; NORRIS MCLAUGHLIN & MARCUS, P.A.; JAMES SHRAGER, ESQ.; DEANNA KOESTEL, ESQ.; KEYSTONE DEVELOPMENT GROUP, LLC; MICHAEL BLAZOSKI; and THE STOP & SHOP SUPERMARKET COMPANY, LLC, Defendants-Respondents, and PRICE MEESE SHULMAN & D'ARMINIO, P.C.; GAIL PRICE, ESQ.; and PAUL A. CONCIATORI, ESQ., Defendants-Respondents/Cross-Appellants.
Edward R. Grossi argued the cause for appellants/cross-respondents. Shaji M. Eapen argued the cause for respondents/cross-appellants Price Meese Shulman & D'Arminio, P.C., Gail L. Price, Esq. and Paul A. Conciatori, Esq. (Morgan Melhuish Abrutyn, attorneys; Elliott Abrutyn, of counsel and on the briefs; Mr. Eapen, on the briefs). Wilson, Elser, Moskowitz, Edelman & Dicker LLP, respondent pro se, and attorneys for respondents Thomas Quinn, Esq. and Joanna Piorek, Esq. (Kurt W. Krauss, of counsel and on the brief; Robert C. Neff, on the brief). Norris McLaughlin & Marcus, P.A., respondent pro se, and attorneys for respondents James Shrager, Esq., Deanna Koestel, Esq., Keystone Development Group, LLC, Michael Blazoski, and The Stop & Shop Supermarket Company, LLC (Robert Mahoney, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti, St. John and Guadagno. On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9152-14. Edward R. Grossi argued the cause for appellants/cross-respondents. Shaji M. Eapen argued the cause for respondents/cross-appellants Price Meese Shulman & D'Arminio, P.C., Gail L. Price, Esq. and Paul A. Conciatori, Esq. (Morgan Melhuish Abrutyn, attorneys; Elliott Abrutyn, of counsel and on the briefs; Mr. Eapen, on the briefs). Wilson, Elser, Moskowitz, Edelman & Dicker LLP, respondent pro se, and attorneys for respondents Thomas Quinn, Esq. and Joanna Piorek, Esq. (Kurt W. Krauss, of counsel and on the brief; Robert C. Neff, on the brief). Norris McLaughlin & Marcus, P.A., respondent pro se, and attorneys for respondents James Shrager, Esq., Deanna Koestel, Esq., Keystone Development Group, LLC, Michael Blazoski, and The Stop & Shop Supermarket Company, LLC (Robert Mahoney, of counsel and on the brief). PER CURIAM
In this appeal, we address a dispute regarding discovery that arose between plaintiffs Alice Boswell, Ruth Belthoff, and Charlotte Gann, and defendants Price Meese Shulman & D'Arminio (Price Meese), Norris McLaughlin & Marcus (NMM), and Wilson, Elser, Moskowitz, Edelman & Dicker (Wilson Elser). Plaintiffs allege that Price Meese and NMM concealed evidence during a suit brought against plaintiffs by defendant Stop & Shop Supermarket Company (Stop & Shop). They also assert that these defendants, along with defendant Wilson Elser, then concealed evidence during plaintiffs' malpractice suit against Price Meese (the Price Meese Litigation).
In Boswell v. Price Meese Shulman & D'Arminio, P.C., No. A-4531-13 (App. Div. August 18, 2016), by opinion of even date, we addressed the back-to-back appeal by plaintiffs of the trial court's decision in the legal malpractice action. We affirmed the decision of the trial court.
The trial court here dismissed plaintiffs' complaint for failure to state a claim under Rule 4:6-2(e). The court found that the fraudulent concealment claims raised in the complaint were barred by res judicata, collateral estoppel, and the entire controversy doctrine, because the judge in the Price Meese Litigation denied plaintiffs' motion to amend their complaint to include the same claims and decided other discovery motions in defendants' favor.
Plaintiffs appeal the dismissal of their complaint. Price Meese cross-appeals the court's denial of its motion for fees and sanctions under Rule 1:4-8 and N.J.S.A. 2A:15-59. Having reviewed the arguments in light of the record and applicable law, we affirm both the dismissal of plaintiffs' complaint and the denial of Price Meese's motion for fees and sanctions.
Certain issues that ensued in the litigation were addressed by us in Boswell, supra. An examination of the lease between plaintiffs and Stop & Shop and issues related to the underlying litigation are set forth in that opinion and will not be repeated, except as relevant to the resolution of the issues raised on appeal here.
I.
The instant matter stems from the alleged concealment of evidence by defendants in two earlier matters: the "Lot 2 Litigation," and the "Price Meese Litigation." The relevant facts of these prior proceedings are summarized below.
A. Lot 2 Litigation
Plaintiffs owned property in Paramus, known as "Lot 2," which was leased to various successive tenants over the course of many years, before Stop & Shop became the tenant. The lease stated that the lessee would have the right to purchase Lot 2 for $142,500 if notice was given to the lessor at least ninety days prior to the termination of the lease or of any renewal period of the lease.
In 2005, Stop & Shop began plans to update Lot 2 to serve as an entranceway and primary parking area. Stop & Shop retained defendant Price Meese, specifically defendants Gail Price and Paul Conciatori, to represent it in submitting a site plan application to the Borough of Paramus for a new Stop & Shop and refurbished parking areas. However, a title defect was discovered: Lot 2 had been "incorrectly subdivided" in 1956. Defendant Michael Blazoski, representing Stop & Shop's real estate consultant, Keystone Development Group, LLC, contacted plaintiffs to inform them of the problem in early July 2006.
Blazoski spoke to plaintiffs' attorney, Edward Breslin, about Stop & Shop's desire to apply to the Paramus Planning Board to effect the subdivision, correcting the defect. Blazoski said that Price Meese would represent plaintiffs for the limited purpose of making the application, at Stop & Shop's expense. Conciatori informed plaintiffs that Price Meese also represented Stop & Shop, and that this representation might in the future include services related to Stop & Shop's purchase of Lot 2 from plaintiffs.
Price Meese prepared a site plan application for Lots 2 and 4 which was sent in December 2007 to Breslin for signature of the plaintiffs as owners of Lot 2. In the application, Stop & Shop indicated that it was the owner of the adjacent Lot 4 and the "long-term lessee of Lot 2." All three plaintiffs signed the application as owners of Lot 2, certifying in part that they agreed to be bound by the representations in the application. On February 11, 2008, Price Meese filed Stop & Shop's preliminary site plan application with Paramus.
The subdivision application was approved and when the fully executed and recorded Subdivision Deed was accomplished, Price Meese's limited representation of plaintiffs in that matter concluded. In March 2008, while the site plan application was pending, Stop & Shop informed plaintiffs that it intended to exercise its purchase option on Lot 2. In response, plaintiffs' new counsel, Philip Boggia, wrote to Price Meese on April 3, 2008, to request that Price Meese turn over "all documents that pertain to the [1955] lease and any extensions pertaining thereto" in its possession. The court ultimately determined that Price Meese complied with this request.
Stop & Shop ordered a title commitment and wrote to plaintiffs regarding closing on the property, the details of which were confirmed by letter dated January 16, 2009. However, on January 22, 2009, Boggia informed Stop & Shop that plaintiffs would not proceed to closing. Plaintiffs took the position that the 1955 lease had not been renewed properly and therefore was no longer in force and effect, rendering the purchase option void.
On June 22, 2009, Stop & Shop filed a complaint against plaintiffs demanding specific enforcement of the purchase option. Stop & Shop asserted that plaintiffs breached the lease's terms and committed fraud and misrepresentation by refusing to sell the property. Because Price Meese had represented plaintiffs for purposes of the subdivision application, plaintiffs moved to disqualify Price Meese from representing Stop & Shop in the litigation. Prior to the motion being decided, Price Meese withdrew and NMM, specifically defendants James Shrager and Deanna Koestel, took over representation of Stop & Shop on July 6, 2010. Following discovery, on January 25, 2011, plaintiffs agreed to accept a settlement of $2,500,000 in exchange for Lot 2.
B. Price Meese Litigation
On June 23, 2011, plaintiffs filed a complaint against Price Meese and Gail Price, alleging that these defendants committed professional malpractice by failing to disclose a conflict of interest in their representation of plaintiffs while also representing Stop & Shop. Plaintiffs filed an amended complaint on August 17, 2012, adding Conciatori as a defendant and setting forth their claims in greater detail. The amended complaint asserted breach of fiduciary duty, fraud, professional malpractice, breach of contract, breach of the duty of good faith and fair dealing, and infliction of emotional distress in connection with Price Meese's allegedly conflicted representation. Price Meese retained Wilson Elser to represent it in this matter, specifically defendants Thomas Quinn and Joanna Piorek.
On January 17, 2013, in response to plaintiffs' discovery requests, Wilson Elser turned over a CD containing various documents. The next day, Wilson Elser issued a further response, asserting that some documents responsive to plaintiffs' requests were subject to the attorney-client and/or work product privileges. Wilson Elser provided plaintiffs with privilege logs listing documents it would not turn over.
Plaintiffs moved to compel Price Meese to turn over the withheld documents. Wilson Elser argued that Price Meese and NMM were asserting the attorney-client privilege on behalf of their client, Stop & Shop, and because Stop & Shop had not waived its privilege claims, the documents were not discoverable by plaintiffs. Further, some of the material sought by plaintiffs was protected personal and confidential financial information.
On March 8, 2013, the judge denied plaintiffs' motion to compel discovery, finding that Price Meese had sufficiently demonstrated that the documents at issue were privileged. The judge found that Price Meese had "an absolute obligation to assert the privilege on behalf of [Stop & Shop] and cannot waive that protection."
Plaintiffs moved for reconsideration, which the court denied. The judge determined that plaintiffs had not submitted any additional evidence or arguments that the documents withheld were not privileged. He stated that plaintiffs were "engaged in a spurious and vexatious discovery expedition" and that their continued demands for discovery were "wholly irrelevant, harassing and merely an attempt to seek attorney client information." Plaintiffs filed a motion for leave to appeal this decision, which we denied.
On August 29, 2013, following the close of the discovery period, Wilson Elser provided plaintiffs with more documents and a new privilege log denoting which information was being produced, and which was still being held subject to Stop & Shop and NMM's assertion of attorney-client privilege. Plaintiffs objected to the late production and demanded further documents. Plaintiffs asserted that Price Meese's invoices related to the Lot 2 Litigation, which were provided in the August 29, 2013 production, referenced documents that were not produced or listed in any privilege log. On October 4, 2013, Wilson Elser produced further documents that previously had been withheld as privileged, but which Wilson Elser later had determined were related to a prior tenant on Lot 2, not Stop & Shop.
At a deposition of Conciatori on October 7, 2013, Quinn reiterated that Wilson Elser and Price Meese were asserting the attorney-client privilege on Stop & Shop's behalf as to the remaining undisclosed documents. He explained that Wilson Elser had consulted Stop & Shop and NMM throughout discovery and had been directed as to what documents could be disclosed and which were privileged. Plaintiffs objected to the October 4, 2013 production, asserting that because Wilson Elser previously withheld certain documents it had now decided could be produced, its assertions of privilege were "frivolous."
Plaintiffs moved for reconsideration of the court's prior discovery decisions, to reopen discovery and adjourn the matter for a later trial date, and for the court to issue a spoliation instruction to the jury. Plaintiffs also moved for leave to file a second amended complaint, including a new claim of fraudulent concealment of evidence against Price Meese. The proposed amended complaint alleged that Price Meese had "withheld, concealed, or destroyed evidence that they are legally obligated to disclose," and that this evidence was material to the litigation. The complaint referenced documents "reflected in [Price Meese's] billing records" that allegedly were not produced.
On December 20, 2013, the court denied all of plaintiffs' motions. The judge found that plaintiffs had not offered "any plausible or convincing evidence to warrant re-opening and extending discovery" to include their proposed new claim of fraudulent concealment. The judge further stated that plaintiffs were "unable to establish a prima facie case of fraudulent concealment" and that therefore their proposed claim was "unsustainable as a matter of law." Specifically, he found that plaintiffs "failed, as a matter of law" to demonstrate that Price Meese had "intentionally withheld, altered or destroyed the evidence with the purpose to disrupt the litigation," as required to satisfy their prima facie burden. Thus, the court concluded that permitting plaintiffs to amend their complaint to include a fraudulent concealment claim "would be futile."
Further, the judge determined that a spoliation instruction was not warranted, because Price Meese and Wilson Elser had withheld documents properly under the attorney-client privilege. In so concluding, the judge noted that he had "stated and reaffirmed" this finding in his decisions to deny plaintiffs' earlier motions to compel and for reconsideration. He also stated that many of the documents plaintiffs sought "were produced prior to and during the course of" the Lot 2 litigation. For this reason, and because further documents had been provided, the court ruled that plaintiffs were not "substantially prejudiced by the loss of evidence" as required to establish entitlement to a spoliation instruction.
Plaintiffs sought reconsideration of the December 20, 2013 orders, and on January 31, 2014, the court denied their motion. The same day, the court granted a motion by NMM to quash four subpoenas issued by plaintiffs to NMM, and its clients Stop & Shop and Blazoski. The judge found that the information and documents sought by plaintiffs in the subpoenas were attorney-client privileged material that had already been denied to them in the court's decisions on earlier discovery motions.
The Price Meese Litigation proceeded to trial on February 18, 2014. Price Meese moved for dismissal of all claims and the court dismissed every claim except professional malpractice. A jury found in plaintiffs' favor and judgment was entered in plaintiffs' favor in the amount of $918,059.
Price Meese appealed the judgment against them. Plaintiffs cross-appealed, asserting that the judge erred in denying plaintiffs' motions to compel discovery, to re-open discovery, for a spoliation instruction, and to amend their complaint. We affirmed the judgment of the trial court in Boswell, supra.
On September 25, 2015, we denied plaintiffs' motion to consolidate the appeal of the Price Meese Litigation with the appeal in the current matter. --------
C. Instant Matter
On September 29, 2014, plaintiffs filed a new complaint against defendants asserting fraudulent concealment of evidence. The complaint alleged that Price Meese and NMM concealed information and evidence about the lease during the Lot 2 Litigation, and that Wilson Elser wrongfully withheld evidence as privileged during the Price Meese Litigation. The allegedly withheld evidence was the same evidence referenced in plaintiffs' proposed amended complaint and sought by plaintiffs in their motions during the Price Meese Litigation. Plaintiffs asserted that as a result of defendants' concealment of evidence, their settlement of the Lot 2 Litigation was not as beneficial as it could have been, and demanded compensatory and punitive damages.
On October 23, 2014, Price Meese issued a notice to plaintiffs asserting that their complaint violated N.J.S.A. 2A:15-59.1 and Rule 1:4-8, which prohibit frivolous litigation. This notice demanded that plaintiffs withdraw their complaint within twenty-eight days, as they had not established a prima facie claim of fraudulent concealment because there was no evidence that defendants wrongfully and intentionally concealed documents, and because plaintiffs' discovery-related claims had already been litigated in the Price Meese Litigation. Moreover, Price Meese asserted that plaintiffs' claims were barred by the res judicata, collateral estoppel, and the entire controversy doctrines.
Plaintiffs did not withdraw their complaint, and Price Meese moved for dismissal for failure to state a claim upon which relief can be granted under Rule 4:6-2(e). Wilson Elser also filed a motion to dismiss.
After a hearing, a second judge issued three orders dismissing plaintiffs' complaint with prejudice. The judge found that res judicata barred plaintiffs' complaint as to the Price Meese defendants, because the claims therein had been "fairly litigated and determined" during the Price Meese Litigation. The judge noted that the parties in the current matter were identical to those in the earlier litigation, and that the claims in both matters "arose out of the same transaction or occurrence."
The court further found that the judge in the Price Meese Litigation adjudicated plaintiffs' fraudulent concealment claim on the merits when he denied their motion to file an amended complaint. The second judge noted that the court denied plaintiffs' motions to compel production of the evidence they claimed was concealed, and that the judge in the Price Meese Litigation found that plaintiffs were not entitled to a spoliation instruction.
The second judge also took into consideration that the earlier discovery-related decisions are currently the subject of a cross-appeal by plaintiffs in the Price Meese Litigation. Finally, she found that plaintiffs' complaint did not set forth any new issues that were not raised during the Price Meese Litigation. For these reasons, she concluded that plaintiffs' claims had already been litigated, and that they were barred from bringing a new cause of action raising the same claims against the Price Meese defendants.
The second judge reached the same conclusions as to the NMM and Wilson Elser defendants. She found that although the NMM defendants were not named in the Price Meese Litigation, they were in privity with the defendants in that suit because they were involved in the Lot 2 Litigation and participated in the opposition to plaintiffs' discovery-related motions in the Price Meese Litigation. The Wilson Elser defendants were also in privity with the Price Meese defendants because they represented them in the prior litigation.
On February 24, 2015, Price Meese filed a motion for sanctions, fees, and costs against plaintiffs pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8, alleging that the complaint was frivolous. Price Meese asserted that the complaint was not based upon any existing law or upon a reasonable argument for the extension or modification of existing law, and was filed to harass Price Meese.
While Price Meese's motion was pending, plaintiffs sought reconsideration of the court's February 18, 2015 orders. On March 23, 2015, Price Meese again wrote to plaintiffs asserting that their motion was frivolous, and warning that sanctions would be sought if the motion was not withdrawn within twenty-eight days.
A hearing was held on April 24, 2015, after which the court denied plaintiffs' motion for reconsideration. The court reiterated its finding that plaintiffs' claims in the instant complaint were the same as issues raised and decided during the Price Meese Litigation. The judge stated that plaintiffs' proper course of action was to pursue their cross-appeal of the Price Meese Litigation decisions.
The court found that plaintiffs' complaint was an attempt to persuade it to override decisions by another judge "on the same issues in the same controversy between the same parties," and that this was "procedurally inapt." Finally, she found that under Tartaglia v. UBS PaineWebber, Inc., 197 N.J. 81, 121 (2008), plaintiffs could not file a separate complaint for fraudulent concealment because the allegedly concealed evidence came to light before the completion of the Price Meese Litigation and therefore should have been, and was, addressed as part of that matter.
The court also denied Price Meese's motion for fees and sanctions. The judge found that plaintiffs' complaint and motion for reconsideration did not rise to the level of pleadings presented for an improper purpose and that there was no evidence that plaintiffs' counsel acted in bad faith when filing them.
II.
In an appeal from the dismissal of a complaint under Rule 4:6-2(e), we review the complaint de novo, owing no deference to the trial court's conclusions. Flinn v. Amboy Nat'l Bank, 436 N.J. Super. 274, 287 (App. Div. 2014).
Pursuant to Rule 4:6-2(e), a defendant may bring a motion to dismiss for:
failure to state a claim upon which relief can be granted . . . . If a motion is made raising any of these defenses it shall be made before pleading if a further pleading is to be made.
To properly state a claim, a complaint must contain "a statement of the facts on which the claim is based, showing that the pleader is entitled to relief," and a "demand for judgment for the relief to which the pleader claims entitlement." R. 4:5-2. When deciding a motion to dismiss under Rule 4:6-2(e), the test is "whether a cause of action is suggested by the facts." Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 746 (1989). Plaintiffs are "entitled to every reasonable inference of fact," and the court is not concerned with plaintiffs' ability to prove their allegations. Ibid. However, "a pleading should be dismissed if it states no basis for relief and discovery would not provide one." Rosen v. Cont'l Airlines, 430 N.J. Super. 97, 101 (App. Div. 2013).
A. Preclusion Doctrines
As a preliminary matter, plaintiffs argue that the court erred by "failing to assess the adequacy of [their] pleadings," and instead ruled only on defendants' "affirmative defenses" of the three preclusion doctrines. They assert that this improperly converted defendants' motion to dismiss to a motion for summary judgment, because a court must confine its review of a motion to dismiss to "the alleged facts apparent on the face of the challenged claim." Rieder v. State Dep't of Transp., 221 N.J. Super. 547, 552 (App. Div. 1987).
Rule 4:6-2 states that, if on a motion to dismiss under subsection (e), matters outside the pleading are presented to and considered by the court, the motion "shall be treated as one for summary judgment" under Rule 4:46. Plaintiffs correctly state that the preclusion doctrines applied by the court are affirmative defenses that must ordinarily be pled. McNeil v. Legislative Appointment Comm. of the State of N.J., 177 N.J. 364, 399 (2003), cert. denied, 540 U.S. 1107, 157 L. Ed. 2d 893, 124 S. Ct. 1068 (2004).
However, the standard on a motion to dismiss under Rule 4:6-2(e) is whether the complaint states a claim upon which relief could be granted. If plaintiffs' claims are precluded, no relief is available to them, regardless of whether their complaint was otherwise adequate and stated facts and arguments that would establish a viable cause of action. The court did not err in considering the preclusion doctrines when reviewing defendants' motions for dismissal, because if these doctrines apply, plaintiffs' complaint stated "no basis for relief" and "discovery would not provide one." Rosen, supra, 430 N.J. Super. at 101.
As to the court's application of the preclusion doctrines, plaintiffs argue that their complaint should not have been dismissed for failure to state a claim on grounds of res judicata and collateral estoppel, because "there was no prior adjudication on the merits" of their fraudulent concealment claims. They assert that the denials of their motions to compel discovery, to amend their complaint, and for a spoliation instruction during the Price Meese litigation did not constitute a "final judgment," and that court's decisions did not "take into consideration the ultimate merits" of their fraudulent concealment claims. Further, even if those decisions constituted adjudications on the merits, their new complaint should not be barred under the entire controversy doctrine because they never had a "full and fair opportunity" to pursue their claims.
Although the merits of an action are typically decided at a trial, "[u]nder the principles of res judicata[,] claims that are actually litigated and determined before trial also are barred from being relitigated." Velasquez v. Franz, 123 N.J. 498, 506 (1991) (citing Restatement (Second) of Judgments § 27 comment d (1982)). The doctrine seeks "to guard the individual against vexatious repetitious litigation and the public against the serious burdens which such litigation imposes on the community." Lubliner v. Bd. of Alcoholic Beverage Control for the City of Paterson, 33 N.J. 428, 435 (1960).
For res judicata to apply, the matters must involve "substantially similar or identical causes of action and issues, parties, and relief sought." Culver v. Ins. Co. of North Am., 115 N.J. 451, 460 (1989). To determine whether two causes of action are the same, a court must consider:
(1) whether the acts complained of and the demand for relief are the same (that is, whether the wrong for which redress is sought is the same in both actions); (2) whether the theory of recovery is the same; (3) whether the witnesses and documents necessary at trial are the same (that is, whether the same evidence necessary to maintain the second action would have been sufficient to support the first); and (4) whether the material facts alleged are the same.
[Id. at 461-62.]
Collateral estoppel is a branch of res judicata which "bars relitigation of any issue which was actually determined in a prior action, generally between the same parties, involving a different claim or cause of action." Sacharow v. Sacharow, 177 N.J. 62, 76 (2003). To invoke this doctrine to bar relitigation of an issue, a party must demonstrate:
(1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the court in the prior proceeding issued a final judgment on the merits; (4) the determination of the issue was essential to the prior judgment; and (5) the party against whom the doctrine is asserted was a
party to or in privity with a party to the earlier proceeding.
[First Union Nat'l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 352 (2007) (citation omitted).]
To avoid preclusion, a plaintiff must demonstrate that he or she lacked a "full and fair opportunity to litigate the issue" in the prior proceeding, or that there are other circumstances that justify affording the plaintiff another opportunity to litigate the issue. Barker v. Brinegar, 346 N.J. Super. 558, 566 (App. Div. 2002). For example, if "new evidence has become available that could likely lead to a different result," a plaintiff may be permitted to raise an issue previously decided. Id. at 567.
The entire controversy doctrine "embodies the principle that the adjudication of a legal controversy should occur in one litigation in only one court; accordingly, all parties involved in a litigation should at the very least present in that proceeding all of their claims and defenses that are related to the underlying controversy." Wadeer v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 605 (2015) (citations omitted). The purposes of the doctrine are "(1) the need for complete and final disposition through the avoidance of piecemeal decisions; (2) fairness to parties to the action and those with a material interest in the action; and (3) efficiency and the avoidance of waste and the reduction of delay." Ibid. (citations omitted).
Thus, the entire controversy doctrine imposes on a litigant the duty to present "all aspects of a controversy in one legal proceeding." Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 240 (App. Div. 2009) (citation omitted). In determining what constitutes a single controversy, courts "look at the core set of facts that provides the link between distinct claims against the same or different parties." Id. at 244.
All three preclusion doctrines bar a party who had the chance during a prior proceeding to litigate the claims or issues. Under any of these doctrines, however, a full trial is not required for a court's decision to have preclusive effect. Velasquez, supra, 123 N.J. at 506-07. For example, "a judgment of involuntary dismissal or a dismissal with prejudice constitutes an adjudication on the merits 'as fully and completely as if the order had been entered after trial.'" Id. at 507 (quoting Gambocz v. Yelencsics, 468 F.2d 837 (3d Cir. 1972)). A claim or issue may be precluded if it was determined
on a motion to dismiss for failure to state a claim, a motion for judgment on the pleadings, a motion for summary judgment . . . a motion for directed verdict, or their equivalents, as well as on a judgment entered on a verdict.
[Id. at 506-07 (quoting Restatement (Second) Judgments § 27 comment d (1982)).]
By these standards, all of the court's decisions on plaintiffs' motions in the Price Meese Litigation constituted judgments on the merits of the issues for purposes of the preclusion doctrines.
A motion for leave to amend a complaint, in particular, is governed by the same standard as a motion to dismiss under Rule 4:6-2(e). Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 257 (App. Div. 1997). That is, if the proposed amendment to a complaint does not state a cause of action, or asserts a claim that "is not sustainable as a matter of law," a court should deny the motion to amend. Id. at 256-57. In Velasquez, the Court explicitly stated that a decision on a motion to dismiss for failure to state a claim carries preclusive effect. 123 N.J. at 506-07. This effect should extend to a denial of a motion to amend, where that denial was based upon a finding that the proposed additional claims would be futile.
The judge in the Price Meese Litigation, in deciding plaintiffs' motion to amend, stated that their proposed claim of fraudulent concealment was indeed futile and "unsustainable as a matter of law." The judge considered plaintiffs' claims and determined that they were "unable to establish a prima facie case" of fraudulent concealment. This constituted an explicit judgment as to the merits of plaintiffs' proposed claim, which has preclusive effect under the res judicata and collateral estoppel doctrines.
The court addressed plaintiffs' assertions that defendants failed to identify and turn over some relevant documents and wrongfully asserted privileges to justify withholding other evidence in his decisions on all of the motions brought by plaintiffs during the Price Meese Litigation. The judge repeatedly found that plaintiffs were not entitled to further discovery, defendants' assertions of privilege were proper, and plaintiffs had not presented any credible evidence that defendants concealed relevant material.
Plaintiffs' claims in their latest complaint deal with the same allegedly hidden and withheld documents as their motions in the earlier litigation. The causes of action raised by plaintiffs here are the same as those raised or attempted to be raised during the Price Meese Litigation, and the issues are the same as those previously decided by the court. The acts plaintiffs complain of are identical, as is their demand for relief. Further, plaintiffs allege no new facts, and the evidence needed to support their earlier and current claims is the same. Here, the court's application of the preclusion doctrines was proper, as plaintiffs had a full and fair opportunity to litigate their discovery-related claims and issues in the Price Meese Litigation and, in fact, did so.
The court here found that for purposes of the preclusion doctrines, NMM and Wilson Elser were in privity with Price Meese such that plaintiffs cannot raise a separate action for fraudulent concealment against them, just as they cannot against Price Meese. This finding was appropriate. NMM "represented the same legal right" as Price Meese during the Lot 2 Litigation since it took over the legal representation of Stop & Shop from Price Meese in that matter. E.I.B. v. J.R.B., 259 N.J. Super. 99, 102 (App. Div. 1992). Similarly, Wilson Elser provided legal representation to Price Meese during the Price Meese Litigation. Plaintiffs do not appear to contest the court's finding of privity among the defendants.
B. Fraudulent Concealment
Plaintiffs argue that their complaint properly pleaded a claim of fraudulent concealment against defendants and argue that the litigation privilege does not protect defendants' actions in the Price Meese Litigation. Finally, plaintiffs assert that the court erred in stating that Tartaglia, supra, 197 N.J. at 121, barred the filing of a separate complaint because plaintiffs discovered the alleged concealment of evidence before judgment was entered in the Price Meese Litigation.
As discussed above, plaintiffs' claims in the instant complaint are barred by res judicata and other preclusion doctrines. As a result, we need not address their argument that their complaint properly stated a cause of action for fraudulent concealment.
Further, the court's application of Tartaglia was not erroneous. In that case, the Court stated that if spoliation of evidence is discovered while litigation is ongoing, an adverse inference and spoliation instruction "may be invoked and the party is permitted to amend the complaint to add a count for fraudulent concealment." Tartaglia, supra, 197 N.J. at 119-20. If the spoliation "is not uncovered until after the underlying action 'has been lost or otherwise seriously inhibited, the plaintiff may file a separate tort action.'" Id. at 120 (quoting Rosenblit v. Zimmerman, 166 N.J. 391, 408 (2001)).
Here, plaintiffs became aware of some of the evidence they believe defendants wrongfully withheld early in discovery in the Price Meese Litigation, and filed a motion to compel production of this evidence. Plaintiffs learned of other allegedly concealed evidence after the close of the discovery period, but before trial. The court therefore did not err in finding that under Tartaglia, plaintiffs should have addressed the alleged fraudulent concealment during the Price Meese Litigation, and not in a separate action.
Indeed, plaintiffs did address the issue during the Price Meese Litigation, by moving for a spoliation instruction and to amend their complaint. The court denied plaintiffs' motions because it determined that their proposed claim was futile and they failed to establish that a spoliation inference was warranted. Plaintiffs are not permitted to also file this separate action simply because they disagree with the court's decisions in the underlying matter.
In sum, we affirm the court's dismissal of plaintiffs' complaint.
III.
In its cross-appeal, Price Meese argues that the court erred in denying its motion for fees and sanctions against plaintiffs, specifically, by holding that plaintiffs' complaint and motion for reconsideration of the dismissal thereof were not frivolous pleadings and actions. Price Meese asserts that plaintiffs knew or should have known that their complaint was without any reasonable basis in law or equity, because it was duplicative of claims raised and denied in the Price Meese Litigation. Price Meese argues that plaintiffs had no good faith basis to proceed with the same claims in a new action, and that the court should have imposed reasonable attorney fees, costs, and sanctions against them.
A trial judge's decision on an application for fees or sanctions is reviewed under an abuse of discretion standard. United Hearts v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (citing Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)), certif. denied, 200 N.J. 367 (2009).
N.J.S.A. 2A:15-59.1 provides that a prevailing party in a civil action may be awarded reasonable costs and attorney fees if the court finds that the complaint or defense of the nonprevailing party was frivolous. For a filing to be considered frivolous under the statute, a judge must find that:
(1) The complaint, counterclaim, cross-claim or defense was commenced, used or continued in bad faith, solely for the purpose of harassment, delay or malicious injury; or
(2) The nonprevailing party knew, or should have known, that the complaint, counterclaim, cross-claim or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law.
[N.J.S.A. 2A:15-59.1(b).]
Rule 1:4-8(b) provides that a party may make a motion for sanctions against another party that has filed a paper with a court for a frivolous purpose. This Rule requires that the moving party first serve written notice, stating that the paper is believed to violate the Rule, the basis for that belief, and a demand that the paper be withdrawn. Ibid. The notice must also advise that an application for sanctions will be made if the offending paper is not withdrawn within twenty-eight days of service of the written demand. Ibid. The sanction imposed is limited to "a sum sufficient to deter repetition of such conduct," and may consist of a penalty paid to the court, an order directing payment to the movant of "some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation," or both. R. 1:4-8(d).
The nature of conduct warranting sanction under Rule 1:4-8 or an imposition of fees and costs under N.J.S.A. 2A:15-59.1 has been strictly construed and narrowly applied. McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561 (1993); Wyche v. Unsatisfied Claim & Judgment Fund of N.J., 383 N.J. Super. 554, 560 (App. Div. 2006). The statute and Rule must be interpreted consistent with goals of deterring baseless litigation, but must be read restrictively, so as not to dissuade citizens from accessing the courts. DeBrango v. Summit Bancorp, 328 N.J. Super. 219, 226 (2000). Ordinarily, litigants should bear their own counsel fees and costs. Id. at 227.
An award of attorney fees, costs, and sanctions "is not warranted where the plaintiff had a reasonable, good faith belief in the merits of the action." Wyche, supra, 383 N.J. Super. at 561. This test is one of objective reasonableness. Ibid. "[A]n honest attempt to press a perceived, if ill-founded, claim" should not result in an imposition of sanctions or fees. McKeown-Brand, supra, 132 N.J. at 563.
Here, the court did not abuse its discretion when it found that Price Meese was not entitled to an award of fees and sanctions against plaintiffs. Although the court ultimately dismissed plaintiffs' complaint because the claims raised therein were precluded, Price Meese did not establish that plaintiffs filed the new complaint in bad faith or with a purpose to harass. Further, because Rule 1:4-8 and N.J.S.A. 2A:15-59.1 must be interpreted narrowly, we affirm the denial of fees and sanctions to Price Meese.
Affirmed on the appeal and cross-appeal. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION