Opinion
Civ. No. 99-1700 (DRD).
January, 2001
David D. F. Lawrence, Esq., Mark Berard, Esq., Durkin Durkin, West Caldwell, New Jersey, Attorneys for Plaintiffs.
Elliott Abrutyn, Esq., Warren Usdin, Esq., Margan, Melhuish, Monaghan, Arvidson, Abrutyn Lisowski, Livingston, New Jersey, Attorneys for Defendant.
O P I N I O N
Plaintiffs Brian Fuchs, Thomas Flanagan, and National Sweeteners, Inc. filed this lawsuit alleging breach of contract and legal malpractice by defendant Steven Goldberg in connection with the formation of a joint venture to acquire and operate an Avenel, New Jersey facility for the distribution of high fructose corn syrup. Goldberg moves for summary judgment, alleging that plaintiffs are collaterally estopped by the outcome of their prior breach of contract action against their potential co-venturer, Minnesota Corn Processors ("MCP"), in which it was held that there was no binding agreement between plaintiffs and MCP. Goldberg argues that because it has already been found, through extrinsic evidence, that there was no "meeting of the minds" between plaintiffs and MCP, and therefore it would have been impossible for Goldberg to have drafted a binding agreement, plaintiffs should be barred from litigating whether Goldberg could have drafted a binding agreement. For the reasons set forth herein, Goldberg's motion will be granted and the complaint will be dismissed with prejudice.
Because this case is being dismissed with prejudice on the collateral estoppel issue, it is not necessary to reach the other issues raised in the briefs and argued at the hearing on this motion ( e.g . , whether lost profits from a new business are recoverable under New Jersey law).
FACTS
The facts giving rise to this action are fully set forth in the August 17, 1997 opinion in Flanagan, et al. v. Minnesota Corn Processors, 96-2633, and will be summarized here. In February 1995, Fuchs retained Goldberg, an attorney, to represent him in negotiations to form a joint venture with Flanagan and MCP for the acquisition of a New Jersey facility for the purpose of distributing high fructose corn syrup. Fuchs, Flanagan, and MCP representatives visited the New Jersey facility in March and April 1995 and discussed a potential business arrangement. Goldberg was present during discussions held on April 12, 1995, and created, by hand, a document that was signed by the parties, entitled "Agreement subject to the execution of a formal contract," and that read as follows:PARTIES: Minnesota Corn Processors (MCP)
Brian Fuchs (BF)
Tom Flanagan (TF)
The parties shall form a corporation to be initially owned as follows:
-MCP 50%
-BF 25%
-TF 25%
The initial income interest shall be as follows:
-MCP 33-1/3%
-BF 33-1/3%
-TF 33-1/3%
The company will buy out TF's interest in 5 yrs. at a price to be determined by a formula established in the contract. Subsequent to the buy-out, the ownership of the company shall be:
-MCP 50%
-BF 50%.
MCP shall put up all capital to purchase the facility and put it in operating condition.
PURPOSE: To acquire the facility at Avenel, N.J.
Terms such as salary, if any, minimum put-through costs, quantity of loads, etc. to be formalized by contract.
The parties agree that this document is only an outline of the proposed agreement to be specifically delineated by formal contract.
Following the April 1995 meeting, the parties negotiated a $1.9 million purchase price for the New Jersey facility, but the parties could not reach a consensus concerning an operating agreement. On July 14, 1995, MCP expressed its intent to discontinue discussions with Fuchs and Flanagan and eventually purchased the facility on its own.
In June 1996, Fuchs and Flanagan filed suit against MCP in this District, alleging breach of contract, breach of fiduciary duty, equitable estoppel, and unjust enrichment. On August 19, 1997, I granted summary judgment for MCP, finding that the April 12, 1995 document was not an enforceable agreement and that the parties did not intend to be bound. Flanagan, et al. v. Minnesota Corn Processors, 96-2633. Specifically, MCP asserted that the April 12, 1995 document was preliminary and non-binding, claiming that it was subject to the execution of a formal contract. (Slip op. at 10.) Additionally, MCP argued that the parol evidence rule barred plaintiffs from introducing extrinsic evidence of intent to be bound because the April 12 document was integrated and unambiguous. (Id. at 11.) It was determined that there was no intent to be bound on the face of the document. (Id. at 13.) Further, extrinsic evidence was considered and it was concluded that those facts were insufficient to demonstrate an intent to be bound. (Id. at 14.) The following was stated regarding whether the parties intended to be bound:
The facts set forth by the plaintiffs are simply insufficient to demonstrate an intention of the parties to be bound by the preliminary agreement. Although the parties had met before and spent the day negotiating, this does not indicate that the preliminary agreement was intended to express essential terms in a binding contract. The comments of [an MCP executive] that "we have a deal" and "I don't go home until we have a deal" and the further negotiations and attempts to acquire the [New Jersey] facility after the preliminary agreement are inconclusive. [The MCP executive's] statement that "details aren't important" supports the contention of the defendants that no binding agreement was reached rather than the claims of the plaintiffs.
Under the circumstances of this case, both the incomplete terms of the agreement between the parties and the attendant circumstances demonstrate an intention not to be bound until a formal contract was executed. The execution of a formal contract was a condition precedent to the parties' obligation to enter into the joint venture described in the agreement. Accordingly, because no formal contract was ever executed, MCP [and its executives] did not breach the contract by failing to go through with the joint venture . . . ."
(Id.)
Thereafter, the instant action was brought in New York Supreme Court, Nassau County. Goldberg removed the action to the Eastern District of New York on the basis of diversity. The Eastern District transferred the case to the District of New Jersey. In their complaint, plaintiffs allege that "at the April 12, 1995 meeting, plaintiffs Fuchs and Flanagan, and MCP reached an agreement on the material terms of a joint venture between them to acquire, own, operate, and manage" the New Jersey facility. (Compl. ¶ 15.) However, plaintiffs allege that Goldberg "negligently, carelessly, and unskillfully drew and prepared the April 12 agreement, in that defendant failed to include in the Agreement such terms, provisions and/or language as were necessary to render same binding and enforceable." (Compl. ¶ 28.)
STANDARD OF REVIEW
Pursuant to Rule 56(c), a motion for summary judgment will be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In other words, "summary judgment may be granted if the movant shows that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party." Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir. 1988). All facts and inferences must be construed in the light most favorable to the non-moving party. See Peters v. Delaware River Port Auth. of Pa. N.J., 16 F.3d 1346, 1349 (3d Cir. 1994). Substantive law controls the inquiry into which facts are "material." Anderson, 477 U.S. at 247-48. An issue is "genuine" if a reasonable jury could decide the issue in the nonmovant's favor. Id. Thus, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id.
The party seeking summary judgment always bears the initial burden of production. Celotex, 477 U.S. at 323. This requires the moving party to establish either that there is no genuine issue of fact and that the moving party must prevail as a matter of law, or to demonstrate that the nonmoving party has not shown the requisite facts relating to an essential element of an issue on which it bears the burden. Id. at 322-23. Once the party moving for summary judgment has carried its initial burden, the burden shifts to the non-moving party, who in order to avoid summary judgment must demonstrate facts supporting each element for which it bears the burden and it must establish the existence of genuine issues of material fact that would justify a trial. Miller, 843 F.2d at 143.
However, at the summary judgment stage courts neither weigh the evidence nor make credibility determinations; those tasks are within the realm of the fact-finder. See Anderson, 477 U.S. at 249. Therefore, to demonstrate a genuine issue of material fact, the party opposing summary judgment need not produce evidence so strong that it mandates a decision in its favor. Rather, the party opposing summary judgment must present "evidence on which the jury could reasonably find" for the non-moving party. Anderson, 477 U.S. 252. "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient." Id.
If a moving party satisfies its initial burden of establishing a prima facie case for summary judgment, the opposing party "must do more than simply show that there is some metaphysical doubt as to material facts."Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Id. at 587 (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).
DISCUSSION
The doctrine of collateral estoppel, or issue preclusion, "prevents re-litigation of a particular fact or legal issue that was litigated in an earlier action." Seborowiski v. Pittsburgh Press Co., 188 F.3d 163, 169 (3d Cir. 1999). It "derives from the simple principle that `later courts should honor the first actual decision of a matter that has been actually litigated.'" Burlington Northern Railroad Co. v. Hyundai Merchant Marine Co., Ltd., 63 F.3d 1227, 1231 (3d Cir. 1995). Issue preclusion requires that:
1) the issue decided in the prior adjudication must be identical to the one presented in the later action, 2) there must be a final judgment on the merits, and, 3) the party against whom the doctrine is asserted must have been a party or in privity with a party to the prior adjudication and have had a full and fair opportunity to litigate the issue in question in the prior action.Seborowiski, 188 F.3d at 169 (quoting Dici v. Commonwealth of Pennsylvania, 91 F.3d 542, 548 (3d Cir. 1996)).
Defendant argues that issue preclusion applies because in Flanagan, et al. v. Minnesota Corn Processors it was concluded that the parties had not agreed to be bound and therefore plaintiffs should be barred from attempting to re-litigate that issue. Plaintiffs contend that issue preclusion is inappropriate in this case because "[t]he issues at bar pertaining to Defendant's malpractice were not litigated in the underlying action. Hence, the controlling issues [include]: . . . Whether Defendant improperly, negligently and carelessly drafted an agreement on behalf of the Plaintiffs that both Defendant and his clients intended to be a binding agreement . . . ." (Pl. Br. at 14.)
To prove legal malpractice, plaintiffs must establish: (1) the existence of an attorney-client relationship creating a duty of care upon the attorney; (2) that the attorney breached the duty owed; (3) that the breach was the proximate cause of any damages sustained; and (4) that actual damages were incurred. Sommers v. McKinney, 287 N.J. Super. 1, 9-10 (App.Div. 1996). Plaintiff's claim of legal malpractice (and breach of contract) appear to be precluded by the decision in Flanagan, et al. v. Minnesota Corn Processors.
Assuming that plaintiffs can establish the existence of an attorney-client relationship creating a duty of care upon Goldberg, plaintiffs cannot establish that Goldberg breached that duty because to do so would require re-litigation of whether the parties intended to be bound. In order to establish that Goldberg breached his duty, plaintiffs would be required to establish that Goldberg negligently, carelessly, and unskillfully drew and prepared the April 12 document by failing to include language necessary to render it binding and enforceable. In the prior action, however, that issue was litigated, it was concluded that there was no meeting of the minds and therefore, it would have been impossible for Goldberg to have drafted a binding agreement, and final judgment was issued. Thus, the first two requirements of issue preclusion are satisfied.
The third and fourth requirements, that the party against whom issue preclusion is asserted was a party to the prior adjudication and that the party had a full and fair opportunity to litigate the issue, are both satisfied as well. Fuchs, Flanagan, and National Sweeteners, Inc., the plaintiffs in the instant action, were the plaintiffs in the action against MCP. Not only did they have an opportunity to litigate whether there was an intent to be bound, they actually litigated the issue and a final judgment was entered. See Falconer v. Meehan, 804 F.2d 72, 76 (7th Cir. 1986) ("Collateral estoppel is proper in a situation like the case at bar, when facts giving rise to a later cause of action were adversely decided against the plaintiff in the prior action, even if in the prior action a different legal theory was argued.")
CONCLUSION
For the reasons set forth above, defendant's motion for summary judgment is granted and the complaint is dismissed with prejudice. An appropriate order will follow.