Entire Case Doctrine In New Jersey

A decision of the New Jersey Supreme Court reversed and remanded a dismissed legal malpractice claim.

The entire controversy doctrine seeks to impel litigants to consolidate their claims arising from a single controversy whenever possible. If a party fails to assert a claim that the entire controversy doctrine requires to be joined in a given action, a court may bar that claim.

In this appeal, the Court reviews a judgment dismissing a legal malpractice claim asserted by two clients against their former counsel. The malpractice claim was not asserted until three years after the conclusion of a collection action filed by the law firm against the clients to recover unpaid legal fees.

In 2005, Evangelos Dimitrakopoulos retained the law firm of Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C. (Borrus firm), for assistance in a business dispute with Steven Eleftheriou. Represented by the Borrus firm, Dimitrakopoulos and his wife filed a verified complaint against Eleftheriou and his wife. For reasons that the record does not disclose, the Borrus firm filed a motion to withdraw as counsel shortly after it was retained.

On March 7, 2011, the Borrus firm filed a complaint against Dimitrakopoulos, alleging that its former client owed it $93,811.95 in fees for legal services and that payment had been demanded and not made. Dimitrakopoulos, acting pro se, filed an answer to the collection complaint but filed no counterclaim or third-party claim.

In a proceeding before the arbitrator on September 6, 2011 — six months after the collection action was filed — the Dimitrakopouloses and the Eleftherious settled their dispute. In light of the settlement, the arbitrator did not issue an award.

On July 12, 2012, the court in the collection matter granted the Borrus firm’s unopposed motion for a final judgment by default in the amount of $121,947.99 for legal services, interest, attorneys’ fees, and court costs. Dimitrakopoulos did not appeal.

Accordingly, a total of sixteen months elapsed between the filing of the Borrus firm’s collection action and the entry of the default judgment in that action. After the resolution of the business dispute between the Dimitrakopouloses and the Eleftherious on September 6, 2011, the collection action remained pending for an additional ten months.

On September 10, 2015, approximately three years after the entry of judgment in the collection action, the Dimitrakopouloses sued the Borrus firm and the principal attorneys who worked on their matter for legal malpractice. Defendants moved to dismiss the complaint based on the entire controversy doctrine and the doctrine of waiver. The Dimitrakopouloses argued that the damages claimed in the malpractice action were known to them as of September 6, 2011, the day that they settled their dispute with the Eleftherious.

The trial court concluded that the Dimitrakopouloses could have asserted their malpractice claim in the collection matter. An Appellate Division panel affirmed that judgment and stated that under this Court’s decision in Olds v. Donnelly, 150 N.J. 424, 443 (1997), legal malpractice claims are exempt from the entire controversy doctrine to the extent that they need not be asserted in the underlying action. The panel confirmed, however, that the underlying action was the litigation between the Dimitrakopouloses and the Eleftherious, not the Borrus firm’s collection action. Like the trial court, the panel concluded that during the remaining ten months of the collection action, the Dimitrakopouloses had a fair and reasonable opportunity to litigate their malpractice claim. The panel did not reach the Borrus firm’s waiver argument. The Court granted the Dimitrakopouloses’ petition for certification. 232 N.J. 280 (2018).

HELD: The Court reiterates its holding in Olds that the entire controversy doctrine does not compel a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client. 150 N.J. at 443. However, the collection action at issue in this matter was not an “underlying action” as that term is used in Olds, and the entire controversy doctrine may bar the claim. The record of this appeal, however, is inadequate for an application of the equitable rules that govern here.

(Mike Frisch)