Robert McHale v. Ralph Kelly ( 2013 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 12-4541
___________
ROBERT F. MCHALE; DELILAH A. MCHALE,
Appellants
v.
RALPH J. KELLY
____________________________________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 12-cv-01363)
District Judge: Honorable Robert B. Kugler
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
May 14, 2013
Before: SMITH, CHAGARES and SHWARTZ, Circuit Judges
(Opinion filed: May 30, 2013)
_________
OPINION
_________
PER CURIAM
Robert and Delilah McHale, husband and wife, appeal pro se from the order of the
District Court dismissing their complaint. We will affirm.
I.
This civil action is the second that the McHales have brought against Ralph J. Kelly,
1
Esq., an attorney who represented them in a personal injury matter. Disposition of this appeal
requires some discussion of the background of the McHales’ prior suit, and we assume for
present purposes only that the McHales’ factual allegations are true.
In 1999, Robert McHale was injured in an automobile accident in New York state. The
McHales retained Kelly, who filed a personal injury action on their behalf in New York in
2001. Kelly also advised them to pursue an uninsured motorist claim in Pennsylvania. The
McHales resisted but, on Kelly’s advice, eventually agreed and obtained a settlement of
$750,000 in 2004. According to the McHales, Kelly misrepresented his expertise in workers
compensation matters and this settlement reduced Robert McHale’s workers compensation
medical coverage. When the McHales confronted Kelly about that issue, he offered them a
settlement of approximately $22,000. The McHales accepted it and signed a full release in
2004. In 2006, the McHales met with a New York attorney, who took over their representation
in the New York action and told them that (1) Kelly’s advice to pursue the uninsured motorist
claim was erroneous because it could not increase their ultimate award, and (2) one of the
defendants in the New York action had been dismissed because Kelly served the wrong
corporate entity. The New York action apparently remains pending.
The McHales filed their first action pro se against Kelly in 2011 (D.N.J. Civ. No. 11-cv-
00143), alleging that he committed malpractice in connection with the uninsured motorist
claim, Robert McHale’s workers compensation coverage, and the New York action. On
Kelly’s Rule 12(b)(6) motion to dismiss, the District Court determined that Pennsylvania’s
two-year statute of limitations applied and dismissed the complaint on statute of limitations
grounds on October 14, 2011.
2
The McHales then sent the District Court a letter dated October 18, 2011, in which they
took issue with certain of the court’s rulings and requested leave to file an amended complaint
on the basis of discovery provided by Kelly shortly before the dismissal order. The McHales
later submitted another letter along with a proposed amended complaint asserting claims for
fraud, “aggravated negligence,” and breach of fiduciary duty on the ground that Kelly’s
discovery responses revealed that he knew about but did not disclose his mistakes at the time
he and the McHales entered into the 2004 settlement and release. By letter dated December 9,
2011 (which is docketed as a “letter order”), the District Court advised them that these later
filings “have no legal effect” because “there is no pending action in this court at this time and
no valid complaint to amend.” The District Court did not specifically address the McHales’
letter of October 18, but its December 9 letter order left no doubt that it considered the action
concluded. The McHales did not appeal from either the District Court’s order of dismissal or
its December 9 letter order.
Instead, they filed pro se the separate civil action at issue here. Their complaint asserts
the three claims they sought to assert in their proposed amended complaint in their first action,
and the underlying allegations are materially identical. Kelly filed a Rule 12(b)(6) motion to
dismiss on the basis of res judicata, which the District Court granted. The District Court
agreed that the McHales’ claim for fraud is barred by res judicata, but it again concluded that
their other claims are governed by Pennsylvania law and dismissed them on statute of
limitations grounds. The McHales appeal pro se.1
1
The District Court had diversity jurisdiction under 28 U.S.C. § 1332, and we have jurisdiction under
28 U.S.C. § 1291. We exercise plenary review over the dismissal of a complaint under Rule 12(b)(6).
3
II.
Most of the McHales’ arguments on appeal are addressed to the dismissal of their first
action. They argue, for example, that the District Court erred in that action by applying
Pennsylvania instead of New Jersey law and by denying leave to file an amended complaint.
We lack jurisdiction to review the dismissal of the McHales’ first action, however, because
they did not appeal and the jurisdictional period for doing so has expired. See Bowles v.
Russell, 551 U.S. 205, 214 (2007). The McHales argue that they did not file an appeal in their
first action only because they thought that the District Court would permit an amended
complaint, but the District Court did nothing to mislead them in that regard and, even if it had,
we have “no authority to create equitable exceptions to jurisdictional requirements.” Id.The fact that the McHales did not appeal the dismissal of their first action means that
the judgment in that action is final for res judicata purposes. The District Court concluded that
it was bound to apply New Jersey’s law of res judicata under Semtek International Inc. v.
Lockheed Martin Corp., 531 U.S. 497 (2011), and that New Jersey law bars the McHales’
fraud claim, but it declined to dismiss their other two claims on that basis. Kelly argues that
Semtek does not apply because the preclusive effect of a federal diversity judgment on a
second federal diversity action is a matter of federal law, see Paramount Aviation Corp. v.
Agusta, 178 F.3d 132, 144-45 (3d Cir. 1999), and that we should affirm on the alternative
ground that federal law bars the McHales’ complaint as a whole. We need not decide whether
See Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220 (3d Cir. 2011). The McHales argue that the
District Court erroneously converted Kelly’s Rule 12(b)(6) motion into a motion for summary
judgment, but the District Court properly treated it as a Rule 12(b)(6) motion. The McHales also argue
that the District Court misapplied New Jersey state pleading standards, but those standards do not
govern in federal court and the court’s ruling did not turn on the pleading standard in any event.
4
Semtek or Paramount Aviation controls in this situation generally because we agree that the
McHales’ second action is barred under the circumstances presented here.
“Both New Jersey and federal law apply res judicata or claim preclusion when three
circumstances are present: (1) a final judgment on the merits in a prior suit involving (2) the
same parties or their privies and (3) a subsequent suit based on the same cause of action.” In re
Mullarkey, 536 F.3d 215, 225 (3d Cir. 2008) (quotation marks omitted). Each of these
elements is present here. First, we need not decide whether a federal dismissal on statute of
limitations grounds constitutes a judgment “on the merits” under New Jersey law 2 because,
even under Semtek, such a dismissal constitutes a judgment on the merits as to subsequent
complaints filed in the same federal court. See Semtek, 531 U.S. at 506. Second, the parties
are identical. Finally, under both federal and New Jersey law, the McHales’ second complaint
was based on the same “cause of action” as their first because there is an “essential similarity
of the underlying events giving rise to the various legal claims.” Lubrizol Corp. v. Exxon
Corp., 929 F.2d 960, 963 (3d Cir. 1991) (quotation marks omitted); see also id. at 965 (noting
that New Jersey law is the same). Res judicata “bars not only claims that were brought in a
previous action, but also claims that could have been brought,” Mullarkey, 536 F.3d at 225,
and the McHales’ claims in this action clearly qualify.
Indeed, the McHales did attempt to bring those claims in their first action, but the
District Court did not permit them to do so. The McHales take issue with that decision, but
2
The District Court concluded that it does, though it considered the issue “a close question.” (D. Ct.
Op. at 8) (citing Walker v. Choudhary, 40 A.3d 63, 75 (N.J. Super. Ct. App. Div. 2012)). The
McHales have provided no reason to question that conclusion, but we need not and do not decide the
issue.
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even if the District Court erred (which we lack jurisdiction to decide) its error would not render
its decision any less a final judgment on the merits. See Federated Dep’t Stores, Inc. v. Moitie,
452 U.S. 394, 398 (1981); Velasquez v. Franz, 589 A.2d 143, 150 (N.J. 1991). The McHales’
remedy for any such error was to file an appeal, not a separate civil action. See Moitie, 452
U.S. at 398 (“A judgment merely voidable because based upon an erroneous view of the law is
not open to collateral attack, but can be corrected only by a direct review and not by bringing
another action upon the same cause of action.”) (quotation mark and alteration omitted);
Velasquez, 589 A.2d at 512 (“If the federal court misinterpreted which choice of law rule to
use, as plaintiff . . . allege[s], correcting that mistake is not a job for a state court [in a
subsequent action] but must be addressed to the third circuit.”).
The McHales blame their failure to appeal on the District Court but, as explained above,
the District Court did nothing to lead them to believe that they would be permitted to file an
amended complaint. And even if it had, there generally is no equitable exception to the
operation of res judicata when a party fails to file an appeal. See Moitie, 452 U.S. at 400-01.
The McHales could have appealed from the District Court’s order dismissing their complaint
in their first action, or from the District Court’s letter order of December 9, 2011, which
declined to take action on the McHales’ most recent post-judgment filings and made clear the
District Court’s determination that the matter was concluded. The McHales decided instead to
institute this second civil action, which is barred by the final judgment entered in their first.
The McHales’ pro se status does not relieve them of the consequences of that procedural
misstep. See Mala v. Crown Bay Marina, Inc., 704 F.3d 239, 245 (3d Cir. 2013).
Our conclusion that the McHales’ complaint as a whole is barred by res judicata
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ordinarily would render it unnecessary to review the District Court’s ruling that their second
and third claims are barred by Pennsylvania’s statute of limitations (which Kelly also defends).
We have jurisdiction to review that ruling, however, and we will exercise it for the reasons
explained in the margin.3
Having done so, we perceive no error. The District Court concluded that the McHales’
second claim is merely a reassertion of the malpractice claim they asserted in their first action
and that it is barred by Pennsylvania’s statute of limitations, 42 Pa. Cons. Stat. § 5524, for the
reasons it previously explained. The District Court also held that the McHales’ third claim is
barred for similar reasons. The McHales do not dispute that their claims are untimely under
Pennsylvania law. Instead, they argue that the District Court should have applied New Jersey’s
six-year statute of limitations, see N.J. Stat. Ann. § 2A:14-1, which would make their claims
timely.
In concluding otherwise, the District Court properly applied the “most significant
relationship” test that New Jersey has adopted from the Restatement (Second) of Conflict of
Laws. See Maniscalco v. Brother Int’l (USA) Corp., 709 F.3d 202, 206 (3d Cir. 2013); see
also Cornett v. Johnson & Johnson, 48 A.3d 1041, 1047 (N.J. 2012) (applying “most
significant relationship” test to statutes of limitations). The District Court also properly
concluded that the relevant contacts, considered qualitatively, point to the application of
Pennsylvania law. See Maniscalco, 709 F.3d at 207. The McHales are domiciled in New
Jersey, and New York is where the automobile accident occurred and where Kelly filed suit.
3
The McHale’s appeal from the District Court’s ruling in this case also gives us jurisdiction to review
the legal issues that formed the basis of the first action and thereby effectively resolves any lingering
issues in both cases.
7
All of the other relevant contacts, however, are with Pennsylvania: Kelly is domiciled in
Pennsylvania and practiced law through a Pennsylvania law firm; he initiated the uninsured
motorist action in Pennsylvania; he negotiated the McHales’ settlement in Pennsylvania and
the settlement agreement is governed by Pennsylvania law; and the insurance policy providing
the lion’s share of that settlement was issued in Pennsylvania. For the reasons explained in
more detail by the District Court, we agree that these contacts give Pennsylvania the most
significant relationship with this suit and that the McHales’ second and third claims are
untimely under Pennsylvania law.
For the foregoing reasons, we will affirm.
8