ELIZABETH LOPEZ-NEGRON VS. PROGRESSIVE CASUALTY INSURANCE COMPANY (L-0779-15 AND L-4577-15, CAMDEN COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3590-17T2
ELIZABETH LOPEZ-NEGRON,
individually and on behalf of
all others similarly situated,
Plaintiff-Appellant,
v.
PROGRESSIVE CASUALTY
INSURANCE COMPANY,
PROGRESSIVE GARDEN STATE
INSURANCE COMPANY,
PROGRESSIVE FREEDOM
INSURANCE COMPANY, and
DRIVE NEW JERSEY
INSURANCE COMPANY,
Defendants-Respondents.
_______________________________
ELIZABETH LOPEZ-NEGRON,
individually and on behalf of
all others similarly situated,
Plaintiff-Appellant,
v.
PROGRESSIVE DIRECT
INSURANCE COMPANY,
Defendant-Respondent.
_____________________________
Argued May 28, 2019 – Decided June 18, 2019
Before Judges Sabatino, Haas and Mitterhoff.
On appeal from Superior Court of New Jersey, Law
Division, Camden County, Docket Nos. L-0779-15 and
L-4577-15.
Jeremy E. Abay argued the cause for appellant (Sacks
Weston Diamond, LLC and Dilworth Paxson, LLP,
attorneys; John K. Weston (Sacks Weston Diamond,
LLC) of the Pennsylvania bar, admitted pro hac vice,
Jeremy E. Abay, Thomas S. Biemer, Jerry R.
DeSiderato, and Erik L. Coccia, on the briefs).
Michael K. Loucks (Skadden, Arps, Slate, Meagher &
Flom, LLP) of the Massachusetts bar, admitted pro hac
vice, argued the cause for respondents (Carl D. Poplar,
P.A. and Michael K. Loucks, attorneys; Michael K.
Loucks, of counsel; Carl D. Poplar, on the briefs).
PER CURIAM
This case returns two years after our 2017 opinion reversing the Law
Division's Rule 4:6-2(e) dismissal of plaintiff's complaint for failure to state a
claim. Lopez-Negron v. Progressive Cas. Ins. Co., No. A-1632-15 (App. Div.
Mar. 6, 2017). On remand, after related federal qui tam litigation settled, the
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2
Law Division dismissed the complaint again, this time on entire controversy
grounds.
For the reasons that follow, we reverse and again reinstate plaintiff's state
court action.
I.
The Factual Background
We discussed the factual background underlying Lopez-Negron's
complaints in our prior opinion, Lopez-Negron, slip op. at 4-15, and incorporate
that full discussion here. The following brief summary will suffice, recognizing
that plaintiff's factual allegations have yet to be explored through complete
discovery or tried.
New Jersey's Fair Automobile Insurance Reform Act, L. 1990, c. 8, § 6,
amended N.J.S.A. 39:6A-4.3(d), a provision of the Automobile Insurance Cost
Reduction Act, N.J.S.A. 39:6A-1.1 to -35, to require that automobile insurers
offer applicants the option to designate their health insurance provider as the
primary payer of Personal Injury Protection ("PIP") benefits. Plans providing
such a designation are often referred to as "health-first" policies, whereby the
auto insurer serves as a secondary payer for injuries that policyholders sustain
in motor vehicle accidents. See N.J.S.A. 39:6A-4.3(d). However, Medicare and
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Medicaid recipients cannot qualify for "health-first" policies. See N.J.A.C.
11:3-14.5(a). Federal law generally requires Medicare and Medicaid to be
secondary payers of last resort if a primary payer exists. See 42 U.S.C. §
1395Y(b)(2)(A)(ii); 42 C.F.R. § 433.139 (2018).
Plaintiff Elizabeth Lopez-Negron, who was covered by Medicare, applied
for automobile insurance with Progressive online. She obtained a "health-first"
plan from Progressive despite her ineligibility. The online application process
used by Progressive posed a number of questions, including asking if the
applicant had health insurance and if this insurance covers injuries from an
accident. If the applicant answered yes, Progressive's website recommended the
applicant obtain a "health-first" policy. Elsewhere on Progressive's website, and
in optional "pop-ups" on the digital application, Progressive elaborated with
more details about the "health-first" option.
Progressive did not obtain other information about Lopez-Negron's health
insurance coverage and Medicare status until after she was in the auto accident
leading to the present controversy.
In May of 2010, Lopez-Negron was in a motor vehicle accident. She
received treatment from Diagnostic Imaging, Inc. ("Diagnostic"), Oxford Health
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Care PC ("Oxford"), Aria Health System ("Aria"), and the City of Philadelphia
EMS Division.
Particularly relevant to the state claims are the x-rays plaintiff received
from Diagnostic. Diagnostic submitted its bills to Progressive. Progressive's
claims adjuster denied the bills because Lopez-Negron had a "health-first" auto
policy. Diagnostic then submitted its bills to Medicare, and Medicare paid for
the two x-rays.
Lopez-Negron filed a bodily injury claim against the third-party tortfeasor
in the accident and received a settlement from that driver's insurer. Medicare
placed a subrogation lien on the settlement proceeds.
Plaintiff's Federal Qui Tam Complaint
In January 2014, Lopez-Negron filed a qui tam action on behalf of the
United States and the State of New Jersey against Progressive Casualty
Insurance Company and Progressive Garden State Insurance Company
("Progressive") in the United States District Court for the District of New
Jersey. 1 The federal complaint alleged claims under the False Claims Act
1
The federal and state actions list different defendants, but all defendants in the
federal action are included in plaintiff's state actions. Accordingly, we will refer
to defendants collectively as "Progressive."
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("FCA"), 31 U.S.C. §§ 3729-3733, and state law claims under the New Jersey
False Claims Act ("NJFCA"), N.J.S.A. 2A:32C-1 to -18. Generally, the federal
complaint alleged Progressive engaged in "an illegal scheme by which [the
insurance company] exploited New Jersey auto insurance law to avoid paying
medical benefits to motor vehicle accident victims by causing healthcare
providers to submit false and fraudulent claims to Medicare and Medicaid."
The federal complaint was initially filed in camera and under seal,
pursuant to the requirements of the FCA and NJFCA, which allow the United
States and New Jersey to review such complaints before deciding whether they
will intervene in the matter. 31 U.S.C. § 3730(b)(2); N.J.S.A. 2A:32C -5(c) to
(d).
On March 11, 2015, the United States declined to intervene in the qui tam
case, and the district court subsequently unsealed the federal complaint on
March 17, 2015. The State of New Jersey likewise declined to intervene on
August 3, 2015. Negron v. Progressive Cas. Ins. Co., Civ. No. 14-577
(NLH/KMW), 2016 U.S. Dist. LEXIS 24994, at *2 n.2 (D.N.J. Mar. 1, 2016).
The New Jersey Class Action Complaint
Meanwhile, in February 2015, Lopez-Negron filed a class action
complaint (Docket No. L-779-15) in the Law Division, pursuant to Rule 4:32,
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against Progressive Casualty Insurance Company, Progressive Garden State
Insurance Company, Progressive Freedom Insurance Company, and Drive New
Jersey Insurance Company. The class action complaint raises claims against
Progressive under the New Jersey Consumer Fraud Act ("NJCFA"), N.J.S.A.
56:8-1 to -20, the New Jersey Truth-in-Consumer Contract, Warranty and Notice
Act ("TCCWA"), N.J.S.A. 56:12-14 to -18, plus common-law claims of fraud,
unjust enrichment, breach of contract, and bad faith.
Lopez-Negron brought the class action "on behalf of all Medicare and
Medicaid beneficiaries who have purchased New Jersey auto insurance policies
from Defendants that, in violation of State and Federal law, deem Medicare or
Medicaid the primary payer of medical expenses," including those who had a
Medicare or Medicaid lien levied on a third-party recovery as a result of this
purchase. The Law Division complaint alleges that "[a]s a direct and proximate
result of Defendants' unconscionable commercial practices, Plaintiff and
members of the Class suffered loss, including paying for insurance policies that
were in violation of applicable law, and the imposition of Medicare and
Medicaid liens." As such, Lopez-Negron seeks various forms of relief,
including statewide class certification, injunctive relief, and damages.
A-3590-17T2
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In December 2015, Lopez-Negron filed a second class action complaint
in the Law Division against another Progressive entity, Progressive Direct
Insurance Company (Docket No. L-4577-15). This complaint was substantively
identical to plaintiff's initial class action complaint. Lopez-Negron asserts that
she discovered the identity of this fifth Progressive defendant during the first
appeal in the state action, and that she filed the separate complaint to toll the
statute of limitations.
Pursuant to a consent order, this second state action was stayed pending
the resolution on appeal of the first state action. The consent order also specified
that the matter "shall be consolidated" with the first state action once the appeal
was resolved.
Motions to Dismiss
Progressive filed separate motions to dismiss the complaint in both the
federal and state cases. In each instance, Progressive argued that Lopez-Negron
failed to present a viable claim upon which relief may be granted.
The Federal Motion to Dismiss
In the federal case, Progressive moved to dismiss the case under Fed. R.
Civ. P. 12(b)(6) in June 2015. Progressive attached plaintiff's class action
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complaint as an exhibit in its motion to dismiss, but evidently did not raise the
entire controversy doctrine or any related fragmentation issues at that time.
On March 1, 2016, the district court denied Progressive's motion to
dismiss, finding that Lopez-Negron sufficiently pled her FCA and NJFCA
claims. Negron, 2016 U.S. Dist. LEXIS 24994, at *2. The court specifically
found in its detailed written opinion that Lopez-Negron met her pleading burden
under the FCA, which requires a plaintiff to show "(1) the defendant presented
or caused to be presented to an agent of the United States a claim for payment;
(2) the claim was false or fraudulent; and (3) the defendant knew the claim was
false or fraudulent." Id. at *14 (quoting Hutchins v. Wilentz, Goldman &
Spitzer, 253 F.3d 176, 182 (3d Cir. 2001)).
The Motion to Dismiss the Law Division Case and the First Appeal
Meanwhile, in June 2015, Progressive moved to dismiss the state class
action complaint under Rule 4:6-2(e) for failure to state a claim. Progressive
also moved to strike the class allegations as deficient under Rule 4:32-1.
The Law Division granted Progressive's motion to dismiss on November
5, 2015, finding Lopez-Negron's claims not viable as a matter of law. The Law
Division did not rule upon Progressive's motion to strike the class claims.
A-3590-17T2
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Lopez-Negron appealed the Law Division's grant of Progressive's motion
to dismiss. Progressive did not argue the entire controversy doctrine or object
to the existence of the simultaneous federal and state actions in its motion to
dismiss or in its initial briefs on appeal. The federal complaint, however, was
attached as an exhibit to Progressive's Law Division motion.
Before oral argument in the first appeal, this court requested supplemental
briefs on "the propriety of the federal qui tam lawsuit and the state court lawsuit
being litigated simultaneously," and specifically discussing "the applicability of
the doctrines of single controversy, issue preclusion, and claim p reclusion and
any other related doctrines, as well as whether the state law claims could be or
could have been addressed by the federal court as matters within its
supplemental jurisdiction." The parties responded, with Progressive arguing to
the court for the first time that Lopez-Negron's claims should be precluded under
the entire controversy doctrine.
On March 6, 2017, in an unpublished opinion, this court vacated the
dismissal order and remanded the case to the Law Division. Lopez-Negron, slip
op. at 3. Among other things, we concluded the Law Division had impermissibly
"decided fact-dependent matters of knowledge, intent, feasibility and
reasonableness" at the motion to dismiss phase. Ibid.A-3590-17T2
10
In remanding this case to the trial court in 2017, we noted "the duplicative
nature of the overall litigation clearly raises the specter of potential inconsistent
factual and legal determinations, not to mention the arguably wasteful
expenditure of scarce judicial resources." Lopez-Negron, slip op. at 39. We
instructed that these forum concerns "be addressed by the Law Division
promptly on remand." Id. at 40. We stated in this regard:
More specifically, plaintiff shall be afforded thirty days
to move, if she wishes, for leave to amend her
complaint in the federal action to include, by way of
supplemental jurisdiction, all of the additional state-law
claims included in her present Law Division action. We
do not, of course, presume how the district court would
rule on such a motion, especially given the amount of
time that already has been expended in the federal case.
In any event, the Law Division may properly take into
account whether plaintiff has attempted to invoke the
supplemental jurisdiction of the federal court, in
deciding whether single controversy or other principles
weigh against allowing the Law Division case to
proceed at the same time the federal action is ongoing.
At the very least, if the Law Division judge
decides to allow this case to continue into the discovery
phase, the judge and counsel should consider
coordinating discovery with the discovery in the federal
action.
We suggest that the Law Division convene a case
management conference within forty-five days of this
opinion, at which opportunity the court and counsel
may explore these and other forum and procedural
concerns.
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[Id. at 40-41].
Post-Remand Proceedings
Motion for Leave to Amend and Stay
Following this court's remand, Lopez-Negron filed a motion in the district
court for leave to amend her federal complaint to include the state claims. The
New Jersey action was stayed pending the resolution of the federal action. Each
side was allowed to file a motion to dissolve the stay or extend the stay after the
motion to amend the complaint in the district court was decided.
The district court held off ruling on the motion as the parties attempted to
settle the federal claims. This delay was apparently due to a consensus between
both parties and the court to wait and see if the federal claims settled.
On September 12, 2017, the district court dismissed Lopez-Negron's
motion to amend because of a "September 11, 2017 letter advising that a
tentative settlement ha[d] been reached." The court noted that Lopez-Negron
could "refile the motion if the settlement [was] not consummated."
Partial Discovery in the Federal Case
Before the federal case settled, the parties conducted a partial amount of
discovery. Lopez-Negron describes this discovery as being limited to damages,
specifically "to determining which health-first policyholders were insured by
A-3590-17T2
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Medicare/Medicaid at the time of their respective auto accidents, then obtaining
and sorting through Medicare/Medicaid data to identify which claims should
have been paid by Progressive." Progressive describes the federal discovery as
"extensive," and including "document discovery, responding to interrogatories
and seeking policy and claims information from Medicare and Medicaid going
as far back as 2008 for individuals who had made claims on Progressive policies
during that time." In any event, there were no depositions taken or expert reports
exchanged.
A proposed joint discovery plan filed on August 23, 2017 states that after
Progressive responded to Lopez-Negron's initial document requests and
interrogatories and made additional productions in the fall of 2016, the parties
"agreed to focus discovery on potential damages in an effort to reach an early
resolution of this matter through settlement."
The Federal Settlement
On November 14, 2017, the United States, the State of New Jersey, Lopez-
Negron, and Progressive entered into a settlement agreement in the federal qui
tam action. Without any admission of wrongdoing, Progressive agreed to pay
$1,380,000 plus interest in settlement to the United States and $620,000 plus
interest to the State of New Jersey. The settlement agreement provided that the
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United States and New Jersey would pay Lopez-Negron thirty percent of these
settlement amounts. Progressive also was to pay Lopez-Negron $212,700 "as
payment for attorney's fees" and $180,000 "for costs and expenses in connection
with the Civil Action."
The settlement agreement specified that the United States and New Jersey
"release the Progressive Entities from any civil or administrative monetary claim
that the United States or New Jersey has for the Covered Conduct" under various
statutes and common law theories. Lopez-Negron, as relator, released "the
Progressive entities from any civil monetary claim the Relator has on behalf of
the United States or New Jersey for the Covered Conduct under the False Claims
Act, 31 U.S.C. §§ 3729-3733, the New Jersey False Claims Act, N.J. Stat. Ann.
§ 2A:32C-1, or the Medicare Secondary Payer Act, 42 U.S.C. § 1395y."
The United States and New Jersey specifically reserved claims in the
settlement, such as those involving any criminal liability or liability arising
under the Internal Revenue Code. There is not a similar provision reserving
specific claims for Lopez-Negron.
On February 15, 2018, the district court issued an order dismissing the
claims in the federal case, pursuant to the settlement agreement.
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Progressive's Motion to Preclude the State Action
Following the federal settlement agreement, the stay of the Law Division
case was lifted through a consent order in November 2017. Progressive then
filed a "Motion to Preclude the Complaint Under R. 4:30A." Progressive also
filed a motion to strike the class allegations.
On March 16, 2018, a different Law Division judge who had been
assigned the case ("the second judge") issued an oral opinion, after hearing
argument from the parties. The judge's opinion and companion order granted
Progressive's motion to preclude the state complaint under Rule 4:30A and
dismissed all of Lopez-Negron's claims with prejudice.
In his oral opinion, the second judge found it was clear that the state and
federal actions involved the same parties, facts, and series of transactions, and
observed the "core . . . of the matter is the same in . . . both actions." The judge
was persuaded that Lopez-Negron "recognized that these were the same core
controversies" when she moved to have the state claims included in the federal
case. The judge also found that if Lopez-Negron wanted to preserve these state
claims, that should have been made explicit in the settlement agreement,
pointing out that, by comparison, the United States and New Jersey both
expressly reserved claims in the settlement agreement. The judge was persuaded
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that Lopez-Negron should have included the state claims in the federal action,
and that the state claims should be dismissed under the entire controversy
doctrine. The judge also concurrently granted Progressive's motion to strike the
class claims, because Lopez-Negron no longer had standing as a class
representative.
II.
Although the parties make a variety of arguments, sub-arguments, and
counter-arguments, the core of this appeal is whether the Law Division
appropriately relied upon the entire controversy doctrine in dismissing plaintiff's
state court complaint with prejudice. We conclude it erred in doing so.
The entire controversy doctrine is an equitable preclusion doctrine that
"seeks to assure that all aspects of a legal dispute occur in a single lawsuit."
Olds v. Donnelly, 150 N.J. 424, 431 (1997). As our Supreme Court recently
reiterated, "The entire controversy doctrine 'seeks to impel litigants to
consolidate their claims arising from a single controversy whenever possible.'"
Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237
N.J. 91, 98 (2019) (quoting Thornton v. Potamkin Chevrolet, 94 N.J. 1, 5
(1983)). "The doctrine serves 'to encourage complete and final dispositions
through the avoidance of piecemeal decisions and to promote judicial efficiency
A-3590-17T2
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and the reduction of delay.'" Ibid. (quoting Wadeer v. N.J. Mfs. Ins. Co., 220
N.J. 591, 610 (2015)).
The doctrine generally disfavors successive suits regarding the same
controversy. See DiTrolio v. Antiles, 142 N.J. 253, 267 (1995). Therefore,
when a party fails to assert a claim that the entire controversy doctrine required
be joined in an action, the court has the authority to bar that claim. R. 4:30A.
Even so, "the boundaries of the entire controversy doctrine are not
limitless. It remains an equitable doctrine whose application is left to judicial
discretion based on the factual circumstances of individual cases." Highland
Lakes Country Club & Cmty. Ass'n v. Nicastro, 201 N.J. 123, 125 (2009)
(quoting Oliver v. Ambrose, 152 N.J. 383, 395 (1998)). As such, "the polestar
for the application" of the doctrine is "judicial fairness," and "a court must apply
the doctrine in accordance with equitable principles, with careful attention to
the facts of a given case." Dimitrakopoulos, 237 N.J. at 114 (quoting K-Land
Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 74 (2002)). 2
2
We appreciate the helpful supplemental briefs of counsel we requested
addressing the Supreme Court's opinion in Dimitrakopoulos, as well as the
excellent written and oral advocacy of both parties in grappling with this
procedurally complicated matter.
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The Supreme Court has expressed three "significant concerns" supporting
preclusion under the entire controversy doctrine: "(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." Id. at 108(quoting Wadeer, 220 N.J. at 605). The doctrine should not be applied "where
to do so would be unfair in the totality of the circumstances and would n ot
promote any of its objectives, namely, the promotion of conclusive
determinations, party fairness, and judicial economy and efficiency." Id. at 114
(quoting K-Land, 173 N.J. at 70). When analyzing fairness, "courts should
consider fairness to the court system as a whole, as well as to all parties."
Wadeer, 220 N.J. at 605.
In ruling on Progressive's motion to dismiss plaintiff's state court action
on entire controversy principles, the Law Division focused largely upon the
overlap between the federal and state litigations, as well as considerations of
judicial economy. These are surely relevant and important parts of the analysis.
We concur with the Law Division that there was a substantial overlap
between the allegations Lopez-Negron pled in her federal lawsuit and those she
pled in the Law Division. Plaintiff eventually acknowledged that when she
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moved to file her supplemental claims in the district court. Except for the qui
tam feature of the federal action that swept in the United States and the State of
New Jersey, there is a common identity of parties in the two lawsuits: Lopez-
Negron and Progressive (or its various related companies). The operative
allegations as to Progressive's allegedly-flawed website process for obtaining a
"health-first" auto policy are essentially the same.
The basic theme of both lawsuits – i.e., that Progressive misled Medicare
and Medicaid recipients into buying health-first policies for which they were
ineligible – is repetitive.
To be sure, the federal qui tam case focused on the alleged damages to the
government programs in making erroneous Medicaid or Medicare payments on
claims until the mistaken health-first elections were discovered. In addition,
plaintiff's federal complaint invoked different federal and state laws to support
liability than in the Law Division case. On the whole, however, the second Law
Division judge was correct in recognizing the substantial overlap and
duplicative aspects of the two cases.
To a certain extent, these two actions raise concerns about the duplicate
consumption of resources in the two forums, and the inherent risks of
inconsistent determinations had both cases been decided on their merits. As of
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this point, the lawsuits have taken the time and attention of a United States
District Judge, a United States Magistrate Judge, a private mediator, two Law
Division judges, and four Appellate Division judges. 3 Additional time and
effort was expended in the two courts by their respective administrative
personnel in judges' chambers and in the clerks' offices, over the course of
several years. It surely would have been more economical and efficient, if
possible, to have this case processed, managed, and adjudicated in one
courthouse, and not two.
Plaintiff points out that the distinctive features of qui tam litigation, in
which she functioned as a "relator" bringing claims of injury on behalf of the
governments, provides ample justification for her decision to litigate the same
core allegations in the two forums. At oral argument on appeal, counsel
represented to the court that the United States Government has taken the legal
position that it has the unilateral authority to control the course of a qui tam
action, including the power to dismiss the case on its own motion. In addition,
plaintiff argues that it is by no means certain the federal court would have
3
We appreciate that the second Law Division judge and the fourth Appellate
Division judge were brought into the case as the result of periodic judicial
reassignments, and annual changes in the appellate "Parts." Even so, the
cumulative time spent by the respective jurists would be substantial, even if
those administrative reassignments had not occurred.
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granted her motion to amend her complaint in that forum to include the
additional state-law claims and exercised supplemental jurisdiction over them
under 28 U.S.C. § 1367. We need not comment or rule upon these issues of
federal law, other than to express our recognition that this dual-forum procedural
context is complicated, and that it might not necessarily have been feasible for
plaintiff's entire "bucket" of claims to be poured into one venue.
The separate state and federal actions did raise risks of inconsistent
adjudications in the two forums. For example, the fact-finder in the federal case
(say, the district judge in an injunctive hearing, or a jury at a trial on liabilit y or
damages) hypothetically might find plaintiff and her witnesses credible and
Progressive's witnesses not credible, while a state judge or jury might find the
opposite. Or the federal decision-maker(s) might find that plaintiff had failed
to meet her burden of proving her core allegations of wrongdoing, while the
state decision-maker(s) might be persuaded she did meet her burden. Indeed,
the first Law Division judge and the district judge diverged sharply in their
perceptions as to whether Progressive's website application process for "health-
first" policies was misleading or otherwise flawed.
Plaintiff suggests that the prospect of inconsistent adjudications can
adequately be addressed by the courts. For example, the court could stay the
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state court action while the federal case proceeded. If and when the federal case
was decided on its merits, the federal findings may have certain preclusive
effects in the state court case under principles of collateral estoppel. Although
that approach may have advantages, the resulting preclusive impacts might well
be disputed, particularly if the findings or a jury verdict in the federal case had
any ambiguities or material omissions. See Winters v. N. Hudson Reg'l Fire and
Rescue, 212 N.J. 67, 95-96 (2012) (articulating that collateral estoppel is an
equitable doctrine requiring satisfaction of five factors, including that the
determination of the issue for which collateral estoppel is sought be "essential
to the prior judgment"). Moreover, the losing party in the federal case could
seek appellate review in the Third Circuit Court of Appeals, which would
prolong the uncertainty. As Oliver Hardy used to say to his sidekick Stan Laurel,
conducting a post-federal preclusion analysis here could easily turn out to be
"another fine mess." 4
That said, the original risks presented of inconsistent adjudications have
now evaporated because the federal action has settled, with no ultimate findings
of liability or damages. Moreover, the United States and the State of New Jersey
4
See, e.g., Another Fine Mess (Hal Roach Studios 1930). There is some debate
about whether Hardy's actual quote is "another nice mess."
A-3590-17T2
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have received their monetary recoveries and are no longer involved, so the
remaining lawsuit is now a two-party dispute.5 The matter therefore is in a much
different posture than it was in 2017 when the first appeal was before this court.
Hence, no further weight should be given to the inconsistency concern, at least
prospectively. The federal case is over and done with.
As we have already noted, the federal settlement documents are silent
about the claims pending in the Law Division. Neither plaintiff nor Progressive
attempted to include those remaining state-court claims as part of a potential
global settlement, although nothing legally prevented either side from making
such an attempt.
Progressive essentially argues that plaintiff waived its remaining state-law
claims by failing to insist upon language in the federal settlement preserving
those claims. Conversely, plaintiff argues that Progressive waived its right to
object to the Law Division case going forward, in part because it missed a chance
to wrap those claims into a global settlement. We adopt neither interpretation
of the omission of the Law Division claims. The federal disposition simply is
what it is: a partial and consensual resolution of the overall controversy between
5
We make no advisory comments about whether this case is appropriate for
class certification, or whether Lopez-Negron is a suitable class representative.
A-3590-17T2
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plaintiff and Progressive. Neither side was obligated to negotiate a resolution
of the state claims in the federal settlement. 6
Having made these observations, we turn to the most salient factor that
must guide our analysis of the entire controversy doctrine for this case: the
principles of equity and fairness. The Supreme Court stressed this factor in
Dimitrakopoulos, 237 N.J. at 114-15. As the Supreme Court reiterated, in
remanding that case for the trial court to conduct a weighing of equitable factors,
"'the polestar for the application of the [entire controversy] rule is judicial
fairness.'" Id. at 114 (alteration in original) (quoting K-Land, 173 N.J. at 74).
The court must consider the "totality of the circumstances" in evaluating
whether it should apply the doctrine to preclude an action. Id. at 119.
The second Law Divisions judge's oral opinion in this case was delivered
before the Supreme Court issued Dimitrakopoulos, with its emphasis on equity
and fairness. The oral opinion does not elaborate much upon these equitable
considerations. Given the posture of this case, we have sufficient information
6
We do not read our opinion in Archbrook Laguna, LLC v. Marsh, 414 N.J.
Super. 97 (App. Div. 2010), to mandate dismissal of the present case. Unlike
the present matter, the plaintiff in that case had previously voluntarily dismissed
claims it had brought in a separate action in another state, and then attempted to
revive them in a New Jersey action. Id. at 102-03. Additionally, the litigation
in another state ended after a jury trial that involved specific findings on the
merits of the out-of-state case. Id. at 104.
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before us to evaluate the equitable factors rather than delegate reconsideration
to the trial court in light of Dimitrakopoulos and provoke even further appellate
review.
After reflecting upon the parties' arguments and the rather idiosyncratic
path of the federal and state court actions, we conclude that the equitable factors
weigh in favor of allowing plaintiff's yet-to-be-adjudicated state law claims to
go forward. There is no allegation that existence of the federal qui tam action
was not duly disclosed to Progressive when that case was unsealed shortly after
the Law Division case was filed. Progressive knew all along that it was
defending both the federal and state cases based on a common core set of factual
allegations.
When it initially moved to dismiss the Law Division action, Progressive
exclusively invoked Rule 4:6-2(e) (failure to state a claim), and did not raise the
entire controversy doctrine as a separate independent ground for dismissal. It
was not until this court, sua sponte, inquired into the subject before oral
argument on the first appeal and requested supplemental briefing, that the entire
controversy concern came to the fore.
Case law instructs that the entire controversy doctrine is an affirmative
defense, which can be waived if not timely asserted. Aikens v. Schmidt, 329
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N.J. Super. 335, 339-40 (App. Div. 2000). Although Progressive complains
about having to endure four years of litigation, it could have attempted to
forestall the duplicative and piecemeal actions by asking the court to bar the
Law Division case with an early motion. It chose not to do so, perhaps for
strategic reasons that are not obvious on the surface. Although we do not rule
that Progressive "waived" its right to invoke the entire controversy doctrine, the
belated timing of its argument, prompted by this court's sua sponte inquiry in
2017, is at least relevant to the overall equities presented.
We discern no strong institutional reasons to dismiss the Law Division
case at this juncture. Although paper (or digital) discovery of documents was
conducted in the federal case, no depositions were yet taken. No expert reports
were exchanged. Presumably many of the documents uncovered and supplied
in the federal case will be useful in the Law Division case. It is not wasteful or
institutionally detrimental for the Law Division case to proceed, now that the
federal action has settled. The controversy is no longer fragmented into two
forums.
Lastly, we conclude it would be unfair to plaintiff and the putative class
members to extinguish these state-law claims before discovery is completed,
followed by possible dispositive motions or a trial. As we have noted, plaint iff
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could not entirely control the path of the qui tam claims, and it was not clear if
the federal court would have exercised supplemental jurisdiction over the state
claims if it reached the merits of that motion. We also recognize, as did the
district judge in the cognate action, that plaintiff's allegations of improper
conduct, as pleaded, had enough potential merit to survive a motion to dismiss
for failure to state a viable claim.
For these reasons, we reverse the trial court's dismissal order and reinstate
the case in the Law Division. The trial judge shall convene a case management
conference within thirty days to plan the remaining discovery and pretrial
motions, including the disposition of class certification issues.
To the extent we have not commented on other points raised by both
parties, we have fully considered them but conclude they lack sufficient merit
or importance to require written comment. R. 2:11-3(e)(1)(E).
Reversed and remanded.
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