SHORT HILLS ASSOCIATES IN CLINICAL PSYCHOLOGY VS. ROTHBARD, ROTHBARD, KOHN & KELLAR (L-3056-16, UNION 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NOT FOR PUBLICATION WITHOUT THE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-1479-17T3
SHORT HILLS ASSOCIATES IN
CLINICAL PSYCHOLOGY,
BARRY HELFMANN, PSY.D.,
ELISSA SAVRIN,PH.D., AYNN
HARTMAN, PH.D., and TERENCE
KEARSE, PH.D.,
Plaintiffs-Appellants,
v.
ROTHBARD, ROTHBARD, KOHN
& KELLAR, JEFFREY M. ROTHBARD,
ESQ., CHRISTOPHER J. KELLAR, ESQ.,
and JAMES F. VISLOSKY, ESQ.,
Defendants-Respondents.
___________________________________
Submitted January 7, 2019 – Decided May 6, 2019
Before Judges Sumners and Mitterhoff.
On appeal from Superior Court of New Jersey, Law
Division, Union County, Docket No. L-3056-16.
Piekarsky & Associates, LLC, attorneys for appellants
(Justin J. Walker, on the briefs).
Wilson, Elser, Moskowitz, Edelman & Dicker LLP,
attorneys for respondents (Gregg Kahn, of counsel and
on the brief; John O'Toole, on the brief).
PER CURIAM
Plaintiffs Short Hills Associates in Clinical Psychology, Dr. Barry
Helfmann, Psy.D, Elissa Savrin, Ph.D., Aynn Hartman, Ph.D., and Terence
Kearse, Ph.D. (collectively SHACP), appeal from an order denying
reconsideration of a Law Division summary judgment order dismissing their
legal malpractice complaint against Rothbard, Rothbard, Kohn & Kellar, Jeffrey
M. Rothbard, Esq., Christopher J. Kellar, Esq., and James F. Vislosky, Esq.,
(collectively the Rothbard Firm) based upon the entire controversy doctrine. We
reverse, because, contrary to the motion court's interpretation of Olds v.
Donnelly, 150 N.J. 424, 443 (1977), and Sklodowsky v. Lushis, 417 N.J. Super.
648, 655 (App. Div. 2011), as well as our interpretation of our Supreme Court's
recent decision in Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman
and Stahl, P.C., __ N.J. __ (2019),1 SHACP was not required to pursue its legal
malpractice claim in a previously settled collection action against its former
1
Following oral argument, we granted SHACP's motion to take judicial notice
of Dimitrakopoulos and consider the parties' supplemental briefs on the opinion.
We denied the request for oral argument.
A-1479-17T3
2
patient, which included the patient's counterclaim against SHACP and the
Rothbard Firm.
I
We summarize the following facts from the record, viewing them "in the
light most favorable to [plaintiff,] the non-moving party." Globe Motor Co. 23
v. Igdalev, 225 N.J. 469, 479 (2016) (citing R. 4:46-2(c)).
SHACP, which provides psychological evaluations and treatment for their
patients, retained the Rothbard Firm on a regular basis to handle the collection
of its delinquent patient accounts. In September 2014, the Rothbard Firm filed
a collection lawsuit against a SHACP patient that included the patient's
unredacted medical diagnoses. In response, the patient filed a counterclaim,
alleging invasion of privacy, breach of the psychiatrist-patient privilege, and
other claims against SHACP and the Rothbard Firm. SHACP then filed a cross-
claim against the Rothbard Firm seeking indemnity and contribution. According
to SHACP, despite the cross-claim, its counsel was in constant contact with the
Rothbard Firm's counsel because they defended the patient's claims "in unity."
A little over a year later, the New York Times published a damaging
article regarding SHACP's history of publicly releasing its patients' medical
diagnoses. A month after the article was published, SHACP settled the
A-1479-17T3
3
collection lawsuit against its patient, which included dismissing the outstanding
account claim. The Rothbard Firm was not a party to the settlement, and the
record provided does not indicate if or how the cross-claim for indemnity and
contribution was resolved.
On September 8, 2016, almost eight months after the collection lawsuit
settlement, SHACP filed a legal malpractice complaint alleging that when the
Rothbard Firm filed the collection lawsuit containing confidential medical
diagnoses and codes, they breached their fiduciary duty and implied warranty of
good faith and fair dealing. SHACP sought monetary damages based upon
alleged injury to its business. The Rothbard Firm eventually moved for
summary judgment, arguing, among other things, that SHACP's complaint was
barred by the entire controversy doctrine.
At the conclusion of oral argument, the court issued its order and written
decision granting the Rothbard Firm's motion. The court held that SHACP's
legal malpractice claim was barred by the entire controversy doctrine because
"it was required to be asserted in the underlying litigation between [the former
patient] and SHACP/[the Rothbard Firm] because the claim could be most
soundly and appropriately litigated and disposed of in a single comprehensive
adjudication" – the collection lawsuit. The court reasoned SHACP was aware
A-1479-17T3
4
of its legal malpractice claim when the patient served his counterclaim and it
responded with a cross-claim for indemnity and contribution against the
Rothbard Firm. According to the court, applying the entire controversy doctrine
was equitable, and thus determined SHACP's reliance on Olds and Sklodowsky,
was misplaced because the legal malpractice claim accrued once the collection
lawsuit was filed and there was no "united front" between SHACP and the
Rothbard Firm in the action.
SHACP's motion for reconsideration was denied. In its oral decision, the
court relied upon the same reasoning it applied in granting summary judgment.
This appeal followed.
II
We begin with the principles that guide our analysis. Appellate review of
a ruling on a motion for summary judgment is de novo, applying "the same
standard governing the trial court[.]" Davis v. Brickman Landscaping, Ltd., 219
N.J. 395, 405 (2014). Thus, we consider, as the motion judge did, "'whether the
competent evidential materials presented, when viewed in the light most
favorable to the non-moving party, are sufficient to permit a rational factfinder
to resolve the alleged disputed issue in favor of the non-moving party.'" Id. at
406 (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).
A-1479-17T3
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"If there is no genuine issue of material fact," an appellate court "must then
decide whether the trial court correctly interpreted the law." DepoLink Court
Reporting & Litig. Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App.
Div. 2013) (citation omitted). We accord no deference to the trial judge's legal
conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013) (citing Zabilowicz
v. Kelsey, 200 N.J. 507, 512-13 (2009)).
When we consider a trial judge's denial of a Rule 4:49-2 motion for
reconsideration, we have determined:
Reconsideration itself is a matter within the sound
discretion of the [c]ourt, to be exercised in the interest
of justice[.] It is not appropriate merely because a
litigant is dissatisfied with a decision of the court or
wishes to reargue a motion, but should be utilized only
for those cases which fall into that narrow corridor in
which either 1) the [c]ourt has expressed its decision
based upon a palpably incorrect or irrational basis, or
2) it is obvious that the [c]ourt either did not consider,
or failed to appreciate the significance of probative,
competent evidence.
[Palombi v. Palombi, 414 N.J. Super. 274, 288 (App.
Div. 2010) (citation omitted).]
Therefore, we will not disturb a judge's denial of a motion for reconsideration
absent an abuse of discretion. See id. at 289.
We turn next to entire controversy doctrine. "The . . . doctrine is an
equitable principle and its application is left to judicial discretion." 700
A-1479-17T3
6
Highway 33 LLC v. Pollio, 421 N.J. Super. 231, 238 (App. Div. 2011) (citing
Allstate N.J. Ins. Co. v. Cherry Hill Pain & Rehab. Inst., 389 N.J. Super. 130,
141 (2006)). "Th[e] 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) (quoting
Highland Lakes Country Club & Cmty. Ass'n v. Nicastro, 201 N.J. 123, 125
(2009)). The doctrine applies when the claims of all parties arise out of the same
common string of facts or circumstances. Ibid.While this appeal was pending, on March 7, 2019, our Supreme Court
recently addressed the entire controversy doctrine's application in a legal
malpractice setting in Dimitrakopoulos. There, the initial action was a law firm's
collection suit against its client for outstanding fees that resulted in a judgment
entered in favor of the law firm. Dimitrakopoulos, __ N.J. __ (slip op. at 5-6).
Three years later, the client filed a legal malpractice claim against the law firm.
Id. (slip op. at 6). The motion court denied the law firm's Rule 4:6-2(e) motion
to dismiss the complaint for failure to state a claim; rejecting the law firm's
contention that the claim was barred under the entire controversy doctrine. Ibid.A-1479-17T3
7
After this court reversed the motion court, our Supreme Court reversed and
reinstated the complaint. Id. (slip op. at 6-7). The Court ruled the undeveloped
record was not detailed enough to determine whether it would be fair and
equitable to bar the plaintiffs' legal malpractice claim under the entire
controversy doctrine. Id. (slip op. at 14). The Court "reiterate[d] [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." Id. (slip op. at 10).
On the other hand, "[a] collection action brought by a law firm against its client ,
however, does not constitute such underlying litigation for purposes of the
principle stated in Olds[,]" and the entire controversy doctrine may apply in that
situation." Id. (slip op. at 10).
In sum, the Court held the following principles govern when determining
whether the entire controversy doctrine should apply where a legal malpractice
claim was not raised in the parties' prior collection action:
First, in order for the entire controversy doctrine to bar
a legal malpractice claim because that claim was not
joined in a prior action, the two claims must "arise from
related facts or the same transaction or series of
transactions," Wadeer, 220 N.J. at 605 (quoting
DiTrolio [v. Antiles, 142 N.J. 253, 267 (1995)]), but
need not share common legal theories, ibid.; DiTrolio,
142 N.J. at 271 . . . .
A-1479-17T3
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Second, the entire controversy doctrine does not require
a client or former client to bring a legal malpractice
case in the underlying action in which the attorney
represented the client. Olds, 150 N.J. at 443-44.
Third, an attorney's collection action against the client,
in which the attorney seeks payment of legal fees
incurred in the representation of the client, is not an
"underlying action" within the meaning of Olds.
Accordingly, a client's legal malpractice claim that is
not asserted in the attorney's collection action may be
barred under the entire controversy doctrine.
Fourth, a court should not preclude a claim under the
entire controversy doctrine if such a remedy would be
unfair in the totality of the circumstances and would not
promote the doctrine's objectives of conclusive
determinations, party fairness, and judicial economy
and efficiency. Wadeer, 220 N.J. at 605; K-Land
[Corp. No.28 v. Landis Sewage Auth., 173 N.J. 59, 70
(2002)]; DiTrolio, 142 N.J. at 273-74 . . . .
[Dimitrakopoulos, __ N.J. __ (slip op. at 11).]
Hence, the Court held that where a counsel's collection lawsuit against a
client negates the attorney-client confidences relationship, the equitable doctrine
of entire controversy bars a legal malpractice claim in the collection action if it
arises from the services that underlie the collection effort and the client had "'a
fair and reasonable opportunity to have fully litigated'" the claim in the
collection action. Id. (slip op. at 11) (citing DiTrolio, 142 N.J. at 273).
A-1479-17T3
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Guided by these principles, we reverse the motion court's order granting
summary judgment dismissal of SHACP's complaint based upon its application
of the entire controversy doctrine, and denying SHACP's reconsideration
motion. In reaching this conclusion, we recognize that allowing SHACP to
pursue their legal malpractice claims against the Rothbard Firm results in the
adjudication of a dispute that arose from the Rothbard Firm's alleged negligence
in filing the lawsuit against SHACP's former patient. SHACP was admittedly
aware of their legal malpractice claims against the Rothbard Firm when the
patient responded to the collection effort with a counterclaim alleging privacy
violations by SHACP and the Rothbard Firm. We are also mindful that judicial
efficiency would have been promoted had SHACP pursued its legal malpractice
claims in the collection litigation. Nevertheless, equity dictates that the entire
controversy doctrine not be applied here.
While Dimitrakopoulos is factually dissimilar to the case before us, it is
instructive in our determination that summary judgment should not have
dismissed SHACP's complaint. The initial action here was SHACP's effort to
collect a bill for outstanding services from its patient, which was unrelated to
the representation that the Rothbard Firm provided to SHACP. Second, the
Rothbard Firm became a party to that dispute only when the patient
A-1479-17T3
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counterclaimed, alleging that the inclusion of his medical diagnoses in the action
violated privacy laws. Dimitrakopoulos does not require the application of the
entire controversy doctrine to summarily dismiss SHACP's complaint because
the initial action was not an attorney's collection action against a client and
SHACP was not being sued by the Rothbard Firm for non-payment of services.
Moreover, there was no dispute regarding SHACP's attorney-client relationship
with the Rothbard Firm as SHACP was represented by the Rothbard Firm in the
collection action against the former patient.
This case fits into the situation the Court delineated in Dimitrakopoulos
because SHACP's "litigation interests [and] . . . privileged communications
[would] be imperiled if the entire controversy doctrine mandates the filing of a
malpractice counterclaim" in the initial action. Id. (slip op. at 10). To require
SHACP to file a legal malpractice claim against the Rothbard Firm would have
created a clear potential to negatively impact its, as well as the firm's, defense
to the patient's counterclaim. It was incumbent upon SHACP and the Rothbard
Firm to cooperate with each other, and share discovery and litigation strategy to
protect their respective interests throughout the collection action as expanded
by the patient's response to being sued. In short, they had a continuing
professional relationship.
A-1479-17T3
11
We find further support for our conclusion in both Olds and Sklodowsky,
which both involved situations where a legal malpractice claim would
compromise the attorney-client relationship between the parties. In Olds, the
Court refused to apply the entire controversy doctrine, explaining that to require
a party to assert a malpractice claim against his lawyer would "chill" or
negatively affect the attorney-client relations. 150 N.J. at 440-41. The Court
reasoned:
The attorney, formerly the client's advocate, is made the
adversary. The client is forced to expend time and
money to engage a second attorney to pursue the
attorney-malpractice claim. Because the first attorney
is now a potential witness, that attorney's own interests
are no longer aligned with those of the client. Although
we do not suggest that potentially negligent attorneys
would misrepresent facts, an attorney charged with
malpractice, like any other litigant, would have an
incentive to testify guardedly when sued by a former
client.
Thus, clients are put in the untenable position of either
pursuing a claim against their attorney, whose
negligence may never result in an unfavorable outcome,
or forever forgoing a legal-malpractice action. Clients
who are satisfied with their attorneys and want to
maintain an otherwise satisfactory relationship may
forgo the right to sue. That result does not provide the
fairness that the entire controversy doctrine is designed
to encourage.
[Olds, 150 N.J. at 440-41.]
A-1479-17T3
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In Sklodowsky, this court concluded that the entire controversy doctrine
should not be applied where "the client's attorney is already a party in an action
that arose from the attorney's alleged negligent legal advice[,]" because it would
"chill a client's relations with his or her attorney and cause the client's and the
attorney's interests to diverge, potentially prejudicing them both." 417 N.J.
Super. at 655. Simply put, a party should not be compelled to assert a legal
malpractice claim in the initial suit where it gives rise to the contention it would
"chill" or "compromise" the continuing professional relationship between the
parties. Id. at 657. Hence, it would be unfair to apply the entire controversy
doctrine under the facts of this case. Id. at 468.
Another factor in not applying the entire controversy doctrine to dismiss
SHACP's complaint is that its damages did not accrue until after the collection
action was settled, which is when SHACP realized its actual damages. See
Grunwald v. Bronkesh, 131 N.J. 483, 495 (1993) ("Actual damages are those
that are real and substantial as opposed to speculative. . . . In the legal-
malpractice context, actual damages may exist in the form of an adverse
judgment.").
Lastly, we reject the Rothbard Firm's argument that pursuant to Rule 4:5-
1(b), SHACP's failure to disclose in the underlying litigation their intent to file
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a legal malpractice claim against it does not apply because the collection action
was a different controversy from the legal malpractice action. Moreover, if the
rule applied, the motion court's discretion to sanction SHACP by dismissing its
complaint for failure to disclose the legal malpractice claim would not have been
warranted, because there was no showing that the Rothbard Firm was
"substantially prejudiced" by the lack of notice. R. 4:5-1(b)(2).
Reversed and remanded for trial.
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