Lx Financial, LLC v. Raphael Rosenblatt, Esq. ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-0926-22
LX FINANCIAL, LLC, PAUL
LUYKX, ARMAND GIULIANO,
ARTHUR BAER, BEST VALUE
HOMES, LLC, BRE CAPITAL,
LLC, CHARLOTTE PERRONE,
CHINA IBC GROUP, LLC, DB
ALEX, LLC, EILEEN EGAN,
EILEEN EGAN IRA, EILEEN
KUSALBA IRA, F26 HOLDINGS,
LLC, JERRY RANMARINE,
JERRY RANMARINE, LLC,
JIM JETER, JLK INVESTMENTS,
LX FINANCIAL 401K, PAUL
LUYKX IRA, SUSAN LUYKX
IRA, VIPAL M. SHAH, and
WILLIAM JOSEPH HEILIG IRA,
Plaintiffs-Appellants,
v.
RAPHAEL ROSENBLATT, ESQ.
and ROSENBLATT LAW, P.C.,
Defendants-Respondents.
Submitted March 20, 2024 – Decided July 9, 2024
Before Judges Currier, Firko and Vanek.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-3754-22.
Mark S. Guralnick, attorney for appellants.
Kaufman Dolowich & Voluck, LLP, attorneys for
respondents (Iram P. Valentin and Timothy M.
Ortolani, of counsel and on the brief).
PER CURIAM
Plaintiffs, who are business investors, appeal from the October 27, 2022
order dismissing their complaint with prejudice after the court found the claims
were barred under the entire controversy doctrine. After our de novo review,
because we find the trial court erred in applying the entire controversy doctrine
and dismissing the complaint, we reverse.
I.
In 2017, plaintiffs filed a complaint (Complaint I) in Superior Court,
Bergen County, against several attorneys who represented them in various real
estate transactions. The operative amended complaint filed in 2018, alleged
claims of professional negligence, breach of fiduciary duty, and breach of
contract. Plaintiffs were represented by defendants Raphael M. Rosenblatt,
Esq., and Rosenblatt Law, P.C. (Rosenblatt) in Complaint I.
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In February 2019, after one of the defendant attorneys in Complaint I filed
a petition for bankruptcy, the bankruptcy court issued an automatic stay of the
claims against him. In June 2019, the parties to Complaint I agreed to a consent
order dismissing the matter in its entirety without prejudice. The consent order
stated in pertinent part:
2. Plaintiffs . . . shall be permitted to move to
restore and re-file their [c]omplaint with all existing
pertinent claims, counts, and defenses reinstated,
restored, and/or otherwise continued under a new
docket number within [sixty] days of relief from the
automatic stay by the bankruptcy court, whether by
motion or disposition of the [b]ankruptcy [m]atter. . . .
....
4. The [p]arties agreeing to the terms of this
[c]onsent [o]rder shall not object to [d]efendants . . .
restoring, re[-]filing, or seeking leave to reinstate their
[t]hird-[p]arty [c]omplaint . . . . The [p]arties agreeing
to the terms of this [c]onsent [o]rder also agree not to
seek dismissal of the [t]hird-[p]arty [c]omplaint
pursuant to R[ule] 4:46-2, or otherwise, upon the
restoration, re-filing, or reinstatement of . . .
[d]efendants' [t]hird-[p]arty [c]omplaint.
5. All prior discovery and deposition testimony
conducted in this action is hereby preserved and shall
apply to the subsequent action re-filed under a new
docket number pursuant to paragraph 2, above.
In July 2019, the bankruptcy court lifted the automatic stay. Rosenblatt
did not take any action to reinstate or restore Complaint I. Therefore, plaintiffs
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retained new counsel who filed a new complaint (Complaint II) in January 2021
in Morris County. In addition to the allegations asserted in Complaint I arising
out of the real estate transactions, Complaint II included several new claims and
additional defendants all related to the transactions. The statute of limitations
had not yet expired as to the Complaint I defendants.
Thereafter, the Complaint II defendants moved to dismiss the complaint
for failure to comply with the deadline established in the consent order relating
to the restoration of Complaint I.
In June 2021, the Morris County court granted the motion and dismissed
Complaint II with prejudice for failure to state a claim under Rule 4:6-2(e). The
trial court found "[t]he [c]onsent [o]rder expressly permitted [p]laintiffs to re-
file the [c]omplaint within [sixty] days of relief from the automatic stay," and
that "[b]y clear implication, any refiling subsequent to the expiration of the
[sixty]-day deadline was precluded by agreement of the parties."
On July 11, 2022, plaintiffs filed a third complaint (Complaint III) in
Bergen County against Rosenblatt, alleging professional negligence and breach
of contract. Plaintiffs alleged Rosenblatt breached his duty to monitor the
bankruptcy court proceedings to timely reinstate and restore Complaint I, and
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that the parties' agreement expressly provided that Rosenblatt would investigate,
prepare, and present plaintiffs' claims, and "properly handle [the] case."
Rosenblatt moved to dismiss Complaint III with prejudice under Rule 4:6-
2(e), asserting the action was barred under the entire controversy doctrine.
Rosenblatt contended plaintiffs abandoned Complaint I in Bergen County when
they chose to file "an entirely different matter in Morris County," which
triggered the entire controversy doctrine because Complaint III arose from "the
same set of core, interrelated facts" as delineated in Complaint II. Plaintiffs
opposed the motion, asserting their claims alleged against Rosenblatt in
Complaint III became ripe only after Complaint II was dismissed with prejudice.
On October 27, 2022, the trial court granted Rosenblatt's motion to
dismiss Complaint III with prejudice. The court found the consent order
"preclude[d] any refiling after the expiration of the [sixty]-day deadline" and
"[p]laintiffs clearly failed to comply" with the deadline in the consent order.
The trial court stated "[a] legal malpractice claim against . . . Rosenblatt . . .
could have been included in [Complaint II] or at any time after the expiration of
the [sixty]-day" deadline.
The court further found the "legal malpractice claim [against Rosenblatt]
accrued the moment that the [sixty]-day time limit had expired, which was on
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September 25, 2019." Therefore, "[p]laintiffs violated the [entire controversy
doctrine] when they failed to join . . . Rosenblatt . . . and the claims against . . .
[Rosenblatt] in . . . Complaint [II]."
II.
On appeal, plaintiffs contend the court erred in finding the entire
controversy doctrine required the dismissal of Complaint III. They assert their
claims against Rosenblatt did not accrue until the underlying case (Complaint
II) was dismissed with prejudice.
Our review of a "Rule 4:6-2(e) motion[] to dismiss for failure to state a
claim upon which relief can be granted [is] . . . de novo." Baskin v. P.C. Richard
& Son, LLC, 246 N.J. 157, 171 (2021) (citing Dimitrakopoulos v. Borrus,
Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237 N.J. 91, 108 (2019)).
In considering a Rule 4:6-2(e) motion, "[a] reviewing court must examine
'"the legal sufficiency of the facts alleged on the face of the complaint,"' giving
the plaintiff the benefit of '"every reasonable inference of fact."'" Ibid. (quoting
Dimitrakopoulos, 237 N.J. at 107). "The essential test [for determining the
adequacy of a pleading] is simply 'whether a cause of action is "suggested" by
the facts.'" Green v. Morgan Props., 215 N.J. 431, 451-52 (2013) (quoting
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). "At
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this preliminary stage of the litigation the [c]ourt is not concerned with the
ability of [the] plaintiffs to prove the allegation contained in the complaint."
Printing Mart-Morristown, 116 N.J. at 746.
Rule 4:30A states:
Non-joinder of claims required to be joined by the
entire controversy doctrine shall result in the preclusion
of the omitted claims to the extent required by the entire
controversy doctrine, except as otherwise provided by
[Rule] 4:64-5 (foreclosure actions) and [Rule] 4:67-
4(a) (leave required for counterclaims or cross-claims
in summary actions).
"The entire controversy doctrine 'generally requires parties to an action to
raise all transactionally related claims in that same action.'" Largoza v. FKM
Real Est. Holdings, Inc., 474 N.J. Super. 61, 79 (App. Div. 2022) (quoting
Carrington Mortg. Servs., LLC v. Moore, 464 N.J. Super. 59, 67 (App. Div.
2020)). "That mandate encompasses not only matters actually litigated but also
other aspects of a controversy that might have been litigated and thereby decided
in an earlier action." Higgins v. Thurber, 413 N.J. Super. 1, 12 (App. Div. 2010),
aff'd, 205 N.J. 227 (2011).
"The doctrine has three fundamental purposes: '(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)
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efficiency and the avoidance of waste and the reduction of delay.'" Bank Leumi
USA v. Kloss, 243 N.J. 218, 227 (2020) (quoting DiTrolio v. Antiles, 142 N.J.
253, 267 (1995)).
Application of the entire controversy doctrine follows principles of equity
and "'"does not apply to unknown or unaccrued claims."'" Dimitrakopoulos, 237
N.J. at 99 (quoting Wadeer v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 606 (2015)).
"When a court decides whether multiple claims must be asserted in the same
action, its initial inquiry is whether they 'arise from related facts or the same
transaction or series of transactions.'" Id. at 109 (quoting DiTrolio, 142 N.J. at
267). The determinative consideration by the court is not whether the
"successive claims share common legal issues," but rather "'whether distinct
claims are aspects of a single larger controversy because they arise from
interrelated facts.'" Ibid. (quoting DiTrolio, 142 N.J. at 271).
In Olds v. Donnelly, 150 N.J. 424, 443 (1997), our Supreme Court held
the entire controversy doctrine does not compel a plaintiff to assert a legal
malpractice claim against an attorney in the action giving rise to the malpractice
claim. The Court reiterated this core principle in Dimitrakopoulos, stating:
[T]he entire controversy doctrine does not require an
attorney's current or former client to assert a legal
malpractice claim against that attorney in the litigation
that gave rise to the malpractice claim even if the two
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claims arise from the same or related facts and would
otherwise be subject to mandatory joinder.
[237 N.J. at 112 (citing Olds, 150 N.J. at 443).]
The Court further stated in Dimitrakopoulos that "even if [a] malpractice claim
accrued before or during [an] earlier action, the client may avoid the entire
controversy doctrine by demonstrating that the prior forum did not afford '"a fair
and reasonable opportunity to have fully litigated"' the malpractice claim." Id.
at 99 (quoting Gelber v. Zito P'ship, 147 N.J. 561, 565 (1997)).
An application of the Olds and Dimitrakopoulos principles to the specific
circumstances presented here constrains us to reverse the trial court's
determination that the entire controversy doctrine required the dismissal of
Complaint III.
Preliminarily, Complaint II involved the same allegations regarding the
series of real estate transactions that gave rise to Complaint I. Although
different counsel represented plaintiffs in Complaint II, the facts and claims
arose out of the same business transactions as asserted in Complaint I.
Therefore, it remained the underlying litigation in which Rosenblatt originally
represented plaintiffs.
The claims against Rosenblatt did not arise out of the original business
transactions. They arose out of his failure to reinstate Complaint I in accordance
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with the consent order. Moreover, plaintiffs could not have brought any claims
against Rosenblatt in Complaint I as the pleading was already dismissed when
their claims against him accrued.
In addition, plaintiffs' claims in Complaint I were not adjudicated nor even
dismissed with prejudice when Complaint II was filed. It was not until the court
determined Rosenblatt did not comply with the consent order's deadline to
restore Complaint I that plaintiffs' claims accrued against Rosenblatt. In
considering the motion to dismiss Complaint II, another court may have
interpreted the language of the consent order differently or determined the
addition of new claims and defendants rendered Complaint II a new action and
not an attempt to restore Complaint I. Plaintiffs did not sustain "actual," "real[,]
and substantial" damages, Dimitrakopoulos, 237 N.J. at 116 (first quoting Olds,
150 N.J. at 437; and then Grunwald v. Bronkesh, 131 N.J. 483, 495 (1993)),
until Complaint II was dismissed with prejudice.
Moreover, if Rosenblatt was added as a defendant to Complaint II, the
court would still have dismissed the action because of its determination
regarding the sixty-day deadline. Therefore, plaintiffs would still have to file a
separate complaint against Rosenblatt to assert their claims of professional
negligence.
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The entire controversy doctrine is an equitable doctrine. As the
Dimitrakopoulos Court stated:
[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. A range of equitable principles may
apply to a particular case.
[Id. at 119 (citations omitted).]
The dismissal of Complaint III did not satisfy any of the entire controversy
doctrine's objectives. There were no conclusive determinations as none of
plaintiffs' claims against any party have ever been adjudicated. That is the basis
of the professional negligence complaint—Complaint III—against Rosenblatt.
Similarly, the dismissal did not result in judicial economy or efficiency as there
has been no litigation. Lastly, as stated, the dismissal was unfair to plaintiffs as
their claims were not adjudicated. Rosenblatt is not prejudiced because, as
counsel to plaintiffs at the time of the execution of the consent order, he was
aware of its terms and whether he complied with them. The equitable principles
at stake here require the reversal of the court's order dismissing Complaint III.
Reversed.
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