Fornarotto v. Amer Waterworks Co

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
5-13-1998
Fornarotto v. Amer Waterworks Co
Precedential or Non-Precedential:
Docket 97-5332
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"Fornarotto v. Amer Waterworks Co" (1998). 1998 Decisions. Paper 110.
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Filed May 13, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-5332
JOSEPH FORNAROTTO,
Appellant
v.
AMERICAN WATERWORKS COMPANY, INC.;
NEW JERSEY-AMERICAN WATER COMPANY-
EASTERN DIVISION
On Appeal from the United States District Court
for the District of New Jersey
Civil Action No. 95-cv-05555
Argued: February 12, 1998
Before: GREENBERG, NYGAARD and McKEE,
Circuit Judges
(Opinion Filed: May 13, 1998)
JOSEPH L. GIJANTO, ESQ. (Argued)
Schibell & Mennie, L.L.C.
1806 Highway 35 South
P.O. Box 2237
Ocean, New Jersey 07712
Attorneys for Appellant
EZRA D. ROSENBERG, ESQ.
ROBERT D. RHOAD, ESQ. (Argued)
Dechert, Price & Rhoads
Princeton Pike Corporate Center
P.O. Box 5218
Princeton, New Jersey 08543-5218
Attorneys for Appellees
OPINION OF THE COURT
McKee, Circuit Judge.
Joseph Fornarotto appeals from the district court's grant
of summary judgment in favor of his employer, New Jersey-
American Water Company. The district court ruled that this
suit under ERISA was barred under New Jersey's entire
controversy doctrine because Fornarotto's previously filed
tort action was sufficiently related to the instant action to
trigger application of that doctrine. For the reasons that
follow we will reverse and remand for further proceedings
consistent with this opinion.
I.
Fornarotto was employed by the New Jersey-American
Water Company (a subsidiary of American Waterworks
Company, Inc.) for nearly 30 years, from March 7, 1966
until January 23, 1995. As a New Jersey-American
employee, Fornarotto was eligible to participate in the
company's pension plan which provided different levels of
benefits to eligible employees, depending upon the
circumstances under which they stopped working for the
company. Those benefits include disability retirement
benefits, if, inter alia, the employee becomes disabled and
is "unable permanently to engage in any occupation or
employment for compensation or profit." App. at 24.
On April 8, 1990, Fornarotto's union was on strike. He
was walking a picket line when he was struck by an
automobile driven by Michael Chiapetta, who was also a
New Jersey-American employee.1 Fornarotto was
_________________________________________________________________
1. Fornarotto claimed that Chiapetta was acting in the course of his
employment at the time of the accident.
2
hospitalized for approximately 10 days in cervical and
lumbar traction. After his discharge, he underwent a course
of physical therapy for his neck, back and knee. In June of
1990, he underwent arthroscopic surgery on his knee, and
began a new course of physical therapy.
On June 11, 1990, Fornarotto filed a personal injury
action against Chiapetta, and New Jersey-American, in the
Superior Court of New Jersey, Law Division, Monmouth
County. Fornarotto v. Chiapetta and New Jersey-American
Waterworks, Co., No. MON-L-54564-90. Thereafter,
Fornarotto returned to work at New Jersey-American.
However, he soon experienced additional problems with his
knee, and began experiencing severe headaches. In March
of 1992, he had a second arthroscopic surgery on his knee
and was continuing to suffer severe headaches that first
began after the accident. Fornarotto continued with
physical therapy until May of 1992 when he was admitted
to the hospital and again put in traction. He was released
after about a week, but his rehabilitation did not go well,
and he eventually needed back surgery. His physical
problems persisted even after that surgery, and as a result
of the lingering effects of his injuries, he had problems
concentrating, sitting, standing, lifting or bending, and was
unable to engage in any activity for more than a short
period of time. He applied for disability benefits under his
employer's benefits plan, but his requests for disability
benefits were denied, and his final appeal from that
decision was rejected on May 8, 1995. Fornarotto has not
worked since January 23, 1993, and claims that he has
been totally disabled since then.
On September 5, 1995, Fornarotto filed a complaint in
the Superior Court of New Jersey, Law Division, Monmouth
County, against American Waterworks and New Jersey-
American Waterworks under the civil enforcement
provisions of the Employee Retirement Income Security Act
("ERISA"), 29 U.S.C. S 1132(a)(1)(B), seeking disability
benefits by reason of being disablied by the injuries he
sustained in the automobile accident.2 On October 27,
_________________________________________________________________
2. State courts have concurrent jurisdiction with federal courts for
actions by an ERISA participant under 29 U.S.C.S 1132(a)(1)(B). 29
U.S.C. S 1132(e)(1).
3
1995, the defendants removed the ERISA action to federal
district court in New Jersey. In November of 1996,
Fornarotto's state court personal injury action was settled
for $450,000, and a Stipulation of Dismissal with Prejudice
was filed. Shortly thereafter, on February 7, 1997,
defendants filed a motion for summary judgment in
Fornarotto's removed ERISA action. They alleged that the
ERISA action arose from the same set of facts as
Fornarotto's personal injury action and was therefore
barred by New Jersey's entire controversy doctrine. The
district court agreed and granted defendants' summary
judgment motion. This appeal followed.3
II.
The "entire controversy doctrine seeks to assure that all
aspects of a legal dispute occur in a single lawsuit." Olds v.
Donnelly, 696 A.2d 633, 637 (N.J. 1997). Although res
judicata principles and New Jersey's entire controversy
doctrine are "blood relatives," the latter is New Jersey's
"specific, and idiosyncratic, application of traditional res
judicata principles." Rycoline Products, Inc. v. C & W
Unlimited, 109 F.3d 883, 886 (3d Cir. 1997). The doctrine
encompasses traditional concepts of claims joinder as well
as party joinder, Olds v. Donnelly, 696 A.2d at 637, though
cases involving the latter predominate.
The fundamental principle behind the inclusion policy
of the entire controversy doctrine is that the
adjudication of a legal controversy should occur in one
litigation in 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.
Venuto v Witco Corp., 117 F.3d 754, 761 (3rd Cir. 1997).
"The objectives behind the doctrine are threefold: (1) to
encourage the comprehensive and conclusive determination
of a legal controversy; (2) to achieve party fairness . . . and
_________________________________________________________________
3. We subject the district court's grant of summary judgment to the
defendants to plenary review. Turner v. Schering-Plough Corp., 901 F.3d
335, 340 (3d Cir. 1990).
4
(3) to promote judicial economy and efficiency by avoiding
fragmented, multiple and duplicative litigation." Id. The
doctrine is a "basic concept of judicial administration that
is of constitutional dimension," viz., N.J. Const. (1947), art.
IV, S 3, P 4.4 DiTrolio v. Antiles, 662 A.2d 494, 502 (N.J.
1995).
The rule evolved from common law concerns of joinder,
and efficiency, but has since been codified and finds its
current expression in Rule 4:30A of the New Jersey Rules
of Civil Procedure, which provides:
Non-joinder of claims or parties 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 R. 4:64-5 (foreclosure actions) and R.
4:67-4(a) (leave required for counterclaims or cross-
claims in summary actions).5
However, as is true with the infamous "rule against
perpetuities", the entire controversy doctrine is easily
recited, but often deceptively elusive and problematic in
application.6 This is because it is often difficult to define the
parameters of "a legal controversy" or "one litigation" with
the precision suggested by the doctrine.
_________________________________________________________________
4. The constitutional provision reads:
Subject to the rules of the Supreme Court, the Law Division and the
Chancery Division shall each exercise the powers and functions of
the other division when the ends of justice so require, and legal
and
equitable relief should be granted in any cause so that all matters
in controversy between the parties may be completely determined.
5. For a discussion of the origins and evolution of the doctrine see Olds,
696 A.2d at 636 et seq.
6. The Rule Against Perpetuities was given its classic expression by John
Chipman Gray and reads: "No interest is good unless it must vest, if at
all, not later than twenty-one years after some life in being at the
creation of the interest." GRAY, THE RULE AGAINST PERPETUITIES S 201 (2d
ed.
1906). One commentator has said that as law students "we struggle with
it and make a little headway." John W. Weaver, Fear and Loathing in
Perpetuities, 48 Wash. & Lee L. Rev. 1393 (1991). However, it is only
later that we realize that "[n]ot only does no one understand the Rule, no
one's really expected to." Id.5
In determining whether successive claims constitute
one controversy for purposes of the [entire controversy]
doctrine, the central question is whether the claims
against the different parties arise from related facts or
the same transaction or series of transactions. It is the
core set of facts that provides the link between distinct
claims against the same or different parties and
triggers the requirement that they be determined in
one proceeding. One measure of whether distinct
claims are part of an entire controversy is whether
parties have a significant interest in the disposition of
a particular claim, one that may materially affect or be
materially affected by the disposition of that claim. The
test for whether claims are "related" such that they
must be brought in a single action under the New
Jersey entire controversy doctrine . . . [is] as follows: if
parties or persons will, after final judgment is entered,
be likely to have to engage in additional litigation to
conclusively dispose of their respective bundles of
rights and liabilities that derive from a single
transaction or related series of transactions, the
omitted components of the dispute or controversy must
be regarded as constituting an element of one
mandatory unit of litigation.
DiTrolio v. Antiles, 662 A.2d at 501 (citations and internal
quotations omitted). However, the current appeal illustrates
the difficulty that courts can encounter when attempting to
determine when the "relationship" of the "core facts"
implicates the doctrine, or when successive law suits
constitute "a single transaction or series of transactions."
For although Fornarotto's tort claim and his ERISA claim
share the common fact of his injuries, the relationship of
the parties and successive claims is such that we conclude
that those suits do not constitute "a single transaction".
This action is therefore not barred by the entire controversy
doctrine.
An examination of the facts in DiTrolio v. Antiles is
instructive. There, a physician, DiTrolio, was denied staff
privileges at a hospital, and he sued the hospital and its
board of trustees challenging the procedures used to deny
him a position on the hospital's staff. The gravamen of that
6
suit was that the four physicians who comprised the
urology department, who were all in competition with him,
had improperly caused the hospital to deny his application.
A mere six days after DiTrolio entered into the settlement
agreement that ended that litigation, he brought a second
action against those four physicians whose conduct had
formed the basis of his suit against the hospital. The trial
court granted the defendants' motion to dismiss the second
suit under the entire controversy doctrine for failure to join
them in the first action. The New Jersey Supreme Court
agreed. The court concluded that the fatal flaw in the
second suit was plaintiff's failure to join the four physicians
as parties in the first action. Id. at 508.
Here, we are concerned with Fornarotto's failure to join
claims, not parties, but that distinction does not alter the
substance of our analysis. In DiTrolio, the court stated that
the "determinative consideration is whether the distinct
claims are aspects of a single larger controversy because
they arise from interrelated facts. . . . [T]he same set of
facts can give rise to discrete causes of action and different
kinds of relief." 662 A.2d at 503. The court focused on the
circumstances underlying the second suit.
[A] controversy between or among persons that arises
from a core set of related factual circumstances may
trigger different claims against different parties. It is
this commonality of facts, rather than commonality of
issues, parties or remedies that defines the scope of the
controversy and implicates the joinder requirements of
the entire controversy doctrine.
Id. (emphasis added). Here, absent the injuries that gave
rise to Fornarotto's tort claim, he would not have become
disabled and sought the disability benefits he sued for in
this ERISA proceeding. Nevertheless, this similarity does
not rise to the level of "commonality of facts" necessary to
trigger the entire controversy doctrine. See Joel v. Morocco,
680 A.2d 1036 (N.J., 1997).
In Joel, the court stated the issue as follows: "The
essential question is whether a party making a judicial
challenge to zoning approvals granted to a partnership
must name in that land-use suit the individual partners in
7
the partnership as a precondition to later enforcement of a
money settlement against the partners." Id. The court then
discussed recent cases and concluded that the doctrine did
not require joinder under those circumstances. "The
assertion of the personal claims against the partners was
not at all necessary to the ``comprehensive and conclusive'
determination of the underlying legal controversy in the
land-use case." Id. at 1039. Therefore, failure to include the
individual partners in the settlement agreement with the
partnership did not preclude the plaintiff from suing those
partners individually after the first action was settled. That
is our situation here. "There were two separate actions, not
two causes of action arising from the same transactional
facts." Id. at 1040. The liability of the partners in Joel v.
Morrocco was governed by the Uniform Partnership law, not
the law of land use that governed resolution of the zoning
dispute. The second suit was therefore unlike cases where
a subsequent suit "would have necessitated a rerun of the
first case to determine [liability in the second suit]" Id. at
1037. The entire controversy doctrine "is easily recognized
in the context of the calculated fragmentation of litigation."
Id. Here, there is no such fragmentation.
Fornarotto's personal injury action was grounded in
traditional negligence, thus issues of fault, duty, causation,
agency, and contributory negligence controlled. None of
those issues is relevant to his ERISA action. The issues
here involve an employer's obligation to pay disability
compensation under the provisions of a pension plan. Even
if the employer and Chiapetta, the driver of the car that
struck Fornarotto, both prevailed in the state court tort
action, the defendant-employer would be no better off here
so long as Fornarotto could establish he was "disabled"
under defendant's plan.7 Accordingly, we conclude that the
link between this action and the prior action is too
attenuated to hold that both actions arise from a
_________________________________________________________________
7. New Jersey-American argues that Fornarotto will receive the "windfall"
of a double recovery if he is allowed to collect on his ERISA claim and
retain the previously bargained-for settlement proceeds. However, the
district court can address that concern if Fornarotto prevails on remand.
That court can then consider this argument and resolve it in context
with the employer's obligation under its pension plan.
8
"commonality of facts." The relationship of the two suits is
rooted more in serendipity and coincidence than
commonality of facts. Fornarotto's ERISA claim does not
"constitute one or more of the bundle of rights and
liabilities which derive from the . . . tortfeasor-injured
person relationship of plaintiff and defendant which should
be disposed of in one unit of litigation." Chiacchio v.
Chiacchio, 486 A.2d 335, 338, (N.J. Super. A.D. 1984)
Fornorotto's first suit and his second suit do not turn on
the "same transactional facts." Joel, 688 A.2d at 1037.
Accordingly, we hold that the entire controversy doctrine
was not implicated by the failure to join the ERISA claim
with the prior tort claim. The two claims are separate and
distinct, and failure to join them does not require a "rerun"
of the preceding state litigation nor does this suit allow
Fornarotto to "seek two bites at the apple." Joel, at 1040.
III.
Fornarotto concedes that his personal injury action and
his ERISA action arise from the same set of facts, i.e., his
automobile accident. In Illiano v. Seaview Orthopedics, 690
A.2d 662 (N.J. Super. A.D. 1997), Illiano suffered back
injuries when his car was struck by a car driven by Gilbert.
Apparently, Gilbert's negligence was not at issue and only
damages were contested. Illiano was treated for the injury
by Dr. Lospinuso, a principal of Seaview Orthopedics.8
Eventually, Illiano's counsel filed a personal injury action
against Gilbert. However, for some unknown reason,
Lospinuso repeatedly and erroneously reported, as part of
Illiano's medical history, that Illiano's back injury was
either work-related or related to a car accident that
occurred later than the Gilbert accident.
Lospinuso refused to correct his report in spite of several
requests by Illiano's counsel to do so. Not unexpectedly,
Lospinuso's erroneous reports "were devastating to
[Illiano's] pending action against Gilbert," Id. at 664, and
Illiano was forced to accept an unfavorable settlement.
_________________________________________________________________
8. Ironically, Lospinuso is also one of Fornarotto's treating physicians.
See App. at p. 36.
9
In the meantime, Illiano's automobile insurance carrier
refused to pay Lospinuso's bill because his medical reports
did not relate Illiano's treatment to the Gilbert accident.
Ultimately, after Lospinuso realized that his erroneous
reports were the reason the carrier was not paying his bill,
he reviewed his records and, in 1992, wrote a letter to
Illiano and Illiano's insurance carrier correcting the error.
However, the letter was too late to assist Illiano in his
negligence action because he had already accepted the
settlement.
Consequently, Illiano sued Lospinuso and Seaview
Orthopedics, claiming that Lospinuso's refusal to correct
his medical reports during the pendency of the Gilbert suit
resulted in the loss of the true value of his claim against
Gilbert. Lospinuso moved for summary judgment
contending, inter alia, that the claim against him should
have been joined to the Gilbert personal injury case and
was therefore barred by the entire controversy doctrine. The
trial court granted Lospinuso's motion, finding that the
entire controversy doctrine did bar Illiano's suit against
Lospinuso.
The New Jersey appellate court reversed, finding that the
Lospinuso claim was "not a constituent component of the
transaction giving rise to the claim against Gilbert." Id. at
666. The appellate court wrote:
The subject of the . . . first suit here was a routine
automobile accident personal-injury case. [Lospinuso]
had nothing to do with giving rise to that cause of
action. The claims made against [Lospinuso] by [Illiano]
arising out of his conduct during the litigation had no
causal nexus with [Illiano's] claim against [Gilbert]. In
short, the Lospinuso claim, in our view, is simply not
fairly characterizable as a constituent component of
[Illiano's] claim against Gilbert. It is rather a separate
and tangential controversy arising out of an altogether
different relationship having its own set of
responsibilities and obligations.
Id. (emphasis added).
The court further noted that when joinder has been
required, it has been "because the claims against [the
10
defendants] in the successive actions were constituent
claims arising out of the same transaction that was the
gravamen of the first suit against others." Id. The
transaction that gave rise to the second suit there was not
the gravamen of the first suit. We believe the same rationale
applies here. Although Fornarotto's automobile accident
triggered both the personal injury claim and his disability
pension claim, thus providing a "causal nexus," the
personal injury action is not a constituent component of
the ERISA action. The ERISA action "aris[es] out of an
altogether different relationship having its own set of
responsibilities and obligations," from the personal injury
action. The doctrine does not require an identity of legal
issues. Joel, at 1038. However, the issues in a successive
suit must be such that the suit is a "consistent component"
of the prior claim. Illiano, 690 A.2d at 666. That is not the
case here, and we conclude the doctrine doesn't apply.
A similar result was reached in Chiacchio v. Chiacchio,
486 A.2d 335 (N.J. Super. A.D. 1984). There, plaintiff/wife
filed a two-count complaint -- count one was in divorce on
grounds of extreme cruelty and count two was in tort to
recover damages for personal injuries as a result of being
shot and strangled by defendant/husband. Husband
notified his homeowner's carrier, which denied coverage.
Husband then filed a motion to join the carrier as a third-
party defendant. The motion was granted and the carrier
was not only joined as a third-party defendant, but was
also ordered to provide a defense in the underlying action
and to pay for any judgment obtained by wife against
husband to the extent of its coverage. The carrier then filed
an answer to the third-party complaint and a counterclaim
for a declaratory judgment as to the coverage issue. The
carrier also moved to vacate the order. The trial court
vacated its prior order except for the joinder of the carrier
as a third-party defendant and further ordered that all
issues raised by the complaint, third-party complaint and
the declaratory judgment counterclaim should be joined in
the pending action. Finally, the trial court granted the wife
permission to file an amended complaint setting forth a
claim for PIP benefits under an automobile policy issued by
the same carrier.
11
The carrier filed an interlocutory appeal contending, inter
alia, that the entire controversy doctrine did not require
that the issues relating to coverage and PIP benefits be
joined in the matrimonial-tort action. The appellate court
agreed stating:
The third-party complaint and [the carrier's]
counterclaim do not involve common questions of fact
or law with those raised in the complaint. Plaintiff
seeks a dissolution of the marriage, equitable
distribution of the marital assets and damages for
injuries sustained as a result of the defendant's
wrongdoing, whereas the amended complaint, third-
party complaint and counterclaim present issues
relating to the insurance coverage afforded by [the
carrier's] policies. These claims do not have the
commonality required for a joinder under [the rules
relating to third-party practice]. Nor do they constitute
one or more of the bundle of rights and liabilities which
derive from the husband-wife or tortfeasor-injured
person relationship of plaintiff and defendant which
should be disposed of in one unit of litigation.
Id. at 7-8 (emphasis added). Just as Fornarotto's ERISA
action is not a "constituent component" of his personal
injury action, his ERISA action does not "constitute . . . the
[same] bundle of rights and liabilities which derive from the
. . . tortfeasor-injured person relationship . . . which should
be disposed of in one unit of litigation."
IV.
In addition, even if the language of the doctrine could be
stretched to cover the ERISA claim, we conclude that it was
error for the district court to rely on the doctrine under
these circumstances. Despite the doctrine's apparent
rigidity, New Jersey courts have clearly stated that it is not
to be applied in a rigid manner divorced from concepts of
equity and fairness. "[P]arty fairness is critical in the
application of the doctrine." Cogdell v. Hospital Center at
Orange, 560 A.2d 1169, 1177 (N.J. 1989). "Equitable
considerations can relax mandatory-joinder requirements
when joinder would be unfair." Id., at 1041. (internal
12
quotations omitted). Indeed, "[t]he polestar of the
application of the rule is judicial ``fairness' ". DiTrolio, 662
A.2d at 504. Strict application of the doctrine here was
simply not fair.
A "fairness" inquiry under the entire controversy doctrine
has a specific focus: "Fairness, in the context of party
joinder, focuses on basic fairness to all of the parties,
especially those sued in the second suit who were
prevented from participating in the first." Id. "Fairness is
thus a protective concept that focuses primarily on whether
defendants would be in a better position to defend
themselves if the claims against them had been raised and
asserted in the first litigation." Id. at 505. A key
determination is whether the defendants "are now
disadvantaged because they were not parties to thefirst
litigation." Id.
Here, Fornarotto's employer was a defendant in both the
personal injury action and the ERISA action. It knew early
on that Fornarotto was claiming that he was disabled. In
fact, the employer argues throughout its brief that
Fornarotto's disability is the key issue in both the personal
injury action and the ERISA action.
In both cases, [Fornarotto] seeks to recover damages
arising out of his alleged disability caused by injuries
suffered in the same auto accident. Moreover, the same
set of facts that were relevant in the [personal injury
action] with respect to the determination whether
[Fornarotto] was disabled and unable to work, and
therefore entitled to recover damages for lost wages,
are necessarily implicated in the [ERISA action].
Appellee's Br. at 8-9. Thus, the employer is in the same
position to defend itself in this suit as it was in the
personal injury action. Failure to join the ERISA claim in
the initial state action would cause some redundancy, thus
causing New Jersey-American some inconvenience, but that
inconvenience does not rise to the level of prejudice or
unfairness requiring application of the doctrine. Moreover,
as will be noted below, some of the redundancy and
inconvenience here is the direct result of New Jersey-
American's tactical decision to remove the then pending
13
state ERISA action to federal court where it could no longer
be consolidated with the state tort action.
Moreover, "[f]airness to the plaintiff must also be
considered." DiTrolio, 662 A.2d at 505. In analyzing this
prong of the fairness inquiry, New Jersey courts have
usually focused upon whether the plaintiff had an
opportunity to assert the barred claim in the initial
litigation. In Cogdell, the court noted that joinder under the
entire controversy doctrine was not required unless the
"plaintiff had sufficient information to have included these
defendants in the earlier lawsuit." 560 A.2d at 1169.
Similarly, the court has also noted "the party whose claim
is being sought to be barred must have had a fair and
reasonable opportunity to have fully litigated that claim in
the original action." Cafferata v. Peyser, 597 A.2d 1101,
1104 (N.J. Super. A.D. 1991). Here, Fornorotto's initial
personal injury claim was filed before he knew that he
would be denied disability benefits from his employer.
Although he could have sought to amend his complaint
when he learned his employer would not pay disability
benefits under his pension, we do not think that fact tilts
the scales of fairness toward New Jersey American's side of
this dispute.
Fornarotto worked for New Jersey-American Water
Company for twenty-nine years. App. at 35. During those
twenty-nine years he contributed a portion of his earnings
to the pension plan from which he now seeks disability
benefits. That pension was an integral part of his
employment contract, and he has paid for that pension
with his labor over the years. There is nothing on this
record to suggest that Fornarotto was anything other than
a good employee, and North-American has not suggested
anything to the contrary. Moreover, even if it had, it would
be unlikely that a subpar job performance would cause an
employee to forfeit his pension. Accordingly, we do not
understand how fairness is served by precluding Fornarotto
from attempting to establish his entitlement to his disability
pension.
Furthermore, Fornarotto's personal injury action and his
ERISA action are separate and distinct causes of action. He
has not split a single cause of action in two actions. His
14
case is unlike Crispin v. Volkswagenwerk, A.G., 476 A.2d
250 (N.J. 1984), where plaintiff, who first brought an
automobile accident case, deliberately withheld a defective
design claim against the automobile's manufacturer, and
unlike Cogdell v. Hospital Center at Orange, 560 A.2d 1169(N.J. 1989), where plaintiffs first sued physicians for birth
injuries to an infant and subsequently sued the hospital
and its staff for the same injuries. Fornarotto has not
engaged in "calculated fragmentation of litigation" nor did
he "for strategic reasons withheld claims concerning the
underlying controversy . . . seek[ing] two bites at the apple."
Joel, 688 A.2d at 1041.
These considerations would, in and of themselves,
establish the unfairness of rigidly applying the entire
controversy doctrine here. However, there is more. The
defendants removed the ERISA claim from state to federal
court. Had the claim remained in state court, it would, in
all probability, have been joined with the then pending
personal injury action. New Jersey Rule of Civil Procedure
4:5-1(b)(2), that was adopted to implement the entire
controversy doctrine, see Pressler, Current N.J. Court Rules,
Comment R. 4:5-1 (1993), imposes a continuing obligation
on litigants to notify the trial court of any other pending or
anticipated litigation. It provides:
Each party shall include with the first pleading a
certification as to whether the matter in controversy is
the subject of any other action pending in any court or
of a pending arbitration proceeding, or whether any
other action or arbitration proceeding is contemplated;
and, if so, the certification shall identify such actions
and all parties thereto. Further, each party shall
disclose in the certification the names of any other
party who should be joined in the action. Each party
shall have a continuing obligation during the course of
the litigation to file and serve on all other parties and
with the court an amended certification if there is a
change in the facts stated in the original certification.
The court may compel the joinder of parties in
appropriate circumstances, either upon its own motion
or that of a party.
15
Rule 4:5-1(b)(2). When Fornarotto's ERISA complaint was
filed, it contained a Rule 4:5-1 certification which recited,
inter alia, that the "matter in controversy is not subject to
any other pending or contemplated court action or
arbitration. . . ." App. at 3. Whether that statement
remained accurate or not is immaterial. Had the employer
filed an answer to the ERISA complaint in the New Jersey
court, it would have been required to file its own Rule 4:5-1
certification. That certification would have informed the
court that, in its opinion, the ERISA action was related to
a pending court action, i.e., the personal injury action. The
matters could then have been consolidated by the state trial
courts. "It is the trial court's responsibility to determine
whether or not joinder is appropriate in a given case, and
thus litigants should be compelled to bring all actions at
one time . . . . The trial court is vested with the discretion
to sever or stay an inappropriate consolidation." DiTrolio,
662 A.2d at 506. However, New Jersey-American did not file
an answer to Fornarotto's ERISA complaint. Instead, it
removed the ERISA action to the district court and then,
after it settled Fornarotto's personal injury action, moved to
dismiss the ERISA action under the entire controversy
doctrine.9 By removing the action to federal court and then
filing a motion to dismiss after the personal injury action
was settled, the employer's counsel clearly out maneuvered
_________________________________________________________________
9. At oral argument, we were informed that there is an exchange of
letters between counsel for Fornarotto and counsel who represented the
employer in the personal injury action, who, we note, are not the
employer's counsel in this case, concerning the wording of the release for
the settlement of the personal injury action. Those letters could be read
as indicating that there was an agreement whereby Fornarotto reserved
his rights to proceed in his ERISA action despite having released the
employer in the personal injury action. Those letters were apparently
attached as exhibits to the summary judgment motion, but for reasons
we cannot understand, the issue of Fornarotto's reservation of rights was
never argued to the district court. Normally, we would reverse the
district court's grant of summary judgment and remand for an
evidentiary hearing on the reservation of rights. However, because we
believe that the entire controversy doctrine should not be applied to bar
Fornarotto's ERISA action, it is not necessary to remand for a
determination as to whether there was in fact a reservation of rights to
proceed in the ERISA action.
16
Fornarotto by not having to alert the state court to the need
to consolidate the matters. Defense counsel thereby kept
the entire controversy arrow poised to strike at the ERISA
action following its removal to federal court. We do not
question defense counsel's tactics or stewardship in doing
so. However, neither can we ignore his tactics when
conducting an inquiry into the fairness of applying the
entire controversy doctrine. The entire controversy doctrine
was never "intended to be a trap for the unwary." Joel, 688
A.2d at 1041. In fact, preclusion is always a "remedy of last
resort." Olds, 696 A.2d at 645.
The limits of the doctrine are reached when its
application "would result in significant unfairness or
jeopardy to a clear presentation of the issues and a just
result." Crispin v. Volkswagenwerk, A.G., 476 A.2d at 260.
Indeed, "[i]mplicit in the development of the entire
controversy doctrine is the recognition that economies and
the efficient administration of justice should not be
achieved at the expense of these paramount concerns." Id.
"[B]ecause the entire controversy doctrine is an equitable
principle, its applicability is left to judicial discretion based
on the particular circumstances inherent in a given case."
Mystic Isle Development Corp. v. Perskie & Nehmad , 662
A.2d 523, 530 (N.J. 1995)(citations omitted).10
Here, we hold that the district court exceeded the limits
of the entire controversy doctrine by stretching it to apply
to an ERISA action under the circumstances of this case.
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10. The specific holding in Mystic Isle was overruled in Olds v. Donnelly,
696 A.2d 633 (N.J. 1997). Prior to Olds v. Donnelly, it appeared that the
entire controversy doctrine required that a claim of legal malpractice
arising from an attorney's representation of his client in a lawsuit be
asserted in the underlying lawsuit in which the legal malpractice arose.
Realizing the havoc to the attorney-client relationship that follows from
the application of the doctrine in such a situation, the New Jersey
Supreme Court held that "the entire controversy doctrine no longer
compels the assertion of a legal malpractice claim in an underlying
action that gives rise to the claim." Id. at 643. However, the general
principle of law from Mystic Isle referred to above is still valid.
17
V.
For all of the above reasons, we will reverse the district
court and remand for further proceedings.
18
NYGAARD, Circuit Judge, dissenting.
I dissent because I believe the district court's conclusion,
though harsh, is correct: the entire controversy doctrine
applies. The doctrine bars successive lawsuits that"arise
from related facts or the same transaction or series of
transactions. It is the core set of facts that provides the link
between distinct claims against the same or different
parties and triggers the requirement that they be
determined in one proceeding." DiTrolio v. Antiles, 662 A.2d
494, 502 (N.J. 1995). If the litigants are "likely to have to
engage in additional litigation in order to conclusively
dispose of their respective bundles of rights and liabilities"
arising from the same series of transactions, the doctrine
applies irrespective of whether the claims or issues are
"independent cause[s] of action by technical common law
definition or independent claim[s] which, in the abstract,
[are] separately adjudicable." O'Shea v. Amoco Oil Co., 886
F.2d 584, 590-91 (3d Cir. 1989).
Both suits derive from the same event: the injury Mr.
Fornarotto suffered at his place of employment. The
personal injury suit sought damages for the physical
injuries he suffered in that accident; the ERISA suit sought
compensation for the wages he lost when he became totally
disabled as a result of those injuries. In the personal injury
suit, Mr. Fornarotto would have had to prove the extent of
his injuries, including his total disability. In the ERISA suit,
he would again have had to prove that his injuries left him
totally disabled. Thus, both lawsuits stem from the same
core set of facts: the extent of his injury resulting from the
accident. When the accident occurred, the "bundles of
rights" that accrued to Fornarotto included compensation
for both (1) physical injury and (2) lost incom e resulting
from that accident. I continue to believe that the entire
controversy doctrine required Mr. Fornarotto to dispose of
those rights in one proceeding.
Indeed, everyone acknowledges that the two suits share
common facts. Although the personal injury suit involved
issues of negligence that were not implicated in the ERISA
suit, that is irrelevant. "The entire controversy doctrine
does not require commonality of legal issues. Rather, the
determinative consideration is whether distinct claims are
19
aspects of a single larger controversy because they arise
from interrelated facts." DiTrolio, 662 A.2d at 504.
Fornarotto admits that his accident caused his disability
and is therefore common to both lawsuits.
The entire controversy doctrine has three objectives:
"(1) to encourage the comprehensive and conclus ive
determination of a legal controversy; (2) to achie ve party
fairness . . . and (3) to promote judicial economy and
efficiency by avoiding fragmented, multiple and duplicative
litigation." Venuto v. Witco Corp., 117 F.3d 754, 761 (3d Cir.
1997). The opinion of the court does not discuss thefirst
and third factors, which weigh in New-Jersey American's
favor.
In arguing the "fairness" factor, Fornarotto's attorney
relies mainly on equitable considerations, but does not cite
a single case in which a New Jersey court assumed that the
entire controversy doctrine was applicable but declined to
enforce it out of "fairness" to one of the parties. Neither I
nor the majority has found one either. "Fairness in the
application of the entire controversy doctrine focuses on the
litigation posture of the respective parties and whether all
of their claims and defenses could be most soundly and
appropriately litigated and disposed of in a single
comprehensive adjudication." DiTrolio, 662 A.2d at 507.
Fornarotto's personal injury suit was pending in the state
court for six years. In settling that suit, Fornarotto released
New-Jersey American from "any and all actions, causes of
actions, claims, demands, costs, loss of services, expenses
and compensation on account of, or in anyway growing out
of" his injuries in the accident. (App. at 49.) To require
relitigation of those same injuries in the ERISA suit is
unfair to New-Jersey American and would certainly
frustrate judicial economy.1
It could be argued that it would be unfair to bar the
ERISA suit because, at the time Fornarotto filed the
personal injury suit, he did not know he was disabled or
that New-Jersey American would deny him disability
_________________________________________________________________
1. Judicial economy is not merely to save us work; it redounds to all
other suits and litigants who are thus denied attention and whose
causes meanwhile must remain untried.
20
benefits. Again, this is true but irrelevant. The entire
controversy doctrine does not take effect until one suit is
finally determined. Rycoline Products, Inc. v. C & W
Unlimited, 109 F.3d 883, 889 (3d Cir. 1997). Upon learning
that New-Jersey American denied him disability benefits,
Fornarotto should have simply amended his pending
personal injury suit to add an ERISA claim. Instead, he
chose to file a separate ERISA action in the same court on
September 5, 1995. New-Jersey American removed that
ERISA suit on October 27, 1995, and the parties settled the
personal injury suit in November, 1996. Thus, two separate
lawsuits arising out of the same event were pending in the
same court for almost two months, and the ERISA suit then
sat in a different court for over one year. This is precisely
the type of fragmented litigation the entire controversy
doctrine was meant to preclude.
Fornarotto's attorney had a statutory duty to bring the
overlap to the court's attention when he first filed the
ERISA suit, but he failed to do so. "A plaintiff who fails to
allow the trial court the opportunity to supervise the entire
controversy risks losing the right to bring that claim later."
Mystic Isle Development Corp. v. Perskie & Nehmad, 662
A.2d 523, 530 (N.J. 1995). Fornarotto should not be saved
by his argument that New-Jersey American avoided that
same statutory duty by removing the ERISA suit before
filing an answer in state court. New-Jersey American had a
procedural right to remove, and removal does not bar
operation of the entire controversy doctrine.2 Indeed, in
Petrocelli v. Daniel Woodhead Co., 993 F.2d 27 (3d Cir.
1993), we upheld summary judgment in favor of a
defendant who removed a suit to federal court and then
claimed it was barred by the entire controversy doctrine.
_________________________________________________________________
2. I am not without compassion for Mr. Fornarotto. Whatever legitimate
rationale there may be that led his attorney to risk the ERISA action by
filing a separate suit, it is not apparent from this record. Moreover, the
timing of the removal, the first settlement, the letters exchanged (see
Maj. Op. n.9), and the motion for summary judgment lead me to believe
that Mr. Fornarotto suffered a procedural "sucker punch," from which he
was unprotected, and by which he was denied disability benefits. The
profession of law is reduced to a mere trade if not practiced with
informed zeal and honor; I see a shortage of both here.
21
Although the defendant in Petrocelli did not know of the
previous suit when it removed the later suit, there, as here,
the plaintiff was aware that a similar suit was pending
when he filed the second suit, but failed to inform the state
court as required. Id. at 28.
For these reasons, which are essentially those given by
the district court in its opinion, I dissent.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
22