HAPPY DAYS ADULT HEALTHCARE LLC VS. OBERMAYERÂ REBMANN MAXWELL & HIPPEL, LLP(L-2151-15, CAMDEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-0501-15T1
HAPPY DAYS ADULT HEALTHCARE
LLC, NEW HORIZONS BEHAVIORAL
HEALTHCARE CENTERS, LLC, BRIAN
KLEIMAN and RIVKA BASYA KLEIMAN,
h/w and STEVEN KLEIMAN and RIVKA
CHAYA KLEIMAN, h/w,
Plaintiffs-Appellants,
v.
OBERMAYER REBMANN MAXWELL &
HIPPEL, LLP,
Defendant-Respondent.
_________________________________
Argued May 17, 2017 – Decided June 26, 2017
Before Judges Alvarez, Accurso and Lisa.
On appeal from Superior Court of New Jersey,
Law Division, Camden County, Docket No. L-
2151-15.
Benjamin Folkman argued the cause for
appellants (Folkman Law Offices, PC,
attorneys; Mr. Folkman, of counsel; Eve R.
Keller, on the brief).
Matthew A. Green argued the cause for
respondent (Obermayer Rebmann Maxwell &
Hippel, LLP, attorneys; Mr. Green and
Michelle L. Ringel, on the brief).
PER CURIAM
This is the second appeal arising out of efforts by
defendant Obermayer Rebmann Maxwell & Hippel, LLP to recover for
services rendered to plaintiffs Brian and Rivka Basya Kleiman
and Steven and Rivka Chaya Kleiman and the limited liability
companies they control, plaintiffs Happy Days Adult Healthcare,
LLC, and New Horizons Behavorial Healthcare Centers, LLC, in
nine different matters between 2009 and 2012. In the prior
appeal, we affirmed a jury verdict in favor of Obermayer.
Obermayer Rebmann Maxwell & Hippel, LLP v. Brian Kleiman, et
al., No. A-0786-15 (App. Div. May 19, 2017) (slip op. at 2). In
this matter, the Kleimans appeal from an August 20, 2015 order
dismissing their complaint against Obermayer for malpractice
based on the entire controversy doctrine. Because we agree
Judge Ragonese was correct that the Kleimans had a full and fair
opportunity to litigate the claim in the first action and failed
to do so, we affirm, substantially for the reasons expressed in
the judge's comprehensive written opinion accompanying the
order.
The background of this matter is set out in Judge
Ragonese's opinion and, because we write solely for the parties,
we have no need to recapitulate it here. The key facts are
clear. Ralph Ferrara has represented the Kleimans in a variety
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of matters since 2005, including in a General Equity case in
Essex County, which the parties refer to as 300 Broadway.
Ferrara was still representing the Kleimans in the 300 Broadway
matter while the fee case and this suit were pending in the
trial court.
In October 2012, Obermayer moved to disqualify Ferrara,
then at Richardson & Patel, and his partner, Morgan Zucker, from
defending the Kleimans in Obermayer's fee suit. The Kleimans
opposed that motion. Because Ferrara was likely to be a
necessary witness, having overseen the Kleimans' work at
Obermayer, the court disqualified Ferrara, but permitted Zucker
to continue to defend the Kleimans against Obermayer's claims.
In December 2012, the Kleimans moved to disqualify the
Obermayer associate litigating the fee case against them because
they claimed Obermayer "mishandled" their matters and they would
be seeking a set-off against the fees Obermayer claimed were due
and owing. Judge Silverman Katz denied the motion because the
Kleimans had not asserted any malpractice or set-off claims in
either their affirmative defenses or counterclaim and had not
submitted an affidavit on the motion identifying the alleged
malpractice. The judge made clear, however, that the motion was
denied without prejudice to permit the Kleimans to cure those
procedural deficiencies.
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In October 2014, in advance of a January 2015 trial date,
Obermayer moved to file a second amended complaint to
specifically assert additional fees it claimed were owed on the
300 Broadway matter. The Kleimans opposed the motion claiming
it was filed after the close of extended discovery and that they
would be prejudiced by the late amendment. Judge Ragonese
disagreed. Although acknowledging Obermayer's tardiness in
asserting the claim, the judge found the parties had conducted
discovery on the claim, which set forth the same facts and legal
theories Obermayer had already asserted as affirmative defenses
to the Kleimans' counterclaim. Accordingly, the judge permitted
Obermayer to file its second amended complaint.
When the Kleimans filed their answer to the amended
pleading in December 2014, they asserted, for the first time,
affirmative defenses of set-off and that the claims were "barred
or limited by [Obermayer's] professional negligence and
malpractice." After the Kleimans' motion to dismiss the amended
complaint was denied, Zucker moved to withdraw as their counsel,
claiming he was in an irreconcilable conflict. Specifically, he
claimed he could not assert a malpractice claim on behalf of the
Kleimans based on Obermayer's representation of them in the 300
Broadway matter without also suing his partner Ferrara, who was
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the billing attorney, responsible for all of the Kleimans' work
when he was at Obermayer.
Judge Fratto denied the motion, first in December and then
again in February when Zucker renewed it. Because the Kleimans
had never set forth how they claimed Obermayer had been
negligent, had never filed an affidavit of merit and did not
have an expert report, Judge Fratto observed he was "hard
pressed not to say that [the motion] appear[ed] to be an attempt
to delay this trial." Ultimately, the judge refused to allow
Zucker to withdraw on the basis of a malpractice claim never
asserted in the more than two years the case had been pending.
Just before the rescheduled trial date in April 2015,
Zucker moved again to withdraw as counsel, and the motion was
again denied. Following unsuccessful motions for leave to
appeal in this court and the Supreme Court, the fee suit finally
went to trial in May 2015. On the first day of trial, the same
counsel representing plaintiffs in this case, appeared for the
Kleimans, individually, while Zucker continued to represent
their business entities. Counsel on behalf of the Kleimans
moved to stay the trial until the 300 Broadway case was
completed or, alternatively, for leave to file an amended
counterclaim for malpractice.
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Judge Ragonese denied both motions as untimely. The judge
also denied the Kleimans' oral motion to preserve their
malpractice claims against Obermayer and exempt them from
application of the entire controversy doctrine, or other
principles of claim preclusion, including res judicata. The
judge granted Obermayer's in limine motion to strike the
Kleimans' affirmative defense of malpractice, based on their
failure to produce an expert report in discovery.
While the fee suit was still being tried, the Kleimans
filed the verified complaint for malpractice in this case and
sought to have it consolidated with Obermayer's fee suit. Judge
Ragonese denied that motion, and likewise denied the Kleimans'
application to stay this suit until the 300 Broadway case was
concluded. The jury returned its verdict in favor of Obermayer
in its fee suit on June 11, 2015, which included a $58,366.15
award in quantum meruit relating to the 300 Broadway file. As
noted, we recently affirmed the verdict in that case.
Obermayer, supra, slip op. at 2.
Following entry of judgment in the fee suit, Obermayer
moved to dismiss the complaint in this action based on res
judicata, collateral estoppel and the entire controversy
doctrine. Judge Ragonese granted the motion. In a
comprehensive written opinion, the judge concluded that the
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Kleimans' legal malpractice claim needed to have been litigated
in the fee action because the claim for fees and the claim for
malpractice "could be most soundly and appropriately litigated
and disposed of in a single comprehensive adjudication."
The judge found that the Kleimans were aware of their
malpractice claim against Obermayer since at least November
2014, yet did not do anything to actually assert the claim until
the first day of trial in May 2015, when they brought on current
counsel to seek to amend their counterclaim. Judge Ragonese
concluded that the Kleimans' "failure to develop the claim in
the [p]rior [a]ction makes it fair that they be precluded from
asserting it in a later and separate action."
The Kleimans appeal, claiming that to require them to
litigate their malpractice claim against Obermayer and Ferrara
while Ferrara was still representing them in the 300 Broadway
matter would have had a chilling effect on the attorney-client
relationship and that they did not have a fair and reasonable
opportunity to litigate the malpractice claim in the fee suit.
We disagree.
The Kleimans first raised the specter of a malpractice
claim against Obermayer in December 2012, six months after
Obermayer filed the fee suit and three months after the court
dismissed their answer and affirmative defenses in the 300
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Broadway suit for their failure to comply with court orders.
Thus at the point in time that Judge Silverman Katz denied the
Kleimans' motion to disqualify the Obermayer associate
representing the firm in the fee suit, the Kleimans were already
aware of the claims they had against Ferrara and Obermayer
arising out of Ferrara's representation of them in 300 Broadway.
That motion was denied because the Kleimans had failed to plead
a malpractice claim. Judge Silverman Katz, however, denied the
motion without prejudice, making clear that if the Kleimans
intended to assert a malpractice claim against Obermayer as an
offset to the fee claim, they needed to amend their pleadings in
order to do so.
The Kleimans, however, did not act until the last days of
December 2014, in advance of a scheduled January 2015 trial
date. And even then, it was not until five months later on the
first day of the rescheduled trial that they took the steps to
have separate counsel assert a counterclaim for malpractice
against Obermayer and ask the court to either stay the action
pending the conclusion of the 300 Broadway suit or sever and
preserve their malpractice claim. Nothing prohibited the
Kleimans from taking those steps in December 2012 after they
were advised to amend their pleadings if they intended to assert
a set-off to Obermayer's fee claim. Under those circumstances,
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we have no hesitation in finding the trial court was correct to
conclude the Kleimans had been provided a full and fair
opportunity to litigate their malpractice claim against
Obermayer when it 1) dismissed the Kleimans' affirmative defense
of malpractice in the fee suit and 2) granted Obermayer's motion
to dismiss the Kleimans' malpractice complaint in this case
under the entire controversy doctrine.1
Further, we reject the Kleimans' claims that their
malpractice claim was not ripe or that forcing them to assert it
while Ferrara was still representing them in the 300 Broadway
matter would have significantly interfered with their
relationship. A claim for legal malpractice "accrues when an
attorney's breach of professional duty proximately causes a
plaintiff's damages." Grunwald v. Bronkesh, 131 N.J. 483, 492
(1993). There is no question but that the Kleimans were aware
1
As a procedural matter, we also note our agreement with
Obermayer that the denial of the Kleimans' motion to amend their
counterclaim to assert a malpractice claim and the grant of
Obermayer's in limine motion striking the malpractice defense in
the first suit constituted a decision on the merits of that
claim. The Kleimans' failure to appeal those rulings bars their
malpractice claim here. See Velasquez v. Franz, 123 N.J. 498,
511 (1991) ("[A] judgement, not set aside on appeal or
otherwise, is equally effective as an estoppel upon the points
decided.") (quoting Reed v. Allen, 286 U.S. 191, 201, 52 S. Ct.
532, 534, 76 L. Ed. 1054, 1058 (1931)).
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of their claim against Ferrara following the suppression of
their answer and affirmative defenses in the 300 Broadway suit.2
They also knew the ruling had caused them to suffer damages,
although the full extent of those damages was not yet known
because the matter was still pending. The 1) Kleimans'
awareness of their claim, 2) their earlier attempt to disqualify
Obermayer's counsel based on asserted negligence, which also
implicated Ferrara, 3) that the fee suit was not the underlying
action giving rise to the alleged malpractice, and 4) the
Kleimans' ability to have taken the steps they took on the trial
date, years earlier, readily distinguishes this case from Olds
v. Donnelly, 150 N.J. 424, 440-43 (1997) and Sklodowsky v.
Lushis, 417 N.J. Super. 648, 653-57 (App. Div. 2011).
The Kleimans were, in December 2012, both aware of their
malpractice claim against Ferrara arising out of the 300
Broadway matter and advised of the necessity to assert it in the
fee case. We thus agree they were provided a full and fair
opportunity to litigate the claim against Obermayer in
Obermayer's fee suit and failed to do so. We accordingly
2
Brian Kleiman himself made the point clearly to Judge Fratto on
Zucker's second motion to withdraw as counsel in the fee suit.
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affirm, substantially for the reasons expressed in Judge
Ragonese's thorough and thoughtful opinion of August 20, 2015.
Affirmed.
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