JOSEPH PETRONE VS. ALEX J. SABO, ESQ.(L-2648-12, MONMOUTH 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NOT FOR PUBLICATION WITHOUT THE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-0460-15T2
JOSEPH PETRONE,
Plaintiff-Appellant,
v.
ALEX J. SABO, ESQ., and
BRESSLER, AMERY & ROSS, P.C.,
Defendants-Respondents.
_______________________________________
Argued April 27, 2017 – Decided June 13, 2017
Before Judges Lihotz and O'Connor.
On appeal from Superior Court of New Jersey,
Law Division, Monmouth County, Docket No. L-
2648-12.
Elena Gammardella argued the cause for
appellant (Law Office of Richard A. Amdur,
Jr., and Hoagland, Longo, Moran, Dunst &
Doukas, LLP, attorneys; Richard J. Mirra, on
the brief).
Mark M. Tallmadge argued the cause for
respondents (Bressler, Amery & Ross, P.C.,
attorneys; Mr. Tallmadge and Risa D. Rich,
on the brief).
PER CURIAM
In this legal malpractice action, plaintiff Joseph Petrone
appeals from the May 19, 2015 Law Division order, which granted
partial summary judgment to defendants Alex J. Sabo and
Bressler, Amery & Ross (BAR). After reviewing the record and
applicable legal principles, we affirm.
I
The motion record informs the following. In 2005,
plaintiff was working as a broker-dealer for Investacorp, Inc.,
a financial services firm. A client of Investacorp filed a
claim against it and plaintiff with the National Association of
Securities Dealers (NASD), alleging they wrongfully caused the
client to sustain losses to its investment account.1 In 2006,
Investacorp and plaintiff retained BAR to defend and represent
them at the NASD arbitration hearing (investor arbitration).
Sabo was an attorney at BAR who handled this matter.
Investacorp wanted to settle the matter with the investor,
but plaintiff, believing he was not liable, was unwilling to
settle. Just days before the arbitration hearing, plaintiff
obtained his own attorney; defendants continued to represent
Investacorp. Before the arbitration hearing commenced,
1
In 2007, NASD became known as the Financial Industry
Regulatory Authority (FINRA).
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Investacorp settled with the investor for $275,000. Two days
later, plaintiff settled for $2500.
In general, broker-dealers are required to report
arbitration awards and settlements. Thus, Investacorp filed a
"Form U4" with NASD in which Investacorp stated both it and
plaintiff settled the claim with the investor, and reported the
amount each contributed toward the settlement. Before
Investacorp filed this form, plaintiff took the position he did
not contribute toward Investacorp's settlement, as he separately
settled with the investor. Moreover, because his settlement was
less than $10,000, he was not required to report his settlement
with NASD. Despite plaintiff's protestations, Investacorp
declined to amend the form and filed it with NASD.
Approximately one month later, Investacorp terminated
plaintiff. As part of the termination process, Investacorp was
required to and did file a Form U5 with NASD.2 In that form,
Investacorp reported plaintiff contributed $2500 to the
settlement of the investor's claim. Plaintiff complained to
Investacorp it was improper to include in the U5 form that he
had contributed toward Investacorp's settlement of the
investor's claims, again contending his settlement was separate
2
Form U5 is the Uniform Termination Notice for Securities
Industry Registration used by broker-dealers to report the
termination of the registration of an individual.
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from Investacorp's and, further, his settlement of $2500 did not
have to be reported. Plaintiff requested Investacorp amend both
forms and delete reference of his settlement with the investor,
but Investacorp refused to do so. According to plaintiff, there
is a question of fact whether BAR advised Investacorp to include
the contested information on the forms.
In 2007, plaintiff filed a claim against Investacorp with
FINRA, alleging the subject information in the U4 and U5 forms
was false and caused him to lose income. As a remedy, plaintiff
sought removal of the allegedly misleading information from the
U4 and U5 forms, and damages in the amount of $531,500. The
specific causes of action plaintiff asserted against Investacorp
were breach of contract, negligence, negligent
misrepresentation, and violation of the New Jersey Wage Payment
Law. In an amended statement of claim presented to the
arbitration panel, plaintiff broke down his request for $531,500
in compensatory damages as follows:
(1) $19,570 in lost trail commission/wages;
(2) $51,430 in lost earnings in 2007;
(3) $40,500 in lost earnings in 2008;
(4) $400,000 for estimated lost earnings
for 2009 through 2019; and
(5) $20,000 in penalties.
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Investacorp filed a counterclaim, seeking that plaintiff
indemnify it for the $275,000 it paid in settlement to the
investor, and attorneys fees. BAR did not represent Investacorp
in this matter (employment arbitration).
After three days of hearings, at which both parties were
represented by counsel, the three-member panel of FINRA
arbitrators heard testimony and reviewed documentary evidence.
The panel ultimately found in plaintiff's favor. The panel
ordered Investacorp to pay plaintiff $12,150 in compensatory
damages, plus interest, and recommended the expungement of all
references to the investor's claim from plaintiff's registration
records. All of the relief Investacorp sought in its
counterclaim was denied.
Three years later, in 2012, plaintiff filed the within
action against Sabo and BAR for legal malpractice. In answers
to interrogatories, plaintiff alleged defendants had a conflict
of interest when they represented both him and Investacorp;
abandoned plaintiff just days before the investor arbitration;
and were responsible for the misleading content in the U4 and U5
forms. Plaintiff claimed the compensatory damages he sustained
as a result of defendants' conduct was $531,500, which when
broken down were exactly the same damages he claimed before the
employment arbitration panel:
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(1) $19,570 in lost trail commission/wages;
(2) $51,430 in lost earnings in 2007;
(3) $40,500 in lost earnings in 2008;
(4) $400,000 for estimated lost earnings
for 2009 through 2019; and
(5) $20,000 in penalties.
In addition, he claimed attorneys fees of $22,000.
Defendants filed a motion for summary judgment dismissal,
arguing the doctrine of collateral estoppel precluded plaintiff
from recovering the aforementioned compensatory damages from
defendants. Their motion was denied but, on reconsideration,
the court granted defendants partial summary judgment. The
court found plaintiff collaterally estopped from seeking the
same damages sought, litigated, and considered by the
arbitrators during the employment arbitration hearing. However,
the court also found that to "the extent the plaintiff has
claims for damages beyond those amounts attributable directly to
Investacorp's improper filing of the U4 and U5 forms, they may
be pursued in this matter."
Thereafter, the parties entered into a consent order
stating all remaining claims were settled, but that plaintiff
preserved his right to appeal the order granting defendants
partial summary judgment. This appeal ensued.
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II
Plaintiff's principal argument on appeal is the trial court
erred when it found plaintiff barred from relitigating the
subject damages on the grounds of collateral estoppel. We
disagree and affirm.
The doctrine of collateral estoppel operates to preclude
the relitigation of issues that have been previously decided.
Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 522 (2006). For
the doctrine to apply, the party asserting the bar must show:
(1) the issue to be precluded is identical
to the issue decided in the prior
proceeding; (2) the issue was actually
litigated in the prior proceeding; (3) the
court in the prior proceeding issued a final
judgment on the merits; (4) the
determination of the issue was essential to
the prior judgment; and (5) the party
against whom the doctrine is asserted was a
party to or in privity with a party to the
earlier proceeding.
[Id. at 521 (quoting In re Estate of Dawson,
136 N.J. 1, 20-21 (1994)).]
This doctrine applies not only to issues raised in a prior
action, but also to facts that were in dispute as well. Id. at
522. Moreover, collateral estoppel may apply even if the prior
proceeding was an arbitration hearing. Habick v. Liberty Mut.
Fire Ins. Co., 320 N.J. Super. 244, 257-58 (App. Div.), certif.
denied, 161 N.J. 149 (1999).
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Applying the elements of collateral estoppel to this
matter, first, the damages defendants seek to preclude from
being relitigated are the very same damages plaintiff sought to
recover from Investacorp during the employment arbitration
hearing. After plaintiff's entitlement to compensatory damages
was litigated before the panel, the arbitrators determined these
damages were $12,150. But for the attorneys fees plaintiff
seeks from defendants, there is no question the damages
plaintiff seeks in this matter are identical to those sought in
the employment arbitration. However, the trial court did not
preclude plaintiff from seeking all damages from defendants in
the within matter, just those sought and litigated during the
arbitration hearing.
As for the second element, whether the damages the trial
court barred from relitigation on collateral estoppel grounds
was litigated in the prior proceeding, there is no question when
before the panel, plaintiff advocated he was entitled to the
very same $531,500 in damages he seeks in the within matter.
After three days of hearings, during which the panel heard
testimony and reviewed various documents, the panel found in
plaintiff's favor, although it determined he was entitled to
only $12,150 in compensatory damages.
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The third element is whether the court in the prior
proceeding issued a final judgment on the merits. An
arbitration panel is not, of course, a court and, thus, cannot
enter a final judgment. However, "the dispositions reached by
arbitrators are afforded collateral estoppel effect by reviewing
courts." Levine v. Wiss & Co., 97 N.J. 242, 250 (1984). As for
the fourth and fifth elements, there is no question the damages
plaintiff sought to recover in the arbitration hearing were
essential to the arbitration award, and the party against whom
the doctrine is asserted was a party to the earlier proceeding.
We note that even if the elements of collateral estoppel
are met, a court may exercise its discretion to deny preclusion
where its application would be unfair. "Even where these
requirements are met, the doctrine [of collateral estoppel],
which has its roots in equity, will not be applied when it is
unfair to do so." Pace v. Kuchinsky, 347 N.J. Super. 202, 215
(App. Div. 2002). Here, plaintiff argues applying this doctrine
to bar the subject damages would be inequitable. We are not
persuaded.
As we observed in Pace, supra, 347 N.J. Super. at 216,
factors disfavoring preclusion include:
[T]he party against whom preclusion is
sought could not have obtained review of the
prior judgment; the quality or extent of the
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procedures in the two actions is different;
it was not foreseeable at the time of the
prior action that the issue would arise in
subsequent litigation; and the precluded
party did not have an adequate opportunity
to obtain a full and fair adjudication in
the prior action.
Here, even if the arbitration award could not be reviewed,
none of the other factors applies. The arbitration hearing was
a contested hearing and, although there was no jury, the hearing
was otherwise sufficiently comparable to a non-jury hearing
conducted in court. Plaintiff knew or should have known the
damages he sought to litigate and have decided at the
arbitration proceeding could be precluded in subsequent
litigation. Finally, plaintiff did have an adequate opportunity
to fully adjudicate his entitlement to the subject damages
during the arbitration proceeding. In summary, it is clear the
five elements of collateral estoppel were met, and fairness
weighs in favor of preclusion.
We have considered plaintiff's remaining arguments and
conclude they are without sufficient merit to warrant discussion
in a written opinion. See R. 2:11-3(e)(1)(E).
Affirmed.
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