ALLSTATE VS. GLOBAL LIBERTY INSURANCE COMPANY OF NEW YORK (L-2257-16, MORRIS 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NOT FOR PUBLICATION WITHOUT THE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-4956-16T2
ALLSTATE,
Plaintiff-Appellant,
v.
GLOBAL LIBERTY INSURANCE
COMPANY OF NEW YORK,
Defendant-Respondent.
______________________________
Argued June 4, 2018 – Decided July 11, 2018
Before Judges Sabatino, Ostrer and Firko.
On appeal from Superior Court of New Jersey,
Law Division, Morris County, Docket No. L-
2257-16.
William Hahn argued the cause for appellant
(McDermott & McGee, LLP, attorneys; William
Hahn, on the briefs).
Jason Tenenbaum argued the cause for
respondent.
PER CURIAM
Plaintiff Allstate appeals from the trial court's June 2,
2017 order denying its order to show cause seeking to confirm an
arbitrator's Personal Injury Protection ("PIP") subrogation award
in its favor, and granting the motion of defendant Global Liberty
Insurance Company of New York ("Global") to dismiss the complaint.
Allstate also appeals from the denial of its motion for
reconsideration. Allstate argues that the court should have
granted its application for two principal reasons. First, Allstate
claims that since the arbitration award was not vacated by Global
within 120 days by summary action filed in the Superior Court of
New Jersey, the award must be confirmed and entered as a judgment.
Second, Allstate claims that the New York action instituted by
Global was procedurally and substantively defective and should
have no binding effect.
Having reviewed Allstate's arguments in light of the record
and applicable legal principles, we reverse and remand.
I.
The dispute between the parties arose out of an automobile
accident that occurred on I-78 westbound in Newark on November 28,
2012, according to the New Jersey Crash Investigation Report.1 As
a result of this rear-end collision case, Allstate was required
to pay PIP benefits in the amount of $208,622.70 to its insured,
Marsha Abramson.
1
The complaint alleges that the accident occurred in Somerville.
The New Jersey Crash Investigation Report indicated that the State
Police from the Somerville station investigated the accident.
2 A-4956-16T2
On December 3, 2014, Allstate filed a complaint in the
Superior Court of New Jersey, Morris County, against Global and
the tortfeasor, Nendi Chen, asserting PIP subrogation rights
pursuant to N.J.S.A. 39:6A-9.1, which governs an insurer's right
to recover PIP benefits paid involving vehicular accidents in New
Jersey.2 Allstate argued that Chen was operating a "taxicab" or
"limousine" service and therefore, was required to maintain $1.5
million dollars in coverage pursuant to N.J.S.A. 48:16-14.
A judge3 ordered the parties to binding arbitration pursuant
to an inter-company agreement, with Arbitration Forums, Inc., in
accordance with N.J.S.A. 39:6A-9.1(b). The judge also dismissed
Allstate's complaint, without prejudice. Global was duly served
with process, and participated in oral argument on October 23,
2015, when the order was entered. The judge noted on the order
in handwriting, "All subject to N.J.S.A. 39:6A-9.1(b)." Global
did not appeal from this order. Therefore, it is final.
2
Abramson settled her personal injury case against Chen for her
$100,000.00 liability limit with Global. This matter was filed
in the Superior Court in Essex County under Docket Number ESX-L-
474-14.
3
Judge Robert J. Brennan entered the October 23, 2015 order
dismissing Allstate's complaint and compelling the parties to
arbitrate before Arbitration Forums, Inc. A different judge ruled
on the present motion.
3 A-4956-16T2
Following resolution of the underlying personal injury matter
against Chen, Allstate and Global proceeded to binding arbitration
in Parsippany, pursuant to the rules of Arbitration Forums, Inc.
On June 10, 2016, the arbitrator issued a written opinion and
concluded that, "Based on all the evidence submitted, it is more
likely than not that the [tortfeasor's] vehicle is a limousine and
not a taxi." This distinction is a significant one because at the
time, the required liability coverage for bodily injury or death
under New Jersey law was $1.5 million dollars for a limousine, as
per N.J.S.A. 48:16-14, whereas a taxi4 only required $35,000 as
per N.J.S.A. 48:16-3. Global argued that under New York Taxi and
Limousine Regulations, there is no such distinction. Relying upon
the evidence submitted, the arbitrator determined that,
"Photographs of the vehicle show that it is a Toyota Highlander
which is gray in color. There are no visible markings on the
vehicle identifying the vehicle as a taxi."
With respect to coverage, the arbitrator found, "The policy
issued to [Chen] is in the name of an individual and not a business
although it is a business policy . . . [Chen] has not provided any
type of licensing information such as a taxi license or number."
4
A taxi is referred to as an "autocab" in N.J.S.A. 48:16-1.
4 A-4956-16T2
In his conclusion, the arbitrator found that "[s]ince the
vehicle appears to be more akin to a limousine than a taxi, it
should have had coverage for a limousine, which is $1.5 million.
[Chen's] policy is [consequently] reformed to include such
coverage in accordance with New York and New Jersey law,
specifically [11] N.Y.C.R.R. 60-1.1(e) and [N.J.S.A.] 48:16-14."
Allstate was found to have proven its damages in the amount
of $208,622.70 in PIP payments. The arbitrator noted that Global
did not dispute the amount of damages but only the allegation that
its insured was operating a "limousine" service.
Global did not pay the award or move to vacate the award
within 120 days as required by N.J.S.A. 2A:23B-23, which provides
as follows:
A summary action pursuant to this section
shall be filed within 120 days after the
aggrieved party receives notice of the award
pursuant to section 19 of this act or within
120 days after the aggrieved party receives
notice of a modified or corrected award
pursuant to section 20 of this act, unless the
aggrieved party alleges that the award was
procured by corruption, fraud, or other undue
means, in which case the summary action shall
be commenced within 120 days after the ground
is known or by the exercise of reasonable care
would have been known by the aggrieved party.
[(Emphasis added).]
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Instead, Global filed a notice of petition to vacate the
award in the Supreme Court of New York. No plausible explanation
was provided by Global as to why it did not move to vacate the
award in the Superior Court of New Jersey and instead brought
proceedings in New York.
As Global admits, counsel for Allstate was not served with
the petition and instead, Global's counsel "mailed" the petition
to "Allstate offices" located in New York, through the New York
State Department of Financial Services. Global defended its manner
of service by asserting that "[t]he underlying New York action was
a 'new' proceeding seeking to vacate an arbitral matter and,
therefore, service only needed to be effectuated on the entity
sued." In an effort to rationalize his actions, counsel for Global
asserted that he did not serve Allstate's New Jersey counsel
because insurance companies in "his experience" sometimes "switch"
attorneys in various proceedings.
Allstate argues that, either pursuant to Rule 1:6-3(c) of
our Rules of Court or N.Y. C.P.L.R. §§ 7501 and 7506(d), service
was mandated to be made upon counsel of record and not solely the
corporate entity. No courtesy copy of the petition was sent to
counsel for Allstate, either.
On August 30, 2016, the New York court conducted a "Special
Proceeding", and entered a final decision and order vacating the
6 A-4956-16T2
New Jersey PIP arbitration award, by default. The New York court
was persuaded by Global that Chen was not operating a limousine
under New York State regulations, thereby dispensing with her need
to have such [greater level of] insurance. Allstate did not appear
in the New York case or oppose the petition because it claims that
service was improvidently made upon an Allstate "entity"
recognized under New York law, despite the fact that the real
party in interest was, "Allstate New Jersey Insurance Company,"
which is a different entity. Thus, Allstate argues that it was
denied procedural and substantive due process of law.
Allstate thereafter filed another complaint, by way of an
order to show cause, in the Superior Court in Morris County
seeking: to enforce the arbitration award and enter judgment
thereon; to declare the order entered in New York be null and
void; to be awarded counsel fees pursuant to N.J.S.A. 2A:23B-25;
and post-judgment interest. After a courtesy copy was served upon
counsel for Global, counsel for Allstate claims that he was then
informed, for the first time, that Global had previously moved to
vacate the arbitration award in New York. Global's failure to
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vacate the award within 120 days of entry was "fatal", according
to Allstate.5
The second motion judge scheduled oral argument on November
28, 2016. Meanwhile, Global filed a notice of removal to federal
court on November 17, 2016. On December 16, 2016, Chief Judge
Jose Linares of the United States District Court of New Jersey
remanded the matter back to the Superior Court in Morris County,
on the basis of lack of diversity of citizenship and subject matter
jurisdiction under 28 U.S.C. § 1332, because Allstate and Global
are both citizens of Illinois, and other states. Judge Linares
specifically identified Allstate as, "Allstate New Jersey," in his
order. Global never appealed Judge Linares' remand decision.
On February 23, 2017, the second motion judge entered an
order scheduling oral argument on May 5, 2017. On March 10, 2017,
Global filed a motion to dismiss Allstate's complaint. Oral
argument was held on May 5, 2017, and the judge entered an order
on June 2, 2017 denying Allstate's order to show cause and request
to enter the arbitration award as a judgment.
In her statement of reasons, the judge expressed "serious
concerns" about the "questionable procedures" undertaken by Global
5
It is noteworthy that the same attorneys have been involved in
this matter at all levels since its inception.
8 A-4956-16T2
to vacate the award in New York. The judge noted that the parties
went to "binding" arbitration to adjudicate the PIP subrogation
claim. In failing to serve counsel for Allstate with the New York
petition, the judge disapproved of the "sharp practice" exercised
by counsel for Global, and she noted, more than once, her "serious
concerns about the procedures used by [Global] to vacate the
arbitration award entered in New Jersey in a different state."
She further questioned the propriety of Global's legal
machinations, and pointed out that she was "troubled" by the
process "from an ethical and professional standpoint." The judge
also found that Allstate's first complaint had been withdrawn,
without prejudice, by consent, thereby vitiating any
jurisdictional objection by Global.
Notwithstanding her criticisms of Global's actions, the judge
determined that the order entered in New York must be given "full
faith and credit." The judge also determined that "res judicata
principles controlled", and, "prohibit this court from confirming
the arbitration award entered in New Jersey at this time, since a
judgment was entered in this matter in the State of New York."
The judge therefore dismissed Allstate's complaint without
prejudice, and anticipated, by way of dicta, that Allstate would
move to vacate default and set aside the decision rendered in New
York, and revisit the merits of its application in Morris County
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Superior Court. Allstate asserts it has no intention of doing so
because jurisdiction lies in the Superior Court in New Jersey, and
there is no "dual" jurisdiction in New York. Thereafter, Allstate
filed a motion for reconsideration, which was denied. Its appeal
was filed in the interim.
II.
We begin by restating fundamental principles governing PIP
arbitration. Our Court has recognized that consensual arbitration
is a favored means of resolving disputes. Martindale v. Sandvik,
Inc., 173 N.J. 76, 84 (2002). "Our courts have long noted our
public policy that encourages the 'use of arbitration proceedings
as an alternative forum.'" Wein v. Morris, 194 N.J. 364, 375-76
(2008) (citation omitted). Arbitration is chosen to avoid
litigation and judiciary involvement, and the role that the
judiciary should aim at is to have no role at all. Perini Corp.
v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 519 (1992).
Embracing this policy, the No-Fault Act's reimbursement
provision, Section 9.1, creates a statutory right of reimbursement
for PIP insurers against certain tortfeasors by allowing an insurer
who pays PIP benefits to:
recover the amount of payments from any
tortfeasor who was not, at the time of the
accident, required to maintain personal injury
protection or medical expense benefits
coverage, other than for pedestrians, under
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the laws of this State . . . In the case of
an accident occurring in this State involving
an insured tortfeasor, the determination as
to whether an insurer . . . is legally entitled
to recover the amount of payments and the
amount of recovery, including the costs of
processing benefit claims and enforcing rights
granted under this section, shall be made
against the insurer of the tortfeasor, and
shall be by agreement of the involved parties
or, upon failing to agree, by arbitration.
[N.J.S.A. 39:6A-9.1 (emphasis added).]
There are no grounds to debate that the location of the
accident is the controlling factor for determining the venue of
the arbitration:
In the case of an accident occurring in this
State involving an insured tortfeasor, the
determination as to whether an insurer, health
maintenance organization or governmental
agency is legally entitled to recover the
amount of payments and the amount of recovery,
including the costs of processing benefit
claims and enforcing rights granted under this
section, shall be made against the insurer of
the tortfeasor, and shall be by agreement of
the involved parties or, upon failing to
agree, by arbitration.
[Ibid. (emphasis added).]
Hence, New Jersey is and continues to be, the forum state, and had
original jurisdiction in this matter.
Thus, the No-Fault Act confirmed jurisdiction of the PIP
arbitration in New Jersey, since the accident occurred here, and
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it was so ordered by a judge of this State, and remanded back to
our State court by a federal judge.
III.
We consider first Allstate's argument that the judge should
have confirmed the award and entered it as a judgment, as Global
did not move to vacate it summarily within 120 days. Allstate's
motion for confirmation was filed "as of right" pursuant to
N.J.S.A. 2A:23B-23(a)(3), which authorizes same from "an order
confirming or denying confirmation of an award." Allstate stresses
that the award "remains valid," and that Global's failure to vacate
the award within 120 days of entry is "fatal."
Allstate argues that the judge erred in relying upon the
"full faith and credit clause", U.S. Const. art. IV, § 1, and
determining that the New York order is entitled to res judicata
principles. We agree.
"The full faith and credit clause requires that a judgment
entered in one state be respected and enforced by the courts of
another state provided that the first state had jurisdiction over
the subject matter and the parties." Arnold, White & Durkee,
Prof'l Corp. v. Gotcha Covered, Inc., 314 N.J. Super. 190, 194
(App. Div. 1998) (citing Nevada v. Hall, 440 U.S. 410, 421 (1979)).
New Jersey is the "first" state under this analysis, and not
New York, because the proceedings were properly commenced here.
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The goal of the clause is to integrate the states into a unified
nation in which a litigant could enforce a valid claim, regardless
of that claim's goal. Id. at 195. Global's surreptitious tactic
of filing the petition in New York is in derogation of this
constitutional mandate.
Allstate's argument that it was denied due process is
supported by our jurisprudence, in tandem with the No-Fault Act.
"A judgment entered in violation of due process of law is not
entitled to full faith and credit." Hupp v. Accessory Distribs.
Inc., 193 N.J. Super. 701, 708 (App. Div. 1984). In essence,
Global "collaterally attacked" the arbitration decision in the
"second state" (New York). Id. at 709. We cannot condone Global's
actions.
New Jersey has long adhered to "the general rule that the
court which first acquires jurisdiction has precedence in the
absence of special equities." Yancoskie v. Del. River Port Auth.,
78 N.J. 321, 324 (1978); see also O'Loughlin v. O'Loughlin, 6 N.J.
170, 179 (1951). Special equities include "great hardship and
inconvenience" to one party. Sensient Colors, Inc. v. Allstate
Ins. Co., 193 N.J. 373, 387 (2008). The first-filed rule, which
has deep roots in our federal system, has been recognized by many
courts. See e.g., Riggs v. Johnson Cty., 73 U.S. 166, 196 (1868)
("[T]he court that first obtains possession of the controversy,
13 A-4956-16T2
or of the property in dispute, must be allowed to dispose of it
without interference or interruption from the coordinate court");
see also First Midwest Corp. v. Corp. Fin. Assocs., 663 N.W.2d
888, 890-91 (Iowa 2003); Medtronic, Inc. v. Advanced Bionics Corp.,
630 N.W.2d 438, 448-49 (Minn. Ct. App. 2001). Our Court has
recognized the "first-filed rule" to be . . . "the guiding
principle by which each state's courts decide the appropriate
choice of forum when substantially similar actions are filed in
more than one jurisdiction." Sensient Colors, Inc., 193 N.J. at
397.
Under the first-filed rule, a state court ordinarily will
stay or dismiss a civil action in deference to an already pending,
substantially-similar lawsuit in another state, unless compelling
reasons dictate that the second state retain jurisdiction.
O'Loughlin, 6 N.J. at 179.
We are unpersuaded by Global's argument that it had grounds
to petition the New York Court for relief based upon the affidavit
of its representative, Mr. Gutierrez, stating that "the $100,000
[i]nsurance policy was paid to Ms. Abramson and no further proceeds
remained on the insurance policy." That fact concerning the
complaint against the tortfeasor in Essex County does not alter
the fact that Allstate's PIP subrogation action in Morris County
was filed before the New York complaint.
14 A-4956-16T2
Even more problematic is the fact that Global never challenged
jurisdiction, other than its removal application, in New Jersey.
Jurisdiction "may not be raised in a second state in an action to
enforce the judgment rendered in the first state." Ibid. (citing
Underwriters Nat'l Assurance Co. v. N.C. Life & Accident & Health
Ins. Guar. Ass'n, 455 U.S. 691, 706 (1982)). We see no basis to
have another state review a statutory and court-sanctioned
arbitration which took place here in New Jersey.
Global has failed to meet its burden of establishing
"special equities," such as forum non conveniens. The accident
occurred on Route 78 in New Jersey, and the No-Fault statute
mandated PIP arbitration in this State, without prejudice.
Moreover, an "injustice would be perpetrated" upon Allstate, and
"no hardship, prejudice, or inconvenience" would inure to Global.
Ibid.The motion judge misapplied res judicata principles. Res
judicata applies when:
(1) the judgment in the prior action must be
valid, final, and on the merits; (2) the
parties in the later action must be identical
to or in privity with those in the prior
action; and (3) the claim in the later action
must grow out of the same transaction or
occurrence as the claim in the earlier one.
[McNeil v. Legislative Apportionment Comm'n,
177 N.J. 364, 395 (2003) (quoting Watkins v.
15 A-4956-16T2
Resorts Int'l Hotel & Casino, Inc., 124 N.J.
398, 412 (1991) (citations omitted)).]
Evaluated under full faith and credit and due process standards,
we conclude that the New York proceeding was invalid, and
Allstate's motion to enforce the arbitration award is not barred
by res judicata.
Further, the entire controversy doctrine applies to multi-
forum litigation. Global's New York action asserted an identical
set of facts as the New Jersey matter. Therefore, the entire
controversy applies to preclude its subsequently-filed claims in
New York. Allstate New Jersey Ins. Co. v. Cherry Hill Pain &
Rehab. Inst., 389 N.J. Super. 130, 140 (App. Div. 2006) (citations
omitted).
In applying this analytical framework, we conclude that both
cases involve the same parties, the same claims, and the same
legal issues. Therefore, Allstate was denied due process, and
jurisdiction must be retained in New Jersey.
IV.
Turning now to Allstate's second argument relating to
procedural and substantive defects, Rule 1:5-1 provides that: "In
all civil actions, unless otherwise provided by rule or court
order, orders, judgments, pleadings subsequent to the original
complaint, written motions . . . shall be served upon all attorneys
16 A-4956-16T2
of record in the action." The purpose of this rule is to prevent
"prejudice in taking further steps in the litigation." See
Pressler & Verniero, Current N.J. Court Rules, cmt. 1 on R. 1:5-1
(2018) (emphasis added). By serving an Allstate entity in New
York by mail, Global was derelict, and its actions do not withstand
judicial scrutiny.
N.J.S.A. 2A:23B-7 dictates in subsection (f) that:
If a party commences a summary action to order
arbitration, the court on just terms shall
stay any judicial proceeding that involves a
claim alleged to be subject to the arbitration
until the court renders a final decision
pursuant to this section.
An order that compels (or denies) arbitration is deemed
"final" for purposes of appeal, but the trial court retains
jurisdiction to address other issues. GMAC v. Pittella, 205 N.J.
572, 586 (2011). Thus, Global's argument is conspicuously flawed
since New Jersey continues to have exclusive jurisdiction over
this controversy, since a final order has yet to be entered.
V.
In sum, we conclude that the judge incorrectly applied the
doctrines of res judicata and full faith and credit,
notwithstanding her astute comments as to procedural
irregularities. We thus reverse and vacate the June 2, 2017 order
and reinstate Allstate's complaint. We specifically remand for a
17 A-4956-16T2
determination as to whether the arbitration award should be
confirmed and judgment entered thereon, modified, or vacated in
accordance with N.J.S.A. 2A:23B-23.6
Allstate's argument that its motion for reconsideration was
not adjudicated is moot and lacks sufficient merit to warrant
discussion in a written opinion. R. 2:11-3(e)(1)(E).
Reversed and remanded. We do not retain jurisdiction.
6
During the appellate oral argument, counsel for Global did not
object to such a remand, in the event we were to conclude that the
New York court lacked jurisdiction.
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