NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-4443-14T4
AHS HOSPITAL CORPORATION,
Plaintiff-Appellant,
v.
MAINARDI MANAGEMENT COMPANY, LP and UNION MEDICAL PARK, LLC,
Defendants-Respondents.
_______________________________
Argued January 24, 2017 – Decided July 14, 2017
Before Judges Espinosa and Guadagno.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1407-14.
Katelyn E. Cutinello argued the cause for appellant (Bubb, Grogan & Cocca, LLP, attorneys; Ms. Cutinello, of counsel and on the briefs).
Michael J. Palma argued the cause for respondents (Law Offices of Viscomi & Lyons, attorneys; Mr. Palma, on the brief).
PER CURIAM
Plaintiff AHS Hospital Corporation (AHS) appeals from the dismissal of a complaint it filed in Morris County to seek
indemnification and defense costs incurred in an action filed,
settled and dismissed in Essex County. For the reasons that
follow, we affirm.
I.
AHS leased premises from defendant Union Medical Park, LLC
(Union) pursuant to a lease agreement in which Union agreed to
indemnify and defend AHS against personal injury claims
"occasioned wholly or in part by any act or omission of" Union or
its agents. In the underlying slip and fall lawsuit filed against
them in Essex County, Rodriguez v. Mainardi Management, Co., L.P.,
et al., No. ESX-L-3914-11,1 AHS and Union asserted cross-claims
against each other. AHS sought contribution, indemnification
generally and specifically pursuant to the lease agreement, as
well as a judgment for attorneys' fees and defense costs it would
incur in the Rodriguez lawsuit.
The Rodriguez action was submitted to non-binding arbitration
in April 2013, resulting in the following: (1) Rodriguez's damages
were assessed at $20,000, not including $6,123.44 for medical
expenses, (2) Rodriguez was found fifty percent (50%) at fault;
(3) Mainardi was found fifty percent (50%) at fault; and (4) no
1 It was alleged in the Rodriguez complaint that defendant Mainardi Management Company is Union's management company.
2 A-4443-14T4 fault was found as to AHS and Union. AHS notified defendants of
its intent to seek indemnification pursuant to the lease in the
event the Rodriguez action proceeded to trial. The Rodriguez
action settled for $13,000, an amount paid entirely by defendants'
insurance carrier.
Within days of the settlement, the trial judge in Essex County
entered an order stating the Rodriguez action was settled. The
order is silent as to the cross-claims filed by AHS and defendants
against each other.
In October 2013, defendants moved to reinstate their cross-
claims against AHS. AHS did not file a similar motion to seek
such relief. It subsequently opposed defendants' motion and cross-
moved for attorneys' fees and costs on the basis that, under the
relevant lease provisions, defendants were responsible for the
condition which caused Rodriguez's slip-and-fall and were required
to indemnify and defend AHS in the Rodriguez action.
A voluntary stipulation of dismissal with prejudice was filed
that dismissed Rodriguez's claims but maintained defendants'
cross-claims against AHS. The stipulation, which was silent as
to AHS's claims against defendants, was executed by Rodriguez and
defendants but not by AHS.
Following oral argument on defendants' motion and AHS's
cross-motion, the Essex County trial judge denied both motions by
3 A-4443-14T4 orders dated December 6, 2013. The order on defendants' motion
denied their request to reinstate their cross-claims with
prejudice. The order denying AHS's motion for attorneys' fees and
costs did not specify that it was entered with prejudice. AHS did
not move for reconsideration or file a notice of appeal from this
order.
Approximately six months later, AHS filed the instant suit
in Morris County (the AHS suit). AHS alleged breach of contract,
contractual and common law indemnification claims, specifically
seeking reimbursement for attorneys' fees and costs incurred as a
result of the Rodriguez action. Defendants filed an answer,
denying the allegations.
Defendants moved to dismiss AHS's complaint as barred by the
December 6, 2013 order in the Rodriguez action under the entire
controversy doctrine and res judicata. In response, AHS argued
that the entire controversy doctrine did not bar its complaint
because the claims it raised in the AHS suit were not addressed
on their merits and had not accrued at the time of the Rodriguez
action. AHS also argued that res judicata did not bar its
complaint because (1) the December 6, 2013 decision in the
Rodriguez action did not address the merits of its claims and was
not made with prejudice; (2) there was no identity of issues or
cause of action between the Rodriguez action and the AHS suit; and
4 A-4443-14T4 (3) defendants were not prejudiced by the filing of the AHS suit.
Following oral argument, the trial judge in Morris County
entered an order dismissing AHS's complaint with prejudice. The
judge recognized that the December 6, 2013 decision was not made
on "a motion to reinstate [AHS's] cross claim" and the record was
sparse regarding the Essex County judge's consideration of AHS's
motion for attorney's fees. Still, he reasoned it could be
inferred that the Essex County trial judge had considered
reinstating AHS's cross-claim and therefore, the decision should
be viewed as one on the merits, warranting the application of res
judicata to bar the AHS suit in Morris County.
In its appeal, AHS argues the trial court erred in dismissing
its complaint on res judicata grounds because: the trial judge in
Essex County did not enter a final judgment on the merits of the
claims AHS presented in the instant suit; its claims against
defendant had not accrued; there was no identity of issues, claims
and causes of action in the Rodriguez action and equity requires
that its contractual and indemnity claims be heard fully and fairly
on the merits. AHS also argues its claims are not barred by the
entire controversy doctrine because there was no ruling on the
merits of its claims against defendants in the Rodriguez action.
We agree with AHS that it was error to apply the doctrine of
res judicata to dismiss the instant lawsuit. However, "appeals
5 A-4443-14T4 are taken from orders and judgments and not from opinions, oral
decisions, informal written decisions, or reasons given for the
ultimate conclusion." Do-Wop Corp. v. City of Rahway, 168 N.J.
191, 199 (2001). Our review of legal questions, such as the
application of res judicata, collateral estoppel and the entire
controversy doctrine, is de novo. Int’l Union of Operating Eng'rs
Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372, 386
(2007). Because our review of the record supports the dismissal
of AHS's complaint under both collateral estoppel and the entire
controversy doctrine, we affirm.
II.
Res judicata, or claim preclusion, embodies "the principle
that public policy and welfare require a definite end to litigation
when each of the parties has had a full, free and untrammeled
opportunity of presenting all of the facts pertinent to the
controversy." McNeil v. Legislative Apportionment Comm'n, 177
N.J. 364, 399-400 (2003) (citation omitted), cert. denied, 540
U.S. 1107, 124 S. Ct. 1068, 157 L. Ed. 2d 893 (2004). By barring
subsequent litigation, this doctrine "insulates courts from the
inefficiency of relitigating claims that have already been
resolved, thereby protecting the integrity of judgments and
preventing the harassment of parties." Bondi v. Citigroup, Inc.,
423 N.J. Super. 377, 422 (App. Div. 2011), certif. denied, 210
6 A-4443-14T4 N.J. 478 (2012).
There are three requirements that must be satisfied for res
judicata to apply:
(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.
[Ibid. (quoting Watkins v. Resorts Int'l Hotel & Casino, 124 N.J. 398, 412 (1991)).]
The first of these criteria is not satisfied here. The
December 6, 2013 order and the reasoning proffered in the judge's
oral decision did not address the merits of AHS's cross-claims.
Procedurally, AHS's cross-claims were dismissed by virtue of the
order that dismissed the Rodriguez action. AHS had not filed a
motion to reinstate its cross-claim or a motion for reconsideration
of the June 17, 2013 dismissal order pursuant to Rule 4:49-2. It
was perhaps not unreasonable for the trial judge in Morris County
to infer that the Essex County judge had considered the merits of
reinstating AHS's cross-claim when he denied the cross-motion for
attorneys' fees. However, in the absence of such a motion or any
identifiable statement in the record to support that inference,
we are constrained to conclude that the inference is based upon
speculation rather than upon a record that reveals AHS had a full
7 A-4443-14T4 and fair hearing on its cross-claims prior to the December 6, 2013
order. See also Walker v. Choudhary, 425 N.J. Super. 135, 154
(App. Div.), certif. denied, 211 N.J. 274 (2012). It was,
therefore, error to apply the doctrine of res judicata here.
III.
The corollary of res judicata – which bars the relitigation
of a claim – is collateral estoppel, which bars the relitigation
of an issue. Unlike res judicata, "issue preclusion can result
from a judgment even if that judgment was not rendered on the
merits." Watkins, supra, 124 N.J. at 422. Collateral estoppel
bars the relitigation of an issue that has been adjudicated in a
prior litigation if:
(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.
[Bondi, supra, 423 N.J. Super. at 423 (quoting First Union Nat'l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 352 (2007)).]
Under the first prong, determining whether the issues are
identical requires consideration of
[1] whether there is substantial overlap of evidence or argument in the second proceeding;
8 A-4443-14T4 [2] whether the evidence involves application of the same rule of law; [3] whether discovery in the first proceeding could have encompassed discovery in the second; and [4] whether the claims asserted in the two actions are closely related.
[First Union Nat'l Bank, supra, 190 N.J. at 353.]
AHS's cross-motion for attorneys' fees and costs in the
Rodriguez action raised two main arguments: (1) pursuant to section
7.01(a) of the lease,2 defendants were responsible for the
condition that led to Rodriguez's injury, and (2) pursuant to
Section 8.05(b) of the Lease,3 defendants were required to
2 Section 7.01(a) of the lease, "Responsibilities of Landlord," provides, in relevant part:
[Union] agrees, at no additional cost to [plaintiff], to repair, maintain and, if necessary, replace: (i) the Common Areas, including, without limitation, cleaning and sweeping the Common Areas . . . and the common utility systems (including plumbing, electricity and lighting) serving the Common Areas, . . . and personnel to provide and supervise such services, and (ii) . . . and all operating systems serving HEALTH PARK (as opposed to solely the Leased Premises), including . . . plumbing . . . . 3 Section 8.05(b) of the lease, "Indemnification," provides:
[Union] shall indemnify, defend and save [plaintiff] harmless from and against any and all claims, actions, damages, liability and expense in connection with . . . personal injury . . . arising from or out of any
9 A-4443-14T4 indemnify and defend AHS in the Rodriguez action, thereby making
them liable for AHS's attorneys' fees and costs. In support, AHS
cited the deposition testimony of Rodriguez and a Mainardi
representative as well as the lease. The claims AHS alleged in
the instant suit essentially rely upon the same arguments,
evidence, and rule of law. Although the breach of contract claim
additionally requires a determination that defendants breached the
lease by causing the condition that led to Rodriguez's injury and
refusing to indemnify or defend AHS in the Rodriguez action, it
seeks the same relief pursuant to the same lease provision as
AHS's cross-motion in the Rodriguez action. Thus, the cross-
motion in the Rodriguez action and the claims in the AHS suit
implicate identical issues.
Under the second prong, an issue is "actually litigated" if
"there was a full and fair opportunity to litigate the issue" in
the prior suit. Perez v. Rent-A-Ctr., Inc., 186 N.J. 188, 199
(2006) (citation omitted), cert. denied, 549 U.S. 1115, 127 S. Ct.
occurrence in, upon or at the Property (excluding the Leased Premises), or occasioned wholly or in part by any act or omission of [Union], its agents, contractors, employees, servants, lessees or concessionaires, unless caused by the gross negligence or willful misconduct of [plaintiff] or its agents or servants.
10 A-4443-14T4 984, 166 L. Ed. 2d 710 (2007). In other words, an issue that "is
properly raised, by the pleadings or otherwise, and is submitted
for determination, and is determined" is considered to be "actually
litigated." Allesandra v. Gross, 187 N.J. Super. 96, 105-06 (App.
Div. 1982) (citation omitted). By contrast, an issue was not
found to be "actually litigated" where, although it was raised,
"[n]o testimony was taken or evidence offered in the [prior]
proceeding on this issue and no decision with respect thereto was
ever rendered by the [prior] judge." Id. at 106-07.
The very cross-motion filed by AHS in the Rodriguez action
raised the issues regarding the application of the lease provisions
to the Rodriguez action, i.e., whether defendants were responsible
for Rodriguez's injury; whether defendants were required to
indemnify and defend AHS in the Rodriguez action, and whether they
were required to reimburse AHS for incurred attorneys' fees and
costs. AHS deposed Carleen Evans, Building Supervisor for Mainardi
Management Company and Union, on these issues, relied upon that
discovery and litigated these issues in a letter brief and at oral
argument. The oral decision and December 6, 2013 order constituted
determinations of the issues raised by AHS.
Under the third prong, collateral estoppel's finality
requirement "is 'less stringent' than the finality requirement for
res judicata." In re Liquidation of Integrity Ins. Co./Celotex
11 A-4443-14T4 Asbestos Tr., 214 N.J. 51, 68 (2013) (citation omitted).
"[C]ollateral estoppel applies whenever an action is 'sufficiently
firm to be accorded conclusive effect.'" Hills Dev. Co. v.
Township of Bernards, 103 N.J. 1, 59 (1986) (quoting Restatement
(Second) of Judgments § 13 (1982)). On the other hand, "preclusion
should be refused if the decision was avowedly tentative."
Restatement (Second) of Judgments § 13 comment g (1982). "[T]hat
the parties were fully heard, that the court supported its decision
with a reasoned opinion, that the decision was subject to appeal
or was in fact reviewed on appeal, are factors supporting the
conclusion that the decision is final for the purpose of
preclusion." Ibid.
The December 6, 2013 order does not suffer from ambiguity as
to whether AHS's motions were denied. It cannot be denied that
the oral decision supporting the December 6, 2013 order lacked a
clear statement of reasons as required by Rule 1:7-4. That
deficiency does not, however, preclude a finding that the finality
prong has been satisfied. AHS had the opportunity to file a motion
for clarification or reconsideration and certainly had the right
to appeal from the order, all options it elected not to pursue.
"Correcting flawed reasoning is the subject of direct appeals, and
collateral attacks which 'undercut the decisional process' are
prohibited." Velasquez v. Franz, 123 N.J. 498, 512 (1991) (quoting
12 A-4443-14T4 Restatement (Second) of Judgments § 71 comment e (1982)).
There is no real dispute that the fourth and fifth prongs are
satisfied. Clearly, the determination of whether the lease held
defendants responsible for causing Rodriguez's injury and required
defendants to indemnify and defend AHS in the Rodriguez action was
essential to AHS's cross-motion in the Rodriguez action seeking
attorneys' fees and costs pursuant to the lease. Similarly, it
is clear that AHS, the party collateral estoppel is asserted
against in the AHS Suit, was a party in the Rodriguez action.
However, "because it is an equitable doctrine, even if all
five elements coalesce, it 'will not be applied when it is unfair
to do so.'" Allen v. V & A Bros., Inc., 208 N.J. 114, 138 (2011)
(quoting Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521-22
(2006)). Courts consider the following factors in making a
fairness determination:
The factors favoring issue preclusion include: conservation of judicial resources; avoidance of repetitious litigation; and prevention of waste, harassment, uncertainty and inconsistency. Those factors disfavoring preclusion include: the party against whom preclusion is sought could not have obtained review of the prior judgment; the quality or extent of the 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.
13 A-4443-14T4 [Olivieri, supra, 186 N.J. at 523 (citation omitted).]
There are no factors that militate against the application
of collateral estoppel here. There was no obstacle to a review
of the December 6, 2013 decision, either by a motion for
reconsideration or direct appeal. It was not merely foreseeable
but apparent by the assertion of the cross-claims in the Rodriguez
action that AHS was aware of the issues raised by the lease
provisions. Because both suits were brought in Superior Court,
there was no difference in procedures that precluded AHS from
obtaining full relief in the Rodriguez action. In short, there
was nothing in the procedures that denied AHS a full and fair
adjudication of its claims in the Rodriguez action.
The factors favoring the application of collateral estoppel
are prevalent. Because the issues implicated in both suits are
identical, allowing the AHS suit to proceed would mean that the
same witnesses will be deposed and the same documents will be
requested in discovery, causing repetitious litigation, judicial
waste, and a severe imposition on the doctrine's intended benefits
of "avoidance of duplication" and "reduction of unnecessary
burdens of time and expenses." N.J. Div. of Youth & Family Servs.
v. R.D., 207 N.J. 88, 115 (2011) (quoting Olivieri, supra, 186
N.J. at 522).
14 A-4443-14T4 Therefore, the legal requirements for the application of
collateral estoppel have been met and the equities weigh in favor
of its application.
IV.
The purpose of the entire controversy doctrine is threefold:
"(1) the need for complete and final disposition through the
avoidance of piecemeal decisions; (2) fairness to parties to the
action and those with a material interest in the action; and (3)
efficiency and the avoidance of waste and the reduction of delay."
Wadeer v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 605 (2015) (quoting
DiTrolio v. Antiles, 142 N.J. 253, 267 (1995)).
Codifying the entire controversy doctrine, Rule 4:30A states,
"Non-joinder of claims required to be joined by the entire
controversy doctrine shall result in the preclusion of the omitted
claims to the extent required by the entire controversy
doctrine. . . ." It is "a remedy of last resort." Hobart Bros.
Co. v. Nat’l Union Fire Ins. Co., 354 N.J. Super. 229, 244 (App.
Div.) (quoting Vision Mortg. Corp. v. Chiapperini, 156 N.J. 580,
584 (1999)), certif. denied, 175 N.J. 170 (2002). A subsequent
claim will be barred by the entire controversy doctrine "only when
a prior action based on the same transactional facts has been
tried to judgment or settled," Allstate N.J. Ins. Co. v. Cherry
Hill Pain & Rehab. Inst., 389 N.J. Super. 130, 140 (App. Div.
15 A-4443-14T4 2006) (citation omitted), certif. denied, 190 N.J. 254 (2007),
unless the claim was "either unknown, unarisen or unaccrued at the
time of the original action," K-Land Corp. No. 28 v. Landis
Sewerage Auth., 173 N.J. 59, 72 (2002) (citation omitted).
It is undisputed that the claims in the AHS suit involve the
same transactional facts as in the Rodriguez action. AHS argues,
however, that the entire controversy doctrine does not apply
because its claims did not accrue until the Rodriguez court held
defendants liable for Ms. Rodriguez's damages under the lease.
This argument lacks merit. Although varying slightly in nature,
the claims asserted in the instant suit seek indemnification and
reimbursement of attorneys' fees and costs.
Although a defendant's indemnification claim "begins to
accrue when the plaintiff recovers a judgment against it[,] [u]nder
the entire controversy doctrine, if those claims are known, they
should be asserted in the original action." Mettinger v. Globe
Slicing Mach. Co., 153 N.J. 371, 387 (1998), (citation omitted).
In fact, Rule 4:7-5, which governs cross-claims, was specifically
amended in 1979 "to require defendants to assert any cross-claims
for . . . indemnity which they may have against any other party
in the action itself despite the fact that the cause of action
for . . . indemnity does not technically accrue until payment of
the judgment by that defendant." Buck v. MacDonald, 300 N.J.
16 A-4443-14T4 Super. 158, 161 (App. Div. 1997) (quoting Pressler, Current N.J.
Court Rules, comment 2 on R. 4:7-5 (1997)). The fact that AHS
pled its cross-claims for indemnification in the Rodriguez action
firmly establishes its knowledge of the factual and legal basis
for these claims during that litigation, rendering them subject
to the entire controversy doctrine.
We acknowledge that a plaintiff whose claim is barred "must
have had a fair and reasonable opportunity to have fully litigated
her claim in the prior action." Oliver v. Ambrose, 152 N.J. 383,
396 (1998). However, the dismissal of an action without prejudice
does not preclude the application of the doctrine. Mystic Isle
Dev. Corp. v. Perskie & Nehmad, 142 N.J. 310, 333 (1995). "In
certain circumstances, . . . the principles underlying the entire
controversy doctrine may mandate that a suit be barred even though
it stems from the dismissal of a prior action without prejudice."
Ibid. The subsequent action may be barred where a plaintiff (1)
"manipulates the judicial system in order to fragment litigation";
(2) "has failed to avail himself of opportunities to pursue his
remedies in the first proceeding"; and (3) "has deliberately
flouted orders of the court." Ibid. (quoting Restatement (Second)
of Judgments § 19 comment a (1982)).
As we have noted, AHS failed to avail itself of opportunities
to pursue its remedies in the Rodriguez action by failing to file
17 A-4443-14T4 motions for clarification or reconsideration and by failing to
seek a direct appeal. Filing a new suit rather than pursuing
those remedies runs counter to the general rule that
"requires . . . errors underlying a judgment be corrected on
appeal or other available proceedings to modify the judgment or
to set it aside, and not made the basis for a second action on the
same claim." Restatement (Second) of Judgments § 19 comment a
(1982).
Because the entire controversy doctrine is equitable in
nature, we must consider whether its application "would be unfair
in the totality of the circumstances and would not promote any of
its objectives, namely, the promotion of conclusive
determinations, party fairness, and judicial economy and
efficiency." K-Land Corp., supra, 173 N.J. at 70 (quoting
Pressler, Current N.J. Court Rules, comments 1 & 2 on R. 4:30A
(2002)).
Barring any subsequent suit forecloses the adjudication of a
claim asserted by a party. In considering party fairness, we do
not merely consider the merits of AHS's claims; we must consider
the fairness to all parties within the circumstances of the case.
Nothing in the record suggests that defendants engaged in any
strategy designed to deprive AHS of a full and fair adjudication
of its indemnification claims. AHS had only to file a motion that
18 A-4443-14T4 mirrored the ones filed by defendants in the Rodriguez action to
preserve their claims. It elected not to do so or to appeal but,
rather, to pursue those claims in a separate action in a separate
county, a choice not inconsistent with forum shopping. To permit
AHS to pursue its claims in a separate action filed well after the
time for appeal had expired would seriously undermine the
doctrine's objectives of promoting conclusive determinations,
judicial economy and efficiency, especially in light of the fact
that it took over two years to resolve the Rodriguez action.
Our consideration of the facts and equitable factors leads
us to the conclusion that the entire controversy doctrine would
properly apply here, supporting the dismissal of AHS's complaint
with prejudice. Thus, the dismissal of AHS's complaint was
warranted under either the application of collateral estoppel or
the entire controversy doctrine.
Affirmed.
19 A-4443-14T4