Olds v. Donnelly

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Olds v. Donnelly (A-109)

(NOTE: This is a companion case to Karpovich v. Barbarula and Donohue v. Kuhn, also decided today.)

Pollock, J., writing for a majority of the Court.

The basic issue in this case, as in Karpovich v. Barbarula, N.J. (1997) and Donohue v. Kuhn, N.J. (1997), also decided today, is the application of the entire controversy doctrine to legal-malpractice actions.

On June 27, 1985, Dr. Donahue allegedly committed medical malpractice while operating on Robert Olds. Approximately one month later, Olds retained Dennis Donnelly to represent him in a possible medical-malpractice action against Dr. Donahue. The Retainer Agreement indicated that Donnelly accepted the retainer subject to investigation.

On June 25, 1987, two days before the expiration of the statute of limitations on the medical-malpractice claim, Donnelly advised Olds that he no longer wished to represent him. Donnelly agreed, however, to prepare a pro se complaint and serve it on Dr. Donahue. Donnelly filed the complaint and attempted to serve Dr. Donahue by mail. Because Donnelly had used the wrong address, however, the summons and complaint were returned to Donnelly's office. Donnelly mailed them to a different address on August 10, 1987, by certified mail, with the return receipt addressed to Olds. Olds never received the receipt.

In 1988, Olds received notice from the Clerk of the Union County Superior Court that the case would be dismissed for lack of prosecution. Olds contacted Donnelly, who eventually sent Olds a letter stating that he had closed his files on the matter and it was up to Olds to pursue the matter.

Olds was able to effectuate service on Dr. Donahue in July 1989. In February 1991, Dr. Donahue moved to dismiss the complaint for failure to make timely service. Shortly thereafter, Joe Maran, Esq., filed a substitution of attorney for Olds. Maran appeared in opposition to Dr. Donahue's motion to dismiss on March 22, 1991. The trial court granted the doctor's motion to dismiss the complaint with prejudice after finding that Dr. Donahue was prejudiced by the two-year delay in service.

Thirteen months later, in April 1992, Olds, represented by Maran, instituted this legal-malpractice action against Donnelly. On March 18, 1994, about a month before the scheduled trial date, Donnelly moved for summary judgment, arguing that under the entire controversy doctrine, Olds should have asserted his legal-malpractice claim against Donnelly in the medical-malpractice action against Dr. Donahue. The trial court denied Donnelly's motion.

A jury returned a verdict of $ 500,000 for Olds. The trial court, however, granted Donnelly's motion for judgment notwithstanding the verdict, holding that the evidence did not support a finding that the legal malpractice proximately caused the dismissal of the action against Dr. Donahue.

Olds appealed. Donnelly cross-appealed, challenging the order denying summary judgment on entire controversy grounds. The Appellate Division reversed and remanded for entry of judgment in Olds's favor. 291 N.J. Super. 222, 232, 677 A.2d 238. It denied Donnelly's cross-appeal, reasoning that Olds's legal-malpractice claim did not accrue until the dismissal of the medical-malpractice action.

HELD: The party-joinder requirements of the entire controversy doctrine do not extend to claims of attorney malpractice.

1. The entire controversy doctrine seeks to assure that all aspects of a legal dispute occur in a single lawsuit. The goals of the doctrine are to promote judicial efficiency, assure fairness to all parties with a material interest in the action, and encourage the conclusive determination of a legal controversy. The mandatory joinder of claims was incorporated into the rules in 1979. The mandatory joinder of parties followed. Rule 4:30A now codifies the mandatory joinder of both claims and parties. (pp. 7-12)

2. The Court begins its analysis with Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 662 A.2d 509 (1995), which held that the entire controversy doctrine barred Circle's legal-malpractice action. In dicta, the Court stated that the doctrine applies to a client's legal malpractice claim against his or her attorney, even when the attorney is currently representing the client in an underlying action. The Court further held in Circle Chevrolet that the accrual of a legal-malpractice claim for purposes of imposing the entire-controversy bar is determined under the discovery rule, which involves two elements: actual injury and knowledge of fault. Here, the trial court's dismissal of Olds's medical-malpractice complaint for untimely service was not mandatory. Because dismissal of the complaint was not a foregone conclusion, Donnelly's negligence did not proximately cause actual damage to Olds until the trial court dismissed Olds's complaint against Donahue. Consequently, the entire controversy doctrine imposed no obligation on Olds to join Donnelly in the underlying medical-malpractice action. (pp. 12-18)

3. The Court is aware of the criticism of Circle Chevrolet's expansion of the entire controversy doctrine to attorney-malpractice actions. Critics have pointed out the adverse effect on the attorney-client relationship from requiring the joinder of an attorney who continues to represent a client in an underlying action. The Court acknowledges that the application of the doctrine to legal-malpractice claims has not fulfilled its expectations. The Court concludes 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. (pp. 18-22)

4. The New Jersey State Bar Association suggests in its amicus brief that the Court abolish the mandatory party joinder requirements found in Rule 4:30A. Similarly, the concurrence recommends overruling the rule of preclusion. Critics assert that mandatory party joinder is counterproductive and serves to complicate, prolong, and increase the cost of litigation. Others suggest expansion of party joinder under Rule 4:28. The Civil Practice Committee, to which the Court regularly looks for recommendations on proposed rule changes, already has appointed a subcommittee on the entire controversy doctrine. That subcommittee is the logical entity to consider initially the various proposals for such rule changes. Preclusion is a remedy of last resort. If a remedy other than preclusion will vindicate the cost or prejudice to other parties and the judicial system, the court should employ such a remedy. (pp. 23-31)

5. In fairness to other litigants and the judicial system, the Court determines to apply this decision not only to the present case but to all pending cases, whether on appeal or in the trial courts. (pp. 31-32)

Judgment of the Appellate Division is AFFIRMED.

JUSTICE STEIN, concurring in part and dissenting in part, is of the view that the preclusive aspect of the entire controversy doctrine is not the appropriate mechanism to enforce mandatory party joinder, and that less intrusive measures should be used to encourage party joinder in civil litigation.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, and COLEMAN join in JUSTICE POLLOCK's opinion. JUSTICE STEIN has filed a separate opinion, concurring in part and dissenting in part.

Christopher J. Carey argued the cause for appellant (Tompkins, McGuire & Wachenfeld, attorneys; John P. O'Toole, on the brief).

Joseph Maran, Jr., argued the cause for respondent Robert Olds (Maran & Maran, attorneys).

William W. Voorhees, Jr., argued the cause for respondent Joe Maran (Voorhees & Acciavatti, attorneys).

Andrew P. Napolitano argued the cause for amicus curiae, New Jersey State Bar Association (Cynthia M. Jacob, President, attorney; Linda Lashbrook, on the brief).

The opinion of the Court was delivered by POLLOCK, J. STEIN, J., concurring in part and dissenting in part. Chief Justice PORITZ, and Justices HANDLER, POLLOCK, O'HERN, GARIBALDI and COLEMAN. Justice STEIN.