Jarosz v. Palmer

• Decision Date: 07 January 2002
• Citation: 766 NE 2d 482,436 Mass. 526
• Parties: JAMES JAROSZ v. STEPHEN L. PALMER & another.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

436 Mass. 526

766 NE 2d 482

JAMES JAROSZ v. STEPHEN L. PALMER & another.¹

Supreme Judicial Court of Massachusetts, Middlesex.

January 7, 2002.

April 19, 2002.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, SOSMAN, & CORDY, JJ.

Nelson G. Apjohn (Scott A. McQuilkin with him) for the defendants.

Scott S. Sinrich for the plaintiff.

COWIN, J.

The plaintiff, James Jarosz, appeals from an order of the Superior Court dismissing his claims against the defendants on the basis of issue preclusion. The plaintiff's claims against attorney Stephen L. Palmer and his law firm Warner & Stackpole LLP (Palmer) are premised on the contention that Palmer represented Jarosz individually in his acquisition of a corporation. A Superior Court judge granted the defendants' motion for judgment on the pleadings after concluding that Jarosz was precluded from arguing that Palmer had represented him individually because, in a separate case brought by Jarosz against his former business partners, another judge of the Superior Court had concluded that Palmer and Jarosz did not have an attorney-client relationship. The Appeals Court, in Jarosz v. Palmer, 49 Mass. App. Ct. 834 (2000), determined that the requirements for issue preclusion had not been met and reversed the Superior Court's order dismissing the case. We granted Palmer's application for further appellate review. We reverse the Superior Court's order and remand the case for further proceedings.

1. Factual background and procedural history. We summarize the relevant facts from the Superior Court's order on the defendants' motion for judgment on the pleadings. Jarosz and three business partners together agreed to acquire a company known as Union Products. Jarosz hired Palmer, an attorney, to assist in the acquisition and financing of the business. Jarosz and his partners successfully acquired the business and each became twenty-five per cent owners. The relationship between Jarosz and his partners eventually soured, and the partners terminated Jarosz from his position as employee and officer of Union Products. As a result, Jarosz filed suit against the partners, Union Products, Inc., and Union Products Realty Corp., alleging wrongful termination and breach of fiduciary duty (the Union Products case). Palmer represented the corporations in this suit.

Jarosz moved to disqualify Palmer from serving as the corporations' attorney in the Union Products case on the basis that Palmer had represented Jarosz individually in his acquisition of Union Products, and therefore his continued representation of the corporations created a conflict of interest. The judge's order on Jarosz's disqualification motion in the Union Products case stated that, for Jarosz to succeed on his motion, "he must meet the threshold burden of establishing that an attorney-client relationship existed between himself and Palmer during the acquisition dealings." Having found that Jarosz failed to meet this burden, the judge denied the motion.

After the commencement of the Union Products case, Jarosz filed this suit against Palmer, alleging breach of contract, breach of fiduciary duty, legal malpractice, and violations of G. L. c. 93A. Palmer defended the suit on the ground, inter alia, that he had not represented Jarosz individually. Palmer filed a motion for judgment on the pleadings, claiming that the judge's ruling on Jarosz's motion for disqualification in the Union Products case precluded Jarosz from relitigating the issue whether Palmer had represented Jarosz individually. The judge in the instant case allowed the motion, finding that the three requirements for issue preclusion were met: the issue had been actually litigated, was the subject of a valid and final judgment, and was essential to the judge's decision.

Jarosz filed a timely notice of appeal, claiming that the issue had not been actually litigated, was not the subject of a final judgment, and was not essential to the decision. In addition, he claimed that the motion judge erred in considering evidence outside the pleadings, namely, a copy of the judge's order denying Jarosz's motion for disqualification in the Union Products case.

After the judge issued his order, but while Jarosz's appeal was pending, Jarosz and the defendants in the Union Products case entered into a stipulation of dismissal. The stipulation provided:

"Plaintiff James Jarosz, and defendants Union Products, Inc., Union Products Realty Corp., Donald Featherstone, Edward Boudreau and Dennis Plante, being all of the parties to this action, pursuant to Mass. R. Civ. P. Rule 41 (a) (1) (ii), do hereby stipulate and agree that this action be, and hereby is, dismissed with prejudice, without costs, and with all appeals waived."

Palmer supplemented the record before the Appeals Court with the stipulation of dismissal, and argued the effect of the stipulation of dismissal during oral argument.

The Appeals Court reversed the judgment on the basis that the judge's determination in the Union Products case did not constitute a final judgment for the purposes of issue preclusion. Jarosz v. Palmer, supra at 837-838. Because a motion to disqualify is an interlocutory order subject only to discretionary review by a single justice of the Appeals Court, the court concluded that the decision was not subject to appeal and therefore issue preclusion could not apply. Id. The Appeals Court apparently did not consider the stipulation of dismissal in the Union Products case relevant to its determination; its decision mentions the stipulation of dismissal in a footnote, but does not accord it any effect. Id. at 838 n.3.

We conclude that issue preclusion's requirement that the issue decided be "essential to the judgment" requires that the issue be essential to the merits of the underlying case. Because this requirement was not met in this case, we reverse the Superior Court's judgment on this basis. We hold also that issue preclusion requires that the decision be "subject to review," and that because the likelihood of obtaining interlocutory review of a motion to disqualify is so remote, it is not sufficient to invoke the doctrine of issue preclusion. The fact that the parties to the Union Products case entered into a stipulation of dismissal after the entry of the disqualification motion does not change our analysis of the finality requirement; a stipulation of dismissal with prejudice is not the equivalent of a final judgment on the merits for the purposes of issue preclusion.

2. Motion for judgment on the pleadings. Jarosz argues that the judge erred in considering materials outside the pleadings in allowing the defendants' motion for judgment on the pleadings under Mass. R. Civ. P. 12 (c), 365 Mass. 754 (1974). According to rule 12 (c), "if, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment." Thus, Jarosz argues that he should have been accorded notice and an opportunity to present further material, as he would have if the judge had treated the motion as one for summary judgment.

A defendant's rule 12 (c) motion is "actually a motion to dismiss ... [that] argues that the complaint fails to state a claim upon which relief can be granted." J.W. Smith & H.B. Zobel, Rules Practice § 12.16 (1974). In deciding a rule 12 (c) motion, all facts pleaded by the nonmoving party must be accepted as true. Minaya v. Massachusetts Credit Union Share Ins. Corp., 392 Mass. 904, 905 (1984). Because a motion under rule 12 (c) is akin to a motion under Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974), and because we have stated that "[i]t seems reasonable to take judicial notice of facts when considering a motion to dismiss under Mass. R. Civ. P. 12 (b) (6)," Jackson v. Longcope, 394 Mass. 577, 580 n.2 (1985), we see no reason that a judge may not also consider on a rule 12 (c) motion those facts of which judicial notice can be taken. Further, a judge may take judicial notice of the court's records in a related action. See Brookline v. Goldstein, 388 Mass. 443, 447 (1983), and cases cited. See also P.J. Liacos, Massachusetts Evidence § 2.8.1, at 26 (7th ed. 1999) ("As to ... related proceedings, a court may also take judicial notice of the records of other courts"). Although Jarosz argues that the motion should have been treated as one for summary judgment, see Mass. R. Civ. P. 56 (c), 365 Mass. 824 (1974), with notice and the opportunity to present additional material, Jarosz was not harmed by the absence of additional procedures. In his memorandum to the judge, he argued that the motion should be treated as one for summary judgment, demonstrating an awareness of the possibility that the judge might agree to consider additional material presented by the parties. However, Jarosz did not seek to present any further evidence. The burden was on him to show that he could present matters outside the pleadings that were relevant to the judge's determination.²

3. Issue preclusion.³ The doctrine of issue preclusion provides that when an issue has been "actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties whether on the same or different claim." Cousineau v. Laramee, 388 Mass. 859, 863 n.4 (1983), quoting Restatement (Second) of Judgments § 27 (1982). See Heacock v. Heacock, 402 Mass. 21, 25 (1988). Jarosz successfully argued before the Appeals Court that the judge's decision in the Union Products case failed to meet the finality requirement. However, he challenges the Appeals Court's conclusion that the issue was both actually litigated and essential to the decision.

a. Actually litigated. The Appeals Court concluded correctly that the issue of Jarosz's attorney-client relationship with Palmer was actually litigated in the Union Products...