Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., A-46 September Term 2017

• Decision Date: 07 March 2019
• Docket Number: 080357,A-46 September Term 2017
• Citation: 203 A.3d 133,237 N.J. 91
• Parties: Evangelos DIMITRAKOPOULOS and Matilde Dimitrakopoulos, Plaintiffs-Appellants, v. BORRUS, GOLDIN, FOLEY, VIGNUOLO, HYMAN AND STAHL, P.C., Steven L. Fox, Esq. and Anthony B. Vignuolo, Esq., Defendants-Respondents, and Frazer Evangelista & Company, LLC, and Ralph J. Evangelista, Defendants.
• Court: New Jersey Supreme Court

237 N.J. 91

203 A.3d 133

Evangelos DIMITRAKOPOULOS and Matilde Dimitrakopoulos, Plaintiffs-Appellants,

v.BORRUS, GOLDIN, FOLEY, VIGNUOLO, HYMAN AND STAHL, P.C., Steven L. Fox, Esq. and Anthony B. Vignuolo, Esq., Defendants-Respondents,andFrazer Evangelista & Company, LLC, and Ralph J. Evangelista, Defendants.

A-46 September Term 2017

080357

Supreme Court of New Jersey.

Argued October 10, 2018

Decided March 7, 2019

Jae H. Cho, Princeton, argued the cause for appellants(Cho Legal Group, attorneys; Kristen M. Logar, on the brief).

James E. Stahl, North Brunswick, argued the cause for respondents(Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, attorneys; James E. Stahl, North Brunswick, on the brief).

Diana C. Manning, Florham Park, argued the cause for amicus curiaeNew Jersey State Bar Association(New Jersey State Bar Association, attorneys; Robert B. Hille, President, of counsel and on the brief, and Diana C. Manning, Florham Park, and Peter J. Gallagher, Morristown, on the brief).

JUSTICE PATTERSONdelivered the opinion of the Court.

The entire controversy doctrine "seeks to impel litigants to consolidate their claims arising from a single controversy whenever possible."Thornton v. Potamkin Chevrolet, 94 N.J. 1, 5, 462 A.2d 133(1983)(quotingAlfone v. Sarno, 87 N.J. 99, 113, 432 A.2d 857(1981)(internal quotation marks omitted) ).The doctrine serves "to encourage complete and final dispositions through the avoidance of piecemeal decisions and to promote judicial efficiency and the reduction of delay."Wadeer v. N.J. Mfrs. Ins. Co., 220 N.J. 591, 610, 110 A.3d 19(2015).If a party fails to assert a claim that the entire controversy doctrine requires to be joined in a given action, a court may bar that claim.R. 4:30A;R. 4:7-1.

In this appeal, we review the trial court's judgment dismissing a legal malpractice claim asserted by two clients against their former counsel.The malpractice claim was not asserted until three years after the conclusion of a collection action filed by the law firm against the clients to recover unpaid legal fees.The trial court held that the entire controversy doctrine barred the legal malpractice claim, and an Appellate Divisionpanel affirmed that decision.

We reiterate our holding in Olds v. Donnelly that the entire controversy doctrine does not compel a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client.150 N.J. 424, 443, 696 A.2d 633(1997).A collection action brought by a law firm against its client, however, does not constitute such underlying litigation for purposes of the principle stated in Olds.The assertion of a malpractice claim in such an action -- in which the attorney and client are already adverse -- does not raise the privilege and loyalty concerns that warranted the exception to the entire controversy doctrine recognized in Olds.In appropriate settings, a court may apply the entire controversy doctrine to preclude a legal malpractice claim that a client has declined to assert in the attorney's action to collect unpaid legal fees.

The entire controversy doctrine, however, is constrained by principles of equity.It "does not apply to unknown or unaccrued claims."Wadeer, 220 N.J. at 606, 110 A.3d 19(quotingDiTrolio v. Antiles, 142 N.J. 253, 273-74, 662 A.2d 494(1995) ).Consequently, a client whose malpractice claim was not asserted in an attorney's collection action may avoid preclusion of that claim by proving that he or she did not know, and should not reasonably have known, of the existence of the claim during the pendency of the collection action.SeeMauro v. Raymark Indus., Inc., 116 N.J. 126, 135-36, 561 A.2d 257(1989)(citingAyers v. Township of Jackson, 106 N.J. 557, 583, 525 A.2d 287(1987) );Cafferata v. Peyser, 251 N.J. Super. 256, 260-61, 597 A.2d 1101(App. Div.1991).Moreover, even if the malpractice claim accrued before or during the earlier action, the client may avoid the entire controversy doctrine by demonstrating that the prior forum did not afford "a fair and reasonable opportunity to have fully litigated" the malpractice claim.Gelber v. Zito P'ship, 147 N.J. 561, 565, 688 A.2d 1044(1997)(quotingCafferata, 251 N.J. Super. at 261, 597 A.2d 1101 ).Those principles demand a thorough examination of the individual case.

We conclude that the collection action at issue in this matter was not an "underlying action" as that term is used in Olds, and that the entire controversy doctrine may bar the claim.The record of this appeal, however, is inadequate for an application of the equitable rules that govern here.That record does not reveal when the cause of action for legal malpractice accrued or indicate whether the malpractice claimants would have had "a fair and reasonable opportunity to have fully litigated" their claim had they asserted it in the collection action.DiTrolio, 142 N.J. at 273, 662 A.2d 494;see alsoWadeer, 220 N.J. at 606, 110 A.3d 19;Oliver v. Ambrose, 152 N.J. 383, 396, 705 A.2d 742(1998).Those questions warrant further consideration by the trial court based on an expanded record.

Accordingly, we reverse the Appellate Division's judgment, and remand this matter to the trial court for further proceedings.

I.

A.

In 2005, Evangelos Dimitrakopoulos settled a dispute with a business associate, Steven Eleftheriou.¹As a term of that settlement, Dimitrakopoulos and Eleftheriou formed a limited liability company, Integrated Construction and Utilities, LLC(Integrated).The LLC's members were Dimitrakopoulos's wife, Matilde Dimitrakopoulos, who owned a fifty-one percent interest, and Eleftheriou, who owned the remaining forty-nine percent interest.Although he was not a member of the LLC, Evangelos Dimitrakopoulos was the exclusive agent for his wife in the management of the LLC and was responsible for several aspects of its operations.

Apparently suspicious that Eleftheriou was diverting Integrated funds, Evangelos Dimitrakopoulos retained the law firm of Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C. (Borrus firm).In October 2009, he and the Borrus firm signed a retainer agreement, which set forth the hourly rates to be charged for legal services by the two principal attorneys designated to work on the matter, Steven L. Fox and Anthony B. Vignuolo, and by the firm's associates.²

In the retainer agreement, Evangelos Dimitrakopoulos agreed to fully cooperate with the firm and pay all bills.The Borrus firm agreed to provide "conscientious, competent and diligent services" and to "seek to achieve solutions which are just and reasonable" for its client, but noted that "attorneys cannot and do not warrant, predict or guarantee results or the final outcome of any case."

Represented by the Borrus firm, the Dimitrakopouloses filed a verified complaint against Steven Eleftheriou and his wife Daniella Eleftheriou in the Chancery Division.The record does not include the verified complaint filed by the Borrus firm and does not reveal the claims that the Borrus firm asserted on the Dimitrakopouloses' behalf.Other than to note that Steven and Daniella Eleftheriou filed a counterclaim, the record does not indicate what proceedings took place during the initial stage of that action.

For reasons that the record does not disclose, the Borrus firm filed a motion to withdraw as counsel for the Dimitrakopouloses shortly after it was retained.On December 17, 2009, the return date of the firm's motion to withdraw from the case, Evangelos Dimitrakopoulos and the Eleftherious agreed that their dispute would be submitted to binding arbitration.The Borrus firm represented that it would submit to the court a list of potential arbitrators and that it would continue to serve as counsel for the Dimitrakopouloses until the court appointed an arbitrator.The Borrus firm and the Eleftherious' counsel agreed to submit to the court a consent order by which the court would appoint an arbitrator and dismiss the action pending in the Chancery Division.

It appears that, after an arbitrator was selected, the Borrus firm was permitted to withdraw as counsel and the Dimitrakopouloses retained substitute counsel to represent them in the arbitration proceedings.

B.

On March 7, 2011, the Borrus firm filed a complaint against Evangelos Dimitrakopoulos in the Law Division.The firm alleged that its former client owed it $ 93,811.95 in fees for legal services and that payment had been demanded and not made.The Borrus firm represented that, in accordance with N.J.S.A. 2A:13-6 and Rule 1:20A-6, it had advised Evangelos Dimitrakopoulos in writing of his right to pursue fee arbitration.Notwithstanding the fact that Matilde Dimitrakopoulos was also its former client, the Borrus firm did not name her as a defendant in the collection action.

Evangelos Dimitrakopoulos, acting pro se, filed an answer to the collection complaint.He admitted that the Borrus firm had demanded payment of its outstanding legal fees, that those fees remained unpaid, and that he had been advised of his statutory right to pursue fee arbitration.Dimitrakopoulos denied, however, that he had "promised to pay for services which were unnecessary and contrary to [his] direction."He filed no counterclaim against the Borrus firm, or any third-party claim.³

In a proceeding before the arbitrator on September 6, 2011 -- six months after the collection action was filed -- the Dimitrakopouloses and the Eleftherious settled their dispute.The terms of that settlement are not in the record.In light of the settlement, the arbitrator did not issue an award.

Later that month, the court in the collection matter granted the Borrus firm's unopposed motion to suppressEvangelos Dimitrakopoulos's answer for failure to provide complete and responsive certified answers to interrogatories pursuant to Rule 4:23-5(a)(1).The court imposed that remedy without prejudice.The Borrus firm then sought suppression of the answer with...