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HOW TO BEAT NEW JERSEY'S ENTIRE CONTROVERSY DOCTRINE

by Gregory J. Schwartz, ESQ.
Schwartz | Kelly LLC

If you are out-of-state counsel looking to file a lawsuit in New Jersey, you may have wrestled with or stumbled upon New Jersey's Entire Controversy Doctrine. The unique doctrine has been the death-knell of many civil actions in New Jersey by virtue of the parties' failure to comply with the Entire Controversy Doctrine's overriding policy mandates. But while the Entire Controversy Doctrine is a powerful procedural bar to many actions, it is a beatable doctrine with careful planning, precise pleadings and a healthy dose of fortitude.

This Firm has successfully defeated the Entire Controversy Doctrine.¹ It has a detailed working knowledge of the more than 50 reported Entire Controversy Doctrine cases in New Jersey. Although it is difficult to offer a blueprint for how to defeat the doctrine in any litigation, this article summarizes the Entire Controversy Doctrine's core requirements. The article also offers suggestions for how to comply with these requirements and then dissects the parameters of the Entire Controversy Doctrine in order to present a workable plan for defeating the doctrine's broad reach.

Entire Controversy Doctrine History.  Initially, the Entire Controversy Doctrine required mandatory joinder of claims in a single action. In a nutshell, the Entire Controversy Doctrine required that a party assert all claims against another party, whether a plaintiff or defendant or third-party defendant, in a single action so long as the claims arose from a common nucleus of facts.² Any omitted claims were subject to bar in a subsequent action, even if the omitted claims involved a defendant's claims against a plaintiff that were not asserted in a counterclaim. Later, however, in a dramatic and swift evolution, the doctrine was vastly expanded in 1995 to include joinder of parties as well as claims. At that point, the Entire Controversy Doctrine required that a party join any other party who may have been liable in an action based upon the operative facts in the litigation.³ In that case, the New Jersey Supreme Court held that a party claiming legal malpractice in defense of a claim had to join that party's lawyers with the underlying case.

This wholesale revamp of the Entire Controversy Doctrine caused wide-spread panic amongst the New Jersey bar. It also resulted in numerous actions being dismissed throughout the 1990s. The mandatory party joinder component of the Entire Controversy Doctrine continued to be interpreted and expanded broadly by trial and appellate courts. As a result, lawyers frequently added, out of fear, parties and claims that were unrelated to the core transaction involved in the lawsuit, resulting in very complicated, unmanageable cases. The New Jersey Supreme Court recognized this in 1997 and reversed the process in Olds v. Donnelly.⁴

The Entire Controversy Doctrine Today.  The Entire Controversy Doctrine was revised to delete mandatory party joinder and essentially return the Entire Controversy Doctrine to its roots – mandatory claim joinder. The Entire Controversy Doctrine is codified at New Jersey Court Rule 4:30A, which 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 . . .

Obviously, this circular Rule leaves an out-of-state practitioner scratching her head. Further Entire Controversy Doctrine implementing Rules include Rule 4:28, which governs joinder of parties, and Rule 4:29, which deals with joinder of multiple parties and permissive joinder.

The key part of today's version of the Entire Controversy Doctrine is located in Rule 4:5-1, which pertains to a party's initial pleading. The Entire Controversy Doctrine requirement is buried in the Rule's command that a party certify in its initial pleading to the absence of any claims that should be joined in the action, or parties known to the pleader who may also be liable to a party in the case. The last sentence of the Rule states that a second action cannot be dismissed unless the failure to join omitted parties was both “inexcusable” and prejudiced the party's ability to defend the second action.

What to watch out for.  What constitutes "inexcusable" conduct has been the subject of only a few appellate court decisions since the rule change.⁵ Likewise, only a few cases have addressed the prejudice component.⁶ The Entire Controversy Doctrine today, therefore, centers around these two keys components: inexcusable and prejudice.

Courts have reverted to pre-Olds decisions for a determination of whether a party's failure to join was inexcusable.⁷ For the most part, courts are looking for whether a party has intentionally withheld constituent claims for the purpose of gaining a strategic advantage over another party. As to the second component, courts are looking for whether a party was disadvantaged by not being joined in the first action. Notably, the burden of proof rests with the party invoking the Entire Controversy Doctrine.⁸ Thus, the party must show that it suffered some cognizable detriment by not being joined in the first action.

How to beat the doctrine.  Staying a step ahead of the Entire Controversy Doctrine at the outset is simple; trying to get in front of it in a second action is more complicated but often-times manageable. If your case is the first to be filed and you are struggling with whether you need to join another party, you merely have to comply with Rule 4:5-1. Counsel should identify the other party who may be liable based upon the same operative facts and leave it to the Court or another party to force the joinder. If that never happens, then counsel can probably bring the second action against the party identified in the Rule 4:5-1 Certification because counsel complied with the initial pleading requirements. This Firm has often taken this tack with success.

Always remember that claims joinder remains mandatory. Thus, omitting any claims against existing parties is very risky so long as those claims are related to the core transactional facts. If the claims are wholly unrelated, the Entire Controversy Doctrine probably does not require their joinder. This is a prickly analysis, however, so counsel should remain very cautious about withholding any potential claims.

If yours is the second-filed case, avoiding the pitfalls of the Entire Controversy Doctrine may be more challenging. Carefully analyze the reasons why parties were omitted in the first instance to assess whether the non-joinder was excusable. The facts of Hobart II detail the type of excuses the Court will accept for not joining parties or claims in an initial action. Additionally, the complaining party must prove prejudice. The Appellate Division in Hobart II, for example, found that the omitted party was simply unable to establish its burden of proving that it was prejudiced by not being joined in the initial action. Frequently, prejudice is the easier of the two standards to defeat.

A final word of caution.  Be careful. This is a tricky doctrine. You do not want to risk a dismissal on a procedural issue and never have your case heard on the merits. Retain and consult with good legal counsel to help you navigate the contours of the Entire Controversy Doctrine. Given this Firm's proven track record of perseverance, effective appellate advocacy and creating a bullet-proof record at the trial record, we invite you to call us about your Entire Controversy Doctrine concerns. We look forward to hearing from you at 908-735-2377, or contact Hobart's trial counsel, Gregory J. Schwartz, Esq., online.

1. Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229 (App. Div. 2002) (“Hobart I”); Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., A-3155-06T2 (March 25, 2008) (“Hobart II”). For a copy of the unreported decision, click here.
2. Cogdell v. Hospital Center at Orange, 116 N.J. 7 (1989).
3. Circle Chevrolet v. Giordano, 142 N.J. 280 (1995).
4. Olds v. Donnelly, 150 N.J. 424 (1997).
5. See, e.g.,; Mitchell v. Procini, 315 N.J. Super. 557 (App. Div. 1998) (“Mitchell I”); see also Hobart I and Hobart II.
6. See, e.g., Mitchell v. Procini, 331 N.J. Super. 445 (App. Div. 2000) (“Mitchell II”); see also Hobart I and Hobart II.
7. Mitchell I, 315 N.J. Super. 557.
8. Hobart II, citing Hobart I, 354 N.J. Super. at 242.