The New Jersey Supreme Court has said there wasn’t enough information on record to resolve a case raising the issue of whether the entire controversy doctrine required ex-clients of a New Jersey law firm to pursue a malpractice action as a defense or counterclaim in their former law firm’s suit to collect unpaid fees, and not at a later date.
But the court said the entire controversy doctrine may be applied to bar such a legal malpractice claim “in appropriate settings.”
The justices on March 7 reversed the dismissal and remanded for further proceedings in Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, a legal malpractice case filed by former clients of Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl three years after resolution of the firm’s collection suit related to its representation of the same clients. A trial court dismissed the malpractice suit as barred by the entire controversy doctrine, and the Appellate Division affirmed. The Supreme Court took up the case and heard arguments in October 2018.
In its opinion, the court revisited its 1997 ruling in Olds v. Donnelly that “the entire controversy doctrine no longer compels the assertion of a legal malpractice claim in an underlying action that gives rise to a claim.”
The Dimitrakopoulos case raised the question of what constitutes the “underlying action.”
“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,” the court said. “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 court added, “ 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,” but the doctrine “is constrained by principles of equity.”
Justice Anne Patterson, writing in the Dimitrakopoulos opinion, noted that there wasn’t enough information on record.
“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,” she wrote. “The record of this appeal, however, is inadequate for an application of the equitable rules that govern here” and “does not reveal when the cause of action for legal malpractice accrued,” she said.
“We are not in a position, based on the record, to determine whether, following the accrual of their cause of action, the Dimitrakopouloses would have had a fair and reasonable opportunity to litigate their malpractice claim had they brought that claim in the collection action,” Patterson said. “The record is also inadequate for us to decide whether the Borrus firm’s decision not to name Matilde Dimitrakopoulos as a defendant in the collection action affects the application of the entire controversy doctrine to this appeal.”
According to documents, the events began in 2009, when Evangelos and Matilde Dimitrakopoulos retained Borrus Goldin to represent them in litigation against a former business partner who had allegedly diverted funds from the company. Matilde owned 51 percent of the company, Integrated Construction and Utilities. Her husband, Evangelos, held no ownership interest but acted as her agent, performing ownership duties on her behalf.
In December 2010, the partnership dispute was submitted to binding arbitration, and Borrus Goldin was allowed to withdraw as counsel. In September 2011, that case ended with a settlement.
Meanwhile, in March 2011, Borrus Goldin sued the Dimitrakopouloses to collect unpaid legal fees from the business dispute. But Evangelos, who was pro se, did not completely answer interrogatories, and Borrus Goldin was granted a default judgment for $121,947 in July 2012, documents said.
Then, three years later, in September 2015, the Dimitrakopouloses filed their own legal malpractice suit against Borrus Goldin and partners Steven Fox and Anthony Vignuolo, claiming they issued excessive bills and agreed to binding arbitration without the clients’ consent in the Integrated Construction and Utilities case.
The trial judge dismissed that case under the entire controversy doctrine, pointing out that the Dimitrakopouloses knew on or around December 2010 that their alleged damages were attributable to the attorneys’ professional negligence. They then had a 10-month period before the settlement and final judgment to file amended pleadings asserting malpractice. In response to questioning from the trial judge, the plaintiffs’ counsel conceded that plaintiffs’ damages were ascertained as of September 2011, documents said, but the lawsuit came three years later.
Jae H. Cho of Cho Legal Group represents the plaintiffs and did not return a call seeking comment.
James E. Stahl of Borrus Goldin represented the firm. He also did not return a call seeking comment.