The New Jersey Supreme Court in Bank Leumi USA v. Kloss, Docket No. 083372, 2020 WL 4091413 (N.J. Sup. Ct. July 21, 2020), recently provided clear guidance to defendants who seek to file a pre-answer motion to dismiss, but have claims of their own and do not want to run afoul of New Jersey’s Entire Controversy Doctrine (ECD) and lose the right to later assert those claims. The court held that the ECD does not bar a party who files a successful pre-answer motion to dismiss from later asserting claims that arise from the same transactional facts. The clarity provided by the court’s decision should better enable practitioners to recommend the most efficient and effective means by which their clients may assert any claims they may have against a plaintiff who sues them first.
The Sometimes Frightening and Nerve-Racking ECD
The ECD (N.J. Ct. R. 4:30A) requires litigants to assert all affirmative claims relating to the controversy between them and to join all parties with a material interest in the controversy. Otherwise, forever hold their peace. The ECD understandably scares many lawyers. After all, its consequences are very harsh and there has been a great deal of litigation (and sometimes confusion) over how it applies to various types of claims, from environmental actions to legal malpractice claims. Some may therefore tend to assume it will apply and follow the safest course of action to make sure they do not run afoul of it later down the road—even if there are good arguments as to why it would not seem to apply. Again, this tendency is understandable. But it is important keep current and to understand when the ECD clearly will not apply so that we can be aware of all of our clients’ options and recommend the most efficient and effective course of action to take.
