(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued December 2, l996 -- Decided February 26, 1997
O'HERN, J., writing for a unanimous Court.
This appeal, like Joel v. Morrocco, also decided today, concerns an application of the entire
controversy doctrine.
In August l99l, Marc and Marlene Gelber (the homeowners) filed a complaint against the Zito
Partnership and its two principals, Matthew R. Zito and Daniel Falcone (the architect). When the
homeowners filed their complaint, they certified, pursuant to Rule 4:5-1(b)(2), that the matter in controversy
was not the subject of any other action pending in any court or of a pending arbitration proceeding. At that
time, the certification was true. In July l993, the architect took the deposition of an expert witness for the
homeowners, during which he learned that the homeowner had brought a separate claim in a May l992
arbitration proceeding against Elecon Builders (the contractor), which had been hired to complete the
renovations that were the subject of the l99l suit against the architect. In connection with that arbitration,
the homeowners again recited that the matter in controversy was not the subject of any other pending action
in any court.
During that arbitration process, the contractor had opposed the homeowners' claim on the basis
that the architect was responsible for some of the damages. That notwithstanding, in October l992, an
arbitrator entered a monetary award against the contractor in favor of the homeowners, which the contractor
would not pay. Therefore, in November l992, the homeowners brought a summary action to confirm the
arbitration award. In opposition to the confirmation action, the contractor submitted an affidavit disputing
the award and claiming that the homeowners' filing of the suit against the architect had not been disclosed
to him until after the arbitration proceeding.
After learning of the arbitration proceedings, the architect filed a motion to dismiss the
homeowners' complaint, alleging that the homeowner was attempting to “double dip,” in violation of the
entire controversy doctrine. The architect further alleged that the homeowner had violated Rule 4:5-1(b)(2),
which places a continuing duty on litigants to notify the parties and the court of any other pending litigation
or arbitration proceeding. The Law Division granted that motion. The Appellate Division affirmed, ruling
that, even if the homeowners had not yet formulated the extent of the claims against the contractor prior to
entering the arbitration action, the homeowner should have informed defendant and the court of the
arbitration proceeding as required by the Rule 4:5-1(b)(2). One member of the panel dissented with respect
to claims against the architect that dealt with improper design and other claims “that had nothing to do with
Elecon.”
The homeowners appealed to the Supreme Court as of right under Rule 2:2-1(a).
HELD: There has been a sufficient showing of prejudice to the architect, resulting from violation of the
notice requirements of Rule 4:5-1, to warrant a measured application of the entire controversy doctrine to
preclude the homeowners' pursuit of claims that were intertwined with the construction defects.
1. The Court did not intend that violation of the notice requirements of Rule 4:5-1 should result in
automatic orders for dismissal. Rather, courts must carefully analyze each of the pillars of the entire
controversy doctrine before dismissing claims or parties to a suit. (p.5)
2. In considering fairness to the party whose claim is sought to be barred, a court must consider whether the
claimant has had a fair and reasonable opportunity to have fully litigated that claim in the original action.
(pp. 5-6)
3. Joinder is only one goal of the entire controversy doctrine, and the homeowners' failure to give notice
deprived both the architect and the court of the opportunity to have the Superior Court manage or otherwise
coordinate the two proceedings. (pp. 6-8)
4. Rule 4:5-1(b)(2) is designed to implement the entire controversy doctrine, not to contain its essence, and
the purpose of the doctrine is to promote fairness through providing a single, economic and efficient forum
for litigating controversies. (pp. 8-10)
5. Because the arbitration with the contractor covered much common ground with the litigation against the
architect, on remand, the court must assess the extent to which the homeowners' claims in this suit against
the architect will in any way implicate the facts and claims involving both the architect and the contractor.
(p.10)
6. Because of the double violation of Rule 4:5-1, in failing to inform the Superior Court that the other
action was pending in either the confirmation suit or the suit against the architect, the homeowner must bear
the added burden of dispelling any possibility of prejudice to the architect by submitting clear specifications
of allegedly surviving claims that do not in any way involve the work of the general contractor and the dollar
amounts claimed therefor. (p. 11)
The judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law
Division for proceedings consistent with the Court's opinion.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and
COLEMAN join the JUSTICE O'HERN's opinion.
SUPREME COURT OF NEW JERSEY
A-
66 September Term 1996
MARC GELBER and MARLENE GELBER,
Plaintiffs-Appellants,
v.
THE ZITO PARTNERSHIP, a partnership
consisting of MATTHEW R. ZITO and
DANIEL FALCONE,
Defendants-Respondents.
DANIEL FALCONE, ARCHITECT,
Plaintiff,
v.
MARC GELBER and MARLENE GELBER,
Defendants.
Argued December 2, 1996 -- Decided February 27, 1997
On certification to the Superior Court,
Appellate Division.
James G. Aaron argued the cause for
appellants (Ansell, Zaro, Grimm & Arron,
attorneys).
Andrew J. Carlowicz argued the cause for
respondent Daniel Falcone (Hoagland, Longo,
Moran, Dunst & Doukas, attorneys; Thomas S.
McGuire, on the brief).
Lewis M. Markowitz argued the cause for
respondent Matthew R. Zito (Epstein, Epstein,
Brown & Bosek, attorneys; Andrew M. Epstein,
on the brief).
The opinion of the Court was delivered by
O'HERN, J.
This appeal, like Joel v. Morrocco, ___ N.J. ___ (1997),
also decided today, concerns an application of the entire
controversy doctrine. We apply the principles there stated to
the disposition of this appeal.
In this case, we hold that it was error to dismiss all
allegations of a homeowner's current suit for professional
malpractice against an architect on the basis that the homeowner
had failed to inform the court that it had previously made a
claim in arbitration against the general contractor for defective
construction of the home designed by the architect. We remand to
the Law Division to determine the extent to which the facts
giving rise to the claims against the architect might fairly be
considered distinct from the facts giving rise to the claims
against the contractor, such that claims based on any distinct
facts so considered would not be subject to or barred by the
entire controversy doctrine. For purposes of this appeal, we
adopt the version of the case set forth in the architect's
Appellate Division brief.
In August 1991, plaintiff filed a complaint against a former
architectural firm, the Zito Partnership, and its two principals,
Matthew R. Zito and Daniel Falcone (the architect).See footnote 1 At the
time the plaintiff filed its complaint against the architect,
plaintiff certified, pursuant to Rule 4:5-1(b)(2): "There are no
other matters in controversy other than the matter of Daniel
Falcone, architect, v. Marc Gelber and Marlene Gelber." At that
time, the certification was true. In July 1993, the architect
took the deposition of an expert witness for the homeowner. (We
refer to the husband and wife plaintiffs-homeowners in the
singular.) During this deposition, the architect first learned
that the homeowner had brought a separate claim in a May 1992
arbitration proceeding against Elecon Builders (the contractor).
Elecon had been hired for the renovations that were the subject
of the 1991 suit against the architect. That arbitration
proceeding had actually been commenced by the contractor against
the homeowner in May 1992 and the homeowner had counterclaimed in
arbitration for defective performance.
In October 1992, an arbitrator had entered an award in favor
of the homeowner against the contractor and awarded $113,775 in
damages, which, after credits to the contractor, resulted in a
final award of $58,390. The contractor would not pay the
arbitration award and, pursuant to the arbitration statute, the
homeowner brought a summary action to confirm the arbitration
award in November 1992. In connection with that arbitration
proceeding, which the contractor opposed on the basis that the
architect was responsible for some of the damages, the attorney
for the homeowner (now counsel in both matters) again recited
that the matter in controversy "is not the subject of any other
pending action in any court."
The contractor's affidavit in opposition to the confirmation
action disputed the arbitration award and also complained that it
had been "undisclosed" to him until after the arbitration
proceeding that the homeowner had brought a lawsuit against the
architect. The contractor made specific reference to a dispute
concerning the faulty design of kitchen windows, claiming that
this was the fault of the architect. The homeowner had contended
in the arbitration that the faulty design was the responsibility
of the contractor.
After learning of these arbitration proceedings, the
architect obtained a copy of the arbitration report submitted by
the homeowner's expert witness. The architect took another
deposition of the expert witness and, with this added
information, moved to dismiss the complaint in the Law Division,
alleging that the homeowner was attempting to "double dip" in
violation of the entire controversy doctrine. The architect
alleged that the homeowner had violated Rule 4:5-1(b)(2), which
places a continuing duty on litigants to notify the parties and
the court of any other pending litigation or arbitration
proceeding.
The Law Division granted that motion. The court concluded
that because the homeowner failed to join the contractor in the
current suit against the architect and failed to notify the court
and architect of the course of the arbitration, the homeowner
violated the entire controversy doctrine and could not proceed
against the architect in this matter.
The Appellate Division affirmed. It ruled that even if the
homeowner had not yet formulated the extent of the claims against
the contractor prior to entering the arbitration action, the
homeowner "should have informed defendant and the court of the
arbitration proceeding as required by Rule 4:5-1(b)(2). The
failure to do so is a bar to this action." One member of the
panel joined the majority as to the claims that pertained to the
defects involving the contractor that the architect had the duty
to supervise, but dissented with respect to claims against the
architect that dealt with improper design, as well as malpractice
relating to improper identification and designation of the
property and the elevations. "These have nothing to do with the
claims that involved Elecon." The homeowner appeals to us as of
right under Rule 2:2-1(a).
We begin by restating the obvious: The twin pillars of the
entire controversy doctrine are fairness to the parties and
fairness to the system of judicial administration. Joel v.
Morrocco, supra, ___ N.J. at ____ (slip op. at 12). The Court
did not intend that violation of the notice requirements of Rule
4:5-1 should result in automatic orders for dismissal. Courts
must carefully analyze each of the pillars of the doctrine before
dismissing claims or parties to a suit.
In considering fairness to the party whose claim is sought
to be barred, a court must consider whether the claimant has “had
a fair and reasonable opportunity to have fully litigated that
claim in the original action.” Cafferata v. Peyser,
251 N.J.
Super. 256, 261 (App. Div. 1991). The homeowner argues that he
could not have pressed the claim against the architect in an
arbitration. After all, the entire controversy doctrine is not
part of arbitral practice. (The powers of an arbitrator are
strictly limited by the terms of the arbitration agreement.)
Further, the homeowner argues that the trial court could not have
ordered consolidation of the two proceedings because the
architect had waived the right to arbitration, and because the
arbitration between the contractor and homeowner was limited in
scope. In point of fact, the architect, if informed of the
arbitration with the contractor, might have chosen to invoke the
arbitration clause in its own contract. In that circumstance, a
court might have ordered consolidation of the two arbitrations.
Manchester Tp. Bd. Of Educ. v. Thomas P. Carney, Inc.,
199 N.J.
Super. 266, 279 (App. Div. 1985).
We need not decide whether, if informed of the pending
arbitration, the trial court could have required joinder in
either forum. The notice requirements of Rule 4:5-1 require
conduct on the part of attorneys for reasons not limited to
joinder of actions. Joinder is but one goal of the entire
controversy doctrine. Quite aside from joinder of the
controversies in either the arbitral or judicial forum, a trial
court, once informed of related actions, can employ various
procedural tools to prevent excessively complicated or unfair
litigation. See Zirger v. General Accident Ins. Co.,
144 N.J. 327 (1996) (authorizing modification of arbitration agreement to
limit duplicative litigation). The court could have taken
measures to clarify the case before it through stipulations,
authorizing discovery relating to the nature of the claims being
addressed in the arbitration proceedings (including the extent to
which the claims overlapped or paralleled those in the judicial
proceedings), and the extent to which witnesses and evidence
would be the same in both proceedings. It could have considered
the applicability of collateral estoppel in respect of factual
determinations bearing on the claims and defenses of the
respective parties. The court could have required the homeowner
to obtain a transcript of the arbitration hearing and to provide
it to the architect and the court in the judicial proceeding. It
could have further entertained applications to stay one or the
other proceeding to assure consistent results in both
proceedings. Even if the trial court could not have controlled
the disposition of the arbitration, it could have sought to
foster mediation among the parties.
At a minimum, therefore, the homeowner's failure to give
notice deprived both the architect and the court of the
opportunity to have the Superior Court manage or otherwise
coordinate the two proceedings. Hence, we agree that on this
record there has been a sufficient showing of prejudice to the
architect, resulting from violation of the notice requirements of
Rule 4:5-1, to warrant a measured application of the entire
controversy doctrine.
Obviously, there is harm to the homeowner if valid claims
against the architect were to be dismissed, but this harm was
avoidable by the homeowner. The homeowner employed the same
expert witness in both proceedings. Although counsel argued that
he was not aware of the pending arbitration proceeding, he was at
least on notice that the homeowner had requested the services of
an expert and thus counsel had sufficient reason to believe that
another claim was pending. Counsel surely knew that another
action was pending when he filed the confirmation action in
December 1992; by that time, the homeowner and the same attorney
had been in litigation with the architect for over a year, and
the homeowner had received the judgment in the arbitration
proceeding two months earlier.
Before us the homeowner readily acknowledged prejudice to
the architect in the pursuit of claims that were intertwined with
the construction defects. The entire controversy doctrine
therefore precludes assertion of these claims in a subsequent
proceeding. The homeowner, however, insists that there are other
design claims that are separate and distinct from the factual
predicate for the claims for construction defects. The narrow
question is whether violation of Rule 4:5-1(b)(2) requires a
dismissal under Rule 4:30A of those claims against the architect
based on facts or sets of facts different from those dealt with
in the earlier proceeding. We agree that violations of the Rule
are not to be regarded as mere technicalities for which dismissal
would always be inappropriate. DiTrolio v. Antiles,
142 N.J. 253, 277 (1995). Nor do such violations mandate dismissal in all
circumstances. Rather, the Rule is designed to implement the
entire controversy doctrine, not to contain its essence.
As the dissenting member of the Appellate Division observed:
"The doctrine is not to be used as a means of calendar clearance.
Rather, it is to promote fairness through providing a single,
economic and efficient forum for litigating controversies."
The purpose of the rule is not just to notify a new party of the
imminence of a future lawsuit; the purpose of the rule is to
secure the coordination and consolidation of all litigation
emanating from a single controversy through the joinder of all
participants in that controversy in a current action and to
subject joinder issues to the supervisory authority of the court.
DiTrolio, supra, 142 N.J. at 277. Thus, even if joinder could
not occur, the architect was sufficiently prejudiced that it
would be unfair to permit all allegations of the current suit to
go forward against it.
Counsel for the architect urges us to adopt a rule of
automatic dismissal whenever any violation of the Rule occurs,
because prejudice always results. We cannot agree that an
arbitration with a contractor over instances of faulty
construction always requires dismissal of an homeowner's suit
that alleges major design deficiencies against an architect. A
dispute with a contractor, for example, over the color of a
kitchen cabinet ought not result in the dismissal of a suit
against an architect alleging mislocation of a structure.
Dismissal is only appropriate when the claims in the action
against the architect are derived from facts also forming the
basis for the suit against the contractor. As in every
application of the entire controversy doctrine, courts must
carefully examine the three aspects of fairness. Joel, supra,
___ N.J. at ___ (slip op. at 4-5).
In this case, the arbitration with the contractor covered
much common ground with the litigation against the architect. On
remand, the court must assess the extent to which the homeowner's
claims in this suit against the architect will in any way
implicate the facts and claims involving both the architect and
the contractor. It is readily apparent that many claims do
implicate the conduct of both the contractor and the architect.
For example, the expert's report prepared for the homeowner in
the arbitration proceeding alleged as a deficiency against the
contractor the fact that a floor was constructed out of level.
The report of the same expert, prepared for the lawsuit, alleged
as a deficiency that the construction documents did not address
the fact of several out-of-level floor problems. We surmise that
there are few claims that will not fall into this category of
overlapping responsibility--either failure on the part of the
contractor to follow up with the architect or an expectation on
the part of the architect that the as-built work would be
satisfactory.
Because of the double violation of Rule 4:5-1, in failing to
inform the Superior Court that the other action was pending in
either the confirmation suit or the suit against the architect,
the homeowner must bear the added burden of dispelling any
possibility of prejudice. To that end, the homeowner shall
submit to the Law Division clear specifications of allegedly
surviving claims that do not in any way involve the work of the
general contractor and the dollar amounts claimed therefor. The
architect may present to the court counter-proofs. If a
reasonable fact finder could find that there was overlapping
responsibility for the work, the court should dismiss any of
those claims before trial and permit the case to proceed only as
to those claims against the architect that are entirely factually
separable from claims related to work performed by the
contractor. Because we anticipate there will be few such claims,
there will be little burden to the court in their disposition.
The judgment of the Appellate Division is reversed. The
matter is remanded to the Law Division for proceedings consistent
with this opinion.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK,
GARIBALDI, STEIN and COLEMAN join the JUSTICE O'HERN's opinion.
NO. A-66 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
MARC GELBER and MARLENE GELBER,
Plaintiffs-Appellants,
v.
THE ZITO PARTNERSHIP, a partnership
consisting of MATTHEW R. ZITO and DANIEL FALCONE,
Defendants-Respondents.
DANIEL FALCONE, ARCHITECT,
Plaintiff,
v.
MARC GELBER and MARLENE GELBER,
Defendants.
DECIDED February 27, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1Actually, the architect had sued the homeowner in the Special Civil Part for non-payment in May 1991. The Superior Court consolidated the architect's action with the August 1991 complaint filed by the homeowner in the Law Division.