The Supreme Court of New Jersey revisited the application of the entire controversy doctrine to legal malpractice actions in Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C., 237 N.J. 91 (2019). The Court reiterated its holding in Olds v. Donnelly, 150 N.J. 424, 443 (1997), that the entire controversy doctrine does not require a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client. A collection action by a law firm against a former client, however, may invoke the entire controversy doctrine and preclude a later action for legal malpractice.
The clients in this matter were Evangelos and Matilde Dimitrakopoulos. The Dimitrakopouloses retained Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C. (“the Borrus firm”) for representation in an action against a business associate (“the underlying business action”). The underlying business action eventually settled in arbitration after the Borrus firm withdrew as counsel. Before the underlying business action settled, the Borrus firm filed a Complaint against Mr. Dimitrakopoulos seeking unpaid legal fees. Sixteen months after the Complaint was filed, final judgment by default was entered as a result of Dimitrakopoulos’s failure to provide discovery. Three years after entry of judgment in the fee-collection action, the Dimitrakopouloses sued the Borrus firm for legal malpractice.
The Borrus firm filed a motion to dismiss the Complaint for failure to state a claim on which relief could be granted based on the entire controversy doctrine and the doctrine of waiver. The trial court dismissed the legal malpractice action, finding that while plaintiffs were not required to file the legal malpractice action during the underlying business action, they should have asserted any legal malpractice claims during the fee-collection action. The Dimitrakopouloses appealed and the Appellate Division affirmed.
The Supreme Court of New Jersey then reversed the judgment of the Appellate Division and remanded the matter to the trial court for further proceedings. The Court set forth the following analysis: first, the alleged legal malpractice must arise from related facts or the same transaction or series of transactions as the prior action, but need not share common legal theories. Second, as set forth in Olds, the client is not required to bring a legal malpractice action in the same action wherein the attorney represented the client. Third, a fee-collection action brought by an attorney against a former client is not an “underlying action” within the meaning of Olds. Finally, as the entire controversy doctrine is an equitable remedy, the court must consider the totality of the circumstances and determine whether the remedy would promote the doctrine’s objectives of conclusive determinations, party fairness and judicial economy and efficiency. Here, the Court determined the record did not contain necessary information and remanded the matter to the trial court. The Complaint was dismissed on remand by the trial court after briefing and oral argument.
This case both serves as a reminder to all practitioners to develop and protect the record at the trial court level and signifies an important development in the application of the entire controversy doctrine to legal malpractice actions.
*Diana C. Manning argued this matter before the Supreme Court of New Jersey on behalf of amicus curiae New Jersey State Bar Association.