The Entire Controversy Doctrine and the Importance of Joining Additional Parties in Initial Pleadings

Mac Naughton v. Power Law Firm, A-3711-19, 2021 WL 2964324 (N.J. Super. App. Div. July 15, 2021).

This case addresses the importance of naming additional parties pursuant to Rule 4:5-1(b)(2) in initial pleadings.

Plaintiff W. James Mac Naughton (“Jim”) appealed a May 27, 2020 Order granting summary judgment to defendant Power Law Firm, LLP, Jinhee Bae, and Meghan Maier.  Jim was a co-trustee with his uncles of a Trust established by his parents.  In 2012, a dispute arose between the co-trustees concerning the use of a Trust asset — a vacation home in Cape Cod.  The co-trustees consulted defendants — Power Law Firm — for legal advice regarding the management of the Trust asset.  Several years later, in March 2017, a second dispute arose as to Jim’s use of Trust funds.  The other co-trustees — Jim’s uncles — consulted with defendants again for legal advice concerning the dispute.  In an attempt to resolve the matter, defendants communicated with Jim, and even drafted an agreement, to attempt to resolve the dispute.  The matter did not resolve amicably, and thus the co-trustees eventually decided to pursue litigation against Jim.  They were referred by defendants to another law firm for purposes of litigation against Jim.

In May 2018, the co-trustees (represented by the new law firm) filed an amended verified complaint against Jim, and the litigation was settled over a year later.  In November 2019, Jim filed a complaint against defendants — the law firm that had advised the co-trustees — alleging legal malpractice, breach of fiduciary duty, and breach of fiduciary duty to a former client.  The defendant law firm filed an answer and simultaneously moved for summary judgment.  The trial court granted defendant’s motion and dismissed Jim’s complaint, finding that Jim’s failure to appraise the court of defendants in his initial pleadings ran afoul of the entire controversy doctrine and Rule 4:5-1.

The Appellate Division affirmed, finding that the entire controversy doctrine reflects a long-held preference that related claims and matters arising among related parties be adjudicated together rather than in separate, successive, fragmented, or piecemeal litigation.  Further, the court found that pursuant to Rule 4:5-1(b)(2) a party is required to certify in his or her initial pleadings the names of any non-party who should be joined in the action or who is subject to joinder because of potential liability to any party on the basis of the same transactional facts.

In the instant matter, Jim was aware as early as 2017 of the potential claims he had against defendants, and his failure to assert the claim, or at least advise the court of any non-party who should be joined in the action was inexcusable as it was apparently a deliberate strategy to obtain depositions and discovery to utilize in a subsequent action.  The court also agreed that defendants were substantially prejudiced by the inexcusable failure.  Defendants were deprived of the opportunity to participate in the extensive discovery process in the underlying action and to permit Jim to duplicate that process would be unfair to the defendants.