ENGINE DISTRIBUTORS, INC., VS. ARCHER & GREINER, PC, (L-1147-17, ATLANTIC COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4307-18T4
ENGINE DISTRIBUTORS, INC.,
Plaintiff-Appellant,
v.
ARCHER & GREINER, PC,
Defendant-Respondent.
__________________________
Submitted June 3, 2020 – Decided July 1, 2020
Before Judges Koblitz, Whipple and Mawla.
On appeal from the Superior Court of New Jersey, Law
Division, Atlantic County, Docket No. L-1147-17.
Goldberg & Wolf, attorneys for appellant (Alan Lee
Frank and Robert Brookman, on the briefs).
Archer & Greiner, attorneys for respondent (Ellis I.
Medoway and Edward J. Kelleher, on the brief).
PER CURIAM
Plaintiff Engine Distributors, Inc. (EDI) appeals from a May 1, 2019 order
denying its motion for summary judgment and granting defendant Archer &
Greiner, PC's (Archer) motion for summary judgment and dismissal of EDI's
malpractice complaint. We reverse and remand for further proceedings.
EDI was represented by an attorney in various legal matters beginning in
the late 1970s. Floyd Glenn Cummins was EDI's president and majority
shareholder. In 2003, EDI's attorney defended EDI in an age discrimination
lawsuit. That attorney later joined Archer as a partner in 2005, and there,
another partner assisted him on the discrimination case. During that
representation, Archer received EDI's financial records regarding compensation,
profit and loss, sales commission, expense reports and financial charts for the
time period between 1999 and 2002. In June 2007, EDI terminated Archer's
representation altogether.
Archer sued EDI for its outstanding legal fees and EDI counterclaimed
alleging malpractice. In 2010, the parties settled the matter and signed a general
release. The attorney who brought EDI to Archer and was EDI's lead counsel,
left the firm in July 2013.
In October 2013, Lisa Cummins retained Archer to represent her in a
divorce from Glenn.1 Although Glenn retired from EDI in 2015, Lisa argued
1
We utilize Glenn rather than Floyd because he is referred to accordingly in the
record. We utilize Glenn and Lisa's first names because they share a common
surname. We intend no disrespect.
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EDI was his alter ego. The Family Part judge agreed and granted Lisa's motion
to join EDI as a party in the divorce.
In October 2017, EDI filed a motion to disqualify Archer as Lisa's counsel
based on the firm's past representation of EDI. The Family Part judge reviewed
relevant evidence, including depositions of the Archer attorneys who previously
represented EDI, and denied the motion. The judge found Glenn to be a
"recalcitrant litigant" because he
knew there was a conflict four years ago. He chose to
allow this representation to continue, not only knowing
that [Archer] had represented his company on a number
of litigation efforts on his behalf, but they had also
entered into litigation between them . . . they were suing
each other over fees. . . . It is unfathomable to me that
a savvy businessman . . . would allow that
representation to continue other than to at some point
in the future try to use it as a sword.
. . . [Lisa] has had a long road with . . . [Archer] and the
conflict wasn't raised until December . . . of 2016. Then
[EDI] agreed, along with [Glenn and Lisa], to enter into
binding arbitration . . . .
....
Unless [the Law Division judge] determines that there
is a conflict, I'd be willing to reconsider this, but I think
also that when we agreed to enter into binding
arbitration we decided that we weren't going to assert
this conflict issue, and I deem that to be consent on the
part of EDI.
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The judge ordered the parties to return to arbitration.
In June 2017, prior to the decision in the family case, EDI filed a
complaint in the Law Division against Archer alleging legal malpractice,
namely, violation of Rule of Professional Conduct (RPC) 1.9 and 1.10; breach
of contract; and breach of fiduciary duty. EDI's complaint alleged Archer's
representation of Lisa damaged it because Archer used confidential information
it learned during its previous representation of EDI against EDI in the
matrimonial litigation. It also alleged Archer's prior representation of EDI
included work on bank loan transactions as well as review of tax returns, bank
statements, sales commission reports, sales reports, expense reports,
confidential financial reports, and financial charts that included sales metrics
and gross profits. EDI alleged Archer also knew the identities of EDI's clients,
key suppliers, and distributors. EDI alleged its attorney analyzed Glenn and
Lisa's pre-nuptial agreement before its execution. The complaint alleged
Archer's knowledge about details of prior loan instruments gave it insight into
an asset loan agreement that EDI entered into after Archer's representation
terminated.
During discovery, EDI served deposition notices on three attorneys at
Archer, namely, Lisa's divorce attorney, the attorney who assisted the lead
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attorney in the discrimination case, and the firm's corporate designee. EDI also
subpoenaed its former lead attorney for a deposition. After successive motion
practice before the Law Division judge, EDI deposed the Archer attorney who
worked on the discrimination case with the lead attorney, Archer's corporate
designee, and the lead attorney. EDI's requests to depose Lisa's matrimonial
attorney, or alternatively have an adverse inference drawn for Archer's failure
to produce the attorney for a deposition, were denied.
In January 2019, EDI and Archer filed motions for summary judgment,
which are the subject of this appeal. The Law Division judge granted Archer's
motion for summary judgment on collateral estoppel grounds. The judge found
the conflict of interest issue and the evidence involved was identical to the issue
the Family Part judge decided. The Law Division judge also found "the conflict
of [interest] issue was actually litigated before [the Family Part judge]. Unlike
a stipulated issue [or a] similarly non-litigated issue, the conflict . . . issue was
zealously argued by the parties" and decided with finality because "[a]t the same
time, the instant litigation was initiated[,] and the parties were on notice that
[the Family Part judge]'s decision may have an effect on the civil action." The
judge concluded
the conflict of interest issue was essential to [the Family
Part judge]'s prior denial of the motion to disqualify. In
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the instant case, [EDI] asserts claims of professional
negligence, breach of contract and breach of fiduciary
duty; however, underlying all of these claims is the
alleged conflict of interest. The issues necessary to find
a conflict here, such as the scope of [Archer]'s former
representation of [EDI], were essential to [the Family
Part judge]'s decision not to disqualify [Archer] as
[Lisa]'s counsel. Last, the party against whom the
doctrine is asserted, [EDI], was the moving party in the
matrimonial action.
"We review a grant of summary judgment de novo, applying the same
standard as the trial court." Woytas v. Greenwood Tree Experts, Inc., 237 N.J.
501, 511 (2019). Under this standard, summary judgment is granted only "if the
pleadings, depositions, answers to interrogatories and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any
material fact challenged and that the moving party is entitled to a judgment or
order as a matter of law." R. 4:46-2(c).
EDI argues the Law Division judge erroneously applied the doctrine of
collateral estoppel because: (1) the Family Part judge's findings were dicta and
unessential to that court's decision; (2) the Law Division judge never made a
final determination on the conflict of interest issue; (3) EDI never had a full and
fair opportunity to establish that Archer's representation of Lisa constituted a
conflict of interest; (4) the issues precluded were not identical to the issues
decided in the matrimonial case; (5) the judge misread the Family Part judge's
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statements regarding the conflict of interest; and (6) even if all the elements of
collateral estoppel were present, the Family Part judge's determination was
erroneous because she decided the conflict of interest issue without the benefit
of the relevant evidence, namely, the barred deposition.
EDI also argues the Law Division judge should have granted its motion
for summary judgment because Archer violated the RPCs and breached its duty
of loyalty to EDI by joining it in the matrimonial matter, which was substantially
related to Archer's prior representation of EDI. EDI asserts the judge improperly
denied it the opportunity to depose Lisa's matrimonial attorney or alternatively
grant it an adverse inference.
RPC 1.9(a) states: "A lawyer who has represented a client in a matter shall
not thereafter represent another client in the same or substantially related matter
in which that client's interests are materially adverse to the interests of the
former client unless the former client gives informed consent confirmed in
writing." RPC 1.10(a) states: "When lawyers are associated in a firm, none of
them shall knowingly represent a client when any one of them practicing alone
would be prohibited from doing so by . . . RPC 1.9 . . . ." Although a "[v]iolation
of the rules of professional conduct do[es] not per se give rise to a cause of
action in tort," Sommers v. McKinney, 287 N.J. Super. 1, 13 (App. Div. 1996),
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"the existence of a duty owed by an attorney may be supported by reference to
an attorney's obligation under the RPCs, and that plaintiffs may present evidence
that an attorney has violated the RPCs in cases claiming the attorney has
breached his or her duty of care." Baxt v. Liloia, 155 N.J. 190, 199-200 (1998).
In addition to the first count of EDI's Law Division complaint alleging
violations of RPC 1.9 and 1.10, the second and third counts for breach of
contract and breach of fiduciary duty are grounded in the assertion that Archer
violated the RPCs, namely, that the alleged disclosure and use of confidential
information gained from Archer's prior representation, occurred when Archer
began representing Lisa.
Our de novo review of the record shows EDI waived the right to seek
Archer's disqualification in the matrimonial matter. However, the Family Part
judge did not adjudicate the conflict of interest issue. Indeed, the Family Part
judge left open the possibility that the Law Division judge's adjudication of the
issue could conclude there was a conflict of interest. For these reasons,
collateral estoppel did not apply. See Hennessey v. Winslow, 183 N.J. 593, 599
(2005) (requiring, among other factors, that the issue in the prior litigation be
substantially similar or identical to the issue in the second case, and that the
issue was actually litigated in the first case).
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Whether Archer was disqualified on grounds of a conflict of interest was
essential to address the claims in EDI's Law Division complaint because the
conflict of interest was a condition precedent to finding a breach of contract and
fiduciary duty. We cannot conclude the conflict of interest was waived where
the issue was not actually adjudicated. For these reasons, we reverse and remand
the matter to the Law Division judge to determine whether there was a conflict
of interest and if further discovery is needed to decide this dispute.
Reversed and remanded. We do not retain jurisdiction.
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