Ellison v. Schenck, Price, Smith & King, 654 A.2d 1024 (N.J.Super.A.D. 1995)
NJ Underlying Real Estate and Litigation
Student Contributor: John J. Anzalone
Facts: Plaintiff’s entered into a lease for developing cemetery grounds. Defendant represented both Plaintiff and the Cemetery. The Defendant also represented the plaintiff in negotiating the terms of the sublease of leased land. After the lease had become unprofitable for Plaintiff, Plaintiff sued Defendant. Plaintiff asserted that they relied on defendant’s advice to enter into the contract because they were wrongly led to believe there was nothing preventing the lawful lease of the land. Plaintiff also claimed they suffered loses because the defendant failed to put an escalation clause in the contract with the person they sublet to.
Issue: Did plaintiff’s failure to sue the attorney in the suit against the cemetery preclude them from later suing the attorney?
Ruling: The court affirmed the dismissal of the suit by holding that Plaintiff was barred from suing he should have sued the attorney as well in an earlier suit against the cemetery, based on the following considerations:
1) Under New Jersey’s "Entire Controversy Doctrine", any suit against an indispensable party that should have been added to a prior suit, results in the inability to bring a suit against that party that is part of the same dispute.
2) Parties are indispensable when the case cannot be decided between the parties present in the suit without judging or affecting the interest of the party that should have been added.
3) Had the plaintiffs won, the Defendant would have been hampered by the decision in protecting itself from being found liable for substantial damages.
Lesson: New Jersey’s "Entire Controversy Doctrine" provides an effective shield from suits by client-plaintiffs who fail to add a claim against an allegedly negligent lawyer to a suit that is ongoing and in which the lawyer’s alleged negligence took place.
NOTE: In response to an uproar from its decision in Circle Chevrolet v.Giordanno Halleran & Ciesla, 142 N.J. 280 (1995) which held that the entire controversy doctrine bars subsequent legal malpractice claims, the Supreme Court of New Jersey reversed that holding in Olds v. Donnelly, 150 N.J. 424 (1997) and held that legal malpractice cases are exempt from the entire controversy doctrine. Thus, this case is no longer good law on the issue of the entire controversy’s applicability to legal malpractice actions.