New Jersey Supreme Court limits access to state courts, draws criticism.

The New Jersey Supreme Court has extended the reach of a controversial legal doctrine, closing the doors of the state's courthouses under certain circumstances to plaintiffs across the country.

In four cases decided August 1, the court expanded the scope of New Jersey's entire-controversy doctrine. Since 1989, the doctrine has required plaintiffs to include all possible defendants in one lawsuit. If potential defendants are left out, the plaintiffs are barred from suing them later. (Cogdell v. Hospital Center at Orange, 560 A.2d 1169 (N.J. 1989).)

The August decisions expanded the doctrine in three ways:

* The court applied the same restriction to plaintiffs from outside New Jersey. The justices held that claims against all defendants must be included in the original complaint (if the court's jurisdiction allows it), even if the case is filed in another state. After that litigation is completed, plaintiffs will be barred from suing additional parties in New Jersey courts for injuries arising out of the same set of facts. (Mortgagelinq Corp. v. Commonwealth Land Title Insurance Co., 662 A.2d 536 (N.J. 1995).)

* The court held that if a possible legal malpractice claim grows out of the facts giving rise to a lawsuit, the plaintiff must include it in the original complaint rather than waiting until later to sue the attorney separately. (Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 662 A.2d 509 (N.J. 1995); Mystic Isle Development Corp. v. Perskie & Nehmad, 662 A.2d 523 (N.J. 1995).)

* The justices ruled that case settlements bar further litigation on the same matter. Traditionally, settlements have preclusive effect only to the extent that the parties agree to it. But the court apllied the entire-controversy doctrine to all settlements, even if the parties intended to leave open the possibility of future litigation. (DiTrolio v. Antiles, 662 A.2d 494 (N.J. 1995).)

The court based the decisions on the theory that the doctrine promotes fairness to the parties and efficiency in the courts.

The decisions are "incredibly unusual," said Allan Stein, a professor at Rutgers University School of Law in Camden, New Jersey. "The whole entire-controversy doctrine is unique to New Jersey." Although most jurisdictions require that all claims against a defendant be brought together in one case, Stein said, only the state of New Jersey requires party joinder.

Tom Vesper, a West Atlantic City lawyer, said the decisions will have enormous practical implications for attorneys representing plaintiffs. He said he has alerted colleagues in other states that they need to incorporate their clients' claims against New Jersey defendants--many pharmaceutical and manufacturing companies, for example, are located in the state--because they won't be allowed to sue them later in New Jersey.

"You've got [lawyers] in California who have no idea what's going to happen to them," Vesper said, adding that the rulings will unfairly immunize New Jersey defendants from litigation.

Although the court said the doctrine promotes fairness "to all parties," the decisions are "punitive against plaintiffs," Stein said. "You use it or lose it."

A dissenter in the Mortgagelinq case agreed. "I fail to see the fairness in preventing defrauded plaintiffs from pursuing just claims against wrongdoers in the courts of this state," wrote Justice Stewart Pollack.

Mortgageling involved a fraud claim originally brought against Pennsylvania defendants in federal court in that state. When the plaintiffs--a mortgage lender and the Federal Home Loan Mortgage Corp.--filed suit in New Jersey against New Jersey defendants allegedly involved in the same fraud scheme, the defendants asked the court to dismiss the case under the entire-controversy doctrine. The court did so, and the state supreme court ultimately affirmed.

"It strikes me as manifestly unfair," Pollack wrote, "to permit swindlers to escape liability merely because plaintiffs' counsel did not appreciate that the failure to join defendants in the earlier federal action would preclude plaintiffs from maintaining a subsequent suit in the courts of this state."

Stein said the decision tells plaintiffs' attorneys "when you litigate in Pennsylvania federal court, you should pay attention to the New Jersey entire-controversy doctrine. The consequence of not doing so is that you can't proceed in New Jersey."

Although he described that result as "weird," he said he doubted the court had violated any constitutional principles. The "saving grace" of all four decisions, he said, is that the justices acknowledged that the claims they bar in New Jersey can still be brought in other jurisdictions.

"A state, by and large, has wide latitude in determining when it wants to provide people with the opportunity to use its courts," Stein said. As long as instate and out-of-state claims are treated the same, "there's little constitutional obligation for my state to open its courts to anybody."

The two cases that incorporate legal malpractice claims into the entire-controversy doctrine "present a very perplexing problem from a legal ethics standpoint," Stein said. Circle Chevrolt, in particular, requires attorneys who make mistakes to add any potential malpractice claims to the original case--essentially bringing claims against themselves. An attorney in this situation would be forced to leave the litigation, Stein said.

Vesper said the decision will not allow a lawyer to try to correct the mistake and potentially avoid complicated legal mal-practice litigation for the client.

"In a lawyer-client relationship, it's the client's action and the client's best interests that should be served," Vesper said. "I don't think it serves the client" to force an attorney to leave the case and to force a malpractice claim into the original action when, in the end, it might not be necessary. If the lawyer were able to correct the error, the "possible malpractice would not in law or fact cause any harm to the client."

Stein agreed that all four cases may encourage more--and more complex--litigation as plaintiffs try to protect their potential claims from being squelched under the entire-controversy doctrine.

"A doctrine based on efficiency principles ends up creating inefficiencies, doing exactly the opposite of what you intend," Stein said. "You end up generating more litigation than you save."