Opinion ID: 2198038
Heading Depth: 1
Heading Rank: 3

Heading: New Jersey Simmermon case

Text: Dryvit filed its answer in the Simmermon case on March 15, 2002, just three weeks before the Tennessee Circuit Court certified the nationwide class against Dryvit and gave its preliminary approval to the class action settlement. The record does not reveal when Dryvit first became aware that the Tennessee homeowners' class action would be converted into a nationwide class action. In any event, Dryvit's answer did not contain the certification mandated by Rule 4:5-1(b)(2). In accordance with that rule, Dryvit was required to aver whether the matter in controversy [was] the subject of any other action pending in any court . . . or whether any other action . . . [was] contemplated.  R. 4:5-1(b)(2) (emphasis added). That rule, moreover, requires a defendant to file with the [plaintiff] and with the court an amended certification if there is a change in the facts stated in the original certification. Ibid. Dryvit never filed any certification with plaintiff or the court that the matter in controversy in the Simmermon case was the subject of the Tennessee nationwide class action. On March 25, 2003, Dryvit's counsel first sent a letter to plaintiff's counsel regarding the nationwide class action settlement  eleven months after preliminary approval of the settlement, six months after the opt-out deadline had expired, and two months after the Tennessee court entered its approval of the settlement. In the letter, plaintiff's counsel was advised that because his client had not opted out of the nationwide class action, he was `barred and enjoined' from proceeding with the case against Dryvit. Defense counsel asked that a stipulation dismissing the claims against Dryvit be forwarded to him. Dryvit's counsel later forwarded a copy of the class action settlement agreement to plaintiff's counsel and renewed his call for a stipulation dismissing the claims against Dryvit. Plaintiff's counsel did not oblige. By this point, the parties had exchanged written discovery. On May 30, 2003, defense counsel, for the first time, informed the trial court about the class action settlement and submitted that plaintiff was barred from prosecuting the claim against Dryvit. In response, plaintiff's counsel complained that Dryvit, while exchanging discovery in the New Jersey case, withheld information about the class action, thus denying plaintiff the opportunity to opt out. Discovery proceeded, and plaintiff was deposed on three different dates, the last time in July 2004. In the meantime, in March 2004, the trial court rejected Dryvit's argument that the parties lacked privity and therefore denied Dryvit's motion to dismiss the Consumer Fraud Act and common law tort claims. The court, however, granted summary judgment in favor of Dryvit on the Magnuson-Moss Warranty Act claim. At a hearing in November 2004, Dryvit sought a stay of the Simmermon case pending final resolution of the nationwide class action in Tennessee. Dryvit's counsel explained that the order approving the class action settlement had been stayed pending an appeal by intervenors challenging the order approving the class action settlement. Counsel further explained that because the settlement was not a final nonappealable order under Tennessee law, it was not yet entitled to the preclusive effect of res judicata. Despite that information, plaintiff did not seek relief in the Tennessee courts from the settlement order. Instead, he filed an affidavit with the Law Division, averring that he did not receive a mailed notice concerning the class action settlement and that had he received timely notice he would have opted out of the class. Invoking the doctrines of laches and equitable estoppel, the trial court denied the motion to stay the New Jersey action. The trial court found that while litigating the Simmermon case, Dryvit's counsel had strategically waited until after the opt-out deadline to inform plaintiff of the nationwide class action. The court also determined that although plaintiff did not complete the opt-out form, his prosecution of claims in New Jersey  without notice of the settlement  reasonably demonstrates a desire to be excluded from the [nationwide] class action litigation. [8] After the appeals had run their course in the nationwide class action in 2005, and the Tennessee Circuit Court again approved the settlement, the Law Division in July 2005 granted Dryvit's motion to amend its answer to include the affirmative defense of res judicata based on the finality of the nationwide class action settlement. In January 2006, the trial court granted Dryvit's motion to dismiss plaintiff's action on the ground that New Jersey was obliged to give full faith and credit to the Tennessee class action judgment, which precluded the prosecution of plaintiff's individual claims in New Jersey. The court determined that the Tennessee Circuit Court had jurisdiction over the class action and plaintiff as a class member, that the first-class mailing and other procedures for notifying class members of the settlement and opt-out satisfied federal due process requirements, and that plaintiff's failure to opt out rendered him bound by the class action settlement. The court rejected plaintiff's arguments that, on the basis of equitable estoppel and laches, defendant should be barred from invoking the preclusive effect of the Tennessee judgment. The court reasoned that Dryvit's failure to disclose its knowledge of the Tennessee class action did not place plaintiff in a position of extreme and unalterable prejudice. That was so because plaintiff was aware of the class action since 2003 and made no effort in the succeeding two years, before the Tennessee judgment became truly final, to challenge the notification procedure or to request an extension of the opt-out period in the Tennessee courts. The court observed that plaintiff acted on the erroneous belief that the nationwide class settlement did not control the New Jersey litigation. The trial court also denied plaintiff's motion for reconsideration.
The Appellate Division reversed the grant of summary judgment and remanded to the trial court for further proceedings. Simmermon, supra, 393 N.J.Super. at 335, 340, 923 A. 2d 311. The panel reasoned that under Rule 4:5-1(b)(2), Dryvit was required to disclose to plaintiff and the court the terms of the nationwide class action settlement because the transactional facts in that matter were the same as those in the Simmermon case. Simmermon, supra, 393 N.J.Super. at 339, 923 A. 2d 311. The panel concluded that Dryvit's failure to comply with Rule 4:5-1(b)(2) barred it from invoking the preclusive effect of the settlement agreement in the Tennessee matter. Simmermon, supra, 393 N.J.Super. at 335, 923 A. 2d 311. The panel also noted that Dryvit offered no explanation for its violation of the rule. Id. at 339, 923 A. 2d 311. According to the panel, had Dryvit provided the certification mandated by Rule 4:5-1(b)(2), plaintiff could have taken the appropriate steps to opt out of the nationwide class action and the trial court would have been in the position, as part of its case management responsibilities, to address the situation in a timely fashion. Simmermon, supra, 393 N.J.Super. at 339, 923 A. 2d 311. By violating the rule, Dryvit was able to wait until the Tennessee litigation [was] concluded. . . and then, when it [was] too late for plaintiff to opt out of the Tennessee proceedings, use the Tennessee class action settlement as a bar to plaintiff obtaining any relief in New Jersey. Ibid. Because the panel believed that Dryvit should not be permitted to reap a benefit from its conduct, it concluded that the violation of the Rule's clear injunction [was] an entirely independent legal basis for not enforcing the Tennessee judgment. Id. at 339-40, 923 A. 2d 311. As a result, the panel discerned no need to address the Due Process analysis conducted by the trial court. Id. at 339, 923 A. 2d 311. We granted defendant's petition for certification. 192 N.J. 596, 934 A. 2d 638 (2007).