Court Opinion

ID: 4178997
Source: CourtListenerOpinion
Date Created: 2017-06-20 14:12:45.128824+00
Date Added: 2024-06-11T14:38:46.258372
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-0460-15T2

JOSEPH PETRONE,

        Plaintiff-Appellant,

v.

ALEX J. SABO, ESQ., and
BRESSLER, AMERY & ROSS, P.C.,

        Defendants-Respondents.

_______________________________________

              Argued April 27, 2017 – Decided June 13, 2017

              Before Judges Lihotz and O'Connor.

              On appeal from Superior Court of New Jersey,
              Law Division, Monmouth County, Docket No. L-
              2648-12.

              Elena Gammardella argued the cause for
              appellant (Law Office of Richard A. Amdur,
              Jr., and Hoagland, Longo, Moran, Dunst &
              Doukas, LLP, attorneys; Richard J. Mirra, on
              the brief).

              Mark M. Tallmadge argued the cause for
              respondents (Bressler, Amery & Ross, P.C.,
              attorneys; Mr. Tallmadge and Risa D. Rich,
              on the brief).

PER CURIAM
     In this legal malpractice action, plaintiff Joseph Petrone

appeals from the May 19, 2015 Law Division order, which granted

partial summary judgment to defendants Alex J. Sabo and

Bressler, Amery & Ross (BAR).   After reviewing the record and

applicable legal principles, we affirm.

                                I

     The motion record informs the following.    In 2005,

plaintiff was working as a broker-dealer for Investacorp, Inc.,

a financial services firm.   A client of Investacorp filed a

claim against it and plaintiff with the National Association of

Securities Dealers (NASD), alleging they wrongfully caused the

client to sustain losses to its investment account.1   In 2006,

Investacorp and plaintiff retained BAR to defend and represent

them at the NASD arbitration hearing (investor arbitration).

Sabo was an attorney at BAR who handled this matter.

     Investacorp wanted to settle the matter with the investor,

but plaintiff, believing he was not liable, was unwilling to

settle.   Just days before the arbitration hearing, plaintiff

obtained his own attorney; defendants continued to represent

Investacorp.   Before the arbitration hearing commenced,

1
    In 2007, NASD became known       as   the   Financial   Industry
Regulatory Authority (FINRA).

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                                                            A-0460-15T2
Investacorp settled with the investor for $275,000.   Two days

later, plaintiff settled for $2500.

     In general, broker-dealers are required to report

arbitration awards and settlements.   Thus, Investacorp filed a

"Form U4" with NASD in which Investacorp stated both it and

plaintiff settled the claim with the investor, and reported the

amount each contributed toward the settlement.   Before

Investacorp filed this form, plaintiff took the position he did

not contribute toward Investacorp's settlement, as he separately

settled with the investor.   Moreover, because his settlement was

less than $10,000, he was not required to report his settlement

with NASD.   Despite plaintiff's protestations, Investacorp

declined to amend the form and filed it with NASD.

     Approximately one month later, Investacorp terminated

plaintiff.   As part of the termination process, Investacorp was

required to and did file a Form U5 with NASD.2   In that form,

Investacorp reported plaintiff contributed $2500 to the

settlement of the investor's claim.   Plaintiff complained to

Investacorp it was improper to include in the U5 form that he

had contributed toward Investacorp's settlement of the

investor's claims, again contending his settlement was separate

2
     Form U5 is the Uniform Termination Notice for Securities
Industry Registration used by broker-dealers to report the
termination of the registration of an individual.
                                3
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from Investacorp's and, further, his settlement of $2500 did not

have to be reported.    Plaintiff requested Investacorp amend both

forms and delete reference of his settlement with the investor,

but Investacorp refused to do so.    According to plaintiff, there

is a question of fact whether BAR advised Investacorp to include

the contested information on the forms.

       In 2007, plaintiff filed a claim against Investacorp with

FINRA, alleging the subject information in the U4 and U5 forms

was false and caused him to lose income.    As a remedy, plaintiff

sought removal of the allegedly misleading information from the

U4 and U5 forms, and damages in the amount of $531,500.    The

specific causes of action plaintiff asserted against Investacorp

were breach of contract, negligence, negligent

misrepresentation, and violation of the New Jersey Wage Payment

Law.   In an amended statement of claim presented to the

arbitration panel, plaintiff broke down his request for $531,500

in compensatory damages as follows:

           (1)   $19,570 in lost trail commission/wages;

           (2)   $51,430 in lost earnings in 2007;

           (3)   $40,500 in lost earnings in 2008;

           (4)   $400,000 for estimated lost earnings
                 for 2009 through 2019; and

           (5)   $20,000 in penalties.

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                                                           A-0460-15T2
    Investacorp filed a counterclaim, seeking that plaintiff

indemnify it for the $275,000 it paid in settlement to the

investor, and attorneys fees.   BAR did not represent Investacorp

in this matter (employment arbitration).

    After three days of hearings, at which both parties were

represented by counsel, the three-member panel of FINRA

arbitrators heard testimony and reviewed documentary evidence.

The panel ultimately found in plaintiff's favor.     The panel

ordered Investacorp to pay plaintiff $12,150 in compensatory

damages, plus interest, and recommended the expungement of all

references to the investor's claim from plaintiff's registration

records.   All of the relief Investacorp sought in its

counterclaim was denied.

    Three years later, in 2012, plaintiff filed the within

action against Sabo and BAR for legal malpractice.    In answers

to interrogatories, plaintiff alleged defendants had a conflict

of interest when they represented both him and Investacorp;

abandoned plaintiff just days before the investor arbitration;

and were responsible for the misleading content in the U4 and U5

forms.   Plaintiff claimed the compensatory damages he sustained

as a result of defendants' conduct was $531,500, which when

broken down were exactly the same damages he claimed before the

employment arbitration panel:
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                                                           A-0460-15T2
         (1)    $19,570 in lost trail commission/wages;

         (2)    $51,430 in lost earnings in 2007;

         (3)    $40,500 in lost earnings in 2008;

         (4)    $400,000 for estimated lost earnings
                for 2009 through 2019; and

         (5)    $20,000 in penalties.

In addition, he claimed attorneys fees of $22,000.

    Defendants filed a motion for summary judgment dismissal,

arguing the doctrine of collateral estoppel precluded plaintiff

from recovering the aforementioned compensatory damages from

defendants.    Their motion was denied but, on reconsideration,

the court granted defendants partial summary judgment.    The

court found plaintiff collaterally estopped from seeking the

same damages sought, litigated, and considered by the

arbitrators during the employment arbitration hearing.    However,

the court also found that to "the extent the plaintiff has

claims for damages beyond those amounts attributable directly to

Investacorp's improper filing of the U4 and U5 forms, they may

be pursued in this matter."

    Thereafter, the parties entered into a consent order

stating all remaining claims were settled, but that plaintiff

preserved his right to appeal the order granting defendants

partial summary judgment.     This appeal ensued.

                                  6
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                                 II

       Plaintiff's principal argument on appeal is the trial court

erred when it found plaintiff barred from relitigating the

subject damages on the grounds of collateral estoppel.    We

disagree and affirm.

       The doctrine of collateral estoppel operates to preclude

the relitigation of issues that have been previously decided.

Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 522 (2006).     For

the doctrine to apply, the party asserting the bar must show:

           (1) the issue to be precluded is identical
           to   the   issue   decided   in  the   prior
           proceeding; (2) the issue was actually
           litigated in the prior proceeding; (3) the
           court in the prior proceeding issued a final
           judgment    on    the   merits;   (4)    the
           determination of the issue was essential to
           the prior judgment; and (5) the party
           against whom the doctrine is asserted was a
           party to or in privity with a party to the
           earlier proceeding.

           [Id. at 521 (quoting In re Estate of Dawson,
           136 N.J. 1, 20-21 (1994)).]

       This doctrine applies not only to issues raised in a prior

action, but also to facts that were in dispute as well.    Id. at

522.     Moreover, collateral estoppel may apply even if the prior

proceeding was an arbitration hearing.    Habick v. Liberty Mut.

Fire Ins. Co., 320 N.J. Super. 244, 257-58 (App. Div.), certif.

denied, 161 N.J. 149 (1999).
                                 7
                                                          A-0460-15T2
    Applying the elements of collateral estoppel to this

matter, first, the damages defendants seek to preclude from

being relitigated are the very same damages plaintiff sought to

recover from Investacorp during the employment arbitration

hearing.   After plaintiff's entitlement to compensatory damages

was litigated before the panel, the arbitrators determined these

damages were $12,150.   But for the attorneys fees plaintiff

seeks from defendants, there is no question the damages

plaintiff seeks in this matter are identical to those sought in

the employment arbitration.   However, the trial court did not

preclude plaintiff from seeking all damages from defendants in

the within matter, just those sought and litigated during the

arbitration hearing.

    As for the second element, whether the damages the trial

court barred from relitigation on collateral estoppel grounds

was litigated in the prior proceeding, there is no question when

before the panel, plaintiff advocated he was entitled to the

very same $531,500 in damages he seeks in the within matter.

After three days of hearings, during which the panel heard

testimony and reviewed various documents, the panel found in

plaintiff's favor, although it determined he was entitled to

only $12,150 in compensatory damages.

                                8
                                                          A-0460-15T2
    The third element is whether the court in the prior

proceeding issued a final judgment on the merits.    An

arbitration panel is not, of course, a court and, thus, cannot

enter a final judgment.   However, "the dispositions reached by

arbitrators are afforded collateral estoppel effect by reviewing

courts."   Levine v. Wiss & Co., 97 N.J. 242, 250 (1984).     As for

the fourth and fifth elements, there is no question the damages

plaintiff sought to recover in the arbitration hearing were

essential to the arbitration award, and the party against whom

the doctrine is asserted was a party to the earlier proceeding.

    We note that even if the elements of collateral estoppel

are met, a court may exercise its discretion to deny preclusion

where its application would be unfair.    "Even where these

requirements are met, the doctrine [of collateral estoppel],

which has its roots in equity, will not be applied when it is

unfair to do so."   Pace v. Kuchinsky, 347 N.J. Super. 202, 215

(App. Div. 2002).   Here, plaintiff argues applying this doctrine

to bar the subject damages would be inequitable.    We are not

persuaded.

    As we observed in Pace, supra, 347 N.J. Super. at 216,

factors disfavoring preclusion include:

           [T]he party against whom preclusion is
           sought could not have obtained review of the
           prior judgment; the quality or extent of the
                                 9
                                                            A-0460-15T2
         procedures in the two actions is different;
         it was not foreseeable at the time of the
         prior action that the issue would arise in
         subsequent litigation; and the precluded
         party did not have an adequate opportunity
         to obtain a full and fair adjudication in
         the prior action.

    Here, even if the arbitration award could not be reviewed,

none of the other factors applies.    The arbitration hearing was

a contested hearing and, although there was no jury, the hearing

was otherwise sufficiently comparable to a non-jury hearing

conducted in court.   Plaintiff knew or should have known the

damages he sought to litigate and have decided at the

arbitration proceeding could be precluded in subsequent

litigation.   Finally, plaintiff did have an adequate opportunity

to fully adjudicate his entitlement to the subject damages

during the arbitration proceeding.    In summary, it is clear the

five elements of collateral estoppel were met, and fairness

weighs in favor of preclusion.

    We have considered plaintiff's remaining arguments and

conclude they are without sufficient merit to warrant discussion

in a written opinion.   See R. 2:11-3(e)(1)(E).

    Affirmed.

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