Court Opinion

ID: 4090865
Source: CourtListenerOpinion
Date Created: 2016-10-19 20:00:36.367551+00
Date Added: 2024-06-11T14:36:06.226619
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                      No. 15-4045
                                      ___________

                                    STEVEN DURST;
                                    REUBEN DURST,
                                              Appellants

                                             v.

                  MATTHEW DURST; HALLORAN & SAGE LLP;
                 ROBINSON & COLE LLP; KELLEY GALICA-PECK
                    ____________________________________

                     On Appeal from the United States District Court
                               for the District of New Jersey
                         (D.C. Civil Action No. 1-12-cv-05255)
                     District Judge: Honorable Jerome B. Simandle
                      ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                   October 5, 2016

             Before: VANASKIE, SCIRICA and FUENTES, Circuit Judges

                            (Opinion filed: October 19, 2016)
                                     ___________

                                       OPINION*
                                      ___________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
PER CURIAM

       Steven Durst and Reuben Durst appeal from orders of the United States District

Court for the District of New Jersey, which granted summary judgment motions for all

Defendants, and denied the Plaintiffs’ motions to amend their complaint and their motion

for reconsideration. We will affirm the District Court’s orders and final judgment.

       Because we write primarily for the parties, who are familiar with the background

of this case, we discuss that background only briefly. This litigation involves the Jake

Ball Trust (the “Trust”), initially established by Steven Durst (“Steve”) as a revocable,

inter vivos trust, and converted in 2007 to an irrevocable trust. Steve was the Grantor,

and he named his brothers Matthew Durst (“Matt”) and Reuben Durst (“Mike”) as co-

trustees. The lawsuit revolves around issues concerning one asset, the “Millville Asset”

(the “Asset”).

       In November 2005, Steve, who was eligible for a 10% member interest in the

Asset, designated Matt, as Trustee of the Trust, to receive that interest. Steve did not read

the Operating Agreement connected with the Asset before signing it, and did not notice

Section 7.04, which allowed Bruce A. Goodman (who was Steve’s boss at the time), to

buy out the 10% interest under a certain formula if Steve were to cease his employment

with Goodman for any reason. According to the amended complaint, this provision

“could effectively destroy the value” of the Asset to the Trust. Dkt. #24 at ¶ 42(c).

                                             2
       In May 2010, Steve was terminated, and Goodman advised that he was exercising

his option to buy out the Trust’s interest in the Asset. Matt, as trustee, filed a lawsuit

against Goodman and his company in the Superior Court of New Jersey, Cumberland

County, Chancery Division, seeking to have Section 7.04 declared void and

unenforceable. The parties to that suit participated in a two-day mediation session; Steve

also “participated for a portion of the mediation.” Chancery Court decision, Dkt. #12-7

at 11. The parties reached a settlement, and “placed [it] on the record before the

[Chancery] Court on October 4, 2011.” Id. Following the settlement, Steve “allegedly

undertook actions to prevent the settlement from going into effect.” Id. at 9. Goodman

and his company filed a motion to enforce the settlement, and Steve and Mike filed a

cross-motion to set the settlement aside, arguing that the Asset had been undervalued for

purposes of the settlement.

       The Chancery Court gave Steve and Mike and the parties a little over four months

to conduct limited discovery relevant to the motions. In ruling in favor of enforcing the

settlement, the Court noted that despite the discovery opportunity, proposed intervenors

Steve and Mike did not submit an appraisal or present any other evidence to prove their

allegation that the Asset had been undervalued. Id. at 11. The Court found “no

compelling circumstances that support setting aside the settlement.” Id. The Court

rejected Steve and Mike’s argument that Matt lacked the authority to enter into a

settlement without the approval of co-trustee Mike, since a provision of the Trust allowed

                                              3
any person dealing with the Trust to rely on any Trustee’s statement of his authority to

act on behalf of the Trust. The Court also concluded that Steve and Mike had “not shown

that the settlement was a bad deal for the Trust,” and that they had not made any showing

“that the Trust would make out better if the settlement were to be set aside.” Id. Steve

and Mike appealed, but they withdrew the appeal before it was decided.

       While the appeal was still pending, Steve and Mike filed the lawsuit that is the

subject of the current appeal. 1 The District Court granted Matt’s motion for partial

summary judgment, see Dkt. #65; granted Robinson & Cole’s (“R & C”) motion for

summary judgment, see Dkt. #99, and then granted Matt’s subsequent motion for

summary judgment and the summary judgment motions of the other remaining

Defendants, see Dkt. #149. The Court also denied Steve and Mike’s motion for

reconsideration of certain opinions and orders, see Dkt. #147.

       Steve and Mike timely appealed. In their brief, they challenge five orders of the

District Court: (1) the partial summary judgment grant to Matt; (2) the denial of their

motion to amend the complaint to add John Yacovelle, Esq., as a defendant; (3) the

summary judgment grant to Defendants Kelly Galica-Peck, R & C, and Halloran & Sage

1
  The suit was originally filed in state court by Steve, Mike, and the Trust, against Matt.
The state court dismissed the Trust from the suit and Matt then removed the matter to
federal court. Steve and Mike later amended the complaint to add claims against Kelley
Galica-Peck (who represented Matt as trustee of the Trust beginning in late 2006), and
two law firms that she worked for, Halloran & Sage, LLP (until October 2010), and
Robinson & Cole, LLP (after October 2010).

                                             4
(“H & S”); (4) the denial of Steve and Mike’s motion to amend the complaint to add

appraiser Parker Benjamin as a defendant; and (5) the denial of their motion for

reconsideration.

       We turn first to the decisions granting summary judgment. 2 We exercise plenary

review over such decisions and review the facts in the light most favorable to the

nonmoving party. See Miller v. Am. Airlines, Inc., 632 F.3d 837, 844 (3d Cir. 2011).

Summary judgment is appropriate when “the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(a).

       The District Court first granted Matt’s motion for partial summary judgment,

concluding that Steve and Mike “should be collaterally estopped from arguing two

discrete issues before the court: the value of [the Asset] and the fairness of [the]

settlement” reached in the Chancery Court. Dist. Ct. Op., Dkt. #64 at 1-2. The District

Court properly looked to New Jersey law to determine the preclusive effect of the

Chancery Court litigation, see Del. River Port Auth. v. Fraternal Order of Police, 290
F.3d 567, 573 (3d Cir. 2002), and applied New Jersey’s five-part issue preclusion test. 3

2
  We have jurisdiction pursuant to 28 U.S.C. § 1291. We may affirm a district court’s
decision on any basis supported by the record. See Murray v. Bledsoe, 650 F.3d 246, 247
(3d Cir. 2011) (per curiam).
3
  In order for preclusion to apply: “(1) the issue must be identical; (2) the issue must
have actually been litigated in a prior proceeding; (3) the prior court must have issued a
final judgment on the merits; (4) the determination of the issue must have been essential
                                               5
       We agree with the District Court that the issues of the Asset’s value and the

fairness of the settlement to the Trust were litigated in the Chancery Court, and that the

Chancery Court issued a judgment on the merits in which those two issues were essential.

We also agree that although Steve and Mike were not formally joined as intervenors in

the action, they were essentially treated as such by the Chancery Court. As the District

Court noted, “Through their counsel, they participated in a case management conference

and conducted discovery into the value of [the Asset] and the fairness of the settlement”;

they also “submitted briefs and argued at oral argument.” Dist. Ct. Op., Dkt. #64 at 18.

The Chancery Court “took pains to include them as intervenors for this discovery

opportunity and for presentation of evidence, briefs and arguments.” Id. We agree that

they were essentially treated as parties for the purposes of litigation of those two issues,

and we thus agree that it was proper to preclude them from relitigating those issues in the

District Court. See Ross v. Ross, 705 A.2d 784, 791 (N.J. Super. Ct. App. Div. 1998)

(“We hold that a judgment may be binding as an estoppel on a person who, although not

nominally or formally a party to the action in which it was rendered, submitted his or her

interest in the subject matter of the litigation to the consideration of the court and invited

its adjudication thereon.”). 4

to the prior judgment; and (5) the party against whom collateral estoppel is asserted must
have been a party or in privity with a party to the earlier proceeding.” Id.
4
  Steve and Mike have also essentially waived any argument that they were not parties.
Their brief contains this caption: “Was the Decision in the Prior Action Asserted Against
a Party to the Earlier Adjudication?” App. Br. at 11. But that section of the brief argues
                                              6
       Steve and Mike argue extensively in their brief that the issue of whether Matt

exceeded his authority as a Trustee when he entered the settlement was not litigated in

the Chancery Court. We agree that the Chancery Court was focused on whether

Goodman and his company could rely on Matt’s assertion that he was authorized to settle

the case, and not on the wider question of whether Matt was correct in that assertion. But

the District Court properly granted summary judgment on the issue of Matt’s authority, as

a claim for breach of fiduciary duty requires a showing of damages. See F.G. v.

MacDonell, 696 A.2d 697, 703-04 (N.J. 1997) (fiduciary liable for harm caused by

breach of duties imposed by fiduciary relationship). Because the Chancery Court held

that the Trust was not harmed by the settlement, Steve and Mike cannot prove damages. 5

       As to summary judgment for the remaining Defendants, 6 Steve and Mike argue

only that Galica-Peck lied about when she and R & C knew that appraiser Parker

only that they were not allowed to litigate the issue of Matt’s authority and fiduciary
obligation in the Chancery Court and does not address whether they were treated as
parties. See Kopec v. Tate, 361 F.3d 772, 775 n.5 (3d Cir. 2004) (“An issue is waived
unless a party raises it in its opening brief, and for those purposes a passing reference to
an issue . . . will not suffice to bring that issue before this court”) (internal quotation
marks omitted).
5
  In the District Court, Steve and Mike also alleged that Matt breached his fiduciary duty
in other ways, but they did not make such argument in their brief here. Those issues are
thus waived. See Kopec, 361 F.3d at 775 n.5; F.D.I.C. v. Deglau, 207 F.3d 153, 169-70
(3d Cir. 2000).
6
  The claims against these Defendants sound in legal malpractice. Under New Jersey
law, a legal malpractice claim has three elements: “(1) the existence of an attorney-client
relationship creating a duty of care by the defendant attorney, (2) the breach of that duty
                                              7
Benjamin had valued the Asset at $841,000, rather than $600,000. It is unclear why they

believe R & C would be liable. They argue that Galica-Peck testified at her deposition

that she knew that the appraisal was $841,000 at the time the trust was converted from

revocable to irrevocable. But the conversion occurred in 2007, and Galica-Peck did not

join R & C until 2010. We agree with the District Court that R & C could not be liable

for actions that Galica-Peck took before she joined their firm.

       As for the time after Galica-Peck joined R & C, Steve and Mike argue that Galica-

Peck and R & C, by misinforming them that Parker Benjamin’s appraisal had not been

relied upon in deciding to convert the trust, caused Steve and Mike to miss an opportunity

to sue Parker Benjamin “for his failure to account for the devastating impact of Section

7.04.” App. Br. at 15. But as the District Court pointed out, Matt testified at his

deposition that he believed that the Asset was valued at $600,000, not the $841,000

mentioned by Parker Benjamin, and his co-trustee Mike “never personally relied on

advice from [Galica-]Peck in the administration of any Trust matters.” Dist. Ct. Op., Dkt.

#98 at 29. Thus, Steve and Mike pointed to no evidence showing that the Trustees relied

on the Parker Benjamin appraisal, as conveyed by Galica-Peck. We further agree with

the District Court that Steve, a self-proclaimed “knowledgeable and sophisticated real

estate businessman,” who “signed the Operating Agreement in 2005,” could not claim to

by the defendant, and 3) proximate causation of the damages claimed by the plaintiff.”
Jerista v. Murray, 883 A.2d 350, 359 (N.J. 2005) (quoting McGrogan v. Till, 771 A.2d
1187, 1193 (N.J. 2001)) (quotation marks omitted).
                                            8
have reasonably relied on the appraisal, as he is charged with having known the terms of

the Operating Agreement, including Section 7.04, when he signed it. Id. at 30. See

Marcinczyk v. N.J. Police Training Comm’n, 5 A.3d 785, 789 (N.J. 2010) (in absence of

fraud, duress, illegality, or mistake, party to contract is “‘conclusively presumed’ to

understand and assent to its legal effect”) (quoting Rudbart v. N.J. Dist. Water Supply

Comm’n, 605 A.2d 681, 685 (N.J. 1992)). As there was no reasonable reliance on the

Parker Benjamin appraisal, Steve and Mike did not show that Galica-Peck or R & C

caused them to forego a meritorious claim against Parker Benjamin.

       For the same reasons, Steve and Mike did not point to any evidence raising a

genuine issue of fact suggesting that they were harmed by advice that Galica-Peck gave

at the time that she was employed at H & S. The District Court thus properly granted

Galica-Peck’s and H & S’s summary judgment motions.

       We turn next to Steve and Mike’s claim that they should have been allowed to

amend their complaint to add attorney John Yacovelle and appraiser Parker Benjamin as

Defendants. Steve and Mike did not timely seek reconsideration of the Magistrate

Judge’s July 25, 2014 and April 10, 2015 orders denying their motions to amend. See 28

U.S.C. § 636(b)(1)(B) (non-dispositive matters may be decided by Magistrate Judge);

Fed. R. Civ. P. 72(a) (party may object to magistrate judge’s order in non-dispositive

matter within 14 days, and “may not assign as error a defect in the order not timely

objected to”); D.N.J. Local Rule 72.1(c)(1) (party may appeal Magistrate Judge’s

                                              9
determination in non-dispositive matter within 14 days). Thus, to the extent Steve and

Mike argue that the Magistrate Judge’s decisions were in error, they have waived the

right to appeal those decisions. See Washington v. Hovensa LLC, 652 F.3d 340, 348 (3d

Cir. 2011); United States v. Polishan, 336 F.3d 234, 240 (3d Cir. 2003).

       Steve and Mike did belatedly seek reconsideration of those orders (as well as the

District Court orders granting partial summary judgment for Matt and summary judgment

for R & C), on August 10, 2015. The District Court denied reconsideration, noting first

that the reconsideration motion was untimely pursuant to D.N.J. Local Rule 7.1(i), which

requires such a motion to be filed within 14 days, as they had “waited at minimum six

months before challenging the entry of any of the four orders.” Dist. Ct. Op., Dkt. #146

at 4. The Court also found the motion procedurally deficient, as they had failed to timely

appeal the Magistrate Judge’s orders to the District Court pursuant to Fed. R. Civ. P.

72(a), and they had failed to accompany their motion for reconsideration with “[a] brief

setting forth concisely the matter or controlling decisions which the party believes the

Judge or Magistrate Judge has overlooked,” pursuant to D.N.J. Local Rule 7.1(i). Dist.

Ct. Op., Dkt. #146 at 4-5.

       The District Court nonetheless considered the motion on the merits. We review a

district court’s order denying a motion for reconsideration for an abuse of discretion. 7

7
 We note that even though the motion was untimely under the Local Rule (and would
have been untimely even if it could be construed as a motion for reconsideration filed
pursuant to Fed. R. Civ. P. 59(e)), the District Court did not lack jurisdiction to consider
                                              10
Max’s Seafood Café v. Quinteros, 176 F.3d 669, 673 (3d Cir. 1999). A motion for

reconsideration “must rely on one of three grounds: (1) an intervening change in

controlling law; (2) the availability of new evidence; or (3) the need to correct clear error

of law or prevent manifest injustice.” Wiest, 710 F.3d at 128. The District Court

generously construed the “Certification” that Steve had filed in connection with the

motion as a brief, and found two possible arguments in support of reconsideration: that

denial of the motion would result in manifest injustice, and that new information gained

in discovery warranted reopening. Dist. Ct. Op., Dkt. #146 at 6. These two bases

essentially boil down to one argument, also presented in their brief here—that the District

Court abused its discretion and caused manifest injustice by failing to reconsider its

decisions in light of Galica-Peck’s April 2015 deposition testimony that she was aware of

the $814,000 valuation at the time the trust was converted.

        We discern no abuse of discretion here. A district court should be “loathe to

[revisit its earlier decisions] in the absence of extraordinary circumstances such as where

the initial decision was clearly erroneous and would make a manifest injustice.” Lesende

the motion. See State Nat’l Ins. Co. v. County of Camden, 824 F.3d 399, 406 (3d Cir.
2016) (district court has inherent power to reconsider prior interlocutory orders at any
point while litigation continues). And we have jurisdiction to consider its order denying
the motion to reconsider. Cf. Lizardo v. United States, 619 F.3d 273, 277 (3d Cir. 2010)
(following Kontrick v. Ryan, 540 U.S. 443, 454 (2004), Fed. R. Civ. P. 59(e) should not
be considered a jurisdictional rule; thus, untimely Rule 59(e) motion is no longer
considered a nullity); Wiest v. Lynch, 710 F.3d 121, 127 (3d Cir. 2013) (“If the time limit
contained within Rule 59(e) is not jurisdictional, we cannot see how the time limit
                                              11
v. Borrero, 752 F.3d 324, 339 (3d Cir. 2014). “The scope of a motion for reconsideration

. . . is extremely limited,” and should “be used only to correct manifest errors of law or

fact or to present newly discovered evidence.” Blystone v. Horn, 664 F.3d 397, 415 (3d

Cir. 2011). But while a motion to reconsider can be based on new evidence, “new” in

this context means evidence that could not have been submitted to the court earlier,

because it was not previously available, not simply evidence submitted after an adverse

court ruling. Id. at 415-16. Although Galica-Peck’s deposition occurred after the

challenged rulings, because Steve and Mike “offer[ed] no explanation for the [over two-

year] delay in taking these depositions that forced this testimony to become ‘newly

discovered’ after these four challenged motions were decided,” Dist. Ct. Op., Dkt. #146

at 8, the District Court did not abuse its discretion in denying the motion for

reconsideration. Further, given the Trustees’ and Steve’s lack of reliance on the

$841,000 valuation, we agree with the District Court that “the deposition testimony

presented would not change the outcome of the prior decisions.” Id. at 8-9.

       For the foregoing reasons, we will affirm the District Court’s judgment.

contained within [E.D. Pa.] Local Rule 7.1(g) [providing 14 days for reconsideration
motion] is jurisdictional.”).
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