Court Opinion

ID: 4430458
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:41:50.664147+00
Date Added: 2024-06-11T14:50:59.383381
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NOT FOR PUBLICATION WITHOUT THE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-4960-16T4

MHA, LLC,

       Plaintiff-Appellant,

v.

BRACH EICHLER, LLC; DEBRA
LIENHARDT, ESQ. and MARK
MANIGAN, ESQ.,

     Defendants-Respondents.
__________________________________

                Argued September 13, 2018 – Decided September 24, 2018

                Before Judges Hoffman and Firko.

                On appeal from Superior Court of New Jersey, Law
                Division, Hudson County, Docket No. L-4864-16.

                David M. Estes argued the cause for appellant (Mazie
                Slater Katz & Freeman, LLC, attorneys; Eric D. Katz,
                of counsel and on the briefs; David M. Estes, on the
                briefs).

                Charles X. Gormally argued the cause for respondents
                (Brach Eichler LLC, attorneys; Charles X. Gormally
                and Thomas Kamvosoulis, of counsel and on the brief).
PER CURIAM

      Plaintiff MHA, LLC (MHA or plaintiff) appeals from a June 9, 2017 Law

Division order dismissing with prejudice plaintiff's complaint against its former

attorneys, defendants Brach Eichler, LLC, Debra Lienhardt, and Mark Manigan.

For the reasons that follow, we vacate and remand.

                                        I

      Plaintiff retained defendants to assist in its acquisition of Meadowlands

Hospital Medical Center (the Hospital) from Liberty Riverside Healthcare

System, Inc. (Liberty). Defendants represented plaintiff in the negotiation and

drafting of the asset purchase agreement (APA) whereby plaintiff acquired

ownership of the Hospital from Liberty.

      The APA, signed on January 8, 2010, contained Section 2.2, entitled

"Excluded Assets." In relevant part, Section 2.2 excluded the following assets

"from the sale and purchase contemplated by the [APA]":

            (e) All amounts owed or payable to Hospital or claims
            by Hospital against, third parties, including, without
            limitation, all accounts and notes receivable, negotiable
            instruments[,] and chattel paper;

            (f) All charity care, disproportionate hospital payments
            and any other similar grants or payments related to
            services provided by Hospital prior to the [c]losing
            [d]ate . . . .

The APA also contained an integration clause.
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       Pursuant to the Community Health Care Assets Protection Act, N.J.S.A.

26:2H-7.10 to -7.14, the parties submitted the APA to the Attorney General, who

approved the transaction in a fifty-six-page letter dated November 10, 2010. The

letter noted that the treatment of accounts receivable became an issue during the

parties' negotiation process, stating:

                     Initially, MHA stated that it wanted [the]
                     Hospital's accounts receivable to be included in
                     the sale for this purchase price and it was not
                     willing to assume any of [the] Hospital's long-
                     term liabilities. Because this proposal was not
                     economically advantageous to [the] Hospital and
                     Liberty, at Liberty's request, MHA later agreed to
                     revise its proposal to exclude the accounts'
                     receivable, but requested that [Liberty] provide it
                     with short-term financing to provide working
                     capital immediately following the closing.

The next day, plaintiff's chief executive officer, Richard Lipsky, executed a

certification agreeing to "the conditions set forth in the Attorney General's

approval letter . . . ."

       Liberty then filed a verified complaint seeking approval of the acquisition,

which the Chancery Division granted on December 1, 2010.                   In granting

approval, the court cited the Attorney General's advisory letter supporting the

proposed transaction. The judge's order approving the Agreement specifically

provided that the "Hospital will retain its accounts receivable and will retain

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liability for its accounts payable and long-term debt to third party creditors."

Plaintiff took ownership of the Hospital on December 7, 2010.

      Following the completion of the transaction, disputes arose between

plaintiff and Liberty concerning certain accounting aspects of the APA. Those

disputes resulted in a binding arbitration proceeding, which the arbitrator

ultimately decided in Liberty's favor.

      Specifically, the arbitrator found,

            [Plaintiff] wanted the transfer of assets to include
            the Hospital's accounts receivable for services rendered
            prior to the closing date, and it is equally beyond
            dispute that neither Liberty, the Attorney General[,] or
            the court would allow the Hospital's sale to take place
            if transferring the Hospital's pre-Closing Date accounts
            receivable were to be included in the sale.

He further determined,

            Liberty and MHA agreed to a bright line test for
            entitlement to payments and underpayments, the bright
            line of demarcation being the Closing Date, all
            payments or underpayments the responsibility of/due to
            Liberty if the predicate patient care or service was
            rendered before the Closing Date, all payments or
            underpayments the responsibility of/due to MHA if the
            predicate patient care or service was rendered after the
            Closing Date.

      In December 2016, plaintiff filed a complaint against defendants, alleging

legal malpractice in the negotiation and drafting of the APA. In lieu of an

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answer, defendants moved to dismiss, pursuant to Rule 4:6-2(e), alleging

plaintiff's complaint failed to state a claim upon which relief can be granted. On

May 1, 2017, plaintiff filed an amended complaint further alleging breach of

fiduciary duty based upon the same factual allegations as its malpractice claim.

      In her oral decision following oral argument, the motion judge announced

her intention to treat defendants' motion as a summary judgment motion, stating,

                   I am guided by Rule 4:6-2(e) and the cases
            interpreting    it[,]   including . . . Printing   Mart[-
            Morristown] v. Sharp Electronics[, 116 N.J. 739
            (1989)] . . . which discusses my scope of review. The
            inferences I'm permitted to draw, and if a motion to
            dismiss [f]or failure to state a claim relies on materials
            outside the pleadings, the motion is to be treated by me
            as a summary judgment motion. That's in Lederman v.
            Prudential Life Insurance Company of America, 385
            N.J. Super. 324[, 337 (App. Div. 2016)].

                   I need not state in great detail the summary
            judgment standard. It is contained in Rule 4:46-
            2(c) . . . .

                  ....

                  So obviously with the mountain of documents
            I've been presented with, this is to be treated as a
            summary judgment motion and not within the four
            corners of the pleadings. Looking for genuine issues of
            material facts, I think it's well[-]settled that [when]
            there is any ambiguity in a written agreement that
            ambiguity is strictly construed against the drafter.

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                                         5
                   Here, the drafter was the law firm on behalf of
            the client, a client who is not unsophisticated . . . . A
            client who approved the issuance of the [APA], and a
            client who proceeded to the closing.

                   I don't see any material facts in dispute that
            would warrant this complaint moving forward. I
            believe this motion is ripe for granting and that is
            because in large part on the commentary of [the
            arbitrator] in his written opinion and the serial approval
            of this purchase agreement by the Chancery Court, the
            interpretation at the arbitration[,] and I tend to agree
            with the moving party that I can't imagine any degree
            of discovery at this point that would change the
            underlying facts so as to make this a viable claim. So
            I'm granting the motion for those reasons.

                                        II

      On appeal, plaintiff argues its amended complaint presented prima facie

claims for legal malpractice and breach of fiduciary duty regarding defendants'

"representation and performance during the negotiation and purchase of the

[Hospital], including [their] review and revisions to the [APA]."        Plaintiff

further asserts the motion court 1) improperly used documents outside the

pleadings in considering the motion to dismiss; 2) erred by converting the

motion to dismiss into one for summary judgment without adequate notice ; and

3) erroneously held there were no genuine issues of fact in dispute.

      When presented with a Rule 4:6-2(e) motion to dismiss for failure to state

a claim, the court must deny the motion if the facts alleged in the complaint – if

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                                             6
accepted as true – are legally sufficient to state a cause of action. Printing Mart,

116 N.J. at 746. In ruling on such a motion, the judge is obliged to afford a

plaintiff, "every reasonable inference of fact," because the test for determining

the adequacy of a pleading is whether the alleged facts suggest a cause of action.

Ibid. If matters outside the pleadings are presented and not excluded, the judge

must treat the Rule 4:6-2(e) motion as one for summary judgment, and must

afford the parties a "reasonable opportunity to present all material pertinent to

such a motion." R. 4:6-2.

      We cannot affirm the dismissal of plaintiff's complaint at this preliminary

stage, and "cannot condone a procedure whereby a judge sua sponte, without

notice . . . circumvents the basic requirements of notice and an opportunity to

be heard." Klier v. Sordoni Skanska Constr. Co., 337 N.J. Super. 76, 84-85

(App. Div. 2001); see also Velantzas, 109 N.J. at 192. Plaintiff had no notice

that it needed to oppose anything other than a motion to dismiss, pursuant to

Rule 4:6-2(e), and first learned of the judge's sua sponte decision to convert the

dismissal motion to a summary judgment motion when she delivered her oral

opinion. Once the judge decided to treat defendants' motion as a summary

judgment motion, she should have re-scheduled the motion in order to afford

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                                          7
"all parties [a] . . . reasonable opportunity to present all matters pertinent to such

a motion." R. 4:6-2.

      Moreover, the judge entered the order under review prior to any discovery,

and without the parties submitting statements of material facts. As noted by

plaintiff, in support of the motion under review, "defense counsel . . . submitted

a 373-page certification implicating a complex, regulatory contract involving a

long-running multi-million dollar dispute." We agree with plaintiff that such a

complicated matter would benefit from discovery, particularly in determining

the absence of any "genuine issue as to any material fact challenged." R. 4:46-

2(c). Accordingly, we conclude the judge improvidently granted summary

judgment in failing to afford plaintiff adequate notice and the benefit of full

discovery.

      Vacated and remanded. We do not retain jurisdiction.

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