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Gross v. Dufour9/9/1993
CIVIL ACTION
CASSINI, III, J.S.C.
This case was commenced on March 13, 1992 by the filing of a complaint by plaintiffs in Superior Court of New Jersey ("State Action"). Prior thereto, a matter had been commenced on December 18, 1991, in the United States District Court for the District of New Jersey ("Federal Action") by some of the plaintiffs in this case. An Amended Complaint was filed in the Federal Action on January 23, 1992 to include additional plaintiffs, all of whom are identical to those plaintiffs named in the State Action.
The Federal Action was brought by plaintiffs against Car Checkers of America, Inc., its President and Vice President, Wendy M. Geller and Lee S. Geller, respectively (collectively "Car Checkers"). Car Checkers is a New Jersey based national franchisor that offers franchises for the operation of mobile used-vehicle diagnostic inspection and appraisal service businesses. Plaintiffs are various existing or potential franchisees (i.e. those who have entered into franchise development agreements with Car Checkers). Jurisdiction arose out of diversity jurisdiction and federal question jurisdiction based on an alleged violation of the Racketeer Influenced Corrupt Organization Act (RICO).
In their federal complaint, plaintiffs assert that defendants included false information in their Uniform Franchise Offering Circular (UFOC) which was provided to each purchaser or potential franchisee, that they created "Phantom Franchisees" which allegedly did not exist and made material misrepresentations regarding the profitability of the franchise program. In addition, plaintiffs allege: (1) RICO violations; (2) common law fraud; (3) breach of duty of good faith and fair dealing; (4) breach of contract; and (5) negligence.
In their state court complaint, plaintiffs included defendants who were not named in the Federal Action. The state court defendants consist of: Cohen, DuFour & Associates, a public accounting firm; Franchise Brokers Networks, Inc., brokers; Antonio Inacio, Esq., in house counsel and the law firm of Tenzer, Greenblatt, Fallon and Kaplan, outside counsel, all of whom are
various professionals who had been retained by or employed by the Federal Action defendants. In addition, the State Action raises claims of fraud, negligence and similar related allegations as those contained in the Federal Action.
It is argued by the state defendants that the state court complaint arises out of the identical transactions and occurrences which formed the bases for the Federal Action. That is, the State Court Action mirrors the allegations contained in the Federal Action and arise out of identical circumstances as those pleaded in the district court complaint.
Defendant, Cohen, DuFour & Associates, now moves to dismiss the state complaint based on the entire controversy doctrine. All other state court defendants have subsequently joined in this motion. Defendants contend that the entire controversy doctrine bars the plaintiffs from litigating in state court against parties who were not included in the Federal Action.
The "entire controversy doctrine", pursuant to R. 4:30A, provides as follows:
Non-joinder of claims or parties required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine. . .
This rule does not define the doctrine but nonetheless alerts litigants of potential claim exclusion both against non-parties as well as parties. The rule was adop
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