Keeping Current With the Entire Controversy Doctrine

Ricketti v. Barry, 775 F.3d 661 (3d Cir. 2015).  State court judges see a lot of New Jersey’s entire controversy doctrine (“ECD”).  Some federal judges, not so much.  This opinion, issued yesterday by the Third Circuit, reversed a dismissal of a case under the ECD.  That case was the second one filed by plaintiff that involved “the same common law causes of action and averred mostly the same supporting facts.”  A prior action had been settled.  In the second action, however, plaintiff named two defendants who had not been sued in the first action.  The District Court dismissed that second action under the ECD due to plaintiff’s failure to have named those two defendants in the first action.

In an opinion by Judge Hardiman, the panel described the current state of the ECD, which it called “New Jersey’s specific, and idiosyncratic, application of traditional res judicata principles,” as well as its history, evolution, and New Jersey state court caselaw applying the ECD.  Judge Hardiman observed that the ECD had changed significantly in 1998, when New Jersey Court Rule 4:30A was amended to eliminate a prior requirement that all parties be joined in the same action or the ECD would bar a subsequent case.  At that time, Rule 4:5-1(b)(2) was also amended to require the disclosure of “the names of any non-party who should be joined in the action … because of potential liability to any party on the basis of the same transactional facts.”  That same rule provides for sanctions, including dismissal, for violation of the disclosure requirement, but states that a second action is not to be dismissed for non-compliance with the rule “unless the failure of compliance was inexcusable and the right of the undisclosed party to defend the successive action has been substantially prejudiced by not having been identified in the prior action.”  If those standards are not met, a sanction less draconian than dismissal is called for.

Here, Judge Hardiman found, the District Court dismissed the second action without considering whether the omission of the new defendants from the first case was “inexcusable” or whether those new defendants had been “substantially prejudiced” by being omitted from the first case.  “The record shows that the District Court applied the entire controversy doctrine as it existed before New Jersey altered its party joinder rules in 1998.  The Court neither cited Rule 4:5-1(b)(2) nor mentioned sanctions short of dismissal.”  All of the cases cited by the District Court either pre-dated the 1998 amendments or did not mention those amendments.

The standard of review of the District Court’s application of the ECD, a legal doctrine, was plenary.  Under that standard, the District Court’s decision could not stand.  Accordingly, the Third Circuit reversed the dismissal and remanded to the District Court to apply current ECD principles.