Opinion
DOCKET NO. A-1017-12T3
05-13-2013
PATRICIA A. HANDLEY, Plaintiff-Appellant, v. CHASE BANK U.S.A., N.A. and REED SMITH, LLP, Defendants-Respondents.
Patricia A. Handley, appellant pro se. Covington & Burling, LLP, attorneys for respondent Chase Bank U.S.A., N.A. (Christina Olson, of counsel and on the brief). Reed Smith, LLP, respondent pro se (George E. McDavid and David M. Fritch, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Harris and Hoffman.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3280-11.
Patricia A. Handley, appellant pro se.
Covington & Burling, LLP, attorneys for respondent Chase Bank U.S.A., N.A. (Christina Olson, of counsel and on the brief).
Reed Smith, LLP, respondent pro se (George E. McDavid and David M. Fritch, of counsel and on the brief). PER CURIAM
Plaintiff Patricia A. Handley appeals from the Law Division's September 14, 2012 order that (1) vacated the entry of default against defendants Chase Bank U.S.A., N.A. and Reed Smith, LLP, and (2) dismissed her complaint with prejudice. We affirm.
I.
This appeal has its genesis in Handley's August 2005 Law Division complaint against Chase and Citibank, N.A., which sought tort remedies for violations of the federal Truth in Lending Act (TILA), 15 U.S.C.A. §§ 1601 to 1667, and the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1 to -20. The defendants removed the case to the United States District Court for the District of New Jersey, depriving the Law Division of jurisdiction. See 28 U.S.C.A. § 1446(d).
Chase was represented by Reed Smith in the federal proceeding, which successfully moved to compel arbitration of the dispute. On July 14, 2008, an order and award was issued in the arbitration, which dismissed Handley's claims and awarded Chase $19,925.41 on its counterclaim.
Handley moved in the District Court (1) to vacate the arbitration award pursuant to the "evident partiality" provision of the Federal Arbitration Act (FAA), 9 U.S.C.A. § 10(a)(2), and (2) to allow her lawsuit to proceed to trial. Among her arguments, Handley averred that Chase "had no defense for violating TILA and the corresponding NJCFA," and accordingly "the only strategy [Chase] could use was to totally misrepresent the facts to the Arbitrator during the hearing in order to avoid the appearance of partiality or collusion." Judge Faith S. Hochberg denied Handley's motion on October 27, 2008, and a final judgment in favor of Chase was entered on November 6, 2008.
Six months later, on May 8, 2009, Handley filed her second lawsuit, this time directly docketed in the United States District Court for the District of New Jersey. The defendants were Chase and its attorneys, Reed Smith. The gravamen of Handley's claims were based upon her assertion that
Defendant Reed Smith, on behalf of and together with Defendant [Chase], in defense of a civil action for which there was no defense, conspired to intentionally misrepresent the law and key facts, and to submit misleading documents provided by Chase, to the National Arbitration Forum ("NAF") and subsequently to the U.S. District Court for the sole purpose of depriving Plaintiff of one of her basic civil rights — a right every litigant is entitled to and expects; i.e., a fair and honest trial.
On October 9, 2009, Judge Stanley R. Chesler dismissed this complaint with prejudice, writing:
Having examined the Complaint, this Court finds that it does not implicate any federal right, nor does it allege that any person deprived her of a right under color of state law. This Court concludes that the Complaint fails to state a valid claim for relief, and Defendants' motions to dismiss will be granted. . . . Because this Court
concludes that the Complaint is so far from stating a valid claim for relief that amendment is futile, the Complaint will be dismissed with prejudice.
All of this does not mean that Plaintiff's grievances have no remedy available; it means only that she has no new and independent cause of action for them. As for her claim that Defendants acted fraudulently in the arbitration, Plaintiff's remedy was to move to vacate the award before Judge Hochberg, as Plaintiff did. Should Plaintiff believe that Judge Hochberg erred in affirming the award and entering judgment against her, Plaintiff's remedy is to file a timely appeal to the Third Circuit for review of the final judgment. . . . Legal remedies may be available to Plaintiff, but not by way of a new and separate action.
[Emphasis added.]
Handley duly appealed both judgments. On July 15, 2010, the Third Circuit affirmed in a consolidated opinion, Handley v. Chase Bank USA N.A., 387 F. App'x 166 (3d Cir. 2010), and the United States Supreme Court denied further review. Handley v. Chase Bank USA N.A., ___ U.S. ___, 131 S. Ct. 1475, 179 L. Ed. 2d 315, reh'g denied, __ U.S. ___, 131 S. Ct. 1846, 179 L. Ed. 2d 796 (2011).
On April 15, 2011, just eleven days following the last Supreme Court action on her federal cases, Handley filed her third complaint — the present one — in the Law Division. The claims against defendants were a reprise and refinement of those contained in Handley's earlier federal complaint, which asserted a conspiracy and an array of misrepresentations committed by defendants during the arbitration proceedings.
Over Handley's opposition, Chase and Reed Smith removed the case to the United States District Court for the District of New Jersey. Chase and Reed Smith then moved to dismiss the complaint. Handley neither opposed the motion nor moved for a remand to state court. On September 12, 2011, Judge Chesler dismissed Handley's complaint with prejudice "because the allegations, taken as true, show that relief is barred by the affirmative defense of res judicata." The Third Circuit summarily affirmed Judge Chesler's order on February 24, 2012.
Less than one month later, Handley moved to "reinstate" the same civil action that had been removed to federal court and adjudicated there. Although opposition was submitted arguing that the Superior Court of New Jersey lacked jurisdiction over the complaint because it had already been removed, an order was nonetheless entered on May 11, 2012 granting Handley's reinstatement motion. When answers to the reinstated complaint were neither filed nor served, Handley applied for the entry of default under Rule 4:43-1, which was completed on July 9, 2012.
Chase and Reed Smith immediately moved to vacate the default and sought dismissal of the reinstated complaint on several grounds, including res judicata. The Law Division granted the motion on September 14, 2012, writing, "the court believes it is bound by a decision of Judge Hochberg refusing to set aside the arbitration award." This appeal followed.
II.
On appeal, Handley presents the following arguments:
POINT I: THE ENTRY OF DEFAULT SHOULD NOT BE SET ASIDE.After reviewing the record in light of these contentions, we find them unpersuasive.
POINT II: THIS COURT DOES NOT LACK SUBJECT MATTER JURISDICTION.
POINT III: THE CLAIMS SHOULD NOT BE BARRED BY RES JUDICATA.
A. THE FINAL JUDGMENT OF THE U.S. DISTRICT COURT WAS NOT BASED ON THE MERITS OF THE CASE.
i. THE U.S. DISTRICT COURT'S RULING ON THE COMPLAINT WAS NOT BASED ON THE FACTS AND ISSUES OF THE DISPUTE.B. RESTATEMENT (SECOND) OF JUDGMENTS §28 (1982) APPLIES TO THE COMPLAINT.
ii. THE MERITS OF THE CASE.
iii. THE U.S. SUPREME COURT HAS RULED ON THE EVOLUTION OF THE MEANING OF THE TERM "ON THE MERITS."
C. COLLATERAL ESTOPPEL DOES NOT APPLY TO THE COMPLAINT.
A.
Rule 4:43-3 authorizes relief from the entry of default. That rule provides: "For good cause shown, the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with R[ule] 4:50." "The required good-cause showing for setting aside an entry of default pursuant to this rule is clearly a less stringent standard than that imposed by R[ule] 4:50-1 for setting aside a default judgment." Pressler & Verniero, Current N.J. Court Rules, comment on R. 4:43-3 (2013); see also US Bank Nat'l. Ass'n v. Guillaume, 209 N.J. 449, 467 (2012). A motion under Rule 4:43-3 is addressed to the sound discretion of the motion court, which should be guided by equitable principles in determining whether relief should be granted or denied. See O'Connor v. Altus, 67 N.J. 106, 129 (1975).
In our review, we do not "decide whether the trial court took the wisest course, or even the better course, since to do so would merely be to substitute our judgment for that of the lower court. The question is only whether the trial judge pursued a manifestly unjust course." Gittleman v. Cent. Jersey Bank & Trust Co., 103 N.J. Super. 175, 179 (App. Div. 1967), rev'd on other grounds, 52 N.J. 503 (1968). We are unable to reach that conclusion in light of the obligation to liberally indulge applications for relief from defaults. See N.J. Div. of Youth & Family Servs. v. M.G., 427 N.J. Super. 154, 171 (App. Div. 2012). A motion to vacate a default, as here, requires only a "mere showing of good cause," N.J. Mfrs. Ins. Co. v. Prestige Health Grp., LLC, 406 N.J. Super. 354, 360 (App. Div.), certif. denied, 199 N.J. 543 (2009), a threshold easily surmounted in this case. The Law Division did not err in vacating the default.
B.
Handley argues that notwithstanding her receiving a full — albeit adverse — adjudication of all of her claims in the federal judicial system, she is entitled to treat that process as a rehearsal, and may now engage the true performance in state court. She is mistaken. Not only is state court jurisdiction absent because of the statutory removal and lack of remand of her civil action, but her claims are subject to preclusion under the long-standing and fundamental principle of res judicata.
1.
When the present matter was initially filed in April 2011, it was immediately removed to federal court by Chase and Reed Smith. Handley sought review of that removal, lost in the Third Circuit, and cannot collaterally attack it here. See Stoeckel v. Twp. of Knowlton, 387 N.J. Super. 1, 13 (App. Div.) certif. denied, 188 N.J. 489 (2006). Her reliance upon Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 118 S. Ct. 921, 139 L. Ed. 2d 912 (1998) was rejected as inapposite by that court, and even if we had the authority to superintend the interpretation of federal law by a Circuit Court of Appeals, which we do not, we would reach the same conclusion. That is, removal was proper because of Handley's claims under federal law, not Chase's and Reed Smith's federal defenses.
Accordingly, because the removal was appropriate, the Superior Court lost jurisdiction. See Jatczyszyn v. Marcal Paper Mills, Inc., 422 N.J. Super. 123, 134 (App. Div. 2011) ("Under the clear language of 28 U.S.C. § 1446(d), once a state case has been removed to federal court 'the State court shall proceed no further unless and until the case is remanded.'"). Since the case was never remanded, jurisdiction in the Superior Court remains absent.
2.
"[T]he doctrine of res judicata provides that a cause of action between parties that has been finally determined on the merits by a tribunal having jurisdiction cannot be relitigated by those parties or their privies in a new proceeding." Velasquez v. Franz, 123 N.J. 498, 505 (1991) (citing Roberts v. Goldner, 79 N.J. 82, 85 (1979)). An issue is actually litigated when it is properly raised by pleadings or otherwise, is submitted for determination, and a decision is rendered. Id. at 506 (citing Restatement (Second) of Judgments § 27 comment d (1982)).
A dismissal with prejudice "constitutes an adjudication on the merits 'as fully and completely as if the order had been entered after a trial.'" Id. at 507 (quoting Gambocz v. Yelencsics, 468 F.2d 837 (3d Cir. 1972)). Indeed, the "with prejudice" feature of the dismissal connotes finality, affirmatively foreclosing the right to maintain an action on the same cause or claim.
"Res judicata, or claim preclusion, insulates courts from the inefficiency of relitigating claims that have already been resolved, thereby protecting the integrity of judgments and preventing the harassment of parties." Bondi v. Citigroup, Inc., 423 N.J. Super. 377, 422 (App. Div. 2011), certif. denied, 210 N.J. 478 (2012); see also Tarus v. Borough of Pine Hill, 189 N.J. 497, 520 (2007) (noting that res judicata is "a common-law doctrine barring relitigation of claims or issues that have already been adjudicated"). To apply the bar, three elements must be met:
(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one.
[McNeil v. Legislative Apportionment Comm'n of N.J., 177 N.J. 364, 395 (2003) (quoting Watkins v. Resorts Int'l Hotel & Casino, Inc., 124 N.J. 398, 412 (1991) (citations omitted)), cert. denied, 540 U.S. 1107, 124 S. Ct. 1068, 157 L. Ed. 2d 893 (2004).]
Moreover,
[i]f given preclusive effect, the prior judgment will bar not only the matters actually determined in the previous proceedings, but also all claims that could have been raised in the first action. Mortgagelinq Corp. v. Commonwealth Land Title Ins. Co., 142 N.J. 336, 338 (1995). Conversely, a claim that could not have been presented in the first action, for instance because of the first court's lack of jurisdiction over the claim, will not be barred in the subsequent action. Watkins, supra, 124 N.J. at 413. The reasoning for this exception is that if the [defendants] could not have asserted the two claims "in a single forum, it would be unfair to force [the defendants] to sacrifice the claims that could not be so asserted in order to bring a single action in one forum." Id. at 413-14.
[Bondi, supra, 423 N.J. Super. at 422-23.]
Beyond the trappings of fairness that res judicata brings to the parties' dispute, it also forestalls inconsistent results. As a general matter, the law disfavors inconsistent judicial determinations. Our Supreme Court has "struggled to avoid inconsistent adjudications whenever feasible in the interests of justice. Consistency in the results of decided cases fosters the credibility —and acceptability — of the justice system. Inconsistency, on the other hand, ultimately engenders loss of confidence in the administration of justice." Crispin v. Volkswagenwerk, A.G., 96 N.J. 336, 353 (1984) (Handler, J., concurring) (citing City of Hackensack v. Winner, 82 N.J. 1 (1980)). To avoid such undesirable inconsistencies, the law developed res judicata.
The record amply supports the preclusion of plaintiff's conspiracy and misrepresentation claims, warranting dismissal of her complaint. These claims were fully addressed and resolved against Handley in a final judgment in federal court; there is nothing more to litigate in state court. We do not sit as a court of do-overs, nor do we generally second-guess a final judgment of a court of competent jurisdiction. See Dewey v. R.J. Reynolds Tobacco Co., 121 N.J. 69, 78-80 (1990) (recognizing that although questions of federal law are not "binding per se" on New Jersey courts, they should nonetheless receive the "due respect" of appropriate observance through the principle of judicial comity).
Handley seeks to avoid the consequences of res judicata by arguing that she was deprived of due process of law, and that the federal rulings negatively affect the public interest by eroding her, and others, "right to a fair trial in civil cases." She cites Restatement (Second) of Judgments § 28(5) (1982) as the savior of her position:
Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances:
. . . .
(5) There is a clear and convincing need for a new determination of the issue (a) because of the potential adverse impact of the determination on the public interest or the interest of persons not themselves parties in the initial action[.]
The present record fails to demonstrate that there has been, or is likely to be, a "potential adverse impact of the determination on the public interest or the interest of persons not themselves parties in the initial action." Handley's dispute with Chase and Reed Smith is an entirely private matter, with no overtones beyond the confines of their litigation. We fail to discern any need, much less a "clear and convincing need," for a new determination on a matter of such inconsequence to the public.
We cannot agree that Handley was deprived of due process at any time in these proceedings. She had full opportunities to litigate her claims, and all of her grievances were reviewed on appeal. Even if some or all of those federal determinations were erroneous, Handley's remedy is to have them set aside or reversed there. Handley received all the process that she was due.
Handley's remaining appellate contentions, including her argument that collateral estoppel does not apply to the complaint, are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APELATE DIVISION