MAZIE SLATER KATZ & FREEMAN LLC v. GARY KRUGMAN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0718-12T4

MAZIE SLATER KATZ & FREEMAN,

LLC,

Plaintiff-Respondent,

v.

GARY KRUGMAN,

Defendant-Appellant.

_______________________________

May 6, 2013

Argued April 24, 2013 Decided

Before Judges Grall, Koblitz and Accurso.

On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No.

L-4355-12.

Bruce H. Nagel argued the cause for appellant (Nagel Rice, LLP, attorneys;

Mr. Nagel, on the briefs).

Eric D. Katz argued the cause for pro se respondent (Mazie Slater Katz & Freeman, LLC, attorneys; Mr. Katz, of counsel and on the brief).

PER CURIAM

This appeal arises out of a federal class action suit against an insurance carrier filed by plaintiff-law firm on behalf of a class of New Jersey dentists complaining of inadequate reimbursements. Kirsch v. Delta Dental of N.J., Inc., Civil Action No. 07-186 (D.N.J. filed Nov. 15, 2006), appeal filed, No. 12-1684 (3d Cir. Mar. 14, 2012). Defendant in this appeal, Gary Krugman, was a member of the class represented by plaintiff. In the federal action, Krugman filed an objection to the settlement limited to the fees sought by class counsel. The District Court granted final approval to the settlement and approved counsel's fee request in its entirety. Defendant appealed the counsel fee award to the Third Circuit, posting a bond as required by the District Court. Ibid. The appeal has been submitted to a panel where the matter remains pending. Because of that pending appeal, class counsel has not been paid its fee award.

Following defendant's filing of his federal appeal, plaintiff sued him in Superior Court alleging that the appeal constitutes tortious interference with plaintiff's contract with Delta Dental of New Jersey, Inc. and tortious interference with plaintiff's prospective economic advantage in receiving its fee award. Defendant moved to dismiss the complaint in lieu of answer, pursuant to R. 4:6-2, and sought sanctions and attorney's fees. The trial judge dismissed the complaint without prejudice without hearing argument. The order provides that plaintiff's complaint is dismissed "without prejudice pending the outcome of the pending [federal] appeal." No statement of reasons is appended, and no disposition of plaintiff's motion for sanctions and fees is noted.

Defendant appeals from that order contending that the complaint should have been dismissed with prejudice because class counsel may not sue one of its own client class members who exercises his right to object to the settlement negotiated on his behalf by class counsel. He contends that "[t]his lawsuit represents the underbelly of class action practice and must be dismissed with prejudice." He further contends that his motion for fees and sanctions should have been granted.

Plaintiff counters that defendant's objection to the class action settlement was untimely, thus stripping him of any interest in the terms of the settlement and making the objection and its continued maintenance on appeal a tortious interference with plaintiff's receipt of its fee award. The law firm maintains that its complaint against its client was properly dismissed without prejudice because the Third Circuit must "specifically address the procedural and substantive legitimacy of [defendant's] objection" to the class settlement in adjudicating the federal appeal. Although arguing that the trial judge was correct in dismissing its complaint against its client, plaintiff contends that the implicit denial of defendant's motion for fees and sanctions should be affirmed as it "had no merit." Plaintiff does not address defendant's arguments as to the propriety of suing one's own client.

Because a dismissal without prejudice, such as the one entered here, is generally appealable as of right, see County of Morris v. 8 Court St. Ltd., 223 N.J. Super. 35, 38-39 (App. Div.), certif. denied, 111 N.J. 572 (1988), it was incumbent on the trial judge to place her reasons for the ruling on the record. R. 1:7-4(a); Ronan v. Adely, 182 N.J. 103, 110-12 (2004). Although the failure of the trial court to state its reasons for entry of a final order often so hampers appellate review that remand is required, we do not find it necessary here.

It is clear to us that the trial judge determined that principles of comity counseled that the Superior Court should decline to hear this matter until the parties had exhausted their federal remedies. See Thompson v. City of Atlantic City, 190 N.J. 359, 382 (2007) (noting that instead of exercising jurisdiction to review a federal settlement, "[a] better course might have been for the Superior Court to decline to hear the matter until [the plaintiff] first exhausted its potential federal remedies" as a matter of comity). We agree with that course here. Plaintiff contends that defendant's act of objecting to plaintiff's fee in the class action and on appeal is tortious because the objection was untimely and substantively without merit. The procedural and substantive merits of defendant's objection, however, are currently under consideration by the Third Circuit. Accordingly, out of respect for that court and in accommodation of its work, the trial judge voluntarily refrained from exercising jurisdiction to hear plaintiff's complaint involving as it does a matter falling within the Third Circuit's purview. Ibid.

Neither party is in any way harmed by that action. Because a dismissal without prejudice adjudicates nothing, Malhame v. Borough of Demarest, 174 N.J. Super. 28, 30-31 (App. Div. 1980), plaintiff remains free to re-file its claims after disposition of the federal appeal. Defendant will be likewise free to make a motion to the trial court to dismiss the claims with prejudice at that time.

The trial judge's further declination to entertain defendant's motion for fees and sanctions is not properly before us.1 R. 2:2-3(a)(1). Rule 1:4-8(b)(1) requires an application for sanctions to be made by motion "separately from other applications." Toll Bros., Inc. v. Twp. of W. Windsor, 190 N.J. 61, 69 (2007) ("A litigant seeking sanctions under the Rule must file a separate motion describing the specific conduct alleged to be a violation of the Rule."). Because defendant coupled his motion for sanctions under the Rule with his motion to dismiss, the trial judge could properly have declined to entertain the motion for sanctions on the papers filed. Defendant will be free to renew this motion in accordance with the Rule following disposition of the federal appeal.

Affirmed.

1 Appeals are taken from orders. Heffner v. Jacobson, 100 N.J. 550, 553 (1985). No order has ever been entered denying defendant's motion for sanctions and fees.