METALLIX REFINING INC. v. FRY'S METALS, INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

METALLIX REFINING, INC., a

corporation,

Plaintiff-Respondent,

v.

FRY'S METALS, INC., a

corporation; WESTBURY ALLOYS,

INC., a corporation; CAMERON

& MITTLEMAN, L.L.P., a limited

liability partnership; RICHARD

MITTLEMAN, an individual; and

AMY MOWER, an individual,

Defendants-Respondents.

and

FRY'S METALS, INC., a

Corporation,

Third-Party Plaintiff,

v.

CAMERON & MITTLEMAN, L.L.P.,

Third-Party Defendant.

________________________________

PHILIP CHAPMAN, and CHAPMAN,

HENKOFF, PEDUTO & SAFFER, LLC,

Appellants.

________________________________

August 19, 2014

 

Argued May 21, 2014 Decided

 

Before Judges Sapp-Peterson, Lihotz and Hoffman.

 

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2469-00.

 

Michael J. Canning argued the cause for appellants1 Philip Chapman, and Chapman, Henkoff, Peduto & Saffer, LLC (Giordano, Halleran & Ciesla, P.C., attorneys; Mr. Canning, of counsel and on the brief; Matthew N. Fiorovanti, on the brief).

 

Michael A. Saffer argued the cause for respondent Metallix Refining, Inc. (Mandelbaum Salsburg, P.C., attorneys; Mr. Saffer, of counsel and on the brief; Arla D. Cahill, on the brief).

 

Jonathan I. Rabinowitz argued the cause for respondent Fry's Metals, Inc. (Rabinowitz, Lubetkin & Tully, L.L.C., attorneys; Mr. Rabinowitz, of counsel and on the brief; John J. Harmon, on the brief).

 

Thomas H. Mulcahy argued the cause for respondents Cameron & Mittleman, L.L.P., and Richard Mittleman and Amy Mower (Purcell, Mulcahy, Hawkins, Flanagan & Lawless, L.L.C., attorneys; Mr. Mulcahy, of counsel and on the brief; Kelley W. Lavery and Katherine Lyons, on the brief).

 

PER CURIAM

Chapman, Henkoff, Peduto & Saffer, LLC (Chapman), which provided legal representation regarding transactional matters to RFE Industries, Inc., (RFE), the predecessor corporation to plaintiff Metallix Refining, Inc. (Metallix), appeals from the trial court order denying its motion to intervene in an action filed by Metallix in connection with the sale of RFE's MFE Division (MFE), to Anton Noll, Inc. (Noll) and Noll's subsequent sale of the MFE assets to Fry's Metals, Inc. (Fry's) and Westbury Alloys, Inc. (Westbury). The trial court denied Chapman's application, concluding that its application was untimely. We affirm.

The procedural and factual background in this case, which we derive from the record before the motion judge and a prior unpublished opinion we issued following our grant of interlocutory review, is lengthy. For our purposes, the relevant facts begin in the summer of 1997 when RFE filed a voluntary petition for bankruptcy. While the bankruptcy action was pending, Noll approached RFE about acquiring the MFE Division. RFE retained Chapman as special counsel to represent its interests in the negotiations with Noll; Noll retained Cameron & Mittleman, L.L.P. (C&M) to represent its interests. Chapman prepared the asset purchase agreement and the parties signed the agreement (RFE-Noll Agreement) on September 4, 1997.

The RFE-Noll Agreement provided that payment to RFE for the acquisition would consist of two components: (a) cash consideration based upon the value of MFE's machinery, equipment and inventory sold to Noll; and (b) a monthly royalty payment to RFE, for a three-year period, pursuant to a specific formula based upon future revenues generated from then-existing customers of MFE.

While the consummation of the Noll RFE-Agreement was pending, Fry's contacted RFE seeking to acquire the MFE Division. RFE advised Fry's of the pending contract to sell MFE to Noll. Fry's, represented by Adler Pollock & Sheehan, Inc., entered into negotiations with Noll to directly acquire MFE soon after the RFE-Noll Agreement was finalized. The proposed Noll-Frye's acquisition would involve the purchase of the tin and tin-lead anodes, solders,2 solder dross3 and scrap metal portions (dross assets) of MFE. The proposal include the royalty payment provision in the RFE-Noll Agreement. In this same time period, Westbury also approached RFE about acquiring MFE. According to Metallix, RFE informed Westbury about the RFE-Noll Agreement, specifically about the cash consideration and future royalty payments.

On January 30, 1998, the RFE-Noll Agreement closed. On February 13, 1998, Noll entered into an agreement to sell the dross assets to Fry's, which closed on February 19, 1998. The Noll-Fry's Agreement provided that Fry's would pay $800,000 to Noll for the dross assets, with no mention of royalty payments to RFE. Subsequent to the Noll-Fry closing, Westbury also negotiated an asset purchase agreement with Noll (Noll-Westbury Agreement). Under this agreement, Noll agreed to sell silver anodes and silver plating components of MFE to Westbury. On February 27, 1998, the Noll-Westbury Agreement closed and it did not include a provision for payment of future royalty payments to RFE. Subsequent to the closings of both the Noll-Fry's Agreement and the Noll-Westbury Agreement, Noll filed a petition for bankruptcy. RFE never received any royalty payments.

On May 23, 2000, Metallix commenced an action against Fry's and Westbury seeking compensatory damages, royalty payments, interest, and attorneys' fees (Metallix action). The complaint alleged that despite Fry's and Westbury's knowledge that the assets they acquired from Noll were subject to and encumbered by the royalty payment obligation to Metallix, Fry's and Westbury refused to pay any royalty Payments to Metallix. Metallix filed several amended complaints, including one that added C&M. Metallix alleged that C&M conspired with Noll to defraud RFE out of the royalty payments by intentionally concealing from RFE, during the negotiations of the RFE-Noll Agreement, that Noll intended to sell the assets to Fry's without including its royalty payment obligation to RFE in the sales agreement. Metallix did not assert a claim against its own attorney, Chapman, with respect to its loss of royalty payments.

In 2005, C&M moved for leave to file a third-party legal malpractice complaint against Chapman. Metallix opposed the motion, submitting a brief prepared on its behalf by Chapman. The court denied the motion. In June 2006, the court denied C&M's second motion seeking leave to file a third-party complaint against Chapman, which Chapman opposed. On September 21, 2007, C&M filed a third motion for leave to file a third-party complaint against Chapman, which the court denied on May 6, 2008. Chapman also opposed this motion.

In April 2009, C&M filed a direct complaint against Chapman seeking contribution (contribution action) and alleging malpractice in the underlying Metallix action. Chapman filed a motion to dismiss the complaint for failure to state a claim upon which relief may be granted, R. 6:6-2(3). The court granted the motion on August 28, 2009. On September 18, 2009, C&M filed a motion for leave to appeal the interlocutory order, which we granted. We reversed the trial court order dismissing C&M's complaint. Cameron & Mittleman, L.L.P. v. Chapman, No. A-0808-09 (App. Div. March 17, 2010).

We analyzed the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -5, and found that C&M and Chapman were allegedly responsible for the same injury. Metallix alleged C&M's failure to disclose the Noll-Fry transaction resulted in harm, and C&M asserted Chapman should have included a provision in the RFE-Noll Agreement, which would have protected RFE's interests in the royalty payments, resulting in harm to Metallix. Id. at 9-10. We stated:

Although the precise allegations of negligence against each law firm and attorney in this case are not identical, the harm to Metallix, the loss of royalties owed to RFE from the sale to Noll, is the same. Furthermore, the loss arose from essentially the same transaction at essentially the same time, i.e., the sale of the MFE assets by RFE to Noll at a time when the Chapman Firm had not structured the transaction to prohibit Noll from a further sale of the assets or to protect RFE's right to receive the royalties, and the Cameron Firm had not disclosed to RFE that Noll was negotiating a sale of the assets to a third party which would jeopardize future payment of the royalties. These facts are quite close to those in LaBracio [Family P'ship v. 129 Roosevelt Ave. Inc., 340 N.J. Super. 155 (App. Div. 2001)] and quite distinct from those in Cherry Hill [Manor Assoc. v. Faugno, 182 N.J. 64 (2004)].

[Id. at 18-19]

 

On June 17, 2010, The Supreme Court denied Chapman's motion for leave to file an interlocutory appeal of that decision. Cameron & Mittleman v. Chapman, M-1247, September Term 2009, 065847.

On November 17, 2010, C&M filed a motion to consolidate the Metallix action with the reinstated contribution action. Metallix opposed the motion, and Chapman took no position. The court denied the motion on January 7, 2011.

Notwithstanding the court's denial of C&M's consolidation motion, on March 1, 2011, the court issued a case management order outlining a discovery schedule for both cases. The court ordered the parties to provide all electronic discovery no later than March 28, 2011, and all non-electronic discovery no later than April 26, 2011. The discovery end date for the Metallix action was set for September 30, 2011. On September 13, 2011, the court extended the discovery end date in the Metallix action to February 27, 2012.

On November 1, 2011, C&M filed a motion to amend the complaint in the contribution action to name Metallix and Fry's as defendants. The court denied the motion on January 20, 2012.

On May 24, 2012, Chapman filed a motion to dismiss the contribution action, or in the alternative, for leave to file a third-party complaint. Chapman subsequently filed a motion to intervene in the Metallix action on May 30, 2012, for the limited purpose of its potential liability as an alleged joint tortfeasor being assessed simultaneously with C&M and Fry's in the Metallix action.

Following oral argument, Judge Honora O'Brien Kilgallen issued two orders, both dated January 15, 2013.4 The judge found Chapman's motion to intervene was untimely because "Chapman has been on notice of [its] involvement in the case since June of 2010." The judge also found that Chapman's interests would not be impaired, and it would have the opportunity to defend any interest it may have in the contribution action without intervention. The judge further found that permitting intervention would result in prejudice to Metallix because "any fault apportioned to Chapman would result in a lower recovery for Metallix since the statute of limitations has run." The judge stated: "If Chapman is permitted to intervene, the opportunity for the trier of fact to render a fair and just verdict would be diminished, if not eliminated."

The court cited Higgins v. Owens-Corning Fiberglass Corp., 282 N.J. Super. 600 (App. Div. 1995), and Burt v. West Jersey Health Systems, 339 N.J. Super. 296 (App. Div. 2009), finding the decision in Higgins to be most applicable to this case. The court noted that Chapman had no incentive to actively defend its potential liability because it bears no risk. The court explained that "[a]gain, allowing Chapman to intervene would force Metallix to defend Chapman in an effort to protect its own recovery. As Metallix argued, this would cause delay and additional costs in experts in an already drawn out case." Therefore, the court concluded it would be unfair and unjust to permit Chapman to intervene in the underlying case.

The judge also denied Chapman's motion to dismiss, finding there would be undue prejudice and delay if the motion were granted. She granted Chapman's alternative application seeking leave to file a third-party complaint, because no party would be directly affected by the court's decision to grant the motion. The order also granted Fry's and C&M's motion to amend their answers to include the affirmative defense of collateral estoppel.

Subsequently, Chapman filed a motion for reconsideration. Judge O'Brien Kilgallen denied Chapman's motion, finding that Chapman failed to "provide anything to substantiate" its argument that the court's decision was based on a palpably incorrect basis. Chapman filed a motion for leave to file an interlocutory appeal of Judge O'Brien Kilgallen's orders denying the motion to intervene in the Metallix action and the motion to dismiss the contribution action. On May 9, 2013, we denied Chapman's application. The parties, however, were subsequently notified by the Clerk, Appellate Division, that Chapman's appeal would proceed in the normal course, with the parties addressing the issue of the finality in their respective briefs.

On appeal, Chapman raises the following points for our consideration:

POINT I

 

THE JANUARY 15, 2013 ORDER DENYING CHAPMAN'S MOTION FOR INTERVENTION AS OF RIGHT SHOULD BE CONSIDERED A FINAL JUDGMENT FOR APPELLATE PURPOSES.

POINT II

 

THE MOTION JUDGE ERRED IN FINDING THAT CHAPMAN DID NOT SATISFY THE REQUIREMENTS FOR INTERVENTION AS OF RIGHT UNDER R[ULE] 4:33-1.

 

A. CHAPMAN'S MOTION TO INTERVENE WAS "TIMELY" WITHIN THE MEANING AND SPIRIT OF THE RULE.

 

B. THE MOTION JUDGE ERRONEOUSLY FOUND THAT THE DISPOSITION OF THE METALLIX ACTION WOULD NOT IMPAIR OR IMPEDE CHAPMAN'S ABILITY TO PROTECT HIS INTERESTS.

 

i. METALLIX ACTION WITH ASSESSMENT OF CHAPMAN LIABILITY

 

ii. METALLIX ACTION WITH NO ASSESSMENT OF CHAPMAN LIABILITY.

C. THE MOTION JUDGE ERRONEOUSLY FOUND THAT METALLIX WOULD BE PREJUDICED AS A RESULT OF CHAPMAN'S INTERVENTION.

 

i. THE POTENTIAL REDUCTION OF METALLIX'S RECOVERY IS DUE SOLELY TO ITS INTENTIONAL DECISION NOT TO JOIN CHAPMAN AS A DIRECT DEFENDANT.

 

ii. METALLIX HAS KNOWN THAT THE POTENTIAL LIABILITY OF CHAPMAN WILL BE AN ISSUE DURING TRIAL OF THE METALLIX ACTION REGARDLESS OF WHETHER CHAPMAN IS A PARTY SINCE, AT THE LATEST, JULY 2006.

 

D. THE MOTION JUDGE ERRONEOUSLY FOUND THAT INTERVENTION WOULD NOT FURTHER THE INTERESTS OF JUDICIAL ECONOMY.

 

I.

We first address whether the order denying intervention was final or interlocutory for purposes of this appeal. "Rule 2:2 3(a) governs the right to appeal to the Appellate Division from final judgments and also delineates various orders that, although interlocutory, are deemed final for purposes of taking an appeal as of right." GMAC v. Pitella, 205 N.J. 572, 583 (2010). The denial of a motion to intervene, whether as of right or permissively, is not included in Rule 2:2-3(a) as an order treated as final for purposes of appellate review, notwithstanding recent amendments to the rule.5 R. 2:2-3a. We nonetheless find persuasive federal authority resolving the question based upon whether the appeal is from an order denying intervention as of right versus permissively. See Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 513, 70 S. Ct. 322, 325, 94 L. Ed. 299 (1950), (noting "[w]e have held that an order denying intervention to a person having an absolute right to intervene is final and appealable"). Intervention as of right requires that, in addition to making a timely application and demonstrating an interest in the subject matter of the action, the movant establish that it "is so situated that the disposition of the action may as a practical matter impair or impede the ability to protect that interest." R. 4:33-1.

Judge O'Brien Kilgallen found the motion was untimely and that Chapman's interest would not be impaired or impeded if it is not permitted to join in the Metallix action. While we owe no deference to a trial court's legal conclusions, Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995), we concur with the judge's conclusion here. If Chapman's timeline is considered, as Judge O'Brien Kilgallen accepted, Chapman was on notice of its potential liability in the Metallix action for at least two years before it filed its motion. The record, however, reflects Chapman's knowledge of its potential liability existed as far back as 2005, when it assisted Metallix in opposing C&M's first motion for leave to file a third-party legal malpractice action. Thereafter, it remained a silent partner, who provided assistance to Metallix in opposing subsequent motions from C&M seeking to join it in the Metallix action or it affirmatively took no position on such motions. Moreover, we cannot ignore that Chapman's did not move to intervene until after the statute of limitations had run for any direct action Metallix may have against it. Consequently, as Judge O'Brien Kilgallen aptly noted, "Chapman has no risk" and, therefore, "no incentive for them to actively defend their potential liability."

Because we conclude Chapman was not entitled to intervention as of right, but only permissive intervention, which implicates the trial court's discretionary authority, we conclude the appeal is interlocutory. Although we previously denied interlocutory review, we address the merits of Chapman's appeal, given our direction to the parties to address the issue of the finality or interlocutory nature of the order.

II.

Chapman contends Judge O'Brien Kilgallen erred when she found that its motion was untimely, that its interest would not be affected if not permitted to intervene, and that Metallix would be prejudiced if it was permitted to intervene. In addition, Chapman urges the judge failed to consider judicial economy when considering its motion, and had she done so, intervention would have been found to have been in the best interests of all parties. We reject all of these arguments.

The grant or denial of a motion for permissive intervention is committed to the sound discretion of the trial court and will not be disturbed on appeal, absent a clear showing that the court has misapplied its discretion. Am. Civil Liberties Union of N.J., Inc., v. Cnty. of Hudson (ACLU), 352 N.J. Super. 44, 65 (App. Div.) (citing State v. Lanza, 39 N.J. 595, 600 (1963), cert. denied, 375 U.S. 451, 84 S. Ct. 525, 11 L. Ed. 2d 477 (1964)), certif. denied, 174 N.J. 190 (2002). An abuse of discretion occurs "when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007) (internal quotation marks and citation omitted).

In our unpublished decision in Chapman I, we addressed Chapman's potential liability and, based upon that conclusion, reversed the order dismissing C&M's direct claim against it. Chapman I, supra, slip op. at 19-20. The Supreme Court denied Chapman's motion to file an interlocutory appeal. in June 2010. Unquestionably, at that point, Chapman was on notice of its potential liability. Nontheless, it opposed the motion seeking consolidation of the two actions and then waited two additional years before seeking intervention, solely for the purpose of being added to the verdict sheet--well beyond the statute of limitations for Metallix to advance a direct claim against it.

Likewise, Judge O'Brien Kilgallen did not err when she concluded that Chapman's right to defend its interests would not be affected by the denial of its motion to intervene in the Metallix action. As noted earlier, Metallix has no claim against Chapman because the statute of limitations has run on any such claims. Moreover, C&M's claims against Chapman would only accrue if Metallix obtains a judgment against C&M, in which case Chapman would have the full opportunity to defend its interests in the contribution action. See Polkidori v. Kordys, Puzio & Di Tomaso, 217 N.J. Super. 424, 432 (App. Div. 1987) (holding that "[b]y the terms of [the New Jersey Joint Torfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -5] a 'judgment' is required in order to trigger the right to contribution").

In addition, we agree, as Judge O'Brien Kilgallen found, Chapman's intervention would diminish the jury's opportunity to render a fair and just verdict, because any percentage of liability a jury would assess against Chapman could not be recovered by Metallix because of the statute of limitations. Further, by the time Chapman sought intervention, extensive discovery had been exchanged between the parties and, even if, as Chapman contends, discovery was still incomplete at the time it filed its intervention motion, we agree, as C&M has asserted in its brief, "each party [would] have to recast its position and engage in discovery to support and further its new course and its new exposure."

Finally, we reject Chapman's claim of judicial economy as without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). Chapman's active and implicit opposition to being joined in the Metallix action, dating back to 2005 when it assisted Metallix in opposing C&M's motion to commence a third-party action against it, is compelling evidence that it saw no need to protect its interests against potential liability by joining the Metallix action, in the name of judicial economy.

To summarize, we discern no basis to disturb Judge O'Brien Kilgallen's decision. The decision to deny permissive intervention was reached rationally, through consideration of appropriate factors and rested upon sound reasoning. Iliadis, supra, 191 N.J. at 123.

Affirmed.

 

 

1 Appellants are appealing the denial of their motion to intervene and subsequent denial of their motion for reconsideration.

2 Solder is a fusible metal alloy used to join together metal work pieces and having a melting point below that of the work pieces. http://www.merriam-ebster.com/dictionary/solder (last visited August 13, 2014).

3 Dross is an "unwanted material that is removed from a mineral (such as gold) to make it better. http://www.merriam-webster.com/dictionary/dross (last visited August 13, 2014).

4 The orders are actually dated January 15, 2912. The year is an error.

5 This rule has been amended several times in recent years to treat as final orders for appeal purposes, for example, an order enrolling a defendant into a pre-trial intervention program over the objection of the prosecution (1996); an order granting or denying leave to file a late notice of claim (2006); and an order compelling or denying arbitration (2010).