HAPPY DAYS ADULT HEALTHCARE LLC VS. OBERMAYERÂ REBMANN MAXWELL & HIPPEL, LLP(L-2151-15, CAMDEN COUNTY AND STATEWIDE), A-0501-15T1

Background

Plaintiffs (the Kleimans and two LLCs) had a prior fee suit brought by defendant law firm Obermayer seeking unpaid fees for work from 2009–2012; that fee suit proceeded to jury trial and judgment for Obermayer, later affirmed on appeal.
Plaintiffs alleged in later filings that Obermayer (and attorney Ralph Ferrara, formerly at Obermayer) committed malpractice in handling the separate 300 Broadway matter, which they claimed would operate as a set‑off to fees owed.
Courts disqualified Ferrara as counsel in the fee suit because he was likely a necessary witness; his partner Zucker continued to represent defendants there until he repeatedly sought to withdraw based on conflict concerns arising from the malpractice theory and was denied.
Plaintiffs first raised malpractice/set‑off theories in pleadings and motions intermittently (December 2012 advice to amend pleadings; December 2014 belatedly added an affirmative defense; on first day of trial in May 2015 they sought to amend counterclaim and to stay or preserve the malpractice claim).
Trial court refused leave to amend or to preserve the malpractice claim as untimely and struck malpractice defenses for failure to produce an expert report; after the jury verdict in the fee suit, Obermayer successfully moved to dismiss the separate malpractice complaint under the entire controversy doctrine.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether plaintiffs’ malpractice claim must have been litigated in the earlier fee action under the entire controversy doctrine	Malpractice claim was not ripe and forcing litigation while Ferrara still represented them would chill attorney‑client relationship; plaintiffs lacked fair opportunity to litigate	Plaintiffs were aware of malpractice claims early, were advised to plead them, delayed asserting them, and thus had a full and fair chance to litigate in the fee action	Court held entire controversy doctrine bars the separate malpractice suit; plaintiffs had a full and fair opportunity and failed to timely assert the claim
Whether denying leave to amend/civil preservation at trial and striking malpractice defense were rulings on the merits that preclude relitigation	Plaintiffs contended procedural rulings were not dispositive and did not bar later suit	Defendant argued rulings and failure to appeal amounted to adjudication on the merits and preclusion	Court agreed denial/striking decisions were effectively on the merits; failure to appeal them bars relitigation
Whether malpractice claim accrued and was ripe only after resolution of 300 Broadway	Plaintiffs argued damages uncertain while 300 Broadway remained pending, so claim was not ripe	Defendant argued malpractice accrues when breach causes damages and plaintiffs knew of suppression and injury earlier	Court held malpractice accrued when plaintiffs were aware of malpractice and damages risk; claim was ripe enough to require assertion in fee action
Whether disqualification of Ferrara and his continued representation of plaintiffs in related matter made fair litigation impossible	Plaintiffs claimed conflict would chill representation and prevent fair presentation of malpractice claim	Defendant noted Ferrara’s disqualification in fee suit and that plaintiffs could have amended pleadings and preserved claims earlier	Court found no unfairness that excused plaintiffs’ delay; opportunity to litigate existed despite representation in 300 Broadway

Key Cases Cited

Grunwald v. Bronkesh, 131 N.J. 483 (1993) (legal malpractice accrues when attorney breach proximately causes plaintiff's damages)
Olds v. Donnelly, 150 N.J. 424 (1997) (ripeness and related doctrines in legal malpractice contexts)
Sklodowsky v. Lushis, 417 N.J. Super. 648 (App. Div. 2011) (distinguishing requirements for ripeness and preclusion in malpractice claims)
Velasquez v. Franz, 123 N.J. 498 (1991) (final judgment not set aside on appeal operates as estoppel on points decided)
Reed v. Allen, 286 U.S. 191 (1932) (federal principle that unappealed judgments bind parties on decided issues)