SMITH v. HILLSIDE VILLAGE
OPINION. Signed by Judge Kevin McNulty on 9/11/17. (DD, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 17-0883 (KM)
KEVIN MCNULTY, U.S.D.J.:
The defendant, Hillside Village, filed two state court actions against its
elderly, disabled tenant, Sandra Smith: one for damages, and one to evict her.
It lost both, and the State appellate court stated that it “expected” Hillside to
repair the apartment and restore her tenancy “promptly.” Hillside has not done
so. Now, the tenant sues under federal law to restore her tenancy, and for
damages. Because Ms. Smith did not have a full and fair opportunity to litigate
her federal claims in the prior actions, and because the equities do not entitle
Hillside to repose, its motion to dismiss the tenant’s federal court complaint on
resjudicata grounds is denied.
Ms. Smith, 78 years old at the time of the events in suit, occupied a rentcontrolled apartment in Hillside’s building for some 51 years.2 She lived alone,
and in her later years developed a psychological disorder that caused her to
hoard materials, resulting in severe clutter. In addition, structural damage to
the apartment contributed to the municipal authorities’ declaring it to be
unsanitary’ and uninhabitable.
Hillside immediately filed an action under the wrong statute, New
Jersey’s Unlawful Detainer Act (the Detainer Matter), seeking eviction and
possession on three days’ notice. Procedural confusion ensued. The judge,
improvising, directed Hillside to file a landlord-tenant action (the LT Matter), a
summary proceeding, in which possession issues would be heard; he kept the
Detainer Matter open for the purpose of later hearing Hillside’s claims for
damages. Both cases were tried. Ultimately, Hillside lost both. The Detainer
action failed at trial on the merits. On appeal from the LT action, the Appellate
Division reversed the judgment of possession in Hillside’s favor and stated that
it “expected” Hillside would repair the apartment and restore Smith’s tenancy
Hillside did not repair the apartment or restore Smith’s tenancy. Shortly
after the Appellate Division affirmance, Smith filed this federal court action,
Certain items submitted and properly considered on this motion to dismiss are
cited as follows:
Notice to Quit
3 Day Notice to Quit dated 7/20/20 15, ECF no. 5-2 at 6
Complaint in the Detalner Matter, ECF no. 5-2 at 67
Complaint in the LT Matter, ECF no. 5-2 at 2
Judgment in the LT Matter, ECF no. 5-2 at 96
Transcript of Hearing, 7/24/20 15 in Detainer Matter,
ECF no. 7-1 at 3
Although the parties do not discuss it, it is perhaps not irrelevant that the unit
seeking possession of the premises. This action, under the Fair Housing Act
Amendments, is based on Hillside’s refusal to accede to Smith’s August 2015
proposal for a reasonable accommodation of her disability, consisting of mental
health treatment and an agreement for monitoring of her apartment by an
Hillside now invokes equity, in the form of res juthcata. This court, it
says, must save it from Ms. Smith’s vexatious assertion of claims she should
have pursued earlier. Although the summary LT Action for possession would
not have permitted counterclaims, Hillside says, leave to bring a counterclaim
for possession could have been sought in Hillside’s unsuccessful Detainer
action for damages.
The Detainer Matter, DC-10607-15: Phase 1
Prior to this federal litigation, on July 24, 2015, Hillside filed in Special
Civil Part, Bergen County, an action (the “Detainer Matter”) against Smith by
Order to Show Cause. (Hillside Village a Sandra Smith, Docket no. DC-l060715 (N.J. Super. Ct., Law Div., Special Civil Part, Bergen Co.))
The complaint in the Detainer Matter alleged that on July 17, 2015, an
officer of the Ridgefield Bureau of Fire Prevention went to inspect the
apartment after receiving a report of an odor of gas. Inspectors, code
enforcement officials, inspectors, and representatives of Hillside found
appalling conditions within. The complaint cites destruction of the kitchen
cabinets, holes in the ceiling, and likely insect and rodent infestation. The
inspectors “red-tagged” the apartment as unfit for occupancy, and issued a
letter and order to correct to Hillside.
Ms. Smith was removed from the premises. Hillside had counsel serve on
Ms. Smith a 3-day Notice to Quit with demand for possession.
The Detainer Matter complaint sought a judgment of possession of
Smith’s apartment pursuant to New Jersey’s Unlawful Detainer statute, N.J.
§ 2A:39-1 et seq., and an injunction against Smith’s returning to the
apartment except to recover personal property. (See Detainer Cplt., passim.)
On July 24, 2015, both parties, by counsel, appeared before the Hon.
Joseph R. Rosa, Jr., J.S.C. on an order to show cause in the Detainer Matter.
Ms. Smith’s counsel argued, and Judge Rosa agreed, that an action under the
Unlawful Detainer statute was not an appropriate shortcut; Smith, as a
longtime tenant, was entitled to the protections of the anti-eviction provisions
of New Jersey law.
What was required, Judge Rosa said, was a landlord/tenant action citing
statutory grounds for eviction. (SeeDetainerTr. 5:4—10, 8:18—9:1) He told
Hillside’s counsel he would have to file an eviction complaint. (Id. 12:25—13:18)
Counsel for Hillside agreed to “go downstairs and file this as an LT”
(landlord/tenant) action, based on the existing Notice to Quit. (Id. 13: 19—21)
Counsel for Hillside expressed concern that such an LT proceeding would
take too long. Judge Rosa reassured him that he had no vacation plans for
August and that “I’ll just put this on the DC calendar because it’ll wind up
being moved by the time
we can have the tenancy done a long time before
this [i.e., the Detainer Matter] comes up.” (Detainer Tr. 12:23—13:3) Judge Rosa
thus predicted that “you’ll have [Smith] evicted and locked out even though
she’s out already” in the LT Matter, before Smith was even required to file an
answer in the Detainer Matter. (Id. 16:8—12; 15:16—18)
Judge Rosa’s statement that Smith was “out already” seemingly referred
to the fact that the municipal officials had “red-tagged” the unit as unfit for
habitation and removed her. The Judge stated that he would not let Ms. Smith
reenter the apartment while it was in that condition. Counsel for Smith
acknowledged that she was not immediately seeking such relief. (Detainer Tr.
Judge Rosa volunteered further that “if I were the landlord, I would be in
no rush to clean that up. If [the municipal authorities have] already said we’ll
give you another 30 days, why in the world would you want to clean it up and
then just have her try to come back in? (Detainer Tr. 14:8—14) Counsel for
Hillside stated that although the municipality could fine his client for
unsanitary conditions, it was not his client’s “responsibility to clean the
tenant’s apartment.” (Id. 14:17—18, 24—25)
Judge Rosa and counsel, all talking over each other, seemingly came to
share an understanding that the Detainer Matter would stay open so that
Hillside’s claim for “money damages” could be adjudicated.3 Counsel for Ms.
This three-way interaction is difficult to describe. (See Detainer Tr. pp. 12—16.)
The following principles may help clarify the legal background:
New Jersey is an anti-eviction jurisdiction. See N.J.S.A. 2A: 18-61.1 to
6 1.12, the Anti-Eviction Act (Act). As such, under the Act, no residential
tenant may be removed from a premises unless the removal is for one of
the statutory causes set forth under the Act, N.JS.A. 2A:18-61.1(a)-(aJ.
[The opinion here cites non-payment of rent under § 2A:18-61.1(a). The
basis cited in the LT action against Smith was § 2A:18-61-1(c) (willfully
or by gross negligence causing damage to premises)]
The sole purpose of a summary action instituted by the landlord to
recover possession of leased premises is to enable the landlord to obtain
speedy recovery of the premises. West, supra, 69 N.J. at 300, 354 A.2d
65; Vineland Shopping Ctr., Inc. v. De Marco, 35 N.J 459, 462, 173 A.2d
270 (1961). A judgment of possession enables the landlord to legally
enter the property. In the absence of the judgment of possession, a
landlord is prohibited from taking possession of residential premises. See
Levin v. Lynn, 310 N.J Super. 177, 183, 708 A.2d 454 (App.Div.l998).
Possession of the premises is the only available remedy for nonpayment
of rent, because money damages may not be awarded in a summary
dispossess action. Hous. Auth. of Morristown v. Little, 136 N.J 274, 280
However, neither a landlord nor tenant are precluded from seeking to
recover money damages in a subsequent proceeding. Moyano u. Williams,
267 N.JSuper. 213, 216, 630 A.2d 1212 (Law Div. 1993). SeeAzaru.
Jabra, 167 N.J Super. 543, 552, 401 A.2d 293 (Law Div.1979) (holding a
“summary dispossession action is not conclusive or binding as between
the parties in subsequent litigation”); see also Berzito v. Gambino, 63 N.J.
460, 469, 308 A.2d 17 (1973) (holding tenants were not precluded from
seeking to recover rent paid prior to court’s ruling in summary
dispossession action that landlord had breached the warranty of
habitability). N.JS.A. 2A: 18-59.
147 Broadway Coip. zc Robinson, No. A-6483-06T1, 2008 WL 2663751, at *2 (N.J.
Super. Ct. App. Div. July 9, 2008).
Smith stated that the Detainer Matter should be dismissed outright. She noted,
correctly, that there was currently no such claim for damages even alleged in
the Detainer Complaint. (Detainer Tr. 15:23—25; see Detainer Cplt., passim.)
Judge Rosa declined to sign Hillside’s order to show cause for emergent
relief in the Detainer Matter. He found no irreparable harm and stated that the
issue of the tenancy could be settled in the LT Matter. (See id. 16:15—17:5)
The State LT Matter, DC-5606-15
Hillside filed a handwritten complaint in the LT Matter the same day,
July 24, 2015. (Hillside Village
Sandra Smith, Docket no. DC-5606-15 (N.J.
Super. Ct., Law Div., Special Civil Part, Bergen Co.) As statutory grounds for
removal, the Complaint cited N.J. Stat. Ann.
2A:18-61-1(c) (“The person has
willfully or by reason of gross negligence caused or allowed destruction,
damage or injury to the premises.”). It incorporated by reference the earlier
Notice to Quit and sought a judgment of possession. (LT Cplt.
10) An eviction
action, it did not seek back rent or damages. It alleged that Ms. Smith had
willfully damaged the apartment and had failed to vacate it as required by the
Notice to Quit.4 Trial was scheduled for August 6, 2015.
Hillside attaches an August 4, 2015, letter from Smith’s counsel in
advance of the LT trial requesting an “interactive dialogue for reasonable
accommodation under the Fair Housing Amendments Act of 1988, 42 U.S.C.
3601, et seq. (hereafter: FHAA), to enable Mrs. Smith to comply with her lease,
in view of her obsessive compulsive/hoarding disorder.” (Cplt. Ex. F, ECF no.
5-2 at 83) The letter cited the landlord’s duty under FHAA to accommodate the
needs of disabled persons and make reasonable accommodations before
terminating a tenancy. (Id.) Hillside’s counsel emailed that he would discuss it
In her subsequently filed Answer, Smith admitted the hoarding but stated that
any damage to the apartment resulted from the landlord’s failure to remedy a termite
infestation and water infiltration. (ECF no. 5-2 at 88) She ultimately prevailed at trial.
at the courthouse, but that Smith should be prepared to try the case if an
accommodation could not be reached. (Id. at 84)
The LT Matter was tried before Judge Rosa on August 6 and 18, 2015.
(ECF no. 5-2 at 20) Smith attempted to raise the FHAA, 42 U.S.C.
§ 360 1—19
(at least as a defense if not as a claim), but was not permitted to do so in this
summary action. (Id. at 21; see Hillside Village v. Smith, 2017 WL 412803 at *6
n.3 (Jan. 31, 2017).)
Judge Rosa announced his decision on August 28, 2015, and on
September 2, 2015, entered judgment in favor of Hillside on the claim that
Smith had willfully or by gross negligence damaged the apartment. (LT
Judgment, as amended, ECF no. 5-2 at 97) Hillside was granted possession of
Smith appealed to the New Jersey Superior Court, Appellate Division.
(Notice of Appeal, ECF no. 5-2 at 99) To look ahead a bit, the Appellate Division
ultimately reversed the LT Judgment. See Section I.D, infra.
The Detainer Matter-Phase 2
The Detainer Matter, as noted above, was left open so that Hillside could
pursue its claim for damages. The record of what happened next in the
Detainer Matter, at least as presented by the parties, is sparse. In particular,
the papers seem to lack a copy of the judgment in the Detainer Matter—the
very judgment on which Hillside relies to foreclose the current action.
This much can be gathered. In the Detainer Matter, Hillside pursued a
claim for damages based on damage to the apartment during Ms. Smith’s
On appeal, the Appellate Division noted that the thai judge had “observed that
in need of help,tm but had “rejected defendant’s claim that
defendant was ‘someone
she was entitled to an accommodation under federal law because a summary
dispossession action did not provide for the expert testimony that would be necessary
to establish her entitlement to such accommodations and none was offered in this
case.” Hillside Village v. Smith, 2017 WL 412803 at *5 n.3. (Jan. 31, 2017). The
Appellate Division reversed on other grounds without reaching that issue, but I take
notice of its account of the procedural history of the case.
tenancy. After a two-day trial concluding on January 6, 2016, the Hon. James
X. Sattely, J.S.C., dismissed Hillside’s case for failure of proof. (See Decision of
Judge Sattely regarding attorneys’ fees, dated Jan. 28, 2016, ECF no. 7-2 at 3)
Appeal of the LT Matter
As noted above, Ms. Smith appealed from the judgment of eviction in the
LT Matter. The Appellate Division reversed Judge Rosa’s judgment awarding
possession to Hillside. Hillside Village v. Smith, 2017 WL 412803 (Jan. 31,
2017) (Copy of decision, ECFno. 5-2 at 61).
The Notice to Quit, the Appellate Division held, was defective, and did not
create jurisdiction in the trial court. The Notice cited hoarding and unsanitary
conditions, but did not specify any damage that Smith had caused to the
apartment. In particular, it did not specify the damage—structural damage,
broken faucets, collapsed cabinets, and so on—to which the witnesses testified
at trial.6 Nor did the trial court make the necessary findings that the damage
resulted from Ms. Smith’s willful or grossly negligent conduct. 2017 WL
412803 at *6.
The Appellate Division vacated the judgment of possession and
remanded for entry of an order dismissing the LT Complaint with prejudice.
The court noted that Hillside had left the apartment vacant and had not
performed any repairs for more than a year. It stated that “[sjince the judgment
of possession has now been vacated, we expect that [Hillsidej will promptly
make the necessan’ repairs and restore [SmithJ to possession of the
apartment.” 2017 WL 412803 at *6 n.7. That allegedly has not occurred,
“promptly” or othenvise.
The lapse is perhaps explained by counsel’s initial filing of the action under the
Unlawful Detainer statute, without reference to the statutory grounds for eviction in
N.J. Stat. Ann. § 2A:18-61-1. Hillside’s hastily-contrived LT complaint cited those
statutory grounds. But instead of restarting the process with a new Notice to Quit,
counsel repurposed the original Notice to Quit. (See Detthner Tr. 13:6—15). That
original Notice evidently had not been drafted with the statutory grounds for eviction
The Complaint in this Federal Action
On February 9, 2017, Ms. Smith filed the complaint in this federal
action. It asserts claims under the federal Fair Housing Act (“FHA”), 42 U.S.C.
3613(c), and the New Jersey Law Against Discrimination (“NJLAD”), N.J. Stat.
10:5-4 et seq. The allegations of this federal-court complaint are as
Ms. Smith, 78 years old, moved into her rent-controlled apartment at
Hillside Village 51 years ago. At some time, she became depressed and
developed hoarding disorder, a recognized mental disorder. As a result her
apartment became extremely cluttered.
On July 17, 2015, she permitted emergency personnel to enter her
apartment. She was told that someone had reported the odor of gas. The
source was found to be her clothes dryer.
The emergency personnel noted the hoarding conditions, as well as
structural problems such as a hole in the bathroom ceiling, damage to the
floors, and plumbing issues. The official issued a notice of code violations and a
notice that the apartment could not be occupied until the conditions were
remedied. Smith alleges that she did remove her possessions, both to alleviate
the hoarding and to permit repairs. Since then she has resided elsewhere, but
apparently has no permanent home of her own.
On July 20, 2015, Hillside issued a three-day Notice to Quit. The Notice
cited the hoarding and failure to perform basic housekeeping activities, but not
the structural defects.
In connection with subsequent state-court eviction proceedings (the “LT
Matte?’), Ms. Smith’s counsel presented Hillside with a proposed plan of action.
Smith would agree to attend counseling, would take medication to address her
psychological condition, and would arrange for monitoring of her apartment by
a support organization. She requested that Hillside permit her to resume
occupancy of her apartment under those conditions.7 Hillside declined to
accept Smith’s proposal for a reasonable accommodation and did not permit
her to reoccupy the apartment.
The trial court ordered Smith’s eviction. The Appellate Division reversed
the decision of the trial court, but Ms. Smith still has not been restored to
The federal court complaint seeks an order compelling Hillside to repair
the apartment and restore Ms. Smith to possession, as well as damages.
Standard on a Motion to Dismiss
Defendants have moved to dismiss the Complaint for failure to state a
claim, pursuant to Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) provides for the
dismissal of a complaint, in whole or in part, if it fails to state a claim upon
which relief can be granted. The defendant, as the moving party, bears the
burden of showing that no claim has been stated. Hedges v. United States, 404
F.3d 744, 750 (3d Cir. 2005). In deciding a Rule 12(b)(6) motion, a court must
take the allegations of the complaint as true and draw reasonable inferences in
the light most favorable to the plaintiff. Phillips v. County of Allegheny, 515
F.3d 224, 231 (3d Cir. 2008) (traditional “reasonable inferences” principle riot
undermined by Twombly, see infra).
Federal Rule of Civil Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Ati. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the
complaint’s factual allegations must be sufficient to raise a plaintiff’s right to
relief above a speculative level, so that a claim is “plausible on its face.” Id. at
Smith alleges that she specifically directed Hillside to a May 17, 2004 Joint
Statement of the Department of Housing and Urban Development and the Department
of Justice on Reasonable Accommodations Under the Fair Housing Act.
570; see also Umland u. PL4NCO Fin. Seru., Inc., 542 F.3d 59, 64 (3d Cir. 2008).
That facial-plausibility standard is met “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556). While “[tjhe plausibility standard
is not akin to a ‘probability requirement’.
it asks for more than a sheer
possibility.” Iqbal, 556 U.S. at 678.
In support of its res judicata claim, Hillside submitted 100 pages of
exhibits. Smith has responded with a smaller number of exhibits, for the most
part records of the prior court proceedings. Neither side has objected to the
other’s reliance on such exhibits. Particularly relevant here are papers filed in
the State Action and decisions of the State courts. These are cited to establish
the nature and scope of prior proceedings between the parties, and the rulings
of the state courts. Such records are subject to judicial notice. S. Cross
Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 181 F.3d 410, 426-27
(3d Cir. 1999). See generally Fed. R. Evid. 201.8
Resjudicata, an affirmative defense, often raises issues of fact, but in a
proper case may be cognizable on a motion to dismiss;
We held in Bethel v. Jendoco Constr. Corp., 570 F.2d 1168, 1174
(3d Cir. 1978), that if a statute of limitations “bar is not apparent
on the face of the complaint, then it may not afford the basis for a
Even setting aside judicial notice, certain records that are the basis of the
complaint may be considered without converting a facial Rule 12(b)( 1) challenge into a
factual one, or a Rule 12(b)(6) motion into one for summary judgment. See Schmidt v.
Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (“However, an exception to the general rule is
that a ‘document integral to or explicitly relied upon in the complaint’ may be
considered ‘without converting the motion to dismiss into one for summary judgment.’
“) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997)); Pension Ben. Guar. Corp. v. White ConsoL Indus., Inc., 998 F.2d 1192, 1196 (3d
Cir. 1993). Indeed, where a complaint is based on particular documents, a defendant
may submit and rely on such documents in its motion to dismiss. The reasons for the
rule are (1) that the plaintiff, having relied on the document, cannot claim unfair
surprise; and (2) the plaintiff cannot base a claim on a document while shielding the
document itself from view. Burlington, 114 F.3d at 1426. Certain of the documents
cited and expressly or impliedly relied on in the federal court complaint would fit
within this exception as well.
dismissal of the complaint under Rule 12(b)(6).” This holding
applies not only to a statute of limitations defense, but also to any
affirmative defense raised pursuant to Rule 8(c), including res
judicata and the Entire Controversy Doctrine.
Rycoline Products, Inc. u. C & W Unlimited, 109 F.3d 883, 886 (3d Cir. 1997).
Thus i-es judicata may be considered on a Rule 12(b)(6) motion, where, as here,
the necessary facts are “apparent on the face of the face of the complaint” and
other documents properly considered on a motion to dismiss.
Hillside, citing the prior judgment in the State Detainer Matter (not the
LT Matter), asserts that the claims in this federal action are barred by i-es
judicata, and in particular, New Jersey’s entire controversy rule. I cannot agree.
The motion to dismiss on entire controversy grounds will be denied.
1. Resfudicata and the New Jersey entire controversy rule
The preclusive effect of a state court judgment in a subsequent federal
action depends on the law of the state that adjudicated the original action. See
Greenleafu. Garlock, Inc., 174 F.3d 352, 357 (3d Cir.1999) (“To determine the
preclusive effect of [the plaintiffs] prior state action we must look to the law of
the adjudicating state.”). See also Allen v. McCurry, 449 U.S. 90, 96, 101 S. Ct.
411, 415 (1980). Under New Jersey law, claim preclusion in the traditional
sense tends to be subsumed by the broader “entire controversy” rule. The
entire controversy rule precludes, not just claims actually decided by a prior
judgment, but all claims and parties that a
could have joined in a prior
case based on the same transaction or occurrence.
The entire controversy rule rests on considerations of both fairness and
Under the entire controversy doctrine, a party cannot withhold
part of a controversy for separate later litigation even when the
withheld component is a separate and independently cognizable
cause of action. The doctrine has three purposes: (1) complete and
final disposition of cases through avoidance of piecemeal decisions;
(2) fairness to parties to an action and to others with a material
interest in it; and (3) efficiency and avoidance of waste and delay.
See DiTrolio v. Antiles, 142 N.J. 253, 662 A.2d 494, 502 (N.J.1995).
As an equitable doctrine, its application is flexible, with a case-bycase appreciation for fairness to the parties.
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 137 (3d Cir. 1999).
The entire controversy doctrine “requires a party to bring in one action
‘all affirmative claims that [it] might have against another party, including
counterclaims and cross-claims,’
or be forever barred from bringing a
subsequent action involving the same underlying facts.” Rycoline Prods., Inc.
C & WUnlimited, 109 F.3d 883, 885 (3d Cir. 1997) (quoting Circle Chevrolet Co.
v. Giordano, Halleran & Ciesla, 142 N.J. 280, 289, 662 A.2d 509, 513 (1995)).’°
See also Sylvia B. Pressler & Peter G. Verniero, N.J. Ct. R. 4:30A, Comment 1
(2017 ed., annot.)
We have described the entire controversy doctrine as “New Jersey’s
specific, and idiosyncratic, application of traditional res judicata
principles.” Rycoline Prods., Inc. v. C & W Unlimited, 109 F.3d 883,
886 (3d Cir. 1997). A mainstay of New Jersey civil procedure, the
doctrine encapsulates the state’s longstanding policy judgment
that “the adjudication of a legal controversy should occur in one
litigation in only one court[.]” Cogdell v. Hosp. Ctr. at Orange, 560
A.2d 1169, 1172 (N.J. 1989); see also N.J. Const. art. VI, § 3, ¶ 4
(“[Ljegal and equitable relief shall be granted in any cause so that
all matters in controversy between the parties may be completely
determined.”); Smith v. Red Top Taxicab Corp., 168 A. 796, 797
Hillside at one point seems to demur; Ms. Smith, it says, is mixing up joinder
rules with the entire controversy doctrine, which requires only (1) that the claims arise
from the same transactions as the prior action (2) that the plaintiff did not raise them
in the prior action. (Def. Reply 3)1 disagree; many additional equitable considerations
go into the court’s decision, and the joinder rules have much to do with whether a
claim could have been asserted in a prior action. Indeed, the entire controversy rule
may be seen as the implementation of a particularly strong version of mandatory
joinder of claims. See, e.g., N.J. Ct. R. 4:30A (current ver.) (“Non-joinder of claims or
parties required to be joined by the entire controversy doctrine shall result in the
preclusion of the omitted claims to the extent required by the entire controversy
Circle Chevrolet was later overruled to the extent that attorney malpractice
claims, because they are not to be brought in the action in which the malpractice
occurred, were exempted from the entire controversy doctrine. Olds v. Donnelly, 150
N.J. 424, 696 A.2d 633 (1997)
(N.J. 1933) (“No principle of law is more firmly established than
that a single or entire cause of action cannot be subdivided into
several claims, and separate actions maintained thereon.”)....
Ricketti z1’. Barry, 775 F.3d 611, 613 (3d Cir. 2014).
There is no requirement that the claim as to which preclusion is sought
have been actually asserted in the prior action. Rather, the necessary relation
between the prior action and the present one is a factual, transactional one:
In determining whether a subsequent claim should be barred
under this doctrine, “the central consideration is whether the
claims against the different parties arise from related facts or the
same transaction or series of transactions.” [citing Dirrolio v.
Antiles, 142 N.J. 253, 268, 662 A.2d 494 (1995)]. “‘It is the core
set of facts that provides the link between distinct claims against
the same parties
and triggers the requirement that they be
determined in one proceeding.’” Id. at 267—68, 662 A.2d 494.
There is no requirement that there be a “commonality of legal
issues.” Id. at 271, 662 A.2d 494.
Wadeer v. New Jersey Mfrs. Ins. Co., 220 N.J. 591, 605, 110 A.3d 19, 27
(2015). So the entire controversy doctrine applies in federal court “when there
was a previous state-court action involving the same transaction.” Bennun v.
Rutgers State Univ., 941 F.2d 154, 163 (3d Cir. 1991). It extinguishes any
subsequent federal-court claim that could and should have been joined in the
prior state action.
Application of entire controversy rule to this case
Certain requirements of the entire controversy rule are surely present.
The LT Matter surely proceeded to judgment, and the Detainer Matter seems to
have done so. Each involved many of the same transactions that are the
subject of this federal action: Ms. Smith’s tenancy, the issue of financial
responsibility for the physical conditions in the apartment, and her eviction by
Hillside. See Bennun, 941 F.2d at 163 (3d Cir. 1991) (“a previous state-court
action involving the same transaction”).
a. Preclusive effect of the LT Matter
I first consider the preclusive effect of the State LT Matter.
The entire controversy rule’s preclusive effect is limited to claims that
could have been brought in the prior action. Thus, for example, non-”germane”
claims, which cannot be asserted in a foreclosure action, will not be barred
from being asserted in a later action. See N.J. Ct. R. 4:64-5 (limiting
permissible claims in mortgage foreclosure actions to those which are
“germane” to the foreclosure); Coleman v. Chase Home Fin., LLC ex rel. Chase
Manhattan Mortgage Cop., 446 F. App’x 469 (3d Cir. 2011) (federal-court
claims that would have been “germane” to prior mortgage foreclosure action are
barred by the foreclosure judgment).
As Ms. Smith sees it, she cannot be barred from asserting her FHA claim
in the current federal action, because she was “prohibited by court rule from
bringing a counterclaim in the LT Matter.” (Def. Brf. 8) When Smith says
“prohibited by court rule,” she refers to N.J. Ct. R. 6:3-4:
(a) No Joinder of Actions. Summary actions between landlord and
tenant for the recovery of premises shall not be joined with any
other cause of action, nor shall a defendant in such proceedings
file a counterclaim or third-party complaint.
(Def. Brf. 10) (citing, e.g., Housing Authority of Morristown v. Little, 135 N.J.
274, 280, 639 A.2d 286, 289 (1994) (“The only remedy that can be granted in a
summary dispossess proceeding is possession; no money damages may be
awarded.”); 147 Broadway Corp. v. Robinson, ,No. A-6483-06T1, 2008 WL
2663751, at *2 (N.J. Super. Ct. App. Div. July 9, 2008) (“money damages may
not be awarded in a summary dispossess action.
[H]owever, neither a
landlord nor tenant are precluded from seeking to recover money damages in a
Hillside does not really disagree: It acknowledges that “[d]ue to the
jurisdictional limitations of the Landlord/Tenant Court in New Jersey, a
counterclaim cannot be raised as a matter of law so the relevance of [the] LT
Matter to the application of the entire controversy doctrine is limited.” (Def.
Reply Brf. 1 & n.1) (citing N.J. Ct. R. 6:3-4(a)). By “limited,” Hillside means
“nonexistent.” It quickly concedes that the LT Matter has no preclusive effect,
and that “the only matter relevant to this Motion to Dismiss based on New
Jersey’s entire controversy doctrine is the unlawful detainer action bearing the
Superior Court of New Jersey Law Division, Special Civil Part Docket No. DC10607-15.” (P1. Reply Brf. 1)
h. Preclusive effect of the Detainer Matter
Finally, then, I consider the preclusive effect of the Detainer Matter,
which is the real source of the parties’ disagreement on this motion.
Hillside stresses that in the Detainer Matter, unlike the LT Matter,
Smith’s counterclaims were not barred; they could have been asserted by leave
of court. See N.J. Ct. R. 4:67-4. In Hillside’s view, that assertion of claims in
the prior action required permission does not alter the res judicata analysis:
Thus it was defendants’ entire controversy obligation to raise their
civil rights, torts and other causes of action by way of a motion for
leave to file a counterclaim in the summary action. Concomitantly,
it was the trial court’s responsibility in ruling upon such a motion,
to exercise the substantial discretion it had to manage the entire
controversy between the parties, including the entry of an order
severing those claims and assigning them appropriately for plenary
treatment in other divisions of the Superior Court.
Perretti v. Ran-Day’s
Kosher, Inc., 289 N.J. Super. 618, 624, 674 A.2d 647,
650 (App. Div. 1996). In short, says Hillside, a party should be barred from
asserting a claim if it could have sought leave to assert it in the prior action,
but did not. Only where the party attempted to assert the claim, and “[w]here
the court has expressly reserved the plaintiffs right to maintain the second
action or where its rulings on related issues indicate it was likely to have
reserved that right, the preclusive effect of the entire controversy does not
apply.” Diorio v. Structural Stone & Brick Co., Inc., 368 N.J. Super. 134, 139,
845 A.2d 658, 661 (App. Div. 2004). That, says Hillside, did not happen here.
Ms. Smith stresses, in contrast, that the entire controversy rule is an
equitable doctrine. A court must always consider whether applying the rule
would “promote any of its objectives, namely, the promotion of conclusive
determinations, party fairness, and judicial economy and efficiency.” K-Land
Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 70, 800 A.2d 861, 868
(2002). And it must decline to apply the entire controversy rule where “where to
do so would be unfair in the totality of the circumstances.” Id. Relevant
equitable circumstances disfavoring preclusion include the following:
jT]he party against whom preclusion is sought could not have
obtained review of the prior judgment; the quality or extent of the
procedures in the two actions is different; it was not foreseeable at
the time of the prior action that the issue would arise in
subsequent litigation; and the precluded party’ did not have an
adequate opportunity to obtain a full and fair adjudication in the
Ohvieñ v. YM.F. Carpet, Inc., 186 N.J. 511, 523, 897 A.2d 1003 (2006).
The Detainer Matter, in contrast with the LT Matter, does not afford Ms.
Smith the argument that she was prohibited as a matter of law from asserting
counterclaims. Rather, Smith’s position here boils down to a contention that
she did not have a “fair and reasonable opportunity to have frilly litigated [her
FHA] claim in the [Detainer Matter]” under all the circumstances. K-Land, 173
N.J. at 72—73, 800 A.2d at 870 (quoting Gelber v. Zito Partnership, 147 N.J.
561, 565, 688 A.2d 1044 (1997)) (Emphasis added). I agree.
First, the gist of this federal action is Ms. Smith’s demand for possession
of the apartment. Claims for possession were not heard in the Detainer Matter.
They were relegated to the LT Action, where—as all agree—Smith’s
counterclaims could not be heard as a matter of law. Moreover, despite
Hillside’s having failed to prevail in either action, it has not in fact repaired the
apartment or restored her tenancy, as contemplated by the Appellate Division’s
decision. That being the case, Hillside can hardly be heard to claim that she
has exhausted her rights and that it is entitled to repose. The harm, despite the
state courts’ rulings, continues.
Second, Ms. Smith made significant efforts to assert her rights under the
FHA in the only context where it mattered: in connection with the LT Action
that resulted in her eviction (subsequently overturned on appeal). She directed
Hillside to her rights under the FHAA, sought to consult with Hillside’s counsel
about them in advance of trial, and proposed a reasonable accommodation
consisting of treatment of her disorder and monitoring of the apartment by an
outside agency. The Appellate Division decision acknowledges that she
attempted to raise the FHAA, at least as a defense if not as a counterclaim, in
the LT Action, but was rebuffed.
Third, there was procedural confusion as to the division of issues
between the two actions—some of it created by Hillside. Counterclaims may be
asserted (by permission) in Detainer proceedings, but Judge Rosa immediately
ruled that the Detainer Matter as filed was not an appropriate vehicle for
Hillside’s claim for possession. Instead, he directed Hillside to file an LT action
for eviction. A reasonable litigant could have interpreted that improvised
ruling—brought on by Hillside’s procedural error—as a ruling that possession
issues would not be adjudicated in the Detainer Matter, but had been relegated
to the LT Matter, where, everyone agrees, Ms. Smith was prohibited by court
rule from bringing a counterclaim.
Indeed, the division of issues between these two kinds of action is
usually understood as possession on the one hand, and damages on the other.
See Housing Authority of Morristown, 135 N.J. at 280; 147 Broadway Corp.
2008 WL 2663751, at *2. I find it likely that Judge Rosa meant no more than
he said—i.e., that he was retaining jurisdiction over the Detainer Matter for
purposes of hearing Hillside’s claims for damages, and that possession issues
would be adjudicated first. A reasonable litigant could have concluded that the
Detainer Matter was confined to such damages claims.
Fourth, I find that the order of decision—quick adjudication of Hillside’s
LT action for possession and eviction, followed by more leisurely adjudication of
the Detainer Matter—meant as a practical matter that the possession issue
would be settled before Smith ever had the opportunity to assert her
possessrny rights under the FHAA. On the first day, July 24, 2015, Judge Rosa
(who presumably was unaware of Smith’s FHAA defense) treated a quick
eviction as a fait accoinpiL He assured Hillside’s counsel that he would not be
going on vacation in August and “you’ll have [Smith] evicted and locked out”
before Smith would even required to file an answer in the Detainer Matter, which
was placed on the slower “CD” track. (Detainer Tr. 16:8—12; 15:16—18)
Establishing Hillside’s right to possession in the LT Matter before issue was
even joined in the Detainer Matter seems to have been the plan from day one.
As it turned out, Judge Rosa was almost as good as his word: he fully
tried the LT matter on August 6 and 18, 2015, before Smith filed her Answer in
the Detainer Matter on August 22, 2015. The Judge announced his decision in
the LT Matter just days later, on August 28, 2015; judgment of possession was
formally entered on September 2, 2015 (ECF no. 5-2 at 96); and he amplified
his reasoning on September 9, 2015. Of course, no counterclaims are
permitted in such summary actions, so an FHAA counterclaim could not have
been asserted in the LT Matter. It is very clear, however, that Smith’s counsel
asserted her rights under the FHAA, in writing, and sought an accommodation
of her disability from Hillside’s counsel, who declined. In addition, Smith
attempted to assert the FHAA as a defense in the LT Action; the court excluded
it because it would have required introduction of expert testimony, a
procedural opportunity which the court regarded as unavailable in a summary
action. See Hillside Village v. Smith, 2017 WL 412803 at *6 n.3 (Jan. 31, 2017).
So what opportunity to assert an FHAA claim remained? Hillside believes
Smith could have sought leave to assert it in the Detainer Matter, the trial of
which lay some fifteen months in the future. At that point, however, the issue
of possession had already been decided. That may be a feature, not a bug; a
summary LT proceeding prioritizes efficiency in disposing of possession issues,
leaving any errors to be redressed by the second-best remedy of damages. And
once it has been adjudged that the landlord is entitled to possession, it may
make little sense to say that the tenant is now entitled to a separate
adjudication of whether she is entitled to possession—unless the situation
changes and the landlord’s entitlement to possession is vacated.
Fifth, circumstances have now changed in precisely that manner. Judge
Rosa’s judgment for possession in the LT Matter was eventually reversed on
appeal; the trial court, said the Appellate Division, had not even possessed
jurisdiction over the case based on the defective Notice to Quit. The possession
issue is therefore no longer closed. Now, no presently valid order of any court
supports the eviction or entitles Hillside to possession. Yet Hillside has not, as
the appellate court admonished it to do, repaired the apartment or resumed the
tenancy. 2017 WL 412803 at *6 n.7.1’ So it is difficult to accept Hillside’s
contention that the matter is simply over and done with.
This tangled procedural history does not give the Court confidence that
Smith had a fair opportunity to present and litigate her FHAA claims. Nor do
the circumstances, at least as alleged here, suggest that Hillside is entitled to
repose as a matter of equity. Considering the totality of the circumstances, I
will exercise my equitable discretion to deny application of the entire
Defendant’s motion (ECF no. 5) under Federal Rule of Civil Procedure
12(b)(6) to dismiss the complaint for failure to state a claim upon which relief
may be granted on grounds of res judicata and the entire controversy doctrine
is denied. A separate Order accompanies this Opinion.
Dated: September 11, 2017
United States District Judge
It appears from prior decisions in these matters, including the Appellate
Division decision, that Hillside has left the apartment unrepaired. It may have done so
for the strategic reason suggested by Judge Rosa: that if the local authorities declared
the apartment habitable, the tenant might move back in, absent a valid order of the
court barring her from doing so.
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