Plaintiffs Scott Diamond and Edward Street Holdings filed a lawsuit in the Law Division against defendant Warren Diamond (“Warren”) for claims that had been the subject of a Chancery Division matter. In the chancery matter, the plaintiffs had filed a 12-count counterclaim against Warren which included, among other claims, a malicious abuse of process claim, claiming that Warren willfully and maliciously abused the process with the ulterior motive to unlawfully take, by deception, assets belonging to Scott worth $12 to $15 million dollars. The issue in Diamond v. Diamond, 2024 N.J. Super. Unpub. LEXIS 2381 (App. Div. Oct. 10, 2024) was whether the later filed Law Division case was barred by a consent order the parties had entered into in negotiating a settlement, pending the adjudication of an arbitration hearing.
The consent order entered into between the parties specifically permitted either party within 60-days of the final adjudication of the arbitration to refile a separate action in the Union County Chancery Division for any “affirmative claims, counterclaims, and/or third-party claims that were advanced, and not dismissed by any respective party in that action.” Further, all affirmative defenses would be tolled and suspended until sixty days after the adjudication of this arbitration.
The arbitration was adjudicated on July 15, 2021. Neither party filed a new action as defined by the consent order within the 60-day period agreed to in the order. About eighteen months later, plaintiffs filed this complaint against Warren in the Law Division. The facts of the complaint were substantially the same as those set forth in the plaintiff’s dismissed chancery action counterclaim.
Following service of the complaint, Warren filed a motion to dismiss, arguing that the complaint was subject to dismissal because the consent order barred the refiling of plaintiffs’ claims after the 60-day tolling period. Further, Warren argued that the consent order required any new action to be filed in the Chancery Division rather than the Law Division. In addition, Warren made other arguments to support his motion to dismiss.
Plaintiff argued that the consent order from the chancery action only addressed the tolling of the statute of limitations and the order was not a final order since it only dismissed the parties’ claims and defenses without prejudice. Plaintiff further argued that because its counterclaims in the chancery action were not dismissed with prejudice, their Law Division complaint was not barred by the consent order and should not be dismissed.
The trial court granted defendant Warren’s motion and entered an order dismissing plaintiffs’ complaint with prejudice. The trial court found that the consent order was an agreement between the parties approved by the court and that it “operates as a contract between the parties” and that courts must “examine the plain language of the order and the parties’ intent, as evidenced by the contract’s purpose and surrounding circumstances.” The court found that consent order was clear that there was a 60-day deadline that applied to both the tolling of the statute of limitations and an opportunity to refile any of the affirmative claims, counterclaims and/or third-party claims. Further, the court found that the matter was adjudicated and a final award was entered in the arbitration. Hence, the trial court found that the consent order barred the refiling of the claims.
This order was appealed to the Appellate Division, which agreed with the trial court. The Court noted that consent orders are “essentially unique contracts” and in construing a consent order, a court should use principles of contract interpretation. In essence, a consent order is an agreement of the parties that has been approved by the court and operates as a contract between the parties. Under basic contract principles, the Appellate Division noted that if the contract entered into is clear, then it must be enforced as written.
The Appellate Division reviewed the consent order and found that a refiled action would include “any affirmative claims, counterclaims, and/or third-party claims that were advanced, and not dismissed by any respective party in this action.” It found that the consent order preserved and permitted a party to assert as part of any refiled action, all rights, remedies, defenses, and claims for relief that he, she, or it asserted, or seeking to obtain, or could have obtained in the action for a period of 60-days after the adjudication of the arbitration.
Based upon the Appellate Division’s review of the record, it concluded that plaintiffs’ were “distinctly” aware of the factual basis for their claims against Warren for malicious abuse of process and malicious use of process before the execution and filing of the consent order in the chancery action. Almost identical claims were made in the plaintiffs’ counterclaim in the chancery action and the plainly disclosed facts forming the basis of the plaintiffs’ “new” claims asserted in the Law Division were known at the time the chancery action concluded.
The Appellate Division concluded that the clear language in the consent order barred any claims against the other party in any refiled action which could have been obtained in the chancery action unless those claims were filed within the 60-day tolling period. The Court noted that plaintiffs’ complaint asserted claims that could have brought in the chancery action.
It found that the parties were bound by their contractual agreement set forth in the consent order, regardless of whether plaintiffs’ newly pled claims would have been filed in a timely manner under the applicable Statute of Limitations. Hence, the Appellate Division found that the trial court’s dismissal of the complaint was appropriate and upheld the trial court’s dismissal.
