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A disability law firm and one of its attorneys must answer claims that they wrongly obtained and used a competitor’s client lists, the Appellate Division ruled Tuesday.

The underlying lawsuit against attorney Lorna Orak and the People’s Disability Advocates of America was wrongly dismissed based on a trial judge’s failure to properly consider whether it was subject to the entire controversy doctrine, and whether the plaintiff failed to join parties who were indispensable to the case, the appeals court said. The appeals court reversed an April 2018 ruling that dismissed the suit.

The lawsuit filed by GAR Disability Advocates claims that two former employees in its Kentucky branch, Miranda Deem and Erica Dougherty, supplied the confidential client list to People’s Disability Advocates. After GAR terminated Dougherty in 2016 and Deem in 2017, it learned that its clients were being diverted to People’s after being contacted by that firm’s representatives, including Deem and Dougherty.

GAR sued in June 2017 in the U.S. District Court for the District of New Jersey, seeking an injunction against People’s, Deem, Dougherty and other fired employees. The suit alleged conversion and tortious interference with existing business relationships, and sought damages and injunctive relief. Before filing an answer, People’s said it was not subject to the court’s jurisdiction, and GAR stipulated to dismissal of the complaint against the law firm, leaving the case against Deem and Dougherty intact. Then, in November 2017, GAR sued Orak and People’s in Bergen County Superior Court. The complaint disclosed a continuing federal suit in the Eastern District of Kentucky against Deem and Dougherty.

In April 2018, People’s and Orak moved to dismiss the Bergen County lawsuit for failure to join necessary parties under R. 4:28-1, and for the plaintiff’s alleged violation of the entire controversy doctrine under R. 4:30A. Superior Court Judge Charles Powers granted the motions.

On appeal, Appellate Division Judges Garry Rothstadt and Robert Gilson said dismissal of GAR’s suit in federal court did not bar it from proceeding in state court, especially since Orak was not a party to the federal case. What’s more, the entire controversy doctrine does not apply to preclude a successive action if the previous action did not result in an adjudication on the merits, the appeals court said. And the voluntary dismissal of a federal court action does not preclude a state court claim against the same defendant because there has been no adjudication on the merits, the panel said.

There is no evidence that GAR filed the state court case to engage in “the kind of deliberate manipulation and forum shopping that the entire controversy doctrine is intended to avoid,” Rothstadt and Gilson said. The plaintiff sought to bring all claims in one action, and it disclosed the federal action in its complaint in the state court case, they said. Therefore, the trial judge’s reliance on the entire controversy doctrine was a mistaken exercise of his discretion, they said.

Likewise, the appeals court said Powers erroneously dismissed the case based on the plaintiffs’ failure to join Deem and Dougherty as parties. There was no dispute that they could not be served in New Jersey, but Powers did not conduct an analysis of whether they must be joined as indispensable parties as required by R. 4:28-1, the appeals court said. Rather, Powers “merely relied upon their role as alleged bad actors who were integral to plaintiffs’ claim that defendants caused it harm through their actions and that there would be two litigations proceeding simultaneously. While the claim that Deem and Dougherty acted improperly ran through both the federal action and this one, it was not determinative of whether this action could proceed or if in fact, regardless of the two individuals’ conduct, defendants were liable to plaintiff,” the appeals court said.

Because it was not feasible to join Deem and Dougherty, Powers should have conducted an analysis of whether they were indispensaible to the case, Rothstadt and Gilson said. They sent the case back to the trial court for reconsideration of that issue.

According to its website, GAR Disability Advocates is “a specialized advocacy firm” and is “devoted to helping individuals obtain long term disability benefits from the Social Security Administration.”

People’s Disability Advocates is described on its website as an “accomplished Social Security disability firm” offering “dedicated disability benefits lawyers.”

Tamra Jones, GAR’s general counsel, represented it at the Appellate Division. She did not return a call about the case. Orak and People’s did not file briefs before the Appellate Division. Orak did not return a call about the case.