Most New Jersey litigators are, or ought to be, familiar with the "entire controversy doctrine"—a facet of New Jersey practice unique enough that federal courts consistently refer to it as this state's "specific, and idiosyncratic, application of traditional res judicata principles." E.g., Fields v. Thompson Printing Co., 363 F.3d 259, 265 (3d Cir. 2004). The doctrine is so imbued in our jurisprudence that it was codified at Rule 4:30A. Indeed, it finds its roots in Article VI, Section 3, Paragraph 4 of the New Jersey Constitution. DiTrolio v. Antiles, 142 N.J. 253, 267 (1995). With such a well-established foundation, it may be surprising to learn that there is presently an irreconcilable conflict between the standards of review applied by state and federal appellate courts when reviewing a trial court's application of the doctrine.

The standard applied by New Jersey state courts is well-settled. State appellate courts consistently hold that a trial court's decision to apply (or not apply) the entire controversy doctrine is reviewed under an "abuse of discretion" standard. See, e.g., 700 Highway 33 v. Pollio, 421 N.J. Super. 231, 238 (App. Div. 2011); Unkert by Unkert v. Gen. Motors Corp., 301 N.J. Super. 583, 595 (App. Div.), certif. denied, 152 N.J. 10 (1997); Busch v. Biggs, 264 N.J. Super. 385, 397 (App. Div. 1993). This standard is both intuitive and in harmony with the doctrine's cornerstone purpose. In other words, it flows naturally from the foundational principle that the entire controversy doctrine is an equitable one "whose application is left to judicial discretion based on the factual circumstances of individual cases." Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, 237 N.J. 91, 114 (2019). It is a simple proposition that discretionary decisions are reviewed for abuse of the afforded discretion; or so one would think.

The U.S. Court of Appeals for the Third Circuit has long held that, under the Full Faith and Credit Act, federal courts are bound to apply the doctrine "as an aspect of the substantive law of New Jersey." See, e.g., Rycoline Products v. C & W Unlimited, 109 F.3d 883, 887 (3d Cir. 1997). Logically, then, the Third Circuit should be comforted by the fact that state appellate courts have soundly resolved any question regarding the applicable standard of review. The doctrine's contours are definite, and the standard of review easily understood. The standard governing review of a district court's decision to apply the doctrine should not diverge from the standard of review applied by our state appellate courts.

Certainly, the conclusion to apply an abuse of discretion standard is supported by dicta contained in the Third Circuit's decision in Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 138 (3d Cir. 1999). There, in response to the appellant's contention that the lower court abused its discretion, the panel opined that the district court, "of course, has great discretion" in applying the equitable considerations underlying the doctrine. Yet, it may appear to some (and rightly so) that the Third Circuit has consistently acted counterintuitively, by departing from the standard set forth by New Jersey's appellate courts and reviewing district courts' application of the entire controversy doctrine using a plenary standard of review (i.e., de novo). See, e.g., Ricketti v. Barry, 775 F.3d 611, 613 (3d Cir. 2015).

A critical assessment of the jurisprudence underpinning the plenary standard of review offers no insight into this conflict. Instead of relying on precedential case law from our state courts, the Circuit's practice appears to be founded in an amalgamation of errors and vagaries dating back to Circuit case law from the late 1980s. By way of example, Ricketti relied on the boilerplate statement in Venuto v. Witco Corp., 117 F.3d 754, 758 (3d Cir. 1997), which, in turn, relied on a citation to Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 962 (3d Cir. 1991), prefaced with a "see" signal. Yet, Lubrizol stated nothing more than the non-controversial proposition that the Circuit's "review of the district court's legal determinations is plenary." However, the Venuto court failed to appreciate that the legal determination in Lubrizol was whether federal or state law principles governed in successive actions premised on diversity jurisdiction. Lubrizol has nothing to say about the applicable standard for reviewing a district court's decision to apply (or not apply) an equitable and discretionary doctrine, such as the entire controversy doctrine.

In Bennun v. Rutgers State University, 941 F.2d 154, 163 (3d Cir. 1991), the Circuit similarly stated, without more, that plenary review was appropriate. For support, it relied upon "footnote four" in its earlier 1987 decision in Doerinkel v. Hillsborough, 835 F.2d 1052, 1054 n.4 (3d Cir. 1987) (continuing the traditional jurisprudential significance of footnote fours). Reviewing a grant of summary judgment based on the entire controversy doctrine and other res judicata principles, Doerinkel's footnote four states that the court would undertake a plenary review because the panel was "concerned with interpretation and application of legal precepts." No further explanation is provided.

It seems clear that the Third Circuit's use of a plenary standard of review is not the product of tested precedent on this issue and might fairly be characterized as unconsidered copy-and-paste. Cf. Brian Soucek, Copy-Paste Precedent, 13 J. App. Prac. & Process 153 (2012). Indeed, the origin of the Circuit's adherence to the plenary review standard largely pre-dates the clear pronouncements by our state appellate courts that "abuse of discretion" was the appropriate standard of review of a trial court's decision to apply the doctrine. In fact, it seems no Circuit panel has ever cited state court precedent on this fundamental issue, which is difficult to reconcile with the long-settled principle that federal courts are to apply the entire controversy doctrine as the substantive law of the state.

It is similarly difficult to reconcile the plenary review standard with the diametrically opposed notion that application of the doctrine in a particular case is properly entrusted to the sound discretion of a trial court. This point is consistently evidenced by the Circuit's decisions to uphold rulings on issues left to "the sound discretion" of the trial court, which are generally reviewed under the abuse of discretion standard. See, e.g., Trotter v. 7R Holdings, 873 F.3d 435, 439 (3d Cir. 2017) (forum nonconveniens dismissal); In re SGL Carbon Corp., 200 F.3d 154, 159 (3d Cir. 1999) (Chapter 11 petition dismissal).

The majority and dissenting opinions in the Third Circuit's recent decision, United States ex rel. Charte v. Am. Tutor, 934 F.3d 346 (3d Cir. 2019), best exemplify the peculiarity of applying a plenary standard to appellate review of an entire controversy doctrine dismissal. Charte concerned whether the plaintiff was precluded by the entire controversy doctrine from bringing a qui tam claim that arose from the same operative facts as a prior state court action she had settled several years earlier. The district court held that the doctrine barred plaintiff's claim, believing it was fundamentally fair to apply the doctrine based on the relevant facts and circumstances. On appeal, both the majority and dissent agreed that the doctrine is an equitable one left to judicial discretion based on the facts of the individual case. They nonetheless came to opposite conclusions based, by all indications, on the level of deference given to the district court.

Reversing, the majority cited Ricketti to justify exercising plenary review. Relying on several factors, the majority effectively substituted its determination of "fairness" under the totality of the circumstances, for that of the district court. Judge Thomas Hardiman's dissent does not expressly state that he was utilizing a more deferential standard of review. Yet, his language and reasoning strongly suggest he did so, as he stated that the panel ought to have given the district court's ultimate finding that the plaintiff engaged in gamesmanship "the respect it is due." Indeed, the dissent further recognized that "institutional competence is especially important" given that the doctrine is discretionary and left to case-by-case determinations. This finding was "central" to his conclusion. His view of "fairness" aligned with that of the district court.

The dueling Charte opinions bring to the forefront the need for the Circuit to fully consider the appropriate standard of review of a district court's decision whether to apply the entire controversy doctrine. District courts are left in something of a quandary when, at once, they are assured that they have great discretion to apply the doctrine based on their understanding of the facts and weighing of the equities in the cases before them, but must also make their decisions knowing they will be scrutinized under a de novo standard, effectively no different than summary judgment or a legal conclusion. Unfortunately, there is no hope of the Third Circuit engaging in the required self-scrutiny through Charte, since the full panel has decided to deny the request for en banc review.

The Circuit's current standard of choice is directly at odds with the standard long-utilized by our state courts (and the dicta espoused by the Agusta panel). Certainly, reasonable minds can disagree as to appropriate scrutiny for reviewing decisions that are dispositive of substantive claims. However, the appellate courts of the state of New Jersey must remain the ultimate authority on that issue. Fundamentally, inequity will result where federal courts continue to apply New Jersey law governing the entire controversy doctrine differently than the state's own appellate courts. Simply put, this disconnect calls for the Third Circuit's attention.

Brian M. Block, Philip A. Portantino and Melody M. Lins are associates in the Litigation Practice Group at Mandelbaum Salsburg in Roseland.