NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-4918-13T1

RACHEL KRANZ, a minor by her Guardian ad Litem, SHELLY KRANZ and JONATHAN APPROVED FOR PUBLICATION KRANZ, Individually, August 31, 2016

Plaintiffs-Appellants, APPELLATE DIVISION

v.

STEVEN SCHUSS, M.D., and TEANECK PEDIATRICS, P.A.,

Defendants-Respondents. __________________________________________________

Argued October 26, 2015 – Decided August 31, 2016

Before Judges Messano, Simonelli and Carroll.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2066-12.

Michael B. Zerres argued the cause for appellants (Blume, Donnelly, Fried, Forte, Zerres & Molinari, P.C., attorneys; Mr. Zerres and Robin A. Donato, on the briefs).

Thomas J. Pyle, Jr., argued the cause for respondents (Post, Polak, Goodsell, MacNeill & Strauchler, P.A., attorneys; Jay Scott MacNeill, of counsel; Mr. Pyle, on the brief).

The opinion of the court was delivered by

MESSANO, P.J.A.D. "The Comparative Negligence Act and the Joint Tortfeasors

Contribution Law comprise the statutory framework for the

allocation of fault when multiple parties are alleged to have

contributed to the plaintiff's harm." Town of Kearny v. Brandt,

(2013). In Young v. Latta,

(1991), the Court held that, "in every case in which there are

multiple defendants, whether or not a cross-claim for

contribution has been filed," a non-settling tortfeasor is

entitled to a credit reducing any judgment by the degree of

fault allocated by the jury to a settling tortfeasor. The Court

cited extensively to its seminal case of Judson v. Peoples Bank

& Trust Company of Westfield,

(1954), aff'd on

reconsideration,

(1957), and Judson's historical

analysis of the Joint Tortfeasors Contribution Law (the JTCL),

N.J.S.A. 2A:53A-1 to -5. Id. at 590-91. Justice Clifford

wrote:

Judson . . . provides two principles important to our implementation of the [JTCL]: that a settling tortfeasor shall have no further liability to any party beyond that provided in the terms of settlement, and that a non-settling defendant's right to a credit reflecting the settler's fair share of the amount of the verdict—regardless of the actual settlement —represents the judicial implementation of the statutory right to contribution.

[Id. at 591 (emphasis added).]

2 A-4918-13T1 After Judson, the "Court [] held that a non-settling defendant

does not get an increased credit if a settling tortfeasor pays

more than his or her pro rata share of the liability." Ibid.

(citing Theobald v. Angelos,

(1965)).

The subsequent passage of the Comparative Negligence Act

(CNA), N.J.S.A. 2A:15-5.1 to -5.8, did not "sap[] the vitality

of those principles." Id. at 592. "Pursuant to the [CNA], the

finder of fact must make an allocation of causative fault

between settling and non-settling defendants so that the court

can calculate the amount of the credit due [to] the non-settler

even though the non-settler cannot pursue a claim for

contribution against the settler." Ibid. As Judge Pressler

explained nearly two decades ago,

the effect of the [CNA] was to replace the former pro rata liability of joint tortfeasors under the [JTCL], . . . with the obligation of each tortfeasor to pay damages in accordance with its own adjudicated percentage of fault. A necessary corollary of this scheme is to deny to comparative- negligence joint tortfeasors a reduction of their liability based on a plaintiff's pretrial settlement with a defendant who is never found to be liable at all. Thus, under the comparative-negligence scheme, a plaintiff is entitled to retain the proceeds of the pretrial settlement as well as the full jury verdict as allocated among all other defendants.

. . . .

3 A-4918-13T1 [U]nless the settling defendant's percentage of liability is adjudicated at trial, there is simply no right in the adjudicated tortfeasors to a reduction of their own separately-allocated responsibility for the verdict.

[Johnson v. Am. Homestead Mortg. Corp.,

(App. Div. 1997).]

In this appeal, we are called upon to consider whether the

motion judge correctly decided that defendants were entitled to

a pro tanto credit for the amount plaintiffs obtained by way of

an out-of-state settlement with tortfeasors who were never

defendants in this litigation and could not have been sued in

the courts of this State because New Jersey lacked personal

jurisdiction. The issue is one of first impression. We

conclude that the principles outlined above apply and therefore

reverse.

I.

The record is undisputed. Rachel Kranz was born in New

York in December 2003 and came under the medical care of a

series of doctors in New York. In January 2005, Rachel and her

family moved to New Jersey, where she began receiving pediatric

care from defendant, Steven Schuss, M.D., and his affiliated

practice group, Teaneck Pediatrics (collectively, defendants).1

1 To avoid confusion, we sometimes use the first names of the plaintiffs. We intend no disrespect by this informality.

4 A-4918-13T1 At Rachel's medical check-up in January 2006, Dr. Schuss

suspected that she suffered from left hip dysplasia. These

suspicions were confirmed, and Rachel underwent open reduction

surgery and a second follow-up surgery to correct the condition.

On July 30, 2007, with her mother Shelley acting as

guardian ad litem (GAL), Rachel commenced suit in New York

alleging medical malpractice against the hospital of her birth

and several doctors (the New York defendants) who had attended

to her prior to the family's move to New Jersey, claiming

damages resulting from the failure to diagnose the dysplasia.

On April 7, 2011, the New York court entered an order approving

a structured settlement in the amount of $2 million (the New

York settlement).

On March 12, 2012, once again with her mother acting as

GAL, and now joined by her father, Jonathan, as a plaintiff on

his own behalf, Rachel filed a complaint in New Jersey alleging

medical negligence by defendants in their failure to timely

diagnose and treat Rachel's dysplasia. It suffices to say that

plaintiffs' experts opined that defendants' failure to diagnose

the dysplasia earlier was a breach of the professional standard

of care and likely increased the probability that Rachel would

require open reduction surgery to address her condition and that

she would likely develop arthritis in later life. At least one

5 A-4918-13T1 of plaintiffs' experts opined in his report that certain

findings, in particular the asymmetry of Rachel's gait and

rotation of her hips, most likely would have been present at the

age of six months, i.e., before she came under defendants' care.

Defendants' experts, to the contrary, essentially concluded

there was no breach of professional standards because Rachel's

dysplasia was not clinically detectable until age two, and Dr.

Schuss properly and timely diagnosed the condition and

recommended further treatment as appropriate.

After discovery ended in December 2013, defendants sought

an order providing them with a credit of $2 million against any

judgment returned in plaintiffs' favor. Plaintiffs opposed the

motion and cross-moved for an order barring defendants from 1)

serving any new expert reports, and 2) referring to, or offering

evidence of, the New York settlement at trial.

Acknowledging that "[t]he case law in New Jersey doesn't

seem to give [] any clear definitive answer as to what to do in

a case like we have here," defense counsel argued that

plaintiffs were seeking damages for "the exact same harm" as in

the New York litigation. Plaintiffs' counsel also acknowledged

the unique procedural circumstances.

Addressing the judge's concern of a potential "windfall,"

particularly in light of plaintiffs' application to bar any

6 A-4918-13T1 further defense expert reports or any mention of the New York

settlement, plaintiffs' counsel stated, "I don't know that

there's any way to truly avoid a windfall . . . . However,

there [are] public policy decisions in New Jersey saying that

where it really truly is unavoidable like it is here, it should

inure [to] the injured party." Counsel also acknowledged that,

separate from any apportionment between the New York defendants

and these defendants, the jury might need to apportion

responsibility for the ultimate consequence of any delay in

diagnosing Rachel's injury. See, e.g., Flood v. Aluri-

Vallabhaneni,

(App. Div.)

(explaining the burden of proof and apportionment in failure to

diagnose medical malpractice cases), certif. denied,

(2013).

Recognizing the lack of any precedent squarely on point and

without an extensive statement of reasons, the judge concluded

on "general principles of equity . . . that it would be a

windfall to the plaintiff[s]" if a $2 million credit was not

applied to any verdict in their favor. The judge entered the

February 28, 2014 order under review that provided defendants

with a $2 million credit "based upon the plaintiffs[']

previously pending and now resolved New York State action

involving the same claims of negligence and compensating the

7 A-4918-13T1 plaintiff for the same injuries that are at issue in the instant

litigation." The order further stated that $2 million dollars

would be deducted from any verdict "rendered by a jury against

[d]efendants," who "shall only be responsible for the remainder

of the verdict after the credit is applied . . . ."2

The parties thereafter appeared before the Civil Division

presiding judge, and plaintiffs voluntarily dismissed their

complaint pursuant to an agreement placed on the record, which

we have reviewed. Despite the voluntary dismissal of the

complaint, we conclude that the February 28, 2014 interlocutory

order is reviewable as of right. See Janicky v. Point Bay Fuel,

Inc.,

(App. Div. 2009) (explaining that

even a consent judgment may be appealable as of right if an

"economic stake" hinges on resolution of the appeal).

II.

Because the appeal presents a purely legal issue, we review

de novo the judge's decision to give defendants a pro tanto

credit for the amount of the New York settlement.

.

For purposes of the JTCL, "'joint tortfeasors' means two or

more persons jointly or severally liable in tort for the same

2 The judge did not address the cross-motion and no separate order was entered.

8 A-4918-13T1 injury to person or property, whether or not judgment has been

recovered against all or some of them." N.J.S.A. 2A:53A-1.

Where injury or damage is suffered by any person as a result of the wrongful act, neglect or default of joint tortfeasors, and the person so suffering injury or damage recovers a money judgment or judgments for such injury or damage against one or more of the joint tortfeasors, either in one action or in separate actions, and any one of the joint tortfeasors pays such judgment in whole or in part, he shall be entitled to recover contribution from the other joint tortfeasor or joint tortfeasors for the excess so paid over his pro rata share . . . .

[N.J.S.A. 2A:53A-3 (emphasis added).]

The right to contribution flows from "'joint liability and not

joint, common or concurrent negligence.'" Cherry Hill Manor

Assocs. v. Faugno,

(2004) (quoting Farren v.

N.J. Tpk. Auth.,

(App. Div. 1954)).

"'When one defendant settles, the remaining codefendant or

codefendants are chargeable with the total verdict less that

attributable to the settling defendant's percentage share.'"

Cockerline v. Menendez,

(App. Div.)

(quoting Cartel Capital Corp. v. Fireco of N.J.,

(1980)), certif. denied,

(2010).

The CNA, in turn, requires the fact finder to determine

"[t]he extent, in the form of a percentage, of each party's

negligence or fault. The percentage of negligence or fault of

9 A-4918-13T1 each party shall be based on 100% and the total of all

percentages of negligence or fault of all the parties to a suit

shall be 100%." N.J.S.A. 2A:15-5.2(a)(2) (emphasis added).

"[T]he statutes' objectives are best served when the factfinder

evaluates the fault of all potentially responsible parties."

. Simply put, "[t]he law favors

apportionment even where the apportionment proofs are imprecise,

allowing only for rough apportionment by the trier of fact."

Boryszewski v. Burke,

(App. Div. 2005),

certif. denied,

(2006).

Plaintiffs argue that the motion judge accorded defendants

a "windfall," because given the statutory scheme, there is no

legal authority for a pro tanto credit equal to the amount of

the New York settlement. They note that if the New York

defendants were parties to the suit, defendants would not

receive a credit for the full settlement amount, but rather

would be entitled to a credit based only upon an allocation of

fault to the New York defendants.3

3 Plaintiffs also contend that their cross-motion to bar any further discovery and bar defendants from introducing any evidence of the New York settlement should have been granted. As a result, defendants, who have not produced any proof of the New York defendants' liability, are not entitled to any allocation of fault or resulting credit. We deal with these issues later in this opinion.

10 A-4918-13T1 Defendants argue the collateral source rule, N.J.S.A.

2A:15-97, and general notions of public policy support the

judge's decision. We disagree.

The "primary effect" of the collateral source rule "was to

eliminate double recovery to plaintiffs." Perreira v. Rediger,

(2001). However, by its terms, the collateral

source rule does not apply when a plaintiff receives benefits

for injuries caused by a joint tortfeasor. N.J.S.A. 2A:15-97.

Defendants argue the New York defendants could not be

"joint tortfeasors" because they "were not, and could never have

been . . . parties to the New Jersey action." We discuss the

significance of that below. However, defendants urged the

motion judge to grant them a pro tanto credit precisely because

plaintiffs were seeking damages for "the exact same harm" as

alleged in the New York litigation. The judge accepted this

argument, because his order provided that the New York

litigation "involv[ed] the same claims of negligence and

compensat[ed] the plaintiff for the same injuries that are at

issue in the instant litigation." Although defendants deny any

negligence, it would appear from the record before us that the

New York defendants and defendants are not successive

tortfeasors, but rather joint tortfeasors, whose alleged

11 A-4918-13T1 collective negligence delayed the diagnosis of Rachel's

dysplasia.4

We also reject defendants' public policy arguments.

Defendants argue that under New York law, they would be entitled

to a pro tanto credit for the settlement plaintiffs reached with

the New York defendants. See Williams v. Niske,

(1993) (explaining New York's General Obligations Law § 15-

108(a)). Defendants contend that permitting a pro tanto credit

discourages forum shopping, such as occurred here. However, the

statutory interplay we described above is evidence of New

Jersey's public policy, and granting defendants a pro tanto

credit is contrary to that policy.

We must address, nevertheless, defendants' implicit

argument that apportionment under N.J.S.A. 2A:15-5.2(a)(2) is

inappropriate because the New York defendants could not have

been joined in the same suit. In other words, they could never

4 As noted, one of plaintiffs' experts opined in his report that certain symptoms of Rachel's dysplasia were observable before defendants began their care. The record does not include the expert reports from the New York litigation; however, the "verified bill of particulars" from that suit includes allegations that the New York defendants, among other things, failed to "timely recognize the presence of left hip dysplasia." Because we are reversing and requiring the re-opening of discovery, we hasten to add that our conclusion that the New York defendants and defendants are joint tortfeasors is based solely upon the record before us, and we do not foreclose a contrary conclusion if further discovery proves otherwise.

12 A-4918-13T1 have been parties. See ibid. (emphasis added) (the fact finder

must determine the "extent, in the form of a percentage, of each

party's negligence or fault").

We start by recognizing that our courts have permitted

apportionment of fault by the factfinder in a variety of

circumstances, even though a joint tortfeasor is no longer a

party in the suit. For example, as already noted, in

, the Court held that, even in the absence

of a specifically-pled cross claim for contribution, a non-

settling tortfeasor was entitled to a credit based upon the

allocation of fault to the settling defendant who was no longer

in the litigation. In Brodsky v. Grinnell Haulers, Inc.,

(2004), the Court similarly held that a non-

settling tortfeasor was entitled to have any award reduced by

the percentage of fault attributable to a joint tortfeasor

dismissed from the litigation due to a discharge in bankruptcy.

In Brandt, supra,

, the Court held that the

non-settling defendants were entitled to have the jury allocate

fault as to the defendants dismissed from the litigation because

of the statute of repose. N.J.S.A. 2A:14-1.1(a). And, in Burt

v. West Jersey Health Systems,

(App.

Div. 2001), we held that the plaintiff's recovery should be

reduced by the percentage of fault allocated to those defendants

13 A-4918-13T1 dismissed from the litigation because the plaintiff failed to

comply with the Affidavit of Merit Statute, N.J.S.A. 2A:53A-26

to -29.

In some cases, however, the joint tortfeasor's absence from

the suit at its inception has barred a defendant's right to

apportionment. See, e.g., Ramos v. Browning Ferris Indus. of S.

Jersey, Inc.,

(1986) (no right to

apportionment against an employer immune from liability under

the Workers' Compensation Act); Bencivenga v. J.J.A.M.M., Inc.,

(App. Div.) (no right to

apportionment against a fictitiously-named defendant not

identified or served prior to trial), certif. denied,

(1992); but see

(concluding that, based upon public policy concerns,

apportionment was appropriate as against fictitious phantom

drivers who allegedly caused the accident). Apportionment was

not permitted in Ramos and Bencivenga because "as a matter of

law, [the] defendant[s] could not under any circumstances be []

joint tortfeasor[s] under [the JTCL]."

(citing

).

In this case, the New York defendants were never parties to

this suit, nor could they have been, because it is undisputed

that New Jersey lacked personal jurisdiction over them.

14 A-4918-13T1 Plaintiffs, however, argue that the circumstances are "almost-

identical" to the facts presented in Carter v. University of

Medicine and Dentistry of New Jersey,

(D.N.J.

1994).

In Carter, plaintiffs filed two separate but concurrent

actions.

. One, filed in the Superior Court for the

District of Columbia, alleged the failure on the part of a

Washington, D.C., doctor to diagnosis and treat their infant

son's congenital brain condition while under the doctor's care,

i.e., after he was seven months of age.

. The

parents filed a second suit in federal district court in New

Jersey making similar claims against New Jersey medical

providers for the period of time before the family moved to

Maryland, while their son was under their care, i.e., from birth

to the age of six and one-half months.

Plaintiffs

settled with the Washington, D.C., physician, and the New Jersey

defendants moved in limine to have the jury apportion the

"causative fault between the settling and nonsettling

defendants."

. The plaintiffs sought to preclude the

defendants from asserting the Washington, D.C., doctor was

negligent or that his negligence contributed to their son's

condition.

.

15 A-4918-13T1 Examining at length the JTCL, the CNA and precedent we

cited above, the judge rejected the plaintiffs' argument that

apportionment was improper because the settling doctor was "not

technically a party to this lawsuit and hence cannot be a joint

tortfeasor within the meaning of the relevant statutes."

. The judge concluded that the "splitting of the action for

purely jurisdictional purposes does not vitiate [the Washington,

D.C., doctor's] status as a settling defendant insofar as this

action is concerned."

. The judge said the claims

against all the defendants were "identical and inextricably

interwoven," explaining:

[D]istilled to its purest essence, the New Jersey action concerns the alleged misdiagnosis of the infant plaintiff's hydrocephalic condition from birth to [six and one-half] months of age, while the Washington action was predicated on a simple extension of that purported misdiagnosis from seven to eighteen months. Thus, given the fact that the Washington, D.C. lawsuit is distinguishable from the present action only by jurisdictional happenstance, it logically (and equitably) follows that the jury in this case should be entitled to consider the relative fault of the settling Washington, D.C. physician.

[Ibid.]

Defendants' attempts to distinguish Carter are wholly

without merit. They note the Washington, D.C., settlement

agreement specifically permitted a reduction in damages in the

16 A-4918-13T1 New Jersey litigation by the percentage of liability attributed

to the settling doctor, that certain experts were the same in

both cases and the suits were pending at the same time.

However, the JTCL and the CNA permit the non-settling tortfeasor

a reduction of damages without regard to whether it is expressly

permitted by a settlement agreement. There is nothing in this

record to demonstrate defendants are unable to obtain the name

of plaintiffs' experts in the New York action and depose them,

thereby establishing their status as joint tortfeasors and

obtaining the benefit of apportionment under the JTCL and the

CNA. Although this case was not prosecuted concurrently with

the New York case, as a minor, Rachel's cause of action did not

have to be commenced in New Jersey until two years after she

turned eighteen years of age, N.J.S.A. 2A:14-2.5 We might

conclude the lack of concurrent litigation mattered if

defendants were in fact prejudiced by the delay in prosecuting

the New Jersey suit, but we fail to see any prejudice to

defendants' contribution rights. See, e.g., Mettinger v. Globe

Slicing Mach. Co.,

(1998) (a defendant's claim

5 We assume the claim was not for medical malpractice resulting in "injuries sustained at birth," which has a different limitations period. N.J.S.A. 2A:14-2(b).

17 A-4918-13T1 for contribution does not accrue until the plaintiff recovers a

judgement against it).6

The lack of actual prejudice is compelling. In Yousef v.

General Dynamics Corp.,

(2011), the Court

considered whether a suit brought in New Jersey by New Jersey

residents injured while on a business trip in South Africa due

to the alleged negligence of the defendant corporation and its

employee-driver, a resident of Florida, should be dismissed

under the doctrine of forum non conveniens. The defendants

argued that the suit should have been brought in South Africa.

.

Although the facts involving the accident were disputed,

the front-seat passenger of the car said that a stop sign

regulating the unilluminated intersection where the crash

occurred was bent, making it difficult to see.

Defendants also obtained information from a South African

witness corroborating the condition of the sign and stating that

the intersection was the site of frequent accidents.

. Additionally, there were provisions of South African law

that mostly favored the defendants and would have the likely

result of limiting any award of damages.

.

6 Defendants have not, for example, claimed that they would be unable to obtain contribution in a subsequent federal diversity action.

18 A-4918-13T1 We affirmed the trial court's decision denying the

defendants' motion to dismiss.

. The Court

conducted an exhaustive review of the equitable considerations

that underpin the doctrine of forum non conveniens, and noting

"[a]t least presumptively, a plaintiff is entitled to his choice

of forum," the Court concluded that the "defendants failed to

carry their burden of demonstrating that New Jersey [was] a

'demonstrably inappropriate' forum."

.

Addressing specifically the defendants' argument that they

were prejudiced by the lack of ability to implead the South

African municipality as a third-party defendant, the Court said:

Because the South African municipality cannot be impleaded as a party, New Jersey's [CNA], which only applies to "parties," does not permit allocation of fault between defendants and the non-party municipality. See N.J.S.A. 2A:15-5.2(a)(2) ("The percentage of negligence or fault of each party shall be based on 100% and the total of all percentages of negligence or fault of all the parties to a suit shall be 100%." (emphasis added)). Assuming that defendants have taken steps necessary to preserve their rights against the municipality under South African law, and assuming that there is adequate evidence to support a claim of municipal liability going to the jury, the trial court may consider -- as a matter of equity -- allowing the jury to consider apportioning fault between defendants and the municipality. In this way, the disadvantage to defendants in trying this case in New Jersey will be greatly diminished if, in the event of a determination of liability, they can

19 A-4918-13T1 apportion damages in a way consistent with the [CNA].

[Id. at 570-71.]

Although the federal district court's decision in Carter is

not controlling, we believe its reasoning, tempered by the

Court's dicta in Yousef, is persuasive. Defendants' "all-or-

nothing" defense may undercut their ability to prove that the

New York defendants were in fact negligent, thereby denying

defendants, at the least, the benefit of apportionment. That

strategic decision, however, is not prejudice that inexorably

results from application of the JTCL and the CNA to the unique

circumstances of this case.

We are convinced that equity is not achieved by providing

defendants with a pro tanto credit in this litigation for the

amount of the New York settlement. That result is an undeserved

windfall for defendants, and it finds no support in relevant

case law. The equitable result is to permit defendants to have

any judgment that plaintiffs may secure against them reduced by

the amount of fault a jury attributes to the New York

defendants. We are therefore compelled to reverse the order

under review.

Finally, plaintiffs claim that their cross-motion should

have been granted, discovery should have been closed, and

defendants should have been barred from furnishing any further

20 A-4918-13T1 expert reports or introducing evidence regarding the New York

settlement. The natural consequence of plaintiffs' argument is

that defendants are not entitled to any credit, because they

proffered no evidence establishing that the settling defendants

were negligent, and, hence, no basis for a jury to apportion

fault.

In light of our decision which completely upends the

posture of the litigation, we conclude the result urged by

plaintiffs is unfair. We therefore direct the Law Division to

reinstate the complaint, re-open the discovery period and

provide the parties with a reasonable amount of additional time

to conduct discovery and serve additional reports, anticipating

the likelihood of discovery that might necessarily cross state

lines.

Reversed and remanded. We do not retain jurisdiction.

21 A-4918-13T1