Stewart G. Pollock

“ School officials could find an educational purpose in not permitting the use of the student newspaper as a means of promoting R-rated films, which some parents do not want their children to see. Students would remain free, of course, to continue to see the films if accompanied by an adult and to talk to each other about the films both in and out of school. Preventing publication of a review of an R-rated film in a school newspaper is hardly likely to stop teenagers from seeing or talking about the film. ”

“ The wealth of suggestions deserves our careful consideration. Our biennial review of proposed amendments to the Rules of Practice, which we will undertake next term, provides a suitable occasion to review proposals for modifications of the entire controversy doctrine, expanded use of party joinder, and other suggestions to improve the administration of justice. The Civil Practice Committee, to which we regularly look for recommendations on proposed rule changes, already has appointed a subcommittee on the entire controversy doctrine. ”

“ I The matrix for our decision is the customs and practices of the reinsurance industry and the role of Pritchard & Baird as a reinsurance broker. Reinsurance involves a contract under which one insurer agrees to indemnify another for loss sustained under the latter's policy of insurance. Insurance companies that insure against losses arising out of fire or other casualty seek at times to minimize their exposure by sharing risks with other insurance companies. Thus, when the face amount of a policy is comparatively large, the company may enlist one or more insurers to participate in that risk. ”

“ Thus, clients are put in the untenable position of either pursuing a claim against their attorney, whose negligence may never result [NJ441] in an unfavorable outcome, or forever forgoing a legal-malpractice action. Clients who are satisfied with their attorneys and want to maintain an otherwise satisfactory relationship may forgo the right to sue. That result does not provide the fairness that the entire controversy doctrine is designed to encourage. ”

“ The distinguishing circumstances in regard to banks and other corporations holding trust funds is that the depositor or beneficiary can reasonably expect the director to act with ordinary prudence concerning the funds held in a fiduciary capacity. Thus, recognition of a duty of a director to those for whom a corporation holds funds in trust may be viewed as another application of the general rule that a director's duty is that of an ordinary prudent person under the circumstances. ”

“ The purpose of the doctrine is not to bar meritorious claims, but to encourage litigants to bring to the attention of trial courts persons who should be joined in a proceeding. See id. at 567, 688 A.2d 1044 (stating "the purpose of the rule is not just to notify a new party of the imminence of a future law suit, the purpose of the rule is to secure the coordination and consolidation of all litigation emanating from a single controversy through the joinder of all participants in that controversy in a current action and to subject joinder issues to the supervisory authority of the court") ”

“ Parents expect that teachers and administrators will be responsible for the students. In discharging those responsibilities, educators make numerous decisions that restrict students' freedom. In a representative democracy, students, like the general population, regularly accept policy decisions made by appointed and elected officials. I see nothing unconstitutional in requiring students to accept the policy decisions of school officials concerning the review in a junior high school newspaper of R-rated films. ”

“ Nonetheless, a close corporation may, because of the nature of its business, be affected with a public interest. For example, the stock of a bank may be closely held, but because of the nature of banking the directors would be subject to greater liability than those of another close corporation. Even in a small corporation, a director is held to the standard of that degree of care that an ordinarily prudent director would [NJ36] use under the circumstances. ”

“ Subject to the rules of the Supreme Court, the Law Division and the Chancery Division shall each exercise the powers and functions of the other division when the ends of justice so require, and legal and equitable relief should be granted in any cause so that all matters in controversy between the parties may be completely determined. ”

“ Whether in other situations a director has a duty to do more than protest and resign is best left to case-by-case determinations. In this case, we are satisfied that there was a duty to do more than object and resign. Consequently, we find that Mrs. Pritchard's negligence was a proximate cause of the misappropriations.
To conclude, by virtue of her office, Mrs. Pritchard had the power to prevent the losses sustained by the clients of Pritchard & Baird. With power comes responsibility. She had a duty to deter the depredation of the other insiders, her sons. ”

“ School officials may properly adopt a standard that prevents the review of a category of films, such as those that are R-rated, even if the category includes films that some people might find the appropriate subject of a review.
The education of children is an informal partnership consisting of students, parents, teachers, administrators, and school boards. ”

“ One New Jersey case recognized the duty of a bank director to seek counsel where doubt existed about the meaning of the bank charter. Williams v. McKay, supra, 46 N.J.Eq. at 60. The duty to seek the assistance of counsel can extend to areas other than the interpretation of corporation instruments. Modern corporate practice recognizes that on occasion a director should seek outside advice. A director may require legal advice concerning the propriety of his or her own conduct, the conduct of other officers and directors or the conduct of the corporation. ”

“ Because the dismissal of Olds's medical-malpractice complaint was not a foregone conclusion, Donnelly's negligence did not proximately cause actual damage to Olds until the trial court actually dismissed with prejudice Olds's complaint against Dr. Donahue in 1991. Only then did Olds suffer real and substantial, as opposed to speculative, damage. See Grunwald, supra, 131 N.J. at 495, 621 A.2d 459 (reasoning that actual damage is "real" not "speculative") . To trigger the statute of limitations, only the fact, not the amount of damages need be certain. ”

“ An R-rated film may include hard language, or tough violence, or nudity within sensual scenes, or drug abuse or other elements, or a combination of some of the above, so that parents are counseled, in advance, to take this advisory rating very seriously. Parents must find out more about an R-rated movie before they allow their teenagers to view it. ”

“ A director's duty of care does not exist in the abstract, but must be considered in relation to specific obligees. In general, the relationship of a corporate director to the corporation and its stockholders is that of a fiduciary. Whitfield v. Kern, 122 N.J.Eq. 332, 341 (E. & A. 1937) . Shareholders have a right to expect that directors will exercise reasonable supervision and control over the policies and practices of a corporation. The institutional integrity of a corporation depends upon the proper discharge by directors of those duties. ”

“ When a loss occurs, a reinsurer pays money due a ceding company to the broker, who then transmits it to the ceding company.
The reinsurance business was described by an expert at trial as having "a magic aura around it of dignity and quality and integrity." A telephone call which might be confirmed by a handwritten memorandum is sufficient to create a reinsurance obligation. Though separate bank accounts are not maintained [NJ23] for each treaty, the industry practice is to segregate the insurance funds from the broker's general accounts. ”

“ Our expectation was that once an attorney notified a client of a possible malpractice claim, the trial court would have the discretion to manage the case. Circle Chevrolet, supra, 142 N.J. at 293, 662 A.2d 509. On further consideration, however, we believe that the risk of the disclosure of privileged information and the generally adverse effects on attorney-client relationships outweigh any [NJ442] benefit from requiring a client to assert a malpractice claim in the pending lawsuit. ”

“ Because directors are bound to exercise ordinary care, they cannot set up as a defense lack of the knowledge needed to exercise the requisite degree of care. If one "feels that he has not had sufficient business experience to qualify him to perform the duties of a director, he should either acquire the knowledge by inquiry, or refuse to act." Ibid.
Directors are under a continuing obligation to keep informed about the activities of the corporation. ”

“ Although we do not suggest that potentially negligent attorneys would misrepresent facts, an attorney charged with malpractice, like any other litigant, would have an incentive to testify guardedly when sued by a former client. ”

“ In the opinion, Vice Chancellor Pitney explained that bank depositors have a right to
rely upon the character of the directors and officers [and upon the representation] that they will perform their sworn duty to manage the affairs of the bank according to law and devote to its affairs the same diligent attention which ordinary, prudent, diligent men pay to their own affairs ”

“ Consistent with that approach, we confine our holding in this case to attorney-malpractice claims, without reaching other claims, such as "second-litigation malpractice claims against accountants, architects, engineers, physicians, or psychologists." Post at 451, 696 A.2d at 647. [A645] For present purposes, we note simply that legal malpractice claims uniquely raise the specter of forcing a party in an action to sue the same lawyer who is representing that party in the action.
We have always emphasized that preclusion is a remedy of last resort. ”

“ But when a business fails from general mismanagement, business incapacity, or bad judgment, how is it possible to say that a single director could have made the company successful, or how much in dollars he could have saved? [Id. at 616-617]
Pointing out the absence of proof of proximate cause between defendant's negligence and the company's insolvency, Judge Hand also wrote:
[NJ42] The plaintiff must, however, go further than to show that [the director] should have been more active in his duties. ”

“ Second, the nature of the reinsurance business distinguishes it from most other commercial activities in that reinsurance brokers are encumbered by fiduciary duties owed to third parties. In other corporations, a director's duty normally does not extend beyond the shareholders to third parties.
In this case, the scope of Mrs. Pritchard's duties was determined by the precarious financial condition of Pritchard & Baird, its fiduciary relationship to its clients and the implied trust in which it held their funds. ”

“ In particular, mandatory party joinder assures that all potentially responsible persons will participate in the original action. Id. at 25, 560 A.2d 1169. Requiring the joinder of all parties with a material interest in a litigation thus guarantees a complete determination of liability, avoids prejudice to absent parties, and prevents a duplication of lawsuits. Id. at 25-26, 560 A.2d 1169. The touchstone of mandatory party-joinder is fairness both to the plaintiff and to the defendant. ”

“ Cases involving nonfeasance present a much more difficult causation question than those in which the director has committed an affirmative act of negligence leading to the loss. Analysis in cases of negligent omissions calls for determination of the reasonable steps a director should have taken and whether that course of action would have averted the loss.
Usually a director can absolve himself from liability by informing the other directors of the impropriety and voting for a proper course of action. ”

“ The New Jersey Business Corporation Act, which took effect on January 1, 1969, was a comprehensive revision of the statutes relating to business corporations. One section, N.J.S.A. 14A:6-14, concerning a director's general obligation had no counterpart in the old Act. That section makes it incumbent upon directors to
discharge their duties in good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions. ”

“ With certain corporations, however, directors are seemed to owe a duty to creditors and other third parties even when the corporation is solvent. Although depositors of a bank are considered in some respects to be creditors, courts have recognized that directors may owe them a fiduciary duty. See Campbell, supra, 62 N.J.Eq. at 406-407. Directors of nonbanking corporations may owe a similar duty when the corporation holds funds of others in trust. ”

“ Although specific duties in a given case can be determined only after consideration of all of the circumstances, the standard of ordinary care is the wellspring from which those more specific duties flow. ”

“ III Individual liability of a corporate director for acts of the corporation is a prickly problem. Generally directors are accorded broad immunity and are not insurers of corporate activities. The problem is particularly nettlesome when a third party asserts that a director, because of nonfeasance, is liable for losses caused by acts of insiders, who in this case were officers, directors and shareholders. ”