December 12, 1995
This case arises out of two previous pieces of litigation. The first was an action brought in federal court in New Jersey by Lightning Lube, Inc. against Witco Corporation, in which Lightning Lube alleged violations of RICO and federal antitrust law, as well as fraud, breach of contract, and tortious interference.
In that action, Lightning Lube was represented by Steven Kramer and Jeffrey Nowak of the law firm Steven M. Kramer & Associates. Lightning Lube ultimately recovered a judgment in the sum of $ 11.5 million. The second action was a malpractice suit brought by Ralph Venuto, Lightning Lube's President, against Mr. Kramer. This action, apparently, was resolved through arbitration. Although the parties to the present lawsuit have not submitted any description or documentation of the malpractice action, and thus this court does not know the scope of the issues involved or whether it was submitted to court-annexed or private arbitration, the action appears to have focused on an allegation that Kramer negligently represented Lightning Lube, preventing it from recovering a significantly larger judgment in its suit against Witco. According to Kramer, the malpractice claim resulted in an arbitral award against him in the sum of $ 440,000.
Following Kramer's defeat in the malpractice action, he filed the present action, a suit against his former associate Jeffrey Nowak. The complaint asserts federal jurisdiction on the basis of diversity of citizenship, in that Kramer is domiciled in New York and Nowak is domiciled in Pennsylvania. The complaint alleges that the arbitral judgment "was based upon conduct engaged in by Mr. Nowak while he was an independent contractor for the plaintiff in the case entitled Lightning Lube, Inc. v. Witco Corp., 802 F. Supp. 1180 (DNJ). The conduct consisted of miscalculation of prejudgment interest." Complaint, P 5. Based on this description of Nowak's alleged misconduct, Kramer asserts a claim for contribution, in which Kramer seeks to shift a portion of the arbitral award onto Nowak. Kramer further asserts claims for negligence and for breach of contract.
II. The Present Motion
Nowak has moved to dismiss or, in the alternative, for summary judgment. Nowak argues that he was Kramer's employee and not, as Kramer asserts, an independent contractor. Nowak also argues that (1) the contribution claim must be dismissed because there has been no finding that Nowak and Kramer were joint tortfeasors, (2) the negligence claim must be dismissed because the complaint does not assert any duty owed by Nowak and because the claim is barred by the statute of limitations, and (3) the breach of contract claim must be dismissed because the complaint does not assert that Nowak failed to fulfill a specific contractual provision.
On its face, Nowak's motion appears to seek dismissal under Rule 12(b)(6) on each of the claims, while seeking summary judgment under Rule 56 solely on the issue of whether Nowak was Kramer's employee. Despite this appearance, Nowak has submitted numerous exhibits, including several affidavits and various documents, which he relies on in support of his arguments for dismissal of the individual claims. Under Rule 12, these exhibits are material only if the motion to dismiss is converted into a motion for summary judgment. Rule 12 provides:
If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
Fed. R. Civ. P. 12(b).
It is possible that Kramer construes Nowak's motion as seeking summary judgment on all claims, not merely the independent contractor issue. In opposing the dismissal of the individual claims, Kramer, too, relies on the exhibits submitted by Nowak. Moreover, Kramer has submitted an affidavit of his own, which he relies on in opposition to all of Nowak's arguments. This affidavit, however, is the only submission Kramer has produced. Under the circumstances, in which it is unclear whether the movant intended to seek dismissal or summary judgment, and in which it is similarly unclear how the motion was construed by the nonmovant, I believe that the best course is to follow the dictates of Rule 12 and to notify the parties that I intend to treat the motion as one for summary judgment. Kramer will have two weeks following the issuance of this opinion in which he may, if he so elects, submit (1) a further response to the motion and (2) additional exhibits and affidavits.
Because both parties treated the motion as seeking summary judgment, not dismissal, on the independent contractor issue, this issue is now ripe for resolution, and I address it below. In addition, I discuss the doctrinal framework which -- as I currently understand the matters in dispute -- seems likely to provide the setting for the disposition of the remaining issues in the case.
III. Facts Alleged
The factual allegations contained in the complaint are extremely skimpy, consisting of the single sentence quoted in full above: "The conduct consisted of the miscalculation of prejudgment interest." Nonetheless, affidavits submitted by both parties flesh out the background and details of this event.
According to Nowak, the two parties first met in July 1988, while Nowak was in his final semester at Rutgers University Law School in Newark, New Jersey. Kramer was a practicing lawyer with offices in Philadelphia and New York and had placed an advertisement seeking a law student to work on a large antitrust matter -- Lightning Lube, Inc. v. Witco Corp. -- pending in federal court. Nowak responded to the advertisement, was interviewed by Kramer in Kramer's Philadelphia office, and was hired by Kramer. At Kramer's instruction, Nowak then began working out of the client's office in Mt. Laurel, New Jersey. Nowak worked at Lightning Lube's office from June 1988 until shortly after the conclusion of the litigation sometime in 1993 or 1994.
By June 1989, Nowak had been admitted to the New Jersey bar, and Kramer placed Nowak's name on his letterhead as an associate of the firm "Steven M. Kramer & Associates." The letterhead also lists Lightning Lube's address -- where Nowak worked -- as the firm's New Jersey office. In addition to arranging that Lightning Lube provide office space to Nowak, Kramer also arranged that Lightning Lube pay Nowak's salary directly. Kramer nonetheless maintained strict supervision over Nowak's work. Every day, Nowak prepared a log detailing the work he had done that day; the log was faxed to Kramer's New York office. All documents prepared by Nowak for the litigation were also faxed to Kramer for his approval. One fact to be noted about the relationship of the two parties is that Kramer often directed Nowak to sign Kramer's name to documents to be filed in the district court in New Jersey.
Thus, the documents Nowak filed in the Lightning Lube litigation contain only Kramer's signature.
Among the many papers Nowak prepared for the Lightning Lube litigation was a motion for prejudgment interest. This motion was prepared after the jury returned a judgment of approximately $ 11.5 million in compensatory damages and $ 50 million in punitive damages in favor of Lightning Lube. Both Kramer and Nowak agree that Kramer instructed Nowak to prepare the motion. Kramer claims that he "completely delegated the task to Mr. Nowak." Plaintiff's Ex. 1, P 2. Nowak disputes this characterization:
I prepared a draft of the Motion and faxed it, and a copy of the underlying New Jersey authority, . . . to Mr. Kramer for his review and approval. Mr. Kramer reviewed the Motion and approved of the prejudgment interest figure and method of calculation. Moreover, Mr. Kramer was fully aware of New Jersey's Rules of Civil Procedure regarding pre and post judgment interest rates and the method of calculation.