New Jersey Appellate Division Holds That the Entire Controversy Doctrine Does Not Reach Tangentially-Related Claims Pending in Another Court, Despite Common Facts

In Alpha Beauty Distributors, Inc. v. Winn-Dixie Stores, Inc. the New Jersey Appellate Division reversed a trial court’s dismissal of an action under the Entire Controversy Doctrine, finding that the dismissed action was not part of the same “core controversy” as a related federal-court proceeding. Plaintiff Alpha Beauty Distributors is owned by Bebert Azran. After purchasing Alpha from Noel and Reid Kleinman, Azran discovered fraud and breaches of fiduciary duty, and sued the Kleinmans in Federal District Court on behalf of himself and Alpha . The federal action centered on allegations that the Kleinmans had damaged Alpha and Azran “through a course of self-dealing and conversion of corporate assets.” Among other things, the federal complaint alleged that the Kleinman’s had given certain of Alpha’s customers improper credits, but it did not encompass any claims against such customers for the improper credits.