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Posts Tagged ‘New Jersey’

Pay History is out for New Jersey Employers, Mostly…

Posted on: February 10th, 2020

By: Justin Boron

As of 2020, New Jersey employers, in general, may no longer ask applicants past salary information.  If they do, it constitutes an unlawful employment practice.  See N.J. Stat. § 34:6B-20.  New Jersey joins more than a dozen other states, the District of Columbia, Puerto Rico, and multiple local governments that have enacted similar provisions.

But there are several exemptions, such as voluntary disclosure, internal transfers, federal law or regulation requiring disclosure.   If an employer does not fit into one of the exemptions, the employer should review and revise its applications and policies immediately.

The law imposes a civil penalty in an amount not to exceed $1,000 for the first violation, $5,000 for the second violation, and $10,000 for each subsequent violation collectible by the Commissioner of Labor and Workforce Development.

The legislation also amended the New Jersey Law Against Discrimination to create a cause of action for violations that affect a member of a protected class, such as race or sex, so in addition to fines, violations could result in civil litigation as well.

If you have any questions or would like more information, please contact Justin Boron at [email protected].

Litigation Funding – The Struggle to Peek Behind the Curtain

Posted on: October 17th, 2019

By: Joshua Ferguson

Continuing a nationwide trend, this past month the U.S. District Court for the District of New Jersey rejected a discovery request into the plaintiff’s litigation funding arrangements. Re: Valsartan N-Nitrosodimethylamine Litigation, MDL Docket No. 2875, No. 19-2875, D. N.J., Camden Vicinage.

Litigation funding is where a third party provides the financial resources to enable Plaintiff’s litigation or arbitration cases to proceed. The litigant obtains all or part of the financing to cover its legal costs from a private commercial litigation funder, almost always with repayment at exorbitant interest rates.   It seems a natural conclusion that these same litigation funders would have an “interest” in the results of the outcome to secure their “risk”, but the courts have concluded otherwise on several occasions.

Similar to arguments in other matters involving concerns over litigation funding, defendant in the New Jersey District court action argued disclosure was necessary to determine whether the plaintiffs were the “real parties in interest” in the case.

The court noted a “plethora of authority” from courts across the United States concluding that such information is irrelevant to the claims and defenses at issue.

The “plethora of authority” includes numerous cases, including a 2019 decision in Northern District of California that noted that “the courts simply held that fee and litigation funding agreements could be discoverable when there was a specific, articulated reason to suspect bias or conflicts of interest.”  MLC Intellectual Property LLC v. Micron Technology, Inc., No. 14-cv-03657, 2019 WL 118595 (N.D.Cal. Jan. 7, 2019)

Until and unless the Government steps to slow litigation funding through regulation, any chance of success on securing discovery as to litigation funding will require actual proof of bias or conflict of interest.

If you have any questions or would like more information, please contact Josh Ferguson at [email protected].

Investors’ Life Insurance ‘Gamble’ Busts out in NJ Courts

Posted on: September 19th, 2019

By: Justin Boron

To take out insurance, you almost always need an “an insurable interest” in the risk being insured, such as a financial interest in a home or a car.  It’s what prevents strangers to the risk from betting on the occurrence of a casualty, like your neighbor taking out a policy on your house or car in the hopes that either is destroyed in an accident.  The requirement takes on heightened importance in the area of life insurance where it prevents strangers to the insured life from betting on someone’s death and discourages worse things, like foul play.

But because life insurance is treated as a transferrable asset—much like a home or car—investors developed a workaround for the “insurable interest” requirement.  In arrangements referred to as stranger-oriented life insurance policies—STOLIs, for short—investors fund the premiums for a life insurance policy purchased by the insured who has the insurable interest when the policy is purchased but who intends to re-sell it at a discount to investors without an insurable interest.  The insured’s frequent practical purpose is to pay for immediate health care needs or other expenses.  The investors’ purpose is to make a profit off the benefit when it is paid.  Usually, that means that their profit increases the sooner the insured dies.  STOLIs, of course, are controversial.  But despite efforts to regulate them, they continue to evolve in one form or another.

Considering New Jersey law, the Third Circuit Court of Appeals recently confronted whether a STOLI involving a $5 million benefit could be upheld under the states’ public policy.  Based on certified questions answered by the New Jersey Supreme Court, it concluded that the life insurance policy was void ab initioSun Life Assurance Co. v. Wells Fargo Bank NA, Nos. 16-4337, 16-4387, 2019 U.S. App. LEXIS 24916, at *5-6 (3d Cir. Aug. 21, 2019).  It reasoned that the STOLI arrangement was intended to benefit the investors whose interest was in the early death of the insured rather than anyone whose interest was in the continued life of the insured.  As a result, it was not an insurance policy; it was a gamble on a person’s life.

In so holding, the Third Circuit and the New Jersey Supreme Court joined at least 30 other states prohibiting or regulating STOLIs, so its decision is not particularly remarkable on its own.  But it illustrates how determined investors are to bet on the duration of a person’s life when there is a financial incentive and how common the STOLI arrangements might be.  Absent a large benefit, they probably go unchallenged.

In fact, there have been multiple recent cases that either voided such policies or precipitated legislative change to the “insurable interest” requirement.   See, e.g., Wells Fargo Bank, N.A. v. Pruco Life Ins. Co., 200 So. 3d 1202 (Fla. 2016); Lincoln Nat’l Life Ins. Co. v. Gordon R.A. Fishman Irrevocable Life Tr., 638 F. Supp. 2d 1170 (C.D. Cal. 2009); Sun Life Assurance Co. v. Conestoga Tr. Servs., LLC, 263 F. Supp. 3d 695, 702 (E.D. Tenn. 2017).

Although the New Jersey ruling places it in line with other states’ position on the issue, the Third Circuit decided to refund the policyholder the premiums paid to the insurer.  As a result, the ruling might not discourage the practice completely, and it certainly will persist in other states where there is no anti-STOLI legislation.

If you have any questions or would like more information, please contact Justin Boron at [email protected].

NJ Appellate Division Finds Trial Court Had No Jurisdiction in Fee Dispute Between Firm and Client In Successful Legal Malpractice Action Against Client’s Previous Attorney

Posted on: September 11th, 2019

By: Erin Lamb

A three-judge panel of the New Jersey appellate division has ruled that a trial judge, having presided over a successful legal malpractice trial, had no jurisdiction to award fees in a dispute between a law firm and its client that was unrelated to the shifting of Plaintiff’s fees from her to the negligent counsel, as required under the Saffer decision.

Plaintiff hired a firm to represent her in a malpractice suit against an attorney who had advised her on the purchase of a home in Mantoloking, Ocean County, New Jersey. She claimed the attorney failed to inform her that the property contained a storm water easement. She also brought suit against the New Jersey Department of Transportation for negligence over its installation of a storm water pipe under the foundation of her home. The suit named other Defendants who were not involved in the trial.

In 2016, a jury found her previous attorney liable and ordered her previous attorney to pay $980,000 in compensatory damages.  The jury also found the NJDOT, the only other remaining defendant, was not liable.

In New Jersey, negligent attorneys are responsible for the reasonable legal expenses and attorney fees incurred by a former client in prosecuting the legal malpractice action. Saffer v. Willoughby, 143 N.J. 256, 272 (1996). The Saffer court determined such costs were “consequential damages that are proximately related to the malpractice.”  Plaintiff was therefore eligible for an award of counsel fees and costs. The trial judge held a bench trial and awarded Plaintiff $99,506.10 in consequential damages.

There were, however, two outstanding issues pertaining to the costs and fees – 1) her previous attorney likely was not liable for all of Plaintiff’s consequential damages, because the Action had included other parties and causes of action, and 2) the firm representing her in the malpractice action had remaining, unpaid, legal bills, which exceeded the awards of the compensatory and consequential damages. The trial court ordered limited discovery into these issues of apportionment, focusing on the apportionment of the costs and fees to be paid by the negligent previous counsel.

Plaintiff reached a settlement with her previous counsel on the costs and fees claim and informed the court of that development. The only remaining issue was the unpaid bills of the firm that represented her in the malpractice action. Plaintiff had already paid the firm $400,000.  The firm claimed $1.7 million remained unpaid.

The trial judge informed both parties that he would issue a resolution if they could not resolve the dispute. Both the firm and Plaintiff objected to the trial court’s desire to determine the reasonableness of the costs and fees. The firm asserted the retainer agreement listed Cook County, Illinois, as the forum for any disputes arising from the attorney-client relationship. The firm duly informed the trial court that they objected to any further determinations from the judge as New Jersey had no jurisdiction to determine the reasonableness of the costs and fees. Plaintiff informed the court she intended to dispute the reasonableness of Freeborn’s fees separately. However, she never pursued any action.

Despite the objections, the trial judge proceeded with a plenary hearing on the reasonableness of the firm’s fees.  It entered an order reducing the $1.7 million bill to $359,000. The trial court claimed jurisdiction was proper under a 2005 Appellate Division case, Levine v. Levine, 381 N.J. Super. 1 (App. Div. 2005).

The appellate division disagreed with the trial court’s reasoning and found it should not have relied on Levine, which involved the right of an attorney in a matrimonial action to petition for a lien on a client’s assts, and protecting substantive and procedural due process rights regarding attorney-client fee disputes under the New Jersey Attorney’s Lien Act.

The appellate court noted that the firm had not taken any steps to involve the trial court in their fee dispute with their client; no petition had been filed seeking a lien and determination under the Attorney’s Lien Act; and the court proceeded under the objection of the firm. Plaintiff also had not taken any steps to involve the trial court. There was no subject matter jurisdiction. The firm was never named as a party in any action related to the claim.

The trial court had no legal authority to assert jurisdiction, rendering any relief granted a legal nullity. The Appellate Division ruled that the firm must file a separate cause of action to adjudicate its claim for fees against its client and expressly rendered no opinion as to the enforceability of the forum selection clause in the retainer agreement.

The case is Lucas v. 1 on 1 Title Agency, et al. No. A-2217-16T2 (App. Div. 2019).

If you have any questions or would like more information, please contact Erin Lamb at [email protected].


Revisiting the Applicability of the Entire Controversy Doctrine to Legal Malpractice Claims

Posted on: April 2nd, 2019

By: Nicole Graham

The New Jersey Supreme Court recently revisited the applicability of the entire controversy doctrine as it relates to legal malpractice claims. In Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C., 2019 N.J. LEXIS 272, 219 WL 1065049 (N.J. 2019), the client asserted a claim for legal malpractice against the law firm three years after a default judgment was entered against the client in a collection action the law firm had previously filed. The law firm moved to dismiss based on the entire controversy doctrine because the legal malpractice claim was not raised as a counterclaim in the collection action. The clients claimed they were not obligated to assert a malpractice claim in the collection action because (1) the statute of limitations on the malpractice claim had not run and (2) they did not know during the pendency of the collection action that the law firm had committed malpractice. The clients argued they were representing themselves in the collection and as pro se litigants could not identify a malpractice claim. They further claimed that requiring a pro se litigant to identify malpractice claim is contrary to public policy.  The law firm argued the client did know about their claim as evidenced by their answer to the collection action complaint in which they alleged there were billed for legal work that was unnecessary and contrary to their direction.

The trial court dismissed the legal malpractice claim finding it was precluded by the entire controversy doctrine. The appellate court affirmed. The New Jersey State Bar Association filed an amicus brief and argued that unless the entire controversy applied, no attorney’s collection judgment would be considered final because the client would be permitted to bring a malpractice claim at a later stage.

The New Jersey Supreme Court reiterated its holding in Olds v. Donnelly, 150 N.J. 424, 443, 696 A.2d 633 (1997), that the entire controversy doctrine does not compel a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client. The Court noted, however, a collection action brought by a law firm against its client for unpaid legal fees does not constitute “underlying litigation” because the lawyer and client are already adverse and, therefore, such litigation does not raise the privilege and loyalty concerns that warrant the exception to the entire controversy doctrine recognized in Olds. Therefore, a court may apply the entire controversy doctrine to preclude a later filed legal malpractice claim the client declined to assert in the attorney’s action to collect unpaid legal fees.

Such preclusion is not absolute. The entire controversy doctrine is an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases. The client can avoid preclusion by demonstrating the prior forum did not afford a fair and reasonable opportunity to have fully litigated the malpractice claim. The court may consider such issues as the steps required to investigate, file and prosecute the malpractice claim in that forum, the status of the collection action when the malpractice claim accrued, the time constraints imposed by the rules of court, and the prospect of obtaining extensions of time to litigate the malpractice claim. A client may also avoid preclusion if he or she did not know, and should not have reasonably known, of the existence of the malpractice claim during the pendency of the collection action.

The New Jersey Supreme Court remanded the case to the trial court to determine when the legal malpractice claim accrued and whether the malpractice claimants would have had a fair and reasonable opportunity to have fully litigated their claim in the collection action.

When defending a legal malpractice claim where the defendant law firm previously litigated a collection action for unpaid fees, it is not enough to argue the entire controversy doctrine bars the claim. The defendant law firm must also prove the client knew or should have reasonably known of the existence of the claim during the pendency of the collection action, and that the forum in which the collection action was pending would have provided the client a fair and reasonable opportunity to fully litigate the malpractice claim.

If you have any questions or would like more information, please contact Nicole Graham at [email protected].