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Posts Tagged ‘New Jersey’

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].

Phony Fakes Fall (Allegedly)

Posted on: February 15th, 2019

By: Kevin Stone

The fictional Mike Moffitt famously called Jerry Seinfeld a phony. The reasons remain unknown. A non-fictional New Jersey man, however, appears to be a bona fide phony. Surveillance video of a company breakroom appears to capture the man throwing ice on the floor and then gently laying down next to it. He then filed an insurance claim for the ambulance ride and hospital treatment that followed the “fall.” Unlike the fall, the filing of the claim may actually harm him, as he was arrested for filing a false claim.

This incident is a great reminder to maintain surveillance cameras where appropriate. Cases often come down to the credibility of the plaintiff. But cameras don’t lie.

If you have any questions or would like more information, please contact Kevin Stone at (770) 303-8643 or [email protected].

“Sanctuary Cities” Get a Reprieve For Now

Posted on: January 10th, 2019

By: Pamela Everett

As many city, county and state attorneys are aware, in 2017 the US. Department of Justice (DOJ) added three conditions to the application process for the Edward Byrne Memorial Justice Assistance Grant (“Byrne JAG”) program in an effort to eliminate so called sanctuary cities. The Byrne JAG program originated from the Omnibus Crime Control and Safe Streets Act of 1968,  which created grants to assist the law enforcement efforts of state and local authorities. Under the Byrne JAG program, states and localities may apply for funds to support criminal justice programs in a variety of categories, including law enforcement, prosecution, crime prevention, corrections, drug treatment, technology, victim and witness services, and mental health.

The first condition, called the “Notice Condition” requires grantees, upon request, to give advance notice to the Department of Homeland Security of the scheduled release date and time of aliens housed in state or local correctional facilities. The second condition, called the “Access Condition,” requires grantees to give federal agents access to aliens in state or local correctional facilities in order to question them about their immigration status. The third condition, called the “Compliance Condition” requires grantees to certify their compliance with 8 U.S.C. § 1373, which prohibits states and localities from restricting their officials from communicating with immigration authorities regarding anyone’s citizenship or immigration status. Grantees are also required to monitor any subgrantees’ compliance with the three conditions, and to notify DOJ if they become aware of credible evidence of a violation of the Compliance Condition. Additionally, all grantees must certify their compliance with the three conditions, which carries the risk of criminal prosecution, civil penalties, and administrative remedies. The DOJ also requires the jurisdictions’’ legal counsel to certify compliance with the conditions.

A number of jurisdictions have sued the DOJ and the U. S. Attorney General regarding these new conditions and sought a nationwide injunction; however, so far, none have  been successful in obtaining a nationwide injunction.  Recently a partial win was handed to the states of New York, Connecticut, New Jersey, Rhode Island, Washington, and Commonwealths of Massachusetts and Virginia and the City of New York. The States and the City challenged the imposition of the three conditions on five bases: (1) the conditions violates the separation of powers, (2) the conditions were ultra vires under the Administrative Procedure Act (“APA”), (3) the conditions were not in accordance with law under the APA, (4) the conditions were arbitrary and capricious under the APA, and (5) § 1373 violated the Tenth Amendment’s prohibition on commandeering.  This case challenged the authority of the Executive Branch of the federal government to compel states to adopt its preferred immigration policies by imposing conditions on congressionally authorized funding to which the states are otherwise entitled.

While the court held that the plaintiffs did not make a sufficient showing of nationwide impact to demonstrate that a nationwide injunction was necessary to provide relief to them, it did find as follows: (1) The Notice, Access, and Compliance Conditions were ultra vires and not in accordance with law under the APA. (2) 8 U.S.C. § 1373(a)–(b), insofar as it applies to states and localities, is facially unconstitutional under the anticommandeering doctrine of the Tenth Amendment. (3)  The Notice, Access, and Compliance Conditions violated the constitutional separation of powers. (4)The Notice, Access, and Compliance Conditions were arbitrary and capricious under the APA.  (5) The DOJ was mandated to reissue the States’ FY 2017 Byrne JAG award documents without the Notice, Access, or Compliance Conditions, and upon acceptance to disburse those awards as they would in the ordinary course without regard to those conditions.  Additionally, the DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

The DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

There are several other cases pending, including one filed by the City of San Francisco, seeking the issuance of a nationwide injunction to prohibit the enforcement of the new conditions. Stay tuned for more developments in this area.

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

 

Related litigation: City of Chicago v. Sessions, 264 F. Supp. 3d 933 (N.D. Ill. 2017); affd. appeal, City of Chicago v. Sessions, 888 F.3d 272 (7th Cir. 2018), but later stayed the nationwide scope of the injunction pending en banc review. Conference City of Evanston v. Sessions, No. 18 Civ. 4853, slip op. at 11 (N.D. Ill. Aug. 9, 2018) City of Philadelphia v. Sessions, 280 F. Supp. 3d 579 (E.D. Pa. 2017); City of Philadelphia v. Sessions, 309 F. Supp. 3d 289 (E.D. Pa. 2018)(currently on appeal); California ex rel. Becerra v. Sessions, 284 F. Supp. 3d 1015 (N.D. Cal. 2018)

 

Arbitration Agreements in New Jersey Need More Details

Posted on: November 16th, 2018

By: Chris Curci

On November 13, 2018, the Superior Court of New Jersey, Appellate Division, issued an important decision holding that an arbitration agreement between the employer and employee was not enforceable. Flanzman v. Jenny Craig, Inc., Docket No. L-6238-17.  The arbitration agreement read:

Any and all claims or controversies arising out of or relating to [plaintiff’s] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind.

According to the Appellate Division, this agreement was unenforceable because it “failed to identify the general process for selecting an arbitration mechanism.” What exactly does that mean?

In its effort to clarify this standard, the Appellate Division stated that an employer is not required to “detail in the arbitration agreement the exact manner in which the arbitration” will proceed. However, an employer must identify the “forum” for the arbitration and clearly explain how the employee’s judicial rights to a jury trial are being replaced by the arbitration rights.

For example, the Court noted that it would be sufficient for an employer to (1) identify a forum such as the American Arbitration Association (“AAA”) or the Judicial Arbitration and Mediation Services (“JAMS”), and (2) adopt that forum’s rules and procedures. The Court opined that this would be sufficient because AAA and JAMS’s rules and procedures address numerous procedural issues, such as: (1) notification requirements, (2) how to initiate proceedings, (3) management conferences, (4) discovery, (5) the location of the hearings, (6) the number of arbitrators, (7) how to communicate with the arbitrator, (8) attendance requirements, (9) dispositive motions, (10) evidence, (11) modification of awards, (12) and applications for fees, expenses and costs.

In other words, while the arbitration agreement is not required to “detail the exact manner in which the arbitration will proceed,” an employer must specifically identify a forum such as AAA or JAMS and incorporate that forum’s rules and procedures. This allows the employee to fully understand how his or her judicial rights to a jury trial are being replaced by arbitration.

Employers should review their employee arbitration agreements to ensure their enforceability. If you need help with this or any other employment related question, Chris Curci practices Labor & Employment law in Pennsylvania and New Jersey and is a member of Freeman Mathis & Gary’s Labor and Employment Law National Practice Section. He represents employers in litigation and advises clients on all aspects of employment law. He can be reached at [email protected].