COMMENTARY ON LAWYERING, LANGUAGE, AND POLITICS
Tuesday, April 26, 2016
NJ Justices Expand Fee-shifting Rule to Non-Clients
Rejecting the entreaties of the State Bar Association, the New Jersey Supreme Court expanded its fee shifting rule for prevailing legal malpractice plaintiffs. The Court - which has since 1996 adhered to a judge-made rule that it slowly extended, first beyond negligence-based claims, to those involving other breaches of duty to clients. But now in Innes v. Marzano-Lesnevich the court has extended the rule of Saffer v. Willoughby (1996) to a non-client - the beneficiary of an escrow agreement breached intentionally by the defendant attorney. Despite the slippery slope arguments of the dissenters the limitation to intentional breaches of duty by lawyers as escrow agents will in fact sharply limit the further expansion of the exception to the so-called American Rule. The case arose from the decision of a successor attorney not to abide by the agreement of the parties - that the divorcing wife's attorney would hold the child's passport to prevent removal of the young child from the United States. The defendant lawyer handed over the passport to the mother without the father's consent, the child was taken to Spain where Spanish courts, ruling in the father's absence barred any contact with the young child of the marriage. The mother was jailed for reusing to return the child to the U.S. and eventually convicted of child-napping. A large verdict for plaintiff was awarded in the Superior Court, I was plaintiff's expert on breach of fiduciary duty at trial. After initially denying that she had handed over the escrowed passport in violation of the agreement, the defendant admitted it. She asserted that the parties had abrogated the signed escrow agreement. I treated the breach as a flagrant violation of a duty implied in law when she retained the passport and agreement as successor attorney in a divorce case. But the case was sent to the jury as a negligence case. The Supreme Court has now remanded the case to the trial judge to make a specific fact finding on intentional breach. The court observed that the record was sufficient to support such a finding, so it is likely that the trial judge will make the required finding. - GWC NJ Justices Expand Fee-shifting Rule to Non-Clients
by Michael Booth//New Jersey Law Journal.
A sharply divided New Jersey Supreme Court ruled April 26 that attorneys can be held liable for counsel fees if they are found to have intentionally breached their fiduciary duty to non-clients.
In a 3-2 ruling in Innes v. Marzano-Lesnevich, the majority expanded the fee-shifting standards set in its 1996 ruling in Saffer v. Willoughby, where the court said attorneys could be held liable for counsel fees when their clients are successful in legal malpractice actions.
Justice Lee Solomon, writing for the majority, said the ruling was a slight extension of Saffer and another small departure from the so-called "American rule"—the doctrine that says parties in civil cases are largely responsible for their own counsel fees.
Chief Justice Stuart Rabner and Justice Barry Albin joined in the ruling.
"Consistent with our case law, we reaffirm that a prevailing beneficiary may be awarded counsel fees incurred to recover damages arising from an attorney's intentional violation of a fiduciary duty," Solomon said.
Justice Jaynee LaVecchia, joined by Appellate Division Judge Mary Cuff, dissented, saying the majority's ruling represented a further deterioration of the American rule.
"In its present adjustment to our case law governing fee shifting, the majority deals the American rule yet another blow by expanding awards of attorneys' fees to non-clients of attorneys in escrow settings," LaVecchia said.
Justices Anne Patterson and Faustino Fernandez-Vina recused.
"We refine our tightly circumscribed exception to New Jersey's general rule against awarding counsel fees to prevailing parties and hold that, because defendants were acting in a fiduciary capacity as trustees and escrow agents for both Innes and Carrascosa, if they intentionally breached the fiduciary obligation to Innes by releasing Victoria's United States passport to Carrascosa without Innes' permission, defendants can be held liable for counsel fees," Associate Justice Lee Solomon said.
"Innes relied on defendants to carry out their fiduciary duties and responsibilities … and prevent Carrascosa from taking Victoria away from him," he said. "As the Appellate Division concluded, there is substantial support in the record from which to conclude that defendants' conduct was intentional."