Litigation Privilege Protects Client’s Statement That His Former Lawyer Was a Liar, Thief, and “No Good Drunk”

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Privilege (pd)Anyone who has practiced law for any period of time likely has a story about a misdirected email. You know, the one you meant to send to a client or a colleague, but it went to your adversary or your supervising partner instead. These situations often just result in mild to moderate awkwardness around the office, but they sometimes create bigger problems. MacNaughton v. Harmelech, a recent decision from the Appellate Division, involved the latter. But it also involved the litigation privilege, something I wrote about just a few weeks back. (What Do eBay, The "40 Year Old Virgin," And The Litigation Privilege Have In Common?). And, fortunately for defendant, the statements in his misdirected email were protected by that privilege.

In MacNaughton, plaintiff, a New Jersey lawyer, represented defendant in a lawsuit involving defendant's company. Defendant disputed plaintiff's bill and plaintiff eventually sued defendant over the bill. At some point during the litigation, the trial court asked the parties whether they were interested in mediation. Around the same time, however, plaintiff was "in contact with another of defendant's creditors about banding together to force defendant into involuntary bankruptcy." As you might expect, when defendant learned about plaintiff's efforts, it colored his decision about whether to agree to mediation. In fact, defendant sent the following email, reprinted exactly as it appeared in the Appellate Division's decision, to his lawyers on the subject:

Please I Am asking you to file a paper in the state court there WILL NOT BE AGREE NOT TO BE A MEDIATION MACNAUGHTON CALL TODAY AND ASK HIM TO TRY TO POT ME IN IN VALENTRY BANKRUPTCY AS YOU SEE HE IS A. LIAR THIEF AND NO GOOD DRUNK

NO TO BE TRUSTED THANKS

Unfortunately, defendant also copied plaintiff on this email. Upon receiving it, plaintiff filed a one-count complaint for defamation. The trial court held a hearing on whether the statements were protected under the litigation privilege. After taking testimony from defendant and his current counsel, the court applied the four-factor test from Hawkins v. Harris, and held that they were. As a result, plaintiff's claim was dismissed. Plaintiff appealed.  

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“[Saint] Cecelia You’re Breaking My Heart” (By Not Paying My Commission)

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

House + money (pd)If you are a realtor and you enter into an exclusive agreement to find tenants for your client's property, but then your client enters into a rent-free lease with a tenant, do you still get a commission? The answer, at least according to the Appellate Division in Century 21-Main Street Realty, Inc. v. St. Cecelia's Church, is no. 

In Century 21, plaintiff entered into an exclusive listing agreement with defendant, a church, under which  plaintiff would list an "inactive school building," which the church owned, for either sale or lease. Under the agreement, plaintiff was entitled to a commission equal to 6% of the sales price, if the property was sold, or one month of rent, if the property was leased. During the term of the agreement, the church entered into a lease with the local school board, which allowed the board to use the building "rent free" for the first 26 months. It also contained two, six-month "hold over terms." If the board continued to occupy the building during either or both of these terms, it would have to pay the church $900,000 per term. The lease also required the board to repave the parking lot, and allowed, but did not require, the board to make any repairs or renovations to the building that it saw fit, at the board's expense.

Two months after the church signed the lease, plaintiff demanded a commission based on the "asserted costs" of the repairs the board intended to make to the building. It asserted that it was entitled to a commission equal to "two month's rent due based on rental, repair evaluation." Apparently, plaintiff assumed the repairs would costs $1.5 million, divided that amount by the 26-month term of the lease to come up with the per-month cost of the repairs, and then claimed that it was entitled to two month's payment as its commission. The church refused to pay any commission and plaintiff sued. 

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Words Matter: Language In Retainer Agreement Bars Recovery Of Fees Incurred In Fee Arbitration Proceeding

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Words (pd)One of my favorite quotes from a judicial decision comes from the New Jersey Supreme Court in Atlantic Northern Airlines v. Schwimmer: "Litigation proceeding from the poverty of language is constant." I have never understood this to be a knock on the drafter. Rather, I understood it to mean that no matter how carefully you choose your words you can never make a contract, agreement, or other document litigation-proof. You see examples of this nearly every day in the daily decisions, including in the Appellate Division's recent decision in The Law Offices of Bruce E. Baldinger, LLC v. Rosen.

Baldinger involved a dispute between a law firm and its former client over attorney's fees. Defendant retained plaintiff to represent him in connection with a dispute with a contractor over work performed at defendant's home. Plaintiff and defendant entered into a retainer agreement that included an initial flat fee of $1,200 followed by hourly billing. The retainer agreement also dictated that interest at the rate of 1% per month would be charged on any unpaid balances after 30 days. The retainer agreement also contained the following provision, which is most important to our story: "If collection and enforcement efforts are required, you agree to pay counsel fees along with costs of suit." This would become important later on.

After about a month, defendant "became dissatisfied with plaintiff's representation and terminated plaintiff's services." Defendant had already paid the $1,200 flat fee, but plaintiff demanded that he also pay an addition $4,308 for work performed by plaintiff up to that point. Defendant refused to pay.

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Are Exceptions Starting To Swallow The “American Rule” In New Jersey?

Constitution (pd)The answer to that question would appear to be: it depends who you ask. In a pair of decisions released on April 26, 2016, Innes v. Marzano-Lesnevich and In Re Estate of Folcher, the New Jersey Supreme Court addressed the “American Rule” — the idea that each party to a lawsuit is responsible for its own attorney’s fees — and specifically whether to narrow or expand certain common-law exceptions to that rule. At the center of the two decisions was Justice LaVecchia, who authored the majority opinion in Folcher and the dissent in Innes. These decisions leave little doubt that this is not the last we have heard from the Supreme Court on the parameters of the American Rule.

First, a brief history of the American Rule in New Jersey. In 1948, New Jersey adopted a new Constitution and re-organized its court system. As part of this re-organization, and as it relates to the awarding of prevailing party attorney’s fees, New Jersey could have adopted either the English Rule, which allows for the liberal awarding of such fees, or the American Rule, which does not. New Jersey chose the latter. This decision is currently embodied in Rule 4:42-9, which only allows for eight exceptions to the general rule.

Over the years, however, New Jersey courts have created common law exceptions to the American Rule. These cases have followed two, independent tracks, one arising in the context of the attorney-client relationship and one arising in the context of estate administration.

 

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