August 12, 2019
A recent Law 360 story by Kevin Penton, “Law Firm Wins Nix of $1.3M Fee Reduction in Client Dispute,” reports that a New Jersey trial judge jumped the gun when he decided a fee dispute between an Illinois-based law firm and its client by reducing the firm's bill from approximately $1.7 million to $359,000 before either a formal complaint or a petition for fees had been filed, a state appellate court has ruled.
Superior Court Judge Craig L. Wellerson lacked jurisdiction to decide the fee dispute between Susan Lucas and Freeborn & Peters LLP as the disagreement was not part of the underlying legal malpractice case Lucas had filed against another law firm, and neither Freeborn & Peters nor Lucas had formally petitioned the court over the matter, according to the opinion by a three-judge Appellate Division panel.
While Lucas gave her blessing during a December 2016 hearing for the judge to decide the matter, that was insufficient grounds for Judge Wellerson to intercede, according to the Appellate Division opinion, which nullified the fee reduction and instructed Freeborn & Peters to file a separate cause of action in pursuit of the fees it seeks to recover from Lucas. "The court intruded in this dispute over Freeborn's repeated objections and Lucas' acquiescence, which in no way endowed the court with the subject matter jurisdiction to adjudicate this fee dispute," the opinion reads.
Lucas hired Freeborn & Peters to serve as her counsel in a case in which she asserted, among other things, that Arnold Schancupp & Associates had committed legal malpractice when it represented her in the purchase of a home along the Jersey Shore and failed to disclose that the property was subject to a storm water easement, according to the opinion. A jury awarded Lucas $980,000 in compensatory damages, with an additional $99,506 in consequential damages awarded by the court, according to Friday's opinion.
While Lucas and Freeborn & Peters had issues at the end of the underlying case over how much she owed the firm, she told the judge during a telephone conference that she intended to separately dispute the reasonableness of the fees, while the law firm stipulated that their retainer agreement designated a court in Illinois as the venue where any disputes between the parties would be resolved, according to the opinion.
Judge Wellerson still proceeded with a hearing to consider the reasonableness of the fees, during which Lucas agreed for the judge to rule on the matter and Freeborn & Peters continued to lodge objections, according to court documents. "Because the trial court did not have the legal authority to unilaterally assert jurisdiction over this fee dispute, the court's decision to sua sponte adjudicate this dispute was an ultra vires act; any relief awarded by the court in this context is a legal nullity," the opinion reads.
"My clients are relieved that the matter is resolved and that they can proceed to the next stages of recouping their fees," John Hanamirian, an attorney representing the law firm, told Law360. "They did win this case for their client in a six-week trial, but that victory and their relationship with their client was made adversarial by this process. That is beyond unfortunate."