A recent New Jersey Law Journal story, “NJ Justices Expand Fee Shifting to Include Non-Clients” reports that 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.
The case involves an international child abduction that the plaintiff—the child's father—successfully claimed was facilitated when the mother's attorney gave her the child's passport.
The court's ruling means that family lawyer Madeline Marzano-Lesnevich and her firm, Hackensack's Lesnevich, Marzano-Lesnevich & Trigg, could be forced to pay a judgment of $992,333, which includes $158,517 for the father's counsel fees and costs, if it is determined that the firm intentionally violated an agreement to keep the child's passport in escrow.
The New Jersey State Bar Association had argued as amicus against awarding counsel fees to non-clients. "We agree with Justice LaVecchia's concerns that there should be a limited exception to the award of counsel fees," said the bar's attorney in the case, Frugan Mouzon. This ruling, he said, could lead to a "slippery slope" where counsel fees could be awarded in other cases.
The bar's president, Bernardsville solo Miles Winder III, also said he disagreed with the ruling. "The American rule requires each party pay its own litigation costs. That has been a bedrock of jurisprudence in New Jersey," Winder said. "When the Court ruled in Saffer, it made a narrow exception that was specific to the attorney-client relationship.
"Today the court has expanded that for the first time to include non-clients. The NJSBA agrees with the dissent that this pushes the boundaries too far," Winder said.