April 11, 2008
ANN K. YABLONSKI, FOR HERSELF AND AS ADMINISTRATRIX OF THE ESTATE OF ALAN J. YABLONSKI, PLAINTIFF-APPELLANT,
ALAN G. TREMBULAK, ESQ., AN ATTORNEY AT LAW OF THE STATE OF NEW JERSEY; WOODS & TREMBULAK, ATTORNEYS AT LAW OF THE STATE OF NEW JERSEY, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9211-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 15, 2008
Before Judges Fuentes, Grall and Chambers.
Plaintiff, Ann K. Yablonski, retained defendant, Alan G. Trembulak, to prosecute a cause of action against her late husband's accounting firm and its partners. In this suit, plaintiff sought to recover the value of her husband's partnership interest in the firm. Plaintiff ultimately settled her claims against the accounting firm for $18,000. She subsequently filed a legal malpractice action against defendant and his firm, claiming Trembulak failed to adequately investigate her claims against the accounting firm through discovery, and pressured her into settling the case.
Plaintiff sought to use the trial testimony of her expert from the underlying case against her husband's accounting firm to prove her damages in the legal malpractice action against Trembulak, because the expert had since died. Trembulak objected, claiming that plaintiff had not informed him of her intention to use the expert's trial testimony until the day of the trial.
Trembulak filed two in limine motions: the first motion sought to bar plaintiff from using the expert's trial testimony; the second motion, predicated on the success of the first one, sought to dismiss the legal malpractice case for lack of competent evidence as to damages. The trial court granted both motions.
Plaintiff now appeals from these rulings. We affirm. We will discuss the issues raised in the context of the facts developed by the parties before the trial court.
In this legal malpractice action, plaintiff is required to establish defendant's alleged deviation from the standard of conduct expected of a reasonably competent attorney, in the context of his performance in an earlier case. This so-called "suit within a suit" approach necessitates that we describe, in some detail, that earlier matter. See Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343, 358 (2004).
The Underlying Case
In 1972, Allan Jacobs, Harold Siegal, Harry B. Jacobs, Morton R. Weinberg, and Frederick J. Bastien signed a written partnership agreement and formed an accounting partnership called Jacobs, Siegal & Company. The agreement provided that if any partner died, the surviving partners would purchase his entire interest. The agreement further specified, that the deceased partner's interest "shall be deemed to consist solely of the deceased partner's capital account and his share of work in process both of which shall be determined and paid as follows. . ."
Alan J. Yablonski (the husband of Ann K. Yablonski, the plaintiff in the legal malpractice action), served as an associate of Jacobs, Siegal & Company for approximately ten years. In late 1985, he accepted an offer to become a partner, effective January 1, 1986. Toward this end, the partners drafted an amendment to the partnership agreement specifying that Mr. Yablonski would receive a fifteen percent interest, while the other partners held interests close to twenty percent. The amendment also provided that, except as amended, the signing parties ratified and confirmed the original partnership agreement. According to one of the firm's partners, Mr. Yablonski read the agreement and agreed to its terms. However, Mr. Yablonski never signed the amendment or the original agreement.
In 1987, one of the original partners, Harry Jacobs, died; the partnership purchased his interest. The accounting firm calculated his death benefit according to the terms of the original partnership agreement. One of the partners, Morton Weinberg, testified that he discussed with Mr. Yablonski how Mr. Jacob's interest would be calculated.
On April 3, 1996, Alan Yablonski committed suicide. At the time of his death, Mr. Yablonski's partnership share in the accounting firm had increased to twenty-three percent. In July of that same year, Ms. Yablonski retained Trembulak and his firm to pursue a claim against her late husband's partners and their accounting firm, to recover her husband's partnership interest in the firm. Ms. Yablonski paid Trembulak an initial retainer of $9000; she later on agreed to a contingency fee arrangement.
At some point during that same year, Ms. Yablonski began to think there might be a conflict of interest between Trembulak and the accounting firm because Trembulak was a friend of one of the accounting firm's new partners. Trembulak assured her, however, there was no problem, and he continued to represent her in the suit. By way of settlement, the partnership offered to purchase Mr. Yablonski's share, in accordance with the partnership agreement; this amounted to $45,432. Both parties agree that this amount was in accordance with the partnership agreement's buyout provision.
Ms. Yablonski took the position, however, that because her late husband had not signed the original partnership agreement, nor the amendment to that agreement, she was not barred from arguing that his partnership interest was worth substantially more than $45,432. She thus claimed that, in determining the value of her late husband's interest, the good will of the accounting partnership had to be taken into account, despite the fact that the agreement excluded good will. Despite this argument, Ms. Yablonski, acting as the Administratix of her late husband's estate, accepted the $45,432 offer, reserving her rights to pursue the good will issue through litigation.
In 1998, Trembulak commenced an action on behalf of the estate of Alan J. Yablonski in the Union County Superior Court, Chancery Division. According to Trembulak, in preparation for trial, he had completed document discovery, including reviewing the partnership agreement, the amendment to the agreement, and all of the tax documents for the partnership. He also retained certified public accountant Stephen F. Mannuzza to calculate the value of Mr. Yablonski's share of the partnership. He did not, however, conduct any depositions.
The trial began on October 29, 1998. The accounting firm argued that the late Alan Yablonski had agreed orally to the terms of the written partnership agreement. Under this oral contract, the accounting firm had acted properly by compensating his estate under the explicit terms of the partnership agreement. On behalf of the estate, Trembulak argued that the partnership was legally bound to compensate his client based on the firm's true value, which included good will.
Three witnesses testified on the first day of the trial. Stephen F. Mannuzza, the expert retained to offer an opinion as to the value of decedent's interest, and Ms. Yablonski testified on behalf of plaintiff. Morton Weinberg, one of the partners of the accounting firm, testified on behalf of the firm. Mannuzza valued Mr. Yablonski's interest in the partnership at $132,187. The accounting firm did not present any contrary expert report.
Due to the unavailability of one of the firm's partners, the trial was to continue on November 4, 1998. Plaintiff claims the night before this second court date Trembulak advised her to accept a settlement offer of $18,000. According to Ms. Yablonski, Trembulak was insistent about her accepting the offer, arguing that continuation of the trial would involve revisiting her husband's suicide, which would harm her case and embarrass her and her son. Additionally, plaintiff claims that Trembulak warned her that, if she did not settle, she would receive nothing. Finally, Trembulak allegedly told her she was being unsympathetic to one of the firm's partners who was ill.
On the next scheduled trial date, November 4, 1998, Trembulak advised the court that the parties had settled. On November 23, 1998, Ms. Yablonski executed the settlement agreement with the accounting firm. The firm agreed to pay her $18,000 to release all claims against it; this sum was of course in addition to the $45,000 she had already received.
The Legal Malpractice Action
Mannuzza, the expert retained by the estate of Alan Yablonski to address the question of damages in the suit against the accounting firm, died on September 22, 2000, almost two years after the settlement. Almost four years later, on October 28, 2004, Ms. Yablonski filed a legal malpractice complaint against Trembulak and his his law firm Woods & Trembulak.
In this action, the estate of Yablonski and Ann K. Yablonski individually, alleged defendants failed to adequately pursue discovery, because no depositions were taken and "very little documentary evidence, if any, was adduced from the accounting firm." According to Ms. Yablonski, six weeks before the start of the trial Trembulak told her that he wanted to resign from her case. She claims she attempted to find a replacement to no avail. She further alleges that Trembulak called her the night before the first day of trial, and said he would not come to court and that she would have to settle. She claims that he "sounded near tears."
On February 3, 2005, Trembulak served plaintiffs with a request for answers to interrogatories. Among the written requests, defendants requested plaintiffs to: "State the name and address of all experts retained by the party answering these [i]nterrogatories." On May 19, 2005, plaintiffs responded by stating: "[p]laintiff has not yet retained an expert for this case. An expert was retained in the underlying matter and all documents obtained by him have been produced or are in defendants' possession."
On October 20, 2005, after exchange of written discovery, but before any depositions were taken, defendants filed a motion for summary judgment. In opposition to this motion, plaintiffs filed a certification, which included, among other items, the expert report of Mannuzza, the expert on damages in the underlying trial. The court denied defendants' motion for summary judgment on December 2, 2005.
On December 27, 2005, defendants filed a motion pursuant to R. 4:17-4(e) requesting the court set a date certain for the "furnishing of all liability and damages expert reports." The court granted the motion on January 25, 2006, requiring plaintiffs to serve defendants with all expert reports by February 10, 2006. The order further provided that failure to do so would bar plaintiffs from "introducing any expert testimony at the time of trial."
On August 28, 2006, defendants filed a second motion for summary judgment. That same day plaintiffs sent defendants an expert report from Eric Summerville, Esq., limited to the question of liability. In his report, Summerville reviewed the complaint, answer, and trial materials from the case, including the expert report from Mannuzza (prepared for the earlier trial), and excerpts from the trial transcript testimony. Summerville opined that "[i]t is clear Defendant breached this standard of care by not adequately investigating Ms. Yablonski's case and then threatening to abandon her on the eve of trial and finally by pressuring her to accept a settlement when her desire was to have her case tried."
Summerville identified the "trial within a trial" as establishing that Mr. Yablonski was subject to a partnership agreement, which excluded good will. He opined that plaintiff would prevail, and thereby be entitled to damages, if a jury found Mr. Yablonski was not bound to the written partnership agreement, since under applicable case law he would then be entitled to good will. Relying on Mannuzza's expert report, he found that plaintiffs' damages consisted of $132,186, the value of Mr. Yablonski's interest including good will, minus the $45,000 already paid and the $18,000 settlement, plus interest, and $9000 in counsel fees plaintiff paid defendant.
On September 18, 2006, defendants filed a motion to bar Summerville's expert report, arguing that the report was untimely, constituted a net opinion, and improperly referenced and relied upon the report prepared by Mannuzza. As to the latter issue, defendants argued plaintiffs had not identified Mannuzza as their expert in this case; furthermore, because of the impossibility of cross-examination occasioned by Mannuzza's death, his report constituted inadmissible hearsay.
On October 6, 2006, the court denied defendants' motion to bar plaintiff's expert report and their motion for summary judgment. The matter was initially scheduled for trial on January 8, 2007. For reasons not made clear in the record, the matter was carried until February 20, 2007.
Defendants claim plaintiffs advised them for the first time on February 20, 2007 that they intended to rely on Mannuzza's trial testimony, as their expert evidence on the measure of damages. The trial was again inexplicably delayed. As the new judge assigned to preside over the trial, Judge Santiago ordered defendants to file a motion in limine to bar the use of Mannuzza's trial testimony.
The motions were considered by Judge Santiago on March 16, 2007. Defendants argued Mannuzza's testimony was admissible under N.J.R.E. 804(b). Plaintiffs argued that a different judge had previously ruled permitting the use Mannuzza's trial testimony on the question of damages. Thus, according to plaintiffs, that ruling should be respected as the "law of the case."
Addressing the question directly, Judge Santiago made the following findings:
I don't see any Order by [the previous Judge] that specifically states in his order that this case can proceed without a damage expert. The whole issue that when this first in limine Motion came before me was to bar Mr. Mannuzza's testimony from the prior trial as an expert on damages.
In reviewing this under Best Practices, it is clear through -- after I looked at each Interrogatory, no where does it state that he will be their expert on damages, in the pre-trial submissions no where does it state that he will be their expert on damages, in the pre-trial submissions no where does it name him as an expert.
In addition, the Court is concerned that now on the 11th hour of trial to name -- name him as their expert in damages to -- to bring -- to bring the testimony in just stating that the -- oh, well we would be --the defendants knew we relied on this amount of money as our damages, you still have --have the duty to notify your adversary who your experts are going to be. This is more like a -- a trial by ambush trying to come around the back door and say okay, this is going to be our expert. That's not what back -- Best Practices are all about. You had a duty to name -- name him as your expert and you haven't done so.
In looking at Evidentiary Rules . . . I have to agree with defense counsel on this that the prior trial is a different trial than the malpractice claim. Mr. Trembulak should have the opportunity to cross-examine Mr. Mannuzza on this malpractice case that arises against him. . . . At least that attorney has -- should have that ability to have some other expert that they can cross-examine in a case against them.
In the case of Starch v. Zone, that's 211 N.J. Super. 75, that was a pre- [N.J.R.E.] 804 case. And the ca[se] -- that held that there must be substantial identity with the issues of the party in interest in order for deposition testimony to be admissible in a subsequent action. Here, they are not substantially identical. You have issues that are -- are similar, but they're not substantially identical. This is a malpractice case, the other was for the amount of -- seeking in -- in damages on the underlying case although there is some similarity but it -- there is not a substantial identity.
What should have occurred here was that the plaintiff should have obtained a witness, their expert, and given their --the report of Mr. Mannuzza as part of --could have done that.
The court then addressed the question of whether to afford plaintiffs extra time to obtain another expert on damages. Based on both the age of the case, and on plaintiffs' failure to address this issue in a timely manner, Judge Santiago granted defendants' motions, barring the use of Mannuzza's trial testimony, and, as a consequence, dismissing the case for lack of a competent expert on the question of damages.
Plaintiffs argue that Mannuzza's trial testimony from the underlying case is admissible under N.J.R.E. 804(b)(1)(A) and (B). They argue that defendants have the "very same" interest as the accounting firm did, to "discredit Mr. Mannuzza's valuation of the accounting firm to undermine Ms. Yablonski's claim." Although the legal malpractice action has created some commonality of interests between the accounting firm and Trembulak, in that they both benefit from impeaching the reliability of Mannuzza's opinion, the analysis does not end there.
N.J.R.E. 804(b) provides as follows:
(b) Hearsay exceptions. --Subject to Rule 807, the following are not excluded by the hearsay rule if the declarant is unavailable as a witness.
(1) Testimony in prior proceedings.
(A) Testimony given by a witness at a prior trial of the same or a different matter, or in a hearing or deposition taken in compliance with law in the course of the same or another proceeding, if the party against whom the testimony is now offered had an opportunity and similar motive in the prior trial, hearing or proceeding to develop the testimony by examination or cross-examination.
(B) In a civil action or proceeding, and only when offered by the defendant in a criminal action or proceeding, testimony given in a prior trial, hearing or deposition taken pursuant to law to which the party against whom the testimony is now offered was not a party, if the party who offered the prior testimony or against whom it was offered had an opportunity to develop the testimony on examination or cross-examination and had an interest and motive to do so, which is the same or similar to that of the party against whom it is now offered.
Expert opinion testimony given in a prior trial, hearing, or deposition may be excluded, however, if the judge finds that there are experts of a like kind generally available within a reasonable distance from the place in which the action is pending and the interests of justice so require. [(Emphasis added.)]
We reject plaintiff's argument that Mannuzza's trial testimony is admissible under N.J.R.E. 804(b)(1)(A), since this section only applies to testimony offered against a party, who was a party to the prior proceeding. Here, Trembulak represented plaintiff in the underlying trial, but he was not a party to that proceeding.
As noted by the emphasized language, N.J.R.E. 804(b)(1)(B) is made applicable only in such cases where "the party who offered the prior testimony or against whom it was offered had an opportunity to develop the testimony. . . and had an interest and motive to do so, which is the same or similar to that of the party against whom it is now offered." In the underlying trial, Mannuzza's testimony was offered against the plaintiff's late husband's accounting firm. The firm sought to discredit Mannuzza's qualifications as well as his valuation of the firm.
We recognize that Trembulak was the one who originally retained Mannuzza to determine the damages incurred by plaintiff in the case against the accounting firm. It was also Trembulak, in his capacity as plaintiff's counsel in that earlier case, who presented Mannuzza as an expert witness to the trier of fact, and argued that his opinion should be accepted as a valid and accurate account of the damages sustained by his client (now his adversary). Thus, it can be argued, that Trembulak should not now be precluded from disavowing the testimony of that same witness, simply because his role has now changed from prosecuting a case on behalf of plaintiff, to defending against a malpractice action brought by plaintiff against him.
This argument, however, fails to appreciate the nature of the claims against Trembulak and his firm. Count One, paragraph six of plaintiff's legal malpractice complaint against defendants alleges:
[O]n November 23, 1998, feeling coerced by MR. TREMBULAK, and that she had no other choice, MS. YABLONSKI entered into a settlement agreement with the accounting firm wherein the accounting firm agreed to pay MS. YABLONSKI just $18,000.00 even though her expert had determined that she was entitled to over $130,000.00. Additionally, MS. YABLONSKI had viable claims and good legal standing to pursue at least the $130,000.00. Her claims and strong position were squandered as a result of Defendants' numerous failures in representing her and the estate's interests.
To properly defend himself against this allegation, Trembulak needs to explore the possible shortcomings of the expert's opinion. However, unlike the accounting firm, Trembulak would not seek to completely discredit the qualifications of an expert he retained. Instead, he would need to present evidence supporting his decision to recommend the settlement. This evidence may include, a flaw in the expert's analysis, a failure by the expert to consider information undermining his opinion, that was not discovered or appreciated by the accounting firm's defense attorney, and an explanation about how the good will valuation of the accounting firm was not a precise quantifiable element of the business's value. All this can only be done through the rigors of cross-examination.
Finally, even if the accounting firm and Trembulak's interests were "similar," Judge Santiago retained the authority under N.J.R.E. 804(b)(1)(B) to grant defendants' motion barring the use of prior testimony. The Rule expressly permits the court to exclude such evidence "if the judge finds that there are experts of a like kind generally available within a reasonable distance from the place in which the action is pending and the interests of justice so require." N.J.R.E. 804(b)(1)(B); see also Thompson by Thompson v. Merrell Dow Pharmaceuticals, Inc., 229 N.J. Super. 230, 251-52 (App. Div. 1988).
"'As a general rule, admission or exclusion of proffered evidence is within the discretion of the trial judge whose ruling is not disturbed unless there is a clear abuse of discretion.'" Yilmaz, Inc. v. Director, Div. of Taxation, 390 N.J. Super. 435, 443 (App. Div.), certif. denied, 192 N.J. 69 (2007) (quoting Dinter v. Sears, Roebuck & Co., 252 N.J. Super. 84, 92 (App. Div. 1991)). We find no basis to conclude that Judge Santiago abused her discretion in barring Mannuzza's testimony.
Under the authority conferred in N.J.R.E. 804(b)(1)(B), Judge Santiago properly denied plaintiff's belated request to rely upon the trial testimony of the expert retained in connection with her cause of action against her late husband's accounting firm. The record shows that the accounting expert died before the legal malpractice action was even filed. Under these circumstances, plaintiff unreasonably failed to retain an independent expert for this legal malpractice action long before this matter came to trial.
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