May 21, 2008
THE MAKE-UP BAR, LLC, PLAINTIFF-APPELLANT,
COOPER, LEVENSON, APRIL, NIEDELMAN & WAGENHEIM, P.A.,*FN1 AND ROBERT E. SALAD, ESQ., DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-867-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: April 30, 2008
Before Judges Cuff and Lihotz.
This is a legal malpractice case. The case has its genesis in the eight-month tenure of a hair stylist at plaintiff salon. The stylist left plaintiff's employ to start his own business and four persons employed by plaintiff soon followed the departed stylist. Plaintiff alleged that defendant law firm failed to protect its interests in spite of a specific request to do so and assurances by defendant firm that the agreement drafted by it met plaintiff's needs. Plaintiff appeals from the order granting summary judgment in favor of defendant. We affirm.
This is the second time this matter is before this court. In our prior opinion, A-3842-04T2 (App. Div. Feb. 22, 2006), we reversed an order granting summary judgment in favor of defendants Cooper, Levenson, April, Niedelman & Wagenheim, P.A. and Robert E. Salad, because the order was entered prematurely and because there were material issues of fact affecting proximate cause. Following further discovery, defendants renewed their motion for summary judgment. The motion judge held that plaintiff's damages were speculative and insufficient to submit to a jury.
The facts are largely uncontested. We adopt the factual statement from our prior opinion pertaining to the formation of the employment relationship between Lisa Severino, the owner and operator of plaintiff The Make Up Bar, and Vincent Scerati; Severino's relationship with defendant law firm; and Severino's attempt to enforce the agreement drafted by defendant law firm and executed by Scerati.
Severino, a hairdresser, claims that she retained attorney Salad to draft a "no-hire" agreement for execution by Scerati, a hairdresser whom she had agreed to employ for a short period until his own salon, Blink Spa, was opened. Instead, she claims Salad drafted a "non-solicitation" agreement, which proved effectively unenforceable when, in an injunctive action filed by The Make-up Bar against Scerati in the Chancery Division after four of The Make-up Bar's employees had found employment at Scerati's salon, each certified that he or she had not been solicited by Scerati. Scerati corroborated the employees' position in his own certification, and he stated additionally that he would not have signed a no-hire agreement if it had been presented to him. The action filed against Scerati was dismissed without prejudice with Severino's consent.
Plaintiff filed its complaint for legal malpractice on February 13, 2004. Following the reversal of the first summary judgment and remand to the trial court, defendants renewed their motion for summary judgment after additional discovery. As in its first motion for summary judgment, defendants conceded for purposes of the motion that they failed to prepare the agreement that Severino requested. In support of their motion, Scerati certified that he would not have signed a more restrictive agreement. Plaintiff produced a handwritten document as evidence that the departure of the four employees caused it to lose in excess of $600,000 in revenue. Defendants argued that the information supplied by plaintiff concerning damages was legally insufficient to prove that any error by it caused any damage to plaintiff.
During discovery, plaintiff prepared and submitted calculations of her losses sustained by the departure of the four employees allegedly solicited by Scerati to leave plaintiff's employ. Severino testified that the $600,000 loss contemplates that each departed employee would have stayed in plaintiff's employ for three years. Plaintiff also submitted a list of all employees who had worked at plaintiff salon from 2001 through 2006. Of the seventy-four employees, two were fired. Five employees on the list included Scerati and the four employees who left to join his salon. Of the remaining sixty-eight employees, only four stayed in plaintiff's employ more than a year; none remained in plaintiff's employ for three years; many remained in plaintiff's employ for only several months; some stayed a matter of weeks.
This court employs the same standard that governs trial courts in reviewing summary judgment orders. Prudential Prop. & Cas. Ins. v. Boylan, 307 N.J. Super. 162, 167 (App Div.), certif. denied, 154 N.J. 608 (1998). Pursuant to Rule 4:46-2(c), the trial court shall grant a motion for summary judgment if "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law."
In considering a motion for summary judgment, the trial court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Judson v. Peoples Bank & Trust Co., 17 N.J. 67, 75 (1954); R. 4:46-2(c).
A plaintiff in a legal malpractice action must establish (1) the existence of an attorney-client relationship creating a duty of care upon the attorney, (2) a breach of that duty, and (3) damages proximately caused by the attorney's breach. McGrogan v. Till, 167 N.J. 414, 425 (2001) (citing Conklin v. Hannoch Weisman, 145 N.J. 395, 416 (1996)). Further, the burden is on the plaintiff to show, by a preponderance of the evidence, what specific damages were suffered as a result of those actions. Albee Assocs. v. Orloff, Lowenbach, Stifelman & Siegel, P.A., 317 N.J. Super. 211, 222 (App. Div.) (citing Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 342 (1980)), certif. denied, 161 N.J. 147 (1999)).
In this case, Judge Fernandez-Vina suggested that the evidence raised material issues of fact with regard to what information and assurances were supplied to plaintiff by defendants, and Severino's resulting conduct if she had been informed of the facts as defendants and Scerati claim those facts to have existed. Accordingly, the judge appropriately declined to rule that summary judgment should be granted on the basis of a lack of proximate cause. Instead, the judge granted defendants' motion for summary judgment based on his determination that plaintiff could not prove any damages suffered by a preponderance of the evidence. We agree.
In its complaint, plaintiff simply alleged that it "suffered damages" and "substantial business losses" as a result of defendants' failure to draft an appropriate agreement that would enjoin Scerati from hiring plaintiff's employees for a certain period of time. In support of its claim, plaintiff provided a single-page submission of handwritten calculations that purported to identify the revenue generated by the four employees during 2001 and 2002. Plaintiff's only expert, attorney Barry E. Levine, provided a report completely devoid of any assessment of damages. Levine testified that he was unaware of the attrition rate of beauty salon employees and that he had performed no investigation into the matter, formal or otherwise. Further, neither Severino nor Levine, as lay and expert witnesses, produced evidence of the specific business diverted to the other salon by its hiring of plaintiff's four former employees. Plaintiff failed to identify which customers, if any, followed the employees to the other salon and which customers continued to patronize it. Moreover, plaintiff did not commission any analysis or comparison of profits generated or clients lost before and after the employees left plaintiff salon. In opposition to defendants' motion, plaintiff merely set forth that it was damaged in the amount noted in Severino's handwritten exhibit.
Plaintiff may recover lost profits as an element of damages in certain instances. The Supreme Court has stated that "[l]oss of profits, where based on sound fact and not on mere opinion evidence without factual support, is recognized as a proper measure of damages if 'capable of being estimated with a reasonable degree of certainty.'" Stanley Co. of Am. v. Hercules Powder Co., 16 N.J. 295, 314 (1954) (quoting Rempfer v. Deerfield Packing Corp., 4 N.J. 135, 144 (1950)). As such, a party "must show that profits were lost as a result of the actionable conduct complained of." V.A.L. Floors, Inc. v. Westminster Cmtys., Inc., 355 N.J. Super. 416, 423 (App. Div. 2002) (quoting Cromartie v. Carteret Sav. & Loan, 277 N.J. Super. 88, 103 (App. Div. 1994)). "Anticipated profits that are remote, uncertain or speculative are not recoverable." Desai v. Bd. of Adj. of Phillipsburg, 360 N.J. Super. 586, 595 (App. Div.) (citing Stanley Co., supra, 16 N.J. at 314), certif. denied, 177 N.J. 492 (2003).
In Platinum Management v. Dahms, 285 N.J. Super. 274 (Law Div. 1995), the plaintiff toy company sued another toy company after an employee left the plaintiff's employ, joined the defendant's company, and attempted to divert the plaintiff's customers, in violation of a covenant not to compete. Id. at 282. In approving the plaintiff's method of calculating damages, the trial judge stated that:
Damages to [the plaintiff] proximately resulting from [the] defendants' wrongs, measured by an accounting of the profits to [the defendant] on sales made to the diverted customers after [the employee] was hired by [the defendant] are appropriately allowed in this case, involving essentially unfair competition -- a wrongful acquisition of [the plaintiff's] customers in violation of a covenant not to compete and by intentional interference with [the plaintiff's] prospective economic advantage.
[Id. at 308.]
The trial judge found that the "real harm" to the plaintiff was the "unfair advantage gained by [the defendant] in competing for customers" and, as such, "[t]he profits to [the defendant] from such sales are a reliable indication of the value of that unfair advantage." Ibid. Relying on expert testimony, the trial judge determined that the plaintiff had supplied "evidence sufficient to estimate damages with a reasonable degree of certainty" to satisfy its burden to prove damages. Id. at 309.
Plaintiff argues that Platinum Management does not prescribe the sole manner by which damages could be proved in an "interference" case. That may be; however, even a cursory review of the proofs before the motion judge reveals that the reasonable degree of certainty necessary for a proper measure of damages is lacking in this case.
Any inference that may appropriately be drawn from the record with regard to plaintiff's alleged damages is based solely on Severino's self-serving handwritten calculations and revenue figures. To arrive at her calculations, Severino:
[T]ook the gross of what those four employees brought in and then I added my services of -- that I was performing on those -- their clients and my retail sales, I estimated that, and then I divided by two to get their commission, which is roughly half, and then I times'd (sic) it by three years.
Severino testified that after dividing by two the gross figure, she then took that number and multiplied by three based on the "rule of thumb" that "most stylists once they're there for more than a year, they're there for 3 years, it's just like an industry rule of thumb, so that they would have been there for two more years." However, Severino failed to buttress her calculations with any further evidence or testimony to support her computations. Plaintiff simply asserts on appeal that the trial court was obligated to accept Severino's figures because they were neither speculative, inaccurate or far reaching. However, this argument does not comport with the undisputed evidence produced by Severino regarding the operational history of her salon.
For instance, plaintiff did not identify a single diverted customer. In calculating its estimated lost profit damages, plaintiff utilized only established revenue without subtracting correlating expenses, making the actual amount of anticipated profits remote, uncertain or speculative and far short of the reasonable degree of certainty required under the law. Notably, while plaintiff claims its lost profits to exceed $600,000, its tax returns submitted during discovery for 2002, the year Scerati and the other employees worked for plaintiff, reveal net profit of only $19,001. No tax returns were provided for 2001, which makes it impossible to compare net profit prior to, and following, Scerati's employment. Moreover, the summary judgment record provides no evidential support for plaintiff's assertion that each employee would have stayed in her employ for three years. In fact, the summary judgment record reveals that the tenure of each departed employee was similar to most of the persons employed by plaintiff, none of whom stayed even close to three years.
Due to the uncertain, contingent and speculative nature of plaintiff's methodology, it fails to meet the legal standard of "reasonable certainty." The evidence in the record, together with all legitimate inferences that can be drawn therefrom in favor of plaintiff, cannot sustain a judgment in favor plaintiff. Brill, supra, 142 N.J. at 540. Accordingly, defendants were entitled to a judgment as a matter of law.