August 5, 2008
SUSAN E. NEVINS, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
PHILIP N. MULDOON, JR., THE LAW OFFICES OF PHILIP N. MULDOON, JR., ESQUIRE, P.C., DEFENDANTS, AND MARESSA, GOLDSTEIN, BIRSNER, PATTERSON, DRINKWATER & ODDO, P.C., DEFENDANT-RESPONDENT/CROSS-APPELLANT, AND MARMERO & MAMMANO, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Burlington County, L-3763-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 30, 2008
Before Judges Axelrad, Payne and Messano.
In this legal malpractice case, plaintiff Susan Nevins asserts negligence on the part of defendant Philip N. Muldoon, Jr. in failing to competently pursue and exhaust internal appeals with her employer, New Jersey Bell, from a denial of her claim for short-term disability benefits and in failing to file an ERISA*fn1 appeal in federal district court from Bell's interim denial of such benefits. At the time of the acts at issue, Muldoon was employed by the defendant law firm of Maressa, Goldstein, Birsner, Patterson, Drinkwater & Oddo, P.C. (Maressa Goldstein) as an associate. Following a period of solo practice as The Law Offices of Philip N. Muldoon, Jr., Esquire, P.C., Muldoon took a position as an associate with defendant law firm, Marmero & Mammano, P.C. A stipulation of dismissal of claims against Muldoon has been filed as the result of his declaration of bankruptcy, and claims against his firm, which has no assets, have likewise been dismissed. Summary judgment against plaintiff was granted on her remaining claims against the two law firms. The decision granting summary judgment to Maressa Goldstein was based upon lack of expert evidence on the issue of proximate causation; the decision granting summary judgment to Marmero & Mammano was based upon a lack of successor corporation liability. Plaintiff has appealed from these summary judgment orders. Additionally, defendant Maressa Goldstein cross-appeals from an advisory determination by the judge that, if trial of plaintiff's claims were held, whether plaintiff would have prevailed on her ERISA claim was an issue of fact to be determined by a jury.
Plaintiff was a long-term employee of New Jersey Bell who, in 1985, commenced having physical difficulties that included chronic pain of unknown origin. As the result of her condition, Bell granted plaintiff three separate periods of temporary disability extending from November 24, 1986 to June 11, 1987, from April 14, 1989 to April 6, 1990, and from November 16, 1992 to September 1, 1993. In 1993, plaintiff was diagnosed with chronic fatigue syndrome, multiple chemical sensitivity, reactive depression and other illnesses allegedly due to toxic chemical exposures to pesticides at her prior home. Plaintiff claimed that her symptoms were exacerbated by workplace exposures to various substances, including perfumes. From September 1993 until November 1993, plaintiff was authorized to telecommute from her home on a limited basis, but then was either required to or voluntarily returned to her job.
In March 1995, plaintiff's condition allegedly worsened and, in September 1995, after a further opportunity to telecommute was denied, she ceased work and applied for short-term sickness and accident disability benefits pursuant to Bell's ERISA plan. Her application was denied by letter dated September 29, 1995.
Thereafter, plaintiff appealed to Bell's Benefit Claims Committee. Supporting medical documentation was submitted by plaintiff in November 1995, consisting of letters from internist Steven C. Halbert, M.D. stating that plaintiff's symptoms were consistent with chronic fatigue and immune dysfunction syndrome and requesting a period of temporary disability benefits; psychiatrist Bernardo A. Merizalde, M.D., disputing the finding of a Bell expert that plaintiff's condition was purely psychological and urging that she be permitted to telecommute; and osteopathic physician Marc P. Hurowitz, reciting plaintiff's history of treatment for fibromyalgia, Raynauds phenomena, a vasomotor instability, peripheral neuropathy of unknown etiology, plantar facitis, chronic fatigue immune deficiency syndrome, and multiple chemical sensitivity and requesting a period of disability of at least nine months.*fn2
In March 1996, plaintiff retained the firm of Maressa Goldstein to file a suit against Bell pursuant to the New Jersey Law Against Discrimination (NJLAD), N.J.S.A. 10:5-1 to -49. Philip Muldoon, an associate, was assigned to her case.
On April 8, 1996, prior to a determination by the Benefit Claims Committee, Bell's associate medical director, Barton Margoshes, M.D., requested that plaintiff provide updated medical information to Bell's Health Management Center within two weeks. On April 15, 1996, plaintiff's appeal was denied by the Benefit Claims Committee, primarily on the basis of the reports of Bell's two independent medical examiners, David A. Allan, M.D., a rheumatologist, and Gladys S. Fenichel, M.D., a psychiatrist, who concluded that plaintiff was not totally disabled as required by the plan as a condition for receipt of temporary disability benefits. Dr. Allan stated:
My assessment is that Ms. Nevins has several trigger points and a history of pain which is consistent with a partial fibromyalgia syndrome, but she does not fulfill the standard criteria for fibromyalgia syndrome. She has signs and symptoms suggesting a continued mild vasospastic disorder which in my examination did not appear to be disabling. There is no evidence of underlying autoimmune disease, specifically a connective tissue disease such a lupus, Sjogren's, or rheumatoid arthritis. Ms. Nevins seems to have tachyarrhythmias of undetermined etiology.
The doctor recommended a return to full-time sedentary employment, thyroid and cardiac evaluations, and a psychological evaluation as the result of what appeared to him to be a significant psychological disability. However, Dr. Fenichel was of the opinion "from a psychiatric perspective at the time of [her] evaluation that Ms. Nevins [was] not disabled from a return to sedentary work." She opined that "any disability experienced by Ms. Nevins should be viewed as related to her underlying medical conditions and not to a psychiatric diagnosis."
The letter from the Benefit Claims Committee denying benefits stated in relevant part:
The Committee considered the following in evaluating Ms. Nevins's claim:
Ms. Nevins's claim letter and the documentation that accompanied it; your [Nevins's interim attorney's] letter; and, information from the Health & Safety Management Center (HSMC).
Ms. Nevins's benefits were suspended on September 12, 1995, her eighth calendar day of absence, based on the September 8, 1995 progress notes from Ms. Nevins's personal physician, Dr. Hurowitz, which indicated medical conditions that did not warrant disability to work beyond a seven day recovery period.
Subsequent documentation submitted by Ms. Nevins's personal physicians, Dr. Moskowitz, Dr. Merizalde, Dr. Halbert, and Dr. Hurowitz, did not contain medical evidence to substantiate that Ms. Nevins was disabled to work as of September 12, 1995.
On October 20, 1995, Dr. Allan, Company consultant, conducted an independent medical examination on Ms. Nevins, and reported that, from a medical standpoint, she was not disabled to work. Ms. Nevins underwent an independent psychiatric evaluation on November 16, 1995 with Dr. Fenichel, Company consultant, who stated that Ms. Nevins was not disabled from a psychiatric standpoint.
Dr. Margoshes, Company Medical Director, reviewed the record and indicated that it contained no information to substantiate that Ms. Nevins was disabled to work during the period in question.
The Plan states that disability payments will terminate when disability ceases.
The Committee understands that its decision may disappoint Ms. Nevins. However, the Committee must interpret and administer the Plan in accordance with Plan provisions. Under the Plan, disability to work has consistently been interpreted to mean total disability. Therefore, in order to grant benefits under the Plan, the Committee must have medical evidence which substantiates a claimant's total disability to perform work.
For example, although an employee may not be able to perform his/her regular duties, he/she may be able to perform other work as recommended by Health Services; thus, he/she would not be considered disabled to work.
Plaintiff was advised that she had sixty days to file a second internal appeal with the Benefit Appeals Committee. The denial letter further stated:
If you choose to submit an appeal, please be aware that the Appeals Committee, like the Claims Committee, must base its decision on medical evidence which substantiates total disability to work. If a treating physician merely submits an unsubstantiated opinion that an employee is unable to work, that opinion cannot be given the same weight as a report of specific, clinical findings (quantified, where possible) which are based on a concurrent examination and which evidence careful testing and review.
According to plaintiff, Muldoon had informed her that he would take care of the appeal to the Benefit Appeals Committee, and she forwarded to him Margoshes's April 8 request for additional medical information. However, Muldoon did not respond on her behalf and advised her that it was not necessary to pursue a further appeal. According to plaintiff, three pieces of medical information could have been supplied in response to the April 8 request: (1) plaintiff's October 20, 1995 letter to Allen updating him as to her current physical condition (a letter that both Dr. Allen and Dr. Fenichel acknowledged reviewing); (2) a May 9, 1996 report of Dr. Michael B. Lax, wherein he reported that he agreed with Doctors Moskowitz, a clinical psychologist, Halbert and Hurowitz that "plaintiff's illness has characteristics of three syndromes that are often overlapping. These syndromes include fibromyalgia, chronic fatigue syndrome, and multiple chemical sensitivities" and recommended, like Dr. Merizalde, that plaintiff be permitted to telecommute; and (3) Dr. Lax's August 15, 1996 addendum stating that plaintiff was totally disabled.
Plaintiff was terminated on September 6, 1996 because of the denial on April 15, 1996 by the Benefit Claims Committee of her appeal from Bell's initial denial of disability benefits, failure to submit supplemental medical information pursuant to the medical department's request, and failure to return to work.
On October 31, 1996, Muldoon left Maressa Goldstein to open his own practice, taking plaintiff's file with him. On November 15, 1996 he filed a NJLAD complaint on plaintiff's behalf alleging discrimination as the result of Bell's refusal to permit plaintiff to permanently telecommute. On January 27, 1999, plaintiff was determined to be totally disabled by the Social Security Administration and entitled to receive benefits retroactive to September 5, 1995. Later, she also received benefits under a private plan.
In September 1999, plaintiff became dissatisfied with Muldoon, retaining current counsel on October 25, 1999. On December 1, 1999, Muldoon, as a salaried associate, joined a law firm led by Frank Marmero. Muldoon's own firm was not dissolved, but it had no assets. One month later, Marmero merged with another firm to form Marmero & Mammano. Muldoon did not have an ownership interest in either of these firms, which at most, could have collected fees as the result of collection efforts to obtain payment for prior work done by Muldoon.
In a letter dated February 11, 2000 to current counsel, Bell offered to settle plaintiff's claim for $27,500, inclusive of attorney's fees, to review plaintiff's medical information to re-determine eligibility for short-term disability benefits (giving rise to the possibility of long-term benefits), and to evaluate plaintiff's explanation why such information was not timely submitted. Plaintiff claims not to have been informed of this settlement offer.
In October 2001, plaintiff settled her NJLAD action for $350,000. Her malpractice claim was filed on December 13, 2001. In her complaint, plaintiff alleged that Muldoon was negligent in failing to file a second internal appeal and then an ERISA appeal on her behalf. Maressa Goldstein was charged with negligent failure to supervise; Marmero & Mammano was charged with successor corporation liability.
Plaintiff's legal malpractice expert, Bruce McMoran, rendered a report on December 14, 2004 that did not express an opinion as to whether plaintiff would have prevailed in the second internal appeal or in a subsequent federal ERISA action, and he declined to reach an opinion on the issue in his deposition, while observing that because Bell's conduct would have been assessed under an arbitrary and capricious standard in an ERISA appeal, plaintiff would probably have a better chance of recovery under the NJLAD. This evidence led to entry of summary judgment in favor of Maressa Goldstein on the basis of lack of proof of causation. Summary judgment was granted to Marmero & Mammano upon a finding that successor corporation liability had not been established.
On appeal, plaintiff contests the judge's decision to grant summary judgment to Maressa Goldstein based upon her failure to present expert testimony on the issue of proximate causation. She claims that no expert was needed to determine whether she would have prevailed had a second internal appeal or a subsequent ERISA appeal had been filed on her behalf. In her view, the actual "genuine disputed issue in this case appears to be whether [plaintiff] . . . was disabled within the meaning of . . .
[Bell's] Short Term Disability Plan" and a jury would be quite capable of "assess[ing] the proofs of disability," upon evidence that included plaintiff's 1999 Social Security disability benefits award and a private disability award, and resolving this issue anew on its own. According to plaintiff, if the jury were satisfied, based upon its own review of the record, that plaintiff was disabled in 1996, it would be patently obvious that Muldoon's negligence in failing to file the requisite appeals proximately caused plaintiff's damages.
Expert testimony is required to establish proximate cause in legal malpractice cases unless the "causal relationship between the attorney's legal malpractice and the client's loss is so obvious that the trier of fact can resolve the issue as a matter of common knowledge." Sommers v. McKinney, 287 N.J. Super. 1, 11 (App. Div. 1996); see also 2175 Lemoine Ave. Corp. v. Finco, Inc., 272 N.J. Super. 478, 490 (App. Div.), certif. denied, 137 N.J. 311 (1994). In the present case, Muldoon is alleged to have failed to submit requested additional medical documentation, file a second internal appeal, and file an ERISA appeal. In a legal malpractice case involving failure to appeal, proximate cause "ultimately reduces to a prediction of what the outcome of a hypothetical appeal would have been." Andrews v. Saylor, 80 P.3d 482, 486-87 (N.M. Ct. App. 2003).
In the present matter, Bell's sickness and accident disability plan provided up to fifty-two weeks of short-term disability benefits for eligible employees "unable to work due to sickness, non-job-related accidental injury or an occupational illness." A section captioned "Participant Rights and Benefit Appeals" gave procedural details on filing claims and on filing appeals following a denial of benefits. It stated, in relevant part:
The claims administrator has sole authority to decide claims under the plan. The appeals administrator has sole authority to review and resolve any appeal of a denied claim. In case of an appeal, the appeals administrator's decision is final and binding on all parties to the full extent permitted under applicable law, unless the claimant or a beneficiary later proves that the appeals administrator's decision was an abuse of discretion.
The record upon appeal to the Benefit Appeals Committee would have consisted only of those documents submitted to the Benefit Claims Committee, plus those documents that plaintiff has alleged Muldoon neglected to submit in connection with the unperfected second internal appeal. A forecast by the factfinder as to the probable result of a second administrative appeal would also be limited to that record. Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997) (thus limiting record on ERISA appeal). No discovery was taken that would further aid in determining the basis for the Claims Committee's decision. Additionally, no discovery was taken that would assist the factfinder in forecasting how the Benefit Appeals Committee would have responded if an appeal had been filed that included plaintiff's October 20, 1005 letter to Dr. Allen and the two reports of Dr. Lax. Nor has any evidence been presented of the composition of that Appeals Committee, the views of its members, or the standards or procedures employed by that committee in evaluating claims. In the circumstances presented, the result of such an appeal does not appear self-evident, particularly in light of plaintiff's concession on appeal that, at the time, multiple chemical sensitivity - one of plaintiff's primary diagnoses, and the reason that she claimed she could not work outside her home - was not a condition that was generally accepted by the medical community.*fn3 In the absence of any evidence in this crucial area, we are at a loss to discern how a factfinder could determine whether an abuse of discretion by the Benefit Claims Committee would have been found upon further internal appeal.*fn4 A causal relationship between Muldoon's alleged legal malpractice and damage to plaintiff arising from his alleged failure to perfect a second internal appeal simply cannot be established upon the record presented.
Plaintiff contends further that Muldoon's failure to exhaust internal claims procedures precluded any ERISA appeal, citing Berger v. Edgewater Steel Co., 911 F.2d 911, 916 (3d Cir.), cert. denied, 499 U.S. 920, 111 S.Ct. 1310, 113 L.Ed. 2d 244 (1991) and Wolf v. National Shopmen Pension Fund, 728 F.2d 182, 185-86 (3d Cir. 1984). Plaintiff argues further that Muldoon's alleged abandonment of her internal appeal fatally prejudiced the plaintiff's claim for disability benefits by extinguishing the opportunity to prevail on an ERISA appeal.*fn5
Nonetheless, plaintiff must provide prima facie evidence that she would have prevailed on that appeal to establish a causal relationship between Muldoon's alleged negligence and damage to her.
The standard of review that would have been employed by the federal district court in reviewing any denial of benefits by Bell is relevant in this regard. Although plaintiff's position on this issue is not entirely clear, she appears to argue that the court would have employed a de novo standard. In contrast, Maressa Goldstein claims that an arbitrary and capricious standard would have been employed. The motion judge ruled, following argument on motions for summary judgment, that the applicable standard would have been whether the actions of the Benefit Appeals Committee was arbitrary and capricious.
The issue is governed, in part, by the United States Supreme Court's decision in Bruch v. Firestone Tire & Rubber Co., 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed. 2d 80 (1989). In that case, involving suit by several former employees under 29 U.S.C.A. § 1132(a)(1)(B) alleging that the internal administrator of defendant Firestone's self-funded pension and welfare plans had improperly denied them severance benefits based upon an erroneous interpretation of what constituted an eligible "reduction in work force" under the terms of the plans, the Supreme Court held:
[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Because we do not rest our decision on the concern for impartiality that guided the Court of Appeals, . . . we need not distinguish between types of plans or focus on the motivations of plan administrators and fiduciaries. Thus, for purposes of actions under § 1132(a)(1)(B), the de novo standard of review applies regardless of whether the plan at issue is funded or unfunded and regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest. Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a "facto[r] in determining whether there is an abuse of discretion." Restatement (Second) of Trusts § 187, Comment d (1959). [Id. at 115, 109 S.Ct. at 956-57, 103 L. Ed. 2d at 95.]
The Third Circuit Court of Appeals, recognizing the "opaque direction" given by the Supreme Court in Bruch, has held, in accordance with five other courts, that when a company both funds and administers benefits in its discretion, as Bell did in the present matter, "it is generally acting under a conflict that warrants a heightened form of the arbitrary and capricious standard of review." Pinto v. Reliance Std. Life Ins. Co., 214 F.3d 377, 378 (3d Cir. 2000).
A further issue exists as to whether a jury or a judge should determine whether plaintiff would have prevailed on an ERISA appeal. In an advisory ruling, the motion judge ruled that the matter was for a jury to decide. Research suggests that the courts are split on this issue. Compare Andrews, supra, 80 P.3d at 486 (holding in a legal malpractice case that the issue of the prediction of the ultimate outcome of an appeal should be determined by the jury) with Governmental Interinsurance Exch. v. Judge, 850 N.E. 2d 183, 212 (Ill. 2006) (holding, in accordance with the bulk of precedent, that the issue of proximate cause in an appellate legal malpractice action had to be resolved by a judge as an issue of law, based on the underlying record and the standard of review that would have applied if the appeal had gone forward).
As we have previously stated, we fail to see how such a decision can be made on the sparse record presented, regardless of whether the decision is made by the judge or a jury. Whether a purportedly negative decision by the Benefit Appeals Committee, finding no abuse of discretion by the Benefit Claims Committee, would constitute an arbitrary and capricious act on the Appeals Committee's part simply cannot be determined without further evidence as to the standards employed by the two corporate committees. And in this case, the issue is what the committees would have done, not what a jury with the benefit of hindsight would have determined.
In this regard, it appears possible to us that foundational evidence could have been provided by lay witnesses, although we acknowledge the advantages that could be derived from further elucidation by an expert benefits administrator's review of the record. The problem is that neither exists. For that reason, we affirm the grant of summary judgment as to Maressa Goldstein.
We reject plaintiff's alternative argument that an additional opportunity should have been afforded her to produce the missing proofs. Once a trial date has been set, as it was in this case, a request for leave to produce additional discovery will only be entertained where there is good cause and/or exceptional circumstances. Ponden v. Ponden, 374 N.J. Super. 1, 10-11 (App. Div. 2004), certif. denied, 183 N.J. 212 (2005); Tucci v. Tropicana Casino & Resort, 364 N.J. Super. 48, 53-54 (App. Div. 2003). We have been advised of no such circumstances in this case.
We likewise affirm the grant of summary judgment to defendant Marmero & Mammano. As we noted previously, in September 1999, plaintiff became dissatisfied with Muldoon and, on October 25, 1999, she retained her present counsel. A substitution of attorney was filed on November 8, 1999. On November 30, 1999, Muldoon stopped practicing law through his own corporation, which had no assets, although he did not dissolve that entity. On December 1, 1999, Muldoon joined a law firm led by Franc Marmero as a salaried associate, entitled to fifteen percent commission on fees earned by him on firm files and a thirty-three percent commission on any fees generated from his own files. Muldoon and Marmero agreed to equally split any outstanding fees due Muldoon on Muldoon's past work if other Marmero employees assisted in collection efforts. Only $3,000 was recovered, of which Marmero & Mammano received $1,500. Marmero provided Muldoon with professional liability insurance, effective December 1, 1999.
On December 16, 1999, Marmero merged his firm with that of Philip Mammano, at which time the two were designated the firm's only shareholders and directors. Muldoon continued his employment in the capacity of an associate under the same terms that he had negotiated with Marmero.
Marmero died on January 3, 2001, and Marmero & Mammano paid $324,500 to his estate for his interest in the firm, leaving Mammano as the sole shareholder. Muldoon filed for bankruptcy in November 2001 and personally assumed all responsibility for the debts of his professional corporation. Muldoon left Marmero & Mammano on disability leave in August 2003 and ultimately did not return. The firm purchased Muldoon's furniture for $3,500, which amount was also deemed to satisfy any commissions that might have been owed to him.
The Supreme Court held in Lefever v. K.P. Hovnanian Enters., Inc., 160 N.J. 307, 310 (1999), that even when a company sells its assets to another company - a circumstance that did not exist here - the acquiring company is not liable for the liabilities of the acquiring company unless "(1) the successor expressly or impliedly assumes the predecessor's liabilities; (2) there is an actual or de facto consolidation or merger of the seller and the purchaser; (3) the purchasing company is a mere continuation of the seller; or (4) the transaction is entered into fraudulently to escape liability." Here, plaintiff claims the existence of a de facto merger or of a fraudulent transaction undertaken to escape liability.
In the present case, there is no evidence of the "transfer or sale of all assets, exchange of stocks, [or] change of ownership whereby stockholders, officers and creditors go to the surviving corporation, and assumption [occurs] of a variety of liabilities pursuant to previously negotiated agreements." Wilson v. Fare Well Corp., 140 N.J. Super. 476, 483 (Law Div. 1976). Indeed the evidence suggests that approximately two months after his representation of plaintiff was terminated, Muldoon essentially abandoned his independent practice, while not dissolving it to become a salaried employee of Marmero and then of Marmero & Mammano. Nothing suggests that either of Marmero's firms assumed any of Muldoon's liabilities or that Muldoon transferred assets to either. Further, no evidence supports plaintiff's position that, to avoid liability, Muldoon stripped his practice of assets and transferred them to Marmero when obtaining salaried employment with the firms of which Marmero was a partner. Indeed, nothing suggests that in September 1999, Muldoon anticipated suit by plaintiff since, on September 21 of that year, plaintiff had applauded Muldoon's good work in a letter written to him. Accordingly, we concur with the motion judge's conclusion that successor corporation liability was not established in this case.
In light of our determination of the two issues that we have discussed, we need not address plaintiff's remaining arguments.