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Fox Rothschild, L.L.P. v. Trust

March 12, 2009

FOX ROTHSCHILD, L.L.P., PLAINTIFF-RESPONDENT,
v.
ALANWOOD TRUST, DEFENDANT, AND JOSEPH KALMAN, DEFENDANT-APPELLANT. FOX ROTHSCHILD, L.L.P., PLAINTIFF-APPELLANT,
v.
ALANWOOD TRUST, DEFENDANT, AND JOSEPH KALMAN, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-1863-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: January 7, 2009

Before Judges Axelrad, Parrillo and Lihotz.

Defendant, Joseph Kalman, acting in his capacities as trustee of the Alanwood Trust ("Trust") and individually as its sole beneficiary, appeals summary judgment dismissal of the legal malpractice counterclaims against plaintiff, Fox Rothschild, L.L.P.*fn1 ("Fox"), arising out of the law firm's representation of the Trust in a condemnation action, and various discovery rulings made during the litigation. Fox appeals separately, consolidated for purposes of this opinion, the sua sponte dismissal of its claim for legal fees against Kalman individually for work performed for the Trust.*fn2 We affirm on Kalman's appeal and vacate and remand on Fox's appeal.

I.

In 2002, Kalman contacted Herman Bass, an attorney with Fox, to represent the Trust in connection with an eminent domain condemnation by the Casino Reinvestment Development Authority ("CRDA") of property owned by the Trust in Atlantic City. Fox and the Trust entered into a written agreement for professional services, memorialized in a July 9, 2002 engagement letter signed by Kalman as trustee on July 26, 2002. The CRDA's certified general appraiser, Jerome McHale, established a $307,000 fair market value for the vacant parcel ($7.00 per square foot), which Kalman had rejected. On behalf of the Trust, Fox obtained an appraisal by Michael Buchalski, also a certified general appraiser, of $660,000 ($15 per square foot). During the multi-day trial in April 2003, McHale testified for the CRDA, opining a highest and best use of the property as being held for future development, and Buchalski testified for the Trust, opining a highest and best use of the property as yielding twenty-four townhouses. In addition, Fox produced rebuttal testimony by real estate expert Kevin Corcoran on behalf of the Trust. The jury rendered a condemnation award of $307,200. The court denied Fox's motion for a new trial.

On June 16, 2004, Fox filed suit against the Trust for unpaid legal fees in the amount of $129,655.95 for its representation in the condemnation action. Defendant Kalman, acting pro se on behalf of the Trust, filed an answer and counterclaim asserting legal malpractice. Fox then filed its answer to the counterclaim. Pursuant to court order of May 19, 2005, Fox filed an amended complaint asserting claims against Kalman individually and as trustee.

The Trust, now represented by Steven Hershkowitz, filed an answer to the amended complaint with an amended counterclaim on September 28, 2005, asserting causes of action of legal malpractice, breach of fiduciary duty, and breach of contract based on the following allegations: (1) failure of the Fox attorneys to proffer into evidence an unconsummated 1985 sales contract for the subject parcel for a significantly higher price than the CRDA offered in the condemnation action in exchange for the CRDA not introducing information regarding a tax appeal filed by the Trust seeking to reduce the real estate tax assessment on the property; (2) failure of the Fox attorneys to effectively cross-examine the CRDA's expert at trial; and (3) the Fox attorneys' employing a "team" approach on every issue and excessively billing the file. Kalman also filed a pro se counterclaim in his individual capacity on September 29, 2005, seeking damages allegedly sustained by the Trust based on theories of breach of fiduciary duty in connection with Corcoran's rebuttal report and testimony (count one), negligence in failing to prove that McHale's appraisal was unreliable (count two), misrepresentation in claiming the Trust could not submit a revised appraisal report without court approval and then not objecting to the CRDA's amended report (count three), overbilling (count four), violation of the Rules of Professional Conduct in not obtaining the trustee's authority to forego introduction of the prior sales contract in return for the CRDA's silence on the tax appeal (count five), duress in threatening to withdraw from representation a month prior to trial (count six), excessive fees (count seven), and fraud relating to count three (count eight). On October 11, 2005, Fox filed an answer to the amended counterclaim.

On September 21, 2006, Fox moved for partial summary judgment to dismiss the legal malpractice claims against it contained in defendants' counterclaims, except for the claim concerning attorneys' fees. The Trust cross-moved for summary judgment as to its claims of legal malpractice and excessive attorneys' fees set forth in its counterclaim. It relied upon a report of Anthony P. Ambrosio, an attorney, which opined, without reviewing the trial tape or transcript,*fn3 that Fox committed malpractice primarily based on: (1) Bass' purported failure in the underlying condemnation trial to exclude McHale's report and testimony or effectively cross-examine him by showing his faulty methodology and improper use of comparable sales; and

(2) Bass' failure to present to the jury evidence of the l985 unconsummated contract, which the CRDA had approved, based on his stipulation with the CRDA's attorney not to introduce evidence of the position the Trust took in a prior tax appeal. Ambrosio also opined that Fox engaged in grossly excessive billings.

In response, Fox submitted the expert report of S. David Brandt, an attorney who, after viewing Ambrosio's report and the entire videotape of the trial,*fn4 concluded: (1) McHale employed a recognized appraisal methodology, which was admissible, and Bass performed extensive cross-examination of McHale's analysis, choice of comparable sales, and adjustments, asking specifically about McHale's adjusting so that larger properties were worth less per square foot; (2) under the case law, testimony regarding the unconsummated 1985 contract for $581,343.75 likely would not have been admissible, while testimony regarding the Trust's $480,000 appraisal in the tax appeal could have been quite damaging; therefore, the stipulation was quite favorable for the Trust; and (3) any remaining claims of malpractice asserted by defendants were simply disappointments with the jury verdict and anger over the amount of the bills.

The court heard oral argument on the motions on November 9, 2006, at which Fox and the Trust were represented by counsel and Kalman appeared pro se. Kalman did not file a separate cross-motion for summary judgment nor proffer an expert report, though he implicitly joined in the Trust's motion, arguing similar to Ambrosio that Bass committed malpractice by ineffectively cross- examining McHale about the inconsistency between his comparables and his contention that smaller properties are valued higher than larger properties.

Pertinent to Fox's appeal, in a colloquy on the record prior to argument, the court sought clarification of the procedural history and inquired as to why Kalman was named as an ...


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