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Schnitzer v. Hackensack University Medical Center


July 21, 2009


On appeal from Superior Court of New Jersey, Law Division, Essex County, L-2157-05.

Per curiam.


Argued March 25, 2009

Before Judges Payne, Waugh and Ashrafi.

Plaintiffs Stephen Schnitzer and his wife, Jo Ann, appeal from a May 9, 2008 order approving the disbursement of expenses in the amount of $49,989.12, as set forth in the closing statement of the Schnitzers' attorneys, O'Connor, Parsons & Lane, LLC, incurred prior to settlement of the Schnitzers' medical malpractice case for the total sum of $1,100,000. They appeal, as well, from the trial judge's July 18, 2008 order denying reconsideration.

On appeal, plaintiffs present the following issues for review:

1. Did the court below err by failing to place fully the legal and factual reasons and factual findings for its decision upon the record below?

2. Was the decision below in error by paying medical expert witnesses who had no contract and brought no Quantum Meruit action below?

3. Are "standby" expert fees against public policy and not properly payable?

4. Was it a violation of R. 1:27-7(d) to allow a $1,500.00 deceptively stated "disbursement" payment to counsel for work done in his office at twice the rate charged by outside services with a profit?

Following our review of plaintiffs' arguments in light of the record on appeal and applicable precedent, we affirm.


In or around November 2004, Gerald B. O'Connor, then a member of the law firm of O'Connor & Demas, met with the Schnitzers to discuss replacing a New York firm as counsel to them in a medical malpractice action against Daniel Smith, M.D. and the Hackensack University Medical Center. An agreement was reached, and a retainer agreement was executed that conferred upon the firm of O'Connor & Demas "the exclusive right to take all legal steps to enforce the said claim either by way of suit or settlement." The retainer agreement further provided that, upon obtaining a recovery and deducting "[t]he amount of expenses paid by the firm," O'Connor & Demas would be entitled to a contingency fee based upon the net amount remaining. The agreement also included the following statement:

The above contingent fee shall be computed on the net recovery arrived at by deducting from the gross recovery all expenses incurred in connection with the institution and prosecution of the claim, including expenses incurred in investigation, preparation and trial of the case, expenses for expert or other testimony, the cost of briefs and transcripts on appeal and any interest included in the judgment pursuant to Rule 4:42-11(b).

The agreement did not reserve to either of the Schnitzers the right to approve fees or expenses before they were incurred.

A request that the file be transferred to O'Connor was made by Jo Ann Schnitzer on December 17, 2004. Thereafter, suit was instituted against Hackensack University Medical Center, Daniel Smith, M.D. and, later, Eric Rothschild, M.D. in the Law Division, Essex County. Eventually, claims against the hospital were dismissed when it was demonstrated that Dr. Smith was not its employee. Summary judgment was granted to Dr. Rothschild as the result of the absence of any evidence of his negligence. Suit continued against Dr. Smith. In addition to seeking compensatory damages, a punitive damage claim was asserted against him.

In June 2007, the liability carrier for Dr. Smith offered the full policy limits applicable to the claim - the sum of $1,000,000 - and indicated that Dr. Smith would be willing to make an additional personal contribution to the settlement. According to O'Connor, the Schnitzers did not authorize a response to this offer.*fn1 A letter from O'Connor to Stephen Schnitzer, dated August 2, 2007, stated the following:

Enclosed please find an approximate closing statement if the case settled now. If [Jo Ann] waits until after all experts have reviewed the case for trial, anticipate a minimum of $50,000.00 more in expenses.

She is now losing money on the interest she can earn.

In September 2007, a further settlement conference was held before the Civil Presiding Judge, at which time the Schnitzers demanded $1,000,000 on the compensatory damage claim and $570,000 in punitive damages. They refused to negotiate this amount then or at any time in the period that preceded the trial date.

On January 18, 2008, a motion to dismiss the punitive damage count was heard and denied. At that time, Dr. Smith's carrier indicated that the $1,000,000 offer remained open and that Dr. Smith was willing to contribute personally the amount of $50,000 or somewhat more. The Schnitzers rejected the offer and instructed O'Connor to prepare for trial, which was scheduled for January 28, 2008.

Trial preparation took place, including extensive preparation of the Schnitzers' two liability and proximate cause experts, Dr. Richard Luciani and Dr. David Befeler. Additionally, O'Connor asked both doctors to reserve time to attend the trial, requesting that Dr. Luciani reserve two days and that Dr. Befeler reserve one. Oral contracts for attendance and witness fees were entered by O'Connor with Dr. Luciani in the amount of $15,000 and with Dr. Befeler in the amount of $7,500. Neither doctor required prepayment of the fees.*fn2

On January 28, 2008, the case was assigned to a judge for trial, but the matter was adjourned to the following day. On January 29, 2008, additional settlement negotiations took place. At that time, the Schnitzers again rejected a settlement in the amount of $1,050,000. However, later in the morning, after a jury panel had been called for, Jo Ann Schnitzer stated that she would agree to a settlement of $1,100,000, and her husband concurred. A settlement in that amount was reached, and the settlement was placed on the record. The Schnitzers declined to be present for that proceeding.

As part of the settlement, O'Connor agreed not to take a contingency fee on the $100,000 personally contributed by Dr. Smith. Additionally, he granted a "professional courtesy fee reduction" to the Schnitzers of $96,056.75, presumably as the result of Stephen Schnitzer's status as a lawyer.

Thereafter, various disputes arose over the form and execution*fn3 of the release and the production of certain documents that the Schnitzers insisted were part of the settlement. Relevant here, a dispute also arose over the closing statement issued by O'Connor's firm. That statement set forth pretrial expenses in the amount of $22,202.12 and trial expenses in the amount of $27,787. Among the trial expenses were the $7,500 payment to Dr. Befeler and the $15,000 payment to Dr. Luciani. Additionally, the firm charged $1,500 for trial board exhibits that the firm had created for use solely in connection with the trial of the matter.

The Schnitzers resisted payment of these three items, claiming with respect to the expert fees that they were unearned, because the experts had not appeared; were excessive, since they exceeded the hourly rates charged for other aspects of the experts' work; and that no proof had been offered to demonstrate that the experts had, in fact, reserved the days for the purpose specified. The Schnitzers also contested the fee charged for the trial board exhibits, claiming that it was unrecoverable overhead expense and excessive.

As the result of the Schnitzer's refusal to sign a release of claims, in April 2008, a motion was brought on behalf of Dr. Smith to enforce the settlement. At the Schnitzers' instruction, O'Connor cross-moved for production of the documents that the Schnitzers sought. O'Connor also filed a cross-motion seeking approval of the disbursements set forth on the firm's closing statement. That latter motion was granted, following oral argument, in the court's May 9, 2008 order, and reconsideration was denied.


As we stated previously, the retainer agreement between O'Connor and Jo Ann Schnitzer conferred on O'Connor and his firm the exclusive right to take all legal steps to enforce her claim of medical malpractice. An agency relationship was thereby established. Kernan v. One Washington Park Urban Renewal Assocs., 154 N.J. 437, 453 (1998). The agency agreement contained within it the Schnitzers' implicit authorization for O'Connor to enter into contracts with experts for their services. Restatement (Second) of Agency §50 (1958) (The "authority to make a contract is inferred from authority to conduct a transaction, if the making of such a contract is incidental to the transaction, usually accompanies such a transaction, or is reasonably necessary to accomplish it.") Pursuant to the authority thus granted, O'Connor entered into verbal contracts with Dr. Luciani and Dr. Befeler for the provision of services, including attendance at trial on specified dates as expert witnesses. The Schnitzers do not dispute O'Connor's authority to do so. Rather, the Schnitzers claim, after the fact, that the fees set forth in the contracts were excessive. However, in authorizing their formation, the Schnitzers did not reserve to themselves the power of pre-approval. Thus, the contracts are binding upon them as principals. JMB Enterprises v. Atl. Emp. Ins. Co., 228 N.J. Super. 610, 618 (App. Div. 1988). As the motion judge observed, at this stage of the proceedings, the Schnitzers were not entitled to a hearing to establish the fair value of the services offered*fn4 or to explore their other defenses to payment.

Further, as O'Connor notes in his brief on appeal, entry into the contracts was necessary, given the imminence of trial, the Schnitzer's direction that they wished to proceed to trial, and their evident lack of flexibility in considering settlement offers below their $1,570,000 demand. Grounds for a claim of breach of O'Connor's duty to the Schnitzers as their trial attorney would be present if the necessary trial preparation had not been undertaken. Ziegelheim v. Apollo, 128 N.J. 250, 260-61 (1992); Kranz v. Tiger, 390 N.J. Super. 135, 149 (App. Div.), certif. denied, 192 N.J. 294 (2007); Passanante v. Yormark, 138 N.J. Super. 233, 238 (App. Div. 1975), certif. denied, 70 N.J. 144 (1976). We thus affirm the trial judge's determination to approve these disbursements.


The Schnitzers have also challenged the inclusion of the cost of preparing trial board exhibits, in house, in the closing statement rendered by O'Connor's firm. The Schnitzers claim, without any proof, that the cost was excessive. O'Connor has demonstrated otherwise by comparing the costs charged to those of the commercial facility that O'Connor's firm utilized until it purchased the equipment that would permit creation of the boards in house. O'Connor's evidence in this respect is unrefuted.

Additionally, the Schnitzers seek to categorize the cost of the boards as unrecoverable firm overhead. We find that characterization to be mistaken. The boards, upon which were mounted enlarged copies of medical records pertaining to Jo Ann Schnitzer, were intended for use as evidence at trial. Because of their fact-specific nature, they could not be reused in connection with another matter. Rule 1:21-7(d) specifically permits an attorney to recover such "expenses for . . . evidence." See also Delle Fave v. Sanitation Equip. Corp., 197 N.J. Super. 555, 562 (Law Div. 1984).

We do not regard any of the Schnitzers' additional arguments to be of sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).


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