On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9493-02.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 15, 2009
Before Judges Grall, Messano and LeWinn.
Plaintiff Middlebrooks & Shapiro, P.C. (M&S) filed a complaint to recover $148,972.27 that it alleged Dorothy Bonanno owed for legal services provided between April 5, 1998 and November 30, 1999. M&S asserted a right to payment based on breach of contract, unjust enrichment and quantum meruit. Mrs. Bonanno filed a counterclaim charging M&S with breach of contract and legal malpractice. M&S filed a third-party complaint seeking contribution and indemnification from others who allegedly advised Mrs. Bonanno in the same matters. The third-party defendants are two lawyers - Keith A. McKenna and Anthony Ambrosio; three law firms - McKenna, Mulcahy & McKenna, L.L.P., Anthony Ambrosio, P.C., and Ambrosio, Kyreakakis, DiLorenzo, Moraff & McKenna; and one accountant - Frank M. Cerreta.
M&S's third-party claims were dismissed prior to trial, and Cerreta was awarded counsel fees and costs pursuant to Rule 1:4-8. M&S's claim for legal fees and Mrs. Bonanno's counterclaim for malpractice were tried to a jury for ten days during March and April 2007.*fn1 Relying on Puder v. Buechel, 183 N.J. 428 (2005), the trial judge dismissed Mrs. Bonanno's counterclaim for malpractice, denied M&S's application for a directed verdict and instructed the jury to consider Mrs. Bonanno's evidence of malpractice as a defense to non-payment. The jurors found that:
1) M&S and Mrs. Bonanno had an attorney-client relationship; 2) M&S deviated from the standard of practice in representing Mrs. Bonanno; and 3) the deviation warranted a reduction in the full amount claimed by M&S.
On post-verdict motions, the judge denied M&S's application for judgment notwithstanding the verdict and, applying Saffer v. Willoughby, 143 N.J. 256 (1996), awarded Mrs. Bonanno $52,000.49 for fees and costs she incurred in defending against M&S's complaint - a contingency fee of one-third of the bill for legal services avoided plus the fee charged by her malpractice expert. That award did not include the fee charged by Mrs. Bonanno's financial expert.
We now consolidate two appeals arising from the litigation commenced by M&S. In A-3157-07, Mrs. Bonanno contends that the trial judge erred in applying Puder and by excluding her accountant's fees from those awarded pursuant to Saffer. In response, M&S argues that the dismissal was proper under Puder and, if not, warranted due to Mrs. Bonanno's failure to establish the necessary causal relationship between Shapiro's advice and her damages. Additionally, by way of cross-appeal, M&S claims the judge should have directed a verdict or judgment notwithstanding the verdict in favor of M&S, should not have awarded any fees and costs pursuant to Saffer, should not have dismissed its third-party claims against Ambrosio, McKenna and their firms and should have granted its application to amend the complaint. In A-3755-07, M&S challenges the dismissal of its claims against Cerreta and his award of fees and costs pursuant to Rule 1:4-8.
We affirm the dismissal of Mrs. Bonanno's claim for damages because her evidence was inadequate to permit the jury to find causation, and we conclude that the third-party complaints for contribution and indemnification are moot in light of the dismissal of the malpractice claim. We reverse the fees awarded to Mrs. Bonanno in defending against the fee dispute and the orders awarding fees to Cerreta pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1.
This is the pertinent evidence. Mrs. Bonanno retained Richard P. Shapiro of M&S in April 1998. He died in May 2002, about eight months before M&S commenced this litigation to collect what the firm was owed for the services he provided.
The circumstances existing when Shapiro was first consulted provide context essential to an understanding of the issues in this case. Mrs. Bonanno and her husband Joseph Bonanno divorced in August 1990. The marital assets included commercial real estate, which included a fifty-percent interest in property owned by 23 Commerce Road Associates, L.P. (23 Commerce Road). Prior to their divorce, Mr. Bonanno held a twenty-five-percent "general partnership interest" in 23 Commerce Road, and Mrs. Bonanno held a twenty-five-percent interest.
Pursuant to the terms of the Bonanno's property settlement agreement, Mrs. Bonanno acquired all but one percent of her husband's twenty-five-percent "general partnership interest" in 23 Commerce Road, and he retained his one-percent interest. The remaining fifty-percent interest was held by the Riback Group, the members of which are Martin and Charles Riback and Peter Silberlicht.
After the divorce, apparently acting under the authority of his one-percent general partnership interest, Mr. Bonanno continued to manage 23 Commerce Road through West Essex Management Corporation (West Essex), an entity which he established for that purpose. According to Mrs. Bonanno, her former husband was manipulating the finances of 23 Commerce Road, through West Essex, to deprive her of the income she would have otherwise derived from her share of 23 Commerce Road.
In the early 1990s, Cerreta, who was assisting Mrs. Bonanno in her efforts to implement the Bonannos' property settlement agreement, referred her to Anthony Ambrosio, Esq. Ambrosio subsequently represented Mrs. Bonanno in various matters, including one in which she alleged that her matrimonial lawyer had committed malpractice.
Mrs. Bonanno's efforts to enforce the property settlement agreement were further complicated by Mr. Bonanno's filing for bankruptcy in 1994. The trustee commenced an adversary action challenging the validity of the transfers that led to Mrs. Bonanno's acquisition of her forty-nine-percent interest in 23 Commerce Road. The trustee also proposed a sale of Mr. Bonanno's one-percent interest.
On February 20, 1998, the trustee issued a notice of proposed settlement of his adversary action challenging Mrs. Bonanno's interest in 23 Commerce Road. The trustee proposed to accept $170,000 from Mrs. Bonanno and, in return, dismiss the adversary action and convey Mr. Bonanno's right, title and interest in the partnership to her.
Objections to the trustee's proposed settlement were filed by the Riback Group and Mr. Bonanno's second wife. The Riback Group contended that the partnership agreement precluded the transfer and, referencing Mrs. Bonanno's inability to manage, expressed the Riback Group's "strong objection" to her "purchase and/or management" of 23 Commerce Road. On April 14, 1998, the attorney then representing Mrs. Bonanno in the bankruptcy matter, Arnold Jay Gold, prepared a response. With respect to the one-percent interest retained by Mr. Bonanno, Gold wrote: "Dorothy Bonanno is willing to purchase this interest, subject to all claims and possible objections by limited partners. Dorothy Bonanno is not seeking clear title to the interest from [the t]rustee and or the court."
Despite Gold's involvement, Ambrosio recommended Mrs. Bonanno retain Shapiro to represent her in the bankruptcy. Ambrosio introduced Shapiro to Mrs. Bonanno. M&S's records reflect services rendered in connection with the bankruptcy on April 5, 6, 8, 9, 13, 14, 15, 16, 17, 22, 23 and 30, 1998. The work billed includes conferences and correspondence with Ambrosio and Cerreta, appearances in bankruptcy court and conferences with the trustee's attorney and the bankruptcy judge.
On May 11, 1998, the bankruptcy judge entered an order approving a settlement by which the trustee agreed to accept $170,000, dismiss the adversary proceeding and convey the trustee's entire interest in 23 Commerce Road, the "general partnership and limited partnership interest of" Mr. Bonanno, to his former wife. The order expressly states:
[T]he Court makes no findings of fact or conclusions of law regarding the existence of and/or the extent of any general partnership interest which the [Trustee] may have in 23 Commerce Road, L.P. The Court makes no findings of fact or conclusions of law regarding whether the Trustee may exercise any right of any general partner in 23 Commerce Road, L.P., or whether the purchaser of such property from the Trustee may exercise any right of any general partner in such partnership.
Within four days of that order, Cerreta wrote to Shapiro acknowledging receipt of the order and asking Shapiro to seek the judge's authorization for Mrs. Bonanno to pursue the "assets or rights acquired" under the May 11 order in state court or another forum. On June 2, 1998, the judge amended the order to exclude the final sentence of the paragraph quoted above referencing the right of a purchaser as a general partner.
According to Mrs. Bonanno, she participated in the bankruptcy because the one-percent interest her former husband retained in 23 Commerce Road was for sale and she wanted to be able to manage the property. She testified that Shapiro told her that "once [she] had the one percent general partnership, [she] would then be able to manage the property. [She] would be able to fire the or remove the managing company [West Essex] at the time and that [she] would be in control with the Ribacks."
On May 26, 1998, Mrs. Bonanno, as fifty-percent owner of "the membership and voting rights" of 23 Commerce Road Associates, L.P., and the "Riback Group," as fifty-percent owners, entered into a letter of agreement. It provided for two "managing members," one designated by Mrs. Bonanno and the other designated by the Riback Group, who would "jointly co-manage the property." It further provided Mrs. Bonanno with the right to "initially administer the property" and receive a four-percent management fee, with the Riback Group receiving a two-percent management fee. In addition, Mrs. Bonanno was to receive ...