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Steiert v. Levy


August 13, 2010


On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-3790-06.

Per curiam.


Argued May 11, 2010

Before Judges Parrillo and Ashrafi.

Plaintiff Geoffrey L. Steiert appeals from an order dated January 9, 2009, granting summary judgment to defendant attorneys and dismissing on statute of limitations and other grounds plaintiff's complaint alleging legal malpractice. We affirm.

Plaintiff, who is a licensed attorney in this State and experienced in bankruptcy work, filed his complaint on April 27, 2006, against defendants Levy, Angstreich, Finney, Baldante, Rubenstein & Coren, P.C., and Thomas S. Harty, an attorney with defendant law firm. He alleged legal malpractice in defendants' representation of him from March 1999 through May 1, 2000, in federal litigation in which plaintiff sought to recover on five promissory notes he held documenting more than $400,000 he had invested in a business venture. Plaintiff alleged that defendant attorneys had negligently failed to protect his interests in the federal litigation causing him to lose the ability to collect on his notes.

After completion of more than two years of discovery in the malpractice action, defendant attorneys moved for summary judgment on three grounds: 1) that plaintiff's malpractice complaint was barred by the six-year statute of limitations, 2) that the undisputed evidence failed to show the alleged negligence of defendants caused plaintiff any damages, and 3) that plaintiff's claims were barred because he had voluntarily settled the federal litigation. Following oral argument, the trial court granted defendants' motion and dismissed plaintiff's complaint in its entirety, placing an oral decision on the record. Plaintiff now appeals from that summary judgment order and decision.

In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the trial court. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Prudential Prop. & Cas. Ins. Co. v. Boyland, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We 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). On this appeal, we review the facts most favorably to plaintiff.

In the 1990s, plaintiff was familiar with Charles McCormick and his corporation, Mata Services, Inc., which operated a "factoring" business buying and selling computer equipment. Plaintiff had made a small investment in the company through two agents working with McCormick, William and Kathy Schroeder, and he had made a profit.

In 1997, McCormick solicited investors for a new venture he was offering through a new company called Ki Digital, Inc., which would offer high-tech special effects services to the film industry and Fortune 500 companies. Between September 1997 and April 1998, plaintiff invested in the new venture through loans totaling more than $400,000, evidenced by five promissory notes payable to him personally or to business entities that plaintiff owned and controlled. The loans carried a very high interest rate, six percent per month. McCormick and the Schroeders allegedly promised plaintiff that through the loans he would be reserving an option to own stock in the new company once a private stock offering was made. Unfortunately for plaintiff, these loans were made at the tail end of a Ponzi scheme; McCormick, Mata Services, Inc., and the new venture had no ability to meet all their obligations and promises made to investors and lenders.

In June 1998, the Attorney General of New Jersey filed a complaint against McCormick, Ki Digital, Inc., and Mata Services, Inc. alleging securities violations. The Chancery Division appointed a receiver to audit and preserve the assets of the corporations, which were determined by an accounting report to be insolvent. Plaintiff was aware of the Attorney General's lawsuit and the accounting report.

In November 1998, represented by attorney Daniel Posternock, plaintiff filed a complaint in the United States District Court in New Jersey alleging fraud and seeking recovery of his investment from a number of individual and corporate defendants. He did not serve the complaint upon the receiver appointed by the Chancery Division. When the defendants did not file timely answers, plaintiff obtained default judgment in December 1998, against some of the defendants in the amount of $865,589.

In January 1999, defendants in the federal litigation filed motions to vacate the default judgment. Also, the attorney for the receiver wrote to Posternock requesting that he agree to vacate the default judgment because the receiver had not been served. Plaintiff, on the other hand, undertook personally, upon Posternock's declining to do so, to docket his default judgment in the Superior Court of New Jersey on February 8, 1999. The attorney for the receiver wrote to federal Judge Stanley Brotman complaining of plaintiff's actions.

In the meantime, United States Magistrate Judge Robert Kugler entered a scheduling order permitting plaintiff to file a response by March 19, 1999, to defendants' motion to vacate the default judgment. Unaware of the scheduling order, Judge Brotman issued an order on March 3, 1999, vacating the default judgment.

Plaintiff then discharged Posternock and engaged the services of defendant law firm and attorney Thomas Harty beginning on about March 12, 1999. Harty's first task was to address Judge Brotman's order vacating the default judgment. Upon being contacted by Judge Brotman's chambers and reviewing the nature of the prior proceedings, Harty determined not to oppose further the defendants' motion to vacate the default judgment because of the several errors and deficiencies in plaintiff's prior pleadings. Plaintiff agreed with Harty that in lieu of attempting to maintain the default judgment, Harty would instead promptly move for summary judgment. On March 16, 1999, plaintiff wrote to Harty admitting that he, plaintiff, had "made this mess" and that Harty was not "obligated to clean it up."

Plaintiff then urged Harty to seek temporary restraints against defendants' dissipation of assets. Plaintiff himself prepared papers for an application for restraints, which Harty filed on April 8, 1999. At an April 13, 1999 hearing before Magistrate Judge Kugler, plaintiff's application for restraints fell apart when his witness admitted that his information on defendants' alleged actions to dissipate and conceal assets had come from plaintiff himself. Judge Kugler denied the application for restraints. Plaintiff attended the hearing and was fully aware of the results.

Over the course of the next year, Harty undertook to amend plaintiff's complaint to name the proper parties, and he spent substantial time focused on defendants' motions to dismiss the complaint. He did not file a motion for summary judgment and allegedly did not promptly seek discovery.

Plaintiff prepared discovery demands, but Harty did not use them. As part of their retention agreement, Harty had promised to keep plaintiff fully informed of developments in the case and to allow plaintiff's direct participation in the litigation. According to plaintiff, however, Harty intentionally concealed information from him and did not accept plaintiff's participation and efforts.

After several disputes about the course of representation, plaintiff obtained from Harty a box of documents related to the case on April 29, 2000. In reviewing the documents, plaintiff learned that Harty had not proceeded with the discovery demands that plaintiff had prepared and had failed to obtain plaintiff's approval for and inform plaintiff of important developments, such as voluntary dismissal of the claims against McCormick's wife.*fn1

On May 1, 2000, plaintiff terminated the services of Harty and defendant law firm. Plaintiff then represented himself in the federal litigation for the next eleven months. He did not serve his own discovery demands but relied on those served by Harty. He also did not file a motion for summary judgment.

In March 2001, plaintiff entered into a settlement with the receiver by which the insolvent corporate defendants acknowledged his unpaid loans. He also obtained a consent judgment from McCormick for $500,000. Neither of these settlements provided any actual compensation to plaintiff. He has never recovered any of his investment.

On cross-motions for summary judgment, the trial court ruled that plaintiff's claims were limited by N.J.S.A. 2A:14-1 to alleged acts of negligence that occurred in the six years before filing his malpractice complaint, that is, from April 27, 2000, forward. Defendants represented plaintiff in the federal litigation only up to May 1, 2000, and nothing happened in that four-day period that can be viewed as negligence or that caused any damage to plaintiff. The court rejected plaintiff's claims that the discovery rule should be applied to toll the running of the statute of limitations for earlier alleged negligence of defendants. Furthermore, the court held that plaintiff's settlement of the federal litigation precluded recovery on a legal malpractice claim under the holding of Puder v. Buechel, 183 N.J. 428 (2005).

With respect to the last basis for summary judgment, the Supreme Court has now explained and limited the holding of Puder in Guido v. Duane Morris LLP, 202 N.J. 79 (2010). We need not consider whether plaintiff's voluntary settlement of the federal litigation with the receiver and McCormick precludes any of his claims against these defendants. The statute of limitations and the absence of any evidence of damages caused to plaintiff based on information he learned only after April 27, 2000, are sufficient grounds to affirm the trial court's judgment.

Pursuant to N.J.S.A. 2A:14-1, a legal malpractice action must be commenced within six years from the accrual of the cause of action. Vastano v. Algeier, 178 N.J. 230, 236 (2003); McGrogan v. Till, 167 N.J. 414, 419 (2001). Ordinarily, a cause of action "accrues when an attorney's breach of professional duty proximately causes a plaintiff's damages." Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993). The discovery rule tolling the six-year statute of limitations may apply to a legal malpractice action. Ibid. Under that rule, "a cause of action accrues when a client suffers actual damages and knows or should reasonably know that the lawyer has breached a professional duty owed to the client." Vastano, supra, 178 N.J. at 232.

Plaintiff claims damages as a result of failure to collect any compensation on his promissory notes because the defendants in the federal litigation were either without assets to pay compensation or were otherwise unavailable. Because plaintiff knew no later than April 1999 that there may be no assets from which to collect from the federal defendants, the relevant question is what allegedly negligent actions of defendant attorneys caused plaintiff to lose the ability to collect on his notes.

Plaintiff has alleged the following negligent actions of defendants:

o failure to oppose the motions to vacate default judgments, which occurred in March 1999;

o failure to devise a successful strategy to obtain a restraining order against dissipation of assets, which occurred in April 1999;

o failure to file for summary judgment, which plaintiff was aware of before April 27, 2000;

o failure to seek timely discovery, which plaintiff allegedly did not become aware of until he received the box of documents from Harty on April 29, 2000;

o dismissing Margaret McCormick from the complaint without approval and notification of plaintiff, which plaintiff was not aware of until April 29, 2000;

o failure to file a timely amended complaint, which plaintiff was allegedly not aware of until April 29, 2000.

Plaintiff was fully aware of the first three listed allegations of malpractice before April 27, 2000. He knew that Harty had decided not to oppose the federal defendants' motions to vacate the default judgment, and he ultimately agreed to the strategy suggested by Harty in March 1999 of dropping that opposition. Plaintiff was also fully aware of the attempt to obtain a restraining order on dissipation of assets in April 1999. He drafted the application, attended the hearing, observed for himself Harty's efforts in that regard, and was aware of the unsuccessful result. As to failure to file a motion for summary judgment, plaintiff certainly knew before April 27, 2000, that Harty had not filed such a motion as he allegedly had promised to do.

The trial court ruled correctly that the first three allegations of negligence were barred by the statute of limitations because they occurred before April 27, 2000, plaintiff was fully aware of them, and any damages allegedly caused by those negligent acts were or should have been known to plaintiff at the time the actions occurred.

Plaintiff's only recourse is to argue that the malpractice was a continuum of negligent conduct that did not end until after April 27, 2000, when he discharged the services of defendants and was unsuccessful in the underlying litigation. This argument fails because a legal malpractice cause of action does not accrue only when the underlying litigation is finally decided adversely to a malpractice plaintiff. See Grunwald, supra, 131 N.J. at 496-99; Dinizio v. Butler, 315 N.J. Super. 317, 322 (App. Div. 1998). The cause of action accrues when plaintiff knew or should have known of his alleged injury and defendants' fault.

In Grunwald, the Court held that "the six-year limitations period begins to run when the client suffers damage and discovers, or through reasonable diligence should discover, that that damage is attributable to the attorney's negligent advice." Id. at 499. The Court also stated: "[K]nowledge of fault may occur before or during a judicial resolution of the underlying action." Id. at 497. Thus, a claim for malpractice does not have to await resolution of the underlying case or termination of the attorney's services.

Here, plaintiff knew that the failure to maintain the default judgment may affect his ability to collect from defendants, and he also knew that failure to obtain a restraining order may affect the availability of assets upon which to execute on a judgment. Plaintiff also knew that without a summary judgment, he could not collect from defendants and that assets might be dissipated. Additionally, he knew in 1999 that Harty decided not to oppose vacating of the default judgment, that he was unsuccessful in obtaining restraints against dissipation of assets, and that he had not filed a summary judgment motion. Therefore, plaintiff had knowledge of all the elements of his claims based on the first three items of alleged malpractice long before April 27, 2000, and he cannot rely on the discovery rule to save those claims.

Assuming as true plaintiff's claim that he did not learn of the last three listed items of negligence until he received the box of documents from Harty on April 29, 2000, nothing in the evidence presented on the summary judgment record shows how those actions of Harty caused any damage to plaintiff in the form of inability to collect a money judgment. After discharging Harty and defendant law firm, plaintiff continued the underlying litigation for another eleven months, during which time he had the ability to obtain discovery that Harty had failed to obtain, to move for summary judgment, and to move to reinstate the complaint against Margaret McCormick if appropriate. He did not take any of those actions.

More important, plaintiff has not presented any evidence establishing that delay in taking those actions caused dissipation of assets upon which he could have executed on a judgment, or a better settlement agreement than he was able to accomplish in March 2001. Likewise, plaintiff has not presented any evidence to show how any delay in Harty's filing an amended complaint, which was done in November 1999, caused any of his alleged injury or losses. Although he may not have learned of those actions of Harty until after April 27, 2000, defendants were entitled to summary judgment because there is no disputed issue of fact that those actions or inactions of his attorney made any difference in the loss of plaintiff's ability to obtain judgment or to collect on a judgment.*fn2

Because plaintiff failed to demonstrate that genuine issues of material fact existed as to any alleged negligence of defendants that either occurred or plaintiff discovered during the six-year limitations period, and that caused his losses, the trial court correctly dismissed his complaint on statute of limitations and causation grounds.


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