On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket Nos. L-116-06 and L-246-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad and J. N. Harris.
The Betal parties*fn1 appeal from summary judgment dismissal by the Law Division of their legal malpractice complaint against Hedinger & Lawless, LLC (Hedinger). The Betal parties argue there was, at a minimum, a genuine issue of material fact as to whether an attorney-client relationship existed that would withstand summary judgment. Hedinger cross-appeals, arguing that even if the Betal parties are correct, summary judgment is still appropriate because of the Betal parties' inability to establish a prima facie case of legal malpractice. We affirm the grant of summary judgment based on Hedinger's cross-appeal.
I. On January 10, 2006, Hedinger filed a complaint against the Betal parties to recover legal fees for services rendered. A default judgment was entered, which was vacated by order of October 27, 2006. On September 26, 2006, the Betal parties filed a complaint against Hedinger for legal malpractice, alleging negligent representation in a surety action. At some point the cases were consolidated.
Hedinger moved for summary judgment, which was granted on March 19, 2010 following oral argument, and the Betal parties' malpractice claim was dismissed with prejudice. Based on the Betal parties' non-appearance at trial on April 19, 2010, and the submission of an affidavit of amount due, the court entered default judgment against the Betal parties in the fee action on May 7, 2010, in the amount of $45,300.96. The Betal parties appealed and Hedinger filed a protective cross-appeal, claiming, in the event the Betal parties were successful on appeal, summary judgment should have been granted on alternate grounds.
II. Betal Enterprises was a construction and demolition business that stopped operating sometime in 2004. Betal Environmental is a now defunct corporation that performed asbestos removal, lead abatement, and mold remediation.
The Betal parties first engaged Hedinger, a firm specializing in construction law, in June 2001 regarding a dispute with Little Falls Township over their insurance coverage for a building project. According to the retainer agreement, signed by the Betal parties' representative, Hedinger was retained "in connection with the Rochelle Park project and possible other matters." The Betal parties paid a $2,500 retainer to the law firm and after that was consumed, prompt payment was expected on monthly invoices. The agreement also provided Hedinger reserved "the right to terminate [the] representation . . . if payment is not received within sixty days" of the invoice date.
Hedinger continued to represent the Betal parties with matters generally handled by Robert Lawless and an associate, James Tarnofsky. By letter of April 6, 2004, Lawless notified the Betal parties of the delinquent outstanding balance and advised that if "an immediate and sizable payment" were not made, the firm would "have no alternative but to discontinue services." On April 14, 2004, Rovcanin requested a meeting with Tarnofsky regarding an action that had just been filed against the Betal parties by Centennial Insurance Company, their surety on performance and payment bonds for various construction projects in Little Falls, including the Rochelle Park project (the Centennial action). Centennial sought reimbursement from the Betal parties as they had indemnified it against any losses resulting from claims against the bonds. The Betal parties had been dismissed from or failed to complete the projects at issue.
On April 20, 2004, Tarnofsky advised Rovcanin by phone that the firm would not work on the file until the outstanding bills were paid, and refused to meet with him. On June 25, 2004, Centennial's counsel sent Tarnofsky a letter noting the Betal parties had not filed an answer to the complaint but, pursuant to Tarnofsky's request, a thirty-day extension had been granted. A July 2, 2004 letter reflects that Tarnofsky procured another thirty-day extension.
On July 9, 2004, Rovcanin again requested a meeting with Tarnofsky, and on July 23, he sent Tarnofsky a detailed letter outlining the potential claims against subcontractors on the projects at issue in the Centennial action who purportedly contributed to delays and losses. Tarnofsky and Lawless met with Rovcanin on July 27, 2004. Rovcanin presented his strategy to delay filing the answer and then eventually file an answer and bring a third-party action against numerous entities. Rovcanin informed the attorneys at this meeting that he was "judgment proof" so the risks attendant to a default judgment were irrelevant.
According to Lawless' deposition testimony, Rovcanin was advised at the meeting "in no uncertain terms" that any claim against Centennial disputing the amount owed would be "an absolute waste of time," given the nature of the indemnity agreement. Rovcanin was also advised that the third-party action was unlikely to succeed because his business "operated on a shoe string" and he would be unable to win "the battle of credibility" against the third parties. Rovcanin was further informed that defending the Centennial action and litigating a third-party complaint would cost "hundreds of thousands of dollars."
By letter of July 27, 2004, Tarnofsky confirmed to Rovcanin the content of the meeting and requested additional documentation necessary to prepare a "proper third party complaint." The letter concluded:
Also, and as discussed, I will only be authorized to file this complex litigation on your behalf should you bring your account with this firm current as you have indicated. Notwithstanding payment of the invoices in full, I will require the foregoing documentation and the supplemental documentation to adequately prosecute these claims.
Sometime thereafter, Tarnofsky drafted a ten-page answer and affirmative defenses, and an eighty-five page third-party complaint naming twenty-two defendants. The pleading was never filed.
On August 9, 2004, Tarnofsky received a letter from Centennial's counsel that the Betal parties had not filed an answer, and if they failed to answer by August 12, Centennial would seek a default. The same day, Tarnofsky forwarded the letter to Rovcanin with a note stating, "it is imperative that you follow through with your commitment to this firm on Wednesday so that we may proceed in a timely manner."
Centennial requested entry of default on August 18, 2004. On August 19, 2004, Tarnofsky forwarded the submissions to Rovcanin and noted that Centennial was willing to consent to vacating; however, it was imperative an answer be filed as soon as possible.
On October 7, 2004, Centennial requested entry of a default judgment. On October 12, Lawless notified Rovcanin of the $6,300 outstanding balance for services rendered through September 30, 2004, asking that Rovcanin, "[p]lease immediately pay this amount so that we can continue services on your behalf." By letter of November 12, Centennial informed Hedinger that default judgment had been entered against the Betal parties in the amount of $2,842,398.66. A few days later, Tarnofsky forwarded the order to Rovcanin advising, "[n]otwithstanding the enclosed, I have been advised by counsel for Centennial, that by consent or unopposed motion, we can have the default vacated when we are prepared to file the comprehensive Third-Party Complaint." On November 30, the Betal parties paid Hedinger $5,811.15 in fees for the Centennial matter.
On February 4, 2005, Tarnofsky again sent Rovcanin a letter enclosing invoices for services rendered through January 31, 2005, totaling $17,478.82, of which $12,400 was delinquent. The letter concluded with the admonition that "absent an immediate and sizable payment against the ...