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Mortgage Grader, Inc. v. Ward & Olivo, L.L.P.

Superior Court of New Jersey, Appellate Division

November 14, 2014

MORTGAGE GRADER, INC., Plaintiff-Respondent,
v.
WARD & OLIVO, L.L.P., and JOHN OLIVO, ESQ., [1] Defendants, and JOHN WARD, ESQ., Defendant-Appellant

Submitted November 5, 2014

Approved for Publication November 14, 2014.

On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-3739-12.

Piro, Zinna, Cifelli, Paris & Genitempo, L.L.C., attorneys for appellant ( Daniel R. Bevere and Shane A. Sullivan, on the brief).

Pashman Stein, P.C., attorneys for respondent ( Dennis T. Smith and Michael J. Zoller, on the brief).

Before Judges YANNOTTI, FASCIALE and HOFFMAN. The opinion of the court was delivered by FASCIALE, J.A.D.

Page 1227

[438 N.J.Super. 205] OPINION

FASCIALE, J.A.D.

In this legal malpractice case, we granted leave to appeal from a February 28, 2014 order denying defendant John Ward's motion to dismiss the complaint for failure to comply with the Affidavit of Merit Statute (" AMS" ), N.J.S.A. 2A:53A-26 to -29.

Under the facts of this case, Ward argues that he is shielded from liability as a partner in a limited liability partnership (" LLP" ) and is therefore not vicariously liable for the alleged legal malpractice of his former partner, defendant John Olivo. Ward also contends that he is otherwise entitled to a dismissal of the complaint because plaintiff Mortgage Grader, Inc. (" MG" ) failed to serve an affidavit of merit (" AOM" ) on Ward or substantially comply with the AMS.

The primary issue is whether Ward loses his liability protection as a partner in an LLP if the LLP failed to purchase a tail insurance policy.[2] We disagree with the motion judge that such a [438 N.J.Super. 206] sanction is authorized and hold that when attorneys practice law as an LLP, and the LLP fails to obtain and maintain professional liability

Page 1228

insurance as required by Rule 1:21-1C(a)(3), the LLP does not revert to a general partnership (" GP" ) under the Uniform Partnership Act (" UPA" ), N.J.S.A. 42:1A-1 to -56. Rather, pursuant to Rule 1:21-1C(a)(2), " [a]ny violation of [ Rule 1:21-1C] by the [LLP] shall be grounds for the Supreme Court to terminate or suspend the [LLP]'s right to practice law or otherwise to discipline it." (Emphasis added). We also conclude that Ward is entitled to a dismissal of the complaint against him because MG failed to serve an AOM on Ward or substantially comply with the AMS.

As a result, we reverse, remand, and direct the trial court to enter an order dismissing the complaint against Ward with prejudice.

I.

Ward and Olivo established defendant Ward & Olivo, L.L.P., (" W& O" ), a law firm engaged in the practice of intellectual property law. Ward and Olivo formed W& O as an LLP pursuant to the UPA,[3] and W& O obtained and maintained a claims-made professional liability insurance policy.

On July 29, 2009, MG retained W& O to sue various persons or entities for patent infringement. Olivo entered into a contingency fee agreement with MG and filed a lawsuit (the " underlying lawsuit" ) against several defendants. MG settled the underlying [438 N.J.Super. 207] lawsuit (" the settlements" ) by giving those defendants licenses in exchange for payment of a " one-time settlement amount."

On June 30, 2011, Ward and Olivo stopped actively practicing law as W& O.[4] Thereafter, W& O began winding up its law practice by collecting outstanding legal fees. W& O's professional liability insurance policy expired on August 8, 2011, and W& O did not purchase a tail insurance policy.

MG filed a legal malpractice complaint against W& O, Olivo, and Ward in October 2012. MG alleged in its complaint that Olivo's legal advice harmed MG's patent rights because Olivo, among other things, failed to require that royalty rates or licensing fees be part of the settlement. MG also alleged that W& O and Ward were vicariously liable for Olivo's acts or omissions. By the time MG filed its complaint, W& O's claims-made policy had expired and W& O was uninsured. Ward had no involvement in the underlying lawsuit, the settlements, or Olivo's legal representation of MG.

On March 5, 2013, Ward filed his answer to the complaint. MG did not provide Ward with an AOM within 120 days pursuant to N.J.S.A. 2A:53A-27 (establishing deadlines for service of an AOM). On July 29, 2013, Ward filed his motion to dismiss the complaint for failure to serve the AOM. Ward also argued that, under the facts of this case, he was shielded from liability as a partner of W& O pursuant to N.J.S.A. 42:1A-18(c) (indicating generally that a partner in an LLP is not personally liable for the acts of another partner).

MG maintained that it had substantially complied with the AMS by serving Olivo and W& O, but ...


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