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Mac Naughton v. Harmelech

United States District Court, D. New Jersey

December 12, 2017

W. JAMES MAC NAUGHTON, Plaintiff pro se,
v.
SHAI HARMELECH pro se, CABLE AMERICA, INC., d/b/a SATELLITE AMERICA and USA SATELLITE & CABLE, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          KEVIN MCNULTY UNITED STATES DISTRICT JUDGE.

         On October 13, 2016, Magistrate Judge Michael A. Hammer filed a report and recommendation ("R&R", ECF no. 426)) denying the application of W. James Mac Naughton, plaintiff pro se, for attorney's fees. Mac Naughton filed a timely objection to the R&R (ECF no. 427). No papers were filed in response to the objection. I have, however, reviewed the papers filed by both sides in connection with the Magistrate Judge's decision. Substantially for the reasons stated by the Magistrate Judge, the R&R is adopted as the ruling of the Court.

         My standard of review is de novo.[1] In this diversity case, I must apply State substantive law, which requires me to determine how the State's highest court has decided, or predict how it would decide, the applicable legal issues. See Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220-21 (3d Cir. 2008); Norfolk Southern Ry. Co. v. Basell USA Inc., 512 F.3d 86, 92 (3d Cir. 2008); see also West v. AT&T Co., 311 U.S. 223, 237 (1940); McCabe v. Ernst & Young, LLP, 494 F.3d 418, 424 (3d Cir. 2007).

         The issue, as presented to the Magistrate Judge, was primarily one of law. Defendants urged, and Judge Hammer accepted, that a party who happens to be a lawyer but appears pro se is not entitled to an award of fees. The heart of Mac Naughton's objection is that the cases prohibiting such an award deal with statutory fee-shifting provisions. Parties, he urges, should be able to contract for a contrary result, as they did in this case.[2]

         Before the Magistrate Judge, Mac Naughton argued that Illinois law applied, and defendants argued that New Jersey law applied. On appeal, Mac Naughton appears to concentrate more on New Jersey law. Judge Hammer considered both Illinois and New Jersey law, but ultimately decided that the choice of law issue was inconsequential, because the two states' laws are similar. (R&R 5)

         As to Illinois, Judge Hammer cited Homer v. Lentz, 132 Ill.2d 49, 62-63 (1989), as well as intermediate appellate court cases citing Hamer. (R&R 6-7) In particular, he cited Tantiwongse v. Law Offices of Edward R. Jaquays, 371 Ill.App.3d 1161, 1164 (2007), which extended the reasoning of Hamer to bar a contractually-based fee award. (R&R 7-8)). I agree with Judge Hammer's reasoning.

         In New Jersey, as Judge Hammer found, the picture is similar. The leading case is Segal v. Lynch, 211 N.J. 230, 264 (2012), which involved a fee-shifting rule, N.J. Ct. R. 2:11-4. I agree with Judge Hammer that there are strong indications that New Jersey would apply the Segal rule to contractually-based fee awards as well.

         First, Segal itself cited at least one prior lower court case disallowing a contractually-based pro se fee award, without distinguishing it in any way. See Gruber & Colabella, P.A., v. Erickson, 345 N.J.Super. 248, 252 (Law Div. 2001) (interpreting a retainer agreement, and stating that "when a law firm appearing pro se prevails in an action to collect legal fees from a former client, it is not entitled to recover additional attorney's fees for its collection efforts.") (cited in Segal, 211 N.J. at 261). Segal did not, however, discuss this aspect of Gruber, which it cited it in connection with documenting a split in the New Jersey case law. (See discussion at R&R 8-9.)

         Second, I supplement the R&R by noting that research has uncovered only one only New Jersey case (an unpublished one) that interprets Segal in connection with contractually-based fees. See Ragan & Ragan, P.C. v. Winberry Realty Partnership, 2013 WL 1438102 (Super. Ct. N.J. App. Div. Apr. 10, 2013). Ragan applied the Segal rule and disallowed the fees.

         Third, Judge Hammer noted Segal's strong public policy basis for disallowing pro se fees. (See R&R 8 (general policy discouraging fee-shifting); R&R 9 (discouragement of abusive litigation tactics, avoidance of disparate treatment of classes of pro se litigants); R&R 10 (policy of encouraging parties to obtain independent counsel) (citing Kay v. Erhler, 499 U.S. 432, 437-38 (1991)). I agree with Judge Hammer that these policies do not suggest any strong basis for distinguishing between statutory and contractually-based fees. (R&R 10-11)

         Now, on appeal, Mac Naughton stresses that Segal represented a change in the law, and that pre- Segal law should apply to a lawsuit begun before Segal was decided in 2012, based on a pre-Segal contract. As Mac Naughton presents it, Segal changed everything; before Segal, pro se fees were allowed (Mac Naughton Brf. at 5 (citing Brach, Eichler et al. v. Ezewko, 345 N.J.Super. 1, 783 A.2d 246 (App. Div. 2001) (statutory fee-shifting case)). Actually, as Segal carefully documented, the pre-Segal New Jersey cases were split; what Segal accomplished was not a U-turn in the law, but a resolution of that split. No vested expectations were defeated by Segal. In any event, I am not persuaded that Segal intended to grandfather all existing contracts, permitting fee awards into the future until all such contracts expired or claims were exhausted. Certainly Segal's public policy rationale would argue against creating such an ongoing entitlement for some litigants, but not others.

         Again, the only authority on this point seems to be the unpublished Ragan case, which is not binding but persuasive. It held that "[n]othing in the Court's opinion suggests that Segal was intended to have only prospective application." Ragan, 2013 WL 1438102 at *6 (applying Segal to bar fee award in case on direct appeal when Segal was decided).

         In sum, based on the sound reasoning of Judge Hammer, the R&R is ...


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