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Harding v. Jacoby & Meyers, LLP

United States District Court, D. New Jersey

July 11, 2018

NANCY HARDING and JEFFREY HARDING, on Behalf Of Themselves and All Others Similarly Situated, Plaintiffs,
v.
JACOBY & MEYERS, LLP, FINKELSTEIN & PARTNERS, LLP, TOTAL TRIAL SOLUTIONS, LLC, ANDREW FINKELSTEIN and KENNETH OLIVER, Defendants. BARBARA J. SMALLS, on Behalf Of Herself and All Others Similarly Situated, Plaintiff,
v.
JACOBY & MEYERS, LLP, TOTAL TRIAL SOLUTIONS, LLC and ANDREW FINKELSTEIN,, Defendants.

          OPINION

          MARK FALK UNITED STATES MAGISTRATE JUDGE

         This matter comes before the Court upon Plaintiffs' motion for leave to amend the Complaint. The motion is opposed. The motion is decided on the papers. Fed.R.Civ.P. 78(b). For the reasons set forth below, the motion is granted.

         BACKGROUND

         A. Factual and Procedural History

         This is a putative class action for breach of fiduciary duty and breach of contract. The matter arises from a dispute between Plaintiffs Nancy and Jeffrey Harding (the “Hardings” or “Plaintiffs”) and their former lawyers, Finkelstein & Partners, LLP (“F&P”). Plaintiffs retained F&P to separately represent them in two unrelated personal injury lawsuits. (Compl. ¶¶ 12, 36.) Each executed a retainer agreement which provided for, among other things, that F&P would receive a one-third contingency fee. Both of the Hardings' personal injury cases settled. F&P deducted from the settlement proceeds payments made to Defendant Total Trial Solutions, LLC (“TTS”), an alleged litigation support company that is owned, at least in part, by Defendant Andrew Finkelstein (“Mr. Finkelstein”) and Defendant Kenneth Oliver. (Compl. ¶¶ 6-8.)

         Plaintiffs commenced this putative class action on August 28, 2014, asserting claims for, inter alia, breach of fiduciary duty and breach of contract. Plaintiffs allege that they were improperly charged for work performed by TTS. According to Plaintiffs, Defendants formed TTS to evade ethics rules forbidding attorneys from collecting more than one-third from a net recovery in a personal injury case, as well as rules proscribing charging clients more than the actual cost of the disbursements. Plaintiffs claim that TTS's work should have been actually covered by F&P's contingency fee arrangement; instead Plaintiffs were charged for TTS's work as a separate expense.

         Following dispositive motion practice, and prior to the Undersigned being assigned to the case, multiple scheduling orders were entered by two other Magistrate Judges initially case managing the action. (CM/ECF No. 40, 46, 57 and 63.) Pursuant to one of these Orders entered July 10, 2015, the date by which motions to amend were to be filed was July 24, 2015.[1] In September 2015, the parties raised various discovery disputes with the Court. On October 15, 2015, the Court entered an Order providing that current expert and class certification motion dates were to be held in abeyance pending a decision on the discovery disputes. (CM/ECF No. 63.) No. further Orders regarding scheduling of the matter were entered. On February 25, 2016, the case was reassigned to District Judge John M. Vazquez and the Undersigned. On March 9, 2016, Plaintiffs filed a motion to consolidate this case with Smalls v. Jacoby and Meyers, LLP et al., 15-6559 (JMV). On July 25, 2016, the Court denied the motion and granted Plaintiffs leave to file their class certification motion by August 30, 2016. (CM/ECF No. 79.) Although the cases were nearly identical, consolidation was denied primarily because the cases were at different procedural stages. Plaintiffs filed a motion for class certification[2] which District Judge Vazquez denied, without prejudice, on October 30, 2017. (CM/ECF No. 101.)[3]

         On December 7, 2017, Plaintiff moved again to consolidate the Smalls and Harding cases. Given the passage of time and other developments, the reason for denying consolidation no longer existed. On June 29, 2018, the Smalls case was consolidated into the Harding case.

         According to Plaintiff, while the motion for class certification was pending in this case, deposition testimony taken in Smalls, including the deposition of Mr. Finkelstein, TTS's Chief Operating Officer, and F&P's Chief Financial Officer, revealed that TTS was the alter-ego of F&P. At a conference before the Court in Smalls on May 18, 2017, Counsel advised of its intention to seek leave to amend to add allegations that TTS is the alter-ego of Mr. Finkelstein and/or Jacoby & Meyers, LLP and is used by them to circumvent ethics rules prohibiting a law firm from charging a profit on disbursements expended by a law firm on a client's behalf. Plaintiffs in Smalls filed an application to amend. The Court granted Plaintiffs' application on November 16, 2017, and the Smalls Plaintiffs filed an Amended Complaint on November 27, 2017.

         B. Current Motion

         Plaintiffs now seek leave to amend their Complaint in the now consolidated Harding case to assert nearly identical allegations to those asserted in Smalls- that TTS is the alter-ego of Mr. Finkelstein and F&P. Defendants do not oppose the motion under Federal Rule of Civil Procedure 15.[4] (Def.'s Br. at 1.) Instead, Defendants argue that Plaintiffs' motion is out of time and that Plaintiffs have failed to make a showing of good cause to permit moving after the date to amend provided in the July 10, 2015 Scheduling Order (“Scheduling Order”). More specifically, Defendants contend that Plaintiffs' deadline to seek leave to amend expired on July 24, 2015, and that Plaintiffs have not demonstrated good cause as required by Federal Rule of Civil Procedure 16 to warrant relief from the Scheduling Order.

         Plaintiffs argue that they were diligent through out the course of the litigation, and reasonably moved for leave to amend after facts were learned in Smalls revealing that TTS shares an alter-ego relationship with Mr. Finkelstein, Jacoby & Meyers, and F&P. Plaintiffs contend that their efforts were delayed by Defendants' scheduling their witnesses for deposition near the end of discovery, the then pending motion for class certification, as well as complying with the Court's procedure for seeking leave. Plaintiffs further argue that Defendants unfairly focus on the outdated scheduling order deadline while completely ignoring the evolving procedural history and circumstances in this case and in Smalls.

         DISCUSSION

         A. Legal ...


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