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Meisels v. Fox Rothschild LLP

Supreme Court of New Jersey

January 9, 2020

Moshe Meisels, Chanie Meisels, Monroe Estates, Ltd., and Premier Estates NY, Inc., Plaintiffs-Respondents/Cross-Appellants,
v.
Fox Rothschild LLP and Anthony Argiropoulos, Esquire, Defendants-Appellants/Cross-Respondents.

          Argued September 10, 2019

          On certification to the Superior Court, Appellate Division.

          Francis P. Devine, III, argued the cause for appellants/cross-respondents (Pepper Hamilton, attorneys; Francis P. Devine, III, and Angelo A. Stio, III, of counsel and on the briefs).

          Brian K. Condon argued the cause for respondents/cross-appellants (Condon Catina & Mara, attorneys; Brian K. Condon and Laura M. Catina, on the briefs).

          Diana C. Manning argued the cause for amicus curiae New Jersey State Bar Association (New Jersey State Bar Association, attorneys; Evelyn Padin, President, of counsel, John E. Keefe, Jr., Diana C. Manning, Benjamin J. DiLorenzo, and Ann Marie Effingham, on the brief).

          LaVECCHIA, J., writing for the Court.

         This appeal involves claims of conversion and breach of fiduciary responsibility leveled at an attorney, Anthony Argiropoulos, Esq., and his then-law firm, Fox Rothschild LLP (collectively, "the firm"), regarding funds wire-transferred to the firm's trust account.

         As alleged in this matter, an intermediary entity wired funds for plaintiff Moshe Meisels, a London-based real estate investor, to the firm's trust account in connection with a real estate deal in which Eliyahu Weinstein, the firm's client, was engaged. Prior to the commencement of this litigation, the firm was admittedly unaware of Meisels's existence. It is undisputed that Meisels did not speak to, or otherwise communicate with, Argiropoulos or Fox Rothschild.

         In his pleadings, Meisels alleges that he had Rightmatch Ltd., an entity located in London, transfer over $2.4 million to the attorney trust account of Fox Rothschild, Weinstein's attorneys at the time. Rightmatch wired the money in two transfers, executed by Cambridge Mercantile Group. Confirmations for each transfer were sent, "[f]or and on behalf of Cambridge Mercantile Corp.," to Rightmatch, with a single line indicating "Attn: Moshe Meisels." The transfers themselves did not identify plaintiff as the funds' owner or include any instructions regarding limitations or conditions.

         Defendants distributed the funds as their client directed. Meisels alleges that Weinstein instructed the firm to distribute the funds for purposes other than the agreed-upon real estate transaction. According to Meisels, the purchase of the Irvington property was never consummated; Weinstein defrauded Meisels and his related co-plaintiffs.

         Plaintiff commenced this action in 2012 and, after discovery and the filing of an amended complaint, defendants sought summary judgment on the grounds that (1) plaintiff did not produce evidence to support ownership of the funds that Rightmatch wired to Fox Rothschild and therefore lacked standing to sue; and (2) plaintiff had no contact with anyone from Fox Rothschild and, therefore, could not establish the essential elements of any of the claims.

         The motion court granted summary judgment to the firm and dismissed the amended complaint with prejudice. The Appellate Division affirmed as to the fiduciary duty claim but reversed as to the conversion claim, rejecting defendants' argument "that Meisels was required to show that he demanded the return of his property."

         The Court granted defendants' petition for certification, seeking review of the Appellate Division's judgment reinstating the conversion claim. 236 N.J. 67 (2018). The Court also granted plaintiff's cross-petition, seeking review of the Appellate Division's judgment dismissing the breach of fiduciary duty claim. 236 N.J. 44 (2018).

         HELD: The firm did not breach any fiduciary duty where the firm was not made aware, nor did it have any basis on which it reasonably should have been aware, of plaintiff or of a claim by plaintiff to the funds. As such, there was no relationship between the firm and plaintiff on which a fiduciary duty was owed. On that issue, the Court affirms the judgment of the Appellate Division. However, defendants cannot be found to have engaged in conversion in this matter. Where, as here, a law firm lawfully holds in trust wired funds for its client's real estate transaction, which funds are received with no limiting direction or instruction and for which the firm receives no demand from the non-client, the firm's disposition of the trust funds in accordance with the client's instructions does not give rise to a claim for conversion. The Court rejects the reasoning that under these circumstances the obligation to make a demand is excused and reverses as to the conversion claim.

         1. As officers of the courts, attorneys owe a duty of care that finds helpful benchmarks in the Rules of Professional Conduct (RPCs). Standing alone, a violation of the RPCs does not create a cause of action for damages in favor of a person allegedly aggrieved by that violation. In this matter, the RPCs provide relevant information for assessing the claimed violation of a fiduciary duty with which the firm is charged. RPC 1.15 addresses an attorney's obligation to safeguard property in his or her possession, including property received from a non-client third party. (pp. 12-14)

         2. Here, RPC 1.15 does not provide a pathway for finding a fiduciary duty that was breached by the firm. Meisels maintains that an attorney "owes a fiduciary duty to persons, though not strictly clients, who he knows or should know rely on him in his professional capacity." However, case law extending an attorney's duty to a third party not in privity with the attorney has been approached with care so as to be fair to all; generally stated, it is cabined by considerations of reasonableness. Meisels admits that defendants had no knowledge of his existence, had no contact with him, possessed no knowledge about any purported agreement between him and Weinstein, and made no representations to Meisels. It is simply not reasonable to expect a lawyer to have fiduciary obligations to an individual under such circumstances. Meisels produced no evidence to show that he relied upon defendants in their professional capacity. The circumstances of this case, moreover, offer no indicia that defendants endeavored to induce Meisels to rely on the firm. Inducement of reliance cannot be ascribed to the firm simply because the funds for its client's commercial real estate transaction were permitted to be wired to and held in the firm's trust account. In these circumstances, the firm's disposition of the funds held in its trust account in compliance with the client's instructions, as required by RPC 1.2, was not a breach of fiduciary duty. No fiduciary duty was owed by the firm to Meisels. (pp. 14-18)

         3. The Court traces the history of the tort of conversion. To determine whether a conversion has occurred, there must first be an assessment into whether defendant has independent dominion and control over the subject property. Additionally, where the defendant lawfully acquired plaintiff's property, the plaintiff must show that he demanded the return of the property and that the defendant refused compliance. The demand is the linchpin that transforms an initial lawful possession into a setting of tortious conduct, if the demand is refused. Accordingly, in such circumstances, a demand is essential; a claimant must make a demand at a time and place and under such circumstances as defendant is able to comply with if he is so disposed, and the refusal must be wrongful. There are circumstances, to be sure, where demand may be futile, but that is and must be viewed as an exception. (pp. 18-22)

         4. Funds held in an attorney's trust account for its client are the client's funds, not the firm's. Here, with no knowledge of a competing claim to the funds -- and, indeed, no knowledge whatsoever about Meisels and his role in the transaction -- the firm acted appropriately in adhering to the client's directions. Meisels cannot prove that the firm itself exercised independent dominion and control over his funds. That requirement for a conversion claim is lacking in this matter. The lack of independent dominion and control, moreover, renders more serious the lack of demand here. The demand would have been the means to alert the firm that a competing claim existed and would have triggered the firm's obligation to reasonably inquire further, and perhaps seek judicial assistance, before embarking on fulfillment of a client's direction. Violation of the demand might then create the tort of conversion. Only when an attorney misdirects or misappropriates funds, or when an attorney has acted contrary to a known, competing claim -- or a competing claim that reasonably should have been known -- can there be an independent dominion or control over the funds by the firm to the repudiation of the rights of the proper owner. (pp. 23-25)

         The judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART, and the Court orders the conversion claim DISMISSED.

          CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE LaVECCHIA's opinion.

          OPINION

          LaVECCHIA JUSTICE

         We granted certification in this appeal to address claims of conversion and breach of fiduciary responsibility leveled at an attorney and his then-law firm regarding funds wire-transferred to the firm's trust account. As alleged in this matter, an intermediary entity wired the funds for plaintiff, a non-client, to the firm's trust account in connection with a real estate deal in which the firm's client was engaged. The wire transfers themselves did not identify plaintiff as the funds' owner, nor did they include any instructions regarding limitations or conditions. Defendants distributed the funds as their client directed. We now address whether, years later, these defendant attorneys should be liable to plaintiff, who was unknown to defendants and had not before asserted an interest in the funds.

         The trial court granted summary judgment to defendants Fox Rothschild LLP and its then-partner, Anthony Argiropoulos, Esq. (collectively, "the firm"). On appeal, the Appellate Division affirmed the dismissal of the fiduciary duty claim but remanded the conversion claim for trial.

         We conclude that the trial court and Appellate Division appropriately recognized that the firm did not breach any fiduciary duty where the firm was not made aware, nor did it have any basis on which it reasonably should have been aware, of plaintiff or of a claim by plaintiff to the funds. As such, there was no relationship between the firm and plaintiff on which a fiduciary duty was owed. On that issue, we affirm the judgment of the Appellate Division. However, we reverse on the conversion claim and order that it, too, be dismissed.

         Defendants cannot be found to have engaged in conversion in this matter. The firm acted in conformity with its client's instructions about funds lawfully held in the firm's trust account; plaintiff did not have the funds wire-transferred to the firm with any direction or instructions; and plaintiff made no demand for the funds until years after the transaction was concluded, far too late to alert the attorney that there was a contrary claim. Where, as here, a law firm lawfully holds in trust wired funds for its client's real estate transaction, which funds are received with no limiting direction or instruction and for which the firm receives no demand from the non-client, the firm's disposition of the trust funds in accordance with the client's instructions does not give rise to a claim for conversion. We reject the Appellate Division's reasoning that under these circumstances the obligation to make a demand is excused and that liability can exist without it.

         I.

         Plaintiff Moshe Meisels, a London-based real estate investor, entered into a real estate agreement with Eliyahu Weinstein, the firm's client and a non-party to this appeal. According to the agreement, each party "agreed to provide $2.5 million toward the purchase of a property in Irvington, New Jersey."

         In his pleadings, Meisels alleges that he had Rightmatch Ltd., an entity located in London, transfer a total of $2, 414, 163.50 to the attorney trust account of Fox Rothschild, Weinstein's attorneys at the time. Rightmatch made two transfers, executed by Cambridge Mercantile Group, to that account for $1, 328, 680.99 and $1, 083, 482.51, respectively. Wire confirmations for each transfer were sent, "[f]or and on behalf of ...


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