NJ: When is an Attorney a Joint Tortfeasor?

Posted on October 13, 2010 by Krishna Shah

Cameron & Mittleman v. Chapman, N.J. App. Div., March 17, 2010 (Unpublished).

Facts:  Plaintiff sued his former attorneys ("Firm A") for professional negligence, alleging that it lost royalty income for which it had bargained in the sale of certain assets.  Plaintiff claimed that the loss was caused by Firm A's failure to disclose to Plaintiff the negotiation of a further transfer of the assets by the acquiring company.  Plaintiff alleged that this failure deprived it of the ability to take certain preventive measures.  

Firm A filed a third-party complaint against "Firm B", the attorneys who represented Plaintiffs in a later transaction wherein they structured the agreement governing the sale of the Plaintiffs' assets to the acquiring company.  Firm A alleged that the loss of the royalties would have been avoided had Firm B structured the agreement to prohibit any further transfer of the assets, or otherwise protected Plaintiffs' interests with respect to the royalty payments in the event of such transfer.  

Firm B filed a motion to dismiss and argued that it was not a "Joint Tortfeasor" under N.J.S.A. 2A:53A-1 et seq., given that the two firms represented Plaintiffs in "two separate and distinct corporate transactions, that happened at separate points in time."

Issue:  Can attorneys be liable as joint tortfeasors where they represent the client in separate matters at separate times? 

Ruling:  Yes.  In deciding the issue, the Court first noted that the purpose of the Joint Tortfeasor Contribution Law ("JTCL") is "to promote the fair sharing of the burden of judgment by joint tortfeasors and to prevent a plaintiff from arbitrarily selecting his or her victim."

The Court then determined that Firm A and Firm B were responsible for the "same injury," i.e. loss of royalty income.  Moreover, the Court noted that Plaintiffs' claims against Firm A and Firm B arose at essentially the same time: 

[W]e have concluded that, for the purposes of the JTCL, [Plaintiffs'] putative cause of action against both [Firm A and Firm B] arose at essentially the same time, i.e., the finalization of the transaction...When that transaction was finalized without [Firm B] having structured the agreement to protect against further transfer of the assets and without [Firm A] having disclosed...the negotiations concerning the planned, subsequent sale...the alleged wrongs by the parties to this action that are said to have caused the loss of the royalty income were essentially complete.

Accordingly, the Court held that Firm A could in fact pursue a claim for contribution against Firm B under the Joint Tortfeasor Contribution Law.

Lesson:  In order to show that multiple attorneys are responsible for Plaintiff's damages under the Joint Tortfeasor Contribution Law, it is necessary to establish that each attorney's negligence contributed to the "same injury", and that Plaintiff's cause of action against each of the attorneys arose at the same time.

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Shifting and Sharing the Blame to others for Legal Malpractice

Posted on October 25, 2009 by Ben Wasserman

Cherry Hill Manor Associates v. Faugno (N.J.Super.A.D., 2004) (PDF) reversed by 182 N.J. 64 (2004)

NJ Underlying Real Estate and Litigation

Student Contributor: John Anzalone

Facts:   Plaintiff retained Attorney 1 to represent it in a real-estate purchase. After the transaction failed, Plaintiff retained Attorney 2 to recover its deposit from seller. Attorney 2 failed to add a claim for legal malpractice against Attorney 1 in the suit. Plaintiff then hired Attorney #3, the Defendant, to file a malpractice claim against Attorney 1, but the suit was dismissed because he should have been sued in the case against the seller Attorney #2. Plaintiff then filed a malpractice complaint against Attorney 2 for failure to include Attorney 1 in the suit against the seller, but the suit was dismissed because he should have been sued in the case against Attorney 1. Plaintiff then sued Defendant and his law firm for failing to add a claim against Attorney 2 to the suit against Attorney 1. Defendant and his law firm added Attorney 2 and Attorney 1 to the case under a New Jersey statute providing for indemnification and contribution by those also responsible for Plaintiff's damages.

Issue:   Could the defendant attorney seek reimbursement for damages paid to the Plaintiff from the lawyers the plaintiff previously retained to try to recover its deposit?

Ruling:   In reversing the lower court, the Appellate Division held that an attorney could seek to recover from the lawyers Plaintiff previously retained to try to recover its deposit, based on the following factors:
1) The Defendants' liability and the predecessor attorney's potential liability to the plaintiff were all for failing to protect the interest of the Plaintiff.
2) All liability in the case followed from Attorney 1's potential malpractice in protecting the Plaintiff's interest in its contract with the seller.
3) Defendant was liable for failing to protect Plaintiff's claim against Attorney 2, who was potentially liable for failing to protect Plaintiff's claim against Attorney 1, who was potentially liable for failing to protect Plaintiff's interest against the seller.

Lesson:   When attorneys are sued for failing to protect the plaintiff's interest by a subsequent lawyer for that plaintiff, the attorneys remain potentially liable to the paying defendant lawyer for the extent of the damages to the plaintiff that they caused.

Editor's Note: This summary is posted for educational purposes only, as the Appellate Division decision summarized above was reversed by the NJ Supreme Court. See, 182 N.J. 64,76 (2004). (PDF)

The Supreme Court stated:

...we are dismayed by the cottage industry of litigation that was spawned by a rather commonplace real estate transaction that occurred eighteen years ago. By this opinion, we bring this matter to an end today. We, therefore, hold that, under the circumstances of this case, the prior tortfeasors are not liabile for statutory contribution to the subsequent tortfeasor because the prior and subsequent tortfeasors were not jointly or severally liable to plaintiff for the same cause of action.  We further hold that the subsequent totfeasor cannot claim statutory contribution form the prior tortfeasor inasmuch  as the "injury" inflicted by the prior  tortfeasrn is not the "same injury" as the one inlficted by the subsequent tortfeasor.

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Sharing Malpractice Liability Between Out-of-State and Local Counsel

Posted on October 16, 2009 by Ben Wasserman

Connell, Foley & Geiser, LLP v. Israel Travel Advisory Service, Inc.,377 N.J. Super. 350, 872 A.2d 1100 (App. Div. 2005)

NJ Underlying litigation

Student Contributor:  Dannis Le,  Class of 2009.

Facts: Out-of-state law firm recommended a New Jersey law firm to represent client in litigation. That firm worked closely with the N.J. law firm but did not appear as counsel of record. After client lost the case, the NJ law firm sued client for unpaid legal fees and client counter-claimed for malpractice. Client did not claim that out-of-state firm committed malpractice. The NJ law firm sought contribution  from the out-of-state firm in the malpractice action, on the theory that it was either co-counsel or successor counsel in the underlying case. 

Issue: Is out-of-state counsel liable for contribution tn a malpractice action when it did not appear as counsel of record with NJ local counsel?

Ruling: The Appellate Division remanded the malpractice claim for trial and affirmed that the NJ law firm could seek contribution from the out-of-state firm, because: 

  1. Co-counsel owes a duty to the client, not to other co-counsel. NJ local counsel must show that the out of state law firm had a duty to their joint client in order to seek contribution in the client's malpractice claim. 
  2. Liability under the NJ Joint Tortfeasors Contribution Law. It would defeat the purpose of the JTCL to allow the out of state law firm to escape liability because it was not named in the malpractice claim: "The purpose of the JTCL is to promote the fair sharing of the burden of judgment by joint tortfeasors and to prevent a plaintiff from arbitrarily selecting his or her victim." 
  3. Malpractice can occur whether or not an attorney is formally admitted to practice in the state. The Court found no authority to the contrary. Not being admitted to a state does not bar a malpractice claim against out-of-state counsel in that state. 

Lesson: A firm acting as co-counsel has a duty to the client. Co-counsel can be held jointly liable for any malpractice committed. This is true even if they are not admitted pro hac vice in NJ and are not the counsel of record. But under NJ law there is no successor counsel liability. 

Editor's Note: On the duty of local NJ counsel when lead counsel is an out-of-state firm acting pro hac vice, see Ingemi v. Pelino & Lentz, 866 F. Supp. 156 (D.N.J. 1994) where NJ local counsel was held to a reasonable care standard and a duty to take more than a de minimis role in representing the client.

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