NJ: No Charitable Immunity for Legal Aid Malpractice
James v. Murray, NJ Law Div. (trial court) Docket No. ESX-L-9471-09 (May 17, 2011)
NJ Underlying Divorce
Facts: Legal Services of NJ provides free legal representation to indigent litigants. Its revenue comes mostly from governmental as opposed to private charitable donations. Plaintiff here was represented by Legal Services in her divorce action. She was the beneficiary of two life insurance policies, which she lost due to her lawyer's negligence in failing to advise her that by statute, N.J.S.A. 3B:3-14, she would automatically forfeit spousal rights to insurance proceeds in the event of divorce. Here, plaintiff assumed she still had right to collect the $60,000 in life insurance proceeds. She only found out she was not after her husband died and she had paid for his funeral expenses. Defendant Legal Services moved for Summary Judgment asserting it was entitled to protection of the Charitable Immunity Law.
Issues:
1) Even if defendants were negligent, is a Legal Services organization entitled to the benefit of the NJ Charitable Immunity Law-- N.J.S.A.2A:53A-7(a), which grants immunity to employees of non profits organized for religious, charitable or educational purposes?
2) Are IOLTA funds, which are imposed on NJ attorneys as part of their license registration requirement and are allocated by the NJ Supreme Court for funding of Legal Services to be considered governmental funding or private contributions, the latter of which would afford Legal Services immunity?
Ruling: 1) No; 2) Stay tuned for an App. Div. decision.
Quoting from Legal Services' own mission statement, the Court noted:
...free legal services to low-income, senior and disabled county residents in order to assure that their legal rights are portected and that access to the civil justice system is not denied...simply because they cannot afford a private attorney...
The defendant had to show that it was engaging in charitable or educational purposes at the time it was rendering the services at issue in order to claim immunity. Whether the Legal Services satisfied that criteria was a fact sensitive analysis which requires the Court to look beyond the defendant's non-profit structure and social service activities to take into account its source of funding. Here, the Court pointed to Legal Services source of revenues which showed that 99% came from governmental grants and only 1% came from private contributions.
Moreover, defendants failed to present evidence suggesting that they solicit or depend upon private charitable contributions for funding. In short,...defendants have failed to demonstrate that hey are organized exclusively for charitable purposes.
Lesson: This was plaintiff's second divorce. If the attorney representing her in either of her divorces advised her that she would forfeit her spousal life insurance benefits because of her divorce, would she have proceeded to divorce? The decision doesn't answer that question, but that would surely be an important question of fact especially in view of the lawyer's duty under RPC 1.4 to communicate such information to the client so that she could have made an informed choice about that statutory forfeiture. Could the forfeiture been avoided if it were addressed in the Property Settlement Agreement? Questions to ponder. And lessons to be learned... Check back for an Appellate Division decision concerning this trial court decision.
