May 2023

Working together, Jack Slimm and Jeremy Zacharias (Mount Laurel, NJ) received the following results:

• They were successful before the New Jersey Superior Court, Law Division in barring the plaintiffs’ expert from testifying and obtaining summary judgment on behalf of the defendants in this complex legal malpractice matter.

This case arose out of an action filed by the plaintiffs against their former attorneys, a large home builder, alleging that the defendants’ tortious conduct deprived the plaintiffs of the opportunity to construct an affordable housing complex. However, the plaintiffs had never financed or built a residential development before they sought to construct the housing at issue. At the trial level, the real estate ventures were deemed new businesses. Therefore, the trial court barred the testimony of plaintiffs’ expert on damages and granted summary judgment. The Appellate Division affirmed the trial court’s determination.

On petition for certification, the New Jersey Supreme Court issued its opinion, in which Justice Patterson wrote that New Jersey would now join the majority of jurisdictions that reject a per se ban on claims by new businesses for lost profit damages approaching $8.5 million. The Supreme Court, in its opinion, clarified that New Jersey should follow the New York Rule, which makes it more difficult for a new business to establish lost profit damages with reasonable certainty.

The Supreme Court remanded the case back to the trial court to carefully scrutinize a new business’ claim that a defendant’s tortious conduct or breach of contract prevented it from profiting from an enterprise in which it has no experience, and directed the trial court to bar the claim unless the plaintiffs can prove the claim with reasonable certainty. The Supreme Court ruled that if the trial judge, on remand, does not view the plaintiffs’ proofs to meet the standard, then the trial court should grant the motions, and dismiss the complaints.

On remand, the trial court held Rule 104 hearings, took the testimony of the plaintiffs’ expert and held briefing in line with the new standard. The trial court entered an order barring the plaintiffs’ expert from testifying and granted summary judgment on behalf of the defendants. In doing so, the trial court, as the gatekeeper, carefully scrutinized the plaintiffs’ claim for lost profit damages and determined the plaintiffs were unable to prove its damages with reasonable certainty since their claim, that it would have gained a substantial profit in a venture in which it had no experience, was speculative.

This decision is vitally important to companies, businesses, developers, and law firms defending claims of new businesses for loss of profits in New Jersey. This decision recognizes that it is substantially more difficult for a new business than for an experienced business to prove lost profits with reasonable certainty. Accordingly, any anticipated profits that are remote, uncertain, or speculative are not recoverable.

• Jack and Jeremy were also successful before the New Jersey Appellate Division, which affirmed a decision that dismissed a complex legal malpractice action arising out of an underlying first-party coverage action in the United States District Court. The case involved hundreds of thousands of dollars in building damage caused by Super Storm Sandy.

The plaintiffs filed a complaint against our law firm clients alleging claims for legal malpractice. The malpractice claims were in connection with the defendants’ interaction with the plaintiffs in the underlying lawsuit, which concerned the plaintiffs’ right to recover from an insurance company as a result of purported damage suffered on October 29, 2012, from Super Storm Sandy.

At the close of discovery, a motion for summary judgment was filed on behalf of the defendants, asserting that an order for dismissal should be entered. In granting the defendants’ motion, the trial court held that: (1) the plaintiffs’ expert report was lacking in the damages analysis explanation; (2) no individual attorney-client relationship existed between one of the plaintiffs and the defendants to confer standing to the plaintiff to maintain an individual legal malpractice claim; and (3) the plaintiffs’ allegations that the defendants acted willfully and with wanton disregard towards the plaintiffs to support a punitive damages claim was not supported by the record.

Upon affirming the trial court’s decision, the Appellate Division, reviewing de novo the grant of summary judgment, held that the plaintiffs had not established proximate cause as a matter of law and that expert testimony was necessary to prove proximate causation and damages. The causal relationship between the defendants’ alleged malpractice and the plaintiffs’ asserted loss was not obvious that the trier of fact could have resolved the issue as a matter of common knowledge without the assistance of expert testimony. The court held that the expert’s opinion was an impermissible net opinion, with no evidential weight, since the expert failed to explain the why and wherefore behind the opinion.

This decision is key to many areas of practice since the Appellate Division, in affirming the trial court’s order granting summary judgment, opined on many thorny aspects of litigation, including the parameters of expert reports in legal malpractice claims and the extent that a party could maintain an individual legal malpractice claim when no attorney-client relationship existed. The Appellate Division carefully scrutinized when an attorney owed a duty to a non-client and held, consistent with established precedent, that the grounds on which any plaintiff may pursue a malpractice claim against an attorney with whom there was no attorney-client relationship are exceedingly narrow.

Jack Slimm (Mount Laurel, NJ) obtained, on pretrial motions, an order of dismissal of a legal malpractice action involving $12 million in liquidated damages. This case arose out of two underlying Law Division actions, two bankruptcy matters, a Federal District Court action, an appeal to the Third Circuit, an underlying foreclosure and note action, and an appeal to the Appellate Division. Jack represented a well-known bankruptcy practitioner in connection with claims made by the plaintiff borrower against the lending bank, the bank officers, and counsel.

Jeremy Zacharias (Mount Laurel, NJ) obtained complete dismissal on behalf of his client, a local well-known law firm based in Camden County, New Jersey, from a complaint alleging defamation for statements made in a legal filing. In this matter, the statements that were allegedly defamatory were included in a certification by the law firm’s client in opposition to a motion filed by the plaintiff in this matter. Jeremy successfully argued that the litigation privilege barred the plaintiff’s claims against the law firm and its attorneys based on the absolute immunity afforded to attorneys in representing clients before the court. The court agreed with Jeremy’s arguments regarding the application of the litigation privilege and dismissed the plaintiff’s claims, with prejudice, against the law firm and its attorneys.

Aaron Moore (Philadelphia, PA) obtained a nonsuit at the beginning of trial in a legal malpractice case. In the underlying matter, our client represented a subcontractor in connection with its efforts to collect payments on a project. The contractor who hired the subcontractor was terminated from the project. The project owner orally promised payment to the subcontractor if it completed the work. The work was completed, and the subcontractor did not get paid. Thereafter, the subcontractor retained our client to prosecute a civil action. Our client sued the owner by its trade name and the subcontractor was awarded all amounts owed at the underlying trial. The subcontractor stopped paying our client’s legal fees; thus, execution on the judgment was not completed. The subcontractor then sued our client claiming that its judgment was uncollectible because it was against a trade name. Before the jury came into the courtroom the court granted our motion for nonsuit based on the court’s orders granting our motions in limine seeking to preclude certain evidence and arguments.

Josh Byrne (Philadelphia, PA) received the following results:

• Josh was part of a multi-state team of lawyers that participated in a three-day bench trial in Arapahoe County Colorado and successfully argued that an underlying client had the capacity to execute a retention agreement with a forum selection clause requiring any legal malpractice action be brought in Pennsylvania. The legal malpractice claims alleged multi-millions of dollars of damages and involved representation of a billionaire oil investor who had been involved in a multi-year battle with his family over control of his businesses. Enforcement of the forum selection clause effectively bars the legal malpractice claims due to the operation of the statute of limitations.

• Representing a prominent Philadelphia criminal defense firm in a legal malpractice action, Josh had preliminary objections sustained and a legal malpractice complaint dismissed with prejudice in Lehigh County.

• Josh achieved a dismissal of a disciplinary complaint for his client in a matter involving allegations of failures to communicate with clients and prosecute a case over a six-year period. The letter requesting information from the Office of Disciplinary Counsel was 99 paragraphs long, the response took 106 single-spaced pages, with 176 exhibits.

• Josh had preliminary objections sustained and a legal malpractice complaint dismissed with prejudice in Bucks County.

• Josh achieved an informal admonition, the lowest form of discipline which is non-public, for his client in a matter that involved alleged failures to appropriately represent clients and timely file an appeal in six different criminal matters.

*Prior Results Do Not Guarantee a Similar Outcome

by Gregory P. Graham, Esq.

Attorneys eager to solidify relationships with new clients by finalizing engagement letters often overlook one crucial element: the final payment provision. In addition to ensuring that the lawyer is paid in full for their services, a final payment framework working hand-in-hand with a scope of services description provides excellent protection from potential legal disputes.

It is widely understood that a well-drafted scope of services provision ensures that both the lawyer and the client are on the same page regarding the extent of the lawyer’s services. This can prevent misunderstandings about what the lawyer is undertaking for the client. By setting clear expectations, a scope of services agreement can also protect the lawyer from potential legal disputes. If the client requests work that is outside the scope of the engagement, the lawyer can point to the agreement to show that the requested work was not part of their original agreement. If a client initiates legal action for activities that were never within the scope of the lawyer’s duties under their agreement, the lawyer has a frontline defense to any malpractice claim.

But what about an engagement letter that includes a strong scope of services provision but is unclear as to the final payment mechanism? A final payment provision obviously ensures that lawyers receive payment for their hard work. But it can do so much more. Lawyers providing distinct services—such as the administration of an estate or representation in a particular legal dispute—should consider the benefits of including the final payment framework in their engagement correspondence.

First, a final payment provision can include the timeline for when a lawyer will close their file and conclude their representation. Language indicating that file closures will occur within thirty days of processing final payment can be the companion bookend to the scope of services provision. Any ambiguity about which duties were expressly undertaken by an attorney can be examined in the context of one document - with the scope of services being the narrative description, and the letter itself and the final payment provision providing the timeline of the attorney-client relationship.

Furthermore, the language of a final payment term can directly link to the scope of services description. Tying the timeline for final payment or linking the procedural steps for final payment to the conclusion of services being provided, such as the closing of a docket or final approval of a bankruptcy proceeding, can highlight the total universe of services provided by the attorney.

Lastly, a final payment provision can help prevent disputes over fees. If the lawyer and client do not agree on the fees owed, it can create a dispute that may be difficult to resolve. By including a final payment provision in the engagement letter, the fees are clearly defined and agreed upon in advance, which can help prevent disputes and misunderstandings.

In conclusion, including a final payment provision in an original engagement letter is often an overlooked element that can manage client expectations as to the scope of the relationship from the outset of the engagement, as well as provide protection against potential disputes. A wise lawyer should therefore consider communicating their goodbye along with their hello.

Gregory Graham and Carly Edman (Pittsburgh, PA) authored the article “Retooling the Client Engagement Letter to Minimize Liability Claim Exposure,” appearing in the March 23, 2023, edition of PLUS Blog, the blog of the Professional Liability Underwriting Society. You may read the article here.

Josh Byrne and Alesia Sulock (Philadelphia, PA) authored the article “When Disciplinary Counsel Knocks on Your Door, How Do You Respond?” appearing in the March 20, 2023, issue of The Legal Intelligencer. Read the article here.

Alesia and Josh also authored “Why Your Mental Health Matters to the Disciplinary Board,” which was published on May 16, 2023, in The Legal Intelligencer. You can read their article here.

Danielle Robinson (Fort Lauderdale, FL) and Jeremy Zacharias (Mount Laurel, NJ) presented a seminar to a client on “Negotiating, Skills for Claim Handling and Everyday Life.” Danielle and Jeremy’s presentation focused on negotiation strategies and tactics to utilize in everyday life, as well as in the claims process and handling a mediation or contentious negotiation.