ALLSTATE NEW JERSEY INSURANCE COMPANY v. HARRIS C. LEGOME (L-0859-13, GLOUCESTER COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1886-20
ALLSTATE NEW JERSEY
INSURANCE COMPANY,
ALLSTATE INSURANCE
COMPANY, ALLSTATE
INDEMNITY COMPANY,
ALLSTATE PROPERTY AND
CASUALTY INSURANCE
COMPANY, ALLSTATE
NEW JERSEY PROPERTY
AND CASUALTY INSURANCE
COMPANY and ENCOMPASS
INSURANCE COMPANY,
Plaintiffs-Appellants,
v.
HARRIS C. LEGOME, ESQUIRE,
LEGOME AND ASSOCIATES, LLC,
VINCENT A. CAMPO, ESQUIRE,
MARY ELIZABETH BOGAN,
ESQUIRE, MELISSA KEPHART,
MICHELE D'AMBRA STEPHANIE
PAOLINO and COLLEEN CROSBY,
Defendants-Respondents.
_______________________________
Argued May 12, 2022 – Decided July 26, 2022
Before Judges Haas, Alvarez and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Gloucester County, Docket No. L-0859-13.
Michael A. Malia argued the cause for appellants (Peri
& Stewart, LLC and Kennedy Vuernick, LLC,
attorneys; Michael A. Malia and Douglas M. Alba, on
the briefs).
Joseph P. Grimes argued the cause for respondents.
PER CURIAM
Plaintiffs Allstate Insurance Company and its affiliates (Allstate) appeal
from a February 11, 2021 final judgment following a November 19, 2020,
decision denying Allstate's motion for reconsideration of the court's July 29,
2020 order granting defendants, attorney Harris Legome, his firm, and
employees, summary judgment. We affirm, substantially for the reasons set
forth in Judge James R. Swift's well-reasoned opinion. We add the following
brief remarks.
We discern the following facts from the record. From 2009-2013
defendants successfully litigated 7,000 personal injury protection (PIP) claims
on behalf of plaintiffs. As a result, Allstate paid defendants' attorney's fees and
cost payments associated with the arbitrations before the National Arbitration
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Forum and Forthright. 1 The subject of this appeal is a group of 263 cases in
which Allstate paid attorney's fees to defendants under the PIP arbitration
system. Approximately seventy percent of these awards were settled prior to
arbitration and the other thirty percent represent attorney's fees awards made by
the arbitrator. Allstate alleges that defendants violated the New Jersey Insurance
Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -34, and seek the return of
$1.1 million consisting of all legal fees and costs paid or ordered to be paid to
defendants as the prevailing party against Allstate in PIP arbitrations.
Allstate alleges that defendants engaged in extensive misrepresentation at
the time Legome worked on these cases. In his deposition, Legome testified that
his secretaries used a fee certification form with pre-filled time entries and work
descriptions regardless of whether they accurately reflected actual work. For
example, the task of creating a demand for arbitration had a standard time entry
of 1 or 1.2 hours irrespective of how accurate that time was. Defendant Melissa
Kephart, one of the firm's secretaries, described the process of preparing the fee
certifications as going through the existing fee certification file, recreating it,
1
Forthright is the administrator of the New Jersey no-fault PIP arbitration
Program.
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copying and pasting as necessary and changing the caption. The other
secretaries, defendants Stephanie Paolino, Colleen Crosbee, and Vincent
Campo, all testified to using the same template form and copying and pasting.
Defendants also admitted to making judgment calls or guessing at how much
time was spent on certain activities when they were not working from the
template.
Defendants billed $25 for certified mail. Defendant Kephart testified that
she did not know if anyone kept track of postage and that she had never actually
sent anything by certified mail. Defendant Crosbee testified that no one
documented proof of the certified or regular mail charges and, therefore, she did
not know if the $25 was accurate or even reflected an actual expense. Allstate
also alleges that, at times, defendants billed for more than twenty-four hours in
a day and negotiated settlements when Legome was not available. Further,
Allstate alleges Legome may not have done any of the work on particular files
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himself despite the fact that he always signed the fee certifications containing
only his name.2
On June 11, 2013, Allstate filed a complaint against defendants alleging
violations of IFPA, common law fraud, and unjust enrichment. The parties
participated in discovery over the next seven years. On May 8, 2020, defendants
moved for summary judgment. On July 29, 2020, Judge Swift issued a written
decision and order granting defendants' motions and dismissing all of Allstate's
IFPA and unjust enrichment claims, and a majority of Allstate's common law
fraud claims.3
2
Judge Swift emphasized he does not condone any of Legome's alleged
misconduct. Nor do we. The issue, however, is not whether Legome did
anything unethical or otherwise unlawful, but whether Allstate has stated a
viable claim under IFPA or the common law. We therefore must set aside our
distaste for the underlying facts and scrutinize Allstate's claims with the same
objective lens we apply in any plaintiff's cause of action. It bears noting that
despite Allstate's expressed moral outrage at Legome's conduct, it apparently
never reported these transgressions to the ethics committee, opting instead to
pursue claims for money damages. Regardless, Legome has since been disbarred
on unrelated ethics charges.
3
The remaining claims were for common law fraud for seven settled cases with
fee certifications which are not the subject of this appeal.
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On November 19, 2020, the judge denied Allstate's motion for reconsideration. 4
This appeal followed.
On appeal, Allstate presents the following arguments for our
consideration:
POINT I
THE TRIAL COURT ERRED BY GRANTING
DEFENDANTS' SUMMARY JUDGMENT
MOTIONS, DISMISSING PLAINTIFFS' [IFPA]
CLAIMS.
A. Standard of Review for Summary Judgment.
B. The Trial Court Misapplied the Law Because
Fraudulently Obtained Insurance Company
Payments are Actionable Under the IFPA, Which is
to be Construed Liberally.
1. The trial court ignored the IFPA's plain
language and incorrectly modified the IFPA.
a. Each IFPA section does not require
as a prerequisite a claim for benefits
pursuant to or related to an insurance
policy.
i. N.J.S.A. 17:33A-4(a)(3)'s
plain and ordinary language
only requires the Plaintiffs to
4
Because there were several outstanding motions and claims at the time of the
July 29, 2020, order, the judge entered a February 11, 2021 consent order
disposing of all remaining claims, issues, and parties in order to achieve finality
for purposes of appeal.
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prove the Defendants
concealed the occurrence of an
event which affected the
Defendants' initial or
continued right or entitlement
to (1) any insurance payment
or (2) the amount of any
payment to which the person is
entitled.
ii. The trial court erred by
rewriting the IFPA by omitting
keywords from N.J.S.A.
17:33A-4(a)(2), and then
relying upon that incorrect
citation, contrary to the
statute's plain and ordinary
reading.
2. The trial court failed to construe the IFPA
liberally.
C. The Trial Court Erred Because an Insurance Company
Can Pursue An IFPA Action Even if the Insurance
Company's Payment Is Not Made Pursuant to an Insurance
Policy.
D. The Trial Court Erred Because There Was Evidence
Creating a Genuine Issue of Material Fact as to Whether
PIP Attorney Fee Payments were Made Pursuant to or
Related to an Insurance Policy.
1. 2,551 Legome attorney fee certifications
seeking payment were pursuant to, in connection
with and/or related to a policy of insurance
Plaintiffs issued.
2. The Legome Defendants conceded in their
briefs in support of summary judgment that
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Legome's attorneys' fees were pursuant to a
liability or indemnity policy.
3. Defendant Crosbee admitted that all Legome
attorney fee certifications were prepared or made
and intended to be presented to Plaintiffs in
support of a claim for payment or other benefit
under an insurance policy.
4. Plaintiffs' checks payable to the Legome
Defendants were made pursuant to, in connection
with and/or related to a policy of insurance.
5. Allstate Analyst Michael Gallagher confirmed
that attorneys' fees are paid under the PIP
insurance coverage.
6. Plaintiffs' expert, Carl Poplar, Esquire, found
sufficient evidence for Plaintiffs to get to a jury
on its claims.
7. The Defendants sent demands for arbitration
to Plaintiffs which were pursuant to, in
connection with and/or related to a policy of
insurance issued by the Plaintiffs.
8. Defendants submitted assignment of benefits
forms which were pursuant to, in connection with
and/or related to an insurance policy.
9. Arbitration awards that awarded the Legome
Defendants attorneys' fees and costs were made
pursuant to, in connection with and/or related to
a policy of insurance issued by the Plaintiffs.
E. The Trial Court Relied Upon Factual Information Not in
the Record to Support its Flawed Conclusion.
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POINT II
The Trial Court Erred by Granting Defendants'
Summary Judgment Motions, Dismissing Plaintiffs'
Common Law Fraud Claims.
A. The Trial Court Erred In Dismissing Plaintiffs' Common
Law Fraud Claims in Arbitration Award Cases.
B. The Trial Court Erred in Dismissing Plaintiffs' Common
Law Fraud Claims in Settled Cases Without Fee
Certifications.
POINT III
The Trial Court Erred by Granting Defendants'
Summary Judgment Motions, Dismissing Plaintiffs'
Claims for Unjust Enrichment and Costs.
POINT IV
The Trial Court Erred by Denying Plaintiffs' Motion for
Reconsideration.
A. Standard of Review for Reconsideration.
B. The Court Abused its Discretion and the Court's Decision
Was Against the Interests of Justice.
We review a trial court's grant of summary judgment de novo, applying
the same standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346
(2017). Summary judgment must be granted "if the pleadings, depositions,
answers to interrogatories and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact challenged and
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that the moving party is entitled to a judgment or order as a matter of law."
Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224
N.J. 189, 199 (2016) (quoting R. 4:46-2(c)).
Further, we review the decision of a motion for reconsideration for an
abuse of discretion. Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div.
1996). Reconsideration should only be granted in "those cases which fall into
that narrow corridor in which either 1) the [c]ourt has expressed its decision
based upon a palpably incorrect or irrational basis, or 2) it is obvious that the
[c]ourt either did not consider, or failed to appreciate the significance of
probative, competent evidence." Id. at 384 (quoting D'Atria v. D'Atria, 242 N.J.
Super. 392, 401 (Ch. Div. 1990)). Therefore, we have held that "the magnitude
of the error cited must be a game-changer for reconsideration to be appropriate."
Palombi v. Palombi, 414 N.J. Super. 274, 289 (App. Div. 2010).
Pursuant to N.J.S.A. § 17:33A-4
a. A person or a practitioner violates this act if he:
(1) Presents or causes to be presented any
written or oral statement as part of, or in
support of or opposition to, a claim for
payment or other benefit pursuant to an
insurance policy or the "Unsatisfied Claim
and Judgment Fund Law," P.L.1952, c.174
(C.39:6-61 et seq.), knowing that the
statement contains any false or misleading
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information concerning any fact or thing
material to the claim; or
(2) Prepares or makes any written or oral
statement that is intended to be presented
to any insurance company, the Unsatisfied
Claim and Judgment Fund, or any claimant
thereof in connection with, or in support of
or opposition to any claim for payment or
other benefit pursuant to an insurance
policy or the "Unsatisfied Claim and
Judgment Fund Law," P.L.1952, c.174
(C.39:6-61 et seq.), knowing that the
statement contains any false or misleading
information concerning any fact or thing
material to the claim; or
(3) Conceals or knowingly fails to disclose
the occurrence of an event which affects
any person's initial or continued right or
entitlement to (a) any insurance benefit or
payment or (b) the amount of any benefit
or payment to which the person is entitled;
(4) Prepares or makes any written or oral
statement, intended to be presented to any
insurance company or producer for the
purpose of obtaining:
(a) a motor vehicle insurance
policy, that the person to be
insured maintains a principal
residence in this State when, in
fact, that person's principal
residence is in a state other
than this State; or
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(b) an insurance policy,
knowing that the statement
contains any false or
misleading information
concerning any fact or thing
material to an insurance
application or contract;
(5) Conceals or knowingly fails to disclose
any evidence, written or oral, which may
be relevant to a finding that a violation of
the provisions of paragraph (4) of this
subsection a. has or has not occurred; or
(6) Prepares, presents or causes to be
presented to any insurer or other person, or
demands or requires the issuance of, a
certificate of insurance that contains any
false or misleading information concerning
the policy of insurance to which the
certificate makes reference, or assists,
abets, solicits or conspires with another to
do any of these acts. As used in this
paragraph, "certificate of insurance" means
a document or instrument, regardless of
how titled or described, that is, or purports
to be, prepared or issued by an insurer or
insurance producer as evidence of property
or casualty insurance coverage. The term
shall not include a policy of insurance,
insurance binder, policy endorsement, or
automobile insurance identification or
information card.
Nothing in the IFPA describes attorney's fees as a benefit or claim
pursuant to a policy. Instead, as the judge found, attorney's fees are authorized
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by statute as a penalty for an insurer's wrongful non-payment of a claim. The
judge stated:
Pursuant to N.J.S.A. 39:6A-5.2(g), the costs of the
proceedings shall be apportioned by the DRP [dispute
resolution professional] and the award may include
reasonable attorney's fees for a successful claimant in
an amount consonant with the award. Where attorney's
fees for a successful claimant are requested, the DRP
shall make the following analysis consistent with the
jurisprudence of this State to determine reasonable
attorney's fees, and shall address each item below in the
award:
1. Calculate the "lodestar," which is the number
of hours reasonably expended by the successful
claimant's counsel in the arbitration multiplied by
a reasonable hourly rate in accordance with the
standards in Rule 1.5 of the Supreme Court's
Rules of Professional Conduct . . . .
i. The "lodestar" calculation shall exclude
hours not reasonably expended;
ii. If the DRP determines that the hours
expended exceed those that competent
counsel reasonably would have expended
to achieve a comparable result, in the
context of the damages prospectively
recoverable, the interests vindicated, and
the underlying statutory objectives, then
the DRP shall reduce the hours expended
in the "lodestar" calculation accordingly;
and
iii. The "lodestar" total calculation may
also be reduced if the claimant has only
achieved partial or limited success and the
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DRP determines that the "lodestar" total
calculation is therefore an excessive
amount. If the same evidence adduced to
support a successful claim was also offered
on an unsuccessful claim, the DRP should
consider whether it is nevertheless
reasonable to award legal fees for the time
expended on the unsuccessful claim.
2. DRPs, in cases when the amount actually
recovered is less than the attorney's fee request,
shall also analyze whether the attorney's fees are
consonant with the amount of the award. This
analysis will focus on whether the amount of the
attorney's fee request is compatible and/or
consistent with the amount of the arbitration
award. Additionally, where a request for
attorney's fees is grossly disproportionate to the
amount of the award, the DRP's review must
make a heightened review of the "lodestar"
calculation described in (e)1 above.
Guided by these principles, we reject Allstate's argument that the judge
erred in dismissing its IFPA violation claims. In his opinion Judge Swift
reasoned,
a prerequisite for a violation under the [IFPA] is a claim
for payment relating to an insurance policy. Each
section states that a claim for benefits pursuant to a
policy of insurance is required. Allstate's claim under
the IFPA fails in this regard. The payments made to
Legome result from a specific legislative-
administrative code penalty for failing to pay a first-
party claim. N.J.A.C. 11:3-5.6(e) authorizes the
payment to Legome, not a provision or claim under that
insurance policy. In fact, when challenged at oral
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argument, Allstate admitted that there is no policy
provision that authorizes this payment. It is a function
of statute, not contract. It is a penalty for failing to pay
a legitimate claim authorized by the Code. It is similar
and analogous to R. 4:42-9(a)(6) that authorizes
attorney's fees in successful actions upon a first-party
liability or indemnity claim. It is a penalty imposed
designed to encourage the payment of legitimate claims
by the insurer. The policy itself does not permit the
payment of the fees, so it is not a claim for payment
pursuant to a policy of insurance, and therefore the
IFPA cannot apply.
[see also N.J.S.A. 39:6A-5.2(g).]
As the judge aptly found, the payments were not made as a benefit
pursuant to an insurance policy as contemplated by IFPA, but as a penalty
against Allstate pursuant to N.J.A.C. 11:3-5.6(e). In that regard, the attorney-
fee payments are not mentioned in the insured's policy. Nor do they diminish
the available PIP coverage to the insured, unlike payments to a successful
provider or insured, which are paid out of the PIP coverage until the policy limit
is exhausted. Furthermore, as the judge said, defendants were never paid what
they asked for. Since it is undisputed that Legome was always paid a reasonable
amount, which was determined by the arbitrator's evaluation as established in
the Code or by agreement of an Allstate adjuster, there was no harm to Allstate.
We also reject Allstate's argument that the judge improperly dismissed its
fraud claims. "To establish common-law fraud, a plaintiff must prove: '(1) a
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material misrepresentation of a presently existing or past fact; (2) knowledge or
belief by the defendant of its falsity; (3) an intention that the other person rely
on it; (4) reasonable reliance thereon by the other person; and (5) resulting
damages.'" Banco Popular N. Am. v. Gandi, 184 N.J. 161, 172-73 (2005)
(quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997)). "Fraud
is not presumed; it must be proven through clear and convincing evidence."
Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div.
1989).
For claims that involved a completed arbitration in which a fee
certification was submitted to the arbitrator for consideration, Judge Swift
properly dismissed those claims, reasoning that
Legome's fee certification was submitted to the
arbitrator in the cases that were not settled. The only
person who relied upon the certifications was the
arbitrator (to the extent that they did), not Allstate. In
those cases, there was not reliance on the fee
certification by this plaintiff when an award of fees was
made. Allstate[] obviously had the ability to contest the
extent of the fees requested, and had the ability to
appeal those attorney's fees awarded if they felt
aggrieved in some manner. B[ut] to somehow suggest
in those cases they detrimentally relied upon the
inflated fee certifications stretches the facts. The fraud,
if any, is upon the tribunal, not the plaintiff.
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We agree with Judge Swift's reasoning. The arbitrator serves as a
gatekeeper to ensure the insured's treatment was medically necessary and
causally related to the accident. If the claimant succeeds in making that
showing, then the claimant is a prevailing party entitled to a fee. The arbitrator
then serves an additional gatekeeping function by assessing the fee certification
and awarding a reasonable fee based on the statutory factors set forth in N.J.S.A.
39:6A-5.2(g). Allstate does not contend the arbitrators failed to discharge their
prescribed duties, nor does it contend any of the fees actually awarded and paid
were unreasonable. Any dismissal of the extent of the ability of the arbitrator,
a full-time professional, to adequately assess reasonableness appears unfounded.
Therefore, with respect to completed arbitrations, Allstate's fraud claims fail for
lack of reliance and no showing of damages.
For the same reasons, we find the judge was correct in dismissing
Allstate's unjust enrichment claim. "The doctrine of unjust enrichment rests on
the equitable principle that a person shall not be allowed to enrich himself [or
herself] unjustly at the expense of another." Assocs. Com. Corp. v. Wallia, 211
N.J. Super. 231, 243 (App. Div. 1986). To prevail on a claim for unjust
enrichment, a plaintiff must demonstrate that the defendant "received a benefit"
from him or her and that "retention of that benefit without payment would be
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unjust." VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994). A plaintiff
must additionally "show that it expected remuneration from the defendant at the
time it performed or conferred a benefit on defendant and that the failure of
remuneration enriched defendant beyond its contractual rights." Ibid.As Judge Swift correctly noted in his opinion,
[i]n each and every successful PIP claim made, Legome
was entitled to a fee. In every one of the cases in which
a fee request was made, Legome received a fee far less
than what was requested. In every one of the cases, he
earned a fee, therefore no unjust enrichment exists.
Moreover, the employees of the law firm received no
direct benefit from the plaintiff, only the firm itself.
Simply put, Allstate could not succeed on its claim because it failed to provide
any evidence that demonstrated that defendants received more than what they
were entitled to: a reasonable fee.
Judge Swift also properly dismissed claims that were settled without a fee
certification because "[t]he parties simply agreed upon a fee based presumably
upon a standard or commonly awarded fee for which the PIP adjuster and
Legome were unquestionably familiar." It is undisputed that Legome was
entitled to a fee in all cases which he prevailed. In a negotiated fee without a
certification, there is simply a demand and a counteroffer. The same concerns
that arise from a fee certification that contains inflated or false entries simply
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do not apply where no certification exists. The thoroughness of the judge's
analysis is demonstrated by the fact that he did not dismiss the cases where a
certification was presented to an Allstate adjustor, rather than an arbitrator.
Judge Swift correctly distinguished that category of case because there was
potentially direct reliance on the certifications by Allstate itself.
To the extent we have not addressed Allstate's remaining arguments, we
find they lack sufficient merit to warrant discussion in a written opinion. See
R. 2:11-3(e)(1)(E).
Affirmed.
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