John Giovanni Granata v. Edward F. Broderick, Jr. , 446 N.J. Super. 449 ( 2016 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2928-14T2
A-3036-14T2
JOHN GIOVANNI GRANATA,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
August 9, 2016
v. APPELLATE DIVISION
EDWARD F. BRODERICK, JR., ESQ., an
Attorney at Law of the State of New
Jersey; BRODERICK, NEWMARK & GRATHER,
Defendants-Respondents.
_____________________________________
ROTENBERG, MERIL, SOLOMON, BERTIGER &
GUTILLA, P.C.; GOURVITZ & GOURVITZ,
LLC,
Intervenors-Respondents.
_____________________________________
JOHN GIOVANNI GRANATA,
Plaintiff-Respondent,
v.
EDWARD F. BRODERICK, JR., ESQ., an
Attorney at Law of the State of New
Jersey; BRODERICK, NEWMARK & GRATHER,
Defendants-Respondents.
____________________________________
OKS REALTY,
Intervenor-Appellant,
and
ROTENBERG, MERIL, SOLOMON, BERTIGER &
GUTILLA, P.C.; GOURVITZ & GOURVITZ,
LLC,
Intervenors-Respondents.
_____________________________________________________
Argued June 1, 2016 – Decided August 9, 2016
Before Judges Yannotti, St. John, and
Guadagno.
On appeal from the Superior Court of New
Jersey, Law Division, Passaic County, Docket
No. L-3278-07.
Kenneth S. Thyne argued the cause for John
Giovanni Granata (appellant in A-2928-14 and
respondent in A-3036-14) (Roper & Thyne,
LLC, attorneys; Mr. Thyne, on the brief).
Robyne D. LaGrotta argued the cause for
appellant OKS Realty in A-3036-14 (LaGrotta
Law, LLC, attorneys; Ms. LaGrotta, of
counsel and on the brief).
Robert L. Podvey and Michael J.P. Schewe
argued the cause for respondents Rotenberg,
Meril, Solomon, Bertiger & Gutilla, P.C.
(Podvey, Meanor, Catenacci, Hildner,
Cocoziello & Chattman, P.C., attorneys; Mr.
Podvey, of counsel; Robert K. Scheinbaum and
Mr. Schewe, on the brief).
Ari H. Gourvitz argued the cause for
respondent Elliot H. Gourvitz (Gourvitz &
Gourvitz, LLC, attorneys; Mr. Gourvitz, on
the brief).
Dominic V. Caruso, attorney for respondent
Diane Marie Acciavatti, joins in the brief
of respondent Elliot H. Gourvitz.
2 A-2928-14T2
The opinion of the court was delivered by
GUADAGNO, J.A.D.
In these appeals, calendared back-to-back and consolidated
for purposes of our opinion, plaintiff John Giovanni Granata
appeals from Law Division orders dated January 15, 2015 and
January 26, 2015. The first order granted $279,720 in
attorney's fees to Granata's former attorney, Diane Marie
Acciavatti, for her services in a legal malpractice action
against defendants Edward F. Broderick, Jr., and Broderick,
Newmark, & Grather. The second order denied Granata's motion
for reconsideration.
Additionally, Granata and appellant OKS Realty (OKS), a
creditor of Acciavatti, appeal from portions of a separate
January 26, 2015 order determining distribution priorities of
the attorney's fee award. The trial judge placed OKS behind
three other creditors and rejected its claim of priority, which
was based on a 2010 promissory note executed by Acciavatti and
secured by her anticipated legal fees in the malpractice action.
Whether an attorney's pledge of anticipated counsel fees
can be considered a security interest under Article 9 of the
Uniform Commercial Code (UCC) is an issue of first impression in
New Jersey. For the reasons that follow, we hold that it can,
and affirm the order granting Acciavatti attorney's fees, but
3 A-2928-14T2
reverse the distribution order and remand with instructions to
recognize OKS's priority over the other creditors.
I.
We have previously considered issues related to these
appeals in Granata v. Broderick, No. A-5272-10 (App. Div. July
8, 2013), certif. denied, 216 N.J. 7 (2013); Gourvitz v. Colfax,
No. A-4887-10 (App. Div. May 24, 2013); and Granata v.
Prudential Insurance Co. of America, No. A-7052-97 (App. Div.
Dec. 28, 1998), certif. denied, 160 N.J. 88 (1999).
Granata began working for Prudential Insurance Company of
America (Prudential) in 1986, selling property and casualty,
life, and automobile insurance. Granata v. Prudential Ins. Co.
of Am., supra, slip op. at 2. Granata became licensed by the
National Association of Securities Dealers (NASD) to sell
securities and investments for Pruco, a wholly owned subsidiary
of Prudential. Ibid. Prudential terminated Granata for
violating company policy by signing a client's signature in an
attempt to authorize a transfer of the client's money from a
money market account to a bond mutual fund. Id. at 3. Granata
admitted that he signed the form to transfer the funds, but
claimed that the client requested the transfer. Ibid.
Granata filed a complaint for retaliatory discharge under
the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to
4 A-2928-14T2
-8, claiming that Prudential fired him in retaliation for
complaining about discriminatory practices. Id. at 1, 4.
Prudential moved to compel arbitration before the NASD. Id. at
2. The trial judge denied the motion, but we reversed, holding
that Prudential's reason for termination "deals solely and
specifically with securities issues, namely proper authorization
to transfer client funds, which is within the expertise of NASD
arbitrators." Id. at 14-15.
Defendants represented Granata before the NASD arbitration
panel in 2001. Granata sought three million dollars in
compensatory and punitive damages, but the NASD panel awarded
him $28,000 in compensatory damages and assessed $12,530.50 in
costs and fees against him.
In 2007, Granata retained Diane Acciavatti to bring a legal
malpractice complaint against defendants. Acciavatti accepted a
$10,000 retainer and agreed to a contingent fee arrangement.
A jury trial was held in July and August 2010. The jury
found for Granata and awarded $525,000 for pre-termination
damages and $385,000 for post-termination loss of renewal
commissions. The judge awarded interest, bringing the judgment
to $1,597,193.
Acciavatti filed a motion for counsel fees, litigation
costs, and pre-judgment interest. Defendants opposed the motion
5 A-2928-14T2
and moved for judgment notwithstanding the verdict (JNOV) and a
new trial. After oral argument on November 5, 2010, the trial
judge granted Acciavatti's motion for fees and costs, denied
defendants' motions for JNOV and a new trial, and reserved on
the motion for pre-judgment interest.1 In April 2011, the judge
granted the motion for pre-judgment interest in the amount of
$208,000.
Defendants appealed, and Granata filed a cross-appeal.
Acciavatti had an oral agreement with Granata to represent him
at $350 per hour, and told him she would seek counsel fees from
defendants "when we prevail in the Appellate Court." We
reversed and remanded for a new trial based on the judge's
failure to give the jury an "exercise of judgment charge," and
for the improper admission of a net opinion. Granata v.
Broderick, supra, slip op. at 29-30.
In March 2013, while the appeal was pending, Acciavatti
withdrew from the practice of law. In April 2013, Dominic
Caruso was appointed attorney-trustee for Acciavatti's practice.
On March 28, 2013, the firm of Roper & Twardowsky, LLC (the
Roper firm)2 filed a substitution of counsel form for Acciavatti.
1
OKS failed to include the November 5, 2010 transcript and the
order entered thereafter in its appendix.
2
The firm is now known as Roper & Thyne, LLC.
6 A-2928-14T2
On July 15, 2013, Granata executed a retainer agreement
with the Roper firm to bring a petition for certification to the
Supreme Court. Acciavatti assisted the Roper firm in preparing
the petition, which was denied on October 1, 2013. Granata v.
Broderick, 216 N.J. 7 (2013). After remand, the Roper firm
continued to represent Granata on a contingency basis.
In January 2014, following a two-day mediation, this case
settled for $840,000. After settlement, three of Acciavatti's
creditors claimed liens upon any legal fees owed to her from her
work on the case.
The Gourvitz Lien
Gourvitz & Gourvitz, LLC and Elliot H. Gourvitz
(collectively Gourvitz) represented Donna Day Colfax in her
matrimonial litigation. A judgment of divorce (JOD) was entered
in June 2006. Colfax discharged Gourvitz and appealed the JOD
utilizing a different attorney.
Gourvitz sued Colfax for unpaid counsel fees, and Colfax
filed a third-party complaint asserting malpractice claims
against Gourvitz. Colfax discharged her attorney and retained
Acciavatti in May 2009.
In January 2010, Colfax's malpractice claims were dismissed
for her failure to answer interrogatories. On March 5, 2010,
the court granted Gourvitz's motion for summary judgment, and on
7 A-2928-14T2
March 17, 2010, a judgment for $368,209.30 was entered against
Colfax. The judge denied Colfax's motion to vacate the
dismissal of her malpractice claims.
Colfax retained new counsel and appealed the dismissal of
her malpractice claims against Gourvitz. On May 24, 2013, we
reversed, finding that the court failed to comply with Rule
4:23-5(a)(2), and abused its discretion when it denied Colfax's
motion to vacate the dismissal order. Gourvitz v. Colfax, supra,
slip op. at 25, 31-32. Although Acciavatti neglected several
issues in the case, we found that the court "should have
shielded the blameless client from the ultimate sanction of the
dismissal of her malpractice claim." Id. at 31.
For reasons that are not clear in the record before us,
Acciavatti agreed to pay Gourvitz $82,500 from fees she expected
to receive in the Granata v. Broderick matter. On August 19,
2011, the trial judge in this matter entered an order affixing
an attorney's lien on fees awarded to Acciavatti. The order
declared that a "lien is placed on the file in the Granata v.
Broderick matter in favor of [Gourvitz] for the sum of $82,500"
and that there would be no disbursements of attorney's fees to
Acciavatti in Granata v. Broderick until the fees were paid to
Gourvitz.
8 A-2928-14T2
Gourvitz's claim against Colfax was then resolved by a
consent judgment entered on September 9, 2011. The judgment
indicated that Gourvitz recovered $259,944.53 from Colfax in
April 2010 and was paid $25,000 by Acciavatti in October 2010.
Acciavatti assumed responsibility for the remaining portion of
the judgment against Colfax and agreed to pay Gourvitz $82,500
within 82 months at a rate of $1000 per month.3
On October 6, 2011, Acciavatti defaulted on the consent
judgment, and a $98,638.65 judgment was entered against her. On
November 4, 2011, the judgment was recorded as a lien. On
August 19, 2013, Gourvitz filed a writ of execution, seeking to
satisfy the consent judgment through a levy on Acciavatti's
assets and seizure of her property.
The Rotenberg Lien
The accounting firm of Rotenberg, Meril, Solomon, Bertiger
& Guttilla, P.C. (Rotenberg) provided Colfax with accounting
services in September 2003, and later filed suit for unpaid
accounting fees. The action was consolidated and litigated as a
third-party claim before the trial court in Gourvitz v. Colfax,
3
It is unclear why Acciavatti assumed responsibility for the
Colfax judgment or why the judge affixed an attorney's lien
before she assumed that responsibility.
9 A-2928-14T2
supra, slip op. at 2.4 Although not part of the appeal in
Gourvitz v. Colfax, Colfax brought a third-party complaint
against Rotenberg, asserting claims relating to Rotenberg's
performance of accounting services.
On August 27, 2010, the trial court granted summary
judgment in favor of Rotenberg and ordered Colfax to pay a
$151,652.42 judgment to Rotenberg. On February 4, 2011, the
judgment was recorded as a lien.
On March 21, 2011, Acciavatti signed a settlement agreement
with Rotenberg in which she assumed Colfax's debt to Rotenberg.
Acciavatti agreed to pay Rotenberg $75,000 as part of the
settlement agreement, in lieu of Colfax having to pay the full
$151,652.42 judgment. Acciavatti entered into a consent
judgment with Rotenberg and signed an affidavit of judgment by
confession.
Under the March 21, 2011 settlement agreement, Acciavatti
agreed to assign a lien of $75,000 to Rotenberg on recovery of
any attorney's fees due in Granata v. Broderick. Acciavatti
also agreed that she would not assign, convey, transfer, sell,
or otherwise dispose of her interest in attorney's fees in this
case without Rotenberg's prior written consent. Acciavatti
4
We referred to Rotenberg as the "Solomon defendants" in
Gourvitz v. Colfax, supra, slip op. at 2.
10 A-2928-14T2
agreed to pay $5000 to Rotenberg at the time of the agreement
and an additional $1000 per month until the $75,000 was paid in
full. The agreement provided that if Acciavatti defaulted on
her obligation, the amount due would increase to the original
$151,652.42, less any payments Acciavatti made toward the debt.
On April 14, 2011, Rotenberg and Colfax entered into a
stipulation of dismissal in the Gourvitz v. Colfax litigation,
ending Rotenberg's involvement in that case. Gourvitz v. Colfax,
supra, slip op. at 12.
Acciavatti then defaulted under the Rotenberg settlement
agreement and, on December 28, 2012, a final judgment of default
was entered against Acciavatti in the amount of $133,652.42.
The judgment was recorded as a lien on January 24, 2013.
In January 2014, a writ of execution was filed seeking to
satisfy the Rotenberg settlement agreement through a levy on
Acciavatti's assets. The writ was sent to the Passaic County
Sheriff's Office on February 26, 2014. On March 19, 2014,
Rotenberg served the writ upon defendants' counsel, who notified
the court of the lien on March 25, 2014.
The OKS Lien
On October 27, 2010, OKS loaned Diane Marie Acciavatti, LLC
(Acciavatti, LLC) $125,000. On that date, a security agreement,
a promissory note, and a guaranty of payment were all executed
11 A-2928-14T2
and signed by Acciavatti on behalf of Acciavatti, LLC. The
security agreement identified as "collateral" the legal fees
owed to Acciavatti in the Granata v. Broderick matter. The
promissory note indicated that monthly payments would begin on
December 1, 2010, and required Acciavatti to pay the full amount
on the loan either when she received legal fees from this case
or on November 1, 2013, whichever came earlier.
On December 2, 2010, OKS filed a UCC-1 financing statement
with the Department of Treasury, which listed as debtors both
Acciavatti, LLC and Acciavatti individually as guarantor of the
loan. The statement listed as collateral the attorney's fees
due to Acciavatti in the litigation captioned Granata v.
Broderick.
Granata's motion seeking declaratory relief
After Granata and defendants settled, Acciavatti wrote to
the Roper firm to remind Granata of Gourvitz's lien on any
attorney's fees awarded to her. Gourvitz previously made
Granata aware of the lien through correspondence to the Roper
firm in 2013.5 On February 6, 2014, trustee Caruso sent a notice
of attorney's lien to the Roper firm.
5
The record contains several letters from Gourvitz to the Roper
firm informing Granata of Gourvitz's lien on the attorney's fees
awarded in this case. The Roper firm responded to Gourvitz's
inquiries and indicated that it would keep Gourvitz informed of
(continued)
12 A-2928-14T2
On February 12, 2014, Granata, through the Roper firm,
initiated this current action by filing a motion seeking "an
order declaring that no attorney's lien attaches to any
settlement proceeds payable to [Granata]." The motion was
noticed to Acciavatti, Gourvitz, trustee Caruso, and defendants'
counsel. Acciavatti's other two creditors, OKS and Rotenberg,
were not noticed.
In a certification attached to the motion, Granata opposed
"any application by attorneys other than my present counsel for
an attorney's lien or an award of attorney's fees in this case,"
and sought an order declaring that Granata's "settlement is not
subject to any claim for an attorney's lien or attorney's fees
by [Acciavatti, trustee Caruso, or Gourvitz]." Granata asserted
that, during Acciavatti's representation of him, he loaned her
$28,000, which included a $3000 payment for an automobile.
Gourvitz filed a cross-motion seeking to enforce the August
19, 2011 attorney's lien. Trustee Caruso responded to Granata's
motion with a certification that explained his involvement as a
court-appointed trustee for Acciavatti's law practice and
asserted that any award "for the work [Acciavatti] performed in
the representation of [Granata] will be payable to me, as the
(continued)
any attorney's fees awarded to Acciavatti, but would not share
information about the status of the case on remand.
13 A-2928-14T2
attorney-trustee," and "[a]ny distribution will then be made by
me to [Acciavatti's] creditors, i.e., [Gourvitz], who has a
judgment against [Acciavatti]."
Acciavatti submitted a certification detailing the work she
performed in this case and estimating that she worked 828 hours
until she withdrew. Acciavatti admitted to borrowing $28,000
from Granata, but stated that she advised Granata to seek
independent counsel, that she represented Granata pro bono in
return in an unrelated legal matter, and that she anticipated
repaying Granata from any attorney's fees awarded in this case.
On March 14, 2014, the judge who had presided over the
original trial heard argument on Granata's motion. The judge
found that Acciavatti's withdrawal from this case was
involuntary and that she was entitled to a fee based upon
quantum meruit. The judge determined that Granata was entitled
to two-thirds of the settlement amount and ordered Broderick to
issue a check for the full settlement amount of $840,000 to the
Roper firm, with two-thirds to be released to Granata and one-
third to be held in escrow in the Roper firm's trust account for
any subsequent award of attorney's fees.
The judge then ordered the Roper firm to provide trustee
Caruso with a breakdown of the hours it spent on this case, and
reserved ruling on an attorney's fee award to either Acciavatti
14 A-2928-14T2
or the Roper firm subject to further briefing from Acciavatti's
creditors.
Rotenberg, who was the only creditor not present for the
hearing, then served its writ of execution upon defendants'
counsel, who informed the court of Rotenberg's lien on any
attorney's fee award.
On March 17, 2014, Acciavatti filed for bankruptcy, which
temporarily stayed the proceedings. Acciavatti, LLC did not
file for bankruptcy. In June 2014, a notice of proposed
abandonment was executed in the bankruptcy proceedings, whereby
Acciavatti agreed to abandon the potential attorney's fee award
from this case. Acciavatti acknowledged that any fee award was
first "subject to allocation between [her] and [the Roper
firm]." Acciavatti recognized that any attorney's fee award to
her would then be distributed among her creditors, listing OKS's
lien of approximately $119,000, Gourvitz's lien of approximately
$90,000, and Rotenberg's lien of approximately $135,000. On
June 20, 2014, a bankruptcy discharge was granted and the stay
on proceedings was subsequently lifted.
On July 7, 2014, the Roper firm wrote to trustee Caruso and
informed him that the Roper firm and Granata agreed to a flat
fee of $40,000. At a conference on August 8, 2014, the judge
indicated that, of the $279,720 available for distribution,
15 A-2928-14T2
$40,000 would go to the Roper firm. The Roper firm withdrew
that amount from the escrowed funds, but the judge sought
additional briefing as to how to disburse the remaining funds.
On August 27, 2014, while the issue of the distribution of
Acciavatti's fees was still being litigated, Granata filed a
legal malpractice complaint against Acciavatti and Acciavatti,
LLC. The complaint alleged that Acciavatti failed to serve
interrogatories or obtain appropriate expert reports for
Granata; demanded $28,000 in personal loans from Granata before
and during trial; failed to disclose to Granata that she pledged
attorney's fees in this case to her creditors; and failed to
request oral argument before the Appellate Division. Granata
claimed that these deficiencies caused him to settle for a
"compromised amount." The complaint asserted that the $1.5
million jury verdict that Acciavatti received on Granata's
behalf was "a lesser amount than [what would have been awarded]
had [Granata's] case been prepared properly." As a result of
the alleged malpractice, Granata argued that Acciavatti should
be equitably estopped from receiving attorney's fees for her
work in this case.
After the filing of this complaint, Granata retreated from
his earlier position that Acciavatti should receive some fees
for her work, and argued that any consideration of claims by the
16 A-2928-14T2
creditors or trustee Caruso should await the outcome of the
legal malpractice case. Granata conceded that trustee Caruso
successfully opposed his motion for a declaration that there is
no attorney's lien, but argued that the failure of Caruso and
Acciavatti to file a petition for a lien was a procedural
barrier precluding any lien for Acciavatti's attorney's fees.
On January 9, 2015, the judge found that neither Granata's
malpractice complaint nor trustee Caruso's failure to file a
petition for an attorney lien procedurally barred an award of
attorney's fees to Acciavatti. The judge then addressed
distribution of Acciavatti's attorney's fee award to her
creditors.
The judge determined that OKS was last in priority because
the $840,000 settlement was not finalized until January 2014,
and before that, OKS had "done nothing but filed a UCC back in
2010 . . . on an asset that didn't exist until four years
later." He reasoned that OKS had "a security interest in
something that didn't even exist," while Rotenberg and Gourvitz
both had judgments and issued writs of execution.
The judge also noted that OKS made its loan to Acciavatti,
LLC, and that Acciavatti was the guarantor of the loan. He
reasoned that because Acciavatti resigned from practicing law
and filed for bankruptcy, OKS's loan was made to an LLC which is
17 A-2928-14T2
no longer in existence. The judge concluded that "[OKS] has
done absolutely nothing beyond getting a UCC on something that
is going to become due and payable to a [non-existent]
entity . . . and the guarantor has gone through bankruptcy."
The judge did not rule on an argument raised by Gourvitz
that OKS was not entitled to distribution because it was a
foreign bank. Relying on the September 9, 2011 consent judgment
issued in Gourvitz v. Colfax, the judge declared that Gourvitz
had priority on any attorney's fees issued to Acciavatti because
Rotenberg was a party in Gourvitz v. Colfax and was aware of
Gourvitz's lien.
The judge determined that the attorney's fee award would be
one-third of the settlement amount held in escrow, or $279,720,
and would be distributed as follows:
(1) $40,000 to Granata's attorneys, the
Roper firm, pursuant to the previously-
entered flat fee agreement;
(2) $9597.56 to trustee, Dominic Caruso;
(3) $82,045.24 to Gourvitz;
(4) $133,652.42 to Rotenberg; and
(5) the remaining $14,424.78 to OKS.
The judge denied Granata's motion for a stay and ordered
the funds be released by the Roper firm to trustee Caruso for
distribution. On January 12, 2015, and again on January 14,
18 A-2928-14T2
2015, the Roper firm refused to transmit the escrowed funds to
trustee Caruso, indicating its intent to seek a stay in the
Appellate Division and to move for reconsideration. On January
15, 2015, the judge issued an order memorializing Acciavatti's
fee award and ordering the transfer of funds. That day, trustee
Caruso filed an order to show cause to hold the Roper firm in
contempt for failure to comply with the court's directive.
On January 22, 2015, the judge entered an order holding the
Roper firm in contempt and sanctioning it $200. On January 26,
2015, the judge entered an order memorializing the court's
January 9, 2015 decision, setting the amounts to be distributed
and the order of priority of Acciavatti's creditors: (1)
$83,284.97 to Gourvitz;6 (2) $133,652.42 to Rotenberg; and (3)
$13,185.05 to OKS. Finally, the judge ordered the Roper firm to
pay counsel fees associated with the order to show cause to
trustee Caruso and counsel for each creditor.
On January 26, 2015, the judge denied a motion by Granata
for reconsideration. On January 30, 2015, we denied Granata's
motion for a stay.
Granata now appeals from both the January 15, 2015 order
awarding counsel fees to Acciavatti and the January 26, 2015
6
It is not clear why the amounts to Gourvitz and OKS contained
in this order differ slightly from the amounts contained in the
judge's January 9, 2015 decision.
19 A-2928-14T2
order denying his motion for reconsideration. OKS appeals from
the court's January 26, 2015 order relegating it to last in the
priority of Acciavatti's creditors.
II.
Granata first argues that the judge erred in granting
Acciavatti an attorney's fee award without the filing of a
petition for an attorney's lien. Gourvitz and Rotenberg argue
that a filing of a petition was not required.
N.J.S.A. 2A:13-5, commonly known as the Attorney's Lien Act
(Act), provides, in pertinent part:
After the filing of a complaint . . . the
attorney or counsellor at law, who shall
appear in the cause for the party
instituting the action . . . shall have a
lien for compensation, upon his client’s
action, . . . which shall contain and attach
to a verdict, report, decision, award,
judgment or final order in his client’s
favor, and the proceeds thereof in
whosesoever hands they may come. The lien
shall not be affected by any settlement
between the parties before or after judgment
or final order, nor by the entry of
satisfaction or cancellation of a judgment
on the record. The court in which the
action or other proceeding is pending, upon
the petition of the attorney or counsellor
at law, may determine and enforce the lien.
In H. & H. Ranch Homes, Inc. v. Smith, we established a
specific procedure for determining and enforcing an attorney's
lien:
20 A-2928-14T2
The attorney should make application to the
court, as a step in the proceeding of the
main cause, by way of petition, which shall
set forth the facts upon which he relies for
the determination and enforcement of his
alleged lien. The petition shall as well
request the court to establish a schedule
for further proceedings which shall include
time limitations for the filing of an answer
by defendants, the completion of pretrial
discovery proceedings, the holding of a
pretrial conference, and the trial. The
court shall, by order, set a short day upon
which it will consider the application for
the establishment of a schedule. A copy of
such order, together with a copy of the
petition, shall be served upon defendants as
directed by the court. The matter should
thereafter proceed as a plenary suit and be
tried either with or without a jury, in the
Law Division[.]
[54 N.J. Super. 347, 353-54 (App. Div.
1959).]
Granata argues that the failure of Acciavatti or trustee
Caruso to file a petition consistent with this procedure
requires reversal of the order granting Acciavatti an attorney's
lien. We disagree.
In Musikoff v. Jay Parrino's the Mint, L.L.C., the Court
held that "the Act is grounded in equitable principles and was
designed to protect attorneys who have represented their former
clients competently and with diligence, but have gone unpaid."
172 N.J. 133, 146 (2002).
Here, Granata initiated this action by filing a motion
seeking an order declaring that no attorney's lien attaches to
21 A-2928-14T2
any settlement proceeds payable to Granata. Gourvitz responded
with a cross-motion to enforce the court's August 19, 2011
order, which affixed an attorney's lien in his favor for $82,500
to be paid from the fees awarded to Acciavatti in this matter.
Acciavatti and trustee Caruso then provided certifications
detailing the amount of work that Acciavatti performed in
preparing this case. Acciavatti's certification provided
specific detail of the 828 hours of work she performed, and
acknowledged that she borrowed $28,000 from Granata to be paid
back from her anticipated counsel fees. A hearing was held on
Granata's motion on March 14, 2014.
While Granata objected to compensating Acciavatti on a
quantum meruit basis for the work she performed, he did not
dispute the number of hours worked7 or the loan repayment
arrangement as alleged by Acciavatti. When pressed by the
judge, counsel for Granata conceded that he could not say "in
candor as an officer of the court" that giving nothing to
Acciavatti "for the work she did on the Granata case would be a
fair result."
7
The Roper firm's certification in support of Granata's motion
was critical of certain aspects of Acciavatti's performance,
such as her failure to obtain updated expert reports and failure
to prepare summaries of the transcripts she reviewed; however,
there was no challenge to the number of hours she claimed to
have worked on the case.
22 A-2928-14T2
On July 7, 2014, counsel for Granata wrote to Caruso,
indicating that her firm agreed to accept a flat fee settlement
of $40,000, and requesting that Caruso consent to the release of
that sum from the monies being held by her firm.
We employ a deferential standard of review and will affirm
the factual determinations of the trial judge, provided they are
supported by adequate, substantial, and credible evidence. Rova
Farms Resort, Inc. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 484
(1974). However, questions of law and the legal consequences
that flow from the established facts are reviewed de novo.
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366,
378 (1995).
Given our narrow scope of review, we are satisfied that the
motion judge was presented with abundant, unchallenged evidence
to support his quantum meruit findings, and Granata has failed
to demonstrate any procedural irregularities that would require
reversal of the order granting attorney's fees to Acciavatti.
We review the court's denial of Granata's motion for
reconsideration under an abuse of discretion standard. Fusco v.
Bd. of Educ., 349 N.J. Super. 455, 462 (App. Div.), certif.
denied, 174 N.J. 544 (2002). "Motions for reconsideration are
granted only under very narrow circumstances[.]" Ibid.
"Reconsideration should be used only for those cases which fall
23 A-2928-14T2
into that narrow corridor in which either (1) the Court has
expressed its decision based upon a palpably incorrect or
irrational basis, or (2) it is obvious that the Court either did
not consider, or failed to appreciate the significance of
probative, competent evidence." Ibid. (quoting D'Atria v.
D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990)).
Granata argues there were "numerous factual disputes" that
the court "summarily determined" without holding a plenary
hearing, but does not identify any of these disputes. During
oral argument on Granata's motion for reconsideration, the judge
questioned Granata's counsel as to what factual disputes were
not resolved. Counsel responded that the court awarded
Acciavatti an "enhanced fee" under Rule 1:21-7(f) that was
"ordinarily done on application." This is not a contested fact,
but a challenge to the procedure employed by the judge.
Although Rule 1:21-7(f) directs an attorney to make an
application if a permitted fee is deemed inadequate, the rule's
intent is only to require that the application complies with the
procedural requirements of notice and a hearing. In re Estate of
F.W., 398 N.J. Super. 344, 356 (App. Div. 2008). Here, those
procedural requirements were met as a result of the hearing held
after Granata made the initial motion seeking declaratory
relief.
24 A-2928-14T2
Granata next argues that the judge erred in disregarding
his malpractice complaint against Acciavatti. The judge
followed the procedure established in Saffer v. Willoughby,
which required him to determine whether there was a "substantial
basis" to the malpractice action before determining Acciavatti's
attorney's fee award. 143 N.J. 256, 268 (1996).
Saffer involved a fee dispute between an attorney and
former client. Id. at 260. The client filed a request for fee
arbitration and, before a decision was reached, the client
discovered evidence that led him to file a legal malpractice
claim in the Law Division against his former attorney. Ibid.
The Court held that where a "substantial basis" for a
malpractice claim is discovered after a fee is awarded, a client
may seek a stay of the award either before or after the award
has been confirmed. Id. at 268.
The granting of a stay is discretionary with the trial
court and "limited only by special equities showing abuse of
discretion in that injustice would be perpetrated on the one
seeking the stay, and no hardship, prejudice or inconvenience
would result to the one against whom it is sought." Gosschalk v.
Gosschalk, 48 N.J. Super. 566, 579 (App. Div.), aff'd, 28 N.J.
73 (1958).
25 A-2928-14T2
At the January 9, 2015 proceeding, the judge determined
that Granata did not make out a substantial claim of
malpractice, primarily because Acciavatti received a $1.5
million jury verdict for Granata, which ultimately resulted in
an $840,000 settlement award. As the judge astutely observed,
"if that's malpractice . . . lawyers are held to a very high
standard."
The elements of a legal malpractice claim "are (1) the
existence of an attorney-client relationship creating a duty of
care by the defendant attorney, (2) the breach of that duty by
the defendant, and (3) proximate causation of the damages
claimed by the plaintiff." McGrogan v. Till, 167 N.J. 414, 425
(2001).
Granata's malpractice complaint fails to sufficiently
assert a substantial basis for causation and damages. "The
general rule in this State is that an attorney is only
responsible for a client's loss if that loss is proximately
caused by the attorney's legal malpractice." 2175 Lemoine Ave.
Corp. v. Finco, Inc., 272 N.J. Super. 478, 487 (App. Div.),
certif. denied, 137 N.J. 311 (1994). "The test of proximate
cause is satisfied where the negligent conduct is a substantial
contributing factor in causing the loss." Ibid.
26 A-2928-14T2
The allegations contained in Granata's malpractice
complaint relate to actions taken by Acciavatti before our
remand of the $1.5 million jury award she obtained. Following
our remand, it is undisputed that Acciavatti did not participate
in any aspect of this case. Granata was free to again proceed
to trial or settle the suit; he chose to settle after mediation
for $840,000.
Granata does not claim that, in settling the case, he
relied to his detriment on any advice or action by Acciavatti,
who no longer represented him. See Grunwald v. Bronkesh, 131
N.J. 483, 495 (1993) ("Legally-cognizable damages occur when a
plaintiff detrimentally relies on the negligent advice of an
attorney."). Yet, Granata nonetheless surmises that his
settlement on remand was for less than what he would have
obtained had Acciavatti represented him more competently. This
conjecture is insufficient to demonstrate proximate cause.
Lemoine, supra, 272 N.J. Super. at 488 (client's burden to show
proximate cause must be sustained by preponderance of competent,
credible evidence, and is not satisfied by mere conjecture,
surmise or suspicion).
Contrary to Granata's assertions, it is not clear that
Acciavatti violated any rule of professional conduct where, as
here, Acciavatti advised Granata to seek independent advice of
27 A-2928-14T2
counsel before Granata loaned her $28,000. See In re Youmans,
118 N.J. 622, 633 (1990) ("[A]n attorney is ethically required
to advise clients to obtain independent counsel before making a
loan to that attorney."). Even if Acciavatti did not advise
Granata to seek independent counsel, Granata must still
establish proximate cause. Petrillo v. Bachenberg, 263 N.J.
Super. 472, 483 (App. Div. 1993) (violation of rule of
professional conduct does not per se give rise to malpractice),
aff'd, 139 N.J. 472 (1995); Albright v. Burns, 206 N.J. Super.
625, 634-35 (App. Div. 1986) (even when plaintiff establishes
rule violation, she must establish proximate cause).
We are satisfied that it was not an abuse of discretion for
the judge to deny Granata's request for a stay pending the
outcome of his malpractice claim, as there was ample support in
the record for the conclusion that there was not a substantial
basis to the claim.
Finally, Granata contends that the court erred in awarding
Acciavatti fees in excess of what she was entitled to under her
retainer agreement. Acciavatti was originally retained by
Granata on a contingent fee basis, with a $10,000 retainer.
"An attorney hired on a contingent fee basis and later
discharged before completion of the services is not entitled to
recover fees on the basis of such contingent agreement; instead,
28 A-2928-14T2
he or she may be entitled to recover on a quantum meruit basis
for the reasonable value of the services rendered." Glick v.
Barclays De Zoete Wedd, Inc., 300 N.J. Super. 299, 310 (App.
Div. 1997). The equitable doctrine of quantum meruit means "as
much as he deserves." La Mantia v. Durst, 234 N.J. Super. 534,
537 (App. Div.), certif. denied, 118 N.J. 181 (1989). We have
identified several factors that courts should consider in
applying the doctrine: (1) the amount of time an individual
attorney spent on the case in relation to the total amount of
professional hours spent to resolve it; (2) the quality of
representation provided; (3) the results achieved by each
lawyer's efforts; (4) the reason the client switched
representation; (5) the viability of the client's claims at the
time of transfer; and (6) the amount of recovery ultimately
realized. Id. at 540-41. "[T]he crucial factor in determining
the amount of recovery is the contribution which the lawyer made
to advancing the client's cause." Glick, supra, 300 N.J. Super.
at 311.
We note that the judge who made the quantum meruit fee
determination presided over the jury trial, which resulted in a
$1.5 million verdict in Granata's favor, and approved the
$840,000 mediated settlement. The judge was presented with
well-documented proof of the extensive work Acciavatti performed
29 A-2928-14T2
during each phase of litigation. We are satisfied that this
evidence provided ample support for the judge's decision to
award an attorney's fee to Acciavatti based on quantum meruit.
III.
OKS claims that the trial judge erred in placing it last in
priority among Acciavatti's creditors and argues that it had a
perfected security interest in any legal fees owed to both
Acciavatti and Acciavatti, LLC on December 2, 2010, before the
Gourvitz or Rotenberg liens were filed.
Gourvitz and Rotenberg argue that OKS should be barred from
challenging the priority order, as it failed to file any motions
or pleadings, and never intervened as a party. They also argue
that OKS's UCC-1 financing statement did not perfect its
security interest and did not attach; that Acciavatti's debt to
OKS was discharged in bankruptcy; that OKS's interest was in
Acciavatti, LLC, which ceased to exist when Acciavatti was
awarded attorney's fees; that OKS is a foreign bank; and that
OKS's interest was not perfected until attorney's fees were
awarded in 2015, making it a junior creditor.
As an initial matter, we note that none of the creditors in
this action formally intervened under Rule 4:33-1. Gourvitz
filed a cross-motion in response to Granata's motion to preclude
attorney's fees, and all three creditors filed letter briefs
30 A-2928-14T2
espousing their positions as to the distribution of the escrowed
funds. Rule 4:33-1 is clear that intervention as of right is
afforded to parties who claim "an interest relating to the
property or transaction which is the subject of the action and
is so situated that the disposition of the action may as a
practical matter impair or impede the ability to protect that
interest." We are satisfied that each of the creditors was
entitled to intervene as of right. Therefore, procedurally,
each of their opposition letters are deemed to be motions to
intervene as of right pursuant to Rule 4:33-1. See DNI Nevada,
Inc. v. Medi-Peth Med. Lab, Inc., 337 N.J. Super. 313, 313 n.1
(App. Div. 2001) (bank's opposition to motion for turnover of
funds deemed motion to intervene as of right pursuant to Rule
4:33-1).
On October 27, 2010, following the $1.5 million jury
verdict, but before our decision vacating that verdict,
Acciavatti, LLC obtained a loan from OKS which Acciavatti
guaranteed. On that date, a security agreement, a promissory
note, and a guaranty of payment were all executed and signed by
Acciavatti on behalf of Acciavatti, LLC. On December 2, 2010,
OKS filed a UCC-1 financing statement, listing as debtors both
Acciavatti, LLC and Acciavatti as guarantor of the loan. The
statement identified the collateral as legal fees due to
31 A-2928-14T2
Acciavatti in the litigation, Granata v. Broderick, and noted
that judgment was entered on August 23, 2010.
Gourvitz is a lien creditor. On September 9, 2011, a
consent judgment was entered in Gourvitz v. Colfax, whereby
Acciavatti assumed responsibility for a debt obligation to
Gourvitz as a result of a March 5, 2010 summary judgment order
entered against Acciavatti's client, Colfax, for collection of
unpaid legal fees. On August 19, 2011, even though Acciavatti
had not yet assumed responsibility for the debt, the trial judge
entered an order declaring that Gourvitz had a lien on any
attorney's fees awarded to Acciavatti in this case. On November
4, 2011, Gourvitz's judgment was recorded as a lien, and a writ
of execution was filed on August 19, 2013.
Rotenberg is also a lien creditor. Acciavatti assumed a
debt obligation to Rotenberg pursuant to a March 21, 2011
settlement agreement. On that same day, Acciavatti entered into
a consent judgment with Rotenberg, which was recorded as a lien
on January 24, 2013. A writ of execution was filed in January
2014.
The trial judge placed OKS behind Gourvitz and Rotenberg in
priority because OKS filed its UCC financing statement in 2010
"on an asset that didn't exist until four years later." The
judge held that OKS had a security interest in Acciavatti's
32 A-2928-14T2
claim to attorney's fees, but that, at the time of the UCC
filing, the interest did not exist.
We must determine whether Acciavatti possessed an interest
in her anticipated legal fees in 2010, and whether OKS's UCC
filing granted it a perfected interest in those fees. If both
questions are answered in the affirmative, OKS, as a perfected
secured creditor, would enjoy priority over Gourvitz and
Rotenberg, who are subsequent lien creditors seeking to levy on
the same collateral. See Shaw Mudge & Co. v. Sher-Mart Mfg. Co.,
132 N.J. Super. 517, 521 (App. Div. 1975) (perfected security
interest has priority over lien creditor whether or not lien
creditor has knowledge of the security interest).
N.J.S.A. 12A:9-203(a) provides that a "security interest
attaches to collateral when it becomes enforceable against the
debtor with respect to the collateral, unless an agreement
expressly postpones the time of attachment." N.J.S.A. 12A:9-
203(b) provides, in pertinent part, that a security interest
attaches to collateral as soon as: (1) "value has been given";
(2) "the debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party"; and (3)
"the debtor has authenticated a security agreement that provides
a description of the collateral."
33 A-2928-14T2
To perfect a security interest under N.J.S.A. 12A:9-310(a),
a financing statement must be filed. Under N.J.S.A. 12A:9-
502(d), that financing statement may be filed before a security
agreement is made or a security interest otherwise attaches.
Under N.J.S.A. 12A:9-315(a)(2), "a security interest attaches to
any identifiable proceeds of collateral."
In Shaw Mudge, supra, a manufacturing company, Sher-Mart,
borrowed $50,000 from a bank, secured by a promissory note and
an agreement granting the bank a first security interest in
collateral, including Sher-Mart's accounts receivable "now
owned, held and/or hereafter to be created." 132 N.J. Super. at
519. A financing statement was filed simultaneously. Ibid.
Shaw Mudge sued Sher-Mart to recover on a book account. Ibid.
Judgment, including interest and costs, was entered in favor of
Shaw Mudge. Ibid. Shaw Mudge then levied on a Sher-Mart account
receivable and sought an order directing the obligor to pay the
amount of its judgment. Ibid. Sher-Mart opposed the motion and
the matter was scheduled for hearing. Ibid.
Prior to the hearing, the bank assigned its rights in the
Sher-Mart security agreement to the Small Business
Administration (SBA) and filed a financing statement covering
the assignment. Ibid. At the time, Sher-Mart owed the SBA in
excess of $48,000. Ibid. When Sher-Mart failed to make an
34 A-2928-14T2
installment payment on its note, the SBA declared Sher-Mart in
default and demanded payment in full. Id. at 519-20. The SBA
moved to vacate the levy and sought the amount due on the
account receivable. Id. at 520. The motion judge upheld the
levy. Ibid.
The SBA appealed, and we reversed, holding that a secured
creditor who has filed a financing statement is entitled to
priority over a subsequent lien creditor seeking to levy on or
otherwise claim the same collateral. Id. at 520-21. We also
noted that the rule applies to after-acquired collateral covered
by the agreement, provided that attachment has occurred. Id. at
522. We explained that the fact that there had not yet been a
default on the secured bank loan at the time of the Shaw-Mudge
levy was not determinative, as "[t]he rights of the parties were
fixed, not when the levy was made . . . but rather when the
security interest attached." Ibid.
Under N.J.S.A. 12A:9-102(a)(2), an "account" includes a
right to payment of a monetary obligation, whether or not earned
by performance, for services rendered or to be rendered. A
"secured party" is defined as "a person in whose favor a
security interest is created or provided for under a security
agreement, whether or not any obligation to be secured is
outstanding." N.J.S.A. 12A:9-102(a)(72)(A).
35 A-2928-14T2
Although no reported New Jersey case has considered whether
an attorney's pledge of an anticipated counsel fee can be
considered a receivable under UCC Article 9, other courts have
uniformly held that contracts for legal fees, including fees in
pending contingency fee cases, are accounts for Article 9
purposes. See Cadle Co. v. Schlichtmann, 267 F.3d 14, 18-19 (1st
Cir. 2001) (amounts to be paid under contingent fee agreements
are accounts under Article 9), cert. denied, 535 U.S. 1018, 122
S. Ct. 1607, 152 L. Ed. 2d 622 (2002); In re Holstein Mack &
Klein, 232 F.3d 611, 614-15 (7th Cir. 2000) (fees to be earned
from personal injury and class action suits by law firm
considered receivables); U.S. Claims, Inc. v. Yehuda Smolar,
P.C., 602 F. Supp. 2d 590, 597 (E.D. Pa. 2009) (assignment of
amounts owed under contingent fee agreement governed by Article
9); U.S. Claims, Inc. v. Flomenhaft & Cannata, LLC, 519 F. Supp.
2d 515, 521 (E.D. Pa. 2006) (fee contracts created rights to
receive payment for services to be rendered by law firm on
behalf of clients and thus fell squarely within definition of
account).
We agree with these decisions and hold that, under certain
circumstances, an attorney's pledge of anticipated counsel fees
can be considered an account receivable and secured under
Article 9.
36 A-2928-14T2
OKS met the requirements of N.J.S.A. 12A:9-203 for its
security interest to attach to Acciavatti's counsel fees. The
OKS security agreement described the collateral as Acciavatti's
attorney's fees in this case and Acciavatti had a transferrable
interest to the collateral, as the anticipated attorney's fees
qualified as an account under N.J.S.A. 12A:9-102(a)(2).
OKS also complied with the requirements to perfect its
security interest under N.J.S.A. 12A:9-310(a) and -315(a)(2) by
filing a financing statement covering the collateral of
Acciavatti's anticipated counsel fees. When OKS filed its
financing statement on December 2, 2010, it perfected its
security interest in Acciavatti's anticipated legal fees,
whether owed to Acciavatti or Acciavatti, LLC. As such, OKS's
security interest was perfected before Gourvitz or Rotenberg
obtained their liens and, therefore, OKS enjoyed priority over
both.
The judge's conclusion that OKS had a security interest in
an asset that did not exist until four years later ignored the
clear language of the security agreement, which identified the
collateral for the loan to Acciavatti as the legal fees she
anticipated receiving for her work in this case. The agreement
was executed after the jury had returned a $1.5 million verdict
in Granata's favor. Our subsequent decision vacating the jury
37 A-2928-14T2
verdict had no effect on Acciavatti's claim for fees for work
she had already performed on the case. Her claim was validated
with the judge's quantum meruit award, at which time OKS's prior
recorded lien attached. See Cont’l Fin., Inc. v. Cambridge Lee
Metal Co., 56 N.J. 148, 152 (1970) (value of company's accounts
receivable could not have been fixed or ascertained at time of
recording of lien, but when they did materialize, they became
property of party to which prior recorded lien immediately
attached).
Although the exact amount of Acciavatti's fee was unknown
at the time of the OKS filing, its lien was sufficiently
specific and perfected, as the identity of the lienor, the
property subject to the lien, and the amount of the lien were
all established. Id. at 151 (citing United States v. Equitable
Life Assurance Soc'y, 384 U.S. 323, 327-28, 86 S. Ct. 1561,
1564, 16 L. Ed. 2d 593, 597 (1966)).
The additional arguments made by Gourvitz and Rotenberg
lack sufficient merit to warrant discussion in our opinion
beyond the following brief comment. R. 2:11-3(e)(1)(E).
Gourvitz has provided no proof in support of the claim that OKS
is a foreign bank, which is presented "upon information and
belief." OKS responds that it is a partnership formed in New
38 A-2928-14T2
Jersey, and is not required to file formation or authorization
documents for the public record in New Jersey.
IV.
The January 15, 2015 order granting $279,720 in attorney's
fees to Acciavatti and the January 26, 2015 order denying
Granata's motion for reconsideration are affirmed. The January
26, 2015 order setting distribution priorities is vacated and
the matter remanded for proceedings consistent with our opinion.
We do not retain jurisdiction.
39 A-2928-14T2