GARY REINERT VS. ANDREW INDECK, ESQUIRE (L-0427-15, BURLINGTON COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-4119-16T1
GARY REINERT,
Plaintiff-Appellant,
v.
ANDREW INDECK, ESQUIRE, and
WEBER GALLAGHER SIMPSON
STAPLETON FIRES & NEWBY,
LLP,
Defendants-Respondents.
____________________________________
Argued May 31, 2018 – Decided September 7, 2018
Before Judges Haas and Rothstadt.
On appeal from Superior Court of New Jersey,
Law Division, Burlington County, Docket No.
L-0427-15.
Jack Meyerson argued the cause for appellant
(Meyerson & O'Neill, attorneys; Jack Meyerson,
of counsel and on the brief).
Jeffrey B. McCarron argued the cause for
respondents (Swartz Campbell, LLC, attorneys;
Jeffrey B. McCarron and Kathleen M. Carson,
on the brief).
PER CURIAM
Plaintiff, Gary Reinert, appeals from the Law Division’s
September 11, 2015 order that granted, in part, defendants Andrew
Indeck's and Weber Gallagher Simpson Stapleton Fires & Newby LLP's
(WGSSFN) motion to dismiss plaintiff's complaint under Rule 4:6-
2(e) for failure to state a claim upon which relief could be
granted.1 The complaint alleged professional negligence against
Indeck and his law firm, WGSSFN, as well as his former law firm,
defendant Scarinci Hollenbeck, LLC (SH). According to plaintiff,
the lawyers were negligent in representing a company, in which
plaintiff had an ownership interest, in an unsuccessful
arbitration. He also claimed that he received deficient advice
about establishing a defined benefit plan (DBP) for the company
that caused him to later settle a lawsuit that the claimants in
the arbitration filed against plaintiff under the New Jersey
Fraudulent Transfer Act (NJFTA), N.J.S.A. 25:2-20 to -34. That
1
Although plaintiff's June 15, 2017 amended notice of appeal
also identifies the appeal being from the Law Division's April 21,
2017 order granting Indeck and WGSSFN summary judgment and
dismissing the balance of plaintiff's complaint, his merits brief
is limited to the September 11, 2015 order and his appendix does
not contain any documents filed in support or in opposition to the
summary judgment motion. We therefore limit our review to the
earlier order. See Sklodowsky v. Lushis, 417 N.J. Super. 648, 657
(App. Div. 2011) (stating "[a]n issue not briefed . . . is deemed
waived" (citations omitted)); see also R. 2:6-1(a)(1)(I)
(requiring an appellant to provide us with "such . . . parts of
the record . . . as are essential to the proper consideration of
the issues").
2 A-4119-16T1
complaint alleged that plaintiff transferred assets from the
company in the arbitration to another entity he controlled.
The trial court dismissed plaintiff's claims arising from the
arbitration because he did not have standing to sue as defendants
did not represent him individually in the arbitration to which he
was not a party. Plaintiff argues on appeal that the trial court
erred in dismissing his claims because but for defendants’
negligence, the company that was a named party in the arbitration,
would not have been subject to a multimillion-dollar judgment, and
he would not have ultimately been personally exposed to the NJFTA
action. For the reasons that follow, we affirm.
The facts giving rise to plaintiff's claims as derived from
his complaint are summarized as follows. In December 2005,
Christopher Pizzo, the principal of Noble Learning Systems, Inc.
(NLS), entered into a distribution agreement with Damian Ross, the
sole member of Zenshin, LLC (Zenshin), to sell instructional self-
defense videos produced by Carl Cestari, a martial arts instructor.
The distribution agreement between Zenshin and NLS contained an
arbitration clause addressing any disputes arising from the
agreement.
After Cestari's death, a dispute arose between Ross and Pizzo
about the continued distribution of the Cestari videos. In the
meantime, Pizzo developed his own new videos and organized new
3 A-4119-16T1
entities, including Close Combat Company, LLC (CCC), to market
them. CCC, however, never held any assets or conducted any sales
or marketing activities related to the Cestari videos.
In December 2007, Ross and Zenshin sued Pizzo and NLS based
upon their continuing sale of the Cestari videos. Two months
later, they filed another action to enjoin Pizzo, NLS and CCC from
distributing the videos.2 The attorney representing the defendants
in those actions had the dispute diverted to arbitration in
accordance with the parties' agreement.
At the time Ross filed his lawsuits, CCC was inactive and had
no assets. Later, CCC's activities changed and it became
profitable. That change occurred after Pizzo hired plaintiff in
2007 as a consultant to NLS for the purpose of creating a business
plan for the company. The plan he developed called for the
creation of yet another company which plaintiff would manage.
Rather than start a new company, Pizzo reactivated CCC to market
the new videos, which thereafter became successful and realized a
profit for several years. By April 2008, plaintiff supplied all
of CCC's funding through his contribution of personal funds in the
2
We briefly addressed the specific claims made by Ross and Zenshin
in an earlier unpublished opinion in which we affirmed the Chancery
Division's confirmation of the arbitration award. See Zenshin,
LLC v. Close Combat Co., LLC, No. A-0313-12 (App. Div. Aug. 21,
2013) (slip op. at 4). Those details need not be repeated here
for our purposes.
4 A-4119-16T1
amount of $100,000 and he "became part owner, and [chief operating
and financial officer] of CCC . . . ." Plaintiff and Pizzo shared
the profits from the sale of the new videos equally, with plaintiff
also receiving an annual salary of $650,000.
In 2009, plaintiff and Pizzo retained Indeck, who was then
with SH, to replace the attorney representing CCC, NLS and Pizzo
in the arbitration. Indeck had previously represented plaintiff
in unrelated personal matters. Indeck's and SH's hiring was
confirmed in a February 18, 2009 retainer letter sent by Indeck
on behalf of SH. The letter was addressed to plaintiff, Pizzo and
CCC at the business's address, and referenced the action filed by
Ross and Zenshin, naming CCC, NLS and Pizzo as the only defendants
in the action it described as the "Arbitration Matter[.]" The
retainer letter stated that "[y]ou have asked that we perform
legal services in connection with an arbitration matter filed by
the Claimants in the above matter." Pizzo and plaintiff signed
the letter. The letter did not designate their signatures as
being on behalf of CCC or NLS.3
3
Notably, in November 2009, plaintiff retained Indeck and SH
pursuant to a separate retainer agreement to represent him in
"various personal and corporate matters." The letter was sent to
plaintiff only at his home address and referenced only "General
Matters[.]"
5 A-4119-16T1
In 2010, plaintiff discussed with Indeck the creation of a
DBP for his retirement through CCC. By that time, Indeck had left
SH and was with WGSSFN. Plaintiff explained to Indeck that he
would be funding the plan with money plaintiff's wife obtained
through the settlement of a personal injury action. According to
plaintiff, Indeck assured him that he would not be personally
liable for any judgment against CCC and that the arbitration would
not create a problem for the establishment of the DBP, especially
because CCC would ultimately be dismissed from the arbitration.
Contrary to Indeck's prediction, on January 25, 2012, the
arbitrator struck the arbitration defendants' answer and defenses
and entered summary judgment against them due to discovery
violations. In April 2012, the arbitrator entered an award in
favor of Ross and Zenshin in excess of $2.4 million against Pizzo,
NLS, and CCC, jointly and severally. Ross and Zenshin successfully
moved in the Chancery Division for an order confirming the
arbitration and the court entered judgment in their favor against
Pizzo, NLS and CCC in the total amount of $2,851,221.88. Indeck
filed an appeal and we affirmed. See Zenshin, LLC, slip op at 4.
Ross and Zenshin filed a new action "seeking injunctive and
declaratory relief and related damages" to collect the judgment.
The "[c]omplaint alleg[ed] violations of the [NJFTA] against
Pizzo, NLS, and CCC, and CCC's [DBP]." In spring 2013, plaintiff
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"and his [own] company, Keystone Lighthouse, LLC, were added" as
defendants to the suit. Ross and Zenshin alleged in an amended
complaint that plaintiff formed a DBP "in an effort to hinder and
obstruct [them] in the collection of their imminent arbitration
award against [CCC]." After retaining new counsel, plaintiff paid
$460,000 to settle the NJFTA matter. He claims that he incurred
additional attorneys' fees and expenses, "includ[ing]
approximately $46,000 in IRA/DB Plan penalties . . ., past and
future lost wages, and damage to [his] personal and professional
reputation."
On February 17, 2015, plaintiff filed his complaint in the
underlying action. In his complaint, plaintiff alleged claims of
negligence - legal malpractice (count 1), breach of contract (count
2), and breach of fiduciary duty (count 3) against Indeck, SH and
WGSSFN. He also asserted a negligent supervision and vicarious
liability claim (count 4) against both law firms.
In counts one and two, plaintiff alleged that defendants
never advised him, Pizzo, CCC, or NLS that their representation
"constituted a concurrent conflict of interest[,]" in violation
of Rule of Professional Conduct 1.7. Plaintiff also asserted that
defendants never sought their "informed consent to the waiver of
the conflict of interest." Additionally, plaintiff alleged that
Indeck "failed to defend CCC on the basis that it was a distinct,
7 A-4119-16T1
unrelated entity that did not sell or profit from the [Cestari
videos]" and that the company was "inactive during the existence
of the Pizzo/NLS/Ross business relationship . . . through February
2008."
Moreover, plaintiff asserted that Indeck mishandled the
underlying arbitration matter by failing to: 1) comply with a
discovery order; 2) "seek CCC's dismissal" from the matter; 3)
recommend that CCC or plaintiff "obtain independent counsel or
. . . advance separate claims or defenses[;]" 4) mitigate the
damages that were awarded to Ross; and 5) inform him of the risks
associated with creating a DBP for CCC while the underlying
litigation was pending.
In support of count three, plaintiff alleged that defendants
owed him a fiduciary duty because of the "ongoing attorney-client
relationship" that existed before and during the underlying action
and "as a shareholder of CCC . . . ." He also alleged that
defendants failed "to advise [him] to obtain separate counsel,
and" that they "accepted legal fees . . . from CCC, [and] utilized
them to promote the defense of Pizzo and NLS, to the detriment of
CCC."
In April 2015, defendants filed a motion to dismiss
plaintiff's complaint under Rule 4:6-2(e), which Judge Patricia
Richmond granted as to SH, but granted in part as to Indeck and
8 A-4119-16T1
WGSSFN, dismissing only the claims arising from Indeck's
representation of the parties to the arbitration. Prior to
entering her order, Judge Richmond considered the parties' oral
arguments on July 15, 2015 and then placed her decision on the
record on the same date.
In her oral decision, Judge Richmond distinguished between
the arbitration action to which plaintiff was not a party, and the
NJFTA action where he was named as an individual defendant. The
judge determined that plaintiff "was not a party to that
arbitration and the $2.8 million verdict . . . was against CCC"
and not plaintiff. However, she found that plaintiff had pled a
viable claim of liability against Indeck and WGSSFN in the NJFTA
action.
In her ensuing September 11, 2015 order as to Indeck and
WGSSFN, Judge Richmond granted their motion to dismiss with respect
to "the handling of the underlying arbitration litigation[,]" but
denied it "to the extent the claims [were] based on . . . Indeck's
alleged conduct concerning plaintiff's transactions involving the
CCC['s DBP]." Accordingly, she dismissed all counts against Indeck
and WGSSFN arising from the arbitration matter, and dismissed
count four "of plaintiff's complaint for negligent supervision and
vicarious liability . . . with leave granted to plaintiff to move
to amend count [four] of the complaint to assert a vicarious
9 A-4119-16T1
liability claim only to the extent of the non-dismissed substantive
claim."
Following discovery, Indeck and WGSSFN filed a motion for
summary judgment. After considering the parties written and oral
arguments on April 21, 2017, another judge granted the motion,
dismissing with prejudice the remaining claims against Indeck and
WGSSFN. This appeal followed.
On appeal, plaintiff contends that his complaint "alleged
sufficient facts to establish a legal malpractice claim[,]" and
that he has standing to pursue the claim because he suffered a
"personal harm" as a result of defendants' conduct and as a member
of a limited liability company he "may bring a direct action."
Moreover, he asserts that he "suffered a 'special injury' which
allows him to sue individually, as opposed to bringing a derivative
action[.]" We disagree.
We review de novo a trial court's order dismissing a complaint
under Rule 4:6-2(e), applying the same standard as the trial court.
See Stop & Shop Supermarket Co. v. Cty. of Bergen, 450 N.J. Super.
286, 290 (App. Div. 2017). That standard requires us to examine
the challenged pleadings to determine "whether a cause of action
is 'suggested' by the facts." Teamsters Local 97 v. State, 434
N.J. Super. 393, 412 (App. Div. 2014) (quoting Printing Mart-
Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). We
10 A-4119-16T1
search the pleading "in depth and with liberality to determine
whether a cause of action can be gleaned even from an obscure
statement." Seidenberg v. Summit Bank, 348 N.J. Super. 243, 250
(App. Div. 2002) (citing Printing Mart-Morristown, 116 N.J. at
746). "[I]t is the existence of the fundament of a cause of
action . . . that is pivotal[.]" Teamsters Local 97, 434 N.J.
Super. at 412-13 (second alteration in original) (quoting Banco
Popular N. Am. v. Gandi, 184 N.J. 161, 183 (2005)).
"A pleading should be dismissed if it states no basis for
relief and discovery would not provide one." Rezem Family Assocs.,
LP v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div.
2011) (citing Camden Cty. Energy Recovery Assocs., L.P. v. N.J.
Dep't of Envtl. Prot., 320 N.J. Super. 59, 64 (App. Div. 1999),
aff'd, 170 N.J. 246 (2001)). Ordinarily, dismissal for failure
to state a claim is without prejudice, and the court has discretion
to permit a party to amend the pleading to allege additional facts
in an effort to state a claim. See Hoffman v. Hampshire Labs,
Inc., 405 N.J. Super. 105, 116 (App. Div. 2009). Although leave
to amend should be liberally granted, "without consideration of
the ultimate merits of the amendment," it need not be granted
where an amendment would be a "futile" and "useless endeavor."
Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006) (citation
11 A-4119-16T1
omitted); see also Prime Accounting Dep't v. Twp. of Carney's
Point, 212 N.J. 493, 511 (2013).
In order for plaintiff's complaint to survive a motion under
Rule 4:6-2(e), it must have pled sufficient allegations to
establish a claim for legal malpractice. A claim for "[l]egal
malpractice is a variation on the tort of negligence" relating to
an attorney's representation of a client. Garcia v. Kozlov,
Seaton, Romanini & Brooks, P.C., 179 N.J. 343, 357 (2004) (citing
McGrogan v. Till, 167 N.J. 414, 425 (2001)). To establish a prima
facie case of legal malpractice, a plaintiff must demonstrate: (1)
the existence of an attorney-client relationship creating a duty
of care upon the attorney to the plaintiff; (2) the breach of that
duty by the attorney; and (3) such breach was the proximate cause
of the damages sustained by the plaintiff. Jerista v. Murray, 185
N.J. 175, 190-91 (2005); Kranz v. Tiger, 390 N.J. Super. 135, 147
(App. Div. 2007). "The client bears the burden of proving by a
preponderance of competent credible evidence that injuries were
suffered as a proximate consequence of the attorney's breach of
duty." Sommers v. McKinney, 287 N.J. Super. 1, 10 (App. Div.
1996) (citing Lieberman v. Emp'rs Ins. of Wausau, 84 N.J. 325, 342
(1980)).
We conclude from our de novo review that Judge Richmond
correctly dismissed plaintiff's complaint with prejudice because
12 A-4119-16T1
contrary to his arguments, he could not establish the required
elements of an attorney-client relationship or that he personally
suffered any damages as a consequence of defendants' actions in
the arbitration.
First, it is beyond cavil that a lawyer representing a
corporation or other business entity is not automatically deemed
to represent its officers or shareholders. "By representing the
organization, a lawyer does not thereby also form a client-lawyer
relationship with all or any individuals . . . who direct its
operations or who have an ownership or other beneficial interest
in it, such as its shareholders." Restatement (Third) of the Law
Governing Lawyers § 96 cmt. b (Am. Law Inst. 2000). This maxim
is incorporated into our Rules of Professional Conduct that state:
"A lawyer employed or retained to represent an organization
represents the organization as distinct from its directors,
officers, employees, members, shareholders or other constituents."
RPC 1.13(a). The retainer letter here therefore did not establish
an attorney-client relationship between plaintiff and Indeck or
his firm in the "arbitration matter[.]" Plaintiff failed to allege
any facts that established that the defendants knew or reasonably
should have known that their representation of CCC implicated an
attorney-client relationship with plaintiff. Cf. Restatement
(Third) of the Law Governing Lawyers § 14 cmt. f (Am. Law Inst.
13 A-4119-16T1
2000) (discussing circumstances under which a person associated
with an organizational client may be deemed represented by the
organization's attorney); Petit-Clair v. Nelson, 344 N.J. Super.
538, 543-44 (App. Div. 2001) (holding applicable RPC 1.8 and
rejecting an attorney's argument that he represented only a
closely-held corporation, and not its husband and wife owners, in
obtaining the mortgage of their residence as security for the
corporation's fee, where it was "undisputed that defendants
[husband and wife] and plaintiff [attorney] related to each other
as attorney and client"). Any claims by plaintiff that he
understood that somehow defendants represented him individually
in an action in which he was not a party, is belied by the fact
that when he was to be represented individually, he signed a
different retainer letter for that purpose.
However, as plaintiff argues, an attorney could have a limited
duty to a non-client. Finding an attorney owes a duty to a non-
client "has been applied rather sparingly," in "carefully
circumscribed" holdings, LoBiondo v. Schwartz, 199 N.J. 62, 101,
116 (2009) (citation omitted), because the Court's "ordinary
reluctance to permit non-clients to sue attorneys remains
unchanged." Green v. Morgan Props., 215 N.J. 431, 460 (2013).
Therefore, "the grounds on which any plaintiff may pursue a
malpractice claim against an attorney with whom there was no
14 A-4119-16T1
attorney-client relationship [remain] exceedingly narrow." Id.
at 458.
"[P]rivity between an attorney and a non-client is not
necessary for a duty to attach 'where the attorney had reason to
foresee the specific harm which occurred.'" Innes v. Marzano-
Lesnevich, 435 N.J. Super. 198, 213 (App. Div. 2014) (quoting
Estate of Albanese v. Lolio, 393 N.J. Super. 355, 368-69 (App.
Div. 2007)). "Whether an attorney owes a duty to a non-client
third party depends on balancing the attorney's duty to represent
clients vigorously with the duty not to provide misleading
information on which third parties foreseeably will rely[.]"
Petrillo v. Bachenberg, 139 N.J. 472, 479 (1995) (citations
omitted); accord Davin, LLC v. Daham, 329 N.J. Super. 54, 76 (App.
Div. 2000) ("When considering the imposition of a duty upon an
attorney, we must . . . consider the impact that duty will have
upon the public, in general, and the attorney's client's right to
vigorous and effective representation."). "Ultimately, in
determining whether a duty exists, '[t]he primary
question . . . is one of fairness.'" Innes, 435 N.J. Super. at
213 (alterations in original) (quoting Estate of Albanese, 393
N.J. Super. at 369).
A duty to a non-client has been found "in some circumstances
[where] an attorney knows or reasonably should know that a non-
15 A-4119-16T1
client will rely on the attorney's representation or opinion
. . . ." LoBiondo, 199 N.J. at 101 (citing Petrillo, 139 N.J. at
483-84). For example, a duty arises where "an attorney . . .
participated in a civil conspiracy with the goal of assisting a
client to engage in a fraudulent transfer of assets to the
detriment of a lender." Innes, 435 N.J. Super. at 213 (quoting
Lobiondo, 199 N.J. at 102).
Here, plaintiff's allegations do not give rise to a duty owed
to him by defendants arising out of the arbitration. Plaintiff
claims that defendants owed him a duty under Petrillo because he
reasonably relied on Indeck's statements that CCC would be
dismissed from the litigation. Plaintiff also alleges that he did
not believe he would be personally liable for damages resulting
from the arbitration matter because Indeck never warned him that
creating the DBP would create a personal risk to him in the
litigation.
Both the prediction about the arbitration's outcome for CCC
and Indeck's alleged failure to warn against plaintiff's personal
liability did not amount to legal advice made by an attorney to
his or her client or a representation made to a third-party upon
which liability could attach. Attorneys are not guarantors of a
successful outcome, nor are they answerable for every "error of
judgment in the conduct of a case or for every mistake which may
16 A-4119-16T1
occur in practice." 2175 Lemoine Ave. Corp. v. Finco, Inc., 272
N.J. Super. 478, 486 (App. Div. 1994) (citation omitted); see also
Model Jury Charges (Civil), 5.51, "Legal Malpractice" (approved
June 1979) ("The law recognizes that the practice of law according
to standard legal practice will not necessarily prevent a poor
result."). Further, when Indeck discussed the CCC's DBP with
plaintiff, the company was solvent and the issue of plaintiff's
potential liability had not arisen, and would not, until a judgment
was entered against CCC and plaintiff, without Indeck's advice,
transferred assets from CCC to his own company.
Second, the fact that CCC had a judgment entered against it
as a result of the unsuccessful arbitration did not result in any
harm to plaintiff that was distinct from an injury, if any, to the
other shareholder, Pizzo. See Strasenburgh v. Straubmuller, 146
N.J. 527, 550 (1996) (stating that stockholders who suffer injuries
to their stock that are the same as all other stockholders "may
not recover for the injury to [their] stock alone, but must seek
recovery derivatively [on] behalf of the corporation" (citation
omitted)). A shareholder can recover in a non-derivative suit
only if he or she suffers a special injury. "A special injury
exists 'where there is a wrong suffered by [a] plaintiff that was
not suffered by all stockholders generally or where the wrong
involves a contractual right of the stockholders, such as the
17 A-4119-16T1
right to vote.'" Strasenburgh, 146 N.J. at 550 (alteration in
original) (citation omitted); see also Delray Holding, LLC v.
Sofia Design & Dev. at S. Brunswick, LLC, 439 N.J. Super. 502, 510
(App. Div. 2015).
Plaintiff asserts that the NJFTA action was filed against him
because the arbitration should not have been filed against CCC,
contrary to Indeck's assurances it was not dismissed, and Ross and
Zenshin sought to hold him liable for the judgment. However, none
of his assertions are correct as the possibility of plaintiff's
liability only arose when he transferred assets from CCC to his
own company without any advice from Indeck. Under these
circumstances, plaintiff's complaint did not allege he suffered
any special injury that was proximately caused by CCC's attorneys'
actions.
Finally, to the extent that plaintiff's claim relied upon any
advice from Indeck about the formation of his DBP at CCC, that
claim was dismissed on summary judgment and, as noted, he never
appealed from that determination.
Affirmed.
18 A-4119-16T1