SFI ADVISORS, LLC v. THE LENNEY LAW FIRM, LLC (L-7025-19, BERGEN 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NOT FOR PUBLICATION WITHOUT THE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-1356-20
SFI ADVISORS, LLC,
Plaintiff-Appellant,
v.
THE LENNEY LAW FIRM, LLC,
and THOMAS M. LENNEY, ESQ.,
Defendants-Respondents.
______________________________
Submitted October 28, 2021 – Decided January 4, 2022
Before Judges Alvarez and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-7025-19.
Asatrian Law Group, LLC, attorneys for appellant
(Martin V. Asatrian, of counsel; Jeffrey Zajac, on the
brief).
Respondent has not filed a brief.
PER CURIAM
Plaintiff SFI Advisors, LLC (SFI) appeals from a December 31, 2020
order denying reconsideration of the trial judge's dismissal of its legal
malpractice complaint against defendants The Lenney Law Firm, LLC and
Thomas Lenney, Esq. The judge dismissed the case with prejudice after a proof
hearing, finding the lack of expert evidence on the liability issue was fatal to
SFI's professional malpractice claims. We affirm, substantially for the reasons
set forth in Judge Estela M. De La Cruz's October 26, 2020 written decision.
Defendants represented SFI in the underlying lawsuit, in which a former
employee sued SFI's investment management director Scott Smith for sexual
harassment in violation of the New Jersey Law Against Discrimination
(NJLAD), N.J.S.A. 10:5-1 to 10:5-50. The complaint also asserted negligence
and wrongful termination claims against SFI and SFI's managing director, John
Sampers.
SFI retained defendants to represent all parties before the Equal
Employment Opportunity Commission (EEOC) and in the litigation.
(Represented by Lenney, the NJLAD case went to trial and the jury found all
three defendants liable. The resulting judgment totaled $589,000, including
compensatory damages, punitive damages, and attorney's fees. Post-judgment
and pending appeal, SFI, represented by new counsel, settled all claims for
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$400,000. After resolving the NJLAD case, SFI sued defendants for legal
malpractice in their handling of the underlying suit.
Because defendants did not timely answer the complaint, on December
23, 2019, default was entered against both defendants pursuant to Rule 4:43-1.
A two-day proof hearing was conducted on August 5, 2020, and October 14,
2020. Only Sampers testified at the hearing. Sampers stated that at the time of
the events, he was a co-owner of SFI. He testified that defendants advised him
that the plaintiff had made a demand of approximately $50,000 to settle. After
discussing the demand with defendants, Sampers rejected it, and SFI never made
any counteroffer to settle. According to Sampers, defendants viewed the case
as having nuisance value and Lenney told Sampers, "you can either pay me to
defend you or pay them to settle it." Sampers testified that defendants never
fully advised him of the risks of going to verdict, and specifically never advised
him that a judgment against SFI would entitle plaintiff to attorney's fees under
N.J.S.A. 10:5-27.1. Sampers testified that if he had known about the risk of fee
shifting, he would have settled.
Sampers voiced his lay opinion that, in hindsight, defendant Lenney was
incompetent at trial, and lacked employment discrimination experience.
Sampers indicated defendants never suggested that Scott, as the harasser, should
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have retained separate counsel. Sampers attributed the poor result to defendants'
inexperience and their failure to adequately prepare the clients for depositions
and trial testimony. He testified that defendants' lack of preparation also caused
the underlying defendants to voluntarily dismiss a counterclaim, resulting in the
loss of a leverage point in negotiations.
Sampers identified the following exhibits, which were entered into
evidence at trial:
Exhibit A - plaintiff's settlement amount totaling
$400,000 with evidence of cancelled checks, bank
statements, and bank levies.
Exhibit B - cancelled checks and bank statements of all
legal expenses associated with the underlying lawsuit
including legal fees to the Lenney Law Firm, John
Scura, and the Asatrian Law Group.
Exhibit C - checks, bank statements, credit card receipts
for transcripts, Veritext, and legal expenses related to
the appeal and the underlying litigation.
Exhibit F - Contingent Fee Agreement dated January
23, 2019 for the current litigation.
Exhibit G – Wasserman's Affidavit of Merit (AOM).
The AOM attested as follows:
I hereby state, pursuant to N.J.S.A. 2A:53A-27, that
there exists a reasonable probability that the care, skill
or knowledge exercised in the practice or work of the
attorney(s) at law about which Plaintiff makes
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complaint in the counterclaim, i.e. THE LENNEY
LAW FIRM, LLC and THOMAS M. LENNEY, ESQ.
fell outside acceptable professional standards of
practice.
The AOM and Sampers' lay testimony were the only evidence presented
as proof on the issue of liability.
On October 26, 2020, Judge De La Cruz denied plaintiff's request to enter
default judgment and dismissed plaintiff's complaint with prejudice. The judge
found plaintiff failed to present competent evidence of a breach of a duty by
defendants. She found the lack of an expert opinion fatal to SFI's professional
malpractice claims. Acknowledging that expert testimony "is not necessarily
required in a legal malpractice case to establish an attorney's duty of care[,]" the
judge reasoned that
given the context, nature and distinctive stages
involved . . . proofs required to establish a breach of
duty in any of the levels accused must be more than
with a one-line statement in an [AOM] and must be
more than through plaintiff witness' lay opinions that
the legal defendants were incompetent.
The judge recognized that the litigation was unopposed but found plaintiff's
claims to be "so sweeping[] and encompass[ing such] a complex case that was
litigated to verdict" that the claims "deserve[d], and indeed require[d],
knowledgeable explanation through competent expert evidence." Therefore,
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absent speculation, the judge was required to deny the request for default
judgment and dismiss the complaint with prejudice.
On November 4, 2020, plaintiff filed a motion for reconsideration, which
the judge denied by order dated December 31, 2020.
On appeal, plaintiff raises the following arguments for our consideration:
POINT I
BECAUSE THE PLAINTIFF PRODUCED A PRIMA
FACIE CASE OF LEGAL MALPRACTICE AT THE
PROOF HEARING, THE LAW DIVISION ERRED
BY DENYING FINAL JUDGMENT ON THE BASIS
OF AN ALLEGED FAILURE TO ESTABLISH
LIABILITY.
A. The Testimony of John Sampers
Provided Evidence of Professional
Negligence by the Defendants.
B. The Defendants Were Negligent In the
Underlying Proceeding by Simultaneously
Representing Both the Employer and Scott
Smith, the Employee Who Allegedly
Engaged In the Sexual Discrimination.
POINT II
THE LAW DIVISION COMMITTED REVERSIBLE
ERROR BY ADJOURNING THE PROOF HEARING
AND REQUESTING FURTHER PROOF OF
DAMAGES AND NOT THAT OF LIABILITY, AND
THEN DENYING JUDGMENT BASED UPON A
LACK OF LIABILITY.
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We review the denial of a motion for reconsideration for an abuse of
discretion. Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996). "A
motion for reconsideration is designed to seek review of an order based on the
evidence before the court on the initial motion . . . not to serve as a vehicle to
introduce new evidence in order to cure an inadequacy in the motion record."
Cap. Fin. Co. of Del. Valley, Inc. v. Asterbadi, 398 N.J. Super. 299, 310 (App.
Div. 2008).
For these reasons, 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." Cummings, 295 N.J. Super. 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).
Rule 4:43-2(b) provides in pertinent part:
If, to enable the court to enter judgment or to carry it
into effect, it is necessary to take an account or to
determine the amount of damages or to establish the
truth of any allegation by evidence or to make an
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investigation of any other matter, the court, on its own
motion or at the request of a party on notice to the
defaulting defendant or defendant's representative, may
conduct such proof hearings with or without a jury or
take such proceedings as it deems appropriate.
Pursuant to the Rule, the court can require plaintiff to prove "the right to relief."
Pressler & Verniero, Current N.J. Court Rules, cmt. 2.2.2 on R. 4:43-2(b)
(2022). Thus, when required, a plaintiff must prove a prima facie case.
Heimbach v. Mueller, 229 N.J. Super. 17, 20 (App. Div. 1988).
A prima facie case of legal malpractice has three elements: "(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." Jerista v. Murray,
185 N.J. 175, 190-91 (2005) (quoting McGrogan v. Till, 167 N.J. 414, 425
(2001)).
Expert testimony is not always required to establish a prima facie case of
legal malpractice, especially if the issues are "within the grasp of common
understanding." Brizak v. Needle, 239 N.J. Super. 415, 431 (App. Div. 1990).
Expert testimony is, however, necessary when "the matter to be addressed is so
esoteric that the average [fact-finder] could not form a valid judgment as to
whether the conduct of the professional was reasonable." Sommers v.
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McKinney, 287 N.J. Super. 1, 10 (App. Div. 1996). The court has cautioned
"that a plaintiff's attorney who litigates a legal malpractice claim without the
opinion testimony of a legal expert unnecessarily exposes his client to a serious
risk of dismissal." Brizak, 239 N.J. Super. at 432.
Guided by these standards, we discern no abuse of discretion in the judge's
denial of reconsideration. We agree with the judge that NJLAD claims are not
so self-evident or simplistic as to allow a factfinder to conclude, without expert
opinion, that an attorney's representation was negligent. Judge De La Cruz
correctly determined that, given the complex nature of the underlying litigation
and the scope of plaintiff's malpractice allegations, plaintiff should have proven
its case with expert testimony on the applicable standard of care and the breach
of that standard. We agree that Sampers' lay opinion regarding defendants
incompetence is not enough to establish either duty or a breach. Sampers is an
investment advisor, and nothing in the record suggests he has any legal
expertise.
We also agree that Wasserman's AOM did not establish a breach of
defendants' duty. Wasserman's AOM did not address how defendants deviated
from a defined standard of care. Indeed, it is impossible to discern from the
record whether plaintiff's central grievance–defendants' advice whether to settle
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or proceed to trial–was reasonable under the unique facts of the case. Expert
testimony on the elements of the NJLAD case and the proofs presented at trial
was necessary to determine the propriety of defendants' settlement advice.
The judge also correctly found that the conflict of interest arising from
defendants' representation of all SFI defendants, even if an ethical violation, did
not suffice to prove negligence per se. An RPC violation alone is not enough to
establish legal malpractice. See Baxt v. Liloia, 155 N.J. 190, 198-99 (1998). At
a minimum, expert testimony concerning the element of causation would be
required to evidence how the SFI defendants were harmed by the representation.
Plaintiff's argument that the judge, once she appreciated the deficiency of
the proofs, should have interrupted the proof hearing and advised plaintiff that
expert proof would be required is without sufficient merit to warrant discussion
in a written opinion. See R. 2:11-3(e)(1)(E).
Affirmed.
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