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HLF Wins Appeal for Chicago Law Firm

New Jersey Law Journal, August 9, 2019


Appeals Court Revives $2.1M Attorneys Fee Request in Malpractice Fight

The panel found a trial judge lacked jurisdiction to cut the attorneys fee award to $359,000.

By Charles Toutant | August 09, 2019 at 04:18 PM

Appellate Division Judge Jose Fuentes

A New Jersey appeals court has ruled that a trial judge hearing a legal malpractice lawsuit lacked jurisdiction when he trimmed the plaintiff-side lawyers’ fees from $2.1 million to $359,000.

The trial judge lacked jurisdiction to hear a dispute between the plaintiff and her counsel over the hefty legal bill, the appeals court said. The judge had no subject-matter jurisdiction to adjudicate the fee dispute because the plaintiff’s attorneys were not parties to the case and had not filed a collection action, the appeals court said.

The appeals court said it’s up to the law firm that billed $2.1 million, Freeborn & Peters of Chicago, to bring a fee collection suit against former client Susan Lucas.

Lucas hired Freeborn & Peters to represent her in a malpractice suit against Fairfield attorney Arnold Schancupp, who advised her on the purchase of a home in Mantoloking. She claimed Schancupp failed to inform her that the property was subject to a storm water easement. She also sued the New Jersey Department of Transportation for negligence over its installation of a storm water pipe under the foundation of her home.

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After a 22-day trial in 2016, Schancupp was ordered to pay $980,000 in compensatory damages and another $99,506 in consequential damages. The jury found the DOT not liable.

The verdict against Schancupp made Lucas eligible for an award of counsel fees and costs from the malpractice case. The trial judge, Craig Wellerson, set a protocol for limited discovery on the issue of how much of the plaintiff’s legal fees could be apportioned to Schancupp, since her suit named other defendants in addition to him.

Lucas later informed the court that she and Schancupp had reached a resolution on her claims for counsel fees. But the issue of Freeborn’s outstanding fees remained. Lucas paid the firm $400,000 over the course of the litigation, leaving an unpaid bill for $1.7 million.

Wellerson told the parties that if they could not resolve the dispute, he would issue a resolution. But the retainer agreement between Lucas and Freeborn designated Cook County, Illinois, as the forum to adjudicate any disputes arising from their attorney-client relationship. A Freeborn lawyer, Darren VanPuymbrouck, told the judge the firm objected to the jurisdiction of the New Jersey court to resolve the fee dispute.

But Wellerson held a plenary hearing to determine the reasonableness of Freeborn’s fees, and entered an order reducing the bill to $359,000.

On appeal, Freeborn argued that Wellerson acted outside his jurisdiction when he reduced its fee. It claims Wellerson improperly disregarded the forum selection clause in the retainer agreement. Wellerson responded by citing Levine v. Levine, a 2005 Appellate Division case that addressed the process for an attorney to put a charging lien on a client’s assets.

But Appellate Division Judges Jose Fuentes, Francis Vernoia and Scott Moynihan said the reliance on Levine was misplaced because that case involves the right of an attorney in a matrimonial action.

“The procedural and substantive due process considerations reflected in Levine stand in sharp contrast to the ad hoc approach the trial judge employed here,” Fuentes wrote for the appeals court.

Because the trial court had no legal authority to unilaterally assert jurisdiction over the fee dispute, any relief it granted was “a legal nullity,” Fuentes said.

John Hanamirian of Hanamirian Law Firm in Moorestown, who represented Freeborn & Peters, said the decision was “the correct application of the law.” Hanamirian added that the $2.1 million bill represents work from five lawyers on a variety of issues related to Lucas’ purchase of her home, including claims against several other parties besides Schancupp and the DOT. He said he had no information on any future actions Freeborn & Peters would take in connection with the fee dispute.

Jay Rice of Nagel Rice in Roseland, who represented Lucas, did not respond to a request for comment.

Laura Temoyan