NJ Divorce Client Must Pay Fees Despite Pending Malpractice Suit Against Firm

A family court order requiring a divorce litigant to pay the law firm Budd Larner $50,000 in legal fees, even though he had a malpractice case pending against the firm, has been upheld on appeal.

The New Jersey Appellate Division ruled on Feb. 8 that there was no error in ordering and enforcing the fee award to the Short Hills, NJ, firm, because the client neither asked the family court for a stay nor sought to consolidate the malpractice and matrimonial cases. In Cole v. Cole, A-1710, the court also found it significant that the court below “expressly carved out the malpractice issue from its decision, and made no findings on those allegations.“

The Case

Joseph Cole retained Thomas Baldwin of Budd Larner on April 28, 2003, to handle his divorce from Justine Cole, which was being litigated in Monmouth County Family Part. By the time Cole fired Baldwin on Nov. 4, 2005, he had run up a tab of $124,547.81, by the firm's calculation, and had paid $60,684. Cole hired a new lawyer ' August Landi ' and in February 2006 signed a consent order that gave the firm “an enforceable charging lien“ for $53,347.76, but the lien was vacated in March 2007. A few months later, on May 14, 2007, the Coles resolved their financial issues, with Joseph agreeing to pay Justine $75,000 if she waived her right to alimony. However, a subsequent order, on Sept. 21, 2007, required that the $75,000 payment be held in escrow until Cole set up an escrow account as security for the Budd Larner lien. In the meantime, he had to pay $300 per week in alimony.

Plenary Hearing

Family Part Judge Richard English then held a plenary hearing to decide the amount of the lien. With adjustments and write-offs, Budd Larner was claiming a balance of $53,663.89, plus 12% interest, compounded monthly. Cole had filed the malpractice case, Cole v. Budd Larner, MON-L-1055-08, a few months earlier and Budd Larner and Baldwin were aware of it, though they claimed they had not yet been served. Cole is pro se in the malpractice case. At the 2008 hearing, Judge English refused to allow Cole to litigate the malpractice issue and denied Baldwin's request to say there was no negligence, insisting that he was “not dealing with a malpractice case,“ but “simply an attorney fee lien and then services provided.“

Judge English ' finding no evidence of overbilling or charging for work not done, but reducing the claim slightly due to some irregularities in the invoices ' held that Budd Larner was entitled to $50,000 but did not allow the interest. He denied a request to reconsider and required Cole to pay the fees, despite the pending malpractice action.

The Appeal

Cole appealed, arguing that fees should not have been decided while there was a pending malpractice action in which the allegations went to the necessity of the services and the reasonableness of the fees. The appellate panel, in an unpublished per curiam opinion, found no error, saying there was no law that prohibited holding a plenary hearing on fees within the matrimonial case, and finding it was “in accordance with the generally accepted procedure regarding attorney's liens.“

The panel also found that Cole did not “make any effort to coordinate his legal malpractice case with the plenary hearing by requesting a stay or consolidation until after the decision was made“ and that Judge English “was careful to carve out the legal malpractice issues from his rulings,“ leaving Cole to pursue them.

The panel compared the situation with that in Saffer v. Willoughby, 143 N.J. 256 (1996), where a fee arbitration committee awarded fees even though the client had a pending malpractice suit against the attorney. The lawyer contended that the fee award amounted to a conclusive determination that there was no malpractice, but the high court disagreed, finding the fee committee had no jurisdiction to decide malpractice claims. Judge English may have had such jurisdiction, but deferred to the court handling the malpractice case, the panel said.

Cole was arguably entitled to a stay of the attorney lien issues until the malpractice claim was resolved, but he did not ask for one and, in any event, it made sense to decide the lien dispute because it was holding up the Coles' financial settlement, the panel added. The appeals judges also saw no error in making Cole pay the fees, though fee arbitration awards are stayed for related malpractice cases where the judge finds a “substantial basis.“ While Cole tried to vacate the judgment, he did not ask to stay enforcement, they noted.

Baldwin says there was no malpractice, and he believes Cole filed his malpractice claim “to thwart my firm's fee collection case.“ Landi did not return calls seeking comment.

Mary Pat Gallagher is a reporter for the New Jersey Law Journal, an ALM sister publication of this newsletter in which this article originally ran.

A family court order requiring a divorce litigant to pay the law firm Budd Larner $50,000 in legal fees, even though he had a malpractice case pending against the firm, has been upheld on appeal.

The New Jersey Appellate Division ruled on Feb. 8 that there was no error in ordering and enforcing the fee award to the Short Hills, NJ, firm, because the client neither asked the family court for a stay nor sought to consolidate the malpractice and matrimonial cases. In Cole v. Cole, A-1710, the court also found it significant that the court below “expressly carved out the malpractice issue from its decision, and made no findings on those allegations.“

The Case

Joseph Cole retained Thomas Baldwin of Budd Larner on April 28, 2003, to handle his divorce from Justine Cole, which was being litigated in Monmouth County Family Part. By the time Cole fired Baldwin on Nov. 4, 2005, he had run up a tab of $124,547.81, by the firm's calculation, and had paid $60,684. Cole hired a new lawyer ' August Landi ' and in February 2006 signed a consent order that gave the firm “an enforceable charging lien“ for $53,347.76, but the lien was vacated in March 2007. A few months later, on May 14, 2007, the Coles resolved their financial issues, with Joseph agreeing to pay Justine $75,000 if she waived her right to alimony. However, a subsequent order, on Sept. 21, 2007, required that the $75,000 payment be held in escrow until Cole set up an escrow account as security for the Budd Larner lien. In the meantime, he had to pay $300 per week in alimony.

Plenary Hearing

Family Part Judge Richard English then held a plenary hearing to decide the amount of the lien. With adjustments and write-offs, Budd Larner was claiming a balance of $53,663.89, plus 12% interest, compounded monthly. Cole had filed the malpractice case, Cole v. Budd Larner, MON-L-1055-08, a few months earlier and Budd Larner and Baldwin were aware of it, though they claimed they had not yet been served. Cole is pro se in the malpractice case. At the 2008 hearing, Judge English refused to allow Cole to litigate the malpractice issue and denied Baldwin's request to say there was no negligence, insisting that he was “not dealing with a malpractice case,“ but “simply an attorney fee lien and then services provided.“

Judge English ' finding no evidence of overbilling or charging for work not done, but reducing the claim slightly due to some irregularities in the invoices ' held that Budd Larner was entitled to $50,000 but did not allow the interest. He denied a request to reconsider and required Cole to pay the fees, despite the pending malpractice action.

The Appeal

Cole appealed, arguing that fees should not have been decided while there was a pending malpractice action in which the allegations went to the necessity of the services and the reasonableness of the fees. The appellate panel, in an unpublished per curiam opinion, found no error, saying there was no law that prohibited holding a plenary hearing on fees within the matrimonial case, and finding it was “in accordance with the generally accepted procedure regarding attorney's liens.“

The panel also found that Cole did not “make any effort to coordinate his legal malpractice case with the plenary hearing by requesting a stay or consolidation until after the decision was made“ and that Judge English “was careful to carve out the legal malpractice issues from his rulings,“ leaving Cole to pursue them.

The panel compared the situation with that in Saffer v. Willoughby , 143 N.J. 256 (1996), where a fee arbitration committee awarded fees even though the client had a pending malpractice suit against the attorney. The lawyer contended that the fee award amounted to a conclusive determination that there was no malpractice, but the high court disagreed, finding the fee committee had no jurisdiction to decide malpractice claims. Judge English may have had such jurisdiction, but deferred to the court handling the malpractice case, the panel said.

Cole was arguably entitled to a stay of the attorney lien issues until the malpractice claim was resolved, but he did not ask for one and, in any event, it made sense to decide the lien dispute because it was holding up the Coles' financial settlement, the panel added. The appeals judges also saw no error in making Cole pay the fees, though fee arbitration awards are stayed for related malpractice cases where the judge finds a “substantial basis.“ While Cole tried to vacate the judgment, he did not ask to stay enforcement, they noted.

Baldwin says there was no malpractice, and he believes Cole filed his malpractice claim “to thwart my firm's fee collection case.“ Landi did not return calls seeking comment.

Mary Pat Gallagher is a reporter for the New Jersey Law Journal, an ALM sister publication of this newsletter in which this article originally ran.