The Garden State: Malpractice Fee Shifting in NJ

New Jersey is known for its beaches and its tomatoes. In the malpractice community, New Jersey is also known for its unique rules on fee shifting. New Jersey allows successful litigants in attorney malpractice suits to recover as consequential damages the legal expenses and attorneys’ fees they incur in prosecuting the claim.  We previously reported on the case of Innes v. Marzano-Lesnevich, pending before the New Jersey Supreme Court that could potentially expand the rules on fee shifting in malpractice cases.  Well, the New Jersey Supreme Court has spoken and any attorney practicing in New Jersey should be aware of the outcome.

The case stemmed from a divorce and custody dispute between Innes (Husband) and Carracosa (Wife), regarding their daughter. Their agreement forbade either parent from taking their daughter outside the United States without the other’s written consent. Nevertheless, allegedly counsel for Wife improperly released daughter’s passport to Wife without Husband’s consent, allowing Wife to take the child to Spain.

A sharply divided court ruled that attorneys who intentionally breach a fiduciary relationship, even with a non-client, can be held liable for counsel fees. The court found that Husband relied on counsel for Wife “to carry out their fiduciary duties and responsibilities under the Agreement and prevent” Wife from taking their daughter “away from him.” Attorneys for the Wife breached their fiduciary obligation to Husband by releasing the passport without his written permission.

The court remanded the case to the trial court for a determination as to whether counsel intentionally violated their fiduciary duty to Husband when they breached the agreement, which would result in the potential to recover counsel fees under the new holding.

This ruling could be problematic. Now that the attorney-client relationship is no longer a prerequisite for the recovery of counsel fees in a malpractice case, in all likelihood, it’s only a matter of time before litigants seek to expand the scope to include cases beyond those dealing with an intentional breach of fiduciary duty.  The result could also mean more litigation against professionals with alleged fiduciary responsibilities.

Additionally, this ruling is likely to impact insurance underwriters and professional liability policies.  Insurance companies may need to begin specifically addressing these types of scenarios in policies and outlining what is and isn’t covered.  Attorneys and professionals with fiduciary relationships should take note of this potentially new area of exposure and ensure that they will be covered in the event such a claim arises.