New Jersey Appellate Court Upholds Summary Judgment for Defendants in Legal Malpractice Case

New Jersey Appellate Court Upholds Summary Judgment for Defendants in Legal Malpractice Case

The Appellate Division of the Superior Court of New Jersey upheld a lower court's decision to grant summary judgment in favour of the defendant lawyers and law firm.

The court found that the plaintiff had not proven that the defendants had a duty to the plaintiff, nor had they established that the defendants' negligence in an earlier coverage case was the direct cause of the plaintiff's damages.

Defendant law firm and two attorneys were sued for legal malpractice by Morris Properties, Inc. (MPI) and its president Karen Morris, who was represented by them in an underlying case against their former property insurer, West American Insurance Company. The plaintiffs alleged that the defendants' representation was negligent and caused damages.

During Hurricane Sandy in October 2012, Morris Properties, Inc. (MPI) claimed that a building it owned suffered wind and water damage. To pursue an insurance claim against its former property insurer, West American Insurance Company (West American), MPI engaged Metro Public Adjustment (Metro) for assistance. After Metro submitted a claim for wind and water damage to West American, the insurer denied coverage to MPI under the policy. West American's inspector concluded that the hurricane-related wind damage was limited to one area of the roof and that the cost to repair the damage was less than MPI's $51,590.76 deductible.

After MPI rejected the settlement offer, the case proceeded to trial. The trial court ultimately granted summary judgment in favour of West American, finding that the damage to the building was not covered under the insurance policy. MPI subsequently filed a legal malpractice action against defendants, alleging that defendants had failed to exercise reasonable care in representing MPI by not recommending that MPI accept the $34,000 settlement offer.

Following the conveyance of the settlement offer, the defendant law firm served MPI's responses to West American's first set of interrogatories, stating that MPI had no previous roof problems or damage claims prior to the loss in question. Karen Morris, as president of MPI, signed a verification affirming the accuracy of the responses to the best of her knowledge, information, and belief.

During Morris's deposition as a corporate designee for MPI, she testified that MPI had no history of roof leaks or tenant complaints about roof leaks prior to the damage from Hurricane Sandy. However, counsel for West American presented Morris with letters that had been sent to MPI from tenants complaining about roof leaks before Hurricane Sandy. Morris claimed she had never seen the letters before. Defendants represented MPI at the deposition.

After the deposition, West American filed a motion to amend its answer and assert a counterclaim for insurance fraud against MPI. In response, defendants filed a motion to withdraw as counsel for MPI, which was ultimately granted by the court. MPI then hired new counsel and entered into a settlement agreement with West American, under which both parties released their claims against each other and West American agreed to pay MPI $10,000.

MPI and Morris filed a malpractice lawsuit against defendants, accusing them of three acts of malpractice, including not naming experts and submitting an expert report, failing to inform Morris of a $34,000 settlement offer, and inadequately preparing Morris for her deposition in the coverage action. The plaintiffs requested compensatory and punitive damages for MPI and punitive damages for Morris.

The plaintiffs presented an expert report by William Hildebrand, Esq., which stated that defendants had breached the standard of care expected of reasonably prudent attorneys in their representation of MPI. However, the report did not address whether defendants' alleged breach of the standard of care had caused plaintiffs' damages, nor did it assess the damages incurred by plaintiffs, if any.

The defendants filed a motion for summary judgment, arguing that Hildebrand's report did not address the issue of proximate cause and damages and that Morris did not have standing to bring an individual claim against them. The trial court agreed and granted summary judgment in favor of the defendants.

The appellate court upheld the trial court's ruling, finding that plaintiffs had not proven proximate cause as a matter of law. The court noted that Hildebrand's expert report did not establish that MPI would have achieved a better outcome in the underlying case had defendants not allegedly breached their standard of care. Additionally, the plaintiffs' claim that defendants failed to communicate the $34,000 settlement offer was dismissed on appeal due to the lack of written evidence that Morris would have accepted the offer. Furthermore, the court held that Morris did not have standing to pursue an individual claim against defendants.

The appellate court upheld the trial court's ruling that Morris lacked standing to assert a malpractice claim against the defendants individually. The court reasoned that since Morris was not the client of the defendants, any damages she suffered were derivative of those suffered by MPI. As such, she did not have an independent claim against the defendants.

The significance of this decision lies in the established principle that a plaintiff usually requires a competent legal expert to opine on the applicable standard of care, breach of duty by the defendant, and the proximate cause of damages.

Unless the "common knowledge" exception applies, such as in cases involving a blown statute of limitations, expert testimony is necessary. The case serves as an example of how a malpractice claim can be easily dismissed if the plaintiff fails to prove each element of their claim with competent expert testimony.