Opinion
DOCKET NO. A-4164-09T4 DOCKET NO. A-5344-09T4
05-03-2012
LARKEN ASSOCIATES, L.L.C., JLB ASSOCIATES, L.L.C and READINGTON COMMONS II, L.L.C., Plaintiffs-Appellants, v. P&H CLINTON PARTNERSHIP, PULTE HOMES OF NEW JERSEY, L.P. and PULTE HOME CORPORATION OF THE DELAWARE VALLEY, Defendants-Respondents. LARKEN ASSOCIATES, L.L.C., JLB ASSOCIATES, L.L.C., READINGTON COMMONS II, L.L.C. and LAWRENCE GARDNER, Plaintiffs-Appellants, v. HILL WALLACK L.L.P., THOMAS CARROLL III, STEPHEN EISDORFER, ESTATE OF HENRY HILL, ESQ., and KENNETH MEISER, Defendants-Respondents.
Bobby Kasolas argued the cause for appellants (Brach Eichler, L.L.C., attorneys; Charles X. Gormally, of counsel and on the brief with Mr. Kasolas). Kenneth E. Meiser argued the cause for respondents in A-4164-09T4 (Hill Wallack L.L.P., attorneys; Mr. Meiser and Henry T. Chou, on the brief). Patrick B. Minter argued the cause for respondents in A-5344-09T4 (Graham Curtin, attorneys; Christopher J. Carey, of counsel; Mr. Minter and Loren L. Speziale, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne, Simonelli and Hayden.
On appeal from Superior Court of New Jersey, Law Division, Somerset County, Docket Nos. L-998-05 and L-2276-09.
Bobby Kasolas argued the cause for appellants (Brach Eichler, L.L.C., attorneys; Charles X. Gormally, of counsel and on the brief with Mr. Kasolas).
Kenneth E. Meiser argued the cause for respondents in A-4164-09T4 (Hill Wallack L.L.P., attorneys; Mr. Meiser and Henry T. Chou, on the brief).
Patrick B. Minter argued the cause for respondents in A-5344-09T4 (Graham Curtin, attorneys; Christopher J. Carey, of counsel; Mr. Minter and Loren L. Speziale, on the brief). PER CURIAM
These are back-to-back appeals, which we address in a single opinion. In A-4164-09, plaintiffs Larken Associates, L.L.C., JLB Associates, L.L.C. and Readington Commons II, L.L.C. (hereafter, plaintiffs or Larken) appeal from an order of summary judgment, dated April 28, 2010, dismissing plaintiffs' claims against defendants P&H Clinton Partnership, Pulte Homes of New Jersey, L.P. and Pulte Home Corporation of the Delaware Valley (hereafter, P&H) of malicious use of process, malicious abuse of process, tortious interference with economic advantage, and tortious interference with a contractual relationship. Plaintiffs also appeal orders denying their motions to disqualify P&H's counsel, Hill Wallack, L.L.P., and to pierce the attorney-client privilege between Hill Wallack and P&H in order to permit the depositions of certain Hill Wallack attorneys. In A-5344-09, plaintiffs Larken Associates, L.L.C., JLB Associates, L.L.C., Readington Commons II, L.L.C., and Lawrence Gardner, Larken's chief executive officer, (hereafter, Larken or plaintiffs) appeal a May 28, 2010 order of summary judgment dismissing their claims against defendants Hill Wallack, L.L.P. and attorneys Thomas Carroll, III, Stephen Eisdorfer, the Estate of Henry Hill, Esq., and Kenneth Meiser (hereafter, Hill Wallack) for abuse of process, malicious use of process, tortious interference with contractual relations and prospective economic advantage, and legal malpractice. We affirm.
I.
The background to these cases is lengthy and complex. In 1999, Larken contracted to purchase approximately eleven acres of undeveloped land in Readington with the intention of building a multi-use commercial development, called "Readington Commons," and consisting of a child care center, medical and general office buildings, and associated parking. At the time, Readington's sewer capacity, which was managed by the Readington-Lebanon Sewerage Authority (hereinafter, RLSA) was fully allocated, leaving no capacity for Larken's proposed development.
However, in January 1999, the RLSA began construction of a Department of Environmental Protection (DEP)-approved expansion of its sewage treatment facility that would enable it to accommodate an additional 400,000 gallons of sewage per day. As a result, 320,000 gallons per day would be added to Readington's existing allocation, and 80,000 gallons would be added to Lebanon's allocation. In March 2000, Larken paid $143,635.24 to Readington for a specific allocation of Readington's increased municipal capacity, which was deemed ready for use in August 2000.
In early January 2001, Larken hired Hill Wallack attorney, Thomas Carroll, III, for the limited purpose of obtaining preliminary site plan approval for Readington Commons. In that connection, Carroll attended two hearings before Readington's Planning Board on February 13 and April 9, 2001. The Board granted the requested approval on April 9, 2001, and its action was memorialized in a resolution dated May 14, 2001. The attorney-client relationship between Carroll and Larken ended on June 4, 2001 when Larken directed Carroll not to perform any additional legal work for it.
By October 1, 2003, Larken had commenced and was "well into" the construction of site improvements for Readington Commons, having spent $2.94 million on the project. In January and March 2004, Readington issued Larken Uniform Construction Code (UCC) construction permits for some of the proposed buildings.
In the meantime, P&H was planning to build a mixed residential development, called "Windy Acres," in nearby Clinton. The site was listed by Clinton in its substantive certification to the Council on Affordable Housing (COAH) as fulfilling nearly fifty percent of its inclusionary zoning obligation in accordance with the Court's Mount Laurel decisions. Running through the tract upon which Windy Acres was to be built was the South Branch of the Rockaway Creek, which at the time was categorized by the DEP as a Fresh Water 2 (FW-2) trout maintenance stream and as containing Category Two waters for anti-degradation purposes.
S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mt. Laurel, 67 N.J. 151 (1975), appeal dismissed and cert. denied, 423 U.S. 808, 96 S. Ct. 18, 46 L. Ed. 2d 28 (1975)(Mt. Laurel I); S. Burlington Cnty. N.A.A.C.P. v. Twp. of Mt. Laurel, 92 N.J. 158 (1983) (Mt. Laurel II).
Because Clinton's sewer capacity had been exhausted, in 1999, the municipality proposed building a new sewage treatment plant near Windy Acres that would discharge effluent into the South Branch, and in February 2000, Clinton and P&H entered into an allocation agreement granting P&H 300,000 gallons per day in sewerage capacity in return for payment, by P&H, of its pro rata share of construction costs. Thereafter, P&H applied to Clinton's Planning Board for preliminary site plan approval. However, following intense opposition to the development, the Board denied P&H's application. That denial was challenged by P&H in an action in lieu of prerogative writs and, accepting a special master's determination that the Board's action was arbitrary, unreasonable and indefensible, the court remanded P&H's application to the Board for further proceedings as to, among other things, potable water and sewerage issues. P&H Clinton P'ship v. Planning Bd. of Clinton Twp., Docket No. HNT-L-342-01 (Law Div. Feb. 4, 2004), appeal dismissed, Docket No. A-4179-03 (App. Div. April 9, 2007).
In the meantime, opposition was mounted to the construction by Clinton of the sewage treatment plant. In apparent response to that opposition, effective May 2003, the DEP reclassified the South Branch from a Category Two to a Category One waterway, thereby providing heightened protection to the South Branch's water quality and effectively precluding the construction of the plant as the result of the degradation in the quality of the water in the South Branch that would be caused by effluent discharges from the treatment facility. The DEP suggested that connection to a regional sewerage system was one of the alternatives to disposal in the stream.
Although Windy Acres was not within the RLSA's established sewer service area, the trunk line from Lebanon to the RLSA's plant ran immediately adjacent to the Windy Acres site. Thus, P&H requested an allocation from the RLSA of a portion of its sewerage capacity. When the RLSA refused, stating that P&H was not within its service area and its capacity was fully allocated, on July 23, 2003, P&H filed an action in lieu of prerogative writs seeking declaratory and injunctive relief against Clinton, the DEP and the RLSA and its constituent members, Readington and Lebanon, to compel access to and allocation of the RLSA's sewer capacity for Windy Acres. P&H Clinton P'ship v. Twp. of Clinton, Docket No. HNT-L-375-03 (Law Div. January 20, 2004), aff'd as modified, Docket No. A-2997-03 (App. Div. May 25, 2006), certif. denied, 189 N.J. 103 (2006).
In that action, P&H alleged that because the DEP had reclassified portions of the South Branch, the only feasible way to construct Windy Acres, which was an integral part of Clinton's plan to meet its Mount Laurel obligations, was to obtain sewer service through the RLSA sewage treatment plant. In its complaint, P&H alleged Clinton's reliance upon Windy Acres to satisfy 182 units of its fair share Mount Laurel housing obligation; the lack of any other feasible means of disposing of Windy Acres' sanitary sewage; the existence of excess capacity at the RLSA sewage treatment facility; and the accessibility of RLSA sewerage lines to Windy Acres. It further alleged:
Under the New Jersey Constitution, provision of safe, decent housing for low and moderate income households is a regionwide obligation. All public entities whose action[s] affect land use have an affirmative judicially enforceable duty to facilitate the provision of low and moderate income housing so as to satisfy the unmet regional housing need, including facilitating the provision of sanitary sewage service. This duty extends to state agencies, sewage authorities, and municipalities, including defendants NJDEP, the Readington Lebanon Sewage Authority, Reading Township, Lebanon Borough, and the Lebanon Borough Sewerage Authority as well as Clinton Township.P&H thus requested a declaratory judgment and injunctive relief enforcing the rights that it articulated, regardless of the fact that the development was not within the RLSA's sewer service area. None of the developers or landowners that had purchased or contracted for capacity in the RLSA's expansion was named in the suit.
Following the filing of suit, P&H was granted an order, dated October 1, 2003, requiring that defendants show cause why temporary restraints should not be entered enjoining the RLSA, Readington and Lebanon from permitting new connections or allocations of treatment capacity to any end user without first obtaining court approval, with the exception of developers of affordable housing. The order also required Readington Township and the Lebanon Borough Sewerage Authority to provide notification of the action to individuals and entities that had received an allocation commitment in connection with the expansion of the RLSA treatment facility or had received site plan or subdivision approval or had such approvals pending for developments that would require sewer treatment at the RLSA's facility.
In response, in November 2003, numerous developers, including Larken, then intervened to protect their allocation claims. Thereafter, the RLSA, Readington, Lebanon, and many of the intervenors moved to dismiss P&H's complaint, claiming that the capacity at the RLSA's plant was fully used, allocated or reserved. Additionally Larken moved to disqualify Hill Wallack as counsel for P&H, alleging a conflict of interest and violations of Rules of Professional Conduct (RPC) 1.9 and 1.7. The dismissal motion was granted by the trial court, which dismissed P&H's complaint with prejudice.
In an oral decision, placed on the record following argument on December 19, 2003, the court first addressed Larken's motion to disqualify Hill Wallack as P&H's counsel. It found that, although the two matters in which Hill Wallack provided representation were substantially related, Larken had not alleged that Carroll was privy to confidential information. Larken had conceded that it entered into its sewage capacity agreement in March 2000, nine months before Carroll's representation commenced. And "Mr. Carroll certifie[d] that his involvement was strictly limited to the environmental and traffic concerns and had nothing to do with the sewage capacity." Further, the court found that the interests of P&H and Larken were not materially adverse because the second form of order submitted by P&H in its action created an exemption from its effect for property owners that had previously received an allocation of sewer capacity in the RLSA plant and had received final site plan approval and/or subdivision approval and had building permits that allowed commencement of construction — conditions that Larken had met.
Addressing the motion to dismiss P&H's complaint, the court noted that the RLSA plant had a 1.6 million gallon per day capacity, and that the DEP presently authorized discharge flows of up to 1.45 million gallons per day on a staggered basis. Although the current average daily flow ranged from 580,000 to 730,000 gallons per day, usage was trending upward. Further, one report provided that 883,409 gallons per day of unused capacity had been allocated to end users. Thus, very little, if any, unused sewage capacity remained that could be redirected to Windy Acres. In these circumstances, the court maintained, plaintiff could not make the required showing, pursuant to Crowe v. DeGioia, 87 N.J. 412 (1981), of a probability of success on the merits thereby justifying injunctive relief.
In reaching that conclusion, the court acknowledged the scarce resources doctrine, recognized in a Mount Laurel context in Hills Development Co. v. Bernards Township, 103 N.J. 1, 61-63 (1986), which empowered the courts, pending the outcome of proceedings before COAH, to impose conditions or restraints upon the actions of a municipality designed to assure the municipality's future ability to comply with its Mount Laurel obligations. The court further noted that scarce resource principles were utilized by a trial court in Samaritan Center, Inc. v. Borough of Englishtown, 294 N.J. Super. 437 (Law Div. 1996) to justify the issuance of a mandatory injunction to compel neighboring Englishtown to permit a nonprofit Mount Laurel developer to tap into its water and sewer lines because of their proximity to the developer's proposed low and moderate income housing development in Manalapan. However, the P&H court held:
In deciding whether Englishtown should be required to supply sewerage service to the Manalapan Mt. Laurel development, the Samaritan court was careful to weigh the hardships to the affected parties. The court only compelled Manalapan to assist after it balanced the equities — the public interest facilitated by requiring Manalapan to provide for Englishtown's Mt. Laurel construction versus any impact on Manalapan's water quality.
Specifically, the court noted that the sewer line connection at issue was relatively unused. Further, the court noted that proper engineering could ensure that neither community experienced a deterioration in water quality. The court only agreed to grant the relief because a carefully drafted order "could include appropriate conditions" that would prevent negative impacts on end consumers in the area.
In contrast, the P&H court noted that, in Bi-County Development of Clinton, Inc. v. Borough of High Bridge, 174 N.J. 301 (2002), the Supreme Court determined not to extend the scarce resource doctrine to a developer that had paid a fee in lieu of constructing affordable housing. The Court noted, "as a general rule, a municipality that provides services for the benefit of its residents is under no obligation to extend its services to those beyond its borders. [Id. at 316.]" The P&H court further explained:
The Court held compelling circumstances should exist in order to justify under Mt. Laurel principles disturbing the general rule that a municipality may exclude another municipality or its residents from using or connecting to its sewer system. [Id. at 328.]
The Court continued, "we anticipate that general rule will be disturbed only in the case of developments that substantially and directly serve important regional and environmental interests. The Bi-County development is not in that category." [Ibid.]
In addition, the Court held that compelling circumstances did not exist in that case, in part because the success of the proposed project was not at stake as plaintiffs had an alternate means of acquiring sewer services.
Applying the cited precedent to the present circumstances, the P&H court found that if it were to grant the requested relief, "numerous third parties will be negatively impacted." It held: "[T]he relief sought is not 'appropriate' within the meaning of Hills because there's absolutely no legal precedent for a court to seize sewerage capacity previously allocated to private parties in favor of a Mt. Laurel developer." While New Jersey's courts have gone to great lengths to effectuate Mt. Laurel policy, even requiring a municipality to provide sewer capacity for an inclusionary development in an adjoining municipality, "the courts have remained mindful of the effects of these efforts on third parties and have stopped short of divesting private third parties of previously allocated scarce resources." Further, the court rejected P&H's argument that the development was necessary to the fulfillment of Clinton's Mt. Laurel obligation, determining that the municipality could satisfy those obligations through approval of the development of another site.
The P&H court "found instructive" COAH's policies and administrative decisions in which the agency "expressly stopped short of divesting private third parties of scarce resources." The court also found that P&H was "a sophisticated home builder," and had "assumed the risk that logistical and environmental limitations might ultimately prevent the proposed development." Thus, the court concluded that P&H's "predicament is not deserving of the extraordinary relief requested," and "even taking all of the facts and allegations in the complaint as true," it concluded that "the relief requested is totally without legal basis." The court therefore found that P&H had failed to state a claim upon which relief could be granted, and it granted dismissal pursuant to Rule 4:6-2(e) and Rule 4:46.
Upon appeal, we affirmed the order of the trial court dismissing the complaint against the intervenors and the DEP with prejudice. We affirmed the dismissal of the complaint against the remaining defendants, but modified the order to render the dismissal "without prejudice to allow [P&H] to reinstate its complaint in the event that COAH determines that Windy Acres is necessary for Clinton's certified affordable housing plan and [P&H] is unable to negotiate a resolution with Clinton and/or RLSA to provide sewer capacity for Windy Acres." P&H Clinton P'ship, supra, Docket No. A-2997-03 (slip op. at 33-34). We dismissed as moot Larken's cross-appeal of the court's refusal to disqualify Hill Wallack. Id. at 32-33. The Supreme Court denied certification. P&H Clinton P'ship, supra, 189 N.J. at 103.
II.
During the period prior to the conclusion of appeals from the trial court's ruling in P&H, Provident Bank wrote a February 3, 2005 letter to Larken refusing construction financing for its project, stating:
In light of the pending law suit regarding the possible loss of sewer allocation for the project, we are not in a position to give due consideration to your request for construction financing at this time.
The Bank would be in a position to consider construction financing on the project once the pending litigation has been satisfactorily resolved.
Consequently, in mid-2005, Larken filed a complaint and first-amended complaint against P&H Clinton Partnership and associated entities, Pulte Homes of New Jersey, L.P., and Pulte Home Corporation of the Delaware Valley (the underlying action), the dismissal of which forms the basis for one of the present appeals. In it, Larken contended that P&H's prior suit against the RLSA and other entities constituted malicious use of process, malice, tortious interference with economic advantage and tortious interference with contract. A lengthy period of discovery and motion practice followed.
In November 2007, more than two years after Larken filed its first-amended complaint, it moved to disqualify Hill Wallack from its representation of P&H. The motion was heard by Judge Accurso and denied, as was a subsequent motion for reconsideration and a motion for leave to appeal. Judge Accurso held that the present action by Larken alleging that P&H's suit was maliciously instituted without probable cause and that it constituted interference with Larken's contractual relationships and its prospective economic advantage was not substantially related to Hill Wallack's limited five-month representation of Larken in connection with its application for preliminary site plan approval, and that no confidential information was imparted. Additionally, the court held that any objection to the representation had been waived by Larken's failure to assert the conflict for more than two years after its suit was filed.
In that motion, Larken relied on CEO Gardner's certification that Larken's former attorney had sent Carroll his entire file on the project in 2001, including the site plan application and all expert reports. Gardner claimed, citing only to the 2001 cover letters from former counsel to Carroll, that the file contained "all confidential, pricing, sewage and other information concerning the project."
Thereafter, Larken filed a second-amended complaint alleging in four counts tortious interference with contractual relations, tortious interference with prospective economic advantage, abuse of process, and malicious use of process. In January 2009, Larken again moved to disqualify Hill Wallack, and in September 2009, it moved to pierce the attorney-client privilege in order to take the depositions of Hill Wallack attorneys. In support of the disqualification motion, Larken submitted as proof of Carroll's knowledge of its sewer capacity allocation the transcript of the February 13, 2001 hearing before Readington's Planning Board. That transcript disclosed that, after the Board determined to carry the Larken matter to April 9, Gardner introduced himself, stated that he had paid approximately $150 thousand for sewer rights, and that Larken's contract to purchase the Readington property expired in May. As a consequence, he sought a final decision at the April meeting, which in fact occurred.
The information thus was no longer confidential, if it ever were.
Judge D'Annunzio determined to defer the disqualification and discovery issues until the parties filed summary judgment motions on the "core issue" of "whether [P&H's] attempt to get relief from the sewer problem was a legitimate reaction [to] the DEP['s] reclassifying the stream as a Category One stream."
P&H then moved for summary judgment, and Larken filed a cross-motion for "summary judgment on the element of lack of probable cause" in connection with counts three and four of the complaint alleging abuse of process and malicious use of process. In a letter opinion dated March 11, 2010, the court granted summary judgment to P&H on counts three and four, finding that P&H had probable cause to file its underlying lawsuit seeking a sewerage allocation from the RLSA and its participating municipalities.
In doing so, the court discussed Dynasty Building Corporation v. Borough of Upper Saddle River, 267 N.J. Super. 611 (App. Div. 1993), certif. denied, 135 N.J. 467, 468 (1994), a decision requiring the Borough of Ramsey to provide sewage treatment capacity, if sufficient service and capacity existed, to Dynasty's inclusionary Mt. Laurel development to be built in Upper Saddle River pursuant to a revised intermunicipal agreement governing the provision of sewer services by Ramsey. The court then discussed Bi-County, the Bi-County Court's approval of the rationale of Samaritan as consistent with the Court's holdings in Mt. Laurel I and II, and the Bi-County Court's limitation of remedies such as granted in Samaritan to instances in which "[c]ompelling circumstances" justified an exception to the general rule that a municipality could exclude another municipality from using or connecting to its sewer system. The court then observed that Bi-County was decided in 2002 and that, in the following year, its holding had not been subsequently construed. It held:
Thus, when P&H filed the underlying action in July 2003, the law was that where there are "compelling circumstances" a Mt. Laurel developer could petition a court to require a public sewage treatment facility in another jurisdiction to accept and treat the development's sewage, provided the development built affordable housing. Although the Supreme Court did not define "compelling circumstances" or the range of remedies that would be available, its approval of Samaritan suggested that failure of a Mt. Laurel project in the absence of a sewerage system qualified as compelling circumstances.
The court then noted that it was unlikely that Windy Acres could be built if it could not obtain capacity from the RLSA. It found that, although a factual issue existed as to whether P&H could have built a DEP-compliant sewage treatment plant, in bringing suit, P&H was nonetheless entitled to rely upon the fact that it reasonably believed it was unable to do so.
An issue in the underlying litigation, the court held, "would have been whether the RLSA had the capacity to serve Windy Acres and, if not, whether a Bi-County remedy could include an order to expand the capacity, at the developer's expense." Although that issue had not been previously resolved, the court found it "appropriate for P&H to test Bi-County's application and limits through litigation."
The court held:
P&H was caught in a collision between the state policy in support of the provision of affordable housing, which P&H was attempting to advance, and the state policy to protect its waters. In light of Bi-County, Dynasty and Samaritan, a reasonably prudent person could reasonably believe that the circumstances in which P&H found itself constituted "compelling circumstances" within the meaning of Bi-County and that resort to litigation to establish whether or not RLSA had or could develop the capacity to serve Windy Acres was justifiable. Viewed objectively, there was a "good or sound chance of establishing the claim to the satisfaction of the court . . . ." LoBiondo [v. Schwartz], 199 N.J. [62,] 93 [(2009)].
The court rejected Larken's claim that the trial court's decision dismissing P&H's suit established a lack of probable cause as a matter of law. The court noted that on P&H's appeal of the dismissal of its underlying action, we set aside the trial court's with-prejudice dismissal of the complaint as to the RLSA and its participating municipalities, holding that it should have been without prejudice pending further action by COAH. The court reasoned that, by modifying the trial court's judgment, we "recognized a potential legal and factual basis for the underlying action, contrary to the trial court's statement that it was solely without foundation."
The court also found erroneous the view that the underlying suit was an attempt to permanently seize capacity previously allocated to Larken and others. The court held, "P&H requested no such relief in the complaint, and the injunctive relief sought on the return date of the order to show cause was interim relief to maintain the status quo, but subject to a specifically defined safety valve and the general safety valve of 'good cause.'" As a final matter, the court held that we had effectively narrowed Bi-County by holding that "compelling circumstances" would exist to compel the RLSA to provide sewerage service only if there were no other sites that could meet the township's fair share obligation, and that such a narrowing could not have been reasonably anticipated by P&H when it commenced the underlying suit.
The court ended its opinion by stating:
The court concludes that probable cause existed to file the underlying action, that the law and the facts supported an arguable case of "compelling circumstances" within the meaning of Bi-County, that P&H had a "good or sound chance" of establishing itsThe court did not address the tortious interference claims directly because of the absence of briefing, but observed that its determination regarding probable cause "would appear to preclude" the remaining claims.
claim, and that the filing of the underlying action was an objectively reasonable exercise by P&H of its right to seek judicial intervention to resolve the problem created by the DEP's reclassification of South Branch of Rockaway Creek.
In a supplemental written opinion, dated April 28, 2010, the court granted summary judgment on Larken's remaining claims of tortious interference with business advantage and contract arising out of the underlying action. The court concluded that "1) defendants were privileged to file the litigation; and 2) the court's determination in the malicious process case that defendants were justified in filing the underlying action eliminates the 'malice' element of tortious interference." The court thus entered an order of summary judgment in P&H's favor on all four counts. An appeal followed.
While motions for summary judgment in Larken's action against P&H were pending, on December 17, 2009, Larken filed its action against Hill Wallack, alleging abuse of process, malicious prosecution/malicious misuse of process, tortious interference with contractual relations, tortious interference with prospective economic advantage, and legal malpractice.
In lieu of filing an answer, on or about February 18, 2010, Hill Wallack moved to dismiss the complaint. In response, Larken's counsel filed a certification, to which he attached a transcript of the February 13, 2001 public hearing before Readington's Planning Board. That transcript disclosed that, when the Board indicated that it was carrying Larken's application for preliminary site plan approval to April 9, Lawrence Gardner, the chief executive officer of Larken, requested that the Board make a final decision at the April meeting. He disclosed that he had paid "150 some odd thousand dollars to the sewer authority to acquire the sewer for this property" and that he was under a contract to purchase the property that would expire in May. Therefore, timing was of concern to him. According to counsel, this transcript confirmed that Carroll knew Larken was relying heavily on its sewer capacity reservation in seeking site plan approval and purchasing the property for its project.
Although issue was joined, the parties in Larken's action against Hill Wallack agreed to defer Hill Wallack's motion to dismiss until Judge D'Annunzio had issued a final decision in Larken's action against P&H, which occurred on April 28, 2010. Following oral argument before Judge Goodzeit on Hill Wallack's motion against Larken, she granted summary judgment, finding in a written decision dated May 28, 2010, Larken's action for legal malpractice to be barred by the statute of limitations and its remaining causes of action barred by application of collateral estoppel as the result of Judge D'Annunzio's decision. An order dismissing Larken's complaint against Hill Wallack with prejudice was entered on June 21, 2010.
III.
On appeal from the orders for summary judgment, we adopt the same legal standard employed by the trial court. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We thus examine the competent evidentiary materials presented in a light most favorable to Larken to determine if there exists any genuine issue as to any challenged material fact, and if there is not, whether P&H and Hill Wallack are entitled to judgment as a matter of law. Brill, supra, 142 N.J. at 529, 539-41. Having done so, we conclude that summary judgment was properly entered in these matters.
We first address issues raised in A-4164-09, Larken's appeal from the order of summary judgment in favor of P&H. We commence with the appeal from the dismissal of Larken's claim of malicious use of process, a claim that is disfavored because of its potential to chill free access to the courts. LoBiondo v. Schwartz, 199 N.J. 62, 91 (2009). To establish a cause of action, Larken must prove (1) a civil action was instituted by P&H against it; (2) the action was motivated by malice; (3) probable cause to bring the underlying suit was lacking; (4) the action was terminated favorably to the party bringing the malicious use of process claim; and (5) that party had suffered a special grievance. Id. at 90.
We note the curious fact that Larken claims malicious use of process by Hill Wallack, yet P&H did not sue Larken. Neither party has addressed the significance of that fact, despite the trial court's acknowledgment that it created an "interesting issue."
Determining whether probable cause has been demonstrated is generally an issue for the court, unless the facts giving rise to probable cause are themselves in dispute. Id. at 93. Whether there is probable cause is determined by means of an objective analysis. Ibid. (citing Westhoff v. Kerr S.S. Co., 219 N.J. Super. 316, 321 (App. Div.), certif. denied, 109 N.J. 503 (1987)). "The question to be decided is whether, in the prior suit, the facts supported the actor's 'honest belief' in the allegations." Ibid. (citing Westhoff, supra, 219 N.J. Super. at 321). In other words, using a reasonably prudent person standard, whether "there was a good or sound chance of establishing the claim to the satisfaction of the court[.]" Ibid. (citing Westhoff, supra, 219 N.J. Super. at 321-22).
"Malice . . . is defined as the 'intentional doing of a wrongful act without just cause or excuse.'" Id. at 93-94 (quoting Jobes v. Evangelista, 369 N.J. Super. 384, 398 (App. Div.), certif. denied, 180 N.J. 457 (2004)). Malice can "be inferred from a finding that a defendant has neither probable cause nor a reasonable belief in probable cause." Id. at 94.
Our review of the record in this matter satisfies us that Larken failed to offer evidence that P&H lacked probable cause to bring its action against the parties to that suit. We therefore affirm substantially on the basis of the sound and well-articulated opinion of Judge D'Annunzio. We add only the following to address the particular arguments raised by Larken on appeal.
Larken raises the broad argument that no legal authority supports the trial court's finding that P&H had probable cause to file the underlying action. It supports that position first by reviewing nine COAH rulings reached between 1977 and 1995 and arguing that they demonstrate that not even the agency would order a municipality to give its own developers access to already allocated resources. It also relies on N.J.A.C. 5:93-3.4(c)(2), a regulation that controls COAH's substantive certification review when a municipality has sufficient land to support an inclusionary development but insufficient sewer and water. The regulation permits the municipality's housing obligation to be deferred until adequate sewer and water are made available and does not provide for a remedy such as envisioned in Samaritan and Bi-County or for interference with existing allocations. Finally, it relies on a 2003 certification submitted in the underlying action by Art Bernard, COAH's policy writer from 1986 to 1993 and its former director from 1993 to 1994, stating that COAH had never interfered with any previously committed sewer allocations, even if it could have done so.
However, when the Bi-County Court asked COAH to file an amicus curiae brief addressing the issue of "[w]hether COAH views the [Fair Housing Act] and its implementing regulations as permitting an inclusionary development to demand access to a neighboring community's water/sewer system if such access will result in substantial cost savings while presenting no public health or safety concerns to the neighboring community[,]" 174 N.J. at 314-15, COAH responded: "it lacked the jurisdiction to decide whether an inclusionary developer in one municipality can compel another municipality to allow access to its sewer system and declined to take any position on that issue." Id. at 315. Additionally, COAH recognized that its regulations did not apply to neighboring municipalities or sewer authorities in municipalities that were not seeking substantive certification, and that it lacked statutory authorization to grant relief from restrictions imposed by a neighboring municipality. Id. at 325-26. The Supreme Court found, therefore, that COAH's policies could not assist it in resolving the issue of whether a developer of an inclusionary development could demand access to a neighboring community's water and/or sewer systems. Id. at 326.
As a consequence, we find the administrative evidence upon which Larken relies to have no relevance in determining the legal issue of whether P&H had probable cause to file the underlying action, which challenged whether a developer of an inclusionary development could demand access to a neighboring community's sewer system. Indeed, as P&H notes in its brief, COAH announced in one of its agency decisions, Morel & Segal, Inc. v. Lopatcong Township, COAH Docket No. 94-646 (Oct. 11, 1995), that it did not have jurisdiction to adjudicate third-party rights in scarce resource matters, and the parties would have to seek relief in the courts. Slip op. at 16-20.
Larken argues additionally that no published case supports the premise that a developer, promising to construct affordable housing, can demand sewage capacity in a neighboring municipality that has contractually allocated all or most of its own capacity to local developers, and for that reason, P&H could not have had a reasonable expectation or honest belief that it could obtain that capacity. However, even if we accept the proposition that P&H knew all capacity had been allocated, it was clear that not all allocated capacity had been used, and the evidence did not establish when use, if ever, would occur. Thus, an issue existed as to the appropriate use of that unused capacity in circumstances when it was needed by a developer of affordable housing, and a further issue existed as to whether the RLSA could be compelled to engage in a further expansion of its facilities at P&H's expense. While these issues had not been addressed in any of the cases decided to date, we concur with Judge D'Annunzio's view that the breadth of the undefined term "compelling circumstances," used in Bi-County to justify relief to Mt. Laurel developers faced with inadequate sewerage facilities in the municipality in which construction was planned, and the absence of any discussion in that opinion of specific remedies, reasonably left open to P&H the opportunity to test the outermost bounds of that decision. See N.J.S.A. 2A:16-52, a part of the Declaratory Judgment Act, N.J.S.A. 2A:16-50 to 62; N.J. Ass'n for Retarded Citizens, Inc. v. N.J. Dep't of Human Servs., 89 N.J. 234, 242 (1982); In re Ass'n of Trial Lawyers of Am., 228 N.J. Super. 180, 183 (App. Div.), certif. denied, 113 N.J. 660 (1988).
For purposes of this argument, we accept that the capacity of the RLSA's plant was fully accounted for, Larken had paid for a portion of the plant's expansion as well as for an allocation of a portion of the expanded facility's capacity, and Larken had spent $3 million in developing its site and had received preliminary and final approvals.
We disagree with Larken's position that the remedies available to P&H were limited by the Court's decision in Mongiello v. Borough of Hightstown, 17 N.J. 611 (1955). That decision's holding that "[a] municipal [utility] system should be so operated as to serve effectively the municipality and its residents," id. at 618 and that "non-residents can incidentally be served as an accommodation and without endangering the local service . . . but such incidental service to non-residents may not fairly be converted into an obligation to render additional non-resident service tending to jeopardize the service within the municipality," ibid., was rendered long before the decisions in Mt. Laurel and Bi-County and in a different context. The decision is thus not dispositive here.
Additionally, we reject Larken's argument, based on the operation of the doctrines of res judicata and collateral estoppel, that the trial court's decision dismissing P&H's action, together with our decision affirming that dismissal, effectively barred Judge D'Annunzio from finding that P&H had probable cause to commence that action. Res judicata bars repetitive litigation when there has been a final judgment and the causes of action, issues, parties, and the relief sought are substantially alike. Culver v. Ins. Co. of N. Am., 115 N.J. 451, 460 (1989). For collateral estoppel to apply,
the party asserting the bar must show that:
(1) the issue to be precluded is identical to the issue decided in the prior proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the court in the prior proceeding issued a final judgment on the merits; (4) the determination of the issue was essential to the prior judgment; and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.
[In re Estate of Dawson, 136 N.J. 1, 20 (1994) (citations omitted).]
We do not regard either doctrine as barring Judge D'Annunzio from opining as he did. P&H's underlying action for non-resident sewer access and Larken's action for malicious use of process cannot be considered the same controversy, or as having the same issues. In P&H's underlying action, which was not filed against Larken, the issue was whether P&H presented sufficient compelling circumstances for a non-resident allocation of the RLSA's sewer capacity and for an order imposing restraints on the RLSA's disposition of scarce sewer resources. Here, the issue is whether P&H had probable cause to commence the action in the first place. Moreover, the fact that P&H lost in the underlying action is not evidence that it brought those proceedings without probable cause to do so. Westhoff, supra, 219 N.J. Super. at 322.
The court's decision in Bellemead v. P&H Clinton Partnership, Docket No. HNT-L-22-04, denying P&H's motion to dismiss the complaint on the pleadings pursuant to Rule 4:6-2 is similarly non-dispositive. The judge in that matter did not have the advantage of the evidence presented in this matter. Moreover, because the matter settled, no final disposition on the merits was ever reached.
In summary, the undisputed evidence demonstrates that, in July 2003 when the underlying action was filed by P&H, its Windy Acres development constituted a major component of Clinton's substantive certification in support of its affordable housing obligation. At that time, no other developer had come forward to propose an alternative to the Windy Acres site that would offer as many affordable housing units. However, because the DEP, seemingly bowing to pressure, determined to raise the water purity classification for the South Branch, it became all but impossible for Clinton to build the sewage treatment plant that was envisioned as the facility that would handle Windy Acres' waste. Acting in accordance with the DEP's recommendation that it connect to a regional wastewater treatment facility as an alternative to disposal utilizing the South Branch, P&H filed suit against the RLSA and its participating municipalities. At that time, although the RLSA's treatment capacity had been expanded, and allocations of that capacity had been made, the plant was not operating at full capacity and, although usage was incrementally increasing, it was not known when or if capacity would be reached.
In these circumstances, we are satisfied, as was Judge D'Annunzio, that, utilizing a reasonably prudent person standard, P&H had a "reasonable belief that there was a good or sound chance of establishing [its] claim to the satisfaction of the court." LoBiondo, supra, 199 N.J. at 93.
We are similarly satisfied that, in seeking a temporary injunction, P&H did not engage in an abuse of process — a claim that, to succeed, requires proof that P&H performed an additional act during the underlying action that represented an illegal, improper or perverted use of legal process, or a use neither warranted nor authorized by that process, and that P&H had an ulterior motive and used its action as a means to coerce or oppress Larken. Wozniak v. Pennella, 373 N.J. Super. 445, 461 (App. Div. 2004), certif. denied, 183 N.J. 212 (2005). In this regard, we agree with Judge D'Annunzio's rejection of any perception that P&H sought to use the underlying suit to seize permanently the capacity relied upon by Larken and others. The judge held, and we agree: "P&H requested no such relief in the complaint, and the injunctive relief sought on the return date of the order to show cause was interim relief to maintain the status quo, but subject to a specifically defined safety valve and the general safety valve of 'good cause.'"
Further, because of the uncertain parameters of the law after the Court rendered its decision in Bi-County, we cannot conclude upon de novo review that P&H abused the motion process by attempting to restrain the use of allocated, but physically unused, scarce resources at the RLSA's sewage treatment plant for its own inclusionary development in neighboring Clinton or that Judge D'Annunzio erred by not giving dispositive effect to our affirmance of the trial court's dismissal of P&H's order to show cause.
Similarly, we affirm the dismissal of Larken's claims of tortious interference with contract and business relationships, determining that it failed to demonstrate, as it must have shown, Printing Mart v. Sharp Electronics, 116 N.J. 739, 751 (1989), that P&H was motivated by malice to interfere with Larken's sewer allocation contract or its anticipated economic benefits, because P&H was justified in challenging the state of the law after Bi-County.
IV.
As a final matter in connection with the appeal in A-4164-09, we address Larken's argument that Judge Accurso and Judge D'Annunzio erred in failing to disqualify Hill Wallack from representing P&H in the underlying litigation and that Judge D'Annunzio erred by refusing to grant Larken's motion to pierce the attorney-client privilege between Hill Wallack and P&H before ruling on the parties' cross-motions for summary judgment. Larken alleges that, as the result of Hill Wallack's prior representation of the company, Hill Wallack knew of Larken's sewer capacity reservation and used that "confidential" information against Larken when it represented P&H in the underlying and current actions, creating a conflict of interest in violation of RPC 1.9 and 1.7.
The issue of Hill Wallack's disqualification was raised by Larken in the underlying action instituted by P&H against the RLSA and others, and the order denying Larken's disqualification motion was the subject of a cross-appeal by Larken in that matter. Larken argued in that connection that Hill Wallack's representation of P&H had violated RPC 1.9. Upon review, we found the issues raised to be moot under Rule 2:8-2. P&H Clinton P'ship, supra, Docket No. A-2997-03 (slip op. at 32-33). As a consequence, we will not address that matter further, and will focus upon Larken's present suit.
In that regard, our review of the record in this matter satisfies us that Judge Accurso did not abuse her discretion in determining, among other bases for denying Larken's motion, that Larken's motion to disqualify Hill Wallack, filed in November 2007, more than two years after it had commenced its suit against P&H and issue had been joined, was not timely filed, and as a result Larken's objections to the representation had been waived. As a consequence of the judge's initial order and subsequent order upon reconsideration after examination of additional evidence, the issue became settled, and there was no reason for its further reconsideration by Judge D'Annunzio in January and September 2009.
As Judge Accurso recognized, Larken had raised the alleged conflict of interest in 2003, and again in its cross-appeal after dismissal of P&H's action. In 2005, Larken instituted its own action, and despite its evident knowledge of conduct that it claimed constituted a conflict of interest, it sat back without objection while Hill Wallack appeared for and actively represented P&H for a period of two years before filing its disqualification motion.
To disqualify Hill Wallack, Larken was required to prove that "the matters between the present and former clients [were] 'the same or . . . substantially related,' and the interests of the present and former clients [were] 'materially adverse.'" City of Atl. City v. Trupos, 201 N.J. 447, 462 (2010) (quoting RPC 1.9(a)). The party seeking to disqualify counsel also "bears the burden of proving that disqualification is justified." N.J. Div. of Youth & Family Servs. v. V.J., 386 N.J. Super. 71, 75 (Ch. Div. 2004) (internal quotations and citation omitted). "[B]ecause 'the appearance of impropriety' standard no longer has any vibrancy when gauging the propriety of attorney conduct, surmise alone cannot support an order of disqualification." City of Atl. City, supra, 201 N.J. at 469. Our review of a trial court's decision on a disqualification motion is de novo. Id. at 463.
Given the nature of the allegations in Larken's suit against P&H, we have difficulty perceiving a basis for Hill Wallack's disqualification. Nonetheless, even assuming a disqualifying conflict existed as the result of Hill Wallack's representation of P&H in this case, we agree that the conflict was waived.
In Dewey v. R.J. Reynolds Tobacco Co., 109 N.J. 201, 215 (1988), the Supreme Court "conclude[d] that under RPC 1.9 a mandatory disqualification is no longer required." Similarly, in Alexander v. Primerica Holdings, Inc., 822 F. Supp. 1099, 1115 (D.N.J. 1993), writ of mandamus granted, 10 F.3d 155 (3d Cir. 1993), the federal district court declared that "[w]aiver is a valid basis for the denial of a motion to disqualify." In that case, the court held that a motion seeking disqualification, filed three years after commencement of the litigation and in circumstances in which facts regarding the conflict had been known from the outset, was untimely. The court stated:
[A] finding [of waiver] is justified . . . when a former client was concededly aware of the former attorney's representation of an adversary but failed to raise an objection promptly when he had the opportunity. In [this] circumstance, the person whose confidences and secrets are at risk of disclosure or misuse is held to have waived his right to protection from that risk.
[Id. at 1115.]
Likewise, in Chattin v. Cape May Greene, Inc., 243 N.J. Super. 590 (App. Div. 1990), aff'd o.b., 124 N.J. 520 (1991), we held that the trial court had not abused its discretion when denying a motion to disqualify opposing counsel, because the movant had "unduly delayed raising the issue until shortly before the retrial, even though it was aware of the facts relevant to the alleged conflict for several years." Id. at 609.
We expressed doubts that waiver had occurred in Twenty-First Century Rail Corp. v. New Jersey Transit Corp., 419 N.J. Super. 343, 348 n.2, 364 (App. Div.), appeal granted, 206 N.J. 37 (2011), but did not resolve the issue.
--------
In Alexander, the federal court set forth five factors relevant to a determination whether the moving party seeking disqualification of an opponent's counsel had waived the right to that relief: "(1) the length of the delay in bringing the motion to disqualify, (2) when the movant learned of the conflict, (3) whether the movant was represented by counsel during the delay, (4) why the delay occurred, and (5) whether disqualification would result in prejudice to the non-moving party." Alexander, supra, 822 F. Supp. at 1115. Particularly important was whether the movant appeared to be using the motion as a technical maneuver. Ibid. (citing Richardson-Merrell, Inc. v. Roller, 472 U.S. 424, 436, 105 S. Ct. 2757, 2763, 86 L. Ed. 2d 340, 350 (1985) (expressing a concern for the "tactical use of disqualification motions to harass opposing counsel")).
Application of the test articulated by the court in Alexander to the present facts suggests that the court's denial of Larken's disqualification motion was properly justified. As we have noted, Larken waited two years after Hill Wallack's appearance in the matter to seek the firm's disqualification. Yet, it was aware of what it perceived to be a conflict from the outset and had supporting evidence in hand or available to it throughout the litigation. Moreover, Larken was a sophisticated developer that was vigorously represented by competent counsel at all stages of the litigation.
Turning to Larken's final attempts to disqualify Hill Wallack and to pierce the attorney-client privilege, we find Judge D'Annunzio's decision to defer Larken's motions pending a determination of the substantive issues raised by the litigation to have been proper, given Hill Wallack's continuous representation of P&H since 2003 and the imminent filing of dispositive motions. In particular, we note that, pursuant to our prior analysis of the probable cause issue in light of the decisions in Samaritan and Bi-County, any confidential information that P&H possessed as the result of Hill Wallack's representation of Larken was immaterial to whether P&H had probable cause to bring its underlying action.
V.
We next address the issues raised in A-5344-09 by Larken in its appeal from the order of summary judgment entered by Judge Goodzeit in favor of the Hill Wallack defendants. In that regard, we agree with Judge Goodzeit that Larken's claims against the Hill Wallack defendants for malicious prosecution/ malicious misuse of process, tortious interference with economic advantage and tortious interference with contract were barred by collateral estoppel. The identical issues were decided in Larken's action against P&H; the issues were clearly litigated in that proceeding, resulting in an order of summary judgment in P&H's favor; and the issues were central to the court's determination. In re Estate of Dawson, supra, 136 N.J. at 20. Further, the party against which the doctrine was to be asserted, Larken, was essentially the same as the plaintiff in the action against P&H. The only difference was the addition of Lawrence Gardner as a plaintiff in the present matter, and he was clearly in privity with Larken. Similarly, Hill Wallack, as P&H's agent, was in privity with P&H.
We recognize, as did Judge Goodzeit, that even when, as here, all the essential elements required for the application of collateral estoppel are found to exist, the doctrine should not be applied when it is unfair to do so. Fama v. Yi, 359 N.J. Super. 353, 359 (App. Div.), certif. denied, 178 N.J. 29 (2003). "In all cases in which collateral estoppel is sought to be invoked, the court must, in the exercise of its discretion, weigh economy against fairness." Barker v. Brinegar, 346 N.J. Super. 558, 566 (App. Div. 2002). In conducting that weighing process, Judge Goodzeit stated:
[W]ith the exception of the legal malpractice claim . . . , plaintiffs seek to pursue their claims against Hill Wallack based on Hill Wallack's representation of P&H. In New Jersey, "an attorney acts as an agent for his client." Hewitt v. Allen Canning Co., 321 N.J. Super. 178, 184 (App. Div. 1999)[, certif. denied, 161 N.J. 335 (1999)]. This proposition reflects the redundancy of plaintiffs' pursuit of their previously-litigated abuse of process, malicious prosecution, tortious interference with contractual relations, and tortious interference with prospective economic advantage claims; for purposes of those claims, Hill Wallack is the same party as P&H. In other words — and again, leaving aside the malpractice claim — given that Hill Wallack was an agent for P&H, plaintiffs are pursuing these claims for a second time against virtually the same party against whom such claims were already pursued. In short, plaintiffs are seeking a second bite at the apple by prosecuting the same claims against agents of P&H. . . . [T]he very purpose of collateral estoppel is to prevent parties from relitigating identical claims determined adversely as to the party against whom collateral estoppel is asserted. Accordingly, it is not unfair to preclude plaintiffs from pursuing these claims . . . .
Further, the judge observed, given the length of the previous litigation, it was likely that protracted litigation would ensue here, as well. And given the existence of an attorney-client relationship between P&H and Hill Wallack, the judge would anticipate many assertions of the attorney-client privilege, followed by multiple motions seeking to defeat that privilege. Thus, the invocation of collateral estoppel would not only avoid repetitious litigation, it would conserve judicial resources. Additionally, the judge found that any substantive review of the merits of Larken's non-malpractice claims would require inquiries identical to those already conducted by Judge D'Annunzio.
We concur with Judge Goodzeit's reasoning. We reject Larken's argument that, because summary judgment was entered in its action against P&H before discovery was complete, it was deprived of a full and fair opportunity to litigate its claims against that entity. The issue before Judge D'Annunzio was a purely legal one — whether, judged objectively, P&H had probable cause to commence the underlying action to test the boundaries of the "compelling circumstances" required by Bi-County, supra, 174 N.J. at 328, for a non-resident to demand allocation of sewer capacity from a neighboring sewerage authority. Since the disposition of that issue involved only a review of law that was current at the time P&H filed its sewer access suit, no facts or witness credibility would have affected or been material to the judge's decision. Thus, Larken was not precluded from a full and fair opportunity to litigate the issues relevant to its suit as the result of the timing of the parties' dispositive motions. Accordingly we affirm Judge Goodzeit's order of summary judgment substantially on the basis of her written opinion in the matter.
VI.
As a final matter, we address the dismissal, by order of summary judgment, of Larken's claim against Hill Wallack of legal malpractice on statute of limitations grounds.
In finding the cause of action to be barred, Judge Goodzeit appropriately applied the six-year statute set forth in N.J.S.A. 2A:14-1. Vastano v. Algeier, 178 N.J. 230, 233 (2003). "Ordinarily, a cause of action 'accrues when an attorney's breach of professional duty proximately causes a plaintiff's damages.'" Ibid. (quoting Grunwald v. Bronkesh, 131 N.J. 483, 492 (1993)). Pursuant to New Jersey's discovery rule, "a cause of action [for legal malpractice] accrues when a client suffers actual damages and knows or should reasonably know that the lawyer has breached a professional duty owed to the client." Id. at 232. Actual injury and knowledge of fault are both required. Olds v. Donnelly, 150 N.J. 424, 439 (1997). However, the statute of limitations begins to run "when a plaintiff knows or should know the facts underlying [injury and fault], not necessarily when a plaintiff learns the legal effect of those facts." Ibid.
In this matter, Judge Goodzeit properly found that Larken knew or should have known of Hill Wallack's alleged fault at the time that it moved to intervene in the action filed by the firm on behalf of P&H against the RLSA seeking a sewer allocation and potentially threatening the allocation previously given to Larken. At that time, Larken retained counsel, and thus commenced to incur attorney's fees to protect its right to the allocation that it had purchased. Precedent holds that the incurring of attorney's fees, prior to any decision in a matter, constitutes damages sufficient to commence the running of the statute of limitations. Grunwald, supra, 131 N.J. at 495.
[A] client may suffer damages, in the form of attorney's fees, before a court has announced its decision in the underlying action. "'It is not necessary that all or even the greater part of the damages have to occur before the cause of action arises.'" United States v. Gutterman, 701 F.2d 104, 106 (9th Cir. 1983) (applying California law) (quoting Bell v. Hummel & Pappas, 136 Cal. App. 3d 1009, 186 Cal. Rptr. 688, 694 (Ct. App. 1982)).
[Ibid.]
Larken filed its action against Hill Wallack on December 17, 2009. Larken moved to intervene in the P&H matter on December 10, 2003 — a date more than six years prior to Larken's commencement of its action against the firm and its lawyers. As a consequence, we find that Judge Goodzeit properly dismissed Larken's malpractice claim, correctly recognizing that a legal malpractice claim may accrue while the underlying claim is being litigated. Id. at 499-500.
We reject Larken's argument that its cause of action against Hill Wallack did not accrue until P&H's suit was dismissed on January 20, 2004, until we rendered our decision on May 5, 2005, until the Supreme Court denied certification on December 8, 2006, at a later date when Larken received its first building permits, or thereafter when depositions commenced. As we have illustrated, precedent does not support Larken's position.
Moreover, we note that Larken's own allegations in its complaint against Hill Wallack and its admissions in oral argument before the trial court reveal its knowledge of alleged malpractice at the time it intervened in P&H's action against the RLSA. In paragraphs 92 through 94 of its complaint, Larken alleged that as the result of Hill Wallack's representation of it for purposes of preliminary site plan approval, the firm and, particularly, Carroll, were aware that Larken heavily relied upon the 7,628 gallons per day of sewer capacity that it had purchased from the RLSA in obtaining preliminary site plan approval, in determining to purchase the property for $1 million for purposes of development, and in obtaining the governmental approvals necessary to develop Readington Commons. Larken continued:
95. Upon learning of Defendants' filing of the RLSA litigation and Order to Show Cause, Lawrence Gardner contacted Hill Wallack and Carroll and advised them that he believed Hill Wallack was in an ethical conflict of interest due to Hill Wallack's representation of P&H in a matter adverse to Larken involving the same or similar subject matter that Hill Wallack had represented Larken in. The ethical conflict of interest was obvious since under the Rules of Professional Conduct, a law firm is prohibited from representing a client against a former client where the present and former matters are "the same" or a "substantially related matter", [sic] or where the two matters are practically the same or where there is . . . a patently clear relationship between them.
96. The RLSA lawsuit was the "same" or "substantially related" to Hill Wallack's representation of Plaintiffs in obtaining site plan approval for Readington Commons.
. . . In essence, Defendants were trying to undo the work they had been paid by Larken to previously perform.
. . . .
99. As a direct and proximate result of the foregoing, Plaintiffs have been damaged and will continue to suffer damages.
Later, during oral argument, Larken's counsel declared that "it is very clear . . . legal malpractice" occurred because Carroll knew that Larken had paid to secure sewer capacity and then "[a]ll of a sudden we have Hill Wallack representing [P&H] to try and take away the very foundation of all the work that they performed for [Larken.]" Thus, it is clear that Larken had knowledge of its alleged injury at the time that it retained counsel for the purpose of intervening in the RLSA matter more than six years before Larken instituted suit against Hill Wallack.
We are therefore satisfied that summary judgment was properly granted dismissing each of Larken's claims in its suits against P&H and Hill Wallack.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION