Opinion
DOCKET NO. A-2730-11T4
04-10-2013
RAGAN & RAGAN, P.C., Plaintiff-Respondent, v. WINBERRY REALTY PARTNERSHIP, a New Jersey Partnership, and JOHN WINBERRY, MARY LOURDES WINBERRY, CELESTE WINBERRY and GREGORY WINBERRY, Defendants-Appellants.
Noel E. Schablik argued the cause for appellants. W. Peter Ragan, Sr., and Thomas Paschos argued the cause for respondent (Ragan & Ragan, P.C., and Thomas Paschos & Associates, P.C., attorneys; Mr. Ragan, of counsel; Mr. Ragan, Mr. Paschos, and June D. MacCarthy, on the briefs).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Harris.
On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket Nos. L-5967-09 and L-0460-11.
Noel E. Schablik argued the cause for appellants.
W. Peter Ragan, Sr., and Thomas Paschos argued the cause for respondent (Ragan & Ragan, P.C., and Thomas Paschos & Associates, P.C., attorneys; Mr. Ragan, of counsel; Mr. Ragan, Mr. Paschos, and June D. MacCarthy, on the briefs). PER CURIAM
This appeal arises from a law firm's suit to collect fees for legal work performed for a client (the collection action), and the client's counterclaim for legal malpractice. Defendants Winberry Realty Partnership (the partnership) and the individual members of the partnership appeal from two orders dated October 24, 2011, granting summary judgment in favor of plaintiff Ragan & Ragan, P.C., and dismissing defendants' counterclaim, and from a January 6, 2012 order denying defendants' motion for reconsideration. For the reasons that follow, we affirm the award to plaintiff of its fees for legal services provided to defendants, and we affirm the dismissal of the malpractice counterclaim. We reverse the award to plaintiff of counsel fees for its self-representation in the collection action.
The October 24, 2011 summary judgment order awarded plaintiff approximately $33,000 in fees for legal services previously rendered to defendants, and also awarded the law firm its fees, in an amount to be determined later, for prosecuting the collection action. The fees for the collection action were awarded by order dated November 9, 2011. Defendants' original notice of appeal listed the November 9 order. Its amended notice of appeal did not. We understand that defendants are appealing the award of counsel fees for the collection action, but they are not challenging the amount of the fee award.
I
Plaintiff represented defendants in a tax foreclosure action and convinced the court to vacate a default judgment against the partnership. See AFTH Real Property, LLC v. Winberry Realty Partnership, 417 N.J. Super. 518 (App. Div. 2010) (affirming order vacating judgment, conditioned on payment of legal fees and costs), certif. denied, 208 N.J. 337 (2011). Prior to plaintiff undertaking the representation in the AFTH case, the parties signed a retainer agreement that contained the following arbitration provisions:
Any claim by the Firm for unpaid fees and expenses and any defenses or counterclaims to such claim, whether based on a claim of inadequate representation, malpractice, or any other ground, shall be resolved exclusively through arbitration. In other words, there will be no jury trial or non-jury Court proceeding to resolve any dispute between the Client and the Firm ("the Parties"); rather, any such dispute will be resolved by the Parties or through binding non-court arbitration proceedings. For purposes of the resolving fee disputes, the parties agree to have the matter resolved by arbitration in accordance with its rules. The award of the arbiters shall be final, binding and conclusive on the Parties, and the Parties agree to sign all appropriate documents necessary to make such proceedings final, binding and conclusive as required by the arbiter.
The arbitration contemplated by the above paragraph shall be in accordance with New Jersey Court R. 1:20A-1 @ seq., [sic] before the District Fee Arbitration Committee established by the New Jersey Supreme Court. The Law Firm shall give the Client notice and the opportunity to pursue such fee arbitration. In the event the Client fails or refuses to initiate the arbitration, then the Law Firm shall, notwithstanding any of
the provisions of the above paragraph, be free to initiate a civil action on account of any monies due under this agreement.
[Emphasis added.]
When defendants failed to pay plaintiff's bill for its legal services, plaintiff sent defendants a letter dated October 9, 2009, demanding the fees, and offering defendants the opportunity to engage in fee arbitration, as required by Rule 1:20A-6. The letter advised defendants, in pertinent part, as follows:
Additionally, I hereby advise you under and pursuant to R. 1:20A-6 that the name, address, and telephone number of the current Secretary of the Fee Committee in the District where this firm practices is as follows:
Robert J. Saxton, Esq., Secretary District IX Fee Arbitration Committee 1540 Highway 138, Box 1141 Wall Township, NJ 07719 (732) 280-1700You have the right to select to pursue arbitration of the fee. However, if you do not promptly communicate with the Fee Secretary set forth above and file the approved form of request for fee arbitration within 30 days after receiving this notice, you shall lose the right to initiate fee arbitration and this office shall file a civil action complaint against you in the Superior Court of New Jersey. You should FIRST immediately telephone the Fee Secretary to request the appropriate forms. Unless payment is made by you or you request Fee Arbitration, suit will be instituted to collect the outstanding indebtedness.
When defendants failed to request fee arbitration, or arbitration of any kind, plaintiff filed suit on November 12, 2009 to collect the fees. Default judgment was entered in May 2010, but plaintiff consented to the court vacating the judgment and agreed to dismiss the collection action without prejudice.
On June 29, 2010, plaintiff sent defendants a demand letter and offered to try to resolve the dispute through mediation conducted by the "local fee arbitration committee." On December 16, 2010, plaintiff sent defendants another pre-action notice, as required by Rule 1:20A-6, offering the opportunity for fee arbitration. Defendants failed to demand arbitration, and plaintiffs filed the collection action on January 18, 2011.
On March 31, 2011, defendants filed an answer and a counterclaim alleging legal malpractice. Plaintiff filed an answer to the counterclaim on April 29, 2011, thereby triggering the time limit for defendants to file an Affidavit of Merit. See N.J.S.A. 2A:53A-27 (setting a sixty-day time limit and permitting one sixty-day extension). Defendants failed to file an Affidavit of Merit. After an exchange of paper discovery, plaintiff filed a motion on August 30, 2011, to dismiss the counterclaim and for summary judgment on its fee claim. As to the collection action, the motion was supported by a certification of W. Peter Ragan, Esq., together with the firm's detailed hourly billing records and proof of the firm's pre-action compliance with Rule 1:20A-6.
In opposition to the motion, defendants submitted a certification from defendant John J. Winberry, Jr. (Winberry). His certification alleged a long list of disagreements with the legal strategy the Ragan firm pursued while representing defendants in the tax foreclosure litigation. He claimed that "Mr. Ragan's conduct fell far short of adequate representation" in various ways, including Ragan's refusal to present, in briefs and oral arguments, points that Winberry thought were meritorious and Ragan did not. Winberry did not deny that defendants failed to file an Affidavit of Merit.
Winberry also asserted in general terms that the firm billed defendants "for typing expenses charged at the rate of an associate of Mr. Ragan's." Apparently Winberry believed that if the firm's associates were typing legal documents, he should not be billed for that time. He did not question any specific hours or services listed on the firm's extensive billing records.
Late on Friday afternoon, October 20, 2011, four days before the October 24 motion hearing, defendants faxed a letter to plaintiff and the court demanding arbitration pursuant to the retainer agreement. Plaintiff opposed the request as being untimely.
In an oral opinion issued on October 24, 2011, the motion judge concluded that the counterclaim was based on a claim of legal malpractice and therefore required an Affidavit of Merit. She also found that defendants had failed to specify any discovery they might have needed to prepare the Affidavit. The judge rejected defendants' argument that "this is a common knowledge malpractice type of case," concluding that "[c]learly the jury would require the assistance of an expert." She therefore granted the motion to dismiss the malpractice counterclaim.
With regard to the collection action, she found that defendants had neither specified any billed hours that they claimed were excessive nor submitted any other legally competent evidence that the fees were unreasonable. The judge also stated that she had reviewed the bills herself and found nothing excessive in the number of hours billed. However, the judge disallowed the eighteen percent interest provided by the fee agreement, and awarded only the rate permitted by the Court Rules for prejudgment interest. She also awarded plaintiff a counsel fee for the time spent litigating the collection action, pursuant to the terms of the retainer agreement. However, she awarded fees at the firm's hourly rate, rather than awarding thirty percent of the amount recovered, as specified in the agreement.
Defendants filed a motion for reconsideration, arguing, among other things, that plaintiff was not entitled to collect fees for its pro se representation. They also argued that the malpractice claim did not require an Affidavit of Merit.
In a lengthy oral opinion issued on January 6, 2012, the motion judge reaffirmed her earlier ruling that the counterclaim required an Affidavit of Merit. After reciting plaintiff's extensive efforts to obtain defendants' agreement to go to arbitration, the judge rejected defendants' untimely contention that the matter should now be dismissed in favor of arbitration. She reasoned that the collection action was ripe for summary judgment because defendants did not specify any additional discovery they needed. Nor did they raise any material dispute of fact as to the reasonableness of the fees. She denied the reconsideration motion. However, she also denied plaintiff's application for counsel fees as a sanction for frivolous litigation.
II
On this appeal, we review the judge's grant of summary judgment de novo, employing the same standard used by the trial judge. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We consider whether there are material disputes of fact and, if not, whether the undisputed facts, viewed in the light most favorable to the non-moving party, entitle the moving party to judgment as a matter of law. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, 189 N.J. 436, 445-46 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
Likewise, we review de novo a trial court's legal interpretations and its construction of arbitration clauses. See Cole v. Jersey City Medical Center, 425 N.J. Super. 48, 56 (App. Div.), certif. granted, 212 N.J. 198 (2012); Alfano v. BDO Seidman, LLP, 393 N.J. Super. 560, 573 (App. Div. 2007).
Viewing the record in light of those legal standards, we find that the motion judge properly granted plaintiff summary judgment with respect to its fees for the AFTH case. Defendants' arguments on that point are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add the following comment.
Plaintiff submitted legally competent evidence, including detailed billing records, concerning the legal services that it rendered. Defendants raised no objection to any specific time entry or to the overall number of hours billed. Their contention that firm associates should not have billed for typing documents was frivolous. Even if defendants suggested some of the language contained in the documents, the firm's attorneys were still ultimately responsible for composing the documents that would be submitted to the court. Because defendants failed to raise a material dispute of fact over the bills, no hearing was required as to the reasonableness of the fees, and summary judgment was properly granted. See Gruhin & Gruhin, P.A. v. Brown, 338 N.J. Super. 276, 280 (App. Div. 2001). We agree with the motion judge that defendants failed to specify any additional discovery they needed on this or any other issue in the case. Thus, the summary judgment motion was not premature. See Trinity Church v. Atkin Olshin Lawson-Bell, 394 N.J. Super. 159, 166 (App. Div. 2007).
Defendants' arguments concerning the Affidavit of Merit are also insubstantial. Winberry's certification set forth a litany of criticisms, all directed at his prior attorney's litigation strategy in the tax foreclosure action. Apparently, at every turn in that lawsuit, Winberry sought to second-guess his attorney and micro-manage the litigation. Although defendants attempt to characterize their counterclaim as a "breach of contract" action, the certification can only be described as setting forth a malpractice claim focused on legal strategy issues. See Couri v. Gardner, 173 N.J. 328, 340 (2002) (holding that "[i]t is not the label placed on the action that is pivotal but the nature of the legal inquiry"). These were clearly not matters within the common knowledge of lay jurors. See Hubbard v. Reed, 168 N.J. 387, 394-95 (2001); Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 540 (App. Div. 2009), certif. denied, 203 N.J. 93 (2010). Therefore, an Affidavit of Merit was required, and the trial court properly dismissed the counterclaim.
Defendants' appellate arguments concerning their entitlement to arbitration are equally unpersuasive. R. 2:11-3(e)(1)(E). The extent of a party's obligation to engage in arbitration is ordinarily determined by the wording of the arbitration clause, as a matter of contract law. See Fawzy v. Fawzy, 199 N.J. 456, 469 (2009); Yale Materials Handling Corp. v. White Storage & Retrieval Systems, Inc., 240 N.J. Super. 370, 374 (App. Div. 1990). A contractual right to arbitration can be waived, either explicitly or through a party's conduct. See McKeeby v. Arthur, 7 N.J. 174, 181 (1951); Wein v. Morris, 388 N.J. Super. 640, 651 (App Div. 2 006), affirmed in part, reversed in part on other grounds, 194 N.J. 364 (2008); Farese v. McGarry, 237 N.J. Super. 385, 394 (App. Div. 1989).
Defendants argue that the arbitration clause is ambiguous, as it relates to the scope of the issues subject to arbitration. They urge that the clause, having been drafted by plaintiff, should be construed favorably to defendants. However, we need not decide whether the arbitration clause is narrowly limited to fee arbitration pursuant to Rule 1:20A-6, as plaintiff claims, or whether it applies more broadly to all claims and counterclaims, as defendants argue.
Regardless of its scope, the clause unambiguously required defendants "to initiate the arbitration," failing which plaintiff was "free to initiate a civil action" to collect its fees. In the face of repeated pre-litigation correspondence from plaintiff offering the opportunity for arbitration, defendants failed to seek arbitration. Accordingly, pursuant to the express terms of the retainer agreement, plaintiff was entitled to pursue its claims in court. Further, no reasonable construction of the clause would permit defendants to then bifurcate the dispute by requiring separate arbitration of their defenses and counterclaims. See Zirger v. General Accident Ins. Co., 144 N.J. 327, 343 (1996) ("Just as we view piecemeal litigation as anathema, we also look with disfavor upon the unnecessary bifurcation of disputes between judicial resolution and arbitration.").
Moreover, even if the agreement had not clearly permitted plaintiff to file suit under these circumstances, we would conclude that defendants waived the right to arbitrate their counterclaims by their unreasonable delay. Defendants filed an answer and a counterclaim without mentioning an asserted right to arbitration. Defendants waited until plaintiff had incurred the expense of discovery and motion practice, and served their arbitration demand just before the summary judgment motion was to be heard. The judge properly rejected defendant's eleventh-hour litigation tactic. See Farese, supra, 237 N.J. Super. at 394. Further, it would be contrary to the Affidavit of Merit statute to allow defendants, who let the statutory time limit pass without filing an Affidavit, to salvage their malpractice cause of action by removing the matter to arbitration.
Lastly, we must agree with defendants on the issue of counsel fees for plaintiff's self-representation in the collection action. After the motion judge decided this case, the Supreme Court issued its opinion in Segal v. Lynch, 211 N.J. 230, 260-64 (2012). In that case, the Court disapproved granting attorneys fees for representing themselves in litigation. Nothing in the Court's opinion suggests that Segal was intended to have only prospective application. This case was on direct appeal when Segal was decided, and we perceive no reason not to follow the Court's holding in that case. Plaintiff's arguments on this point warrant no further discussion. R. 2:11-3(e)(1)(E).
Accordingly, we reverse the fee award of $13,318 to plaintiff for litigating the collection action. In all other respects, the orders on appeal are affirmed. We remand for the limited purpose of entering an amended judgment consistent with this opinion.
Affirmed in part, reversed and remanded in part.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION