Title: Packard-Bamberger & Co., Inc., et als. v. Andrew Collier, et als.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). VERNIERO, J., writing for a unanimous Court. The principal issue in this appeal is whether the trial court erred in awarding counsel fees to plaintiffs in connection with their suit brought against a corporate director who also served as legal counsel to the corporation. This case has a long history involving the struggle for control of Packard-Bamberger & Co. (PB). Frank Packard (Frank) founded PB with a partner in 1933 and ran it until his death in 1981. PB's main business was a supermarket and department store located on a ten-acre parcel in Hackensack. In the 1950s, Frank created American Beauty Parlor (ABP), a subsidiary of PB, which operated a beauty parlor and barbershop at PB's Hackensack facility. Through ABP, Frank also incorporated Hudson Valley Realty Corporation (HVRC), which was then owned by him and a friend, Emil Buehler. From 1969 until Frank's death, PB and ABP were managed by the same board of directors: Frank, Andrew Collier, and Daniel Amster. Amster also served as legal counsel for PB and ABP, in addition to serving as Frank's personal attorney. Frank's death sparked a battle for control of the companies among Frank's son, John, Frank's estate, and Collier. Although Frank's wife, Margaret, and Amster initially served as co-executors of Frank's estate, the two began to have problems working together, and United Jersey Bank (UJB) was appointed as a third co-executor. UJB thereafter initiated a probate proceeding. During that litigation, the trial court convened a PB shareholder's meeting to allow the shareholders to vote on the dissolution of PB. Frank's estate and Peter (Frank's other son), together owning a majority of the shares, voted to dissolve PB. John and Collier dissented, each voting to maintain PB's corporate existence. After the dissolution vote, the trial court entertained offers for PB, offering John and Collier the opportunity to purchase the shares belonging to Frank's estate and to Peter. The court subsequently rejected both offers, approving instead a $4 million proposal from a real estate development company for PB's Hackensack property. The court also ordered the liquidation of PB. The Appellate Division subsequently reversed those rulings, and remanded the matter for further proceedings. On remand, a different trial court evaluated the competing offers of John and Collier and determined that John's offer would be accepted. Since John previously had purchased Peter's shares in PB, the trial court's ruling gave John control of PB's outstanding stock, with the exception of Collier's one share. During the period when the trial court was accepting offers for PB, Frank Bovino, a co-owner of Sherbrooke Realty and Construction Company (Sherbrooke), had written several letters to Collier, expressing Sherbrooke's interest in purchasing PB's property. Ultimately, Sherbrooke submitted to Collier an offer to purchase PB's property for $12 million, which was approximately three times greater than any other offer that had been received for that property. Collier had showed the exchange of letters to Amster, who then assisted Collier in the negotiations with Sherbrooke. Neither Collier nor Amster informed John and/or the other plaintiffs of Sherbrooke's offer. That failure later formed the basis for a breach of duty claim. The co-owner of HVRC, Buehler, died in 1984. A few months after his death, John communicated with a representative of Buehler's estate, indicating that PB would be interested in purchasing the estate's interest in HVRC. The representative informed John that the estate was not planning to sell its interest in HVRC. Unbeknownst to John, Collier also had communicated with representatives of Buehler's estate about the sale of the HVRC stock. In his communications, he had suggested that he was acting in his capacity as an officer of PB. Although those initial communications did not lead to a transaction, Collier later communicated with the estate representative and negotiated the terms of a purchase by him, in his individual capacity, of the estate's HVRC stock for $220,000. John was not made aware of those negotiations as well. Amster had assisted Collier in that transaction, which assistance resulted in Amster becoming the beneficial owner of half of Collier's HVRC stock. Amster's role in the transaction later formed the basis for John's claim that Collier usurped a corporate opportunity for his own benefit. After John gained control of PB, he ultimately discharged Amster and Collier. Thereafter, in June 1987, John, PB, and ABP filed suit against Collier, later amending the complaint to include Amster and his law firm as defendants. The trial was limited to two main issues: whether Collier and Amster breached their fiduciary duties by failing to reveal Bovino's offer for PB's Hackensack property and whether they usurped a corporate opportunity by purchasing the Buehler estate's interest in HVRC. The trial court determined that Collier and Amster, both by his position as director of PB and by his position as counsel, breached their fiduciary duty to PB by not revealing the Bovino offer. The court further determined that Collier and Amster usurped a corporate opportunity in the HVRC stock purchase, noting specifically that Amster had violated the Rules of Professional Conduct by his failure to reveal that corporate opportunity, instead taking advantage of that opportunity for his own personal gain. Although the trial court found that John and the other plaintiffs had not sustained any monetary damages by Collier's and Amster's conduct, it ruled that principles of equity required them to transfer the HVRC stock to PB, without cost. Although the trial court initially rejected plaintiffs' request for an award of attorneys' fees, it later awarded those fees on the basis of Saffer v. Willoughby, 143 N.J. 256 (1996), which held that a client may recover reasonable expenses and attorneys' fees as consequential damages for attorney malpractice. The trial court made that award despite the fact that a special master earlier had rejected plaintiffs' malpractice claim against Amster. In making the award, the trial court reasoned that similar authorization for the award of attorneys' fees exists when an attorney commits intentional misconduct. The court determined that the services for which there should be an award of counsel fees amounted to $235,000. The court then divided that amount by three, rounded the number to $80,000, and entered judgment accordingly. With the exception of the attorneys' fees award, the Appellate Division affirmed the rulings of the trial court. Because plaintiffs had not succeeded on a malpractice claim asserted against Amster, the Appellate Division concluded that the trial court was not authorized to award counsel fees, reasoning that Saffer did not control. The Supreme Court granted plaintiffs' petition for certification, which raised the full panoply of issues resolved by the lower courts. HELD: A successful claimant in an attorney-misconduct case may recover reasonable counsel fees incurred in prosecuting that action. 1. Although New Jersey generally disfavors the shifting of attorneys' fees, a prevailing party can recover those fees if they are expressly provided for by statue, court rule, or contract. In addition, under Saffer, a negligent attorney is responsible for the reasonable legal expenses and attorney fees incurred in prosecuting a legal malpractice action. (pp. 15-17) 2. The trial court correctly ruled that the Saffer holding allowing the award of counsel fees should be applied in this setting. Thus, a successful claimant in an attorney-misconduct case may recover reasonable counsel fees incurred in prosecuting that action. To hold otherwise would lead to the incongruous result that a plaintiff could recover counsel fees if successful in proving an attorney's negligence, but not when proving an intentional violation of a fiduciary duty arising as a result of the attorney-client relationship. (pp. 17-19) 3. Amster's duties as a director and legal counsel overlapped, and he owed fiduciary duties to PB in both of his roles. Because Amster's misconduct breached his duties as an attorney, the trial court's award of attorneys' fees was proper. (pp. 19-20) 4. Fee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion. Here, applying the two-pronged test to determine whether the party seeking the fee prevailed in the litigation, the trial court correctly determined that plaintiffs were the prevailing parties in respect of the fee-disengorgement issue and the issue concerning the return of the HVRC stock. (pp. 20-22) 5. In addition to the lodestar amount (the number of hours reasonably expended by an attorney, multiplied by a reasonable hourly rate), courts consider other factors in evaluating a fee application, such as the interest to be vindicated in the context of the statutory or policy objectives; any circumstances incidental to the litigation that directly or indirectly affected the extent of counsel's efforts; and whether the hours expended by counsel exceeded those that competent counsel would have expended to achieve a comparable result. (pp. 22-24) 6. The trial court did not abuse its discretion in evaluating plaintiffs' fee application. (pp. 24-25) Judgment of the Appellate Division in respect of plaintiffs' counsel fee award is REVERSED. In respect of all other issues, the judgment of the Appellate Division is AFFIRMED. CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, LONG, LaVECCHIA, and ZAZZALI join in JUSTICE VERNIERO's opinion. PACKARD-BAMBERGER & CO., INC., a New Jersey Corporation; AMERICAN BEAUTY PARLOR, INC., a New Jersey Corporation; JOHN PACKARD and LYNN PACKARD, Plaintiffs-Appellants, v. ANDREW COLLIER; PACKARD'S TRAVEL AGENCY, INC. and HUDSON VALLEY REALTY CORP., Defendants & Third Party-Plaintiffs, and DANIEL AMSTER and AMSTER & ROSENSWEIG, ESQS., Defendants-Respondents, and ALFIERO PALESTRONI, Third-Party Defendant & Defendant on the Counterclaim. Argued January 16, 2001 -- Decided May 30, 2001 On certification to the Superior Court, Appellate Division. The opinion of the Court was delivered by VERNIERO, J. The principal issue in this appeal is whether the trial court erred in awarding counsel fees to plaintiffs in connection with their suit brought against a corporate director who also served as legal counsel to the corporation. Finding intentional misconduct on the part of the attorney-director, the trial court awarded counsel fees on the basis of Saffer v. Willoughby, 143 N.J. 256 (1996). In Saffer, we held that a client may recover reasonable expenses and attorneys' fees as consequential damages for attorney malpractice. The Appellate Division reversed the trial court's award of counsel fees, concluding that the principles espoused in Saffer were inapplicable. The panel affirmed the trial court on numerous other issues. We agree with the trial court that the holding in Saffer should extend to attorney misconduct cases. We thus reinstate plaintiffs' counsel fee award. In all other respects, we affirm the judgment of the Appellate Division. NO. A-134 PACKARD-BAMBERGER & CO., INC., a New Jersey Corporation, et al., Plaintiffs-Appellants, v. ANDREW COLLIER; PACKARD'S TRAVEL AGENCY, INC. and HUDSON VALLEY REALTY CORP., Defendants & Third Party-Plaintiffs. DECIDED May 30, 2001 Chief Justice Poritz