Court Opinion

ID: 7360754
Source: CourtListenerOpinion
Date Created: 2022-07-26 14:06:20.249396+00
Date Added: 2024-06-11T16:20:32.240876
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                         SUPERIOR COURT OF NEW JERSEY
                                                         APPELLATE DIVISION
                                                         DOCKET NO. A-1886-20

ALLSTATE NEW JERSEY
INSURANCE COMPANY,
ALLSTATE INSURANCE
COMPANY, ALLSTATE
INDEMNITY COMPANY,
ALLSTATE PROPERTY AND
CASUALTY INSURANCE
COMPANY, ALLSTATE
NEW JERSEY PROPERTY
AND CASUALTY INSURANCE
COMPANY and ENCOMPASS
INSURANCE COMPANY,

           Plaintiffs-Appellants,

v.

HARRIS C. LEGOME, ESQUIRE,
LEGOME AND ASSOCIATES, LLC,
VINCENT A. CAMPO, ESQUIRE,
MARY ELIZABETH BOGAN,
ESQUIRE, MELISSA KEPHART,
MICHELE D'AMBRA STEPHANIE
PAOLINO and COLLEEN CROSBY,

     Defendants-Respondents.
_______________________________

                    Argued May 12, 2022 – Decided July 26, 2022
            Before Judges Haas, Alvarez and Mitterhoff.

            On appeal from the Superior Court of New Jersey, Law
            Division, Gloucester County, Docket No. L-0859-13.

            Michael A. Malia argued the cause for appellants (Peri
            & Stewart, LLC and Kennedy Vuernick, LLC,
            attorneys; Michael A. Malia and Douglas M. Alba, on
            the briefs).

            Joseph P. Grimes argued the cause for respondents.

PER CURIAM

      Plaintiffs Allstate Insurance Company and its affiliates (Allstate) appeal

from a February 11, 2021 final judgment following a November 19, 2020,

decision denying Allstate's motion for reconsideration of the court's July 29,

2020 order granting defendants, attorney Harris Legome, his firm, and

employees, summary judgment. We affirm, substantially for the reasons set

forth in Judge James R. Swift's well-reasoned opinion. We add the following

brief remarks.

      We discern the following facts from the record.           From 2009-2013

defendants successfully litigated 7,000 personal injury protection (PIP) claims

on behalf of plaintiffs. As a result, Allstate paid defendants' attorney's fees and

cost payments associated with the arbitrations before the National Arbitration

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                                        2
Forum and Forthright. 1 The subject of this appeal is a group of 263 cases in

which Allstate paid attorney's fees to defendants under the PIP arbitration

system. Approximately seventy percent of these awards were settled prior to

arbitration and the other thirty percent represent attorney's fees awards made by

the arbitrator. Allstate alleges that defendants violated the New Jersey Insurance

Fraud Prevention Act (IFPA), N.J.S.A. 17:33A-1 to -34, and seek the return of

$1.1 million consisting of all legal fees and costs paid or ordered to be paid to

defendants as the prevailing party against Allstate in PIP arbitrations.

      Allstate alleges that defendants engaged in extensive misrepresentation at

the time Legome worked on these cases. In his deposition, Legome testified that

his secretaries used a fee certification form with pre-filled time entries and work

descriptions regardless of whether they accurately reflected actual work. For

example, the task of creating a demand for arbitration had a standard time entry

of 1 or 1.2 hours irrespective of how accurate that time was. Defendant Melissa

Kephart, one of the firm's secretaries, described the process of preparing the fee

certifications as going through the existing fee certification file, recreating it,

1
   Forthright is the administrator of the New Jersey no-fault PIP arbitration
Program.
                                                                               A-1886-20
                                          3
copying and pasting as necessary and changing the caption.            The other

secretaries, defendants Stephanie Paolino, Colleen Crosbee, and Vincent

Campo, all testified to using the same template form and copying and pasting.

Defendants also admitted to making judgment calls or guessing at how much

time was spent on certain activities when they were not working from the

template.

      Defendants billed $25 for certified mail. Defendant Kephart testified that

she did not know if anyone kept track of postage and that she had never actually

sent anything by certified mail.     Defendant Crosbee testified that no one

documented proof of the certified or regular mail charges and, therefore, she did

not know if the $25 was accurate or even reflected an actual expense. Allstate

also alleges that, at times, defendants billed for more than twenty-four hours in

a day and negotiated settlements when Legome was not available. Further,

Allstate alleges Legome may not have done any of the work on particular files

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himself despite the fact that he always signed the fee certifications containing

only his name.2

      On June 11, 2013, Allstate filed a complaint against defendants alleging

violations of IFPA, common law fraud, and unjust enrichment. The parties

participated in discovery over the next seven years. On May 8, 2020, defendants

moved for summary judgment. On July 29, 2020, Judge Swift issued a written

decision and order granting defendants' motions and dismissing all of Allstate's

IFPA and unjust enrichment claims, and a majority of Allstate's common law

fraud claims.3

2
   Judge Swift emphasized he does not condone any of Legome's alleged
misconduct. Nor do we. The issue, however, is not whether Legome did
anything unethical or otherwise unlawful, but whether Allstate has stated a
viable claim under IFPA or the common law. We therefore must set aside our
distaste for the underlying facts and scrutinize Allstate's claims with the same
objective lens we apply in any plaintiff's cause of action. It bears noting that
despite Allstate's expressed moral outrage at Legome's conduct, it apparently
never reported these transgressions to the ethics committee, opting instead to
pursue claims for money damages. Regardless, Legome has since been disbarred
on unrelated ethics charges.
3
  The remaining claims were for common law fraud for seven settled cases with
fee certifications which are not the subject of this appeal.

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                                       5
On November 19, 2020, the judge denied Allstate's motion for reconsideration. 4

This appeal followed.

      On appeal, Allstate presents the following arguments for our

consideration:

            POINT I

            THE TRIAL COURT ERRED BY GRANTING
            DEFENDANTS'    SUMMARY      JUDGMENT
            MOTIONS, DISMISSING PLAINTIFFS' [IFPA]
            CLAIMS.

                 A. Standard of Review for Summary Judgment.

                 B. The Trial Court Misapplied the Law Because
                 Fraudulently Obtained Insurance Company
                 Payments are Actionable Under the IFPA, Which is
                 to be Construed Liberally.

                    1. The trial court ignored the IFPA's plain
                    language and incorrectly modified the IFPA.

                      a. Each IFPA section does not require
                         as a prerequisite a claim for benefits
                         pursuant to or related to an insurance
                         policy.

                          i. N.J.S.A. 17:33A-4(a)(3)'s
                         plain and ordinary language
                         only requires the Plaintiffs to

4
  Because there were several outstanding motions and claims at the time of the
July 29, 2020, order, the judge entered a February 11, 2021 consent order
disposing of all remaining claims, issues, and parties in order to achieve finality
for purposes of appeal.
                                                                             A-1886-20
                                        6
         prove      the     Defendants
         concealed the occurrence of an
         event which affected the
         Defendants'      initial     or
         continued right or entitlement
         to (1) any insurance payment
         or (2) the amount of any
         payment to which the person is
         entitled.
         ii. The trial court erred by
         rewriting the IFPA by omitting
         keywords      from     N.J.S.A.
         17:33A-4(a)(2), and then
         relying upon that incorrect
         citation, contrary to the
         statute's plain and ordinary
         reading.

   2. The trial court failed to construe the IFPA
   liberally.

C. The Trial Court Erred Because an Insurance Company
Can Pursue An IFPA Action Even if the Insurance
Company's Payment Is Not Made Pursuant to an Insurance
Policy.

D. The Trial Court Erred Because There Was Evidence
Creating a Genuine Issue of Material Fact as to Whether
PIP Attorney Fee Payments were Made Pursuant to or
Related to an Insurance Policy.

   1. 2,551 Legome attorney fee certifications
   seeking payment were pursuant to, in connection
   with and/or related to a policy of insurance
   Plaintiffs issued.

   2. The Legome Defendants conceded in their
   briefs in support of summary judgment that

                                                          A-1886-20
                        7
     Legome's attorneys' fees were pursuant to a
     liability or indemnity policy.

     3. Defendant Crosbee admitted that all Legome
     attorney fee certifications were prepared or made
     and intended to be presented to Plaintiffs in
     support of a claim for payment or other benefit
     under an insurance policy.

     4. Plaintiffs' checks payable to the Legome
     Defendants were made pursuant to, in connection
     with and/or related to a policy of insurance.

     5. Allstate Analyst Michael Gallagher confirmed
     that attorneys' fees are paid under the PIP
     insurance coverage.

     6. Plaintiffs' expert, Carl Poplar, Esquire, found
     sufficient evidence for Plaintiffs to get to a jury
     on its claims.

     7. The Defendants sent demands for arbitration
     to Plaintiffs which were pursuant to, in
     connection with and/or related to a policy of
     insurance issued by the Plaintiffs.

     8. Defendants submitted assignment of benefits
     forms which were pursuant to, in connection with
     and/or related to an insurance policy.

     9. Arbitration awards that awarded the Legome
     Defendants attorneys' fees and costs were made
     pursuant to, in connection with and/or related to
     a policy of insurance issued by the Plaintiffs.

E. The Trial Court Relied Upon Factual Information Not in
the Record to Support its Flawed Conclusion.

                                                            A-1886-20
                          8
            POINT II

            The Trial Court Erred by Granting Defendants'
            Summary Judgment Motions, Dismissing Plaintiffs'
            Common Law Fraud Claims.

            A. The Trial Court Erred In Dismissing Plaintiffs' Common
            Law Fraud Claims in Arbitration Award Cases.

            B. The Trial Court Erred in Dismissing Plaintiffs' Common
            Law Fraud Claims in Settled Cases Without Fee
            Certifications.

            POINT III

            The Trial Court Erred by Granting Defendants'
            Summary Judgment Motions, Dismissing Plaintiffs'
            Claims for Unjust Enrichment and Costs.

            POINT IV

            The Trial Court Erred by Denying Plaintiffs' Motion for
            Reconsideration.

            A. Standard of Review for Reconsideration.

            B. The Court Abused its Discretion and the Court's Decision
            Was Against the Interests of Justice.

      We review a trial court's grant of summary judgment de novo, applying

the same standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346

(2017). Summary judgment must be granted "if the pleadings, depositions,

answers to interrogatories and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any material fact challenged and

                                                                             A-1886-20
                                        9
that the moving party is entitled to a judgment or order as a matter of law."

Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224

N.J. 189, 199 (2016) (quoting R. 4:46-2(c)).

      Further, we review the decision of a motion for reconsideration for an

abuse of discretion. Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div.

1996). Reconsideration should only be granted in "those cases which fall into

that narrow corridor in which either 1) the [c]ourt has expressed its decision

based upon a palpably incorrect or irrational basis, or 2) it is obvious that the

[c]ourt either did not consider, or failed to appreciate the significance of

probative, competent evidence." Id. at 384 (quoting D'Atria v. D'Atria, 242 N.J.

Super. 392, 401 (Ch. Div. 1990)). Therefore, we have held that "the magnitude

of the error cited must be a game-changer for reconsideration to be appropriate."

Palombi v. Palombi, 414 N.J. Super. 274, 289 (App. Div. 2010).

      Pursuant to N.J.S.A. § 17:33A-4

            a. A person or a practitioner violates this act if he:

                  (1) Presents or causes to be presented any
                  written or oral statement as part of, or in
                  support of or opposition to, a claim for
                  payment or other benefit pursuant to an
                  insurance policy or the "Unsatisfied Claim
                  and Judgment Fund Law," P.L.1952, c.174
                  (C.39:6-61 et seq.), knowing that the
                  statement contains any false or misleading

                                                                           A-1886-20
                                       10
information concerning any fact or thing
material to the claim; or

(2) Prepares or makes any written or oral
statement that is intended to be presented
to any insurance company, the Unsatisfied
Claim and Judgment Fund, or any claimant
thereof in connection with, or in support of
or opposition to any claim for payment or
other benefit pursuant to an insurance
policy or the "Unsatisfied Claim and
Judgment Fund Law," P.L.1952, c.174
(C.39:6-61 et seq.), knowing that the
statement contains any false or misleading
information concerning any fact or thing
material to the claim; or

(3) Conceals or knowingly fails to disclose
the occurrence of an event which affects
any person's initial or continued right or
entitlement to (a) any insurance benefit or
payment or (b) the amount of any benefit
or payment to which the person is entitled;

(4) Prepares or makes any written or oral
statement, intended to be presented to any
insurance company or producer for the
purpose of obtaining:

      (a) a motor vehicle insurance
      policy, that the person to be
      insured maintains a principal
      residence in this State when, in
      fact, that person's principal
      residence is in a state other
      than this State; or

                                               A-1886-20
                    11
                        (b) an insurance policy,
                        knowing that the statement
                        contains    any     false   or
                        misleading         information
                        concerning any fact or thing
                        material to an insurance
                        application or contract;

                  (5) Conceals or knowingly fails to disclose
                  any evidence, written or oral, which may
                  be relevant to a finding that a violation of
                  the provisions of paragraph (4) of this
                  subsection a. has or has not occurred; or

                  (6) Prepares, presents or causes to be
                  presented to any insurer or other person, or
                  demands or requires the issuance of, a
                  certificate of insurance that contains any
                  false or misleading information concerning
                  the policy of insurance to which the
                  certificate makes reference, or assists,
                  abets, solicits or conspires with another to
                  do any of these acts. As used in this
                  paragraph, "certificate of insurance" means
                  a document or instrument, regardless of
                  how titled or described, that is, or purports
                  to be, prepared or issued by an insurer or
                  insurance producer as evidence of property
                  or casualty insurance coverage. The term
                  shall not include a policy of insurance,
                  insurance binder, policy endorsement, or
                  automobile insurance identification or
                  information card.

      Nothing in the IFPA describes attorney's fees as a benefit or claim

pursuant to a policy. Instead, as the judge found, attorney's fees are authorized

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                                      12
by statute as a penalty for an insurer's wrongful non-payment of a claim. The

judge stated:

            Pursuant to N.J.S.A. 39:6A-5.2(g), the costs of the
            proceedings shall be apportioned by the DRP [dispute
            resolution professional] and the award may include
            reasonable attorney's fees for a successful claimant in
            an amount consonant with the award. Where attorney's
            fees for a successful claimant are requested, the DRP
            shall make the following analysis consistent with the
            jurisprudence of this State to determine reasonable
            attorney's fees, and shall address each item below in the
            award:

                  1. Calculate the "lodestar," which is the number
                  of hours reasonably expended by the successful
                  claimant's counsel in the arbitration multiplied by
                  a reasonable hourly rate in accordance with the
                  standards in Rule 1.5 of the Supreme Court's
                  Rules of Professional Conduct . . . .

                        i. The "lodestar" calculation shall exclude
                        hours not reasonably expended;

                        ii. If the DRP determines that the hours
                        expended exceed those that competent
                        counsel reasonably would have expended
                        to achieve a comparable result, in the
                        context of the damages prospectively
                        recoverable, the interests vindicated, and
                        the underlying statutory objectives, then
                        the DRP shall reduce the hours expended
                        in the "lodestar" calculation accordingly;
                        and
                        iii. The "lodestar" total calculation may
                        also be reduced if the claimant has only
                        achieved partial or limited success and the

                                                                        A-1886-20
                                      13
                        DRP determines that the "lodestar" total
                        calculation is therefore an excessive
                        amount. If the same evidence adduced to
                        support a successful claim was also offered
                        on an unsuccessful claim, the DRP should
                        consider whether it is nevertheless
                        reasonable to award legal fees for the time
                        expended on the unsuccessful claim.

                  2. DRPs, in cases when the amount actually
                  recovered is less than the attorney's fee request,
                  shall also analyze whether the attorney's fees are
                  consonant with the amount of the award. This
                  analysis will focus on whether the amount of the
                  attorney's fee request is compatible and/or
                  consistent with the amount of the arbitration
                  award.     Additionally, where a request for
                  attorney's fees is grossly disproportionate to the
                  amount of the award, the DRP's review must
                  make a heightened review of the "lodestar"
                  calculation described in (e)1 above.

     Guided by these principles, we reject Allstate's argument that the judge

erred in dismissing its IFPA violation claims.      In his opinion Judge Swift

reasoned,

            a prerequisite for a violation under the [IFPA] is a claim
            for payment relating to an insurance policy. Each
            section states that a claim for benefits pursuant to a
            policy of insurance is required. Allstate's claim under
            the IFPA fails in this regard. The payments made to
            Legome result from a specific legislative-
            administrative code penalty for failing to pay a first-
            party claim. N.J.A.C. 11:3-5.6(e) authorizes the
            payment to Legome, not a provision or claim under that
            insurance policy. In fact, when challenged at oral

                                                                         A-1886-20
                                       14
            argument, Allstate admitted that there is no policy
            provision that authorizes this payment. It is a function
            of statute, not contract. It is a penalty for failing to pay
            a legitimate claim authorized by the Code. It is similar
            and analogous to R. 4:42-9(a)(6) that authorizes
            attorney's fees in successful actions upon a first-party
            liability or indemnity claim. It is a penalty imposed
            designed to encourage the payment of legitimate claims
            by the insurer. The policy itself does not permit the
            payment of the fees, so it is not a claim for payment
            pursuant to a policy of insurance, and therefore the
            IFPA cannot apply.

            [see also N.J.S.A. 39:6A-5.2(g).]

      As the judge aptly found, the payments were not made as a benefit

pursuant to an insurance policy as contemplated by IFPA, but as a penalty

against Allstate pursuant to N.J.A.C. 11:3-5.6(e). In that regard, the attorney-

fee payments are not mentioned in the insured's policy. Nor do they diminish

the available PIP coverage to the insured, unlike payments to a successful

provider or insured, which are paid out of the PIP coverage until the policy limit

is exhausted. Furthermore, as the judge said, defendants were never paid what

they asked for. Since it is undisputed that Legome was always paid a reasonable

amount, which was determined by the arbitrator's evaluation as established in

the Code or by agreement of an Allstate adjuster, there was no harm to Allstate.

      We also reject Allstate's argument that the judge improperly dismissed its

fraud claims. "To establish common-law fraud, a plaintiff must prove: '(1) a

                                                                            A-1886-20
                                       15
material misrepresentation of a presently existing or past fact; (2) knowledge or

belief by the defendant of its falsity; (3) an intention that the other person rely

on it; (4) reasonable reliance thereon by the other person; and (5) resulting

damages.'" Banco Popular N. Am. v. Gandi, 184 N.J. 161, 172-73 (2005)

(quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997)). "Fraud

is not presumed; it must be proven through clear and convincing evidence."

Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div.

1989).

      For claims that involved a completed arbitration in which a fee

certification was submitted to the arbitrator for consideration, Judge Swift

properly dismissed those claims, reasoning that

            Legome's fee certification was submitted to the
            arbitrator in the cases that were not settled. The only
            person who relied upon the certifications was the
            arbitrator (to the extent that they did), not Allstate. In
            those cases, there was not reliance on the fee
            certification by this plaintiff when an award of fees was
            made. Allstate[] obviously had the ability to contest the
            extent of the fees requested, and had the ability to
            appeal those attorney's fees awarded if they felt
            aggrieved in some manner. B[ut] to somehow suggest
            in those cases they detrimentally relied upon the
            inflated fee certifications stretches the facts. The fraud,
            if any, is upon the tribunal, not the plaintiff.

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                                       16
      We agree with Judge Swift's reasoning.         The arbitrator serves as a

gatekeeper to ensure the insured's treatment was medically necessary and

causally related to the accident.     If the claimant succeeds in making that

showing, then the claimant is a prevailing party entitled to a fee. The arbitrator

then serves an additional gatekeeping function by assessing the fee certification

and awarding a reasonable fee based on the statutory factors set forth in N.J.S.A.

39:6A-5.2(g). Allstate does not contend the arbitrators failed to discharge their

prescribed duties, nor does it contend any of the fees actually awarded and paid

were unreasonable. Any dismissal of the extent of the ability of the arbitrator,

a full-time professional, to adequately assess reasonableness appears unfounded.

Therefore, with respect to completed arbitrations, Allstate's fraud claims fail for

lack of reliance and no showing of damages.

      For the same reasons, we find the judge was correct in dismissing

Allstate's unjust enrichment claim. "The doctrine of unjust enrichment rests on

the equitable principle that a person shall not be allowed to enrich himself [or

herself] unjustly at the expense of another." Assocs. Com. Corp. v. Wallia, 211

N.J. Super. 231, 243 (App. Div. 1986).        To prevail on a claim for unjust

enrichment, a plaintiff must demonstrate that the defendant "received a benefit"

from him or her and that "retention of that benefit without payment would be

                                                                             A-1886-20
                                       17
unjust." VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994). A plaintiff

must additionally "show that it expected remuneration from the defendant at the

time it performed or conferred a benefit on defendant and that the failure of

remuneration enriched defendant beyond its contractual rights." Ibid.

      As Judge Swift correctly noted in his opinion,

            [i]n each and every successful PIP claim made, Legome
            was entitled to a fee. In every one of the cases in which
            a fee request was made, Legome received a fee far less
            than what was requested. In every one of the cases, he
            earned a fee, therefore no unjust enrichment exists.
            Moreover, the employees of the law firm received no
            direct benefit from the plaintiff, only the firm itself.

Simply put, Allstate could not succeed on its claim because it failed to provide

any evidence that demonstrated that defendants received more than what they

were entitled to: a reasonable fee.

      Judge Swift also properly dismissed claims that were settled without a fee

certification because "[t]he parties simply agreed upon a fee based presumably

upon a standard or commonly awarded fee for which the PIP adjuster and

Legome were unquestionably familiar."        It is undisputed that Legome was

entitled to a fee in all cases which he prevailed. In a negotiated fee without a

certification, there is simply a demand and a counteroffer. The same concerns

that arise from a fee certification that contains inflated or false entries simply

                                                                            A-1886-20
                                       18
do not apply where no certification exists. The thoroughness of the judge's

analysis is demonstrated by the fact that he did not dismiss the cases where a

certification was presented to an Allstate adjustor, rather than an arbitrator.

Judge Swift correctly distinguished that category of case because there was

potentially direct reliance on the certifications by Allstate itself.

      To the extent we have not addressed Allstate's remaining arguments, we

find they lack sufficient merit to warrant discussion in a written opinion. See

R. 2:11-3(e)(1)(E).

      Affirmed.

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