Court Opinion

ID: 9764828
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:41:22.01586+00
Date Added: 2024-06-11T07:30:01.857848
License: Public Domain

LaVECCHIA, J.,
dissenting.
In this suit involving an express trust and a paid fiduciary, the trustee was removed from his post based on proof of his undue influence over the beneficiary. Although the urge to award counsel fees in favor of the trust and against the ousted trustee is understandable, it is not permitted under our court rule governing fee shifting. I would not expand our case law to cover it.
The majority acknowledges that “the history of [Rule 4:42-9] demonstrates that New Jersey has a strong policy against the shifting of counsel fees.” Ante at 293, 823 A.2d at 7. A longstanding exception to that policy allows a plaintiff “the right to recover attorney’s fees incurred in other litigation with a third person, if [the plaintiff] became involved in that litigation as a result of a ... tortious act by the present defendant.” Ante at 294-95, 823 A.2d at 8 (quoting In re Estate of Lash, 169 N.J. 20, 31, 776 A.2d 765 (2001)). In other words, one has the right to recover attorneys’ fees when such fees are a provable element of damages incurred in litigation with third parties. I part company with my colleagues, however, when they take the momentous step of holding that the estate can recover its fees incurred directly in litigation against the fiduciary, Bono, and against Serena. The majority clearly understands the import of its holding: “[t]hat claim directly implicates the American Rule----To charge them with the counsel fees incurred by the Foundation and Parkinson as plaintiffs is tantamount to charging the losing parties with the prevailing parties’ counsel fees.” Ante at 296, 823 A.2d at 9.
*302The “American Rule,” or principle, that litigants should bear their own costs for counsel fees was recognized by the United States Supreme Court as early as 1796. See Arcambel v. Wiseman, 3 U.S. (Dall.) 306, 1 L.Ed. 613 (1796). As that Court has explained, the outcome of litigation “is at best uncertain,” and one should therefore “not be penalized for merely defending or prosecuting a lawsuit.” Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S.Ct. 1404, 1407, 18 L.Ed.2d 475, 478 (1967). In addition, “the time, expense, and difficulties of proof inherent in litigating the question of what constitutes reasonable attorney’s fees would pose substantial burdens for judicial administration.” Ibid.; see also Lash, supra, 169 N.J. at 43, 776 A.2d 765.
Rule 4:42-9 represents our Court’s policy determination that the American Rule generally governs the award of fees in New Jersey. That rule “requires a denial of fees in the normal course of events.” McGuire v. City of Jersey City, 125 N.J. 310, 326, 593 A.2d 309 (1991). When originally enacted, it pointedly sought to “eliminate the abuses of the pre-1948 chancery practice of granting excessive fees to favored members of the bar.” Satellite Gateway Communications, Inc. v. Musi Dining Car Co., 110 N.J. 280, 285, 540 A.2d 1267 (1988); see also Sunset Beach Amusement Corp. v. Belk, 33 N.J. 162, 167, 162 A.2d 834 (1960) (“This rule constituted a policy decision to break with the practice of the former Court of Chancery which authorized counsel fees to the victor in the ordinary adversary proceeding..,. In actual operation it proved onerous upon litigants and spawned charges of favoritism.”); Pressler, Current N.J. Court Rules, comment 1 on R. 4:42-9 (2003). Indeed, shortly after the rule originally was adopted, the Legislature passed a bill to overturn the rule, which Governor Driscoll vetoed, stating that it “would revive an unhappy practice that has been generally repudiated.” State v. Otis Elevator Co., 12 N.J. 1, 27, 95 A.2d 715 (1953) (Jacobs, J., dissenting). For over fifty years, the Court has resisted the temptation to carve out exceptions, adhering to the policy determination codified *303in the rule despite the sympathetic facts in individual cases no different from those presented here.
Liberty Title & Trust Co. v. Plews, 6 N.J. 28, 77 A.2d 219 (1950), also involved an express trust and a paid fiduciary. Writing for the Court, Chief Justice Vanderbilt stated that the proofs “demonstrate[d] conclusively that the trustee was guilty of self-interest, self-dealing, private profit-taking and flagrant mismanagement ... all of which it successfully concealed from the court.” Id. at 37, 77 A.2d 219. Nonetheless, the Court denied counsel fees, stating that despite the fraud, the then-recently enacted rule on fee shifting “specifically enumerated the types of actions in which allowances to counsel may be made, and the discretion of the trial court is limited to the granting or denying of allowances in such actions.” Id. at 44, 77 A.2d 219. The Court underscored that “[i]t was not contemplated that the rule would or could be completely dispensed with in individual cases.” Ibid.
Sixteen years later in Grober v. Kahn, 47 N.J. 135, 219 A.2d 601 (1966), Chief Justice Weintraub found it necessary to reiterate the Court’s adherence to the policy codified in our court rules, again in the context of an assertion that fraud by a fiduciary should give rise to an award of counsel fees. The Chief Justice understood the natural desire to award fees in such circumstances, stating that “[t]here is a defensible feeling that counsel fees should be awarded in a case of fraud, and if the wrongdoer has breached as well a duty of loyalty, that feeling is intensified.” Id. at 150, 219 A.2d 601. Nonetheless, the Court rejected the argument that counsel fees should be allowed, and held that “imposition of counsel fees is a policy issue which was resolved when our rules of court were formulated. If a change is to be made, it should be made with directness and in relevant terms. Meanwhile, the policy of our rule should be honored.” Id. at 151, 219 A.2d 601.
Thus, we have adhered strictly to our court rule in the past, recognizing that “sound judicial administration is best advanced if litigants bear their own counsel fees. In accordance with this policy, unless legal fees are authorized by statute, court rule, or *304contract, they are not recoverable.” Satellite Gateway, supra, 110 N.J. at 285, 540 A.2d 1267 (citations omitted). However, despite recognizing this “well-established rule,” ibid., the majority chooses to award counsel fees in this case, without any statute, court rule, or contract permitting an authorization. The majority asserts that it will not open the floodgates to fee shifting because the counsel-fee award is limited to the particular facts here involving fraud by a fiduciary, an “egregious intentional tort” that requires clear and convincing evidence. Ante at 300, 823 A.2d at 11.
The assertion that this holding will be circumscribed by the narrow facts .of this case does not withstand scrutiny. Once the Court decides that it can pick and choose from among individual cases when to deviate from the traditional requirement that there must be a statute, rule, or contract allowing an award of counsel fees, there is no discernible difference between fees in a case of fraud by a trustee and fees in the case of any other intentional tort. In either, a prevailing plaintiff has incurred harm (including attorneys’ fees) because of the intentional tortious acts of another, and may argue, based on today’s holding, that he or she should be entitled to fees to be made whole.
The majority justifies its holding by analogizing this award of counsel fees to awards authorized by Saffer v. Willoughby, 143 N.J. 256, 670 A.2d 527 (1996), and Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 771 A.2d 1194 (2001), wherein the Court allowed fee shifting in attorney-malpractice cases. However, as explained by the dissent in Lash, supra, those departures were justified only because they were grounded in this Court’s exclusive and “unique role in regulating the bar.” Lash, supra, 169 N.J. at 44, 776 A.2d 765 (Verniero and LaVecehia, JJ., dissenting). Consistent with that rationale, the Court in Packardr-Bamberger, supra, emphasized that “a plaintiff must demonstrate the existence of an attorney-client relationship as a prerequisite to recovery [of attorneys’ fees].” 167 N.J. at 443, 771 A.2d 1194. The Court specifically noted that the defendant in Packardr-Bamberger acted in a dual capacity, as a corporate director and as legal *305counsel, and owed the plaintiffs a fiduciary duty in both roles. Ibid. However, it was only due to the existence of the attorney-client relationship that fees could be shifted as consequential damages to the attorney because, as the Court emphasized, “[the defendant] violated the duty he owed [the plaintiffs] as legal counsel.” Ibid. If the defendant had not been legal counsel, and had only violated his fiduciary duty as a director, “attorneys’ fees would not have been appropriate unless authorized by contract, statute, or some other specific rule.” Ibid. Accordingly, the restricted holdings in Saffer and Packard-Bamberger are not persuasive support for the counsel-fee shifting that the Court now authorizes.
In sum, the majority’s justification for its holding is unsatisfying — not only because of the lack of statute, rule, or contract authorizing the award (as has traditionally been required), but even more so because, as explained above, the Court has considered, and rejected, awarding fees in cases that are indistinguishable from the case at bar. The desire to award counsel fees in extreme circumstances, such as a fraud committed by a fiduciary, is understandable. Fraud, especially by a fiduciary, is a contemptible thing; but the efficient and equitable administration of justice is best served by adherence to the rule that counsel fees will not be awarded except when provided for by rule, statute, or contract. Today’s decision is a step towards reviving the pre-1948 “unhappy practice” that our Court rectified with the promulgation of Rule 4:42-9. I decline to join in a decision that undercuts our court rules. Accordingly, I respectfully dissent.
Justice VERNIERO joins in this dissent.
For reversing and remanding — Chief Justice PORITZ and Justices COLEMAN and LONG — 3.
For affirming — Justices VERNIERO and LaVECCHIA — 2.