Court Opinion

ID: 4430528
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:43:03.602539+00
Date Added: 2024-06-11T14:50:57.717906
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NOT FOR PUBLICATION WITHOUT THE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-4119-16T1

GARY REINERT,

        Plaintiff-Appellant,

v.

ANDREW INDECK, ESQUIRE, and
WEBER GALLAGHER SIMPSON
STAPLETON FIRES & NEWBY,
LLP,

     Defendants-Respondents.
____________________________________

              Argued May 31, 2018 – Decided September 7, 2018

              Before Judges Haas and Rothstadt.

              On appeal from Superior Court of New Jersey,
              Law Division, Burlington County, Docket No.
              L-0427-15.

              Jack Meyerson argued the cause for appellant
              (Meyerson & O'Neill, attorneys; Jack Meyerson,
              of counsel and on the brief).

              Jeffrey B. McCarron argued the cause for
              respondents (Swartz Campbell, LLC, attorneys;
              Jeffrey B. McCarron and Kathleen M. Carson,
              on the brief).

PER CURIAM
     Plaintiff, Gary Reinert, appeals from the Law Division’s

September 11, 2015 order that granted, in part, defendants Andrew

Indeck's and Weber Gallagher Simpson Stapleton Fires & Newby LLP's

(WGSSFN) motion to dismiss plaintiff's complaint under Rule 4:6-

2(e) for failure to state a claim upon which relief could be

granted.1   The complaint alleged professional negligence against

Indeck and his law firm, WGSSFN, as well as his former law firm,

defendant Scarinci Hollenbeck, LLC (SH).       According to plaintiff,

the lawyers were negligent in representing a company, in which

plaintiff   had   an   ownership   interest,     in   an   unsuccessful

arbitration.   He also claimed that he received deficient advice

about establishing a defined benefit plan (DBP) for the company

that caused him to later settle a lawsuit that the claimants in

the arbitration filed against plaintiff under the New Jersey

Fraudulent Transfer Act (NJFTA), N.J.S.A. 25:2-20 to -34.           That

1
   Although plaintiff's June 15, 2017 amended notice of appeal
also identifies the appeal being from the Law Division's April 21,
2017 order granting Indeck and WGSSFN summary judgment and
dismissing the balance of plaintiff's complaint, his merits brief
is limited to the September 11, 2015 order and his appendix does
not contain any documents filed in support or in opposition to the
summary judgment motion.    We therefore limit our review to the
earlier order. See Sklodowsky v. Lushis, 417 N.J. Super. 648, 657
(App. Div. 2011) (stating "[a]n issue not briefed . . . is deemed
waived" (citations omitted)); see also R. 2:6-1(a)(1)(I)
(requiring an appellant to provide us with "such . . . parts of
the record . . . as are essential to the proper consideration of
the issues").

                                   2                            A-4119-16T1
complaint     alleged    that   plaintiff    transferred     assets   from   the

company in the arbitration to another entity he controlled.

     The trial court dismissed plaintiff's claims arising from the

arbitration because he did not have standing to sue as defendants

did not represent him individually in the arbitration to which he

was not a party.        Plaintiff argues on appeal that the trial court

erred   in    dismissing    his   claims    because   but    for   defendants’

negligence, the company that was a named party in the arbitration,

would not have been subject to a multimillion-dollar judgment, and

he would not have ultimately been personally exposed to the NJFTA

action.      For the reasons that follow, we affirm.

     The facts giving rise to plaintiff's claims as derived from

his complaint are summarized as follows.                 In December 2005,

Christopher Pizzo, the principal of Noble Learning Systems, Inc.

(NLS), entered into a distribution agreement with Damian Ross, the

sole member of Zenshin, LLC (Zenshin), to sell instructional self-

defense videos produced by Carl Cestari, a martial arts instructor.

The distribution agreement between Zenshin and NLS contained an

arbitration     clause    addressing   any    disputes      arising   from   the

agreement.

     After Cestari's death, a dispute arose between Ross and Pizzo

about the continued distribution of the Cestari videos.                 In the

meantime, Pizzo developed his own new videos and organized new

                                       3                                A-4119-16T1
entities, including Close Combat Company, LLC (CCC), to market

them.   CCC, however, never held any assets or conducted any sales

or marketing activities related to the Cestari videos.

      In December 2007, Ross and Zenshin sued Pizzo and NLS based

upon their continuing sale of the Cestari videos.             Two months

later, they filed another action to enjoin Pizzo, NLS and CCC from

distributing the videos.2 The attorney representing the defendants

in those actions had the dispute diverted to arbitration in

accordance with the parties' agreement.

      At the time Ross filed his lawsuits, CCC was inactive and had

no   assets.    Later,   CCC's   activities   changed   and   it    became

profitable.    That change occurred after Pizzo hired plaintiff in

2007 as a consultant to NLS for the purpose of creating a business

plan for the company.       The plan he developed called for the

creation of yet another company which plaintiff would manage.

Rather than start a new company, Pizzo reactivated CCC to market

the new videos, which thereafter became successful and realized a

profit for several years.    By April 2008, plaintiff supplied all

of CCC's funding through his contribution of personal funds in the

2
  We briefly addressed the specific claims made by Ross and Zenshin
in an earlier unpublished opinion in which we affirmed the Chancery
Division's confirmation of the arbitration award. See Zenshin,
LLC v. Close Combat Co., LLC, No. A-0313-12 (App. Div. Aug. 21,
2013) (slip op. at 4). Those details need not be repeated here
for our purposes.

                                   4                               A-4119-16T1
amount of $100,000 and he "became part owner, and [chief operating

and financial officer] of CCC . . . ."    Plaintiff and Pizzo shared

the profits from the sale of the new videos equally, with plaintiff

also receiving an annual salary of $650,000.

     In 2009, plaintiff and Pizzo retained Indeck, who was then

with SH, to replace the attorney representing CCC, NLS and Pizzo

in the arbitration.   Indeck had previously represented plaintiff

in unrelated personal matters.        Indeck's and SH's hiring was

confirmed in a February 18, 2009 retainer letter sent by Indeck

on behalf of SH.   The letter was addressed to plaintiff, Pizzo and

CCC at the business's address, and referenced the action filed by

Ross and Zenshin, naming CCC, NLS and Pizzo as the only defendants

in the action it described as the "Arbitration Matter[.]"         The

retainer letter stated that "[y]ou have asked that we perform

legal services in connection with an arbitration matter filed by

the Claimants in the above matter."      Pizzo and plaintiff signed

the letter.   The letter did not designate their signatures as

being on behalf of CCC or NLS.3

3
   Notably, in November 2009, plaintiff retained Indeck and SH
pursuant to a separate retainer agreement to represent him in
"various personal and corporate matters." The letter was sent to
plaintiff only at his home address and referenced only "General
Matters[.]"

                                  5                          A-4119-16T1
      In 2010, plaintiff discussed with Indeck the creation of a

DBP for his retirement through CCC.           By that time, Indeck had left

SH and was with WGSSFN.         Plaintiff explained to Indeck that he

would be funding the plan with money plaintiff's wife obtained

through the settlement of a personal injury action.                According to

plaintiff, Indeck assured him that he would not be personally

liable for any judgment against CCC and that the arbitration would

not create a problem for the establishment of the DBP, especially

because CCC would ultimately be dismissed from the arbitration.

      Contrary to Indeck's prediction, on January 25, 2012, the

arbitrator struck the arbitration defendants' answer and defenses

and   entered      summary   judgment   against    them    due    to   discovery

violations.        In April 2012, the arbitrator entered an award in

favor of Ross and Zenshin in excess of $2.4 million against Pizzo,

NLS, and CCC, jointly and severally. Ross and Zenshin successfully

moved   in   the    Chancery   Division     for   an    order   confirming     the

arbitration and the court entered judgment in their favor against

Pizzo, NLS and CCC in the total amount of $2,851,221.88.                   Indeck

filed an appeal and we affirmed.            See Zenshin, LLC, slip op at 4.

      Ross and Zenshin filed a new action "seeking injunctive and

declaratory relief and related damages" to collect the judgment.

The   "[c]omplaint     alleg[ed]   violations      of    the    [NJFTA]   against

Pizzo, NLS, and CCC, and CCC's [DBP]."            In spring 2013, plaintiff

                                        6                                 A-4119-16T1
"and his [own] company, Keystone Lighthouse, LLC, were added" as

defendants to the suit.     Ross and Zenshin alleged in an amended

complaint that plaintiff formed a DBP "in an effort to hinder and

obstruct [them] in the collection of their imminent arbitration

award against [CCC]."   After retaining new counsel, plaintiff paid

$460,000 to settle the NJFTA matter.           He claims that he incurred

additional     attorneys'    fees       and      expenses,   "includ[ing]

approximately $46,000 in IRA/DB Plan penalties . . ., past and

future lost wages, and damage to [his] personal and professional

reputation."

     On February 17, 2015, plaintiff filed his complaint in the

underlying action.   In his complaint, plaintiff alleged claims of

negligence - legal malpractice (count 1), breach of contract (count

2), and breach of fiduciary duty (count 3) against Indeck, SH and

WGSSFN.   He also asserted a negligent supervision and vicarious

liability claim (count 4) against both law firms.

     In counts one and two, plaintiff alleged that defendants

never advised him, Pizzo, CCC, or NLS that their representation

"constituted a concurrent conflict of interest[,]" in violation

of Rule of Professional Conduct 1.7.          Plaintiff also asserted that

defendants never sought their "informed consent to the waiver of

the conflict of interest."    Additionally, plaintiff alleged that

Indeck "failed to defend CCC on the basis that it was a distinct,

                                    7                              A-4119-16T1
unrelated entity that did not sell or profit from the [Cestari

videos]" and that the company was "inactive during the existence

of the Pizzo/NLS/Ross business relationship . . . through February

2008."

     Moreover,    plaintiff   asserted   that    Indeck   mishandled    the

underlying arbitration matter by failing to: 1) comply with a

discovery order; 2) "seek CCC's dismissal" from the matter; 3)

recommend that CCC or plaintiff "obtain independent counsel or

. . . advance separate claims or defenses[;]" 4) mitigate the

damages that were awarded to Ross; and 5) inform him of the risks

associated with creating a DBP for CCC while the underlying

litigation was pending.

     In support of count three, plaintiff alleged that defendants

owed him a fiduciary duty because of the "ongoing attorney-client

relationship" that existed before and during the underlying action

and "as a shareholder of CCC . . . ."            He also alleged that

defendants failed "to advise [him] to obtain separate counsel,

and" that they "accepted legal fees . . . from CCC, [and] utilized

them to promote the defense of Pizzo and NLS, to the detriment of

CCC."

     In   April   2015,   defendants     filed   a   motion   to   dismiss

plaintiff's complaint under Rule 4:6-2(e), which Judge Patricia

Richmond granted as to SH, but granted in part as to Indeck and

                                   8                               A-4119-16T1
WGSSFN,   dismissing    only   the       claims   arising   from    Indeck's

representation of the parties to the arbitration.                   Prior to

entering her order, Judge Richmond considered the parties' oral

arguments on July 15, 2015 and then placed her decision on the

record on the same date.

     In her oral decision, Judge Richmond distinguished between

the arbitration action to which plaintiff was not a party, and the

NJFTA action where he was named as an individual defendant.               The

judge   determined   that   plaintiff      "was   not   a   party   to   that

arbitration and the $2.8 million verdict . . . was against CCC"

and not plaintiff.     However, she found that plaintiff had pled a

viable claim of liability against Indeck and WGSSFN in the NJFTA

action.

     In her ensuing September 11, 2015 order as to Indeck and

WGSSFN, Judge Richmond granted their motion to dismiss with respect

to "the handling of the underlying arbitration litigation[,]" but

denied it "to the extent the claims [were] based on . . . Indeck's

alleged conduct concerning plaintiff's transactions involving the

CCC['s DBP]." Accordingly, she dismissed all counts against Indeck

and WGSSFN arising from the arbitration matter, and dismissed

count four "of plaintiff's complaint for negligent supervision and

vicarious liability . . . with leave granted to plaintiff to move

to amend count [four] of the complaint to assert a vicarious

                                     9                               A-4119-16T1
liability claim only to the extent of the non-dismissed substantive

claim."

     Following discovery, Indeck and WGSSFN filed a motion for

summary judgment.   After considering the parties written and oral

arguments on April 21, 2017, another judge granted the motion,

dismissing with prejudice the remaining claims against Indeck and

WGSSFN.   This appeal followed.

     On appeal, plaintiff contends that his complaint "alleged

sufficient facts to establish a legal malpractice claim[,]" and

that he has standing to pursue the claim because he suffered a

"personal harm" as a result of defendants' conduct and as a member

of a limited liability company he "may bring a direct action."

Moreover, he asserts that he "suffered a 'special injury' which

allows him to sue individually, as opposed to bringing a derivative

action[.]"   We disagree.

     We review de novo a trial court's order dismissing a complaint

under Rule 4:6-2(e), applying the same standard as the trial court.

See Stop & Shop Supermarket Co. v. Cty. of Bergen, 450 N.J. Super.

286, 290 (App. Div. 2017).   That standard requires us to examine

the challenged pleadings to determine "whether a cause of action

is 'suggested' by the facts."      Teamsters Local 97 v. State, 434

N.J. Super. 393, 412 (App. Div. 2014) (quoting Printing Mart-

Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)).       We

                                  10                        A-4119-16T1
search the pleading "in depth and with liberality to determine

whether a cause of action can be gleaned even from an obscure

statement."   Seidenberg v. Summit Bank, 348 N.J. Super. 243, 250

(App. Div. 2002) (citing Printing Mart-Morristown, 116 N.J. at

746).   "[I]t is the existence of the fundament of a cause of

action . . . that is pivotal[.]"     Teamsters Local 97, 434 N.J.

Super. at 412-13 (second alteration in original) (quoting Banco

Popular N. Am. v. Gandi, 184 N.J. 161, 183 (2005)).

     "A pleading should be dismissed if it states no basis for

relief and discovery would not provide one." Rezem Family Assocs.,

LP v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div.

2011) (citing Camden Cty. Energy Recovery Assocs., L.P. v. N.J.

Dep't of Envtl. Prot., 320 N.J. Super. 59, 64 (App. Div. 1999),

aff'd, 170 N.J. 246 (2001)).    Ordinarily, dismissal for failure

to state a claim is without prejudice, and the court has discretion

to permit a party to amend the pleading to allege additional facts

in an effort to state a claim.      See Hoffman v. Hampshire Labs,

Inc., 405 N.J. Super. 105, 116 (App. Div. 2009).    Although leave

to amend should be liberally granted, "without consideration of

the ultimate merits of the amendment," it need not be granted

where an amendment would be a "futile" and "useless endeavor."

Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006) (citation

                               11                           A-4119-16T1
omitted); see also Prime Accounting Dep't v. Twp. of Carney's

Point, 212 N.J. 493, 511 (2013).

       In order for plaintiff's complaint to survive a motion under

Rule   4:6-2(e),   it   must   have    pled   sufficient   allegations    to

establish a claim for legal malpractice.           A claim for "[l]egal

malpractice is a variation on the tort of negligence" relating to

an attorney's representation of a client.             Garcia v. Kozlov,

Seaton, Romanini & Brooks, P.C., 179 N.J. 343, 357 (2004) (citing

McGrogan v. Till, 167 N.J. 414, 425 (2001)).        To establish a prima

facie case of legal malpractice, a plaintiff must demonstrate: (1)

the existence of an attorney-client relationship creating a duty

of care upon the attorney to the plaintiff; (2) the breach of that

duty by the attorney; and (3) such breach was the proximate cause

of the damages sustained by the plaintiff.         Jerista v. Murray, 185

N.J. 175, 190-91 (2005); Kranz v. Tiger, 390 N.J. Super. 135, 147

(App. Div. 2007).       "The client bears the burden of proving by a

preponderance of competent credible evidence that injuries were

suffered as a proximate consequence of the attorney's breach of

duty."     Sommers v. McKinney, 287 N.J. Super. 1, 10 (App. Div.

1996) (citing Lieberman v. Emp'rs Ins. of Wausau, 84 N.J. 325, 342

(1980)).

       We conclude from our de novo review that Judge Richmond

correctly dismissed plaintiff's complaint with prejudice because

                                      12                           A-4119-16T1
contrary to his arguments, he could not establish the required

elements of an attorney-client relationship or that he personally

suffered any damages as a consequence of defendants' actions in

the arbitration.

      First, it is beyond cavil that a              lawyer representing a

corporation or other business entity is not automatically deemed

to represent its officers or shareholders.           "By representing the

organization, a lawyer does not thereby also form a client-lawyer

relationship with all or any individuals . . . who direct its

operations or who have an ownership or other beneficial interest

in it, such as its shareholders."        Restatement (Third) of the Law

Governing Lawyers § 96 cmt. b (Am. Law Inst. 2000).               This maxim

is incorporated into our Rules of Professional Conduct that state:

"A   lawyer   employed   or   retained   to   represent     an   organization

represents    the   organization   as    distinct    from   its    directors,

officers, employees, members, shareholders or other constituents."

RPC 1.13(a).    The retainer letter here therefore did not establish

an attorney-client relationship between plaintiff and Indeck or

his firm in the "arbitration matter[.]" Plaintiff failed to allege

any facts that established that the defendants knew or reasonably

should have known that their representation of CCC implicated an

attorney-client relationship with plaintiff.                Cf. Restatement

(Third) of the Law Governing Lawyers § 14 cmt. f (Am. Law Inst.

                                    13                                A-4119-16T1
2000) (discussing circumstances under which a person associated

with an organizational client may be deemed represented by the

organization's attorney); Petit-Clair v. Nelson, 344 N.J. Super.

538, 543-44 (App. Div. 2001) (holding applicable RPC 1.8 and

rejecting      an     attorney's     argument       that    he    represented    only    a

closely-held corporation, and not its husband and wife owners, in

obtaining the mortgage of their residence as security for the

corporation's         fee,   where     it   was     "undisputed      that    defendants

[husband and wife] and plaintiff [attorney] related to each other

as    attorney      and   client").         Any    claims    by    plaintiff    that    he

understood that somehow defendants represented him individually

in an action in which he was not a party, is belied by the fact

that when he was to be represented individually, he signed a

different retainer letter for that purpose.

       However, as plaintiff argues, an attorney could have a limited

duty to a non-client.            Finding an attorney owes a duty to a non-

client    "has        been   applied    rather       sparingly,"       in    "carefully

circumscribed" holdings, LoBiondo v. Schwartz, 199 N.J. 62, 101,

116   (2009)     (citation       omitted),        because   the    Court's     "ordinary

reluctance       to     permit    non-clients        to     sue    attorneys     remains

unchanged."         Green v. Morgan Props., 215 N.J. 431, 460 (2013).

Therefore, "the grounds on which any plaintiff may pursue a

malpractice claim against an attorney with whom there was no

                                            14                                   A-4119-16T1
attorney-client relationship [remain] exceedingly narrow."                           Id.

at 458.

     "[P]rivity       between    an    attorney       and    a    non-client    is   not

necessary for a duty to attach 'where the attorney had reason to

foresee the specific harm which occurred.'"                        Innes v. Marzano-

Lesnevich, 435 N.J. Super. 198, 213 (App. Div. 2014) (quoting

Estate of Albanese v. Lolio, 393 N.J. Super. 355, 368-69 (App.

Div. 2007)).         "Whether an attorney owes a duty to a non-client

third party depends on balancing the attorney's duty to represent

clients    vigorously     with       the    duty     not    to    provide    misleading

information     on    which   third        parties    foreseeably      will    rely[.]"

Petrillo   v.     Bachenberg,    139        N.J.   472,     479    (1995)    (citations

omitted); accord Davin, LLC v. Daham, 329 N.J. Super. 54, 76 (App.

Div. 2000) ("When considering the imposition of a duty upon an

attorney, we must . . . consider the impact that duty will have

upon the public, in general, and the attorney's client's right to

vigorous    and      effective       representation.").             "Ultimately,       in

determining        whether       a         duty      exists,        '[t]he      primary

question . . . is one of fairness.'"                  Innes, 435 N.J. Super. at

213 (alterations in original) (quoting Estate of Albanese, 393

N.J. Super. at 369).

     A duty to a non-client has been found "in some circumstances

[where] an attorney knows or reasonably should know that a non-

                                            15                                  A-4119-16T1
client will rely on the attorney's representation or opinion

. . . ."      LoBiondo, 199 N.J. at 101 (citing Petrillo, 139 N.J. at

483-84).      For example, a duty arises where "an attorney . . .

participated in a civil conspiracy with the goal of assisting a

client   to    engage   in   a   fraudulent   transfer    of    assets   to   the

detriment of a lender."          Innes, 435 N.J. Super. at 213 (quoting

Lobiondo, 199 N.J. at 102).

     Here, plaintiff's allegations do not give rise to a duty owed

to him by defendants arising out of the arbitration.                  Plaintiff

claims that defendants owed him a duty under Petrillo because he

reasonably     relied   on   Indeck's      statements    that   CCC   would     be

dismissed from the litigation.         Plaintiff also alleges that he did

not believe he would be personally liable for damages resulting

from the arbitration matter because Indeck never warned him that

creating the DBP would create a personal risk to him in the

litigation.

     Both the prediction about the arbitration's outcome for CCC

and Indeck's alleged failure to warn against plaintiff's personal

liability did not amount to legal advice made by an attorney to

his or her client or a representation made to a third-party upon

which liability could attach.          Attorneys are not guarantors of a

successful outcome, nor are they answerable for every "error of

judgment in the conduct of a case or for every mistake which may

                                      16                                 A-4119-16T1
occur in practice."   2175 Lemoine Ave. Corp. v. Finco, Inc., 272

N.J. Super. 478, 486 (App. Div. 1994) (citation omitted); see also

Model Jury Charges (Civil), 5.51, "Legal Malpractice" (approved

June 1979) ("The law recognizes that the practice of law according

to standard legal practice will not necessarily prevent a poor

result.").   Further, when Indeck discussed the CCC's DBP with

plaintiff, the company was solvent and the issue of plaintiff's

potential liability had not arisen, and would not, until a judgment

was entered against CCC and plaintiff, without Indeck's advice,

transferred assets from CCC to his own company.

     Second, the fact that CCC had a judgment entered against it

as a result of the unsuccessful arbitration did not result in any

harm to plaintiff that was distinct from an injury, if any, to the

other shareholder, Pizzo.   See Strasenburgh v. Straubmuller, 146

N.J. 527, 550 (1996) (stating that stockholders who suffer injuries

to their stock that are the same as all other stockholders "may

not recover for the injury to [their] stock alone, but must seek

recovery derivatively [on] behalf of the corporation" (citation

omitted)).   A shareholder can recover in a non-derivative suit

only if he or she suffers a special injury.       "A special injury

exists 'where there is a wrong suffered by [a] plaintiff that was

not suffered by all stockholders generally or where the wrong

involves a contractual right of the stockholders, such as the

                               17                           A-4119-16T1
right to vote.'"     Strasenburgh, 146 N.J. at 550 (alteration in

original) (citation omitted); see also Delray Holding, LLC v.

Sofia Design & Dev. at S. Brunswick, LLC, 439 N.J. Super. 502, 510

(App. Div. 2015).

      Plaintiff asserts that the NJFTA action was filed against him

because the arbitration should not have been filed against CCC,

contrary to Indeck's assurances it was not dismissed, and Ross and

Zenshin sought to hold him liable for the judgment.       However, none

of his assertions are correct as the possibility of plaintiff's

liability only arose when he transferred assets from CCC to his

own   company   without   any   advice   from   Indeck.   Under     these

circumstances, plaintiff's complaint did not allege he suffered

any special injury that was proximately caused by CCC's attorneys'

actions.

      Finally, to the extent that plaintiff's claim relied upon any

advice from Indeck about the formation of his DBP at CCC, that

claim was dismissed on summary judgment and, as noted, he never

appealed from that determination.

      Affirmed.

                                   18                             A-4119-16T1