PROFESSIONAL MALPRACTICE ISSUES

In Pennsylvania, Unfair Trade Practices in Consumer Protection Law Does Not Apply to Attorney Misconduct

In Beyers v. Richmond, ---A.2d---, 2007 WL 4557840 (Pa. December 28, 2007), Forceno & Arangio, P.C., Robert Arrangio and Raymond P. Forceno, appealed from a judgment entered in favor of Janice Iannece Beyers and James Piccirilli, holding the appellees liable for treble damages under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

In the underlying matter, Ms. Beyers and Mr. Piccirilli were injured in an automobile accident. They retained the services of Donald Richmond, an associate of the Law Firm of Forceno and Arrangio, PC (The Firm). The personal injury matter was settled in the amount of $468,401.67. Ms. Beyers was to receive 42.5%, or $205,495.72. The settlement funds were received by The Firm. Thereafter, Donald Richmond converted $185,000 of the settlement money for his own use. The remaining funds were also deposited into court. Thereafter, The Firm submitted a distribution schedule that provided for $68,481.91 attorney’s fees, $1,576.65 in unidentified costs, $6,480.59 for loan repayment to an accountant, and $18,001.61 for medical bills. After these amounts were deducted from the settlement, the Court ordered that The Firm pay Ms. Beyers $110,904.96 based upon the distribution schedule which The Firm had prepared.

In January 2002, Ms. Beyers filed a Complaint against Mr. Richmond and The Firm, alleging negligent supervision, negligence, conflict of interest, breach of fiduciary, duty, violation of the Unfair Trade Practices and Consumer Protection Law (“UTOCPL”), assumpsit in the form of forfeiture of attorneys’ fees, and fraudulent misrepresentation. Specifically, Ms. Beyers contended that deductions on the distribution sheet were improper.

Following a bench trial on the civil issue of damages, judgment was entered in favor of Ms. Beyers. This judgment included treble damages, awarded under the Unfair Trade Practices and Consumer Protection Law. The judgment was affirmed by the Superior Court. The Firm appealed.

The Pennsylvania Supreme Court, finding in favor of The Firm, found that although the conduct of the appellants was reprehensible, the Pennsylvania Unfair Trade Practices and Consumer Protection Law did not apply to attorneys’ conduct in the collection and distribution of settlement proceeds. To apply the Unfair Trade Practices and Consumer Protection Law in such a case would encroach upon the court’s exclusive power to regulate the practice of law in Pennsylvania.

In so ruling, the Pennsylvania Supreme Court examined prior case law concerning the application of the UTPCPL to physicians. Those cases held that the act was not intended to apply to treatment provided by physicians. Further, the Supreme Court herein noted that the Pennsylvania Constitution provides the Supreme Court with the power to prescribe rules governing the practice, procedure and conduct of all courts, and the Constitution suspends all laws to the extent that they are inconsistent with the rules prescribed under those provisions. Because there were rules of civil procedure governing attorney conduct as is alleged in this matter, specifically Pennsylvania Rule of Professional Conduct 1.5 (c), concerning contingent fees, and Rule of Professional Conduct 1.15 (b), governing the receipt of funds or other property in which a client or third person has an interest, the Pennsylvania Unfair Trade Practice and Consumer Protection Law was superseded. Thus, the Pennsylvania Supreme Court found that the exclusive remedy for the attorney misconduct alleged in this case was governed by the Rules of Professional Conduct, and the collection and distribution of settlement proceeds did not fall within the scope of the Unfair Trade Practice and Consumer Protection Law.

EMPLOYMENT LAW

A Recovery of Counsel Fees Under New Jersey’s Law Against Discrimination Requires a Showing of Bad Faith and a Consideration of the Extent to Which Plaintiff has the Ability to Pay the Award

In Michael v. Robert Wood Johnson Univ. Hosp., --- N.J. Super ----, 2008 WL 123811 (App. Div. January 15, 2008), Plaintiff, a part-time employee of defendant Robert Wood Johnson Hospital for over twenty years, filed suit against the Hospital and one of her superiors, alleging, inter alia, that she had been the victim of age discrimination and a hostile work environment. The trial court granted summary judgment, dismissing all of plaintiff's claims. Plaintiff appealed, and the Superior Court, Appellate Division, affirmed.

Following the Superior Court’s affirmance of the trial court's order granting summary judgment, defendants promptly moved for counsel fees relying on both upon the frivolous claims statute, N.J.S.A. 2A:15-59.1, and upon the Law Against Discrimination, specifically, N.J.S.A. 10:5-27.1. Later, defendants' attorney specifically withdrew the portion of the motion based on the frivolous claims statue. The trial court, proceeded, nonetheless, to analyze defendants' application both in terms of N.J.S.A. 2A:15-59.1 and N.J.S.A. 10:5-27.1 and held defendants were entitled to an award of counsel fees under both statutes.

Plaintiff appealed from a trial court order awarding defendant $129,692.79 in counsel fees and costs. The Plaintiff appealed arguing that the trial court erred in awarding a counsel fee under N.J.S.A. 2A:15-59.1 and further erred in awarding a counsel fee under N.J.S.A. 10:5-27.1.

The Court agreed with plaintiff that any award of counsel fee based upon N.J.S.A . 2A:15-59.1 is an error. The Court stated “[d]efendants clearly advised the trial court that they were no longer seeking fees under that statute. Defendants having abandoned that claim, there was no basis for the trial court to sua sponte resuscitate it.”

The Court proceeded to review the award of counsel fees under the Law Against Discrimination at N.J.S.A. 10:5-27.1 which provides in pertinent part:

In any action or proceeding brought under this act, the prevailing party may be awarded a reasonable attorney's fee as part of the cost, provided however, that no attorney's fee shall be awarded to the respondent unless there is a determination that the complainant brought the charge in bad faith.

The Court noted there is little reported authority on the issue of awarding counsel fees to a respondent under N.J.S.A. 10:5-27.1. The statute itself provides that such fees cannot be awarded unless there is a determination that the “complainant brought the charge in bad faith.” The Appellate Division rejected the definition of “bad faith” relied upon by the trial court. The Court provided:

In determining whether a prevailing defendant is entitled to an award of counsel fees under N.J.S.A. 10:5-27.1, a trial judge must engage in a multi-step analysis. The first issue to be determined is whether the court is satisfied that the unsuccessful plaintiff proceeded in bad faith. . . . . We are of the view that the meaning and application of the term “bad faith” must be determined within the context of the particular matter being considered.

The Court supported a previous ruling by the Supreme Court “equat[ing] bad faith with “a reckless disregard or purposeful obliviousness of the known facts” stating this “more fully achieves the legislative objective of ‘eliminat[ing] the possible chilling effect on civil rights plaintiffs, who may decide not to pursue a meritorious suit for fear of suffering a fee award, and the goal of deterring plaintiffs from filing frivolous claims.’”

The Court then addressed the question whether the financial ability of a non-prevailing party should be taken into account when a trial court is presented with an application for counsel fees under N.J.S.A. 10:5-27.1. The Court noted :

The statute refers to an award of a “reasonable” attorney's fee; it does not direct that the prevailing party is to be made whole for the sums it expended in retaining counsel to defend itself. In our judgment, the ability of a party to pay an award of counsel fees is inherent in the concept of analyzing what is a reasonable fee.

The Court reversed the award of counsel fees and remanded the matter to the trial court because the trial court did not make the requisite finding that plaintiff proceeded in bad faith in this litigation. The Court held:

If the trial court determines that the matter was brought in bad faith, it should then proceed to consider what would constitute a reasonable award of counsel fees. In settling upon what it considers a reasonable award, the trial court should take into account the extent to which plaintiff has the ability to pay an award of counsel fees, and also the extent to which plaintiff pursued the matter because of her own views or desires or relied, either exclusively or partially, upon the advice of counsel.