INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS v. BONNIE WERNER-MASUDA

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4937-09T2

A-5067-09T2

INTERNATIONAL ASSOCIATION OF

MACHINISTS AND AEROSPACE

WORKERS, AFL-CIO,

Plaintiffs,

v.

BONNIE WERNER-MASUDA, KEVIN

McCORMICK, VICKIE WARLICK,

RAY YOKOYAMA, EVERGREEN

MANAGEMENT, and EVERGREEN

MANAGEMENT II,

Defendants,

and

UNION OF INDEPENDENT FLIGHT

ATTENDANTS,

Defendant-Appellant/

Cross-Respondent,

and

McCORMICK ADVISORY GROUP,

Defendant-Respondent/

Cross-Appellant.

INTERNATIONAL ASSOCIATION OF

MACHINISTS AND AEROSPACE

WORKERS, AFL-CIO,

Plaintiffs,

v.

BONNIE WERNER-MASUDA, UNION

OF INDEPENDENT FLIGHT ATTENDANTS,

KEVIN McCORMICK, VICKIE WARLICK,

RAY YOKOYAMA, EVERGREEN MANAGEMENT,

and EVERGREEN MANAGEMENT II,

Defendants,

and

McCORMICK ADVISORY GROUP,

Defendant-Respondent/

Cross-Appellant.

_____________________________

IN THE MATTER OF HEROLD LAW, P.A.,

and CHARLES F. WASKEVICH, JR.,

ESQUIRE,

Appellants/Cross-Respondents.

________________________________________

December 11, 2012

 

Argued February 29, 2012 - Decided

 

Before Judges Cuff, Waugh, and St. John.

 

On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket No. L-0537-05.

 

Kevin M. Kilcommons argued the cause for appellant/cross-respondent in A-4937-09T2 (Kilcommons Shanahan, LLC, attorneys; Mr. Kilcommons, of counsel and on the brief).

 

Craig S. Provorny argued the cause for appellants/cross-respondents in A-5067-09 (Herold Law, P.A., attorneys; Mr. Provorny and Charles F. Waskevich, Jr., of counsel and on the brief).

 

Michael J. Epstein argued the cause for respondent/cross appellant (The Epstein Law Firm, P.A., attorneys; Mr. Epstein, on the briefs, and James L. Fant, on the brief in A-5067-09).

 

PER CURIAM

Defendants Union of Independent Flight Attendants (UIFA) and McCormick Advisory Group (MAG) appeal orders entered by the Law Division in connection with UIFA's claims against MAG for breach of contract. In a separate appeal, Herold Law, P.A. (Herold Law), and Charles F. Waskevich, Jr., a partner at Herold Law, appeal from an order of the Law Division imposing sanctions in connection with the mistrial declared during the first trial of UIFA's claims against MAG, at which they represented UIFA. The appeals were argued together, and we now consolidate them for the purposes of this opinion. We affirm all orders on appeal except the order dismissing the claims concerning successor liability, which we vacate and remand for further consideration.

I.

We discern the following facts and procedural history from the record on appeal.

A.

UIFA was formed by a group of flight attendants who worked for Continental Airlines. They were unhappy with their existing union, the International Association of Machinists and Aerospace Workers (IAM), which is affiliated with the AFL-CIO. After attempting to reform IAM from within, they decided to create a new union and seek its certification to replace IAM as the representative of Continental's flight attendants.

In the spring of 2003, Vickie Warlick, a Continental flight attendant who had been an officer of IAM's Newark local, approached Andrea Estelle for advice on creating a new union. Estelle, a Continental flight attendant based in Houston, had been involved in an earlier, unsuccessful attempt to create a new union. Estelle told Warlick about her experience, agreed to assist her, and recommended that they consult Kevin McCormick at MAG.

MAG's brochure described the company as an advisor, assisting "labor organizations, professional and non-profit associations," and other membership associations achieve their goal of vesting control with the membership. MAG offered "a full range of consulting, management, financial, and administrative services, specializing in the creation, development, and ongoing operations of associations." The only reference to legal services in the brochure was under the heading of consulting. It stated that MAG could "[a]dvise on and recommend legal, insurance, accounting, and labor relations professionals" for use by its client associations.

In December 2003, Estelle contacted McCormick and set up a meeting for early 2004. Estelle also attempted to enlist the support of Bonnie Werner-Masuda, a Newark-based Continental flight attendant who had been Warlick's ally in connection with efforts at internal reform of IAM. However, Werner-Masuda was still an officer in IAM's Newark local. Although she declined to attend the MAG meeting because she wanted to continue her efforts to reform IAM from within, Werner-Masuda told Estelle that she had a list containing the names and addresses of Continental flight attendants.

On January 20, 2004, Warlick, Estelle, Ray Yokoyama, Jo Anne Allen, Nelson Lee, and Jeffrey Palledino, all Continental flight attendants, met with McCormick and his assistant Darlene Bolduc. McCormick told them that MAG would help set UIFA up "as a legal entity" by "get[ting them] templates of constitutions and bylaws so they [could] start creating their own." MAG would also assist them with writing their campaign strategy. In addition, MAG would do UIFA's "books and records, [its] tax returns, and keep [its] . . . dues collection, . . . and report that back to the Board," as well as keep UIFA's files, answer the telephone, and handle newsletters or correspondence.

Because of UIFA's initial inability to pay, McCormick told them that MAG would keep track of the hours spent by MAG on consulting and administrative services, and would bill UIFA once it had been certified. Until that time, UIFA would only be required to pay for out-of-pocket expenses, the funding for which could come from donations and fundraisers held by the initial UIFA members. If UIFA were to be unsuccessful in obtaining certification, McCormick and MAG would not be compensated for their efforts.

Bolduc explained that she would handle "the administrative end," including filing reports with the United States Department of Labor, data entry, and financials. She would also keep count of the cards signed by Continental flight attendants authorizing an election to choose a new union. Bolduc told the group that UIFA would have one year from commencement of its campaign to obtain authorizations from fifty percent plus one of the Continental flight attendants, approximately 5000 cards. They could then file for an election with the National Mediation Board.

There was a discussion of legal services, the nature of which was a hotly disputed issue during the trial and is central to this appeal. Warlick claimed that McCormick told them "that he was in the business of providing administrative, legal, and financial assistance to groups like ours that" were restricted by "the AFL/CIO umbrella" in such a way that their only alternative was to form an independent union. According to Warlick, McCormick said that UIFA would have the "top legal labor firm, Seham, Seham, and Peterson [(the Seham firm)], working for" them.

Warlick further claimed that McCormick showed them letters and literature from Seham regarding their work with flight attendants and a mechanics association involving another airline. Based on the letters, Warlick understood that, if UIFA used MAG, the Seham firm would be their attorneys and would be paid on a contingency basis. She asserted that McCormick promised that they would receive the same services and the same legal firm as flight attendants for other airlines who had worked with MAG.

Allen agreed that McCormick told the group that he was able to provide an attorney for UIFA and its members, and they "would have access to Mr. Seham anytime we may have needed him." She claimed McCormick made it sound like he had "a partnership" with the Seham firm. "He indicated to us and told us that he and Lee Seham worked together, and that any legal questions we had, he would refer them to Mr. Seham, and that was part of the entire offer coming from him." According to Allen, McCormick never told them they were required to go to Seham themselves if they wanted to retain him, although she believed they had asked whether it was necessary for them to do so.

Allen asserted that McCormick referred them to a website created by United flight attendants, which explained what MAG was doing for them as they attempted to start up the United Flight Attendant Union (UFAU). Warlick claimed that, when she viewed the UFAU site in January 2004, it included a statement that MAG "provid[ed] professional, legal, financial, and administrative services."

Lee similarly claimed that McCormick promised to provide legal assistance, in addition to administrative and financial services. However, he conceded that McCormick did not go into specific detail about the legal services, stating only that "he had a law firm" that would be available when UIFA "needed help." Lee understood McCormick to mean that "whoever was counsel for MAG, was also a counsel for us as well." Although Lee conceded that McCormick did not specifically explain the process of legal fee payment, he assumed the expenses "were all in one."

McCormick did not dispute that he told the flight attendants at the January 20 meeting that the Seham firm was available to assist them if they needed legal support in the future. However, he denied telling them that MAG would provide or pay for such legal services. Lee Seham similarly denied making any arrangement with MAG to provide legal services to UIFA and its members at MAG's expense, subject to reimbursement in the event UIFA became certified.

Estelle also disagreed with Warlick, Lee, and Allen's understanding regarding McCormick's promises. She maintained that McCormick only told them that "[MAG] would provide administrative services" and that it had "the Seham law firm available . . . at that time if we chose to retain them as our legal staff." According to Estelle, neither McCormick nor Bolduc said that MAG provided legal services or would provide or pay for such services. Unlike the other UIFA members, Estelle understood that UIFA would be responsible for paying the Seham firm for any assistance it might provide to UIFA.

McCormick warned the flight attendants at the January 20 meeting that the IAM would attack them each personally and try to demean them. Warlick claimed they were told that such attacks should be described in an incident report and sent to Bolduc, who would pass the information along to the Seham firm.

McCormick suggested the UIFA members raise $150,000 for expenses, including the money needed to send three rounds of mailers to the entire staff of Continental flight attendants. McCormick did not tell the UIFA members how to obtain a mailing list. Although McCormick mentioned that the address list "just appeared" one day in the case of another start-up union, Estelle and Bolduc claimed that McCormick instructed the flight attendants to get the information if they could, but warned them against doing anything illegal.

UIFA, through Estelle, subsequently agreed to retain MAG. The agreement between MAG and UIFA was oral. According to Estelle, she did not see any reason for a written agreement.

McCormick, Bolduc, Estelle, Warlick, and Yokoyama attended a second meeting in early March. Estelle was elected to be UIFA's president, with Yokoyama as secretary/treasurer.

Werner-Masuda stopped by the meeting to visit her friends and to meet McCormick and Bolduc. She stayed for about an hour. According to Werner-Masuda, she brought a copy of the IAM Newark local's address list with her and handed it to Estelle. She also asserted that Estelle then gave it to McCormick and Bolduc. Estelle, however, denied receiving an address list at the meeting.

On March 24, a third meeting was held in Houston. Scott Peterson, an attorney from the Seham firm, attended the meeting to discuss UIFA's constitution. In April, the founding members of UIFA decided to remove Estelle from her role as president because of disagreements between her and Warlick, as well as a general consensus that Estelle was not doing enough for UIFA.

Warlick then spoke to Werner-Masuda about joining UIFA. Allen believed that Werner-Masuda became interested in UIFA in March or April 2004, but was not actively participating at that time. Estelle, however, testified that Werner-Masuda was involved with UIFA in March.

On April 1, 2004, while Werner-Masuda was still an IAM officer, she was included in an e-mail from Yokoyama regarding UIFA campaign materials. The e-mail was sent to the founding UIFA members, McCormick, and Bolduc. The campaign materials from Yokoyama included a statement that "[UIFA] has legal representation with expertise in aviation labor and the Railway Labor Act"1 and that "[UIFA] has a professional administrative staff with years of experience in labor organizations." After reviewing the e-mail and attachment, McCormick assumed that UIFA had entered into an agreement with the Seham firm. Werner-Masuda was included in a second e-mail on April 2.

In May 2004, Werner-Masuda resigned her position with IAM and accepted the UIFA members' offer to become its president.

Warlick and Werner-Masuda assembled address lists for the mailings to be sent out during UIFA's campaign. According to Estelle, Werner-Masuda was able to get address lists from IAM by downloading it from an IAM program known as V-Lodge. Warlick, however, claimed that an unknown person left address lists for Cleveland, Guam, and part of Texas in her file at Newark Airport. She forwarded those lists to Bolduc. Warlick did not know whether Werner-Masuda accessed V-Lodge to obtain additional addresses for the campaign.

Werner-Masuda admitted that a list she obtained from an IAM official in 2003 was used in the UIFA campaign. She also admitted using V-Lodge to obtain at least some information for UIFA.

According to Allen, the majority of addresses the members provided "came from friends and then friends of friends." She related that she had a lot of contacts and obtained a significant number of addresses from those people. Her address list contained about six hundred names. She testified that she sent it to Warlick.

The official UIFA campaign commenced on June 20, 2004, with a letter sent to Continental. UIFA sent out between 7300 and 7800 letters to Continental flight attendants, launched its website, and issued a press release. About 1000 of the letters were returned by the post office because of incorrect addresses. Approximately 1000 signed cards were collected in the first month of the campaign. There were approximately 4000 cards by the beginning of August.

UIFA's mailing included a statement that it had "legal representation with expertise in labor and the Railway Labor Act" in addition to "a professional administrative staff with years of experience in labor organizations." Bolduc, like McCormick, understood the comment about legal representation to indicate that UIFA had entered into an agreement with the Seham firm. She further understood the comment regarding administra-tive staff to refer to UIFA's separate agreement with MAG.

The MAG profile posted on UIFA's website around late August 2004 explained that:

MAG is a full service administrative services firm established in 1989 specializing in providing financial, administrative, and day-to-day business services to member control organizations. . . . Its founder, Kevin F. McCormick, has 25 years progressive experience in finance, accounting, association management and administration and labor contract negotiations.

 

It related that MAG was hired to serve as an advisor and a "home office," and would provide "clerical, accounting, reporting, and consulting" services, but was not involved in UIFA's decision-making. There was no mention of the provision of legal services by MAG.

Prior to the commencement of any litigation, the UIFA organizers started exchanging e-mails concerning how they would explain the source of their address lists. On June 30, Yokoyama sent McCormick an e-mail suggesting they say the address list "just showed up on our desk one day anon[ymously]." McCormick suggested that "the best thing to say is that the mailing list was developed from a variety of sources over time and that the data was provided to UIFA's administrators."

In a July 15 e-mail string, McCormick told Yokoyama he was "uncomfortable with the statements that we were supplied a mailing list accidentally" from IAM. McCormick forwarded the e-mails to Peterson at the Seham firm for his opinion. When Peterson asked how the list was obtained, Warlick responded: "[Werner-Masuda] was sent the names and addresses by [an IAM official] to her personal e-mail for the [IAM] elections in [Newark]" in either late May or early June 2003.

On July 16, Yokoyama sent an e-mail to Peterson and McCormick, stating:

The primary method [by which] we obtained the list was internally while [Werner-Masuda] still had access to the IAM's website and while she was being sent the mailing addresses in order to fulfill her duties; however, in one instance, [an IAM official] sent [Werner-Masuda] an e-mail to her personal e-mail with the address list attached.

 

Yokoyama noted that Werner-Masuda also obtained addresses from the Cleveland IAM local's secretary/treasurer, and that other UIFA members collected data from various other sources.

In a July 17 e-mail, Werner-Masuda explained that she

went into V-Lodge and extracted the addresses for IA[M] A-S and [Warlick] did [Cleveland], [Guam], and IA[M] T-Z. The Newark list was sent to my personal e-mail address by [an IAM official]. Also an ex-officer in [Cleveland] sent me her [Cleveland] list. I also tried to update my list with corrections of addresses that I knew were bad.

 

On August 23, Bolduc sent an e-mail to UIFA, attaching a letter from McCormick outlining the terms of the relationship between MAG and UIFA and requesting proposed changes. Bolduc explained that the purpose of the letter was to memorialize the agreement and "make it clear to the officers and committee and the membership of the campaign that an agreement was made with [MAG]."

In the letter, McCormick noted that MAG had advised the UIFA members that IAM "would focus their efforts on demonizing MAG, the UIFA legal team, and the UIFA Organizing Committee Leadership." In response to the IAM's assertions that UIFA was controlled by MAG and was locked into a long-term contract, McCormick laid out the terms of the arrangement between MAG and UIFA:

MAG has agreed to assist the UIFA Organizing Committee by providing administrative, accounting, and general consulting services during the organizational campaign. The decision-making authority for all aspects of the campaign rests solely with the Interim Officers of UIFA and the Organizing Committee. MAG is to be compensated for its services only in the event UIFA is certified by the National Mediation Board to represent the Continental Flight Attendants. MAG will be reimbursed during the campaign for its out of pocket expenses, which must be authorized by the Interim Executive Board.

 

There was, however, no mention of the provision of legal services. Bolduc received no objections to the language used in McCormick's letter.

On August 27, Yokoyama sent an e-mail to the founding UIFA members, McCormick, and Bolduc, attaching a new "Hot Chatter," or web update, regarding MAG's role, as well as MAG's August 23 letter and profile. The UIFA website was updated consistent with the e-mail, providing links to MAG's profile and the August 23 letter.

B.

On August 5, IAM filed a complaint against Werner-Masuda, UIFA, and MAG in the United States District Court for the District of Maryland, alleging federal- and state-law causes of action, all of which centered on the allegation that Werner-Masuda, while an IAM officer, had improperly accessed IAM's V-Lodge in order to compile addresses for the mailings to be sent out by MAG and UIFA.

After IAM filed the federal suit, Seham, via a telephone call arranged by Bolduc, told the UIFA members that his firm could not represent UIFA or Werner-Masuda because there was a conflict of interest based on his relationship with McCormick and MAG. Warlick described herself as "shocked" and "angry," because she felt Seham "was supposed to be our attorney." Estelle was not surprised by Seham's decision, however, since he had a long-standing relationship with MAG, not UIFA.

Two or three weeks after the call with Seham, McCormick, Bolduc, Estelle, Warlick, Werner-Masuda, Yokoyama, Allen, and some others met in Newark. McCormick told them that UIFA would need "to pay the entire bill for the entire lawsuit." Warlick complained to McCormick that he should have let them know they would not be represented if they were sued by IAM. She claimed that if she had known, she never would have started the campaign or would have saved money for representation. McCormick and Bolduc explained that provision of or payment for legal services were never part of MAG's agreement with UIFA.

Although Werner-Masuda felt that MAG had abandoned the UIFA defendants, she and Warlick requested that MAG continue providing consulting services, and MAG agreed to do so. Seham also continued performing work for UIFA on an occasional basis into December, but did represent UIFA or MAG for purposes of the federal lawsuit.

In late August 2004, Werner-Masuda and UIFA retained George Lane to represent UIFA and the other defendants in the federal court action. UIFA had minimal funds at the time, so Warlick paid $1500 for deposition transcripts and Werner-Masuda paid the remainder. Werner-Masuda believed she paid Lane approximately $20,000, but owed $60,000 more. Lane believed Werner-Masuda and UIFA owed him additional fees, but could not quantify the amount because the hard drive on which he maintained his billing records had crashed.

On September 16, the District Court dismissed the federal causes of action for failure to state a claim. The judge declined to retain jurisdiction over the remaining state-law claims, and dismissed them without prejudice.

On November 7, IAM filed a complaint in the Law Division. In addition to the defendants named in the federal action, the New Jersey complaint named McCormick, Warlick, and Yokoyama. We will refer to all of those defendants as the UIFA defendants. The causes of action were based on the same allegation of improper access and use of information derived from V-Lodge. IAM sought return of the information, injunctive relief, and money damages.

Following IAM's filing of the New Jersey action, Werner-Masuda, Warlick, Yokoyama, and UIFA retained Waskevich and Herold Law to represent them. Seham represented McCormick and MAG. Warlick signed a retainer agreement with Herold Law for herself and UIFA, and the others subsequently signed an amended retainer on December 1. Werner-Masuda paid the $5000 retainer fee. Waskevich explained to his clients that each client was jointly and severally liable for the entire bill. At the time, UIFA had no funds, so the three individual UIFA defendants, Warlick, Werner-Masuda, and Yokoyama, agreed to split the legal bills three ways.

On May 5, 2006, the UIFA defendants filed counterclaims against IAM and a third-party complaint against certain IAM officials and local affiliates. On the same day, UIFA and Warlick filed cross-claims against MAG and McCormick (MAG defendants) for indemnification and contribution. The MAG defendants filed cross-claims against the UIFA defendants in July 2006, for breach of contract and damages due to tortious conduct, including the alleged illegal access of IAM's program and distribution of the IAM's address information. In December 2006, UIFA and Warlick filed amended cross-claims against the MAG defendants, adding Werner-Masuda and Yokoyama as cross-claimants, and adding claims for breach of contract and fraud.

Meanwhile, on May 22, IAM accepted the MAG defendants' offer of judgment. The Law Division entered judgment against the MAG defendants, awarding IAM $30,000 in damages, plus costs. The judgment also enjoined MAG from using address materials obtained from IAM sources.

On June 16, IAM offered to settle with the UIFA defendants for a payment of $10,000 and the return all of address information obtained from IAM sources. The UIFA defendants responded on October 2, demanding damages from IAM, including $8.9 million for UIFA, $950,000 for Werner-Masuda, $800,000 for Warlick, and $790,000 for Yokoyama.

On October 31, IAM again offered to settle with the UIFA defendants, requesting only that they return the address information. The UIFA defendants countered with an offer of judgment requesting $20,000 and dismissal with prejudice for each defendant. In a separate proposal on November 7, the UIFA defendants demanded $25,000 each, a retraction of IAM's accusations of theft, and an apology. On November 15, IAM offered to mediate if the UIFA defendants withdrew their financial demands. No settlement was reached and the litigation continued.

In early 2008, IAM and the UIFA defendants finally reached a settlement. A February 15 stipulation dismissed IAM's claims against the UIFA defendants and their claims against IAM and its officials with prejudice, and no costs to any party.

C.

At oral argument on March 14, 2008, the MAG and UIFA defendants cross-moved for summary judgment on their remaining claims against each other. In light of the UIFA defendants' settlement with IAM, the motion judge granted the MAG defendants' motion for summary judgment in part on March 18. He dismissed the UIFA defendants' claims for contribution and indemnification, but denied the motion as to the UIFA defendants' remaining claims. He granted the UIFA defendants' summary judgment motion with respect to the MAG defendants' claim for reimbursement of their legal fees.

In June, the MAG defendants sought to compel Waskevich's deposition. They argued that he was the only person who could testify concerning the counsel fees the UIFA defendants incurred in defending against IAM's claims. On July 25, a special discovery master appointed by the Law Division denied the motion. The MAG defendants then moved to dismiss the UIFA defendants' claims on the ground that they could not prove their damages in light of Waskevich's refusal to testify. That motion was also denied.

On September 10, the UIFA defendants filed a second amended cross-claim, adding Evergreen Management, Incorporated (EMI), and Evergreen Management, Incorporated II (EMI II), as successors in interest to MAG.

The first jury trial began on December 11. Waskevich sought to introduce his invoices for legal fees into evidence through Warlick's testimony. He informed the trial judge that he would testify on the reasonableness of the fees at the end of the trial, at which time he would be examined by another attorney. The MAG defendants objected, citing Waskevich's refusal to sit for a deposition concerning his fees and the fact that he had not been disclosed as a trial witness. The judge held that Waskevich could not be a witness in the case for those reasons.

The following day, the judge held that the invoices for legal fees were inadmissible because none of Waskevich's proposed witnesses could provide the requisite foundation for their admissibility or testify to the reasonableness of the fees. The judge outlined three options: (1) conversion of the trial into one for liability only, with damages to be tried separately; (2) declaration of a mistrial; or (3) dismissal of the UIFA defendants' claims. The MAG defendants refused to consent to a severance of liability and damages. The judge concluded that dismissal of the claims would be too harsh a sanction under the circumstances. Consequently, the judge reluctantly declared a mistrial.

The MAG defendants filed a motion for reconsideration on January 27, 2009, arguing that the trial judge should have dismissed the UIFA defendants' claims. The judge denied the motion, but noted that he would "not foreclose [the MAG] defendants from bringing a motion at the close of the second trial for counsel fees and other expenses" resulting from the mistrial. We denied the MAG defendants' application for leave to appeal.

New counsel was retained by the UIFA defendants, except for Yokoyama, who had died in the interim. His estate declined to participate in the litigation. The second jury trial commenced on November 30, before a different trial judge. Yokoyama's claims were dismissed with prejudice at that time.

At the close of the UIFA defendants' case, the MAG defendants sought dismissal of their claims. The trial judge granted MAG's motion in part. He dismissed all of the individual parties, leaving only UIFA and MAG as parties. He also dismissed the UIFA defendants' claim that the MAG defendants "cut and r[a]n" from their obligations. The judge refused to dismiss UIFA's claim for breach of contract based on MAG's alleged failure to provide legal services.

On December 21, while the jury deliberated, the judge ruled that EMI and EMI II were not proper parties to the litigation. The same day, the jury returned a unanimous verdict finding that MAG breached its agreement with UIFA by failing to provide and pay for legal services and expenses in connection with the IAM litigation. It awarded UIFA $352,069.01 in damages. It also found that UIFA breached the contract by not paying expenses, and ordered UIFA to pay MAG $7,346.46 in expenses.

On January 22, 2010, MAG moved for sanctions in connection with the mistrial. On March 5, the judge imposed sanctions of $43,904.07 in legal fees and costs against Waskevich and Herold Law for causing the mistrial. Herold Law's subsequent motion for reconsideration was denied.

Also on March 5, the trial judge denied MAG's motions for a new trial, judgment notwithstanding the verdict, and remittitur. However, he determined that he would conduct "an independent analysis" of the fee award. The judge also denied UIFA's post-trial motions.

On March 25, the trial judge issued a written decision and entered judgment in favor of UIFA in the amount of $219,511.88. He subtracted the $7,146.46 award for out-of-pocket expenses, which were UIFA's obligation under its agreement with MAG, and then molded the fee award to reflect deductions for time spent on issues that he determined were not involved in the IAM litigation. He also reduced the amount of the fee award to deduct contributions to UIFA's legal fees made by Yokoyama, whose estate had disclaimed any interest in the case.

These appeals followed.

II.

UIFA makes the following arguments on appeal:

POINT I - THE COURT ERRED AS A MATTER OF LAW BY DISMISSING DEFENDANTS, EMI AND EMI II.

 

POINT II - THE COURT ERRED BY MOLDING THE VERDICT AND REDUCING THE JURY AWARD BY ONE THIRD FOR YOKOYAMA DEFENSE CONTRIBUTIONS.

 

In its cross-appeal, MAG makes the following arguments:

POINT I - EMI AND EMI II ARE NOT MAG'S SUCCESSOR IN INTEREST

 

A. EMI Distinguished from EMI II

B. No Statutory Merger Occurred

C. No De Facto Merger Occurred

D. No Exception to General Rule of No Liability

 

POINT II - TRIAL COURT ERRED IN ORDERING A MISTRIAL

 

A. Standard for Dismissal with Prejudice

B. Motions for Mistrial

C. The UIFA Produced No Evidence of Damages

 

POINT III - THE TRIAL COURT ERRED IN GRANTING THE UIFA'S MOTION FOR SUMMARY JUDGMENT ON MAG'S CLAIM FOR LEGAL FEES

 

POINT IV - NO CONTRACT EXISTED BECAUSE OF LACK OF CERTAINTY AND NO MEETING OF THE MINDS

 

POINT V - THE UIFA WAS NOT A PROPER PARTY BECAUSE IT CEASED TO EXIST

 

POINT VI - THE DOCTRINE OF UNCLEAN HANDS BARRED THE UIFA DEFENDANTS FROM RECOVERING AGAINST MAG

 

A. The Doctrine of Unclean Hands

B. The Court Should Have Granted Motion to Dismiss

C. The Trial Court erred In Not Charging Unclean Hands

 

POINT VII - THE TRIAL COURT ERRED IN APPLYING THE LAW ON THE RECOVERY OF REASONABLE AND NECESSARY LEGAL FEES

 

A. Oral Contract Is Not An Exception to American Rule

B. UIFA Was not a Prevailing Party

C. The UIFA Did Not Produce A Lodestar

D. The Legal Fees Were Dispro-portionate to the Result

E. UIFA's Failure to Settle Was Unreasonable

F. Legal Services for Individuals As Opposed to UIFA

G. The Trial Court Should Have Decided Legal Fees

 

POINT VIII - MAG WAS ENTITLED TO A NEW TRIAL OR JUDGMENT NOTWITHSTANDING VERDICT

 

A. New Trial

B. Judgment Notwithstanding the Verdict

C. Independent Analysis And Remittitur

D. Molding For Yokoyama

 

Finally, Herold Law and Waskevich make the following arguments on their separate appeal:

POINT I - THE STANDARD OF REVIEW ON THIS APPEAL

 

POINT II - [THE SECOND TRIAL JUDGE] ERRED BY SANCTIONING THE UIFA DEFENDANTS' COUNSEL FOR CAUSING THE DECEMBER 9, 2008 MISTRIAL WHICH WAS ERRANTLY DECLARED BY [THE FIRST JUDGE] SUA SPONTE

 

A.

We start our analysis with MAG's overarching argument that, because it had no contractual obligation to provide legal services for UIFA and its members, the Law Division erred in denying its motion for summary judgment and refusing to dismiss UIFA's claims during and after the second trial.

It is well-established that our review of a judge's conclusions of law is plenary. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference."). Consequently, in the context of a motion for summary judgment, we apply the same standard governing the trial judge. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-40 (1995); R. 4:46-2(c).

Motions for involuntary dismissal in accordance with Rule 4:37-2(b), as well as motions for judgment occurring at the close of evidence, Rule 4:40-1, or after the verdict, Rule 4:40-2(b), are all governed by a similar standard: "'[I]f, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ, the motion must be denied. . . .'" Verdicchio v. Ricca, 179 N.J. 1, 30 (2004) (alterations in original) (quoting Estate of Roach v. TRW, Inc., 164 N.J. 598, 612 (2000)). R. 4:40-2; Verdicchio v. Ricca, 179 N.J. 1, 30 (2004). Reviewing courts apply the same standard. Barber v. ShopRite of Englewood & Assocs., Inc., 406 N.J. Super.32, 52 (App. Div.), certif. denied, 200 N.J.210 (2009).

"A contract arises from offer and acceptance and must be sufficiently definite 'that the performance to be rendered by each party can be ascertained with reasonable certainty.'" Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992) (quoting West Caldwell v. Caldwell, 26 N.J. 9, 24-25 (1958)). Therefore, where the "parties agree on essential terms and manifest an intention to be bound by those terms, they have created an enforceable contract." Ibid. See also Friedman v. Tappan Dev. Corp., 22 N.J. 523, 533 (1956) (to be enforceable must have meeting of minds on all essential terms). Thus, a meeting of the minds is evidenced by each party's express agreement to the terms. Johnson & Johnson v. Charmley Drug Co., 11 N.J. 526, 538-39 (1953). Where the parties fail to agree on one or more essential terms, the contract is generally found to be unenforceable. Weichert, supra, 128 N.J. at 435.

Nevertheless, the contract is not necessarily void even where contract terms are "ambiguous or doubtful." Hall v. Bd. of Educ., 125 N.J. 299, 306 (1991). Vagueness is only fatal where "the contract [is] so vague or indefinite that it [can]not realistically be enforced." Satellite Entm't Ctr., Inc. v. Keaton, 347 N.J. Super. 268, 277 (App. Div. 2002). See Weichert, supra, 128 N.J. at 427 (failure to include essential terms prevents recognition of parties' obligations); West Caldwell, supra, 26 N.J. at 24-25 (1958) (intent of parties could not be determined from vague terms).

Here, the UIFA defendants alleged that McCormick and MAG "held themselves out and represented . . . that they were engaged in the business of providing administrative, legal, accounting and consulting services," and that McCormick and MAG "breached their agreement and have refused to provide the legal . . . services that they committed to provide."

As non-attorneys, MAG would not have been able to provide legal services to UIFA directly. However, an attorney may accept payment from a third party when six conditions are met: (1) the informed consent of the client is obtained, requiring the attorney to explain the relevant risks and alternatives; (2) the third-party payer is prohibited from "directing, regulating or interfering with the lawyer's professional judgment in representing his client," in accordance with R.P.C. 1.8(f)(2) and 5.4(c); (3) it is ascertained that no current attorney-client relationship exists between the lawyer and the third-party payer; (4) communications between the lawyer and third-party payer as to the substance of the representation are prohibited, in accordance with R.P.C. 1.8(f)(3); (5) the third-party payer properly and efficiently processes the lawyer's invoices; and (6) payment continues absent leave of court and notice to the lawyer and client. In re State Grand Jury Investigation, 200 N.J. 481, 495-96 (2009). Although it is possible the Seham firm's existing attorney-client relationship with MAG prohibited it from representing UIFA in the IAM litigation, MAG was not prohibited from paying for the services of a different firm in that action. In re State Grand Jury Investigation, supra, 200 N.J. at 495. See also R.P.C. 1.7.

Because of the conflicting factual positions of the parties as to whether MAG had agreed to provide legal services, summary judgment was inappropriate. The motion judge appropriately denied the MAG defendants' motion under the principles outlined in Brill, supra, 142 N.J. at 540 (a court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.").

At trial, Warlick, Lee, and Allen, who attended the January 2004 meeting with MAG, testified that McCormick had promised that MAG would provide legal services in addition to financial, administrative, and consulting services. Warlick and Allen testified that McCormick named the Seham firm, while all three witnesses claimed that McCormick assured them a firm would be working for them and would assist with any legal problems. Although, neither Warlick nor Lee provided any specific detail as to the alleged agreement for legal services, they could have believed that the contingency fee arrangements for MAG's other services would apply to legal services, that UIFA would only be billed if it were certified.

McCormick, Bolduc, Seham, and Estelle, on the other hand, testified that there was no agreement for the provision of legal services. MAG points to the fact that no such provision appeared in the August 2004 written summary of the relationship between MAG and UIFA. Although McCormick conceded that he mentioned Seham during the January 2004 and subsequent meetings, it was only as someone who could help the union in the future if the members so desired.

Seham, for his part, explained that he would not allow a third party to negotiate the terms of his, or his firm's, representation, and he had never known MAG to provide or pay for legal services for any of their mutual clients. Nevertheless, he conceded that he and his firm performed work on UIFA's behalf, with the understanding, like Warlick and Lee, that the bills would be submitted to UIFA for reimbursement if the union were certified.2

Following the conclusion of testimony, the trial judge instructed the jury in accordance with the model jury charge. See Model Jury Charge (Civil), 4.10C, "Existence of a Legally Enforceable Contract" (1998). He explained that, in order to establish a contract claim, a party must prove entry into a contract, that one party abided by its obligations while the other breached, and that the breach caused a loss to the non-breaching party. The judge then defined a contract, and recited the factors required to determine whether it existed, including meeting of the minds and certainty.

Following the verdict, MAG moved to set aside the judgment in part on the ground that a contract did not exist. The judge found that reasonable minds could disagree as to whether a valid contract was formed, and denied MAG's motion, finding that the question had been properly left to the jury.

There was conflicting testimony on the issue of whether MAG undertook to provide legal services. Based on the conflicting evidence, a jury could have found in favor of MAG. The outcome depended largely on the jury's findings with respect to the credibility of the witnesses. The trial judge had the opportunity to hear the testimony, and he determined that there was sufficient credible evidence to support the jury's verdict. We agree. There was sufficient credible evidence to support the jury's determination that a valid contract existed for the provision of legal services as alleged by UIFA based upon its evident decision to credit the testimony of UIFA's witnesses.

Consequently, we reject MAG's arguments that there was no valid contract and that the jury's contrary finding was against the weight of the evidence.

B.

We next address MAG's arguments concerning judicial estoppel and unclean hands. MAG argues that the UIFA defendants should have been judicially estopped from asserting that Werner-Masuda did not access V-Lodge to obtain information for the UIFA address lists because their attorney in the federal action conceded that she had done so.3 Because of their admitted improper conduct, MAG also argues that their claims were barred under the principles of unclean hands.

Relying on Kimball International, Inc. v. Northfield Metal Products, 334 N.J. Super. 596, 607 (App. Div. 2000), certif. denied, 167 N.J. 88 (2001), the first trial judge held that, in order for judicial estoppel to apply in New Jersey, "the party [against which it is asserted] must have succeeded in maintaining" their "previously asserted position." Because "the original federal case between IAM and UIFA was dismissed [on] jurisdictional grounds and [the action brought in New Jersey was] also eventually settled between all parties," the issue of how Werner-Masuda obtained the address information was never determined on the merits. The judge noted, however, that "[a]ny inconsistencies in [UIFA's] position [went] directly to credibility and [could] be addressed in cross-examination."

The MAG defendants also raised judicial estoppel at the second trial. Like the first trial judge, the second trial judge found that the federal court statements did not justify an estoppel, but observed that the credibility issue could be addressed during cross-examination.

The principle of judicial estoppel "bar[s] a party to a legal proceeding from arguing a position inconsistent with one previously asserted." N.M. v. J.G., 255 N.J. Super. 423, 429 (App. Div. 1992). Its purpose is to preserve "the integrity of the judicial process." Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996). In order for judicial estoppel to apply, however, the prior position must have been successfully maintained in the judicial proceeding. Chattin v. Cape May Greene, Inc., 243 N.J. Super. 590, 620 (App. Div. 1990), aff'd, 124 N.J. 520 (1991).

Successful maintenance of a position requires only "that the party was allowed by the court to maintain its position," and not that the "party prevailed in the underlying action." Cummings, supra, 295 N.J. Super. at 387. In other words, the party must "have convinced the court to accept its position." In re Cassidy, 892 F.2d 637, 641 (7th Cir.), cert. denied, 498 U.S. 812, 111 S. Ct. 48, 112 L. Ed. 2d 24 (1990); accord Ali v. Rutgers, 166 N.J. 280, 288 (2000). Thus, where the preceding action was concluded by a settlement, "a party ordinarily is not barred from taking an inconsistent position in successive litigation." Kimball, supra, 334 N.J. Super. at 607.

Finally, estoppel is considered an "'extraordinary remed[y]'" that only should be applied "'when a party's inconsistent behavior will otherwise result in a miscarriage of justice.'" Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d 355, 365 (3d Cir. 1996) (quoting Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 424 (Stapleton, J., dissenting), cert. denied, 488 U.S. 967, 109 S. Ct. 495, 102 L. Ed. 2d 532 (1988)); accord Ali, supra, 166 N.J. at 288.

We conclude that both trial judges properly denied the MAG defendants' motion to dismiss on judicial estoppel grounds. First, judicial estoppel is not applicable because no prior court ever "accepted" the UIFA defendants' position with respect to the allegedly stolen lists. Second, the MAG defendants had ample opportunity to cross-examine on the discrepancies in the UIFA defendants' explanations of how the lists were obtained. They did so, albeit unsuccessfully in terms of convincing the jury. Consequently, we see no miscarriage of justice.

At the close of the UIFA defendants' case at the second trial, the MAG defendants moved for a directed verdict in part on the ground that legal fees could not be awarded because Werner-Masuda perjured herself by denying she accessed V-Lodge and took IAM's confidential information. The MAG defendants again argued that her testimony contradicted her prior statements and certain proffered evidence. The judge denied the motion, noting that the issue of Werner-Masuda's credibility should be left to the jury. The judge concluded that, considering her testimony and all reasonable inferences therefrom, he could not conclude that "no reasonable jury could . . . award legal fees under these circumstances."

We find no error in the judge's denial of the motion. The question of whether Werner-Masuda lied about taking the address information from the IAM's database was a credibility issue for the jury to decide. Evidence had been offered suggesting that she did not deliberately steal information, and the MAG defendants had ample opportunity to discredit her on cross-examination. Moreover, there was a legitimate question as to whether MAG encouraged or acquiesced in Werner-Masuda's conduct.

The MAG defendants also argue that the trial judge failed to charge the jury with respect to their unclean hands argument.

Because "[a] jury is entitled to an explanation of the applicable legal principles and how they are to be applied in light of the parties' contentions and the evidence produced in the case," Navarro v. George Koch & Sons, Inc., 211 N.J. Super. 558, 574 (App. Div.), certif. denied, 107 N.J. 48 (1986), the jury charge, taken as a whole, should properly and clearly state the law in a manner the jury can understand. Rendine v. Pantzer, 276 N.J. Super. 398, 431 (App. Div. 1994), aff'd as modified, 141 N.J. 292 (1995). "Jury charges 'must outline the function of the jury, set forth the issues, correctly state the applicable law in understandable language, and plainly spell out how the jury should apply the legal principles to the facts as it may find them.'" Velazquez ex rel. Velazquez v. Portadin, 163 N.J. 677, 688 (2000) (quoting Jurman v. Samuel Braen, Inc., 47 N.J. 586, 591-92 (1966)).

Nevertheless, the failure to give correct jury instructions "constitutes reversible error [only] where the jury outcome might have been different had the jury been instructed correctly." Ibid. Reviewing courts "must examine the charge as a whole, rather than focus on individual errors in isolation." Viscik v. Fowler Equip. Co., 173 N.J. 1, 18 (2002).

The trial judge observed that there were allegations of questionable behavior in obtaining the address lists with respect to both sides. There had been evidence suggesting that McCormick had known "what was happening and tolerated it." For that reason, the judge decided to allow counsel "in summation to point out where [they felt] either party acted in bad faith, rather than the Court spoon feeding the jury." We see no reversible error in that decision.

In his summation, MAG's attorney argued to the jury that the UIFA defendants were responsible for the union's failure and IAM's lawsuit because the evidence demonstrated that Werner-Masuda took information from IAM's computer system. He further explained that, although Werner-Masuda insisted she did not take the information, there was significant evidence suggesting otherwise, including her own prior testimony. MAG's counsel argued: "We all know that the IAM's claim had basis and the allegations were true. They did take the information."

In contrast, UIFA's attorney argued that McCormick, "with a wink and a nod," told the UIFA members a list had once anonymously appeared on his desk. He pointed out that, although McCormick later suggested asking Peterson at the Seham firm about the lists, no evidence of a response from the firm was presented a trial. He asserted "that if [] Peterson thought that [Werner-Masuda] or [Warlick] did anything wrong in the way they were putting those lists together, we would have seen that evidence." He suggested that what Werner-Masuda did and when she did it was "not as important as what [] McCormick knew and when he knew it." Reiterating the issue of McCormick's "anonymous" comment, he explained that McCormick "was an expert in organizing these efforts. For him to stand here and say he didn't know this was going on . . . is preposterous. . . . [H]e wasn't credible with you."

The trial judge instructed the jury that it could consider inconsistencies and discrepancies in witness testimony when determining their believability, and that, if the jury determined that a witness testified falsely with the intent to deceive, the jury could decide whether to disregard the witness's testimony entirely.

The judge also instructed the jury that it could consider whether any unreasonable refusal to accept an early settlement of the IAM suit led to the accumulation of unreasonable fees. The trial evidence suggests that the refusal to settle was inextricably entwined with the individual defendants' insistence that they had committed no wrongdoing with respect to the address list. Essentially, the same evidence would have been taken into account on the question of unclean hands.

We see no indication in the jury's verdict that it would have decided the case differently had a theory of unclean hands been specifically charged. The jury's damages award indicates that it did not believe that UIFA's failure to settle was unreasonable and that it found the individual defendants' testimony regarding their conduct to be credible.

C.

We now turn to the arguments raised by MAG and by Herold Law and Waskevich with respect to the mistrial.

The decision to grant or deny a motion for mistrial is reviewed for abuse of discretion. McKenney v. Jersey City Med. Ctr., 167 N.J. 359, 376 (2001).

As already outlined, Waskevich refused to sit for a deposition concerning his legal fees, which were the core of UIFA's claim for damages. He was not named as a trial witness prior to the first trial or during the selection of the jury. Then, during his examination of one of his witnesses, he disclosed, for the first time, his intention to testify. At that point, counsel for MAG understandably objected. The trial judge reminded Waskevich that, prior to trial, they had discussed whether he would be testifying as to the reasonableness of his fees and that Waskevich had told him that he would not.

The judged outlined three options: (1) bifurcating the trial; (2) declaring a mistrial; or (3) dismissing UIFA's claim with prejudice. The judge declined to bifurcate liability and damage given the objection of UIFA's attorney, who had planned his trial strategy around a single trial. The judge also concluded that dismissal with prejudice was "too harsh a remedy." Consequently, he declared a mistrial. In denying the subsequent motion for reconsideration, the judge again concluded that granting a mistrial "was the right thing to do."

The judge acknowledged that some prejudice would result to the MAG defendants based on "the expense of pre-trial and trial costs for the first trial as well as for the second trial." Consequently, he allowed the MAG defendants to move for fees and expenses arising from the mistrial.

We reject Waskevich and Herold Law's contention that the trial judge should have allowed the first trial to continue by admitting Waskevich's invoices solely through Warlick's testimony. The trial judge correctly determined that the reasonableness of the fees, and not just the amount of the fees, was an issue for trial. In the context of a contract providing that the aggrieved party was entitled to recover attorneys' fees from the breaching party, we have held that the aggrieved party's "fee arrangement is subject to judicial review as to its reasonableness." Belfer v. Merling, 322 N.J. Super. 124, 141 (App. Div.), certif. denied, 162 N.J. 196 (1999). Although not an award of fees pursuant to Rule 4:42-9, such fees are "an element of damages which must be proved in the same manner as any other item and which must be assessed by the finder of fact as a matter of right and in the actual amount established by the proofs." Ibid.

Waskevich sought to establish the existence and amount of damages by submitting his invoices through Warlick's testimony. Although the invoices themselves might have been admissible under the business-records hearsay exception, N.J.R.E. 803(c)(6), Warlick would not have had the requisite knowledge to testify that the work was necessary or the fees reasonable. Absent an expert, only Waskevich was capable of establishing the reasonableness of his billing rate and the amount of time spent on the case.

We also reject MAG's argument that the judge should have dismissed the case with prejudice. "The dismissal of a party's cause of action, with prejudice, is drastic." Lang v. Morgan's Home Equip. Corp., 6 N.J. 333, 339 (1951); accord Abtrax Pharms. v. Elkins-Sinn Inc., 139 N.J. 499, 514 (1995). That sanction should only be sparingly invoked, and only when no less significant "sanction" is sufficient to eliminate the resulting prejudice, or when the attorney is not at fault, but the litigant is. Abtrax, supra, 139 N.J. at 514. In this case, the error leading to the mistrial was attorney error, not that of the UIFA defendants.

The prejudice suffered by the MAG defendants was the additional cost associated with the aborted first trial, which was cured by the award of fees following conclusion of the second trial. Courts possess the inherent authority to impose sanctions "as a means to enforce [the] ordinary rules of practice and discovery." Brundage v. Estate of Carambio, 195 N.J. 575, 610 (2008). "[A] trial judge has wide discretion in deciding the appropriate sanction for a breach of discovery rules," so long as the sanction is "just and reasonable." Mauro v. Owens-Corning Fiberglas Corp., 225 N.J. Super. 196, 206 (App. Div. 1988), aff'd, 116 N.J. 126 (1989). See R. 4:23. "Generally, financial sanctions . . . are limited to orders requiring reimbursement of the fees and expenses of a party." Wolfe v. Malberg, 334 N.J. Super. 630, 637 (App. Div. 2000).

In imposing fees, the first trial judge carefully reviewed the fees claimed by the MAG defendants for the first trial and found them to be reasonable in accordance with R.P.C. 1.5(a). He noted that Herold Law had not contested the amount requested.

The judge then considered "whether [] Waskevich's position [at the first trial] was sufficiently reasonable that it didn't merit any sanctions whatsoever." He determined that "at some point [] Waskevich had to know that he needed some proof on these fees, that you couldn't simply, if you are going to a jury trial, give them a bunch of [] papers without any support and expect the jury to consider it." The UIFA defendants bore the burden of proof with respect to damages, and they were "unable to proceed on the damage claim" after the MAG defendants had already invested $43,000 in preparing and trying the case for three days.

In Oliviero v. Porter Hayden Co., 241 N.J. Super. 381, 388 (App. Div. 1990), we held that the trial judge had the authority to assess sanctions and counsel fees against an attorney for inconveniences and expenses incurred in attending an aborted trial, when the attorney involved was "undeniably negligent in preparing the case, and the defendants were substantially prejudiced by counsel's conduct." Therefore, we perceive no error in the trial judge's award of fees to MAG in the amount of $34,904.07.

We find no merit in MAG's argument that it was entitled to additional charges for the discovery violation. That issue does not require discussion in a written opinion. R. 2:11-3(e)(1)(E).

In summary, we affirm the first trial judge's decision to grant a mistrial rather than ordering a dismissal with prejudice. We also affirm the award of sanctions to MAG for legal fees arising out of the mistrial.

D.

We next address the issues related to the quantum of damages.

MAG contends that UIFA was not entitled to damages because: (1) an oral contract to pay counsel fees is not an exception to the American Rule against fee-shifting; (2) UIFA was not a prevailing party; (3) UIFA failed to present a lodestar amount; (4) the legal fees were disproportionate to the result; (5) UIFA's failure to settle was unreasonable; (6) the legal services were provided for the individual defendants rather than UIFA; and (7) the trial judge, not the jury, should have decided the issue of fees. We disagree.

The essence of UIFA's claim was that MAG was contractually obligated to provide legal services for UIFA's benefit, subject to ultimate reimbursement in the event UIFA's campaign was successful and it was certified. As a result, the fees at issue were contractual damages, which are not precluded by the American Rule. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 440 (2001). We know of no requirement that such a contract be in writing.

There was no requirement in the contract found by the jury that UIFA be successful in its legal endeavors. Under the circumstances of this case, the requirement that a fee applicant be the "prevailing party," Litton Industries, Inc. v. IMO Industries, Inc., 200 N.J. 372, 386 (2009), is not applicable.

At the start of the second trial, the MAG defendants argued that the judge, rather than the jury, should decide the amount of fees recoverable. Because there was no case governing the issue, the trial judge decided to submit the issue to the jury, but to conduct an independent review if the jury found in favor of UIFA. In doing so, he would apply the remittitur standard, asking whether the verdict was against the weight of the evidence, and the lodestar standard for legal fees.

Consequently, the judge instructed the jury on the factors for establishing a reasonable fee award in a contract case, as detailed in Litton. Id. at 386-88. Adopting the approach outlined by the Supreme Court for the determination of attorneys' fees in cases involving settlements, Best v. C&M Door Controls, Inc., 200 N.J. 348, 360-61 (2009), the judge also instructed the jury that it "must assess the reasonableness of [UIFA's] rejection of IAM's offer of judgment in 2006, or any subsequent settlement offer in favor of continuation of litigation." In the event the jury determined that IAM's offers were reasonable and were unjustifiably rejected by UIFA, the jury was required to take that "into account in determining [UIFA's] entitlement to fees."

The judge's full instruction as to the legal-fee damages was as follows:

The UIFA claims that it has suffered damages, namely legal fees, as a result of MAG's breach of the contract obligation to pay for or provide legal services.

 

. . . .

 

A party who is awarded a verdict for breach of contract is entitled to compensatory damages for such losses as may fairly be considered to have arisen naturally from the other party's breach of contract. . . . Alternatively, a party may be entitled to such damages as may be reasonably supposed to have been contemplated by both parties, at the time they made the contract as the probable result of the breach of such contract.

 

Compensatory damages for breach of contract are designed under the law to place the injured party in as good a monetary position as it would have enjoyed if the contract had been performed as promised.

 

In this case, if you determine that a contract existed which obligated MAG to provide or pay for legal services for UIFA, and the contract was breached by MAG, then you will need to decide what damages the UIFA is entitled to, if any, as a result of the MAG breach. Once again, it is UIFA's . . . burden to prove its damages to you. If you find that no contract to provide or pay for legal services existed, then you do not have to decide the issue of damages.

 

In order to be entitled for damages for legal fees in New Jersey, the UIFA must prove that the fees it paid either directly or through . . . any of the individuals to Waskevich and paid or still owed as to Lane were reasonably necessary in the IAM litigation.

 

In assessing reasonableness, you must determine a lodestar, that is the amount of hours reasonably expended in the successful litigation -- in the litigation rather than multiplied by a reasonable hourly rate.

 

When considering the reasonableness of a fee, there are eight factors for you to consider.

 

One, the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal services properly.

 

Two, the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.

 

Three, the fee customarily charged in the locality for similar services - legal services.

 

Four, the amount involved and the results obtained.

 

Five, the time limits imposed by the client or by the circumstances.

 

Six, the nature and length of the professional relationship with the client.

 

Seven, the experience, reputation, and ability of the lawyer or lawyers performing the services.

 

And I guess eight really isn't applicable. I am going to just not read that.

 

The burden of demonstrating the reasonableness and need for the fees incurred falls on the UIFA, which is seeking to recover the legal fees.

 

As part of demonstrating that the fees incurred by UIFA [are] reasonable . . . it has to demonstrate the number of hours spent, the tasks handled, and the amount of the fees incurred. While the proofs need not be exact, they need to be more than mere speculation. The UIFA has only the obligation of demonstrating what portion of the fees they have incurred or paid were proximately caused by MAG's alleged breach of the contract.

 

Finally, under this reasonableness standard, you must assess the reasonableness of [UIFA's] rejection of IAM's offer of judgment in 2006, or any subsequent settlement offer in favor of continuation of litigation. If you determine that IAM offered -- proffered a reasonable offer of judgment or subsequent settlement that [UIFA] unjustifiably rejected, that is a factor to be taken into account in determining [UIFA's] entitlement to fees.

 

Finally, the judge explained that the jury could only award damages for fees incurred "in defending against the IAM's claims and pursuing claims against IAM and related parties." Nothing regarding UIFA's claims against MAG was to be considered.

Following the verdict, the judge conducted his own analysis of the fee award. He explained that his intent was to "provide a clear record for appeal in the event a reviewing Court determined that fees should not have been given to the jury in the first place," and to avoid necessitating a remand. Consequently, he conducted "a line by line analysis of all the legal bills submitted," as well as post-trial documents. The judge also considered Waskevich's testimony, his retainer, the settlement agreement, and prior offers to settle. Following his review, the judge analyzed the evidence in accordance with R.P.C. 1.5 and the Litton factors, ultimately molding the verdict to eliminate time spent on, and costs associated with, issues arising outside of the IAM litigation, and also reducing the award by one-third to reflect the portion of the fee paid by Yokoyama.

We find no error in the procedure followed by the trial judge. There were issues of fact related to the fees that were appropriate for determination by the jury, particularly the question of whether the UIFA defendants' refusal to settle earlier in the IAM litigation rendered the subsequent fees unreasonable. Although the trial judge might have broken those factual issues out for consideration by the jury and then, guided by the jury's findings, addressed the quantum of fees himself, it was not unreasonable for him to allow the jury to address all of the fee issues first, subject to his subsequent review based on considerations most appropriately decided by a judge.

Determination of fees as damages for breach of contract, as opposed to fee shifting authorized by rule or statute, requires the factfinder to apply factors relevant to general contract damages in addition to the factors utilized in judicial calculations of fee awards. Cf. Litton, supra, 200 N.J. at 406-412 (J. Rivera-Soto concurring) (in contractual fee-shifting context where "parties have bargained for an aggrieved party to recover its counsel fees and costs as part of its contract damages," courts should calculate the lodestar as well as apply "[b]asic principles of contract law").

The lodestar is defined as the "number of hours reasonably expended . . . multiplied by a reasonable hourly rate." Litton, supra, 200 N.J. at 386. With respect to Waskevich's rate, the second trial judge found that "his initial fee of $285 per hour for such complex and difficult litigation was reasonable," as was his one rate increase to $295 per hour. In analyzing the time spent on the case, the judge noted that "very little time" was spent on the matter by anyone other than Waskevich.

With respect to the time Waskevich asserted he spent working on the case, the judge explained:

[T]he time spent in general, with certain specific exceptions . . ., is consistent with the notion that there were an enormous number of depositions, document reviews, conferences with clients, responses to discovery involved over the period of time [during] which the litigation was most intense. While [Waskevich] may not have been able to break down each date into a specific time for a particular component, the court finds that items such as 4 hours for document reviews of thousands of pages, 5 hours for preparing for depositions and equivalent times for attending them, time spent on research with respect to defamation and the right to organize, all appear reasonable under the circumstances.

 

Nevertheless, the judge deducted a total of 37.3 hours for time spent on the cross-claims in 2006 and 2007.

"[O]n appeal, the standard of review for determining the excessiveness of a damages award is the same standard applicable to the trial court," namely that remittitur should not occur unless the award "shock[s] the judicial conscience" and is "manifestly unjust." Johnson v. Scaccetti, 192 N.J. 256, 281-82 (2007). "[T]he court must accept the evidence in the light most favorable" to the successful party. Id. at 281. Although a reviewing court considers the issue de novo, it must give deference to the trial judge's "'feel of the case,'" id. at 282 (quoting Baxter v. Fairmont Food Co., 74 N.J. 588, 600 (1977)), and, in order to avoid substituting its own judgment for that of the jury, should keep in mind that "remittitur is intended to be used in limited circumstances and is reserved for the unusual case that meets the 'shocking' criteria." Ming Yu He v. Miller, 207 N.J. 230, 252 (2011).

The trial judge conducted an in-depth independent review of the fee issues in light of the trial evidence. He appropriately used the lodestar approach. We defer to his view of the testimonial evidence and issues of credibility. Johnson, supra, 192 N.J. at 282. We conclude that his decision was supported by sufficient credible evidence in the record. Although the award is significant, it does not shock the judicial conscience and was not manifestly unjust. Id. at 281-82.

Having reviewed the remaining issues raised by MAG, we find them to be without merit and not warranting further discussion in a written opinion. R. 2:11-3(e)(1)(E).

We now address UIFA's argument that the trial judge should not have excluded recovery for Yokyama's share of the fees.

The judge found from the evidence that UIFA was essentially out of business and concluded that the damages would be used to reimburse the individuals who paid UIFA's legal expenses. He held that including Yokoyama's contribution in the final award would result in Warlick and Werner-Masuda, the two other contributors, "receiv[ing] more than their fair share." For that reason, he reduced the award by one third to account for Yokoyama's share. UIFA contends that the judge's decision was based on two faulty assumptions, that UIFA was out of business and that Werner-Masuda and Warlick would reap a windfall. We disagree.

Although UIFA's official filings through 2008 suggest that it still exists as an entity, there was no evidence that it continued to function other than to defend the IAM litigation and then pursue its own claim against MAG. It was no longer seeking to replace IAM as the union for Continental's flight attendants.

Both Werner-Masuda and Warlick testified about their efforts to obtain the necessary funds and their resulting financial straits. The judge's conclusion that they would repay themselves from the damages award to UIFA was well supported in the record. Werner-Masuda and Warlick were unable to provide documentary evidence to demonstrate their specific contributions, but Warlick testified that the three individuals had agreed to split the legal expenses three ways.

Consequently, the judge's determination to reduce the award by one third was reasonable and supported by the record. We find no error.

E.

We next turn to the issue of successor liability. UIFA contends that the trial judge erred as a matter of law in dismissing the successor-liability claims against EMI and EMI II.

An appellate court reviews motions to dismiss "by the same standard applied by the trial court; thus, considering and accepting as true the facts alleged in the complaint, [the reviewing court] determine[s] whether [the non-moving party] set forth a claim upon which relief can be granted." Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App. Div.), certif. denied, 185 N.J. 297 (2005).

The question of whether UIFA had demonstrated that EMI and EMI II were successors in interest to MAG, and as such liable for any judgment against MAG, first arose on a motion at the close of UIFA's case. The judge expressed his discomfort with dismissing as a matter of law at that point, and decided to reserve his decision. The parties ultimately agreed that if the jury returned a verdict in UIFA's favor, the judge would decide the issue of successor liability. The judge noted that the question was a purely legal issue with no contested facts requiring jury involvement, and also was "totally divorced from the rest of the case."

The evidence adduced at trial showed that MAG consisted of two operations, characterized informally as "divisions." One focused on property management, while the other handled labor issues, such as those involved in this case. In September 2005, McCormick decided to discontinue the labor operation and sell MAG.

McCormick and his wife were the only shareholders in MAG when McCormick began negotiations with EMI and another company to sell the business in October or November of 2005. McCormick testified that the present lawsuit had no impact on his decision to sell MAG. At the time, there were no claims by the UIFA defendants against MAG or McCormick.

In March 2006, McCormick reached an agreement to sell MAG to EMI II, a new company to be created by EMI for the purpose of acquiring the MAG stock. McCormick insisted that EMI act as a guarantor of EMI II's obligation under the agreement. The purchase price for the stock was $850,000.

A stock purchase agreement (SPA) was signed on March 3, 2006. The SPA proved that none of MAG's liabilities were being transferred to EMI II. Additionally, an indemnification and hold-harmless provision provided that the liability for any pending litigation stayed with McCormick and his wife, and was not transferred in the sale. Thomas Ducharme, a principal of EMI and EMI II, testified that he was not concerned about MAG's then-pending litigation with IAM because of the indemnification agreement.

MAG itself does not take the position that it has no responsibility for liabilities that had been incurred prior to the date of the stock sale, including those arising from the current litigation. The only issue is whether EMI or EMI II have any separate responsibility for MAG's liabilities in the event MAG does not satisfy the judgment against it.

It is our understanding from the record that MAG continues to exist as a corporate entity, although it may not be actively engaged in the transaction of any business. It is not clear from the record whether MAG has sufficient assets to satisfy the judgment against it.

In ruling on EMI and EMI II's motion to dismiss, the trial judge treated the transaction as if it had been an asset purchase rather than a stock purchase in which MAG's corporate existence continued. Consequently, he applied case law governing successor liability in the event of an asset purchase. See, e.g., Lefever v. K.P. Hovnanian Enters., 160 N.J. 307, 310 (1999).

For that reason, we vacate the order dismissing the claims against EMI and EMI II and remand for further consideration in the event the issue is not rendered moot by payment of the judgment by or on behalf of MAG. If MAG is insolvent, the judge will have to consider whether the McCormicks, EMI, or EMI II should be held liable on the basis of legal theories such as successor liability or piercing of the corporate veil. If the judgment is satisfied by or on behalf of MAG, such consideration will not be necessary.

F.

Having reviewed the remaining arguments presented in light of the applicable law and the record on appeal, we find them to be without merit and not warranting extended discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following.

The first judge correctly denied MAG's motion addressed to the continued existence of UIFA. 29 C.F.R. 402.5 provides that labor organizations using the LM-4 form may file the requisite terminal form on the LM-4. If an organization selects the box rendering the form terminal, it will have ceased to exist; if not, it will remain viable. Although UIFA lacked assets and active members, there was no evidence suggesting any intent on the part of the UIFA officers and committee members to terminate the union prior to the completion of the MAG litigation.

We also reject MAG's argument that the first judge erred in dismissing its claim for counsel fees. Relying on In re Niles Trust, 176 N.J. 282, 294-95 (2003), they asserted that "an award of attorneys' fees [was] appropriate" under these circumstances of the case. We disagree. Niles involved a fiduciary's breach of duty, which is not involved in this case. Nor is this a case, such as In re Estate of Lash, 169 N.J. 20, 31 (2001), that involves an attorney's breach of fiduciary duty. Neither MAG nor UIFA acted in a fiduciary capacity.

As the Supreme Court explained in Estate of Vayda, 184 N.J. 115, 122-23 (2005):

Remaining properly tethered to [the policies underlying the American Rule], we have created limited categories as exceptions to the principle that each party should bear its own costs, including only those instances involving claims against attorneys (for malpractice, misconduct, or malfeasance by way of a breach of fiduciary duty), or when an executor or trustee has committed "the pernicious tort of undue influence."

 

[Id. at 123.]

No exception to the American Rule exists with respect to MAG's claims against UIFA.

MAG also raises several alleged errors concerning various evidentiary ruling, contending that: (1) the judge's failure to strike UIFA's comment about the "cut and run" theory was plain error requiring reversal; (2) Werner-Masuda and Warlick's testimony played on juror sympathy and did not match the bill amounts submitted to the jury; (3) the judge erred by admitting UFAU's website into evidence; and (4) cumulative error requires reversal. These arguments are without merit.

At the conclusion of the second trial, MAG moved for a new trial on the grounds that UIFA's counsel's closing comments regarding MAG's alleged decision to "cut and run," as well as testimony about payments from Werner-Masuda and Warlick, were improper and intended to garner sympathy. MAG further argued that these errors viewed together constituted cumulative error sufficient for a new trial.

The trial judge found no basis to conclude that the statements in UIFA's closing, even taken together with Werner-Masuda's and Warlick's testimony, resulted in an inflated damage award. In light of his opportunity to observe the witnesses, the judge found no inflammation of the jury and no cumulative error. We reach the same conclusion.

The judge's decision to admit UFAU's website into evidence was not an abuse of discretion. The jury had heard sufficient testimony challenging its weight and authority to evaluate its import in the context of the dispute about MAG's obligation to provide legal services to UIFA.

We find no trial errors warranting reversal. There was ample evidence in the record to support the jury's verdict.

Affirmed in part, vacated and remanded in part.

1 45 U.S.C.A. 151 to 188. The Railway Labor Act governs labor relations involving airlines and their employees. 45 U.S.C.A. 181.

2 We note that, where contracts between attorneys and clients are concerned, R.P.C. 1.5(b) requires that a lawyer who "has not regularly represented the client," must communicate "the basis or rate of the fee . . . in writing to the client before or within a reasonable time after commencing the representation." The writing requirement of R.P.C. 1.5(b) exists "to avoid misunderstandings and to avoid fraud." Starkey, Kelly, Blaney & White v. Estate of Nicolaysen, 172 N.J. 60, 69 (2002). Seham, however, is not seeking reimbursement for his fees, inasmuch as he did not represent UIFA or its members in the IAM litigation.

3 In their appellate brief, the MAG defendants assert that they moved for directed verdict/dismissal under the unclean hands doctrine at the close of the UIFA defendants' case in the second trial. However, the record does not include their written motion, and it is unclear from the trial judge's oral opinion whether such a motion was specifically brought alleging unclean hands. Several motions, including those for judicial estoppel on the grounds of Werner-Masuda's alleged inconsistent statements, are closely related to the allegation of unclean hands and are, therefore, discussed here.