ARTURI, D'ARGENIO GUAGLARDI & MELITI LLP v. JESSE D. SADEJ

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0T4

ARTURI, D'ARGENIO,

GUAGLARDI & MELITI LLP,

Plaintiff-Appellant,

v.

JESSE D. SADEJ and

CARLA SADEJ,

Defendants-Respondents.

____________________________

August 11, 2014

Submitted October 30, 2013 Decided

Before Judges Sapp-Peterson, Lihotz and Hoffman.

On appeal from Superior Court of New Jersey,

Law Division, Bergen County, Docket No. L-10470-10.

Arturi, D'Argenio, Guaglardi & Meliti, LLP, appellant pro se (Anthony X. Arturi, Jr., on the brief).

Lawrence H. Kleiner, attorney for respondent Jesse D. Sadej.

PER CURIAM

Plaintiff, Arturi, D'Argenio, Guaglardi & Meliti, LLP (ADGM), appeals from the trial court order denying its motion for summary judgment and granting the cross-motion to dismiss its complaint, albeit without prejudice. ADGM filed the underlying complaint alleging defendants, Jesse and Carla Sadej (the Sadejs),1 owed counsel fees and costs to their firm under an Appeal Retainer Agreement they executed in connection with an earlier action. The trial court ruled ADGM was precluded from initiating legal action against its client for legal fees while still representing them. In addition, the court held that because there was a pending action in another county related to ADGM's claim for outstanding legal fees, the matter should be addressed in that proceeding. We affirm.

I.

ADGM filed a complaint against defendants in Bergen County on October 29, 2010, in an effort to collect fees allegedly owed under a retainer agreement defendants executed in connection with litigation commenced in Ocean County Superior Court. The background surrounding that litigation is set forth in our unpublished opinion in Borough of Seaside Park v. Sadej, No. A-6596-06 (App. Div. July 17, 2009) (Sadej I), which we incorporate into this opinion:

Jesse and Carla Sadej owned a single-family home in the Borough of Seaside Park (Borough). They filed building plans with the Borough for construction of improvements. After most of the construction was completed, the Borough issued stop work orders, asserting that the construction was not in compliance with the filed plans and that zoning violations occurred. It turned out that the plans on file with the Borough (Borough plans) differed from those possessed by the Sadejs (Sadej plans). According to the Sadejs, the Borough plans reflected fraudulent alterations of the plans they had filed.

The Borough initiated this litigation in the Chancery Division, seeking to prevent further construction and require removal of the construction that had been accomplished.

[Sadej I, supra, slip op. at 2-3.]

The Sadejs retained ADGM to represent them in this action and asserted a counterclaim against the Borough, its mayor, council, and administrator, advancing claims of estoppel and malicious prosecution. After several years of litigation, the court dismissed the Borough's zoning violation claims against the Sadejs. In addition, the court dismissed the Sadejs' claims for estoppel and malicious prosecution.2 The court also denied the Sadejs' application for counsel fees. The Sadejs appealed, and among the points raised on appeal was their contention the trial court erred in dismissing their malicious use of process claim. Id. at 5.

On appeal, we determined the trial court erred when it dismissed the malicious use of process claim. We reversed on that claim, reinstated the Sadejs' claims against all parties except the Borough, and remanded for further proceedings. Id. at 22. We also vacated and remanded, for further proceedings, the order denying their application for counsel fees and costs under the Frivolous Litigation Statute (FLS), N.J.S.A. 2A:15-59. Id. at 42-43.

At some point, the Sadejs separated, and divorce proceedings were subsequently initiated. On January 11, 2010, ADGM wrote to the Sadejs, through their respective divorce attorneys, advising that a new retainer agreement was necessary if ADGM were to represent them in the remand proceedings. Only Jesse responded. In a January 13, 2010 email, Jesse indicated that payment would be coming out of a negotiated settlement, but that ADGM would have a limited role going forward. On July 18, 2010, Jesse wrote to ADGM via email, advising ADGM that the firm was "officially terminated." On September 2, 2010, ADGM sent the Sadejs a Rule 1:20A-6 pre-action notice explaining that the Sadejs had the right to request fee arbitration. The following month it commenced its collection action against defendants in Bergen County Superior Court, notwithstanding that it had not filed a substitution of attorney. In the action it also sought to recover additional counsel fees and costs against Jesse in connection with legal representation it provided in unrelated matters.

In December 2010, apparently unaware that Jesse had terminated ADGM as counsel in the Ocean County litigation, the Ocean County judge's chambers contacted ADGM to schedule a settlement conference on the remanded claims. In response, on December 30, 2010, ADGM wrote to the court and advised that it had not been retained to represent the Sadejs in the remanded matter. It did not follow-up that communication by filing a substitution of counsel.

In February 2011, Lawrence Kleiner notified ADGM that he had been retained to represent Jesse in the remand proceeding. ADGM advised Kleiner that it intended to assert an attorney's lien against the proceeds of any favorable judgment the Sadejs obtained in the remanded matter. Kleiner agreed to grant ADGM an unquantified lien on the proceeds of any settlement or award received on the reinstated and remanded claims. ADGM did not file a substitution of attorney following this communication with Kleiner. It was not until June 20, 2011 that ADGM finally filed its substitution of attorney with the court.

On February 14, 2011, ADGM, in the Bergen County collection action, obtained a default judgment against Jesse individually in the amount of $39,662.78, and a default judgment against Jesse and Carla, jointly and severally, for $60,052.45 in connection with the Ocean County appeal litigation. On June 16, 2011, the trial court vacated the default judgments, and the Sadejs filed answers on July 1, 2011. On November 15, 2011, the trial court entered a case management order, which addressed discovery and dispositive motions.

Meanwhile, in December 2011, the Sadejs proceeded to trial in Ocean County on the remanded claims. After four weeks of testimony, the case settled for $125,000.00.

On January 24, 2012, the judge in the Bergen County collection action issued an order restraining disbursement of the settlement proceeds in the Ocean County action in light of the attorney's lien, pursuant to pursuant to N.J.S.A. 2A:13-5. On January 26, 2012, the court modified the restraint.

On February 1, 2012, ADGM moved for summary judgment in the Bergen County collection action. On February 3, 2012, the Bergen County judge denied the order to show cause seeking a restraint on the distribution of the settlement proceeds in the Ocean County action, but on February 9, 2012, the Ocean County judge signed an order to show cause restraining the distribution of any and all settlement proceeds received by the Sadejs in the Ocean County matter. On March 6, 2012, the Sadejs filed opposition to ADGM's motion for summary judgment and cross-moved to dismiss ADGM's complaint. The next day, the Sadejs filed a malpractice complaint against ADGM and several of its partners individually, Jesse D. Sadej & Carla Sadej v. Anthony X. Arturi, Jr., Esq., Barry S. Guaglardi, Esq., Arturi, D'Argenio, Guaglardi & Meliti, LLP, in Bergen County Superior Court, in connection with ADGM's representation of the Sadejs in the Ocean County action.

On March 16, 2012, Judge Rachelle L. Harz denied ADGM's summary judgment motion, without reaching the merits of the motion. The judge found the Sadejs had filed the malpractice claim against ADGM and that the collection action could not be decided on the merits. On March 23, 2012, the judge dismissed ADGM's complaint without prejudice. The judge found ADGM initiated an action against the Sadejs to collect legal fees while still representing them. The judge was aware that Jesse had "officially terminated" ADGM via e-mail on July 18, 2010, but noted ADGM had not filed a motion with the court to be relieved as counsel, and did not do so until June 20, 2011, which was after ADGM had filed its collection action. Therefore, the judge concluded the claim for unpaid fees did not accrue until after the substitution of attorney was filed. Judge Harz additionally determined that the Ocean County Law Division judge who presided over the trial had already scheduled a hearing regarding legal fees due ADGM, and that any claim for legal fees and costs should be addressed before that judge. The present appeal followed.

ADGM contends the retainer agreement expressly provided that legal services and representation would be rendered in connection with the appeal of the Ocean County action initiated against defendants by the Borough, and that representation did, in fact, occur. ADGM argues that absent a showing by the Sadejs that the fees and costs were unreasonable, ADGM is entitled to the amount due. Further, ADGM argues the Sadejs failed to proffer the necessary expert evidence to create any triable dispute as to the reasonableness of the fees charged. ADGM urges the Sadejs' counterstatement of material facts presented in opposition to its summary judgment motion presented no genuinely disputed issue of material fact warranting a trial on the merits.

The Sadejs argue the trial court did not err when it denied summary judgment to AGDM because their malpractice complaint was filed against ADGM and the viability of their cause of action is evident from finding out in the earlier appeal that their allegations that the defendants in the Ocean County action violated their civil rights and were barred by the statute of limitations. Sadej I, supra, slip op. at 24.

Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2. All papers on file must be considered. Even though the allegations of the pleadings may raise an issue of fact, if the other papers show that, in fact, there is no real material issue, then summary judgment can be granted. Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75 (1954).

Here, ADGM argues that the issue was quite clear. The retainer agreement at issue relates only to the appeal of the Ocean County action, and because it achieved success in connection with that appeal, it is entitled to recover its counsel fees and costs. This argument ignores the procedural posture of the collection action at the time the complaint was filed against the Sadejs.

It is undisputed ADGM was the attorney of record for the Sadejs in the Ocean County matter when it filed its collection action in Bergen County on October 29, 2010 for fees related to that matter. Despite having been advised by Jesse in July 2010 that its services were no longer needed, ADGM continued to be counsel of record until June 20, 2011, when the substitution of attorney was filed.

Attorneys have the right to sue in a court of law on a contract basis for a fee owed and also have recourse to common law and statutory liens to secure a fee. In re Simon, 206 N.J. 306, 316 (2011) (citations omitted). A claim by an attorney for unpaid fees does not, however, accrue until after the conclusion of the case or the termination of the attorney-client relationship. Pellettieri, Rabstein, & Altman v. Protopapas, 383 N.J. Super. 142, 151 (App. Div. 2006). RPC 1.16(a)(3) provides that a lawyer shall withdraw from the representation of a client if the lawyer is discharged." RPC 1.16(a)(3). Agreements between attorneys and clients concerning the client-lawyer relationship are enforceable, provided the agreement satisfies the general requirements for contracts and the requirements of professional ethics. Cohen v. Radio-Electronics Officers Union, 146 N.J. 140, 155-56 (1996) (citations omitted).

In re Simon involved a case wherein an attorney was suing his client, while still representing him, in an effort to preserve property which could be used to pay for his services. Id. at 307. The Supreme Court concluded that there was a clear violation of the Rule and ethical standards. Ibid.

When a firm accepts a retainer to conduct a legal proceeding, it impliedly agrees to prosecute the matter to a conclusion. Kriegsman v. Kriegsman, 150 N.J. Super. 474, 479 (App. Div. 1977).

Every defense, legal or equitable, in law or fact, to a claim for relief in any complaint, counterclaim, cross-claim, or third-party complaint shall be asserted in the answer thereto, except that the following defenses, unless otherwise provided by R. 4:6-3, may at the option of the pleader may be made by motion, with briefs . . . (e) failure to state a claim upon which relief can be granted . . . . If, on a motion to dismiss based on the defense numbered (e), matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided by R. 4:46 . . . .

[R. 4:6-2.]

Here, the retainer agreement executed in connection with the defense of the Sadejs in the initial Ocean County action and the subsequent retainer agreement related to the appeal of the Ocean County litigation limited the scope of ADGM's representation to each of those matters. ADGM is correct that In re Simon was decided after the complaint in this case was filed. Id. at 306. However, In re Simon merely applied existing principles of law; it did not announce a new rule. See Gormely v. Wood-El, ___ N.J. ___ (2014) (slip op. at 29) (rejecting State's contention its officials were entitled to qualified immunity for injuries attorney sustained after being attacked by client at psychiatric institution because the "the right to be free from state-created dangers was clearly established" at the time).

The Sadejs "officially terminated" ADGM via e-mail on July 18, 2010. At that point, ADGM should have complied with RPC 1.16(a)(3) and formally withdrawn from representation. No trial date had been set in the remanded matter and Jesse's letter certainly evidenced his consent that plaintiff withdraw from representing the Sadejs in the Ocean County action. Thus, in accordance with Rule 1:11-2, plaintiff should have filed a substitution of attorney naming the new attorney or indicating that the Sadejs would be appearing pro se in relation to the remand proceedings. Because it failed to do so, it remained counsel of record and therefore was precluded from initiating the collection action at that point.

We reject the argument that the Sadejs failed to raise the defense that ADGM still represented the Sadejs at the time the complaint was filed by failing to plead it in their answer or at any time in discovery. Both Jesse Sadej and Carla Sadej, in their separate answers to the complaint, raise the defense that plaintiffs have failed to set forth a cause of action upon which relief can be granted.

ADGM's right to sue the Sadejs did not accrue until after the conclusion of the case or the termination of the attorney-client relationship. The trial court dismissed the complaint because ADGM's claim did not accrue until after the substitution of attorney was filed.

Rather than dismissing ADGM's action without prejudice, perhaps the more practical disposition of the action would have been to transfer the Bergen County action to Ocean County and then to have the two actions consolidated. The court's failure to do so, however, was neither error nor a mistaken exercise of discretion, given that the dismissal of the Bergen County action was without prejudice.

The remaining arguments advanced on behalf of ADGM are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 Because Jesse and Carla share the same last name, where necessary we refer to them by their first names. In doing so, we intend no disrespect.

2 As we noted in our earlier opinion, although the trial court and the Sadejs referred to the action as malicious prosecution, because the matter was civil in nature, their claim was one for malicious use of prosecution. Because the elements of malicious prosecution and malicious use of process are the same, the misdesignation of the cause of action is not critical to the issues implicated in this matter.