Granata v.Broderick

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Justia Opinion Summary

In this appeal, the New Jersey Supreme Court considered whether an attorney’s pledge of anticipated attorney’s fees could be considered an account receivable and secured under Article 9 of the Uniform Commercial Code (UCC), and whether the lender here complied with the requirements of the UCC to perfect its security interest. Plaintiff John Giovanni Granata retained Diane Acciavatti to bring a legal malpractice complaint against defendants Edward Broderick Jr., and Broderick, Newmark, & Grather. Acciavatti accepted a $10,000 retainer and agreed to a contingent fee arrangement. After a jury trial, Granata was awarded a judgment of $1,597,193, and the trial judge granted Acciavatti’s motions for fees, costs, and pre-judgment interest. Defendants appealed, and Granata cross-appealed. Acciavatti had an oral agreement with Granata to represent him at $350 per hour and told him she would seek counsel fees from defendants after the appeal. While the appeal was pending, Acciavatti withdrew from the practice of law. Dominic Caruso was appointed attorney-trustee for Acciavatti’s practice, and the firm of Roper & Twardowsky, LLC (the Roper firm), filed a substitution of counsel form for Acciavatti. The Appellate Division reversed and remanded for a new trial. Following a two-day mediation, the case settled for $840,000. Three of Acciavatti’s creditors then claimed liens upon any legal fees owed to her from the case. The appellate panel considered whether Acciavatti possessed an interest in her anticipated legal fees and whether one of her creditor's UCC filing granted it a perfected interest in those fees. The panel reasoned that, “[i]f both questions [we]re answered in the affirmative, [the creditor], as a perfected secured creditor, would enjoy priority over [the other creditors], who are subsequent lien creditors seeking to levy on the same collateral.” The panel expressed agreement with cited decisions and held “that, under certain circumstances, an attorney’s pledge of anticipated counsel fees can be considered an account receivable and secured under Article 9.” The panel observed that “[the appealing creditor] met the requirements of N.J.S.A. 12A:9-203 for its security interest to attach to Acciavatti’s counsel fees." Finding no reversible error in that judgment, the Supreme Court affirmed.

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)

                   John Giovanni Granata v. Edward F. Broderick, Jr. (A-31/32-16) (078207)

(NOTE: The Court did not write a plenary opinion in this case. Instead, the Court affirms the judgment of
the Appellate Division substantially for the reasons expressed in Judge Guadagno’s written opinion, which is
published at 
446 N.J. Super. 449 (App. Div. 2016).)

Argued October 24, 2017 -- Decided November 14, 2017

PER CURIAM

         In this appeal, the Court considers whether an attorney’s pledge of anticipated attorney’s fees can be
considered an account receivable and secured under Article 9 of the Uniform Commercial Code (UCC), and whether
the lender here complied with the requirements of the UCC to perfect its security interest.

          In 2007, plaintiff John Giovanni Granata retained Diane Acciavatti to bring a legal malpractice complaint
against defendants Edward F. Broderick Jr., and Broderick, Newmark, & Grather. Acciavatti accepted a $10,000
retainer and agreed to a contingent fee arrangement. After a jury trial, Granata was awarded a judgment of
$1,597,193, and the trial judge granted Acciavatti’s motions for fees, costs, and pre-judgment interest. Defendants
appealed, and Granata filed a cross-appeal. Acciavatti had an oral agreement with Granata to represent him at $350
per hour and told him she would seek counsel fees from defendants after the appeal.

         While the appeal was pending, Acciavatti withdrew from the practice of law. In April 2013, Dominic
Caruso was appointed attorney-trustee for Acciavatti’s practice. On March 28, 2013, the firm of Roper &
Twardowsky, LLC (the Roper firm), filed a substitution of counsel form for Acciavatti. In July 2013, the Appellate
Division reversed and remanded for a new trial. In January 2014, following a two-day mediation, the case settled
for $840,000. Three of Acciavatti’s creditors then claimed liens upon any legal fees owed to her from the case.

          The Gourvitz Lien: Acciavatti agreed to pay Gourvitz & Gourvitz, LLC, and Elliot H. Gourvitz
(collectively Gourvitz) $82,500 from fees she expected to receive in the Granata v. Broderick matter. On August
19, 2011, a trial judge entered an order declaring that a “lien is placed on the file in the Granata v. Broderick matter
in favor of [Gourvitz] for the sum of $82,500” and that there would be no disbursements of attorney’s fees to
Acciavatti in Granata v. Broderick until the fees were paid to Gourvitz. On October 6, 2011, Acciavatti defaulted on
the consent judgment, and a $98,638.65 judgment was entered against her. On November 4, 2011, the judgment
was recorded as a lien. On August 19, 2013, Gourvitz filed a writ of execution.

         The Rotenberg Lien: On March 21, 2011, Acciavatti agreed to pay the accounting firm of Rotenberg,
Meril, Solomon, Bertiger & Guttilla, P.C. (Rotenberg), $75,000 as part of a settlement agreement. Acciavatti signed
an affidavit of judgment by confession and agreed to assign a lien on recovery of any attorney’s fees due in Granata
v. Broderick. The agreement provided that if Acciavatti defaulted on her obligation, the amount due would increase
to $151,652.42, less any payments Acciavatti made toward the debt. Acciavatti then defaulted and, on December
28, 2012, a final judgment of default was entered against Acciavatti in the amount of $133,652.42. The judgment
was recorded as a lien on January 24, 2013. In January 2014, a writ of execution was filed.

          The OKS Lien: On October 27, 2010, OKS Realty (OKS) loaned Diane Marie Acciavatti, LLC
(Acciavatti, LLC) $125,000. On that date, a security agreement, a promissory note, and a guaranty of payment were
all signed by Acciavatti on behalf of Acciavatti, LLC. The security agreement identified as “collateral” the legal
fees owed to Acciavatti. On December 2, 2010, OKS filed a UCC-1 financing statement with the Department of
Treasury, which listed as debtors both Acciavatti, LLC, and Acciavatti individually as guarantor of the loan. The
statement listed as collateral the attorney’s fees due to Acciavatti in the litigation captioned Granata v. Broderick.
          On February 12, 2014, Granata, through the Roper firm, initiated this current action by filing a motion
seeking “an order declaring that no attorney’s lien attaches to any settlement proceeds payable to [Granata].” On
March 14, 2014, the judge who had presided over the original trial heard argument on Granata’s motion. The judge
determined that Granata was entitled to two-thirds of the settlement amount and ordered Broderick to issue a check
for the full settlement amount of $840,000 to the Roper firm, with two-thirds to be released to Granata and one-third
to be held in escrow for any subsequent award of attorney’s fees. Acciavatti acknowledged that any fee award was
first “subject to allocation between [her] and [the Roper firm]” and would then be distributed among her creditors.

         On July 7, 2014, the Roper firm informed trustee Caruso that the Roper firm and Granata agreed to a flat
fee of $40,000. The judge indicated that, of the $279,720 available for distribution, $40,000 would go to the Roper
firm. The judge then addressed distribution of Acciavatti’s attorney’s fee award to her creditors. The judge
determined that OKS was last in priority because the $840,000 settlement was not finalized until January 2014, and
before that, OKS had “done nothing but filed a UCC back in 2010 . . . on an asset that didn’t exist until four years
later.” The judge reasoned that OKS had “a security interest in something that didn’t even exist,” while Rotenberg
and Gourvitz both had judgments and issued writs of execution. On January 26, 2015, the judge entered an order
memorializing the court’s January 9, 2015 decision, setting the amounts to be distributed and the order of priority of
Acciavatti’s creditors: (1) $83,284.97 to Gourvitz; (2) $133,652.42 to Rotenberg; and (3) $13,185.05 to OKS.

         OKS appealed, claiming error in its placement last in priority among Acciavatti’s creditors. The Appellate
Division agreed and vacated the order setting distribution priorities. 
446 N.J. Super. 449, 478 (App. Div. 2016).

           The appellate panel considered whether Acciavatti possessed an interest in her anticipated legal fees in
2010 and whether OKS’s UCC filing granted it a perfected interest in those fees. Id. at 474. The panel reasoned
that, “[i]f both questions [we]re answered in the affirmative, OKS, as a perfected secured creditor, would enjoy
priority over Gourvitz and Rotenberg, who are subsequent lien creditors seeking to levy on the same collateral.”
Ibid. (citing Shaw Mudge & Co. v. Sher-Mart Mfg. Co., 
132 N.J. Super. 517, 521 (App. Div. 1975)).

          The panel noted that, “[a]lthough no reported New Jersey case has considered whether an attorney’s pledge
of an anticipated counsel fee can be considered a receivable under UCC Article 9, other courts have uniformly held
that contracts for legal fees, including fees in pending contingency fee cases, are accounts for Article 9 purposes.”
Id. at 476 (collecting cases). The panel expressed agreement with the cited decisions and held “that, under certain
circumstances, an attorney’s pledge of anticipated counsel fees can be considered an account receivable and secured
under Article 9.” Ibid. The panel observed that “OKS met the requirements of 
N.J.S.A. 12A:9-203 for its security
interest to attach to Acciavatti’s counsel fees.” Ibid. The panel also noted that “[t]he OKS security agreement
described the collateral as Acciavatti’s attorney’s fees in this case and Acciavatti had a transferrable interest to the
collateral, as the anticipated attorney’s fees qualified as an account under N.J.S.A. 12A:9-102(a)(2).” Ibid. Finally,
the panel remarked that “OKS also complied with the requirements to perfect its security interest under 
N.J.S.A.
12A:9-310(a) and -315(a)(2) by filing a financing statement covering the collateral of Acciavatti’s anticipated
counsel fees.” Ibid. “When OKS filed its financing statement on December 2, 2010,” the panel reasoned, “it
perfected its security interest in Acciavatti’s anticipated legal fees, whether owed to Acciavatti or Acciavatti, LLC.
As such, OKS’s security interest was perfected before Gourvitz or Rotenberg obtained their liens and, therefore,
OKS enjoyed priority over both.” Id. at 476-77. The panel added that the “decision vacating the jury verdict had no
effect on Acciavatti’s claim for fees for work she had already performed on the case.” Id. at 477.

          Gourvitz and Rotenberg petitioned for certification. The Court granted certification to review petitioners’
challenges to the determinations regarding the distribution priorities of the attorney’s fee award, more specifically
the rulings that an attorney’s pledge of anticipated attorney’s fees can be considered an account receivable and
secured under Article 9 of the UCC, and that the lender here complied with the requirements of the UCC to perfect
its security interest by filing a financing statement covering the collateral of the anticipated attorney’s fees. 
228 N.J. 520 (2017).

HELD: The judgment of the Appellate Division is affirmed substantially for the reasons expressed in those parts of
Judge Guadagno’s opinion addressing the distribution priorities of the attorney’s fee award.

       CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-
VINA, SOLOMON, and TIMPONE join in this opinion.

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                                    SUPREME COURT OF NEW JERSEY
                                      A-
31 September Term 2016
                                      A-
32 September Term 2016
                                               078207

JOHN GIOVANNI GRANATA,

   Plaintiff,

         v.

EDWARD F. BRODERICK, JR.,
ESQ., an Attorney at Law of
the State of New Jersey;
BRODERICK, NEWMARK & GRATHER,

   Defendants.


ROTENBERG, MERIL, SOLOMON,
BERTIGER & GUTILLA, P.C.; and
ELLIOT H. GOURVITZ, ESQ.,

   Intervenors-Appellants.


JOHN GIOVANNI GRANATA,

   Plaintiff,

         v.

EDWARD F. BRODERICK, JR.,
ESQ., an Attorney at Law of
the State of New Jersey;
BRODERICK, NEWMARK & GRATHER,

   Defendants.


OKS REALTY,

    Intervenor-Respondent,

         and



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ROTENBERG, MERIL, SOLOMON,
BERTIGER & GUTILLA, P.C.; and
ELLIOT H. GOURVITZ, ESQ.,

    Intervenors-Appellants.


         Argued October 24, 2017 – Decided November 14, 2017

         On certification to the Superior Court,
         Appellate Division, whose opinion is
         reported at 
446 N.J. Super. 449 (App. Div.
         2016).

         Robert L. Podvey argued the cause for
         appellant Rotenberg, Meril, Solomon,
         Bertiger & Gutilla, P.C. (Connell Foley,
         attorneys; Robert L. Podvey, of counsel and
         on the brief).

         Ari H. Gourvitz argued the cause for
         appellant Elliot H. Gourvitz, Esq. (Gourvitz
         & Gourvitz, attorneys; Ari. H. Gourvitz, on
         the briefs).

         Robyne D. LaGrotta argued the cause for
         respondent OKS Realty (LaGrotta Law,
         attorneys; Robyne D. LaGrotta, of counsel
         and on the briefs).

PER CURIAM

    The Court granted certification to review petitioners’

challenges to the Superior Court, Appellate Division’s

determinations regarding the distribution priorities of the

attorney’s fee award, more specifically the rulings that an

attorney’s pledge of anticipated attorney’s fees can be

considered an account receivable and secured under Article 9 of

the Uniform Commercial Code (UCC), and that the lender here

complied with the requirements of the UCC to perfect its

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security interest by filing a financing statement covering the

collateral of the anticipated attorney’s fees.   Having

considered the parties’ arguments presented in their briefs and

at oral argument, the judgment of the Appellate Division is

affirmed substantially for the reasons expressed in those parts

of Judge Guadagno’s opinion addressing the distribution

priorities of the attorney’s fee award, reported at 
446 N.J.

Super. 449 (App. Div. 2016).



     CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in this
opinion.




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