NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3461-14T3 A-3550-14T3
MARK CHERNALIS, ANTHONY CHERNALIS, ONE SUNNY HILL ASSOCIATES LLC and TWO SUNNY HILL ASSOCIATES LLC,
Plaintiffs-Appellants/ Cross-Respondents,
v.
DEBRA TAYLOR, a/k/a DEBRA HELEN AZARIAN, ROBERT TAYLOR and THE ROBERT TAYLOR FAMILY URBAN FARMS REAL ESTATE TRUST,
Defendants/Third-Party Plaintiffs- Respondents/Cross-Appellants,
RICHARD TAYLOR, ALETA TAYLOR, TOBOGGAN RIDGE PARTNERS LLC and SANDY RIDGE PARTNERS LLC,
Third-Party Defendants-Respondents. ___________________________________
MARK CHERNALIS, ANTHONY CHERNALIS, ONE SUNNY HILL ASSOCIATES LLC and TWO SUNNY HILL ASSOCIATES LLC,
Plaintiffs-Respondents, v.
DEBRA TAYLOR, a/k/a DEBRA HELEN AZARIAN, ROBERT TAYLOR and THE ROBERT TAYLOR FAMILY URBAN FARMS REAL ESTATE TRUST,
Defendants/Third-Party Plaintiffs- Respondents/Cross-Appellants,
RICHARD TAYLOR, ALETA TAYLOR, TOBOGGAN RIDGE PARTNERS LLC and SANDY RIDGE PARTNERS LLC,
Third-Party Defendants- Appellants/Cross-Respondents. __________________________________
Argued February 14, 2018 – Decided June 7, 2018
Before Judges Koblitz, Manahan and Suter.
On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-000228-12.
Anthony X. Arturi argued the cause for appellants/cross-respondents (in A-3461-14) Arturi Law, LLC, attorneys; Anthony X. Arturi, of counsel and on the briefs).
Kevin P. Harrington argued the cause for appellants/cross-respondents (in A-3550-14) (Harrington and Lombardi, LLP, attorneys; Thomas R. Rumana, of counsel; Kevin P. Harrington, on the brief).
David M. Blackwell argued the cause for respondents/cross-appellants (in A-3461-14 and A-3550-14)(Donnelly Minter & Kelly, LLC, attorneys; David M. Blackwell and Patrick B. Minter, of counsel and on the briefs).
2 A-3461-14T3 PER CURIAM
The dispute underlying these appeals stems from the purchase
of a shopping center. The transaction was complex. It was
structured to effectuate not only the purchase by a separate entity
formed for the purpose of the acquisition, Urban Farms Acquisition
LLC (Urban Farms). It was also structured to maintain family
control despite the participation of outside investors and to
channel profits and equity growth to the outside investors and
family trusts for estate tax considerations. The transaction also
included operating agreements and provisions relative to
compensation.
Subsequent to the closing of the transaction, Mark and Anthony
Chernalis (collectively plaintiffs) became aware that certain
transactional documents provided defendants, Debra Taylor (Debra),
Robert Taylor (Robert), and the Robert Taylor Family Trust and
Urban Farms (RTT) (collectively defendants) with a greater
interest than contemplated. Mark and Anthony, individually and
in the capacity of their entities, One Sunny Hill Associates LLC
and Two Sunny Hill Associates LLC, instituted an action, later
amended, seeking defendants' expulsion from the management of the
property as well as compensatory and punitive damages and counsel
fees. Defendants filed an answer and counter-claim seeking
compensatory damages and counsel fees. Defendants also filed a
3 A-3461-14T3 third-party complaint naming Richard Taylor (Richard), Aleta
Taylor, Tobaggan Ridge Partners LLC and Sandy Ridge Partners LLC,
as third-party defendants, later amended, alleging breach of
fiduciary duties and other tortious misconduct. The third-party
defendants were outside investors.
A bench trial was conducted over several days in April and
May 2014. Following the trial, the judge issued an opinion finding
that Debra acted as an attorney for plaintiffs during the entirety
of the transaction. The judge held that Debra failed to satisfy
the stringent documentation and disclosure requirements for
attorneys who enter into business ventures with their clients. As
such, the judge held that the defendants' direct cash investment
was terminated and to be refunded without entitlement to future
earnings on the investment or to unpaid fees for services relating
to the transaction.
The judge further held that defendants' interest in the
property and their consequential compensation was greater than
intended. However, the judge determined that the unintended
interest and compensation was not the product of fraud or
misconduct that would warrant disgorgement of any payments
4 A-3461-14T3 defendants received or warrant an award of punitive damages or
counsel fees.1 For the reasons that follow, we affirm.
I.
We summarize the following from the voluminous record. Mark
and Anthony operated a grocery and catering business known as The
Market Basket. The Market Basket was the anchor tenant in a
shopping center. Mark and Anthony desired to purchase the shopping
center pursuant to a right of first refusal. Their first attempt
to purchase the shopping center failed. Mark and Anthony were
determined to succeed at the next opportunity, so they hired Debra,
based upon her combination of skills as a financial advisor,
licensed accountant, and lawyer.
As contemplated, Urban Farms would be comprised of three
classes of individuals and entities that would receive
compensation dependent upon their assigned class holder status.
The outside investors, Class A, would participate in the property's
appreciation and the preferred fixed return, or "dividend" of six
percent on their direct cash investments. The Class A members
would also receive thirty-five percent of the remaining earnings.
The Class B members, comprised sole of Anthony and his wife, would
1 Thereafter, the judge issued a supplemental opinion repeating the decision to deny counsel fees as well as certain post-judgment claims which are not the subject of these appeals.
5 A-3461-14T3 share only in the preferred fixed return with any preferred
dividend to be allocated to the Class C members.
By agreement, the property would be managed by a separate
company, Merrywood Associates LLC (Merrywood), which Mark and
Debra would run in exchange for a share of the operating profits.
Debra's participation in Merrywood was not through her name but
through RTT.
II.
Debra was the principal of Taylor Financial Group, which she
described as a wealth management firm. Debra held securities
licenses and an affiliation with a broker-dealer. She was a
Certified Public Accountant (CPA) and a licensed real estate
salesperson.
Debra was also an attorney, licensed to practice in New
Jersey. She elected to retire from the practice of law in 2001,
but subsequently returned to the practice in August 2012. During
her retirement, Debra understood that she was ineligible to draft
or to revise legal documents, to render legal assistance, or to
give legal advice.
When their first attempt to acquire the shopping center
failed, Mark and Anthony attributed the failure in part to the
limitations of their counsel at the time. When the property became
available again in 2009, Mark and Anthony were eager to pursue it
6 A-3461-14T3 and sought Debra to assist them in the acquisition. Mark believed
that Debra was "uniquely qualified" because she was an attorney
and a CPA with experience in financial planning and estate
planning, as well as in real estate. Mark and Anthony understood
from the onset that Debra "was going to help quarterback the deal"
by being "our attorney" and advising both the family and any other
attorney that was to be involved. Mark believed that the
arrangement was "perfect" because being a lawyer meant that Debra
could "deal with legal aspects" in addition to "communications"
and financing, which amounted to handling all aspects of getting
the deal done.
Despite the absence of a written retainer agreement or any
writing relative to the scope of services that Debra would provide,
Mark and Anthony believed that she was, at all times, acting as
their attorney.
A.
For purpose of the transaction, Debra recommended that the
family hire a new accountant, Martin Goldstein, for his experience
in real estate financing. Throughout the transaction, Goldstein
operated in that capacity including developing the general
structure for the investments and the interests in Urban Farms.
Debra also recommended that the family replace their prior
attorney with an experienced real estate attorney, Jack Zakim.
7 A-3461-14T3 Zakim was involved only with the negotiations with the lender and
the property's owner. He viewed Debra's role in the transaction
to be multi-faceted including as attorney, financial advisor and
spokesperson for the family.
Debra also advised plaintiffs to retain the services of
another attorney, Mark Press, to handle issues relating to outside
investors. Press was involved in drafting documents relative to
the operating agreements including those that provided for
compensation to Richard, Mark and Debra. Press viewed Debra's
role as a financial advisor to the Chernalis family who was
involved in "orchestrating the entire transaction." Press relied
on Debra to explain documents to the family although he did not
agree that when doing so that she was necessarily acting as a
lawyer. When Debra described her background to Press, she included
being an attorney.
Debra requested that another attorney, David Edelbaum, who
specialized in tax and estate planning, become involved. Edelbaum
considered Debra's role to be a financial advisor only, despite
knowing that she was an attorney and a CPA.
B.
Mark initially raised the issue of Debra's compensation as
the family did not want to see "a huge bill all of a sudden." At
first, Debra said that she was satisfied with compensation through
8 A-3461-14T3 her work on The Market Basket's retirement plan and by future
business referrals. However, as the transaction became more
involved, Debra recommended her compensation come from a Class C
share interest, which she referenced as a "co-promote fee," as is
consistent with industry usage for participation in a transaction
not arising from a tangible investment. Mark and Anthony agreed
to this method of Debra's compensation. It was later agreed that
the compensation would flow through Merrywood and that Debra's
interest would be payable to RTT. The percentages of the
compensation were stated explicitly in the numerous drafts of the
operating agreements. It was also agreed that Debra could make a
cash investment for a Class A interest in Urban Farms, but as an
outside investor and not as compensation for her services.
C.
The closing on the property took place on December 17, 2009,
although the parties executed the closing documents, including the
operating agreements, two days earlier. The final version of the
Merrywood operating agreement contained two class members. The
Class A members were Mark, Toboggan Ridge Partners, LCC (Toboggan
Ridge) and RTT.2 The Class B members were Mark and RTT. The
2 Toboggan Ridge was an entity used by Richard Taylor for his investment in order to remain under the bank's threshold requiring a personal lender to give a personal guarantee.
9 A-3461-14T3 percentages assigned to the members of Class A became the focal
point of contention when Mark and Anthony were apprised of them.
Mark had seen a spreadsheet calculating the distributions for
fiscal year 2009 pursuant to the Urban Farms operating agreement
that included percentages far greater than those discussed by the
parties for Debra's compensation. When Debra insisted that the
percentages were in accord with the closing documents, this
litigation ensued.
III.
At the conclusion of the bench trial, Judge Robert P. Contillo
placed his decision on the record. In reaching his decision,
Judge Contillo made the following factual findings.
The family engaged Debra because she "stressed" that her
unique qualifications as a financial advisor, attorney and CPA,
plus her substantial real estate experience, would let her handle
both "the financial and real estate components of the transaction."
Anthony and Mark "believed that her skill set was exactly what
they needed to achieve their goal."
Debra advised them that she would quarterback the deal and
assemble a team of professionals that would work together to
represent the family in negotiations over the terms of acquisition,
the requisite financing, the corporate structures of the
acquisition, the post-acquisition management of the property, the
10 A-3461-14T3 tax implications and the estate planning aspects of what was by
all accounts a highly complex undertaking with multiple moving
parts. Mark and Anthony lacked sophistication and experience
about such matters, even though they were adept at managing their
own business. They came "to depend heavily and primarily on Debra
Taylor for advice and guidance in all these aspects of the deal."
Debra was responsible for ensuring that the family understood
that she did not intend to provide legal advice and was ineligible
to do so. She allowed them or led them to believe that she was
willing and able to provide legal advice, and did not disclose her
retirement from practice, which was only revealed after the
closing.
While "[o]thers served discrete functions to the Chernalis
family as the efforts to purchase got underway — lawyers, tax
advisors, financial advisors, accounting advisors, estate
planners, real estate advisors — [] Debra Taylor never ceased
serving — serving well, but nevertheless serving — in each of
those capacities." Zakim, although retained as an attorney,
"always considered" Debra to be the family's counsel.
The original concept for the transaction did not include
giving Debra a financial interest. The suggestions that Debra
could make a capital investment or have a role in managing the
property arose only after her attorney-client relationship with
11 A-3461-14T3 the family had begun, and after "Mark and Anthony had come to
depend upon her as their primary advisor." The notion that Debra
was Mark's "partner in the transaction," was "a litigation
construct, designed to obscure the fiduciary nature of Debra
Taylor's fundamental role as the primary advisor to the Chernalis
family."
Mark was "a credible and forthright witness." While Mark and
Anthony agreed to give her "a piece of the deal," the "nature,
extent and value of those interests remained amorphous and
changing," to the extent that none of the other professionals was
able to confirm the "compensation arrangement" that Debra was
claiming to have reached with the family.
The family eventually agreed to let Debra make a cash
investment for a Class A interest, and to give her a Class C
interest as compensation for her services. Debra "never advised
any Chernalis, orally or in writing, to seek independent advice"
with respect to either of those interests. "No one else — none
of the other professionals in the case — gave advice to any of the
Chernalis family with respect to" those interests, and Debra "did
not think and had no reason to think" otherwise. At no point
during Debra's efforts to obtain a Class C interest did she seek
"to clarify or memorialize[] her role as the Chernalis family
legal advisor and advisor on all aspects of the transaction, or
12 A-3461-14T3 her terms of compensation."
Debra served as Mark and Anthony's attorney "from the moment
she agreed to represent their interests" in connection with
acquiring the property. Debra "emphasized her credentials and
skills as a lawyer" as well as her other abilities "to make the
relationship adhere." Debra never told them that she intended to
refrain from giving legal advice, or that any legal advice she
gave should be confirmed by independent counsel. The legal advice
advice and work that Debra performed, "quite competently,"
included reviewing the lease to discover the right of first
refusal, reviewing the pleadings and giving legal advice in the
lis pendens action, and being "deeply involved in the revision of
complex legal documents deeply implicating the Chernalis family's
rights, including the operating agreements and private placement
memorandum."
The ability of professionals other than lawyers to read and
interpret such documents was irrelevant, because "[w]hen you are
someone's attorney and you are giv[ing] them legal advice," the
relationship is established with all of its professional
responsibilities. That the family signed a retainer agreement
with one of the other attorneys for limited supplemental legal
services in no way justified an inference that the family must
have understood the lack of a retainer agreement for Debra to mean
13 A-3461-14T3 that she was not providing any legal services or advice in the
course of her uniquely central role in all aspects of the
transaction.
Debra did not engage in fraudulent conduct nor engage in acts
of intentional misrepresentation. The allegations in the third
party complaint and the third party defendants' counterclaim
seeking counsel fees were not supported by the proofs.
Having made these findings, the judge provided his
conclusions of law. In doing so, the judge held the following.
Debra was bound by the Rules of Professional Conduct (RPCs).
In serving the family as an attorney without a retainer agreement,
Debra violated RPC 1.5(b). Debra's entry into a business
transaction with the family, specifically, her Class C interest,
violated most of the conditions of RPC 1.8(a), since she did not
provide full written disclosure of the nature and extent of her
interest in terms that the family could have been expected to
understand, and because she did not advise them of the reasons why
they should seek independent counsel about it. The inability of
the other professionals in the transaction to confirm that the
family intended Debra to have the 47.69% interest that she was
claiming in Class C's 65% share of remaining available cash was
further proof that she failed to comply with RPC 1.8(a).
The record contained no evidence to indicate what constituted
14 A-3461-14T3 a "fair and reasonable" Class C interest for Debra to receive as
compensation. The RPCs placed the burden of proof on Debra, and
she did not meet her burden. Debra's violations of RPC 1.5(b) and
RPC 1.8(a) made the terms of defendants' Class C interest
unenforceable. Thus, defendants "cannot retain any Class C
interest in [p]laintiffs' property."
Defendants' Class A interest was "a pure investment
opportunity" and not controversial because it was not intended as
compensation for any aspect of Debra's service to the family.
There was "no suggestion that the Chernalis family failed to grasp
the simple concept that Debra Taylor would get six percent on her
money, with no management rights." There was also no suggestion
that it was unfair or unreasonable for Debra to receive the same
rate of return as other the Class A members. As such, Debra should
not be penalized for acquiring the Class A investment.
Notwithstanding, Debra must relinquish "her right to future
interest payments" on the investment after a refund of her capital
contribution.
Plaintiffs were not entitled to punitive damages based upon
insufficient proof. Plaintiffs and third-party defendants were
not entitled to counsel fees. The third-party complaint was
dismissed based upon insufficient proof that Richard engaged in
actionable conduct.
15 A-3461-14T3 On appeal, plaintiffs raise the following arguments:
POINT I
THE $30,000 IN DIVIDENDS AND $160,000 IN MANAGEMENT FEES THAT DEFENDANTS RECEIVED THROUGH UNENFORCEABLE BUSINESS TRANSACTIONS BETWEEN LAWYER AND CLIENT SHOULD HAVE BEEN DEEMED PRINCIPAL AND CREDITED TO PLAINTIFFS.
POINT II
THE COURT SHOULD HAVE AWARDED PLAINTIFFS' LEGAL FEES THEY WERE FORCED TO INCUR BY THE INTENTIONAL MISCONDUCT OF DEBRA TAYLOR AS AN ATTORNEY.
POINT III
THE COURT SHOULD HAVE AWARDED LEGAL FEES TO PLAINTIFFS PURSUANT TO DIMISA v. ACQUAVIVA, 198 N.J. 547, 553-54 [] (2009), BECAUSE DEBRA TAYLOR'S BREACH OF FIDUCIARY DUTY FORCED PLAINTIFFS TO SUE A THIRD PARTY TO RECOVER BACK THEIR WRONGFULLY HELD PROPERTY INTERESTS.
POINT IV
THE EVIDENCE WARRANTED A PUNITIVE DAMAGE AWARD WHERE DEBRA'S BREACH OF DUTY AND CONVERSION OF A 47.69% INTEREST IN PLAINTIFF[S'] TRANSACTION WAS MADE WITH RECKLESS DISREGARD FOR THE HARM HER ACTIONS WOULD CAUSE TO HER CLIENTS.
POINT V
THE COURT SHOULD HAVE HELD DEBRA LIABLE FOR FRAUD BASED ON HER ADMISSIONS ABOUT WHAT SHE KNEW PRE-CLOSING.
On cross-appeal, defendants raise the following arguments:
16 A-3461-14T3 POINT I
DEBBIE WAS NOT ACTING AS AN ATTORNEY FOR THE CHERNALIS FAMILY AND, AS SUCH, SHE DID NOT VIOLATE THE RULES OF PROFESSIONAL CONDUCT.
THE OPERATING AGREEMENTS AS DRAFTED, REVIEWED, APPROVED AND SIGNED ACCURATELY SET FORTH HOW THE ACQUISITION WAS INTENDED TO BE STRUCTURED.
THE CHANCERY DIVISION CORRECTLY DENIED THE PLAINTIFFS' APPLICATION FOR ATTORNEYS' FEES.
THE CHANCERY DIVISION CORRECTLY FOUND THAT THE DEFENDANTS NEED NOT DISGORGE EITHER THE CLASS A PREFERRED INTEREST DISTRIBUTIONS OR ANY MANAGEMENT FEES THAT WERE PAID.
THE TRIAL COURT CORRECTLY FOUND THAT PLAINTIFFS WERE NOT ENTITLED TO PUNITIVE DAMAGES.
POINT VI
THE TRIAL COURT CORRECTLY FOUND THAT DEBBIE WAS NOT LIABLE FOR FRAUD.
On appeal, defendants/third-party plaintiffs raise the
following arguments:
RICH TAYLOR HAS ABANDONED ANY CHALLENGE TO JUDGE CONTILLO'S DISMISSAL OF HIS COUNTERCLAIM AND, IN ANY EVENT, THE COUNTERCLAIM WAS PROPERTLY [SIC] DISMISSED.
17 A-3461-14T3 POINT II
THERE WAS NEVER ANY REQUEST FOR ATTORNEYS' FEES OR ORDER ENTERED DENYING ATTORNEYS' FEES AND, IN ANY EVENT, THE ATTORNEYS' FEES WERE PROPERLY DECLINED.
THERE WAS SUFFICIENT EVIDENCE FROM WHICH THE CHANCERY COURT COULD HAVE FOUND IN FAVOR OF DEBBIE WITH REGARD TO THE CLAIMS IN THE THIRD- PARTY COMPLAINT AGAINST RICH TAYLOR.
On appeal, the third-party defendants raise the following
arguments:
THE COURT WRONGFULLY DISMISSED THIRD[-]PARTY DEFENDANT'S COUNTERCLAIM UNDER THE THIRD[- ]PARTY EXCEPTION TO THE AMERICAN RULE ESPOUSED BY THE SUPREME COURT IN DIMISA v. ACQUAVIVA, 198 N.J. 547, 553-54 (2009).
THE TRIAL COURT ERRED IN FINDING THAT THIRD[- ]PARTY DEFENDANT DID NOT INCURR [SIC] ATTORNEYS['] FEES DISTINCTLY RELATED TO ROBERT TAYLOR AND THE TRUST'S INVOLVEMENT IN THE SUIT.
We review the factual findings made by a trial judge to
determine whether they are "supported by adequate, substantial and
credible evidence." Rova Farms Resort, Inc. v. Inv'rs Ins. Co.
of Am., 65 N.J. 474, 484 (1974). Such findings made by a judge
in a bench trial "should not be disturbed 'unless they are so
wholly insupportable as to result in a denial of justice.'" Id.
18 A-3461-14T3 at 483-84 (quoting Greenfield v. Dusseault, 60 N.J. Super. 436,
444 (App. Div. 1960)). Factual findings that "are substantially
influenced by [the judge's] opportunity to hear and see the
witnesses and to have the 'feel' of the case" enjoy deference on
appeal. State v. Johnson, 42 N.J. 146, 161 (1964).
After carefully reviewing the record developed by the parties
before Judge Contillo, we affirm substantially for the reasons
expressed in his oral opinion and his supplemental opinion. We
add the following.
An attorney-client relationship can exist even in the absence
of "a specific retainer [agreement] memorializing" it. Kaye v.
Rosefielde, 432 N.J. Super. 421, 477 (App. Div. 2013) (citing
Seidman v. Clifton Sav. Bank, 205 N.J. 150, 169 (2009)), rev’d,
in part on other grounds and remanded, 223 N.J. 218, 220-22 (2015)
(reversing lower courts' blinkered view of their inherent
discretion to fashion equitable remedies, and remanding only for
new determination on remedy). "To form an attorney-client
relationship, it is enough that the attorney has voluntarily agreed
and acted as the client's legal advisor, and the client equally
willingly sought and was guided by the attorney's counsel." Ibid.
While the attorney must "affirmatively accept" that "professional
responsibility," ibid. (quoting In re Silverman, 113 N.J. 193,
207 (1998)), the acceptance "need not necessarily be articulated,
19 A-3461-14T3 in writing or speech but may, under certain circumstances, be
inferred from the conduct of the parties." Ibid. (quoting In re
Palmieri, 76 N.J. 51, 58-59 (1978)). As for the client, "there
must be some act, some word, some identifiable manifestation that
the reliance on the attorney is in his professional capacity,"
instead of "plainly no more than part and parcel of a joint
business venture among sophisticated businessmen." Palmieri, 76
N.J. at 60.
The RPCs govern all attorney-client relationships. In re
Greenberg, 155 N.J. 138, 152 (1997); Karamatos v. Paliaz, 360 N.J.
Super. 76, 84 (App. Div. 2003). They "establish the state's public
policies with respect to attorney conduct," and contracts between
attorneys and clients, whether retainer agreements or for business
transactions, "that violate the RPCs" in any way "violate public
policy, and courts must deem them unenforceable." Jacob v. Norris,
McLaughlin & Marcus, 128 N.J. 10, 17 (1992).
The disclosure requirements for business transactions between
an attorney and client are stringent, in part because they are
presumed to pose a conflict of interest. See RPC 1.8.
Furthermore, the disclosure of every aspect of the attorney's
interest, the explanation of the desirability of independent legal
counsel for the client concerning the transaction, and the client's
informed consent to the transaction must all be in writing. RPC
20 A-3461-14T3 1.8(a). The attorney must also explain when his or her activity
would represent the provision of legal services to the client as
opposed to furtherance of their business interests. RPC 1.8(a)(3).
"[I]t is the substance of the relationship, involving as it
does a heightened aspect of reliance, that triggers the need for
the rule's prescriptions of full disclosure and informed consent."
Silverman, 113 N.J. at 214.
In Silverman, the Court noted that, while an attorney-client
relationship is not created simply because the attorney performs
some tasks connected to the business venture with the client that
lay persons are authorized to perform, the client's belief that
the attorney "would exercise his legal skills for his benefit in
carrying out these collateral tasks" can nonetheless establish
sufficient reliance to create the relationship. Id. at 219-20.
Here, we discern no basis to disturb the judge's determination
that Debra served as an attorney and obtained a financial interest
in a business transaction in violation of the RPCs. The factual
findings on this score were supported by sufficient credible
evidence. The conclusions of law that flowed from those findings
are unassailable.
An award of punitive damages should be reserved for special
circumstances, where the conduct is particularly egregious.
Maudsley v. State, 357 N.J. Super. 560, 590-91 (App. Div. 2003).
21 A-3461-14T3 A party seeking punitive damages must prove by clear and convincing
evidence that "the harm suffered was the result of . . . acts or
omissions . . . actuated by actual malice or accompanied by a
wanton and willful disregard . . . ." Longo v. Pleasure Prods.,
Inc., 215 N.J. 48, 58 (2013) (quoting N.J.S.A. 2A:15-5.12). We
review the decision to deny punitive damages for abuse of
discretion. Maudsley, 357 N.J. Super. at 590.
We are satisfied that the judge's decision not to award
punitive damages is supported by substantial credible evidence in
the record. Specifically, the judge found that Debra was not
responsible for the inaccuracies in the final drafts of the
operating agreements relative to the Class C interests. There was
no proof that Debra was aware of the inaccuracies prior to the
closing. Even though Debra sought to utilize the inaccuracies,
post-closing, to her advantage, the judge did not find her conduct
was malicious. Given our limited review of punitive damages
awards, we find no basis to disturb the judge's finding.
"[A] reviewing court will disturb a trial court's award of
counsel fees 'only on the rarest of occasions, and then only
because of a clear abuse of discretion.'" Litton Indus., Inc. v.
IMO Indus., Inc, 200 N.J. 372, 386 (2009) (quoting Packard-
Bamverger & Co. v. Collier, 167 N.J. 427, 443-44 (2001)). The
same standard of review applies to the denial of counsel fees.
22 A-3461-14T3 New Jersey generally follows the so-called "American Rule"
(Rule) which requires that each party pay its own legal costs.
Rendine v. Pantzer, 141 N.J. 292, 322 (1995). Plaintiffs and
third-party defendants argue that they were entitled to counsel
fees premised upon exceptions to the Rule. Plaintiffs argue
entitlement premised upon both attorney misconduct and upon fees
they incurred as a result of the third-party litigation. Third-
party defendants argue entitlement premised upon fees incurred in
defending the third–party complaint instituted by RTT.
For the same reasons that the judge held that punitive damages
were not warranted, i.e., lack of intentional conduct by Debra
pre-closing, the judge denied an award of counsel fees based upon
her alleged misconduct. The judge further held that RTT and Debra
were essentially "alter egos" and that neither plaintiffs nor
third-party defendants incurred any separate or distinct attorney
fees predicated upon the third-party action. As such, the
exception to the Rule was not applicable as this was not
"litigation against a stranger". DiMisa v. Acquaviva, 198 N.J.
549, 554 (2009). We discern no error in either of these
determinations.
Finally, we conclude that the remaining arguments raised in
these appeals, not specifically addressed herein, lack sufficient
merit to warrant discussion in a written opinion. R. 2:11-
23 A-3461-14T3 3(e)(1)(E).
Affirmed.
24 A-3461-14T3