In the fall of 1994, the Borough of Paramus (Paramus) offered "an early buy-out" retirement package to all police officers with at least twenty-five years of service. Plaintiff James R. Albro, who had been employed by Paramus as a police officer since 1969, applied for the retirement package and was effectively deemed retired as of January 1, 1995. By letter dated February 13, 1995, however, plaintiff attempted to withdraw his application for retirement and sought reinstatement; Paramus refused his request.
Plaintiff filed suit against Paramus, and defendant, Vincenza Leonelli-Spina,
While his lawsuit was pending, however, the Division of Pensions considered plaintiff to be retired, and in March or April 1995, plaintiff began receiving monthly pension checks. He did not cash or deposit the checks, believing that the success of his lawsuit would be adversely affected if he did so. The payments were instead deposited in an escrow account that became the focus of this litigation.
On February 20, 2004, plaintiff filed a verified complaint seeking compensatory and punitive damages alleging that defendant: failed to make payments of estimated income taxes on the escrowed funds; improperly withheld the pension funds claiming they were payments for her legal fees; failed to provide him with information regarding the escrow account in violation of
The issues of liability and compensatory damages were heard during a seven-day bench trial before the late Sybil R. Moses, A.J.S.C. On September 10, 2007, Judge Moses issued a written opinion setting forth her findings, awarding judgment in favor of plaintiff, and dismissing defendant's counterclaim with prejudice. On October 3, 2007, she entered an interlocutory order for judgment fixing plaintiff's total economic damages at $260,242.95.
Because of Judge Moses' death, a plenary hearing as to punitive damages and other relief was held before a second judge. On December 9, 2008, that judge issued a written opinion awarding plaintiff punitive damages in the amount of $350,000, attorneys' fees in the amount of $145,297.95, and $16,305.62 in costs. An order of final judgment was entered on January 12, 2009, incorporating these amounts, plus $23,710.62 in post-judgment interest, for a total judgment of $795,557.04. This appeal followed.
Defendant contends that Judge Moses "improperly amended plaintiff's . . . complaint to include claims for fraud and misappropriation of funds"; that her "decision was against the weight of the evidence; and that punitive damages should not have been awarded because defendant "ha[d] no ability to pay," and because plaintiff's testimony at the plenary hearing "contradicted his testimony at trial." We have considered these arguments in light of the record and applicable legal standards. We affirm.
It suffices to say that the trial testimony produced two widely divergent accounts of events. Plaintiff claimed that he first met with John J. Feczko, an attorney who employed defendant, regarding representation in his suit against Paramus. Feczko suggested that defendant handle the case because he lacked experience in labor and employment matters. Defendant told plaintiff that the firm would handle the litigation on a contingency basis, though plaintiff did not know exactly what that meant. No written retainer agreement was executed.
When plaintiff began to receive his pension checks, he met with defendant seeking her advice. She told him that she would research the issue, and in the fall of 1995, plaintiff's pension checks were returned to the Division of Pensions, which in turn issued a new, consolidated check for $17,061.75 that defendant suggested plaintiff place in an escrow account. A money market savings account was opened in the name of "John J. Feczko, Trustee for James R. Albro Retirement Account." Plaintiff endorsed the consolidated pension check and all subsequent pension checks he received and turned them over to defendant. Plaintiff never authorized Feczko or defendant to use the escrow account to pay their legal fees, and he never received any bank statements regarding the account.
In November 1996, defendant left Feczko's employ to open her own firm in the same building. She advised plaintiff that she would continue representing him in his lawsuit, he agreed, but no discussion of fees took place and no retainer agreement was executed.
In April 1998, plaintiff spoke with his accountant, Kenneth Chazotte, CPA, regarding the possible tax consequences of the pension payments. Chazotte advised plaintiff to make quarterly estimated tax payments and prepared vouchers which in turn plaintiff presented to defendant for payment from the escrow account. Defendant agreed to make the tax payments and made the first payment in front of plaintiff, who believed that defendant would continue in this regard. He delivered quarterly estimated tax vouchers prepared by Chazotte for 1999, 2000, and 2001. Defendant never objected to plaintiff's request or advised him that she would not make those payments.
At defendant's request, her husband, Patrick Spina, of the law firm of Averna and Spina, became involved in the litigation against Paramus. Plaintiff never entered into any verbal or written fee agreement with Spina or his firm, and he never agreed to pay them separately for their services. In the summer of 2001, plaintiff and his wife met with defendant and Spina to discuss potential settlement of the litigation. Plaintiff thought the settlement was fair and reasonable, believed that all legal fees would be paid by Paramus, and that all monies in the escrow account would be released to him. Plaintiff would not have settled the case if he thought additional legal fees would be assessed.
After entry of the consent judgment, neither defendant nor Spina ever told plaintiff that he was responsible for attorneys' fees above the $165,000 paid by Paramus, and plaintiff never received any invoices or statements from either defendant or Spina for legal services rendered. Before the distribution of the settlement proceeds in October 2001, defendant had plaintiff execute a one-page document which she told him was a "contract" with her firm. Plaintiff did not read it because he did not have his glasses and because he trusted defendant. When questioned about a purported three-page retainer agreement furnished by defendant during this litigation, plaintiff testified that he had never seen it prior to this lawsuit and never received a copy of it.
Pursuant to the settlement, Paramus paid a total of $465,000 in two checks made payable to the Averna and Spina Trust Account. The ledger sheet from that account indicates that defendant received $100,000 and that Averna and Spina distributed $67,082.21 to itself.
Plaintiff continued to give his monthly pension check to defendant until April 2002 because "[he] was led to believe that [the case] wasn't totally settled yet and [he] had to continue doing it." Defendant told plaintiff that she had to do a final accounting and deal with any tax issues before she could turn over the money. She did not tell him that she had used the escrow money in payment of her legal fees.
Plaintiff learned that defendant had not paid the quarterly estimated taxes when he received deficiency notices from the Internal Revenue Service (IRS). When he showed the notices to defendant, she claimed that she had made the tax payments and assured plaintiff she would look into the problem. Eventually, the IRS filed a federal tax lien on plaintiff's house and on his wife's bank account. In November 2003, plaintiff decided to purchase a farm in upstate New York. He advised defendant of his plans, and instructed her to wire monies from the pension escrow account. Defendant failed to do so, though plaintiff was nonetheless able to complete the purchase. He attempted to contact defendant and Spina to find out what had happened, but they simply ignored his calls and never returned any of his numerous messages. Thereafter, plaintiff retained legal counsel to represent his interests regarding the pension escrow account, and this litigation ultimately ensued.
Plaintiff's wife Judith testified and corroborated much of her husband's account.
When Judith received notice from the IRS that the taxes were past due, she was very upset and called defendant, who told her that she would look into the matter. Judith spoke with defendant several times thereafter and she always claimed to be working on the issue. The Albros and Chazotte met with defendant, who claimed she had made the estimated tax payments, exhibiting copies of the fronts of checks drawn on the escrow account. As a result of defendant's failure to pay the quarterly estimated taxes, the Albros had to pay penalties to the IRS and accounting fees to Chazotte.
Regarding the settlement reached with Paramus, Judith reiterated that while satisfied with the terms, she and plaintiff both believed that defendant's legal fees would be paid by Paramus, that the fees were limited to $165,000, and that the escrow monies would be returned to them and not be used by defendant to pay for legal services rendered.
Judith reviewed bills produced during discovery that defendant claimed were sent to the Albros. Judith took issue with many of the entries for legal services allegedly performed by defendant, denying, for example, that either she or plaintiff attended conferences with defendant on Sundays, holidays, or during times when they were vacationing out of state. Judith noted that one of the entries was for the day her first grandchild was born; she and plaintiff were in the hospital all day on that occasion.
Feckzo also testified on plaintiff's behalf. Although his recollection was not clear, he believed that he told the Albros that all legal fees would be paid by Paramus if the suit was successful. In discussing the case with defendant, Feckzo denied that she ever told him that she would only take the case on an hourly rate basis. To his knowledge, defendant did not prepare a retainer or fee agreement for the Albros while she was in his employ. Feckzo did not make any withdrawals from the escrow account while it was in his name, and he was unaware that defendant had made any withdrawals.
Chazotte testified that he met with the Albros because they were concerned about the tax consequences of plaintiff's receipt of his pension checks, and he prepared quarterly estimated tax payment vouchers as a result. He had taken credit for those payments on the Albros' tax returns based on the assumption that the payments had been made. In 2000, Chazotte learned that the Albros had received deficiency notices from the IRS and met with plaintiff several times. Plaintiff would call defendant from Chazotte's office and he would speak with her. Chazotte told defendant that if she provided him with copies of the front and back of the checks she had sent to the IRS, he would personally resolve the problem.
At plaintiff's request, Chazotte set up a meeting with the Albros and defendant at his office in January 2002. He asked defendant for evidence of her payments to the IRS; defendant could only provide copies of the fronts of checks she allegedly sent. Chazotte authored a letter for plaintiff's signature dated January 20, 2004, specifically asking for a full accounting of the escrow fund. Defendant responded claiming he could review the file after she retrieved it from storage. Defendant, however, never informed plaintiff that she had retrieved the file and never furnished an accounting of the escrow account.
As a result of the late payment of estimated taxes, the Albros incurred penalties and interest. Chazotte estimated that the total penalty was $14,950.97; Chazotte provided additional services as a result of the tax problems involved in the case, and he billed the Albros approximately $8500 for those services.
Plaintiff also presented the expert testimony of Stephan C. Chait, a certified public accountant specializing in forensic accounting. According to Chait, defendant's bookkeeping did not comport with the requirements of the Rules of Court and contained many discrepancies. Among other things, defendant had no records of transactions from the escrow account since 1998, when she transferred it from Feczko to herself. As to defendant's bills for legal services, Chait saw no link between the escrow account and the payment of her legal fees. Chait concluded that the alleged unauthorized withdrawals from the escrow account by defendant totaled $211,738.46. Other damages included interest and penalties due to governmental authorities of $14,950.97, interest that would have been earned on those funds of $24,838.52, and Chazotte's fees of $8715, for a total of $260,242.95. Finally, Chait explained that in 1999 an attorney like defendant, with six years experience, would have had an hourly billing rate of $150; he "hypothecated" that in 1996, the general billing rate for an attorney with six years experience was $135.
Defendant testified that she discussed her decision to start her own firm with plaintiff. She discussed the payment of her legal fees and advised him that she would bill him at an hourly rate of $250 per hour. Plaintiff asked if he could pay the fees out of the escrow account. Defendant prepared her standard retainer agreement for plaintiff and witnessed him execute it on December 4, 1996. The agreement provided in pertinent part:
The agreement was signed by plaintiff, but was not dated; it did not have a signature line for Judith, and was not executed by her. Defendant explained that she did not have Judith sign the agreement because she was not a major part of the litigation against Paramus.
Defendant claimed she never discussed a contingent fee arrangement with plaintiff, and that she had never handled similar cases on a contingency basis. Moreover, she never told plaintiff or Judith that she would cap her legal fees at whatever Paramus was willing to pay. Defendant claimed that she regularly worked on weekends and holidays, met with plaintiff on those days during the course of the litigation, and claimed that she periodically sent plaintiff her bills for legal services. She further testified that she discussed the bills with plaintiff before withdrawing money from the pension escrow account.
Even though the case against Paramus settled, defendant billed for approximately 1600 hours; she took only three depositions over two days, and Paramus only deposed plaintiff. She billed plaintiff $10,541 as disbursement for depositions notwithstanding that all the transcripts totaled 316 pages. Defendant produced no bills from the court reporting service. Defendant also billed plaintiff $2499.75 for photocopies at twenty-five cents each, meaning she claimed to have made 9999 copies. The total fees and costs billed by defendant to plaintiff was approximately $411,000, and she claimed that she did not bill for approximately $55,000 worth of additional work that she had performed for plaintiff.
Defendant acknowledged that two of plaintiff's pension checks were deposited directly into her attorney business account; she believed that was acceptable since she was owed payment for her fees. Defendant acknowledged that she did not maintain a single, unified ledger that represented all the deposits and withdrawals from the pension escrow account.
Defendant disputed Feczko's claims and insisted that he saw checks drawn on the pension escrow account to pay her legal fees because the account was under his name until January 1999; she claimed they discussed the fees due and owing to her before transferring the pension escrow account into her name.
She opened the new escrow account, depositing four pension checks that plaintiff had given her, and later transferring the funds from Feczko's account. Defendant claimed that she gave plaintiff every bank statement from 1999 through 2002. Defendant closed the escrow account in April 2002, by making a withdrawal of $13,339.10; she kept this money as payment on a balance due for legal services rendered. Regarding Spina's involvement in the case, defendant claimed that it was plaintiff's idea that he get involved; while plaintiff was present, she showed Spina her retainer agreement and he agreed to work on the case pursuant to its terms.
Defendant denied that she ever agreed to pay the quarterly estimated taxes out of the escrow account. Rather, anytime plaintiff asked her, she would write a check to pay the estimated taxes. At the January 2002 meeting with Chazotte, defendant said she had paid all the taxes, but meant only that she had paid all the taxes when requested by plaintiff. She claimed that she provided the Albros with all the information requested by Chazotte. When plaintiff requested an accounting of the pension escrow account and access to the litigation file, and accused her of being uncooperative, she ended their relationship.
Spina testified on defendant's behalf and explained that he became involved in the case at plaintiff's request. He asked if there was a retainer agreement and defendant said there was and showed it to him. Plaintiff was present and nodded his head in approval. Spina concluded that his firm was retained by plaintiff and that it had a written retainer agreement — defendant's retainer agreement — with plaintiff. Spina acknowledged neither he nor his firm was mentioned in the agreement but believed it had been verbally modified. Spina prepared the language of the consent order and acknowledged that it did not suggest there were additional legal fees, or that Paramus was not paying all of plaintiff's counsel fees.
Defendant also presented the expert testimony of Gianfranco A. Pietrafesa, Esq. We need not recite it at length. It suffices to say that Pietrafesa opined after reviewing defendant's purported time sheets that a fee of $333,000 was reasonable. He did not review the file to determine whether defendant misappropriated any funds, violated the Rules of Professional Conduct, or falsified or fabricated documents in order to justify her legal fees. He was unaware that defendant withdrew at least $211,000 from the escrow account, that she was paid $165,000 by Paramus, or that she had outstanding invoices of $34,000, for a total legal fee of approximately $410,000. Pietrafesa could not say whether that amount was reasonable.
Defendant contends that Judge Moses erred by amending plaintiff's complaint, sua sponte, to include claims for fraud and misappropriation of funds. Plaintiff counters by arguing the complaint sufficiently pled claims of misappropriation, and that discovery and subsequent trial testimony revealed plaintiff's claim that defendant defrauded him. Plaintiff notes that the case was tried on these theories without objection from defendant. Therefore, plaintiff argues, amendment of the complaint was proper pursuant to
In her post-trial opinion, Judge Moses thoroughly addressed the issue as follows:
We note that as to the claim of misappropriation, plaintiff alleged sufficient facts in the complaint so as to place defendant fully on notice. For example, plaintiff's complaint claimed that he "turned over to [defendant] each and every pension check that [he] received with the assumption that they were being placed into [defendant's] Trust Account until the dispute was resolved where at such time the proceeds together with interest would then be turned over to [him]." The complaint further alleged that plaintiff had unsuccessfully attempted to regain the monies from defendant, and that "[a]t no time, during the course of [his] frequent discussions with [defendant] did she ever advise that the funds . . . did not belong to [him] or that [defendant] was taking them in payment for her `fee' . . . ." Furthermore, before the trial began, Judge Moses described the case as involving, "in addition to all of the fee issues, . . . a claim for intentional conversion of these fees . . . ." Defendant lodged no objection.
For this reason, and further for the reasons expressed by Judge Moses, we find no error.
Specifically citing five conclusions Judge Moses reached from the trial evidence, defendant argues that her decision was against the weight of the evidence. Defendant contends that plaintiff's inconsistencies made his testimony incredible; that the finding that defendant did not contemporaneously bill plaintiff for her legal services was incorrect; that the evidence supported the conclusion that plaintiff voluntarily signed the retainer agreement; that the court ignored defendant's expert's testimony that her fees were reasonable; and that defendant did not agree to pay plaintiff's taxes out of the escrow account.
Our review of the factual findings made by the trial judge in a non-jury trial is quite limited.
We find the challenge to Judge Moses's general credibility determinations to be of insufficient merit to warrant any extensive discussion.
Defendant contends that the evidence demonstrated plaintiff voluntarily signed the retainer agreement and his excuses — he did not have his glasses, he did not read the document, and he trusted defendant — cannot relieve him of the agreement's terms. Indeed, it is well settled that "[a] party who enters into a contract in writing,
In this case, however, Judge Moses found that defendant made a material misrepresentation of fact when she advised plaintiff that Paramus would pay all of his legal fees. The judge further concluded that the retainer agreement was not signed on December 4, 1996, that plaintiff was only shown the signature page, and that defendant never advised him of the $250 hourly fee she subsequently claimed for services provided. These conclusions are amply supported by the record.
Defendant next contends that Judge Moses failed to consider the testimony of her expert Pietrafesa. While it is true that the judge did not cite Pietrafesa's testimony in her opinion, it was largely irrelevant to the issues presented. As Judge Moses succinctly explained:
In sum, we reject defendant's argument that Judge Moses's conclusions were against the weight of the evidence.
Lastly, defendant argues that the judge erred in awarding punitive damages because: (1) she failed to consider defendant's ability to pay such an award; and (2) plaintiff's and Judith's testimony at the plenary hearing contradicted their trial testimony. To appropriately consider the contentions, we review some of the relevant testimony from the plenary hearing.
Plaintiff and Judith testified regarding the financial ramifications suffered as a result of defendant's misconduct. Plaintiff explained that he needed to continue to work to make ends meet, that he was in constant fear of losing his home because of government liens, and that this financial insecurity was extremely stressful. Judith was forced to return to work to pay the mortgage.
Defendant also testified at the plenary hearing. She had filed a voluntary bankruptcy petition on November 1, 2007.
The judge found defendant's credibility "illusory, at best." In awarding plaintiff punitive damages, the judge noted that defendant "at a time and for years thereafter, when she was 'raking' in the fees based on a flourishing legal practice, deceitfully took and misappropriated
Citing Judge Moses's findings and conclusions and the testimony presented at the plenary hearing, the judge "f[ound] that plaintiff ha[d] proven by clear and convincing evidence that punitive damages [we]re warranted due to defendant['s]. . . tortious conversion of plaintiff's funds, her fraud, her breach of the covenant of good faith and fair dealing and her breach of the fiduciary duties . . . owed to [plaintiff]." As a result, the judge awarded punitive damages in the amount of $350,000.
We start with some basic principles.
"`Actual malice'" means an intentional wrongdoing in the sense of an evil-minded act."
The decision to award punitive damages and the amount of such damages is within the sound discretion of the factfinder.
We reject defendant's claim that the judge failed to consider her ability to pay. The judge specifically noted that defendant filed a bankruptcy petition and was disbarred. But she also noted that defendant's claims of poverty needed to be "contrasted by the fact that she still lives seemingly in the same or similar level of comfort in the marital home and still driving a luxury vehicle, . . . as she did when the wrongdoing occurred." The judge concluded defendant was "making every attempt to avoid the statutory punitive remedy that plaintiff [wa]s entitled to by presenting a façade of poverty."
The record clearly reflects that the judge considered defendant's financial circumstances, one factor of many she was required to consider. In
Defendant's other challenge to the punitive damage award rests upon alleged inconsistencies between plaintiff's and Judith's testimony at trial and their testimony at the plenary hearing. The argument lacks sufficient merit to warrant any extensive discussion.