NOEL L. HILLMAN, District Judge.
This matter concerns claims by Plaintiff, Archer & Greiner, PC, against Defendant, Alan P. Rosefielde, for unpaid legal fees, and Rosefielde's counterclaims and third-party complaint against Archer & Greiner, PC and two of its lawyers, Benjamin Morgan and John Connell (collectively hereinafter "Archer"), for legal malpractice, breach of fiduciary duty, and breach of contract arising out of the representation of Rosefielde that resulted in the alleged unpaid legal fees. Archer has moved for judgment on the pleadings in its favor on Rosefielde's claims against it. For the reasons expressed below, Archer's motion will be granted in part and denied in part.
This action arises out of Archer's representation of Rosefielde in a dispute between Bruce Kaye, who managed several timeshare business entities, and Rosefielde, an attorney whom Kaye initially retained as outside counsel and later became inhouse general counsel of Kaye's business entities and Kaye's personal attorney, as well as Chief Operating Officer of several of the timeshare entities.
The background for this "inordinately complicated" and "massive" case
The N.J. Supreme Court's opinion granting certification provided that "the petition for certification is granted limited to the issue of whether the Appellate Division erred by affirming the trial court's holding that economic damages are a necessary prerequisite for disgorgement of the employee's salary."
After considering that question, the N.J. Supreme Court reversed the appellate division and held that "the remedy of equitable disgorgement is available to a trial court even absent a finding that the employer sustained economic loss by virtue of the employee's disloyal conduct. In accordance with the broad discretion afforded to courts fashioning equitable remedies that are fair and practical, a trial court may order disgorgement of an employee's compensation as a remedy for a breach of loyalty in an appropriate case."
In his claims against Archer, Rosefielde argues that the N.J. Supreme Court's certification of the disgorgement issue was flawed from the outset because Rosefielde was not an "employee." Because the N.J. Supreme Court based its holding on the assumption that Rosefielde was an employee rather than an independent contractor, which Rosefielde contends that he was and that Kaye also viewed him that way, the determination that he must be disgorged of his salary is incorrect. Rosefielde blames Archer for this incorrect court order because it failed to correct, in either its brief, at oral argument, or in a motion for reconsideration, the N.J. Supreme Court's mistaken assumption that Rosefielde was Kaye's employee.
Rosefielde also claims that Archer committed legal malpractice, breached its fiduciary duty to Rosefielde, and breached their contract in other ways: (1) failing to follow his detailed request that the brief submitted to the N.J. Supreme Court explain that Rosefielde had entered into a settlement agreement regarding his and Kaye's Florida litigation, and that the appeal was the only outstanding dispute between him and Kaye; (2) failed to argue in the brief or at oral argument the doctrine of judicial estoppel — that Rosefielde could be considered an employee for the purposes of engorgement, but could not be considered an employee under New Jersey's Contentious Employee Protection Act; (3) billed excessively for its work, and billed for unnecessary work; and (4) by written agreement, Archer accepted a payment by Rosefielde of $30,000 in full satisfaction of all amounts due and owing Archer as of September 26, 2013, but Archer is seeking payment for five bills that were invoiced prior to September 26, 2013.
Archer argues that it is entitled to judgment in its favor on Rosefielde's malpractice and breach of fiduciary claims because the N.J. Supreme Court's decision did not hinge on the settlement or Rosefielde's classification as an employee or independent contractor. Archer further argues that even if Archer erred in the ways Rosefielde contends, it had no impact on the N.J. Supreme Court's decision.
Archer also argues that contrary to Rosefielde's allegations, it pointed out to the court in several of its brief that the lower courts did not classify Rosefielde as an employee and that Rosefielde had settled the litigation with Kaye. Archer further argues that Rosefielde's breach of contract claims are either a repackaging of his malpractice claims or are simply affirmative defenses to Archer's claims against him.
A. Subject matter jurisdiction
Defendant removed this action from New Jersey state court to this Court pursuant to 28 U.S.C. § 1441. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between the parties and the amount in controversy exceeds $75,000. The citizenship of the parties is as follows: Plaintiff is a professional corporation organized under the laws of New Jersey with its principal place of business in Haddonfield, New Jersey
B. Standard for Judgment on the Pleadings
A Rule 12(c) motion for judgment on the pleadings may be filed after the pleadings are closed. Fed. R. Civ. P. 12(c);
A district court, in weighing a motion to dismiss, asks "`not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim.'"
The N.J. Supreme Court's assumption that Rosefielde was an "employee"
Rosefielde claims that Archer failed to follow his detailed request that Archer argue in the brief and at oral argument that the appellate division had determined that Rosefielde was not an employee but rather an independent contractor, and even that Kaye referred to Rosefielde as an independent contractor. Rosefielde argues that this was crucial because the N.J. Supreme Court's certification of the sole question on appeal erroneously assumed Rosefielde's status as an "employee." Rosefielde also claims that Archer failed to argue in the brief or at oral argument the doctrine of judicial estoppel, where Rosefielde should not be considered an employee for the purposes of engorgement, since he was not considered an employee under NJ CEPA. Rosefielde also claims that Archer failed to file a motion for reconsideration on this issue after the N.J. Supreme Court issued its decision.
In setting forth the relevant background facts, the N.J. Supreme Court noted:
Rosefielde argues that this incorrect assumption, left unchallenged and uncorrected by Archer, resulted in the improper disgorgement of his wages, and constitutes legal malpractice, breach of fiduciary duty, and breach of contract.
The elements of a legal malpractice claim "`are (1) the existence of an attorney-client relationship creating a duty of care by the defendant attorney, (2) the breach of that duty by the defendant, and (3) proximate causation of the damages claimed by the plaintiff.'"
Archer is entitled to judgment in its favor on all three legal theories for Rosefielde's claims regarding his classification by the N.J. Supreme Court as an "employee." First, contrary to Rosefielde's claims, Archer filed an opposition and cross-motion relating to Kaye's motion to expand the certified question to the N.J. Supreme Court, and in that filing, Archer succinctly notes: "The assertion that Rosefielde was an employee contradicts the trial court's finding that Rosefielde did not qualify for employee status as affirmed by the appellate panel." (Docket No. 23-1 at 9.) This alone defeats all of Rosefielde's claims on this issue.
Second, this Court agrees with Archer that the N.J. Supreme Court's decision does not hinge on Rosefielde's status as an employee, independent contractor, or any other descriptive name for his role in Kaye's entities. Under the long-established premise that the "disgorgement remedy is consonant with the purpose of a breach of the duty of loyalty claim," the N.J. Supreme Court considered whether that remedy is available when a plaintiff cannot show economic loss.
By way of an example for its holding, one of the cases discussed by the N.J. Supreme Court is
When specifically applying the principles of duty of loyalty and disgorgement to Rosefielde, the N.J. Supreme Court found that "the trial court's thorough factual findings provide substantial information about the timing of Rosefielde's disloyal acts and the frequency and amount of his compensation. Rosefielde, through his company Plumrose, was paid his $500,000 annual salary on a monthly basis, in equal shares by Flagship and Atlantic Palace."
Thus, even though the N.J. Supreme Court referred to Kaye as an "employer" and Rosefielde as an "employee," a claim based on a breach of the duty of loyalty arises from the concept of agent and principal, as provided by the Restatement, and warrants the equitable remedy of disgorgement even when the principal as not suffered economic loss. It is indisputable that Rosefielde acted as Kaye's agent in some form, whatever that form may be called. Contrary to Rosefielde's arguments here, the N.J. Supreme Court's decision in
Finally, Rosefielde's argument about Archer's failure to raise the principle of judicial estoppel to support his malpractice, breach of fiduciary duty, and breach of contract claims is without merit. As a primary matter, in support of Rosefielde's claim under New Jersey's Contentious Employee Protection Act, Rosefielde asserted that "despite his status as COO and general counsel, he functioned as Kaye's employee."
That the lower courts did not find Rosefielde to be an "employee" as defined by NJ CEPA has no import, however, on how Rosefielde is classified in the breach of the duty of loyalty context. How a person's status is defined by a statute does not assume the same status under a different statute or common law.
In sum, Rosefielde's claims relating to the N.J. Supreme Court's classification of Rosefielde as an "employee" fail for three reasons: (1) Archer informed the court that the lower courts did not find Rosefielde to be an "employee"; (2) the N.J. Supreme Court's decision in
Rosefielde's claim regarding the settlement agreement
Rosefielde claims that Archer committed legal malpractice and breached its fiduciary duty and their contract by failing to follow his detailed request that the brief submitted to the N.J. Supreme Court explain that Rosefielde had entered into a settlement agreement regarding his and Kaye's Florida litigation, and that the appeal was the only outstanding dispute between him and Kaye.
This claim fails because Archer informed the N.J. Supreme Court in at least three court filings of the settlement. Archer filed a motion to dismiss the certification as barred by a settlement agreement between the parties, or in the alternative, stay the matter pending a decision by the Florida courts regarding the settlement agreement. (See Docket No. 21 at 20.) In a subsequent brief filed in opposition to Kaye's petition brief, which changed the noticed grounds for certification, Archer again argued that Kaye's petition should be dismissed because of the settlement agreement. (See
Rosefielde's claims regarding Archer's alleged excessive and unnecessary billing
Rosefielde claims that Archer engaged in unnecessary and excessive billing. Rosefielde also claims that Archer breached the parties' September 26, 2013 agreement that settled all outstanding legal bills when it filed the instant suit against Rosefielde to collect on five bills that were invoiced prior to September 26, 2013. Archer argues that all of Rosefielde's counterclaims regarding Archer's legal fees are affirmative defenses to its claims against Rosefielde to collect on those bills rather than actionable counterclaims.
The Court agrees that Rosefielde's allegations regarding Archer's legal bills are similar to Rosefielde's defenses to Archer's claims against him.
This does not mean, however, that Rosefielde cannot assert counterclaims on the same bases as his affirmative defenses. For example, Rosefielde claims that Archer breached the parties' September 26, 2013 settlement agreement by seeking payment for invoices #1403020 dated 11/16/11, #1408540 dated 12/12/11, #1436955 dated 05/09/12, #1455322 dated 08/08/12, and #1212890 dated 08/07/08, which were all invoiced prior to September 26, 2013, and thus have been fully satisfied. (Docket No. 7 at 21.) Even though Rosefielde's affirmative defense of accord and satisfaction may be a defense to liability on Archer's claims against Rosefielde for payment of those five bills, such defense does not prevent Rosefielde from asserting his own breach of contract claim against Archer for Archer's liability for breaching the parties' contract.
This also holds true for Rosefielde's claims for malpractice and breach of fiduciary duty relating to Archer's alleged improper billing. In general, counterclaims against law firms seeking to collect on outstanding bills are not dismissible merely because they are duplicative of the clients' affirmative defenses.
Because Archer has not argued that Rosefielde's claims based on his allegations of Archer's improper billing are deficient on any other basis than being duplicative of his affirmative defenses, those claims survive Archer's instant motion.
Archer is entitled to judgment in its favor on Rosefielde's counterclaims/third-party claims arising out of the N.J. Supreme Court's decision in