NJ: Underlying Litigation
Facts: This case found its way back to court after it was initially dismissed under the “entire controversy” doctrine which required plaintiffs to "present all claims, even those against different parties, that stem from the same transactionally related facts in one controversy before one court." A later NJ Supreme Court decision, Olds v. Donnelly,150 N.J. 424 (1997) held that the entire controversy doctrine does not compel joinder of legal malpractice claims in underlying actions.
This court was called on to address Plaintiffs argument, that they were entitled to be reimbursed for their legal expenses, which included costs and attorneys’ fees incurred in pursuing the legal malpractice action against defendant, and the trial Judge erred by not including these expenses as an element of consequential damages. Plaintiffs also contend that prejudgment interest was not properly calculated.
Issues: (1) In determining damages, is it proper to include legal fees that were incurred in pursuing the legal malpractice action against the defendant?
(2) What is the correct way to peg prejudgment interest in a legal malpractice claim?
Ruling: (1) Under Saffer v. Willoughby, 143 N.J. 256 (1996), a client may recover for all losses which are proximately caused by the attorney’s negligence or malpractice, including the legal fees and expenses incurred in successfully prosecuting a legal malpractice action.
The purpose of a legal malpractice claim is ‘to put a plaintiff in as good a position as he or she would have been had the attorney kept his or her contract.
(2) In awarding prejudgment interest, such an award, represents payment for use of money, and in another sense is compensatory, to indemnify claimant for loss of what moneys due him would presumably have earned if payment had not been delayed.
The award of prejudgment interest in a legal malpractice action should not be limited to the tort recovery rule, but should be guided by equitable principles with the concept of making the victim whole of paramount significance.
Editor’s Note: New Jersey is purported to have been the only state that recognizes the primacy of making the victim whole in legal malpractice cases, by treating legal fees and costs of the legal malpractice action as being consequential damages. The Texas Supreme Court has recently similarly so held. See our blog posts from Paul M.Koning of November 2, 2009 regarding Akin Gump v. NDR.
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Posted in: Attorneys Fees