PER CURIAM.
Defendants Edward F. Broderick, Jr. and Broderick, Newmark & Grather, appeal the jury verdict entered for plaintiff John Giovanni Granata in this legal malpractice action. We reverse and remand for a new trial.
We briefly summarize the relevant procedural history and the facts based on the record before us.
In 1986, plaintiff began to work as a captive insurance agent for Prudential Insurance Company of America, selling property, casualty, life, fire and automobile insurance. As a "captive" agent, he could only write insurance for Prudential. Plaintiff's income was based solely on commissions, calculated on a percentage of the premium for a new policy and a percentage of the premium every year that the policy was renewed. Plaintiff was a successful agent, obtaining bonuses and awards for his performance over the years. In 1987, plaintiff obtained his securities license and began selling securities for Pruco Securities, LLC, as well (Prudential Insurance Company of America and Pruco Securities, LLC, collectively "Prudential").
At a January 1995 meeting, plaintiff complained to high-level management that Prudential was improperly discriminating against agents who served areas with large minority populations. Plaintiff was such an agent. In April 1996, plaintiff was terminated from Prudential for, according to the company, violating rules when he impersonated a client in order to transfer money between securities accounts.
In May 1996, plaintiff consulted defendant Broderick. Plaintiff's primary goal was to be reinstated by Prudential. Broderick filed a complaint on behalf of plaintiff against Prudential and Joseph Gebbia, a regional vice-president at Prudential,
Arguing that plaintiff's termination from Prudential was based on his violation of the rules regarding securities accounts, Prudential moved to compel arbitration before the National Association of Securities Dealers (NASD). The trial judge denied the request, but we reversed, holding that the claims had to be heard by NASD because the dispute did not fall into the "insurance business exception" of the NASD Code.
Defendants represented plaintiff in the arbitration action against Prudential before a NASD panel. The matter was arbitrated for nine days in April and June 2001. Plaintiff requested three million dollars in compensatory and punitive damages. Prudential argued that if plaintiff had been improperly terminated, which it denied, he failed to mitigate his losses; if he had, his damages would have been $85,000.
As part of plaintiff's claim against Prudential, defendants hired economic damages expert Frank Tinari and an insurance expert who had worked with Tinari, Armando Castellini. Part of Castellini's role was to supply Tinari with information on the industry to help Tinari determine plaintiff's losses. Based on statistical evidence provided by Castellini, the average life of an automobile insurance policy was seven years, and thus, had plaintiff not been terminated, he would have received commissions on his renewal policies for seven years. Castellini determined that plaintiff's post-termination losses for commissions and bonuses lost on new policies and renewals over a seven-year period was $1,958,536. He calculated plaintiff's pre-termination losses stemming from Prudential's alleged violation of the Fair Automobile Insurance Reform Act of 1990 (FAIRA),
Tinari relied on Castellini's opinions in determining the amount of commissions, the residual commissions, and the rate of renewals. Tinari submitted a report dated March 14, 2000, to defendants. The report calculated damages for the combined pre-termination and post-termination losses at between $1.7 and $2.1 million.
Just prior to the NASD arbitration, Broderick asked Tinari to prepare a revised report that did not take into account pre-termination losses sustained as a result of Prudential's tiering and non-renewal practices which purportedly violated FAIRA. The resulting April 4, 2001 report did not include pre-termination losses, and found a loss range of $664,420 to $1,087,572.
Broderick explained that he asked for the revised report because he understood that pre-termination damages were not recoverable under CEPA. He also knew that he would get a "strong objection" from Prudential if he attempted to recover those damages at arbitration because Prudential claimed that as a prerequisite to the pre-termination claim, a determination had to be made by the Department of Banking and Insurance (DOBI) that Prudential had violated FAIRA.
However, Broderick knew that lost renewal commissions were recoverable under CEPA. Although Broderick conceded that neither of Tinari's reports separately addressed the calculation of lost renewal commissions, he noted that Tinari testified at the arbitration about the lost renewal commissions as an element of the damages claim. Further, Broderick contended that he pleaded a cause of action under CEPA and not FAIRA because he knew that plaintiff's main objective was to regain his job with Prudential, and while that was not a possible remedy under FAIRA it was under CEPA.
The NASD panel awarded plaintiff $28,000 in compensatory damages and assessed $12,530.50 in costs and fees against him. The panel gave no reasons for its decision.
On July 31, 2007, plaintiff filed a legal malpractice complaint against defendants. Plaintiff claimed that defendants deviated from the accepted standards of legal practice by failing to properly pursue: (1) damages sustained as a result of Prudential's policies that reduced his income prior to his termination (pre-termination damages); and (2) damages suffered as a result of income lost from commissions on renewal policies that he would have received had he not been terminated (lost renewal commissions).
A jury trial in the legal malpractice action was held in July and August 2010. The jury found for plaintiff and awarded $525,000 for pre-termination damages and $385,000 for post-termination loss of renewal commissions. The judge awarded interest for a total judgment of $1,597,193, and denied defendants' motion for judgment notwithstanding the verdict (JNOV). This appeal ensued.
On appeal, defendants argue that the judge should have dismissed plaintiff's claims on summary judgment, excluded the testimony of plaintiff's insurance expert, and excluded the testimony of plaintiff's legal malpractice expert as a net opinion. Defendants further argue that the legal malpractice expert impermissibly testified beyond the scope of his report, that a mistrial should have been granted due to the conduct of two jurors, and that the jury instructions were incomplete. Defendants also dispute the calculation of interest; plaintiff cross-appeals on that issue as well.
We state the basic principles that inform our consideration of the issues raised on appeal.
Attorneys owe a duty to their clients to provide their services with reasonable knowledge, skill, and diligence.
Included within this duty is the obligation to take "any steps reasonably necessary in the proper handling of the case."
To present a prima facie legal malpractice claim, a plaintiff must establish the following elements: "(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."
Defendants argue that the judge erred in admitting the testimony of Richard A. Grodeck, Esq., plaintiff's expert on standards accepted by the legal community, who testified that defendants deviated from the applicable standard of care. Grodeck was an attorney who was qualified as an expert regarding the standard of care for attorneys who represent clients with claims for lost income related to: (1) employment; (2) insurance agents; and (3) violations of FAIRA.
Grodeck determined that defendants deviated from the required standard of care and that Broderick's representation of plaintiff was deficient in two ways. First, he concluded that Broderick failed to properly present plaintiff's claim for lost renewal commissions at the arbitration. Tinari failed to make the "important distinction" between renewal commissions, which could not be replaced or mitigated, and loss of new business, which could be replaced and mitigated. Broderick failed to "organize his presentation" of the case accordingly. Grodeck found that,
Further, Grodeck believed Broderick's decision not to have Castellini testify at the arbitration hearing was not consistent with accepted standards. Castellini needed to tell the arbitrators that each insurance policy had a life expectancy of seven years as a foundation for Tinari's economic analysis.
Second, according to Grodeck, Broderick improperly abandoned plaintiff's claim for pre-termination losses. Broderick abandoned the claim because it was not cognizable under CEPA, but, had he also pled a cause of action under FAIRA in the original complaint, plaintiff could have recovered pre-termination losses.
On June 12, 2000, almost three years after defendants commenced plaintiff's action against Prudential, we issued
Grodeck was asked whether if Broderick had included a FAIRA claim, the Appellate Division would have sent the matter to arbitration. It was Grodeck's opinion that had the claim been included then "more likely than not, the Appellate Division would have viewed this as being intrinsically insurance related with the result that the law suit would have remained in the Superior Court and not — in a dispute, not sent to the NASD for arbitration." Grodeck also opined that there was a possibility that the matter would have been severed, that the CEPA claim could have been resolved before the panel of arbitrators while the FAIRA claim could have been decided in Superior Court. He stated the court was a preferable forum for plaintiff's claims.
Grodeck asserted that once our decision in
Grodeck believed Prudential's tiering policies supported a violation of FAIRA. To support his opinion, he relied on the DOBI's Market Conduct Examination. He also pointed to two bulletins issued by the Commissioner of the DOBI.
Grodeck was asked his opinion about the outcome of the NASD hearing, specifically, whether he had an opinion as to why the amount of the compensatory damages the arbitrators awarded to Granata were so low in comparison to the damages requested by Granata as supported by Tinari's presentation. Grodeck responded that,
Lance Kalik, defendants' expert, was an attorney who was accepted as an expert in litigation and FAIRA claims. After reviewing the case, he opined that defendants did not deviate from the standard of care in pursuing plaintiff's case against Prudential. First, he emphasized the fact that the arbitrators held in plaintiff's favor and awarded damages. Kalik noted that Tinari presented evidence of renewal damages at the arbitration, as did plaintiff himself. Kalik believed it was acceptable for Tinari, as an expert, to rely on information provided by another expert, Castellini, and therefore, it was not necessary for Castellini to testify. Further, because the arbitrators did not give an explanation for their award, there was no way to know how they arrived at the damages figure. Thus according to Kalik, "one cannot conclude from the information supplied whether or not the presentation of lost renewal commissions had any bearing whatsoever on the arbitrator's decision."
Additionally, Kalik opined that Broderick did not depart from the standard of care when he failed to pursue a claim for pre-termination damages. Plaintiff's primary argument was that he was fired for complaining about illegal practices, a CEPA argument, not that he was fired because of his auto loss experience, a FAIRA argument. Kalik believed Broderick made a "strategic decision;" rather than asserting pre-termination losses in arbitration and "invit[ing] a motion by Prudential to dismiss the arbitration in favor of a proceeding before DOBI, which had primary jurisdiction to determine whether Prudential's practices did in fact violate the FAIR Act," it was better to proceed with the CEPA claim for post-termination losses in the context of arbitration. This was so because the proofs regarding a CEPA violation were stronger than the proofs that Prudential violated FAIRA.
Kalik cited the Supreme Court's decision in
Defendants argue that because Grodeck's testimony amounted to a net opinion, the court should have granted their motion to preclude it. Prior to trial, defendants claimed Grodeck's testimony regarding both elements of alleged malpractice, amounted to net opinion, and sought to exclude it. With regard to pre-termination damages, defendants argued that Grodeck's testimony, that plaintiff would have prevailed had defendants filed a claim under FAIRA, was not supported by facts. With regard to the renewal commissions damages claim, defendants argued that Grodeck had no basis to testify that the arbitrators' award of $28,000 had to come from their acceptance of Prudential's position that plaintiff had failed to mitigate his damages. Although these positions were exhaustively argued, and the judge rejected defendants' arguments, he stated only that "Grodeck looked at the facts as he saw them. He didn't ignore facts; he just didn't come up with this." The judge also noted that if he precluded Grodeck's testimony, plaintiff's claims would be "knock[ed] out."
Pursuant to
We do not agree with defendants that Grodeck's opinion regarding the FAIRA claim was a net opinion as he testified that he personally was involved in, and aware of, other FAIRA cases that were being successfully litigated by plaintiffs during the time period in question. However, we agree with defendants that Grodeck's report and testimony concerning the claim for lost renewal commissions was a net opinion that should not have been admitted. He concluded that the reason the award was so low was because plaintiff did not mitigate his damages:
Grodeck admitted that Prudential asserted at the arbitration that renewal commissions could have been mitigated by replacing the total income stream, and not by looking at the discrete sources of claimed damages. The crux of Grodeck's opinion was that the arbitrators made a mistake that no one could explain, so it must have been defendants' fault. His opinion was grounded in nothing but his own unsupported speculation. He gave no "whys" or "wherefores" for his opinion and simply drew a conclusion without factual support.
Defendants next argue that the trial judge erroneously excluded the "exercise of judgment" passage from the jury charge with respect to both the FAIRA claim and the renewal commissions damages claim. We are persuaded that "exercise of judgment" should have been given with respect to the renewal damages claim.
It is fundamental that "[a]ppropriate and proper charges to a jury are essential for a fair trial."
During the charge conference, plaintiff's attorney objected to the inclusion of the "exercise of judgment" portion of the model jury charge. That portion of the charge reads:
The "exercise of discretion" charge is only appropriate in instances in which an attorney selects one of two courses "either of which has substantial support as proper practice by the [legal] profession."
The judge determined that the exercise of judgment charge should not be given on either of plaintiff's claims, explaining as follows:
With respect to the FAIRA claim, defendants argue on appeal that because Grodeck and Kalik "reached different conclusions regarding [defendants'] judgment in prosecuting the underlying claims" the charge should have been given. Specifically, defendants assert that Grodeck believed defendants' decision to "forego any claim for pre-termination damages was ill-advised[,]" while Kalik testified that the legal decision was "entirely reasonable given the difficult standard of proof in FAIRA violation cases." Defendants note the "hazy legal atmosphere" at the time, which meant that success was not ensured, and plaintiff's desire to be reinstated to his job, as legitimate reasons for not pursuing the pre-termination damages claim. Defendants posit the decision as "a choice between pursuing an uncertain, potentially expensive claim in a complex field of law that was outside the expertise of the arbitrators, or dropping that claim to save plaintiff money and emphasize the cause of action at the heart of the complaint." Plaintiff's theory of the case was that defendants erred when they did not initially plead a cause of action under FAIRA; possibly resulting in plaintiff's claim being heard by the arbitrators instead of the court, potentially denying him the opportunity to recover for pre-termination losses, which defendants conceded were not recoverable in the arbitration.
The choice facing defendants then, was whether or not to plead a cause of action sounding in FAIRA. While the experts differed on what the likely result of a FAIRA claim would have been, that was not the pivotal question. The inquiry is whether an attorney who does not plead all possible, viable causes of action on behalf of a plaintiff, deviates from the standard of care or is simply exercising judgment. The fact that the experts disagreed about the possible outcome of the FAIRA claim showed that there was a chance that plaintiff would have recovered under it. Under that scenario, an attorney's duty is clear. "[A]n attorney has an obvious duty to timely file and properly prosecute the claims of his client."
There could be no testimony that failure to file a potentially viable claim on behalf of a client is an acceptable "exercise of discretion." We agree that the judge was correct in refusing to give the abuse of discretion charge on the FAIRA aspect of plaintiff's case with regard to the commencement of an action in Superior Court. However, we do not agree that the "exercise of discretion" charge should not have been given with respect to the FAIRA claim before the NASD panel or the renewal commissions damages claim. The jury could have determined that defendants' decisions were a reasonable exercise of professional judgment.
Defendants argue that there was "no question that the renewal damages were presented based upon [defendants'] exercise of judgment" and that there was no consensus to govern an attorney's conduct in such situations. Plaintiff argued that defendants deviated from the accepted standard of care with regard to the lost renewal commissions for two reasons: (1) defendants' presentation of the evidence regarding damages did not separate the renewal losses and new business losses; and (2) defendants did not call Castellini to testify that plaintiff would have received renewal commissions for seven years. Grodeck distinguished between matters of judgment and departures from the standard of care, saying that it was a departure from the standard of care to "fail to present evidence necessary to prove your case." Grodeck opined that the decision not to distinguish the losses to the arbitration panel was not an exercise of judgment because defendants needed to "present evidence of the loss of the renewal commissions." Tinari's report was not sufficient because it did not present the renewal commission as a separate category of loss. Grodeck also claimed that defendants did not present evidence of the "life expectancy" of the renewal losses because "Castellini or some other source" was not called to present that evidence. Grodeck opined that the figures needed to be presented "separately in order to provide an intelligible, comprehensible way for the arbitrators to handle this claim."
Kalik disagreed and opined that defendants did not depart from the standard of care because the standard was not whether, if the attorney had done something differently, the result would have been different. He believed that defendants "put on a very effective case" before the arbitrators as evidenced by the fact that "he got an award." Broderick presented Tinari's expert testimony that included evidence of renewal commissions. "It was clear from the transcripts of those arbitration proceedings that the arbitrators had before them evidence that [plaintiff] had lost renewal commissions." Further, Tinari relied on Castellini's expertise in reaching his damages figures, as an expert is permitted to do, so there was no need to call Castellini.
Plaintiff does not contend that the arbitrators did not have evidence of the lost renewal commissions before them; he contends only that it should have been presented in a clearer fashion so that the arbitrators could have better understood it. Thus, contrary to plaintiff's claim, defendants did not fail to present evidence necessary to prove his case. Broderick made a choice to present damages, including renewal damages, as one lump sum, as opposed to presenting them as separate parts of the larger damage award. That is just the sort of decision that a jury may decide is an exercise of judgment. There are no objective standards to determine how an expert's report must be presented, and the fact that the arbitrators did not accept plaintiff's amount of damages does not show malpractice per se. Broderick presented all of the evidence necessary to establish plaintiff's claim.
Because the manner in which Broderick presented the claim was arguably a matter of judgment, the judge should have given the "exercise of judgment" charge with respect to that claim. The judge should have separated a FAIRA claim in Superior Court from both the FAIRA claim before the NASD panel and the renewal commission damages claim and tailored the charge to explain the relevancy of the charge to the those claims.
We find defendants' remaining contentions to be without sufficient merit to warrant discussion in this opinion.
Therefore, we reverse and remand for a new trial on the basis of the incomplete jury instructions and the admission of the net opinion of plaintiff's expert. Accordingly, the matter is remanded for a new trial on all issues.