On May 30, 2001, the Supreme Court decided Packard-Bamberger & Co. v. Collier, 167 N.J. 427 (2001). Writing for a unanimous Court, Justice Verniero held that a corporate director who had also acted as counsel to the corporation could be liable for an award of attorneys’ fees in an attorney misconduct action against him by that corporation and a shareholder. The attorney was found to have engaged in intentional misconduct by failing to disclose a third party’s offer to purchase corporate property, and by assisting another director in purchasing stock that the corporation also sought to purchase.
This decision built on Saffer v. Willoughby, 143 N.J. 256 (1996). There, the Court had held, as Justice Verniero summarized it near the start of his Packard-Bamberger opinion, that “a client may recover reasonable expenses and attorneys’ fees as consequential damages for attorney malpractice.”
Saffer had involved attorney negligence. The attorney against whom the fee award was sought in Packard-Bamberger argued that neither Saffer nor any statute or rule “expressly authorized” fees in a case like Packard-Bamberger That argument did not impress the Supreme Court.
Justice Verniero stated that the attorney’s “position requires a circumscribed reading of Saffer, one that is inconsistent with the sound policies undergirding that decision. Such an approach would lead to the incongruous result that a plaintiff could recover counsel fees if successful in proving an attorney’s negligence, but not when proving an intentional violation of a fiduciary duty arising as a result of the attorney-client relationship.”
The Court went on to say that “[a] client’s claim concerning the defendant-attorney’s breach of a fiduciary duty may arise in the legal malpractice context. Nonetheless, if it does not and is instead prosecuted as an independent tort, a claimant is entitled to recover attorneys’ fees so long as the claimant proves that the attorney’s breach arose from the attorney-client relationship. Accordingly, we hold that a successful claimant in an attorney-misconduct case may recover reasonable counsel fees incurred in prosecuting that action.” Plaintiffs here were found to be prevailing parties eligible for fees.
To that point, this was a good result for plaintiffs. But the bottom line was not so good for them.
Plaintiffs had sought approximately $2 million, the amount of their counsel’s lodestar, in attorneys’ fees. The trial court had awarded just $80,000, based largely on the fact that plaintiffs’ “level of success achieved in the litigation is limited as compared to the relief sought.”
Under Rendine v. Pantzer, 141 N.J. 292 (1995), the “clear abuse of discretion” standard applied to review of the fee award. [Disclosure: I was one of the attorneys who represented the defendant in Rendine in the Supreme Court]. Justice Verniero held that there was no basis to disturb the trial court’s award, rejecting plaintiffs’ argument that because the attorney’s misconduct in Packard-Bamberger was intentional, he should have been required to pay the full lodestar amount, “as a form of punishment and to deter others from behaving similarly.”