Important Attorney's Fees Shifting Opinions Issued By New Jersey Supreme Court

New Clarification on When Attorney's Fees May Be Shifted

The New Jersey Supreme Court recently issued two opinions clarifying the limitations on the exceptions to New Jersey’s general policy against attorney fee shifting. Put simply, in New Jersey parties are responsible for paying their own attorney’s fees. This is known as “the American Rule.” The two new opinions clarify when courts may depart from this general rule and order a losing party to pay the attorney’s fees incurred by a prevailing party.

Attorney's Fees Shifting in Estate Litigation

In the first case, In the Matter of the Estate of Adrian J. Folcher, the Supreme Court ruled that attorney’s fees could not be assessed against a person who defrauded an estate but lacked a fiduciary duty to the estate or its beneficiaries. In Folcher, the trial court determined that Folcher’s wife committed the tort of undue influence by causing Folcher to sign various documents, including amendments to his will, known as codicils, which resulted in the wife’s receiving valuable property during Folcher’s life. The trial court voided many of these documents because they had been the result of forgery, fraud and undue influence.

Critically, however, the wife was not named as an executor in Folcher’s will. The Supreme Court ultimately determined that despite the wife’s wrongdoing, because she was not an executor, administrator or trustee of Folcher’s estate, and had no fiduciary duty to Folcher’s estate, there was no legal basis to order her to pay the estate’s attorney’s fees.

Attorney's Fees Shifting in Attorney Malpractice

In the second case, Peter Innes v. Madeline Marzano-Lesnevich, Esq., the Court ruled that attorney’s fees could be assessed against an attorney who intentionally breached her fiduciary obligations to a non-client. In Innes, the plaintiff and his wife, were involved in a divorce and custody battle. During the litigation, the parties agreed that the wife’s attorneys would hold the couple’s daughter’s two passports in trust for the purpose of restricting the wife’s travel outside of the United States with the child without Innes’s permission. The wife then hired a new attorney, who obtained the wife’s file, including the agreement and the passport. The wife then obtained the daughter’s United States passport from the file and took the daughter to Spain.

Innes subsequently sued the attorneys due to their release of the daughter’s passport. A jury determined that the attorneys were negligent in allowing the passport to be released, and the judge ordered the wife’s attorneys to pay Innes’s attorney’s fees. The judge reasoned that the attorneys had breached a duty to Innes by violating the agreement to hold the passport in trust. The Supreme Court ultimately upheld the award of attorney’s fees subject to the trial court’s determination that the breach of the agreement was intentional.

The Continued Limitation on the Award of Fees in New Jersey

Although the fee award was reversed in Folcher and upheld in Innes, both decisions reinforce the clear limitations on fee awards in New Jersey. In the context of an estate dispute, Folcher speaks to the Supreme Court’s adherence to the strict requirement of a fiduciary duty to the estate as a prerequisite to a fee award in the face of blatant fraud, undue influence and wrongdoing. Even in Innes, although the Supreme Court broadened its interpretation of attorneys’ obligation to non-clients, it nonetheless limited the award of fees in that context to circumstances where the attorney intentionally breaches his obligation. The two cases therefore generally reflect continued limitation on the award of attorney’s fees in New Jersey.