New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Lawsuits over the validity of a Last Will and Testament have become a common form of litigation around the country, as well as in the State of New Jersey.  Preparing an estate plan is something that is necessary and something that everyone should take care of while they are in an appropriate physical and mental state.   However, there are no rules as to when estate planning must be done.   Some individuals plan their estates well in advance.  Others wait until the last minute.  Some make sure that they frequently update their estate plans.  Others ignore what has to be done.  The result of late planning is often litigation.

In addition to the act of getting estate planning done, many other factors play into the fact that so many probate estates end up in litigation.  As families grow away from each other, natural suspicions arise.  Did someone influence the preparation of the Will?  Was the maker of the Will competent?  How were the assets divided?  How long was the marriage?  The questions are virtually endless.

In a recent case decided in the United States District Court for the District of New Jersey, the Federal District had to decide whether there was appropriate subject matter jurisdiction for the Federal District Court to hear probate matters.  In the matter of Berman v. Berman, 2009 WL 1617758 (D. N.J.) the case involved allegations of undue influence and lack of testamentary capacity to execute a Will, among other claims.   The plaintiff filed the case in the New Jersey State Court, Probate Division and the defendant removed the case to the Federal District Court.  The central issue for consideration was whether the Federal District Court could hear the dispute between the parties, which included probate issues.

The Federal District Judge noted that the United States Supreme Court had recognized a "probate exception" to otherwise proper federal jurisdiction.  Accordingly, when a case may otherwise qualify to be heard in Federal Court, the Federal Court would not have jurisdiction where the matter involved (1) the probate or annulment of a will; (2) administration of a decedent's estate; or (3) the assumption of jurisdiction of over property that was in the custody of the probate court.

Since the case in Berman involved questions of the validity of a Will, the Court determined that the "probate exception" applied and that the case had to be heard in the State Court.   The case was therefore remanded to the Superior Court of New Jersey, Chancery Division.

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments
• Trackbacks

Public policy supports the resolution of disputes before a lawsuit is filed.  What happens when a contract calls for mediation prior to filing suit as a condition of securing attorneys fees, if the party filing the suit suggests mediation after the lawsuit is filed?  Is the failure to seek mediation a bar to a recovery of attorneys fees or is the request for mediation made just after suit is filed deemed to be substantial compliance?
 

In the case of Lange v. Schilling, No. C055471, 2008 WL 2192833 (Cal. Ct. App. May 28, 2008), the Court of Appeals enforced a contract term that established a condition precedent that required a party to attempt to mediate a conflict before proceeding to arbitration or litigation in order to recover attorney fees.


In that case, the plaintiff bought property from a real estate broker, using a standard residential property purchase agreement. The agreement provided that the parties would mediate any dispute before resorting to arbitration or court action. Under the agreement, if a party commenced an action without first attempting to mediate, that party would not be entitled to recover any attorney fees which would otherwise be available. The Plaintiff sued the broker for alleged misrepresentations made about the property's condition. The Plaintiff then sent the broker a letter stating that he was willing to stay litigation in order to mediate the matter, but received no response. Thereafter, the trial court entered a judgment in favor of Plaintiff and finding the broker liable.


The Plaintiff, after succeeding in the lawsuit, filed a motion to recover attorney fees from the broker. In opposing the motion, the broker argued that the Plaintiff was not entitled to attorney fees because he did not attempt to mediate the dispute. The trial court determined that the plaintiff substantially complied by offering to stay the litigation in order to mediate and awarded the Plaintiff attorney fees. On appeal, the broker argued that the clear language of the agreement precluded an award of attorney fees if a party did not attempt mediation before commencing litigation. The Court agreed and found that since the Plaintiff filed his lawsuit prior to offering mediation, there was no basis to award fees.


The Court noted that while the agreement authorized attorney fees, that right was contingent on compliance with the mediation provision. The Plaintiff filed his lawsuit first and only later offered mediation. His failure to meet the condition precedent precluded any award of fees. The Court stated that the strong public policy in favor of mediation as an alternative to judicial proceedings is served by requiring the party commencing litigation to seek mediation as a condition precedent. Had the parties resorted to mediation, their dispute may have been resolved in a much less expensive and time-consuming manner. The plaintiff argued that his failure to seek mediation should be excused because he promptly offered to mediate, thereby complying with the spirit and intent of the language of the contract. The Court rejected this argument and noted that the plaintiff could have sent an offer for mediation before filing his complaint. The Court further determined that the doctrine of substantial compliance was not applicable because the contract imposed a clear and unambiguous condition.


Accordingly, the Court reversed the fee award.  The message set forth by the Court was simple and direct.  Public policy favors resolution of cases instead litigating them and the Court would therefore not allow the commonly used doctrine of substantial compliance to defeat that policy.

• Email This
• Print
• Comments
• Trackbacks

The mediator privilege is extremely important to the mediation process.  Without it, participants would have no confidence in the process and information necessary to assist the mediator in resolving a case would not be communicated.   It has often been said that the mediation process involves two levels of confidentiality.  The first level is when the parties are together in a joint session.  While the communication itself at a joint session cannot be used at a later proceeding, the information conveyed has been heard by all and that cannot be changed.  However, communications at a separate session consisting of a party, counsel and the mediator are completely confidential, subject to the provisions noted below.

 
Effective July 1, 2008, New Jersey Evidence Rule 519 was amended.  This amended Rule deals with the "Mediator Privilege". 

 
Privileged communications
The amended Rule provides that a mediation communication is privileged and shall not be subject to discovery or admissible in evidence in a proceeding unless waived or precluded as provided by law.  In a mediation proceeding, the following privileges shall apply:

(1) a mediation party may refuse to disclose, and may prevent any other person from disclosing, a mediation communication.

(2) a mediator may refuse to disclose a mediation communication, and may prevent any other person from disclosing a mediation communication of the mediator.

(3) a nonparty participant may refuse to disclose, and may prevent any other person from disclosing, a mediation communication of the nonparty participant.

Evidence or information that is otherwise admissible or subject to discovery shall not become inadmissible or protected from discovery solely by reason of its disclosure or use in a mediation.  


Waiver of privilege
The privilege may be waived in a record or orally during a proceeding if it is expressly waived by all parties to the mediation and:

(1) in the case of the privilege of a mediator, it is expressly waived by the mediator;  

(2) in the case of the privilege of a nonparty participant, it is expressly waived by the nonparty participant;

(3) a person who discloses or makes a representation about a mediation communication that prejudices another person in a proceeding is precluded from asserting a privilege, but only to the extent necessary for the person prejudiced to respond to the representation or disclosure; and  

(4) a person who intentionally uses a mediation to plan, attempt to commit or commit a crime, or to conceal an ongoing crime or ongoing criminal activity is precluded from asserting a privilege.   

Lack of privilege
There is no privilege for a mediation communication that is:

(1) in an agreement evidenced by a record signed by all parties to the agreement;

(2) made during a session of a mediation that is open, or is required by law to be open, to the public;

(3) a threat or statement of a plan to inflict bodily injury or commit a crime;

(4) intentionally used to plan a crime, attempt to commit a crime, or to conceal an ongoing crime or ongoing criminal activity;

(5) sought or offered to prove or disprove a claim or complaint filed against a mediator arising out of a mediation;

(6) except as otherwise provided, sought or offered to prove or disprove a claim or complaint of professional misconduct or malpractice filed against a mediation party, nonparty participant, or representative of a party based on conduct occurring during a mediation;  

(7) sought or offered to prove or disprove child abuse or neglect in a proceeding in which the Division of Youth and Family Services in the Department of Human Services is a party, unless the Division of Youth and Family Services participates in the mediation.

(8) considered by a court, administrative agency, or arbitrator,  in certain limited proceedings involving a crime or to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation, and in which there is a finding, after a hearing in camera, that the party seeking discovery or the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality.   

Permitted disclosures
A mediator may not make a report, assessment, evaluation, recommendation, finding, or other oral or written communication regarding a mediation to a court, administrative agency, or other authority that may make a ruling on the dispute that is the subject of the mediation, except as is noted below. A communication made in violation of subsection a. may not be considered by a court, administrative agency, or arbitrator.


A mediator may disclose:

(1) whether the mediation occurred or has terminated, whether a settlement was reached, and attendance; or

(2) a mediation communication as permitted under other provisions as noted above.

Confidentiality is the key to a successful mediation.   Every mediator must be aware of its significance and make sure that all counsel and participants understand and appreciate its role in the mediation process.

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments
• Trackbacks

• Email This
• Print
• Comments
• Trackbacks

Michael S. Kimm v. Blisset, LLC.

In the case of Michael S. Kimm v. Blisset, LLC., et als., in an opinion decided on August 28, 2006, the Appellate Division of the Superior Court of New Jersey ( Docket No. A-0965-04T2)  dealt with issues concerning the scope of an arbitrator's powers.    In the opinion, the Court drew distinctions between:  1) fee disputes between attorneys and clients; 2) arbitrations in Court annexed proceedings; and 3) arbitrations held pursuant to private agreements.  In addition, the Court focused on the meaning of the recently enacted  New Jersey Arbitration Act, N.J.S.A. 2 A: 23 B-1 to 32 as it relates to the powers of an arbitrator.   

The Court noted that, at its heart, arbitration is a creature of contract.  It is a favored remedy and arbitration agreements are liberally recognized.   It is state contract law principles that generally govern whether a valid agreement to arbitrate exists.

An arbitrator's powers is generally limited by the agreement of the parties.  The Court therefore noted that where only one of the parties believes that the arbitrator was empowered to act, and there was no evidence of an actual agreement, the arbitrator has no authority to act at all.    If the parties have not agreed in advance, the parties cannot force an arbitrator to give reasons for the award or to write a decision  explaining  his or her view of the facts.

In New Jersey, agreements to arbitrate made on or after January 1, 2003, are governed by the revised New Jersey Arbitration Act.  N.J.S.A.  2 A: 23B - 3a.  This revised Act is based largely on the Uniform Arbitration Act of 2000, see Assembly Judiciary Committee Statement on Senate Bill No. 514, L. 2003 c.95, and codified at N.J.S.A. 2A:23B-1 to -32.  This statute replaces the earlier version of the Arbitration Act, see N.J.S.A. 2A: 24 - 1 to -11.

The earlier statute required a written contract or a written "agreement to submit" to arbitration, in order for a party to be required to proceed to arbitration.    The revised statute, by comparison, only requires a "record", which presumably might fall short of a formal, contractual writing.  In addition, under the prior statute, an arbitrator's award had to be reduced to a judgment by a Court in order to be enforceable and the Court would have the ability to vacate, modify or correct the arbitrator's award .  

Under the new statute, the grounds upon which a Court may vacate an award have been expanded and the new statute also empowers the Court to correct or modify an award. The earlier statute gave the Court the authority to vacate an arbitrator's award if the arbitrator "so imperfectly executed (his) powers that a mutual, final and definite award" was not made.  The revised act specifically excludes an attack on an award, either by way of application to the arbitrator or the Court, on the grounds of imperfection, if the claim of imperfection is addressed to the merits of the award.  While an arbitrator may "clarify" the award, the arbitrator may not change his or her mind or reconsider the decision, in the guise of clarification.

Parties intending to have their disputes completely  resolved by arbitration should take care that any agreements they enter into deal clearly and concisely with the issue of what is to be arbitrated and how the arbitration is to be handled and be aware of the provisions of the New Jersey Arbitration Act.

• Email This
• Print
• Comments
• Trackbacks

On April 12, 2006, the American Bar Association Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 06-439 on a lawyer's obligation of truthfulness when representing a client in negotiations in caucused mediation.

Under Model Rule 4.1, a lawyer representing a client in general negotiations outside of the mediation process may not make a false statement of material fact to a third person. However, statements that are considered to be negotiation "puffing", or statements regarding a party's negotiating goals are not considered as false statements of material facts within the meaning of the Model Rules when dealing with general negotiations. The simple example given is where an attorney understates the willingness of a client to make concessions to resolve a dispute. Another example is where a party may exaggerate or emphasize the strengths or minimize the weakness of a factual or legal position. These remarks have been viewed as statements as to which a party would not ordinarily be expected to justifiably rely and are distinguished from a false statement of material fact.

There are obviously two different sides to the issue. In the context of a mediation, it has been argued that lawyers should be held to a more exacting standard of truthfulness because a neutral is involved. The other side asserts that less attention need be paid to the accuracy of information being communicated in a mediation as consensual deception is intrinsic to the process. The issue of "truthfulness in negotiations" also raises the question of whether a lawyer can accept a result that is unconscionably unfair, when it is to the benefit of the lawyer's own client. The other side takes the position that deception is inherent in the negotiation process and that an advocate should take advantage of every opportunity to advance the cause of the client.

In the Opinion, the Committee found that the ethical standard for negotiating in or out of the mediation process are the same. Lawyers are not held to a different or higher standard in a mediation because of the consensual nature of mediation. The Model Rules do not require a higher standard of truthfulness in any particular negotiating context. The Committee ruled that a lawyer representing a party may not make a false statement of material fact to a third person but may make statements regarding negotiating goals or willingness to compromise. For example, even though a client's Board of Directors has authorized a higher settlement figure, a lawyer may state in a negotiation that the client does not wish to settle for more than $50. However, it would not be permissible for the lawyer to state that the Board of Directors had formally disapproved any settlement in excess of $50., when authority had been in fact been granted to settle for a higher figure.

Technorati Tags: New Jersey : Alternative Dispute Resolution : Mediation

• Email This
• Print
• Comments
• Trackbacks

In 1982, in the case of Cenco Inc, v. Seidman & Seidman, 686 F.2d 449 (7th Cir. 1982), the Seventh Circuit Court of Appeals held that the "imputation doctrine" should prohibit all shareholder lawsuits against auditors who were allegedly negligent in performing their auditing duties for a corporate client, where fraud resulted in losses to the shareholders. This case was decided under Illinois law and sought to protect outside auditors against fraud committed by the client, even though a more thorough examination may have disclosed the fraud or at least certain improprieties. This same issue of auditor liability was last addressed in New Jersey in 1990 in the Appellate Division case of In re Integrity Trust, 240 N.J. Super. 480 (App. Div. 1990) where the Court ruled that an outside auditor could be held liable in a fraud case where the auditor actually helped in the fraud.

The New Jersey Supreme Court was recently faced with a similar issue in the case of NCP Litigation Trust v. KPMG, LLC., A-19 September Term 2004, decided June 28, 2006. In the NCP case, the New Jersey Supreme Court held that auditor responsibility was not limited to only auditors who actively participated in the corporate fraud. The Court found that independent auditors can be held liable for a corporate client's fraud, even if they did not participate in or have direct knowledge of the misconduct. The New Jersey Supreme Court expressly declined to follow the Illinois decision in Cenco Inc. stating that Cenco was decided more than 20 years before and that "events since then suggest that auditors must be more alert to corporate fraud and, where appropriate, courts should take steps to protect and safeguard the public from that fraud". The New Jersey Supreme Court indicated that it was writing "...under a clean slate in addressing the issue under New Jersey law. "

The NCP case involved a fraud committed by the chief financial officer and chief executive officer who provided the auditor with fake numbers to artificially inflate the company's stock value and thereby bolster the CFO's financial stake in the business. The company eventually filed bankruptcy and it's shareholders sued the auditor for malpractice claiming that the auditors knew or should have known of the CFO-CEO's fraudulent activities.

The auditor defended the suit on the basis of the "imputation doctrine", which generally protects third parties from suits involving corporate wrongdoers. The Court held that the auditor may have had an independent contractual obligation to detect the fraud, which it allegedly failed to do. The "imputation doctrine" was designed to protect the innocent and the Court found that relieving the auditor of liability would not promote the purpose of the doctrine.

Justices Jaynee laVecchia and Roberto-Soto wrote dissenting opinions stating that the "imputation doctrine" should apply, especially because the auditors in this case were not aware of and did not participate in the creation of fraudulent financial data.

Technorati Tags: New Jersey : Imputation Doctrine : Corporate Fraud

• Email This
• Print
• Comments
• Trackbacks

In a recent decision in the Superior Court of New Jersey, Chancery Division, Bergen County (In the Matter of the Estate of Louis Spadaccini, Deceased), the Honorable Peter E. Doyne, reviewed the current case law dealing with "lack of testamentary capacity " and "undue influence" in probate litigation and will contests.

On the issue of whether an individual has the "testamentary capacity" to execute a will, Judge Doyne noted that the mental capacity of a testator is to be tested as of the time of the execution of the will. Gellert v. Livingston, 5 N.J. 65 (1950). The test of whether an individual has the necessary testamentary capacity to execute a will centers around whether the testator was able to comprehend and understand: the property he was about to dispose; the natural objects of his bounty; the meaning of the business in which he is engaged; the relation of each of these factors to the other and the manner of distribution that is set forth in the will. See, In re Will of Landsman, N.J. Super. 252, 267 (App.Div. 1999).

In addition to what the party claiming a lack of testamentary capacity must prove, the contestant usually has the burden of proving that there was a lack of capacity by clear and convincing evidence, In re Coffin's Estate, 103 N.J. Super. 1 (App. Div. 1968), as it is presumed that the testator was of sound mind and competent when a will is executed. Haynes v. First National State Bank, 87 N.J. 163, 175-176 (1981).

On the issue of "undue influence", Judge Doyne, citing the Haynes case, noted that undue influence is the "mental, moral or physical" exertion which destroys the "free agency of the testator" by preventing him "from following the dictates of his own mind and will and accepting instead the domination and influence of another." As in the case of testamentary capacity, the burden of proving undue influence falls upon the party claiming that there was undue influence.

However, of particular significance is the fact that the burden of proof will switch if it can be shown that a confidential relationship existed between the testator and beneficiary and suspicious circumstances are present.

These basic concepts and points of law are relevant to almost every will contest. Unfortunately, probate litigation usually involves fights among family members where the relationship has deteriorated over the years. When a loved one dies, some family members will have remained close with the decedent, and the relationship with others will have faded. Whatever the relationship, questions as to the disposition of a loved one's assets often present issues of capacity and undue influence.

Technorati Tags: New Jersey : Probate Litigation : Will Contests

• Email This
• Print
• Comments
• Trackbacks