Lewis J. Pepperman - New Jersey Law Blog

Contesting a Will - State Court or Federal Court

Lewis J. Pepperman — Tue, 25 Aug 2009 08:03:44 -0500

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.

Claim of Undue Influence Resolved by Court Before Death of Testator

Lewis J. Pepperman — Fri, 15 Aug 2008 08:10:01 -0500

A will is obviously prepared when a individual is still alive. A will contest usually comes about after the individual dies. However, a California Appellate Court has recently decided that when a conservator secures Court approval of an estate plan while the individual is still alive, any challenge to the will must be made at that time and not after the individual dies.

In the case of Murphy v. Murphy, in the Court of Appeal of the State of California, First Appellate District, Docket No. A115177, a dispute arose between siblings after their father had a stroke and could no longer operate his business. The son was concerned that his sister was exercising undue influence over the father, and, with Court approval, hired a conservator to wind down the business and deal with the father's assets. At that time the son learned that his father's will left all assets to his sister and none to him.

The conservator sought Court approval, through a substituted judgment, to re-execute the living trust containing the same division of property and the Probate Court authorized the conservator to do so. This resulted in the implementation of a living trust and pour over will that effectively disinherited the son. The son was on notice of the plan but did not challenge the trust terms at that time.

Following the father's death, the son filed suit against his sister alleging breach of an oral contract, undue influence, intentional interference with contractual relation and fraud. The Trial Court issued a judgment in favor of the son and imposed a constructive trust over one half of the father's property.

On appeal, the California Appellate Court reversed the decision of the Trial Court finding that the son's claims were barred by the principles of collateral estoppel. In the appeal, the parties agreed that the application of the doctrine of collateral estoppel to a substituted judgment order presented an issue of first impression. While the doctrine of collateral estoppel did not bar a second action from being filed, it did preclude a party to an action from re-litigating in a second proceeding matters that had been litigated and determined in a prior proceeding.

The threshold requirements to prevent an issue from being re-litigated are: 1) the issue is identical to that decided in the former proceeding; 2) the issue was actually litigated in the former proceeding; 3) the issue was decided in the former proceeding; 4) the decision in the former proceeding was final and on the merits; and 5) preclusion is sought against a person who was a party or was in privity to the former proceeding.

This decision appears to be the first decision in the country to provide that attacks on wills would be barred after the estate owner dies, if there has been a court-approved substituted judgment will the testator was still alive. The opinion essentially bulletproofs the will of a person found incompetent and placed under the protection of a conservator, if the Court approves a revised estate plan with appropriate notice being given to all parties in interest who may have any basis to object.

Failure to Request Mediation Bars Claim For Attorney's Fees

Lewis J. Pepperman — Wed, 06 Aug 2008 08:07:46 -0500

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.

Mediator Privilege Amended as of July 1, 2008

Lewis J. Pepperman — Wed, 30 Jul 2008 08:01:29 -0500

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.

Arbitrator's Immunity From Civil Liability

Lewis J. Pepperman — Wed, 12 Mar 2008 08:10:47 -0500

Is an Arbitrator in a civil matter immune from a party's claim of negligence that occurs during the arbitration proceeding? This is the question that was recently asked in a case heard before the Appellate Division of the New Jersey Superior Court. In the case of Malik v. Ruttenberg (Docket No. A-6615-06T3), the Appellate Division of the State of New Jersey was presented with a situation where an attorney involved in the arbitration allegedly assaulted one of the parties. The party involved had previously asked the Arbitrator to remove this attorney from the proceedings. This request was denied by the Arbitrator and the assault allegedly took place during a recess outside of the arbitration room.

The party that was allegedly assaulted brought an action against the American Arbitration Association and the Arbitrator, claiming that they knew of this attorney's dangerous tendencies but failed to exercise reasonable care to control these tendencies. The American Arbitration Association and the Arbitrator sought dismissal of the complaint based upon a claim of immunity under N.J.S.A. 2A: 23B -14.

The Appellate Division noted that whether a common law or statutory immunity applies to a party is a question of law. If an immunity applies and bars civil liability, it trumps any theory of negligence. In its analysis, the Court noted that there are few doctrines that were more solidly established at common law than the immunity of judges from liability for damage for acts committed within their judicial jurisdiction. This immunity is necessary for the independent and impartial exercise of judicial judgment that is vital to the judiciary. The opinion of the Court noted that the common law extended absolute judicial immunity to the work of quasi-judicial figures such as arbitrators. An alleged wrongful act does not expose a judge to liability so long as the act was undertaken in an official capacity and an arbitrator is similarly protected.

The Appellate Court found that an Arbitrator's duty to control the proceedings was clearly within the scope of a judicial function. The acts of the Arbitrator were found to be protected by judicial immunity, as was the arbitral organization in its job of administering an arbitration. In finding that "immunity trumps liability" the Appellate Division dismissed the complaint filed against the Arbitrator and the American Arbitration Association.

Proof of confidential Relationship Creates Heavy Burden on a Party Receiving a Gift

Lewis J. Pepperman — Wed, 02 May 2007 08:03:32 -0500

In a case recently decided by the Appellate Division of the Superior Court of New Jersey (In the Matter of the Estate of Samia Balgar, Docket No. A-6621-04T5) the Appellate Court dealt with an issue concerning the disposition of certain joint bank accounts on the death of one of the parties to the account.

In this case, the decedent had executed a will leaving her estate equally to her five daughters, with one of the daughters, the defendant in this case, being the executor. At the same time as the will was executed, the defendant was designated as the decedent's power of attorney. At issue were several bank accounts that were jointly held by the decedent and the defendant. The plaintiffs alleged that the defendant had coerced her mother into transferring most of her assets into these joint bank accounts.

The Trial Court determined that there was a confidential relationship between the defendant and the decedent and that the defendant did not submit sufficient proofs to rebut the presumption of undue influence that arises once a confidential relationship is found.

The Appellate Court affirmed the findings of the Trial Court that the defendant had not made her burden of proof, even in light of the fact that the plaintiffs failed to set aside the statutory presumption that a survivor takes the funds in an account on the death of the other party, as is required by the applicable statute, N.J.S.A. 17:16-5(a).

The Appellate Court noted that based upon the confidential relationship, the defendant had to prove that there was no undue influence and that the defendant's proofs had to be based upon the standard of "clear and convincing evidence". The Court noted that to prove a case by clear and convincing evidence, the evidence offered must produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegation sought to be established"...and "must be so clear, direct, and weighty and convincing as to enable the judge or jury to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue."

In matters where it is alleged that a confidential relationship existed between a decedent and a party receiving a transfer or gift, the party contesting the transfer or gift must only must only prove, by a preponderance of the evidence, that a confidential relationship existed. Once that is done, the party that received the transfer or gift is charged with meeting an extremely high standard of proof. In this case, as in many others, the defendant was unable to meet this burden.

Arbitrator's Powers Under Revised Arbitration Act

Lewis J. Pepperman — Tue, 12 Sep 2006 08:10:27 -0500

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.

ABA Opinion Sets Standards for Negotiations in Mediations

Lewis J. Pepperman — Wed, 09 Aug 2006 08:31:03 -0500

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

New Jersey Supreme Court Rules That Independent Auditors Can Be Liable for a Corporate Client's Fraud

Lewis J. Pepperman — Wed, 02 Aug 2006 08:28:42 -0500

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

Reviewing Current Case Law in Probate Litigation and Will Contests

Lewis J. Pepperman — Mon, 24 Jul 2006 08:23:55 -0500

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

$25 Million Dollar Dispute Ordered To Mediation

Lewis J. Pepperman — Tue, 06 Jun 2006 16:11:21 -0500

When first entering into the mediation process, it is not unusual for one or both sides to not have much faith that mediation will be able to solve the dispute. However, experience has shown that a skilled, trained, mediator, with knowledge of the industry, can help to bring an amicable solution to even the most adverse situation.

As reported in The Washington Business Review, the Marty and Dorothy Silverman Foundation ("Foundation") is seeking payment of nearly $25 million for 31 acres of property from the University Heights Association ("UHA") in Albany, N.Y. The UHA is a consortium of the Albany Medical Center, Albany Law School, Albany College of Pharmacy and The Sage College's Albany campus, and is looking to improve the inventory of buildings on the four campuses as well as create a medical research hub and improve the surrounding neighborhood. The UHA contends that the $25 million in dispute were not loans that needed to be repaid and that the Foundation intended to forgive the payments. Foundation lawyers indicate that the UHA filed tax returns and financial statements in which it listed the payments as loans and that the loans are to be repaid.

The parties have been trying to come to a meeting of the minds that is acceptable to everybody, without success, for over three years.

After the filing of two lawsuits by the Foundation, the UHA attempted to seek Chapter 11 bankruptcy protection in a defensive move to protect association assets, but a Federal Bankruptcy Court Judge dismissed the filing as premature. State Supreme Court Justice Karla Moskowitz has ordered the two sides to try to work out their differences through the Alternative Dispute Resolution program in Manhattan.

While the parties are somewhat skeptical that mediation can help settle this longstanding dispute, both sides will give it a good faith try. The UHA indicated that the Chapter 11 could be refiled, depending on the outcome of mediation.

The Court will pick a mediator who is acceptable to both sides. The mediation process, which is anticipated to take between thirty and forty-five days, is non-binding.

It will be interesting to see if the mediation process can help these parties resolve their differences and avoid a costly fight played out in the courts.

Being Indigent is Not a Reason to Extend the Time to Vacate an Order Probating a Will

Lewis J. Pepperman — Wed, 24 May 2006 08:58:23 -0500

Estate of Florence Schifftner, Deceased

If a will has been admitted to probate by the Surrogate's Court, New Jersey Court Rule 4:85-1 allows a party four months to file a complaint to set it aside. However, if the complaint is not filed within the four month period, a party may seek relief under the "escape provision" of Rule 4:85-1 and file the complaint within a "reasonable time under the circumstances". Under section (f) of New Jersey Court Rule 4:50, this relief can only be secured where there are exceptional, extraordinary and compelling grounds for such relief.

In The Matter of the Estate of Florence Schifftner, Deceased, decided on April 25, 2006, the Appellate Division of the New Jersey Superior Court dealt with the issue of whether an inability to afford counsel constitutes "exceptional, extraordinary and compelling grounds" and therefore a reason to allow a litigant to attack the probate of a will after the four month period.

The plaintiff in the Schifftner case was seeking to overturn a judgment admitting the will of his late mother to probate. The will had been probated after due notice to the plaintiff and he did not file an appeal. The plaintiff argued that although he was aware of the will being probated, he was unable to take appropriate action as his did not have sufficient funds at the time to hire an attorney. The Appellate Division concluded that indigence, under the circumstances of this case, was not an "extraordinary" reason justifying relief. The Court noted that it was an unfortunate fact that many litigants were unwilling to obtain, or unable to afford, representation. The Court went on to say that pro se litigants are allowed the same protection afforded to represented litigants and pro se litigants are given the right to be heard. The Court held that counsel is only required when a litigant faces a "consequence of magnitude" such as a criminal prosecution that threatens actual incarceration or the loss of a fundamental constitutional right such as an interference with the parental relationship.

The Court went on to say that where the consequences are less severe, the failure of representation is not fatal. The possibility of losing a civil suit does not implicate the need to have counsel. The plaintiff in Schifftner, having filed his complaint to overturn probate of a will more than four months after probate, was therefore not allowed to use the Rule 4:50 "escape provision" based upon the fact that he could not afford to hire a lawyer during the applicable time period.

Boston Town and Power Giant Give Mediation A Try

Lewis J. Pepperman — Mon, 15 May 2006 09:35:28 -0500

With a recently retired Federal Judge playing the role of a mediator, a dispute between power giant American National Power ("ANP") and the Town of Blackstone ("Blackstone") in Massachusetts is taking a break from the Courthouse. The pending litigation concerns an estimated $10 million in tax revenue that Blackstone officials maintain the company must pay the town through 2019 concerning one of the company's co-generation plants. The mediation is an attempt to resolve two legal actions the company has filed in protest of its bills, which actions are pending before the Massachusetts Appellate Tax Board in Boston and the Middlesex County Superior Court in Framingham, MA.

The combatants met for two lengthy sessions of mediation and among those participating were Blackstone Town Administrator Raymond Houle, Selectman Chairman Charles Sawyer and other members of the selectmen's panel.

A mediated settlement will be of obvious benefit to all involved since it will allow the town and the company to avoid a costly litigation battle. During last October's financial town meeting, Blackstone voters, acting on the request of officials, appropriated $50,000 as a down payment on the legal costs of taking a stand against ANP in court. This year, officials are asking for an even heftier fortification of the war chest -- $250,000 -- to carry on the courtroom battle, if necessary.

Arguing that softening market conditions for electricity have lessened the value of its holdings, ANP wants the town to reduce its assessments, thereby lowering the company's tax bills. The town calculates ANP's taxes in two ways: Like any property owner, ANP gets a tax bills for its real estate and land. When the company built its plant in the late 1990s, it also negotiated a plan known as a Payment in Lieu of Taxes, or PILOT, fixing assessments on turbines and other business equipment for 20 years, through 2019.

The two methods resulted in a combined assessment of roughly $2.87 million on the company this year. But the company, as it did last year, protested the assessment in court and paid only a portion of it -- about $1.94 million. The payment represents 100 percent of the company's obligations on real estate, but only about two-thirds of what the town maintains it owes under the PILOT. If the trend continued for the life of the agreement, the town would stand to lose about $10 million in revenue.

This is another example of the beneficial role mediated resolutions can play in business litigation.

Technorati Tags: New Jersey : ADR : Alternative Dispute Resolution

Compensation Rules for Those Subpoenaed to Testify at a Deposition

Lewis J. Pepperman — Tue, 09 May 2006 08:49:43 -0500

Leonard Charles v. 1170 Apartment Corp. et. als.

The New Jersey Court Rules do not specifically define whether a professional who is subpoenaed to testify at a deposition is entitled to be compensated for the time spent at the deposition. In the matter of Leonard Charles v. 1170 Apartment Corp. et. als., the New Jersey Apellate Division recently dealt with this issue. This case involved an attorney who was subpoenaed to testify at a deposition involving a former client. The attorney was no longer involved in the case and had no interest in the outcome. The attorney requested that he be compensated at his usual hourly rate and the plaintiff that subpoenaed him refused to pay him.

New Jersey Court Rule 4:14-7(b)(1) provides that a subpoened witness shall be reimbursed for the "out-of-pocket" expenses and loss of pay incurred in attending the deposition. The plaintiff in the Charles case argued that the subpoenaed attorney should not be compensated as the Rule was only intended to protect individuals such as hourly employees. The plaintiff asserted that the Rule was not intended to cover professionals. The Appellate Division disagreed and held that a literal reading of the Rule would defeat the underlying intent. The Court noted that the overwhelming purpose of the Rule was to provide compensation to individuals who are compelled to appear at a deposition in a controversy in which they have no stake in the outcome. The Court went on to hold that the term "loss of pay" includes an actual loss of income, as in the case of a salaried employee, or in the case of a professional, loss of billable time. It does not matter whether the professional is a member of a firm or is a single practitioner.

The Court concluded by quoting President Lincoln and noting that "a lawyer's time and advice are his (or her) stock in trade." This opinion is extremely helpful to all involved as it resolves as issue that has caused uncertainty where none should exist.

Technorati Tags: New Jersey : Litigation

Judge Cautions Litigants Regarding Trial Costs

Lewis J. Pepperman — Thu, 12 Jan 2006 09:25:05 -0500

The Matter of the Estate of Lee Siegel, deceased

In The Matter of the Estate of Lee Siegel, deceased, Docket No. P-480-04, Judge Gerald C. Escala, Presiding Judge of the Chancery Division for Bergen County, rendered a decision on December 8, 2005, following a two-day bench trial in an estate matter. The decision centered around attorney fee applications made in the case.

While finding the attorney fee applications themselves to be reasonable, the Court admonished the litigants and counsel for having failed to perform a reality check as they proceeded with the case toward trial. Judge Escala noted that:

"All too often, litigants leave common sense behind when they embark on litigation in which they convince themselves they are destined to prevail, oblivious to the fact that they might not be successful. They also fail to notice the sometimes astounding amount of time in legal services (and costs) they are incurring to pursue their claim. It must be because in addition to their self-conviction of the justice of their case, they also firmly believe they will not have to pay for the legal services, so they proceed vigorously without regard to the costs. Or, they have a notion that counsel fees can be assessed by the court from some unidentified source, that is, one not related to the cause at hand."

The Court went on to explain that New Jersey follows the American Rule with regard to payment of legal fees, which requires that each side pay their own legal fees, with certain limited exceptions.

Judge Escala's words should be seriously considered by every attorney and client that becomes involved in litigation. Our courts are not a place to litigate personal feelings or personal agendas. Economic realities must play a key, if not defining, role. The toll in terms of cost, time and emotion is often not appreciated at the outset of a case. Parties should assess the strength of their case at the outset and honestly consider the strength of the other side. Playing the devil's advocate is a must. Attempting to settle early on through the process of mediation is a wise course to follow. It is true that certain cases will go to trial. However, all trial attorneys and litigants should heed the well written words of Judge Escala.

Technorati Tags: New Jersey : Litigation

New Jersey Civil Mediation Program

Lewis J. Pepperman — Thu, 17 Mar 2005 22:13:58 -0500

At a recent meeting of the Conference of Civil Presiding Judges in New Jersey ("Conference"), the question was raised as to whether non-attorneys could appear on behalf of a business entity at a Court ordered mediation. This question was referred by the Conference to the New Jersey Unauthorized Practice of Law Committee ("Committee"). The Committee determined that such appearances are not permissible under the applicable New Jersey Rules of Court and Professional Responsibility.

At the same meeting, the Conference also addressed the issue as to whether an attorney, not admitted in New Jersey, may represent a party at a New Jersey Court ordered mediation without first being admitted pro hac vice. The Conference concluded that such representation may only take place in specific, limited circumstances. The Conference defined such circumstances as where "the lawyer engages in representation of a party to a dispute by participating in arbitration, mediation or other alternate or complimentary dispute resolution program on behalf of an existing client in a jurisdiction in which the lawyer is admitted to practice and the dispute originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice."

Mediation in New Jersey has become mandatory in most cases and usually takes place in the early stages of litigation. Mediators are appointed by the Court from a State appointed list, but the litigants have the option of choosing their own mediator.

Finding a Firm That Fits

Lewis J. Pepperman — Fri, 12 Nov 2004 15:57:57 -0500

If you own a business, you'll need a law firm to protect your interests. What do you look for? The key to finding a good legal match is to know what your company's needs are now and likely to be in the future. As a business grows, its needs change. A start up software publisher may only need an intellectual property lawyer and someone to handle its incorporation. As a business grows, takes on additional employees and moves into its own building the owners will have to deal with real estate and employment law issues.

"The first thing is to decide if the business needs a headline grabbing national firm, mid-sized firm, small firm or solo practitioner," says Lewis J. Pepperman, co-managing director of Stark & Stark, a 96 attorney law firm headquartered in Lawrenceville, NJ with offices in Cherry Hill, NJ and Philadelphia. "The law has become so specialized that most solo practitioners or small firms may not be able to handle many of the issues facing a growing business. Entrepreneurs have better things to do than look for a new attorney every time a different legal issue comes up."

While the national firms with legions of lawyers and offices seemingly everywhere have the resources, they come at a price. Giant firms mean giant overhead, which a client pays for. For many businesses it's overkill. "The client ends up paying for resources they'll never use. If your business basically operates in New Jersey and Pennsylvania, it's irrelevant if the law firm has offices in Beverly Hills and Atlanta." Many mid-size firms have national capabilities, without having an office in every state.

For many businesses, a mid-sized law firms with 75 -100 attorneys makes the most sense from an economic and talent perspective. "Firms this size usually have been together a number of years and have built up a reputation. They have the depth and practice groups to provide representation in just about every area of law," said Pepperman. "Firms such as Stark & Stark can do the same quality work as the national firms but at lower rates. The client pays for what they need."

Pepperman advises business owners to thoroughly cross-examine their law firm candidates:

Are you familiar with my industry?
The first consideration should be the attorney's legal skills and general experience. Is the person a quick study? Does the firm represent any of your competitors?

Who will be doing the day-to-day work on my business?
The senior partner may make the initial pitch for the business, but will have little if any involvement after that. Ask to meet the person who will actually be working on your business.

How will my business be billed?
Lawyers have become more flexible in negotiating fees. Don't be afraid to ask for a flat fee or contingent fee on certain matters. What expenses are included in the fees and what is billed separately?

What can I do to keep my legal bills down?
Communication is the key. Don't be afraid to ask hard questions. If it is helpful to you to receive statements twice a month, ask for it. Understanding what your lawyer is doing helps both you and your lawyer.

Will I be able to approve staffing on my business?
Make sure the experience and cost of the attorney is appropriate in relation to the value of the work being done. There are times when more than one attorney will be needed to work on a matter. Does that second attorney need to be a senior partner billing at top dollar or would an associate with a moderate level of experience fit the bill? Would you be better off with just one attorney assigned to the matter, rather than having layers of lawyers reviewing each other's work? How many attorneys attend a deposition?

Does the firm explain legal matters in plain English?
Make sure that your law firm is willing to translate at no extra cost. If you receive a legal brief or memo, insist on a short summary... in plain English.

Looking for a lawyer is like seeking out any other business service. Do some research and don't be afraid to ask questions. Know what you really need.

Taxation on Settlement Awards

Lewis J. Pepperman — Fri, 05 Nov 2004 19:06:51 -0500

The American Jobs Creation Act of 2004 will allow certain relief to taxpayers who receive settlements or court awards in employment discrimination cases. This legislation is meant to deal with an issue which has been the subject of differing decisions in the Federal Appeals Courts.

Prior to this legislation, successful litigants were required to pay taxes on money which they didn't get to keep. They were required to pay taxes on an entire award or settlement, even though part of the money received went directly to their attorney to pay legal fees, and without regard to the fact that the attorney also paid taxes on this part of the award. A bill to fix the problems, the Civil Rights Tax Relief Act, has languished in Congress for nearly five years without success until this provision was added to the Jobs Creation Act.

Congress has created a special deduction in these cases for attorneys' fees and court costs. This will be an above the line deduction which will appear on the Federal Income Tax Returns for adjusted gross income. Accordingly, this deduction can be claimed without regard to whether or not a tax payer files an itemized return.

The law will not be retroactive and will be effective only for fees and costs relating to any judgment or settlement that occurs after the effective date of the legislation.

The Internal Revenue Service has favored this double taxation for years and its policy is presently the subject of two cases set for argument in the United States Supreme Court in November. In these cases, Commission of Internal Revenue v. Banks and Commission of Internal Revenue v. Banaites, the tax payers both won awards in employment disputes and challenged the fact that they were taxed on the entire amount. This new legislation which overturns the disputed policy has created great uncertainty in these cases. This new legislation was supported by various groups including the National Employment Lawyers' Association, AARP, National Whistle Blower Center, US Chamber of Commerce, Lawyers' Committee for Civil Rights Under Law, the Bazelon Center for Mental Health Law and the NAACP.