Court Green-Lights Whistleblower Suit Over Firm's Handling of Case Settlement

Mary Pat Gallagher

New Jersey Law Journal

A lawyer who claims her firm fired her for threatening to report a violation of ethics rules governing civil case settlements can sue under New Jersey's whistleblower law, a state appeals court says.

The Appellate Division held on Thursday that a trial judge erred in throwing out the claim based on his view that the alleged misconduct was not covered by the Conscientious Employee Protection Act and because plaintiff Melissa Morris did not follow through on her threat to go to authorities.

The ruling, in Morris v. Greitzer and Locks of New Jersey, allows Morris to pursue her CEPA claim against what is now the Locks Law Firm of Philadelphia over its handling of an aggregate settlement of suits over fen-phen diet drugs.

When Morris joined the firm's Cherry Hill, N.J., office as an associate in March 2000, bringing nine case files with her, partner Gene Locks allegedly promised her 50 percent of all fees earned on any of her cases that were completed by Dec. 31, 2000. That beat the offer she got from her old firm, Ominsky & Messa in Philadelphia: a 30 percent cut of fees on any cases she left behind, upped to 40 percent in diet-drug cases.

Morris' dispute with the Locks firm concerns the only one of her cases not already pending in a Pennsylvania court -- a fen-phen claim by her neighbor Alan Weber over the death of his wife. After Morris' move, Weber signed a new agreement with the Locks firm, opted out of a diet-drug class action and sued in Middlesex County Superior Court.

Morris alleges that in September 2000, James Pettit, managing partner of the Cherry Hill office, told her he settled Weber's case for more than four times the amount Weber authorized but he refused to tell her how much. Around the same time, Pettit said he feared some diet-drug clients might not accept the amount allocated to them so he wanted Weber to sign a release stating consideration of only one dollar, Morris claims.

She also alleges that Pettit said he was withholding 10 percent of each diet-drug client's settlement in case anyone objected to the amount they got. Morris understood this to mean that Pettit would use the withheld amounts to give more money to the ones who were not happy, and when she asked Pettit if this was ethical, he allegedly told her, "Melissa, I am doing the best I can."

Morris claims that when she raised the issue of her 50 percent share of fees for the Weber case on Oct. 2, 2000, Pettit denied the existence of the fee agreement. The next day, he told her that he had made a mistake about the size of the Weber settlement -- that it was actually only three times the authorized amount.

That created a problem for Morris, who had already given Weber the good news about the higher figure. Weber, who wanted outside proof of the amount of his settlement, met with Pettit and afterwards told Morris he feared he would lose the settlement altogether if he challenged the firm, she alleges.

Morris continued to assert her right to the fees and on Nov. 14, 2000, was told to send her case files to the firm's Philadelphia office, which she alleges violated an agreement that she would work on her own cases. Interpreting the demand as a first step in firing her, she did not comply.

Gene Locks came to Cherry Hill later that month and demanded that Morris turn over the files at once or face termination. Morris says she questioned the propriety of the manner in which the diet-drug cases were settled and the reduction in Weber's settlement and said she would report them.

She then removed files and the firm fired her on Nov. 28, 2000, allegedly for theft of them.

Morris sued the firm, Locks and Pettit in Camden County on June 4, 2001, for violation of CEPA, breach of contract, intentional infliction of emotional distress and detrimental reliance.

Superior Court Judge Charles Little dismissed all of Morris' claims except breach of contract. By the time of the bench trial, which ran from December 2006 to February 2007, the Locks firm had a counterclaim against her and against the Ominsky firm, which in turn had claims against Morris and the Locks firm. The trial outcome was a net award of $12,406 for Greitzer & Locks against Morris, $11,543 for the Ominsky firm against Greitzer & Locks and $32,057 for the Ominsky firm against Morris.

On Thursday, Appellate Division judges Mary Catherine Cuff, Clarkson Fisher Jr. and Christine Miniman said Little was wrong in dismissing the CEPA claim. The statute clearly applied because Rule of Professional Conduct 1.8(g), which requires informed client consent for an aggregate settlement, "closely relates" to the complained-of conduct, and RPC 7.1(a), which prohibits false and misleading communications, might also apply, they wrote per curiam.

The judges also found CEPA did not require Morris to go to the Office of Attorney Ethics. The "'threat' of reporting the activity to a public body is all the statute requires," they wrote.

Because Little struck the jury demand over the Ominsky firm's objection and all the claims were "inextricably intertwined," the appeals court required a new trial on all claims.

Morris' lawyer, Carl Poplar of Cherry Hill, says the case highlights concerns about the use of aggregate settlement in mass tort cases.

The opinion mentions no dollar figure for Weber's settlement or Morris' fee claim because Little granted a motion by the Locks firm to seal that information, over his objection, Poplar says.

Not returning calls for comment were Pettit, Locks, Kimberly Sutton, of Obermayer Rebmann Maxwell & Hippel in Cherry Hill, who represents the Ominsky firm, now Ominsky & Ominsky, and Joseph Kenney, of Ballard Spahr Andrews & Ingersoll in Voorhees, N.J., the trial lawyer for the Locks defendants. Pettit argued the appeal.

Morris no longer practices law and has returned to her previous career, nursing.