A city school board is suing McCarter & English for allegedly advising it to pursue a defamation action despite clear precedent prohibiting such claims by public entities.
The litigation may grow more involved, now that the Appellate Division has ruled that the Elizabeth Board of Education’s former president and the school superintendent are personally liable for joining in the defamation action.
The officials claim they did so based on the Newark firm’s advice, raising the likelihood that they will file their own malpractice suits.
The board sued McCarter and one of its partners for malpractice in April and discovery is under way in the case, Elizabeth Board of Education v. McCarter & English, UNN-L-3014-12.
The events giving rise to the litigation began in 2008, when McCarter was special counsel to the school board.
Shortly before the June 2008 primary for the Elizabeth City Council, anonymous political mailings were sent to city residents. One of them — written on school board letterhead, purportedly to the board president, Rafael Fajardo, by acting superintendent Pablo Munoz — referred to “our primary objective” of “getting the Hispanics to come out and vote for our candidate and to ensure a low turnout of the [I]talian vote.”
There were also two fliers sent. One painted Fajardo and Munoz as leaders of an “Army of … Undercover Republicans [who] are getting richer at the expense of taxpayers and the youth of our City.” The other accused Fajardo of having ties to the construction industry and of pushing for construction of more schools in order to enrich himself. It also said that the school administration building was being used for political purposes and that one of the council candidates was Fajardo’s protégé.
The board, Fajardo and Munoz sued “John Doe” defendants over the mailings in a complaint that included claims for defamation and malicious representation. Fajardo and Munoz also brought claims for false-light invasion of privacy and intentional infliction of emotional distress.
The school board funded the lawsuit, paying McCarter fees of $63,622, partially financed by $52,000 in state Department of Education grant money.
No John Doe was ever identified. The suit was put on hold after Antonio Rivera — a Union County Workforce Investment Board official subpoenaed during the litigation — sued to enjoin the use of school funds to pay legal fees.
Rivera’s lawyer, Richard Rudin of Weiner Lesniak in Parsippany, says the board went on a “witch hunt” to find the source of the fliers and improperly used state education funds to do so.
The education department launched an investigation into the use of the funds. McCarter, in response, defended the board’s right to bring and pay for the suit. The firm explained that the defamation counts were on behalf of all three plaintiffs and that the invasion-of-privacy claims on behalf of Fajardo and Munoz were not the focus and would result in only minimal recovery at best.
McCarter refused to provide its retainer letter, invoking attorney-client privilege.
The department’s Office of Fiscal Accountability and Compliance concluded that the funds had been misspent. The department upheld the decision and in late 2009 recouped the $52,000 by withholding it from state aid payments.
In the meantime, an injunction in Rivera v. Elizabeth Board of Education barred the board from proceeding with the John Doe suit or using school money to pay for it. The suit was dismissed without prejudice under a July 2008 consent decree.
Once the Department of Education reached its decision, Rivera sought an order requiring Munoz and Fajardo to reimburse the school district for the legal fees from the John Doe case.
On Sept. 13, 2011, Union County Assignment Judge Karen Cassidy ordered the two men to pay $63,622 to the district.
The Appellate Division affirmed on Jan. 18. The panel pointed out that the board, as a government entity, could not maintain a cause of action for defamation and the board’s claim for malicious representation was essentially the same tort.
The fact that the board had no cognizable claims “fortified the conclusion that the suit primarily advanced Munoz’s and Fajardo’s individual interests,” Judges Francine Axelrad, Paulette Sapp-Peterson and William Nugent wrote per curiam.
They also found support in McCarter’s letter to the Department of Education, which acknowledged that the complaint sought relief on behalf of all three plaintiffs and referred to them recovering damages, contrary to the contention by Fajardo, Munoz and the board that the individual plaintiffs joined the John Doe suit solely to benefit the board.
The letter compared the board’s paying the entire cost of the action to the action of an insurer that defends counts against an insured not covered by the policy. The court saw that analogy as suggesting that the counts pertaining to Fajardo and Munoz were not in their official capacities.
The judges emphasized that the board provided no resolution or minutes authorizing the John Doe suit. They referred to Rivera’s position as “an expensive, politically motivated fishing expedition that named no one and was never going anywhere.”
They rejected an advice-of-counsel defense advanced by the board, Fajardo and Munoz.
McCarter partner Francis Kirk stated in a certification filed in the case that he advised the board that Munoz and Fajardo should be named as plaintiffs out of concern that the entire-controversy doctrine might preclude some claims. Fajardo and Munoz did not ask to be part of the case “but permitted themselves to be included … based on the direct advice of counsel,” under the assumption that any damages obtained “would belong to the board,” said Kirk, who is now a defendant in the legal malpractice suit.
The court also referred to board general counsel Kirk Nelson’s certification that he advised the board that no resolution was needed to file the John Doe suit and that it was sufficient for a board majority to authorize it because McCarter had already been retained as special counsel.
Michael Stein, of Pashman Stein in Hackensack, who represents the board, says it will seek certification of the ruling. “How can you saddle these guys with $60,000 in legal fees when everybody is saying they only joined because McCarter told them to?” he asks. “When a partner at McCarter says they only did this on our advice and they had no interest in filing it, that ought to end the question of whether these guys should be forced to repay the board.”
Stein says McCarter was negligent in advising the board to sue when it had no cause of action, in filing the suit without named defendants, in getting Fajardo and Munoz to join the case and in doing so without signing a retainer agreement with them, or advising them to seek independent counsel.
The board hopes to recover its legal fees for the John Doe and Rivera suits, as well as those incurred in the malpractice action.
Stein represented Fajardo and Munoz in Rivera, but they are getting advice from a separate attorney, Bruce Rosen, on their own potential malpractice suit against McCarter.
Rosen, of McCusker Anselmi Rosen & Carvelli in Florham Park, says they had held off suing until the appeals court decision in Rivera, under a tolling agreement with McCarter that has just been extended in light of the anticipated petition for review.
McCarter’s attorney, Michael Furey, of Riker Danzig Scherer Hyland & Perretti in Morristown, declines comment except to say “we believe the claims against McCarter are very defensible.”
McCarter has filed a third-party complaint against Nelson for contribution.
Nelson’s lawyer, Scott Piekarsky of Piekarsky & Associates in Wyckoff, could not be reached for comment.