A trial judge should have barred as a net opinion an expert witness's testimony that legal malpractice must have been to blame for a low damages award in a suit against Prudential, a New Jersey appeals court ruled on Monday.
Overturning a $1.6 million judgment in the malpractice case, the Appellate Division also found error in the failure to instruct the jury that the plaintiff lawyer's decision to present damages to an arbitration panel as a lump sum could be deemed an "exercise of judgment" rather than a breach of the standard of care.
According to the opinion in Granata v. Broderick, A-5272-10, John Granata claimed he was fired in 1996 as a salesman at Prudential Insurance Co. of America and Pruco Securities LLC in retaliation for his complaint a year earlier to high-level management. He had alleged the company was improperly discriminating against agents like himself who served inner-city areas with large minority populations, through such practices as redlining.
The reason given by Prudential for Granata's firing was that he had signed a client's name to a form authorizing a transfer of the client's funds from a money market account to mutual bonds.
Granata retained Edward Broderick Jr., who filed a whistleblower suit. Prudential moved to compel NASD arbitration on the ground that it axed Granata for violating rules about securities accounts. The motion was denied but reversed on appeal in 1998, and the claim went to arbitration.
Granata, who was seeking $3 million in compensatory and punitive damages, was awarded $28,000 and assessed $12,530 in costs and fees.
The arbitrators did not provide reasons for their decision.
The six-year limitations period had almost run by 2007, when Granata sued Broderick and his firm, Morristown's Broderick Newmark & Grather, in Passaic County Superior Court.
Granata alleged two chief areas of malpractice.
One was that Broderick failed to "organize his presentation" on damages at the arbitration because his expert, Frank Tinari, did not distinguish between lost renewal commissions, which could not be replaced or mitigated, and the post-termination loss of new business.
As a result of that lump-sum approach to lost income, the arbitrators looked at everything as subject to mitigation, in the view of Granata's malpractice expert, Richard Grodeck of Piro, Zinna, Cifelli, Paris & Genitempo in Nutley.
Grodeck also believed Broderick should have presented testimony from an insurance expert who worked with Tinari regarding the seven-year life expectancy of the policies he sold, to bolster the claim for the lost renewal commissions.
Asked why the arbitrators awarded Granata so much less than he sought, Grodeck testified, "I cannot tell you how they reached that" but "they must've concluded mitigation was available to Mr. Granata."
The other alleged malpractice was that Broderick should have pleaded a FAIRA claim, not just one under the Conscientious Employee Protection Act, CEPA, and that by not doing so, he abandoned the chance to obtain damages for pretermination loss, which are not recoverable under CEPA but were arguably so under FAIRA.
The law was unclear when Granata sued Prudential, but while the matter was pending, an appeals court held that the type of conduct alleged by Granata violated FAIRA.
The Supreme Court later reversed in R.J. Gaydos Ins. Agency, Inc. v. Nat'l Consumer Ins. Co., 168 N.J. 255 (2001), on the ground that an insurance agent has no private right of action under the law.
Grodeck opined that the presence of a FAIRA claim in the suit against Prudential might have prevented it being sent to arbitration and that the FAIRA claim would likely have settled before the Supreme Court decision because insurers want to keep such matters out of court.
Countering those views was Broderick's expert, Lance Kalik of Riker Danzig Scherer Hyland & Perretti in Morristown.
He emphasized that Broderick presented evidence of renewal damages at arbitration; that the arbitrators did, in fact, rule in Granata's favor and award him damages, and that there was no way to know how they arrived at the amount.
Kalik characterized the choice not to pursue pretermination damages as a "strategic decision" meant to avoid the risk that Prudential would try to get the matter sent to the Department of Banking and Insurance, DOBI.
In addition, the CEPA claim was stronger than the FAIRA one, he said.
The case was tried before Judge Thomas LaConte in 2010 to a $910,000 verdict — $525,000 for pretermination damages and $385,000 for post-termination loss of renewal commissions. With interest, the judgment totaled $1,597,193.
In finding Grodeck's opinion should have been excluded, Appellate Division Judges Clarkson Fisher Jr., Alexander Waugh Jr. and Jerome St. John wrote that the crux of it was "that the arbitrators made a mistake that no one could explain, so it must have been defendant's fault" and it was "grounded in nothing but his own unsupported speculation."
On the jury charge question, they called presenting damages in a lump sum "just the sort of decision that a jury may decide is an exercise of judgment."
They added that there are "no objective standards to determine how an expert's report must be presented, and the fact that the arbitrators did not accept plaintiff's amount of damages does not show malpractice per se."
They rejected, however, the argument that the "decision not to assert a FAIRA claim warranted an exercise of judgment" instruction. "There could be no testimony that failure to file a potentially viable claim on behalf of a client is an acceptable 'exercise of discretion,'" they wrote.
Broderick says he is thrilled with the outcome, adding "there is always somebody to find fault with the lawyer when the outcome isn't what they think it should have been."
His attorney on appeal, Christopher Carey of Morristown's Graham Curtin, says given the net opinion holding, the court did not address whether Grodeck should have been allowed to testify that Prudential violated FAIRA based on bulletins issued by DOBI. He views that issue as "fair game" on retrial.
Granata's attorney, Diane Acciavatti, could not be reached for comment. Her office was last listed in Woodland Park, but the number was disconnected.