Weber Gallagher Simpson Stapleton Fires & Newby and one of its lawyers cannot be held liable on legal malpractice claims brought against them by a disgruntled client in a multimillion-dollar dispute over martial arts videos, a New Jersey appeals court has ruled.
A two-judge Appellate Division panel on Sept. 7 said the court below acted properly in dismissing malpractice claims against attorney Andrew Indeck and Weber Gallagher, which is based in Philadelphia and has offices in New Jersey.
Indeck is currently the firm’s chairman.
“It is beyond cavil that a lawyer representing a corporation or other business entity is not automatically deemed to represent its officers or shareholders,” the court said.
The underlying representation occurred years before Indeck, who practices in the firm’s Bedminster office, became chairman. He was elected to the role in July.
Two trial court judges and the Appellate Division ruled that plaintiff Gary Reinert had no standing to sue Indeck or the firm.
Reinert himself was not on the hook personally for any of the damages, but rather one of his companies was, the appeals court noted.
The panel said client unhappiness by itself is not the basis for a malpractice claim.
“Attorneys are not guarantors of a successful outcome,” said Appellate Division Judges Michael Haas and Garry Rothstadt.
Neither Indeck nor his attorney, Jeffrey McCarron of Swartz Campbell in Philadelphia, returned calls seeking comment.
Reinert’s attorney, Jack Meyerson of Philadelphia’s Martin & O’Neill, also did not return a call.
The underlying case began in 2005 when Christopher Pizzo, the principal of a company called Noble Learning Systems Inc., reached an agreement with Damian Ross, the sole member of a company called Zenchin Inc., to distribute martial arts videos featuring a well-known self-defense artist, Carl Cestari.
That business relationship soured after Cestari died and Pizzo was supposed to stop distributing videos featuring Cestari, according to the decision.
At the time, Reinert owned a company called Close Combat Co. Pizzo and Reinert then reached a distribution agreement to distribute martial arts videos, including some featuring Cestari. Close Combat became profitable to the point where Reinert was earning $650,000 a year, the court noted.
Ross and Zenshin then sued Close Combat, demanding that it stop distributing Cestari videos. According to the terms of an agreement, the dispute was to be settled through arbitration. Reinert and Pizzo retained Indeck to represent Close Combat, but never indicated on the retainer agreement that they expected to be represented individually, according to the decision.
In April 2012, an arbitrator awarded Ross and Zenshin $2.4 million. A Chancery Division judge approved the award and, after adding interest, increased the award to $2.85 million. That award was upheld on appeal, the court said.
Reinert then filed his legal malpractice suit against Indeck. In his lawsuit, filed in Burlington County Superior Court, Reinert alleged negligence, breach of contract, breach of fiduciary duty and negligent supervision against the firm.
He also alleged that Indeck gave him bad advice when he set up a defined benefit plan, which Reinert claimed led Ross and Zenshin to sue for fraudulent transfer and ultimately causing Reinert to pay $400,000 to settle those claims, the court said.
Reinert said Indeck mishandled discovery, failed to seek dismissal of the Ross and Zenshin claims, failed to advise him to retain independent counsel, failed to mitigate dangers and failed to inform him about the risks of setting up the defined benefit plan.
The claims were twice dismissed below on standing grounds, because Reinert was not personally harmed by the judgment or the settlement, according to the decision.
The Appellate Division in the Sept. 7 unpublished decision said malpractice claims should be dismissed if they are “futile” or are a “useless endeavor.”
“We conclude [that] contrary to his arguments, [Reinert] could not establish the requisite requirements of an attorney-client relationship or that he personally suffered any damages as a consequence of defendants’ actions in the arbitration,” the panel said.
“Here, plaintiff’s allegations do not give rise to a [third-party] duty owed to him by defendants,” the court added.