Houghton v. Hill Wallack, LLP, A-0770-19
| Decision Date | 24 June 2021 |
| Docket Number | A-0770-19 |
| Parties | LYNN HOUGHTON, and HELPING SENIORS OF THE VALLEY, LLC, Plaintiffs-Appellants, v. HILL WALLACK, LLP, and EVAN M. GOLDMAN, ESQ., Defendants-Respondents, and CHIPMAN BROWN CICERO & COLE, LLP, JOSEPH B. CICERO, ESQ., and STEPHANIE HABELOW, ESQ., Defendants. |
| Court | New Jersey Superior Court – Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 20, 2021
On appeal from the Superior Court of New Jersey, Law Division Mercer County, Docket No. L-1081-18.
Terry E. Thornton argued the cause for appellants (O'Brien Thornton, LLC, attorneys; Merrill M. O'Brien and Terry E Thornton, on the briefs).
James G. O'Donohue argued the cause for respondents (Hill Wallack, LLP, attorneys; Victoria J. Airgood and James G O'Donohue, on the brief).
Before Judges Yannotti, Haas, and Natali.
In this appeal, plaintiffs Lynn Houghton and Helping Seniors of the Valley, LLC, challenge an October 9, 2019 Law Division order dismissing their legal malpractice claims against defendants Evan Goldman and Hill Wallack, LLP. For the following reasons, we vacate the October 9, 2019 order and remand for further proceedings.
To provide context for our opinion, we detail the salient facts and procedural history. Houghton is the sole owner of Helping Seniors, a
Pennsylvania business dedicated to providing non-medical support services to the elderly. The business is a franchisee of Seniors Helping Seniors, LLC, (SHS), a company incorporated in Delaware and headquartered in Pennsylvania. Houghton executed an initial ten-year franchise agreement with SHS in November 2006.
Under the terms of the agreement, plaintiffs agreed not to compete with SHS for two years after termination of the agreement for any reason and agreed to pay attorney's fees to SHS "in connection with the enforcement of the [agreement's] covenants." Plaintiffs had the option to renew the agreement, which they did by sending a notice of renewal to SHS for an additional term of ten years commencing on November 18, 2016. On December 8, 2016, plaintiffs executed a new franchise agreement "similar to the 2006 agreement," and which contained a Delaware choice-of-law and forum clause.
In 2017, Houghton sought legal counsel to review severing her franchise relationship with SHS so she could operate her business independently. Houghton received Goldman's name from a colleague who described him as "a successful New Jersey franchise attorney." After researching Goldman online, she learned from Hill Wallack's website that he was "[c]ounsel in the Princeton, [New Jersey] office" and chair of the firm's franchise law practice. At the time, Goldman was admitted to practice law in New Jersey and the District of Columbia and claimed to have litigated matters in at least seventeen different states.
Houghton contacted Goldman on March 27, 2017 by calling the firm's New Jersey phone number and leaving a voicemail on his office phone, which Goldman returned from his New York cell phone number. For the duration of their relationship, Houghton and Goldman communicated exclusively through telephone and email primarily while Goldman was located outside New Jersey. Houghton never went to Goldman's Princeton office.
During their initial call, Houghton told Goldman she "couldn't risk [her] business in any way," and Goldman responded he would recommend against action if he did not find a "winnable" way out of the franchise agreement. After reviewing the agreement and relevant federal franchise law, Goldman believed he found a "loophole" supporting termination of the agreement and sent Houghton a March 29, 2017 engagement letter limiting the scope of their initial engagement to "consult[ing] . . regarding concerns with the . . . franchise agreement."
Goldman sent the retainer letter to Houghton electronically on Hill Wallack letterhead that listed its Princeton address and New Jersey telephone number. Houghton returned the signed letter by mail to Goldman's Princeton office where Houghton sent all future checks for his legal services.
On April 4, 2017, Goldman sent SHS a notice of rescission to its Pennsylvania headquarters declaring the 2016 franchise agreement "void ab initio." Two days later, Goldman notified SHS that Houghton intended to withhold franchise royalty payments. SHS's attorney responded in a letter addressed to Goldman's Princeton office disputing the allegations and seeking to resolve the dispute amicably.
In an April 22, 2017 email, Goldman advised Houghton that SHS would "try to get an injunction potentially shutting [her] down." Alarmed, Houghton responded that it was of "great concern that they could shut [her] down!" In a May 2, 2017 email, Houghton told Goldman that she was "completely stressed out over [her] business and career potential."
After settlement negotiations failed, Goldman sent Houghton a second engagement letter on May 15, 2017, again on Hill Wallack letterhead, expanding the scope of his and Hill Wallack's representation to include "litigation commenced by, or against, [SHS]." The letter also indicated that Houghton would have to "retain separate, local counsel who is licensed to practice in the [S]tate of Delaware," which plaintiffs did in an agreement with Chipman Brown Cicero & Cole, LLP, and its lawyers Joseph B. Cicero and Stephanie Habelow (CBCC defendants).
Neither of plaintiffs' engagement letters with Goldman and Hill Wallack included forum selection, arbitration, or choice-of-law provisions. Conversely, plaintiffs' engagement letter with CBCC included a provision in which the parties agreed to resolve "any dispute arising out of or relating to [the engagement] . . . including but not limited to any alleged claims for legal malpractice . . . [through] binding arbitration in Wilmington, Delaware."
Plaintiffs filed a five-count complaint against SHS in Delaware state court on June 27, 2017, later amended on September 25, 2017, alleging in part that SHS breached the agreement by failing to provide plaintiffs with necessary inspections, training, and support. Plaintiffs also contended that SHS committed fraud by omission by failing to provide them with a franchise disclosure document prior to entering the 2016 franchise agreement. The complaint identified Goldman as plaintiffs' counsel along with the CBCC defendants.
SHS moved to dismiss plaintiffs' complaint. On December 6, 2017, the court reserved decision until briefing was completed on jurisdictional issues but noted it was "not yet impressed by the [federal disclosure document] argument because when [it] read the code [and] federal regulations, [it] read it as [not] apply[ing] to renewal whether or not there has been an [i]nterruption in the business." Houghton terminated Goldman and Hill Wallack's services on December 28, 2017. On January 4, 2018, plaintiffs voluntarily dismissed the amended complaint against SHS.
SHS thereafter filed an application seeking attorneys' fees based on the 2016 agreement and local Delaware rules, including that the Delaware action was filed and prosecuted in bad faith. During arguments, the Delaware judge noted the The judge noted he would "hate to punish the plaintiff[s] for [this] when the [culpable party] . . . [was] the author of this complaint." Plaintiffs contend that during negotiations, SHS's attorney told the CBCC defendants that SHS would "shut [Houghton] down" if litigation continued. Plaintiffs ultimately agreed to reimburse SHS for $120, 000 in attorneys' fees incurred in defending the litigation.
On May 17, 2018, plaintiffs filed a complaint against Goldman, Hill Wallack, and the CBCC defendants in the Law Division in Mercer County alleging legal malpractice in connection with their advice in the SHS litigation. Plaintiffs contended venue was proper in Mercer County because Goldman and Hill Wallack's Princeton office is where "the majority of the acts which constitute legal malpractice occurred."
On November 27, 2018, the CBCC defendants moved to dismiss plaintiffs' complaint contending New Jersey courts lacked in personam jurisdiction over them. They also argued the arbitration agreement contained in their retainer agreement mandated dismissal. Neither Goldman nor Hill Wallack joined CBCC's application.
Plaintiffs opposed CBCC's motion and, on December 5, 2018, filed a separate application solely against Goldman and Hill Wallack. In that motion, plaintiffs sought a determination that New Jersey law applied to their malpractice claims. They specifically argued that Goldman and Hill Wallack bore responsibility for the costs and attorneys' fees caused by their malpractice under the fee shifting principles espoused in Saffer v. Willoughby, 143 N.J. 256 (1996).
On February 19, 2019, the court held oral arguments on both applications and reserved its decisions. The court resolved the outstanding motions by issuing four separate orders with accompanying written statements of reasons: three on September 19, 2019, and a fourth, "[f]inal" order on October 9, 2019.
All three of the September 19, 2019 orders were captioned "order dismissing plaintiffs' complaint for lack of in personam jurisdiction and compelling arbitration in Wilmington, Delaware." Notably, in those orders, the court explicitly granted relief only to plaintiffs' claims against the CBCC defendants, and in the analysis section of the appended statements of reasons focused primarily on the claims and arguments against those defendants. For example, without addressing Goldman or Hill Wallack's contacts with New Jersey, or New Jersey's possible interest in resolving plaintiffs' malpractice action, ...
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