Recent Case Underscores Reluctance of New Jersey Courts to Award Attorney’s Fees

           New Jersey follows the American Rule, which is that each party pays their own attorney’s fees no matter who wins. A recent Appellate case looked at a scenario where one party may receive fees from the other. In that case, the court affirmed the trial court’s denial of attorney’s fees for defendants who previously succeeded in dismissing a very closely related case.

            In the most recent case, the defendants, Joseph Wolfson, Betty Simon, and Betty Simon Trustee, LLC, were sued by two of Simon’s grandchildren, Heather and Lucas Alper, in January 2018. The Alpers argued that Wolfson fraudulently induced Simon to transfer funds out of two accounts that she had previously established for the Alpers and into the Betty Simon Trust (the Trust), a broader trust account established and controlled by Simon. The Alpers argued that Simon did not understand the nature of the transactions that Wolfson was preparing for her and that Wolfson would merely place the transfer papers in front of her and tell her to sign them without explaining their nature.

In 2015, two of Simon’s other grandchildren filed very similar complaints against Wolfson and the Betty Simon Trustee, also arguing that Wolfson fraudulently induced Simon to transfer money out of accounts she established for their children (Simon’s great-grandchildren) and into the Trust. That complaint, however, was dismissed for lack of standing. Standing is a requirement that the party bringing a claim must be the proper party to bring the suit. Because the judge found that all the accounts, including those established for the plaintiffs’ children (Simon’s great-grandchildren), were owned and controlled by Betty, he concluded that the grandchildren had no interest in the accounts and therefore had no standing to bring a complaint about how they were managed.

Based on the previous ruling holding that Simon owned the accounts completely, the defendants in the recent case argued that the Alper’s claim also lacked standing and was therefore improper and frivolous. Defendants informed the Alpers that if they did not withdraw their claim, the defendants would seek sanctions against them, including attorney’s fees. They also moved to dismiss the claim altogether. While the judge dismissed the complaint for lack of standing, he denied the defendant’s request for attorney’s fees, even after the Alpers filed a motion to reconsider the dismissal of their claim.

In New Jersey, defendants may be granted attorney’s fees if the judge finds that the complaint is “frivolous.” A complaint is “frivolous” if it is either 1) made in bad faith, or 2) the party knew or should have known, that the complaint had no reasonable basis and could not be supported by arguing for a good faith extension of the law. Additionally, a complaint can be deemed “frivolous” if it 1) is presented for no valid purpose other than to harass or intimidate, and 2) the attorney claimed that the complaint was based on valid existing law or a fair extension or reversal of valid law. Parties seeking attorney’s fees must also provide notice to the attorney who signed the alleged frivolous complaint.

In this case, however, the judge found that the claim made by the Alpers was not made in bad faith, notwithstanding the 2015 ruling. Noting that the award of attorney’s fees is usually reserved for the most exceptional cases, the judge reasoned that proof of bad faith must be presented. To the contrary, it appeared that the complaint in this case was based on reasonable concerns of undue influence. The Alpers alleged that Simon did not understand the nature of the transfers that Wolfson was preparing for her and that Wolfson essentially “dominated Simon’s will, which is a substantive concern even if the Alpers were not the proper parties to bring that complaint. Absent a showing of bad faith, the court could not conclude that the Alper’s complaint was frivolous.

If you are a plaintiff who is accused of filing a frivolous lawsuit or a defendant who believes you may be facing a lawsuit filed in bad faith, or have questions about the award of attorney’s fees in general, feel free to contact Ward, Shindle & Hall.