Attorney Intentionally Breaching A Fiduciary To Non-Client Can Be Held Liable For Fees As Consequential Damages.
Although our focus is on California cases, we thought it would be instructive to report on the New Jersey Supreme Court’s recent decision in Innes v. Marzano-Lesnevich, No. 074291 (N.J. Supreme Ct. Apr. 26, 2016) (published).
There, a divided 3-2 state high court decided that there is an exception to the “American Rule” (parties generally bear their own costs unless a contract or statute dictates otherwise, which was not in play) for attorneys who intentionally breach a fiduciary duty, even to a nonclient. In those situations, attorney’s fees may be awarded as consequential damages for intentional fiduciary relationship breaches. No out-of-state authorities were cited, with New Jersey precedents being cited on both the majority and dissenting justices.
Justice LaVecchia dissented, joined by Judge Cuff, temporarily assigned. The dissent argues essentially that the theoretical underpinning to the majority opinion is incoherent (see footnote 2 of the dissent). If the theoretical underpinning lies in the attorney-client/fiduciary relationship found in malpractice cases, there is no attorney-client relationship here with the plaintiff, meaning that the case extends existing law. If the theoretical underpinning is that consequential damages result from a breach of fiduciary duty, then fees as damages are extended to a new frontier, and the American Rule is further diluted.
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