(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interests of brevity, portions of any opinion may not have been summarized).
Argued September 9, 1996 -- Decided July 17, 1998
CHIEF JUSTICE PORITZ, writing for a unanimous Court.
The issue in this appeal is whether a violation of the Rules of Professional Conduct can be used to provide a
basis for civil liability against an adversary's attorney.
This case arose as a dispute over the propriety of litigation tactics used by attorneys Gerald Liloia and
Anthony Sylvester in an underlying foreclosure action. Sherwood Baxt was a partner with Paul Hartman and Paul Baxt
(“debtors”) in The Grove Mercantile Center (“Grove”). Sherwood Baxt and Saida Baxt were defendants in the
foreclosure suit brought by the Summit Trust Company (“Summit”) alleging Grove's default on a construction loan
from Summit. Liloia and Sylvester represented Summit in the foreclosure litigation.
In October 1988, Grove obtained construction financing for a commercial real estate project in Jersey City
from Summit by way of two mortgage loans, totaling $4.1 million. The original documents called for repayment of the
entire debt on November 1, 1989. Before then, however, the debtors sought and obtained a one-year extension on
repayment of the loan.
The debtors did not repay the loan at the end of the extended period and Summit instituted foreclosure proceedings in
March 1991. At issue in the foreclosure litigation was whether the extension was granted subject to a mortgage modification
agreement containing a release of any lender-liability counterclaim Grove may have had against Summit. The debtors
questioned whether the modification agreement had been executed.
During the course of discovery, Summit produced its credit file to Grove. That file contained a copy of the
modification agreement signed only by an bank officer, Jennifer Calenda. However, when Summit's attorneys examined
Grove's files, they found and copied an agreement signed by both Calenda and by Grove partner Paul Hartman, who had
previously informed his attorney that he did not recall executing or returning the agreement to Summit.
After discovering the document, Summit filed a motion for summary judgment, based in large part on the release
provision of the modification agreement. Liloia and Sylvester attached a copy of the modification agreement to the summary
judgment motion, making no reference to the source of the document. The debtors opposed the motion, contesting the validity
and enforceability of the release. Grove subsequently made a cross-motion for a determination of no deficiency liability and to
compel the depositions of bank officers that the debtors had been seeking for several months. Prior to the first scheduled
deposition, Grove's attorney requested access to the bank's credit file. Liloia and Sylvester instructed Summit officers to place
the copy of the modification agreement signed by both Calenda and Hartman in the bank's files. Thereafter, for a period of at
least one month, Liloia and Sylvester knowingly and deliberately obstructed the discovery process by misleading the debtors
and their attorney about the source of the signed modification agreement and by refusing to respond candidly to specific
requests for direct and accurate information.
Following their discovery of the source of the fully executed modification agreement, the Baxts filed an action against
Liloia and Sylvester seeking damages for tortious concealment of evidence and for alleged breaches of the Rules of
Professional Conduct (“RPCs”). The Baxts demanded costs associated with the depositions and the review of their own files
through which they learned that the document signed by Hartman came from those files. On Liloia's and Sylvester's motion to
dismiss the complaint, the Chancery Division dismissed the second count of the complaint, concluding that the claim alleging a
violation of the RPCs was collateral and one over which the court did not have “primary jurisdiction.”
The parties ultimately settled the foreclosure action, expressly reserving the Baxts' right to continue with their action
against Loloia and Sylvester. Subsequently, the trial court granted Liloia's and Sylvester' s motion for summary judgment,
holding that the Baxts could not maintain a cause of action based on spoliation of evidence because they had not demonstrated
justifiable reliance on the copy of the modification agreement attached to Summit's motion.
The Appellate Division affirmed both the dismissal of the claim based on the alleged violation of the RPCs and the
grant of summary judgment on the spoliation claim. A majority of the panel declined to permit a new cause of action based on
the RPCs. Although Judge Dreier concurred in the judgment, he would not have found the Baxts precluded from recovery
except for the global settlement of the foreclosure suit.
On remand from the Supreme Court for reconsideration in light of the Baxts' assertion that the settlement of the Grove
litigation expressly excluded their claims against Liloia and Sylvester, the Appellate Division reaffirmed its decision. Judge
Dreier dissented, finding that the Baxts had asserted an actionable claim under the RPCs.
The appeal is before the Supreme Court as of right because of the dissent below.
HELD: The Rules of Professional Conduct, standing alone, cannot form the basis of a cause of action.
1. The purpose of the Model Rules of Professional Conduct, on which New Jersey's RPCs are based, was to regulate lawyer
conduct through the disciplinary process, not to serve as a basis for civil liability. Consonant therewith, neither New Jersey nor
any other jurisdiction has allowed a cause of action based solely on a violation of the RPCs. (pp. 7-10)
2. Our courts have recognized that the existence of a duty owed by an attorney may be supported by reference to an attorney's
obligations under the RPCs , and that claimants may present evidence that an attorney has violated the RPCs in cases claiming
the attorney has breached his or her duty of care. (pp. 10-13)
3. State disciplinary codes are not designed to establish standards for civil liability but, rather, to provide standards of
professional conduct by which lawyers may be disciplined. Disciplinary rules serve purposes that are substantially different
from those of an individual litigant in a civil action. (pp. 14-15)
4. Even when consideration of a rule is useful in determining whether a duty exists or a standard of care has been breached, the
rule must be intended to protect a person in the claimant's position or be addressed to the particular harm suffered by the
claimant. (pp. 15-16)
5. New Jersey's disciplinary system has been recognized as one of the most demanding disciplinary systems in the nation, and it
is not necessary to create a cause of action based on a violation of the RPCs to ensure that attorneys conform their conduct to
the high standards set forth in the Rules. (pp. 16-17)
6. A claim based on tortious concealment has not been preserved for review by the Supreme Court. That notwithstanding, the
facts presented by the Baxts do not make out a claim for tortious concealment of evidence. (pp. 17-20)
7. By placing the signed agreement in Summit's files and by misleading the Baxts as to its source, Loloia and Sylvester violated
the mandate of our Court Rules that fair dealing with opposing parties is an absolute requirement even in an adversary system
such as ours. (pp. 20-24)
8. The Baxts may within 30 days seek to reopen the order of dismissal for the limited purpose of seeking recovery of
reasonable expenses from Liloia and Sylvester for violations of the discovery rules. Should they choose to do so, the trial court
should determine the scope of their misconduct and the appropriate amount of attorney's fees and costs to be assessed against
them. (pp. 24-26)
9. Liloia's and Sylvester's conduct requires that this matter be referred to the Office of Attorney Ethics for its review and
consideration. The Baxts should inform the OAE whether they intend to pursue sanctions against defendants for discovery
violations in order that the OAE may stay its review until the civil action is completed.
The judgment of the Appellate Division is AFFIRMED as modified.
JUSTICES HANDLER, O'HERN, STEIN and COLEMAN and JUDGE PRESSLER join in CHIEF JUSTICE
PORITZ's opinion. JUSTICES POLLOCK and GARIBALDI did not participate.
SUPREME COURT OF NEW JERSEY
A-
13 September Term 1996
SHERWOOD BAXT and SAIDA BAXT,
Plaintiffs-Appellants,
v.
GERALD A. LILOIA and ANTHONY J.
SYLVESTER,
Defendants-Respondents.
Argued September 9, 1996 -- Decided July 17, 1998
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at 284
N.J. Super. 221 (1995).
Helen Davis Chaitman argued the cause for
appellants (Ross & Hardies, attorneys; Ms.
Chaitman, George B. Gelman, of counsel).
Peter N. Perretti, Jr. argued the cause for
respondents (Riker, Danzig, Scherer, Hyland &
Perretti, attorneys; Mr. Perretti and Michael
Cole, of counsel; Harold L. Kofman, on the
brief).
The opinion of the Court was delivered by
PORITZ, C.J.
In this appeal, plaintiffs have asked the Court to recognize
a new cause of action premised upon a breach of the Rules of
Professional Conduct ("RPCs" or "Rules") adopted by the Court for
the governance of the legal profession. More specifically,
plaintiffs urge us to permit this new claim to be brought against
attorneys who represent an adversary of the claimant. A majority
of the Appellate Division declined to sanction lawsuits "based
solely on an allegation that the conduct of the[] defendants
violated the Rules of Professional Conduct."
284 N.J. Super. 221, 223 (1995) (Baxt II). The dissenting member would permit
civil liability upon a violation of the Rules resulting in
foreseeable injury to a third party. Id. at 224 (Dreier,
P.J.A.D., dissenting). The issue is before the Court as of right
pursuant to Rule 2:2-1(a)(2). See Manalapan Realty v. Township
Committee,
140 N.J. 366, 377 (1995). We agree with the majority
of the panel below and affirm with modifications not relevant to
this issue.
This case arose as a dispute over the propriety of litigation tactics used by defendants Gerald Liloia and Anthony Sylvester in an underlying foreclosure suit. Plaintiff Sherwood Baxt was a partner with Paul Hartman and Paul Baxt ("the debtors") in The Grove Mercantile Center ("Grove"). Both Sherwood Baxt and plaintiff Saida Baxt were defendants in the foreclosure suit brought by the Summit Trust Company ("Summit") alleging Grove's default on a construction loan from Summit to Grove. Defendants Liloia and Sylvester are attorneys who represented Summit in the foreclosure litigation.
Grove obtained construction financing for a commercial real estate project in Jersey City from Summit in October 1988 by way of two mortgage loans, one for $3.8 million and the other for $300,000. The original documents provided for periodic advances to Grove and for repayment of the entire debt on November 1, 1989. The debtors were also accorded the right to a six-month extension upon payment of $20,500. Before November 1989, the debtors realized they needed an extension of the construction loan beyond six months and sought an additional year from the bank, which Summit granted.
The debtors did not repay the loan at the end of the
one-year extension period and Summit instituted foreclosure proceedings in March 1991. At issue in the foreclosure litigation was whether the extension was granted subject to a mortgage modification agreement containing a release of any lender-liability counterclaim Grove may have had against Summit. Although the debtors later questioned whether the modification agreement had been executed, it was undisputed that Grove had paid two separate fees, each in the amount of $20,500 as required by the modification agreement, and that subsequently Summit advanced sums in excess of $1,400,000 to Grove.
In discovery Summit produced its credit file to Grove. The file contained a copy of the modification agreement signed only by a bank officer, Jennifer Calenda. However, when Summit's attorneys examined Grove's files, they found and copied an agreement signed by both Calenda and by Grove partner Paul Hartman. Summit later moved for summary judgment based in large part on the release provision of the modification agreement. The summary judgment motion and ensuing events constitute the gravamen of this action against Summit's attorneys, defendants Liloia and Sylvester. Defendants attached a copy of the modification agreement executed by Jennifer Calenda and Paul Hartman to the summary judgment motion. No reference was made to the source of the document. In response to the motion, the debtors contested the validity and enforceability of the release; however, they neither denied Hartman's execution of the agreement nor the fact of delivery of his executed copy to the bank, although Hartman had previously informed his attorney that he did not remember executing or returning the agreement to Summit.
Grove subsequently made a cross-motion for a determination of no deficiency liability and to compel the depositions of bank officers that the debtors had been seeking for some months. Prior to her first scheduled deposition, Grove's attorney requested access to the bank's credit file. The defendants instructed Summit officers to place the copy of the modification agreement signed by both Hartman and Calenda in the bank's files. Subsequently, in her December 4, 1991 deposition, bank officer Calenda said that Hartman had faxed a signed copy of the modification agreement to the bank and that additional monies would not have been disbursed to Grove had Summit not received the signed agreement. During Calenda's December 4 deposition and later at a December 7, 1991 deposition of a former Summit officer, the debtors' attorney asked for both the originals and faxed copies of the mortgage and note modification agreement in the bank's files. None were provided. The debtors' attorney reviewed her client's files before resuming Calenda's deposition on December 27, 1991 and realized that the modification agreement submitted with Summit's motion for summary judgment had come from the Grove files. At the deposition, the attorney asked Calenda "where [the agreement] came from" and defendant Liloia stated for the first time that the source of the document was the debtor's files.
Plaintiffs brought this action on June 18, 1992. Their complaint seeks damages for tortious concealment of evidence (Count I) and for alleged breaches of the RPCs (Count II). Plaintiffs ask for costs associated with the depositions and the review of their own files through which they learned that the document signed by Hartman came from those files. On defendants' motion to dismiss the complaint, the Chancery Division dismissed the second count in December 1992, concluding that plaintiffs' claim the RPCs had been violated was a collateral matter over which the court did not have "primary jurisdiction."
The parties settled the Grove foreclosure litigation by agreement on February 23, 1993, expressly reserving the plaintiffs' right to continue with the present lawsuit. Subsequently, the trial court found that plaintiffs could not maintain a cause of action based on spoliation of evidence because they had not demonstrated justifiable reliance on the copy of the modification agreement attached to Summit's motion. The court granted summary judgment to defendants.
The Appellate Division affirmed both the dismissal of the
RPC claim and the grant of summary judgment on the spoliation
claim.
281 N.J. Super. 50, 56-58 (1995) (Baxt I). A majority of
the panel examined prior New Jersey precedent and found that no
case had "involved a cause of action for damages by an adversary
premised solely on an attorney's alleged disregard of his ethical
responsibilities." Id. at 56. The majority's understanding of
the RPCs lies at the heart of its holding:
The underlying purpose of the Rules of
Professional Conduct . . . is not to serve as
a source of litigation, but rather to express
the fundamental standards required to uphold
the integrity of our legal system. The
interests the Rules of Professional Conduct
seek to vindicate are the interests of
society in assuring a legal system based on
integrity and honesty, not private interests.
The court declined to permit a new cause of action based on the
Rules. Judge Dreier concurred in the judgment, although he would
not have found plaintiffs precluded from recovery except for the
global settlement of the foreclosure lawsuit. Id. at 58-59
(Dreier, P.J.A.D., concurring).
On remand from this Court for reconsideration in light of
plaintiffs' assertion that the settlement of the Grove litigation
expressly excluded their claims against the defendants, the
Appellate Division reaffirmed its decision. Baxt II, supra, 284
N.J. Super. at 222-23. Judge Dreier dissented, finding that the
plaintiffs had asserted an actionable claim under the RPCs. Id.
at 223 (Dreier, P.J.A.D., dissenting).
This case raises the issue whether a violation of the Rules of Professional Conduct can be used to provide a basis for civil liability against an adversary's attorney. The Baxts' complaint asserts that defendants breached RPC 3.3 ("Candor Toward the Tribunal"), RPC 3.4 ("Fairness to Opposing Party and Counsel"), and RPC 4.1 ("Truthfulness in Statements to Others"). Plaintiffs have argued on appeal that defendants' conduct also violated RPC 1.2(d) ("Scope of Representation"). Plaintiffs press the Court to recognize a new cause of action for breach of the RPCs.
The New Jersey Rules of Professional Conduct are based on the American Bar Association (ABA) Model RulesSee footnote 1 as revised by the Supreme Court Committee on the Model Rules of Professional Conduct and modified and adopted by this Court on July 12, 1984. See R. 1:14. Although our Rules do not contain the explanatory material which introduces the ABA Model Rules, see Pressler, Current N.J. Court Rules, Introduction to Rules of Professional Conduct (1998), reference to the Scope section of the ABA Rules is instructive. On the issue before us, the section explicitly states:
Violation of a Rule should not give rise
to a cause of action nor should it create any
presumption that a legal duty has been
breached. The Rules are designed to provide
guidance to lawyers and to provide a
structure for regulating conduct through
disciplinary agencies. They are not designed
to be a basis for civil liability.
Furthermore, the purpose of the Rules can be
subverted when they are invoked by opposing
parties as procedural weapons. The fact that
a Rule is a just basis for a lawyer's self
assessment, or for sanctioning a lawyer under
the administration of a disciplinary
authority, does not imply that an antagonist
in a collateral proceeding or transaction has
standing to seek enforcement of the Rule.
Accordingly, nothing in the Rules should be
deemed to augment any substantive legal duty
of lawyers or the extra-disciplinary
consequences of violating such a duty.
[Model Rules of Professional
Conduct, Scope (1992).]
By this language, the ABA "intended to make clear that the
purpose of the Model Rules was to regulate lawyer conduct through
the disciplinary process, not to serve as a basis for civil
liability." See The Legislative History of the Model Rules of
Professional Conduct: Their Development in the ABA House of
Delegates 20 (1987).
Consonant with the intent of the ABA, no New Jersey case has
allowed a cause of action based solely on a violation of the
RPCs. See Sommers v. McKinney,
287 N.J. Super. 1, 13 (App. Div.
1996) ("Violation of the rules of professional conduct do[es] not
per se give rise to a cause of action in tort."); Ruberton v.
Gabage,
280 N.J. Super. 125, 130 (App. Div.) (same), certif.
denied,
142 N.J. 451 (1995); Petrillo v. Bachenberg,
263 N.J.
Super. 472, 483 (App. Div. 1993) (same), aff'd,
139 N.J. 472
(1995); Albright v. Burns,
206 N.J. Super. 625, 634 (App. Div.
1986) (same). Moreover, our research has found no case in any
other jurisdiction permitting the RPCs to be used in this
manner.See footnote 2 Whether analyzing the issue under the Model Rules, the
Model Code of Professional Responsibility, or other local ethics
provisions, no court has found a cause of action premised solely
on a breach of the relevant provisions to be viable. See, e.g.,
Terry Cove North, Inc. v. Marr & Friedlander, P.C.,
521 So.2d 22
(Ala. 1988) (holding that violation of state's legal ethics rules
alone does not create cause of action against attorney); Orsini
v. Larry Moyer Trucking, Inc.,
833 S.W.2d 366 (Ark. 1992) (same);
Allen v. Lefkoff, Duncan, Grimes & Dermer, P.C.,
453 S.E.2d 719
(Ga. 1995) (same); L & H Airco, Inc. v. Rapistan Corp.,
446 N.W.2d 372 (Minn. 1989) (same); Garcia v. Rodey, Dickason, Sloan,
Akin & Robb, P.A.,
750 P.2d 118 (N.M. 1988) (same); Lazy Seven
Coal Sales, Inc. v. Stone & Hinds, P.C.,
813 S.W.2d 400 (Tenn.
1991) (same); see also Mozzochi v. Beck,
529 A.2d 171, 176 (Conn.
1987) ("Every court that has examined this question has concluded
that the Code of Professional Responsibility does not, per se,
give rise to a third party cause of action for damages.");
Beattie v. Firnschild,
394 N.W.2d 107 (Mich. Ct. App. 1986)
(stating that violations of Code of Professional Responsibility
create rebuttable presumption of malpractice, but are not
negligence per se); Hizey v. Carpenter,
830 P.2d 646, 651 (Wash.
1992) (en banc) ("Because the CPR and RPC explicitly, and in what
we deem to be clear and unambiguous language, disclaim any intent
to create civil liability standards, we refuse to hold their
violation creates a cause of action for malpractice.").
Courts in New Jersey and elsewhere have nonetheless
recognized the relevance of the Rules in civil cases against
attorneys. See, e.g., Allen, supra, 453 S.E.
2d at 721 (finding
that "pertinent Bar Rules are relevant to the standard of care in
a malpractice action"); Petrillo, supra, 139 N.J. at 479 (finding
RPCs to be useful in determination "whether an attorney owes a
duty to a non-client third party"); Smith v. Haynsworth, Marion,
McKay & Geurard,
472 S.E.2d 612, 614 (S.C. 1996) (holding that,
"in appropriate cases, the RPC may be relevant and admissible in
assessing the legal duty of an attorney in a malpractice
action"); Lazy Seven Coal Sales, Inc., supra, 813 S.W.
2d at 405
(reasoning that, "[e]ven though . . . the Code does not define
standards for civil liability, the standards stated in the Code
are not irrelevant in determining the standard of care in certain
actions for malpractice"). Our courts have recognized that the
existence of a duty owed by an attorney may be supported by
reference to an attorney's obligations under the RPCs, and that
plaintiffs may present evidence that an attorney has violated the
RPCs in cases claiming the attorney has breached his or her duty
of care.
Thus, in Albright v. Burns, supra, the Appellate Division
found that an attorney had a duty to third party beneficiaries of
a will where the attorney had assisted his client in removing
substantial assets from decedent's estate prior to his death.
206 N.J. Super. at 632-33. The court drew support from the
"newly-adopted" Rules of Professional Conduct, citing RPC 1:15
(requiring a lawyer to deal properly with property belonging to
third person) and RPC 1.7 (generally limiting dual representation
where clients' interests are adverse) because the attorney
"represent[ed both] the estate and its principal debtor." Id. at
633-34. The court explained:
While violations of ethical standards do not
per se give rise to tortious claims, the
standards set the minimum level of competency
which must be displayed by all attorneys.
Where an attorney fails to meet the minimum
standard of competence governing the
profession, such failure can be considered
evidence of malpractice.
The Appellate Division has also allowed a former husband to
maintain a cause of action for abuse of process against his ex
wife's attorney. In Tedards v. Auty,
232 N.J. Super. 541, 548
(App. Div. 1989), the defendant was alleged to have obtained a
writ of ne exeat on his client's false certification and then to
have threatened further use of the writ to force a favorable
settlement and payment of counsel fees. The court characterized
the defendant's acts by reference to RPC 3.3(a)(4), noting that
"[t]he duty to represent a client does not shield an attorney
from the consequences of offering evidence that he knows is
false." Id. at 551. In this case, the rule was used as a
standard against which the defendant's conduct could be measured
in considering whether plaintiff's allegations were sufficient to
make out the elements of the tort of abuse of process.
In Petrillo v. Bachenberg, supra, this Court recently
approved prior Appellate Division opinions wherein attorneys were
found to "owe a limited duty in favor of specific non-clients."
139 N.J. at 479-80 (discussing R.J. Longo Constr. Co. v.
Schragger,
218 N.J. Super. 206, 209-10 (App. Div. 1987);
Albright, supra, 206 N.J. Super. at 632-33; Stewart v. Sbarro,
142 N.J. Super. 581, 593 (App. Div.), certif. denied,
72 N.J. 459
(1976)). Petrillo involved a buyer of real property who alleged
negligent misrepresentation by the seller's attorney for failure
to provide complete information about the results of percolation
tests conducted on the property. In determining that the
seller's attorney owed a duty to the buyer, we "recognize[d] that
attorneys may owe a duty of care to non-clients when the
attorneys know, or should know, that non-clients will rely on the
attorneys' representations and the non-clients are not too remote
from the attorneys to be entitled to protection." Id. at 483-84.
We said that the existence of a "duty to a non-client third party
[in these circumstances] depends on balancing the attorney's duty
to represent clients vigorously, Rules of Professional Conduct,
Rule 1.3 (1993), with the duty not to provide misleading
information on which third parties foreseeably will rely, Rules
of Professional Conduct, Rule 4.1 (1993)." Id. at 479; see also
Malewich v. Zacharias,
196 N.J. Super. 372, 376-77 (App. Div.
1984) (finding support in Disciplinary Rules for duty to opposing
counsel where negligent or intentional misrepresentation of
third-party defendant had directly caused counsel's malpractice).
In Albright, supra, plaintiffs alleged breach of fiduciary
duty and negligence; in Tedards, supra, plaintiff claimed abuse
of process against a former adversary's attorney; and in
Petrillo, supra, the claim was for negligent misrepresentation.
In each of these cases, the court was required to determine
whether, in the factual context, a duty was owed by an attorney
to third parties. In deciding whether a duty existed and, also,
whether the attorney had breached the standard of care, the Court
considered pertinent RPCs. Neither the Appellate Division nor
this Court has held, however, that the RPCs in themselves create
a duty or that a violation of the RPCs, standing alone, can form
the basis for a cause of action. We decline to do so today.
The myriad of courts that have considered this issue have
focused on the same concerns we express in this opinion. First,
there is general reliance on the ABA Model Code, and frequently a
particular state's code, for the principle that state
disciplinary codes are not designed to establish standards for
civil liability but, rather, to provide standards of professional
conduct by which lawyers may be disciplined. See supra at ___
(slip op. at 8); Lazy Seven Coal Sales, Inc., supra, 813 S.W.
2d
at 404 (quoting Terry Cove North, supra, 521 So.
2d at 23);
Garcia, supra, 750 P.
2d at 123. Indeed, the Supreme Court of
Washington has refused to allow juries even to be informed about
the RPCs, not only because they do not set the standard for civil
liability, but also because, in that court's view, they "provide
only vague guidelines" for governing the practice of law within
the State. Hizey, supra, 830 P.
2d at 652. Although we approve
reference to the RPCs in assessing the existence of a duty to
third parties and as a measure of the minimum standard of care,
we are mindful of the Washington court's admonition in deciding
that a new cause of action based on the RPCs is unwarranted.
The disciplinary rules serve purposes that are substantially
different from those of an individual litigant in a civil action.
The Hizey Court has looked closely at those differences:
First, a lawyer may be disciplined even if
the misconduct does not cause any damage.
The rationale is the need for protection of
the public and the integrity of the
profession. Second, although the severity of
the breach may affect the nature of the
discipline, the prophylactic purpose of the
ethical rules may result in a sanction even
if the conduct would not otherwise constitute
a civil wrong. Third, even if the injured
party initiates a disciplinary complaint,
that individual is not a party to the
proceeding.
[Ibid. (citation and internal quotation
marks omitted).]
The New Jersey disciplinary system is also designed to protect
the public and "the integrity of the profession."
Moreover, although various of the Rules set forth
prohibitions, others are framed as precatory guidelines. Compare
RPC 3.3(a)(1) ("A lawyer shall not knowingly . . . make a false
statement of fact or law to a tribunal. . . ."), with RPC 2.1
("In representing a client, a lawyer shall exercise independent
professional judgment and render candid advice. In rendering
advice, a lawyer may refer not only to law but to other
considerations, such as moral, economic, social and political
facts, that may be relevant to the client's situation."), and RPC
3.2 ("A lawyer shall make reasonable efforts to expedite
litigation consistent with the interests of the client and shall
treat with courtesy and consideration all persons involved in the
legal process."). Many of the disciplinary rules are
aspirational in nature and, therefore, particularly unsuitable
for use outside of the disciplinary system. Certainly, a claim
against a lawyer for failure to treat a third party with courtesy
and consideration, in those cases where such conduct does not
otherwise constitute an actionable tort, would be a most
difficult claim to put forward. The concept of professionalism
embodied in RPC 3.2 lies at the core of what it means to be a
good lawyer; yet, a lack of courtesy and consideration, though
reprehensible, would be an inappropriate predicate upon which to
base a civil action. Even when consideration of a rule is useful
in determining whether a duty exists or a standard of care has
been breached, the "[r]ule must be intended to protect a person
in the plaintiff's position or be addressed to the particular
harm suffered by the plaintiff." Allen, supra, 453 S.E.
2d at
721-22.
Plaintiffs have, however, expressed concern about whether
New Jersey's disciplinary system serves as an effective deterrent
to unethical behavior. Yet, our system has been recognized as
"one of the most demanding disciplinary systems in the nation."
James R. Zazzali, Disciplining Attorneys: The New Jersey
Experience, 1 Geo. J. Legal Ethics 659, 661 (1988). Chief
Justice Wilentz wrote, almost twenty years ago, "that the
principal reason for discipline is to preserve the confidence of
the public in the integrity and trustworthiness of lawyers in
general." In re Wilson,
81 N.J. 451, 456 (1979). He believed
that "public confidence in this Court and in the bar as a whole
requires the strictest discipline." Id. at 461. His message
remains powerful today.See footnote 3 We reject plaintiffs' contention that a
cause of action based on a violation of the RPCs is necessary to
ensure that attorneys conform their conduct to the high standards
set forth in the Rules.
In the courts below, plaintiffs also alleged tortious concealment of evidence by defendants; however, the parties dispute whether this claim is properly before this Court. Defendants contend that the claim has not been preserved because it was not expressly addressed by the dissent in the Appellate Division. See R. 2:2-1 (limiting the scope of as-of-right appeals to Supreme Court to "those issues as to which . . . there is a dissent in the Appellate Division"). Plaintiffs assert that the claim is properly before us because the dissenting judge referenced his earlier concurring opinion, stating that it "should have been a dissent," Baxt II, supra, 284 N.J. Super. at 224 (Dreier, J., dissenting), and because the earlier concurrence noted "little difference between the liability for spoliation of evidence[See footnote 4] and the alleged acts of defendants," Baxt I, supra, 281 N.J. Super. at 59. In essence, plaintiffs argue that the dissenting judge incorporated by reference the views expressed in his earlier concurring opinion.
We do not read the dissent's passing reference in his earlier concurring opinion as an unambiguous pronouncement that defendants' acts constituted tortious concealment of evidence. Moreover, the dissent--which is the basis for plaintiffs' appeal -does not mention plaintiffs' tortious concealment claim but, rather, specifically focuses on "plaintiffs' civil claim for breach of the ethical rules." Baxt II, supra, 284 N.J. Super. at 224 (Dreier, J., dissenting). We conclude that a claim based on tortious concealment has not been preserved for review by this Court.See footnote 5
Nonetheless, we consider it appropriate to make a few observations concerning the principles underlying a tortious concealment claim. This claim was first recognized in New Jersey as recently as 1991 in Viviano v. CBS, Inc., 251 N.J. Super. 113, 123-26 (App. Div. 1991), certif. denied, 127 N.J. 565 (1992). The plaintiff in Viviano was hurt when a machine she was operating malfunctioned causing substantial injuries to her hand. Despite repeated discovery requests, the defendant withheld an internal memorandum written three days after the accident that would have provided "key information plaintiff needed to recover for her injuries." Id. at 124. To prevail on a claim of tortious concealment, the Appellate Division required plaintiff to prove that: there was a legal obligation on defendant's part to disclose; the information was material to plaintiff's case; plaintiff could not have "readily" obtained the information without disclosure by the defendant; there was intentional nondisclosure; and plaintiff "was harmed by relying on the nondisclosure." Id. at 123.
Viviano is a textbook case for tortious concealment. In Viviano, defendant was legally required to comply with plaintiff's discovery requests. Instead, defendant was found to have purposefully held back a memorandum that provided the very information that plaintiff needed to prove her case. This information was "material" because it went to the crux of plaintiff's complaint. And, except for a fortuitous accident in which plaintiff gained access to her personnel file, she could not have found the critical memorandum without disclosure by the defendant. In the case at bar, as the Baxts' attorney candidly admitted during oral argument before the Court, the answer to her question about the source of the signed modification agreement lay in her own client's files, files she could be presumed to have reviewed by the time of the bank's summary judgment motion. When she did review those files, she learned that they were the source of the signed agreement. Moreover, discovery of the provenance of the signed modification agreement still left open the question whether it was an enforceable document. Most important, the agreement was a relatively insignificant factor in a case involving a default on loans totaling $5,500,000. When the plaintiffs ultimately settled the foreclosure litigation, they surely weighed the value of their lender-liability counterclaim against Summit in determining that settlement was in their best interest.
These facts do not make out a claim for tortious concealment of evidence.
The record before this Court presents an object lesson in unprofessional behavior by experienced and knowledgeable trial lawyers. For a period spanning the course of at least one month, between November and December 1991, defendants Liloia and Sylvester knowingly and deliberately obstructed the discovery process in the Summit foreclosure action by misleading plaintiffs about the source of the signed modification agreement and by refusing to respond candidly to specific requests for direct and accurate information. The sequence of events during which this behavior took place can be briefly described.
In June 1991, the bank produced its credit file for Grove's inspection. At that time the file contained one copy of the modification agreement signed only by bank officer Jennifer Calenda. From July 31 to August 1, 1991, Grove in turn produced documents for the bank's inspection, wherein defendants found and copied an original modification agreement signed by Paul Hartman and witnessed, notarized and signed by Calenda. Subsequently, on September 27, 1991, Summit filed a motion for summary judgment, attaching in support a copy of the executed modification agreement obtained through discovery. Grove opposed Summit's motion and filed a cross-motion to compel depositions, which was granted.
Grove's attorney, by letter dated November 27, 1991, requested that defendants make the "bank's original credit file" available for her use during her scheduled depositions. Presumably this request was not honored at the November 30, 1991 deposition of Scott Witherspoon, a former bank officer, as Grove's attorney renewed her request by letter dated December 1, 1991. Prior to the next scheduled deposition, defendant Liloia instructed Calenda to insert the copy of the agreement signed by Hartman and found in Grove's files into the bank's credit file.
At the December 4, 1991 deposition of Calenda, Grove's attorney attempted to find out whether the bank had ever received an original copy of the modification agreement signed by Paul Hartman. Defendants Liloia and Sylvester promised to investigate whether the bank had received an original or a facsimile only. During the deposition, Grove's attorney also repeated her request for access to the bank's original files. Although it does not appear that she received the files at the deposition, defendant Sylvester did indicate by letter dated December 5, 1991 that "the original files were produced again" for her inspection on December 4.
On December 7, 1991, prior to a second deposition of Witherspoon, Grove's attorney reviewed what Sylvester characterized as "the original bank files" and listed for the record the documents she found, including the copy of the signed modification agreement. In the deposition which followed, the attorney repeatedly requested that defendant Sylvester produce "the document on which [the bank] moved for summary judgment." Even more specifically, she asked Sylvester if "[t]he copy annexed to the motion for summary judgment[] was . . . taken from the bank's files?" The following colloquy took place:
Mr. Sylvester: I'm not here to answer questions.
I don't know. You know, I'm not going to answer the
questions.
Ms. Chaitman: Can you tell me where else it would
have been?
Mr. Sylvester: I'm not saying where it was taken
from, I'm not here.
Ms. Chaitman: Let me say this. When the
documents were produced to us, there was no Mortgage
and Note Modification Agreement produced with any
signatures on it other than Jennifer's and . . . I'm
wondering if it came out of some file other than
produced to us. . . .
Mr. Sylvester: Okay. I'll take your request under
advisement. Let's proceed.
At this point, if not before, defendants certainly should have
disclosed that the modification agreement on which the bank moved
for summary judgment was a copy of the agreement in the bank's
files, having been placed there by the defendants after they
discovered it among Grove's papers. This disclosure was not
made.
On December 7, 1991, after the Witherspoon deposition,
Grove's attorney wrote to defendants "to repeat the requests
. . . that you produce all originals of the mortgage and note
modification agreement . . . and all faxed copies in the Bank's
files, within the next five days." In subsequent letters to
defendant Sylvester dated December 11 and 17, 1991, Grove's
attorney again complained that Sylvester had not responded to her
prior requests. It was only at the continuation of Calenda's
deposition, on December 27, 1991, that Liloia finally stated that
the signed copy of the agreement had come from the Grove files.
The inference that may be drawn from this pattern of
behavior is that defendants were stonewalling and that they
intended to conceal from Grove's attorney the source of the
signed copy of the agreement even after repeated clear requests
for that information. That defendants placed the copy of the
signed agreement in the bank's files prior to producing them for
inspection as the bank's "original" files is particularly
disturbing and suggests purposeful misrepresentation. Such
conduct appears on its face to violate the New Jersey Rules
Governing Civil Practice and the Rules of Professional Conduct.
Although a motion seeking, among other things, an award of attorney's fees against Summit was filed in the foreclosure litigation, the motion is not in the record provided to us. We do know that in early January 1992, after the above-described events took place, Grove sought sanctions against Summit based in large part on the conduct of the bank's attorneys and seeking various forms of relief including reimbursement for counsel fees.See footnote 6 The trial court consolidated the present lawsuit with the foreclosure litigation for discovery purposes only and, on December 18, 1992, issued certain rulings from the bench. The Summit case thereafter settled. It does not appear that Grove's sanctions motion was decided before the Summit litigation settled, or that the Baxts' right to seek sanctions against Liloia and Sylvester was specifically preserved.
We observe that Rule 4:23-3 provides for reasonable expenses where the opposing party "fails to admit . . . the truth of any matter as requested under R. 4:22," should the party requesting the admission thereafter prove the truth of the matter, and that Rule 4:23-4 provides for costs where a party "fails to comply with a demand for a copy of a document made pursuant to R.
4:18-2." The relief sought here--attorney's fees and costs- would have been available under those rules.See footnote 7 Plaintiffs made repeated requests concerning the origin of the signed modification agreement. Those requests were ignored or answered in a deceptive manner by Summit's attorneys. By placing the signed agreement in Summit's files and by misleading plaintiffs as to its source, defendants violated the mandate of our Court Rules that fair dealing with opposing parties is an absolute requirement even in an adversary system such as ours. Justice Pollock's concurrence in Kernan v. One Washington Park Urban Renewal Assocs., ___ N.J. ___, ___ (1998) (slip op. at 12), is equally applicable here:
More egregious examples of discovery
abuse may exist. The nondisclosure in this
case, however, suffices to make the point.
Shenanigans have no place in a law suit.
Modern litigation is too time consuming and
expensive for courts to tolerate discovery
abuses. For over fifty years, courts have
endeavored to transform civil litigation from
a battle royal to a search for truth.
That the Baxts' attorney was able to discover the provenance
of the signed modification agreement does not justify misuse of
the discovery process. But for the settlement of the foreclosure
litigation, plaintiffs could have sought attorney's fees based on
defendants' conduct in that lawsuit. Instead, the Baxts reserved
the right to seek attorney's fees against defendants in this
action. Because the dismissal of this action leaves plaintiffs
without a remedy for defendants' discovery violations, and
because the settlement agreement put defendants on notice that
the issue of attorney's fees remained to be litigated, in the
unique circumstances of this case we will permit plaintiffs to go
forward with their reserved right to seek counsel fees by way of
a motion pursuant to Rule 4:50-1(f) ("On motion, with briefs, and
upon such terms as are just, the court may relieve a party . . .
from a final judgment or order for . . . (f) any other reason
justifying relief from the operation of the judgment or order.").
They may within 30 days seek to reopen the order of dismissal in
Summit Trust Company v. Grove Mercantile Center for the limited
purpose of seeking recovery of reasonable expenses from Gerald
Liloia and Anthony Sylvester for violations of the discovery
rules. See R. 4:23-3, -4. If plaintiffs pursue their case in
that forum, the trial court should determine the scope of
defendants' misconduct and the appropriate amount of attorney's
fees and costs to be assessed against them.See footnote 8
RPC 8.3(a) requires that "[a] lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority." Grove's attorney should have reported the violations alleged herein to the Office of Attorney Ethics ("OAE") or the local District Ethics Committee at the time they occurred. She did not.
Defendants' conduct requires that we refer this matter to the OAE for its review and consideration. Plaintiffs should inform the OAE whether they intend to pursue sanctions against defendants for discovery violations in order that the OAE may stay its review until the civil action is completed.See footnote 9
As modified, the judgment of the Appellate Division is affirmed.
JUSTICES HANDLER, O'HERN, STEIN, and COLEMAN and JUDGE PRESSLER join in CHIEF JUSTICE PORITZ's opinion. JUSTICES POLLOCK and GARIBALDI did not participate.
NO. A-13 SEPTEMBER TERM 1996
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
SHERWOOD BAXT and SAIDA BAXT,
Plaintiffs-Appellants,
v.
GERALD A. LILOIA and ANTHONY J.
SYLVESTER,
Defendants-Respondents.
DECIDED July 17, 1998
Chief Justice Poritz PRESIDING
OPINION BY Chief Justice Poritz
CONCURRING OPINION BY
DISSENTING OPINION BY
CHECKLIST
MODIFY &
AFFIRM
CHIEF JUSTICE PORITZ
X
JUSTICE HANDLER
X
JUSTICE O'HERN
X
JUSTICE STEIN
X
JUSTICE COLEMAN
X
JUDGE PRESSLER
X
TOTALS
6
Footnote: 1 1
The Model Rules replaced the Code of Professional
Responsibility (CPR), which had been adopted by the ABA in 1970.
The CPR consisted of Canons, Ethical Considerations, and
Disciplinary Rules. This tripartite structure was considered
confusing and difficult to administer. See Note, The Evidentiary
Use of the Ethics Codes in Legal Malpractice: Erasing a Double
Standard,
109 Harv. L. Rev. 1102, 1103 (1996).
Footnote: 2 2
Courts in other jurisdictions have relied on the Scope
section of the ABA Model Code in holding that violations of the
Rules of Professional Conduct do not give rise to an independent
cause of action against an attorney. See, e.g., Orsini v. Larry
Moyer Trucking, Inc.,
833 S.W.2d 366 (Ark. 1992); Smith v.
Haynsworth, Marion, McKay & Geurard,
472 S.E.2d 612 (S.C. 1996);
Hizey v. Carpenter,
830 P.2d 646 (Wash. 1992).
Footnote: 3 3
Seven years ago, the Court described the New Jersey attorney
disciplinary system as a "system second to none." In re Konopka,
126 N.J. 225, 236 (1991) (citing Bumsted & Guttman, New Jersey
Leads Nation with Stringent Discipline, Beyond the Law, Gannett
News Service Special Report, pt. II at 12 (1986)).
Today, that system has been streamlined and made more accessible
to the general public through rule changes instituted in 1994.
See R. 1:20-9(b), (c) (stating that "[a]ll proceedings shall be
public except" in certain enumerated instances and that "all
documents and records filed subsequent to the filing and service
of a complaint . . . shall be available for public inspection");
Cammarere, Attorney Penalties Zoom,
7 N.J. Lawyer 1, 1, 7 (May 4,
1998) (reporting on "tougher" and "more efficient" new
disciplinary system); Office of Attorney Ethics Report to the
Supreme Court of New Jersey and Disciplinary Oversight Committee
(February 25, 1998) (providing overview of expeditious handling
of ethics matters in 1997).
Footnote: 4 4
As a technical matter, the tort of spoliation has not been
alleged. The term "spoliation" is defined as "[t]he intentional
destruction of evidence . . . . The destruction, or the
significant and meaningful alteration of a document or
instrument." Black's Law Dictionary 1401 (6th ed. 1990)
(citation omitted); see Viviano v. CBS Inc.,
251 N.J. Super. 113,
125-26 (App. Div. 1991) (noting that destruction of evidence is
element of tort of spoliation), certif. denied,
127 N.J. 565
(1992). In this case plaintiffs' claim of tortious concealment
arises from the allegation that defendants concealed the source
of the modification agreement attached to their motion for
summary judgment, not that defendants destroyed or substantially
altered the agreement.
Footnote: 5
--------------- FOOTNOTES ---------------
Footnote 1 When there is any question whether a dissent in the Appellate Division has ruled on a specific claim, a petition for certification should be filed seeking review by the Supreme Court of any such claim. R. 2:12-9. Footnote: 6 Footnote 2 This information can be found in an affidavit submitted by Grove's attorney in support of the cross-motion and provided in plaintiffs' appendix. Footnote: 7 Footnote 3 Had the conduct at issue in this case occurred subsequent to the adoption of Rule 1:4-8 in 1996, sanctions under that rule would also have been available. Footnote: 8 Footnote 4 Defendants, citing Hawkins v. Harris, 141 N.J. 207, 214-17(1995), contend that their conduct is subject to the privilege of
communications in judicial proceedings. We need not in this case reach the question of the extent of the privilege in New Jersey. Suffice it to say, defendants cannot raise the privilege as a defense in a discovery sanctions proceeding. Footnote: 9Our decision is based on the record before us on motion for summary judgment below. The trial court, if plaintiffs seek sanctions for discovery rule violations, and the OAE shall make their determinations de novo on the record as appropriately supplemented pursuant to this decision.