In the law, "attorney’s fees are awarded…" carry awesome power.  Traditionally, the American rule is that each side bears its own attorney fees unless there is an agreement or a statute which grants attorney fees to the prevailing party.  Attorney fees are awarded in L & T litigation, based upon the usual rental lease; in discrimination cases by statute, and so on.

Then there is the unique New Jersey legal malpractice fee shifting rule.  In a story by the National Law Journal, we see:

"A New Jersey appeals court ruled Feb. 18 that a plaintiff who won a $20,000 settlement from a lawyer and two business entities can pursue the lawyer for the entire $144,000 legal fee expended in the case, even though the non-lawyers paid two-thirds of the settlement.

The three-judge panel ruled in Geranio v. FEC Mortgage Corp. , A-4839-06, that under New Jersey’s unique fee-switching rules, West Orange, N.J., lawyer Anthony Gualano is liable for the entire legal fees of the plaintiff in the underlying case, which alleged malpractice in the handling of a property refinancing. The new and old mortgage holders were also defendants.

The suit by Steven Geranio alleged that Gualano, as lawyer for FEC Mortgage Co. — and as the only attorney at the closing — failed to spot a $15,000 error in the payoff statement. Geranio also sued FEC for not noticing the error and claimed that the mortgage company being paid off, LHW Development Corp., unjustly enriched itself by accepting the $15,000.

The case settled for $20,000 — the full substantive damages plus interest — but that didn’t end the matter.

Under Saffer v. Willoughby , 143 N.J. 256 (1996), the costs of pursuing errant lawyers are considered consequential damages of malpractice and can be recovered. That meant a malpractice liability trial was necessary to determine that a fee award was warranted.

Bergen County Superior Court Judge Lawrence Smith found Gualano liable and a subsequent judge, Richard Donohue, set the damages at $38,000 — not the $144,000 requested — on the principle that much of the plaintiffs fees were caused by the pursuit of the business entities.

That was wrong, the appeals court said. "The judge failed to consider the legal fees plaintiffs incurred in having to litigate claims against FEC and LHW in order to recoup the $15,000 overpayment," Judges Michael Winkelstein, Jose Fuentes and William Gilroy said in a per curiam opinion.

The judges said Gualano was negligent in various ways that caused the plaintiffs to pay off their mortgage. "Thus, were it not for Gualano’s negligence, plaintiffs would not have had to file suit against FEC and LHW to recoup the overpayment," they said. "The motion judge, therefore, should have considered plaintiffs’ counsel’s legal work [performed] before the $20,000 settlement was reached."

There have been rulings that lawyers can be assessed only the percentage of the plaintiffs fees attributed to the lawyers’ negligence if the percentage is apportioned at a trial.

In this case, the defendants agreed on a three-way split before the end of the trial. Gualano’s lawyer, Allan Maitlin of Sachs, Maitlin, Fleming & Green in West Orange, argued that the one-third split should apply to the fee as well or that there should be a retrial to apportion liability among the defendants.

But the court said Gualano agreed to the settlement knowing there was no court determination of percentage of liability and that he is on the hook for the cost of the pursuit of all the defendants."