With New Jersey at the forefront of extending liability for legal malpractice to non-clients of lawyers, the New Jersey Supreme Court has weighed in on the question of whether successful non-client plaintiffs are entitled to attorneys’ fees under Saffer v. Willoughby, 143 N.J. 256 (1996). Saffer generally authorizes the recovery of attorneys’ fees for clients that have succeeded in a legal malpractice claim, and cases interpreting the rule have described the principle as grounded in the significance of the attorney-client relationship.

In Innes v. Marzano-Lesnevich, No. A-16-14 (074291), 2015 N.J. LEXIS 331 (N.J. Apr. 26, 2016), the New Jersey Supreme Court refused to draw a bright-line rule precluding non-clients from recovering attorneys fees in legal malpractice actions, but instead recognized that attorneys acting in a fiduciary capacity for the benefit of a non-client may be exposed to liability for attorneys’ fees based on a finding that the attorney intentionally breached the fiduciary duty owed.

Innes involved a contentious custody dispute in which the husband and wife agreed to deposit their child’s passport in trust with the wife’s attorney to secure the parents’ agreement that their child would not be removed from the country without the other’s consent. The wife discharged her attorney, and her new attorney released the child’s passport to the wife. Following the release, the child was removed to her mother’s native Spain where she has remained with no meaningful contact with the husband, her father, for over ten years.

The father sued the attorney who released the passport and was successful before a jury. The trial court granted post-trial motions for an award of attorneys’ fees under Saffer concluding that the father had established a breach of a professional duty owed to the father, and the Appellate Division affirmed.

The Supreme Court, in a 3-2 vote, with two justices not participating, affirmed the right to collect attorneys’ fees, but remanded for a determination of whether the wife’s attorney intentionally breached her fiduciary duty. The Court’s decision will likely be cited by proponents of both those in favor of attorneys’ fee awards, and those opposed to the expansion of Saffer’s scope. Proponents will cite its expansion of the availability of attorneys’ fees to analogous fiduciary roles and contexts, while opponents will cite the opinion’s limiting language.

While the Court’s opinion attempts to limit its application to “attorneys acting in a fiduciary capacity as trustees and escrow agents for both [the client and non-client],” the dissent’s concern that the decision “deals the American Rule yet another blow by expanding awards of attorneys’ fees to non-clients of attorneys in escrow settings” is well-founded. The majority noted prior decisions emphasizing the significance of the attorney-client relationship to the Saffer rule, but nevertheless imposed liability for attorneys’ fees based on the attorney’s fiduciary relationship with the non-client. As noted by the dissent, attorneys now occupy a position “worse than all others who may act in an escrow capacity.” Whether this expansion of liability for attorneys fees to non-clients bleeds into other escrow agents, or leads to disputes over whether the duty owed by an attorney to a non-client is a “fiduciary” one as envisioned in Innes, appears to be fact intensive and the extent of this expansion remains to be seen.