Photo by LightField Studios/Shutterstock.com

An attorney's pledge of anticipated counsel fees to pay off a debt can be considered an account receivable under the Uniform Commercial Code, the New Jersey Supreme Court ruled on Tuesday.

The court's unanimous, per curiam ruling affirmed an Appellate Division panel reaching the same conclusion in upending a $1.6 million award in a legal malpractice case involving a corporate whistleblower and his former law firm, and an unrelated malpractice case against his second attorney.

The court agreed with Appellate Division Judges Michael Guadagno, Joseph Yannotti and Jerome St. John that a creditor, OKS Realty, should be placed first in line of a series of creditors to a New Jersey attorney since it filed a financing statement under Article 9 of the Uniform Commercial Code with the U.S. Treasury Department.

The court said OKS should be prioritized before other creditors, a law firm and an accounting firm, because of the pledge by the now-retired attorney, Woodland Park solo Diane Acciavatti, to use an anticipated fee to pay off a loan.

“An attorney's pledge of anticipated counsel fees can be considered an account receivable,” Guadagno previously wrote for the Appellate Division panel, in August 2016.

The ruling means that a company that loaned $125,000 to Acciavatti moves ahead of two other creditors since it was the only one to file a financing statement with the Treasury Department.

“OKS met the requirements … for its security interests to attach to Acciavatti's counsel fees,” Guadagno said. “Whether an attorney's pledge of anticipated counsel fees can be considered a security interest under Article 9 of the Uniform Commercial Code … is an issue of first impression in New Jersey. We hold that it can.”

OKS's attorney, Robyne LaGrotta, said she will now move to claim funds that already have been paid to two other creditors—Springfield's Gourvitz & Gourvitz, and an accounting firm, now called RotenbergMeril. Gourvitz has been paid $83,284 and RotenbergMeril has been paid $133,652.

The multipronged litigation stretches back to 2007 when a plaintiff, John Granata, retained Acciavatti to represent him in legal malpractice lawsuit against his former lawyer, Edward Broderick Jr., and his firm, Broderick Newmark & Grather in Morristown.

Broderick had represented Granata in a whistleblower action against his former employer, Prudential Insurance Co. of America. Granata, a salesman, claimed he was fired in 2006 because he had complained to superiors that the company was improperly discriminating against agents like himself who served inner-city areas with large minority populations, through such practices as “redlining.” The company said it fired Granata for allegedly signing a client's name to a form authorizing a transfer of the client's funds from a money market account to mutual bonds.

Granata had been seeking $3 million in damages from Prudential, which forced the lawsuit into arbitration. An panel of arbitrators award Granata $28,000, but assessed him $12,530 in fees and costs.

Granata, then represented by Acciavatti, sued Broderick and his firm for malpractice. A jury found in Granata's favor and awarded him $910,000 in damages. With prejudgment interest, the award came to nearly $1.6 million. An Appellate Division panel composed of Judges St. John, Clarkson Fisher Jr. and Alexander Waugh Jr. later overturned that verdict on the grounds of improperly introduced testimony.

Acciavatti left the practice of law after the appeals court ruling, and another firm took over the case and eventually settled it for $840,000. Before she retired, however, she was sued by a client represented by Gourvitz & Gourvitz and RotenbergMeril. LaGrotta, who heads a firm in Parsippany, said she did not know the details behind that lawsuit.

Acciavatti had agreed to pay Gourvitz & Gourvitz $82,500 and RotenbergMeril $75,000 out of funds she anticipated from Granata's lawsuit against Broderick, according to the court. Acciavatti eventually defaulted on those agreements, the court said. Both Gourvitz & Gourvitz and RotenbergMeril had filed liens against Acciavatti.

At the time the action was pending against Acciavatti, she obtained the $125,000 from OKS, which then filed the notice with the Treasury Department.

After the settlement was reached in the Broderick matter, all three creditors moved to be paid. A trial judge ruled that OKS should be third in line, and OKS appealed.

The panel of Guadagno, Yannotti & St. John said OKS should have been first in line because of its UCC filing with the Treasury Department. The court's Tuesday ruling affirmed that holding.

Ari Gourvitz, representing his firm, declined to comment. RotenbergMeril's attorney, Robert Podvey of the Newark office of Connell Foley, was away from his office and could not be reached.

Photo by LightField Studios/Shutterstock.com

An attorney's pledge of anticipated counsel fees to pay off a debt can be considered an account receivable under the Uniform Commercial Code, the New Jersey Supreme Court ruled on Tuesday.

The court's unanimous, per curiam ruling affirmed an Appellate Division panel reaching the same conclusion in upending a $1.6 million award in a legal malpractice case involving a corporate whistleblower and his former law firm, and an unrelated malpractice case against his second attorney.

The court agreed with Appellate Division Judges Michael Guadagno, Joseph Yannotti and Jerome St. John that a creditor, OKS Realty, should be placed first in line of a series of creditors to a New Jersey attorney since it filed a financing statement under Article 9 of the Uniform Commercial Code with the U.S. Treasury Department.

The court said OKS should be prioritized before other creditors, a law firm and an accounting firm, because of the pledge by the now-retired attorney, Woodland Park solo Diane Acciavatti, to use an anticipated fee to pay off a loan.

“An attorney's pledge of anticipated counsel fees can be considered an account receivable,” Guadagno previously wrote for the Appellate Division panel, in August 2016.

The ruling means that a company that loaned $125,000 to Acciavatti moves ahead of two other creditors since it was the only one to file a financing statement with the Treasury Department.

“OKS met the requirements … for its security interests to attach to Acciavatti's counsel fees,” Guadagno said. “Whether an attorney's pledge of anticipated counsel fees can be considered a security interest under Article 9 of the Uniform Commercial Code … is an issue of first impression in New Jersey. We hold that it can.”

OKS's attorney, Robyne LaGrotta, said she will now move to claim funds that already have been paid to two other creditors—Springfield's Gourvitz & Gourvitz, and an accounting firm, now called RotenbergMeril. Gourvitz has been paid $83,284 and RotenbergMeril has been paid $133,652.

The multipronged litigation stretches back to 2007 when a plaintiff, John Granata, retained Acciavatti to represent him in legal malpractice lawsuit against his former lawyer, Edward Broderick Jr., and his firm, Broderick Newmark & Grather in Morristown.

Broderick had represented Granata in a whistleblower action against his former employer, Prudential Insurance Co. of America. Granata, a salesman, claimed he was fired in 2006 because he had complained to superiors that the company was improperly discriminating against agents like himself who served inner-city areas with large minority populations, through such practices as “redlining.” The company said it fired Granata for allegedly signing a client's name to a form authorizing a transfer of the client's funds from a money market account to mutual bonds.

Granata had been seeking $3 million in damages from Prudential, which forced the lawsuit into arbitration. An panel of arbitrators award Granata $28,000, but assessed him $12,530 in fees and costs.

Granata, then represented by Acciavatti, sued Broderick and his firm for malpractice. A jury found in Granata's favor and awarded him $910,000 in damages. With prejudgment interest, the award came to nearly $1.6 million. An Appellate Division panel composed of Judges St. John, Clarkson Fisher Jr. and Alexander Waugh Jr. later overturned that verdict on the grounds of improperly introduced testimony.

Acciavatti left the practice of law after the appeals court ruling, and another firm took over the case and eventually settled it for $840,000. Before she retired, however, she was sued by a client represented by Gourvitz & Gourvitz and RotenbergMeril. LaGrotta, who heads a firm in Parsippany, said she did not know the details behind that lawsuit.

Acciavatti had agreed to pay Gourvitz & Gourvitz $82,500 and RotenbergMeril $75,000 out of funds she anticipated from Granata's lawsuit against Broderick, according to the court. Acciavatti eventually defaulted on those agreements, the court said. Both Gourvitz & Gourvitz and RotenbergMeril had filed liens against Acciavatti.

At the time the action was pending against Acciavatti, she obtained the $125,000 from OKS, which then filed the notice with the Treasury Department.

After the settlement was reached in the Broderick matter, all three creditors moved to be paid. A trial judge ruled that OKS should be third in line, and OKS appealed.

The panel of Guadagno, Yannotti & St. John said OKS should have been first in line because of its UCC filing with the Treasury Department. The court's Tuesday ruling affirmed that holding.

Ari Gourvitz, representing his firm, declined to comment. RotenbergMeril's attorney, Robert Podvey of the Newark office of Connell Foley, was away from his office and could not be reached.