Focazio, M.D. v. Arthur St. Realty, LLC, ___ N.J. Super. ___ (App. Div. 2025). As Judge Vinci stated in his opinion for the Appellate Division in this case, “[i]t has long been the rule in New Jersey that a tort claim cannot be assigned prior to judgment.” This case, which alleged legal malpractice, centered on agreements that plaintiff entered into with the opposing party in the lawsuit that underlay the malpractice action (“Tsairis”) and with his attorneys in that lawsuit.
Tsairis prevailed against plaintiff in an arbitration in that underlying case, and plaintiff entered into a settlement agreement (“the Security Agreement”) with Tsairis under which plaintiff was to pay Tsairis $289,470 to satisfy the arbitration award. The settlement agreement gave Tsairis a security interest in collateral defined as monies that plaintiff might receive from the legal malpractice case.
Plaintiff also owed money to his attorneys in the underlying lawsuit for their fees. He entered into an agreement (“the Law Firm Agreement”) with those attorneys that recognized a charging lien in their favor. As Judge Vinci summarized, “[i]n exchange for [the attorneys’] agreement to forebear [collection efforts], plaintiff agreed he ‘irrevocably acknowledges the creation of and/or otherwise creates an Attorney’s Charging Lien in favor of the [Law Firms] and upon any and all of the Client's proceeds resulting from [this malpractice action].’ As an element of damages in this case, plaintiff contends he owes the Law Firms $253,725.”
On the date that a jury trial was to begin, defendants in the malpractice action “filed a three-page ‘application seeking appropriate [relief] in light of plaintiff’s impermissible assignment of his legal malpractice claims.’ They argued the Security Agreement and the Law Firm Agreement gave Tsairis and the Law Firms a pecuniary financial interest in the result of the malpractice action and ‘[a]part from the legal impermissibility of this assignment dynamic, such an arrangement places . . . [d]efendants in a prejudiced stance in light of the certain bias of a known integral witness to this litigation.’ They argued the ‘assignments are impermissible and as such, [p]laintiff’s action should be dismissed with prejudice.’”
The Law Division granted the motion, dismissing the case for lack of standing. That court, Judge Vinci observed, “noted ‘tort claims cannot be assigned prior to judgment,’ but ‘[t]he language of the agreements at issue does not indicate an assignment of any claims, but rather the assignment of future proceeds for judgment.’ It found ‘plaintiff makes a distinction without a difference between assigning a claim and pledging future proceeds.’” The Law Division went on to say that “[w]hile there may be a syntactical and practical difference between the two, New Jersey courts have yet to rule on such.”
Plaintiff appealed, and the Appellate Division reversed, applying de novo review. “Under the plain language of the Security Agreement and the Law Firm Agreement, plaintiff did not assign his malpractice claim to third parties. Rather, he assigned to Tsairis and the Law Firms a limited portion of his anticipated recovery in the action, after first using the proceeds to pay his own legal costs and attorneys' fees, to satisfy amounts he owed to those third parties.” The agreements were clear and could not be rewritten to say something they did not say.
The panel reversed the Law Division’s conclusion that plaintiff lacked standing to sue because (according to the erroneous view of the Law Division) he had “assigned the entirety of his right of recovery in this action and ‘will receive the benefit of the judgment in name only.” Despite plaintiff’s assignment of a portion of potential proceeds of the malpractice case, he “remains the real party in interest and possesses a sufficient stake in the outcome of the litigation to establish standing.”
Judge Vinci then turned to the larger issue of the distinction between assigning a tort claim and assigning potential proceeds. He ruled that “an assignment limited to the anticipated proceeds of a tort claim, as opposed to the tort claim itself, is permissible so long as the injured person prosecutes the action in their own name and has standing to do so,” citing several prior decisions. Plaintiff satisfied those conditions here, and defendants’ several arguments against the panel’s result were unavailing.
The panel had a few more things to say. First, Judge Vinci addressed the procedure under which the Law Division had handled defendants’ “application,” on the day of trial, to dismiss the case. “The application could not be filed and considered as a motion in limine because it was dispositive. [Rule] 4:25-8(a)(1). Nor was it filed timely or appropriately as a motion to dismiss in accordance with Rules 1:6-3 and 4:6-3.” But the Law Division “required counsel to file written opposition and participate in oral argument the following day, while simultaneously delivering his opening statement and presenting plaintiff’s testimony. The next day, the court dismissed plaintiff’s case and discharged the jury.” That was improper. “Plaintiff and his counsel deserved a fair opportunity to oppose defendants’ untimely and procedurally deficient application.”
Next, Judge Vinci dealt with plaintiff’s appeal of the Law Division’s denial of motions in limine to exclude evidence that plaintiff had filed. The abuse of discretion standard applicable to discovery issues applied to that aspect of the appeal. “The court denied plaintiff’s motions to exclude evidence without prejudice. It determined plaintiff did not provide information sufficient to determine whether the evidence should be excluded, and it would be in a better position to evaluate the admissibility of the evidence after hearing relevant witness testimony.” There was no abuse of discretion.
Finally, in remanding the case, the panel directed that the case be assigned to a different Law Division judge. The opinion cited cases stating that such an action is appropriate when “there is a concern that the trial judge has a potential commitment to [their] prior findings” or when the original judge “may have a commitment to [their] prior findings”