New Jersey Attorney Law Review Blog

In an important decision that provides guidelines for retiring judges seeking future employment in the legal profession, on September 24, 2008 the New Jersey Supreme Court ordered that a new trial must be conducted because of the appearance of impropriety created by a then soon-to-be retiring Chancery Court trial judge who, before the case had been concluded, began negotiating employment with an attorney appearing before him whose firm represented one of the litigants in the same case. DeNike v. Cupo (A-61-07, September 24, 2008).

In so ruling, the New Jersey Supreme Court reversed the decision of the lower court (Appellate Division) which had determined that the trial judge's conduct, although inappropriate, did not influence the outcome of the case because the trial judge already had issued his substantive rulings in several written opinions and that his remaining functions as the presiding judge in this case were "ministerial."

The NJ Supreme Court concluded that the public trust in the judicial system would be compromised in the absence of a new trial. Specifically, the NJ Supreme Court held:

Judges must avoid actual conflicts as well as the appearance of impropriety to promote confidence in the integrity and impartiality of the Judiciary. Unfortunately, the negotiations between trial judge and lawyer in this case created an appearance of impropriety. Stated simply, the conduct here fell far short of the high standards demanded of judges and fellow members of the legal profession and had the capacity to erode the public's trust. Because any lesser remedy would allow reasonable doubts to linger about the fairness of the outcome of the case, the judgment of the Appellate Division is reversed and the matter is remanded for a new trial.

Although there was no evidence that this respected trial judge acted out of actual bias in favor of the firm whom he was in the midst of negotiating terms of employment, the NJ Supreme Court was of the opinion that the appearance of impropriety generated by these employment negotiations and the prospect of a financial relationship between the law firm and the judge raises doubts about those decisions and the judge's impartiality in general.

Regrettably, from the standpoint of a knolwedgeable, objective observer, the brief negotiations toward the end of the litigation could reasonably have infected all that occurred beforehand. As a result, a full trial is required to restore public confidence in the integrity and impartiality of the proceedings, to resolve the dispute in particular, and to promote generally the administration of justice.

Recognizing that the existing Rules of Professional Conduct and Code of Judicial Conduct do not specifically provide instructions for post-retirement employment discussions between judges facing mandatory retirement and private employers in the legal profession, the NJ Supreme Court offers the following guidelines:

1. Judges may not discuss or negotiate for employment with any parties or attorneys involved in a matter in which the judge is participating personally and substantially. If the subject is raised in any fashion, judges should put a halt to the conversation at once, rebuff any offer, and disclose what occurred on the record.

2. Judges who engage in retirement discussions while still on the bench - with attorneys who do not have a matter pending before them - must proceed in a way that minimizes the need for disqualification and upholds the integrity of the courts. To that end, judges should delay starting any discussions until shortly before their planned retirement, and should discuss post-retirement employment opportunities with the fewest possible number of of prospective employers.

3. Judges must disqualify themselves from matters involving parties or attorneys with whom they have discussed future employment, whether or not those discussions lead to a future relationship.

4. Judges should wait a reasonable period of time before discussing employment with an attorney or law firm that has appeared before the judge.

The NJ Supreme Court referred the matter to the Professional Responsibility Rules Committee and the Advisory Committee on Extrajudicial Activities for their recommendations.

Labels: Bergen County attorneys, Bergen County lawyers, judicial impropriety, New Jersey Supreme Court, NJ Supreme Court decisions

A bank employee who misappropriates a customer's cash deposit can expose the bank to a claim under the New Jersey Consumer Fraud Act, a NJ appeals court ruled in Lee v. First Union National Bank, et al., App. Div., Case No.: 09-2-1547.

In this case, the plaintiff, an existing customer of First Union National Bank, alleged she paid $2,000 in cash to a bank employee who worked in the bank's brokerage services unit which was supposed to be used to purchase shares of a mutual fund. Instead of depositing these funds into her brokerage account, the plaintiff claimed the bank's employee misappropriated her $2,000 cash tender for his own personal use which resulted in an overdraft in her checking account. The bank covered the shortfall by taking money from plaintiff's checking account and liquidating some of the mutual fund shares.

Plaintiff's complaint alleged violation of the Consumer Fraud Act (CFA) and common-law conversion. The trial judge granted summary judgment in favor of the bank and its brokerage arm, holding that the CFA was not applicable to a sale of securities and the count for misappropriation was barred by the two-year statute of limitations under the Blue Act, N.J.S.A. 49:3-71(g).

On appeal, the New Jersey Appellate Division reversed on the following grounds: (1) The transaction is not exempt from the CFA prohibition on deceptive sales practices because the claim relates to misrepresentation as to performance of services and not the nature or existence of the security; (2) N.J.S.A. 49:3-71(g) is not applicable because the gravaman of this count of the complaint concerns the unlawful "taking, detaining, or converting of personal property," which is subject to the six-year statute of limitations.

Labels: bank fraud, New Jersey bank attorney, New Jersey bank attorneys, New Jersey bank lawyers, New Jersey banking law, New Jersey Consumer Fraud Act, NJ banking lawyers, NJ Consumer Fraud Act

Banks beware! In a case of first impression, a New Jersey appeals court held that a bank that pursues criminal charges against an innocent third party whose identify is stolen and used to defraud the bank can be sued civilly for negligence and malicious prosecution.

In this particular case, Brunson v. Affinity Federal Credit Union, A-4439-06, the bank employed a fraud and loss prevention specialist (Mr. Wilcox) who happened to be a certified fraud examiner. According to the appellate record, an imposter posing as the plaintiff Brunson opened an Affinity account in Brunson's name using Brunson's social security number and an out-of-state driver's license bearing Brunson's date of birth and a Paterson, NJ address (misspelled with two "t's".) Within days of opening this account, the imposter successfully cashed $9,506 in phony checks drawn against a corporation known as Viva International Group.

The bank's fraud and loss prevention specialist Wilcox was provided with surveillance tapes and still photographs depicting the imposter as a black male about five feet six inches tall. Wilcox verified that Viva International Group did not employ anyone named "Brunson" on its payroll nor was there any "Brunson" authorized to sign company checks. Wilcox also learned that Brunson had a criminal record. Hastily reaching the conclusion that Brunson was responsible for this fraud, Wilcox filed two criminal complaints against Brunson for uttering a forged document and for theft by deception and testified before the grand jury that ultimately indicted Brunson. Critically, Wilcox didn't bother to review police photographs of Brunson to compare against the surveillance images maintained by the bank, nor did he show the bank's tellers who dealt with the imposter a photo of Brunson to confirm the identification. Had he taken these extra precautions, Wilcox would have learned that Brunson is six foot three, nine inches taller than the imposter.

Brunson, a New York City resident, was arrested in Virginia, was extradited to New Jersey and was released after spending 13 days in jail. The charges were ultimtaely dropped.

At the trial level, the Superior Court judge dismissed Brunson's suit against Affinity and Wilcox on motion practice without the case having reached a jury, labeling the incident as an innocent mistake and finding that Wilcox did not willfully withhold or misrepresent information in his grand jury testimony. Brunson timely appealed the granting of summary judgment in defendants' favor, arguing that there were disputed factual issues and that a grand jury indictment did not preclude a claim for malicious prosecution.

The appeals court agreed with Brunson, ruling that financial institutions and fraud investigators have a duty to "pursue with reasonable care their responsibility for protecting not only their own customers, but non-customers who may be victims of identity theft." In the absence of any reported New Jersey legal precedent supporting a duty of care in this particular setting, the 3-judge appellate panel was persuaded to follow the holding of the Alabama Supreme Court in similar decision where that court ruled that a bank could be liable for the false arrest of someone whose stolen identity was used to open an account. Patrick v. Union State Bank, 681 So.2d 1364 (Ala. 1995).

The New Jersey Appellate Division concluded that the trial court erroneously granted summary judgment in favor of Affinity and Wilcox, noting that the facts surrounding whether Wilcox had probable cause to file criminal complaints against Brunson were in dispute, and that the mere existence of a grand jury indictment against Brunson does not bar Brunson's claim for malicious prosecution.

"Because of the foreseeability of harm, fairness and public policy require financial institutions to be accountable when they negligently put individuals at risk by failing to exercise reasonable care in undertaking investigations of fraud claims," the Appellate Panel remarked ... [even when the person is not an account holder].

Only a civil jury can determine "whether the grand jury would have indicted plaintiff [Brunson] if it had been presented with photographs of the imposter along with the disparity in their [physical] descriptions," the 3-Judge Appellate Panel concluded. In remanding the case back to the trial court for further proceedings, Brunson will have to demonstrate the following elements to sustain a civil claim for malicious prosecution arising out of a criminal prosecution: (i) the ciminal proceeding was instituted by the defendant, (ii) the criminal proceeding was actuated by malice, (iii) there was no probable cause for the proceeding, and (iv) the proceeding was terminated in his favor.

Labels: Negligence by Banks, New Jersey attorneys, New Jersey banking litigation, New Jersey law firm, New Jersey lawyers, NJ attorneys, NJ Banking, NJ banking attorneys, NJ banking lawyers, NJ lawyers