MAC NAUGHTON v. HARMELECH et al

Filing 467

MEMORANDUM OPINION AND ORDER that plaintiff's objections (ECF no. 427) to the R&R(ECF no. 426) are denied, the 426 Report and Recommendations is affirmed and adopted, and the application for attorney's fees is therefore denied. The clerk shall close the case. Signed by Judge Kevin McNulty on 12/12/17. (sr, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

W. JAMES MAC NAUGHTON,

No. 09-cv-5450 (KM)(MAH)

Plaintiff pro se,
MEMORANDUM OPINION
AND ORDER

V.

SHAI HARM ELECH pro se, CABLE
AMERICA, INC., d/b/a SATELLITE
AMERICA and USA SATELLITE &
CABLE, INC.,
Defendants.
KEVIN MCNULTY. U.S.D.J.:
On October 13, 2016, Magistrate Judge Michael A. Hammer filed a report
and recommendation (“R&R”, ECF no. 426)) denying the application of W.
James Mac Naughton, plaintiff pro se, for attorney’s fees. Mac Naughton filed a
timely objection to the R&R (ECF no. 427). No papers were filed in response to
the objection. I have, however, reviewed the papers filed by both sides in
connection with the Magistrate Judge’s decision. Substantially for the reasons
stated by the Magistrate Judge, the R&R is adopted as the ruling of the Court.

My standard of review is de novo.’ In this diversity case, I must apply
State substantive law, which requires me to determine how the State’s highest

Under [28 U.S.C. § 636(b)(l)] subparagraph (B), a district court may refer
a dispositive motion to a magistrate judge “to conduct hearings,
including evidentiary hearings, and to submit to a judge of the court
proposed findings of fact and recommendations for the disposition.” 28
U.S.C. § 636(b)( 1)(B). The product of a magistrate judge, following a
referral of a dispositive matter, is often called a “report and
recommendation.” Parties “may serve and file specific written objections
to the proposed findings and recommendations” within 14 days of being
served with a copy of the magistrate judge’s report and recommendation.
Fed. 1?. Civ. P. 72(b)(2). If a party objects timely to a magistrate judge’s
report and recommendation, the district court must “make a de novo

court has decided, or predict how it would decide, the applicable legal issues.
See Hunt u. US. Tobacco Co., 538 F.3d 217, 220-2 1 (3d Cir. 2008); Norfolk
Southern Ry. Co. u. Basell USA Inc., 512 F.3d 86, 92 (3d Cit. 2008); see also
West v. AT&T Co., 311 U.S. 223, 237 (1940); McCabe u. Ernst & Young, LLP,
494 F.3d 418, 424 (3d Cir. 2007).
The issue, as presented to the Magistrate Judge, was primarily one of
law. Defendants urged, and Judge Hammer accepted, that a party who
happens to be a lawyer but appears pro se is not entitled to an award of fees.
The heart of Mac Naughton’s objection is that the cases prohibiting such an

determination of those portions of the report or specified proposed
findings or recommendations to which objection is made.” 28 U.S.C. §
636(b)(1); see also Fed. R. civ. V 72(b)(3). If a party does not object
timely to a magistrate judges report and recommendation, the party may
lose its right to de novo review by the district court. Nara u. Frank, 488
F.3d 187, 194 (3d Cir. 2007) (citing Henderson u. Carlson, 812 F.2d 874,
878—79 (3d Cir. 1987)). However, we have held that because a district
court must take some action for a report and recommendation to become
a final order and because “[tjhe authority and the responsibility to make
an informed, final determination
remains with the judge,” Mathews ii.
Weber, 423 U.S. 261, 271, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976), even
absent objections to the report and recommendation, a district court
should “afford some level of review to dispositive legal issues raised by
the report,” Henderson, 812 F,2d at 878. We have described this level of
review as “reasoned consideration.” Id. If a party falls to object timely to
the magistrate judge’s report and recommendation, we generally review
the district court’s order for plain error. BHghtwefl a Lehman, 637 F.3d
187, 193 (3d Cir. 2011); Nat-a, 488 F.3d at 194. But see Leyva v.
Williams, 504 F.3d 357, 363—64 (3d Cir. 2007) (applying de novo
appellate review when a pro se litigant did not timely object to a
magistrate judge’s report and recommendation and the magistrate judge
did not “warn[ ] that [the litigant’s] failure to object to the Magistrate
Judge’s report would result in forfeiture of his rights”); Henderson, 812
F.2d at 878 n.4 (“[Wjhen the district court elects to exercise its power to
review a magistrate’s report de novo, a party’s previous failure to object
becomes irrelevant.”).
...

Equal Employment Opportunity Comm’n v. City of Long Branch, 866 F.3d 93, 99—100
(3d Cir. 2017).
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award deal with statutory fee-shifting provisions. Parties, he urges, should be
able to contract for a contrary result, as they did in this case.2
Before the Magistrate Judge, Mac Naughton argued that Illinois law
applied, and defendants argued that New Jersey law applied. On appeal, Mac
Naughton appears to concentrate more on New Jersey law. Judge Hammer
considered both Illinois and New Jersey law, but ultimately decided that the
choice of law issue was inconsequential, because the two states’ laws are
similar. (R&R 5)
As to Illinois, Judge Hammer cited Hamer v. Lentz, 132 Ill. 2d 49, 62—63
(1989), as well as intermediate appellate court cases citing Hamer. (R&R 6—7) In
particular, he cited Tantiwongse v. Law Offices of Edward R. Jaquays, 371111.
App. 3d 1161, 1164 (2007), which extended the reasoning of Harrier to bar a
contractually-based fee award. (R&R 7—8)). I agree with Judge Hammer’s
reasoning.
In New Jersey, as Judge Hammer found, the picture is similar. The
leading case is Sega! v. Lynch, 211 N.J. 230, 264 (2012), which involved a feeshifting rule, N.J. Ct. R. 2:11-4. I agree with Judge Hammer that there are
strong indications that New Jersey would apply the Sega! rule to contractuallybased fee awards as well.
First, Sega! itself cited at least one prior lower court case disallowing a
contractually-based pro se fee award, without distinguishing it in any way. See
Oru her & Colabella, P.A., v. Erickson, 345 N.J. Super. 248, 252 (Law Div. 2001)
(interpreting a retainer agreement, and stating that “when a law firm appearing
pro se prevails in an action to collect legal fees from a former client, it is not
entitled to recover additional attorney’s fees for its collection efforts.”) (cited in
Sega!, 211 N.J. at 261). Sega! did not, however, discuss this aspect of Omber,

The note and security agreement at issue provide that “Maker shall be liable for
all reasonable attorneys fees and costs arising out of the collection or enforcement of
this Note and Security Agreement.” (Quoted at R&R 2—3)
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which it cited it in connection with documenting a split in the New Jersey case
law. (See discussion at R&R 8—9.)
Second, I supplement the R&R by noting that research has uncovered
only one only New Jersey case (an unpublished one) that interprets Segal in
connection with contractually-based fees. See Ragan & Ragan, P.C. u. Winberry
Realty Partnership, 2013 WL 1438102 (Super. Ct. N.J. App. Div. Apr. 10, 2013).
Ragan applied the Segal rule and disallowed the fees.
Third, Judge Hammer noted Segal’s strong public policy basis for
disallowing pro se fees. (See R&R 8 (general policy discouraging fee-shifting);
R&R 9 (discouragement of abusive litigation tactics, avoidance of disparate
treatment of classes of pro se litigants); R&R 10 (policy of encouraging parties
to obtain independent counsel) (citing Kay v. Erhler, 499 U.S. 432, 437—38
(1991)). I agree with Judge Hammer that these policies do not suggest any
strong basis for distinguishing between statutory and contractually-based fees.
(R&R 10—11)
Now, on appeal, Mac Naughton stresses that Segal represented a change
in the law, and that pre-Segal law should apply to a lawsuit begun before Segal
was decided in 2012, based on a pre-Segal contract. As Mac Naughton
presents it, Segal changed everything; before Segal, pro se fees were allowed
(Mac Naughton Brf. at 5 (citing Brach, Eichler et aL v. Ezewko, 345 N.J. Super.
1, 783 A.2d 246 (App. Div. 2001) (statutory fee-shifting case)). Actually, as
Segal carefully documented, the pre-Segal New Jersey cases were split; what
Segal accomplished was not a U-turn in the law, but a resolution of that split.
No vested expectations were defeated by Segal. In any event, I am not
persuaded that Segal intended to grandfather all existing contracts, permitting
fee awards into the future until all such contracts expired or claims were
exhausted. Certainly Segal’s public policy rationale would argue against
creating such an ongoing entitlement for some litigants, but not others.

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Again, the only authority on this point seems to be the unpublished
Ragan case, which is not binding but persuasive. It held that “[n]othing in the
Court’s opinion suggests that Segal was intended to have only prospective
application.” Ragan, 2013 WL 1438102 at *6 (applying Segal to bar fee award
in case on direct appeal when Segal was decided).
In sum, based on the sound reasoning of Judge Hammer, the R&R is
affirmed and adopted by the Court.
ORDER

ACCORDINGLY, IT IS this 12th day of December, 2017,
ORDERED that the plaintiffs objections (ECF no. 427) to the Magistrate

Judge’s R&R (ECF no. 426) are DENIED; that the R&R is affirmed and adopted;
and that the application for attorney’s fees is therefore denied.
The clerk shall close the file.

WN MCNULTY
United States District Jud

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