MAC NAUGHTON v. HARMELECH USA USA (2020)

OPINION *

Attorney W. James Mac Naughton appeals the denial of his motion for pro se attorney's fees. Mac Naughton argues that the New Jersey Supreme Court's decision in Segal v. Lynch, 211 N.J. 230, 48 A.3d 328 (2012), does not prevent him from recovering such fees and non-taxable litigation costs because it does not apply retroactively. The District Court denied Mac Naughton's motion in a well-reasoned Memorandum Opinion ¹ that adopted and supplemented the Magistrate Judge's thorough Report and Recommendation.² After a plenary review,³ we agree with the District Court's assessment. Thus, for the reasons set forth in the Memorandum Opinion, as well as our independent assessment of Mac Naughton's retroactivity argument, we will affirm.⁴

The Segal Court held that pro se attorney-litigants cannot recover attorneys’ fees under a fee-shifting statute.⁵ However, the New Jersey Supreme Court did not specifically decide whether Segal applies retroactively or whether pro se attorney-litigants are barred from collecting contractually-based non-taxable costs. Mac Naughton raises these two points in his arguments on appeal. He argues that Segal does not retroactively apply to his 2009 contract for pro se attorney's fees, or at least does not apply to the time he spent acting pro se before Segal.⁶ He also argues that Segal does not apply to his contractually-based litigation costs. Resolving these questions requires us to predict how the New Jersey Supreme Court would handle these issues.⁷

New Jersey follows the traditional rule of “a presumption in favor of retrospectivity.”⁸ To determine whether a “new rule of law” should be applied retroactively or prospectively, New Jersey courts consider the following policy factors: “(1) the purpose of the rule and whether it would be furthered by a retroactive application, (2) the degree of reliance placed on the old rule by those who administered it, and (3) the effect a retroactive application would have on the administration of justice.”⁹ Applying these factors, we conclude Segal should be applied retroactively.

First, Segal did not create a new rule of law, rather the Segal court reconciled a split: “The conflicting decisions found in our trial and appellate courts express a variety of policy considerations in support of or in opposition to permitting attorneys to be awarded counsel fees for representing themselves.”¹⁰ Second, the goals of Segal are served by retroactive application. All pro se litigants will be treated equally and thereby maintain public confidence in the judicial system.¹¹ Third, retroactive application of Segal does not cause substantial inequitable results. As there was a split of authority on this issue, pro se attorney-litigants cannot reasonably argue their detrimental reliance on now overturned precedent. Moreover, as to Mac Naughton specifically, given that he argued for the application of Illinois law before the District Court, he cannot now argue that he detrimentally relied on pre-Segal case law when drafting the promissory agreement and litigating its enforcement.¹²

Finally, as to Mac Naughton's claim that Segal does not apply to his non-taxable litigation costs, we also find his argument does not have merit. Similarly situated pro se litigants who are not attorneys would not be able to recover those fees or costs. Thus, Segal’s emphasis on not creating two classes of pro se litigants with different remedies bars Mac Naughton's recovery.¹³

For the foregoing reasons, we will affirm the District Court's opinion and the pro se application for attorney's fees and non-taxable costs is denied.

FOOTNOTES

1.   A-3-7.

2.   A-8-18.

3.   Raab v. City of Ocean City, 833 F.3d 286, 292 (3d Cir. 2016) (“We review a district court's denial of attorney's fees for abuse of discretion. ․ However, if the fee application was denied based on the district court's conclusions on questions of law, our review is plenary.” (citation omitted) ).

4.   The District Court had jurisdiction pursuant to 28 U.S.C. § 1332(a). We have jurisdiction pursuant to 28 U.S.C. § 1291.

5.   Segal v. Lynch, 211 N.J. 230, 48 A.3d 328, 346–48 (2012).

6.   Id. at 9. As Mac Naughton does not argue that Segal does not apply to contractually-based attorney's fees, we will not address that issue. See Appellant Br., 9.

7.   Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220–21 (3d Cir. 2008).

8.   Twp. of Stafford v. Stafford Twp. Zoning Bd. of Adjustment, 154 N.J. 62, 711 A.2d 282, 287 (1998). See also In re Contest of Nov. 8, 2011 Gen. Election of Office of New Jersey Gen. Assembly, 210 N.J. 29, 40 A.3d 684, 707 (2012).

9.   Twp. of Stafford, 711 A.2d at 287–88 (quoting State v. Knight, 145 N.J. 233, 678 A.2d 642, 651–52 (1996)).

10.   Segal, 48 A.3d at 346–48 (citing appellate and trial level decisions between 1994 and 2011 that fluctuated between permitting or barring pro se attorney's fees).

11.   Id. at 347-48.

12.   See Appellant Br., 10, 14; see also A-12.

13.   Segal, 48 A.3d at 347 (quoting Gruber & Colabella, P.A. v. Erickson, 784 A.2d 758, 761 (N.J. Super. Law. Div. 2001) ) (“Most significantly, one court emphasized that ‘to hold otherwise would in effect create two separate classes of pro se litigants—those who are attorneys and those who are not—and grant different rights and remedies to each.’ ” (internal quotation marks omitted) ).

McKee, Circuit Judge