Third Party Exception To American Rule

The New Jersey Supreme Court has held that the third-party exception to the American Rule governing counsel fees does not apply in a circumstance where the tortfeasor and the putative third party are effectively the same. The case involved an action to vacate a foreclosure in which an individual was alleged to have breached a fiduciary duty to his entity co-defendant partners. The plaintiffs had prevailed on the theory that the individual and the entity were one. Thus, the entity "was the instrument of [the individual's] deceit, not a separate and distinct party." The plaintiffs may recover attorneys' fees for its legal action against the entity defendant. (Mike Frisch)