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Westfield Centre Service Inc. v. Cities Service Oil Co.

Decided: June 2, 1978.

WESTFIELD CENTRE SERVICE, INC., A CORPORATION OF THE STATE OF NEW JERSEY AND JAMES GALLIGAN, INDIVIDUALLY AND AS PRESIDENT OF WESTFIELD CENTRE SERVICE, INC., PLAINTIFFS,
v.
CITIES SERVICE OIL COMPANY, A DELAWARE CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY, DEFENDANT



Ackerman, J.s.c.

Ackerman

[162 NJSuper Page 116] This is a supplemental decision to this court's previous determination in this matter reported at 158 N.J. Super. 455. In that opinion the court held that defendant's actions had violated the New Jersey Franchise Practices Act, N.J.S.A. 56:10-1 et seq.; that plaintiffs had been successful in obtaining an injunction against the improper termination of the franchise, and that plaintiffs were therefore entitled to reasonable counsel fees pursuant to

N.J.S.A. 56:10-10. Id. at 484-485. The complete factual background of this case, as well as the legal reasoning underlying the court's ultimate determination, is set forth at length in the earlier opinion, and will not be discussed here except insofar as is directly relevant.

Plaintiffs seek total counsel fees of $41,080 for 668-1/4 hours and costs and disbursements of $3,280.46.

N.J.S.A. 56:10-10 provides:

Any franchisee may bring an action against its franchisor for violation of this act in the Superior Court of the State of New Jersey to recover damages sustained by reason of any violation of this act and, where appropriate, shall be entitled to injunctive relief. Such franchisee, if successful, shall also be entitled to the costs of the action including but not limited to reasonable attorney's fees.

Defendant initially contends that this provision is unconstitutional in that it allows counsel fees to a successful franchisee, but not to a successful franchisor. Defendant argues that this constitutes an unlawful classification which denies the franchisor equal protection and equal access to the courts.

Neither defendant nor plaintiffs cite any New Jersey case law on this subject. Defendant relies chiefly on the United States Supreme Court case of Gulf, Colo. & Santa Fe Ry. v. Ellis , 165 U.S. 150, 17 S. Ct. 255, 41 L. Ed. 666 (1897), which defendant describes as the "leading case in the United States concerning the constitutionality of unilateral awards of attorneys' fees."

In Ellis the Court struck down a statute providing that any person with a valid claim against a railroad for $50 or less might litigate same and, if successful, recover up to $10 in attorney's fees. Mr. Justice Brewer, writing for the court, began his discussion by noting that the railroads "do not enter the courts upon equal terms. They must pay attorneys' fees if wrong; they do not recover any if right; while their adversaries recover if right and pay nothing if wrong." 165 U.S. at 151, 17 S. Ct. at 256, 41 L. Ed. at 667. Had this distinction been the sole basis for the court's decision,

this court agrees that defendant would be on firm ground. The Ellis court's subsequent language, however, makes it clear that not every provision for the unilateral award of counsel fees offends equal protection.

Thus, the court noted that every debtor should pay its debts and stated that "there might be no impropriety in giving to every successful suitor attorneys' fees." 165 U.S. at 157, 17 S. Ct. at 257, 41 L. Ed. at 669. The court also noted that railroads alone of all corporations were required to bear this burden, so that "the rule of equality is ignored." 165 U.S. at 157, 17 S. Ct. at 257, 41 L. Ed. at 669. More significantly for present purposes, the court rejected the argument that the statute was based on certain special duties imposed on railroads with this language:

While this is an action for stock killed, the recovery of attorneys' fees cannot be sustained upon the theory just suggested. There is no fence law in Texas. The legislature of the state has not deemed it necessary for the protection of life or property to require railroads to fence their tracks, and as no duty is imposed, there can be no penalty for non-performance. [165 U.S. at 158, 17 S. Ct. at 258, 41 L. Ed. at 669]

The court went on to state that this was "not a statute for the protection of particular classes of individuals supposed to need protection, but for the punishment of certain corporations on account of their delinquency." 165 U.S. at 159, 17 S. Ct. at 258, 41 L. Ed. at 669.

A fair reading of Ellis , then, reveals that the statute in that case was held invalid not because it awarded counsel fees to successful plaintiffs but not defendants, but because it arbitrarily awarded counsel fees in suits on debts against railroads but no other corporations. In the absence of some special duty imposed on railroads, the classification lacked a rational basis.

That this is a proper reading of Ellis is demonstrated by the case of Atchison, Topeka & Santa Fe R.R. v. Matthews , 174 U.S. 96, 19 S. Ct. 609, 43 L. Ed. 909 (1899), decided two years after Ellis. At issue in Matthews was a

Kansas statute which provided for reasonable attorney's fees to a successful plaintiff, but not defendant, in an action for damages by fire caused by the operation of a railroad. Mr. Justice Brewer, again writing for the Court, found the statute to be valid, saying:

The purpose of the statute is not to compel the payment of debts, but to secure the utmost care on the part of railroad companies to prevent the escape of fire from their moving trains * * *. Its monition to the railroads is not, "pay your debts without suit or you will, in addition, have to pay attorney's fees"; but rather, "see to it that no fire escapes from your locomotives, for if it does you will be liable, not merely for the damages it causes, but also for the reasonable attorney's fees of the owner of the property injured or destroyed." [174 U.S. at 98, 19 S. Ct. at 610, 43 L. Ed. at 910]

Ellis , the court held, was inapplicable because the Kansas legislature had made a reasonable classification in including "all corporations engaged in this business of particular hazard." 174 U.S. at 102, 19 S. Ct. at 611, 43 L. Ed. at 912.

The true basis for the Ellis decision was made even more explicit in Missouri, Kan. & Tex. Ry. v. Cade , 233 U.S. 642, 34 S. Ct. 678, 58 L. Ed. 1135 (1914). In upholding a statute which provided for attorney's fees of up to $20 to any successful plaintiff with one of a number of specified claims against any defendant, the Supreme Court said that the Ellis statute "was adjudged to be invalid because it singled out a particular class of debtors, and imposed this burden upon them, without any reasonable ground for the discrimination." 233 U.S. at 649, 34 S. Ct. at 680, 58 L. Ed. at 1138. Unlike that statute, the statute in Cade

If the classification is otherwise reasonable, the mere fact that attorneys' fees are allowed to successful plaintiffs only, and not to successful defendants, does not render the statute repugnant to the "equal protection" clause * * *. Actor and reus differ in their respective attitudes towards a litigation; the former has the burden of seeking the proper jurisdiction and bringing the proper parties before it, as well as the burden of proof upon the main issues; and these differences may be made the basis of distinctive treatment respecting the allowance of an attorney's fee as a part of the costs. [233 U.S. at 650, 34 S. Ct. at 681, 58 L. Ed. at 1138]

Defendant cites a number of other cases from other states holding invalid various statutes providing for the award of attorney's fees to successful plaintiffs but not defendants. In the court's judgment, it is unnecessary to discuss these cases, especially since it appears that there are as many or more cases upholding such statutes. See, generally, the cases collected in Annotation, "Validity of Statute Allowing Attorney's Fee to Successful Claimant but not to Defendant, or Vice Versa," 73 A.L.R. 3d 515 (1976). Particularly relevant is the following ...


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