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Specialized Medical Systems Inc. v. Lemmerling

Decided: December 2, 1991.

SPECIALIZED MEDICAL SYSTEMS, INC., PLAINTIFF-RESPONDENT,
v.
LUC J. LEMMERLING, M.D., DEFENDANT-APPELLANT



On appeal from the Superior Court of New Jersey, Law Division, Essex County.

J.h. Coleman, Stern and Keefe.*fn1The opinion of the court was delivered by Stern, J.A.D.

Stern

Following the entry of judgment in favor of plaintiff for $5,776.99, the trial court awarded plaintiff $7,500 in counsel fees. Defendant appeals the award.*fn2

On September 5, 1984, plaintiff, Specialized Medical Systems, and defendant, Doctor Luc J. Lemmerling, entered into an agreement whereby plaintiff sold a computer and related hardware and software to defendant to expedite billing, accounting and patient treatment. Subsequently, in May and June of 1985, the parties entered into maintenance agreements for hardware and software respectively. The total purchase price of the package was $35,533.00, with separate monthly payments to be made on each maintenance contract. The Hardware Maintenance Agreement contained the following provision:

In the event of litigation or other proceedings to enforce or defend any term or provision of this agreement, the losing party shall pay to the prevailing party

all costs and expenses of such litigation or proceedings including attorney's fees.

As time passed the relationship between plaintiff and defendant deteriorated. Defendant claimed that plaintiff had failed to fulfill its obligations to service the equipment, which did not perform to defendant's satisfaction. Unable to resolve their differences, defendant stopped all payment on the contracts and plaintiff instituted a collection action. Defendant counterclaimed, alleging fraud, breach of warranties and violations of the New Jersey consumer fraud law, N.J.S.A. 56:8-1 et seq., and the Magnuson-Moss Act, 15 U.S.C. 2301 et seq.

Plaintiff brought suit claiming $9,600.00 in damages. Defendant's counterclaim was dismissed. The judge concluded that the defense was "absolutely unjustified." The jury returned a verdict for plaintiff which was embodied in a judgment on May 30, 1990 for $4,422.26 plus pre-judgment interest aggregating the $5,776.99. Only $750.00 of the verdict related to the breach of the Hardware Maintenance Agreement.

On September 28, 1990 plaintiff applied to the court for attorney's fees as authorized in the Hardware Maintenance Agreement.*fn3 Taking into account that the award "should be discounted" because of "expenditures not involving the Hardware Maintenance Agreement," plaintiff asked for an award of $15,000, noting that the bulk of the work was directed to plaintiff's defense against the counterclaim (which if defendant prevailed could have resulted in treble damages). Plaintiff acknowledged that the provision for attorney's fees was embodied only in the Hardware Maintenance Agreement and that the

other two agreements had no similar provision. However, plaintiff noted that the alleged breach of the Hardware Maintenance Agreement constituted a significant part of defendant's entire counterclaim.

Defendant argued that any award had to be limited to the services directed exclusively to the claim and defense related to the Hardware Maintenance Agreement since only that agreement contained the attorney fee provision.*fn4 Defendant further claimed plaintiff's attorney took the case on a contingency and therefore counsel fees had to be limited to the agreed percentage of recovery. Defendant also contended that the efforts of plaintiff's counsel directed to the counterclaim were irrelevant because plaintiff's attorney had told defendant's counsel that plaintiff would not be charged a fee on the counterclaim, since plaintiff's president was "a personal friend of mine." Defense counsel argued:

"It is undisputed . . . that [plaintiff's president] individually or his company . . . did not have an agreement to pay hourly rates to the attorney, did not have any expectation to pay an hourly rate to its attorney and, in fact, if your Honor does not award attorney's fees in this case, these firms will not ...


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