On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Approved for Publication September 26, 1996.
Before Judges Shebell, Baime and P.g. Levy. The opinion of the court was delivered by Shebell, P.j.a.d.
The opinion of the court was delivered by: Shebell
The opinion of the court was delivered by SHEBELL, P.J.A.D.
Plaintiff, International Fidelity Insurance Company (International), moved for summary judgment to enforce an indemnity agreement, contained in a performance bond, between it and defendants, Bob Jones Electrical Contracting Company, Inc., and Robert and Lois Jones. Pursuant to the agreement, plaintiff sought reimbursement from defendants for expenses including attorney's fees. In due course, defendants cross-moved for dismissal of the complaint for failure to give a pre-action notice of claim for legal fees pursuant to R. 1:20A-6 and for referral of the fee dispute to the District Fee Arbitration Committee under R. 1:20A-2. In his written opinion, the Law Division Judge denied plaintiff's motion for judgment and granted defendants' motion to dismiss.
The motion Judge rejected plaintiff's argument that defendants were contractually bound to reimburse plaintiff for whatever legal fees plaintiff paid as long as plaintiff paid them in "good faith." The Judge found that the provision in the agreement entitling the surety "to charge for any and all disbursements made by it in good faith..." was, in his words, "contrary to the policy set forth by the Supreme Court (which has the ultimate authority to regulate payment of attorney's fees) in R. 1:20A-6 which allows the party whose actions necessitated the legal fees and who is paying the legal fees to request fee arbitration." The Judge stated:
Rule 1:20A-2 grants jurisdiction to the Fee Committee to arbitrate this matter. Thus, plaintiff was obligated, pursuant to R. 1:20A-6, to give defendant a Pre-Action Notice of its intent to sue for legal fees. Failure to give this notice and to allege the giving of the notice in the complaint requires dismissal of the claim for reimbursement for legal fees. R. 1:20A-6.
After denial of its motion for reconsideration, plaintiff filed this appeal from the October 25, 1994 order granting reimbursement only for the uncontested expenses and denying reimbursement for legal fees. We reverse and remand.
At the time plaintiff's action was instituted, R. 1:20A-2, provided in pertinent part:
Fee Committees shall have jurisdiction to arbitrate third-party legal matters where the lawyer is retained by one other than the client but where the client is specifically billed for those services, except that Fee Committees shall not have jurisdiction of such cases where one party to the settlement of a legal action agrees to pay for the legal fees of another.
This provision was amended effective March 1, 1995 to provide in part:
(a) Generally. Each Fee Committee shall, pursuant to these rules, have jurisdiction to arbitrate fee disputes between clients and attorneys. Fee Committees shall also have jurisdiction to arbitrate disputes in which a person other than the client is legally bound to pay for the legal services, except that Fee Committees shall not have jurisdiction of such cases if the obligation arises out of the settlement of a legal action.
[R. 1:20A-2; Emphasis Added.]
The official Comment to the 1995 ...