March 12, 2008
MIDDLEBROOKS & SHAPIRO, P.C., PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
KENNETH ESDALE, DEFENDANT-THIRD PARTY PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
ESTATE OF RICHARD SHAPIRO, THIRD-PARTY DEFENDANT-APPELLANT/ CROSS-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-4726-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 7, 2008
Before Judges Parrillo and Gilroy.
Plaintiff Middlebrooks & Shapiro, P.C., a law firm, and third-party defendant Estate of Richard Shapiro (collectively, the plaintiffs), appeal from the May 25, 2006, order of the Law Division, which awarded defendant Kenneth Esdale, plaintiff on the counterclaim and third-party complaint, attorney fees and costs in the amount of $18,544.50. Plaintiffs argue that the amount of the award is excessive. Defendant cross-appeals, arguing that the award is insufficient. We affirm the appeal in part; except, we reduce the amount of disbursements awarded to defendant and remand to the trial court to enter an amended order. We affirm the cross-appeal.
The procedural history and statement of facts leading to the proceeding on remand, resulting in the order of May 25, 2006, are contained in our prior opinion, Middlebrooks & Shapiro, P.C. v. Esdale, No. A-3285-02 (App. Div. January 20, 2006). The following will suffice to place this appeal in context.
On March 1, 2000, defendant retained the services of plaintiffs to institute a specific performance action against a third-party to enforce a contract for the purchase and transfer of a liquor license. On dismissal of the Chancery action, the law firm filed suit against defendant in the Special Civil Part to recover $8,540.49 owed for legal services in prosecuting the Chancery action. Defendant counterclaimed and filed a third-party complaint against the Estate, alleging legal malpractice, and moved to transfer the matter to the Law Division, asserting that his claim exceeded the monetary jurisdictional limit of the Special Civil Part. The motion to transfer was granted, and the matter was tried to a jury.
Following the close of testimony, the trial court granted plaintiffs' motion for dismissal of defendant's loss of profit claim. Id. at 7. However, the court, citing Saffer v. Willoughby, 143 N.J. 256, 272 (1996), submitted defendant's claim for return of his retainer to the jury, determining that "if the jury found plaintiff negligent, defendant would be entitled to a judgment for $5,000, representing the return of the retainer based on the principle that an attorney may not collect fees for services negligently performed." Id. at 8.
The jury returned a verdict on special interrogatories, determining that: 1) the law firm had failed to prove its claim for legal services; 2) plaintiffs were negligent in representing defendant; and 3) and such negligence proximately caused harm to defendant. Ibid. The court molded the verdict and awarded defendant $5,000 on the counterclaim and third-party complaint, together with $40,000 in attorney's fees, and expenses of $8,340.80. Id. at 8-9. On appeal, we affirmed the dismissal of plaintiffs' claim and the award of $5,000 damages on the counterclaim and third-party complaint. We remanded the matter to the trial court for reconsideration on the issue of attorney's fees and expenses, concluding that the trial court had erred in awarding attorney's fees on the record submitted. Id. at 24-26.
On remand, defendant submitted an application to the Law Division for attorney's fees and expenses in the amount of $80,395.29. The application was supported by a twenty-four-page certification of counsel stating that, although counsel could not locate a copy of the retainer agreement with defendant, "[t]his matter was handled by my office on an hourly basis and not on a contingency fee basis." Attached to the certification were reconstructed time records, setting forth the items of legal services rendered; the time spent on each item; and a statement of disbursements. On May 25, 2006, the trial court rendered an oral opinion, awarding defendant $13,400 attorney's fees, together with $5,144.50 in expenses. A confirming order was entered the same day.
On appeal, plaintiff argues:
POINT I. THE APPLICATION FOR ATTORNEY'S FEES WAS NOT SUFFICIENTLY DETAILED TO ALLOW THE LAW DIVISION TO EVALUATE CAREFULLY AND CRITICALLY THE AGGREGATE HOURS ADVANCED BY COUNSEL TO SUPPORT THE CLAIM, AND THE LAW DIVISION ERRED WHEN IT AWARDED FEES BASED ON AN INCOMPLETE APPLICATION WHICH DID NOT COMPLY WITH THE APPELLATE DIVISION'S PRIOR DECISION.
POINT II. THE FAILURE TO COMPLY WITH RULES OF PROFESSIONAL CONDUCT, NEW JERSEY RULES OF COURT, AND CASE LAW RENDERED THE APPLICATION FOR ATTORNEY'S FEE FATALLY DEFECTIVE.
On his cross-appeal, defendant argues:
POINT I. THE DETERMINATION OF THE APPELLATE DIVISION DID NOT REQUIRE A REDUCTION IN THE COUNSEL FEE AWARD AS SUGGESTED BY PLAINTIFF[']S COUNSEL, BUT INSTEAD REQUIRED AN ANALYSIS BASED UPON THE LODESTAR ANALYSIS AND UNDER THAT ANALYSIS, THE TRIAL COURT'S DETERMINATION OF THE REDUCTION IN COUNSEL FEES CONSTITUTES AN ERROR.
Appellate review of a trial court's attorney fee determination is deferential. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001). We will only disturb the trial court's determination "'on the rarest of occasions, and then only because of a clear abuse of discretion'" based on the record presented on the fee application. Ibid. (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)).
A plaintiff in a legal malpractice action is "entitled to recover for losses that are proximately caused by an attorney's negligence." Id. at 441. "[T]he purpose of a legal malpractice claim is to put the client in as good a position as he or she would have been if the attorney had performed competently." Ibid. Accordingly, "a negligent attorney is responsible for the reasonable legal expenses and attorney fees incurred by a former client in prosecuting the legal malpractice action. Those are consequential damages that are proximately related to the malpractice." Saffer, supra, 143 N.J. at 272.
Trial courts may employ the "lodestar" method in calculating attorney fee awards in legal malpractice actions. Packard-Bamberger, supra, 167 N.J. at 444-46. "The lodestar calculation is defined as the number of hours reasonably expended by the attorney, multiplied by a reasonable hourly rate." Id. at 445. Determining the lodestar is not a mechanical function. A trial court must "evaluate carefully and critically the aggregate hours and specific hourly rates advanced by counsel for the prevailing party to support the fee application." Rendine, supra, 141 N.J. at 335.
"'No compensation is due for non-productive time.'" Ibid. (quoting Copeland v. Marshall, 641 F. Supp. 2d 880, 891 (D.C. Cir. 1980)). A trial court "should exclude hours that are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. Further, the court can reduce the hours claimed by the number of hours spent litigating claims on which the party did not succeed." Ibid. (quoting Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)). "Moreover, the court can deduct hours when the fee petition inadequately documents the hours claimed." Ibid. While "[t]he use of contemporaneously recorded time records is the preferred practice to verify hours expended by counsel in connection with a counsel-fee application," a court may award counsel fees based on reconstructed records. Szczpanski v. Newcomb Med. Ctr., 141 N.J. 346, 367 (1995). However, where the record consists of reconstructed records, the trial court must scrutinize the records with "meticulous care." Id. at 368.
As to the reasonableness of hourly rates, the determination "need not be unnecessarily complex or protracted, but the trial court should satisfy itself that the assigned hourly rates are fair, realistic, and accurate, or should make appropriate adjustments." Rendine, supra, 141 N.J. at 337. Moreover, "[t]o take into account delay in payment, the hourly rate at which compensation is to be awarded should be based on current rates rather than those in effect when services were performed." Ibid.
There is no absolute requirement that a counsel fee award be proportionate to the amount recovered. Szczepanski, supra, 141 N.J. at 366. However, "[t]he trial court's responsibility to review carefully the lodestar fee request is heightened in cases in which the fee requested is disproportionate to the damages recovered." Ibid. Among other factors, the court should consider "any circumstances incidental to the litigation that directly or indirectly affected the extent of counsel's efforts." Id. at 367. If the trial court "determines that the hours expended 'exceed those that competent counsel reasonably would have expended to achieve a comparable result, a trial court may exercise its discretion to exclude excessive hours from the lodestar calculation.'" Ibid. (quoting Rendine, supra, 141 N.J. at 336).
We have considered each of the arguments presented by plaintiffs and defendant in light of the record, the applicable law, and the arguments of counsel. Except as stated, infra, we are satisfied that none of them are of sufficient merit to warrant discussion in a written opinion, and we affirm substantially for the reasons expressed by Judge Anzaldi in his oral opinion of May 25, 2006. R. 2:11-3(e)(1)(A) and (E).
Following trial, defendant was awarded $40,000 in attorney's fees, together with $8,340.80 in expenses and costs.
On appeal, we remanded the matter to the trial court for reconsideration of the issue of attorney's fees and expenses, stating that "defendant is not entitled to an award of attorney's fees and expenses in prosecuting his unsuccessful claim for consequential damages for loss of profit caused by his failure to obtain a liquor license, but only for services and expenses necessarily related to the prosecution for the recovery of the $5,000 retainer." Middlebrooks & Shapiro, supra, slip op. at 24-25. We also stated that "defendant is not entitled to attorney's fees caused by his delay in prosecuting the action by non-compliance with case management orders." Id. at 25. Lastly, we noted that the trial court had "awarded expenses without having proper backup documentation concerning the expenses requested by defendant. The burden is on the party requesting attorney's fees and expenses to provide the court with proper documentation supporting the claims." Ibid.
On remand, notwithstanding our direction, defendant submitted an application for an attorney fee and expense award in the amount of $80,395.29, including disbursements of $8,340.80. Judge Anzaldi determined that the fee award should be calculated using an hourly rate of $225 per hour. After deleting hours that were "spent because of failure to comply with prior case management orders" and "those periods of time that were incurred at the very outset of the case, incurred during the course of transferring it and getting it to the Superior Court," the judge adjusted the lodestar downward, because of inherent factors in the trial proceedings, and awarded defendant $13,400 in attorney's fees. The judge also awarded disbursements in the amount of $5,144.50, the amount requested, less the cost of taking the deposition of Melinda Middlebrooks ($446.30) and a portion of fees paid to defendant's liability expert ($2,270), because the expert had to redraft his reports for reasons unrelated to plaintiffs.
Although the trial judge did not review on the record each item of service contained in defense counsel's certification, we are satisfied that he did not abuse his discretion in evaluating defendant's application. We are satisfied that the judge carefully reviewed the lodestar fee request because of the disparity between the fee requested and the amount recovered. The judge rejected more than a substantial portion of defendant's claim, justifying the reduction in the fee award request.
Where we part ways with the trial judge is in awarding of $1,500 for fees that defense counsel contends were paid to attorney Raffi Momjian for legal services that "precede[d] [defense counsel's] period of time into the case . . . . [Momjian] was looking at it to determine if there was negligence." Momjian neither appeared in the action, nor provided a preliminary, written expert report. A review of the record fails to disclose any documentation for Momjian's services, either by personal statement, or by documentation of a cancelled check, evidencing monies paid. The failure to document expenses was one of the primary reasons the matter was remanded to the trial court. We are satisfied that defendant was not entitled to be reimbursed for monies paid to Momjian. Accordingly, the amount of disbursements awarded to defendant should be reduced by an additional $1,500.
We affirm on the appeal; except, we direct that the amount of disbursements awarded to defendant be reduced by $1,500. We affirm on the cross-appeal. We remand the matter to the trial court to enter an amended order in accordance with this opinion. We do not retain jurisdiction.
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