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Pena v. Drive-Masters Co.


July 29, 2010


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-4529-05.

Per curiam.


Argued May 11, 2010

Before Judges Messano and LeWinn.

Plaintiffs appeal from the Law Division's order granting their attorneys, F. Gregory Barnhart, of Searcy, Denney, Scarola, Barnhart & Shipley, P.A.,*fn1 and Alan Y. Medvin, of Medvin & Elberg, attorneys' fees pursuant to Rule 1:21-7(c).*fn2 Barnhart and Medvin sought fees based upon a total recovery of $13,490,000 obtained in the settlement of a complex products liability/negligence action in which plaintiffs collectively suffered serious injuries. Given the size of the recovery, counsel sought 25% of the amounts recovered by the Estate of Marven Pena, a minor who died in the accident, and another minor plaintiff, Irving Pena*fn3 ; the attorneys sought one-third of the settlement amounts designated for the adult plaintiffs, two of whom suffered permanent and total disability as a result of the accident. The attorneys sought a total fee of $4,082,556.52 and agreed to split that amount.

Plaintiffs opposed the request as to the fees sought on the settlements reached on behalf of the adult plaintiffs, and hired other counsel to argue their cause in the Law Division. We digress briefly to provide some background from the underlying lawsuit.

In August 2004, plaintiffs were on a family vacation in Florida in their Ford Econoline van that had been specially modified to accommodate a lift so that Marven, who was severely disabled and used a wheelchair, could access the vehicle. While traveling on the highway in Florida, the van's drive shaft fractured, causing it to tear a hole in the fuel tank. A fire erupted, and, while the other family members were able to escape, Marven could not, and he subsequently died. The remaining plaintiffs suffered injuries in varying degrees of severity.

The family retained Barnhart's firm in Florida, which filed suit in New Jersey, and retained local counsel, Medvin, to assist in the prosecution of the case. On April 9, 2009, the last aspect of the litigation settled before now-retired Judge Donald S. Goldman. At the time, both Barnhart and Medvin appeared, along with defense counsel, and the settlement was placed on the record. With plaintiffs present, the judge explained that given the size of the settlement, "there w[ould] have to be an application made with respect to attorneys' fees to the . . . assignment judge," and requested the application be made "as soon as practicable."

The four adult plaintiffs indicated they understood the terms of the settlement, and each indicated their satisfaction with the award and the services provided by their attorneys. Judge Goldman noted the work that had been done to secure the settlement, stating, "all the attorneys in this case can be proud from a professional level of the work that they've done."

Barnhart and Medvin submitted certifications to the court in their application seeking fees. Barnhart detailed the significant legal work involved in "bring[ing] more defendants who could share liability" into the suit, including the Ford dealer itself, Hackettstown Ford, Inc. He noted the various layers of insurance coverage that were ultimately marshaled to comprise the total settlement amount. At one point, Barnhart certified that "there were no less than twelve law firms aligned against plaintiffs' counsel." He attached copies of the contingency fee agreements his firm executed with plaintiffs, which provided for a one-third fee on the gross settlement amount in the event litigation was filed and resulted in a recovery. Barnhart claimed this was less than the amount actually permitted under Florida law.

Barnhart provided a "good faith estimate" of the amount of time actually spent by various members of the firm on the litigation, noting that it was not until January 2009 that his firm "began keeping time in all cases." Based upon his estimate, and his hourly rates, Barnhart claimed his firm alone was due more than $3.5 million dollars; he acknowledged that the total fee sought would be shared with Medvin, thus, resulting in a fee to his firm of $2,041,278.26. Barnhart further provided extensive detail regarding the complexity of the litigation, the need for experts in several fields, and the fact that he and Medvin "used every bit of [their] creativity, legal knowledge and experience to fashion theories of liability which would withstand judicial scrutiny and to find other sources of liability and insurance coverage."

Medvin's certification similarly detailed the complex nature of the litigation. He acknowledged that he "did not keep time records with respect to this case," as was his routine practice except when "retained on an hourly basis." He estimated the time spent to be 4,650 hours, and that both firms had expended $600,000 in costs preparing for trial, which, at the time of the last settlement, was looming. Medvin claimed that at no time did he have "more than three other cases pending in addition to the Pena matter."

Plaintiffs filed a joint certification in opposition. They noted "that [they] ha[d] absolutely no problem with the manner in which either Mr. Barnhart or Mr. Medvin represented [them]." They also "d[id] not dispute that this was a difficult case, but it [wa]s [their] understanding that many cases of this type [we]re difficult." They further noted the lack of any documentation by either firm regarding the hours spent on the litigation. Plaintiffs claimed that "the issue of a 'full fee' was not discussed with [them] until after the case was settled." Plaintiffs urged the judge to grant "a fee of 20 to 25%" which they believed was "reasonable."

Barnhart and Medvin filed reply certifications. Each claimed they had discussed the one-third fee with all the family members after the "net result to each client [was] calculated." They claimed the fee was discussed again after the settlements were placed on the record and after Marvin's settlement was approved. Barnhart claimed that discussions took place at every settlement.*fn4 Barnhart further asserted that plaintiffs knew the fee amounts had been escrowed pending the ultimate fee application to the court.

On July 10, 2009, Assignment Judge Patricia K. Costello heard oral argument on the application filed by Barnhart and Medvin; represented by counsel, plaintiffs opposed the request. On July 17, 2009, Judge Costello issued a written opinion. She extensively reviewed the underlying litigation and the settlements obtained. She reviewed Rule 1:21-7(c) and noted that "[i]n settling a reasonable fee, a court should consider the factors listed in RPC 1.5(a)[,]" citing our decision in Ehrlich v. Kids of N. Jersey, Inc., 338 N.J. Super. 442, 446 (App. Div. 2001). She noted, "[w]hile not dispositive, another factor to be considered is whether the client has consented to the additional fee request."

Judge Costello then applied the factors set forth in RPC 1.5(a) to the case at hand. As to "the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly[,]" RPC 1.5(a)(1), she noted that although neither firm kept time records, both made "good faith estimates." She concluded, "the lack of time records alone w[ould] not be fatal to a reasonable fee application[,]" citing In re Estate of F.W., 398 N.J. Super. 344, 356-57 (App. Div. 2008). Judge Costello observed that "ten experts and twenty-three fact witnesses" were deposed; "[t]wenty-one expert reports were created by twenty-five experts"; "[f]orty-five motions, briefs, and responding briefs were filed," as well as "between twenty-five and twenty-eight in limine motions . . . in preparation for trial." The expert reports covered a variety of issues including liability and damages.

Regarding RPC 1.5(a)(2), "the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer[,]" Judge Costello, citing Barnhart's and Medvin's certifications, inferred that "[t]he amount of time and attention paid to this case could not have been missed by the clients." Judge Costello took note that while the retainer signed in Florida did not comport with New Jersey law and permitted an even greater recovery, the dispute was governed by Rule 1:21-7(c). See RPC 1.5(a)(3) (requiring consideration of "the fee customarily charged in the locality for similar legal services").

Judge Costello then considered factors (4), (5), and (6) of RPC 1.5(a), discussing "the amount involved and the results obtained[,]" the lack of any "time limitations imposed by the client[s] or the circumstances[,]" and "the nature and length of the professional relationship" plaintiffs had with the two firms, which was non-existent prior to this litigation.

The judge then took note of "the experience, reputation, and ability" of Barnhart and Medvin, RPC 1.5(a)(7), detailing the credentials of both lawyers, and noting the certifications filed by their adversaries in the litigation that attested to their "reputation[] and ability . . . ." Noting the contingent fee arrangement, RPC 1.5(a)(8), Judge Costello observed "[t]here was a definable risk in taking this case." She noted the expenses advanced by the firms, and that except for the "certain recovery coming from . . . Drive-Master," "[t]here was a real possibility that plaintiffs would not be able to establish liability for the remaining defendants."

In part, Judge Costello concluded:

The motion is granted for the following reasons. Counsel have detailed their litigation strategy and have demonstrated that they have met . . . and exceeded their proofs under the relevant factors.

The time and labor involved were extraordinary. The number of plaintiffs, their varying causes of action, and the diverse theories under which they claimed damages made the case quite complex. . . . The case was vigorously litigated at every stage . . . .

The obvious defendant under the simplest theory of liability had limited coverage . . . . Counsel brought in numerous other defendants under inventive, and . . . novel legal theories. . . .

Counsel are highly-skilled, . . . and are well-recognized in their fields. The result was impressive and directly attributable to their skill and tenacity.

They took on a case with catastrophic losses and injuries and, in spite of serious liability issues, achieved an impressive result. Along the way, they each spent over four years living with this case to the exclusion of other opportunities.

Judge Costello then addressed the gravamen of plaintiffs' opposition. Noting plaintiffs' objection to the lack of detailed time records, she concluded that "although the[] estimate is generally challenged as high, no specifics have been made. The estimates appear fair and reasonable . . . ." Noting plaintiffs' assertions that "they were unaware of the application until after they settled the case," and that the difference between the fees sought and the amount plaintiffs contended was reasonable -- approximately $1 million -- "would be more meaningful to them than to the lawyers[,]" Judge Costello concluded that while "[t]his [wa]s an emotionally appealing argument," it was "not . . . intellectually sound . . . ." Observing that plaintiffs and the attorneys "diverge on the facts" regarding whether plaintiffs were advised of the potential fees before settlement, the judge also noted that "no one requested a plenary hearing." She nevertheless "resolve[d] this point in [the attorneys'] favor," noting the Florida retainer that permitted an even higher recovery and the amounts "escrowed as defendants settled, a fact plaintiffs d[id] not dispute."

Finally, Judge Costello noted that "contingent fees recognize[] a broader value than mere income to a firm . . . ." They serve as "an imaginative solution to the problem of the cost of legal services being an obstacle to vindication of a claim even when the plaintiff's stakes are very large[,]" quoting Merendino v. FMC Corp., 181 N.J. Super. 503, 511 (Law Div. 1981). She continued, "[w]hile the clients' position [wa]s a factor to consider, it [wa]s not a dispositive one. Regardless of whether the clients consent, it is the court's responsibility to balance the factors and reach a fair resolution." She entered the order under review and this appeal ensued.

Before us, plaintiffs have raised the same arguments, and the additional argument that a plenary hearing was required. We have considered these contentions in light of the record and applicable legal standards. We affirm.

As to the claims that the fee application did not provide sufficient detail regarding the actual time expended, or that the fee was unjustified under the circumstances, we affirm substantially for the reasons expressed by Judge Costello in her written opinion. See R. 2:11-3(e)(1)(A). No further discussion is necessary.

As to the claim that plaintiffs were unaware that a fee request would be made or the consequences of it being granted, prior to agreeing to the settlement, we concur with Judge Costello that consent was not a determinative factor. Rule 1:21-7(f) provides that an attorney seeking a fee pursuant to Rule 1:21-7(c) must file an application on written notice to the client . . . to the Assignment Judge for the hearing and determining of a reasonable fee in light of all the circumstances. This rule shall not preclude the exercise of a client's existing right to a court review of the reasonableness of an attorney's fee.

The Rule is silent regarding consent by the client. Arguably, the last sentence of the Rule contemplates that a client may choose not to consent to the fee application and is entitled to a hearing on the issue of reasonableness under any circumstance.

"[I]n considering a fee application under this subsection with respect to an award in excess of $2,000,000, the judge should rely on the factors listed in RPC 1.5 in setting a reasonable fee." Pressler, Current N.J. Court Rules, comment 7 on R. 1:21-7(f) (2010) (emphasis added); accord, Estate of F.W., supra, 398 N.J. Super. at 357. In turn, RPC 1.5(a) does not include the client's consent as a factor in determining a reasonable fee.

As a result, we conclude that plaintiffs' other contention -- that Judge Costello erred by not holding a plenary hearing to resolve the disputed fact as to consent that was evident from the certifications -- is without merit. First, as noted by Judge Costello, there was adequate circumstantial support to conclude that Barnhart and Medvin in fact discussed the issue with plaintiffs before or contemporaneously with the settlements. Second, even if that was not the case, because the totality of Judge Costello's other findings are amply supported by the record, and because they establish the reasonableness of the fee she awarded, resolution of the issue in plaintiffs' favor would not lead to a different result.

As a corollary to this argument, plaintiffs contend that they were entitled to a plenary hearing under the terms of Rule 1:21-7(f). However, it is undisputed that they never sought one below. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) ("[A]ppellate courts will decline to consider questions or issues not properly presented to the trial court . . . "). The Rule requires a "hearing" on the application, not a plenary hearing with testimony, and it cannot be disputed that in this case plaintiffs received the procedural guarantees afforded by the Rule.


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