May 11, 2011
C.P., SR., PLAINTIFF-APPELLANT,
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket No. FD-18-595-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 9, 2010
Before Judges Yannotti and Espinosa.
This is plaintiff's second appeal from a counsel fee award to defendant. For the reasons that follow, we reverse.
This matter was the subject of a prior appeal, C.P., SR., v. A.F., No. A-4111-07 (App. Div. May 12, 2009). The factual background is set forth in our unpublished opinion and need not be repeated here. We note only the salient facts relevant to this appeal.
The parties were not married but had one child together, C.P., in March 2004. After the Division of Youth and Family Services (DYFS) removed C.P. from defendant's custody in January 2007, plaintiff became the custodial parent. In May 2007, plaintiff filed a pro se application for custody of C.P. and, by the following month, was represented by Legal Services of Northwest New Jersey, Inc. (Legal Services). Defendant retained private counsel. In August 2007, DYFS determined that A.F. could resume her role as the custodial parent and, thereafter, defendant filed a motion seeking child support from plaintiff. The parties settled the custody and parenting time issues in February 2008, leaving defendant's request for an award of counsel fees to the trial court for determination.
Defendant submitted a certification of attorney services in the amount of $8,485.26. In support of her application, defendant contended she had incurred over $13,000 in counsel fees and costs due to "significant extra charges associated with having to defend against multiple bad faith 'unfounded' claims via DYFS and to the police"; she had exhibited good faith in attempting to resolve the dispute and defendant had demonstrated "extreme bad faith"; and there had been no previous award of counsel fees.
In opposition, plaintiff submitted a certification in which he stated he filed a complaint for custody out of concern for his son when defendant was indicted for her alleged participation in a drug distribution ring. He argued the filing of a complaint under such circumstances should not "be considered a factual basis for a finding of bad faith." He also noted he had not made any discovery demands and litigation activity was made necessary by defendant's motions for the release of DYFS records and to quash hospitalization records regarding a second suicide attempt. Plaintiff stated defendant's request for child support exaggerated his income by $5000. He further alleged she "made regular accusations of fact that were simply not true and interfered with the progress of the case." By way of example, plaintiff stated defendant had falsely alleged she had been a client of defendant's attorney to support an application for his disqualification. Plaintiff also stated defendant's counsel had repeatedly alleged plaintiff committed acts of domestic violence against defendant and that the falsity of these allegations was shown by the fact that defendant conceded in court she was not ever harmed by him and withdrew her complaint. He cited other examples of litigation activity that, he claimed, needlessly prolonged the matter and added to expenses, noting it was not he but defendant "who took the drugs that led to the neglect complaint by DYFS; . . . who participated in a drug ring . . . [and] repeatedly ended up in the hospital for suicidal actions or ideations." Finally, plaintiff stated he lacked the income or assets to satisfy the fee sought.
The trial court awarded defendant the full $8,485.26 in counsel fees requested. The court stated plaintiff was financially capable of paying defendant's "substantially reduced attorney's fees," there had been no prior award of counsel fees, and there was "demonstrated litigiousness on the part of [p]laintiff, if not bad faith in his assertions."
In reversing the award of counsel fees to defendant, we stated the following about the basis for the award:
Prior to making the award, the court . . . indicated that in determining whether counsel fees should be awarded, it would "consider the non-payment of support by defendant during the [January 12 to May 6, 2007] time period as well as the plaintiff's payment of all day care expenses without defendant's contribution during that same time." However, the court's statement of reasons did not include its consideration of these factors. Rather, the court's written statement of reasons focused upon the parties' ability to pay and plaintiff's litigiousness. Yet, even with its consideration of these factors, the court did not make specific reference to the facts upon which it relied in reaching its determination. [Id., slip op. at 8]
Citing Rule 1:7-4(a), we noted the particular importance of factual findings relevant to the legal standards where the trial court's decision is discretionary, such as in the award of counsel fees. Id., slip op. at 9. We stated further:
Based upon the record before us, it appears that plaintiff filed a motion for custody in May 2007, months before defendant sought child support in a motion she filed on August 28, 2007. Hence, it is unclear to us how the court concluded that plaintiff filed his motion for custody only after defendant filed her motion seeking child support. Additionally, the court did not identify the specific litigation conduct of plaintiff that led the court to find that plaintiff demonstrated litigiousness. To the extent the court was referencing the matters before DYFS that defendant claimed was evidence of plaintiff's bad faith, the court did not set forth the particular facts from those proceedings that may have led it to conclude that plaintiff was litigious. Nor did the court explain how plaintiff, who was represented by Legal Services throughout the proceedings, was in a better position to pay defendant's counsel fees than defendant. Consequently, we are constrained to reverse the award of counsel fees and remand for further proceedings. [Id., slip op. at 9-10.]
On remand, no additional information was supplied regarding defendant's legal fees. At oral argument, plaintiff was again represented by Legal Services. Plaintiff took custody of C.P. and left his job in July 2008 after DYFS removed C.P. from defendant's care for a second time when she suffered a relapse into drug use. As a result, he had been unemployed for approximately one and one-half years at the time of argument. Counsel for plaintiff argued that he lacked the ability to pay defendant's counsel fees. He also argued that plaintiff did not act in bad faith or conduct himself in a manner that caused defendant to incur unnecessary legal fees, noting plaintiff had requested no discovery, filed no motions or orders to show cause, did not delay the case, and when the court had encouraged the parties to settle, plaintiff had done so. In contrast, counsel noted that defendant's counsel had made several motions. As to plaintiff's involvement in the DYFS stage of the proceedings, counsel stated, "He appeared in the case only when DYFS made it clear to Mr. [P.] that if he did not take the action and file this matter the child would be placed with a third party." Counsel also asked the court to consider that plaintiff had taken no money from defendant and continued to be the sole supporter of C.P., with no assistance from defendant.
Defendant, appearing pro se, stated she applied for representation by Legal Services at the outset of the proceedings but was found ineligible because she was employed at the time. She argued plaintiff was already unemployed when C.P. was placed with him; that he had filed incomplete financial information in his case information statement and that he did not settle the case until the day of trial, after she had subpoenaed witnesses to attend. As for her counsel's fees, she stated that the billings provided detailed accounts of the time spent by her attorney. She identified no fee or expense she incurred due to any bad faith action of the plaintiff's.
At oral argument, the court stated that a written decision would be provided to the parties and gave the following decision and reasons orally:
[I]n this case, based upon all of the circumstances and the nine criteria to be considered by this Court under Rule 4:42-9, when I reviewed it, reconsidered it, it did appear that the parties' positions were pretty much at the same level or point regardless of perspective.
Both parties legitimately are subject to criticism for bad faith. Both parties were in similar financial circumstances. Both parties had roughly equal ability to pay for fees. One had the advantage of Legal Services, which is - - which does factor into the ability to pay. The other did not. And in any event, to - - to get to it, I have determined that each party shall be responsible for legal fees in the amount of $4,242.63 to Deborah Alexander, Esq., and I make those comments so it does not look to a reviewing court that I just split the amount.
I did split the amount, but there is reason for it, which is articulated here.
The court's written decision acknowledged the present custodial arrangements, i.e., plaintiff has primary residential custody and defendant has C.P. five to six nights within each fourteen-day period. Regarding the parties' financial situations, the court acknowledged the contentions of the parties: plaintiff was receiving unemployment benefits and residing with his wife, who earned an annual income of $27,000; defendant's only income was welfare assistance.
The court addressed the ability of the parties to pay counsel fees as follows:
In the present case, Plaintiff is, or will be, better able to pay Defendant's substantially reduced attorney's fees while Defendant lacks the capacity.
Regarding ability to pay, the Court finds that neither Party has the current income or assets to pay the disputed counsel fees. However, the lack of ability to pay is not dispositive here, as counsel must be paid and the fees must be assigned to one or both of the Parties. The Court notes that since the outset of this litigation, both Parties have been previously employed. Plaintiff earned as much as $31,000 annually in 2007-08 and Defendant clearly earned nearly $30,000 annually as she qualified for $742 bi-weekly unemployment compensation as a result of her previous employment. Further, Defendant indicates that she also worked seasonal, part-time employment with UPS. Therefore, although both Parties are currently unemployed, the Court finds that both Parties have the equal ability to pay the counsel fees.
The court addressed the issue of bad faith as follows:
Regarding the good faith and/or bad faith of the Parties, here the Court finds that both Parties acted in equally bad faith. With respect to Plaintiff, the Court agrees with Defendant that Plaintiff did make a frivolous allegation of domestic violence against her, causing her to have to request DYFS files to prove her position. The Court also agrees that Plaintiff failed to appeal DYFS' finding that he committed domestic violence in [C.P.'s] presence and that he likely only discontinued his domestic violence allegations against Defendant in this trial after realizing that he could not prove same to the Court. Moreover, Plaintiff repeatedly failed to comply with support Orders for [C.P.], instead resorting to self-help by first agreeing in a previous Certification that he indeed has a support obligation, then certifying he would not pay same until Defendant paid him support for the time period during which he was [C.P.'s] sole residential custodian. Yet, Plaintiff never filed a motion for support from Defendant and now asks the Court to consider his non-action against her to be a sign of his good faith.
With respect to Defendant, although Plaintiff never filed for support against her, the Court finds that Defendant never made an attempt to offer or pay any support for [C.P.]. The Court is bewildered by Defendant's multiple enforcement motions with respect to support owed to her while harboring an apparent lack of belief that she owed any support to Plaintiff for his care of [C.P.]. Only now does Defendant indicate that she contributes to certain of [C.P.'s] costs. The Court finds Defendant's apparent position that Plaintiff should have [to] be solely responsible for [C.P.'s] support while he was given sole residential custody of [C.P.] to be in bad faith, especially since the custody change occurred through DYFS and as a result of Defendant's drug abuse. [Emphasis added.]
The court also specifically rejected defendant's argument that plaintiff acted in bad faith by enrolling C.P. in public school kindergarten without her consent. In fact, the court concluded her reliance on such argument in support of her application for counsel fees was in bad faith.
Notably, the court cited the lack of any evidence that any of the "bad faith" actions attributed to the plaintiff, or indeed either party, caused defendant to incur unnecessary counsel fees:
Both of the Parties' actions have financial value. There is value to the litigation time involved with Plaintiff's allegations of domestic violence against Defendant, and there is value to the unpaid support for [C.P.] from Defendant to Plaintiff, despite the lack of a support Order. However, neither of the Parties has assigned any particular value to the other Parties' bad faith. [Emphasis added.]
The court ordered that the parties "equally bear the disputed counsel fees in this case, ($8,485.26/2) = $4,242.63 each." In this appeal, plaintiff argues the court abused its discretion in making this award; that the award was not supported by sufficient or credible evidence and should be reversed.
We review an award of counsel fees for abuse of discretion. Where the judge follows the law and "makes appropriate findings of fact, a fee award is accorded substantial deference and will be disturbed only in the clearest case of abuse of discretion." Yueh v. Yueh, 329 N.J. Super. 447, 466 (App. Div. 2000); see also Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011); Strahan v. Strahan, 402 N.J. Super. 298, 317 (App. Div. 2008). An abuse of discretion "arises when a decision is 'made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigration & Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)); Barr, supra, 418 N.J. Super. at 46.
Consistent with the American Rule, in which each party bears its own litigation costs, Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc., 181 N.J. 245, 280-81 (2004), Rule 4:42-9(a) provides that "[n]o fee for legal services shall be allowed" except in enumerated circumstances, one of which is in a family action. R. 4:42-9(a)(1). Rule 5:3-5(c)*fn1 grants the court discretion to award counsel fees in support and custody cases subject to R. 4:42-9(b), (c), and (d) and states:
In determining the amount of the fee award, the court should consider, in addition to the information required to be submitted pursuant to R. 4:42-9, the following factors: (1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (3) the reasonableness and good faith of the positions advanced by the parties both during and prior to trial; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award.
In Mani v. Mani, 183 N.J. 70, 93 (2005), the Supreme Court described the required considerations in awarding counsel fees pursuant to R. 5:3-5(c)(1) and R. 4:42-9(b)*fn2
[T]he court must consider whether the party requesting the fees is in financial need; whether the party against whom the fees are sought has the ability to pay; the good or bad faith of either party in pursuing or defending the action; the nature and extent of the services rendered; and the reasonableness of the fees. . . . [Id. at 94-95 (citations omitted).]
We turn first to the issue of bad faith, a factor relied upon by the trial court in its determination. Bad faith and the assertion of unreasonable positions are properly considered by the court. Diehl v. Diehl, 389 N.J. Super. 443, 455 (App. Div. 2006). The purpose of an award in such circumstances "is to protect the innocent party from unnecessary costs and to punish the guilty party." Yueh, supra, 329 N.J. Super. at 461. Accordingly, such consideration requires an evaluation of both the litigant's conduct and the unnecessary costs an adversary has incurred as a result of such conduct.
For example, in Yueh, a counsel fee award was warranted because the plaintiff filed motion after motion, delayed the discovery process that increased his counsel fee billings, and acted in "constant disregard" of court orders and discovery rules. In Addessa v. Addessa, 392 N.J. Super. 58 (App. Div. 2007), where the plaintiff's bad faith weighed heavily, we affirmed a counsel fee award that charged plaintiff "only for the unnecessary litigation for which he was responsible." Id. at 79. However, we substantially reduced a counsel fee award when there was no evidence that the plaintiff incurred fees to enforce court orders or obtain discovery. Diehl, supra, 389 N.J. Super. at 454. And, in Barr, supra, 418 N.J. Super. at 47, a counsel fee award was reversed in part because the trial court failed to delineate those counsel fees incurred in enforcing an existing order.
On remand, the trial court identified plaintiff's conduct that it determined to be evidence of bad faith, i.e., a frivolous allegation of domestic violence against defendant that caused her to have to request DYFS files to prove her position and repeated failures to comply with support orders. However, the court also detailed acts of bad faith by defendant. The court expressed bewilderment at defendant's contradictory positions that she should provide no support for C.P. while he was in plaintiff's custody, even though the change in custody was due to her drug use, while she filed multiple enforcement motions with respect to support owed to her. The court also found defendant's attempt to buttress her counsel fee application with an argument that defendant acted in bad faith by enrolling C.P. in public kindergarten without her consent to be made in bad faith. Therefore, the court considered them equally at fault.
This was, however, an inadequate basis to require plaintiff to pay one-half of defendant's counsel fees. First of all, the award did not serve the purpose "to protect the innocent party from unnecessary costs and to punish the guilty party." Yueh, supra, 329 N.J. Super. at 461. By the court's own estimation, defendant was equally "guilty" of acting in bad faith and yet was rewarded by a ruling that relieved her of one-half of her counsel fees. In addition, neither defendant nor the court identified any fee or cost unnecessarily incurred as a result of plaintiff's alleged bad faith. As a result, the imposition of any counsel fee award, let alone one-half of the fees, exceeded the amount of fees properly attributed to plaintiff as a result of unnecessary litigation.
Another factor considered by the trial court was ability to pay, which is addressed in Rule 5:3-5(c) by way of two factors:
(1) the financial circumstances of the parties; and (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party. At the time of the initial award and on remand, the parties' financial circumstances caused the court to find "that neither Party has the current income or assets to pay the disputed counsel fees." Based upon this equal inability to pay the fees, the court concluded that "both Parties have the equal ability to pay the counsel fees." (Emphasis added.)
In reaching this conclusion, the court appeared to consider plaintiff's representation by Legal Services as an economic advantage not enjoyed by defendant. While it is true that plaintiff did not incur any legal expenses of his own, his representation by Legal Services reflected a lack of resources to pay such fees, not the release of an obligation that now freed him to allocate unspent funds to defendant's legal expenses. It was, therefore, error for the court to consider representation by Legal Services evidence of an enhanced ability to pay.
The court also discounted "the lack of ability to pay . . . as counsel must be paid and the fees must be assigned to one or both of the Parties." However, none of the factors in Rule 5:3-5(c) call for the court to insure that "counsel must be paid." In the absence of factors that justify an award pursuant to the Rule, the American Rule applies and the payment of fees will depend upon the ability of the litigant who incurred the fees.
We therefore conclude that the award of counsel fees here constituted an abuse of discretion. While we would ordinarily remand for reconsideration of the order in light of this opinion, the record is adequate to permit us to exercise original jurisdiction to conclude this litigation without further expense to the litigants. See Diehl, supra, 389 N.J. Super. at 453-54. There is no evidence of any legal expense unnecessarily incurred by defendant as a result of plaintiff's alleged bad faith and none were identified by either defendant or the court. In addition, the record fails to support any finding that plaintiff had the ability to pay one-half of defendant's counsel fees. Accordingly, there is no basis for an award of counsel fees on this record.