On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4158-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 21, 2011
Before Judges Axelrad and Ostrer.
In response to defendants' pre-answer motion to dismiss for failure to state a claim upon which relief can be granted, R. 4:6-2(e), the trial court dismissed with prejudice this putative class action by tenants who alleged that their landlords' charge of attorney's fees violated various statutory and common law rights. We reverse. Viewing the complaint's allegations with liberality, we conclude that it states viable claims, and, to the extent it does not, dismissal should have been without prejudice, as the claim is susceptible to appropriate amendment. See Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746, 772 (1989) (stating that a court must search a complaint liberally to discern the statement of a claim, and dismissal should presumptively be without prejudice).
Specifically, we discern a cause of action based on plaintiffs' allegation that the landlords have imposed charges on their tenants, denominated as attorney's fees, that exceed the landlords' actual cost for in-house legal representation. This runs afoul of the general proscription that an attorney's fee may not be shared with a non-attorney. R.P.C. 5.4. Therefore, we conclude that plaintiffs state a claim under the Consumer Fraud Act, N.J.S.A. 56:8-1 to 184 (CFA); and a claim for negligent misrepresentation. Although plaintiffs failed to plead an essential element of a claim for wrongful eviction under N.J.S.A. 2A:18-61.6(d), a curative amendment is possible; consequently, that claim should have been dismissed without prejudice.
We accept plaintiffs' factual allegations as true and extend to plaintiffs every reasonable inference. Printing-Mart Morristown, supra, 116 N.J. at 746. Defendants consist of two single-purpose LLCs - East Coast The Willows, LLC (Willows), and East Coast Colonial Apartments, LLC (Colonial) - each of which owns an apartment complex in New Jersey; three related entities, Morgan Management, Mitchell L. Morgan, Inc., and Morgan Properties, which own or manage 131 apartment communities, including Willows and Colonial, with over 30,000 apartment residences in New Jersey and several other states; and Rosemary Spohn, an attorney who serves as a salaried, in-house counsel for Morgan Properties.
The four named plaintiffs were or are tenants of Willows or Colonial. They were subject to eviction actions and charged $400 as an attorney's fee, which would be reduced to $200 if they paid all their arrears before the court date of the eviction proceeding. Plaintiffs alleged that defendants filed an average of two hundred eviction actions a month in Camden County alone. They alleged that the attorney's fees that defendants charged exceeded Spohn's actual costs as a salaried employee.
In support of their motion, defendants filed with the court the leases of the individually named plaintiffs.*fn1 The 2010 lease between Willows and plaintiff Darnice Green, and between Colonial and plaintiffs Michael and Beth Permenter included the same provision:
If the Landlord uses the services of an attorney (including in-house counsel) for any good cause in relation to the enforcement or defense of any terms of this Lease, or in any relation to this tenancy, whether or not litigation is commenced, Resident must pay Landlord's attorney fees in the amount of four hundred dollars ($400) plus costs as Additional Rent for each cause in which the attorney's services are engaged.
By its plain language, the fee-shifting provision is not limited to fees incurred in eviction actions. Rather, anytime the landlord turns to its attorney for assistance, a flat $400 liability may arise. This apparently would include preparing and serving various notices relating to any breach of the lease.
Previous leases for Green and the Permenters, and for plaintiff Mathew Blumberg differed in significant respects from the 2010 lease. They allowed the landlord to seek more than $400 if the attorney's fee actually exceeded that amount. They permitted collection of interest on the fee; reduced the fee-shift to $200 if the tenant paid all rent and late charges before the attorney had to appear in court; and authorized charging the $400 fee for "matters that do not require the filing of an action with a court" such as service of notices. Reading the complaint indulgently, the named plaintiffs actually paid fees charged.
In count one of their three-count complaint, plaintiffs allege wrongful eviction under N.J.S.A. 2A:18-61.6. In support of that claim, plaintiffs allege that defendants represented that plaintiffs would be subject to eviction if the attorney's fees were not paid. In count two, plaintiffs ground a CFA claim on the unconscionability of the attorney's fee provision and the allegation that the landlords misrepresented the nature of the attorney's ...