November 23, 2011
BARRY ASSOCIATES, LLC, PLAINTIFF-APPELLANT,
300 ALLENHURST, LLC, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. DC-2676-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 28, 2011
Before Judges Waugh and St. John.
Plaintiff Barry Associates, LLC (Barry), appeals from the September 4, 2010 order of the Special Civil Part awarding it $1057.25 in counsel fees, arguing that it was entitled to $20,164.50 in fees. We reverse and remand for further proceedings consistent with this decision.
We discern the following facts and procedural history from the record on appeal.
Barry is a real estate agency that earns commissions by finding
commercial tenants for property owners. Defendant 300 Allenhurst, LLC
(Allenhurst), owns commercial properties for lease.*fn1
Allenhurst hired Barry to secure a qualified tenant for one
of its buildings. The parties executed a contract that provided for
Barry to earn a five percent commission on the rent payable by the new
tenant. The contract also provided that Allenhurst would be liable for
any "reasonable attorney fees" incurred by Barry in the event
Allenhurst breached the contract.
After Barry found a tenant for Allenhurst, it made several commission payments to Barry. However, two of its checks were returned for insufficient funds. In September 2009, Barry brought an action in the Small Claims Section of the Special Civil Part, seeking the remaining commission. It subsequently received leave to file an amended complaint and the matter was transferred to the regular Special Civil Part. Allenhurst filed an answer, in which it contested the amount owed to Barry.
After a four-day bench trial, spanning a period of approximately two months, the trial judge found in favor of Barry on most of its claims and awarded $4229 in damages. Barry's attorney filed an application for counsel fees in the amount of $20,164.50, but the trial judge awarded only $1057.25 in fees. This appeal followed.
On appeal, Barry argues that the judge should have awarded the full amount of counsel fees requested and that he erred in capping fees at twenty-five percent of the damages awarded. Barry also challenges some of the factual findings contained in the judge's oral decision on counsel fees. Allenhurst argues that the fees requested were excessive considering the nature of the case, and that the judge's award of fees was reasonable.
An award of counsel fees is a decision that rests within the discretion of the trial judge and is thus reviewed for an abuse of that discretion. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44 (2001). "'[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion.'" Id. at 444 (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). A trial court decision will constitute an abuse of discretion where "the 'decision [was] made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" United States v. Scurry, 193 N.J. 492, 504 (2008) (alteration in original) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)).
Long adhering to the so-called American Rule, that a prevailing party is not entitled to recovery of attorneys' fees, New Jersey generally disfavors the shifting of fees. N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 569 (1999) (citations omitted). Nonetheless, a prevailing party can recover attorneys' fees if expressly provided for by contract. Packard-Bamberger, supra, 167 N.J. at 440 (citing Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 504 (1983)). Although Rule 4:42-9(a) does not include contracts within its eight exceptions under which attorneys' fees may be awarded, the rule does not preclude parties from agreeing to fee-shifting provisions, and a party may be contractually obligated to pay attorneys' fees. Satellite Gateway Commc'ns, Inc. v. Musi Dining Car Co., 110 N.J. 280, 285-86 (1988) (citations omitted).
The method for calculating reasonable counsel fees in contract cases is the same as that used in other counsel fee cases, although there is no enhancement of the fee as there is under some fee-shifting statutes. Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 386, 389 (2009). The requesting party must establish that legal work performed "'was causally related to securing the relief obtained.'" Id. at 386 (quoting
N. Bergen Rex Transp., supra, 158 N.J. at 570). A fee award will be "'justified if [the party's] efforts [were] a necessary and important factor in obtaining th[at] relief.'" Ibid. (quoting N. Bergen Rex Transp., supra, 158 N.J. at 570). In this regard, "the relationship between the fee requested and the damages recovered is a factor to be considered by the trial court because the notion of proportionality is integral to contract fee-shifting to meet the reasonable expectation of the parties." Litton Indus., supra, 200 N.J. at 389. Nevertheless, that consideration is fact-sensitive "necessarily" because there is "no precise test or mathematical calculation for that adjustment." Ibid.
In calculating the amount of reasonable attorneys' fees, courts
determine the "lodestar," defined as the "number of hours reasonably
expended" by the attorney, "multiplied by a reasonable hourly rate."
Ibid. (citing Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004));
Rendine, supra, 141 N.J. at 334-35. "The court must not include
excessive and unnecessary hours spent on the case in calculating the
lodestar." Furst, supra, 182 N.J. at 22 (citing Rendine, supra, 141
N.J. at 335). The lodestar may be enhanced or reduced based
upon a number of factors, including a reduction for hours spent on
unsuccessful or meritless claims that are independent, factually or
legally, of the meritorious claims. R.M. v. Supreme Court of N.J., 190
N.J. 1, 11 (2007) (citing Hensley v. Eckerhart, 461 U.S. 424, 434, 103
S. Ct. 1933, 1940, 76 L. Ed. 2d 40, 51 (1983)). The court is required
to make findings on each element of the lodestar fee. Id. at 10.
The trial judge correctly began his analysis with reference to RPC 1.5, and an analysis of the hours claimed and their relationship to the issues tried. That analysis appeared to be aimed at determining the lodestar. However, he ultimately determined the award on the basis of a percentage, twenty-five percent, of the recovery. That was not the method provided for in the contract, which called for an award of "reasonable attorney fees" rather than a percentage of the recovery. Use of a percentage can have the effect of unreasonably capping the amount of the fee that would otherwise be reasonable under the circumstances.
While a reduction in the amount of fees requested may well be justified by application of the lodestar method, the process cannot be shortcut by application of a percentage cap that is not found in the contract being enforced. See Litton Indus., supra, 200 N.J. at 388-89. Consequently, we reverse the award of counsel fees and remand to the trial judge for calculation of counsel fees using the lodestar method. As part of that process, the judge should consider the other issues raised by Barry on appeal, as to which we express no opinion. We do not retain jurisdiction.
Reversed and remanded.