May 21, 2012
ESTATE OF EMANUEL NEEDLE, PLAINTIFF-APPELLANT,
BYRAM COVE, INC., DEFENDANT-RESPONDENT, AND PAUL BURKE, AND ESTATE OF PAUL BURKE, DEFENDANTS. BYRAM COVE, INC., DEFENDANT-RESPONDENT, AND PAUL BURKE, AND ESTATE OF PAUL BURKE, DEFENDANTS,
ESTATE OF EMANUEL NEEDLE, PLAINTIFF-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket Nos. L-7429-05, L-1125-06 and DC-31239-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 24, 2012 --
Before Judges Baxter, Nugent and Carchman.
In yet another appeal in this ongoing litigation, plaintiff the Estate of Emanuel Needle challenges an order on remand awarding defendant Byram Cove, Inc., counsel fees and costs in the amount of $156,440. As a result of plaintiff's prolongation and expansion of what should have been a relatively short-lived and easily resolved collection matter involving $13,000 at issue, the court has been confronted with a fee application that is significantly disproportionate to the amount in dispute. Again, we are constrained to reverse and remand for further consideration of the fees awarded.
We need not repeat the facts, as they are fully set forth in our earlier opinion, Needle v. Byram Cove, Inc., Docket No. A-1196-08 (App. Div. June 24, 2010), certif. denied, 204 N.J. 41 (2010).
We summarize by noting that the litigation started as a Special Civil Part action for the recovery of costs for the removal of a tree and for collection of past-due condominium assessments; it then spawned related litigation involving separate complaints in the Law Division and, ultimately, resulted in the entry of a judgment against plaintiff that included the award of counsel fees in excess of $59,000, which award was later supplemented and amended to reflect counsel fees of $72,689. This order was entered on October 28, 2008, and presumably represented the fees incurred up to that time.
In our previous opinion, we rejected plaintiff's various claims. We then said:
We now address the issue of damages, specifically counsel fees. Judgment was originally entered in the amount of $72,481.75. According to the record on appeal, this amount was derived from a June 19, 2008 certification filed by Barry M. Epstein, Esq.[,] in detailing the damages as $795.00 - Removal of the tree $6,000.00 - Annual Assessments owed for calendar years 2004- 2007 $4,787.00 - Special Assessment for improvements to common tennis court $300.00 - 5% fine on unpaid Annual Assessments (does not include the Tennis Court Assessment) $447.25 - Litigation costs Thereafter, a supplemental certification was filed, which is not included in the record, and the damages were increased to $86,158.25. We can only assume that the increased amount represented additional counsel fees. We fail to discern anything in the record that reflects an assessment of the bona fides of the original award of $59,012.50 in fees and the presumably supplemental award of an additional $13,676.50 in fees for a total fee award of $72,689.
We recognize that the awards here resulted from a default proceeding, yet we consider it incumbent on the trial judge to assess the bona fides of a fee claim even if it results in the first instance from a contract award or a default. The amount of the judgment[,] exclusive of fees[,] is $13,469.25.
We find no error in the underlying claims for $13,469.25[,] and we affirm as to that portion of the judgment. We do not take issue with defendant's position that it is entitled to a contract fee award under the bylaws for fees incurred in enforcing the bylaws nor do we determine that the full amount claimed should not be the ultimate award; however, the record is devoid of any analysis of the fees claimed, and we consider such review critical to any such award. We remand to the Law Division for further review as to the quantum of fees.
On remand, defendant moved for additional fees, including those fees that had previously been awarded, together with fees incurred since that time, so that the earlier award of fees appeared to be incorporated, and the additional fees awarded were $83,751, for a total of $156,440.
Defendant's application for fees and costs included approximately $210,000 of total fees incurred, which defendant reduced by approximately $55,000, this amount being attributable to the reinstatement of defendant's corporate charter. The actual claim for fees and costs was $156,887.25; as we have noted, the judge awarded $156,440.*fn1 The billing rates were noteworthy. The senior partner, who was defendant's president, billed at a rate of $665 per hour, while the associate who was charged with primary responsibility for the defense of the action charged at a rate of $380 per hour, her rate increasing during the course of the litigation.
While the rates and charges were appropriately set forth in the certification of services as well as the supporting billing documents, counsel acknowledged that these were not the rates charged to the client. In fact, the client was not billed for the services rendered, and whatever fees were awarded represented the total fees to be paid to defendant's counsel with no additional contribution from the client.
In granting the fee application and considering the mandate on remand, the judge set forth the basis of his fee award. Citing Rendine v. Panzer, 141 N.J. 292 (1995) and Litton Industries, Inc. v. IMO Industries, Inc., 200 N.J. 372 (2009), he said:
The [c]court has reviewed the detailed billing statements by Byram's counsel. The hourly rates are in accord with partners and associates in the jurisdiction of the [c]court for litigation attorneys of the stature and experience of Byram's counsel. The hours expended are reasonable and related to work incurred in pursuit of Byram's affirmative claims. Byram did not seek fees attributed to time spent by Epstein or Lodato at Sills, Beck . . . . Byram did not seek fees incurred except as permitted for under the terms of the By-Laws . . . . Byram did not seek fees for paralegal time or time spent by Epstein prior to entry of [s]ummary [j]udgment. All efforts related to reinstatement of Byram's charter are not sought or included by the [c]court in this award. Only a small fraction of the time spent by Epstein was actually included in this award (i.e.[,] 13.1 hours).
Byram's counsel achieved excellent results in this case. [See Von Pein v. Von Pein, 268 N.J. Super. 7 (App. Div. 1993)]. In light of the substantial write-offs and the extraordinary amount of time and effort by Byram's counsel, the [c]court approves the aforesaid fee and cost request. For additional reasons, see this [c]court's oral decision on April 29, 2011.
On appeal, plaintiff raises issues as to plaintiff's substitution as a party*fn2 as well as defendant's entitlement to fees. In addition, plaintiff raises issues as to the quantum of fees.
We decline to revisit plaintiff's claim as to defendant's entitlement to fees, as we resolved that issue in the earlier appeal; moreover, we deem the issue of the estate's status in this litigation as one without merit, and we need not comment further on the issue. R. 2:11-3(e)(1)(E). Our remand was limited to consideration of the fee award, and notwithstanding the seemingly new issues now being raised, we determine that the true issue in dispute is the quantum of fees. We now address that issue.
We first note that we do not question the reasonableness of the time expended in defendant's defense and prosecution of the myriad actions and appeals that derived from this dispute. While plaintiff raised legitimate issues as to defendant's corporate status, the bulk of the litigation was noteworthy for the time and effort expended when so little money was at stake. Whatever motivated plaintiff to engage in this course of litigation, the conduct and strategy that expanded this litigation beyond reason is not for us to determine; however, the underlying premise that plaintiff (now his estate) would be responsible for defendant's fees did not appear to be a relevant factor in the equation.
Our focus in this appeal is on the quantum of fees defendant requested. Following the appeal of the fee award, we remanded for compliance with Rule 1:7-4 and a statement of reasons to support the fee award. Unfortunately, the motion judge died, and a new judge assumed responsibility for reviewing and reconstructing the records, an arduous, and in many instances, thankless task, requiring a careful scrutiny of the time records to reach a just result.
The reasons proffered for the award, while incorporating the language of the relevant rules and cases, fail to reflect basic constructs that would apply here. These principles are particularly relevant in this case.
As we have noted, this is a fee-shifting case, resulting from a by-law provision that allows for the award of fees. When a contractual provision permits fee-shifting, "the provision should be strictly construed in light of our general policy disfavoring the award of attorneys' fees." Litton Indus., supra, 200 N.J. at 385.
Determination of the amount of the award requires calculation of the "lodestar," which is the "number of hours reasonably expended by the successful party's counsel in the litigation, multiplied by a reasonable hourly rate." Id. at 386 (emphasis added). Under Rule of Professional Conduct 1.5(a), "[a] lawyer's fee shall be reasonable in all cases, not just fee-shifting cases[.]" Ibid. (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21-22 (2004) and RPC 1.5(a)). In determining reasonableness, Rule of Professional Conduct 1.5(a) requires the court to consider:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services;
(8) whether the fee is fixed or contingent. [RPC 1.5(a) (emphasis added).]
In addition, as this is a contract fee case, the court must evaluate the reasonableness of the total fee requested as compared to the amount of the award. See Litton Indus., supra, 200 N.J. at 387.
Unlike the traditional fee-shifting case in which enhancement has some relevancy as a type of encouragement to represent a party, the opposite applies in a contract case.
That is, although enhancement is not a concern, 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. [Id. at 389 (internal citation omitted).] Determining the reasonableness of the hourly rate of the lodestar further requires evaluation of the prevailing attorney's rates in comparison to rates "for similar services by lawyers of reasonably comparable skill, experience, and reputation in the community." Id. at 387 (quoting Furst, supra, 182 N.J. at 22) (internal quotation marks omitted) (emphasis added).
The Supreme Court has described a "reasonable hourly rate" as one "'that would be charged by an adequately experienced attorney possessed of average skill and ordinary competence -- not those that would be set by the successful or highly specialized attorney in the context of private practice.'" Walker v. Giuffre, 209 N.J. 124, 132-33 (2012) (quoting Singer v. State, 95 N.J. 487, 500-01, cert. denied, 469 U.S. 832, 105 S. Ct. 121, 83 L. Ed. 2d 64 (1984)). See also Bung's Bar & Grill, Inc. v. Twp. Council of Florence, 206 N.J. Super. 432, 473-75 (App. Div. 1985) (approving upward adjustment but noting that quality is a consideration "only in the rare case where the fee applicant offers specific evidence to show that the quality of service rendered was superior to that one reasonably should expect in light of the hourly rates charged and that the success was 'exceptional'") (citing Blum v. Stenson, 465 U.S. 886, 899, 104 S. Ct. 1541, 1549, 79 L. Ed. 2d 891, 902 (1984)); In re Trust of Brown, 213 N.J. Super. 489, 501 (Law Div. 1986) (observing that counsel's affidavits "offer[ed] so little in out-of-the-ordinary legal problems as to make an extra fee allowance inappropriate").
The same standard applies when attorneys undertake representation without expectation of payment. New Jerseyans for a Death Penalty Moratorium v. N.J. Dep't of Corr., 185 N.J. 137, 156 (2005) (holding that a reasonable counsel fee is determined independent of the fee arrangement between a party and counsel and stating that an attorney's expectation of payment has no bearing on the fee award). See also BJM Insulation & Const., Inc. v. Evans, 287 N.J. Super. 513, 517 (App. Div. 1996) (stating that the terms under which an attorney has agreed to provide representation to a client "is none of [the obligor party's] business").
We are confronted here with two unique circumstances. First, by agreement between defendant's attorneys and their client, no fee is being charged to them directly, so that whatever is collected from plaintiff as a result of the award represents counsel's fee. Second, given the nature of the issues involved in this litigation, an awarding court must evaluate whether the rate defendant's attorneys used as the basis for their request is a reasonable hourly rate for "similar legal services" considering the issues involved in the litigation.
The judge alluded to the "stature and experience of defendant's counsel" and noted that the rates were "in accord with [rates of] partners and associates in the jurisdiction of the [c]court;" however, the judge gave little if any weight to the issues or "stakes" involved in the litigation, prompting the question whether a "reasonable litigant" would engage an attorney at rates ranging from $380 to $650 per hour for the purpose of collecting damages for removal of a tree and unpaid assessments, recognizing, of course, that the original action generated significant defenses and spurred new litigation. We have significant doubts that counsel would be retained at such rates, but that is an issue to be explored on remand.
We recognize that an agreement between an attorney and client may not be relevant to the fee award in most instances, but a fee application cannot be an opportunity to recoup fees that would never have been incurred at the proffered rate. In reaching this conclusion, we cast no aspersions on the competence or professionalism of defense counsel in this case. They fulfilled their obligation to their client to the utmost and did so in an entirely appropriate and professional manner; however, when a court is called upon to assess fees, these factors are relevant and must be factored into any fee award.
We again note that the original award was apparently $72,000, and it has now more than doubled; however, the fees incurred and services performed after the first award did not support such a significant increase in the award. We certainly did not anticipate that result when we remanded for a statement of reasons. Despite the trial court's abbreviated statement of reasons, we fail to understand the basis for such an award since the hours expended after the remand were less than the hours certified to before the remand.
The appropriate course of action at this point in the proceedings is to remand for reconsideration and review of the fee award and a full statement of reasons consistent with this opinion. We limit the remand to the fees incurred as of May 27, 2011. If defendant seeks additional fees, that should be the subject of additional motion practice and should not be included in the remand.
The order of May 27, 2011 is reversed, and the matter is remanded for proceedings consistent with this opinion. We do not retain jurisdiction.