December 19, 2012
IN THE MATTER OF THE ESTATE OF HALINA KRZEMINSKI, DECEASED.
On appeal from Superior Court of New Jersey, Chancery Division, Probate Part, Ocean County, Docket No. 178931.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 7, 2012 -
Before Judges A. A. Rodriguez and Ashrafi.
Attorney Joel A. Davies appeals from an order denying his motion for reconsideration of the amount of attorney's fees the Probate Part awarded to him following litigation of a contested will. Davies contends that the court reduced his requested fee based on an improper policy of capping the hourly rate where the attorney's fees are to be paid out of the estate. Although we agree with Davies that a judge's personal policy or a local court policy should not be the basis for determining reasonable attorney's fees pursuant to Rule 4:42-9, the judge in this case did not abuse his discretion in reducing the hourly rate requested by Davies. Therefore, we affirm the judge's order.
To evaluate Davies's claim for higher fees, we review the factual record and procedural history of the probate case. The decedent, Halina Zdonkiewicz Krzeminski, and her husband, Stefan Krzeminski, were citizens of Poland before World War II. She was an architect and he a planning engineer. After the war, they left Poland and lived in Asia and Australia before immigrating to the United States. They worked on a number of civic and private projects, including Halina's final position as a design architect for the Port Authority of New York and New Jersey. The professional endeavors of Halina and Stefan resulted in substantial personal assets at the time of their deaths. They had no children.
After Stefan died, Halina discussed the preparation of a will with Caesar Gaza, a long-time family friend who spoke Polish. Gaza drafted a will in English that he reviewed with Halina on several occasions. In August 2008, Gaza delivered the draft will for final preparation to the law firm at which attorney Jeffrey McWeeney worked. Before the will could be prepared and executed, however, Halina died on September 5, 2008. Initially, no family member or other person was available to claim Halina's body and to arrange for a funeral.
Thomas Ruddy was Halina and Stefan's accountant and had a durable power of attorney executed by Halina. About four weeks after her death, Ruddy sought authorization to arrange for her funeral. Representing Ruddy and Gaza, attorney McWeeney filed a complaint in the Probate Part, Ocean County, for Ruddy's appointment as temporary administrator pursuant to N.J.S.A. 3B:10-12. The complaint also sought to probate the unsigned draft will prepared by Gaza pursuant to N.J.S.A. 3B:3-3. Ruddy was named in the draft will as executor of the estate, and Gaza was named as alternate executor and also as a co-executor for the purpose of making distributions to Polish beneficiaries. Gaza had contacted Halina's relatives in Poland.
Halina's estate was valued at more than $3,200,000. The unexecuted will offered for probate contained a number of bequests, including specific bequests to three relatives in Poland totaling $60,000; a bequest of $1,000 to Eve Morawski, a friend of Halina, and of $25,000 to another named friend in Poland; bequests to named American and Polish charities totaling $1,070,000; a contingent bequest "if possible" to Ruddy of "not less than $220,000 but not to exceed the sum total of $250,000 derived from the combined corpus commissions as executor of the estate and the estate itself"; and an unspecified bequest to Gaza, the amount left blank in the draft will with the notation "to be indicated directly to attorney at the request of [Gaza]."
In October 2008, the judge of the Probate Part authorized Ruddy to make funeral arrangements, and he scheduled a hearing on an order to show cause why the unexecuted will should not be admitted to probate under N.J.S.A. 3B:3-3. An attorney filed an answer and counterclaim on behalf of Eve Morawski, contending that some of the charitable bequests were not in accord with Halina's wishes. Also, attorney Christopher Olszak filed an answer and counterclaim on behalf of four members of the Zdonkiewicz family in Poland, Halina's nieces and nephews. The Zdonkiewicz parties contested probate of the unexecuted will and sought intestate distribution of the estate pursuant to N.J.S.A. 3B:5-4. A number of the charities named in the will also filed pleadings, and the Attorney General of New Jersey joined the action in his parens patriae role on behalf of other charities that were beneficiaries under the will.
Because attorney McWeeney had a conflict of interest as a witness in the litigation, he withdrew from the case, and attorney Davies undertook representation of Ruddy and Gaza beginning in February 2009. After discovery was conducted, Davies prevailed in opposing a motion for summary judgment brought by attorney Olszak on behalf of the Zdonkiewicz parties. We subsequently denied Olszak's motion for leave to file an interlocutory appeal.
Following further discovery, the attorneys participated in settlement discussions before the judge of the Probate Part. In the course of those discussions, which were conducted off the record, the attorneys provided estimates of the fees they were likely to request from the estate in accordance with Rule 4:42-9(a)(3). The judge indicated that it was the practice and policy of the surrogate's office in Ocean County to pay appointed attorneys at the rate of $200 per hour and that such a rate was sometimes considered a cap on the award of fees out of an estate to retained attorneys. Nothing in our record suggests that any of the attorneys objected to a $200 hourly rate at that point. The two attorneys who had accumulated the most hours in the litigation, Davies and Olszak, estimated that the fees they would request would be in the neighborhood of $50,000, those amounts calculated based on the $200 rate.
According to the judge, Deputy Attorney General Marc Krefetz, who was appearing on behalf of otherwise unrepresented charities, was instrumental in analyzing the applicable law and in leading the parties to the settlement they eventually reached. On June 28, 2010, the court entered a consent judgment to document the settlement.
The consent judgment admitted the will to probate with agreed modifications. The charities and other named beneficiaries received forty percent of the estate after payment of expenses and taxes; the next of kin seeking intestate distribution received sixty percent. Ruddy waived a claim for commissions as executor, but he received the designated $220,000 minimum bequest provided to him in the will. Gaza waived any claim as a beneficiary and did not receive any monetary benefit.
With respect to attorney's fees, the consent order provided: "That all counsel of record in this matter shall be permitted to serve affidavits of services to the Court by June 30, 2010 for approval of counsel fees to be paid from the Estate of Halina Krzeminski as a cost of administration and consistent with New Jersey Court Rule 4:42-9."
On July 22, 2010, Davies submitted an affidavit of services. He sought $92,155 for 263.3 hours of services and $228 for expended costs. The fee Davies requested was calculated based on an hourly rate of $350. He noted his experience in probate litigation since 1990 and two published decisions in which he had participated. He considered this matter "a case of first impression on a recently enacted statute [that] involved both novel and difficult questions of law," and he asserted he had obtained a favorable result for his clients Ruddy and Gaza and for the charities named in the will.
On September 17, 2010, the judge entered an order authorizing the administrator of the estate to disburse as counsel fees the following sums:
$52,988.00 to Davies, $55,618.52 to Olszak, $40,633.20 to the attorney appointed as administrator during the litigation, $13,776.42 to McWeeney, $0 to an attorney who represented McWeeney, $8,200.00 to an attorney for three Polish charities, and $6,060.00 to the attorney for Eve Morawski.
Davies filed a motion for reconsideration. He argued that our decision in In re Probate of the Alleged Will and Codicil of Macool, 416 N.J. Super. 298 (App. Div. 2010), issued during the same week as the Probate Part's order, was contrary to the judge's reduction of his fee request. In Macool, we held that the Probate Part could not reduce an attorney's fee request by fifteen percent in accordance with the judge's personal policy of "discouraging or deterring" fee-shifting cases. Id. at 314.
After oral argument on Davies's motion for reconsideration, the judge in this case entered the order of January 13, 2011, from which this appeal is taken. In an oral decision, the judge stated he had carefully reviewed the affidavits of services filed by Davies and the other attorneys, and he had considered the standards for award of attorney's fees established by the Supreme Court in Rendine v. Pantzer, 141 N.J. 292 (1995). The judge found the hours of services listed in Davies's affidavit to be reasonable, and he had no major dispute that an attorney with the experience and knowledge of Davies might reasonably charge his client $350 per hour for his services on a contested probate matter, although that rate seemed somewhat high in the county. The judge stated he had not applied a fixed policy of capping the hourly rate at $200 but had understood the attorneys to have assented to that rate at the time of the settlement discussions.
The judge stopped short of making a finding that any agreement existed specifying fees, but the discussion of attorneys' fees at the settlement conference indicated the attorneys' awareness of the general practice in the county to limit their fee requests and an indication of their intent to honor that practice. Davies's earlier estimate of $50,000 approximated the time he had spent on the case up to that point, about 250 hours, multiplied by the $200 hourly rate. The judge said that "a meeting of the minds" had occurred during the settlement discussions about the approximate amount of fees that the estate would have to pay.
Only one other attorney had exceeded by a substantial amount the estimate of his fees, and the judge had reduced that attorney's award, too, to approximate the amount that had been previously discussed. The judge stated that no other attorney besides Davies had requested approval of the $350 rate, although all the attorneys had provided competent professional services during the litigation and other attorneys in the case also had higher customary rates and a comparable level of skill and experience to Davies.
In addition, the judge commented that the Deputy Attorney General's role had been instrumental in the case. According to the judge, DAG Krefetz's efforts and research had "led the way to convincing the court and ultimately all the parties to arrive at a fair, reasonable settlement." Thus, Davies could not take the entire credit for a successful result for his clients, and certainly not for the charities. Also related to consideration of relative success as a yardstick for an award of fees, the judge noted that the Macool decision, which was the basis of Davies's motion for reconsideration, also held that the unsigned document in that case should not be admitted to probate. Consequently, had Macool been issued before settlement discussions occurred in this case, that decision may actually have thwarted the settlement agreement that was reached.*fn1
Returning to the most important factor in the court's decision, the judge considered the higher rate Davies requested to be unfair to the other attorneys and to the parties in the litigation. The fee awarded to Davies, $52,760, was almost twenty-five percent of the total monetary benefit to his clients, $220,000. The judge considered that amount to be fair, reasonable, and proportionate to the clients' recovery.
On appeal before us, Davies argues that county or local policies with respect to awarding attorney's fees are an improper consideration, that the approximation of attorneys' fees at the settlement conference was not binding on the attorneys or the parties, that the judge erred in discrediting the value of his efforts in bringing about a positive result for his clients, and that those results justify the award of his full fee request.
The only party that has filed opposition to Davies's arguments on appeal is the Attorney General. The other participating attorneys have expressly declined to submit arguments in the appeal. Earlier, we considered and denied Davies's motion to bar the Attorney General's arguments on appeal because the Attorney General had not filed opposition papers in the Probate Part to the attorneys' fee requests. Before the trial court, attorney Olszak filed opposition to Davies's request on behalf of the Zdonkiewicz clients, whose benefits under the settlement would be reduced by the fees payable to the attorneys. Since Olszak determined not to file opposition on appeal, it is appropriate for the Attorney General to undertake that responsibility on behalf of the charities, which also stand to have their benefits reduced if Davies prevails on appeal.
We begin by stating our standard of review. A trial judge's decision to award attorneys' fees is reviewed under an abuse of discretion standard. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44 (2001). A reviewing court "will disturb a trial court's award of counsel fees 'only on the rarest of occasions, and then only because of a clear abuse of discretion.'" Litton Indus. v. IMO Indus., 200 N.J. 372, 386 (2009) (quoting Packard, supra, 167 N.J. at 444) (internal quotation marks omitted).
Rule 4:42-9(a)(3) provides, in pertinent part:
In a probate action, if probate is refused, the court may make an allowance to be paid out of the estate of the decedent. If probate is granted, and it shall appear that the contestant had reasonable cause for contesting the validity of the will or codicil, the court may make an allowance to the proponent and the contestant, to be paid out of the estate.
"Except in a weak or meretricious case, courts will normally allow counsel fees to both proponent and contestant in a will dispute." In re Reisdorf, 80 N.J. 319, 326 (1979).
In calculating an award of attorney's fees, the court must determine the "lodestar," that is, "the number of hours reasonably expended multiplied by a reasonable hourly rate." Rendine, supra, 141 N.J. at 334-35.
Generally, a reasonable hourly rate is to be calculated according to the prevailing market rates in the relevant community. Thus, the court should assess the experience and skill of the prevailing party's attorneys and compare their rates to the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. [Id. at 337 (quoting Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)).]
The hourly rate must be "fair, realistic, and accurate." Ibid.
After fixing a reasonable hourly rate, the trial court must determine whether "the specific circumstances incidental to a counsel-fee application demonstrate that the hours expended, taking into account the damages prospectively recoverable, the interests to be vindicated, and the underlying statutory objectives, exceed those that competent counsel reasonably would have expended to achieve a comparable result." Id. at 336. On this basis, a trial court may delete excessive hours from its calculation. Ibid. A court is then free to "reduce the lodestar fee if the level of success achieved in the litigation is limited as compared to the relief sought." Ibid. A successful fee application, however, does not require "proportionality between the damages recovered and the attorney-fee award." Furst v. Einstein Moomjy, Inc. 182 N.J. 1, 23 (2004).
Here, the judge stated that he had conducted this type of analysis in accordance with Rendine, finding no basis to dispute Davies's reporting of hours worked on the case or, as a general matter, that such work might reasonably be charged at the rate of $350 per hour by attorneys with comparable skill and experience. However, the judge reduced Davies's fee request by about forty-five percent based entirely on application of the $200 hourly rate because of the particular facts of this case, namely, that all the attorneys had impliedly agreed to that reduced hourly rate.
In Macool, supra, 416 N.J. Super. at 313, we held that the trial judge's award of attorney's fees could not be based on the judge's personal policy or on a desire to deter fee shifting requests. Neither of those considerations motivated the judge in this case. Rather, the judge based his decision on the attorneys' estimate of fees at the time of the settlement discussions, the fact that those estimates honored a custom of reducing the hourly rate charged in the circumstances of a probate case where the estate will be diminished by the award, and the judge's determination that the fees awarded met the Rendine standard.
It was not improper for the judge to take into account the parties' apparent agreement at the time of settlement discussions. Attorneys often agree to an hourly charge below their customary rate when they are appointed by the court or expect to be paid through a fixed fund under the court's supervision. In such circumstances, a reduced rate may be justified by a lesser risk that the attorney will not be paid for his services, or the absence of efforts to collect the fee from a private party. Also, attorneys sometimes view such discounted fees as part of their professional responsibility to the court and the community and as a manner of developing good will that benefits their practice in intangible ways other than direct remuneration.
Attorneys also may agree to discount their fees for purposes of facilitating a settlement. If an attorney believes that settlement is in the best interests of the client but the net recovery for the client must be greater to settle the case, the best interests of all involved may be served if the attorney agrees to reduce his fees.
Moreover, where an attorney is retained by a private party, the court's partial award of the amount requested under Rule 4:42-9 does not preclude an agreement between the attorney and the client for payment of the difference. In this case, Davies's affidavit of services did not state whether he had entered into a formal retainer agreement with Ruddy and Gaza. Our record does not indicate whether Davies and the clients agreed to a particular hourly rate. Nor did Davies's submission indicate whether the clients had paid any of his fees or had agreed to pay any amount beyond that awarded by the court. We do not know on this record whether the Probate Part's decision will preclude Davies from seeking his full hourly rate from his clients or another source. The Probate Part's orders of September 17, 2010, and January 13, 2011, did not bar Davies from recovery of additional amounts that his clients may have agreed to pay him.
We have recounted the specific facts of this appeal in some detail because, viewing the circumstances in their totality, we are convinced that the Probate Part's fee award was fair and justified. We find no abuse of discretion in the judge's decision to limit the hourly rate for the reasons he explained.
To reiterate the basis of our conclusion, we emphasize that the parties and attorneys agreed in principle to an approximation of the attorneys' fees payable from the estate, and that the agreement was based on an hourly rate of $200. After the settlement agreement was reached and formalized by a consent judgment, Davies could not substantially increase his demand for attorney's fees beyond the estimated and agreed rate. In accord with the holding of Macool, supra, 416 N.J. Super. at 313, we continue to direct trial judges not to employ a personal policy or an unauthorized method of calculating attorneys' fees under Rule 4:42-9. Nevertheless, we conclude the trial judge in this case did not run afoul of that admonition in determining an appropriate award of attorney's fees.