Superior Court of New Jersey, Law Division, Somerset County, Special Civil Part
Approved For Publication March 13, 2015.
W.S. Gerald Skey for plaintiffs ( Skey & Bhattacharya LLC, attorneys).
Richard A. Mastro for defendant ( Legal Services of Northwest Jersey, Somerset County Division, attorneys).
[439 N.J.Super. 644] CIVIL ACTION
STATEMENT OF REASONS
This case raises the issue of whether a matrimonial attorney fee retainer agreement is subject to the Truth in Lending Act (" TILA" ), 15 U.S.C. § 1601 to 1667(f). The dispute arises out of legal services provided by plaintiffs to defendant. Defendant retained plaintiffs to represent her in a divorce by way of a retainer agreement executed on April 26, 2010. Plaintiffs state that they represented defendant for approximately six months, after which time defendant reconciled with her husband and the divorce was dismissed by way of a stipulation of dismissal filed on September 3, 2010. Plaintiffs allege that, because of defendant's financial difficulties, defendant was not required to pay a retainer up front. Instead, the agreement indicates that plaintiffs would [439 N.J.Super. 645] apply to the court for pendente lite financial relief for defendant, and that they would also seek an award of counsel fees from the court to fund the retainer.
Plaintiffs' billing records demonstrate that they zealously represented defendant's interest from the outset, including: preparing and filing the initial responsive pleadings, along with an emergent application; filing a motion to change venue; proposing a case management order; amending defendant's pleadings; preparing discovery demands; and ultimately preparing the stipulation of dismissal when defendant reconciled with her husband. In all, plaintiffs charged approximately $6,748.01 in attorney's fees and costs for their efforts on Defendant's behalf between April 2010 and September 2010, excluding interest. Giving defendant credit for a $2000 payment, the only payment on the account, and charging her interest of one percent pursuant to the agreement for unpaid balances exceeding thirty days, plaintiffs assert that defendant owes $7,157.90. Plaintiffs now move for summary judgment in the amount of $7,427.80 and for summary judgment dismissing defendant's counterclaim.
Defendant also seeks summary judgment in her cross-motion, and dismissal of plaintiffs' complaint. Defendant argues that she is a consumer, and the retainer agreement entered into is governed by TILA because it provides services for personal, family, or household purposes. 15 U.S.C. § 1602(i). Defendant states that a retainer agreement constitutes an open-end credit agreement, which must be disclosed before the first use of the account, and periodically by way of statements pursuant to 15 U.S.C. § 1637(a) and (b). An open-end credit agreement is defined as one " under which the creditor reasonably contemplates repeated transactions, which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance." 15 U.S.C. § 1602(j). Defendant asserts that even though a retainer fee was not paid at the outset of the representation, plaintiffs continued to provide services, which defendant contends is the epitome of a finance charge for an open-ended transaction.
[439 N.J.Super. 646] Defendant contends that the retainer agreement attempts to circumvent TILA by designating the finance charge as a " late payment charge." Defendant points out that the monthly invoices designate those fees as a " finance charge." Defendant therefore suggests that by plaintiffs' own admission, it is a finance charge as defined in TILA. Defendant asserts that TILA applies because plaintiffs did not have to extend credit in terms of money, but only the right to pay a debt by deferring it over time, which is in and of itself an extension of credit under TILA.
Defendant relies on out-of-state authority, namely; Kroll v. Cities Service Oil Co.,
352 F.Supp. 357 (N.D.Ill. 1972), and Bright v. Ball Memorial Hospital Association, Inc., 616 F.2d 328 (7th Cir. 1980), in pointing out the difference between late charges and finance charges. In both cases, the courts held that the distinction hinges on the denial of continued extension of credit. Defendant states that when credit is continued in all but emergency cases, the assessed interest is a finance charge. Defendant states that the transaction at issue began when plaintiffs extended credit to her, and despite the fact that the retainer was not paid, work began, was billed, and was subject to a finance charge that extended month after month. Defendant asserts that pursuant to 15 U.S.C. § 1601, " the term 'credit' means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment."
Defendant seeks an award of attorney's fees. She contends that attorney's fees are mandatory in a successful action under TILA, and that she will submit a certification of services upon the direction ...