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C.C. v. Eastern Camden County Regional School District

United States District Court, D. New Jersey

March 29, 2017

C.C., a minor, individually and by his parents, J.C. and M.C., Plaintiffs,
v.
Eastern Camden County Regional School District, et al., Defendants.

          OPINION

          JOSEPH H. RODRIGUEZ U.S.D.J.

         This matter is before the Court after a Complaint was filed, but prior to the filing of an Answer or other responsive pleading, on a motion to approve a settlement between the parties on behalf of a minor Plaintiff [Doc. 13]. The Court held a fairness hearing on September 13, 2016 and the record of that proceeding is incorporated here. Because the Court finds the terms of the settlement not fair or reasonable to the minor, as they provide for attorneys' fees that are grossly disproportionate to the minor's recovery, the motion to approve settlement will be denied.

         Background

         The underlying facts asserted in this case occurred in 2013-14 and previously were litigated as the result of a Due Process Petition filed by Plaintiffs on April 22, 2014 with the New Jersey Office of Special Education under docket number EDS 06359-2014 S, agency reference number 2014- 2105. The Petition was transmitted to the New Jersey Office of Administrative Law on May 27, 2014, and on February 19, 2015 the parties settled their administrative, IDEA-based claim.

         The settlement agreement, which was approved by Administrative Law Judge John F. Russo on May 4, 2015, included the following remedies:

(a) IEEs to be conducted; (b) a requirement that subsequent HIB investigations include a determination as to whether C.C.'s alleged conduct was a manifestation of C.C.'s disabilities, or a result of C.C.'s unique characteristics and/or disabling condition; (c) C.C. be exempt from suspension for exhibiting manifestations of his disabilities, to be addressed by his PBIP; (d) C.C. to be subject to discipline if he exhibits behaviors identified in 20 U.S.C. §§1415(k)(7)(A)-(D); (e) Eastern must perform an Manifestation Determination before suspension, held within two school days after the incident; (f) C.C.'s HIB disciplines to be expunged; (g) Eastern to ensure C.C.'s IEP remain current; (h) PBIP to not be used as punishment against C.C.; (i) C.C.'s parents to be allowed to participate in future questionings or interrogations; (j) Eastern to provide individualized counseling goals and objectives; (k) C.C. is a member of a protected class under §504 and the ADA.

(Compl. ¶ 68.) Within the terms of the settlement included the following provision: “Petitioners release Eastern from the claims raised in the petitions, including attorney's fees and costs, but excluding any civil claims.” (Compl. ¶ 69.) As part of the settlement at the administrative level, Plaintiffs' attorney Jamie Epstein received attorneys' fees of $98, 000. Plaintiffs state that this amount “was based on a compromise of Mr. Epstein's estimate of fees for legal services rendered in the administrative matter[] for 334.3 hours at $400 per hour or $167, 150, which was sent to ALJ Russo and Eastern on 1/16/15.” (Pl. Aug. 24, 2016 Br., p. 15.)

         Plaintiffs filed the Complaint in this Court on August 3, 2015, invoking federal question jurisdiction, and stating that “Plaintiffs' claims for monetary damages, punitive damages, and other relief . . . could not be addressed in the Administrative Law setting, ” (Compl. ¶ 72). Plaintiffs set forth claims under the Rehabilitation Act, the Americans with Disabilities Act, the NJLAD, 42 U.S.C. § 1983, and the NJCRA, all fee-shifting statutes, as well as a claim of vicarious liability.

         No further action was taken in the case. On December 9, 2015, a Notice of Call for Dismissal on January 8, 2016 pursuant to Federal Rule of Civil Procedure 4(m) and Local Civil Rule 41.1(a) was entered on the docket. On December 28, 2015, Plaintiffs, Epstein, and attorney Julie Warshaw entered into a contingency fee agreement whereby Epstein and Warshaw, referred to as “the LAW FIRM, ” would “seek reimbursement of all allowable attorney's fees beyond the initial [$1, 000] retainer [paid by Plaintiffs], if any, from [Defendants] . . . . Additionally, the Law Firm shall be entitled to 25% of any damages awarded net of costs.” (Dec. 28, 2015 Retainer Agmt., ¶ 1.) Plaintiffs also agreed that Epstein's hourly rate was $500 and Warshaw's was $425. (Dec. 28, 2015 Retainer Agmt., ¶ 3.) Next, the Agreement provided, “if we settle your case, you, the CLIENT, understand and agree, you are responsible for the balance of any remaining attorney's fees (unless the LAW FIRM is willing to compromise its fees) and expert's fees and costs not recovered in the settlement. (Dec. 28, 2015 Retainer Agmt., ¶ 5c.) Finally, under a paragraph entitled Co-Counsel Terms, the Agreement states:

By 12/30/15, Attorney Warshaw shall file an entry of her appearance and shall become lead counsel responsible for all aspects of the case and henceforth, Attorney Epstein's role shall be limited to consulting to Attorney Warshaw. Attorney Warshaw shall also seek both Attorneys' fees. The Attorneys must consent to any settlement of their Attorneys' fees. In the event CC is awarded damages via litigation or settlement, Attorney Warshaw shall distribute 20% of her net attorney fees to Attorney Epstein in consideration of this referral.

(Dec. 28, 2015 Retainer Agmt., ¶ 10.)

         On December 30, 2015, Julie Warshaw entered her appearance for Plaintiffs, [1] and Defendants were served on January 6, 2016, terminating the Notice of Call for Dismissal. By letter dated March 30, 2016, Warshaw informed the Court that this matter had settled and requested a Friendly hearing.

         The May 18, 2016 Settlement Agreement provides for payment to Plaintiffs of $33, 400, from which $10, 000 is to be paid to the Warshaw Law Firm, LLC and $10, 000 to Jamie Epstein, Esquire “to reimburse them for all disbursements, costs and expenses incurred in their representation of Plaintiffs, and to satisfy [their] contingent fees.” The Surrogate of Camden County is to hold the net recovery of $13, 400 in trust for C.C.

         Warshaw states that the $10, 000 is a compromised lesser amount which she felt was reasonable based on the total amount of the settlement. (Warshaw Aff., Jun.24, 2016, ¶ 6.) Warshaw cites “extensive time, effort, expertise, negotiation, level of experience, and the difficulty of taking on a case that had been previously handled by another attorney” as justification for her $10, 000 fee.

         Epstein declared, in support of his proposed fee of $10, 000, “[i]n this case, Plaintiffs had no obligation for attorneys' fees meaning I would only be paid my attorney's fees and costs through the fee shifting provisions of C.C.'s claims.” (Epstein Aff., Jun. 26, 2016, ¶ 13.) That is, “the attorney's fee arrangement is 100% contingent and there was no retainer.” (Epstein Aff., Jun. 26, 2016, ¶ 26(8).) “C.C.'s parents paid the case costs for the complaint filing fee and courier fee as indicated by my bill (APX 14).”[2] (Epstein Aff., Jun. 26, 2016, ¶ 14.)

         Epstein states, “I alone represented C.C. in the administrative action, ” and “I alone researched and drafted the complaint in this matter, after which Julie Warshaw, Esquire entered her appearance.” (Epstein Aff., Jun. 26, 2016, ¶ 15, 16.) He then avers that “[a]fter the complaint was served, Ms. Warshaw and I collaborated as a team on the case thereafter with Ms. Warshaw leading the negotiations with my input, review and comment.” (Epstein Aff., Jun. 26, 2016, ¶ 17.) In contrast, Warshaw's affidavit states “[a] significant amount of time and effort went into the negotiations toward a settlement of this ...


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