by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
I recently wrote about Garmeaux v. DNV Consepts, Inc., a case in which the Appellate Division held that, under New Jersey's Consumer Fraud Act, successful plaintiffs can, in certain circumstances, recover legal fees they incurred in connection with both the prosecution of their affirmative claims and the defense against any counterclaims. If the facts relevant to a counterclaim are "inextricably caught up with," and related to the common core of, the facts relevant to an affirmative CFA claim, then legal fees can be awarded for both claims. In another recent decision, Riccardi v. Bruno, the Appellate Division addressed a similar issue but arrived at a result that was less favorable to plaintiff than the result in Garmeaux.
In Riccardi, plaintiff purchased a home from one of the defendants. The home had been damaged in a fire and required "extensive renovations" before being put on the market. (Although it was not listed as having been fire damaged, the certificate of occupancy issued by the township at the closing noted "rehab after fire.") After the closing, plaintiff allegedly discovered numerous problems with the house, including mold, burnt and fractured joists, and damaged foundation walls. He sued the seller and several related entities (architect, contractor, home inspector, etc.), alleging breach of contract and a violation of the CFA.
Default was entered against several defendants for failing to answer the complaint, and the claims against several others were dismissed either by summary judgment or at the close of plaintiff's case in chief. The jury then determined that the two remaining defendants — the prior owners of the property — violated the CFA. The jury's verdict was based on a "knowing concealment, suppression, or omission of a material fact with the intent that other would rely upon that fact." (The decision does not identify the fact that was omitted.) The jury found no cause of action under the CFA based on an unconscionable commercial practice, fraud, false pretense, false promise , or misrepresentation. And, it awarded plaintiff only $4,500, which was "attributable to the cost to repair a damaged window frame and to dispose of buried construction litter."
Following the verdict, plaintiff's counsel sought $116,603.78 in attorney's fees under the fee-shifting provisions of the CFA. After briefing and oral argument on this request, the court reduced it by almost $100,000, awarding plaintiff's counsel $6,840 in fees and another $229.12 in costs. The trial court based this decision on two factors: (1) the significant portion of the attorney's time that was spent on claims other than the CFA claim; and (2) the limited result obtained by counsel on the CFA claim. On the second point, the court noted that plaintiff's claim "initially was upwards of a couple hundred-thousand dollars, and the end result was $4500." Not surprisingly, plaintiff appealed.
The Appellate Division affirmed the trial court's decision. It noted that, "where a party presents 'distinctly different claims for relief' in one lawsuit, work on [the] non-CFA claims are not counted against a defendant." The test in such cases is whether the non-CFA claims "involve the common core of the CFA-related facts." If they do, then the lawsuit "should not be viewed as a series of discrete claims, rather the attorneys' fees related to the common core of CFA-related work may be considered by a court when calculating the award." If they do not, however, then the court must separate the CFA-related claims from the non-CFA-related claims, and award fees only for the former.
As it must in any fee-shifting situation, a court must also determine that the fees sought by a successful plaintiff are reasonable. To do this, the court must ascertain the ""lodestar" — the number of hours expended multiplied by the lawyer's hourly rate. Both must be reasonable before a court can award fees. One factor courts consider when determining whether the number of hours is reasonable is the "degree of success achieved by the prevailing party." While an award of fees "need not necessarily be proportionate to the damages recovered," the lodestar must be decreased "if the prevailing party achieved limited success in relation to the relief he had sought."
In Riccardi, the Appellate Division determined that the lodestar calculated by the trial court, as opposed to the $116,000 sought by plaintiff's counsel, was reasonable given the degree of success achieved. It noted that, "[w]hen there is a stark disparity between the attorney's fees sought and those fees awarded, the award should be subjected to careful review . . . to ensure its reasonableness." After this careful review, however, the Appellate Division determined that, given the "very limited success attained" on plaintiff's CFA claim, the trial court had correctly determined that plaintiff should only be awarded a small portion of the fees requested.