Words Matter: Language In Retainer Agreement Bars Recovery Of Fees Incurred In Fee Arbitration Proceeding

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Words (pd)One of my favorite quotes from a judicial decision comes from the New Jersey Supreme Court in Atlantic Northern Airlines v. Schwimmer: "Litigation proceeding from the poverty of language is constant." I have never understood this to be a knock on the drafter. Rather, I understood it to mean that no matter how carefully you choose your words you can never make a contract, agreement, or other document litigation-proof. You see examples of this nearly every day in the daily decisions, including in the Appellate Division's recent decision in The Law Offices of Bruce E. Baldinger, LLC v. Rosen.

Baldinger involved a dispute between a law firm and its former client over attorney's fees. Defendant retained plaintiff to represent him in connection with a dispute with a contractor over work performed at defendant's home. Plaintiff and defendant entered into a retainer agreement that included an initial flat fee of $1,200 followed by hourly billing. The retainer agreement also dictated that interest at the rate of 1% per month would be charged on any unpaid balances after 30 days. The retainer agreement also contained the following provision, which is most important to our story: "If collection and enforcement efforts are required, you agree to pay counsel fees along with costs of suit." This would become important later on.

After about a month, defendant "became dissatisfied with plaintiff's representation and terminated plaintiff's services." Defendant had already paid the $1,200 flat fee, but plaintiff demanded that he also pay an addition $4,308 for work performed by plaintiff up to that point. Defendant refused to pay.

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Court Awards Attorney Almost $100,000 Less Than He Requested In New Jersey Consumer Fraud Act Case

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Legal fees (pd)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."

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Are Exceptions Starting To Swallow The “American Rule” In New Jersey?

Constitution (pd)The answer to that question would appear to be: it depends who you ask. In a pair of decisions released on April 26, 2016, Innes v. Marzano-Lesnevich and In Re Estate of Folcher, the New Jersey Supreme Court addressed the “American Rule” — the idea that each party to a lawsuit is responsible for its own attorney’s fees — and specifically whether to narrow or expand certain common-law exceptions to that rule. At the center of the two decisions was Justice LaVecchia, who authored the majority opinion in Folcher and the dissent in Innes. These decisions leave little doubt that this is not the last we have heard from the Supreme Court on the parameters of the American Rule.

First, a brief history of the American Rule in New Jersey. In 1948, New Jersey adopted a new Constitution and re-organized its court system. As part of this re-organization, and as it relates to the awarding of prevailing party attorney’s fees, New Jersey could have adopted either the English Rule, which allows for the liberal awarding of such fees, or the American Rule, which does not. New Jersey chose the latter. This decision is currently embodied in Rule 4:42-9, which only allows for eight exceptions to the general rule.

Over the years, however, New Jersey courts have created common law exceptions to the American Rule. These cases have followed two, independent tracks, one arising in the context of the attorney-client relationship and one arising in the context of estate administration.

 

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