Appellate Division Holds That Consumer Fraud Act Plaintiffs Can Recover Attorneys’ Fees Expended in Defense of Counterclaim

Jaret N. Gronczewski 

sfsf

The New Jersey Appellate Division in Garmeaux v. DNV Concepts, Inc. t/a The Bright Acre, No. A-1400-14T1, held that a prevailing plaintiff in a Consumer Fraud Act (“CFA”) case is entitled to recover attorneys’ fees expended to defend an intertwined counterclaim. The opinion, which addressed an issue of first impression for the court, has been approved for publication. The court also reaffirmed that New Jersey law does not impose a proportionality requirement on fee awards.

The plaintiffs in Garmeaux sued Bright Acre in connection with services rendered to replace their gas fireplace in 2010. According to the plaintiffs’ testimony, Bright Acre introduced them to co-defendant James Risa, who was slated to perform the installation services for the new fireplace. At the time, Risa had worked at Bright Acre for approximately 20 years. Risa, however, also owned and operated his own independent company called Professional Fireplace Services. In March 2010, Risa provided a $3,700 estimate to the plaintiffs for installation services. And Bright Acre provided a sales order for $2,450 in August 2010. In September 2010, the plaintiffs made a payment to Professional Fireplace Services toward the $3,700 installation fee. Work began in late October 2010.

Shortly after the installation work began, the plaintiffs became dissatisfied with Risa’s performance. The plaintiffs complained to Bright Acre about Risa’s unsatisfactory work. Bright Acre did not provide a response. The plaintiffs alleged that they were then informed in December 2010—for the first time—that Risa performed the installation work on his own company’s behalf instead of on Bright Acre’s behalf. The plaintiffs eventually hired another company to complete the installation project and filed suit against Bright Acre and the other co-defendants in November 2011.

The plaintiffs brought seven counts, including a CFA count. The CFA count was based on an alleged fraudulent omission by Bright Acre for failing to timely inform the plaintiffs that Risa was performing the installation work on his own company’s behalf. Bright Acre filed a counterclaim with its amended answer seeking damages for fraudulent concealment, altering evidence, defamation, and frivolous litigation. The concealment and alteration counterclaim was based on allegations that the plaintiffs altered an invoice from Risa to remove the reference to Professional Fireplace Services from the masthead. After a five-day jury trial, a verdict was returned in the plaintiffs’ favor. They were awarded $4,790 on their negligence claim and $1,500 of their CFA and Home Improvement Act claims. The jury found against Bright Acre on its counterclaim.

The plaintiffs’ counsel filed a fee application seeking $70,911.12. The trial court, without a hearing, entered an award for $20,000. The trial court reduced the award for unspecified entries that it found excessive or redundant, and it also factored in the small jury award. The plaintiffs appealed the fee award.

The Appellate Division reversed and remanded the fee award. First, the Appellate Division held that, as a matter of law, a CFA plaintiff can obtain counsel fees in defense of counterclaims that involve a “common core of CFA-related facts.” Because there were no New Jersey decisions on point, the court looked to persuasive support from a Wisconsin Appeals Court decision that held similarly. The Appellate Division relied on both that case and the CFA’s remedial purpose to find that the counterclaim at issue was inextricably related to the CFA claim.

The court then tackled the “quantum of the fees awarded.” It reaffirmed that reasonableness is the primary consideration for any fee determination, regardless of the source authorizing the fee-shifting. In determining the lodestar, the court held that the prevailing party’s “degree of success” should inform the analysis, but the “award need not be proportionate to the damages recovered.” And trial courts are required to consider the remaining seven factors contained in RPC 1.5(a), as well as the policies behind the enabling fee-shifting statute.

In cases of statutory fee-shifting, the Appellate Division observed that “the trial court’s obligation to carefully review the lodestar fee request is heightened.” It found that the trial court’s review failed to meet that heightened requirement. First, it found that the trial court improperly used a proportionality test to reduce the award, and that the trial court did not properly credit the plaintiffs’ “success” in thwarting the counterclaim in determining the appropriate fee award. Second, it was unable to conclude, based on the opinion below, whether the trial court took into account the CFA’s public policy when making its decision (e.g., deterrence of fraud and encouraging attorneys to undertake representation of CFA plaintiffs). Thus, the Appellate Division remanded the matter to the trial court to reconsider the fee award.

The Garmeaux decision should further the CFA’s policy encouraging representation of CFA plaintiffs. The Appellate Division has made clear that fees incurred in defending factually-intertwined counterclaims are recoverable in CFA suits. Further, it reaffirmed that there is no proportionality requirement under New Jersey law, so a significant fee award is attainable even if the underlying CFA award is insubstantial. The decision should also factor into the strategy for attorneys defending a CFA suit, because such counsel are on notice that a successful plaintiff can recover a significant fee award.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s