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Raceway Petroleum, Inc. v. Gambacorto

A-3487-08T1 (N.J. Super. App. Div. 2011) (Unpublished)

LEASES; ATTORNEYS FEES — Where a lease provides that a prevailing party in a law suit is entitled to recover attorneys fees from the other party, it doesn’t matter whether the final monetary award, after netting damages against credits, was in favor of the non-prevailing party.

A landlord leased a gas station for an initial ten year term. After discovering subsurface contamination, the tenant sued for breach of the lease. After a period of discovery, it moved for partial summary judgment as to the cause of the property’s environmental problems. The lower court, after taking limited discovery regarding the origination of the subsurface environmental contamination, found the contamination existed prior to lease commencement and that the landowner was responsible.

Based on its litigation success as to this environmental issue, the tenant moved for an award of attorneys’ fees as permitted by the lease. The motion was tolled until after a jury found that the tenant had properly exercised two five-year options. It awarded damages to the tenant. However, because the withheld rent exceeded the awarded amount, the landlord was entitled to be reimbursed the difference. The lower court denied the motion for counsel fees, determining the tenant was not a prevailing party in the litigation.

On the tenant’s appeal, the Appellate Division reversed the lower court’s ruling, holding that the lower court gave undue emphasis to the fact that the tenant still owed money to the landlord at the conclusion of the case, and so was not entirely successful in the claims it prosecuted at trial. The Court concluded that the tenant was successful in its environmental claim, and also was found to have rightfully exercised its renewal options. As a result, it received a damage award because the environmental condition. The Court ruled that these were substantial victories were sufficient to consider the tenant a prevailing party for purposes of a fee application.

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