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Schmoll v. J.S. Hovnanian & Sons, LLC

2006 WL 1520751 (N.J. Super. Ch. Div. 2006)

CONSUMER FRAUD; ATTORNEYS’ FEES — Counsel fees in fee shifting cases are not based on the value of the relief obtained and whether the class members eventually take advantage of the settlement should have no bearing on whether the class members are entitled to attorneys’ fees.

A group of homeowners sued their builder, alleging the builder delivered improper air circulation in utility closets contrary to the Consumer Fraud Act. They only sought equitable relief requiring the builder to fix those utility closets with improper air circulation. A settlement was reached, and the parties sought court approval of the settlement. The homeowners also sought an award of counsel fees.

In class actions, a court must determine if the proposed settlement is fair and reasonable to the members of the class. Nine factors are considered in deciding if a proposed settlement is fair. These are: (1) the complexity, expense, and likely duration of the litigation; (2) the reactions of the class to the proposed settlement; (3) the state of the proceeding and the amount of discovery completed; (4) the risk of establishing liability; (5) the risk of establishing damages; (6) the risk of maintaining the class action throughout the trial; (7) the ability of the defendant to withstand a greater judgment; (8) the risk of reasonableness of the settlement fund in light of the best possible recovery; and (9) the risk of reasonableness of the settlement in light of all the attendant risks of litigation. In this case, the settlement provided the homeowners with essentially all the relief they sought. All parties recommended approval of the settlement. No class member objected to the settlement. Judging all the factors, the Court approved the settlement, finding it fair and reasonable, but the builder objected to an award of counsel fees until such time that it was known how many class members participated in the settlement and how many of them suffered with utility closets that had improper air circulation. The builder also objected to the amount of the fee application. In response, the homeowners argued that the settlement completed the litigation, and the award of attorneys’ fees should not be based on the proportionality of the monetary value of the settlement.

According to the Court, counsel fees in fee shifting cases are not based on the value of the relief obtained. Further, whether class members eventually take advantage of the settlement should have no bearing on whether or not the homeowners are entitled to attorneys’ fees. Although the homeowners initially sought relief under several legal theories, the approved settlement provided them with the relief they sought. As such, they were considered the prevailing party. In determining whether to award counsel fees, a court must consider the fee application in light of RPC 1.5(a) (factors to be weighed by the Court); R. 4:42-9(b) (the fee shifting mechanism); and the applicable fee-authorizing statute (in this case, N.J.S.A. 56:8-19 of the Consumer Fraud Act). The factors to be weighed by a court in fee-shifting cases are: (i) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to properly perform the legal service; (ii) the likelihood that the attorney would have to forego acceptance of other employment; (iii) the fees customarily charges in the geographic locality for the same services; (iv) the amount involved and the results obtained; (v) any time limitations imposed by the client or by the circumstances; (vi) the nature and length of the professional relationship with the client; (vii) the experience, reputation, and ability of the attorney; and (viii) whether the fee was fixed or contingent. Here, the Court found authority in the Consumer Fraud Act to award attorneys’ fees. Although the Court awarded attorneys’ fees, because this case did not present any novel legal or factual issues, and because the Court found the attorneys were inefficient with the use of their time, the Court reduced the amount of the award by about forty-percent.

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