December 6, 2018
A recent Law 360 story by Bill Wichert, “3 Firms Must Evenly Split $11.3M Fees in Century 21 Suit,” reports that three law firms representing Century 21 Real Estate Corp. franchisees in a class action against the company and its former parent must evenly split roughly $11.3 million in attorneys’ fees awarded in connection with a settlement in the case, a New Jersey appeals court ruled in nixing one firm’s bid for a larger share.
A three-judge appellate panel upheld a trial court order that confirmed an arbitration award dividing the money equally between Zwerling Schachter & Zwerling LLP, Keefe Law Firm and Kopelowitz Ostrow PA, rejecting Zwerling Schachter’s argument that it deserved more than a third of the fees due to its work and responsibility in the litigation. The arbitrator, a former federal judge, correctly found that representation agreements between the firms and franchisees required the firms to equally share the attorneys’ fees even if they did not share the work and responsibility in the class action equally, according to the panel.
The class action, which was initially filed in 2002, alleged that Century 21’s then-parent, Cendant Corp., breached a contract by diverting Century 21 advertising funds to competitors. The franchisees claimed that Cendant, which also owned Coldwell Banker and ERA Real Estate, misappropriated funds to try to sink Century 21 and build up its other units. In 2002 and 2004, Zwerling Schachter, Kopelowitz Ostrow and McElroy Deutsch & Mulvaney LLP entered into "attorneys-class representative agreements" with plaintiffs in the case, according to the appellate opinion.
Those agreements said that each firm would receive “33⅓ percent” of any attorneys’ fees awarded in the case and that “each of the law firms named herein shall share the fee which is in accordance with their anticipated division of work and responsibility in this matter,” the opinion said. McElroy Deutsch withdrew from the matter in 2004, and the firm that ultimately became Keefe Law Firm joined the case, the opinion said. The parties have agreed that Keefe, Zwerling Schachter and Kopelowitz Ostrow have a right to share in the attorneys’ fees, with McElroy Deutsch to receive its fees out of Keefe’s share, according to the opinion. After the class action settled in 2012, the three firms could not agree on how to split up the attorneys’ fees, the opinion said.
Zwerling Schachter said the apportionment should be based on the hours worked and the responsibility assumed during the case, while Keefe and Kopelowitz Ostrow said the attorneys-class representative agreements required the firms to divide the money equally. Keefe and Kopelowitz Ostrow in 2013 made an offer of judgment to Zwerling Schachter, under which that firm would have received $600,000 more than if the firms split the fees equally, but Zwerling Schachter rejected the offer, the opinion said.
The firms agreed in 2014 to submit their fee dispute to arbitration. In 2016, the arbitrator found that “the attorneys-class representative agreements ‘require[d] the parties to share the attorneys' fee award in equal thirds, even if the parties did not share the work and responsibility in the underlying class action equally,’” the opinion said.
The trial court in June 2016 entered orders confirming the arbitration award and denying Zwerling Schachter’s motion to vacate the award. In November 2016, the court denied a motion from Keefe and Kopelowitz Ostrow seeking to recoup the attorneys’ fees and costs they incurred after Zwerling Schachter rejected their offer of judgment, the opinion said. On Zwerling Schachter’s appeal of the June 2016 orders, the appellate panel affirmed those decisions by citing in part the attorneys-class representative agreements, saying the panel agreed with the arbitrator that the first sentence of those agreements “is clear in providing that each of the three firms was to receive one-third of a fee award."
“We also agree with the arbitrator that the key phrase in the second sentence is ‘anticipated division of work and responsibility,’” the panel said. “Finally, we agree with the arbitrator's reasoning that the second sentence did not undercut or modify the clearer first sentence.” The panel also noted the arbitrator’s findings that there was no evidence that “any of the firms had ‘failed to contribute at all toward earning the fee award,’” and that “the evidence showed ‘each party contributed thousands of hours to the class litigation.’”
“In short, the plain language of the attorneys-class representative agreements and the extrinsic evidence supports an equal apportionment of the fee award,” the panel said. Keefe and Kopelowitz Ostrow appealed the November 2016 order, but the panel affirmed that ruling as well, saying “the amount of the arbitration award was not sufficient to trigger the shifting of fees and costs under Rule 4:58, the offer of judgment rule.”
The case is Frank K. Cooper Real Estate #1 Inc. et al. v. Cendant Corp. et al., case numbers A-1482-16T3 and A-1579-16T3, in the Superior Court of New Jersey, Appellate Division.