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Category: Fee Calculation Method

Class Counsel Seek $12M in Attorney Fees in VW Settlement

April 9, 2019

A recent Law 360 story by Reenat Sinay, “Bernstein Litowitz Seeks $12M in Atty Fees for VW Deal,” reports that Bernstein Litowitz Berger & Grossmann LLP has requested $12 million in attorney fees in California federal court for securing a $48 million settlement for a class of Volkswagen AG investors, ending claims in multidistrict litigation that VW misled them in its financial reporting about its environmental compliance.

U.S. District Judge Charles R. Breyer gave the initial nod to the deal in November and conditionally certified the proposed class of investors who purchased American depositary receipts through VW between November 2010 and January 2016.  According to the terms of the agreement, lead counsel for the investors said they would ask for no more than 25% of the settlement fund.

The investors’ attorneys at Bernstein Litowitz said their request of 25% of the settlement in attorney fees, which amounts to $12 million, was “fair and reasonable.”  Lead counsel also asked for $296,879.86 in reimbursement for litigation expenses and a total of $7,328 to be split between the two class representatives.

“The significant monetary recovery was achieved through the skill, tenacity, and effective advocacy of lead counsel, who litigated this action on a fully contingent basis against highly skilled defense counsel,” the attorneys said.  “The settlement was reached only after nearly three years of hotly contested and difficult litigation, including substantial fact discovery, which required lead counsel to dedicate a significant amount of time and resources to the action.”

In their bid for final approval of the settlement, lead plaintiff Arkansas State Highway Employees Retirement System and named plaintiff Miami Police Relief and Pension Fund told the court that the deal represented “an excellent result” for the investors and requested that Judge Breyer grant final certification of the settlement class.  “Plaintiffs respectfully submit that the proposed settlement is an excellent result for the settlement class and satisfies the standards for final approval under Rule 23 of the Federal Rules of Civil Procedure,” the institutional investors said.  “The proposed settlement represents approximately 33% of the likely maximum recoverable damages in the action, which is an excellent recovery for the settlement class.”

The litigation stems from the revelation in September 2015 that Volkswagen was equipping some of its diesel vehicles with devices that would allow the cars to pass government-mandated emissions tests, then emit more pollution once they hit the roads.  Soon after the U.S. Environmental Protection Agency went public with the allegations, the company acknowledged it had installed the defeat device software in at least 11 million vehicles, nearly 600,000 of which had been sold in the U.S.  The government filed a Clean Air Act suit against VW and its subsidiaries in January 2016.  Several class actions, filed by drivers, dealerships and stockholders, followed.

The instant suit was first filed in Virginia federal court in September 2015 by the City of St. Clair Shores Police and Fire Retirement Systems, asserting on behalf of investors that the carmaker and several executives violated federal securities laws, according to court records.  Along with several similar cases, it was moved to California in December 2015 by the U.S. Judicial Panel on Multidistrict Litigation.

Under the terms of the agreement, the funds allocated to each class member will be determined through a series of calculations.  The value of each ADR purchased will be calculated through artificial inflation estimates and data tracking to determine when each claimant bought and sold VW's ADRs, according to the motion.  Each claim will then be established by subtracting the claimant's gains from their losses, and the distribution amount will be set by dividing the claim amount by the total recognized claims of all recognized claimants, multiplied by the net amount of the settlement fund, the investors said.

Lead counsel highlighted the “significant risk” they faced in litigating the class action against “determined adversaries,” and noted that the 25% fee request is in line with awards granted in similar cases.  Attorneys put in 14,000 hours of work despite the risk of no recovery, they said.  “The 25% fee requested by lead counsel, which has the full support of the institutional-investor plaintiffs, is also well within the range of percentage fees that have been awarded in securities class actions and other complex class actions in the Ninth Circuit with recoveries of comparable size,” they said.

The case is In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, case number 3:15-md-02672, in the U.S. District Court for the Northern District of California.

5 Law Firms to Divide $214M in Fees in $1.5B Syngenta MDL

March 21, 2019

A recent Law 360 story by Ryan Boysen, “5 Firms to Get $214M in $1.5B Syngenta MDL Corn Settlement,” reports that five law firms will receive $214 million in fees from the $1.5 billion Syngenta AG tainted corn settlement after a Kansas federal court adopted those same firms' recommendation on how to allocate some of the money.  Those firms, who all played major leadership roles in guiding the multidistrict litigation to a successful settlement, submitted a report last month on how to allocate a $247 million chunk of the roughly $500 million in total attorneys' fees awarded by U.S. District Judge John W. Lungstrum last year.

In the order, Judge Lungstrum agreed to pay out the $247 million according to the six-tiered structure proposed by those firms, a structure that will see them take home $214 million in fees while the remaining $33 million is split between 59 other firms.  Judge Lungstrum said that despite the "inherent conflict of interest that exists" in having the five lead firms propose the overall allocation, "in that any undercompensation of non-lead counsel would increase [co-lead counsel]'s own share of the fee pool," he nonetheless decided to have those firms take the reins because they "performed the great majority of the substantive work on behalf of plaintiffs in this litigation."

Thus, he added, "they are in the best position to judge the relative contributions by the petitioning attorney to the settlement and the benefit of the settlement class."  Judge Lungstrum said that after reviewing the proposal he found it "fair, reasonable and appropriate," and noted that out of the 64 total firms affected by the proposal only two objected.  The order overruled those objections in the course of approving the report.

The five firms that will split the "Tier 1" award of $214 million are Stueve Siegel Hanson LLP, Gray Ritter & Graham PC, Gray Reed & McGraw LLP and Hare Wynn Newell & Newton, which all served as co-lead class counsel, and Seeger Weiss LLP, which served as settlement class counsel and by all accounts took the lead role during settlement discussions.

The litigation dates back to 2014, when corn farmers and others in the corn industry began filing lawsuits claiming Syngenta caused China to block millions of tons of U.S. corn exports because the Swiss-based agrochemical giant began marketing genetically modified corn seed varieties without prior approval from Chinese regulatory agencies, costing the farmers billions.  The case settled in 2017 for $1.5 billion, and last New Year's Eve Judge Lungstrum entered a controversial order setting aside one-third of that for attorneys' fees and splitting that $500 million fund into four pools.  That order has since spawned fears about how the inevitable appeals resulting from it will be handled.

Those four pools include one that covers the firms involved in the MDL he oversaw in Kansas, one that covers a simultaneous consolidated proceeding in Minnesota state court, one that covers yet another action in Illinois federal court, along with one that will go toward so-called individually retained private attorneys.

The bulk of the overall fund, roughly 50 percent, went toward the Kansas fund, and that's the money Judge Lungstrum asked the co-lead counsel firms and Seeger Weiss to divvy up.  The five Tier 1 firms performed "the great bulk of the work litigating the claims in the MDL," Judge Lungstrum said, in justifying their request to receive $214 million from the $247 million fund.

Tier 2 consists of six firms, "all involved since the beginning of the litigation, whose work focused on litigation of the class and bellwether cases," Judge Lungstrum said.  Those firms will receive a total of $21 million.  Tier 3 consists of "five firms that performed substantive legal work on class and bellwether plaintiff claims," and that group will receive a total of about $6 million.  The 48 firms covered by Tiers 4, 5 and 6 will receive the remaining $6 million.

Weller Green Toups & Terrell, a firm placed in Tiers 4 and 5, objected to its total payout of roughly $1.2 million recommended by the report, claiming it's owed more like $25 million.  Judge Lungstrum shut down that objection, remarking that many of the firm's arguments had been previously denied and were made "largely by cutting and pasting from its previous briefs."

Hossley — Embry LLP also objected, arguing in particular that the $600 per submitted plaintiff fact sheet recommended by the report was too low.  Hossley stands to receive $673,000 for both Tier 4 and Tier 5 work, much of it relating to fact sheets the firm submitted.  Judge Lungstrum rejected that argument, saying it shouldn't have taken more than two or so hours to fill out a plaintiff fact sheet and that the work was easily done by less-experienced attorneys or paralegals, who have lower hourly rates.  The Kansas fund report and its adopting by Judge Lungstrum appeared to be fairly straightforward and agreeable compared with other episodes that have surfaced since the settlement was approved.

One group of 60,000 farmers sued Watts Guerra LLP on civil Racketeer Influenced and Corrupt Organization Act claims last year, alleging the firm conspired to charge them hefty contingency fees on top of what it stood to reap from the $500 million fund that was ultimately established.  Judge Lungstrum dismissed that suit earlier this month, finding that the contingency fees had been voided when Watts Guerra and its clients finally joined the settlement and therefore the farmers didn't ultimately receive any more or less money from the deal than any other firm's clients.

The case is In re: Syngenta AG MIR162 Corn Litigation, case number 2:14-md-02591, in the U.S. District Court for the District of Kansas.

$2.4M Fee Award in CPI Credit Card IPO Action

March 14, 2019

A recent Law 360 story by Matthew Guarnaccia, “Credit Card Co. Investors Score $2.4M in IPO Suit Atty Fees,” reports that the New York federal judge overseeing a class action lawsuit related to CPI Card Group Inc.’s initial public offering awarded lead counsel Labaton Sucharow LLP $2.37 million in attorneys’ fees and costs, stopping short of the total amount requested by investors for work in reaching an $11 million settlement with the credit card company.  In addition to granting final approval of the settlement, U.S. District Judge Lewis A. Kaplan awarded 20.6 percent of the total amount of the deal as attorneys' fees to Labaton.

The award came in below the 25 percent, or $2.75 million, requested by Labaton, with Judge Kaplan saying he had a few reservations about the lodestar claimed by the firm.  The judge did note, however that his concerns were not about the validity or accuracy of the timekeeping figures provided by lead counsel.  In particular, Judge Kaplan said Labaton reported contributions from 19 attorneys and 14 other timekeepers during the case, and that it is likely this work included “some nontrivial amount of duplication or unnecessary effort.”  The overall number of timekeepers also seemed excessive given the amount of work that was actually done on this case, which included drafting the complaint, litigating class certification and dismissal motions, the defense of a deposition, and settlement negotiations, the judge said.

In addition, Judge Kaplan said the requested lodestar was based on current hourly rates of the timekeepers involved, even though the rates for some increased over the course of the litigation.  “Accordingly, the court has adjusted the lodestar to reflect historical hourly rates to the extent that some differ from current rates and considered the use of current hourly rates in considering the multiplier,” Judge Kaplan wrote.

Judge Kaplan’s final consideration in lowering the lodestar was Labaton’s assertion that more than 2,900 hours was dedicated to the case, which he called “relatively straightforward and not heavily litigated.”  As a result, the judge lowered the total hours sought by 10 percent, leaving a lodestar of approximately $1.5 million, and allowing for a 1.5 percent multiplier, as opposed to the 1.64 multiplier requested by Labaton.

The resulting attorneys’ fee figure is around $2.27 million. Judge Kaplan also tacked on around $106,000 in expenses, but said the lead plaintiff in the case was not entitled to a requested $10,000 award for “time and trouble.”  The fee award by Judge Kaplan comes a little more than a month after the judge gave final approval to a deal that ended the shareholder lawsuit led by investor Alex Stewart.

In his lawsuit, Stewart claimed CPI shipped more than 100 million extra cards to its biggest customers before its October 2015 IPO without telling investors.  Orders allegedly plummeted after the offering because of the "bloated" inventory at financial institutions, as did the initial $10-per-share stock price, which stood at $4.70 a share when the suit was filed in June 2016.  CPI produces 35 percent of all payment cards in the U.S. and serves the majority of the top 20 U.S. debit and credit card issuers, including JPMorgan Chase & Co., American Express Co., Bank of America Corp. and Wells Fargo & Co., according to its U.S. Securities and Exchange Commission registration statement.

The case is In Re: CPI Card Group Inc. Securities Litigation, case number 1:16-cv-04531, in the U.S. District Court for the Southern District of New York.

Article: Fresh Takes on Seeking Costs and Fees Under Rule 45

February 22, 2019

A recent Pepper Hamilton blog post article by Donna Fisher, Matthew Hamilton, and Sandra Hamilton, “Fresh Takes on Seeking Costs and Fees Under Rule 45,” reports on fee-shifting incurred in responding to a Federal Rules of Civil Procedure 45 subpoena.  This article was posted with permission.  The article reads:

Recent case law reveals that courts vary widely in their approaches to shifting the costs and fees incurred in responding to a Federal Rule of Civil Procedure 45 subpoena.  Some courts view shifting costs and fees as mandatory in situations where a nonparty is forced to bear “significant” costs.  Others may shift costs and fees only to the extent those costs are “unreasonable,” which is measured by (1) the nonparty’s size and economics, despite its lack of connection to the dispute, (2) defining “reasonable costs” so narrowly that the nonparty bears substantial costs or (3) eliminating attorneys’ fees from the cost-shifting calculation.  The relief a nonparty may be awarded may depend on factors that are not specifically identified in Rule 45 but that are nonetheless included in the court’s concept of fairness.  As the cases discussed below demonstrate, nonparties responding to Rule 45 discovery requests should consider the following best practices:

Know and understand the applicable jurisdiction’s rules pertaining to Rule 45’s protections. 

Be able to demonstrate that the non-party has attempted to respond to Rule 45 discovery in the most efficient manner available.

If possible, demonstrate that review for compliance with regulations or attorney-client privilege is consistent with any applicable protective order or local rule and, therefore, not just for the non-party’s benefit. 

In order to increase the likelihood of recovering costs of any motion practice, attempt to cooperate with the requesting party and demonstrate a willingness to resolve or mitigate the costs and the dispute.

The cases discussed below evaluate motions for costs and fees in two broad categories: (1) those incurred when litigating the scope of the subpoena itself and (2) those incurred in compliance.

Costs and Fees Incurred Litigating the Scope of the Subpoena Itself

The district court in In re Aggrenox Antitrust Litigation considered the motion of a nonparty, Gyma Laboratories of America, to recover $72,778.20 in costs and fees incurred in response to a Rule 45 subpoena from the direct purchaser plaintiffs.  Gyma objected to the requests as overbroad and asserted that production would be unduly burdensome.  At the hearing on cross-motions to compel and to shift costs and fees, the court expressed concern that Gyma had not made a record establishing the alleged difficulties in production, but directed that Gyma would be eligible for reimbursement of reasonable costs incurred.

In reviewing Gyma’s subsequent motion for costs and fees, the court reasoned that Rule 45 makes cost-shifting “mandatory in all instances in which a non-party incurs significant expense from compliance with a subpoena,” but that it did not require the requesting party to bear the entire cost of compliance.  Further, the court held that only “reasonable” costs are compensable under Rule 45 and that the moving party bears the burden of proof.  The court found that Gyma had not established that a reasonable client would use its “expensive” New York counsel to handle the subpoena, and further that costs and fees incurred prior to the date it provided an estimate of costs to the plaintiffs and the court were not fairly chargeable.

Moreover, the court found that many of the costs and fees were incurred in connection with Gyma’s efforts to resist compliance with the subpoena, which the court found was a unilateral “decision to litigate the subpoena zealously.”  Finding that Gyma was “notably intransigent and dilatory in its response,” and considering the admonition of the U.S. Court of Appeals for the Second Circuit, that courts should “not endorse scorched earth tactics” or “hardball litigation strategy,” the district court denied Gyma’s motion for fees in bringing the motion, and awarded only $20,000 in reasonable costs and fees for compliance with the subpoena.

The court in Valcor Engineering Corp. v. Parker Hannifin Corp. considered the motion of non-party MEDAL, to shift the entire cost of production pursuant to a subpoena, $476,000, to the requesting party.  The court found that the costs and fees were objectively unreasonable, and that much of the cost resulted from MEDAL’s tactical decision to aggressively challenge every aspect of the subpoena, which led to two separate motions to compel.  Moreover, the court found that MEDAL demonstrated little interest in minimizing expenses or preventing further motion practice.  For example, after the court granted the first motion to compel, MEDAL withheld nearly 90 percent of the documents identified by search terms as non-responsive, without providing any explanation.  The court also found that MEDAL’s aggressive tactics tended to demonstrate that it was not a truly disinterested non-party, and that it had been intimately involved in the acts giving rise to the litigation.  Finding that MEDAL’s motion came “close to wielding the shield of Rule 45 as a sword,” the court denied its motion for cost-shifting.

By contrast, the court in Linglong Americas Inc. v. Horizon Tire Inc. granted, in full, a similar request by non-party GCR Tire & Service for costs and fees associated with a Rule 45 subpoena served by Horizon.  GCR objected to the scope of the subpoena, and its counsel spent several months negotiating with Horizon’s counsel to narrow the request.  GCR moved to recover its costs and fees, and Horizon objected to allocation of fees incurred in narrowing the scope of the subpoena.  Reviewing Rule 45 case law, including Aggrenox, the court reasoned that it was required to protect the non-party from significant, reasonable expenses incurred in compliance.  The court found that narrowing the subpoena took several months of work by GCR’s attorneys and that the charges were reasonable, particularly since GCR had already paid them.  The court further found that expenses incurred in litigating the fee dispute were reasonable and incurred in compliance with the subpoena.  Accordingly, the court awarded the full $24,567 sought for responding to the subpoena and another $15,338 in fees for filing the fee dispute.

Costs and Fees Incurred in Collection, Processing and Review

In Sands Harbor Marina Corp. v. Wells Fargo Insurance Services of Oregon, the plaintiffs alleged that EVMC Real Estate Consultants, Inc. and others conspiring with EVMC fraudulently induced the plaintiffs to pay advance loan commitment fees when, in fact, no financing was available.  Wells Fargo, the employer of one of the defendants, served a subpoena on Dogali Law Group, a nonparty law firm that had represented EVMC in connection with the loan transactions at issue.  Dogali withheld multiple documents on the basis of attorney-client privilege.  Several years later, the court ruled that a defendant law firm could not withhold documents on the basis of attorney-client privilege because no surviving entity had standing to invoke the privilege on EVMC’s behalf.  Wells Fargo then renewed and expanded its earlier subpoena to Dogali, seeking the withheld documents.  When Dogali argued that an electronic production would be time-consuming, Wells Fargo proposed to use its own vendors to reduce time and costs.  After unsuccessful negotiations about the payment of costs and fees for the production, the court ordered production of the previously withheld privileged documents, as well as all documents responsive to the expanded subpoena.  Dogali later filed a motion for costs and fees in the amount of $39,709.

Weighing the mandate of Rule 45, the court held that Dogali was entitled to an award of fees.  While the court generally agreed that the legal services rates charged were reasonable, it found that the legal time spent responding to the second subpoena and renewed subpoena included time for tasks that were unreasonable, such as time spent researching whether Dogali had standing to assert the attorney-client privilege, reviewing the documents for privilege, creating privilege logs for documents reviewed previously, and researching privilege and waiver issues.  In addition, the court held that time spent communicating with former partners, preparing file memoranda, and conferring with Wells Fargo’s counsel about costs and production was not reasonable.

Finally, the court looked at the attorney time spent researching and preparing the motion for costs as well as the paralegal time spent reviewing documents for production.  The court denied Dogali’s request for the costs of drafting and reviewing the application as unnecessary and excessive.  As to time billed for the paralegal and cost of production, the court noted Wells Fargo’s offer to allow Dogali to utilize its vendor and determined that “rather than explore a more efficient and economical approach for the production, [Dogali] opted to have [its] paralegal print each email individually and convert it into a pdf…[Wells Fargo] should not be required to bear the cost of [Dogali’s] unilateral decision to utilize a more time-consuming approach.”  After carving out costs and fees determined to be unreasonable, the court awarded Dogali fees and costs in the amount of $10,537.33.

In Nitsch v. Dreamworks Animation SKG Inc., the court determined that attorneys’ fees and costs associated with protecting the confidentiality of affected non-parties were reasonable and therefore compensable.  Non-party Croner Company, a consulting company that conducted annual compensation benchmarking, moved for reimbursement of costs incurred in responding to the plaintiffs’ subpoena, which sought survey data that Croner obtained from companies in the animation and visual effects industry over several years.  Before Croner responded to the subpoena, its counsel conferred with plaintiffs’ counsel, advised that it would seek reimbursement of costs, and provided an initial estimate of those costs.

Because all surveys Croner conducted were subject to confidentiality provisions, Croner notified affected clients about the subpoena and devised a form of production to produce the information for the plaintiffs but preserve the anonymity of the survey participants.  The process was more time-consuming than expected, and Croner sought costs, including outside attorneys’ fees, in the amount of $67,787.55.  The plaintiffs objected on the basis that the request was unreasonable, arguing that Croner had produced only 16 documents and that the requested sum was grossly over-inflated and unreasonable.

Citing Rule 45(d)(2)(B)(ii)’s requirement that a court must protect a person who is neither a party nor a party’s officer from “significant expense resulting from compliance,” the court stated that the “shifting of significant expenses is mandatory, but the analysis is not mechanical; neither the Federal Rules nor the Ninth Circuit has defined ‘significant expenses.’”  The court then discussed whether costs tied to Croner’s confidentiality concerns were compensable, as “resulting from compliance” with a subpoena.

The court noted that reimbursable fees include those incurred in connection with legal hurdles or impediments to production, such as ensuring that production does not violate federal law or foreign legal impediments, but reimbursable fees do not include fees incurred for services for the non-party’s sole benefit and peace of mind.  The plaintiffs argued that Croner’s efforts to protect client confidentiality were purely business interests that inured solely to Croner’s benefit and that the protective order was sufficient to address Croner’s confidentiality issues.  The court disagreed, finding that the efforts to address confidentiality issues were reasonable and compensable.

Significantly, the court held that Croner’s efforts were consistent with the protective order entered into by the parties, stating that: Croner’s efforts to protect client confidentiality were not made to be obstreperous, but were the result of compliance with the subpoena.  Indeed, if any of the parties in this case were asked to produce a non-party’s confidential information, the stipulated protective order requires them to do what Croner did.

In Steward Health Care System LLC v. Blue Cross & Blue Shield of Rhode Island, however, the court reached the opposite conclusion when the non-party, Nemzoff & Company LLC, requested reimbursement for costs and fees associated with complying with a subpoena from Blue Cross, which included a review for relevancy and privilege.  Nemzoff initially refused to comply due to the costs involved, resulting in a court order compelling compliance and a warning that Nemzoff should minimize expense as it may bear the cost.  The court explained that only “reasonable expenses” incurred — and not all expenses — may be shifted.

The court held that attorneys’ fees have traditionally been awarded as sanctions in the most egregious circumstances or when the requested fees were for work that benefited only the requesting party.  Since it was not presented with any argument for sanctions, the court found that Nemzoff’s use of its own attorneys to review the documents for relevancy, confidentiality and privilege matters was only for Nemzoff’s benefit, and conferred an unwanted benefit upon Blue Cross.  Nemzoff’s attorneys were protecting its own interests.  As such, the court denied Nemzoff’s request.

While cost-shifting remains within the discretion of the court, courts have consistently been more likely to award costs and fees when a non-party has worked in good faith to narrow the scope of a subpoena and responded in an efficient fashion.  To the contrary, when a non-party attempts to obstruct the discovery process, courts have refused to shift costs and fees.  As demonstrated by the case law, the potential for cost-shifting must necessarily turn on the particular facts and circumstances of each case.

Donna Fisher is a member of the health sciences department at Pepper Hamilton LLP.  Matthew Hamilton is a member of the health sciences department at and partner at the firm.  Sandra Adams is a discovery attorney at the firm.  For a full list of end notes, visit https://www.pepperlaw.com/publications/fresh-takes-on-seeking-costs-and-fees-under-rule-45-2019-02-13/

NJ Court Didn’t Consider Interrelated Claims in Awarding Attorney Fees

February 20, 2019

A recent Law 360 story by Jeannie O’Sullivan, “NJ Fee Award Didn’t Consider Interrelated Claims, Court Says,” reports that the New Jersey state appeals court has vacated a lower court’s refusal to award counsel fees for the portion of time dedicated to allegations that were ultimately dropped from a lawsuit over a failed air conditioning repair job, ruling in a published decision that the facts surrounding the successful claim and the nixed claims were interrelated.

The three-judge panel’s decision handed a victory to Jeffrey S. Jacobs, who appealed his award of $19,800 in counsel fees in his lawsuit against Mark Lindsay and Son Plumbing & Heating Inc., John Stretavski and Mark D. Lindsay.  Jacobs — who prevailed in his Consumer Fraud Act (CFA) claims but agreed to drop common law torts of malicious prosecution, defamation and tortious interference with economic relationships — had sought a $327,776.70 counsel fee award.

In determining the fee award, an Essex County Superior Court judge had disallowed any time Jacob’s counsel had devoted to discovery related to the common law claims, because he’d only prevailed in the CFA claim.  Acknowledging that state Supreme Court precedent allows a fee determination to be overturned on only “the rarest of occasions” and when a “clear abuse of discretion” exists, the panel disagreed with the lower court’s method.  “The record shows that in reviewing plaintiff's counsel's fee application, the judge did not appreciate the interrelation between facts supporting defendants' unconscionable commercial practices claim under the CFA and the common law torts of malicious prosecution, defamation, and tortious interference with economic relationships,” the appeals decision said.

Further, that judge lacked a “correct understanding or appreciation” of the underlying material facts that prompted the first judge who had been assigned to this case to grant Jacob’s motion for summary judgment on the CFA claims, the appeals court said.  Specifically, the judge’s reasoning made no mention that Lindsay admitted in a deposition to “engaging in the unconscionable commercial practice” of filing criminal complaints with the local police in order to collect on unpaid invoices.

“Here, Lindsay admitted that MLSP has a history of instituting criminal actions as a means of collecting its unpaid invoices.  This outrageous abuse of our criminal justice system is precisely the type of unconscionable commercial practice the CFA was designed to protect consumers from and deter unscrupulous commercial entities from engaging in,” the decision said.  “However, the salutary purpose of the CFA is undercut if the professional work performed by competent private counsel in the course of representing consumers victimized by such practices is arbitrarily undervalued by the judges entrusted to enforce the CFA's fee-shifting provision,” the decision continued.

In the same decision, the appeals court also rejected the defendants’ cross-appeal challenging the $45,000 settlement the parties had reached after Jacobs prevailed in the CFA claim.  Despite the fact that the parties had acknowledged Jacobs prevailed on the CFA claim, the defendants had reserved the right to appeal the grant of summary judgment under CFA.  “Stated differently, defendants' attempt to preserve their right to appeal the Law Division's order that found them liable under the CFA is nothing more than a transparent subterfuge intended to obtain an advisory ruling from this court on a question of law,” the decision said.

After Jacobs hired the defendants to fix his home air conditioning unit, but after three service calls, they were unable to correct the problem, according to the decision.  After each call, the defendants provided an invoice describing the services performed and the parts installed.  Jacobs issued checks for the first two service calls, but placed a stop order on the checks after the defendants’ third unsuccessful repair attempt, the decision said.  Lindsay then filed a report with the Caldwell Police Department, and the police formally charged Jacobs with theft of services, the decision said.

The case is Jeffrey S. Jacobs v. Mark Lindsay and Son Plumbing & Heating Inc. et al., case no. A-3854-16T1, in the New Jersey Appellate Division.