A.W. v. Mount Holly Twp. Bd. of Educ. (In re Costello & Mains, LLC)

• Decision Date: 01 February 2018
• Docket Number: DOCKET NO. A–0165–16T2
• Citation: 180 A.3d 343,453 N.J.Super. 110
• Parties: A.W., BY her parent and guardian, B.W., Plaintiff–Respondent, v. MOUNT HOLLY TOWNSHIP BOARD OF EDUCATION, Defendant–Respondent. In the Matter of Costello & Mains, LLC, Appellant.
• Court: New Jersey Superior Court — Appellate Division

453 N.J.Super. 110

180 A.3d 343

A.W., BY her parent and guardian, B.W., Plaintiff–Respondent,

v. MOUNT HOLLY TOWNSHIP BOARD OF EDUCATION, Defendant–Respondent.In the Matter of Costello & Mains, LLC, Appellant.

DOCKET NO. A–0165–16T2

Superior Court of New Jersey, Appellate Division.

Submitted October 25, 2017

Decided February 1, 2018

Costello & Mains, LLC, appellant pro se (Deborah L. Mains, on the brief).

Respondents have not filed a brief.

Before Judges Alvarez, Nugent, and Geiger.

The opinion of the court was delivered by

GEIGER, J.S.C. (temporarily assigned).

This matter presents the unresolved issue of whether the contingent attorney's fee limitation on minors' settlements imposed by Rule 1:21–7(c)(6) applies to a minor plaintiff's settlement of claims under the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5–1 to –42, and the New Jersey Civil Rights Act (NJCRA), N.J.S.A. 10:6–1 to –2, if the plaintiff does not apply for a fee-shifting award of attorney's fees pursuant to N.J.S.A. 10:5–27.1 or N.J.S.A. 10:6–2(f). The trial court held the contingent fee is subject to the limitation imposed by the rule. We affirm.

The record on appeal establishes that during the 2011–2012 school year, A.W. was a fifth grade student at Folwell Elementary School in Mount Holly Township. During that year, A.W. reported incidents of repeated bullying and intimidation by other students to the school's principal. The following school year, A.W. enrolled at F.W. Holbein Middle School, also located in Mount Holly Township. Her mother, B.W., informed the school's administrators of the abuse A.W. endured during the previous school year. Despite the alert, the bullying resumed once A.W. began attending F.W. Holbein. A.W. alleged she was subjected to ongoing harassment, intimidation, and bullying by other students, which continued on a near daily basis until, following a recommendation from her physician, she was placed on homebound instruction in October 2013. She ultimately transferred to a private school.

A.W. claimed the harassment she experienced was a manifestation of gender or perceived disability discrimination. Even after complaints to school officials, the harassment allegedly continued on a daily basis without investigation or appropriate action by school administrators. A.W. further claimed the bullying and intimidation, coupled with the school's failure to prevent or deter the harassment, caused her to suffer severe emotional distress, anxiety, depression, and Post Traumatic Stress Disorder.

A.W. retained appellant Costello & Mains, LLC to represent her in her claims against defendant Mount Holly Township Board of Education (the Board). On January 2, 2014, B.W., as natural parent and guardian of A.W., entered into an eighteen-page retainer agreement with appellant. The agreement provides for a forty-five percent contingent fee or, in the alternative, a fee based on prescribed hourly rates, whichever would be greater. The fee provisions of the agreement state:

These are contingent matters, in that the fee arises only in the event of successful conclusion by way of settlement or verdict.

You have asked the firm to represent you in a matter which involves a claim or claims made under either New Jersey State or Federal statutes which provide for "fee shifting." These statutes provide that for a claim such as yours, you are entitled to "shift" your legal fees and most litigation costs to the wrong-acting defendant and make an application to the Court upon successful trial of your matter to have that fee added to your recovery. The foreknowledge on the part of defendant(s) that it/they might have to pay this fee in addition to any recovery by you is also a consideration in any negotiation.

It is important that you understand that the fact that this statutory provision exists does not relieve you of the obligation to pay fees to the firm, potentially from any recovery by you.

In such matters, it is customary for the firm to keep accurate, hourly billing records as the matter progresses toward trial. If at some point an offer to settle the matter is made and the offer is made as a "lump sum" by the defendant, you agree that the firm will be compensated in the following manner:

The firm will get either 45% (forty five percent) of the total settlement figure after costs are deducted or its hourly rate accumulated to that point after costs are deducted, whichever is greater, but not both.

....

If the offer made to settle the case is made with one component for you and a separate component for the firm's fees, you agree that those components will be combined in order to determine what the total recovery is for purposes of determining the firm's 45% fee.

If the matter proceeds to trial or arbitration and a fee award is made by a Court, arbitrator or other competent trier of fact and law, you agree that the fee awarded to the firm will be added to the totality of your recovery for purposes of determining what your total recovery is with respect to the calculation of the firm's 45%. This is so because "attorney[']s fees" are part of the relief due to you at the close of such cases, and these fees thus form a part of your relief and recovery.

The agreement further enumerates the hourly rates charged by the firm's attorneys and paralegals and also contains an additional provision permitting appellant to request a still higher fee:

The firm retains the right under New Jersey Court Rules to request a fee that is higher than those provided for in this agreement, if in the firm's judgment, the firm has performed work that is in excess and thus disproportionate to the fee that it has earned. You have the right to oppose such an application or to consent to such an application if one is made. The firm will advise you if one is being made and will provide you with a copy of it at the appropriate time. The [c]ourt, arbitrator or other competent trier of fact or law retains the final decision as to whether or not a higher or additional fee is to be provided.

On March 24, 2014, plaintiff filed a three-count complaint against the Board, alleging violations of the LAD and NJCRA and demanding judgment for compensatory and punitive damages, costs of suit, attorney's fees, enhanced attorney's fees, and equitable relief. Following the filing of defendant's answer, the parties engaged in discovery, which concluded on August 15, 2015. The Board then moved for summary judgment, which was denied on January 22, 2016. Shortly thereafter, the parties reached a tentative settlement, inclusive of attorney's fees and costs, in the amount of $100,000, subject to the Board's approval. The proposed settlement precluded plaintiff from applying for an award of attorney's fees and costs from defendant under the fee-shifting provisions of the LAD or NJCRA. On March 9, 2016, the Board approved the settlement. The parties then agreed on the terms of a general release, which was to be executed along with a stipulation of dismissal upon approval of the settlement by the court.

Because A.W. was still a minor, appellant requested the trial court conduct a "friendly hearing" pursuant to Rule 4:44. Although Rule 1:21–7(c)(6) imposes a twenty-five percent limit on contingent fees in cases involving minor plaintiffs, appellant sought approval of the forty-five percent contingent fee provided for in the retainer agreement without moving for approval of the fee pursuant to Rule 1:21–7(f). Plaintiff did not oppose the fee sought by appellant. During the hearing, appellant elicited testimony from A.W. substantiating the merits of the complaint and testimony from B.W. regarding her understanding of the settlement. B.W. testified she understood the overall settlement amount was $100,000, the amount of costs incurred was $4692.33, and appellant's fee would be $42,888.45 pursuant to the contingent fee arrangement.

B.W. further testified she understood she was under no obligation to enter into the settlement and had the right to refuse to settle and proceed to trial, which could potentially have resulted in a greater recovery. She also testified the amount of the settlement was fair and she was satisfied with the services performed by appellant.

B.W. did not testify she understood a prevailing plaintiff could apply to the court for an award of reasonable attorney's fees and costs to be paid by defendant under the fee-shifting provisions of the LAD and NJCRA. She also did not testify regarding the decision not to seek attorney's fees and costs from defendant in order to expedite a settlement. Nor was there testimony confirming she understood A.W.'s right to seek fee-shifting was being forfeited under the terms of the settlement.

In an exchange with the trial court, appellant confirmed it interpreted Rule 1:21–7(c) to mean it could charge any percentage contingent fee, even fifty-five percent, assuming the client agreed to that rate.

The trial court approved the settlement amount, finding it to be reasonable, but declined to award the forty-five percent contingent fee sought by appellant. At appellant's request, the judge refrained from entering a ruling as to the contingent fee and allowed appellant to make an application to enforce the contingent fee retainer agreement.

Appellant then moved for an order approving its forty-five percent contingent fee but did not apply for, or submit materials in support of, an enhanced fee under Rule 1:21–7(f). Plaintiff did not oppose the motion. Appellant renewed its argument that the language of the rule excludes fee-shifting cases, like those brought under the LAD and NJCRA, from the fee limitations imposed by Rule 1:21–7(c). Appellant contended there is no limit on the contingent fee percentage in LAD and NJCRA actions so long as the client agrees. In support of its argument, appellant relied on Szczepanski v. Newcomb Medical Center, Inc., 141 N.J. 346, 661 A.2d 1232 (1995) and Venegas v. Mitchell, 495 U.S. 82, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990).

The judge issued...