JANE MCCLUTCHY v. CECONI CHEIFETZ LLC (2011)

Ceconi & Cheifetz, LLC (C & C), represented plaintiff Jane McClutchy in her matrimonial action.   It is undisputed that the only parties in the action before the court were plaintiff and defendant, Harold McClutchy, and the only issues before the court were those that arose from plaintiff's complaint for divorce.   At no time was appellant, C & C, a party to the action before the court and at no time did plaintiff ask the court to limit her contractual liability to C & C for the fees incurred in her divorce litigation.   Nonetheless, the trial court sua sponte capped the legal fees of the parties' counsel at $50,000.¹  C & C appeals from that order and we reverse.

Plaintiff retained C & C pursuant to the terms of a written retainer agreement that complied with the requirements of Rule 5:3-5(a) and (b) and had annexed to it a copy of the Statement of Client's Rights and Responsibilities in Civil Family Actions (Pressler and Verniero, Current N.J. Court Rules, Appendix XVIII to Rule 5:3-5(a) at 2535 (2011)).   The agreement identified the attorney in charge of managing plaintiff's matter, her hourly rate, and also identified the other attorneys who might work on the case, the hourly rate of each, and the rate to be charged for a paralegal.   The agreement advised that plaintiff would be billed “approximately on a monthly basis.”   The agreement specified:  “In the event that we actually receive payment of all or part of our fees and costs and disbursements from your spouse, either by way of court order or settlement, credit in those amounts shall be given to you.   Regardless, you remain at all times primarily obligated to pay us for our invoices.”

After nearly three years of litigation, the matrimonial action was tried for three days in September 2008.   Each of the parties asked the court for an award of counsel fees from the other party pursuant to Rule 5:3-5(c).  Although that Rule requires parties to submit supporting information pursuant to Rule 4:42-9 and identifies additional factors to be considered by the court, the trial court did not permit either counsel to submit a certification of services and limited counsel to a one-page summary of total fees incurred, less amounts already paid, with written summations.   The one-page summary submitted by C & C reflected that plaintiff had paid $46,706 in fees and had an outstanding balance of $101,900.89.

The court was plainly concerned with the amount of the legal fees incurred by each party in what it perceived to be a relatively straightforward divorce with no exceptional issues between parties of moderate means.   The court's written opinion of October 16, 2008, includes the following:

Finally, the issue of counsel fees remains.   It is shocking to the court that [t]he cost of [the parties' daughter's] college education (215,000.00) at a prestigious school (Lehigh University) is exceeded by the cost of the divorce in attorneys and expert fees ($230,000.00), even prior to the trial.   The court and everyone reading this opinion should be offended that such a situation has occurred.

․

Returning to counsel fees, the litigants must bear responsibility for such a high expenditure of monies as well as the attorneys.   As Argila ² posed, it should be apparent to the client that the acceptance of this particular employment (retained by the client) will preclude other employment by the lawyer (accurately stating that the lawyer cannot bill anyone else for that time).

In October 2006, there was $300,000.00 from the net proceeds of the sale from the Cape May property, yet none of these proceeds have gone to the parties and over $90,000.00 (over the course of the last year) has been spent on attorneys and unnecessary fees.   The wife requested an advance of her share of equitable distribution from these funds.   The husband was steadfast in his refusal and previous orders (by the prior judge) only authorized fees to be released from the escrow account.

However, here this case involved no novelty or difficulty of the questions or issues involved and the court could find no reason whatsoever for it to be necessary for two (2) lawyers (a second chair) throughout the entire trial.   The lawyers in this trial are of the highest experience, best reputation and have significant ability.   The court actually wondered how this high level of representation existed in a case “ordinary” in nature with no complex issues.   These parties were W-2 wage earners with assets for retirement and a marital home and a summer home.   Their debt structure was ordinary, consisting of mortgages, an equity line and credit cards.   There was nothing to authorize or explain almost a quarter of a million dollars in attorneys fees alone (see attached).   This was a “cut and dry” case that could have been handled alone by a 5th year associate.

․

It is clear by case law that counsel fees lie solely in the discretion of the court and here is how the court will exercise its discretion.   The court will cap the fees at $50,000.00 to each side.   There will be no additional fees requested paid above that figure which will be the total amount permitted to be collected by each side.  [Counsel for defendant] has advised the court that agreement has already been reached between he and his client to limit the fees to $50,000.00 figure (in addition to fees already paid).   The court appreciates this voluntary act, and cannot prevent lawyers and their clients from reaching agreement beyond the court's trial determination.   However, no court enforcement or collection will be made for amounts beyond this court's decision of a total $50,000.00 fee to each party.

C & C filed a motion to be relieved as counsel, to intervene in the matter pursuant to Rule 4:33-1, and to vacate that portion of the court's decision that limited its legal fees to $50,000.   By order dated December 5, 2008, the motion was denied in its entirety, and as to the limit on legal fees, the judge stated:

The Court shall not vacate that portion of the Court's letter decision of October 16, 2008, with regard to collection and/or enforcement of counsel fees due to Ceconi & Cheifetz, LLC except that the fees of Ceconi & Cheiftez are now capped at $60,000.3  Plaintiff has tendered payment of $11,769 representing $3294 in fees and $8475. in costs bringing her payment to $50,000 in fees plus costs.

The cap on fees was also included in paragraph 13 of the judgment of divorce:

The Court will cap the fees at $50,000 to each side.   There will be no additional fees requested paid above that figure, which will be the total amount permitted to be collected by each side.   No Court enforcement nor collection will be made for amounts beyond this Court's decision of a total $50,000 fee to each party.

C & C appeals from the order of December 5, 2008, and Paragraph 13 of the judgment of divorce and presents the following issues for our consideration:

POINT I

THE TRIAL COURT IMPROPERLY CAPPED ATTORNEY'S FEES AND PRECLUDED COLLECTION OR ENFORCEMENT OF FEES BETWEEN ATTORNEY AND CLIENT

A.  THE TRIAL COURT IMPROPERLY APPLIED ARGILA v. ARGILA, 256 N.J. SUPER.   484 (APP.DIV.1992) IN THIS MATTER

B. THE TRIAL COURT ERRED IN ITS IMPROPER AND ARBITRARY DETERMINATION AS TO THE REASONABLENESS OF COUNSEL FEES.

POINT II

THE TRIAL COURT'S OCTOBER 6, 2008 RULING CREATED AN INADVERTENT CONFLICT OF INTEREST AS TO THE ATTORNEY/CLIENT RELATIONSHIP AND THE TRIAL COURT ERRED IN DENYING CECONI & CHEIFETZ'S MOTION TO BE RELIEVED AS ATTORNEYS FOR PLAINTIFF

POINT III

THE TRIAL COURT ERRED IN DENYING CECONI & CHEIFETZ'S REQUEST TO INTERVENE PURSUANT TO R. 4:33-1.

After carefully reviewing the record, briefs and arguments of counsel, we conclude, for the reasons that follow, that the trial court exceeded its authority by sua sponte limiting C & C's fees.

Family courts have “special jurisdiction and expertise in family matters [.]”  N.J. Div. of Youth and Family Servs. v. M.C. III, 201 N.J. 328, 343 (2010);  Cesare v. Cesare, 154 N.J. 394, 413 (1998).   As a result, we ordinarily defer to the factual findings of the trial court.  N.J. Div. of Youth and Family Servs. v. E.P., 196 N.J. 88, 104 (2008).   However, no special deference is required here because the alleged error rests upon a mistake of law rather than an error in factfinding.  Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995);  Connell v. Diehl, 397 N.J.Super. 477, 491 (App.Div.), certif. denied, 195 N.J. 518 (2008).

“[T]he trial court's subject matter jurisdiction in a matrimonial action does not normally encompass the power to adjudicate financial disputes that may crop up between a litigant and the litigant's attorney.” ⁴  Fischer v. Fischer, 375 N.J.Super. 278, 284 (App.Div.2005).   As noted, there is nothing in the limited record presented to the court, which includes the court's written opinion, the transcripts of oral argument and the brief submitted by plaintiff, that suggests that a dispute existed between C & C and plaintiff regarding fees or that plaintiff ever asked the court to review her obligation to pay her counsel's fees.   Therefore, the only issue relating to counsel fees submitted to the court was the request of each party for an award of counsel fees from the other party pursuant to Rule 5:3-5(c).

Rule 5:3-5(c) “is concerned only with allowances to other parties-not to one's own counsel.”  Cohen v. Cohen, 146 N.J.Super. 330, 337 (App.Div.1977).   The decision regarding an award of an attorney's fee to an adverse party remains separate and distinct from the enforceability of a fee agreement between attorney and client.⁵  Fischer, supra, 375 N.J.Super. at 284-85;  Gruhin & Gruhin, P.A. v. Brown, 338 N.J.Super. 276, 280-81 (App.Div.2001)(a finding as to the reasonableness of an award pursuant to Rule 4:42-9(a)(1) and Rule 5:3-5(c) does not necessarily impact a litigant's obligation to pay his or her own attorney's fees pursuant to a valid and enforceable written retainer agreement).   Because Argila, supra, concerned the trial court's exercise of discretion regarding an award of counsel fees to an adverse party, and not the reasonableness of the fees an attorney charged his own client, the trial court's reliance upon Argila to support its review of the reasonableness of C & C's fees here was misplaced.   See also Pressler and Verniero, Current N.J. Court Rules, comment 4 on Rule 5:3-5 (2011).

We recognize that Rule 5:3-5(c) instructs the court to consider factors that touch upon the reasonableness of each party's counsel fees in determining whether to make such an award, i.e., “(3) the reasonableness and good faith of the positions advanced by the parties both during and prior to trial;  (4) the extent of the fees incurred by both parties;  (5) any fees previously awarded;  (6) the amount of fees previously paid to counsel by each party;  [and] (7) the results obtained[.]”  However, although the reasonableness of the fees charged is relevant to the counsel fee award determination, this consideration has no independent significance in the present context.

In short, C & C was not a party to the matrimonial action and the reasonableness of the fees it charged plaintiff pursuant to the retainer agreement was not an issue presented to the court for adjudication.   When a court enters judgment on a matter not properly before it, the judgments are not “merely erroneous:  they would be absolutely void;  because the court in rendering them would transcend the limits of its authority in those cases.”   Standard Oil Co. v. Missouri, 224 U.S. 270, 282, 32 S.Ct. 406, 409, 56 L. Ed. 760, 768 (1912);  see also Sattelberger v. Telep, 14 N.J. 353, 363 (1954);  see e.g., Grow Co. v. Chokshi, 403 N.J.Super. 443, 478-79 (App.Div.2008) (where no stay of judgment was sought, judge exceeded his authority in requiring party to post supersedeas bond);  Brown v. Port Auth. Police Superior Officers Ass'n, 283 N.J.Super. 122, 137 (App.Div.1995) (where no request had been made for such relief, trial court violated the fundamental procedural rule that a court “cannot enter a judgment which is beyond the claim asserted” in sua sponte order conditioning the dismissal of action upon the parties submitting to binding arbitration).

We conclude that the trial court exceeded its authority in ordering that C & C could not collect more than $50,000 in fees from plaintiff.   Therefore, we reverse and vacate those parts of the order and judgment of divorce that limited the amount of fees C & C may collect from its client.   In light of this decision, we need not address the arguments raised in Points II and III of intervenor's brief.

FOOTNOTES

FN1. Although the court's ruling applied to counsel for both plaintiff and defendant, defendant and his counsel reached a separate agreement as to his obligation for legal fees..  FN1. Although the court's ruling applied to counsel for both plaintiff and defendant, defendant and his counsel reached a separate agreement as to his obligation for legal fees.

FN2. Argila v. Argila, 256 N.J.Super.   484 (App.Div.1992)..  FN2. Argila v. Argila, 256 N.J.Super.   484 (App.Div.1992).

FN3. The $60,000 cap included an award of $10,000 that defendant was ordered to pay..  FN3. The $60,000 cap included an award of $10,000 that defendant was ordered to pay.

FN4. Such disputes are typically addressed in the fee arbitration procedure that the Supreme Court established in 1978 to provide litigants “a swift, fair and inexpensive method of resolving fee disputes.”   Saffer v. Willoughby, 143 N.J. 256, 263 (1996)(quoting In re LiVolsi, 85 N.J. 576, 601-02(1981)).   The Rules provide the client with the right to proceed with arbitration, R. 1:20A-3, and prohibit an attorney from instituting a lawsuit to recover a fee without giving the client a Pre-Action Notice that informs him or her of the right to request fee arbitration and the procedure.   R. 1:20A-6..  FN4. Such disputes are typically addressed in the fee arbitration procedure that the Supreme Court established in 1978 to provide litigants “a swift, fair and inexpensive method of resolving fee disputes.”   Saffer v. Willoughby, 143 N.J. 256, 263 (1996)(quoting In re LiVolsi, 85 N.J. 576, 601-02(1981)).   The Rules provide the client with the right to proceed with arbitration, R. 1:20A-3, and prohibit an attorney from instituting a lawsuit to recover a fee without giving the client a Pre-Action Notice that informs him or her of the right to request fee arbitration and the procedure.   R. 1:20A-6.

FN5. Moreover, the two situations are subject to different standards when properly submitted for adjudication.   See Rosenberg v. Rosenberg, 286 N.J.Super. 58, 63-67 (App.Div.1995);  see also Johnson v. Johnson, 390 N.J.Super. 269, 276-77 (App.Div.2007);  Levine v. Levine, 381 N.J.Super. 1, 10 (App.Div.2005);  Cohen, supra, 146 N.J.Super. at 337..  FN5. Moreover, the two situations are subject to different standards when properly submitted for adjudication.   See Rosenberg v. Rosenberg, 286 N.J.Super. 58, 63-67 (App.Div.1995);  see also Johnson v. Johnson, 390 N.J.Super. 269, 276-77 (App.Div.2007);  Levine v. Levine, 381 N.J.Super. 1, 10 (App.Div.2005);  Cohen, supra, 146 N.J.Super. at 337.

PER CURIAM