JOHN LEWANDOWSKI JUDITH LEWANDOWSKI LAURENCE QUINLAN MAUREEN QUINLAN EDWARD ZAWISZA RAYMOND ZAWISZA v. FREEDOM TITLE ABSTRACT INC CATHLEEN MACKIE (2013)

Plaintiffs appeal the trial court order voluntarily dismissing their complaint without prejudice, pursuant to Rule 4:37–1(b), and the award of $24,418.20 in counsel fees in connection with the action.   The court justified the award with its reliance upon Mack Auto Imports, Inc. v. Jaguar Cars, Inc., 224 N.J.Super.   254 (App.Div.1990), where this court held a court may impose counsel fees as a condition of a voluntary dismissal.   We affirm the award of counsel fees but vacate the amount of the award because plaintiffs were not given a meaningful opportunity to challenge the amount and reasonableness of the counsel fees sought, and the court failed to articulate the reasons for the amount of the award.

Plaintiffs, Raymond Zawisza and Edward Zawisza, Laurence Quinlan and Maureen Quinlan, and John Lewandowski and Judith Lewandowski, are homeowners who purchased their homes, located in Little Egg Harbor, from Hi–Tech Homes, Inc. (Hi–Tech), a home building company owned and operated by Terrence Moeller (Moeller).   Plaintiffs purchased their homes at different times between 1996 and 2000.   Although plaintiffs received deeds to their respective properties and purchased title insurance from defendant, clear title was never conveyed.

In May 2004, Freedom Title & Abstract, Inc. (Freedom Title) conducted a refinance closing between Hi–Tech and TEB Associates (TEB) using the Zawiszas', Quinlans' and Lewandowskis' properties to secure a $900,000 loan.   Freedom Title performed a title search and, on the closing date, issued a title commitment to TEB without disclosing plaintiffs' ownership interests in these properties.

Moeller defaulted on the loan, causing TEB to foreclose on Hi–Tech's mortgage in 2007.   On September 21, 2009, plaintiffs filed a complaint against Hi–Tech, Moeller, Catherine Moeller, Freedom Title and its owner, Cathleen (Mackie), alleging fraud and related counts.   All parties, except Hi–Tech, filed an answer, and default was entered against the company.   Moeller answered the complaint and, in his answer, asserted “[n]one of the allegations apply due to filing personal bankruptcy.”

Defendants served requests for admissions and initial interrogatories plaintiffs.   Plaintiffs responded to the requests for admissions and responded to the initial interrogatories propounded.   Plaintiffs also served the first set of interrogatories defendants, to which defendants responded in April 2010. n May 2010, defendants responded to plaintiffs' request to produce documents.

By letter dated March 24, 2010, defendants served notices to take the depositions of plaintiffs on April 7, 8 and 9, 2010.   Plaintiffs' counsel advised, by letter dated March 26, that co-counsel was unavailable on the requested dates and proposed five alternative dates.   Of the dates offered, defendants agreed to April 29, May 10 and May 12.   Approximately two weeks later, plaintiffs' counsel indicated she would be unavailable on April 29, May 10 and May 12, and the depositions were again rescheduled for May 12, June 2, and June 3. By letter dated May 10, 2010, plaintiffs' counsel advised that “we are adjourning all the depositions until a time following our application to the Bankruptcy Court to reopen Mr. Moeller's case to file a[c]omplaint for [n]on-[d]ischargeability.”

Defendants subsequently advised plaintiffs' counsel that they “ not agree to an indefinite and informal stay of discovery” and sought to reschedule discovery for that summer.   Plaintiffs' counsel did not respond, resulting in defendants fil a motion to compel discovery.   On September 10, 2010, the court entered an order plaintiffs to appear for depositions in October and to produce any expert reports by October 1, 2010.

Defendants thereafter served deposition notices scheduling plaintiffs for dates October 7, 13 and 14, 2010.   By letter dated October 6, plaintiffs again cancelled the depositions and “advised that the Moeller bankruptcy matter is in the process of being reopened.”   On the same date, plaintiffs filed a motion with the bankruptcy court to reopen Moeller's bankruptcy case.

Defendants filed a motion to dismiss or alternatively for summary judgment on October 14, 2010.   Plaintiffs filed a motion to extend discovery on November 2, and filed a brief in opposition to defendants' motion to dismiss and in support of motion to extend discovery on November 23.   Defendants filed a reply brief on November 29.

The trial court heard oral arguments on both motions on December 3, 2010.   The court ed its decision on the motion to dismiss until January 21, 2011, but entered an order extending discovery until March 8, 2011.   The order provided that deposition of the parties and the witnesses were to be completed by January 15, 2011, and an expert report was to be provided by plaintiffs by February 1, 2011.

Defendants once again served deposition notices on plaintiffs scheduling depositions January 4, 6, and 11, 2011. laintiffs' counsel cancelled the depositions, stating “the depositions in this matter, scheduled for January 4, January 6 and January 11, 2011, will not be moving forward[,]” offering as an explanation for the cancellation that the bankruptcy court had granted plaintiffs' motion to reopen the bankruptcy proceedings.   The next day, plaintiffs filed a complaint for non-dischargeability of debt, asserting the same claims against defendants and Moeller as had been asserted against them in the Law Division.

On January 19, 2011, plaintiffs notified the Law Division of the reopened bankruptcy proceedings, stating that “in light of the U.S. Bankruptcy Court action, the Law Division matter should be dismissed by [the][c]ourt, thus allowing the Bankruptcy action to continue as the sole legal action.”   Defendants responded on January 20, 2011, assuring the Law Division that it had jurisdiction but urging that “to the extent the [c]ourt would grant ․ [p]laintiffs' request for a voluntary dismissal, ․ it is respectfully requested that the [c]ourt award ․ [d]efendants their reasonable counsel fees expended in this matter to date as these efforts would need to be duplicated in federal court.”

he parties appeared before the court for oral argument seeking voluntary dismissal of their complaint without prejudice.   The court advised plaintiffs that if they wanted a voluntary dismissal, “ will have to pay defendants' counsel fees.   If not, I'll proceed with counsel's motion for ummary .” At the request of plaintiffs' counsel, the trial court directed defendants to provide a ertification of ervices to help plaintiffs decide how to proceed.   The court then rescheduled the motion.

Defendants provided the ertification of ervices and plaintiffs sought a further two-week adjournment as plaintiffs' counsel was “in the process of reviewing” the ertification of ervices and had “not had an opportunity to evaluate the extent of said ertification with client[.]”  The trial court granted this request and, when plaintiffs sought yet another adjournment, claiming a deficiency in the Certification of Services, the trial court granted an additional two-week adjournment.

Immediately after seeking this adjournment and four days before the discovery deadline, plaintiffs filed a cross-motion for leave to file an amended complaint and to extend discovery “to allow the arties sufficient time to reconcile the jurisdictional issues that have arisen in connection with the Terrence Moeller Bankruptcy Adversary Action and avoid needless and costly duplicative litigation.”   Plaintiffs also requested that the uperior ourt proceedings be “placed on the inactive trial list” to allow the bankruptcy proceeding to proceed without limitation.   Defendants filed opposition on March 14, 2011.

On March 18, 2011, the trial court heard oral argument on the pending motions.   The court a plaintiffs' request for a more specific bill.   The court echoed defense counsel's contention that “the way [the] firm's computer system is set up, they would expend so many more man hours getting more specifics and would also have questions of privilege and strategy and attorney work product.”   The court concluded that “for the purposes of this motion[,] I let the bill as it presently stands suffice.”   The court also noted the bill could be subject to reduction, once the court took a closer look at it.   Again presented with the option of paying defendants' counsel fees, plaintiffs' counsel opted to take the voluntary dismissal and have the court rule on what a reasonable fee would be.

On March 31, 2011, plaintiffs' counsel submitted a upplemental ertification of, noting the hourly rate of the attorneys who worked on the matter and requesting $57,862.77 in counsel fees.   By letter dated April 27, 2011, plaintiffs urged the court not to award fees to defendants in connection with the dismissal and asserted “[i]t is impossible for ․ [p]laintiffs to appreciate the extent of work conducted by ․ [d]efendants as said [d]efendants have refused to provide our office with copies of their invoices—whether redacted or in original form—evidencing the services actually performed.”   On May 16, 2011, the court entered an order dismissing plaintiffs' complaint without prejudice and awarding defendants $29,418.20 for counsel fees as a condition of dismissal.

laintiffs for reconsideration or, in the alternative, a stay of the May 16 counsel fee order, reasserting their position that an award of fees “was unwarranted, especially in the absence of the opportunity by ․ [p]laintiffs to review, and respond, to ․ [d xhibit to their Affidavit of Services.”

The present appeal followed, with the trial submitting an amplification of the record pursuant to 2:5–1(b) on August 17, 2011.   In its amplification, the court reasoned that “considering the length of time this case has been ongoing and the considerable discovery that had been done, it was unfair to force ․ [d]efendant[s] to bear the cost of duplicating much of the aw ivision litigation in the Bankruptcy Court case.”   In reviewing the history of the case, the noted that after three prior adjournments at plaintiffs' request, refused to adjourn the motion again “[a]s Mr. Levin's office had called on motion day to say he was sick on at least one other occasion on the same motion [.]”  The court also noted that had conducted an -camera review of all of defendants' attorneys' invoices “because the invoices set out in great detail exactly what research was done and strategies utilized [and as] the claims were to be litigated again in Bankruptcy Court, it would have been improper to require [d]efendants to reveal the detail in the invoices.”

The court additionally explained that approximately one-half of the fees sought should not be borne by plaintiffs “because the work would not have to be duplicated.”   The court found, however, that

$29,418.20 of the fees were for responding to discovery, pleadings, motions and other litigation expenses that will have to be replicated in the Bankruptcy Court case.   Thus, this [c]ourt found it was appropriate to condition a dismissal without prejudice on the payment of those fees that must be duplicated, which is supported by Mack Auto,.

On appeal, plaintiffs raise the following points for our consideration.

POINT I

THE TRIAL COURT'S AWARD OF COUNSEL FEES WAS ARBITRARY AND CAPRICIOUS AND WARRANTS REVERSAL BY THIS COURT.

POINT II

THE TRIAL COURT'S FAILURE TO ARTICULATE A BASIS FOR THE AWARD OF FEES AND FAILURE TO PERMIT APPELLANTS TO REVIEW AND RESPOND [TO] RESPONDENT[S'] CERTIFICATION OF SERVICES IS REVERSIBLE ERROR.

POINT III

THE TRIAL COURT'S AMPLIFICATION OF THE RECORD IS EXTREMELY PREJUDICIAL TO APPELLANTS AND SHOULD BE DISREGARDED.

The standard for setting aside a trial court's award of counsel fees requires that we find a clear abuse of discretion.  Litton Indus., Inc. v. IMO Indus., 200 N.J. 372, 386 (2009) (citations omitted).   Based upon our review of the record we discern no such abuse of discretion in the decision to award counsel fees but remand for further proceedings as to the reasonable amount of fees to be awarded.

.

After a defendant has a responsive pleading, a plaintiff may voluntarily dismiss an action “only by leave of court and upon such terms and conditions as the court deems appropriate.” . 4:37–1(b).  Although not expressly stated in the rule, such “terms and conditions” have been construed to include reimbursement of defendant's expenses, including counsel fees.  Mack Auto,, 244 N.J.Super. 260;  Shulas v. Estabrook, 385 N.J.Super. 91, 104 (App.Div.2006).

“Whether to dismiss with or without prejudice, whether to impose terms, and the crafting of terms that are fair and just in the circumstances, are all matters that lie within the court's sound discretion.”,, 385 N.J.Super. at 97.  “[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion.”   Packard–Bamberger & Co. v. Collier, 167 N.J. 427, (2001).   As we have previously stated:

A motion based on R. 4:37–1(b) involves three sequential inquiries:  (a) whether the matter should be dismissed without prejudice, (b) if so, whether terms should be imposed, and (c) if so, what terms will alleviate any prejudice to the defendant and prevent injury to the efficient administration of justice generated by the ensuing delay and duplication of effort.

,, 385 N.J.Super. at 98.]

Once court decides to dismiss action without prejudice, the court must then decide what, if any, terms should be imposed.  Ibid. The terms and conditions which the court may impose “are for the protection of the rights of the defendant.”   Home Owners Loan Corp. v. Huffman, 134 .2d 314, 317 (8th Cir.1943)

Thus, failure to submit a Certification of Services that afforded plaintiffs' counsel a meaningful opportunity to respond, together with the absence of specific findings from the trial court explaining the reasons for the particular counsel fee awarded, requires a remand.

III.

Finally, plaintiffs take exception to the trial court's reference to their attorney's requests for adjournments “as a basis for determining that an award of fees was warranted.”   Plaintiffs argue counsel's legitimate request for an adjournment should never be a basis for an award of counsel fees and to insert this into the record by way of amplification does nothing more than prejudice plaintiffs.   Defendants assert plaintiffs' attack on the trial court's amplification of reasons is without basis.

Under 2:5–1(b), a trial court may file and mail to the parties an amplification of a prior statement, opinion or memorandum.   The amplification clearly and unambiguously explains that fees were imposed because the court found it unfair that defendants bear the cost of duplicating much of the aw ivision case in the bankruptcy proceeding.   Plaintiffs' claim otherwise is without merit.

Affirmed as to the decision to award counsel fees, as to the amount of counsel fees, and remand for further proceedings consistent with this opinion.   We do not retain jurisdiction.

 ⁴

FOOTNOTES

FN4. In their March 31 certification, plaintiffs requested $57,862.77.   It is unclear where the court got this figure from..  FN4. In their March 31 certification, plaintiffs requested $57,862.77.   It is unclear where the court got this figure from.

PER CURIAM