Mount Laurel Township, Plaintiff-Intervenor, v. HOVNANIAN SONS LLC (2006)

This decision represents the court's findings following the fairness hearing held on February 6, 2006, for the approval of the settlement of the above class action.

In addition to consideration of whether the class action settlement is fair, reasonable and adequate, the award of counsel fees and expenses is also at issue.

BACKGROUND

Plaintiffs' complaint in the Chancery Division primarily sought equitable relief to require the defendant builder to inspect the homes of the Holiday Village East Development in Mount Laurel Township, New Jersey, constructed after November 30, 1992, and which contain natural gas-powered furnaces, hot water heaters and clothes dryers located in the utility room of each home.

These inspections were allegedly required because of the allegation that defendant violated the New Jersey Uniform Construction Code. Plaintiffs contend there was insufficient air combustion airflow in the utility rooms.¹ All of the allegations have been denied by the defendants and have been vigorously opposed.

Plaintiffs sought a court determination that if an inspection found such violations, that defendant be ordered to make the necessary correction to the defects found. Plaintiffs also initially sought damages under various legal theories, but by the commencement of the trial those damage claims had been abandoned.

In the complaint, the plaintiffs recited numerous legal theories for liability, including implied warranty of habitability, implied covenant of construction in a workmanlike manner, negligence, strict liability as a mass builder and violations of the Consumer Fraud Act under N.J.S.A. 56:8-1, 56:8-166. At the fairness hearing and in their briefs, plaintiffs relied only upon the Consumer Fraud Act for the fee-shifting authority.

On August 1, 2003, Judge Bookbinder granted class certification to the owners of homes constructed by defendant in the Holiday East Development in Mount Laurel Township.

On February 6, 2004, Judge Bookbinder further permitted Mount Laurel Township to intervene as a party plaintiff and granted leave for the Township to file its own complaint, which it promptly did.

It appears that the purpose of Mt. Laurel's intervention was to protect its rights in the event the court entered equitable relief that directly or indirectly required the use of Township resources. They essentially “piggy backed” on plaintiffs' claim and sought no independent relief. The Township seeks no counsel fees or expenses.

On December 17, 2004, the court in a written decision denied defendant's motion to transfer the matter to the Law Division and to dismiss Mount Laurel's complaint. The Township's public nuisance cause of action was dismissed. In the same decision, plaintiffs' motion for partial summary judgment was denied.

Trial commenced on April 18, 2005, and proceeded on April 19 and 20, 2005. On June 29, 2005, the parties entered into a Stipulation of Settlement. Pursuant to the Stipulation of Settlement, on August 31, 2005, the court entered an Order of preliminary approval authorizing that a notice of settlement be sent to each class member and setting the date for the fairness hearing.

As evidenced by the certification of mailings filed with the court and representation of counsel at oral argument, the court is satisfied the Order has been complied with and that proper notice consistent with due process has been afforded the class members. This initial notice provided for a fairness hearing on December 2, 2005, at 1:30 p.m.

On December 2, 2005, the court conducted a fairness hearing and considered the argument of counsel related to the award of counsel fees. Other than the named plaintiff Harry Schmoll, no general members of the class appeared. Defendant's counsel represented that they received no written objections from any class members and only received a few phone calls from individuals seeking information. Likewise, the court announced that it had received no written objections. All of the parties urged the Court to grant final approval of the settlement.

By letter of December 6, 2005, the court was notified by defendant's counsel that it appeared that the public notice of the settlement that was submitted at the December 5, 2005, fairness hearing contained a significant error, in that the notice provided a requirement to supply a carbon monoxide detector to class members. This was not a term that had been agreed to under the Stipulation of Settlement previously entered into and preliminarily approved by the court. By letter of December 7, 2005, plaintiffs' counsel agreed that the class notice was in error and that it had been published in the Burlington County Times² on November 3, 2005. On that same day, the court directed that all counsel appear on December 12, 2005, to resolve the issue.

On December 12, 2005, on the record the matter was discussed fully as to the process for going forward. The Court determined that even though it appeared that the correct notice was mailed to the class home owners, the fact that the public notice that was published in the newspaper was erroneous could lead to confusion among the class members and could adversely affect their decision-making as to whether to participate in the inspection process. The court, therefore, ordered that the class be re-noticed, and that the correct notice be republished, and that the court conduct a second fairness hearing on February 6, 2006.

By certification of Stephen DeNittis, Esq., dated January 9, 2006, Mr. DeNittis certifies that the revised notice was mailed to the class homeowners. The notice was also published in The Central Record, a weekly newspaper, which circulates in Mt. Laurel Township.

On February 6, 2006, counsel for the parties appeared for the fairness hearing. No clients or members of the public attended. As the court had no further questions, counsel agreed to rely on their oral arguments they made before the court at the first hearing on December 6, 2005.

THE SETTLEMENT

As in all cases, our courts have long subscribed to policy that encouraged the settlement of lawsuits between the parties, inclusive of class action proceedings. Chattin v. Cape May Greene Inc., 216 N.J.Super. 618, 626, 524 A.2d 841 (App.Div.), certif. denied, 107 N.J. 148, 526 A.2d 209 (1987) (citing Jannarone v. W.T. Co., 65 N.J.Super. 472, 168 A.2d 72 (App.Div.), certif. denied, 35 N.J. 61, 171 A.2d 147 (1961)). However, in class actions, settlements receive a scrutiny not otherwise provided to non-class action settlements before they become enforceable. Our court rules require notice of a proposed settlement of a class action to be given to the members of the class and the court must approve the settlement. R. 4:32-4. While individual parties to non-class actions are in a position to agree to the terms of a settlement, individuals of a class are generally not in that position; thus it becomes the responsibility of the court to determine if the class action settlement is fair and reasonable to the members of the class. Chattin, supra, 216 N.J.Super. at 627, 524 A.2d 841.

Both the plaintiffs' counsel and defendant's counsel argue in favor of the approval of the settlement. There have been no written objections by class members after notice of the settlement. While no class members appeared at the hearing, nonetheless the court is obligated to independently consider the settlement as a substitute for the consents of the individual class members. Of course the fact that there is no opposition is a fact for consideration as well.

The standards for approval of class actions that have been developed in the federal courts have been followed by our state courts and generally involve nine factors for consideration. Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283, 317 (3d Cir.1998). They are listed below with the Court's comment:

1. The complexity, expense and likely duration of the litigation;

As will be further discussed, the court is not of the belief that this case was complex. It involved neither novel issues of law nor a complex fact pattern. The case was vigorously defended, which added to the burden of class counsel. The settlement had the effect of terminating an ongoing trial and its continued inherent expense.

2. The reactions of the class to the settlement;

The class posed no objections or requests for exclusion, which permits the inference of satisfaction with the proposed settlement.

3. The state of the proceeding and the amount of the discovery completed;

The trial had commenced before the settlement occurred.

4. The risk of establishing liability;

As will be further discussed, the risk of establishing liability based upon whether there were construction code violations was fairly low.

5. The risks of establishing damages;

This factor as it relates to damages is not so relevant as the relief sought was equitable. However, as to equitable relief, the risk was moderate, but on the low side of the moderate range.

6. The risks of maintaining the class action through the trial;

The risk of maintaining the class was not high. There have been no efforts by defendant to move to de-certify the class once the class was certified. There appears to be no basis in any event.

7. The ability of defendant to withstand a greater judgment;

Since the class is not seeking a money judgment, this factor is largely irrelevant. It is not disputed that defendant is a significant builder in the housing industry and could certainly withstand a greater judgment in terms of damages or equitable remedy.

8. The risk of reasonableness of the settlement fund in light of the best possible recovery;

9. The risk of reasonableness of the settlement in light of all the attendant risks of litigation.

Perhaps Factors 8 and 9 are the most helpful in evaluating the settlement. The court is satisfied that the settlement is reasonable in light of the best recovery possible. The fact of the matter is that the settlement provides the class with essentially the entire relief that they sought when the suit was commenced. The settlement provides the opportunity for the class members to voluntarily have their utility rooms inspected, and if there are violations, to have the defendant builder make the corrections at its cost. As indicated above, counsel for both parties are in agreement that the settlement is reasonable and in the interests of their clients.

These factors must be considered in light of the fact that plaintiff only seeks equitable relief as there is no fund in court. Also, in considering the settlement as to fairness, the analysis does not turn on the merits of the case. Eichenholtz v. Brennan, 52 F.3d 478 (3d Cir.1995). Because it is a case for equitable relief rather than money damages, certain of these factors may have less bearing and others more importance.

After reviewing the settlement in light of the above factors, including reviewing the agreement itself and its related documents, and after considering the comments of counsel and their respective written submissions, the court can find no reason that suggests that this settlement should not be approved. The Court concludes and finds that the settlement is fair and reasonable in every respect.

COUNSEL FEES:

Plaintiffs' counsel seeks fees and cost in the amount of $417,510.12. Defendant's objections fall into two categories. First, that the court's determination of reasonable counsel fees should be deferred until it is determined how many of the class members actually participate in the settlement and as to those that do participate, how many of those class members' homes actually have air-combustion violations in their respective utility rooms. Defendant envisions the ability to potentially argue that in fact plaintiffs are not the prevailing party under the settlement and thus are not entitled to any award of fees.

Secondly, defendants object to the amount of the fees in the application as not being reasonable and in compliance with applicable case law.

The Timing Issue:

The applicable terms of the Stipulation of Settlement executed by the parties (emphasis added) provide:

3. The amount of attorney fees, if any to be paid by Hovnanian shall be determined by the Court, unless the parties can resolve the amount amicably. If the matter cannot be resolved, Class counsel shall submit their fee petition at least twenty-one days prior to the scheduled date of the fairness hearing and Hovnanian shall file their objections ten days thereafter. It is acknowledged and agreed that Mount Laurel is not seeking reimbursement of attorney's fees as a result of the lawsuit or of this settlement. The Court will either hear argument concerning fees at the fairness hearing, or, at its option, may schedule a separate hearing regarding same after acknowledging plaintiffs' Class counsels' request and Hovnanian's objections at the fairness hearing. It is acknowledged that Hovnanian intends to take the position that the fee argument should take place after the inspection results are received. The parties agree to abide by the Court's decision in this regard, and shall be allowed to supplement their respective positions subsequent to the fairness hearing, in the event the Court accepts Hovnanian position. The Court may consider all relevant evidence including testimony adduced to date, and may allow for a plenary hearing, as it deems necessary in making its fee determination.

While defendant urges the court to now exercise the deferral option, plaintiffs strenuously oppose such deferral. The court is bound to follow the same legal basis for determining counsel fees whether or not the issue is deferred. Plaintiffs' position is that the settlement concludes the active litigation and provides the full measure of the equitable relief they sought against defendant and that the award of attorney fees should not be based upon the proportionality of the monetary value of the settlement. Defendant, on the other hand, argues that they expect that the majority if not all of the participating class members' homes will be found to be compliant with the regulatory scheme of the Department of Community Affairs' “engineered approach to air combustion.”³ It asserts, even if there was a de minimis violation of the venting provisions of the Department's administrative building codes in place when the class member homes were constructed, that the end result will show that defendant is not liable or, in the alternative, that the violations were minimal, requiring only minimal alterations to the utility rooms, if any. This argument is the same defense defendant raised during the entire litigation, including during the trial. Defendant also argues that the court must take into consideration the results of the inspections to be made and factor into its fee determination the extent to which the class members' homes actually need repairs and the attendant cost.

Plaintiffs invoke R. 4:42, which they assert prohibits the entry of a delayed order for attorneys' fees and “requires that any fee award be made prior to the entry of an order for final judgment.” They argue that the primary relief they sought was equitable and it is this relief which they received under the Stipulation of Settlement. As such they, therefore, have prevailed and are entitled to fee shifting under the Consumer Fraud Act. They further argue that the monetary value of their repairs resulting from the equitable relief is not the measure for determining the counsel fees.

Without question, plaintiffs were seeking equitable relief in the nature of a court order to provide the opportunity to the class members to have their homes inspected, and if a home is found to be in violation of the Department of Community Affairs' building codes as to combustion air in their utility rooms, then to require defendant to make such alterations at its expense. While defendant denied any violations and defended itself vigorously, after trial began, defendant agreed to settle the case and agreed to the following relief as summarized in the corrected Class Action Settlement Notice sent to each class member:

A. All members of the Class shall be given an opportunity to have their utility room inspected by the Mt. Laurel Building Department at no cost to the Class member in order to determine whether their utility room has adequate combustion air as required by the New Jersey Uniform Construction Code.

B. If such an inspection reveals that there is inadequate combustion air, corrective work will be performed in accordance with specification previously approved by the Mt. Laurel Building Department. Hovnanian will be responsible for the cost and performance of such corrective work.

The Stipulation of Settlement itself provides that the litigation is “hereby fully and finally settled, subject to the approval of the Court․”

What defendant now argues in support of deferring the attorney fees issue is that plaintiffs at best accomplished limited success and that waiting until all the inspections are complete will prove that there were very few or no violations and thus little if any liability. As will be discussed, while the question of limited success is a factor in whether to decrease a lodestar, it lends no support as to whether the fee issue should be deferred. If defendant wished to test its defenses that it had limited or no liability, it had the option to continue the trial to the end and receive a court ruling on the merits. Instead they chose to end the litigation and agreed to settle the merits of the dispute. The analysis required by the Supreme Court in Rendine v. Pantzer, 141 N.J. 292, 661 A.2d 1202 (1995), will be just as applicable in the future as it is today. What defendants are proposing would most likely lead to a plenary hearing on the attorney fees issue. In fact the Stipulation of Settlement contemplates that potential.

Our courts discourage a plenary hearing on the issues of attorney fees. “We hold to the common sense position that a plenary hearing should be conducted only when the certifications of counsel raise material factual disputes that can be resolved solely by the taking of testimony. We expect that such hearings will be a rare, not routine, occurrence.” Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 24, 860 A.2d 435 (2004).

Citing Blum v. Witco Chem. Corp., 829 F.2d 367, 377 (3d Cir.1987), the Court in Furst stated, “We strongly discourage the use of an attorney-fee application as an invitation to become mired in a second round of litigation.”

The law seems clear that counsel fees in fee-shifting cases are not based on the dollar cost or dollar value of the relief obtained. Furst, supra, 182 N.J. at 24, 860 A.2d 435. Szczepanski v. Newcomb Med. Ctr., 141 N.J. 346, 366, 661 A.2d 1232 (1995); Grubbs v. Knoll, 376 N.J.Super. 420, 432, 870 A.2d 713 (App.Div.2005). That being the case, whether or not the class members take advantage of the equitable relief granted them, and whether or not the costs to remedy any of the defects uncovered are minimal, would have no bearing on whether or not plaintiffs are entitled to fees under fee shifting. Therefore, postponing the attorney fee issue to some undefined date in the future would serve no positive purpose and would unjustifiably delay the attorney fee determination to which plaintiffs' attorneys are entitled. Likewise, such an indeterminate wait for the local housing code official to complete the inspection process would further exacerbate the strictures of R. 4:42.

While the parties provided in their agreement an “option” for the court to delay the fee determination, such an option cannot bind the court. Clearly the intent for such a provision was to facilitate a settlement, while preserving to the time of the fair hearing the parties' opportunity to brief and argue to the court their respective positions on the issue.

The court declines to exercise the “option” and will not defer the attorney fee issue.

3

Plaintiffs' attorneys have submitted a joint petition for attorney fees and costs, which include certifications, memorandums and various exhibits supporting the application. The joint application is by the Law Firm of Philip Stephen Fuoco, and from the Law Offices of Shabel & DeNittis, P.C. These attorney certifications contain information regarding attorney hourly rates, background of counsel, and a description of the legal effort on behalf of plaintiffs, with each entry displaying the attorney who provided the service, the date of the service, the time in hours and tenths and a description of the service. At the conclusion is a summary of the total hours for each attorney, with a total raw fee before any adjustment or enhancements. These certifications contain an itemized statement of costs expended by the firms in furtherance of their case.

The Shabel firm's certification, signed by both Mr. Shabel and Mr. DeNittis, delineates in accordance with the Rules the class action experience for both Mr. Shabel and Mr. DeNittis with varying hourly rates approved by other courts. In this case, Mr. Shabel charges $395 per hour and Mr. DeNittis charges $250 per hour. These rates are consistent with the rates charged in many previous cases that these attorneys have litigated and which are detailed in their certification. The fees they have charged historically have been approved in the Superior Court in Burlington and Camden Counties. The court is satisfied that the rates are within the range of rates charged within the community of Burlington and Camden County where these lawyers practice. The Shabel Firm seeks $234,825.00 in raw fees, and $23,093.09 in costs.

Joseph A. Osefchen, Esq., executed the certification for the Fuoco firm. The certification provides the background of the attorneys who worked on the case, with a summary of hours worked and hourly rates and costs expended. Attached to the certification is a billing statement showing the services by category and within each category, the date, the attorney who provided the service, the time expended and a one-line abbreviated description of the service.⁴ Also included is the same type of information for paralegal services. The total value of the fee the Fuoco firm seeks is $84,390.25 in raw fees plus $381.00 in costs, as set forth in the certification.

As in the Shabel firm certification, the Fuoco firm certification also provided the experience and hourly rates, $495 for Mr. Fuoco and $300 for Mr. Osefchen. Also included are the certifications of three practitioners who certify to the “range” of prevailing market rates for comparable services involving complex class action fee shifting in this legal community.⁵

All of plaintiffs' counsel demonstrate significant legal experience, although they cite other class action cases in which they participated without providing information sufficient for a meaningful comparison with the present case.

Before any adjustments the two firms combined have set the proposed lodestar at $321,601.00, exclusive of $23,474.09 of out-of-pocket costs.

Plaintiffs' counsel have voluntarily reduced their proposed lodestar by an initial ten percent “across the board” or $32,160.17. They further reduced the lodestar by $7,015.00 for time expended when more than two plaintiffs' attorneys participated at a hearing; they are charging only for the two lowest billing rates.⁶ Finally, they have reduced the lodestar further, deleting any billings for paralegal services, thereby reducing the un-enhanced lodestar to $278,340.08. Plaintiffs' counsel seeks a fifty percent enhancement of this amount, for a total fee of $417,510.12

Defendant, Hovnanian, after challenging the right to counsel fees, challenges the amount of fees themselves. They argue that the fees are unreasonable because the service time of 1,085 hours was “excessive and redundant,” that the hourly rates are unreasonable and not in line with the Rules of Professional Conduct (“RPC”), and that the fees should not be enhanced.

3

In determining any application for counsel fees, the court must first analyze such a request in light of RPC 1.5(a), which sets forth the factors the Court must consider; secondly, R. 4:42-9(b), which sets forth the mechanism for the application; thirdly, the applicable fee-authorizing statute, which in this case is N.J.S.A. 56:8-19, the Consumer Fraud Act, which sets forth the authority. These items must not be analyzed independently of one another, but rather in conjunction with one another in order for the court to come to the appropriate conclusion.

Initially, the joint fee application is in substantial compliance with R. 4:42-9(b), in that the appropriate certifications have been filed, which address the applicable factors under RPC 1.5(a).

The factors with the court's comment are set forth below:

RPC 1.5. Fees

(a) A lawyer's fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

Plaintiffs' counsel in their pleadings and arguments have consistently classified this law suit as “complex,” which in part provides support for extensive fees. The court is not persuaded that this case raised novel or unique legal issues or factual issues such as to classify the matter as complex. Certainly, because it is a class action, the legal mechanics were more extensive, but not so much that the matter requires the platoon of four highly skilled and experienced class action lawyers from two different firms.

Factually, this case involved whether the combustion air in utility rooms of a class of a few hundred homes met the standard of the New Jersey building code. It was argued by defendant that if such a defect existed at all, it was a de minimis variation from the standard. The potential problem was first discovered when homeowners were having repairs in the utility rooms and the issue arose on inspection by the Township inspector.

While the initial complaint of plaintiffs listed numerous causes of action, by the time of trial they had abandoned all of the causes, except for a violation of the Consumer Fraud Act. Plaintiffs abandoned their claim for damages and were seeking an equitable remedy by way of court-ordered remedy to such members of the class who had a violation and wanted it fixed. The Township code official has not sought a mandatory fix.

This case involved basic statutory and administrative code interpretation and determination of violations that are not novel or complex to determine. An inspection of the utility room in a participating home will quickly and definitively determine any violation.⁷ The fact that the parties retained expert witnesses is certainly not unusual in a construction defect case.

This case has not raised any novel or complex theories of law. In the court's opinion, the need for plaintiffs to involve two law firms was excessive. There is nothing in the certifications that suggest that one firm or the other needed the expertise of the other to conduct this case. None of the certifications suggest specifically or generally that this case raised such complex or novel issues that one firm needed professional help from the other. In fact, the wide-ranging experience of all the lawyers demonstrates that either of these firms would be independently capable of representing this class well in what involved a fairly uncomplicated fact pattern. The reality is that these two firms divided the representation among themselves, resulting in not only duplication of services, such as review of documents and conferences among themselves, but also of services that were not efficiently provided because of the natural accrual of time and overhead between independent organizations.

(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

Plaintiffs' counsel failed to address this factor. The inference is that the complexity and nature of this case undertaking did not prevent either firm from representing other clients.

(3) The fee customarily charged in the locality for similar legal services;

As discussed above, the court is satisfied that the hourly rates charged by the Shabel firm are in line with rates for similar services within the community in Burlington and Camden Counties. However, the rates of the Fuoco firm, and particularly the rate of Mr. Fuoco, for a case of this type is excessive. In the certification it is pointed out that Mr. Fuoco has participated in over 100 class actions involving ERISA, civil rights, consumer fraud and other causes of action. The highest rate he has had approved is $420. Here he seeks a rate of $495 without explanation as to what makes this case more complex than the example cases he has listed.⁸ Clearly, with expertise should come efficiency. His firm performed only 255.65 hours out of the total of 1085 hours expended by both firms together. The supporting certifications of independent counsel state that $420 is in the range of rates for the community. Because of the lack of factual or legal complexity, the court finds that $420 is reasonably in the range for a case of this nature in the Burlington and Camden County community. The burden here is on counsel to demonstrate his fees follow the well-established standards.

(4) The amount involved and the results obtained;

The court is of the opinion that the results obtained by plaintiffs are significant. Plaintiffs have secured the opportunity to have the utility room in their homes inspected and a determination made as to whether it is in violation of the air combustion standard to which the parties and the Township have agreed. If there is a violation, defendant will make the necessary improvements at its expense. While the evidence at trial and in the pleadings is unsettled as to the exact expense, it has been suggested at various times by the parties that the cost could range from a few dollars to several hundred dollars per home.

(5) The time limitations imposed by the client or by the circumstances;

The certifications do not address that there were any time limitations imposed by the client or circumstances.

(6) The nature and length of the professional relationship with the client;

The certifications do not address this factor.

(7) The experience, reputation, and ability of the lawyer or lawyers performing the services;

The experience and skill of the lawyers was addressed in the certifications and has been heretofore discussed above.

(8) Whether the fee is fixed or contingent;

While counsel did not include a copy of the contingent fee agreement to the fee application, they have certified that they have taken the case based solely upon a contingent fee arrangement, at no cost or risk to the class. Fees and costs are only recoverable from defendant, to the extent the court permits.

3

The court also must satisfy itself that there is legal authority to shift the fees. Here plaintiffs' rely upon N.J.S.A. 56:8-19 of the Consumer Fraud Act. This provision (emphasis added) provides:

Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefore in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. In all actions under this section, including those brought by the Attorney General, the court shall also award reasonable attorneys' fees, filing fees and reasonable costs of suit.

The primary relief sought and received by plaintiffs through this litigation, which concluded in a settlement, was equitable in nature. In fact plaintiffs abandoned any claim for damages that was originally part of their initial pleadings. Defendant entered the settlement without admission that it violated the Consumer Fraud Act. The question to be resolved is whether there can be fee shifting under the Consumer Fraud Act when the parties agree to an equitable solution, and when there is no court-determined or admitted violation of the Consumer Fraud Act. The answer must be in the affirmative. The words of the Consumer Fraud Act quoted above show the Legislature contemplated not only a private cause of action for monetary damages, but actions for equitable relief. The statute provides for the award of reasonable attorneys' fees in all actions under this section. N.J.S.A. 56:8-19. In Consumer Fraud actions, fee shifting applies in favor of the prevailing party when equitable remedies are achieved even if no monetary damages are awarded or agreed to in the case of a settled case. See New Jerseyans for a Death Penalty Moratorium v. New Jersey Dep't. of Corrs., 185 N.J. 137, 883 A.2d 329 (2005) (where fee shifting was permitted in a non-damage case, under the Open Public Records Act).

Defendant, though, argues in its brief and oral argument and insists that since it has not admitted liability under the act and the individual inspections have not yet been completed, that fee-shifting cannot apply. In other words, defendant maintains that in this settlement the plaintiffs are not the prevailing party for counsel fee purposes.

Clearly, the success of plaintiffs in this settlement demonstrates that they have prevailed. As stated in H.I.P. v. K. Hovnanian at Mahwah VI, Inc., 291 N.J.Super. 144, 154, 676 A.2d 1166 (Law Div.1996), “Fundamentally, a prevailing party is one who achieves a substantial portion of the relief it sought.” As in the instant case, the plaintiff there “achieved via settlement and consent order qualitatively and as a matter of principle, a large portion of what it hoped for by way of judgment.” Id.; see also, Ashley v. Atl. Richfield Co., 794 F.2d 128, 131 (3d Cir.1986); Warrington v. Village Supermarket, Inc., 328 N.J.Super. 410, 417-19, 746 A.2d 61 (App.Div.2000).

The landmark case in New Jersey on this subject is Rendine v. Pantzer, 141 N.J. 292, 661 A.2d 1202 (1995). The analysis first requires the court to determine the lodestar fee by ascertaining the number of hours reasonably expended multiplied by a reasonable hourly rate. In the instant case both of plaintiffs' law firms together expended 1,085.60 hours of lawyer time. As previously stated, the use of two law firms to handle a case where there were no novel legal issues or complex factual or scientific issues was inappropriate.⁹ While plaintiffs have prevailed substantially, in obtaining the right to have the class members' homes inspected on a voluntary basis, it is still far from clear what this legal exercise will practically accomplish, as there is no evidence yet as to how many homes will participate in the settlement, and of those who do participate how many violations may be found.

Undoubtedly, plaintiffs' attorneys also believe that their billings are excessive. While they gave no reason, they arbitrarily decided to reduce the application by ten percent across the board.

The court has examined the billing certifications submitted, entry-by-entry. The Shabel firm's billings are chronological and generally detailed. The Fuoco firm's billings are broken down by task and provide less detail. In either case, it is clear that significant time was spent in duplicative effort and consulting between the lawyers. For example, on October 16, 2002, Mr. DeNittis made an entry for a site inspection of two homes; he took photos and measurements and spoke to the parties, and the time billed for that task is 6.7 hours. Thereafter, there is an entry by Mr. Shabel for the same date that says, “site inspection w/ Steve DeNittis” for another 6.7 hours.¹⁰ This represents a joint charge of $4321.50 for going to two homes and looking at their utility rooms. The billings are replete with services that both these attorneys partnered, but which were unnecessary given the nature of this case.

Throughout the billings are charges for conferences between Mr. Shabel and Mr. DeNittis. For example, on November 19, 2002, they each charged 1.2 hours for a conference to discuss prior phone calls and again on November 21, 2002, they each charged 1.1 hours for a conference between themselves. These entries do not disclose what the conferences were about and are examples of the significant intra-office communication, which is not justified. On March 11, 2004, each of the attorneys charged 0.75 hours for reviewing the same fax from the Township solicitor. On March 20, 2005, and March 21, 2005, Mr. DeNittis spent 16 hours reviewing the “entire file.” On March 22, 2005, Mr. Shabel spent 4 hours reviewing a draft witness list, an exhibit list and “important documents.”

On March 23, 2005, Mr. DeNittis spent 6 hours on research and drafting on a motion in limine regarding Carl Walter. On March 24, 2005, 8.2 hours were spent drafting the Carl Walter motion and research on Vinciguerra report. On March 25, 2005, there was a charge for 6.2 hours for a draft of a motion in limine for Vinciguerra report. On March 26, 2005, 3.2 hours for research on whether the case is a jury trial or bench trial was billed, and on the same day another 8 hours to draft a third motion in limine. On March 28, 2004, there was a charge of 0.3 hours to “circulate” the motions to the other three attorneys. On the same day, March 28, Mr. Shabel charged 6 hours to review the motions. Also on March 28 Mr. Shabel charged 2.5 hours to have a conference with Mr. DeNittis, who also charged 2.5 hours for the same conference. Again, no detail is given of the purpose of such meeting. As well, the Fuoco firm also reviewed these motions.

On the next day, March 29, Mr. DeNittis charged 1 hour for a conference with Mr. Shabel and Mr. Shabel charged an hour for the same conference.¹¹ On March 30, 2005, the two attorneys each billed 1.5 hours for meeting with each other, with little detail. On April 1, 2005, Mr. DeNittis charged for 4 hours to “Review defendant's responses to Requests for Admissions, all of defendant's discovery requests.” Likewise Mr. Shabel charged on the same day 3.5 hours for the exact same service. These are only illustrations of the types of entries that demonstrate to the court the inefficiencies and unjustifiable expenditure of time that runs throughout the Shabel firm billings. A review of these billings show no attempt to manage the time spent in any efficient manner.

Likewise, many of the billings for extensive communication between the two law firms appear unnecessary, as will be discussed.

As to the time expended by the Shabel firm, the court after a careful review of the time entries concludes that Mr. Shabel's time should be reduced from 177.50 hours to 100 hours and Mr. DeNittis' time should be reduced from 652.45 hours to 400 hours.

The Fuoco billings are set up by task. There are numerous tasks such as conference, conference with co-counsel, research, review, telephone, brief writing, and brief writing: class actions issues, among others. It is clear that this firm had relatively little interaction with the client class. Undoubtedly, the firm provided important and valuable services in the research and brief writing areas, but extensive conferences, telephone conferences and review of other lawyers' work appears out of line, certainly not completely necessary for a case of this nature. Of the 38.95 hours that Mr. Fuoco spent on this case, 7.85 hours was for reviewing documents that in many cases were prepared by one of the other lawyers or reviewed by other lawyers. It should be noted that the description of the various reviews is not informative. The entry merely states “review motions and briefs,” or “review class issues,” or “review discovery issues.” Such a description makes it difficult if not impossible to cross check the entry.

Like Mr. DeNittis, in the Shabel firm, Mr. Osefchen provided the majority of the services for his firm. While his services appear to be mostly in the area of research and brief preparation, under the task of “Conference” there are nearly 15 hours of entries showing conferences and telephone calls with the Shabel firm, with only a few exceptions. The entries provide little explanation. In addition, there is a task called “Conference co-counsel” with another 8.75 hours of telephone calls and conference with the Shabel firm, again with little explanation. Scattered throughout the billings there are further conferences with the Shabel firm and a task called “Strategy and Analysis,” which also contains more conferences with the Shabel firm. The court does not question the fact that the two firms needed to communicate, but the nature of this case and the relief that was being sought did not justify the need for two firms with two separate overheads, to conduct such extensive inter- and intra-firm communication.

After carefully considering the time entries of the Fuoco firm, the court is reducing the hours expended by Mr. Fuoco from 38.95 hours to 25 hours and the time expended by Mr. Osefchen from 216.70 to 150 hours. The time reductions for these firms represent, in the court's opinion, a more appropriate expenditure of time in a case of this nature.

As indicated heretofore, clearly counsel jointly also recognized that their bill for services is too high, as they reduced their proposed lodestar voluntarily by ten percent.¹² They also further reduced the billings for joint appearances of counsel, when more than two attorneys appeared in court. While the court does not want to place their good faith in the category of “no good deed goes unpunished,” the court believes that the excessive time expenditures warrants a further reduction.

Having reviewed the hourly rates, and the time expended, the court finds, with the appropriate adjustments, the lodestar for this case to be as follows:

The lodestar is therefore $188,550. The Court finds that this sum represents the time reasonably spent by plaintiffs' lawyers multiplied by the hourly rates determined above in this case. The analysis of the time expenditures is not to suggest that there was an intentional effort on the part of counsel to inflate their bills; rather it demonstrates a lack of coordination and efficiency. This may be the result of having two independent firms representing the same client. Plaintiffs' counsel in their application did not seek costs for paralegal services, which they specifically removed.

Defendant argues that the potential violations are de minimis, and should inspections find violations, that the sum of money necessary to fix the violations is minor as compared to the significant fees that plaintiffs' counsel seeks. Our Supreme Court has substantially adopted the rule that fee-shifting statutes do not require proportionality between damage recoveries and counsel fee awards. However, at the same time the Court has stated:

Nevertheless, if the specific circumstances incidental to a counsel-fee application demonstrate that the hours expended, taking into account the damages prospectively recoverable, the interest to be vindicated, and the underlying statutory objectives, exceed those that competent counsel reasonably would have expended to achieve a comparable result a trial court may exercise its discretion to exclude excessive hours from the lodestar calculation.

[Rendine v. Pantzer, supra, 141 N.J. at 336, 661 A.2d 1202.]

Additionally, the Court continued: “Similarly, a trial court should reduce the lodestar fee if the level of success achieved in the litigation is limited as compared to the relief sought.” Id. at 336, 661 A.2d 1202.

On the first point, while this is not a damage award case, and the remedy is equitable, the court in the discussion above has already taken into consideration the nature of this case, its lack of legal and factual complexity, and the homeowners' interests should they choose to avail themselves of the settlement provisions. The conclusion has been a reasonable reduction in both the hours and where appropriate, the hourly rate. The court concludes that the statutory objective of the Consumer Fraud Act has been accomplished, in giving these homeowners the opportunity to correct a potential air combustion violation, which while minor in cost to fix, could have significant impact on property and life if left unaddressed.

With regard to the second point concerning the level of success achieved, the Supreme Court has provided further guidance. The Court has “not established a per se requirement that there be a close relationship between recovery and fees awarded.” New Jerseyans For a Death Penalty Moratorium v. New Jersey Dep't. of Corrs., supra, 185 N.J. at 154, 883 A.2d 329 (citing N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 574, 730 A.2d 843 (1999)).

The consideration of the level of success is to be qualitative and not quantitative. “The fee award should not be reduced simply because the plaintiff failed to prevail on every contention raised in the law suit.” Id. at 154, 883 A.2d 329 (citing Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40, 50 (1983)).

In determining the qualitative success the court should not merely add up the counts of the complaint and determine which counts were successful. Plaintiffs' complaint had many counts and varying theories of recovery, but following discovery and motions for summary judgment, the underlying focus on the Consumer Fraud Act surfaced. Plaintiffs pursued that cause of action up until the parties entered into a settlement following the commencement of trial. The stated goal of this suit was to correct what is perceived to be a potential air-combustion problem in the utility rooms of the class. That goal was initially pursued on several legal and equitable theories.

Ultimately, the goal was successful in that a settlement was reached where plaintiffs have achieved substantially the relief they sought. While defendant insists that plaintiffs have not prevailed in the settlement, such insistence is without support in the record. What became clear in the record as this case unfolded is that on many occasions defendant could have settled the merits of the case on terms similar to the present settlement. Defendant initially chose to proceed with the litigation, which was its right to do. Once trial had begun, defendant could have continued the trial and awaited a decision of the court, which may or may not have supported its position. Instead, defendant capitulated to the relief that plaintiffs sought all along, while not admitting to liability. The fact remains that plaintiffs prevailed in securing the relief to which they felt entitled and for which they brought the lawsuit. In the court's opinion, plaintiff achieved a considerable degree of qualitative success and on this basis the lodestar should not further be reduced on this basis.

Enhancement:

The court has determined the lodestar to be $188,550. Rendine requires a consideration of “whether to increase that[the] fee to reflect the risk of nonpayment in all cases which the attorney's compensation entirely or substantially is contingent on a successful outcome.” Rendine, supra, 141 N.J. at 337, 661 A.2d 1202. In this case it is represented that the attorneys took this case on a complete contingency. That is to say, that their clients would not be expected to pay any counsel fees under any circumstances. Likewise, the clients are not responsible to pay any of the out-of-pocket costs of suit.

In addition, there is no fund in court, and no damages by the time of trial were sought. Plaintiffs only sought equitable relief under the Consumer Fraud Act to provide them with the option to have their respective utility rooms inspected for air combustion violations and to have the defendant builder correct the violation at the builder's expense.

The Court in Rendine, in requiring a risk of non-payment consideration, also permits a trial court, in its discretion, to consider the likelihood of success in the enhancement consideration.

In examining the risk of nonpayment, plaintiffs' counsel had a significant risk. They had agreed with their clients that if the case were unsuccessful, they (the attorneys) would not be paid. While the court would not classify this case as “complex” in its facts or the law to be applied, in any class action there is a significant level of legal activity required. It is not disputed that should the inspections disclose air combustion violations the cost of the fix for an individual utility room will be fairly inexpensive, perhaps a few hundred dollars, or even much less. While proof by a plaintiff of difficulty in hiring an attorney is not a prerequisite to a contingency enhancement, in a case such as this where the relief is equitable in nature and the potential recovery is potentially minimal, it is not beyond reason that the utility room conditions might never be addressed without such a complete contingency arrangement provided by plaintiffs' attorneys, at the risk of receiving no compensation should the case have failed on the merits.

Defendant's counsel argues that plaintiffs' counsel have taken no steps to minimize the risk, but does not suggest what those steps might have been. To the contrary, the settlement that was reached by the parties was in substantial part available to defendant from the beginning of these proceedings. As in Rendine, plaintiffs' counsel's risk actually increased because of defendant's decision to litigate the case to trial, when there were natural points along the way that this same settlement may well have occurred. As early as February 3, 2003, plaintiffs' counsel, in a letter to defendant's counsel, made an offer to settle the litigation on suggested terms that are essentially the same as the resolution the parties entered into, only nearly two-and-a-half years later and after further litigation.

Generally, defendants must not be deterred from defending themselves, but clearly when this case was first filed there was a calculation by defendant not to settle, and a second calculation to settle the matter two-and-a-half years later after the trial began. This strategy is clearly the prerogative of defendant and its counsel, but the effect was to heighten the risk to plaintiffs by way of outlay of additional time and expense.

Likewise, “cases in which the likelihood of success is unusually strong, a court may properly consider the inherent strength of the prevailing party's claim in determining the amount of contingency enhancement.” Rendine, supra, 141 N.J. at 341, 661 A.2d 1202. Plaintiffs faced a risk of non-payment because of the nature of the equitable relief they sought. Nevertheless a court finding that there was a clear code violation, even a de minimis violation, which even defendant conceded, was a likely possibility. Had the trial continued to the end, and the Court found violations, the natural but not necessarily exclusive remedy would have been an Order to the defendant to inspect and fix the violations, which was the essential relief that the parties settled upon. While of course very few if any cases are “air tight,” a review of the facts in this case as presented through certifications, the testimony at trial, and the building code provisions, leads the court to conclude that plaintiffs' likelihood of success was very good. This finding offsets to some degree the risk of the contingent fee arrangement.

Our Supreme Court in Rendine, supra, 141 N.J. at 343, 661 A.2d 1202 states:

We conclude that contingency enhancements in fee shifting cases ordinarily should range between five and fifty percent of the lodestar fee, with the enhancement in typical contingency cases ranging between twenty and thirty five percent of the lodestar.

The nature of this class action case is one of limited public interest, in that it affects a relatively small universe of people who will participate, anywhere from a handful to several hundred. No new legal theory or even extensions of legal principles are involved. This case is a consumer case with a limited but important impact on the homeowners who fall into the class. After considering the risk of nonpayment as set forth above, the court finds that this case falls into a category best described as on the lower end of the moderate range for enhancement. Therefore, the court finds that a twenty percent enhancement of the lodestar is an appropriate enhancement in a fee shifting case of this nature.

The court in summary finds the lodestar to be $188,550. The enhancement shall be twenty percent or $37,700.10 for a total fee of $226,260 plus out-of-pocket expenses of $23,474.09,¹³ for a total judgment of $249,734.09, payable by J.S. Hovnanian and Sons, LLC. Counsel for plaintiffs shall prepare a judgment consistent with this decision.

FOOTNOTES

1.  The term air combustion refers to the amount of air or airflow into and out of an enclosed utility room that contains natural gas-burning appliances such as the home's heater or boiler, or gas clothes dryer. The applicable building codes have set standards to insure there is adequate ventilation to these appliances to prevent incomplete combustion and the buildup of various gases with their inherent dangers to the occupants of the home.

2.  Actually, this reference in the December 7, 2005, letter was in error. Plaintiffs' counsel meant to say the Central Record. In response to a written inquiry by the court, Mr. DeNittis explained in his letter of January 24, 2006, that his earlier letter erroneously said the notice was published in the Burlington County Times, when in fact it was published in The Central Record.

3.  This term refers to a regulatory interpretation approach to analyzing air combustion airflow, approved by the New Jersey Department of Community Affairs as part of the Stipulation of Settlement. This approach appears to provide more flexibility for finding compliance with the applicable construction code.

4.  The quality of the description is not uniform, as will be discussed.

5.  It should be noted that all three certifications are based on hourly rates of $420 for Mr. Fuoco and $257 for Mr. Osefchen.

6.  This adjustment apparently does not consider which of the attorneys provided the services.

7.  Even the potential repairs if a violation is found are not complex-replacing a door or a vent panel, for example.

8.  Mr. Fuoco did not co-sign the certification for this application.

9.  Because the contingent fee agreement was not provided the court, it is unclear as to whether both firms are parties to the agreement.

10.  According to their letterhead, the Shabel firm is located in the adjoining community to the Hovnanian development.

11.  While obviously a mistake, the March 29 entry of Mr. Shabel for the one hour conference with Mr. DeNittis actually states it was a conference with “Norman Shabel.”

12.  There is no explanation as to why they selected ten percent as opposed to a different percentage.

13.  Defendant's counsel posed no objection to these costs and they appear to the Court to be appropriate.

HOGAN, J.S.C.