FRANK K. COOPER REAL ESTATE 1, INC. VS. CENDANT CORPORATION (L-0377-02, MORRIS COUNTY AND STATEWIDE) (CONSOLIDATED) ( 2018 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-1482-16T3
A-1579-16T3
FRANK K. COOPER REAL ESTATE
#1, INC., a Florida corporation, SILM
ENTERPRISES d/b/a CENTURY 21
PROPERTY MART, INC., a Michigan
corporation, CENTRE POINT REAL
ESTATE d/b/a CENTURY 21 CENTRE
POINT, a sole proprietorship, and DAVID
NICHOLS and KIM COMBS, INC. d/b/a
CENTURY 21 SUNLAND REALTY,
an Arizona corporation, on behalf
of themselves and all others similarly
situated, and QUALITY ASSOCIATES
II d/b/a CENTURY 21 PROFESSIONAL
CORPORATION, a New Jersey corporation,
Plaintiffs,
v.
CENDANT CORPORATION f/k/a
HOSPITALITY FRANCHISE SYSTEMS
and CENTURY 21 REAL ESTATE
CORPORATION,
Defendants.
IN THE MATTER OF KEEFE BARTELS,
LLC, n/k/a KEEFE LAW FIRM, and
KOPELOWITZ OSTROW PA,
Appellants,
v.
ZWERLING, SCHACHTER &
ZWERLING, LLP,
Respondents.
IN THE MATTER OF ZWERLING,
SCHACHTER & ZWERLING, LLP,
Appellants,
v.
KEEFE BARTELS, LLC, n/k/a KEEFE LAW
FIRM, and KOPELOWITZ OSTROW PA,
Respondents.
Argued October 23, 2018 - Decided December 6, 2018
Before Judges Yannotti, Rothstadt, and Gilson.
On appeal from Superior Court of New Jersey, Law
Division, Morris County, Docket No. L-0377-02.
Joseph P. LaSala argued the cause for appellants in
A-1482-16 and respondents in A-1579-16 (McElroy,
Deutsch, Mulvaney & Carpenter, LLP, attorneys;
Joseph P. LaSala, on the briefs).
Stephen R. Knox argued the cause for respondents in
A-1482-16 and appellants in A-1579-16 (Bressler,
A-1482-16T3
2
Amery & Ross, PC, attorneys; Stephen R. Knox and
Gerd W. Stabbert, Jr., on the briefs).
PER CURIAM
These two appeals involve a dispute over the apportionment of
approximately $11.3 million in attorneys' fees awarded in connection with a
class action settlement. Three law firms represented the class of plaintiffs and
claim a portion of the fees: Zwerling, Schachter & Zwerling, LLP (ZSZ); Keefe
Bartels, LLC, n/k/a Keefe Law Firm (Keefe); and Kopelowitz Ostrow, PA.
(KO). ZSZ contends that it is entitled to substantially more than one-third of
the fees based on the number of hours it worked and the responsibility it
undertook during the class action. Keefe and KO, in contrast, argue that the
firms agreed to split equally any attorneys' fees, with each firm receiving one-
third of the fee award. To try to resolve the dispute, Keefe and KO made an
offer of judgment, but ZSZ did not accept that offer.
Eventually, the firms agreed to arbitrate the fee dispute. The arbitrator
found that the firms had agreed to split the fee award equally, with each firm
receiving one-third "despite any unequal division of work and responsibility in
the underlying class action." Thus, the arbitrator directed that each of the three
firms "share the attorneys' fee award in equal thirds[.]" The trial court affirmed
the arbitration award. The trial court also denied a motion by Keefe and KO to
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3
award them costs and fees incurred after ZSZ did not accept their offer of
judgment.
ZSZ appeals from orders entered on June 10, 2016 confirming the
arbitration award and denying its motion to vacate the arbitration award. Keefe
and KO appeal from a November 2, 2016 order denying their motion for an
award of fees and costs incurred after their offer of judgment was rejected. In
this consolidated opinion, we affirm all three orders. The arbitrator acted within
the scope of his authority and there is no basis to overturn the arbitration award.
Moreover, the amount of the arbitration award was not sufficient to trigger the
shifting of fees and costs under Rule 4:58, the offer of judgment rule.
I
Counsel began investigating the potential class action in 2000, suit was
filed in 2002, and the class action eventually settled over ten years later in 2012.
Accordingly, some background concerning how the three firms came to
represent the class and how they dealt with each other is relevant to
understanding their fee dispute.
In 2000, a Florida law firm, which ultimately turned over its interests to
KO, began investigating claims against Century 21 Real Estate Corporation
(Century 21) by disgruntled franchisees. The Florida law firm was originally
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Atlas Pearlman, PA. Thereafter, Atlas became Adorno & Yoss, PA. That firm
then dissolved and the attorneys who were working on the class action joined
KO. We refer to these firms collectively as KO.
In 2001, KO entered into an attorney-class representative agreement with
two Century 21 franchisees. KO believed that the class action should be pursued
as a nationwide class action. At that time, however, KO had a limited number
of attorneys and limited experience with class actions. Consequently, KO
reached out to ZSZ, which was a firm with substantial class action experience.
KO and ZSZ decided to file the class action in New Jersey. One of the
lawyers involved explained that the decision was based on a choice-of-law
provision in the franchise agreements. ZSZ and KO then approached McElroy,
Deutsch & Mulvaney, LLP (MDM), a New Jersey law firm, to act as additional
class counsel.
In January 2002, the three firms entered into an attorneys-class
representative agreement with a class representative plaintiff, Frank K. Cooper
Real Estate #1, Inc. Relevant to their roles and potential attorneys' fees, the
agreement provided:
I further understand that [KO], [ZSZ] and [MDM] will
be co-counsel to me in this matter, and that they shall
be apportioning the fees recovered with [KO] receiving
33 1/3 %, [ZSZ] receiving 33 1/3% and [MDM]
A-1482-16T3
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receiving 33 1/3% of any attorneys' fee earned in this
case. I agree to the fee sharing set forth in this
agreement. More specifically that each of the law firms
named herein shall share the fee which is in accordance
with their anticipated division of work and
responsibility in this matter.
On January 30, 2002, the class action lawsuit was filed in the Superior
Court of New Jersey. Thereafter, the three firms entered into two more
attorneys-class representative agreements with additional class plaintiffs. The
second and third agreements were signed on January 30, 2004, and April 5,
2004. Both of those agreements contained the same fee-splitting language as in
the first agreement. Moreover, all three agreements provided that if any attorney
withdrew as counsel, that attorney would be entitled to compensation at his or
her standard hourly rate in effect when the agreement was signed, provided there
was a recovery against the defendants in the class action.
In 2004, MDM withdrew as one of the class counsel, and the New Jersey
firm that ultimately became Keefe substituted in to replace MDM. Before us,
the parties agree that KO, Keefe, and ZSZ are the three firms with a right to
share in the apportionment of the class attorneys' fees under the attorneys-class
representative agreements signed in 2002 and 2004. Keefe also acknowledges
that MDM will receive its fees out of Keefe's share of the fees.
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The class action was actively litigated for years. Following a series of
motions, a class was certified in August 2010. Just before that certification, in
late 2009, ZSZ sent an email to KO and Keefe seeking their lodestars. A lodestar
is a composite of "the number of hours reasonably expended on the litigation
multiplied by a reasonable hourly rate." Rendine v. Pantzer, 141 N.J. 292, 334-
35 (1995) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). Thereafter,
in January 2010, ZSZ sent an email stating that KO had not assumed an equal
amount of the work and that it was "a good time . . . to determine what a fair
allocation of fees would be." In October 2010, ZSZ sought to modify the
apportionment of attorneys' fees from the allocation set forth in the attorneys-
class representative agreements. Because ZSZ maintained it had done more
work on the class action than the other two firms, it proposed allocating the fees
based on the hours actually spent on the case. Although the firms thereafter
exchanged communications and met to discuss the fee allocation, no new
allocation agreement was reached.
As noted earlier, the class action was settled in February 2012. The court
approved that settlement in June 2012. In connection with approving the
settlement, the court also awarded $11,299,727 in attorneys' fees to class counsel
and $2,969,773 in costs incurred by class counsel.
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The firms could not agree on how to apportion the fee award. Thus, in
2013, ZSZ filed a motion for summary judgment on the issue of apportionment ,
and Keefe and KO cross-moved for summary judgment. ZSZ argued that the
apportionment should be based on hours spent and responsibility assumed
during the class action. KO and Keefe contended that the attorneys-class
representative agreements governed and required the firms to share the fee
equally, with each firm receiving one-third of the fee award.
After hearing oral argument, the trial court denied both motions for
summary judgment in orders entered on March 8, 2013. In its oral decision, the
court reasoned that there was some ambiguity in the attorneys-class
representative agreements as to whether the firms were agreeing to split the fees
on an equal one-third basis, or whether the fees were to be allocated based on
the work and responsibilities undertaken in the class action. The trial court,
therefore, directed that an evidentiary hearing be held.
Accordingly, in its order denying ZSZ's motion, the trial court directed
that
[t]wo issues are to be resolved in an evidentiary
hearing: 1) whether the firms each undertook their
respective [one-third] share of "work and
responsibility" in the class action litigation and, if not,
2) whether any firm not having done so is entitled to a
quantum meruit award and, if so, how much.
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The court also "determined that ZSZ, [Keefe, and] KO are parties to the [three]
Attorneys-Class Representative Agreements" and "[t]hat issue is resolved [and]
it is so ordered." Finally, the court directed the parties to engage in discovery
on the issues that would be addressed at the evidentiary hearing.
On June 3, 2013, Keefe and KO served an offer of judgment on ZSZ. The
three firms had previously agreed to distribute seventy-five percent of the fee
award without prejudice to a reallocation. Thus, each firm had received twenty-
five percent of the fee award, and the remaining twenty-five percent had been
placed in escrow. The offer of judgment stated that each firm would retain the
twenty-five percent of the fee award already distributed to it, Keefe and KO
would receive $1,360,000 of the remaining monies held in escrow, and ZSZ
would receive $1,580,000 of the monies in escrow. Thus, ZSZ would receive
"$600,000 more of the total fee award than [ZSZ] otherwise would have received
had each firm received an equal one-third share of the total fee award[.]" ZSZ
did not accept that offer.
Thereafter, the three firms engaged in discovery. In July 2014, the firms
agreed to submit the fee dispute to arbitration. The written arbitration agreement
stated that they "agreed to submit the Fee Dispute" to binding arbitration under
the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32. "Fee Dispute" was
A-1482-16T3
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not defined, but the arbitration agreement contained no language limiting that
term.
The three firms also agreed to "limit their right of appeal and expand the
scope of judicial review of any arbitration award[.]" In that regard, the firms
agreed that any appeal from the arbitration award would be to the Law Division
and to the Appellate Division, but that no party would appeal to the New Jersey
Supreme Court. They also agreed that the arbitrator's legal conclusions would
be reviewed "de novo," but factual findings made by the arbitrator "shall not
[be] disturb[ed]" unless they "are so manifestly unsupported by or inconsistent
with the competent, relevant and reasonably credible evidence as to offend the
interests of justice."
The parties then selected an arbitrator, a former United States District
Court Judge. The parties thereafter submitted numerous briefs and substantial
volumes of documents and materials to the arbitrator. The arbitrator held a
hearing in April 2015, and the parties submitted post-hearing briefs.
On January 12, 2016, the arbitrator issued a written award. The arbitrator
found that the three firms had entered into the attorneys-class representative
agreements in 2002 and 2004, and did not modify their fee-splitting agreement
thereafter. The arbitrator then determined that he was not bound by the trial
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court's legal determinations made when the court denied summary judgment in
2013. Thus, the arbitrator concluded that the attorneys-class representative
agreements "mandate an equal sharing of the attorneys' fees, despite any unequal
division of work and responsibility in the underlying class action."
In reaching that conclusion, the arbitrator looked at the operative language
contained in two sentences. The first sentence provided that class counsel "shall
be apportioning the fees recovered with [KO] receiving 33 1/3 %, [ZSZ]
receiving 33 1/3 %, and [Keefe] receiving 33 1/3 % of any attorneys' fee earned
in this case." The arbitrator found that sentence was clear in stating that each
firm would receive an equal one-third allocation of fees. The second sentence
stated: "More specifically that each of the law firms named herein shall share
the fee which is in accordance with their anticipated division of work and
responsibility in this matter." The arbitrator reasoned that the "[m]ore
specifically" sentence did not provide "explicit guidance as to how the fees
should be distributed." Instead, the arbitrator held that the "primary" "33 1/3%"
sentence "explains precisely how the fees are to be divided and, thus, 'controls
over the more general' clause."
The arbitrator supported that conclusion with factual findings concerning
the probative extrinsic evidence. In that regard, the arbitrator found: (1) there
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was no evidence that any firm failed to contribute towards earning the fee award,
and each of the three firms contributed thousands of hours to the class action;
(2) the firms "'made no effort at the beginning of the case (or later) to e qualize
the billing rates amongst the three firms' or exchange time records"; (3) ZSZ did
not raise the issue of an allocation of fees based on time spent on the litigation
"until very late in the case, when a recovery or settlement became likely"; and
(4) "ZSZ's post-Agreement conduct supports [Keefe's and KO's] assertion that
the Agreements entitled each of the parties to a one-third share of the attorneys'
fees, even if the parties did not share the work and responsibility in the c lass
action litigation equally."
KO and Keefe moved to confirm the arbitration award, and ZSZ cross-
moved to vacate the award. On June 10, 2016, the trial court heard oral
argument and entered orders confirming the arbitration award and denying t he
motion to vacate the award. In its oral decision, the court acknowledged the
modified standard of review the firms had agreed to in their arbitration
agreement. Applying a de novo review, the court found that the arbitrator acted
within the scope of his authority and that his award did not contain any errors
of law. In that regard, the trial court found that the arbitrator was not bound by
A-1482-16T3
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the court's reasoning in denying summary judgment. The trial court also found
that there was no basis to disturb the arbitrator's factual findings.
On June 30, 2016, Keefe and KO filed a motion seeking reimbursement
of the attorneys' fees and costs they incurred after ZSZ did not accept their offer
of judgment. On November 2, 2016, the court denied that motion.
ZSZ appeals from the June 10, 2016 orders confirming the arbitration
award and denying its motion to vacate the award. Keefe and KO appeal from
the November 2, 2016 order denying their motion for fees and costs incurred
after the offer of judgment was not accepted. We will first address ZSZ's appeal
and then analyze the appeal brought by Keefe and KO.
II
On its appeal, ZSZ makes three primary arguments. It contends that the
trial court erred in (1) finding that the arbitrator did not exceed the scope of his
authority; (2) concluding that the arbitrator correctly found that the attorneys-
class representative agreements called for an equal, one-third fee allocation; and
(3) confirming an equal one-third allocation without considering the evidence
that Keefe and KO did not actually perform one-third of the work and
responsibility. We are not persuaded by any of these arguments.
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A. The Scope of the Arbitrator's Authority
Agreements to arbitrate are contracts and, therefore, subject to the laws
governing contract interpretation. Roach v. BM Motoring, LLC, 228 N.J. 163,
174 (2017) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687
(1996)). In interpreting an arbitration provision, courts look to the provision's
plain language. Ibid. (quoting M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171
N.J. 378, 396 (2002)); see also Garfinkel v. Morristown Obstetrics &
Gynecology Assocs., P.A., 168 N.J. 124, 135 (2001) (explaining that "the intent
expressed or apparent in the writing . . . controls" the interpretation of an
arbitration agreement) (quoting Quigley v. KPMG Peat Marwick, LLP, 330 N.J.
Super. 252, 266 (App. Div. 2000)). Thus, "[a] contracting party is bound by the
apparent intention he or she outwardly manifests to the other party. It is
immaterial that he or she has a different, secret intention from that outwardly
manifested." Quigley, 330 N.J. Super. at 266 (quoting Tung v. Briant Park
Homes, Inc., 287 N.J. Super. 232, 239 (App. Div. 1996)).
The parties here agreed that their arbitration was governed by the New
Jersey Arbitration Act (Act), N.J.S.A. 2A:23B-1 to -32. The Act provides that
a "court shall decide whether an agreement to arbitrate exists or a controversy
is subject to an agreement to arbitrate." N.J.S.A. 2A:23B-6(b). Accordingly,
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determining whether an agreement calls for a particular dispute to be arbitrated
is a question for the court, unless the arbitration agreement expressly confers
that authority on the arbitrator. Morgan v. Sanford Brown Inst., 225 N.J. 289,
304 (2016). Our standard of review of the scope of the arbitrator's authority is
de novo. Id. at 302-03 (explaining that the "standard of review of the validity
of an arbitration agreement, like any contract, is de novo" (citing Atalese v. U.S.
Legal Servs. Grp., 219 N.J. 430, 446 (2014)).
ZSZ argues that the arbitration award should be vacated because the
arbitrator exceeded his authority in two ways. First, ZSZ contends that it agreed
to arbitrate only two issues. Specifically, those issues were the questions the
trial court identified in its order denying summary judgment; that is, (1) whether
each firm performed its one-third share of work and responsibility; and, if not,
(2) whether and how the fee award should be apportioned on a quantum mer uit
basis. Second, ZSZ argues that the arbitrator exceeded his authority because in
denying summary judgment, the trial court had made certain legal decisions that
constituted law of the case and were binding on the arbitrator.
We disagree with both of those arguments. The express terms used by the
parties here did not limit the arbitrator's authority. Instead, the parties agreed to
submit to binding arbitration the "Fee Dispute." The arbitration agreement did
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not define "Fee Dispute," nor did the agreement contain any language limiting
that term. The plain interpretation of "Fee Dispute" is that it is a comprehensive
term, encompassing the entire dispute over the attorneys' fees.
Here, the parties were sophisticated law firms represented by seasoned
and experienced legal counsel. If they had intended to limit the arbitrator's scope
of authority, they could have easily done so by adding specific language to the
arbitration agreement. They did not. Instead, as written, the agreement granted
the arbitrator broad authority over the entire fee dispute.
We reject ZSZ's second argument concerning the law of the case for two
reasons. First, as just noted, the parties granted the arbitrator broad authority to
address the fee dispute without any limitation concerning the prior decision by
the trial court.
Second, the law of the case doctrine does not apply here. The law of the
case doctrine "is a non-binding rule intended to 'prevent relitigation of a
previously resolved issue.'" Lombardi v. Masso, 207 N.J. 517, 538 (2011)
(quoting In re Estate of Stockdale, 196 N.J. 275, 311 (2008)). The doctrine
reasons that "a legal decision made in a particular matter 'should be respected
by all other lower or equal courts during the pendency of that case.'" Ibid.(quoting Lanzet v. Greenberg, 126 N.J. 168, 192 (1991)). The law of the case
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doctrine, however, is discretionary. Id. at 538-39 (quoting Hart v. City of Jersey
City, 308 N.J. Super. 487, 498 (App. Div. 1998)).
Moreover, "an order denying summary judgment is not subject to the law
of the case doctrine because it decides nothing and merely reserves issues for
future disposition." Gonzalez v. Ideal Tile Importing Co., 371 N.J. Super. 349,
356 (App. Div. 2004), aff’d, 184 N.J. 415 (2005). Because the denial of
summary judgment "preserves rather than resolves issues[,] . . . later
reconsideration of matters implicated in the motion, including the reasons in
support of the denial, are not precluded." Blunt v. Klapproth, 309 N.J. Super.
493, 504 (App. Div. 1998) (citing A&P Sheet Metal Co. v. Edward Hansen, Inc.,
140 N.J. Super. 566, 573-74 (Law Div. 1976)). Indeed, we have cautioned that
courts "should not" treat an earlier denial of summary judgment "as establishing
the law of the case." Schuhalter v. Salerno, 279 N.J. Super. 504, 508 n.1 (App.
Div. 1995).
Here, we discern no reason to treat the trial court's reasoning in denying
summary judgment as law of the case. As the arbitrator pointed out, the issue
first came before the trial court on a limited record. The record presented in the
arbitration was far more expansive. Furthermore, the trial court's reasoning on
the motions for summary judgment was not a final decision. Indeed, the same
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judge who denied summary judgment affirmed the arbitration award and
expressly found that his prior reasoning was not law of the case.
ZSZ contends that the court's "re-visitation" of its prior ruling was unfair
because it did not have notice of that decision. The record does not support
ZSZ's contention. Both before the arbitrator, and on the motions to confirm and
vacate the arbitration award, all parties extensively briefed and addressed
whether the language in the attorneys-class representative agreements called for
an equal one-third fee allocation and whether that issue had already been decided
when the trial court denied summary judgment.
In summary, we hold that the arbitration agreement gave the arbitrator
authority to decide all issues related to the fee dispute. Accordingly, the
arbitrator did not exceed the scope of his authority.
B. The Arbitration Award
Next, ZSZ contends that the trial court erred in confirming the arbitrator's
award. The arbitrator concluded that the attorneys-class representative
agreements "require[d] the parties to share the attorneys' fee award in equal
thirds, even if the parties did not share the work and responsibility in the
underlying class action equally."
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The arbitrator reached that decision by looking at the two operative
sentences in the attorneys-class representative agreements. Those two sentences
provided:
I further understand that [KO], [ZSZ] and [Keefe] will
be co-counsel to me in this matter, and that they shall
be apportioning the fees recovered with [KO] receiving
33 1/3 %, [ZSZ] receiving 33 1/3 %, and [Keefe]
receiving 33 1/3 % of any attorneys' fee earned in this
case. . . . More specifically that each of the law firms
named herein shall share the fee which is in accordance
with their anticipated division of work and
responsibility in this matter.
The arbitrator concluded that the first sentence was clear. He then determined
that the second sentence did "not render the contract susceptible to two or more
reasonable interpretations." Instead, the arbitrator found the second sentence
demonstrated "that the parties anticipated a certain division of work and
responsibility in the underlying . . . matter and agreed to split the fees based on
that anticipation, and not based on the actual work and responsibility undertaken
by each party."
The arbitrator went on to look at the extrinsic evidence and found that that
second sentence did not support ZSZ's position. In that regard, the arbitrator
made two factual findings. First, the arbitrator determined that ZSZ did not
attempt to exchange lodestars with the other firms or equalize billing rates until
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seven years into the litigation. Second, the arbitrator determined that ZSZ
neither disputed the allocation of work nor sought to modify the attorneys' fee
provision of the attorneys-class representative agreements until 2010, when a
settlement was likely.
In reviewing the arbitrator's award here, we use two standards of review.
In their arbitration agreement, the parties agreed to expand the scope of judicial
review. They agreed that both the Law Division and this court would use a de
novo standard for legal conclusions and a much more deferential standard for
factual findings. The Act provides that parties to an arbitration agreement can
expand the scope of judicial review of an arbitration award. N.J.S.A. 2A:23B-
4(c) ("[N]othing in this act shall preclude the parties from expanding the scope
of judicial review of an award by expressly providing for such expansion in a
record."); see also Curran v. Curran, 453 N.J. Super. 315, 322 (App. Div. 2018)
(quoting Van Duren v. Rzasa-Ormes, 394 N.J. Super. 254, 265 (App. Div.
2007)).
We agree with the arbitrator that the first sentence of the attorneys-class
representative agreements is clear in providing that each of the three firms was
to receive one-third of a fee award. We also agree with the arbitrator that the
key phrase in the second sentence is "anticipated division of work and
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responsibility." Finally, we agree with the arbitrator's reasoning that the second
sentence did not undercut or modify the clearer first sentence.
As to the factual findings of the arbitrator, we note that he found no
evidence demonstrating that any of the firms had "failed to contribute at all
toward earning the fee award." Instead, the arbitrator found that the evidence
showed "each party contributed thousands of hours to the class litigation."
Those factual findings are supported by the competent credible evidence
presented to the arbitrator, and we discern no basis to disagree with those factual
findings under the standard of review called for in the parties' arbitration
agreement. Accordingly, there was no evidence supporting a departure from the
plain language of the parties' agreement.
In short, the plain language of the attorneys-class representative
agreements and the extrinsic evidence supports an equal apportionment of the
fee award. Consequently, the trial court did not err by confirming the arbitrator's
award and denying ZSZ's motion to vacate the award.
C. Quantum Meruit
Finally, ZSZ argues that because Keefe and KO did not each fulfill their
share of the work and responsibility, the arbitrator and trial court erred by failing
to apportion the attorneys' fees award on a quantum meruit basis. We disagree.
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Quantum meruit means, literally, "as much as is deserved[.]" Kas Oriental
Rugs, Inc. v. Ellman, 394 N.J. Super. 278, 286 (App. Div. 2007). Quantum
meruit applies when "one party has conferred a benefit on another and the
circumstances are such that to deny recovery would be unjust[.]" Ibid. (quoting
Weichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992)). "[T]he basis for the
application of quantum meruit is 'wholly unlike an express or implied-in-fact
contract in that it is "imposed by the law for the purpose of bringing about justice
without reference to the intention of the parties."'" Ibid. (quoting St. Barnabas
Med. Ctr. v. Cty. of Essex, 111 N.J. 67, 79 (1988)). Consequently, "[i]t has long
been recognized that the existence of an express contract excludes the awarding
of relief regarding the same subject matter based on quantum meruit." Ibid.Here, as we have already determined, the attorneys-class representative
agreements contained an express provision governing apportionment of the
attorneys' fee award. Therefore, quantum meruit does not apply. Thus, the
arbitrator correctly determined that he did not need to conduct a quantum meruit
analysis, and the trial court correctly confirmed the arbitrator's award.
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III
On their appeal, KO and Keefe argue that the trial court erred in denying
their motion for attorneys' fees and costs incurred after ZSZ did not accept their
offer of judgment. We disagree.
Rule 4:58 governs offers of judgment and "permits a party to offer to take
a money judgment or to allow judgment to be taken against it for a sum certain."
Best v. C&M Door Controls, Inc., 200 N.J. 348, 356 (2009) (citing R. 4:58-3).
Thus, Rule 4:58-1(a) provides that in a non-matrimonial matter, seeking
exclusively monetary relief, a party may serve an offer of judgment on an
opposing party and file it with the court so long as the offer is made more than
twenty days before trial. If the opposing party does not accept the offer within
ninety days, or ten days before trial, whichever occurs first, the o ffer is deemed
"withdrawn." R. 4:58-1(b).
Rule 4:58-3 then provides that if a party makes an offer of judgment,
which the opposing party does not accept, and the opposing party thereafter
recovers eighty percent or less of the offered amount, the offering party is
entitled to "allowances." R. 4:58-3(a) to (b). The "allowances" include
reasonable litigation expenses and attorney's fees incurred after the rejection of
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the offer. R. 4:58-2(a); see also R. 4:58-3(a) (directing that allowances under
this rule be defined as prescribed in R. 4:58-2).
The offer of judgment rule is "intended as a procedural mechanism to
facilitate the settlement of cases." Wiese v. Dedhia, 188 N.J. 587, 593 (2006).
It was "designed particularly as a mechanism to encourage, promote, and
stimulate early out-of-court settlement of . . . claims that in justice and reason
ought to be settled without trial." Ibid. (omission in original) (quoting Gonzalez
v. Safe & Sound Sec. Corp., 185 N.J. 100, 125 (2005)). "That goal is achieved
through the imposition of financial consequences (the award of fees and costs)
where a settlement offer turns out to be more favorable than the ultimate
judgment." Best, 200 N.J. at 356 (citing Firefreeze Worldwide Inc. v. Brennan
& Assocs., 347 N.J. Super. 435, 441 (App. Div. 2002)).
Here, Keefe and KO made their offer of judgment in 2013. Earlier, in
April 2012, the three firms entered into a side agreement under which each firm
received twenty-five percent of the total fee award subject to repayment
depending on the outcome of their fee dispute. The remaining twenty-five
percent was placed in escrow until the matter was resolved. Each firm also
received seventy-five percent of their share of costs and expenses included in
the award, except no firm could withdraw more than $525,000 of unreimbursed
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costs and expenses. The remaining costs and expense funds were also placed in
escrow. Focusing just on the attorneys' fees, each firm's twenty-five percent
was approximately $2,820,000.
Keefe and KO offered to take judgment against them
in the amount of $1,360,000, which amount represents
[Keefe's and KO's] two-thirds interest in the remaining
attorneys' fees held in escrow pursuant to that certain
Side Agreement dated April 2012 minus the sum of
$600,000.00, without prejudice. For the sake of clarity,
this Offer of Judgment provides that: (i) [Keefe and
KO] and [ZSZ] retain all attorneys' fees already
distributed pursuant to the settlement, and (ii) ZSZ will
receive $600,000 more of the total fee award than it
otherwise would have received had each firm received
an equal one-third share of the total fee award[.]
In other words, the offer proposed that each firm would retain the twenty-five
percent of the fees it had already received (that is, approximately $2,820,000).
Of the remaining escrow, ZSZ would receive its one-third share plus an
additional $600,000, and KO and Keefe would split the remainder of what was
held in escrow.
ZSZ did not accept the offer of judgment. Under the arbitration award,
each firm received approximately $3,760,000 in fees.
Keefe and KO contend that their offer of judgment was focused only on
the twenty-five percent of the remaining undistributed fees. According to Keefe
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and KO, ZSZ would have received $1,580,000 from the monies remaining in
escrow if it accepted the offer of judgment. They then point out that ZSZ was
awarded $980,000, and thus, recovered only sixty-two percent of the offer. In
their calculations, Keefe and KO used the figure $2,940,000 as the amount in
escrow. Keefe and KO do not clarify the difference between that figure and
$2,820,000, which is twenty-five percent of the total fee award. In its response,
however, ZSZ points out that the $2,940,000 amount includes fees and costs.
For the sake of consistency, we use Keefe and KO's figure of $2,940,000.
The plain language of the offer of judgment, however, does not support
Keefe and KO's interpretation. By its express terms, the offer provided that each
firm would "retain all attorneys' fees already distributed," which amounted to
$2,820,000 for each firm. The apportionment of the monies remaining in escrow
was in addition to that $2,820,000. Consequently, under the offer of judgment,
ZSZ would have received $4,400,000 ($2,820,000 plus $1,580,000). Keefe and
KO would have each recovered $3,500,000 ($2,820,000 plus $680,000). Under
the confirmed arbitration award, each firm received approximately $3,760,000.
Thus, ZSZ received more than eighty percent of the offer of judgment
($3,760,000 divided by $4,400,000 equals 85.5%). Keefe and KO, therefore,
were not entitled to costs and attorneys' fees under Rule 4:58.
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The orders being challenged in both appeals are affirmed.
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