CHRISTOPHER RYAN VS. THE RIDGE AT BACK BROOK, LLC (L-0447-13, HUNTERDON COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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 NO. A-4831-15T3
CHRISTOPHER RYAN,
Plaintiff-Appellant,
v.
THE RIDGE AT BACK BROOK, LLC,
Defendant-Respondent.
___________________________________
Submitted October 10, 2017 – Decided October 19, 2017
Before Judges Sabatino and Ostrer.
On appeal from Superior Court of New Jersey,
Law Division, Hunterdon County, Docket No. L-
0447-13.
Avolio & Hanlon, PC, attorneys for appellant
(Robert P. Avolio and Catherine M. Brennan,
on the briefs).
Wilentz, Goldman & Spitzer, PA, attorneys for
respondent (Brian J. Molloy, of counsel and
on the brief; Robert L. Selvers, on the
brief).
PER CURIAM
This appeal concerns a plaintiff's challenge to the trial
court's award of attorneys' fees to a defendant pursuant to a
contractual fee-shifting provision, and the court's pre-trial
denial of certain financial discovery from defendant. Applying
the appropriate deferential standard of review to both issues, we
affirm.
In January 2002, plaintiff Christopher Ryan joined defendant
The Ridge at Back Brook, LLC, a private golf club ("the Club") in
Ringoes. In order to join the Club, plaintiff signed a membership
agreement and tendered a required membership deposit of $90,000.
Pursuant to the terms of the Club's standardized membership
agreement, the $90,000 deposit would not be refunded until such
time as the Club reached "full membership," which was initially
defined at 275 members and which the Club later increased to 295
members.
In July 2003, plaintiff, along with other members, loaned
money to the Club in order to raise several million dollars for a
new clubhouse. Plaintiff voted in favor of the clubhouse proposal.
He signed a promissory note in July 2003, loaning the Club $25,000
for the clubhouse project. The note provides that the loan would
not be repaid by the Club until such time as the Club achieved
full membership status.
Plaintiff attempted to resign from the Club in February 2010.
Because the Club had not yet attained "full membership," defendant
placed plaintiff's name on an "intent to resign" list of persons
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whose membership deposits would be reimbursed only when and if the
Club reached that goal.
Plaintiff filed a complaint against the Club in the Law
Division in 2013, attempting to get his deposit back and his loan
repaid. He alleged that the Club breached its implied covenant
of good faith and fair dealing, by retaining his $90,000 membership
deposit, requiring him to pay annual membership fees "in
perpetuity[,]" and indefinitely delaying repayment of his $25,000
loan.
Plaintiff's theory of liability essentially was that the Club
had little or no business incentive to attain full membership
because, if that plateau was reached, the Club would suddenly owe
deposits and loan payments back to a large number of members, whom
the Club allegedly could not afford to reimburse simultaneously.
The Club filed a counterclaim seeking from plaintiff accrued unpaid
monthly membership fees.
During the pretrial phase, plaintiff moved to compel certain
discovery from the Club, much of which the trial judge, Hon. Edward
M. Coleman, granted. However, the judge denied plaintiff's
specific request to obtain the internal financial records of the
Club, a limited liability company ("LLC"). Judge Coleman found
that plaintiff had not shown an adequate basis to overcome the
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Club's privacy and proprietary interests in its records. Plaintiff
moved for reconsideration, which the judge also denied.
The case was tried before a jury in March and April 2016.
After four days of testimony, including expert witnesses for both
sides, the jury rendered a unanimous verdict in favor of the Club,
rejecting plaintiff's claim of a breach of the implied covenant
of good faith. In addition, the jury unanimously granted the
Club's counterclaim, in the sum of $47,201.47.
The attachments to the membership agreement include a
unilateral fee-shifting provision. This provision specifies that
if a member sues the Club and fails to obtain a judgment, that
member "shall be liable to the prevailing indemnified parties for
all costs and expenses incurred by them in the defense of such
suit, including court costs and attorney's fees and expenses
through all appellate proceedings." However, there is no similar
fee-shifting provision contained in the promissory note.
Following the verdict in its favor, the Club filed a motion
seeking counsel fees, expert costs, and disbursements. The
certification of services supplied by the Club's law firm did not
distinguish between time that its office spent defending
plaintiff's claims relating to the membership agreement and time
spent defending the claims relating to the promissory note.
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Plaintiff argued that the Club should not receive any fees
from him for defending the promissory note claim, and that the
overall fee request should have been reduced by fifty percent.
Plaintiff further argued that it is the fault of the Club's law
firm that it did not segregate its attorney time entries to specify
the legal work done on the "membership agreement issues" as
distinguished from the "promissory note issues." Plaintiff
further noted that a senior partner litigated the case in tandem
with another senior attorney. Plaintiff argued that instead a
more junior attorney at the firm should have assisted the senior
partner.
On May 16, 2016, Judge Coleman issued a detailed written
decision granting the fee request in part, but making substantial
reductions amounting in the aggregate to about twenty-seven
percent of the overall claimed fees and costs. Among other things,
Judge Coleman applied a five percent reduction for work done only
on the promissory note defense. Although the judge approved the
senior partner's hourly rate, he determined that the defense could
have reasonably relied upon a less experienced second attorney,
and therefore reduced the second attorney's hourly billing rate.
The judge also made other discrete reductions in the attorney time
expended.
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Now represented by a different law firm, plaintiff appeals
the fee award and the pretrial denial of the additional financial
discovery. The Club has not cross-appealed the fee reductions
that Judge Coleman made.
I.
We first address the counsel fee issues. It is well
established that "a party may agree by contract to pay attorneys'
fees" to an opposing party under specified terms and conditions.
North Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J.
561, 570 (1999) (citing Cmty. Realty Mgmt., Inc. v. Harris, 155
N.J. 212, 234 (1998)). In instances where such fee shifting is
controlled by a contractual provision, "courts will strictly
construe that provision in light of the general policy disfavoring
the award of attorneys' fees." Ibid. (citing McGuire v. City of
Jersey City, 125 N.J. 310, 327 (1991)).
Here, plaintiff does not argue that the contractual fee-
shifting provision in the Club's membership agreement is void as
against public policy. Instead, plaintiff simply attacks as
excessive the specific dollar amount of fees and costs the trial
court awarded.
Our scope of review of counsel fee awards is well established.
Fee determinations by trial courts should be disturbed "only on
the rarest occasions, and then only because of a clear abuse of
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discretion." Rendine v. Pantzer, 141 N.J. 292, 317 (1995); see
also Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44
(2001) (citing the "deferential standard of review" mandated by
Rendine). Appellate courts will provide relief from fee-shifting
awards in instances where the trial court has misapplied the law
or relied upon impermissible grounds. See, e.g., Walker v.
Giuffre, 209 N.J. 124, 148 (2012) (holding that a trial court's
failure to comply with the fee-calculation methodology prescribed
by Rendine, supra, 141 N.J. at 292, constitutes an abuse of
discretion).
We have fully considered all of plaintiff's various arguments
for further reducing the counsel fees the trial judge awarded.
Having done so, we conclude that plaintiff has failed to establish
that the judge abused his discretion or misapplied the governing
law in calibrating those fees, including the pertinent factors set
forth in R.P.C. 1.5(a).
Judge Coleman carefully considered the attorney hours
expended, the tasks involved, the lawyers' billing rates, the
complexity of the case, and a host of other considerations. The
judge issued a thoughtful and detailed written opinion explaining
how he had arrived at the fee award. Having presided over the
jury trial and pretrial proceedings in the case, the judge surely
had a unique perspective to appreciate the extent and nature of
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the legal services provided by the Club's defense counsel. The
judge made substantial and reasoned reductions in the hours
expended by defense counsel and the hourly rates of the less senior
attorney. The judge fairly disallowed certain attorney time for
duplicative work and unsuccessful motion practice. We discern no
abuse of discretion, nor any error of law, in those reasoned
determinations.
Although the fee award here was substantially higher than the
amount of damages the Club obtained from the jury on its
counterclaim, that simplistic mathematical comparison does not
dictate the outcome of a proportionality analysis under R.P.C.
1.5(4) (requiring consideration of "the amount involved and the
results obtained"). More was at stake in this case than simply
the particular dollar amounts sought by plaintiff and the arrears
sought by the Club in its counterclaim. Had the Club lost this
case, it faced the risk that other members would likewise demand
to have their deposits refunded and their loans to the Club repaid.
Moreover, if a jury found that the Club had not acted towards
plaintiff in good faith and fairly, reports of such a verdict
easily could have harmed the Club's business image and its
membership retention and recruitment.
Moreover, plaintiff was represented at trial by two very
experienced partners from a large law firm. The Club was justified
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in retaining an equivalent highly experienced litigation team.
This was not, by any means, a routine collection case or garden-
variety breach of contract dispute.
We specifically reject plaintiff's request to increase the
trial judge's five percent fee reduction, which was based on a
rough assessment of the work devoted to defending the loan
agreement, which lacked a fee-shifting provision. Plaintiff's
core legal theory of the Club's alleged lack of good faith and
fair dealing affected both the membership agreement and the
promissory note. There was no obvious realistic way for the time
records to be segregated between the law firm's defense of the
agreement and the defense of the note. The five percent discount
adopted by the trial court, although lacking an empirical and
numerical basis, was not patently unfair or unreasonable under
these discrete circumstances. See, e.g., Litton Industries, Inc.
v. IMO Industries, Inc., 200 N.J. 372, 381-83 (2009) (upholding,
in a context involving overlapping claims and issues, a ten percent
lodestar reduction for a variety of reasons, even though the ten
percent was not mathematically tied to a specific numerical
reference point).
Consequently, we affirm the trial court's fee award in all
respects, without alteration.
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II.
The other issue presented on appeal concerns the trial judge's
denial of plaintiff's pre-trial request for discovery of the LLC's
financial records. This issue also entails a deferential standard
of appellate review. "[A]ppellate courts are not to intervene but
instead will defer to a trial judge's discovery rulings absent an
abuse of discretion or a judge's misunderstanding or
misapplication of the law." Capital Health Sys. V. Horizon
Healthcare Servs., ___ N.J. ___, ___ (2017) (slip op. at 8) (citing
Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 371
(2011)).
We recognize, as did Judge Coleman, that the scope of
permissible discovery in civil matters is presumptively broad.
See Jenkins v. Rainner, 69 N.J. 50, 56 (1976). However, exceptions
can apply where there is good cause to curtail such wide-open
discovery.
Here, the Club invoked its proprietary interests as a
privately-held LLC to keep its financial records confidential.
The Supreme Court has recognized that this is a legitimate interest
that can outweigh a civil litigant's right to discovery. See,
e.g., Herman v. Sunshine Chem. Specialties, Inc., 133 N.J. 329,
344 (1993).
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By operating the Club as an LLC rather than as, say, a
publicly-traded corporation that issues annual reports to
stockholders, the Club's owners and operators elected to maintain
a substantial degree of privacy over the Club's internal business
affairs. See N.J.S.A. 42:2C-1 to -94. The trial judge
appropriately weighed that legitimate privacy interest.
The trial judge did not act unreasonably in rejecting
plaintiff's demand for discovery of the Club's financial records.
The judge fairly drew the line by allowing plaintiff access to
Club membership data and marketing materials, but disallowing
access to the Club's income statements, balance sheets, cash flow
statements and other financial records. Moreover, during his
trial testimony, plaintiff's liability expert did not voice any
difficulty in rendering his opinions due to a lack of access to
such financial reports.
Thus, we affirm the trial judge's discovery ruling, there
being no demonstration that he misapplied his discretion or
unjustifiably deprived plaintiff of access to critical
information.
Affirmed.
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