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

• Court: New Jersey Superior Court Appellate Division
• Decided: October 19, 2017
• Docket: A-4831-15T3
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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

2 A-4831-15T3 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

3 A-4831-15T3 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.

4 A-4831-15T3 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.

5 A-4831-15T3 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

6 A-4831-15T3 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

7 A-4831-15T3 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

8 A-4831-15T3 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.

9 A-4831-15T3 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).

10 A-4831-15T3 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.

11 A-4831-15T3