New Jersey Appellate Division Holds Consumer Fraud Act Plaintiffs Can Recoup Attorneys’ Fees for Successfully Defending Against Counterclaims

In an issue of first impression, the New Jersey Appellate Division held in Garmeaux v. DNV Concepts, Inc. t/a The Bright Acre that a prevailing plaintiff in a Consumer Fraud Act (“CFA”) case is entitled to recover attorneys’ fees expended to defend an “inextricably intertwined” counterclaim. The to-be-published opinion also reaffirmed that New Jersey does not impose a strict proportionality requirement on attorney fee awards.

The Garmeaux plaintiffs sued Bright Acre in connection with services rendered to replace their gas fireplace in 2010. According to the plaintiffs’ testimony, Bright Acre introduced them to co-defendant James Risa, who was to perform the installation services for the new fireplace. At the time, Risa had worked at Bright Acre for approximately 20 years, but also owned and operated his own independent company called Professional Fireplace Services. After complaining about the schedule and quality of Risa’s work, the plaintiffs discovered that Risa performed work on his own company’s behalf and not Bright Acre. The plaintiffs hired another contractor to complete the work and brought suit against Bright Acre and other defendants, alleging, among other things, a violation of the CFA premised on a fraudulent omission. In turn, Bright Acre filed a counterclaim, which sought damages from plaintiffs for fraudulent concealment or alteration of evidence, defamation, and filing a frivolous lawsuit.

Following a trial in which the jury returned a verdict in favor of the plaintiffs’ claims and no cause of action on the counterclaim, the plaintiffs’ counsel filed an Affidavit of Attorney Services and certification requesting counsel fees in the amount of $70,911.12. Without hearing argument on the issue, the trial court entered judgment in favor of the plaintiffs, awarding $20,000 as reasonable attorneys’ fees. Both parties appealed.

In resolving an issue of first impression, the Appellate Division held that “the defense of the counterclaim was inextricably intertwined with the defense of the CFA claim, consideration by the trial court of the attorney’s fees incurred by plaintiffs for that purpose was proper.” As the court explained, the plaintiffs’ CFA claim was premised on a fraudulent omission, in which they averred they were never advised by Bright Acre that the installation performed by Risa would be in his capacity as owner of Professional Fireplace Services, not as its employee. In defending this claim and in prosecuting its counterclaim, Bright Acre proffered two invoices: one with and one without the Professional Fireplace Services masthead to support their argument that plaintiffs’ unlawfully altered the document. As the court stated, “[t]hese ‘conflicting’ invoices were the lynchpin of Bright Acre’s defense intended to demonstrate that plaintiffs were aware of Risa’s employment capacity for purpose of the installation. Bright Acre’s fraudulent alteration counterclaim was premised upon an alleged alteration by plaintiffs of the same invoice.” Thus, the court held that “Bright Acre’s utilization of the invoices for the dual purpose of both shield and sword rendered counsel fees incurred by plaintiffs in response thereto compensable as both ‘inextricably caught up with’ and related to the common core of the CFA claim.”

Second, in response to both parties’ arguments about the quantum of fee awarded, the court reiterated the New Jersey Supreme Court’s rejection of “a proportionality requirement between damages recovered and the attorney fee award, although noting the degree of success obtained remains an important factor.” Because the trial court neither specifically addressed the CFA’s “policy of ensuring that plaintiffs with bona fide claims are able to find lawyers to represent them” nor considered the plaintiffs’ full “measure of success” as factors in the award, the panel remanded for reconsideration of the counsel fee award.

The Appellate Division has made clear that fees incurred in defending factually-intertwined counterclaims are recoverable in CFA suits. Accordingly, the Garmeaux decision furthers the CFA’s policy encouraging representation of CFA plaintiffs and reaffirmed that there is no proportionality requirement under New Jersey law, so a significant fee award is attainable even if the underlying CFA award is insubstantial. Importantly, the decision should also factor into the strategy for attorneys defending a CFA suit, because such counsel are on notice that a successful plaintiff can recover a significant fee award.

Caroline E. Oks is an Associate in the Gibbons Business & Commercial Litigation Department.
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