RICHARD GRABOWKSY VS. TOWNSHIP OF MONTCLAIRÂ (L-4420-12, ESSEX COUNTY AND STATEWIDE)Â (CONSOLIDATED) ( 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NOT FOR PUBLICATION WITHOUT THE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-4294-15T2
A-4489-15T2
RICHARD GRABOWSKY,
Plaintiff-Respondent,
v.
TOWNSHIP OF MONTCLAIR,
PLANNING BOARD OF THE
TOWNSHIP OF MONTCLAIR,
FOUNTAIN SQUARE DEVELOPMENT
LLC, and MONTCLAIR KENSINGTON
URBAN RENEWAL, LLC,
Defendants-Appellants.
________________________________________________________________
Argued March 16, 2017 – Decided August 10, 2017
Before Judges Espinosa, Suter and Guadagno.
On appeal from Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-4420-
12.
Jennifer Borek argued the cause for appellant
Township of Montclair (Genova Burns, LLC,
attorneys; Ms. Borek and Angelo J. Genova, of
counsel; Lawrence Bluestone, on the briefs).
Arthur M. Neiss argued the cause for appellant
Planning Board of the Township of Montclair
(Beattie Padovano, LLC, attorneys; Mr. Neiss,
of counsel and on the brief).
Jonathan T. Guldin argued the cause for
respondent (Clark Guldin, attorneys; Mr.
Guldin, of counsel and on the brief; Madison
Brackelmanns, on the brief).
PER CURIAM
New Jersey follows the "American Rule," which requires
litigants to bear their own litigation costs, regardless of who
prevails. Innes v. Marzano-Lesnevich, 224 N.J. 584, 592 (2016).
Nonetheless, "a prevailing party can recover those fees if they
are expressly provided for by statute, court rule, or contract."
Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 440 (2001). One
of the exceptions to the American Rule established by court rule
is the "fund in court" exception. R. 4:42-9(a)(2). The question
presented by this appeal is whether that exception applies in this
case as a matter of law.
After plaintiff Richard Grabowsky, a Montclair taxpayer and
owner of numerous commercial properties in Montclair, successfully
challenged an ordinance, the trial court relied upon the fund in
court doctrine to award him $123,225.91 in attorney fees and costs.
We consolidated the appeals of defendants Township of Montclair
and Planning Board of the Township of Montclair (collectively,
Montclair). For the reasons that follow, we conclude the fund in
court exception does not apply here as a matter of law and reverse.
2 A-4294-15T2
I.
Because the underlying facts are set forth in the Supreme
Court's decision, Grabowsky v. Twp. of Montclair, 221 N.J. 536
(2013), we need not repeat them at length here.
Plaintiff filed a complaint in lieu of prerogative writs
against the Township, challenging the validity of an ordinance
adopted by the Township to permit the construction of an assisted
living facility on a site located next to the Unitarian
Universalist Congregation Church of Montclair (Unitarian Church).
One of the grounds plaintiff advanced for his challenge 1 was that
Mayor Jerry Fried, a member of the Township Council and Planning
Board, and a second member of the Council, Nick Lewis, each had a
disqualifying indirect personal interest in the development
project because of their membership in the Unitarian Church and
because Fried allegedly made a comment at one of the public
hearings "that an assisted living facility would benefit him
because he could admit his mother to the facility." Id. at 543.
Plaintiff argued that because of these conflicts, their
participation violated the Local Government Ethics Law (LGEL),
1
Plaintiff also alleged the ordinance was "invalid because it
was inconsistent with the Township's Master Plan for
redevelopment, and the procedures followed by the Council in
adopting the amendments to that plan had therefore violated
N.J.S.A. 40A:12A-7 and N.J.S.A. 40:49-2." Grabowsky, supra, 221
N.J. at 544.
3 A-4294-15T2
N.J.S.A. 40A:9-22.1 to -22.25, and the ethics provision of the
Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-23(b). 221 N.J.
at 552.
After we affirmed the dismissal of the complaint on the ground
that the two officials did not have a conflict of interest,2 the
Supreme Court reversed, stating:
[W]e hold that when a church or other
organization owns property within 200 feet of
a site that is the subject of a zoning
application, public officials who currently
serve in substantive leadership positions in
the organization, or who will imminently
assume such positions, are disqualified from
voting on the application.
[Id. at 541.]
The Court remanded the matter to the trial court for limited
discovery on the conflict of interest allegations and for a
determination on the merits. Id. at 562.
On remand, the trial court granted plaintiff's motion for
partial summary judgment, finding that both Mayor Fried and
Councilman Lewis had leadership roles in the Unitarian Church or
2
Plaintiff sought a preliminary injunction barring the Township
and Planning Board from considering or approving development
applications for the assisted living facility. Although no party
filed a motion for any form of dispositive relief, the trial court
sua sponte granted summary disposition, and dismissed plaintiff's
complaint with prejudice. The Supreme Court agreed with our
conclusion that the trial court's summary disposition was
procedurally improper under Rule 4:67-1.
4 A-4294-15T2
were about to assume leadership roles at the Church, and were
therefore disqualified from voting on the ordinance. As a result,
the ordinance was "invalid, unlawful, arbitrary, capricious, null,
void ab initio and of no force and effect."
The trial court also granted plaintiff's request for
attorney's fees. The trial court applied the fund in court
exception to determine that plaintiff was entitled to attorney's
fees, and awarded a total of $123,225.91 in fees and costs. The
award was stayed pending appeal.
On appeal, the Township argues the trial court erred in
applying the fund in court doctrine because that exception requires
the creation of an economic benefit to a class beyond the litigant,
and none was created here or identified by plaintiff. The Township
also argues the fund in court doctrine should not apply here
because the Legislature did not create a fee-shifting provision
under either the MLUL or the LGEL. The Township also challenges
the procedure followed by the trial court in awarding fees and the
use of a lodestar in determining the fee award. The Planning
Board challenges the fee award, noting its limited advisory role,
and arguing the trial court failed to set forth findings of the
specific economic benefits achieved. Because we agree that the
trial court erred in applying the "fund in court" exception to
award fees here, we need not address the arguments presented
5 A-4294-15T2
regarding the method of calculation of those fees or the absence
of fee-shifting provisions in the MLUL and LGEL.
II.
We review a trial court's decision regarding the award of
attorneys' fees with deference and will only disturb the trial
court's decision because of a clear abuse of discretion. Packard-
Bamberger & Co., supra, 167 N.J. at 444 (citing Rendine v. Pantzer,
141 N.J. 292, 317 (1995)). Despite the significant discretion
trial courts have in making that decision, "such determinations
are not entitled to any special deference if the judge
'misconceives the applicable law, or misapplies it to the factual
complex.'" Porreca v. City of Millville, 419 N.J. Super. 212, 224
(App. Div. 2011) (quoting Kavanaugh v. Quigley, 63 N.J. Super.
153, 158 (App. Div. 1960)).
"Because 'sound judicial administration is best advanced if
litigants bear their own counsel fees,' the prevailing party in
litigation generally is not entitled to an award of attorneys'
fees." Henderson v. Camden Cty. Mun. Util. Auth., 176 N.J. 554,
563-64 (2003) (quoting N.J. Dep't of Envtl. Prot. v. Ventron Corp.,
94 N.J. 473, 504 (1983)); see also In re Estate of Lash, 169 N.J.
20, 30 (2001); N. Bergen Rex Transp., Inc. v. Trailer Leasing Co.,
158 N.J. 561, 569 (1999).
6 A-4294-15T2
The fund in court exception is established by Rule 4:42-
9(a)(2), which states:
Out of a fund in court. The court in its
discretion may make an allowance out of such
a fund, but no allowance shall be made as to
issues triable of right by a jury. A fiduciary
may make payments on account of fees for legal
services rendered out of a fund entrusted to
the fiduciary for administration, subject to
approval and allowance or to disallowance by
the court upon settlement of the account.
The name, "fund in court," is somewhat of a misnomer because
there is no requirement that the court have jurisdiction over the
disbursement of the funds in question. See Henderson, supra, 176
N.J. at 564 (citing Silverstein v. Shadow Lawn Sav. & Loan Ass'n,
51 N.J. 30, 45 (1968)); Trimarco v. Trimarco, 396 N.J. Super. 207,
215-16 (App. Div. 2007). Rather, the "fund in court" is created
when a "plaintiff's actions have created, preserved or increased
property to the benefit of a class of which he is a member."
Sarner v. Sarner, 38 N.J. 463, 467 (1962).
The fund in court exception applies to "situations in which
equitably[,] allowances should be made and can be made consistently
with the policy of the rule that each litigant shall bear his own
costs." Sunset Beach Amusement Co. v. Belk, 33 N.J. 162, 168
(1996). Such a situation exists "when a party litigates a matter
that produces a tangible economic benefit for a class of persons
that did not contribute to the cost of the litigation," making it
7 A-4294-15T2
"unfair to saddle the full cost" of the litigation upon the
plaintiff. Henderson, supra, 176 N.J. at 564 (citation omitted)
(emphasis added).
In Porreca, supra, we determined that Rule 4:42-9(a)(2)
required a two-step process:
First, the court must determine as a matter
of law whether plaintiff is entitled to seek
an attorney fee award under the fund in court
exception as articulated in Henderson. If the
court determines plaintiff has met the
threshold, it then has the "discretion" to
award the amount, if any, it concludes is a
reasonable fee under the totality of the facts
of the case.
[419 N.J. Super. at 228 (emphasis added).]
We observed further,
The critical question in considering
plaintiff's entitlement to request attorney's
fees under this Rule is whether a fund in court
was created as a result of his litigation.
There need not be recovery of a lump sum fund
of money; it is sufficient if the fund is the
subject matter of the litigation and is thus
brought under the control of the court.
[Ibid. (emphasis added).]
One of the examples we cited was Trimarco, supra, in which
the plaintiff, a one-sixth shareholder, sued the corporation, two
other shareholders and a former company officer both individually,
alleging wrongful termination, and derivatively on behalf of the
corporation, alleging claims of corporate misconduct under
8 A-4294-15T2
N.J.S.A. 14A:12-7. 396 N.J. Super. at 211-12. The settlement of
the matter produced an economic benefit for the corporation – an
individual defendant was required to sell the corporation a
contiguous lot that she planned to use to the detriment of the
corporation. Id. at 217. This tangible economic benefit was,
therefore, independent of any relief afforded the plaintiff. Ibid.
Similarly, although the plaintiff did not receive a money
judgment in Porreca, supra, the result of the litigation led to
significant economic benefits for the City "in the form of
increased revenue, clearly 'creat[ing], protect[ing] or
increas[ing] a fund for the benefit' of the City's taxpayers."
419 N.J. Super. at 229.
Plaintiff successfully argued before the trial court that his
litigation had served more than his own self-interest and that the
citizens of Montclair benefitted from the litigation because he
established that the amended ordinance was tainted by conflicts
of interests. The trial judge acknowledged there was "insufficient
evidence . . . to determine whether . . . the Township will enjoy
increased tax benefits" when compared to the payments that were
to be made by the developer in lieu of taxes. She did not find
this to be an impediment to an award under the fund in court
exception, stating, "[a] finding of pecuniary benefit is not
necessary to sustain a finding that fees are warranted."
9 A-4294-15T2
As we have noted, for the fund in court exception to apply,
there must be a "fund" that was created, preserved, increased or,
at least, the subject of the litigation. Although the trial court
described plaintiff's suit as producing a "tangible conferred
benefit of protecting the integrity of government and fostering
citizen confidence," that cannot be substituted for the
requirement that the suit produce a "tangible economic benefit"
to a class of persons. As to the critical question, "whether a
fund in court was created as a result of his litigation," Porreca,
supra, 419 N.J. Super. at 228, no fund was the subject matter of
the litigation and the plaintiff's suit did not "create[],
preserve[] or increase[] property to the benefit of a class of
which he is a member." See Sarner, supra, 38 N.J. at 467 (emphasis
added). Therefore, plaintiff's lawsuit fails to survive the first
step of the Porreca process; he is not entitled to seek an attorney
fee award under the fund in court exception as a matter of law.
We note further that the fund in court exception is to be
applied "equitably" when "allowances should be made and can be
made consistently with the policy of the rule that each litigant
shall bear his own costs." Sunset Beach, supra, 33 N.J. at 168
(emphasis added). Because no fund was created by the litigation,
the source for the attorney fee award would be the municipal
coffers. The net effect is that, although there is admittedly
10 A-4294-15T2
insufficient evidence of any benefit to them in the form of
increased tax revenue, taxpayers would be required to fund
plaintiff's lawsuit. These circumstances do not rise to the level
of a situation where, in equity, the results achieved for the
taxpayers make it "unfair to saddle the full cost" of the
litigation upon the plaintiff, Henderson, supra, 176 N.J. at 564
(quoting Sunset Beach, supra, 33 N.J. at 168), and appropriate to
saddle the taxpayers with those costs.
There are three purposes underlying the American Rule: "(1)
unrestricted access to the courts for all persons; (2) ensuring
equity by not penalizing persons for exercising their right to
litigate a dispute, even if they should lose; and (3)
administrative convenience." In re Niles Trust, 176 N.J. 282, 294
(2003). An attorney fee award to plaintiff serves none of these
policies but does penalize the municipal taxpayers who derived no
tangible economic benefit from the litigation. Therefore, in
addition to failing to meet the threshold requirement that a fund
be created, preserved, increased or at least the subject of
litigation, the award could not be made "equitably" and
consistently with the principles underlying our policy that
parties should generally bear their own litigation expenses.
Reversed.
11 A-4294-15T2