Appellate Division Holds That Prevailing Plaintiffs in CFA Action Are Entitled to Attorneys’ Fees Incurred in Defense of a Related Counterclaim
In a case involving home construction that could have an impact on all businesses, the Appellate Division held for the first time in a published opinion that a plaintiff alleging a claim under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”) may be entitled to its fees for defending a related counterclaim. See De Garmeaux v. DNV Concepts, Inc., 2016 WL 7368978 (N.J. App. Div. Dec. 20, 2016). In the case, plaintiffs hired the defendant company to replace their gas fireplace. The workmanship of the installer proved unsatisfactory to plaintiffs, and they filed a civil complaint alleging, among other things, a violation of the CFA. Plaintiffs also alleged that defendant failed to inform plaintiffs that the installer was not directly working for defendant, and rather, was working in his capacity as owner of a separate company. Defendant filed an amended answer including a counterclaim seeking damages for fraudulent concealment or alteration of evidence, defamation, and for filing a frivolous lawsuit. It alleged that plaintiffs had doctored an invoice to conceal the fact that they should have known that the installer’s separate company was performing the work, making the change in the invoice that plaintiffs produced in discovery so that it did not reference a business masthead. During plaintiff’s deposition, however, defense counsel produced an email which attached the same invoice but referenced the business in its masthead. Plaintiffs acknowledged receipt of this invoice during trial testimony, but denied altering the document. Defense counsel made plaintiffs’ lack of credibility a prominent and recurring theme during trial, and the facially disparate invoices were admitted into evidence and presumably considered by the jury in its deliberations. After a five-day jury trial, however, the jury returned a verdict in favor of plaintiffs, and found no cause for action on the counterclaim. Plaintiffs applied for attorneys' fees in the amount of $70,911.12. Without hearing argument on this issue, the trial court entered judgment in favor of plaintiffs, awarding $20,000.00 to plaintiffs’ counsel as reasonable attorneys' fees. In reaching this determination, the trial court included fees generated in defense of the counterclaim, finding the counterclaim related to “the transaction that gave rise to plaintiffs’ affirmative claims.” Both parties appealed.
On appeal, the Appellate Division affirmed the trial court’s award of counsel fees incurred in defending the counterclaim but remanded for reconsideration of the amount awarded. First, the Appellate Division acknowledged that fee shifting is permitted statutorily by the CFA, which is a remedial statute that encourages its use by, among other things, reasonably compensating those who prevail through fee shifting. N.J.S.A. 56:8-19. Second, the Appellate Division noted that plaintiffs’ CFA claim was premised on a fraudulent omission, based on the allegation that defendant never advised plaintiffs that the installation performed by the installer would not be in the installer’s capacity as defendant’s employee, but rather, in the installer’s capacity as owner of a separate company. Specifically, defendant proffered two invoices: one with and one without the separate company’s masthead. Defendant’s fraudulent alteration counterclaim was also premised upon the same alleged alteration by plaintiffs of the same invoice. The Appellate Division held, “[t]he plain conclusion to be drawn by the jury’s verdict was that it rejected [defendant’s] lack of credibility argument and found [plaintiff] to be credible.” Therefore, consistent with the CFA’s intent, defendant’s use 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.” However, the Appellate Division remanded for reconsideration the amount of the counsel fee award on the ground that the trial court neither specifically addressed the CFA’s public policy nor considered plaintiffs’ full “measure of success” as factors in the award. The Appellate Division dismissed defendant’s cross-appeal. Thus, any defendant facing a CFA claim must now consider that CFA’s fee-shifting provisions may be applicable to counterclaims when deciding to plead same.