Apple Sulit-Peralejo, a partner in our Atlantic City office blogged earlier today regarding counsel fees and bad faith.
Often counsel fee decisions come down to findings of bad faith and the case law certainly is replete with references to bad faith. However, when Court Rule 5:3-5(c) was revised about 10 years ago, the standard was relaxed such that bad faith was no longer necessary, but rather, the "reasonableness" of the positions became the standard. Or did it? Reading the cases, such as the one cited in Apple’s post. a lot of time was spent on the issue of bad faith.
That said, when you see large counsel fee awards, it is usually after a trial. In my experience, though few cases are tried (about 1 to 2%), when cases get tried, it is because one party’s conduct or the positions that the took were so absurd that a finding of bad faith is almost inevitable.
Earlier this week, after a 5 day trial that took place over the better part of a year, my client was awarded $40,000 in legal fees. In this case, she was the parent of primary residence in the parties’ divorce agreement. She told her ex-husband that she was going to move to Monmouth County from Hudson County with the parties’ child, to live with her fiance’. The husband made a motion for custody, essentially seeking to preclude our client from moving with her child. The case law is pretty clear that the custodial parent can move within the state of NJ. After we cited that in our brief in opposition to the motion, he concocted a new argument that he was the de facto custodial parent and the trial followed on this issue. During the trial we were able to prove that his claim was bogus and that for a very short period of time post divorce when he had the child more than 50% of the time, it was because he violated the Agreement and refused to return the child. This conduct as well as his lies were simply unreasonable. Similarly, the Court found that he was actively trying to remove our client from the child’s life. This too was unreasonable.
In another trial that took place last summer, despite the fact that our client had a greater income and greater assets (she had certain exempt assets) than her husband, he was ordered to pay $25,000 toward my client’s fees after a 6 day trial. Why? He sought alimony and his position was bogus. In reality, he earned more than our client until the deterioration of the marriage and then he essentially refused to work as he had. He also took absurd position as to issues where the law and facts made the result a certainty. In addition, he conduct throughout the matter was bad.
Last year, after another 5 day custody trial, the Court awarded my client $81,000 out of about $90,000 in legal and expert fees because of her husband’s "extreme bad faith." In this case, despite an adverse expert report, no expert of his own and no real evidence, he forced this custody trial. His only basis for his position, other than his unyielding and unbending personality, was his claim that the children wanted to spend more time with him. That said, one reason for this was that he was improperly involving the children in the litigation. He insisted that the children be interviewed despite the fact that (1) the joint expert said that it would be harmful for the children to speak to the Court; (2) the joint expert conceded that the kids would state that the children wanted to spend more time with the father, but that that was not in their best interests, and (3) the fact that I stipulated that the kids would say whatever he said they would say. He couldn’t do any better than my stipulation but he still forced the kids to meet with the judge. There were certainly ancillary issues where the husband took unreasonable positions which he forced to be tried and lost.
In another case, after a 10 1/2 day trial, my client was awarded $100,000 in legal fees and $60,000 in expert fees after a finding of bad faith. In fact, the Court cited at least 10 reasons that fees were merited, citing bad conduct, discovery abuses, taking bad positions, financial manipulations, making false claims, etc. This case was tried because despite a $400,000 difference in income and a 16+ year marriage, he refused to pay alimony. In fact, he never tried to settle the case. In fact, much of the case revolved around the fact that the accounts receivable in his business increased $150,000 in the 6 months between when my client said she wanted a divorce and when she filed. Of course, he claimed that his income, which had been steadily rising was down too. This was even though his billings were up by about $100,000 in that year and his expenses down about $100,000. Almost every position was absurd.
Interesting, at the recent argument of the appeal on that case, his attorney argued that the fee award was "piling on". I remarked that I did not know that the standing had been changed to "piling on."
In another trial about 2 1/2 s ago, my client was awarded $50,000 in legal fees. Again, bad faith was found. The husband in that case was incapable of being truthful on any issue or fact. On top of that, he was trying to enforce a mediation agreement signed by neither party, followed by neither party, and containing factual representations provided by him regarding the exemption of assets that was fraudulent. Similarly fraudulent was the fact that the single largest asset was never disclosed.
What is the common denominator in each of these large fee awards after trial? One party’s conduct and/or positions advanced was outrageous. The bottom line is that though reasonableness may be the standard, in those 1 to 2% of cases that get to trial, you will probably see bad faith by one of the parties.