Did I Just Waive My Rights to Attorney’s Fees?

By: Jordan S. Tafflin

            The New Jersey Appellate Division recently reiterated the need for care in addressing the issue of attorney’s fees in settlement agreements.  It is commonly assumed by attorneys unless specifically provided by statute, rule or case law, parties bear their own attorney’s fees under the “American Rule”.  Nonetheless, attorneys routinely provide for a release of claims for attorney’s fees in settlement agreements which resolve litigation.  However, Porreca v. City of Millville, 2011 N.J. Super. LEXIS 11 (App.Div.) suggests this should be standard practice, and a failure to clearly and unambiguously waive such fees may lead to exposure for the client.  

            In Porreca, plaintiff Paul Porreca, a resident and taxpayer of the defendant’s municipality, brought two separate actions against the City of Millville (hereinafter “The City”), alleging violations of the municipality’s tax abatement program and a failure to collect “review and inspection fees” from developers in violation of the municipal code.  The parties subsequently entered into a settlement agreement wherein the claims asserted in both the tax abatement litigation and the inspection fee litigation were addressed.  The executed settlement agreement was silent on the issue of attorney’s fees.  Specifically, the settlement agreement provided, “The City and Porreca do hereby remise and release the other…of all claims for damages that were or could have been advanced by Porreca or The City against the other…”. 

After the execution of the release agreement, plaintiff filed a motion seeking an award of attorney’s fees and costs for services rendered in connection with both lawsuits.  The City filed an opposition and a cross-motion for counsel fees and costs for defending the motion.  Following oral argument, the court orally denied plaintiff’s motion and The City’s cross-motion, memorialized in orders.  In the orders, plaintiff’s complaints were dismissed with prejudice pursuant to the settlement agreement, with plaintiff reserving the right to appeal from the court’s denial of counsel fees.

Upon plaintiff’s appeal, the Appellate Court looked to the settlement agreement to determine if plaintiff had waived the claim for attorney’s fees.  The Appellate Court specifically rejected a bright-line rule that the claim for attorney’s fees would survive the settlement agreement unless it was expressly and specifically waived.  The Court then looked to basic contract principals and found the terms of the settlement agreement were ambiguous as only “all claims for damages” were released and the claims asserted by the plaintiff did not involve claims in which attorney’s fees were a traditional element of damages.  The Court criticized both parties’ respective actions in preparing the agreement by stating, “[i]n hindsight it would have been preferable for The City to have acted defensively and made clear during negotiations it was entering into a global settlement with no loose ends.  Plaintiff, however, was in a better position to be up front about his intention to pursue a discretionary attorney fee claim.”  As a result, the Appellate Division remanded the matter to the trial court to address the issue of whether plaintiff had waived his claim for attorney’s fees in the settlement agreement.

This case demonstrates the need for counsel to clearly state its intended actions/results, especially as they relate to attorney’s fees.  Indeed, in drafting a settlement agreement, the issue of attorney’s fees must be addressed and resolved with clear and unambiguous language.  If fees are not waived, the settlement agreement should specify the amount of money being paid therein is in satisfaction of all of plaintiff’s claims, including counsel fees.