The state Supreme Court is considering whether law firms who represent themselves in suits to collect fees from clients should be allowed to recover counsel fees.
A lawyer for Bridgewater’s Kern Augustine Conroy & Schoppmann argued Tuesday that the firm deserved the fees it was awarded to compensate for the valuable time its attorneys had expended in the case.
The case, Kern Augustine Conroy & Schoppmann v. DiDonato, A-133-11, dates back to the late 1990s when Mercer County, through the state’s Green Acres program, acquired 88 acres of E. Bruce DiDonato’s property adjacent to a county park for $900,000 and purchased development rights for $44,000.
The county granted DiDonato an easement in 1997 so he could use his 50-by-2,000-foot dirt driveway. But DiDonato was not told that it was a limited-use, rather than exclusive, easement, allowing neighbors to use the driveway to access the park.
DiDonato erected a gate and fence, and laid down gravel on the driveway, but later was told that the county did not have authority to grant an exclusive easement. He sued, seeking an order for the county to sell him the driveway, void the sale of the developmental rights and fees, and other relief.
During the litigation, DiDonato enlisted the services of several firms, including Kern Augustine. In 2002, DiDonato replaced the firm with new counsel, Morgan Lewis & Bockius.
That year, Kern Augustine filed a suit seeking more than $140,000 in fees for work done in the two years since DiDonato retained them.
Superior Court Judge Neil Shuster held the fee request in abeyance pending a resolution of the easement litigation. After that settled in 2006, DiDonato made an offer of fees that Kern Augustine rejected, claiming it was due more than $500,000, including interest.
When court-ordered mediation failed, the parties asked Shuster to settle certain legal issues that would help bring the sides closer together.
Shuster ruled in 2007 that Kern Augustine’s retainer agreement’s interest rate — 2 percent per month — was not enforceable and that a commercially reasonable rate would be applied.
The firm was entitled to costs associated with pursuing the fees in court but not fees incurred while withdrawing from the easement case, he held.
Shuster retired and the case was eventually transferred to Superior Court Judge Mary Jacobson, who ruled after hearing additional testimony.
In July 2011, Jacobson awarded Kern Augustine $305,058, consisting of $105,777 for fees incurred in the litigation against DiDonato, $102,138 in fees and costs for the collection suit and $97,142 in prejudgment interest.
DiDonato appealed, challenging specific charges in Kern Augustine’s billing, the fees’ reasonableness and the interest rate the judge applied.
Appellate Division Judges Ariel Rodriguez, Jack Sabatino and Victor Ashrafi affirmed, finding Jacobson’s decision supported by the evidence.
DiDonato’s lawyer, Glenn Cochran, asked the court on Tuesday to overturn the $102,138 counsel fee award, and issue a rule that says pro se law firms cannot collect counsel fees when they sue former clients for unpaid debts.
“Why should lawyers be singled out for this preferential treatment?” asked Cochran, who runs a firm in Princeton. The courts, he said, “should treat every pro se litigant equally. Draw a bright-line rule saying there can be no pro se attorney fees in any context.”
“What is the point?” asked Justice Barry Albin, adding that Kern Augustine would have had to spend money to retain counsel if it chose to not proceed pro se.
“A lawyer’s file is no different than an accountant’s file,” replied Cochran, alluding to a situation in which an accountant would have to retain counsel to collect from a former client.
Albin suggested it would be more efficient for a law firm to represent itself since outside counsel would have to be brought up to speed on the case.
“There should be no distinction for pro se plaintiffs,” Cochran said. “There is no incentive here to be efficient.”
Albin said counsel fees could be proper because it was expending its time to collect money due to it. “You could have been representing someone else” instead of being in court on the firm’s own matter, he said.
Justice Jaynee LaVecchia said barring pro se attorneys from collecting counsel fees could affect the right to choose counsel of one’s choice.
“Lawyers can’t choose themselves,” Cochran said.
The firm’s lawyer, partner Robert Conroy, asked that Jacobson’s award be upheld.
Chief Justice Stuart Rabner asked why a pro se firm should be allowed to collect counsel fees.
“For attorneys, their time is their money,” Conroy said.
As a prop, Conroy held out his license to practice law, which says he is entitled to collect fees for work that he performs.
Justice Anne Patterson asked whether that meant attorneys could collect for pro se work performed against other clients.
Conroy said yes. Fees, he said, do not always equate with payments made to another person.
Albin asked Conroy whether the 16 percent interest rate Jacobson applied was justified, or whether it was meant to punish DiDonato.
Conroy said the interest rate was allowable. “It is the highest rate available under the contract” between the firm and DiDonato, he said.