Category Archives: attorneys fees

Can a Tenant Recover Attorney’s Fees From a Landlord if the Lease Does Not Provide for That Right?

Landlords are generally the parties that prepare the lease agreements into which their tenants enter. This unequal bargaining power typically allows landlords to insert language that requires tenants to pay the landlord’s attorney’s fees for any legal claims that arise out of their agreement, but does not require the landlord to pay the tenant’s attorneys fees for breach of the lease terms by the landlord. New York law requires there to be either a contractual or statutory basis for a prevailing party to collect attorney’s fees. But if there is no express language in a lease agreement allowing for tenants to demand attorney’s fees from landlords, does that mean tenants will not able to collect them?

This question was at issue in a recent New York case. Casamento v. Juaregui. Casamento v. Juaregui, 2011 WL 4090175 (2d. Dept. 2011). In the case, Luis Juaregui (“the tenant”) entered into a lease agreement for a Queens apartment owned by Dominic Casamento (“the landlord”). Paragraph 7 of the agreement required the tenant to receive the prior written consent of the landlord before making any alterations to his apartment. Paragraph 10 held the tenant liable for any damages or expenses incurred by the landlord relating to any neglectful act of the tenant. Additionally, paragraph 16 specifically referred to attorneys’ fees, stating that “[a]ny rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses” and including “reasonable legal fees” within the definition of “expenses.” Id. at 288.

In March 2007, the landlord alleged that the tenant had violated paragraphs 7 and 10 by making alterations to certain rooms without the landlord’s consent and also claimed the tenant was responsible, per the terms of the lease, for the landlord’s legal fees. He served a notice of termination and commenced a holdover proceeding.

The question for the court in Casamento was whether the lease at issue was covered by Real Property Law (“RPL”) §234. That law governs residential leases and addresses the imbalance resulting from the unequal bargaining power between landlords and tenants. It establishes an implied covenant that addresses when a tenant will be able to recover attorneys’ fees incurred in the successful defense of a summary proceeding to recover possession of a leasehold. If the court determines that the lease is covered by §234, the tenant should be able to collect attorney’s fees from the landlord.

Section 234 states that courts shall construe a lease to include this implied covenant whenever:

1)  a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of a tenant to perform any covenant or agreement contained in such lease, or

2) that amounts paid by the landlord therefore shall be paid by the tenant as additional rent

See RPL §234.

The Casamento Court determined that the outcome of any claim pursuant to §234 depends upon an analysis of the specific language of the lease provision at issue. In that case, it held that “Paragraph 16, thus, literally fits within the language of the first prong of section 234, since it does ‘provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of a failure of the tenant to perform any covenant or agreement contained in such lease.’” Additionally, the court found that construing the covenant in favor of the tenant is “consistent with the Legislature’s remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants.” The court said that RPL §234 helps avoid a situation where a landlord would have nothing to lose by instituting an eviction proceeding with a frivolous factual basis where there was  prospect of re- enting for a higher amount and the lease included a provision enabling the landlord to recover attorney’s fees. Because the Court determined that RPL §234 applied, it held that tenants can recover attorney’s fees from landlords.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

May Attorneys Fees Be Awarded to a Prevailing Party Even When a Case Doesn’t Reach Trial?

In a recent case, the Appellate Division of the Superior Court of New Jersey held that a plaintiff can be awarded fees even when a case does not reach trial if the suit itself helped encourage a defendant to correct an unlawful practice. Sika Corp. v. Hostler, 2011 N.J. Super. LEXIS 1202 (App. Div. May 11, 2011).

In 2004, the plaintiff, Sika Corporation (“Sika”), hired the defendant, Joseph Hostler (“Hostler”), as the national sales manager of its chemical manufacturing company. Upon being hired, Hostler signed a contract that included a non-compete clause preventing him from disclosing the company’s confidential information; soliciting Sika customers or employees on behalf of a different employer within a year of being terminated; or working, without consent, with a competitor anywhere Sika does business. Id. The agreement also stated that “[i]n the event of a breach… , [plaintiff] shall be entitled to such injunctive relief and damages and also shall be entitled to reimbursement…of [plaintiff’s] reasonable attorneys’ fees and costs incurred by [plaintiff] in enforcing” the agreement. Id. at 2, 3.

In April 2009, Hostler notified Sika that he was leaving the company in order to take a position at BASF Group (“BASF”). Shortly after, Sika filed a complaint against Hostler, alleging that he breached his contract with Sika by emailing a customer contact list to his private email address; soliciting Sika’s customers on behalf of BASF while still employed by Sika; and soliciting Sika employees to work with him at BASF.

The lower court entered a preliminary injunction against Hostler and BASF in June 2009 and the parties reached a settlement embodied in a final consent order in September 2009. Sika later applied for attorney’s fees, arguing “that there had been “certain breaches” of the confidentiality agreement that caused it to file suit to enforce the agreement. Finally, plaintiff argued that Hostler had violated his duty of good faith and loyalty, which caused plaintiff to incur costs to enforce the agreement.” Id. at 7. On that basis, Sika argued that Hostler should pay Sika’s attorney’s fees.

However, the Court denied the motion and a subsequent motion for reconsideration. The Court  reasoned that it had been settled prior to moving past the preliminary injunction, and therefore, the Court had not made a final ruling on the merits of the case. On that basis, there was no finding that bad faith had occurred.

In a 2008 case, the New Jersey Supreme Court addressed the question of whether a litigant is entitled to exercise its right to attorneys fees on the basis of a contract that states attorneys fees will be paid to the “prevailing party.” The issue is how to determine who is the prevailing party if the case was settled before anyone could prevail in the conventional sense.

The test for determining whether someone is a prevailing party is whether the claimant can demonstrate:

1) a factual causal nexus between the plaintiff’s litigation and the relief ultimately achieved, and

2) that the relief ultimately secured by plaintiffs had a basis in law.

Mason v. City of Hoboken, 196 N.J. 51, 76 (2008). (“Put differently, a party prevails “when actual relief on the merits of [the] claim materially alters the relationship  [*18]  between the parties by modifying the defendant’s behavior in a way that directly benefits the plaintiff.” Id. at 73.)

In Sika, the Appellate Division decided that the lower court had raised the bar of the second prong too high. The Appellate Division agreed with Sika’s argument that the focus should be on whether the “plaintiff’s lawsuit acted as a catalyst that prompted defendant to take action and correct an unlawful practice.” Sika at 19. The Court held that

“[w]hether that resolution involves ‘a judicial decree, a quasi-judicial determination, or a settlement [is] not a factor.” Id.

The Court’s decision is significant because it allowed attorneys fees to a prevailing party that did not actually prevail in the conventional sense. In other words, it highlights the legal concept that a party can prevail (and be entitled to legal fees) even if it settles the case.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC