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NJ: Standard of Care in Drafting Settlement Agreements

Porreca v. City of Millville, N.J. App. Div., January 24, 2011. 

Facts: Porreca sued the City of Millville and demanded counsel fees in his pleading.  Eventually, the parties decided to settle the matter and, allegedly, entered into "detailed negotiations."  In the final version of the settlement agreement, the release provided as follows:

The City and Porreca do hereby remise and release the other, its or his respective agents, servants, employees, attorneys, heirs, administrators, successors or assigns of all claims for damages that were or could have been advanced by Porreca or the City against the other…

After entering into this agreement, Plaintiff contended he was also entitled to counsel fees as a prevailing party who obtained a prospective financial benefit for all taxpayers in the City. 

Issue: Did the language of the settlement agreement allow Plaintiff to pursue a subsequent claim for counsel fees? 

Ruling: Undecided.  The Appellate Division provided guidance and remanded the matter for further proceedings. 

First, the Appellate Division examined federal law involving claims for statutory attorney’s fees.  In that context, Third Circuit case law was clear:  a general release in a settlement agreement does not preclude an award of attorney’s fees, unless specifically and expressly waived.  

However, the Court noted that:

The parties have not cited and we have not located any case in this State applying the federal bright-line rule to a counsel fee request not premised on a fee-shifting statute.  As the law on this issue is far from settled, and is essentially non-existent, the parties would not have had an expectation that plaintif’s attorney fee claim would survive unless expressly and specifically waived…

The Court then commented that "by releasing all claims related to either action, plaintiff was presumably releasing any claims to counsel fees."  Moreover, the Court noted that, since there were no other monetary "damages" at issue, "[i]t is arguable that the parties’ release of their respective ‘claims for damages’ was meaningless if it were not intended to apply to attorney’s fees."  

Towards the end, the Appellate Division provided guidance as to what the attorneys’ standard of care might be in drafting a more thorough settlement agreement: 

In hindsight it would have been preferable for the City to have acted defensively and made clear during negotiations that 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. We are troubled by the strategy employed by plaintiff’s attorney. He was intentionally silent about the counsel fee  issue, holding back a material term for a substantial claim, apparently lying in wait for the City to sign the agreement, and springing the claim after the fact. Plaintiff’s attorney’s behavior, certainly calculated to work an advantage . . . based on information that was uniquely his . . . [is] a course of conduct that we neither applaud nor encourage.  This apparent lack of candor is particularly troubling in a suit where the counsel fee is to be borne by taxpayers.


Lesson: Counsel would be well advised to clearly state in the settlement agreement whether counsel fees have been waived as a result of the settlement.  If fees are not waived, the settlement agreement should specify that the amount of money being paid thereunder is in satisfaction of all of plaintiff’s claims, including counsel fees.

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Posted in: Attorneys Fees, New Jersey, Standard of Care