Superior Court of New Jersey Slashes Attorneys' Fees in Class Action Settlement

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In Storch v. Five Guys Enterprises, LLC and FG Madison, LLC, the New Jersey Superior Court found that counsel fees of $50,000 plus approximately $500 in costs were fair and reasonable under the applicable standards as applied to the underlying case.

In the final hearing approving the terms of a settlement of a purported class action brought on behalf of certain purchasers of gift cards sold by Five Guys Enterprises, LLC and one of its New Jersey franchisees, the Superior Court of New Jersey, Law Division–Morris County recently entered an order granting final approval of the terms of the settlement among the parties but reducing the initially requested $130,000 in attorneys' fees to $50,000. In Storch v. Five Guys Enterprises, LLC and FG Madison, LLC, the New Jersey Superior Court found that counsel fees of $50,000 plus approximately $500 in costs were fair and reasonable under the applicable standards as applied to the underlying case.

Underlying Case

In January 2011, the plaintiffs filed a purported consumer class action in New Jersey state court related to the alleged sale of gift cards by Five Guys Enterprises, LLC and one of its New Jersey franchisees. According to the complaint, the gift cards were alleged to violate New Jersey's Gift Card Act, N.J.S.A. 57:80119, and the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.S.J.A. 56:12-14, et seq., due to certain alleged improprieties related to font size and dormancy fee and expiration provisions on the gift cards. After a period of approximately 15 months, during which the parties engaged in motion practice related to the initial complaint and some initial discovery, the parties entered into a settlement agreement memorializing a classwide resolution of all claims at the end of March 2012. In April 2012, the Superior Court of New Jersey granted conditional class certification and preliminary approval of the settlement.

Terms of Settlement

In addition to setting forth certain notice and claims procedures, the settlement agreement provided, among other things, for (1) the distribution of various Five Guys gift cards to certain class members; (2) an award of up to $130,000 in attorneys' fees; and (3) an incentive award of $2,500 for the class representative, Mitchell Storch, the named plaintiff in the action. In papers submitted jointly in support of final approval of the settlement, the parties represented that the settlement, including but not limited to, the foregoing terms, satisfied all applicable rules and standards, which included that the various terms of the settlement were fair, reasonable, adequate and appropriate. In specific support of the request for an award of $130,000 in counsel fees, plaintiffs' counsel submitted their time records for the Superior Court's review.

Reduction of Attorneys' Fees at Final Hearing

During the June 15, 2012, final hearing on the parties' motion for entry of the parties' consent order granting final settlement approval, the parties made representations concerning, among other things, the number of claims submitted and processed during the notice period and the number of gift cards to be issued to certain class members in connection with the settlement. In addition, the court heard argument on whether the terms of the settlement, including, but not limited to the attorneys' fees, were fair, reasonable, adequate and appropriate. After close questioning, the court ruled that the requested $130,000 was not reasonable. Instead, the court stated that the requested fee was "excessive" for a case that, according to the court, did not involve difficult issues; had not involved a single deposition; and was prosecuted by experienced plaintiffs' counsel who, by their own representations, had handled many similar cases previously. In all other respects, the Superior Court approved the settlement and entered a consent order granting final settlement approval that included, inter alia, an award of $50,000 in counsel fees, which the court characterized as "fair and reasonable" in this case.

Duane Morris LLP represented Five Guys franchisee FG Madison, LLC in the lawsuit.