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                                         92 N.J.L.J. 129
27, 1969


Appointed by the New Jersey Supreme Court


Discontinuing Ordinance Challenge
Settlement on Attorneys' Fees

    The Committee has received the following inquiry:

            May attorneys representing plaintiffs in a prerogative writ action challenging the validity of two municipal ordinances, one governing construction and site plan approval and the second rezoning five parcels of land from residential to garden apartments, discontinue the action on condition that one intervenor-defendant who is an owner of a portion of the affected property pay the costs and attorneys' fees incurred by the plaintiffs?

    In October a municipality enacted an ordinance governing construction standards and site approval plans. In November it enacted an ordinance rezoning five tracts of land from residential to garden apartment use. Directly thereafter, four residents and taxpayers of the municipality engaged the services of the inquirer to determine whether these two ordinances were legal in all respects. The inquirer made an investigation and determined that the ordinances, in his opinion, were open to attack on several grounds. The four individuals directed that suit be instituted on their behalf challenging the ordinances. They at that time believed that they would receive additional financial support from other residents (homeowners' association). They further believed that if they were successful in setting aside the ordinances, similar ordinances would not be introduced by a successor township committee after the following election.
    Suit was instituted. Two of the landowners of the parcels rezoned applied to intervene and intervention was allowed, and they joined the township in the defense of the ordinances. This, together with actions taken by the township committee to correct procedural defects in adopting the two ordinances, further complicated the litigation and increased the cost to the original plaintiffs in continuing to maintain the action. However, the original plaintiffs, still believing they could secure additional financing from other residents interested, continued the litigation to the point where all parties moved on motions and cross-motions for summary judgment supported by voluminous exhibits and voluminous briefs.
    The summary judgment was brought on in September and October 1968 and argued for a portion of three days. The summary judgment was denied, and pretrial was set for November 1968 and the trial during the month of December 1968. Prior to the pretrial, a new attorney was substituted for one of the plaintiffs. Shortly after the pretrial and before the trial date, the township committee passed by a 3-0 vote first reading of a new ordinance encompassing both of the original ordinances.
    Financial support for the plaintiffs was not forthcoming from other residents and in view of the new ordinance the original litigation appeared to be about to become moot. Any further litigation could not be supported financially by the plaintiffs and an attack upon a new ordinance appeared to be futile.

    In this dilemma, one of the defendants-intervenors who was the owner of one of the parcels rezoned, offered, in exchange for an immediate dismissal of the pending litigation, to pay $9,750 to the plaintiffs who, in turn, would pay this amount to their attorneys for counsel fees incurred, provided such payment were ethical.
    A full disclosure of the terms of this settlement was made to all parties and the court. There is no dispute as to the reasonableness of the fees. A dismissal was entered on these terms and the question now posed is whether plaintiffs' attorneys can be paid their fees out of the settlement funds.
    It is to be noted that this litigation was not a class action and was brought solely on behalf of the individual plaintiffs.
    It is the opinion of this Committee that under these particular facts and circumstances there is nothing unethical in plaintiffs' attorneys receiving their compensation under the terms of the settlement outlined heretofore. The defendant-intervenor property owner represented by counsel obviously sought an end to the litigation which adversely affected the use of his property. He was willing to pay $9,750 for a termination of the litigation. The plaintiffs represented by counsel during the course of this litigation, acting only for themselves, were willing to terminate the litigation on the terms expressed heretofore. All parties, including the court, having been fully apprised of the terms of the settlement and, no public or class right having been jeopardized, we can find nothing unethical in the terms of the settlement.

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