A $629,000 fee award to New Jersey firm Levine, Staller, Sklar, Chan & Brown for work done on behalf of Atlantic City government officials has been upended by a state appellate court.

“The Law Division judge altogether ignored the city’s objections to the amounts the firm sought, except for the hourly rate,” and “did not even discuss the city’s objections,” the Appellate Division said in the April 21 ruling, which also reinstated the city’s counterclaims.

According to the opinion, the firm, located in Atlantic City, did work on behalf of city officials for several years—including former police Chief John Mooney III, former fire Chief Dennis Brooks, and former Assistant Business Administrator Domenic Cappella Sr.—in connection with at least 21 lawsuits. After a change in mayor and several in city solicitor, payments of the firm’s legal fees by the city became more sporadic and stopped completely after October 2009.

Levine Staller attempted unsuccessfully to collect the fees and in October 2010 filed suit, accompanied by a certification by firm associate David Azotea, who purported to have worked on the matters, the opinion said. The city later filed counterclaims alleging, among other points, that the memoranda of understanding indemnifying Mooney and Brooks were never ratified by the city council and were obtained via corruption—specifically political contributions paid by the firm—and thus were void. The counterclaims sought contribution and indemnification from Mooney and Brooks, disgorgement from the firm, and other relief, according to the opinion.

Atlantic County Superior Court Judge Joseph Kane dismissed the city’s counterclaim, deeming its opposition unopposed because it was filed nine days later. He also prohibited Levine Staller from seeking summary judgment on the basis of a contract existing between the firm and the city, though the firm later moved for summary judgment based on the equitable theory of quantum meruit, the opinion said.

In December 2011, Kane granted the motion, and later entered judgment in Levine Staller’s favor for about $629,000 in unpaid fees, accepting the firm’s recited facts in Azotea’s certification. Based on the city’s late opposition—because of a clerical error, it alleged—Kane held that the city missed its chance to dispute those facts, according to the opinion.

The judge ruled that Levine Staller performed legal services in good faith from which the city benefited, and the bills, paid monthly, established a reasonable value for the services.

Kane rejected Levine Staller’s claim that, under quantum meruit, it was entitled to payment on its standard, rather than discounted, hourly rate: a sum of about $857,000. But he did order payment of fees in the contractually agreed-upon rate, totaling about $629,000.

Atlantic City appealed, and Appellate Division Judges Carmen Alvarez, Alexander Waugh Jr. and Harry Carroll, in a per curiam decision, reversed and reinstated the action.

The panel disagreed with Kane’s decision to take Levine Staller’s facts as accepted, noting that Azotea admittedly performed minimal work on some of the matters documented in the certification.

“A number of the allegations contained in that statement were general, no more than recitations of law,” the court said. “Although specific fee amounts were requested for specific cases, these totals were not supported by documentary evidence.”

The court also questioned a protective order issued by Kane prohibiting the city from deposing anyone at the firm other than John Donnelly and Mary Beth Clark.

“If the city was limited to deposing Donnelly and Clark, because only they had relevant information, then surely Azotea’s lengthy statement of material facts could not have been ‘true to the best of [his] personal knowledge and belief’ as required by the summary judgment rule,” the court said.

Kane, they said, also failed to view the evidence in the light most favorable to Atlantic City, and ignored its allegations that Levine Staller flouted local and state pay-to-play laws and obtained designations of counsel for Mooney and Brooks by illegitimate means.

The panel called it “simply inexplicable” that Kane considered the firm’s summary judgment motion while staying such a motion by the city.

The issue of damages, the court added, should “at a minimum” have received a hearing, “given that the payor is a public entity and the substantial amount involved.”

Kane “treated the firm’s submissions as though they constituted evidence of liquidated damages that only required mathematical calculations based solely on billing records,” but “by definition, the damages awarded in quantum meruit cannot be deemed to be liquidated damages, because such an award is based on the reasonable value of the services,” the court said.

The panel noted that the city, even if it missed its chance to provide proofs, still is entitled to challenge the other side’s proofs, and Kane was required to reach findings and conclusions even if he deemed the firm’s motion unopposed.

The judge “had alternatives that would have avoided consideration of the firm’s demand in a factual vacuum,” and abused his discretion by declining to consider the city’s opposition, the court said. “Certainly, sanctioning could have been imposed short of deciding the issue by default.”

The court also reinstated the city’s counterclaim and third-party claims against Mooney and Brooks.

The panel rejected Levine Staller’s cross-appeals claiming that it was entitled to immediate payment, and at the higher hourly rate.

Azotea, reached by phone, said he was “disappointed with the decision and the city’s actions.”

“Our firm more than earned the fees,” Azotea said. “The city now has spent more defending this case than it would’ve spent on the fees that we earned.”

Azotea, now a partner, added that it was “absolutely not true” that political contributions or acts of corruption precipitated legal work done for the city. “We had authorizations [from city solicitors] for all the work that we did,” Azotea said.

The city’s counsel, Susan Volkert of DeCotiis, FitzPatrick & Cole in Teaneck, said she and her client are “grateful for the court’s careful consideration” and “confident that the city is going to ultimately prevail on the full merits.”

She added that the decision is “really cautionary to all practitioners—you have to get everything in writing.”