A Lesson About Class Counsel’s Attorneys’ Fees From Judge Gooden Brown

Seigelstein v. Shrewsbury Motors, Inc., 464 N.J. Super. 393 (App. Div. 2020). When class action cases settle with a benefit to the class, class counsel, who normally handle those cases on a wholly contingent basis, are entitled to a fee. That fee is paid either as a percentage of the value of the class recovery or is paid by the defendant on top of the settlement for the class, based on either a percentage or on the “lodestar,” which comprises the number of hours reasonably billed multiplied by a reasonable hourly rate.

Often, the fee is agreed upon in settlement negotiations. Sometimes, however, the parties cannot agree on a fee, and the issue is fought out in court.

Judge Gooden Brown’s decision today in this case, which applied the abuse of discretion standard, centered on a dispute over the properly hourly rates for class counsel. Those rates are supposed to replicate what the market rate would be if there were a negotiated fee between attorney and client.

To demonstrate that their rates comported with the market, class counsel submitted their own certifications, “attesting that the hourly rates were consistent with their standard hourly rates and had been previously approved in several New Jersey state and federal cases.” They also offered certifications “from three experienced unaffiliated practitioners who also certified that the hourly rates billed by the attorneys working on the litigation were reasonable and consistent with rates charged in the community by lawyers of comparable seniority and experience.” [Disclosure: One of those affiants was Allyn Lite, my former partner at Lite DePalma Greenberg, LLC]. Defendant argued that the hourly rate of its own highly experienced counsel was less than that of plaintiff’s lead counsel. But defendant offered no evidence of the market for plaintiffs’ class counsel fees.

The Law Division did not accept class counsel’s proffered rates. The judge criticized class counsel’s certifications as not providing enough “meaningful information” about which of class counsel’s attorneys had their rates approved in other cases. She also found the certifications from the other attorneys unpersuasive, stating that one contained only “conclusory assertions,” while the other two involved cases in Middlesex County, not Monmouth County, where this case had been venued. The Law Division declined to rely on two recent decisions that had approved the rates of these class counsel. Instead, the judge cited four unpublished opinions, all but one of which involved counsel other than these. Finally, the Law Division judge relied on her own “fifteen years of private practice” experience.

Judge Gooden Brown found that decision to be an abuse of discretion. She noted that in Rendine v. Pantzer, 141 N.J. 292 (1995), a Law Against Discrimination fee-shifting case (though not a class action), the Supreme Court had approved the claimed rates of the plaintiffs’ counsel where those rates had been supported by “certifications by several lawyers in their own firm” and by “certifications from three experienced employment-law practitioners from other firms.” Class counsel’s proffered certifications here “mirrored the certifications deemed acceptable in Rendine.”

Judge Gooden Brown also cited Walker v. Giuffre, 209 N.J. 124 (2012), which had reaffirmed Rendine and had left intact the Appellate Division’s rejection of the trial judge’s reliance on “personal opinion … predicated solely on [the judge’s] own professional experiences” to determine reasonable hourly rates. Despite that, the Law Division here relied on its own private practice experience. [Disclosure: I was involved as counsel in both Rendine and Walker, the latter of which I argued in the Supreme Court for the successful plaintiff]. Moreover, the Appellate Division criticized the Law Division’s reliance on the four unpublished opinions, citing Rule 1:36-3, which limits the use of such opinions.

Because the Law Division had erred in these multiple ways, its decision was reversed and remanded for reconsideration of an appropriate attorneys’ fee. The panel did not suggest what that fee might be. Judge Gooden Brown was careful to note, however, that the Law Division’s opinion ran 48 pages, showing that the judge there “clearly gave careful thought to her decision.” The panel thus “intend[ed] no criticism of her painstaking and conscientious efforts.”

Today’s decision imparts important lessons. Certifications as to market hourly rates cannot simply be disregarded, especially where a defendant offers no contrary evidence as to the market for plaintiffs’ counsel’s services. A judge’s necessarily limited personal experience with hourly rates has no place in the calculus of reasonable hourly rates. And the use of unpublished opinions must be handled in compliance with the applicable Court Rule. Today’s clear enunciation of these principles by Judge Gooden Brown should go a long way toward streamlining and rationalizing the fee process in class action and other fee-shifting cases.