A Lesson in Attorneys’ Fee Applications From Justice Patterson

Hansen v. Rite Aid Corp., 253 N.J. 191 (2023). This opinion by Justice Patterson for a 5-0 Supreme Court (Justice Fasciale did not participate) reaffirms the attorneys’ fee award principles of Rendine v. Pantzer, 141 N.J. 292 (1995), and Walker v. Giuffre, 209 N.J. 124 (2012). [Disclosure: I was involved in both these cases, as part of the defense team in Rendine and as arguing counsel for the successful plaintiff in Walker]. Employing the abuse of discretion standard in this Law Against Discrimination case, the Court affirmed the rulings of the Law Division, with which the Appellate Division concurred, as to the reasonable hourly rate of plaintiff’s counsel, the number of h ours reasonably billed, and the expenses awarded. More about that below.

But there was more to the case than that. On two legal issues, the Court parted company with the rulings below.

First, there was an issue that arose out of the fact that this case went on appeal previously and was twice remanded for new trials. Plaintiff did not apply for appellate attorneys’ fees when he won those reversals and remands, even though the literal language of Rule 2:11-4 seemingly called for that. That Rule stated that a motion for appellate attorneys’ fees is to “be served and filed within 10 days after the determination of the appeal.” On this appeal, the lower courts held that because plaintiff had not so applied, he could not seek those fees now.

The Supreme Court disagreed. Justice Patterson recognized “that the ten-day time limit set forth in Rule 2:11-4 is impractical and inequitable in certain settings. In the wake of the Appellate Division’s determination of his first and second appeals, plaintiff was not yet a ‘prevailing party’ entitled to seek counsel fees under N.J.S.A. 10:5-27.1 because he had not succeeded as to any significant issue that achieved some of the benefit that he sought in bringing his action.” Because that was so, any motion for appellate fees “would not only have been futile, but frivolous.”

Citing an Eleventh Circuit case under a similar court rule, the Court directed the Civil Practice Committee to propose an amendment to Rule 2:11-4 that would, absent exceptional circumstances, “apply only to fee-shifting cases in which an appellate court reverses and remands for further proceedings, such that the party that has succeeded in the appeal is not yet a prevailing party entitled to an award of fees and costs. In such a setting, a party that later becomes a prevailing party by virtue of a determination on remand should be permitted to seek appellate legal fees directly from the trial court.” The Court remanded the matter for the trial court to evaluate plaintiff’s claim for appellate attorneys’ fees and determine its reasonableness.

The other ruling that the Court reversed related to the enhancement of the lodestar fee (that is, the product of a reasonable hourly rate multiplied by the number of hours reasonably billed by plaintiff’s counsel). The Law Division, again upheld by the Appellate Division, granted a 20% enhancement. That was at the lowest end of the 20-35% range of enhancements for “typical” LAD matters, as stated in Rendine.

Though Justice Patterson held that this case was a “typical,” not a “rare and exceptional” one, in which Rendine had said that an enhancement could go up to 100%, she stated that 20% was too low. “Over more than a decade, plaintiff’s counsel, representing plaintiff on a contingent-fee basis, tried the case three times and litigated two appeals on the merits to the Appellate Division. Counsel’s risk of nonpayment was significant. In order to fairly compensate plaintiff and to further the objectives of N.J.S.A. 10:5-27.1, some degree of increase in the enhancement is warranted.” The Court remanded that issue for the trial court to redetermine the enhancement.

One might reasonably have said that a case with this history is indeed “rare and exceptional,” or nearly so, with the risk of such a matter to plaintiff’s counsel sufficient to justify an enhancement of between 35%-100%. The Court did not do so, but did afford plaintiff the chance to obtain a greater enhancement than 20%.

The Court’s decision to affirm the findings of the Law Division on the issue of the reasonable hourly rate for counsel, the number of hours reasonably incurred, and the costs approved and disapproved provides a number of lessons for plaintiffs’ counsel. As to hourly rates, Rendine and Walker had referred to the need to provide evidence of the “market” rate for the type of work involved. In Rendine, for example, counsel had offered sworn certifications of several attorneys who handled LAD matters for plaintiffs, stating that the hourly rate claimed there was reasonable and representative of the market.

Plaintiff did not do that here. Instead, as Justice Patterson recounted, “Plaintiff submitted unsworn statements by two attorneys, captioned as certifications, in which the attorneys vouched for plaintiff’s counsel’s qualifications and experience and opined that the $725 hourly rate for which plaintiff sought reimbursement was reasonable. Plaintiff also relied on an article stating that legal fees were climbing at so-called ‘Big Law’ firms and other law firms and another article noting high rates charged by lawyers litigating a bankruptcy proceeding unrelated to this case.” That “fell short” of what was required to show the reasonableness of the hourly rate that plaintiff’s counsel here claimed.

Justice Patterson was careful to note, however, that counsel’s reduced hourly rate in this case “is case-specific, and our affirmance of the court’s discretionary decision should not be viewed as a generic approval of a maximum or minimum billing rate for other cases.” Thus, with a properly documented fee application, counsel can still get rates higher than that awarded here. Relatedly, the Court also admonished trial courts not to rely on hourly rates approved in unpublished cases, as was done here. Under Rule 1:36-3, unpublished opinions are not precedent and are not binding on any court, Justice Patterson observed. For that reason, and because hourly rates are case-specific, trial courts cannot rely on rates (higher or lower) awarded in unpublished opinions, but must instead act based on the submissions before them.

It was proper, the Court said, to reduce the number of hours used to calculate the lodestar because plaintiff’s documentation was inadequate. Some of the time entries that plaintiff submitted related to a wholly unrelated matter, claimed that an attorney had worked more than 24 hours in a single day, and were duplicative of other time entries. The Law Division had exhaustively cataloged these deficiencies, and its ruling was not an abuse of discretion, Justice Patterson stated. Plaintiff likely would have done better had counsel’s fee submission been more carefully scrubbed.

Finally, it was not an abuse of discretion for the Law Division to reject many of plaintiff’s claims for costs paid to vendors. The costs request was “replete with errors and duplicate entries and inadequately supported with vendor receipts.” Again, plaintiff might have recovered more of the costs had a different application been submitted.

Regardless, plaintiff has the opportunity to recover more fees on remand, as described above. The saga of this case, in which the termination of plaintiff occurred in February 2009, over fourteen years ago, continues.