A Wise Application of the Supreme Court’s Directives Regarding Awards of Attorneys’ Fees

Grow Company, Inc. v. Chokshi, 424 N.J. Super. 357 (App. Div. 2012).  This is yet another in what seems to be an endless stream of appeals of awards of attorneys’ fees.  That stream flows despite the Supreme Court’s admonition in several cases, including Rendine v. Pantzer, 141 N.J. 282 (1995), and Furst v. Einstein Moomjy, Inc., 182 N.J. 1 (2004), that fee disputes should not give rise to a second litigation, that appellate courts should only rarely overturn trial judges’ discretionary decisions on fee issues, and that a reversal should occur only for a “clear abuse” of that discretion. 

Too often, appellate courts have improperly rejected trial judges’ decisions on fees and imposed unrealistic procedural burdens on the party entitled to fees and on the lower courts, in seeming contravention of the Supreme Court’s directives.  In this case, in contrast, Judge Fisher’s opinion for the panel wisely refrained from doing that even though the trial court’s approach to fees was somewhat novel and, as Judge Fisher observed, less than “perfect.”

This case, described more fully in Grow Company, Inc. v. Chokshi, 403 N.J. Super. 443 (App. Div. 2008), began as a suit for alleged breach of a confidentiality agreement by defendant, a former employee of plaintiff.  Defendant won summary judgment on the grounds that the suit was barred by a covenant not to sue contained in a settlement agreement in a prior case.  That covenant also provided for attorneys’ fees if the covenant were breached.  As a result of the covenant, defendant sought fees.

The Chancery judge determined that there were three broad areas of the case as to which defendant could be awarded fees.  Due to the length and complexity of the case, and the volume of time entries, however, the Chancery Division engaged an expert to go through the record and make recommendations on the fee issue.  The expert gave each entry a “task code” and determined what portion of any document generated by defense counsel related to the three broad areas identified by the judge.  The expert based that analysis on the number of pages of the document that related to compensable issues as opposed to other issues.  Thus, if 13 of the 28 pages of defendant’s Answer related to compensable issues, the expert credited 13/28 of the time expended on that pleading.

The Chancery judge reduced the recommendation on various grounds, including that defense counsel had been overly thorough, “beyond what was reasonably compensable.”  The judge also found, however, that the “percentage of pages” methodology that the expert had applied did not necessarily reflect how many hours an issue involved but amounted to only a “rough estimate” of what the fee should be.  She used her “feel of the case” to reduce the fee from what had been recommended. 

The parties cross-appealed on the fee award and on other issues.  The panel published only that portion of its opinion that dealt with plaintiff’s challenge to the fee methodology used.  Judge Fisher upheld what was done.  The expert’s approach was “unusual,” but was “a fair approach toward illuminating the quest for a reasonable fee.”  The Chancery judge had used her discretion to alter the expert’s recommendation and had not accepted it uncritically. 

Judge Fisher aptly concluded that “the methodology was not perfect but it was the best approach available absent a tedious and painstaking evidentiary hearing designed to examine every task for which defendants sought compensation that may very well have taken more time than the actual trial on the merits,” which itself ran for 15 days.   Invoking “the spirit of our Supreme Court’s declaration that ‘there is no precise formula … [and that t]he ultimate goal is to approve a reasonable attorneys’ fee that is not excessive,'” the panel held that “the Chancery judge’s reliance on the expert’s thorough and thoughtful approach– tempered by her own additional deductions based upon having sat through the trial– ultimately produced a reasonable fee award.”

These are words to live by.  There is a range of reasonableness in any fee award.  When an award falls within that range, challenges to the methodology used to reach the result, or criticism of a trial level judge who lived through the case for not writing a book-length manuscript supporting the fee decision, or other attempts to impose such procedural burdens as to turn the fee proceeedings into a second litigation, so as to discourage parties entitled to fees from seeking them, should be rejected.   

The panel also had something interesting to say, in a footnote, about the law of the case doctrine.  A ruling by the prior panel was law of the case that could not be reargued.  “On the other hand, our determination that … other issues were not ripe for summary judgment did not trigger application of the law of the case doctrine.”  Denial of summary judgment “decides nothing and merely reserves issues for future determination.”