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Contingency Fee Enhancements in NJ

The New Jersey Supreme Court recently held that attorneys may continue to seek awards of contingency fee enhancements. This is significant because the Appellate Division in New Jersey had denied to award contingency fee enhancements in at least two separate cases in light of a recent United States Supreme Court case, Perdue v. Kenny A., ___ U.S. at ____, 130 S. Ct. at 1662, 176 L. Ed. 2d at 494 (2010). (see p. 22).

In a clearly written opinion, the NJ Supreme Court held that Perdue is limited only to “federal fee-shifting purposes.” Ultimately, the NJ Supreme Court

“reject[s] the Appellate Division’s conclusion that the Rendine framework for evaluating attorneys’ fee awards made pursuant to state statutory fee-shifting provisions has been altered in any way by the United States Supreme Court’s Perdue decision.” (see p. 33).

Thus, the New Jersey courts can and should continue to evaluate requests for contingency fee enhancements under the analysis set forth in Rendine v. Pantzer, 141 N.J. 292 (1995).

What does all this mean?

In essence, it means that in those cases in which fee-shifting provisions are available under NJ state law, the trial court may award not only attorney’s fees based on the lodestar (reasonable hourly rate multiplied by the time spent on the case), but it may also increase the fee to as much as 100% “‘to reflect the risk of nonpayment in all cases in which the attorney’s compensation entirely or substantially is contingent on a successful outcome.’” Rendine, 141 N.J. at 337 (see p. 11, 19).

Typically, contingency fee enhancements fall somewhere between 5% and 50% (see p.19). It is worth mentioning, however, that a 100% fee enhancement may be possible, but would only occur in rare instances — only for cases “in which no prospect existed for the attorney to be compensated by payment of a percentage of a large damages award, and in which the relief sought was equitable in nature.” (see p.19-20).

Gavel resting on hundred dollar bills

In upholding Rendine, the Court linked contingency fee enhancement to the need for attracting competent counsel to socially beneficial litigation. (see p.20).

In light of its reasoning above, the NJ Supreme Court went on to hold that the Appellate Division in two separate cases erred in applying Perdue and denying contingency fee enhancements (see p. 22). In one of these cases, the Court reversed the judgment of the Appellate Division and remanded for entry in favor of plaintiff in the amount of $63,350 in attorney’s fees plus a 50% enhancement, bringing it up to a total of $95,025 in attorney’s fees. Not bad for 180 hours of work, which comes down to about $530 per hour.

Although the Court did not directly address the importance of contemporaneous time records — which has been discussed in many other cases in the past — it is a critically important aspect of this case since it appears that none of the plaintiffs’ attorneys’ timesheets were challenged on appeal.

This case also stresses the importance of trial courts and appellate courts to clearly explain its reasons how it calculated the award of attorneys’ fees. Interestingly, it seems that lower courts in NJ do not always clearly explain why it has awarded a certain amount of attorneys’ fees. Paul Kostro, Esq., offers a summary of one such case here.

As the New Jersey Employment Law Blog suggests, this case is required reading. Attorneys who practice consumer law, employment law, and discrimination matters, or any other state law for which fee-shifting provisions are available, will greatly benefit from reading this case.

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