A unanimous opinion of the New Jersey Supreme Court has confirmed that contingency enhancements remain available for attorneys’ fee awards under state fee-shifting statutes, but the Court provided important guidance to trial courts regarding the limited circumstances under which significant enhancements are permitted. This marks the first time in more than 16 years that the Court has spoken on this issue and represents a strong but clarified endorsement of the Court’s prior holding in Rendine v. Pantzer, 141 N.J. 292 (1995). The opinion was handed down in two related cases, Walker v. Guiffre and Humphries v. Powder Mill Shopping Plaza.
A recent opinion of the Supreme Court of the United States, Purdue v. Kenny A., 130 S. Ct. 1662 (2010), affirmed the well-settled rule that a court applying a federal fee-shifting statute may not enhance an attorney’s fee award to account for the contingent nature of an attorney’s representation. The Purdue Court further clarified the very limited circumstances when enhancements may be awarded on other grounds. After Purdue, the Appellate Division of the New Jersey Superior Court reversed the fee awards in Walker and Humphries, in part by holding that the Purdue factors are applicable to New Jersey fee-shifting statutes. The New Jersey Supreme Court granted certification in both cases to review the continued validity of Rendine following Purdue.
Reversing the Appellate Division, the New Jersey Supreme Court confirmed that while New Jersey state courts must apply federal precedent in cases involving federal fee-shifting statutes, that precedent does not govern fee awards under state fee-shifting statutes. Specifically, the Court held that its 1995 decision in Rendine, which considered and rejected the federal prohibition against contingency enhancements, still governs with full force and effect.
In its opinion, the New Jersey Supreme Court found that Purdue broke no new ground, but rather relied upon federal precedent considered and rejected in Rendine. Accordingly, while contingency enhancements are prohibited where a fee award is governed by a federal fee-shifting statute, they remain available where the award is governed by New Jersey fee-shifting statutes such as the Consumer Fraud Act and the Law Against Discrimination.
In confirming the continued viability of Rendine, however, the New Jersey Supreme Court provided important guidance regarding the limited circumstances under which significant contingency enhancements are permitted. Specifically, the Court confirmed that enhancements at the high end of the Rendine spectrum, approaching 50 percent of the lodestar, are appropriate only where: (1) there is no mechanism for mitigating the risk of non-payment, (2) there is no possibility of payment absent a fee award, (3) the relief sought is primarily equitable in nature, and (4) the case serves a broad social purpose. The Court also reiterated the critical importance of trial courts creating adequate records of their enhancement decisions to allow for meaningful appellate review. Accordingly, while contingency enhancements remain available under New Jersey fee-shifting statutes, significant enhancements are limited to non-monetary cases serving a broad social purpose, and any enhanced award must be supported by a robust trial court record.
Ballard Spahr’s Product Liability and Mass Tort Group has substantial experience litigating attorney fee disputes, including in consumer class action cases in New Jersey and around the country. For more information, please contact Neal Walters, 856.761.3438 or waltersn@ballardspahr.com; John B. Kearney, 856.761.3482 or kearneyj@ballardspahr.com; or Michael R. Carroll, 856.761.3452 or carrollm@ballardspahr.com.
Copyright © 2012 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.