The New Jersey Supreme Court recently issued a unanimous decision confirming that a court’s application of contingency enhancements in awarding attorney fees is not only appropriate, but essential in cases where the relief sought is equitable in nature. The Court’s decision, which combined two different appeals, comes as a victory to many lawyers who take cases on a contingency basis, including employment lawyers.
Traditionally, each party in a suit is responsible for their own fees, unless there is an applicable statute that warrants "fee-shifting." A contingency enhancement is a mechanism which allows the Court to increase the fee to take into account the risk of nonpayment when an attorney’s compensation is substantially contingent on a winning outcome. The Court relied primarily upon Rendine v. Pantzer, an employment discrimination case, in reaching its decision. The Rendine Court spelled out three important policy purposes for fee-shifting, which include:
1. Allowing litigants equal access to the courts.
2. Provide these individuals with the resources to enforce protected rights in court.
3. Providing these litigants with adequate representation.
By way of background, the first case on appeal, Walker v. Guiffre, involved a woman who sued multiple car dealerships in New Jersey under the Consumer Fraud Act. During the case, her attorneys pursued extensive discovery and expended a lot of time and effort which resulted in the accumulation of high attorney fees. After winning the trial, Walker’s attorneys requested counsel fees and a contingency enhancement, which the trial court allowed. The Appellate Division overturned the trial court’s award of attorney fees for numerous reasons, including that counsel did not justify the hours utilized, there was little analysis of the reasonableness of the hourly rate charged, there was no justification of the 45% contingency enhancement.
The second case, Humphries v. Powder Mill Shopping Plaza, involved a complaint about the lack of handicap accessibility at a shopping center. The case ultimately settled on most issues and the issue of attorney fees and costs was submitted to the Court to resolve. The trial court concluded that the time expended on the matter was reasonable, especially as the rate charged in the amount of $350 an hour was low for this type of case. The Court applied a 20% contingency enhancement on the award of counsel fees. On appeal, the Appellate Division concluded that Humphries failed to meet a more stringent U.S. Supreme Court standard for justifying a contingency enhancement.
On January 25, 2012, the New Jersey Supreme Court reinstated the contingency enhancements in both cases. The Court emphasized the Humphries case, where the relief sought by the Plaintiff was about more than money, it was about effecting a change which would benefit all handicapped individuals who would have been denied access to the shopping area in the future.
In the field of employment law, fighting for employee rights is not just about obtaining monetary compensation. It has a broader purpose of ensuring that protected classes of people are not discriminated against. The Court's recent decision affirms that lawyers who do this work on a contingency fee basis deserve enhanced fees to buffer the risk they take by accepting these cases.