When You Wish Upon A (Lode) Star

Headnote summary of a decision issued today by the New Jersey Supreme Court.

The facts

In the context of legal fee awards, a “lodestar” is the number of hours reasonably expended multiplied by the reasonable hourly rate. In this appeal, the Court considers the trial court’s reduction of the lodestar calculation proposed by plaintiff Harold Hansen in seeking attorney’s fees and costs after prevailing against his former employer, defendant Rite Aid Corp., on a claim for discrimination based on sexual orientation contrary to the Law Against Discrimination (LAD). The Court also considers the trial court’s denial of legal fees incurred on appeal under Rule 2:11 4 and its assessment of the contingency enhancement of the lodestar at 20%.

After his employment was terminated in May 2008, plaintiff brought claims against Rite Aid and other defendants alleging age discrimination, sexual orientation discrimination, and gender discrimination in violation of the LAD, as well as several common law claims. After three trials, a jury returned a verdict in plaintiff’s favor on his LAD sexual orientation discrimination claim and awarded him a total of $420,500 in compensatory and punitive damages.

Plaintiff moved for an award of counsel fees and costs. In plaintiff’s initial submission, he asked the trial court to determine that a reasonable hourly rate for his lead counsel and the attorney who assisted in the first of the three trials was $725, and that a reasonable number of hours spent on this matter was 3,252. He requested that the trial court determine the lodestar to be $2,355,892.50, and that the court apply a one hundred percent enhancement to the lodestar. Plaintiff also sought an award of costs. In total, plaintiff requested an award of $5,035,773.50.

In support of plaintiff’s fee application, his lead counsel submitted a certification. Plaintiff’s counsel attributed the large number of hours billed to erroneous rulings by the trial judges. She attached to her certification an invoice setting forth time entries reflecting claimed billable hours, and enumerating the disbursements included in the proposed award of costs. Defendants opposed the application, challenging the $725 hourly rate as well as aspects of the records submitted by plaintiff’s counsel.

The trial court issued a seventy-three-page decision with a fifty-four-page spreadsheet reflecting its analysis of the time entries and disbursements set forth in plaintiff’s invoice. The court ruled that a reasonable hourly rate for plaintiff’s lead counsel in this case was $375 per hour and a reasonable hourly rate for the assistant attorney was $325 per hour.

The trial court also found that the total number of hours for which plaintiff sought an award of fees was unreasonable. The court identified several categories of legal work improperly included in plaintiff’s fee application, including work on unrelated matters. The trial court also excluded all time entries reflecting plaintiff’s counsel’s representation of plaintiff in the Appellate Division and in this Court; in the trial court’s view, it could award no fees for appellate work because plaintiff did not seek an award in either appellate court under Rule 2:11-4. The trial court cited plaintiff’s counsel’s multiple entries claiming that more than twenty-four hours of legal work had been performed in a single day. It stated that unwarranted hours were billed for certain tasks and ruled that counsel had spent an excessive amount of time on the fee application itself.

The court also rejected many of plaintiff’s claims for costs incurred in disbursements to vendors, finding the request to be replete with errors and duplicate entries and inadequately supported with vendor receipts. Noting that plaintiff was successful on only one claim and that plaintiff’s lead counsel performed tasks that should have been assigned to a junior attorney or a paralegal, the trial court reduced the lodestar by twenty percent.

The trial court then considered plaintiff’s request for a one hundred percent enhancement of the lodestar because plaintiff’s counsel represented plaintiff on a contingent fee. Noting the complex procedural history of the case, counsel’s confidence in the strength of plaintiff’s claims as reflected by the settlement demands she made on plaintiff’s behalf, and the attorney’s risk of nonpayment, the trial court awarded a twenty percent enhancement of the lodestar.

The trial court awarded $741,387.97 in fees and costs. The Appellate Division affirmed, and the Court granted certification. 250 N.J. 353 (2022).

The court affirmed the hourly rate but remanded on two points

The Court reverses the Appellate Division’s judgment in two respects. First, the Court holds that when an appellate court reverses a judgment and remands for further proceedings, and the plaintiff is not yet a prevailing party when the appeal concludes, Rule 2:11-4 sets an unworkable and unfair deadline for applications for legal fees incurred on appeal. The Court vacates the trial court’s denial of all appellate legal fees and remands for a detailed review of plaintiff’s application for those appellate fees under the principles stated in Rendine v. Pantzer, 141 N.J. 292 (1995), and Walker v. Giuffre, 209 N.J. 124 (2012). Second, the Court reverses the Appellate Division’s judgment affirming the trial court’s assessment of the contingency enhancement of the lodestar at twenty percent. This appeal is a typical discrimination case warranting a contingency enhancement between 20 and 35%, but the attorney’s risk of nonpayment in this protracted proceeding justifies an enhancement within that range that is higher than 20%.

Oral argument linked here. (Mike Frisch)