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NJ Appeals Court Upholds Fee Reductions

January 22, 2015 | Posted in : Billing Practices, Billing Record / Entries, Contingency Fees / POF, Expenses / Costs, Fee Agreement, Fee Award, Fee Award Factors, Fee Calculation Method, Fee Clause, Fee Dispute, Fee Dispute Litigation / ADR, Fee Doctrine / Fee Theory, Fee Issues on Appeal, Fee Jurisprudence, Fee Reduction, Fee Request, Fee Shifting, Hourly Rates, Lodestar

A recent New Jersey Law Journal story, “Court OKs Slash of $94K Fee Application by More Than Half,” reports that even in a fee-shifting case, it’s permissible for a judge evaluating a fee application to consider what a client would be willing to pay for the engagement, a New Jersey appeals court said in upholding the fee reduction of a $94,000 fee application in a case that settled for $10,000.

“We conclude, even in the context of fee-shifting, a fee award should not be premised on a recoupment that would not have been the product of a rationally related fee agreement,” the Appellate Division said in Winyard v. 21st Century Leasing Corp.  The court added, “in an assessment of reasonable counsel fees, consideration whether a client would engage an attorney at the proposed rate is not wide of the mark.  Nor does it ‘amount to a clear error in judgment.’”

The parties litigated for three years before settling in December 2012, with 21st Century agreeing to pay $10,000.  Winyard’s counsel, Furst & Lurie of Montclair, NJ, then applied for $94,000 in fee and costs under the New Jersey Consumer Fraud Act (CFA), which contains a fee-shifting clause.  The application sought fees at a rate of $475 an hour for partner Henry Furst, and $275 an hour for Joshua Lurie, then an associate, the opinion said.

According to the appeals court’s opinion, Union County Superior Court Judge Joseph Perfilio, in a February 2013 ruling, approved the hourly rates but deemed the overall amount excessive, ‘”given that this matter settled for $10,000[.]’”  Perfilio granted fees for some tasks—such as research, court appearances, trial preparation and settlement talks—but not others, such as regular communication with opposing counsel and intra-firm conferences.

Perfilio awarded a total of $46,620, less than half what was sought, and rejected Furst & Lurie’s request for a one-third fee enhancement.  Perfilio noted the argument that fee enhancement are provided for the CFA as a matter of public policy, in order to encourage lawyers to take cases they otherwise might not, but he found “no information to suggest a fear of nonpayment” in the case.

“Were this not a contingency matter plaintiff certainly would never have agreed to pay over $80,000 in a case that settled for $10,000,” Perfilio remarked.  Both sides appealed Perfilio’s decision.  21st Century called the fee excessive even in its reduced form, while Winyard challenged the fee reduction.

But Appellate Division Judges Clarkson Fisher Jr. and Thomas Manahan, in a per curiam decision, said they were “satisfied the judge’s approach ultimately produced a reasonable fee award.  “In reaching this conclusion, we do not detract from the competence of counsel and the manner in which they fulfilled their obligation to their client,” the panel said noting “the spirit of our Supreme Court’s declaration that ‘there is not precise formula’” to crafting fee awards.

Furst & Lurie said in a statement that the court “failed to recognize that attorneys in CFA cases are held to a different billing standard and act as ‘private attorney generals,’ not attorneys who are pursing private interests.  “The proper standard is the time that the attorney general would take to protect the public interest, not the amount of money that a private citizen would pay to pursue an ordinary commercial claim,” the statement said.