On appeal from and on certification to the Superior Court, Appellate Division, whose opinion is reported at 276 N.J. Super. 398 (1994).
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi and Coleman join in Justice Stein's opinion.
The opinion of the court was delivered by: Stein
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
CANDY RENDINE, ET AL. V. EDWARD PANTZER, d/b/a PANTZER MANAGEMENT COMPANY (A-105-94)
(NOTE: This is a companion case to Szczepanski v. Newcomb Medical Center, Inc., et al. also decided today.)
Argued March 13, 1995-- Decided July 24, 1995
STEIN, J., writing for a unanimous Court.
Candy Rendine and Bernadette Lorestani (plaintiffs) brought an action pursuant to the New Jersey Law Against Discrimination (LAD), seeking damages primarily on the basis that their employment was wrongfully terminated by Pantzer because they had become pregnant. Plaintiffs claims were tried jointly and the jury found that Pantzer had violated the LAD. Both Rendine and Lorestani recovered substantial judgments, consisting of compensatory and punitive damages, prejudgment interest, counsel fees and costs.
Under the LAD's fee-shifting provision, the losing party must pay reasonable attorney's fees to the attorney for the prevailing patty. In February 1988, plaintiffs had entered into a retainer agreement with their attorney that provided for a fee that was the greater of: 1) a specific hourly billing plus twenty-five percent of plaintiffs' recovery; or 2) the amount of attorney's fees awarded by court pursuant to the fee-shifting provision of the LAD. In support of an application for counsel fees, plaintiffs' counsel certified that the total hours expended on the litigation was 646.65, which was multiplied by the reasonable hourly rates of the participating attorneys, resulting in a "lodestar' fee of $114,334.25. Counsel also set a fee of $28,634 for post-judgment services and reimbursement for out-of-pocket disbursements.
To support the reasonableness of the lodestar fee, plaintiffs' counsel submitted certifications by several lawyers in the firm to attest to the fact that the hourly rates used to calculate the lodestar were consistent with the standard hourly rates for the participating lawyers. In addition, plaintiffs' counsel submitted certifications from three experienced employment-law practitioners who provided estimates of the hours required to litigate a plaintiff's employment-discrimination case. Those estimates either exceeded or approximated the hours expended by plaintiffs' counsel.
The trial court found counsel's lodestar fee reasonable. In addition, the trial court determined that plaintiffs had established their entitlement to enhancement of the lodestar fee, based on Lorestani's affidavit concerning plaintiffs' difficulty in finding counsel, the affidavits of three unaffiliated attorneys attesting to the need for contingent-fee enhancement, and the affidavit of plaintiffs' retained expert. Accordingly, the trial court applied a multiplier of 2.0 to the lodestar fee, resulting in a prejudgment counsel-fee award of $228,668.50.
Defendant moved for reconsideration of the trial court's decision to enhance the lodestar fee, relying on the U.S. Supreme Court decision in City of Burlington v. Dague, which held that enhancement for a contingency is not permitted under fee-shifting statutes. The trial court denied defendant's motion, declining to adhere to Dague. The court reasoned that this Court, if presented with the same issue, would adopt the reasoning of Justice Blackman's Dissenting opinion in Dague that asserted that a statutory fee may include additional compensation for contingency and still qualify as reasonable.
The Appellate Division affirmed the judgment of the trial court, although one member of the panel Dissented only from the court's affirmance of the portion of the judgment reflecting the jury's award of punitive damages. The Appellate Division affirmed the counsel fee award, agreeing with the trial court's Conclusion that the reasoning of Justice Blackman's Dissent in Dague was more consistent with the objectives of the LAD.
Pantzer appeals as of right from the judgment awarding punitive damages to Lorestani and Rendine. The Court also granted Pantzer's petition for certification on the issues of joinder, adequacy of jury instructions, emotional-distress damages, and the counsel-fee award.
HELD: In determining a reasonable fee under a fee-shifting statute, a trial court, after having carefully established the amount of the lodestar fee, properly may enhance the lodestar fee in cases in which the prevailing party's attorney's fee arrangement was predominantly contingent on a successful result.
1. The trial court's determination to deny severance of Lorestani's and Rendine's claims was a reasonable exercise of its discretion; the jury charge, considered as a whole, constitutes a clear, understandable and correct explanation of the applicable legal principles; and the Appellate Division properly concluded that the trial court's evaluation of the compensatory damage award should not be disturbed since the emotional distress-damage award was not excessive. (pp. 17-25)
2. In a discrimination suit under the LAD, to obtain a punitive damage award, plaintiff must prove actual participation in or willful indifference to the wrongful conduct on the part of upper management; and proof that the offending conduct was especially egregious. In this case, the trial court adequately charged the jury with regard to punitive damages and the proofs were sufficient to sustain the punitive-damages award. (pp. 25-30)
3. Under the LAD and other fee-shifting statutes, the most important step in the fee-setting process is to determine the lodestar, which is the number of hours reasonably expended, multiplied by a reasonable hourly rate. That requires the trial court to carefully evaluate the aggregate hours and specific hourly rates advanced by counsel for the prevailing patty to support the fee application, and in its discretion to exclude excessive hours from the lodestar calculation. In addition, federal fee-shifting statutes do not require proportionality between damages recovered and counsel fee awards, although damages recovered are a factor bearing on the reasonableness of counsel fee awards. (pp. 35-60)
4. As a matter of economic reality and simple fairness, a counsel fee award under a fee-shifting statute cannot be "reasonable" unless the lodestar, calculated as if the attorney's compensation were guaranteed regardless of result, is adjusted to reflect the actual risk that the attorney will not receive payment if the suit does not succeed. The Court adopts standards to guide the award of contingency enhancements that will address concerns about overpayment and double counting. Those standards will serve as a limit on the amount of contingency enhancements and will require a relationship between the amount of the enhancement awarded and the extent of the risk of nonpayment assumed by counsel for the prevailing party. (pp. 60-64)
5. The trial court must determine whether a case was taken on a contingent basis, whether the attorney was able to mitigate the risk of nonpayment in any way, and whether other economic risks were aggravated by the contingency of payment. It is the actual risk or burden that the lawyer bears that determines whether an upward adjustment is called for. Attorneys who are paid a portion of their reasonable hourly fee irrespective of the result, as well as attorneys who entered into contingency fee agreements with clients, have partially mitigated the risk of non-payment. The trial court may take into account the likelihood of success and, if the likelihood of success is unusually strong, a court may properly consider the inherent strength in the prevailing party's claim in determining the amount of contingency enhancement. Moreover, there need not be evidence in the record that without risk enhancement plaintiff would have faced substantial difficulties in finding counsel in the local market. (pp. 64-68)
6. Contingency enhancements in fee-shifting cases ordinarily should range between five and fifty-percent of the lodestar fee, with the enhancement in typical contingency cases ranging between twenty and thirty-five percent of the lodestar. Here, the Court exercises original jurisdiction and modifies the counsel-fee award. The lodestar fee is reasonable but the award of double the lodestar is excessive. Strong evidence supported the jury's finding of unlawful discrimination, suggesting that the risk of non-payment was also somewhat mitigated by the strength of plaintiffs' case. Thus, a contingency enhancement equal to one-third of the lodestar fee is appropriate. (pp. 68-72)
As MODIFIED, judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and COLEMAN join in JUSTICE STEIN's opinion.
The opinion of the Court was delivered by STEIN, J.
Plaintiffs, Candy Rendine and Bernadette Lorestani, brought this action pursuant to The Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42, seeking damages primarily on the basis that their employment wrongfully was terminated because they had become pregnant. Their claims were tried jointly. See R. 4:29-1. After a jury verdict, Rendine recovered a judgment of $460,000, consisting of $225,000 in compensatory damages and $250,000 in punitive damages; Lorestani's judgment of $475,000 consisted of $225,000 in compensatory damages and $250,000 in punitive damages. Both plaintiffs also recovered prejudgment interest, counsel fees, and costs. The Appellate Division affirmed the judgment in all respects, 276 N.J. Super. 398 (1994), one member of the panel Dissenting only from the court's affirmance of the portion of the judgment reflecting the jury's award of punitive damages. Defendant, Edward Pantzer, owner and president of Pantzer Management Company, appeals as of right from the judgment awarding punitive damages to plaintiffs. R. 2:2-1 (a) (2). We granted Pantzer's Petition for Certification raising issues concerning joinder, adequacy of jury instructions, emotional-distress damages, and counsel fees. 138 N.J. 272 (1994).
We adopt and set forth the comprehensive summary of the trial testimony included in the Appellate Division opinion:
Plaintiff Rendine earned a degree in accounting in 1979 and then worked as an auditor and financial analyst with a bank for four years. In 1983 she accepted a position with defendant as assistant controller. Defendant Edward Pantzer was the president and owner of the company and Michael Pantzer (Michael), his brother, was the executive vice-president. In 1985 they hired Steve Weinerman as controller; he was Rendine's immediate superior.
When defendant first interviewed Rendine, he asked her if she had plans to marry and have children "within five years of being married." Rendine answered that she "hoped to be married," but had no plans for children. As assistant controller of residential properties, Rendine supervised "a staff of accountants for accounts receivable, accounts payable, security refund ... [and] payroll." There were about twenty employees at the central office in Tenafly, plus others who worked at the various properties. Rendine was a member of the executive committee, which met weekly and made "all the major decisions of the company." The other members of the committee were the defendant Edward Pantzer, Michael Pantzer, Weinerman, who was Michael's assistant, and Bill Bodger, head of acquisitions.
When Rendine began work, her first assignment was to revamp a six-month old computer system, verifying information about thousands of tenants at numerous properties. She spent some three months visiting the properties in New Jersey, Pennsylvania and Delaware, collecting the information, and then entering it into the computer. She worked every evening until six or seven and sometimes until nine. Rendine also prepared a manual explaining the procedure for entering information into the computer.
In 1984, after Rendine announced her engagement to marry, she said that defendant called her into his office and asked her to polish some silver for him. "He said that since I was getting married and probably going to have silver once I was married, that it would be good practice for me to polish his silver." Rendine politely declined. Defendant denied that this occurred.
With her November annual performance reviews, Rendine received a fourteen-percent salary increase in 1984, fourteen percent in 1985, and eleven percent in 1986. She also received Christmas bonuses for these years of $2500, $1500, and $2500. In January 1986 Michael wrote Rendine a letter, thanking her for doing a good job. Suzanne Rivera, one of the employees whom Rendine supervised, corroborated her competence and ability, and her patience and fairness in dealing with those who worked under her.
Lorestani was hired as a staff accountant to assist Rendine in June 1984. She had five years' experience in bookkeeping or accounting and she earned an accounting degree in 1985. In her job interview, defendant asked her whether she was married, and she said she was engaged. He also asked if she planned to have children. She answered that she "wasn't really thinking at that point about children." Rivera, who was hired in June 1987, was also asked in her job interview about plans to have children.
Lorestani monitored the apartments occupied by defendant's employees, met with Michael each month to review them, and assisted Rendine with the preparation of financial reports. Rendine, who trained Lorestani, thought she was "a very good employee.... She executed all her functions well." Rivera corroborated Lorestani's competence and excellent job performance. Weinerman was also very happy with Lorestani's job performance. Five months after she was hired, Lorestani, whose starting salary was $19,000 a year, received an eleven-percent increment. The following year, 1986, she again received an eleven-percent increment, and in 1987 she received a twelve-percent increment. She also received Christmas bonuses in the amounts of $500 in 1984, and $1000 in 1985 and 1986.
Lorestani's responsibilities increased during the time she worked for defendant. She assumed responsibility for dealing with the managers in the field and took over the cash reconciliations and money-market account activity on about twenty properties. She worked long hours, arriving early in the morning, frequently staying until 7 p.m., and also working on weekends when needed.
Plaintiffs were "inundated" with work, including new properties, and Rendine decided that a bookkeeper should be hired. After consultations with Weinerman and defendant, the bookkeeper position was created. Pam Gaetano was hired in 1987; she worked under Lorestani, who trained her. Rendine evaluated Gaetano, and found her to be "an okay employee." With no math or accounting background, Gaetano "continually had problems understanding .. . a bank reconciliation, doing anything that really had to do with math." Although both Rendine and Lorestani "kept on trying to train her extensively," Rendine felt that Gaetano was unable "to take on staff accountant responsibilities."
An other staff accountant, Dominic Battista, was hired in 1985 or 1986 but he left after about a year. When Lorestani began working with defendant, she was assigned to clean the kitchen. However, when Battista was hired, she "noticed that he did not have kitchen duty. So, I talked to Mr. Michael Pantzer and I asked why that was, and he took me off of the kitchen duty instead of putting Dominic on."
Before Battista was hired, Weinerman told Rendine that "he wanted to hire a male for that position, that they really would not consider a female at that time." He told her that:
It would be in the best interests of the company to look for a male because Bernadette and I had recently been married and we were of child bearing age and our, what do they call it, our biological clock was ticking to have children, our time was running out because we were getting older.
The issue of the gender of the new accountant was discussed at an executive committee meeting, where everyone except Rendine agreed with Weinerman's theory. Weinerman denied making this comment.
Rendine was married in December 1984 and purchased a home with a substantial mortgage in October 1985. Her husband's salary was about the same as hers. Both salaries were needed to carry the home. Lorestani was married in May 1985, and purchased a home, with a mortgage, in November 1985. Both Lorestani and her husband had substantial student loans to repay and were supporting her husband's younger sister. Lorestani and her husband were both earning the same salary; both incomes were needed for their support.
In late December 1986 or early January 1987 Lorestani told Michael Pantzer that she was pregnant. She told him that she planned to return to work, and that her sister would take care of her child. "He was very happy for me. He congratulated me." When asked when she would return, Lorestani answered in four or five weeks with a regular delivery, or six to eight weeks if she needed a Caesarean. Lorestani discussed her maternity leave many times with defendant, his brother, Michael, and Weinerman. She repeatedly told each that she planned to return to work when she was physically able. They each assured her that her job would be available on return. Rendine also announced her pregnancy in January 1987 and defendant, Michael and Weinerman all "appeared to be happy for me." She advised them from the outset that she planned to take at least three months' maternity leave, and then return to work. On several occasions, she was assured that "your job will be waiting for you." Rendine testified about an executive committee meeting while she was pregnant, at which her colleagues said that she looked like a "beached salmon." However, defendant and Michael denied that they or anyone else made any jokes or comments about pregnancy in general or about Rendine in particular. Defendant said that he would not tolerate any such remarks, or discrimination in his company.
Dean Delianites, a CPA as of 1985, with four years' experience in public accounting, was hired as commercial accounting manager in November 1986. Rendine saw him leave work early, at 4 p.m. every day, to attend law school. Rivera corroborated that Delianites left work early, adding that Delianites told the staff that he would make up the time "by working through his lunch hour," but Rivera saw him studying law while eating at his desk.
Rendine's duties were divided between Delianites and Weinerman while she was on maternity leave. She had attempted to train Delianites but he was "too busy" and uninterested. Rendine worked with residential buildings, an area in which Delianites had no experience or training. Lorestani and Rendine trained Gaetano to take over Lorestani's duties but Gaetano had difficulty learning the work.
Lorestani started her maternity leave on June 15, 1987, on the advice of her doctor. This was two weeks earlier than planned because she developed toxemia. On her last day of work, she talked to defendant "and he wished me luck, he said he hoped everything worked out fine and he gave me a hug and he told me my job would be waiting for me."
Lorestani delivered by Caesarean on July 13, 1987. Her husband called her office that day, and she called a few days later. Weinerman congratulated her and told her to take as much time off as she needed and said her job would be waiting. Michael also congratulated her, told her that a return to work in six to eight weeks would not be a problem, and also said her job was waiting for her.
Weinerman called her at home the day she was discharged from the hospital, and asked her for a date of return. She told him it would be six to eight weeks, and "he said fine and when I was ready, my job was there for me." Lorestani talked to someone in the office at least once a week during her maternity leave. Weinerman always asked her when she would return, and she always told him six to eight weeks.
In August, when eight weeks passed, Lorestani arranged an appointment with Weinerman to discuss her return. She had made her child-care arrangements, was excited about returning, and brought her baby with her for the appointment with Weinerman. Weinerman "told me that things were running very smoothly and that there was no longer a place for me and he was firing me." Weinerman denied terminating Lorestani on this particular day; rather, when she called in early September to say she was ready to return, he told her on the telephone that he had no job for her. However, Rivera saw Lorestani that day at the office, arriving happy and showing off her new baby. When she left Weinerman's office, she approached Rivera; she was upset and crying, and "she told me she had just been fired."
Meanwhile, Rendine's last day of work was July 24, 1987, and she gave birth early, on July 26. About a week later, Weinerman called and told her that they were promoting Gaetano from bookkeeper to staff accountant. In August 1987 Rendine received a memo from Michael, dated August 19, to all defendant's personnel, advising that as of August 12 Delianites was promoted to the position of assistant controller, and Gaetano was promoted to the position of staff accountant. The memo also announced that Rendine had given birth to a baby girl, and Lorestani to a baby boy. "As soon as their maternity leaves are over, we enthusiastically welcome the return of both Candy and Bernadette to the accounting department."
Rendine was shocked. In her conversation with Weinerman a week before, he had not mentioned Delianites's promotion. She felt that her position with the company was endangered, since there was no need for two assistant controllers. "I was being replaced and I had only been out of work for three weeks." She immediately called Weinerman, who "said that they felt the need to promote these two people."
About a week later Rendine called the office "just to see how everything was going, if anybody needed me." She discovered that "Dean had taken over my desk," including "access to all my personal belongings." She then called Michael, who was "very cold." She was upset because she had always had a fine relationship with Michael, who attended her wedding with his wife.
In October 1987 Rendine met with Michael and Weinerman to discuss her return; she was given a memo entitled "Candy's Responsibilities." She was told that she would retain her title but would no longer have the responsibilities and authority she had before. Her new job was to work on special projects. However, she had already worked on the special projects listed, and they required very little time. Rendine's new job duties were "practically nothing" compared to "the responsibilities I had before I went on maternity leave" and would have taken her about three days a month to complete.
Rendine returned to work on November 11, 1987, after an absence of thirteen or fourteen weeks. Her desk was "isolated from the other employees." It was "right next to the men's bathroom," noisy and filthy dirty. She spent the first day cleaning it. There were no office supplies and no access to the computer. Her "personal belongings were scattered all over the office." No work was assigned to her the first day.
Defendant, who had expressed appreciation for her work just a month before she left, was now very cold toward her, "and I felt like a stranger." Michael, with whom she had worked closely and had a "wonderful working relationship," was also cold. Weinerman, with whom she had had "a friendly, amicable working relationship," was now "very short," talking to her only when necessary. The people in the office whom Rendine had supervised, and whose questions she spent most of her day answering, "wouldn't even talk to me."
Rivera corroborated Rendine's account of her return to work. According to Rivera, Rendine had more knowledge about the residential accounting functions, but Weinerman and Delianites told the staff that Delianites would be handling their questions. Delianites admitted that in November 1987, when Rendine returned from maternity leave, he was still learning her job. Nevertheless, Weinerman reprimanded Rivera and two others for taking their questions to Rendine rather than Delianites.
According to Weinerman, Delianites complained about Rendine's socializing and her job performance. Once, Rendine went onto the computer without checking first, "and it caused a minor problem." On another occasion, when Delianites asked her to correct some journal entries that she had worked on, "she told him she was too busy." Rendine explained that routine office procedure, to return journal entries to the person who wrote them, to review for accuracy, had not been followed.
Early the following week, Weinerman called Rendine into his office. He told her that he had complaints about her, that she had a bad attitude, and that she had better change. He told her that "things ran smoothly when I wasn't there" and that "people were complaining that I was socializing." He talked for five minutes, refusing to listen to anything Rendine had to say. Rendine became angry, because "people had a bad attitude toward me." Weinerman "kept on yelling." Rendine said "I can't take this any more," and "this is not fair." She got up and walked out. Weinerman "told me that if I left, that would be it." When Rendine asked, "does this mean you're firing me?" Weinerman answered yes, and discharged her.
Weinerman basically corroborated Rendine's account of their verbal encounter, and asserted that he terminated her because she was insubordinate. Defendant, Michael and Weinerman denied any prior Discussion, plans or intent to terminate Rendine. Weinerman and Michael denied that their attitude toward Rendine was cold when she returned from her leave, and denied telling staff not to speak with her.
Defendant, Michael and Weinerman all considered Rendine a valuable employee. However, they said she lacked supervisory experience; her interpersonal skills were mediocre; she had difficulty dealing with people; she was unnecessarily "demanding and short with her people," and had conflicts with them.
According to Weinerman, when Delianites took over Rendine's job, the situation in the office improved. Delianites was capable of handling Rendine's responsibilities and did so effectively. "People started working more closely together without problems.... very good working rapport developed in the office. Everybody respected Dean" Delianites.
However, on cross-examination Weinerman admitted that in his last evaluation of Rendine, in 1986, he rated her above average in effectiveness in dealing with others, and in all of the other specific review factors. In contrast, Delianites was not rated any higher than Rendine, and was rated lower than her in leadership. Rivera, who worked under Delianites for four months, thought that "he did not have enough knowledge to run the department well," and she "had to train him" in her field, security deposit refunds.
Weinerman admitted that he agreed to keep Rendine's job open for her, but never "discussed a time frame," and never promised her that her responsibilities would be the same. According to Weinerman, Rendine told ...