On certification to the Superior Court, Appellate Division, whose opinion is reported at
Stein, J. 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).
MERYL SZCZEPANSKI V. NEWCOMB MEDICAL CENTER, INC., ET AL. (A-117/118-94)
(NOTE: This is a companion case to Rendine v. Pantzer also decided today.)
Argued March 13, 1995 -- Decided July 24, 1995
STEIN, J., writing for a unanimous Court.
In this case, the Court considers the extent to which a plaintiff's contingent fee agreement with her attorney limits or affects the award of a reasonable attorney's fee.
Meryl Szczepanski was a registered nurse employed by Favorite Nurses, Inc. (Favorite), which assigned her to work in the intensive-care unit of Newcomb Hospital, Inc. (Newcomb). In August 1987, Dr. Elmer Mattioli approached Szczepanski from behind and inappropriately touched Szczepanski in a sexual manner. After plaintiff displayed outrage, Mattioli responded with inappropriate movements and remarks.
Szczepanski immediately reported the incident to Newcomb. Newcomb told Szczepanski that it no longer needed her nursing services and told Favorite not to send her to Newcomb because she had filed a complaint against Mattioli. Favorite failed to reassign Szczepanski to any other hospital, falsely telling her that no work was available. Moreover, in an attempt to substantiate that she had been dismissed because of substandard performance, Newcomb falsified patient records, accused her of incompetence, and claimed that it had fired her moments before she had reported the sexual-misconduct incident. Newcomb did not investigate the incident and did not discipline Mattioli.
In August 1988, Szczepanski filed suit against Mattioli for sexual assault and battery and intentional infliction of emotional distress, seeking compensatory and punitive damages and counsel fees. In February 1989, Szczepanski filed an amended complaint adding as defendants Favorite, Newcomb, Newcomb's chief executive officer and two Newcomb supervisors. Among other things, Szczepanski charged Newcomb, Favorite, and her supervisors with retaliatory discharge, contrary to the Law Against Discrimination (LAD).
After a month-long trial, the jury, among other things, found for Szczepanski on the retaliatory discharge claim against Newcomb and Favorit. Szczepanski's total recovery was $115,441, which included prejudgment interest.
Szczepanski's attorney made an application against Newcomb and Favorite for counsel fees pursuant to the LAD. In her certification, counsel asserted that she had spent 676.8 hours on the litigation and had incurred costs of $3,906.02. Counsel's certification noted that most of her recorded time sheets were no longer available as a result of a "personnel problem" and that she had reconstructed the hours by reviewing her files. Pursuant to her regular hourly rate of $200, counsel calculated her lodestar fee amount to be $135,360. Counsel then requested a one-hundred-percent enhancement of that amount to reflect the contingent nature of her compensation agreement, for a total counsel fee award of $270,720 plus costs. In June 1993, Szczepanski's attorney submitted a supplemental certification performed since the first certification, which increased the total for fees and costs to $278,740.
The trial court found that the contingent-fee agreement between Szczepanski and her attorney served as the upper limit on any fee that it could award. The Appellate Division reversed and remanded for a reconsideration of Szczepanski's application for fees, finding that the existence of a contingency fee arrangement does not control the fee-award outcome; rather, it is only a fact to be considered in determining a reasonable fee award.
The Supreme Court granted Newcomb's and Favorite's petition for certification.
HELD: Although relevant, the fee payable under a contingent-fee agreement may bear little relation to the reasonable fee award authorized by a fee-shifting statute, and should not serve as the ceiling on the amount payable by statute.
1. The first and most important step in the process of determining a reasonable counsel fee is the determination of the lodestar. According to the U.S. Supreme Court, federal fee-shifting statutes do not require proportionality between counsel fee-awards and damage recoveries, although the amount of damages awarded is a material factor in setting a reasonable fee. (pp. 7-10)
2. The terms of the contingent-fee agreement is a factor in determining a reasonable fee under federal and state fee-shifting statutes. The U.S. Supreme Court has rejected the contention that the statutory fee may not exceed the amount payable pursuant to the contingent-fee agreement. Reasonable counsel fees payable to the prevailing party under fee-shifting statutes is determined independently of the provisions of the fee agreement between the party and his or her counsel. The focus of the determination is to ascertain what fee is reasonable, taking into account the hours expended, the lawyer's customary hourly rate, the success achieved, the risk of non-payment and other material factors. (pp. 10-15)
3. The matter should be remanded to the Law Division for reconsideration of the counsel-fee award. New Jersey's fee-shifting statutes will not be construed to require proportionality between the damages recovered and counsel-fee awards even if the litigation, as in this case, vindicates no rights other than those of the plaintiff. An overriding public interest is also served by plaintiff's successful prosecution of this retaliatory-discharge claim; her recovery of damages fulfills and vindicates the legislative purpose of preventing employers from retaliating unjustly against employees who oppose practices or acts forbidden by the LAD. (pp. 15-25)
4. A trial court should carefully and closely examine a lodestar-fee request to verify that the attorney's hours were reasonably expended; the extent to which a defendant's discovery posture, or a plaintiff's posture, has caused any excess expenses to be incurred; and what legal services reasonably competent counsel would consider as required to vindicate the protected legal or constitutional rights. The trial court's responsibility is heightened in cases in which the fee requested is disproportionate to the damages recovered. In such cases, the trial court should evaluate not only the damages prospectively recoverable and actually recovered, but also the interest to be vindicated in the context of the statutory objectives, as well as any circumstances incidental to the litigation that directly or indirectly affected the extent of counsel's efforts. Based on that evaluation, if the court determines that the hours expended exceeds what competent counsel reasonably would have expended to achieve a comparable result, the court may exercise its discretion to exclude excessive hours from the lodestar calculation. (pp. 25-26)
5. Although the use of contemporaneously recorded time records is the preferred practice to verify hours expended by counsel in connection with a counsel-fee application, fee applications for services rendered may be supported by reconstructed time records. The trial court on remand should carefully scrutinize counsel's calculation of hours expended to verify the reasonableness of the hours reflected by the reconstructed records. (pp. 25-28)
Judgment of the Appellate Division is AFFIRMED and the matter is REMANDED to the Law Division for further proceedings consistent with this opinion and with Rendine.
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.
As in Rendine v. Pantzer, N.J. , 649 A.2d 1291 (1995), also decided today, this appeal concerns the standards to be applied by trial courts in awarding a reasonable counsel fee under state fee-shifting statutes. Specifically, we consider the extent to which a plaintiff's contingent fee agreement with her attorney limits or affects the award of a reasonable attorney's fee. Collaterally, we address whether a reasonable attorney's fee awarded under a state fee-shifting statute must necessarily be proportionate to the damages recovered in the litigation. Finally, we consider whether the submission of contemporaneous time records is a prerequisite to the award of fees under state fee-shifting statutes.
Because plaintiff's factual presentation is uncontested, we rely on the facts set forth in plaintiff's appellate brief. Plaintiff, Meryl Szczepanski, was a registered nurse employed by Favorite Nurses, Inc. (Favorite), which assigned her to work at the intensive-care unit of Newcomb Hospital, Inc. (Newcomb). In August 1987, defendant Dr. Elmer Mattioli approached plaintiff from behind, reached between her legs, and grabbed her anal-genital area. After plaintiff ...