On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-346-05.
The opinion of the court was delivered by: Miniman, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: May 12, 2010 -- Decided: Before Judges Cuff, C.L. Miniman and Fasciale.
The opinion of the court was delivered by MINIMAN, J.A.D.
Defendants Avaya, Inc. (Avaya), and M. Foster Werner, Jr. (Werner), appeal from a judgment in favor of plaintiff Nicholas Saffos in the amount of $5,633,707.37, inclusive of prejudgment interest, costs, and attorneys' fees. Plaintiff cross-appeals from a $6,285,000 reduction in the amount of the punitive-damage award. We affirm in all respects save the quantum of punitive damages; the attorney-fee lodestar, which we modify; and the award of a contingency-fee enhancement, which we reverse.
Plaintiff, born in 1954, began working for AT&T in 1983 in the corporate real estate department. AT&T created Lucent Technologies (Lucent) to take over the business of Bell Laboratories. In 1995 or 1996, plaintiff transferred to Lucent's real estate department. Avaya was created in 2000 to take over the Business Communications unit of Lucent. Plaintiff then moved into Avaya's Global Real Estate (AGRE) group as a Business Relationship Manager with an annual salary of $83,000. AGRE worked to provide suitable real estate for Avaya's divisions and global affiliates, and to control real estate costs.
On May 20, 2002, Werner was hired as AGRE's director. AGRE had about twenty-four employees at that time. At trial, Werner claimed that AGRE had hired him to improve its reputation, performance, and profitability and testified that he was to reduce costs. He decided to hire people that he personally knew or people recommended by acquaintances he knew and respected.
Upon arriving in Basking Ridge, Werner began reorganizing the office and restructuring AGRE. He changed the names of titles and asked off-site employees to relocate to New Jersey. He also began eliminating AGRE employees who had been holdovers from Lucent and AT&T. First, Werner placed Lee Gruhin, age forty and a twelve-year veteran of Avaya and its predecessors, on a one-month performance improvement plan (PIP), after which he was terminated on August 1, 2002, for "unsatisfactory performance" despite always having had solidly good prior performance reviews.*fn1 Gruhin was replaced by Mark Kennedy, age forty-four, who transferred into AGRE from Avaya's finance department approximately six months later.
Werner next fired four employees under a Forced Management Plan (FMP), including Nancy Glenn, age forty-seven, and Steve Sarasin, age forty-three. An FMP supposedly eliminates positions to create cost savings. Glenn, who was a twenty-one-year veteran of Avaya and its predecessors, had always received exceptional performance evaluations and IPF scores.*fn2 She was working in Colorado and offered to relocate to New Jersey at her own expense, but Werner refused, advising her that there was no money for moving.
When Glenn saw an internal posting of her job on Avaya's system, she complained to the Human Resources Department (HR), but they told her she did not have a case and to "have a good life." On September 29, 2002, while still on Avaya's payroll, she sent an email describing Werner's actions to Amar Pai, Werner's supervisor, the Vice President of Finance Operations and Corporate Controller. Glenn never received a response.
Despite having ostensibly eliminated four positions with the FMP, Werner soon replaced Glenn and Sarasin with Eileen Grippo, age thirty-three, and Nina Caputo, age thirty-four. When Caputo was hired, Werner authorized payment of her relocation expenses, unlike Glenn.
In or about January 2003, Werner told Robert Goeller, age forty-one and a Lease Administrator, to develop a PIP to make "major improvements" to his performance based on an evaluation dated November 2002. He then fired him on February 28, 2003, for unsatisfactory performance and replaced him with Michele Costa, age twenty-eight.
Grippo, who replaced Glenn, testified that Werner created a divisive environment at AGRE. The department was divided into two "camps," the older employees in one group and the younger employees in a totally separate, "favored" group. "It was clear as day." She explained that Werner insulted the older employees behind their backs but was charming and flattering to the younger ones, frequently asked the younger group to join him for lunch, and had them accompany him to corporate meetings, all to the exclusion of the older group.
Werner especially "abused" Susan Bernarducci, age fifty-one, his administrative assistant. When Grippo complained about the different camps to Werner, he started ignoring her. Consequently, she soon resigned, because "[i]t was not a pleasant place to come to work" and Werner "abused people."
In Werner's deposition, read to the jury, he testified that Grippo left AGRE because she was unhappy working with plaintiff due to plaintiff's "complete lack of oral and written communication skills." Grippo flatly denied this at trial, saying, "Not true." Grippo also testified that plaintiff, who had been doing the work of two or three people before she arrived, "seemed to do his job really well." Although he had a "quirky type of communication" style and "talked slow[ly] and deliberate[ly]," he "served his clients very well" and "had a good rapport with them."
Tom Cotter and Mike Ahnell, outside contractors who worked for United Systems Integrators (USI) at AGRE's offices, both testified about Werner's favored treatment of his younger, mostly female, new hires. Werner frequently yelled at Bernarducci and often brought her to tears. The office "was kind of a hostile atmosphere." If you were not part of Werner's "little inner circle" comprised of the new younger people he had hired, you "were clearly on the outside." Everyone seemed "a bit frightened."
Plaintiff had received more-than-favorable performance reviews in the past. Cotter testified that plaintiff had been "an excellent employee," was "well organized," and all of his clients were happy. One of plaintiff's "strengths" was his communication skills. Ahnell from USI had also worked with plaintiff and found him to be "competent" and "able to address the needs of the job." Ahnell never had any problems with plaintiff's communication skills.
Cotter and Ahnell testified that Werner was very critical of Bernarducci's skills, saying that she "couldn't even do a simple business letter." Werner moved Bernarducci to a new position, Business Analyst II, and then ignored her requests for guidance on her new responsibilities. Werner soon put her on a PIP and then terminated her employment for poor performance shortly thereafter. Bernarducci testified that her complaints to HR about how she was being treated were ignored.
Courtney McGough, age thirty-three, replaced Bernarducci as Werner's assistant. She was hired in December 2002 as a "Real Estate Coordinator" but was quickly promoted to a Business Relationship Manager after Grippo resigned. Werner then filled McGough's former position with Kerri Hollick, age twenty-eight, and later with Jennifer DeSilva, age twenty-two.
Werner soon began examining plaintiff's work. In fact, when Werner first arrived at Avaya in 2002, Werner gave plaintiff a "fairly favorable" evaluation and a raise. Despite that 2002 evaluation, in 2003 Werner suddenly found plaintiff to be verbose with a meandering style of communication that was confusing to colleagues and clients. He complained that plaintiff "used big words that weren't necessary" in business, such as "trenchant," "salient," "vanquished," "transmuting," and "fathom."
Werner complained that plaintiff failed to tell him about business problems in a timely fashion and refused to get proper approvals before sending documents to clients. For example, in early September 2002, plaintiff failed to notify him that Avaya was in danger of having a substantial penalty assessed against it because one of its clients in Mexico City had not signed a lease renewal. However, plaintiff testified that he had received the required lease extensions before he left work; thus, there was no risk of any penalties.
Werner also complained that plaintiff emailed internal work-product documents to clients before they were approved and told clients that they could explore other sites on their own. Werner said that these actions violated "policies" that he had established, but admitted he had never documented the alleged "policies." Werner also claimed that he was told by plaintiff's co-workers that clients were unhappy with plaintiff's work.
Based on the foregoing "concerns," Werner placed plaintiff on a PIP on August 26, 2003. He told plaintiff that he had problems with "his writing style, which was not a normal business writing style," and his attitude was inappropriate. He gave plaintiff one month to improve and said he needed to devise his own improvement plan. Plaintiff repeatedly asked Werner for guidance, but Werner ignored his request to see the work product of a "more favorably reviewed associate" for comparison. Consequently, plaintiff was forced to write his own plan, using what he thought were criticisms from his review and adding weekly steps he would take to correct them.
At their first PIP meeting, Werner found plaintiff's plan to be "incomplete," although he made no other criticisms of plaintiff's performance. Werner claimed that plaintiff was not taking the PIP seriously. As a result, Werner gave plaintiff several job openings to explore. Werner terminated plaintiff's employment on September 26, 2003. Plaintiff was forty-nine years old.
Werner replaced plaintiff with Carol Puleo Clark, age thirty-five, who had very little real estate experience. Thereafter, Werner fired John Cook,*fn3 age forty-seven, and Prahans Amin, age thirty-three, for "poor performance." Werner replaced Cook with Simon Ford, age thirty-four.
For each employment action, Werner consulted Ann Marie Judice Bane, his HR liaison. Bane testified that part of her job was "coaching" managers on how to terminate employees and minimize the risk of a lawsuit. Werner said that she "guided" him through the termination process for each employee. For example, Bane told Werner that he could not fire plaintiff under an FMP because they wanted someone new to fill his position. Instead, she told Werner to put plaintiff on a PIP. When Bane raised a concern that Werner was hiring new people who had little or no real estate experience, Werner told her that he knew what he was doing after thirty years in the industry. Bane admitted that Avaya did not use PIPs as standard personnel procedures; they were "more of a Lucent Technologies process."
Werner admitted that he had failed to institute a PIP for Billy Karras, age thirty-three, after Karras indisputably violated AGRE's written code of conduct and accounting control policy. Instead, he gave Karras a "warning" and never fired him. Werner also had given Grippo, age thirty-three, a warning after she met with a client without Werner's prior approval.
In July 2004, Werner's supervisor, Pai, fired him at age fifty-five for poor performance and then replaced him with Andrew Fellouris, age forty. Werner filed an age-discrimination claim against Avaya, which it settled before trial in this matter. The judge permitted the jury to hear testimony about this settlement because it was relevant to Werner's credibility but failed to give the jury a limiting instruction on its use.
Although Pai, Werner's supervisor, had been aware of Werner's actions and eventually fired him, Pai said that he "trusted [his] evaluation of his people and his team." He claimed that he never instructed Werner to fire older people or hire younger ones, and he never heard anyone say that Werner had a bias against older employees (despite the email Glenn sent to him in September 2002).
In excerpts from Werner's deposition that were read to the jury, he testified that he believed that Pai was concerned that age was a detriment at Avaya and preferred younger workers. In his own discrimination suit, Werner stated that Pai engaged in a general pattern of firing older workers and hiring younger ones.
Plaintiff testified that, after his termination, he felt vulnerable and depressed because he was no longer working. His emotional distress and depression worsened over time as his unemployment continued. He searched for a job for nearly a year and a half, sending out hundreds of resumes and retaining professional search firms to find a job comparable to his Avaya position. In the meantime, he worked at a Barnes & Noble store and at a Saab dealership. Also, he became affiliated with Houlihan Lawrence Real Estate (Houlihan Lawrence) and earned a real estate license. He soon realized that he was not going to earn an adequate income at Houlihan Lawrence*fn4 so he decided to pursue franchise opportunities, eventually purchasing a MAACO franchise. Plaintiff's debts mounted to over $630,000, and he used most of his savings to fund the MAACO venture, adding to his emotional distress.
Debra Saffos, plaintiff's wife of twenty-eight years, testified that he had always enjoyed his work and looked forward to going to the office. However, Debra testified that, the year before he was fired, he complained that the atmosphere at Avaya had changed and he seemed uncomfortable to her. He told Debra that his workload had increased and that he was doing the work of other people, especially if new hires had no real estate experience.
Debra testified that getting fired "was devastating to him." It made him "very disappointed, very frustrated, very upset," as he had expected to always be working at Avaya in the real estate department. He became withdrawn, he was depressed, he was frustrated, he had many sleepless nights, and his job search was endless, and he spent a lot of time searching for a job. And--and when he wasn't a candidate for a particular job he was very frustrated and very--very upset and anxious about trying to get back to work as soon as possible.
Frank D. Tinari, Ph.D., an economist, testified for plaintiff as an expert in economics and the calculation of economic damages. He opined that plaintiff's economic losses totaled $499,912, including (1) $402,000 in back pay to April 2008; (2) $78,966 in front pay to the end of 2009, when the MAACO franchise "made enough money [to be] comparable to what he would have had at Avaya"; (3) $7425 in stock-option income; (4) $4725 in employee-stock-purchase-plan income; and (5) $6600 in out-of-pocket expenses paid to employment agencies.*fn5
The jury was presented with a chart demonstrating that the average age of AGRE's workforce after two years of Werner's leadership was ten years younger than it had been before he arrived. In all, nine employees were terminated, and eight were hired as replacements.
The jury returned a verdict in plaintiff's favor, awarding him $250,000 for his emotional distress; $325,500 for back pay; and $167,500 for front pay. On June 17, 2007, the judge found sufficient facts for the jury to consider punitive damages. The parties stipulated Avaya's value at $4 billion, and the jury awarded $10,000,000 for punitive damages. First, the judge entered an order of judgment on the jury's compensatory damages award and ordered defendants to pay $93,278.37 for prejudgment interest on the awards for emotional damages and lost back pay.
Second, the judge considered defendants' motion for judgment notwithstanding the verdict (JNOV) or for a new trial and remitted the punitive-damage award to $3,715,000 (five times the compensatory award). He subsequently awarded $843,638 for attorneys' fees; $210,909 as a twenty-five percent fee enhancement; and $27,882 for costs, bringing the total judgment to $5,633,707.37. Defendants appealed these rulings, and plaintiff cross-appealed the remittitur of the punitive-damage award. The parties have raised the following issues for our consideration.
First, defendants contend that the trial judge erred in failing to grant their post-trial motions because (a) plain-tiff's age-discrimination claim failed as a matter of law, entitling them to JNOV; and (b) the judge made three prejudicial evidentiary errors requiring a new trial.
Second, they contend that (a) the compensatory-damage award must be significantly remitted because the emotional-distress damages were not fair or reasonable; and (b) the economic-damage award must be vacated or reduced because (1) after-acquired evidence precludes or limits economic damages, and (2) plaintiff failed to mitigate such damages.
Third, defendants assert that (a) the remitted punitive-damage award was unjustified because plaintiff failed to show that Avaya's conduct was "especially egregious"; (b) the remitted award is unconstitutionally excessive since Avaya's conduct was not reprehensible; (c) the judge erred in allowing punitive damages in excess of the compensatory award; and (d) the award greatly exceeded comparable civil penalties.
Fourth, defendants argue that (a) the attorney-fee award should be barred because the retainer agreement violated the Rules of Professional Conduct (R.P.C.); (b) the lodestar was excessive; and (c) the fee enhancement was likewise excessive.
Plaintiff disputes each of the issues raised by defendants and contends on his cross-appeal that the punitive damages awarded by the jury did not contravene New Jersey's Punitive Damages Act (PDA), N.J.S.A. 2A:15-5.9 to -5.17, because the Legislature excepted punitive-damage awards for violation of the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49, from the PDA cap. Further, he argues that the punitive-damage award conformed to the requirement of the federal and state constitutions.
Our appellate review is limited by well-settled, controlling principles. Sebring Assocs. v. Coyle, 347 N.J. Super. 414, 424 (App. Div.), certif. denied, 172 N.J. 355 (2002). "We are not to review the record from the point of view of how we would have decided the matter if we were the court of first instance." Ibid. (citation omitted). "Findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (citation omitted).
"While we will defer to the trial court's factual findings so long as they are supported by sufficient, credible evidence in the record, our review of the trial court's legal conclusions is de novo." 30 River Court E. Urban Renewal Co. v. Capograsso, 383 N.J. Super. 470, 476 (App. Div. 2006) (citing Rova Farms, supra, 65 N.J. at 483-84; Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
We may only reverse a trial judge's ruling on a motion for a new trial where "it clearly appears that there was a miscarriage of justice under the law." R. 2:10-1. "The standard for appellate review of a trial court's decision on a motion for a new trial is substantially the same as that controlling the trial court except that due deference should be made to its 'feel of the case,' including credibility." Feldman v. Lederle Labs., 97 N.J. 429, 463 (1984).
At the same time, a trial court's determination is "not entitled to any special deference where it rests upon a determination as to worth, plausibility, consistency or other tangible considerations apparent from the face of the record with respect to which he is no more peculiarly situated to decide than the appellate court." Dolson[ v. Anastasia, 55 N.J. 2, 7 (1969)]. [Caldwell v. Haynes, 136 N.J. 422, 432 (1994).]
We begin with defendants' contentions that the trial judge erred when he denied their JNOV motion and their motion for a new trial because plaintiff's age-discrimination claim failed as a matter ...