2015 NJSBA Annual Meeting
Civil Litigation Track
Collecting Your Legal Fees in Federal and State Court
Moderator/Speaker: Hon. Harriet Derman, J.S.C. (Ret.) DiFrancesco Bateman Coley Yospin Kunzman Davis & Lehrer, PC, Warren
Speakers: Hon. Madeline Cox Arleo United States District Court for the District of New Jersey, Newark Hon. Susan D. Wigenton United States District Court for the District of New Jersey, Newark Hon. Freda L. Wolfson United states District Court for the District of New Jersey, Trenton Hon. Frank M. Ciuffani, P.J.Ch., Middlesex Hon. Walter Koprowski, Jr., P.J. Ch., Essex County Allison Segal, Esq. DiFrancesco Bateman Coley Yospin Kunzman Davis & Lehrer, PC, Warren
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Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
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Federal Rules of Civil Procedure › TITLE IV. PARTIES
Rule 23. Class Actions
(a) PrereQuisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
(b) TYpes of Class ActioNs. A class action may be maintained if Rule 23(a) is satisfied and if:
(1) prosecuting separate actions by or against individual class members would create a risk of:
(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or
(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;
(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or
(3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;
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(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
(c) CertificatioN Order; Notice to Class Members; JudGmeNt; Issues Classes; Subclasses.
(1) Certification Order.
(A) Time to Issue. At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.
(B) Defining the Class; Appointing Class Counsel. An order that certifies a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g).
(C) Altering or Amending the Order. An order that grants or denies class certification may be altered or amended before final judgment.
(2) Notice.
(A) For (b)(1) or (b)(2) Classes. For any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.
(B) For (b)(3) Classes. For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must clearly and concisely state in plain, easily understood language:
(i) the nature of the action;
(ii) the definition of the class certified;
(iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if the member so desires;
(v) that the court will exclude from the class any member who requests exclusion;
(vi) the time and manner for requesting exclusion; and
(vii) the binding effect of a class judgment on members under Rule 23(c)(3).
(3) Judgment. Whether or not favorable to the class, the judgment in a class action must:
(A) for any class certified under Rule 23(b)(1) or (b)(2), include and describe those whom the court finds to be class members; and
(B) for any class certified under Rule 23(b)(3), include and specify or describe those to whom the Rule 23(c)(2) notice was directed, who have not requested exclusion, and whom the court finds to be class members.
(4) Particular Issues. When appropriate, an action may be brought or maintained as a class
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action with respect to particular issues.
(5) Subclasses. When appropriate, a class may be divided into subclasses that are each treated as a class under this rule.
(d) CoNductiNG tHe ActioN.
(1) In General. In conducting an action under this rule, the court may issue orders that:
(A) determine the course of proceedings or prescribe measures to prevent undue repetition or complication in presenting evidence or argument;
(B) require—to protect class members and fairly conduct the action—giving appropriate notice to some or all class members of:
(i) any step in the action;
(ii) the proposed extent of the judgment; or
(iii) the members’ opportunity to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or to otherwise come into the action;
(C) impose conditions on the representative parties or on intervenors;
(D) require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly; or
(E) deal with similar procedural matters.
(2) Combining and Amending Orders. An order under Rule 23(d)(1) may be altered or amended from time to time and may be combined with an order under Rule 16.
(e) SettlemeNt, VoluNtarY Dismissal, or Compromise. The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval. The following procedures apply to a proposed settlement, voluntary dismissal, or compromise:
(1) The court must direct notice in a reasonable manner to all class members who would be bound by the proposal.
(2) If the proposal would bind class members, the court may approve it only after a hearing and on finding that it is fair, reasonable, and adequate.
(3) The parties seeking approval must file a statement identifying any agreement made in connection with the proposal.
(4) If the class action was previously certified under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so.
(5) Any class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's approval.
(f) Appeals. A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 14 days after the order is entered. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.
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(g) Class CouNsel.
(1) Appointing Class Counsel. Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court:
(A) must consider:
(i) the work counsel has done in identifying or investigating potential claims in the action;
(ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action;
(iii) counsel's knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class;
(B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class;
(C) may order potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney's fees and nontaxable costs;
(D) may include in the appointing order provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and
(E) may make further orders in connection with the appointment.
(2) Standard for Appointing Class Counsel. When one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4). If more than one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the class.
(3) Interim Counsel. The court may designate interim counsel to act on behalf of a putative class before determining whether to certify the action as a class action.
(4) Duty of Class Counsel. Class counsel must fairly and adequately represent the interests of the class.
(h) AttorNeY's Fees aNd NoNtaXable Costs. In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties’ agreement. The following procedures apply:
(1) A claim for an award must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision (h), at a time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner.
(2) A class member, or a party from whom payment is sought, may object to the motion.
(3) The court may hold a hearing and must find the facts and state its legal conclusions under Rule 52(a).
(4) The court may refer issues related to the amount of the award to a special master or a magistrate judge, as provided in Rule 54(d)(2)(D).
NOTES (As amended Feb. 28, 1966, eff. July 1, 1966; Mar. 2, 1987, eff. Aug. 1, 1987; Apr. 24, 1998, eff. https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
Dec. 1, 1998; Mar. 27, 2003, eff. Dec. 1, 2003; Apr. 30, 2007, eff. Dec. 1, 2007; Mar. 26, 2009, eff. Dec. 1, 2009.)
NOTES OF ADVISORY COMMITTEE On RULES—1937
Note to Subdivision (a). This is a substantial restatement of [former] Equity Rule 38 (Representatives of Class) as that rule has been construed. It applies to all actions, whether formerly denominated legal or equitable. For a general analysis of class actions, effect of judgment, and requisites of jurisdiction see Moore, Federal Rules of Civil Procedure: Some Problems Raised by the Preliminary Draft, 25 Georgetown L.J. 551, 570 et seq. (1937); Moore and Cohn, Federal Class Actions, 32 Ill.L.Rev. 307 (1937); Moore and Cohn, Federal Class Actions—Jurisdiction and Effect of Judgment, 32 Ill.L.Rev. 555—567 (1938); Lesar, Class Suits and the Federal Rules, 22 Minn.L.Rev. 34 (1937); cf. Arnold and James, Cases on Trials, Judgments and Appeals (1936) 175; and see Blume, Jurisdictional Amount in Representative Suits, 15 Minn.L.Rev. 501 (1931).
The general test of [former] Equity Rule 38 (Representatives of Class) that the question should be “one of common or general interest to many persons constituting a class so numerous as to make it impracticable to bring them all before the court,” is a common test. For states which require the two elements of a common or general interest and numerous persons, as provided for in [former] Equity Rule 38, see Del.Ch.Rule 113; Fla.Comp.Gen.Laws Ann. (Supp., 1936) §4918 (7); Georgia Code (1933) §37–1002, and see English Rules Under the Judicature Act (The Annual Practice, 1937) O. 16, r. 9. For statutory provisions providing for class actions when the question is one of common or general interest or when the parties are numerous, see Ala.Code Ann. (Michie, 1928) §5701; 2 Ind.Stat.Ann. (Burns, 1933) §2–220; N.Y.C.P.A. (1937) §195; Wis.Stat. (1935) §260.12. These statutes have, however, been uniformly construed as though phrased in the conjunctive. See Garfein v. Stiglitz, 260 Ky. 430, 86 S.W.(2d) 155 (1935). The rule adopts the test of [former] Equity Rule 38, but defines what constitutes a “common or general interest”. Compare with code provisions which make the action dependent upon the propriety of joinder of the parties. See Blume, The “Common Questions” Principle in the Code Provision for Representative Suits, 30 Mich.L.Rev. 878 (1932). For discussion of what constitutes “numerous persons” see Wheaton, Representative Suits Involving Numerous Litigants, 19 Corn.L.Q. 399 (1934); Note, 36 Harv.L.Rev. 89 (1922).
Clause (1), Joint, Common, or Secondary Right. This clause is illustrated in actions brought by or against representatives of an unincorporated association. See Oster v. Brotherhood of Locomotive Firemen and Enginemen, 271 Pa. 419, 114 Atl. 377 (1921); Pickett v. Walsh, 192 Mass. 572, 78 N.E. 753, 6 L.R.A. (N.S.) 1067 (1906); Colt v. Hicks, 97 Ind.App. 177, 179 N.E. 335 (1932). Compare Rule 17(b) as to when an unincorporated association has capacity to sue or be sued in its common name; United Mine Workers of America v. Coronado Coal Co., 259 U.S. 344 (1922) (an unincorporated association was sued as an entity for the purpose of enforcing against it a federal substantive right); Moore, Federal Rules of Civil Procedure: Some Problems Raised by the Preliminary Draft, 25 Georgetown L.J. 551, 566 (for discussion of jurisdictional requisites when an unincorporated association sues or is sued in its common name and jurisdiction is founded upon diversity of citizenship). For an action brought by representatives of one group against representatives of another group for distribution of a fund held by an unincorporated association, see Smith v. Swormstedt, 16 How. 288 (U.S. 1853). Compare Christopher, et al. v. Brusselback, 58 S.Ct. 350 [ 302 U.S. 500 ] (1938).
For an action to enforce rights held in common by policyholders against the corporate issuer of the policies, see Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356 (1921). See also Terry v. Little, 101 https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
U.S. 216 (1880); John A. Roebling's Sons Co. v. Kinnicutt, 248 Fed. 596 (D.C.N.Y., 1917) dealing with the right held in common by creditors to enforce the statutory liability of stockholders.
Typical of a secondary action is a suit by stockholders to enforce a corporate right. For discussion of the general nature of these actions see Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936); Glenn, The Stockholder's Suit—Corporate and Individual Grievances, 33 Yale L.J. 580 (1924); McLaughlin, Capacity of Plaintiff-Stockholder to Terminate a Stockholder's Suit, 46 Yale L.J. 421 (1937). See also Subdivision (b) of this rule which deals with Shareholder's Action; Note, 15 Minn.L.Rev. 453 (1931).
Clause (2). A creditor's action for liquidation or reorganization of a corporation is illustrative of this clause. An action by a stockholder against certain named defendants as representatives of numerous claimants presents a situation converse to the creditor's action.
Clause (3). See Everglades Drainage League v. Napoleon Broward Drainage Dist., 253 Fed. 246 (D.C.Fla., 1918); Gramling v. Maxwell, 52 F.(2d) 256 (D.C.N.C., 1931), approved in 30 Mich.L.Rev. 624 (1932); Skinner v. Mitchell, 108 Kan. 861, 197 Pac. 569 (1921); Duke of Bedford v. Ellis (1901) A.C. 1, for class actions when there were numerous persons and there was only a question of law or fact common to them; and see Blume, The “Common Questions” Principle in the Code Provision for Representative Suits, 30 Mich.L.Rev. 878 (1932).
Note to Subdivision (b). This is [former] Equity Rule 27 (Stockholder's Bill) with verbal changes. See also Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827 (1882) and former Equity Rule 94, promulgated January 23, 1882, 104 U.S. IX.
Note to Subdivision (c). See McLaughlin, Capacity of Plaintiff-Stockholder to Terminate a Stockholder's Suit, 46 Yale L.J. 421 (1937).
NOTES OF ADVISORY COMMITTEE On RULES—1946 AMEnDMEnT
Subdivision (b), relating to secondary actions by shareholders, provides among other things, that in, such an action the complainant “shall aver (1) that the plaintiff was a shareholder at the time of the transaction of which he complains or that his share thereafter devolved on him by operation of law . . .”
As a result of the decision in Erie R. Co. v. Tompkins, 304 U.S. 64 (decided April 25, 1938, after this rule was promulgated by the Supreme Court, though before it took effect) a question has arisen as to whether the provision above quoted deals with a matter of substantive right or is a matter of procedure. If it is a matter of substantive law or right, then under Erie R. Co. v. Tompkins clause (1) may not be validly applied in cases pending in states whose local law permits a shareholder to maintain such actions, although not a shareholder at the time of the transactions complained of. The Advisory Committee, believing the question should be settled in the courts, proposes no change in Rule 23 but thinks rather that the situation should be explained in an appropriate note.
The rule has a long history. In Hawes v. Oakland (1882) 104 U.S. 450, the Court held that a shareholder could not maintain such an action unless he owned shares at the time of the transactions complained of, or unless they devolved on him by operation of law. At that time the decision in Swift v. Tyson (1842) 16 Peters 1, was the law, and the federal courts considered themselves free to establish their own principles of equity jurisprudence, so the Court was not in 1882 and has not been, until Erie R. Co. v. Tompkins in 1938, concerned with the question whether Hawes v. Oakland dealt with substantive right or procedure. https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
Following the decision in Hawes v. Oakland, and at the same term, the Court, to implement its decision, adopted [former] Equity Rule 94, which contained the same provision above quoted from Rule 23 F.R.C.P. The provision in [former] Equity Rule 94 was later embodied in [former] Equity Rule 27, of which the present Rule 23 is substantially a copy.
In City of Quincy v. Steel (1887) 120 U.S. 241, 245, the Court referring to Hawes v. Oakland said: “In order to give effect to the principles there laid down, this Court at that term adopted Rule 94 of the rules of practice for courts of equity of the United States.”
Some other cases dealing with [former] Equity Rules 94 or 27 prior to the decision in Erie R. Co. v. Tompkins are Dimpfel v. Ohio & Miss. R. R. (1884) 110 U.S. 209; Illinois Central R. Co. v. Adams (1901) 180 U.S. 28, 34; Venner v. Great Northern Ry. (1908) 209 U.S. 24, 30; Jacobson v. General Motors Corp. (S.D.N.Y. 1938) 22 F.Supp. 255, 257. These cases generally treat Hawes v. Oakland as establishing a “principle” of equity, or as dealing not with jurisdiction but with the “right” to maintain an action, or have said that the defense under the equity rule is analogous to the defense that the plaintiff has no “title” and results in a dismissal “for want of equity.”
Those state decisions which held that a shareholder acquiring stock after the event may maintain a derivative action are founded on the view that it is a right belonging to the shareholder at the time of the transaction and which passes as a right to the subsequent purchaser. See Pollitz v. Gould (1911) 202 N.Y. 11.
The first case arising after the decision in Erie R. Co. v. Tompkins, in which this problem was involved, was Summers v. Hearst (S.D.N.Y. 1938) 23 F.Supp. 986. It concerned [former] Equity Rule 27, as Federal Rule 23 was not then in effect. In a well considered opinion Judge Leibell reviewed the decisions and said: “The federal cases that discuss this section of Rule 27 support the view that it states a principle of substantive law.” He quoted Pollitz v. Gould (1911) 202 N.Y. 11, as saying that the United States Supreme Court “seems to have been more concerned with establishing this rule as one of practice than of substantive law” but that “whether it be regarded as establishing a principle of law or a rule of practice, this authority has been subsequently followed in the United States courts.”
He then concluded that, although the federal decisions treat the equity rule as “stating a principle of substantive law”, if [former] “Equity Rule 27 is to be modified or revoked in view of Erie R. Co. v. Tompkins, it is not the province of this Court to suggest it, much less impliedly to follow that course by disregarding the mandatory provisions of the Rule.”
Some other federal decisions since 1938 touch the question.
In Piccard v. Sperry Corporation (S.D.N.Y. 1941) 36 F.Supp. 1006, 1009–10, affirmed without opinion (C.C.A.2d, 1941) 120 F.(2d) 328, a shareholder, not such at the time of the transactions complained of, sought to intervene. The court held an intervenor was as much subject to Rule 23 as an original plaintiff; and that the requirement of Rule 23(b) was “a matter of practice,” not substance, and applied in New York where the state law was otherwise, despite Erie R. Co. v. Tompkins. In York v. Guaranty Trust Co. of New York (C.C.A.2d, 1944) 143 F.(2d) 503, rev'd on other grounds (1945) 65 S.Ct. 1464, the court said: “Restrictions on the bringing of stockholders’ actions, such as those imposed by F.R.C.P. 23 (b) or other state statutes are procedural,” citing the Piccard and other cases.
In Gallup v. Caldwell (C.C.A.3d, 1941) 120 F.(2d) 90, 95, arising in New Jersey, the point was https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
raised but not decided, the court saying that it was not satisfied that the then New Jersey rule differed from Rule 23(b), and that “under the circumstances the proper course was to follow Rule 23(b).”
In Mullins v. De Soto Securities Co. (W.D.La. 1942) 45 F.Supp. 871, 878, the point was not decided, because the court found the Louisiana rule to be the same as that stated in Rule 23(b).
In Toebelman v. Missouri-Kansas Pipe Line Co. (D.Del. 1941) 41 F.Supp. 334, 340, the court dealt only with another part of Rule 23(b), relating to prior demands on the stockholders and did not discuss Erie R. Co. v. Tompkins, or its effect on the rule.
In Perrott v. United States Banking Corp. (D.Del. 1944) 53 F.Supp. 953, it appeared that the Delaware law does not require the plaintiff to have owned shares at the time of the transaction complained of. The court sustained Rule 23(b), after discussion of the authorities, saying:
“It seems to me the rule does not go beyond procedure. * * * Simply because a particular plaintiff cannot qualify as a proper party to maintain such an action does not destroy or even whittle at the cause of action. The cause of action exists until a qualified plaintiff can get it started in a federal court.”
In Bankers Nat. Corp. v. Barr (S.D.N.Y. 1945) 9 Fed.Rules Serv. 23b.11, Case 1, the court held Rule 23(b) to be one of procedure, but that whether the plaintiff was a stockholder was a substantive question to be settled by state law.
The New York rule, as stated in Pollitz v. Gould, supra, has been altered by an act of the New York Legislature (Chapter 667, Laws of 1944, effective April 9, 1944, General Corporation Law, §61) which provides that “in any action brought by a shareholder in the right of a . . . corporation, it must appear that the plaintiff was a stockholder at the time of the transaction of which he complains, or that his stock thereafter devolved upon him by operation of law.” At the same time a further and separate provision was enacted, requiring under certain circumstances the giving of security for reasonable expenses and attorney's fees, to which security the corporation in whose right the action is brought and the defendants therein may have recourse. (Chapter 668, Laws of 1944, effective April 9, 1944, General Corporation Law, §61–b.) These provisions are aimed at so-called “strike” stockholders’ suits and their attendant abuses. Shielcrawt v. Moffett (Ct.App. 1945) 294 N.Y. 180, 61 N.E.(2d) 435, rev'g 51 N.Y.S.(2d) 188, aff'g 49 N.Y.S.(2d) 64; Noel Associates, Inc. v. Merrill (Sup.Ct. 1944) 184 Misc. 646, 53 N.Y.S.(2d) 143.
Insofar as §61 is concerned, it has been held that the section is procedural in nature. Klum v. Clinton Trust Co. (Sup.Ct. 1944) 183 Misc. 340, 48 N.Y.S.(2d) 267; Noel Associates, Inc. v. Merrill, supra. In the latter case the court pointed out that “The 1944 amendment to Section 61 rejected the rule laid down in the Pollitz case and substituted, in place thereof, in its precise language, the rule which has long prevailed in the Federal Courts and which is now Rule 23(b) . . .” There is, nevertheless, a difference of opinion regarding the application of the statute to pending actions. See Klum v. Clinton Trust Co., supra (applicable); Noel Associates, Inc. v. Merrill, supra (inapplicable).
With respect to §61–b, which may be regarded as a separate problem (Noel Associates, Inc. v. Merrill, supra), it has been held that even though the statute is procedural in nature—a matter not definitely decided—the Legislature evinced no intent that the provision should apply to actions pending when it became effective. Shielcrawt v. Moffett, supra. As to actions instituted after the effective date of the legislation, the constitutionality of §61–b is in dispute. See Wolf v. Atkinson
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(Sup.Ct. 1944) 182 Misc. 675, 49 N.Y.S.(2d) 703 (constitutional); Citron v. Mangel Stores Corp. (Sup.Ct. 1944) — Misc. —, 50 N.Y.S.(2d) 416 (unconstitutional); Zlinkoff, The American Investor and the Constitutionality of Section 61–B of the New York General Corporation Law (1945) 54 Yale L.J. 352.
New Jersey also enacted a statute, similar to Chapters 667 and 668 of the New York law. See P.L. 1945, Ch. 131, R.S.Cum.Supp. 14:3–15. The New Jersey provision similar to Chapter 668 (§61–b) differs, however, in that it specifically applies retroactively. It has been held that this provision is procedural and hence will not govern a pending action brought against a New Jersey corporation in the New York courts. Shielcrawt v. Moffett (Sup.Ct.N.Y. 1945) 184 Misc. 1074, 56 N.Y.S.(2d) 134.
See also generally, 2 Moore's Federal Practice (1938) 2250–2253, and Cum.Supplement §23.05.
The decisions here discussed show that the question is a debatable one, and that there is respectable authority for either view, with a recent trend towards the view that Rule 23(b)(1) is procedural. There is reason to say that the question is one which should not be decided by the Supreme Court ex parte, but left to await a judicial decision in a litigated case, and that in the light of the material in this note, the only inference to be drawn from a failure to amend Rule 23(b) would be that the question is postponed to await a litigated case.
The Advisory Committee is unanimously of the opinion that this course should be followed.
If, however, the final conclusion is that the rule deals with a matter of substantive right, then the rule should be amended by adding a provision that Rule 23(b)(1) does not apply in jurisdictions where state law permits a shareholder to maintain a secondary action, although he was not a shareholder at the time of the transactions of which he complains.
NOTES OF ADVISORY COMMITTEE On RULES—1966 AMEnDMEnT
Difficulties with the original rule. The categories of class actions in the original rule were defined in terms of the abstract nature of the rights involved: the so-called “true” category was defined as involving “joint, common, or secondary rights”; the “hybrid” category, as involving “several” rights related to “specific property”; the “spurious” category, as involving “several” rights affected by a common question and related to common relief. It was thought that the definitions accurately described the situations amendable to the class-suit device, and also would indicate the proper extent of the judgment in each category, which would in turn help to determine the res judicata effect of the judgment if questioned in a later action. Thus the judgments in “true” and “hybrid” class actions would extend to the class (although in somewhat different ways); the judgment in a “spurious” class action would extend only to the parties including intervenors. See Moore, Federal Rules of Civil Procedure: Some Problems Raised by the Preliminary Draft, 25 Geo.L.J. 551, 570–76 (1937).
In practice, the terms “joint,” “common,” etc., which were used as the basis of the Rule 23 classification proved obscure and uncertain. See Chaffee, Some Problems of Equity 245–46, 256–57 (1950); Kalven & Rosenfield, The Contemporary Function of the Class Suit, 8 U. of Chi.L.Rev. 684, 707 & n. 73 (1941); Keeffe, Levy & Donovan, Lee Defeats Ben Hur, 33 Corn.L.Q. 327, 329–36 (1948); Developments in the Law: Multiparty Litigation in the Federal Courts, 71 Harv.L.Rev. 874, 931 (1958); Advisory Committee's Note to Rule 19, as amended. The courts had considerable difficulty with these terms. See, e.g., Gullo v. Veterans’ Coop. H. Assn., 13 F.R.D. 11 (D.D.C. 1952); Shipley v. Pittsburgh & L. E. R. Co., 70 F.Supp. 870 (W.D.Pa. 1947); Deckert v. Independence
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Shares Corp., 27 F.Supp. 763 (E.D.Pa. 1939), rev'd, 108 F.2d 51 (3d Cir. 1939), rev'd, 311 U.S. 282 (1940), on remand, 39 F.Supp. 592 (E.D.Pa. 1941), rev'd sub nom. Pennsylvania Co. for Ins. on Lives v. Deckert, 123 F.2d 979 (3d Cir. 1941) (see Chafee, supra, at 264–65).
Nor did the rule provide an adequate guide to the proper extent of the judgments in class actions. First, we find instances of the courts classifying actions as “true” or intimating that the judgments would be decisive for the class where these results seemed appropriate but were reached by dint of depriving the word “several” of coherent meaning. See, e.g., System Federation No. 91 v. Reed, 180 F.2d 991 (6th Cir. 1950); Wilson v. City of Paducah, 100 F.Supp. 116 (W.D.Ky. 1951); Citizens Banking Co. v. Monticello State Bank, 143 F.2d 261 (8th Cir. 1944); Redmond v. Commerce Trust Co., 144 F.2d 140 (8th Cir. 1944), cert. denied, 323 U.S. 776 (1944); United States v. American Optical Co., 97 F.Supp. 66 (N.D.Ill. 1951); National Hairdressers’ & C. Assn. v. Philad. Co., 34 F.Supp. 264 (D.Del. 1940); 41 F.Supp. 701 (D.Del. 1940), aff'd mem., 129 F.2d 1020 (3d Cir. 1942). Second, we find cases classified by the courts as “spurious” in which, on a realistic view, it would seem fitting for the judgments to extend to the class. See, e.g., Knapp v. Bankers Sec. Corp., 17 F.R.D. 245 (E.D.Pa. 1954); aff'd 230 F.2d 717 (3d Cir. 1956); Giesecke v. Denver Tramway Corp., 81 F.Supp. 957 (D.Del. 1949); York v. Guaranty Trust Co., 143 F.2d 503 (2d Cir. 1944), rev'd on grounds not here relevant, 326 U.S. 90 (1945) (see Chafee, supra, at 208); cf. Webster Eisenlohr, Inc. v. Kalodner, 145 F.2d 316, 320 (3d Cir. 1944), cert. denied, 325 U.S. 807 (1945). But cf. the early decisions, Duke of Bedford v. Ellis [1901], A.C. 1; Sheffield Waterworks v. Yeomans, L.R. 2 Ch.App. 8 (1866); Brown v. Vermuden, 1 Ch.Cas. 272, 22 Eng.Rep. 796 (1676).
The “spurious” action envisaged by original Rule 23 was in any event an anomaly because, although denominated a “class” action and pleaded as such, it was supposed not to adjudicate the rights or liabilities of any person not a party. It was believed to be an advantage of the “spurious” category that it would invite decisions that a member of the “class” could, like a member of the class in a “true” or “hybrid” action, intervene on an ancillary basis without being required to show an independent basis of Federal jurisdiction, and have the benefit of the date of the commencement of the action for purposes of the statute of limitations. See 3 Moore's Federal Practice, pars. 23.10[1], 23.12 (2d ed. 1963). These results were attained in some instances but not in others. On the statute of limitations, see Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir. 1961), pet. cert. dism., 371 U.S. 801 (1963); but cf. P. W. Husserl, Inc. v. Newman, 25 F.R.D. 264 (S.D.N.Y. 1960); Athas v. Day, 161 F.Supp. 916 (D.Colo. 1958). On ancillary intervention, see Amen v. Black, 234 F.2d 12 (10th Cir. 1956), cert. granted, 352 U.S. 888 (1956), dism. on stip., 355 U.S. 600 (1958); but. cf. Wagner v. Kemper, 13 F.R.D. 128 (W.D.Mo. 1952). The results, however, can hardly depend upon the mere appearance of a “spurious” category in the rule; they should turn no more basic considerations. See discussion of subdivision (c)(1) below.
Finally, the original rule did not squarely address itself to the question of the measures that might be taken during the course of the action to assure procedural fairness, particularly giving notice to members of the class, which may in turn be related in some instances to the extension of the judgment to the class. See Chafee, supra, at 230–31; Keeffe, Levy & Donovan, supra; Developments in the Law, supra, 71 Harv.L.Rev. at 937–38; Note, Binding Effect of Class Actions, 67 Harv.L.Rev. 1059, 1062–65 (1954); Note, Federal Class Actions: A Suggested Revision of Rule 23, 46 Colum.L.Rev. 818, 833–36 (1946); Mich.Gen.Court R. 208.4 (effective Jan. 1, 1963); Idaho R.Civ.P. 23(d); Minn.R.Civ.P. 23.04; N.Dak.R.Civ.P. 23(d).
The amended rule describes in more practical terms the occasions for maintaining class actions;
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provides that all class actions maintained to the end as such will result in judgments including those whom the court finds to be members of the class, whether or not the judgment is favorable to the class; and refers to the measures which can be taken to assure the fair conduct of these actions.
Subdivision (a) states the prerequisites for maintaining any class action in terms of the numerousness of the class making joinder of the members impracticable, the existence of questions common to the class, and the desired qualifications of the representative parties. See Weinstein, Revision of Procedure; Some Problems in Class Actions, 9 Buffalo L.Rev. 433, 458–59 (1960); 2 Barron & Holtzoff, Federal Practice & Procedure §562, at 265, §572, at 351–52 (Wright ed. 1961). These are necessary but not sufficient conditions for a class action. See, e.g., Giordano v. Radio Corp. of Am., 183 F.2d 558, 560 (3d Cir. 1950); Zachman v. Erwin, 186 F.Supp. 681 (S.D.Tex. 1959); Baim & Blank, Inc. v. Warren Connelly Co., Inc., 19 F.R.D. 108 (S.D.N.Y. 1956). Subdivision (b) describes the additional elements which in varying situations justify the use of a class action.
Subdivision (b)(1). The difficulties which would be likely to arise if resort were had to separate actions by or against the individual members of the class here furnish the reasons for, and the principal key to, the propriety and value of utilizing the class-action device. The considerations stated under clauses (A) and (B) are comparable to certain of the elements which define the persons whose joinder in an action is desirable as stated in Rule 19(a), as amended. See amended Rule 19(a)(2)(i) and (ii), and the Advisory Committee's Note thereto; Hazard, Indispensable Party; The Historical Origin of a Procedural Phantom, 61 Colum.L.Rev. 1254, 1259–60 (1961); cf. 3 Moore, supra, par. 23.08, at 3435.
Clause (A): One person may have rights against, or be under duties toward, numerous persons constituting a class, and be so positioned that conflicting or varying adjudications in lawsuits with individual members of the class might establish incompatible standards to govern his conduct. The class action device can be used effectively to obviate the actual or virtual dilemma which would thus confront the party opposing the class. The matter has been stated thus: “The felt necessity for a class action is greatest when the courts are called upon to order or sanction the alteration of the status quo in circumstances such that a large number of persons are in a position to call on a single person to alter the status quo, or to complain if it is altered, and the possibility exists that [the] actor might be called upon to act in inconsistent ways.” Louisell & Hazard, Pleading and Procedure; State and Federal 719 (1962); see Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 366 –67 (1921). To illustrate: Separate actions by individuals against a municipality to declare a bond issue invalid or condition or limit it, to prevent or limit the making of a particular appropriation or to compel or invalidate an assessment, might create a risk of inconsistent or varying determinations. In the same way, individual litigations of the rights and duties of riparian owners, or of landowners’ rights and duties respecting a claimed nuisance, could create a possibility of incompatible adjudications. Actions by or against a class provide a ready and fair means of achieving unitary adjudication. See Maricopa County Mun. Water Con. Dist. v. Looney, 219 F.2d 529 (9th Cir. 1955); Rank v. Krug, 142 F.Supp. 1, 154–59 (S.D.Calif. 1956), on app., State of California v. Rank, 293 F.2d 340, 348 (9th Cir. 1961); Gart v. Cole, 263 F.2d 244 (2d Cir. 1959), cert. denied 359 U.S. 978 (1959); cf. Martinez v. Maverick Cty. Water Con. & Imp. Dist., 219 F.2d 666 (5th Cir. 1955); 3 Moore, supra, par. 23.11[2], at 3458–59.
Clause (B): This clause takes in situations where the judgment in a nonclass action by or against an individual member of the class, while not technically concluding the other members, might do so as a practical matter. The vice of an individual actions would lie in the fact that the other members of
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the class, thus practically concluded, would have had no representation in the lawsuit. In an action by policy holders against a fraternal benefit association attacking a financial reorganization of the society, it would hardly have been practical, if indeed it would have been possible, to confine the effects of a validation of the reorganization to the individual plaintiffs. Consequently a class action was called for with adequate representation of all members of the class. See Supreme Tribe of Ben- Hur v. Cauble, 255 U.S. 356 (1921); Waybright v. Columbian Mut. Life Ins. Co., 30 F.Supp. 885 (W.D.Tenn. 1939); cf. Smith v. Swormstedt, 16 How. (57 U.S.) 288 (1853). For much the same reason actions by shareholders to compel the declaration of a dividend the proper recognition and handling of redemption or pre-emption rights, or the like (or actions by the corporation for corresponding declarations of rights), should ordinarily be conducted as class actions, although the matter has been much obscured by the insistence that each shareholder has an individual claim. See Knapp v. Bankers Securities Corp., 17 F.R.D. 245 (E.D.Pa. 1954), aff'd, 230 F.2d 717 (3d Cir. 1956); Giesecke v. Denver Tramway Corp., 81 F.Supp. 957 (D.Del. 1949); Zahn v. Transamerica Corp., 162 F.2d 36 (3d Cir. 1947); Speed v. Transamerica Corp., 100 F.Supp. 461 (D.Del. 1951); Sobel v. Whittier Corp., 95 F.Supp. 643 (E.D.Mich. 1951), app. dism., 195 F.2d 361 (6th Cir. 1952); Goldberg v. Whittier Corp., 111 F.Supp. 382 (E.D.Mich. 1953); Dann v. Studebaker-Packard Corp., 288 F.2d 201 (6th Cir. 1961); Edgerton v. Armour & Co., 94 F.Supp. 549 (S.D.Calif. 1950); Ames v. Mengel Co., 190 F.2d 344 (2d Cir. 1951). (These shareholders’ actions are to be distinguished from derivative actions by shareholders dealt with in new Rule 23.1). The same reasoning applies to an action which charges a breach of trust by an indenture trustee or other fiduciary similarly affecting the members of a large class of security holders or other beneficiaries, and which requires an accounting or like measures to restore the subject of the trust. See Bosenberg v. Chicago T. & T. Co., 128 F.2d 245 (7th Cir. 1942); Citizens Banking Co. v. Monticello State Bank, 143 F.2d 261 (8th Cir. 1944); Redmond v. Commerce Trust Co., 144 F.2d 140 (8th Cir. 1944), cert. denied, 323 U.S. 776 (1944); cf. York v. Guaranty Trust Co., 143 F.2d 503 (2d Cir. 1944), rev'd on grounds not here relevant, 326 U.S. 99 (1945).
In various situations an adjudication as to one or more members of the class will necessarily or probably have an adverse practical effect on the interests of other members who should therefore be represented in the lawsuit. This is plainly the case when claims are made by numerous persons against a fund insufficient to satisfy all claims. A class action by or against representative members to settle the validity of the claims as a whole, or in groups, followed by separate proof of the amount of each valid claim and proportionate distribution of the fund, meets the problem. Cf. Dickinson v. Burnham, 197 F.2d 973 (2d Cir. 1952), cert. denied, 344 U.S. 875 (1952); 3 Moore, supra, at par. 23.09. The same reasoning applies to an action by a creditor to set aside a fraudulent conveyance by the debtor and to appropriate the property to his claim, when the debtor's assets are insufficient to pay all creditors’ claims. See Hefferman v. Bennett & Armour, 110 Cal.App.2d 564, 243 P.2d 846 (1952); cf. City & County of San Francisco v. Market Street Ry., 95 Cal.App.2d 648, 213 P.2d 780 (1950). Similar problems, however, can arise in the absence of a fund either present or potential. A negative or mandatory injunction secured by one of a numerous class may disable the opposing party from performing claimed duties toward the other members of the class or materially affect his ability to do so. An adjudication as to movie “clearances and runs” nominally affecting only one exhibitor would often have practical effects on all the exhibitors in the same territorial area. Cf. United States v. Paramount Pictures, Inc., 66 F.Supp. 323, 341–46 (S.D.N.Y. 1946); 334 U.S. 131, 144 –48 (1948). Assuming a sufficiently numerous class of exhibitors, a class action would be advisable. (Here representation of subclasses of exhibitors could become necessary; see subdivision (c)(3)(B).) https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
Subdivision (b)(2). This subdivision is intended to reach situations where a party has taken action or refused to take action with respect to a class, and final relief of an injunctive nature or of a corresponding declaratory nature, settling the legality of the behavior with respect to the class as a whole, is appropriate. Declaratory relief “corresponds” to injunctive relief when as a practical matter it affords injunctive relief or serves as a basis for later injunctive relief. The subdivision does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages. Action or inaction is directed to a class within the meaning of this subdivision even if it has taken effect or is threatened only as to one or a few members of the class, provided it is based on grounds which have general application to the class.
Illustrative are various actions in the civil-rights field where a party is charged with discriminating unlawfully against a class, usually one whose members are incapable of specific enumeration. See Potts v. Flax, 313 F.2d 284 (5th Cir. 1963); Bailey v. Patterson, 323 F.2d 201 (5th Cir. 1963), cert. denied, 377 U.S. 972 (1964); Brunson v. Board of Trustees of School District No. 1, Clarendon City, S.C., 311 F.2d 107 (4th Cir. 1962), cert. denied, 373 U.S. 933 (1963); Green v. School Bd. of Roanoke, Va., 304 F.2d 118 (4th Cir. 1962); Orleans Parish School Bd. v. Bush, 242 F.2d 156 (5th Cir. 1957), cert. denied, 354 U.S. 921 (1957); Mannings v. Board of Public Inst. of Hillsborough County, Fla., 277 F.2d 370 (5th Cir. 1960); Northcross v. Board of Ed. of City of Memphis, 302 F.2d 818 (6th Cir. 1962), cert. denied 370 U.S. 944 (1962); Frasier v. Board of Trustees of Univ. of N.C., 134 F.Supp. 589 (M.D.N.C. 1955, 3-judge court), aff'd, 350 U.S. 979 (1956). Subdivision (b)(2) is not limited to civil-rights cases. Thus an action looking to specific or declaratory relief could be brought by a numerous class of purchasers, say retailers of a given description, against a seller alleged to have undertaken to sell to that class at prices higher than those set for other purchasers, say retailers of another description, when the applicable law forbids such a pricing differential. So also a patentee of a machine, charged with selling or licensing the machine on condition that purchasers or licensees also purchase or obtain licenses to use an ancillary unpatented machine, could be sued on a class basis by a numerous group of purchasers or licensees, or by a numerous group of competing sellers or licensors of the unpatented machine, to test the legality of the “tying” condition.
Subdivision (b)(3). In the situations to which this subdivision relates, class-action treatment is not as clearly called for as in those described above, but it may nevertheless be convenient and desirable depending upon the particular facts. Subdivision (b)(3) encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote, uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. Cf. Chafee, supra, at 201.
The court is required to find, as a condition of holding that a class action may be maintained under this subdivision, that the questions common to the class predominate over the questions affecting individual members. It is only where this predominance exists that economies can be achieved by means of the class-action device. In this view, a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action, and it may remain so despite the need, if liability is found, for separate determination of the damages suffered by individuals within the class. On the other hand, although having some common core, a fraud case may be unsuited for treatment as a class action if there was material variation in the representation made or in the kinds or degrees of reliance by the persons to whom they were addressed. See Oppenheimer v. F. J. Young & Co., Inc., 144 F.2d 387 (2d Cir. 1944); Miller v. National City Bank of
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N.Y., 166 F.2d 723 (2d Cir. 1948); and for like problems in other contexts, see Hughes v. Encyclopaedia Brittanica, 199 F.2d 295 (7th Cir. 1952); Sturgeon v. Great Lakes Steel Corp., 143 F.2d 819 (6th Cir. 1944). A “mass accident” resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses of liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried. See Pennsylvania R.R. v. United States, 111 F.Supp. 80 (D.N.J. 1953); cf. Weinstein, supra, 9 Buffalo L.Rev. at 469. Private damage claims by numerous individuals arising out of concerted antitrust violations may or may not involve predominating common questions. See Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir. 1961), pet. cert. dism., 371 U.S. 801 (1963); cf. Weeks v. Bareco Oil Co., 125 F.2d 84 (7th Cir. 1941); Kainz v. Anheuser-Busch, Inc., 194 F.2d 737 (7th Cir. 1952); Hess v. Anderson, Clayton & Co., 20 F.R.D. 466 (S.D.Calif. 1957).
That common questions predominate is not itself sufficient to justify a class action under subdivision (b)(3), for another method of handling the litigious situation may be available which has greater practical advantages. Thus one or more actions agreed to by the parties as test or model actions may be preferable to a class action; or it may prove feasible and preferable to consolidate actions. Cf. Weinstein, supra, 9 Buffalo L.Rev. at 438–54. Even when a number of separate actions are proceeding simultaneously, experience shows that the burdens on the parties and the courts can sometimes be reduced by arrangements for avoiding repetitious discovery or the like. Currently the Coordinating Committee on Multiple Litigation in the United States District Courts (a subcommittee of the Committee on Trial Practice and Technique of the Judicial Conference of the United States) is charged with developing methods for expediting such massive litigation. To reinforce the point that the court with the aid of the parties ought to assess the relative advantages of alternative procedures for handling the total controversy, subdivision (b)(3) requires, as a further condition of maintaining the class action, that the court shall find that that procedure is “superior” to the others in the particular circumstances.
Factors (A)–(D) are listed, non-exhaustively, as pertinent to the findings. The court is to consider the interests of individual members of the class in controlling their own litigations and carrying them on as they see fit. See Weeks v. Bareco Oil Co., 125 F.2d 84, 88–90, 93–94 (7th Cir. 1941) (anti- trust action); see also Pentland v. Dravo Corp., 152 F.2d 851 (3d Cir. 1945), and Chaffee, supra, at 273–75, regarding policy of Fair Labor Standards Act of 1938, §16(b), 29 U.S.C. §216(b), prior to amendment by Portal-to-Portal Act of 1947, §5(a). [The present provisions of 29 U.S.C. §216(b) are not intended to be affected by Rule 23, as amended.]
In this connection the court should inform itself of any litigation actually pending by or against the individuals. The interests of individuals in conducting separate lawsuits may be so strong as to call for denial of a class action. On the other hand, these interests may be theoretic rather than practical; the class may have a high degree of cohesion and prosecution of the action through representatives would be quite unobjectionable, or the amounts at stake for individuals may be so small that separate suits would be impracticable. The burden that separate suits would impose on the party opposing the class, or upon the court calendars, may also fairly be considered. (See the discussion, under subdivision (c)(2) below, of the right of members to be excluded from the class upon their request.)
Also pertinent is the question of the desirability of concentrating the trial of the claims in the
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particular forum by means of a class action, in contrast to allowing the claims to be litigated separately in forums to which they would ordinarily be brought. Finally, the court should consider the problems of management which are likely to arise in the conduct of a class action.
Subdivision (c)(1). In order to give clear definition to the action, this provision requires the court to determine, as early in the proceedings as may be practicable, whether an action brought as a class action is to be so maintained. The determination depends in each case on satisfaction of the terms of subdivision (a) and the relevant provisions of subdivision (b).
An order embodying a determination can be conditional; the court may rule, for example, that a class action may be maintained only if the representation is improved through intervention of additional parties of a stated type. A determination once made can be altered or amended before the decision on the merits if, upon fuller development of the facts, the original determination appears unsound. A negative determination means that the action should be stripped of its character as a class action. See subdivision (d)(4). Although an action thus becomes a nonclass action, the court may still be receptive to interventions before the decision on the merits so that the litigation may cover as many interests as can be conveniently handled; the questions whether the intervenors in the nonclass action shall be permitted to claim “ancillary” jurisdiction or the benefit of the date of the commencement of the action for purposes of the statute of limitations are to be decided by reference to the laws governing jurisdiction and limitations as they apply in particular contexts.
Whether the court should require notice to be given to members of the class of its intention to make a determination, or of the order embodying it, is left to the court's discretion under subdivision (d)(2).
Subdivision (c)(2) makes special provision for class actions maintained under subdivision (b)(3). As noted in the discussion of the latter subdivision, the interests of the individuals in pursuing their own litigations may be so strong here as to warrant denial of a class action altogether. Even when a class action is maintained under subdivision (b)(3), this individual interest is respected. Thus the court is required to direct notice to the members of the class of the right of each member to be excluded from the class upon his request. A member who does not request exclusion may, if he wishes, enter an appearance in the action through his counsel; whether or not he does so, the judgment in the action will embrace him.
The notice setting forth the alternatives open to the members of the class, is to be the best practicable under the circumstances, and shall include individual notice to the members who can be identified through reasonable effort. (For further discussion of this notice, see the statement under subdivision (d)(2) below.)
Subdivision (c)(3). The judgment in a class action maintained as such to the end will embrace the class, that is, in a class action under subdivision (b)(1) or (b)(2), those found by the court to be class members; in a class action under subdivision (b)(3), those to whom the notice prescribed by subdivision (c)(2) was directed, excepting those who requested exclusion or who are ultimately found by the court not to be members of the class. The judgment has this scope whether it is favorable or unfavorable to the class. In a (b)(1) or (b)(2) action the judgment “describes” the members of the class, but need not specify the individual members; in a (b)(3) action the judgment “specifies” the individual members who have been identified and described the others.
Compare subdivision (c)(4) as to actions conducted as class actions only with respect to particular issues. Where the class-action character of the lawsuit is based solely on the existence of a “limited https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
fund,” the judgment, while extending to all claims of class members against the fund, has ordinarily left unaffected the personal claims of nonappearing members against the debtor. See 3 Moore, supra, par. 23.11[4].
Hitherto, in a few actions conducted as “spurious” class actions and thus nominally designed to extend only to parties and others intervening before the determination of liability, courts have held or intimated that class members might be permitted to intervene after a decision on the merits favorable to their interests, in order to secure the benefits of the decision for themselves, although they would presumably be unaffected by an unfavorable decision. See, as to the propriety of this so- called “one-way” intervention in “spurious” actions, the conflicting views expressed in Union Carbide & Carbon Corp. v. Nisley, 300 F.2d 561 (10th Cir. 1961), pet. cert. dism., 371 U.S. 801 (1963); York v. Guaranty Trust Co., 143 F.2d 503, 529 (2d Cir. 1944), rev'd on grounds not here relevant, 326 U.S. 99 (1945); Pentland v. Dravo Corp., 152 F.2d 851, 856 (3d Cir. 1945); Speed v. Transamerica Corp., 100 F.Supp. 461, 463 (D.Del. 1951); State Wholesale Grocers v. Great Atl. & Pac. Tea Co., 24 F.R.D. 510 (N.D.Ill. 1959); Alabama Ind. Serv. Stat. Assn. v. Shell Pet Corp., 28 F.Supp. 386, 390 (N.D.Ala. 1939); Tolliver v. Cudahy Packing Co., 39 F.Supp. 337, 339 (E.D.Tenn. 1941); Kalven & Rosenfield, supra, 8 U. of Chi.L.Rev. 684 (1941); Comment, 53 Nw.U.L.Rev. 627, 632–33 (1958); Developments in the Law, supra, 71 Harv.L.Rev. at 935; 2 Barron & Holtzoff, supra, §568; but cf. Lockwood v. Hercules Powder Co., 7 F.R.D. 24, 28–29 (W.D.Mo. 1947); Abram v. San Joaquin Cotton Oil Co., 46 F.Supp. 969, 976–77 (S.D.Calif. 1942); Chaffee, supra, at 280, 285; 3 Moore, supra, par. 23.12, at 3476. Under proposed subdivision (c)(3), one-way intervention is excluded; the action will have been early determined to be a class or nonclass action, and in the former case the judgment, whether or not favorable, will include the class, as above stated.
Although thus declaring that the judgment in a class action includes the class, as defined, subdivision (c)(3) does not disturb the recognized principle that the court conducting the action cannot predetermine the res judicata effect of the judgment; this can be tested only in a subsequent action. See Restatement, Judgments §86, comment (h), §116 (1942). The court, however, in framing the judgment in any suit brought as a class action, must decide what its extent or coverage shall be, and if the matter is carefully considered, questions of res judicata are less likely to be raised at a later time and if raised will be more satisfactorily answered. See Chafee, supra, at 294; Weinstein, supra, 9 Buffalo L.Rev. at 460.
Subdivision (c)(4). This provision recognizes that an action may be maintained as a class action as to particular issues only. For example, in a fraud or similar case the action may retain its “class” character only through the adjudication of liability to the class; the members of the class may thereafter be required to come in individually and prove the amounts of their respective claims.
Two or more classes may be represented in a single action. Where a class is found to include subclasses divergent in interest, the class may be divided correspondingly, and each subclass treated as a class.
Subdivision (d) is concerned with the fair and efficient conduct of the action and lists some types of orders which may be appropriate.
The court should consider how the proceedings are to be arranged in sequence, and what measures should be taken to simplify the proof and argument. See subdivision (d)(1). The orders resulting from this consideration, like the others referred to in subdivision (d), may be combined with a pretrial order under Rule 16, and are subject to modification as the case proceeds.
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Subdivision (d)(2) sets out a non-exhaustive list of possible occasions for orders requiring notice to the class. Such notice is not a novel conception. For example, in “limited fund” cases, members of the class have been notified to present individual claims after the basic class decision. Notice has gone to members of a class so that they might express any opposition to the representation, see United States v. American Optical Co., 97 F.Supp. 66 (N.D.Ill. 1951), and 1950–51 CCH Trade Cases 64573–74 (par. 62869); cf. Weeks v. Bareco Oil Co., 125 F.2d 84, 94 (7th Cir. 1941), and notice may encourage interventions to improve the representation of the class. Cf. Oppenheimer v. F. J. Young & Co., 144 F.2d 387 (2d Cir. 1944). Notice has been used to poll members on a proposed modification of a consent decree. See record in Sam Fox Publishing Co. v. United States, 366 U.S. 683 (1961).
Subdivision (d)(2) does not require notice at any stage, but rather calls attention to its availability and invokes the court's discretion. In the degree that there is cohesiveness or unity in the class and the representation is effective, the need for notice to the class will tend toward a minimum. These indicators suggest that notice under subdivision (d)(2) may be particularly useful and advisable in certain class actions maintained under subdivision (b)(3), for example, to permit members of the class to object to the representation. Indeed, under subdivision (c)(2), notice must be ordered, and is not merely discretionary, to give the members in a subdivision (b)(3) class action an opportunity to secure exclusion from the class. This mandatory notice pursuant to subdivision (c)(2), together with any discretionary notice which the court may find it advisable to give under subdivision (d)(2), is designed to fulfill requirements of due process to which the class action procedure is of course subject. See Hansberry v. Lee, 311 U.S. 32 (1940); Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950); cf. Dickinson v. Burnham, 197 F.2d 973, 979 (2d Cir. 1952), and studies cited at 979 n. 4; see also All American Airways, Inc. v. Elderd, 209 F.2d 247, 249 (2d Cir. 1954); Gart v. Cole, 263 F.2d 244, 248–49 (2d Cir. 1959), cert. denied, 359 U.S. 978 (1959).
Notice to members of the class, whenever employed under amended Rule 23, should be accommodated to the particular purpose but need not comply with the formalities for service of process. See Chafee, supra, at 230–31; Brendle v. Smith, 7 F.R.D. 119 (S.D.N.Y. 1946). The fact that notice is given at one stage of the action does not mean that it must be given at subsequent stages. Notice is available fundamentally “for the protection of the members of the class or otherwise for the fair conduct of the action” and should not be used merely as a device for the undesirable solicitation of claims. See the discussion in Cherner v. Transitron Electronic Corp., 201 F.Supp. 934 (D.Mass. 1962); Hormel v. United States, 17 F.R.D. 303 (S.D.N.Y. 1955).
In appropriate cases the court should notify interested government agencies of the pendency of the action or of particular steps therein.
Subdivision (d)(3) reflects the possibility of conditioning the maintenance of a class action, e.g., on the strengthening of the representation, see subdivision (c)(1) above; and recognizes that the imposition of conditions on intervenors may be required for the proper and efficient conduct of the action.
As to orders under subdivision (d)(4), see subdivision (c)(1) above.
Subdivision (e) requires approval of the court, after notice, for the dismissal or compromise of any class action.
NOTES OF ADVISORY COMMITTEE On RULES—1987 AMEnDMEnT
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The amendments are technical. No substantive change is intended.
COMMITTEE NOTES On RULES—1998 AMEnDMEnT
Subdivision (f). This permissive interlocutory appeal provision is adopted under the power conferred by 28 U.S.C. §1292(e). Appeal from an order granting or denying class certification is permitted in the sole discretion of the court of appeals. No other type of Rule 23 order is covered by this provision. The court of appeals is given unfettered discretion whether to permit the appeal, akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari. This discretion suggests an analogy to the provision in 28 U.S.C. §1292(b) for permissive appeal on certification by a district court. Subdivision (f), however, departs from the §1292(b) model in two significant ways. It does not require that the district court certify the certification ruling for appeal, although the district court often can assist the parties and court of appeals by offering advice on the desirability of appeal. And it does not include the potentially limiting requirements of §1292(b) that the district court order “involve[] a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”
The courts of appeals will develop standards for granting review that reflect the changing areas of uncertainty in class litigation. The Federal Judicial Center study supports the view that many suits with class-action allegations present familiar and almost routine issues that are no more worthy of immediate appeal than many other interlocutory rulings. Yet several concerns justify expansion of present opportunities to appeal. An order denying certification may confront the plaintiff with a situation in which the only sure path to appellate review is by proceeding to final judgment on the merits of an individual claim that, standing alone, is far smaller than the costs of litigation. An order granting certification, on the other hand, may force a defendant to settle rather than incur the costs of defending a class action and run the risk of potentially ruinous liability. These concerns can be met at low cost by establishing in the court of appeals a discretionary power to grant interlocutory review in cases that show appeal-worthy certification issues.
Permission to appeal may be granted or denied on the basis of any consideration that the court of appeals finds persuasive. Permission is most likely to be granted when the certification decision turns on a novel or unsettled question of law, or when, as a practical matter, the decision on certification is likely dispositive of the litigation.
The district court, having worked through the certification decision, often will be able to provide cogent advice on the factors that bear on the decision whether to permit appeal. This advice can be particularly valuable if the certification decision is tentative. Even as to a firm certification decision, a statement of reasons bearing on the probable benefits and costs of immediate appeal can help focus the court of appeals decision, and may persuade the disappointed party that an attempt to appeal would be fruitless.
The 10-day period for seeking permission to appeal is designed to reduce the risk that attempted appeals will disrupt continuing proceedings. It is expected that the courts of appeals will act quickly in making the preliminary determination whether to permit appeal. Permission to appeal does not stay trial court proceedings. A stay should be sought first from the trial court. If the trial court refuses a stay, its action and any explanation of its views should weigh heavily with the court of appeals.
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under subdivision (f).
Changes Made after Publication (GAP Report). No changes were made in the text of Rule 23(f) as published.
Several changes were made in the published Committee Note. (1) References to 28 U.S.C. §1292(b) interlocutory appeals were revised to dispel any implication that the restrictive elements of §1292(b) should be read in to Rule 23(f). New emphasis was placed on court of appeals discretion by making explicit the analogy to certiorari discretion. (2) Suggestions that the new procedure is a “modest” expansion of appeal opportunities, to be applied with “restraint,” and that permission “almost always will be denied when the certification decision turns on case-specific matters of fact and district court discretion,” were deleted. It was thought better simply to observe that courts of appeals will develop standards “that reflect the changing areas of uncertainty in class litigation.”
COMMITTEE NOTES On RULES—2003 AMEnDMEnT
Subdivision (c). Subdivision (c) is amended in several respects. The requirement that the court determine whether to certify a class “as soon as practicable after commencement of an action” is replaced by requiring determination “at an early practicable time.” The notice provisions are substantially revised.
Paragraph (1). Subdivision (c)(1)(A) is changed to require that the determination whether to certify a class be made “at an early practicable time.” The “as soon as practicable” exaction neither reflects prevailing practice nor captures the many valid reasons that may justify deferring the initial certification decision. See Willging, Hooper & Niemic, Empirical Study of Class Actions in Four Federal District Courts: Final Report to the Advisory Committee on Civil Rules 26–36 (Federal Judicial Center 1996).
Time may be needed to gather information necessary to make the certification decision. Although an evaluation of the probable outcome on the merits is not properly part of the certification decision, discovery in aid of the certification decision often includes information required to identify the nature of the issues that actually will be presented at trial. In this sense it is appropriate to conduct controlled discovery into the “merits,” limited to those aspects relevant to making the certification decision on an informed basis. Active judicial supervision may be required to achieve the most effective balance that expedites an informed certification determination without forcing an artificial and ultimately wasteful division between “certification discovery” and “merits discovery.” A critical need is to determine how the case will be tried. An increasing number of courts require a party requesting class certification to present a “trial plan” that describes the issues likely to be presented at trial and tests whether they are susceptible of class-wide proof. See Manual For Complex Litigation Third, §21.213, p. 44; §30.11, p. 214; §30.12, p. 215.
Other considerations may affect the timing of the certification decision. The party opposing the class may prefer to win dismissal or summary judgment as to the individual plaintiffs without certification and without binding the class that might have been certified. Time may be needed to explore designation of class counsel under Rule 23(g), recognizing that in many cases the need to progress toward the certification determination may require designation of interim counsel under Rule 23(g)(2)(A).
Although many circumstances may justify deferring the certification decision, active management may be necessary to ensure that the certification decision is not unjustifiably delayed.
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Subdivision (c)(1)(C) reflects two amendments. The provision that a class certification “may be conditional” is deleted. A court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until they have been met. The provision that permits alteration or amendment of an order granting or denying class certification is amended to set the cut-off point at final judgment rather than “the decision on the merits.” This change avoids the possible ambiguity in referring to “the decision on the merits.” Following a determination of liability, for example, proceedings to define the remedy may demonstrate the need to amend the class definition or subdivide the class. In this setting the final judgment concept is pragmatic. It is not the same as the concept used for appeal purposes, but it should be flexible, particularly in protracted litigation.
The authority to amend an order under Rule 23(c)(1) before final judgment does not restore the practice of “one-way intervention” that was rejected by the 1966 revision of Rule 23. A determination of liability after certification, however, may show a need to amend the class definition. Decertification may be warranted after further proceedings.
If the definition of a class certified under Rule 23(b)(3) is altered to include members who have not been afforded notice and an opportunity to request exclusion, notice—including an opportunity to request exclusion—must be directed to the new class members under Rule 23(c)(2)(B).
Paragraph (2). The first change made in Rule 23(c)(2) is to call attention to the court's authority— already established in part by Rule 23(d)(2)—to direct notice of certification to a Rule 23(b)(1) or (b)(2) class. The present rule expressly requires notice only in actions certified under Rule 23(b)(3). Members of classes certified under Rules 23(b)(1) or (b)(2) have interests that may deserve protection by notice.
The authority to direct notice to class members in a (b)(1) or (b)(2) class action should be exercised with care. For several reasons, there may be less need for notice than in a (b)(3) class action. There is no right to request exclusion from a (b)(1) or (b)(2) class. The characteristics of the class may reduce the need for formal notice. The cost of providing notice, moreover, could easily cripple actions that do not seek damages. The court may decide not to direct notice after balancing the risk that notice costs may deter the pursuit of class relief against the benefits of notice.
When the court does direct certification notice in a (b)(1) or (b)(2) class action, the discretion and flexibility established by subdivision (c)(2)(A) extend to the method of giving notice. Notice facilitates the opportunity to participate. Notice calculated to reach a significant number of class members often will protect the interests of all. Informal methods may prove effective. A simple posting in a place visited by many class members, directing attention to a source of more detailed information, may suffice. The court should consider the costs of notice in relation to the probable reach of inexpensive methods.
If a Rule 23(b)(3) class is certified in conjunction with a (b)(2) class, the (c)(2)(B) notice requirements must be satisfied as to the (b)(3) class.
The direction that class-certification notice be couched in plain, easily understood language is a reminder of the need to work unremittingly at the difficult task of communicating with class members. It is difficult to provide information about most class actions that is both accurate and easily understood by class members who are not themselves lawyers. Factual uncertainty, legal complexity, and the complication of class-action procedure raise the barriers high. The Federal Judicial Center has created illustrative clear-notice forms that provide a helpful starting point for actions similar to those described in the forms. https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
Subdivision (e). Subdivision (e) is amended to strengthen the process of reviewing proposed class- action settlements. Settlement may be a desirable means of resolving a class action. But court review and approval are essential to assure adequate representation of class members who have not participated in shaping the settlement.
Paragraph (1). Subdivision (e)(1)(A) expressly recognizes the power of a class representative to settle class claims, issues, or defenses.
Rule 23(e)(1)(A) resolves the ambiguity in former Rule 23(e)'s reference to dismissal or compromise of “a class action.” That language could be—and at times was—read to require court approval of settlements with putative class representatives that resolved only individual claims. See Manual for Complex Litigation Third, §30.41. The new rule requires approval only if the claims, issues, or defenses of a certified class are resolved by a settlement, voluntary dismissal, or compromise.
Subdivision (e)(1)(B) carries forward the notice requirement of present Rule 23(e) when the settlement binds the class through claim or issue preclusion; notice is not required when the settlement binds only the individual class representatives. Notice of a settlement binding on the class is required either when the settlement follows class certification or when the decisions on certification and settlement proceed simultaneously.
Reasonable settlement notice may require individual notice in the manner required by Rule 23(c)(2)(B) for certification notice to a Rule 23(b)(3) class. Individual notice is appropriate, for example, if class members are required to take action—such as filing claims—to participate in the judgment, or if the court orders a settlement opt-out opportunity under Rule 23(e)(3).
Subdivision (e)(1)(C) confirms and mandates the already common practice of holding hearings as part of the process of approving settlement, voluntary dismissal, or compromise that would bind members of a class.
Subdivision (e)(1)(C) states the standard for approving a proposed settlement that would bind class members. The settlement must be fair, reasonable, and adequate. A helpful review of many factors that may deserve consideration is provided by In re: Prudential Ins. Co. America Sales Practice Litigation Agent Actions, 148 F.3d 283, 316–324 (3d Cir. 1998). Further guidance can be found in the Manual for Complex Litigation.
The court must make findings that support the conclusion that the settlement is fair, reasonable, and adequate. The findings must be set out in sufficient detail to explain to class members and the appellate court the factors that bear on applying the standard.
Settlement review also may provide an occasion to review the cogency of the initial class definition. The terms of the settlement themselves, or objections, may reveal divergent interests of class members and demonstrate the need to redefine the class or to designate subclasses. Redefinition of a class certified under Rule 23(b)(3) may require notice to new class members under Rule 23(c)(2)(B). See Rule 23(c)(1)(C).
Paragraph (2). Subdivision (e)(2) requires parties seeking approval of a settlement, voluntary dismissal, or compromise under Rule 23(e)(1) to file a statement identifying any agreement made in connection with the settlement. This provision does not change the basic requirement that the parties disclose all terms of the settlement or compromise that the court must approve under Rule 23(e)(1).
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It aims instead at related undertakings that, although seemingly separate, may have influenced the terms of the settlement by trading away possible advantages for the class in return for advantages for others. Doubts should be resolved in favor of identification.
Further inquiry into the agreements identified by the parties should not become the occasion for discovery by the parties or objectors. The court may direct the parties to provide to the court or other parties a summary or copy of the full terms of any agreement identified by the parties. The court also may direct the parties to provide a summary or copy of any agreement not identified by the parties that the court considers relevant to its review of a proposed settlement. In exercising discretion under this rule, the court may act in steps, calling first for a summary of any agreement that may have affected the settlement and then for a complete version if the summary does not provide an adequate basis for review. A direction to disclose a summary or copy of an agreement may raise concerns of confidentiality. Some agreements may include information that merits protection against general disclosure. And the court must provide an opportunity to claim work- product or other protections.
Paragraph (3). Subdivision (e)(3) authorizes the court to refuse to approve a settlement unless the settlement affords class members a new opportunity to request exclusion from a class certified under Rule 23(b)(3) after settlement terms are known. An agreement by the parties themselves to permit class members to elect exclusion at this point by the settlement agreement may be one factor supporting approval of the settlement. Often there is an opportunity to opt out at this point because the class is certified and settlement is reached in circumstances that lead to simultaneous notice of certification and notice of settlement. In these cases, the basic opportunity to elect exclusion applies without further complication. In some cases, particularly if settlement appears imminent at the time of certification, it may be possible to achieve equivalent protection by deferring notice and the opportunity to elect exclusion until actual settlement terms are known. This approach avoids the cost and potential confusion of providing two notices and makes the single notice more meaningful. But notice should not be delayed unduly after certification in the hope of settlement.
Rule 23(e)(3) authorizes the court to refuse to approve a settlement unless the settlement affords a new opportunity to elect exclusion in a case that settles after a certification decision if the earlier opportunity to elect exclusion provided with the certification notice has expired by the time of the settlement notice. A decision to remain in the class is likely to be more carefully considered and is better informed when settlement terms are known.
The opportunity to request exclusion from a proposed settlement is limited to members of a (b)(3) class. Exclusion may be requested only by individual class members; no class member may purport to opt out other class members by way of another class action.
The decision whether to approve a settlement that does not allow a new opportunity to elect exclusion is confided to the court's discretion. The court may make this decision before directing notice to the class under Rule 23(e)(1)(B) or after the Rule 23(e)(1)(C) hearing. Many factors may influence the court's decision. Among these are changes in the information available to class members since expiration of the first opportunity to request exclusion, and the nature of the individual class members’ claims.
The terms set for permitting a new opportunity to elect exclusion from the proposed settlement of a Rule 23(b)(3) class action may address concerns of potential misuse. The court might direct, for example, that class members who elect exclusion are bound by rulings on the merits made before
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the settlement was proposed for approval. Still other terms or conditions may be appropriate.
Paragraph (4). Subdivision (e)(4) confirms the right of class members to object to a proposed settlement, voluntary dismissal, or compromise. The right is defined in relation to a disposition that, because it would bind the class, requires court approval under subdivision (e)(1)(C).
Subdivision (e)(4)(B) requires court approval for withdrawal of objections made under subdivision (e)(4)(A). Review follows automatically if the objections are withdrawn on terms that lead to modification of the settlement with the class. Review also is required if the objector formally withdraws the objections. If the objector simply abandons pursuit of the objection, the court may inquire into the circumstances.
Approval under paragraph (4)(B) may be given or denied with little need for further inquiry if the objection and the disposition go only to a protest that the individual treatment afforded the objector under the proposed settlement is unfair because of factors that distinguish the objector from other class members. Different considerations may apply if the objector has protested that the proposed settlement is not fair, reasonable, or adequate on grounds that apply generally to a class or subclass. Such objections, which purport to represent class-wide interests, may augment the opportunity for obstruction or delay. If such objections are surrendered on terms that do not affect the class settlement or the objector's participation in the class settlement, the court often can approve withdrawal of the objections without elaborate inquiry.
Once an objector appeals, control of the proceeding lies in the court of appeals. The court of appeals may undertake review and approval of a settlement with the objector, perhaps as part of appeal settlement procedures, or may remand to the district court to take advantage of the district court's familiarity with the action and settlement.
Subdivision (g). Subdivision (g) is new. It responds to the reality that the selection and activity of class counsel are often critically important to the successful handling of a class action. Until now, courts have scrutinized proposed class counsel as well as the class representative under Rule 23(a)(4). This experience has recognized the importance of judicial evaluation of the proposed lawyer for the class, and this new subdivision builds on that experience rather than introducing an entirely new element into the class certification process. Rule 23(a)(4) will continue to call for scrutiny of the proposed class representative, while this subdivision will guide the court in assessing proposed class counsel as part of the certification decision. This subdivision recognizes the importance of class counsel, states the obligation to represent the interests of the class, and provides a framework for selection of class counsel. The procedure and standards for appointment vary depending on whether there are multiple applicants to be class counsel. The new subdivision also provides a method by which the court may make directions from the outset about the potential fee award to class counsel in the event the action is successful.
Paragraph (1) sets out the basic requirement that class counsel be appointed if a class is certified and articulates the obligation of class counsel to represent the interests of the class, as opposed to the potentially conflicting interests of individual class members. It also sets out the factors the court should consider in assessing proposed class counsel.
Paragraph (1)(A) requires that the court appoint class counsel to represent the class. Class counsel must be appointed for all classes, including each subclass that the court certifies to represent divergent interests.
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Paragraph (1)(A) does not apply if “a statute provides otherwise.” This recognizes that provisions of the Private Securities Litigation Reform Act of 1995, Pub. L. No. 104–67, 109 Stat. 737 (1995) (codified in various sections of 15 U.S.C.), contain directives that bear on selection of a lead plaintiff and the retention of counsel. This subdivision does not purport to supersede or to affect the interpretation of those provisions, or any similar provisions of other legislation.
Paragraph 1(B) recognizes that the primary responsibility of class counsel, resulting from appointment as class counsel, is to represent the best interests of the class. The rule thus establishes the obligation of class counsel, an obligation that may be different from the customary obligations of counsel to individual clients. Appointment as class counsel means that the primary obligation of counsel is to the class rather than to any individual members of it. The class representatives do not have an unfettered right to “fire” class counsel. In the same vein, the class representatives cannot command class counsel to accept or reject a settlement proposal. To the contrary, class counsel must determine whether seeking the court's approval of a settlement would be in the best interests of the class as a whole.
Paragraph (1)(C) articulates the basic responsibility of the court to appoint class counsel who will provide the adequate representation called for by paragraph (1)(B). It identifies criteria that must be considered and invites the court to consider any other pertinent matters. Although couched in terms of the court's duty, the listing also informs counsel seeking appointment about the topics that should be addressed in an application for appointment or in the motion for class certification.
The court may direct potential class counsel to provide additional information about the topics mentioned in paragraph (1)(C) or about any other relevant topic. For example, the court may direct applicants to inform the court concerning any agreements about a prospective award of attorney fees or nontaxable costs, as such agreements may sometimes be significant in the selection of class counsel. The court might also direct that potential class counsel indicate how parallel litigation might be coordinated or consolidated with the action before the court.
The court may also direct counsel to propose terms for a potential award of attorney fees and nontaxable costs. Attorney fee awards are an important feature of class action practice, and attention to this subject from the outset may often be a productive technique. Paragraph (2)(C) therefore authorizes the court to provide directions about attorney fees and costs when appointing class counsel. Because there will be numerous class actions in which this information is not likely to be useful, the court need not consider it in all class actions.
Some information relevant to class counsel appointment may involve matters that include adversary preparation in a way that should be shielded from disclosure to other parties. An appropriate protective order may be necessary to preserve confidentiality.
In evaluating prospective class counsel, the court should weigh all pertinent factors. No single factor should necessarily be determinative in a given case. For example, the resources counsel will commit to the case must be appropriate to its needs, but the court should be careful not to limit consideration to lawyers with the greatest resources.
If, after review of all applicants, the court concludes that none would be satisfactory class counsel, it may deny class certification, reject all applications, recommend that an application be modified, invite new applications, or make any other appropriate order regarding selection and appointment of class counsel.
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Paragraph (2). This paragraph sets out the procedure that should be followed in appointing class counsel. Although it affords substantial flexibility, it provides the framework for appointment of class counsel in all class actions. For counsel who filed the action, the materials submitted in support of the motion for class certification may suffice to justify appointment so long as the information described in paragraph (g)(1)(C) is included. If there are other applicants, they ordinarily would file a formal application detailing their suitability for the position.
In a plaintiff class action the court usually would appoint as class counsel only an attorney or attorneys who have sought appointment. Different considerations may apply in defendant class actions.
The rule states that the court should appoint “class counsel.” In many instances, the applicant will be an individual attorney. In other cases, however, an entire firm, or perhaps numerous attorneys who are not otherwise affiliated but are collaborating on the action will apply. No rule of thumb exists to determine when such arrangements are appropriate; the court should be alert to the need for adequate staffing of the case, but also to the risk of overstaffing or an ungainly counsel structure.
Paragraph (2)(A) authorizes the court to designate interim counsel during the pre-certification period if necessary to protect the interests of the putative class. Rule 23(c)(1)(B) directs that the order certifying the class include appointment of class counsel. Before class certification, however, it will usually be important for an attorney to take action to prepare for the certification decision. The amendment to Rule 23(c)(1) recognizes that some discovery is often necessary for that determination. It also may be important to make or respond to motions before certification. Settlement may be discussed before certification. Ordinarily, such work is handled by the lawyer who filed the action. In some cases, however, there may be rivalry or uncertainty that makes formal designation of interim counsel appropriate. Rule 23(g)(2)(A) authorizes the court to designate interim counsel to act on behalf of the putative class before the certification decision is made. Failure to make the formal designation does not prevent the attorney who filed the action from proceeding in it. Whether or not formally designated interim counsel, an attorney who acts on behalf of the class before certification must act in the best interests of the class as a whole. For example, an attorney who negotiates a pre-certification settlement must seek a settlement that is fair, reasonable, and adequate for the class.
Rule 23(c)(1) provides that the court should decide whether to certify the class “at an early practicable time,” and directs that class counsel should be appointed in the order certifying the class. In some cases, it may be appropriate for the court to allow a reasonable period after commencement of the action for filing applications to serve as class counsel. The primary ground for deferring appointment would be that there is reason to anticipate competing applications to serve as class counsel. Examples might include instances in which more than one class action has been filed, or in which other attorneys have filed individual actions on behalf of putative class members. The purpose of facilitating competing applications in such a case is to afford the best possible representation for the class. Another possible reason for deferring appointment would be that the initial applicant was found inadequate, but it seems appropriate to permit additional applications rather than deny class certification.
Paragraph (2)(B) states the basic standard the court should use in deciding whether to certify the class and appoint class counsel in the single applicant situation—that the applicant be able to provide the representation called for by paragraph (1)(B) in light of the factors identified in paragraph (1)(C).
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If there are multiple adequate applicants, paragraph (2)(B) directs the court to select the class counsel best able to represent the interests of the class. This decision should also be made using the factors outlined in paragraph (1)(C), but in the multiple applicant situation the court is to go beyond scrutinizing the adequacy of counsel and make a comparison of the strengths of the various applicants. As with the decision whether to appoint the sole applicant for the position, no single factor should be dispositive in selecting class counsel in cases in which there are multiple applicants. The fact that a given attorney filed the instant action, for example, might not weigh heavily in the decision if that lawyer had not done significant work identifying or investigating claims. Depending on the nature of the case, one important consideration might be the applicant's existing attorney-client relationship with the proposed class representative.
Paragraph (2)(C) builds on the appointment process by authorizing the court to include provisions regarding attorney fees in the order appointing class counsel. Courts may find it desirable to adopt guidelines for fees or nontaxable costs, or to direct class counsel to report to the court at regular intervals on the efforts undertaken in the action, to facilitate the court's later determination of a reasonable attorney fee.
Subdivision (h). Subdivision (h) is new. Fee awards are a powerful influence on the way attorneys initiate, develop, and conclude class actions. Class action attorney fee awards have heretofore been handled, along with all other attorney fee awards, under Rule 54(d)(2), but that rule is not addressed to the particular concerns of class actions. This subdivision is designed to work in tandem with new subdivision (g) on appointment of class counsel, which may afford an opportunity for the court to provide an early framework for an eventual fee award, or for monitoring the work of class counsel during the pendency of the action.
Subdivision (h) applies to “an action certified as a class action.” This includes cases in which there is a simultaneous proposal for class certification and settlement even though technically the class may not be certified unless the court approves the settlement pursuant to review under Rule 23(e). When a settlement is proposed for Rule 23(e) approval, either after certification or with a request for certification, notice to class members about class counsel's fee motion would ordinarily accompany the notice to the class about the settlement proposal itself.
This subdivision does not undertake to create new grounds for an award of attorney fees or nontaxable costs. Instead, it applies when such awards are authorized by law or by agreement of the parties. Against that background, it provides a format for all awards of attorney fees and nontaxable costs in connection with a class action, not only the award to class counsel. In some situations, there may be a basis for making an award to other counsel whose work produced a beneficial result for the class, such as attorneys who acted for the class before certification but were not appointed class counsel, or attorneys who represented objectors to a proposed settlement under Rule 23(e) or to the fee motion of class counsel. Other situations in which fee awards are authorized by law or by agreement of the parties may exist.
This subdivision authorizes an award of “reasonable” attorney fees and nontaxable costs. This is the customary term for measurement of fee awards in cases in which counsel may obtain an award of fees under the “common fund” theory that applies in many class actions, and is used in many fee- shifting statutes. Depending on the circumstances, courts have approached the determination of what is reasonable in different ways. In particular, there is some variation among courts about whether in “common fund” cases the court should use the lodestar or a percentage method of determining what fee is reasonable. The rule does not attempt to resolve the question whether the lodestar or https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
percentage approach should be viewed as preferable.
Active judicial involvement in measuring fee awards is singularly important to the proper operation of the class-action process. Continued reliance on caselaw development of fee-award measures does not diminish the court's responsibility. In a class action, the district court must ensure that the amount and mode of payment of attorney fees are fair and proper whether the fees come from a common fund or are otherwise paid. Even in the absence of objections, the court bears this responsibility.
Courts discharging this responsibility have looked to a variety of factors. One fundamental focus is the result actually achieved for class members, a basic consideration in any case in which fees are sought on the basis of a benefit achieved for class members. The Private Securities Litigation Reform Act of 1995 explicitly makes this factor a cap for a fee award in actions to which it applies. See 15 U.S.C. §§77z–1(a)(6); 78u–4(a)(6) (fee award should not exceed a “reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class”). For a percentage approach to fee measurement, results achieved is the basic starting point.
In many instances, the court may need to proceed with care in assessing the value conferred on class members. Settlement regimes that provide for future payments, for example, may not result in significant actual payments to class members. In this connection, the court may need to scrutinize the manner and operation of any applicable claims procedure. In some cases, it may be appropriate to defer some portion of the fee award until actual payouts to class members are known. Settlements involving nonmonetary provisions for class members also deserve careful scrutiny to ensure that these provisions have actual value to the class. On occasion the court's Rule 23(e) review will provide a solid basis for this sort of evaluation, but in any event it is also important to assessing the fee award for the class.
At the same time, it is important to recognize that in some class actions the monetary relief obtained is not the sole determinant of an appropriate attorney fees award. Cf. Blanchard v. Bergeron, 489 U.S. 87, 95 (1989) (cautioning in an individual case against an “undesirable emphasis” on “the importance of the recovery of damages in civil rights litigation” that might “shortchange efforts to seek effective injunctive or declaratory relief”).
Any directions or orders made by the court in connection with appointing class counsel under Rule 23(g) should weigh heavily in making a fee award under this subdivision.
Courts have also given weight to agreements among the parties regarding the fee motion, and to agreements between class counsel and others about the fees claimed by the motion. Rule 54(d)(2)(B) provides: “If directed by the court, the motion shall also disclose the terms of any agreement with respect to fees to be paid for the services for which claim is made.” The agreement by a settling party not to oppose a fee application up to a certain amount, for example, is worthy of consideration, but the court remains responsible to determine a reasonable fee. “Side agreements” regarding fees provide at least perspective pertinent to an appropriate fee award.
In addition, courts may take account of the fees charged by class counsel or other attorneys for representing individual claimants or objectors in the case. In determining a fee for class counsel, the court's objective is to ensure an overall fee that is fair for counsel and equitable within the class. In some circumstances individual fee agreements between class counsel and class members might have provisions inconsistent with those goals, and the court might determine that adjustments in the class fee award were necessary as a result. https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
Finally, it is important to scrutinize separately the application for an award covering nontaxable costs. If costs were addressed in the order appointing class counsel, those directives should be a presumptive starting point in determining what is an appropriate award.
Paragraph (1). Any claim for an award of attorney fees must be sought by motion under Rule 54(d)(2), which invokes the provisions for timing of appeal in Rule 58 and Appellate Rule 4. Owing to the distinctive features of class action fee motions, however, the provisions of this subdivision control disposition of fee motions in class actions, while Rule 54(d)(2) applies to matters not addressed in this subdivision.
The court should direct when the fee motion must be filed. For motions by class counsel in cases subject to court review of a proposed settlement under Rule 23(e), it would be important to require the filing of at least the initial motion in time for inclusion of information about the motion in the notice to the class about the proposed settlement that is required by Rule 23(e). In cases litigated to judgment, the court might also order class counsel's motion to be filed promptly so that notice to the class under this subdivision (h) can be given.
Besides service of the motion on all parties, notice of class counsel's motion for attorney fees must be “directed to the class in a reasonable manner.” Because members of the class have an interest in the arrangements for payment of class counsel whether that payment comes from the class fund or is made directly by another party, notice is required in all instances. In cases in which settlement approval is contemplated under Rule 23(e), notice of class counsel's fee motion should be combined with notice of the proposed settlement, and the provision regarding notice to the class is parallel to the requirements for notice under Rule 23(e). In adjudicated class actions, the court may calibrate the notice to avoid undue expense.
Paragraph (2). A class member and any party from whom payment is sought may object to the fee motion. Other parties—for example, nonsettling defendants—may not object because they lack a sufficient interest in the amount the court awards. The rule does not specify a time limit for making an objection. In setting the date objections are due, the court should provide sufficient time after the full fee motion is on file to enable potential objectors to examine the motion.
The court may allow an objector discovery relevant to the objections. In determining whether to allow discovery, the court should weigh the need for the information against the cost and delay that would attend discovery. See Rule 26(b)(2). One factor in determining whether to authorize discovery is the completeness of the material submitted in support of the fee motion, which depends in part on the fee measurement standard applicable to the case. If the motion provides thorough information, the burden should be on the objector to justify discovery to obtain further information.
Paragraph (3). Whether or not there are formal objections, the court must determine whether a fee award is justified and, if so, set a reasonable fee. The rule does not require a formal hearing in all cases. The form and extent of a hearing depend on the circumstances of the case. The rule does require findings and conclusions under Rule 52(a).
Paragraph (4). By incorporating Rule 54(d)(2), this provision gives the court broad authority to obtain assistance in determining the appropriate amount to award. In deciding whether to direct submission of such questions to a special master or magistrate judge, the court should give appropriate consideration to the cost and delay that such a process might entail.
Changes Made After Publication and Comment. Rule 23(c)(1)(B) is changed to incorporate the https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
counsel-appointment provisions of Rule 23(g). The statement of the method and time for requesting exclusion from a (b)(3) class has been moved to the notice of certification provision in Rule 23(c)(2)(B).
Rule 23(c)(1)(C) is changed by deleting all references to “conditional” certification.
Rule 23(c)(2)(A) is changed by deleting the requirement that class members be notified of certification of a (b)(1) or (b)(2) class. The new version provides only that the court may direct appropriate notice to the class.
Rule 23(c)(2)(B) is revised to require that the notice of class certification define the certified class in terms identical to the terms used in (c)(1)(B), and to incorporate the statement transferred from (c)(1)(B) on “when and how members may elect to be excluded.”
Rule 23(e)(1) is revised to delete the requirement that the parties must win court approval for a precertification dismissal or settlement.
Rule 23(e)(2) is revised to change the provision that the court may direct the parties to file a copy or summary of any agreement or understanding made in connection with a proposed settlement. The new provision directs the parties to a proposed settlement to identify any agreement made in connection with the settlement.
Rule 23(e)(3) is proposed in a restyled form of the second version proposed for publication.
Rule 23(e)(4)(B) is restyled.
Rule 23(g)(1)(C) is a transposition of criteria for appointing class counsel that was published as Rule 23(g)(2)(B). The criteria are rearranged, and expanded to include consideration of experience in handling claims of the type asserted in the action and of counsel's knowledge of the applicable law.
Rule 23(g)(2)(A) is a new provision for designation of interim counsel to act on behalf of a putative class before a certification determination is made.
Rule 23(g)(2)(B) is revised to point up the differences between appointment of class counsel when there is only one applicant and when there are competing applicants. When there is only one applicant the court must determine that the applicant is able to fairly and adequately represent class interests. When there is more than one applicant the court must appoint the applicant best able to represent class interests.
Rule 23(h) is changed to require that notice of an attorney-fee motion by class counsel be “directed to class members,” rather than “given to all class members.”
COMMITTEE NOTES On RULES—2007 AMEnDMEnT
The language of Rule 23 has been amended as part of the general restyling of the Civil Rules to make them more easily understood and to make style and terminology consistent throughout the rules. These changes are intended to be stylistic only.
Amended Rule 23(d)(2) carries forward the provisions of former Rule 23(d) that recognize two separate propositions. First, a Rule 23(d) order may be combined with a pretrial order under Rule 16. Second, the standard for amending the Rule 23(d) order continues to be the more open-ended standard for amending Rule 23(d) orders, not the more exacting standard for amending Rule 16 orders.
https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] Rule 23. Class Actions | Federal Rules of Civil Procedure | LII / Legal Information Institute
As part of the general restyling, intensifiers that provide emphasis but add no meaning are consistently deleted. Amended Rule 23(f) omits as redundant the explicit reference to court of appeals discretion in deciding whether to permit an interlocutory appeal. The omission does not in any way limit the unfettered discretion established by the original rule.
COMMITTEE NOTES On RULES—2009 AMEnDMEnT
The time set in the former rule at 10 days has been revised to 14 days. See the Note to Rule 6.
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https://www.law.cornell.edu/rules/frcp/rule_23[5/4/2015 3:10:05 PM] 4:42-9. Attorney's Fees
. (a) Actions in Which Fee Is Allowable. No fee for legal services shall be allowed in the taxed costs or otherwise, except • (1) In a family action, a fee allowance both pendente lite and on final determination may be made pursuant to R. 5:3-5(c). • (2) Out of a fund in court. The court in its discretion may make an allowance out of such a fund, but no allowance shall be made as to issues triable of right by a jury. A fiduciary may make payments on account of fees for legal services rendered out of a fund entrusted to the fiduciary for administration, subject to approval and allowance or to disallowance by the court upon settlement of the account. • (3) In a probate action, if probate is refused, the court may make an allowance to be paid out of the estate of the decedent. If probate is granted, and it shall appear that the contestant had reasonable cause for contesting the validity of the will or codicil, the court may make an allowance to the proponent and the contestant, to be paid out of the estate. In a guardianship action, the court may allow a fee in accordance with R. 4:86-4(e) to the attorney for the party seeking guardianship, counsel appointed to represent the alleged incapacitated person, and the guardian ad litem. • (4) In an action for the foreclosure of a mortgage, the allowance shall be calculated as follows: on all sums adjudged to be paid the plaintiff amounting to $5,000 or less, at the rate of 3.5%, provided, however, that in any action a minimum fee of $75 shall be allowed; upon the excess over $5,000 and up to $10,000 at the rate of 1.5%; and upon the excess over $10,000 at the rate of 1%, provided that the allowance shall not exceed $7,500. If, however, application of the formula prescribed by this rule results in a sum in excess of $7,500, the court may award an additional fee not greater than the amount of such excess on application supported by affidavit of services. In no case shall the fee allowance exceed the limitations of this rule. • (5) In an action to foreclose a tax certificate or certificates, the court may award attorney's fees not exceeding $500 per tax sale certificate in any in rem or in personam proceeding except for special cause shown by affidavit. If the plaintiff is other than a municipality no attorney's fees shall be allowed unless prior to the filing of the complaint the plaintiff shall have given not more than 120 nor fewer than 30 days' written notice to all parties entitled to redeem whose interests appear of record at the time of the tax sale, by registered or certified mail with postage prepaid thereon addressed to their last known addresses, of intention to file such complaint. The notice shall also contain the amount due on the tax lien as of the day of the notice. A copy of the notice shall be filed in the office of the municipal tax collector. • (6) In an action upon a liability or indemnity policy of insurance, in favor of a successful claimant. • (7) As expressly provided by these rules with respect to any action, whether or not there is a fund in court. • (8) In all cases where attorney's fees are permitted by statute. . (b) Affidavit of Service. Except in tax and mortgage foreclosure actions, all applications for the allowance of fees shall be supported by an affidavit of services addressing the factors enumerated by RPC 1.5(a). The affidavit shall also include a recitation of other factors pertinent in the evaluation of the services rendered, the amount of the allowance applied for, and an itemization of disbursements for which reimbursement is sought. If the court is requested to consider the rendition of paraprofessional services in making a fee allowance, the affidavit shall include a detailed statement of the time spent and services rendered by paraprofessionals, a summary of the paraprofessionals' qualifications, and the attorney's billing rate for paraprofessional services to clients generally. No portion of any fee allowance claimed for attorneys' services shall duplicate in any way the fees claimed by the attorney for paraprofessional services rendered to the client. For purposes of this rule, "paraprofessional services" shall mean those services rendered by individuals who are qualified through education, work experience or training who perform specifically delegated tasks which are legal in nature under the direction and supervision of attorneys and which tasks an attorney would otherwise be obliged to perform. . (c) Statement of Fees Received. All applications for the allowance of fees shall state how much had been paid to the attorney (including, in a matrimonial action, the amount, if any, received by the attorney from pendente lite allowances) and what provision, if any, has been made for the payment of fees to the attorney in the future. . (d) Prohibiting Separate Orders for Allowances of Fees. An allowance of fees made on the determination of a matter shall be included in the judgment or order stating the determination.
Note: Source - R.R. 4:55-7(a) (b) (c) (d) (e) (f), 4:55-8, 4:98-4(c). Paragraphs (a) and (b) amended July 7, 1971 to be effective September 13, 1971; paragraph (a) amended November 27, 1974 to be effective April 1, 1975; paragraph (a) amended July 16, 1981 to be effective September 14, 1981; paragraph (a)(1) amended December 20, 1983 to be effective December 31, 1983; paragraphs (a)(1) and (b) amended November 1, 1985 to be effective January 2, 1986; paragraph (b) amended January 19, 1989 to be effective February 1, 1989; paragraph (a)(4) amended June 29, 1990 to be effective September 4, 1990; paragraph (a)(5) amended July 14, 1992 to be effective September 1, 1992; paragraphs (a)(1), (2) and (c) amended July 13, 1994 to be effective September 1, 1994; paragraph (a)(5) amended June 28, 1996 to be effective September 1, 1996; paragraph (a)(1) amended January 21, 1999 to be effective April 5, 1999; paragraph (a)(5) amended July 28, 2004 to be effective September 1, 2004; paragraph (a)(3) amended July 27, 2006 to be effective September 1, 2006; caption amended and subparagraphs (a)(5) and (a)(8) amended July 23, 2010 to be effective September 1, 2010.
42:2C-68 Derivative action.
68. Derivative Action. A member may maintain a derivative action to enforce a right of a limited liability company if:
a. the member first makes a demand on the other members in a member-managed limited liability company, or the managers of a manager-managed limited liability company, requesting that they cause the company to bring an action to enforce the right, and the managers or other members do not bring the action within a reasonable time; or
b. A demand under subsection a. of this section would be futile.
L.2012, c.50, s.68.
42:2C-72 Proceeds and expenses.
72. Proceeds and Expenses.
a. Except as otherwise provided in subsection b. of this section:
(1) any proceeds or other benefits of a derivative action under section 68 of this act, whether by judgment, compromise, or settlement, belong to the limited liability company and not to the plaintiff; and
(2) if the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the company.
b. If a derivative action under section 68 of this act is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees and costs, from the recovery of the limited liability company.
L.2012, c.50, s.72. Page 1
10 of 14 DOCUMENTS
THERESA M. ELLIS and SCOTT A. ZUKOWSKI, w/h, Plaintiffs, v. ETHICON, INC., JOHNSON & JOHNSON, INC., and JOHN DOE(S), Defendants.
Civil Action No. 05-726(FLW)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
2010 U.S. Dist. LEXIS 18455
March 1, 2010, Decided March 1, 2010, Filed
NOTICE: NOT FOR PUBLICATION WOLFSON, District Judge:
SUBSEQUENT HISTORY: Request granted, Stay de- In the instant application, Plaintiff Theresa M. Ellis nied by Ellis v. Ethicon, Inc., 2010 U.S. Dist. LEXIS ("Plaintiff") seeks, inter alia, $ 387,481.35 in attorney's 98603 (D.N.J., Sept. 20, 2010) fees and $ 35,176.50 in costs in connection with litigat- ing this suit, wherein she obtained a favorable jury ver- PRIOR HISTORY: Ellis v. Ethicon, Inc., 2009 U.S. dict with respect to her discrimination claim pursuant to Dist. LEXIS 106620 (D.N.J., Nov. 13, 2009) the Americans with Disabilities Act ("ADA") against Defendant Ethicon, Inc. ("Defendant"). Previously, on November 16, 2009, the Court denied Defendant's mo- COUNSEL: [*1] For THERESA M. ELLIS, Plaintiff: tion for judgment or a new trial and awarded Plaintiff ELIZABETH ZUCKERMAN, LEAD ATTORNEY, back pay in the amount of $ 42,400, along with pre- GEORGE WRIGHT FISHER, JR., ZUCKERMAN & judgment interest, [*2] and an amount to compensate FISHER, LLC, PRINCETON, NJ. Plaintiff for any negative tax consequences. The Court also reinstated Plaintiff to her position at Ethicon in lieu For SCOTT A. ZUKOWSKI, Plaintiff: GEORGE of front pay. To that end, the Court advised Plaintiff to WRIGHT FISHER, JR., LEAD ATTORNEY, ZUCK- submit an application for attorney's fees and costs, along ERMAN & FISHER, LLC, PRINCETON, NJ. with the appropriate calculations to adjust the back pay award to present value, to add prejudgment interest and For ETHICON, INC., JOHNSON & JOHNSON, INC., include an appropriate amount compensating for nega- Defendants: FRANCIS X. DEE, LEAD ATTORNEY, tive tax consequences. In response to the Court's Order, MCELROY, DEUTSCH, MULVANEY, & CARPEN- Defendant now moves to alter the judgment pursuant to TER, LLP, NEWARK, NJ; DONNA DUBETH GAR- Fed. R. Civ. P. 59(e) with respect to adjusting the back DINER, MCELROY, DEUTSCH, MULVANEY & pay award to present value, and it opposes, in part, Plain- CARPENTER, LLP, MORRISTOWN, NJ; JANE A. tiff's application for fees and costs. For the reasons stated RIGBY, MCELROY, DEUTSCH, MULVANEY & herein, the Court will award Plaintiff $ 340,858.85 in CARPENTER, LLP, NEWARK, NJ. fees and $ 37,926.50 in expenses and costs. The Court will amend its previous ruling regarding back pay con- JUDGES: FREDA L. WOLFSON, United States Dis- sistent with this Opinion. trict Judge. Background OPINION BY: FREDA L. WOLFSON Since the facts of this case have been extensively recounted in various opinions, the Court will not repeat OPINION them here. However, the Court will incorporate, and re- Page 2 2010 U.S. Dist. LEXIS 18455, * fer to, the facts set forth in its November 16, 2009 Opin- Under the ADA, the determination of a reasonable ion for the purpose of these motions. fee begins by calculating a lodestar, which is the product of hours counsel reasonably worked on the litigation and Discussion a reasonable hourly rate. Lanni v. State of New Jersey, 259 F.3d 146, 149 (3d Cir. 2001); Public Interest Re- I. Attorneys' Fees and [*3] Costs search Group of New Jersey, Inc. v. Windall, 51 F.3d 1179, 1185 (3d Cir. 1995)("PIRGNJ"); Damian J. v. Sch. According to the Court's instructions, Plaintiff files Dist. of Phila., No. 08-2520, 358 Fed. Appx. 333, 2009 the instant application for attorneys' fees and costs asso- U.S. App. LEXIS 28255, at *5-6 (3d Cir. Dec. 23, 2009). ciated with this litigation. In support of her application, Thus, there are two components to the reasonable fee Plaintiff relies on various exhibits and certifications, in- analysis: the rate charged and the time expended. The cluding the certification of Plaintiff's counsel, Elizabeth lodestar is the presumptively reasonable fee. Planned Zuckerman, Esq. and the Declaration of Fredric J. Gross, Parenthood of Cent. New Jersey v. Attorney General of Esq., an experienced employment attorney practicing in the State of New Jersey, 297 F.3d 253, 265 n.5 (3d Cir. New Jersey, to justify her request of $ 387,481.35 in fees 2002). and $ 35,176.50 in costs. Defendant raises three distinct objections to Plaintiff's fee application: (1) a $ 400 hour- "It is the general rule that a reasonable hourly rate is ly rate is not reasonable; (2) a lower rate should apply to calculated according to the prevailing market rates in the associate-level work performed by Ms. Zuckerman; and community." S.D. v. Manville Bd. of Educ., 989 F.Supp. (3) fees should not be awarded in connection with filing 649, 656 (D.N.J. 1998). "This burden is normally ad- a motion to disqualify. Defendant otherwise does not dressed by submitting affidavits of other attorneys in the object to the number of hours expended on the litigation. relevant legal community attesting to the range of pre- vailing rates charged by attorneys with similar skill and The Americans with Disabilities Act permits courts experience." [*6] Id. (citations omitted). Moreover, the to award reasonable attorneys' costs to a prevailing party. current market rate is the rate at the time of the fee peti- The statute provides that "[i]n any action or administra- tion, not the rate when the services were performed. tive proceeding commenced pursuant to this Act, the Lanni v. State of New Jersey, 259 F.3d 146, 149 (3d Cir. court or agency, in its discretion, may allow the prevail- 2001)("To take into account delay in payment, the hourly ing party, other than the United States, a reasonable at- rate at which compensation is to be awarded should be torney's [*4] fee, including litigation expenses, and based on current rates rather than those in effect when costs . . . ." 42 U.S.C. § 12205. the services were performed")(quoting Rendine v. Plaintiff, the prevailing party in this case, is not au- Pantzer, 141 N.J. 292, 661 A.2d 1202 (1995)); see Rode tomatically entitled to compensation for all the time her v. Dellarciprete, 892 F.2d 1177, 1188-89 (3d Cir. 1990) attorneys spent working on the case; rather, a court (describing petition based on current rates as premised awarding fees must "decide whether the hours set [forth] on a theory of "delay compensation"). "A current market were reasonably expended for each of the particular rate is exactly that - a reasonable rate based on the cur- purposes described and then exclude those that are 'ex- rently prevailing rates in the community for comparable cessive, redundant, or otherwise unnecessary.'" Student legal services." Lanni, 259 F.3d at 150. Once the hourly Pub. Interest Research Group v. AT & T Bell Lab., 842 rate is set, then that rate is multiplied by the numbers of F.2d 1436, 1441-42 (3d Cir. 1988)(citation and quotation hours reasonably expended to arrive at the amount of the omitted). 1 A party seeking attorney fees bears the ulti- fee award. Id. mate burden of showing that its requested hourly rates Significantly, the Court may not reduce an award and the hours it claims are reasonable. See Rode v. Del- sua sponte; rather, it can only do so in response to spe- larciprete, 892 F.2d 1177, 1183 (3d Cir. 1990); see also cific objections made by the opposing party. Bell v. Smith v. Philadelphia Hous. Auth., 107 F.3d 223, 225 United Princeton Properties, Inc., 884 F.2d 713, 719 (3d (3d Cir. 1997). To initially satisfy this burden, "the fee Cir. 1989). But once the opposing party has made a spe- petitioner must 'submit evidence supporting the hours cific [*7] objection, the burden is on the plaintiff to worked and rates claimed.'" Rode, 892 F.2d at 1183 justify the size and reasonableness of her request. Inter- (quotation omitted). faith Cmty. Org. v. Honeywell Int'l, Inc., 426 F.3d 694,
713 (3d Cir. 2005). In reviewing a fee application, a dis- 1 "[Third Circuit] case law construing what is a trict court must conduct a "thorough and searching anal- reasonable fee applies uniformly to all fee shift- ysis" to identify such charges. Evans v. Port Auth. of ing statutes." Goodman v. Pa. Turnpike Comm'n, N.Y. & N.J., 273 F.3d 346, 362 (3d Cir. 2001). As noted 293 F.3d 655, 677 (3d Cir. 2002) [*5] (altera- above, Defendant objects to Plaintiff's fee request on tion, quotation marks and citation omitted). Page 3 2010 U.S. Dist. LEXIS 18455, * three separate grounds; the Court will address each con- has substantial trial experience in both state and federal tention below. courts. Plaintiff's evidence -- a survey of cases discussing hourly rates and the Declaration of Mr. Gross 3 -- support A. Hourly Rate the reasonableness of the $ 350 hourly rate, which falls within the norm of New Jersey attorneys with similar Plaintiff is seeking an hourly rate of $ 400 for Ms. positions and experience. Id.; Zuckerman Aff., PP Zuckerman and Mr. George W. Fisher, Esq., $ 375 for 12(e)-(f); see also Gross Decl. Mr. Richard Yaskin, Esq., 2 and $ 125 for Ms. Priya
Vimalassery, a paralegal. Defendant claims that the 3 Defendant contests the probative value of hourly rate for Ms. Zuckerman and Mr. Fisher is unrea- Mr. Gross' Declaration because it maintains that sonable. It reasons that the record establishes that Plain- there is no showing that Ms. Zuckerman's [*10] tiff retained Ms. Zuckerman and her firm at a "top" rate experience and expertise are similar to Mr. Gross of $ 300 per hour, see Zuckerman Aff., P 4, and this or other counsel discussed by him. The Court billing rate is the best evidence of the market rate. To disagrees. Mr. Gross, an attorney who practices this end, Defendant has parsed through Plaintiff's exhib- in New Jersey, attests to the range of prevailing its and certifications and discredits each of Plaintiff's rates charged by other employment attorneys in supporting documents. the State. In fact, Mr. Gross specifically deline-
ates the rates of attorneys who work in employ- 2 Mr. Yaskin is an attorney who assisted Ms. ment boutique firms, such as Zuckerman & Fish- Zuckerman at the [*8] inception of this case. er. According to Mr. Gross' Declaration, the $ The Court notes that Defendant does not object to 350 hourly rate falls within the low-end of the Mr. Yaskin's hourly rate or the number of hours reasonable range of the rates charged by other at- he spent in this litigation. torneys with similar experience. See Gross' Decl., In 2005, Plaintiff signed a Retainer Agreement with PP 17-23. Zuckerman & Fisher, LLC. The Agreement provided that Although Defendant criticizes Plaintiff's supporting the then hourly rate for Ms. Zuckerman and Mr. Fisher evidence, Defendant neither presents any contrary evi- was $ 300. Zuckerman Aff., P 4. A couple of years later, dence nor cites to a single authority that stands for the the Zuckerman Firm's billing rate increased to $ 350. Id., proposition that this Court is bound by the rate negotiat- P 8. However, effective January 1, 2010, the billing rate ed in the Retainer Agreement at the inception of this case increased again to $ 400 - Plaintiff is requesting this in 2005. Smith, 107 F.3d at 225 ("Once the plaintiff has amount as the hourly rate. Id. While the hourly rate carried this burden [i.e., submitting evidence of the ap- quoted in Plaintiff's Retainer Agreement is helpful in propriate hourly rate], [the] defendant may contest that determining a reasonable hourly rate, the Third Circuit prima facie case only with appropriate record evidence . . has instructed courts to look to the applicant attorneys' ."). Instead, the Court notes that this case spans more customary billing rate for fee-paying clients at the time than five years. While the Retainer Agreement set forth the fee petition was filed. Lanni, 259 F.3d at 150; [*11] a $ 300 hourly rate, the majority of the attorney's PIRGNJ, 51 F.3d at 1185. In that regard, in the first in- billable hours occurred after the rate increased to $ 350, stance, the Court finds the $ 400 hourly rate unreasona- particularly since the bulk of the time charged was in ble. At the time this application was filed in December 2008-2009, when Ms. Zuckerman and Mr. Fisher pre- 2009, the Firm's hourly rate was $ 350. Therefore, there pared and conducted trial, and filed pre- and post-trial is no basis for the Court to permit a $ 400 hourly rate motions. Accordingly, pursuant to Lanni, the Court is when all of the work performed by Ms. Zuckerman and satisfied that Plaintiff has demonstrated that the hourly [*9] Mr. Fisher, up to and including the filing of this rate of $ 350 is reasonable. request, are prior to the rate increase in 2010.
Rather, the Court finds the hourly rate of $ 350, B. Associate-Level Work which was the Firm's hourly rate at time this petition was At the outset, Defendant does not take issue with ei- filed, reasonable. The starting point in determining a ther the number of hours or the hourly rate of the parale- reasonable rate is the experience of the attorneys. See gal. Rather, Defendant contends that 159.12 of the attor- Tenafly Eruv Ass'n v. Borough of Tenafly, 195 Fed. neys' billable hours, which include time for legal re- Appx. 93, 97 (3d Cir. 2006). There is no dispute that search and drafting certain correspondence, should have Plaintiff's attorneys are experienced lawyers in the field been performed by an associate or other less experienced of employment discrimination. Indeed, Ms. Zuckerman attorney, and thus, these hours should not be compen- has cited to many published cases in which she has rep- sated at the lead-attorney hourly rate applicable to Ms. resented plaintiffs, and she has been representing plain- Zuckerman and Mr. Fisher. The Court disagrees. tiffs in employment disputes since 1990. Mr. Fisher also Page 4 2010 U.S. Dist. LEXIS 18455, *
Although a court must exclude hours that reflect "the addresses unsuccessful claims. Indeed, courts should not wasteful use of highly skilled and highly priced talent for reduce a fee award "simply because the plaintiff failed to matters easily delegable to non-professionals or less ex- prevail on every contention raised in the lawsuit." Hens- perienced associates," delegation is neither always possi- ley v. Eckerhart, 461 U.S. 424, 435, 103 S. Ct. 1933, 76 ble in a small firm nor always desirable. Ursic v. Bethle- L. Ed. 2d 40 (1983). Child Evangelism Fellowship of hem Mines, 719 F.2d 670, 677 (3d Cir. 1983); [*12] New Jersey v. Stafford Township School District, No. Sheffer v. Experian Information Solutions, Inc., 290 F. 02-4549, 2006 U.S. Dist. LEXIS 62966, at *62 (D.N.J. Supp. 2d 538, 550 (E.D. Pa. 2003). Here, Defendant's Sep. 5, 2006)("there mere fact that the Motion to Enforce argument with regard to the duty to delegate presupposes the Preliminary Injunction was unsuccessful . . . does not that Plaintiff's lead attorneys readily have junior associ- require this Court to reduce [CFE's] fee award"). To that ates at their disposal. See Poston v. Fox, 577 F. Supp. end, the Third Circuit has instructed that "[t]he mere 915, 919-20 (D.N.J. 1984) (finding that it is not always failure of certain motions or the failure to use depositions possible to delegate in small office); see also Roldan v. is insufficient to warrant a fee reduction . . . ." Blum v. Phila. Hous. Auth., Civ. A. No. 95-6649, 1999 U.S. Dist. Witco Chemical Corp., 829 F.2d 367, 378 (3d Cir. LEXIS 19093, at *14-15 (E.D. Pa. Dec. 7, 1999) (hold- 1987). Rather, the inquiry should be focused on whether ing that reduction in rates is unwarranted in office that is the filed motion was "necessary" and "useful." See, e.g., understaffed and where no less experienced attorney was Planned Parenthood v. AG, 297 F.3d 253, 270-71 (3d available to perform tasks). Although Plaintiff was rep- Cir. 2002)(while the motion for summary judgment was resented by attorneys from a law firm, Zuckerman & not filed, the work on the motion was 'necessary' and Fisher, that firm has no access to junior associates. See 'useful'"). Zuckerman Supp. Aff. P 3. (indicating that Zuckerman & Here, the Court finds that the filing of the motion to Fisher only consists of two founding partners). Given the disqualify in this case was necessary. At the time, [*15] unavailability of junior attorneys to work on this litiga- Plaintiff filed the motion because she believed that she tion, "this Court does not find Plaintiff's attorneys' was a former client of defense counsel's firm McElroy, non-delegation of responsibilities unreasonable." Sheffer, Mulvaney, Deutsche and Carpenter in a matter substan- 290 F.Supp.2d at 550. tially similar to the present case. Plaintiff contended that Furthermore, "it is reasonable for lead trial counsel defense counsel's representation of Defendant in this case to desire to expend his or her own time on some activi- was contrary to the prohibition against representing cur- ties [*13] that, although within the competency of less rent clients with adverse interests to former clients. highly paid associates, are better performed by the lead While defense counsel was not disqualified, the Magis- counsel to ensure the smooth functioning at trial." Id. trate Judge rendered a lengthy opinion resolving certain Having reviewed Defendant's chart which consists of intricate issues of attorney conduct pursuant to New Jer- billable hours that it contends should have been delegat- sey's Rules of Professional Conduct. Having reviewed ed to associates, the Court can only find two instances, the motion and that court's opinion on this matter, this totaling .30 billable hour for faxing, that are not other- Court is satisfied that filing of the motion was necessary wise research tasks and drafting legal correspondence. to resolve allegations of possible conflict of interest. However, these instances of non-delegation are not fre- Accordingly, time billed for this motion will be included quent enough to mandate reducing the number of hours in the fee award. Davis v. Advanced Care Techs., Inc., that will be computed in the lodestar. See Poston, 577 F. No. 06-2449, 2007 U.S. Dist. LEXIS 74728, at *13-14 Supp. at 920 ("The court will not reduce the number of (E.D. Ca. Sep. 26, 2007) ("The motion to remand, how- hours worked on this basis for it finds that the hours of ever, was part of the hours reasonably spent in litigating work that could have been effectively delegated are de the underlying declaratory relief matter and was not a minimis"). separate claim, but rather a method of pursuing Davis' ultimately successful claim"); [*16] James v. Chiches- C. Hours Spent on Motion to Disqualify Defense ter Sch. Bd., No. 96-7683, 1999 U.S. Dist. LEXIS 2831, Counsel at *4-5 (E.D. Pa. Mar. 2, 1999).
Defendant posits that the portion of Plaintiff's fee D. Calculation of Fees and Costs application, which consists of time for the filing of a motion to disqualify defense counsel, should be excluded The Court now calculates the fee award consistent merely because that motion was not successful and was with the rulings herein. First, the Court has reviewed not necessary to Plaintiff prevailing on her ADA claim. Plaintiff's fee schedule. Because the Court has rejected Importantly, Defendant does not contend that the time Defendant's contention regarding delegation of duties to spent preparing the motion was excessive. [*14] In associates, all of the billable hours of Ms. Zuckerman support of its position, Defendant cites to case law which and Mr. Fisher will be credited accordingly. The Court Page 5 2010 U.S. Dist. LEXIS 18455, * remarks that Defendant did not object to the amount of Plaintiff does not point to any evidence that the Court time billed by the attorneys in this litigation. Indeed, the overlooked, or produce any other newly discovered evi- Court's review did not reveal any excessive or redundant dence to support her proposal. Accordingly, Plaintiff's billable hours. 4 To that end, Ms. Zuckerman's and Mr. request on this basis is denied. Fisher's total billable hours accrued during the represen- With respect to prejudgment interest and an upward tation of this case are 932.45. Mr. Yaskin's total billable adjustment of the back pay award to present value, De- hours are 26.22. Next, because the Court finds $ 350 is fendant asks the Court to amend its previous ruling. 6 A the reasonable hourly rate for Ms. Zuckerman and Mr. motion to alter or amend a judgment is governed by Rule Fisher, and Defendant does not object to Mr. Yaskin's 59(e) of the Federal Rules of Civil Procedure, [*19] hourly rate of $ 375, the lodestar amount is therefore $ which allows a party to move to alter or amend a judg- 336,190.10. In addition, Ms. Vimalassery, the paralegal, ment within twenty-eight days of entry. Fed. R. Civ. P. billed a total of 37.35 hours at an hourly rate of $ 125, 59(e). The purpose of this Rule is to correct manifest which yields a total of $ 4,668.75 -- this calculation was errors of law or fact or to present newly discovered evi- [*17] not contested by Defendant. Accordingly, the total dence. Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d fee award is $ 340,858.85. Cir. 1985); see Livingston v. United States, No. 09-546,
2009 U.S. Dist. LEXIS 97539 (D.N.J. Oct. 20, 2009). To 4 Indeed, Ms. Zuckerman certifies, and the that end, a judgment may be altered or amended if the record reflects, that most of Mr. Fisher's time party seeking reconsideration establishes at least one of spent in this litigation was not billed to Plaintiff. the following grounds: (1) an intervening change in con- Finally, Defendant did not object to Plaintiff's re- trolling law; (2) the availability of new evidence that was quest for expenses and costs in this litigation. Plaintiff not available when the Court entered judgment; or (3) the has documented expenses in the amount of $ 37,926.50. 5 need to correct a clear error of law or fact or to prevent Having reviewed this documentation, the Court finds the manifest injustice. Max's Seafood Cafe, by Lou-Ann, Inc. full amount to be reasonable and compensable. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (citing North River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 5 This amount includes $ 35,176.50 set forth in 1194, 1218 (3d Cir. 1995)); Holsworth v. Berg, 322 Fed. Ms. Zuckerman Affidavit, which Defendant did Appx. 143, 146 (3d Cir. 2009). "To support reargument, not contest, and an additional $ 2750.00 for the a moving party must show that dispositive factual mat- expert cost of John Vlasac, CPA. Because the ters or controlling decisions of law were overlooked by Court instructed Plaintiff to include certain cal- the court in reaching its prior decision," and that over- culations in connection with the back pay award, sight negatively affected [*20] the movant. Assisted which required the assistance of an expert, the Living Associates of Moorestown, L.L.C., v. Moorestown Court finds this additional amount reasonable. Tp, 996 F. Supp. 409, 442 (D.N.J. 1998). By contrast, mere disagreement with the district court's decision is II. Back Pay Award and Motion to Amend Judgment inappropriate on a motion to alter judgment, and should be raised through the appellate process. Id. (citing To begin, pursuant to the Court's instructions in its Bermingham v. Sony Corp. of America, Inc., 820 F. Opinion dated November 13, 2009, Plaintiff sought the Supp. 834, 859 n.8 (D.N.J. 1992), aff'd. 37 F.3d 1485 (3d assistance of an expert in: (1) calculating prejudgment Cir. 1994); G-69 v. Degnan, 748 F. Supp. 274, 275 interest for the back pay award of $ 42,400; adjusting the (D.N.J. 1990)). "The Court will only entertain such a award to present value; and adding an amount to account motion where the overlooked matters, if considered by for negative [*18] tax consequences. At the outset, the the Court, might reasonably have resulted in a different expert, John Vlasac, certifies that based on his analysis, conclusion." Assisted Living, 996 F. Supp. at 442. there is no adverse tax consequence attributable to the lump sum receipt of Plaintiff's back pay award. Next, 6 Motion to alter or amend the judgment "must Plaintiff proposes that the Court modify the back pay be filed no later than 28 days after the entry of the award by assuming a 4.85% increase in salary that Plain- judgment." Fed. R. Civ. P. 59(e). On November tiff projects that she hypothetically would have earned at 30, 2009, Defendant timely filed its Rule 59(e) Ethicon from October 21, 2001 to October 20, 2004. The motion after the entry of the Court's Order on Court rejected such a proposal previously "because November 16, 2009. Plaintiff did not produce any evidence at trial with re- spect to bonuses or fringe benefits that she would have Defendant urges that combining a present value ad- received had she stayed at Ethicon, the Court will not justment on past loss with prejudgment interest would be speculate as to the amount of these benefits, and thus, improperly duplicative. Defendant reasons that both cal- will not consider them in calculating back pay." Here, culations address the same time value of money. Plaintiff Page 6 2010 U.S. Dist. LEXIS 18455, * does not substantively respond. Rather, she relies on the Chace v. Champion Spark Plug Co., 725 F. Supp. 868, [*21] Court's previous Opinion in calculating the back 872 (D. Md. 1989) ("And it makes no difference whether pay award. The Court, however, agrees that this Court's plaintiffs characterize the value of losing the benefit of prior ruling would result in an error of law because of the money as prejudgment interest or they simply bring back duplicative remedy, and therefore, will reconsider this pay to present value, since the amounts so computed are issue. compensatory in nature"). "[A]djusting to present value is equivalent to Indeed, having recalculated the numbers, the Court awarding prejudgment interest." Sokol Crystal Products, finds that both present value and prejudgment interest do Inc. v. DSC Communications Corp., 15 F.3d 1427, 1434 precisely the same thing: apply a rate of return to account (7th Cir. 1994)). That is because an award of prejudg- for the time value of money -- that is, the "loss of the use ment interest itself adjusts an award for past loss to pre- of [Plaintiff's] investment or [plaintiff's] funds from the sent value: "Not all portions of a verdict are economic in time of the loss until judgment is entered." Arco Pipeline character, and only the sum that represents past econom- Co. v. SS Trade Star, 693 F.2d 280, 281 (3d Cir. 1982). ic loss is properly adjusted to present value through an Simply put, present valuation and prejudgment interest interest calculation. [Past economic loss requires an] both are a measure of the time value of money, they are adjustment for the time the successful plaintiff's money duplicative, and only one type is permitted. In that re- was out of the market which prejudgment interest pro- gard, the Court amends its previous ruling on this issue vides." Poleto v. Consolidated Rail Corp., 826 F.2d so as to correct an error of law. 1270, 1278 n.14 (3d Cir. 1987), abrogated on other In considering this issue, the Court need not credit grounds, Kaiser Aluminum & Chemical Corp. v. Bon- Plaintiff's proposed methods because she applies the jorno, 494 U.S. 827, 110 S. Ct. 1570, 108 L. Ed. 2d 842 present value of the back pay award in calculating the (1990); Dominator, Inc. v. Factory Ship Robert E. amount of prejudgment interest. Since the Court has re- Resoff, 768 F.2d 1099, 1106 (9th Cir. 1985) jected this approach [*23] as duplicative here, the Court ("[p]rejudgment interest is awarded so that the award will recalculate the back pay award as follows: will reflect the present value of plaintiff's claim"); [*22]
______
Back Pay Period Back Pay Average Time to Interest on November 30, Back Pay at 4% 2009 10/22/01 - 12/15/01 $ 13,369 8.03 year $ 4,294.12 12/17/01 - 12/31/01 $ 322 7.94 years $ 102.27 2002 $ 10,605 7.42 years $ 3147.56 2003 0 6.42 years 0 1/1/04 - 8/4/04 0 5.63 years 0 8/4/04 - 10/20/04 $ 18,104 5.23 years $ 3,787.36 TOTAL $ 42,400 $ 11,331.31 ______
following formula to arrive at the appropriate interest for As an explanation, the Court previously used the each year back pay is awarded: above-delineated Back Pay Periods in which Plaintiff was entitled to an award and calculated the amount of (the back pay amount) x (.04) x (num- back pay in each of the prescribed periods. Accordingly, ber of years) = interest the total amount of back pay is $ 42,400. Next, the Court utilized the 4% interest rate, which was decided in the
Court's previous Opinion, to calculate the prejudgment In that regard, the total prejudgment interest is $ interest in each of the periods wherein back pay was 11,331.31. Accordingly, [*24] Plaintiff's back pay awarded. The Court also must calculate the number of award is $ 53,731.31. 7 years from the midpoint of the applicable back pay peri- od to November 30, 2009. The Court then applies the Page 7 2010 U.S. Dist. LEXIS 18455, *
7 Indeed, Plaintiff proposes that the present For the reasons set forth above, Plaintiff's motion is value of the back pay award of $ 42,4000 in 2009 granted in part, denied in part. Defendant's motion is is $ 51,618, which is substantially similar to the granted. Plaintiff shall be awarded $ 53,731.31 in back back pay award including prejudgment interest. pay; $ 340,858.85 in fees and $ 37,926.50 in expenses However, for the reasons state above, applying and costs. both the present value and prejudgment interest DATED: March 1, 2010 will be duplicative. As such, the Court's award for back pay will be consistent with the calcula- /s/ Freda L. Wolfson tions herein. FREDA L. WOLFSON Conclusion United States District Judge
Page 1
6 of 14 DOCUMENTS
JOHN H. HOLZHAUER, Plaintiff, v. HAYT, HAYT & LANDAU, LLC, Defendant.
Civil Action No. 11-2336
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
2012 U.S. Dist. LEXIS 112740
August 10, 2012, Decided August 10, 2012, Filed
NOTICE: NOT FOR PUBLICATION On April 22, 2010, Plaintiff filed a Complaint alleg-
ing violations under the Federal Debt Collection Practic- COUNSEL: [*1] For JOHN H HOLZHAUER, Plain- es Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Defendant tiff: AMY LYNN BENNECOFF, JACOB U. GINS- [*2] filed an Answer to Plaintiff's Complaint on July 5, BURG, KIMMEL AND SILVERMAN P.C., CHERRY 2011. On January 9, 2012, the parties settled this matter HILL, NJ. for $2,500.00, and agreed that Plaintiff was entitled to
reasonable attorney's fees. 1 On January 10, 2012, the For HAYT, HAYT & LANDAU LLC, Defendant: KA- parties discussed the issue of reasonable attorney's fees REN S. WACHS, LEAD ATTORNEY, Law Offices of during a conference with the Honorable Douglas E. Hayt, Hayt & Landau, Eatontown, NJ; KENNETH R. Alpert, U.S.M.J. Judge Alpert gave Plaintiff until Febru- EBNER, LEAD ATTORNEY, HAYT HAYT & LAN- ary 10, 2012, to file a fee petition if the parties were una- DAU LLC, EATONTOWN, NJ. ble to resolve the matter. On February 10, 2012, K&S
filed the instant motion seeking attorney's fees in the JUDGES: Freda L. Wolfson, United States District amount of $8,769. Pl. Pet. for Attorney's Fees & Costs. Judge. K&S subsequently reduced the amount it seeks to
$8,421.50 for 37.2 hours of work. Pl. Reply at 15. OPINION BY: Freda L. Wolfson
1 K&S notes it does not seek $350 it incurred OPINION in costs. Pl. Br. at 4. WOLFSON, United States District Judge: II. DISCUSSION Presently before the Court is a motion by Plaintiff
John H. Holzhauer ("Holzhauer" or "Plaintiff") for an a. Standard award of attorney's fees pursuant to Fed. R. Civ. P. 54(d) and 15 U.S.C. §1692k(a)(3). Counsel for Plaintiff, Kim- The parties do not dispute that Plaintiff is entitled to mel & Silverman, P.C. ("K&S" or "Plaintiff's Counsel"), reasonable attorney's fees. Pursuant to the FDCPA, a seeks fees in the amount of $8,421.50 for 37.2 hours of prevailing plaintiff is entitled to "the costs of the action, work. Defendant ("Hayt, Hayt and Landau" or "Defend- together with a reasonable attorney's fee as determined ant") opposes Plaintiff's calculation and contends that the by the court." 15 U.S.C. § 1692k(a)(3). The award of proper award for fees should be $2,929.00. For the rea- attorney's fees is "mandated . . . as a means of fulfilling sons set forth below, the Court will grant Plaintiff's mo- Congress's intent that the FDCPA should be enforced by tion, in part, and award attorney's fees in the amount of debtors [*3] acting as private attorneys general." Gra- $7,536.50. ziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991).
Nor do the parties dispute that Plaintiff is a prevail- I. BACKGROUND ing party under § 1692(k). As the Supreme Court found Page 2 2012 U.S. Dist. LEXIS 112740, * in Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, a case requires." Evans v. Port Auth. of N.Y. & N.J., 273 76 L. Ed. 2d 40 (1983), "plaintiffs may be considered F.3d 346, 362 (3d Cir. 2001). 'prevailing parties' for attorney's fees purposes if they succeed on any significant issue in litigation which b. Analysis achieves some of the benefit the parties sought in bring- Plaintiff seeks $8,421.50 in attorney's fees. In re- ing suit." Id. at 433. This District has adopted the Hens- sponse, Defendant contends that $2,929.00 is the appro- ley definition in assessing FDCPA claims and agrees that priate fee award. Specifically, Defendant argues that: (1) Plaintiff is a prevailing party. See Norton v. Wilshire the hourly rates sought by Plaintiff are unreasonable and Credit Corp., 36 F. Supp. 2d 216, 218-19 (D.N.J.1999). excessive; (2) the calculation of fees includes hours not The Supreme Court has also explained how to cal- reasonably expended because they were duplicative, ex- culate an award of attorney's fees: "The most useful cessive, or non-compensable intra-office communication; starting point for determining the amount of a reasonable (3) Plaintiff seeks to recover fees incurred in bad faith fee is the number of hours reasonably expended on the after settlement; 2 and (4) the Court should adjust the litigation multiplied by a reasonable hourly rate. The lodestar [*6] amount to reflect what Defendant argues calculation provides an objective basis on which to make is the limited success of Plaintiff. Def. Opp. at 3-11. an initial estimate of the value of the lawyer's services." Hensley, 461 U.S. at 433. The calculation produces what 2 Defendant provides the Court with no docu- is referred to as the lodestar amount. See Blum v. Sten- mentation or evidence to support its claim that son, 465 U.S. 886, 888, 104 S. Ct. 1541, 79 L. Ed. 2d 891 K&S failed to negotiate in good faith regarding (1984). The prevailing [*4] party bears the burden of attorney's fees, nor does it cite any authorities to proving, through competent evidence, the reasonableness support its position that failure to negotiate a set- of the hours worked and rates claimed. Washington v. tlement should lead to a reduction in the attor- Phila. Cnty. Court of Common Pleas, 89 F.3d 1031, ney's fee awarded to counsel. The Court notes 1035 (3d Cir. 1996). Any party may oppose a fee appli- that "[a] party entitled to an award of attorney's cation by objecting with "sufficient specificity." Inter- fees is also entitled to reimbursement for the time faith Cmty. Org. v. Honeywell Int'l., Inc., 426 F.3d 694, spent litigating its fee application." Planned 703 n.5 (3d Cir. 2005) (citing Hensley, 461 U.S. at 433). Parenthood v. AG, 297 F.3d 253, 268 (3d Cir. Once opposed, "the party requesting fees must demon- 2002). K&S claims only 4.8 hours for time spent strate to the satisfaction of the court that its fee request is after the January 2, 2012, settlement agreement reasonable." Interfaith Cmty. Org., 426 F.3d 694 at 703 (of which the Court strikes 0.2 hours for other n.5. reasons, stated below), and does not bill for work spent preparing its Reply Brief. While the lodestar is presumed to yield a reasonable fee, Washington, 89 F.3d at 1035, either party may seek i. Hourly Rates an adjustment of the lodestar amount, but bears the bur- den of showing that an adjustment is necessary. Rode v. In evaluating the reasonableness of the hourly rates Dellarciprete, 892 F.2d 1177, 1180 (3d Cir. 1990); Mo- asserted by Plaintiff, the relevant inquiry is the prevailing said Techs, Inc., v. Samsung Elecs. Corp., 224 F.R.D. rate for comparable legal services in the forum of litiga- 595, 597 (D.N.J. 2004). In deviating from the lodestar, tion. See, e.g., Interfaith Comm. Org., 426 F.3d at 705. courts may consider numerous factors, such as the time Plaintiff bears the burden "of producing sufficient evi- spent and labor required; the novelty and difficulty of the dence of what constitutes a reasonable market rate [*7] legal issues; the customary fee in the community; for the essential character and complexity of the legal whether the fee is fixed or contingent; the nature and services rendered in order to make out a prima facie length of the [*5] professional relationship with the case." Smith v. Phila. Hous. Auth., 107 F.3d 223, 225 (3d client; and awards in similar cases. See Pub. Interest Cir. 1997). A reasonable rate is determined by "as- Research Grp. of N.J. v. Windall, 51 F.3d 1179, 1185 n.8 sess[ing] the experience and skill of the prevailing party's (3d Cir. 1995) (citing Hensley, 461 U.S. at 434 n.9) attorneys and compar[ing] the rates to the rates prevail- ing in the community for similar services by lawyers of The district court ultimately "retains a great deal of reasonably comparable skill, experience and reputation." discretion in deciding what a reasonable fee award is." Loughner v. Univ. of Pittsburgh, 260 F.3d 173, 180 (3d Bell v. United Princeton Props., 884 F.2d 713, 721 (3d Cir. 2011) (quoting Rode, 892 F.2d at 1183). The Court Cir. 1989). "[I]n determining whether the fee request is has broad discretion to determine an appropriate hourly excessive . . . the court will inevitably engage in a fair rate. See Bell, 884 F.2d at 721. amount of 'judgment calling' based upon its experience with the case and the general experience as to how much In the instant matter, Plaintiff requests compensation for its legal professionals based on their experience: Mr. Page 3 2012 U.S. Dist. LEXIS 112740, *
Kimmel, a named partner, at $325 per hour; Ms. LEXIS 135207 (D.N.J. Nov. 23, 2011); Levy v. Global Bennecoff, an associate, at $250 per hour; Ms. Young, an Credit & Collection Corp., No. 10-4229, 2011 U.S. Dist. associate, at $200 per hour; Mr. Ginsburg, an associate, LEXIS 124226 (D.N.J. Oct. 27, 2011); [*10] at $200 per hour; Mr. Ferris, a law clerk, at $130 per Weed-Schertzer v. Nudelman, No. 10-6402, 2011 U.S. hour; Ms. Sunchych, Ms. O'Connell, Mr. Ryan, and Ms. Dist. LEXIS 108928 (D.N.J. Sept. 23, 2011). Additional- Grob, paralegals, at $125 per hour each. 3 K&S notes that ly, comparable rates for similarly experienced attorneys these rates are reduced from what they contend are their have been approved in other FDCPA cases. E.g., Harlan standard rate, perhaps in order to comport with previous v. NRA Group LLC, No. 10-0324, 2011 U.S. Dist. LEXIS [*8] decisions from this District and the Eastern District 26841 (E.D. Pa. Mar. 2, 2011); (approving rate of $555 of Pennsylvania. In support of its proposed hourly rates, per hour for a partner with a national reputation in con- K&S provides the following: (1) affidavits signed by sumer law, and a rate of $245 per hour for a fourth-year attorneys Kimmel, Bennecoff, and Ginsburg detailing associate); Holliday v. Cabrera & Assocs., P.C., No. their respective qualifications and participation in the 05-0971, 2007 U.S. Dist. LEXIS 161 (E.D. Pa. Jan. 3, present case; Pl. Br. Ex. B; (2) statements in its motion 2007) (approving rate of $380 per hour for a partner, and of the qualifications of each of the legal professionals a rate of $275 per hour for another attorney). Conse- who billed hours in this case, including law clerks and quently, the reduced rates proposed by K&S are con- paralegals; id. at 16-23; (3) citations to cases in which sistent with the market rates for similar legal services. Courts have approved hourly rates for K&S similar to the rates K&S proposes in the present case; id. at 26-27; (4) 4 In previous cases, Mr. Ginsburg was a law citations to cases in which Courts have awarded similar clerk, and his services were billed at a lower rate. hourly rates to similarly qualified attorneys from other As he is now an associate, an increase to $200 per firms in other FDCPA cases; id. at 27-28; and (5) a hour is not unreasonable. print-out from its website which provides the qualifica- In arguing that the rates proposed by K&S are un- tions of some of the legal professionals who billed hours reasonable, Defendant relies heavily upon Levy, 2011 in the present case. Pl. Br. Ex. C. U.S. Dist. LEXIS 124226. Def. Opp. at 5-7. Levy in-
volved another motion brought by K&S. There the court 3 Plaintiff claims that when the parties disagree found the following compensation to be reasonable: Mr. as to the reasonableness of attorney's fees, the Kimmel, [*11] at $310 per hour; Ms. Bennecoff, at Court should conduct a hearing. Pl. Br. at 26 n.7. $210; Ms. Young, at $200; Ms. Sunchych, at $110; Mr. Plaintiffs cite Lanni v. New Jersey, 259 F.3d 146, Ryan, at $110; and Mr. O'Connell, at $110. Id. at *25. 149 (3d Cir. 2001), which states that if there is a There are slight differences between the rates here and dispute over what [*9] are the "reasonable mar- the rates allowed in Levy. Ms. Bennecoff's is $40 more ket rates" then the Court must hold a hearing. The here and all other rates, except Ms. Young's, are $15 Third Circuit has also said that "[a] hearing must more. Ms. Young's rate is the same. Such deviations are be held only where the court cannot fairly decide expected, given the broad discretion the Court has in disputed questions of fact without it." Blum v. determining an hourly rate, as well as the fact that rates Witco Chem. Corp., 829 F.2d 367, 377 (3d Cir. potentially increase slightly over time as attorneys be- 1987); see also Drelles v. Metro Life Ins. Co., 90 come more experienced or as inflation pressures rates Fed. Appx. 587 (3d Cir. 2004). Lanni is inappo- higher. See Bell, 884 F.2d at 721. site because I am not determining the reasonable market rate, but the reasonableness of K&S's ac- Additionally, Defendant argues that K&S's hourly tual rates. As the Court may determine the rea- rates are unreasonable and should be reduced due to the sonableness of these hourly rates based on the similarity of K&S's filings in the present case and in pre- information on the record, no hearing is neces- vious cases, and because the present case was "straight- sary. forward and did not involve complex legal issues or analysis, and the case was not litigated in any significant The Court finds that the hourly rates proposed by way." Def. Opp. at 6-8. This argument is applicable to K&S are reasonable. In cases in the District of New Jer- the number of hours billed, not to the hourly rate. If an sey and the Eastern District of Pennsylvania, equal or attorney has done similar work in the past, she may use a greater hourly rates for K&S have been approved for template to aid her in a similar matter and would there- similar work in similar cases. 4 E.g., Conklin v. Pressler fore spend fewer hours [*12] completing a given task. & Pressler LLP, No. 10-3566, 2012 U.S. Dist. LEXIS But the value of her time does not necessarily decrease. 21609 (D.N.J. Feb. 21, 2012); Brass v. NCO Fin. Sys., To so hold would mean that an attorney would become No. 11-1611, 2011 U.S. Dist. LEXIS 98223 (E.D. Pa. less valuable with more experience. This is a paradoxical July 22, 2011); Cassagne v. Law Offices of Weltman, result that the Court will not endorse. Weinberg & Reis. Co., LPA, No. 11-271, 2011 U.S. Dist. Page 4 2012 U.S. Dist. LEXIS 112740, *
Furthermore, Defendant attempts to weaken the party wasting time acting upon inaccurate information, value of the cases in which courts have approved rates and is therefore not unreasonable. similar to the rates that K&S claims in the present case, Next, Defendant claims that the 0.6 hours that K&S arguing that the defendants in those cases recommended billed for Mr. Ferris's drafting of the discovery request is the hourly rates, not K&S. Courts, not litigants, make excessive, since Mr. Ferris used a template to draft the law. Whether K&S reduced its rates in the present case letter, and simply had to change the caption. 5 Def. Opp. because it independently came to the conclusion that its at 10. While templates can reduce the time it takes to rates were too high--or because it was repeatedly ad- produce a document, it still takes time to review a tem- monished for proposing inflated rates--has little bearing plate and tailor the template based on the specifics of a on the reasonableness of the rates before me now. case. 6 Mr. Ferris presumably had to review the letter to For the reasons stated above, the Court finds that the ensure that each request was applicable to the present hourly rates proposed by K&S, which have been ap- case. Failure to do so could lead to Defendant wasting proved for K&S in similar cases and are consistent with time providing unnecessary discovery, and could expose the market rates for similar services, are reasonable. Plaintiff [*15] to sanctions under Fed. R. Civ. P. 26(g)(1)(B). Consequently, the Court finds that the 0.6 ii. Hours Billed hours that Mr. Ferris spent completing this task is rea- sonable, and will not reduce this entry. A court must "decide whether the hours set out were reasonably expended for each of the particular purposes 5 Similarly, Defendant identifies the April 5, described and then exclude those that are excessive, re- 2011 entry in which Ms. Young spent 1.1 hours dundant or otherwise unnecessary." Pub. Interest Re- drafting the Complaint as an entry that it claims search Grp. of N.J., 51 F.3d at 1188 [*13] (quoting should be reduced due to the similarity of the Hensley, 461 U.S. at 433). Counsel certifies that it has Complaint in the present case and the complaints expended a total of 37.2 hours of attorney and support in Weed-Schertzer and Levy. Def. Opp. at 8. De- staff time on this case. This reflects Plaintiff Counsel's fendant claims that because of similarities among voluntary reduction of its time by 1.6 hours. Specifically, these complaints, it should not have taken K&S Plaintiff's Counsel states that it has expended the follow- 1.1 hours to draft the Complaint. Several of the ing hours on this case: Mr. Kimmel (3.9 hours); Ms. paragraphs are identical or nearly identical, and Bennecoff (15.8 hours); Ms. Young (4.4 hours); Mr. concern allegations regarding things such person- Ginsburg (4.4 hours); Mr. Ferris (1.3); Ms. Sunchych al jurisdiction, venue, background of the FDCPA, (0.5 hours); Ms. Grob (5.4 hours); Ms. O'Connell (0.2 and construction of applicable law. The Court hours); and Mr. Ryan (1.3 hours). Pl. Br. at 2-3. The notes that it would be unreasonable for K&S to Court finds the number of hours expended to be reasona- start from scratch and draft new paragraphs re- ble in some aspects and unreasonable in others and will garding, for example, venue, and finds that 1.1 reduce the hours billed pursuant to the analysis below. hours is a reasonable amount of time to spend
drafting, reviewing, and editing the Complaint. 1. Fees for Potentially Duplicative Work 6 K&S has recently sought fees in numerous Defendant identifies nine entries by K&S that it be- other FDCPA actions using similar filings as lieves are duplicative, and provides explanations for those submitted in this matter; in those cases, the three of these entries. Def. Opp. at 9-10; Ex. B. First, various courts reduced [*16] both the proposed Defendant argues that the 0.2 hours that Ms. Bennecoff hourly rates as well as the number of hours ex- spent on April 22, 2011, reviewing the facts of the case pended. See, e.g., Conklin, 2012 U.S. Dist. LEXIS with Plaintiff and confirming their accuracy is duplica- 21609 (reducing K&S's fees from $28,005.70 to tive of the April 11, 2011, entry in which Ms. Young $16,387); Freid v. Nat'l Action Fin. Services, reviewed the facts of the case with Plaintiff to confirm Inc., No. 10-2870, 2011 U.S. Dist. LEXIS 149668 [*14] their accuracy. Def. Opp. at 9-10. The Court disa- (D.N.J. Dec. 29, 2011) (reducing K&S's fees grees. There are a number of reasons that two attorneys from $97,028.59 to $11,944 ); Brass, 2011 U.S. would need to review the facts. For example, Federal Dist. LEXIS 98223 (reducing K&S's fees from Rule of Civil Procedure 11(b) demands that counsel $5,096.50 to $2,457.20). However, in the present conduct a "reasonable inquiry" to ensure that the repre- case, K&S has billed fewer hours for tasks com- sentations it makes are accurate. The Court finds that pleted with the aid of templates. Compare, e.g., spending 0.2 hours to double check the facts is not un- Pl. Br. Ex. A at 3 (K&S claims 0.6 hours for reasonable. Among other reasons, it helps ensure com- drafting a discovery request and a Rule 26 dis- pliance with Rule 11 and avoids the possibility of either closure, and sending an E-mail), with Docket En- try 25 Ex. B at 5, Conklin, 2012 Dist. LEXIS Page 5 2012 U.S. Dist. LEXIS 112740, *
21609 (K&S billed 1.5 hours, which the Court support that the amount of the time billed was reasona- reduced to one hour, for drafting a discovery re- ble." Def. Opp. at 8 (emphasis in original). Defendant quest). asserts that because "Plaintiff merely submits itemized time entries declaring the amount billed, but nothing Additionally, Defendant argues that the two August submitted supports the implied assertion that the entries 5, 2011, entries by Mr. Kimmel which both read "Re- themselves are reasonable," id. at 8-9, [*19] the Court view file and discuss case with client to arrive at de- should strike the entries identified by Defendant as ex- mand; Email to Karen Wachs demand," are duplicative cessive. According to the Court in Bell: of one another. Def. Br. at 10. The Court notes that K&S voluntarily struck the second of these entries, reducing [T]he adverse party's [objections] can- its number of hours billed by 0.3. Pl. Reply at 15. The not merely allege in general terms that the Court [*17] agrees that it was prudent for K&S to strike time spent was excessive . . . . [Rather], the second entry, but declines to reduce the first entry by they must generally identify the type of 0.3 hours as Defendant requests. work being challenged . . . and . . . specif- Finally, Defendant identifies six entries that it claims ically state the adverse party's grounds for are duplicative, but provides no explanation. Def. Opp. contending that the hours claimed . . . are Ex. B. The Court has reviewed these entries and finds no unreasonable. reason why they should be considered duplicative.
2. Potentially Excessive Entries 884 F.2d at 720. Defendant identifies 22 entries by K&S that it be- Defendant is correct in its assertion that Plaintiff has lieves are excessive, and provides specific reasons for the burden of proving the reasonableness of the fees it objecting to three of these entries. Def. Opp. at 8; Ex. B. requests. However, Defendant's claim that Plaintiff has First, Defendant argues that the one hour that Ms. Young the burden of providing detailed explanations to justify billed for reviewing the file and preparing a pre-litigation each and every tenth of an hour it bills, see Def. Opp. at letter to Defendant on February 16, 2011, is excessive 8-9, is overstated. While a fee petition should include because she used a template, and only had to write two "some fairly definite information as to the hours devoted or three original paragraphs. However, this argument to various general activities . . . , it is not necessary to fails to take into account the time that Ms. Young spent know the exact number of minutes nor the precise activ- reviewing the file. One hour to draft and review a letter ity to which each hour was devoted nor the specific at- as well as review the file to prepare the letter is not ex- tainments of each attorney." Washington, 89 F.3d 1031 cessive. at 1037-38 (internal quotation marks omitted) (quoting Rode, 892 F.2d at 1190)). To require a party seeking Next, Defendant argues that on July 5, 2011, Ms. attorney's fees to provide a thorough [*20] explanation Bennecoff spent 0.5 hours reviewing the Answer and as to why, for example, it billed 0.2 hours speaking to Corporate Disclosure and that this figure should be re- Defense counsel, see Pl. Mot. Ex. A at 5, would be an duced to 0.3 hours. Defendant's [*18] Answer is only onerous task, and would create more billable hours, an eight pages long, and contains a significant amount of outcome that Defendant surely wishes to avoid. Never- standard language. Thus, the Court finds that 0.3 hours is theless, the Court has reviewed these entries and finds a reasonable amount of time for reviewing the Answer that none of these additional 19 entries is excessive, and and the Corporate Disclosure. Thus, this entry will be makes no further reductions for excessive hours. reduced by 0.2 hours.
Defendant also argues that the 0.2 hours that Ms. 3. Intra-Office Communication Bennecoff spent on January 2, 2012, reviewing an eleven Defendant also argues that K&S has billed for ser- word email from ECF regarding the entry of appearance vices that are non-compensable because they relate to of Mr. Ginsburg is excessive, and should be reduced to intra-office communication. In support of its position, 0.1 hours. This is a routine filing and requires little to no Defendant cites Citibank, N.A. v. Hicks, 2004 U.S. Dist. analysis. Therefore, the Court agrees, and this entry shall LEXIS 30432, at *18 (E.D. Pa Aug. 24, 2004). 7 The be reduced accordingly. court in Citibank said that "when several attorneys bill a Finally, Defendant identifies 19 additional entries large number of hours for strategy and conferencing, a that it asks the Court to find excessive and reduce ac- reduction in the fee request may be appropriate," 2004 cordingly, but provides no explanations as to why these U.S. Dist. LEXIS 30432, at *18 (emphasis added), and entries should be deemed excessive, beyond its general relied on Daggett v. Kimmelman, 811 F.2d 793, 797 (3d objection that "Plaintiff has provided no evidence or Cir. 1987). Citibank, however, does not adequately sup- Page 6 2012 U.S. Dist. LEXIS 112740, * port Defendant's argument. It does not hold that billing at 677 ("A Michelangelo should not charge Sistine for intra-office communication is per se unreasonable Chapel rates for painting a farmer's barn."). and that attorneys may not bill any hours for intra-office Consequently, the Court finds that it is reasonable communication. [*21] In fact, the court in Citibank that approximately 12% of K&S's billable hours involve "recognize[d] the value of attorney communication and communication between K&S's attorneys. Cf. Citibank, conferencing in preparation and daily management of a 2004 U.S. Dist. LEXIS 30432, at *17 (halving the num- lawsuit." Citibank, 2004 U.S. Dist. LEXIS 30432, at *17; ber of hours billed for communication among attorneys see also Rodriguez-Hernandez v. Miranda-Velez, 132 when 21.8% of the hours billed were billed for commu- F.3d 848, 860 (1st Cir. 1998) ("Careful preparation often nication among attorneys). As a result, no entries will be requires collaboration and rehearsal...."). Nevertheless, struck or reduced solely based on the rationale that they courts may reduce the number of hours attorneys in a involve intra-office communication. firm bill for communication with co-counsel if, based on the facts of a particular case, the court finds that the Nevertheless, numerous entries are hours billed are unreasonable. Daggett, 811 F.2d at 797 non-compensable because they involve intra-office (finding that excessive communication among Plaintiffs' communication related to administrative tasks. 8 "As a attorneys was one factor which justified the District general rule, time that would not be billed to a client Court's decision to reduce the number of hours that each cannot be imposed on an adversary. Thus, administrative attorney billed by ten percent); Citibank, 2004 U.S. Dist. tasks, which are not the type normally billed to a paying LEXIS 30432, at *17 (reducing the 114.4 hours billed by client, may not be recovered by a party through [*24] a Plaintiff's Counsel for communication among attorneys fee petition." Alexander v. NCO Fin. Sys., 2011 U.S. by half, when 524.1 total hours were billed). In the pre- Dist. LEXIS 64211, at *19 (E.D. Pa. June 16, 2011) (ci- sent case, approximately 14.1 out of 37.2 hours billed by tations omitted). Indeed, certain administrative tasks not K&S relate to intra-office communication. Based on the normally billed to clients such as "opening a file in a numbers of hours billed for intra-office communication, database, mailing letters, and copying documents to a Defendant asks the Court to strike all entries relating CD," may not be recovered by a party through a fee peti- [*22] to intra-office communication, which the Court tion. Id., at *20; see also Halderman v. Pennhurst State will not do. Sch. & Hospital, 49 F.3d 939, 942 (3d Cir. 1995) ("The fact that private lawyers may perform tasks other than 7 The court in Citibank exercised diversity ju- legal services for their clients, with their consent and risdiction and applied Illinois state law to resolve approval, does not justify foisting off such expenses on a dispute over attorney's fees provided for by an adversary under the guise of reimbursable legal contract, not by statute. Nevertheless, as the court fees."). However, tasks such as "discussions with a cli- in Citibank relies on Daggett, infra, in reducing ent, creating a factual summary, and preparing an outline the number of billable hours for intra-office of linked events, have been included in calculations . . . communication, the case is instructive. even if performed by a paralegal." Brass, 2011 U.S. Dist. LEXIS 98223, at *16. In both Daggett and Citibank, the courts focused on the number of hours billed for communication among 8 Defendant terms no entries "administrative." attorneys, not between attorneys and other legal staff. But an objection to a fee need only be sufficiently See Daggett, 811 F.2d at 797-98; Citibank, 2004 U.S. specific to "raise a material fact issue as to the Dist. LEXIS 30432, at *17-18. In the present case, only accuracy of representations as to hours spent, or approximately 4.8 hours out of the 37.2 total hours are the necessity for their expenditure," so as to put billed for communication between K&S attorneys. The the other party on notice that it must [*25] de- remaining 9.3 hours billed for intra-office communica- fend its fee position. Bell, 884 F.2d at 719-20 tion are billed for communication between attorneys and (quoting Cunningham v. City of McKeesport, 753 paralegals. Communication between attorneys and para- F.2d 262, 267 (3d Cir. 1985)). Defendant's char- legals facilitates delegation, which allows a law form to acterization of certain entries as non-compensable conduct its business at a lower cost, as paralegal services intra-office communication was sufficient to put are billed at a significantly lower hourly rate. In fact, K&S on notice that it needed to defend its posi- courts must not "approve [of] the wasteful use of highly tion. Furthermore, K&S is aware that it may not skilled and highly priced talent for matters [*23] easily bill for administrative tasks, as it claims that it delegable to non-professionals or less experienced asso- omitted administrative entries from its invoice. ciates." Ursic v. Bethlehem Mines, 719 F.2d 670, 677 (3d See Pl. Br. at 4 n.5. Cir. 1983). Thus, the lodestar amount may be reduced when an experienced attorney bills hours for work that could have been completed by non-attorney staff. See id. Page 7 2012 U.S. Dist. LEXIS 112740, *
Here, the Court finds that the following billed hours are administrative and will reduce the hours billed for the following entries by the amount noted:
______
Date of Entry Entry Legal Profes- Amount of Re- sional duction Oct. 18, 2010 Prepare a note in Amicus Mr. Kimmel 0.1 Apr. 22, 2011 Receipt of email from Pay.gov confirming payment for Ms. Bennecoff 0.1 9 complaint, saved in Amicus Apr. 22, 2011 Email to SY re: question regarding notation on file; Re- Ms. Bennecoff 0.2 view response Apr. 22, 2011 Review and respond to ALB email regarding notation on Ms. Young 0.2 file May 6, 2011 Prepare Copies of Complaint and Cover Sheet to send to Ms. Sunchych 0.1 Defendant, Prepare copies of Notice and Waiver for File July 29, 2011 Email to DG to send to Defendant's Counsel and Calendar Ms. Bennecoff 0.1 July 29, 2011 Email correspondence to DG re: reserving conference Ms. Bennecoff 0.1 room for dep July 29, 2011 Sent Discovery Requests to Defendant's Counsel via email Ms. Grob 0.3 and Regular US Mail; Copied to Amicus; Calendared re- sponse date; Reserve conference room July 29, 2011 Review email from DG indicating discovery requests have Ms. Bennecoff 0.1 been sent to Defendant July 29, 2011 Review email from DG indicating that the deposition no- Ms. Bennecoff 0.1 tice was sent to Defendant and room reserved for dep Aug. 1, 2011 Calendar Deposition Date Ms. Grob 0.1 Aug. 3, 2011 email to DG to return her call Ms. Bennecoff 0.1 Sept. 12, 2011 Calendared follow-up Ms. Grob 0.1 Sept. 29, 2011 Email to DG adjourn or get via telephone die [sic] to pre- Ms. Bennecoff 0.1 planned vacation day Oct. 7, 2011 Email to DG to follow-up with Defendant's counsel about Ms. Bennecoff 0.1 the status of discovery responses and to reschedule dep Oct. 7, 2011 Email from ALB about following up on discovery re- Ms. Grob 0.1 sponses and rescheduling deposition in this matter Nov. 15, 2011 Faxed continuance letter to court & defendant's counsel Ms. Grob 0.1 Jan. 18, 2012 Email to DG to make sure fee petition calendared Ms. Bennecoff 0.1 Jan. 18, 2012 Email communication from ALB re: calendaring fee peti- Ms. Grob 0.1 tion due date; Calendar same Feb. 19, 2012 PDF motion, brief, COS, TOA, TOC; Efile Ms. Bennecoff 0.2 TOTAL RE- 2.5 DUCTION ______
As a result, this time will be subtracted from the 9 In [*26] this entry, K&S bills 1.5 hours at a time submitted by K&S as indicated above. rate of $250 per hour. This should total $375, but
Plaintiff's Counsel only bills $300. Whether a iii. Proportionality of Attorney's Fees to Settlement mistake or a reflection of what K&S believes is Amount reasonable, the Court will award K&S only $300 for this entry. Page 8 2012 U.S. Dist. LEXIS 112740, *
Defendant contends that the Court should reduce the Absent the attorney's fees provision, attorneys would be lodestar amount to reflect what Defendant argues is a less inclined to take on FDCPA cases, and the rights of proportional discrepancy between the attorney's fees that debtors wronged by creditors in violation of the FDCPA K&S requests and the $2,500 settlement amount. The would not be protected. Consequently, the purpose of the Court disagrees. In Hensley, the Supreme Court held that statute, deterring abusive debt collection practices, see 15 under 42 U.S.C. § 1988 (remedies for violations of the U.S.C. 1692(e), would be frustrated. Civil Rights Act of 1964), "the extent of a plaintiff's Additionally, in the present case, the ratio of attor- success is a crucial factor in determining the proper ney's fees to the award amount, 3.0 to 1, is consistent amount of an award of attorney's fees." 461 U.S. at 440. with other FDCPA cases in this District and the Eastern This holding also applies when determining attorney's District of Pennsylvania involving K&S. E.g. Conklin, fees under the FDCPA. Graziano, 950 F.2d at 114; see 2012 Dist. LEXIS 21609 (7.8 to 1); Brass, 2011 U.S. also Hensley, 461 U.S. at 424 ("[T]he standards set forth Dist. LEXIS 98223 (2.4 [*28] to 1); Cassagne, 2011 in this opinion are generally applicable in all cases in U.S. Dist. LEXIS 135207 (5.4 to 1); Levy, 2011 U.S. Dist. which Congress has authorized an award of fees to a LEXIS 124226 (5.8 to 1); Weed-Schertzer, 2011 U.S. 'prevailing party.'"). However, in Riverside v. Rivera, 477 Dist. LEXIS 108928 (3.4 to 1). U.S. 561, 106 S. Ct. 2686, 91 L. Ed. 2d 466 (1986), [*27] the Court declined to extend Hensley to "adopt a Consequently, the Court finds that Defendant has strict rule that attorney's fees . . . be proportionate to not met its burden of proving that the lodestar amount is damages recovered." Id. at 483-84. unreasonable, see Rode, 892 F.2d at 1180, and declines to adjust the lodestar amount based on the amount of In general, reasonable attorney's fees are "adequate Plaintiff's recovery. to attract competent counsel, but . . . do not produce windfalls to attorneys." Student Pub. Interest Research iv. Lodestar Calculation Grp. of N.J. v. AT&T Bell Labs., 842 F.2d 1436, 1448 (3d Cir. 1988) (citations omitted). Congress' inclusion of Based on the above analysis, the Court finds that the the attorney's fee provision of the FDCPA sought to en- following hourly rates and the following number of sure that "the Act . . . be enforced by debtors acting as hours are reasonable: private attorneys general." Graziano, 950 F.2d at 107.
______
Legal Professional Hourly Rate Hours Worked Total Fee Mr. Kimmel $325 3.8 $1,235 Ms. Bennecoff $250 14.4 $3,600 Ms. Young $200 4.2 $840 Mr. Ginsburg $200 4.4 $880 Mr. Ferris $130 1.3 $169 Ms. Sunchych $125 .4 $50 Ms. Grob $125 4.6 $575 Ms. O'Connell $125 .2 $25 Mr. Ryan $125 1.3 $162.50 TOTAL 34.6 $7,536.50 ______
As a result, the total amount to be awarded is Dated: August 10, 2012 $7,536.50 in attorney's fees. /s/ Freda L. Wolfson
III. CONCLUSION Freda L. Wolfson, U.S.D.J. Based on the foregoing, the Court will grant in part and deny in part Plaintiff's Motion for Attorney's Fees. An appropriate order shall follow.
Page 1
1 of 14 DOCUMENTS
IN RE JOHNSON & JOHNSON DERIVATIVE LITIGATION
Civil Action No. 10-2033(FLW),Civil Action No. 11-4993(FLW),Civil Action No. 11-2511(FLW)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
2013 U.S. Dist. LEXIS 167066; Fed. Sec. L. Rep. (CCH) P97,742
November 25, 2013, Decided November 25, 2013, Filed
NOTICE: NOT FOR PUBLICATION KIMBERLY J. CLIFTON (3:10-cv-02033-FLW-DEA, SUBSEQUENT HISTORY: Judgment entered by In re 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), Johnson & Johnson Derivative Litig., 2013 U.S. Dist. Objector, Pro se, DALLAS, TX. LEXIS 172545 (D.N.J., Nov. 25, 2013) For JEANNE M. CALAMORE, Derivatively on behalf PRIOR HISTORY: In re Johnson & Johnson Deriva- of JOHNSON & JOHNSON tive Litig., 2013 U.S. Dist. LEXIS 180822 (D.N.J., June (3:10-cv-02033-FLW-DEA), Plaintiff: AUDRA ELIZ- 13, 2013) ABETH PETROLLE, CARELLA BYRNE CECCHI OLSTEIN BRODY & AGNELLO, ROSELAND, NJ; COUNSEL: [*1] ROBERT D. STUART DONALD A. ECKLUND, CARELLA, BYRNE, CEC- (3:10-cv-02033-FLW-DEA, 3:11-cv-04993-FLW-DEA, CHI, OLSTEIN, BRODY & AGNELLO, P.C., ROSE- 3:11-cv-02511-FLW-DEA), Objector, Pro se, AR- LAND, NJ; LISA J. RODRIGUEZ, NICOLE M. AC- LINGTON, VA. CHIONE, Schnader Harrison Segal & Lewis LLP, Cherry Hill, NJ; JAMES [*2] E. CECCHI, CARELLA THOMAS C. KEEGAN (3:10-cv-02033-FLW-DEA, BYRNE CECCHI OLSTEIN BRODY & AGNELLO, 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), P.C., ROSELAND, NJ. Objector, Pro se, ERIE, PA. For M.J. COPELAND, Individually and Derivatively on MERTON S. ROTHMAN (3:10-cv-02033-FLW-DEA, Behalf of Johnson & Johnson; Consolidated from 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), 10-cv-6251 (3:10-cv-02033-FLW-DEA), Plaintiff: Objector, Pro se, WOODBURY, NY. JAMES E. CECCHI, LEAD ATTORNEY, CARELLA BYRNE CECCHI OLSTEIN BRODY & AGNELLO, JOHN HENN (3:10-cv-02033-FLW-DEA, P.C., ROSELAND, NJ; JAMES C. SHAH, SHEPHERD, 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), FINKELMAN, MILLER & SHAH, LLP, COL- Objector, Pro se, BOSTON, MA. LINGSWOOD, NJ.
JOHN E. NOTESTEIN (3:10-cv-02033-FLW-DEA, For MINNEAPOLIS FIREFIGHTERS' RELIEF ASSO- 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), CIATION, CONSOLIDATED FROM 10-3215, NE- Objector, Pro se, FOUNTAIN HILLS, AZ. CA-IBEW WELFARE TRUST FUND, CONSOLI- DATED FROM 10-3215, NECA-IBEW PENSION BRENT CLIFTON (3:10-cv-02033-FLW-DEA, TRUST FUND, CONSOLIDATED FROM 10-3215 3:11-cv-04993-FLW-DEA, 3:11-cv-02511-FLW-DEA), (3:10-cv-02033-FLW-DEA), Consol Plaintiffs: JAMES Objector, Pro se, DALLAS, TX. E. CECCHI, LEAD ATTORNEY, CARELLA BYRNE Page 2 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
CECCHI OLSTEIN BRODY & AGNELLO, P.C., NEHAN, HENRY B. SCHACHT, ANN DIBBLE ROSELAND, NJ; DONALD A. ECKLUND, CAREL- JORDAN, ROBERT J. DARRETTA, STEVEN S. LA, BYRNE, CECCHI, OLSTEIN, BRODY & REINEMUND, CHRISTINE A. POON, WILLIAM C. AGNELLO, P.C., ROSELAND, NJ; LINDSEY H. WELDON, DAVID SATCHER, CHARLES O. TAYLOR, CARELLA, BYRNE, CECCHI, OLSTEIN, PRINCE, III, WILLIAM D. PEREZ, LEO F. MULLIN, BRODY & AGNELLO, ROSELAND, NJ. SUSAN L. LINDQUIST, ARNOLD G. LANGBO, MICHAEL M.E. JOHNS, JAMES G. CULLEN For HAWAII LABORERS PENSION FUND, DERIV- (3:10-cv-02033-FLW-DEA), Defendants: EDWIN F. ATIVELY ON BEHALF OF JOHNSON & JOHNSON, CHOCIEY, JR., LEAD ATTORNEY, RIKER, DAN- CONSOLIDATED FROM 10-2516 ZIG, SCHERER, HYLAND & PERRETTI LLP, MOR- (3:10-cv-02033-FLW-DEA), Consol Plaintiff: PETER S. RISTOWN, NJ. PEARLMAN, LEAD ATTORNEY, COHN, LIFLAND, PEARLMAN, HERRMANN & KNOPF, LLP, SADDLE For JOHNSON & JOHNSON, A NEW JERSEY COR- BROOK, NJ; DONALD A. ECKLUND, CARELLA, PORATION (3:10-cv-02033-FLW-DEA), Defendant: BYRNE, CECCHI, OLSTEIN, BRODY [*3] & DONALD A. ROBINSON, LEDA DUNN WETTRE, AGNELLO, P.C., ROSELAND, NJ; JAMES E. CEC- LEAD ATTORNEYS, KEITH J. MILLER, ROBIN- CHI, CARELLA BYRNE CECCHI OLSTEIN BRODY SON, WETTRE & MILLER LLC, NEWARK, NJ. & AGNELLO, P.C., ROSELAND, NJ. For RALPH S. LARSEN, CONSOLIDATED FROM For CARPENTERS PENSION FUND OF WEST VIR- 10-2516, 10-2275, PETER LUTHER, CONSOLIDAT- GINIA, DERIVATIVELY ON BEHALF OF JOHNSON ED FROM 10-3215, ANNE M. MULCAHY, CON- & JOHNSON, CONSOLIDATED FROM 10-2275 SOLIDATED FROM 10-3147, 10-2386, 10-3215, JOHN (3:10-cv-02033-FLW-DEA), Consol Plaintiff: JAMES W. SNOW, CONSOLIDATED FROM 10-2275, MAX- E. CECCHI, LEAD ATTORNEY, CARELLA BYRNE INE F. SINGER, CONSOLIDATED FROM 10-2275, CECCHI OLSTEIN BRODY & AGNELLO, P.C., JOHN S. MAYO, CONSOLIDATED FROM 10-2275, ROSELAND, NJ; LINDSEY H. TAYLOR, LEAD JOAN G. COONEY, CONSOLIDATED FROM ATTORNEY, CARELLA, BYRNE, CECCHI, OL- 10-2275, GERARD N. BURROW, CONSOLIDATED STEIN, BRODY & AGNELLO, ROSELAND, NJ; FROM 10-2275 (3:10-cv-02033-FLW-DEA), Consol DONALD A. ECKLUND, CARELLA, BYRNE, CEC- Defendants: EDWIN F. [*5] CHOCIEY, JR., LEAD CHI, OLSTEIN, BRODY & AGNELLO, P.C., ROSE- ATTORNEY, RIKER, DANZIG, SCHERER, HYLAND LAND, NJ. & PERRETTI LLP, MORRISTOWN, NJ.
For WALTER E. RYAN, JR., DERIVATELY ON BE- For LISA J. RODRIGUEZ, ESQ., CONSOLIDATED HALF OF JOHNSON & JOHNSON, CONSOLIDATED FROM 10-2516, 10-2275, 10-3147, 10-2386, 10-3215 FROM 10-3147 (3:10-cv-02033-FLW-DEA), Consol (3:10-cv-02033-FLW-DEA), Interested Party: LISA J. Plaintiff: DONALD A. ECKLUND, CARELLA, BYR- RODRIGUEZ, Schnader Harrison Segal & Lewis LLP, NE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C., Cherry Hill, NJ. ROSELAND, NJ; JAMES E. CECCHI, CARELLA BYRNE CECCHI OLSTEIN BRODY & AGNELLO, STEPHEN R. LINDEMOOD P.C., ROSELAND, NJ. (3:11-cv-04993-FLW-DEA), Objector, Pro se, SAN ANTONIO, TX. For ALBERT L. FELDMAN, DERIVATELY ON BE- HALF OF NOMINAL DEFENDANT JOHNSON & For M.J. COPELAND, individually and derivatively on JOHNSON, CONSOLIDATED FROM 10-2386 behalf of Johnson & Johnson (3:10-cv-02033-FLW-DEA), Consol Plaintiff: DONALD (3:11-cv-04993-FLW-DEA), Plaintiff: JAMES C. A. ECKLUND, CARELLA, BYRNE, CECCHI, OL- SHAH, SHEPHERD, FINKELMAN, MILLER & STEIN, BRODY & AGNELLO, P.C., ROSELAND, NJ; SHAH, LLP, COLLINGSWOOD, NJ. JOSEPH J. DEPALMA, LITE, DEPALMA, GREEN- BERG, LLC, NEWARK, NJ; JAMES E. CECCHI, For LESLIE KATZ, CONSOLIDATED FROM 11-4994 CARELLA BYRNE [*4] CECCHI OLSTEIN BRODY (FLW) (3:11-cv-04993-FLW-DEA), Consol Plaintiff: & AGNELLO, P.C., ROSELAND, NJ. GARY S. GRAIFMAN, KANTROWITZ, GOLD- HAMER & GRAIFMAN, ESQS., MONTVALE, NJ. For MARY SUE COLEMAN, RUSSELL C. DEYO, NICHOLAS VALERIANI, ALEX GORSKY, JOSEPH For CHARLES O. PRINCE, III, RUSSELL C. DEYO, C. SCODARI, ROBERT N. WILSON, JAMES T. LE- NICHOLAS VALERIANI, ALEX GORSKY, JOSEPH Page 3 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
C. SCODARI, ROBERT N. WILSON, JAMES T. LE- INSON, ROBINSON, WETTRE & MILLER LLC, NEHAN, HENRY B. SCHACHT, ANN DIBBLE NEWARK, NJ. JORDAN, ROBERT J. DARRETTA, STEVEN S. REINEMUND, CHRISTINE A. POON, WILLIAM C. JUDGES: Freda L. Wolfson, United States District WELDON, DAVID SATCHER, TED TORPHY, WIL- Judge. LIAM D. PEREZ, LEO F. MULLIN, SUSAN L. LINDQUIST, ARNOLD G. LANGBO, MICHAEL M.E. OPINION BY: Freda L. Wolfson JOHNS, JAMES G. CULLEN, MARY SUE COLE- MAN, ANNE M. MULCAHY OPINION (3:11-cv-04993-FLW-DEA), Defendants: EDWIN F. WOLFSON, United States District Judge: CHOCIEY, [*6] JR., LEAD ATTORNEY, RIKER, DANZIG, SCHERER, HYLAND & PERRETTI LLP, The Court has previously approved the parties' set- MORRISTOWN, NJ. tlement in this consolidated shareholder derivative ac- tion, which includes suits brought by both De- For JOHNSON & JOHNSON mand-Futility and Demand-Refused Plain- (3:11-cv-04993-FLW-DEA), Defendant: DONALD A. tiffs-Shareholders (collectively, "Plaintiffs"). The re- ROBINSON, LEDA DUNN WETTRE, LEAD AT- maining determination in this case is the amount of at- TORNEYS, ROBINSON, WETTRE & MILLER LLC, torneys' fees and costs to be awarded to Plaintiffs' coun- NEWARK, NJ. sel.1 Plaintiffs' counsel 2 seek in excess of $6.5 million in attorney's fees and approximately $450,000 in costs, as For DOMINIC J. CARUSO, CONSOLIDATED FROM well as a multiplier of 1.5. Presented with a multitude of 11-4994 (FLW), ROBERT MILLER, CONSOLIDATED attorneys and voluminous time entries, this Court, ap- FROM 11-4994 (FLW), ASHLEY A. MCEVOY, pointed a Special Master to assist in making the lodestar CONSOLIDATED FROM 11-4994 (FLW), PETER B. calculations and determining compensable costs, pursu- LUTHER, CONSOLIDATED FROM 11-4994 (FLW), ant to Fed. R. Civ. P. 53.3 The issue of [*8] whether a RALPH S. LARSEN, CONSOLIDATED FROM multiplier is appropriate and if so, in what amount, was 11-4994 (FLW), COLLEN GOGGINS, CONSOLI- left for this Court following the Special Master's Report DATED FROM 11-4994 (FLW), SETH FISCHER, on the lodestar. CONSOLIDATED FROM 11-4994 (FLW), MICHAEL J. DORMER, CONSOLIDATED FROM 11-4994 1 In this Court's prior Opinion dated October (FLW) (3:11-cv-04993-FLW-DEA), Consol Defendants: 26, 2012 (the "October Opinion"), the Court, inter EDWIN F. CHOCIEY, JR., LEAD ATTORNEY, alia, approved the final settlement reached be- RIKER, DANZIG, SCHERER, HYLAND & PERRETTI tween Defendant Johnson & Johnson Corp. and LLP, MORRISTOWN, NJ. Plaintiffs. In Re Johnson & Johnson Derivative Litig., 900 F.Supp. 2d 467 (D.N.J. 2012) ("Octo- For SANDRA WOLLMAN, CYNTHIA DIAMOND, ber Opinion"). In addition, the Court found that CONSOLIDATED FROM 11-2652, JOSEPH CAFARO, awarding attorneys' fees and costs to Plaintiffs' CONSOLIDATED FROM 11-2652, GILA counsel is appropriate. Id. at 496. I note that de- HEIMOWITZ, Derivatively on Behalf of Johnson & fendants do not object to Plaintiffs' attorneys' fees Johnson (3:11-cv-02511-FLW-DEA), Plaintiffs: PETER up to a maximum of $10 million. S. PEARLMAN, COHN, LIFLAND, PEARLMAN, 2 The law firms which represent the De- HERRMANN & KNOPF, LLP, SADDLE BROOK, NJ. mand-Futility plaintiffs are: Carella, Byrne; Rob- bins, Geller; Bernstein Litowitz; and Morris and For MARY SUE COLEMAN, WILLIAM C. WELDON, Morris. The Demand-Refused plaintiffs are rep- DAVID SATCHER, CHARLES PRINCE, WILLIAM resented by: Kantrowitz, Goldhamer; and Abra- D. PEREZ, LEO F. MULLIN, ANNE M. MULCAHY, ham Fruchter. SUSAN L. [*7] LINDQUIST, MICHAEL M.E. 3 In an Order dated October 22, 2012, this JOHNS, IAN E.L. DAVIS, JAMES G. CULLEN Court appointed the Hon. Harriet Derman, J.S.C. (3:11-cv-02511-FLW-DEA), Defendants: EDWIN F. (Ret.), as the Special Master. CHOCIEY, JR., RIKER, DANZIG, SCHERER, HY- In her well-reasoned and thorough, 138-page Report LAND & PERRETTI LLP, MORRISTOWN, NJ. and Recommendation (the "Report"), the Special Master
recommends that this Court award counsel For JOHNSON & JOHNSON, a New Jersey Corporation $5,383,905.76 in fees, and $416,305.73 in [*9] costs. (3:11-cv-02511-FLW-DEA), Defendant: LEDA DUNN As discussed below, objections were filed challenging WETTRE, LEAD ATTORNEY, DONALD A. ROB- various aspects of the Report concerning the lodestar Page 4 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742 calculations. This Opinion reflects the Court's final de- to dismiss the Demand-Refused Plaintiffs' com- termination of the fee application. For the reasons set plaint [*11] was pending. forth below, the Court ADOPTS in full the Special Master's Report as follows: counsel are awarded fees in Summary of Special Master's Report the total amount of $5,383,905.76, and expenses in the Plaintiff's counsel, collectively, seek fees for over amount of $416,305.73. Furthermore, the Court denies 12,500 hours of work spent on litigating these cases, and counsel's request for a multiplier. the documents purportedly supporting the appropriate-
ness of those hours are substantial and extensive. As the BACKGROUND thoroughness of the Report reflects, the Special Master The underlying facts and procedural history of this carefully and scrupulously evaluated the records, as well case have been fully set forth by this Court in its October as requested counsel to produce additional documenta- Opinion and in the Report; as such, to promote judicial tion, and on several occasions, met with counsel. I will economy, the Court incorporates those facts herein, and only briefly summarize the Report's conclusions. will only delineate additional facts that are necessary and The Special Master was tasked with determining the relevant to the issues addressed here. appropriate hourly rate for each counsel, and the time Briefly, these derivative suits essentially accused expended by various Plaintiffs' attorneys in this matter J&J, inter alia, of failing to comply with product recalls, was reasonable. She first conducted the lodestar analysis lack of good manufacturing practices, off-label drug by examining the 12,797.70 hours spent by the six plain- marketing and violating federal and state statutes. Plain- tiffs' firms. In that process, the Special Master com- tiffs allege that based on various wrongdoings, J&J mented on the divisiveness of the firms representing the breached its fiduciary duty to its shareholders. separate plaintiffs at the inception of these matters, in- cluding the rancor between Demand-Futility and De- After the resolution of J&J's motions to dismiss,4 the mand-Refused Plaintiffs. However, when the possibility parties reached [*10] a settlement, and as a result, the of a settlement became a reality, the firms combined Court held a fairness hearing, wherein I heard the parties' their resources and pursued a common goal - to amicably respective positions on the settlement terms, as well as end litigation. [*12] Nonetheless, as the Special Master objections from the public. On October 26, 2012, this found, and this Court agrees, the firms' efforts were Court issued its Opinion and Order approving the settle- plagued by inefficiencies, billing errors, and in some ment and also approved, in principle, an award of attor- instances, inflated hourly rates. neys' fees and costs to counsel for Plaintiffs. In that con- nection, I determined that to calculate the amount of the As the Special Master noted, the number of hours fees, a traditional lodestar analysis must be undertaken. and concomitant fees in this application are "extraordi- However, as I have explained previously, counsel's fee nary" when there has been very limited discovery in declarations and time records were not sufficiently de- these matters, and the cases were in their infancy. Fur- tailed in order for this Court to engage in the searching thermore, the Special Master was concerned with the and thorough inquiry that a lodestar analysis requires. manner in which the hours were billed, and indeed, this And, more importantly, the time records produced in Court shared the same views when reviewing the settle- support of the fee application were voluminous. Accord- ment and the application for fees. More particularly, the ingly, I instructed Plaintiffs' attorneys to supplement the Special Master found that some of the time records failed record, and further, to assist the Court in its review, I to provide sufficient details as to the type of task or ac- appointed a Special Master to recommend the appropri- tivity being billed. Coupled with attorneys' inefficiencies ate lodestar amount. and billing for unnecessary work, were duplication of efforts, bloated hourly rates and the billing of lawyers at 4 At the time the settlement discussion began, partner rates for low level tasks. Thus, the Special Master the Demand-Futility Plaintiffs' complaint had reduced the total requested fees to $5,383,905.76. The been dismissed without prejudice, and a motion chart below represents the breakdown of the recom- mended lodestar awarded to each firm:
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FIRM Hours Requested Recommended Expended Lodestar Lodestar Demand-Futility Page 5 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
FIRM Hours Requested Recommended Expended Lodestar Lodestar Carella Byrne 1,701.50 $927,997.95 $777,265.00 Berstein Litowitz 2,305.50 $1,084,585.55 $676,630.63 Robbins Geller 1,158.00 $564,067.50 $487,718.75 Morris and Morris 4,074.50 $2,181,711.54 $1,946,323.75 Demand-Refused Abraham Fruchter 2,755.25 $1,607,587.59 $1,032,173.13 Kantrowitz Goldhamer 802.95 $520,901.76 $463,794.50 TOTAL $5,383,905.76 ______
Bernstein Firm argues that the Court's fee award, partic- Summary [*13] of Objections ularly in the multiplier context, must not be based on the law of fee shifting for the benefit of a prevailing litigant, Pursuant to Fed. R. Civ. P. 53(f)(2), the Court di- but rather, this type of fee award should be based on a rected the parties, including objectors, to submit objec- corporate benefit analysis. Furthermore, the Bernstein tions to the Special Masters' recommendations, if any. Firm takes issue with the Special Master's treatment of One of the objectors, Mark G. Petri (the "Objector"), certain hourly rate declarations from other New Jersey principally challenges the aspect of the Report that ad- attorneys. Lastly, the Firm disagrees with some of the dresses the reduction of fees resulting from "internal findings and comments made by the Special Master re- warfare" of Plaintiffs' counsel. More specifically, the garding the manner in [*15] which the Bernstein Firm Objector argues that the Special Master committed a litigated these matters. legal error on the issue whether $1.15 million of lodestar spent on "fighting" amongst the groups of Plaintiffs' at- The Abraham and Kantrowitz Firms collectively ask torneys to become lead counsel is billable to the share- this Court to reject the Report's recommended reductions holders.5 in their requested fees. In their objections, both firms generally disagree with the Special Master's finding that 5 After the issuance of the Report, I directed some of the firms' billings were excessive, vague or re- the Special Master to submit a separate spread- lated to work that was unnecessary. In an attempt to once sheet which enumerates the hours she subtracted again justify their hourly billing, the firms delineate the for counsel's time spent on three specific catego- reasons why the reductions of their billable hours by the ries: (1) motions for appointment of lead counsel Special Master were not warranted. I will discuss those and any opposition thereto; (2) Demand-Refused contentions more fully below. As a final note, both the counsel's motion for, and complaint in, interven- Carella and Robbins Firms do not object to the recom- tion; and (3) opposition to the motion for inter- mendations made by the Special Master, and no one has vention. objected to the Special Master's recommendation as to the compensable expenses. The Morris Firm also objects to the Report. While the firm does not take issue with the recommended lode- DISCUSSION star amount, it does object on the basis that the Special
Master erred when she suggested [*14] that the risks of I. The Lodestar Amount counsel's contingency fee business model should not be shifted to the defendant. The Morris Firm is concerned A. Standard of Review because it argues that in a common benefit case, such as this matter, J&J is funding the award of attorneys' fees as Federal Rule of Civil Procedure 53 sets forth the the beneficiary of the benefits achieved by Plaintiffs' standard this Court applies when reviewing the Special counsel, not as an unsuccessful defendant. And, the Mor- Master's Report and Recommendation. See Fed. R. Civ. ris Firm submits that this distinction is important when P. 53(f)(3)-(5). In that connection, with respect to the evaluating whether a multiplier is appropriate. Special Master's decisions, the Court "may adopt or af- firm, modify, wholly or partly reject or reverse, or re- In addition, the Bernstein Firm objects to certain le- submit to the master with [*16] instructions." Fed. R. gal and factual errors allegedly made in the Report; Civ. P. 53(f)(1). It is clear that "[t]he court must decide however, it does not seek to change the overall recom- de novo all objections to conclusions of law made or mended lodestar award. First, like the Morris Firm, the Page 6 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742 recommended by a master." Fed. R. Civ. P. 53(f)(4). ($194,554.00) on a complaint in interven- Similarly, all objections to the master's findings of fact, tion. unless the parties stipulate otherwise, are reviewed de 3. Demand Futility counsel seeks to novo. Fed. R. Civ. P. 53(f)(3). On the other hand, "[t]he include 153.5 hours ($98,363.75) for time Special Master's rulings on procedural matters are re- spent in opposing Demand Refused viewed under the abuse of discretion standard." Honey- counsel's motion to intervene. well Int'l, Inc. v. Nikon Corp., 2009 U.S. Dist. LEXIS
17115, at *1 (D. Del. Mar. 4, 2009) (citing Fed. R. Civ.
P. 53(f)(5)). The nature of the "internal warfare" among counsel With the above standards in mind, I acknowledge was summarized in the Report. The Special Master re- that it is the role of this Court to review de novo the Spe- marked that combative exchanges between Plaintiffs' cial Master's conclusions of law and fact. Indeed, I have attorneys at one time were "intense." See Report at p. 91. thoroughly reviewed the Report and the accompanying Suffice to say, "tension by and among the competing exhibits, as well as the parties' declarations in support of Demand-Futility attorneys and the competing De- their fees; having done so, I agree with the Special Mas- mand-Refused [*18] attorneys, as well as the tension ter's assessment of the lodestar analysis. Therefore, in between the Demand-Futility and Demand-Refused at- this Opinion, I will only address the specific objections torneys, necessitated the expenditure of over 1,500.00 raised by the parties. hours or almost twelve percent (12%) of the hours
sought." Id. at p. 92. The Special Master did not treat the B. Petri's Objection "in-fighting" lightly. She acknowledged that "[a] great The Objector asks this Court to exclude any hours deal of time and money was spent to secure a spot on the billed by the various Plaintiffs' attorneys in their efforts team." Id. In that regard, the Special Master questioned to become [*17] the lead counsel for both the De- whether "this internal dispute brought any value to the mand-Futility and Demand-Refused plaintiffs in this shareholders of J&J." Id. consolidated matter. Indeed, the Objector made the same Having made that assessment, however, the Special argument to the Special Master. According to the Objec- Master declined to exclude wholesale the $1.15 million tor's calculations, the number of hours expended in those in fees identified by the Objector as hours related to "in- efforts amounted to approximately $1.15 million in fees. ternal warfare." Rather, the Master reasoned that she had Specifically, the Objector identifies three categories of already deducted some of the hours objected to on other fees that should be excluded: grounds, i.e., that they were excessive or vague. The re-
maining hours, the Special Master explained, were not 1. 592.5 hours ($361,800) for the four otherwise objectionable since those efforts - even if they law firms' fight over who would become were related to the appointment of lead counsel - con- Demand-Futility lead counsel. ferred some benefit to the class. See Report at p. 95. 2. Demand Refused counsel claims While the Objector did not have the benefit of a 755.75 hours ($495,280.75) for its motion breakdown of the subtractions taken by the Special Mas- to intervene and motion to appoint lead ter in these categories, pursuant to my request, [*19] the and liaison counsel in the demand refused Special Master recently submitted a separate spreadsheet actions, as well as 334.9 hours outlining the deductions taken. The following chart summarizes those reductions.
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Category Amount Amount of % of Billed Deduction Reduction Taken Motions for $361,800.00 $103,079.38 28.46% Appointment of Lead Counsel and Any Oppositions thereto, filed by Demand Page 7 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
Futility Counsel Motion for $689,834.75 $217,037.50 31.46% Intervention; Motion to Appoint Lead Counsel; and Complaint in Intervention Opposition to Motion $98,363.75 $23,194.38 11.61% for Intervention ______
above chart, are sufficient to account for hours billed that The standard which the Court applies to determine were not "reasonable" or "useful" in achieving the final whether fees should be deducted is straightforward: it is result reached in this case. axiomatic that hours not reasonably expended must be excluded from the fee calculation, Hensley v. Eckerhart, C. The Morris and Bernstein Firms' Objections 461 U.S. 424, 434, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983), and hours are not reasonablely extended "if they Both the Morris and Bernstein Firms disagree with are excessive, redundant or otherwise unnecessary." the Special Master's comments regarding the nature of Rode v. Dellarciprete, 892 F. 2d 1177, 1183 (3d Cir. contingency fees. More specifically, both Firms argue 1990). "Time expended is considered 'reasonable' if the that the Special Master should not have applied a work performed was 'useful and of a type ordinarily nec- fee-shifting analysis because this case should be ana- essary to secure the final result obtained from the litiga- lyzed under the common benefit doctrine, and this dis- tion.'" Public Interest Research Group of N.J., Inc. v. tinction is important to the determination whether a mul- Windall, 51 F.3d 1179, 1188 (3d Cir. 1985). tiplier is appropriate. I disagree with the Firms' charac- terization of the Special Master's reasoning, particularly With that in mind, I reject the Objector's [*20] since she was not tasked with, nor did she engage in, an broad assertion that all hours spent by Plaintiffs' counsel analysis of fees vis-a-vis whether a multiplier should be related to the appointment of lead counsel or intervention applied. Rather, her analysis was limited to a lodestar were not necessary or did not secure the results reached calculation, and she appreciated [*22] that this is a in this case. First, the lead counsel selection process is common fund case. necessary and appropriate in order to secure competent counsel for the class. See In re Lucent Techs. Sec. Litig., At the outset, I note that while the attorney's fees 194 F.R.D. 137, 156 (D.N.J. 2000). Indeed, the motion sought in this case are not based upon statutory or con- practice involved in selecting counsel ultimately led to tractual fee-shifting, in a common benefit case where an organizational plan, agreed to by the parties, concern- there is no monetary benefit conferred through litigation, ing which law firms would represent plaintiffs in both the lodestar formula is a method commonly used to de- Demand Futility and Demand Refused actions. While the termine attorney's fees. Lindy Bros. Builders Inc. of process may have been contentious at times, the efforts Philadelphia v. American Radiator & Standford Corp., expended by these firms were beneficial in reaching the 487 F.2d 161 (3d Cir. 1973); In re Scher- outcome. Likewise, the Court finds that the Demand Re- ing-Plough/Merck Merger Litig., No. 09-1099, 2010 U.S. fused counsel's filing of its motion to intervene was nec- Dist. LEXIS 29121, at *53 (D.N.J. Mar. 26, 2010);" Joy essary to protect the interests of the demand refused Mfg. Corp. v. Pullman-Peabody Co., 742 F. Supp. 911, plaintiffs. Thus, I reject the Objector's position that 913 (W.D. Pa. 1990). The lodestar method involves mul- counsel should not be compensated for any work related tiplying the number of hours expended by the attorneys' to those efforts. reasonable hourly rate. See In re Johnson and Johnson, 900 F.Supp. 2d. at 496. In that regard, the Special Master That said, however, I do find excessive the hours appropriately analyzed counsel's hourly rates using the spent on motion practice related to the above-referenced lodestar analysis, which is not disputed by the parties. three categories of fees. Having independently reviewed the billing [*21] entries and corresponding hours billed The language from the Report with which the Firms for each category, I concur with the Special Master's take issue read as follows: observations that some of the hours are excessive, vague or otherwise not necessary, and therefore, reductions are I have also never understood why the appropriate. In that regard, I further find that the reduc- element of contingency should generate a tions taken by the Special Master, as outlined in the higher rate for taking the risk; it would Page 8 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
seem to me that practitioners who have argues because the hourly rates set forth in the Rate undertaken an [*23] uphill legal battle Declarations are consistent with rates approved by courts would be happy to settle for some com- around the country, there was no basis for the Special pensation - unless it was not uphill at all Master to discount them. The Court disagrees. The Spe- and was in actuality almost a certainty. In cial Master had an independent obligation to determine this contingent matter, with J&J as a de- whether the Rate Declarations were appropriate and suf- fendant, a dozen firms were "falling all ficient to support the hourly rates requested in this case. over themselves" to participate. In any The Special Master found several deficiencies in those event, the possibility of losing one con- declarations. First, the Special Master explained that the tingent case and therefore compensating declarations failed to "comment on the fact that their with higher rates in another matter is not billing rates may be applicable for periodic the problem of the defendant in the sec- non-contingent clients while the clients in this matter are ond matter. not contractually obligated to ever pay the designated rate - or any other rate." Report, p. 109. Moreover, the declarants did not "offer any specific comparisons or Report at p. 117. However, the Special Master was re- provide specific references." Id. Another deficiency, the sponding to counsel's position that they should receive Special Master noted, was the lack of information re- their substantial requests for fees because counsel un- garding whether the "requested rates are commensurate dertook the prosecution of this matter entirely on a con- with this District's prevailing market rates." Id. Addi- tingency basis and assumed significant risks in bringing tionally, "the Affidavits do not cite to a single specific these claims. The Special Master clarified that in deter- case where counsel's proposed rates were awarded in a mining the lodestar, the focus is on the appropriate hour- shareholder derivative action." [*26] Id. at 110. Thus, ly rate for each counsel and the reasonableness of the the Special Master concluded that the Rate Declarations time expended. In other words, it is only after the lode- were not helpful to her in determining reasonable hourly star is calculated that the Court then determines whether rates for the relevant market. Given the explanations, this to decrease or increase the amount by applying a multi- Court agrees with the Special Master's conclusions, and I plier, which "attempts to account for the contingent na- find that she properly gave less weight to the Rate Dec- ture and risk involved in a particular case and the quality larations. of the attorneys' work." In re Diet Drugs, 582 F.3d 524, 540 n.33 (3d Cir. 2009). [*24] Indeed, the Special 8 Plaintiffs' Counsel submitted the following Master appropriately focused on a traditional lodestar declarations from attorneys in New Jersey: (1) analysis as opposed to whether an enhancement is war- Michael D. Sirota, Esq., co-managing shareholder ranted based upon risk and contingency.6 Therefore, the of Cole, Scholtz, Meisel, Forman & Lenoard, Firms' objection to the Special Master's comments about P.A.; (2) Stephen M. Greenberg, Esq., counsel to fees and contingencies appears to misapprehend the im- McElroy, Deutsch, Mulvaney & Carpenter LLP; port of her observations.7 Finally, the risk and contingent and (3) John A. McGahren, Esq., a partner at nature of a case are factors to be considered in determin- Patton Boggs LLP. ing whether an enhancement or multiplier applies, which Finally, the Bernstein Firm requests this Court not to will be decided by me, infra, and were not a part of the repeat or adopt certain "unnecessary criticism of coun- Special Master's Report. sel" in the Report. Having carefully reviewed the con-
tents of the Report, I do not find that the Special Master 6 It is appropriate to consider if the issues in has overstated or inappropriately remarked upon the at- this case are novel and complex - neither of these torneys and their billing practices. Indeed, the Master criteria account for an increased hourly rate here. was tasked by this Court to compare the work performed 7 The Special Master's comments are, howev- by each of the lawyers with the number of hours billed in er, well taken. As this Court has observed in other order to determine the appropriateness of the requested matters, the setting of hourly rates by firms, such fees. Necessarily, in order to make that determination, as the Morris and Bernstein Firms, whose clients [*27] the Special Master was well within her authority to are almost exclusively contingent fee clients, support the recommended deductions with her explana- does not necessarily reflect a reasonable fee for tions. lodestar analysis.
Next, the Court addresses the Bernstein Firm's sug- D. The Abraham and Kantrowitz Firms' Objections gestion that the Special Master erred when she "disre- Before the Special Master, the Abraham and garded" the hourly rate declarations from prominent New Kantrowitz Firms requested a total of $2,128,489.35 for Jersey attorneys ("Rate Declarations").8 [*25] The Firm Page 9 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742 a combined 3558.20 hours billed. Based on various - and the reasonableness of the hours that both firms spent on indeed, extensive - reasons, the Special Master reduced the Complaint in Intervention. both firms' fees to $1,495,967.63. Unsurprisingly, the In sum, I do not find convincing the objections made Abraham Firm takes issue with the Special Master's rea- by the Abraham and Kantrowitz Firms. Accordingly, soning for reducing its fees. In its view, the majority of having addressed, and rejected, all of the objections the work performed was appropriate and justified. In that made by the parties, the Court adopts in full the Special regard, the Abraham Firm insists that hours billed for the Master's report and recommendation. following four categories of work should not have been so drastically reduced: 1) obtaining, reviewing and ana- II. Multiplier lyzing documents relating to DePuy's metal hip replace- ment and other factual updates; (2) reviewing transcripts Before I assess whether an award of a multiplier is and exhibits from the civil trials relating to the alleged appropriate, I clarify, as I did in my previous Opinion, improper sale of Risperdal; (3) drafting a books and rec- that an award of attorneys' fees [*30] in this case is ords action which was not filed; and (4) working on the based on the substantial benefit conferred upon the complaint in intervention and the Katz Complaint. Be- shareholders through corporate governance reforms cause I agree with the Special Master's deductions in achieved by the settlement, and not based upon a mone- these categories, I will only briefly comment on [*28] tary award to the sharholders. Indeed, this is not the clas- the Abraham Firm's objections. sic type of common fund case wherein a monetary fund is created for the benefit of a class. As a result, "a lode- As to the first category, the Special Master correctly star analysis is fitting where there is no monetary com- determined that some of the hours the Abraham Firm ponent to the settlement and no valuation of the billed reviewing documents relating to the DePuy metal non-monetary award upon which the Court could base a hip replacement were excessive, while others produced percentage." In re Johnson & Johnson, 900 F.Supp. 2d at no value to the class. The deductions taken in this cate- 498; see In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, gory of fees were necessary because, as the Special 300 (3d Cir. 2005). With that distinction, I turn, next, to Master found, some of the hours are plainly excessive. the issue whether a multiplier is warranted. In that con- To highlight this problem, the Abraham Firm routinely nection, notwithstanding the fact that the Special Master, over-billed for sending emails. In one example, the firm in her lodestar analysis, recommended reducing the re- charged over 2.5 hours for sending a routine email to quested fees to $5.38 million, counsel continue to request co-counsel. And, in other instances, the Abraham Firm that this Court award fees in the amount of $10 million, simply designated the work performed as "Doc review" which results in a multiplier of approximately 1.86. without indicating what documents, or even the subject matter, being reviewed. In those specific instances, the After determining the appropriate lodestar figure for Special Master appropriately reduced all of the hours, attorney's fees, the court may either increase or decrease which amounted to over 50 hours. I need not go through the lodestar amount through the use of a multiplier. Id. A the entries one by one since that task was competently multiplier "attempts [*31] to account for the contingent performed by the Special Master, and because I agree nature or risk involved in a particular case and the quali- with her observations, I reject the Abraham Firm's objec- ty of the attorneys' work." Id. (quoting In re Diet Drugs, tion on this issue. 582 F.3d 524, 540 n. 33 (3rd Cir. 2009)).9 Further, in order to receive an upward adjustment, the fee applicant Next, I am in complete agreement with the Special must show some basis that such an adjustment is neces- Master's reductions in the hours billed for Risperdal sary to provide fair and reasonable compensation. See In transcript [*29] review. While the Abraham Firm ar- Re: Prudential Ins. Co. Am. Sales Practice Litig., 148 gues that it was necessary to review the transcripts, I find F.3d 283, 340 (3d Cir. 1998). excessive that the firm dedicated well over 180 hours to that routine task. Accordingly, a deduction of 125.25 9 In a classic lodestar valuation, it is presumed hours in this category is more than reasonable; had I re- that the lodestar figure represents the "reasonable viewed those hours in the first instance, I might have fee." As such, a multiplier is only warranted in taken an even greater deduction. Likewise, the Abraham special circumstances. Perdue v. Kenny A., 559 Firm's billing related to drafting a "book and records U.S. 542, 552-53, 130 S. Ct. 1662, 176 L. Ed. 2d action" was excessive. Furthermore, because such an 494 (2010). action was never initiated, the significant amount of time spent on preparing the complaint added no value to the An upward adjustment generally may not based on benefit of the corporation and the shareholders. Finally, factors already accounted for in determining the original as to the last category, I have already addressed, supra, lodestar figure. See Blum v. Stenson, 465 U.S. 886, 898-99, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1984). To Page 10 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742 illustrate, a multiplier cannot be based on the "novelty cases that deals with multipliers in that context. Rather, and complexity of the issues" because those factors have as the case law instructs, I can only award a multiplier in been accounted for in determining the "number of billa- this case if I find that the lodestar insufficiently accounts ble hours" and the "reasonable hourly rate." Id.; see, e.g., for the risks of litigation, the contingent nature of the McLendon v. Continental Group, Inc. 872 F. Supp. 142, case, the results achieved and the quality of representa- 162 (D.N.J. 1994) (rejecting a lodestar enhancement tion. These factors, however, do not always compel en- based on the quality [*32] of the representation because hanced fees. See Goldberger v. Integrated Res., 209 F.3d that factor was accounted for in petitioners' hourly rate); 43, 54 (2d Cir. 2000). Bagel Inn, Inc. v. All Star Dairies, 539 F. Supp. 107, 113 I begin with the premise that I find the lodestar (D.N.J. 1982) (denying a petition for lodestar enhance- amount of approximately $5.38 million more than ade- ment for one of the firms involved in the litigation be- quately compensates Plaintiffs' counsel for the work they cause the "quality of services . . . is reflected in the performed. While counsel, collectively, purportedly hourly rate"); Lake v. Nationwide Bank, 900 F. Supp. spent over 12,000 hours litigating these matters, these 726 (E.D. Pa. 1995) (declining to apply a quality multi- consolidated actions were still in their infancy. Little plier even though the attorneys "shepherd[ed] this case discovery had occurred, and more importantly, for the efficiently"); Cerva v. E.B.R. Enterprises, Inc. 740 F. Demand-Futility Plaintiffs, the Complaint had been dis- Supp. 1099, 1106 (E.D. Pa. 1990) (declining to apply a missed without prejudice. As for the Demand-Refused quality multiplier because petitioner's skill was already Plaintiffs, the Court stayed Defendants' motion to dis- reflected in his high rate); Orson Inc. v. Miramax Film, miss pending the outcome of the settlement discussions. Corp., 14 F. Supp. 2d 721, 726 (E.D. Pa. 1998) (denying For cases that have not progressed beyond the motion to enhancement of lodestar because petitioner's only basis dismiss stage, $5.38 million in fees is a [*35] substan- for such a request was the "novelty of the issues"); Cic- tial award. In fact, because the lodestar is substantial, an carone v. B.J. Marchese, Inc. 03-CV-1600, 2004 U.S. additional multiplier cannot be justified. Dist. LEXIS 25747, 2004 WL 2966932, at *4 (December 22, 2004 E.D. Pa) (holding that an enhancement multi- In my view, the lodestar properly accounts for the plier was inappropriate because the work was "adequate, results achieved and the quality of representation. The but not outstanding" and the settlement was for far less hourly rates awarded in this case range from $125 to than initially sought). $750. Indeed, most of the partners of the law firms charged well over $600 an hour. In light of the signifi- Nevertheless, courts have noted that since one of the cant hourly rates, counsel are sufficiently compensated goals of performing [*33] the lodestar analysis is to for the quality of their work, which recognizes the vari- "assure that counsel undertaking socially beneficial liti- ous attorneys' skills and experience. These factors were gation receive an adequate fee irrespective of the mone- already taken into account by the Special Master when tary value of the final relief achieved for the class," mul- she made her recommendations. In addition, I disagree tipliers can be applied to compensate attorneys who take with counsel's position that the complexity of this case on risky, but socially beneficial litigation. In re Scher- warrants a multiplier. I find that the degree of complexity ing-Plough Corp. S'holders Derivative Litig., No. involved with the issues in these cases is more than ade- 01-1412, 2008 U.S. Dist. LEXIS 2569, 2008 WL 185809, quately reflected in the number of hours billed. See Dis- at *5 (D.N.J January 14, 2008) (citing In re GMC cussion, infra. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 (3d Cir. 1995)). In sum, "[m]ultipliers may re- Moreover, whether Plaintiffs would ultimately pre- flect the risks of non[-]recovery facing counsel, may vail is a factor that this Court weighed heavily, not only serve as an incentive for counsel to undertake socially in finding the settlement reasonable, but also in my de- beneficial litigation, or may reward counsel for an ex- termination that an award of attorneys' fees is appropri- traordinary result. By nature they are discretionary and ate. See In re Johnson & Johnson, 900 F.Supp. 2d at not susceptible to objective calculation." In re Pruden- 484. Indeed, the Special Master [*36] discussed the tial, 148 F.3d at 340. results achieved through the settlement, and how counsel should properly be compensated for those results. Ac- In this case, I do not find that a multiplier is war- cordingly, because the lodestar calculations took into ranted for several reasons. Counsel argues, at the outset, account those considerations, I need not provide a further that in common fund cases where the lodestar method is enhancement in this regard. See Pa. v. Del. Valley Citi- used to cross check percentage-of-recovery awards, the zens' Council for Clean Air, 483 U.S. 711, 753, 107 S. Third Circuit has approved multiples ranging from one to Ct. 3078, 97 L. Ed. 2d 585 (1987) ("a multiplier[] is not four. See In re Prudential, 148 F.3d at 341. However, designed to be a 'windfall' for the attorney"). this is not a common fund [*34] case, and therefore, it is not appropriate for this Court to rely on the line of Page 11 2013 U.S. Dist. LEXIS 167066, *; Fed. Sec. L. Rep. (CCH) P97,742
Nor is an enhancement necessary to compensate THIS MATTER having been opened to the Court counsel for the contingent nature of this case. I doubt that by both Demand-Futility and Demand-Refused Plain- the contingency nature and the risk of nonpayment dis- tiffs-Shareholders (collectively, "Plaintiffs"), on an ap- couraged Plaintiffs' counsel from pursuing this litigation. plication for attorneys' fees and costs; it appearing that See Report, p. 116. Indeed, that conclusion is bolstered defendants do not object to attorneys' fees up to a maxi- by the number of attorneys seeking to be first in the door mum of $10 million; it appearing that the Court appoint- in filing lawsuit on behalf of shareholders, and the in- ed a Special Master to recommend the appropriate fees tense level of competition litigating who would become and expenses; it appearing that the following law firms lead counsel. In my view, from counsel's perspective, made objections to the Report and Recommendation: this was a "promising" case, holding the prospect of a Bernstein Litowitz; Morris and Morris; Kantrowitz, large fee recovery from solvent defendants. See Gold- Goldhamer; and Abraham Fruchter; it appearing that berger v. Integrated Res., 209 F.3d 43, 53-54 (9th Cir. Mark G. Petri, an objector, also objected; it appearing 2000)(refusing to award a multiplier when the contingent that the Court having reviewed the Report and Recom- nature of the case was in doubt). My conclusion rests on mendation and all the objections filed thereto, for the the observations [*37] that: (1) counsel benefitted from reasons set for the in the Opinion filed [*39] on even the spadework done by federal authorities, whose inves- date, and for good cause shown, tigations had progressed substantially at the time of the IT IS on this 25th day of November, 2013, filing, and during, the litigation; (2) there was no groundbreaking issue which loomed significant in this ORDERED that the Report and Recommendation is case; (3) the likelihood of non-payment was slim, be- ADOPTED in full; cause J&J, a well-established public entity, is solvent, and the individual directors and officers were the benefi- ORDERED that Plaintiffs' counsel are awarded a ciaries of an insurance policy; (4) use of current hourly total amount of $5,383,905.76 in attorneys' fees as fol- billing rates compensated counsel for delay in payment; lows: and (5) use of high hourly billing rates compensated counsel for the quality of their efforts, and what risk 1. Carrella Byrne is awarded there was in the case. See, e.g., Charles v. Goodyear Tire $777,265.00 and Rubber Co., 976 F. Supp 321, 325 (D.N.J. 1997)("a 2. Bernstein Litowitz is awarded positive multiplier is not warranted as the fee award is $676,630.63 more than reasonable and already accounts for the risks of litigation, the contingent nature of the case, the results 3. Robbins Geller is awarded achieved and the quality of representation."). $487,718.75 Having considered all of the factors, I find that an 4. Morris and Morris is awarded award of a multiplier is not warranted since enhancing $1,946,323.75 fees above the already generous rates included in the 5. Abraham Fruchter is awarded lodestar would result in overcompensation and thus, a $1,032,173.13 windfall [*38] to counsel to the detriment of the share- holders. 6. Kantrowitz Goldhamer is awarded $463,794.50 III. CONCLUSION
For the foregoing reasons, the Special Master's Re- port and Recommendation is ADOPTED in its entirety. ORDERED that Plaintiffs' counsel are awarded a Plaintiffs' counsel are awarded fees in the total amount of total amount of $416,305.73 in costs; $5,383,905.76, and expenses in the amount of ORDERED that Plaintiffs' counsel request for a $416,305.73. Counsel's request for a multiplier is DE- multiplier is DENIED; and it is further NIED. ORDERED that this case shall be marked as Dated: 11/25/2013 CLOSED. /s/ Freda L. Wolfson /s/ Freda L. Wolfson Freda L. Wolfson, Freda L. Wolfson, United States District Judge United States District Judge
ORDER
Rutgers School of Law
« Citation Original WP 5.1 Version Data This case can also be found at 141 N.J. 292.
SYLLABUS
(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 party. 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 http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
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 party 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)
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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.
SUPREME COURT OF NEW JERSEY
A- 105 September Term 1994
CANDY RENDINE and BERNADETTE LORESTANI,
Plaintiffs-Respondents,
v.
EDWARD PANTZER, d/b/a PANTZER MANAGEMENT COMPANY,
Defendant-Appellant.
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Argued March 13, 1995 -- Decided July 24, 1995
On appeal from and on certification to the Superior Court, Appellate Division, whose opinion is reported at 276 N.J. Super. 398 (1994).
Paul A. Rowe argued the cause for appellant (Greenbaum, Rowe, Smith, Ravin & Davis, attorneys; Harriet F. Klein and Bruce D. Greenberg, on the briefs).
Nancy Erika Smith argued the cause for respondents (Smith Mullin, attorneys; Ms. Smith, Christopher P. Lenzo, and Jon W. Green, on the briefs).
Matthew R. Gabrielson, Deputy Attorney General, argued the cause for amicus curiae, Attorney General of New Jersey (Deborah T. Poritz, Attorney General, attorney; Joseph L. Yannotti, Assistant Attorney General, of counsel).
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). I
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 http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
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. "[H]e 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
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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."
Another 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:
[I]t 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
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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 "[h]e 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
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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
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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.... [A] 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
him that she was having difficulty finding child care.
Defendant and Michael Pantzer said that the company had a maternity leave policy providing twenty-eight days with pay. The policy was "flexible enough" to allow for a longer leave, but it would be without pay. A maternity leave "would never be open-ended." The employee must advise the company of the date of her return. Defendant was "certain that either Michael Pantzer and Steve Weinerman and or myself made it clear to Candy that she was going to get a paid four weeks maternity leave and we expected her to be back at the end of that." Rendine denied that she was ever told about this policy.
According to Weinerman, if both Rendine and Lorestani had returned to work within thirty days, they would have been given their prior jobs. However, Weinerman did not intend to demote Delianites and Gaetano. Weinerman explained that since defendant acquired four commercial properties in 1987 and wanted "to bring all of our accounting and management in-house," he determined to create a second assistant controller position, with one assistant responsible for commercial and the other for residential. Rendine and Delianites would be the two assistants. However, Weinerman admitted that he never told Rendine about this plan; he only told her that she would be working on "special projects." Weinerman originally testified that his plan was never implemented because Rendine was terminated. On cross-examination, he said
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that he abandoned this plan before his meeting with her in October.
Weinerman admitted that he had supervised Delianites elsewhere before coming to work for defendant, that they had stayed in touch, that he brought Delianites into the company, and wanted a chance to promote him. He also admitted that he kept Delianites's promotion a secret from Rendine, that Delianites and Gaetano were the only two people who worked for defendant who were promoted before their annual performance reviews, and that Rendine's job functions were so small when she returned from leave
that "it was not a hardship" for the company to discharge her.
As to Lorestani, Weinerman admitted promising her that her job would be kept open but never mentioned any particular period of time, and never promised that it would be kept open indefinitely. Weinerman complained that Lorestani would not give a definite date for her return to work, since she was "still working on" child care.
Weinerman explained that Gaetano was doing both Lorestani's accounting job and her own bookkeeping job, so that there was no need for Lorestani to return. However, he admitted that he hired a new bookkeeper, Lynn Rochford, just days after he discharged Lorestani. Weinerman rated Lorestani higher than Gaetano in their performance reviews, explaining that this was only because Lorestani had more experience.
However, Rivera, who helped train Gaetano, found that she had difficulty with simple bookkeeping and accounting concepts. Gaetano "constantly needed assistance ... to do her job." Gaetano had difficulty dealing with the property managers, and Rivera frequently took their calls and corrected Gaetano's mistakes. Rochford also criticized Gaetano's job performance. Weinerman nevertheless concluded that Gaetano "was as good or better as the staff accountant" than Lorestani.
Defendant claimed Rendine was an insubordinate and unsuitable employee. Defendant claimed that Lorestani was not reinstated because her services were not needed, failed to inform defendant of the time of her planned return, delayed coming back to work, and the operation ran more smoothly without her because of "bad relations with her coworkers."
The defense contended, through defendant Edward Pantzer and Weinerman, that its unwritten policy fixed the length of paid maternity leave at four weeks (plus sick and vacation days) but that it did not limit the allowable length of unpaid leave. In
contrast, defendant gave no paid leave for disability beyond sick and vacation days. Weinerman testified that exceptions for unpaid maternity leave were "invariably granted," if an employee provided defendant with a return date and kept him advised of developments.
Defendant produced as witnesses four of his resident managers and three of his leasing agents who took maternity leaves of absence and successfully returned to their positions with defendant. Although three took their maternity leaves after defendant was served with the summons and complaint in July 1989, the other four took their leaves earlier. All seven of these women took no more than six weeks leave, consisting of thirty days with pay plus accrued vacation or personal leave, and all seven worked at the sites of defendant's properties; none worked in the central office. Jeanette Croce, an assistant controller, who did not work in the central office, was allowed to take
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a maternity leave of eleven weeks in 1991, which included five weeks of unpaid leave. In contrast, plaintiffs' witness, Rivera, took a five-month maternity leave in 1988. Upon her return she found she had much less responsibility than before, and she resigned after two weeks.
Defendant also admitted that he terminated his personal secretary, Kathy Rega, in part because she was unable to work after 5 p.m. Defendant explained that Rega could not work later because she had a part-time job in the evenings. However, at a prior deposition, defendant testified that Rega was unable to work after 5 p.m. because of her family obligations. Defendant's current personal secretary, Mary Beth Chvisuk, had one child when he hired her, and discovered she was pregnant some sixty days later. Nevertheless, he wanted her to return to work after a maternity leave. On cross-examination, he admitted that this occurred after he was served with the summons and complaint in the present case.
The defendant company had four employees in the past few years who were injured or
ill; defendant held their jobs open for them, one as long as six months, and did not require them to specify their dates of return. Michael admitted that the difference between defendant's policies for maternity leave and sick leave was that those out on sick leave were not required to come back at a specific time but those on maternity leave were. Also, the employees who were allowed extended sick leave were treated differently from Rendine, in that they were allowed to return to their same positions, with their same responsibilities and authority.
Rendine applied for unemployment compensation benefits. Defendant contested her application. Unrepresented by counsel, she attended a short hearing on her claim. She did not raise her discrimination claim at that hearing because "I didn't think that that was the place to discuss it." The hearing dealt only with her dispute with Weinerman resulting in her termination. The decision was adverse to Rendine, and she took an administrative appeal but lost. She did not appeal further because it would have cost her more than the value of the six weeks of benefits at stake.
Michael refused to give Rendine a reference because she was terminated. Nevertheless, she began looking for a new accounting position immediately after her discharge. She described an extensive job search, consisting of contacting employment agencies, sending out thirty resumes in 1987 and one hundred in 1988, making telephone calls, responding to want ads, and using personal contacts. She was looking for any reasonable salary, including one lower than her earnings from defendant. In 1988 she became pregnant again and stopped looking for work in October of that year. She resumed her job search in January 1989 sending out sixty or seventy resumes, contacting employment agencies, and reviewing want ads. She would have accepted around $25,000 per year, down from the $38,000 she had earned with defendant. Finally, in February 1991, she stopped looking for work, frustrated that she could not find anything. The employment agencies "said the economy was bad, there
weren't jobs." Rendine could not afford to accept the minimum wage, because of her child care and other expenses. She intended to resume her job search when her children, ages four-and-a-half and three at the time of trial, went to school.
Rendine described the hardship of losing fifty percent of her family's income. She and her husband had to refinance their mortgage with an
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adjustable rate. They could no longer pay their bills. Their social life, entertainment, vacations and clothing purchases were adversely affected. They depleted their savings, and borrowed money from Rendine's parents. Rendine said that she changed from "laid back" and "relaxed" to "uptight." She was always worried about paying bills. She and her husband constantly had fights about money. She was sometimes unable to sleep, and had nightmares about her employment experience. She was frustrated, angry and depressed. Rendine lost her self-confidence and self-esteem, and was unable to face her friends. Even at the time of trial, she was still "having a very difficult time just coping with the situation."
Weinerman provided Lorestani with an "okay" but not "great" letter of recommendation and she immediately began looking for work after her termination. She registered with employment agencies, sent out about twelve resumes each month, and looked at the want ads every day. In 1987 she had three or four interviews, but was not offered any work. She became pregnant again in late 1987, but continued to look for work until May 1988. She resumed her job search about two months after her delivery; she again had a Caesarean, and gave birth to twins. Later in 1988 she was hospitalized and unable to look for work. She did not claim lost earnings in this case for her periods of disability.
In 1990 she turned down a job offer for $7 per hour. Later in 1990 she accepted a position as a part-time bookkeeper with a law firm, for $13,000 a year. However, she encountered difficulties there with a hostile co-worker and was forced to resign. In late
1991 Lorestani began working thirty hours per week for $4.50 an hour, and continued at that job through trial.
Lorestani's husband took a second job as a waiter, Monday through Friday nights, and Saturday and Sunday. He went directly from his full-time job, as an engineer, to the second job, arriving home after midnight. Lorestani "felt like I was a single mother" but "was very thankful that he was willing to work that hard." Lorestani's family members purchased clothes and shoes for the children. She was embarrassed and humiliated, "but we needed it." She gained a lot of weight and lost her self-confidence. Before she lost her job, she and her husband frequently entertained in their home. She explained: "After I was fired ... I was just very bitter and very angry and I resented our friends. They all worked and they had kids and they weren't fired.... I became ... not a nice person to be around...."
The jury obviously resolved the conflicting evidence about whether defendant's sick and maternity leave and employment policy was discriminatorily administered in plaintiffs' favor. [ 276 N.J. Super. 407-20.]
II
Both before trial, and in his motion for a new trial, defendant contended that prejudicial error had been committed because of the denial of his motion to sever the claims of the two plaintiffs. In denying defendant's new-trial motion, the trial court rejected the claim that the joint trial had prejudiced defendant, observing that except for two witnesses, all of the other witnesses' testimony had been relevant to the claims of both plaintiffs and, accordingly, the http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
jury would have
heard their testimony whether the trials had been joint or separate. The Appellate Division agreed with the trial court's conclusion that defendant had not demonstrated that joinder of the claims had resulted in undue prejudice, noting that the trial court had carefully admonished the jury "that each plaintiff had a separate complaint," which the jury must consider "on its own merits." 276 N.J. Super. at 425. Before us, defendant acknowledges that if the cases had been tried separately each plaintiff would have attempted to offer evidence of the circumstances surrounding the other plaintiff's termination, although contending that such evidence would not necessarily have been admissible. Essentially, defendant argues that irrespective of the likelihood that separate trials would result in virtually the same evidence being twice presented to two juries, the prejudice that resulted from a joint trial of plaintiffs' claims was irremediable, denying defendant a fair trial. Rule 4:29-1(a), which authorizes joinder of claims asserted by multiple parties, provides in part: [A]ll persons may join in one action as plaintiffs or be joined as defendants jointly, severally, in the alternative, or otherwise, if the right to relief asserted by the plaintiffs or against the defendants arises out of or in respect of the same transaction, occurrence, or series of transactions or occurrences and involves any question of law or fact common to all of them.
The Rule's objective has been described as intending
(1) to foster the virtually unrestricted joinder of persons interested in any capacity in the same claim, whether as plaintiffs or
defendants, and (2) to license the joinder of multiple claims, by or against multiple parties, where the claims have the requisite common origin and the necessary common issue of law or fact.
[Morris M. Schnitzer & Julius Wildstein, New Jersey Rules Service 1954 to 1967 AIV-1037 (special reprint ed. 1982).]
Defendant does not appear to challenge the trial court's conclusion that plaintiffs' claims satisfy the Rule's requirement of a common origin, and the involvement of common issues of law and fact. Both plaintiffs informed defendant's management that they were pregnant at approximately the same time, Lorestani in late December 1986 or early January 1987, and Rendine in January 1987. Their maternity leaves overlapped, Lorestani remaining at home from June 15 to late August 1987, and Rendine's leave extending from July 24 to November 11, 1987. Rendine was terminated approximately one week after returning to work; Lorestani was terminated in early September 1987, according to her testimony on the day she visited the office to make arrangements to return to work. Both plaintiffs alleged that they had been terminated because defendant had discriminated against female employees who became pregnant. Defendant contends that the trial court should have granted his motion to sever to avoid the risk of prejudice, relying on Rule 4:29-2 and Rule 4:38-2(a). We do not underestimate the concern that the joint trial of similar claims asserted by several parties against the same defendant can present a risk that the jury might use the evidence cumulatively, reaching
conclusions from the aggregate of the evidence that it might not have reached in assessing the claims separately. We have noted that potential for prejudice in considering the question of severance in the context of criminal prosecutions involving multiple offenses allegedly committed by one defendant. See State v. Pitts, 116 N.J. 580, 600-03 (1989). As with civil joinder, our resolution of http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
severance issues in criminal trials is informed by considering whether "assuming the charges were tried separately, evidence of the offenses sought to be severed would be admissible under [N.J.R.E. 404(b)] in the trial of the remaining charges." Id. at 601-02. Both the trial court and the Appellate Division addressed the severance issue preliminarily by considering whether severance would result in excluding evidence relating to the severed claim, and both courts concluded that virtually the same evidence would have been proffered whether the cases had been tried separately or jointly. 276 N.J. Super. at 425, 428. As noted by the Appellate Division, a number of federal courts have ruled that testimony by employees about discriminatory actions by the defendant-employer similar to those alleged by the plaintiff is admissible to prove the employer's motive or intent to discriminate. See Spulak v. K Mart Corp., 894 F.2d 1150, 1156 (10th Cir. 1990); Estes v. Dick Smith Ford, Inc., 856 F.2d 1097, 1102-05 (8th Cir. 1988); Conway v. Electro Switch Corp., 825 F.2d 593, 597-98 (1st Cir. 1987); Hunter v. Allis- Chalmers Corp., 797 F.2d 1417, 1423-24 (7th Cir. 1986); Stumph v. Thomas & Skinner,
Inc., 770 F.2d 93, 97 (7th Cir. 1985); Phillips v. Smalley Maintenance Servs., Inc., 711 F.2d 1524, 1532 (11th Cir. 1983); Morris v. Washington Metro. Area Transit Auth., 702 F.2d 1037, 1045-46 (D.C. Cir. 1983). Defendant relies on federal court decisions that have excluded testimony of other employees claiming discriminatory treatment analogous to that asserted by the plaintiff. Schrand v. Federal Pac. Elec. Co., 851 F.2d 152, 155-56 (6th Cir. 1988); Haskell v. Kaman Corp., 743 F.2d 113, 120-22 (2d Cir. 1984); Moorhouse v. Boeing Co., 501 F. Supp. 390, 393-94 (E.D. Pa.), aff'd, 639 F.2d 774 (3d Cir. 1980). We are in accord with the Appellate Division's observations that the testimony in Haskell and Schrand was held inadmissible because it lacked relevance. 276 N.J. Super. at 427. In Haskell, testimony of former officers of the defendant was offered to prove a pattern and practice of age discrimination, but was held inadmissible because the evidence was statistically insignificant. 743 F. 2d at 121. In Schrand, testimony alleging age discrimination by two officers of the defendant was held to be irrelevant because they had worked in offices distant from the plaintiff and under different managers. 851 F. 2d at 156. In Moorhouse, the trial court exercised its discretion to exclude age- discrimination testimony by five former employees of the defendant, who were plaintiffs in separate actions, on the grounds of prejudice and possible confusion, noting that had the cases been consolidated the trial would have involved six plaintiffs and sixteen individual
defendants, as well as the corporate defendant. 501 F. Supp. at 392. Prejudice to a defendant resulting from the joint trial of claims by multiple plaintiffs cannot easily be quantified, particularly if separate trials would not materially alter the evidence offered to support and defeat the claims. Accordingly, our Rules vest the determination whether or not to sever claims to the sound exercise of a trial court's discretion. See R. 4:38-2(a). Other courts, confronted with the issue, have determined that the advantages of a joint trial outweigh the risk of undue prejudice. Duke v. Uniroyal Inc., 928 F.2d 1413, 1420-21 (4th Cir.), cert. denied, 502 U.S. 963, 112 S. Ct. 429, 116 L. Ed.2d 449 (1991); Mosley v. General Motors Corp., 497 F.2d 1330, 1334 (8th Cir. 1974); Blesedell v. Mobil Oil Co., 708 F. Supp. 1408, 1422 (S.D.N.Y. 1989); cf. Hammons v. Adams, 786 F.2d 1253, 1253 (5th Cir. 1986) (finding no abuse of discretion in serving claims of three plaintiffs involving different incidents of discrimination as well as different pretexts for discharge). We are fully in accord with the Appellate Division's conclusion that the trial court's determination to deny severance was a reasonable exercise of that court's discretion. 276 N.J. Super. at 431.
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III
Defendant contends that errors in the jury charge, although not objected to at trial, are sufficiently prejudicial as to constitute plain error, requiring reversal of the judgments. See R. 2:10-2. Specifically, defendant argues that the jury charge misstated the standard of illegality by which plaintiffs' claims were to be evaluated; that the trial court's instructions erroneously shifted the burden of proof of "pretext" from plaintiffs to defendant; and that the jury charge explaining the mixed motives defense was erroneous. We have carefully reviewed the trial court's instructions to the jury, and are persuaded by the Appellate Division's careful analysis that the jury charge considered as a whole constitutes a clear, understandable, and correct explanation of the applicable legal principles. 276 N.J. Super. at 431-38. IV
Defendant contends that the portion of the jury's compensatory- damage award that represents emotional-distress damages to plaintiffs is so lacking in evidential support as to be excessive as a matter of law. Defendant acknowledges that the jury's allocation of compensatory damages between economic loss and emotional- distress damages cannot be ascertained. Nevertheless, the Appellate Division opinion assumed that Rendine's award included approximately $105,000 in emotional
distress damages, and Lorestani's award approximately $125,000 in such damages, based on the difference between the jury's total compensatory damage awards and the claimed economic damages of each plaintiff. 276 N.J. Super. at 439. Defendant contends that the absence of expert testimony and other independent evidence corroborating the claimed emotional distress damages demonstrates the excessiveness of the jury award. The Appellate Division specifically rejected the contention that expert testimony or independent corroboration was a prerequisite to a pain and suffering award in a discrimination case, characterizing defendant's assertions as unsupported. 276 N.J. Super. at 442; see also Bolden v. Southeastern Pa. Transp. Auth., 21 F.3d 29, 34 (3d Cir. 1994) (agreeing "that the approach taken by our sister circuits [that] have dispensed with a requirement of expert testimony to corroborate a claim for emotional distress is more consistent with the broad remunerative purpose of the civil rights laws"). We also note that a 1990 amendment to the LAD, L. 1990, c. 12, § 51, specifically authorized recovery of emotional-distress damages, and the accompanying Committee Statement noted that the amendment emphasized that the LAD is to be liberally construed so that all common-law remedies are available to persons protected by the LAD. Assembly Judiciary, Law & Public Safety Committee, Statement to Bills Nos. 2872, 2118 & 2228 (1990) (reprinted at N.J.S.A. 10:5-3).
Essentially, defendant contends that the trial court's failure to find the emotional-distress-damage award excessive was an abuse of discretion. However, the general principle that trial courts should not interfere with jury- damage awards unless so disproportionate to the injury as to shock the conscience, Baxter v. Fairmont Food Co., 74 N.J. 588, 596-97 (1977), applies http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
with equal force to awards of emotional distress damages in LAD cases. We find unassailable the Appellate Division's conclusion that the trial court's evaluation of the compensatory damage award should not be disturbed: Although defendant's discriminatory treatment did not cause plaintiffs to relocate or suffer illness or homelessness, both plaintiffs described in detail their inconvenience and economic loss, physical and emotional stress, anxiety in searching for reemployment, uncertainty, career and family disruption and other adjustment problems. Plaintiffs' problems seem precisely the type for which the Legislature intended compensation.
. . . The trial judge here was not shocked by compensatory awards; he did not consider them excessive in view of the evidence. His determination as well as that of the jury, are entitled to considerable appellate deference. [276 N.J. Super. at 440-41 (citations omitted).]
V
Defendant asserts that the trial court erred in submitting the issue of punitive damages to the jury, contending that to sustain an award of punitive damages on this record would be
tantamount to adopting a rule that punitive damages may be awarded in every case in which a violation of the LAD has been established. Defendant observes that "[t]he worst interpretation that can be placed upon defendant's actions is that he desired to avoid disruptions to his business caused by absences due to pregnancy, particularly in positions that were critical to the daily functioning of the company," arguing that such conduct does not rise to the level of willfulness, malice, or reckless disregard for consequences required to sustain an award of punitive damages. Our case law has established two distinct conditions that must be met as prerequisites to the award of punitive damages in a discrimination suit under the LAD. The first was recently set forth in Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587 (1993), to distinguish punitive damage awards from our holding that in the context of a sexual harassment claim an employer will be liable in compensatory damages for a supervisor's sexual harassment of another employee if the employer "contributed to the harm through its negligence, intent, or apparent authorization of the harassing conduct . . . [or] if the employer negligently or recklessly failed to have an explicit policy that bans sexual harassment." Id. at 624. However, with respect to punitive damage awards, we held that "a greater threshold than mere negligence should be applied to measure employer liability. Punitive damages are to be awarded 'when the wrongdoer's conduct is especially egregious.' Hence, the employer should be liable
for punitive damages only in the event of actual participation by upper management or willful indifference." Id. at 624-25 (citation omitted). In addition to the requirement of actual participation in or willful indifference to the wrongful conduct on the part of upper management, we also impose a requirement of proof that the offending conduct be "especially egregious." Leimgruber v. Claridge Assocs., 73 N.J. 450, 454 (1977). Our cases have attempted to describe conduct that is sufficiently egregious to warrant a punitive-damage award. In Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37 (1984), we observed: To warrant a punitive award, the defendant's conduct must have been wantonly reckless or malicious. There must be an intentional wrongdoing in
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the sense of an "evil-minded act" or an act accompanied by a wanton and wilful disregard of the rights of another. . . . The key to the right to punitive damages is the wrongfulness of the intentional act.
. . . Moreover, it is especially fitting to allow punitive damages for actions such as legal fraud, since intent rather than mere negligence is the requisite state of mind. [Id. at 49-50 (citations omitted).]
Similarly, we noted in Berg v. Reaction Motors Division, 37 N.J. 396, 414 (1962): "Our cases indicate that the requirement [of willfulness or wantonness] may be satisfied upon a showing that there has been a deliberate act or omission with knowledge of a high degree of probability of harm and reckless indifference to consequences." In Herman v. Sunshine Chemical Specialties, Inc., 133 N.J. 329, 337 (1993), we stated that proof of actual malice
was "[a] condition precedent to a punitive-damages award." We also note that the Third Circuit in reviewing our LAD and punitive-damages decisions has expressed its certainty that this Court "would in some cases find that employment discrimination was wantonly reckless or malicious conduct reflecting intentional wrongdoing in the sense of an evil-minded act or a disregard of the rights of another, the type of conduct [that] it has held may justify an award of punitive damages." Levinson v. Prentice-Hall, Inc., 868 F.2d 558, 562 (1989); see also Weiss v. Parker Hannifan Corp., 747 F. Supp. 1118, 1135 (D.N.J. 1990) ("Under New Jersey law, the exceptional nature of a given case and the wanton or malicious nature of the defendant's conduct are questions for the finder of fact."). As the Appellate Division noted, the trial court's instruction to the jury, consistent with our decisions, used the terms "actual malice . . . intentional wrongdoing, and evil minded act . . . wanton and willful disregard of the rights of others" in characterizing the findings required of the jury as a condition to imposing a punitive damage award. 276 N.J. Super. at 444. In addition, the trial court "carefully charged the jury that punitive damages could not be assessed against defendant for the acts of his employees, unless defendant himself authorized or directed them, or at least agreed with and acquiesced to them." Ibid. We have no doubt that the proofs were sufficient to sustain a punitive- damages award. Defendant argues that at worst the
evidence portrays a company desirous of avoiding the inconvenience that might result from female members of its executive staff assuming the burden of parenting a new-born child. As the Appellate Division opinion explains in detail, however, the evidence also would have permitted the jury to conclude that defendant's decision to terminate plaintiffs' employment was accompanied by conduct that was malicious and intentionally wrongful. Id. at 444-46. Despite unqualified promises to plaintiffs that their positions would be available on their return from disability leave, both plaintiffs were discharged within a matter of days after they had prepared to return to work. Other employees were promoted to fill their positions while plaintiffs were on leave. Moreover, the Appellate Division observed that "[t]here was ample evidence for the jury to conclude that the dismissal of Rendine for insubordination was intentionally and maliciously contrived." Id. at 445. Our review of the record firmly supports that inference, the evidence persuasively suggesting that the carefully orchestrated steps that prompted Rendine's confrontation with Weinerman and http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
her resultant dismissal was developed with defendant's full knowledge, participation, and authorization. Similarly, the jury could have concluded that defendant never had intended to permit Lorestani to return to work, and that the expressions of concern for her well being during her pregnancy were part of a strategy designed to facilitate her discharge without consequence to defendant.
Significant evidence of malice and reckless misconduct permeated the record. Plaintiffs offered substantial proof not only that they had been discharged because they had become pregnant and bore children, but that defendant never had intended that they return to work after their disability leave and, through his subordinates, had embarked on a course of conduct designed to mislead plaintiffs and other company employees into believing that the company's motives and intentions were honorable and lawful. We agree with the Appellate Division's conclusion that "[t]he jury had ample evidence to support its determination that the discrimination against both plaintiffs was not only intentional wrongdoing but also malicious or 'evil-minded.'" Id. at 446. VI
Finally, we address an issue that heretofore has evaded our review but that has generated a veritable deluge of reported federal court opinions including two relatively recent United States Supreme Court decisions, as well as a generous outpouring of legal commentary. The question concerns the calculation of a "reasonable attorney's fee," payable under fee-shifting statutes such as the LAD, see N.J.S.A. 10:5-27.1, to the prevailing party. Specifically, we consider whether calculation of a reasonable attorney's fee under fee-shifting statutes should be limited by the "lodestar" fee--determined by multiplying the number of hours
reasonably expended by the prevailing party's attorneys during the litigation by the attorneys' reasonable hourly rate--or whether a trial court 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, to take into account the contingent nature of the attorney's compensation agreement in determining the statutory "reasonable attorney's fee" to be paid to the prevailing party. In addressing the issue, our primary goals are to arrive at a rule that is faithful to the Legislature's objective in enacting fee-shifting provisions, while at the same time sharply discouraging collateral litigation of "reasonable fee" issues under fee-shifting statutes by setting forth standards that inform the exercise of discretion by trial courts called on to determine such fees. Our expectation is that future fee determinations by trial courts will be disturbed only on the rarest occasions, and then only because of a clear abuse of discretion. A
We first set forth the facts relevant to the trial court's award of counsel fees. In February 1988, plaintiffs entered into a retainer agreement with their attorney, Elliot Baumgart. The agreement provided for a fee measured by the greater of (1) hourly billings at the rate of seventy-five dollars for Baumgart and sixty-two dollars and fifty cents for his associate, Ira Weiner (which amounted to fifty percent of Baumgart's and Weiner's regular billing rates), plus
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twenty-five percent of
plaintiffs' recovery or (2) the amount of attorneys fees awarded by the court pursuant to the fee-shifting provisions of the LAD. (Baumgart subsequently merged his firm with Rabner, Allcorn and Widmark, which later became Rabner, Allcorn and Meislik, the firm that represented plaintiffs at trial.) The agreement required plaintiffs to pay a nonrefundable retainer of five thousand dollars, and to reimburse counsel for disbursements pursuant to periodic invoices. According to the post-trial certification of plaintiffs' counsel, after the retainer had been applied to the reimbursement of counsel's initial disbursements, plaintiffs were able to pay only an additional $2,750, which was applied toward counsel's additional out-of-pocket expenses. According to counsel's certification, if plaintiffs had not prevailed in the litigation they would undoubtedly have been unable to pay their attorneys' fees and disbursements as required by the agreement. The certification suggests the probability that if counsel had attempted to collect the unpaid fees and disbursements plaintiffs would have sought the protection of the Bankruptcy Act. Nevertheless, counsel elected to continue the representation "on what had in reality become a completely contingent basis." The trial court agreed, characterizing counsel's arrangement with plaintiffs as "if not by design but certainly [as a matter of] practicality, on a contingent fee basis." In support of their application for counsel fees, plaintiffs' counsel certified that after eliminating 38.95 hours of duplicative or unproductive time, their total hours expended
on the litigation was 646.65, which when multiplied by the reasonable hourly rates of the participating attorneys resulted in a "lodestar" fee of $114,334.25. Counsel also sought a fee of $28,634 for postjudgment services, as well as reimbursement for out-of-pocket disbursements incurred before and after judgment. To support the reasonableness of their lodestar fee, plaintiffs' counsel submitted certifications by several lawyers in their own firm attesting 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 from other law firms who had provided estimates of the hours required to litigate a plaintiff's employment-discrimination case, and the estimates either exceeded or approximated the hours expended by plaintiffs' counsel. Those unaffiliated lawyers also certified that the hourly rates billed by the attorneys that had worked on the litigation appeared to be reasonable and consistent with rates charged by lawyers of comparable seniority and experience. Although defendant did not specifically challenge the reasonableness of the hourly rates used to calculate plaintiffs' counsel's lodestar fee, defendant contended that the hours expended, especially those devoted to pretrial discovery and preparation, were excessive and should be reduced significantly. The trial court concluded, however, that the total number of hours expended by plaintiffs' counsel was reasonable, as were the
hourly rates, which resulted in the trial court's acceptance of the lodestar fee of $114,334.25. The court also found reasonable counsel's prejudgment disbursements of $11,861.25. In considering whether the award of a "reasonable attorney's fee" under the LAD warranted enhancement of plaintiffs' counsel's lodestar fee to reflect the essentially contingent nature of the counsel-fee arrangement, the trial court observed that the Rules of Professional Conduct (RPC) required consideration of several factors in determining a reasonable fee, one of which is "whether the fee is fixed or contingent." RPC 1.5(a)(8). Concluding that plaintiffs' fee agreement with counsel had evolved into a predominantly contingent-fee http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
arrangement because of plaintiffs' limited resources, the court characterized the fee arrangement as one that "qualifies for possible enhancement." The trial court relied initially on Justice O'Connor's concurring opinion in Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S. Ct. 3078, 97 L. Ed.2d 585 (1987), (Delaware Valley II) (four-one-four decision), which it recognized as the "holding" of the case. See Fadhl v. City & County of San Francisco, 859 F.2d 649, 650 n.1 (9th Cir. 1988) ("Justice O'Connor's concurring opinion constitutes the Court's holding in the case."). The trial court adopted two conditions for lodestar-fee enhancement set forth in Justice O'Connor's concurrence. First, "that no enhancement for risk is appropriate unless the applicant can establish that without an adjustment for risk the prevailing party 'would have faced substantial
difficulties in finding counsel in the local or other relevant market.'" Id. at 733, 107 S. Ct. at 3091, 97 L. Ed. 2d at 603 (quoting plurality opinion, 483 U.S. at 731, 107 S. Ct. at 3089, 97 L. Ed. 2d at 601. Second, "the fee applicant bears the burden of proving the degree to which the relevant market compensates for contingency." Id. at 733, 107 S. Ct. at 3090-91, 97 L. Ed. 2d at 603. In addition, the trial court adopted Justice O'Connor's observation that "compensation for contingency must be based on the difference in market treatment of contingent fee cases as a class, rather than on an assessment of the 'riskiness' of any particular case." Id. at 731, 107 S. Ct. at 3089-90, 97 L. Ed. 2d at 601. Based on those criteria, the trial court determined that plaintiffs had established their entitlement to enhancement of the lodestar fee. In reaching that conclusion, the trial court referred to the affidavit of plaintiff Lorestani that stated that plaintiffs had telephoned ten or twelve attorneys and had met with two or three law firms, all of whom were either not interested in representing them, not qualified, or too expensive. One firm requested a retainer of $30,000. In addition, the trial court favorably referred to the certifications of three attorneys in large and mid-size law firms with responsibility for determining whether their firm should assume representation of plaintiffs in employment-discrimination cases on a contingent-fee basis. Those attorneys certified that their firms rarely accept such contingent-fee cases, and then only if the likelihood of proving
liability is high, the potential damage recovery is substantial, and the firm can anticipate a fee at the conclusion of the litigation that would approximate two to two-and-one-half times the fee payable based on the hours expended multiplied by the regular hourly rates of the participating lawyers. One such attorney certified that his firm has not been accepting any plaintiff-employment discrimination cases on a contingent-fee basis, and expressed the belief that most qualified and experienced attorneys in the field had a similar policy. He expressed the view that attorneys who successfully litigate such cases on a contingent-fee basis should receive enhanced compensation. Based on plaintiff Lorestani's affidavit concerning plaintiffs' difficulty in finding counsel, the affidavits of the three unaffiliated attorneys attesting to the need for contingent- fee enhancement, and the affidavit of plaintiffs' retained expert, the trial court determined that the criteria set forth in Justice O'Connor's concurrence in Delaware Valley II had been satisfied. Accordingly, the trial court applied a multiplier of 2.0 to the lodestar fee of $114,334.25, 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 United States Supreme Court's decision in City of Burlington v. Dague, 505 U.S. ___, 112 S. Ct. 2638, 120 L. Ed.2d 449 (1992), decided one day before the trial court had rendered its decision on counsel fees. In Dague, the Court held that "enhancement for
contingency is not permitted under the fee-shifting statutes at issue," 505 http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
U.S. at ___, 112 S. Ct. at 2643, 120 L. Ed. 2d at 459, but the rationale of the Court's holding apparently applies to all federal fee-shifting statutes. The trial court, however, declined to adhere to the reasoning of the Supreme Court in Dague, forecasting that this Court, if presented with the same issue, would adopt the reasoning of Justice Blackmun's dissenting opinion in Dague asserting "that a statutory fee may include additional compensation for contingency and still qualify as reasonable." Id. at ___, 112 S. Ct. at 2644, 120 L. Ed. 2d at 460. (Blackmun, J., dissenting). Accordingly, the trial court denied defendant's motion for reconsideration of the counsel fee award. The Appellate Division affirmed the trial court's counsel fee award, observing that [i]n view of the unrefuted attorneys' affidavits submitted, together with the difficulties plaintiffs had in obtaining counsel in this very case, a fee enhancement based on contingency considerations appears essential to the enforcement of the LAD. . . . We conclude that a liberal construction of N.J.S.A. 10:5-27.1, to promote the goal of ending discrimination, includes contingency fee enhancement in appropriate cases. [276 N.J. Super. at 458 (citations omitted).]
The Appellate Division agreed with the trial court's conclusion that the reasoning of Justice Blackmun's dissent in Dague was more consistent with the objectives of the LAD than was the rationale of the Dague majority. In addition, the Appellate Division observed that even the enhanced lodestar fee awarded by
the trial court was approximately $50,000 less than the fee to which plaintiffs' attorneys were entitled under their fee agreement, calculated by multiplying the hours expended by one-half the attorneys' regular hourly rate plus twenty-five percent of the recovery. Thus, the Appellate Division explained, "the use of the multiplier here clearly served the statutory purpose of enabling plaintiffs to obtain counsel, where plaintiffs may still be called upon to bear part of the bargained-for reasonable expense of representation." Id. at 461.
B
Under the so-called "American Rule," adhered to by the federal courts and by the courts of this state, "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser." Alyeska Pipeline Serv. Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S. Ct. 1612, 1616, 44 L. Ed.2d 141, 147 (1975); Gerhardt v. Continental Ins. Cos., 48 N.J. 291, 301 (1966); Janovsky v. American Motorists Ins. Co., 11 N.J. 1, 7 (1952); cf. R. 4:42-9 (setting forth specific instances in which courts are authorized to award counsel fees). As an exception to the American Rule, Congress and the state legislatures have authorized courts pursuant to specific statutory enactments to order the losing party to pay a "reasonable" attorney's fee to the attorney for the prevailing party. Less than a decade ago over 100 separate federal fee shifting statutes had been enacted. See Pennsylvania v. Delaware
Valley Citizens' Council for Clean Air, 478 U.S. 546, 562, 106 S. Ct. 3088, 3096, 92 L. Ed.2d 439, 454 (1986), (Delaware Valley I). In addition to the provision of the LAD at issue here, N.J.S.A. 10:5-27.1, our Legislature also has
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passed a substantial number of statutes authorizing an award of a reasonable counsel fee to the attorney for the prevailing party. See, e.g., N.J.S.A. 56:8-19 (consumer-fraud actions); 113 N.J. 594 (1989), Justice O'Hern referred to the Statement of the sponsor of 42 U.S.C.A. §1988, the Civil Rights Attorney's Fee Awards Act of 1976 (Fee-Awards Act or section 1988), enacted in response to the Supreme Court's decision in Alyeska, supra, to explain the rationale for the adoption of fee-shifting statutes by Congress and our State Legislature: "The problem of unequal access to the courts in order to vindicate congressional policies and enforce the law is not simply a problem for lawyers and courts. Encouraging adequate representation is essential if the laws of this Nation are to be enforced. Congress passes a great deal of lofty legislation promising equal rights to all.
Although some of these laws can be enforced by the Justice Department or other Federal agencies, most of the responsibility for enforcement has to rest upon private citizens, who must go to court to prove a violation of law. * * * But without the availability of counsel fees, these rights exist only on paper. Private citizens must be given not only the rights to go to court,
but also the legal resources. If the citizen does not have the resources, his day in court is denied him; the congressional policy [that] he seeks to assert and vindicate goes unvindicated; and the entire Nation, not just the individual citizen, suffers. [ 122 Cong. Rec. 33,313 (1976) (Statement of Sen. Tunney).]"
[Coleman, supra., 113 N.J. at 597.] The federal courts have developed various methodologies for determining a reasonable counsel fee pursuant to fee-shifting statutes. An early approach adopted by the Fifth Circuit in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (1974), advocated reliance on twelve somewhat subjective factors derived from guidelines recommended by the American Bar Association Code of Professional Responsibility, Disciplinary Rule 2-106: (1) the time and labor required; (2) the novelty and difficulty of the question; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorney; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Johnson, supra, 488 F. 2d at 717-19. A different, less subjective approach was adopted by the Third Circuit in Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 167-69 (1973) (Lindy I).
That court's methodology was first to calculate the "lodestar" fee based on the hours spent on the case multiplied by the attorneys reasonable hourly rate of compensation. That amount was then subject to adjustment on the basis of "(1) the contingent nature of the case, reflecting the likelihood that hours were invested and expenses incurred without assurance of compensation and (2) the quality of the work performed as evidenced by the work observed, the complexity of the issues and the recovery obtained." Merola v. Atlantic Richfield Co., 515 F.2d 165, 168 (3d Cir. 1975); Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 117 (3d Cir. 1976) (Lindy II). The United States Supreme Court first addressed the question of calculating reasonable attorney's fees under fee-shifting statutes in Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed.2d 40 (1983), in which the principal issue presented was "whether a partially prevailing plaintiff may recover an attorney's fee for legal services on unsuccessful claims." Id. at 426, 103 S. Ct. at 1935-36, 76 L. Ed. 2d at 46. In Hensley the Court adopted a hybrid
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methodology, combining the lodestar approach of Lindy Brothers with the twelve-factor test endorsed in Johnson. The Court observed: The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an initial estimate of the value of a lawyer's services. The party seeking an award of fees should
submit evidence supporting the hours worked and rates claimed. Where the documentation of hours is inadequate, the district court may reduce the award accordingly.
[Id. at 43, 103 S. Ct. at 1939, 76 L. Ed. 2d at 50.]
The Court noted, however, that the inquiry does not end with the lodestar fee and that other factors, including the result obtained, may induce a trial court to adjust the lodestar fee upward or downward. The Court added that "[t]he district court also may consider other factors identified in Johnson v. Georgia Highway Express, Inc., [supra, 488 F. 2d at 717-19], though it should note that many of these factors usually are subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Id. at 434, n.9, 103 S. Ct. at 1940 n.9, 76 L. Ed. 2d at 51 n.9. Concluding that "the extent of a plaintiff's success is a crucial factor in determining the proper amount of an award of attorney's fees," Id. at 440, 103 S. Ct. at 1943, 76 L. Ed. 2d at 54, the Court remanded the matter to the district court because its opinion "did not properly consider the relationship between the extent of success and the amount of the fee award." Id. at 438, 103 S. Ct. at 1942, 76 L. Ed. 2d at 54. Justice Brennan sharply disagreed with the Court's decision to remand, observing that appellate courts should hesitate to prolong litigation over attorney's fees after the merits of a case have been concluded. * * *
If a district court has articulated a fair explanation for its fee award in a given case, the court of appeals should not reverse or remand the judgment unless the award is so
low as to provide clearly inadequate compensation to the attorneys on the case or so high as to constitute an unmistakable windfall.
[Id. at 454-55, 103 S. Ct. at 1950, 76 L. Ed. 2d at 64, (Brennan, J., concurring in part and dissenting in part).]
In Blum v. Stenson, 465 U.S. 886, 104 S. Ct. 1541, 79 L. Ed.2d 891 (1984), the Court considered whether an application for a counsel-fee award to a nonprofit legal-service organization under the Fee-Awards Act should be calculated on the basis of cost or prevailing market rates, and also addressed the circumstances under which an upward adjustment of the lodestar fee is permissible under section 1988. Concerning the first issue, the Court concluded that "[t]he statute and legislative history establish that 'reasonable fees' under section 1988 are to be calculated according to the prevailing market rates in the relevant community, regardless of whether plaintiff is represented by private or non-profit counsel." Id. at 895, 104 S. Ct. at 1547, 79 L. Ed. 2d at 899-900. In respect of the district court's fifty percent upward adjustment of the lodestar fee, the Court acknowledged that circumstances might occur "in which the basic standard of reasonable rates multiplied by reasonably expended hours results in a fee that is either unreasonably low or unreasonably high." Id. at 897, 104 S. Ct. at 1548, 79 L. Ed. 2d at 901. Nevertheless, the Court observed that when "the applicant for a fee has carried his burden of showing that the claimed rate and
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number of hours are reasonable, the resulting product is presumed to be the reasonable fee contemplated by § 1988." Ibid. Elaborating on its observation in Hensley, supra, that many of the so-called Johnson factors are subsumed within the lodestar fee, the Court held in Blum that the "novelty and complexity of the issues," "the special skill and experience of counsel," the "quality of representation," and the "results obtained" presumably are fully reflected in the lodestar amount, and thus cannot ordinarily serve as an independent basis for increasing the basic fee award. Id. at 898-900, 104 S. Ct. at 1549-50, 79 L. Ed. 2d at 901-03. The Court added, however, that quality of representation "may justify an upward adjustment only in the rare case where the fee applicant offers specific evidence to show that the quality of service rendered was superior to that one reasonably should expect in light of the hourly rates charged and that the success was 'exceptional,'" a standard not met by the award before the Court. Id. at 899, 104 S. Ct. at 1549, 79 L. Ed. 2d at 902. Accordingly, the Court modified the district court's fee award by reinstating the lodestar-fee amount and eliminating the fifty-percent enhancement. Id. at 901-02, 104 S. Ct. at 1550, 79 L. Ed. 2d at 903-04. The Court expressly declined to consider whether enhancement of the lodestar based on the contingent nature of counsel's representation was permissible. Id. at 901 n.17, 104 S. Ct. at 1550 n.17, 19 L. Ed. 2d at 903 n.17.
In Delaware Valley I, supra, the Court reversed an enhancement of the lodestar fee by a factor of two that was based on the superior quality of counsel's work and the outstanding result. The Court stated: "Because considerations concerning the quality of a prevailing party's counsel's representation normally are reflected in the reasonable hourly rate, the overall quality of performance ordinarily should not be used to adjust the lodestar, thus removing any danger of 'double counting.'" 478 U.S. at 566, 106 S. Ct. at 3099, 92 L. Ed. 2d at 457. The Court did not address in Delaware Valley I whether the lodestar fee amount could be increased to compensate for the contingent nature of counsel's compensation, and restored the case to the docket for argument of that issue. Id. at 568, 106 S. Ct. at 3100, 92 L. Ed. 2d at 458. The Court in Delaware Valley II, however, was sharply divided over whether enhancement of the lodestar fee to reflect contingency was consistent with congressional intent in enacting fee-shifting statutes. The suit had been instituted to compel Pennsylvania to comply with a district court consent decree, entered pursuant to the Clean Air Act, that obligated Pennsylvania to establish inspection and maintenance programs for vehicle emission systems. Because Pennsylvania failed to comply with the consent decree, protracted litigation ensued resulting in a new deadline for commencement of the inspection and maintenance program. As the prevailing party, plaintiff sought an attorney's fee award pursuant to section 304(d) of the Clean
Air Act, 42 U.S.C.A. §7604(d). After dividing counsel's work into nine phases and computing the lodestar fee for each phase, the district court doubled the lodestar for three phases of the litigation to take into account the contingency of success. Delaware Valley II, supra, 483 U.S. at 714, 107 S. Ct. at 3081, 97 L. Ed. 2d at 591. Reversing the Court of Appeals for the Third Circuit which had affirmed the contingency enhancement of the fee award, 762 F.2d 272, 283 (1985), five members of the Court concluded that enhancement of the lodestar fee on the basis of contingency was improper, although on different grounds. The four Justices joining in the plurality opinion (Chief Justice Rehnquist and Justices While, Powell, and Scalia), concluded that enhancement of a statutorily authorized counsel fee to reflect contingency was inappropriate, adding that even if the Clean Air Act were construed to permit increasing the lodestar fee to reflect contingency, such enhancement would be unsupported by the record
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before the Court. Id. at 727-31, 107 S. Ct. at 3087-89, 97 L. Ed. 2d at 599-601. Justice O'Connor, concurring in part and concurring in the judgment, agreed with the plurality opinion that enhancement was not warranted in this case. Id. at 734, 107 S. Ct. at 3091, 97 L. Ed. 2d at 603. The plurality opinion based its rejection of contingency enhancement on three principal factors: First, because statutorily authorized counsel fees are limited to successful cases, contingency enhancement clashes with the legislative direction in that its effect is to compensate
counsel sufficiently in successful cases to offset the economic loss sustained in unsuccessful cases; second, contingency enhancement could result in awarding the highest fees in cases least likely to succeed, which encourages the filing of high-risk cases, while simultaneously penalizing those defendants whose conduct was least culpable; and third, because all cases present some degree of risk, the plurality expressed concern that contingency enhancement would be awarded in almost all successful fee-shifting cases. Id. at 724-25, 107 S. Ct. at 3086, 97 L. Ed. 2d at 597. The four dissenting members (Justices Blackmun, Brennan, Marshall, and Stevens) and Justice O'Connor agreed that statutory attorney's fees may be enhanced for contingency. Responding to the plurality's concerns, the dissent emphasized that enhancement for contingency is not generally to be conditioned on the degree of risk presented by specific cases, but rather is designed "to place contingent employment as a whole on roughly the same economic footing as noncontingent practice." Id. at 745-46, 107 S. Ct. at 1097, 97 L. Ed. 2d at 611 (Blackmun, J., dissenting). Justice O'Connor agreed, observing that "compensation for contingency must be based on the difference in market treatment of contingent fee cases as a class, rather than on an assessment of the 'riskiness' of any particular case." Id. at 731, 107 S. Ct. at 3089-90, 97 L. Ed. 2d at 601. However, Justice O'Connor insisted that uniformity in the degree of enhancement for risk was essential, disagreeing with the dissent's analysis
that extra enhancement for exceptional cases was permissible. Id. at 732-33, 107 S. Ct. at 3090, 97 L. Ed. 2d at 602. In the dissent's view "the likelihood of success may appropriately be taken into account" in those unusual cases in which the risks are so apparent and significant that they will constitute an economic disincentive independent of that created by the basic contingency in payment. When the result achieved in such a case is significant and of broad public interest, an additional enhancement is justified in order to attract attorneys to take such cases, which otherwise might suffer from lack of representation. Extra enhancement for such cases, however, should be awarded in exceptional cases only.
[Id. at 751, 107 S. Ct. at 3100, 97 L. Ed. 2d at 614.]
Although in Delaware Valley II five members of the Supreme Court concluded that contingency enhancements of a lodestar fee were permissible under fee-shifting statutes based primarily on the fact of contingency rather than its degree, that view was rejected by the Court five years later in Dague, supra, 505 U.S. ___, 112 S. Ct. 2638, 120 L. Ed.2d 449. Dague owned property adjacent to a landfill operated by the City of Burlington, and retained attorneys on a contingent-fee basis to institute suit against Burlington because of its improper operation of the landfill. The district court determined that Burlington had violated provisions of the Solid Waste Disposal Act and Federal Water Pollution Act, ordering Burlington to close the landfill by January 1, 1990. Concluding that Dague was a prevailing party entitled to counsel fees under those Acts, the district court calculated the lodestar fee to be $198,027.50. It then determined
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that that fee should be enhanced by twenty-five percent because of Dague's substantial risk of not prevailing and because in the absence of an enhanced fee Dague would have encountered difficulty in retaining counsel. The court of appeals affirmed. 935 F.2d 1343, 1359-60 (2d Cir. 1991). The Supreme Court reversed in a six-to-three decision, holding that the fee-shifting statutes at issue did not permit enhancement of the lodestar fee on the basis of contingency, a holding that obviously applied to all federal fee-shifting statutes. See Charles Silver, Incoherence & Irrationality in the Law of Attorneys' Fees, 12 Rev. Litig. 301, 319 n.69 (1993); 2 Mary Frances Derfner & Arthur D. Wolf, Court Awarded Attorney Fees ¶ 16.04[4][b], at 16-164 to -166 (rev. ed. 1990). The Court determined that "enhancement for contingency would likely duplicate in substantial part factors already subsumed in the lodestar," id. at ___, 112 S. Ct. at 2641, 120 L. Ed. 2d at 456, observing that the difficulty of establishing the merits of a risky claim are reflected in the lodestar fee, either by the higher number of hours required or by the higher hourly rate of the attorney skilled enough to litigate the claim. Ibid. The Court also expressed the concern noted by the plurality in Delaware Valley II, that "[t]o award a contingency enhancement under a fee-shifting statute would in effect pay for the attorney's time (or anticipated time) in cases where his client does not prevail." Id. at ___, 112 S. Ct. at 2643, 120 L. Ed. 2d at 458. Finally, the Court concluded that "the interest in ready
administrability that has underlain our adoption of the lodestar approach and the related interest in avoiding burdensome satellite litigation * * * counsel strongly against adoption of contingency enhancement." Id. at ___, 112 S. Ct. at 2643, 120 L. Ed. 2d at 459 (citations omitted). Justices Blackmun, Stevens and O'Connor dissented. In her separate dissenting opinion Justice O'Connor observed: As Justice Blackmun cogently explains, when an attorney must choose between two cases--one with a client who will pay the attorney's fees win or lose and the other who can only promise the statutory compensation if the case is successful--the attorney will choose the fee-paying client, unless the contingency-client can promise an enhancement of sufficient magnitude to justify the extra risk of nonpayment. Thus, a reasonable fee should be one that would "attract competent counsel," and in some markets this must include the assurance of a contingency enhancement if the plaintiff should prevail. I therefore dissent from the Court's holding that a "reasonable" attorney's fee can never include an enhancement for cases taken on contingency.
[Id. at ___, 112 S. Ct. at 2648, 120 L. Ed. 2d at 465 (citations omitted).]
Although overruled by the Supreme Court's decision in Dague, the pre-Dague dispositions of the issue by federal circuit courts of appeals are nevertheless pertinent to our assessment of the propriety of contingency enhancements of lodestar fees under New Jersey's fee-shifting statutes. While the rationales were not identical and subsequent decisions in some circuits have altered earlier holdings, during the decade before the Supreme Court's 1987 decision in Delaware Valley II, "the federal courts [of
appeals] were unanimous in awarding increased fees or in holding that the fee for contingent litigation may be increased to account for the risk that counsel will recover no fee at all." 2 Derfner & Wolf, supra, ¶ 16.04, at 16-155; see, e.g., Copeland v. Marshall, 641 F.2d 880, 892-93 (D.C. Cir. 1980); Wildman v. Lerner Stores Corp., 771 F.2d 605, 611-14 (1st Cir. 1985); Lewis v. Coughlin, 801 F.2d 570, 575-76 (2d Cir. 1986); Hall v. Borough of Roselle, 747 F.2d 838, 842-43 (3d Cir. 1984); Vaughns v. Board of Educ., 770 F.2d 1244, 1245-46 (4th Cir. 1985); Graves v. Barnes, 700 F.2d 220, 222-24 (5th Cir.
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1983); Kelley v. Metropolitan County Bd. of Educ., 773 F.2d 677, 683-86 (6th Cir. 1985), cert. denied, 474 U.S. 1083, 106 S. Ct. 853, 88 L. Ed.2d 893 (1986); Kamberos v. GTE Automatic Elec., Inc., 603 F.2d 598, 604 (7th Cir. 1979), cert. denied, 454 U.S. 1060, 102 S. Ct. 612, 70 L. Ed.2d 599 (1981); Craik v. Minnesota State Univ. Bd., 738 F.2d 348, 350-51 (8th Cir. 1984); LaDuke v. Nelson, 762 F.2d 1318, 1332-33 (9th Cir. 1985), modified, 796 F.2d 309 (9th Cir. 1986); Ramos v. Lamm, 713 F.2d 546, 557-58 (10th Cir. 1983); Hall v. Board of School Comm'rs., 707 F.2d 464, 465-66 (11th Cir. 1983); Crumbaker v. Merit Sys. Protection Bd., 781 F.2d 191, 196-97 (Fed. Cir. 1986), modified, 827 F.2d 761 (Fed. Cir. 1987). Although several of the courts of appeals apparently viewed contingency of recovery alone as a sufficient basis to warrant enhancement of the lodestar fee, a number of courts emphasized the importance of the degree of risk present in the specific
case. For example, in Lewis, supra, the Court of Appeals for the Second Circuit observed: In and of itself, contingency is not a sufficient basis for awarding a lodestar bonus. Rather, it is the evaluation of the odds against success that ultimately determines whether an enhancement is merited. We have consistently viewed the risk of loss on the legal issues as an important consideration in any award of attorneys' fees above an hourly rate. [801 F. 2d at 575.]
Similarly, in Craik, supra, the Eighth Circuit, in approving a twenty-five- percent enhancement for contingency, noted: Counsel for plaintiffs undertook this case, which they must have known would require a massive expenditure of time and energy in the face of the very real possibility that no fee at all would be obtained. The risk here went beyond the normal contingent-fee situation. In Mr. Quiggle's case, for example, substantially all of his professional time between December 1982 and June 1983 was spent on this appeal. The investment of that much time out of one's law practice with no real hope of compensation if the appeal should prove unsuccessful is indeed a major risk, one that we think should be taken into account in setting a reasonable fee. [738 F. 2d at 350-51.]
The scholarly commentary on the issue, both post- and pre-Dague, is fairly uniform in favor of contingency enhancements of lodestar fees, with predictable variations in approach and rationale. See, e.g., Silver, supra, 12 Rev. Litig. at 315 ("The argument for contingency enhancements is that they encourage lawyers to gamble. It is predictable that the lodestar method- the reigning method of calculating fees--will not have this
effect without contingency enhancements because the lodestar method bases fee awards on the hourly rates lawyers charge when payment is certain.") (footnote omitted); The Supreme Court, 1991 Term--Leading Cases, 106 Harv. L. Rev. 163, 344 (1992) ("Contingency enhancements, however, are an essential component of the market. * * * Barring contingency enhancements requires lawyers to run a substantial risk of nonpayment for the same return that they receive from clients who pay in advance."); Report of the Third Circuit Task Force, Court Awarded Attorney Fees (Oct. 1985), reprinted in 108 F.R.D. 237, 265 (1985) ("[T]he Task Force feels that the contingency factor, which it defines simply as 'the risk of winning or losing,' should be considered in all cases. Plaintiffs' attorneys always face the prospect of receiving no compensation in
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statutory fee cases. Accordingly, even modest risks in cases in which liability is reasonably certain to be established should be recognized in the fee-setting process.") (footnote omitted); Thomas D. Rowe, Jr., The Legal Theory of Attorney Fee Shifting: A Critical Overview, 1 982 Duke L.J. 651, 673-76; John Leubsdorf, The Contingency Factor in Attorney Fee Awards, 90 Yale L.J. 473, 480 (1981) ("A lawyer who both bears the risk of not being paid and provides legal services is not receiving the fair market value of his work if he is paid only for the second of these functions."); Samuel R. Berger, Court Awarded Attorneys' Fees: What is "Reasonable"? 126 U. Pa. L. Rev. 281, 324-26 (1977); Developments in the Law--Class Actions, 89 Harv. L. Rev. 1318, 1615-17 (1976); Comment, Court
Awarded Attorney's Fees and Equal Access to the Courts, 122 U. Pa. L. Rev. 636, 708-11 (1974); The Committee on Legal Assistance, Committee Report: Counsel Fees in Public Interest Litigation, 39 Record of NYCBA 300, 317 (1984); cf. James D. Kole, Nonpayment Risk Multipliers: Incentives or Windfalls?, 53 U. Chi. L. Rev. 1074, 1106-07 (1986) (arguing for abandonment of contingency enhancements); Rochelle C. Dreyfuss, Note, Promoting the Vindication of Civil Rights Through the Attorney's Fees Awards Act, 80 Colum. L. Rev. 346, 375 (1980) (urging that contingency factor be ignored in setting reasonable counsel fees). C
Aside from the careful and insightful approaches to the question afforded by the trial court's and Appellate Division's rulings, we write on a relatively clean slate in addressing the issue of contingency enhancement of lodestar fees under the LAD. Although we often have incorporated the reasoning of federal cases construing analogous federal statutes in our interpretation of the LAD, we have not been reluctant to depart from federal precedent when we determined it to be inappropriate. See Grigoletti v. Ortho Pharmaceutical Corp., 118 N.J. 89, 107 (1990). Nor have we previously had occasion to consider calculation of a reasonable attorneys fee under the LAD. In Singer v. State, 95 N.J. 487, cert. denied, 469 U.S. 832, 105 S.
Ct. 121, 83 L. Ed.2d 64 (1984), construing the federal Fee-Awards Act, we concluded that the plaintiffs in that litigation were entitled to be considered "prevailing parties" under the Fee-Awards Act and thereby entitled to an award of a reasonable attorney's fee. Id. at 496. Although remanding the matter to the trial court to determine a reasonable fee, id. at 501-02, we referred to federal precedents construing analogous federal fee-shifting statutes to provide guidance to the trial court. We noted that the Supreme Court in Hensley, supra, 461 U.S. at 433, 103 S. Ct. at 1939, 76 L. Ed. 2d at 50, had confirmed that the appropriate starting point under federal law for establishing a reasonable fee is to determine the lodestar, "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Id. at 499. We noted that the lodestar may be adjusted upward or downward to reflect the twelve factors relied on in Johnson, supra, 488 F. 2d at 717 (citing Hughes v. Repko, 578 F.2d 483 (3d Cir. 1978)) to support that proposition. We characterized Hughes as holding that "adjustments to amount of counsel fees may be made to reflect the quality of the attorney's work, the complexity of the issues presented and the contingent nature of success." Ibid. (emphasis added). Because we were addressing attorney's fees under the Fee-Awards Act, our reference to the appropriateness of enhancing the lodestar fee to reflect contingency did not
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signal any predisposition concerning that question in the context of the LAD.
Our review of the extraordinary volume of federal litigation on the question of contingency enhancements in determining a reasonable fee under federal fee-shifting statutes demonstrates the need for a clear rule, one that can readily and definitively be applied by trial courts, a rule that will end, not perpetuate, litigation of the issue. We note that in the period between the Supreme Court's decisions in Delaware Valley II and Dague some courts of appeals adopted Justice O'Connor's concurring opinion as establishing the governing standard, see, e.g., Fadhl, supra, 859 F. 2d at 650 n.1, whereas other circuit courts concluded that Delaware Valley II "provides no controlling legal holding." King v. Palmer, 950 F.2d 771, 784 (D.C. Cir. 1991), cert. denied, ___ U.S. ___, 112 S. Ct. 3054, 120 L. Ed.2d 920 (1992); Homeward Bound, Inc. v. Hissom Memorial Ctr., 963 F.2d 1352, 1358 (10th Cir. 1992); see also Dague, supra, 935 F. 2d at 1360 (recognizing "the anomaly of the views of one justice, with whom no one concurs, being the law of the land, where the Court is so divided on an issue and where there is no majority opinion at all"), rev'd, 505 U.S. ___, 112 S. Ct. 2638, 120 L. Ed.2d 449 (1992). Our objectives in this murky area of counsel-fee awards are clarity, simplicity, and finality, to the extent they are attainable. Under the LAD and other state fee-shifting statutes, the first step in the fee- setting process is to determine the "lodestar": the number of hours reasonably expended multiplied by a reasonable hourly rate. In our view, the trial court's
determination of the lodestar amount is the most significant element in the award of a reasonable fee because that function requires the trial court to evaluate carefully and critically the aggregate hours and specific hourly rates advanced by counsel for the prevailing party to support the fee application. Trial court's should not accept passively the submissions of counsel to support the lodestar amount: Compiling raw totals of hours spent, however, does not complete the inquiry. It does not follow that the amount of time actually expended is the amount of time reasonably expended. In the private sector, "billing judgment" is an important component in fee setting. It is no less important here. Hours that are not properly billed to one's client also are not properly billed to one's adversary pursuant to statutory authority. Thus, no compensation is due for nonproductive time. For example, where three attorneys are present at a hearing when one would suffice, compensation should be denied for the excess time.
[Copeland, supra, 641 F. 2d at 891.]
The Court of Appeals for the Third Circuit made the following observations about the proposed lodestar: The district court should exclude hours that are not reasonably expended. Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. Further, the court can reduce the hours claimed by the number of hours "spent litigating claims on which the party did not succeed and that were 'distinct in all respects from' claims on which the party did succeed." Institutionalized Juveniles [v. Secretary of Pub. Welfare, 758 F.2d 897, 919 (3d Cir. 1985)] (quoting Hensley, 461 U.S. at 440, 103 S. Ct. at 1943). The court also can deduct hours when the fee petition inadequately documents the hours claimed.
[Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)(citations omitted).]
Concerning the trial court's obligation to exclude from the proposed lodestar calculation hours not reasonably expended by the prevailing party's http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
attorney, we consider in Szczepanski v. Newcomb Hospital Medical Center, ___ N.J. ___ (1995), also decided today, the question whether and to what extent in awarding counsel fees under state fee-shifting statutes a trial court should take into account the relationship between the damages recovered and the hours expended. In City of Riverside v. Rivera, 477 U.S. 561, 106 S. Ct. 2686, 91 L. Ed.2d 466 (1986), a plurality of the Supreme Court upheld a counsel-fee award of $245,456.25 in a suit alleging civil-rights violations in which the plaintiffs had been awarded compensatory and punitive damages of $33,350. The plurality opinion concluded that although damages recovered were a factor bearing on the reasonableness of counsel fee awards, federal fee-shifting statutes did not require proportionality between damage recoveries and counsel-fee awards, observing that "[u]nlike most private tort litigants, a civil rights plaintiff seeks to vindicate important civil and constitutional rights that cannot be valued solely in monetary terms." Id. at 574, 106 S. Ct. at 2694, 91 L. Ed. 2d at 479. Although Justice Rehnquist's dissent did not reject the principle underlying the plurality opinion's holding, it concluded that "this case shares none of the special aspects of certain civil rights litigation which the plurality suggests . . . would justify an award of attorney's fees totally
divorced from the amount of damages awarded by the jury. Id. at 595, 106 S. Ct. at 2704, 91 L. Ed. 2d at 492. Our view of the issue is substantially in accord with the analysis set forth in Justice Brennan's plurality opinion. Nevertheless, if the specific circumstances incidental to a counsel-fee application demonstrate that the hours expended, taking into account the damages prospectively recoverable, the interests to be vindicated, and the underlying statutory objectives, exceed those that competent counsel reasonably would have expended to achieve a comparable result, a trial court may exercise its discretion to exclude excessive hours from the lodestar calculation. Similarly, a trial court should reduce the lodestar fee if the level of success achieved in the litigation is limited as compared to the relief sought. "If . . . a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount. This will be true even where the plaintiff's claims were interrelated, nonfrivolous, and raised in good faith." Hensley, supra, 461 U.S. at 436, 103 S. Ct. at 1941, 76 L. Ed. 2d at 52; see, e.g., Scales v. J.C. Bradford & Co., 925 F.2d 901, 910 (6th Cir. 1991) (reducing lodestar by forty- five percent to reflect plaintiff's partial success). In addition, the attorney's presentation of billable hours should be set forth in sufficient detail to permit the trial
court to ascertain the manner in which the billable hours were divided among the various counsel: To this end the first inquiry of the court should be into the hours spent by the attorneys--how many hours were spent in what manner by which attorneys. It is not necessary to know the exact number of minutes spent nor the precise activity to which each hour was devoted nor the specific attainments of each attorney. But without some fairly definite information as to the hours devoted to various general activities, e.g., pretrial discovery, settlement negotiations, and the hours spent by various classes of attorneys, e.g., senior partners, junior partners, associates, the court cannot know the nature of the services for which compensation is sought.
[Lindy I, supra, 487 F. 2d at 167.]
The trial court must then determine whether the assigned hourly rates for the participating attorneys are reasonable: Generally, a reasonable hourly rate is to be calculated according to the
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prevailing market rates in the relevant community. Thus, the court should assess the experience and skill of the prevailing party's attorneys and compare their rates to the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.
[Rode, supra, 892 F. 2d at 1183 (citation omitted).]
That determination need not be unnecessarily complex or protracted, but the trial court should satisfy itself that the assigned hourly rates are fair, realistic, and accurate, or should make appropriate adjustments. To take into account delay in payment, the hourly rate at which compensation is to be awarded should be based on current rates rather than those in
effect when the services were performed. See Delaware Valley II, 483 U.S. at 716, 107 S. Ct. at 3082, 97 L. Ed. 2d at 592 ("In setting fees for prevailing counsel, the courts have regularly recognized the delay factor, either by basing the award on current rates or by adjusting the fee based on historical rates to reflect its present value.") (plurality opinion); Ramos, supra, 713 F. 2d at 555. We hold that the trial court, after having carefully established the amount of the lodestar fee, should consider whether to increase that fee to reflect the risk of nonpayment in all cases in which the attorney's compensation entirely or substantially is contingent on a successful outcome. We understand and carefully have evaluated the various objections advanced to contingency enhancements, including the often repeated admonition that "[t]hese statues were not designed as a form of economic relief to improve the financial lot of [attorneys]." Dague, supra, 505 U.S. at ___, 112 S. Ct. at 2642, 120 L. Ed. 2d at 457 (quoting Delaware Valley I, supra, 478 U.S. at 565, 106 S. Ct. at 3098, 92 L. Ed. 2d at 456). Both as a matter of economic reality and simple fairness, we have concluded that a counsel fee awarded under a fee-shifting statute cannot be "reasonable" unless the lodestar, calculated as if the attorney's compensation were guaranteed irrespective of result, is adjusted to reflect the actual risk that the attorney will not receive payment if the suit does not succeed. The reasoning underlying
our holding often has been explained, and most effectively in simple terms. As the late Judge Charles Wyzanski once observed: No one expects a lawyer to give his services at bargain rates in a civil matter on behalf of a client who is not impecunious. No one expects a lawyer whose compensation is contingent upon his success to charge, when successful, as little as he would charge a client who in advance had agreed to pay for his services, regardless of success.
[Cherner v. Transitron Elec. Corp., 221 F. Supp. 55, 61 (D. Mass. 1963).]
See also Blum, supra, 465 U.S. at 903, 104 S. Ct. at 1551, 79 L. Ed. 2d at 905 ("Lawyers operating in the marketplace can be expected to charge a higher hourly rate when their compensation is contingent on success than when they will be promptly paid, irrespective of whether they win or lose.") (Brennan, J., concurring); Berger, supra, 126 U. Pa. L. Rev. at 324-25 ("The experience of the marketplace indicates that lawyers generally will not provide legal representation on a contingent basis unless they receive a premium for taking that risk."); 2 Derfner & Wolf, supra, ¶ 15.01[2][c], at 15-16 ("Most courts realize that where payment of a fee is contingent on success an attorney should receive a larger overall fee than where payment is guaranteed regardless of outcome....") (footnote omitted). We are unpersuaded by Justice Scalia's suggestion in Dague, supra, that awarding contingency enhancement under a fee-shifting statute "would in effect pay for the attorney's time (or anticipated time) in cases where his client
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does not prevail."
505 U.S. at ___, 112 S. Ct. at 2643, 120 L. Ed. 2d at 458. In our view the case for contingency enhancement has nothing to do with the amount of time lawyers invest in losing cases. It rests on the desire to enable parties to compete for legal services in the private market. In that market, parties who can offer only fee awards contend with parties who can offer certain hourly payments and with parties who can offer contingent percentage fees from damage awards. To bid for services effectively, parties with only fee awards to offer must be able to pay market rates. They cannot do that when they are denied contingency enhancements because they cannot cover the nonpayment risk. A lawyer given a choice between an unenhanced hourly rate in a fee award case and an equal rate in a case where payment is certain will have a strong incentive to decline the fee award case.
[Silver, supra, 12 Rev. Litig. at 331-32 (footnote omitted).]
We acknowledge the concerns about overpayment and double-counting expressed in Dague, supra, 505 U.S. at ___, 112 S. Ct. at 2641-42, 97 L. Ed. 2d at 456-57, and Delaware Valley II, 483 U.S. at 726-27, 107 S. Ct. at 3087, 97 L. Ed. 2d at 598, and address those concerns by the standards that we adopt to guide the award of contingency enhancements. Those standards will serve as limits 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. In that respect, we do not adopt the view espoused in Justice O'Connor's concurrence in Delaware Valley II that "a court should not award any enhancement based on 'legal' risks or risks peculiar to the case," 483 U.S.
at 734, 107 S. Ct. at 3091, 97 L. Ed. 2d at 603, which rests on the assumption that all contingent-fee cases should be treated as a class, without distinction based on their specific circumstances. We think the more practical approach is that outlined in the Delaware Valley II dissent, which observes that "a court's job simply will be to 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," and notes that 'it is the actual risks or burdens that are borne by the lawyer or lawyers that determine whether an upward adjustment is called for.'" 483 U.S. at 747, 107 S. Ct. at 3098, 97 L. Ed. 2d at 612 (Blackmun, J., dissenting) (quoting Wildman, supra, 771 F. 2d at 613). As the American Bar Association advocated in its brief in Delaware Valley II, "[i]n adjudicating claims of enhancement, therefore, courts should evaluate both the extent to which the attorney has been able to mitigate the basic risk of nonpayment and the extent to which other factors may have aggravated it." Brief for American Bar Association as Amicus Curiae at 19. Thus, attorneys who are paid a portion of their reasonable hourly fee irrespective of result have partially mitigated the risk of non-payment. Similarly, "[a]n attorney who has entered into a contingent fee contract in a suit seeking substantial damages has also significantly reduced his risk, for he has obtained, in exchange for his acceptance of the risk of nonpayment, the
prospect of compensation greater than the prospective 'lodestar' amount." Id. at 20. Nevertheless, even in cases in which an attorney has negotiated a contingent-fee payment, the risk of nonpayment might remain substantial because of the specific problems of proof and the hazards inherent in all litigation. Moreover, in a wide variety of fee-shifting cases attorneys will be unable to mitigate the risk of nonpayment. In many cases, a client will be unable to pay for counsel or will be unwilling
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to assume the risk of liability for attorney's fees, even if the public interest may be significantly aided by the private litigation. Other cases simply will not generate significant funds, even if they are successful. Many actions seek only declaratory or injunctive relief, many are hampered by immunity doctrines and special defenses available to the defendants, and many will generate only small awards.
[Delaware Valley II, supra, 483 U.S. at 749, 107 S. Ct. at 3099, 97 L. Ed. 2d at 613 (Blackmun, J., dissenting).]
Although we authorize the award of contingency enhancements based on the risk of nonpayment, that principle does not preclude a trial court, in exercising its discretion to award a reasonable attorney's fee, from also taking into account in certain cases the likelihood of success. Sometimes, the "legal" risks facing a case may be so apparent and significant that they will constitute an economic disincentive independent of that created by the basic contingency in payment. When the result achieved in such a case is significant and of broad public interest, an additional enhancement is justified in order to attract attorneys to take such cases, which otherwise might suffer from lack of representation.
Extra enhancement for such cases, however, should be awarded in exceptional cases only.
[Id. at 751, 107 S. Ct. at 3100, 97 L. Ed. 2d at 614 (Blackmun, J., dissenting).]
Similarly, in cases in which the likelihood of success is unusually strong, a court may properly consider the inherent strength of the prevailing party's claim in determining the amount of contingency enhancement. Cf. Hall, supra, 747 F. 2d at 843-44 ("[O]ne can fairly conclude that from the outset the plaintiff had a very strong case and 'objectively viewed, the risk that plaintiff['s] counsel would come away empty handed was remote.'" (quoting McMullan v. Thornburgh, 570 F. Supp. 1070, 1076 (E.D. Pa. 1983)). We decline to adopt the condition on the award of contingency enhancements advocated by the plurality opinion in Delaware Valley II that there be "evidence in the record * * * that without risk enhancement plaintiff would have faced substantial difficulties in finding counsel in the local or other relevant market." 483 U.S. at 731, 107 S. Ct. at 3089, 97 L. Ed. 2d at 601 (plurality opinion). We find the condition insufficiently related to the primary rationale for contingency enhancements, which is to assure that counsel for the prevailing party is paid a reasonable fee by the nonprevailing party. Whether counsel is readily available to a plaintiff by virtue of the prospect of receiving a substantial contingent fee out of the recovery, or difficult to retain because the claim seeks only equitable relief, the justification for enhancement is the same:
The recognition that in either case the lodestar amount is not a reasonable fee to be charged to the nonprevailing party because it does not reflect the risk of nonpayment. The Bar's knowledge that contingency enhancements are awarded in litigation instituted under fee-shifting statutes surely will increase the availability of attorneys to prosecute those claims, but proof by a plaintiff of difficulty in hiring an attorney is not and should not be a prerequisite to contingency enhancement under New Jersey's fee-shifting statutes. Determination of the amount by which a lodestar fee should be enhanced to reflect the risk of nonpayment is conceptually difficult because there is "no such thing as a market hourly rate in contingent litigation." 2 Derfner & Wolf, supra, ¶ 16.04 [4][a], at 16-153. We note that plaintiffs' application for counsel fees relied in part on certifications from three attorneys specializing in employment- discrimination cases who stated that contingency enhancements of two to two- http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
and-one-half times the lodestar is required to induce competent attorneys to undertake to represent plaintiffs in comparable cases. We are skeptical about whether the size of contingency enhancements can responsibly be predicated solely on the certifications of attorneys who practice in the field, and note that other courts have arrived at the same conclusion. Cf. Kelly v. Matlack, Inc., 903 F.2d 978, 986-87 (3d Cir. 1990) (affirming trial court's determination to deny contingency enhancement despite submission of eight attorney affidavits advocating doubling of lodestar);
Rode, supra, 892 F. 2d at 1184-85 (rejecting attorney affidavits submitted to support fee application as insufficient to establish relevant market's treatment of contingency cases); Blum v. Witco Chem. Corp., 888 F.2d 975, 983-84 (3d Cir. 1989) (confirming district court's conclusion that eight attorney affidavits supporting contingency enhancement were inadequate to quantify amount by which lodestar fee should be increased). We also discern from our review of the extensive litigation concerning contingency enhancements that fee awards of double the lodestar represent the high end of attorney fee awards under fee-shifting statutes: Before the Supreme Court began to address contingent multipliers, the size of contingency enhancements varied both according to the type of litigation and the degree of risk involved in the individual lawsuit. Although the lower courts' tendency to fail to spell out precisely how much of a fee enhancement was due to contingency and how much to other factors makes any breakdown inherently imprecise, a total multiplier of 2, representing all enhancing factors, appears typically to have been applied as a ceiling in public interest litigation, see, e.g., Kelley v. Metropolitan County Board of Educ., 773 F.2d 677 (6th Cir. 1985) (en banc) cert. denied, 474 U.S. 1083, 106 S. Ct. 853, 88 L. Ed. 2d 893 (1986) (multiplier of 1.25 for contingency); Vaughns v. Board of Educ. of Prince George's County, 770 F.2d 1244 (4th Cir. 1985) (multiplier of 1.075 for contingency); Sierra Club v. Clark, 755 F.2d 608 (9th Cir. 1985) (multiplier of 1.3 for contingency, difficulty and results); Craik v. Minnesota State Univ. Board, 738 F.2d 348 (8th Cir. 1984) (multiplier of 1.25 for contingency). . . .
[2 Derfner & Wolf, supra, ¶ 16.04[4][a], at 16-157 n.151.]
The American Bar Association expressed a similar view concerning the size of contingency enhancements: Further, the degree of enhancement actually awarded by the courts in civil rights case has been far from extravagant. Of the 26 post-Blum v. Stenson cases awarding risk-based enhancement under Section 1988 discussed in the preceding paragraph, enhancement of 100" is the maximum reported, and the unweighted average of all enhancement factors employed was only approximately 32%. Similarly, in Wildman v. Lerner Stores Corp., 771 F.2d 605, 613 (1st Cir. 1985), the First Circuit observed that during 1980-1985, for civil rights cases, enhancement of 100" was the maximum reported, and that enhancements of such magnitude had been awarded only three times.
[Brief for American Bar Association as Amicus Curiae, supra, at 17.]
We conclude that 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. Such enhancements should never exceed one-hundred percent of the lodestar, and an enhancement of that size will be appropriate only in the rare and exceptional case in which the risk of nonpayment has not been mitigated at all, i.e., where the "legal" risk constitutes "an economic disincentive independent of that created by the basic contingency in payment * * * [and] the result achieved * * * is significant and of broad public
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interest." Delaware Valley II, supra, 483 U.S. at 751, 107 S. Ct. at 3100, 97 L. Ed. 2d at 614 (Blackmun, J., dissenting). Enhancements of that magnitude will be reserved for cases of that
description in which no prospect existed for the attorney to be compensated by payment of a percentage of a large damages award, and in which the relief sought was primarily equitable in nature. Obviously, we remain willing to revisit the issue if presented with compelling evidence that our perception of the proper range of contingency enhancements is inconsistent with the relevant market and therefore is obstructing the availability of competent counsel to conduct fee-shifting litigation. Our desire to avoid ancillary litigation over counsel-fee awards prompts us to exercise our original jurisdiction and modify the counsel-fee award fixed by the trial court, which was made without the benefit of the guidelines established in this opinion. On this record, defendant having asserted only a generalized challenge, in the course of argument on the application for counsel fees, to the number of hours expended by plaintiffs' counsel in pretrial preparation and discovery, we accept the trial court's determination that the lodestar fee is reasonable. In view of the substantial verdict recovered by plaintiffs, no question exists about whether the level of success achieved is sufficient to warrant an award of the entire lodestar fee amount. See Hensley, supra, 461 U.S. at 435-36, 103 S. Ct. at 1940-41, 76 L. Ed. 2d at 52. The guidelines we have adopted, however, suggest that the fee award of double the lodestar- representing a contingency enhancement of one hundred percent of the lodestar--is excessive. As the Appellate Division noted, the partially contingent- fee agreement between plaintiffs and counsel
"provided for compensation of about $278,207 for the services rendered by counsel before judgment. (This is 25" of the recovery of $935,000 plus an hourly-rate calculation based on 50" of the median rate, or $68.75 per hour for partners and associates, times 646.65 hours.)" 276 N.J. Super. at 460. Pursuant to that agreement, although counsel would have borne the practical risk of nonpayment because of plaintiffs' limited financial resources if the suit had been unsuccessful, that risk was somewhat offset by the prospect of substantial compensation, independent of the court-awarded fee, in the event of a large recovery. In addition, without diminishing the burdens borne by plaintiffs' counsel in overcoming a vigorous defense and persuading the jury to award substantial compensatory and punitive damages, our assessment of the record, consistent with those of the trial court and Appellate Division, is that strong evidence supported the jury's finding that unlawful discrimination was a contributing factor in the termination of Rendine and Lorestani, which suggests that the risk of nonpayment was also somewhat mitigated by the strength of plaintiffs' case. "The jury had ample evidence to support its determination that the discrimination against both plaintiffs was not only intentional wrongdoing but also malicious or 'evil-minded.'" Id. at 446. Although we assess plaintiffs' counsel's risk of nonpayment as moderate, that risk increased during the course of the litigation by virtue of defendant's vigorous resistance to each
element of plaintiffs' claims. We lack the intimate familiarity with the record and feel for the case possessed by the trial court. Nevertheless, based on our careful review of the trial record we have concluded that a contingency enhancement equal to one-third of the lodestar fee, or $38,111.42, is appropriate. We therefore modify the judgment and reduce the prejudgment counsel fee award from $228,668.50 to $152,445.67. Based on the Appellate Division's calculation that plaintiffs' counsel are entitled to a fee of $278,207 pursuant to their contingent-fee agreement, our modification of the judgment apparently will increase plaintiff's obligation for prejudgment counsel fees from http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] Rutgers School of Law
$49,538.50 to $125,761.33. Although the adoption of guidelines for determining reasonable counsel fees mandated our intervention to modify the fee set by the trial court, we reiterate our assumption that in the future the need for appellate supervision of counsel- fee awards under fee-shifting statutes will be infrequent. D
Defendant's amended Petition for Certification encompassed the Appellate Division's order entered September 7, 1994, awarding counsel fees, costs, and disbursements on appeal. By virtue of our grant of the petition, defendant's challenge to the Appellate Division's order is before us. We decline to disturb that order in any respect. VI
Except for the modification of the counsel-fee award, we affirm the judgment of the Appellate Division.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi and Coleman join in Justice Stein's opinion.
SUPREME COURT OF NEW JERSEY
NO. A-105 SEPTEMBER TERM 1994
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO Appellate Division, Superior Court
CANDY RENDINE and BERNADETTE LORESTANI,
Plaintiffs-Respondents,
v.
EDWARD PANTZER, d/b/a PANTZER MANAGEMENT COMPANY,
Defendant-Appellant.
DECIDED July 24, 1995
Chief Justice Wilentz PRESIDING
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OPINION BY Justice Stein
CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST MODIFY & AFFIRM
CHIEF JUSTICE WILENTZ X JUSTICE HANDLER X JUSTICE POLLOCK X JUSTICE O'HERN X JUSTICE GARIBALDI X JUSTICE STEIN X JUSTICE COLEMAN X TOTALS 7
This archive is a service of Rutgers School of Law - Camden.
http://njlaw.rutgers.edu/collections/courts/supreme/a-105-94.opn.html[5/4/2015 3:18:12 PM] USA v. NCH CORPORATION, et al Doc. 497
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA,
Plaintiff, Civil Action No. 98-5268 (SDW)(MCA)
v.
NCH CORPORATION, et al.,
Defendants.
N.J. DEPARTMENT OF Civil Action No. 05-881 (SDW)(MCA) ENVIRONMENTAL PROTECTION, and THE ADMINISTRATOR OF THE N.J. SPILL COMPENSATION FUND, OPINION
Plaintiffs, September 10, 2010
v.
HIGGINS DISPOSAL, INC., et al.,
Defendants.
WIGENTON, District Judge.
Before the Court is Third Party Defendant Sun Pipe Line Company Inc.’s (“Sun”)
application for attorneys’ fees and costs (the “Application”) pursuant to this Court’s June 24,
2009 Order granting Sun’s Motion for Summary Judgment on Indemnification from Third Party
Defendant Sheehan Pipe Line Construction Company (“Sheehan”). This Court has jurisdiction
pursuant to 28 U.S.C. § 1331. Venue is proper pursuant to 28 U.S.C. § 1391(b). The
Application is decided without oral argument pursuant to Federal Rule of Civil Procedure 78.
Dockets.Justia.com FACTUAL AND PROCEDURAL BACKGROUND
This application arises out of a decade-plus long dispute concerning the correct distribution of clean-up costs for the subsurface water contamination at the Higgins Farm
Superfund Site (“Higgins Farm” or the “Site”). The Court will not recite the entire history of the case as the alleged facts have been laid out clearly in the extensive procedural history, but a brief summary is appropriate.
Higgins Farm is a seventy-five (75) acre farm that has been the subject of United States
Environmental Protection Agency (“EPA”) and New Jersey Department of Environmental
Protection (“DEP”) regulatory action since the late 1980s. For many years, the Site served as a dump for drums containing, among other things, byproducts of chemical manufacturing and toxic waste. Neither Sun nor Sheehan dispute that the estimated amounts of EPA and DEP’s past and future cleanup costs could exceed thirty-six (36) million dollars. 1
In 1998, the EPA commenced an action pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”) with respect to Higgins Farm. The EPA named Lisbeth Higgins, the Site owner, and Third-Party Plaintiffs
FMC Corporation (“FMC”) and NCH Corporation (“NCH”) as defendants and alleged that they were potentially responsible parties based upon their alleged disposal of hazardous waste at the
Site. In June 2000, FMC and NCH filed third party actions against various parties, including
Sheehan and Sun. Specifically, FMC and NCH alleged that a puncture in Sun’s pipeline by a backhoe in 1956 contributed to the subsurface water contamination at Higgins Farm. The claims against Sheehan and Sun did not include CERCLA counts, but rather were framed under the
1 The parties, however, do disagree on the maximum potential liability risk to Sun and Sheehan and whether they were jointly and/or severally liable for the ultimate cleanup costs. ( See Sheehan’s Mem. in Opp. to Sun’s Mot. for Fees 8-10 (“Sheehan Opp. Mem.”); Sun’s Reply Mem. in Supp. of Fees 5-7 (“Sun Reply”).)
2 New Jersey Spill Compensation and Control Act. N.J. STAT . ANN . § 58:10-23.11 . (“Spill Act”).
NCH further asserted a tort claim against them.
On October 31, 2008, Sun filed for summary judgment on its cross-claims against
Sheehan for indemnification pursuant to the 1956 contract between Sun and Sheehan under which Sheehan installed a fourteen (14) inch pipeline for Sun. In its June 24, 2009 Order, this
Court, among other things, granted Sun’s motion for summary judgment on its contractual indemnity claim against Sheehan and ordered that Sheehan pay Sun its attorneys’ fees and costs pursuant to the indemnity agreement. The Court left it to the parties to “negotiate and agree on a reasonable sum” for Sun’s fees and also made itself available to assist, if necessary. (June 24,
2009 Order.) 2
Ultimately, the parties failed to reach an agreement on the amount of fees and costs.
Pursuant to Local Civil Rule 54.2 and as authorized by this Court’s December 17, 2009 and
January 25, 2010 Orders, Sun submitted a detailed affidavit by Sun’s lead counsel Harold L.
Segall, with accompanying exhibits, setting forth the fees and costs it sought from Sheehan pursuant to the indemnity agreement (the “Affidavit”). Sun seeks a total of $3,399,449 in addition to the reasonable costs associated with its current application for attorneys’ fees and costs. Sheehan opposes the fee petition and asks for a substantial reduction 3 based upon alleged
inefficiencies in Sun’s billing practices and what it claims are unreasonable charges.
DISCUSSION
“Attorneys’ fees and expenses may be awarded to a prevailing party in a federal litigation
where authorized by statute, court rule or contract.” Apple Corps. Ltd. v. Int’l Collectors Soc’y ,
2 The Court also asked for periodic updates on the status of the settlement negotiations and, on more than one occasion, extended the parties’ deadlines to come to an agreement. 3 Sheehan repeatedly asks that this Court “substantially reduce” Sun’s fee request; however, Sheehan neglects to provide the exact reduction it feels would be appropriate. ( See Sheehan Opp. Mem. 1. 31.)
3 25 F. Supp. 2d 480, 484 (D.N.J. 1998). “The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Hensley v. Eckerhart , 461 U.S. 424, 433 (1983). “The product of this calculation is called the lodestar,” Apple Corps., 25 F. Supp. 2d at 484, and it
“provides an objective basis on which to make an initial estimate of the value of a lawyer’s services.” Hensley , 461 U.S. at 433; see also Washington v. Phila. County Ct. of Com. Pl. , 89
F.3d 1031, 1035 (3d Cir. 1996) (“The lodestar is strongly presumed to yield a reasonable fee.”).
However, the lodestar calculation requires that the court “‘carefully and critically’ evaluate the hours and the hourly rate put forth by counsel.” Blakey v. Cont’l Airlines, Inc. , 2 F. Supp. 2d
598, 602 (D.N.J. 1998) (citations omitted).
The party seeking attorneys’ fees has the burden of establishing the reasonableness of the fees by “submit[ting] evidence supporting the hours worked and rates claimed.” 4 Rode v.
Dellarciprete , 892 F.2d 1177, 1183 (3d Cir. 1990) (internal quotations omitted) (citing Hensley,
461 U.S. at 433). In other words, Sun’s counsel must “produce satisfactory evidence -- in addition to [their] own affidavits -- that the requested rates are in line with those prevailing in the
community for similar services by lawyers of reasonably comparable skill, experience and
reputation.” Blum v. Stenson , 465 U.S. 886, 896 n.11 (1984). In this case, Sun’s fee application
request is supported in great detail by the Affidavit of Harold L. Segall, Esq., in which the hours
and tasks of the attorneys, paralegals and support staff who worked on the matter are set forth.
The amount of fees sought by Sun can be calculated by multiplying the hours submitted for each
4 In addition, L. Civ. R. 54.2(a) requires that the fee applicant submit an affidavit detailing: “(1) the nature of the services rendered, the amount of the estate or fund in court, if any, the responsibility assumed, the results obtained, any particular novelty or difficulty about the matter, and other factors pertinent to the evaluation of the services rendered; (2) a record of the dates of services rendered; (3) a description of the services rendered on each of such dates by each person of that firm including the identity of the person rendering the service and a brief description of that person’s professional experience; (4) the time spent in the rendering of each of such services; and (5) the normal billing rate for each of said persons for the type of work performed.”
4 professional by the rate listed for the respective professional. The product of these numbers yields a total figure of $2,944,160.63. Additionally, B&D provided a courtesy discount to Sun in the amount of $50,908.87. Thus, Sun seeks a total of $2,893,251.76 for the fee portion of its claim, not including the fees it will seek for work done on the pending fee request.
Once the applicant has produced satisfactory evidence, the burden shifts to “the party opposing the fee to contest the reasonableness of the hourly rate requested or the reasonableness of the hours expended.” Apple Corps. , 25 F. Supp. 2d at 485. “If the party opposing the fee petition meets its burden of proving that an adjustment is necessary, the court has wide discretion to adjust the attorneys’ fee.” Id. (internal quotations omitted).
I. The Lodestar
The first step in calculating the lodestar is determining whether the number of hours expended was reasonable. Any “hours that were not reasonably expended” must be excluded from the fee calculation. Hensley, 461 U.S. at 434 (internal quotations omitted). “Hours are not
reasonably expended if they are excessive, redundant, or otherwise unnecessary.” Rode , 892
F.2d at 1183. After the Court determines whether the hours expended were reasonable, it must
then assess the hourly rate charged for that work. A “reasonable hourly rate is calculated
according to the prevailing market rates in the community.” Washington , 89 F.3d at 1035. “The
starting point in determining a reasonable hourly rate is the attorneys’ usual billing rate, but this
is not dispositive.” Pub. Interest Research Group v. Windall , 51 F.3d 1179, 1185 (3d Cir. 1995).
Once the lodestar has been computed, the “court can adjust the lodestar downward if the
lodestar is not reasonable in light of the results obtained.” Rode , 892 F.2d at 1183. A court may
not, however, decrease a fee award based on factors that were not raised at all by the opposing
party. Id . To that end, Sheehan does not challenge the reasonableness of the hourly rates
5 claimed by Sun 5 and therefore, the Court need only consider whether the number of hours
expended by B&D was reasonable. 6 See id.
II. Reasonableness of hours
Sun seeks attorneys’ fees for a total of 10,044 hours worked by B&D professionals.
Sheehan challenges the reasonableness of those hours on several grounds. First, Sheehan
provides twelve examples of what it alleges are specific billing abuses committed by B&D. 7
Second, Sheehan challenges B&D’s use of “Block Billing”. Finally, Sheehan argues that B&D’s
fees should be reduced because they were billed in increments of .25 hours instead of what it
believes to be the industry standard of .1 increments.
The “district court has a great deal of discretion to adjust the fee award in light of those
objections.” Rode , 892 F.2d at 1183; see also Bell v. United Princeton Prop., Inc. , 884 F.2d 713,
721 (3d Cir. 1989) (noting that “the court will inevitably be required to engage in a fair amount
of ‘judgment calling’ based upon its experience with the case and its general experience as to
how much time a case requires”). The Court addresses each of Sheehan’s arguments below.
a. Sun’s Specific Challenges and Block Billing
Among other things, Sheehan points to twelve specific instances in which it contends that
Sun’s attorney hours are too high. Those examples are: 1.) Sun’s Motion to Dismiss Third Party
Claims; 2.) Sun’s Motion to Dismiss Cross Claims; 3.) Sun’s Pro Hac Vice Applications; 4.)
5 Sun seeks compensation at 2009 rates for all time worked on this case since 2000. This is the law in the Third Circuit ( See Lanni v. N.J. , 259 F.3d 146, 150 (3d Cir. 2001) (“‘To take into account delay in payment, the hourly rate at which compensation is to be awarded should be based on current rates rather than those in effect when the services were performed.’”) (quoting Rendine v. Pantzer , 141 N.J. 292, 337 (N.J. 1995)). 6 Sheehan never challenges the specific hourly rates charged by Sun’s counsel’s - Beveridge & Diamond, P.C.’s (“B&D”) - professionals. Sheehan, however, does challenge the hourly rate insomuch as they argue that B&D failed to properly allocate work amongst its paralegals, associates and partners. Nevertheless, this Court construes those challenges as better subsumed within the reasonableness of hours analysis. See infra Section II., c. 7 Sheehan argues that the examples provided “are merely illustrative and by no means exhaustive of the billing abuses by B&D.” (Sheehan Opp. Mem. 15.) However, a court is precluded from decreasing a fee award based on factors that were not raised by the opposing party and thus this Court deems any other specific examples waived. Rode , 892 F.2d at 1183.
6 Sun’s Motion for Limited Discovery; 5.) Sun’s Motion to Strike Expert Report of Dale Jensen;
6.) Sun’s Motion to Bifurcate; 7.) Sun’s Motion for Indemnification from Sheehan; 8.) Spill
Action Motion Drafted and Filed by Sheehan; 9.) Sun’s Preparing for and Taking Deposition of
Frank Rovers; 10.) Sun’s Preparing for and Defending Deposition of Kathryn Johnson; 11.)
Sun’s Preparing for and Defending Deposition of Thomas Gillespie; and 12.) Sun’s General
Deposition Preparation. Sheehan alleges that B&D professionals spent a total of 2,415.25 hours on the twelve challenged examples. However, in its Reply to Sheehan’s Opposition, Sun argues that they only worked 1,722 hours on those very same tasks. ( See Sun Reply 10-19; Sun Suppl.
Aff. in Supp. of Fees ¶¶ 19-67 (“Sun Suppl. Aff.”).) As will be explained infra, this discrepancy
is due in large part to B&D’s use of block billing and is a significant reason for the fee dispute in
the first place.
“Block billing is a time-keeping method by which each lawyer and legal assistant enters
the total time daily spent working on a case, rather than itemizing the time expended on specific
tasks.” Brown v. City of Pittsburgh , No. 06-393, 2010 WL 2207935, at *8 n.12 (W.D. Pa. May
27, 2010) (quoting Welch v. Met. Life Ins. Co. , 480 F.3d 942, 945 (9th Cir. 2007)). In this
Circuit, “[b]lock billing is a common practice which itself saves time in that the attorney
summarizes activities rather than detailing every task” and such billing will be upheld as
reasonable if the listed activities reasonably correspond to the number of hours billed. United
States of America ex rel. Doe v. Pa. Blue Shield , 54 F. Supp. 2d 410, 415 (M.D. Pa. 1999).
While a substantial number of vague entries may be a reason to exclude hours, it is not a reason
to exclude the entire entry. This Court believes the more appropriate approach would be to look
at the entire block, comparing the listed activities and the time spent, and determining whether
the hours reasonably correlate to all of the activities performed.
7 In Rode v. Dellarciprete, 892 F.2d 1177 (3d. Cir. 1990), the Court of Appeals addressed the proper degree of specificity required of a party seeking attorneys’ fees, and stated that specificity should only be required to the extent necessary for the court “to determine if the hours claimed are unreasonable for the work performed.” Id. at 1190. “It is not necessary to know the exact number of minutes spent nor the precise activity to which each hour was devoted nor the specific attainments of each attorney.” Id. (citing Lindy Bros. Builders, Inc. of Phila. v. Am.
Radiator & Standard Sanitary Corp. , 487 F.2d 161, 167 (3d Cir. 1973)).
When looking at the time entries for tasks not specifically challenged by Sheehan,
B&D’s fees seem reasonable. The entries for each attorney from B&D on each day are sufficiently specific for this Court to make a determination as to the reasonableness of the tasks themselves and, in the majority of the cases, the time allotted for each task. While individual, line item billing records are always preferred by a court forced to evaluate the time expended in determining an appropriate fee award, the total amount of time attributed to these block activities in this instance does not strike this Court as unreasonable or inconsistent with the time one would expect to expend on the activities described in those entries. Thus, while not necessarily ideal,
B&D’s time entries do not suggest that anything is amiss. 8 The block billings all describe necessary tasks in this case, performed on a given date. Hence, given this Court’s background and experience, Sheehan’s general challenge to the block-style billing employed by Sun’s counsel in this litigation is rejected. See Brown , 2010 WL 2207935, at *9 (overruling the
defendant’s general objection based on block billing after finding that billing entries were
sufficiently specific).
8 In light of the extremely detailed affidavits and exhibits submitted by Sun, including B&D’s time entries, this Court is generally less skeptical than Sheehan’s counsel appears to be about the billing records Sun presents in its fee petition and supporting exhibits for days when multiple tasks in this case were performed and the time combined into one total for the day.
8 As applied to the specific challenges raised by Sheehan, however, this Court finds problems with B&D’s block billing method. As stated above, there are significant discrepancies between the amount of time the parties believe B&D professionals spent on the twelve challenged examples. This confusion arises from B&D’s failure to task bill because the parties now have to estimate, after the fact, how much time was spent on a particular task within a block billing description. Whereas Sheehan apportions most, if not all, of the time listed in a block billed time entry to the specific task it is challenging, Sun’s lead counsel, Mr. Segall, has submitted a Supplementary Affidavit, with exhibits, breaking down the entries and allotting time in a much more favorable light. Unfortunately, neither method is accurate.
The use of Sheehan’s method is misleading and would result in inflated hours.
Specifically, Sheehan’s proposed calculations would result in the same disputed time being apportioned to multiple tasks because in calculating the hours for a given task, Sheehan included other tasks appearing in that day’s time entry. (See Sheehan Opp. 24 n.33.) For example, in its
Opposition, Sheehan claims that B&D spent 17.5 billable hours preparing pro hac vice applications in August 2000. ( Id. 17.) Included in that time is 11.25 hours spent by Kathleen
Lennon, a former environmental litigation associate at B&D, on August 1, 2000, “prepar[ing] pro hac vice motions.” ( See Sun’s Suppl. Aff., Ex. 4.) However, Ms. Lennon’s time entry description for those 11.25 hours also includes “research and preparation of motion to dismiss” and a “telephone conference with H. Segall.” ( Id .) Those same hours could have been – and probably were – utilized by Sheehan in its calculation of the amount of time B&D lawyers spent on Sun’s August 2000 Motion to Dismiss Third Party claims, which Sheehan also challenges.
This double billing/counting is not a reliable method to challenge Sun’s fee request.
9 Sun’s Supplemental Affidavit fairs no better. 9 In his Supplemental Affidavit, Mr. Segall would have the Court believe that he is able to review ten year old B&D invoices and calculate the exact amount of time spent on any task, on any day, by any B&D professional, based upon his eighteen years of experience as a billing attorney. ( See Sun’s Suppl. Aff. ¶ 6.) Despite this
Court’s faith in Mr. Segall’s qualifications and expertise, it would be virtually impossible for any person to recall, based on memory alone, the exact amount of time another professional spent on a specific task over ten years ago – at least with sufficient accuracy to satisfy this Court. 10
At the end of the day, however, both Sun and Sheehan’s inability to correctly identify
time entries stems directly from B&D’s failure to task bill. Courts within this Circuit have held
that a party “block bills at his own peril.” See Estate of Schultz v. Potter , No. 05-1169, 2010 WL
883710, at *7 n.14 (W.D. Pa. Mar. 5, 2010). This Court agrees and holds that when there is confusion due to block billing, the blame lies on the party seeking fees because they were in the best position to mitigate any confusion by task billing. As explained above, the Court does not expect minute by minute entries by counsel. However, the significant amount of “block billing” employed by B&D, in this instance, thwarts the Court in the performance of its review obligations and does not reasonably meet Sun’s obligation to provide “some fairly definite information as to the hours devoted to various general activities” and by whom. Keenan v. City of Phila., 983 F.2d 459, 473 (3d Cir. 1992). The Court will now look at the twelve challenged examples listed by Sheehan and, where necessary, reduce the fee amount sought by an appropriate percentage in response to the impediments caused by B&D’s use of block billing.
9 Shortsightedly, Sun criticizes Sheehan’s Opposition papers for misrepresenting the fees Sun seeks and failing to accurately calculate the hours spent by B&D professionals on specific tasks. Significantly, however, much of the information that Sun has provided to clarify the amount of time billed for specific tasks (such as which professional’s time was excluded as a discount to Sun or Sheehan) was not provided until Sun filed its Supplemental Affidavit. 10 If Sun has notes or other documentation which prove the specific amount of time each B&D individual spent completing specific tasks, they should have been attached to Sun’s fee request.
10 i. Sun’s Motion to Dismiss Third Party Claims
Sheehan opposes fees for work done relating to Sun’s October 2, 2000 Motion to
Dismiss. In its Motion to Dismiss, Sun sought dismissal of FMC and NCH’s contribution claims on the grounds that 1.) FMC and NCH had not engaged in the clean up and thus couldn’t recover costs under the Spill Act; 2.) FMC and NCH were not responsible for the same injury as Sun; and 3.) FMC and NCH’s claims did not meet the pleading requirements of Rule 14. The papers submitted by Sun in support of its motion included an 11-page moving brief and a 16-page reply.
Ultimately, the motion was denied.
According to Sheehan’s calculations, Sun billed 294 hours for this motion. ( See Sheehan
Opp. 16.) Sheehan then uses a blended rate of $360 per hour (partner rate of $445 per hour and associate rate of $275 per hour) to calculate that Sun seeks to recover $105,840.00 ($360 x 294 hours) for time spent on this motion. As is the case with respect to all of Sheehan’s challenges,
Sun disagrees with Sheehan’s figures. Sun asserts that B&D spent 280 hours on the motion.
(See Sun Reply 10.) Furthermore, Sun does not use a blended rate to determine the final cost.
Instead, as explained above, Mr. Segall estimates the precise amount of time spent on the motion by each professional and calculates the overall fee by using their respective 2009 billing rates. 11
Consequently, Sun claims that B&D’s invoices reflect fees in the amount of $89,070 for its work on the Motion to Dismiss. Using either calculation, this Court agrees with Sheehan; the amount of time spent by B&D professionals on this relatively non-complex motion was excessive. The excessiveness is illustrated, in part, by Sun’s straightforward and concise 11-page moving brief.
Thus, Sun’s fees sought for this motion will be reduced by 20%.
11 B&D’s 2009 rates for Partners, Associates, Paralegals and Paralegal Assistants were $445.00, $275.00, $166.50 and $117.00 per hour, respectively.
11 Because B&D block billed, there is no way for this Court to segregate the exact amount of time spent on the Motion to Dismiss from other services listed in those block billing entries.
Consequently, as will be the case in all of the examples successfully challenged by Sheehan, the
Court will split the difference between the parties’ respective estimation of Sun’s fees. For the
Motion to Dismiss, that number equals $97,455.00 and a 20% fee reduction would amount to
$19,491.00.
ii. Sun’s Motion to Dismiss Cross Claims
Sheehan also opposes fees for B&D’s work done relating to Sun’s Motion to Dismiss
Cross Claims by Third-Party Defendant Firmenich (“Firmenich”). In support of its Opposition,
Sheehan claims that B&D spent 66 hours researching and preparing an uncomplicated motion that included a 9-page brief – which was ultimately denied. ( See Sheehan Opp. 16-17.) Even if this Court agreed with Sheehan’s calculation of the time spent on this Motion, this Court disagrees that the time billed was excessive. 12 First, based upon this Court’s experience, the time
in and of itself seems reasonable. Secondly, though the Motion was denied, Firmenich stipulated
that if Sun prevailed against FMC and NCH, it would dismiss its claims against Sun.
Consequently this Court will not grant Sheehan’s request for a deduction.
iii. Sun’s Pro Hac Vice Applications
Sheehan next seeks reduction for fees relating to B&D’s preparation of pro hac vice applications for Harold Segall, Justin Savage and James Parkinson in August of 2000 and April of 2005. Sheehan claims that B&D spent 28.75 hours on these applications for a total fee amount of $10,350.00. (See Sheehan Opp. 17.) Sun counters that it only spent a total of 10 billable hours and that its fees amount to only $2,877.50. This difference is rather staggering and is indicative of the problems caused by block billing. In fact, the Court is particularly troubled
12 Sun claims that it only spent 48.5 hours on the motion. ( See Sun Reply 11.)
12 by this instance of block billing by B&D. Not only is the amount of time sought excessive, but the number of days spent on the applications is unwarranted as well. For example, for Sun’s
August 2000 pro hac vice applications, B&D professionals worked on the applications for at least six (6) consecutive business days spanning both the months of July and August. ( See Sun
Suppl. Aff., Ex. 4.) Additionally, Sun’s April 2005 pro hac vice applications were worked on for three (3) consecutive business days even though, presumably, there should have been saved drafts in an electronic database from Sun’s earlier filings. ( See id .) It should not take a firm as sophisticated as B&D nine (9) business days to create and finalize pro hac vice applications.
The Court realizes that some of this time was discounted; however, the fact that it was entered by
B&D and billed to Sun in the first place is problematic. Two specific entries in which R.
Pomeroy 13 spent the same amount of time completing what looks to be the same tasks, on back
to back days,14 is particularly disconcerting. (See id .) Though Sun claims those fees were
eventually discounted, this Court believes they indicate the excessiveness of B&D’s billing
practices in this instance. Consequently, the Court will eliminate the fees sought by Sun for the
pro hac vice applications in their entirety. See Employers Ins. Co. of Wausau v. Harleysville
Inc. , No. 05-4900, 2008 WL 5046838, at *2-3 (D.N.J. Nov. 20, 2008) (significantly reducing hours billed for filing a pro hac vice motion). While the court in Harleysville did not completely disallow time billed for filing pro hac vice motions, it reduced the time in half. The Court
reasoned that because these types of motions did not involve the filing of a legal brief or legal
research, and are generally standard form motions, 4.1 hours for one motion was excessive. Id .
The court further noted that such motions are normally saved on a firm’s computers and updated
13 None of the parties’ supporting documentation provided R. Pomeroy’s first name. 14 April 19, 2005 and April 20, 2005.
13 as necessary. Id . Here, once the Court splits the difference between the parties, the amount of fees that will be eliminated is $6,613.75.
iv. Sun’s Motion for Limited Discovery
Sheehan opposes fees relating to Sun’s Motion for Limited Discovery. Sheehan argues that the hours spent on the motion (174) and total fees claimed ($62,640.00) were excessive in light of the simplicity of the issues. Sun, on the other hand, claims that it spent only 128.25 hours on the motion for attorneys’ fees totaling $38,626.25. After the Court’s review of the hours spent by B&D professionals, the Court does not find that Sun’s fees for this motion were excessive and no reduction will be imposed. Of particular note is the fact that Sheehan joined
Sun’s Motion and that the motion was successful – FMC and NCH were required to supplement their prior document productions. See Hensley , 461 U.S. at 434-36 (holding that the “degree of success” or the “results obtained” should be adequately accounted for in the lodestar).
v. Sun’s Motion to Strike Jensen Expert Report
On October 9, 2007, Sun filed a motion to strike the expert report of Dale Jensen. 15
Sheehan argues that fees relating to this motion are excessive in light of Sun’s alleged failure to confer with Sheehan before filing the motion – in breach of the Joint Defense Agreement between Sun, Sheehan and the other third-party defenses – and Sun’s violation of Local Civil
Rule 37.1(b) which requires Court permission and conference between the opposing parties’ in an attempt to solve their dispute. In its defense, Sun does not challenge its alleged violation of L.
Civ. R. 37.1, but instead argues that it “agreed to withdraw the motion only in exchange for a valuable discovery stipulation [from FMC and NCH] . . . .” ( See Sun Suppl. Aff. ¶ 34.) Sun’s rebuttal fails. L. Civ. R. 37.1(b) was intended to discourage this very type of conduct, where negotiations occur after valuable time and resources (both by the parties and the Court) are
15 Mr. Jensen was an expert for FMC and NCH.
14 wasted. Additionally, Sun’s failure to seek judicial permission, though ultimately excused by
Magistrate Judge Arleo, led to additional filings by Sun and fees incurred by B&D which are reflected on its invoices and they now seek to recoup. ( See Sun Corrected Aff., Ex. 8.)
Consequently, Sun’s requested fees for this motion will be eliminated.
Sheehan claims that B&D spent 150 hours preparing the motion for a total fee amount of
$54,000.00. ( See Sheehan Opp. 18.) Sun counters that it only spent a total of 42.50 billable
hours and that the fees relating to the motion amount to only $13,302.50. (See Sun Suppl. Aff. ¶
33.) When the Court splits the difference, the amount that will be eliminated from Sun’s fee petition is $33,651.25.
vi. Sun’s Motion for Bifurcation
Sheehan also opposes Sun’s request for fees relating to Sun’s preparation of a motion to bifurcate in October 2007. Once again, Sheehan argues that Sun failed to obtain permission from the Court prior to completing work on its motion. Ultimately, the Court informed the parties that it would not entertain the motion and Sun’s efforts were wasted. Sun’s arguments in defense of its preparation of the motion are unconvincing. Though Sun might have been able to use part of its work product at later stages in the litigation, at the end of the day, Sun was dismissed as a party and the motion was unnecessary. Consequently, Sun’s fees for this motion will be eliminated. After averaging the amounts claimed by the parties in their Opposition and
Reply, the Court will reduce Sun’s fee request by $7,631.25.16
vii. Sun’s Motion for Indemnification
Next Sheehan opposes Sun’s fee request relating to Sun’s successful motion for
indemnification from Sheehan. Sheehan argues that the motion did not involve complex legal
16 Sheehan claims that B&D spent 26.5 hours preparing the motion for a total fee amount of $9,540.00. (See Sheehan Opp. 19.) Sun counters that it only spent a total of 20.50 billable hours and that the fees relating to the motion amount to only $5,722.50. ( See Sun Suppl. Aff. ¶ 37.)
15 issues and did not warrant the 500 hours (give or take) 17 spent on it by Sun. Though the hours
and fees relating to this motion might appear steep at first glance, this Court disagrees that the
fees are overly excessive. Sun’s motion was successful and, as a result, Sun was indemnified
from millions of dollars in liability and fees. Given the significance of the stakes, and Sun’s
ultimate outcome, the fee request is reasonable. Furthermore, after reviewing Sun’s invoices for
the motion, the Court believes that Sun was prudent and diligent in its time keeping practices
relating to this motion. Consequently, this Court will not reduce Sun’s fee request relating to its
Motion for Indemnification.
viii. Spill Action Motion Drafted and Filed by Sheehan
Sheehan next claims that “B&D billed 403 hours to a motion that it did not even draft or
file.” (See Sheehan Opp. 20.) This motion was a joint motion by Sheehan and Sun for summary
judgment under the Spill Act. Sun claims that B&D only spent 229.75 hours on the motion.
Once again, the disagreement on the amount of hours spent by B&D on the motion is significant.
After reviewing the invoices, the Court notes that if Sun spent 229.75 hours on the motion, it
would not necessarily be excessive, notwithstanding the fact that Sun was not ultimately
responsible for the drafting or filing the motion. Substantial input by Sun could very well
warrant the amount of hours Sun claims it spent on the motion. 403 hours, however, is not
warranted, and because Mr. Segall did not engage in a contemporaneous review of B&D’s
invoices, and for the reasons stated in our analysis above, this Court cannot merely take his word
for it.
17 Sheehan argues that B&D spent 539 hours ($194,040.00) on the Motion while Sun counters with a total preparation time of 490 hours ($145,842.50).
16 Consequently, Sun’s fee request for this motion will be reduced by 50%. After the Court averages the fees claimed by the parties, this amount totals $53,744.06.18
ix. Sheehan’s Remaining Examples
Sheehan’s four remaining challenges fail. After reviewing the invoices, this Court is
satisfied that Sun’s remaining fee requests were not excessive and need not be reduced.
Specifically, none of Sun’s work in preparation for the Frank Rover, Kathryn Johnson or Thomas
Gillespie depositions seem unreasonable in light of their importance to Sun’s overall defense of
this case. Additionally, though some of Sun’s entries relating to its deposition preparations do
not identify the deponent who was the subject of the preparation, after reviewing Sun’s invoices
this Court can still discern the subject of many of the time entries through common sense.
Furthermore, in this instance, this Court believes the hours are reasonable notwithstanding Sun’s
lack of specificity. See Rode , 892 F.2d at 1190 (holding that specificity should only be required to the extent necessary for the court “to determine if the hours claimed are unreasonable for the work performed”).
b. Billing in .25 Increments
Sheehan also challenges Sun’s method of billing in .25 increments. Sheehan argues that rounding to the nearest .25 (i.e., 15 minutes), instead of the industry standard .1 (i.e., 6 minutes) has inflated Sun’s invoices. This Court agrees. As stated by one bankruptcy court in this
Circuit, “minimum charges of .10-hour increments more fairly reflect actual time involved, than do quarter hour segments.” In re Jefsaba, Inc. , 172 B.R. 786, 801 (Bankr. E.D. Pa. 1994)
(quoting In re Corporacion de Servicios Medico-Hospitalarios de Fajardo , Inc., 155 B.R. 1, 2
(Bankr. D.P.R. 1993). Additionally, in In re St. Joseph’s Hospital , the Court referred to billing
18 Sheehan claims that the total fee amount claimed by Sun for this motion is $145,080.00. ( See Sheehan Opp. 20.) Sun, on the other hand, claims it seeks $69,896.25 for the motion. ( See Sun Suppl. Aff. ¶ 44.)
17 in one-tenth of an hour increments as “normal” and stated that to do otherwise “suggests the opportunity for padding on short tasks.” 19 102 B.R. 416, 418 (Bankr. E.D. Pa. 1989); see also
Williams v. Sullivan , No. 89-3285, 1991 WL 329581, at *2 (D.N.J. Feb. 7, 1991) (holding that
billing in 15 or 30 minute increments was unwarranted and reducing billable hours by 12
percent); Lopez v. S.F. Unified Sch. Dist. , 385 F. Supp. 2d 981, 993 (N.D. Cal. 2005) (holding
that “billing by the quarter-hour, not by the tenth is a deficient practice because it does not
reasonably reflect the number of hours actually worked”) (internal citations and quotations
omitted); Zucker v. Occidental Petroleum Corp. , 968 F. Supp. 1396, 1403 (C.D. Cal. 1997)
(demonstrating that attorney with $300 hourly rate who works 6 minutes on a matter would
charge $30 if he bills by the tenth of an hour and $75 if he bills by the quarter hour); Preseault v.
United States , 52 Fed.Cl. 667, 680-81 (2002) (reducing fee by 20% and citing cases where fees based on quarter-hour billings were reduced).
We have no reason to discredit Mr. Segall’s certification that time spent in increments of less than 15 minutes was not billed. (See Sun Suppl. Aff ¶ 69). However, there may have been instances where B&D professionals billed 30 minutes for work which actually took 20 minutes.
As stated above, this Court believes that billing in increments of .1 leads to a more accurate record of the services performed. Therefore, without imposing an overly undue or harsh penalty on counsel for its choice in time recording practices, this Court will impose a 12.5% fee reduction to Sun’s request, after the deductions related to Sheehan’s challenges have already been subtracted.
19 Judge Scholl further stated that billing in increments greater than one-tenth of an hour often causes the court to make an overall downward adjustment to the requested fees. In that particular case, Judge Scholl did not make a downward adjustment notwithstanding the fact that time was billed in quarter hour increments because his other reductions were so substantial. Id .
18 c. Allocation of Billable Work Amongst B&D Professionals
Along with the arguments above, Sheehan also argues that B&D failed to appropriately allocate work among its professionals. Specifically, Sheehan argues that: 1.) B&D partners micromanaged and billed for the same tasks that had already been completed by lower-billing professionals; 2.) associates billed for work that should have been completed by paralegals; and
3.) multiple professionals worked on tasks that could have been completed by one. This Court disagrees. Tellingly, in an attempt to provide an example of B&D’s overbilling, Sheehan provides a brief overview of the typical use of “pyramid billing” by most law firms (pyramid billing is where hours spent on a matter are distributed in a pyramid structure with the bulk of hours being spent by lower-billing professionals and less billable hours spent by partners).
Sheehan then goes on to criticize B&D for not following this model and uses Mr. Segall’s 2000 plus billable hours on this litigation as an example. Significantly, however, Mr. Segall is the only B&D partner Sun seeks compensation for and Mr. Segall’s hours accounted for only 22 percent of the total hours for which Sun seeks compensation (2,214 out of 10,044 hours). (See
Sun Suppl. Aff., Ex. 6.) Consequently, Sheehan’s arguments based upon its belief that B&D failed to use a “pyramid structure” are unavailing.
Sheehan also attempts to provide other examples of B&D’s alleged failure to allocate work properly, including B&D’s use of four professionals at document productions by NCH and
FMC. First, Sun fails to challenge (or even list) the total hours/fees accrued by these professionals during those productions. Secondly, only two of the B&D professionals at the productions were attorneys (associates). ( See Sun. Suppl. Aff ¶ 78.) In light of the significance of the production and the attendance by some partners of the law firms hired by parties in the litigation, including Sheehan, this Court does not find B&D’s allocation wasteful. ( See id. ¶ 79.)
19 Consequently, Sheehan’s request for a fee reduction based upon a failure of B&D to properly
allocate work is denied.
III. Proposed Adjustments to Lodestar
Once the lodestar is calculated, it is presumed to be the reasonable fee. Blum , 465 U.S. at
897. The district court, however, has the discretion to make certain adjustments to the lodestar.
Rode , 892 F.2d at 1183. The party seeking adjustment has the burden of proving that an
adjustment is necessary. Id .
a. Doctrine of Laches
Sheehan asks for an adjustment to the lodestar under the doctrine of laches. Specifically,
Sheehan argues that Sun is barred by the doctrine of laches for not filing its summary judgment
motion on the indemnification issue until over a year and a half after the Court gave it
permission to do so. This argument is also unavailing. Laches contains two essential elements:
“(1) inexcusable delay in instituting suit; and (2) prejudice resulting to the defendant from such
delay.” Kepner-Tregoe, Inc. v. Executive Dev., Inc. , 79 F. Supp. 2d 474, 486 (D.N.J. 1999).
Sheehan can prove neither.
Significantly, Sheehan could have resolved the indemnity issue at any time, thus Sun’s
timing neither “prejudiced” Sheehan nor was an inexcusable delay. Sheehan was well aware that
Sun had an indemnification claim against it and could have accepted its indemnity options at any
time during the case in an effort to control Sun’s litigation costs and choice of counsel.
Additionally, if it was confident in its position and in an effort to mitigate risks, Sun was also
free to file its own motion for summary judgment on the indemnity issue after the Court gave it
permission to do so. Simply put, Sheehan’s laches argument is without merit.
20 b. Insurance
Finally, Sheehan appears to ask that Sun’s fees be offset by any monies paid by Sun’s
insurance carrier so as to avoid “double recovery.” ( See Sheehan Opp. 30.) Sheehan made this
same argument in its summary judgment briefing relating to its indemnification dispute with
Sun. However, this Court did not consider and thus implicitly rejected this argument in its June
24, 2009 Order granting Sun’s Motion for Summary Judgment. Furthermore, Sheehan merely
asks that the Court keep this “settlement in mind” when “consider[ing]” Sun’s fee request. (Id.)
Sheehan fails to ask for any specific relief, and as it did in its Order granting Sun
indemnification, this Court will reject Sheehan’s argument.
IV. Reasonableness of Litigation Costs and Expenses
Sun is also seeking $191,328 in disbursements and $314,869 in expert charges. Sheehan
neither brings any separate challenge to,20 nor does the Court find any unreasonableness with
Sun’s request for these expenses. See Apple Corps., 25 F. Supp. 2d at 497 (awarding expenses as
separate and distinct from attorneys’ fees calculated under the lodestar). Thus, these costs will
be awarded in full.
V. Fees and Costs for Fee Request
Finally, this Court will not award Sun any fees in connection with the preparation of its
pending fee request. This fee dispute is caused, in part, because of confusions arising out of
B&D’s billing practices. This Court will not reward any ambiguity associated with B&D’s
invoices by awarding fees or costs for this application.
20 Sheehan does challenge the fees and costs associated with Sun’s billing practices to the extent they are related to the twelve (12) specific challenges above. The Court, however, addressed these specific examples above and need not analyze them again.
21 CONCLUSION
For the reasons set forth above, Sun will be awarded attorneys’ fees in the amount of
$2,425,605.39. That amount reflects Sun’s original request for attorneys’ fees minus reductions of $19,491.00, $6,613.75, $33,651.25, $7,631.25, and $53,744.06 for work performed in connection with Sun’s Motion to Dismiss Third Party Claims, Sun’s Pro Hac Vice Applications,
Sun’s Motion to Strike the Jensen Report, Sun’s Motion for Bifurcation and Sun and Sheehan’s
Joint Motion for Summary Judgment under the Spill Act, respectively. Sun’s attorneys’ fees also reflect an additional 12.5% reduction after the above reductions based upon B&D’s method of billing in .25 increments. Finally, Sun will be awarded $191,328 in expenses and $314,869 for fees relating to its expert charges, bringing Sun’s total fee award to $2,931,802.39.
s/ Susan D. Wigenton Susan D. Wigenton, U.S.D.J.
cc: Madeline Cox Arleo, U.S.M.J.
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Arlindo Araujo Accident & Injury, Criminal, Divorce & WADE v. COLANER Family Law, Estate, Immigration CIVIL ACTION NO. 06-3715-FLW. New Brunswick, NJ see profile
GARY S. WADE, Plaintiff, v. MICHAEL COLANER, Defendant.
United States District Court, D. New Jersey. Learn more about Lawyer.com Membership December 28, 2010.
OPINION
FREDA L. WOLFSON, District Judge.
This case was tried to a jury from April 19 to April 26, 2010. On the last day, the jury returned a verdict in favor of Plaintiff Gary S. Wade ("Plaintiff" or "Wade") and against Defendant State Trooper Michael Colaner, ("Defendant" or "Colaner") on Plaintiff's claim of excessive force under 42 U.S.C. § 1983.1 The jury awarded Plaintiff $500,000 in compensatory damages and $4.5 million in punitive damages. Colaner now moves for judgment under FED. R. CIV. P. 50(b) or, in the alternative, for a new trial under FED. R. CIV. P. 59. Defendant's Rule 50(b) motion is premised on his assertions that (1) he should have been held immune from the excessive force claim under the doctrine of qualified immunity; (2) the question of whether his conduct constituted excessive force should have been decided by the Court; (3) the result of this case impermissibly conflicts with findings made during the state court proceedings surrounding Plaintiff's criminal charges; and (4) the issue of punitive damages should not have been submitted to the jury because the evidence could not support a rational finding that Colaner acted with reckless or callous disregard of Plaintiff's rights. In the alternative, Defendant requests a new trial pursuant to Rule 59, contending that the jury's determination was the result of emotion and passion, and is not rationally supported by the trial record. Defendant also advances seven trial errors that he contends entitle him to a new trial. Finally, Defendant seeks a substantial remittitur of both the compensatory and punitive damage awards.
For the reasons set forth below, Colaner's Rule 50(b) and Rule 59 motions are DENIED. The motion for remittitur is DENIED as to the jury's compensatory damage award, but GRANTED as to punitive damages.
I. BACKGROUND — FACTS AND PROCEDURAL HISTORY
A. DEFENDANT'S USE OF FORCE
The account of the incident, upon which Plaintiff's claims arose, is based on a videotape of the stop and arrest involving Wade and Colaner, (See Doc. No. 73-3, Ex. A-1),2 and the testimony of the witnesses. The Court remarks at the outset, that the video, which was audio and video taped by a recorder attached to the dashboard of Defendant's state police vehicle, is the most potent and best evidence that 3
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accurately portrays the incident at issue. In fact, Defendant, in his earlier-filed summary judgment papers, conceded this fact, and urged the Court to view the video tape in resolving his motion. Indeed, because of that tape, the Court denied Defendant's motion based on qualified immunity and allowed Plaintiff's excessive force claim to proceed to trial. At trial, the jury had the opportunity to repeatedly view the tape; the jury not only saw what transpired between Colaner and Wade, but it was able to hear the verbal exchange between the parties, including their tones and inflections. The recitation of most the salient evidence follows.
On August 17, 2004, Wade, a detective with the Borough of Tinton Falls police department, was traveling northbound on the Garden State Parkway in Tinton Falls in an unmarked police car when Defendant pulled him over for speeding. (4/19/10 Tr. at 16:13-23; 42:6-8). After initiating the stop, Colaner turned on his dash-mounted video and audio recording system which recorded the stop. (4/21/10 Tr. at 40:17-19; Doc. No. 83, Stipulated Fact E). The Court notes that defendant Trooper Ryan was present at all times during the arrest. However, as shown on the recording, Ryan walked to, and remained, at the passenger side of Wade's car, and his demeanor contrasted Colaner's behavior. In fact, because the Court found at trial that Ryan remained claim and under control throughout the arrest — even during the confrontation between Colaner and Wade — and that Ryan did not employ, or aid or abet Colaner in the use of, any excessive force, the Court granted him judgment as a matter of law. In that regard, the following facts will focus on the exchange between Colaner and Wade.
When Colaner approached Wade's car, Wade repeatedly asked why he had been pulled over. (See Doc. No. 77-3, Keoskey Cert., Ex. A(1); Video at 09:08:50; 4/19/10 Tr. at 52:17-18). Without responding, Colaner demanded Plaintiff produce his license, registration, and insurance card. (See Video at 09:08:53; 4/19/10 Tr. at 52:19-23). Wade requested that a supervisor be sent out and told Colaner he had no reason to pull Wade over in his own town. (See Video at 09:08:57-09:05; 4/19/10 Tr. at 53:6-7, 93:14- 17). In response, Colaner advised Wade that he was placing him under arrest for disorderly conduct. (See Video at 09:09:06-10; 4/19/10 Tr. at 53:8-14). Wade then requested a Tinton Falls supervisor over his radio, which Wade contends was in compliance with the policy of his police department. (See Video at 09:09:11-30; 4/19/10 Tr. at 53:19-54:7).
While Wade was on the radio, Colaner asked Wade if he was a police officer and if he was carrying a weapon. (See Video at 09:09:13-20; 4/19/10 Tr. at 55:13-20). Wade did not immediately respond. According to Plaintiff, Colaner next pulled out his handgun and pointed it at Wade's face. (See Video at 09:09:20; 4/19/10 Tr. at 56:24-57:3). However, according to Colaner, he brandished his weapon "after gaining the acknowledgement of the presence of a weapon by Mr. Wade." (Doc. No. 77-3, Keoskey Cert., Ex. B at 4). When Wade got off the radio, he told Colaner that he had a supervisor coming out to the scene, (see Video at 09:09:32; 4/19/10 Tr. at 56:4-10), and that he was a police officer. (See Video at 09:09:44; 4/19/10 Tr. at 57:7-13). When Colaner asked where his weapon was, Wade told him it was on his ankle. (See Video at 09:09:48; 4/19/10 Tr. at 57:17-25). Colaner then asked Wade to identify the location of his ID, but told Wade not to retrieve it. (See Video at 09:09:52; 4/19/10 Tr. at 58:17-20). Wade responded that his ID was in his bag and that his badge was on his belt. (See Video at 9:09:53- 55; 4/19/10 Tr. at 58:21-23). Throughout this exchange, Colaner maintained his weapon pointed in the direction of Wade's vehicle. (See Video at 9:09:20-09:10:10).
Colaner then proceeded to open the driver's side door of Plaintiff's vehicle, while at the same time asking again the location of Plaintiff's weapon. (See Video at 09:10:02-05; 4/19/10 Tr. at 60:7-10). Plaintiff, for the second time, responded that it was on his ankle. (See Video at 09:10:05). When Colaner reached for Wade's weapon, Wade asked Plaintiff not to touch it, a request Plaintiff claims was consistent with his police training, as well as his own safety fears because the weapon, a Glock, does not have a safety. (See Video at 09:10:06; 4/19/10 Tr. at 60:9-25). Both parties dispute whether Wade brushed Colaner's arm away at this point. (4/19/10 Tr. at 62:18-21; 4/21/10 Tr. at 61:1-10). Colaner then placed his firearm back in its holster, took out his handcuffs, reached into Plaintiff's vehicle, and grabbed Plaintiff to handcuff him. (See Video at 09:10:10-17; 4/19/10 Tr. at 62:22-63:4; 64:11-15). During this effort, Wade repeatedly asked Colaner to "[r]elax," and told Colaner that he would let Colaner handcuff him. (See Video at 09:10:15-21; 4/19/10 Tr. at 63:7-22).
Colaner then ordered Wade out of the car and tried to forcibly pull him out, but, as Wade pointed out to Colaner, his seatbelt was still latched. (See Video at 09:10:22-24; 4/19/10 Tr. at 64:11-19). Nevertheless, Colaner continued to order Wade out of the car and again tried to pull him out, and Wade asked him to unclip the seatbelt. (See Video at 09:10:24-26). Plaintiff then asked Colaner to let his arm out of the seatbelt so he could exit the car. (See Video at 09:10:27-31). Without any apparent resistance from Wade, Colaner placed the handcuff on his left wrist. (See Video at 09:10:31-39; 4/19/10 Tr. at 63:2-4). Wade exited the vehicle while Colaner held onto the handcuff that was clasped around Plaintiff's left wrist. (See Video at 09:10:41-43; 4/19/10 Tr. at 66:18-67:19). The videotape clearly shows that while Plaintiff was exiting the vehicle, Colaner was rigorously shaking a can of pepper spray in his right hand. (See Video at 09:10:42; 4/21/10 Tr. at 154:16-18). Wade got out of the car, turned his back to Colaner, and dropped his right hand down behind his back. (See Video at 09:10:43-46; 4/19/10 Tr. at 67:10-23). Colaner then directed Wade to get on the ground next to his car, which was parked along the Parkway. However, Wade refused to drop down because, as he testified at trial, the car was parked too close to incoming traffic. Next, rather than finish the handcuffing of Wade, Colaner drew back his right fist — with a can of pepper spray in that hand — and struck Wade in the back of his head. (See Video at 09:10:46; 4/19/10 Tr. at 123:14-25). Wade, staggered by the force of the blow, was dragged by Colaner and the second trooper on the scene, Ryan, to the ground, while Colaner sprayed Wade in the back of the head with pepper spray. (See Video at 09:10:47-52; 4/19/10 Tr. at 70:6-71:16). Once Wade was on the ground, Colaner placed the second handcuff on Plaintiff's right wrist. (See Video at 09:10:52-9:11:17).
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With no apparent resistance from Wade, Colaner yelled numerous times at Wade to "stop resisting," who immediately and calmly responded to each declaration, "I'm not resisting." (See Id.; 4/19/10 Tr. at 72:12- 20).
B. PLAINTIFF'S STATE COURT PROCEEDINGS
On March 9, 2006, after a full trial by the Borough of Freehold Municipal Court, Plaintiff was convicted of careless driving and obstruction, but acquitted of resisting arrest. (See Doc. No. 26-2, Ex. D). Plaintiff appealed his convictions to the Superior Court of New Jersey, Law Division, and the Superior Court of New Jersey, Appellate Division. Both courts affirmed. (See Doc. No. 73-2, Ex. C(3); Doc. No. 73-2, Ex. F).
C. EXCESSIVE FORCE CLAIM TRIED TO A JURY
This action was initiated by Plaintiff on August 1, 2006.4 On January 22, 2010, Colaner and Ryan filed a motion for summary judgment limited to the issue of whether they were entitled to qualified immunity in connection with Plaintiff's excessive force claim. (Doc. No. 77). On March 19, 2010, following oral argument, this Court denied that motion and, on April 13, 2010, issued an opinion setting forth the basis for that ruling. See Wade, 2010 U.S. Dist LEXIS 36210 at *1-*2. (Doc. No. 88). In evaluating the merits of the claims by Colaner and Ryan for qualified immunity, using the two-prong test that requires a plaintiff claiming excessive force to have alleged both the violation of a Constitutional right and that the right was `clearly established' at the time of the violation, the Court found that Plaintiff had sufficiently pled the claim against Colaner and Ryan. Id. at *1. On April 19, 2010, the matter proceeded to a jury trial on the excessive force issue. (Doc. No. 93).
At trial, Plaintiff's expert witness James A. Williams ("Williams"), a specialist in police procedures, police policy, and the use of force — whose qualifications Colaner did not object to at trial — concluded that Colaner's use of force was excessive. (4/20/10 Tr. at 18:15-22, 22:18-23:8). Williams testified that Wade was under Colaner's complete control at the time Wade exited the vehicle and Colaner struck him, and that Wade had turned his back to Colaner in an act of submission. (Id. at 35:20-36:17). Williams further testified that Colaner's blow to the back of Wade's head was excessive and "unreasonable, unnecessary and potentially dangerous." (Id. at 40:4-21). Because Wade was under the control of both Colaner and Ryan, who were taking Wade to the ground, Williams testified that the use of pepper spray was similarly inappropriate. (Id. at 44:09-19).
Moreover, Williams testified that striking a person in the base of the head with a closed fist, with an object in the fist to strengthen it, indicates that the strike was intended as a punitive measure to cause pain, and not for a legitimate law enforcement purpose. (Id. at 41:17-42:21; 43:12-44:3). Further, he noted that Ryan never acted as though there was a threat and never pulled his own weapon. (Id. at 33:22-34:5; 38:19-21). This comports with Williams' conclusion that, under the circumstances, neither belligerence nor the fact that Wade had a weapon justified Colaner's excessive use of force. (Id. at 44:23-45:13).
The jury also heard evidence regarding Colaner's non-compliance with the New Jersey Attorney General's Use of Force Policy ("the Attorney General's Policy" or "the Policy"). The Policy calls for law enforcement officers to exercise "utmost restraint," and to "exhaust all other reasonable means before resorting to the use of force." (Doc. No. 77-4, Keoskey Cert., Ex. E at 38).5 The Policy requires law enforcement officers to complete both an underlying incident report and a use of force report "[i]n all instances when physical, mechanical, or deadly force is used." (Id. at 45). During the trial, the jury heard evidence that although Colaner submitted both reports, each time he disclosed only his use of pepper spray, leaving out that he punched Wade in the back of his head. In the incident report, he wrote, "I not only stood my ground but pressed forward to achieve a lawful objective [-] overcoming [Defendant's] physical resistance[,]" but did not mention the blow he delivered to Wade's head. (Doc. No. 77-3, Keoskey Cert., Ex. B at 17). Indeed, in his Use of Force Report, Colaner checked "chemical" force, and not physical force, even though the form expressly requires the trooper to "check all that apply." When questioned about this, Colaner first answered that he only needed to check the "highest level" of force that he used. (4/21/10 Tr. at 178:10-13). He also claimed that the force he used to handcuff Wade did not constitute a reportable use of force because he thought Wade was only offering "minimal resistance." (Id. at 103:6-9; 176:11-177:7).
Plaintiff presented evidence at trial to demonstrate the physical harm he suffered at the time of the incident, as well as the continuing psychological effects. The jury heard evidence of Wade suffering two sprained wrists and a lump in the back of his head that gave him headaches for a week following the incident. (4/19/10 Tr. at 74:7-17). Additionally, the pepper spray caused Plaintiff to suffer burning and irritation of his eyes, back, and head. (Id. at 74:18-21; 4/21/10 Tr. at 10:4-13). Psychologically, Wade claimed to still suffer anxiety that leads to difficulty breathing (4/19/10 Tr. at 75-76), as well as persistent flashbacks (Id. at 76:3-6, 80-81), nightmares (Id. at 75:7-13, 80:11-24), recurring headaches (Id. at 80:3- 10), and difficulty with sleeping and eating. (Id. at 79:1-80:2). Wade also testified that the incident left him afraid of the police (Id. at 75:7-17, 78:3-20) and of driving long distances (Id. at 75:7-20, 77:25-78:2), caused him to lose interest in friends (Id. at 82:4-15) and the enjoyment of life (Id. at 81:13-82:15), and left him vigilant and aware. (Id. at 82:16-22). Plaintiff testified that he changed the license plates on his
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personal car out of fear that the vanity tags he used previously would allow state police to identify him. (Id. at 83:2-15).
Wade's wife, Bonnie, also testified to the psychological impact that Colaner's conduct has had on Wade, changing him from a very outgoing person to someone who no longer wants to be around people and prefers to stay inside (4/21/10 Tr. at 5:19-6:10, 21:19-22:2), negatively impacting his sleeping and eating habits (Id. at 14:22-15:7, 18:20-19:17), and triggering symptoms of anxiety such as difficulty breathing when driving on highways. (Id. at 15:8-16:18). The psychological injuries Wade continues to suffer from have also had a negative impact on Wade's relationship with his wife. (Id. at 22:3-8).
Wade also presented evidence that, approximately two years after the incident, he sought counseling with Dr. Koppel, a licensed social worker, as a result of the high levels of anxiety. (4/22/10 Tr. at 3:24- 25, 5:8-17). Dr. Koppel also noticed the psychological injuries that Colaner's conduct inflicted upon Wade, and diagnosed Wade with post-traumatic stress syndrome. (Id. at 8:1-5). During his testimony, Koppel referenced Wade's emotional problems, which included his fear of the police and anxiety, as well as issues relating to the litigation process, having a gun pointed at him by Colaner, and his fall-out with his employer. (Id. at 6-7, 11-12, 15-16). Plaintiff only saw Dr. Koppel once. (Id. at 11:14-15). Dr. Dawson Shoemaker, who saw Wade the day after the attack, diagnosed Wade with "acute anxiety disorder." (4/20/10 Tr. at 81:21-24).
Colaner offered the testimony of Mickie McComb, a sergeant first class in the New Jersey State Police Training Academy and the assistant unit head of the Firearms Self-Defense Unit. As a trainer, McComb testified that, according to the Standard Use of Force Legal Preamble for all New Jersey State Police, police recruits are taught to treat an armed driver with an "extreme heightened awareness and caution[.]" (4/22/10 Tr. at 22, 26). More specifically, McComb testified that: "We teach that anyone with a weapon, you should have an extreme heightened awareness and caution, and take proper approaches, and be on your guard because you don't know what could transpire. So you are very alert and you never take anything for granted. So until you could rule out certain aspects of the stop, they have to be completely — treat them differently, like a high risk situation." (Id. at 26). On cross, McComb testified that state police should "use force only when and to the extent necessary and use only force that is reasonable in relation to the harm [one seeks] to prevent." (Id. at 32). In addition, consistent with the policy, McComb testified that state police would have to report every incident of use of force during an arrest subject to a few exceptions, such as "handcuffing with no or minimal resistance" or "pushing, pulling or blocking the subject to counter minimal resistance." (Id. at 36-37).6
Defendant also offered the testimony of psychiatrist Dr. Jeffrey Berman ("Berman"), who testified about the contents of a written report he prepared for the Court. (4/22/10 Tr. at 100:4-8). The report was based upon a two-and-a-half-hour psychiatric evaluation Berman had conducted on Plaintiff approximately two months prior to the report. (Id. at 100:9-15, 101:6-8). Berman reviewed the symptoms of post-traumatic stress disorder, and concluded that Plaintiff was not suffering from the disorder. (Id. at 101-104). When questioned by Defendant's counsel, Berman conceded that Wade's symptoms were consistent with generalized anxiety disorder. (4/22/10 Tr. at 108:5-9).
D. POST-TRIAL MOTIONS AND JURY VERDICT
Following the conclusion of the evidence, Colaner and Ryan moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(a). (See 4/22/10 Tr. at 129, 132, 137). This Court granted Ryan's motion for judgment as a matter of law, finding that testimony in the case "demonstrate[d] that no jury could reasonably find a sufficient evidentiary basis to find that [Ryan] aided and abetted in this matter." (See Id. at 136-38). This Court did not grant Colaner's motion, explaining:
I need not belabor this. I entered a ruling in this matter. Indeed, based on the testimony at trial, frankly, it's only strengthened I believe what my finding was based on the testimony I've heard and what has transpired at trial. There is certainly at this point no basis for dismissing these charges; that I could in no way find that a reasonable jury would not have a legally sufficient evidentiary basis to find there was excessive force used here.
(See Id. at 137:16-25).
Before closing arguments, the Court had a lengthy conference with counsel to discuss the jury charge and jury verdict form. Neither party objected to the final charge or verdict form. (4/23/10 Tr. at 3:7-20). The purpose of the verdict form, as it related to punitive damages, was to inquire whether the jury found that punitive damages should be awarded. (Id. at 3:8-4:6). If the jury answered in the affirmative, then the Court planned to allow the parties to introduce additional evidence, after which the Court would lay out instructions for the jury to consider before quantifying an award. (Id. at 80:16-80:25). However, when the jury deliberated and filled out the verdict form, instead of only answering `yes' or `no' to the punitive damages question, the jury responded in the affirmative and awarded $7.5 million in punitive damages to the Defendant. (Id. at 83:5-12). The Court explained that the jury had made a mistake by calculating the damages before hearing further instructions. (Id.). Defendant moved for judgment notwithstanding the verdict, arguing that the $7.5 million punitive damages award showed that the jury had been "prejudiced and inflamed," and as such, the verdict should be disregarded, or a new jury should be impaneled so that a non-prejudiced group could decide punitive damages. (Id. at 82:14-83:12). The Court denied this
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motion, stating, "[w]hen you say they have been inflamed, they've heard nothing other than the facts, as to whether making a determination that [Defendant's conduct] was malicious and wanton. . ." (Id. at 83:13-84:12).
The Court reconvened the jury and provided a supplemental instruction on punitive damages. (Id. at 87:13-89:3). Defendant then produced evidence, through the testimony of Colaner, concerning Defendant's net worth, namely that he had a $300,000 mortgage on a home worth approximately $400,000. (Id. at 89:16-90:15). During the jury's deliberations on the punitive damages award, the jury posed the following question to the Court: "Is [Colaner] the only source to pay the punitive award?" (Doc. No. 98) The Court responded, with the concurrence of counsel, by instructing, "You are to consider only the evidence presented in this case and not whether there is an additional source to pay the punitive award." (Doc. No. 98). Thereafter, the jury returned with a punitive award in the amount of $4.5 million.
Following the jury's verdict in favor of Plaintiff, which found that Defendant used excessive force against Plaintiff, and that Defendant was liable for the sum of $500,000 in compensatory damages and $4.5 million in punitive damages, (Doc. No. 99), on May 21, 2010, Defendants filed the instant renewed motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b) or, in the alternative, a new trial pursuant to Federal Rule of Civil Procedure 59 or remittitur of the damage awards. (Doc. No. 110, "Def.'s Br.").
II. DEFENDANT'S RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 50(B).
At the conclusion of the jury trial, the Court denied Colaner's motion for judgment as a matter of law pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The Court explained that it had already "entered a ruling in this matter[,]" and that the testimony heard at trial had only strengthened its conclusion. (See 4/22/10 137:16-22). "[This Court] could in no way find that a reasonable jury would not have a legally sufficient evidentiary basis to find there was excessive force used here." (See Id. at 137:22-25). The ruling referenced by the Court was the denial of the summary judgment motion in Wade, 2010 U.S. Dist LEXIS 36210, wherein the Court found that a "reasonable factfinder could conclude that Colaner used excessive force against Plaintiff" and that "there is no room for reasonable legal mistake" about the legality of Defendant's use of force. Id. at *28, *35. Because "[t]he standard for granting summary judgment under Rule 56 mirrors the standard for a directed verdict under FED. R. CIV. P. 50(a)[,]" Glenn Distribs. Corp. v. Carisle Plastics, Inc., 297 F.3d 294, 299 (3d Cir. 2002) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)), this Court now again applies those standards to the evidence presented in connection with Defendant's use of force to deny his renewed motion for judgment as a matter of law under Rule 50(b).
A. STANDARD OF REVIEW — RULE 50(B)
Rule 50(a) provides that "[i]f a party has been fully heard on an issue during a jury trial," a court may grant a motion for judgment as a matter of law where the "the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the [nonmoving] party . . ." See FED. R. CIV. P. 50(a). If the motion made under Rule 50(a) is denied by the court, the party may file a renewed motion for judgment as a matter of law under Rule 50(b) no later than ten days after judgment is entered. See Levine v. Voorhees Bd. of Educ., No. 07-1614, 2010 WL 2735303 at *1 (D.N.J. July 9, 2010) (citing FED. R. CIV. P. 50(b)). Rule 50(b) provides that, in deciding a 50(b) motion, the court may: "(1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law." See FED. R. CIV. P. 50(b).
Judgment as a matter of law under Rule 50 "should only be granted if the record is critically deficient of that minimum quantity of evidence from which a jury might reasonably afford relief." Levine, 2010 WL 2735303 at *1. (quoting Raiczyk v. Ocean County Veterinary Hospital, 377 F.3d 266, 269 (3d Cir. 2004) (internal quotation marks omitted) (citing another source)). "The question is not whether there is literally no evidence supporting the unsuccessful party, but whether there is evidence upon which a reasonable jury could properly have found its verdict." Id. (quoting Johnson v. Campbell, 332 F.3d 199, 204 (3d Cir. 2003) (internal quotations marks omitted) (citing another source)).
B. DISCUSSION
In the instant motion for judgment as a matter of law, Defendant again argues that Plaintiff's excessive force claim fails to meet both prongs of the qualified immunity test. Defendant further asserts that the Court erred in finding that the question of excessiveness was a factual one for the jury, rather than a legal one for this Court. Defendant next argues that the result in this case impermissibly conflicts with findings made by the state court during Plaintiff's criminal proceedings following his arrest. Lastly, Defendant contends that the issue of punitive damages should not have been submitted to the jury. For the reasons set forth below, Defendant's motion is denied.
I. QUALIFIED IMMUNITY
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In its summary judgment ruling, this Court explained the doctrine of qualified immunity and its two-prong test:
`The doctrine of qualified immunity protects government officials `from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known'. Bayer v. Monroe County Children & Youth Servs., 577 F.3d 186, 191 (3d Cir. 2009) (quoting Pearson v. Callahan, ___U.S. ___, ___, 129 S.Ct. 808, 815 (2009)). More simply stated, qualified immunity is `an entitlement not to stand trial or face the other burdens of litigation . . ..' Mitchell v. Forsyth, 472 U.S. 511, 526 (1985). This defense strikes a balance, shielding those officers from liability that mistakenly, but reasonably, believed their actions were lawful while permitting a plaintiff to recover against those defendants that knowingly violated the plaintiff's rights. Curley v. Klem, 499 F.3d 199, 206-07 (3d Cir. 2007).
In assessing whether qualified immunity applies, courts consider two inquiries: (i) whether the facts alleged, when viewed in the light most favorable to the party asserting the injury, show the officer's conduct violated a constitutional right; and (ii) whether the right that was [allegedly] violated was clearly established, i.e ., whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted. Saucier v. Katz, 533 U.S. 194, 201 (2001) (overruled, in part, by a unanimous Court in Pearson, 129 S.Ct. at 818, which relaxed the rigid two-step application of the Saucier analysis in favor of a more flexible approach that permits judges of district courts and courts of appeals `to exercise their sound discretion in deciding which of the two prongs of the qualified immunity analysis should be addressed first'). Accordingly, in assessing whether [Colaner and Ryan] are entitled to qualified immunity, the Court examines whether Plaintiff has alleged the violation of a constitutional right and whether that right was clearly established. As previously noted, the Supreme Court made clear in Pearson, that it is within the discretion of this court which of the two prongs of the qualified immunity test to address first. However, `[i]f the answer to either question is `no,' the analysis may end there.' Matos v. City of Camden, No. 06-205(NLH), 2009 WL 737101, *3 (D.N.J. Mar. 18, 2009) (citing Pearson, 129 S.Ct. at 823).
Wade, 2010 U.S. Dist LEXIS 36210 at *20-*22. The same analysis applies to Defendant's present argument.
A. PRONG ONE: DEPRIVATION OF A CONSTITUTIONAL RIGHT
The use of excessive force is an unlawful seizure under the Fourth Amendment and constitutes a constitutional violation. See Graham v. Connor, 490 U.S. 386, 395 (1989); Couden v. Duffy, 446 F.3d 483, 496 (3d Cir. 2006); Estate of Smith v. Marasco, 430 F.3d 140, 150 (3d Cir. 2005). Claims alleging the use of excessive force in the course of an arrest "should be analyzed under the Fourth Amendment and its `reasonableness' standard," under which a court inquires if the officer's "actions are `objectively reasonable' in light of the facts and circumstances confronting them." Graham, 490 U.S. at 395, 397. In Graham, the Supreme Court explained that the reasonableness inquiry "requires careful attention to the facts and circumstances of each particular case, including the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officer or others, and whether he is actively resisting arrest or attempting to evade arrest by flight." Since the Graham decision, the Third Circuit has noted other relevant factors that a court should consider, including: "[whether] the physical force applied was of such an extent as to lead to injury[;] . . . the possibility that the persons subject to the police action are themselves violent or dangerous[;] the duration of the action[;] whether the action takes place in the context of effecting an arrest[;] the possibility that the suspect may be armed[;] and the number of persons with whom the police officers must contend at one time." Estate of Smith, 430 F.3d at 150 (quoting Sharrar v. Felsing, 128 F.3d 810, 822 (3d Cir. 1997), abrogated on other grounds by Curley, 499 F.3d 199).
The Supreme Court has cautioned, however, that in weighing these factors to determine the reasonableness of a particular use of force, an officer's conduct
must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight . . . Not every push or shove, even if it may later seem unnecessary in the peace of a judge's chambers, violates the Fourth Amendment. The calculus of reasonableness must embody allowance for the fact that police officers are often forced to make split-second judgments-in circumstances that are tense, uncertain, and rapidly evolving-about the amount of force that is necessary in a particular situation.
Graham, 490 U.S. at 396-97 (citations omitted) (internal quotation marks omitted).
Defendant argues that, as a matter of law, the force he used against Plaintiff was not excessive under the circumstances. First, Defendant contends that from the moment Plaintiff responded in the affirmative to his queries about whether Plaintiff was in possession of a weapon, as a matter of law Defendant was "entitled to disarm [P]laintiff, and was entitled to reasonable cooperation from him in the disarming process; and . . . in the event of non-cooperation, [Defendant] was entitled to use force to immobilize [P]laintiff and neutralize the weapon." (Def.'s Br. at 10). Defendant characterizes Plaintiff's refusal to turn over his weapon as a display of "defiance, of a most unambiguous nature." (Def.'s Br. at 10). Second, Defendant claims that the jury's finding of excessive force puts the case in conflict with established case
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law.
With regard to Defendant's first argument, that he was entitled to use force to immobilize Plaintiff because he was armed and non-cooperative, this Court's previous analysis is still applicable.
The problem with [Colaner and Ryan's] analysis is that it fails to account for the fact that at the time Colaner struck Plaintiff, Plaintiff was already out of his vehicle and standing with his back to Colaner, with one wrist handcuffed and his free hand dropped behind his back so that Colaner could finish handcuffing him. As Plaintiff points out, at the time that Colaner struck Plaintiff, he already had a firm grip on Plaintiff's handcuffed left hand and Plaintiff had already indicated that he would let Colaner handcuff him. The events depicted by the videotape, which indisputably captured the events, do not, as [Colaner and Ryan] suggest, contradict Plaintiff's version of events such that no reasonable jury could find that [Colaner and Ryan] violated the Fourth Amendment. Indeed, the videotape is consistent with Plaintiff's version of events. The video does not depict the sort of tense, uncertain events that [Colaner and Ryan] contend transpired. Ryan's conduct during the course of the arrest bolsters Plaintiff's contention that Plaintiff posed no immediate threat to the troopers. At no time did Ryan brandish his weapon. Significantly, as Colaner was extracting Plaintiff from his vehicle, Ryan can be viewed on the videotape walking at a normal gait around the vehicle, without even a glance in the direction of Colaner and Plaintiff until he approached them. The events that transpired on video belie Colaner's contention that the use of pepper spray and blunt force was required to subdue Plaintiff.
Wade, 2010 U.S. Dist LEXIS 36210 at *25-*27. This previous finding of the Court was further strengthened when Colaner was cross-examined during trial. Colaner admitted that, at the time of the arrest, he "believe[d] [Plaintiff] was offering minimal resistance." (4/21/10 Tr. at 103:8-9). Additionally, when shown the videotape and questioned, Colaner admitted that he "didn't tell him until four seconds after his arm was out from behind his body . . . to stop resisting[.]" (4/21/10 Tr. at 173:20-175:3). As a result, this argument is unconvincing.
Defendant's second argument on this point, that the result in this case conflicts with binding case law, is similarly unavailing. Defendant consistently asserts that the use of force against an armed, non- cooperative suspect has been approved by courts. However, no case cited by Defendant lends itself to a finding that Defendant's use of force did not constitute excessive force.7
As Defendant points out, the Third Circuit has recognized that officers facing individuals who are suspected to be violent and known to be armed are of special concern in the Graham analysis. Thus, in Mellot v. Heemer, 161 F.3d 117, 122-123 (3d Cir. 1998), cert. denied, 526 U.S. 1160 (1999), where deputy marshals effecting a court-ordered eviction pointed loaded firearms at persons in the house and twice pushed an evictee into a chair, the court found the employed methods objectively reasonable based on several factors, including: the lack of physical injury to any plaintiff; the presence of fewer than ten officers to contend with the five individuals who were on the property; and the fact that the "the marshals had significant reason to fear armed confrontation" in light of an evictee's ownership of numerous firearms and his previous threats to shoot any federal agent who came onto his property. See also Sharrar, 128 F.3d at 816, 821-22 (finding that police's actions, in response to a violent domestic assault that involved the use of a gun, to surround house containing four suspects with twenty police officers - including a SWAT team armed with machine guns — and then force the compliant suspects to exit the house and lie face-down in the dirt, at which point the officers held guns to their heads while yelling obscenities and threatening to "blow [their] heads off if they moved," while "Rambo-type behavior . . . [that came] close to the line, [the] circumstances, in totality, [did] not rise to a Fourth Amendment violation.").
Defendant's use of force is not justified under this argument. Here, unlike in Mellot, there was no uncertainty regarding the location of Plaintiff's weapon, Defendant had no reason to believe that Wade was potentially violent, Wade did suffer injuries, and Colaner and Ryan had no other suspects with whom to contend. Further, at the time Colaner struck his blow, Colaner was already aware that Plaintiff was a police officer and not an armed felon on the road. It was not reasonable for Colaner to have feared armed confrontation. Indeed, Ryan testified on cross-examination that he never pulled out his weapon or pepper spray during the incident, and also confirmed previous testimony he'd given in municipal court, wherein he stated it was belief that, "you are not going to get a bad guy that says, [']My weapon is here.[']" as Wade did. (Tr. 4/21/10 at 212-13, 220:2-4).
The Third Circuit has permitted police to use force on individuals who, unlike Wade, were actively and physically resisting arrest. In Feldman v. Cmty. Coll. Of Allegheny, 85 Fed. App. 821, 826 (3d. Cir. 2004), in which the plaintiff alleged that an arresting police officer kicked him in the head while trying to remove him from a college campus as a trespasser, the court found that summary judgment was properly granted in the defendants' favor because, even if the plaintiff's accusation was true, the kick to the head was an objectively reasonable response to a plaintiff who was "actively struggling" against officers who were attempting to remove him. In the same vein, in Brown v. Reinhart, 325 Fed. Appx. 47, 49 (3d Cir. 2009), the plaintiff was being arrested on a disorderly conduct offense when he began "pulling away and laying on his hands to avoid being handcuffed." Id. After a verbal warning, one police officer pepper sprayed the plaintiff, allowing the officers to gain control of his left hand. In order to gain control of plaintiff's right hand, the named defendant police officer "used his right knee to deliver a `'stun blow' to [the plaintiff's] right thigh," a tactic that allowed officers to handcuff the plaintiff. Id. The Court found that the defendant officer's use of force was objectively reasonable under the circumstances, "especially in light of Brown's active resistance to arrest." Id. at 51.
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The same result has been reached with suspects who offer passive resistance. See Thomas v. City of Erie, 236 Fed. Appx. 772, 776 (3d Cir. 2007) (excessive force not present when the plaintiff, who admitted to going limp and dropping to the ground with his hands underneath his body when officers were trying to place him under arrest, was forced to the ground and later inadvertently hit his head on the police van he was placed in); Cruz v. City of Wilmington, 814 F.Supp. 405, 412-13 (D. Del. 1993) (no excessive force used during a traffic stop where, after a plaintiff refused orders and moved his hands toward his glove box, officers pulled him from his car, and then, after the plaintiff disobeyed two commands to keep his hands on the hood of the vehicle and failed to remain still during a pat down, an officer twisted plaintiff's arm to handcuff him). These courts approved the use of substantially less force on arrestees who were offering more resistance than Plaintiff in this case at the time Defendant punched and pepper sprayed him. Moreover, at the time of the use of force, Plaintiff was not resisting in any manner and was permitting Defendant to handcuff him. Thus, these cases do not support Defendant's position here.
Defendant cites two cases from within this district for the proposition that "[t]he use of pepper spray in effectuating an arrest has also repeatedly been found, in like circumstances, to be objectively reasonable under the law." (Def.'s Br. at 16). An examination of the cases reveals that neither excuses Defendant's behavior. In a suit brought by the parents of a man who died while in police custody, Davis v. Twp. of Paulsboro, 421 F.Supp.2d 835, 854-855 (D.N.J. 2006), the court found that the use of pepper spray on the son at the time of his arrest did not constitute excessive force because the he was
visibly agitated, acting aggressively, and yelling profanities. [Plaintiffs' son] banged the walls in his house and shoved [an officer] three times before [that officer] used one spray of pepper spray on [plaintiffs' son]. Before resorting to the pepper spray, [the officer] told [plaintiffs' son] to relax or if he did not, he would be arrested. [Plaintiffs' son] responded by swinging his arms and yelling `I aint [sic] going nowhere. Get the fuck off me.' Moreover, [p]laintiffs do not allege nor do we find any facts in the record establishing that [their son] suffered any lasting injury from the spray. Given these circumstances, we conclude that [plaintiffs' son] posed an immediate threat to [the officer] and possibly others in the house, therefore spraying [him] once with pepper spray was objectively reasonable.
Even more distinguishable is Tofano v. Reidel, 61 F.Supp.2d 289, 305-06 (D.N.J. 1999), in which the court found that no excessive force had been used against a man who, among other acts, slashed an officer's neck with a handcuff.
Here, Defendant has failed to demonstrate any active or passive resistance, violence, aggression, or urgent circumstance that would in any way make Defendant's conduct objectively reasonable. Accordingly, this Court again finds that a reasonable jury could conclude, and in fact did, that Colaner used excessive force against Plaintiff in violation of his Fourth Amendment rights. The Court must now determine whether Colaner violated a clearly established right; if so, he cannot succeed on qualified immunity.
B. PRONG TWO: CLEARLY ESTABLISHED RIGHT
Defendant argues that, even if this Court again finds that a reasonable jury could have found that he had used excessive force under the Fourth Amendment, he is still entitled to qualified immunity because the fact that his conduct constituted excessive force was not `clearly established' at the time of the incident. (Def.'s Br. at 16-17, 22). Defendant also argues against his conduct being `clearly established' as excessive force by asserting that the Attorney General's Policy, by which Trooper Colaner was trained, "includes wrestling a resisting subject to the ground as an example of the force that may be `necessary to overcome a subject's physical resistance to the exertion of the law enforcement's authority." (Def.'s Br. at 22-23) (citing Wade, 2010 U.S. Dist LEXIS 36210).
A right is `clearly established' if "it would be clear to a reasonable officer that his conduct was unlawful in the situation confronted." Curley, 499 F.3d at 207. A court determining whether a constitutional right is clearly established does not examine excessiveness under objective standards of reasonableness. Instead, "the right the official is alleged to have violated must have been `clearly established' in a more particularized, and hence more relevant, sense: The contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right." Saucier v. Katz, 533 U.S. at 201-02.
As this Court pointed out in Wade, 2010 U.S. Dist LEXIS 36210 at *32, "Plaintiff's claim can only survive the second step of the qualified immunity analysis if, given his version of events, there is no room for reasonable disagreement among reasonable troopers as to the lawfulness of Colaner's actions." Thus, for example, in Brosseau v. Haugen, 543 U.S. 194, 199-01 (2004), the Supreme Court found that although shooting a fleeing suspect may constitute excessive force, the officers who did so were entitled to qualified immunity because the conduct was not clearly established to be a violation of the Fourth Amendment, as evidenced by varying responses to similar fact patterns by the courts at that time. See, e.g., Istvanik v. Rosen, 50 Fed. Appx. 533, 536-37 (3d Cir. 2002) (affirming a district court's post-trial entry of judgment in favor of a police officer, who was found by a jury to have used excessive force by over-tightening the handcuffs of a jailed arrestee, because, "at the time of the incident, the question of whether tight handcuffing constitutes a violation of Fourth Amendment rights . . . was not established even in a general sense."); Leveto v. Lapina, 258 F.3d 156, 166 (3d Cir. 2001) (finding, despite facial viability of claims against Internal Revenue Service for alleged pat-downs, lengthy detentions, and
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closure of business in violation of the Fourth Amendment, the officers were entitled to qualified immunity because the law was not clearly established at the time).
In 2006, the Third Circuit fleshed out its standards for qualified immunity in Couden, 446 F.3d at 495.
A grant of qualified immunity may be upheld where a challenged police action presents an unusual legal question or `where there is `at least some significant authority' that lends support' to the conduct in question, even if the conduct was unconstitutional. `On the other hand, the plaintiff need not show that there is a prior decision that is factually identical to the case at hand in order to establish that a right was clearly established.'
The Couden court found that reasonable police officers would not have jumped on a14-year-old boy, put a knee in his back, pointed guns at his head, handcuffed him, and sprayed him with mace on suspicion of burglary, where the police had no reason to believe the boy was violent and there were four officers to control the boy. Id. at 497. In coming to this conclusion, the court reasoned:
[T]he constitutional right in question was clearly established under the qualified immunity test. The factors relevant to the excessive force analysis are well-recognized. . . See Sharrar, 128 F.3d at 822; cf. Estate of Smith v. Marasco, 430 F.3d 140, 150 (3d Cir. 2005) (noting that a `reasonable officer would be guided by the Sharrar factors in determining whether to use overwhelming force in a given situation,' and that `if an officer applies the Sharrar analysis in an unreasonable manner, he is not entitled to qualified immunity')). In this case, most of these factors — including the potential threat posed by the suspect, whether the suspect was resisting arrest, armed, or attempting to flee, and the ratio of officers to suspects — clearly suggested the use of a low level of force.
Id.; see also Green v. N.J. State Police, 246 Fed. Appx. 158, 162 (3d. Cir. 2007) (recognizing that "[i]n the context of excessive force claims, we have relied on the factors set forth in Graham and Sharrar in evaluating whether an officer made a reasonable mistake. We have stated that these factors `are well- recognized,' and that when an officer applies them in `an unreasonable manner, he is not entitled to qualified immunity.'").
Based on this standard, the Court finds that Defendant has not met his burden of showing the violation of a clearly established right. First, as the Couden court explained, a prior decision of a court that is factually identical is not needed for a right to be considered `clearly established.' Rather, because the factors listed in Sharrar and Estate of Smith are `well-recognized,' an officer is not entitled to qualified immunity if his use of force, evaluated by a weighing of those factors, was unreasonable. See Wade, 2010 U.S. Dist LEXIS 36210 at *34-35 (citing Green, 246 Fed. Appx. at 162-63) (citations omitted). Thus, this Court, in Wade at *35, denied summary judgment on the following basis, which remains valid post trial:
No reasonable application of the Graham and Sharrar factors could justify Colaner's use of force under the circumstances here. The mere fact that Plaintiff was under arrest, coupled with the fact that the use of force was brief, and the fact that Plaintiff had his weapon holstered on his ankle are not enough for Colaner to have reasonably thought it was lawful to strike Plaintiff on the back of the head and administer pepper spray because Plaintiff, though subdued, refused to lie on the ground. There is no room for reasonable legal mistake about the matter.
Indeed, unlike the defendants in Brosseau and Istvanik, Defendant has also failed to show that there is conflict in the courts about the reasonableness of the force he used on Plaintiff.
Second, the Attorney General's Policy does not shield Defendant. The Policy permits officers to use force only to: (1) overcome resistance; (2) to protect the officer or a third party from unlawful force; (3) to protect property; or (4) to effect other lawful objectives, such as to make an arrest. Despite Colaner's frequent description of Plaintiff as someone who was resisting arrest, the videotape, Colaner's own testimony where he said Plaintiff was only "minimally" resisting, and the state court acquittal of Plaintiff on the charge of resisting arrest, provide adequate evidence that Colaner was neither overcoming resistance nor using proper force to arrest Wade. Defendant's noncompliance with the Policy cannot make his `reliance' on that same policy reasonable.
At this point, Plaintiff has already met his burden to overcome a motion for judgment as a matter of law. However, the evidence adduced at trial supports Plaintiff's position that the actions of Colaner during and following the arrest suggest that Colaner knew that his conduct had violated a `clearly established' right. First, despite Wade's acquittal on the resisting arrest charges filed by Colaner, Colaner continued to claim that Wade resisted arrest by hiding his arm under his body. (Video at 09:10:52-09:11:17; 4/21/10 Tr. 173:9-20, 175:13-16). The jury viewed that video of the incident, which showed Wade lying on the ground with his arms behind his back for several seconds before Colaner repeatedly told Wade to "stop resisting," (see Video at 9:11:00-9:11:04), and the jury also heard Colaner admit that he "didn't tell him until four seconds after his arm was out from behind his body . . . to stop resisting[.]" (4/21/10 Tr. at 173:20-175:3).
Indeed, following the arrest, the jury heard testimony that Colaner failed to note his striking of Plaintiff in his Use of Force Report. (Id. at 98, 176-178). In his investigative report, which he filed after he watched the video of the incident, Colaner wrote, "I not only stood my ground but pressed forward to achieve a
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lawful objective [-] overcoming [Defendant's] physical resistance." (Id. at 181). Additionally, the jury also heard testimony that Defendant struck Plaintiff with his pepper spray canister in his closed hand. The jury was entitled to weigh the credibility of Colaner, particularly as judged against the facts as depicted in the video.
As the Supreme Court has recognized, the "jury's authority [is] to assess the credibility of witnesses, resolve genuine issues of fact, and make the ultimate determination[.]" See Tellabs, Inc. v. Makor issues & Rights, Ltd., 551 U.S. 308, 310 (2007); see also Kansas v. Ventris, 129 S.Ct. 1841, 1847 (2009) (recognizing that "[o]ur legal system . . . is built on the premise that it is the province of the jury to weigh the credibility of competing witnesses"); Edmonson v. Leesville Concrete Co., Inc., 500 U.S. 614, 624-25 (1991) (stating that when a party "invoke[s] its Seventh Amendment right, the jury becomes the principal factfinder, charged with weighing the evidence, judging the credibility of witnesses, and reaching a verdict[,] . . . [and these] factual determinations as a general rule are final"). Prior to the jury trial, this Court had already found on a motion for summary judgment that there were sufficient facts for a jury to find that Defendant had used excessive force on Plaintiff. Nothing occurred during the trial to strengthen Defendant's assertions. Clearly, as explained above, the jury had sufficient evidence from which to conclude that Colaner had used excessive force.
II. EXCESSIVENESS DECIDED BY JURY
Defendant dedicates a paragraph in his briefing to argue that "the Court erred in finding the question of excessiveness to be a factual one for the jury, rather than a legal one for the court." (Def.'s Br. at 12). Defendant appears to be trying to relitigate summary judgment, wherein this Court decided that, viewing the facts in the light depicted by the videotape consistent with Scott v. Harris, 550 U.S. 380 (2007), it was Defendant's version of the events that was contradicted by the videotape. Wade, 2010 U.S. Dist LEXIS 36210 at *27-*28. This Court further found that "[a] jury could indeed view the videotape and find consistent with Plaintiff's version of events that Colaner's conduct in striking Plaintiff on the back of the head and using the pepper spray after Plaintiff had already been partially restrained and appeared compliant was not objectively reasonable." Id. at *28.
The Court did not find that Defendant's conduct was objectively reasonable under the circumstances at the summary judgment stage. Thus, it was appropriate for excessiveness to be a question of fact for the jury. See Abraham v. Raso, 183 F.3d 279, 290 (3d. Cir. 1999) (agreeing with the Ninth Circuit that "even though reasonableness traditionally is a question of fact for the jury, defendants can still win on summary judgment...") (citations omitted); see also Armstrong v. Sherman, No. 09-716, 2010 WL 2483911, *4 (D.N.J. June 4, 2010) ("[S]ince there is no clearly-defined rule for determining reasonableness, excessive force claims will frequently raise a question of fact for a jury") (citing Abraham, 183 F.3d at 290).
III. STATE COURT FINDINGS
Defendant claims that the result in this case, as well as the Court's finding on summary judgment that Defendant's "use of blunt force and pepper spray served no purpose other than to inflict discomfort and pain," Wade at *34, is irreconcilable with express findings made against Plaintiff in state court proceedings." (Def's Br. at 18). Defendant made this argument in his motion to dismiss, and the Court disagreed, stating that "the fact that Plaintiff was acquitted of resisting arrest militates against [Heck v. Humphrey, 512 U.S. 477 (1994)] barring Plaintiff's excessive force claim." (Doc. No. 40 at 16). If Plaintiff had been convicted in the state court of resisting arrest at the time Defendant used force to effectuate his arrest, this Court could not have based its finding that Defendant used excessive force on Plaintiff's lack of resistance.8 See Gilles v. Davis, 538 F.Supp.2d 785, 789 (D.N.J. 2008) ("Under Heck, a § 1983 action that impugns the validity of the plaintiff's underlying conviction cannot be maintained unless the conviction has been reversed on direct appeal or impaired by collateral proceedings.").
However, Plaintiff was only convicted of careless driving and obstruction in state court. As a result, Plaintiff is correct when he states that "the jury [did not need to] find any facts in conflict with those findings in order to return a verdict of excessive force." (Pl.'s's Br. at 18). It is axiomatic that merely having probable cause to arrest or charge someone with obstruction does not give a police officer carte blanche to use unlimited force. Additionally, as the jury heard, by the time Wade had one handcuff on and was compliantly waiting for Colaner to finish handcuffing him, only to be struck in the back of his head by Colaner, Wade was no longer obstructing. He had already provided Colaner with his information, including the location of his gun and the fact that he was a police officer. (4/19/10 Tr. at 57:10-25). Moreover, as Plaintiff points out, none of the state court findings listed by Defendant are actually in conflict with the facts supporting the jury's verdict.
No court has found that Wade did not tell Colaner that he would let Colaner handcuff him. No court found that Colaner did not punch Wade in the back of the head and did not pepper spray him. No court found that Wade did not have one hand handcuffed and submissively put the other behind his back waiting to be handcuffed. No court found that Wade attempted to retrieve his weapon or threatened Colaner. Thus, there is no inconsistency between the facts supporting the jury's verdict and the facts found by the state courts.
(Pl.'s Br. at 19).
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Finally, because the issue of excessive force was never before the State court, and Plaintiff was acquitted of resisting arrest, it cannot be said that the State court proceedings embraced the question of whether Colaner used an appropriate amount of force. Thus, Colaner's argument that the jury verdict contradicts the state court's findings is unconvincing and unavailing.
IV. SUBMISSION OF PUNITIVE DAMAGES TO JURY
Lastly, Defendant argues that the issue of punitive damages should not have been submitted to the jury because the evidence cannot support a rational finding that Defendant acted with reckless or callous disregard of Plaintiff's rights. (Def.'s Br. at 24). Punitive damages are designed to "represent a limited remedy, to be reserved for special circumstances," Savarese v. Agriss, 883 F.2d 1194, 1205 (3d. Cir. 1989), "in which the defendant's conduct amounts to something more than a bare violation justifying compensatory damages or injunctive relief." Keenan v. City of Phila., 983 F.2d 459, 470 (3d Cir. 1992). Generally, "punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003). Specifically, punitive damages are available in Section 1983 cases where a defendant has acted with a "reckless or callous disregard of, or indifference to, the rights and safety of others." Mitchell v. City of Phila., 344 Fed. Appx. 775, 780 (3d Cir. 2009) (quoting Keenan, 983 F.2d at 469-70). Where there is no evidence that a defendant acted with the requisite bad intent, the issue should not be submitted to the jury. See Kolstad v. ADA, 527 U.S. 526, 538-39 (1999) ("W]here there is no evidence that gives rise to an inference of actual malice or conduct sufficiently outrageous to be deemed equivalent to actual malice, the trial court need not, and indeed should not, submit the issue of punitive damages to the jury") (citation omitted).
Plaintiff, in opposition, correctly claims that by not mentioning punitive damages in his pre-verdict motion for judgment as a matter of law, Defendant did not preserve the issue for this Rule 50(b) motion. As the Third Circuit noted in Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1173 (3d Cir. 1993), a post-trial "motion for judgment as a matter of law pursuant to Rule 50(b) must be preceded by a Rule 50(a) motion sufficiently specific to afford the party against whom the motion is directed with an opportunity to cure possible defects in proof which otherwise might make its case legally insufficient." Colaner's pre-verdict motion for judgment as a matter of law did not address punitive damages, and when Colaner's counsel made the request, counsel stated that, "[w]ith regard to [Colaner], we merely repeat the arguments from our qualified immunity in light of the evidence in this trial, your Honor." (See 4/22/10 Tr. at 137). This was in reference to Defendant's earlier summary judgment motion, which the Court denied in Wade, 2010 U.S. Dist LEXIS 36210. Colaner made no mention of punitive damages in his moving or reply brief in that action. (See Dkt. 77-1; Dkt. 86). Therefore, by failing to specify that he was also moving for pre- verdict judgment as a matter of a law on the issue of punitive damages, Defendant waived his right to raise this argument post-verdict. See Williams v. Runyon, 130 F.3d 568, 571-72 (3d. Cir. 1997) (citations omitted).
Additionally, evidence introduced at trial lends sufficient support to the jury's ability to consider awarding punitive damages. The jury repeatedly saw the video of the incident, which depicts Defendant violently striking Plaintiff in the back of the head, and then, after wrestling him to the ground, administering pepper spray to the back of Plaintiff's head. The jury also heard testimony regarding Defendant's failure to comply with the Attorney's General's Policy regarding use of force. (4/21/10 Tr. at 176-180). Further, Plaintiff's expert, Williams, testified that the act of striking a person in the base of the head with a closed fist, with an object in the fist to strengthen it, indicates that the strike was intended as a punitive measure to cause pain, rather than for a legitimate law enforcement purpose. (See 4/20/10 Tr. at 41:17-42:21; 43:12-44:3). Since the Court finds there was sufficient evidence to give rise to the jury's inference of actual malice, it was therefore proper to submit punitive damages to the jury.
Defendant's motion for judgment as a matter of law is denied.
III. DEFENDANT'S MOTION FOR A NEW TRIAL PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 59
A. STANDARD OF REVIEW
Federal Rule of Civil Procedure Rule 59(a) provides, in relevant part, that:
A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States....
See FED. R. CIV. P. 59(a). In the past, courts have been permitted to grant new trials under several circumstances, including when "the verdict is against the clear weight of the evidence; damages are excessive; the trial was unfair; and [when] substantial errors were made in the admission or rejection of evidence or the giving or refusal of instructions. . ." Lyles v. Flagship Resort Development Corp., 371 F.Supp.2d 597, 602 (D.N.J. 2005) (quoting Lightning Lube, Inc., v. Witco Corp., 802 F.Supp. 1180, 1186
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(D.N.J. 1992)) (aff'd, 4 F.3d 1153 (3d Cir. 1993)); Matos v. City of Camden, No. 06-205 (NLH), 2010 WL 3199928, *1 (D.N.J. Aug. 12, 2010). In the absence of a finding that not granting a new trial would sanction a miscarriage of justice, the judge must respect the jury's verdict. See Levine, 2010 WL 2735303 at *3 (citing Shanno v. Magee Indus. Enters., Inc., 856 F.2d 562, 567 (3d Cir. 1988); see also Lyles, 371 F. Supp. 2d at 601-02 (citing Roebuck v. Drexel University, 852 F.2d 715, 736 (3d Cir. 1988)) (citing another source). "A trial court may not grant a new trial because it would have come to a different conclusion than that reached by the jury." Id. (citing Lightning Lube, Inc., 802 F.Supp. at 1186).
"A district court has broad latitude to order a new trial for prejudicial errors of law." Matos, 2010 WL 3199928, at *1 (citing Klein v. Hollings, 992 F.2d 1285, 1289-90 (3d Cir. 1993)). "In evaluating a motion for a new trial on the basis of trial error, the court must first determine whether an error was made in the course of the trial and then decide whether that error was so prejudicial that refusal to grant a new trial would be inconsistent with substantial justice." Id. (quotations omitted). "By contrast, a court's discretion to order a new trial for a verdict contrary to the weight of the evidence is more limited." Id. (quoting Paolella v. Browning-Ferris, Inc., 973 F.Supp. 508, 511 (E.D.Pa 1997)). A court may not grant a new trial simply because it would have reached a different verdict. Id. Rather, "new trials because the verdict is against the weight of the evidence are proper only when the record shows that the jury's verdict resulted in a miscarriage of justice or where the verdict, on the record, cries out to be overturned or shocks our conscience." Greenleaf v. Garlock, Inc., 174 F.2d 352, 366 (3d Cir. 1999) (quotations omitted).
B. DISCUSSION
Defendant argues that a new trial is required. Defendant contends that the jury pre-judged the issue of punitive damages, and acted out of passion, rather than reason, in making its decision. Defendant also alleges seven trial errors that he argues entitle him to a new trial. For the reasons set forth below, Defendant's motion is denied in all respects.
1. THE JURY'S DECISION REGARDING PUNITIVE DAMAGES
Defendant now argues that the jury, by twice handing down a punitive verdict that "it well knew [Colaner] could not possibly pay[,]" either acted "irrational[ly]" or, if under the belief that Colaner would be indemnified, "acted on a patently improper consideration." (Def.'s Br. at 28). Defendant contends that "[t]his is clearly a case in which the jury lost track of the constraining principles that govern punitive damage awards, and became enthralled with its own power." (Def.'s Br. at 30). In reply, Plaintiff asserts that Colaner has presented no evidence of either passion or prejudice on the part of the jury. The Court agrees with Plaintiff.
The Third Circuit has repeatedly stated that "[a] new trial is warranted only upon the showing that the verdict amounted from passion or prejudice, and yet the size of the award alone [is not] enough to prove prejudice and passion." See Bianchi v. City of Philadelphia, 80 Fed. Appx. 232, 237 (3d Cir. 2003) (citing Evans v. Port Authority of N.Y. and N.J., 273 F.3d 346, 352 (3d Cir. 2001)) (quoting Dunn v. Hovic, 1 F.3d 1371, 1383 (3d Cir. 1992)); see also Hurley v. Atlantic City Police Dep't, 174 F.3d 95, 114 (3d. Cir. 1999), cert. denied, 528 U.S. 1074 (2000) (citing Dunn, 1 F.3d at 1383). Colaner has only pointed to three possible instances which evidence his assertion that the jury acted out of passion or prejudice: (1) the jury's premature attempt to award punitive damages; (2) the jury's question regarding the source of payment if Defendant was ordered to pay punitive damages; and (3) a sermon, posted on the internet by juror Jeffrey Eaton ("Eaton"), in which Eaton discussed his experience serving on the jury and mentioned that Plaintiff had lost his job following the incident with Defendant. None of these pieces of evidence support a finding of passion or prejudice.
First, Defendant has failed to explain how a premature award of punitive damages, which the jury reduced by $3,000,000 after hearing additional testimony and instructions, evidences passion or prejudice. As this Court explained when Defendant objected to the re-submission of the punitive damages issue to the jury:
When you say [the jury has] been inflamed, they've heard nothing other than the facts, as to whether making a determination that it was malicious and wanton, in coming into their determination the only new thing they will be instructed upon is they may consider — and, by the way, the instruction reads they `do not have to, but they may consider the assets of the defendant,' and the rest of the instruction in calculating says exactly what the original charge said as well:
In determining whether a finding of [punitive damages] is appropriate in considering, will it deter others? Will it deter this defendant and is it punishing?
(4/23/10 Tr. at 83-84) (internal quotation marks omitted). Defendant has failed to convince the Court that this mistake on the jury's part demonstrates passion or prejudice in its later award of a smaller amount of punitive damages.
Second, the jury's decision to send a note to the Court asking whether, in the event punitive damages were awarded, Colaner would be the only source of the funds, does not evidence passion or prejudice.
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The Court provided an answer, instructing the jury to "consider only the evidence presented in this case and not whether there is an additional source to pay the punitive award." Defendant assented to, and did not object to the Court's answer, and in his moving brief admits it was right for the Court to instruct the jury "to consider only the evidence that had been presented." (Def.'s Br. at 28). Defendant has presented no evidence, other than the size of the verdict, that this question supports a finding of prejudice or passion.9
Lastly, Defendant argues that proof of prejudice or passion can be found in a sermon that was posted on the internet several weeks after the conclusion of the trial by juror Eaton. (See Doc. No. 124, Keoskey Cert., Ex. A). According to Defendant, this sermon "provides objective evidence that the jury's award encompassed issues and considerations that should have played no part in its deliberation." (Def.'s Reply Br. at 14). However, Eaton's sermon only once references a fact that should not have been considered in making an award. In first describing the case he was impaneled to serve on, Eaton stated, "[Plaintiff] would ultimately be acquitted of the charge of resisting arrest, but in the end he lost his job with the Tinton Falls police." (See Id.). After a sermon in which Eaton spoke about the Bible, criticized the "Tea Party Movement," and described the "spirit of democracy," Eaton concluded his sermon by explaining, "[w]e on the jury found [Colaner] guilty of using excessive force and awarded damages to [Plaintiff]. It was a certain kind of love in a world of less than perfect creatures. Amen." (See Id.). There is nothing in Mr. Eaton's sermon to suggest that the award of punitive damages was supported by prejudice or passion. If anything, by referencing "a world of less than perfect creatures[,]" Mr. Eaton reinforces this Court's belief that the jury awarded punitive damages because it believed Defendant acted with reckless or callous disregard for Plaintiff's rights.
Accordingly, a new trial is not warranted on the basis that the jury's award was tainted by prejudice or passion.
2. EVIDENTIARY ISSUES
Defendant next identifies seven evidentiary errors that he believes deprived him of a fair trial. The first, third, and fourth alleged evidentiary errors stem from this Court's granting of pre-trial motions in limine, which were filed by Plaintiff to bar: the introduction of any evidence of Plaintiff's convictions for careless driving and obstruction of the administration of law; any testimony from former defendant Chief Turning; and any evidence that, in the eighteen months before the incident in this case, Plaintiff was stopped fourteen other times by police. (See Doc. No. 61-63). Defendant contends that the Court erred in granting the motions, as well as failing to adjust and correct those rulings at trial when it became evident that modifications were warranted. Defendant's other four alleged evidentiary errors stem from supposed errors made in the jury instructions, Plaintiff's cross-examination of Defendant, and Plaintiff's expert testimony. The Court is not persuaded that any of these alleged trial errors warrant ordering a new trial and will address each in turn.
A. THE EXCLUSION OF PLAINTIFF'S CONVICTIONS FOR CARELESS DRIVING AND OBSTRUCTION
Defendant argues that he was deprived of a fair trial as a result of the Court's decision to grant Plaintiff's motion in limine to exclude evidence of his criminal convictions for careless driving and obstruction of the administration of law, and that even if the Court concludes that the evidence was properly excluded before the trial began, the Court's failure to reconsider its decision after Plaintiff made "repeated tactical use of his acquittal on [the resisting arrest] charge" was in error. (Def.'s Br. at 43). Defendant contends that the jury "was entitled to know . . . that plaintiff's non-cooperative conduct, as a matter of law, had been determined to constitute a criminal offense[,]" and because they did not know of his convictions, the jury returned a verdict "flatly inconsistent with the findings made in the state court proceedings." (Id.). The Court disagrees. Introduction of Plaintiff's conviction for administration of law under N.J.S.A. 2C:29-1 is barred by FED. R. EVID. 609(a)-(b) because it is neither a crime punishable by a term of imprisonment in excess of one year, N.J.S.A. 2C:43-8, nor a crime involving dishonesty or false statement.
Nevertheless, Defendant relies on a series of unpersuasive cases. See United States v. One Assortment of 89 Firearms, 465 U.S. 354, 361-362 (1984) (finding criminal acquittal of firearms charges did not preclude subsequent forfeiture action because of different burdens of proof in criminal and civil actions); Wheeler v. Nieves, 762 F.Supp. 617, 625 (D.N.J. 1991) (holding that plaintiff in civil action was collaterally estopped by findings in previous criminal action where "the wrongs alleged by [plaintiff] in the . . . civil action were also at issue in the prior criminal proceedings"). Defendant primarily relies upon Nelson v. Jashurek, 109 F.3d 142 (3d Cir. 1997), in which the Third Circuit remanded an excessive force case in circumstances where the plaintiff, unlike here, had been convicted in state court of resisting arrest. The Nelson court found that, in the event the case reached trial, "the trier of fact must be aware that [defendant] was justified in using `substantial force' in arresting [plaintiff][,]" because there was a danger that the jury would "base its verdict on findings not consistent with the conclusion the jury reached in the criminal case." Id. at 146.
At the outset, the Court notes that it has already ruled that the jury's finding did not conflict with any findings in the state court proceedings. Additionally, the Court finds Defendant's cited cases unavailing. One Assortment dealt with the issue of whether the government, after having failed in a criminal suit, was collaterally estopped from bringing a civil forfeiture action. It has no relevance to the case at hand.
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Wheeler is unhelpful because no finding regarding excessive force was entered by the state court here. Lastly, this case is entirely inapposite of Nelson, as the Nelson court based its decision on the fact that the plaintiff had been convicted of resisting arrest in state court. Thus, in Nelson, it was important that the jury knew that the officer was justified in using reasonable force to arrest the resisting plaintiff.
Here, however, Plaintiff was not only acquitted of resisting arrest, but there was sufficient evidence for the jury to find that he was no longer obstructing at the time Defendant employed force, including Colaner's own admission that he ""believe[d] [Plaintiff] was offering minimal resistance." (4/21/10 Tr. at 103:8-9). As Plaintiff argues, "[t]he reasonableness of the use of force is assessed against the backdrop of the circumstances presented from the point of view of the officer. At the time Colaner punched and sprayed Wade, he did not [and] could not know whether Wade would ultimately be convicted; all he knew was the underlying facts." (Pl.'s Br. at 43). As will be explained below, the underlying facts, such as Plaintiff having been pulled over for speeding and his untimely responses to Defendant's questions about whether he was a police officer, were not disputed at trial. Thus, Plaintiff's convictions for careless driving and obstruction were irrelevant and there was no error in excluding this evidence.
B. FAILURE TO LATER PERMIT INTRODUCTION OF PLAINTIFF'S CONVICTIONS
Defendant argues that the doctrines of "opening the door" and "completeness" should have led to the admission of Plaintiff's convictions into evidence during the trial. The Court disagrees.
The "opening the door" doctrine, sometimes referred to as curative admissibility, "provides that once a party introduces inadmissible evidence, the opposing party may introduce otherwise inadmissible evidence to rebut or explain the first offering." See U.S. v. Chinnery, 68 Fed. Appx. 360, 366 (3d Cir. 2003) (holding that "[a]s the government does not argue that [a government witness's] testimony on cross-examination was inadmissible, the doctrine of curative admissibility is inapplicable.") (citing Government of Virgin Islands v. Archibald, 987 F.2d 180, 187 (3d Cir. 1993)). Other courts have found that the doctrine also allows admission of otherwise inadmissible evidence to contradict testimony of parties who are attempting to mislead the trier of fact. See United States v. Antonakeas, 255 F.3d 714, 724-725 (9th Cir. 2001) (holding that defendant, by denying any involvement in drugs, opened the door to rebuttal testimony that he sold drugs in the past); United States v. Bailleaux, 685 F.2d 1105, 1110 (9th Cir. 1982) (finding that defendant, by testifying that he had previously confessed to crimes he was convicted of in another state, allowed the government on cross-examination to introduce evidence of underlying facts of that conviction to rebut inference of innocence).
The doctrine of completeness is a related evidentiary doctrine that "states that a witness may be questioned as to the basis, motive, or reasons for an opinion, elicited on cross-examination." Chinnery, 68 Fed. Appx. at 367 (citing Archibald, 987 F.2d at 187-88) ("When a witness testifies on cross- examination as to part of a conversation, statement, transaction or occurrence, the principle of completeness allows the party calling the witness to elicit on redirect examination `the whole thereof, to the extent it relates to the same subject matter and concerns the specific matter opened up.'") (citations omitted). The doctrine of completeness is codified in FED. R. EVID. 106, which provides that "[w]hen a writing or recorded statement or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writing or recorded statement which ought in fairness to be considered contemporaneously with it." U.S. v. Evans, 356 Fed. Appx. 580, 583 (3d Cir. 2009). This codification "guards against the potential for evidence to be misleading when presented out of context. Admission of additional evidence is compelled `if it is necessary to (1) explain the admitted portion, (2) place the admitted portion in context, (3) avoid misleading the trier of fact, or (4) insure a fair and impartial understanding.'" Id. (quoting United States v. Soures, 736 F.2d 87, 91 (3d Cir. 1984)).
Here, Defendant stipulated to the fact that Wade was acquitted of the resisting arrest charge filed against him. (Doc. No. 83, Stipulated Fact D). During trial, Plaintiff did not introduce any inadmissible evidence himself, nor did he testify in any way that would have led the jury to believe he had been acquitted of anything but the resisting arrest charges. In fact, if any statement was made during the trial that conflicted with findings made in state court, it was Defendant's assertion that Wade had resisted arrest despite his stipulation that Plaintiff was acquitted of that charge. (4/21/10 Tr. at 172-173). Further, Defendant distorts the record by claiming that Plaintiff testified contrary to his conviction for careless driving by stating at trial that Defendant "had no reason to pull me over. I didn't do anything[,]" and thus Defendant should have been permitted to reference that conviction. (Def.'s Reply Br. at 15). However, an examination of the record reveals that Plaintiff, in response to a question about Plaintiff's actual response at the time he was pulled over, stated "I'm upset, and I'm asking him that I want a supervisor out at the scene, and he had no reason to pull me over. I didn't do anything." (4/19/10 Tr. at 52:5-8). The other instances referenced by Defendant — namely Plaintiff's counsel's references to Plaintiff's acquittal on resisting arrest charges during his opening statement, closing statement, and cross-examination of Colaner — neither opened the door to introduction of his convictions nor required that they be introduced to give the jury the complete picture. (See 4/19/10 Tr. at 27; 4/21/10 Tr. at 175; 4/23/10 Tr. at 85).
C. EXCLUSION OF CHIEF TURNING'S TESTIMONY
In the Proposed Pretrial Order and Final Pretrial Order, Defendant listed Chief Turning, who had been Chief of Police for the Borough of Tinton Falls, as a liability witness, stating that Turning "has knowledge regarding Plaintiff's employment with the Tinton Falls Police Department, his arrest, and ultimate
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suspension[,] [and] will testify as to the Plaintiff's demeanor, attitude and general behavior as a police officer, to include his various discipline and anger issues." (Doc. No. 62-2, Cunniff Cert., Ex. A. at 11; Doc. No. 83 at 14). Plaintiff filed a motion in limine to exclude Turning's testimony, arguing Turning's testimony should be barred: (1) pursuant to FED. R. EVID. 404(a)-(b) because it constitutes an improper attempt to use Wade's alleged character and prior acts to prove conduct in conformity therewith; (2) pursuant to FED R. EVID. 402 as irrelevant; and (3) pursuant to FED R. EVID. 403 because its prejudicial effect would substantially outweigh its probative value. (Doc. No. 62-3 at 2). At a motion hearing on March 19, 2010, this Court granted the motion to exclude Turning's testimony. (Doc. No. 87). Defendant now argues that this Court, "in barring [D]efendant from calling [Turning], failed to give any consideration to his status as a named defendant, and wrongly allowed plaintiff to argue that the testimony of an individual he had himself chosen to sue was irrelevant." (Def.'s Br. at 47). Defendant also claims that, had Turning been called, he would have "offer[ed] testimony regarding [P]laintiff's medical condition prior to the stop, and to refute [P]laintiff's claims that he now suffers from psychological problems . . . that stem from [Colaner's] actions." (Id.).
The Court finds Defendant's argument unavailing for the same reasons stated by this Court in granting Plaintiff's motion in limine. FED. R. EVID. 404(a) and 404(b) bar Turning's testimony because it is an attempt by Defendant to use Wade's character and alleged prior acts to prove conduct in conformity therewith during the traffic stop. (See Doc. No. 89). Moreover, there was no basis for the Court to find that Turning would have testified in the manner suggested by Defendant. In Turning's sworn June 21, 2007 deposition, he reported that Wade's performance evaluations were all excellent, that Wade was "an excellent officer who performed his duties well, . . . worked very hard[,] . . . [and] was a very good employee." (Doc. No. 121, Dec. of Schramm, Ex A., Turning Dep 55:9-56:1). Indeed, while Turning was initially named as a defendant in this suit, the claims asserted against Turning were related to Plaintiff's employment status at the Tinton Falls Police Department after Plaintiff's arrest; the excessive force claims were not asserted against Turning. In fact, Turning was not present during the incident and had no knowledge of what transpired between Colaner and Wade. Ultimately, Turning was also dismissed as a defendant. Accordingly, Turning's testimony was properly excluded.
D. EXCLUSION OF EVIDENCE OF PLAINTIFF'S PREVIOUS VEHICLE STOPS
Defendant argues that CAD Abstract Reports, which showed that Plaintiff was stopped by police fourteen times in the eighteen months before the traffic stop that gave rise to this action, were "relevant and admissible for numerous permissible purposes," including to show that Plaintiff "had ample knowledge of how properly to conduct himself during a traffic stop . . . [and] was in the habit of disregarding traffic laws." (Def.'s Br. at 48). Here, where the jury was charged with deciding whether the force used by Defendant was reasonable under the circumstances, such evidence is wholly irrelevant. See FED. R. EVID. 402. First, introducing evidence of whether Wade was in the "habit" of disregarding traffic laws would constitute an improper attempt to show that his prior alleged bad acts were in conformity therewith in violation of Rule 404(b) of the Federal Rules of Evidence. See Spain v. Gallegos, 26 F.3d 439, 453 (3d Cir. 1994) (finding that evidence may be excluded when its admission is likely to lead to litigation of collateral issues, thereby creating a side issue which might distract the jury from the main issues). Second, the state of mind of Plaintiff before and during the traffic stop was similarly immaterial.
Defendant also asserts that this evidence was relevant to refute Plaintiff's claim that he continues to suffer psychological ailments, including nightmares and flashbacks, due to the attack. Defendant contends that had the jury known about Wade's prior stops, they may have found that the flashbacks stemmed from those stops. This argument is wholly without merit. There is no link between the previous stops and the one at issue. There is simply no basis upon which to find that the previous stops had any connection whatsoever to Plaintiff's psychological injuries, as there is no indication that any of these stops was anything other than routine stops. Absent some testimony linking the abstracts to Plaintiff's injuries, this evidence of Plaintiff's prior traffic stops was properly excluded.
E. PLAINTIFF'S COUNSEL'S CROSS-EXAMINATION OF DEFENDANT
Defendant next argues that he is entitled to a new trial because he was questioned on cross-examination as to the veracity of the testimony of Plaintiff's wife, Bonnie Wade. Defendant contends his counsel objected on the grounds that such questioning was argumentative. However, an examination of the transcript reveals that Defendant's counsel did not object to this question. He objected to an accusatory half-question asked by Plaintiff's counsel to Defendant, and after the objection was made, did not object again when Plaintiff pursued a less argumentative style of questioning.
Q: You hit him in the shoulder. So you have no explanation why he had a bump on his head?
A: He's lying.
Q: You believe that he is not telling the truth?
A: I absolutely believe he is not telling the truth.
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Q: Just like all the times you told different stories here, between now and the grand jury, between now and your deposition, between now and —
[Defendant's Counsel]: Objection your Honor, Argumentative.
Q: Do you also believe Bonnie Wade is not telling the truth when she felt a bump on the back of his head? Do you believe she's making that up?
A: He put it there possibly. She saw him after the event. There is a gap in time there.
Q: You believe that he deliberately put a bump on the back of his head to make you look bad?
A: I think he is absolutely capable of that, sir.
(4/21/10 Tr. at 167:4-23). It should also be noted that Plaintiff's counsel questioned Defendant about the location of the bump in response to Defendant's belligerent outburst, in which he accused Plaintiff of lying. In light of Defendant's accusation, which his counsel did not seek to strike, Plaintiff's counsel was not in error to question whether Defendant also believed Bonnie Wade, who corroborated her husband's story about the bump, was lying as well. Indeed, Colaner opened the door to being questioned about Bonnie's Wade assertions by testifying that, contrary to Plaintiff's accusations, he actually hit Plaintiff in the shoulder. (See 4/21/10 Tr. at 68:23-67:1, 70:2-5). It was not improper for Plaintiff's counsel to question Colaner about this fact, and once Colaner directly accused Plaintiff of lying, Plaintiff's counsel was not foreclosed from seeking clarification from Defendant.
Defendant's reliance on out-of-circuit authority is unconvincing. In United States v. Richter, 826 F.2d 206, 208-209 (2d Cir. 1987), for instance, the court held that a prosecutor's line of questioning on cross- examination, which compelled the defendant to state that a law enforcement officer was lying, constituted reversible error because, even though defense counsel had not objected to the question, there was evidence that the prosecutor had also later misled the jury. In United States v. Sullivan, 85 F.3d 743, 749-50 (1st Cir. 1996), the court stated that it was improper for counsel to ask one witness to comment on the veracity of the testimony of another witness, but declined to state that the "at most, rhetorical points" scored by the government actually affected the outcome of the trial. More recently, in United States v. Geston, 299 F.3d 1130, 1136-37 (9th Cir. 2002), the court held that "it was plain error for the court to allow the prosecutor to persist in asking witnesses to make improper comments upon the testimony of other witnesses," but did so only after determining that the prosecutor's actions "seriously affected the fairness, integrity, or public reputation of judicial proceedings, or where failing to reverse a conviction would result in a miscarriage of justice." Id. (quoting United States v. Tanh Huu Lam, 251 F.3d 852, 862 (9th Cir. 2001)) (citation omitted). Here, Defendant did not object to the question asked. Further, Plaintiff's counsel did not "persist" in asking witnesses to comment upon the credibility of other witnesses. The allegedly objectionable questioning of Colaner regarding the testimony of Bonnie Wade was limited and provoked by Colaner's angry accusation that Plaintiff had lied about his injury. Mrs. Wade testified consistent with her husband. Obviously, Colaner's accusation called into question not only Plaintiff's testimony, but that of Mrs. Wade, as well. Thus, the exchange was not unduly prejudicial. The Court finds the cited case law unpersuasive, and finds no plain error in the Court's decision to not exclude the limited line of questioning by Plaintiff's counsel.
f. Failure to Instruct the Jury on Non-Compensable Issues
Contrary to Defendants' assertions, Defendant is not entitled to a new trial because the Court did not specifically instruct the jury that Colaner's brandishing of his weapon, Wade's loss of employment, and stress related to the litigation process were not compensable injuries. Before giving jury instructions, this Court specifically noted, "for the record[,] we have spent the last day or so reviewing the jury charges as well as the verdict form," and then asked if either party had any objections before they were submitted to the jury. (4/23/10 Tr. at 3:7-13). Defendant raised no objections. (Id. at 3:14). Defendant made no request that the instructions specifically identify the issues not to be considered by the jury in assessing damages. Thus, Defendant failed to make a timely objection to the jury instructions under FED. R. CIV. P. 51(c), and the Court may only review the instructions for plain error. Hailey v. City of Camden, 631 F.Supp.2d 528, 540 (D.N.J. 2009) ("[W]here . . . Defendants failed to object to the jury instructions . . . the Court reviews for `plain error in the instructions affecting substantial rights.'") (citing FED. R. CIV. P. 51(d)(2); Franklin Prescriptions, Inc. v. New York Times Co., 424 F.3d 336, 339 (3d Cir. 2005)). When reviewing for plain error, courts will grant "a new trial only if the alleged error is fundamental and highly prejudicial, such that the instructions failed to provide the jury with adequate guidance and our refusal to consider the issue would result in a miscarriage of justice." Ryder v. Westinghouse Elec. Corp., 128 F.3d 128, 136 (3d Cir. 1997) (citing Bereda v. Pickering Creek Indus. Park, Inc., 865 F.2d 49, 53 (3d Cir. 1989)). The Court fails to find plain error in the instructions.
The jury was specifically instructed that its duty was to decide if Colaner's use of pepper spray and/or his decision to strike Plaintiff in the head constituted excessive force, and if so, they would have to calculate compensatory damages by considering only injuries alleged by Plaintiff, which the Court described in detail. (4/23/10 Tr. at 25-27). Thus, the Court explicitly instructed the jury as to the only actions which it
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could consider in reaching its decision. Indeed, the Court is not obligated to mention every conceivable fact that the jurors should not consider as opposed to instructing them as to what they may consider. During the entirety of Plaintiff's counsel's summation, he did not mention any non-compensable factors. For example, Plaintiff's counsel, when arguing for compensatory damages, stated:
The next question you are going to have to decide is damages. This is a tricky question. It's hard to put a number on physical health. It's even harder to put a number on your mental health. You have to decide what it's worth not to spend your life on high alert, anxious and afraid you are going to be attacked. What's it worth not to have nightmares and flashbacks? What's it worth not to have trouble sleeping and eating? What's it worth not to have headaches? What's it worth not to be afraid to drive long distances and drive on state highways? What's it's worth not to be afraid and get that pit in your stomach, we all know what that feeling is, and have trouble breathing every time you see the state police? What's it's worth not to think about it every day? What's it worth not to be withdrawn from your friends and not to enjoy life?
(Id. at 66:15-67:6). The argument for damages revolved around the specific emotional harm suffered by Plaintiff. Additionally, throughout the trial, when testimony regarding non-compensable issues was elicited — often by Defendant's counsel in an attempt to show that Plaintiff's psychological injuries were not the result of Colaner's use of excessive force — Defendant had countless opportunities to request a limiting instruction pursuant to FED. R. EVID. 105, but failed to do so. (4/19/10 Tr. at 58:4-5; 4/20/10 Tr. at 53:3- 9; 4/21/10 Tr. at 133:11-14; 4/22/10 Tr. at 7:5-6, 15:5-16:10). The instructions given do not constitute plain error.
G. STATEMENTS MADE BY PLAINTIFF'S EXPERT
Lastly, Defendant argues that he is entitled to a new trial because Plaintiff's expert, Williams, testified improperly and erroneously. Defendant never objected to any of Williams' testimony. Thus, he waived his objections, and the Court reviews only for plain error. See Archibald, 987 F.2d at 184 (citations omitted).
Defendant identifies approximately twenty instances of improper testimony from Williams that Defendant contends should have been stricken. For example, Defendant identifies five statements made by Williams that Defendant asserts were not based on Williams' personal knowledge, and therefore were in violation of FED. R. EVID 602. Defendant's counsel offered no objections to the testimony that he now challenges. Further, he identifies only two cases for his proposition that Williams' "testimony should have been stricken as a series of impermissible net opinions having no capacity to enlighten, but tremendous capacity to confuse and prejudice." (Def.'s Br. at 53). Both cases are from out-of-circuit and inapposite to the present case because the parties made timely objections to the testimony in those cases, and thus the courts were not reviewing for plain error. See Thompson v. City of Chicago, 472 F.3d 444, 458 (7th Cir. 2006); White v. Geradot, 2008 U.S. Dist. LEXIS 72436, *14-*20 (N.D. Ind. 2008). Having reviewed each instance of Williams' allegedly improper testimony, the Court finds that, even when taking the statements in their totality after giving no credence to the arguments made in opposition by Plaintiff, Williams' testimony does not rise to the level of plain error.
Additionally, Defendant's argument that Williams erroneously "provided the jury with a flatly incorrect legal standard by suggesting that [the Attorney General's Policy] serves as the ultimate test for reasonableness[,]" (Def.'s Br. at 53), is belied by the transcript of his testimony. Williams never held out the Attorney General's Policy — the same policy that Defendant has attempted to use to justify his use of force — as determinative of whether Defendant used excessive force as a matter of law. On redirect, Plaintiff's counsel read from the Policy, "It is the policy of the state of New Jersey that law enforcement officers will use only that force which is objectively reasonable and necessary[,]" and asked Williams if he agreed with this standard, and if this was the standard to which he had testified. (4/20/10 Tr. at 76:8-17). Williams replied in the affirmative to both questions. (Id. at 76:14-17). When Plaintiff's counsel asked Williams if, in his opinion, Colaner had complied with the Policy, he replied in the negative. (Id. at 76:18- 20). The language "objectively reasonable and necessary" is either less broad or equivalent to the actual jury instructions, which instructed the jury to determined whether Defendant's actions were "objectively reasonable in light of the facts and circumstances confronting" him at the time. Indeed, that is the standard the law requires; the fact that it was indicated in the State's Policy merely reflects the state of the law, and the Policy does not state a different standard. As an expert, Williams was permitted to answer the question pursuant to FED. R. EVID. 704, and thus no plain error is evident in his testimony.
Defendant's motion for a new trial is denied.
3. DEFENDANT'S MOTION FOR REMITTITUR
Having denied Defendant's motions for judgment as a matter of law and a new trial, the Court addresses Defendant's last argument, which is that, on their face, both the jury's $500,000 award of compensatory damages and $4.5 million award of punitive damages are excessive and conscience-shocking, and thus both awards should be vacated or steeply remitted.
"[T]he remittitur is well established as a device employed when the trial judge finds that a decision of the jury is clearly unsupported and/or excessive." Cortez v. Trans Union, LLC, Nos. ___ F.3d ___, 08-2465, 08-2466, 2010 WL 3190882, *18 (3d. Cir. 2010) (quoting Spence v. Bd. of Educ. of Christina Sch. Dist.,
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806 F.2d 1198, 1201 (3d Cir. 1986)); see also Keenan, 983 F.2d at 469 ("We may grant a new trial or remittitur only if the verdict awarded by the district court is so grossly excessive as to shock the judicial conscience.") (citation omitted); Gumbs v. Pueblo Intern., Inc., 823 F.2d 768, 771-773 (3d. Cir. 1987) ("[O]ur review of this question is severely limited . . . [While] [a] jury has very broad discretion in measuring damages[,] . . . a jury may not . . . treat an injury as though it were a winning lottery ticket. There must be a rational relationship between the specific injury sustained and the amount awarded.")
As the Third Circuit has explained, while the term `remittitur' is often used by courts "to refer to any reduction in a damages award, including one which is imposed to satisfy constitutional due process concerns, the term is actually far more specific." Id. If a court determines that a verdict is constitutionally excessive, it has no choice but to reduce the verdict "so that it conforms to the requirements of the due process clause." Id. at *19 (quoting Johansen v. Combustion Engineering, Inc., 170 F.3d 1320, 1331 (11th Cir. 1999)) (citation omitted). In contrast, a court imposes remittitur when it believes the jury's award is unreasonable in light of the facts that were before them. Id. The Third Circuit has advised, however, that
the remedies available to a court when reducing a jury award based upon due process concerns are not necessarily the same as those available when a court exercises its discretion because it believes the amount of the award is inconsistent with the evidence in a case. The latter is conditional, and the court must offer a new trial as an alternative to a reduction in the award in to avoid depriving the plaintiff of his/her Seventh Amendment right to a jury trial.
Id. (citing Hetzel v. Prince William Cnty., 523 U.S. 208, 211, 118 S.Ct. 1210, 140 L.Ed.2d 336 (1998) (per curiam)). When, however, a Court reduces a damages award that it finds constitutionally excessive, the award is reduced as a matter of law without interference with the plaintiff's Seventh Amendment right to have the jury determine the findings of fact. Id.
A. REMITTITUR OF COMPENSATORY DAMAGES
"Unlike punitive damages that are intended to punish and deter, `[c]ompensatory damages are intended to redress the concrete loss that the plaintiff has suffered by reason of defendant's wrongful conduct.'" Cortez, 2010 WL 3190882, at *21. Defendant seeks substantial remittitur of the jury's award of $500,000 in compensatory damages. Defendant argues that the damage award is far in excess of what courts have upheld in similar excessive force cases, and largely cites cases from the Second Circuit that are collected in DiSorbo v. Hoy, 343 F3d. 172, 184-185 (2d Cir. 2002). See Def. Br. at 34-36. Moreover, Defendant argues, in similar cases "involving emotional distress claims for minor physical injuries," courts within this district have been hesitant to uphold large awards. (Def.'s Br. at 37) (citing "Glass, supra, 2008 U.S. Dist. LEXIS 71241 (in which Judge Simandle remitted a $250,000 emotional distress award to $50,000); Lyles, supra, 371 F.Supp.2d at 604-05; cf. Blakey, supra, 992 F.Supp. at 741 (remitting $500,000 emotional distress award to $250,000 where the plaintiff presented limited expert testimony and had limited treatment for non-permanent emotional distress)."). Defendant argues that here, where the jury has awarded $500,000 in compensatory damages, "as compensation for trauma arising from a six- second tussle in which plaintiff was a very active participant, resulting in a knot on his head and stinging scalp, the award is shocking and excessive and should be vacated or remitted." (Pl.'s Br. at 37).
Plaintiff argues that the jury's compensatory damage award is supported by the evidence. This evidence includes proof of temporary physical harm he suffered at the hands of Plaintiff, as well as evidence of the pervasive psychological injuries he continues to suffer from, including persistent nightmares and flashbacks, recurring headaches, difficulty eating and sleeping, a loss of interest in friends and the enjoyment of life, a fear of police, and post-traumatic stress disorder. (Pl.'s Br. at 34). Plaintiff contends that, "[a]t only 36 years old, Wade will likely have to cope with these psychological symptoms for the rest of his life." Plaintiff takes issue with Defendant's reliance on DiSorbo v. Hoy, 343 F.3d 172 (2d Cir. 2003) and the other Second Circuit cases discussed therein, noting that while the Third Circuit has made clear that a "court may not require a reduction in the amount of the verdict to less than the `maximum recovery' that does not shock the judicial conscience, Gumbs, 823 F.2d at 774, the law in the Second Circuit permits remittitur of a jury award that falls "within a reasonable range" of awards, DiSorbo, 343, F.3d at 185-86. Pl.'s Br. at 36.
The Court finds Defendant's reliance on the out-of-circuit cases misplaced in light of the clear instruction from the Third Circuit that remittitur may only reduce the award to the maximum recovery that does not shock the judicial conscience. Clearly, the Second Circuit precedent cited by Defendant is inapposite since it uses a different standard. Moreover, upon review of amounts made and approved in the Third Circuit precedent, the Court finds that the record supports the compensatory damage award here. In Evans v. Port Authority of N.Y. and N.J., 273 F.3d 355 (3d Cir. 2001), an employment discrimination lawsuit, the Third Circuit approved a district court's decision to order remittitur of a $1.15 million award of compensatory damages to $375,000. As Plaintiff points out, the $375,000 compensatory damage award in Evans, when adjusted for inflation, is approximately equal to $462,000 in current dollars. (Pl.'s Br. at 35). See also, Gagliardo v. Connaught Labs., 311 F.3d 565, 573-74 (3d Cir. 2002) (affirming denial of motion for new trial and remittitur of $1.55 million damage award for pain and suffering based on testimony that plaintiff, who was afflicted with MS, changed from "happy and confident" to "withdrawn and indecisive" as a result of employment discrimination); Ridley v. Costco Wholesale Corp., 217 Fed. App'x 130, 136-37 (3d Cir. 2007) (affirming $200,000 emotional distress damages award based on testimony of plaintiff and spouse that discrimination caused plaintiff to have difficulty sleeping, weight loss, social
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withdrawal and loss of self-esteem).
In Glass v. Snellbaker, 2008 WL 4371760 (D.N.J. September 17, 2008), where a police officer's First Amendment rights were violated, the court remitted a $250,000 emotional distress to $50,000. Defendant argues that like the plaintiff in Glass, Wade suffered only minor physical injuries and non-permanent emotional distress. Unlike the Glass plaintiff, however, who "reported no changes in sleep or other emotional effects," "did not testify that he suffered any lasting emotional distress or other non-economic injury" and failed to provide testimony regarding the emotional impact of the defendants' conduct or continuing emotional harm, here, Plaintiff presented substantial testimony regarding the emotional impact that Defendant's conduct has had on his daily life and that these effects continue today.
The Court has already determined that the record amply supports the jury's finding of excessive force. Clearly, in light of the damages awards, the jury found credible Wade's testimony, as corroborated by his wife, that as a result of Defendant's use of excessive force Wade suffers persistent nightmares and flashbacks, suffers recurring headaches, has difficulty eating and sleeping, has lost interest in the enjoyment of life and is afraid to drive long distances. Viewing the facts in the light most favorable to Wade, the Court finds that the jury could reasonably have attributed significant emotional distress resulting from the incident and found that he will likely continue to suffer from these symptoms. The Court recognizes that while the compensatory damage award was generous, it is supported by the evidence and does not shock the judicial conscience.
B. REMITTITUR OF PUNITIVE DAMAGES
"The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor." State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003) Defendant contends that the jury's $4.5 million punitive award is so grossly excessive that it violates his right to due process. "In Campbell, the Supreme Court summarized the three guideposts a court reviewing punitive damages should consider: "(1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases." Cortez, 2010 WL 3190882, at *26 (quoting Campbell, 538 U.S. at 418).
1. DEGREE OF REPREHENSIBILITY
"The Supreme Court has recognized that the degree of reprehensibility of the defendant's conduct is "[t]he most important indicium of the reasonableness of a punitive damages award." CGB Occupational Therapy, Inc. v. RHA Health Services, Inc., 499 F.3d 184, 190 (3d Cir. 2007) (quoting Campbell, 538 U.S. at 419). In evaluating a jury's punitive damage award under this first guidepost, courts "must consider whether: "[1] the harm caused was physical as opposed to economic; [2] the tortious conduct evinced an indifference to or reckless disregard of the health or safety of others; [3] the target of the conduct had financial vulnerability; [4] the conduct involved repeated actions or was an isolated incident; and [5] the harm was the result of intentional malice, trickery, or deceit, or mere accident." CGB Occupational Therapy, Inc., 499 F.3d at 190 (quoting Campbell, 38 U.S. at 419).
Here, it is clear that the evidence supports a finding of three of the five subfactors. Testimony supports a finding that Wade suffered physical as well as emotional harm, Defendant's conduct evinced an indifference to the health and safety of others; and the harm was the result of malice. Plaintiff contends that this latter guidepost alone supports the size of the award. The Court, however, is not convinced. Although the evidence supports a finding of intentional malice, the tortious conduct is limited to a single isolated incident. Based on this Court's consideration of this reprehensibility guidepost, it would appear that Defendant's conduct although reprehensible is not sufficiently egregious to warrant a punitive damages award of $4.5 million. Accordingly, the Court turns to the remaining guideposts.
2. RATIO OF PUNITIVE DAMAGES TO HARM
"The second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff." CGB Occupational Therapy, Inc., 499 F.3d at 192 (quoting Gore, 517 U.S. at 580). "The Supreme Court has been `reluctant to identify concrete constitutional limits on the ratio,' instead emphasizing that `the precise award in any case . . . must be based upon the facts and circumstances of the defendant's conduct and the harm to the plaintiff.'" Id. (quoting Campbell, 538 U.S. at 424-25). "It has cautioned, however, that `in practice fee awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." Id.
Defendant argues that "[b]y any rational measure, the jury's award of compensatory damages was `substantial' here, and the jury's 9:1 punitive-to-compensatory ratio excessive." (Pl.'s Br. at 39). Plaintiff counters that the 9:1 ratio is constitutionally permissible as it falls within the single-digit ratio. Citing CGB Occupational Therapy, Inc., 499 F.3d at 193, Plaintiff contends that the Third Circuit has imposed a remitted punitive damages award with approximate 7:1 punitive to compensatory damages ratio. Plaintiff
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argues that given Defendant's conduct and the resulting harm to Plaintiff, the single-digit ratio of 9:1 does not offend due process. In support of that assertion, Plaintiff cites to out-of-circuit caselaw in which courts have upheld larger ratios in cases involving the vindication of constitutional rights. (Pl.'s Br. at 40 (citing Romanski v. Detroie Entm't, LLC, 428 F.3d 629, 646 (6th Cir. 2005), cert. denied, 549 U.S. 946 (2006) (in § 1983 case, ordering remittitur to a ratio of 2,150:1) Williams v. Kaufman County, 352 F.3d 994, 1016 (5th Cir. 2003) (affirming 10:1 ratio); Lincoln v. Case, 340 F.3d 283, 293 (5th Cir. 2003) (remitting to ratio of 110:1)).
As Defendant points out, however, the few out-of-circuit cases cited by Plaintiff involving analogous torts did not award punitive damages even approaching the magnitude of the $4.5 million award here. See Romanski v. Detroie Entm't, LLC, 428 F.3d 629 (remitting the punitive award of $875,000 to $600,000, noting that the high ratio was sustainable given that the $279.05 compensatory damage award was "unusually low"); Williams v. Kaufman County, 352 F.3d 994 (affirming $15,000 punitive award where compensatory award for unlawful detention and invasion of privacy based on strip search was $100); Lincoln v. Case, 340 F.3d 283 (remitting punitive award from $100,000 to $55,000 where compensatory award in Fair Housing Act case was only $500). The $4.5 million punitive damage award here does not bear a reasonable relationship to the reprehensibility of Defendant's use of excessive force and results in an unsustainable damages-to-harm ratio of 9:1. The Court is cognizant of the fact that the ratio falls within the single-digit range, nevertheless, the Court finds that "it crosses the line into constitutional impropriety." CGB Occupational Therapy, Inc., 499 F.3d at 193. While the Supreme Court has held that ratios in excess of the single-digit range "may comport with due process in cases where `a particularly egregious act has resulted in only a small amount of economic damages,' or where `the injury is hard to detect or monetary value of noneconomic harm might have been difficult to determine'", Id. (quoting Campbell, 538 U.S. at 425), the Court finds the 9:1 ratio here unsustainable given the $500,000 compensatory award that, while not excessive, is at the upper limit of what the evidence will bear.
The Third Circuit has held that it is uncertain "as to how to properly apply" the third guidepost set forth in Campbell. In CGB Occupational Therapy, Inc., 499 F.3d at 190, the Third Circuit confined its analysis to the first two guideposts, noting that the third guidepost was not instructive in the tortious interference case. Plaintiff argues that Defendant has improperly applied this third guidepost, analyzing comparable punitive awards in similar cases, rather than civil penalties authorized in comparable cases.
Regardless of the proper application of the third guidepost, the Court is convinced that under the first two guideposts, the punitive damage award cannot stand. In determining the constitutional limit of a punitive damages award, the Third Circuit has held that the court "must accord `a measure of deference' to the jury's award" and "is obliged to `decrease the award to an amount the evidence will bear, which amount must necessarily be as high — and may well be higher — than the level the court would have deemed appropriate if working on a clean slate.'" CGB Occupational Therapy, Inc., 499 F.3d at 193 (quoting Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224, 231 (3d Cir. 2005)). The evidence here will simply not support a $4.5 million punitive award. In arriving at the appropriate punitive damage award, the Court may take into consideration the financial strength of Defendant. As the Third Circuit noted in CGB Occupational Therapy, Inc., 499 F.3d at 193, "what `may be awesome punishment for an impecunious individual defendant . . . [may be] wholly insufficient to influence the behavior of a prosperous corporation.' Continental Trend, 101 F.3d at 641; see Campbell, 538 U.S. at 427-28, 123 S.Ct. 113 (observing that consideration of defendant's wealth is not `unlawful or inappropriate' so long as it is not used to `make up for the failure of other factors, such as 'reprehensibility,' to constrain significantly an award that purports to punish a defendant's conduct.') (citation omitted)." While Defendant's use of excessive force, as found by the jury, was indeed reprehensible, a punitive award of $4.5 million is not supportable here where Defendant testified to a net worth of approximately $100,000. Given a compensatory award which reaches the upper bounds and Defendant's limited net worth, the Court finds that a punitive award in the amount of $2 million represents the constitutional upper limit in this case.
FOOTNOTES
1. At the close of trial, and before submitting the case to the jury, the Court dismissed defendant Michacl Ryan ("Ryan"), a New Jersey State Trooper, who was present at the time of the incident between Plaintiff and Defendant, from the case and granted him judgment as a matter of law pursuant to FED. R. CIV. P. 50(a). (4/22/10 Tr. at 136-138). The claim against Ryan was that he aided and abetted Colaner.
2. A copy of the video was introduced into evidence as J-1. See 4/19/10 Tr. at 47.
3. The lengthy background and procedural history of this case is more fully set forth in previous Opinions and orders of this Court issued on March 20, 2009 (Doc. No. 40), June 17, 2009 (Doc. No. 50), and April 13, 2010 (Doc. No. 88), which are hereby incorporated by reference.
4. Prior to trial, this Court took the following actions: (1) two defendants were dismissed from the case, leaving Colaner and Ryan as the remaining defendants; and (2) dismissed Plaintiff's deliberate indifference claim against Colaner and Ryan but permitted Plaintiff to proceed with his claims of excessive force against the pair. In that context, the Court limited the excessive force claim to Colaner's use of pepper spray and his physical strike against Wade. Based on qualified immunity, the Court dismissed Plaintiff's claim that Colaner used excessive force by brandishing his gun during the arrest.
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5. The Policy specifically provides that a law enforcement officer may use physical or mechanical force only when the officer reasonably believes that it is immediately necessary at the time: (a) to overcome resistance directed at the officer or others; (b) to protect the officer, or a third party, from unlawful force; (c) to protect property; or (d) to effect other lawful objectives, such as to make an arrest. (Id. at 42-43). Physical force is defined to include actions such as "wrestling a resisting subject to the ground," or "striking with the hands or feet." (Id. at 41). Likewise, mechanical force is defined to include spraying with a chemical agent. (See Id.).
6. John J. Ryan, the defense's expert witness, testified regarding the Error! Main Document Only.police's procedures with respect to the use of force during an arrest. (See 4/22/10 Tr. at 63-67). Essentially, on direct, Ryan opined that Colaner's use of force was consistent with standard police procedures. (Id. at 69). Notably, on cross, contrary to the depictions of the video, Ryan testified that Wade was non-complaint throughout the incident; that instead of moving his right arm behind his back, Wade moved his arm away from Colaner (See Id. at 78); that instead of striking Wade with his fist, Colaner struck Wade with his forearm (See Id. at 82-83); and that although Wade only offered minimal resistance, Colaner was justified in using force because Wade had a gun strapped to his ankle (See Id. at 81).
7. Defendant cites many out-of-Circuit cases that are factually dissimilar to the case at hand; some are even helpful to Plaintiff because, in those cases, the plaintiffs were actively or passively resisting arrest over a prolonged period of time, and force was used after the issuance of warnings. See Meecham v. Frazier, 500 F.3d 1200, 1204-1205 (10th Cir. 2007) (no excessive force when, during a traffic stop that turned into a "fifty-minute ordeal requiring arrest" because the plaintiff refused to answer questions, stop talking on her cell phone, or get out of her car, and after repeated warnings, officers used pepper spray to bring the woman out of the car and onto the ground); Forrester v. City of San Diego, 25 F.3d 804, 807-08 (9th Cir. 1994) (ample evidence supported the jury's conclusion that officers who used pain compliance arrest techniques on trespassing protestors, but did not deliver any physical blows or cuts, had not used excessive force); Draper v. Reynolds, 369 F.3d 1270, 1278 (11th Cir. 2004) (not excessive force for police officer to use taser during a traffic stop where plaintiff's hostility, belligerence, refusal to comply with several requests from the officer created a "tense and uncertain situation," and officer's use caused no injury); Crowell v. Kirkpatrick, 667 F. Supp. 2d. 391, 410 (D. Vt. 2009) (no excessive force where officers, forty minutes after arriving to a property and spending time trying to use less intrusive means of arrest, tased protestors). Further, Defendant cites Phillips v. James, 422 F.3d 1075, 1083-1084 (10th Cir. 2005) for the proposition that an "officer's use of deadly force was found objectively reasonable where plaintiff resisted and was armed . . . ." (Def.'s Br. at 17). As Plaintiff correctly points out, this is an "egregious characterization" of Phillips, where "the drunk and medicated [plaintiff] had locked himself in the bedroom with numerous firearms and refused to come out, repeatedly threatened to shoot the officers, and stated that he had pulled a weapon on officers in the past. After the officers heard sounds of a shotgun being chambered, and tried to negotiate with the suspect for an hour, the suspect came outside holding a gun, took note of the officers stationed around the house, went back inside the house, propped up a window in apparent preparation of shooting at the SWAT team, and advised the officers that he had a clean shot at them." (Pl.'s Br. at 17-18) (citing Phillips, 422 F.3d at 1078-79).
8. Indeed, this Court, in Hendrix v. City of Trenton, No. 06-3942, 2009 U.S. Dist. LEXIS 120718, at *24- 30 (D.N.J. Dec. 29, 2009), construing Third Circuit precedent, explained that there are circumstances where despite a plaintiff having physically provoked an officer first, because the plaintiff was no longer a threat to that officer's safety, the officer's assaultive behavior would be deemed excessive or gratuitous. In other words, at the time the officer had applied unreasonable or excessive force, the plaintiff was already subdued by the officer. Id. at *24; see Nelson v. Jashurek, 109 F.3d 142, 145-46 (3d Cir. 1997); Green v. New Jersey State Police, 246 Fed. Appx. 158, 162 n. 8 (3d Cir. 2007); Lora-Pena v. FBI, 529 F.3d 503, 505-06 (3d Cir. 2008).Error! Main Document Only.Error! Main Document Only.
9. Defendant contends that the instruction "[i]f you find it more likely than not that [Colaner] acted maliciously or wantonly in violating Gary Wade's federal rights, then you may award punitive damages against [Colaner]" (4/23/10 Tr. at 29) implored the jury to calculate punitive damages and "may even have implied, unintentionally, that Trooper Colaner had, in fact, violated plaintiff's rights." (Def.'s Br. at 27). Because Defendant did not object to the language, those instructions are subject to review only for plain error. See FED. R. CIV P. 51. There is no error, let alone plain error, in those instructions. (Compare 4/23/10 Tr. at 28-31 with Third Circuit Model Civil Jury Instructions, § 4.8.3 (Section 1983 — Damages — Punitive Damages)). Additionally, Defendant cannot successfully argue that the jury was prejudiced on the basis that, when it deliberated on the jury verdict form for the first time, it was unaware of Defendant's financial status. See Keenan, 983 F.2d at 472 n.12 (citing Bennis v. Gable, 823 F.2d 723, 734 n. 14 (3d Cir. 1987)) ("We reject the defendants' contention that evidence of their financial status was a prerequisite to the imposition of punitive damages."). Even if this decision was in error, the Court subsequently rectified it by permitting Defendant to testify regarding his net worth, and instructing the jury that it was permitted to consider that testimony in calculating damages. (See 4/23/10 Tr. at 88-90).
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http://www.leagle.com/decision/In%20FDCO%2020101230A05[5/4/2015 3:10:57 PM] Honorable Madeline Cox Arleo is a judge of the United States District Court for the District of New Jersey. Judge Arleo was previously a United States Magistrate Judge.
A Fellow of the American Bar Association, Judge Arleo has been an Advisor to the Historical Society of the United States District Court for the District of New Jersey and to the Association of the Federal Bar for the District of New Jersey, and has served on the Paralegal Studies Advisory Board at Montclair State University. Prior to her appointment, Judge Arleo was a Partner at Tompkins, McGuire, Wachenfeld & Barry, and was associated with the law firm of Clapp & Eisenberg. She has been Secretary to the District V-A Ethics Committee and an Adjunct Professor of Law at Seton Hall University Law School.
Judge Arleo received her undergraduate degree from Rutgers College and her Master’s degree from the Eagleton Institute of Politics, Rutgers University. She is a summa cum laude graduate of Seton Hall University School of Law, where she served as Editor-in-Chief of the Law Review. She was a law clerk to the Honorable Marie L. Garibaldi, New Jersey Supreme Court.
FRANK M. CIUFFANI, PJ, CH
Professional Experience
September 2008 to Present - Presiding Judge Chancery-Middlesex
2003 – 2008 Superior Court Judge-Middlesex County
1974 – 2003 Wilentz, Goldman & Spitzer Specialized in Commercial Litigation and Employment Law
1994 Re-Certified Civil Trial Attorney
1987 Certified Civil Trial Attorney
1984 Chairman, District XIII Ethics Committee
1973-1974 Assistant Prosecutor-Middlesex County
Education
1972 Juris Doctorate, Villanova University
1969 Bachelor of Arts, Cum Laude University of Notre Dame
1965 Perth Amboy High School
• Admitted to Practice before the United States Supreme Court and Second Circuit Court of Appeals • Member, Supreme Court CDR Committee • Member, Middlesex County Bar Association (1973 – Present) • Member, State Bar Association • Elected to the American Bar Fellowship (restricted to 1/3 of 1% of all attorneys in the United States)
The Honorable Harriet Derman
DiFrancesco Bateman T: (908) 757-7800 – Ext. 134 Coley Yospin Kunzman Davis Lehrer & Flaum, P.C. F: (908) 757-8039 Attorneys at Law [email protected] 15 Mountain Boulevard, New Jersey 07059 www.newjerseylaw.com
CURRENT POSITION Of Counsel with DiFrancesco, Bateman, Coley, July 2009 to Present Yospin, Kunzman, Davis, Lehrer & Flaum, P.C.
Provides alternative dispute resolution, case management and special master services
Successfully mediated and/or arbitrated coverage disputes; personal injury; shareholder oppression; employment litigation, including sexual harassment and conscientious employee protection, and discrimination cases; medical and dental practice disputes; municipal services and prerogative writ actions; will contests; breach of fiduciary duty; undue influence; land disputes; contract actions; and professional malpractice matters
Lectured on mediation practice to attorneys for Continuing Legal Education (CLE) credits
PROFESSIONAL ACCOMPLISHMENTS Highest ranking of Martindale-Hubbell, Peer Review Rating (AV Preeminent) Fellow of The American College of Trust and Estate Counsel Member of the Editorial Board of the New Jersey Law Journal
APPOINTMENTS Appointed by Governor Chris Christie to Judicial Advisory Panel to review candidates for appointment to the Superior Court
Appointed by Chief Justice Stuart Rabner to Supreme Court Committee on Dispute Resolution
MEDIATION CREDENTIALS Approved Federal Mediator Approved International Institute for Prevention & Resolution (CPR) Mediator
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JUDICIAL EXPERIENCE Chancellor and Presiding Judge of General Equity & Probate September 2006 to June 30, 2009
Served as arbiter of corporate and securities law disputes Supervised and adjudicated many significant business and corporate Issues including
Shareholder derivative suits, claims of breach of the business judgment rule and breach of fiduciary duty by members of the Board of Directors Allegations of misrepresentations in securities filings, including proxy documents Trade secrets and confidential information Restrictive covenants, including insurance businesses, medical and dental practices, brokers and engineers Shareholder, partnership, and limited liability company matters and dissolutions
Managed real estate matters, such as quiet title actions and reformation of recorded instruments
Dealt with issues impacting intervivos trusts
Served as foreclosure judge for three (3) counties
Served as Probate Judge, trying and settling hundreds of will contests and matters dealing with estates of decedents and incompetents and testamentary trusts
Member of Supreme Court Committee on Judicial Performance
Presiding Judge of Civil Division September 2003 to September 2006
Supervised civil trial judges of Somerset, Hunterdon and Warren Counties
Managed and/or settled multimillion dollar EIFS/stucco construction defect cases; multi-party wrongful death actions; multi-party assault & battery and Dram Shop liability cases; multi-party insurance coverage matters; complex commercial litigation; wrongful death malpractice actions; and automobile, fall down and other personal injury matters
Conducted trials, settlements hearings, and motions in such areas as contract disputes, breach of fiduciary duty, employment discrimination, personal injury, products liability, malpractice, construction defect and injury and insurance coverage
Settled thousands of cases of every variety on the Civil Docket
Member of Supreme Court Committee on Civil Practice (Chairperson of Subcommittee on Employment Discrimination)
Member of Supreme Court Committee on Voir Dire in the Courts
Judge of the Superior Court of New Jersey February 1998 to September 2003
Conducted civil trials, settlements, hearings, and motions as a civil judge
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Served as Replevin Judge
Adjudicated family disputes (dissolution, equitable distribution, custody, visitation and relocation) as trial level judge
Authored hundreds of opinions Member of Supreme Court Committee on Family Practice Member of Supreme Court Committee on Civil Practice
EXECUTIVE EXPERIENCE Chief of Staff to Governor Christine Todd Whitman July 1996 to January 1998
Primary gatekeeper and adviser to Governor Christine Todd Whitman of New Jersey
Oversaw implementation of Governor’s policy initiatives and agenda
Chief Counsel to Governor Christine Todd Whitman May 1996 to July 1996
Served as chief lawyer to Governor Christine Todd Whitman on all legal and legislative issues
Advised the Governor on such issues as securing passage of state budget and Governor's legislative initiatives
Interacted with Legislature to reach consensus on legislation
Recommended gubernatorial approval or vetoing of bills of Legislature
Served as solicitor to Governor with respect to formulation and implementation of highest ethical standards for the Governor and her staff
Facilitated all gubernatorial appointments, including members of the judiciary
Commissioner of Department of Community Affairs February 1994 to May 1996
Oversaw, as Cabinet level officer, multiple divisions, including Local Government Services (responsible for all municipal and local authority budgets and dispensing millions of dollars in municipal aid), Codes and Standards, Fire Safety, Housing, Hispanic Center, and Aging and Senior Services
Managed more than 1,000 employees and greater than one billion dollar annual budget
Served as Chairperson of New Jersey Housing and Mortgage Finance Agency, annual issuer of approximately $300 million dollars in bonds, whose portfolio exceeded $3 billion in mortgage loan assets
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Served as Chairperson of Hackensack Meadowlands Development Commission, which oversees reclamation, planning, and development of 21,000 acres in the Hackensack River Meadowlands
Served as Chairperson of Council on Affordable Housing
Served as Board Member of the New Jersey Sports and Exhibition Authority
LEGISLATIVE EXPERIENCE Member, New Jersey General Assembly, 18th District January 1992 to January 1994
Elected in 1992 and 1994 to represent New Jersey’s 18th District as Assemblywoman
Served as Majority Whip in 1994 and Assistant Majority Whip from 1992 to 1994
Member of Judiciary Law and Public Safety Committee
Vice-Chairwoman of Joint Legislative Committee on Economic Recovery
Sponsor of tax and business legislation recognizing S Corporation status for New Jersey businesses, authorizing Limited Liability Companies and authorizing tax credits for the creation of jobs
Sponsor of additional legislation, including rape shield law, mandatory seat belts on school buses, reformation of construction lien law, and campaign finance reform
Reached consensus on legislation with different constituencies
LEGAL EXPERIENCE Partner, Weiner, Hendler & Derman, P.A. 1982 to 1994
Practiced as name partner in boutique law firm specializing in tax, securities, corporate operations and governance, contract drafting and negotiation, real estate, estate planning and administration, and commercial litigation
Oversaw financial reporting for clients, including security filings with Securities and Exchange Commission and New Jersey Division of Securities
Counseled clients with respect to disclosures and corporate governance and process
Counseled clients on legally minimizing and deferring payment of federal and state taxes, including the use of off-shore tax entities
Advised privately and publicly held corporations on transactions, meetings, process, and planning
Significant legal experience in:
Deferred compensation, pension and profit sharing plans and stock option plans and recommending and implementing appropriate employee benefit plans for clients Page 4 of 7
Real estate law including preparation and implementation of Planned Real Estate Development projects
Tax and securities law, oil and gas partnerships and medical equipment partnerships
Estate planning and succession planning for family businesses and estate administration
Operation and termination of medical and dental practices
CORPORATE BOARD EXPERIENCE 1989-1994
Member of Board of Directors of publicly traded New Brunswick Scientific, Edison, New Jersey
NON-PROFIT BOARD 2009 to Present
Member of Board of Directors of Opportunity Project, Inc., 80 East Willow Street, Millburn, New Jersey 07041
A clubhouse program empowering people with brain injury
FACULTY PRESENTATIONS
Contested Guardianships – 2011 - New Jersey Institute for Continuing Legal Education
Mediation and Settlement Techniques of a Business Dispute – 2011 – New Jersey Institute for Continuing Legal Education
Summary Judgment Practice - 2011 - The Sidney Reitman Labor & Employment Inn of Court
Chancery Practice - 2008 - New Jersey State Bar Association, Equity Section
Medicine for Judges - 2006 - Judicial College
Hot Topics in Civil Trials - 2000 - New Jersey Institute for Continuing Legal Education
ACTIVITIES
President, Middlesex County Bar Association
First Vice President, Tax Section of the New Jersey State Bar Association
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Member, Board of Directors, New Jersey Lawyer, weekly newspaper sponsored by State Bar Association
Member, Supreme Court of New Jersey Ethics Committee for Middlesex County
Secretary, Fee Arbitration, Middlesex County
MEMBERSHIPS
New Jersey State Bar Association Dispute Resolution, Labor and Employment Law, Real Property, Trust and Estate Law, and Taxation Sections Equity Jurisprudence, Construction Law, Business & Commercial Litigation (including subcommittees studying creation of a separate business court or track and amendment of limited liability company law) Committees The Marie Garibaldi Alternative Dispute Resolution Inn of Court The Joseph Halpern-David Furman Inn of Court The New Jersey Association of Professional Mediators Somerset County Bar Association Middlesex County Bar Association Retired Judges Association
HONORS AND AWARDS
Retail Merchants Association Legislator of the Year Association for Retarded Citizens Legislator of the Year New Jersey Women of Achievement Award, Douglass College Delaware Raritan Girl Scouts Women of Distinction Award Honoree of the Year American Heart Association Hands of Humanity Award by Jewish Family and Vocational Services La Tribuna Distinguished Woman First Recipient of New Jersey League of Municipalities Cabinet Member Award Woman Lawyer of Achievement Award by Women Lawyers of Monmouth County Outstanding Woman Award, Executive Women of New Jersey
EDUCATION
New York University School of Law, Graduate Division, L.L. M. in Taxation Seton Hall Law Center, J.D., cum laude New York University, B.A.
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ADDITIONAL INFORMATION
Married Three children Completed triathlons in 2005 and 2006 Newspaper “junkie” Interests include current events, running, skiing, traveling, dancing, tennis and reading
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Honorable Walter Koprowski, Jr., P.J.Ch. was appointed to the bench in 2005 and sits in Newark, New Jersey, where he serves as Presiding Judge of the Chancery Division in Essex County.
In 2009 Judge Koprowski was assigned to the Chancery Division, Probate Part, in Essex County. He is Chair of the Chancery Division Probate Part Judges Committee and a member of the Judiciary Surrogates Liaison Committee and the National College of Probate Judges. He served as the Supervising Judge of the Special Civil Part and as a Trial Judge in the Civil Division, and also served on the Special Civil Part Supervising Judges Committee and the Supreme Court Special Civil Part Practice Committee.
Judge Koprowski has been a speaker and panelist for programs presented by ICLE, the Essex County Bar Association, Rutgers School of Law, the Guardianship Association of New Jersey and the Judicial College. He is also a member of the Brennan-Vanderbilt American Inn of Court.
Judge Koprowski is an honors graduate of Rutgers University and Seton Hall University School of Law.
Allison L. Segal, is an associate at DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, P.C. in Warren, New Jersey. Ms. Segal’s practice is dedicated to commercial litigation with a particular focus on business entities and individuals in commercial disputes, shareholder litigation, consumer fraud actions, and home improvement contractor litigation as well as municipal tax appeals. She is admitted to practice in the State of New Jersey, the State of New York, and the United States District Court for the District of New Jersey. Prior to joining DiFrancesco, Bateman, Ms. Segal clerked for the Honorable Margaret Mary McVeigh, P.J. Ch., in the General Equity Division in the Passaic Vicinage. She also recently co-authored the article “Avoiding Problems in Calculating Hours for a Lodestar.”
Ms. Segal received her B.A., with honors, from Drew University and her J.D. from Widener University School of Law. BIOGRAPHICAL INFORMATION
THE HONORABLE SUSAN D. WIGENTON, U.S.D.J.
Susan D. Wigenton serves as a United States District Judge, for the District of New Jersey, where she sits in Newark, New Jersey, hearing civil and criminal matters. She previously served as a United States Magistrate Judge from 1997 until her appointment in 2006.
Judge Wigenton was a trial attorney engaged in private practice in her own firm, until she was appointed to the Bench. Prior to that time, she practiced with the law firm of Giordano, Halleran & Ciesla, P.C., Middletown, New Jersey, where she was a Partner/Shareholder. She also served as the Public Defender for the City of Asbury Park, from 1989 until 1993, and graded bar exams for the State of New Jersey Board of Bar Examiners for more than eight (8) years. From 1987 through 1988, Judge Wigenton served as the Judicial Law Clerk to the Honorable Lawrence M. Lawson, who currently serves as the Assignment Judge for the Monmouth County Superior Court.
Judge Wigenton holds a Bachelor’s Degree in Political Science from Norfolk State University, Norfolk, Virginia and a Doctorate of Jurisprudence Degree from the College of William & Mary, Marshall-Wythe School of Law, Williamsburg, Virginia. FREDA L. WOLFSON, U.S.D.J.
Judge Freda L. Wolfson is a United States District Judge of the District of New Jersey and has served in that position since December 4, 2002. From 2002 to 2005, Judge Wolfson sat in the Camden vicinage and since 2005, has been sitting in Trenton. Prior to her appointment to the District Court, she served as a United States Magistrate Judge, also in Trenton, New Jersey, for 16 years. She has authored numerous opinions on a vast array of subjects. The Judge is currently the Chair for the Rules of Practices and Procedure Committee and the Co-Chair for the Committee on Pro Se Litigation, as well as a member of the Committee on Budget and Functioning of the Clerk’s Office. Notably, Judge Wolfson had been designated by the Multi-District Litigation Panel to preside over five separate multi-district cases.
In the past, Judge Wolfson has served as Chair of the United States District Court, District of New Jersey Pro Se Committee, as Supervisor of the District’s Pro Se Law Clerks, and as a member of both the Third Circuit Court of Appeals Task Force for Indigent Litigants in Civil Cases and the Judges’ Advisory Committee for the Rutgers University School of Law – Newark. She frequently participates in professional seminars as a speaker or panelist before such organizations as the Association of the Federal Bar of the State of New Jersey, the New Jersey State Bar, the ATLA-New Jersey Educational Foundation, the New Jersey Institute of Continuing Legal Education, and numerous county bar associations. Recently, Judge Wolfson was a guest panelist at the Annual Jewish Law Symposium, where she discussed the intersection of law and religion.
Committed to the education of young lawyers, Judge Wolfson often acts as a judge in moot court and mock trial competitions at local law schools. In 2009, Judge Wolfson delivered the convocation address to Rutgers University School of Law – Newark graduates at their commencement ceremony. Judge Wolfson, a first generation American, was born on May 20, 1954, and grew up in Vineland, New Jersey. She was an Eagleton Institute of Politics Undergraduate Fellow and Phi Beta Kappa at Rutgers University, Douglass College, where she graduated magna cum laude in 1976. In 1979, she graduated cum laude from Rutgers University School of Law – Newark, where she served both as a teaching assistant and as a research assistant, in addition to serving as an editor of the Rutgers Law Review. Judge Wolfson has also been honored as an American Bar Foundation Fellow, and as a recipient of the New Jersey State Bar Association Young Lawyer Division’s Professional Achievement Award. She received the 2002 Outstanding Alumnus Award from the Alumni Association of the Rutgers – Newark School of Law. More recently, Judge Wolfson received the 2008 Women's Initiative & Leaders in Law Platinum Award from the New Jersey Women Lawyers Association.
Prior to her 1986 appointment to the United States District Court at the age of 32, Judge Wolfson worked as a litigation attorney at the Roseland firm of Lowenstein, Sandler, Kohl, Fisher & Boylan, and at the former Newark firm of Clapp & Eisenberg, where she handled commercial litigation, employment litigation, and casino licensing applications.
Judge Wolfson is married to the Honorable Douglas K. Wolfson, J.S.C., who is a former Assistant New Jersey Attorney General, Director of the Division of Law in the Department of Law and Public Safety. The Wolfsons have two sons, Brian and Matthew.