Last week, the New Jersey Supreme Court reiterated that lawyers who represent clients on a contingency basis in disputes brought under New Jersey laws that permit the recovery of attorneys’ fees can recover an additional fee “enhancement” pursuant to the framework the Court set forth nearly 20 years ago in Rendine v. Pantzer, 141 N.J. 292 (1995). The decision, Walker v. Guiffre, Case Nos. 72-10, 100-10 (N.J. Jan. 25, 2012), is noteworthy for businesses that all too frequently must weigh the risk of paying their opponents’ attorneys’ fees when deciding whether to settle disputes – particularly those companies that wishfully thought the reins on contingency fee enhancers might be tightened in light of two recent decisions by New Jersey appellate courts.

The New Jersey Appellate Division ruled in Walker v. Giuffre, 415 N.J. Super. 597 (App. Div. 2010) and Humphries v. Powder Mill Shopping Plaza, that the framework established in Rendine required modification to comply with the U.S. Supreme Court’s decision in Perdue v. Kenny A., 130 S. Ct. 1662 (2010). The Court in Perdue examined attorneys’ fee awards under federal laws and held, in part, that contingency fee enhancements were improper under federal fee-shifting statutes. The N.J. Supreme Court in Walker analyzed the New Jersey appellate decisions on a consolidated basis and explained that the U.S. Supreme Court decision in Perdue had no impact on the longstanding holding of Rendine. It reasoned that the N.J. Supreme Court already had considered the very arguments and considerations set forth in Perdue when it decided Rendine, including the conclusion that contingency fee enhancements are improper under federal fee-shifting statutes. In short, the framework set forth in Rendine, which permits contingency fee enhancements under New Jersey fee-shifting statutes, remains good law.

Among New Jersey laws that permit the recovery of attorneys’ fees and, therefore, the potential for a contingency fee enhancer, are the two laws most frequently implicated in New Jersey employment lawsuits: the New Jersey Conscientious Employee Protection Act (“CEPA”) and the New Jersey Law Against Discrimination (the “LAD”). A number of laws outside the employment context likewise place businesses on the defensive and permit the recovery of attorneys’ fees, including the New Jersey Consumer Fraud Act (“CFA”). (A listing of New Jersey statutes that permit fee-shifting can be found here.) Notably, the court’s decision in Walker arose from claims brought under the CFA and LAD.

Significantly, CEPA, the CFA and the LAD are one-sided fee-shifting statutes that only allow an individual who brings a successful claim to recover attorneys’ fees. Companies that successfully defend such claims cannot receive a similar award. Accordingly, while businesses must weigh the risk of paying the other side’s lawyer when sued under these statutes, an individual who files a claim does not face the same risk. The company’s risk naturally is increased where there also is the potential for a fee enhancement, which, as Walker reminds us, remains as viable a consideration under New Jersey law as it has since the Court’s decision in Rendine.

Attorneys’ fee awards typically are calculated by multiplying the reasonable number of hours an attorney spent working on a case by a reasonable hourly rate. The court in Rendine (a LAD case) decided that an enhancement to this award should be available where an attorney takes a case predominantly on a contingent basis, so as to compensate the lawyer for the added risk undertaken in the representation. As announced by the court in Rendine, these contingency fee enhancers ordinarily range between five and 50 percent of the attorneys’ fee award, and most frequently fall in the 20 to 35 percent range. A 100 percent enhancement is possible, but limited to the exceptional case where there is no prospect for a large damage award and where the relief sought is primarily non-monetary and equitable in nature. Other factors that influence the size of a contingency enhancement include the strength of the claim and whether the attorney mitigated the risk of nonpayment in any way.

For additional details regarding the decision in Walker, contact an attorney in Gibbons Business and Commercial Litigation or Employment & Labor Law Departments.

James J. LaRocca is an Associate in the Gibbons Employment & Labor Law Department. This blog also appears on the Gibbons Business Litigation Alert.