Best v. C&M Door Controls, Inc., A-57 September Term 2008.

• Decision Date: 14 October 2009
• Docket Number: A-57 September Term 2008.
• Parties: Thomas BEST, Plaintiff-Appellant, v. C&M DOOR CONTROLS, INC., Defendant-Respondent, and Christopher O'Keefe and Michael Craven, Defendants.
• Court: New Jersey Supreme Court

981 A.2d 1267

200 N.J. 348

Thomas BEST, Plaintiff-Appellant, v. C&M DOOR CONTROLS, INC., Defendant-Respondent, and Christopher O'Keefe and Michael Craven, Defendants.

A-57 September Term 2008.

Supreme Court of New Jersey.

Argued March 10, 2009.

Decided October 14, 2009.

Steven J. Greenstein, Rahway, argued the cause for appellant (Tobin, Reitman, Greenstein, Caruso, Wiener & Konray, attorneys).

John F. Casey, West Orange, argued the cause for respondent (Wolff & Samson, attorneys; Mr. Casey and Kiran V. Somashekara, on the briefs).

Lewis H. Robertson, submitted a brief on behalf of amicus curiae American Civil Liberties Union of New Jersey (Mr. Robertson, Jeanne Locicero, and Edward L. Barocas, attorneys).

PER CURIAM.

In 2004, Thomas Best sued his former employer, C&M Door Controls, for violations of the Prevailing Wage Act (PWA), N.J.S.A. 34:11-56.25 to -56.47, and the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14, claiming that he had been underpaid on PWA work and that, when he complained, his employer retaliated against him. Invoking Rule 4:58-3, the offer-of-judgment rule, Best offered to take judgment in the amount of $100,000, inclusive of counsel fees against C&M. C&M countered with two offers— one for $15,000 and one for $25,000, also inclusive of fees, which Best rejected. A jury awarded Best $2,600 on the PWA claim and returned a verdict of no cause for action on the CEPA claim.

Best thereafter sought counsel fees of $122,000 plus costs under the fee-shifting provisions of the PWA, N.J.S.A. 34:11-56.40. C&M sought fees under Rule 4:58-3(b) because the jury verdict was less than eighty percent of its offer of judgment. In addition, C&M requested an award under the frivolous-claim provision of CEPA, N.J.S.A. 34:19-6.

Citing Rule 4:58-3(c)(4), which provides an exception from the operation of the offer-of-judgment rule in cases in which "a fee allowance would conflict with the policies underlying a fee-shifting statute," the judge denied fees to C&M, declaring that such an award would contravene the policies of fee shifting. He further denied C&M fees under CEPA's frivolous-claim provision because there had been no finding that Best's action was instituted "without a basis in law or fact," as required under N.J.S.A. 34:19-6.

The judge went on to award Best fees under the fee-shifting provisions of the PWA, limited to those that had accrued up until C&M's "more than adequate offer of judgment." That award, which was in the amount of $62,529.65, reflected a reduction of forty percent based on Best's "limited success" in the case. According to the judge, "others prosecuting similar claims have spent approximately forty percent of their time on the CEPA claim."

Both parties appealed. In a published opinion, the Appellate Division affirmed the denial of C&M's fee application under the frivolous-claim provision of CEPA for the reasons expressed by the trial judge and, additionally, because the denial of C&M's motion to dismiss the CEPA claim prior to trial obviated the possibility that the litigation could be proved frivolous. Best v. C&M Door Controls, Inc., 402 N.J.Super. 229, 239, 953 A.2d 775 (2008).

The panel further identified CEPA as the kind of statute contemplated by the exception in Rule 4:58-3, thus eliminating an offer-of-judgment award in a CEPA case. Id. at 246-47, 953 A.2d 775. However, it distinguished the PWA from CEPA, declaring that because the PWA was intended to benefit both employers and employees, it would not be undermined by application of Rule 4:58-3. Id. at 244-45, 953 A.2d 775. Accordingly, the panel permitted C&M to recover fees based on its offer of judgment and reversed and remanded the trial judge's contrary ruling. Id. at 247-48, 953 A.2d 775. The panel also reversed and remanded the award to Best under the PWA because the judge had failed to make specific findings regarding the forty percent reduction based on "limited success." Id. at 248, 953 A.2d 775. Finally, the panel affirmed the trial judge's decision to limit Best's award to the fees accrued prior to the July 2006 offer. Id. at 249, 953 A.2d 775.

We granted Best's petition for certification. 197 N.J. 13, 960 A.2d 743 (2008). Best essentially argues that C&M was not entitled to an award of fees under Rule 4:58 because the rule is inapplicable in a fee-shifting case and that his own fees should not have been cut off at the point of C&M's offer of judgment. C&M did not file a cross-petition for certification, thus abandoning the claims for relief that it had advanced before the Appellate Division.

What is before us is the interplay between fee-shifting statutes, in particular CEPA and the PWA, and the offer-of-judgment rule. We hold that a defendant can never be awarded fees under Rule 4:58 in a case involving CEPA, the PWA, or a similar fee-shifting statute. However, a trial judge may take into account a plaintiff's unreasonable rejection of an offer of judgment in calculating plaintiff's award under such a statute.

I.

A fee-shifting statute is one that permits a deviation from the so-called American Rule that requires each party to bear its own litigation costs. See, e.g., R. 4:42-9. Fee shifting affords access to the judicial process to persons who have little or no money with which to hire a lawyer by providing an incentive to lawyers to undertake litigation. Coleman v. Fiore Bros., Inc., 113 N.J. 594, 597, 552 A.2d 141 (1989) (quoting Carlstadt Educ. Ass'n v. Mayor & Council of Carlstadt, 219 N.J.Super. 164, 166, 530 A.2d 34 (App.Div. 1987)).

From matters involving consumer fraud, N.J.S.A. 56:8-19, to instances of discriminatory treatment, N.J.S.A. 10:5-27.1, the New Jersey Legislature has promulgated a "substantial number of statutes authorizing an award of a reasonable counsel fee to the attorney for the prevailing party." Although the underlying purpose of those statutes may vary, they share a common rationale for incorporating a fee-shifting measure: to ensure "that plaintiffs with bona fide claims are able to find lawyers to represent them[,] . . . to attract competent counsel in cases involving statutory rights, . . . and to ensure justice for all citizens."

[New Jerseyans for a Death Penalty Moratorium v. N.J. Dep't of Corr., 185 N.J. 137, 152-53, 883 A.2d 329 (2005) (citations omitted).]

In the main, CEPA and the PWA are typical fee-shifting statutes.¹

A.

CEPA "seek[s] to overcome the victimization of employees and to protect those who are especially vulnerable in the workplace from the improper or unlawful exercise of authority by employers." Abbamont v. Piscataway Twp. Bd. of Educ., 138 N.J. 405, 418, 650 A.2d 958 (1994). The counsel-fee element of CEPA was enacted to ensure that plaintiffs have access to the judicial system and to guarantee the availability of competent counsel. See New Jerseyans for a Death Penalty Moratorium, supra, 185 N.J. at 152-53, 883 A.2d 329 (quoting Coleman, supra, 113 N.J. at 598, 552 A.2d 141). Thus, under CEPA, a prevailing employee is entitled to an award of reasonable counsel fees. N.J.S.A. 34:19-5(e). A prevailing employer may also be awarded fees, but only where a judge determines that the action was instituted by plaintiff "without basis in law or in fact." N.J.S.A. 34:19-6.

B.

The PWA was enacted to "establish a prevailing wage level for workmen engaged in public works in order to safeguard their efficiency and general well-being and to protect them as well as their employers from the effects of serious and unfair competition resulting from wage levels detrimental to efficiency and well-being." N.J.S.A. 34:11-56.25. See Dep't of Labor v. Titan Constr Co., 102 N.J. 1, 6, 504 A.2d 7 (1985) (recognizing PWA's intent to protect employers and employees). In furtherance of its goals, the PWA provides a fee-shifting remedy to a prevailing employee. N.J.S.A. 34:11-56.40. The purpose of that provision has been recognized as an effort to vindicate the public policy underlying the PWA by ensuring that "competent counsel" will represent "plaintiffs with bona fide claims," even if the amount in controversy is not great. See New Jerseyans for a Death Penalty Moratorium, supra, 185 N.J. at 152-53, 883 A.2d 329 (quoting Coleman, supra, 113 N.J. at 598, 552 A.2d 141).

II.

The offer-of-judgment rule permits a party to offer to take a monetary judgment or to allow judgment to be taken against it for a sum certain. R. 4:58-3. The fundamental purpose of the rule is to induce settlement by discouraging the rejection of reasonable offers of compromise. See, e.g., Palmer v. Kovacs, 385 N.J.Super. 419, 425, 897 A.2d 429 (App.Div.), certif. denied, 188 N.J. 356, 907 A.2d 1015 (2006); Sovereign Bank v. United Nat. Bank, 359 N.J.Super. 534, 542, 821 A.2d 87 (App. Div.), certif. denied, 177 N.J. 489, 828 A.2d 917 (2003); Firefreeze v. Brennan & Assoc., 347 N.J.Super. 435, 441, 790 A.2d 238 (App.Div.2002). That goal is achieved through the imposition of financial consequences (the award of fees and costs) where a settlement offer turns out to be more favorable than the ultimate judgment. Firefreeze, supra, 347 N.J.Super. at 441, 790 A.2d 238.

Rule 4:58-1(a) provides generally for the making and acceptance of an offer of judgment Except in a matrimonial action, any party may, at any time more than 20 days before the actual trial date, serve on any adverse party, without prejudice, and file with the court, an offer to take a monetary judgment in the offeror's favor, or as the case may be, to allow judgment to be taken against the offeror, for a sum stated therein (including costs). The offer shall not be effective unless, at the time the offer is extended, the relief sought by the parties in the case is exclusively monetary in nature.

Rule 4:58-2(a) sets forth the consequences of the non-acceptance of a claimant's offer:

If the offer of a claimant is not accepted and the claimant obtains a money judgment, in an amount that is 120% of the offer or...