In Garzon v. Morris County Golf Club, A-1100-21 (App. Div. December 23, 2022), the Appellate Division of New Jersey held that a Petitioner’s attorney’s counsel fee should not automatically be set at 20% of awards. The Court applied this analysis to both the counsel fee on the permanency award, as well as the counsel fee on successful motions.
In the underlying workers’ compensation case, there were two successful motions filed by Petitioner’s attorney. The first Motion sought temporary disability benefits from December 29, 2016 to January 24, 2017 in the amount of $1,880.84, as well as re-authorization of treatment with the treating physician. Respondent had discontinued temporary disability benefits for that time period while Petitioner was on vacation in Colombia. The adjuster in this case sent correspondence to the treating physician asking why he extended Petitioner’s disability while Petitioner was on vacation. After receiving the treating physician’s response, the adjuster informed Petitioner that the treating physician was no longer authorized and directed treatment to a new facility. The Motion resolved and Respondent agreed to pay the temporary disability benefits, as well as continue to authorize recommended treatment.
The second Motion sought to enforce the prior order with reinstatement of temporary disability payments. Respondent had discontinued temporary disability benefits after the treating physician implemented permanent work restrictions on August 23, 2018. Respondent agreed to pay the back due temporary disability benefits and an order was entered by the Judge confirming same.
At the conclusion of the case, the parties agreed on a permanency value resulting in an award to Petitioner of $164,577. The Judge awarded a full 20% counsel fee on the permanency award to be fully payable by Respondent due to their alleged bad faith conduct throughout the litigation. For the first Motion, the Judge granted an additional counsel fee of $78,000 based on a calculation of 20% of medical and indemnity benefits after the Motion was filed totaling $390,000. For the second Motion, the Judge granted an additional counsel fee of $12,500 based on a calculation provided by Petitioner’s attorney alleging they spent 25 hours on the litigation and their hourly fee would typically be $500.
The Appellate Division found that the WCJ did exactly what the Court has cautioned against when the WCJ engaged in a “reflexive application” of the twenty-percent maximum set forth in N.J.S.A. 34:15-64(a) and failed to make a “full analysis of the fee submission.” Id.
The Court vacated the award of $32,915 in counsel fees with respect to the permanency award. The Court also vacated the award in counsel fees of $78,000 on the first Motion, as well as the $12,500 fee on the second Motion. For both Motions, the Court felt that the WCJ did not give consideration as to what legal fees were actually incurred in bringing the motion and whether those fees were reasonable.
With regard to fees on a successful motion, the Court stated:
“In N.J.S.A. 34:15-28.1, which is the applicable statute for an award of fees in connection with a motion regarding a delay or refusal to pay temporary disability benefits, the Legislature said nothing about awarding fees equal to twenty percent of the benefits obtained through the motion. Instead, the Legislature clearly provided for an award of ‘any reasonable legal fees incurred by the petitioner as a result of and in relation to such delays or refusals.’” Id.
The Court stressed that the Respondent paid benefits immediately after the accident, agreed to limit what ultimately had to be tried, and interrupted benefits payments based only on Petitioner’s trip to Colombia and on information that her treating physician had imposed permanent restrictions. According to the Court, “those circumstances do not bespeak a maximum award.” Id.
As far as the calculation of counsel fees, the Court held that “a judge's first step in awarding a reasonable amount of attorney's fees is determining the lodestar, which equals the number of hours reasonably expended multiplied by a reasonable hourly rate”. Citing Jacobs v. Mark Lindsay & Son Plumbing & Heating, Inc., 458 N.J. Super. 194, 209 (App.Div.2019) (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21 (2004) (quoting Rendine, 141 N.J. at 335)). Thus, to determine the lodestar, the judge must consider the reasonableness of both the attorney's rate and the number of hours the attorney expended on the case. Jacobs, 458 N.J. Super. at 209-10; see also Rendine, 141 N.J. at 335-37.
The Court reiterated they have "cautioned against a reflexive application of a twenty-percent award without full analysis.” Citing Collas, 460 N.J. Super. at 285. Of particular importance, the Court indicated that, “Although the amount of the award is a factor to be considered in fixing the fee, it has limited significance; the more important factors are the nature and extent of the services and the responsibility involved.” Citing Barbarevech, 143 N.J. Super. at 34 (quoting Del Peso v. H.A. Bar & Rest. Co., 75 N.J. Super. 108, 122-23 (App. Div. 1962)). The Court found that the WCJ did not heed that caution and abused his discretion by failing to follow applicable statutory and case law regarding awarding counsel fees.
This case is not a reported decision and therefore is not binding on Judges of Compensation or on other appellate panels. However, this case should be very useful in arguing against excessive counsel fees on successful motions. This appellate division decision will allow Respondent’s attorneys to argue the counsel fee on motions should not solely be based on a percentage of the amount of medical and temporary disability benefits after the motion was filed. Judges of Compensation have been granting counsel fees on successful motions based on the amount of medical and temporary disability benefits occurring after the motion which can be volatile and completely unrelated to any work done by the attorney. With this holding, the analysis for counsel fees on successful motions should require more evidence of the time spent on the motion and litigation as opposed to a simple calculation based on the medical and temporary disability expenses. The analysis cited by the appellate division will ultimately benefit Respondents who have been getting stuck with excessive counsel fees on these motions when the treatment following a motion has resulted in expensive medical treatment such as surgeries and pain management.
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