Litton Industries, Inc. v. IMO Industries, Inc.

SYSTEMS, INDUSTRIES, INC., AND PLAIN- INC. LITTON LITTON CROSS-APPELLANTS, IN- AND v. IMO TIFFS-RESPONDENTS VARO, INC., DUSTRIES, INC., BAIRD CORPORATION AND INTERNATIONAL, INC., DEFEN- OPTIC-ELECTRONIC AND CROSS-RESPONDENTS. DANTS-APPELLANTS Arguеd Decided November2009. December bar, Lamb, III, argued Texas George a member of the C. (Duane Moms, attor- appellants cross-respondents and cause for briefs). Luchak, neys; on the Frank A. Smith, respondents cross- argued the for and T. cause

James (Blank Smith, Rome, attorneys; Stephen M. Mr. appellants Orlof- briefs). Merlino, sky Anthony and on PER CURIAM. computation and appeal in this is the award principal

The issue action. attorneys’ arising out a breach of contract of fees of alleged in for the breach sought million Plaintiffs $9 jury The that contract for fraud. found provisions two in the and contract, plain- provision rejected one defendants breached claims, plaintiffs damages. million awarded in tiffs’ other and $2.3 provided that for attor- trial the contract The court determined $3,858,725 attorneys’ in neys’ plaintiffs fees and costs and awarded fees, fees, $896,920 fees, $180,718 in and experts’ consultants’ $1,039,540 costs, prejudgment interest. as well as affirmed, an essentially but remanded on Appellate

The Division appeal. granted both defendants’ not to this We issue relevant costs, attorneys’ related fees and petition for certification prejudg- calculation cross-petition related to the plaintiffs’ and part reverse in two asserted trial errors. We ment interest and attorneys’ provided for agreement remand. hold that the We governed the fee award is fees and and that amount of costs awards, attorneys’ fee within applicable to principles traditional did hold that triаl court the context of the contract. We also for prejudgment in the awarded not abuse its discretion amount in the trial deviations. interest or commit error claimed

I. be- litigation complex on a underlying The centered Industries, Inc. Systems, Inc. and Litton plaintiffs Litton tween Industries, (collectively plaintiffs), defendants IMO Litton or Inc., Inc., Varo, Corporation, Optic Baird Electronic Interna- defendants). tional, (collectively May In Inc.

agreed purchase optical system certain assets defendants’ Agreement million. Purchase $52 business and Sale (Agreement) provided for a date of Defen- transfer June 1995. they reasonably anticipate dants warranted did not government of their bids or would in a loss and contracts result agreed any government they to submit not bid or contract that good during period estimated in faith would result a loss before the transfer date. date,

Prior to the transfer bid to defendants submitted a the Army United for States the refurbishment and manufacture of military equipment. early certain The transfer occurred in June shortly Army military and thereafter the awarded the equipment to Army ultimately contract defendants. The huge plaintiffs. resulted in a financial loss for May plaintiffs On a complaint against filed defendants they alleging approximately lost fulfilling million in the $16 obligations Army under the on improp- contract which defendants erly initially bid. Plaintiffs made two claims: breach of 3.12(a)(iv) § Agreement of the and fraud claim based on the 3.12(a)(iv) alleged same breach. provided part Section in 3.12(a)(iv), as described оn Schedule [e]xcept none of the Government Contracts, Contracts, Sales Bids or Government Bids of the Sellers with t.o the respect Business is to in a reasonably result Contract Loss of anticipated completion upon performance.. added).] ((emphasis

Plaintiffs asserted that provision defendants breached that be- they cause anticipated should have a loss on the bid submitted to Army. the 2003, plaintiffs complaint

In June to moved amend their to alleged include an additional claim on the based violation of 5.3(ii) § Agreement, prohibited of which defendants from government making any they bid or contract that in estimated Agreement result in a loss. Section 5.3 good faith would provided part that in Law, Antitrust or Law, by Applicable otherwise be may as

[e]xcept required consent of not, shall without Law, prior Contract the Sellers Government respecting ... Bid or Bid Contract, ... into Government Litton make or enter any (ii) or at at the time of execution thereof which the total cost estimate Contracts for good be, as estimated Bid, or as case may the time of the Government Bid in a net loss on the Contract---- Sellers, applicable faith would result $9,022,042 on the sought for the claims based At trial plaintiffs 5.3(ii) 3.12(a)(iv) § § of both fraud and breach of theories of prevailed plaintiffs on breach Agreement. Ultimately, 5.3(ii), rejected jury but all other premised §on contract claim damages, million in which jury claims. awarded $2.3 an error. million to correct parties agreed reduce $2.1 verdict, notwithstanding the judgment Defendants moved attorneys’ fees and costs plaintiffs filed a to recover motion $6,411,354. Agreement provided 11.1 of the Section the amount of plaintiffs for indemnify and reimburse agreed to that defendants (whether Buying interest suffered and all Losses suffered or incurred by any otherwise) resulting Claim or or with respect Third-Party incurred any following: arising from or out of each (b) Agreement Breach of Covenant covenants, or of their [defendant] Seller any breach of nonfulfillment by

Any obligations Agreement____ agreements, forth this or other set demands, ... claims Agreement as “all “Losses” is defined losses, costs, damages, expenses, ... actions or causes of action liabilities, paid ... and awards amounts settlement judgments, any of (including attorneys’ fees and incident to costs reasonable ” foregoing).... judgment notwith- denied motion for

The trial court defendants’ Special on the issue standing appointed and a Master1 the verdict Special Specifically, the trial court asked the attorneys’ fees. Master Master. was Former Justice Stewart Pollock appointed Special to determine and recommend ... a lodestar amount for the tees and attorneys!’] litigation costs incurred Plaintiffs in the of their claim under reasonably by 5.3(ii) [Agreement], the claim on which the Plaintiffs at prevailed Islection

trial. The Court will conduct its and determine the proportionality analysis amount fee so the Master award, need determine the lodestar Special only amount for that claim. Special The plaintiffs’ § Master found that claims under 3.12 § 5.3 arose from a “common core of facts” and that those claims legal § were so interrelated that the services on the 3.12 § claim were to be included in the lodestar amount for the 5.3 claim. Special The Master on focused the fact would proofs have had to establish same to succeed on a claim under § § Special either 3.12 or The 5.3. Master determined that the attorneys’ adjusted fees and costs would be through better a proportionality analysis by parsing than out every each and claims, intermingled from the and that a necessary reduction was for the failed fraud claim. Because the fraud claim was one of claims, plaintiffs’ Special three basic Master found it would be plaintiffs’ fair and request reasonable to reduce attorneys’ fees Special one-third. The Master also plaintiffs’ request reduced reduction, for costs a similar calculating amount. After Special $2,971,295 Master an recommended award of for attor- $693,026.96 neys’ fees and for costs.

The trial court Special received the report Master’s and ren- September dered a decision on 2006. The court denied judgment defendants’ motion for notwithstanding verdict, fees, costs, plaintiffs legal awarded prejudgment interest at a simple rate of interest from the date of commencement of the litigation. fees, addressing In legal agreed the trial court with Special § Master that the contractual claims under 3.12 and § 5.3 constituted а “common core of facts.” The trial court explained that [t]he claims themselves are . intertwined inextricably claims relate and separating legal and it is overlap envision manner of impossible work and expenses associated with one claim from the other. II cannot be done. simply Accordingly, indeed are based

They common core. upon and without qualifica- legal tion, this court finds work, that the costs and expenses attributable to the two 5.3(ii) § claim of attributed for purposes contractual claims be entirely may determining [lode]stai\ However, rejected Special Master’s conclu- trial court the- equal of represented an one-third amount sion that the fraud claim work, costs, compared to the two contractual legal and as expenses easily fraud claim could be claims. The court found markedly than the separated required less work contractual and by proposed reductions accepted the itemized claims. The court a offset for the fraud claim plaintiffs’ and ordered total fee counsel $4,287,472, $226,250. and approved lodestar of The court a of $1,039,540 fully costs of were allocated plaintiffs’ concluded that $896,920, claim, experts’ were fees of their as successful $180,718. of the consultants’ fees proportionality:

The trial court next discussed a [lode]star fee, a modification of a relates to analysis Generally, proportionality fee-shifting the level of success statutes, order tо accommodate virtue of [Agreement] litigation. the basis is the Here, achieved in for the application a [M]aster a as [S]pecial work was riode]star computation performed appointing agreement in the order as embodied parties result of rare between 2005____ dated April 15, in [the] have Costs amount of fees been determined. and consultant [E]xpert allocated to found to be reasonable $1,039,540.00 fully have been intrinsically adjustment jury Therefore, per- proportionality successful award. [plaintiffs’] alone. tains to the fees attorneys’ proportionality analysis the court reasoned In its the success [a] relationship critical in the is of consideration required analysis sought. meaningful damages A of difference realized as to the amount compared damages of more than [Plaintiffs] in this case. asked exists between the two $9 a million. Even [were] [plaintiffs’] expert million and rewarded with verdict of $2.3 understanding an that a reduction partial on this expressed issue obliquely forthcoming. forecast. The This is an accurate question, fees would be attorneys’ is what amount? course, by resulting in of mathematical computation The answer is not product percentage dam- recoverable on a comparison prospectively based ages is an in fact. While this relationship unquestionably important, recovered including those factors considerations, on a other complex answer is dependent referenced in RPC 1.5. еxtremely complex, litigation was The trial noted that court preparation, discovery and trial resulted required lengthy intense trial, long in cjompetent expended and that “[ counsel much hours, energy great legal hours, and a legal number of reasonable successfully pursing legal against [defendants] redress because there was no alternative.” The court concluded that there was no justification greatly modify plaintiffs’ request deter- and percent mined that a reduction of ten was fair and reason- both Consequently, able. the percent court deducted ten from the $4,287,472 lodestar of attorneys’ arrive at an fee award of $3,858,725. $1,039,540, approved experts’ the of With costs fees of $896,920, $180,718, and consultants’ fees of the trial court awarded $5,975,903 plaintiffs a of in attorneys’ total fees and costs. Fur- ther, the appropriate court found that this was an case for the prejudgment award of interest and looked to the tort model as a guide plaintiffs simple commencing award interest as of the filing original date of complaint. the judgment,

In the judgment amended the court entered in favor $8,886,407.03, of in the amount of as follows: jury’s damages; 82,100.000.00 a. on the vertliel compensatory Prejudgment (a)(ii), b. t.o R. 4:42-11 interest awarded in the amount of pursuant (calculated $810,504.03 on the amount of t.he award of compensatory (late filing $2,100,000.00 from the the on 8, Complaint May 2006); through October litigation fees, c. and costs of awarded in Attorneys’ expenses the amount of $5,975,903.00. appealed. Both unpublished opiniоn, sides In an Appellate part, Division reversed in and remanded for trial limited to plaintiffs’ expenses claim for profits administrative and lost associ- ated with their successful contract respects, claim. In all other Appellate judgment court, Division affirmed the of the trial granted stay of execution on the judgment. final amended panel Agreement found that the definition of “losses” clearly attorneys’ included litigation, fees connection with that the tidal court’s analysis “common core of facts” sup- was ported Further, by the panel agreed record. with the trial court that the fraud claim easily separated was from the other claims, legal and that the time associated with that claim did not legal panel approved large portion work. The for a

account the trial court and noted that calculation the lodestar the amount of large difference between “critically considered” the Although actually sought and amount recovered. at result than might that it have arrived a different panel stated court, light trial it court’s trial concluded factors, abuse of there was no appropriate of all the consideration legal fees and awarded. in the amount of costs discretion panel the trial plaintiffs’ cross-appeal, affirmed respect of In at interest rate prejudgment simple interest award of court’s plaintiffs’ multiple allegations of trial error. rejected and cross-petition. plaintiffs’ granted petition defendants’ We (2008). 522, N.J. N.J. 950 A.2d 195 II. it was error to award fees to Defendants contend that fee-shifting provi lacked a Agreement clear plaintiffs because Further, attor urge that even if an award of defendants sion. im required by Agreement, the trial court: neys’ fees was to eliminate fees for sendees failed to reduce the award properly claims; improperly applied the “common related to unsuccessful contractual, developed statutory, for not doctrine that was core” performed proportionality fee-shifting provisions; improperly ‍‌‌‌​​‌‌‌‌​​‌‌​‌‌‌‌‌‌​‌‌‌​​‌​​​​​‌‌‌‌‌​​‌​‌​​‌‌​​‍case; fee-shifting contractual analysis of the in a lodestar proportionality analysis to the costs. improperly apply failed to provided for Agreement explicitly counter Plaintiffs that costs, appropriate and attorneys’ fees and and that the award was fee-shifting jurisprudence. with this Court’s consistent argue erred cross-petition, plaintiffs that the trial court In their permits an by failing apply tort interest-rate rule prescribed interest percent two above the otherwise additional excluding argue Plaintiffs also that the trial court erred rate. jury, and in testimony witness in the readback to portions of during closing arguments when plaintiffs’ counsel its treatment disregard portion jury instructed the of counsel’s the court closing argument. shown no response,

In defendants assert have justice support denial of their claim for enhancement manifest award, prejudgment that the trial court did not interest evidentiary treatment of the readbaek issue or counsel’s err its closing arguments.

nr. general, Jersey shifting In New disfavors the of attor Co., Leasing neys’ Bergen Transp., fees. N. Rex Inc. v. Trailer (1999). 561, 569, However, prevailing N.J. A.2d 843 “a party they expressly provided can recover if are those fees Co., statute, rule, Packard-Bamberger court or contract.” & Inc. (2001). Collier, v. 167 N.J. 771 A .2d 1194 When the fee- shifting provision, provision is controlled a contractual strictly general policy light should be of our disfavor construed attorneys’ Bergen, supra, ing the award of fees. See N. 158 N.J. 570, 730 843. at A.2d provision

The focus in this case is the contractual in the agreement required that defendants to reimburse lor arising any Agreement. “losses” out of breach of the “Losses” claims, demands, reimbursement, were defined as “all claims for action, assessments, losses, costs, damages, actions or causes of liabilities, judgments, expenses, paid awards ... and amounts in attorneys’ (including reasonable fees and costs incident settlement ” foregoing).... urge Agreement specific enough Defendants that the is not attorneys’ disagree. plain language warrant fees. We The in the Agreement provides attorneys’ lees and costs are included in Although definition “losses.” words “reasonable attor- neys’ parenthetical, fees and costs” are located in a that does not Agreement from in attorneys’ detract the intent fees and part plaintiffs’ would be costs recoverable as losses. We are 386 Agree- correctly concluded that the court that the trial

satisfied plaintiffs’ in successful attorneys’ and сosts fees provided ment of contract claim. breach Prelimi the award. the dollar amount of next consider

We a trial court’s reviewing court will disturb narily, that a we note “ occasions, then ‘only on the rarest of counsel fees award ” discretion.’ Packard-Bamber only a clear abuse of because of 444, (quoting Rendine v. A.2d 1194 supra, N.J. at 771 ger, 167 (1995)). Pantzer, 292, 317, A.2d 1202 141 N.J. 661 attorneys’ test for reasonable applied have the same We attorneys’ in fee award that we use other in contract cases fees 570, 730 Bergen, supra, 158 N.J. at Jersey. See N. in New cases attorneys’ of an determining the reasonableness In A .2d843. party seeking the fee award, whether the the threshold issue “is regard, party must In that litigation.” Ibid. prevailed “ securing the causally was related that the ‘lawsuit establish are a obtained; party’s] if efforts justified [the fee award is relief obtaining relief.’” Ibid. necessary important factor 487, 494, State, 472 A.2d cert. Singer 95 N.J. (quoting v. (1984)). 832, 105 denied, S.Ct. 83 L.Ed.2d 469 U.S. case, the tests for the plaintiffs satisfied present

In the of contract They prevailed on one of their breach of fees. award indemnify plain claims, defendants to required and the a breach. in the event of tiffs for their losses award is determining the amount of the step next “lodestar,” hours reason that number of which is to calculate the litigation, party’s counsel in the by the ably expended successful Moom hourly rate. Furst v. Einstein by reasonable multiplied (2004). of Professional Inc., A.2d 435 Rule N.J. jy, 1.5(a) lawyer’s fee shall be reason that ‘[a] “commands Conduct cases,” 21-22, A.2d cases, at just fеe-shifting id. in all not able’ 1.5(a)), consider: requires courts to (quoting RPC and (1) the time and labor the and of the required, novelty involved, difficulty questions legal and the skill the service requisite perform properly; (2) the if likelihood, the that the of the apparent client, acceptance particular will other the employment preclude employment by lawyer; (3) charged legal the fee. in the services; similar customarily locality (4) the amount involved and the results obtained; (5) the time limitations the client or imposed circumstances; by (6) length the nature and professional client; with relationship (7) performing experience, or reputation, ability lawyer lawyers services; (8) contingent. whether the fee is fixed or 1.5(a).] [RPC computation of the lodestar mandates that trial court determine the hourly reasonableness of the rate of “the prevailing attorney in comparison to rates ‘for similar services lawyers skill, reasonably comparable experience, reputa community.” Furst, tion’ in 22, supra, 182 N.J. at 860 A.2d Rendine, (quoting 337, 1202). supra, 141 N.J. at 661 A.2d Further, the court must consider degree success deter mining the Furst, reasonableness of expended. supraq, the time Thus, 182 N.J. at 860 A .2d435. party when a has succeeded only relief, on some of its claims for the trial court should reduce the lodestar to account for Moreover, the limited success. Ibid. if the same evidence support adduced to a successful claim was claim, also offered on an unsuccessful the court should consider whether it is nevertheless legal reasonable to award fees for the expended time on the unsuccessful claim.

Beyond amount, the lodestar in cases in which the fee requested recovered, far damages exceeds the “the trial court should damages sought consider the actually Co., recovered.” Packord-Bamberger supra, & 167 N.J. at 771 A.2d 1194. In addition to proportionality analysis, court must evaluate the requested reasonableness of the total fee compared as is, jury amount of the award. That when the actually amount recovered is less attorney's request, than the the court must consider determining that fact in the overall sure, attorney’s the fee award. Ibid. To be

reasonableness of portion that of the reasonableness precise is formula for there no attorney’s goal approve analysis. is to a reasonable The ultimate fee that is not excessive. principles guide, as our we turn now those

With the court abused its discretion in evaluat determine whether trial Although application. This is a contract case. ing plaintiffs’ fee expressly provided in the what parties the could have contract utilized, express in language in the absence of approach would be jurisprudence attorneys’ agreement, our fee- we resort to cases, analysis an evidence shifting which includes same do presented for both successful and unsuccessful claims. We are recognition parties fact that the that legal principles and to have presumed to know relevant adopted they exprеssed if not a different understand them have ing. 3.12, they reasonably § did not represented

In defendants that loss, anticipate government of their bids would result in a that 5.3, any government § bid agreed not make defendants they reasonably in a that would result loss. estimated timing the two of the bids. primary difference between was already place § bids that had taken when 3.12 addressed Here, governed § future entered into and 5.3 bids. contract was Special court found a common core Master and the trial each essentially require production the same evi- of facts that spent evaluating the time on the successful and unsuc- dence agree and affirm that conclusion. cessful contract claims. We attorneys’ found fees related to the The trial court claim identifiable and therefore deleted unsuccessful fraud were appropriate. time the award. That was from adjustment to that an The trial court further determined necessary damages because the actual the lodestar amount was substantially less than the amount of recovered were Division, Appellate the trial court sought. found As “critically large considered” the difference between the amount of damages sought actually and the amount recovered and reduced However, percent. the fee ten appear it does not that the trial large court also attorneys’ considered the difference between the requested actually and the amount recovered. Unlike the feе-shifting traditional case in which enhancement has some rele vancy type as a encouragement represent to party, see Rendine, supra, 141 N.J. at 661 A.2d opposite is, applies in a although contract case. That enhancement is not a concern, relationship requested between the fee and the recovered is a factor to be considered the trial court because the notion of proportionality integral is to contract fee- shifting expectation to meet the parties. reasonable

Here, the trial court separately should have considered whether to reduce even more the amount of light the fee in of the fee request that recovery. exceeded the amount of analysis That necessarily is fact-sensitive is precise as there no test or mathe- matical calculation adjustment. for that The trial court is in the position weigh best to competing arguments making in any fee adjustment to ensure that the counsel lee award is reasonable. remand,

On plaintiffs’ addition to claim for administrative expenses and profits lost associated with their successful contract retried, claim that must be the trial court must reconsider the attorneys’ reasonableness of the request light of all of the factors noted herein.

Lastly, disagree defendants with the trial court’s award plaintiffs’ all of light costs of their limited success. The trial court found that the intrinsically costs were related to the success claim, ful аnd we find contrary no evidence to reach a different Consequently, decision. the trial court did not abuse its discretion $L,089,640 in determining that the costs of were reasonable and fully plaintiffs’ allocable to jury successful award.

IV. A. cross-appeal. con plaintiffs’ Plaintiffs turn next to We its properly court exercised discretion tend that trial 4:42-11(a)(ii) R. award rate initially utilize the tort under interest, should add an additional but the court prejudgment “the damages judgment compensatory exceeded 2% because the they Special Part and are entitled monetary limit Civil 4:42—11(a)(iii).” disagree. higher rate of R. We is in a action Although prejudgment interest tort 4:42-ll(b), governed by R. prejudgment “the award of expressly equitable equitable is claims based on interest on contract Bank, Nat’l 186 N.J. Essex v. principles.” County First Union (2006). prejudgment award of Thus the is the sound discretion of in a case within interest is prejudgment interest Similarly, the rate at which trial court. v. Musto See the court. is the discretion of calculated within Vidas, 52, 74-75, (App.Div.2000). N.J.Super. .2d586 We 754 A 333 pre primary awarding explained the consideration have that judgment interest is the not, the has of amount use, had the plaintiff question; the defendant has the the sum interest covers the value of awarded and the factor simply

prejudgment during to which the had the benefit of monies which defendant period earlier is to have been entitled. found plaintiff N.J. Co., v. Investors 474, A .2d 495 [Rova Farms Inc. Ins. ‍‌‌‌​​‌‌‌‌​​‌‌​‌‌‌‌‌‌​‌‌‌​​‌​​​​​‌‌‌‌‌​​‌​‌​​‌‌​​‍506, Resort, (1974).] “represents mani interest a prejudgment of Unless allowance appellate should interfere.” justice, of аn court not fest denial (internal Essex, supra, County N.J. at 891 A.2d 600 omitted). quotation and citation appropriate that this an case to award The trial court found was interest, challenges decision. prejudgment and neither side R. 4:42-11 Moreover, merely guide a court used as trial “to ultimately there no unusual circumstances concluded that were warrant an simple enhancement of the interest rate.” The trial court’s 4:42—ll(a)(ii), decision to choose the by rate set R. without (a)(iii), enhancement added subsection was not a manifest justice. denial of

B. Plaintiffs challenge next response the trial court’s jury’s questions concerning the limitations of federal antitrust law may impacted as it Agreement. have

Although reading part of all or of a testimony witness’ is court, within the discretion of the trial “in the absence of some circumstance, unusual request granted.” should be State v. Wolf, 176, 185, 44 N.J. (1965); 207 A.2d 670 see also State v. Wilson, (2000). 165 N.J. In this Wolf Court reasoned that |t]he justice true administration of calls for such action. Where there is a doubt in jurors the minds of prejudicial as to what a witness it said, cannot be to to anyone rehearing have that doubt removed a of his There is no testimony. need to be giving for fear of undue chary prominence of the witness. If testimony jury under our intelligent enough trials is to be system considered to be entrusted with enough powers decision, it must be assumed have sense they ask have their memories or stimulated refreshed as to those only portions disagreement. about which are in testimony doubt or they It must be assumed disagrеements also that if had similar doubts or they about statements of other

witnesses would seek the same they If do not ask for remedy. they further reading right there is no in a to demand it. The matter must party be left in the judge, e sensitn discretion of the trial 44 N.J. 670.] at 207 A.2d [Wolf, supra, case, In present during asked, jury initially deliberations the “what restrictions [the does federal act] have on closing corpo- purchase?” rate question was related to testimony witness, plaintiffs’ Hicks, Thomas as evidence of “reliance” on plaintiffs’ fraud claim. Hicks had testified that did not Army review' the prior bid to its submission because of the placed constraints on during approval process. the counsel, After consultation with the trial court read certain portions of testimony Hicks’ jury. jury The then asked [plaintiffs] looking from at bid or [the] act “forbidls]

whether the not to at interpretation and their decision look [plaintiffs’] was it them, pending actually it because of Does forbid bid? deal, away it?” discussion with stay from After considerable counsel, portions of Hicks’ direct and the court read additional plaintiffs’ response it was that included his that cross-examination Army if The court then asked to look at the bid. choice not responded, follow-up questions. juror After jury any other no had jury its deliberations. continued reading erred not another contend that court Plaintiffs Hicks, not that we response by he testified in which “LiJt’s said, your operate. We can’t it. it’s business didn’t look at We Harl^Scott, regulations, other of Lfederal] look at it because you сan’t tell how to things. get involved. We We’re afraid rejecting you it over.” In your nm business until turn reasoning that the request, trial discretion court exercised help jury’s ques- testimony vague would not answer the was and tion. challenge to plaintiffs’ found no merit Appellate Division

The trial The court reviewed agree with that conclusion. we of the jury’s counsel and ordered a readback questions with testimony on direct and cross-examina- portions of Hicks’ relevant portion testimony the fairly tion. The court ascertained read, wanted, testimony the court jury the selected was after Receiving re- inquired questions. additional no jury if the had jury to its deliberation. sponse, allowed the continue the trial court fairly adequately responded to the put, the Simply trial court jury’s questions.

C. that the trial court erred when Plaintiffs further contend trial court has plaintiffs’ interrupted it counsel’s summation. trial, including scope conduct of the broad discretion applies to discretion The abuse of standard counsel’s summation. Hisenaj rulings during counsel’s summation. See the trial court’s (2008) (“In Kuehner, reviewing a v. 194 N.J. ruling, appellate an court is limited to trial court’s evidential discretion.”). examining the decision for abuse of sought permission closing arguments, plaintiffs’ Prior counsel to convey jury that defendants did not call as witnesses list, jury persons some of the on their witness and that the could against inference defendants on that basis. Defendants’ draw an argument replied defendants could make a similar counsel all of their witnesses. The trial because had not called permit plaintiffs’ argu- court indicated that it was not inclined to agreed ruling. to abide the court’s ment and counsel closing argument presented After defendants their and com- plied ruling, plaintiffs’ with the court’s counsel summation made concerning present failure to cer- several comments defendants’ experts challenge tain witnesses or to introduce rebuttal testimony plaintiffs’ experts. plain- Near the end of numerous summation, interrupted and instructed the tiffs’ the trial court jury disregard counsel’s comments. brought in to stated several times now that weren't people [Counsell—you’ve costfs), challenge designs, certain certain certain and so forth on down equipment, line. plaintiffls). plaintiffls) charge jury, brought I is

The will The complaint, [have] the burden to their There is no burden on the prove complaint.. part defendant!s[. need not witnesses whatsoever. can produce They They rely on cross-examination and so forth. supporting So to draw an inference case because was not plaintiffls’] somebody wrong. disregard here is unfair. It’s Please if. Follow instruction. produced my objection completed then Plaintiffs’ counsel offered no his However, instructions, during jury plaintiffs argued summation. prejudicial. were The trial court court’s comments disagreed, noting parties previously agreed that both had not to the decision not to call certain discuss witnesses. find no in the limitation on

We abuse of discretion trial court’s plaintiffs’ regarding counsel’s comments defendаnts’ failure to call noted, certain the trial court defendants were not witnesses. As proof produce any experts, and the burden of was required to that defendants breached the contract. upon plaintiffs to establish statement of the law. trial court’s comments were correct

V. part Appellate Division is affirmed in and judgment The of the for the trial court to reconsider the part. reversed in remand We award, attorneys’ the retrial of the after reasonableness Division, by Appellate in accordance with the issue remanded principles pronounced herein. RIVERA-SOTO, concurring part in and in the result.

Justice This is a contract case. obvious, repeating bears because it

That self-evident statement majority the two conclusions advanced is at odds with basic that, analysis: in contract action where fee-shifting in its counsel (1) fees, recovery counsel can be the measure of includes no breach of contract had on claims—claims on which unsuccessful they “common core” of facts or has occurred—when share a claims, 387-88, ante at legal related theories with unsuccessful (2) ascertained, 429,1 a contractual A .2dat after the lodestar is “reasonable,” ante at must be award of counsel fees nevertheless 389, 982A.2d at 430. concepts majority’s approach, imports which wholesale context,

developed statutory fee-shifting is ill-suited in the tort or context, whether a counsel setting. in a In that discrete contraсt so, amount, and, if should be appropriate what fee award is informed, rigidly governed, by well-recognized meth- but not lodestar odology determining counsel fees awards—a used prinei- analysis—-followedby application of traditional 1 Although majority referring as one based avoids to its studiously analysis (1984), Singer core,” State, v. 95 N.J. on a "common see using findings were the "common core" its affirmance of the below that reached and extent of 388-89, 429-30, A.2d at unveil the true nature ante at analysis, majority. methodology adopted by pies that eschew quantum any enhancements and define the recovery in terms of what is foreseeable. majority Because the so, fails to do I concur the result.2

I. purchase A and sale of sophisticated business assets between represented commercial entities able counsel that devolved into years now more than litigation, including twelve lengthy, contentious, trial, expensive form backdrop ap- for this Yet, peal. the core facts relevant to the presented issues in this appeal simply. are stated May plaintiff On Litton Industries, Inc. entered purchase into a written agree- and sale (Agreement) ment with defendant pro- IMO Industries Inc.3 As vided in the Agreement, recitals of the plaintiff agreed pur- chase from defendant so much of defendant’s business as was “engaged in the designing, developing, business of manufacturing, selling image night intensifier components vision systems, and products, optical systems laser and other military applications, custоmers, Government, commercial the U.S. foreign and certain governments! Agreement specified did not contain a pur- .J” instead, price; chase Section 1.4 a described mechanism for ascer- taining purchase the price. According parties, resulting the purchase price under Section 1.4 approximately was million. $52 2, 1995,

On June parties Agreement, closed on the and the However, assets were transferred. plaintiff defendant, later sued forth, setting general, in separate three claims: the breach of two respects-as plaintiff’s In appeal-I all other raised in cross- concur with the majority’s reasoning and conclusions. parties purchase agreement, Also listed as to the parties and sale and later as lawsuit, plaintiffs wholly subsidiary Systems, were owned Litton Inc. (LSI); (Baird) Varo, Corporation (Varo), Baird wholly and Inc. each a owned defendant; subsidiary International, Optic-Electronic (OEII), of and Inc. a wholly reference, subsidiary plaintiif owned of Varo. For ease of and LSI are collectively defendant, Baird, "plaintiff" referred to as and Varo and OEII are collectively referred to as "defendant.” respect fraud of con- Agreement, and in those provisions of the claims, alleged plaintiff of contract tract In its breach breaches.4 3.12(a)(iv) 5.3(ii) and had Sections that defendant breached 3.12(a)(iv) set forth defendant’s Agreement, respectively. Section none of sales contracts were representation warranty upon comple- in a “reasonably anticipated result Contract Loss (the claim). vein, In a similar performance”5 of “loss-leader” tion 5.3(ii) during Agreement limited defendant’s actions Section original purchase and sale the interim between date of 11, the actual date on the agreement—May closing 1995—-and 2, provided for- Agreement—June 1995—and that defendant was entering agreement cost “for which total bidden from into [defendant], good in faith would estimate ... as estimated claim). (the “prohibited-contracts” in net loss” result a September on hotly disputed jury After trial started 5,500 covered over on November concluded jury transcript jury a unanimous verdict. The pages, returned plaintiffs part, rejecting in in both loss- found defendant’s favor 3.12(a)(iv) plaintiffs claim. claim and fraud leader or Section However, prohibited-contracts or respect plaintiffs in Section 5.3(ii) claim, jury in returned verdict favor judg- damages. Defendant’s motion for awarded million $2.3 setting notwithstanding was denied. This factual ment the verdict respect limited of counsel provides predicate for the issue majority is my disagreement fees on with the centered. which charged originally contract; with defendant breach of Plaintiffs complaint made; breach of fraudulent misrepre- respect misrepresentations negligent sentations; breach of the covenant misrepresentations; implied dealing; unjust good conversion; enrichment; faith and fair unlawful imposition damages. However, trust; later amended of constructive punitive plaintiff fraud two breach of contract claims and the its to consist complaint solely jury to for its consideration. claim ultimately presented 5 Agreement I those Part I to the defines a "Contract Loss" as of Appendix cost to "the sales ... is less than the sum of the incurred instances where price cost to dale and the estimated completef.]”

397 verdict, plaintiff After the filed a motion for counsel fees and costs, invoking Agreement. Section 11.1 of the That Section provides, part, in relevant as follows: 11.1 Indemnification defendant by I i. Agreement In order to induce to enter into this and to consummate the [plaintiff] agree[s| [defendant transactions covenant!»] and shall contemplated hereby, against and shall [plaintiff] defend and hold harmless indemnity [plaintiff] and with for) (and shall respect reimburse and all Losses [plaintiff] suffered or any (whether

incurred suffered or incurred with by [plaintiffl Third- respect any otherwise) resulting arising Claim or from or Party out of each of the following: (b) Agreement. Breach of Covenant or agree- breach [defendant! [its] or nonfulfillment of of Any any covenant», obligations Agreement].| or ments, other set forth in this indemnity The obligations of Section triggered by 11.1 are crucial contractually defined term: “Loss.” Part I of Appendix I Agreement demands, claims, to the defines “Loss” to all “meant J reimbursement, claims for action, actions or causes of assess- ments, losses, costs, damages, liabilities, expenses, judgments, awards, fines, sanctions, penalties, charges, paid and аmounts (in,chiding settlement attorneys’ reasonable and costs inci- fees foregoing)” dent to (emphasis supplied). The lion’s share of post-verdict litigation parties between the centers on meaning and effect of that definition. Based on indemnity and definitional Agree sections ment, plaintiff sought an award of counsel fees and totaling costs almost million. $6.5 Defendant resisted application, largely noting plaintiff only had been successful respect one claims, three and that its counsel application procedurally was deficient. parties, With the consent of the appoint trial court Special ed a Master “for purpose of assisting the Court in Agreement 6Section It.3 of the defines a Claim" as claim "Third-Party "any or demand a third litigation Because the claims asserted in this party." are limited to Agreement, those made between the there are parties no Third- Party Claims at issue. designated Master was the Special Honorable Stewart G. Pollock, a retired Justice of this Court. fees, any, attorney’s if to be awarded to determining the of amount charged Special was to The Master [plaintiff] case[.]” the this arguments and other as counsel, of take such documents, steps review such hear and to determine and recommend the Master appropriate deems necessary Special for fees and costs a lodestar amount the attorney’s reasonably the Court 5.3(ii) litigation of the [its] of claim under Section incurred in the [plaintiff] [Agreement], at trial. the claim on which [plaintiff] prevailed however, that specifically provided, “[t]he The of reference order analysis determine the proportionality conduct Court will its award, only need Special so the Master of amount for claim.” determine the lodestar amount that Master. He presentations Special made parties The their 5.3(ii) plaintiff[ claim recovered is § ] that “the on which concluded claims, notably most sufficiently related the other contractual costs, 3.12(a)(iv) claim, justify including § all the services 5.3(ii) § in the for claim.” including experts, for lodestar those addressing the from issue explained “refrain[ed] He that he had in the ‍‌‌‌​​‌‌‌‌​​‌‌​‌‌‌‌‌‌​‌‌‌​​‌​​​​​‌‌‌‌‌​​‌​‌​​‌‌​​‍court reserved Order proportionality, an issue that trial however, acknowledged, that Special Master of Reference.” The highlights interrelationship between the contractual claims “[t]he identifying specific hours to be eliminated and difficulty adjusting means of re suggests appropriate that the more (citing analysis” Szczep quested through proportionality fee is Ctr., Inc., 141 N.J. A.2d v. Newcomb Med. anski (1995)). of this matter Special reasoned that “the resolution Master of the individual depends not so much on a detailed examination analysis of by [plaintiff]’s it does on an time counsel as entries 5.3(ii) § other claims on relationship claim between that “claims [plaintiff] sought relief.” He found which and that those claims so arise ‘a common core facts’ from may claims other contractual legal services on interrelate 5.3(ii) § claim.” He concluded be in the lodestar included after the incurred before or that “all fees and costs—-whether 5.3(ii) they specifically § or claim and whether not assertion 5.3(ii) § claim—reasonably claim for the identify relate to However, purpose determining plaintiff the lodestar.” because claim, pursuit Special had been unsuccessful of its fraud plaintiffs recovery Master endeavored to exclude from “the fees punitive damages, attributable to the claims for fraud and contingency agreement, interlocutory appeal.” fee and the In so, doing he fix determined to the lodestar at two-thirds of the expenses sought, reasoning amount of counsel fees and as follows: The fraud claim was one of three basic claims. It that a one- iplaintifffs follows damage|sj third reduction for the fraud and claims is both fair and punitive reasonable. a one-third reduction for Likewise, costs related to the fraud and damages Accordingly is claims fair and punitive reasonable. Master Special recommends that for fees be reduced [plaintiffl’s $1,504,- request attorney’s by 573.00-one-third from the total amount incurred, $4,513,721.39; and, iplaintiffl’s for costs be reduced $346,513.43-one-third from the total amount request sought, recognizes, $1,039,540.44. In as addition, $34,227.99 for attor- [plaintiff] contingency agreement fees on the $3,625.00 and for foes on ney’s attorney’s | for] should be added to the deductions the fraud and interlocutory appeal leaving claim. The sum punitive of ail deductions is a net $1,838,939.47, sum of $2,971,295.00 $693,026.96 fees and for costs. attorney’s Summing up, that, Special Master noted consistent with his charge, he did proportionality. not address the issue of He also downplayed rejection many objections, his ob- defendant’s (the serving “Lpjresumably proportionality] the resolution of many issue will include of the issues that trouble defendant^]” among He included them items [plaintiffj’s “such as whether limited, substantial, considered, but success should be whether the requested requirements 1.5(a), fee satisfies the of RPC whether recovered, and to may what extent the fee exceed the amount and request whether the overall is reasonable.” Adopting Special framework, analytical Master’s the trial court qualification work, found “without ... legal that the costs expenses attributable to the may two contractual claims be 5.3(ii) § entirely attributed to the purposes claim for of determin- ing the accepted Tt [lodestar].” the “common core of facts” analysis Special referenced Master due “impossibility work, to allocate expenses” among costs and the three claims advanced, plaintiff particularly plaintiff as had been unsuccessful view, on two of them. In the trial court’s the central issue was woi-k, expenses, excluding that which of the costs and “whether all [claim], [thej reasonable may allocated to fraud were be is in the record or nothing It that “there warranted.” concluded report suggest otherwise.” Special that would in the Master’s However, Special rejected the Master’s broads- the trial court counsel fee apportionment word one-third/two-thirds over the vantage point having presided unique claim. From the trial, claims “[kjnowledge the trial court observed made, trial discovery and the actual observed undertaken the fraud claim does not allow for the conclusion that presentation work, legal expenses and equal an one-third amount of the bears costs, basis, do the claims.” quantitative on a as two contractual “[ujnlike claims, fraud claim explained that the contractual It markedly being separately is less capable of evaluated is claims, despite assertion [defendant’s involved the contract [than] work, greater a of the the fraud claim should shoulder share issues and costs.” It reasoned that “the contractual expenses of this only but also the structure constitute not the foundation majority legal effort and litigation and account for the vast of the trial court pursuing the matter.” The expenses associated with offsets, that, approved appropriate after “the resultant determined $4,287,472.00. Additionally, legal amount for fees is lodestar $896,920 approved, ... as are the expert of are recommended fees $180,718.00.” The in the consultant fees amount of recommended plaintiff preliminarily fees and thus awarded to total counsel costs $5,365,110. was then, analysis, proportionality

Shifting, application of analy- explained “[generally, proportionality the trial court fee, of fee- to a of a virtue [lodestar] sis relates modification statutes, shifting in to the level of success order accommodate adjust- litigation[,]” noting proportionality in that “the achieved reviewing the pertains attorney’s fees alone.” After ment customarily determining in to enhance applied elements whether lodestar, court that “after decrease a the trial or concluded lengthy singular and circumstances consideration of the facts litigation, in finds of involved this this court a reduction 10% requested legal Consequently the fee is both fair and reasonable. $3,858,725.00.” legal in awarded fee is the amount of ultimately judgment8 9in The trial court entered a final favor of plaintiff against and defendant following

in $8,886,407.03, the amount of which includes the elements: jury’s damages; $2,100,000.00 a. on the verdict for compensatory l(a)(ii), Prejudgment R. 4:42-1 of b. interest awarded the amount pursuant (calculated $810,504.03 on the amount of the award compensatory filing through the date $2,100,000.00from on Complaint May 2006); October and litigation fees, c. and costs of awarded the amount Attorney’s expenses $5,975,903.00. appealed, plaintiff cross-appealed. Defendant Defendant points appeal, including raised four on its direct that the trial improper court’s counsel fee award was either or excessive. plaintiff, Appellate On the award of counsel fees to Division first noted Agreement provided that Section 12.10 of the that it construed, interpreted, “shall be and enforced accordance with regard thе law of the State of Texas without to its choice of law principles controlling panel United States federal law.” The concluded, however, procedural, that “an award of counsel fees is Jersey applies” (citing Bergen Transp., thus New law N. Rex Co., 561, 568-70, Leasing Inc. v. Trailer 158 N.J.

(1999)). “[tlhough It Jersey traditionally noted that New follows rule,’ party required the ‘American pay where each is its own 4:42-9(a) litigation expenses, recognizes fees and other Rule cer “[ojne here, exceptions” tain and that exceptions applies of those is, contract, that where claima is based on a ‘the rule does not preclude party agreeing by pay attorneys’ a from contract 8 original judgment The trial amended; court’s final later was all references judgment. are to the amended final 9 Although jury had a million, 380, returned verdict ol S2.3 see at 982 supra judgment 424, court, A.2d at the trial with the consem of the molded the parties, million to correct an admitted error model. plaintiff's $2.1 402 ” Assocs., LLC, Projects, Angel Inc. v. 357 (quoting

fees’ Kellam A.,2d 132, 138, (App.Div.2003)). N.J.Super. 642 recoverable Addressing whether counsel fees were at outset action, Appellate Division reasoned in this breach of in the of the definition of loss a strict construction that “even with Agree- only interpretation of the Agreement ... reasonable may in connection with fees be awarded ment is that counsel It the contractual litigation Agreement.” described under an award “expansive” “eonclude[d] of “Loss” as definition Agreemеnt.” contemplated the terms of counsel fees was (1) that the counsel Turning two-pronged claim to defendant’s (2) recovery, that the disproportionate to fee award was eliminate adequate an reduction to trial court had failed to make claims, panel acknowl for related to unsuccessful fees services It of counsel fee awards. edged scope limited of review ‘willbe recognized trial court’s counsel determination “[a] occasions, only and then because of only the rarest of disturbed on ” Co., Packardr-Bamberger (quoting & of discretion’ a clear abuse (2001)). Collier, Without Inc. v. 167 N.J. contractually counsel fees claims and distinguishing based between claims, it counsel fees noted statutory, Rule or common law based related, by are and unsuccessful claims that when “successful theories,’ legal the court or ‘related either a ‘common core facts’ whether relief obtained to determine must consider ‘the overall compen should be to the unsuccessful claims those hours devoted ” Inc., Prods., N.J.Su Kluczyk Tropicana v. (quoting sated’ (App.Div.2004)). It also considered per. A .2d 23 award reduced the counsel fee “whether the court should have obtaining million $2.1 on limited success based million[,]” concluding that claim verdict when its initial was $16 ultimately sought a claim is portion “‘when substantial along with other be considered rejected, that circumstance should ” Inc., supra, N.J. at Bergen Transp., (quoting N. Rex factors’ 843). end, 573-74, that there panel In the concluded 730 A .2d wаs no abuse of discretion in the trial court’s award of counsel fees expenses. or petitioned, plaintiff

Defendant cross-petitioned, for certifica- tion; petitions Indus., granted. both were Litton Inc. v. IMO Indus., Inc., (2008). 195N.J. 950A.2d 908

II. A. principal Defendant’s claim is that there is no basis for an award of counsel fees here. That claim cannot be sustained on the appeal. record of this general

The long-standing rule in Jersey New is that legal statute, “unless Rule, fees are authorized court or con tract, they are not Commc’ns, recoverable.” Satellite Gateway Co., Dining Inc., Inc. v. Musi Car 110N.J. 540A.2d 1267 (1988) (footnote omitted). Agreement clearly and unambigu ously contemplates that part counsel fees will be of the contractu ally defined against “Loss” recoverable breaching party. The Agreement comprehensive, sets forth a indeed exhaustive list of “Loss”; items that constitute a they demands, claims, are: “all reimbursement, claims action, or actions causes of assess ments, losses, costs, damages, liabilities, expenses, judgments, awards, fines, sanctions, penalties, charges, and paid amounts (including settlement attorneys’ reasonable fees and costs incident doubt, foregoing)[.J” of the No explicit inclusion of reasonable counsel part fees and costs as of a defined “Loss” encompasses the claims advanced here. Nothing in language Agreement negotiated by sophisticated these commercial entities recovery limits the of reasonable counsеl fees argued by manner defendant. Conversely, sophis had those same parties ticated intended the result urges, defendant now limitation would expressly have been laid out within the four scrupulously Agree- detailed lengthy and otherwise

corners this ment; it was not.

B. fees it for the court to award counsel proper Because was trial to defendant’s claim Agreement, the one must turn under challenge fees awarded. That respect quantum of counsel by methodology trial court calculated on which the focuses award, majority point on which the counsel fee the fundamental and I differ. from an award of counsel fees “must start

Any consideration of Jersey strong public policy against has a proposition that New policy embraced that shifting and that this Court has of costs Rule,’ prohibits recovery of adopting which by the ‘American In party against losing party.” by prevailing fees counsel (2005) 115, 120, N.J. 875 A.2d 925 Vayda, 184 re Estate of omitted). (citations, editing marks quotation marks and internal Rule, State, a the law of “which is this Under American attorney’s granted fees unless author prevailing party may not be Work, contract, rule, parties’ court or statute.” Rock ized Inc., 344, 350-51, Co., N.J.Super. 933 v. 396 Inc. Pulaski Const. denied, 32 194 N.J. 944 A.2d (App.Div.2007), A.2d 988 certif (citations omitted). (2008) Rule, awards, exceptions to the fall as American Counsel fee readily general categories. primary and four most under granted pursuant awards recognized form are those counsel fee See, e.g., Jerseyans a Death fee-shifting New statute. for 137, 152, Dep’t of Corrs., 185 N.J. 883 Penalty v. N.J. Moratorium “|f]rom (2005) involving matters consum (explaining 329 A.2d 56:8-19, fraud, discriminatory trеat er N.J.S.A. instances 10:5-27.1, ment, Jersey Legislature promul has N.J.S.A. New authorizing of a an award gated a substantial number statutes attorney prevailing party” reasonable counsel fee omitted)). (citation quotation Those statutes and internal marks incorporating fee-shifting “share a common rationale lor meas find ure: to ensure ‘that with bona fide claims are able to them, lawyers competent represent to attract counsel cases ” justice involving statutory rights, and to ensure for all citizens.’ Bros., 152-53, (quoting Id. at 883 A.2d 329 Coleman v. Fiore (1989) omitted)). (editing N.J. A marks .2d category The second of counsel fee consists of those awards of Vayda, supra, allowed court rule. In re 184 N.J. See Estate (“Ln general, at Rule 4:42-9 codifies those where, specific separately enabling instances in the absence of a contract, shifting Thus, permitted.”). statute or is for exam ple, shifting eight Rule 4:42-9 allows for counsel fee discrete family permitted circumstances: in actions under when Ride 5:3- 5(c); court; actions; probate out of a in in fund certain in actions; mortgage foreclosure in tax certificate foreclosure ac tions; upon liability indemnity policy; in actions a or insurance as Court; expressly by otheiwise allowed the Rules and in all of 4:42-9(a)(1) (a)(8). statutorily cases where allowed. R. to category presents The third of tightly counsel fee awards exception circumscribed common law to the American Rule that ready description, may loosely defies fiduciary but be titled as cases; category malfeasance that is summarized as follows: |143 (1996)] Willoughby, 256, evolution from v. N.J. 670 A.2d 527 Saffer (allowing damages of as the fees permissible consequential recovery attorneys’ Packard-Bamberger case), in incurred of an to malpractice prosecution attorney (2001)] (allowing [167 & v. Collier, 427, Co. N.J. of recovery fees incurred of an misconduct case based on attorneys' prosecution attorney principles), Lash, [169 breach of to In re Estate N.J. 776 A.2d fiduciary duty (2001)] (allowing 765 lees as of recoverable for part attorneys’ attorney bond), Niles, [176 malfeasance an action on a led to In re N.J. surety ultimately (2003)], 1 282, 823 A.2d where we held that “when an executor or trastee commits influence, tort of undue an to the American Rule is created pernicious exception that, the estate to he made whole an assessment of all permits reasonable costs against that were incurred 298-99, estate.” Id. at 823 A.2d 1. fiduciary (footnote omitted).] 122-23, [In re Estate 184 N.J. at 875 A .2d 925 of Vayda, supra, The final category where counsel fee awards are allowed derogation parties, of the American Rule is where as a matter of short, shifting. In New contract, agreed to counsel have pay may agree by to party Jersey recognizes that “a Inc., supra, N.J. at Transp., Bergen Rex attorneys’ fees.” N. omitted). said, (citations where That “even A.2d 843 provisions, courts by contractual shifting is controlled attorney-fee policy light general provision in strictly construe will (citations omit attorneys’ fees.” Ibid. disfavoring the award matter, ted). category can be further subdivid this practical aAs provisions are those contractual types. First ed into two statutes, namely, instances where fee-shifting those mirror adjunct to a shifting as an agreed counsel fee parties have to choice, see, Community Realty Mgmt., Inc. e.g., dispute resolution (1998) (recognizing that Harris, 714 A.2d 155 N.J. v. contractually agree pay reason may Jersey “a tenant in New omitted). Second, eviction”) (citations related to an legal able fees where, here, parties as those instances germane, are and more counsel fees party to recover its aggrieved an bargained have damages or “losses.” part of its contract and costs as

C. methodology applicable and now-standard The traditional repeating in claims bears counsel fee ascertaining quantum full: “prevailing recover an must be matter, party” a plaintiff As a threshold “prevailing fee____ lor attorney’s considered parties” Plaintiffs be may attorney’s litigation significant achieves which on issue if succeed

fees purposes they sought bringing that Once it is determined suit. benefit the parlies some of the “prevailing determines a two-factor computation a party,” is plaintiff litigation on expended of hours reasonably is the number “lodestar”, it is critical because rate. This calculation a reasonable hourly multiplied by a objective of the value of an initial estimate on which to make an basis provides services. ‍‌‌‌​​‌‌‌‌​​‌‌​‌‌‌‌‌‌​‌‌‌​​‌​​​​​‌‌‌‌‌​​‌​‌​​‌‌​​‍lawyer’s determining whether two sеparate inquiries: the “lodestar” Thus, requires sought rate and whether the reasonable, hourly is of hours of work claimed number reasonable____ is rate have a reasonable worked and hourly number of hours Once a reasonable multiplying the other deter- one by calculation defined, a arithmetic simple been end the Ascertaining however, does not “lodestar,” mines the “lodestar.”

407 Because the determination to award if inquiry. and, counsel fees in what so, awarding is amount, entrusted to the discretion, court’s exercise of the amount of the “lodestar” be reduced or enhanced..... may (2007) [R.M. v. Court New 190 N.J. 918 A.2d Supreme 1, 9-11, Jersey, (citations, omitted). editing internal marks and ] marks quotation Different, arise, however, considerations when the claim for counsel fees is based on a recognizes contract that those fees as an integral part contractually damages defined recoverable instances, non-breaching party. a In those the initial—but cer- tainly final—inquiry not is common with fee-shifting those of all lodestar, is, eases: what is the what hourly is a reasonable rate times a reasonable number of hours? conducting

In analysis the lodestar in a contract fee-shifting setting, guided a trial court should be overarching several principles. Because the counsel fee award must be tethered to a contract, proven only breach of those counsel fees incurred in pursuit of a successful breach of contract claim are recoverable. When, here, party as claims, a is successful in less than all of its those hours related to either unsuccessful contract claims or claims for which counsel fees are not allowed should be excluded State, from Singer 487, 500, the calculus. v. 95 N.J.

(1984) (“While plaintiff should recover for those hours reason ably supportive related claims, to or of his successful hours devoted to claims that are entirely distinct from the relevant excluded.”). successful claims should be That must be so because part allowance of counsel fees as requires contract precise analysis: careful and it is a fundamental and time- honored tenet of contract law that a [in “defendant a breach of chargeable action] is not for loss that he did not have probable reason to foresee as a result of the breach when the Bachstadt, contract was made.” Donovan v. 91 N.J. (1982) (citing Baxendale,

A.2d 160 Hadley v. 9 Ex. Eng. (1854)). Rep. Finally, lodestar, in determining the the trial court governed by must be the factors enumerated in Rule 4:42- 9(b) (c) 1.5(a). and RPC generally See Furst v. Einstein Inc., Moomjy, 21-22, (2004) 182 N.J. 860 A (describing .2d 435 408 4:42-9(b) 1.5(a) and RPC as “factors

application [that] Rule a fee in the reasonableness of award must inform the calculation of ease”). every this and fee-shifting in a contractual

Once the lodestar is determined case, parties sophisticated these volun- required. Because more is component a tarily that fees would be determined counsel one revert to traditional contractually damages, defined must rule of decision. principles рroper contract for the Lane, Co., Co., Totaro, Middleton & Duffy, & L.L.C. v. Cannova (2007), L.L.C., 1, succinctly sets 1100 forth 191 N.J. 921 A.2d damages. any award of contract principles that inform bedrock “ matter, ‘judicial upon remedies explains As a threshold it restitution, general categories: contract fall into three breach of 12, damages performance.’” Id. at 921 A.2d compensatory 160). 443-44, Donovan, N.J. 453 A.2d (quoting supra, 1100 91 at It noted that a different Restitution returns [e]ach contract remedies serves purpose. of these or she the contract was to the condition he before occupied innocent party damages or the innocent into the he position party executed. Compensatory put been Performance makes she have achieved had the contract completed. would breaching requiring non-breaching to fulfill his or her party whole party

obligation agreement. under (citation omitted).] [Id. at 1100 921 A.2d 12-13, that, “[mjost often, Totaro, award further courts Duffy observed a action” and compensatory breach contract “[tjhe breach, award, damage and its a connection extent of Law, English arising from the seminal origins has its Common Baxendale, 341, Eng. Rep. Hadley v. 9 Exch. 156 145 decision in omitted). (citations (1854)[.]” Id. at 921 A.2d “ First, con ‘[u]nder Basic law control. principles law, a liable for all of the party who contract is tract breaches consequences of of that contract.’” probable natural and the breach Lloyd’s, (quoting v. 131 N.J. Ibi d. Pickett (1993)). Second, goal injured party put “the is ‘to A.2d 445 ” good performance as if had been rendered.’ Ibid. position as 160) Donovan, (editing A.2d supra, 91 N.J. at (quoting omitted). Third, marks “in compensable, order to be ‘the loss breach, reasonably consequence must be a certain of the the exact ” 14, amount of the loss need not be certain.’ Id. at 921 A.2d 1100 160) Donovan, 445, (quoting supra, 91 N.J. at A.2d (editing 453 omitted). Fourth, uncertainty marks “mere quantum as to the of damages deny is an insufficient basis on which to the non- “ breaching party Finally, ‘proof relief.” Ibid. damages of need ” not be done with exactitude.’ Ibid. (quoting Lane v. Oil Deliv Inc., 413, 420, ery N.J.Super. 216 (App.Div.1987)). parties If contractually agree that counsel fees are to be includ quantum damages ed in the to be in awarded a breach of action, question contract is not limited to whether lodestar—again, reasonably “the number of hours expended on litigation multiplied by rate[,]” hourly a reasonable Hensley v. Eckerhart, 424, 433, 40, 461 U.S. 103 S.Ct. 76 L.Ed.2d (1983)—was correctly computed. 50 keenly Also relevant is whether sought satisfy the counsel fees traditional notions of damages. long-honored recoverable contract That process re quires exploration type damages an of whether sought were contemplation in the parties; whether the amount of foreseeable; damages reasonably were damages and whether the aggrieved party award returns the position it would have been in but for Binninger, the breach. See Crater v. 33 N.J.L. (E. 513, 1869) “[tjhe 515 & (explaining principle justice A. is, ... party injured that the compensated, is to be at least to the extent judicially, redress is awarded for the actual loss sustained. The effort possible, is to reach this measure as near as unless, punitive in damages, nothing cases fit for more than given”). this is to be principles require outright rejection

Those of the notion that a lodestar a breach of may eligible contract case be enhancement, concept vitality only as that has in the context of encouraging otherwise represent party reluctant counsel to Pantzer, 339, the first instance. Rendine v. 141 N.J. 661A.2d (1995). Conversely, because counsel fee awards contract damages satisfy for contract must nonetheless the standards cases awards, properly award should contractually based counsel fee and, damages if it recovered disproportionate is to be reduced Totaro, hence, supra, 191 at Duffy, N.J. not foreseeable. Co., Mining See, Peevyhouse Coal e.g., v. & A.2d 1100. Garland (Okla.1962) strip operator mine not (holding that is P.2d 109 prior mining property condition cost return to its liable for disproportionate proper is operations because restoration cost land). Thus, diminution in value of affected damages: measure in this require, limit legal precepts that instance, proportional fees awarded be that the counsel to be recovered, is, that damages in contract amount of contract the foresee quantum of the counsel fees must be parlance, that the able, principle stands in stark contrast to the а conclusion that Furst, statutory fee-shifting Rule See applicable in or cases. that, 23, (stating statutory fee- N.J. A.2d supra, 182 at 860 435 cases, the proportionality need not between shifting “there be itself’). award See also damages attorney-fee and the recovered 1202; Rendine, 336, Szczepanski supra, N.J. at A.2d 141 661 Knoll, 1232; 365, Grubbs v. 376 supra, 141 N.J. at 661 A.2d 420, 432, v. (App.Div.2005); A.2d Scullion N.J.Super. 870 713 Co., A.2d 469 N.J.Super. Farm Ins. State (App.Div.2001). Master, court, Appellate trial Division and Special damages gauged majority plaintiffs have each counsel

now the matter, applying quintessential fee-shifting all without as a claim Also, Appel- distinctions drawn here. once the contract-based category of the case for an additional late Division remanded claim, there on damages plaintiff award to its successful award, the counsel fee see judgment final on which to base was no 4:42-9(d) on the (requiring “[a]n allowance fees made R. judgment or matter shall be included determination of the determination”), necessary precedent stating condition order plaintiffs damages claim. setting the amount of full contractually part When counsel fees are plaintiffs of a dam claim, ages applicable process simple. is The trial court first difficult, should face dual-layered fixing task of the lodestar: determining hourly a reasonable rate for the services rendered counsel; setting a expended reasonable number of hours by plaintiffs plaintiff’s behalf, counsel on which must include differentiating performed between work by plaintiffs cоunsel on portion the successful of its plaintiff expend case and those efforts success; ed without and then multiplying product of one the other. The lion’s share of squarely that task plaintiff, falls on as it bears production both the burden of and the burden of persuasion in respect of its damages. asserted Murphy See v. Implicito, N.J.Super. (App.Div.2007) “[tjo (explaining claim, establish a breach of contract plaintiff has the burden to show that ... plaintiff sustained (citation omitted)). as a result” determined,

Once the lodestar is squarely the trial court must uncertainty address the determining inherent in proportionali- ty contractually of a against allowed counsel fee award the dam- ages plaintiff ultimately award recovers. In give order to true meaning bargain parties, struck between the part and as ascertaining quantum foreseeable, whether the of counsel fees are weigh the trial court must the amount of counsel fees determined whether, as the lodestar basis, and conclude proportional on a the size of the counsel fee award contemplation was within the of the parties.10 however, majority, rejects

The traditional contract principles in favor of its “common core” and analysis. reasonableness Those concepts simply place have no in contract claims. The burden of 10There is no reason treat to claim for an award of plaintiffs expenses any Therefore, the trial court differently. also should determine whether the ex- claimed as of its penses by counsel fee award plaintiff part were related to successful claim and plaintiff's reasonable in amount, and whether those ex- were foreseeable, is, penses whether are to they proportionate damages ultimate recovery. plaintiff. If a damages squarely on the

proof on contract rests prove damages they are plaintiff can his contract contract recoverable; cannot, foreseeable, they if should they should he be wholly plaintiff to a contract to inappropriate be. allow not It is to explicitly—the gimmick of a “common core” use—tacitly, if not wholly Similarly, inappropri it competent proofs. is substitute for fees-shifting damages counsel award to the ate to tether a contract 389, A. 2d at expectation parties,” ante at “reasonable of the fundamental and available as that basis fails to address damages. compensatory or contract remedies: either restitution 12-13, Totaro, Duffy, supra, N.J. at 921 A.2d 1100. See III. Although majority’s rejection of all of the I concur with the plaintiffs cross-appeal, as well as with the remand issues raised on majority of the fees ordered for the re-assessment counsel award, majority in join respect I with methodolo- cannot concerning plaintiffs fees claim on gy applied to be counsel genesis: its methodology be defined remand. That should Hence, parties. required should be is contract between the what production and of plaintiff joint persuasion bear burden respect damages, proofs and that those be in of its counsel fees is damages all other contract claims: what sum examined like necessary non-breaching party position to to return the either (restitution) to was entered into or it was before position non-breaching in the it would have been place party course, provided, (compensatory damages), but the breach extent, I any damages were To that limited such foreseeable.11 remanding judgment challenge Division's did not the Appellate parties event, case, a remand would have followed in Hence, see n. supra. methodology ascertaining and the as be applied decision today view, defines—albeit, be of counsel fees to awarded further only my quantum That said, of that remand. because the amount incorrectly—the scope costs to be awarded must be the contract counsel fees and proportional meaningful of counsel fee and recovered, a assessment the quantity solely reject majority’s methodology and in the must concur this requiring result further and far more detailed examination of counsel fees claim. joins opinion. in this

Justice HOENS part/reverml part/r&mandment—Chief For affirmance LONG, LaVECCHIA, ALBIN, RABNER ‍‌‌‌​​‌‌‌‌​​‌‌​‌‌‌‌‌‌​‌‌‌​​‌​​​​​‌‌‌‌‌​​‌​‌​​‌‌​​‍and Justices Justice WALLACE, and HOENS—7. RIVERA-SOTO

Opposed—None. PATEL, APPELLANT-APPELLANT,

HINA K. v. NEW COMMISSION, JERSEY MOTOR VEHICLE

RESPONDENT-RESPONDENT. Argued September Decided November2009. performed only judgment costs award can be after final on the contract dam- ages, piecemeal and not or interim manner.

Case Details

Case Name: Litton Industries, Inc. v. IMO Industries, Inc.

Court Name: Supreme Court of New Jersey

Date Published: Nov 2, 2009

Citation: 982 A.2d 420

Docket Number: A-10/11 September Term 2008

Court Abbreviation: N.J.