Fee Shifting

It has been said that: “The road to hell is paved by successful litigants”!

The hard truth is: litigation is expensive. Regardless of whether you are the one initiating the lawsuit or forced to defend yourself, most people do not want to pay the legal and other fees associated with any lawsuit.

Under the “American Rule” each side to a case pays for their own legal fees, win or lose. However, in limited circumstances there are exceptions to the American Rule. This can occur in cases of misconduct, such as fraud or frivolous litigation, or in cases where responsibility for paying legal fees was previously negotiated by the parties or where provided by Rule or Statute.

In-depth analysis of the claims and/or defenses in any litigation matter also includes determining whether “fee shifting” of attorneys’ fees applies. If so, it is important to raise them timely. For example, if the case involves breach of the Consumer Fraud Act or Home Improvement Contractors Act, it is imperative to include a claim for attorneys’ fees, costs and treble damages upfront in the complaint so as to not waive the claim later on.

Likewise, asserting a claim for attorneys’ fees is warranted in claims that appear potentially frivolous. Under N.J.S.A. 2A:15-59.1 a. (1):

A party who prevails in a civil action, either as plaintiff or defendant against any other party may be awarded all reasonable litigation costs and reasonable attorney fees, if the judge finds at any time during the proceedings or upon judgment that a complaint, counterclaim, cross-claim or defense of the non-prevailing person was frivolous.

Additionally, under R. 1:4-8:

• The signature of an attorney or pro se party constitutes a certificate that the signatory has read the pleading, written motion or other paper. By signing, filing or advocating a pleading, written motion, or other paper, an attorney or pro se party certifies that to the best of his or her knowledge, information and belief, formed after an inquiring reasonable under the circumstances:
  • The paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
  • The claims, defenses and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
  • The factual allegations have evidentiary support or, as to specifically identified allegations, they are either likely to have evidentiary support, or they will be withdrawn or corrected if reasonable opportunity for further investigation or discovery indicates insufficient evidentiary support; and
  • The denials of factual allegations are warranted on the evidence or, as to specifically identified denials, they are reasonably based on a lack of information or belief or they will be withdrawn or corrected if a reasonable opportunity for further investigation or discovery indicates insufficient evidentiary support.

Rule 1:4-8 thus establishes legal grounds for fee-shifting in addition to other sanctions for filing a frivolous pleading.

If a notice is not timely served, pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8, putting the litigant on notice of the frivolousness of their claims and/or defenses, then the claim for payment of legal fees may be waived. Moreover, entitlement to seek reimbursement of attorneys’ fees only begins to toll from the date that the Frivolous Claims Notice is served.

When properly preserved and utilized, fee shifting provisions [1] [2] can be crucial to a client. In cases with “fee shifting,” it is not only necessary to preserve the right to shift fees up front, but it is arguably most important to preserve the right to seek attorneys’ fees and costs prior to obtaining a final judgment.

Often, in rushing to obtain a final order, a litigant inadvertently forecloses itself from the opportunity of obtaining an award of attorneys’ fees and costs together with a final judgment. With certain limited exceptions, a party must move in tandem with an order seeking final judgment and an allowance of fees. Failure to do so will result in the waiver of one’s ability to do so later. Knowing the proper procedures for seeking reimbursement of attorneys’ fees is of the upmost importance and can make the difference between a satisfied client and a thankful one.

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[1] “Court rules authorizing the allowance of attorney’s fees include among others] the following”:

• R. 1:4-8 (frivolous actions);
• R. 1:10-3 (relief to litigant);
• R. 4:5-1(b) (sanctions for failure to give notice of other actions and other potential parties);
• R. 4”14-8 (failure to attend deposition or serve deposition subpoena);
• R. 4:23-1 to 4:23-5 (discovery sanctions);
• R. 4:37-1(b) (voluntary dismissal);
• R. 4:46-6 (summary judgment);
• R. 4:50-1 (vacation of default judgment);
• R. 4:52-7 (labor disputes);
• R. 4:58-2 and 4:58-3 (offer of judgment);
• R. 4:86-4(e) (attorney for alleged incompetent).
• Pressler & Verniero, Current N.J. Court Rules, cmt. 2.7 on R. 4:42-9 (2027).

 [2] Fee shifting provisions are also granted under statutory authority, which must be analyzed and preserved. For example, the following statutes authorize fee shifting:

• Child Sexual Abuse Civil Actions;
• Civil Rights (N.J.S. 10:6-2);
• Condominium Act (N.J.S. 46:8B-21);
• Conscientious Employee Protections Act (CEPA) (N.J.S. 34:19-5 and 34:19-6);
• Construction Lien Law (N.J.S. 2A:44A-1 to 2A:44A-38);
• Consumer Fraud Act (N.J.S. 56:8-19);
• Domestic Violence (N.J.S. 2C:25-29b(4));
• Eminent Domain (N.J.S. 20:3-26);
• Employee Indemnity;
• Environmental Rights Act (N.J.S. 2A:35A-10);
• Family Leave Act (N.J.S. 34:11B-12);
• Franchise Practices Act (N.J.S. 56:10-1, 10);
• Frivolous claims (N.J.S. 2A:15-59.1);
• Insurance Fraud Prevention Act (N.J.S.17:33A-5b);
• Landlord Tenant (N.J.S. 2A:18-61.66 and 2A:18-61.67);
• Law Against Discrimination ((LAD, N.J.S. 10:5-27.1);
• “Lemon Law” (N.J.S. 56:12-32(a));
• Nursing Home Bill of Rights (N.J.S. 30:13-8);
• Open Public Records Act (N.J.S. 47:1A-6);
• Parentage Act (N.J.S. 9:17-54);
• Prevailing Wage Act (N.J.S.34:11-56.40);
• Prevention of Domestic Violence Act (N.J.S. 2C:25-29b(4));
• Racketeer Influenced and Corrupt Organizations Act (RICO) (N.J.S. 2C:41-6(c));
• Real Estate Guaranty Fund (N.J.S. 45:15-37);
• Residential Tenants’ Security Deposit Return (N.J.S. 46:8-21.1);
• Sales Representatives’ Rights Act (N.J.S. 2A:61A-3(a));
• Stockholder Rights;
• Tort Claims Act (N.J.S. 59:9-5);
• Truth in Consumer Contract, Warranty and Notice Act (N.J.S. 56:12-14 to -18);
• Uniform Commercial Code;
• Uniform Securities Law (N.J.S. 49:3-47 et seq.);
• Workers’ Compensation (N.J.S. 34:15-64);
• American with Disabilities Act (42 U.S.C. §§ 12101 to 12213);
• Fair Housing Act (42 U.S.C. §§3601 to 3619);
• Federal Odometer Law (49 U.S.C. §32710(a));
• Immigration-related unfair labor practice (8 U.S.C. §1324);
• Individuals with Disabilities Education Act (20 U.S.C. §§1407-1491o);
• Magnuson-Moss Warranty Act (15 U.S.C.A. §2301, et seq.);
• Truth in Lending Act (15 U.S.C. §1635, 1640);

Pressler & Verniero, Current N.J. Court Rules, cmt. 2.8.2 and 2.8.3 on R. 4:42-9 (2027).

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No aspect of this advertisement has been approved by the New Jersey Supreme Court. This publication is for informational purposes. It does not constitute legal advice or create an attorney-client relationship. The content is current as of date and time of its publication. It may not reflect developments or changes in the law that have occurred since its publication. Beattie Padovano, LLC, and the attorneys that authored this content disclaim any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication. For further information, please contact the attorneys who authored this publication.