New Jersey Employment Law Blog - Current Information on Employment Law and Business/Civil Litigation

Defense counsel in employment cases --- in any fee-shifting case, actually --- are going to be crying in their beer over yesterday's decision by the NJ Supreme Court in two consolidated cases.  The cases are Walker v. Giuffre and Humphries v. Powder Mill Shopping Plaza.  Interestingly, neither is an employment case, but their combined impact upon employment cases is undeniable.

For the past 17 years, under a case called Rendine, attorneys who represent plainitffs under contingency fee agreements in fee-shifting cases under NJ law have been permitted to seek enhancements of their fees under certain circumstances.  For instance, if the base fee is $100,000, and the court decides that a Rendine enhancement of 25% is appropriate, the attorney's fee becomes $125,000.  The theory is that allowing fee enhancements incentivizes attorneys to take on difficult cases, or ones that seek to vindicate important policies, where there is a significant risk of non-payment.

The law in NJ seemed settled.  Then enter the US Supreme Court, with its 2010 decision in Perdue v. Kenny A, a civil rights case.  The Court there held that fee ehancements are only appropriate to award superior attorney performance in extraordinary cases.  That standard is far more restrictive than the Rendine standard, and it is undeniably the law of the land in cases that are decided under federal law. 

The Perdue standard then seeped down into a couple of cases decided under NJ state law.  In the Walker and Humphries cases, panels of the NJ Appellate Division adopted the Perdue "extraordinary circumstances" test to deny fee enhancements to successful plaintiffs, who appealed.

In no uncertain terms the NJ Supreme Court reversed the Appellate Division, holding that

the mechanisms for awarding fees, including contingency enhancements, that we adopted in Rendine shall remain in full force and effect as the governing
principles for attorneys’ fee awards made pursuant to fee-shifting
provisions in our state statutes and rules.

Take that, US Supremes!

The opinion is long, but it is required reading for attorneys who handle contingency cases.  It clarifies all of the standards that are used to award fees in contingency fee cases, not just fee enhancements. Among other things, folks, there is going to be little excuse for not keeping detailed, contemporaneous time records --- if you want to get paid.

There's a good chance that we're all going to be citing to Walker and Humphries from now on.  Rendine will still be cited, but we'll be arguing the cases decided on January 25, 2012.

Many companies now have policies that govern the use of electronic business systems, such as e-mail, for the personal business of employees.  Some prohibit personal use entirely, but many allow for some amount of personal use as a convenience to their employees.

So what do some employees do?  When they consider suing their employer for some perceived violation of their rights, they communicate with their attorneys using the company's e-mail system.  That's right.  They send what might be legally privileged communications over an e-mail system owned and controlled by their adversary.   You would think that people - even people without a background in the law - would stop, think twice, and realize that this really isn't a great idea.  But apparently that's not always the case.

Recently, in Holmes v. Petrovich Development Company,  the California courts held that an employee who was consulting with counsel in connection with a pregnancy discrimination claim used a company system for privileged communications at her own risk.

[T]he e-mails sent via company computer under the circumstances of this case were akin to consulting her lawyer in her employer‚Äüs conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him. By using the company‚Äüs computer to communicate with her lawyer, knowing the communications violated company computer policy and could be discovered by her employer due to company monitoring of e-mail usage, Holmes did not communicate “in confidence by means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted.” (Evid. Code, § 952.) Consequently, the communications were not privileged.

The law is much different in New Jersey.  Here employees have some protection if they are incautious enough to communicate with counsel through an adversary's system.  The main case is Stengart  v. Loving Care Agency.  The  NJ Supreme Court opinion is here, and our post on the earlier Appellate Division opinion here.  In a nutshell, under Stengart employers and their attorneys are prohibited from reading e-mails between employees and their lawyers.

The question is, Stengart notwithstanding, why would an employee take the foolish risk of compromising the protection provided by the attorney-client privilege by using her employer's e-mail system?  After all, most everyone owns or has access to a personal computer, a wireless phone or Blackberry, on which secure communications can be sent.

When prospective plaintiffs come to see us, one of the first things that we tell them is not to use employer-provided equipment for anything: communications, note-taking, whatever.  And yet, it is surprising how many have already done something like that.

So this is a quiet plea for all of you, who think that your workplace rights have been infringed, not to use your company's e-mail system to communicate with lawyers.  Anything else will do: your own computer system, snail mail, telephone from home, dogsled, carrier pigeon . . . whatever.  But for heaven's sake don't jeopardize your case by being careless or lazy and letting your adversary serve as your messenger.

There's legal, and then there's smart.  Be smart.

The fallout from the mega-firms' increase of annual compensation for first year associates to as much as $160,000 (!) continues to raise the eyebrows of corporate in-house counsel.  Rather than continue to pay high prices for inexperienced lawyers, corporations are taking steps to keep their legal costs in line.  Some examples:

1. Keeping more work in-house.
2. Demanding flat fees rather than hourly billing.
3. Using creative, risk-sharing billing arrangements.
4. Seeking authoritative answers from more expensive but experienced lawyers rather than hours of research from neophytes.

Law.com has more here.

We've preached this gospel before, but it's worth repeating.  Even businesses that do not have their own legal departments can learn from the big kids. 

Take some time to research law firms, meet with several, and decide which you want to establish a relationship with.  Chemistry between lawyer and client counts, more than most business owners realize.

Understand that traditional hourly billing, by its nature, can encourage inefficiency.  Sometimes it makes economic sense, sometimes it doesn't.  But hourly billing is deeply ingrained in American business culture.  All sorts of professionals use it, from attorneys to accountants to architects to engineers, and more.  We're used to it, and sometimes it's hard to have the courage to break out of the mold of business as usual.   The next time that you need legal services, ask prospective attorneys about their willingness to work on an alternative fee arrangement.  Think about ruling out the ones who won't discuss it. 

Think hard about whether a big firm with hundreds of associates (and commensurate overhead) is really what you need.  New Jersey has scores, perhaps hundreds, of top-quality small and mid-sized business law firms that are staffed by lawyers who have fled the big firms for a different kind of professional life.  And often for a different way to do business.  Finding them is worth your time.

Learn from the in-house lawyers whose job it is to get the most bang for their company's legal services buck.

A few days ago I was talking to an adversary in an employment litigation.  She's a partner with a large (700 lawyer) and very capable firm with offices in many states.   I had read stories about her firm making more acquisitions of smaller practices and asked when her firm's expansion would stop.  You could almost hear the shrug through the telephone.  The answer: "the consultants keep telling us that bigger is better."

Now this firm is reflective of a larger trend.  All across the country the big firms are expanding, often by buying up small and mid-size firms.  In fact, the phenomenon has become international, with firms from different countries hooking up.  But is bigger necessarily better, as the consultants tell my colleaugue's firm?  Or, to pose the question from a client's perspective, is a bigger law firm necessarily a better choice for your business?

I can't prove this empirically, but my informal observations of the legal scene suggest that, as a rule, big businesses historically gravitate to comparably large law firms as their primary counsel.  (And yes, I know that there are exceptions.  In fact, that's the point.  Read on.)

The Legal Intelligencer reports on a recent study by BTI Consulting Group that shows that "in 2006, 61.1 percent of corporate clients reported they had fired one of their primary law firms in the last 18 months -- up from 53.7 percent in 2005."  The corporate clients reported using an average of two "primary" firms.  Do the math and you quickly realize that a lot of firms lost major client relationships last year.

Actions speak louder than words, so what are the clients telling us?

Obviously, they are willing to make changes.  Why?

To get better service is one answer.  But "service" is not as simple as returning phone calls and getting work done on time.

"Clients want firms that are there to help solve problems and not just there to bill hours. It's about communicating and demonstrating value, understanding the business and using a business perspective," Shunk said, adding later, "Firms that recognize how they can do that can exceed and surpass a competitor law firm." 

And therein lies the opportunity for small and medium-sized firms, which often are hungrier than their larger compeitors, can be more creative in proposing solutions, and have the flexibility to respond quickly to changing situations.

And let's be honest.  It wasn't so long ago that a 100-lawyer firm that would be considered mid-sized today, was a behemoth in the legal world.  Firms of that size frequently handled the most sophisticated kinds of work for the most sophisticated clients.  Have the requirements of business really changed so much that a 100 lawyer firm can no longer meet most of the needs of big business clients?  I suspect not.  The world is more complicated now, but it's not that much more complicated.

I'm interested to hear what clients think about this.  Please comment with your thoughts.

A recent Law.com article took an interesting look at the question of who are California's best management side employment lawyers.

Ask anyone who's the best trial lawyer or the best IP litigator in California, and you'll probably hear the names of well-known, $700-per-hour senior rainmakers at California's largest law firms.

But there are a great many superb lawyers practicing outside the headlines at smaller firms all over the state or in more junior positions at the megafirms. They may not have the same name recognition -- but they also don't usually come with the same price tag.

Thus began the quest to identify high quality but lesser known employment lawyers.

Law.com highlighted four; who they are is not important for purposes of this post. Why they are well regarded is. Here are some of the common threads.

First, their rates are usually lower --- sometimes much lower --- than those found in the larger firms.

Second, they are highly competent. Often they are alumni of the larger firms who have left to establish their own practices.

Third, they work with focus and efficiency. As one said, "One of the things that seems to resonate with my clients a lot, I do what needs to be done to win -- not everything that can be done."

Fourth, they offer clients real solutions to business problems, not theorizing or temporizing. In other words, they give specific, practical answers to managers who need them.

The article was limited to California, but it's reasonable to think that there are similar attorneys in the other 49 states as well. The question is how to find them.

More on that in another post soon.