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The offer of judgment rule must sometimes give way when it runs up against a fee-shifting statute, a New Jersey state appeals court has held. The panel in Best v. C&M Door Controls Inc., A-3801-06, found Aug. 19 that awarding fees under the rule clashed with policies behind the Conscientious Employee Protection Act but not those underlying the Prevailing Wage Act. Thus, a worker who won a wage verdict that was lower than the employer’s offer of judgment but lost on his whistleblower claim could recover statutory fees on the wage claim. But the employer was entitled to recover fees under the rule, though only to the extent they were incurred defending the wage claim — not the whistleblower one. The panel applied the rule, 4:58, as amended in 2006, after the offer of judgment and jury verdict but before the employer applied for fees and costs under the rule. The amended version applied because the rule is procedural and is thus deemed to apply to actions pending when it took effect, wrote Judge Carmen Messano, joined by Paulette Sapp-Peterson. Judge Edwin Stern concurred, saying he did not necessarily agree that the amended version of the rule applied but that it made no difference because language added in 2006 — that fees would not be awarded where it would conflict with policies underlying a fee-shifting statute — merely clarified the rule rather than changing it. Stern also opined that the Prevailing Wage Act might be the only fee-shifting statute whose policy does not conflict with the offer of judgment rule and thus the rule could not be used in any other type of fee-shifting case. Thomas Best sued in Middlesex County Superior Court, alleging that his employer, Port Reading’s C&M Door Controls Inc., violated the Prevailing Wage Act, N.J.S.A. 34:11-56.25 et seq., by miscalculating his hours and underpaying him, and CEPA, N.J.S.A. 34:19-1 et seq., by retaliating against him when he complained to the Department of Labor. Best made a pre-trial offer of judgment of $100,000 and rejected defense offers of judgment of $15,000, then $25,000. During the trial, he sought lost wages of $46,262 but the jury awarded him only $2,600 on the PWA claim and found no cause on the CEPA claim. Best’s lawyer, Steven Greenstein, asked Judge Mathias Rodriguez for $147,492 in counsel fees and costs under the PWA, while C&M counsel John Casey asked for either $42,417 in fees and expenses under the rule or $79,011 under a CEPA provisiion for frivolous claims. Rodriguez awarded Greenstein $62,529, denying any fees incurred after the $25,000 offer of judgment. He denied Casey’s application altogether, finding a conflict between the rule and the PWA’s fee-shifting policy. He denied fees under CEPA despite the no-cause verdict because there was no judicial finding the claim was frivolous. Both sides appealed. Messano said the panel had to weigh two competing public policies — the need to ensure that plaintiffs with bona fide cases are able to retain counsel and the desire set forth in the offer of judgment rule to encourage early settlement. The court first found that the 2006 amendment did not make the rule “per force inapplicable to all fee-shifting statutes” and that the PWA was a fee shifting statute that did not preclude use of the rule. Because the PWA allows a worker to recover only the wages due and the statutory scheme provides for administrative enforcement, “pursuing the PWA claim through protracted litigation did not serve the legislative purpose,” reasoned Messano. In addition, since the PWA also benefits employers, by protecting those who pay proper wages from being underbid on public contracts by those who do not, “an employer’s obligation to defend himself against a modest wage claim, thus incurring significant legal expenses in the process, does not further the legislative goal of insuring competitiveness and financial security” to employers. But the court came to the opposite conclusion in evaluating the portion of Casey’s fee request attributable to his successful defense of the CEPA claim. It found a conflict because CEPA, unlike the PWA, did not have a dual purpose that also served the employer’s interest. In addition, the nature of the damages available under CEPA, which can include unliquidated and punitive damages, makes it more difficult for an employee presented with an offer of judgment to gauge its sufficiency under the rule, which kicks in when the judgment, excluding counsel fees, is less than 80 percent of the offer. The panel sent the case back to Rodriguez to award fees to Casey for defending the PWA claim, while affirming the denial of CEPA fees in the absence of a finding that it was frivolous. It also reversed the fee award to Greenstein under the PWA, because Rodriguez reduced the request by 40 percent to account for the time spent pursuing the CEPA claim without setting forth findings of fact and conclusions of law to support that determination. Casey, of West Orange’s Wolff & Samson, says the ruling offers some good news for employers. “The court made a policy decision that says if employers make a good faith effort to settle a claim under the prevailing wage act, they can take the benefits of the offer of judgment rule.” Greenstein, of Rahway’s Tobin, Reitman, Greenstein, Caruso, Wiener & Konray, says, “it’s not clear to me how this will finally end up. This is indeed a mixed bag.”

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