(Photo by Gina Passarella)

Plaintiffs who succeeded in voiding New Jersey’s ban on direct shipments of wine to consumers from out-of-state vineyards have been awarded $574,925 in counsel fees.

U.S. District Judge Katharine Hayden’s original grant of $802,221 in legal fees to the plaintiffs as prevailing parties was partially vacated on appeal. Her reduced award, issued Monday, was not opposed by the state.

The suit, Freeman v. Fischer, filed in 2003 by wine connoisseurs and consumers, alleged that aspects of the state’s alcoholic beverage law treated in-state and out-of-state wineries differently, infringing on the dormant Commerce Clause in violation of 42 U.S.C. 1983.

While the case was pending, the U.S. Supreme Court ruled in Granholm v. Heald, 544 U.S. 460 (2005), that a state allowing direct shipment of wine to consumers must be evenhanded. New Jersey then amended its law to ban direct shipment of wine to consumers altogether.

Hayden found the ban constitutional with minor exceptions. Both sides appealed, and the U.S. Court of Appeals for the Third Circuit ruled in 2010 that the ban on direct shipment passed constitutional muster but held that other provisions violated the Commerce Clause.

The plaintiffs asked the Third Circuit to award fees, but the request was denied without comment. After the case was remanded, the Legislature adopted revisions to the contested provisions, and Hayden entered a consent order. The plaintiffs requested attorney’s fees and costs and were awarded $802,221.

The state appealed the fee award, claiming Hayden lacked authority to award fees after the appeals court denied a fee application.

In October 2013, the Third Circuit upheld the bulk of the fee award, including the finding that the plaintiffs were prevailing parties and the establishment of rates at $600 per hour for lead counsel and $285 per hour for associates. But the appeals court overturned the award of fees related to the first appeal.

The court cited Yaron v. Twp. of Northampton, 963 F. 2d 33 (3d Cir. 1992), which held that once an appeals court has entertained an application for fees, a district court may not. Hayden found Yaron did not apply because it concerned fees for prevailing defendants, rather than plaintiffs, but the appeals court said that its jurisdiction over a motion for appellate attorney fees, once assumed, was exclusive.

The Third Circuit also found Hayden had improperly awarded fees for work done strictly on behalf of Oliver Winery, a plaintiff who was voluntarily dismissed from the case; for work done in support of the plaintiffs’ unsuccessful effort to substitute Chateau Thomas Winery as a plaintiff in place of another party that withdrew, Hansel Winery; and time spent seeking additional plaintiffs.

Hayden reduced the fee award by $186,136 for work on the prior appeal, $17,160 for time spent litigating the Yaron issue, $4,777 for time spent on behalf of Oliver Winery, $14,048 for time spent attempting to substitute Chateau Thomas Winery, and $5,175 for time spent seeking other plaintiffs.

“We’re happy the judge approved our fee application. We’ll be happier when the state pays us,” says the lawyer representing the plaintiffs, Gary Redish of Winne, Banta, Hetherington, Basralian & Kahn in Hackensack.

But another plaintiff lawyer, Robert Epstein, of Epstein, Cohen, Self & Flora in Indianapolis, says he will petition the U.S. Supreme Court for certiorari to restore his fee award to the higher level. “We think we’re entitled to it,” he says. He argues that the Third Circuit’s holding in Yaron is contrary to the rule adopted in other circuits.

Besides Redisk and Epstein, the plaintiffs were represented by James Tanford, a professor at Indiana University School of Law in Bloomington, Ind.

The state was represented in the case by Assistant Attorneys General Robert Lougy and David Bregenzer. The Attorney General’s office said it had no immediate comment on the case.

The revised statute creates an out-of-state plenary license. Available to wineries producing less than 250,000 gallons per year, the license permits the shipment of wine directly to New Jersey consumers or retail stores, and allows the opening of tasting rooms here. Licensees must ship only their own products, limit shipments to 12 cases per year per person, for personal consumption, and must comply with Division of Taxation collection requirements.

Contact the reporter at ctoutant@alm.com.