JHC INDUSTRIAL SERVICES, LLC VS. CENTURION COMPANIES, INC. (L-7635-17, BERGEN COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1980-19
JHC INDUSTRIAL
SERVICES, LLC,
Plaintiff-Appellant, APPROVED FOR PUBLICATION
September 17, 2021
v.
APPELLATE DIVISION
CENTURION COMPANIES,
INC., and BONDEX
INSURANCE COMPANY,
Defendants-Respondents.
___________________________
Argued January 27, 2021 - Decided September 17, 2021
Before Judges Ostrer, Accurso, and Enright.
On appeal from the Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-7635-17.
Autumn N. McCourt argued the cause for appellant
(Brach Eichler, LLC, attorneys; Anthony M. Rainone,
of counsel and on the briefs; Autumn M. McCourt, on
the briefs).
Harold P. Cook, III, argued the cause for respondent.
The opinion of the court was delivered by
ACCURSO, J.A.D.
Defendant Centurion Companies, Inc. subcontracted demolition work it
agreed to perform for Alfred Sanzari Construction, Inc. to plaintiff JHC
Industrial Services, Inc. JHC did the work and Sanzari paid Centurion for it.
Centurion, however, did not pay JHC in full, prompting this action under
N.J.S.A. 2A:30A-1 to -2, the legislation designed to ensure the prompt
payment of subcontractors and known as the Prompt Payment Act. Although
JHC completely prevailed in this two-year, contested case, the trial judge
refused its application for $104,670.51 in "reasonable costs and attorney fees"
pursuant to N.J.S.A. 2A:30A-2(f), instead awarding it $12,250.40 in fees and
$4,125.33 in costs for a total award of $16,375.73, reasoning it could not
"[u]nder Rendine [v. Pantzer, 141 N.J. 292, 334-35 (1995)], . . . grant over
$100,000 in fees on a judgment that could not have exceeded $30,500."
We reverse. The Prompt Payment Act is a fee-shifting statute that
makes an award of "reasonable costs and attorney fees" mandatory to a
prevailing party. N.J.S.A. 2A:30A-2(f). Our Supreme Court has expressly
"decline[d] to construe New Jersey's fee-shifting statutes to require
proportionality between damages recovered and counsel-fee awards even if the
litigation . . . vindicates no rights other than those of the plaintiff."
Szczepanski v. Newcomb Med. Ctr., 141 N.J. 346, 366 (1995). As the clear
purpose of the Prompt Payment Act is to ensure that subcontractors are fully
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and promptly paid for their work, a mandatory award of reasonable costs and
attorney fees is necessary to vindicate the Act's salutary purposes. Because the
trial court erred in imposing a proportionality requirement where none exists,
we vacate the fee award and remand for the trial court to award plaintiff
reasonable costs and attorney fees under the relevant Rendine factors.
The facts essential to deciding this appeal concern only Centurion's
unwillingness to pay plaintiff for the demolition work it fully performed and
its efforts to drag out the litigation plaintiff was forced to file to recover what
was due. Plaintiff prevailed on its partial summary judgment motion
establishing Centurion owed it $30,500, a judgment Centurion has not
appealed. Thus, we dispense with any discussion of the facts giving rise to
plaintiff's claim and focus on the effort it took plaintiff to secure its final
judgment.
Following timely completion of JHC's work in June 2017, it was owed
$30,500 by Centurion. When Centurion failed to pay, JHC threatened to lien
the job. Glen Poppe, Centurion's project manager 1 testified at deposition and
confirmed at trial that he told JHC "right up front if you put a lien on the job,
I'm going to bond it, and I'm not going to pay you." Poppe made good on his
threat.
1
Poppe also testified his son Christopher "owns" the Centurion companies.
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After plaintiff sued Centurion and the owner to foreclose the lien JHC
filed notwithstanding Poppe's threat, it was advised by the owner's counsel that
Centurion had secured a bond for release of the lien months before, requiring
plaintiff to discharge its lis pendens against the property and file an amended
complaint substituting the bonding company for the owner. Centurion then
failed to answer, necessitating plaintiff to enter default against it. The parties
entered a consent order to vacate default, and Centurion filed a motion to
dismiss the action and compel arbitration. Plaintiff was forced to oppose the
motion, which after protracted motion practice and oral argument was denied
in a written opinion finding no agreement to arbitrate.
After its motion to compel arbitration was denied, Centurion filed an
answer and counterclaimed for breach of contract, intentional interference with
contract, breach of the implied covenant of good faith and fair dealing and
overstatement of a construction lien. The court thereafter ordered the parties
to mediation, and they agreed on a mediator. A week before the scheduled
date, however, Centurion balked at the mediator's fees and refused to
participate, necessitating a motion to the court to compel its participation. 2
Plaintiff won that motion, too.
2
Included in that motion was a request to compel Centurion to answer the
interrogatories and document demands it had previously ignored. While the
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Centurion thereafter missed a court-ordered deadline to supply complete
discovery, forcing yet another motion by plaintiff. After Centurion served
amended discovery responses, plaintiff withdrew its motion. Keeping to the
same pattern, Centurion refused to confirm deposition dates of its principals,
forcing plaintiff to file yet another motion, this time to extend discovery to
permit those depositions to go forward. After Centurion finally committed to
dates for depositions, plaintiff also withdrew that motion.
After close of discovery, plaintiff filed a motion for partial summary
judgment on its breach of contract and Prompt Payment Act claims. Centurion
cross-moved for summary judgment dismissing the Prompt Payment Act
claim. Following oral argument, the court entered summary judgment for
plaintiff on its contract claim, finding "it is undisputed that JHC completed its
work on the contract in full." The court denied both parties' motions on the
Prompt Payment Act claim based on Centurion's assertion that plaintiff's
delays in completing its work delayed the job and caused Centurion to incur
additional costs and damages. Plaintiff's motion for reconsideration was
denied.
motion prompted Centurion to finally provide some discovery, the answers
were inadequate. The court ordered Centurion to provide complete responses
within thirty days.
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Accordingly, Centurion forced plaintiff to trial on its Prompt Payment
Act claim and on Centurion's counterclaims for breach of contract, intentional
interference with contract, breach of the implied covenant of good faith and
fair dealing and overstatement of a construction lien. Then, less than a week
before the scheduled trial date, when it was reasonable to conclude plaintiff's
counsel had already begun to prepare for trial, Centurion sought and received a
thirty-day adjournment.
The case was finally tried without a jury by a different judge, who had
not heard any of the pre-trial motions. The trial began with defendant
dismissing all of its counterclaims. After hearing two days of testimony, the
court awarded judgment to plaintiff on its Prompt Payment Act claim.
The court found that notwithstanding plaintiff had fully and promptly
performed, Centurion never paid plaintiff the remaining $30,500 due, forcing
plaintiff to file its lien. The court found the money "still hasn't been paid, even
though it's over two years outstanding." The court further found Centurion
produced "no evidence that there was a problem with the work done, or the
job, or that there was a dispute." In sum, "[t]here was no problem with this
job. The job was done. . . . [T]here's just non-payment."
The court directed plaintiff to file a certification of services, although
noting "[t]his matter was not that complicated," and that it was "not sure how
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much the legal fees could be[,] based on . . . non-payment of a bill."
Nevertheless, the court stated it would render its decision based on the lodestar
factors that are applicable.
Upon receipt of plaintiff's counsel's detailed certification of services in
accordance with Rule 4:42-9(b) and RPC 1.5(a), however, the judge did not
discuss the applicable lodestar factors. Instead, after identifying the Rendine
factors, it found only that the case "was a basic contract recovery case," which
"did not require any special knowledge or [involve] novel questions." Noting
"there were only five motions filed by the plaintiff," 3 the majority of which
"were non-dispositive discovery motions," the court emphasized that "[t]he
amount involved was only $30,500." Although allowing that "[p]laintiff's
counsel returned a satisfactory result for the client," the court declared it
"unreasonable to spend triple the amount on litigation costs than it is possible
to obtain from the judgment," and that it could not "[u]nder Rendine . . . grant
over $100,000 in fees on a judgment that could not have exceeded $30,500."
Although fee determinations are discretionary decisions by trial courts
we only rarely disturb, Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444
(2001), this one, which was based on a clear error of law, cannot stand, see
3
Plaintiff filed six motions in the trial court and responded to two filed by
Centurion.
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Matter of Commitment of W.W., 245 N.J. 438, 448 (2021) (noting questions of
statutory interpretation are reviewed de novo). As our Supreme Court
explained in Rendine, "our Legislature has passed a substantial number of
statutes authorizing an award of a reasonable counsel fee to the attorney for the
prevailing party." 141 N.J. 292, 322 (1995). "Although the underlying
purpose of those statutes may vary, they share a common rationale for
incorporating a fee-shifting measure: to ensure 'that plaintiffs with bona fide
claims are able to find lawyers to represent them[,] . . . to attract competent
counsel in cases involving statutory rights, . . . and to ensure justice for all
citizens.'" New Jerseyans for a Death Penalty Moratorium v. N.J. Dep't of
Corr., 185 N.J. 137, 152-53 (2005) (quoting Coleman v. Fiore Bros., 113 N.J.
594, 598 (1989)).
The law is well settled that "[a] reasonable attorney's fee may exceed the
value of the recovery by the plaintiff" in a statutory fee-shifting case.
Balducci v. Cige, 240 N.J. 574, 599 (2020). The Court over twenty years ago
expressly "decline[d] to construe New Jersey's fee-shifting statutes to require
proportionality between damages recovered and counsel-fee awards even if the
litigation . . . vindicates no rights other than those of the plaintiff."
Szczepanski, 141 N.J. at 366. In statutory fee-shifting cases "in which the fee
requested is disproportionate to the damages recovered," the court has
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instructed trial judges to "evaluate not only the damages prospectively
recoverable and actually recovered, but also the interest to be vindicated in the
context of the statutory objectives." Ibid.As the Court has noted in the context of a Consumer Fraud Act matter,
"[t]he Legislature undoubtedly was aware that in consumer fraud cases
involving minor losses, attorneys' fees frequently would exceed the damages
suffered. Nevertheless, the Legislature intended plaintiffs to have access to
the court system to pursue relatively small claims against deceptive retailers. "
Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 24 (2004). The Court observed
"[i]n that respect, the provision for attorneys' fees is one of the deterrent
aspects of the legislation, and therefore, fraudulent retailers should beware. "
Ibid.Because we presume "the Legislature . . . to be aware of judicial
construction of its enactments," N.J. Democratic Party, Inc. v. Samson, 175
N.J. 178, 195 n.6 (2002), we can safely assume the Legislature was well aware
of the Court's long-standing interpretation of the State's fee-shifting statutes as
not including a proportionality requirement when it amended the Prompt
Payment Act in 2006 to add the attorney's fee provision. See Senate Budget
and Appropriations Comm., NJ S. Comm. State. to S.B. 1726 (1R) 212th
Legislature (June 30, 2006) (noting "[t]he bill, as amended, provides
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procedures and remedies for prime contractors, subcontractors and
subsubcontractors who are not paid in a timely way in connection with a public
or private construction contract," including "that actions brought to collect
payments pursuant to the bill be conducted inside of this State and that the
prevailing party be awarded reasonable costs and attorney fees"). As the entire
thrust of the statute is to ensure that contractors and subcontractors receive full
payment for their work promptly on completion, it is patently clear the
Legislature intended the attorney's fee provision as "one of the deterrent
aspects of the legislation."4 See Furst, 182 N.J. at 24.
Thus, we conclude the court erred in reading a proportionality
requirement into the attorney's fee provision of the statute and in deciding it
could not grant plaintiff's fee request for $104,670.51 expended to recover the
$30,500 Centurion refused to pay plaintiff after if fully performed. As the
Court noted in Furst, statutory fee-shifting provisions are intended both to
punish and deter the conduct the statute interdicts, here failure to promptly pay
a subcontractor the full amount owed; let the non-paying owner or contractor
beware. See 182 N.J. at 12 (noting the Consumer Fraud Act's equitable and
4
The other is the provision included in the original 1991 enactment that "the
delinquent party shall be liable for the amount of money owed under the
contract, plus interest at a rate equal to the prime rate plus 1%." N.J.S.A.
2A:30A-2(c).
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legal remedies, "treble damages, reasonable attorneys fees, and costs of suit,"
are "not only to make whole the victim's loss, but also to punish the wrongdoer
and to deter others from engaging in similar fraudulent practices").
The statute's salutary goals of ensuring that contractors and
subcontractors are fully and promptly paid for their work are thwarted when
such plaintiffs fully prevail on a suit to vindicate their rights under the Act but
net little or nothing owing to the costs of the litigation. See Coleman, 113 N.J.
at 597 (explaining a statutory fee-shifting provision provides those protected
by the statute not only the right to go to court to enforce the law but also the
resources to do so). Without the court's unstinting enforcement of the
statutory fee-shifting provision, contractors and subcontractors with relatively
small claims would win only a Pyrrhic victory against defendants who failed to
discharge their statutory obligations to pay promptly what they owe. Cf.
Jacobs v. Mark Lindsay & Son Plumbing & Heating, Inc., 458 N.J. Super. 194,
211-12 (App. Div. 2019) (noting "the salutary purpose of the [statute] is
undercut if the professional work performed by competent private counsel in
the course of representing consumers victimized by [unlawful] practices is
arbitrarily undervalued by the judges entrusted to enforce the [Consumer Fraud
Act's] fee-shifting provision").
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Instead of deterring owners and contractors from delaying payment or
stiffing their subs as the Legislature intended, it would be the stiffed
contractors and subcontractors who would be deterred from suing to vindicate
their statutory rights. Courts are simply not free to ignore the clear intent of
the Legislature by failing to enforce a plainly written statutory provision such
as the one at issue here, by imposing a limitation not found in the text. See
DiProspero v. Penn, 183 N.J. 477, 492 (2005) (instructing that courts should
not "write in an additional qualification which the Legislature pointedly
omitted in drafting its own enactment") (quoting Craster v. Bd. of Comm'rs, 9
N.J. 225, 230 (1952)).
We accordingly remand to the trial court to reconsider the mandatory fee
award due plaintiff in accordance with Rendine. The first step, of course, will
be "to determine the 'lodestar': the number of hours reasonably expended
multiplied by a reasonable hourly rate," encompassing the first two Rendine
factors. 141 N.J. at 334-35. While the trial court did not comment on the
hourly rates of counsel, we note the hourly rate of the senior partner on
plaintiff's side, $400 to $475 for the years in which the suit was pending in the
trial court, was commensurate with what defense counsel claims was his own
customary rate of $450 for the same time period, leading one to suspect
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plaintiff's counsel's rates were reasonable in accord with the prevailing market
rates in the community. 5 See id. at 337.
Because the third and fourth Rendine factors, which require adjusting
the lodestar for the plaintiff's degree of success and consideration of any
entitlement to a contingent fee enhancement, id. at 336-38, are not implicated
here, the single most important task for the trial judge on remand will be to
determine "the number of hours reasonably expended," id. at 336, in obtaining
complete success for plaintiff on its Prompt Payment Act claim following trial.
Although the court has an "obligation to exclude from the lodestar calculation
hours not reasonably expended," it may not arbitrarily reduce plaintiff's fees
because it considers them disproportionate to the sum owed plaintiff on the
contract. Szczepanski, 141 N.J. at 354.
Instead, in determining the number of hours reasonably expended in this
suit under the circumstances, the court must consider "the interests to be
vindicated, and the underlying statutory objectives" of the Prompt Payment
Act, see Rendine, 141 N.J. at 336, as well as the extent to which Centurion's
discovery posture "caused any excess expenses to be incurred," Szczepanski,
5
On remand, however, the court is to follow the directive in Rendine that "the
hourly rate at which compensation is to be awarded should be based on current
rates rather than those in effect when the services were performed," in order to
account for the delay in payment. 141 N.J. at 337.
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141 N.J. at 366. As we have already discussed the importance of a mandatory
fee award to the interests to be vindicated and the Legislature's objectives in
enacting the Prompt Payment Act, we focus here on Centurion's litigation
posture in running up the fees.
When Glen Poppe testified at his deposition that he told JHC "right up
front if you put a lien on the job, I'm going to bond it, and I'm not going to pay
you," plaintiff's counsel followed up by asking why Centurion refused to pay
JHC, notwithstanding that Sanzari had paid Centurion for the work. Poppe
responded, "Because I told him not to lien the job." When plaintiff's counsel
pressed, asking "now that you've been paid, why not pay [JHC]," Poppe
replied, "It's just not going to happen until someone tells me I have to pay
him. That's all I can tell you."
From our perspective, that comment epitomized Centurion's litigation
posture in this matter. After not bothering to advise plaintiff it had secured a
bond in response to its lien, thereby forcing plaintiff to file amended pleadings,
Centurion first tried to dismiss plaintiff's complaint and compel it to go to
arbitration, although the court found there had been no agreement to arbitrate.
Centurion then filed counterclaims on which plaintiff took discovery, only to
have Centurion dismiss all of those claims on the first day of trial. Centurion
ignored plaintiff's discovery requests, forcing plaintiff to engage in repeated
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motion practice to obtain answers to interrogatories and document requests and
to schedule the deposition of its principals.
Centurion took no discovery itself. And it backed out of mediation after
having agreed on a mediator, necessitating yet another motion on plaintiff's
part to compel compliance with a clear order of the court. Then Centurion
opposed plaintiff's motion for summary judgment, raising defenses to
plaintiff's Prompt Payment Act claim it had no ability to prove at trial
according to the trial judge. Centurion took these steps notwithstanding
repeated warnings from plaintiff's counsel that this was a fee-shifting case.
Centurion should certainly not be forced to pay for "prolix or repetitious
legal maneuvering," Szczepanski, 141 N.J. at 366, but neither should it be
allowed to evade responsibility for running up plaintiff's fees by its own legal
maneuvering and obdurate approach to the litigation, forcing plaintiff to trial
on claims to which Centurion had no defense. On remand, the trial court must
consider all of these facts in assessing "what legal services reasonably
competent counsel would consider as required to vindicate" plaintiff's rights
under the Prompt Payment Act, see ibid., mindful that plaintiff's counsel
obtained not merely a "satisfactory result for the client," but complete success
on all of plaintiff's claims after two years of litigation and trial in this matter.
Reversed and remanded. We do not retain jurisdiction.
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