Donelson Update — Employer Liable for Punitive Damages and Attorneys’ Fees Under CEPA

In our June 15, 2011 post, we reported on Donelson v. DuPont Chambers Works, a case in which two employees alleged they were retaliated against after they raised safety concerns about the employer’s manufacture of a dangerous chemical. The jury rendered a verdict in favor of one employee (Seddon) and against the other (Donelson). On appeal, the New Jersey Supreme Court held that the employer was liable under New Jersey’s Conscientious Employee Protection Act (“CEPA”) for the economic losses of Seddon, who was unable to continue working because of his mental injuries caused by the employer’s retaliatory actions. The Court reversed the decision of the Appellate Division that Seddon could not recover his economic losses because he had not been discharged or constructively discharged from his job. The Supreme Court remanded the case to the Appellate Division to decide the issues of punitive damages and attorneys’ fees.

In the Appellate Division’s recent decision on November 7, 2011, the employer fared no better than it had in the Supreme Court. The jury had awarded Seddon $500,000 in punitive damages. The Appellate Division concluded that the evidence was more than sufficient for the jury to find that the employer’s conduct was “especially egregious,” thus meriting an award of punitive damages. The employer’s “especially egregious” conduct consisted of, among other things, subjecting the employee to disparaging emails, wrongly accusing him of falsifying manufacturing records of a caustic chemical, suspending him after he called the employer’s harassment hotline and forcing him to work a one-man shift after he returned to work. Interestingly, the Appellate Division held that the nature of the employee’s complaints to management, involving concerns of “grave safety risks” posed by the employer’s manufacturing process, added to the “especially egregious” nature of the acts of retaliation for CEPA purposes. Thus, the court upheld the trial court’s decision not to vacate the punitive damages award.

The Appellate Division, however, did take issue with the trial court’s handling of the issue of attorneys’ fees. After determining the amount of fees reasonably expended by plaintiffs’ counsel, the trial court awarded fees of only 50 percent of that amount, on the theory that the attorneys had prevailed on the claims of only one of the two plaintiffs. The Appellate Division recognized that a trial judge “may find a fee award excessive if a plaintiff achieved only limited success or prevailed on only some of the issues, even if the claims were interrelated, nonfrivolous, and raised in good faith.” Nevertheless, the trial judge may not adopt a “mathematical approach” by comparing the total number of issues with those actually prevailed upon. Where a plaintiff has achieved “excellent results,” his attorney should recover a fully compensatory fee. Here, the court ruled, the trial judge’s 50 percent reduction was an abuse of discretion because the judge: (1) failed to consider that the time spent by the attorneys with Donelson was not unproductive time, as Donelson would have been called as a witness even if he had not been a co-plaintiff, and (2) failed to give adequate recognition to the “vast importance” of the claims Seddon advanced and succeeded in proving. The Appellate Division remanded the fee award issue to the trial judge, strongly suggesting that only a very modest fee reduction based on Donelson’s failure to prevail would be in order.

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