Background

Like most states, New Jersey has as statute that seeks to incentive prompt payment to contractors and subcontractors.  New Jersey’s Pompt Payment Act is designed to further New Jersey’s “strong public policy to ensure that contractors performing construction work in New Jersey are paid promptly.” Erco Interior Sys., Inc. v. Nat’l Commercial Builders, Inc., 2019 WL 2004367, at *4 (App. Div. 2019). And to “level the playing field” to assure payment is made promptly.  New Jersey Governor’s Message, 2006 S.B. 1726/A.B. 3174 (the Prompt Payment Act).  Under the Prompt Payment Act, an award of attorneys fees, interest, and costs is mandatory.   As the Prompt Payment Act states “[i]n any civil action brought to collect payments pursuant to this section, the action shall be conducted inside of this State and the prevailing party shall be awarded reasonable costs and attorney fees.” N.J.S.A. 2A:30A–2(f). Additionally, the prevailing party shall be entitled to interest on the amount owed at the prime rate plus 1%. N.J.S.A. 2A:30A:2(c). Interest begins to accrue when payment is owed. Id.

Who is a subcontractor under the act?

The Prompt Payment Act defines a subcontractor “as any person who has contracted to furnish labor, materials or other services to a prime contractor in connection with a contract to improve real property.” N.J.S.A. § 2A:30A-1.  The Prompt Payment Act defines prime contractor “as a person who contracts with an owner to improve real property.” Id. Finally, the Prompt Payment Act broadly defines improve as:

“to build, alter, repair or demolish any structure upon, connected with, on or beneath the surface of any real property; to excavate, clear, grade, fill or landscape any real property; to construct driveways and private roadways on real property; to furnish construction related materials, including trees and shrubbery, for any of the above purposes; or to perform any labor upon a structure, including any design, professional or skilled services furnished by an architect, engineer, land surveyor or landscape architect licensed or registered pursuant to the laws of this State.”

Id.

How are attorneys fees determined under the statute?

When determining the amount of attorneys fees and costs under fee shifting statute, like the Prompt Payment Act, New Jersey courts use the “lodestar” method.  Rendine v. Pantzer, 141 N.J. 292, 334–35, 661 A.2d 1202, 1226 (1995)(“ the first step in the fee-setting process is to determine the “lodestar.”)  Under the lodestar method the Court first determines the reasonableness of the rates proposed by prevailing counsel. Id.  Then, the Court determines whether the time expended was reasonable. Id. at 1227. It is well settled that in determining the reasonableness of the hourly rate this Court should compare the proposed rate to that charged with “the rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Rendine, 661 A.2d at 1227; Furst, 860 A.2d at 447 (“the court should evaluate the rate of the prevailing attorney in comparison to rates for similar services by lawyers of reasonably comparable skill, experience, and reputation in the community.”) In determining whether the time expended was reasonable the Court considers, the time “competent counsel reasonably would have expended to achieve a comparable result” and “circumstances to obtain that result.  Furst, 860 A.2d at 447. Among the circumstances to consider is opposing counsel’s conduct in obtaining the result.  Szczepanski v. Newcomb Med. Ctr., Inc., 141 N.J. 346, 366, 661 A.2d 1232, 1243 (1995). The hammer in the Prompt Payment Act comes from the ability to recover attorneys fees even when they are disproportional to the amount of underlying damages awarded. Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 23, 860 A.2d 435, 447 (2004)(“there need not be proportionality between the damages recovered and the attorney-fee award itself.”); Szczepanski v. Newcomb Med. Ctr., Inc., 141 N.J. 346, 366, 661 A.2d 1232, 1243 (1995)(“We decline to construe New Jersey’s fee-shifting statutes to require proportionality between damages recovered and counsel-fee awards.”