Catalyst Theory in New Jersey
When a lawsuit effects a positive change in the conduct of the wrongdoer, the plaintiff in that lawsuit has been a catalyst for the change. Sometimes, a wrongdoer will change its conduct after a plaintiff’s complaint (often a class action) exposes the fraudulent or wrongful conduct. The wrongdoer will often then argue that the lawsuit is moot and that the plaintiff (and plaintiff’s lawyers) should receive nothing, even though it was the lawsuit that brought about the positive change.
In some jurisdictions, this argument has been successful. Not in New Jersey.
In D. Russo Inc. v. Township of Union, ___ N.J. Super. ___ (App. Div. 2010), the New Jersey Appellate Division held that a lawsuit filed under the State Civil Rights Act that leads to a change in the defendant’s conduct can make the plaintiff a “prevailing party” for the purpose of an award of attorney’s fees. This is true even if the action is dismissed as moot rather than being litigated to the point that a final judgment is entered in the plaintiff’s favor.
In so holding, the Appellate Division applied the so-called catalyst theory. There is every reason to believe that the rationale supporting the application of the catalyst theory to cilvil rights claims would also apply to claims filed under the Consumer Fraud Act, as well as other fee-shifting statutes like the Law Against Discrimination.