Balducci v. Cige, 240 N.J. 574 (2020). In this case, as discussed here, the Appellate Division invalidated a retainer agreement in an opinion reported at 456 N.J. Super. 219 (App. Div. 2018). The panel also made some broad statements about how attorneys should conduct themselves in connection with retainer agreements in contingent fee matters, such as the Law Against Discrimination, N.J.S.A. 10:5-2 et seq. (“LAD”), which was at issue in the underlying action.
Today, the Supreme Court, having granted certification and received amicus briefs from three Bar associations on the question of whether the Appellate Division had created new rules of professional conduct, affirmed the invalidation of the retainer agreement as “grounded in sufficient credible evidence in the record. Justice Albin wrote the Court’s unanimous opinion, which applied a standard of review deferential to the trial level court “because the trial court determined the validity of the retainer agreement by taking the testimony of the parties and by making credibility and factual findings .”
But most of the Court’s decision addressed the Appellate Division’s statements that went beyond the particular facts of this case. The Court expressed concern that “the ethical pronouncements issued in [the Appellate Division’s] opinion may have far-reaching and negative effects, not only on employment-law attorneys and attorneys handling fee-shifting claims, but also on their clients. Some of those pronouncements appear too broad and some unsound, and others are worthy of the deliberative process by which new ethical rules are promulgated by this Court.”
The Appellate Division had stated that if an attorneys’ fee is based, in whole or in part, on an hourly rate, the attorney “(1) ‘must inform the client that if the case becomes complex and protracted, the hourly rate-based fee the client is responsible to pay can approach or even exceed his or her recovery’; (2) ‘should provide examples of how much hourly fees have totaled in similar cases’; and (3) ‘must provide the client with approximate costs … and must give examples of such costs in similar cases’ ‘if the client is required to advance costs.’”
The Court found some of that unclear and perhaps questionable. Justice Albin clarified that it “clearly should be explained to the client” that “the attorney’s fee may exceed” the recovery by the client. The Court noted that that is not an improper result and cited cases where that had occurred. But “attorneys are not clairvoyant and can offer only their best professional judgment. Estimating the value of the case or the number of attorney hours that ultimately will be expended may not be possible with precision. For instance, in any case tried to a jury involving such intangibles as pain and suffering or loss of enjoyment of life, a wide spectrum of acceptable outcomes would be upheld by our courts.”
The same is so, Justice Albin said, regarding expenses. “Nevertheless, attorneys must give their clients meaningful guidance on their potential financial obligations.”
The Appellate Division had said that attorneys in LAD cases should “provide examples of how much hourly fees have totaled in similar cases.” The Court found that “a difficult, if not impossible, task.” That would depend on whether the “similar case” was settled or tried, the amount of fact and expert discovery, and other variables. And Justice Albin echoed the “practical question” posed by the amici: “how are [attorneys] to acquire meaningful information about comparable hourly fees and costs?”
“Nevertheless, an attorney has an obligation to provide the client with meaningful information about the potential aggregate hourly fees and costs that may be incurred during the course of the litigation so that the client may make an intelligent assessment whether to retain the attorney and on what terms.” It is not clear what that means. More clear was the Court’s statement that “at the outset of the attorney-client relationship, the charges for identifiable costs, such as photocopying expenses, should be disclosed.”
In the case before it, the attorney’s “retainer agreement did not disclose that the client would be charged $1.00 for every email received or sent, in addition to the hourly fee charged for preparing and reading those emails. Such an email charge does not appear to conform to a standard of reasonableness.”
The Court also expressed doubt about the Appellate Division’s statement that “the attorney must inform the client [that] other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component.” Justice Albin observed that there are cases where an hourly arrangement may benefit a client more than a contingent one. “The wide diversity of cases and the varying fee arrangements used by attorneys may not call for the imposition of blunt and broad ethical obligations on attorneys.”
Today’s opinion also questioned the Appellate Division’s statement that when “LAD attorneys have not had experience with ‘similar cases,’ ‘consideration should be given to referring the case to a certified civil trial attorney.’” An attorney who has handled one type of LAD case may be equally capable of handling another. “In addition, without in any way diminishing the value or importance of the designation of certified civil trial attorney– a special designation that signals that an attorney has recognized competence and experience as a litigator– certification is a voluntary, lawyer-initiated process, and some of the finest attorneys in their respective fields have decided not to seek certification. [Citation]. .And, there is no certification for the subspecialty of LAD cases.”
The Appellate Division had found “problematic” a provision in the attorney’s retainer agreement that “calculated the contingent fee on the sum total of the award for damages and statutory attorney’s fees.” But Justice Albin noted that that method of calculation may be “relatively common and permissible.” He noted that after plaintiff relieved defendant as counsel, her new attorney had the same provision in his retainer agreement.” Justice Albin also cited authorities elsewhere that have authorized that method of calculating fees.
The Court decided to establish an ad hoc committee to study the issues raised by this case. That committee will consist of representatives of the Court’s Civil Practice Committee, Professional Responsibility Rules Committee, and Advisory Committee on Professional Ethics, as well as “other representative members of the Bar and Bench with experience in these matters.” With that committee’s insights, the Court will then consider whether any new rule of general applicability to the Bar is appropriate, and what any such rule(s) might be.
Today’s opinion contains much useful discussion of retainer agreements and the effect of fee-shifting provisions on such agreements. Every attorney should read this opinion and watch for the results of the study that the Court has ordered. Meanwhile, today’s decision provides some guidance on some of the issues to a certain extent.
