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NJ Justices Toss ‘Unsound’ Attorney Fee Ethics Rules

January 29, 2020 | Posted in : Contingency Fees / POF, Ethics & Professional Responsibility, Fee Agreement / Fee Proposal, Fee Calculation Method, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting, Hourly Rates / Hourly Billing, Prevailing Party Issues, Scholarship on Fees, Statutory Fees

A recent Law 360 story by Bill Wichert, “NJ Justices Throw Out ‘Unsound’ Ethics Rules for Atty Fees,” reports that the New Jersey Supreme Court upended new ethics rules from an appellate panel with respect to attorney fees in discrimination and related cases, saying they could have “far-reaching and negative effects” on lawyers and their clients.  The justices reined in those “ethical pronouncements” from the panel's 2018 published decision affirming a trial court’s orders declaring Brian M. Cige’s agreement with Lisa Balducci unenforceable.  The Supreme Court said a new ad hoc committee of judges and attorneys will be created to address such issues and make recommendations to the court.

“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,” Justice Barry T. Albin wrote in the unanimous opinion.  The ethical obligations set forth by the panel covered attorneys handling New Jersey Law Against Discrimination and other fee-shifting cases when a retainer agreement includes hourly fees.  In fee-shifting actions, a defendant is responsible for a prevailing plaintiff’s reasonable attorney fees.

Among those rules, the Supreme Court rejected the panel’s finding that such attorneys must provide clients with “‘examples of how much hourly fees have totaled in similar cases.’”  That requirement “imposes a difficult, if not impossible, task,” the justices said.  “The attorney would have to know whether the ‘similar case’ settled or was tried, the nature and length of the discovery process, the number of depositions conducted and expert witnesses retained, the overall complexity of the litigation, and many other factors,” Justice Albin wrote.

The justices challenged the panel’s directive that attorneys inform clients that “‘other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component,’” noting that clients may benefit more from an hourly-fee deal than a contingent-fee arrangement.  The Supreme Court also expressed doubts about the panel’s pronouncement that attorneys “‘disclose other competent counsel who represent clients in similar cases advance litigation costs.’”

“Must an attorney refer a potential client to a competitor who may be less experienced or skilled merely because that attorney advances litigation costs?” the justices said.  “The answer to that question suggests that the Appellate Division’s disclosure requirement must be considered critically.”  The panel further asserted that “‘if the attorney has no such experience with similar cases ... consideration should be given to referring the case to a certified civil trial attorney,’” but the Supreme Court questioned whether that was correct as well.

The justices noted that “an attorney who has represented a client in one particular species of LAD cases may be no less capable of handling another species of such cases.”  “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,” the Supreme Court said.

The Supreme Court, however, upheld the panel’s finding that Cige’s retainer agreement was invalid.  Balducci retained Cige in 2012 to represent her son in an LAD lawsuit against a school district over bullying he had faced, court documents state.  The retainer agreement stated that Cige was entitled to the greater of three fee calculation methods: his hourly rate, a contingent fee or an award of statutory attorney fees, court documents state.

Balducci has claimed that Cige told her she would not have to pay his hourly fees, although the retainer agreement indicated otherwise, court documents state.  She has said Cige assured her the attorney fees would be covered by the school board, court documents state. Cige has denied making any statements that conflicted with the written agreement, according to the court documents.

The agreement also did not specify what Cige would charge Balducci for expenses, including $1 for every email sent or received, court documents state.  After Balducci terminated his services in 2015, Cige billed her for about $286,000 in fees and expenses, court documents state.  Balducci then filed the instant action seeking to have the agreement declared unenforceable, court documents state.

A trial court heard testimony from Balducci, her son and Cige, and sided with Balducci in invalidating the agreement, court documents state. The appellate panel upheld that decision.  In affirming the invalidation ruling, the Supreme Court concluded there was “sufficient credible evidence in the record” to back up the trial court’s findings.

“The court accepted Balducci’s assertion that she would not have retained Cige had he informed her that she would be responsible for his hourly fees if the lawsuit failed.  The court, moreover, determined that ‘a reasonable client’ would have viewed the retainer agreement as a typical contingent-fee arrangement, obligating the client to pay a percentage of a monetary recovery only if the lawsuit succeeded,” the justices said.