A recent Law 360 article by Paul Aloe, “Discrimination Cases Are Too Complex For AI Fee Prediction,” responses to another Law 360 article, “Legal Prediction is Demanding But Not Impossible.”  This article was posted with permission.  The article reads:

A recent Law360 guest article by Joseph Avery criticizing the New Jersey Supreme Court’s opinion in Lisa Balducci v. Brian M. Cige shows a profound misunderstanding of the opinion and the nature of hourly fee retainers.  The article overlooks that even with artificial intelligence, an experienced litigator cannot safely predict the hourly fee of a litigated case.

That is especially so with respect to cases under the New Jersey Law Against Discrimination, or NJLAD, with which Balducci v. Cige dealt.  Those cases are often highly charged and emotional — and the length and work required is very difficult to predict.

Some cases resolve quickly, many after protracted litigation.  The New Jersey Supreme Court was entirely correct that predicting the cost and length of a new case is "a difficult, if not impossible, task" and thus lawyers are not obligated to provide a calculation of the entire fee that will be incurred at the outset of the litigation.

The decision itself recites factors that make that so, including whether the cases is settled or 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."

The opinion in Balducci v. Cige makes complete sense in the context of which it was decided.  This was a NJLAD case, and the courts below found that the attorney had assured the client that she would not have to pay the hourly rate, even though the retainer said otherwise.

There is also an indication in the decision that the attorney admitted padding his invoices.  When the client became dissatisfied with the attorney, and exercised her right to terminate the attorney, the attorney then presented her with a bill for $270,791, which she likely had no means to pay.

This of course is not the typical hourly arrangement, where a client receives a regular invoice, calculated on the hours expended, and pays that invoices as the litigation progresses.  In that situation, if the client chooses to terminate the lawyer, the client is free to do so.  In this case, the billing contradicted the oral assurances that the fee would be paid by the client, which undermined her right to change attorneys.

Discrimination cases are very different than the typical hourly fee arrangement.  Discrimination cases are often brought with the expectation that the fee will be paid by the defendants, either as part of a settlement or at trial, which appears to be the situation in this case, even though the actual retainer agreement said otherwise.

Of course, NJLAD cases present special circumstances that do need to be considered.  While it is often the case that the attorney receives his or her fee from the defendants as part of a settlement or judgment, that is not always the case.

The case can be lost at trial, the plaintiff might decide to no longer pursue the case, the court might award some but not all of the fees incurred, the plaintiff might win a judgment that includes fees, but the defendants might go bankrupt or otherwise be unable to pay it.  Although New Jersey Rule of Professional Conduct 1.5(b) only provides "[w]hen the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated in writing to the client before or within a reasonable time after commencing the representation," it is entirely appropriate that the retainer agreement in a NJLAD case spell out exactly when and under what circumstances a client may personally have to pay the fees.

Some situations where fees are not recovered may be the fault of neither the lawyer nor the client.  For example, where the defendant goes bankrupt rather than paying a judgment.  Other situations may be more complicated, as when the client loses the ultimate case, which could be the result of the client not being credible, the handling of the case by the attorney, or both.  These situations are not easy to spell out, but it is important at the outset for the lawyer and the client to have an understanding of who is bearing this risk.

Balducci v. Cige, however, presents a particularly important ethical issue, because the client was exercising her right to terminate counsel.  The rules of professional ethics afford clients the unfettered right to discharge counsel, but in this case, it seems the retainer was used in such a fashion as to undermine that right.

Of course, there are situations where a client, just before receiving a settlement, might choose to terminate the attorney.  Another factor is that where the client discharges the attorney, but continues the case, and ultimately receives an attorney fee award, the award would presumably compensate both the old and the new attorney.  A still further situation may be where a client, having commenced a NJLAD case, decides to no longer pursue it.  These types of cases in particular are difficult cases for the plaintiff.

The defense is often able to suggest that the underlying problem was with the plaintiff, not the defendant, and even where that is not the defense, since the NJLAD deals with unlawful discrimination, the pursuit of the case may be very painful for the plaintiff.  Clients of course should be free to discontinue suits, but the discontinuance leaves the attorney without a fee.

Again, if the client were regularly paying an hourly fee that decision would be entirely up to the client.  But where the parties have agreed that the fee will be paid by the defendants, the parties need to consider what occurs if the client decides to discontinue the suit.

All of these are difficult issues.  The New Jersey Supreme Court wisely directed the appointment of an ad hoc committee to address the ethical issues raised in its decision.  In the NJLAD situation, many of those ethical issues are difficult and complex.  Requiring attorneys to use artificial intelligence to make predictions is rightfully not endorsed, and deemed nearly impossible, by the court.

Paul Aloe is a partner at Kudman Trachten Aloe LLP in New York, NY.