Supreme Court holds retainer agreement invalid, reserves issues of professional conduct for ad hoc review
The New Jersey Supreme Court affirmed the Appellate Division’s holding, that a retainer agreement in a Law Against Discrimination (LAD) case that imposed legal fees and costs on a client even if the lawsuit failed, is invalid. But, the Court reserved comment on “ethical pronouncements” by the lower court, recommending further review for consideration by a newly created ad hoc committee.
“The New Jersey Supreme Court decision today on Balducci v. Cige concurs with the New Jersey State Bar Association’s amicus argument that there needs to be a more robust decision-making process to address what it considers the Appellate Division’s new mandates imposing ethical requirements that could significantly impact the ability of attorneys to retain and serve their clients. The NJSBA hopes to play a role in that process,” said NJSBA President Evelyn Padin. The association participated as amicus curiae in the matter of Balducci v. Cige, Docket No. A-54-18, raising concerns about the Appellate Division’s holding that imposed professional obligations not mandated by the Rules of Professional Conduct. William E. Denver, NJSBA Past President Thomas H. Prol and Edward J. Zohn wrote the brief, and Zohn argued the matter before the Supreme Court on behalf of the NJSBA.
“Although the Appellate Division’s concerns over the retainer agreement in this case are understandable, the ethical pronouncements issued in its 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,” said Justice Barry Albin, who wrote the majority opinion. “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 underlying matter challenged the validity of a retainer agreement of attorney Brian Cige, who handled a matter for the son of a plaintiff, Lisa Balducci. Balducci signed a retainer agreement that proposed a fee of either the greater of an hourly rate, 37.5 percent of the net recovery or the statutory fees, by settlement or award. Balducci terminated the attorney-client relationship and received a bill for fees and expenses in the amount of nearly $287,000. In addition to holding the agreement invalid, the Appellate Division held that Cige was also obligated by the Rules of Professional Conduct to communicate clearly that his fee structure was different, in that the plaintiff would be obligated to pay regardless of the success of her case. The court further held that attorneys must tell clients that if a case becomes too complex, an hourly rate-based fee could approach or even exceed any recovery, and advise of other attorneys who would represent the client on a purely contingency fee basis.
While the NJSBA took no position on the validity of the retainer agreement, it took issue with the Appellate Division’s interpretations of the Rules of Professional Conduct. In reviewing the recommendations by the Appellate Division regarding providing comparative recovery to clients in similar cases or referrals to attorneys who may have experience in similar cases, the Supreme Court noted concerns with these recommendations. The Supreme Court concluded that such recommendations “require careful and thoughtful consideration and deliberation,” and that such professional standards governing attorneys are done “through the rulemaking process.”
“We have decided that the study of the professional responsibility issues should be addressed by a newly established ad hoc committee comprised of representatives of [the Civil Practice Committee, the Professional Responsibility Rules Committee, and the Advisory Committee on Professional Ethics], and of other representatives of the bar and bench with experience in these matters,” said the Supreme Court.
The NJSBA continues to monitor this issue and the ad hoc committee, in anticipation of any new rules resulting from this decision.
This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.