Friday, August 31, 2018
A case summary of the New Jersey Appellate Division
The court holds that if an attorney charges clients in LAD and other fee-shifting cases a fee based in whole or in part on an hourly rate, the attorney is ethically obligated to: disclose that the hourly rate-based fee could approach or exceed the client's recovery; provide examples of hourly rate-based fees in similar types of cases; and inform the client that other competent counsel represent clients in similar cases solely on a contingent fee basis.
Similarly, counsel who require clients to advance costs are ethically obligated to provide information about litigation costs such as deposition and expert fees, and provide examples of what costs have totaled in similar types of cases. An attorney is also ethically obligated to inform the client that other competent counsel who represent clients in similar cases advance litigation costs.
Details from the decision
Defendant, Brian M. Cige, an attorney, appeals from two Law Division orders. The orders declared unenforceable and void his retainer agreement (the "Agreement") with plaintiff, Lisa Balducci, a client he represented in a claim seeking damages under the New Jersey Law Against Discrimination ("LAD"), N.J.S.A. 10:5-1 to -49. The orders also dismissed his counterclaim for fees and costs. The trial court permitted defendant to recover for his services based on the doctrine of quantum meruit.
The trial court found defendant violated his professional responsibility to explain the Agreement's material terms to plaintiff so that she could make an informed decision about retaining him. The trial court's factual and credibility findings have ample support on the plenary hearing record. Defendant did not explain the effect his "greater three fee agreement" would have on any recovery, inform plaintiff of alternatives to such an agreement, or give plaintiff any indication of the tens of thousands of dollars in expenses she would have to pay as the case progressed. Hence we affirm.
The court quoted the lengthy agreement in full
The parties disputed the circumstances under which plaintiff signed the Agreement. According to plaintiff, defendant did not explain the terms of the Agreement. Rather, he told her, "[t]his is a standard agreement for a case like [this]." Plaintiff, who had worked for attorneys and who now operated her own business, "quickly glanced at it and . . . had a concern." She said to defendant, "Brian, this says that I am going to be responsible at the end if we lose the case." He said she would not. He told her the language concerning his hourly rate was standard for a LAD case like this. He said: "We are friends. I was at your wedding. I would never do this to you. Ignore that. Don't worry about it. It is standard information." Plaintiff signed it, because she trusted him, he was a friend, and she believed him.
The attorney recalled the circumstances quite differently while the client's child corroborated her testimony.
After the client discharged him, he asserted a lien that impaired a consent resolution of the underlying matter.
There is no dearth of competent, civic-minded attorneys willing to litigate LAD and other statutory fee-shifting cases under fee agreements that do not include an hourly component. The number of such cases litigated in our trial courts and reported in the case law evidence this, as does — at least as to numbers — advertising on television and radio, in telephone books and newspapers, and on billboards and other media. Indeed, the firm currently representing plaintiff in the LAD action has a fee agreement without an hourly component.
Ethically then, must an attorney whose fee for undertaking a LAD case that includes an hourly rate component explain both the consequences on a recovery and the availability of other competent counsel likely willing to undertake the same representation based on a fee without an hourly component? We conclude the answer is yes.
...We do not find the Agreement in this case unenforceable because of the problematic nature of the three fee provisions. We do find the Agreement unenforceable because, as the trial court found, defendant did not adequately inform plaintiff about the ramifications.
In summary, we conclude that if an attorney's fee in a LAD or statutory fee-shifting case is based in whole or in part on an hourly rate, then the attorney is ethically obligated to inform the client of the ramifications. The attorney 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. Further, the attorney must inform the client other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component, and might also advance costs. The attorney should provide examples of how much hourly fees have totaled in similar cases, or if the attorney has no such experience with similar cases — in which case consideration should be given to referring the case to a certified civil trial attorney — how much hourly fees have totaled in the same types of cases found in case law.
Similarly, if the client is required to advance costs, the attorney must provide the client with approximate costs resulting from things such as depositions and expert fees, and must give examples of such costs in similar cases. The attorney must disclose other competent counsel who represent clients in similar cases advance litigation costs...
The fee agreement in this case is ambiguous and to some extent illusory. Defendant failed to discharge his ethical obligation to explain the terms of the agreement, their implications, and alternatives to the agreement, so the client could make an informed decision regarding his representation. The trial court did not err by so finding.