NJSBA weighs in on fee-shifting provisions in retainer agreements

The New Jersey State Bar Association is challenging a published appellate court decision imposing new requirements on attorneys when entering into retainer agreements in fee-shifting cases. In Balducci v. Cige, Docket No. A-3068-16T2, the NJSBA filed an amicus brief urging the Supreme Court to grant certification and reverse the Appellate Division's decision, which, according to the association, amounted to improper rulemaking.

According to the NJSBA, the case “effectively amended the Rules of Professional Conduct by fiat, and usurped a plenary authority vested exclusively in the Supreme Court to govern the practice of law.” The association urged the Supreme Court to review the impact of the ruling.

The association argued in court papers that the ruling will have a substantial impact on solo and small-firm practitioners. The decision “creates these new ethical mandates for attorneys in fee-shifting cases, without those having first been exposed to the crucible of the rulemaking process.” William E. Denver, past NJSBA president Thomas H. Prol, and Edward J. Zohn wrote the brief.

The case emanates from the crumbling relationship of an attorney and plaintiff in a Law Against Discrimination case. Lisa Balducci retained attorney Brian Cige to handle a matter involving her son. She signed a retainer agreement that proposed a fee of either the greater of an hourly billing 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. Cige argued that Balducci read the agreement and understood the terms.

The Appellate Division upheld the trial court's decision that Cige was 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. It 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 to advise of other attorneys who would represent the client on a purely contingency fee basis.

The NJSBA filing took issue with the Appellate Division's ruling, arguing it imposes an unsupported obligation to inform the client of the ramifications in such a case billed in whole or in part on an hourly rate.

“If attorneys are either induced into representing clients in fee-shifting cases solely on contingency, or are forced to find and suggest other attorneys who would, the Appellate Division's understandable desire to ensure that clients are compensated for economic and non-economic loss will be turned on its head,” wrote the NJSBA. The Court has not yet decided if it will hear the case.

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.