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In September 2018, we addressed the Appellate Division's opinion in Balducci v Cige, 456 NJ Super 219 (App. Div. 2018), affirming the trial court's invalidation of a retainer agreement in a case under the Law Against Discrimination (LAD). The fee agreement provided that the client was responsible to pay the greatest amount of fees calculated on an hourly rate, or contingent fee and any statutory award, or fees awarded under the fee shifting. The Appellate Division found the agreement to be "problematic" because it was "ambiguous if not misleading." The holding was based on the attorney's failure to advise or inform the client about the "ramifications" of the agreement and the fact that the fee could approach or even exceed plaintiff's recovery if any. The court pointed out that most retainers in LAD cases do not include an hourly rate and that if one is charged counsel must explain whether other attorneys were likely or willing to undertake the matter without the hourly component and that the client's obligation to advance costs must be fully and completely disclosed.

In our editorial about the Appellate Division opinion, we wrote "there can be a reasonable debate about the details the Balducci court required in a LAD retainer agreement, especially the requirement to advise about fee practices of other counsel… ."

On Jan. 29, 2020, the Supreme Court affirmed the Appellate Division judgment. It restated the requirements that fees "shall be reasonable," that every lawyer must set forth "the basis or rate of the fee … in writing to the client" except where there is an ongoing regular representation, RPC 1.5(a),(c), and that every lawyer has a duty to "explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." RPC 1.4(c). If a retainer agreement is "susceptible to two reasonable interpretations," it "should be construed in favor of the client." The court concluded that the parol evidence rule did not apply and, based on scope of review, that there was "sufficient credible evidence in the record" to invalidate the retainer. Accordingly, Cige's recovery was limited to the "quantum meruit value of his services."

With respect to the ethical mandates imposed by the Appellate Division, the Supreme Court started by making clear that "attorneys and clients can agree to fee arrangements of their choice provided that they do not violate the Rules of Professional Conduct." Hourly billing rates, contingent fee agreements and awards under fee shifting statutes may all provide some benefits to the client as well as the attorney. However, there are difficulties and risks in endeavoring to project the fee by any method. Attorneys must provide clients with "meaning guidance on their potential financial obligations" and "meaningful information about potential aggregate hourly fees and costs that may be incurred during the course of litigation so that the client may make an intelligent assessment whether to retain the attorney and on what terms." However, the number of hours and costs are variable and may be difficult to estimate, and trying to compare "similar cases" imposed "a difficult, if not impossible, task." There would be "insufficient information on hours and costs in similar cases for any 'meaningful comparative approach'" to other fee shifting cases or to evaluate what impact such a recovery would have on an hourly rate. Clearly, charges for identifiable costs must be disclosed, but "[t]he wide diversity of cases and the varying fee arrangements used by attorneys may not call for the imposition of blunt and broad ethical obligations on attorneys" or indication of how other competent counsel advance litigation costs.

The court questioned the recommendation of referring LAD cases to certified civil trial counsel because a non-certified attorney "may be no less capable of handling" a species of LAD cases. Other concerns of the Appellate Division were addressed with respect to the calculation of contingent fee awards and a retainer based on a part of wages when the recovery involves an employee's reinstatement.

Because of the difficult professional responsibility issues involved, the court decided that they "should be addressed by a newly established ad hoc committee comprised of representatives" of certain Supreme Court standing committees "and of other representatives of the bench and bar with experience" in the subject , and that the ad hoc committee will consider the matter and make a report to the court which will invite comments in the normal course.

While we agree with the decision and the creation of an ad hoc study committee, we are disappointed with the absence of any direction to the trial court to consider whether this particular attorney so overreached and exploited the client that even quantum meruit should be denied. When a lawyer seeks a quantum meruit fee, the amount remains subject to dispute, and the client still has to spend time, money and aggravation if he wants to dispute it. Quantum meruit is an equitable remedy. We believe that in the case where the lawyer has charged an outrageously excessive fee or otherwise plainly overreached an unsophisticated client under an unenforceable retainer agreement, all compensation should be denied on the basis of unclean hands. The Third Circuit has so ruled in cases arising under federal law. Such cases should be very rare, and the promulgation of more detailed rules in this area should make them rarer yet, but extreme wrongs call for extreme remedies, and the nuclear option should be available in the proper case.