Will the Judiciary Re-Write the Rules for Retainers in Fee-Shifting Cases?

Balducci v. Cige, 240 N.J. 574  (2020)

A former client filed an action against her former attorney for a declaratory judgment that the retainer agreement with him to represent her in a suit for damages under a Law Against Discrimination (LAD) lawsuit was unenforceable.

The trial court declared the agreement unenforceable and dismissed the attorney’s counterclaim for fees and costs.  The attorney appealed.  The Appellate Division affirmed the lower court, and the attorney petitioned the New Jersey Supreme Court for certification.

The Supreme Court affirmed the appellate court’s invalidation of the retainer agreement but also chose to address certain ethical pronouncements made by the Appellate Division regarding fee-shifting matter retainers, stating that some “appear too broad and some unsound, and others are worthy of the deliberative process by which new ethical rules are promulgated by this Court.”  Id. at 581.  The Court determined to “address those issues under [its] constitutional authority to regulate the conduct of attorneys in this State.”  Id. (citing N.J. Const. art. VI, § 2, ¶ 3).

Specifically he Supreme Court addressed the following directives and concerns expressed by Appellate Division:

  • that attorneys in fee-shifting cases be required to “provide examples of how much hourly fees [and costs] have totaled in similar cases.”  Id. at 603;
  • that attorneys must inform their clients “other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component,” and “that an attorney ‘must disclose [that] other competent counsel who represent clients in similar cases advance litigation costs.’”  Id. at 604;
  • that LAD attorneys who have not had experience with “similar cases,” should consider referring the case to a certified civil trial attorney.  Id;
  • that provisions in the defendant attorney’s retainer agreement should not calculate the contingent fee on the sum total of the award for damages and statutory attorney’s fees.  Id. at 605; and
  • that the defendant attorney’s retainer agreement should not include an “additional fee of fifteen percent of one year’s wages in the event a client who has lost a job based on discrimination is reinstated.”  Id. at 606.

The Supreme Court concluded that “[a]ll of the issues discussed above require careful and thoughtful consideration and deliberation,” and “decided that the study of the professional-responsibility issues should be addressed by a newly established ad hoc committee” established to “make recommendations on the questions raised in this opinion.”  Id.