Balducci v. Cige

240 N.J. 574

223 A.3d 1229

Lisa BALDUCCI, Plaintiff-Respondent,

v.Brian M. CIGE, Defendant-Appellant.

A-54 September Term 2018

081877

Supreme Court of New Jersey.

Argued October 24, 2019

Decided January 29, 2020

Brian M. Cige argued the cause for appellant (Law Offices of Brian M. Cige, attorneys; Brian M. Cige on the briefs).

Jay J. Rice argued the cause for respondent (Nagel Rice, attorneys; Jay J. Rice, of counsel and on the briefs, and Randee M. Matloff and Michael J. Paragano, on the briefs).

Edward J. Zohn argued the cause for amicus curiae New Jersey State Bar Association (New Jersey State Bar Association, attorneys; Evelyn Padin, President, of counsel, and Edward J. Zohn, William E. Denver, and Thomas H. Prol, on the brief).

Richard M. Schall argued the cause for amicus curiae National Employment Lawyers Association of New Jersey (Schall & Barasch, attorneys; Richard M. Schall, on the brief).

Benjamin Folkman argued the cause for amicus curiae New Jersey Association for Justice (Folkman Law Offices, attorneys; Benjamin Folkman, on the brief).

JUSTICE ALBIN delivered the opinion of the Court.

A retainer agreement between a lawyer and a client is not an ordinary contract subject to the rules of the marketplace. It is a contract that must conform to the Rules of Professional Conduct that guide lawyers in their dealings with prospective clients. A lawyer stands in a fiduciary relationship with a prospective client and must act within the ethical constraints commanded by professional standards of responsibility. A retainer agreement must be fair and understandable, and the fee arrangement must be reasonable. The oral assurances that the attorney gives the client should not be different from the written words in the retainer agreement. Those general principles are key to the resolution of this appeal.

Plaintiff Lisa Balducci retained defendant Brian Cige to represent her son in a bullying lawsuit brought against a school district under New Jersey's Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49. The written retainer agreement seemingly ensured Cige the highest calculation of legal fees under three potential scenarios: (1) his hourly rate multiplied by hours worked, regardless of whether the lawsuit prevailed; (2) a contingent fee of thirty-seven-and-one-half percent (37 1/2%) of the net recovery combined with any statutory attorney's fees awarded under LAD; or (3) the statutory attorney's fees under LAD awarded by judgment or settlement. The agreement guaranteed that Cige would bear no financial risk but possibly benefit from a windfall of legal fees.

Three years into the LAD litigation, Balducci switched attorneys and instituted a declaratory-judgment action to invalidate the retainer agreement on the ground that Cige procured the agreement in violation of the Rules of Professional Conduct. A Superior Court judge voided the agreement, finding that Cige orally promised Balducci that she would not be responsible for legal fees if the lawsuit did not succeed, despite the terms of the retainer agreement that suggested otherwise. The court found that Cige was entitled only to the quantum meruit of his legal fees.

The Appellate Division affirmed the trial court's judgment. But it also made a number of pronouncements purportedly imposing new ethical obligations on attorneys handling LAD and other fee-shifting claims. Cige and several bar associations assert that the newly imposed professional obligations are at odds with the current practices of attorneys who handle employment-law and other fee-shifting cases and are not mandated by the Rules of Professional Conduct. Any new professional obligations, they maintain, should have been vetted through the Court's rulemaking process.

We agree that the invalidation of the retainer agreement is supported by sufficient credible evidence in the record and therefore affirm the judgment of the Appellate Division. 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. 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.

We will address those issues under our constitutional authority to regulate the conduct of attorneys in this State. N.J. Const. art. VI, § 2, ¶ 3.

I.

In September 2012, Balducci retained Cige to represent her high-school age son in a bullying lawsuit, brought under LAD, against a school district. Three years later, Balducci terminated Cige's representation and retained another lawyer to handle the case. In July 2016, Balducci filed a declaratory-judgment action to void the retainer agreement on the ground that it violated the Rules of Professional Conduct. In turn, Cige counterclaimed, demanding all legal fees and expenses owed under the retainer agreement.

A Superior Court judge conducted a two-day plenary hearing at which Balducci, her son, and Cige testified.

Balducci's Testimony

Balducci testified that, in September 2012, she approached Cige about bullying that her son had encountered in school, which had a devastating impact on his psychological and physical health. She went to Cige because he was "one of [her] very close friends." Cige socialized with her, had attended her wedding, and had represented her in a prior legal matter. Cige explained to her that he had the experience to handle the lawsuit against the school district.

Cige presented Balducci with what he described as a standard retainer agreement for a LAD case. Balducci was not an unsophisticated client, having worked for lawyers, owned a title company, and invested in real estate ventures. She raised questions about language in the retainer agreement that seemingly made her the guarantor of all legal fees and costs, even if the lawsuit failed. Cige told her not to be alarmed by the "standard language" in the retainer agreement. He assured her that the attorney's fees would be paid by the school board, not by her, saying, "[w]e are friends. I was at your wedding. I would never do this to you. Ignore that." (That account was corroborated by Balducci's son, who testified that he was present during the meeting.) Trusting Cige as a friend, Balducci signed the retainer agreement, which, in relevant part, is set forth below:

3. Legal Fees. The Law firm cannot predict or guarantee what your final bill will be. This will depend on the amount of time spent on your case and the amount of other expenses.

A. Initial Payment. The Law firm will begin work on your case upon receipt of $3,750.00. This sum will be used to pay for your initial filing fee, other fees and expenses, and legal fees, according to this Agreement.

B. Retainer. You agree to pay $7,500.00* as the minimum retainer, but maximum amount for legal fees to be paid until case is settled or judgment is entered. Notwithstanding, you are encouraged to make additional payments toward legal fees as invoiced to minimize having a large invoice when the case ends.

*$3,750.00 to be paid within[ ] ninety (90) days of signing this Agreement.

C. Legal Fee. You agree to pay the Law Firm for legal services the greater of:

i.	Rate Per Hour	Services of
$475.00	Brian M. Cige, Esq.

(This hourly rate[ ] is subject to review and revision on 1 January 2014 and annually thereafter. Further, at the Law Firm's discretion, it may either use the rates which were current when the services were performed and adding interest at the regular rate for paying clients or using the rate current at the time the payment is made.)

ii. thirty seven and one half percent (37 1/2%) of the net recovery (including attorneys fees referred to in iii below).

iii. statutory attorneys fees, by settlement or award, received with credit for all payments received.

Client has been advised that, in employment cases, the employer may offer reinstatement of his or her prior position or a comparable position. In the event the client accepts an offer of reinstatement, the client agrees to pay the Law Firm fifteen additional percent (15%) of the total pay he or she would receive from the employer upon reinstatement for a one (1) year pay period, in no more than six (6) equal monthly installments.

D. All Services Will Be Billed. You will be billed at the hourly rate set forth in paragraph 3C for all services rendered. This includes telephone calls (minimum charge of 6 minutes), dictating and reviewing letters, travel time to and from meetings and the Court, legal research, negotiations and any other service relating to this matter. Client hereby gives the Law Firm a continuing lien on the client's claim and the proceeds thereof for the amount of the attorney's fees, out-of-pocket expenses, and costs for which the client is obligated under this agreement. The attorney's lien is given by the client pursuant to New Jersey [Statutes] Annotated Title 2A:13-5.

4. Costs and Expenses. In addition to legal fees, you must pay the following costs and expenses: experts' fees, court costs, accountants' fees, appraisers' fees, service fees, investigators' fees, deposition costs, messenger services, photocopying charges, telephone toll calls, postage and any other necessary expenses in this matter. The Law Firm may require that expert(s) be retained directly by you. You would then be solely responsible to pay the expert(s).

5. Bills. The Law Firm will send you itemized bills from time to time. The Law Firm may require that costs and expenses (see paragraph 4) be paid in advance. All bills for costs and legal expenses are due upon receipt and failure to pay will waive any discounts. You will be charged interest at a monthly rate of one and one-half percent (1 1/2%) on any remaining balance not paid within thirty (30) days from the date of the bill. If an outstanding

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