Lisa Balducci v. Brian M. Cige (081877) (Somerset County & Statewide)

• Court: Supreme Court of New Jersey
• Decided: January 29, 2020
• Docket: A-54-18
• Status: Published

Opinion

SYLLABUS

This syllabus is not part of the Court’s opinion. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Court. In the interest of brevity, portions of an opinion may not have been summarized.

Lisa Balducci v. Brian M. Cige (A-54-18) (081877)

Argued October 24, 2019 -- Decided January 29, 2020

ALBIN, J., writing for the Court.

Plaintiff Lisa Balducci instituted a declaratory-judgment action to invalidate the retainer agreement into which she entered with her former attorney, defendant Brian Cige, on the ground that Cige procured the agreement in violation of the Rules of Professional Conduct. A Superior Court judge voided the agreement, and the Appellate Division affirmed. But the Appellate Division also made a number of pronouncements about ethical obligations on attorneys handling fee-shifting claims. The Court considers Cige’s challenge to the judgment against him, as well as arguments that the professional obligations imposed by the Appellate Division are at odds with current practices and are not mandated by the Rules of Professional Conduct.

Balducci retained Cige to represent her son in a bullying lawsuit, brought under New Jersey’s Law Against Discrimination (LAD), against a school district. Three years later, she terminated Cige’s representation and retained another lawyer to handle the case. Balducci filed a declaratory-judgment action to void the retainer agreement, and a Superior Court judge conducted a hearing at which Balducci, her son, and Cige testified.

Balducci testified that, in September 2012, she approached Cige about bullying that her son had encountered in school. Cige presented her with what he described as a standard retainer agreement for a LAD case, and Balducci raised questions about language 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” and assured her that the attorney’s fees would be paid by the school board, not by her. (That account was corroborated by Balducci’s son, who testified that he was present during the meeting.) Trusting Cige, Balducci signed the agreement, one key provision of which required her to “pay the Law Firm for legal services the greater of” Cige’s hourly rate, 37 1/2% of both the net recovery and any statutory fee award, or statutory attorney’s fees. By early 2015, Balducci became dissatisfied with Cige’s handling of the case. The school board rejected her first settlement demand of $3,500,000. After consulting with an expert in bullying cases, Cige approximated the value of the case at somewhere between $500,000 and $700,000. Only when Balducci terminated his services did he inform her she was responsible for the payment of his hourly fees -- almost $271,000. 1 Cige gave a very different account, but admitted that he did not inform Balducci of the potential value of the case, of the potential litigation expenses, or of the estimated financial obligation she would bear if the litigation did not succeed. Nor did he detail the billing rates for expenses in the retainer agreement. The expenses for the emails -- $1.00 for every email sent or received -- amounted to just over $1700 and were in addition to the hourly rate he charged. Photocopying costs represented almost $12,000 of the nearly $16,000 in expenses owed at the time Cige’s services were terminated.

At the conclusion of the plenary hearing, the trial court invalidated the retainer agreement, crediting Balducci’s testimony over Cige’s. The Appellate Division affirmed, finding substantial and credible evidence in the record to support the trial court’s decision. 456 N.J. Super. 219, 234, 243-44 (App. Div. 2018).

The Appellate Division also articulated a set of ethical obligations, purportedly arising from the Rules of Professional Conduct, that must be followed by attorneys in fee-shifting actions when a retainer agreement includes an hourly fee component. Those obligations are discussed in numbered paragraphs 6-9 below.

The Court granted certification limited to Cige’s challenge of the invalidation of the agreement and his claim that the Appellate Division retroactively applied new rules of professional conduct. 236 N.J. 616 (2019).

HELD: The invalidation of the retainer agreement is supported by sufficient credible evidence in the record. 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 the Court. The Court addresses those issues under its constitutional authority to regulate the conduct of attorneys in this State, N.J. Const. art. VI, § 2, ¶ 3, and directs that an ad hoc committee be established to address the professional-responsibility issues discussed in this opinion. The Court expresses no ultimate opinion on the matters referred to the committee, which will report its recommendations to the Court.

1. The paramount principle guiding every fee arrangement is that “[a] lawyer’s fee shall be reasonable.” RPC 1.5(a). Every lawyer must set forth “the basis or rate of the fee . . . in writing to the client,” RPC 1.5(b), and must explain the charges and costs for which the client is responsible, beyond the hourly rate, to permit the client to make an informed decision whether to retain the attorney. A lawyer also 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), and is forbidden from making “false or misleading communications” relating to “legal fees,” RPC 7.1(a)(4). (pp. 20-22) 2 2. A court’s review of a retainer agreement is not limited by the parol evidence rule because ordinary contract principles must give way to the higher ethical and professional standards that govern the attorney-client relationship. The parol evidence rule cannot bar a client from testifying that she signed a retainer agreement based on an attorney’s material misrepresentation. Further, an agreement susceptible to two reasonable interpretations should be construed in favor of the client. The attorney bears the burden of establishing the fairness and reasonableness of the transaction. (pp. 22-24)

3. Here, the dispute between Cige and Balducci amounted to a credibility contest. After hearing the testimony of three witnesses, the trial court found that Balducci never agreed to guarantee Cige his hourly rate if the lawsuit did not prevail. The court, moreover, determined that “a reasonable client” would have viewed the retainer agreement as a typical contingent-fee arrangement, obligating the client to pay a percentage of a monetary recovery only if the lawsuit succeeded. To the extent that ambiguity rendered the retainer agreement susceptible to more than one reasonable interpretation, the agreement must be construed in favor of the client. Based on the deference due the trial court’s credibility and factual findings and the Court’s independent review of the record, the Court is satisfied that the trial court’s judgment must be upheld. (pp. 25-27)

4. Attorneys and clients can agree to fee arrangements of their choice, provided they do not violate the Rules of Professional Conduct. The most conventional fee arrangement is for a client to pay an attorney on an hourly basis. Fee arrangements that provide incentives to lawyers to undertake the representation of clients who are unable or unwilling to pay an hourly rate are also permissible. The contingent-fee arrangement, in which an attorney is entitled to legal fees only if the client receives a recovery, is one such option. In addition to its benefits to clients, the attorney likewise has a powerful incentive to accept a contingent-fee agreement -- the potential of receiving legal fees far in excess of what would have been earned by an hourly-rate computation. Rule 1:21-7 authorizes and circumscribes contingent-fee arrangements. Significantly, New Jersey’s court rules do not place fixed fee caps on contingent fees in statutorily based discrimination cases. Nevertheless, in all cases, the contingent fee must conform to the rule of reasonableness articulated in RPC 1.5(a). (pp. 27-30)

5. Fee arrangements are also based on fee-shifting statutes that provide that, when a plaintiff is the prevailing party in a lawsuit, the defendant is responsible to pay the plaintiff’s reasonable attorney’s fees and costs. The fee-shifting provisions in LAD and other fee-shifting statutes do not require proportionality between damages recovered and counsel-fee awards. A reasonable attorney’s fee may exceed the value of the recovery by the plaintiff. When the attorney and client enter into a contingent-fee arrangement in a LAD case, the statutory-fee award -- the reasonable value of services rendered by the attorney -- may yield a higher return to the attorney than a contingent-fee award. In such a scenario, the client would receive the damages award and the attorney the statutory award for the reasonable value of his services. Additionally, in many cases, an hourly- 3 fee arrangement may better serve the client’s interests than a contingent-fee arrangement -- provided the client has the resources to pay the hourly fee. These principles are relevant because hourly billing, contingent-fee arrangements, and fee-shifting provisions intersect in the retainer agreement in this appeal. That retainer agreement has prompted pronouncements by the Appellate Division that have raised concerns by three bar associations. (pp. 30-33)

6. The Appellate Division’s first directive was 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 (1) “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”; (2) “should provide examples of how much hourly fees have totaled in similar cases”; and (3) “must provide the client with approximate costs . . . and must give examples of such costs in similar cases” “if the client is required to advance costs.” Balducci, 456 N.J. Super. at 242-43. It is not clear whether the Appellate Division has made a distinction between (1) an hourly rate that is computed based on a reasonable attorney’s fee award owed to a plaintiff as the prevailing party in a LAD case and (2) an hourly rate that the client is responsible to pay regardless of the outcome. Amici assert that, while Cige’s agreement appears to be an outlier, other hybrid fee agreements are permissible. The Court notes that it currently has no basis to cast ethical doubt on certain hybrid fee arrangements. Attorneys should explain to their clients in fee-shifting cases that the attorney’s fees may exceed the recovery by the client and will depend on various unknown factors; however, estimating the value of the case or the number of attorney hours that ultimately will be expended may not be possible with precision. The Court explains why mandating that attorneys in fee-shifting cases “provide examples of how much hourly fees [and costs] have totaled in similar cases” imposes a difficult, if not impossible, task, but notes that at the outset of the attorney-client relationship, the charges for identifiable costs, such as photocopying expenses, should be disclosed. Here, the retainer agreement did not disclose that the client would be charged $1.00 for every email received or sent, in addition to the hourly fee charged for preparing and reading those emails. That charge does not appear to conform to a standard of reasonableness. (pp. 34-38)

7. The Appellate Division next instructed that “the attorney must inform the client [that] other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component,” id. at 242, and “must disclose [that] other competent counsel who represent clients in similar cases advance litigation costs,” id. at 243. The wide diversity of cases and the varying fee arrangements used by attorneys may not call for the imposition of blunt and broad ethical obligations. And the disclosure requirement must be considered critically because it could impose on an attorney the duty to refer a potential client to a competitor who may be less experienced or skilled merely because that attorney advances litigation costs. (p. 38)

4 8. The Court also questions the correctness of the Appellate Division’s third suggestion -- that when LAD attorneys have not had experience with “similar cases,” “consideration should be given to referring the case to a certified civil trial attorney.” Id. at 242. The Court stresses the variety among LAD cases, the fact that some of the finest attorneys in their respective fields have decided not to seek certification, and the lack of available certification for the subspecialty of LAD cases. (p. 39)

9. Last, the Appellate Division found “questionable the [retainer agreement’s] 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 243, and “problematic” the provision computing the contingent fee based on both the client’s damages and the statutory fee award, id. at 239- 40. As to the computation provision, the Court notes that such a method may be relatively common and has been authorized by other jurisdictions. Regarding the reinstatement provision, the Court notes that there may be employment-law cases in which the settlement provides only for reinstatement -- without any financial recovery, and without attorney’s fees -- and therefore, it may be that in such a circumstance, a fee taken from a percentage of a year’s salary would be reasonable. (pp. 39-41)

10. The Court notes that those issues all require careful and thoughtful consideration and deliberation. The Court generally establishes professional standards governing attorneys through the rulemaking process. Several Supreme Court committees have overlapping jurisdiction over the professional-responsibility issues raised in this opinion: the Civil Practice Committee, the Professional Responsibility Rules Committee, and the Advisory Committee on Professional Ethics. The Court has decided that the study of the professional-responsibility issues should be addressed by a newly established ad hoc committee comprised of representatives of those three committees, and of other representative members of the Bar and Bench with experience in these matters. The Court therefore will ask the Administrative Director of the Courts to select members for this committee for the Court’s approval. (p. 41)

11. This committee of experienced judges and attorneys will make recommendations on the questions raised in this opinion. With the valuable input and insight from the committee, the Court then will be able to carefully survey all viewpoints and deliberate before considering any new rule of general applicability to the Bar. The committee may also consider whether to revisit a cap on contingent fees in statutorily based discrimination and employment claims. See R. 1:21-7(c). The Court expresses no ultimate opinion on the matters referred to the committee. (p. 42)

The judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE ALBIN’s opinion. 5 SUPREME COURT OF NEW JERSEY A-54 September Term 2018 081877

Lisa Balducci,

Plaintiff-Respondent,

v.

Brian M. Cige,

Defendant-Appellant.

On certification to the Superior Court, Appellate Division, whose opinion is reported at 456 N.J. Super. 219 (App. Div. 2018).

Argued Decided October 24, 2019 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).

1 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

2 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

3 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

4 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

5 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

6 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. 7 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 balance necessitates collection efforts . . . the Law Firm will be paid its legal fees for collecting same. 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.

By October 2012, Balducci had paid the $7500 minimum retainer.

Balducci accepted her financial obligation to pay the expenses and, over the

next three years, paid approximately $18,000 to $19,000 for the cost of

experts’ fees, depositions, photocopies, and other items. The expenses that

Cige claimed were still due, however, exceeded those payments.

8 In 2013, Balducci received invoices reflecting the hourly legal fees owed

and became very upset. She called Cige, who explained that he forwarded the

invoices only because of his legal obligation to keep track of his billing. He

also confided that he was “padding” the bills, stating that the school board

would be responsible for the legal fees after the successful conclusion of the

case. Because of her expressed discomfort at receiving the invoices, he agreed

to stop sending them.

By early 2015, Balducci became dissatisfied with Cige’s handling of the

case. Cige saddled her with the preparatory work for depositions while he

spent time at chess tournaments, and he was not adequately prepared for the

depositions. The mounting expenses also made her anxious. In September

2015, Balducci received an invoice for $12,400.61 in unpaid expenses, and

Cige estimated that his legal fees totaled $200,000.

The school board rejected Balducci’s first settlement demand of

$3,500,000. After consulting with an expert in bullying cases, Cige

approximated the value of the case at somewhere between $500,000 and

$700,000.

By October 2015, weighed down by the multiplying expenses and

disenchanted with her attorney, Balducci retained a law firm willing to front

the expenses and terminated Cige’s services. Only at that point did Cige

9 inform her that she was responsible for the payment of his hourly fees, which,

by February 9, 2016, had climbed to $270,791.22.

Cige’s Testimony

Cige gave a very different account of his relationship with Balducci and

the terms of their agreement. He began by stating that he had “more than

twenty-five years of experience litigating [LAD] cases” and had “some

experience in bullying law.” He had tried ten to twelve jury trials and fifteen

to twenty non-jury trials. He also had represented a Somerville high school

student in a bullying case against a board of education, though he had never

tried a bullying case to conclusion. Cige had lectured on subjects such as LAD

and disability discrimination as well as bullying, but was not designated a

certified civil trial attorney.

Balducci was not a close social acquaintance, however Cige had

successfully represented her in a litigated matter. According to Cige, under

the retainer agreement, he was entitled to the greater of three alternate methods

of calculating his fee: (1) his hourly rate multiplied by the number of hours

worked; (2) a contingent fee of 37 1/2% of both the net recovery and any

award of statutory attorney’s fees; or (3) an award of statutory attorney’s fees.

Cige maintained that Balducci had the responsibility to pay his hourly fees,

10 regardless of whether the case prevailed. He denied making any statement to

Balducci that conflicted with the written terms of the retainer agreement.

Cige asserted that Balducci reviewed the retainer agreement in his office

and that he asked her if she had any questions before she signed it. Cige,

however, admitted that he did not inform Balducci of the potential value of the

case, of the potential litigation expenses, or of the estimated financial

obligation she would bear if the litigation did not succeed. Nor did he detail

the billing rates for expenses in the retainer agreement. Instead, he later

forwarded a letter to Balducci indicating that he billed “$0.25 per page for

photocopies, $1.00 per email, $1.00 per fax, $0.55 per mile, and $25.00 for

New Jersey Lawyers Service.” The expenses for the emails -- $1.00 for every

email sent or received -- amounted to just over $1700 and were in addition to

the hourly rate he charged. Photocopying costs represented almost $12,000 of

the nearly $16,000 in expenses owed to Cige at the time his services were

terminated.

Cige tendered to the school board a $3,500,000 settlement demand, a

figure he thought high, to comply with his client’s wishes. He believed the

case had substantial value because Balducci’s son had suffered severe harm

from the bullying. He did not discuss with Balducci the settlement value in

other cases, because the unique facts of each case do not permit reliable

11 comparisons. By letter dated September 3, 2015, Cige advised Balducci that

he estimated the settlement value of her son’s case to be between $500,000 and

$700,000 and that a successful trial would probably yield between $1,000,000

and $1,200,000. He also indicated to her that the settlement value would

increase as the legal fees increased.

Balducci’s dissatisfaction with his representation manifested itself after

his estimate of the case’s value did not meet her expectations and after she

received invoices for outstanding expenses. On January 19, 2016, months

after his services were terminated, Cige advised Balducci that she still owed

$15,955.45 in expenses. Approximately three weeks later, Balducci forwarded

a check in the amount of $6122.62 for the expenses she considered valid. Cige

responded two days later, informing Balducci that in addition to the

outstanding expenses, she owed legal fees totaling $270,791.22.

On March 10, 2016, Balducci initiated fee arbitration. The Fee

Arbitration Committee, however, declined jurisdiction because the amount in

dispute exceeded $100,000. Thereafter, Balducci filed the declaratory-

judgment complaint.

12 II.

A.

At the conclusion of the plenary hearing, the trial court invalidated the

retainer agreement, crediting Balducci’s testimony over Cige’s. The court

determined that “a reasonable client would have understood [the] retainer

agreement” as a typical contingent-fee arrangement in which the client is

obligated to pay legal fees only if the lawsuit is successful. It next determined

that Cige did not fulfill his duty “to communicate clearly that his fee structure

was different” and that Balducci was required to pay legal fees regardless of

the case’s success, citing RPC 1.4(c). The court accepted Balducci’s

testimony that Cige informed her that his hourly fees would be paid by the

school board -- not by her.

The court enumerated other professional failings by Cige: (1) he did not

advise Balducci “of the average settlement in matters much like hers”; (2) he

did not “articulate how expensive [Balducci’s] matter could ultimately be, and

what recovery [she] could expect (within reason)”; and (3) he did not identify

in the retainer agreement numerous costs that would be charged, “including,

most egregiously, $1 per email sent and received.” The court found that Cige

had failed to impart information “material and necessary to permit [Balducci]

13 to make an informed decision regarding representation” in violation of the

Rules of Professional Conduct.

Last, the court credited Balducci’s testimony that she never would have

retained Cige to represent her son “had she known she would be liable to pay

[Cige’s] hourly rate even in the event her claims were unsuccessful.”

Accordingly, the court voided the retainer agreement and limited Cige’s legal

fees to “the quantum meruit of [his] work” to be determined at a later hearing.

B.

The Appellate Division affirmed, finding substantial and credible

evidence in the record to support the trial court’s decision. Balducci v. Cige,

456 N.J. Super. 219, 234, 243-44 (App. Div. 2018). The Appellate Division

highlighted the testimony and evidence credited by the trial court: Cige not

only failed to explain that “the cost of his services, based on his hourly rate

and liberal billing practices, could approach or exceed [Balducci’s] recovery,”

but also “represented -- or misrepresented as the case may be -- that he would

not charge her his hourly rate.” Id. at 234. It found the retainer agreement

unenforceable because Cige “did not adequately inform [Balducci] about [its]

ramifications,” not “because of the problematic nature of the three fee

provisions.” Id. at 241.

14 The Appellate Division, additionally, spoke more expansively about an

attorney’s ethical obligation to inform his client of the ramifications of a

retainer agreement in fee-shifting cases, given the “ambiguous if not

misleading” nature of the agreement in this case. Id. at 234.

It noted that LAD’s fee-shifting provision is designed to attract

competent counsel to enforce the statutory rights of victims of discrimination.

Id. at 236. It then made the following observations: (1) “in the absence of a

statutory fee award, an attorney’s hourly fee can approach or exceed a LAD

client’s recovery”; (2) a retainer agreement in a LAD case that places the onus

on the client to pay the hourly fee can greatly diminish the client’s damages

award, thus undermining LAD’s policy of “compensating victims of

discrimination,” and, in the event of an unsuccessful outcome, financially

devastate the client; and (3) “[t]here 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.” Ibid. With those

observations in mind, the Appellate Division articulated a set of ethical

obligations, purportedly arising from the Rules of Professional Conduct, that

must be followed by attorneys in LAD and fee-shifting actions when a retainer

agreement includes an hourly fee component.

15 First, “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.” Id. at 242. Thus, “[t]he

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.” Ibid. In addition, “[t]he

attorney should provide examples of how much hourly fees have totaled in

similar cases,” ibid., and “if the client is required to advance costs, the attorney

must provide the client with approximate costs . . . and must give examples of

such costs in similar cases,” id. at 243.

Second, “the attorney must inform the client [that] other competent

counsel represent clients in similar cases solely on a contingent fee basis,

without an hourly component,” id. at 242, and “must disclose [that] other

competent counsel who represent clients in similar cases advance litigation

costs,” id. at 243.

Third, if an attorney does not have experience with similar LAD cases,

“consideration should be given to referring the case to a certified civil trial

attorney.” Id. at 242.

Last, the Appellate Division found “questionable the [retainer

agreement’s] additional fee of fifteen percent of one year’s wages in the event

16 a client who has lost a job based on discrimination is reinstated,” id. at 243,

and “problematic” the provision computing the contingent fee based on both

the client’s damages and the statutory fee award, id. at 239-40.

C.

We granted Cige’s petition for certification limited to his challenge of

the invalidation of the retainer agreement and his claim that the Appellate

Division retroactively applied new rules of professional conduct. 236 N.J.

616, 616-17 (2019). We also granted the motions of the New Jersey State Bar

Association, the National Employment Lawyers Association of New Jersey,

and the New Jersey Association for Justice to participate as amici curiae.

III.

Cige claims that the Appellate Division erred in affirming the

invalidation of the retainer agreement. He alleges that the retainer agreement

is a clear and unambiguous “integrated written” contract and therefore the

parol evidence rule barred oral testimony collaterally attacking the validity of

the agreement. He also contends that the Appellate Division improperly

created and then retroactively applied new ethical standards on attorneys

handling LAD and other fee-shifting cases, requiring, among other things, that

clients be informed how other attorneys bill similar cases.

17 B.

Balducci asks this Court to affirm the Appellate Division, which found

ample evidence to uphold the trial court’s factual findings that Cige failed to

explain material terms of the retainer agreement to her, thus rendering the

agreement unenforceable. She points to the trial court’s finding that she

signed the retainer agreement only because Cige assured her that the

agreement was a contingent-fee arrangement and that she would not be

responsible for his legal fees if the lawsuit were unsuccessful.

The three amici claim that the Appellate Division made novel and ill-

considered pronouncements on the Rules of Professional Conduct applicable in

statutory fee-shifting cases that were unnecessary to decide the narrow facts

before it. Amici assert that those pronouncements amounted to rulemaking

that falls within the exclusive domain of the Supreme Court -- rulemaking that

is ordinarily preceded by careful consideration and review by Supreme Court

committees and input from the Bar.

Amici contend that the client’s right to an attorney’s fee award as a

prevailing party in a fee-shifting case does not exclude an attorney from

contracting with a client for payment of services on an hourly basis with or

without a contingent-fee arrangement.

18 Amici take issue with newly ordained ethical requirements imposed on

attorneys who charge wholly or partly on an hourly basis in fee-shifting cases,

and make some general points. In a LAD fee-shifting case, for example, a

client may be better served by a retainer agreement based on an hourly fee than

a contingent fee when the proofs are strong, success is expected, and the

recovery likely will be very high. In that circumstance, a contingent-fee

arrangement might reap an unwarranted windfall for an attorney. Therefore,

referring the client to an attorney who would take the case on a contingent

basis might not be in the client’s best interests.

Amici also submit that LAD attorneys should not be responsible for

advising their clients of other attorneys’ billing practices because they have no

access to such information and no obligation to conduct market research or

investigate their competitors’ practices. Amici reject the suggestion that

experienced and skilled LAD attorneys, who have not handled a “similar”

case, should refer the client to a certified civil trial attorney who may have less

experience and expertise in LAD matters. According to amici, the Appellate

Division unfairly criticized the varied hourly billing arrangements commonly

used in LAD cases that properly apportion risk between attorneys and clients

and failed to give guidance to attorneys in fulfilling the new ethical mandates.

19 IV.

The Appellate Division’s decision requires that this Court address two

distinct issues. The first is whether the trial court properly invalidated the

retainer agreement between Balducci and Cige. The second is whether some

of the Appellate Division’s general pronouncements on professional standards

applicable in fee-shifting cases exceeded the bounds of its charge.

We start with general ethical principles that relate to the conduct of

attorneys in their relationships with clients.

This Court has exclusive constitutional authority to regulate the practice

of law by establishing ethical duties that attorneys owe their clients and

potential clients. N.J. Const. art. VI, § 2, ¶ 3; Am. Trial Lawyers Ass’n, N.J.

Branch v. Supreme Court, 66 N.J. 258, 262-63 (1974). Those ethical

obligations are set forth in the Rules of Professional Conduct and court rules

and have been further refined by our case law. See R. 1:14 (“The Rules of

Professional Conduct . . . as amended and supplemented by the Supreme Court

. . . shall govern the conduct of the members of the bar and the judges and

employees of all courts of this State.”).

A retainer agreement between an attorney and client is a contract, but

not an ordinary contract. “[T]he unique and special relationship between an

20 attorney and a client” requires that a retainer agreement satisfy not only

ordinary principles governing contracts, but also the professional ethical

standards governing the attorney-client relationship. Alpert, Goldberg, Butler,

Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 529 (App. Div. 2009)

(quoting Cohen v. Radio-Elecs. Officers Union, Dist. 3, 275 N.J. Super. 241,

259 (App. Div. 1994), modified, 146 N.J. 140 (1996)).

Because lawyers stand in a fiduciary relationship with their clients, see

Alpert, 410 N.J. Super. at 531, they must act fairly in all their dealings with

them, see In re Humen, 123 N.J. 289, 299-300 (1991). Fee agreements that

contravene the Rules of Professional Conduct and public policy are not

enforceable. See Tax Auth., Inc. v. Jackson Hewitt, Inc., 187 N.J. 4, 15

(2006).

The paramount principle guiding every fee arrangement is that “[a]

lawyer’s fee shall be reasonable.” RPC 1.5(a). Every lawyer must set forth

“the basis or rate of the fee . . . in writing to the client.” 1 RPC 1.5(b). That

professional imperative requires that the lawyer also make a “[f]ull and

complete disclosure of all charges which may be imposed upon the client.”

Alpert, 410 N.J. Super. at 531; see also Michels, New Jersey Attorney Ethics

1 The only exception to that rule is when the lawyer has regularly represented the client. RPC 1.5(b). 21 § 33:4-1 (2019). An attorney must explain the charges and costs for which the

client is responsible, beyond the hourly rate, to permit the client to make an

informed decision whether to retain the attorney. Alpert, 410 N.J. Super. at

531.

A lawyer also has a corresponding 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), and is forbidden from making “false or

misleading communications” relating to “legal fees,” RPC 7.1(a)(4). “[C]lear

communication about the basis of the fee and the services it will cover should

be the objective of every fee agreement.” Michels, § 33:1. In determining the

validity of a retainer agreement, a court may consider the circumstances

related to the making of the agreement, including whether the parties “actually

negotiated the agreement,” “the client’s level of sophistication or experience in

retaining and compensating lawyers,” and other relevant factors. See Cohen v.

Radio-Elecs. Officers Union, Dist. 3, 146 N.J. 140, 160 (1996); see also

Restatement (Third) of the Law Governing Lawyers § 18 cmt. h (Am. Law

Inst. 2000).

A court’s review of the validity of a retainer agreement is not limited by

the parol evidence rule. See Restatement (Second) of Contracts § 214(d) (Am.

Law Inst. 1981) (“Agreements and negotiations prior to or contemporaneous

22 with the adoption of a writing are admissible in evidence to establish . . .

illegality, fraud, . . . or other invalidating cause . . . .”); accord Conway v. 287

Corp. Ctr. Assocs., 187 N.J. 259, 269-70 (2006) (noting that the words of the

retainer agreement did not preclude “a broad use of extrinsic evidence to

achieve the ultimate goal of discovering the intent of the parties” ). The parol

evidence rule generally “prohibits the introduction of evidence that tends to

alter an integrated written document.” See Conway, 187 N.J. at 268 (citing

Restatement (Second) of Contracts § 213). That rule does not apply to retainer

agreements because “ordinary contract principles . . . must give way to the

higher ethical and professional standards” that govern the attorney-client

relationship. See Alpert, 410 N.J. Super. at 529. An attorney cannot give an

oral assurance to a client that conflicts with a written retainer agreement and

expect to find refuge in the parol evidence rule. See RPC 7.1(a). The parol

evidence rule cannot bar a client from testifying that she signed a retainer

agreement based on an attorney’s material misrepresentation.

We also must be mindful that lawyers typically prepare retainer

agreements, that clients rely on the integrity of their lawyers who fashion the

agreements, and that, as such, an agreement susceptible to two reasonable

interpretations should be construed in favor of the client. See Starkey, Kelly,

Blaney & White v. Estate of Nicolaysen, 172 N.J. 60, 67 (2002); Cohen, 146

23 N.J. at 156; see also Restatement (Third) of the Law Governing Lawyers § 18

cmt. h. When a court reviews a retainer agreement, it should do so “from the

standpoint of a reasonable person in the client’s circumstances.” Restatement

(Third) of the Law Governing Lawyers § 18 cmt. h; see Cohen, 146 N.J. at

156.

Ultimately, “the attorney bears the burden of establishing the fairness

and reasonableness of the transaction.” Cohen, 146 N.J. at 156.

Before applying those principles to the case before us, we begin with our

standard of review. Although the interpretation of a contract is generally

subject to de novo review, Keiffer v. Best Buy, 205 N.J. 213, 222-23 (2011),

we apply a deferential standard here because the trial court determined the

validity of the retainer agreement by taking the testimony of the parties and by

making credibility and factual findings, see Cesare v. Cesare, 154 N.J. 394,

411-12 (1998). “Deference is especially appropriate ‘when the evidence is

largely testimonial and involves questions of credibility.’” Id. at 412 (quoting

In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997)). That is so

because an appellate court’s review of a cold record is no substitute for the

trial court’s opportunity to hear and see the witnesses who testified on the

stand. See State v. Elders, 192 N.J. 224, 244 (2007). We may not overturn the

24 trial court’s factfindings unless we conclude that those findings are

“manifestly unsupported” by the “reasonably credible evidence” in the record.

Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting In re

Tr. Created By Agreement Dated Dec. 20, 1961, 194 N.J. 276, 284 (2008)).

We first conclude that the trial court’s factfindings in support of the

invalidation of the retainer agreement are grounded in sufficient credible

evidence in the record. A retainer agreement must be viewed through the

prism of a lawyer’s ethical responsibilities as commanded by the Rules of

Professional Conduct. The trial court’s purview extended beyond the four

corners of the retainer agreement to a consideration of all the circumstances

that led the parties to reach an agreement. See Cohen, 146 N.J. at 160. In this

setting, the parol evidence rule cannot place a stranglehold on the admission of

extrinsic evidence, particularly the testimony of the client and attorney.

Through the testimony of the parties, the court had to determine the nature of

the actual agreement that had been reached and whether oral promises

conflicted with the agreement reduced to writing.

At its core, the dispute between Cige and Balducci amounted to a

credibility contest. After hearing the testimony of three witnesses, the trial

court found that Balducci never agreed to guarantee Cige his hourly rate if the

25 lawsuit did not prevail. The trial court credited Balducci’s and her son’s

testimony that Cige gave oral assurances that, despite the written language in

the retainer agreement, Balducci would never have to pay the hourly rate. The

court accepted Balducci’s assertion that she would not have retained Cige had

he informed her that she would be responsible for his hourly fees if the lawsuit

failed. The court, moreover, determined that “a reasonable client” would have

viewed the retainer agreement as a typical contingent-fee arrangement,

obligating the client to pay a percentage of a monetary recovery only if the

lawsuit succeeded. To the extent that ambiguity rendered the retainer

agreement susceptible to more than one reasonable interpretation, the

agreement must be construed in favor of the client. See Cohen, 146 N.J. at

156. Based on the deference we must accord the trial court’s credibility and

factual findings and our independent review of the record, we are satisfied that

the trial court’s judgment must be upheld.

We note that the court additionally indicated that Cige fell short of his

duty to impart material information so that Balducci could make an informed

decision about whether to retain him -- information concerning the “average

settlement” in such cases, the range of recovery to be expected, and the

expenses involved, including what the court described as the egregious

26 charging of $1.00 per email. We will address the practicability of imposing on

attorneys those and other obligations later.

In sum, we hold that sufficient credible evidence in the record supports

invalidating the retainer agreement and limiting Cige to the quantum meruit

value of his services.

We now address some of the central concerns raised by amici and Cige

-- that the Appellate Division has imposed new and unfair mandates on

practitioners in LAD and other fee-shifting cases.

We begin with some basic precepts relating to fee arrangements and the

import of the LAD fee-shifting provision in such arrangements.

Attorneys and clients can agree to fee arrangements of their choice,

provided they do not violate the Rules of Professional Conduct. The most

conventional fee arrangement is for a client to pay an attorney on an hourly

basis. See generally Ted Schneyer, Legal-Process Constraints on the

Regulation of Lawyers’ Contingent Fee Contracts, 47 DePaul L. Rev. 371, 375

(1998). Fee arrangements that provide incentives to lawyers to undertake the

representation of clients who are unable or unwilling to pay an hourly rate are

also permissible.

27 The contingent-fee arrangement is one such option. Am. Trial Lawyers

Ass’n, N.J. Branch v. Supreme Court, 126 N.J. Super. 577, 582 (App. Div.),

aff’d, 66 N.J. 258 (1974). In a contingent-fee agreement, the attorney agrees

to provide legal services for compensation that is contingent on the successful

outcome of the case by settlement or judgment, and compensation is fixed by a

percentage of the net recovery. See R. 1:21-7(a); see also Am. Trial Lawyers

Ass’n, 126 N.J. Super. at 582. In a contingent-fee arrangement, the attorney is

entitled to legal fees only if the client receives a recovery. See R. 1:21-7(a).

Such an arrangement has obvious benefits to the client. The attorney

assumes most of the risk -- no recovery, no legal fees, see ibid., although,

depending on the terms of the retainer agreement, the client may be

responsible for expenses, see generally Michels, § 33:3-2(d). A contingent-fee

arrangement also opens the courthouse door to the poor and those with modest

incomes, who are unable to pay an attorney’s hourly rate. See Douglas R.

Richmond, Turns of the Contingent Fee Key to the Courthouse Door, 65 Buff.

L. Rev. 915, 915-16 (2017). The attorney likewise has a powerful incentive to

accept a contingent-fee agreement -- the potential of receiving legal fees far in

excess of what would have been earned by an hourly-rate computation. See id.

at 917-18 (surveying cases and noting that “some cases are potentially much

28 more lucrative on a contingent fee basis than they would be if the firm billed

by the hour”).

Rule 1:21-7 authorizes and circumscribes contingent-fee arrangements.

A.W. v. Mount Holly Twp. Bd. of Educ., 453 N.J. Super. 110, 119 (App. Div.

2018). In all cases concerning a contingent-fee arrangement, the attorney must

first “advise[] the client of the right and afford[] the client an opportunity to

retain the attorney under an arrangement for compensation on the basis of the

reasonable value of the services.” R. 1:21-7(b). In cases involving “the

alleged tortious conduct of another, . . . but excluding statutorily based

discrimination and employment claims,” Rule 1:21-7(c) sets limits on the

percentage of recovery that an attorney may receive. Thus, in a tort case, the

attorney’s compensation is limited to “33 1/3% on the first $750,000

recovered.” R. 1:21-7(c) (setting forth declining percentages of compensation

for amounts over $750,000).

Significantly, our court rules do not place fixed fee caps on contingent

fees in statutorily based discrimination cases. See ibid. Nevertheless, in all

cases, the contingent fee must conform to the rule of reasonableness articulated

in RPC 1.5(a). R. 1:21-7(e); see also A.W., 453 N.J. Super. at 121; Advisory

Comm. on Prof’l Ethics, Op. 715 (N.J. 2008) (noting that in a consumer

protection fee-shifting case, “[a] 50 percent contingency . . . cannot per se be

29 deemed to be ‘reasonable’” and must be judged by the factors in RPC 1.5(a)).

“[T]he element of uncertainty of recovery is often important in determining

whether a contingent fee as ultimately charged is reasonable or excessive.” In

re Reisdorf, 80 N.J. 319, 329 (1979).

Fee arrangements are also based on fee-shifting statutes that provide

that, when a plaintiff is the prevailing party in a lawsuit, the defendant is

responsible to pay the plaintiff’s reasonable attorney’s fees and costs. LAD is

one such fee-shifting statute. See N.J.S.A. 10:5-27.1; Pinto v. Spectrum

Chems. & Lab. Prods., 200 N.J. 580, 593 (2010). LAD is remedial social

legislation intended to combat various forms of discrimination in our society.

See N.J.S.A. 10:5-3; see also Caraballo v. City of Jersey City Police Dep’t,

237 N.J. 255, 267 (2019). To incentivize attorneys to undertake LAD claims,

particularly when the claims have small monetary value, the Legislature

enacted a provision allowing that a prevailing plaintiff “may be awarded a

reasonable attorney’s fee as part of the cost.” N.J.S.A. 10:5-27.1; see also

Pinto, 200 N.J. at 593. The purpose of the fee-shifting provision is to attract

competent counsel to serve as “private attorneys general” to enforce the

statutory rights of victims of discrimination, thus vindicating individual right s

and advancing societal goals. Pinto, 200 N.J. at 593 (quoting Evans v. Jeff D.,

30 475 U.S. 717, 745 (1986) (Brennan, J., dissenting)); New Jerseyans for a

Death Penalty Moratorium v. Dep’t of Corr., 185 N.J. 137, 152-53 (2005).

The fee-shifting provisions in LAD and other fee-shifting statutes do not

“require proportionality between damages recovered and counsel-fee awards

even if the litigation . . . vindicates no rights other than those of the plaintiff.”

Szczepanski v. Newcomb Med. Ctr., Inc., 141 N.J. 346, 366 (1995) (LAD

case); see also Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 23 (2004) (adopting

the same non-proportionality approach in a Consumer Fraud Act case). A

reasonable attorney’s fee may exceed the value of the recovery by the plaintiff.

See, e.g., Abrams v. Lightolier Inc., 50 F.3d 1204, 1211, 1221-22 (3d Cir.

1995) (affirming an award of attorney’s fees under LAD in the amount of

$546,379.59 where the damages award totaled only $473,953.45); Gallo v.

Salesian Soc’y, Inc., 290 N.J. Super. 616, 659-60 (App. Div. 1996) (affirming

an award of attorney’s fees under LAD in the amount of $48,750 where the

damages award totaled only $24,000).

When the attorney and client enter into a contingent-fee arrangement in a

LAD case, the statutory-fee award -- the reasonable value of services rendered

by the attorney -- may yield a higher return to the attorney than a contingent-

fee award. For example, assuming a retainer agreement had a one-third

contingent-fee component, and the plaintiff succeeds in the LAD action, with

31 the jury awarding $100,000 in monetary damages and the court awarding

$100,000 in reasonable attorney’s fees, the contingent fee would not represent

the reasonable value of the attorney’s services. In such a scenario, the client

would receive the damages award and the attorney the statutory award for the

reasonable value of his services. See Szczepanski, 141 N.J. at 366 (“The

LAD’s fee-shifting provision, N.J.S.A. 10:5-27.1, was intended to assure that

counsel for litigants like plaintiff will receive reasonable compensation for

services reasonably rendered to effectuate the LAD’s objectives, even if the

contingent fee payable based on the damages recovered did not constitute a

reasonable fee for those services.”).

Additionally, in many cases, an hourly-fee arrangement may better serve

the client’s interests than a contingent-fee arrangement -- provided the client

has the resources to pay the hourly fee. That is because “[i]f the risk of

nonpayment to a lawyer is small or nonexistent, resort to a contingent

arrangement with its potential for a much larger fee, can be unfair and

inequitable to the client.” Reisdorf, 80 N.J. at 329.

These principles are relevant because hourly billing, contingent-fee

arrangements, and fee-shifting provisions intersect in the retainer agreement in

this appeal. That retainer agreement has prompted pronouncements by the

Appellate Division that have raised concerns by three bar associations.

32 The Appellate Division found the written retainer agreement here

“problematic” because the attorney benefitted from the greater of a contingent

fee, a statutory award of attorney’s fees, and the attorney’s hourly fee, win or

lose. Under that agreement, all the risk was borne by the client. If the lawsuit

prevailed, the attorney potentially could receive a windfall under the

contingent-fee arrangement; if the lawsuit failed, the client potentially could

be bankrupted by hundreds of thousands of dollars in fees owed to the attorney

under the hourly-fee arrangement. Would a reasonably well-informed client

agree to such an arrangement? The answer is, probably not. Balducci stated

that she would not have done so. None of the amici came to the defense of this

form of retainer agreement.

Amici assert that the Appellate Division has overreacted to the extremity

of this retainer agreement by placing restrictions on otherwise appropriate fee

arrangements presently in use in LAD and other fee-shifting cases and by

placing unrealistic professional obligations on attorneys who handle such

cases.

We now turn to some of the Appellate Division’s statements that are the

focus of the concerns raised by the amici and Cige. We are compelled to

address those statements because of their potentially far-reaching impact on

the practice of law.

33 VI.

Amici take issue with the Appellate Division’s directive 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 (1) “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”;

(2) “should provide examples of how much hourly fees have totaled in similar

cases”; and (3) “must provide the client with approximate costs . . . and must

give examples of such costs in similar cases” “if the client is required to

advance costs.” Balducci, 456 N.J. Super. at 242-43.

First, it is not clear whether the Appellate Division has made a

distinction between (1) an hourly rate that is computed based on a reasonable

attorney’s fee award owed to a plaintiff as the prevailing party in a LAD case

and (2) an hourly rate that the client is responsible to pay regardless of the

outcome. One of the amici at oral argument indicated that Cige’s retainer

agreement, requiring a client to pay the hourly rate in full even if the LAD

lawsuit fails, appears to be an outlier. Amici have advised, however, that

hybrid fee arrangements that include an hourly fee are used in LAD cases. In

such cases, the client will pay an upfront retainer, covering part of the

attorney’s hourly fees, and then the remaining payment of attorney’s fees,

34 whether contingent or statutorily based, depends on whether the lawsuit

prevails. If the suit is successful, then the initial retainer is reimbursed

through the attorney’s fees awarded by statute or settlement. In that scenario,

we are told the risk is shared by both attorney and client. Based on the record

before us, and without the input of the Professional Responsibility Rules

Committee, the Advisory Committee on Professional Ethics, or other relevant

Court committees suggesting otherwise, we have no basis to cast ethical doubt

on such fee arrangements. 2

As earlier explained, in a fee-shifting case, the attorney’s fees may

exceed the recovery by the client. That clearly should be explained to the

client to avoid any misunderstanding later in the litigation, particularly given

the fact that most cases are resolved by settlement. See Alpert, 410 N.J. Super.

at 531-32. For example, an attorney might explain that the value of the LAD

claim is likely anywhere between $100,000 and $500,000, but that the final

tally of reasonable attorney’s fees will depend on various unknown factors,

such as whether the discovery process extends over a period of years; whether

discovery is labor intensive, involving numerous depositions and review of a

2 The Advisory Committee on Professional Ethics is designated to issue advisory opinions to answer questions raised concerning the propriety of particular professional practices or an attorney’s ethical responsibilities in a particular context. See R. 1:19-2. 35 multitude of documents; whether the case is settled or tried, and, if tried, the

length of the trial; and whether there are appeals. Meaningful communication

with the client and transparency are necessary for the client to make an

informed decision. See generally Michels, § 33:1.

On the other hand, attorneys are not clairvoyant and can offer only their

best professional judgment. Estimating the value of the case or the number of

attorney hours that ultimately will be expended may not be possible with

precision. For instance, in any case tried to a jury involving such intangibles

as pain and suffering or loss of enjoyment of life, a wide spectrum of

acceptable outcomes would be upheld by our courts. Cuevas v. Wentworth

Grp., 226 N.J. 480, 500 (2019) (“Because no two juries likely will award the

same damages for emotional distress in a discrimination case, a permissible

award may fall within a wide spectrum of acceptable outcomes.”). Estimating

expenses likewise depends on whether a case settles early or goes the distance.

Nevertheless, attorneys must give their clients meaningful guidance on their

potential financial obligations. See Alpert, 410 N.J. Super. at 530-31.

Mandating that LAD attorneys -- or attorneys in other fee-shifting cases

-- “provide examples of how much hourly fees [and costs] have totaled in

similar cases” imposes a difficult, if not impossible, task. The attorney would

have to know whether the “similar case” settled or was tried, the nature and

36 length of the discovery process, the number of depositions conducted and

expert witnesses retained, the overall complexity of the litigation, and many

other factors. Amici pose a practical question: how are they to acquire

meaningful information about comparable hourly fees and costs? We recently

have spoken critically about the “comparative-verdict methodology,” noting

that the varying awards in LAD and other cases “are not easily susceptible to

comparison.” Cuevas, 226 N.J. at 486-87. In the same way, attorneys who

take on LAD cases are unlikely to have sufficient information on hours and

costs in similar cases for any “meaningful comparative approach.” See id. at

487.

Nevertheless, an attorney has an obligation to provide the client with

meaningful information about the potential aggregate hourly fees and costs

that may be incurred during the course of the litigation so that the client may

make an intelligent assessment whether to retain the attorney and on what

terms. See Alpert, 410 N.J. Super. at 531-32. Clearly, at the outset of the

attorney-client relationship, the charges for identifiable costs, such as

photocopying expenses, should be disclosed. In the present case, the retainer

agreement did not disclose that the client would be charged $1.00 for every

email received or sent, in addition to the hourly fee charged for preparing and

37 reading those emails. Such an email charge does not appear to conform to a

standard of reasonableness.

Like amici, we have doubts about the soundness of the Appellate

Division’s command that “the attorney must inform the client [that] other

competent counsel represent clients in similar cases solely on a contingent fee

basis, without an hourly component.” See Balducci, 456 N.J. Super. at 242.

As explained earlier, an hourly-rate fee arrangement may benefit a client more

than a contingent-fee arrangement in certain cases. The 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.

Currently, many attorneys advance litigation costs, and others do not.

We harbor doubts about the Appellate Division’s directive that an attorney

“must disclose [that] other competent counsel who represent clients in similar

cases advance litigation costs.” See id. at 243. Must an attorney refer a

potential client to a competitor who may be less experienced or skilled merely

because that attorney advances litigation costs? The answer to that question

suggests that the Appellate Division’s disclosure requirement must be

considered critically. It bears mentioning that, in the age of the Internet, much

information is available to an inquisitive client in searching for an attorney.

38 Additionally, we question the correctness of the Appellate Division’s

suggestion that when LAD attorneys have not had experience with “similar

cases,” “consideration should be given to referring the case to a certified civil

trial attorney.” Id. at 242. Certainly, long experience handling discrimination

cases is vitally important in assessing an attorney’s capabilities. However, an

attorney who has represented a client in one particular species of LAD cases

may be no less capable of handling another species of such cases. We cannot

say, for example, that an attorney who has handled multiple sex- and age-

discrimination cases is not skilled or experienced enough to handle a race - or

religious-discrimination case -- or a bullying case. In addition, without in any

way diminishing the value or importance of the designation of certified civil

trial attorney -- a special designation that signals that an attorney has

recognized competence and experience as a litigator -- certification is a

voluntary, lawyer-initiated process, and some of the finest attorneys in their

respective fields have decided not to seek certification. See generally R. 1:39.

And, there is no certification for the subspecialty of LAD cases. See ibid.

The Appellate Division, moreover, found “problematic” the provision in

Cige’s retainer agreement that calculated the contingent fee on the sum total of

the award for damages and statutory attorney’s fees. That method of

calculation, however, may be relatively common and permissible. Indeed,

39 Balducci’s successor attorney had the same provision in his retainer agreement

for calculating the contingent fee. In addition, other jurisdictions have

authorized that method of calculation. See, e.g., Cambridge Tr. Co. v. Hanify

& King Prof’l Corp., 721 N.E.2d 1, 6 (Mass. 1999) (stating that there is “no

authority that makes it per se unreasonable for an attorney and client to agree

that the attorney is to be paid a percentage of a total award, which may include

damages as well as court-awarded attorney’s fees”); Prof’l Ethics Comm’n,

State of Maine, Op. No. 81 (1987) (stating that “a fee agreement which

included the fee itself in the base against which the contingency percentage is

to be charged” is not “excessive per se”); North Carolina State Bar, Formal

Ethics Op. 4 (2002) (allowing an attorney to “add the court-awarded attorney

fee . . . to the judgment . . . and take a one-third contingent fee from the

total”).3

Last, the Appellate Division found “questionable the [retainer

agreement’s] 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.” Balducci,

456 N.J. Super. at 243. Cige evidently was using a form retainer agreement

3 At oral argument before this Court, counsel for the New Jersey Association for Justice stated that an attorney may appropriately receive “the greater of the contingency, the fee that’s awarded, or the combination,” while counsel for the New Jersey State Bar Association suggested that such an arrangement would be limited by RPC 1.5. 40 because the present case did not involve a job loss. The reasonableness of

such a provision applying in all discrimination cases, regardless of the

financial recovery, may seem dubious. However, there may be employment-

law cases in which the settlement provides only for reinstatement -- without

any financial recovery, and without attorney’s fees -- and therefore, it may be

that in such a circumstance, a fee taken from a percentage of a year’s salary

would be reasonable.

All of the issues discussed above require careful and thoughtful

consideration and deliberation. This Court generally establishes professional

standards governing attorneys through the rulemaking process. Several

Supreme Court committees have overlapping jurisdiction over the

professional-responsibility issues raised in this opinion: the Civil Practice

Committee, the Professional Responsibility Rules Committee, and the

Advisory Committee on Professional Ethics. We have decided that the study

of the professional-responsibility issues should be addressed by a newly

established ad hoc committee comprised of representatives of those three

committees, and of other representative members of the Bar and Bench with

experience in these matters. We therefore will ask the Administrative Director

of the Courts to select members for this committee for this Court’s approval.

41 This committee of experienced judges and attorneys will make

recommendations on the questions raised in this opinion. With the valuable

input and insight from the committee, this Court then will be able to carefully

survey all viewpoints and deliberate before considering any new rule of

general applicability to the Bar.

The committee may also consider whether to revisit a cap on contingent

fees in statutorily based discrimination and employment claims. See R. 1:21-

7(c). We express no ultimate opinion on the matters referred to the committee.

VII.

We affirm the judgment of the Appellate Division upholding the trial

court’s invalidation of the retainer agreement and its scheduling of a hearing to

determine the quantum meruit value of Cige’s attorney’s fees. An ad hoc

committee will be established to address the professional-responsibility issues

discussed in this opinion. That committee will report its recommendations to

the Court.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE ALBIN’s opinion.