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In re Livolsi

Decided: April 13, 1981.

IN THE MATTER OF THE APPLICATION OF PHILIP J. LIVOLSI, PETITIONER


On a Petition for Review of Rule 1:20A-1, et seq.

For affirmance -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For reversal -- None. The opinion of the Court was delivered by Wilentz, C.J. Schreiber, J., concurring.

Wilentz

[85 NJ Page 581] This case involves challenges to the constitutionality and desirability of the Fee Arbitration Committees (Committees) established by this Court in R. 1:20A pursuant to our constitutional authority to regulate the practice of law. The Rule's purpose was to provide a satisfactory mechanism for the resolution of fee disputes between attorneys and their clients. As presently constituted, a Committee must arbitrate fee disputes upon a client's request (whether the lawyer consents or not), or upon a lawyer's request if the client consents. R. 1:20A-3(a). The Committee's determination is binding on both client and attorney, and is unappealable. R. 1:20A-3(a)(c)(d). The procedures

of the Committee are essentially the same as those of District Ethics Committees. R. 1:20A-3(b).

Petitioner LiVolsi and amicus New Jersey State Bar Association (Association) contend that R. 1:20A is unconstitutional for four reasons: that promulgation of R. 1:20A is beyond the Supreme Court's authority under N.J.Const. (1947), Art. VI, § II, par. 3; that it denies lawyers equal protection of the laws; that it denies attorneys the right to trial by jury guaranteed by the New Jersey Constitution; and that the unappealability of Committee determinations violates both the due process clause of the Fourteenth Amendment and the New Jersey Constitution. We reject these contentions and uphold the validity of R. 1:20A. We also reject the Association's argument that the compulsory nature of Committee arbitrations is undesirable and reaffirm our commitment to R. 1:20A.

I.

PROCEDURAL BACKGROUND AND JURISDICTION

Petitioner, a member of the New Jersey Bar, brought an action against this Court in the United States District Court, District of New Jersey, challenging the constitutionality of R. 1:20A. While this action was pending, we invited petitioner to bring his challenge before our Court. Petitioner agreed to do so and on April 2, 1979, exercising original jurisdiction over this matter, we permitted petitioner to file a petition directly with this Court "for a determination of the constitutionality of R. 1:20A and further, to determine the intended scope and meaning of the aforementioned Rule." Order of April 2, 1979. Subsequently, petitioner filed a brief in support of his claim, and an amicus brief was filed by the Association supporting his position. A brief in opposition was filed by the Attorney General.

Although none of the parties before us challenges the procedure by which we are hearing this petition, we feel it necessary to explain this rather unusual exercise of our original jurisdiction. This Court is, of course, primarily an appellate

body, N.J.Const. (1947), Art. VI, § II, par. 2.*fn1 It could be argued that we are exclusively an appellate body because the only explicit grant of original jurisdiction to this Court comes from N.J.Const. (1947), Art. VI, § V, par. 3,*fn2 which permits original jurisdiction "as may be necessary to the complete determination of any cause on review." Plainly, this provision grants us original jurisdiction only over matters related to causes already before us. See, e.g., Kelly v. Curtiss, 16 N.J. 265 (1954); City of Newark v. West Milford Twp., 9 N.J. 295 (1952).

We find, however, that N.J.Const. (1947), Art. VI, § II, par. 3,*fn3 provides this Court with an independent basis for exercising original jurisdiction in the case before us. This provision grants us "jurisdiction" over the "discipline of persons admitted" to the Bar. It is the source of our exclusive power over the practice of law. State v. Rush, 46 N.J. 399, 411-12 (1966). We have recently held that the Supreme Court, acting pursuant to that power, has the authority to initiate disciplinary proceedings on its own as well as to review those conducted by Ethics Committees. In re Loring, 73 N.J. 282, 289 (1977). We have also held that this power enables us to adjudicate a dispute about the unauthorized practice of law even though the party

seeking relief might not have traditional standing. In re Estate of Margow, 77 N.J. 316, 323 (1978).*fn4

These cases, recognizing that this Court's plenary constitutional authority includes original jurisdiction over cases involving the "disciplining" of attorneys, imply that we also have original jurisdiction over challenges to the methods by which we exercise constitutional authority. It would make little sense for us to have original jurisdiction over the appropriateness, or the constitutionality, of disciplining individual attorneys while challenges to the constitutionality of our agencies, such as the Committees, must necessarily go first to Superior Court. The constitutional provision, Art. VI, § II, par. 3, must be read as vesting original, as well as appellate, jurisdiction in this Court over all matters concerning our authority to "discipline" the Bar.*fn5 We therefore hold that we may exercise original jurisdiction over this challenge to R. 1:20A.

II.

CONSTITUTIONALITY OF R. 1:20A

A. The Power of this Court to Promulgate R.1:20A

There is something almost anachronistic about the challenge to the Court's power to adopt R. 1:20A under the New Jersey

Constitution. For 33 years this Court has exercised plenary, exclusive, and almost unchallenged power over the practice of law in all of its aspects under N.J.Const. (1947), Art. VI, § II, par. 3. The enormous scope of this power puts R. 1:20A in proper perspective. Though critically important, it is but a minor regulation of the practice of law compared to others whose validity is beyond dispute.

The heart of the constitutional provisions concerning the judicial system was the concentration of responsibility for its proper functioning in the Supreme Court and Chief Justice. Such responsibility requires appropriate power over courts, judges, practice and procedure, and lawyers. Responsibility for an adversarial judicial system requires responsibility for the adversaries, and control over both.

In exercising this responsibility, one of the many goals this Court has sought to achieve has been maintaining public confidence in the judicial system. The intended direct beneficiary of that system is the litigant, the client, who can realistically gain access to it only through his relationship with a lawyer. The value of the judicial product depends upon the effectiveness of this access, the effectiveness of this relationship. If lawyers refuse to represent, the judicial system is almost worthless; if the terms and conditions of representation are unfair, the judicial system is impaired to that extent. This dependency of the public's confidence in the judicial system on its satisfaction with lawyer-client relationships is not theoretical: those dissatisfied with the system include a fair proportion dissatisfied with their lawyer. The most common cause of that dissatisfaction concerns fees, see section IIIA, infra.

Given the critical importance of the constitutional power of this Court over the practice of law, and its pervasiveness, starting with admission, ending with disbarment, and covering everything in between, we have no doubt that the power extends to every aspect of fee agreements between lawyers and clients. If this Court can set a limit on fees for certain matters,

American Trial Lawyers v. New Jersey Supreme Court, 66 N.J. 258 (1974) (upholding the contingent fee schedule promulgated in R. 1:21-7); require service for no fee at all in others, State v. Rush, supra, 46 N.J. at 411-12 (noting this Court's authority to require attorneys to defend indigents without charge); and disregard completely fee agreements in all matters (if they are unreasonable), Steiner v. Stein, 2 N.J. 367, 372 (1949) (see section IIC, infra); if, in short, this Court has the authority to control the substance of the fee relationship, then a power of a lesser magnitude -- determining the procedure for resolving fee disputes -- must also be within our province.*fn6

B. The Equal Protection Claim

Petitioner maintains that his right to equal protection guaranteed by the Fourteenth Amendment to the United States Constitution is violated by R. 1:20A. This Rule, it is argued, unconstitutionally "singles out" attorneys from among professionals who provide fee-based services for compulsory arbitration. We find no support for this argument in federal constitutional law.

Since lawyers are not a protected "suspect class," and since there is no recognized fundamental right being infringed upon by R. 1:20A, there need be only a rational basis supporting the difference in treatment. See San Antonio Ind. School Dist. v. Rodriguez, 411 U.S. 1, 93 S. Ct. 1278, 36 L. Ed. 2d 16 (1973). We find that such a rational basis plainly exists in the need to assure the reasonableness of attorney-client fees by providing a swift, inexpensive remedy to correct unreasonable fees. As the

United States Supreme Court has recognized, the state has a special interest in regulating the legal profession and attorney-client relationships. Goldfarb v. Virginia State Bar Association, 421 U.S. 773, 792, 95 S. Ct. 2004, 2015, 44 L. Ed. 2d 572 (1975). See In re Logan, 70 N.J. 222, 229-30 (1976).

C. The Right to Jury Trial

Petitioner and the Association maintain that R. 1:20A unconstitutionally denies attorneys the right to trial by jury guaranteed by N.J.Const. (1947), Art. I, par. 9.*fn7 We disagree, on the two grounds that in New Jersey attorneys never had an absolute right to trial by jury in fee dispute cases and that recognizing a jury ...


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