This is a contested application under R. 1:21-7(f) for approval of an attorney's fee in excess of the contingent fee provided for in a retainer agreement or allowable under R. 1:21-7(c). Several questions of first impression arise out of this case involving a unique blend of litigation and settlement.
Niveen Iskander, born September 6, 1966, was badly burned in an accident on her ninth birthday while her father and uncle were working with adhesive cement in remodeling the kitchen of her home. She sued them alleging negligence, and also sued the manufacturer and retailer of the product alleging strict liability in tort. All defendants cross-claimed for indemnification and contribution. After 18 days of a jury trial, the case was settled just before summations and charge for $825,000 plus the interest on $300,000 deposited with the court on March 31,
1981 and subsequently placed in certificates of deposit that were periodically rolled over and will provide an additional total yield of $88,000 by November 3, 1983. The application is for a $180,000 counsel fee; plaintiffs and independent counsel object to any increased allowance over ". . . $99,467 representing the minimum amount on the retainer agreement . . ." (consent order filed August 5, 1983 permitting partial payment subject to final court determination as to fees).
A standard contingent fee form was executed November 10, 1975 that followed R. 1:21-7, except that the 50% and 40% provisions of R. 1:21-7(c)(1) and (2) were not utilized and the agreement as to the first $50,000 of net recovery was 33 1/3% or 25% if "settled without trial." The latter limitation is in accordance with the rule provision applicable to infants or incompetents. The provisions for 20% on the next $50,000 and 10% on recovery over $100,000 were the same as the then limitations of R. 1:21-7(c) -- which were increased by rule amendment effective November 1, 1976.
The fee agreement also contained provisions according with R. 1:21-7(b) and (f) and a letter of transmittal of the agreement repeated the clients' right to retain counsel on a non-contingent basis and set forth hourly rates and the requirement of a cash retainer. Nawal Iskander, the mother and guardian ad litem of Niveen Iskander testified, however, that no one explained the R. 1:21-7(f) reservation paragraph of the fee agreement. She admitted, though, that during the trial and settlement negotiations she was aware that the increased fee application would be made. Niveen Iskander, now 17, testified she had nothing to do with the fee agreement and had no thoughts as to a reasonable counsel fee.
Under all the circumstances, I am satisfied that the case was settled on a basis that permits court consideration of the increased fee application on the merits, and that neither the infant plaintiff nor her mother were induced to settle without
realizing that application would be made for an overall fee of about 20% of the total recovery. The polestar in an R. 1:21-7(f) application is the clear language requiring the assignment judge to determine "a reasonable fee in light of all the circumstances." R. 1:21-7(e) also requires contingent fees to conform to DR 2-106(A) that sets forth factors to be considered as guides in determining a "reasonable fee." The position of the guardian ad litem, although not controlling, is entitled to consideration, Murphy v. Mooresville Mills, 132 N.J. Super. 197, 200 (App.Div.1975), but it is virtually impossible for lay persons to make informed judgments as to the reasonableness of attorneys' contingent fees, Landgraf v. Glasser, 186 N.J. Super. 381, 385 (Law Div.1982). They simply do not have the experience required to make what really amounts to a comparative evaluation of the factors involved in a particular case against the presumed reasonableness of the percentages set forth in R. 1:21-7. Amer. Trial Lawyers Assoc. v. N.J. Supreme Ct., 126 N.J. Super. 577 (App.Div.1974), aff'd 66 N.J. 258 (1974).
R. 1:21-7(d) lists the deductions which must be made from the aggregate sum of the recovery to determine the "net sum recovered" for fee purposes. The percentage limitations of R. 1:21-7(c) are then applied to the net sum recovered to ascertain the permissible fee unless an increase is approved pursuant to R. 1:21-7(f). As already noted, the aggregate recovery is $913,000 which includes $88,000 of "interest." There is no dispute about the amount of the deductions for disbursements which total $21,736.58. The only question in ascertaining the net recovery for fee calculation purposes is whether the $88,000 of interest is to be included as part of the base. The net recovery will be $891,236.42 ($913,000 less $21,763.58) or $803,236.42 ($825,000 less $21,763.58).
Under the circumstances of this case, the $88,000 may be termed "presettlement interest." The court rules do not specifically cover such interest and no reported opinion addresses the
subject either. Prejudgment interest must be excluded from the base by virtue of R. 1:21-7(d) and R. 4:42-11(b). The court rules do not cover postjudgment interest although Judge Pressler in her comment on R. 1:21-7(d) states:
It should also be pointed out that the calculation is required to be made without regard to postjudgment interest or the prejudgment interest added to the judgment in tort actions by virtue of R. 4:42-11(a) and (b).*fn1
No reported appellate opinion has considered the question of whether contingent counsel fees may be allowed on postjudgment interest, but a strong argument can be made that they should. R. 1:21-7(d) includes a provision which states:
The permissible fee shall include legal services rendered on any appeal or review proceeding or on any retrial, but this shall not be deemed to require an attorney to take an appeal.
The law favors settlement of controversies and our court rules support this goal of our judicial system.*fn2 Our contingent fee rules are designed to try to obtain the maximum aggregate marginal benefit for both clients and attorneys. Merendino v. FMC Corp., 181 N.J. Super. 503 (Law Div.1981). Participation of both the attorney and his client in any postjudgment interest will facilitate settlements and aggregate marginal benefits in cases involving appeals. See also Daly v. Great Atlantic & Pacific Tea Co., Inc., 191 N.J. Super. 622 (Law Div.1983); Pettiford v. Eskwitt, 189 N.J. Super. 485 (Law Div.1983). Although R. 1:21-7(d) precludes any increase in the R. 1:21-7(c) percentages because of appeal or retrial, the sharing of postjudgment interest will provide at least some additional ...