February 6, 1990
PAULINE P. SALERNO, PLAINTIFF,
FELIX G. SALERNO, DEFENDANT
[241 NJSuper Page 538]
Plaintiff-wife seeks payment by defendant-husband of her counsel fees in this dissolution action. This is a supplement to the letter opinion of this court dated January 26, 1990, wherein the court rendered a decision as to defendant's responsibility for counsel fees. The only remaining issue, which this court addresses sua sponte, is whether plaintiff's counsel is entitled to be paid any portion of a "premium" billing of $30,250, which is in addition to a fee of $47,206 charged by plaintiff's counsel based on the hourly rate set forth in the retainer agreement. The additional $30,250 "premium" has been billed to plaintiff for the same services for which an hourly rate was charged. Thus, the total charge for services by plaintiff's counsel is $77,456.
This court finds that the premium sought by plaintiff's counsel is not a permissible charge to either plaintiff or defendant under the facts of this case. While plaintiff's fee agreement states counsel's final bill will be based on not only the hourly rate, but "(b) the result accomplished; (c) the amount in controversy; and (d) our experience and ability . . .," this court finds the retainer agreement as drafted does not comply with the New Jersey rules of court. (See entire agreement in appendix.) R. 1:21-7A requires retainer agreements in family actions and was adopted in 1982 "in response to increasing lawyer-client problems concerning fees in matrimonial litigation." Pressler, Current N.J. Court Rules, Comment R. 1:21-7A (1990). There are 12 elements which should be considered by counsel in drafting a fee agreement; and the fifth element, "Method of computing fee," is stated as follows:
This may be general or specific depending upon the nature of the matter and the agreement between the lawyer and client. If any charges are to be based on time, the hourly rate of the attorneys should be set forth. If charges are to be based on other factors, those factors should be stated. [ Ibid. ]
There does not appear to be any prohibition against an attorney charging an hourly rate for a service and also making an additional charge for that same service "based on other
[241 NJSuper Page 539]
factors." However, plaintiff's attorney's $200-an-hour rate should reflect item (d) in her fee agreement, her "experience and ability." Her factors (b) and (c), "the amount in controversy" and "the result accomplished," are not factors which alert a client to what to expect by way of an attorney bill for services. To compare the amount in controversy with the result accomplished (i.e., the client received equitable distribution of what percentage of total marital assets) and charge based on a percentage of the equitable distribution to the client clearly has the aspects of a contingent fee.
RPC 1.5(d)(1) states:
(d) A lawyer shall not enter into an arrangement for, charge, or collect:
(1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof. . . . [Emphasis supplied]
There is no stated prohibition against contingent fees in equitable distribution matters. This court reads the phrase "or property settlement in lieu thereof" to relate back to alimony or support. Thus, while plaintiff's attorney is not prohibited from entering into a contingent fee agreement on the equitable distribution aspect of this controversy, the agreement must satisfy RPC 1.5(c), which states:
A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by law or by these rules. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.
The retainer agreement is deficient in that it does not state that the premium billing (i.e., contingent fee) will apply only to the attorney's representation on equitable distribution. It is also deficient in that counsel failed to state the exact formula to be applied to the "amount in controversy" and "the result accomplished" (i.e., the exact percentage) in the fee agreement.
[241 NJSuper Page 540]
The lack of an exact percentage creates a guessing game for the client. The court rule and rules of professional conduct were intended to prevent uncertainty about fees and the surprise bill at the end of litigation, which historically led to many fee disagreements. To permit the "premium" billing as requested herein is, as to that portion of the bill, to return to the uncertainty of the pre-fee agreement days.
Since this court finds the instant retainer agreement on premium billing to be in violation of R. 1:21-7A and RPC 1.5(c) and (d)(1), not only is plaintiff's request that defendant pay a portion of this bill denied, plaintiff's attorney is directed to remove the premium charges from plaintiff's bill.
[241 NJSuper Page 541]
You have asked our firm to act as your attorneys. This letter sets forth the agreement concerning our representation of you. This agreement shall become effective upon our receipt of a countersigned copy of this letter and the retainer fee.
1. You hereby agree to pay our firm a non-refundable minimum retainer fee of $2500. The minimum fee will be credited against the legal services and court costs and disbursements in your matter as they accrue. If the services rendered by me are completed in less than hours, I will retain the full retainer as a minimum fee.
2. The final billing is based on four factors: (1) the basic hourly rate of $200 for partner's time, $125.00 for senior associate's time, and $100.00 per hour for associates' time, and $50.00 for paralegal's time, plus travel expenses to court; (b) the result accomplished; (c) the amount in controversy; and (d) our experience and ability, all of which will be taken into consideration when the final bill is issued and none of which is solely determinative of the fee. It is impossible to determine in advance the amount of time that will be needed to complete your case. We will keep you informed of time used for conferences, telephone calls, drafting documents, research, court time and necessary travel time. You will not be billed for clerical or secretarial time.
3. We will bill you periodically on a time-expended basis for the accrued legal fee and disbursements, reserving the right to bill you an additional amount at the termination of your case based on the factors discussed in Paragraph 2. We reserve the right to terminate our attorney-client relationship for non-payment of fees or costs. All bills which are submitted are payable and due when rendered.
[241 NJSuper Page 542]
4. "Disbursements" include our out-of-pocket expenses, such as court filing fees, sheriff's fees, transcripts, appraisers, accountants charges, photocopying costs and long-distance telephone calls. Costs will also be itemized and billed on a monthly basis.
5. Fees and costs may be awarded from the marital property either before or after its division. Because fee and costs awards are totally unpredictable, you are primarily liable for payment of the total fee. Of course, amounts received from your spouse pursuant to court order will be credited to your account. This firm shall be under no obligation to sue for, or execute upon, any judgment for counsel fees. If you ask us to proceed with the collection of such fees so that you may obtain a refund, there will be an additional fee for such services based on our hourly rate.
6. If you discontinue this case before completion, this firm shall only be entitled to such sums earned under the above hourly rate plus all disbursements up to that date, provided you notify us in writing to discontinue all future representation.
7. The retainer does not cover any services rendered after the date of the divorce. In the event it is necessary for us to prepare documents, attend real estate closings or implement the Judgment of Divorce or Property Settlement Agreement, you will be billed at the above hourly rate for such services, or at our prevailing rate for such services.
8. We shall keep you well informed as to the progress of your case. We shall send you copies of all papers coming in and going out of our offices, including correspondence, pleadings and other court documents. If no one is available when you telephone, your call shall be returned as promptly as possible. The file and its progress are open to your inspection at any reasonable time.
9. Please countersign this agreement and return it to us in the enclosed envelope together with the retainer fee so that we will have a mutual memorandum of our understanding.
Very truly yours,
PELLETTIERI, RABSTEIN & ALTMAN