On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-7063-98.
Before Judges Skillman, Carchman and Wells.
The opinion of the court was delivered by: Wells, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
The law firm of Levine and Wallerstein (Wallerstein), attorneys for plaintiff Della Straubinger, appeals from a judgment of the Law Division, Hudson County, which awarded it one-third of a contingent fee generated by a personal injury recovery secured by Straubinger and two-thirds to the law firm of Doyle and Brady (Brady) who formerly represented Straubinger. Brady cross appeals, asserting that the trial judge erred by failing to follow established criteria for the award to Wallerstein.
The underlying facts of the dispute are not materially contested. On March 10, 1998, plaintiffs Della Straubinger and Barbara Gregoire were injured in a two-car accident with defendant Margaret Krell Schmitt. Straubinger and Gregoire were the driver and passenger, respectively, of one car while Schmitt was the operator of the other car. Apparently, Schmitt was intoxicated and turned left in front of Straubinger causing the accident.
Straubinger and Gregoire both retained Brady to represent them in pursuing a claim against Schmitt. Straubinger retained the firm first, while Gregoire followed shortly thereafter. Straubinger signed a contingent fee agreement on March 17, 1998. In September 1998, Brady filed a complaint on behalf of both Straubinger and Gregoire in Superior Court, Hudson County, naming as defendants Margaret Krell Schmitt as driver and Charles Schmitt as owner of the car which collided with Straubinger. On July 22, 1999, the case proceeded to arbitration, resulting in awards of $175,000 for Straubinger and $125,000 for Gregoire. The arbitrator determined that Schmitt was 100 percent liable. A trial de novo notice was promptly filed by Straubinger and Gregoire.
Dissatisfied with Brady's services, on January 4, 2000, Straubinger discharged the firm and retained Wallerstein to handle her case. Straubinger certified that she felt she was not being given proper representation. More specifically, she was upset by the fact that the arbitration occurred before her August 1999 neck surgery; she felt unprepared for both the arbitration hearing and her deposition; she claimed that Brady did not keep her informed of the status of her case; and, her telephone calls were not returned. At a settlement conference on June 13, 2000, in front of Judge Gallipoli, Straubinger, now represented by Wallerstein, settled for $196,342.15 while Gregoire, still represented by Brady, received $98,000. A fee dispute arose between the two law firms. On July 26, 2000, Judge Gallipoli entered a consent order with regard to the lien for counsel fees. He ordered that $68,225.99 of the settlement proceeds which constituted the contingent fee and litigation costs attributable to Straubinger's recovery be placed in escrow pending further order of the court. The order also set a date for a plenary hearing before another judge.
After hearing on August 28, 2000, the judge rendered his decision by letter opinion on September 21, 2000. The judge awarded two-thirds of the counsel fees to Brady and one-third to Wallerstein. Wallerstein filed its Notice of Appeal of that decision on October 11, 2000. Brady timely cross-appealed.
During the course of the hearing on August 28, 2000, Brady testified that he had discussed with Gregoire a potential conflict of interest in representing both her and Straubinger, as passenger and driver of the vehicle. Gregoire told him that she did not wish to sue her friend Straubinger. The evidence showed that Schmitt was intoxicated, and the question of liability was very clear to Brady. However, Brady never discussed the issue of any conflicts with Straubinger. There was also no discussion with either client of the potential for conflict arising out of the fact that their combined injury claims could exceed the single accident limit of $300,000 provided by Schmitt's automobile insurance policy. No conflict waiver forms were signed.
The judge found the conflicts of interest were "inconsequential," and applied the factors for allocating a contingent fee between two law firms discussed in LaMantia v. Durst, 234 N.J. Super. 534 (App. Div.), cert. denied, 118 N.J. 181 (1989). The judge concluded Brady had done the bulk of the work on the case and thus awarded Brady two-thirds of the Straubinger fee and Wallerstein one-third.
We agree in part and disagree in part with the judge's ruling and remand for a further hearing. It is fairly well established that an attorney's violation of the Rules of Professional Conduct (RPC) in connection with the representation of a client may jeopardize that attorney's right to collect fees for services rendered. In Cohen v. Radio-Electronics Officers Union, 146 N.J. 140, 155-56 (1996), the Supreme Court stated:
[A]n attorney's freedom to contract with a client is subject to the constraints of ethical considerations and [the Supreme Court's] supervision....
Agreements between attorneys and clients concerning the client-lawyer relationship generally are enforceable, provided that the agreements satisfy both the general requirements for contracts and the special requirements of professional ethics. An otherwise enforceable agreement between an attorney and client would be invalid ...