This past term our Supreme Court gave us five important decisions in what has become recognized as a relatively new substantive area of law called “the law governing lawyers.” This new area of law is roughly subdivided into four areas: lawyer malpractice, legal ethics, attorney fees and attorney advertising. The five decisions from the court this past term provide abundant food for thought as they impact the practice of law in each of these sub-areas.
• Post-Settlement Liability
In Gere v. Louis, 209 N.J. 486 (2012), the New Jersey Supreme Court again revisited the ground laid in Puder v. Buechel,??183??N.J.??428 (2005), and its progeny, addressing the interrelationship between divorce-related settlements and a client’s ability to maintain a malpractice suit against the divorce attorney subsequent to entering into a settlement agreement. In its holding, the court determined that the former client, despite a statement on the record attesting to the fact that the settlement agreement was “fair” and “reasonable,” was not precluded from pursuing a malpractice action against her prior counsel where the complained-of conduct related to the management of the case following the achievement of a settlement agreement. The court also made determinations as to the timeliness of the plaintiff’s filing and statute of limitations as a defense, finding that the plaintiff’s claim was not time barred as the result of equitable tolling.
Gere dealt with divorce proceedings involving substantial assets held by plaintiff Julia Gere and her former husband, Peter Ricker. Gere was represented by defendant Frank Louis, who worked toward obtaining a property settlement agreement on her behalf, one which addressed the couple’s multiple holdings amassed over the course of a marriage of more than 30 years.
The marital assets included real estate holdings and business interests. Gere was faced with decisions as to which of these property interests she wished to maintain after the divorce was finalized. Those decisions were deferred until after execution of their property settlement agreement. The agreement had a provision which allowed Gere a period of six months within which to review financial records. As a triggering mechanism, the plaintiff had the option to waive any of her interests in these marital assets and receive an indemnification obligation from Ricker if she exercised that option in writing. If no affirmative writing was sent, Gere would then retain a one-half interest in all of her former husband’s “ancillary real estate investments.”
One such investment pertained to land owned by Navesink Partners. That asset included three tracts of land where there was an office building, a boat-repair shop, a parking area and two active marinas. Navesink owned and operated the business operations of the marina.
Ricker wrote to Louis toward the end of the six-month period and inquired as to Gere’s disposition relative to Navesink and its operations. Louis placed a call to Gere, but reached a friend, who Louis knew personally and believed spoke on behalf of Gere. The message Louis took from that conversation was that Gere was opting to keep her interest in the Navesink real estate but not the business operations of the marina.
Acting on that perceived instruction, Gere wrote to Ricker’s attorney to confirm that his client, Gere, was interested in maintaining all the Navesink real estate, but not the business operations of the marina. Gere would later testify as to being wholly unaware that this position had been taken on her behalf, and that it did not accurately express her intentions.
Approximately 14 months after Louis sent this letter, he again wrote to Ricker’s attorney about open issues, including the marina. In this letter, Louis expressed that Gere??wanted to terminate her business relationship with her former husband concerning the other assets and needed to establish a methodology for her equitable interest or have them sold. In response, Ricker took the position that plaintiff had relinquished her rights to the marina.
This, in part, led to post-judgment litigation in which Ricker maintained that the plaintiff had waived any interest in Navesink, while Gere contended that she had only intended to separate herself from the business operations and its financial risk, but not waive the value of her one-half interest. This caused Louis towithdraw as counsel due to the previous position he had taken on her behalf. He was succeeded by defendant John DeBartolo.
The parties were given time to conduct discovery on the key issues (though not much was undertaken) and dispositive motions were filed. The cross-motions were denied in 2003, with the court determining that a plenary hearing was necessary. That hearing, however, did not commence until 2006. By that time, attorney Carl Soranno was representing Gere.
The plenary hearing took eight days, though they were not consecutive. The hearing commenced in April 2006, but it had not concluded by October 2006, which was significant insofar as Oct. 11, 2006, represented the six-year anniversary of the initial letter sent by Louis which had touched off the controversy about the marina.
Soranno, concerned about expiration of the six-year statute of limitations for a potential legal malpractice claim, requested that Louis enter into a tolling agreement, and he complied. A second tolling agreement was later required, but was unsigned. Later, the trial court ruled that tolling was equitably extended to May 11, 2007.
The parties settled their dispute prior to the trial court’s ruling. Gere accepted a 50 percent ownership interests in the real estate, and a 40 percent interest in the marina’s business operations. Her decision to settle was expressly based upon the risk that the trial court would find that she had waived her interest entirely and walk away with nothing vis-a-vis the business operations.
The settlement was placed on the record and a release prepared. She stated on the record that it was a fair and reasonable resolution, but that it was also borne out of an aversion to the risk posed if the court were to rule. In connection with the settlement, Gere also expressly reserved her right to pursue third parties, including her former attorneys, with a claim sounding in legal malpractice.
In November 2007, Gere filed a malpractice action against her former attorneys, Louis and DeBartolo, claiming that she received less after resolution of the plenary hearing than she would have received if the operation of the marina had never come into dispute. The defendants moved for summary judgment on two grounds — statute of limitations and claim preclusion on the basis of Puder. The trial court granted the defendants’ motions, ruling that Puder’s preclusive effect barred the claim, and that the statute of limitations as to Louis had been exceeded given that the date of equitable tolling was in May 2007.
The Appellate Division affirmed in an unpublished decision. The Supreme Court granted certification, limited to the issue of whether??Puder??barred the plaintiff’s malpractice claim against DeBartolo. The court also granted amicus curiae status to the New Jersey State Bar Association.
Relative to preclusion under Puder, DeBartolo argued that Gere had made a reasoned decision to mitigate her losses, and should not be precluded from pursuing Louis, her former counsel, in legal malpractice. Louis argued that consistent with Puder, a plaintiff’s testimony as to the fair and reasonable nature of the underlying settlement, coupled with certain testimony indicating that the plaintiff sought to keep only the real estate portion of the asset, required dismissal, particularly insofar as she was in a better position than she would have been had she made the decision to keep only the real estate and eschew the marina business. DeBartolo concurred with the argument that the decision was strategic and Puder applied. Not surprisingly, amicus favored application of Puder to bar the claim of a client against her former lawyer.
The court determined that Puder did not serve to bar Gere’s claim and reversed. The court drew a distinction between the two cases, noting that in Puder, the plaintiff entered into a settlement which, per her own admission, placed her in a position she would have occupied before the alleged malpractice, deeming that settlement “fair” and “reasonable,” in reality curing any ills which arose from the alleged malpractice. In Gere, however, the negligence attributed to defendant Louis did not concern the propriety of an initial agreed-to property settlement agreement; it revolved around the attorney’s actions subsequent to execution of the property settlement agreement, actions which “jeopardized her rights under the original property settlement agreement.” While the settlement in the midst of the plenary hearing resulted in a 40 percent share in the business operations, she not only had a damages claim for the 10 percent that was forfeited, but the value of several years of business participation which had passed during the pendency of the litigation, and which position had been compromised due to the alleged inattention of her prior counsel.
Gere thus reinforces the principle, also found in Guido v. Duane Morris, 202 N.J. 79 (2010), that Puder does not, by any means, stand as an absolute bar to malpractice claims that follow divorce settlement agreements. Equitable exceptions exist which allow for malpractice suits to follow, and, as exemplified in Gere,can be predicated on conduct that postdates execution of a settlement agreement and adversely affects the litigant’s interests. Also of interest: there is no language in Gere that limits its rationale, holdings or their effect to the assertion of legal malpractice claims against matrimonial lawyers alone. Presumably, the duties of the lawyer in settlement and post-settlement representation of clients in other practice areas are no different, and the correlative rights of clients against allegedly negligent lawyers in these areas remain intact.
• Criminal Defense Lawyer Liability
In Rogers v. Cape May County Office of the Public Defender, 208 N.J.414 (2011), the New Jersey Supreme Court addressed the issue of a criminal defendant’s rights to pursue a defense attorney for legal malpractice upon “exoneration” following a criminal conviction, building upon the framework set forth in its seminal decision on the issue, McKnight v. Office of the Public Defender, 197 N.J. 180 (2008). McKnight, and now Rogers, addresses the parameters of what constitutes a timely action for legal malpractice in the criminal setting, with discussion and rulings that concern: the measure of “exoneration” necessary in order for a (former) criminal defendant to bring a viable malpractice action against his or her defense counsel; the calculus to be applied to the date of accrual; and the interplay between these principles and the Tort Claims Act, N.J.S.A.??59:1-1 et seq.
By way of background, the criminal defendant turned civil plaintiff in McKnight had pled guilty to a third-degree aggravated assault upon advice of counsel. Following his guilty plea, McKnight learned that the plea and resulting conviction had an adverse impact on his immigration status, as it rendered him deportable. Upon learning this, McKnight tried, without success, to withdraw his guilty plea before the trial court. That decision was affirmed on appeal, subsequent to which McKnight sought postconviction relief (PCR), claiming ineffective assistance of counsel. The PCR application was granted, and McKnight was afforded the opportunity to plead to a lesser offense which did not affect his immigration status.
McKnight subsequently filed a notice of claim under the Tort Claims Act, which was dismissed as untimely. The trial judge ruled that the claim had accrued at the time McKnight learned of the effect his plea would have on his immigration status, and that the filing of the notice of claim three years later, after the PCR was granted, was belated. The decision was affirmed on appeal by a majority, which found that at the latest, the cause of action accrued with the defendant’s unsuccessful attempt to withdraw his guilty plea, with Judge Stern dissenting.
Judge Stern opined that in a criminal case, a malpractice claim does not accrue until a defendant is “exonerated.” Judge Stern’s dissenting opinion expressed that while exoneration does not require a determination of “actual innocence,” the grant of PCR is insufficient. Discussing the range of possibilities, Judge Stern wrote that exoneration might be “vacation of a guilty plea and dismissal of the charges, entry of judgment on a lesser offense after spending substantial time in custody following conviction for a greater offense,” “dismissal of the charges, acquittal on retrial,” “or any disposition more beneficial to the criminal defendant than the original judgment.” On certification, Judge Stern’s opinion was adopted by the Supreme Court.
In Rogers, the defendant was indicted on nine CDR counts, and was represented by counsel from the Cape May CountyOffice of the Public Defender (OPD). At trial, in an effort to demonstrate that the arresting officer could not distinguish Rogers from his brother, the public defender crafted a plan by which Rogers would switch places with his brother, sitting in the back of the courtroom while his brother sat at counsel table, hoping that the arresting officer would misidentify the defendant. The state learned of the plan, and it was aborted by the defense. However, the jury learned of the scheme when the state cross-examined??Rogers, thereby damaging his credibility. Rogers was convicted??on seven counts, and on July 30, 1999, was sentenced to a custodial term of 14 years. The Appellate Division affirmed the conviction and certification was denied.
In 2002, Rogers filed a PCR petition, and in 2005 an amended petition was filed alleging ineffective assistance of counsel. The trial judge denied the petition, but on Oct. 23, 2007, the Appellate Division reversed and remanded for a new trial on the basis that the public defender’s “conduct in devising the defendant-substitution plan” amounted to deficient performance, which denied Rogers a fair trial. On July 25, 2008, the trial judge dismissed the indictment against Rogers, with prejudice.
On Sept. 11, 2008,??Rogers retained counsel to pursue a civil claim for legal malpractice against his former attorney and the Cape May County OPD. His new counsel immediately requested the PCR file, which he needed to review before filing a notice of tort claim. When he did not receive the file by Nov. 3, 2008, counsel sent a notice of tort claim to the OPD. Eight months later, on July 14, 2009, the attorney filed a motion for leave to file a late notice of tort claim, which was denied. The trial judge determined that Rogers’ claim accrued on Oct. 23, 2007, when the Appellate Division reversed his conviction and remanded the case for trial. Because Rogers’ notice of tort claim was filed more than one year later, the trial court ruled that it “lacked jurisdiction to provide the relief that is requested.”??
The Appellate Division affirmed, finding that late notice must be filed within one year after accrual of a claim under??N.J.S.A.??59:8-9. Citing McKnight’s “exoneration” standard for accrual, the Appellate panel held that Rogers??was exonerated on Oct. 23, 2007, with its reversal and remand, and that the notice had to be filed within 90 days thereof. Because the filing was not timely made, and because Rogers??offered no fair “explanation of extraordinary circumstances” for his late filing, the trial court’s ruling was affirmed, with the added determination that Rogers’ claim was filed more than one year from accrual and thus was time-barred under the Tort Claims Act as he was precluded from filing a late notice of claim.
The Supreme Court reversed. After reviewing the strictures of the Tort Claims Act as well as the McKnight decision, the court turned to its application of the facts in Rogers to both the 90-day and one-year statutory requirements of the Tort Claims Act. The specific issue reviewed by the court was whether Rogers’ cause of action accrued with the Appellate Division’s Oct. 23, 2007, reversal and granting of PCR, or whether it accrued with the dismissal of charges on July 25, 2008.
Citing language from its decision in McKnight, the court delineated the difference between PCR and exoneration, the former being a temporary status not necessarily freeing the criminal defendant from future prosecution and penalty, the latter representing a circumstance where the defendant has achieved a measure of permanent relief in the manner outlined by Judge Stern. Applying this model to the facts in Rogers, the court determined that his cause of action sounding in legal malpractice did not accrue until Rogers obtained his dismissal of the charges pertaining to CDR in favor or the lesser charges on July 25, 2008. With that disposition, he had achieved the level of permanence which Judge Stern envisioned in McKnight, that disposition giving rise to a cause of action sounding in malpractice.
Having thus determined the date of accrual, the court then addressed the interplay between accrual of the cause of action and compliance with the Tort Claims Act. Measured from July 25, 2008, his notice of claim filed in November was 10 days late, though he was still well within the one year allotted for filing a motion on late notice of claim and could theoretically pursue his action upon a showing of “extraordinary circumstances” and the absence of prejudice against the municipal defendants pursuant to N.J.S.A.??59:8-8 and -9. With that window of opportunity potentially available to Rogers, the Supreme Court remanded for a determination by the trial court as to whether, under the circumstances, Rogers could display “extraordinary circumstances” and an absence of prejudice to the defendants.
Rogers is thus notable for the manner in which it built on McKnight, pinpointing the circumstances under which a claim in legal malpractice accrues for an aggrieved criminal defendant who achieves the requisite level of exoneration, and delineating how the Tort Claims Act, and compliance with its filing requirements, might come into play once the cause of action has accrued. Rogers is also significant because it seems to set New Jersey apart from most other jurisdictions, including New York, regarding the extent of “exoneration” that a criminal defendant-turned-plaintiff must show in a legal malpractice action against his former criminal defense attorney. In other states, the criminal defendant must prove his actual innocence of the underlying criminal charge. In New Jersey, by our Supreme Court’s adoption of Judge Stern’s approach in McKnight, there may well be a somewhat lesser burden.
Legal Ethics: The Enduring Fiduciary Duty
Twenty-First Century Rail Corp. v. N.J. Transit Corp., 210 N.J. 264 (2012), involved a law firm that undertook to represent a client in a construction project, even though it had represented an adverse party in the same matter. The facts, somewhat complex, can be summed up this way: Bruce Meller and his firm Peckar & Abramson (Peckar) were retained in 2004 by a joint venture responsible for constructing certain infrastructure at one portion of a larger project to construct a Hudson-Bergen Light Rail Transit System. The joint venture, Frontier-Kemper/Shea/Bemo (FKSB), asked Peckar to provide legal advice in connection with its rights and obligations resulting from certain construction delays. Part of Peckar’s representation involved guidance on FKSB’s attribution of responsibility for the various delays to others, including Washington Group, the contracting affiliate of the primary contractor for the now-disputed and delayed portion of the light rail project.
In a letter dated March 24, 2004, Peckar provided FKSB with an opinion letter addressing the risks faced by FKSB and whether Washington could legally lay all the blame for the construction delays at the feet of FKSB. Thus, the court explained, “FKSB necessarily revealed to the lawyers both the claims that [Washington] was raising about the causes of the delays and FKSB’s contrary view about which party or parties were responsible for those delays.” The letter also discussed certain design and constructability issues on the project, including references to work performed by the project engineer, PB Americas. FKSB was billed $5,360.08 for legal services rendered by Peckar in meeting with the client and preparing the letter of March 24, 2004.
About a year later, Meller was contacted by an attorney at the Akin, Gump, Strauss, Hauer & Feld law firm. The two attorneys knew each other from a prior, unrelated litigation. The Akin, Gump attorney asked Meller’s impressions of Washington because FKSB was considering whether it should enter into a liquidating agreement with that entity. Meller advised that he was no longer on good terms with Washington, and he advised the Akin, Gump attorney against dealing with the entity. The two attorneys then differ on what happened next, with Meller claiming he was told that Akin, Gump was representing FKSB, while the Akin, Gump attorney claimed he never mentioned such representation. Not in dispute is the fact that “Meller was at all times aware that he and his law firm had a prior attorney-client relationship with FKSB. There is also no doubt that Meller and his law firm were aware that FKSB was a target of [Washington]‘s ire over project delays in 2004.”
Litigation ensued in which Twenty-First Century Rail Corp. — the prime contractor for the relevant portion of the light rail project — alleged that PB Americas was responsible for the construction delays due to grossly defective product designs and slow responses to requests for corrections needed to move forward on the project. Peckar was retained to represent PB Americas. FKSB moved to disqualify Peckar under RPC 1.9.
RPC 1.9 governs the requirements for attorneys that engage in successive representation of different clients in the same or substantially related matters. The RPC provides that an attorney who has represented a client in a matter may not represent another client in the same or a substantially related matter “in which that client’s interests are materially adverse to the interests of the former client unless the former client gives informed consent confirmed in writing.” RPC 1.9(a). Considering the disqualification motion, the Appellate Division relied on City of Atlantic City v. Trupos, 201 N.J. 447 (2010), which outlined a framework for determining when successive matters are “substantially related” within the meaning of RPC 1.9(a). The two-part Trupos framework provides that RPC 1.9(a)’s prohibition is triggered when there is a convergence of two factors: the matters between the clients are the same or substantially similar, and the interests of the present and former clients are materially adverse. Matters will be substantially related if: (1) the lawyer for whom disqualification is sought received confidential information from the former client that can be used against the current client; or (2) facts relevant to the prior representation are both relevant and material to the subsequent representation.
Based on this framework, the Appellate Division denied the disqualification motion because it held that the documents forming the basis of the March 24, 2004, letter were publicly available and no confidential information was contained within the letter itself. Because Peckar’s representation of FKSB was limited and not substantially related to the litigation, the Appellate Division determined that Peckar need not be disqualified.
• Lack of Written Consent Proves Fatal to the Representation
Balancing the important right of a party to choose its own counsel against the need to maintain the highest standards of professional conduct, the court considered the disqualification question de novo. Looking to the plain language of RPC 1.9(a), the court explained that if an attorney proposes to represent a client in the same matter in which he or she previously represented another party, the written consent of the former client is required. Without written consent, as a threshold matter, representation of an adverse client in the same matter is precluded. Thus, the court did not even need to arrive at the Trupos analysis to conclude that the two matters were, in fact, the same because “[b]oth matters involve the same discrete phase of the overall project, the same contracts, the same parties and, based upon our evaluation of the documents that the parties have provided concerning the matters on which FKSB consulted the lawyers in the first instance, the same dispute.” Moreover, in the letter of March 24, 2004, Peckar discussed certain issues relating to design and construction, which, the court noted, “make plain that counsel was aware of and considered the adverse positions of FKSB, the lawyer’s now-former client, and PB Americas, the subsequent and current client.” By failing to reach out to FKSB as the former client to obtain written — or even oral — consent to the representation of PB Americas, Peckar ran afoul of RPC 1.9(a). The court reversed the Appellate Division and remanded to the trial court.
The significance of Twenty First Century is that it speaks about the fiduciary duty, perhaps the only duty to the client that continues even after the attorney-client relationship has ended. When it comes to conflicts of interest — the essence of the fiduciary duty — we can no longer rely on the way we used to get waivers of conflicts. There was a time when the Rules of Professional Conduct did not require us to secure waivers of conflicts in writing. And although the rules have changed as of 2004, many lawyers still persist in doing things the old fashioned way. In the case of the Twenty First Century — at least since 2004, conflicts waivers, when they are permissible, must be in writing.
Moreover, there must be consultation with the client about the ramifications of the waiver. Sometimes, we must even urge our clients, both current and former, to seek the advice of independent counsel before they consent to waive their former lawyer’s conflict. And even if there is a knowing and voluntary waiver, the lawyer is duty bound to keep all information secured during the course of the prior client’s representation confidential and, moreover, may not use that information to benefit the new client or damage the prior client. So, the Twenty First Century case brings us a stark lesson in how things must be done when it comes to protecting the interests of our former clients, lest we suffer the ethical, let alone financial, consequence of being disqualified from what might otherwise be potentially lucrative new matters.
Attorney Fees: Fee Shifting
In Walker v. Guiffre, 209 N.J. 124 (2012), the Supreme Court of New Jersey declined to follow the explicit holding of the U.S. Supreme Court which does not permit contingency enhancements under statutes that allow for fee-shifting to a prevailing plaintiff. In a break with custom, Justice Hoens began the court’s analysis not with a factual or procedural recitation, but with a detailed background of how our court arrived at its pivotal 1995 decision of Rendine v. Pantzer, 141 N.J. 292 (1995). Rendine, she explained, allowed — in certain circumstances — a “contingency enhancement” by which an award in excess of the lodestar (calculated by multiplying the reasonable number of hours spent on the matter by the attorney’s reasonable hourly rate) would be increased to “reflect the actual risk that the attorney would not receive payment if the suit did not succeed.” Walker, 209 N.J. at 133.
By way of background, the Rendine decision itself came on the heels of years of federal jurisprudence about fee-shifting and how to calculate an appropriate attorney fee when the statute giving rise to the plaintiff’s claims authorizes such a break from the traditional “American rule” where each party bears its own costs and counsel fees incurred during litigation. Fee-shifting first was authorized with little explanation in the Civil Rights Act of 1976, 42 U.S.C.A. § 1988(b). When enacting the act, Congress relied on the U.S. Court of Appeals for the Fifth Circuit in Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974), which had enumerated 12 factors to consider when awarding counsel fees, including whether the fee was fixed or contingent.
Johnson gave way to the Supreme Court’s decision in Hensley v. Eckerhart, 461 U.S. 424 (1983), which adopted the lodestar approach. Hensley also allowed for enhancing the lodestar calculation with some (but not all) of the Johnson factors; only some could be used because, the court explained, some Johnson factors already were subsumed within the lodestar calculation. This, in turn, led to the Supreme Court splitting 4-1-4 on whether a contingency enhancement specifically would be allowed. In Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air (Delaware II), 483 U.S. 711 (1987), a four-Justice plurality held that the contingency enhancement was not allowed because every litigation involves a risk of an uncertain result. By contrast, Justice O’Connor proposed a two-pronged approach for calculating the contingency enhancement, while a four-Justice dissent led by Justice Blackmun argued that the contingency enhancement was “necessary to ensure that plaintiffs would be able to attract competent counsel.” Walker, 209 N.J. at 136 (citations omitted). The U.S. Supreme Court resolved the lingering uncertainty about a contingency enhancement by rejecting it conclusively in City of Burlington v. Dague, 505 U.S. 557 (1992).
• New Jersey’s Rendine Approach
It is against this historical background that the New Jersey Supreme Court decided Rendine. Having before it all of the prior cases — Johnson, Hensley, Delaware II and Dague — the court “rejected the framework adopted by the United States Supreme Court in Dague,” and, in its place, “held that courts making attorneys’ fee awards based on state statutory fee-shifting provisions … ‘should consider whether to increase that [lodestar] fee to reflect the risk of nonpayment in all cases in which the attorney’s compensation entirely or substantially is contingent on a successful outcome.’” Walker, 209 N.J. at 138 (citingRendine, 141 N.J. at 337). In rejecting the Supreme Court’s Dague analysis, the court in Walker established clear guidelines for calculating the contingency enhancement that were “designed to effectuate the purposes that statutory fee-shifting provisions are intended to advance.” The “ordinary range” for a contingency enhancement was set at between 5 and 50 percent, with the typical range set between 20 percent and 35 percent.
• The Consolidated Appeals
Against this extended historical backdrop, the court considered two consolidated appeals: one brought under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1, et seq., and the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14, et seq.; and the other brought under, among other statues, Title III of the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12181-12189), and New Jersey’s Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -49. In the first case, Walker v. Guiffre, the Appellate Division reversed the trial court’s award of a 45 percent contingency enhancement, which was awarded to counsel with little explanation. Finding that the trial court erred by failing to explain its reasoning, the Appellate Division further took issue with the trial court’s failure to apply the Supreme Court’s analysis in Perdue v. Kenny A., 130 S.Ct. 1662 (2010), which had not been decided when the trial court considered the fee issue.
The court concluded that the Appellate Division correctly held that the trial court’s explanation of the contingency enhancement fell well short. However, the court took issue with the Appellate Division’s nod to Perdue. Rather, the court noted that the proper analysis should have been conducted pursuant to Rendine, and so the case was remanded for an analysis of the contingency enhancement consistent with Rendine.
The second of the consolidated cases, Humphries v. Powder Mill Shopping Plaza, A-100-10 (2012), involved a disabled driver who could not access a shopping mall because of inadequate handicapped parking spaces and poorly maintained (or nonexistent) sidewalk ramps. In a lawsuit asserting claims under the ADA and LAD, the trial court determined that the plaintiff was entitled to relief and to attorney fees under the fee-shifting provisions of the relevant statutes. Counsel submitted a lodestar calculation and requested a 50 percent contingency enhancement. Using counsel’s lodestar calculation, the trial court awarded the requested fee and, relying on Rendine, awarded a contingency enhancement of 20 percent. The Appellate Division, looking to its newly published decision in Walker, reversed the contingency enhancement and remanded to the trial court.
The court confirmed the appropriateness of the trial court’s lodestar calculation, and used the case to “illustrate the proper application of the Rendine guidelines for contingency enhancements and, in doing so, to fix where on the spectrum of typical and ordinary contingency enhancements this litigation properly is found.” Walker, 209 N.J. at 155. Considering those guidelines, the court noted that enhancement of contingency awards at the high end of the range are appropriate when: (1) there is no mechanism for mitigating the risk of nonpayment; (2) there is no possibility of payment absent an award of fees; and (3) the relief sought is primarily equitable and not monetary in nature. Based on all these factors, counsel’s request of a 50 percent contingency enhancement was reasonable, fair, and should have been awarded in its entirety.
The ruling can have a potentially significant impact on awards of counsel fees to plaintiffs who prevail in legal malpractice suits and assert their rights under Saffer v. Willoughby, 143 N.J. 256 (1996), where our court held that attorney fees and litigation costs are recoverable as compensatory damages to the prevailing plaintiff. Stay tuned for a follow-up article about that.
The Ethics of Attorney Advertising: Be Wary of the Wiles of the Web
In In re Hyderally, 208 N.J. 453 (2011), the court took to task, without reprimand, an attorney whose website for more than two years, improperly displayed the seal of the New Jersey Board on Attorney Certification. Finding no clear and convincing evidence of intentional misconduct by the attorney, the court declined to impose discipline for the alleged violation of Rule 8.4(c) of the Rules of Professional Conduct (professional misconduct involving “dishonesty, fraud, deceit or misrepresentation”).
Ty Hyderally is not a certified civil or criminal trial attorney. He is, however, an attorney practicing in Montclair, who, in 2005, employed his cousin to design his firm’s website. His cousin was not an attorney and claimed not to be familiar with legal terminology. As a result, when he designed the website, the cousin looked online generally for “imagery [related] to law in New Jersey,” and he noticed the court approved seal “talking about the New Jersey Supreme Court Certified Attorney.” Thinking that the seal meant only that “if you practice in New Jersey, that means you’re a certified attorney,” the cousin/web designer added the seal to Hyderally’s firm website. The seal remained on the website for about two years.
Hyderally learned of the seal’s presence after a grievance was filed with the Supreme Court Committee on Attorney Advertising, which referred the matter to the Office of Attorney Ethics (OAE). The OAE filed a complaint against Hyderally, charging him with a violation of RPC 8.4(c). Significantly, the OAE did not charge Hyderally with violating RPC 7.1 or 7.2, “which define the parameters of acceptable attorney representations about services, and of attorney advertising.”
According to Hyderally’s testimony at the disciplinary hearing conducted by the District Ethics Committee, as soon as he became aware that the seal was on his website, he instructed his cousin to take it down. He further testified that the seal’s presence on the website was unintentional and inadvertent, he never intended to hold himself out as a certified trial attorney, he never referred to trial certification on business cards or letterhead, and he never paid any referral fees as allowed to certified trial attorneys pursuant to Rule 1:39-6(d). The District Ethics Committee concluded that Hyderally had an obligation to monitor his website to “ensure that no improper content appeared on that website.” The Disciplinary Review Board agreed that Hyderally had improperly displayed the seal, but it dismissed the complaint and found no clear and convincing evidence of a willful violation — based on the fact that Hyderally immediately removed the seal when he discovered its presence and had not benefited from it.
The court explained that attorney certification, as authorized by Rule 1:39, “represents a significant professional achievement by the lawyers who earn it.” It is earned through a demanding set of criteria, and thus it allows for certain benefits (such as payment of referral fees). It also requires additional compliance by requiring certain special disclosures. Overall, the court explained, “[t]he ‘New Jersey Supreme Court Certified Attorney’s seal is thus an important symbol of professional competence in a specialized field, achieved by virtue of a demanding process.”
The importance of the seal means that its use must be protected for the appropriate circumstances. Notwithstanding its improper usage on Hyderally’s website, however, he was charged only with violating RPC 8.4(c), which requires clear and convincing evidence of an intentional violation. The court found no such clear and convincing evidence on Hyderally’s part. But, the case is important now that attorneys — from solos to mega law firms — have come to recognize the singularly important role that marketing their practices through the Internet plays in their economic survival.
As attorney Internet marketing becomes even more prominent, diversified and complex, and with the proliferation of interactive websites, blogs and social networking, Hyderally is even more significant to the practice of law in the age of technology. It signals that the lawyer can no longer simply delegate the job of Internet marketing to the vast number of website designers and marketing companies that have appeared. Lawyers must take an active role in making certain that, as with any other form of traditional advertising, the content of their Internet marketing strictly adheres to the Rules of Professional Conduct. A lawyer’s lack of familiarity with new and developing forms of marketing will no longer serve as an excuse if the content of his or her advertising fails to comply with the rules.
The court cautioned all attorneys that they are “responsible for monitoring the content of all communications with the public — including their websites — to ensure that those communications conform at all times with the Rules of Professional Conduct.” Ultimately, regardless of whether the website or other public communication was developed and maintained by the attorney or an outside third party, “all language and design that appears on it should be reviewed frequently for compliance with Rule 1:39 and all Rules of Professional Conduct.” Unequivocally, an attorney is the final gatekeeper for the representations he, his office or his communications and advertisements make to the public. Those communications must be accurate and true.
The law is a living, breathing entity which grows and evolves, and that vitality is evident in the decisions from our Supreme Court in the relatively newly recognized area of the law governing lawyers. This year’s term saw the evolution of the law pertaining to the viability of attorney malpractice claims arising from underlying divorce and presumably other civil litigation settlements, growth in the law governing malpractice claims brought by former criminal defendants, development of the law of attorney fee shifting, conflicts of interest and the proper methodology for securing client waivers to those conflicts, and in application of the Rules of Professional Conduct relative to web-based advertising. This is truly a varied and abundant menu to savor and appreciate how these decisions affect our everyday practice of law in this new age of technology. •