NJ Appellate Court Voids $286,746.67 Retainer for Failing to Explain the Material Terms – Use These Best Practices to Avoid Issues

Recently, a New Jersey appellate court affirmed a trial court’s ruling that an attorney’s retainer agreement and bill of $286,746.67 was void because the attorney failed to explain the material terms of the agreement so that the client could make an informed decision. 

In Balducci v. Cige, the plaintiff-client retained the defendant-attorney, to represent her under the New Jersey Law Against Discrimination case. Without getting into the specifics of this fee-shifting type of case, the agreement provided three methods of paying for legal services, whichever is greater: (a) hourly rate of $475; (b) 37.5% of net recovery, including attorney fee award; or (c) statutory attorney fees.  The agreement also charged $1.00 for every email sent or received, including facsimile. 

The trial court found that the attorney “violated his professional responsibility to explain the Agreement’s material terms to plaintiff so that she could make an informed decision about retaining him” (pg 2).  Click here to read the full opinion and get the full story

This case is a great reminder to revisit some best practices for your retainer/engagement agreement.

 

Don’t Use Legalese

Your client hired you to handle the legalese, so don’t make it difficult for your client to understand the engagement agreement.  Use simple and easy to understand language to describe the agreement. If the engagement agreement is difficult to understand, you’re already making it difficult and the client could misunderstand the agreement. You want to make it as easy as possible for your client to make an “informed decision” about hiring you.

 

Define the Scope of Representation

In your agreement, make it abundantly clear what you have been retained to do for your client. Put a description of what your firm will do, as well as what your firm will not do. For example, if you are only representing the client through trial, make it clear that any post-trial or appellate work will require a new agreement.

The engagement agreement isn’t the place to use marketing slogans for your firm. For example, “we will provide you the most professional and highest quality representation in this matter.” This type of language can be construed as a guarantee of success or a promise to provide care beyond a standard professional care.  It’s unnecessary and can lead to issues in the future.

 

Clearly Identify the Client

Make sure that your agreement clearly defines who is and who isn’t the client.  If you represent a company, partnership or other entity, the agreement should clearly state who you represent. It’s very easy for the client to think that you represent their personal interest in addition to a company  

 

Fees – Tell the Client Everything

Disagreement over fees is one of the top reasons a client becomes disgruntled, files grievances or a malpractice claim.  Clearly explaining the fees and expenses is the best way to minimize your exposure to malpractice and disciplinary issues.

Always refer to your jurisdiction’s rules on fees, but the most important thing to do is make clear how you will charge the client for your services. Explain the rate and basis of the fee in detail.  Give examples of the fees to be charged if you believe it will help the client understand the fee.  

Also, be clear on what expenses the client is responsible for.  In contingency fee cases, explain the expense the client is responsible for and whether the client is responsible regardless of the outcome of the case.

Further, make sure that your fee agreement and terms are reasonable. Review your jurisdiction’s  corresponding Rule 1.5 from the Model Rules of Professional Conduct to ensure that the terms of your agreement abides by the Rule. 

 

Managing Expectations

When you clearly communicate expectations and manage those expectations, you will build a health and trustworthy relationship.  Lay the ground rules and explain how you work, how your office works, and if you utilize other associate attorneys, paralegals, or other staff.

Also, be clear about how you communicate. Let the client know that you can’t respond immediately to phone calls, emails or text message.  Let them know that it may take you 24 hours to respond, if that’s your policy or practice.

Communicate what you expect of the client as well. Communication is a two-way street and you should make sure that the client understand how they are expected to communicate and respond.  

 

Get It in Writing and Signed

Although it may not be required in your jurisdiction, always get the engagement agreement in writing and signed by the client.

An easy way to ensure your client reviews and signs your engagement agreement is to use an electronic signature service such as InfoTrack’s SignIT.  Using electronic signature makes it easy for the client to review and sign, provides tracking capability, and a reminder feature to have the client sign the agreement in a timely manner.

Asking a client to print, sign, scan, and then email back to you can be enough of a barrier to not sign the document. Using a service such as SignIT, allows your client to review the document on their smart phone, tablet, or computer. The client can then electronically sign the document, and have it emailed back to you immediately. You’ll know where the agreement stand every step of the way.

 

Conclusion

With the tips above, you should be off to a solid attorney client relationship. Trust is the bedrock of the attorney client relationship and it starts from the engagement agreement. If you are looking for innovative ways to improve your practice and want to see how to incorporate SignIT into your practice, give us a call at (844) 340-3096 or email sales@infotrack.com. It only takes a few minutes to show you how easy it is to use electronic signatures.