Cohen v. Radio-Electronics Officers Union

146 N.J. 140, 679 A.2d 1188 (1996)

 

RULE:

Agreements between attorneys and clients concerning the client-lawyer relationship generally are enforceable, provided 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 is invalid if it runs afoul of ethical rules governing that relationship. Consistent with the special considerations inherent in the attorney-client relationship, the attorney bears the burden of establishing the fairness and reasonableness of the transaction. A court shall construe an agreement between a lawyer and a client as a reasonable person in the circumstances of the client would have construed it. Those principles apply as readily to retainer agreements as to other agreements between lawyers and clients. 

FACTS:

Appellant attorney left his law firm to move to Arizona and open a solo practice. He entered into a retainer agreement with appellee client that provided for a reduction in appellant's hourly rate in exchange for six months' notice to terminate the agreement. The agreement provided appellant with annual compensation, paid monthly, in return for legal services. After two full years of compensation, appellee gave appellant notice of termination three days before the anniversary date of the contract. Appellant filed an action for breach of contract and sought damages. The trial court held the contract enforceable. The appellant court reversed and awarded appellant damages in quantum meruit. 

ISSUE:

Was the six month termination notice provision enforceable?

ANSWER:

No.

CONCLUSION:

Because it would be counterproductive to preclude clients from bargaining for a reduction in fees in exchange for a reasonable limitation on the right to discharge the lawyers, a retainer agreement setting a reasonable fee may take into account the cost of a lawyer's availability and the opportunities that the lawyer forgoes. Under the circumstances of this case, however, a provision for six months notice of termination excessively burdens the client's right to discharge the attorney.

The supreme court affirmed the finding that the notice of termination provision was unenforceable. However, it modified the judgment and found that the reasonable value of appellant's services were not limited by the contract fee and found that the parties intended to provide that appellee pay reasonable compensation to appellant if it terminated their relationship. As such, it directed appellee to compensate appellant for one month's notice.

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