Cohen v. Radio-Electronics Officers Union, Dist. 3, NMEBA

• Decision Date: 14 August 1996
• Docket Number: RADIO-ELECTRONICS
• Citation: 146 N.J. 140,679 A.2d 1188
• Parties: , 65 USLW 2142 Ernest Allen COHEN, Plaintiff-Appellant and Cross-Respondent, v.OFFICERS UNION, DISTRICT 3, NMEBA, Defendant-Respondent and Cross-Appellant.
• Court: New Jersey Supreme Court

Page 140

146 N.J. 140

679 A.2d 1188, 65 USLW 2142

Ernest Allen COHEN, Plaintiff-Appellant and Cross-Respondent, v. RADIO-ELECTRONICS OFFICERS UNION, DISTRICT 3, NMEBA,

Defendant-Respondent and Cross-Appellant.

Supreme Court of New Jersey.

Argued Sept. 12, 1995.

Decided Aug. 14, 1996.

Samuel N. Reiken, Parsippany, for appellant and cross-respondent (Lillick & Charles, attorneys; Mr. Reiken, Parsippany and Linda P. Torres, Newark, on the briefs).

Ira R. Mitzner, a member of the District of Columbia bar, Washington, DC, for respondent and cross-appellant (Zazzali, Zazzali, Fagella & Nowak, Newark, attorneys; Mitzner, Washington, DC, Kenneth I. Nowak and James R. Zazzali, Newark, on the briefs).

Harold A. Sherman, President, submitted a letter brief on behalf of amicus curiae New Jersey State Bar Association.

Richard K. Jeydel, President-Elect, submitted a letter brief on behalf of amicus curiae New Jersey Corporate Counsel Association.

The opinion of the court was delivered by

POLLOCK, J.

At issue is the enforceability of a one-year automatically-renewable retainer agreement providing for six months notice to the lawyer before the client could terminate the agreement. The issue arises in the context of a negotiated agreement in which the lawyer and the client's representative, each a skilled negotiator, bargained for the notice of termination in exchange for a reduced fee and the attorney's availability on demand.

On April 28, 1987, plaintiff, Ernest Allen Cohen, entered into an annual retainer agreement (the Agreement) with defendant, the Radio-Electronics Officers Union District 3 (NMEBA AFL-CIO) (the ROU), to provide up to 1,000 hours of legal work in 1988 for the set fee of $100,000, to be paid in monthly installments of $8,333.33. The Agreement would automatically renew unless either party gave "written notice of termination on a date in any year not less than six (6) months nor more than seven (7) months after the commencement anniversary date of this agreement."

The ROU discharged Cohen on December 28, 1989, three days before the renewal date. Cohen claims that the ROU violated the notice-of-termination provision of the Agreement and that it owes him the full $100,000 fee for 1990. The ROU contends that the Agreement unreasonably burdens its right to discharge Cohen at will and that it does not owe him anything.

The Law Division found that the Agreement was reasonable and enforceable. In three separate opinions, a divided Appellate Division panel reversed and remanded, holding that the lengthy notice-of-termination provision unreasonably burdened the client's right to choose its lawyer. 275 N.J.Super. 241, 261-62, 645 A.2d 1248 (1994). Cohen appeals as of right on the issue of the validity of the contract and the allowed damages. R. 2:2-1(a). The ROU cross-appeals on the issue of setoff. We modify and affirm the judgment of the Appellate Division.

I

Cohen is an attorney admitted to practice law in Arizona, New York, and New Jersey. He specializes in labor and employment law. From 1964 until December 1987, Cohen was a partner at a New York law firm, Marchi, Jaffe, Cohen, Crystal, Rosner & Katz (the Marchi firm). In December 1987, Cohen became of counsel to the firm.

The ROU is a labor organization of approximately 200 members that represents radio officers responsible for communications on seagoing ocean vessels. It moved from Jersey City, New Jersey, to Panama City Beach, Florida, in 1987.

From 1975 to 1980, the Marchi firm served as general counsel for the ROU. Cohen was the partner in charge of the work. His hourly rate for the ROU was $150.

Underlying the current dispute between Cohen and the ROU is a rift between competing factions in the union, each of which sought to appoint the ROU's counsel. In 1980, the ROU sustained a change in leadership. The new leaders discharged the Marchi firm and retained the law firm of Dickstein, Shapiro & Morin (the Dickstein firm), which represents the ROU in this action.

After his election as secretary-treasurer of the ROU, Thomas C. Harper asked Cohen in December 1985 to return as general counsel. On January 4, 1986, the ROU and the Marchi firm agreed on an hourly rate that would not exceed $150. According to Cohen, however, he and Harper agreed that the rate would increase gradually until it reached Cohen's standard rate of $225 per hour. In June 1986, after Harper became President of the ROU, the Marchi firm continued as general counsel with Cohen as the partner in charge.

In March 1987, Cohen decided to move to Arizona in January 1988. He planned to remain of-counsel with the Marchi firm, to practice as a solo practitioner in Arizona, and to teach as an adjunct professor at the University of Arizona College of Law.

On April 27, 1987, Cohen met with Harper to discuss his plans. At trial, Cohen and Harper gave different accounts of the meeting. According to Cohen, Harper suggested that Cohen after moving to Arizona continue as general counsel. Cohen characterized Harper as "an extremely accomplished and successful negotiator," who bargained hard about specific provisions of the contract. In particular, Harper and Cohen negotiated a reduction in Cohen's hourly rate from $150 to $100 in exchange for six months' notification of termination of the Agreement.

Cohen explained to Harper why he needed a lengthy notice-of-termination provision in the Agreement. As a solo practitioner, he would need time to obtain new clients, if the ROU discharged him. The University of Arizona, moreover, needed to know in June, if Cohen was to become a full-time faculty member the following year. As the trial court found, "teaching or representing the ROU were the two options being considered by Cohen, and they were mutually exclusive." Thus, an independent economic reason underlay Cohen's request for a provision requiring either party to give notice of termination in June. Harper's response, according to Cohen, was "If you want a long notice provision from me, you're going to have to pay for it."

By the end of the meeting, Cohen and Harper agreed on the basics of a contract designating Cohen as General Counsel. At Harper's insistence, Cohen drafted a proposed contract for Harper to present the next day to the ROU's District Executive Committee (DEC), the governing body of the ROU. Finally, Cohen testified that he advised Harper to consult independent counsel on the proposed contract.

Harper's version differed considerably. According to Harper, Cohen "almost begg[ed]" to continue as general counsel after his move to Arizona. Cohen presented Harper with several ideas "how it could be made to ROU's advantage to have it work, including the reduced rate." Harper denied that the parties discussed any specific contract provisions and that Cohen advised him to seek independent legal advice. He claimed that Cohen, without any instruction from Harper, drafted the proposed contract and insisted that Harper sign it the following day.

On April 28, 1987, Harper, acting on behalf of the ROU, signed the Agreement naming Cohen as general counsel. Later, in April or May, 1987, the DEC signed the Agreement after Harper made minor handwritten changes.

The Agreement, which was renewable, retained Cohen as the ROU's general counsel for one year, effective January 1, 1988. According to its terms, the Agreement was "negotiated and executed in New Jersey with reference to New Jersey law." The parties agree that New Jersey law governs this dispute.

The Agreement provided for "annual compensation of $100,000 for 1,000 hours of service," to be paid at a monthly rate of $8,333.33. It also provided for a rate of $150 for each hour in excess of 1,000 hours. According to Cohen, he was to receive the $100,000 even if he worked less than 1,000 hours.

In addition, the ROU would "seek to have Cohen designated Co-counsel to all applicable ROU related Plans and Trusts" (the ROU Plans and Trusts) and that "[w]hatever compensation Cohen receives from such Plans or Trusts will entitle ROU to additional hours of services at the rate of (1) hour per $100 of compensation."

The ROU Plans and Trusts, which are entities separate from the ROU, provide various benefits to ROU members and company employees. The ROU and employers of the ROU's members jointly fund the ROU Plans and Trusts. Each plan or trust has two attorneys acting as counsel. The ROU recommends one attorney and the employer, the other. Although the trustees of the individual plans formally select counsel, they usually follow recommendations of the ROU and the employers.

Under the Agreement, Cohen was to be "available during ROU's regular business hours for consultation by phone within 24 hours of any call from ROU to Cohen." If the ROU considered the call to be an emergency, Cohen had to be "available during regular business hours within three hours." If Cohen was "unavailable due to illness, vacation or other legitimate cause," he was obligated to provide at his own cost "appropriate substitute coverage for ROU." Furthermore, the Agreement required Cohen to be available to travel as required.

The Agreement also contained an automatic-renewal provision, which stated that the Agreement would be renewed automatically unless the party seeking to terminate gave written notice of termination between six and seven months after the commencement of the anniversary date, or January 1. The termination would become effective the following January 1.

Nine months later, in December 1987, Cohen moved to Tucson, Arizona. He began work under the Agreement on January 1, 1988. In 1988, he performed 550 hours of service for the ROU. The Agreement was renewed effective January 1989 without objection from the ROU. Cohen continued to represent the ROU throughout 1989, performing 1,003 hours of service that year. According to Cohen, legal services rendered for the ROU and related matters "represented well over 50% of my professional time" in 1988 and 198...