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

• Decision Date: 28 July 1994
• Docket Number: AFL-CI,RADIO-ELECTRONICS,D
• Parties: , 63 USLW 2198 Ernest Allen COHEN, Plaintiff-Respondent/Cross-Appellant, v.OFFICERS UNION, DISTRICT 3, NMEBA,efendant-Appellant/Cross-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 241

275 N.J.Super. 241

645 A.2d 1248, 63 USLW 2198

Ernest Allen COHEN, Plaintiff-Respondent/Cross-Appellant, v. RADIO-ELECTRONICS OFFICERS UNION, DISTRICT 3, NMEBA AFL-CIO, Defendant-Appellant/Cross-Respondent.

Superior Court of New Jersey Appellate Division.

Argued May 31, 1994.

Decided July 28, 1994.

Ira R. Mitzner, Washington, DC, of the Washington, D.C. Bar, admitted pro hac vice, argued the cause, for appellant (Zazzali, Zazzali, Fagella & Nowak, Newark, attorneys; Mr. Mitzner, Washington, DC, and Kenneth I. Nowak, Newark, on the brief).

Samuel N. Reiken, Newark, argued the cause, for respondent (Lillick & Charles, attorneys, Mr. Reiken and Linda P. Torres, on the brief).

Before Judges PETRELLA, BAIME and VILLANUEVA.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

The significant issue on this appeal is whether a renewable one-year agreement for legal services between an attorney and his client is governed by general contract principles or those principles as modified by ethical considerations and standards applicable to the practice of law as a profession. The subject agreement between the parties has elements of a non-refundable retainer agreement as it can only be canceled by notice within a restrictive thirty-day period, i.e., not less than six nor more than seven months before the start of the next one-year period. ¹

Defendant Radio-Electronics Officers Union, District 3, NMEBA, AFL-CIO (ROU) appeals from a monetary judgment enforcing a notice provision of a one-year renewable contract for legal services in favor of plaintiff Ernest Allen Cohen. Cohen, an attorney admitted to practice law in New York, New Jersey, and Arizona, cross-appeals contending that the judge inappropriately applied the doctrine of mitigation of damages and miscalculated certain set-off amounts.

We conclude that the subject contract for legal services, which only permitted "proper" termination of counsel within a limited one-month period and is essentially an agreement for a non-refundable retainer fee, violates public policy and our Rules of Professional Conduct (RPC) as it infringed upon the client's inherent right to discharge his attorney at will, foisted an unwanted attorney upon a client who lost faith and confidence in his services, and provided for the payment of a contract fee regardless of whether the attorney actually performed any professional legal services.

I.

ROU, a labor organization, represents radio officers who are responsible for the communications and electronics aboard ocean-going vessels. Together with employer contributions, it funds various affiliated plans and trusts, which are considered separate entities, to provide medical, vacation, and other benefits to its members.

In December 1985, Thomas C. Harper, then secretary-treasurer of ROU, sought legal services from Cohen, who at that time was a partner in the New York firm of Marchi, Jaffe, Cohen, Crystal, Rosner & Katz (Marchi firm). On January 4, 1986, the Marchi firm and ROU (then based in Jersey City, New Jersey) entered into a contract wherein the parties agreed upon $150 per hour as the highest hourly rate for legal services. In 1986 and 1987, the Marchi firm provided ROU about 1,300 or 1,400 hours in legal services.

In March 1987, Cohen decided to relocate to Arizona and leave the Marchi firm for personal reasons. Shortly thereafter he told Harper, then president of ROU, of his plans. According to Harper, Cohen stated that he wanted to take a few clients with him, including ROU, and practically begged him to be general counsel instead of the Marchi firm.

Cohen on the other hand stated that he told Harper of an offer that he had to teach as an adjunct associate professor at the University of Arizona School of Law. Although Cohen foresaw the possibility of teaching on a full-time basis in the future, he did not apply for this position in 1988, nor was he certain about his future plans. Cohen, however, apparently told Harper that he would have to notify the law school in June of any year in which he wanted the University to consider him for a full-time position. Cohen further claims that Harper initiated the offer to keep him as general counsel and, although he had reservations, he believed it could work given his intention to retain of-counsel status at the Marchi firm.

Although both sides presented conflicting testimony with regard to the actual drafting and signing of the April 28, 1987 agreement, we need not recount those differences. Suffice it to say, ROU and Cohen entered into a one-year agreement, effective January 1, 1988, whereby Cohen would act as general counsel for ROU after he relocated to Arizona. ² The parties "negotiated and executed [the agreement] in New Jersey with reference to New Jersey law" and, on this appeal, neither party contests the application of New Jersey law.

According to its terms, the agreement automatically renewed itself each year unless either party provided "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 month...." Put simply, the termination notice had to be given during June of the year preceding the termination date.

The parties agreed that the annual compensation shall be $100,000 for 1,000 hours of service. ROU also agreed that it would seek to have Cohen designated co-counsel for all applicable ROU trusts and plans ³ and, further, any compensation received by Cohen from those plans or trusts would entitle ROU to additional hours of service at the rate of one hour per $100 of compensation. The agreement also permitted Cohen to charge $150 per hour for any time in excess of 1,000 hours, excluding the additional time for the plans.

Cohen in addition had to be "available during ROU's regular business hours for consultation by phone within 24 hours of any call from ROU to Cohen." If ROU identified the call as "on an emergency basis," Cohen had to "be available [by phone] during regular business hours within 3 hours." Alternatively, if Cohen was "unavailable due to illness, vacation or other legitimate cause," he had to provide "appropriate substitute coverage for ROU" at his own cost.

In January 1988, Cohen started to submit invoices with regard to his dual representation of the plans and ROU, including "the amount of time [he] spent on matters of interest to the ROU." According to David Tipton, an ROU auditor, Cohen completed 550 hours of service in 1988 and 1,003 hours in 1989 for ROU. Tipton also determined that Cohen should have reimbursed ROU for $8,079 it had already paid the Marchi firm for legal services.

On December 10, 1989, Harper advised Cohen that the trustees for the plans had decided to replace him as co-counsel and, on December 28, Harper notified Cohen of his termination, effective January 1, 1990, as general counsel for ROU. At that point, Cohen had been fully paid (except for three hours) for legal services rendered through December 31, 1989, but ROU refused to pay him an additional $100,000 for 1990.

Cohen thereafter filed a complaint seeking damages for termination of the legal services agreement without proper notice. More specifically, he sought $100,000 for 1990 based on the failure to comply with the notice provision contained in the agreement and $75,000 for reasonably anticipated fees from ROU related trusts and plans.

In its answer, ROU contended that the contract was not enforceable because (1) Cohen did not advise Harper and ROU to seek independent counsel prior to signing the agreement; (2) certain provisions of the agreement violated the law and were unreasonably advantageous to Cohen; (3) the Rules of Professional Conduct barred a suit arising out of an attorney discharge; and (4) even if the Rules of Professional Conduct did not apply, ROU terminated their agreement with Cohen for cause. ⁴ ROU in addition counterclaimed, asserting breach of contract, misrepresentation with regard to billings, and malpractice.

After an eight-day trial, the trial judge rendered his oral decision on May 4, 1993, which he later supplemented with a May 12 letter. In his decision, the judge essentially construed the agreement under general contract principles and concluded that ROU had to provide appropriate advance notice to terminate its agreement with Cohen. The judge did not find the six-month advance notice provision unreasonable or unfair because the University of Arizona made faculty hiring decisions in June each year and ROU had Cohen at its "beck and call" to travel all over the country, sometimes on short notice. Nor did the judge interpret RPC 1.16 (terminating representation) as precluding Cohen from maintaining a breach of contract action and, further, stated that there were "no New Jersey appellate decisions which render all actions by attorneys for wrongful termination unenforceable."

Although the trial judge determined that the parties properly entered into a fair and reasonable agreement, he found illegal the clause providing ROU a one hour credit for each $100 received by Cohen from the trusts or plans. ⁵ The judge stated that Cohen and Harper both "breached their respective duties as co-counsel and trustee to the plans ... in including that provision in their retainer agreement." Notwithstanding the illegality of this provision, the judge determined that the other compensation provisions contained within the agreement were severable and enforceable.

After determining the enforceability of the agreement, the judge rejected ROU's claim that it had discharged Cohen for cause as pretextual and exaggerated. We find no reason to detail the respective claims of either side here or disturb the trial judge's findings regarding them. Although there is a sufficient basis in the record to support his findings, Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474, 484, 323 A.2d 495 (1974), they are irrelevant to our decision.

The trial...