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NJ: Establishing the Attorney-Client Relationship

Connelly v. Frohling, Hudak & McCarthy, P.C., N.J. App. Div., September 9, 2010 (Unpublished).

Facts:  After Plaintiffs’ house sustained extensive damage, including destruction of the roof and resulting mold infestation, as a result of several storms, Plaintiffs sued their homeowners’ insurer pro se.  After their complaint was dismissed, Plaintiffs consulted defendants with regard to reinstatement within the one year time frame.  Despite Plaintiffs’ claim that the defendants had agreed to take their case on contingency, more than a year went by without an executed retainer agreement or reinstatement of Plaintiffs’ complaint.  Plaintiffs then pursued this malpractice action.

Issue:  Can Plaintiffs establish an attorney-client relationship in the absence of an executed retainer agreement? 

Ruling:  Yes.  The Court considered, in detail, all of the factual circumstances by which Plaintiffs came to believe the defendants would handle their claims against the insurer.  The Court noted that Plaintiffs met with the defendant attorneys at their offices on multiple occasions, the attorneys comments to the effect that Plaintiffs had a "very strong case against [the insurer]," and that they "would be willing to help with the matter."

The Court further noted the firm’s alleged willingness to accept the case "on a contingency fee basis" after reviewing documents related to Plaintiffs’ claims against their insurer, including their insurance policy, proofs of payment, medical records, and maps of their property. 

When a retainer agreement finally was presented to Plaintiffs, it required them to pay a $10,000 retainer fee for "services rendered" to be "credit against" the "final bill."  Although these terms were allegedly different from what Plaintiffs had originally agreed to, at least one of the Plaintiffs signed the agreement given the impending deadlines. 

Subsequently, defendants prepared a certification for Plaintiffs to sign in support of their motion to reinstate which, allegedly, contained materially inaccurate statements pertaining to the delay in retaining counsel and Plaintiff’s medical condition.  Shortly after Plaintiffs refused to sign this certification, defendants asked Plaintiffs to pick up their documents and "withdrew" their letter of engagement.

Despite defendants’ position that they did not represent Plaintiffs in their claims against the insurer, the Court found that Plaintiffs had presented "more than adequate evidence to demonstrate defendants’ negligence in not moving to vacate the dismissal in a timely manner and in failing to advise plaintiffs that the firm would not represent them."

Accordingly, the Court held that the first prong of a legal malpractice action – the existence of an attorney-client relationship – had been satisfied.  Upon finding that the Plaintiffs had presented at least some evidence of damages as a result of the defendants’ alleged negligence, the Court reversed the dismissal of the malpractice action.

Lesson:  An attorney cannot rely on the absence of a fully executed retainer agreement to argue that an attorney-client relationship does not exist.  Courts will conduct a fact intensive analysis and consider (1) whether the attorney discussed the matter in any amount of detail with the prospective client; (2) whether the issue of attorney’s fees was discussed or agreed upon; and (3) whether the attorney reviewed documents or performed any other investigation or work in connection with the prospective matter.  The decision suggests that this list is not exhaustive, and that each relationship will entail a different fact sensitive analysis.  The language used by the Court in coming to its determination demonstrates the need for attorneys to provide timely notice in all prospective cases they decide not to pursue.

Editor’s Note:  As a side note, this matter also presents an interesting issue about whether a judge ought to recuse himself in legal malpractice matters where he fails to disclose the existence of prior malpractice claims filed against him in unrelated matters.  The Appellate Division noted: 

We know of no obligations of a trial judge to provide a list of malpractice claims filed against him or the firm with whom he practiced merely because it is requested without any additional contention or assertion warranting such a disclosure.

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Posted in: Engagement, New Jersey