That question remains unanswered after the New Jersey Supreme Court declined to get involved in helping decide Gore v. Nagel.
Debbie Gore of Texas filed the action naming Bruce Nagel, who was local New Jersey counsel for the six Texas law firms.
The high court denied a request from an appellate court for guidance on whether Texas law firms must adhere to the rule limiting contingency fees in New Jersey to 33.3% or one-third of any personal injury case.
Texas law firms do not have such a rule and routinely charge their clients a 40% contingency fee as the defendants here did, among them, Potts law and Bailey Peavy Bailey.
A failure to follow the New Jersey rules can mean you are prevented from taking a percentage of the case. instead, you can recover, at most, attorney’s fees on a quantum meruit basis, which could mean a small fee of about $1,000 per case.
In an April 9th one-page order, the New Jersey Supreme Court said it “respectfully” declined to take on the question posed by a circuit panel in December:
“Whether New Jersey’s public policy interest in regulating those who use its court compels application of the State’s contingency fee rules to a malpractice dispute between out-of-state plaintiffs and out-of-state lawyers?”
Adam Slater of Mazie Slater, filed on behalf of Gore of Dickinson, Texas, and a class of 1,450 women who had been implanted with pelvic mesh and were represented by Houston, Texas law firms. The petition was later amended to add Doris Lance-Smith of Alabama.
The cases were filed in the New Jersey pelvic mesh multi-county litigation (MCL) filed against Johnson & Johnson and C.R. Bard and created by an Order of the New Jersey Supreme Court.
Ethicon (Johnson & Johnson) and Bard are both headquartered in New Jersey.
In a 27-page class action lawsuit filed in June 2019, [Docket No. Ber-L-4381-19] Slater said the six firms committed legal malpractice and in collecting “improper, excessive fees” breached their fiduciary duty.
Slater’s suit sought an accounting of the monies deducted from plaintiff settlements and for the Texas firms to release their fees and expenses to be paid back to the class. Defendant Texas firms were led by Derek Potts of Potts Law firm, Bailey Peavy Bailey, Junell & Associates, Burnett Law, Mesh Litigation Center (Potts), Steelman & McAdams, and K. Camp Bailey.
In New Jersey, local counsel for the Texas firms included Bruce Nagel of Nagel Rice and Andrew O’Connor and Robert Solomon.
The legal malpractice lawsuit sought the return of conservatively about $15 million to the plaintiffs.
But on March 24, 2020, U.S District Judge Madeline Cox Arleo granted the defendants Motions to Dismiss. She ruled Texas fees at 40% should prevail because the Texas firms had the most significant relationship to the plaintiff claims and because of a lack of “any binding legal authority” that addresses the question, despite the fact that the cases were filed in New Jersey.
There was no finding of damages to the plaintiffs, she added, which would be tangible injury, necessary to find for the plaintiffs.
The matter was closed.
Slater has filed a request for the court to reconsider, otherwise, the Third Circuit will have to answer without guidance from the high court.
If left in favor of the Defendants, it could be a precedent-setting decision that allows out-of-state law firms to set the contingency fee of their choosing.
On June 25, 2020, Slater filed a brief (50 pages) to the U.S. Court of Appeals for the Third Circuit asking to go to the state Supreme Court saying:
“The District Court’s decision rewarded a New Jersey law firm for violating the New Jersey Court Rules in its representation of approximately 1450 plaintiffs in New Jersey lawsuits without having executed any retainer agreements with their clients, with the knowledge that the only existing retainer agreements over-charged the clients, and without disclosing their receipt of attorney’s fees to their clients. New Jersey public policy and settled law requires the application of the New Jersey Court Rules to protect the Plaintiffs and the proposed class from this conflicted self-dealing.”
The New Jersey District Court erred when it said it had “no authority” to apply NJ rules, says the brief.
December 17, 2020 Circuit Judge Thomas Ambro from the US Court of Appeals filed a petition to seek certification to go to the higher court.
The Texas lawyers' attitudes toward the pelvic mesh implanted women they represented is clearly revealed in documents filed in Gore v Nagel.
In the financial arrangement between New Jersey-based Nagel Rice and the Potts firm, more than 1,000 cases would be put in one of two categories.
The first was called Parking lot cases. These were filed but they had no intention to litigate. The cases potentially for litigation were to yield a 20% compensation fee off the top to the New Jersey partner - No administration work was necessary, just piggyback on their NJ license to practice law.
“We literally ask nothing of you but your license on these cases.”
One of the partners in the local firm asked a Potts Law contact what is the flavor of the cases, in other words what cash value are they likely to yield? “I understand you aren’t going to park the Ferraris in the long term parking garage” was the answer.
The 40% retainer violated state rules, not only by overcharging but on calculating how costs of litigation are paid.
Rule 1:21:-7 (d) requires that “all litigation costs be deducted from the gross recovery before attorney’s fees are calculated so that the litigation costs are shared between the client and the attorneys.” The retainer agreement presented to clients had the women pay the attorney’s fees with costs deduced from solely from the client’s portion after the deduction of attorney’s fees.
Women were also not informed they could avoid the contingency fee arrangement altogether and instead pay for “the reasonable value of the services.”
New Jersey Rule 1:21-7 governs the retainer agreements in the state. It limits fees to 33.3% for the first $500,000 recovered; 30% for the next $500,000; and 25% for the next $500,000; and finally, 20% for the next $500,000.
“Plaintiffs are entitled to the protections contained in those rules” writes Slater.
Debbie Gore was represented by McAdams to pursue her mesh claim. Under the Retainer agreement she would pay McAdams 40% of the total sum collected plus any applicable expenses. She received a gross settlement award of $45,000 which she accepted. Of that amount, she received a net settlement award of $28,574.41 of which $12,825 went to attorney’s fees.
The other plaintiff Doris Lance-Smith of Alabama (Potts Law) was awarded a gross settlement of $45,000 and a net settlement of $12,398.58. Medical liens consumed more than $10,000, and attorney fees amounted to more than the plaintiff at $17,100.