N.J. Ct. R. 1:21-7

As amended through October 28, 2024

Rule 1:21-7 - Contingent Fees

(a) As used in this rule the term "contingent fee arrangement" means an agreement for legal services of an attorney or attorneys, including any associated or forwarding counsel, under which compensation, contingent in whole or in part upon the successful accomplishment or disposition of the subject matter of the agreement, is to be in an amount which either is fixed or is to be determined under a formula.

(b) An attorney shall not enter into a contingent fee arrangement without first having advised the client of the right and afforded the client an opportunity to retain the attorney under an arrangement for compensation on the basis of the reasonable value of the services.

(c) In any matter where a client's claim for damages is based upon the alleged tortious conduct of another, including products liability claims and claims among family members that are subject to Part V of these Rules but excluding statutorily based discrimination and employment claims, and the client is not a subrogee, an attorney shall not contract for, charge, or collect a contingent fee in excess of the following limits:

(1) 331/3% on the first $750,000 recovered;

(2) 30% on the next $750,000 recovered;

(3) 25% on the next $750,000 recovered;

(4) 20% on the next $750,000; and

(5) on all amounts recovered in excess of the above by application for reasonable fee in accordance with the provisions of paragraph (f) hereof; and

(6) where the amount recovered is for the benefit of a client who was a minor or mentally incapacitated when the contingent fee arrangement was made, the foregoing limits shall apply, except that the fee on any amount recovered by settlement before empaneling of the jury or, in a bench trial, the earlier to occur of plaintiff's opening statement or the commencement of testimony of the first witness, shall not exceed 25%.

(d) The permissible fee provided for in paragraph (c) shall be computed on the net sum recovered after deducting disbursements in connection with the institution and prosecution of the claim, whether advanced by the attorney or by the client, including investigation expenses, expenses for expert or other testimony or evidence, the cost of briefs and transcripts on appeal, and any interest included in a judgment pursuant to R. 4:42-11(b); but no deduction need be made for post-judgment interest or for liens, assignments or claims in favor of hospitals or for medical care and treatment by doctors and nurses, or similar items. The permissible fee shall include legal services rendered on any appeal or review proceeding or on any retrial, but this shall not be deemed to require an attorney to take an appeal. When joint representation is undertaken in both the direct and derivative action, or when a claim for wrongful death is joined with a claim on behalf of a decedent, the contingent fee shall be calculated on the aggregate sum of the recovery.

(e) Paragraph (c) of this rule is intended to fix maximum permissible fees and does not preclude an attorney from entering into a contingent fee arrangement providing for, or from charging or collecting a contingent fee below such limits. In all cases contingent fees charged or collected must conform to RPC 1.5(a).

(f) If at the conclusion of a matter an attorney considers the fee permitted by paragraph (c) to be inadequate, an application on written notice to the client may be made to the Assignment Judge or the designee of the Assignment Judge for the hearing and determining of a reasonable fee in light of all the circumstances. This rule shall not preclude the exercise of a client's existing right to a court review of the reasonableness of an attorney's fee.

(g) Where the amount of the contingent fee is limited by the provisions of paragraph (c) of this rule, the contingent fee arrangement shall be in writing, signed both by the attorney and the client, and a signed duplicate shall be given to the client. Upon conclusion of the matter resulting in a recovery, the attorney shall prepare and furnish the client with a signed closing statement.

(h)Calculation of Fee in Structured Settlements. As used herein the term "structured settlement" refers to the payment of any settlement between the parties or judgment entered pursuant to a proceeding approved by the Court, the terms of which provide for the payment of the funds to be received by the plaintiff on an installment basis. For purposes of paragraph (c), the basis for calculation of a contingent fee shall be the value of the structured settlement as herein defined. Value shall consist of any cash payment made upon consummation of the settlement plus the actual cost to the party making the settlement of the deferred payment aspects thereof. In the event that the party paying the settlement does not purchase the deferred payment component, the actual cost thereof shall be the actual cost assigned by that party to that component. For further purposes of this rule, the party making the settlement offer shall, at the time the offer is made, disclose to the party receiving the settlement offer its actual cost and, if it does not purchase the deferred payment aspect of the settlement, the factors and assumptions used by it in assigning actual cost.

(i)Calculation of Fee in Settlement of Class or Multiple Party Actions.When representation is undertaken on behalf of several persons whose respective claims, whether or not joined in one action, arise out of the same transaction or set of facts or involve substantially identical liability issues, the contingent fee shall be calculated on the basis of the aggregate sum of all recoveries, whether by judgment, settlement or both, and shall be charged to the clients in proportion to the recovery of each. Counsel may, however, make application for modification of the fee pursuant to paragraph (f) of this rule in appropriate cases.

N.J. Ct. R. 1:21-7

Source -- R. 1:21-6(f), as adopted July 7, 1971 to be effective 9/13/1971 and deleted December 21, 1971 to be effective 1/31/1972. Adopted December 21, 1971 to be effective 1/31/1972. Amended June 29, 1973 to be effective 9/10/1973. Paragraphs (c) and (e) amended October 13, 1976, effective as to contingent fee arrangements entered into on November 1, 1976 and thereafter. Closing statements on all contingent fee arrangements filed as previously required between January 31, 1972 and January 31, 1973 shall be filed with the Administrative Office of the Courts whenever the case is closed; paragraph (c) amended July 29, 1977 to be effective 9/6/1977; paragraph (d) amended July 24, 1978 to be effective 9/11/1978; paragraph (c) amended and new paragraphs (h) and (i) adopted January 16, 1984, to be effective immediately; paragraph (d) amended July 26, 1984 to be effective 9/10/1984; paragraph (e) amended June 29, 1990 to be effective 9/4/1990; paragraphs (b) and (c)(5) amended July 13, 1994 to be effective 9/1/1994; paragraph (c) amended June 28, 1996 to be effective 9/1/1996; paragraph (c) amended January 21, 1999 to be effective 4/5/1999; paragraphs (g) and (h) amended July 5, 2000 to be effective 9/5/2000; paragraph (c) amended July 12, 2002 to be effective 9/3/2002; paragraphs (d) and (f) amended July 9, 2008 to be effective 9/1/2008; paragraph (f) amended July 19, 2012 to be effective 9/4/2012; paragraph (c) amended July 22, 2014 to be effective 9/1/2014; Official Comment adopted April 26, 2024 to be effective 9/1/2024.

Official Comment by the Supreme Court (September 1, 2024)

In Balducci v. Cige, 240 N.J. 574 (2020), a case concerning ethical issues relating to retainer fee agreements in statutorily based discrimination cases, the Supreme Court raised questions about the necessity for new rules of general applicability concerning the reasonableness of such fees. After thorough consideration and public comment, the Court finds that lawyers who represent clients in statutorily based discrimination cases must abide by the following:

1. Lawyers must explicitly disclose, in the retainer agreement, all identifiable fees or costs that the clients may have to pay either up-front or at the conclusion of the case.

2. Within the wide scope of potential paths litigation might take, lawyers must provide clients with an estimate of fees and costs and the range of value of the case at the initiation of the representation.

3. Lawyers have a continuing obligation to inform clients about additional fees and costs that may arise as the case progresses.

4. Lawyers must promptly inform the client when rising fees and costs are likely to result in little to no monies recovered by the client in the lawsuit.

5. The retainer agreement is presumptively unreasonable when a lawyer charges the greater of a contingent fee or a regular hourly fee that is payable even if there is no recovery.

6. A contingency fee agreement in which the damages award and the fee award are combined, and a percentage is applied to the combined amount, is not presumptively unreasonable.

7. There should not be a cap on fees recoverable in statutory feeshifting cases, but lawyers should notify clients, in the retainer agreement or orally, when the fee percentage is higher than 331/3 percent.

8. There is no need for proportionality between the lawyers' fee award and the damages award.