Under these facts, your lawyer is at a minimum in hot water with the NJ Bar. He is required to do a conflicts check prior to representing you, and get a waiver of any conflicts from you before proceeding. If he did not do this, he could be subject to discipline. See http://www.judiciary.state.nj.us/oae/. Did you sign an engagement letter? What did it say about conflicts?
This comment does not constitute legal advice, but rather the poster's personal opinion, and should not be relied upon without consulting your own legal counsel.
While I am not familiar with details of NJ law, in Michigan this looks like a case where you would have a reasonable claim for a full refund, rather than you having to pay him, because it appears it was the attorney's duty to refuse the case upon learning the identity of the plaintiff. You should file a counterclaim. Unfortunately, to pursue a lawsuit successfully against an attorney, you probably will need to get -- you guessed it -- another attorney. However, you have a potential ally on your side, the NJ Office of Attorney Ethics, found at http://www.judiciary.state.nj.us/oae/index.htm
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There are several different areas of concern with the facts you have set out. As James identified this is something you should likely find a new attorney to assist you with. At the very least you should gather all relevant documents and schedule an initial consultation with a local attorney who offers a free initial consultation just so you can get some feedback after she assesses all relevant facts and documents specific to your case, rather than high-level generalities.
Best of luck
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