May 30, 2013
Get It In Writing Or You May Not Get Paid
In a case dealing with a law firm's entitlement to fees in representing a divorce client, the New York Appellate Division for the First Judicial Department remanded in light of the non-compliance of the firm with with written retainer requirements:
Following arbitration, the law office commenced this action seeking unpaid legal fees in the amount of $83,775.69 and a trial was held on the claim. [Client] Blisko asserted that the retainer did not comply with 22 NYCRR 1400.3 because it did not state the "hourly rate of each person whose time" was charged to her, but rather only stated the hourly rate of [attorney] Eisenberger and made no mention of any other attorney working on the case. Blisko also contended that the retainer expressly stated that the law office's representation did not include being trial counsel. The trial court rejected Blisko's arguments and ordered her to pay $83,775.69 to the law office, in addition to the substantial amount she already had paid.
We modify because the law office should be denied any legal fees arising from representation of Blisko after the grounds trial commenced. The plain language of the retainer states that the law office's representation of Blisko includes work leading "up to" a trial, "but not including an actual trial." Indeed, the law office acknowledges that the retainer did not include representation at trial. Following the commencement of the trial on August 18, 2009, the retainer between the law office and Blisko terminated and plaintiff was representing Blisko without a written retainer.
The law office contends that, even if the retainer terminated when the trial began, it may still collect unpaid fees from Blisko because it substantially complied with the requirements of 22 NYCR 1400.3. The substantial compliance argument has no relevance to this issue because there was no trial retainer at all. If the law office wanted to be paid for representing Blisko at trial, it needed to have the client sign a new retainer. Moreover, there is no indication that the law office explained the limited nature of the retainer to the client, who then agreed to expand its scope to include the actual trial.
Although the law office cannot receive legal fees for any services completed after trial commenced, it may receive any outstanding unpaid fees for work completed prior to commencement of the actual trial. The law office substantially complied with the requirements of 22 NYCRR 1400.3 by giving the client the required statement of client rights and responsibilities and by listing the fee of the primary attorney. Blisko's testimony indicates that she was aware that more than one attorney was working on her case, and that she received bills reflecting the work of multiple attorneys.
Finally, as a general principle, the law office "need not return fees [it] properly earned." Although the retainer does not fully comply with 22 NYCRR 1400.3, the law office did complete work that was within the scope of the pretrial retainer, and therefore it is not required to return fees already paid to it for work completed before the trial. When a client is seeking the return of funds already paid to the attorney, the attorney does not need to show substantial compliance with 22 NYCRR 1400.3, but only that the fees paid were properly earned.
(citations omitted throughout)
May 24, 2013
Court Remands Fee Award Of Over $15.8 Million
The New York Appellate Division for the First Judicial Department has remanded a matter involving legal fees charged to and gifts received from a wealthy widow in an estate matter:
Beginning in 1983, defendant law firm represented the family of Sylvan Lawrence in litigation concerning the administration of his estate. In 1998, Alice Lawrence, Sylvan's widow, paid three of the firm's partners, the individual defendants, a bonus or gift totaling $5.05 million and also paid the firm $400,000 as a bonus or gift. By the end of 2004, the widow had paid, approximately $22 million in legal fees on an hourly fee basis.
In the hope of reducing her anticipated legal fees in the ongoing litigation, the widow entered into a revised retainer agreement with the law firm in January 2005. The revised retainer agreement provided, inter alia, for a 40% contingency fee. In May 2005, the estate litigation settled with a payment to the estate of more than $111 million and, in accordance with the revised retainer agreement, the firm sought a fee of 40% of that amount. When the widow refused to pay the 40% contingency fee, this litigation resulted, in which, among other relief, the return of the gifts the widow made in 1998 is sought.
The court held
The revised retainer agreement is both procedurally and substantively unconscionable (Lawrence v Graubard Miller, 48 AD3d 1, 6 [1st Dept 2007], affd 11 NY3d 558 ). The evidence shows that the widow believed that under the contingency arrangement, she would receive the "lion's share" of any recovery. In fact, as it operated, the law firm obtained over 50% of the widow's share of proceeds. Thus, the law firm failed to show that the widow fully knew and understood the terms of the retainer agreement — an agreement she entered into in an effort to reduce her legal fees...
In considering the substantive unconscionability of the revised retainer agreement, the Referee correctly considered such factors as the proportionality of the fee to the value of the professional services rendered, the sheer amount of the fee, and the risks and rewards to the attorney upon entering into the contingency agreement. With regard to the last factor, the law firm had internally assessed the estate's claims to be worth approximately $47 million so that the contingency fee provision in the revised retainer would have meant a fee of about $19 million. Contrary to the law firm's assertion, on this record it seems highly unlikely that the firm undertook a significant risk of losing a substantial amount of fees as a result of the revised retainer agreement's contingency provision. Rather, the Referee accurately characterized this attempt by the law firm to justify its action as "nothing but a self-serving afterthought."(citations omitted)
The amount the law firm seeks ($44 million) is also disproportionate to the value of the services rendered (approximately $1.7 million) (see Lawrence v Graubard Miller, 11 NY3d at 596). The record shows that the law firm spent a total of 3,795 hours on the litigation after the revised retainer agreement became effective, resulting in an hourly rate of $11,000, which, as the Referee stated, is "an astounding rate of return for legal services."
However, the remedy recommended by the Referee and adopted by the Surrogate — namely, a new "reasonable" fee arrangement for the parties — was improper. Where, as here, there is a preexisting, valid retainer agreement, the proper remedy is to revert to the original agreement. For the reasons found by the Referee, we reject the firm's suggestion that it receive a reduced contingency fee. Accordingly, the matter is remanded for the determination of the fees due the law firm under the original retainer agreement. Given that the firm is entitled to fees under the original retainer agreement, it is also entitled to prejudgment interest from the date of the breach. (citations omitted)
Because the individual defendants acted alone, and in secret from the rest of the law firm, with respect to the gifts, we decline to rule that such conduct by the individual defendants results in the firm's forfeiture of its lawful fees from the date the individual defendants received the gifts.
The Surrogate's Court (opinion linked here) had awarded the law firm fees in the amount of $15,837,374.02 but found that the gifts solicted by the attorneys (concealed from their law firm and the widow's children) emanated an "odor of overreaching too potent to be ignored." (Mike Frisch)
May 06, 2013
Contingent Fee Sharing
In a lawsuit involving a dispute between lawyers over the legal fees in a complex medical malpractice case, the Maryland Court of Special Appeals has held that
...we will apply the general rule that the termination of a contingency fee agreement terminates the fee-sharing agreement predicated on it. Because PGA [the law firm of Orioles owner Peter Angelos] is not entitled to a contingency fee, there is no contingency fee for Mr. Brault to share. Accordingly, to the extent the circuit court factored in the fee-sharing agreement, the circuit court's ruling must be vacated and remanded for further proceedings.
We stress that our decision in this case does not mean that Mr. Brault is not entitled to compensation for his work while the contingency arrangement was in effect. Like PGA, howver, his claim would be for the reasonable value of his services.
The case involved an attorney (Mr. Gately) who while with PGA undertook the representation of the client with assistance from other firm attorneys. Mr. Brault was brought in as co-counsel and a favorable verdict was obtained. The verdict was overturned on appeal.
Mr. Gately was then discharged from PGA. The client followed him and Mr. Brault. The case later settled for an undisclosed amount. PGA sued to enforce its lien. The disputed funds remained in escrow.
Mr. Gately acknowledged that no post-verdict effort had contributed to the settlement, which he attributed to an act of God.
The court here held that PGA had behaved ethically and was not deprived of it entitlement to fees.
The court also held that the discharged attorneys may properly sue successor counsel. (Mike Frisch)
March 26, 2013
No Fee Decision Affirmed
The New York Court of Appeals has affirmed without discussion a judgment dismissing a claim for legal fees.
ThomsonReuters had this report on the decision of the Appellate Division:
Kasowitz Benson Torres & Friedman is not entitled to a multimillion-dollar fee stemming from its successful representation of drugstore chain Duane Reade, a divided New York state appeals court ruled Tuesday.
Kasowitz had claimed it was owed approximately $7 million for litigation over automated teller machine fees owed to Duane Reade.
In a 3-2 ruling, the Appellate Division, First Department, found that the two parties had negotiated a "precise" fee arrangement via email that did not permit Kasowitz to recover fees beyond a flat $1 million payment.
Alternative fee arrangements, rather than hourly fee structures, have become increasingly common in corporate litigation. But they can also lead to disagreements about interpretation.
The negotiations between Kasowitz and Duane Reade on the fee structure occurred with a simple email exchange, rather than a with formal contract, eventually leading to a dispute over the meaning of the emails.
February 21, 2013
Client May Discharge Attorney But Contingent Fee Remains Earned
The Rhode Island Supreme Court affirmed the grant of summary judgment to an attorney in a suit for fees against a former client.
The attorney had represented the client in actions against her late father's estate for a 15% contingency fee.
After the claim was reduced to settlement, the attorney collected his fees as payments were recovered. The client later discharged the attorney and claimed no obligation to continue to pay.
The court found that the attorney's rights under the contingent fee agreement had fully vested when the underlying claim was settled. Although the client was free to discharge the attorney, such action "does not alter his entitlement to fees already earned." (Mike Frisch)
February 02, 2013
Fee In Land Not Simple Or Proper
An Alaskan Native corporation entered into a fee agreement with a law firm in connection with litigation over "its certification of and title to certain lands" under the Native Claims Settlement Act.
The contingent fee agreement gave the law firm an interest in the lands at issue.
After the client had prevailed, a bar arbitration panel found that the firm could not take the land, but was entitled to a fee payment equal to the land's value. A 1995 court judgment enforced the arbitration award. The client paid the law firm for several years.
The client eventually was unable to continue the payments and litigation ensued.
The Alaska Supreme Court held that the contingency agreement violated provisions of the Act and that the arbitration award was improper. The court noted tht the case presented "complex" issues as to whether the 1995 judgment was void or voidable.
The court ordered the law firm to return $643,760 in paid fees.
The firm may now establish its entitlement for fees under quantum meruit. (Mike Frisch)
January 28, 2013
Trimming The Fat
The Wyoming Supreme Court has affirmed a district court judge's order reducing by half the payment to an attorney appointed to represent an indigent parent in a parental rights matter.
The court agreed with the district court that some of the attorney's billings were "patently excessive." For instance, the attorney had billed 47.57 hours for a Friday through Sunday.
In order to properly charge the claimed time, he would have to have not eaten, relieved himself or done anything else during the blocked time (citing an earlier case where that point was made).
On this record, we cannot escape the judgment that [the attorney's] litigation efforts became overkill.
The district court's 50% cut was an appropriately "practical means of trimming fat" from the fee application. (Mike Frisch)
September 25, 2012
A Fee Dispute
The Tennessee Court of Appeals affirmed a trial court award of quantum meruit fees to a law firm discharged after being retained to pursue a damage claim against the Tennessee Valley Authority arising from a coal ash spill.
The clients followed a firm lawyer who left and set up her own practice. The underlying case was resolved and the attorney was paid her fee.
The clients then sued the law firm, seeking a judgment holding that they owed no fee to their former firm. The firm counterclaimed and contended that they were entitled to the full contingent fee.
The court found that the law firm was only entitled to payment for the work performed prior to the departure of the attorney and clients. (Mike Frisch)
August 07, 2012
No Success Fee
The New York Appellate Division for the First Judicial Department affirmed the dismissal of a suit for legal fees:
This is a dispute over whether plaintiff Kasowitz law firm is entitled to a success fee in addition to the flat $1 million fee it has already received in connection with its representation of defendant Duane Reade. The issues are whether the parties' e-mails established a binding fee agreement, and whether the fee was to be limited to the moneys Duane Reade received in settlement of the underlying Cardtronics litigation, or was to encompass all of the benefits Duane Reade received from the termination of its ATM placement contract with Cardtronics, including increased revenues from Duane Reade's new ATM contract with JP Morgan Chase (Chase)...
...three e-mails constitute an integrated fee agreement (see Nolfi Masonry Corp. v Lasker-Goldman Corp., 160 AD2d 186, 187  ["a binding agreement may be assembled from more than one writing"]). By the plain language employed, they demonstrate that Kasowitz made an offer to represent Duane Reade in the Cardtronics case for a flat $1 million, plus a success fee equal to 20% of the amounts recovered above $4 million in that litigation, and that Duane Reade accepted that offer. Kasowitz is not entitled to a success fee under the terms of the fee agreement, since Duane Reade received total compensation of approximately $1.75 million — well below the $4 million threshold — as a result of the settlement of the Cardtronics action.
The dissent believes that the fee agreement is ambiguous as to the scope of the fee. The dissent reasons that the term "recover," as used in the September 8, 2006 e-mail, may reasonably be interpreted to encompass noncash resolutions, i.e. any value received as a result of the settlement of the Cardtronics action. However, in adopting this position, the dissent fails to consider the term "recovered" or "recovery" in the context of the e-mail as a whole, and improperly relies on extrinsic evidence, including Bergman's affidavits, in order to find ambiguity where none exists.
July 31, 2012
Don't Knock The Block (Billing)
An award of fees to an attorney who sued his client in a matrimonial case was affirmed by the New York Appellate Division for the First Judicial Department:
"Where there has been substantial compliance' with the matrimonial rules, an attorney will be allowed to recover the fees owed for services rendered, but not yet paid for" (Edelman v Poster, 72 AD3d 182, 184 , quoting Flanagan v Flanagan, 267 AD2d 80, 81 ). The applicable rule, 22 NYCRR 1400.3, mandates that an attorney in a matrimonial matter file a copy of the signed retainer agreement with the court, along with the statement of net worth. Here, the record shows that a copy of the executed retainer was filed with the court on May 14, 2004, along with the updated statement of net worth. Even if plaintiff, as substituted counsel, should have filed the retainer within 10 days of its execution, he substantially complied with the requirements by filing the executed copy with the updated statement of net worth. Although it would have been better practice for plaintiff to have put proof of the filing in evidence on his direct case, his failure to do so does not change the fact that he substantially complied with the rule (see Kurtz v Kurtz, 1 AD3d 214, 215 ).
Defendant also argues that plaintiff's billing practices and willful spoliation of evidence should result in sanctions, and dismissal of his claims. Specifically, defendant argues that block billing was improper and that "task billing," which lists the time for each separate task and is an enhanced level of billing, should have been used. However, block billing is common practice among law firms and neither 22 NYCRR 1400.3 nor the retainer agreement calls for task based billing. Regarding the spoliation of evidence allegation, defendant contends that plaintiff intentionally destroyed a particular attorney's individual time sheets, thereby preventing her from using those records to impeach plaintiff. Plaintiff testified at trial that the information from that attorney's individual time sheets was entered into the firm's time entry system, then reviewed by him and incorporated into the firm's bills to defendant. In any event, the time sheets were not key evidence, and thus their alleged destruction did not deprive defendant of the ability to defend against plaintiff's claim for fees(Coleman v Putman Hops. Center, 74 AD3d 1009 , lv dismissed 16 NY3d 884 ). Accordingly, a spoliation sanction is not warranted.
June 13, 2012
Law Firm May Represent Itself In Suit For Unpaid Fees
The New York Appellate Division for the First Judicial Department affirmed the denial a former client's motion to dismiss to suit for legal fees, other than a claim of fraudulent inducement. The court also affirmed the denial of a motion to disqualify the plaintiff law firm from representing itself in the litigation.
The majority concluded:
It is well settled that "[t]he public policy of New York which permits a
client to terminate the attorney-client relationship freely at any time,
notwithstanding the existence of a particularized retainer agreement between the
parties, would be easily undermined if an attorney could hold a client liable
for fraud on the theory that the client misrepresented his or her true intent
when the retainer was executed" (Demov, Morris, Levin & Shein v
Glantz, 53 NY2d 553, 557 ). Accordingly, the motion court erred in
failing to dismiss plaintiff's cause of action for fraudulent inducement against
both the corporate and the individual defendant (Kaplan v. Heinfling, 136
AD2d 34, 39 , lv denied 72 NY2d 810 ).
The court correctly declined to dismiss the complaint pursuant to CPLR
3211(a)(4), because "[t]he three remedies of an attorney discharged without
cause — the retaining lien, the charging lien, and the plenary action in quantum
meruit — are not exclusive but cumulative" (see Levy v Laing, 43 AD3d 713, 715 ), and the attorney "does not waive her right to commence an immediate plenary action for a
judgment against her client by commencing a proceeding to fix the amount of her
charging lien" (Butler, Fitzgerald & Potter v Gelmin, 235 AD2d 218, 219 ). Moreover, "an attorney may enforce his lien in a court other than that before which his services were rendered" (see Nickel Rim Mines Ltd. v Universal-Cyclops Steel Corp., 202 F Supp 170, 176 [D NJ 1962]).
Contrary to the dissent's contention, the court also correctly declined to
dismiss plaintiff's cause of action for quantum meruit pursuant to CPLR
3211(a)(7). Plaintiff alleges that it was terminated without cause by
defendants, and received no compensation whatsoever for the three years of work
it performed on the case and the value it brought to the case. Specifically,
within its complaint, plaintiff pleaded that it "fully and faithfully performed
legal services for BanxCorp and Mehl," that when it "performed those legal
services for BanxCorp and Mehl, it reasonably expected to be compensated for
those services," that "BanxCorp and Mehl encouraged the [plaintiff] to provide them with legal services, participated in the [plaintiff's] provision of such services, and accepted the
benefits of the legal services the [plaintiff] provided to them," and that the
services "were rendered under circumstances in which BanxCorp and Mehl knew that
the [plaintiff] expected to be compensated for those services." Since a
plaintiff pleads a cause of action for quantum meruit when he alleges that (1)
services were performed in good faith, (2) the acceptance of the services by the
person to whom they were rendered, (3) an expectation of compensation therefor,
and (4) the reasonable value of the services (Fulbright & Jaworski, LLP v Carucci, 63 AD3d 487,
489 ; Nabi v Sells, 70 AD3d 252, 252 ; Soumayah v Minnelli, 41 AD3d 390, 391 ), based on the foregoing, plaintiff has adequately pleaded a cause of action for quantum
meruit against all the defendants. Fulbright doesn't avail Mehl since
there we dismissed plaintiff's cause of action for quantum meruit against the
corporate defendant's president insofar as plaintiff in that case failed to
allege three elements critical to a cause of action for quantum meruit
(Fulbright at 489).
From the dissent in part:
Plaintiff, a law firm, seeks to recover the reasonable value of services it
rendered while representing defendant BanxCorp, the plaintiff in BanxCorp v
Bankrate, Inc., an antitrust action that was filed in the United States
District Court for the District of New Jersey (Civil Action No. 07-3398).
Plaintiff rendered its services pursuant to a written contingency fee agreement
that was executed on behalf of BanxCorp by Mehl, its principal. The motion court
declined to dismiss the complaint as against Mehl on the sole ground that "a
corporate officer who participates in the commission of a tort can be held
personally liable even if the participation is for the corporation's benefit." Although it might have applied to the now dismissed fraud cause of action, the motion court's reasoning
has no application to the quantum meruit claim, the only remaining cause of
action. This is because quantum meruit is not a theory of tort liability.
Plaintiff's rationale for piercing BanxCorp's corporate veil is equally
unavailing. "The party seeking to pierce the corporate veil must establish that
the owners, through their dominion, abused the privilege of doing business in
the corporate form to perpetrate a wrong or injustice against that party such
that a court in equity will intervene" (Matter of Morris v New York State
Dept. of Taxation & Fin., 82 NY2d 135, 142 ). An inference of
abuse, however, does not arise "where a corporation was formed for legal
purposes or is engaged in legitimate business" (Credit Suisse First Boston v Utrecht-America Fin. Co., 80 AD3d 485, 488  [citation omitted]). Here, plaintiff makes no claim of
such illegality or illegitimacy with respect to BanxCorp's formation or
business. In fact, it is alleged in the antitrust complaint, drafted by
plaintiff, that BanxCorp is in the business of providing bank rate tables
listing interest rates for financial institutions (see BanxCorp v Bankrate,
US Dist Ct, D NJ, 07 Civ 3398, Wigenton, J., 2008). Plaintiff seeks to
pierce the corporate veil on the basis of assertions that Mehl dominated
BanxCorp and used its credit lines for his personal needs. These allegations do
not amount to anything that can be construed as the use of BanxCorp's corporate
form to perpetrate a wrong against plaintiff. This case is similar to Fulbright & Jaworski, LLP v
Carucci (63 AD3d 487 ), in which this Court found that a quantum meruit claim against its corporate client's president was not stated. Here, as in Fulbright, there is no allegation of facts from which it can be inferred that Mehl, as an individual, accepted services from plaintiff or that plaintiff had a reasonable expectation of compensation by Mehl. Without doubt, Mehl himself could not collect on any judgment that might be entered in favor of BanxCorp in the antitrust action as a result of plaintiff's services.
June 06, 2012
Threats Get Attorney Suspended
From the web page of the Ohio Supreme Court:
The Supreme Court of Ohio today suspended the law license of [a] Cincinnati attorney...for six months for violating the Rules of Professional Conduct in his dealings with a client who reneged on an agreement to pay [his] bill for legal services in a divorce case.
[The attorney] admitted that after the client received a distribution from her former spouse’s 401(k) account but failed to make a promised payment to him from the proceeds, then failed to return his phone calls and changed her cell phone number to avoid him, [he] went to the client’s apartment to demand payment. In the confrontation that ensued, [he] admitted that in front of the client’s six-year-old daughter he angrily threatened to file criminal charges against her unless she immediately went to her bank and withdrew funds to pay his bill. The client went to the bank but was so visibly upset that bank employees called police. [He] subsequently agreed to accept payment of a reduced amount.
In a 6-1 per curiam opinion, the court adopted findings by the Board of Commissioners on Grievances and Discipline that [his] actions violated the state disciplinary rules that prohibit an attorney from filing or threatening to file criminal charges to gain an advantage in a civil dispute, and from engaging in conduct that adversely reflects on the attorney’s fitness to practice law.
In rejecting the disciplinary board’s recommendation of a stayed license suspension as the appropriate sanction for [the] misconduct, the court found that [the attorney's] prior suspension for a previous disciplinary infraction, the vulnerability of his client, and the emotional harm she suffered outweighed mitigating factors in the case and merited an actual six-month suspension from practice.
The court’s opinion was joined by Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Terrence O’Donnell, Robert R. Cupp and Yvette McGee Brown. Justice Judith Ann Lanzinger dissented, stating that she would impose a six-month suspension with all six months stayed on conditions.
The opinion is linked here. (Mike Frisch)
June 04, 2012
Client Bound By Fee Arbitration Result
The Maine Supreme Judicial Court affirmed a fee arbitration award to a law firm that had sued a client for unpaid bills.
The client had asked for arbitration and had not initially raised a statute of limitations (six years) defense. The court here found that the client had sought the arbitration, Bar Counsel had properly referred the matter to a panel, and the client was bound by the unfavorable result.
Any defense under the statute of limitations was waived. (Mike Frisch)
February 22, 2012
No Meeting Of Minds
A doctor whose bill for dog bite treatments was not paid filed a pro se lawsuit against the attorney who handled the underlying litigation. The doctor appealed the trial court's judgment in favor of the attorney.
The Connecticut Supreme Court affirmed, finding a basis in the record to conclude that, although the doctor provided medical records to the attorney, there was no "meeting of the minds" between the two on the subject of the attorney's obligation to pay the doctor's bills. (Mike Frisch)
February 13, 2012
Law Firm Prevails In Suit On Guarantee
The New York Appellate Division for the First Judicial Department affirmed the grant of summary judgment to a law firm that sued a third party who had agreed to pay the fees of the firm's client:
Pursuant to the written guarantee between the parties, defendant guaranteed payment to plaintiff-firm in accordance with the retainer agreement between plaintiff and defendant's former girlfriend. Defendant further guaranteed to make payments to plaintiff for services rendered according to a schedule specifying three monthly payments of $25,000 and, thereafter, "monthly payments of no less than $15,000 . . . until such time as all fees incurred by [defendant's former girlfriend] pursuant to the Retainer Agreement have been paid." Defendant made payments to plaintiff in the amount of $135,000, and then stopped making payments.
We reject defendant's contention that he was not required to make additional payments under the written guarantee because plaintiff failed to advise him of expenditures of time over and above the time covered by the retainer and provide him with periodic statements of account. Under the plain and unambiguous terms of the retainer agreement, plaintiff was required to advise and mail periodic statements of account to defendant's former girlfriend, not defendant. Accordingly, the court properly denied defendant's cross motion for summary judgment dismissing the complaint Given the unambiguous terms of the retainer agreement and guarantee, there was no basis for considering parol evidence. (citations mitted)
Plaintiff's allegations that, among other things, defendant owes it "the outstanding balance" on his former girlfriend's account were sufficient to state a cause of action for breach ofthe guarantee...
February 02, 2012
No Objections To Bill
The New York Appellate Division for the First Judicial Department affirmed an award of legal fees because the client had not timely objected to the invoices:
The record demonstrates that defendants failed to dispute that plaintiff sent them the subject invoices and that no objections were lodged thereto until after this action had been commenced (see Bartning v Bartning, 16 AD3d 249, 250 ). Defendants' challenges to the reasonableness of plaintiff's fees fail. In the context of an account stated pertaining to legal fees, a firm does "not have to establish the reasonableness of its fee" (Thelen LLP v Omni Contr. Co., Inc., 79 AD3d 605, 606 , lv denied 17 NY3d 713 ), because "the client's act of holding the statement without objection will be construed as acquiescence as to its correctness" (Cohen Tauber Spievak & Wagner, LLP v Alnwick, 33 AD3d 562, 563 , lv dismissed 8 NY3d 840  [internal quotation marks omitted]; see also Tunick v Shaw, 45 AD3d 145, 149 , lv dismissed 10 NY3d 930 ).
January 24, 2012
Customary But Improper Legal Fee Charges
In a decision reversing the Circuit Court and Court of Special Appeals, the Maryland Court of Appeals reached a decision with respect to legal fees charged in foreclosure sales:
We hold that , in the absence of specific authority in the contract of indebtedness or contained in statute or court rule, it is an impermissible abuse of discretion for trustees or the lenders who 'bid in' properties to include the demand for additional legal fees for the benefit of the Trustees in the advertisement of sale, or in any other way, in that it is contrary to the duty of trustees to maximize the proceeds of the sales, and, moreover, is not in conformance with state or local rules and... is against public policy.
The court noted that the practice of charging for such fees was, prior to its decision, the customary practice in Maryland foreclosure sales. (Mike Frisch)
December 09, 2011
One Out Of Three Doesn't Earn The Fee
The New York Appellate Division for the Second Judicial Department affirmed an award of damages to a former client who had sued his attorney for breach of contract:
Pursuant to a May 28, 2002, retainer agreement, the defendant was required to perform three tasks for the plaintiff in exchange for an attorney's fee in the sum of $20,000. The defendant failed to perform two of the three agreed-upon tasks, despite having been paid in full. The plaintiff informed the defendant by letter dated February 8, 2006, that he was discharging the defendant for cause, and sought the return of any unearned fees. The defendant denied the plaintiff's request for the return of any unearned fees, prompting the plaintiff to file a pro se complaint alleging breach of contract. Based on the evidence that the defendant had not performed all of the agreed upon tasks under the terms of the retainer agreement, the Supreme Court, inter alia, denied the defendant's motion for summary judgment dismissing the complaint and, upon searching the record, awarded summary judgment to the plaintiff on the issue of liability. Following an inquest on damages, the Supreme Court entered judgment in favor of the plaintiff and against the defendant in the principal sum of $13,333.34.
On appeal, the defendant provides no valid basis for reversing the judgment. It is clear that the defendant made a promise to perform, but there was no subsequent performance with respect to two of the three tasks that formed the basis for the $20,000 attorney's fee...
June 22, 2011
Takings Clause Applies To Appointed Counsel's Representation
A South Carolina attorney who had been appointed to represent an indigent defendant in a complex criminal case advised the judge that he would stop working on the matter in light of his concern that he would not be paid beyond the statutory maximum for the representation. The judge threatened contempt and the attorney retained counsel. Eventually, the attorney agreed to continue with the case.
He did not get paid over the statutory cap. The trial judge denied excess compensation as a result of the attorney's "unprofessional behavior." He appealed the fee decision.
The South Carolina Supreme Court held that the Takings Clause of the Fifth Amendment of the United States Constitution was implicated but that the trial court did not abuse its discretion in denying fees over the cap:
We...recognize the historic obligation of an attorney to honor court-ordered appointments for the representation of indigents, while also recognizing that the attorney's service constitutes property for Fifth Amendment purposes where there is a right to counsel. We do not view these principles as mutually exclusive. In harmonizing these positions, a trial court should be guided by Bailey's approach to just compensation assessed in light of the public service foundation associated with membership in the legal profession.
The court quoted with approval this statement from the Kansas Supreme Court:
Attorneys make their living through their services. Their services are the means of their livelihood. We do not expect architects to design public buildings, engineers to design highways, dikes, and bridges, or physicians to treat the indigent without compensation. When attorneys' services are conscripted for the public good, such a taking is akin to the taking of food or clothing from a merchant or the taking of services from any other professional for the public good. And certainly when attorneys are required to donate funds out-of-pocket to subsidize a defense for an indigent defendant, the attorneys are deprived of property in the form of money. We conclude that attorneys' services are property, and are thus subject to Fifth Amendment protection.
A dissent by Justice Pleicones would find an abuse of discretion by the trial judge:
As noted by the majority, the sole basis for denying Appellant an award of fees in excess of the statutory limit was his unprofessional conduct. In my opinion, the trial court abused its discretion in failing to consider, as required by the statute, whether the requested payment in excess of the limit was necessary to provide effective assistance of counsel or whether the services provided were reasonably and necessarily incurred. In my opinion, the trial court should have allowed Appellant to submit evidence as to the reasonableness of his fees, and reviewed it accordingly. Even in light of Appellant's undeniably petulant behavior, I would find the trial court abused its discretion and would remand the matter with instructions to evaluate the necessity for and worth of Appellant's services.
In South Carolina, the statutory cap is $3,500. (Mike Frisch)
April 11, 2011
A Question Of Fact
A case summary from the Kentucky Court of Appeals:
The Court reversed and remanded a summary judgment in favor of a lawyer and law firm on appellant’s claim for reimbursement of all or part of a $10,000 fee paid during representation of appellant in a criminal matter after he plead guilty in lieu of going to trial. The Court held that the written fee agreement between the parties for trial preparation and trial, consisting of letters between the parties, was ambiguous as to the question of whether appellant would be entitled to a partial reimbursement of the subject fee in the event that the case did not proceed to trial. In light of the ambiguous nature of the parties’ fee agreement, there were genuine issues of material fact that could not properly be resolved via summary judgment. Because the parties did not create a fee contract that addressed the issue of who was entitled to what in the event that a trial did not take place, the question would have to be resolved by a finder of fact.
The opinion is linked here. (Mike Frisch)