Tuesday, August 7, 2012
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.
Tuesday, July 31, 2012
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.
Wednesday, June 13, 2012
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.
Wednesday, June 6, 2012
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)
Monday, June 4, 2012
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)
Wednesday, February 22, 2012
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)
Monday, February 13, 2012
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...
Thursday, February 2, 2012
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 ).
Tuesday, January 24, 2012
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)
Friday, December 9, 2011
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...
Wednesday, June 22, 2011
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)
Monday, April 11, 2011
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)
Friday, January 28, 2011
The New York Appellate Division for the First Judicial Department reversed an order dismissing the claim of discharged counsel for a share of fees:
It appears that plaintiffs discharged appellants less than five months after the action was commenced. Whether or not appellant was investigating and conducting discovery as to other potential defendants, as appellant claims, cannot be discerned from the record. The parties submitted starkly contrasting versions of the events which led to appellant's discharge. The general rule is that a hearing is required to determine if an attorney was discharged for cause or without cause before the completion of his services (see Hawkins v Lenox Hill Hosp., 138 AD2d 572 ). It is not clear from the record whether or not the motion court ever provided appellant with the opportunity to present and cross-examine witnesses. Accordingly, the matter is remanded for a hearing before the motion court to determine the issue of whether or not appellant was discharged for cause.
The fee entitlement claim was brought in the underlying civil case rather than as a separate action. (Mike Frisch)
Friday, December 24, 2010
From the web page of the Rhode Island Supreme Court:
NAIAD Inflatables of Newport, Inc. (NAIAD), engaged the law firm of Duffy & Sweeney, Ltd. (D&S) to defend it in a civil lawsuit brought in 2005 by the plaintiff, Stafford J. King, III. Soon, however, NAIAD became delinquent in its financial obligations to D&S. Concerned with both a large receivable and a looming trial date, D&S filed a motion to withdraw from the case. This motion was unopposed by the client or by opposing counsel. A justice of the Superior Court denied the firm’s motion. On the grounds of abuse of discretion by the hearing justice, the law firm timely appealed.
D&S filed a motion to withdraw based upon NAIAD’s failure to fulfill its financial obligations under the engagement agreement. Supported by an affidavit of counsel, the motion was properly certified and forwarded to all parties of interest in compliance with the Rules of Civil Procedure. Providing its client with ample notice, D&S made numerous requests for payments, sent reminder invoices, and warned NAIAD that D&S—based on a signed engagement agreement between the parties—would seek to withdraw as counsel if the client failed to bring the balance current. Further, D&S informed NAIAD that it would have the right to object before the Superior Court in the event that such a motion was filed. Denying the unopposed motion, the hearing justice cited Article V, Rule 1.16 of the Supreme Court Rules of Professional Conduct, and ruled that granting the motion would have a “materially adverse effect” on the interests of the clients.
In reversing the Superior Court’s denial of counsel’s motion to withdraw, the Supreme Court said that the hearing justice did not accord adequate weight to the hardship and substantial financial burden that would befall D&S if the law firm were required to continue in its representation of a nonpaying client. Moreover, the Court was of the opinion that the law firm’s request to withdraw was not presented at such a critical point in the litigation process that withdrawal would be detrimental to either the court or the client.
The opinion is linked here. (Mike Frisch)
Thursday, August 26, 2010
The Oregon Supreme Court has held that a prevailing pro se attotney in a case seeking disclosure of public records is entitled to reasonable attorney's fees:
...we agree with plaintiff that the term "attorney fees," as used in ORS 192.490(3), means the reasonable value of legal services provided by an attorney in seeking the disclosure of public records. Plaintiff is a practicing attorney who performed legal services in pursuit of disclosure of public records, and plaintiff is therefore entitled to recover from defendant the reasonable value of those services, despite the fact that he acted pro se.
Wednesday, July 28, 2010
Thursday, July 8, 2010
The Legal Ethics Committee of the District of Columbia Bar has issued an opinion explaining the proper handling of flat fees. the opinion considers the impact of a recent opinion of the D.C. Court of Appeals on the subject. The summary:
In its decision in In re Mance, 980 A.2d 1196 (D.C. 2009), the District of Columbia Court of Appeals held that, absent informed consent from the client to a different arrangement, a lawyer must deposit a flat or fixed fee paid in advance of legal services in the lawyer’s trust account. Under Mance, such funds must remain in the lawyer’s trust account until earned unless the client gives informed consent to a different arrangement. This Opinion provides guidance for the Bar concerning these rulings.
The lawyer and client may agree on how and when the attorney is deemed to have earned some, or all, of the flat fee and thereby entitled to transfer trust funds into the lawyer’s operating account. Such an agreement must bear a reasonable relationship to the anticipated course of the representation and must avoid excessive “front–loading.” A written agreement or a writing evidencing the agreement is strongly recommended but not mandatory. In the absence of any agreement with the client regarding milestones by which the lawyer will have earned portions of the fixed fee, the lawyer will have the burden to establish that whatever funds that have been transferred to the lawyer’s operating account have been earned.
Alternatively, a lawyer may place unearned funds in an operating account provided that the lawyer obtains informed consent from the client as provided in Rule 1.15(e). In order to obtain such consent, the lawyer must explain to the client that the funds may also be placed and kept in a trust account until earned and that placement in an operating account does not affect a lawyer’s obligation to refund unearned funds if the client terminates the representation. The lawyer should also explain the additional protection offered by a trust account. For the lawyer’s and client’s protection, these disclosures should be in writing, but the Rules do not mandate a writing.
The Mance opinion is linked here. (Mike Frisch)
Wednesday, April 14, 2010
The dismissal of a suit involving a dispute between attorneys who had jointly represented a client was affirmed by the New York Appellate Division for the First Judicial Department. The court described the claims:
At issue is the propriety of the motion court's dismissal of an attorney's claims under the theories of quantum meruit, as well as tortious interference with advantageous economic relationships. Both plaintiff Robert Steinberg and defendant Stanley Schnapp are attorneys admitted to practice in New York. Non-party Leon Baer Borstein also is an attorney, and was the preliminary executor of the estate of Isi Fischzang.
At least three documents relevant to this appeal appear in the record. In an undated and unsigned writing, Borstein advised that he had retained both Steinberg and Schnapp "as my attorneys with respect to all legal proceedings and asset administration concerning the wills, assets and estate of the late Isi Fischzang." Borstein also prepared a document dated September 2007, and entitled "Contract of Employment of Attorneys at Law." It provided that Steinberg was to serve as "trial counsel for all litigation issues," while Schnapp was designated as "the general counsel for the fiduciary and estate, with respect to all litigation proceedings concerning the wills, assets and estate of the late Isi Fischzang." There is also a June 2007 document, offered in reply papers from Schnapp, and signed by Borstein, in which Borstein also advises that he retained both Schnapp and Steinberg. In none of these documents, or in any other contained in the record, is there any suggestion of privity between Schnapp and Steinberg.
The arrangement among the attorneys did not last long, and on March 12, 2008 Steinberg instituted the action which gives rise to this appeal. He asserted two causes of action against Schnapp for quantum meruit and interference with advantageous economic relationships. In the quantum meruit cause of action he alleged that he had performed professional legal services for Schnapp at Schnapp's "special instance and request," but in connection with the Fischzang estate. He further alleged that he was orally retained by Schnapp, and that Borstein had confirmed the retainer in a writing. The services for which he seeks payment were services performed in conjunction with the estate, including two appearances in Surrogate's Court and negotiations with lawyers representing the decedent's widow.
In the claim for tortious interference Steinberg alleges that he was fired because the "underlying client" (Borstein) had become dissatisfied with the delays in the probate of the estate, but that Schnapp fired Steinberg to shift the blame for the delays to Steinberg. Notably, Steinberg acknowledges that the "underlying client" could have requested his discharge "whimsically or capriciously or for any reason or for no reason, but the discharge would remain without cause.'" His concern that there is an intimation that his termination was "for cause" apparently provides much of the impetus for this litigation.
As an at-will employee of the client, the attorney has no cause of action against co-counsel:
Steinberg intimates in his complaint that Schnapp failed to communicate certain problems concerning the probate of the estate to Borstein, but left Steinberg to incur the client's dissatisfaction. His concerns are amplified in his affidavit in opposition to the motion for summary judgment, in which he suggests that any fees he earned are being withheld as a result of allegations made by Schnapp concerning the quality of his work. The specifics are not offered. At best, Steinberg is suggesting that Schnapp made an inaccurate statement about the quality of Steinberg's work, which statement led Borstein to terminate the attorney relationship, a relationship that is terminable at will, in any event. Such statements would be neither tortious nor criminal.
Thursday, March 18, 2010
The Maryland Court of Appeals addressed the implications of a fee sharing agreement between two attorneys pursuing a medical malpractice case. Attorney One referred the matter to Attorney Two early in the prosecution of the case. They entered into an arrangement by which the division of fees was based on the "anticipated division of services to be rendered." Attorney Two had primary responsibility and Attorney One was to assist as requested by Attorney Two.
While the claim was in negotiations, Attorney Two advised the clients that they might have a legal malpractice case against Attorney One. The underlying medical malpractice case then settled for $225,000. Attorney Two paid Attorney One one-half of the fee.
Attorney One then sued Attorney Two on a variety of contract and tort theories alleging breach of good faith, fair dealing and disclosure duties. The circuit court granted summary judgment to Attorney Two. The Court of Special Appeals affirmed. Here, the Court of Appeals agreed, concluding that Attorney Two fulfilled her covenant of good faith and fair dealing by delivering to Attorney One his proportionate share of the fee.
The court held that the fee sharing agreement did not establish a joint venture with the resulting fiduciary obligations that would apply to such ventures. The court agreed that the tort claims failed because, among other things, Attorney Two "could not tortiously interfere with an economic relationship to which she was a party." (Mike Frisch)
Tuesday, March 9, 2010
A law firm that had represented a client sued the client for unpaid fees. The plaintiff firm also sued the law firm that had referred the client, claiming that the defendant law firm had represented that their clients (the Nassers) guaranteed payment of their fees. Plaintiff appealed the dismissal of claims against the referring law firm.
The New York Appellate Division for the First Judicial Department held that the claims were viable:
The complaint alleges that defendants-respondents represented to plaintiff law firm that they had authority from the Nassers to promise payment of $75,000 of the legal fees incurred by plaintiff's client when, in fact, they lacked the authority to bind the Nassers. Thus, the complaint alleges a viable claim for breach of the implied warranty of authority. The complaint also alleges that defendants-respondents falsely represented to plaintiff law firm that they specifically discussed the subject matter of their authority and representations with the Nassers. Thus, the complaint alleges a viable clam for tortious misrepresentation of authority and assurances of payment.
To the extent the motion court relied on the principle of apparent authority, lack of consideration and the statute of frauds to dismiss these causes of action, such was error. The doctrine of apparent authority is irrelevant because the fourth and fifth causes of action are not seeking to hold the principals (the Nassers) liable on the ground that defendants-respondents had apparent authority from the Nassers to make promises of payment. Rather, these causes of action are seeking to hold the agents, defendants-respondents, liable for contracts or representations they purported to make on behalf of the principal (the Nassers) while acting without authority from the principal. Therefore, the fact that the Nassers never manifested to plaintiff law firm that defendants-respondents were authorized to act on the Nassers' behalf has no bearing on the viability of the fourth and fifth causes of action. Moreover, regardless of whether or not there was consideration running to the Nassers, defendants-respondents can still be held liable for their own tortious conduct in making deliberate misrepresentations of fact that they had authority to make the promises that the Nassers would pay $75,000 of the legal fees incurred by plaintiff's client (see Restatement (Third) of Agency §§ 6.10, 7.01 ). In addition, the statute of frauds does not come into play since the fourth and fifth causes of action are not seeking to enforce the unwritten agreement by the Nassers to pay plaintiff's client's legal fees against the Nassers. These causes of action state a claim against the defendants-respondents regardless of whether there is an enforceable contract with the Nassers.
The sixth cause of action against defendants-respondents for tortious interference with defendant Jacques Nasser's contract with plaintiff law firm to pay $37,500 of the legal fees incurred by plaintiff's client was also improperly dismissed by the motion court. In order for there to be a viable claim there must be a valid contract between Jacques Nasser and plaintiff law firm. Pursuant to General Obligations Law § 5-701(a)(2), every agreement, promise or undertaking which is a special promise to answer for the debt of another is void unless it is in writing. Under a long-standing exception to the statute of frauds, however, the promise need not be in writing if it is supported by new consideration moving to the promisor and beneficial to him, and the promisor has become in the intention of the parties a principal debtor primarily [*3]liable (see Martin Roofing v Goldstein, 60 NY2d 262, 264 , cert denied 466 US 905 ; Carey & Assoc. v Ernst, 27 AD3d 261 ). At the very least, the allegations in the complaint raise an issue of fact concerning whether Jacques Nasser agreed to act as a guarantor in the event plaintiff's client did not pay her legal fees, in which case there was no enforceable contract, or whether in seeking to secure the benefit of the cooperation of plaintiff's client in connection with the lawsuit against him by her employer, Jacques Nasser offered to lift the burden of the obligation to pay legal fees from plaintiff's client and pay the law firm directly, in which case the contract would not be barred by the statute of frauds (see Rowan v Brady, 98 AD2d 638, 639 ). Therefore, the sixth cause of action for tortious interference with contract is reinstated.
Finally, the motion court erroneously dismissed the seventh cause of action against defendants-respondents which alleges tortious interference by defendants-respondents with the attorney-client relationship between plaintiff law firm and its client, defendant Srour. Insofar as the complaint alleges that defendants-respondents, knowing that Srour was represented by plaintiff law firm, met with Srour alone, without informing plaintiff law firm of the meeting, and approximately three days later, Srour discharged plaintiff law firm, it is sufficient at this stage of the proceedings, to state a viable claim, and therefore the seventh cause of action is reinstated.