Tuesday, February 3, 2015
The New York Appellate Division for the First Judicial Department affirmed dismissal of a claim brought against O'Melveny & Myers
Plaintiffs alleged that defendant attorneys (OM & M), who represented their preparatory school in an earlier federal action alleging the school's negligent supervision and retention of a football coach, made intentional misrepresentations in the federal action that proximately caused plaintiffs' attorneys to spend unnecessary attorney hours to establish an equitable estoppel argument opposing the school's motion to dismiss on statute of limitations grounds. The parties to the federal action ultimately entered into a confidential settlement, and plaintiffs voluntarily discontinued their claims, with prejudice, as against all the named defendants therein. Plaintiffs' counsel in the federal action had a contingency fee arrangement with the plaintiffs, and was evidently compensated accordingly.
Even assuming any unwarranted attorney hours were, in fact, expended by plaintiffs' counsel on account of OM & M's challenged representations made to the court, any burden in rendering such additional attorney hours, and corresponding injury, was shouldered by plaintiffs' counsel, who worked pursuant to a contingency fee. Plaintiffs, upon settlement of their federal action, paid the same attorney fees to their counsel regardless of the hours their counsel had expended on the matter. Thus, plaintiffs have not alleged facts as would show OM & M's alleged misrepresentations proximately caused them any injury (see Strumwasser v Zeiderman, 102 AD3d 630 [1st Dept 2013]). Indeed, regardless of the alleged deceit by OM & M in federal court, the burden always remained with plaintiffs in such court to establish, in the first instance, a basis for their equitable estoppel argument, which warranted the pre-dismissal motion early discovery they conducted. To the extent plaintiffs' discovery was inhibited at all due to alleged lost notes prepared by one of the school's initial investigators, the attorney hours expended on such issue were not attributable to the alleged OM & M misrepresentations. Moreover, plaintiffs' spoliation motion was pending in the federal court, and a final determination of such motion was interrupted by plaintiffs' settlement of the action.
Plaintiffs' second cause of action, alleging OM & M was unjustly enriched by its receipt of attorney fees from its client, and that such fees should be disgorged in light of the alleged unwarranted attorney hours OM & M caused plaintiffs' counsel to expend in the federal action, fails to state a claim, as plaintiffs have not shown how OM & M's alleged fraud enriched OM & M at plaintiffs' expense (see Edelman v Starwood Capital Group, LLC, 70 AD3d 246, 250-251 [1st Dept 2009], lv denied 14 NY3d 706 ).
Law360 reported on the trial court disposition. (Mike Frisch)
Saturday, January 31, 2015
The United States Court of Appeals for the District of Columbia Circuit affirmed the dismissal of a law firm's suit for fees.
In August 2010, Stephen R. Berry of Berry Law advised Kraft that it might have an antitrust claim worth tens of millions of dollars against News Corporation, News America Marketing FSI LLC, and News America Marketing In-Store LLC (collectively “News Corp.” or “News”). (All referenced facts come from the complaint.) The claim related to possible monopolization and tying in the “sale of in-store promotion services and free-standing-insert coupons placed in newspapers.” Kraft’s chief litigation counsel, Douglas Cherry, asked Berry for further legal analysis of the possible claim.
Berry Law then prepared a 42-page evaluation memorandum for Kraft’s top management analyzing liability and damages issues. Berry alleges that he completed that memo by November 10, 2010. At about the same time, Cherry noted that the matter was “moving pretty fast” and that he wished to brief Kraft’s general counsel about the matter. The complaint says that “upon information and belief, [the evaluation memorandum] was forwarded at the very least to Kraft’s General Counsel in early 2011.” It was presumably Cherry who did the forwarding.
In response to an email from the law firm seeking a fee agreement, Kraft's counsel stated in part
we have never paid for that work as far as I know for any outside counsel.
The firm later claimed fees due in an amount over $191,000 on a theory of implied-in-fact contract,
To state a claim for breach of an implied-in-fact contract, Berry Law must plausibly allege that it rendered Kraft valuable services; that Kraft accepted, used, and enjoyed those services; and that the circumstances “reasonably notified” Kraft that Berry “expected to be paid” by Kraft...
Kraft told Berry that it would not compensate him for work completed prior to management approval. No compensation is due where the “plaintiff did not contemplate a personal fee, or the defendant could not reasonably have supposed that he did.” Bloomgarden, 479 F.2d at 212. Rather, in view of Kraft’s unequivocally expressed position on preliminary work, Berry cannot reasonably have contemplated a fee for work completed before Kraft moved forward, nor could Kraft reasonably have known Berry contemplated any such payment. Instead, Berry completed the memorandum and other legal work in the hope that Kraft would retain him as counsel in the event that Kraft “moved forward.” Because Berry Law’s “services were rendered simply in order to gain a business advantage,” its quasicontract claim fails. Id. at 211.
Thursday, November 20, 2014
An attorney was properly paid a fee of over half a million dollars for his work in a contested probate matter, according to a decision of the New York Appellate Division for the Second Judicial Department
Karen Cullin retained James Spiess to represent her in a contested probate proceeding. The parties entered into a contingent fee agreement, pursuant to which Spiess agreed to represent Cullin for an initial retainer of $5,000 plus 33 % of any proceeds he would recover on her behalf, by settlement or trial, up to a maximum fee of $600,000. Just before Cullin was to be examined by potential objectants pursuant to SCPA 1404, Cullin directed Spiess to settle the probate proceeding as expeditiously as possible. Spiess negotiated a settlement providing, inter alia, for the propounded instrument, which primarily benefitted Cullin, to be admitted to probate in exchange for a minimal payment to the objectants. Speiss thereafter was paid, from estate funds, fees in the amount of $585,000.
The court here relied upon a recent (and, in my view, shamefully pro-lawyer) decision of the Court of Appeals in affirming the reasonableness of the fee
Here, the evidence supports the Surrogate's conclusion that the fee paid to Spiess was reasonable in light of the difficulty of the issues involved, the favorable terms of the settlement to which Spiess's efforts and expertise contributed, and the significant risk that Spiess took that probate of the propounded instrument would be denied and that he would not earn any fees other than the initial retainer of $5,000 (see generally Matter of Lawrence, ______ NY3d ______, 2014 NY Slip Op 07291, 9-10 ). Under the circumstances, we perceive no basis upon which to disturb the Surrogate's determination with respect to Spiess's attorney's fee.
Tuesday, October 28, 2014
The long running and hotly-contested dispute between the heirs of real estate magnate Sylvan Lawrence and the Graubard Miller law firm has been resolved in favor of the law firm by the New York Court of Appeals.
The court enforced a revised contingent fee retainer agreement found "unconscionable" by the lower court that results in a fee of $44 million for five months work on top of $18 million paid in hourly fees.
The court noted that the underlying estate litigation unexpectedly settled when the firm uncovered "smoking gun" evidence shortly after entering into the revised agreement.
Beginning in 1983, defendant law firm Graubard Miller (Graubard or the law firm) represented Alice Lawrence (Lawrence) and her three children in litigation arising from the death of her husband and their father, Sylvan Lawrence (decedent), a real estate developer. At the time of decedent's death in 1981, his company owned commercial real estate in New York City valued at an estimated $1 billion. Decedent's brother and lifelong equal business partner, Seymour Cohn (Cohn), was executor of the estate. Cohn resisted selling decedent's properties and distributing the proceeds to Lawrence and the children, which caused Lawrence to bring suit in 1983. For over two decades, she and Cohn (and after he died in November 2003, his estate) battled in court (hereafter, the estate litigation)...
The estate litigation came to an abrupt and unexpected end on May 18, 2005, when the Cohn estate agreed to settle for over $100 million, a sum about twice what Graubard assessed the remaining claims to be worth. There quickly followed, though, this dispute between Lawrence and Graubard with respect to the law firm's fee, and the validity of certain gifts made by Lawrence to three Graubard partners in 1998. For the reasons that follow, we hold that the parties' revised retainer agreement was neither procedurally nor substantively unconscionable and is therefore enforceable; and that the Lawrence estate's claim for return of the gifts is time-barred.
The court found that a revised retainer that ended up substantially benefiting the firm was not unconscionable.
Further, the client was "no naif."
We agree with Graubard that a hindsight analysis of contingent fee agreements not unconscionable when made is a dangerous business, especially when a determination of unconscionability is made solely on the basis that the size of the fee seems too high to be fair...
It is in the nature of a contingency fee that a lawyer, through skill or luck (or some combination thereof), may achieve a very favorable result in short order; conversely, the lawyer may put in many years of work for no or a modest reward.
Notably absent from the court's opinion is any discussion of the ethics rules governing fees and gifts.
A concurring and dissenting opinion would find that the return of gift claim is not time-barred.
The court here reviewed the decision of the Appellate Division for the First Judicial Department remanding the matter to the Surrogate for further findings.
The Appellate Division described the situation
In 1983, Mrs. Lawrence retained the Graubard firm to represent her in connection with her deceased husband's estate on an hourly fee basis, which retention was confirmed by letter dated August 4, 1983. Thereafter, the Graubard firm billed Mrs. Lawrence over $18 million in legal fees incurred in litigation instituted against the executor of the estate concerning his administration of the estate, as well as other matters. During that period more than $350 million in distributions were made to the beneficiaries of the estate. In addition, in December 1998, Mrs. Lawrence paid three of the firm's partners bonuses or gifts totalling over $5 million, plus approximately $2.7 million in gift taxes on such payments.
In November 2004, according to Mrs. Lawrence, she noticed that her legal bills were increasing to almost $1 million per quarter and asked about the possibility of entering into a new fee arrangement. As a result, in January 2005, a modified retainer agreement was entered into which provided, in pertinent part, that, commencing January 1, 2005, the firm would continue to bill Mrs. Lawrence on an hourly basis for services rendered with an annual cap of $1.2 million, exclusive of disbursements. In the event any additional monies were distributed to the beneficiaries of the estate, or Mrs. Lawrence settled the litigation with the executor's estate, the Graubard firm was to be paid from Mrs. Lawrence's share of such monies 40% of the total distributed to the beneficiaries, minus the total amount previously paid by her pursuant to the one-year, $1.2 million retainer. Prior to the revised retainer agreement, Mrs. Lawrence had personally negotiated with her nephew, the late executor's son, and received a $60 million offer from the executor's estate, but such offer did not result in a settlement.
On May 18, 2005, about four and a half months after the modified retainer agreement was entered into, the Graubard firm reached a settlement in the litigation against the former executor's estate in which it agreed to pay the Lawrence estate approximately $104.8 million. Shortly thereafter, Mrs. Lawrence retained new counsel and refused to pay the Graubard firm's fee.
On August 5, 2005, the Graubard firm filed a petition in Surrogate's Court to compel payment of its legal fees, asserting claims against Mrs. Lawrence for breach of the 2005 retainer fee agreement in the amount of 40% of not less than $110.3 million plus 40% of any additional sums paid to the estate, less $348,272.78 paid by Mrs. Lawrence to Graubard on May 6, 2005, together with statutory interest, or alternatively, quantum meruit legal fees in the same amount. The petition also asserted claims against the current executor, Richard Lawrence, for tortious interference with contract in inducing his mother's breach of the retainer agreement and to recoup for legal services benefitting the estate.
It is my view that this dissenting opinion from Judge Catterson with respect to the Appellate Division remand got it exactly right.
Because I believe that as a matter of law a legal fee of $40 million for five months work following years of litigation which was fully compensated on an hourly basis, is unconscionable, I respectfully dissent and would void the agreement embodying that fee. Further, because of the allegations by plaintiff that the defendants violated certain provisions of the Code of Professional Responsibility, I would refer the defendants to the Departmental Disciplinary Committee.
I cannot agree with the majority's view that the undisputed facts of this case are insufficient for a ruling of unconscionability as a matter of law. Specifically, it is undisputed that, for almost the entire year prior to January 2005, Graubard focused on litigating an accounting claim after Alice Lawrence (Alice) declined a $60 million dollar settlement offer on that claim. It is also undisputed that five and half months after signing the modified retainer agreement containing the 40% contingent fee provision, Graubard finalized a settlement of approximately $100 million dollars on the claim. It then sought $40 million as its contingent fee.
In other words, having billed Alice for every hour expended on work in connection with the claim after Alice left the $60 million offer on the table, Graubard now seeks to retain every dollar over and above that amount as its contingent fee, essentially divesting Alice of any benefit she may have gained from Graubard's legal services. The majority's contention that the circumstances underlying the agreement must be further fully developed is incomprehensible in the face of this substantive unconscionability.
For these reasons as set forth more fully below, I believe that, the agreement embodying that fee should be declared void.
This decision is a huge win for the lawyers but a lamentably pro-lawyer view of unconscionable fees. (Mike Frisch)
Friday, October 24, 2014
A law firm was entitled to its legal fees, notwithstanding errors made by its original counsel, according to a decision of the New York Appellate Division for the First Judicial Department:
The motion court properly concluded that the varying figures given by R & M during this litigation, as to the total outstanding fees due, did not undermine R & M's prima facie case for an account stated, inasmuch as the discrepancies were plainly attributable to the incompetence of its original attorney in drafting the motion papers on its previous motions for summary judgment, which, inter alia, did not include R & M's complete billing invoices from the past, and records of off-sets that the parties had agreed to. The monthly invoices and records - the timely receipt of which Sakow never disputed - were never challenged by Sakow as to accuracy or reasonableness until the instant litigation was commenced years later. Such circumstances, including that Sakow continued to make payments towards the total fees accrued and billed, without reservation, belie the belated challenges to the reasonableness of the invoiced fees...
The record reflects that R & M represented Sakow on many legal matters since 1989, and that R & M would send regular, detailed monthly invoices to account for the fees claimed. The record also demonstrates that Sakow never denied receipt of invoices supporting the "balance forward" figure referenced in the March 7, 2002 invoice, that no objection was raised as to such invoices, and that Sakow continued to make regular payments towards the invoices.
Wednesday, October 1, 2014
When lawyers sue their former clients for unpaid fees, the result often is a return volley alleging legal malpractice.
The New York Appellate Division for the First Judicial Department dealt with such a situation in a decision issued yesterday.
The former client
The Dille Family Trust (the Trust), of which defendant is trustee, owned trademarks and copyrights for "Buck Rogers." Two of the Dille family members are beneficiaries of the trust; their grandfather's syndicate had obtained the Buck Rogers trademark and copyrights. The syndicate had hired Philip Nowlan to create comic strips based on the character, and his heirs started cancellation proceedings to terminate the syndicate's trademark rights and obtain the rights for themselves. The beneficiaries of the Trust retained plaintiff law firm to handle intellectual property matters, including the cancellation action.
The trial court erred in part
Contrary to the motion court's conclusion, there was a valid fee agreement between plaintiff and the Trust. The better practice would have been to send the engagement letter to the trustee, rather than only to the beneficiaries. However, the record, including email exchanges between the trustee and plaintiff, shows that the trustee was well aware of and approved of the beneficiaries' authority to act on the Trust's behalf with regard to plaintiff's retainer and representation (see Granato v Granato, 75 AD3d 434 [1st Dept 2010]). It is irrelevant that the original engagement letter was not signed by the client (see 22 NYCRR 1215.1[a]).
While the court found a triable dispute over the bill, the legal malpractice counterclaim failed
Regarding the legal malpractice counterclaim, assuming that plaintiff's conduct, in failing to complete a chain-of-title report or failing to resolve the underlying intellectual property disputes before withdrawing, amounts to negligence, the Trust failed to demonstrate causation. The Trust failed to show how it would have successfully opposed the underlying trademark cancellation proceeding, or would otherwise have protected its intellectual property rights, but for plaintiff's omissions.
In addition, the resulting inability to efficiently market the trademarks is too speculative to constitute the "actual ascertainable damages" required to support the malpractice counterclaim.
Beneficiary Flint Dille's bare allegation that he and plaintiff had agreed to a $25,000 fee cap is unsupported in the engagement letter sent to Dille listing an hourly rate or by anything else in the record, and therefore cannot establish a legal malpractice counterclaim. (citations omitted)
Thursday, September 4, 2014
The District of Columbia Court of Appeals has held that a suit initiated by a law firm for unpaid fees must be sent to the Bar's arbitration program on the former client's demand.
Judge Fisher noted that
BTP, a biotechnology firm, retained [Ludwig & Robinson] as counsel in March 2011 to help resolve a trade secret dispute. The dispute was settled in May 2012, L&R having billed BTP on a monthly basis during the course of its representation. By June 2012 L&R claimed that BTP owed approximately $1.7 million in outstanding legal fees, disbursements, and expenses. In January 2013 L&R brought suit to collect its fees.
Several weeks later, BTP responded to the complaint by filing a motion to stay the trial court proceedings and compel arbitration. In addition to claiming that L&R had expressly agreed to arbitrate the fee dispute, BTP argued that a binding agreement to arbitrate had been formed by operation of law. BTP cited Rule 8 of the D.C. Bar‟s Attorney/Client Arbitration Board ("ACAB"), which states that "if a client files a petition to arbitrate a fee dispute with a lawyer, the lawyer is deemed to have agreed to arbitrate."
Significantly, the court upheld the Bar's mandatory arbitration regime
L&R contends that this court lacked authority to promulgate Bar Rule XIII. Quite to the contrary, this court possesses broad authority to regulate the practice of law, deriving much of this power from the District of Columbia Court Reorganization Act of 1970. A portion of that Act, passed by Congress, provides that "[t]he District of Columbia Court of Appeals shall make such rules as it deems proper respecting the examination, qualification, and admission of persons to membership in its bar, and their censure, suspension, and expulsion." D.C. Code § 11-2501 (a) (2012 Repl.). Beyond this broad statutory grant of authority, the court possesses significant inherent authority as well. In Sitcov v. District of Columbia Bar, we relied upon the "almost universally accepted" proposition "that the highest court in the jurisdiction is imbued with the inherent authority to define, regulate, and control the practice of law in that jurisdiction." 885 A.2d 289, 297 (D.C. 2005) (quoting Brookens v. Comm. on Unauthorized Practice of Law, 538 A.2d 1120, 1125 (D.C. 1988)).
The court rejected the contention that arbitration violated the law firm's Seventh Amendment jury trial rights.
The trial court had erred in declining to enforce the valid arbitration agreement. (Mike Frisch)
Wednesday, August 27, 2014
In a fee dispute between an associate attorney and his former law firm over contingent fees, the Indiana Court of Appeals held that the associate was not unjustly by retaining the full fees generated by the cases.
The court majority relied on four actors
the clients chose to continue with the departing associate, there was no agreement between the firm and associate ("sophisticated parties") as to the consequences of his departure, there were no covenenants not to competeor provisions for file ownership, and the firm was well-compensated for the associate's work.
The majority rejected the trial court's suggestion that the firm could sue the clients.
A dissent by Justice Crone would remand to award the firm fees based on quantum meruit
I respectfully dissent. While it may be true that C&M was "very well compensated" for Daly’s time while he was a salaried associate at the firm, that compensation is simply irrelevant to C&M’s quantum meruit claim for the 1000-plus hours that C&M’s attorneys contributed to the twenty-four cases that Daly took with him to Golitko & Daly.
Tuesday, July 8, 2014
A lawyer who had consented to disbarment in Pennsylvania received a public censure as reciprocal discipline in New Jersey.
While that might seem unusual, there were some rather unusual circumstances
The record in the matter now before us reveals that respondent’s paralegal, Bonnie Sweeten, had intercepted and concealed from respondent the petition for discipline, the equivalent of our formal ethics complaint, sent to respondent by the Pennsylvania ethics authorities. Sweeten explained her actions in an affidavit, the partial contents of which are contained in an August 25, 2009 Joint Stipulations of Fact and Law between respondent and the Pennsylvania disciplinary authorities...
The affidavit of the paralegal admited to concealing the disciplinary matter from the attorney.
However, the Pennsylvania Supreme Court later vacated the resulting suspension and remanded the matter.
Thereafter, the attorney consented to disbarment of her own accord.
The paralegal achieved a level of notoriety by a false abduction claim and embezzling her way to Disney World and then Club Fed, as reported by the Huffington Post.
But no suspension for the attorney in New Jersey based on the Pennsylvania consent for reasons the Disciplinary Review Board ("DRSB") explains
In conclusion, respondent is guilty of two separate offenses each of which would, on its own, warrant the imposition of a reprimand: practicing law while on inactive status and failing to supervise non-attorney staff. In addition, she failed to communicate with a client, used misleading letterhead and business account checks, engaged in conduct prejudicial to the administration of justice and failure to safeguard client funds. We conclude that a censure sufficiently addresses the totality of respondent’s misconduct.
The Office of Attorney Ethics ("OAE") had sought a suspension with reinstatement conditioned on reinstatement in Pennsylvania, which would be tantamount to disbarment. Remarkably, the attorney did not even see fit to participate in the New Jersey proceedings.
I can understand the position of the OAE, which would not impose disbarment because there is no possibility of reinstatement in New Jersey. OAE's proposed sanction is thus quite reasonable.
The DRB's recommendation makes no sense to me at all. And the court just rubber-stamped it.
It is my experience that an attorney (particularly if represented by counsel) does not consent to disbarment unless disciplinary counsel has the goods. The idea of reciprocal discipline is basically that other jurisdictions respect and enforce a consent unless there is some grave injustice or due process violation.
I don't see any such suggestion here.
I find it quite disheartening that the New Jersey authorities would take a consent disbarment and convert it into no suspension at all as reciprocal discipline.
Notice to all Pennsylvania attorneys who are thinking about engaging in misconduct: join the New Jersey Bar. (Mike Frisch)
Friday, May 16, 2014
An Illinois Hearing Board has proposed a suspension of three years and until further order in a case involving misuse of entrusted funds.
The attorney's explanation?
His mother did it:
Although Respondent denied committing misconduct, he acknowledged using funds that had been improperly transferred from his IOLTA account into his business account. Respondent claimed his mother, who was 82 years of age at the time of the hearing, transferred the funds without his knowledge. Respondent also claimed his mother was responsible for fabricating the false bank statements he submitted to the ARDC.
The Hearing Board did not believe the testimony of Respondent and his mother and found Respondent committed all of the charged misconduct. Specifically, the Hearing Board found Respondent failed to promptly deliver to a client or third person funds that the client or third person is entitled to receive, engaged in conduct involving dishonesty, fraud, deceit or misrepresentation, knowingly made a false statement of material fact to a third person, knowingly made false statements of material fact in connection with a disciplinary matter, and engaged in conduct prejudicial to the administration of justice.
The Hearing Board found a substantial amount of aggravation, including Respondent's false testimony in this proceeding, pattern of dishonesty, and failure to recognize his misconduct. There was minimal mitigation. After considering the proven misconduct and case law, the Hearing Board recommended that Respondent be suspended for three years and until further order of the court and that he be required to pay restitution within six months of the final order of discipline.
Thursday, April 3, 2014
The New York Court of Appeals has held favorably to an attorney in a case that presented this issue
This appeal concerns the appropriate treatment of statutory counsel fees awarded under the New York City Human Rights Law where the contingency fee agreement does not explicitly mention statutory fees. We hold that, absent a contract term expressly providing for a different distribution, an attorney is entitled to the greater of either the contingency fee or the statutory award.
The case involved former police officer two clients who retained counsel to sue New York but later became dissatisfied. The attorney sought declatatory relief when a dispute arose with the clients over her fees.
...in light of their unequivocal terms, the Appellate [Fee] Agreements should be enforced as written. Because the statutory appellate fees exceeded the contracted-for minimum of $20,000 per appellant, per appeal, [attorney] Dorman is entitled to receive those court-ordered fees in their entirety. As for compensation owed to Dorman for her representation at trial, she is entitled to collect either one third of the jury award, or the statutory trial fees, whichever is greater.
Saturday, February 22, 2014
The Alaska Supreme Court affirmed an arbitration award in a claim against an attorney brought by the girlfriend of a former client.
The court held that the former client's claim that the award was procured by fraud was not reviewable.
In doing so, I would respectfully suggest, the court gives cold comfort to former clients who invoke the Bar's arbitration procedures and expect a decent result.
The attorney was retained (through the girlfriend) to represent the defendant on federal drug charges.
At the arbitration, they testified that they understood the fee arrangement was $25,000 if the matter did not go to trial, $50,000 if there was a trial and $75,000 if the trial required experts.
The attorney was paid $75,000 in cash up front. The cash was wrapped in a grocery bag.
The client pleaded guilty on the morning of trial. He sought return of "at least" $50,000. The attorney refused, claiming that the arrangement was for a flat, non-refundable fee.
At the arbitration, the attorney produced a purported fee agreement to support his "non-refundable" claim. The client and girlfriend denied that the agreement was genuine and claimed fraud. The girlfriend asserted that she had not signed it.
The arbitration panel found the fee to be reasonable. While the arrangement may have violated ethical rules governing fees, the panel accepted the attorney' version of the fee arrangement and told the client that he could complain to the bar counsel about the potential ethics rule violations.
The court here found that the courts no authority to review the client's claim that the award was procured by fraud.
The attorney thus gets to keep the $75K (and presumably the grocery bag).
To put it mildly, the Bar's fee arbitration process worked very well from the point of view of the lawyer. For the client, not so much.
The court offered little recourse even where the fee may have violated Rule 1.5. (Mike Frisch)
Friday, November 8, 2013
A single retainer agreement sufficed to cover a second matter and entitled counsel to legal fees, according to a decision of the New York Appellate Division for the First Judicial Department:
The record establishes plaintiff's entitlement to recover the unpaid legal fees that arose from its representation of defendants in two underlying actions. Contrary to defendants' contention, the subject retainer agreement governs plaintiff's work on both underlying matters. In compliance with 22 NYCRR 1215.1, which mandates that retainer agreements contain an "explanation of the scope of the legal services to be provided" (22 NYCRR 1215.1[b]), the agreement specifies that plaintiff's services "will include legal representation and advice with respect to specific matters that you refer to the Firm." Although defendants initially sought plaintiff to represent them in only one of the underlying actions, it is undisputed that they requested plaintiff's services with respect to the other action, shortly thereafter. Plaintiff's representation of defendants in the latter matter therefore falls within the ambit of the retainer.
The client did not challenge the invoices when rendered and could thus not attack the reasonableness of the fees. (Mike Frisch)
Thursday, October 31, 2013
If you are a New York attorney and wish to be paid under a contingency fee agreement in a medical malpractice action, it is prudent to file the agreement with the Office of Court Administration in a timely manner --within 30 days.
That lesson emerges from a case decided yesterday by the New York Appellate Division for the Second Judicial Department.
Lawyer One retained Lawyer Two to assist in the litigation. When the case was resolved, Lawyer Two contended that Lawyer One had shortchanged him.
Lawyer Two had inadvertantly failed to file the required papers. Fortunately for him, the court excused the lapse:
In exercising its discretion to extend the time to file the subject retainer statement pursuant to CPLR 2004, a court may consider such factors as the length of the delay, the reason or excuse for the delay, and any prejudice to the person opposing the motion. Here, the reason for the delay, in effect, [Lawyer Two's law office failure, was an isolated, inadvertent mistake and there is no prejudice to [Lawyer One], as the remaining contractual contentions will be resolved in connection with any separate plenary action that may be commenced. Accordingly, the Supreme Court providently exercised its discretion in permitting the filing of a retainer statement nunc pro tunc by extending the time to do so for "good cause" shown (citations omitted)
Wednesday, October 23, 2013
The Washington State Court of Appeals, Division II has reversed and remanded a trial court order denying an attorney's motion to withdraw from the representation of the plaintiffs in a medical malpractice case.
The clients, after an initial payment, had failed to satisfy obligations under the fee agreement to pay costs. The attorney had advanced significant sums for experts and depositions in the litigation.
Further representation would result in an unreasonable financial burden on [the attorney] and that with their dispute over fees and the resulting professional conflict, the [clients] rendered [the attorney's] representation unreasonably difficult...This is not one of those rare cases where [the attorney's] withdrawal would have harmed the efficiency of the judicial system, and we do not see that her withdrawal would have had a materially adverse effect on the [clients'] interests. Trial had not been set and there were no dispositive motions before the court when [the attorney] moved to withdraw.
The attorney had given notice of her intent to withdraw with ample time to secure new counsel. In fact, successor counsel was eventually retained.
That fact did not moot the withdrawal issue, according to the court.
The court concluded that the trial court abused its discretion in denying the motion to withdraw and remanded for entry of an order granting withdrawal as of June 15, 2012. (Mike Frisch)
Thursday, September 5, 2013
The Illinois Administrator has filed a complaint alleging two counts of misconduct on the part of the accused attorney.
One count alleges that the attorney violated her duty of confidentiality by responding to a client's unfavorable review of her services:
On or about September 6, 2012, Respondent agreed to represent Richard Rinehart ("Rinehart") in matters related to Rinehart's securing unemployment benefits from his former employer, American Airlines. Shortly before hiring Respondent, American Airlines had terminated Rinehart's employment as a flight attendant because Rinehart allegedly assaulted a fellow flight attendant during a flight. At that time, Rinehart paid Respondent $1,500 towards her fee.
Between September 6, 2012 and January 16, 2013, Respondent met with Rinehart on at least two occasions and obtained information from Rinehart concerning his employment history at American Airlines and information concerning the alleged incident involving the other flight attendant. Respondent also reviewed Rinehart's personnel file, which she had obtained from American Airlines.
On or about January 16, 2013, Respondent represented Rinehart at a telephonic hearing before the Illinois Department of Employment Security ("IDES"), which resulted in the IDES denying Rinehart unemployment benefits. Shortly thereafter, Rinehart terminated Respondent's representation of him.
On or about February 5, 2013, Rinehart posted a client review of Respondent's services on the legal referral website AVVO, in which he discussed his dissatisfaction with Respondent's services. Rinehart stated in the posting that "She only wants your money, claims "always on your side" is a huge lie. Paid her to help me secure unemployment, she took my money knowing full well a certain law in Illinois would not let me collect unemployment. [N]ow is billing me for an additional $1500 for her time."
Between February 7, 2013 and February 8, 2013, Respondent contacted Rinehart by email and requested that Rinehart remove the February 5, 2013 posting about her on AVVO. Rinehart responded that he refused to remove the posting unless he received a copy of his files and a full refund of the $1,500 he had paid.
Sometime between February 5, 2013 and April 10, 2013, AVVO removed Rinehart's posting from its online client reviews of Respondent.
On or about April 10, 2013, Rinehart posted a second client review of Respondent on AVVO. In the April 10, 2013 posting, Rinehart stated that "I paid Ms. Tsamis $1500 to help me secure unemployment while she knew full well that a law in Illinois would prevent me from obtaining unemployment benefits."
On or about April 11, 2013, Respondent posted a reply to Rinehart's April 10, 2013 client review. In that reply Respondent stated that:
"This is simply false. The person did not reveal all the facts of his situation up front in our first and second meeting. [sic] When I received his personnel file, I discussed the contents of it with him and informed him that he would likely lose unless the employer chose not to contest the unemployment (employers sometimes do is [sic]). Despite knowing that he would likely lose, he chose to go forward with a hearing to try to obtain benefits. I dislike it very much when my clients lose but I cannot invent positive facts for clients when they are not there. I feel badly for him but his own actions in beating up a female coworker are what caused the consequences he is now so upset about."
By stating in her April 11, 2013 AVVO posting that Rinehart beat up a female coworker, Respondent revealed information that she had obtained from Rinehart about the termination of his employment. Respondent's statements in the posting were designed to intimidate and embarrass Rinehart and to keep him from posting additional information about her on the AVVO website.
Thursday, May 30, 2013
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)
Friday, May 24, 2013
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)
Monday, May 6, 2013
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)
Tuesday, March 26, 2013
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.