Friday, September 29, 2023
A law firm is entitled to the referral fee paid to an employee, per a decision of the New York Appellate Division for the First Judicial Department
Plaintiff was entitled to summary judgment as a matter of law. The duty of loyalty, grounded in the faithless servant doctrine, is breached where the employee, "acting as the agent of the employer, unfairly competes with his employer, [and] diverts business opportunities to himself or others to the financial detriment of the employer" (Sullivan & Cromwell LLP v Charney, 15 Misc 3d 1128[A], 2007 NY Slip Op 50889[U], *7 [Sup Ct, NY County 2007]; see also Western Elec. Co. v Brenner, 41 NY2d 291, 295 ). Defendant does not dispute that he referred a matter to another law firm without plaintiff's knowledge or consent and collected more than $140,000 in referral fees. A for-profit referral, without plaintiff's knowledge or consent, violates defendant's duty of loyalty and, at a minimum, entitles plaintiff to the referral fee (see Chun Ho Chung v Williams Schwitzer & Assoc., P.C., 200 AD3d 514, 515 [1st Dept 2021]).
The court's denial of the motion to reargue is not appealable.