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Plaintiff Seeks to Enforce Charging Liens


The law firms seek to determine and enforce charging liens pursuant to section 475 of the Judiciary Law. The liens would secure fees claimed by the Firms for legal services to respondent under a retainer agreement dated July 10, 2006 (the “2006 Retainer”). The Firms represented him in a decade-long dispute among several family members, involving various real estate holdings and family trusts. The dispute had been punctuated by at least two abortive settlements, the latter one in 2004. On January 3, 2008, however, the family internecine battles ended in a global settlement placed on the record in open court and then further memorialized in a written stipulation implemented by a closing on August 27-29, 2008. The liens now claimed by the Firms relate to his share of the proceeds of that settlement.

Discovery having concluded, the Firms and respondent have cross-moved for partial summary judgment. The issues raised on these motions involve the validity of the 2006 Retainer, its allegedly wrongful procurement, and, if it is valid, the meaning of several of its terms and the extent (if any) to which William’s obligations under it are subject to conditions that have not been satisfied. The Firms acknowledge that the sums to which they are entitled for work resulting in the 2008 settlement cannot be fully determined without a hearing. Respondent for his part asserts that a hearing is needed to determine the Firms’ fees for hourly services in the litigation preceding that settlement.

The 2006 Retainer was drafted and executed on its letterhead. As described below, the Retainer provides for fees in respect of both settlement-related work and litigation-related work. Settlement-related work gives rise to two types of fees: a flat fee and a performance fee, both contingent upon the effectuation of a settlement. Settlement itself is defined as “a settlement among substantially all of the descendants of the decedent and the trusts and estates thereof.”

In relevant part, the provisions governing the flat fee are as follows: “The amount of the flat fee will vary only in relation to the time an agreement is reached. For the purposes of this agreement, the time the agreement is reached is the date a settlement agreement (or any ancillary agreement) is signed by any person firm or entity that will be a signatory to the agreement (or any ancillary agreement), whether or not the person, firm or entity is a litigant.

For his part, respondent denies that there is any valid retainer agreement with either firm. As discussed below, he raises several defenses to the lien sought by each as well as one counterclaim against both of the Firms. If the 2006 Retainer is ruled to be valid, the parties also ask the court to resolve disputes concerning the meaning of certain of its terms.

Notwithstanding the parties’ sharp disagreement about the immediate circumstances in which the 2006 Retainer was negotiated, the facts leading to such negotiations are essentially undisputed, and, to the extent relevant here, they are traced below.

On October 11, 2007, one of the Firm partners, died. The other partners nonetheless continued to work on behalf of respondent, including work on a summary judgment motion in the accounting for Ruth’s estate. The court denied that motion, and a trial was scheduled for the end of October 2007 and then rescheduled to January 3, 2008. On December 28, 2007, however, the parties called the court to report that they had resolved all outstanding disputes. As indicated above, the global settlement was placed on the record and implemented by a closing at the end of August 2008.

A summary determination of a claim or defense is appropriate only where the party seeking it makes a prima facie showing of entitlement to such determination as a matter of law. If such showing is made, the burden shifts to the opposing party to produce admissible evidence establishing that a material issue of fact nevertheless remains open, requiring trial.

In addressing the particular claims, defenses, and counterclaim raised here, the court must be cognizant of certain general principles that underlie the attorney-client relationship. Given the fiduciary nature of that relationship, fee agreements between attorney and client are “affected by lofty principles different from those applicable to commonplace commercial contracts”. Accordingly, as a matter of public policy, courts must carefully scrutinize such fee arrangements. A client must be “fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements”. The burden is on the attorneys who drafted the fee agreement to show that it is “fair, reasonable, and fully known and understood by their clients”. Moreover, as a general contract principle, where a term of the agreement is ambiguous, that is, reasonably susceptible of more than one interpretation, that term must be construed in favor of the non-drafting client. Where there is no ambiguity, however, the client does not have such an advantage; the instrument must simply be read in accordance with its plain terms. Furthermore, in a dispute between lawyer and client, the latter is not to be perceived as always the former’s victim. Indeed, the charging lien itself is the law’s device for shielding a lawyer from the possible knavery or overreaching of the client.

The Respondent argues that the partner’s compensation must be limited to quantum meruit in that the 2006 Retainer was with the Firm, and that law partnership dissolved by operation of law upon the death of partner, on October 11, 2007. Respondent points out that the Retainer does not contain provisions for its continued effectiveness post-dissolution or for any assignability to another firm. Indeed, he maintains that, as a personal services contract, the Retainer could not have been made assignable and that it therefore cannot now serve as the basis for the partner’s claim to a charging lien. Instead, according to respondent, the partner could not purport to represent him under the 2006 Retainer after the Firm dissolved or, at the latest, after February 2008, when the partner filed a change of attorneys from the Firm to his own. According to William, in the absence of his own separate retainer, the partner has no basis for his claim to a performance fee.

While respondent is technically correct as to provisions of partnership law, the enforceability of an attorney retainer, including its transfer to another law firm or entity, does not depend on partnership law. The case of Goldston v Bandwidth Tech. Corp. (52 AD3d 360 [1st Dept 2008]) makes the point. There the Appellate Division addressed a claim that “the dissolution of the attorney law firm by operation of law upon the departure of [the main attorney providing work to the client] constitute[d] a breach of the retainer agreement”, making it unenforceable. The court emphasized that “a change in the organization of a business does not, without more, give rise to a claim by a party contracting with that business even if the reorganization adversely affects the party’s interest”. The question there, as here, is whether the client clearly recognized that the attorney was continuing the prior representation. Here, the evidence is indisputable that respondent considered his attorney in these proceedings,8 and he was not discharged by respondent until well after this charging lien proceeding was commenced.

A similar rule has been recognized even in the matrimonial context where the policing of retainer agreements by regulation is more stringent. In response to this authority, respondent cites only an unreported Ohio case primarily involving fee-splitting between different attorneys, which does not support respondent’s position. The defenses that the 2006 Retainer was not assignable to the partner and that the settlement did not occur while the retainer was still in effect are dismissed.

The Firms claim that the hourly billing for litigation work is properly the subject of a summary judgment motion as an account stated. Respondent on the other hand argues that he regularly disputed the bills for litigation work and that no account can therefore be stated in relation to such billing. An account stated is merely a contract express or implied as to the amount of compensation due for services rendered. The issue here is whether there is evidence of assent by William to the account as stated. Assent may be implied from actions taken or by the client’s silence after receipt of the invoices in question. Respondent alleges that he raised oral objections to the bills that were sent from the Firm almost monthly during June 2006 through August 2008 and from the partner Firm in February 2008 and in August 2008.10 While an oral protest may in certain circumstances create a question of fact as to assent, the law is clear that the client must substantiate the protest that he alleges by making specific, rather than conclusory, allegations detailing when and to whom the alleged oral objections were made and the substance of the alleged conversations. “Bare assertion of oral protest” is insufficient, especially where the debtor receiving the account made partial payments on it. Here, respondent’s assertions amount to nothing more than bare claims of prior oral protests, and moreover, when he had the funds, he partially paid the amounts due. In his affidavit in opposition, he alleges that the Firms’ hourly charges “have been and are being disputed” and that this “has been conveyed to the partner a number of times.” However, just when and what particular charges he was or is disputing, even at this late date, remain unspecified. Instead, William makes two general points regarding the invoices. First, without referring to any particular invoice, he sweepingly claims that the partner “overdoes things.” Second, he claims that there “were innumerable incidences where he would bill [him] for normal office, paralegal, and administrative time that the partner, because he had no secretary or paralegal, would do.” But he fails to specify even one of such “innumerable incidences”; nor does he specify when or how such an objection was made. Such belated, conclusory and unsupported claims are insufficient to raise a question of fact on the issue of the accounts stated by the invoices sent to respondent by the Firms. The Firms are therefore granted summary judgment on their claims of accounts stated for hourly litigation work.

The parties disagree about the meaning and application of several of the 2006 Retainer’s terms. The first issue in such connection13 concerns the method by which the performance fee is to be calculated under the Retainer’s terms. As indicated above, the Retainer defines the size of the performance fee in terms of (a) the value of the settlement ultimately reached for William over and above the $43 million Trigger Amount (the “Increase in Value)” and (b) fixed percentages (varying in direct proportion to the magnitude of the Increase in Value), as follows: “If the Increase in Value is: $0 – $5,000,000, x = 3%; $5,000,001 – $10,000,000, x = 5%; $10,000,001, x = 8%”

According to the partner’s reading, if the Increase in Value is above $10 million (as he maintains it is), then the performance fee is 8% of the Increase in Value in its entirety. By contrast, respondent proposes that in such circumstance the performance fee is instead to be calculated in three steps, applying 3% to the first $5 million of the Increase in Value, 5% to the next $5 million, and 8% only to the amount above $10 million. But the court does not agree that the foregoing terms lend themselves to more than one reasonable construction, much less that they support respondent’s reading. In other words, those terms — “if the Increase in Value is $10 million, x [the applicable percentage] is 8% — unambiguously provide that the performance fee is the product of 8% and the Increase in Value where the latter exceeds $10 million. Indeed, as numerous statutes illustrate, if the terms for which respondent argues had been intended, that intention could very readily have been expressed.

The parties further disagree as to whether respondent’s remainder interest in Trust should be discounted to its present value, given intervening life estate. In this connection, the partner’s position— that no such discount is required—is unsupported by the language of the 2006 Retainer as drafted by himself. Nor does he position find support in the spirit of the agreement, which clearly contemplates that the performance fee be based upon the current value (even if only approximated by appraisals from 2004) of whatever was conceded to respondent in the settlement. Accordingly, respondent’s interest in Marital Trust remainder is to be discounted as he has argued.

Each party’s motion for partial summary judgment is granted in part and denied in part as set forth in the foregoing discussion. As is indicated by the foregoing, and as is acknowledged by the Firms’ request for only partial summary judgment, the precise value of what respondent received in settlement cannot be calculated on this record and is accordingly an issue to be resolved at a hearing.

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