“On Monday, May 18, Richard Klass, second vice president of the Brooklyn Bar Association, moderated a two-hour CLE entitled, “Resume Building and Interview Skills” along with panelists Andrea Bonina and David Sarnoff….”
The crisis has been averted. The lawyer did a great job for his client. The lawyer sent his client the final bill for services rendered. Unfortunately, the client now had other bills to pay and the legal problem the lawyer dealt with was starting to appear very small in the rearview mirror.
The lawyer came to Richard A. Klass, Your Court Street Lawyer, to sue the client to collect on the outstanding bill.
Complaint for Legal Fees Filed against Client
The lawyer commenced an action against his client alleging several causes of action in the complaint, including:
Breach of contract: A written retainer agreement with an attorney is an enforceable contract. As held in Jacobson v Sassower, 66 NY2d 991, 993 , “as a matter of public policy, courts pay particular attention to fee arrangements between attorneys and their clients. An attorney has the burden of showing that a fee contract is fair, reasonable, and fully known and understood by the client.”
Assuming that the fee arrangements were fair to the client, the lawyer may establish his prima facie entitlement to judgment as a matter of law against the client on the cause of action alleging breach of contract by submitting evidence of the existence of a contract, the lawyer’s performance under the contract, the client’s breach of the contract, and resulting damages. See, Joseph W. Ryan, Jr., P.C. v Faibish, 136 AD3d 984 [2d Dept 2016].
Account Stated: Many times, an attorney is able to prove that he sent his client monthly invoices and the client never said one word about fees; then, when the bill comes due, the client ‘wakes up’ and starts objecting to all of the attorney’s charges.
An attorney can make out a prima facie showing of his entitlement to summary judgment on an “account stated” claim by providing documentary evidence of the invoices, and an affidavit stating that he sent the invoices on a monthly basis to defendant, and that defendant received the invoices and failed to object to the invoices until this litigation. See, Glassman v Weinberg, 154 AD3d 407 [1st Dept 2017].
Quantum Meruit: This Latin phrase basically means that one should be paid the reasonable value of services rendered on behalf of another.
If the terms of a retainer agreement are not established, or if a client discharges an attorney without cause, the attorney may recover only in quantum meruit to the extent that the fair and reasonable value of legal services can be established. See, Seth Rubenstein, P.C. v Ganea, 41 AD3d 54 [2d Dept 2007]. A cause of action for quantum meruit requires a showing of “a plaintiff’s performance of services in good faith, acceptance of those services by a defendant, an expectation of compensation and proof of the reasonable value of the services provided.” See, Hyman v Schwartz, 127 AD3d 1281, 1282 [3d Dept 2015].
Before an attorney files a lawsuit to recover legal fees, there are a number of considerations as to whether it is worth doing. The commencement of a lawsuit by an attorney against his client ought to be the last resort after an attempt to resolve nonpayment. While not exhaustive, some questions to ask before suing a client may be:
Did the attorney achieve a favorable result? While not necessarily a defense, the client in unsuccessful litigation may perceive that the attorney provided no value.
Is the client judgment-proof? Will any judgment actually be collectible?
Is there a written retainer agreement? It may be required by Uniform Rules of Court Part 1215.
Were contemporaneous time records kept?
Was the client sent detailed bills at regular intervals?
Has the client threatened to sue for legal malpractice? An estimated 40% to 50% of legal malpractice cases emanate from an attorney’s collection case.
Is the amount of unpaid fees large enough to justify bringing an action?
Is there a requirement for service of a notice of the availability of fee dispute arbitration under Uniform Rules of Court Part 137.
Is there the possibility of pursuing a charging lien on the case, or a retaining lien on the file?
How long has the clock been ticking on the dispute? The statutes of limitations are three years for the client to sue for legal malpractice and six years for the attorney to sue the client to collect his fees.
– Richard A. Klass, Esq.
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached at (718) COURT●ST or RichKlass@courtstreetlaw.comcreate new email with any questions.
He was an associate at a law firm that handled cases involving workplace discrimination, including cases based upon age, disability, gender, race, religion and sexual orientation discrimination. The associate decided it was time for him to transition from the law firm to another firm in which he would become a partner. Some of the law firm’s clients whose cases were handled by the associate elected to transfer representation from the former firm to the associate’s new law firm.
Law Firm’s Charging Lien
When an attorney commences a lawsuit or appears in a lawsuit, he is deemed the “attorney of record” in the case. One of the ramifications of being the attorney of record is that the attorney has the right to maintain a “charging lien” on any recovery in the case. This right is derived both from longstanding common law and statutory law, codified in New York’s Judiciary Law Section 475, which provides:
Section 475. Attorney’s lien in action, special or other proceeding. From the commencement of an action, special or other proceeding in any court or before any state, municipal or federal department, except a department of labor, or the service of an answer containing a counterclaim, or the initiation of any means of alternative dispute resolution including, but not limited to, mediation or arbitration, or the provision of services in a settlement negotiation at any stage of the dispute, the attorney who appears for a party has a lien upon his or her client’s cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, award, settlement, judgment or final order in his or her client’s favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien.
Practically, the charging lien gives the attorney the right to collect his legal fees from any moneys recovered in the lawsuit, even once the attorney is no longer representing the client. This is based on the premise that when an attorney is dismissed without cause, he is entitled to a lien to secure payment of his reasonable fees and costs incurred prior to the date of substitution of counsel. See, Sequa Corp. v. GBJ Corp., 156 F.3d 136 [2 Cir. 1998].
Agreement to Determine the Amount of Lien
When a client discharges an attorney without cause, the attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the services rendered whether that be more or less than the amount provided in the contract or retainer agreement (Matter of Montgomery, 272 NY 323 [1936\]). As between them, either can require that the compensation be a fixed dollar amount determined at the time of discharge on the basis of quantum meruit (Reubenbaum v. B. & H. Express, 6 AD2d 47 [1 Dept. 1958]) or, in the alternative, they may agree that the attorney, in lieu of a presently fixed dollar amount, will receive a contingent percentage fee determined either at the time of substitution or at the conclusion of the case. See, Lai Ling Cheng v Modansky Leasing Co., Inc., 73 NY2d 454 .
In one of the cases which the associate took with him to his new law firm, the former firm retained Richard A. Klass, Esq., Your Court Street Lawyer, to enforce its charging lien. The two firms came to an agreement, which was so-ordered by the judge, that the former law firm maintained a charging lien against any recovery in the case and that the amount of that lien would be determined at the conclusion of the litigation (assuming there would be a recovery from the defendants).
Entitlement to Attorney’s Fees in Proportionate Contribution to Case
The workplace discrimination case settled and the net legal fee sat in escrow as per the attorneys’ agreement pending resolution of their division amongst the two law firms. Unfortunately, the two firms were unable to come to terms as to the percentage split and requested that the judge hold a hearing to determine the allocation of fees.
The judge granted the law firms’ request for a hearing on the issue of the charging lien. It was noted that the court’s determination would be centered on determining the proportionate contributions of both prior and substitute counsel, citing to the case of Mason v. City of New York, 2016 WL 2766652 [SDNY 2016]. As stated in Buchta v Union Endicott Cent. School Dist., 296 AD2d 688, 689–90 [3 Dept 2002], “In assessing each firm’s proportionate contribution, we focus on the time and labor spent by each, the actual work performed, the “difficulty of the questions involved, the skill required to handle the matter, the attorney’s skills and experience, [and] the effectiveness of counsel in bringing the matter to resolution.”
A hearing was held in which both the partner in the original law firm and the associate/partner in the new law firm testified as to the services rendered on behalf of the clients in the case. The prior law firm’s partner testified as to all of the intake and pre-litigation tasks performed before substitution of counsel, including compiling evidence; interviews of clients; review of vast collection of evidence including email communications, video recordings and audio recordings. The former associate testified as to all of the services he rendered both at his old and new firms. Unfortunately for the former firm, it was unable to produce contemporaneous time records for services rendered while the former associate was in its employ. Based upon the testimony of the attorneys and the documents produced at the hearing, the judge apportioned the net legal fee between the two law firms.
It is critical for attorneys to enter and keep time records for all time spent working on their cases. Contemporaneous time records are important if the attorney must file a lien or prove time spent on a case. Equally important, a law firm should ensure that its attorneys, paralegals and support staff submit their time records in case the firm needs to justify its fees on a case.
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn, New York. He may be reached by phone at (718) COURT●ST or at RichKlass@courtstreetlaw.comcreate new email with any questions. Prior results do not guarantee a similar outcome.
“Lawyers are men whom we hire to protect us from lawyers.”
— Elbert Hubbard, The Fra Magazine, Sept. 1911
The associate of a law firm found another opportunity and decided to leave his current firm for another. The associate contacted existing clients of his current law firm to ask if they wanted him to continue as their attorney and follow him to the new firm. A bunch of clients agreed to transfer their cases to the new law firm.
Unlike many other areas of commerce, a law firm may not impose restrictions on the right of an attorney to practice after termination from the firm, including “grabbing” clients with whom the attorney had a prior professional relationship. See, Rule of Professional Conduct 5.6.
Law firm’s right to assert charging lien
While it may be the prerogative of a client to continue with the attorney who has been handling his case, it is also the right of the law firm who employed the attorney to claim a lien on the case for legal services rendered by that law firm, including those services rendered by the attorney-employee prior to his departure. In this particular situation, the law firm retained Richard A. Klass, Your Court Street Lawyer, to assert its charging liens against the cases which the former associate took with him to his new firm.
Under New York Judiciary Law Section 475, a charging lien is a lien that attaches to any verdict, report, determination, decision, award, settlement, judgment or final order in favor of the attorney of record, if such a favorable result is ultimately achieved by him. Basically, the charging lien recognizes that the attorney has an equitable ownership interest in the case and the attorney is entitled to “collect his fee from the fund that he created for that purpose on behalf of the client.” See LMWT Realty Corp. v. Davis Agency, 85 NY2d 462 .
Substitution of counsel doesn’t defeat the lien.
Despite the former associate taking a bunch of clients with him, the law firm did not lose its right to charging liens on those client’s cases. A charging lien is not lost because there is a substitution of counsel from the old firm to the new one. See, In re Burroughs & Brown, 239 AD 794 [2 Dept. 1933]. When a client discharges an attorney “without cause,” the attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the services rendered. Matter of Montgomery, 272 NY 323 . That compensation may either be a fixed dollar amount determined at the time of discharge or the attorney may opt for a contingent percentage fee determined by the court (typically at the conclusion or settlement of the case). See, Lai Ling Cheng v. Modansky Leasing Co., Inc., 73 NY2d 454 .
Associate is not deemed “attorney of record.”
The prior law firm filed a petition to enforce its charging lien against the potential recovery in one of the contingency cases, naming both the former client and former associate. In response to the petition, the former associate argued that he should be deemed the “attorney of record” because he was the attorney primarily responsible on the particular case, handling almost all of the work done on the case while previously employed at the law firm. He claimed that the law firm was not entitled to maintain its lien on the case.
In reply to the former associate’s argument, Richard A. Klass, Your Court Street Lawyer, urged the court to follow longstanding New York law that an associate or of-counsel is not entitled to assert his own lien because he is not the “attorney of record.” See, Edelman v. Orseck, 99 AD2d 763 [2 Dept. 1984]. The standard rule that the former associate failed to realize was that, while he was an associate, he was an employee who worked on files and matters assigned to him by his former employer. The law firm served as the ‘attorney of record’ in those matters, supported by its attorneys, associates and support staff. Indeed, all of the work and effort put into the cases by the associate while he was employed at the law firm inures to the benefit of his employer.
Associate of a law firm is not an independent contractor
In granting the law firm’s petition to enforce its charging lien, the judge held that the former associate was not an independent contractor when he works at the law firm, he was an employee. The judge specifically held that the work the associate did was not on his own account but on account of his former employer, and that whether the associate did most, if not all of the work on the case while he was employed there was irrelevant to the issue as to whether the law firm maintained its claim for services rendered.