Brooklyn Bar Association helps attorneys improve their resumes during COVID-19

Richard Klass in white shirt speaking at Brooklyn Bar Association, helping attorneys dealing with unemployment during COVID-19 pandemic.
Richard Klass (pictured), second vice president of the Brooklyn Bar Association, moderated the panel, which included attorney Andrea Bonina and retired attorney David Sarnoff. Screenshots via Zoom

Reported by Rob Abruzzese, Legal Editor
opens in a new windowBrooklyn Daily Eagle
May 26, 2020

“More than two million New Yorkers have filed for unemployment since the COVID-19 pandemic started, and lawyers are not immune. To help laid-off attorneys and people who are simply looking for a new job, the Brooklyn Bar Association held a continuing legal education seminar to help ensure that lawyers are putting their best foot forward.

“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….”

#COVID19 #BklynEagle #BrooklynBarAssoc #CourtStreetLawyer


R. A. Klass
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Scales of justice

When Clients Don’t Pay Their Lawyers

Red text reading "Always the Last to Know" with blue text "Be Paid" superimposed over the word "know" illustrating article about legal fees.

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. KlassYour 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 [1985], “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. SeeJoseph 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. SeeGlassman 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. SeeSeth 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.” SeeHyman v Schwartz, 127 AD3d 1281, 1282 [3d Dept 2015].

Pre-litigation Considerations

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.com with any questions.

Prior results do not guarantee a similar outcome.

© 2020 Richard A. Klass
Credits:
Image at top of page: Richard A. Klass

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Scales of justice

When Lawyers Engage in a Tug-of-War

man and woman in a tug-of-war, illustrating article by Richard Klass about a law firm ’s charging lien

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 [1989].

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.

Practice Tip:

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.


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.com with any questions.
Prior results do not guarantee a similar outcome.

©2017 Richard A. Klass.
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Image at top of page: Shutterstock

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“What’s in a Name?” asked Shakespeare. “$300,000” we replied.

Portrait of William Shakespeare by William Page, 1873, illustrating article about notice of pendency by Richard Klass.

The child got injured as a result of a trip and fall accident in a building in Brooklyn. His mother hired a law firm to pursue his personal injury claim. The law firm recovered judgment in favor of the child against the building’s owner; however, it was having trouble collecting on the Judgment because the owner seemingly did not have premises liability coverage on the building. To enforce the Judgment, the law firm retained Richard A. Klass, Your Court Street Lawyer, as special collection counsel.

Typographical Error in Judgment

Once a Judgment is granted in favor of a litigant, the court clerk “ opens in a new windowdockets” the Judgment and records the exact name of the judgment debtor (CPLR 5018). After docketing, the Judgment becomes a lien against any real property owned by the debtor in that county (CPLR 5203). Unfortunately, in this particular case, the Judgment misspelled the name of the building owner/judgment debtor (The “Iguenia” Limited Partnership instead of “Iugenia” Limited Partnership). [This is not the debtor’s actual name; we have changed it for this article.]

Since the clerk indexes judgment debtors’ names exactly as they appear in judgments, a misspelling can effectively allow a judgment debtor to sell its real property to a good faith buyer without the imposition of the judgment lien. In this case, the misspelled name “Iguenia” would have allowed the building owner to sell its property to an unknowing buyer (bona fide purchaser) without having to satisfy the personal injury judgment.

Enforcement Remedy of Receivership

Given the very real possibility that the building owner could sell the property to avoid payment of the Judgment, there needed to be a mechanism to ensure that no one could claim that it did not have notice of the judgment lien. A motion to “resettle” (amend) the Judgment into the correct name might have alerted the debtor to a quick way to dispose of its assets before the Judgment could be fixed.

The strategy devised, utilizing one of the enforcement of judgment measures of New York’s Civil Practice Law and Rule’s (CPLR) Article 52, was to file a petition for the court to appoint a receiver over the property under CPLR 5228. A receiver may be appointed by a court to “administer, collect, improve, lease, repair, or sell any real or personal property in which the judgment debtor has an interest.”

Filing of the Notice of Pendency

The filing of the new case against the debtor gave the creditor/petitioner the ability to also file a opens in a new windowNotice of Pendency (also referred to as a “Lis Pendens”).CPLR Section 6501 states:

A notice of pendency may be filed in any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property, except in a summary proceeding brought to recover the possession of real property. The pendency of such an action is constructive notice, from the time of filing of the notice only, to a purchaser from, or incumbrancer against, any defendant named in a notice of pendency indexed in a block index against a block in which property affected is situated or any defendant against whose name a notice of pendency is indexed. A person whose conveyance or incumbrance is recorded after the filing of the notice is bound by all proceedings taken in the action after such filing to the same extent as a party.

Typically, in post-judgment enforcement measures, it is not necessary to file a Notice of Pendency with the court clerk because the Judgment is already filed as of record (and, thus, acts as notice to the world of its existence). Here, the filing of the Notice of Pendency with the petition for receivership was essential in order to make sure that everyone in the world knew that there was a judgment lien against the real property.

Clerk’s Rejection – and Acceptance

Sometimes, creative lawyering is not appreciated or understood by the court clerk. Upon presenting the Notice of Pendency for filing with the new petition for receivership, the clerk rejected it as an inappropriate document. With the CPLR book in hand (the lawyers’ equivalent of an NFL Rulebook), Richard Klass met with the Chief Clerk to convince him that the filing was allowed based upon the fact that the outcome of the receivership petition would necessarily affect the “possession, use or enjoyment” of the debtor’s real property. It was also urged that the clerk could not reject the filing because he was constrained by CPLR 2102(c) (“A clerk shall not refuse to accept for filing any paper presented for that purpose except where specifically directed to do so by statute or rules promulgated by the chief administrator of the courts, or order of the court.”).

Once the Chief Clerk accepted the filing of the Notice of Pendency, the debtor was served with the petition for receivership. The debtor brought into the picture its former insurance broker, who it alleged failed to procure the appropriate insurance policy to cover the building. The parties settled the matter with the debtor acknowledging both the Judgment and the lien and the creditor allowing the debtor to sue its insurance broker and wait for payment of the Judgment until that case resolved. In the end, the creditor received over $300,000 in satisfaction of his Judgment.

— by Richard A. Klass, Esq.

Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached by phone at (718) COURTST or e-mail at richklass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.

© 2015 Richard A. Klass
Credits: Image at top: Portrait of William Shakespeare by William Page, 1873. Marketing by opens in a new windowThe Innovation Works, Inc.


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Debt Collection Tips: Docketing the Judgment

Once the creditor has obtained a Judgment from a court, the collection process has now begun.  In the context of collecting the money due on the Judgment, it may be necessary to “docket” the Judgment in the County Clerk’s Office.

In each county of the State, there is a court of general jurisdiction called the “Supreme Court.”  In some counties, towns, cities, and villages, there are lower courts (such as Civil Court, District Court, etc.).  Judgments entered in those courts are not automatic liens upon any realty that the debtor may own in the county.  Rather, a “Transcript of Judgment” must be obtained from the court and filed with the County Clerk to create the lien.  Once docketed, the Transcript of Judgment will serve as notice to others that there is a lien upon any realty owned by the debtor; other parties are now aware that the lien must be paid according to its priority.

Judgments entered in a Supreme Court case are automatically docketed with the County Clerk.

Unlike New Jersey or some other states, which have state-wide recognition, the Judgment must be docketed by the filing of a Transcript of Judgment in each county in which the debtor has realty in order to create the lien.

The docketing of a Judgment is also essential when attempting to issue an Income Execution to a County Sheriff in another county (where, perhaps, the employer of a debtor is located).  Another purpose of docketing a Judgment may be where the Judgment was entered in federal District Court and the creditor wants to use a Sheriff instead of a United States Marshall.

— by Richard A. Klass, Esq.

———–
copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.


R. A. Klass
Your Court Street Lawyer

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A Day Late and a Dollar Short

Color sketch of the image Felicitas in the mosaic frieze at the Palais Pringsheim, Berlin by Anton von Werner. Shows monk on right, working at a desk with blue prints, looking at activity to the left. On the left is a man in old fashioned brown clothing, with drawings under one arm, looking at and touching the cheek of a baby which is being held by a sitting woman who has two other children next to her.

A comprehensive medical practice was opening up in an office building and needed extensive renovations in the space. The medical practice hired a construction company to handle the build-out of the office at a cost of over $250,000. The construction contract specified that the contractor would achieve “substantial completion” of the project within 3 months after work began in April 2012. Unfortunately, the project took a lot longer than anticipated (about 9 months). Finally, on January 16, 2013, the project was confirmed by the contractor as complete, and the work was approved by the county. There was even a confirming email from the contractor to the medical provider stating “We Passed!!!” An invoice marked “Final Billing” was rendered, and a Certificate of Compliance was issued by the Building Inspector on January 31, 2013.

Since the project took much longer to complete than anticipated and agreed-upon in the construction contract, the medical provider withheld final payment, claiming it suffered heavy losses including loss of business, substantial rent payments to the landlord for the unusable space and additional overhead expenses.

Mechanic’s Lien Filed

Instead of directly addressing the client’s concerns, on October 8, 2013, the contractor simply filed a “Notice of Mechanic’s Lien” with the County Clerk. New York’s Lien Law Section 10 provides a powerful collection tool to a home improvement or commercial contractor—the right to place a lien upon someone’s house or building:

Section 10(1) Notice of lien may be filed at any time during the progress of the work and the furnishing of the materials, or, within eight months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished; provided, however, that where the improvement is related to real property improved or to be improved with a single family dwelling, the notice of lien may be filed at any time during the progress of the work and the furnishing of the materials, or, within four months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished.

The “Eight Month” Rule

One of the fundamentals of the Lien Law is that its procedures are to be strictly followed by the lienor. Unlike other areas of law, in which harmless errors can be glossed over, the Lien Law requires punctilious compliance; otherwise, the lien will be invalid. This is mainly because the right to place a lien on someone’s house is such a harsh remedy.

After being directed by the landlord to remove the mechanic’s lien, the medical provider retained Richard A. Klass, Your Court Street Lawyer. The first step was to analyze the lien notice itself—and determine whether a proceeding could be brought to discharge the mechanic’s lien under Lien Law Section 19(6) for being “facially invalid.” This means that, from looking at the face of the notice of lien itself, it may be determined that the lienor does not have a valid lien.

In the lien notice, the contractor had stated that the last item of work was performed on “February 13, 2013.” However the court ruled that all work was completed by January 31, 2013. Thus, the October 8, 2013, lien notice was filed more than 8 months afterward (late filing). This late filing would make the mechanic’s lien invalid under the Lien Law. In Ren. Reh. Systems Co., Inc. v. Faulkner, 85 AD3d 752 [2 Dept. 2011], the court held that the failure of a mechanic’s lien to be timely filed pursuant to the Lien Law was fatal to the mechanic’s lien.

Extra Work Doesn’t Count

In response to the proceeding brought by the medical provider to discharge the mechanic’s lien, the contractor claimed that it sent a subcontractor to the premises to perform some work in March 2013; thus, its filing of the lien was timely. The medical provider challenged this claim by showing the court that the subcontractor only performed a normal service call for “no heat.” It was argued that the court should follow the rule in Nelson v. Schrank, 273 AD72 [2 Dept. 1947], that a mechanic’s lien is not timely filed when measured from the last date that extra work was performed when the extra work was not part of the original contract, anticipated when the original contract was made, or done in continuance of the work under the contract.

In discharging the mechanic’s lien, the court held that there was no proof that the extra work completed was part of the original contract, was anticipated when the original contract was made, or constituted work completed under the original contract. Accordingly, the court granted the petition to discharge the mechanic’s lien.

— by Richard A. Klass, Esq.

———–
copyr. 2015 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-mail to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.

Credits: Photo of Richard Klass by Robert Matson, copyr. Richard A. Klass, 2011.
Marketing services by The Innovation Works, Inc. www.TheInnovationWorks.com.
Image at top: Felicitas, by Anton von Werner, 1872.


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Difference of Opinion regarding Mandatory Attorney Fee Dispute Arbitration

The Fee Dispute Resolution Program (22 NYCRR Section 137) was created to mandate arbitration of fee disputes between attorneys and their former clients in civil matters. It has been subject to differing opinions among different departments leading to divergent opinions on the issue of whether or not an arbitration is necessary when the former client fails to object the validity of the underlying fee.

In 2000, the Second Department determined in Scordio that when there is a fee dispute between an attorney and a former client, the attorney was not required to send notice to the former client informing them of their rights to arbitrate when there was no dispute or objection to the reasonableness of the attorney’s fees. Scordio v. Scordio, 270 A.D.2d 328 (2nd Dept. 2000).

The decision in Scordio would ordinarily lend to the notion that an attorney may pursue collection of his fees without notice to a client of his right to arbitration but the rules regarding arbitration of fee disputes were modified and expanded in 2002, and now lists exceptions to when a notice to a client of his right to arbitrate can be waived. In Wexler & Burkhart, the court held that a reading of the Rules in this way would “effectively eviscerate Part 137 of the Rules, a comprehensive scheme for the informal and expeditious resolution of fee disputes between attorneys and clients through arbitration and mediation.” Wexler & Burkart LLP v. Grant, 12 Misc.3d 1162(A) (Nassau Cty. 2006).

The court in Rotker determined that “the rules of the appellate division establish a clear public policy in favor of the arbitration of attorney-client fee disputes.” Rotker v. Rotker, 195 Misc.2d 768 (Westchester Cty. 2003). Rotker was a matrimonial case where the attorneys for the wife instituted a retainer lien against her for non-payment of her fees. The attorneys asserted that since the client had not disputed the fees, under Scordio, they were entitled to payment without arbitration. The court held that even if it was determined that counsel was not fired for cause, the attorneys were required to provide the client notice of her rights to arbitrate the dispute, with said notice given in writing. If the client then failed to avail herself of her right to arbitrate after 30 days of mailing the notice, the right to arbitration would be waived. Id at 790-791.

The court in Rotker went so far as to hold that the failure of former counsel to send the 30-day notice, regardless of whether or not there is a dispute, would mandate the dismissal of any action for unpaid counsel fees. Rotker at 791.

The basic tenet held in these decisions is the idea that if the Scordio argument is used as a means to avoid Rule 137, then nearly anyone can circumvent the protections that Rule 137 was meant to provide. Wexler & Burkhart LLP at 214;

The position of the Wexler & Burkhart decision and the Rotker decision was most recently supported in Noel F. Caraccio, where the court held that regardless of whether there was an objection or dispute as to the fees when they were billed, the attorney was still required to send the 30-day notice of the right to arbitrate. Noel F. Caraccio PLLC v. Thomas, 29 Misc.3d 1230 (A) (City Ct., Rye 2010); Rotker at 791.

Thus, it is questionable as to whether Scordio remains good law, and as such, it is prudent to notify the former client of his rights to arbitrate the fee in order to prevent a dismissal of an attorney’s action for payment.

— Elisa S. Rosenthal, Esq.
Associate
Law Office of Richard A. Klass
Copyr. 2014

Elisa S. Rosenthal, Esq. is an associate of the law firm of Richard A. Klass, Esq.. She practices primarily in the areas of commercial litigation, debt collection/enforcement of judgments, legal malpractice and real estate litigation. She may be reached by phone at (718) COURT-ST [(718) 268-7878)] or www.courtstreetlaw.com.

———–
copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.


R. A. Klass
Your Court Street Lawyer

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An attorney maintains a common law and statutory charging lien in the judgment

Under common law, an attorney was originally only entitled to a lien upon the judgment but the scope of the charging lien was extended by statute [Judiciary Law Section 475] to give the attorney a lien upon the client’s cause of action as well. The lien comes into existence, without notice or filing, upon commencement of the action or proceeding. See, Matter of Heinsheimer, 241 NY 361 [1915]. In Matter of Heinsheimer, Judge Cardozo stated,

If the attorney got possession of the fund, he had a general lien. If he did not get possession, his lien was for the services that brought the fund into existence. This charging lien still exists under our statutes. It has been enlarged to the extent that it now attaches to a cause of action even before judgment. ‘From the commencement of an action or special proceeding‘ the attorney now has a lien ‘upon his client’s cause of action, claim or counterclaim, which attaches to a verdict, report, decision, judgment or final order in his client’s favor, and the proceeds thereof in whosoever hands they may come.‘ (Judiciary Law, Cons. Laws, ch. 30, section 475.) Except as thus changed, the charging lien is today what it was at common law.

The concept of protecting an attorney’s lien in litigation from inception through and after entry of judgment is an old one. As stated in the decision of Fischer-Hansen v. The Brooklyn Heights Railroad Company, 173 NY 492 [1903].

There is much learning in the books relating to the lien of an attorney upon a judgment for his costs as it existed before the statute, and though now virtually obsolete, it shows the fixed determination of the courts to protect attorneys against fraudulent settlements. The lien upon a judgment was not created by statute, but was ‘a device invented by the courts for the protection of attorneys against the knavery of their clients by disabling their clients from receiving the fruits of recoveries without paying for the valuable services by which the recoveries were obtained.’ Goodrich v. McDonald, 112 NY 157 [1889].

In Peri v. The New York Central and Hudson River Railroad Company, 152 NY 521 [1897], the Court of Appeals held that an attorney’s charging lien is a statutory lien “of which all the world must take notice, and any one settling with a plaintiff without the knowledge of his attorney, does so at his own risk.” In this case, that risk is borne by all of the defendants.

New York Judiciary Law Section 475 provides:

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 client’s cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, award, settlement, judgment or final order in his 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.

The Court of Appeals noted, in Matter of City of New York (United States of America-Coblentz), 5 NY2d 300 [1959], that the statute gives an attorney a lien on the cause of action which attaches to the judgment from the commencement of the action. In the decision, the Court stated that Section 475, in substance, declares the common law. The origin of an attorney’s lien, whether as retaining or as charging, is obscure, but in all events, irrespective of type, has been recognized and enforced by the courts from very early times (see Fourth Annual Report of N. Y. Judicial Council, 1938, p. 49; 7 C. J. S., Attorney and Client, Section 210 et seq.; 5 Am. Jur., Attorneys at Law, Section 208 et seq.). The underlying purpose at both common law and now, by statute, is to protect an attorney against the ‘knavery of his client’ (Matter of Rosentover v. Weiss, 247 AD 137 affirmed 272 N.Y 557; Goodrich v. McDonald, 112 NY 157) and, being created by statute, does not require the giving of any notice in order to bring it into existence (Matter of Drake v. Pierce Butler Radiator Corp., 202 Misc. 935) for it is generally regarded as an equitable assignment to the attorney of the fund procured by his efforts to the extent of the amount of his lien (Matter of Herlihy, 274 AD 342).

Other parties do not have the ability to destroy the attorney’s vested property rights in and to the Judgment. See, LMWT Realty Corp. v. Davis Agency, Inc., 85 NY2d 462 [1995] (“Manifestly, then, an attorney’s charging lien is something more than a mere claim against either property or proceeds; an attorney’s charging lien “is a vested property right created by law and not a priority of payment”).

In enforcing the charging lien, the attorney is not required to solely chase after his client for the money he is owed; he can also pursue the other defendants. In Haser v. Haser, 271 AD2d 253 [1 Dept. 2000], the court held that, under New York law, a plaintiff’s attorney may enforce her statutory charging lien against the defendant’s own assets, if he still possesses the settlement proceeds or knowingly paid them to the plaintiff so as to deprive the attorney of her compensation (citing to Kaplan v Reuss, 113 AD2d 184, 186-187, affd 68 NY2d 693; Fischer-Hansen v Brooklyn Hgts. R. R. Co., 173 NY 492, 502). The lien which attaches in the attorney’s favor cannot be impaired by a collusive settlement.

by Richard A. Klass, Esq.

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copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.
Prior results do not guarantee a similar outcome.


R. A. Klass
Your Court Street Lawyer

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Debt Collection Tips: Docketing a Judgment Lien

Once a Judgment has been entered in a court, there are various methods which may be utilized by the judgment creditor to collect the Judgment from the debtor.

Where the debtor owns real estate, a lien may be placed upon the property. This type of lien is referred to as a Judgment lien under Article 52 of the Civil Practice Law and Rules (CPLR).

The Judgment lien is placed upon real estate by the “docketing” of a Transcript of Judgment with the County Clerk’s Office.  Once the Judgment is docketed or registered, the judgment creditor may issue an Execution to the Sheriff to levy and sell the real estate, or merely leave the lien against the property until the debtor sells or transfers the property (at which time, the Judgment will likely be paid from the proceeds at closing).

If the Judgment was obtained in the Supreme Court of the county in which the property is located, no further action is required to docket the lien.

If the Judgment was obtained in another court (such as the New York City Civil Court, federal court, Family Court, or District Court), that court will issue, for a fee, a Transcript of Judgment with a raised seal, which Transcript of Judgment will then be filed with the County Clerk’s Office, at which point the lien will be effective.

If the debtor owns real estate in a county different from the one in which the Judgment was entered, a Transcript of Judgment should issue from the County Clerk’s Office in which the Judgment was entered and be filed with the County Clerk’s Office in which the property is located to effectuate the lien.

by Richard A. Klass, Esq.

R. A. Klass
Your Court Street Lawyer

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The Importance of Saving Proof of Payment.

In 1994, tax payments were made to the NYC Department of Finance for several parcels of real property by a client.  In 2001, unbeknownst to the client, the Department of Finance unilaterally reversed the payments made, added interest, created tax liens, and bundled up the liens for public auction sale.

My firm commenced an action against the City of New York in 2002, after learning of the tax lien sales, to declare that the payments made in 1994 had truly been made, and that the Department of Finance acted without authority in reversing the credits.  Luckily for the client, he saved the receipts issued by the Department of Finance when he made the payments in 1994 (which receipts are stamped onto the tax bills and actually given to the taxpayer).

The case culminated with the City of New York agreeing to reverse all of the unauthorized charges in 2001, reversing the tax lien sales, and clearing the tax delinquencies on the client’s account.  A win!

What does this teach?  The importance of retaining proof of payment in various situations.  Here, proof of payment was crucial in winning the case.

Common proofs of payment include a check or credit card statement showing that the bill was paid.  Other forms of proof may be a store receipt, credit card receipt, or paid invoice.  If cash is tendered, a signed receipt should be obtained.

The general rule of thumb is that most business records should be maintained for safekeeping for seven years.  Many advocate saving records for much longer, if feasible given space considerations.

The ability to prove payment of a debt or bill comes in handy in various situations, including:

1. Many parents pay the custodial parent their child support payments by cash.  Sometimes, the custodial parent has kept poor records and will allege non-payment.  The burden of proving payments will fall upon the person charged with making the support payments.

2. Distribution companies, such as food wholesalers, will have the drivers pick up payments at the time of making delivery of goods.  The driver may not account for the payments and the store will be forced to show payment of the invoices.

3. Tenants of smaller rental buildings or two-family houses will pay the landlord (who generally lives at the building) by cash and fail to obtain a rent receipt.  Afterwards, the landlord may commence an action for non-payment in the Housing Court and the tenant will be without proof of payment of the rent.

Since the general burden of proof of payment falls upon the person liable for the same, it is crucial that proof be obtained at the first instance and maintained.  This will ensure that later mistakes or intentional denials of payment are disproved.

by Richard A. Klass, Esq.

R. A. Klass
Your Court Street Lawyer

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