Opinion
Index No: 159052/12
01-09-2017
BRIAN COHEN, Plaintiff, v. MICHAIL Z. HACK, EVAN SCHWARTZ, SCOTT HARRIGAN, individually and as members OF QUADRINO & SCHWARTZ, P.C. and QUADRINO & SCHWARTZ, P.C., Defendants.
Steven Cohn, P.C., Carle Place (Mitchell R. Goldklang of counsel), for plaintiff. Traub Lieberman Straus & Shrewsberry LLP, Hawthorne (Lisa L. Shrewsberry of counsel), for defendants.
DECISION/ORDER
Motion sequence 4 Recitation, as required by CPLR 2219 (a), of the papers considered in reviewing defendants' motion and plaintiff's cross-motion for summary judgment under CPLR 3212.
| Papers | Numbered |
|---|---|
| Defendants' Notice of Motion | 1 |
| Defendants' Memorandum of Law in Support | 2 |
| Plaintiff's Notice of Cross-Motion and in Opposition | 3 |
| Defendants' Reply Affirmation | 4 |
Traub Lieberman Straus & Shrewsberry LLP, Hawthorne (Lisa L. Shrewsberry of counsel), for defendants. Gerald Lebovits, J.
Defendants move and plaintiff cross-moves under CPLR 3212 for summary judgment.
Plaintiff alleges that on April 23, 2008, he met with Evan Schwartz, a member of the law firm of Quadrino & Schwartz, P.C. (the law firm), and that he and Schwartz, on the law firm's behalf, executed a retainer agreement (the initial retainer) to represent him in connection with filing long-term disability claims against Guardian Life Insurance Company of America (Guardian) and New York Life Insurance Company (NY Life) (plaintiff affidavit, ¶ 2; plaintiff EBT at 26-28).
The initial retainer includes the following provisions:
"1. The Client retains the [law firm] to represent him in connection with the filing of a long term disability claim with [Guardian] and NY Life. This Agreement does not obligate the [law firm] to commence a lawsuit or other legal proceeding absent a separate, written Agreement between the parties.
2. For legal services rendered, the [law firm] shall be compensated on an hourly basis."
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"8. If at any point in the future the Client requests the [law firm] to perform additional work beyond the scope of this Agreement as described in Paragraph and [the law firm agrees] to perform such work, the scope of the additional work to be performed shall be set forth in writing and signed by both Client and [the law firm]."
* * *
"10. The Client hereby acknowledges that if any unpaid balance is not remitted in full . . . within 30 days after due date the [law firm] shall have the right to stop all work and withdraw from representation of the Client. In the event that the [law firm] ever permit 30 days to elapse past a given due date, it shall not be construed as a waiver of the [law firm's] right to stop all work and withdraw."
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"14. The [law firm] may withdraw from, or terminate representation of the Client at any time after reasonable notice to Client for . . . non-payment of fees."
Plaintiff contends that he provided the necessary financial documentation to the law firm to enable it to prosecute his claim (plaintiff affidavit, ¶ 3). Plaintiff states that in May 2009, he was advised that Guardian had denied his claim for disability benefits, that he was not advised of an appeal procedure, but that he was told that if he did not pay the then-outstanding balance of accrued legal fees of approximately $17,000, the law firm would withdraw from representing him (id., ¶¶ 7-9; plaintiff EBT at 29, 34-37, 42-43). Plaintiff further states that on July 24, 2009, he was advised that the only way to contest Guardian's denial of his claim was to commence a lawsuit against it and that this required a new retainer agreement (the lawsuit retainer) (plaintiff affidavit, ¶¶ 10-11; plaintiff EBT at 35-37, 51-54). On My 24, 2009, plaintiff and Schwartz, on the law firm's behalf, executed the lawsuit retainer (plaintiff affidavit, ¶¶ 11-14).
The lawsuit retainer included the following provisions:
"1. The Client hereby retains the [law firm] to commence and pursue a lawsuit against [Guardian] for unlawfully terminating the client's long term disability benefits.
2. The [law firm] shall be compensated as follows:"
* * *
"b. In the event of a recovery [prior to trial preparation as defined] the [law firm shall receive Thirty Three (33%) percent of any amounts recovered.
3. This Agreement is for legal services to be provided up to and including the entry of a judgment in the lawsuit to be commenced under this Agreement. The [law firm is] not obligated to defend or pursue an appeal [absent] . . . a new agreement."
* * *
"11. The Client and the [law firm] acknowledge, understand, and agree that the [law firm] undertake[s] to exercise [its] best judgment and to put forth [its] best efforts in the performance of all services and duties under this Agreement, but . . . it is acknowledged, understood, and agreed that the [law firm] do[es] not stipulate or guarantee specific results or outcomes."
The lawsuit retainer had a written addendum (the addendum), executed by plaintiff on August 24, 2009. The addendum noted an outstanding balance of $16,569.53 due under the terms of the initial retainer. It provided that the outstanding balance would be held "in abeyance" pending the lawsuit's resolution; if no recovery were obtained in the lawsuit, plaintiff agreed to pay the outstanding balance and that all other terms of the initial retainer remained in effect.
On August 5, 2009, the law firm electronically filed a summons and complaint in Supreme Court, New York County, under index number 111342/2009: Brian Cohen v The Guardian Life Insurance Company of America (the lawsuit). In November 2009, the lawsuit was settled and, under the terms of the settlement, plaintiff received a monthly disability payment of $5,181. He contends that the one-third contingency fee owing to the law firm under the lawsuit retainer is excessive.
On December 20, 2012, plaintiff commenced this action asserting three causes of action: (1) legal malpractice; (2) fraudulent misrepresentation; and (3) breach of contract, improper and excessive billing. On January 16, 2014, Justice Paul Wooten granted a portion of defendants' motion to dismiss to the extent of dismissing the fraud cause of action, denied dismissal of the legal malpractice cause of action, and denied the portion of the motion that sought arbitration of the breach-of-contract cause of action. The Appellate Division, First Department, affirmed the dismissal of the fraud cause of action and the denial of the submission to arbitration of the breach-of-contract cause of action (see Cohen v Hack, 118 AD3d 460 [1st Dept 2014]). It modified Justice Wooten's January 2014 Order, finding that plaintiff's assertion "that defendants, in bad faith and without full disclosure, pressured [plaintiff] into changing from an hourly retainer to a contingency retainer [did not allege that] the result of his dispute with his disability insurer [was caused] to be worse [and this was] fatal to his claim for malpractice" (id. at 460).
On April 13, 2015, Justice Wooten granted plaintiff leave to amend his complaint solely to add two unopposed allegations and denied the remaining portion of plaintiff's motion, which sought to add causes of action for breach of fiduciary duty and violation of Judiciary Law § 487.
On March 4, 2016, defendants made the instant summary-judgment motion to dismiss plaintiff's remaining cause of action for breach of contract or, alternatively, to submit the contract claim to arbitration. On April 14, 2016, plaintiff cross-moved for summary judgment, seeking rescission of the lawsuit retainer (Goldklang affirmation, ¶ 57).
Defendants contend that the law firm acted properly in representing plaintiff in his disability claim, that plaintiff fell behind in his obligation to pay hourly legal fees according to the initial retainer, and that after Guardian's denial of plaintiff's claim, the law firm and plaintiff agreed to enter into the lawsuit retainer (Schwartz affidavit, ¶ 2, 4-9; Schwartz EBT at 12-13, 16- 17, 19, 59, 63-64, 66). They assert that after it commenced the lawsuit, there were negotiations with Guardian and they obtained for plaintiff a monthly disability benefit of $5,181 (Schwartz affidavit, ¶¶ 10-11; Schwartz EBT at 66, 68-71, 81, 84, 89-91, 97-100, 104-105, 108-110, 164).
Defendants note that plaintiff had previously executed contingency-fee agreements with attorneys in connection with automobile accidents and the fees in those cases were one-third of the recovery (plaintiff EBT at 18-23). They also note that the first time plaintiff objected to the hourly bills was at his examination before trial (EBT) on December 15, 2015 (id. at 147-148).
Defendants contend that they are entitled to the one-third contingency fee under the terms of the lawsuit retainer and, consequently, seek dismissal of plaintiff's breach-of-contract cause of action.
Summary-Judgment Standard
A party seeking summary judgment must make a prima facie case showing that it is entitled to judgment as a matter of law by proffering sufficient evidence to demonstrate the absence of any material issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). If the movant fails to make this showing, a court must deny the summary-judgment motion (id.). Once the movant meets its burden, then the opposing party must produce evidentiary proof in admissible form sufficient to raise a triable issue of material fact (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
In deciding the motion, the court must draw all reasonable inferences in favor of the nonmoving party and deny summary judgment if it has any doubt that a material issue of fact exists (Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931, 932 [2007]; Dauman Displays v Masturzo, 168 AD2d 204, 205 [1st Dept 1990], lv dismissed 77 NY2d 939 [1991]). If a court can draw different conclusions from the evidence, the court should deny summary judgment (Sommer v Federal Signal Corp., 79 NY2d 540, 555 [1992]).
Also, "the general rule is that a party may not obtain summary judgment on an unpleaded cause of action" (Weinstock v Handler, 254 AD2d 165, 166 [1st Dept 1998]; accord Pludeman v N. Leasing Sys., Inc., 106 AD3d 612, 616 [1st Dept 2013]; Kramer v Danalis, 49 AD3d 263, 264 [1st Dept 2008]).
Contract Interpretation
Generally, "when parties set down their agreement in a clear, complete document, their writing should . . . be enforced according to its terms [and extrinsic evidence] is generally inadmissible to add to or vary the writing" (W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). It is improper for the court to rewrite the parties' agreement; the best evidence of the parties' agreement is their written contract (Greenfield v Philles Records, 98 NY2d 562, 569 [2002]).
But "[c]ourts 'give particular scrutiny to fee arrangements between attorneys and clients,' placing the burden on attorneys to show the retainer agreement is 'fair, reasonable, and fully known and understood by their clients'" (Matter of Lawrence, 24 NY3d 320, 336 [2014] [citation omitted]). Also, "[a] revised fee agreement entered into after the attorney has already begun to provide legal services is reviewed with even heightened scrutiny, because a confidential relationship has been established and the opportunity for exploitation of the client is enhanced" (id.).
Rescission
Rescinding a contract "is permitted where there is a breach of contract that is 'material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract'" (Lenel Sys. Intl., Inc. v Smith, 106 AD3d 1536, 1538 [4th Dept 2013] [citation omitted]; accord Matter of Kassab v Kasab, 137 AD3d 1138, 1140 [2d Dept 2016]; RR Chester, LLC v Arlington Bldg. Corp., 22 AD3d 652, 654 [2d Dept 2005]). A court may void a contract "on the ground of a unilateral mistake of fact only where the enforcement of the contract would be unconscionable, the mistake is material and made despite the exercise of ordinary care by the party in error" (William E. McClain Realty v Rivers, 144 AD2d 216, 218 [3d Dept 1988], app dismissed 73 NY2d 995 [1989]). A party may also establish a claim to rescission "based on . . . the parties' mutual mistake" (Silver v Gilbert, 7 AD3d 780, 781 [2d Dept 2004]; accord Almap Holdings v Bank Leumi Trust Co. of N.Y., 196 AD2d 518, 519 [2d Dept 1993], lv denied 83 NY2d 754 [1994]). The party moving for rescission "has the burden of establishing these elements by clear and convincing evidence" (Executive Risk Indem. Inc. v Pepper Hamilton LLC, 56 AD3d 196, 206 [1st Dept 2008], affd as mod 13 NY3d 313 [2009]; accord Silver, 7 AD3d at 781).
Discussion
Initially, the court notes that the portion of defendants' motion that seeks submission of plaintiff's breach-of-contract cause of action to arbitration is foreclosed by the Appellate Division's decision affirming the portion of the January 2014 Order on this issue and holding that "arbitration of the contract claim was inappropriate under the circumstances [given plaintiff's claim] of defendants' misconduct" (Cohen, 118 AD3d at 460).
Plaintiff's cross-motion for summary judgment seeking rescission of the lawsuit retainer is denied because plaintiff has not shown "by clear and convincing evidence" (Executive Risk, 56 AD3d at 206) "a unilateral mistake where the enforcement of the contract would be unconscionable" (William E. McClain Realty, 144 AD2d at 218) or a "mutual mistake" (Silver, 7 AD3d at 781). Also, plaintiff has offered no reason to vary from "the general rule . . . that a party may not obtain summary judgement on an unpleaded cause of action" (Pludeman, 106 AD3d at 616, quoting Weinstock, 254 AD2d at 166).
Plaintiff contends that the law firm has engaged in excessive and improper billing and, thus, was not entitled to the outstanding balance or the one-third contingency fee. But "[a]bsent incompetence, deception or overreaching, contingent fee agreements that are not void at the time of inception should be enforced as written [and] 'the power to invalidate fee agreements with hindsight should be exercised only with great caution'" (Matter of Lawrence, 24 NY3d at 339, quoting Lawrence v Graubard Miller, 11 NY3d 588, 596 n 4 [2008]).
The terms of the initial retainer required plaintiff to remain current on the law firm's bills for its services. The law firm has presented evidence that plaintiff acknowledged the outstanding balance in the addendum and his EBT testimony in which he objected to the invoices for the first time only at his EBT in December 2015 (plaintiff EBT at 147-148). The contingent-fee arrangement of one-third of the recovery under the terms of the lawsuit retainer has not been shown to be unreasonable and the court notes that plaintiff had executed similar contingency-fee agreements providing for a one-third recovery in other lawsuits (id. at 18-23). For a court to engage in "hindsight analysis of contingent fee agreements not unconscionable when made is a dangerous business, especially when a [court's] determination of unconscionability is made solely on the basis that the size of the fee seems [in retrospect to be] too high to be fair" (Matter of Lawrence, 24 NY3d at 340). Defendants have shown that they acted according to the terms of the initial retainer, the lawsuit retainer, and the addendum. A court should "enforce clear and complete documents, like [these agreements] according to their terms" (see id. at 341). Defendants' motion to dismiss plaintiff's remaining breach-of-contract cause of action, and this action, is granted.
Accordingly, it is hereby
ORDERED that defendants' motion for summary judgment dismissing plaintiff's complaint is granted and the complaint is dismissed in its entirety, with costs and disbursements in favor of defendants as taxed by the Clerk of the Court; and it is further
ORDERED that plaintiff's cross-motion for summary judgment is denied; and it is further
ORDERED that defendants serve a copy of this decision and order with notice of entry on plaintiff and on the County Clerk's Office, which is directed to enter judgment accordingly. Dated: January 9, 2017
/s/
J.S.C.