Opinion
101547/10.
Decided March 17, 2011.
KASOWITZ BENSON TORRES/ANO LLP, NEW YORK, NEW YORK, ATTORNEY FOR THE PLAINTIFF.
McKENNA LONG ALDRIDGE, NEW YORK, NY, ATTORNEY FOR THE DEFENDANT.
This breach of contract action arises out of a contingency fee dispute between plaintiff law firm Kasowitz, Benson, Torres Friedman, LLP ("Kasowitz") and their former clients, defendants Duane Reade and Duane Reade, Inc. ("Duane Reade"). Kasowitz moves, pursuant to CPLR § 3212, for an order granting partial summary judgment on its first cause of action for breach of contract. Duane Reade cross-moves, pursuant to CPLR §§ 2215 and 3212, for an order granting it summary judgment, or, in the alternative, striking all or portions of Kasowitz's motion for partial summary judgment. Both parties agree to file their applications under seal.
Kasowitz, affirmation of Mitchell R. Schrage ¶ 2, and so-ordered stipulation dated April 15, 2010.
BACKGROUND
From 2003 until approximately October 2009, ATM machines in the Duane Reade drug stores were owned and operated by Cardtronics, LP ("Cardtronics"). Prior to 2005, Cardtronics would charge surcharge fees to the Duane Reade ATM machine users, and Duane Reade would receive half of the surcharge fees. In 2005, Cardtronics entered into a "branding agreement" with JP Morgan Chase Bank ("Chase"), pursuant to which all of the ATM machines located in the Duane Reade stores would be branded with the Chase insignia. As such, Chase customers who used those ATM machines would be able to withdraw cash without having to pay a surcharge fee. The machines were still owned and operated by Cardtronics.
Cardtronics and Duane Reade amended their contract to reflect the new branding agreement. This branding selection benefitted both Cardtronics and Duane Reade, since more Chase customers would be enticed to use the ATM machines and Duane Reade would encounter more foot traffic. Duane Reade would still receive the surcharge fees from the non-Chase users, and also receive a portion of money from the Chase users, even though Cardtronics did not charge Chase users a fee.
In 2006, a dispute arose between Duane Reade and Cardtronics regarding how much money Duane Reade would be paid for the Chase customers. Duane Reade and Cardtronics each had different interpretations of how much Duane Reade should be paid for the ATM transactions. Cardtronics wanted to pay Duane Reade based on a fixed number of transactions for the remaining life of the contract. Duane Reade sought to determine the amount of transactions on a month-by-month basis.
In March 2006, Duane Reade retained Daniel Goldberg ("Goldberg"), a lawyer who works for Kasowitz, to represent Duane Reade as outside counsel in anticipation of potential litigation with Cardtronics. According to Goldberg, while he was working for a different law firm, he was actually advised in 2004 that Duane Reade was seeking to terminate its contract with Cardtronics for a more lucrative contract directly with Chase. Goldberg produces an internal Duane Reade e-mail from Duane Reade's CEO to Duane Reade's then general counsel, which states the following:
"FYI
Tony has asked me to look over the Cardtronics ATM contract to see if we have any option/possibility to cancel. After a short conversation, he agreed that perhaps Dan Goldberg at White and Case could help. I have a call in to Dan and plan to send him relevant documents tonight" (Kasowitz's Exhibit C).
Although Goldberg was formally retained in March 2006, the attorney's fee arrangement between Kasowitz and Duane Reade was not settled until September 8, 2006, via an e-mail from Goldberg to Michelle Bergman ("Bergman"), who was Duane Reade's general counsel at the time. Goldberg e-mailed Bergman a proposed fee arrangement by which Kasowitz would charge a flat fee of $1 million, payable in 10 installments, plus disbursements, for the potential Cardtronics litigation. The e-mail also provided for a "success fee," which was a contingency fee equal to 20% of whatever new value from the damages "over the life of the [Cardtronics] contract" in excess of $4 million Duane Reade recovered after asserting its breach of contract claim against Cardtronics. The e-mail read as follows:
"I sent it again before. Very frustrating. Well, the upshot is that I came up with something that I believe will be very attractive. We can do the Cardtronics case for a flat $1 million, payable over 10 months as you suggested (exclusive of disbursements), plus 20% of amounts recovered above some number, as opposed to a percentage payable from dollar one.
Based on the numbers we have, which obviously are approximations, we actually think the damages could be between $10 and $11 million over the life of the contract. So, I'm thinking of 20% of everything above $4 million as the success fee portion. Thus, if we get $10 million, the total fee would be $2.2 million (with you keeping $7.8 million obviously). That's $1 million in flat fee, plus $1.2 million in success fee.
That's actually a bit lower than what I had previously suggested of a discount off of time plus 20%. That is, if we did 60% of time plus 20% contingency from dollar one, and we recover $10 million, our total fee would be $2.9 million (assuming our actual hourly would come to $1.5 million, 60% of which is $900,000; leaving $900,000 in time charges, plus $2 million in success fee). Even if the recovery is $5 million (settlement or what have you), the total fee would be $1.2 million, which is still a discount of a few hundred thousand based on "splitting the baby." What do I need to do to put you in a new lawsuit today?
By the way, our discussion about it being a "binary" case of either we win it all or lose it all, though in large part that's true, the damage question is not entirely irrelevant. We're saying that we should get paid based on the actual amount of transactions; figuring that out likely will be disputed before we're done . . ." (Kasowitz's Exhibit D).
The amount of transactions refers to the ATM transactions by Chase account holders.
On September 19, 2006, Goldberg sent a follow-up email to Bergman regarding the fee arrangement. Bergman responded by email later that day and stated, "Go" (Kasowitz's Exhibit E).
In June 2006, on behalf of Duane Reade, Kasowitz initiated an action in federal court against Cardtronics for breach of contract and a declaratory judgment interpreting the fee language portion of the contract between Cardtronics and Duane Reade. The federal action was withdrawn and brought in New York State Supreme Court in October 2006 ( see Duane Reade v Cardtronics. Index No. 603545/06). Duane Reade's complaint sought damages for breach of contract plus a declaration requiring Cardtronics to pay a certain surcharge fee throughout the life of their contract.
Goldberg claims that in May 2007, he was present in a court-ordered mediation at which he proposed two potential plans to try to settle with Cardtronics. The first plan, according to Goldberg, was that the ATM machines would have an increased surcharge, thereby increasing revenues to Duane Reade. The second plan included severing Duane Reade's contract with Cardtronics so that Duane Reade could directly enter into a contract with another provider, such as Chase. At that time, no settlement was reached between the parties.
Duane Reade paid all of the $100,000 installments on time, and by October 2007, had completed the installment payments as per the fee arrangement. Duane Reade still paid disbursements after this point.
In November 2007, the Supreme Court granted summary judgment in favor of Cardtronics. Still using Kasowitz as its counsel, Duane Reade appealed and Kasowitz filed an appellate brief seeking to enforce the contract in Duane Reade's favor in January 2008. Kasowitz referred to the case as a "straight forward commercial dispute over the meaning of discrete contractual language" (Duane Reade's Exhibit H, Civil Appeal, Pre-Argument Statement, at 2). There was no mention in the brief about terminating Duane Reade's contract with Cardtronics. On August 5, 2008, the Appellate Division, First Department, ruled that the language of the contract between Duane Reade and Cardtronics was ambiguous, and the matter was remanded for a trial ( see Duane Reade, Inc. v Cardtronics, LP , 54 AD3d 137 [1st Dept 2008]).
In September 2008, Kasowitz prepared an outline for Duane Reade, suggesting ways that Duane Reade could successfully terminate its relationship with Cardtronics without potential breach of contract. The outline discussed ways of determining if Cardtronics violated any of its own provisions in the contract. There was no mention of how to successfully break relations with Cardtronics in order to move forward with another provider, such as Chase. There was also no mention of how to entice Chase to work with Duane Reade directly.
Goldberg maintains that in October 2008, while he attended a strategy meeting at Duane Reade, he presented ways for Duane Reade to terminate its agreement with Cardtronics. He asserts that Duane Reade's goal was "effecting a termination of the Cardtronics ATM Agreement, through a settlement of the Cardtronics litigation or otherwise" (Goldberg Affidavit, ¶ 23).
Also in October 2008, Bergman e-mailed Goldberg with a list of questions from Chase about Duane Reade's current ATM relationship with Cardtronics. The questions were e-mailed from Chase to Duane Reade as a way "to help Chase better understand [Duane Reade's] current ATM relationship" (Kasowitz's Exhibit L, at 2). The questions answered by Kasowitz included analyzing the agreement between Cardtronics and Duane Reade.
In November 2008, Bergman resigned as general counsel for Duane Reade and was replaced by Phillip Bradley ("Bradley"). Kasowitz forwarded Bradley the previous ideas addressing reasons why or how Cardtronics purportedly breached its agreement with Duane Reade, and how Duane Reade could successfully cancel its relationship with Cardtronics. There was no mention of preparing a new agreement with Chase.
The record also indicates that, at the request of Duane Reade, Cardtronics was communicating with Chase regarding a possible reassignment of the ATM machines to Chase. Kasowitz was not involved in these discussions. Nor was Kasowitz involved in the e-mails between Duane Reade's new general counsel and Cardtronics.
One e-mail dated December 31, 2008 from Bradley to Cardtronics provided, in pertinent part:
"I also wanted to follow up on that part of our conversation regarding the compensation Duane Reade will receive from Cardtronics in connection with the change in relationship among Chase, Cardtronics and Duane Reade. In addition to a severance of the relationship between Cardtronics and Duane Reade, and Duane Reade and Chase entering into a direct ATM placement agreement, Duane Reade expects to receive compensation from Cardtronics. This compensation flows from (a) the pending litigation over past due fees and (b) the pending default notice sent by Duane Reade to Cardtronics. The compensation Duane Reade expects to receive from Cardtronics is $3,000,000.
This payment would result in the dismissal by the parties of the pending litigation" (Kasowitz's Exhibit K).
Another e-mail, written on February 4, 2009 by Bradley to Cardtronics stated:
"I am glad that Cardtronics is making progress with Chase.
While I recognize that it is Cardtronics' current position that it will not pay Duane Reade anything to settle the pending litigation (and performance issues), bear in mind that it is Duane Reade's position that it will not walk away from the litigation simply to do a direct deal with Chase. Duane Reade will only do the direct deal with Chase if the litigation (and performance issues) with Cardtronics is settled on terms satisfactory to Duane Reade. I have conveyed to you Duane Reade's current demand"(Kasowitz's Exhibit M).
On February 13, 2009, unbeknownst to Kasowitz, Duane Reade, through its in-house counsel, settled the Cardtronics action. In summary, the settlement agreement provided for a $1 million payment to Duane Reade, the dismissal of any and all claims, the termination of the contract between Cardtronics and Duane Reade, and the removal of the ATM machines. Both parties agreed to discontinue the litigation. Duane Reade did not receive any cash or consideration from Chase as a result of the Cardtronics settlement.
Despite not being present at the settlement, Duane Reade asked Kasowitz to draft the settlement agreement between Cardtronics and Duane Reade. On February 18, 2009, Goldberg e-mailed Bradley the draft settlement documents which included the resolution of the issues between Duane Reade and Cardtronics. In that e-mail, Goldberg also asked about the details of moving the ATM business from Cardtronics to Chase and stated, "we don't know any of the details of how you are going to move the business from Cardtronics to Chase . . ." (Kasowitz's Exhibit O). Goldberg reminded Bradley that Kasowitz had suggested that Duane Reade litigate with Cardtronics so that Duane Reade could effectuate a deal with Chase. Goldberg also inquired about the "success fee" that Kasowitz was to receive as a result of an upcoming partnership with Chase.
On March 23, 2009, Bradley e-mailed Goldberg the following:
"I can make this real easy for you. [Duane Reade] still does not have a deal with Chase. The litigation is being settled on the basis of a $1 million payment from Cardtronics to Duane Reade. That deal was reached on February 13 between John Lederer and Jack Antonini and memorialized in an email exchange between Mike Keller, and me, the content of which is pasted below . . ." (Kasowitz's Exhibit P, at 1).
Kasowitz submits internal e-mails between Duane Reade and Chase, attempting to indicate that the "termination of the Cardtronics ATM Agreement, a new direct deal with Chase, and termination of the litigation were most certainly a packaged deal'" (Kasowitz's Letter to Justice Wooten, August 4, 2010, at 5). According to Kasowitz, the internal e-mails documented that Cardtronics was hesitant to sign the settlement agreement with Duane Reade until Chase signed its new contract.
On May 8, 2009, the settlement agreement between Cardtronics and Duane Reade was signed and witnessed by the parties, including Kasowitz. On the same date, Duane Reade and Cardtronics entered into a third amendment of their agreement which created a five-month transition period for the removal of Cardtronics' ATM machines from the Duane Reade stores. During this five-month time period, the ATM surcharges for non-Chase users were increased by $1 each. Duane Reade received $1 per every ATM machine transaction, as opposed to its previous receipt of $.50 per transaction, for those five months. Kasowitz alleges that Duane Reade, for the five-month transition period, received approximately $150,000 in "incremental value" for the non-Chase withdrawals (Goldberg Affidavit, ¶ 34).
Also on May 8, 2009, Duane Reade and Chase entered into an agreement by which Chase would place Chase ATM machines in all of the Duane Reade stores. This contract was drafted by Duane Reade's counsel and was not signed by Kasowitz. The agreement provided that Duane Reade would receive an initial payment of $3 million and $3.5 million each year from years 6 through 10 of the contract. Duane Reade would also receive a surcharge fee of $1 for each ATM transaction, instead of $.50. Based on approximating the surcharge transactions, Kasowitz concluded that Duane Reade would be receiving approximately $18 million in revenue. This number was speculated on a certain amount of transactions for the upcoming 10-year period. In the agreement, Duane Reade would also receive $.99 for each "Allpoint Network Withdrawal."
As defined in the contract between Chase and Duane Reade, "Allpoint Network Withdrawal means any cash withdrawal made at an Agreement ATM by a user accessing such Agreement ATM with a card or other device issued by a bank or financial institution that is a member of the Allpoint ATM Network." Kaufman Affirmation, Exhibit R, at 2. According to Bradley, Allpoint Network fees were also part of the contract between Duane Reade and Cardtronics. Dorkey Affirmation, Exhibit L, at 2.
On December 15, 2009, Kasowitz submitted an invoice to Duane Reade for an alleged contingency fee that Kasowitz thought it was owed as a result of the recent agreements with Chase and Duane Reade. In its invoice, Kasowitz concluded that it was owed $7.1 million plus 20% of the Allpoint Network Fees. Kasowitz listed the amount owed from the Allpoint Network fees as "????" (Kasowitz's Exhibit V, at 2).
Duane Reade did not pay the invoice, and as a result, the present action followed. Kasowitz's complaint seeks damages in the amount of no less than $7.1 million. Kasowitz brings three causes of action: breach of contract, quantum meruit and unjust enrichment. With respect to Kasowitz's proposed contingency fee, the complaint alleges the following:
"Taking into account the cash from Cardtronics, the increased surcharge fees, and the increase in money Duane Reade is receiving from Chase under the Chase ATM deal that replaces the Cardtronics one, as provided for in the Cardtronics Settlement, Duane Reade realizes more than $39,500,000 from the Cardtronics litigation.*
Under the terms of the Fee Agreement, [Kasowitz] is entitled to 20% of any such value in excess of the $4,000,000 threshold provided for in the Fee Agreement. Accordingly, [Kasowitz] is entitled to a success fee under the Fee Agreement of no less than $7,100,000, which represents 20% of the $35,500,000 in value that exceeds the threshold amount, in addition to 20% of all other revenues obtained by Duane Reade under the Chase deal which [Kasowitz] requires further discovery to calculate precisely.
*On its face, the Chase ATM agreement provides incremental value to Duane Reade from sources which [Kasowitz] can currently quantify, in addition to certain revenues that [Kasowitz] requires further discovery to calculate precisely but which are likely to be substantial" (Kasowitz's Exhibit X, ¶¶ 18, 19).
DISCUSSION
Kasowitz moves, pursuant to CPLR § 3212, for an order granting it partial summary judgment on liability on its first cause of action for breach of contract. Kasowitz argues that it is entitled to a contingency fee based on the e-mail between Bergman and Goldberg and the fact that, as a result of the Cardtronics litigation, Duane Reade was able to enter into a much more lucrative deal with Chase. Kasowitz does not see the severance with Cardtronics and the new contract with Chase as separate entities, but as one package. Kasowitz claims that it suggested the new agreement with Chase in a mediation and other meetings, and that Duane Reade could not have been successful without Kasowitz's success in the Cardtronics litigation which ultimately resulted in the termination of the contract. Kasowitz believes that the goal of the litigation, what Kasowitz was retained for, was to terminate with Cardtronics so that Duane Reade could work with Chase.
Duane Reade cross-moves, pursuant to CPLR §§ 2215 and 3212, for an order granting it summary judgment, or, in the alternative, striking all or portions of Kasowitz's motion for partial summary judgment. Duane Reade argues that the language of the fee agreement, as drafted, only allows for a potential recovery based on the $1 million settlement between Cardtronics and Duane Reade. Since this recovery was not more than $4 million, Kasowitz is not entitled to any more fees beyond its flat fee and disbursements. Duane Reade also argues that in 2006, when the contingency fee was arranged, there was no mention or strategy to terminate with Cardtronics. If summary judgment is not granted in its favor, Duane Reade seeks to strike all or portions of Kasowitz's motion for a variety of reasons, including alleging that Kasowitz and Bergman breached their ethical duties of confidentiality.
Summary Judgment:
"The proponent of a motion for summary judgment must demonstrate that there are no material issues of fact in dispute, and that it is entitled to judgment as a matter of law" ( Dallas-Stephenson v Waisman , 39 AD3d 303 , 306 [1st Dept 2007]; see also Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Santiago v Filstein , 35 AD3d 184 , 185-86 [1st Dept 2006]). The evidence should be viewed in the "light most favorable to the opponent of the motion" ( People v Grasso , 50 AD3d 535 , 544 [1st Dept 2008]; see also Kesselman v Lever House Restaurant , 29 AD3d 302 [1st Dept 2006]).
Upon the proffer of evidence establishing a prima facie case by the movant, "the party opposing a motion for summary judgment bears the burden of produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact'" ( Grasso, 50 AD3d at 545, quoting Zuckerman v City of New York, 49 NY2d 557, 562). If there is any doubt as to the existence of a triable issue of fact, summary judgment must be denied ( see Rotuba Extruders v Ceppos, 46 NY2d 223; Gross v Amalgamated Hous. Corp., 298 AD2d 224 [1st Dept 2002]). "[I]ssue finding, rather than issue-determination, is the key to the procedure and the motion should not be granted where there is any doubt as to the existence of a genuine factual issue" ( Insurance Corp. of NY v Central Mut. Ins. Co. , 47 AD3d 469 , 472 [1st Dept 2008]). "Mere conclusory assertions, devoid of evidentiary facts, are insufficient [to defeat a well-supported summary judgment motion], as is reliance upon surmise, conjecture or speculation" ( Grullon v City of New York, 297 AD2d 261, 263-264 [1st Dept 2002] [internal quotations and citations omitted]).
In support of its motion, Kasowitz submits, inter alia, Goldberg's affidavit, Bergman's affidavit, the e-mail contingency fee agreement, the invoice to Duane Reade for $7.1 million dollars plus 20% Allpoint Network Fees, various e-mail communications, and the contract between Duane Reade and Chase. Kasowitz proffers that the contingency fee agreement is a valid and binding contract and that it complies with the rules of professional conduct. Kasowitz further argues that the language of the contingency fee agreement would entitle it to recover a significant amount of money as a result of a contract between Duane Reade and Chase.
Kasowitz's alleged damages are partially based on complete speculation of how many ATM transactions may occur in the future as result of the new Chase ATM placement. Kasowitz even acknowledges that further discovery would be necessary to assess the scope of alleged owed fees.
In opposition and in support of its cross-motion, Duane Reade submits, inter alia, attorney affidavits and various other documents. Duane Reade does not dispute that the fee agreement, made via the September 8, 2006 e-mail, is a valid and binding contract; it just does not believe that this fee agreement incorporates any transactions with Chase.
Kasowitz additionally submits a reply and sur-reply. "The function of reply papers is to address arguments made in opposition to the position taken by the movant and not to permit the movant to introduce new arguments in support of, or new grounds for the motion" ( Dannasch v Bifulco, 184 AD2d 415, 417 [1st Dept 1992]). Kasowitz's reply is a "new" self-serving affidavit from Bergman citing the negotiation history and defending her actions to file the first affidavit as proper, ethical, and not in breach of any confidentiality with Duane Reade. The sur-reply, submitted after oral argument, is a collection of post October 2008 documents and e-mails. A sur-reply is not permitted under CPLR § 2214 (b) ( see Graffeo v Paciello , 46 AD3d 613 [2d Dept 2007]). However, the Court granted a limited submission for documents that Kasowitz referenced, but omitted in its reply papers.
After the First Department decision in Duane Reade, 54 AD3d at 137.
Language of the Contingency Fee Agreement:
Kasowitz and Duane Reade seek summary judgment based upon the same issue, a contingency fee contract. Each of the parties attaches a materially different meaning to the "success fee" portion of the contract. Whether a contract term is ambiguous must be determined by the Court as a matter of law ( see Kass v Kass, 91 NY2d 554, 566). With respect to contract interpretation, the Court of Appeals has held that, "when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing" ( W.W.W. Associates v Giancontieri, 77 NY2d 157, 162; see also Duane Reade, 54 AD3d at 140).
Applying the above law to the facts at hand, it is evident that the fee arrangement, as it was written in 2006, is "clear and complete," and did not encompass any work for the new contract between Duane Reade and Chase, just the existing agreement between Duane Reade and Cardtronics. It is apparent that at the time the e-mail was written, Kasowitz was basing its fee on potential earnings from the surcharge fees that Cardtronics withheld during the second amendment of its ATM agreement with Duane Reade. Kasowitz based the expected damages of $10 million on the "numbers" that it had at the time over the "life of the contract" between Duane Reade and Cardtronics. These numbers consisted of damages based purely on litigating with Cardtronics to enforce the contract with Duane Reade and Cardtronics in Duane Reade's favor, so that Duane Reade would receive what it felt was a proper amount of surcharge fees from the ATM transactions ("actual amount of transactions") (Kasowitz's Exhibit D).
Most importantly, the amounts recovered clearly refer to amounts recovered in the "Cardtronics case," which Kasowitz thought to be about $10 million at the time, not amounts recovered as a result of a new ATM agreement with another provider. There is no mention that the contingency fee was to be based on any sort of new ATM arrangement with Duane Reade and another provider, nor is there any mention of Chase. Every reference in the e-mail is to Cardtronics. If Kasowitz wanted to ensure that it would be receiving a contingency fee based on any developments with any other ATM machine providers, Kasowitz should have explicitly written such in its contingency fee. The record readily shows, even as late as 2008, that the litigation strategy by Kasowitz was not to terminate with Cardtronics, but to enforce the contract in Duane Reade's favor. Even if the litigation strategy shifted after this point, Kasowitz should have redrafted the contingency fee agreement to acknowledge this shift ( see Gladstein v Martorella , 71 AD3d 427 , 429 [1st Dept 2010] ["An omission or mistake in a contract does not constitute an ambiguity"] [internal quotations omitted]).
The settlement agreement in the Cardtronics litigation consisted of a $1 million payment to Duane Reade and the termination of the contract. The settlement agreement did not execute the new arrangements or negotiations with Chase. As such, Duane Reade properly paid the $1 million flat fee to Kasowitz, and Kasowitz did not earn a contingency fee.
Termination with Cardtronics:
Kasowitz further asserts that even were the Court to find an ambiguity in the terms of the fee agreement, summary judgment should still be granted because Duane Reade fully understood the terms of the contingency fee. Kasowitz cites to Jacobson v Sassower, 66 NY2d 991, 993 [internal quotations omitted], where the Court of Appeals stated that "[e]ven in the absence of fraud or undue influence, an agreement to pay a legal fee may be invalid if it appears that the attorney got the better of the bargain, unless [he or she] can show that the client was fully aware of the consequences and that there was no exploitation of the client's confidence in the attorney."
Kasowitz argues that termination of the Cardtronics agreement for a more lucrative deal with Chase was considered as part of the initial contingency fee, and that Duane Reade understood this to be the case. In support of its position, Kasowitz submits an e-mail from as early as 2004, in which Duane Reade discusses asking Goldberg for advice. However, there is no mention of incorporating a new deal with Chase, and the Court notes that this e-mail was sent even before Cardtronics had entered into its branding agreement with Chase in 2005.
Kasowitz also submits an affidavit from Bergman in which she suggests that terminating with Cardtronics was expected as a possible resolution and that the fee arrangement would reflect such. According to Kasowitz, Bergman's affidavit would create an understanding on Duane Reade's behalf as to what the contingency fee covered. Kasowitz also asserts that it was due to Kasowitz's counsel that Duane Reade was effectively able to achieve results it was seeking and as such, Kasowitz is entitled to its contingency fee based on the entire successful package.
In response, Duane Reade argues that, at a minimum, termination was only considered as a possibility in 2008, while the fee arrangement was set up in 2006. Kasowitz submitted appellate briefs as late as January 2008 that sought to have the contract with Cardtronics enforced according to its terms, not terminated. Duane Reade contends that even as late as January 2009, the purpose of the litigation was to receive compensation from Cardtronics and to end litigation, not necessarily to terminate the Cardtronics agreement. Duane Reade also notes that Bergman never stated in her affidavit that the Chase deal was to be incorporated into the contingency fee.
Although disputed by Kasowitz, it is evident by the parties' actions and e-mails that, as of 2006, Duane Reade did not seek to terminate its relationship with Cardtronics. At a minimum, Duane Reade sought to terminate in 2008. However, even if the parties had discussed termination as a potential outcome in 2006, and even if Duane Reade's litigation strategy did change, and even if Kasowitz was instrumental in effectively terminating with Cardtronics, the contingency fee arrangement simply is not ambiguous and does not encompass any compensation for a new arrangement with Chase.
Kasowitz was to be paid a success fee for the Cardtronics case. At first, the potential successful outcome was thought of as litigating to recover surcharge amounts owed. Then, the potential successful outcome shifted to settling with Cardtronics. As a result of this settlement, Duane Reade terminated its contract with Cardtronics. This is all part of the Cardtronics action. Kasowitz ensured the successful outcome of the litigation, which in this case, meant the termination of the Cardtronics relationship and a settlement agreement where Duane Reade was paid $1 million.
"Whether a contract is ambiguous is a question of law and extrinsic evidence may not be considered unless the document itself is ambiguous" ( Bailey v Fish Neave , 8 NY3d 523 , 528 [internal quotations omitted]). This Court has already determined that the contingency fee agreement, as a matter of law, is not ambiguous. Even giving Kasowitz the benefit of the doubt, whether or not Duane Reade intended the contingency fee to include termination with Cardtronics is irrelevant. Duane Reade did terminate with Cardtronics and the $1 million settlement was the result.
At a minimum, Kasowitz may be entitled to part of the increased surcharge fees as a result of the five-month transition. Even then, assuming that Kasowitz's numbers are accurate, at an increased revenue for Duane Reade of approximately $150,000 for five months, Duane Reade's potential earnings would be much less than $4 million. Thus, the contingency fee would not be triggered as per the fee agreement. As such, as a matter of law, Kasowitz would still not be entitled to a contingency fee.
No Exclusive Right to Be Duane Reade's Counsel:
Kasowitz argues that it should be compensated for the "packaged deal" between Duane Reade, Chase and Cardtronics that occurred as a result of Duane Reade terminating with Cardtronics. Kasowitz simply cannot set forth any triable issues of fact that it had the exclusive right to handle any and all transactions with Chase on behalf of Duane Reade. Even if one transaction was dependent on the other one occurring, Kasowitz cannot claim that it deserves to be compensated for work that it did not perform or in which it had no part. Kasowitz did not negotiate with Chase, nor did it perform any legal services in relation to the new agreement between Chase and Duane Reade. Kasowitz did not even know the terms of the agreement between Chase and Duane Reade until after the agreement between the parties was signed. Duane Reade used its own counsel to negotiate the deal with Chase.
Kasowitz cannot expect to be compensated for any and all future outcomes that Duane Reade may achieve with other companies as a result of the termination with Cardtronics. Kasowitz was engaged as counsel for assistance only with the Cardtronics litigation and settlement. This settlement eventually led to the successful outcome of terminating the agreement with Cardtronics. Kasowitz was paid the flat fee plus disbursements for its assistance for this outcome. Accordingly, Duane Reade did not breach its contract with Kasowitz.
Considering the evidence in the light most favorable to the non-movant on a summary judgment motion ( see Kesselman v Lever House Restaurant , 29 AD3d 302 , 304 [1st Dept 2006]), the Court concludes that Kasowitz has not met its burden of establishing its entitlement to judgment as a matter of law on its first cause of action for breach of contract. Duane Reade, however, on its cross-motion for summary judgment has met its burden of establishing its entitlement to judgment as a matter of law on the first cause of action and thus, Duane Reade's cross-motion for summary judgment is granted.
Unjust Enrichment and Quantum Meruit:
With regard to the remaining causes of action in Kasowitz's complaint, the Court finds it proper to grant summary judgment to Duane Reade dismissing the entire complaint at this
time. A plaintiff may not sue in quantum meruit for services provided to the defendant when there exists an express contract, setting the terms of plaintiff's compensation, ( see New York Contract Law § 22.34). Where, as here, an express contract governs the fee agreement in question, recovery under the theory of quantum meruit is not appropriate ( see Parker Realty Group, Inc. v Petigny , 14 NY3d 864 , 865-866). Furthermore, "[t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter" ( Clark-Fitzpatrick, Inc. v Long Island Rail Road Co., 70 NY2d 382, 388). Unjust enrichment is classified as a quasi-contract claim ( see IDT Corp. v Morgan Stanley Dean Witter Co. , 12 NY3d 132 , 142). Accordingly, Kasowitz's claims for unjust enrichment must also fail.
Kasowitz's remaining causes of actions are for unjust enrichment and quantum meruit. While Duane Reade cross-moves for summary judgment to dismiss all the Kasowitz's claims, its motion addresses only the breach of contract claim. Whether the cross-motion is for full or partial summary judgment is immaterial for summary judgment purposes. ( see CPLR § 3212 [b]); Atiencia v MBBCO II, LLC, 75 AD3d 424, 424 [1st Dept 2010] ["A court, in the course of deciding a motion, is empowered to search the record and award summary judgment to a nonmoving party"]).
The Court has considered Kasowitz's remaining contentions and finds them to be without merit. As a result of this decision, Duane Reade's cross-motion to strike is moot.
CONCLUSION
Accordingly, it is,
ORDERED that Kasowitz, Benson, Torres Friedman, LLP's motion for partial summary judgment is denied; and it is further,
ORDERED that the part of Duane Reade and Duane Reade, Inc.'s cross-motion seeking to strike is denied as moot; and it is further,
ORDERED that the part of Duane Reade and Duane Reade, Inc.'s cross-motion for summary judgment is granted and the complaint is dismissed with costs and disbursements to Duane Reade and Duane Reade, Inc. as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further,
ORDERED that the Clerk is directed to enter judgement accordingly; and it is further,
This constitutes the Decision and Order of the Court.