Opinion
93-CV-0302E(F)
April 4, 2001
Edward C. Cosgrove, Esq., 1000 Main-Seneca Bldg., 237 Main St., Buffalo, N.Y. 14203, for the plaintiff.
Charles C. Swanekamp, Esq., c/o Jaeckle Fleischmann Mugel, Fleet Bank Bldg., 12 Fountain Plaza, Buffalo, N.Y. 14202 and James J. Capra, Jr., Esq., Kenneth N. Hart, Esq., Gino D. Vissicchio, c/o Orrick, Herrington Sutcliffe, 666 Fifth Ave., New York, N.Y. 10103, for Quality, Penn Sunrise.
Kenneth W. Africano, Esq., c/o Damon Morey, 1000 Cathedral Place, 298 Main St., Buffalo, N.Y. 14202 for Paige.
MEMORANDUM and ORDER
Tops Markets, Inc. ("Tops") originally filed this action April 2, 1993 raising both federal and state claims against defendants. Defendant James V. Paige, Jr. filed a state law counterclaim. This Court granted summary judgment in favor of the defendants on the federal causes of action, declined to exercise supplemental jurisdiction over the state causes of action and dismissed the Complaint herein August 21, 1996. Thereafter Tops discharged its original attorney, John H. Stenger, Esq., who had commenced this action and retained Edward C. Cosgrove, Esq. October 8, 1996. Cosgrove refiled the state causes of action in New York State Supreme Court for Erie County and appealed the federal dismissal to the United States Court of Appeals for the Second Circuit. The latter affirmed in part, vacated in part and remanded this case to this Court. Tops filed an amended complaint June 15, 1998 wherein the sole cause of action raised was for attempted monopolization in violation of the Sherman Antitrust Act, 15 U.S.C. § 2. Trial was had in this matter from August 16, 1999 until September 8, 1999 resulting in a jury verdict for defendants on all counts — including a finding that Tops was liable on a counterclaim brought by Paige. A separate trial on the amount of damages to be assessed against Tops on Paige's counterclaim was to be scheduled later. On February 16, 2000 Tops discharged Cosgrove as its attorney and retained Daniel C. Oliverio, Esq. of Hodgson Russ LLP to defend it in the damages trial on Paige's counterclaim. In the letter discharging Cosgrove, Tops requested a bill for all outstanding disbursements. Lennon September 5, 2000 Aff. Ex. D (Mineo February 16, 2000 Letter). Cosgrove never responded to this request — Schmitt August 28, 2000 Aff. ¶ 7 — but filed a motion July 19, 2000 seeking to recover his disbursements and his attorney fees under quantum meruit and asserting a retaining lien over the case file until a hearing had been held to determine the amount of such and he had received payment therefor. After being discharged, Cosgrove never indicated to Tops — until he filed the instant motion five months thereafter — that he would be asserting a retaining lien over the file and would refuse to turn it over to Oliverio until a hearing had been had to determine his fees under quantum meruit and such had been paid by Tops; rather he implied that it was taking him such a long time to transfer the file because of its size and because he had not maintained the state and federal actions separately. In response to Cosgrove's motion, Tops took the position that all of his valid disbursements had already been paid and that he was not entitled at the present time to a retaining lien or to the determination and payment of his attorney fees under quantum meruit. The undersigned has endeavored to get Tops and Cosgrove to work this matter out between themselves without the need for judicial intervention, first during the oral argument on this motion August 25, 2000, then in a September 19, 2000 letter and again during a September 22, 2000 hearing for the purpose of setting a date for the damages trial on Paige's counterclaim. Due to the inability of Tops and Cosgrove to work this matter out between themselves, which prejudiced both Tops and Paige because Cosgrove's refusal to turn the file over to Oliverio has prevented the damages trial on Paige's counterclaim from being conducted, this Court will now resolve Cosgrove's motion.
The state case, Tops Markets, Inc. v. Quality Markets, Inc., No. I 1997-7273, was assigned to and is still proceeding before Administrative Justice Vincent E. Doyle.
Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90 (2d Cir. 1998).
Tops also terminated Cosgrove in the state court action and Cosgrove filed an identical motion before Justice Doyle. Although the state court case had not yet been tried, Justice Doyle denied Cosgrove's motion for an immediate hearing to fix the amount of his attorney fees under quantum meruit in a decision and order dated September 11, 2000 and instead held that the "amount of Cosgrove's attorney's fees, if any, in this State Court action shall be determined at its conclusion, secured by a lien on the proceeds of any recovery."
September 5, 2000 Aff. (¶¶ 40-68) by Lennon, Cosgrove's partner.
Due to the dispute over Cosgrove's assertion of a retaining lien on the case file, the date for the damages trial on Paige's counterclaim could not be set and has been adjourned sine die.
"The right of an attorney to recover for professional services must rest on an express or implied contract. The burden of establishing the existence of a contract, with full knowledge by the client of all material circumstances, is on the attorney." Paulsen v. Halpin, 427 N.Y.S.2d 333 (App.Div. 4th Dep't 1980). Disputes over attorney fees are governed by the law of the forum state. Cook v. Moran Atlantic Towing Corp., 79 F.R.D. 392, 394 (S.D.N.Y. 1978). This Court has not been provided with a copy of the retainer agreement between Tops and Cosgrove and, accordingly and for present purposes, will rely upon the characterization of such in the August 28, 2000 Affidavit of Tops's in-house counsel, Nicholas Schmitt, Esq. The contingency agreement between Tops and Cosgrove provided "that in return for fully prosecuting the action and defending any counterclaims, Mr. Cosgrove will be paid one-third of any recovery in this action and his reasonable and necessary disbursements upon proper documentary proof. Tops reserved the right to challenge any disbursements. Any out-of-the-ordinary disbursements, such as for expert witnesses, etc., required Tops'[s] prior approval." Schmitt August 28, 2000 Aff. ¶ 2.
Internal citations omitted.
"The unqualified right to terminate the attorney-client relationship at any time has been assiduously protected by the courts. An attorney however, is not left without recourse for unfair terminations lacking cause. If a client exercises the right to discharge an attorney after some services are performed but prior to the completion of the services for which the fee was agreed upon, the discharged attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the completed services. [The New York Court of Appeals has] recognized that permitting an discharged attorney to recover the reasonable value of services rendered in quantum meruit, a principle inherently designed to prevent unjust enrichment, strikes the delicate balance between the need to deter clients from taking undue advantage of attorneys, on the one hand, and the public policy favoring the right of a client to terminate the attorney-client relationship without inhibition on the other." Matter of Cooperman, 83 N.Y.2d 465, 473 (1994).
Internal citations and quotation marks omitted.
When an attorney in a contingency fee case is discharged by his client without cause and before the conclusion of the case — i.e., before the client's right vel non recovery has been established, the attorney has a common law retaining lien over the file to secure the payment of both his disbursements and the fair and reasonable value of his services under quantum meruit and generally may not be compelled to turn over the file until a hearing has been held to ascertain the amount of his attorney fees and the client has paid such in full or provided security therefor because, once the attorney relinquishes possession of the file, the retaining lien is extinguished. Lai Ling Ching v. Modansky, 73 N.Y.2d 454, 458-459 (1989); In re Weltling, 266 N.Y. 184, 186-188 (1935); Andriev v. Keller, 563 N.Y.S.2d 88 (App.Div.2d Dep't 1990); Hom v. Hom, 622 N.Y.S.2d 282 (App.Div.2d Dep't 1994). However, if an attorney is discharged for cause he has no right to compensation or to a retaining lien; it is only when he is discharged without cause before the completion of his services that the amount of his compensation must be determined under quantum meruit. Teichner v. W J Holsteins, Inc., 64 N.Y.2d 977, 979 (1985). When an attorney in a contingency fee case is discharged at the end of the case after it has been established that plaintiff will have no recovery upon which he would be entitled to a percentage thereof, the attorney has no right to recover the reasonable value of his services under quantum meruit. Crowley v. Wolf, 281 N.Y. 59, 65 (1939); Tuff Rumble Management v. Landmark Distributors, Inc., 677 N.Y.S.2d 788 (App.Div. 1st Dep't 1998). "A hearing is required to determine if [the attorney] was discharged for cause or, if he was discharged without cause before completion of the services, for a determination of his fee on a quantum meruit basis." Teichner, at 979. The factors used in determining the fair and reasonable value of an attorney's services under quantum meruit include: the nature of the litigation; the difficulty of the case and the amount at stake; the time, the effort and skill required; the counsel's experience, ability, reputation and role in the case; the results achieved; the fee customarily charged in the locality; the contingency or certainty of compensation; and the terms of the contingency agreement. Shrauger v. Shrauger, 537 N.Y.S.2d 84 (App.Div.3d Dep't 1989); Smith v. Boscov's Department Store, 596 N.Y.S.2d 575 (App.Div.3d Dep't 1993).
The court has discretion to defer the determination of the fair and reasonable value of a discharged attorney's fees under quantum meruit until the conclusion of the litigation because the amount of recovery is an element in fixing such, and can substitute a statutory charging lien pursuant to N.Y. Jud. Law § 475 in place of the retaining lien to secure payment of such, provided that all authorized disbursements due and owing are paid. Security Credit Systems, Inc. v. Perfetto, 662 N.Y.S.2d 674 (App.Div. 4th Dep't 1997); Matter of Shaad, 399 N.Y.S.2d 822 (App.Div. 4th Dep't 1977); Steves v. Serlin, 509 N.Y.S.2d 666 (App.Div.3d Dep't 1986). New York courts "have, in many cases, ordered attorneys to deliver to their clients papers and records received by the attorneys in the course of litigation, though through such delivery the attorney's retaining lien was destroyed." Robinson v. Rogers, 237 N.Y. 467, 471 (1924). "[T]he recognized power of the court to compel an attorney to deliver to his client papers upon which the [attorney] has a lien is not based upon any assumed right of the court to destroy even a common-law lien when other adequate security has been furnished, but rather upon the control by the courts of their own officers, and their power to compel attorneys to act equitably and fairly towards their clients." Id. at 472. "[W]here the retention of papers by an attorney serves to [prejudice] a client the attorney should be required to deliver up the papers upon receiving proper security for his compensation, because insistence upon his lien under such circumstances is not in accordance with the standards of conduct which a court may properly require of its officers." Id. at 473.
In his July 19, 2000 motion, Cosgrove claimed numerous unreimbursed disbursements going back as far as March of 1997. He did not provide any proof that these disbursements had been validly incurred and has included expenses that were incurred in the state court action. Tops has submitted an affidavit stating that all of these disbursements have been paid with two exceptions. Cosgrove claims a total of $1,760.66 for attendance at an antitrust course given by the Practicing Law Institute in November 1998 and a total of $37,447.07 for work done by Ann W. Herman, Esq. from January 21, 1997 through December 31, 1999. Tops states that it never authorized Cosgrove to attend the antitrust course at its expense and did not authorize Cosgrove to retain Herman except for a period from June 1, 1999 through September 30, 1999; however it has stated that it will pay Cosgrove $1,714.04 for work claimed to have been done by Herman from October 22, 1999 through December 31, 1999 — if provided with contemporaneous time sheets to substantiate such. Schmitt August 28, 2000 Aff. ¶¶ 3, 10-12. During oral argument on this motion August 25, 2000 Oliverio indicated that Tops would issue a check to Cosgrove within three days if this Court directed it to pay the disputed disbursements. August 25, 2000 Hearing Transcript at 10-11. If Cosgrove submits written evidence to this Court showing that he had been specifically authorized by Tops to attend the antitrust course and to hire Herman on an hourly basis from January 21, 1997 through December 31, 1999 at Tops's expense, and provides contemporaneous time records for the $1,714.04 claimed for the work done by Herman between October 22, 1999 through December 31, 1999, this Court will ensure that he is paid for such. However, if Cosgrove is unable — or unwilling — to present such proof, this Court will hold that these disbursements were unauthorized and that Tops is not liable to pay Cosgrove for such.
Cosgrove has not contradicted Tops's assertion that all disbursements other than those relating to an antitrust course and Herman have been paid. See footnote 9.
Cosgrove claims $406 for "U.S. Air", $359.66 for "Barbizon Hotel, New York City for PLI Conference" and $995 for "Tuition paid to Practicing Law Institute for Anti-Trust course — 11/16-11/17/98."
Cosgrove also contends that, because he was terminated by Tops, he is immediately entitled to recover the reasonable value of his attorney fees under quantum meruit and that he has a retaining lien over the file until a hearing has been held to determine the amount of such and he receives payment therefor. However, the cases cited by Cosgrove for the proposition that a discharged attorney in a contingency fee case need not wait until the conclusion of litigation for a hearing to fix the amount of his recovery under quantum meruit are inapplicable to the present case. As noted supra, a trial was had in this case resulting in a jury verdict against Tops and finding that it was entitled to no recovery. However the jury also found against Tops on the counterclaim raised by defendant Paige with the result that a damages trial on such has to be held before final judgment can be entered. Tops discharged Cosgrove after the jury had found that it was entitled to no recovery and that was the end of the case in regard to the possibility of Cosgrove earning a contingency fee. The mere fact that Tops chose to be defended by Oliverio in the damages trial on Paige's counterclaim and discharged Cosgrove before final judgment had been entered cannot serve as the basis for recovery under quantum meruit by Cosgrove. He took the case on a contingency fee basis and lost; accordingly he is not entitled to recover under quantum meruit at this point and therefore has no retaining lien to secure the payment of such. This Court holds that Cosgrove is not entitled to a hearing to determine the reasonable value of his services under quantum meruit before turning the file over to Oliverio.
Tillman v. Komar, 259 N.Y. 133, 135-136 (1932) (client's right to recover established before attorney discharged); Lai Ling Ching v. Modansky Leasing Co., Inc., 73 N.Y.2d 454, 456 (1989) (attorney discharged after conducting preliminary investigation but before action commenced); In re Welting, 266 N.Y. 184, 186-187 (1935) (attorney discharged during pendency of litigation); Turner v. Steve Brody, Inc., 264 N.Y.S.2d 867 (App.Div.2d Dep't 1965) (attorney discharged before instituting legal action).
Cosgrove's claim that he needs the file to determine the reasonable value of his services under quantum meruit — should he become entitled to a hearing on such —, is meritless, because Cosgrove has already gone through the file and "reconstructed" the time he spent on this case. In any event, a court cannot rely on "reconstructed" time sheets to determine the reasonable value of attorney's services under quantum meruit, because such do not establish the reasonable value thereof. General Star Indem. v. Custom Editions Upholstery, 940 F. Supp. 645, 653 (S.D.N.Y. 1996).
Cosgrove still may become entitled to a quantum meruit hearing at some time in the future if Tops decides to continue this case by appealing to the Second Circuit Court of Appeals the jury verdict against it on its antitrust claim. However the client always has the right to decide "to end further litigation when convinced by a decision after trial against [it] upon the merits" and, if that decision "has the effect of honestly convincing a client that [its] case is hopeless, [it] should not be compelled to go on in order to afford [its] attorney an opportunity to earn a fee." Crowley, at 66. Accordingly, Cosgrove may become entitled to a quantum meruit hearing if Tops decides to appeal this case, although Tops is under no obligation to do so. However, if a client decides to appeal a case, the discharged attorney is then entitled to recover the reasonable value of his services under quantum meruit and need not depend on another attorney to be successful on appeal because the
"value of one attorney's services is not measured by the result attained by another. This [attorney] did not contract for his contingent compensation on the hypothesis of success or failure by some other member of the bar. A successor may be able to obtain far heavier judgments than the efforts of the original attorney could secure, or, on the other hand, inferior equipment of a different lawyer might render futile an attempt to prove damages to the client. In making their agreement, the parties may be deemed to have estimated this lawyer's pecuniary merit according to his own character, temperament, energy, zeal, education, knowledge, and experience which are the important factors contributing to professional status and constituting in a large degree, when viewed in relation to the volume of work performed and the result accomplished, a fair standard for gauging the value of services as prudent counsel and skillfull advocate." Tillman v. Komar, 259 N.Y. 133, 135-136 (1932).
If Tops decides to appeal the jury verdict against it on its antitrust claim after the entry of final judgment, then and only then will a hearing to determine the reasonable value of Cosgrove's services under quantum meruit need to be conducted. Accordingly, should Tops decide to appeal the jury verdict on its antitrust claim — as opposed to only the counterclaim by Paige — Cosgrove may at such time renew his motion for a hearing to determine the reasonable value of his attorney fees under quantum meruit.
Cosgrove need not wait until the ultimate conclusion of the case if Tops appeals because it is preferable to determine the reasonable value of his services under quantum meruit at such time rather than years later when the case finally concludes. Cohen v. Grainger, Tesoriero Bell, 81 N.Y.2d 655, 659 (1993).
Accordingly, it is hereby ORDERED that Cosgrove shall immediately turn the case file over to Oliverio and that, should Tops decide to appeal the jury verdict against it on its antitrust claim after final judgment has been entered, a hearing will then be held to determine the reasonable value of Cosgrove's services under quantum meruit.