Opinion
62283 CVN 2005.
Decided June 7, 2006.
In this pre-answer motion, defendant Gerald B. Lefcourt, P.C. ("defendant" or "Law Firm") moves for an order pursuant to CPLR § 3211(a)(7) dismissing the complaint on the ground that it fails to state a cause of action upon which relief may be given as well as denying any leave to re-plead. Plaintiff Dan Beech ("plaintiff" or "Beech") opposes the motion and cross-moves for an order pursuant to CPLR § 3212 granting him summary judgment on its first cause of action. Defendant opposes the cross-motion. Both the motion and cross-motion are consolidated herein for disposition.
Background
In October, 2003, Beech retained the Law Firm to represent him in a criminal matter in Supreme Court, Nassau County. Beech paid the Law Firm fifteen thousand dollars. The Law Firm neither provided Beech with a letter of engagement nor a written retainer agreement. Beech essentially avers that the Law Firm did minimal or no work for him. Defendant states that the scope of its representation of Beech could not clearly be defined at the time of its retention. In addition, defendant asserts that the parties orally agreed to a flat fee for the Law Firm to be available as a consultant, rather than a lead attorney.
Standard of Review
In determining a motion to dismiss a pleading for failure to state a cause of action the court must "accept the facts as alleged in the Complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit into any cognizable legal theory." Leon v. Martinez, 84 NY2d 83, 87-88, 614 NYS2d 972, 974 (1994). However, the standard of review for a summary judgment motion is different as the movant has the initial burden of proving entitlement to summary judgment. Winegrad v. N.Y.U. Medical Center, 64 NY2d 851, 487 NYS2d 316 (1985). Once the movant has provided such proof, in order to defend the summary judgment motion the opposing party must "show facts sufficient to require a trial of any issue of fact." CPLR § 3212(b); Zuckerman v. City of New York, 49 NY2d 557, 427 NYS2d 595 (1980); Friends of Animals v. Associated Fur Mfrs., 46 NY2d 1065, 416 NYS2d 790 (1979); Freedman v. Chemical Construction Corp., 43 NY2d 260, 401 NYS2d 176 (1977); Spearmon v. Times Square Stores Corp., 96 AD2d 552, 465 NYS2d 230 (2nd Dept 1983). If the opposing party fails to submit evidentiary facts to controvert the facts set forth in the movant's papers, the movant's facts may be deemed admitted and summary judgment granted since no triable issue of fact exists. Kuehne Nagel, Inc. v. F.W. Baiden, 36 NY2d 539, 369 NYS2d 667 (1975).
Written Letters of Engagement/Retainer Agreements
By Joint Order dated December 20, 2001, the Appellate Divisions promulgated Part 1215 of Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York ("22 NYCRR § 1215"). This rule became effective March 4, 2002 and applies to cases where the fee is "expected" to be less than $3,000. 22 NYCRR § 1215.2(a). The rule generally mandated attorneys to provide clients with letters of engagement prior to representation. 22 NYCRR § 1215.1(a). The letter of engagement, inter alia, must provide an explanation of the legal services provided and the fees to be charged for such representation. 22 NYCRR § 1215.1(b)(1)(2). However, instead of providing a letter of engagement, attorneys may obtain a fully executed written retainer agreement from clients after commencing representation provided it contains an explanation of the scope and fees to be charged. 22 NYCRR § 1215.1(c). Unfortunately, this rule does not provide for a penalty in breach thereof.
In the absence of clear intent, courts must and have interpreted the intent of the drafters in promulgating Rule 1215.1. In doing so, many courts and commentators have compared Part 1215 to Part 1400. Part 1400 provides for the mandatory execution and filing of written retainer agreements setting forth the terms of compensation and nature of legal services in domestic relations matters. The Appellate Division, Second Department, has clearly held that attorneys cannot maintain an action seeking to collect fees for legal representation in domestic relations cases because of the failure to comply with Part 1400. See Alexander Potsuch, P.C. v. Berson, 261 AD2d 494, 688 NYS2d 897 (2nd Dept 1999); Kayden v. Kayden, 278 AD2d 202, 717 NYS2d 908 (2nd Dept 2000). Professor David D. Siegel also opined that both Parts 1215 and 1400 may be analogous. Professor Siegel postulated as follows:
If the sanction of forfeiture can be imposed in the latter instance (involving only the issue of which the forum hears the dispute) [Part 1400], then isn't it a fortiori a looming prospect in the former situation as well (involving the attorney's obligation to advise the client about fees right at the outset) [Part 1215]?
Siegel's Practice Review, 120 Siegel's Prac Rev 1 (March 2, 2002).
A year later, Professor Siegel's analysis was proven correct by the holding in Feder Goldstein Tanenbaum D'Errico v. Ronan, 195 Misc 2d 704, 706, 761 NYS2d 463, 464 (Dis Ct, Nassau Co, 2003) which was the first reported case to interpret Part 1215. The District Court found that Rule 1215 is "substantially similar" to Rule 1400.3 and cited a host of cases which held that an attorney who fails to provide a written retainer agreement pursuant to Rule 1400.3 is precluded from recovering legal fees. As such, the District Court concluded that the plaintiff-attorney's failure to provide the defendant-client with a letter of engagement or written retainer agreement pursuant to Rule 1215.1 precluded the attorney from recovering fees.
The next reported case dealing with Part 1215 was Matter of the Estate of Carmela Feroleto, 6 Misc 3d 680, 791 NYS2d 809 (Surrogate's Court, Bronx Co, 2004). In a well-reasoned decision, Surrogate Holzman distinguished Feder and found that forfeiture of fees may not be the appropriate sanction for noncompliance with Rule 1215.1 under all the circumstances, as follows:
However, this court shares the concern that the Feder case might be used as a "forbidding precedent" to "create an unfair windfall for clients" should it be followed where clients know that the services are not pro bono and the failure to comply with the rule is not willful (Davis, Engagement Letters: Can't Live Without Them, Can't Change Them, NYLJ, January 5, 2004, at 3, col. 1).
Surrogate Holzman also explained the different rationales behind the promulgation of Parts 1215 and 1400. Rule 1400.3 was "promulgated to address abuses in the practice of matrimonial law and to protect the public." Julien v. Machson, 245 AD2d 122, 666 NYS2d 147, 148 (1st Dept 1997). Rule 1215.1 was "designed to prevent a misunderstanding about fees which is the most frequent source of disputes between attorneys and clients." Estate of Feroleto, supra. Surrogate Holzman rejected a complete forfeiture for unintentional noncompliance with Rule 1215.1 and offered a "measured penalty" which would be to "resolve any misunderstanding arising from the lack of a letter of engagement or signed retainer agreement in favor of the respondent [the client]." Id. However, where the noncompliance is intentional, courts have held that the attorney is precluded from recovering legal fees. Klein Calderoni Santucci, LLP v. Bazerjian, 6 Misc 3d 1032 (A), 800 NYS2d 348 (Sup Ct, Bronx Co, 2005, Gonzalez, J.); Nadelman v. Goldman, 7 Misc 3d 1011 (A), 801 NYS2d 237 (Civ Ct, New York Co, 2005, Oing, J.); See also Grossman v. West 26 Corp., 9 Misc 3d 414, 801 NYS2d 727 (Civ Ct, Kings Co, 2005, Nadelson, J.) (The court concluded that an attorney who fails to comply with Part 1215 was precluded from recovering the full amount of attorney's fees for which he had billed his client, but nevertheless permitted the attorney to recover attorney's fees on a quantum meruit basis.)
In a case of first impression, the Civil Court determined whether a client may recoup or recover legal fees already paid to an attorney who failed to comply with Rule 1215.1. Lewin v. Law Offices of Godfrey G. Brown, 8 Misc 3d 622, 798 NYS2d 884 (Civ Ct, Kings Co., 2005, Bluth, J.). In Lewin, supra, a former client commenced an action seeking the return of $7,500 she had already paid the defendant-attorney for legal services. The defendant orally agreed to represent plaintiff's family member in a criminal case in exchange for $15,000. After making an initial payment of $7,500 to defendant, plaintiff discharged defendant and refused to pay the attorney the second installment of $7,500. The court found that defendant failed to comply with Rule 1215.1 because he neither provided plaintiff with a written letter of engagement nor a retainer agreement. Therefore, the defendant was precluded from recovering the second $7,500 installment for legal fees.
Significantly, however, the court held that defendant was not required to return the $7,500 in attorney's fees he had already received for the legal services rendered. The court substantially relied on analogous provisions of Part 1400 in matrimonial cases which do not mandate the refund of legal fees. Markard v. Markard, 263 AD2d 470, 692 NYS2d 733 (2nd Dept 1999); Mulcahy v. Mulcahy, 285 AD2d 587, 728 NYS2d 90 (2nd Dept 2001) (where there is noncompliance with 22 NYCRR § 1400.3, a court need not direct the return of a retainer fee already paid for properly-earned services).
Here, plaintiff's first cause of action alleges noncompliance of 22 NYCRR § 1215.1 as a basis to recover a $15,000 retainer fee already paid to defendant. Plaintiff relies heavily on the Feder case for the proposition that he could maintain a cause of action for forfeiture of the $15,000 fee. This reliance is misplaced as the facts in Feder are distinguishable from the facts herein because Feder only dealt with an attorney seeking collection of unpaid legal fees rather than the refund of a retainer fee already paid for alleged legal services which was squarely rejected in the Lewin case. To apply a strict forfeiture of a legal fee already paid would "create an unfair windfall for clients" that may "unjustly enrich the [client] at the expense of the [attorneys]." Estate of Feroleto, 6 Misc 3d at 683-684. In other words, a client cannot utilize the noncompliance with Part 1215 as a sword to recover fees already paid for properly-earned legal services. Markard v. Markard, supra. Instead, a violation of Part 1215 was only intended to be used as shield or as a defense to the collection of unpaid legal fees.
To be clear, an attorney's failure to comply with Part 1215 has severe consequences for an attorney seeking collection of fees with the harshest penalty of forfeiture to be imposed on the intentional or willful noncompliance to the least sanction of a reduced fee imposed on a quantum meruit theory for unintentional violations. While a client cannot maintain a cause of action for return of a legal fee based on noncompliance with Rule 1215.1, a client may seek recovery of the already paid fee grounded in a breach of contract theory, if an attorney did not properly earn any part of such fee. In this regard, an attorney must be cognizant that courts may "resolve any misunderstanding arising from the lack of a letter of engagement or signed retainer agreement" in favor of a client. Estate of Feroleto, supra.
Accordingly, this Court holds as a matter of law that plaintiff cannot utilize the noncompliance with Rule 1215.1 as an affirmative cause of action to seek return of legal fees already paid to defendant for services rendered. Thus, plaintiff's first cause of action fails to state a cause of action upon relief may be granted.
Breach of Contract
Plaintiff's terse second cause of action is alleged as follows:
9. On or about October 15, 2003, the plaintiff entered into a contract with defendant corporation whereby defendant would represent plaintiff in a criminal matter pending in Nassau County;
10. The plaintiff tendered FIFTEEN THOUSAND DOLLARS ($15,000.00) to the defendant as payment for said representation;
11. The defendant failed and refused to provide plaintiff with said legal representation.
These allegations fail to state a cause of action as plaintiff failed to recite the terms of the alleged agreement, if any, and whether defendant breached the terms of said agreement causing him alleged damages.
Conclusion
Based on the foregoing, defendant's motion is granted to the extent of dismissing the first cause of action with prejudice. The second cause of action is dismissed with leave to plaintiff to serve and file a complaint that states a cause of action within twenty (20) days of notice of entry of this decision and order. Plaintiff's cross-motion is denied as moot.
The foregoing constitutes the decision and order of this Court. Courtesy copies of this decision and order have been mailed to counsel for the parties.