Opinion
11264/96.
Decided June 28, 2005.
Upon the foregoing papers, the law firm of Talisman, Rudin DeLorenz, P.C., f/k/a Talisman, Rudin, Eskenazi Delorenz, P.C. ("Talisman firm" or "Talisman") moves, by order to show cause, for an order granting attorney's fees after settlement of the above-captioned personal injury action.
Factual Background
On or about October 25, 1995, plaintiff Giuseppe Calabro ("plaintiff") sustained personal injuries while playing at a playground located at Seth Low Public School IS 96, in the Borough of Brooklyn, County of Kings, City and State of New York. On or about December 4, 1995, the Talisman firm was originally retained by plaintiff to represent his interests in a personal injury claim stemming from the incident. Shortly thereafter the Talisman firm filed notices of claim against the City of New York and the Board of Education of the City of New York ("Board of Education") on December 11, 1995 and December 12, 1995, respectively. On or about April, 4, 1996, the Talisman firm commenced a personal injury action on plaintiff's behalf against the Board of Education. The Talisman firm maintains that it thereafter proceeded to engage in discovery (i.e., drafted responsive papers to the Board of Education's discovery demands, and requested and reviewed medical records). On or about May 1, 1997, the Talisman firm was discharged by the plaintiff and the firm of Weingrad Weingrad, LLP ("Weingrad firm" or "Weingrad") was substituted to prosecute the action. Pursuant to the terms of a letter agreement dated May 1, 1997, the Weingrad firm agreed to pay the Talisman firm for disbursements in the amount of $421.38 in exchange for the plaintiff's file, and further agreed that, in the event of a recovery in the action, the Talisman firm would receive 30 percent of the attorney's fees for all services rendered and that the remaining 70 percent would go to the Weingrad firm. Pursuant to the terms of the agreement, the attorney's fees were to be calculated on the net sum remaining after all costs and disbursements incurred were deducted. In July 2004, in response to its inquiry, the Talisman firm was advised by the Weingrad firm that the Board of Education moved for summary judgment dismissing plaintiff's action, which was granted by order of the Court (Hutcherson, J.) dated September 10, 2001. The Weingrad firm thereafter filed a notice of appeal in order to preserve plaintiff's right to appeal the dismissal of the action. Plaintiff then discharged the Weingrad firm and retained the services of another law firm, Reitano Spata Bellini, LLP ("Reitano firm"), to prosecute the appeal. The Weingrad firm turned plaintiff's file over to the Reitano firm and, pursuant to a letter dated November 13, 2001, agreed that it would only seek to be paid for its disbursements ($7,643.63) in the event of a recovery, and waived its right to collect any other attorney's fees related to the plaintiff's action. The Reitano firm successfully prosecuted the appeal and, by decision and order dated April 28, 2003, the Appellate Division, Second Department, reversed the September 10, 2001 order and reinstated the plaintiff's complaint. On or about December 1, 2003, the Reitano firm settled the action on behalf of plaintiff for $706,234.94 and, pursuant to the letter agreement dated November 13, 2001, paid the Weingrad firm its disbursements in the amount of $7,643.63 out of the settlement proceeds.
The Talisman firm now moves, by order to show cause, for an order granting it attorney's fees in light of the settlement of the above-captioned personal injury action. In support of this motion, the Talisman firm asserts that it has an attorney lien pursuant to Judiciary Law § 475, and that it should be paid attorney's fees from the settlement of the plaintiff's action pursuant to the terms of its agreement with the Weingrad firm, which it maintains was in place at the time the case file was transferred from the Weingrad firm to the Reitano firm.
Discussion
The remedy available to an attorney for recovery of his or her fee is the Judiciary Law § 475 "charging lien." This can be employed both while the action is pending, and in a separate lawsuit ( see Citizen's Bank of White Plains, NY, v. Oglesby, 270 AD 136, 141). Judiciary Law § 475, entitled, "Attorney's lien in action, special, or other proceeding," 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, 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, 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" (emphasis added).
A charging lien is a security interest in the favorable result of the litigation ( see Butler, Fitzgerald Potter v. Gelmin, 235 AD2d 218; Rotker v. Rotker, 195 Misc 2d 768 [Sup Ct, Westchester County 2003]). It gives an attorney equitable ownership interest in the client's cause of action ( see LMWT Realty Corp. v. Davis Agency Inc., 85 NY2d 462, [1995]) and it ensures that the attorney can collect his fee from the fund that he or she has created and obtained on behalf of his or her client ( see Petition of Rosenman Colin, 850 F2d 57 [2d Cir 1988]). The lien comes into existence, without notice or filing, upon commencement of the action or proceeding ( see Judiciary Law § 475; see also Banque Indosuez v. Sopwith Holdings Corp., 98 NY2d 34; LMWT Realty Corp., 85 NY2d at 467). An attorney's charging lien also extends to settlement proceeds ( see LMWT Realty Corp., 85 NY2d at 467; Costello v. Kiaer, 278 AD2d 50, 5 [2000]).
Moreover, a charging lien is available only to an "attorney of record" ( see Rodriguez v. City of New York, 66 NY2d 825, 827). However, an attorney need not be counsel of record at the time a plaintiff receives judgment or settlement proceeds in order to have a lien on those proceeds, so long as the attorney was counsel of record at one point in the proceedings. Thus, an "attorney's participation in the proceedings at one point as counsel of record is a sufficient predicate for invoking [Section 475's] protection." ( Klein v. Eubank, 87 NY2d 459, 462 [emphasis in original]). Where an attorney's representation terminates upon mutual consent, and there has been no misconduct, no discharge for just cause, and no unjustified abandonment by the attorney, the attorney maintains his or her right to enforce the statutory lien ( see Matter of Dunn, 205 NY 398, 401; Corby v. Citibank, 143 AD2d 587). However, where an attorney withdraws or is discharged without good cause, his or her lien is automatically forfeited (see Klein v. Eubank, 87 NY2d 459, 462).
In the case at bar, it is undisputed that, before being substituted by the Weingrad firm, the Talisman firm commenced this action, conducted discovery and initially appeared on behalf of the plaintiff. Thus, the Court finds that the Talisman firm was, at some point, the plaintiff's attorney of record in his personal injury action. Consequently, in the event that it is determined that the Talisman firm was discharged/substituted without cause, it would have a statutory lien on the settlement proceeds, pursuant to Judiciary Law § 475, for legal services rendered ( see Smerda v. City of New York, 7 AD3d 511; Gurvitsch v. Gurvitsch, 239 AD2d 465; Rodriguez v. City of NY, 66 NY2d 825). Furthermore, the lien would be enforceable against the Reitano firm, which is in possession of a portion of the settlement proceeds ( see Kaplan v. Reuss, 113 AD2d 184, 186-187, affd. 68 NY2d 693). However, as an initial matter, the Court must determine whether the Talisman firm meets the threshold for a charging lien, that is, whether it was discharged without cause. Accordingly, a hearing must be conducted to determine first whether Talisman was discharged with or without cause ( see Mann v. Loveft Gould, 289 AD2d 206). If the Talisman firm was discharged without cause then the firm will be entitled to a portion of the attorney's fees.
Where there is a fee dispute between attorneys, the substituted/outgoing attorney may elect to receive compensation based upon quantum meruit or a contingent percentage based on his or her proportionate share of the work performed on the entire case ( see Matter of Cohen v. Grainger, Tesoriero Bell, 81 NY2d 655, 658; Lai Ling Cheng v. Modansky Leasing Co., 73 NY2d 454, 458; Fernandez v. New York City Health Hosps. Corp., 238 AD2d 544). However, where substituted/outgoing counsel fails to demand payment of a fixed sum at the time of discharge, it is presumed that he or she elected to receive a contingent percentage fee ( see Matter of Cohen, 81 NY2d at 659-660).
Here, it is clear that, at the time that the Talisman firm was substituted by the Weingrad firm, the Talisman firm elected to receive a contingent percentage of the recovery rather than a fee based on quantum meruit. Although the letter agreement of May 1, 1997 between Talisman and Weingrad, specifies that the fees will be divided 30 percent to the Talisman firm and the remaining 70 percent to the Weingrad firm, the Reitano firm was not a party to that agreement and therefore cannot be bound by it. Moreover, the Weingrad firm waived it rights to recover any attorney's fees. Rather, the Court finds that it is more appropriate to calculate the amount owed to the Talisman firm, if any, based upon its proportionate share of the work performed on the entire case ( see Matter of Cohen, 81 NY2d at 658). As subsequently retained counsel, the Reitano firm is also entitled to a share of the contingency fee, calculated on its proportionate share of the overall work., The Talisman/Weingrad agreement in no way affects the Reitano firm's right to such a fee. When more than one attorney is to share in a contingent fee recovery, the Court must prorate the fee based on their respective investments of labor in the case (i.e., the amount of time spent by the attorneys on the case, the nature of the work performed, and the relative contributions of counsel) (see Lai Ling Cheng, 73 NY2d at 458; Matter of Gary E. Rosenberg, P.C. v. McCormack, 250 AD2d 679, 680). Therefore, if the Talisman firm was not discharged for cause, the amount of the fee payable to it must be determined as a prorated percentage of the aggregate attorney's fee based on that firm's proportionate share of the total work performed in the action. Thus, a hearing is necessary to determine such value, if any ( see Carr v. Wegmans Food Markets, 289 AD2d 955).
As noted above, pursuant to the letter agreement dated November 13, 2001, the Weingrad firm waived its right to collect any attorney's fees related to the plaintiff's personal injury action.
Conclusion
Accordingly, pursuant to Article 22 of the Judiciary Law, in accordance with the provisions of Part 122 of the Rules of the Chief Administrator of the Courts (NYCRR Part 122), the following issues: (1) whether the Talisman firm was discharged without cause, and, if it was, then, (2) the amount of the aggregate attorney's fee and the pro rata share of such fee owing to the Talisman firm and the Reitano firm is referred to the Judicial Hearing Officer in the JHO Part upon the filing of the requisite forms and approval of the Administrative Judge. The date will be fixed by the Clerk of the Part. The remainder of the Talisman firm's motion shall be held in abeyance on the determination of the Judicial Hearing Officer, after which the motion shall be referred back to the Court for final decision.
The foregoing constitutes the decision and order of the Court.