Opinion
4098-1996
01-19-2011
In the Matter of the Petition for Judicial Settlement of the Account of ROBERTA L. KOEPPEL and ALEXANDRA KOEPPEL as Executors of the Will of Robert A. Koeppel, Deceased.
For Richenthal, Abrams and Moss and the Law Offices of Craig Avedisian P.C.: Law Offices of Craig Avedisian P.C. and Schoeman Updike and Kaufman LLP For William Koeppel: Law Offices of Walter Jennings P.C.
For Richenthal, Abrams and Moss and the Law Offices of Craig Avedisian P.C.: Law Offices of Craig Avedisian P.C. and Schoeman Updike and Kaufman LLP
For William Koeppel: Law Offices of Walter Jennings P.C.
Kristin Booth Glen, J.
The law firm of Richenthal Abrams and Moss (the "Richenthal Firm") and the Law Offices of Craig Avedisian PC ("Avedisian)" (together, the "Firms") seek to determine and enforce charging liens pursuant to section 475 of the Judiciary Law. The liens would secure fees claimed by the Firms for legal services to William W. Koeppel ("William") under a retainer agreement dated July 10, 2006 (the "2006 Retainer"). The Firms represented William in a decade-long dispute among several Koeppel family members, involving various real estate holdings and family trusts. The dispute had been punctuated by at least two abortive settlements, the latter one in 2004. On January 3, 2008, however, the Koeppels' internecine battles ended in a global settlement placed on the record in open court and then further memorialized in a written stipulation implemented by a closing on August 27-29, 2008. The liens now claimed by the Firms relate to William's share of the proceeds of that settlement.
The statute provides: "From the commencement of an action, special or other proceeding in any court ..., 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."
Discovery having concluded, the Firms and William have cross-moved for partial summary judgment. The issues raised on these motions involve the validity of the 2006 Retainer, its allegedly wrongful procurement, and, if it is valid, the meaning of several of its terms and the extent (if any) to which William's obligations under it are subject to conditions that have not been satisfied. The Firms acknowledge that the sums to which they are entitled for work resulting in the 2008 settlement cannot be fully determined without a hearing. William for his part asserts that a hearing is needed to determine the Firms' fees for hourly services in the litigation preceding that settlement.
THE TERMS OF THE 2006 RETAINER
The 2006 Retainer was drafted by the Richenthal Firm (with which Avedisian was then of counsel ) and executed on its letterhead. As described below, the Retainer provides for fees in respect of both settlement-related work and litigation-related work.
Avedisian had begun his representation of William in relation to Koeppel family matters in December 1996. He did so first as an associate of another firm and then, starting in 2002, as the principal of the Law Offices of Craig Avedesian, a solo practice. The services relevant to this proceeding, however, were performed after Avedisian had become "of counsel" to the Richenthal Firm.
Settlement-related work gives rise to two types of fees: a flat fee and a performance fee, both contingent upon the effectuation of a settlement. Settlement itself is defined as "a settlement among substantially all of the descendants of Ruth and Harry Koeppel and the trusts and estates thereof."
In relevant part, the provisions governing the flat fee are as follows:
"The amount of the flat fee will vary only in relation to the time an agreement is reached. For the purposes of this agreement, the time the agreement is reached is the date a settlement agreement (or any ancillary agreement) is signed by any person firm or entity that will be a signatory to the agreement (or any ancillary agreement), whether or not the person, firm or entity is a litigant. The flat fee will be in the following amounts over the following dates:
1.Before September 30, 2006 - $850,000
2.From October 1, 2006 to November 19, 2006 - Amount reduced $2,000/day
3.From November 19, 2006 to [May 1, 2007] ... - $750,000 ...
4.From [May 1, 2007] to the end of this Agreement - $650,000."As for the performance fee, the provisions governing it are in relevant part as follows:
"The performance fee will be calculated based on an increase in gross value over the agreement in principle reached in 2004 (the "2004 Deal") with Clypeta Realty Co. substituted for Whitehouse Estates, Inc. less $6,000,000 on account of the replacement of the brick facade. The valuations used will be based on Mr. Von Ancken's 2004 appraisals adjusted only for mortgages to third parties....
"Substituting Clypeta for Whitehouse Estates, Inc. less $6,000,000, the gross value above which a percentage will be earned is $43,640,000 (the Trigger Amount') ...."
Under a rider to the letterhead, the performance fee is the product of (1) the amount, if any, by which the settlement proceeds to William exceed (i.e., represent "an increase in value" over) the Trigger Amount and (2) a percentage ("x") determinable as follows:
"If increase in value [over the Trigger amount] is:
$0 - $5,000,000, x = 3%For work conducted in litigation, as opposed to settlement negotiation, the 2006 Retainer provides for compensation on the basis of billable hours. On that basis, the Richenthal Firm claims a lien in the amount of $298,955.55 as of January 19, 2010 (plus interest). On the same basis, the Avedisian Firm seeks hourly fees and expenses of $4,533.70 (plus interest). For work conducted in settlement negotiation, Avedisian also claims a flat fee of at least $650,000 (plus interest) and a performance fee of $6,218,926.82 (plus interest).
$5,000,001 - $10,000,000, x = 5%
$10,000,001, x = 8%"
For his part, William denies that there is any valid retainer agreement with either firm. As discussed below, he raises several defenses to the lien sought by each as well as one counterclaim against both of the Firms.
If the 2006 Retainer is ruled to be valid, the parties also ask the court to resolve disputes concerning the meaning of certain of its terms.
Notwithstanding the parties' sharp disagreement about the immediate circumstances in which the 2006 Retainer was negotiated, the facts leading to such negotiations are essentially undisputed, and, to the extent relevant here, they are traced below.
THE KOEPPEL FAMILY LITIGATION
Dissension among three generations of Koeppels over the considerable family wealth is at the root of the present proceeding. In the first generation were Harry, who died in March 1983, and his wife Ruth, who died in November 2000. In the second generation were the couple's two children, Robert, who died in October 1996 (i.e., predeceasing his mother by more than four years) and Nancy, who is still living.
Harry's will divided his estate between a trust ("Harry's Marital Trust") and an outright disposition to Ruth. Ruth in turn placed the assets that she had received outright from Harry's estate, including interests in various real estate entities, into successive grantor trusts. Until 1998, the trusts operated under provisions paralleling the provisions of Harry's Marital Trust, with the remainders evenly divided between the issue of Robert (William and his sisters Alexandra and Caroline) and Nancy (her children, David, Steven, and Elizabeth).
Robert left a large estate, including interests in the thirteen closely held companies in which the Koeppel real estate was held. Under Robert's will, probated on November 13, 1996, these interests passed to a marital trust for the lifetime benefit of his widow, Roberta ("Robert's Marital Trust"). The portion of the remainder that included majority interests in 11 of the closely held companies was to pass to William, with Robert's interests in the two additional family businesses to be divided between Alexandra and Caroline.
William had a strained relationship with his father and continues to have a strained relationship with Roberta. She, however, serves with Alexandra as co-executor and co-trustee under Robert's will. The intra-family litigation began after Robert's death when William sued his mother and sister as executors of Robert's estate, asserting, inter alia, claims of ownership to Robert's interests in the family businesses. Those claims went to trial before then Surrogate Preminger and were resolved in a decision rendered in early 2001 (Matter of Koeppel, NYLJ, January 8, 2001, at 26, col 6 [Sur Ct New York County]). Shortly thereafter, the executors petitioned to settle an interim accounting (for the period October 23, 1996, through September 1, 2001), in which William filed objections.
Additional issues arose with respect to Ruth's grantor trust, first established in 1983 and then replaced in 1993 (the "1993 Grantor Trust"). After Robert died, Ruth began to have more contact with Nancy, from whom she had been estranged for many years. By February 1998, Ruth had moved into Nancy's home in Florida, and two weeks after Ruth's relocation Ruth executed instruments revoking the 1993 Grantor Trust and replacing it with another trust (the "1998 Grantor Trust"). The dispositive provisions of the 1998 Grantor Trust differed dramatically from those of the 1983 and 1993 trusts. Rather than benefiting the issue of both of Ruth's children, the 1998 trust instrument instead left one half of the remainder at Ruth's death to Nancy outright and the balance in further trust for Nancy's primary benefit, giving Nancy the right to appoint the principal by her will. The 1998 trust instrument named Nancy and her son David as trustees (as opposed to the earlier instruments, under which Robert had served as trustee, followed by Alexandra as his nominated successor).
Shortly after the 1998 trust instrument was executed, Nancy and David as fiduciaries sought an accounting by Alexandra as trustee under the 1993 Grantor Trust and an order directing that she turn over the principal of that trust to them as trustees of the 1998 Grantor Trust. Alexandra responded by challenging the validity of the purported revocation and replacement of the 1993 Grantor Trust, maintaining that Ruth had lacked capacity to take such steps and that, in the alternative, she had been unduly influenced to do so.
At or about the same time as the 1998 trust instrument was drafted, Ruth changed her will and also purportedly tried to install Nancy and David as successor trustees of Harry's Marital Trust. After Ruth's death almost three years later, Nancy offered Ruth's will for probate in Florida, over Alexandra's objections.
Various proceedings, involving numerous motions, followed. Thus, after Nancy and David petitioned to compel an accounting for Harry's Marital Trust, Roberta and Alexandra voluntarily accounted for that trust as well as for the 1993 Grantor Trust, in proceedings in which Nancy and David filed objections. The issues in these accountings were referred to the Hon. Alice Daniels to hear and report. Nancy challenged, inter alia, the validity of a 1994 transfer to Robert of Ruth's 55% interest in a property known as "Clypeta"; questioned the trustees' valuations in relation to the real estate entities; objected to the size of management fees paid by the trustees in connection with the real estate interests held in the trusts; and further objected to the trustees' failure to turn over assets to Nancy, individually, and to her and David as trustees of the 1998 Grantor Trust.
During the hearing before Special Referee Daniels, the fiduciaries of Robert's and Ruth's respective estates entered into a settlement term sheet dated October 16, 2001, which purported to embody a global settlement of issues regarding those estates ("2001 Term Sheet"), including a Federal RICO action commenced by Nancy in the Federal District Court for the Southern District of New York and the Florida proceeding for probate of Ruth's 1998 will. Eventually, however, the term sheet, expressly conditioned upon court approval, itself became a subject of litigation, Nancy unsuccessfully seeking its approval in this court, in the Florida probate court, and in federal courts in Florida and New York.
In August 2002, Roberta and Alexandra filed an Intermediate Accounting as executors of Robert's estate. William filed objections in that proceeding, claiming, inter alia, that the fiduciaries had inflated estate income to benefit Roberta individually, leaving his remainder interest so encumbered as to be essentially worthless. In a separate proceeding against Robert's executors, William also sought to enforce certain rights arising from his 30.98% interest in one of the real estate entities, Whitehouse Estates, Inc., as well as his alleged ownership of other property that the executors claimed were part of Robert's estate.
In November 2003, the issues raised in the executors' Intermediate Accounting, as well as those raised in William's proceeding against Robert's executors, were referred to the Hon. Israel Rubin to hear and report, the most significant of which were (1) whether the 2001 Term Sheet should be approved; (2) the proper characterization and treatment of the challenged inter-company balances; and (3) the ownership of the Clypeta entity. The 2001 Term Sheet had allocated Clypeta to Nancy or to entities under her control, a position that William vigorously opposed.
Special Referee Rubin took testimony and evidence over twenty-four days from July 2004 through April 2005. His report, which this court confirmed in its entirety, recommended that the 2001 Term Sheet not be approved, that the Clypeta entity be ruled an asset wholly owned by Robert's estate (and not partially owned by Ruth's Grantor Trust), and that the inter-company balance issues be resolved by an independent accountant.
On December 1, 2004, while the evidence was still being taken by Special Referee Rubin, the parties reached a tentative global settlement. William's share in the 2004 tentative settlement is the basis for the $43 million "Trigger Amount" to which the 2006 Retainer refers. The 2004 tentative settlement, which called for acceleration of William's remainder interest in Robert's Marital Trust, was never consummated. Instead, in the wake of Referee Rubin's confirmed rulings, litigation among the various family members continued. By the spring of 2006, however, William apparently had decided that his fee arrangements with his lawyers could not also continue.
THE RETAINER NEGOTIATIONS AND SUBSEQUENT DEVELOPMENTS
On May 30, 2006, William met with Avedesian to complain that he was "asset rich, cash poor." According to William, he had by then paid the Richenthal firm almost 3/4 of a million dollars; such payments, he avers, had required him to mortgage his New York home and further borrow against other assets (a West Palm Beach apartment, yacht, and businesses). Client and counsel were in agreement that William's finances pointed to the wisdom of a contingency arrangement. Over the next three weeks, Avedisian negotiated the new retainer with William's accountant, Rifkin. As noted in the 2006 Retainer itself, William also consulted with an independent attorney during these fee negotiations. The proposed retainer was sent to William on July 10, 2006. On July 12, William came to Avedisian's office to sign the retainer agreement and various security agreements.
William recalls: "In effect what I was doing at the time was I was borrowing and withdrawing the equity from the assets to pay the indebtedness on those very same assets." (WWK Affidavit in Opposition, at 11).
It is noted that during the entire period William was also represented by co-counsel, the firm of Kaye Scholer. On the heels of the settlement closing, that firm also brought a proceeding to enforce a charging lien, but that proceeding was immediately settled by a stipulation with William.
For present purposes, the history of subsequent settlement negotiations and court appearances and conferences can be pared down to the following. By the summer of 2007, another settlement was in the offing between Robert's estate and Ruth's estate, but to the exclusion of William. However, in October of 2007, counsel for the fiduciaries of Robert's estate approached William with an idea for including him in the settlement, with interests in Whitehouse Estates as the centerpiece of a possible deal for him.
On October 11, 2007, Arthur Richenthal, one of the Richenthal Firm partners, died. Avedisian nonetheless continued to work on behalf of William, including work on a summary judgment motion in the accounting for Ruth's estate. The court denied that motion, and a trial was scheduled for the end of October 2007 and then rescheduled to January 3, 2008. On December 28, 2007, however, the parties called the court to report that they had resolved all outstanding disputes. As indicated above, the global settlement was placed on the record and implemented by a closing at the end of August 2008.
STANDARDS FOR SUMMARY JUDGMENT AND REVIEW OF ATTORNEY-CLIENT AGREEMENTS
Summary determination of a claim or defense is appropriate only where the party seeking it makes a prima facie showing of entitlement to such determination as a matter of law (Andre v Pomeroy, 35 NY2d 361, 364 [1974]; see CPLR § 3212). If such showing is made, the burden shifts to the opposing party to produce admissible evidence establishing that a material issue of fact nevertheless remains open, requiring trial (Zuckerman v City of New York, 49 NY2d 557, 562-563 [1980]).
In addressing the particular claims, defenses, and counterclaim raised here, the court must be cognizant of certain general principles that underlie the attorney-client relationship. Given the fiduciary nature of that relationship, fee agreements between attorney and client are "affected by lofty principles different from those applicable to commonplace commercial contracts" (Matter of Cooperman, 83 NY2d 465, 472 [1994]). Accordingly, as a matter of public policy, courts must carefully scrutinize such fee arrangements (Bizar & Martin v U.S. Ice Cream Corp., 228 AD2d 588 [2d Dept 1996], citing Jacobson v Sassower, 66 NY2d 991, 993 (1985) and Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172, 176 [1986]). A client must be "fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements" (Shaw, 68 NY2d at 176). The burden is on the attorneys who drafted the fee agreement to show that it is "fair, reasonable, and fully known and understood by their clients" (id.). Moreover, as a general contract principle, where a term of the agreement is ambiguous, that is, reasonably susceptible of more than one interpretation, that term must be construed in favor of the non-drafting client (id). Where there is no ambiguity, however, the client does not have such an advantage; the instrument must simply be read in accordance with its plain terms. Furthermore, in a dispute between lawyer and client, the latter is not to be perceived as always the former's victim. Indeed, the charging lien itself is the law's device for shielding a lawyer from the possible knavery or overreaching of the client (Matter of Jaffe, 162 Misc 877 [Sur Ct Kings County 1937]; see Demov, Morris, Levin & Shein v Glantz, 53 NY2d 553, 558 [1981]).
DURESS
As his first defense, William maintains that the 2006 Retainer is the product of duress and is thus unenforceable. William alleges that he had threatened to fire Avedisian in June 2006 and that Avedisian in turn threatened to retaliate either by withholding documents from and cooperation with new counsel or by dropping documents at William's doorstep. According to William, Avedisian also threatened to reveal to others involved in the Koeppel family proceedings that William was destitute, could not afford to continue to litigate, and would therefore be obliged to accept any settlement terms. Such threats, William maintains, added up to economic duress.
Avedisian vigorously denies such allegations. He claims that William himself suggested the contingency-fee arrangement, given his liquidity problems at the time, and that William is now simply attempting to evade payment for legal services from which he gained major benefits. Avedisian characterizes the 2006 Retainer as the product of intensive negotiations with William and his accountant, Noah Rifkin, as entirely free agents. Indeed, Avedisian maintains that at all times during the relevant period William had enjoyed a very significant net worth, but had simply chosen to devote his liquid assets to a lavish lifestyle rather than to legal fees.
To repudiate an agreement on the ground of duress, a party to it must show both (1) that he was wrongfully threatened by the other party and (2) that his will was thereby overpowered, resulting in his executing an agreement that he would otherwise have rebuffed (Austin Instr., Inc. v Loral Corp., 29 NY2d 124, 130 [1971]). But even if it is assumed arguendo that Avedisian in fact wrongfully threatened to betray his client's confidences (despite the risk to his law license that his doing so would pose), William's case for duress would still fall short since he has failed to establish that he had no choice but to accede to Avedisian's contractual demands.
The other threats that William attributes to Avedisian were not "wrongful." That Avedesian refused to turn over documents to new counsel unless paid in full, i.e., that he asserted a retaining lien permitted by law; that Avedisian further threatened, once paid in full, to dump the files in a box and put them on his doorstep and give no cooperation to new counsel, are merely things that Avedisian had the right to do and thus do not serve as a basis for a claim of duress (Fred Ehrlich, P.C., v Tullo, 274 AD2d 303 [1st Dept 2000]; Gerstein v 532 Broad Hollow Road Co., 75 AD2d 292, 297 [1st Dept 1980]).
First, the law is clear that financial pressure and arguably unequal bargaining power do not per se add up to a lack of free will (Orix Credit Alliance, Inc. v Hanover, 182 AD2d 419 [1st Dept 1992]; see Gubitz v Security Mut. Life Ins. Co. of New York, 262 AD2d 451 [2d Dept 1999]; Edison Stone Corp. v 42d St. Dev. Corp., 145 AD2d 249 [1st Dept 1989]). Second, William does not even attempt to provide factual support for his assertion that it was "virtually impossible" to obtain the services of another law firm at the time.
What is clear is that William's financial position in the spring of 2006 was direly illiquid at least by his own estimate. But, given William's then assets and the various undisputed elements of his then life-style, that estimate was, to some extent if not entirely, "self-imposed ... and subjective," rather than, as it would have to be, objectively "reasonable" (Austin Instr., Inc. v Loral Corp., supra, at 131). In any event, William's hands were hardly tied under the circumstances, since there were clear alternatives to the fee deal offered by the Firms. William could still have proceeded toward litigation or settlement, if not likely pro se, then with the assistance of the Firms' existing co-counsel or, indeed, with some other firm as new counsel (as he himself apparently acknowledges he had threatened to do). Indeed, the choice of any of these options would have neutralized the purported threat by Avedisian to disclose that William could not afford to continue to fight for his position in the family litigation. In other words, William had it in his power to belie any such disclosure simply by continuing to press his interests through the services of his then co-counsel or another firm.
Nor can William be heard to suggest that a substitution of new counsel would have presented itself as a useless alternative. Substitution is a common and legitimate incident of litigation, and not necessarily at the early stage of proceedings or disputes. To be sure, substitutions usually occasion added delay in bringing new counsel up to speed, but the courts make accommodations for such delay where and to the extent appropriate. Substitution may also appear less than ideal to the client, who in the end may decide that the cost of a premium contingency or other fee arrangement is warranted to keep existing, experienced counsel at his side. But the point nonetheless remains that the client who must decide between a novation of his fee arrangement with his existing counsel and a different fee arrangement with a substitute is hardly left "without a choice to speak of."
Furthermore, the terms of the 2006 Retainer (the product of weeks-long discussions with William and his accountant) were hardly so one-sided as to indicate that William would not have accepted them voluntarily. This is not to ignore that, in assessing attorney-client agreements, courts must be alert to such contracts' inherent potential for overreaching. But there is nothing in the record here to warrant the conclusion that the fees prescribed by the Retainer were either onerous or unconscionable. Certainly, the fact of a contingency arrangement, even one with the prospect of a multi-million-dollar fee, does not per se invalidate the agreement. Thus, as the Court of Appeals has recently had occasion to observe,
"In general, agreements entered into between competent adults, where there is no deception or overreaching in their making, should be enforcedas written. Accordingly, the power to invalidate fee agreements with hindsight should be exercised only with great caution. It is not unconscionable for an attorney to recover much more than he or she could possibly have earned at an hourly rate. Indeed, the contingency system cannot work if lawyers do not sometimes get very lucrative fees, for that is what makes them willing to take the risk — a risk that often becomes reality — that they will do much work and earn nothing. If courts become too preoccupied with the ratio of fees to hours, contingency fee lawyers may run up hours just to justify their fees, or may lose interest in getting the largest possible recoveries for their clients" (Lawrence v Miller, 11 NY3d 588, 596, at n 4 [2008], affirming 48 AD3d 1 [1st Dept 2007]).
As past was prologue, the eventuality of a global settlement among all parties here was far from certain.
Indeed, documents that are part of the record show that other parties to the Koeppel family litigation paid their respective lawyers fees in the several millions of dollars. As for William's case in particular, it is clear that he could not or would not continue to pay for representation in settlement negotiations on a cash basis. Under such circumstance, it was understandable that he would choose a contingency arrangement. It was also understandable that he would prefer to make such an arrangement with Avedisian and his then Firm, given Avedisian's decade-long familiarity with the myriad issues involved, even if obliged to pay a premium for such advantage.
Moreover, a defense of economic distress also requires an immediate disavowal of the contract, not the wait-and-see approach adopted by William. As explained by the Second Circuit:
"The requirement that the party claiming duress disclaim the contract or release about which he is complaining promptly or be held to have forfeited his right to do so protects the stability and reliability of such agreements by denying the weaker party the heads I win, tails you lose' option of waiting to see how the arrangement works out and then deciding whether to seek to undo it . . . . [T]he requirement of prompt disavowal after execution is fair to the disadvantaged party, who will ordinarily know at the time he executes the instrument that he is being economically coerced. He will therefore be able to disclaim the instrumentDespite having a net worth of around $6 million, receiving dividends from Whitehouse Estates of $442,680 in August 2006 and borrowing at least $2,174,503 against his assets from May 2006 through August 2008 (and purchasing a Rolls Royce, albeit pre-owned, in the middle of September 2006), William never sought to disavow the Retainer on the ground of duress.
immediately if he was forced into it by economic duress and wishes to avoid its effect" (VKK Corp. v National Football League, 244 F3d 114, 123-24 [2d Cir 2001]; accord Leader v Dinkler Management Corp., 26 AD2d 683 [2d Dept 1966], aff'd 20 NY2d 393 [1967]; Port Chester Elec. Const. Corp. v Hastings Terraces, 284 App Div 966, 966-67 [2d Dept 1954]).
Furthermore, even after the Firms commenced the current proceeding in August 2008, William's initial opposing affidavits did not raise the issue of duress. It was not until he filed his pre-hearing brief at the end of October 2008 that William alluded to the duress issue, which was subsequently raised in his answer. William's failure to disavow the contract promptly requires the conclusion that he would have "forfeited his right" to claim duress even if the retainer had been so procured.
William's affirmative defense that the 2006 Retainer is invalid as the product of duress is therefore dismissed.
DISSOLUTION OF THE RICHENTHAL FIRM AND NON-ASSIGNABILITY OF THE 2006 RETAINER
William argues that Avedesian's compensation must be limited to quantum meruit in that the 2006 Retainer was with the Richenthal Firm, and that law partnership dissolved by operation of law upon the death of partner Arthur Richenthal, on October 11, 2007. William points out that the Retainer does not contain provisions for its continued effectiveness post-dissolution or for any assignability to another firm. Indeed, William maintains that, as a personal services contract, the Retainer could not have been made assignable and that it therefore cannot now serve as the basis for Avedisian's claim to a charging lien. Instead, according to William, Avedisian could not purport to represent William under the 2006 Retainer after the Richenthal Firm dissolved or, at the latest, after February 2008, when Avedisian filed a change of attorneys from the Richtenthal Firm to his own. According to William, in the absence of his own separate retainer, Avedisian has no basis for his claim to a performance fee.
William also argues that the 2006 Retainer violated 22 NYCRR § 1215.1 by not setting forth the dollar amounts to be charged on an hourly basis, as well as the amounts that the client could expect to be charged for expenses, and by failing to disclose that William might have the right to arbitrate fee disputes. The regulation in question, however, which became effective as of March 2, 2002, contains an exception for "representation where the attorney's services are of the same general kind as previously rendered to and paid for by the client" (22 NYCRR § 1215.2[b]). The original fee arrangement between William and the Firms had been established in a 2002 written retainer — executed prior to the regulation's effective date — providing for hourly billing at a certain rate and setting forth the manner in which expenses were to be handled; such terms explicitly continued to apply to litigation work under the 2006 Retainer. It may be noted that, in any event, the billing rates were clearly stated on all invoices sent to William. Moreover, by their terms the arbitration provisions of Part 137 of the Rules of the Chief Administrator do not apply to "amounts in dispute involving a sum of less than $1,000 or more than $50,000" and were thus not applicable to the 2006 Retainer, which clearly contemplated fees in excess of $50,000 (see Morgan Lewis & Bockius LLP v IBuyDigital.com, Inc., 14 Misc 3d 1224(A), 836 NYS2d 486 [Sup Ct New York County 2007]).
While William is technically correct as to provisions of partnership law, the enforceability of an attorney retainer, including its transfer to another law firm or entity, does not depend on partnership law. The case of Goldston v Bandwidth Tech. Corp. (52 AD3d 360 [1st Dept 2008]) makes the point. There the Appellate Division addressed a claim that "the dissolution of the [attorney law firm] by operation of law upon the departure of [the main attorney providing work to the client] constitute[d] a breach of the retainer agreement" (id. at 365), making it unenforceable. The court emphasized that "a change in the organization of a business does not, without more, give rise to a claim by a party contracting with that business even if the reorganization adversely affects the party's interest" (id. at 366 [citations omitted]). The question there, as here, is whether the client clearly recognized that the attorney was continuing the prior representation. Here, the evidence is indisputable that William considered Avedesian his attorney in these proceedings, and he was not discharged by William until well after this charging lien proceeding was commenced.
William argues that he relied on the advice and expertise of the Richenthal Firm as a whole, and there is no question that Avedisian did seek counsel, on occasion, with the attorneys of that Firm on issues related to Koeppel matters. However, there is also no question that the Firm's other attorneys were not involved on a daily basis, as Avedisian was, with the sturm und drang of the Koeppel litigations and settlement discussions, and that the principal work was done by Avedisian. As always, William was free to terminate his relationship with Avedesian and chose not to do so; under Goldston, the 2006 Retainer remained enforceable by Avedisian in such circumstance.
A similar rule has been recognized even in the matrimonial context where the policing of retainer agreements by regulation is more stringent (see Gross v Gross, 36 AD3d 318 [2d Dept 2006] [no new retainer required between spouse and her attorney following dissolution of attorneys partnership where same attorney was doing the same work for the client — interpreting 22 NYCRR § 1400.3]; Sheresky, Aronson & Mayefsky, LLP v Linder, NYLJ, Oct. 22, 1998, at 30, col 3 [Sup Ct NY County][same]). In response to this authority, William cites only an unreported Ohio case primarily involving fee-splitting between different attorneys, which does not support William's position (see Korey v Gross, 2004 WL 2260685, No. 2002 CA 00438 [5th Dist. Stark County, Ohio Court of Appeals 2004]).
The defenses that the 2006 Retainer was not assignable to Avedesian and that the settlement did not occur while the retainer was still in effect are dismissed.
FAILURE TO SATISFY MATERIAL TERMS
As yet another defense, William contends that his obligation to pay fees under the 2006 Retainer was subject to preconditions that have not been satisfied. In this connection, he argues that the Retainer required (1) that his remainder interest in Robert's Marital Trust be accelerated and the trust assets be disbursed, as contemplated in principle under the 2004 agreement; (2) that he receive in settlement the specific properties whose values were the basis of the "Trigger Amount"; and (3) that there be a closing, which William contends has not yet occurred.
None of these conditions is found in the text of the 2006 Retainer; moreover, as to the purported failure to close, this court has previously found to the contrary (Matter of Koeppel, NYLJ, Nov. 25, 2009, at 1, col 3 [Sur Ct, New York County]).
The Retainer expressly contemplates a "(1) contingency arrangement for a settlement among substantially all of the descendants of Ruth and Harry Koeppel and the trusts and the estates thereof; (2) fees for litigation work; (3) out of pocket expenses; and (4) security in respect of your fees and expenses." There is nothing in the instrument that expressly or impliedly conditions the contingency fee on any specific settlement result. Although William claims to have understood that there was such a condition, the court cannot accept his invitation to import into the agreement terms that were not there when the parties executed it. This is not to overlook that the Retainer's performance fee provisions refer to four specified real estate entities and arrive at the Trigger Amount by adding the total values of such entities. But it is clear that such provisions merely establish a baseline against which to measure the "increase in gross value" that is one of the two factors in the fee calculation. The provisions not only are bare of language to suggest the purported condition, but also, are expressed in terms that affirmatively suggest quite the contrary. Thus, if the Retainer had contemplated a performance fee only on condition that William receive the four specified properties as part of the settlement ultimately secured for him by the Firms, the appraised values of those properties would have been irrelevant: the performance fee would simply have been calculable as a percentage of the value of any additional interest that was ultimately secured for him in settlement.
As for William's contention that the closing has not occurred, that proposition was resolved against William in a decision of this court addressing the enforcement of William's side agreement with Avedisian on August 20, 2008, concerning a monthly escrow payment to secure the Firms' respective charging liens (Matter of Koeppel, NYLJ, Nov. 12, 2009, at 31, col 6 [Sur Ct New York County]). In that decision, this court ruled that the closing had in fact occurred and had thus triggered William's obligation to begin the payments provided for under the side agreement. There is certainly no legal basis to reargue that decision in the context of this one.
For the foregoing reasons, William's defenses alleging unsatisfied conditions are dismissed.
HOURLY BILLING — ACCOUNT STATED
The Firms claim that the hourly billing for litigation work is properly the subject of a summary judgment motion as an account stated (Tunick v Shaw, 45 AD3d 145 [1st Dept 2007]). William on the other hand argues that he regularly disputed the bills for litigation work and that no account can therefore be stated in relation to such billing. An account stated is merely a contract express or implied as to the amount of compensation due for services rendered (Parker, Chapin, Flattau and Klimpl v Daelen Corp., 59 AD2d 375 [1st Dept 1977]; see Rodkinson v Haecker, 248 NY 480 [1928]). The issue here is whether there is evidence of assent by William to the account as stated. Assent may be implied from actions taken or by the client's silence after receipt of the invoices in question (see Shea & Gould v Burr, 194 AD2d 369 [1st Dept 1993]; Ruskin, Moscou, Evans & Faltichek, P.C. v Beal, 212 AD2d 687 [2d Dept 1995]). William alleges that he raised oral objections to the bills that were sent from the Richenthal Firm almost monthly during June 2006 through August 2008 and from the Avedisian Firm in February 2008 and in August 2008. While an oral protest may in certain circumstances create a question of fact as to assent, the law is clear that the client must substantiate the protest that he alleges by making specific, rather than conclusory, allegations detailing when and to whom the alleged oral objections were made and the substance of the alleged conversations (Fink, Weinberger, Fredman, Berman & Lowell, P.C. v Petrides, 80 AD2d 781 [1st Dept 1981]). "Bare assertion of oral protest" is insufficient (Darby & Darby P.C. v VSI International, Inc., 268 AD2d 270, 273 [1st Dept 2000]), especially where the debtor receiving the account made partial payments on it (Parker, Chapin et al, 59 AD2d 375; Shea & Gould, 194 AD2d 369; cf. Farley v Promovision Video Displays Corp., 198 AD2d 122 [1st Dept 1993] [refusals to pay attorney's bill]). Here, William's assertions amount to nothing more than bare claims of prior oral protests, and moreover, when he had the funds, he partially paid the amounts due.
To be a basis for an account stated, invoices must state the dollar amount of the charges, the billable hours expended, and the services rendered (Ween v Dow, 35 AD3d 58 [1st Dept 2006]). William does not contend that the invoices here were inadequately stated.
William's bill of particulars describes the frequency of his protests as follows: "On or about once a week during the summer of 2007 and 2008, once a month almost every month from September through May for the years 2005 through 2008." Avedisian points out that William thus claims to have disputed invoices for months in which no invoices were in fact sent to him for litigation work. On the other hand, Avedisian concedes that there was one occasion on which William did protest an invoice, which billed for work performed at a meeting among counsel in July 2006. Although that meeting had been called to discuss settlement, it appears to have focused instead on litigation issues, and Avedisian billed William accordingly as litigation time. Nevertheless, when William objected, Avedisian voided the charges and did not bill William for the time in question.
William's claim that the burden is on the Firms to show which invoices he was making partial payment on is supported by no authority or reasoning, and the court rejects it.
In his affidavit in opposition, William alleges that the Firms' hourly charges "have been and are being disputed" and that this "has been conveyed to Mr. Avedisian a number of times." However, just when and what particular charges he was or is disputing, even at this late date, remain unspecified. Instead, William makes two general points regarding the invoices. First, without referring to any particular invoice, he sweepingly claims that Avedisian "overdoes things." Second, he claims that there "were innumerable incidences where Mr. Avedisian would bill [him] for normal office, paralegal, and administrative time that Mr. Avedisian, because he had no secretary or paralegal, would do." But he fails to specify even one of such "innumerable incidences"; nor does he specify when or how such an objection was made. Such belated, conclusory and unsupported claims are insufficient to raise a question of fact on the issue of the accounts stated by the invoices sent to William by the Firms (Warshaw, Burstein, Cohen, Schlesinger & Kuh v Kessner, 214 AD2d 472 [1st Dept 1995]; Rosenman Colin Freund Lewis & Cohen v Neuman, 93 AD2d 745 [1st Dept 1983]). The Firms are therefore granted summary judgment on their claims of accounts stated for hourly litigation work.
William also complains bitterly about the excessive time spent by Avedisian in preparing a spreadsheet regarding the intercompany balances for the hearing before Referee Rubin. That work was invoiced prior to July 2006, but it was paid in full and the debt was acknowledged in writing by him on May 3, 2005. This allows no later objection on William's part that these charges were not accounts stated (Biegen v Paul K. Rooney, P.C., 269 AD2d 264 [1st Dept 2000]; Bracken & Margolin, LLP, 270 AD2d 221 [2d Dept 2000]). In his memorandum of law on his cross motion, the point is also made by William that Avedisian also did work late at night when he was more tired and less efficient, but these claims are not supported by a factual affidavit on these cross motions from one with personal knowledge and thus not considered here.
REMAINING DEFENSE AND COUNTERCLAIM
William's last remaining defense against the petition is that the Firms have breached their ethical and fiduciary duties to William by revealing in their papers on this motion his confidences as a client, to his embarrassment and injury. These allegations are also part of the fabric of his counterclaim to the effect that Avedisian drafted the settlement documents to benefit the attorneys to whom he was answerable; that Avedisian failed to advise him that he would owe $7 million in fees upon entering into the settlement; and that Avedisian failed to wind up the closing contemplated by the settlement. But such defense and counterclaim receive little attention in William's motion papers. Nor does the record otherwise support either, on the facts or the law.
Simply put, William has failed to preserve his claims for trial by laying bare his proofs to show that the Firms disclosed client confidences that would not have been obtainable from outside sources. In any event, the Rules of Professional Conduct permit a lawyer to "reveal or use confidential information to the extent that the lawyer reasonably believes necessary . . . to defend the lawyer . . . against an accusation or wrongful conduct; or . . . to establish or collect a fee" (22 NYCRR Part 1200, Rule 1.6[b][5] [formerly DR 4-101(C)(4)]). In raising an economic duress claim, William placed his ability to pay for new counsel at issue, and the Firms were thus justified in demonstrating that William at all relevant times had significant net worth and that his liquidity problems were self-inflicted injuries incident to his high-wheeling lifestyle. There is thus no proscribed revelation of client confidences on which to rest William's claimed defense to the contract.
Beyond merely conclusory statements, William has also failed to substantiate his claim that Avedisian drafted settlement documents to benefit the Firms and their members rather than him as client. In other words, William's general sense of betrayal cannot serve as the basis for his breach of fiduciary duty claims.
Additionally, an attorney is not obliged to forecast to the client the specific size of the ultimate fee, so long as the retainer agreement gives the client notice of the basis upon which the fee is calculable. Nor is a lawyer required to inform the client that a lien in respect of the legal fee will attach to settlement proceeds (see Friedman v Park Cake, Inc., 34 AD3d 286, 286 [1st Dept 2006] ["While it undoubtedly would be preferable for counsel to identify and discuss any specific liens on a plaintiff's settlement, regardless of whether the client affirmatively asked for that information, the failure to do so is not grounds for depriving counsel of an earned legal fee.]). Finally, the claim that Avedisian failed to complete the closing is not supported by William, and, as noted above, was in any event resolved in a prior decision of the court (Matter of Koeppel, NYLJ, Nov. 12, 2009, at 31, col 6 [Sur Ct New York County]).
Consequently, the affirmative defense and counterclaim premised on purported breaches of ethical or fiduciary duties are dismissed.
DISPUTES AS TO THE MEANING OF CERTAIN TERMS
The parties disagree about the meaning and application of several of the 2006 Retainer's terms. The first issue in such connection concerns the method by which the performance fee is to be calculated under the Retainer's terms. As indicated above, the Retainer defines the size of the performance fee in terms of (a) the value of the settlement ultimately reached for William over and above the $43 million Trigger Amount (the "Increase in Value)" and (b) fixed percentages (varying in direct proportion to the magnitude of the Increase in Value), as follows:
Initially, the parties had disagreed about whether under the circumstances the 2006 Retainer entitled the Firms to a flat fee of $750,000 or $650,000, Avedisian contending that William had rejected a higher settlement made available to him between November 19, 2006, and May 1, 2007, William denying that such had been the case. The issue, however, appears to have been mooted by Avedisian's stipulation (in papers on this motion) to claim a flat fee of $650,000 only, with the proviso that the 2008 settlement will remain the basis for determining the issues raised by this proceeding. Assuming that such proviso will be satisfied, the court deems the flat-fee issue mooted by Avedesian's stipulation.
"If the Increase in Value is:
$0 - $5,000,000, x = 3%According to Avedisian's reading, if the Increase in Value is above $10 million (as he maintains it is), then the performance fee is 8% of the Increase in Value in its entirety. By contrast, William proposes that in such circumstance the performance fee is instead to be calculated in three steps, applying 3% to the first $5 million of the Increase in Value, 5% to the next $5 million, and 8% only to the amount above $10 million. But the court does not agree that the foregoing terms lend themselves to more than one reasonable construction, much less that they support William's reading. In other words, those terms — "if the Increase in Value is $10 million, x [the applicable percentage] is 8% — unambiguously provide that the performance fee is the product of 8% and the Increase in Value where the latter exceeds $10 million. Indeed, as numerous statutes illustrate, if the terms for which William argues had been intended, that intention could very readily have been expressed (compare, e.g., SCPA § 2309[2]; 26 USC § 1; 26 USC § 2001).
$5,000,001 - $10,000,000, x = 5%
$10,000,001, x = 8%"
Another of William's arguments is that his remainder interest in Robert's Marital Trust cannot be factored into the "Increase in Value" because such interest was property to which he would have been entitled with or without Avedisian's assistance. Notably, however, the 2006 Retainer pegs "value" not in terms of "acquisitions" for William, but only in terms of the money or money's worth that would be allocated to William as his portion of family interests that he did not already own outright. Indeed, the value of property in which William has a remainder interest was factored into William's share of the abortive 2004 settlement and thus into the base line against which the value of the Firms' settlement services is measured.
By contrast, William is correct to dispute Avedisian's claim that the 30.98% of Whitehouse Estates in William's name prior to the settlement should be considered as part of the value of William's share of the 2008 settlement. That William had such an individual interest in Whitehouse Estates was never at issue in the Koeppel family disputes and was independent of the estates and trusts that were carved up in the 2008 settlement. Accordingly, that interest cannot factor into Avedisian's performance fee under the 2006 Retainer.
The parties further disagree as to whether William's remainder interest in Robert's Marital Trust should be discounted to its present value, given Roberta's intervening life estate. In this connection, Avedisian's position— that no such discount is required—is unsupported by the language of the 2006 Retainer as drafted by Avedisian himself. Nor does Avedisian's position find support in the spirit of the agreement, which clearly contemplates that the performance fee be based upon the current value (even if only approximated by appraisals from 2004) of whatever was conceded to William in the settlement. Accordingly, William's interest in Robert's Marital Trust remainder is to be discounted as William has argued.
CONCLUSION
Each party's motion for partial summary judgment is granted in part and denied in part as set forth in the foregoing discussion. As is indicated by the foregoing, and as is acknowledged by the Firms' request for only partial summary judgment, the precise value of what William received in settlement cannot be calculated on this record and is accordingly an issue to be resolved at a hearing.
This decision constitutes the order of the court.
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SURROGATE