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stating that "a violation of disciplinary rules does not necessarily relieve the client entirely from payment" but finding no violation based on the record developed thus far
Summary of this case from Louima v. City of New YorkOpinion
00 Civ. 1140 (JGK).
April 18, 2000.
OPINION AND ORDER
Petitioner Olshan Grundman Frome Rosenzweig Wolosky LLP ("Olshan") seeks pursuant to Fed.R.Civ.P. 64 and N.Y. C.P.L.R. § 6201 an order of attachment of undistributed royalty funds of respondents Olaf Jeglitza and Jurgen Wind held by The American Society of Composers and Performers ("ASCAP"), Broadcast Music. Inc. ("EMI"), and The Harry Fox Agency ("Harry Fox"). For the reasons stated below, the application for an order of attachment is granted.
I.
The petitioner in this action is a law firm with an office in New York. The respondents are composers and citizens of Germany, where they also reside. The petitioner alleges that the respondents have failed to pay it legal fees and disbursements arising out of the petitioner's representation of the respondents who were defendants in the underlying copyright infringement action, MCA Music v. Soul Street Music Publishing, 96 Civ. 2369, which was discontinued by Order of this Court on March 22, 2000 pursuant to a settlement agreement among the parties. This Court has supplemental jurisdiction to hear this dispute over attorney's fees incurred in the underlying action. See Alderman v. Pan Am World Airways, 169 F.3d 99, 102 (2d Cir. 1999);Itar-Tass Russian News Agency v. Russian Kurier Inc., 140 F.3d 442, 453 (2d Cir. 1998). According to the petitioner, the respondents have failed to make payments in the amount of $62,637.31 to satisfy five statements of account issued between September 1999 and January 2000 for legal services the petitioner performed and disbursements it incurred from April 1999 through January 2000. (See Petition, at ¶¶ 17-22) The petitioner has brought claims against the respondents for breach of contract, unjust enrichment, quantum meruit, and fraud.
The petitioner contends that undistributed royalties in excess of $500,000 are presently held for the benefit of the respondents by ASCAP, BMI, and Harry Fox. (See Decl. of Thomas J. Fleming dated Feb. 15, 2000 ("Fleming Decl."), at ¶ 2.) The petitioner contends that these are the only assets belonging to the respondents in the United States and that the respondents intend to transfer those funds out of the United States as a result of the settlement of the underlying action, thereby leaving the petitioner without a remedy should it prevail on its claims. (See Fleming Decl., at ¶¶ 2, 11.)
Following a hearing on February 17, 2000, the Court granted the petitioner's motion for a temporary restraining order ("TRO"). Among other things, the TRO, which was extended beyond ten days on the consent of the parties, restrained any transfer of funds held at ASCAP, BMI and Harry Fox for possible distribution to the respondents up to the amount of $62,637.21. The Court also ordered expedited discovery.
The Court conducted a hearing on the petitioner's present application for an order of attachment on April 11, 2000. Following that hearing, for reasons that were explained on the record, the Court continued the TRO until April 25, 2000.
While this was the first extension of the TRO, to the extent that the time limit for a TRO had expired, for the same reasons explained on the record, the Court also issued a Preliminary Injunction with the same conditions as the TRO. The respondents agree that after an attachment is issued, there will no longer be a need for injunctive relief because the funds subject to attachment should be sufficient to satisfy any judgment in this case.
II.
To determine whether an order of attachment should be granted, this Court is required to apply the laws of the State of New York. See Fed.R.Civ.P. 64. Under New York law, an order of attachment may be granted if the petitioner shows "that there is a cause of action, that it is probable that the [petitioner] will succeed on the merits, that one or more grounds for attachment provided in section 6201 exist, and that the amount demanded from the [respondent] exceeds all counterclaims known to the [petitioner]." N.Y. C.P.L.R. § 6212(a); see APC Commodity Corp. v. Ram Dis Ticaret A.S., 965 F. Supp. 461, 466 (S.D.N.Y. 1997). The burden is on the moving party to show that the grounds for an attachment exist. See Asdourian v. Konstantin, 50 F. Supp.2d 152, 158 (E.D.N.Y. 1999).III.
Based on the hearings held before this Court on February 17, 2000 and April 11, 2000 and the submissions related to those hearings, the petitioner has clearly met its burden in showing each of the required elements for an order of attachment.
The petitioner has demonstrated that it has a cause of action for breach of contract, and that it will probably succeed on the merits of that claim. There is no dispute in this case that the respondents retained the petitioner to perform legal services in connection with the underlying action. The petitioner has submitted records of the services it performed and the disbursements it incurred in connection with its representation of the respondents. (See Exh. C to Decl. of Barry Platnick ("Platnick Decl.") dated April 6, 2000.) While the respondents contend that the petitioner had "capped" its fees in 1998, it appears that this was an estimate as to the further fees and not a guarantee and there were substantial additional litigation expenses through January, 2000. Thus, the petitioner has a cause of action to recover the amounts due, and a probability of prevailing on its claims against the respondents.
The respondents argue that for several reasons they are entirely relieved from paying the petitioner the amount at issue, but these arguments are insufficient to alter the conclusion, at this stage of the proceedings, that it is probable that the petitioner will prevail. First, the respondents contend that they discharged the petitioner for cause and that they are thereby relieved from payment. See e.g., Campagnola v. Mulholland, Minion Roe, 76 N.Y.2d 38, 44 (1990). However, the respondents make no showing at all that they discharged the petitioner for cause. Indeed, this argument is inconsistent with the respondents' argument that the petitioner actually abandoned them. It therefore can not be said at this stage of the proceedings that the petitioner would not be entitled to payment on this basis. The respondents also contend that the petitioner is not entitled to payment because it withdrew without justification from representing them. See, e.g., Kahn v. Kahn, 588 N.Y.S.2d 658, 659 (2d Dep't 1992). On the papers before the Court, however, this allegation is without foundation. The respondents have not shown that there was any unjustified withdrawal. The petitioner delivered motion papers that it had prepared to successor counsel and the respondents consented to the substitution of the law firm of Cinque Cinque, P.C., for the petitioner in this action. It therefore can not be concluded that the petitioner has forfeited its fees on this ground.
The respondents also contend that the petitioner is not entitled to compensation because Barry Platnick, who was of counsel to the petitioner in the underlying action, violated several state disciplinary rules. This argument does not undermine the conclusion that it is probable that the petitioner will prevail. First, a violation of disciplinary rules does not necessarily relieve the client entirely from payment. See Mar Oil, S.A. v. Morrissey, 982 F.2d 830, 840 (2d Cir. 1993); In re Rosenman Colin, 850 F.2d 57, 63-64 n. 3 (2d Cir. 1988). Moreover, the respondents' allegations of misconduct are not sufficiently persuasive to conclude that the petitioner will not prevail. The respondents contend that Mr. Platnick violated DR 9-102(a) by failing to keep in an escrow account certain funds they sent him for payment of legal fees. An attorney is not, however, required to hold in an escrow account funds received from the client for payment of the client's legal fees. See New York State Bar Assoc. Committee on Professional Ethics, Opinion 570 (1985).
The respondents also contend that Mr. Platnick agreed to keep their funds in a special account and not draw on those funds without the respondents' consent. (See (See Decl. of Olaf Jeglitza ("Jeglitza Decl.") dated March 27, 2000, at ¶ 3.) The petitioner disputes this assertion, however, and it contends that a substantial portion of the funds wired were for payment of fees already rendered. (See Platnik Decl. at ¶ 3.) On the present record, it can not be concluded that the respondents will prevail because of the alleged violation of any duties the petitioner allegedly owed to the respondents.
The respondents also contend that Mr. Platnick violated DR 9-102(C)(3) by failing to credit their account for payments in the amount of $8.105.67 wired in November 1998 (See Jeglitza Decl., at ¶ 5.) This amount does, however, appear as a credit in the documentation submitted by the petitioner. (See Ex. A to Platnick Decl.) It can not therefore be said on the present record that the petitioner will not prevail on this basis.
In addition, the respondents contend that Mr. Platnick received a referral fee from the petitioner in violation of DR 2-107(A). Since there is no dispute that Mr. Platnick was of counsel to the petitioner and he performed substantial services in connection with the underlying action, it can not be concluded that this fee was improper or that the petitioner would not prevail because of this argument. See, e.g., Nicholson v. Nason Cohen, 597 N.Y.S.2d 23 (1st Dep't 1993); Gold v. Katz, 598 N.Y.S.2d 205, 206 (1st Dep't 1993).
Therefore, the petitioner has shown that it has a cause of action against the respondents and that it is probable that it will prevail.
To obtain an order of attachment, the petitioner must also show that there is a basis for the attachment under N.Y. C.P.L.R. § 6201. Here, this requirement is plainly met because the respondents, who reside in Germany, are non-domiciliaries residing outside New York. See N.Y. C.P.L.R. § 6201(1); see also American Federal Group Ltd. v. Rothenberg, No. 91 Civ. 7860, 1998 WL 273034, *6 (S.D.N.Y. May 28, 1998).
The petitioner has also shown that the amount it seeks exceeds the amount of all known counterclaims. The respondents have not asserted any counterclaims against the petitioner, and the respondents represent that they are unaware of any such claims, so this requirement is also satisfied. See CITGO Petroleum Corp. v. Panther Oil Corp., No. 97 Civ. 1121, 1997 WL 168589, *2 (E.D.N.Y. April 3, 1997).
Accordingly, because the petitioner has satisfied all of the requirements for an order of attachment, the petitioner's application is granted.
CONCLUSION
For the reasons stated above, the petitioner's application for an order of attachment is granted. The petitioner is directed to submit a proposed Order of Attachment in accordance with this Opinion and Order by April 18, 2000.
SO ORDERED.
DATED: New York, New York
4/14/00