Opinion
No. 12026/03.
2012-11-30
DIALCOM, LLC, Plaintiff, v. AT & T CORP. and Concert, USA, Defendants.
Subin Associates, Gregory T. Cerchione, LLP, New York, for Petitioner. Oved & Oved, Darren Oved, New York, for Respondent.
Subin Associates, Gregory T. Cerchione, LLP, New York, for Petitioner. Oved & Oved, Darren Oved, New York, for Respondent.
DAVID SCHMIDT, J.
The following papers numbered 1 to 9 read herein: Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed 1–5
Opposing Affidavits (Affirmations) 6
Reply Affidavits (Affirmations) 7
Affidavit (Affirmation)
Other Papers Memorandum of Law 8
Transcript of Oral Argument dated June 28, 2012__________ 9
Upon the foregoing papers, in this action by plaintiff Dialcom, LLC (Dialcom) against defendants AT & T Corp. (AT & T) and Concert, USA (Concert) for, among other things, breach of sales agency agreements, petitioners move, by order to show cause, for an order: (1) restoring this action to the calendar for the purpose of setting this matter down for a hearing on the issue of a retaining lien claimed to be held by them, as counsel who was replaced by substituted counsel, namely, the law firm of Oved & Oved LLP (Oved & Oved), and (2) scheduling a hearing to hear and determine the amount of attorneys' fees, if any, to which they are entitled, pursuant to such retaining lien, for the representation provided by them to Dialcom prior to this substitution of counsel.
BACKGROUND
Dialcom had a sales agent relationship with AT & T and Concert, in which it, as their agent, marketed certain international telecommunications services to companies, for which it was to be paid commissions by them. In late 2002, Dialcom sought representation in connection with a dispute it had with AT & T and Concert regarding their failure to pay it commissions under several revenue commitment contracts involving, as customers (among other unspecified customers), IDT, Quest Communications (Qwest), Verizon, and Bell South (the Revenue Commitment Contracts), which it had procured, through its marketing efforts, for AT & T and Concert in the course of its work as their agent.
Dialcom originally entered into a written Sales Agency Agreement with AT & T on October 30, 1999, which expired on December 31, 1999. Dialcom then continued to perform agency services for AT & T and Concert (who, it was informed by AT & T, would then be handling AT & T's international operations) without a written agreement from January 1, 2000 to October 6, 2000. During that time period, Dialcom, in or about January 2000, procured Quest as a customer for and on behalf of AT & T. In March 2000, AT & T “transitioned” the Qwest account from Dialcom, i.e., AT & T began servicing the Qwest account directly. In August 2000, Dialcom procured for Concert a three-year Revenue Commitment Contract with IDT (the IDT $750 Million Revenue Commitment Contract), which guaranteed that IDT would purchase from Concert, at a minimum, $750 million in telecommunications services between 2000 and 2003.
On October 6, 2000, Dialcom and Concert entered into a Master Agency Agreement (the MAA), which was made retroactively effective to April 1, 2000. Dialcom procured most of the Revenue Commitment Contracts for AT & T pursuant to the terms of the MAA. The MAA contained three Service Attachments. The compensation provision in the MAA was contained in Service Attachment One (SA–1), which expressly provided that Dialcom would receive a two percent commission based on the total revenue amount actually billed and collected by Concert pursuant to a Revenue Commitment Contract by a customer that was obtained as a result of Dialcom's marketing efforts.
However, AT & T and Concert, after transitioning the Qwest account, failed to compensate Dialcom for its marketing efforts by paying it commissions on the revenues billed and collected from this account. Furthermore, almost immediately after Dialcom had secured the IDT $750 Million Revenue Commitment Contract, Concert transitioned it, and AT & T refused to pay it based upon the ground that it had no obligation to do so under the MAA because it, and not Concert, had, in fact, billed and collected the revenue amounts generated from that contract. In addition, Concert did not pay Dialcom the two percent commissions that it owed Dialcom with respect to the Revenue Commitment Contracts that it had procured from Bell South and Verizon, which were also transitioned.
According to petitioner, during the fall and winter of 2002 to 2003, he met with Ike Rudy and Ezra Rudy, who are principals of Dialcom, regarding Dialcom's potential claims as against AT & T and Concert. On April 2, 2003, petitioner, on behalf of Dialcom, commenced this action by filing a summons with notice. Subsequently, Dialcom agreed to retain both petitioners in connection with its action as against AT & T and Concert. By a retainer agreement dated September 2, 2003 (the retainer), Dialcom d/b/a All One engaged petitioners' respective law firms to represent it in connection with its dispute with AT & T and Concert. Paragraph 1 of the retainer provided that these two firms would be co-counsel and divide responsibilities as they deemed appropriate.
Paragraph 2 of the retainer set forth how petitioners' fee for this matter would be determined. It stated that Dialcom would pay petitioners one-third of the first $1,000,000 of any sums it received “in connection with any action or proceeding or otherwise by way of judgment or settlement in the [action] and one-quarter of any of the foregoing sums in excess of $1,000,000,” and that Dialcom was required to pay them for costs incurred by them upon their rendering of a bill to it for those costs. It also stated Dialcom had “agree[d] to pay [petitioners] a $30,000 flat fee for work [which they] perform[ed] from the inception of the case through and including a motion to dismiss and an additional flat fee of $20,000 if the case [were to] continue[ ] past the dismissal stage.” It specified that Dialcom would “receive a credit [for these flat fees] against the contingency fee that may be due [to them] in the event that [Dialcom] prevailed in the action.” Paragraph 3 of the retainer stated that upon the execution of such retainer, Dialcom would pay the $30,000 flat fee as a retainer and that petitioners would draw upon it as they deemed appropriate. Paragraph 4 of the retainer provided that Dialcom “ha[d] the right to terminate the representation [of it by them] at any time subject to [their] retaining lien in connection with the action ... which retaining lien w[ould]l be based upon the contingent fee arrangement set forth above.” The retainer further provided that petitioners' obligation to Dialcom would be “to represent [it] until there was a final resolution by way of settlement or a final substantive determination of the [c]ourt, or termination of [their] representation pursuant to the terms [t]hereof.”
After AT & T and Concert served a demand for a complaint, petitioners, on behalf of Dialcom, served them with a complaint on October 24, 2003. Thereafter, petitioners drafted and served a first amended complaint dated November 5, 2003, which was identical to the original complaint except that it annexed exhibits. The first amended complaint set forth six causes of action. However, none of the six causes of action asserted in the first amended complaint sought recovery for breach of the compensation provision of SA–1 which, as noted above, provided for a two percent commission of all revenues collected as a result of Dialcom's marketing efforts, nor did they reference any of the Revenue Commitment Contracts that Dialcom had procured.
Instead of pleading breach of contract claims arising from Dialcom's right to commissions under SA–1, petitioners, on behalf of Dialcom, focused almost entirely on paragraph four of section 4 of the MAA (MAA 4.4). MAA 4.4 obligated Concert only to “review commercially reasonable opportunities to compensate [Dialcom] for decreased [c]ommission amounts,” and to consider, in compensating Dialcom, assigning new customer accounts to Dialcom or adding additional services for which Dialcom would be entitled to perform marketing services. The first cause of action of the first amended complaint alleged a claim for breach of contract based upon MAA 4.4. The second, third, and fourth causes of action of the first amended complaint alleged, respectively, claims of promissory estoppel, fraudulent inducement, and breach of the covenant of good faith and fair dealing. The fifth and sixth causes of action of the first amended complaint alleged, respectively, a claim for breach of contract by failing to timely and correctly bill customers, and a claim for breach of contract by failing to pay commissions on non-transitioned accounts. The first amended complaint also contained allegations that AT & T and Concert participated in a “double booking” scheme.
Thereafter, AT & T and Concert moved to dismiss Dialcom's first amended complaint. By decision and order dated July 20, 2004, the court: (1) dismissed Dialcom's first cause of action as to the IDT and Qwest accounts as time-barred, and dismissed such cause of action as to the Bell South and Verizon accounts to the extent that Dialcom's claims as to such accounts accrued prior to April 2, 2002; (2) dismissed Dialcom's second cause of action for promissory estoppel for failure to state a cause of action, and dismissed Dialcom's third cause of action for fraudulent inducement and fourth cause of action for breach of the covenant of good faith and fair dealing on the ground that they were entirely duplicative of Dialcom's breach of contract cause of action; (3) denied AT & T and Concert's motion, insofar as it sought dismissal of Dialcom's fifth and sixth causes of action based upon the ground that they failed to state a cause of action by reason of Dialcom's failure to comply with a contractual 60–day notice provision, without prejudice, because the record was far from developed, precluding a proper resolution of these issues, and (5) struck, as inflammatory and unnecessary, so much of Dialcom's first amended complaint as alleged that AT & T and Concert participated in a “double booking” scheme. In that July 20, 2004 decision and order, Dialcom was directed to serve a second amended complaint to strike these objectionable allegations and to delete the dismissed causes of action.
Dialcom, by petitioners, served a “second amended verified complaint” dated September 15, 2004, which contained three causes of action. The first cause of action alleged a breach of contract by AT & T and Concert as to each of the transitioned accounts based upon MAA 4.4, and sought compensatory as well as punitive damages. The second cause of action (as alleged in the fifth cause of action of the first amended complaint) alleged a breach of contract by AT & T and Concert by their failure to timely and correctly bill customers. The third cause of action (as alleged in the sixth cause of action of the first amended complaint) alleged a breach of contract by AT & T and Concert based upon their failure to pay commissions on non-transitioned accounts.
Thereafter, Dialcom moved to further amend its complaint, and AT & T and Concert cross-moved to dismiss the Dialcom's “second amended verified complaint.” On March 7, 2005, while the motion and cross motion were pending, petitioners stipulated with AT & T and Concert to go forward with discovery as to those causes of action which survived the prior motion to dismiss. On April 1, 2005, AT & T and Concert served Dialcom with interrogatories requesting that petitioners detail Dialcom's bases for its claims for damages, as well as notices of deposition and a demand for discovery and inspection. On June 24, 2005, after numerous requests by AT & T and Concert for responses, petitioners belatedly served answers containing merely vague responses. Consequently, AT & T and Concert served a second set of interrogatories to clarify petitioners' answers to such interrogatories.By decision and order dated November 29, 2005, the court deemed the “second amended verified complaint” to be a “proposed” amended complaint, denied Dialcom leave to assert a claim for punitive damages in such complaint, denied Dialcom leave to supplement, restate, or reinstate causes of action which were already previously dismissed by the court (i.e., all claims as to the transitioned IDT and Qwest accounts and claims as to the transitioned Bell South and Verizon accounts that accrued prior to April 2, 2002), and granted Dialcom leave to amend the complaint to include proposed additional factual allegations regarding AT & T and Concert's bad faith in connection with its breach of contract cause of action in failing to provide Dialcom with commercially reasonable opportunities as a means to compensate it for lost commissions under MAA 4.4. The court, in that November 29, 2005 decision and order, denied AT & T and Concert's cross motion for dismissal of Dialcom's proposed second amended complaint with respect to the additional factual allegations, and, in view of the court's denial of leave to Dialcom to otherwise amend its complaint, denied, as academic, their remaining requests for dismissal.
On December 21, 2005, AT & T and Concert moved to compel answers by Dialcom to its second set of interrogatories and to compel the production by Dialcom of corresponding documents requested in those interrogatories. According to an affidavit submitted by petitioner, on December 27, 2005, he had a meeting with Dialcom, in which they discussed having new counsel for the action. Petitioner asserts that on December 30, 2005, Matthew Bondy, Esq., an associate attorney for him, moved for a protective order with respect to discovery, and that, thereafter, Mr. Bondy, Esq. sent to Ike Rudy a response by Dialcom to AT & T and Concert's second set of interrogatories. Petitioners do not assert that they thereafter served any response to the document requests or interrogatories upon AT & T or Concert. Petitioners, in their affidavits, state that on February 2, 2006, they had a telephone conference with Ezra Rudy and Darren Oved, Esq., a member of the law firm of Oved & Oved, and that on that date, a Consent to Substitute Attorney was executed by them and Dialcom.
By the Consent to Substitute Attorney dated February 2, 2006, petitioners and Dialcom consented and agreed that Oved & Oved would be substituted as the attorney of record for Dialcom in this action in the place and stead of petitioners, and that petitioners' attorneys' fees would “be determined by the court at the conclusion of the case” if not agreed upon by Dialcom and petitioners. At the time of the execution of this Consent to Substitute Attorney, Dialcom had, pursuant to the terms of the retainer, already paid petitioners the $30,000 fee due at the time of the execution of the retainer, which the retainer had stated, was a flat fee for the work which they had performed from the inception of the case through and including a motion to dismiss. The additional flat fee of $20,000, which the retainer had provided would be paid to petitioners in the event that the case continued past the dismissal stage, was not paid to petitioners. The Consent to Substitute Attorney, unlike the retainer, did not specify that any contingency fee was to be paid to petitioners, but it stated that petitioners' “retaining lien, pursuant to the retainer ... [would] remain in full force and effect.”
On February 23, 2006, Oved & Oved moved, on behalf of Dialcom, for leave to renew the court's prior orders dismissing the claims under MAA 4.4 and for leave to amend the complaint to assert new claims for commissions under SA–1 and new facts concerning the IDT $750 Revenue Commitment Contract and the other Revenue Commitment Contracts that had been omitted by petitioners. The proposed amendment by Oved & Oved pleaded for the first time supplemental factual allegations concerning the Service Attachments, the full text of Section 4 of the MAA, and the complete factual circumstances surrounding the IDT and Qwest accounts.
Specifically, the Second Amended Complaint drafted by Oved & Oved asserted a first cause of action for breach of contract as to the IDT account under the MAA based upon AT & T and Concert's failure to pay Dialcom a two percent commission on all revenue amounts generated under the IDT $750 Million Revenue Commitment Contract, plus additional bonus commissions due in connection therewith; second and third causes of action for breach of contract under the MAA as to the Bell South account and the Verizon account, respectively, based upon AT & T and Concert's failure to pay Dialcom a two percent commission on all revenue amounts generated from the Bell South Revenue Commitment Contract and the Verizon Revenue Commitment Contract entered into with AT & T shortly after it transitioned management of the accounts away from Dialcom in or about May 2002, plus additional bonus commissions due in connection therewith; a fourth cause of action for quantum meruit/unjust enrichment as to the Qwest account concerning Concert's failure to compensate Dialcom for procuring, marketing, and servicing the Qwest account, which was transitioned away from Dialcom to Concert prior to the effective date of the MAA; a fifth cause of action under the MAA for non-transitioned accounts based upon AT & T and Concert's failure to timely bill and collect revenue and incorrectly billing customers; and a sixth cause of action alleging bad faith by AT & T and Concert by their attempt to avoid payment obligations under the MAA by having AT & T, rather than Concert, bill and collect revenue under the MAA and transitioning from Dialcom management of accounts involving Revenue Commitment Contracts in order to deprive Dialcom of bonus commissions under the Service Attachments.
AT & T and Concert opposed the motion by Oved & Oved by arguing that Dialcom, in previously seeking relief only based upon MAA 4.4 and failing to mention SA–1, had conceded that MAA 4.4, rather than SA–1, was its sole basis for recovering compensation. Specifically, AT & T and Concert asserted that Dialcom was directly contradicting itself by asserting claims based upon the two percent commission to which it was entitled under SA–1 when for years it had been seeking claims only based upon MAA 4.4.
By decision and order dated October 17, 2006, the court did not grant the motion by Oved & Oved insofar as it sought to allow Dialcom the right to pursue the dismissed claims under MAA 4.4 that had been previously pleaded by petitioners, but the court granted Dialcom leave to serve an amended complaint, finding that Dialcom's “new facts” in its proposed Second Amended Complaint incorporated claims “which were not asserted in prior pleadings.” On April 8, 2008, the Appellate Division, Second Department, unanimously affirmed the court's October 17, 2006 decision and order, holding that the claims pleaded by Oved & Oved in the Second Amended Complaint were not “duplicative of any previously-dismissed claims.”
On March 9, 2007, AT & T and Concert moved for leave to reargue the court's October 17, 2006 decision and order, or, in the alternative, to dismiss the first, fourth, and sixth causes of action of Dialcom's Second Amended Complaint pursuant to CPLR 3211(a)(5) and (7). AT & T and Concert again argued that Dialcom's claims should be dismissed because Dialcom had conceded that its sole right to recover for breach of contract was under MAA 4.4 by omitting the claims for commissions under SA–1 from the dismissed complaints. AT & T and Concert further reiterated their argument that the new claims for commissions based upon the SA–1 were inconsistent with that concession.
By decision and order dated June 17, 2008, the court rejected these arguments and denied AT & T and Concert's motion to reargue. The court, in its June 17, 2008 decision and order, noted that the focus of most of the prior litigation in this action was on MAA 4.4 which only addressed supplemental compensation, which was separate and distinct from Concert's payment obligations under SA–1 and the MAA. The court specifically noted that Dialcom “had retained new attorneys who, upon reviewing the case file, found a complete failure by [Dialcom's] former attorneys to plead any cause of action or allegations concerning [AT & T and Concert's] payment obligations under [SA–1], or any portion of the MAA aside from [MAA 4.4] or to properly plead a quantum meruit claim with respect to the Qwest account.” It further determined that the claim concerning IDT pleaded in the first cause of action of Dialcom's Second Amended Complaint drafted by Oved & Oved was not barred by the one-year Statute of Limitations, in contrast to the claims pleaded by petitioners concerning the transition of the IDT account (analyzed under the court's July 20, 2004 decision and order) which were time-barred. It also found that Dialcom had now properly pleaded, in its fourth cause of action a viable claim for quantum meruit claim with respect to the Qwest account. It additionally found that Dialcom's sixth cause of action for breach of the covenant of good faith and fair dealing contained sufficient allegations as to a willful and bad faith effort by AT & T and Concert to circumvent the entire MAA and deprive Dialcom of its benefits so as to survive dismissal.
In addition to defending the new claims set forth in the Second Amended Complaint, Oved & Oved served numerous voluminous discovery requests concerning the IDT, Qwest, Verizon, and Bell South accounts, including two comprehensive document requests, interrogatories, a demand for witness names, and a notice of deposition of 13 different employees and former employees of AT & T. According to Oved & Oved, due to the past inaction by petitioners with respect to discovery, AT & T challenged Dialcom's right to serve discovery for the first time in the three years since the action was commenced. The parties entered into a stipulation dated March 25, 2009 providing for a discovery schedule.
On April 9, 2009, Oved & Oved moved on Dialcom's behalf for partial summary judgment on the issue of liability with respect to Dialcom's first cause of action as it related to the IDT account and AT & T's failure to pay any commissions under SA–1 for revenues billed and collected under the IDT $750 Million Revenue Commitment Contract. Since the very existence of the IDT $750 Million Revenue Commitment Contract had been omitted from the prior complaints drafted by petitioners, this summary judgment motion relied entirely upon the claims pleaded in the Second Amended Complaint which was drafted by Oved & Oved. In addition, Oved & Oved secured a critical affidavit by Jonathan Levy, who was an executive with IDT when the IDT $750 Million Revenue Commitment Contract was negotiated and executed, wherein he attested that the IDT $750 Million Revenue Commitment Contract directly resulted from the extensive marketing efforts of Dialcom. At the return dates for the summary judgment motion, principals of Dialcom and AT & T appeared before the court and participated in settlement negotiations.
On May 25, 2010, which was the final return date for the summary judgment motion, Dialcom, AT & T, and Concert, by a Stipulation of Settlement, so-ordered by the court, reached a settlement of this action, whereby they agreed that AT & T, on its own behalf and on behalf of Concert, would pay Dialcom the sum of $7,500,000 within 30 days of the date of that stipulation, and Dialcom agreed to release all of its claims against AT & T and Concert. Oved & Oved did not collect any portion of this settlement sum as [Slip Op. 9]a fee for its legal services. Rather, Oved & Oved billed for its legal services at an hourly rate, whereby it had billed for more than 1,800 hours and collected a total of approximately $600,000 in fees over the course of the four years in which it represented Dialcom. On August 23, 2011, petitioners filed the instant order to show cause, seeking a hearing to determine the amount Dialcom owes them for attorneys' fees. Oral argument of petitioners' motion was held on June 28, 2012.
DISCUSSION
In support of their motion, petitioners assert that they are entitled to a minimum of $269,415 for 598.70 hours of work performed by them, plus $60,000 for 200 hours of work performed by Mr. Bondy, Esq. for a minimum of 200 hours at $300 per hour, for a total of $329,415, exclusive of the $20,000 initial retainer balance which was not paid by Dialcom. Petitioners request, however, that the court should find the contingency fee agreement set forth in the retainer to be effective and that they be awarded a full contingency fee plus the balance of the retainer in the sum of $1,978,333.
Petitioners claim that since the representation provided by them to Dialcom was on a contingency basis, detailed time records are not available to attach to their papers in support of their instant application. They assert, though, that they will produce documentation, time records, and electronic mail and attorney notes in support of their requested fees when this matter is set down for a hearing. Petitioners rely upon the retainer, the Consent to Substitute Attorney, and a letter dated May 8, 2007 from one of the petitioners, wherein he requests that if the case is settled or otherwise concluded whereby money is to be paid to Dialcom, no remittance should be made unless both petitioners' names appear as payees thereon or upon the written agreement of them and Dialcom.
In addition, petitioners have submitted affidavits by them, which briefly and summarily set forth the work performed by each of them in this action. Petitioners basically assert that they met with the clients, made certain court appearances, and attended certain conferences.
It is undisputed that petitioners performed no legal services for Dialcom from the time that they were discharged in February 2006 until the settlement of this action in 2010. Oved & Oved, on behalf of Dialcom, point out that petitioners had no part in the litigation of the summary judgment motion or the settlement negotiations that resolved the litigation. Oved & Oved note that, in fact, the pleadings and motion papers that petitioners had drafted in this action actually hindered Dialcom's position in settlement negotiations as AT & T and Concert (as discussed above) had repeatedly argued that petitioners' prior failure to raise claims under MAA 4.4 undercut the positions later taken by them on Dialcom's behalf.
In addressing petitioners' motion, it is noted that a client may discharge an attorney at any time, with or without cause ( see Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553, 556 [1981];Matter of Montgomery, 272 N.Y. 323, 326;Martin v. Camp, 219 N.Y. 170, 174 [1916],rearg. denied219 N.Y. 627 [1916] ). “When a client discharges an attorney without cause, the attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the services rendered whether that be more or less than the amount provided in the contract or retainer agreement” (Lai Ling Cheng v. Modansky Leasing Co., 73 N.Y.2d 454, 457–458 [1989];see also Matter of Cooperman, 83 N.Y.2d 465, 472 [1994];Teichner v. W & J Holsteins, 64 N.Y.2d 977, 979 [1985];Matter of Tillman, 259 N.Y. 133, 135 [1932];Byrne v. Leblond, 25 AD3d 640, 641 [2d Dept 2006]; Ingber v. Sabato, 229 A.D.2d 884, 887 [3d Dept 1996], lv dismissed88 N.Y.2d 1064 [1996],lv denied90 N.Y.2d 808 [1997];Smith v. Boscov's Dept. Store, 192 A.D.2d 949, 950 [3d Dept 1993] ).
As between an attorney and a client, “[u]pon the termination of the contract of retainer, a cause of action for the reasonable value of the services performed immediately accrues to the attorney and he [or she] need not be compelled to wait the outcome of the litigation from which he [or] she has been displaced” (Paulsen v. Halpin, 74 A.D.2d 990, 991 [4th Dept 1980] ). Rather, the attorney can require that the compensation be a fixed dollar amount either immediately payable at the time of discharge or secured by lien, based on quantum meruit ( see Lai Ling Cheng, 73 N.Y.2d at 458;Paulsen, 74 A.D.2d at 991). Alternatively, the attorney and client may expressly agree, at the time of the discharge and substitution, that the attorney may receive a contingent percentage fee “to be determined at the conclusion of the case, also on the basis of quantum meruit” (Paulsen, 74 A.D.2d at 991;see also Ford v. Albany Med. Ctr., 283 A.D.2d 843, 846 [3d Dept 2001], lv dismissed96 N.Y.2d 937 [2001],rearg. denied97 N.Y.2d 654 [2001] [holding that a contingent fee percentage must be based upon quantum meruit]; Matter of Cordes v. Purcell, Fritz & Ingrao, 89 A.D.2d 870, 870 [2d Dept 1982] [a contingent percentage fee which is to be determined at the conclusion of the case as compensation for the outgoing attorney must still be based upon quantum meruit] ). However, unless the attorney and client otherwise enter into such an express agreement for a contingency fee at the time of discharge, the attorney is limited to recover compensation for legal services actually performed by him or her on a quantum meruit basis even if the retainer previously provided for a contingency fee arrangement ( see Matter of Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655, 658 [1993];Kennedy v. Point Dedicated Servs., LLC, 31 AD3d 1117, 1118 [1st Dept 2006] ).
Here, as set forth above, the retainer provided for petitioners to be paid, as attorneys' fees in this action, a contingency fee of one-third of the first $1,000,000 and one-quarter of any sums in excess of $1,000,000 of any sums received by Dialcom in connection with the action by way of judgment or settlement. It also provided for a flat fee of $30,000 to be paid to petitioners for work performed from the inception of the case through a motion to dismiss and an additional flat fee of $20,000 if the case were to [Slip Op. 11]continue past the dismissal stage. However, in the Consent to Substitute Attorney, there is no mention of a contingency fee. Rather, such Consent to Substitute Attorney merely provides that petitioners' retaining lien, pursuant to the retainer, shall remain in full force and effect and that their attorneys' fees would be determined by the court at the conclusion of the case if not agreed to by petitioners and Dialcom.
Petitioners construe this provision in the Consent to Substitute Attorney broadly, arguing that the reference to their retaining lien
actually refers to their charging lien,
A retaining lien is defined as “[a]n attorney's right to keep a client's papers until the client has paid for the attorney's services” (Black's Law Dictionary [9th ed 2009], lien) [Note: online version].
and that the contingency agreement set forth in the retainer remains in full force and effect. It appears, however, from the language employed and the absence of any mention of a contingency fee that a recovery in quantum meruit based upon the legal work actually performed by petitioners was contemplated. Petitioners cannot seek apportionment of the fees earned by Oved & Oved since Oved & Oved's fees were based upon an hourly rate. In any event, even if the terms of the Consent to Substitute Attorney are construed as providing for a proportionate share of a contingency fee based upon the amount of the settlement, petitioners can only recover in quantum meruit for the actual work performed by them and not for the work performed by Oved & Oved ( see Matter of Tillman, 259 N.Y. at 135;Rothfeder v.. City of New York, 48 AD3d 234, 235 [1st Dept 2008] ).
A charging lien is defined as “[a]n attorney's lien on a claim that the attorney has helped the client perfect, as through a judgment or settlement” (Black's Law Dictionary [9th ed 2009], lien) [Note: online version].
Although, in determining attorneys' fees after the dismissal of an attorney, a canceled retainer contract no longer serves “to establish the sole standard for the attorney's compensation,” it may, “[t]ogether with other elements ... be taken into consideration as a guide for ascertaining quantum meruit” (Matter of Tillman, 259 N.Y. at 135). The amounts awarded to the discharged attorney, however, cannot be disproportionate to the value of the services that the attorney provided, but must, instead, be based upon the quality of the professional services actually and necessarily performed and the results that were achieved for the client prior to the attorney's discharge ( see Id. at 135–136;Paulsen, 74 A.D.2d at 991;Martin v. Feltingoff, 7 AD3d 467, 467–468 [1st Dept 2004], lv denied3 NY3d 608 [2004];Lupo v. Pro Foods, 2012 N.Y. Slip Op 31207[U] [Sup Ct, N.Y. County 2012] ). The court must consider “the nature and extent of the attorney's services, the amount of time involved, the value of the services rendered, the amount of services still to be performed, [and] the likelihood of [the] plaintiff's recovery” (Corsi v. Ott, 44 A.D.2d 906, 906 [4th Dept 1980]; see also Board of Mgrs. of Boro Park Vil.-Phase I Condominium v. Boro Park Townhouse Assoc., 284 A.D.2d 237, 237 [1st Dept [Slip Op. 12]2001] [the work performed by the incoming and outgoing attorneys and the contributions of the respective attorneys toward achieving the outcome reached in the action must be considered in determining the outgoing attorneys' fees] ).
In the present action, the affidavits submitted by petitioners do not show that they performed any work beyond defending the motions to dismiss, which defense was largely unsuccessful and required major repleading by Oved & Oved. As previously noted, the retainer provided for a flat fee of $30,000 for work performed up to and including defending a motion to dismiss. Thus, on the face of the retainer that petitioners drafted and prepared, they valued at $30,000 all of the legal services they had performed from the inception of the case through defending the motions to dismiss. Petitioners have not asserted that they performed any additional legal services and “[t]he law requires that an agreement between the client and the attorney be construed most favorably to the client' “ (Meyer, Suozzi, English & Klein, P.C. v. Vista Maro, LLC, 2011 N.Y. Slip Op 30173[U] [Sup Ct, Nassau County 2011], quoting Matter of Bizar & Martin v. U.S. Ice Cream Corp., 228 A.D.2d 588, 589 [2d Dept 1996] ).
Even more significantly, it is well established that where an outgoing attorney's efforts in a litigation are ultimately of no value to his or her client, such as where it does not contribute to the settlement of the litigation or where all of the work the attorney performed prior to being terminated has to be duplicated or redone by the incoming counsel, the court must decline to award any fees to the discharged counsel and no hearing to determine fees is necessary ( see Hinds v. Kilgallen, 83 AD3d 781, 783 [2d Dept 2011] ). “The value of one attorney's services is not measured by the result attained by another” (Matter of Tillman, 259 N.Y. at 133;see also Pilitz v. Incorporated Village of Freeport, 762 F Supp 2d 580, 583–584 [ED N.Y.2011] [where the outgoing law firm played no part in the achievement of the settlement reached, it was not entitled to any charging lien for the reasonable value of the legal services rendered up to the date of its discharge]; Rothfeder, 48 AD3d at 235 [an outgoing attorney's charging lien for attorney's fees against settlement proceeds “is enforceable only against the portion of the fund created in that action as a result of th[at] attorney's efforts ... and not against the fruition of a distinct cause of action not resulting from his efforts but from the successor attorney's efforts]; City of Troy v.. Capital Dist. Sports, 305 A.D.2d 715, 716 [3d Dept 2003] [the attorney's charging lien “attaches only when proceeds in an identifiable fund are created by the attorney's efforts in that action or proceeding”]; Ayala v. S.S. Fortalez, 253 A.D.2d 721, 721 [1st Dept 1998] [outgoing attorneys' fee must be based on their proportionate contribution to the outcome and the final recovery in the action] ).
Thus, an outgoing attorney is not entitled to collect any fees where his or her efforts did not contribute to the ultimate outcome of the litigation and such outcome is not the fruits of his or her labor ( see Matter of Queller, Fisher, Washor, Fuchs & Kool, LLP v. Law Offs. of Lawrence P. Biondi, 94 AD3d 1127, 1127 [2d Dept 2012]; Hinds, 83 AD3d at 782;Rothfeder, 48 AD3d at 234;Chadbourne & Parke, LLP v. AB Recur Finans, 18 AD3d 222, 223 [1st Dept 2005]; Martin, 7 AD3d at 467–468). Here, petitioners' work did not contribute to the ultimate settlement of this litigation, which was solely a result of the separate and distinct claims for commissions pleaded by Oved & Oved, and Oved & Oved's efforts in aggressively prosecuting those new commission claims. Petitioners are not entitled to recover any additional fees based upon the substantial work performed solely by Oved & Oved which resulted in the settlement.
Moreover, petitioners have failed to show that the work performed by them was of any value to Dialcom ( see Hinds, 83 AD3d at 783). Indeed, petitioners' failure to identify the proper claims for commissions which should have been initially asserted by Dialcom resulted in the dismissals of most of the claims in the complaints drafted by them, requiring Oved & Oved to redraft and completely revamp the complaint and redo the tasks that petitioners were hired to perform (which resulted in Dialcom incurring additional attorneys' fees), and then to reverse the prejudice resulting from petitioners' pleadings and their dereliction with respect to seeking discovery from AT & T and Concert for nearly three years.
Petitioners argue, however, that they need a hearing to determine whether the work performed by them contributed to laying a foundation for the case. This argument is unavailing. While Dialcom's fifth and sixth causes of action of the first amended complaint drafted by petitioners were not dismissed and remained in the Second Amended Complaint, they do not appear to have been the impetus for the settlement in this action. Rather, as set forth in the affirmation of Darren Oved (and as discussed above), the settlement was reached following a motion by Oved & Oved, on behalf of Dialcom, for summary judgment with respect to the first cause of action as it related to the IDT account and the failure of AT & T and Concert to pay any commissions under SA–1 for revenue billed and collected under the IDT $750 Million Revenue Commitment Contract. As previously noted, the very existence of this contract had been omitted from the dismissed complaints drafted by petitioners and the claims concerning IDT in those complaints had been dismissed.
Furthermore, petitioners' application for a hearing to determine its share of attorneys' fees in this action is wholly devoid of a factual basis ( see Reyes v. Wootos Realty, Inc., 37 AD3d 276, 276 [1st Dept 2007] ). Petitioners' sole argument for a hearing is their conclusory assertion that they should be paid for their hours and that they disagree that their services were inadequate. However, petitioners' bald request for a hearing is not supported by any specific billing records as to any work performed by them, and they have completely failed to show or to even assert how their work served to advance the case beyond the pleadings stage (which had to be almost completely repleaded by Oved & Oved) ( see Hinds, 83 AD3d at 783;Reyes, 37 AD3d at 276).
Moreover, petitioners have completely failed to show how their minimal contribution to this litigation by the work performed by them prior to being replaced by Oved & Oved was, in any way, instrumental in obtaining the settlement of this action [Slip Op. 14](which, as previously noted, was obtained following a motion by Oved & Oved for summary judgment on a cause of action which had not been pleaded by petitioners) ( see Matter of Queller, Fisher, Washor, Fuchs & Kool, LLP, 94 AD3d at 1127). Indeed, as discussed above, the prior pleadings by petitioners actually hindered Dialcom's position in this litigation since AT & T and Concert attempted to argue that Dialcom was bound by such prior pleadings and could not assert the new claims pleaded by Oved & Oved, on behalf of Dialcom, which ultimately proved to be successful in reaching a settlement ( see generally Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 44 [1990] [it is especially appropriate to deny credit for a fee where the attorneys failed to perform adequate services in connection with the disputed claim, and, therefore, could not be entitled to any quantum meruit compensation] ). Petitioners have failed to identify any facts that would show why the quality of their work product or the condition of the case at the time they were discharged would justify an award of any additional fees to them. Thus, petitioners' request for a hearing to determine their claimed entitlement to attorneys' fees is not warranted under the circumstances of this case ( see Hinds, 83 AD3d at 783;Reyes, 37 AD3d at 276).
CONCLUSION
Accordingly, petitioners' motion is denied in its entirety.
This constitutes the decision and order of the court.