Opinion
May 9, 2000.
The central issue on these motions is whether individual attorneys who are partners in a Limited Liability Partnership ("LLP") can be held personally liable for the payment of fees for legal services rendered by an outside ("of counsel") attorney, at their direction, on behalf of their firm's clients.
In 1997, plaintiff, who is an attorney with her own practice, was retained to cover, on an "of counsel" basis, numerous court appearances and depositions on behalf of the firm of Gerber Garson, whose partners were Howard Gerber and Gerald Garson. In December 1997, Gerald Garson retired and the firm was reformed as Gerber Gerber, LLP ("the Law firm"), with defendants Howard Gerber and Ethan Gerber as sole partners ("the individual defendants"). Plaintiff continued to cover appearances at the direction and behalf of the lawyers under the new partnership name.
During her relationship with defendants, plaintiff billed each assignment pursuant to a fee schedule, which was based on the court in which she appeared and the nature of the appearance. Beginning in December 1998, defendants allegedly fell behind in the payments to plaintiff. Plaintiff made her last "of counsel" appearance on May 3, 1999, and the payments to her thereafter ceased, leaving an alleged balance due of $83,325.00.
Plaintiff commenced this action against the Law firm and the individual defendants. The first cause of action is a claim for services rendered and the second is for an account stated.
The individual defendants have moved pursuant to CPLR 3211(a) 7 to dismiss the complaint against them, claiming that they are shielded from personal liability for plaintiff's claims by the registration of the firm as an LLP. Plaintiff cross-moved for summary judgment in her favor, which at oral argument was stated to be only against the Law firm.
New York Partnership Law arms a member of an LLP with a shield from personal liability. Specifically, Partnership Law § 26(b) provides that the partners of an LLP are not (subject to the exception for claims of negligence and wrongful conduct referred to in paragraph (c) of said section and to the provisions of paragraph (d) referred to below) liable, "directly or indirectly . . . for any debts, obligations or liabilities of . . . the registered [LLP] or each other, whether arising in tort, contract or otherwise, which are incurred, created or assumed by such [LLP] . . ., solely by reason of being such a partner". This broad protection may be limited pursuant to section 26 (d) of the same law, which states that:
"Notwithstanding the provisions of subdivision (b) of this section, all or specified partners of a partnership which is a registered [LLP] may be liable in their capacity as partners for all or specified debts, obligations or liabilities of a registered [LLP] to the extent at least a majority of the partners shall have agreed unless otherwise provided in any agreement between the partners."
If specified partners of the LLP are to remain liable in their capacity as partners for any specified debts, section 121-1500(a) 8 requires that the registration form filed with the State for the LLP contain "a statement that all or specified partners are so liable for such debts . . . in their capacity as partners of the [LLP] as authorized by [§ 26(d)]". Accordingly, while an LLP protects individual partners from liability for partnership debts, the partners may opt out of that protection in whole or part when registering for LLP status. That is what appeared to have happened here. A review of the standard form Certificate of Registration filed on behalf of the Law firm (as amended) reveals that in paragraph 8 it provides (in a standard printed form):
"If all or specified partners are to be liable in their capacity as partners for all or specified debts, obligations or liabilities of the registered [LLP] as authorized pursuant to Section 26(d) of the Partnership Law, a statement that all or specified partner are so liable."
After this generic form language, the following typed sentence was inserted in the certificate:
"All partners are liable pursuant to section 26(d) of the Partnership Law."
Based on the Certificate of Registration, therefore, the individual partners of the Law firm have agreed to remain personally liable for the debts of the partnership. Movants have not submitted any documentation contradicting this assumption of liability. As this consent incorporates the claims at issue here, the motion to dismiss the complaint against the individual partners based on LLP status is denied.
Next, the individual defendants appear to argue that they were mere agents of their various taxi company clients and hence are not liable to plaintiff under the general agency rule that an agent is not responsible for services rendered on behalf of a disclosed principal. It is undisputed, however, that defendants are attorneys who were retained by various taxi companies to be ultimately responsible for the management of the lawsuits involving those companies, and apparently appeared as attorneys of record in various actions. It is uncontradicted that defendants selected plaintiff, assigned her work, collected her invoices and either paid her out of the LLP's escrow account or forwarded checks from the clients to her. Moreover, there is no allegation that plaintiff at any time dealt with any particular client directly. Here, defendants acted as legal counsel for the taxi company clients and plaintiff was retained to perform certain functions on behalf of the law firm. Surely, any malpractice committed by plaintiff would be the responsibility of the Law firm.
In Urban Court Reporting, Inc. v. Davis, 158 A.D.2d 401 (1990), the First Department, while noting the existence of contrary authority, wrote (p. 402):
"we think that an attorney who, on his client's behalf, obtains goods or services in connection with litigation should be personally liable unless the attorney expressly disclaims such responsibility."
Under the rule of this case, courts have held that, absent an express disclaimer, the attorney is liable for various services rendered in connection with litigation engaged in by the attorney [see, Orsenberg Selsman Rosenzweig Co., LLP v. Slutsker, N.Y.L.J., Mar. 3, 1999, p. 26, c. 1 (A. Term 1st Dept.), (retention of an accounting firm to appear as an expert witness); St. Louis Westervelt, Inc. v. Giulini, 176 Misc.2d 99 (A. Term, 1st Dept. 1998), (appellate printing); Diversified Corporate Services International, Inc. v. Zucker, N.Y.L.J., Nov. 5, 1999, p. 29, c. 4 (Dist. Ct., Nassau Co.), (services rendered in connection with the formation of new corporations); Sullivan v. Greene Zinner, 180 Misc.2d 491 (City Ct., Wh. Plains 1999), (reporting services)].
While, as aforesaid, defendants urge the court to follow the general rule of agency that an agent is not responsible for services rendered on behalf of a disclosed principal, the cases decided subsequent to the Urban Reporting case have recognized that modern litigation practices warrant holding counsel responsible for the services of persons retained in the course of the law suit. If a contrary rule were adopted, plaintiff herein would be required to pursue her claims against a whole host of individual taxi companies, a situation clearly not contemplated by the parties. Thus, since there is no claim of an express disclaimer of liability by defendants, their motion to dismiss is denied.
Questions of fact exist as to the delivery and accuracy of plaintiff's invoices, including allegations of duplicate charges and overbilling, which allegations defendants maintain were asserted at various times after the receipt of statements.
Hence, summary judgment in plaintiff's favor may not be awarded at this juncture on either cause of action, and her cross-motion for summary judgment is therefore denied.
The parties are directed to appear in room 252 at 9:30 a.m. on May 17, 2000 for a preliminary conference. In light of the very limited issues to be litigated, the preliminary conference order shall provide an expedited schedule for the completion of discovery.
This decision constitutes the order of the court.