Terminated For Cause or Not?

ITHACA:     There are two rules on how to divide contingent attorney fees.  One rule applies when the dispute is between the client and the attorney,and a second rule, which is itself more complex, applies when the dispute is between two attorneys.  Here in Wiggins v Kopko  2013 NY Slip Op 02312 [105 AD3d 1132]   April 4, 2013  Appellate Division, Third Department we the full panoply of human interaction...attorneys meeting each other, liking eachother and then falling out of love.

"In October 2004, a client retained the law firm of Wiggins & Masson, LLP, in which plaintiff was a partner, to represent him in a legal malpractice action on a contingency fee basis. Plaintiff thereafter retained defendant Edward E. Kopko to work on this action. Kopko became the attorney with primary responsibility for the action, and eventually entered into a partnership agreement with plaintiff, forming defendant Wiggins & Kopko, LLP (hereinafter referred to as the partnership).[FN1] Disagreements later arose and, in May 2010, plaintiff commenced this action seeking a judgment dissolving the partnership and compelling Kopko to pay certain legal fees.

Upon learning that Kopko had drafted a letter to the client advising him of the partnership's dissolution and soliciting him as a personal client, plaintiff telephoned the client, [*2]discussed the deteriorating relationship between himself and Kopko and warned the client that fee issues might result if he signed a retainer agreement with Kopko. Angered by this call, the client wrote a letter stating that he was discharging plaintiff and the partnership and retaining Kopko, followed—apparently after consultation with Kopko—by a second letter stating that he had discharged plaintiff, the partnership and Wiggins & Masson "for cause." Plaintiff thereafter executed a consent to withdraw himself, the partnership and Wiggins & Masson from the malpractice action and to substitute Kopko. The action was later tried before a jury, resulting in a substantial award."

"We therefore agree with Supreme Court that plaintiff is entitled to share in the fee obtained in the malpractice action on the partnership's behalf. However, we disagree with the further conclusion that the amount should be determined on the basis of quantum meruit. As against a client, a discharged attorney is entitled to a fee determined on a quantum meruit basis at the time of discharge, but different rules apply where, as here, the fee dispute is between attorneys (see Lai Ling Cheng v Modansky Leasing Co., 73 NY2d 454, 457-458 [1989]). In such circumstances, an outgoing attorney may choose to receive immediate compensation on a quantum meruit basis at discharge or to receive a share of a contingent fee based on a proportionate share of the work he or she performed; if no such election is made at the time of discharge, the attorney is presumed to have elected a contingent fee (see Matter of Cohen v Grainger, Tesoriero & Bell, 81 NY2d 655, 658-660 [1993]; Matter of Benjamin E. Setareh, P.C. v Cammarasana & Bilello Esqs., 35 AD3d 600, 601 [2006]; Connelly v Motor Veh. Acc. Indem. Corp., 292 AD2d 332, 333 [2002]; see also Buchta v Union-Endicott Cent. School Dist., 296 AD2d 688, 689 [2002]). Here, Supreme Court found that plaintiff elected quantum meruit compensation in a July 2011 memorandum of law. Even assuming that an election could be made in this manner, it would have been untimely, as the discharge had occurred more than a year earlier. Nothing in the record reveals that an election as to payment of fees was made at or near the time of discharge. Accordingly, as counsel of record, the partnership is presumed to have elected a contingent fee computed according to the proportionate share of work that was performed on its behalf and that of its predecessor firms before the June 2010 substitution of Kopko, to be divided as appropriate between the partners (see Grant v Heit, 10 AD3d 539, 540 [2004], lv denied 4 NY3d 701 [2004]).

Finally, we reject Kopko's contention that plaintiff and the partnership waived a fee by failing to petition the court for a lien pursuant to Judiciary Law § 475. Such a lien attaches by operation of law for the attorney of record when an action is commenced, even if that attorney is no longer counsel of record upon the action's conclusion (see Klein v Eubank, 87 NY2d 459, 462-463 [1996]; Matter of Cohen v Grainger, Tesoriero & Bell, 81 NY2d at 657-658). An outgoing attorney's failure to seek statutory enforcement does not defeat his or her entitlement to [*4]a fee (see Lai Ling Cheng v Modansky Leasing Co., 73 NY2d at 458-459; Ruta & Soulios, LLP v Litman & Litman, P.C., 27 AD3d 236, 236 [2006])."

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