Divorce attorney sues for legal fees and applies a retainer which has a legal fee for collection provision.  In a rare instance, attorney loses all around:

"Reisman, Peirez & Reisman LLP v. Gazzara, 2823/02
Decided: March 30, 2007

"In this action plaintiff law firm seeks to collect unpaid attorneys fees for services performed for the defendant in a matrimonial action. According to the Complaint, plaintiff law firm provided legal services beginning August 9, 1999 and continuing through April, 2001. It further alleges that on or about April 30, 2001 plaintiff served upon defendant a Notice to Arbitrate package pursuant to the Rules of the Chief Administrator, 22 NYCRR §136.5, but defendant has never filed a request to arbitrate. Plaintiff contends that it is owed $30,538.20 plus expenses of $1,263.26 plus interest in outstanding legal fees.

In its Complaint plaintiff asserts four causes of action seeking the $30,538.20 plus interest and fees, under the theories of breach of contract, payment for services performed, account stated, and quantum meruit. In its Fifth cause of action it also seeks reasonable attorneys fees in having to prosecute this claim, as it claims it is expressly permitted pursuant to the retainer agreement between the parties.

Defendant Answer consists of general denials and five defenses, including failure to state a claim, breach of contract in failing to obtain the divorce, false billing, and negligent prosecution of the underlying matrimonial action.

Plaintiff claims that the general denials and claims contained in the defendant’s Answer do not raise a triable issue of fact with respect to defendant’s liability for the sums sought. Further, the firm claims that now that discovery and the depositions of the parties have been completed, there is no question of fact preventing summary judgment on its behalf.

Account Stated

The plaintiff’s Second cause of action seeks to recover on an account stated theory. Attorneys fees may be recovered on the basis on an account stated. (Bartning v. Bartning, 16 AD3d 249 [1st Dept, 2005]). Insofar as the rules of the Chief Administrator of the Courts provide for the arbitration of fee disputes (22 NYCRR §136.5), they pose no obstacle to a plenary action where, as here, the Complaint alleges compliance with the requirement of that the client receive notice of the client’s arbitration rights and further alleges that there has been a failure upon the part of the client to request arbitration. (Idid., contrast Lewis & Merit v. Smith, 170 Misc2d 192 [Sup. Ct. Nas., 1996]).

The common law elements of a cause of action for an account stated are: the existence of a debtor-creditor relationship, a mutual examination of the claims of the respective parties, the striking of a balance, and an agreement, express or implied, that the party against whom the balance is struck will pay the debt. (Bank of New York v. Santarelli, 128 Misc2d 1003 [County. Ct., Greene, 1985]). The rationale for permitting a recovery on an account stated theory is that the parties have, by their conduct, evidenced an agreement upon the balance of an indebtedness. (Interman v. R. S. M. Electron Power, 37 NY2d 151, 153-154 (1975)). In Newburger-Morris Co. v. Talcott (219 N.Y. 505, 512 (1916) Judge Cardozo wrote;

"There is no doubt that an account stated may sometimes result from the retention of accounts current without objection (citations omitted). But the result does not always follow. It varies with the circumstances that surround the submission of the statements (citations omitted) and those circumstances include, of course the relation between the parties."

Among the circumstances to be considered is whether an objection has been made to the account within a reasonable time. (Interman v. R. S. M. Electron Power, supra at 154; see, Corr v. Hoffman, 256 N.Y. 254, 267 (1931)).

The plaintiff offers copies of what are represented to be monthly statements sent to defendant commencing Oct. 25, 1999 and continuing through April 25, 2001. During her pretrial deposition Defendant acknowledged receiving monthly invoices reflecting the work performed by plaintiff law firm. (Deposition of Nancy Gazzara, page 27). However, because defendant had given a deposit of $10,000 with the retainer, the first statement to show a balance due was that of Aug. 25. 2001. Monthly bills showing a balance due were sent each month thereafter through April of 2001. However, the deposition of Seymour J. Reisman on behalf of plaintiff gave rise to some doubt as to the accuracy of the proffered statements and whether they were the statements actually sent to defendant.

Defendant avers that after receiving the Jan. 25, 2001 invoice she telephone Lanny Greenberg, an associate with Reisman, Peirez & Reisman, and then met with her at the law office. Defendant claims that she was advised that, "monies for attorneys’ fees would be advanced and collected at the time of settlement." Defendant also asserts without a time frame that she complained about "excessive charges" to Ms. Greenberg who referred her to Mr. Reisman. Defendant claims that repeated efforts to see Mr. Reisman were unavailing. Defendant also makes a specific challenge to a $1,5000 item on the Mar. 25, 2001 statement identified as time spent drafting and revising a stipulation of settlement.

The court has been provided with a copy of a letter dated May 12, 2001, sent to a prior Justice upon the Plaintiff’s application to be relieved. In that letter, in addition to the contentions just discussed, defendant challenges an item on the April 25, 2001 statement for a meeting she had with plaintiff solely to discuss fees and billing for a second deposition she claims was unnecessary.

While it is uncontested that there was a retainer agreement and an attorney-client relationship in which plaintiff provided professional services, nevertheless there are material issues of fact which preclude the granting of summary judgment. There was no history of defendant paying statements on receipt. (See, Paul, Weiss, Rifkind, Wharton & Garrison v. Koons, 4 Misc3d 447 [Sup. Ct., New York County, 2004]; Milstein v. Montefiore Club, 47 AD2d 805 [4th Dept, 1975]). Nor is it claimed that Defendant made any partial payments. (See, Parker Chapin Flattau & Klimpl v. Daelen Corp., 59 AD2d 375 [1st Dept, 1977]). Whether, under the circumstances of this case, a delay of five months before challenging the statement of account was reasonable, is a question of fact. The excerpts of the defendant’s pretrial deposition which plaintiff cites may be admissions and may perhaps be used for impeachment purposes at trial, but they are insufficient to support a granting of summary judgment. (Knepka v. Tallman, 278 AD2d 811 [2d Dept, 2000]).

Moreover, as will be discussed in greater detail hereinafter, Defendant raises an issue as to whether plaintiff is precluded from recovering any fee because of a failure to comply with the filing requirements of 22 NYCRR §1400.3. For present purposes it suffices to note, " . . . [E]ven an unpleaded defense may be invoked to defeat a summary judgment motion or serve as the basis of for an affirmative grant of such relief in the absence of surprise and prejudice, provided the opposing party has a full opportunity to respond (citations omitted)." (Sheils v. County of Fulton, 14 AD3d 919, 921 [3d Dept, 2005]).

Plaintiff’s Claim for Attorney’s Fees

Plaintiff’s Fifth cause of action seeks to recover reasonable costs and attorneys fees incurred in seeking to collect under the Retainer Agreement. Page 3 of the Retainer Agreement states; "Bills not paid within 30 days will accrue interest at the legal rate (presently nine [9 percent]), and you will be liable for reasonable attorneys’ fees for the collection of said sum." (Emphasis supplied). Absent a provision for a reciprocal allowance for attorneys’ fees to the client should he or she prevail, such a provision is unenforceable as lacking in mutuality and fundamentally unfair. (Ween & Associates v. Dow, 35 AD3d 58 [3d Dept, 2006]). A unilateral provision as in this retainer agreement has also been faulted because of its "distinct potential for silencing a client’s complaint about fees for fear of retaliation for the nonpayment of even unreasonable fees (citations omitted)." (id. at 63).

Filing Requirement of 22 NYCRR §1400.3

The Defendant contends that she is entitled to summary judgment dismissing all of plaintiff’s claims for recovery because of an alleged failure to comply with the requirement of 22 NYCRR §1400.3 that a copy of the retainer agreement be filed with the court. That rule requires in pertinent part; "Where substitution of counsel occurs after the filing of the net worth statement, a signed copy of the attorney’s retainer shall be filed with the court within 10 days of its execution. Here the retainer agreement bears a date of Aug. 9, 1999. At his deposition Seymour J. Reisman testified that he assumed that the retainer agreement was filed with the Court and that it was certainly filed with the motion for pendente lite relief that his firm made during the period it represented defendant.

While an attorney who does not comply with 22 NYCRR §1400.3 "is precluded from seeking fees from his or her client," a fee may nevertheless be recovered "where there is substantial compliance . . . ??." (Mulcahy v. Mulcahy, 285 AD2d 587, 588 [2d Dept, 2001]). Generally, the finding of a lack of substantial compliance has been based upon a complete, nearly complete or flagrant disregard for the applicable rules. (See, Sherman v. Sherman, 34 AD3d 670 [2d Dept, 2006]; Wegman v. Wegman, 8 AD3d 263 [2d Dept, 2004]; Mulcahy v. Mulcahy, supra). On the other hand, a technical violation which does not undermine the underlying policy of protecting the public from known abuses in the field of matrimonial law will not prevent a recovery. (Gross v. Gross, 36 AD3d 318 [2d Dept, 2006]). Here it has not been clearly established whether or when the retainer agreement was filed with the court.

Plaintiff argues that Defendant’s failure to plead such a defense constitutes a waiver any claim of noncompliance with applicable matrimonial rules. Because the matrimonial rules were promulgated to address abuses in the practice of matrimonial law, a failure to comply gives rise to a "preclusion" of the attorney from recovering a fee, rather than a defense. (Julien v. Machson, 245 AD2d 122 [1st Dept, 1997]). It would appear contrary to the policy underlying the rules to find a waiver particularly where the issue arises before trial and any prejudice may be avoided. Even defenses waived under CPLR 3211 (e) may be interposed in an amended answer absent surprise or prejudice resulting from the delay. (Nunez v. Mousouros, 21 AD3d 355, 256 [2d Dept, 2005]). And, as noted above, an unpleaded defense may defeat summary judgment or support reverse summary judgment absent genuine surprise or prejudice and provided there is a full opportunity to litigate the issue. (Sheils v. County of Fulton, 14 AD3d 919, 921 [3d Dept, 2005]).

The Facts surrounding the filing of the retainer agreement and the accuracy and issuance of statements of account to defendant are not sufficiently clear to permit a summary disposition. As to plaintiff’s First, Second and Fourth causes of action issues of fact including not only the question of substantial compliance with the matrimonial rules, but also as to the extent and value of the services provided require trial.

Both motions for summary judgment are denied except that Plaintiff’s Fifth cause of action seeking fees and disbursement pursuant to the Retainer Agreement in connection with its effort to collect for services rendered. Defendant’s motion for summary judgment  it is so ordered."