Attorney fees collections are frequently said to be the major cause of legal malpractice litigation.  Some lawyers have resorted to starting litigation lending setups which lend money to their clients, thereby arranging for the attorney to be paid and the client to be the subject of a high-interest litigation loan. Justicebacker Inc. v Abeles  2019 NY Slip Op 30294(U)  February 7, 2019
Supreme Court, New York County  Docket Number: 650374/2017 Judge: David Benjamin Cohen  is an example of how this might work.  This portion of the case is an argument over disqualification of an attorney under the advocate-witness rule.

“Abeles is a managing member of a restaurant. The restaurant operated out of a leased space
which was severely damaged by Hurricane Sandy. The landlord refused to make the necessary repairs to the premises. As a result, Abeles hired plaintiff/third party defendant Sunny Barkat and his law firm plaintiff JS Barkat, PLLC (Barkat, PLLC), to represent him in three law
suits and an arbitration related to the landlord’s refusal to repair the damage to the leased space.
On December 13, 2012, Abeles signed a retainer with Barkat and Barkat, PLLC. Pursuant to that
retainer agreement, Barkat and Barkat PLLC were to be paid 25% of any recovery, or $25,000,
whichever was greater. The retainer provided that during the pendency of the litigation, Abeles
was to pay Barkat PLLC an initial $2,500, and $1,200 per month thereafter until he paid Barkat
PLLC a total of $25,000. In the event Abeles was unable to continue making payments, Barkat
PLLC would receive a 20% ownership interest in Abeles’ restaurant.
On November 5, 2013, Abeles signed a second retainer agreement with Barkat and Barkat
PLLC which increased the fees Abeles was to pay Barkat and Barkat, PLLC. In the new retainer
agreement, Abeles agreed that Barkat PLLC would receive 40% of any recovery, required a
onetime payment of $7,500, and directed that Abeles would continue paying $1,500 per month
until he paid Barkat PLLC $18,000.
In July 2015, Abeles began experiencing financial problems and was unable to continue
making the monthly $1,500 payments. Barkat then informed Abeles that he owned a crowdfunding
company plaintiff Justicebacker Inc. (Justicebacker), through which Barkat could raise money for
Abeles’s living and business expenses. On August 10, 2015, Abeles signed a commercial litigation
financing agreement with Justicebacker in which Justicebacker agreed to pay Abeles $40,000 for
an 18% interest in his lawsuits or $60,000 for a 20% interest in the lawsuit. Abeles claims he never
received any funds from Justicebacker.

In August 2016, Barkat informed Abeles that he had hired plaintiff Michael Wolk (Wolk) and the Law Offices of Michael B. Wolk, P.C., (Wolk, P.C.) to help him with the lawsuits. Wolk
ultimately settled the lawsuits for $75,000. Abeles claims that he informed Wolk that he would
refuse to settle the cases unless he received at least $33,000 for himself. Abeles also claims that
Barkat and Wolk told him his position was unreasonable because he owed $52,000 to
Justicebacker. At that time, Abeles had already made $46,000 in payments to Barkat PLLC. Abeles
claims that Barkat offered to waive his fee so that Justicebacker would receive $52,000, Wolk
would receive $3,000, and defendant would receive $20,000. Abeles states that he refused to accept
that payout agreement and had Wolk negotiate with Justicebacker to reduce its claim, pursuant to
the commercial litigation financing agreement, from $52,000 to $47,000. At that point, Abeles
claims that Wolk agreed to waive his fee so that Abeles would receive $28,000 from the $75,000
settlement.
Abeles claims that after settling his lawsuits, Barkat and Wolk did not disburse any money
to him. Rather, on January 23, 2017, plaintiffs commenced this suit, while Wolk retained the
$75,000 in his escrow account. In the first cause of action, Justicebacker seeks payment of
$53,5000 pursuant to the terms of the commercial litigation financing agreement. In the second
cause of action, Justicebacker seeks the payment of its legal fees incurred by this action, pursuant
to the provisions of the commercial litigation financing agreement. In the third cause of action,
Barkat PLLC seeks payment of legal fees under a quantum meruit theory. In the fourth cause of
action, Wolk seeks payment of legal fees as the escrowee of the $75,000. ”

“Finally, in view of the fact that Wolk will be called as a witness to testify regarding his
negotiations with Justicebacker on Abeles’s behalf, Wolk should be disqualified pursuant to the
advocate-witness rules (see Rules of Professional Conduct [22 NYCRR 1200.0] rule 3.7[a]; Gould
v Deco/ator, 131AD3d448 [2°d Dept 2015][motion court providently exercised its discretion in
granting the defendants’ motion to disqualify attorneys from representing the plaintiff pursuant to the advocate-witness rules]). “