Holland & Knight LLC v Walsam 316, LLC 2023 NY Slip Op 33748(U) October 17, 2023
Supreme Court, New York County Docket Number: Index No. 654470/2022
Judge: Dakota D. Ramseur cover three important areas in legal malpractice. The first is how law firms may charge clients in a charging lien or a fee claim for fixed monthly electronic research costs, the second is an application of account stated, and the third is an analysis of a Judiciary Law 487 counterclaim. This article will deal with the legal research issue.

“Plaintiff commenced this action to recover $410,539.06 in alleged legal fees Walsam
accrued, of which $26,415.60 is connected to the tenants’ rent overcharge proceeding and $384,123.46 from the indemnification proceeding. (NYSCEF doc. no. 1 at ,i 11, complaint; NYSCEF doc. no. 3, schedule of outstanding invoices.) In March 2023, Walsam answered and interposed counterclaims, both individually and on behalf of a putative class. It alleges that the Engagement Letter between the parties required
Walsam to pay only for “out-of-pocket costs and expenses incurred” on its behalf; instead, plaintiff billed $1,983.46 2 in overhead costs for legal research plaintiff conducted through its subscription to WestLaw and/or Lexis research engines. (NYSCEF doc. no. 7 at ,i 25, 31-36, answer with counterclaims.) As to why the subscription amounts to an overhead cost, Walsam alleges that plaintiff entered a subscription agreement with one or both of these research services, that it paid a flat monthly price for access, and that the price paid for such services did not depend on the amount of legal research performed by the firm for a particular client. (Id. at ,i 32, 34.) In Walsam’ s view, the subscription costs plaintiff invoiced for “was not incurred on behalf of plaintiff or any other firm client.” (Id. at 34.) Plaintiff asserts counterclaim causes of action for
breach of contract, violation of Judiciary Law § 487, fraud, and unjust enrichment. As to
Walsam’ s class claims, it defines the proposed class as: “All clients of Thompson & Knight and Holland & Knight, LLC who, after March 17, 2017, paid charges billed by the firm for online legal research and/or information retrieval services (such as Westlaw or LEXIS) that were within the scope of the firm’s regular subscription with the provider.” (Id. at 39.)”

“Under established principles of contract interpretation, agreements are construed in
accordance with the parties’ intent, which is best manifested by the language used in their writing. (See Osprey Partners, LLC v Bank of NY Mellon Corp., 115 AD3d 561, 561-562 [1st Dept 2014].) Where contractual terms are clear and unambiguous, “the intent of the parties must be found within the four corners of the document.” (ABS Partnership v AirTran Airways, (AD 3d 24, 29 [1st Dept 2003].) Here, plaintiff contends that the content of the Engagement Letter is unambiguous: it permits plaintiff to invoice for “charges for the Firm’s access to and use of any electronic services on Walsam’ s behalf.” Plaintiff further contends that, per the Letter, charges for use of Westlaw and/or Lexis, are considered “out-of-pocket” expenses-as opposed to
overhead expenses-since (1) the language “these costs and expenses include” (which then references the electronic research-related access) refers back to the preceding sentence’s specific mention of “out-of-pocket costs and expenses” and (2) the common understanding of “out-of pocket” is as “an expense paid from one’s own fund” (see Black’s Law Dictionary [11th ed 2019], expense) and that is how plaintiff paid for its subscriptions.

In its memorandum of law in opposition, Walsam entirely fails to address the
Engagement Letter’s specific clause authorizing plaintiff to charge for access to and use of Westlaw and Lexis; instead, it focuses solely on the other, broader clause in the Letter that requires Walsam to timely pay for all “fees and expenses” related to plaintiffs representation. (NYSCEF doc. no. 23 at 12-13.)3 When looking at the broader clause, Walsam suggests that the Letter is, at best, “conflicting and ambiguous” as to whether the Letter permits charging for research and argues the contract must be construed against the drafter (Id. at 12) But whether the broader clause is unambiguous, as Walsam claims, is ultimately immaterial: the more specific clause appears to directly allow for the charges to which Walsam objects and Walsam has advanced no argument as to why this reading of the clause is erroneous, including why the term “out-of-pocket,” given plaintiffs definition, does not include the complained-of research charges
and why plaintiffs actual research was not conducted “on behalf of’ Walsam. Accordingly, the Court need not take recourse and construe any ambiguities in the agreement against the drafter. Walsam’ s citations on this account are misplaced. Since there is no dispute as to the Engagement Letter’s authenticity, and since the Court finds that its contents are unambiguous and establish, as a matter oflaw, that plaintiff did not breach its terms, dismissal is warranted.”