Client is in an auto accident.  Attorney 1 works the case, brings it to a $ 600,000 settlement offer.  Client goes for a 2d opinion, and they tell him the first attorney committed malpractice by not bringing a derivitive action for the wife.  2d Attorney ups the offer to  $950,000 which the client accepts.

Who gets what?  

Were this a law school exam, we would start by citing the responsibilities and rights of the parties.  However, we have the benefit of the AD First Department here:

Matter of Wingate, Russotti & Shapiro, LLP v Friedman, Khafif & Assoc.
2007 NY Slip Op 05655
Decided on June 28, 2007
Appellate Division, First Department

"One month after their retention, the Wingate firm settled the matter for $950,000. It then brought the instant petition, seeking a declaration that the Friedman firm was not entitled to legal fees. The IAS court issued an order, holding that if the parties did not agree upon a particular division of fees ($124,196 for the Wingate firm and $192,470 for the Friedman firm), it would hold a hearing on the issue of whether the Friedman firm had been discharged for cause. Wingate rejected this offer, and a hearing ensued. The Colons also instituted a separate action against the Friedman firm for malpractice in Kings County.

When an action is commenced, the attorney appearing for a party obtains a lien upon his or her client’s causes of action, claims, or counterclaims. This lien attaches to any final order or settlement in the client’s favor (Judiciary Law § 475). Nevertheless, a client has an absolute right to discharge an attorney. If the discharge is based upon misconduct, the attorney automatically forfeits all rights to compensation (see Teichner v W. & J. Holsteins, 64 NY2d 977, 979 [1985]). However, forfeiture of the fee occurs only where "the misconduct relates to the representation for which the fees are sought" (Decolator, Cohen & DiPrisco v Lysaght, Lysaght & Kramer, P.C., 304 AD2d 86, 91 [2003]).

In the case of a fee dispute between outgoing and incoming attorneys, the outgoing attorney has the right to elect either immediate compensation based on quantum meruit for the reasonable value of the services rendered, or a contingent percentage fee to
be determined at the conclusion of the litigation (see Lai Ling Cheng v Modansky Leasing Co., 73 NY2d 454, 458 [1989]; Matter of Gary E. Rosenberg, P.C. v McCormack, 250 AD2d 679, 679-680 [1998]; Schneebalg v Lincoln Sec. Life Ins. Co., 225 AD2d 684 [1996]). Where a firm has not elected to receive a fixed fee upon discharge, there is a presumption that the firm has instead chosen a proportionate share of a contingency fee (see Fernandez v New York City Health & Hosps. Corp., 238 AD2d 544, 545 [1997]).
Here, the IAS court erroneously concluded that the Friedman firm had committed misconduct warranting forfeiture of its fee. First, the court faulted the Friedman firm for failing to file a derivative claim on behalf of Mrs. Colon. However, the record reveals that Mr. Colon represented in his intake interview that he was single. Moreover, Mr. Colon’s tax returns do not indicate whether or not he was married. Mr. Friedman explained at the hearing that he knew Mr. Colon had stated he was single on a Workers’ Compensation claim, and that he was concerned that his client had made a false statement under oath. In light of these facts, it was entirely proper for the Friedman firm to not bring a derivative claim on Mrs. Colon’s behalf.

Finally, the court faulted the Friedman firm for failing to timely file a retainer statement with OCA. This error, which appears to be ministerial in nature, was corrected. The Friedman firm filed the statement, which was accepted nunc pro tunc prior to the fee hearing, and had no effect upon the representation provided to the Colons.