Monique Pillard, president of Elite Models, is the plaintiff in this legal malpractice case,  She was a defendant in a highly significant employment discrimination case revolving around an asthmatic worker who was fired, and the harassment and smoking that took place all around her.

in Pillard v. Goodman, Supreme Court, New York County, we see one of Justice Lehner’s opinions.  Pillard was at one time president of Elite, and then moved around by John Casablancas to another position. Victoria Gallegos was hired as a liaison between Elite and its clients.  After complaining about smoke, she was filed in 1999.  Pillard was one of several defendants in the employment discrimination and eventually received an award of $ 2.6 million in compensatory damages and $ 2.6 million in punitive damages.  The awards were later reduced, but remained substantial.

Pillard was forced into voluntary bankruptcy under Chapter 11, but the crux of this case is whether the attorneys for all the Elite Defendants committed legal malpractice with regard to the smallest defendant in the group.  Supreme Court has determined that the claims survive a motion to dismiss the complaint under CPLR 3211(a)(7).

Pillard’s claim arises from the dense relationship between the attorneys, the company, the board, and the individual defendants. Pillard alleges that attorney Curtin was both her private attorney as well as attorney for Elite, and failed to advise Pillard that asthma was a disability under the Human Rights law and that accommodations had to be made for Gallegos.

More to the point, Pillard alleges multiple conflicts of interest and a wrongful joint representation, failed to offer crucial documents and failed to demonstrate that Pillard was no longer the president of Elite at the time.

Justice Lehner dismissed certain of the causes of action, but the case continues.

There are some basic rules in legal malpractice litigation about fees.  One of these rules is that an attorney may be terminated at any time by the client, either for cause or without cause.  A corollary rule is that when an attorney is terminated for cause, he is due no compensation. 

That’s a pretty stark rule, and admits of little wiggle room.  Nevertheless, in Felix v. Law Office of Thomas F. Liotti, 8395/07;Decided: October 28, 2009; Justice Ute Wolff Lally;NASSAU COUNTY
Supreme Court found a middle path.

"It has already been determined by the order of Justice Diamond dated June 30, 2008 that defendant failed to file a CPL 440 motion as promised in the retainer. Further, in said decision Justice Diamond stated that "the letters attached to defendant’s motion to reargue as exhibits that were allegedly received from plaintiff do not indicate plaintiff’s consent to ignore the filing of the CPL 440 motion that defendant was retained to prepare and submit to the court."

Plaintiff further claims that defendant failed to file the Nassau County appeal provided for in the Retainer Agreement. Defendant asserts that the Nassau County brief was filed before discharge and submits a copy of the brief showing a date of January 23, 2006 (Exh. F). However, said brief was not served upon the Nassau County District Attorney’s office until March 1, 2006 and caused the District Attorney to cross-move the Appellate Division, 2nd Dept. for an order striking said brief as "filed by an attorney who does not represent defendant" (Exh. 7).

Plaintiff seeks a refund of $20,000.00 (see complaint, Exh. 5) arguing that defendant forfeited his entire fee due to his discharge for cause.

At trial plaintiff requested treble damages pursuant to Judiciary Law §487 claiming that defendant deceived this court and committed perjury in claiming to have filed a CPL 440 motion and thus forcing the court (Diamond, J.) to order the Kings County Supreme Court file (People v. Felix, No. 9425/98) and conduct an inspection of same and thereafter making a determination that plaintiff was correct in stating that no CPL 440 motion was filed by defendant. Since plaintiff failed to make such a demand in his pleadings the request is denied as untimely.

Based upon the testimony of plaintiff and defendant and the exhibits the court finds that defendant was discharged for cause on February 8, 2006, and that defendant attempted to file the Nassau County brief on March 1, 2006, although dated January 23, 2006, thirty-five days after discharge.

A client has the absolute right to discharge an attorney at any time with or without cause (Campagnola v. Mulholland, Minion & Roe, 76 NY2d 38; Byrne v. Leblond, 25 AD3D 640).

Where the discharge is without cause, the attorney is limited to recovering in quantum meruit the reasonable value of the services he rendered. However, if the discharge is for cause the attorney has no right to compensation, notwithstanding a retainer agreement (Cheng v. Modansky Leasing Co., Inc., 73 NY2d 454; Teichner v. W & J Holsteins, Inc., 64 NY2d 977; Crowley v. Wolf, 281 NY 59; In the Matter of Terijon Weitling, 266 NY 184).

Here the retainer agreement was for a flat fee. Notably, it specifically stated in paragraph 2: "It is understood that we are not entering into an hourly rate contract, and will not bill on such basis."

Although an attorney discharged for cause is not entitled to any fees, here plaintiff requested in his discharge notice that "all unearned funds be refunded to Rufina Felix promptly (Exh. 2).

Consequently, since the fee agreement had provided for a flat fee of $20,000.00 for two Appellate briefs and one CPL 440 motion, and defendant performed work for only one brief, plaintiff is entitled to a refund of two-thirds of said $20,000.00, to wit $13,333.34."

New York traveled through a sea change in its attorney disciplinary and ethical rules when the new rules were enacted in April.  Prior to the change, DR 2-107 did not require that a client be notified of the "percentage split" of fees between multiple attorneys working on a case; only the fact of multiple attorneys and fee sharing was required.

Now, the NY rules require that a percentage fee split be disclosed to the client under section 1.5[g][2] of the Rules.  As based upon this interpretation, Justice Goodman of Supreme Court, New York County has decided Lapidus & Associates, LLP v, Elizabeth Street Inc. we wee a result.  Plaintiff attorney seeks $90,000 in fees, and defendants have put up several defenses to the claim, with their own counterclaim of $ 175,000 for overbilling.

Clients are in a tough spot when the attorney sends out regular bills, and the client does not vociferously dispute the bills.  Of course, when the litigation is ongoing, and the client needs representation; when the bills are mostly ok, and there is a percentage of overbilling, the client has to decide what to do.  Does it fire the attorney and pay new counsel to pick up ?  Does it bite the bullet?  Does it find a middle course>

Here, client loses almost all around.  It makes an argument that the attorneys were wrongfully sharing fees;  it loses under the old rules, although the court implies that the result would be different for work performed today.  The Client loses on account stated, which is well described in this decision.

Legal malpractice plaintiffs who are suing for representation in a divorce action are routinely placed between a rock and a hard place, when asked at the settlement of their divorce action whether they are satisfied with attorney’s representation.  They are told to say ‘yes" and often do, simply to end the torture.  This simple "yes" can negate the issue of whether they were "effectively compelled to settle" the case.

In Harvey v. Greenberg we see the ultimate negative outcome to plaintiff.  Plaintiff’s theory (as is almost aways true) is that attorney’s mistakes were not clear to the non-attorney client, and were not evident until explained by successor attorney, hence, how could client be held to a "satisfied" standard?

"According to the First Department, a "claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel" (Bernstein v. Oppenheim & Co., P.C., 160 AD2d 428, 429-430 [1st Dept 1990]) (emphasis added). However, the First Department also makes clear that an allocution at settlement wherein the client states that she is satisfied with the attorney’s performance constitutes documentary evidence that contradicts an allegation of legal malpractice (Katebi v. Fink, 51 AD3d 424, 425 [1st Dept 2008], citing Bernstein [holding that while a "’claim for legal malpractice is viable, despite settlement of the underlying action if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel,’ here, the complaint is contradicted by the evidentiary material submitted on the motion to dismiss"]). In Katebi, the plaintiff/client settled the matrimonial action during trial, and the plaintiff’s allocution took place on the record. The Court granted defendants’ motion to dismiss the complaint for failure to state a cause of action for legal malpractice, on the following grounds:

Plaintiff testified that she did not wish to proceed with the trial of the matrimonial action, that she decided instead to enter into the stipulation of settlement because she wanted no further connection with her husband, that she understood that by settling the action before the completion of the trial she was foregoing the right to pursue the funds allegedly dissipated by him, and that she was satisfied with the services provided by her attorney . (Id. at 425)

Similarly, in dismissing another plaintiff’s legal malpractice case, the Court in Weissman v. Kessler, 2008 WL 6920033 [Sup Ct, NY County 2008]) noted that the plaintiff "allocuted that she was satisfied with her counsel and that no one forced her to settle…. Defendants have demonstrated that the documentary evidence conclusively establishes that [plaintiff’s legal malpractice claims] should be dismissed."])."

Corporate clients assign causes of action between themselves on a fairly regular basis.  Often, for purely economic reasons, in mergers, and in other corporate maneuverings, a cause of action will become one of many assets to be exchanged.  Here, in NEW FALLS CORP.,  v. EDWARD N. LERNER,No. 08-4991-cv;UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT;2009 U.S. App. LEXIS 24627;November 10, 2009, Decided it was not permitted, since this 2d Circuit case was decided under California substantive law.
 

"New Falls brought this diversity action alleging [*2] that Lerner committed legal malpractice by failing to perfect an attachment of real estate. Lerner committed the alleged malpractice while representing another entity, Stornawaye Capital, LLC, in an action to enforce a loan. Id. at 283-84. Stornawaye assigned its rights in the loan enforcement action to New Falls, and New Falls subsequently brought this claim for legal malpractice as Stornawaye’s successor.

"Reviewing the District Court’s grant of summary judgment de novo, Sassaman v. Gamache, 566 F.3d 307, 312 (2d Cir. 2009), we affirm the District Court’s clear and thoughtful order. Stornawaye and New Falls unequivocally agreed that California law "determined" their "rights and obligations" under the assignment contract. New Falls, 579 F. Supp. 2d at 286. As a result, the "rights" that New Falls acquired in the assignment could not have included a right to bring malpractice claims, which is a right that cannot be assigned under California law. As the District Court aptly put it, "[b]ecause any attempt to assign a legal malpractice claim by a contract governed by California law is rendered void on the basis of California’s emphatic public policy prohibiting the assignment of legal malpractice claims, Stornaware’s [*4] attempt to transfer its legal malpractice claim against Lerner to New Falls was ineffective as a matter of law." Id. at 288. New Falls, therefore, may not assert Stornawaye’s rights in this malpractice action, and the District Court correctly granted summary judgment for Lerner."
 

Yesterday we discussed medical treatment liens and when an attorney might become liable to pay them, even though the attorney did not deduct from the settlement proceeds when making the distribution.

Today, Joel Stashenko in the NYLJ reports passage of a bill to eliminate "double dipping" by public employees in the disability area.  Specifically, "The bill, contained in a mandate relief measure put on the Legislature’s special session agenda Tuesday by Governor David A. Paterson, eliminates a quirk in state law that has allowed public employees injured due to employer negligence who successfully sue for loss of future wages to get those payments plus whatever disability benefits workers qualify for."

While this is of interest to public employees who are injured, there is a much wide application and interest that this bill addresses.  The entire area of lien recovery, of attorney representation in post-verdict (or settlement) lien resolution, and equitable subrogation is in flux, and this bill simply adds to the mix.

"Another compromise was a provision that eliminates subrogation in medical malpractice suits that litigators have complained has made it more difficult to reach settlements.

The legislation prohibits insurers, except in a few narrow exceptions, from seeking from either plaintiffs or defendants to recoup insurers’ coverage costs if a settlement has been reached in a malpractice case.

"The parties can freely settle a tort suit without being concerned that the disability provider is going to go after those monies," Mr. Schwartz said.

Mr. Cardozo said the provision would effectively undo the Court of Appeals’ ruling in Fasso v. Doerr, 12 NY3d 80, in which the Court ruled that an insurer’s equitable subrogation rights could not be extinguished without the insurer’s consent in the settlement of a personal injury action (NYLJ, Feb. 25, 2009)."

Personal injury law requires doctors, doctor reports, doctor testimony and medical treatment of the plaintiff-clients.  Clients rarely have the means to pay for medical treatment after an injury, yet need it.  Because of this need a system has developed in which plaintiff-clients go to medical providers, who provide medical treatment and file a "doctor’s lien." 

The lien is supposed to work like this:  client sues for the personal injury and if they win, the medical treatment is part of the damages, and then the attorney is supposed to pay off the lien.  Good?  Sure, but what happens when the case is settled 5 years later, and the file is a little confused, and the lien does not get paid?  What happens is that the attorney deducts his fee, the client gets the rest, and then years later, the doctor comes to the attorney for payment.  Naturally, the attorney does not want to pay the client’s medical costs from his own pocket, and litigation ensues.

Here in Complete Management Inc. v. Bader, 112683/08; Decided: October 13, 2009; Justice Emily Jane Goodman , Supreme Court, New York County we see one outcome:

"On April 25, 2005, AR Synergy LLC (ARS), an escrow and collection agent for CMI, mailed listings of reported open liens to Defendants to begin the collection of the outstanding GMMS receivables. Id., ¶23. A spreadsheet listing such liens or GMMS receivables is annexed as "Exhibit B" to the complaint. CMI alleges that, in the ensuing months following the mailing, ARS received no cooperation from Defendants, who have failed to make "subsequent payments of any owed GMMS Receivables to ARS or CMI." Id., ¶24. CMI brings this action against Defendants for "refusing to remit proceeds of liens owed to Plaintiff, or to provide Plaintiff with a more detailed accounting of the status of many of Defendants’ [personal injury] cases."
 

"In Leon v. Martinez (193 AD2d 788 [2d Dept 1993]), the defendant attorney who drafted and notarized a document that gave plaintiffs a lien on the proceeds of his client’s personal injury action was sued by the plaintiffs, after he disbursed proceeds from the settlement of the action to his client in disregard of the lien or assignment. The trial court granted the attorney’s CPLR 3211 motion to dismiss, reasoning that his preparation of the document did not create a personal liability on his part. The Appellate Division reversed, and held that "[w]here attorneys have notice of an assignment or [sic] a portion of their client’s claim for personal injuries and pay out money in disregard of the assignment, they may be liable to the assignees." Id. at 789 (citations omitted). The appellate court’s decision was affirmed by the Court of Appeals. Leon, 84 NY2d 83, supra (Court concluded that there were sufficient allegations in plaintiff’s complaint and supporting affidavit to withstand the motion to dismiss); see also Stanger, D.C., P.C. v. Panzella, 13 Misc 3d 130(A), 2006 NY Slip Op 51842(U) (App Term, 1st Dept 2006) (affirming small claim court’s award of damages to plaintiff chiropractor because, in disregard of assignment, defendant attorney failed to make direct payment of medical fees to plaintiff upon attorney’s receipt of client’s personal injury action settlement proceeds); Williamsburg South Medical v. Maloney, NYLJ, Feb. 10, 2003, at 20, col 6 (Civ Ct, NY County 2003) (court denied defendant lawyer’s motion to dismiss plaintiff doctor’s claims based on breach of contract and breach of fiduciary duty, because complaint contained sufficient facts to support allegation that defendant failed to pay plaintiff with funds from settlement proceeds in which plaintiff has a lien).

In the instant case, the complaint alleges that Defendants knew of the liens in favor of CMI-GMMS, but disregarded such liens by refusing to remit to CMI the settlement or judgment proceeds of their clients. Complaint, ¶¶41-43, 47-52, 58-59. The supporting affidavit submitted by CMI’s agent, Ray Rowney, Jr., also stated, inter alia, that Defendants knew of these liens because (1) they compensated CMI on some of the liens over a period of eight years; (2) CMI communicated with Defendants about payment of the liens and status of the personal injury cases for a 10-year period; and (3) CMI sent the executed lien documents to Defendants. Rowney Affidavit, ¶¶11-12; Exhibit 3. This court may "freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint." Leon, 84 NY2d at 88."

Any place there are disputes over anything, legal malpractice questions lurk.  One is reminded of the New Yorker cartoon in which a 4 year old has dropped his ice cream cone, only to have an adult ask if he needs an attorney.

in a far more serious vein, here is a legal malpractice case arising from return and reimbursement of Nazi confiscated artworks.  Eventually one attorney represented a massive family tree of descendants, all of whom had some claim on a vast trove of artwork which was boxed up and ready to leave Germany in 1939, only to be intercepted by the Nazis and taken away.

In THEKLA NORDWIND and GRETA HOERMAN,  – v.- DAVID J. ROWLAND and ROWLAND & ASSOCIATES we look back to WWII.  ,Clara and Gustav Kirstein lived in Leipzig, Germany with their two daughters, Gabrielle and Marianna, in the 1930s. They were "a close Jewish family of means." Gustav, who was a renowned art publisher and art collector, died in 1934, leaving a life estate in all of his assets to his wife Clara and the remainder to Marianna and Gabrielle in equal shares.

Before his death, Gustav had experienced the beginnings of Nazi persecution when his business was subjected to a forced sale. Faced with the continuing rise of Nazi power, Clara sent her two daughters [*4] to the United States after Gustav’s death. Clara, intending to emigrate to the United States after her daughters, remained in Germany to "sell whatever she could of her remaining artwork and business" and to "ship the balance of her artwork and other personal property to . . . New York, where she planned to join [her family]." On June 29, 1939, however, the Nazis confiscated Clara’s passport and denied her permission to leave Germany. That night, Clara returned to her home in Leipzig and committed suicide. Thereafter, the Nazis confiscated her assets (the "Kirstein Assets"), which included "the artwork and other property that had been packed for shipment to . . . the United States."

In September of 1998, the Nordwind Parties, who are nieces and nephews of Clara Kirstein, became aware of the possibility that they may be entitled to recover restitution for the Kirstein Assets. After conducting research on the Internet, the Nordwind Parties retained defendant Rowland [*7] on October 1, 1998, to "file a claim . . . to the Kirstein Assets and to maximize [their] recovery on the claim to the extent possible." 

"At no point did Rowland inform the Nordwind Parties of any potential conflicts of interests arising from his representation of persons who might hold interests adverse to the Nordwind Parties. Rowland did inform the Nordwind Parties, however, that "[b]oth Miriam Reitz [Baer] . . . and Christel Gauger have indicated that they may wish to assign their rights to Clar[a] Kirstein’s nieces and nephews[, i.e., the Nordwind Parties,] at some time in the future." Rowland had also informed the Nordwind Parties that "only heirs are eligible to file claims under the [German Property Act], a prerequisite status to the assertion of a claim [*9] to the JCC Goodwill Fund." Although it is disputed whether Rowland received oral consent from the Nordwind Parties to contact Gauger and offer his services, it is undisputed that Rowland never obtained a written waiver from them to do so."

"On December 22, 1998, Rowland filed a restitution claim with the JCC Goodwill Fund on behalf of only Miriam Baer and Gauger as heirs to the Kirstein Assets. The following year, on December 3, 1999, Miriam Baer and the Oriental Institute assigned their interests in the Kirstein Assets to the Nordwind Parties. Gauger, however, refused to assign her interests in the Kirstein Assets to the Nordwind Parties."

"The Nordwind Parties also argue that the District Court erred in dismissing their breach of fiduciary duty claim as duplicative of their legal malpractice [*28] claim. We disagree because we conclude, as did the District Court, that the breach of fiduciary duty claim that plaintiffs combined in the first cause of action with their legal malpractice claim must be dismissed as duplicative of the malpractice claim.

HN8Under New York law, where a claim for breach of fiduciary duty is "premised on the same facts and seeking the identical relief" as a claim for legal malpractice, the claim for fiduciary duty "is redundant and should be dismissed." Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 780 N.Y.S.2d 593, 596 (App. Div. 2004). However, if the remedy sought by the plaintiffs "is a restitutionary one to prevent the fiduciary’s unjust enrichment," the "less stringent ‘substantial factor’ standard" would apply to the causation element of the claim for breach of fiduciary duty. See LNC Invs., Inc. v. First Fidelity Bank, N.A. N.J., 173 F.3d 454, 465 (2d Cir. 1999) (Sotomayor, J.); see also, e.g., RSL Commc’ns PLC v. Bildirici, F. Supp. 2d , 2009 U.S. Dist. LEXIS 72691, 2009 WL 2524614, at 23 n.15 (S.D.N.Y. 2009). Otherwise, "where damages are sought for breach of fiduciary duty under New York law, the plaintiff must demonstrate that the defendant’s [*29] conduct proximately caused injury in order to establish liability." LNC Invs., Inc., 173 F.3d at 465; cf. Achtman, 464 F.3d at 337 (requiring proximate-causation standard to establish legal malpractice claim)."