While it is rare, on ocassion, a client may be ordered to pay double fees in a contingent fee case. Here is an example:

Greenberg v. Cross Island Industries Inc., 05CV6026
Decided: October 16, 2007
District Judge Arthur D. Spatt

U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

Alpert & Kaufman, LLP
First Attorneys for the Plaintiff

Gair, Gair, Conason, Steigman & Mackauf
Second Attorneys for the Plaintiff

Judge Spatt

"What began as a routine settlement in a personal injury action has evolved into a contentious battle between plaintiffs’ previous and present counsel over the proper apportionment of legal fees. Here, however, in a somewhat unusual circumstance, the clients, rather than present counsel, are to pay the fee of previous counsel separately and in addition to the fee of present counsel

The Gair Firm asserts that Alpert & Kaufman was dismissed by the Greenbergs for cause and is not entitled to any legal fee. See Garcia v. Teitler, 443 F.3d 202, 212 (2d Cir. 2006); Friedman v. Park Cake, Inc., 34 A.D.3d 286, 287, 825 N.Y.S.2d 11, 12 (1st Dep’t 2006) (stating that where an attorney is discharged for cause, she is entitled to no compensation).

 Evidence of a general dissatisfaction with an attorney’s performance or a difference of opinion between attorney and client does not establish that the attorney was discharged for cause absent some evidence that the attorney failed to properly represent the client’s interest. Garcia, 443 F.3d at 212; Costello v. Kiaer, 278 A.D.2d 50, 50, 717 N.Y.S.2d 560, 561 (1st Dep’t 2000). Indeed, "[a]ttorney-client relationships frequently end because of personality conflicts, misunderstandings, or differences of opinion having nothing to do with any impropriety by either the client or the lawyer." Klein v. Eubank, 87 N.Y.2d 459, 663 N.E.2d 599, 640 N.Y.S.2d 443, (1996); see also D’Jamoos v. Griffith, 2006 WL 2086033, at *5 (E.D.N.Y. July 25, 2006).

Something more than a personality conflict or difference of opinion is required to establish discharge for cause and ‘"[c]ourts typically find a discharge for cause where there has been a significant breach of legal duty.’" D’Jamoos, 2006 WL 2086033, at *5 (quoting Allstate Ins. Co. v. Nandi, 258 F. Supp. 2d 309, 312 (S.D.N.Y. 2003)). For example, in an extreme case, the court held that plaintiff’s counsel was discharged for cause where it kept hidden from its client the fact that it had allowed the statute of limitations to expire. In re Spatola, 196 Misc. 2d 666, 668, 763 N.Y.S.2d 463, 465 (Sur. Ct. Richmond Co. 2003) ("When an attorney deliberately fails to disclose to a client critical information, it weakens [the fundamental] trust and confidence and erodes the relationship to the point that the client . . . has cause to discharge the attorney."). Here, there is no evidence that the conduct of the Alpert Firm breached the trust and confidence so crucial to the attorney-client relationship.

Instead, it is more likely, that the Alpert Firm was discharged as a result of a difference of opinion on how the case ought to be conducted.The Court notes that in Vallejo v. Builders for Family Youth, 2007 WL 10386 (Sup. Ct. Kings Co. Jan. 2, 2007), the court found that because the letters to previous counsel regarding his discharge never mentioned cause and referred to the matter of his compensation, counsel was not discharged for cause. Vallejo, 2007 WL 10386, at *5; see also Realuyo v. Diaz, 2006 WL 695683, at *7 (S.D.N.Y. March 17, 2006) (finding no evidence of discharge for cause because, among other things, the client’s termination letter to attorney failed to specify the reason for termination and requested an accounting of the lawyer’s fee).

There is an unusual twist in the fee arrangement between the Gair Firm and the Greenbergs. In the covering letter from Anthony H. Gair to Barry F. Greenberg dated February 22, 2006 it is stated: "It is understood that you and your wife will be solely responsible for any fees awarded your out-going attorneys. We agree that we will represent you in any fee dispute with the out-going attorneys at no additional cost." In addition, the Gair Firm’s retainer statement, dated March 3, 2006, filed with the Office of Court Administration states that "[a]ny fees awarded to the out-going Attorneys, Alpert & Kaufman, will be the sole responsibility of the plaintiffs." (Retainer Statement of Robert Conason (March 3, 2006)). This agreement is contrary to the usual situation, in which the prior attorney would be paid its portion from the fee received by the incoming firm, rather than by the client.

It’s a trap for the unwary.  We’ve written about this here on the blog, in the New York Law Journal and elsewhere.

Fee determinations in legal fee disputes are determinative of a later legal malpractice case.  Let’s take an example.  Attorney does horrible job, loses case for plaintiff on discovery preclusion grounds.  Let’s assume it is clearly malpractice.  Attorney and client get in a dispute over fees.  Attorney claims $ 100,000 in fees.  At arbitration the award is for $ 100,   Huge negative for attorney?  Yes, but any award of fees, even one so small, necessarily determines that there can be no malpractice case, because no fee may be awarded if there is a determination of legal malpractice.

Here is an example:   Wallenstein v Cohen ,2007 NY Slip Op 09023 ,Decided on November 13, 2007 ,Appellate Division, Second Department .   We agree with the defendants that all of the allegations in the complaint were "reasonably and plainly comprehended to be within the scope of the dispute submitted to arbitration" (Altamore v Friedman, 193 AD2d 240, 247). The determination fixing the value of the defendants’ services necessarily determined that there was no malpractice (see Blair v Bartlett, 75 NY 150, 154; Koppelmann v Finkelstein, 246 AD2d 365, 366; Altamore v Friedman, 193 AD2d at 246; Chisolm Ryder Co. v Sommer & Sommer, 78 AD2d 143, 145-146). Accordingly, the Supreme Court should have granted that branch of the defendants’ motion which was pursuant to CPLR 3211(a)(5) to dismiss the complaint as barred by arbitration and award and by the doctrine of collateral estoppel

Here is a textbook discussion of pleading and dismissal by the District of Columbia Court of Appeals in Flax v. Schertler.  The Court agreed with plaintiff that she had sufficiently alleged failure to bring alternative fraud and fiduciary causes of action in the underlying case, and that she be given additional discovery before motions to dismiss were to be heard.

Burton v. Continental Cas. Co., 2007 WL 2669201 (S.D. Miss. Sept. 6, 2007).

Wiley Rein reports:

"The United States District Court for the Southern District of Mississippi, applying Mississippi law, has granted summary judgment for an insured attorney, holding that his insurer was obligated to defend the attorney where the underlying complaint alleged misconduct that occurred both before and after the retroactive date in the attorney’s professional liability policy. Burton v. Continental Cas. Co., 2007 WL 2669201 (S.D. Miss. Sept. 6, 2007).

The insurer issued a duty-to-defend professional liability policy to the attorney with a retroactive date of November 26, 2001. The policy included a "Retroactive Exclusion Clause Endorsement," which provided that the grant of coverage was available only if "the act or omission occurred on or after 11/26/2001."

Former clients filed suit against the attorney in December of 2002 in connection with his representation of them in a lawsuit against a life insurance company. The underlying plaintiffs alleged that, prior to November 2001, the attorney and other associated lawyers attempted to force plaintiffs to settle their case through a settlement pursuant to which the attorney would receive a separate sum of $2.9 million. The underlying plaintiffs also alleged that the attorney refused to return the case files when asked to do so in November 2002. The insurer denied coverage and declined to defend the attorney in the underlying action. The attorney subsequently filed the instant action. The court also rejected the insurer’s contention that because the allegations in question related to conduct that occurred after the underlying plaintiffs fired the attorney, any misconduct in 2002 was not in connection with provision of "legal services."

Another write up from Hinshaw:

Richard H. Milgrub v. Continental Casualty Company, 2007 WL 625039 (W.D. Pa.).

The attorney-insured in this case sold his home and represented himself, his wife and the buyers in the transaction. The buyers subsequently sued the attorney alleging breach of fiduciary duty and professional negligence. After the attorney’s professional liability insurance carrier attempted to exclude coverage based on the subject policy’s “contractual liability” exclusion, the attorney filed a declaratory judgment action for a coverage determination against the carrier. Finding that the breach of fiduciary duty allegations were not causally based on the contract transaction, the court ordered the carrier to provide coverage for them.

Richard Milgrub and his wife entered a contract on September 9, 2003 to sell their residence to Robert and Shellie Brown (the Browns). The Browns believed Milgrub was acting as the legal representative for both parties in the deal. In November 2004, the Browns sued the Milgrubs alleging: (1) fraudulent representation; (2) claims under the Pennsylvania Sellers Disclosure Act and the Unfair Trade Practices Consumer Protection Act; and (3) claims for professional negligence and breach of fiduciary duty. Milgrub reported the claim to his professional liability provider, the Continental Casualty Company (Continental). Continental denied coverage and Milgrub filed a declaratory judgment action. Both parties in that case moved for judgment on the pleadings.

"The “determinative question” for the court was whether any specific aspect of the breach of fiduciary claim was independent of an alleged conflict of interest, in which case coverage would obtain. The allegations in (1), (3) and (5) above relied on a conflict of interest arising out of the real estate contract. However, the court found that the allegations in (2) and (4) were independent of any alleged conflict based on the contract. For that reason, there would still have been coverage under the policy language covering claims if liability would have attached in the absence of the contractual agreement. The court thus held that there was no coverage for the claims arising out of the contractual obligations, but that there was for the claims arising out of the breach of fiduciary duty allegations.

From Hinshaw:  In an Illinois case where the legal malpractice complaint was dismissed, the court went too far in Visvardis v. Ferleger, ___ Ill. App. 3d ___, 873 N.E.2d 436 (1st Dist. 2007)

"Illinois’ First District Appellate Court recently held that a trial court erred when it went outside of the pleadings to grant a 735 ILCS 5/2-615 motion to dismiss plaintiff’s legal malpractice complaint. The appellate court found fault with the trial court’s having based its decision on a conclusion that plaintiff would not have won the underlying lawsuit even if defendant had not committed malpractice. The appellate court further held that plaintiff’s complaint alleged sufficient facts from which it could be inferred that the defendants in the underlying lawsuit had sufficient assets to pay damages on the date of alleged malpractice (or thereafter"

Legal Malpractice insurance is a vital component of doing business in New York.  What attorney goes to sleep comfortably without it?  Yet, carriers are always looking for a way out.  Here is an example of the latest twist in NJ from Law.Com:

"A legal malpractice carrier is taking a hard line on the level of client grumbling that puts a lawyer on notice of a potential claim that must be reported.

The carrier’s declaratory judgment suit, filed Tuesday in federal court in Trenton, N.J., could cause sleepless nights for any lawyer who has ever had to deal with a client disappointed by the outcome of a case.

General Star National Ins. Co. says a lawyer’s silence about a client’s displeasure over the size of a settlement offer in a wrongful-death case and her threat to consult with separate counsel was enough to void malpractice coverage.

The carrier cites language in its policy, common to legal malpractice policies, that defines a claim to include "knowledge by an insured of any event or circumstance which could reasonably be expected to result in or lead to a claim being asserted against an insured, provided that the insured gives the company written notice of such event or circumstance prior to the termination date of the policy period .  William Voorhees Jr. of Morristown, N.J., says:""The prior knowledge exclusion is the exclusion du jour of the insurance industry," he says. "The denial of claims because of the prior knowledge exclusion has increased dramatically in the past four to five years. It is working, if for no other reason than it has the factual effect of driving down the malpractice plaintiff’s demand."

It centers around a Charles M. Russell statue; what could be more quintessentailly Western.  Real or Fake?  The outcome of this case is a $1 Million verdict against the attorneys and $ 9 Million in Punitive damages.  Hinshaw reports:

"Steve Morton and the international law firm that represented him had very strong, credible grounds to believe that famed artist Charles M. Russell’s signature on a painting that Morton owned was a forgery. But, represented by an “of counsel” attorney of the law firm, Morton nonetheless sued W. Steve Seltzer, an art authenticator, who had refused to recant his professional opinion that the painting was not an authentic painting by Russell. The underlying case was dismissed for lack of expert support for Morton’s position, Morton acknowledged that he could not prevail, and the law firm representing him was found to have committed discovery abuses by withholding key evidence. Seltzer subsequently sued Morton and his law firm for malicious prosecution. The Montana Supreme Court upheld a trial court judgment for $1.1 million in compensatory damages and $9.9 million in punitive damages against the firm.