Arkin Kaplan Llp v. Jones

• Decision Date: 19 July 2007
• Docket Number: 9661.,9660.
• Citation: 840 N.Y.S.2d 48,2007 NY Slip Op 06166,42 A.D.3d 362
• Parties: ARKIN KAPLAN LLP, Appellant, v. THOMAS W. JONES, Respondent. ARKIN KAPLAN LLP, Respondent, v. THOMAS W. JONES, Appellant.
• Court: New York Supreme Court — Appellate Division

42 A.D.3d 362

840 N.Y.S.2d 48

2007 NY Slip Op 06166

ARKIN KAPLAN LLP, Appellant, v. THOMAS W. JONES, Respondent.

ARKIN KAPLAN LLP, Respondent, v. THOMAS W. JONES, Appellant.

9660.

9661.

Appellate Division of the Supreme Court of the State of New York, First Department.

Decided July 19, 2007.

Order, Supreme Court, New York County (Karen S. Smith, J.), entered May 2, 2006, which granted plaintiff's motion for partial summary judgment to the extent it sought dismissal of defendant's counterclaims, and denied the motion to the extent it sought summary judgment on plaintiff's first cause of action, unanimously modified, on the law, to grant plaintiff summary judgment on the first cause of action, and otherwise affirmed, without costs, and the matter remanded for further proceedings. [See 12 Misc 3d 1160(A), 2006 NY Slip Op 50979(U).]

In October 2004, defendant Thomas W. Jones was told by his employer, nonparty Citigroup Inc., that Citigroup intended to terminate his employment as head of its Global Investment Management Division.¹ Citigroup's decision to terminate Jones's at-will employment came in the wake of a scandal involving his division's operations in Japan. Jones, believing that he had viable claims against Citigroup for public statements that (in his view) unfairly placed blame for the scandal on him, retained plaintiff Arkin Kaplan LLP, a law firm, to represent him in efforts to resolve such claims.

The terms of Jones's engagement of Arkin Kaplan are set forth in a retainer agreement dated October 29, 2004. The retainer agreement placed a "cap" of $1 million on Arkin Kaplan's hourly fees, and further provided that the firm would be entitled to a "Success Fee" to be computed on amounts in excess of $1 million, net of hourly fees actually paid, that Jones ultimately received, whether through settlement or litigation, subject to the following limitation: "The Success Fee will be computed only on amounts in excess of current vested entitlements, or entitlements to be vested by January 2006." As relevant to this appeal, the retainer agreement provided that there would be a 10% Success Fee on eligible amounts recovered between $1 million and $10 million.

In March 2005, Arkin Kaplan sent Citigroup a draft complaint asserting causes of action for defamation, civil conspiracy and prima facie tort. Thereafter, Jones and Citigroup reached a settlement under which, inter alia, Jones received a $5 million lump-sum cash payment and Citigroup issued a public statement disclaiming "any suggestion of wrongdoing or violation of law on [Jones's] part." A dispute then arose between Arkin Kaplan and Jones as to whether the settlement with Citigroup entitled the firm to a Success Fee. This action ensued.

Arkin Kaplan's complaint seeks to recover, inter alia, a Success Fee based on the $5 million payment Jones received from Citigroup.² Jones contends that Arkin Kaplan is not due any Success Fee based on the $5 million payment by reason of the retainer agreement's provision that the Success Fee "will be computed only on amounts in excess of current vested entitlements, or entitlements to be vested by January 2006" (emphasis added). While Arkin Kaplan contends that the italicized phrase refers only to entitlements that actually become vested by January 2006, Jones take the position that such language means all compensation to which he would have had a "vested" entitlement if Citigroup had continued to employ him through January 31, 2006. Jones estimates the value of the compensation he claims he would have received through January 31, 2006, had he not been fired, at $13.9 million. Such putative compensation includes salary that would have accrued after his termination took effect on February 22, 2005; bonuses for 2004 and 2005; and stock awards and options that would have vested after the effective termination date. Based on this estimated $13.9 million of compensation that would have "vested" but for his termination, Jones argues that the $5 million settlement payment he received from Citigroup was not "in excess of currently vested entitlements, or entitlements to be vested by January 2006."

After joinder of issue, Arkin Kaplan moved for partial summary judgment, seeking judgment on its right to a Success Fee on the $5 million settlement payment (the first cause of action) and dismissal of the counterclaims asserted in Jones's answer.³ In opposing the branch of the motion addressed to the first cause of action, Jones argued that the relevant contractual language is ambiguous and its interpretation therefore raises a triable issue of fact. Supreme Court, while dismissing Jones's counterclaims, agreed that the phrase "entitlements to be vested by January 2006" was reasonably...