Cohen v. Grainger, Tesoriero & Bell

• Decision Date: 14 October 1993
• Citation: 81 N.Y.2d 655,602 N.Y.S.2d 788,622 N.E.2d 288
• Court: New York Court of Appeals Court of Appeals
• Parties: , 622 N.E.2d 288 In the Matter of Max COHEN, Appellant, v. GRAINGER, TESORIERO & BELL et al., Respondents.

Page 788

602 N.Y.S.2d 788

81 N.Y.2d 655, 622 N.E.2d 288

In the Matter of Max COHEN, Appellant, v. GRAINGER, TESORIERO & BELL et al., Respondents.

Court of Appeals of New York.

Oct. 14, 1993.

[81 N.Y.2d 656] Irving W. Fein, New York City, for appellant.

Florrie L. Wertheimer, P.C., New York City (Jay M. Solomon, of counsel), respondent, pro se, and for Grainger, Tesoriero & Bell and others, respondents.

OPINION OF THE COURT

SIMONS, Justice.

This appeal presents two questions: (1) does a discharged attorney who has instituted a personal injury action in State courts have a statutory lien on a recovery obtained for the client on the same claim sued by a successor attorney in Federal courts; (2) when must a discharged attorney, retained on a contingent fee basis, elect the method of computing the fee.

The dispute arises from these facts.

Petitioner Cohen, an attorney, entered into a written agreement to represent James Staffer in his claim for personal injuries against his employer, Bouchard Transportation Co., Inc. The agreement called for Cohen to receive a contingent fee equaling 33 1/2% of any sum recovered for Staffer. In November 1985, following investigation and preparation, Cohen commenced an action on behalf of Staffer in Supreme Court, Richmond County. He continued handling the case until June 1986. At that time Staffer sent Cohen a letter discharging him, asking Cohen to deliver his file and stating that his new attorney would contact him. The new attorneys did not contact Cohen, however, and it was not until April 1987 that he learned from a third party that Staffer's new counsel was respondent Florrie Wertheimer, P.C., and that the Wertheimer firm had commenced a separate action on the same claim in United States District Court. Some 19 months later, after Staffer had won a $480,650.30 judgment in Federal court, Cohen brought this special proceeding to enforce his attorney's lien under Judiciary Law § 475. He seeks a fee based on a percentage of the judgment recovered.

Supreme Court held that the statute grants a lien only to the attorney of record in the court where plaintiff obtains a recovery. Because the recovery was gained in Federal court and Cohen was not the attorney of record there, Supreme Court concluded that his fee must be measured by quantum meruit and, applying that rule, determined the amount. The Appellate Division modified the judgment by increasing the fee but otherwise affirmed, 179 A.D.2d 808, 578 N.Y.S.2d 665.

Section 475 of the Judiciary Law provides that "[f]rom the commencement of an action * * * the attorney who appears for a party has a lien upon his client's cause of action * * * which attaches to a verdict, report, determination, decision, judgment or final order in his client's favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties".

While we have never passed on the question, the parties now agree that Cohen has a statutory lien which attaches to the recovery notwithstanding that the final judgment was obtained in Federal court. That rule has been applied repeatedly in the Appellate Division by decisions holding that the lien is imposed on the cause of the action and that the proceeds, wherever found, are subject to it. And this is so even if recovery is obtained in an action different from the one in which the services were rendered (see, Neimark v. Martin, 7 A.D.2d 934, 935, 183 N.Y.S.2d 812; Morgan v. Drewry, S.A.R.L., 285 App.Div. 1, 4, 135 N.Y.S.2d 171; Matter of Lourie, 254 App.Div. 555, 3 N.Y.S.2d 191; see also, Matter of Board of Water Supply [Bell], 179 App.Div. 877, 878, 167 N.Y.S. 531). Were the rule otherwise, the client and the successor attorney could easily frustrate the remedial purposes of the statute by the simple expedient of instituting a new action, thereby extinguishing the prior action, and leaving the discharged attorney without security (see, Morgan v. Drewry, S.A.R.L., supra, 285 App.Div. at 5, 135 N.Y.S.2d 171). Accordingly, we hold that Cohen's rights attached when he commenced the State action and he is entitled to a statutory lien against the proceeds of the Federal action.

The question remaining is whether attorney Cohen lost his right to a contingent fee by failing to promptly elect that method of computing his fee. We conclude that petitioner is entitled to a percentage of the fee actually recovered by the Wertheimer firm based upon the pro rata share of the work the two attorneys performed in obtaining the recovery.

It is settled that a client may discharge an attorney at any time, with or without cause (Lai Ling Cheng v. Modansky Leasing Co., 73 N.Y.2d 454, 457, 541 N.Y.S.2d 742, 539 N.E.2d 570; Matter of Montgomery, 272 N.Y. 323, 326, 6 N.E.2d 40). As against the client, a discharged attorney may recover the "fair and reasonable value" of the services rendered(Matter of Montgomery, supra, at 326-327, 6 N.E.2d 40), determined at the time of discharge and computed on the basis of quantum meruit (id.; Reubenbaum v. B. & H. Express, 6 A.D.2d 47, 48, 174 N.Y.S.2d 287). Only if the client and attorney agree may the attorney receive a fee based on a percentage of the recovery (Lai Ling Cheng v. Modansky Leasing Co., 73 N.Y.2d, at 457-458, 541 N.Y.S.2d 742, 539 N.E.2d 570; Reubenbaum, supra, 6 A.D.2d at 48, 174 N.Y.S.2d 287).

But when the dispute is between attorneys, as here, the rules are somewhat different. The discharged attorney may elect to receive compensation immediately based on quantum meruit or on a contingent percentage fee based on his or her proportionate share of the work performed on the whole case (Cheng, supra, 73 N.Y.2d at 458, 541 N.Y.S.2d 742, 539 N.E.2d 570 [citations omitted]. That...