Cohen v. Lord, Day & Lord

• Decision Date: 15 November 1988
• Court: New York Supreme Court — Appellate Division
• Parties: , 57 USLW 2358, 3 IER Cases 1704 Richard G. COHEN, Plaintiff-Respondent, v. LORD, DAY & LORD, Defendant-Appellant.

Page 161

534 N.Y.S.2d 161

144 A.D.2d 277, 57 USLW 2358, 3 IER

Cases 1704

Richard G. COHEN, Plaintiff-Respondent, v. LORD, DAY & LORD, Defendant-Appellant.

Supreme Court, Appellate Division,

First Department.

Nov. 15, 1988.

B.H. Singer, New York City, for plaintiff-respondent.

R.G. Morvillo, New York City, for defendant-appellant.

Before SANDLER, J.P., and CARRO, ASCH, KASSAL and SMITH, JJ.

MEMORANDUM DECISION.

Order, and judgment (one paper) Supreme Court, New York County (Irma Vidal Santaella, J.), entered March 2, 1988, in so far as it denied defendant's motion for summary judgment and granted plaintiff's cross-motion for summary judgment on the first cause of action and referred the issue of the amount due plaintiff on such cause to a special referee for hearing, unanimously reversed, on the law, and summary judgment granted to defendant dismissing the first cause of action, and plaintiff's cross-motion denied, without costs.

Plaintiff Richard Cohen was a partner in defendant law firm, Lord, Day & Lord, ^* from April 1, 1966 until his voluntary withdrawal from the firm on December 31, 1985 to become a partner in another New York law firm, Winthrop, Stimson, Putnam and Roberts. Plaintiff was head of defendant firm's tax department from 1984 until his departure. New York is the only jurisdiction in which plaintiff is licensed to practice law.

Following his departure from Lord, Day & Lord, Cohen was paid $105,759.97 by defendant, which represented his contribution to the firm's working capital. Plaintiff was also paid $46,641.90 by defendant, the balance due of his partnership share of the firm's earnings during the first quarter of its fiscal year ending December 31, 1985. Defendant, however, denied plaintiff's request for additional monies pursuant to Paragraph Tenth B(a)(i) of the Lord, Day & Lord Partnership Agreement, executed by plaintiff on October 1, 1981. Paragraph Tenth B(a)(i), which provides a formula for distributing uncollected earnings to partners upon their withdrawal from the firm, states as follows:

(i) If at the time of his withdrawal he shall have been a member of the Partnership for ten (10) years, there shall be paid, within forty-five (45) days following the close of each of the three twelve-month periods following his withdrawal ... a share of the net profits for each such period determined by multiplying the total net profits of Partnership for each such period by one-third of the average of the percentages which his shares of the net profits as distributed to him for each of the three (3) fiscal years prior to his withdrawal bore to the total net profits of the Partnership in each of such three (3) prior years.

Defendant determined that plaintiff was not entitled to such payments under the provisions of Paragraph Tenth B(d), which states:

(d) Notwithstanding anything in this Article TENTH to the contrary, if a Partner withdraws from the Partnership and without the prior written consent of the Executive Committee continues to practice law in any state or other jurisdiction in which the Partnership maintains an office or any contiguous jurisdiction, either as a lawyer in private practice or as a counsel employed by a business firm, he shall have no further interest in and there shall be paid to him no proportion of the net profits of the Partnership collected thereafter, whether for services rendered before or after his withdrawal. There shall be paid to him only his withdrawable credit balance on the books of the Partnership at the date of his withdrawal, together with the amount of his capital account, and the Partnership shall have no further obligation to him.

By summons and complaint dated January 14, 1987, Cohen commenced a proceeding in Supreme Court, New York County seeking, under his first cause of action, to recover approximately $285,000 in uncollected firm earnings on the theory that Paragraph Tenth B(d) constitutes an unlawful and unreasonable restriction upon his right to practice law, in conflict with Disciplinary Rule 2-108(A) of the New York Code of Profession Responsibility and is, therefore, void as against public policy.

DR2-108(A) entitled "Agreements Restricting the Practice of a Lawyer" states:

(A) A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits.

Plaintiff's second cause of action seeks reimbursement of pension fund contributions in the amount of $1,875.

In lieu of answering, Lord, Day & Lord moved pursuant to CPLR § 3211(a)(7) to dismiss the complaint for failure to state a cause of action. Plaintiff cross-moved for summary judgment and the parties, thereafter, stipulated that both motions were to be treated as motions for summary judgment.

By decision filed on March 2, 1988 the IAS court ruled that Paragraph Tenth (B)(d) was...