Lai Ling Cheng v. Modansky Leasing Co., Inc.

• Decision Date: 04 May 1989
• Citation: 73 N.Y.2d 454,539 N.E.2d 570,541 N.Y.S.2d 742
• Parties: , 539 N.E.2d 570, 57 USLW 2705 LAI LING CHENG et al., as Coconservators of Teresa D. Wong, Conservatee, Plaintiffs, v. MODANSKY LEASING CO., INC., et al., Defendants and Third-Party Plaintiffs, et al., Third-Party Defendants. Edward J. Murtaugh, Nonparty Appellant. Lipsig, Sullivan & Liapakis, P.C., Nonparty Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 742

541 N.Y.S.2d 742

73 N.Y.2d 454, 539 N.E.2d 570, 57 USLW 2705

LAI LING CHENG et al., as Coconservators of Teresa D. Wong Conservatee, Plaintiffs, v. MODANSKY LEASING CO., INC., et al., Defendants and Third-Party Plaintiffs, et al., Third-Party Defendants Edward J. Murtaugh, Nonparty Appellant Lipsig, Sullivan & Liapakis, P.C., Nonparty Respondent.

Court of Appeals of New York.

May 4, 1989.

[539 N.E.2d 571] Jon Holden Adams, Poughkeepsie, for appellant.

Cheryl Eisberg Moin, Pamela Anagnos Liapakis and Cyrus [73 N.Y.2d 456] M. Diamond, New York City, pro se.

OPINION OF THE COURT

SIMONS, Judge.

This appeal involves a dispute between incoming and outgoing attorneys retained in a personal injury claim over the proper fee to be awarded to the outgoing attorney. The incoming attorneys contend that his fee should be determined on a fixed dollar amount based on the reasonable value of his services. The outgoing attorney asserts that he is entitled to a contingent percentage fee based on his proportionate contribution to the final recovery.

The underlying litigation involves a claim on behalf of plaintiffs' conservatee, Teresa Wong. She sustained massive injuries permanently incapacitating her, both mentally and physically, when her vehicle collided with a tractor trailer that had jackknifed and crossed over into the opposite lane of traffic in which she was proceeding. Shortly after the accident, her mother and uncle retained appellant, Edward Murtaugh, to prosecute her claim against defendants and agreed to pay him a contingent fee measured by one third of the recovery. Murtaugh instituted conservatorship proceedings, investigated and gathered evidence of the accident, and performed various other preliminary services. Before he commenced an action, however, plaintiffs discharged him, without cause, and retained the law firm of respondent Lipsig, Sullivan and Liapakis, agreeing to pay them a contingent fee based on one third of the recovery also. At the time of the substitution, the attorneys were unable to agree on the fee to be paid Murtaugh and, accordingly, the Lipsig firm sent a letter to him requesting that he turn over his file and acknowledging that he had a "lien for prior legal services rendered * * * the amount of which shall be subsequently determined at the conclusion of the litigation". The letter provided that if the attorneys were unable to agree on the value of Murtaugh's services at the conclusion of the action, the matter was to be submitted to a court for determination. Murtaugh accepted the terms of the letter by signing and returning a copy.

The Lipsig firm subsequently commenced a negligence action which was settled before trial for $1,800,000. The court set the attorney's fee at $540,000, ordered the sum held until the apportionment of the fee between the attorneys was resolved and disbursed the remainder. When the attorneys could not agree, this proceeding was instituted. After a hearing Supreme Court determined that Murtaugh was entitled to a contingent percentage fee based on the proportionate share of the work he performed in the lawsuit. Analyzing the work of each party and their relative contributions to the resulting settlement, the court fixed Murtaugh's percentage at 20% of the total fee ($108,000), plus interest.

The Appellate Division modified, holding that a discharged attorney claiming a contingent percentage of the attorney's fee must have been the attorney of record, apparently believing that the attorney must have a lien pursuant to section 475 of the Judiciary Law to be entitled to such a fee. Because Murtaugh's name did not appear on the "pleadings, motion papers, affidavits, briefs or record" of the case, the court found he had not become an attorney of record, was not entitled to a charging lien under Judiciary Law § 475, and therefore could not claim a contingent fee (137 A.D.2d 781, 783, 525 N.Y.S.2d 328). Accordingly, it limited him to the reasonable value of his services measured by time and expenses. It deemed a fee of $35,000 reasonable and ordered that he be paid that sum with interest. We now reverse.

Under New York law a client may discharge an attorney at any time, with or without cause (Matter of Montgomery, 272 N.Y. 323, 326, 6 N.E.2d 40; Reubenbaum v. B. & H. Express, 6 A.D.2d 47, 48, 174 N.Y.S.2d 287 [Breitel, J.]. When a client discharges an attorney without cause, the attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the services rendered whether that be more or less than the amount provided in the contract or retainer agreement (Matter of Montgomery, supra, 272 N.Y. at 326-327, 6 N.E.2d 40). As between them, either can require that the compensation be a fixed dollar amount determined at the time of discharge on the basis of quantum meruit (Reubenbaum v. B. & H. Express, supra, 6 A.D.2d at 48, 174 N.Y.S.2d 287) or, in the alternative, they may agree that the attorney, in lieu of a presently fixed dollar amount, will receive a contingent percentage fee determined either at the time of substitution or at the conclusion of the case (id.).

Where the dispute is only between attorneys, however, the rules are somewhat different. The outgoing attorney may elect to take compensation on the basis of a presently fixed dollar amount based upon quantum meruit for the reasonable value of services or, in lieu thereof, the outgoing attorney has the right to elect a contingent percentage fee based on the proportionate share of the work performed on the whole case (Matter of Cordes v. Purcell, Fritz & Ingrao, 89 A.D.2d 870, 453 N.Y.S.2d 237; Paulsen v. Halpin, 74 A.D.2d 990, 991, 427 N.Y.S.2d 333; Reubenbaum v. B. & H. Express, supra, 6 A.D.2d at 49, 174 N.Y.S.2d 287). The percentage may be fixed at the time of substitution but, as several courts have recognized, is better determined at the conclusion of the case when such factors as the amount of time...