Mar Oil, SA v. Morrissey

• Decision Date: 24 January 1992
• Docket Number: No. 86 Civ. 0612 (BN).,86 Civ. 0612 (BN).
• Citation: 782 F. Supp. 899
• Parties: MAR OIL, S.A., Plaintiff, v. Francis X. MORRISSEY, Jr., Defendant.
• Court: U.S. District Court — Southern District of New York

782 F. Supp. 899

MAR OIL, S.A., Plaintiff, v. Francis X. MORRISSEY, Jr., Defendant.

No. 86 Civ. 0612 (BN).

United States District Court, S.D. New York.

January 24, 1992.

Nourse & Bowles, Lawrence J. Bowles and Maria L. Alonso, New York City, for plaintiff.

Bass & Ulman, Alfred Ferrer, III, New York City, for defendant.

OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

NEWMAN, Senior Judge, United States Court of International Trade, sitting as a District Court Judge by Designation:

INTRODUCTION

This is a bitterly contested diversity suit by plaintiff Mar Oil, S.A., a Spanish business corporation, against Francis X. Morrissey, Jr., a New York attorney, who rendered professional services for the plaintiff.¹ By consent, the defendant collected the proceeds of a settlement of claims brought by the plaintiff which were deposited in an escrow account and maintained in defendant's name in trust for plaintiff at Morgan Guaranty Trust Company of New York ("Morgan Guaranty"). Plaintiff contends that Morrissey, without plaintiff's knowledge or consent, unilaterally withdrew the balance of $925,675.38 from the escrow account in purported payment of the balance of Morrissey's professional fees which defendant insists was due him, albeit the plaintiff disputed that any such fee was owing to defendant and that plaintiff disapproved the withdrawal by the defendant of the money from the escrow account.

The complaint is couched in six causes of action which allege, respectively, that defendant used such escrowed funds without authority as his own, and that defendant is indebted to plaintiff for the full amount of the withdrawal; that the fee charged by defendant as represented by the unauthorized withdrawal was unconscionable and unsupportable under a written retainer agreement dated October 31, 1980 entered into by the parties, which called for an agreed hourly rate, plus reimbursable reasonable expenses; that defendant fraudulently induced Sr. Carlos Garcia Monson (Sr. Monson) plaintiff's representative, to sign a document dated February 2, 1984 purporting to have authorized, after the fact, the withdrawal referred to; that the defendant abused his position of trust and confidence flowing from the attorney-client relationship to obtain the signature to such document signed by Sr. Monson; that plaintiff was mistaken concerning the nature of the said signed document as to the amounts and recipients of disbursements covered by the document; and that the defendant fraudulently misrepresented or failed to make proper disclosures in respect to disbursements represented by the document or the nature of the document entirely; and that allowing the defendant to retain said sum of money so withdrawn for the services he rendered would be an unjust enrichment.

Morrissey argues that he undertook an action in New York on plaintiff's behalf which was a "companion" to one pending in Spain, predicated on plaintiff's agreement that Morrissey would be compensated for the New York action on a contingency fee basis and reimbursement of expenses and overhead; that defendant associated with him the maritime law firm of Healy & Baillie to assist him in the New York suit; that the New York action was dismissed on application for a summary judgment; that an appeal was filed; that during the pendency of the appeal, Morrissey for plaintiff negotiated and effected a global settlement of both the New York and Spanish litigation; and that before the settlement agreement was consummated, plaintiff's representative had agreed that the defendant was to receive a contingency fee of $960,000 for his legal services and balance of fees due to Healy & Baillie; and that the recovery for plaintiff under the settlement was $8,060,000 which was effected in July 1983; that by consent, defendant deposited the recovery in an escrow account at Morgan Guaranty and the sum withdrawn by defendant from the escrow account represented approximately 12% of the plaintiff's recovery.

The answer further asserts that the withdrawal from the settlement fund was made pursuant to plaintiff's instructions in July 1983, and represented the payment of $960,000 and an amount for Healy & Baillie's legal fees and expenses, comprising the remainder of the settlement in the account maintained at Morgan Guaranty. Continuing, the answer alleges that on February 2, 1984 plaintiff's representative signed and consented to an accounting of all disbursements made by defendant to date from the Settlement Fund, including the payment of defendant's legal fees in the amount mentioned above, and released and indemnified the defendant from any liability arising from such disbursements. The answer contends that the Mar Oil representative, to maintain secrecy, declined to take a copy of the document back with him and refused to allow defendant to show the document or reveal its contents to any other party. Defendant pleads release from any liability for the disbursement to himself of the $925,675.38 and accord and satisfaction applicable thereto; that the payment to himself resolved any alleged dispute with the plaintiff as to the amount due; that plaintiff's claims are barred by waiver, estoppel, laches and unclean hands.

The Facts

On March 11, 1980 Mar Oil's 239 thousand ton super tanker, the Maria Alejandra, exploded and sank off the coast of Mauretania, West Africa. The accommodation section of the ship sank within 60 seconds causing the loss of 37 of the 44 members of the crew. The Maria Alejandra was a relatively new tanker, having been launched but three years before the explosion. Despite the fact that the lead insurance company and all other members of the insurance consortium honored their share of insurance of 2.25 billion pesetas carried on the ship, New Hampshire Insurance Company ("New Hampshire"), carrying 25% of the insurance coverage, refused to pay.

Thereupon, Mar Oil commenced litigation in Spain for 750 million pesetas equivalent to some U.S. $10 million, $600,000.00 against New Hampshire for breach of the insurance policy pursuant to the exclusive Madrid jurisdiction suit clause, plus interest, consequential damages, legal fees and costs. New Hampshire alleged a number of grounds for refusing to pay under the policy, including the possibility that the explosion and sinking of the ship was caused by the terrorist act of a West African guerrilla group, the Polisario, or to the unseaworthiness of the ship due to the nonfunctioning or malfunctioning of certain blowers on the ship that were essential to prevent the dangerous build-up of flammable gases.

In or about September 1980, Sr. Monson, a sophisticated business and professional man, and the managing director of Mar Oil, S.A., communicated with George A. Spyrou, Esq., the son of a business acquaintance. Sr. Monson requested Spyrou to recommend an attorney in the United States with whom he could consult as to the possibility of taking legal steps in the United States that might obtain a more expedited resolution than the Spanish litigation and compel New Hampshire to honor its obligations under the policy in Spain. Spyrou had graduated from law school in England in 1974 and was admitted to practice law as a Barrister in England in November 1980. He had worked for a period of time in New York City with the firms of Healy & Baillie and Cadwalader, Wickersham & Taft. During Spyrou's stay in New York, he had become acquainted with the defendant Morrissey. Spyrou recommended Morrissey and meetings with Sr. Monson were arranged to be held at the end of October 1980 in New York City.

Defendant was admitted to the bar in Massachusetts and California, and thereafter to the bar of the State of New York in October 1973. In the years 1980 to 1982, Morrissey was employed as an associate by Peter Van Dyke Berg, Esq. at 119 East 55th Street, New York, NY. During the years 1980-1983, defendant was also employed by a trust or trusts at the same address. Morrissey arranged to bring John T. Hamilton, another New York attorney, into the New York meetings. Prior to that time, Hamilton had been retained by Morrissey on various accident claims involving insurance.

Morrissey, Hamilton and Spyrou met in New York with Sr. Monson and other representatives of the plaintiff, and Sr. Monson furnished the defendant and his associates with a copy of the insurance policy and other relevant documents. Morrissey and his associates (sometimes referred to hereafter as "The Team"), prepared a report for Sr. Monson dated October 31, 1980, containing a review of the facts described to them by Sr. Monson and made recommendations for future action.

The Team had first proposed to Sr. Monson that they be retained by plaintiff on a contingency fee basis, under which they would receive 33 1/3 % of any recovery. Sr. Monson flatly rejected any form of contingency fee agreement. The Team then proposed a fee agreement based on time spent, to which Sr. Monson agreed. On October 31, 1980, defendant personally drafted a time-basis fee agreement, which Sr. Monson signed on behalf of the plaintiff (the "fee agreement"). As noted the fee agreement provides that The Team would "take such measures you plaintiff authorize;" that the Team would be paid at "an agreed hourly rate;" that "this understanding is to be interpreted in accordance with the laws of the State of New York; that this understanding may be changed or modified only by a writing signed by all parties." The Fee Agreement required plaintiff to pay all "reasonable" expenses incurred by The Team and further required plaintiff to forward a fee advance of $10,000 to Mr. Spyrou in London.

Until late October 1980, defendant had rarely been involved in litigation, and had never been involved in any litigation involving questions of marine insurance policies, or the seaworthiness of ocean-going tanker vessels, or any other vessels. At this juncture, it should be observed that plaintiff's attorneys have continuously...