SCHNEIDER, KLEINICK v. NYC

• Decision Date: 24 December 2002
• Citation: 754 N.Y.S.2d 220,302 A.D.2d 183
• Court: New York Supreme Court — Appellate Division
• Parties: SCHNEIDER, KLEINICK, WEITZ, DAMASHEK & SHOOT, Appellant,<BR>v.<BR>CITY OF NEW YORK et al., Respondents.

302 A.D.2d 183

754 N.Y.S.2d 220

SCHNEIDER, KLEINICK, WEITZ, DAMASHEK & SHOOT, Appellant,

v.CITY OF NEW YORK et al., Respondents.

MAZZARELLI, J.P.

December 24, 2002.

Diane Welch Bando of counsel (Schneider, Kleinick, Weitz & Damashek, attorneys), for appellant.

Paul L. Herzfeld of counsel (Francis F. Caputo and Gary P. Rosenthal on the brief; Michael A. Cardozo, Corporation Counsel of New York City, attorney), for respondents.

ROSENBERGER, RUBIN and GONZALEZ, JJ., concur.

OPINION OF THE COURT

MAZZARELLI, J.P.

On this appeal we must determine whether attorneys who have been discharged in an action, and who have unsuccessfully attempted to collect their fee from counsel who replaced them and settled the case, may sue the defendant in the underlying matter directly. And, because the City of New York is the defendant in the underlying action, we must also decide whether plaintiff here was required, as a prerequisite, to file a notice of claim pursuant to General Municipal Law § 50-i.

The Facts

Plaintiff Schneider, Kleinick, Weitz, Damashek & Shoot (hereinafter the Schneider firm), as successor in interest to Damashek, Godosky & Gentile (the Damashek firm), represented two infant plaintiffs in an action (the Mills action) against the City of New York for injuries caused by exposure to lead paint. Plaintiff conducted all of the discovery in the matter and filed the note of issue. They were discharged in October 1993. Thereafter, Edgar Jordan III and Philip Frederick were substituted as counsel for the Mills plaintiffs. Steven Levi of the office of the Corporation Counsel represented the City of New York throughout the defense and settlement of the Mills action.

On January 29, 1998, by letter to Mr. Levi, the Schneider firm gave formal notice to the City of its attorney's charging lien in the Mills case. They requested that "any proceedings in settlement of [the] action reflect [their] claim." In August 1998, Jordan and Frederick moved to vacate the Schneider firm's charging lien, urging that the former firm had been discharged for cause. This application was then withdrawn, without prejudice to renewal at the conclusion of the action.

On June 2, 1999, Mr. Levi telephoned the Schneider firm and advised that he had been discussing resolution of the Mills action with Jordan and Frederick for $625,000. Later, on June 22, 1999, the Mills court approved a structured settlement of the infants' claims for that amount, awarding attorneys' fees of $218,000 to plaintiffs' counsel, and specifically directing payment to Jordan and Frederick. Levi left a telephone message with the Schneider firm on June 30, 1999, indicating that he had received a copy of an order in the Mills action which did not include a provision for the Schneider firm's fee.

On July 16, 1999, the Schneider firm moved to restrain the City from disbursing the attorneys' fees, to direct the City to place those fees in escrow and to schedule a hearing for their apportionment. The motion court denied the application and on July 27, 1999, the City paid Jordan and Frederick the full $218,000.

On August 23, 1999, the Mills court referred the issues of the validity and the amount of the Schneider firm's charging lien to a special referee. By written order dated September 13, 1999, it also directed Jordan to place the fees in an interest-bearing attorney's account to be held in escrow pending a final determination. Following a hearing, the referee recommended that the Schneider firm be paid 80% of the attorneys' fees. The Mills court confirmed this recommendation, and on August 14, 2000 directed Jordan and Frederick to pay the Schneider firm $174,563.40. Jordan and Frederick did not comply.

On October 3, 2000, the Schneider firm served a demand for payment of its fees upon the City. It subsequently commenced this action alleging that the defendants were "negligent and reckless" in failing to honor and protect the lien; and that the defendants' conduct constituted prima facie tort. Defendants moved to dismiss the complaint on three grounds: (1) failure to comply with General Municipal Law §§ 50-e and 50-i; (2) as untimely under General Municipal Law § 50-i (1) (c); and (3) for failure to delineate facts supporting a cause of action for prima facie tort. The trial court converted defendants' motion to one for summary judgment, and plaintiff cross-moved for leave to file a late notice of claim.

The court granted defendants' motion and denied plaintiff's cross motion. It concluded that plaintiff's claims accrued on July 27, 1999, when the City paid Jordan and Frederick $218,000, and was therefore time-barred under General Municipal Law § 50-i (1) (c). The court also found that the Schneider firm failed to state a cause of action for negligence because the Mills court's September 13, 1999 order directed Jordan, rather than the City, to hold the funds in escrow. It dismissed the cause of action for prima facie tort for failure to state a claim.

Discussion

We disagree. Plaintiff's complaint, while not artful, sufficiently sets forth a claim pursuant to Judiciary Law § 475 against the City of New York. There is no dispute that the essence of the complaint is the enforcement of the charging lien, and despite plaintiff's apparent misuse of negligence terms in asserting its rights, the facts support a cause of action under Judiciary Law § 475. Moreover, the claim is not encompassed by General Municipal Law § 50-i. The City had knowledge of the Schneider firm's charging lien on the settlement, and upon plaintiff's unsuccessful attempt to secure its fee from substituted counsel, plaintiff had the right to bring this plenary action to enforce the lien against the City (Judiciary Law § 475; see Citizen's Bank of White Plains v Oglesby, 270 App Div 136).

Discharged Attorney's Right to Fees

An attorney who is discharged without cause has three remedies to recover the value of his or her legal services: the retaining lien, the charging lien, and the plenary action in quantum meruit (Butler, Fitzgerald & Potter v Gelmin, 235 AD2d 218, 218-219). These remedies are not exclusive, but cumulative.

The "retaining lien" gives an attorney the right to keep, with certain exceptions, all of the papers, documents and other personal property of the client which have come into the lawyer's possession in his or her professional capacity as long as those items are related to the subject representation (Matter of Lerner v Seigel, 22 AD2d 816). This type of lien is founded upon physical possession, and an attorney may forfeit its retaining lien by voluntarily giving away any of the items to which it may have attached (Annotation, Attorney's Retaining Lien: What Items of Client's Property or Funds Are Not Subject to Lien, 70 ALR 4th 827; First Natl. Bank & Trust Co. v Hyman Novick Realty Corp., 72 AD2d 858, 859 [retaining lien cannot be satisfied by property not in the possession or control of the attorney]). Further, an attorney's retaining lien generally lasts "until [the attorney's] disbursements have been fully paid and, as a general rule, his fee has been determined" (Cosgrove v Tops Mkts., Inc., 39 Fed Appx 661, 664).^[*]

The second remedy available to an attorney for recovery of his or her fee is the Judiciary Law § 475 "charging lien." This can be employed both while the action is pending, and in a separate lawsuit (Citizen's Bank, supra). Judiciary Law § 475, entitled, "Attorney's lien in action, special or other proceeding," provides:

"From the commencement of an action, special or other proceeding in any court or before any state, municipal or federal department, except a department of labor, or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, 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 before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien" (emphasis supplied).

"The [charging] lien is predicated on the idea that the attorney has by his skill and effort obtained the judgment, and hence `should have a lien thereon for his compensation, in analogy to the lien which a mechanic has upon any article which he manufactures.' Williams v. Ingersoll, 89 N.Y. 508, 517 (1882)" (Butler, Fitzgerald & Potter v Sequa Corp., 250 F3d 171, 177; see also LMWT Realty Corp. v Davis Agency, 85 NY2d 462, 467-468). Further, enforcement of a charging lien is founded upon the equitable notion that the proceeds of a settlement are ultimately "under the control of the court, and the parties within its jurisdiction, [and the court] will see that no injustice is done to its own officers" (Rooney v Second Ave R.R. Co., 18 NY 368, 369; see also Fischer-Hansen v Brooklyn Hgts. R.R. Co., 173 NY 492, 502; Petition of Rosenman & Colin, 850 F2d 57, 60). However, an attorney's recovery under Judiciary Law § 475 is contingent upon his client reaching a favorable outcome, because the charging lien is a specific attachment to the funds which constitute the client's recovery (Butler v Sequa, supra at 177). Moreover,

"the plaintiff must show that he comes within the statute by establishing the facts alleged in his complaint, and the action is open to any defense tending to show that no lien ever existed, or that if it once existed it was discharged with the consent of the plaintiff, or was waived or forfeited by his misconduct or neglect" (Fischer-Hansen, supra at 502).

The Court of Appeals addressed the breadth of the Judiciary Law § 475 charging lien and its application in Sargent v McLeod (209 NY 360), a case where an attorney died prior to the settlement of the litigation. The attorney had been hired pursuant to a contingency fee arrangement,...