Tops Markets, Inc. v. Quality Markets, Inc., No. 93-CV-0302E(F) (W.D.N.Y. 4/3/2001), 93-CV-0302E(F).

• Decision Date: 03 April 2001
• Docket Number: No. 93-CV-0302E(F).,93-CV-0302E(F).
• Parties: TOPS MARKETS, INC., Plaintiff, v. QUALITY MARKETS, INC., THE PENN TRAFFIC COMPANY, and SUNRISE PROPERTIES, INC. JAMES V. PAIGE, JR., Defendants.
• Court: U.S. District Court — Western District of New York

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TOPS MARKETS, INC., Plaintiff, v. QUALITY MARKETS, INC., THE PENN TRAFFIC COMPANY, and SUNRISE PROPERTIES, INC. JAMES V. PAIGE, JR., Defendants.

No. 93-CV-0302E(F).

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

April 3, 2001.

MEMORANDUM and ORDER

ELFVIN, Sr. District Judge.

Tops Markets, Inc. ("Tops") originally filed this action April 2, 1993 raising both federal and state claims against defendants. Defendant James V. Paige, Jr. filed a state law counterclaim. This Court granted summary judgment in favor of the defendants on the federal causes of action, declined to exercise supplemental jurisdiction over the state causes of action and dismissed the Complaint herein August 21, 1996. Thereafter Tops discharged its original attorney, John H. Stenger, Esq., who had commenced this action and retained Edward C. Cosgrove, Esq. October 8, 1996. Cosgrove refiled the state causes of action in New York State Supreme Court for Erie County¹ and appealed the federal dismissal to the United States Court of Appeals for the Second Circuit. The latter affirmed in part, vacated in part and remanded this case to this Court. ²

Tops filed an amended complaint June 15, 1998 wherein the sole cause of action raised was for attempted monopolization in violation of the Sherman Antitrust Act, 15 U.S.C. § 2. Trial was had in this matter from August 16, 1999 until September 8, 1999 resulting in a jury verdict for defendants on all counts — including a finding that Tops was liable on a counterclaim brought by Paige. A separate trial on the amount of damages to be assessed against Tops on Paige's counterclaim was to be scheduled later. On February 16, 2000 Tops discharged Cosgrove as its attorney and retained Daniel C. Oliverio, Esq. of Hodgson Russ LLP to defend it in the damages trial on Paige's counterclaim. In the letter discharging Cosgrove, Tops requested a bill for all outstanding disbursements. Lennon September 5, 2000 Aff. Ex. D (Mineo February 16, 2000 Letter). Cosgrove never responded to this request — Schmitt August 28, 2000 Aff. ¶ 7 — but filed a motion July 19, 2000 seeking to recover his disbursements and his attorney fees under quantum meruit and asserting a retaining lien over the case file until a hearing had been held to determine the amount of such and he had received payment therefor.³ After being discharged, Cosgrove never indicated to Tops — until he filed the instant motion five months thereafter — that he would be asserting a retaining lien over the file and would refuse to turn it over to Oliverio until a hearing had been had to determine his fees under quantum meruit and such had been paid by Tops; rather he implied that it was taking him such a long time to transfer the file because of its size and because he had not maintained the state and federal actions separately.⁴ In response to Cosgrove's motion, Tops took the position that all of his valid disbursements had already been paid and that he was not entitled at the present time to a retaining lien or to the determination and payment of his attorney fees under quantum meruit. The undersigned has endeavored to get Tops and Cosgrove to work this matter out between themselves without the need for judicial intervention, first during the oral argument on this motion August 25, 2000, then in a September 19, 2000 letter and again during a September 22, 2000 hearing for the purpose of setting a date for the damages trial on Paige's counterclaim.⁵ Due to the inability of Tops and Cosgrove to work this matter out between themselves, which prejudiced both Tops and Paige because Cosgrove's refusal to turn the file over to Oliverio has prevented the damages trial on Paige's counterclaim from being conducted, this Court will now resolve Cosgrove's motion.

"The right of an attorney to recover for professional services must rest on an express or implied contract. The burden of establishing the existence of a contract, with full knowledge by the client of all material circumstances, is on the attorney." Paulsen v. Halpin, 427 N.Y.S.2d 333 (App. Div. 4th Dep't 1980).⁶ Disputes over attorney fees are governed by the law of the forum state. Cook v. Moran Atlantic Towing Corp., 79 F.R.D. 392, 394 (S.D.N.Y. 1978). This Court has not been provided with a copy of the retainer agreement between Tops and Cosgrove and, accordingly and for present purposes, will rely upon the characterization of such in the August 28, 2000 Affidavit of Tops's in-house counsel, Nicholas Schmitt, Esq. The contingency agreement between Tops and Cosgrove provided "that in return for fully prosecuting the action and defending any counterclaims, Mr. Cosgrove will be paid one-third of any recovery in this action and his reasonable and necessary disbursements upon proper documentary proof. Tops reserved the right to challenge any disbursements. Any out-of-the-ordinary disbursements, such as for expert witnesses, etc., required Tops'[s] prior approval." Schmitt August 28, 2000 Aff. ¶ 2.

"The unqualified right to terminate the attorney-client relationship at any time has been assiduously protected by the courts. An attorney however, is not left without recourse for unfair terminations lacking cause. If a client exercises the right to discharge an attorney after some services are performed but prior to the completion of the services for which the fee was agreed upon, the discharged attorney is entitled to recover compensation from the client measured by the fair and reasonable value of the completed services. [The New York Court of Appeals has] recognized that permitting an discharged attorney to recover the reasonable value of services rendered in quantum meruit, a principle inherently designed to prevent unjust enrichment, strikes the delicate balance between the need to deter clients from taking undue advantage of attorneys, on the one hand, and the public policy favoring the right of a client to terminate the attorney-client relationship without inhibition on the other." Matter of Cooperman, 83 N.Y.2d 465, 473 (1994).⁷

When an attorney in a contingency fee case is discharged by his client without cause and before the conclusion of the case — i.e., before the client's right vel non of recovery has been established, the attorney has a common law retaining lien over the file to secure the payment of both his disbursements and the fair and reasonable value of his services under quantum meruit and generally may not be compelled to turn over the file until a hearing has been held to ascertain the amount of his attorney fees and the client has paid such in full or provided security therefor because, once the attorney relinquishes possession of the file, the retaining lien is extinguished. Lai Ling Ching v. Modansky, 73 N.Y.2d 454, 458-459 (1989); In re Weltling, 266 N.Y. 184, 186-188 (1935); Andriev v. Keller, 563 N.Y.S.2d 88 (App. Div.2d Dep't 1990); Hom v. Hom, 622 N.Y.S.2d 282 (App. Div.2d Dep't 1994). However, if an attorney is discharged for cause he has no right to compensation or to a retaining lien; it is only when he is discharged without cause before the completion of his services that the amount of his compensation must be determined under quantum meruit. Teichner v. W & J Holsteins, Inc., 64 N.Y.2d 977, 979 (1985). When an attorney in a contingency fee case is discharged at the end of the case after it has been established that plaintiff will have no recovery upon which he would be entitled to a percentage thereof, the attorney has no right to recover the reasonable value of his services under quantum meruit. Crowley v. Wolf, 281 N.Y. 59, 65 (1939); Tuff & Rumble Management v. Landmark Distributors, Inc., 677 N.Y.S.2d 788 (App. Div. 1st Dep't 1998). "A hearing is required to determine if [the attorney] was discharged for cause or, if he was discharged without cause before completion of the services, for a determination of his fee on a quantum meruit basis." Teichner, at 979.

The factors used in determining the fair and reasonable value of an attorney's services under quantum meruit include: the nature of the litigation; the difficulty of the case and the amount at stake; the time, the effort and skill required; the counsel's experience, ability, reputation and role in the case; the results achieved; the fee customarily charged in the locality; the contingency or certainty of compensation; and the terms of the contingency agreement. Shrauger v. Shrauger, 537 N.Y.S.2d 84 (App. Div.3d Dep't 1989); Smith v. Boscov's Department Store, 596 N.Y.S.2d 575 (App. Div.3d Dep't 1993).

The court has discretion to defer the determination of the fair and reasonable value of a discharged attorney's fees under quantum meruit until the conclusion of the litigation because the amount of recovery is an element in fixing such, and can substitute a statutory charging lien pursuant to N.Y. Jud. Law § 475 in place of the retaining lien to secure payment of such, provided that all authorized disbursements due and owing are paid. Security Credit Systems, Inc. v. Perfetto, 662 N.Y.S.2d 674 (App. Div. 4th Dep't 1997); Matter of Shaad, 399 N.Y.S.2d 822 (App. Div. 4th Dep't 1977); Steves v. Serlin, 509 N.Y.S.2d 666 (App. Div. 3 d Dep't 1986). New York courts "have, in many cases, ordered attorneys to deliver to their clients papers and records received by the attorneys in the course of litigation, though through such delivery the attorney's retaining lien was destroyed." Robinson v. Rogers, 237 N.Y. 467, 471 (1924). "[T]he recognized power of the court to compel an attorney to deliver to his client papers upon which the [attorney] has a lien is not based upon any assumed right of the court to destroy even a common-law lien when other adequate security has been furnished, but rather upon the control by the courts of their own officers, and their power to compel attorneys to act equitably and fairly towards their clients." Id. at 472....