Universal Acupuncture Pain v. State Farm Mut., 01 Civ. 7677(SAS).
| Decision Date | 12 November 2002 |
| Docket Number | No. 01 Civ. 7677(SAS).,01 Civ. 7677(SAS). |
| Citation | 232 F.Supp.2d 127 |
| Parties | UNIVERSAL ACUPUNCTURE PAIN SERVICES, P.C., Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. State Farm Mutual Automobile Insurance Company, Counter-Plaintiff, v. Universal Acupuncture Pain Services, P.C., Dipak Nandi, and Dongxing Sun, Counter-Defendants. |
| Court | U.S. District Court — Southern District of New York |
Richard J. Quadrino, Quadrino & Schwartz, P.C., Garden City, NY, for movants.
Anthony J. Mamo, Jr., Cortland Manor, NY, for respondents.
Gregory La Sorsa, La Sorsa & Beneventano, White Plains, NY, for Nandi.
Dongxing Sun, Ergo Park, NY, pro se.
Ted S. Helwig, Ross O. Silverman, Gil M. Soffer, Katten Muchin Zavis, Chicago, IL, for State Farm Mut. Auto. Ins.
Quadrino & Schwartz, P.C. ("Q & S"), former counsel for Universal Acupuncture Pain Services, P.C. ("Universal") and Dr. Dipak Nandi, has filed an application seeking: (1) an expedited hearing to fix the retaining and charging liens of Q & S and to determine the amount of attorney's fees and disbursements due Q & S; and (2) an order requiring payment of the amount due fixed by the Court, or requiring the clients to post adequate security to pay the amount due fixed by the Court. Q & S has refused to produce its files to La Sorsa & Beneventano ("La Sorsa"), incoming counsel for Universal and Nandi, until this issue is resolved.
Q & S contends that it is entitled to be compensated immediately in quantum meruit for the reasonable value of the legal services it provided to Universal and Nandi (collectively, "respondents") in this matter, see Memorandum of Law in Support of Motion to Fix and Determine Attorney's Liens ("Q & S Memo") at 3-5, and that it properly maintains both a charging and a retaining lien on respondents' case file that cannot be extinguished until Q & S's fees and disbursements are fixed and paid, see id. at 2-3. Universal and Nandi argue first, that Q & S was discharged for cause and therefore is not entitled to either a retaining or a charging lien, and second, that the Court should defer fixing the amount of Q & S's lien, if any, until the conclusion of the case. See Affirmation of Anthony J. Mamo, respondents' counsel ("Mamo Aff."), at 1-2.
For the reasons stated below, Q & S's Motion to Fix and Determine Attorney's Liens is denied, and Q & S is ordered to release respondents' case file to incoming counsel upon receipt of payment for its disbursements.
In May 2001, Universal retained Q & S to represent it in a suit against State Farm Mutual Automobile Insurance Company ("State Farm") for payment of overdue claims.1 The Retainer Agreement ("Retainer") provides for compensation on a contingency fee basis.2 See 5/01/01 Retainer. State Farm asserted counterclaims against Universal and third-party defendants, Dipak Nandi, the founder of Universal, and Dongxing Sun, a licensed acupuncturist. See Second Amended Answer and Counterclaim ("Counterclaim"). Q & S agreed to represent Nandi on the counterclaims as well,3 also on a contingency basis, but no new retainer was signed.
On August 19, 2002, Universal and Nandi discharged Q & S as counsel, and directed the firm to refrain from performing any further work in the action and to immediately transfer all files to incoming counsel. See 8/19/02 Letter from Nandi to Q & S, Ex. A to Reply Affidavit of Richard J. Quadrino ("Quadrino Reply Aff."). By letter dated September 4, 2002, Q & S advised Universal and Nandi that it elected to be compensated on a quantum meruit basis for the reasonable value of the legal services rendered on their behalf, and that it would maintain a retaining lien on respondents' files until the amount reflected on the enclosed invoice was paid.4 See 9/4/02 Letter from Q & S to Nandi, Ex. B. to Mamo Aff., at 1. Universal and Nandi have not paid the amount due and incoming counsel has not been provided access to the file, which has resulted in delays in discovery. See 9/20/02 Letter from La Sorsa to the Court ("9/20/02 La Sorsa Letter") at 1-2 ().
On September 16, 2002, the Court endorsed a stipulation between Q & S and La Sorsa providing that La Sorsa would be substituted for Q & S as counsel of record in this matter. See Stipulation of Substitution. On September 18, 2002, Q & S filed the instant motion to fix and determine attorney's liens, brought on by Order to Show Cause. See 9/19/02 Order to Show Cause. On September 20, 2002, La Sorsa requested that the Court direct the transfer of the file in this matter from Q & S to La Sorsa, see 9/20/02 La Sorsa Letter at 2, to which Q & S responded that the Court should await disposition of the pending motion, see 9/20/02 Letter from Q & S to the Court at 1. The Court denied La Sorsa's request on September 23, 2002, and suspended all discovery deadlines until further order of the Court. See 9/20/02 La Sorsa Letter at 2.
On September 26, 2002, Nandi filed an affidavit in support of his opposition to the Order to Show Cause, alleging that Q & S was discharged for cause. See Affidavit of Depak Nandi ("Nandi Aff."), Ex. A. to Mamo Aff., at 1-2. A reply was filed by Q & S on October 1, 2002, see Reply Memorandum of Law in Further Support of Motion to Fix and Determine Attorney's Liens ("Q & S Reply"), and a hearing was held on October 2, 2002. Following the hearing, Q & S submitted a supplemental letter on October 4, 2002, see 10/4/02 Letter from Q & S to the Court, to which respondents replied on October 7, 2002, see 10/7/02 Letter from Mamo to the Court.
On October 17, 2002, the Court inquired of Q & S and La Sorsa whether they had discussed how to split any potential recovery on a contingency basis, as directed at the hearing. Q & S and La Sorsa informed the Court that there had been no discussions between the two firms concerning their respective portions of potential legal fees and that they believe such discussions would be premature.5 See 10/18/02 Letter from La Sorsa to the Court ("10/18/02 La Sorsa Letter") at 1; 10/21/02 Q & S Letter at 1. In addition, Q & S provided the Court, as directed, with a breakdown of the firm's time spent litigating State Farm's counterclaims. See 9/4/02 Invoice # 13050, Attachment to 10/21/02 Q & S Letter.
Under New York law, a client has an absolute right to terminate the attorney-client relationship at any time, with or without cause. See Cohen v. Grainger, Tesoriero, & Bell, 81 N.Y.2d 655, 658, 602 N.Y.S.2d 788, 622 N.E.2d 288 (1993) ("In re Cohen"). "An attorney, however, is not left without recourse for terminations lacking cause." Tops Mkts., Inc. v. Quality Mkts., Inc., No. 93-CV-0302E(F), 2001 WL 392082, *2 (W.D.N.Y. Apr.4, 2001). "If a client exercises the right to discharge an attorney after some services [have been] 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." Id. at *2 (citing Matter of Cooperman, 83 N.Y.2d 465, 473, 611 N.Y.S.2d 465, 633 N.E.2d 1069 (1994)).
Either the client or the attorney can require that the compensation be a fixed dollar amount determined at the time of discharge on the basis of quantum meruit, or they may agree that the attorney will receive a contingent percentage fee determined either at the time of substitution or at the conclusion of the case. See Lai Ling Cheng v. Modansky Leasing Co., 73 N.Y.2d 454, 458, 541 N.Y.S.2d 742, 539 N.E.2d 570 (1989).
A discharged attorney may seek two forms of protection. First, under New York statutory law, a departing attorney is entitled to a charging lien on any recoveries obtained by her former client in the proceedings in which she rendered her services. See N.Y. Judiciary Law § 475 (McKinney's 2002) ("From the commencement of an action, special or other proceeding in any court ... the attorney who appears for a party has a lien upon [her] client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order in [her] client's favor, and the proceeds thereof...."). Second, under New York common law, an attorney is entitled to a retaining lien on "all client papers and property, including money, that come into the attorney's possession in the course of employment." Resolution Trust Corp. v. Elman, 949 F.2d 624, 626 (2d Cir.1991). A retaining lien remains in effect until the attorney has been reimbursed for expenses and, as a general rule, the attorney's fee has been determined and either paid or secured. See Lai Ling, 73 N.Y.2d at 457-59, 541 N.Y.S.2d 742, 539 N.E.2d 570. However, if the attorney is discharged for cause, she has no right to compensation or a retaining lien, notwithstanding the existence of a retainer agreement. See Teichner v. W & J Holsteins, Inc., 64 N.Y.2d 977, 979, 489 N.Y.S.2d 36, 478 N.E.2d 177 (1985) (citations omitted).
The rule regarding retaining liens applies differently in contingency cases. When an attorney in a contingency fee case is discharged by her client without cause and prior to the conclusion of the case — i.e., before the client's right to recovery has been established,6 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 ... in place of the retaining lien to secure payment of such." Tops Mkts., 2001 WL 392082, at *3. See also Security Credit Sys., Inc. v. Perfetto, 242 A.D.2d 871,...
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Universal Acupuncture v. Quadrino & Schwartz
...facts underlying this appeal are set forth in a thorough opinion by the district court. Universal Acupuncture Pain Servs., P.C. v. State Farm Mut. Auto. Ins. Co., 232 F.Supp.2d 127 (S.D.N.Y.2002). We repeat them here only to the extent we think necessary to explain our resolution of this In......