Legal Malpractice

Account Stated, Legal Malpractice and Termination without Cause in the Southern District

By (Andrew Lavoott Bluestone)

Magistrate Judge James C. Francis writes in  Brooks Banker,  v.Esperanza Health Systems, Ltd.,  05 Civ. 4115 (DAB) (JCF):

"Brooks Banker, an attorney, brings this action against the defendants, his former clients, for unpaid fees. Mr. Banker now moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment on his account stated claims against defendants Esperanza Health Systems, Ltd., Hunt Health Systems, Ltd., P&G Enterprises, Inc., and MHTJ Investments, Inc. (collectively, the "Business Defendants"). For the reasons that follow, I recommend that the plaintiff's motion be granted."

Account stated claims are those where it is said that the biller sent bills and the payor failed to argue or contradict the bills.  When this happens, the courts deem the bill to be undisputed, and often order it paid, even though there are many new disputes about the bill now.

"Whether an attorney discharged without cause is entitled to bring a claim for account stated is a matter of state law that has not been addressed by the New York Court of Appeals. "In the absence of a definitive ruling by the highest court of a particular state, a district court should predict what the highest state court would decide when faced with an undecided issue of state law." Liddle & Robinson, LLP v. Garrett, 720 F. Supp. 2d 417, 424 (S.D.N.Y. 2010) (citing In re Methyl Tertiary Butyl Ether Products Liability Litigation, 415 F. Supp. 2d 261, 268 (S.D.N.Y. 2005)).

In Liddle, the Honorable Peter K. Leisure, U.S.D.J., engaged in such an analysis and concluded that "where an attorney allegedly discharged without cause seeks unpaid legal fees pursuant to a blended contingency and hourly fee agreement, New York's highest court would find, as this Court does, that the attorney is limited to seeking relief in quantum meruit." Id. at 425. Based on this conclusion, Judge Leisure dismissed breach of contract and account stated claims asserted by an attorney against his former client where the attorney had been terminated without cause. Id. at 425-27."

"More compelling is the plaintiff's contention that Judge Leisure's construction of the New York cases upon which he relied was overbroad. While Rubenstein and Sae Hwan Kim both state that an attorney terminated without cause is entitled to recover in quantum meruit, neither holds that such an attorney is precluded from asserting an account stated claim. See also Schneider, Kleinick, Weitz, Damashek & Shoot v. City of New York, 302 A.D.2d 183, 186, 754 N.Y.S.2d 220, 223 (1st Dep't 2002) (identifying remedies for attorney discharged without cause as retaining lien, charging lien, and quantum meruit, but not addressing account stated); Butler, Fitzgerald & Potter v. Gelmin, 235 A.D.2d 218, 218-19, 651 N.Y.S.2d 525, 527 (1st Dep't 1997) (same).

The cases that do address account stated claims hold unequivocally that such claims may be brought by attorneys discharged without cause. For example, in Ferraioli ex rel.

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Suslak v. Ferraioli, 8 A.D.3d 163, 164, 779 N.Y.S.2d 72, 73 (1st Dep't 2004), the court first found that the petitioner, a law firm, had been terminated without cause and then went on to hold that it was entitled to summary judgment on its account stated claim. Similarly, in Zanani v. Schvimmer, 50 A.D.3d 445, 446, 856 N.Y.S.2d 65, 66 (1st Dep't 2008), the court granted summary judgment to a discharged attorney on an account stated claim, which included bills received by the clients after the attorney was terminated. In Bartning v. Bartning, 16 A.D.3d 249, 249-50, 791 N.Y.S.2d 541, 541-42 (1st Dep't 2005), the court overturned a ruling rejecting an account stated claim based on an invoice sent after the attorney had been terminated. Finally, in Salans Hertzfeld Heilbronn Christy & Viener v. Between the Bread East, Inc., 290 A.D.2d 381, 736 N.Y.S.2d 665 (1st Dep't 2002), the court explicitly addressed the argument advanced by the Business Defendants here. It stated:

The motion court, in denying defendants' motion to dismiss, properly rejected their contention that the termination of plaintiff law firm's services relegated plaintiff to recovering in quantum meruit for services rendered to defendants. Termination does not necessarily result in such remedial limitation and, indeed, we have specifically approved recovery by attorneys on an account stated theory for pre-termination services billed on an hourly basis at a contractually agreed rate.

Id. at 381, 736 N.Y.S.2d at 666 (citations omitted); see also Steven Wechsler, Professional Responsibility, 53 Syracuse L. Rev. 737, 760 (2003).Thus, whatever limitations there may be in New York law to the ability of a lawyer discharged without cause to recover under breach of contract or other theories, they do not preclude a claim for account stated. It is therefore appropriate to turn to the specific claims asserted in this case."

Full post as published by New York Attorney Malpractice Blog on February 14, 2011 (boomark / email).