Legal Malpractice

Defective Retainer Agreements, Fees and Legal Malpractice

By (Andrew Lavoott Bluestone)

Rule 1215, setting forth the necessity for a retainer agreement between attorney and client, has some very strong language.  Under the rule, in the absence of a retainer agrement, no legal fee can be enforced.  This is the rule, no?

Actually, no.  A case this week in the Appellate Division, First Department underscores the reluctance of a court to give the rule any substance.  in Nabi v Sells ;2009 NY Slip Op 09408 ;Decided on December 17, 2009 we see yet another re-iteration of the rule in Seth Rubenstein.  No retainer agreement is necessary, and while collection under the retainer agreement may not proceed, the attorney may yet recover in quantum meruit.

"It was error to dismiss the first cause of action merely because plaintiff is not entitled to the declaration he seeks (see Lanza v Wagner, 11 NY2d 317, 334 [1962], cert denied 371 US 901 [1962]); the proper course is to declare in favor of defendants (see Holliswood Care Ctr. v Whalen, 58 NY2d 1001, 1004 [1983]; Mongelli v Sharp, 140 AD2d 273 [1988]). The aspects of the contingency fee retainer agreement prepared by defendants and signed by plaintiff that allegedly render it noncompliant with 22 NYCRR 1215.1 do not bar defendants from recovering in quantum meruit (see Seth Rubenstein, P.C. v Ganea, 41 AD3d 54, 60-64 [2007]; see also Egnotovich v Katten Muchin Zavis & Roseman LLP, 55 AD3d 462, 464 [2008]; Nicoll & Davis LLP v Ainetchi, 52 AD3d 412 [2008]). " We need not decide whether any of the alleged defects in the retainer agreement, alone or in combination, bar recovery in contract. Provided that defendant attorneys were not discharged for cause, in which case they would not be entitled to any fee
(see Matter of Montgomery, 272 NY 323, 326 [1936]), their recovery would be limited to the fair and reasonable value of their services, computed on the basis of quantum meruit (see Matter of Cohen v Grainger, Tesoriero & Bell, 81 NY2d 655, 658 [1993]; Lai Ling Cheng v Modansky Leasing Co., 73 NY2d 454, 457-458 [1989]; Schneider, Kleinick, Weitz, Damashek & Shoot v City of New York, 302 AD2d 183, 186, 188-189 [2002]; Smith v Boscov's Dept. Store, 192 AD2d 949, 950 [1993]). The rationale for the rule is that, due to the special relationship of the utmost trust and confidence between a client and an attorney, the client has the right to discharge the attorney at any time, for any reason, or for no reason, regardless of any particularized retainer agreement, and the client should not be compelled to pay damages for exercising the absolute right to cancel the contract (see Martin v Camp, 219 NY 170, 173-176 [1916]; see also Demov, Morris, Levin & Shein v Glantz, 53 NY2d 553, 556-557 [1981]; Matter of Montgomery, 272 NY at 327; Matter of Krooks, 257 NY 329, 331-332 [1931]). Against the client's unqualified right to terminate the attorney-client relationship is balanced the notion that a client should not be unjustly enriched at the attorney's expense or take undue advantage of the attorney, and therefore the attorney is entitled to recover the reasonable value of services rendered

Is there a difference between quantum meruit and the retainer agreement amounts?  Actually, no. "Although the annulled contingency fee agreement no longer governs the parties' relationship, it may "be taken into consideration as a guide for ascertaining quantum meruit" (Matter of Tillman, 259 NY 133, 135 [1932]), in addition to such pertinent factors as " the nature of the litigation, the difficulty of the case, the time spent, the amount of money involved, the results achieved and amounts customarily charged for similar services in the same locality'" (Schneider, Kleinick, Weitz, Damashek & Shoot, 302 AD2d at 188-189 [quoting Smith, 192 AD2d at 951]).
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Full post as published by New York Attorney Malpractice Blog on December 22, 2009 (boomark / email).