The opinion of the court was delivered by: BERNARD NEWMAN
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
BERNARD NEWMAN, Senior Judge, United States Court of International Trade, sitting as a United State District Court Judge by Designation:
This is a bitterly contested diversity suit by plaintiff Mar Oil, S.A., a Spanish business corporation, Against Francis X. Morrissey, Jr., a New York attorney, who rendered professional services for the plaintiff.
By consent, the defendant collected the proceeds of a settlement of claims brought by the plaintiff which were deposited in an escrow account and maintained in defendant's name in trust for plaintiff at Morgan Guaranty Trust Company of New York ("Morgan Guaranty"). Plaintiff contends that Morrissey, without plaintiff's knowledge or consent, unilaterally withdrew the balance of $ 925,675.38 from the escrow account in purported payment of the balance of Morrissey's professional fees which defendant insists was due him, albeit the plaintiff disputed that any such fee was owing to defendant and that plaintiff disapproved the withdrawal by the defendant of the money from the escrow account.
The complaint is couched in six causes of action which allege, respectively, that defendant used such escrowed funds without authority a his own, and that defendant is indebted to plaintiff for the full amount of the withdrawal; that the fee charged by defendant as represented by the unauthorized withdrawal was unconscionable and unsupportable under a written retainer agreement dated October 31, 1980 entered into by the parties, which called for an agreed hourly rate, plus reimbursable reasonable expenses; that defendant fraudulently induced Sr. Carlos Garcia Monson (Sr. Monson) plaintiff's representative, to sign a document dated February 2, 1984 purporting to have authorized, after the fact, the withdrawal referred to; that the defendant abused his position of trust and confidence flowing from the attorney-client relationship to obtain the signature to such document signed by Sr. Monson; that plaintiff was mistaken concerning the nature of the said signed document as to the amounts and recipients of disbursements covered by the document; and that the defendant fraudulently misrepresented or failed to make proper disclosures in respect to disbursements represented by the document or the nature of the document entirely; and that allowing the defendant to retain said sum of money so withdrawn for the services he rendered would be an unjust enrichment.
Morrissey argues that he undertook an action in New York on plaintiff's behalf which was a "companion" to one pending in Spain, predicated on plaintiff's agreement that Morrissey would be compensated for the New York action on a contingency fee basis and reimbursement of expenses and overhead that defendant associated with him the maritime law firm of Healy & Baillie to assist him in the New York suit; that the New York action was dismissed on application for a summary judgment, that an appeal was filed; that during the pendency of the appeal, Morrissey for plaintiff negotiated and effected a global settlement of both the New York and Spanish litigation and that before the settlement agreement was consummated, plaintiff's representative had agreed that the defendant was to receive a contingency fee of $ 960,000 for his legal services and balance of fees due to Healy & Baillie; and that the recovery for plaintiff under the settlement was $ 8,060,000 which was effected in July 1983; that by consent, defendant deposited the recovery in an escrow account at Morgan Guaranty and the sum withdrawn by defendant from the escrow account represented approximately 12% of the plaintiff's recovery.
The answer further asserts that the withdrawal from the settlement fund was made pursuant to plantiff's instructions in July 1983, and represented the payment of $ 960,000 and an amount for Healy & Baillie's legal fees and expenses, comprising the remainder of the settlement in the account maintained at Morgan Guaranty. Continuing, the answer alleges that on February 2, 1984 plaintiff's representative signed and consented to an accounting of all disbursements made by defendant to date from the Settlement Fund, including the payment of defendant's legal fees in the amount mentioned above, and released and indemnified the defendant from any liability arising from such disbursements. The answer contends that the Mar Oil representative, to maintain secrecy, declined to take a copy of the document back with him and refused to allow defendant to show the document or reveal its contents to any other party. Defendant pleads release from any liability for the disbursement to himself of the $ 925,675.38 and accord and satisfaction applicable thereto; that the payment to himself resolved any alleged dispute with the plaintiff as to the amount due; that plaintiff's claims are barred by waiver, estoppel, laches and unclean hands.
On March 11, 1980 Mar Oil's 239 thousand ton super tanker, the Maria Alejandra, exploded and sank off the coast of Mauretania, West Africa. The accommodation section of the ship sand within 60 seconds causing the loss of 37 of the 44 members of the crew. The Maria Alejandra was a relatively new tanker, having been launched but three years before the explosion Despite the fact that the lead insurance company and all other members of the insurance consortium honored their share of insurance of 2.25 billion pesetas carried on the ship, New Hampshire Insurance Company ("New Hampshire"), carrying 25% of the insurance coverage, refused to pay.
Thereupon, Mar Oil commenced litigation in Spain for 750 million pesetas equivalent to some U.S. $ 10 million, $ 600,000 against New Hampshire for breach of the insurance policy pursuant to the exclusive Madrid jurisdiction suit clause, plus interest, consequential damages, legal fees and costs. New Hampshire alleged a number of grounds for refusing to pay under the policy, including the possibility that the explosion and sinking of the ship was caused by the terrorist act of a West African guerrilla group, the Polisario, or to the unseaworthiness of the ship due to the non-functioning or malfunctioning of certain blowers on the ship that were essential to prevent the dangerious build-up of flammable gases.
In or about September 1980, Sr. Monson, a sophisticated business and professional man, and the managing director of Mar Oil, S.A., communicated with George A. Spyrou, Esq., the son of a business acquaintance. Sr. Monson requested Spyrou to recommend an attorney in the United States with whom he could consult as to the possibility of taking legal steps in the United States that might obtain a more expedited resolution than the Spanish litigation and compel New Hampshire to honor its obligations under the policy in Spain. Spyrou had graduated from law school in England in 1974 and was admitted to practice law as a Barrister in England in November 1980. He had worked for a period of time in New York City with the firms of Healy & Baillie and Cadwalader, Wickersham & Taft. During Spyrou's stay in New York, he had become acquainted with the defendant Morrissey. Spyrou recommended Morrissey and meetings with Sr. Monson were arranged to be held at the end of October 1980 in New York City.
Defendant was admitted to the bar in Massachusetts and California, and thereafter to the bar of the State of New York in October 1973. In the years 1980 to 1982, Morrissey was employed as an associate by Peter Van Dyke Berg, Esq. at 119 Eat 55th Street, New York, NY. During the years 1980-1983, defendant was also employed by a trust or trusts at the same address. Morrissey arranged to bring John T. Hamilton, another New York attorney, into the New York meetings. Prior to that time, Hamilton had been retained by Morrissey on various accident claims involving insurance.
Morrissey, Hamilton and Spyrou met in New York with Sr. Monson and other representatives of the plaintiff, and Sr. Monson furnished the defendant and his associates with a copy of the insurance policy and other relevant documents. Morrissey and his associates (sometimes referred to as "The Team"), prepared a report for Sr. Monson dated October 31, 1980, containing a review of the facts described to them by Sr. Monson and made recommendations for future action.
The Team had first proposed to Sr. Monson that they be retained by plaintiff on a contingency fee basis, under which they would receive 33 1/3% of any recovery. Sr. Monson flatly rejected any form of contingency fee agreement. The Team then proposed a fee agreement based on time spent, to which Sr. Monson agreed. On October 31, 1980, defendant personally drafted a time-basis fee agreement, which Sr. Monson signed on behalf of the plaintiff (the "fee agreement"). As noted the fee agreement provides that The Team would "take such measures you [plaintiff] authorize;" that the Team would be paid at "an agreed hourly rate;" that "this understanding is to be interpreted in accordance with the laws of the State of New York; that this understanding may be changed or modified only by a writing signed by all parties." The Fee Agreement required plaintiff to pay all "reasonable" expenses incurred by The Team and further required plaintiff to forward a fee advance of $ 10,000 to Mr. Spyrou in London.
Until late October 1980, defendant had rarely been involved in litigation, and had never been involved in any litigation involving questions of marine insurance policies, or the seaworthiness of ocean-going tanker vessels, or any other vessels. At this juncture, it should be observed that plaintiff's attorneys have continuously stressed Morrissey's lack of litigation experience, noting, viz, Morrissey's office had no litigation library, no Law Journal subscription, no LEXIS no Telex Morrissey's attorneys responded to such "denigration" by emphasizing that Morrissey had an excellent academic background and was admitted to the Bars of three states that Morrissey was an associate, albeit briefly, with the prestigious firms of Willkie, Farr and Gallagher and thereafter with Cadwalader Wickersham and Taft; and that Morrissey made a vital contribution to Mar Oil's problems by his "unique legal, diplomatic and political experience in resolving difficult and political experience in resolving difficult multijurisdictional, multicultural and multinational matters."
Defendant recommended various acts of "pressure". Formal administrative complaints were prepared and submitted to the Insurance Commissioners of the States of New York and New Hampshire and such complaints were prepared and filed with the Insurance Commissioners on behalf of Mar Oil. Hamilton, of The Team, had correctly predicted that the responses of the Insurance Commissioners would determine that the matters were in litigation in Spain and the Insurance Commissioners would take no action. The responses of the Commissioners were precisely that. Essentially, all of the numerous non-litigation pressure tactics recommended by Morrissey and The Team were ineffective and without any positive outcome.
In December 1980, Hamilton moved to Delhi, New York, and thereafter was not involved with the Mar Oil matter. It should be noted that defendant was not truthful in his advices to hamilton regarding fees he received from Mar Oil, and did not pay Hamilton all the modest fees due him.
Convinced that Mar Oil had a cause of action in the United States courts, defendant associated himself in about January 1981 with the maritime firm of Healy & Baillie in New York. That firm had more than 40 years of extensive experience in litigating maritime cases and was highly regarded in all types of maritime problems. Thereupon, Healy & Baillie conducted legal research on the issue of whether plaintiff had any causes of action against New Hampshire's parent corporation in New York and submitted its opinion letter recommending a cause of action for tortious interference with contractual relations. In due course, Healy & Baillie drafted a proposed complaint accordingly.
Upon plaintiff's authorization, and in July 1981, a complaint entitled Mar Oil, S.A. v. American International Group, Inc., Maurice R. Greenberg & American International Underwriters Corp., S.D.N.Y., 81 Civ. 4641 (RLC), was served and filed. The cause of action was based on tortious interference with New Hampshire's insurance contract and damages were sought for various types of relief.
These insurance company defendants promptly moved to dismiss the New York action, and after restricted discovery, Judge Carter granted a motion on behalf of defendants for summary judgment. Healy & Baillie had prepared all the legal research, submitted legal opinion letters to plaintiff, researched and prepared all legal memoranda and all other legal documents dealing with the various motions, took the depositions of all the witnesses, and obtained and responded to documentary discovery.
Morrissey claims that he, on his part, undertook a wide variety of legal, diplomatic, political and lobbying efforts in both Spain and the United States on behalf of the plaintiff. He interviewed Mar Oil representatives, reviewed the background facts, met with insurance brokers, conducted an investigation of New Hampshire as well as its parent and affiliate, and prepared the regulatory complaints for the Departments of Insurance of New Hampshire and New York. Moreover, Morrissey met with diplomatic officials, various insurance regulators, lobbyists, Spanish counsel for the plaintiff and representatives of New Hampshire, a well as its parent and affiliates. These meetings, he noted, took place in New York, Washington, D.C., Boston, London and Madrid. As pointed up, none of these actions had any positive outcome, but Morrissey claims that it was he who had decided upon and later recommended the conspiracy tort claim against New Hampshire's parent and affiliate for interference with contractual relations between Mar Oil and New Hampshire the insurance policy.
In the New York action, defendant performed no initial legal research, submitted no legal opinions, prepared no legal documents and deposed no witnesses. He did work on a draft of one affidavit in opposition to the summary judgment motion. Twice, Morrissey submitted some questions to be asked by Healy & Baillie at depositions; attended various meetings and accompanied Healy & Baillie partners and associates to depositions. Further, he received copies of documents prepared by Healy & Baillie and generally assisted in communications and worked at controlling costs. In summary, Morrissey's assertions and indications that he performed the "lion's share of the legal work" is absurd. Plainly, Healy & Baillie did the overwhelming share of the legal work -- and that is demonstrated by their meticulous time records, correspondence files, memoranda and final records. At best, Morrissey merely assisted in communications controlling costs, as a "middle man;" and as a "strategist"
According to Morrissey, among the "most significant" things he did in the New York action was to go to Algecires, Spain to obtain an affidavit from the Harbor Master. it appears that the affidavit was in the Spanish language, and was arranged by Mar Oil and its Spanish attorneys without any important participation by defendant. A major factor was obtaining the affidavit from Sr. Lallemand, the Harbor Master at Algecires (the Maria Alejandra's last port before her loss). The fact is that Sr. Lallemand's affidavit was obtained via the Spanish attorneys; and it was plaintiff's Sr. Ramon Larroque, not defendant. who arranged that Sr. Lallemand's affidavit be taken to Seville for legalization. Interestingly, defendant claimed credit for processing the affidavit and requisite legalization -- an entirely inaccurate version -- and then forwarded the affidavit to Baillie in the United States on April 28th, 1982, stating in part, the reason "I could not return to the States until April 27, 1982" -- an interval which plaintiff insists that, after Morrissey's "needless visit" to Algeciras, he utilized for his "own purposes, including visits to other clients."
Furthermore, plaintiff insists that, although Morrissey claimed involvement in the Spanish action, he could not show the Court any letters or evidence in his files from the Spanish lawyers, and actually performed no service in connection with the Spanish action.
In August 1982, Healy & Baillie advised Mar Oil to withdraw the New York action predicated on the facts that they had obtained from discovery and their review of the law. They also advised Mar Oil to rely on the Spanish action which was apparently then proceeding successfully. On the other hand, Morrissey advised Mar Oil to continue the New York action, and Mar Oil decided to do so. The result, however, was that the New York action was dismissed as stated previously. An appeal was filed to the Second Circuit Court of Appeals from the grant of summary judgment to defendants.
On March 23 and April 11, 1983, in connection with plaintiff's appeal from the dismissal of the suit conferences were held before then staff counsel to the Court of Appeals for the Second Circuit, Nathaniel Fensterstock, Esq. in accordance with the standard procedure in such pre-appeal arguments Mr. Fensterstock promoted discussion of settlement of the entire matter on a global basis, recommended a global settlement of all insurance litigation pending in Spain and New York, and recommended payment of the sum of $ 8 million by New Hampshire to plaintiff, while the insurance company offered $ 6 million. Plaintiff accepted Mr. Fensterstock's recommendation, which was then communicated to the attorneys for the insurance company defendants.
On April 1, 1983, Sr. Monson requested a legal opinion in New York concerning the Inchmaree and "follow the leader" clauses of the Policy for use by Mar Oil's Spanish lawyers in the ongoing Spanish action Morrissey communicated that request to Healy, who immediately commenced work on the requested opinion. On April 12th, Healy completed his 19-page detailed opinion regarding the proper legal interpretations of the Inchmaree and "follow the leader" clauses of the Policy. Healy attached his curriculum vitae to the affidavit opinion and forwarded it to Mar Oil for use by its attorneys in the Spanish action. Here, too, Morrissey did not participate in preparing Healy's opinion. By telex on April 2, 1983, Mar Oil informed Healy and Morrissey of detailed optimistic advice Mar Oil had received from its Spanish attorneys regarding the Spanish action. In essence, the Spanish attorneys advised Mar Oil that in Spain, Mar Oil could receive not only the face amount of the Policy (750 million pesetas, approximately U.S. $ 10 million, $ 600,000) but possibly also an adjustment upwards of perhaps $ 16 million.
Settlement discussions continued between the parties without immediate results and a second conference before Mr. Fensterstock was arranged for April 11, 1983, at which conference Mr. Fensterstock requested that the principals attend. At this conference, senior representatives appeared on behalf of New Hampshire, and after discussion, the latter agreed to recommend settlement at $ 8 million. The record shows that the defendant's attorneys in Spain feared a substantially larger award than $ 8 million, and that fear was a major factor in the global settlement.
At the time of the second conference, defendant suggested that he "take over the negotiations for completing the settlement." Thomas Gallagher, worldwide maritime Insurance Manager for American International Underwrites directing the litigation for Mar Oil's adversaries, convincingly testified at trial regarding the fears of the potential award in the Spanish action, and this testimony viewpoint undoubtedly reflected the defendant's recommendation of acceptance of $ 8 million for the eventual settlement.
On or about May 20-21, 1983, New Hampshire through its New York attorneys, agreed to pay the $ 8 million settlement that had been recommended by Mr. Fensterstock. The Insurance Company defendants, to minimize costs, agreed. They also agreed to pay Mar Oil an additional sum of $ 60,000, settling Spanish court-ordered legal fees and costs amounting to approximately $ 234,000. On May 21, 1983, a settlement agreement was entered into between Mar Oil and the New York defendants under which all litigation in New York and Spain would be terminated upon payment in New York to plaintiff of the sum of $ 8,060,000, and that the Spanish action be similarly marked settled and discontinued.
The retainer agreement between the within parties had specifically provided that "if a lawsuit or litigation is authorized outside of Spain, a separate retainer is to be negotiated before commencement." No such agreement was ever negotiated or made. The short of the matter is: there never was an agreement between plaintiff and defendant to a contingency arrangement whereby Morrissey would be paid a percentage of the ultimate recovery, if any, although -- Morrissey insists -- among other things -- that such a percentage agreement had been reached. Morrissey never submitted any such supporting document.
When the ultimate settlement appeared at hand, Morrissey and Sr. Monson addressed the exact amount due for Morrissey's fees. Prior to that time, the plaintiff had paid to its ...