MEMORANDUM-DECISION AND ORDER
St. Paul moves for summary judgment dismissing all claims asserted by Ray Goddard to any of the interpleaded funds (approx. $ 5 million). St. Paul bases this motion upon its assertion that under New York law, Mr. Goddard's alleged fee agreement and charging lien upon which he bases his claim are unenforceable because Mr. Goddard is not authorized to practice law in New York.
Mr. Goddard opposes this motion on two grounds. First of all, he contends that St. Paul lacks standing to raise the claim that he is engaged in the unauthorized practice of law. Secondly, addressing the merits of St. Paul's motion, Mr. Goddard asserts that his representation of Servidone did not constitute the unauthorized practice of law within the meaning of New York Judiciary Law § 478.
In addition to opposing St. Paul's motion, Mr. Goddard cross-moves for summary judgment. In this regard, he argues that St. Paul lacks standing to challenge his retainer agreement with Servidone and that Servidone has expressly waived all claims to the interpleaded funds. Alternatively, Mr. Goddard contends that St. Paul should be judicially estopped from raising any objections to his fee in the present action because of its actions and conduct in a state court action which also involved the fees earned as a result of the successful prosecution of the same underlying litigation. St. Paul opposes Mr. Goddard's cross-motion in its entirety.
Howard Blum, Barry Golomb and the Minority Interest of Goddard & Blum oppose both of these motions in their entirety.
Max E. Greenberg, Cantor, Trager & Toplitz ("the Greenberg firm" or "the MEG firm") submitted an affidavit in response to the cross-motions of Goddard & Blum, Ray Goddard, Howard Blum and Barry Golomb requesting that "to the extent any of the cross-motions are successful, any judgment issued on behalf of Goddard & Blum or its partners should provide for the initial payment of $ 106,884.25, plus interest from March 31, 1995, to cross-claimant Max P. Greenberg, Cantor, Trager & Toplitz." See Kamien Affidavit dated November 21, 1995, at P 5.
The court entertained oral argument on these motions on December 5, 1995, and reserved decision at that time. The court informed counsel that a written decision would be forthcoming. The following memorandum-decision and order constitutes the court's conclusions with respect to these motions.
Without going into great detail concerning the facts which underlie this dispute, suffice it to say that the interpleaded funds which are the subject of this dispute resulted from the successful prosecution of a federal contract action which the court will refer to as "the Servidone/Texas matter." The pending motions raise the issue of whether or not Mr. Goddard may rely upon his January 18, 1989, retainer agreement with Servidone Construction Corporation ("Servidone") as a basis for his claim to the interpleaded funds.
Mr. Goddard was a partner in the law firm of Goddard & Blum.
Throughout this litigation, he has maintained that he entered into a retainer agreement on January 18, 1989, with Servidone concerning the Servidone/Texas matter pursuant to which Servidone agreed to pay "Ray Goddard his standard and regularly charged legal fees, and the standard legal fees of those with whom he is associated, plus all disbursements in his representation of this matter." See Spalj Affidavit dated July 21, 1995, Exhibit B attached thereto. In addition, in this same agreement, Servidone agreed to pay
Ray Goddard a sum equal to twenty-five (25%) percent of all recoveries obtained, whether by settlement, court decision or otherwise, in excess of Six Million Dollars ($ 6,000,000), and, in such case, Ray Goddard will refund to me the fees previously charged and/or paid not to exceed fifty (50%) percent of the twenty-five (25%) percent contingency fee.
Mr. Goddard also contends that this retainer agreement was between Servidone and him personally and that Goddard & Blum was not a party to this agreement. As a result of this agreement, Mr. Goddard asserts that he is entitled to a fee of $ 4,139,478.24 plus interest.
Throughout this litigation, St. Paul has challenged the validity of this retainer agreement and has asserted that Mr. Goddard is not entitled to any fee purportedly earned thereunder. In support of its present motion, however, St. Paul relies solely upon its argument that this agreement is unenforceable because Mr. Goddard's representation of Servidone constituted the unauthorized practice of law in violation of New York Judiciary Law § 478.
As a preliminary matter, the court must address an issue that Mr. Goddard raises; i.e., whether St. Paul has standing to raise a claim that he was engaged in the unauthorized practice of law. Although Mr. Goddard uses the term "standing," it is clear that the gravamen of his claim is that St. Paul may not rely upon § 478 as a basis for its challenge to his claim against the interpleaded funds. Mr. Goddard offers two main arguments in support of this position. First of all, he asserts that St. Paul cannot challenge the validity of the retainer agreement because St. Paul was not a party to that agreement. See Goddard's Memorandum of Law at 4. Secondly, he contends that St. Paul may not rely upon § 478 because St. Paul is not an intended beneficiary of that statute. See id.
In response, St. Paul asserts that although it was not a signatory to the retainer agreement, Mr. Goddard stood in a special or fiduciary relationship to St. Paul with respect to the prosecution of the Servidone/Texas matter despite the lack of an express contractual attorney/client relationship between them. See St. Paul's Reply Memorandum of Law at 6. Second, St. Paul contends that it may rely upon § 478 because it is a member of the "public" which § 478 is intended to protect. See id. at 8.
There is very little case law concerning the scope of § 478's protection. New York courts which have addressed this issue, however, have concluded that "its purpose is to protect the public in this State from 'the dangers of legal representation and advice given by persons not trained, examined and licensed for such work, whether they be laymen or lawyers from other jurisdictions.'" El Gemayel v. Seaman, 72 N.Y.2d 701, 705, 536 N.Y.S.2d 406, 409, 533 N.E.2d 245, (1988) (quoting Spivak v. Sachs, 16 N.Y.2d, 163, 168, 263 N.Y.S.2d 953, 211 N.E.2d 329 (construing former Penal Law § 270, the predecessor of Judiciary Law § 478)). The court in El Gemayel further explained that "as a matter of public policy, a contract to provide services in violation of the statute is unenforceable in our State courts." Id. at 705, 536 N.Y.S.2d at 409, 533 N.E.2d at (citations omitted).
In McConnell v. Commonwealth Pictures Corp., 7 N.Y.2d 465, 199 N.Y.S.2d 483, 166 N.E.2d 494 (1960), the New York Court of Appeals addressed the issue of the enforceability of illegal contracts. Although § 478 was not at issue, the McConnell court set forth the public policy reasons for refusing to enforce such agreements. In this regard, the court stated that "'it is the settled law of this State (and probably every other State) that a party to an illegal contract cannot ask a court of law to help him carry out his illegal object, nor can such a person plead or prove in any court a case in which he, as a basis for his claim, must show forth his illegal purpose.'" Id. at 469, 199 N.Y.S.2d at 485, 166 N.E.2d at (quoting Stone v. Freeman, 298 N.Y. 268, 271, 82 N.E.2d 571, 572, 8 A.L.R.2d 304 (citing the leading cases)) (emphasis added). The court went on to note that with respect to such an agreement "the court's concern 'is not with the position of the defendant' but with the question of whether a recovery by the plaintiff should be denied for the sake of public interests', a question which is one 'of public policy in the administration of the law.'" Id. at 469, 199 N.Y.S.2d at 485, 166 N.E.2d at (quoting Flegenheimer v. Brogan, 284 N.Y. 268, 272, 30 N.E.2d 591, 592, 132 A.L.R. 613) (emphasis added).
When El Gemayel and McConnell are read together, the court is convinced that St. Paul may rely upon § 478 to challenge the enforceability of Mr. Goddard's retainer agreement with Servidone, despite the fact that St. Paul was not a signatory to that agreement. First of all, the court finds that St. Paul is a member of the public which § 478 is intended to protect. Moreover, the court agrees with St. Paul that the fact that it is incorporated in Minnesota, rather than in New York, does not change this result. To the extent that St. Paul conducts business in New York and, thus, avails itself of the benefits of New York law, it also is entitled to the protection of the same, including § 478. See Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1240, 2 L. Ed. 2d 1283 (1958).
Furthermore, there is nothing in the language of § 478 nor in the case law construing the same which limits its protection to those who are parties to an allegedly illegal agreement. The absence of such a limitation, combined with the public policy considerations that § 478 is intended to protect, render it of no moment that St. Paul is not a signatory to the agreement the enforceability of which it seeks to challenge. If, as St. Paul claims, Mr. Goddard's representation of Servidone constituted the unauthorized practice of law, then he entered into an illegal contract to provide services which, by statute, he could not provide. Under such circumstances, Mr. Goddard may not ask this court to help him reap the benefits of this illegal agreement.
Although not necessary to the court's conclusion that St. Paul may rely upon § 478 to challenge the enforceability of Mr. Goddard's retainer agreement with Servidone, the court notes that St. Paul's argument that Mr. Goddard stood in a fiduciary relationship to St. Paul with respect to the prosecution of the Servidone/Texas matter is very persuasive. Not only was St. Paul Servidone's surety, but it, in fact, paid many of the legal bills associated with this litigation. Under these circumstances, St. Paul certainly could be considered to be in privity with Servidone with respect to the subject agreement and, as such, has a right to challenge its enforceability.
II. Unauthorized Practice of Law
New York Judiciary Law § 478 provides, in pertinent part, that:
It shall be unlawful for any natural person to practice or appear as an attorney-at-law or as an attorney and counselor-at-law for a person other than himself in a court of record in this state, or to furnish attorneys or counsel or an attorney and counsel to render legal services, or to hold himself out to the public as being entitled to practice law as aforesaid, or in any other manner, or to assume to be an attorney or counselor-at-law, or to assume, use, or advertise the title of lawyer, or attorney and counselor-at-law, or attorney-at-law or counselor-at-law, or attorney, or counselor, or attorney and counselor, or equivalent terms in any language, in such manner as to convey the impression that he is a legal practitioner of law or in any manner to advertise that he either alone or together with any other persons or person has, owns, conducts or maintains a law office or law and collection office, or office of any kind for the practice of law, without having first been duly and regularly licensed and admitted to practice law in the courts of record of this state, and without having taken the constitutional oath. . . .
N.Y. Jud. Law § 478 (McKinney 1983 & Supp. 1995).
As a preliminary matter, the court finds, and there is no dispute, that Mr. Goddard, although licensed to practice law in the State of Maryland, the United States Court of Federal Claims, and the United States Court of Appeals for the Federal Circuit, is not licensed to practice law in the State of New York. Nor is there any dispute that Mr. Goddard's activities with respect to his representation of Servidone constituted the practice of law. What is in dispute, however, is whether Mr. Goddard's representation of Servidone from his office in New York City constituted the unauthorized practice of law in violation of New York Judiciary Law § 478.
St. Paul relies upon the following activities to support its position that Mr. Goddard was engaged in the unauthorized practice of law. Mr. Goddard maintains a law office in New York City as a partner in the law firm of Goddard & Blum. On occasion, he met with Mr. Servidone and other employees of Servidone in this office. He spent approximately 90% of his time working on the Servidone/Texas matter from the time that the firm of Goddard & Blum was formed until he and the firm were discharged as Servidone's attorneys in July 1992. See Goddard Affidavit dated September 7, 1995, at P 15. He appeared with his partner Gregory Ronan as co-counsel of record in the Servidone/Texas matter in the United States Court of Federal Claims and personally tried the case before that court. See id. Moreover, he personally wrote the post-trial and appellate briefs with the assistance of Gregory Ronan and Elizabeth Weaver and personally argued the appeal before the United States Court of Appeals for the Federal Circuit. See id.
In addition, Mr. Goddard counseled Servidone in February 1990, regarding the authority of a power of attorney and discussed Servidone's legal relationship with representatives of Servidone in his New York office. See Spalj Supplemental Affidavit dated September 18, 1995, Exhibit B at P 36 attached thereto. Finally, Mr. Goddard admitted preparing a confession of judgment for Servidone's execution that was ultimately filed in New York State Supreme Court on August 2, 1991. See id., Exhibit B at P 47 attached thereto.
In response to St. Paul's argument, Mr. Goddard posits two theories to support the contrary position that his activities with respect to his representation of Servidone in the Servidone/Texas matter did not constitute the unauthorized practice of law: (1) New York Judiciary Law § 478 does not, under the circumstances of this case, prohibit the aforementioned activities and (2) Mr. Goddard could engage in these activities notwithstanding New York Judiciary Law § 478. The court will discuss each of these arguments in turn.
A. New York Judiciary Law § 478 Does Not Prohibit Mr. Goddard's Activities on Behalf of Servidone
First of all, Mr. Goddard argues that § 478 does not apply to his activities on behalf of Servidone because he never appeared as an attorney for Servidone in a court of record in New York State. See Goddard's Memorandum of Law at 5 (citing Goddard Affidavit, P 16). This argument need not detain the court for long. It is well-settled in New York that "the practice of law forbidden in this State by section 270 of the Penal Law . . . includes legal advice and counsel as well as appearing in the courts and holding oneself out as a lawyer."
Spivak v. Sachs, 16 N.Y.2d 163, 166-167, 263 N.Y.S.2d 953, 955, 211 N.E.2d 329, (1965) (emphasis added) (citing People v. Alfani, 227 N.Y. 334, 125 N.E. 671; Bennett v. Goldsmith, 280 N.Y. 529, 19 N.E.2d 927; Matter of New York County Lawyers' Assn. [Cool], 294 N.Y. 853, 62 N.E.2d 398; Matter of New York County Lawyers Assn. [Roel], 3 N.Y.2d 224, 165 N.Y.S.2d 31, 144 N.E.2d 24). Therefore, the fact that Mr. Goddard never appeared in a New York State Court on Servidone's behalf is not dispositive of the issue of whether or not he was engaged in the unauthorized practice of law.
Secondly, Mr. Goddard argues that because he never held himself out to the public as being licensed to practice law in New York State courts, nor advertised that he was licensed to practice law in this state's courts, nor ever appeared in a court of record in New York, he was not engaged in the unauthorized practice of law. See Goddard's Memorandum of Law at 7. In support of this position, Mr. Goddard cites several opinions of the New York State Bar Association's Committee on Professional Ethics as well as the New York Court of Appeals decision in New York Criminal and Civil Courts Bar Ass'n v. Jacoby, 61 N.Y.2d 130, 472 N.Y.S.2d 890, 460 N.E.2d 1325 (1984). In general, each of the Ethics Committee Opinions which Mr. Goddard cites holds that "partnerships may properly be formed between attorneys admitted to practice in different states, if there is no use of a misleading name or other representation which could create a false impression as to the professional position or privileges of a member not locally admitted." New York State Bar Ass'n Committee on Prof. Ethics Opinion 144 (July 2, 1970); see also New York State Bar Ass'n Committee on Prof. Ethics Opinion 658 (February 14, 1994) (Disciplinary Rules contemplate formation of partnerships between attorneys from different jurisdictions); New York State Bar Ass'n Committee on Prof. Ethics Opinion 359 (September 10, 1974) (not improper to list among associates of New York law firm on letterhead a member of the Bar of a foreign country with appropriate disclosure of status).
The New York Court of Appeals addressed the same issue in Jacoby. The court began its discussion by setting forth the general principal governing the operation of multistate law firms in New York. In this regard, the court stated that
[a] multistate law firm (consisting of partners admitted to practice in different States) may practice law in New York State if at least one of its active partners is admitted to practice in this State, and it may conduct such practice under a firm name comprised of a combination of surnames, although none of them is the surname of a partner licensed to practice in New York. The firm may use a letterhead and advertisements disclosing the firm name only, but if on either there also appears the name of any individual partner or associate who is not admitted to practice in New York there shall be a clear indication of that fact.