The opinion of the court was delivered by: Ronald L. Ellis, United States Magistrate Judge
Before this Court is an application by the movant, defendants outgoing
Quadrino & Schwartz, for the posting of adequate security by
defendants Dipak Nandi, M.D., Anil Menhandru, Iftikhar Malik, Afsar Gui,
Bellalina Acevado, Universal Acupuncture Pain Services, P.C., N and R
Associates, Inc., Urban Medical Diagnostics, P.C., Sterling Medical
Diagnostic, P.C., Millennium Medical Diagnostics, P.C., Allenwood Medical
Services, P.C., Triborough Healthcare Management, Inc., Triborough
Medical Diagnostics, P.C., Fordham Management & Consulting, Inc.,
Fordham Medical Pain Treatment, P.C., Plaza Management & Consulting,
Inc. and Plaza Medical Pain Treatment, P.C. (collectively the "Nandi
defendants") in the amount of $60,421.41, and for a hearing to determine
attorney's fees and costs owing before turning over files in the
above-captioned action to defendants' incoming attorney. For the
following reasons, the application is GRANTED IN PART, DENIED IN PART.
Plaintiffs filed this action on June 12, 2001, under the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), alleging that
defendants defrauded them out of millions of dollars. The Nandi
defendants retained the law firm of Quadrino & Schwartz to represent
them in this action. On August 19, 2002, Quadrino & Schwartz was
discharged. In spite of this upheaval, discovery has been scheduled to
proceed according to pace. However, the Nandi defendants dispute the
attorney's fees and costs submitted to them by Quadrino & Schwartz,
and have refused to pay. In response, Quadrino & Schwartz has refused
to turn over its files to incoming counsel for the Nandi defendants in
this matter. On September 26, 2002, Quadrino & Schwartz filed an
order to show cause, fixing both a charging and retaining lien.
Initially, the Nandi defendants disputed that Quadrino & Schwartz
were discharged without cause. However, on October 15, 2002, counsel for
the Nandi defendants orally agreed that they would not dispute the "for
cause" issue, and both parties agreed to submit to this the Court the
dispute as to the amount of the security to be posted.
The Second Circuit has noted, "[u]pon substitution of counsel in
litigation pending before it the court . . . will normally, as ancillary
to its conduct of the litigation, require a lawyer claiming a lien to
turn over papers subject to the lien upon the client's payment of his
outstanding charges or posting of adequate security for payment."
Pomerantz v. Schandler, 704 F.2d 681, 683 (2d Cir. 1983). The purpose of
posting adequate security is to "prevent the client from failing to pay
fees and expenses to which the attorney is entitled." Shoe Show, Inc. v.
Launzel, 1993 WL 150322 *1 (E.D.N.Y. 1993). Both federal and New York
State law recognize this principle. See, e.g., Casper v. Lew Lieberbaum
& Co., 1999 WL 335334 *8 (S.D.NY 1999). The question before this
Court is what amount need be posted to constitute "adequate security."
Quadrino & Schwartz have asserted that Nandi post security for 10%
greater than the disputed amount of $54,928.56, equal to $60,421.41. The
Nandi defendants have asserted that because the disputed amount of
attorney's fees and costs equals roughly $50,000, they should only be
required to post security in the amount of $25,000, or roughly half the
disputed amount. There is some support for the Nandi defendants'
contention that half the amount of the disputed fee is adequate
security. See Capoccia v. Brognano, 513 N.Y.S.2d 863, 866 (3d Dept.
1987). However, "[c]ommon sense dictates that [the posting of security]
intended to protect an
attorney's claim should be set at the amount
reasonably at issue between the parties." Shoe Show, 1993 WL 150322 at *2
(citation omitted). While the Court need not pass on the merits and
indeed will not decide at this time the reasonableness of Quadrino &
Schwartz's bill, see infra, "the posting of [security] in a lesser amount
would virtually ensure that [the movants] will not get paid for any fees
in excess of that amount, regardless of the merits of their claim." Id.
The Nandi defendants have made no showing that they are unable to post
security in excess of $25,000. Should the Nandi defendants ultimately
prevail on their claims and Quadrino & Schwartz's fees and costs are
found to be excessive, they can simply recover the amount of the security
posted in excess of what this Court determines to be reasonable attorney's
fees and costs. Therefore, Quadrino & Schwartz is ordered to turn
over all of its files in regard to this matter to the Nandi defendants'
incoming counsel, and Quadrino & Schwartz's request for the posting
of security in the amount of $60,421.41 is GRANTED.
B. Determination of Reasonable Attorney Fees and Costs
Quadrino & Schwartz have asserted that this Court must hold a
hearing to determine the reasonableness and amount due in attorney's fees
and costs. However, even the cases upon which Quadrino & Schwartz
have relied recognize that this determination need not be made until the
conclusion of the case. See Casper, 1999 WL 335334 at *7; Shoe Show, 1993
WL 150322 at 2. By requiring the posting of adequate security, this Court
has already secured Quadrino & Schwartz's interests until a hearing
is held at the conclusion of the case. Therefore, Quadrino &
Schwartz's request for an immediate hearing is DENIED.
For the foregoing reasons, Quadrino & Schwartz's application for
the posting of adequate security and request for a hearing to determine
attorney's fees and ...