United States District Court, Southern District of New York
January 14, 2003
FRANK J. BARNES, JAMES TULLY, BARBARA TULLY AND JAMES SULLIVAN PLAINTIFFS,
PRINTRON, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: John F. Keenan, United States District Judge
MEMORANDUM OPINION and ORDER
Before the Court is Michael Flanagan's motion for an order directing Curtis, Mallet-Prevost, Colt & Mosle LLP to pay the retaining/charging lien, accrued interest and expenses in his favor on the proceeds of the above-referenced case. For the reasons outlined herein, the motion is denied.
Michael Flanagan ("Flanagan") represented Frank Barnes ("Barnes") in his action against defendants Printron Inc., et al ("printron"). The matter was bifurcated between the federal court complaint (93 Civ. 5085) and a securities arbitration. In February 1994, a decision in the arbitration was reached and Barnes was awarded $60,000 plus forum fees of $8,400. Flanagan did not collect his disbursements and contingency fee at that time. Flanagan allowed Barnes to keep the full $60,000 award without reduction for his fee because Barnes was in difficult financial circumstances and the civil case was proceeding. See Barnes Apr. 4, 2002 Aff. ¶ 13. On March 22, 1994, I dismissed both counts of the complaint.
In April 1994, a dispute arose between Barnes and Flanagan over case strategy, and on June 8, 1994, I granted Flanagan's request for leave to withdraw from this case. See Barnes v. printron, 93 Civ. 5085, 1994 WL 259822 (S.D.N.Y. June 8, 1994). In addition, I held that Flanagan was entitled to a statutory lien under § 475 of the New York Judiciary Law on any proceeds that Mr. Barnes obtained from the lawsuit. Id.
After Flanagan's withdrawal, Victor L. Zimmerman ("Zimmerman") took over primary responsibility of the case, and represented Barnes until the case settled. Zimmerman, presently with the law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP ("Curtis"), litigated the case for approximately six years until a settlement was reached in December 1999 in the amount of $32,500.
Flanagan and Zimmerman now dispute whether Flanagan's disbursements and contingency fee incurred in the NASD arbitration of February 1994 on behalf of Barnes should be protected by the lien. Flanagan provided Barnes with legal services pursuant to a signed retainer agreement of December 22, 1992. In that agreement, Flanagan agreed to undertake on a contingency basis Barnes' claims before the NASD against Summit Investments, Inc. and Steven Hendricks. Flanagan attempted to change the terms of this retainer agreement in a letter of May 25, 1993 stating that as of that date, the fee base for both the arbitration and federal litigation would be merged, but Barnes never signed the proposal. However, in his affidavit of May 17, 2002, Barnes stated that while pursuing the NASD arbitration, Flanagan began the federal litigation, with Barnes' approval, on July 22, 1993, and that from that time through May 1994, Flanagan treated the litigation and the arbitration as essentially one matter.
Barnes is no longer a party to this action because Flanagan released him on the basis of Barnes stating under oath that he has no money. Flanagan pursues his claims solely against Zimmerman and his law firm Curtis, and he asks this Court to award him payment of a total of $32,347.73, an amount reflecting 25% of the $60,000 arbitration award plus $17,847.73 in disbursements.
I. New York Judiciary Law § 475
Section 475 of the New York Judiciary Law governs attorneys' charging liens in federal courts sitting in New York. See Markakis v. S.S. Mparmpa Christos, 267 F.2d 926, 927 (2d Cir. 1959). The Second Circuit has "long recognized that the lien created by § 475 . . . is enforceable in federal courts in accordance with its interpretation by New York courts." In re Chelsey v. Union Carbide Corp., 927 F.2d 60, 67 (2d Cir. 1991). Under § 475, an attorney is given a charging lien upon the recovery obtained upon his client's cause of action. See Markakis, 267 F.2d at 926, 927. The lien attaches upon commencement of the action and covers compensation for services thereafter rendered during the pendency of the action. Id.
Under New York State law, the characteristics of attorneys' charging liens are that: the attorney must appear as the attorney of record, the fund out of which the attorney seeks to be paid must have been secured substantially by the attorney's services rendered in creating such a fund, the lien relates back and takes effect from the time the attorney's services were commenced, the lien attached at the time of the verdict, report, decision, judgment or final ordered is rendered, the attorney must not have evidenced any intent to waive the lien, and application must be made to the court to determine (according to the reasonable value of the services performed) and enforce the lien. See In re E.C. Ernst, Inc., 4 B.R. 317, 3 (S.D.N.Y. 1980).
II. Flanagan's Claim for Compensation for Services Rendered
in the NASD Arbitration
a. The Arbitration Award
Flanagan was the original attorney of record for Barnes. Flanagan worked on the case from approximately the end of December 1992 until I granted his withdrawal on June 8, 1994. Flanagan's permitted withdrawal as attorney of record does not affect his entitlement to the statutory lien under § 475. Itar-Tass Russian News Agency et al. v. Russian Kurier, Inc. et al., 140 F.3d 442, 451 (2d Cir. 1998). A decision in the NASD arbitration was reached in February 1994 while Flanagan was still Mr. Barnes' attorney. At that time Flanagan allowed Barnes to keep the full $60,000 award without reduction for his fee because Barnes was in difficult financial circumstances and the civil case was proceeding. See Barnes Apr. 4, 2002 Aff. ¶ 13. As I wrote in my June 8, 1994 Opinion, there is no dispute that Flanagan provided Barnes with legal services pursuant to the signed retainer agreement of December 22, 1992. Barnes, 1994 WL 259822, at *1. This retainer agreement spoke only to Flanagan's work on Barnes' claim before the NASD. Since Flanagan here only seeks compensation for his services rendered in the NASD arbitration, the proper source from which to seeks those monies is from Barnes.
The amount received by Zimmerman and Curtis in the settlement of the civil litigation is not related to Flanagan's efforts. The fund out of which Flanagan seeks to be paid was not secured substantially by his services to Barnes. See In re E.C. Ernst, Inc., 4 B.R. at 319.
Therefore, Flanagan may not seek repayment of money he willingly gave to Barnes from a law firm's recovery on a matter unconnected to the NASD proceeding. Flanagan chose to release Barnes and has essentially forfeited recourse to his share of the arbitration award. The Court denies Flanagan's request for a lien to attach on the money received by Zimmerman and Curtis in this matter.
b. The Disbursements
By the terms of the retainer agreement, Flanagan is entitled to the amount of disbursements he made in the course of the NASD arbitration proceeding. See In the Matter of the Estate of Henrietta F. Lamerdin, 26 A.D. 914 (1941). The $17,847.73 sought, reflecting $27,243.73 in disbursements less the $8,400 forum fee check received by Flanagan and the $1000 loan to Barnes which Barnes repaid, reasonably represents the value of the work performed by Flanagan in the course of the NASD proceeding.
The June 1994 Order stated that reimbursement for disbursements would take place at the close of the case as provided for in the December 22, 1992 retainer agreement. Accordingly, Flanagan is entitled to recover disbursements now that the case has settled. However, as stated above, Flanagan's only proper source for these monies is Barnes. Having released Barnes, Flanagan's motion is denied.
For the reasons detailed above, the motion is denied. This case is closed and the Court directs the Clerk of the Court to remove it from the Court's active docket.
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