United States District Court, S.D. New York
January 16, 2004.
EDWARD C. KING, Plaintiff -against- LAWRENCE A. FOX, Defendant
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge Page 2
Defendants Lawrence A. Fox ("Fox"), Lenre, Lapidus & Franquinha,
P.C., ("LLF") and Legal Vision, Inc. ("Vision") (collectively,
"Defendants") and have moved for summary judgment, pursuant to
Fed.R.Civ.P. 56, and have moved to strike plaintiff Edward C. King's
("King") jury trial request. King, in turn, has cross moved for
summary judgment, pursuant to Fed.R.Civ.P. 56, and for an order directing
Fox to disgorge monies and fees. For the reasons set forth below, Fox's
summary judgment motion is granted, and King's motion is denied.
King is domiciled in and a citizen of the State of Tennessee and a
former member of the rock band Lynyrd Skynyrd.
Fox is a New York resident a lawyer retained by King to obtain certain
royalties. LLF is a New York law firm. Vision is incorporated under the
laws of and transacting business in the State of New York.
King commenced this action against Defendants on June 4, 1997, filing a
complaint alleging a breach of fiduciary duty,
unjust enrichment, undue influence, conversion, and a violation of New
York Judiciary Law § 487. Defendant Fox answered and counterclaimed
for an accounting of monies owed.
On May 8, 1998, Defendants filed a summary judgment motion, based upon
King's violation of the statute of limitations for bringing an action in
1997 predicated upon a retainer agreement executed in 1976 and a
representation that ended in 1990. Summary judgment was granted and
King's action was dismissed with prejudice. See King v. Fox, No. 97 Civ.
4134, 1999 U.S. Dist. LEXIS 2795 (Mar. 9, 1999). Following discovery,
Fox's counterclaim proceeded to jury trial before the Honorable
Magistrate Judge James C. Francis, IV, and the counterclaims were
Meanwhile, King appealed the summary judgment decision, and the Second
Circuit concluded that "King has raised a genuine issue of material fact
as to whether Fox continued to represent him, thus tolling the statute of
limitations on King's claim." King v. Fox, 28 Fed. Appx. 95, 99 (2d Cir.
2002) *fn1 The Second Circuit thus vacated the summary judgment
order and remanded for further proceedings. Id. Upon remand, the parties
conducted further discovery, including additional depositions.
The instant motions were heard and marked fully submitted on October 8,
The facts are set forth based upon the Local Rule 56.1 statements of
the parties and supporting declarations.
From 1972 to 1975, King was a member of the rock band Lynyrd Skynyrd
("the Band"). King left the Band in 1975.
In 1974, King and the Band entered into various written agreements with
MCA Records, Inc. ("MCA") providing for the payment of royalties. By
written agreement, dated November 26, 1976, King retained attorney Fox to
pursue King's rights to royalties from MCA stemming from his association
with the Band. This agreement set out that:
[The] fee for services in this matter will be a
contingency fee, based upon any money recovered
from the defendants. Our fee for representing you
will be 1/3 of the recovery, whether by way of
settlement, trial, judgment, or other method.
Fox represented King's interests in connection with the pursuit of
royalties from MCA, including the commencement of two lawsuits in New
York, one in 1976 and one in 1982, against MCA which were respectively
settled in 1978 and 1989. The terms of the
settlement of the 1976 lawsuit required MCA to pay King a sum of
money, and to make payment of future royalties and provide royalty
statements. One third of the settlement amount was paid to Fox's then law
firm, and the balance was remitted to King pursuant to their agreement.
Thereafter, royalty payments from MCA were remitted to Fox, who deposited
them into his firm's escrow account, remitting two thirds to King
and paying one third to his firm. This practice continued
uninterrupted from 1979 until 1995.*fn2
In the late 1970's, John K. Groon ("Groon"), an attorney representing
King, reviewed both the settlement of the first lawsuit against MCA and
the scope of the one third fee agreement between Fox and King. On
October 18, 1978, Groon informed Fox that he advised King that Fox's
reading of the retainer was correct. On October 25, 1978, Groon sent Fox
the settlement documents which were executed by King, and neither Groon
nor King raised any further question with respect to the scope of the
Beginning in April 1995, King has received royalty payments relating to
the Band directly from MCA, and has not remitted to Fox a one
On June 4, 1997, King filed suit against Fox for taking a one
third share of King's royalties, alleging claims for breach of fiduciary
duty, unjust enrichment, undue influence, conversion, and a violation of
New York Judiciary Law § 487.
I. Motion for Summary Judgment
A. The Summary Judgment Standard
Summary judgment is granted only if there is no genuine issue of
material fact, and the moving party is entitled to judgment as a matter
of law. Fed.R.Civ.P. 56(c); see generally 6 James Wm. Moore, et al.,
Moore's Federal Practice ¶ 56.15 (2d ed. 1983). The court will not
try issues of fact on a motion for summary judgment, but, rather, will
determine "whether the evidence presents a sufficient disagreement to
require submission to a jury or whether it is so one sided that
one party must prevail as a matter of law." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 251-52 (1986).
The moving party has the burden of showing that there are no material
facts in dispute, and the court must resolve all ambiguities and draw all
reasonable inferences in favor of the party opposing the motion.
Bickhardt v. Ratner, 871 F. Supp. 613 (S.D.N.Y. 1994) (citing Celotex
Corp. v. Catrett. 477 U.S. 317 (1986)). Thus, "[s]ummary judgment may be
granted if, upon
reviewing the evidence in the light most favorable to the non
movant, the court determines that there is no genuine issue of material
fact and the movant is entitled to judgment as a matter of law."
Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir. 1993).
A material fact is one that would "affect the outcome of the suit under
the governing law," and a dispute about a genuine issue of material fact
occurs if the evidence is such that "a reasonable jury could return a
verdict for the nonmoving party." Anderson, 477 U.S. at 248; R.B.
Ventures, Ltd, v. Shane, 112 F.3d 54, 57 (2d Cir. 1997).
1. Fox's Failure to File a Retainer Agreement is Insignificant
King argues that he is entitled to summary judgment since Fox did not
file a retainer with the New York State Office of Court Administration
("OSC") and is thus not entitled to legal fees. Under 22 N.Y.C.R.R. §
Every attorney who, in connection with any action or
claim for damages for personal injuries or for
property damages or for death or loss of services
resulting from personal injuries . . . accepts a
retainer or enters into an agreement, express or
implied, for compensation for services rendered or to
be rendered in such action, claim or proceeding,
whereby his compensation is to be dependent or
contingent in whole or in part upon the successful
prosecution or settlement thereof, shall,
within 30 days from the date of any such retainer or
agreement of compensation, sign personally and file
with the Office of Court Administration of the State
of New York a written statement of such retainer or
agreement of compensation . . .
Thus, pursuant to the Uniform Rules of Court, New York attorneys
are required to file retainer agreements in personal injury and property
damage cases, neither of which is applicable here.
The instant case revolves around a contractual dispute, and does not
present a tort for either personal injury or property damage. To adopt
King's expansive interpretation and perceive this as a property damage
case would require a filing for every contingency fee, eviscerating the
rule's property damage limitation. All available caselaw refers only to
personal injury and tort cases, even the cases King cites in support of
his argument. See Rodriguez v. City of New York, 66 N.Y.2d 825 (1985)
(wrongful death); Rabinowitz v. Counsins, 219 A.D.2d 487 (1st Dep't 1995)
(medical malpractice). Subdivisions (e) and (f) of 22 N.Y.C.R.R. §
603.7 reflect the concerns of typical tort cases, referring to medical
records, loss of time from employment or loss of income, repair bills,
and repair estimates.
Thus, 22 N.Y.C.R.R. § 603.7(a)(1) is inapplicable to the instant
case, and Fox's failure to file a retainer agreement is insignificant.
2. The Special Verdict Form Did Not Establish that the Fee
Arrangement Was Unconscionable
King further argues that the special verdict submitted on Fox's counter
claim established that the fee arrangement was unconscionable,
and that it governs here as either "law of the case" or by collateral
estoppel. King points out that to the question: "has Mr. Fox established
by a preponderance of the evidence that his gain from the contingency fee
was not so large in proportion to the services he rendered as to make the
contract between him and Mr. King unconscionable," the jury answered no.
Thus, the jury found that Fox did not establish by a preponderance of
evidence that contingency fee was not unconscionable.
However, the jury verdict stated a double negative, and that the fee
arrangement was not not unconscionable by a preponderance of evidence
does not necessarily mean that it was unconscionable. In fact, to the
question: "has Mr. Fox established by a preponderance of the evidence
that the contract was made in good faith without unfairness or
overreaching, that is, it was fair, reasonable and fully known and
understood by Mr. King as Mr. Fox's client," the jury was deadlocked.
Thus, neither the law of the case, nor collateral estoppel is
applicable here. Under the law of the case, when a court decides upon a
rule of law, this ruling governs in the same
case. DiLaura v. Power Authority of the State of New York, 982 F.2d 73
(1992). "The doctrine of collateral estoppel, or issue preclusion, bars
subsequent litigation of an issue if the issue in the second action is
identical to an issue that was raised, necessarily decided and material
in the first action, provided that the party against whom the defense is
raised had a full and fair opportunity to litigate the issue in the
earlier action." Schweizer v. Mulvehill, 93 F. Supp.2d 376, 389
Here, there is no identity of issues. Furthermore, Fox's counterclaim
sought damages for the non payment of royalties between 1995 to
the time of trial in 2000 and into the future, while King's claims
concern recovery of legal fees paid to Fox from 1978 until 1995.
Unconscionability in the fee arrangement here may well go to the length
of time under consideration.
3. The Retainer Agreement Was Proper under the Circumstances
a. King Has Not Established a Breach of Fiduciary Duty
As both sides concede, Fox stood in a fiduciary relationship to King as
his attorney. However, in order for King to claim the breach of a
fiduciary duty by Fox, he must allege and prove misconduct. Simply
because a fee arrangement was not ultimately advantageous to the client
does not translate into a
breach of a fiduciary duty. This is the case as "disappointment at having
made a bad deal . . . does not translate into fraud or breach of
fiduciary duty without proof of misconduct." Fuchs v. Schick, No. 01
Civ. 10224, 2003 WL 21283461, at *2 (June 4, 2003). "Courts will protect
counsel's right to an agreed upon contingent fee
percentage, unless counsel has forfeited his right to compensation by
misconduct, or the agreement was induced by fraud, or the attorney has
taken some unconscionable advantage of his client, or the agreement is
illegal." Schweizer, 93 F. Supp.2d at 403-04.
Here, the terms of the retainer agreement were not per se a breach of
fiduciary duty. The retainer agreement provided for a legal fee of one
third of all monies recovered, which fits within the purpose and
standards of contingency fee agreements commonly used across the
country. For instance a one third contingency fee is specifically
provided for by New York Court Rules in personal injury and property
damage cases. 22 N.Y.C.R.R. § 603.7. Nationally, the contingency fee
range is from 33% to 50%, and the Schweizer court considered a one
third contingency fee presumptively valid. Schweizer, 93 F.
Supp.2d at 403.
Contingency fees account for the risk taken in representing a client.
Here, King first came to Fox without any documents, not knowing how much
he would be entitled to, whether debt owed by group members would subsume
some or all of any
recovery, and whether a recovery would entail extensive litigation
or simply negotiation. There was also no way of knowing the amount of
royalties ultimately to be recovered over the years. Furthermore, King
had no money and no ability to pay a retainer or hourly fees. Here,
litigation was successful, and both parties were rewarded handsomely with
King receiving in excess of a million dollars due to Fox's efforts.
King further alleges that Fox failed to disclose to him the true terms
of the retainer, that Fox prevented him from understanding its terms, and
that he would not have agreed to the retainer had he understood its
Fox conveyed the terms of the retainer to King in writing, explicitly
[The] fee for services in this matter will be a
contingency fee, based upon any money recovered
from the defendants. Our fee for representing you
will be 1/3 of the recovery, whether by way of
settlement, trial, judgment, or other method.
Furthermore, in 1978, Groon, an attorney representing King, reviewed both
the settlement of the first lawsuit against MCA and the scope of the one
third fee agreement between Fox and King. Neither King nor Groon
raised any questions as to the retainer agreement at the time. In fact,
in a 1978 letter, Groon advised King that Fox's reading of the retainer
Moreover, the fact that Fox was in New York and King in Alabama erodes
the credibility of King's claim that Fox prevented him from understanding
the terms of the retainer agreement. King was an experienced musician by
the time he came to Fox. He had been in the music business for fifteen
years by 1976 when the retainer was signed. He co-founded Strawberry
Alarm Clock, a group that distributed five albums and had a number one
hit, and he hired two lawyers for various legal problems. King also had
experience with attorneys in other realms, hiring attorneys to assist him
with a publishing company, bankruptcy, and a matrimonial matter.
Furthermore, in 1982, King had additional problems with MCA's royalties
and again contacted Fox. Fox agreed to pursue the matter, and King did
not ask for a retainer or even discuss the fee arrangement. King
testified under oath that he assumed the same arrangement as in his first
case would govern. Fox had settled the first MCA case in 1978, and by
1982, he had paid King royalties for four years in accordance with the
retainer. Six years after the first retainer agreement was entered in
1976, the parties entered into precisely the same arrangement.
King further claims that he phoned Fox in or around 1986, requesting
that Fox stop taking one third of his artist's royalties. King
claims that Fox responded that he could not change the fee arrangement
because it was tied to the settlement or original court order. Fox denies
that such a discussion took
place. King, however, alleges that he never saw language in the settlement
documents indicating that legal fees were tied to the settlement; that
Groon never mentioned any connection; that he was in possession of the
settlement documents in 1986; and that he never contacted a lawyer to
determine whether there was a court order controlling legal fees. King
also testified at trial that he did not want to deal with the fee issue
until after settlement, thereby undermining his subsequent claim that he
thought they were connected. No one told King that the settlement would
not go forward if he did not consent to a fee arrangement at the time.
After being allegedly told of this connection in 1986, King did nothing.
Moreover, as the alleged conversation took place approximately ten years
after the retainer was signed in 1976 and eight years after settlement
was completed in 1978 (by that point, King had received royalties for
eight years), it is irrelevant to King's original understanding of the
King additionally attacks the scope of the retainer agreement, claiming
that it only referred to artist's royalties, as his writer's royalties
were still being paid at the time he retained Fox. However, as King
concedes, soon afterwards, King's writer's royalties were no longer
paid. The retainer agreement refers to "any money recovered from the
defendants" and does not limit itself to artist's royalties. King also
accepted royalty payments under the agreement for years since
settlement in 1978
without raising this distinction; litigation in this case
only commenced in 1997.
b. King Has Not Established Undue Influence
King contends in his third cause of action that he was the subject of
undue influence carried through until 1995. He alleges that undue
influence was exerted because he was in a desperate finance situation, a
distraught emotional state, inexperienced in dealings and affairs, and
because he lacked an independent advisor. King asserts that Fox continued
to exert undue influence for 17 years by "falsely representing that
plaintiff had agreed to the undisclosed terms, falsely representing the
amount of work done under the agreement and directing plaintiff to repose
trust and confidence in him, all the while that defendants exercised
absolute control over plaintiff's royalty payments." (Compl. ¶ 66.)
However, dire financial straits represents no basis to set aside the
retainer agreement. Rather, contingency fees are employed for precisely
this reason. King may have been in a distraught mental state, but he was
not incapacitated, institutionalized, or under the care of a
psychiatrist, and there is no evidence to establish his incompetence.
Furthermore, as discussed above, King was not inexperienced in legal
matters. Even if he were, however, this does not state a basis for
recision of a
retainer agreement, and no authority has been set forth for such a
proposition. Additionally, there is no obligation for an attorney to
ensure that a potential client has an "independent advisor" upon the
signing of a retainer agreement. Here, King could have sought independent
advice from his contacts in the music industry, but did not, and later on
the retainer agreement was, in fact, reviewed by Groon in 1978. As a
practical matter, it would have been difficult for Fox to exert undue
influence over King for 17 years since they hardly saw each other and
lived in different parts of the country. No material fact has been
presented to establish undue influence.
c. King Has Not Established that the Agreement Was
There is further no evidence that the retainer agreement was
unconscionable. The standard for setting aside a contract based upon the
doctrine of unconscionability is extremely high. As the Second Circuit
noted in Doctor's Assocs. v. Jabush, 89 F.3d 109, 113 (2d Cir. 1996), "An
unconscionable bargain is one which `no man in his senses and not under
delusion would make on the one hand, and . . . no honest and fair man
would accept on the other.'" (quoting Hume v. United States, 132 U.S. 406,
411 (1889)). Accord Morris v. Castle Rock Entm't, 246 F. Supp.2d 290,
294-95 (S.D.N.Y. 2003). "Unconscionability is determined by reference to
the relative benefit of the bargain to the parties at the time of its
making, the nature of the methods employed in negotiating it and the
relative bargaining power of the parties." Id. (quoting United
States v. Bedford Assocs., 657 F.2d 1300, 1312-13 (2d Cir. 1981)). New
York Court of Appeals cases employ similar language, explaining that to
support a finding of unconscionability, there must be a showing that the
contract was "both procedurally and substantively unconscionable when
made." Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10 (1988).
Substantive unconscionability is not triggered because a contract
provision in a case happens to benefit one side. Allstate Ins. Co. v.
Jacobs, 208 A.D.2d 578, 579 (2d Dep't 1994).
Here, at the time the retainer agreement was entered, King had no idea
what he might recover from the record company, and had no money to pay an
attorney. Fox agreed to represent him without any idea of the potential
value of the case. A one third contingency fee is standard
throughout the state and country. There was also no procedural unfairness
as Fox did not employ deceptive fine print or high pressure
d. King Has Not Established a Violation of Judiciary Law
Under Judiciary Law § 487:
[A] n attorney who willfully receives any money for or
allowance for or on account of any money which he has
not laid out, or becomes answerable for, is guilty of
a misdemeanor, and in addition to the punishment
prescribed therefor by penal law, he forfeits to the
party injured treble damages, to be recovered in a
There is a very high burden of proof to establish this violation. As
the court explained in Schweizer, 93 F. Supp.2d at 408, relief under the
statute "must be carefully reserved for the extreme pattern of legal
delinquency." See also Mackley v. Sullivan & Liapakis PC, No. 98
Civ. 4860, 1999 WL 287362, at *3 (S.D.N.Y. May 7, 1999). In Scheizer, the
attorney intentionally withheld facts from his client and from a
Surrogate Court about the legal fee, and the court found there was
insufficient evidence to establish a violation of the statute. Id. at
409. In the instant case, conduct is not even comparable because there
was no deceit, and King had full knowledge of the fee arrangement.
There further must be a chronic, extreme pattern of legal delinquency.
Gonzalez v. Gordon, 233 A.D.2d 191 (1st Dep't 1996); Nobile v. Schwartz,
2000 WL 1753036 (S.D.N.Y. 2000). Thus, even egregious misconduct will not
rise to the level of a violation of 487 if there is no pattern of
intentional deceit or wrongdoing. For instance, in Liebert v. Gelbwaks,
234 A.D.2d 164 (1st Dep't 1996), even though the lawyer violated his
fiduciary duty to the client and misdirected escrow monies, there was
insufficient proof to establish a violation. King can point to no pattern
of egregious conduct.
e. King Has Not Established Conversion
King claims in his Fifth Cause of Action that Fox converted his money
by receiving his legal fee pursuant to a retainer agreement. "The
elements of conversion under New York Law are: (1) the party charged has
acted without authorization, and (2) exercised dominion or a right of
ownership over property belonging to another, (3) the rightful owner
makes a demand of the property, and (4) the demand for the return is
refused." Fabry's S.R.L. v. IFT Int'l, No. 02 Civ. 9855, 2003 WL
21203405, at *3 n.3 quoting Seanto Exports v. United Arab Agencies,
137 F. Supp.2d 445, 451 (S.D.N.Y. 2001)). Here, the elements of
conversion have not been established. Fox did not take fees without
authorization since they were taken in accordance with the retainer
agreement. Furthermore, there was no demand made and refused. King never
demanded repayment of fees taken.
4. Fox Has Established Ratification
Fox further has established that King ratified the fee agreement. King
accepted payment of his royalties from Fox without protest for
approximately 17 years. A party must act promptly to repudiate a contract
or will be deemed to have elected to affirm it. Edison Stone Corp. v.
42nd Street. 145 A.D.2d 249, 253 (1st Dep't 1989). In fact, a party who
executes a contract under duress and then acquiesces to the contract for
any "considerable" length of time, ratifies the contract. Sheindlin v.
Sheindlin, 88 A.D.2d 930
(2d Dep't 1982) (deeming ratified an agreement that was partially
complied with for almost three years).
At the time of the first settlement with MCA in 1978, King consulted a
lawyer, Groon, about the scope of the retainer agreement. Groon confirmed
to King that according to the retainer agreement, Fox could recover one
third of his royalties as long as he received them from MCA. King's own
sworn statements indicate that he was fully aware in 1978 how the
retainer agreement would be enforced by Fox. Nevertheless, King
acquiesced to Fox taking one third of his royalties as legal fees from
1978 until 1995. King only brought suit in 1997.
5. This Case is Barred
Moreover, this case is barred. Critical events took place over twenty
years ago. The signing of the retainer took place twenty seven
years ago. Groon, the attorney who reviewed the retainer agreement in
1978 for King, died many years ago. Fox's litigation files pertaining to
King's cases were also culled when the litigations were completed.
Neglect in promptly asserting a claim for relief, if such neglect
causes prejudice to the adverse party, invokes the doctrine of laches,
barring enforcement. Dwyer v. Mazzola, 171 A.D.2d 726 (2d Dep't 1991);
Skrodelis v. Norbergs, 272 A.D.2d 316 (2d Dep't
2000) ("The doctrine of laches is an equitable doctrine which bars the
enforcement of a right where there has been unreasonable and inexcusable
delay that results in prejudice to a party."). Whether laches bars an
action is a question addressed to the discretion of the court. E.
Armata, Inc. v. David Lee's Produce Serv. Corp., No. 99 Civ. 20422002 WL
31834451, at *7 (S.D.N.Y. Dec. 17, 2002).
Here, Fox has been asked to defend a lawsuit, commenced in 1997, that
centers around a retainer agreement executed in 1976. To defend himself,
Fox would have to reconstruct conversations, meetings, and negotiations
that occurred over twenty years ago. Fox points to a loss of memory by
relevant witnesses in support of a finding of prejudice. Fox further
culled his files after each litigation was completed, and thus he would
now have to defend himself on a partial record. The destruction or loss
of documents also supports a finding of prejudice due to delay. O'Dette
v. Guzzardi, 204 A.D.2d 291, 292 (2d Dep't 1994). Finally, Groon died
years ago, and the death of a witness is a serious prejudice caused by
6. King Has Not Established a Claim for Punitive Damages
As the retainer agreement was proper under the circumstances, King does
not establish a claim for punitive damages.
II. Motion to Strike the Jury Trial Request
Fox further moves to strike King's jury trial request, arguing that as
King's claims and relief sought are equitable in nature, there is no
entitlement to a jury trial. However, as summary judgment is granted in
Fox's favor, the issue of a jury trial need not be dealt with here.
For the reasons set forth, summary judgment is granted in Fox's favor.
Enter judgment on notice.
It is so ordered.