The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
Presently before the Court is a motion by Salon Marrow Dyckman &
Newman, LLP ("SMDN"), attorneys of record for Data Stream AS/RS
Technologies, LLC ("Data Stream"), to withdraw as counsel of
record and obtain charging and retaining liens against Data
Stream. SMDN represented Data Stream in two arbitration
proceedings and an action before this Court to confirm one of those
arbitrations. The instant motion was made while the confirmation action,
decided in Data Stream's favor on November 5, 2003, was sub
judice. SMDN's motion is the result of a fee dispute and made
pursuant to Section 475 of the Judiciary Law of New York.
Data Stream is a corporation engaged in the business of
engineering and marketing automated storage retrieval systems for marine
containers, truck chassis and automobiles. Chira Aff. ¶ 1. Joseph
Chira ("Chira") is the Chief Executive Manager of Data Stream.
Id. At some point in 2001, Data Stream found itself
entangled in a pair of arbitration proceedings. In need of new counsel to
represent the company in the proceedings, Chira contacted Robert Marrow
("Marrow"), a former partner in SMDN. See Chira Aff. ¶ 5.
Marrow in turn passed Chira's information on to Louis J. Maione, Esq.
("Maione") of SMDN with the recommendation that Chira and Data Stream might prove to be lucrative
clients. See Maione Aff. ¶¶ 6-10.
After reviewing a file of information relating to Data Stream
given to him by Marrow, Maione contacted Chira in the summer of 2001.
See id. ¶ 12. Chira informed Maione that he was at the time
involved in an ongoing arbitration proceeding against ACEquip, Ltd.
("ACEquip"). Chira had already retained another lawyer to represent Data
Stream in the ACEquip arbitration, but he believed Maione could
provide some assistance in that matter. See Maione Aff. ¶
13; Chira Aff. ¶ 7. Chira informed Maione that he was, however,
interested in retaining him and SMDN to prosecute a claim Data
Stream had against China International Marine Containers (Hong Kong,
Ltd.) ("CIMC"). Maione Aff. ¶ 14.
From the beginning, Chira expressed to Maione a desire to limit the
amount of money Data Stream would spend on legal fees by agreeing
to a cap. See Maione Aff. ¶ 15; Chira ¶ 5. Although
wary of capping his firm's fees at a dollar amount significantly less
than the actual value of the services provided, Maione did suggest in an
August 9, 2001 letter to Chira that he was willing to agree on a cap if
Chira could address his concerns. See Chira Aff. Ex. A. Whether
or not Chira was able to properly allay Maione's fears, Maione
nonetheless forwarded a letter agreement (the "Agreement") captioned
"Retainer Agreement; Transact and CIMC Tianda and Data Stream and Ace quip,
Ltd.".*fn1 The August 30, 2001 letter, which is on SMDN letterhead,
states that "the undersigned is willing to represent you on the following
basis," and is signed by Maione. Below Maione's signature is the
statement, "The Following Terms and Conditions of Representation Are
Agreed and Accepted," followed by Chira's signature on behalf of Data
Stream. Presumably the parties meant the preceding terms and
conditions rather than the "following" as all that follows is the
signature line. Chira Aff. Ex. B; Petition Ex. A.*fn2
Under the terms of the Agreement, Data Stream would be charged
at a rate of $235 per hour of Maione's time. According to the Agreement,
this represented a "discount" of Maione's standard hourly rate of $300.
In order to secure the representation Data Stream was required to
provide SMDN with a check in the amount of $7,500 to serve as a retainer.
Of that amount, the Agreement set forth that $2,750 was to be paid to the
American Arbitration Association as a filing fee. With respect to issue
of a cap, the Agreement stated: [S]ince you wish to "cap" Data Stream's
legal fees at Ten Thousand ($10,000.00) Dollars, we
have agreed to inform you in writing when
we have expended services equal to approximately
fifty (50%) percent of the Ten Thousand
($10,000.00) Dollar "cap", or Five Thousand
($5,000.00) Dollars, based on the discounted hourly
rate (i.e., about twenty (20) hours of time). At
that point, we will discuss with you your desire to
proceed with the matter up to the "cap", or,
perhaps, decide that Data Stream would like
to commit to additional time, i.e., increase the
"cap" to another agreed upon threshold. In that
case, we will amend this agreement, in writing.
However, Data Stream commits to pay for all
services rendered pursuant to this Retainer
Chira Aff. Ex. B; Petition Ex. A. According to Chira, the
requirement that he be notified in writing was inserted at his request.
Chira claims to have wanted the ability to "judge how to proportion
Maione's legal services for the future." Chira Aff. 1 9.
Maione's representation of Data Stream began in September of
2001. During that month Maione filed, on Data Stream's behalf, a
demand for arbitration against CIMC. According to Chira, during the
period from September, 2001 through January, 2002 he never received a
bill from Maione. Nor was Chira informed during this time that Maione's
fees were approaching the 50%/$5,000 mark. Chira Aff. ¶ 10. Finally,
on February 1, 2002, Chira received a letter by facsimile from Maione
alerting him to the fact that Maione's fees had surpassed the $5,000 mark
at the beginning of January. Petition Ex. B. Pursuant to the notification
provision of the Agreement, the February 1, 2002 letter was nearly a full month overdue when it was sent. In addition to informing Chira that
the fees had surpassed 50% of the cap amount, Maione's letter warned that
he anticipated the work he was to do for Data Stream would push
the total to "a few thousand" over $7,500. Maione, therefore, requested
that Chira authorize him to proceed with his representation.
Upon receiving Maione's February 1, 2002 letter, Chira called Maione to
discuss the situation. Chira Aff. ¶ 11. Aside from being nearly a
month late, Maione's letter arrived a mere three days before Data
Stream's arbitration hearing was scheduled to begin. Id.; Petition ¶
28. With the start of the hearing roughly 72 hours away, Chira claims to
have "had little alternative except to allow him to represent Data
Stream at the hearing." Id. According to Chira, he
authorized Maione to continue his work on Data Stream's behalf
and represent the company in the arbitration hearing. Chira also states
that he "again told [Maione] the company had limited resources for this
proceeding, and reminded him of the cap in the Retainer Agreement."
Id. Maione does not dispute that Chira made these statements to
him. In his Reply Affirmation, Maione asserts that the affirmation
"respond[s] to Mr. Chira's affidavit, paragraph by paragraph, where
appropriate, to refute the spurious allegations he has made therein."
Maione Aff. ¶ 5. Yet in response to Mr. Chira's claim that he
reminded him of the cap, Maione states only that "Mr. Chira actually believes that because
he constantly says, `But, I only want to spend $10,000.00 . . .',
[sic] that everyone should agree with him that $10,000.00 becomes the
fixed number." Id. ¶ 38.
Based on Chira's authorization to continue, Maione and SMDN represented
Data Stream throughout the CIMC arbitration proceedings. This
representation included taking part in the hearings in February of 2002,
the drafting and filing of post hearing submissions, a motion for
reargument before the arbitrator and the filing of a motion for
confirmation and modification of the award before this Court.
See Maione Aff. ¶ 41. SMDN's efforts were successful in
winning an award of approximately $152,000 for Data Stream.
See Petition ¶ 20. Maione alleges that he and his firm
expended approximately $30,000 in legal fees in order to obtain this
result. See id. ¶ 59.
Although Chira claims to have requested a bill during his conversation
with Maione in response to the February 1, 2002 letter, Chira did not
receive one until May 6, 2002. See Chira Aff. f 11. Upon
receiving the bill from SMDN, Chira objected to both its amount and
certain of the charges it included. See id. ¶ 14. In
particular, Chira objected to the fact that the bill had greatly
surpassed the $10,000 cap set forth in the Agreement. Maione explained to
Chira that he believed he had been authorized to continue the representation of Data Stream with the
implication that SMDN's bills would be paid regardless of whether they
exceeded the $10,000 cap. Chira and Maione continued to argue over the
amount of the bill from May of 2002 until January, 2003. Their
conversations seem never to have progressed beyond Chira's insistence
that the fees had been capped at $10,000 and Maione's belief that Chira
knew that expecting SMDN to arbitrate the CIMC claim for only $10,000 was
ludicrous and impossible. Due to this lack of progress, Maione sent Chira
a memorandum on January 23, 2003 suggesting Data Stream pay SMDN
a portion of the requested fee and grant the firm a lien on any
arbitration award Data Stream might ...