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United States District Court, S.D. New York

April 13, 2004.


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 Agreement.

 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. Id.

  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 ultimately receive from CIMC. See Petition Ex. C. Chira rejected this suggestion. Maione filed the instant petition to withdraw and requesting charging and retaining liens.*fn3 Data — Stream does not oppose SMDN withdrawing as counsel of record, but is strongly opposed to their being granted liens. Discussion

 The Motion to Withdraw

  The first issue that should be addressed is SMDN's request to withdraw as Data — Stream's counsel of record. In light of the fact that the confirmation action was fully briefed prior to SMDN filing its petition, Data — Stream does not object to allowing SMDN to withdraw. See Chira Aff. ¶ 3. The request is therefore granted.

  With respect to the requested liens, Section 475 of the New York Judiciary Law ("Section 475") provides:

From the commencement of an action, special or other proceeding in any court . . ., the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order in his client's favor. . . . The court upon the petition of the client or attorney may determine and enforce the lien.
N.Y. Judiciary Law § 475 (McKinney's 1997). Although an arbitration proceeding is not "an action, special or other proceeding" as contemplated by Section 475, the filing of a confirmation action in a district court brings the matter within the purview of the statute. See Spinello v. Spinello, 334 N.Y.S.2d 70, 75-76 (N.Y.Sup.Ct. 1972). Upon filing of the confirmation the lien automatically came into existence. See Harley & Browne v. Ressler & Ressler, 957 F. Supp. 44, 48 (S.D.N.Y. 1997). The enforceability of the lien is not, however, automatic. As the statute makes clear, that determination is to be made by the court upon petition. N.Y. Judiciary Law § 475.*fn4 Interpeting the Agreement

  Whether SMDN is entitled to exercise the lien — and to what extent it can be exercised — is dependent upon whether its fees are restrained by a $10,000 cap.*fn5 In order to make that determination, the Court must first resolve how the terms of the Agreement should be interpreted. When faced with the task of interpreting a contract, a court's primary objective must be to give the contract's words the effect of the intent of the drafting parties. See Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993). Thus, "[w]hen the meaning of a contract is litigated, a reviewing court ordinarily looks only at the words used by the drafters, who presumably understood what they intended." Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 426 (2d Cir. 1992). If the parties' intent is clearly discernable from the language of the contract, that intent controls. See Quest Equities Corp. v. Benson, 598 N.Y.S.2d 186, 187 (App. Div. 1st Dep't 1993).

  In this instance the contract's language is clear and the parties' intent is readily discernible. The Agreement plainly states, * [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)." Chira Aff. Ex. B; Petition Ex. A. This sentence leaves no doubt that it was Chira's intention to cap Data — Stream's legal fees at $10,000. It is also clear from this language that Maione understood Chira's desire and sought to craft the Agreement in a manner consistent with that desire. The parties' intention that a cap be placed on fees is further made clear by the inclusion in the Agreement of a process by which the cap could be increased.*fn6 There would be no need to establish such a procedure were it not the parties' intention that a cap be placed on fees.

  The fact that the word "cap" appears within quotation marks throughout the Agreement does not render the intention of the parties to include a cap in the Agreement any less clear. When interpreting contracts, courts are advised to accord the language its plain meaning. Concurrently, courts must take note of the circumstances surrounding the drafting of the contract and the purpose for which it was drafted. See Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990) (MA) court should accord [contractual] language its plain meaning giving due consideration to `the surrounding circumstances [and] apparent purpose which the parties sought to accomplish.'" (quoting William C. Atwater & Co. v. Panama R.R. Co., 246 N.Y. 519, 524)); Aron v. Gillman, 309 N.Y. 157, 163 (1955) ("It is well settled that in construing the provisions of a contract we should give due consideration to the circumstances surrounding its execution, to the purpose of the parties in making the contract, and, if possible, we should give to the agreement a fair and reasonable interpretation.").

  The word "cap," when used in a retainer agreement, has a plain and well — understood meaning. There can be no debate that whether it is used in quotation marks or not, the word cap means to set a quantity's upper limit. The context in which the word is used in no way contradicts this interpretation of its meaning. Rather, setting a dollar amount of $10,000 and suggesting that Data — Stream might decide in the future to "increase the `cap' to another agreed upon threshold," Chira Aff. Ex. B; Petition Ex. A, removes any uncertainty as to the meaning of "cap."

  There is simply no reason to believe the parties intended for the word "cap" to have any meaning other than the one typically ascribed to it. Although it is not uncommon for parties to a contract to provide their own, specific definitions to a contract term and to do so by placing the word in quotation marks, there is absolutely no indication that was the intention in this instance. Unlike contracts that employ this tactic, the Agreement does not provide its own definition of "cap" or otherwise imply it is a previously defined term.

  In light of the fact that the parties' intent is clear and that their can be no misunderstanding as to the meaning of the words used to convey that intent, the Agreement cannot be considered ambiguous. Whether a contract is unambiguous, and if so, what construction is proper are legal questions to be answered by the Court. Seiden Assocs., Inc. v. ANC Holdings. Inc., 959 F.2d 425, 429 (2d Cir. 1992). In order for the Court to find the language of the Agreement ambiguous, the Court would have to believe that a reasonable person examining the Agreement in its full and proper context, fully aware of the customs, practices and usage of terminology in the area of retainer agreements, would be capable of ascribing more than one meaning to the Agreement's language. See Walk — In Med. Ctrs., Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987). For the reasons already discussed, the Court does not believe this to be the case.

  Even if the Court were to view the meaning of the section of the Agreement discussing a cap as ambiguous, basic principles of contract law dictate that the ambiguity be construed against Maione and SMDN. Where an ambiguity exists, courts are obligated to construe the contract's language "most strongly against the party who prepared it, and favorably to a party who had no voice in the selection of its language." Jacobson v. Sassower, 499 N.Y.S.2d 381, 382 (1985). This principle applies with particular force in cases involving retainer agreements drafted by lawyers. See Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 67 (2d Cir. 2000). In this instance it is clear both from the parties' submissions and the Agreement itself that Maione, on behalf of himself and SMDN, was the drafter. Maione, therefore, must suffer the consequences of any perceived ambiguities. For better or worse for Maione, the Court does not find any ambiguities to exist, however. The Lack of a Written Modification

  Maione's argument that he was authorized to exceed the $10,000 cap should be addressed. Both parties agree that on February 1, 2002, Chira instructed Maione to continue his representation of Data — Stream knowing full — well that the legal fees were about to surpass the $7,500 level. See Chira Aff. ¶ 11; Maione Aff. ¶ 37. Neither side, however, offers evidence that Chira authorized Maione to exceed the $10,000 cap. In fact, Maione implies that during the conversation in which Chira told him to continue with his representation Chira continued to insist that he wanted to spend only $10,000 on legal fees. See Maione Aff. ¶ 37. The most telling piece of evidence that Chira had authorized Maione and SMDN to surpass the $10,000 limit would be a written modification of the Agreement. The Agreement itself contemplates, if not demands, just such a document. According to the Agreement, if the parties agreed to increase the cap they would "amend this agreement, in writing." Chira Aff. Ex. B; Petition Ex. A. No such writing exists. Maione concedes, "Mr. Chira . . . never forwarded any writing instructing me to continue, with the CIMC matter." Maione Aff. ¶ 39. The implication is that no writing exists that would, consistent with the suggestion of the Agreement, indicate an agreement between Chira and SMDN to increase the $10,000 cap. Yet, Maione still expects, in opposition to the spirit of basic contract law principles including the parol evidence rule and the statute of frauds, the Court to place greater value on alleged statements than on a written document. The Court is not willing to do that.

  In fact, SMDN's argument is predicated almost exclusively upon an attempt to have the Court either ignore the text of the written documents or discount the clear words of those documents. The petitioner prefers the Court instead rely on the petitioner's proffered history of events and intentions. Worse still, in order to advance SMDN's argument, Maione feels compelled to fill his Reply Affirmation with invective and name — calling directed at his former client and to cavalierly dismiss Chira's arguments as "nonsense." The often bolded and underscored language does not obscure the fact that the language of the Agreement is unambiguous and the intent of the parties to include a cap is clear.

  Nor is the Court swayed by SMDN's attempt to shift the burden of responsibility for staying within the cap or having it increased from its shoulders to those of Data — Stream and Chira. Maione repeatedly states that Chira had an obligation to tell him to "stop" if Chira did not want him to exceed the $10,000 cap. See Petition ¶ 37; Maione Aff. ¶ 40. The reality, however, is that based on the terms of the Agreement and that Maione was the individual responsible for recording and calculating the fees, the burden to either stay within the cap or have it increased by written modification rested with Maione. Had Maione required Chira to sign a written modification increasing the cap on February 1, 2001 or thereabout, he would have been justified. Maione would also have been acting within his rights had he informed Chira that he would terminate his representation of Data — Stream once the fees reached the $10,000 level if Chira did not sign such a writing. To claim, however, that Chira had an obligation to prevent the cap from being exceeded is an inappropriate attempt at burden shifting. Quantum Meruit Relief is Not Available

  In what is essentially an aside, Maione suggests that he and SMDN are entitled to quantum meruit relief. See Maione Aff. ¶ 55. Under the doctrine of quantum meruit, when one party agrees to accept the services of another, an implied contract to pay the reasonable value of such services is formed. GSGSB, Inc. v. New York Yankees, 862 F. Supp. 1160, 1170 (S.D.N.Y. 1994). But, where there is already an express contract to render such services to a party, an implied contract is not formed. See Clark — Fitzpatrick, Inc. v. Long Island R.R. Co., 521 N.Y.S.2d 653, 656 (1987) ("A `quasi contract' only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment."). Thus, under New York law, the existence of an express contract will ordinarily preclude quantum meruit relief. In this instance the existence of the Agreement prevents the Court from providing SMDN with equitable relief.

  The Court recognizes that in certain respects this result is less than satisfying. There is very little doubt that SMDN and Maione provided significantly more than $10,000 worth of legal assistance to Data — Stream and SMDN. The existence, however, of an express contract governing the nature of the representation and setting forth a $10,000 cap on fees is also beyond doubt. SMDN had an obligation to monitor its fees and to insist upon either increasing the cap or withdrawing as counsel. In this respect SMDN failed. As inequitable as this result might seem, it is the result dictated by the contract drafted by SMDN and SMDN's conduct. If courts do not hold lawyers to the terms of the contracts they draft, who then can courts expect to be bound by contracts?


  For the reasons set forth herein, SMDN's motion to withdraw as Data — Stream's counsel of record is granted. SMDN's requests to enforce charging and retaining liens are, however, denied. Data — Stream is directed to pay SMDN the outstanding balance of the $10,000 owed in fees, plus any verified costs and expenses incurred by SMDN.*fn7


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