United States District Court, S.D. New York
April 13, 2004.
DATA STREAM AS/RS TECHNOLOGIES, LLC, Petitioner; -against- CHINA INTERNATIONAL MARINE CONTAINERS, LTD., Respondent, PETITION TO WITHDRAW AS COUNSEL
The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge
OPINION & ORDER
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 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