United States District Court, S.D. New York
August 6, 2004.
THE DWECK LAW FIRM, L.L.P., Plaintiff,
CYNTHIA ALLEN MANN, Defendant.
The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge
OPINION & ORDER
The Dweck Law Firm, L.L.P. ("the Dweck firm" or "the firm")
filed this diversity action against Cynthia Allen Mann ("Mann"),
a former client, alleging breach of the covenant of good faith
and fair dealing. A bench trial began on August 3, 2004, and was
scheduled to conclude on August 4, 2004. At the close of the
defendant's case, the firm elected to withdraw its claim for
breach of the covenant of good faith and fair dealing, and
instead pursue a claim against Mann for fees based on quantum
meruit. This decision was driven by the Second Circuit's
decision in Universal Acupuncture Pain Servs., P.C. v. Quadrino
& Schwartz, 370 F.3d 259 (2d Cir. 2004), where the Court of
Appeals held that under New York law,
[i]f a lawyer is discharged for cause, he or she is
not entitled to legal fees. If the lawyer is
discharged without cause and prior to the conclusion of the case, however, he or she may
recover either (1) in quantum meruit, the fair and
reasonable value of the services rendered, or (2) a
contingent portion of the former client's ultimate
recovery, but only if both of the parties have so
agreed. . . . Recovery on a quantum meruit basis is
called for even where the attorney discharged without
fault was employed under a contingent fee contract.
Id, 370 F.3d 259
, 263 (2d Cir. 2004) (quotation marks and
citations omitted). It is undisputed that Dweck was discharged
Therefore, the only remaining issue is
the calculation of the reasonable value of the services the firm
provided to Mann.
Prior to September 23, 1998, Mann engaged the Dweck firm to
advise her with respect to various issues involving her
employment with First Union National Bank ("First Union" or "the
Bank"). On September 23, 1998, the parties entered into a written
retainer agreement, whereby the firm agreed to prosecute,
negotiate, adjust or settle a claim for wrongful discharge, age
and gender discrimination, harassment, failure to promote, and mental
anguish against First Union and others, on Mann's behalf.
Pursuant to the retainer agreement, Mann was to pay $12,500 upon
execution of the agreement, and, "[s]hould the action or
proceeding result in a recovery, whether by suit, settlement or
otherwise, [Dweck] shall receive thirty-three and one-third (33
1/3%) percent of all sums recovered against which [Mann] shall be
credited the Twelve Thousand Five Hundred ($12,500) Dollars
advanced to [Dweck] hereunder." See Retainer Agreement Between
Cynthia Allen Mann and the Dweck Law Firm L.L.P. ("Retainer
Agreement"). Mann paid the $12,500.
In connection with its obligations under the retainer
agreement, Jack Dweck, a principal of the firm, entered into
negotiations with First Union on Mann's behalf. As a result of
these negotiations, the Bank offered Mann $1 million, plus
outplacement services. Mann declined the settlement offer.
Thereafter, Mann and First Union agreed to mediate their dispute.
During a February, 1999 mediation before the Honorable Richard
Cohen, First Union offered Mann $1,035,000. Dweck recommended
that Mann accept the offer, but she declined because she believed
her claim was worth more.*fn2 By letter dated March 22, 1999, Mann terminated her relationship with the firm,
having paid no fees beyond the original $12,500.
Sometime in 1999, Mann retained a new attorney to pursue her
claim against the Bank. In February, 2000, acting through her new
attorney, Mann filed suit against First Union in the United
States District Court for the Northern District of Illinois,
seeking $4 million in damages. The action was transferred to the
Western District of North Carolina in June, 2000, and trial is
scheduled for November, 2004.
II. APPLICABLE LAW
Under New York law,*fn3 when a discharged attorneys seeks
to recover fees in quantum meruit, courts consider "various
factors in  determin[ing]  the reasonable value of the
services rendered." Ingber v. Sabato, 645 N.Y.S.2d 918, 920 (3d
Dep't 1996). These factors include, inter alia, "the difficulty
of the matter, the nature and extent of the services rendered,
the time reasonably expended on those services, the quality of
performance by counsel, the qualifications of counsel, the amount
at issue, and the results obtained (to the extent known)." Sequa Corp. v. GBJ Corp., 156 F.3d 136, 148 (2d
Cir. 1998). See also General Star Indemnity Co. v. Custom
Editions Upholstery Corp, 940 F. Supp. 645, 652 (S.D.N.Y. 1996);
Smith v. Boscov's Dep't Store, 596 N.Y.S.2d 575, 576 (3d Dep't
1993); Meyer, Suozzi, English & Klein, P.C. v. Albin & Richman,
196 Misc.2d 159, 163 (Dist. Ct. Nassau Co. 2003). "The
determination of the reasonable value of the attorney's services
is a matter within the sound discretion of the trial court."
Sequa Corp., 156 F.3d at 149 (quotation marks omitted).
Where the discharged attorney had a contingency fee contract
with the client, the court may take that fact into account in
calculating the reasonable value of the service rendered. See
Ruggiero v. R.W. Gross Plumbing and Heating, Inc., 641 N.Y.S.2d 189,
191 (3d Dep't 1996) ("[I]n making the [quantum meruit]
award, [the lower court] correctly considered the contingency
agreement as one fact in determining the value of services
rendered."); Gurry v. Wellcome, Inc., No. 98 Civ. 6243, 2000 WL
1702028, at *1 (S.D.N.Y. Nov. 14, 2000) ("[T]he court may take
into account the fact that services were rendered on a contingent
basis."). However, "[a]lthough the contingency provisions of the
terminated retainer agreement may be considered when determining
the reasonable value of the services rendered, the magnitude of
any recovery in quantum meruit does not depend upon the terms of the agreement." Realuyo v. Diaz, No.
98 Civ. 7684, 2000 WL 307407, at *3 (S.D.N.Y. Mar. 23, 2000).
This is true even where the discharged attorney obtained a
settlement offer for the client that was not consummated. See
Ruggiero, 641 N.Y.S.2d at 189-91 (quantum meruit fee should
not be based exclusively on a percentage of the settlement offer
the attorney obtained for the client); Smith, 596 N.Y.S.2d at
576 (same). Moreover, the recovery in quantum meruit may be
"more or less than the amount provided for in the retainer
agreement." Meyer, 196 Misc.2d at 162.
In undertaking a calculation of the fees to be awarded in
quantum meruit, federal district courts may employ a "lodestar"
analysis.*fn4 Such an approach is not required, and a court
employing the lodestar analysis must also "carefully consider
all the factors relevant to a quantum meruit fee analysis
. . ." Sequa Corp., 156 F.3d at 148-49. See also Casper v. Lew
Lieberbaum & Co., 182 F. Supp.2d 342 (S.D.N.Y. 2002) (Ellis,
Magistrate J.) (employing lodestar approach to assist in
calculating quantum meruit fee application). Finally, a discharged attorney seeking compensation in quantum
meruit is entitled to interest on any recovery from the date of
discharge. A "quantum meruit action is essentially an action at
law, inasmuch as it seeks money damages in the nature of a breach
of contract, notwithstanding that the rationale underlying such
causes of action is fairness and equitable principles in a
general rather than legal, sense . . . Thus, [the court is]
required to award interest" pursuant to section 5001 of New
York's Civil Practice Law and Rules ("N.Y.C.P.L.R.").*fn5
Ogletree, Deakins, Nash, Smoak & Stewart P.C. v. Albany Steel
Inc., 663 N.Y.S.2d 313, 315 (3d Dep't 1997). See also Spanos v.
Skuoras Theatres Corp., 235 F. Supp. 1, 17 (S.D.N.Y. 1964)
(awarding interest on attorney's fees calculated in quantum
meruit and citing C.P.L.R. § 5001 in support thereof) (rev'd in
part on other grounds); Brent v. Keesler, 302 N.Y.S.2d 349,
351-52 (2d Dep't 1969); In re Montgomery's Estate, 284 N.Y.S. 5,
8 (4th Dep't 1935). The rate of interest is nine percent per
annum. See N.Y.C.P.L.R. § 5004.
Because the Dweck firm was retained on a contingency basis, no contemporaneous time records were kept with respect to the number
of hours the firm devoted to Mann's negotiations with the Bank.
Jack Dweck testified that he estimates that the firm spent
approximately 400 hours on Mann's action against First Union.
See 8/4/04 Transcript ("Tr.") at 32. These hours include time
expended drafting documents and correspondence, attending
meetings, negotiating with the Bank, preparing for and attending
a mediation session, and communicating with Mann via telephone
and in person. See id. at 32-48.
Dweck further testified that at the time he represented Mann,
his hourly rate for non-contingency cases was $350 per hour, and
his son's rate was $175 per hour.*fn6 Because Mann was a
"high-maintenance" client, Dweck handled her case almost
exclusively, with little assistance from his partners and
associates. Specifically, Dweck estimates that he personally
handled approximately 95 percent of the work done on Mann's
behalf. This was true even in the evenings and on the weekends,
when Dweck made sure that either he or his son were accessible to
Mann at all times. See id. at 51-52.
I find Dweck's testimony regarding the hours devoted to Mann's
case to be credible, but because Dweck acknowledges that the
total hours was nothing more than a "guesstimate," and because there are no records to
support the testimony, a 25 percent discount of that guesstimate
is appropriate. A review of the evidence submitted to the Court
demonstrates that the Dweck firm prepared a number of documents
on Mann's behalf, and attended several meetings and negotiation
sessions. Moreover, based on Mann's testimony during trial, I
conclude that she likely was a demanding client who required
considerable attention. However, even giving Dweck the benefit of
the doubt, his firm could not have spent more than 300 hours
representing Mann between September, 1998 and March, 1999. Of
these hours, 95 percent were performed by Dweck (285 hours), and
five percent were performed by H.P. Sean Dweck (15 hours).
Based on all of the testimony, I further conclude that Jack
Dweck is an extremely experienced attorney who specializes in
employment law, and was highly qualified to represent Mann in her
negotiations with the Bank. Though the underlying claim against
First Union may have been typical, it was probably more difficult
in this instance because of Mann's high salary (resulting in a
high settlement demand) and her need for constant attention. In
particular, Dweck testified that Mann micro-managed his actions,
insisting on constantly overseeing every aspect of the
representation and personally editing documents. See id. at 39.
This likely made the representation somewhat more difficult than
the typical employment case. Finally, although Mann failed to consummate a
settlement during Dweck's representation, he did obtain a
settlement offer of $1,035,000. Notably, had Mann accepted that
offer, under the terms of the Retainer Agreement, the Dweck firm
would have received $332,500.*fn7
Given all of these circumstances, I conclude that the value of
the services the firm provided to Mann in connection with her
claim against First Union is approximately $153,562. I begin with
a lodestar analysis: 300 hours expended by Jack Dweck and his
son, multiplied by their respective rates (285 hours multiplied
by $350/hour for Jack Dweck, and 15 hours multiplied by $175/hour
for H.P. Sean Dweck). This amounts to $102,375. Because of the
risk involved in contingency representation, this figure should
be increased by a factor of 50 percent, bringing the total to
$153,562. See Ruggiero, 641 N.Y.S.2d at 191 ("[I]n making the
[quantum meruit] award, [the lower court] correctly considered the contingency agreement as one fact in determining the value of
services rendered."); Gurry, 2000 WL 1702028, at *1 (same).
Considering the "the difficulty of the matter, the nature and
extent of the services rendered, the time reasonably expended on
those services, the quality of performance by counsel, the
qualifications of counsel, the amount at issue, and the results
obtained," Sequa Corp., 156 F.3d at 148, this result is
The $12,500 paid to the Dweck firm as a retainer must be
subtracted from the fee award, bringing the total fees to
$141,062. Finally, pursuant to N.Y.C.P.L.R. § 5001, the Dweck Law
Firm is entitled to pre-judgment interest on this amount,
accruing from March 22, 1999, the day the firm was terminated and
continuing until the date of this order. Therefore, the firm is
entitled to interest amounting to $83,115. IV. CONCLUSION
For the foregoing reasons, Dweck is entitled to fees and
pre-judgment interest amounting to $224,177. The parties are to
bear their own costs. The Clerk of the Court is directed to
prepare a final judgment and close this case.