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DWECK LAW FIRM v. MANN

August 6, 2004.

THE DWECK LAW FIRM, L.L.P., Plaintiff,
v.
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 without cause.*fn1 Therefore, the only remaining issue is the calculation of the reasonable value of the services the firm provided to Mann.

  I. BACKGROUND

  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.

  III. DISCUSSION

  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 ...


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