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Dweck Law Firm, L.L.P. v. Mann

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


September 29, 2004

THE DWECK LAW FIRM, L.L.P., PLAINTIFF,
v.
CYNTHIA ALLEN MANN, DEFENDANT.

The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

MEMORANDUM: OPINION AND ORDER

The Dweck Law Firm, L.L.P. ("Dweck") sued 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, Dweck 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 Court awarded Dweck fees based on quantum meruit and pre-judgment interest amounting to $224,177.*fn1 Mann now moves for reconsideration of that decision on the ground that the Court overlooked controlling legal authority. For the following reasons, Mann's motion is denied.

At the Court's request, the parties have also addressed the issue of whether the judgment in this action should be a charging lien against the underlying lawsuit by Mann, or enforceable on an immediate basis against all of Mann's assets. Having considered their submissions, I now conclude that Dweck may elect to receive the full amount of the award as a charging lien, or to receive a reduced award, enforceable immediately and against all of Mann's assets.

I. STANDARD OF REVIEW

A. Standard of Review for Motion for Reconsideration

Motions for reconsideration are governed by Local Civil Rule 6.3 and are committed to the sound discretion of the district court.*fn2 Reconsideration is an "extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources."*fn3

Under Local Civil Rule 6.3, "the moving party must demonstrate controlling law or factual matters put before the court on the underlying motion that the movant believes the court overlooked and that might reasonably be expected to alter the court's decision."*fn4 The standard for granting a motion for reconsideration is strict so as to prevent repetitive arguments on issues that have been thoroughly considered by the court.*fn5 But the court may grant a motion for reconsideration to "correct a clear error or prevent manifest injustice."*fn6

A motion for reconsideration is not a substitute for appeal.*fn7 Nor is it a vehicle "to reargue those issues already considered when a party does not like the way the original motion was resolved."*fn8 Accordingly, the moving party may not "advance new facts, issues or arguments not previously presented to the Court."*fn9

II. DISCUSSION

A. The Date from Which Pre-Judgment Interest Should Run

The Court awarded Dweck pre-judgment interest on the fee award running from March 22, 1999, the date Mann discharged Dweck. Mann contends that the Court overlooked controlling legal authority to the effect that prejudgment interest must be computed from the date Dweck demanded payment for his services in quantum meruit, not from the date of discharge.

Under New York law, prejudgment interest is computed from "the earliest ascertainable date the cause of action existed."*fn10 Mann cites a number of cases involving awards of counsel fees in which courts interpret the 'earliest ascertainable date' to be the earliest date on which a demand for payment following the completion of services was made. Mann's argument does not meet the strict standards required of a motion for reconsideration. The Court did not overlook the authority on which Mann relies, but simply did not find it persuasive. While it is true, as Mann argues, that many courts have, without analysis, fixed the date from which interest runs as the date of the first demand for payment, others have used the method adopted by the Court ( i.e., the date of termination).*fn11 The Court found that Dweck's cause of action arose on the date Mann discharged the firm, following Dweck's refusal of Mann's demand that it renegotiate its fee downwards.*fn12 At that time a cause of action in quantum meruit accrued.*fn13 In short, Dweck must be deemed to have sought payment as of that date.*fn14

Even if I found the alternative rule to be applicable, interest would not run from the date Dweck brought the present action seeking payment in quantum meruit, as Mann argues, but from the earliest date after discharge on which Dweck sought payment, regardless of whether Dweck sought payment in quantum meruit or under the contract.*fn15 The latest possible date from which interest could be awarded is therefore November 5, 1999, when Dweck brought suit seeking payment in New York Supreme Court.*fn16

B. The Fair Value of Dweck's Services

Mann also challenges the method used by the Court to determine the fair value of Dweck's services to Mann. The Court relied in part on a lodestar analysis, and determined that Dweck expended 300 hours on the matter. Because Dweck was retained on a contingency basis, no contemporaneous time records were kept for his services on behalf of Mann. Jack Dweck ("Mr. Dweck"), a principal of the firm, testified that his firm spent around 400 hours on the matter, a figure which he conceded was little more than a "guesstimate." The Court found Mr. Dweck's testimony credible, taking into account such evidence as, inter alia, the documents Dweck prepared in the course of its representation of Mann. However, the Court discounted his figure of 400 hours by 25%, to 300 hours, to account for the fact that it was merely an estimate, unsupported by contemporaneous time records.

Mann argues that the Court erred in basing its analysis in part on this post hoc estimate. The rule in this Circuit is that a party seeking an award of attorney's fees must support that request with contemporaneous time records.*fn17

"However, in cases governed by state law, such as diversity cases, where the allocation of attorneys' fees constitutes a substantive issue, state law governs the distribution."*fn18 Under New York law, while the burden is on the discharged attorney to keep and present records from which the court may determine the reasonable value of his or her services, the failure to keep contemporaneous time records is not fatal to a fee request, although the court may discount the amount claimed accordingly.*fn19 Mann challenges Mr. Dweck's estimate as "speculative" and mere "whimsy," and argues that such speculation cannot, as a matter of law, be the basis for an award of fees.*fn20 The Court, however, found the estimate to be credible, and well-supported by the evidence in the record and by Mr. Dweck's description of the nature of the services rendered. Mann's arguments challenging the credibility of the estimate raise no facts or controlling legal authority not considered by the Court.

C. Dweck May Choose to Receive the Full Amount of the Award as a Charging Lien, or a Reduced Award on an Immediate Basis

The Court raised the issue, sua sponte, of whether the judgment in this case should be a charging lien on Mann's underlying lawsuit. Having considered the parties' submissions, I now conclude that Dweck is entitled to an award that is enforceable immediately, against all of Mann's assets.

Under New York law, an attorney discharged without cause may choose between two distinct remedies: she may seek a quantum meruit judgment, enforceable immediately against all of the client's assets, or a charging lien against the underlying lawsuit.*fn21 The discharged attorney's recovery in quantum meruit is not limited by the former client's ultimate recovery in the underlying lawsuit.*fn22 Where the reasonable value of the services cannot be determined before the resolution of the underlying lawsuit, the award may be made a charging lien on that lawsuit.*fn23 This may be the case if, because of the work left to be done in the underlying suit, it is not possible to determine the value of the services or the quality of the attorney's performance without reference to the amount of the award, if any.*fn24

At trial, it was undisputed that Dweck was discharged without cause.

Accordingly, Dweck was entitled to choose, as it did, to pursue a claim for quantum meruit, enforceable immediately. The amount of the award can be fixed now, without waiting for the resolution of the underlying action. The Court has heard evidence on the extent and nature of the services rendered by Dweck. Based on that evidence, the Court determined the hours reasonably worked and a fair hourly rate and set a lodestar recovery. Whatever the outcome of Mann's present litigation, it will shed little light on the value of the services Dweck performed over five years ago.

Mann argues that due to "the procedural manner in which this issue has come up, a charging lien is all this Court presently may award."*fn25 Mann contends that the Court may not make a quantum meruit award to Dweck, enforceable immediately against all Mann's assets, because Dweck never properly commenced an action for quantum meruit. Dweck brought this action seeking to recover for breach of the covenant of good faith and fair dealing. At the end of the trial, I permitted Dweck to revive his previously dismissed claims (" Dweck I ").*fn26

Mann now contends that Dweck never asserted a claim for quantum meruit in Dweck I, and so there was no such claim to revive.

Mann's argument is based on a very narrow reading of Dweck I. In that case, Dweck pressed a claim for breach of contract, seeking to recover fees due under the retainer agreement. Liberally construed, however, Dweck's complaint in Dweck I also stated a claim for quantum meruit. Dweck sought to recover "compensatory damages... for work, labor and services."*fn27 This is the essence of a claim for quantum meruit.*fn28 Accordingly, I discussed the merits of Dweck's quantum meruit claim at some length in my opinion dismissing that case.*fn29 Mann was clearly on notice, throughout the present action, that Dweck had raised a claim for quantum meruit.

However, while Dweck is entitled, if it chooses, to receive immediate payment in quantum meruit, it may not recover the full amount of $224,177 on that basis. In calculating the award of $224,177, I began with a lodestar analysis, then made an upward adjustment of 50% for the risk involved in a contingency representation. Having considered Mann's submission, I am persuaded that this risk premium is not consistent with an award enforceable on an immediate basis against all of Mann's assets. Only if the award is made as a charging lien, so that Dweck can recover only from the proceeds, if any, of Mann's suit, is a risk premium justified. Dweck may therefore choose between remedies.*fn30 If Dweck chooses to accept the award as a charging lien, Dweck may receive the full sum of $224,177. However, if Dweck chooses to enforce the award on an immediate basis, it may not receive the 50% risk premium. Without the risk premium, the fee award and interest total $143,380.*fn31

V. CONCLUSION

For the foregoing reasons, Mann's motion for reconsideration is denied. The Clerk of the Court is directed to close this motion [#27 on the docket sheet]. My Opinion of August 6, 2004 is modified in accordance with the discussion above. The award of $224,177 is conditioned on Dweck's willingness to accept the award as a charging lien; if Dweck elects instead that the award should be enforceable on an immediate basis, Dweck may receive only $143,380.

SO ORDERED

Shira A. Scheindlin U.S.D.J.


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