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CRUZ v. OLYMPIA TRAILS BUS COMPANY

November 14, 2005.

MAYRA CRUZ, et al., Plaintiffs,
v.
OLYMPIA TRAILS BUS COMPANY, Defendant.



The opinion of the court was delivered by: HENRY PITMAN, Magistrate Judge

OPINION AND ORDER

I. Introduction

This is a diversity action in which Mayra Cruz and fourteen other passengers sought to recover damages for personal injuries they sustained in a bus accident. The personal injury claims of all the passengers have been settled. The matter is currently before me on remand to resolve a dispute concerning how the contingent fee resulting from Cruz's settlement should be divided between the law firm which commenced the action on behalf of Mayra Cruz — Budin, Reisman, Kupferberg & Bernstein ("Budin, Reisman") — and the law firm that subsequently took over the representation of Cruz and obtained a settlement in the amount of $475,000 — the Law Offices of Rosemarie Arnold ("the Arnold Firm").

  Budin, Reisman and the Arnold Firm consented to my exercising plenary jurisdiction over this fee dispute pursuant to 28 U.S.C. § 636(c) (Docket Item No. 16). The Court has subject matter jurisdiction over the dispute pursuant to the doctrine of supplemental jurisdiction. See Alderman v. Pan Am World Airways, 169 F.3d 99, 101-02 (2d Cir. 1999); Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 449 (2d Cir. 1997); see also Tancredi v. Metro. Life Ins. Co., 378 F.3d 220, 225 (2d Cir. 2004) ("We have consistently held that `[w]henever a district court has federal jurisdiction over a case, it retains ancillary jurisdiction after dismissal to adjudicate collateral matters such as attorney's fees.'"), quoting In re Austrian & German Bank Holocaust Litig., 317 F.3d 91, 98 (2d Cir. 2003).

  II. Facts

  A. Facts Underlying the Personal Injury Claim and the Fee Dispute

  Based on hearings I held on August 13 and September 4, 2002, I make the following findings of fact.

  On August 14, 1999, Mayra Cruz was a passenger on a bus that was involved in an accident on the New Jersey Turnpike, in Ridgefield Park, New Jersey. Cruz suffered multiple injuries in the accident, was hospitalized for six days and underwent surgery to repair her tibia.

  While Cruz was hospitalized, an investigator from Budin, Reisman met with her. Cruz retained Budin, Reisman as her attorneys on August 18, 1999. Budin, Reisman was also retained by the fourteen other plaintiffs in this matter. On or about September 20, 1999, Budin, Reisman commenced the underlying suit in Supreme Court, Bronx County; an amended complaint was filed on September 29, 1999. Defendants removed the matter to this Court on October 28, 1999.

  By letter dated November 29, 1999, plaintiff terminated Budin, Reisman's representation and hired the Arnold Firm. In June 2000, the Arnold Firm settled plaintiff's case for $475,000 and received a contingency fee of $157,855.12. However, prior to the closing of this case, Budin, Reisman contacted Judge Rakoff and claimed that it was entitled to a portion of that contingency fee for work that it performed on the case prior to its termination.

  B. Procedural History

  On February 11, 2003, I issued an Amended Opinion and Order ruling that (1) New York law applies to Budin, Reisman's claim, (2) Budin, Reisman was not terminated for cause and (3) Budin, Reisman was entitled to fees on a quantum meruit basis in the amount of $16,500 for the sixty hours of work it performed on plaintiff's case (Docket Item No. 26). I arrived at this figure by multiplying sixty hours by $275, which I concluded was a reasonable hourly rate. On October 23, 2003 the Court of Appeals vacated my Amended Opinion and Order and remanded the matter for further proceedings. Budin, Reisman, Kupferberg & Bernstein, LLP v. Law Office of Rosemarie Arnold, 79 Fed. Appx. 460 (2d Cir. 2003). The Court of Appeals agreed with my conclusion that New York law applied to this dispute but found that I had applied New York law erroneously. Specifically, the Court of Appeals stated:
The law pertaining to fee disputes between attorneys when a discharge is not for cause is . . . clear. The Court of Appeals announced in Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655, 602 N.Y.S.2d 788, 622 N.E.2d 288, 290 (1993), that the "discharged attorney may elect to receive compensation immediately [upon discharge] based on quantum meruit or on a contingent percentage fee based on his or her proportionate share of the work performed on the whole case. That right can only be limited by waiver or operation of law." In Cohen, the discharged attorney told the new attorney that he would seek his fee "at an appropriate time." Id. at 290. Although the new attorney argued that it would be "unconscionable" and against the spirit of a "contingency" fee to allow discharged attorneys to take a contingent fee after they know the outcome of the litigation, the New York Court of Appeals held that when attorneys agree to put off getting a quantum meruit recovery up front, a contingent fee basis should be presumed, with the discharged attorney receiving a "prorated share." Id. at 290-91. Although the New York Court of Appeals has held that "[w]here [a] discharge is without cause, the attorney is limited to recovering in quantum meruit the reasonable value of the services rendered," Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 44, 556 N.Y.S.2d 239, 555 N.E.2d 611 (1990), that case applies to disputes between lawyers and their clients, whereas Cohen is the proper authority to guide decisions in disputes between lawyers or sets of lawyers.
The district court erred in applying the quantum meruit basis of recovery. Accordingly, we vacate the district court's judgment so that it may apply the relevant law as set forth in Cohen.
79 Fed. Appx. at 461.

  Thus, in light of the Court of Appeals' decision, my task is to determine the proportionate shares of the work performed by Budin, Reisman and the Arnold Firm and allocate the ...


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