The opinion of the court was delivered by: James Orenstein, Magistrate Judge
Plaintiff Jasmine Gray ("Gray"), who formerly received foster care from defendant City of New York (the "City"), has sued the City and a number of individuals and entities who were involved in providing such care over the years for their alleged violations of Gray's constitutional rights. See generally Docket Entry ("DE") 1 (Complaint). In a motion that does not address the merits of Gray's claims, several defendants now seek to disqualify the law firm of Lansner & Kubitschek (the "Firm") from serving as Gray's counsel and to invalidate the Firm's retainer agreement with Gray (the "Retainer") on the ground that the Retainer is unethical and jeopardizes the integrity of the litigation. DE 92-2 (Notice of Motion).*fn1 Specifically, the movants contend that the Retainer's provision regarding the Firm's role in handling settlement negotiations creates a conflict of interest that may harm them by frustrating a settlement and needlessly increasing the costs of this litigation. For the reasons discussed below, I agree that the Retainer is unethical and may not be enforced but disagree that the latter finding requires the disqualification of Gray's counsel of choice. I therefore grant the motion in part and deny it in part.
On January 23, 2006, in anticipation of filing the instant lawsuit, Gray executed the agreement by which she retained the Firm to represent her in this case. Because the Retainer's fee provisions are at issue in this motion, I reproduce them here in full:
I understand that I will not have to pay any attorneys' fees to my attorneys unless I win or settle the case. If I win or settle the case, the amount of attorneys' fees will be determined in the following ways. (In this agreement, the term "total of all sums recovered" means the total of the sums that I recover, plus all attorneys' fees and costs recovered, less any out-of-pocket disbursements. "I" means myself and anyone else on whose behalf I am suing.)
If I win a judgment under state law only, my attorneys will be entitled to one-third of the total of all sums recovered. If I win a judgment under federal law or both federal and state law, my attorneys will seek to obtain attorneys' fees from the defendants under the Civil Rights Law.*fn2 If the amount awarded by the judge and paid by the defendants in fees is insufficient to total one-third of the total of all sums recovered, the remainder will come from my share of the judgment.
If I settle the case, I agree that my recovery may be settled separately from the attorneys' fees. If there are any settlement discussions, I agree that in such discussions the issues of the merits of the lawsuit and any statutorily-authorized attorneys' fees award may be treated and negotiated separately and that any settlement offer may treat these issues separately. The fees in such an event will be based upon the attorneys' time and hourly rates and may be more than one-third of the total of all sums recovered. The hourly rates for all work are as follows David J. Lansner and Carolyn Kubitschek: $375.00. Other attorneys: $175.00-$300.00. Social workers: $125.00. Law graduates: $125.00 Law students: $100.00 Messengers: $25.00. If the Firm raises its regular rates, the hourly fee will also be raised equally. I further agree that if the defendants make a settlement offer that would require my attorneys to take less than their full fees under the Civil Rights Law, my attorneys may reject the offer or seek the opinion of the judge regarding the reasonableness of the fee. Only if the judge determines that the proposed fee award is reasonable will I respond to the settlement offer.
DE 92-3 (Affidavit of Gino A. Zonghetti) ("Zonghetti Aff.") Ex. F (Retainer) at 1-2.
Gray filed her complaint two days later. I held an initial conference on June 1, 2006 and set a schedule that contemplated the close of discovery on February 11, 2007. DE 22; DE 23. Since then, at the parties' requests, I have granted three extensions of the discovery deadline. See DE 55; DE 69; DE 91.
One of several discovery disputes that engendered such delay gave rise to the issue now before me. On April 10, 2007, the defendants moved to compel Gray to respond to written interrogatories and withdraw certain questions in connection with an earlier deposition. DE 61. Four days later, the defendants supplemented their application with, among other things, an application to compel Gray to produce a copy of her retainer agreement. DE 65. At a conference before me on April 30, 2007, I ordered the Firm to submit the Retainer in camera so that I could assess Gray's claim that attorney-client privilege protected it from disclosure. DE 68. After review, I granted the defendants' motion and ordered Gray to produce the Retainer in unredacted form. DE 70. Shortly thereafter, the defendants requested a pre-motion conference in contemplation of filing the instant motion and I granted the application over Gray's objections. Electronic Order dated May 10, 2007; see DE 71-72.
At my direction, Gray herself attended the pre-motion conference on June 4, 2007, along with her attorneys, so that I could ascertain the extent to which she understood and wished to be bound by the Retainer's provisions regarding settlements. See DE 86 (Transcript of Proceedings held on June 4, 2007) ("Tr."). Some of the statements Gray made during our colloquy gave me pause in that regard. First, in describing why she wished to be bound by the Retainer, she gave an extended answer about the perceived merits of her claims and her counsel, Tr. 6-7, and then, when asked to focus on the Retainer itself, said, "I think this is a good contract that my lawyers made me sign." Tr. 7 (emphasis added). When I asked about the highlighted portion of the latter statement, Gray quickly retracted it. Id.
Second, Gray expressed what appeared to be a belief that she has an agreement with her attorneys that she will be informed of any settlement offer: "I had a conversation with my attorneys, and if they [the defendants] are willing to offer something, they [the Firm's attorneys] will ask me." Tr. 9. Her understanding in that regard is contrary to the text of the Retainer itself. See Retainer at 2 ("if the defendants make a settlement offer that would require my attorneys to take less than their full fees under the Civil Rights Law, my attorneys may reject the offer").
Third, Gray articulated her understanding that in some instances, pursuant to the Retainer, she and her attorneys might disagree as to whether a settlement offer should be accepted, and that in such circumstances, the disagreement would be submitted to a judge rather than resolved by deference to her own wishes. Tr. 9 ("If I agree with [a settlement offer] and they [the Firm's attorneys] don't, I don't know how that's going to work out.... My lawyers will probably go to the judge or something. I don't know."). When I tried to explain that normally a client has the final say over whether to accept a settlement offer, but that the Retainer appears to take away some of that discretion, Gray responded "Yes, I understand. I agree." Tr. 10.
Despite my concerns about certain aspects of Gray's understanding of the Retainer's settlement provisions, it was clear to me that Gray understood that she was giving up certain rights to have the Firm represent her, including some rights that might affect the extent of her monetary recovery, and that she nevertheless wished to have the Firm continue to represent her. Tr. 11-13.
For their part, Gray's attorneys asserted that the Firm's standard practice is to communicate all settlement offers to its clients, notwithstanding its right under the Retainer's explicit terms to reject certain offers unilaterally. Tr. 13. In addition, Gray's counsel asserted that in circumstances in which a client wishes to accept a settlement that would result in her attorneys getting less than what they perceive to be fair compensation, it is appropriate for the attorneys to require the client to discuss the matter with the court rather than acceding to the client's wishes. Tr. 20-21. In the event that the court to whom Gray and her attorneys looked for guidance on the matter declined to provide it, the attorneys did not know whether they would take the position that they could reject the offer or would have to accede to their client's desire to accept it. Tr. 27-30. After considerable difficulty in securing an answer, I finally ascertained that Gray's attorneys take the position that, pursuant to the terms of the Retainer, there are circumstances in which they can unilaterally reject a settlement offer that Gray herself wishes to accept, on the ground that the resulting fee would be insufficient. Tr. 31-32. In light of that position, I granted the defendants leave to file the instant motion. Tr. 32.