United States District Court, W.D. New York
DR. GWENDOLYN COLE-HOOVER, Plaintiff,
DOCCS, et al., Defendants.
DECISION AND ORDER
JEREMIAH J. McCARTHY, Magistrate Judge.
Familiarity with the facts of this case is presumed. By Order to Show Cause ("OSC") dated March 13, 2014 ,  I outlined my concerns as to the retainer agreement which the Law Offices of Prathima Reddy LLC ("Reddy") seeks to enforce by motion dated February 22, 2014 , and invited the parties to address the enforceability of that agreement. Reddy responded by Declaration dated March 27, 2014 , and plaintiff responded by submissions dated April 16, 2014 [423, 424, 425].
Plaintiff alleges that "[t]here was never a retainer agreement signed", and claims that "we agreed on $25, 000 flat fee payable at time settlement was paid. No other discussions on any other fee agreements occurred". Plaintiff's Response , ¶¶16, 6. For purposes of this motion I need not determine whether or not the retainer agreement was executed by plaintiff, since - for the following reasons - I conclude that the agreement is unenforceable even if it was executed. Therefore, Reddy's motion  is denied.
A. Can the Retainer Provision be Interpreted as a Minimum Fee Agreement?
As detailed in the OSC, the retainer agreement provides for a "non-refundable retainer amount of $50, 000" ([414-2], §2), which is prohibited by Rule 1.5(d)(4) of the New York Rules of Professional Conduct (22 N.Y.C.R.R. §1200.0) ("A lawyer shall not enter into an arrangement for... a nonrefundable retainer fee"). However, while prohibiting a nonrefundable retainer agreement, Rule 1.5(d)(4) allows "a lawyer [to] enter into a retainer agreement... containing a reasonable minimum fee clause".
"Non-refundable fee' agreements, by definition, allow an attorney to keep an advance payment irrespective of whether the services contemplated are rendered. By contrast, a minimum fee' agreement is a forecast by the attorney of the minimum amount that a client can expect to pay in order for the attorney to represent the client to completion in the contemplated matter. If the attorney is discharged prior to completion, but after entering into a minimum fee' agreement, he or she is entitled to payment in quantum meruit." Matter of Cooperman , 187 A.D.2d 56, 57 (2d Dept. 1993), aff'd, 83 N.Y.2d 465 (1994).
Responding to the OSC, Reddy argues that "the upfront retainer was in fact a minimum fee. It was not intended or agreed upon as a nonrefundable retainer agreement". Reddy Declaration , ¶49. Given the retainer agreement's express characterization of the $50, 000 as a "non-refundable retainer amount" ([414-2], §2), I question how Reddy can make that argument in good faith. Courts may not "change the words of a written contract so as to make it express the real intention of the parties if to do so would contradict the clearly expressed language of the contract." Rodolitz v. Neptune Paper Products, Inc. , 22 N.Y.2d 383, 386 (1968).
The fact that plaintiff ultimately did not pay (and Reddy now does not seek to collect) the $50, 000 retainer fee is irrelevant to my analysis since, as Reddy admits, "[t]he reasonableness of a contract, including an attorney fee agreement, is to be evaluated at the time it was made". Reddy's Memorandum of Law [414-5], pp. 4-5; Alderman v. Pan Am World Airways , 169 F.3d 99, 103 (2d Cir.1999).
Although Reddy now contends that she and plaintiff "both agreed that Clause 2, requiring the $50, 000 (fifty thousand minimum) payment was null and void" (Reddy Declaration , ¶27), that alleged modification to the original agreement was never reflected in writing, as required by Rule 1.5(c) of the New York Rules of Professional Conduct ("[p]romptly after a lawyer has been employed in a contingent fee matter, the lawyer shall provide the client with a writing stating the method by which the fee is to be determined").
Reddy suggests that by faxing a copy of the retainer agreement back to her office, plaintiff "provid[ed] assurance that there was a meeting of the minds". Reddy Declaration , ¶61, n. 20. However, the copy which plaintiff allegedly faxed back to Reddy (id., ¶27; [414-2]) still provided for a non-refundable retainer. As plaintiff notes, "[t]he document does not contain any amendment... crossing out clause 2 with my signature or initials". Plaintiff's Response , ¶27(d). Therefore, if there was a "meeting of the minds", it included that provision. See Rodolitz , 22 N.Y.2d at 387 ("we concern ourselves with what the parties intended, but only to the extent that they evidenced what they intended by what they wrote").
Accordingly, I conclude that the provision for payment of $50, 000 was an impermissible non-refundable retainer agreement, rather than a permissible minimum fee agreement.
B. Can the Retainer Agreement be ...