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Feder Kaszovitz LLP v. Rosen

United States District Court, S.D. New York

August 3, 2018

LEE S. ROSEN, Defendant.


          McMahon, C.J.

         This case arises from a fee dispute between a law firm, Feder Kaszovitz LLP ("Feder"), and its former client, Lee Rosen. Feder seeks to recover Rosen's non-payment of his legal bills. It asserts claims of breach of contract, account stated, and quantum meruit. Defendant asserts counterclaims of breach of contract and fraud in the inducement.

         Plaintiff now moves for summary judgment on its breach of contract and quantum meruit claims. For the reasons stated below, Plaintiffs motion is GRANTED, with further proceedings to follow.


         The facts of this case are not disputed unless otherwise noted. The Retainer Agreement In August 2013, Alpha Capital Anstalt filed a lawsuit in this district against Rosen and others, alleging, among other things, that Rosen had committed securities fraud. See Alpha Capital Anstalt v. New Generation Biofuels & Lee Rosen, No. 13 Civ. 5586 (VEC) (S.D.N.Y. Aug. 9, 2013), Dkt. No. 1 (the "Alpha Capital lawsuit"). (Decl. of David Richan ("Richan Decl.") ¶¶ 6-7, Dkt. No. 32.)

         Rosen met with one of Feder's partners, Murray Skala, to discuss the Alpha Capital lawsuit. (Decl. of David Sack ("Sack Decl."), Ex. E ("Rosen Dep.") 9:21-10:4, Dkt. No. 26-6.) Rosen ultimately agreed to engage Feder to represent him in the Alpha Capital lawsuit. In connection therewith, the parties executed a retainer agreement, dated October 17, 2013 (the "Retainer Agreement"). (Sack Deck, Ex. F, Dkt. No. 26-7.) It is a fairly standard New York State attorney retainer agreement. It describes the work to be done ("representing you as a defendant in the [Alpha Capital] matter"), and provides for a small upfront payment ($7, 500) against compensation at the hourly rate of attorneys assigned to the matter times actual hours worked, with bills to be rendered periodically. The retainer agreement that the parties signed contains no cap on fees and includes no estimate of either the cost of performing any task or the overall cost of the representation. It does not contain a standard "merger clause" (that is, a clause worded more or less as follows: "This document represents the entire agreement between the parties and supersedes all prior discussions and representations..."); but it states that the agreement reflects "our understanding of the scope of our representation and the terms of our arrangement."

         There were apparently discussions between the parties about the cost to Rosen of dealing with the Alpha Capital lawsuit before the Retainer Agreement was signed. The parties agree on two details about those conversations: that Rosen hoped his lawyers would "piggyback" on work performed for other defendants in the lawsuit (Rosen Dep. 14:12-22); and that the word "cap" was never mentioned prior to the signing of the retainer agreement (Skala Dep. 23:22-24:15; Rosen Dep. 23:10-13.) Otherwise they do not agree what was said. In fact, between the complaint and his deposition testimony, Rosen himself has taken different positions about exactly what he and Skala said to each other.

         Ultimately, none of that is of any moment, since the parties entered into a written retainer agreement governing the terms of their arrangement.

         The Dispute that Led to This Lawsuit

         Needless to say, defending against the Alpha Capital lawsuit cost a lot more than Rosen had hoped to pay.

         On December 5, 2013, Plaintiff filed a motion to dismiss the complaint in the Alpha Capital lawsuit. (Richan Decl., Ex. F., Dkt. No. 32-6.) Skala sent Defendant a letter, dated December 17, 2013, informing Defendant that Plaintiff had filed the motion on his behalf. The letter indicated that Feder had not been able to "piggyback" on the other defendants' work, as both Rosen and Skala had hoped to do. Skala explained both why that proved impossible and what Feder actually had to do in order to prepare papers on Rosen's behalf. (Richan Deck, Ex. G, Dkt. No. 32-7.)

         Attached to the letter was an invoice for work performed, plus disbursements, through November 30, 2013. The total time charges and disbursements totaled $87, 231.69. On the bill, Feder gave Rosen immediate credit for the $7, 500 retained (per the terms of the retainer, it was to have been applied against the final bill, not the first bill). The firm also offered Rosen a "courtesy discount" of 20% of its time charges ($16, 934), as well as the option to defer payment of another $25, 000 until the case was dismissed or settled. This left an amount due and immediately payable of $45, 000.00, against a total amount (less retainer and 20% discount) of $70, 000. (Richan Decl. Ex. H, Dkt. No. 32-8.) Skala's cover letter indicated that the write-off and the deferral of payment were conditioned on prompt payment of the $45, 000.

         When Rosen received Skala's letter and the invoice, he "freaked out." (Rosen Dep. 27:3-23.)

         Lawyer and client met in January 2014. (Richan Decl. ¶ 25; Rosen Dep. 32:5-9.) By that time, Alpha Capital had responded to the defendants' multiple motions to dismiss by filing an amended complaint. The amended complaint was much longer than the original; it also included new allegations against Rosen personally. This meant that the entire exercise had to be repeated, that the first motions were for naught; there would be a second round of motions to dismiss, and that new issues and arguments would have to be addressed. All this was discussed. Apparently the parties also discussed the possibility of filing a motion for sanctions.

         The parties do not agree about the substance of their January discussion insofar as it related to fees. According to Rosen, ("Skala Dep.") 67:4-16, Dkt. No. 32-2.) Skala agreed to "cap [Plaintiffs] fees at $45, 000, including the second motion [to dismiss]." (Rosen Dep. 32:10-22.) Skala, in a follow-up email sent to Rosen in order to memorialize the January meeting, characterized the fee discussion rather differently:

I told you when we met that we would be prepared to cap our fees for the next motion to dismiss round. I indicated that we would be willing to cap our fees at $45 K, but that would not include time in connection with a motion for sanctions, should you so wish to proceed. Upon further consideration, we would be prepared to include the work on the motion for sanctions as falling within the above cap. Also, please send us the payment that you said that we would be receiving last week; it would be much appreciated.

(Sack Decl. Ex. H, at 2, Dkt. No. 26-9) (emphasis added).

         While Rosen insists that this email places an absolute limit of $45, 000 on fees for past and future work (Richan Decl. ¶ 30; Rosen Dep. 34:23-35:9.), I cannot agree with his characterization, or conclude that it raises a disputed issue of fact. Skala's email clearly states that (1) there was going to be a second round of motions to dismiss; (2) Skala had originally promised to "cap our fees for the next motion to dismiss round ... at $45K; (3) in their original conversation, that cap did not include work on a motion for sanctions; but (4) on sober reflection, Feder had decided to include work performed on any sanctions motion within that $45, 000 cap - which is to say, $45, 000 for the work on both the second motion to dismiss and the sanctions motion. Skala's email said nothing about including work on the first motion to dismiss within the cap, or about capping fees for the entire representation at $45, 000. There is no way to read the email as saying anything of the sort. Indeed, on Rosen's reading, Feder would essentially have been agreeing to perform all future work on the case for free, as well as to write off the $20, 000 that it had agreed to defer when it issued the first invoice. Nothing in Skala's email suggests any such "agreement."

         Rosen did not respond to Skala's email with some writing of his own, protesting that it did not reflect their conversation. Neither did he fire his lawyers. Instead, he paid $25, 000 against the $45, 000 invoice on February 22, 2014, and another $10, 000 on or about May 19, 2014 - a total of $42, 500 out of the $45, 000 due on the first invoice.

         During that period, the firm continued to work on Rosen's behalf. Feder filed a motion to dismiss the amended complaint in the Alpha Capital lawsuit on March 20, 2014. (Richan Deck ¶ 31.) Reply papers were filed in May. See Alpha Capital Anstalt, 13 Civ. 5586, ECF No. (S.D.N.Y. Aug. 9, 2013), Dkt. No. 50.

         Having completed work on the second motion to dismiss, Skala sent Rosen a letter, dated June 10, 2014, attaching an invoice for services rendered from March 1 to May 31, 2014. Although the firms' time records revealed over $53, 000 in time actually expended on the second motion to dismiss (substantially less that was expended on the first motion to dismiss), the invoice only charged $48, 000.00 - $45, 420 in fees and the rest in disbursement. This reflected another 15% courtesy discount, which brought the bill to almost exactly the $45, 000 cap that Skala had proposed for Round Two. In his cover letter, Skala noted that, "While we appreciate that from your perspective this has already been more expensive than you anticipated, we trust you appreciate the work that has been done and the need for us to be paid for our work." (Richan Deck Ex. N, Dkt. No. 32-14.)

         Skala followed up with an email dated June 30, 2014, asking for payment of Feder's outstanding invoice. Rosen responded the next day:

We have a big problem. I was EXTREMELY clear when we met at my house that originally I would only spend 25, 000 on the case. The first bill came and I ended up spending 32, 500 and was VERY clear that I would only spend an additional 10, 000I have no intention and no where with all [sic] to pay your bill.

(Richan Deck, Ex. O, Dkt. No. 32-15.)

         Skala responded to Rosen as follows: "If the discounts are not acceptable, and you are not willing to have our outstanding invoice (for $48, 000.00) paid, then we will seek to recover the fair and reasonable value of our services (quantum meruit) which we believe is substantially higher ...

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