Doniger & Engstrand, LLP v Carlomagno
Annotate this CaseDecided on July 7, 2015
SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 9th and 10th JUDICIAL DISTRICTS
PRESENT: : IANNACCI, J.P., MARANO and GARGUILO, JJ.
2014-427 S C
Doniger & Engstrand, LLP, Appellant, July 7, 2015
against
Jacqueline Carlomagno, Respondent.
Appeal from a judgment of the District Court of Suffolk County, Third District (C. Stephen Hackeling, J.), entered November 1, 2013. The judgment, after a nonjury trial, dismissed plaintiff's cause of action.
ORDERED that the judgment is modified by providing that the dismissal is without prejudice; as so modified, the judgment is affirmed, without costs.
On January 3, 2013, plaintiff, a law firm, commenced this commercial claims action against defendant, its former client in a matrimonial action, to recover legal fees in the sum of $4,032.66, allegedly due and owing since March 2, 2012. Following mandatory arbitration (see Rules of Chief Judge [22 NYCRR] part 28), which resulted in an award in favor of plaintiff, defendant demanded a trial de novo (see Rules of Chief Judge [22 NYCRR] § 28.12). At the nonjury trial, defendant sought the dismissal of the action on the ground that plaintiff had not complied with Rules of the Chief Administrator of the Courts (22 NYCRR) § 137.6 (a) (1), which, where the attorney and client cannot agree as to the attorney's fee, requires the attorney to forward to the client a notice of client's right to arbitrate, by certified mail or by personal service. Although plaintiff's witness testified that he had sent the notice of client's right to arbitrate to defendant, he was unable to produce any evidence that it was sent by certified mail. The District Court, in a decision after trial, credited defendant's testimony that she had not been served with notice either personally or by certified mail. Since plaintiff had failed to comply with the regulation, the District Court dismissed the action "without prejudice to his [sic] ability to comply with the Sec. 137.6 requirements." A judgment dismissing the action was entered on November 1, 2013, from which plaintiff appeals.
On appeal, plaintiff concedes that it had not sent the notice of client's right to arbitrate to defendant either by certified mail or by personal service. It is plaintiff's position, however, that defendant has waived her right to arbitrate because she fully participated in the commercial claims litigation.
Where an attorney has commenced an action to recover legal fees, the attorney's failure to have provided the defendant client with written notice of the right to elect to submit the fee dispute to arbitration, and/or the attorney's failure to allege in the complaint either that the defendant client received such notice and did not file a timely request for arbitration, or that the dispute is not covered by the Rules of the Chief Administrator of the Courts (22 NYCRR) part [*2]137, will require the dismissal of the complaint (see Gary Friedman, P.C. v O'Neill, 115 AD3d 792 [2014]; Herrick v Lyon, 7 AD3d 571 [2004]). Plaintiff's concession that defendant was not provided with such written notice either by personal service or by certified mail, in and of itself, warrants the dismissal of its cause of action (see Rules of Chief Admin of Cts [22 NYCRR] § 137.6; Gary Friedman, P.C. v O'Neill, 115 AD3d 792; Peter Axelrod & Assoc., P.C. v Berk, 19 Misc 3d 1134[A], 2008 NY Slip Op 50999[U] [Civ Ct, NY County 2008]).
As to the question of whether defendant waived her right to arbitration, the Court of Appeals has stated:
"While the party who commences an action may generally be assumed to have waived any right it may have had to submit the issues to arbitration, this assumption, of course, does not apply to a defendant. . . . The crucial question, of course, is what degree of participation by the defendant in the action will create a waiver of the right to stay the action. In the absence of unreasonable delay, so long as the defendant's actions are consistent with an assertion of the intention to arbitrate, there is no waiver. However, where the defendant's participation in the lawsuit manifests an affirmative acceptance of the judicial forum, with whatever advantages it may offer in the particular case, his actions are then inconsistent with a later claim that only the arbitral forum is satisfactory" (DeSapio v Kohlmeyer, 35 NY2d 402, 405 [1974]).
"[A]ttorney-client fee agreements are a matter of special concern to the courts and are enforceable and affected by lofty principles different from those applicable to commonplace commercial contracts" (Matter of Cooperman, 83 NY2d 465, 472 [1994]). In view of public policy considerations and the protection that courts generally give the client in attorney-client fee arrangements, particularly since "arbitration is mandatory for the attorney if requested by the client" (Rules of Chief Admin of Cts [22 NYCRR] § 137.2 [a]), the question of whether the client has waived the right to elect fee dispute arbitration by participating in litigation commenced by his or her attorney must be carefully scrutinized by the court. A waiver of the right to arbitrate must be based upon an intentional abandonment or relinquishment of a known right, and the question of whether there has been a waiver depends upon the facts of each particular case (see 5 NY Jur 2d, Arbitration and Award § 103). Here, defendant cannot be said to have intentionally abandoned or relinquished a known right since she never received proper notice of that right. Consequently, we find that defendant did not waive her right to elect fee dispute arbitration by participating in this commercial claims action commenced by plaintiff.
As plaintiff failed to comply with Rules of the Chief Administrator of the Courts (22 NYCRR) § 137.6 (a), in failing to forward to defendant the notice of client's right to arbitrate either by certified mail or by personal service, the District Court did not err in dismissing plaintiff's cause of action (see Gary Friedman, P.C. v O'Neill, 115 AD3d 792; Peter Axelrod & Assoc., P.C. v Berk, 19 Misc 3d 1134[A], 2008 NY Slip Op 50999[U]).
We note, however, that the judgment does not correctly reflect the fact that the District Court, in its decision after trial, stated that the dismissal of plaintiff's cause of action was "without prejudice" to plaintiff's ability to comply with the requirements of Rules of the Chief Administrator of the Courts (22 NYCRR) § 137.6 (a). Where there is an inconsistency between a judgment and the decision upon which it is based, the decision controls (see Berry v Williams, 87 AD3d 958 [2011]; Verdrager v Verdrager, 230 AD2d 786, 787 [1996]). Accordingly, we modify the judgment by providing that the dismissal of plaintiff's cause of action is without prejudice (see CPLR 5019 [a]).
Iannacci, J.P., Marano and Garguilo, JJ., concur.
Decision Date: July 07, 2015
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