Dar v Nadel & Assoc., P.C.

[*1] Dar v Nadel & Assoc., P.C. 2004 NY Slip Op 51390(U) Decided on November 16, 2004 Civil Court Of The City Of New York, Kings County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 16, 2004
Civil Court of the City of New York, Kings County

JOHN C. DAR, Claimant,

against

NADEL & ASSOCIATES, P.C., Defendant.



3379 / 04

Jack M. Battaglia, J.

In this action in the Small Claims Part, John C. Dar is seeking to recover an "overcharge" of legal fees by Nadel & Associates, P.C. At the trial on August 25, 2004, Mr. Dar appeared and testified; Nadel & Associates, P.C. appeared by Netanel Newberger, the associate who dealt with Mr. Dar, and Mr. Newberger testified on behalf of the firm.

Mr. Dar retained Nadel & Associates to represent him in an action in the Small Claims Part against Harari Realty (SCK 8666 / 03). The court file on that action reveals that, on June 24, 2003, Mr. Dar executed an Apartment Lease with 56-11 94th Street Co., LLC for an apartment located in Forest Hills. The Lease provided for a one-year term commencing on July 1, 2003, and Mr. Dar made certain payments to Harari Realty in connection with its execution. But Mr. Dar never took possession of the apartment, and sought return of those payments.

Initially, Mr. Dar's complaint against Harari Realty, filed on December 4, 2003, sought $1,325.00 as "return of security deposit". On the first trial date, January 22, 2004, Mr. Dar's application to increase the amount of his claim to $5,000.00 was granted, and the action was adjourned for trial to March 11.

On February 18, Mr. Dar retained Nadel & Associates, and gave Mr. Newberger a personal check for $1,000.00. The "memo" line on the check reads: "For a hearing" / "$250.00 (?) per hr" / "small claims". Mr. Dar was given a receipt for his payment that reads: "For Small Claims representation Retainer $1000 advance for hourly charges $225 / $285 per hour addl fees may be due."

In a notarized letter to Harari Realty sworn to on February 21, Mr. Dar detailed the amounts he was seeking as damages as including "$1000.00 lawyer fee. $1225.00 broker overcharge fee. 1225.00 rent depo. $1225.00 rent security. $100.00 credit check" and "time lost from work...$25.00." There was no testimony on whether Mr. Newberger assisted Mr. Dar with his statement of damages; time records submitted by Mr. Newberger show that he spoke to Mr. [*2]Dar on February 19 and February 26, with a notation on the latter date that the discussion concerned "letter sent from client to defendant."

In a letter dated March 2, Lorraine Nadel confirmed the representation, and acknowledged receipt of the "advance retainer" of $1,000.00. The letter stated the hourly billing rates at which the firm's "legal services" would be billed, including rates from $285.00 for "Attorney - Partner/Sr" and $225.00 for "Attorney-Associate" to $65.00 for "Legal Secretary". The letter also stated: "It is the practice of this office to charge not less than one-tenth (1/10) of an hour for each telephone call no matter how short its duration..., whether the telephone calls are from or to you or others concerning your matter." As to the retainer, the letter advised that "[i]f there is a balance due after the advance retainer is depleted, it will be payable upon receipt of the bill", and "[a]ny unused portion of the retainer will be refunded." Although Mr. Dar was requested to sign and return a copy of the letter, he did not do so.

Nonetheless, Mr. Newberger appeared with Mr. Dar in the Small Claims Part on March 11. When no one appeared for Harari Realty, Mr. Newberger and Mr. Dar were sent to an arbitrator for inquest. A judgment was awarded to Mr. Dar for $3,775.00, apparently representing the three payments of $1,225.00 each and the $100.00 payment, each as described in the letter to Harari Realty. With interest and disbursements, the total judgment was $4,053.00.

On March 22, Asaf Feldman, "owner" of Harari Realty, obtained an order to show cause to vacate the March 11 default judgment. Because neither Nadel & Associates nor Mr. Newberger was named on the court's file card as representing Mr. Dar, the order was served on Mr. Dar. The return date was April 7.

Mr. Dar testified that, after receiving the order to show cause, he called Mr. Newberger, who told him that the retainer had been depleted and refused to return to court with him unless he paid an additional advance. Mr. Newberger denies any such conversation, but acknowledges an "office policy" not to make any court appearances if the client is not current on billing. Mr. Newberger suggested that Mr. Dar's call might have been referred to the firm's billing manager, who would have told Mr. Dar of the "office policy".

Mr. Newberger presented a copy of the firm's statement to Mr. Dar dated April 5, together with computer time records, showing that, from February 18, the date the representation commenced, until March 25, the date of the last time entry, Mr. Newberger and others in the firm had purportedly spent a total of 4.19 hours on Mr. Dar's case, for accrued charges of $939.13. Since Mr. Dar had paid $1,000.00, there was a "credit balance" of $60.87.

On April 7, Mr. Dar returned to the Small Claims Part without legal representation. The March 11 default judgment was vacated, and the action was adjourned to May 13, when it was adjourned again to June 7. A trial was held on that date, and Judge Ellen M. Spodek awarded Mr. Dar judgment of $1,382.00, "represent[ing] the total ($2,607) of security deposit, one month rent & broker fee less amount [Mr. Dar] recovered from Algin Management under Index No. 4957 / 03 - SCK ($1225.00.)"

In this action, Mr. Dar contends that the most Nadel & Associates would be entitled to as a legal fee is $225.00, Mr. Newberger's rate for the one hour that he spent at court on March 11. But based upon all of the evidence, the Court cannot agree that the fee agreement between the parties would allow billing only for court appearances. That is not to say, however, that the fee agreement was on the terms of the April 5 engagement letter, which Mr. Dar did not sign.

The Court finds that both parties were responsible in fact for the uncertainties about their fee agreement that flow from their proceeding with the representation without Mr. Dar's signature on the engagement letter. But responsibility in fact is not the same as responsibility in law. "An attorney has the burden of showing that a fee contract is fair, reasonable, and fully known and understood by the client." (Jacobson v Sassower, 66 NY2d 991, 993 [1985].) "[A]n agreement to pay a legal fee may be invalid if it appears that the attorney got the better of the bargain, unless [she] can show that the client was fully aware of the consequences and that there was no exploitation of the client's confidence in the attorney." (Id. [quoting Smitas v Rickett, 102 AD2d 928, 929 (3rd Dept 1984)].)

On the facts here, moreover, there are serious questions as to whether Nadel & Associates withdrew from its representation of Mr. Dar, and whether that withdrawal was "based on good and sufficient cause." (See Matter of Ehmer, 272 AD2d 541, 542 [2d Dept 2000].) "When an attorney-client relationship is established, the relation generally terminates once the purpose of the employment is completed, absent a contrary agreement." (Simpson v James, 903 F2d 372, 376 [5th Cir 1990][footnote omitted]; see also Miller v Miller, 203 AD2d 338, 339 [2d Dept 1994]; Bergman v Fingerit, 177 AD2d 448, 449 [1st Dept 1991]; Koury v United Tribes of African News, Inc., 2003 US Dist. LEXIS 9211 , *5 [SDNY 2003].) In litigated matters, "[a]n attorney's power to represent a party to an action which he has instituted ceases upon the entry of judgment and the issuance of execution thereupon, unless his authority is extended by special agreement." (Weiner v Jones, 245 AD 17, 18-19 [4th Dept 1935]; see also Conklin v Conklin, 113 AD 743, 744 [2d Dept 1906]; Massimino v Massimino, 5 Misc 2d 1041, 1043 [Sup Ct, NY County 1957].)

If the attorney-client relationship between Nadel & Associates and Mr. Dar ended with the default judgment on March 11, then the firm could justifiably consider Mr. Dar's request for further assistance as an offer for a new attorney-client relationship, and it might fairly require an additional retainer. Under such circumstances, its failure to act on Mr. Dar's behalf could not be deemed a "withdrawal." Mr. Newberger testified, moreover, that at the conclusion of the inquest, Mr. Dar thanked him for his assistance, and "discharged" him and the firm.

Like other contractual relationships, the duration of the relationship between attorney and client should be defined in the first instance by the understanding and expectations of the parties, but, unlike other contractual relationships, the attorney the party whose specialized knowledge and expertise is the basis of the relationship must bear responsibility for ensuring that the client's understanding and expectations are grounded in the realities of the law and legal [*3]processes. (See Shaw v Manufacturers Hanover Trust Co., 68 NY2d 172, 176-77 [1986][retainer agreement "construed most favorably for the client"].) There was nothing in the evidence to allow the Court to conclude that Mr. Dar understood at the conclusion of the inquest that Harari Realty could move to vacate the judgment, and that, in light of the strong policy that disputes be resolved on their merits (see Photovision Itern., Inc. v. Thayer, 235 AD2d 467 [2d Dept 1997]), such a motion, particularly in the Small Claims Part, might well be granted. There was certainly no testimony that Mr. Newberger explained that to Mr. Dar, or explained how that eventuality would be treated under their agreement.

There is nothing in the evidence from which the Court can conclude that Nadel & Associates conveyed to Mr. Dar an understanding that their relationship had concluded. Significant to the parties' understanding about the conclusion or continuation of their relationship after March 11 is the telephone call between Mr. Dar and Mr. Newberger on March 25, described on the time records as concerning "search for defendant's bank account", for which the firm charged Mr. Dar on the April 5 statement. Whatever Mr. Dar said to Mr. Newberger after the inquest on the evening of March 11 obviously was not understood by the attorney to so sever the attorney-client relationship that Mr. Dar could not be billed for subsequent advice. Moreover, there was no evidence that the April 5 statement was accompanied by a check to Mr. Dar for the "credit balance" that it showed.

If the attorney-client relationship continued after March 11 as the Court now finds it did was the firm justified in refusing to make further appearances for Mr. Dar unless he paid another advance? Since the Court is highly reluctant to conclude that the testimony of a member of the bar was perjury, the Court will accept Mr. Newberger's assertion that he did not demand another advance on behalf of the firm in a telephone conversation with Mr. Dar. But, since the Court also accepts Mr. Dar's testimony that he sought and was refused assistance from the firm when he received the order to show cause, the only explanation would be as Mr. Newberger suggested that the firm's billing manager conveyed the firm's "office policy" to Mr. Dar.

Under the Code of Professional Responsibility, "[i]f permission for withdrawal from employment is required by the rules of a tribunal, a lawyer shall not withdraw from employment in a proceeding before that tribunal without permission." (DR 2-110[A][1]; 22 NYCRR §1200.15[A][1].) "[A]n attorney of record" may withdraw or be changed either with a consent signed by the attorney and client or "by order of the court in which the action is pending, upon motion on such notice...as the court may direct." (CPLR 321[b].) The statutory procedure must be followed even when the client discharges the attorney. (See Gersten v Gersten, 134 AD2d 224, 225 [1st Dept 1987]; Moustakas v Bouloukos, 112 AD2d 981, 983-84 [2d Dept 1985].)

The Court cannot conclude that Nadel & Associates was required to make a motion to withdraw. Mr. Dar did not "appear[] by attorney" in the action against Harari Realty (see CPLR 321[a]), and Nadel & Associates was not "attorney of record" in the proceeding (see CPLR 321[b]); as previously noted, its name does not appear on the court's file card. There is no evidence that the firm deliberately failed to note its appearance for Mr. Dar. Following the usual [*4]procedure in the Small Claims Part, the Clerk would have immediately sent Mr. Dar to the arbitrator when Harari Realty failed to answer the calendar.

Nonetheless, Nadel & Associates was not permitted to withdraw from its representation of Mr. Dar unless it could "be accomplished without material adverse effect on the interests of the client", or if Mr. Dar had engaged in specified conduct that would justify the withdrawal, including "[d]eliberately disregard[ing] an agreement or obligation to the lawyer as to expenses or fees", or if other specified conditions existed. (See DR 2-110[C]; 22 NYCRR §1200.15[C].) Even then, the firm could not withdraw until it had "taken steps to the extent reasonably practicable to avoid foreseeable prejudice to the rights" of Mr. Dar. (See DR 2-110[A][2]; 22 NYCRR §1200.15[A][2].)

The Court notes, first, that withdrawal cannot be justified here on the ground that it could be "accomplished without material adverse effect" on Mr. Dar's interests. In order for a withdrawal to be justified on that ground, the attorney must have, in fact, accomplished the withdrawal without material adverse consequences or, perhaps, at least have used best efforts to do so. There is no evidence that Nadel & Associates made any effort to minimize the consequences to Mr. Dar of appearing without counsel in response to Harari Realty's motion even to the minimal extent of advising him of the rules that would determine the motion and the consequences of its being granted.

"[A]n attorney will be permitted to withdraw from employment when a client refuses to pay a reasonable fee." (Galvano v Galvano, 193 AD2d 779, 780 [2d Dept 1993][emphasis added]; see also Anderson v Schlenker, 281 AD2d 575, 576 [2d Dept 2001]; Stephen Eldridge Realty Corp. v Green, 174 AD2d 564, 565 [2d Dept 1991].) But "[n]onpayment of counsel fees alone will not entitle an attorney to withdraw from representation." (Cashdan v Cashdan, 243 AD2d 598, 598 [2d Dept 1997]; see also Frevola v Frevola, 260 AD2d 480, 480-81 [2d Dept 1999]; Haskell v Haskell, 185 AD2d 333, 333 [2d Dept 1992].)

And so, "even where the retainer has been fully exhausted, where there is no deliberate violation of a fee agreement by a client, a court may still refuse to allow the attorney to withdraw." (Charles Weiner Corp. v D. Jack Davis Corp., 113 Misc 2d 263, 266 [Civ Ct, NY County 1982][emphasis in original].) Disputing the amount owed is not a refusal to pay. (See Matter of Benjamin, 129 AD2d 886, 886-87 [3d Dept 1987].) And withdrawal is not permitted when the client refuses to pay additional fees that the attorney is not entitled to collect. (See Shaw v Manufacturers Hanover Trust Co., 68 NY2d at 177; Abreu v Ferrer, 239 AD2d 249, 249-50 [1st Dept 1997]; Smart v Adams, 4 Misc 3d 1026[A], 2004 NY Slip Op 51068[U], *2-*3 [Sup Ct, Dutchess County]; see also Allen v Rivera, 125 AD2d 278 [2d Dept 1986].) "A lawyer shall not...collect an...excessive fee." (DR 2-106[A]; 22 NYCRR §1200.11[A].)

Consideration of whether withdrawal by Nadel & Associates from its representation of Mr. Dar was justified could begin and end with a determination that a withdrawal can never be justified when the decision to withdraw is made by a non-lawyer, even if, or particularly if, the [*5]non-lawyer is acting pursuant to an "office policy" that would require withdrawal for the sole reason that the client is not current on billed fees or will not pay an additional advance. Here, again, though, the Court is reluctant to rely on a conclusion that a law firm so seriously misunderstood its duty to its client, or so organized its practice that the firm's interest in collecting a fee would risk crucial decisions about the attorney-client relationship being made wrongly or by the wrong person. (See DR 1-104; 22 NYCRR §1200.5.)

Another reason is that judicial proceedings, particularly those in the Small Claims Part, are not the best forum in which to investigate and resolve issues so close to the core of the attorney-client relationship that, when resolved, must reflect on the professional standing of the attorney. The limited time and resources of the Small Claims Part, and its relaxed procedural and evidentiary operation (see CCA §1804), often cannot do sufficient justice to the interests of either party. Considerations of this sort were undoubtedly influential in the establishment of the Fee Dispute Resolution Program by Part 137 of the Rules of Chief Administrator. (See DR 2-106[E]; 22 NYCRR §1200.11[E].) In this case, specifically, the Court's observation of Mr. Dar's demeanor suggests the possibility of misunderstanding for which Nadel & Associates would not be fully responsible as a factual matter. The Court also notes that, when questioned at trial, Mr. Newberger correctly summarized the obligations of an attorney with respect to withdrawal.

Even putting aside, however, how the decision to withdraw was made, the withdrawal of Nadel & Associates cannot be justified. The March 2 engagement letter said nothing about further advances (Shaw v Manufacturers Hanover Trust Co., 68 NY2d at 178), requiring only that any "balance due after the advance retainer is depleted...be payable on receipt of the bill" or after a "reasonable grace period for payment" during which interest would accrue. Nadel & Associates did not present Mr. Dar with any statement for a further advance, nor a bill for any "balance due". (See Bathgate v Haskin, 59 NY 533, 536 [1875].) Indeed, the April 5 statement showed a "credit balance" that, at least at the time of withdrawal, had not been returned to Mr. Dar. (See DR 2-110[A][3]; 22 NYCRR §1200.15[A][3].)

"The conditional nature of an attorney's right to withdraw is due in part to the traditional responsibility of the court to regulate the legal profession...and its right to scrutinize fee arrangements between attorneys and clients". (Charles Weiner Corp. v D. Jack Davis Corp., 113 Misc 2d at 263 [citing First National Bank of East Islip v Brower, 42 NY2d 471 (1977)].) Weighing the factors specified in the Disciplinary Rules (see DR 2-106[B]; 22 NYCRR §1200.11[B]) and those used by courts in determining a reasonable fee (see Matter of Freeman, 34 NY2d 1, 9 [1974]; Matter of Mavis L., 285 AD2d 509, 510 [2d Dept 2001]; M. Sobol, Inc. v Wykagyl Pharmacy, Inc., 282 AD2d 438, 439 [2d Dept 2001]), the Court concludes that Nadel & Associates was not justified in withdrawing for the sole reason that Mr. Dar would not pay a further advance before the court appearance scheduled on Harari Realty's motion to vacate the default judgment.

A review of the April 5 statement and related time records does not necessarily indicate that an unreasonable amount of time was billed on Mr. Dar's case, except to the extent that the [*6]"practice" of billing for one-tenth of an hour no matter how much time is actually spent could result in over-billing. (The bill shows that one-tenth of an hour was billed for eight of the fourteen tasks described on the bill.) More problematic is that, for the March 11 court appearance, Mr. Newberger's time record describes: "1 hour, 5 minutes. Travel to court: 40 minutes." The engagement letter says nothing about billing at full hourly rates for travel time, and yet travel comprised approximately forty percent of the time billed for the appearance.

The Court also questions the reasonableness of hourly billing rates of $285.00 and $225.00 charged to an individual (as compared to a substantial business entity) for a matter in the Small Claims Part. Recognizing that the legal challenge of a matter does not depend on the amount of monetary damages that might be recovered, and that parties do litigate also for matters of principle, there appears to be a real risk that hourly charges of that magnitude, particularly when applied to time-recording on a minimum tenth-of-an-hour basis, will lead to an excessive fee.

The Dar / Harari Realty case, specifically, does not appear to have presented legal issues of significant novelty or complexity, and Mr. Newberger did not contend that it did. Although it might not be particularly fair to use the amount Mr. Dar originally sued for ($1,325.00) or the amount he eventually recovered ($1,382.00) as a guide, the total amount of the default judgment ($4,053.00) would seem appropriate. (The Court will assume that Mr. Dar did not tell Mr. Newberger that he had already recovered $1,225.00 in a previous action.) When compared to that total, a $1,000.00 fee might pass scrutiny as not excessive, even if on an application for attorney fees a court might assess less. No evidence was introduced about Mr. Newberger's level of experience or familiarity with similar matters, or that of other lawyers in the firm.

But how much more could Nadel & Associates have charged without crossing the line? There was no evidence at the trial of the amount of a further advance that was demanded as a condition of continued representation. The Court strongly suspects that, given Mr. Dar's strenuous objection to the amount that had been accrued on his account, a refusal to make any futher payment would have concluded any discussion as to amount. Based, however, on the circumstances of the billing here, including the "credit balance" shown on Mr. Dar's account, the Court concludes that Nadel & Associates was not justified in demanding anything more from Mr. Dar as a condition to appearing on the motion to vacate the default judgment.

Even if, however, a demand for more could be justified, "a lawyer shall not withdraw from employment until the lawyer has taken steps to the extent reasonably practicable to avoid foreseeable prejudice to the rights of the client." (DR 2-110[A][2]; 22 NYCRR §1200.15[A][2].) As previously discussed, there was no evidence that Nadel & Associates took any steps to avoid or reduce the prejudice to Mr. Dar of its withdrawal. Although at a billing rate of $225.00 an hour the "credit balance" of $60.87 would not have gone very far, any attorney who is entitled to charge at that rate should be able to advise a client orally or in writing about a motion to vacate a default judgment without an inordinate expenditure of time.

"Where an attorney's withdrawal from a case is justifiable, the attorney is entitled to recover for services rendered on the basis of quantum meruit...If the attorney fails to demonstrate that the withdrawal was justifiable, the right to recover on the basis of quantum meruit is forfeited." (Kahn v Kahn, 186 AD2d 719, 720 [2d Dept 1992]; see also Lansky v Easow, 304 AD2d 533, 534 [2d Dept 2003]; Matter of Ehmer, 272 AD2d at 542; Allen v Rivera, 125 AD2d at 280.) These rules rest on the fundamental principle that "[t]he contract of the attorney is entire, and the service he is to render is essentially single, although it may require distinct steps and proceedings on his part before the purpose of the employment is fully accomplished." (See Bathgate v Haskin, 59 NY at 535; see also Rindner v Cannon Mills, Inc., 127 Misc 2d 604, 605 [Sup Ct, Rockland County 1985].) And they rest as well, again, on the regulatory authority of the courts.

The Court's concern must focus both on regulation and on contract duties voluntarily undertaken to serve the parties' expectations, with the recognition that the client's expectations about the relationship are substantially shaped by the attorney. Indeed, the knowledge and experience that allows the attorney to strongly influence the client's expectations provide the basis for the client's willingness to part with the fee. All considered, the Court must conclude that Nadel & Associates did not uphold its side of the bargain. Having breached the contract by insisting that it would continue only if paid an additional advance, Nadel & Associates was owed no fee. (See Shaw v Manufacturers Hanover Trust Co., 68 NY2d at 177; Abreu v Ferrer, 239 AD2d at 249-50.)

Judgment is awarded to Mr. Dar for $1,000.00, with interest from April 7, 2004, plus disbursements. If Nadel & Associates has already returned the "credit balance" of $60.87 to Mr. Dar, it may subtract that amount from the total judgment.

November 16, 2004

Judge, Civil Court