National Grid Corp. Servs., LLC v LeSchack & Grodensky, P.C.
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National Grid Corp. Servs., LLC v LeSchack & Grodensky, P.C. 2011 NY Slip Op 32916(U) October 26, 2011 Supreme Court, Nassau County Docket Number: 08330/09 Judge: Stephen A. Bucaria Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: HON. STEPHEN A. BUCARIA Justice TRIAL/IS , PART NASSAU COUNTY NATIONAL GRID CORPORATE SERVICES , LLC INEX No. 08330/09 Plaintiff MOTION DATE: Sept. 16 2011 Motion Sequence # 003 , 004 -against- LeSCHACK & GRODEN SKY , P. C. and MAURCE A. GRODEN SKY Defendants. The following papers read on this motion: Notice of Motion..... ........... ....................... XX Affidavit/Affirmation in Opposition......... XXX Reply Affidavit/rief....................... ......... XX Memorandum of Law................................. Motion by plaintiff National Grid Corporate Services , LLC ("National Grid" ) for an order pursuant to CPLR 3212 granting it partial summar judgment on its second Amended Complaint declaring that its termination of the parties ' Memorandum of Understanding MOU" ) and Legal Services Agreement (" LSA" ) was for cause or , in the alternative , a declaration that defendants quantum meruit denied . Plaintiff s motion for summary judgment dismissing defendants I:ranted in part and denied in part. ' recovery is limited to is ' counterclaims is Motion by defendants LeSchack & Grodensky, P. C. (" L&O" ) and Maurice A. [* 2] NATIONAL GRID CORPORATE SERVICES, LLC Index no. 08330/09 Grodensky for an order pursuant to CPLR 3212 granting them summary judgment dismissing the second Amended Complaint in its entirety and awarding them $1 597 500 as and for contractual damages plus interest as provided by law on their counterclaim is denied National Grid engaged L&G to perform various legal services including obtaining orders of seizure to recover utilty meters from customers who failed to pay their bils. National Grid alleges that defendants ' negligent and reckless acts and omissions caused three ofL&G' s attorneys to resign , thereby frstrating the purpose oftheir retainer agreement and justifying its termination. National Grid further alleges that L&G and Grodensky commingled escrow funds and withheld monies owed it. National Grid asserts claims for breach of contract , conversion , unjust enrichment , money had and received , breach of fiduciary duty and punitive damages. Defendants allege that in terminating them, National Grid breached their agreement and that it in fact played a role in the resignation of three ofL &G' s attorneys. Defendants assert counterclaims for breach of contract , promissory estoppel , breach of the covenant of good faith and fair dealing, and breach of fiduciary duty. On its motion , National Grid seeks a declaration that it terminated the agreement with the defendants for cause , thereby defeating the defendants ' breach of contract claim or , in quantum meruit. National Grid the alternative , that the defendants are limited to recovery in also seeks dismissal of the defendants ' counterclaims. On their motion , defendants seek summary judgment dismissing National Grid' complaint as well as summary judgment and an award of contractual damages on their counterclaim for breach of contract. The facts pertinent to the determination of these motions are as follows: For many years, L&G represented National Grid and its predecessors in replevin actions in which it procured orders of seizure enabling National Grid to recover utilty meters from non-paying customers. L&G also handled a variety of other matters for National Grid including "Right of Access Orders " consumer complaints before courts and state agencies communicating with customers concerning premises access , settlement negotiations , and other biling matters. The parties ' last long- term legal services agreement , or " LSA " was entered into on December 22 , 2003. In that agreement , L&G agreed to provide National Grid [* 3] NATIONAL GRID CORPORATE SERVICES, LLC and its affiliated utilty companies with legal services Index no. 08330/09 from January 1 , 2004 through 2008. The LSA contemplated that L&G would handle as many as 32 700 matters a year during the term of the agreement for a total fee of $12 milion dollars. December 31 L&G had to be available for additional matters and, in fact , in 2008 , handled over a total of 41 000 matters. The LSA provided that " the charge for handling those matters (would) be on a retainer basis. It provided under " compensation " that the " fee for said representation (would) be on an anual retainer basis. " National Grid was also required to reimburse L&G for all costs associated with the replevin postage and process server costs for which L&G biled actions including index fees National Grid separately. The same retainer amount was paid each year regardless of the number ofreplevin matters handled by L&G, with the exception that if the number of referrals fell below 15 375 annually, L&G would be paid on a non-retainer basis. In the event either part failed to perform any of its terms , as a prerequisite to It also contained a merger clause and precluded modification absent a duly executed writing. It required National Grid to deposit with L&G "the additional sum of $100 00 as and for a filing fee fud .to be used to pay court filing fees (emphasis added), " which funds were to continue on termination , the LSA required a 30- day notice of default and right to cure. deposit with L&G during the term of the agreement but remain National Grid' s and be refunded at the termination of the agreement. This Replevin Fund was a distinct account at L&G. Other clients ' funds were not deposited into it. Thoughout the duration ofthe LSA , National Grid paid L& G the annual retainer fee although the number of matters referred varied significantly. Throughout the duration ofthe LSA , L&G invoiced National Grid separately for costs such as filing fees , postage , process severs fees , etc. , which costs were considerable and in some years exceeded $1 milion dollars. Nevertheless, National Grid frequently paid L&G in lump sum payments , either to the Replevin Fee Fund or L&G' s operating account. In mid- 2007 , National Grid changed its method of payment which resulted in an additional delay in payment, from approximately 10 days to approximately 30 days. When the LSA was drawing to a close , National Grid undertook exploration of its options regarding future legal services including a Request for Proposals (" RFP" ). It became apparent (to National Grid) that it was more complex to secure a new , long term legal service agreement for replevin services with a new law firm . . . to step in and timely and [* 4] NATIONAL GRID CORPORATE SERVICES, LLC Index no. 08330/09 satisfactorily perform the required services. " (McCar, Affidavit in Support, p. 4 On December 17 , 15). 2008, National Grid and L&G entered into a memorandum of understanding (" MOU" ), extending their LSA for a six month period, from Januar 1 through June 30 , 2009. The MOU provided that the " referral volume " for that period would be 500. The MOU further provided that the " cost per referral" would be $71 , for a total 597 500. This amount was to be paid in two payments , one on second on April 15 , 2009. The MOU further provided that L&G would amount payable of $1 Januar 15and the be requested to participate in the " upcoming request for proposal process " and was invited to submit a proposal in response to such process. Finally, the MOU provided: " (t)he foregoing reflects the full agreement of the Parties with regard to the extension of the (LSA) and except as provided herein all other terms of the (LSA) remain unchanged. 2009 , three ofL& G' s attorneys , Michael Marlin , Dean Brown and Harold Brin , resigned. National Grid maintains that , as a result ofthe resignations , National Grid' s Vice President of Customer Financial Services lost confidence in L&G' s abilty to On January 13 meet its contractual obligations under the MOU. National Grid therefore froze the first payment due under the MOU which was being processed. On Januar 20 2009 , National Grid requested that L&G adjourn all replevin matters in anticipation of retaining new counsel. L&G objected in a letter by Mr. Grodensky expressing the firm s steadfast intent to honor its agreement. By letter dated January 22 2009, National Grid terminated the LSA and the MOU effective January 28 2009. L&G alleges that it had immediately engaged two competent attorneys to replace the attorneys who left and that it advised National Grid by letter dated January 23 that its abilty to satisfactorily perform its obligations remained unchanged. L & G engaged Steven P. Grodensky, a former L&G attorney and Corporate Secretary, and Walter Bellng as per diem attorney. With defendant Maurice Grodensky, that left three attorneys available to handle National Grid' s legal matters , as well as the manager of its Replevin Department non-attorney Ellot Fishman. L&G in fact continued to handle some 25 000 final biling matters during the ensuing year and half following its termination. The three attorneys who left L&G went to work for the law firm that ultimately replaced L&G in servicing National Grid following the termination of the parties ' agreement. National Grid additionally alleges that following its termination ofL&G , it learned [* 5] NATIONAL GRID CORPORATE SERVICES, LLC that L&G had financial problems , including inabilty to pay Index no. 08330/09 its employees. National Grid also claims that it had ethical concerns about L& G' s affording access to National Grid' confidential fies to outside counsel. National Grid further alleges that following its termination ofL&G , it learned that L&G had commingled the law firm s operating revenues Grodensky' s personal fuds and its Filing Fee Fund account , in breach of their agreement 1200). National Grid seeks as well as the rules of professional conduct (See 22 NYCRR to recover for those violations as well. Tracey McCartey, Vice President of Customer Financial Services at National Grid Andrew Adriance , a " special projects person " at National Grid , and Robert Gould , National Grid' s Operations Collections Manager , testified at their examinations- before- trial that poor performance by L&G was not the cause of its termination of their agreement. Prior to the termination of the agreement , no court appearances were missed; no replevin fies were mishandled; and the quality ofL&G' s work was not affected. On its motion for summary judgment, National Grid seeks a declaration with regard to its first and second causes of action that it terminated L&G for cause rendering L&G' breach of contract claim without merit or , in the alternative , a declaration with regard to its third cause of action that L&G is only entitled to recover in quantum meruit. National Grid also seeks dismissal of all of the defendants ' counterclaims. On its motion for summary judgment , L&G seeks an award of contractual damages as well as dismissal of National Grid' s claims premised upon its alleged commingling of personal , operating and replevin fee funds. Where there is a contractual relationship between a lawyer and a client , the client has the right to terminate the attorney-client relationship at any time , with or without cause. Brien, L.L.P. v ISS Intern. Service Svstem, Inc. 252 AD2d 446 447- 448 (15t Matter of Cooperman 83 NY2d 465 , 472 (1994). When a client discharges an attorney after some services have been performed but prior to the completion Atkins Dept. 1998), citing of the services for which the fee was agreed upon , the discharged attorney is entitled to Brien. Matter of Cooperman L.L. P. v ISS Intern. Service Svstem, Inc. supra , at p. 448 supra. at p. 473. The discharge of the attorney by the client does not constitute a breach of the contract , because it is a term of such contract , implied from the peculiar relationship recover the reasonable value of services rendered in quantum meruit. Atkins , citing which the contract calls into existence , that the client may terminate the contract at any time with or without cause (Id). ," [* 6] NATIONAL GRID CORPORATE SERVICES, LLC Index no. 08330/09 However (t)here have , traditionally, been two recognized exceptions to this general rule , i.e. , where ' the attorney in entering into such a contract has changed his position or incurred expense , or . . . where an attorney is employed under a general retainer for a fixed period to perform legal services in relation to matters that may arise during the period of the Brien. L. P. vISS Intern. Service Svstem. Inc. supra , at p. 448 Ehrlich v Rebco Martin v Camp 219 N. Y. 170 , 1786 (1916), and Dept. 1993); f(aplan v Heinfling Exchange. Ltd. 198AD2d 58 (1 3:522. 3:354 see also , 1 B Carmondyapp den contract.' " Atkins Ins. citing citing 136AD2d34 (1 Dept. Wait , 72 NY2d 810 (1988); 1988) Because the 2004- 2008 legal services agreement required L & G to perform standardized legal services for a fixed period at a set fee , it was a general retainer agreement. The 6 month memorandum of understanding was clearly intended as a " stop gap " measure . pending the awarding of a long term legal services contract through the " request for proposal process. " Nevertheless , because the MOU contemplated L & G' s provision of standardized legal services for a definite period at a set fee , it also constituted a general retainer agreement. Therefore , if National Grid terminated the agreement without cause , the termination would constitute a breach of contract , entitlng L & G to recover for services performed at the contract rate , as well as out-of-pocket damages in the form of expenses incured in anticipation of performance of the contract. Based upon the documents submitted to the court , there is a question of fact as to whether National Grid in good faith had a reasonable basis to doubt L& G' s capacity to perform the legal services covered by the MOU competently or whether National Grid simply wanted to award the legal services contract to other counsel at a reduced cost. In the former case , the termination would be with cause, in the latter case , the termination would not. Accordingly, plaintiff s motion for summary judgment with respect to the claims asserted in denied . Defendants ' motion for summary judgment dismissing plaintiffs claims for declaratory judgment and breach of contract and summary judgment on denied defendants the complaint is ' counterclaim for breach of contract is similarly National Grid may have contributed to the commingling of funds by L&G by paying all charges - - replevin filing fees , postage , process server fees and bils - - by way of one check , as well as precipitating more filings than there were replevin fee funds available to cover them. Nevertheless , contrary to L&G' s position , there is an issue of fact as to whether the entire balance of the replevin fee fund was returned to National Grid. While Fishman report indicated that only $100 000 was deposited into the Replevin Fee Fund on January 1 2004 , his analysis is silent with respect to any existing balance on January 1 , 2004 and does [* 7] NATIONAL GRID CORPORATE SERVICES, LLC Index no. 08330/09 not rebut National Grid' s interpretation of " additional sum of $100 000 . ... " Fishman conceded at his examination- be fore- trial that his analysis did not address the balance prior to January 1 , 2004. Furthermore , Marlin testified at his examination- be fore- trial that he believed the $100 000 deposit was in addition to the then existing $50, 000 balance. Furthermore , the proposed LSA for 2009- 2013 which was prepared by L&G referred to a $75 000 filing fee fund deposit " in addition to the sum of $150, 000 previously deposited Mr. Marlin asked someone at National Grid if they were okay with the filing fee fund being raised from $150 000 to $300 000. Thus , the court determines (emphasis added) . . .. " In fact , that there are issues of fact regarding L&G' s handling of the replevin filing fee fund specifically, whether the $100 000 deposited when the final LSA was entered was in addition to an existing sum which has not been refunded. Accordingly, defendants ' motion for summary judgment dismissing National Grid' s claims sounding in conversion , unjust denied enrichment , money had and received and breach of fiduciary duty is also An action for promissory estoppel may be maintained only in the absence of an express contract. In view of the MOU , plaintiffs motion for summary judgment dismissing defendants I:ranted ' counterclaim based on promissory estoppel is Defendants claim that attorney Marlin attempted to procure National Grid' s contract for himself and/or the other attorneys that left L&G prior to their departre. However , there is no evidence that the departing attorneys were aided , abetted , supported or involved with National Grid prior to leaving L&G. The evidence establishes that no one at National Grid knew about the attorneys ' departure until after it occured. Plaintiff s motion for summary judgment dismissing L&G' s counterclaim for aiding and abetting breach of fiduciary duty is I:ranted However , L&G' s counterclaim for breach of the covenant of good faith and. fair dealing presents an issue of fact. L & G argues that National Grid precluded it from participating in the RFP process when it terminated L&G at the inception of the MOU. Plaintiff s motion for summary judgment dismissing defendants ' counterclaim for breach of the covenant of good faith and fair dealing is denied So ordered. . 0 C T 2 6 2011 Dated ENTEREr OCT 31 2011 CMf) CO "'I CWflCf.
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