Board of Managers of 60 East 88th Street v. Adam Leitman Bailey, PC.
Cite as: Board of Managers of 60 East 88th Street v. Adam Leitman Bailey, PC., 104571/2011, NYLJ 1202640082837, at *1 (Sup., NY, Decided January 8, 2014)
Justice Arthur F. Engoron
Decided: January 8, 2014
Decision and Order After Non-Jury Trial
After a non-jury trial held on June 14, July 29, and October 10, 2013, the Decision and Order of the Court is as set forth herein.
Some years ago a journeyman professional basketball player told a newspaper reporter that he realized he was living in a "fantasy land." He acknowledged that if for some reason he became unable to continue playing basketball and making more than a million dollars a year, he would be making minimum wage, or, simply "out on the streets."
The instant attorney's fees squabble has something of that "fantasy land" quality. A law firm that prosecuted a dog-barking case — well, actually, part of a dog-barking case, as the firm entered the fray after another firm had done much of the work, and as the case settled before trial — and settled the case for $35,000 more than the defendants were offering when the firm took over (plus a $14,000 payment for an unrelated dispute), is seeking to recover a total of $114,000 (not a typographical error) in attorney's fees (including money already paid). The latter phases of a dog-barking case that never went to trial should not be this expensive, especially if you have hired the firm that "Gets Results."
"At the outset there should be recognition of the traditional authority of the courts to supervise the charging of fees for legal services under the courts' inherent and statutory power to regulate the practice of law." First Natl. Bank of E. Islip v. Brower. 42 NY2d 471, 474 (1977) (citations omitted), "The relevant factors in the determination of the value of legal services are the nature and extent of the services, the actual time spent, the necessity therefore, the nature of the issues involved, the professional standing of counsel, and the results achieved." Jordan v. Freeman, 40 AD2d 656, 656 (1st Dept 1972), quoted in 542 E. 14th St. LLC v. Lee. 66 AD3d 18, 24 (1st Dept 2009). The Jordan court continued as follows: "This Court may consider its own knowledge and experience concerning reasonable and proper fees and in the light of such knowledge and experience, the Court may form an independent judgment from the facts and evidence before it as to the nature and extent of the services rendered, make an appraisal of such services, and determine the reasonable value thereof." See also. Matter of Potts Estate 213 AD 59, 61 (1925) ("[t]he burden of proof was on the claimants to establish the reasonableness of the claim and the value of the services rendered"); aff'd 241 NY 593 (1925). Here, defendant has failed "to
establish the reasonableness of the claim," and that "the value of the services rendered" equals the amount defendant is seeking to recover. See also. 22 NYCRR 1200, Rule 1.5:
a) A lawyer shall not make an agreement for, charge, or collect an excessive…fee…. A fee is excessive when, after a review of the facts, a reasonable lawyer would be left with a definite and firm conviction that the fee is excessive. The factors to be considered in determining whether a fee is excessive may include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
* * *
(4) the amount involved and the results obtained;
* * *
(7) the experience, reputation and ability of the lawyer or lawyers performing the services;….
Basic Facts (as The Court Finds Them to Be)
Dennis Herman ("Herman") developed, is currently president of the Board of Directors of, and owns approximately four out of the 18 residential units in the plaintiff condominium. In or about the late 1990's Andrew Stein ("Stein") (of some renown in New York City political circles) moved into the building as the tenant of a unit-owner named Yang ("Yang"). Stein brought two dogs with him, and their barking allegedly became a nuisance. When two neighboring unit owners presented an ultimatum to the Board that either it sue Stein or they would sue the Board, the Board hired the law firm Nessenoff & Miltenberg ("Nessenoff") to address the situation. Informal negotiations were unsuccessful, so in or about 2003 (6/14 Tr 62/25-63/2) (transcript citations are abbreviated as follows: "month/day [in 2013] Tr, page/line-page/line) the Board authorized, and Nessenoff initiated, litigation. Sometime thereafter, Stein and the building were also at loggerheads over his parking practices in the building driveway (leading to the light-hearted appellation, "The Park and Bark Case").
The lawsuit moseyed along for several years. In or about February of 2006 Stein and the canines decamped (6/14 Tr 62/21-24), but the case continued. The only remaining issues were monetary: the building's attempt to collect the fines it assessed and the attorney's fees it sought (6/14 Tr 67/18-21; 68/4-5). Around this same time, the case was assigned to Justice Edward Lehner. Lehner, apparently due to a misunderstanding, dismissed the dog aspect of the case, but was reversed on appeal. Over the course of six years of work, 2003-2009, Nessenoff billed upwards of $100,000 (see 6/14 Tr 35/19-20), possibly $130K (6/14 Tr 72/5-6), and maybe as high as $200,000 (see P's Exh. 9; 6/14 Tr 79/12). Shortly after the assignment to Justice Lehner, Nessenoff suggested that plaintiff consider hiring new counsel.
In or about early 2009, after both sides had submitted summary judgment motions (6/14 Tr 73/14-21), and with Justice Lehner trying to settle the case for $125,000 (see 6/14 Tr 73/22-74/5) the Board began looking for new counsel, and Adam Leitman Bailey ("Bailey") was referred to Herman. In a telephone
Call Bailey told Herman that his firm, the defendant herein, "gets great results" (6/14 Tr 16/21) (see also, P's Exh. 1, cover, "WE GET RESULTS"). At their first meeting Bailey "reminded [Herman] that his firm is the firm that gets results" (id. 20/ 4). According to Herman, Bailey "assure[d Herman] that the matter would be handled for $50,000 on a maximum basis" (id. 21/6-7; 87/8-9; 120/15-16; see also. P's Exh. 9, para. 5: "You originally quoted a cost of $50,000 for a trial."). Bailey testified, at some length (7/29 Tr 43-44), that he was "95 percent " sure that he did not estimate $50,000 to Herman.
Plaintiff was aware that defendant would bill at specified hourly rates (6/14 Tr 75/11-17). In or about late April, 2009 the parties entered into a retainer agreement, dated 4/28/09 (P's Exh. 2). Pursuant thereto, plaintiff paid a $10,000 retainer. The retainer agreement expressly states that results are not guaranteed (see 6/14 Tr 76/19-22). At the time the lawyer-client relationship commenced, and for approximately a month thereafter, Stein (who, rather than Yang, was the real party in interest) had a standing offer to settle the case for $35,000 (6/14 Tr 25/13-14; 68/13-15; see also. P's Exh. 9, para. 2). Plaintiff was seeking close to half a million dollars (6/14 Tr 69/19-24) and would never have settled for $35,000 (6/14 Tr 69/3-5).
In a decision and order dated May 28, 2009 Judge Lehner dismissed plaintiff's claims for (1) parking fines (Stein claimed he had a full-time driver, so his vehicle was never "parked") and (2) attorney's fees (as not being collectible under the by-laws). Not surprisingly, Stein and Yang promptly withdrew their $35,000 offer. Trial was scheduled for November 4, 2009 (6/14 Tr 90/13-15). Unless an appeal succeeded, the only issue in the case was whether plaintiff could collect fines for the dog-barking. Defendant filed a notice of appeal on behalf of plaintiff, and, on October 3, moved the Appellate Division to stay the trial pending the outcome of the appeal.
Meanwhile, by July 30, 2009 (P's Exh. 6, 7/30/09 e-mail, Herman to Metz, cc. to Bailey and Morrison), plaintiff was questioning defendant's abilities ("the right hand does not appear to know what the left hand is doing") and billing ("we need to determine some financial parameters, as [defendant's] invoices were interpreted [by the Board] as excessive and duplicative").
On or about 9/22 Herman delivered 10 large file boxes to defendant. Defendant views this as plaintiff's acquiescence in defendant's preparation for trial. This Court views it as more problematic.
Pursuant to the notice of appeal, on or about October 14 an Appellate Division, First Department, Special Master presided over a settlement conference. At or around this time, Herman authorized defendant to settle for $75,000, then had defendant raise the demand to $100,000 (6/14 Tr 55/10-20). The case soon (on or about October 29, 2009) settled, in principle, for $70,000 (Exh. 7). Stein's attorney's drafted the settlement agreement (6/14 Tr 106/21-22). The parties disputed some residual issues before signing the settlement agreement in or about December, 2009 or January 2010 (6/14 Tr 110-112 et seq.). Defendant's bill for October "was close to $50,000 (6/14 Tr 38/2-3), and by December the total billing was over $100,000 (id. /5). By then, plaintiff had, apparently, paid defendant $15,000 (the original $10,000 retainer fee plus an additional $5,000) (6/14 Tr 45/19-21). Overall defendant billed time-charges for some 15 people (see P's Exh. 10) during its representation of plaintiff, which lasted approximately seven months (roughly May through November, 2009). Defendant is claiming $98,455.20 in the instant litigation (6/14 Tr 118/11-12), exclusive of the $15,000 that both sides agree, for present purposes, plaintiff has already paid.
Plaintiff commenced the instant action for, essentially, a declaration that the fees are excessive. Defendant has counterclaimed for the $98,455.20, as set forth in four causes of action: breach of contract, quantum meruit, account stated, and unjust enrichment. By consent (10/10 Tr 25-26), only the breach of contract claim remains.
Some of this billing, arguably with plaintiff's consent, was to oppose, probably frivolously and ultimately unsuccessfully, a motion by Yang to have some money released from escrow. Some of this billing was, with plaintiff's consent, to move to quash a subpoena served by Stein's and/or Yang's attorneys. Some of this was, with or without plaintiff's consent (the issue is subject to debate), to litigate a dispute over plaintiff's proposed trial-witness list. Some of this billing, apparently, was on a mysterious post-note-of-issue motion to compel additional 'disclosure (7/29 Tr 149). Much of this billing was for trial preparation; and in the instant case much of the objection to that billing is to the effect that Herman (6/14 Tr 39/11-12) "instructed [defendant] numerous times, okay, to do nothing, as we would never proceed to trial with Judge Lehner."
Attorney's fee disputes run, simultaneously, on two different tracks. The objective, quantifiable track determines the reasonable hours billed, the reasonable hourly rate, and multiplies the two. The subjective, qualitative ("holistic") track examines the factors listed above, particularly the difficulty of the case and the results obtained.
In this case, on the objective track, defendant has a strong counterclaim. Colin Kaufman ("Kaufman"), the Co-Chair of defendant's litigation department, is an excellent, experienced trial attorney who spent many hours preparing for a trial that could conceivably have gone forward. Jeffrey Metz ("Metz") is an excellent, experienced appellate attorney (whom this Court has known professionally for many years) who settled a long-running dispute between two headstrong individuals.
On the subjective track, defendant's counter-claim is much weaker. A case that had been extensively litigated for years by another firm, and that was essentially ready for trial when inherited, and that settled, without a trial, should not cost a king's ransom. Furthermore, the factual and legal issues were not that complicated: the building had ear-witnesses to the barking, and the by-laws allowed the building to impose fees.
Where the firm that "gets results" fell short the most was in the results it got: none. Plaintiff could have received $35,000, and paid only minimal fees to defendant, when defendant inherited the case. Assuming that defendant was still just getting up to speed, and nothing was going to happen, until Judge Lehner issued his summary judgment decision, plaintiff could have received nothing, once again paying only minimal fees to defendant. Instead, defendant is now seeking almost $100,000 (above the $15,000 already paid, which for this day and age might be considered "minimal fees") for work resulting in a $70,000 recovery. Obviously, plaintiff would have been better off accepting the $35,000 originally offered, or even simply walking away from the case, than having retained defendant and having to pay some $115,000 to recover $70,000.
Bailey's testimony was fascinating: often perceptive and shrewd; sometimes impressionistic, his lofty ideals butting heads with the every-day reality of practicing law. He claimed (7/29 Tr 14/19-20), "Our
firm never guarantees results." But the firm's motto, emblazoned on its publicity (P's Exh 1; see also, unopened newsletter addressed to "Honorable Arthur F. Engoron", received in or about December 2013, original in Court file), is "We Get Results." So what is "We Get Results"? Mere "puffery"? That would apply to a the claim of being "The Best Firm in the World." But if you hire the firm that "Gets Results," you expect hard-nosed attorneys with a practical approach, not gold-plated preparation for a trial that should not have been that complicated, never was imminent, and never occurred.
Bailey acknowledged (7/29 Tr 15/13-24) that a litigant "want[s] to spend as little money as possible and get the best result." But that did not happen here. In fact, Bailey initially viewed the case (7/29 Tr. 15/19) as "a complete waste of time." His "opinion was that this needs to be settled immediately and it's not a horrible thing even to walk away from this" (7/29 Tr 17/3-5; see also 7/29 Tr 29/21-22: "I definitely think [the case] should have been settled immediately."). So then why did he not advise simply settling for the $35,000 Stein and Yang were offering? According to Bailey, Herman himself fueled the litigation (7/29 Tr. 18/3-5). However, although Bailey testified (7/29 tr 39/15-17) that he told Herman 50 times that plaintiff should settle the case for a nominal amount, he admits (7/29 tr 39/18-22; 40/8-11) that he never put this in writing, because "[t]hat's not something I would e-mail."
This Court is unable to credit the "50 times" testimony. The overall "truth" of this fundamental dispute is probably somewhere between the poles: Herman may have sent mixed messages about how resolutely to press the case forward; and Bailey was probably waiting to see what developed, not egging Herman on but not applying the brakes, either. Of course, generally speaking, the client calls the shots, and the lawyer takes direction. But a lawyer who knows that a case is "a complete waste of time" (supra), and that it "needs to be settled immediately" (supra), has, at least in this Court's view, an ethical obligation to tell that to the client in no uncertain terms, and to put it in writing if the first 49 times do not do the trick. Furthermore, here, the client claims that it did not authorize a "full court press." To the extent that Herman's and Bailey's testimony often diverge, frequently diametrically (see generally. 10/10 tr 32-57), the Court credits the former in all material respects.
Bailey testified (7/29 Tr. 20/18) that the first thing he tried to do with the case was, "Settle it." Indeed (7/29 Tr 21/4-6), "I thought it was a good opportunity to settle this case and walk away and not have to spend all this money and time in a case you're not going to get anything [i.e. would not be able to collect any judgment] anyway," Bailey's view of the case was so negative that he used the double-negative (7/29 tr 30/25-26) to describe it: "this was never a case where we weren't going to spend more legal fees than we were going to get in the verdict." Left unexplained is why the case did not settle for $35,000 (or something in that vicinity) prior to Judge Lehner's decision, approximately a month after plaintiff retained defendant. The blame cannot fall entirely on Herman; Bailey testified (7/29 tr 31/8-9), "I would not have taken the case if Herman didn't agree to try to settle this for a nominal amount." The $35,000 offer was not a jackpot, but hardly chump change, especially considering (supra) that Bailey thought that just "walking away from" the case was a reasonable option. Bailey testified (7/29 tr 31/10) that settling the case for a nominal amount "was the goal coming in [to the case] and then it got lost." Indeed, it did get lost. But who lost it? In this Court's view, both parties are partly at fault, but defendant the more so.
Furthermore, if Bailey thought from the get-go that the case should settle for a nominal amount, Judge Lehner's summary judgment decision should have increased the logic of settlement: a bad case worth only a nominal settlement became a much worse case, perhaps worth nothing at all. Plaintiff eventually
recovered $70,000; but most of defendant's billing, apparently way more than $70,00, occurred after the summary judgment decision.
Bailey's justification for the large legal bills in October 2009 was that the firm had to prepare for trial. His claim that Herman acquiesced in this, partially demonstrated by Herman turning over the file, is problematic at best, given that Bailey testified that "Herman ordered, and he said, whatever we had to do, we need to stop this trial from happening." Why prepare for a trial that needs to be stopped? Bailey also testified (7/29 Tr 25/25-26) that Herman "criticized the fees from the minute we started working for him. He was always critical of the fees." So what is a lawyer to do; discount the complaints as generic and wistful and proceed full speed ahead, or cut back on the work?
Kaufman testified (7/29 tr 135-136) that as to the dog-barking aspect of the trial, defendant, on behalf of plaintiff, would have to prove that the dog-barking was a nuisance and that plaintiff properly imposed fines. This Court fails to see how this could have been so complicated. Plaintiffs tenants obviously, and plaintiffs employees apparently, heard the dogs barking loudly; that is why the tenants complained and plaintiff sued. The propriety of the fines might be legally vague, but not especially complicated: plaintiff claimed the dogs barked loudly; and the by-laws set forth the circumstances pursuant to which plaintiff could impose fines, In fact, defendant stipulated (10/10 tr 4/20-22) that the fines were "$150,000 and…we knew how it was calculated." Abstruse, arcane, recondite legal issues appear absent. Kaufman hoped that Lehner's dismissal of the parking and legal fee claims could be reversed; but he did not spend significant time on these issues (7/29 Tr 140-141).
When asked (7/29 tr 155/14-15) whether, "that there were tenant complaints and there were fines being issued" was "a difficult issue," Kaufman responded, "Every issue is difficult when you're trying a case in Supreme Court to a jury." However, despite extensive testimony (id. et seq.), defendant has failed to convince this Court that proving the dogs barked and the fines were proper was "difficult," or, more to the point, required much preparation.
Plaintiff's counsel asked Kaufman (7/29 Tr 161/7-9) whether he "believe[d] spending $109,000 [sic; $114,000] in legal fees to obtain a $70,000 settlement was a successful result." This question was far too generous. Plaintiff had already spent over $100,000, possibly double that (supra) on the case prior to defendant's involvement; and defendant's involvement resulted in only a $35,000 increase in the amount that plaintiff could have recovered when defendant's involvement commenced.
Metz testified (10/10 Tr 21/19-22/6) as follows:
I've been to scores, scores of these pre-argument conferences over the years and usually what happens with these is that depending on who you get, you have one or two appearances, and if it can't be settled, well, that's it. They've made the good try and then the case gets appealed. But Special Master Antonacci made it very clear that she did not believe that this was the type of case that should be brought before the Appellate Division. [M]aybe that it wasn't worthy of the attention or that the dollars involved were not significant enough. [S]he was pretty clear that this thing was going to get settled in front of her.
This Court wholeheartedly agrees with that assessment: Antonacci obviously believed that the underlying litigation was not worthy of Appellate Division attention. For similar reasons, this Court believes it was not worthy of, or worth, in the posture in which defendant inherited it, $114,000 in legal fees. What was it worth? This Court finds, for all the factors and reasons discussed above, that the reasonable value of defendant's services was $60,000, which, after the $15,000 already paid, leaves a net recovery of $45,000.
Thus plaintiff is hereby awarded judgment declaring that defendant is not entitled to recover more than $45,000 in remaining legal fees, and defendant is hereby awarded judgment for $45,000 for legal fees, and the clerk is hereby directed to enter judgment accordingly.
Dated: January 8, 2014