An attorney who conveys an alleged agreement to cover the legal costs of another lawyer's client can be held liable for unpaid fees, a unanimous panel of the Appellate Division, 1st Department, ruled Tuesday.
The decision allows the firm of DePetris & Bachrach to pursue claims against the Shiboleth law firm and one of its lawyers, Charles B. Manuel, that they had promised that their clients would make good on DePetris & Bachrach's fees.
The ruling in DePetris & Bachrach v. Manuel, 111194/08, reverses the ruling of Justice Paul G. Feinman in Manhattan who had dismissed the four causes of action the DePetris firm has asserted against Shiboleth and Manuel.
DePetris & Bachrach sued former client Claudia Srour for fees it said it earned in representing her as a potential witness in a $78 million lawsuit brought by Merrill Lynch against a wealthy South American family.
The DePetris firm is suing Srour, two members of the Nasser family and Manuel and his firm for $62,000 in unpaid fees. One of the firm's named partners, Ronald E. DePetris, is a former chief assistant U. S. attorney in Brooklyn. As a private practitioner, he successfully defended several KPMG employees who won dismissal of tax shelter fraud charges in the Southern District because federal prosecutors pressured the accounting firm to stop paying their legal fees.
According to the appellate brief filed by the DePetris firm, Srour, a financial advisor with Merrill Lynch, had "critical information" about the Nasser family's account that she had handled while at Merrill.
Merrill had sued several members of the Nasser family because of losses stemming from the large amounts of Bear Stearns stock it bought on margin for their portfolios. After Bear Stearns collapsed in March 2008, the Nasser family owed millions of dollars to Bear Stearns, according to the complaint Merrill filed in Merrill Lynch v. Global Strat Inc., 610012, which is pending in Manhattan Supreme Court.
Manuel, on behalf of two Nasser family members, conveyed to the DePetris firm that his clients would pay $75,000 of Srour's fees and that he and his firm had the authority to make that representation, according to the DePetris firm's complaint.
Given those allegations, the 1st Department panel wrote, the DePetris firm had appropriately stated claims for breach of implied warranty of authority and tortious misrepresentation of authority and assurances of payment respectively.
To validly set forth claims on those two theories, the law firm had to allege that Manuel advised it that he had authority to offer to pay Srour's legal fees when it did not. In fact, the panel wrote, the complaint alleges that Manuel and his firm "falsely represented to [the DePetris law firm] that they specifically discussed the subject matter of their authority and representations with the Nassers."
Similarly, the panel found sufficient the claim that Manuel and his firm had "tortiously interfered" with the contract of Jacques Nasser, one of the Nasser brothers, to pay $37,500 of Srour's legal fees.
Normally, such a contract must be in writing, the panel noted, but there would be an exception if the DePetris firm could prove that Nasser was offering "to lift the burden of the obligation to pay legal fees from [Ms. Srour] and pay the law firm directly."
Justices Peter Tom, David Friedman, John W. Sweeny Jr., Eugene Nardelli and Sheila Abdus-Salaam sat on the panel.
DePetris represented his firm; Manuel represented himself and his firm.
