Firm, Solo in Fee Dispute Admonished for Failure to Execute Retainer Agreement

A Manhattan judge has denied a summary judgment motion filed by a Wall Street litigation boutique in a fee suit against its client, a solo practitioner the firm defended over misconduct charges in a guardianship case. "This case is a textbook example of the trouble litigants can cause themselves when lawyer and client fail to execute a retainer agreement -- even [when], as in this instance -- both lawyer and client are attorneys," Acting Supreme Court Justice Louis B. York wrote.

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After chastising the parties for failing to execute a written fee agreement, a Manhattan judge has denied a summary judgment motion filed by a law firm in its $225,000 fee suit against its client, an attorney the firm defended against charges of misconduct in a guardianship case. “This case is a textbook example of the trouble litigants can cause themselves when lawyer and client fail to execute a retainer agreement — even [when], as in this instance — both lawyer and client are attorneys,” Acting Supreme Court Justice Louis B. York wrote in Fensterstock & Partners v. Shapiro, 111446/03. The suit was filed by Wall Street litigation boutique Fensterstock & Partners against solo practitioner Steven B. Shapiro, who hired the firm in 2001 to defend him against accusations that he mishandled the estate of former United Parcel Service executive Gerald Friedman. Fensterstock’s action against Shapiro is scheduled to continue today with a mediation conference. In the underlying action, attorneys for Dorothy Friedman, the co-guardian of her husband’s estate, described fee requests made by Shapiro and four lawyers he appointed as demonstrating “more of a desire to benefit from the trough of free-flowing fees that [the guardianship statute] can generate than to fulfill the duties of trust and loyalty imposed on fiduciaries.” At the time, Blair C. Fensterstock called the allegations against his client “accusatory and hysterical hearsay.” Friedman sought to disgorge Shapiro of $170,000 in legal fees he received. In the fee dispute before York, Shapiro, who is representing himself, alleged that he and Fensterstock, the principal of the plaintiff law firm, orally agreed to limit Shapiro’s legal fees to $75,000; Fensterstock averred that they had agreed that the $75,000 would serve only as an initial retainer and that the firm would charge its customary hourly rate, even after exhausting the deposit. State law requires written engagement letters only for matters initiated since Jan. 1, 2002. Fensterstock’s firm represented Shapiro in both the dispute with Friedman and before the disciplinary committee of the Appellate Division, 1st Department. The court in the estate case required Shapiro to return $57,000 of the $170,000 sought by Friedman; the disciplinary committee issued “a letter of caution,” but did not discipline Shapiro. Fensterstock & Partners also represented Shapiro when he served as a witness in a case against Acting Supreme Court Justice Diane A. Lebedeff, which stemmed from the Friedman guardianship, according to Fensterstock. Shapiro amassed $300,734 in charges for attorney fees and disbursements, leaving an outstanding debt of $225,734 after the firm applied the retainer. Fensterstock & Partners sent Shapiro 17 bills and 19 reminder notices. He never paid, nor did he object to the charges, according to the decision. The Fensterstock firm filed suit, seeking payment on the basis of account stated, breach of contract and quantum meruit, or the actual value of services performed. Shapiro asserted a number of counterclaims, including fraud and misrepresentation, all of which were dismissed, except for a claim of malpractice. The firm moved for summary judgment, which York dismissed. The motion focused on Fensterstock’s claim for an account stated. It argued that because Shapiro did not object to its 36 requests for payment, his inaction gave rise to the claim. OBJECTIONS CLAIMED Shapiro admitted to receiving the bills, though he claimed to have made numerous objections to the size of the fees. In his complaint, he noted that “on the first day” the firm billed him for 52 hours, according to the decision. Over the first two days, before the firm had received “the pertinent documents,” it had billed 90 hours. And the firm charged $138,000 for work completed in April 2001. The complaint did not say when or to whom Shapiro made such objections. York outlined the pertinent rules for account-stated claims. “One who retains bills for services without objection establishes an account stated claim,” he wrote. “In order to defeat a cause of action for an account stated, a person must object within a reasonable time. … Conclusory oral statements without stating whom and when and the substance of the conversation one spoke to are insufficient to defeat summary judgment.” In an interview, Fensterstock disputed Shapiro’s claims, stating that Shapiro consistently agreed to pay his bill. “What was [at] issue in this case was a lot more than $170,000. It was Shapiro’s license,” Fensterstock said. “In the context of a potential disciplinary action and potential disbarment, our fees were minimal. We were faced with probably half a dozen orders to show cause, several arguments before [Supreme Court Justice Richard B.] Lowe, elongated settlement discussions, and it extended over a period of probably close to two years.” The claim that 52 hours were billed within a day of Shapiro’s hiring the firm and 90 within two is false, Fensterstock said. He added that the firm logged substantial hours initially after being retained because “we probably had two to three feet of motions we had to handle.” “I’m excited to try this case against Shapiro,” Fensterstock added. Shapiro did not respond to messages left on his office voicemail.

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