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A law firm that lost its personal-injury client to a firm that allegedly offered her cash and a place to stay may collect a portion of the second firm’s $180,000 fee, a Manhattan judge has ruled. Supreme Court Justice Shirley Werner Kornreich granted the plaintiff law firm’s motion for summary judgment in its action for the value of its costs and legal services. She also noted that the defendant firm’s conduct “may be grounds for censure or suspension from practice.” After Aura L. Garcia was hit by a car in the Bronx in November 2002, she hired the plaintiff firm, Manhattan-based Ruta & Soulios, to represent her. In an affidavit submitted in the present case, Joseph Ruta said he “spent a great deal of time not only investigating the case but helping Ms. Garcia with her medical and housing issues.” He worked with social workers to ensure that Garcia, who had no place to live, was not transferred from the hospital to a homeless shelter. He developed a theory of liability, he claimed, and made a settlement demand of the driver’s insurer. Garcia signed a retainer agreement, which provided that Ruta’s firm would receive a one-third share of the “gross recovery.” However, in January 2003, Ruta received a letter from Eugene Litman, of Manhattan’s Litman & Litman, stating that Litman’s firm had been retained by Garcia. Ruta claimed that Garcia switched firms because Litman & Litman offered “money and a place for her to stay.” Garcia said she would return her case to Ruta, he added, if he was willing to match their offer. He declined, he said. Jeffrey Litman — one of four brothers who along with their father Eugene run Litman & Litman — submitted an affidavit in response. He claimed that Garcia switched firms because she was unhappy with her previous representation. He added that his firm advised their new client that “once litigation commenced, she could borrow money from an independent agency using the lawsuit as collateral.” Either way, Litman & Litman requested that Ruta & Soulios forward Garcia’s file. Ruta responded three times, stating that his office was willing to turn over the file in exchange for a check for $84.66 to cover disbursements, and that Ruta & Soulios would prefer to “work out a mutually agreeable percentage for legal fees at this point, rather than getting into a fee dispute at the end of the case.” Litman & Litman demurred. The firm then settled Garcia’s case for $550,000, received $179,872 for their fees and declined to negotiate a share for Ruta & Soulios. The fee dispute Ruta sought to avoid ensued. In a letter sent to Ruta, Litman & Litman wrote, “Pleased [sic] be advised This [sic] case has been settled,” according to Kornreich’s decision. “Please note under MCKINNEY’S JUDICIARY LAW SECTION 475 YOU ARE ENTITLED TO ZERO.” Ruta then initiated his action for compensation for legal services rendered and tortious interference with contract. Kornreich agreed with Litman & Litman that Ruta could not establish a claim for a charging lien because he had been discharged before commencing an action. However, she also found that Ruta did have a claim under quantum meruit. When an attorney is replaced by another, the outgoing attorney may elect fixed compensation on the basis of the reasonable value of services or a contingent fee based on the proportionate share of work performed, Kornreich wrote, citing Lai Ling Cheng v. Modansky Leasing Co., 73 NY2d 454. Here, Ruta had clearly opted for the contingent fee, the judge held. “Had plaintiff sought to elect a fixed fee, his reference to a ‘percentage’ [in his letter] would have been nonsensical,” she wrote. The judge dismissed Litman & Litman’s defense, holding that their claim that Ruta “was entitled to nothing because he had no charging lien under Judiciary Law �475 … was unsupportable and discourteous, to say the least.” She added that if Ruta’s allegations prove true, Litman & Litman may have violated the Code of Professional Responsibility by guaranteeing financial assistance to a client. Kornreich referred the case to a special referee to “hear and report recommendations” regarding the amount of fees due Ruta. Jeffrey Litman said in an interview that he did not recall how Garcia became the firm’s client. (The decision states that his brother’s cleaning woman recommended the firm.) He added that he believed that Kornreich’s opinion was flawed and that the firm intends to appeal. “We’re saying the outgoing attorney isn’t entitled to quantum meruit because we never used his work product, we never got his file,” Litman said. Ruta calls this argument a misunderstanding of the law. “I think the case law cited by the judge makes it clear that that’s not the law,” he said. “Their basic argument, that I need to go after the client, is [wrong]. Every case is clear that the work that is done on behalf of the client is payable out of the settlement proceeds.”

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