Andrew Lavoott Bluestone

The attorney-client relationship has a limited lifespan. Generally, it is a project-based temporary business relationship, albeit a fiduciary one.

Whether the representation is short or long, transactional or litigation based, it must someday end. It may end with settlement or a verdict in litigation, it may end at the completion of a transaction, or it may end in the middle.

It is sadly not the end of a relationship which usually results in tension, negotiation or litigation, it’s a question of attorney fees. Depending on the format of those fees, whether hourly, contingent, flat or hybrid, the question of fees either presages or creates the end of the attorney-client relationship. Even when the relationship ends because the work is truly finished, there may be a dispute over fees. Disputes over fees consistently occupy a large amount of attorney time and are governed by some well understood principals.

We will examine discharge of the attorney by the client first. Later we’ll look at attorneys who wish to end the relationship and must do so with permission of the court. Discharge of an attorney by a client is binary. It is either for cause or not for cause.

Discharge of an Attorney

Under New York law a client may discharge her attorney at any time, with or without cause. Campagnola v. Mullholland, Minion & Roe, 76 N.Y.2d 38 (1990); Lai Ling Cheng v. Modansky, 73 N.Y.2d 454 (1989), Garcia v. Teitler, 443 F.3d 202,211 (2d Cir. 2006)

Even though Campagnola is 28 years old, it remains the bedrock of New York law on attorney fees and discharge. When the client discharges the attorney for “cause,” “the attorney has no right to compensation or a retaining lien, notwithstanding a specific retainer agreement.” Campagnola, 76 N.Y.2d at 43. Beyond no compensation, the attorney cannot raise a lien, or collect disbursements or costs. This rule exists regardless of the wording of a retainer agreement, or in the absence of a retainer agreement, whether an action is brought for breach of contract, or is raised before the plenary court in which the matter is pending.

When the discharge is “without cause” the attorney may recover fees on a quantum meruit basis only. Lai Ling Cheng, 73 N.Y.2d at 457-58.  In contrast to all other contract law, there is no cause of action for breach of contract available to a discharged attorney, only quantum meruit. Gair v. Peck, 6 N.Y.2d 97 (1959). Quantum meruit, or the fair and reasonable value of the services rendered, is the correct measure. Lai Ling Cheng, 73 N.Y.2d at 457-58. Quantum meruit examines “evidence of the time and skill required in that case, the complexity of the matter, the attorney’s experience, ability and reputation, the client’s benefit from the service, and the fee usually charged by other attorneys for similar services.” Padilla v. Sansivieri, 31 A.D.3d 64, 67 (2d Dept. 2006)

If the discharge is “without cause,” then questions of compensation of the outgoing attorney are decided based upon whether the fee dispute is attorney vs. attorney or attorney vs. client. Between old and new attorney, there is one analysis. Between client and attorney there is a different analysis. Again, between client and attorney it’s either no fee or a fee in quantum meruit.

Between two attorneys, different rules obtain. Where the old attorney and the new attorney dispute how the fee (generally contingent) is to be divided between them, the outgoing attorney must choose at the time of discharge to receive immediate compensation on a quantum meruit basis or to receive a share of the contingent fee upon success based upon a proportionate share of the work performed. Wiggins v. Kopko, 105 A.D.3d 1132 (3d Dept. 2013) If no specific election is made at the time of discharge, it is presumed that a share of the contingent fee (if successful) is indicated. Grant v. Heit, 10 A.D.3d 539 (1st Dept. 2004)

What Is Good Cause?

Discharge for cause requires more than “poor client relations, differences of opinion or personality conflicts.” Garcia, 443 F.3d at 212. “Impropriety or misconduct on the part of the attorney” or a violation of a disciplinary rule is required (Schultz v. Hughes, 109 A.D.3d 895, 897 (2d Dept. 2013)) such as a failure to advise the client of a medical lien at settlement (Friedman v. Park Cake, 34 A.D.3d 286 (1st Dept. 2006)).

Certain “parameters” have been established for this definition. Lupo v. Pro Foods, 2012 NY Slip Op., 31207(U) (NY County, 2012). Judge Judith Gische wrote that the “salient consideration” is whether there was misconduct by the attorney which justified ending the relationship. A significant breach of a legal duty will suffice.” Allstate Ins. Co. v. Nandi, 258 F. Supp. 2d 309 (S.D.N.Y. 2003).

Good cause for discharge exists when the attorney’s conduct falls below the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession. Morrison Cohen Singer & Weinstein v. Zuker, 203 A.D.2d 119 (1st Dept. 1994); Pierce v. Neuman, 2011 NY Slip Op 31812(U) (NY County, 2011). In situations less than a “departure,” good cause exists when an attorney engages in misconduct (Quinn v. Walsh, 18 A.D.3d 638 (2d Dept. 2005), Matter of Winston, 214 A.D.2d 677 (2d Dept. 1995)), has failed to prosecute the client’s case diligently or has otherwise improperly handled the client’s case. Violations of disciplinary rules are good cause for discharge. Brill & Meisel v. Brown, 2012 NY Slip Op 32107(U) (N.Y. County, 2012); Coccia v. Liotti, 70 A.D.3d 747 (2d Dept. 2010); Doviak v. Finkelstein & Partners, 90 A.D.3d 696 (2d Dept. 2011). Failure to advise of a settlement offer is sufficient. Id.

Good cause can be found even for the failure to return phone calls. Criz v. Olympia Trails Bus Co., 2002 U.S. Dist. Lexis 14680, 2002 WL 1702028 (S.D.N.Y. 2002). Moreover, good cause for termination need not reach the level of legal malpractice. Legal malpractice is the departure from good and accepted practice, which proximately damages a party, in which, but for the negligence of the attorney, there would have been a different or better result. Rudolph v. Shayne, Dachs, Stansici, Corker & Sauer, 8 N.Y.3d 438 (2007). Good cause can exist well below that level.

Termination for good cause has arisen in many situations in which malpractice is not even considered, much less claimed. Substantial delays in prosecuting the case or failing to bring the action earlier than two days before the statute of limitations was to run is sufficient. Wiggins v. Kopko, 105 A.D.3d 1132, 1134 (3d Dept. 2013). Failure to retain an expert can be sufficient. Brown Rudnick v. Surgical Orthomedics, No.13-CV-4348, 2014 U.S. Dist. LEXIS 96097 (S.D.N.Y July 15, 2014). Abandonment of a case, a conflict of interest, a refusal personally to try a case, a failure to disclose a settlement offer are all successful terminations for cause.

The threshold for termination for cause lies well below any question of malpractice. In Dagny Management v. Oppenheim & Meltzer, 199 A.D.2d 711 (3d Dept. 1993), friction between the client and the attorney grew over the management of the settlement funds, in which the attorneys frustrated, but did not destroy, the settlement. The Appellate Division determined that the “firm’s interference with the client’s right to settle constitutes misconduct sufficient to rise to a level warranting discharge for cause and forfeiture of its fee.” De Luccia v. Village of Monroe, 180 A.D.2d 897 (3d Dept. 1992).

Good cause is not found based upon a client’s simple dissatisfaction with reasonable strategic choices (Doviak, 90 A.D.3d 696), or personality conflicts, misunderstandings or differences of opinion (Klein v. Eubank, 87 N.Y.2d 459 (1996)), or a failure to advise the client of a medical lien at settlement (Friedman v, Park Cake, 34 A.D.3d 286 (1st Dept. 2006)).

What Is Quantum Meruit?

Quantum meruit means “as much as he deserved, and is premised upon a finding of an implied promise to pay as much as he reasonably deserved.” It is the “fair and reasonable value of the services rendered, which may be more or less than the amount provided in the contact or retainer agreement.” In attorney discharge cases, quantum meruit is applied to the retainer agreement (or contract price) without limitation. Matter of Montgomery, 272 N.Y. 323 (1936).

Quantum meruit is the reasonable value of the attorney’s services. PJI 4:30. “The reasonable value of an attorney’s service is determined by taking into consideration all of the following elements: the character of the services, the nature and importance of the litigation, the degree of responsibility imposed or incurred, the amount or value involved, the length of time spent, the ability, skill and experience required and exercised, the character qualifications and standing of the attorney and the results achieved.” Amounts set forth in the retainer agreement are not dispositive in this analysis.

How Does an Attorney End the Relationship?

CPLR 321 directs that “an attorney may be changed by filing with the clerk a consent to change signed by the retiring attorney and signed and acknowledged by the party.” If there is no agreement, the attorney must move upon notice to the client and to all parties.

Generally, an attorney may be permitted to withdraw for “good cause.” An attorney may withdraw from representing a client if the client has rendered “it unreasonably difficult for the lawyer to carry out employment effectively” (22 NYCRR 1200.15(c); Green v. Gasparini, 24 A.D.3d 505 (2d Dept. 2005)); or if the client insists upon presenting a claim or defense unwarranted under existing law (Walker v. Mt. Vernon Hospital, 5A.D.3d 590 (2d Dept. 2004)). Failure or refusal to pay legal fees or expenses can be sufficient. Lake v. M.P.C. Trucking, 279 A.D.2d 813 (3d Dept. 2001). Good cause is shown where the attorney-client relationship has significantly deteriorated. Winters v. Rise Steel Erection, 231 A.D.2d 626 (2d Dept. 1996).

Liens After the End of the Representation

A common law retaining lien, known also as a “general possessory lien” entitles the outgoing attorney to “retain all papers, securities or money belonging to the client” that comes into the attorney’s possession during the course of the representation, as “security for payment of the attorney fees.” Judiciary Law, §475-a; Hoke v. Ortiz, 83 N.Y.2d 323 (1994). It is enforceable only on papers within the possession of the attorney and is lost if the papers are transferred or returned. “Attorney’s Retaining Lien Over Former Client’s Papers,” 65 Colum. L. Rev. 296, 298.

More intrusive than a retaining lien is a charging lien under Judiciary Law §475. It comes into existence automatically, without notice of filing, upon the commencement of a case, and is measured by the same quantum meruit standards discussed above. J.K.C. v. T.W.C., 2013 Slip Op. 23060 (Monroe Cty. 2013). If the client asserted a claim, which results in proceeds payable to the client, the charging lien is active. City of Troy v. Capital District Sports, 305 A.D.2d 715 (3d Dept. 2003). It applies to the cause of action and that the proceeds, wherever found, are subject to it. Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655 (1993).

Andrew Lavoott Bluestone is an attorney located in Manhattan, specializing in legal malpractice litigation. He is certified in legal malpractice by the American Board of Professional Liability Attorneys, an adjunct law professor and the author of the New York Attorney Malpractice Blog.