BARRY MALLIN ASSOCIATES v. NASH METALWARE COMPANY INC (2008)

In or about October, 2006, plaintiff Barry Mallin & Associates, P.C., f/k/a Mallin and Goldstein, P.C. (“plaintiff” or “Law Firm”) commenced this action against defendant Nash Metalware Company, Inc. (“defendant” or “Nash Metalware”) to recover $10,200 for breach of an oral agreement to pay for legal services.   Defendant interposed an answer to the complaint asserting that Nash Metalware did not authorize the Law Firm to perform legal services on its behalf, and the Law Firm is precluded from recovering any legal fees for failing to comply with the provisions of 22 NYCRR § 1215.1.

Trial/Witnesses

The trial was conducted on November 7, 2007.   Post-trial memoranda of law were submitted on December 7, 2007.

The named principal of the Law Firm, Barry Mallin, Esq. (“Mr. Mallin”), testified on plaintiff's behalf.   Defendants called Stephanie Eisenberg (“Ms. Eisenberg”), the president of Nash Metalware, and Edward Lazarus (“Mr. Lazarus”), of Royal Engraving, as witnesses.   This Court credits the testimony of the defendant's witnesses over the plaintiff's witness.

Findings of Fact

On or about May 11, 2005, the Mayor of the City of New York approved a certain change in zoning affecting the Greenpoint and Williamsburg areas of Northern Brooklyn, New York (“Greenpoint-Williamsburg Re-Zoning Project” or “Re-Zoning Project”).   In the Greenpoint-Williamsburg Re-Zoning Project, the existing zoning and special mixed district designations would be changed, inter alia, to permit residential use on the waterfront and to restrict certain areas currently zoned for manufacturing use to light industrial use.   The City of New York conducted an Environmental Impact Statement (“EIS”) to assess various environmental effects of the Greenpoint-Williamsburg Re-Zoning Project.

A group or coalition of businesses adversely affected by the zoning changes formed to challenge the City of New York's Greenpoint-Williamsburg Re-Zoning Project.   This group included plaintiff Nash Metalware and Royal Engraving.

The group initially contacted Antonia Bryson, Esq.(“Ms. Bryson”) of the Urban Environmental Law Center who had been lead counsel in challenging a zoning change in Red Hook, Brooklyn.   Ms. Bryson was unable to exclusively represent the group due to other legal professional obligations, but she recommended three other law firms, including the plaintiff.   On or about August 4, 2005, Ms. Bryson or Ms. Eisenberg scheduled a meeting with Mr. Mallin to discuss the case.   On or about August 10, 2005, Mr. Mallin and an associate met with Ms. Bryson, and other representatives of the group, including Ms. Eisenberg and Mr. Lazarus.   Mr. Mallin discussed many aspects of the case such as the lengthy EIS, the applicable four month statute of limitations and the possible filing of an Article 78 proceeding in Supreme Court, New York County, challenging the Re-Zoning Project. There was limited discussion of compensation except that Mr. Mallin initially agreed to a fixed legal fee of $60,000 for the prospective legal representation.   However, Mr. Mallin later allegedly mailed Ms. Eisenberg a draft “Attorney Engagement Agreement” dated August 12, 2005 (“Agreement”) wherein the Law Firm agreed to fix the legal fee at $100,000, which also included “fees for counsel ․ [Ms Bryson] and fees for experts and disbursements.”   Plaintiff sought $50,000 upon signing of the agreement, $25,000 upon filing of the Article 78 proceeding and the remaining $25,000 within 30 days thereafter.  (Plaintiff's Exhibit “1”).   Neither Ms. Eisenberg on behalf of Nash Metalwork nor any other member of the group executed the Agreement.

At the meeting, neither defendant individually nor the group collectively retained the plaintiff to represent them as they were in the process of interviewing other prospective counsel.   Ultimately, defendant and the group retained the service of another law firm that commenced an Article 78 proceeding on their behalf.

Notwithstanding the fact that the Agreement was not signed and no payment was tendered in accordance therewith, Mr. Mallin allegedly commenced legal representation on defendant's behalf.   Mr. Mallin allegedly expended about 77 hours but only billed for 34 hours in reviewing the lengthy EIS, researching cases and preparing a draft of the Article 78 petition.   Mr. Mallin conceded that he did not record his time contemporaneously with the work due to the looming statute of limitation deadline.   However, when he was notified in early September 2005 that the group had selected another attorney, Mr. Mallin estimated that he had performed 34 hours of legal work at $300 per hour totaling $10,200 as of September 9, 2005.   Nine months later, Mr. Mallin then generated a bill for legal services dated June 9, 2006 and sent it to the defendant for payment.   The explanation of fees merely indicated the total amount of time for many alleged tasks performed without an individual specific breakdown for each task and the corresponding time as follows.

GREENPOINT-WILLIAMSBURG RE-ZONING CHALLENGE:  Telephone Consultations with Client (Eisenberg);  Telephone Discussions with Attorney Bryson;  Meeting with Client and Potential Co-Counsel;  Review of Environmental Impact Statement, particularly issues relating to business and employment impact and displacement;  preparation of investigative questions for client an expert;  commencement of draft of Article 78 Petition.  (Plaintiff's Exhibit “2”).

While Mr. Mallin claimed he expended about 77 hours on the case, he conceded that the Article 78 petition that he drafted was only about 75% complete in early September, 2005, just a few days prior to the expiration of the statute of limitations deadline.  (Plaintiff's Exhibit “3”).   The draft was a generic petition which did not reference any specific material from the EIS and lacked a caption, recitation of the parties, and a verification.   Mr. Mallin did not send a copy of the draft petition to Ms. Eisenberg nor did Ms. Eisenberg sign it.

Conclusions of Law

Essential Element of “Meeting of the Minds”Necessary to Establish an Enforceable Oral Contract

 There must be an “objective meeting of the minds” to establish an enforceable contract.  Express Industries and Terminal Corp. v. New York State Department of Transportation, 93 N.Y.2d 584, 589, 693 N.Y.S.2d 857, 860, 715 N.E.2d 1050 (1999).  “In order for a breach of contract to exist, there must be a meeting of the minds for the agreement said to have been breached.”   Miranco Contracting, Inc. v. Perel, 29 A.D.3d 873, 816 N.Y.S.2d 516, 516-517 (2d Dept.2006).   A “mere agreement to agree, in which a material is left for future negotiations, is unenforceable.”  Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109, 436 N.Y.S.2d 247, 249, 417 N.E.2d 541 (1981) (the failure to agree on the amount or consideration for future rental or sale is unenforceable).

 In this regard, plaintiff has failed to meet its burden of proof to demonstrate that the parties had a “meeting of the minds” concerning defendant's alleged oral agreement to retain the plaintiff to legally challenge the Greenpoint-Williamsburg Re-Zoning Project.   It appears that there is conflicting evidence as to the amount of compensation sought and no “meeting of the minds” occurred between the parties.   Specifically, Ms. Eisenberg and Mr. Lazarus credibly testified that Mr. Mallin only sought $60,000 at the August 10, 2005 meeting, while the draft Agreement that Mr. Mallin allegedly sent to defendant set the plaintiff's fee at $100,000 and Mr. Mallin later billed defendant on a $300 hourly basis.  (Plaintiff's Exhibits “1” and “2”).   The credible testimony elicited shows that defendant neither retained the plaintiff nor agreed to the amount of plaintiff's compensation.

Written Letters of Engagement/Retainer Agreements

By Joint Order dated December 20, 2001, the Appellate Divisions promulgated Part 1215 of Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York (“22 NYCRR § 1215”).   This rule became effective March 4, 2002 and applies to cases where the fee is “expected” to be $3,000 or more.  22 NYCRR § 1215.2(a).   The rule generally mandated attorneys to provide clients with letters of engagement prior to representation. 22 § 1215.1(a).   The letter of engagement, inter alia, must provide an explanation of the legal services provided and the fees to be charged for such representation.  22 NYCRR § 1215.1(b)(1) & (2).   However, instead of providing a letter of engagement, attorneys may obtain a fully executed written retainer agreement from clients after commencing representation provided it contains an explanation of the scope and fees to be charged.  22 NYCRR § 1215.1(c).  Unfortunately, this rule does not provide for a penalty in breach thereof.

For many years, trial courts have interpreted the intent of the drafters in promulgating Rule 1215.1 very differently.   There were at least three categories of conflicting interpretations concerning non-compliance with the above rule such as (1) permitting a quantum meruit recovery of attorney fees, (2) permitting the attorney to keep fees already received but prohibiting additional fees not yet paid and (3) prohibiting all legal fees under all circumstances.

Recently, the Appellate Division, Second Department resolved the dispute and held that an attorney who fails to obtain a written retainer agreement or letter of engagement with a non-matrimonial client in violation of Rule 1215.1, may recover the reasonable value services rendered on a quantum meruit basis.   Seth Rubenstein, P.C. v. Ganea, 41 A.D.3d 54, 833 N.Y.S.2d 566 (2d Dept.2007).   However, the Appellate Division noted that attorneys “have every incentive to comply with Rule 1215.1 as compliance establishes in documentary form the fee arrangements to which clients become bound, and which can be enforced through Part 137 arbitration or through court proceedings.”  41 A.D.3d at 64, 833 N.Y.S.2d at 573.

Thus, plaintiff's failure to comply with Rule 1215.1 in not obtaining a signed letter of engagement or a retainer agreement is not fatal and it does not preclude the Law Firm from seeking to recover the reasonable value of services rendered on a quantum meruit basis.

Quantum Meruit

This trial appears to be the first reported case to apply the new ruling of the Appellate Division, Second Department in Seth Rubenstein, P.C. v. Ganea, supra.   The Appellate Division concisely and clearly set forth the applicable law governing attorney and client disputes vis-a-vis express agreements and quantum meruit claims as follows:

Public policy dictates that courts pay particular attention to fee arrangements between attorneys and their clients, as it is important that a fee contract be fair, reasonable, and fully known and understood by the client (see Jacobson v. Sassower, 66 N.Y.2d 991, 993, 499 N.Y.S.2d 381, 489 N.E.2d 1283 [1985];  Shaw v. Manufacturers Hanover Trust Co., 68 N.Y.2d 172, 176, 507 N.Y.S.2d 610, 499 N.E.2d 864 [1986];  Matter of Bizar & Martin v. U.S. Ice Cream Corp., 228 A.D.2d 588, 644 N.Y.S.2d 753 [2d Dept.1996] ).   If the terms of a retainer agreement are not established, or if a client discharges an attorney without cause, the attorney may recover only in quantum meruit to the extent that the fair and reasonable value of legal services can be established (see Matter of Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655, 658, 602 N.Y.S.2d 788, 622 N.E.2d 288 [1983];  Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 43, 556 N.Y.S.2d 239, 555 N.E.2d 611 [1990];  Matter of Schanzer, 7 A.D.2d 275, 182 N.Y.S.2d 475 [1st Dept.1959], affd. 8 N.Y.2d 972, 204 N.Y.S.2d 349, 169 N.E.2d 11 [1960] ).

41 A.D.3d at 60, 833 N.Y.S.2d at 570.

The Appellate Division cautioned attorneys who fail to comply with Rule 1215.1 because it may be difficult for them to meet the burden of proof in proving the terms of the agreement and the reasonable value of the services as follows:

Attorneys who fail to heed rule 1215.1 place themselves at a marked disadvantaged, as the recovery of fees becomes dependent upon factors that attorneys do not necessarily control, such as meeting the burden of proving the terms of the retainer and establishing that the terms were fair, understood, and agreed upon.   There is never any guarantee that an arbitrator or court will find this burden met or that the fact-finder will determine the reasonable value of services under quantum meruit to be equal to the compensation that would have been earned under a clearly written retainer agreement or letter of engagement.

41 A.D.3d at 64, 833 N.Y.S.2d at 573.

 The Appellate Division's admonition is certainly prophetic and true in this case.   Unlike the facts specified in the Second Department's case of Seth Rubenstein, P.C. v. Ganea, where the client readily conceded the retention of the attorney and understood that the legal services were not performed pro bono, the defendant herein convincingly challenged both the retention of plaintiff and any liability for legal services rendered.   Plaintiff has failed to prove that the fee arrangement with defendant was fully known and understood by the defendant.   The credible evidence supports the conclusion that the defendant never retained the plaintiff and ultimately retained the services of another attorney to challenge the Greenpoint-Williamsburg Re-Zoning Project.

Moreover, the plaintiff here only asserted the single cause of action of breach of an oral agreement in the complaint.   Unlike the complainant in Seth Rubenstein, P.C. v. Ganea, plaintiff here did not allege a cause of action in the complaint based on a quantum meruit theory.¹  Therefore, plaintiff may not recover the reasonable value of its legal services based on a quantum meruit basis.  Donohue v. Minicucci, 174 A.D.2d 1013, 572 N.Y.S.2d 171 (4th Dept.1991).

 Assuming, arguendo, that plaintiff asserted a claim based on quantum meruit, plaintiff's billing entries are too imprecise to deduce the reasonable amount of attorney's fees.   It is plaintiff's “burden and responsibility to clearly, and in detail, present the hourly rate for legal services performed by various counsel, the specific services rendered, and the time spent in performing these services, to avoid the Court having to speculate or surmise this information.”  Employers Insurance Co. of Wausau v. Team, Inc., 12 Misc.3d 1192(A), 824 N.Y.S.2d 768 (Table) (Sup. Ct., Kings County 2006) (citing Equitable Lumber Corp. v. IPA Land Development Corp., 38 N.Y.2d 516, 381 N.Y.S.2d 459, 344 N.E.2d 391 (1976);  Orix Credit Alliance, Inc. v. Grace Industries, Inc., 261 A.D.2d 521, 690 N.Y.S.2d 651 (2d Dept.1999).)

Conclusion

Based on the preponderance of the credible evidence, plaintiff has failed to demonstrate that defendant breached an oral agreement to pay for legal services or to recover fees based on a quantum meruit basis.   The clerk is hereby directed to enter a judgment dismissing this action.

The foregoing constitutes the decision and order of this Court.   Courtesy copies of this decision and order have been mailed to counsel for the parties.

FOOTNOTES

1.   Plaintiff failed to move to amend the complaint to add a cause of action for quantum meruit at trial or to conform to the evidence adduced at trial.

SHLOMO S. HAGLER, J.